Cebu Property Ventures and Development

NOTICE OF ANNUAL STOCKHOLDERS’ MEETING

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CEBU HOLDINGS, INC. will be held on TUESDAY, 10 APRIL 2018 at 1:30 in the afternoon at 19th Floor Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City, with the following

A G E N D A1

1. Proof of notice and determination of quorum 2. Approval of the minutes of the previous Annual Stockholders’ Meeting 3. Annual Report 4. Approval of the merger of the Company and Cebu Property Ventures & Development Corporation 5. Election of directors (including independent directors) 6. Election of external auditor and fixing of its remuneration 7. Consideration of such other business as may properly come before the meeting 8. Adjournment

Only stockholders of record at the close of business on 19 FEBRUARY 2018 shall be entitled to notice of, and to vote at, this meeting.

This notice supersedes the notice filed with the Securities and Exchange Commission and the Philippine Stock Exchange on 2 February 2018.

Makati City, 26 February 2018.

JUNE VEE D. MONTECLARO-NAVARRO Corporate Secretary

We are not soliciting your proxy. However, if you would be unable to attend the meeting but would like to be represented thereat, you may accomplish the proxy form herein provided for the purpose and submit the same to the Office of the Corporate Secretary at the 3rd Floor, Tower One & Exchange Plaza, Ayala Triangle, Ayala Avenue, Makati City on or before 27 March 2018. Validation of proxies shall be held on 2 April 2018 at 9:00 o’clock in the morning at the Office of the Corporate Secretary. Thank you.

1 See next page for the explanation for each agenda item. EXPLANATION OF AGENDA ITEMS

Proof of notice and determination of quorum The Corporate Secretary will certify the date the notice of the meeting was sent to all stockholders and the date of publication of the notice in newspapers of general circulation.

The Corporate Secretary will further certify the existence of a quorum. The stockholders present, in person or by proxy, representing a majority of the outstanding capital stock shall constitute a quorum for the transaction of business.

Approval of the minutes of the previous Annual Stockholders’ Meeting The minutes of the meeting held on 24 April 2017 are posted at the company website, www.cebuholdings.com. Copies of the minutes will also be distributed to the stockholders before the meeting.

A resolution approving the minutes will be presented to the stockholders for approval by the vote of the stockholders representing at least a majority of the outstanding capital stock present at the meeting.

Annual report The President, Mr. Aniceto V. Bisnar, Jr., will deliver a report to the stockholders on the performance of the Company in 2017 and the outlook for 2018. The financial statements as of 31 December 2017 will be embodied in the Information Statement to be sent to the stockholders at least 15 business days prior to the meeting.

A resolution noting the report and approving the audited financial statements will be presented to the stockholders for approval by the affirmative vote of the stockholders representing at least a majority of the outstanding capital stock present at the meeting.

Approval of the merger of the Company and Cebu Property Ventures & Development Corporation (CPVDC) Approval by the stockholders will be sought for the merger of the Company and its listed subsidiary, CPVDC, with the Company as the surviving entity, and as embodied in the Plan of Merger. The Company intends to consolidate its portfolio under one listed vehicle to create a unified platform for its investments and expects operational synergies, efficient funds management and simplified reporting to government agencies as a result of the merger.

A resolution for the approval of the merger will be presented to the stockholders for adoption by the affirmative vote of stockholders representing at least 2/3 of the outstanding capital stock.

Election of directors (including the independent directors) Any stockholder may submit to the Nomination Committee nominations to the Board not later than 19 February 2018. The Nomination Committee will determine whether the nominees for directors, including the nominees for independent directors, have all the qualifications and none of the disqualifications to serve as members of the Board before submitting the nominees for election by the stockholders. The profiles of the nominees to the Board will be provided in the Information Statement and in the Company website for examination by the stockholders.

Each stockholder entitled to vote may cast the votes to which the number of shares he owns entitles him, for as many persons as are to be elected as directors, or he may give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he may see fit, provided that the whole number of votes cast by him shall not exceed the number of shares owned by him multiplied by the whole number of Directors to be elected. The nine nominees receiving the highest number of votes will be declared elected as directors of the Company.

Election of external auditor and fixing of its remuneration The Audit Committee will endorse to the stockholders the appointment of an external auditor for the current fiscal year. The profile of the external auditor will be provided in the Information Statement and in the Company website for examination by the stockholders.

A resolution for the appointment of the external auditor and for the approval of its remuneration will be presented to the stockholders for adoption by the affirmative vote of stockholders representing a majority of the outstanding capital stock present at the meeting.

Consideration of such other business as may properly come before the meeting The Chairman will open the floor for comments and questions by the stockholders. Stockholders may raise other matters or issues that may be properly taken up at the meeting. PROXY

The undersigned stockholder of CEBU HOLDINGS, INC. (the “Company”) hereby appoints ______or in his absence, the Chairman of the meeting, as attorney-in-fact and proxy, to present and vote all shares registered in his/her/its name at the annual meeting of stockholders of the Company on 10 April 2018 and at any of the adjournments thereof for the purpose of acting on the following matters:

1. Approval of the minutes of the previous meeting. 5. Election of SyCip Gorres Velayo & Co. as the Yes No Abstain independent auditor and fixing of its remuneration. Yes No Abstain 2. Annual Report. Yes No Abstain

3. Approval of the merger of the Company and Cebu 6. At his/her discretion, the proxy named above is Property Ventures & Development Corporation authorized to vote upon such other matters as may Yes No Abstain properly come before the meeting. Yes No 4. Election of Directors

No. of Votes Anna Ma. Margarita B. Dy ______Aniceto V. Bisnar Jr. PRINTED NAME OF STOCKHOLDER Pampio A. Abarintos* Enrique L. Benedicto* Augusto D. Bengzon ______SIGNATURE OF STOCKHOLDER/ Bernard Vincent O. Dy AUTHORIZED SIGNATORY Jose Emmanuel H. Jalandoni Fr. Roderick C. Salazar Jr.* ______Emilio Lolito J. Tumbocon DATE *Nominees for independent director

THIS PROXY SHOULD BE RECEIVED BY THE CORPORATE SECRETARY ON OR BEFORE 27 MARCH 2018, THE DEADLINE FOR SUBMISSION OF PROXIES. FOR CORPORATE STOCKHOLDERS, PLEASE ATTACH TO THIS PROXY FORM THE SECRETARY’S CERTIFICATE ON THE AUTHORITY OF THE SIGNATORY TO APPOINT THE PROXY AND SIGN THIS FORM.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS DIRECTED HEREIN BY THE STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR THE APPROVAL OF THE MATTERS STATED ABOVE AND FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING IN THE MANNER DESCRIBED IN THE INFORMATION STATEMENT AND/OR AS RECOMMENDED BY MANAGEMENT OR THE BOARD OF DIRECTORS.

A STOCKHOLDER GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME BEFORE THE RIGHT GRANTED IS EXERCISED. A PROXY IS ALSO CONSIDERED REVOKED IF THE STOCKHOLDER ATTENDS THE MEETING IN PERSON AND EXPRESSED HIS INTENTION TO VOTE IN PERSON.

NOTARIZATION OF THIS PROXY IS NOT REQUIRED. SECURITIES AND EXCHANGE COMMISSION

SEC FORM 20-IS

Information Statement of CEBU HOLDINGS, INC. (the “Registrant”, “Company”, or “CHI”) Pursuant to Section 20 of the Securities Regulation Code (the “Code”)

1. Check the appropriate box:

Preliminary Information Sheet  Definitive Information Sheet

2. Name of Registrant as specified in its charter: CEBU HOLDINGS, INC.

3. Province, country or other jurisdiction of incorporation or organization:

REPUBLIC OF THE PHILIPPINES

4. SEC Identification Number: 157912

5. BIR Tax Identification Code: 000-551-890-000

6. Address of Principal Office: 20th Floor, Ayala Center Cebu Tower Bohol Street, Cebu Business Park, Cebu City

7. Registrant’s telephone number, including area code: (63-32) 888-3700

8. Date, time and place of the meeting of security holders:

Date - April 10, 2018, Tuesday Time - 1:30 P.M. Place - 19th Floor, Ayala Center Cebu Tower Bohol Street, Cebu Business Park Cebu City 6000

9. Approximate date on which the Information Statement is first to be sent or given to security holders:

March 15, 2018

10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA:

a. Shares of Stock

Class Number of Shares Common Shares 1,920,073,623

b. Debt Securities - P5 billion bonds.

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11. Are any or all of registrant’s securities listed in a Stock Exchange?

 Yes _____ No

1,920,073,623 common shares are listed with the Philippine Stock Exchange (“PSE”).

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INFORMATION REQUIRED IN INFORMATION STATEMENT

A. GENERAL INFORMATION

Item 1. Date, time and place of meeting of security holders

Date - April 10, 2018, Tuesday Time - 1:30 P.M. Place - 19th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park Cebu City 6000

Principal - 20th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park Office Cebu City 6000

Approximate date when the Information Statement is first to be sent or given to security holders:

March 15, 2018

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY

Item 2. Dissenter’s Right of Appraisal

Under Sections 42 and 81, Title X of the Corporation Code of the Philippines (“Corporation Code”), a stockholder shall have the right to dissent and demand payment of the fair value of his shares in the following instances:

(a) In case any amendment to the Articles of Incorporation has the effect of changing or restricting the rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;

(b) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code;

(d) Investment of funds in any other corporation or business or for any purpose other than the primary purpose for which the Corporation was organized.

Stockholders who shall vote against the Merger of Cebu Property Ventures and Development Corporation (“CPVDC”) with and into the Company (the “Merger”), with the Company as the surviving entity and with CPVDC as the absorbed entity, shall be entitled to exercise their right of appraisal by making a written demand on the Company within thirty (30) days after April 10, 2018 for payment of the fair value of their shares provided, that failure to make the demand within such period shall be deemed a waiver of the appraisal right. If such Merger is implemented, the Company shall pay to the dissenting shareholders, upon surrender of the stock certificate/s, the fair value of the shares as of April 9, 2018, excluding any appreciation or depreciation in anticipation of such corporate action. If the fair value of the shares cannot be agreed upon, the provisions of Section 82 of the Corporation Code shall be complied with. Notwithstanding the foregoing, no payment shall be made unless the Company has unrestricted retained earnings to cover such payment.

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Item 3. Interest of Certain Persons in or Opposition to Matters to be Acted Upon

No current director or officer1 of the Company, or nominee for election as director of the Company, or any associate thereof, has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon other than election to office.

No director has informed the Company in writing that he intends to oppose any action to be taken by the Registrant at the meeting.

B. CONTROL AND COMPENSATION INFORMATION

Item 4. Voting Securities and Principal Holders Thereof a. Number of Shares Outstanding as of January 31, 2018: 1,920,073,623 Common Shares

Number of Votes Entitled: one (1) vote per share b. All stockholders of record as of February 19, 2018 are entitled to notice and to vote at the annual stockholders’ meeting. c. Manner of Voting

Article III, Section 7 of the By-Laws of the Company provides:

Section 7. - Each share of stock entitles the person in whose name it is registered in the books of the Corporation to one vote, provided the conditions as regards payment subject to which it was issued have been complied with. d. Security Ownership of Certain Record and Beneficial Owners and Management

(i) Security Ownership of Record and Beneficial Owners (of more than 5%) as of January 31, 2018

Title of Name, address of Record Name of Beneficial Citizenship No. of Shares Percent Class Owner and Relationship Owner and Held with Issuer Relationship with Record Owner Common Ayala Land, Inc.2 Ayala Land, Inc.3 Filipino 1,381,733,000 71.96% 31/F Tower One & Exchange Plaza Ayala Triangle, Ayala Ave. Makati City Common PCD Nominee Corp. Aggregate of Standard British 331,960,700 17.29% (Non-Filipino)4 Life Aberdeen plc G/F MSE Bldg. affiliated investment Ayala Ave., Makati City management entities on behalf of multiple

1 References to directors, officers, Board, or Committees are references to directors, officers, Board, or Committees of the Company unless otherwise specified. 2 Ayala Land, Inc. (ALI) is a major shareholder of CHI. 3 Pursuant to the By-Laws of ALI and the 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. 4 The PCD is not related to the Company. ______4 managed portfolios (the “Standard Life Aberdeen plc”)5 Common PCD Nominee Corp. PCD Nominee Corp. Filipino 121,710,343 6.34% (Filipino)4 (Filipino)6 G/F MSE Bldg. Ayala Ave., Makati City

(ii) Security Ownership of Directors and Management (Corporate Officers) as of January 31, 2018

Title of Name of Beneficial Owner Amount and Nature Citizenship Percent of Class Class of 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 0.0059% 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 0.0001% 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. 0 Filipino n/a Urbina 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 0.0063%

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

(iii) Voting Trust Holders of 5% or More

The Company knows of no persons holding more than 5% of common shares under a voting trust or similar agreement.

(iv) Changes in Control

No change of control in the Company has occurred since the beginning of its last fiscal year. e. Foreign Ownership Level as of January 31, 2018 – 18.73%

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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Item 5. Directors and Executive Officers

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

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

(i) Directors and Executive Officers

The following nominees, who are all part of the final list of candidates presented by the Corporate Governance and Nomination Committee (composed of Pampio A. Abarintos, Chairman, Aniceto V. Bisnar Jr., and Bernard Vincent O. Dy, as members), have been nominated to the Board for the ensuing year and have accepted their nomination:

Anna Ma. Margarita B. Dy Jose Emmanuel H. Jalandoni Aniceto V. Bisnar Jr. Fr. Roderick C. Salazar Jr. Bernard Vincent O. Dy Emilio Lolito J. Tumbocon Pampio A. Abarintos Augusto D. Bengzon Enrique L. Benedicto

These nominees were formally nominated to the Corporate Governance and Nomination Committee by Mrs. Judilyne L. Boholst, a stockholder of the Company. Messrs. Abarintos, Benedicto and Salazar, all incumbent directors, were nominated as independent directors. Ms. Boholst is not related to any of the nominees for independent directors.

Only nominees whose names appear on the final list of candidates will be eligible for election as directors of the Company. No further nominations will be entertained or allowed on the floor during the actual annual stockholders’ meeting.

The Company has adopted and complied with SRC Rule 38 (Requirements on Nomination and Election of Independent Directors).

(ii) Significant Employees

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

(iii) Family Relationships

None of the directors and executive officers of the Company is related up to the fourth civil degree either by consanguinity or affinity.

(iv) Involvement in Certain Legal Proceedings

For the past five (5) years and the preceding years, there are no material legal proceedings, bankruptcy petition, conviction by final judgment, order, judgment or decree or any violation of a securities or commodities law to which the Company or any of its subsidiaries or affiliates or its directors or executive officers is a party or of which any of its material properties is subject in any court or administrative government agency.

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b. Certain Relationships and Related Transactions

Parties are considered to be related if, among others, one (1) 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.

There have been no guarantees provided or received for any related party receivables or payables and are generally unsecured. Furthermore, these accounts are non-interest bearing except for intercompany loans.

The Company and its subsidiaries (the “Group”) do not provide any allowance relating to receivable from related parties. 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.

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 2017 2016 2017 2016 (In Thousands) Subsidiaries of ALI P=884,719 P=953,436 P=1,383,870 P=966,372 Associates: SouthPortal Properties, Inc. (SPI) 267,082 395,253 − − Solinea, Inc. (Solinea) 251,367 251,295 − − Central Block Developers, Inc. 52,044 72,501 − − (CBDI) Cebu Insular Hotel Company, Inc. − 8,144 − − (CIHC) Parent Company - ALI 30,946 22,009 1,023,008 600,869 Joint venture – Cebu District Property 1,604 1,551 − − Enterprise Inc. (CDPEI) Others − 379 − 20 P=1,487,762 P=1,704,568 P=2,406,878 P=1,567,261

Revenue Costs/Expenses 2017 2016 2015 2017 2016 2015 (In Thousands) (In Thousands) Associates - SPI P=− =−P =330,711 P P=− =−P =− P Joint venture - CDPEI − − 122,978 − − − Parent Company - ALI 14,945 5,635 8,115 69,989 168,636 180,268 Subsidiaries of ALI 26,570 8,876 635,769 184,665 30,755 27,046 P=41,515 =14,511P =1,097,573 P P=254,654 =199,391P =207,314 P

Receivables from/payables to Solinea, Avida Land Corp. (ALC) 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 (1) year. The loans from DirectPower Services Inc., Makati Development Corporation

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(MDC) and Serendra, Inc. bear interest ranging from 2.3% to 2.5% and are due and demandable as of December 31, 2017 and 2016.

The nature and amounts of material transactions with related parties as of December 31, 2017 and 2016 are as follows:

 In December 2015, the Group sold land to ALC amounting to =633.6P million which is payable on installment basis for twenty (20) years starting 2015. The related receivable is interest-bearing and was recognized at present value.

 Included under the accrued project costs in “Accounts and other payables” are construction costs payable to MDC amounting to =342.9P million and P=381.1 million as of December 31, 2017 and 2016, respectively. Advances to MDC, which are included under advances to contractors in “Accounts receivable” (see Note 8) amounted to =47.0 P million and P=61.3 million as of December 31, 2017 and 2016, respectively.

 Expenses to ALI pertain to management fees, professional fees and systems costs.

. Management and service fees charged by ALI amounted to =162.3P million, =125.0P million and P=133.1 million in 2017, 2016 and 2015, 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=15.9 million, =27.6P million and =25.1P million in 2017, 2016 and 2015, respectively.

 As of December 31, 2017 and 2016, the Group has entered into transactions with Bank of the Philippine Islands (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:

2017 2016 (In Thousands) Cash and cash equivalents (Note 5) P=145,908 P=82,315 Financial assets at FVPL (Note 7) 10,129 21,908 Long-term debt (Note 18) 1,480,215 1,181,781 Fair value of plan assets (Note 24) 37,104 46,499

 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 payable in installment until May 2018.

Compensation of key management personnel by benefit type follows:

2017 2016 2015 (In Thousands) Short-term employee benefits P=18,740 P=24,073 =21,336 P Post-employment pension and other benefits 817 924 1,025 P=19,557 P=24,997 =22,361 P

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c. Ownership Structure and Parent Company

The Company’s parent is ALI which owns 71.96% of the total issued and outstanding capital stock of the Company as of January 31, 2018.

Standard Life Aberdeen plc holds 17.29% of the total issued and outstanding capital stock of the Company for its various managed portfolios as of January 31, 2018. d. Resignation of Directors

To date, no director has resigned or declined to stand for re-election to the Board due to any disagreement with the Company relative to the Company’s operations, policies, and practices.

Item 6. Compensation of Directors and Executive Officers a. Executive Compensation

Name and Principal Position Year Salary Other Variable Pay Aniceto V. Bisnar Jr. President Ma. Luisa D. Chiong Chief Finance Officer/Compliance Officer Ma. Clavel G. Tongco Vice President and Head, Commercial Business Group Nerissa N. Josef-Mediano Vice President and Head, Business Development and Office Leasing Group Ma. Cecilia Crispina T. Urbina Assistant Vice President and Head, Corporate Services Group and Human Resources and Administration All above-named Officers as a Actual 2016 P24.07M P0.92M group Actual 2017 P18.74M P0.82M Projected 2018 P19.68M P0.86M All other officers* as a group Actual 2016 P19.20M P1.44M unnamed Actual 2017 P20.52M P1.39M Projected 2018 P21.55M P1.45M * Senior Personnel with pay class of SP-C.

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.

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b. Compensation of Directors

(i) Standard Arrangement (Current Compensation)

Article IV, Section 15 of the Company’s 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.

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

(ii) Other Arrangement

None of the directors, in their personal capacity, has been contracted and compensated by the Company for services other than those provided as a director.

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.

(iii) Employment Contracts and Termination of Employment and Change-in-Control Arrangements

The above named executive officers are covered by Letters of Appointment with the Company stating therein their respective job functionalities, among other matters.

(iv) Warrants and Options Outstanding: Re-pricing

The Company does not offer stock options to its directors, executives, and employees.

Item 7. Independent Public Accountants a. The principal accountant and external auditor of the Company is the accounting firm of SyCip Gorres Velayo & Co. (SGV & Co.). The same accounting firm will be recommended for re-election at the scheduled annual meeting for almost the same remuneration as in the previous year. b. Representatives of SGV & Co. for the current year and for the most recently completed fiscal year are expected to be present at the annual stockholders’ meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Pursuant to the General Requirements of SRC Rule 68, Par. 3 (Qualifications and Reports of Independent Auditors), the Company has engaged SGV & Co. as its external auditor, and Mr. Dolmar C. Montanez has been the partner-in-charge since the audit year 2016. c. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no disagreements with SGV & Co. on any matter of accounting and financial disclosure. d. Audit and Audit-Related Fees

The Company paid its external auditor the following fees in the past two (2) years:

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Audit & Audit-related Fees Tax Fees Other Fees 2017 P670.0 k* None P25 k 2016 P635.2 k* None P25 k * Exclusive of value-added tax (VAT) and out of pocket expenses

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

No tax or other consultancy services were secured from SGV & Co. f. Other Fees

The Company engaged SGV & Co. for the validation of stockholders’ votes during the 2017 and 2016 annual stockholders’ meeting for a fee of P25k, exclusive of VAT, each year.

As recommended by the Audit Committee of the Company (composed of Fr. Roderick C. Salazar Jr., Chairman, Enrique L. Benedicto, and Pampio A. Abarintos, as members), the Board passed a resolution appointing SGV & Co. as its external auditor for year 2017 and the fixing of the audit fees. The stockholders further ratified the resolution of the Board.

Item 8. Compensation Plans

There are no matters or actions to be taken up in the meeting with respect to any plan pursuant to which cash or non-cash compensation may be paid or distributed.

C. ISSUANCE AND EXCHANGE OF SECURITIES

Item 9. Authorization or Issuance of Securities Other than for Exchange

There is no matter or corporate action to be taken up in the meeting with respect to issuance of securities.

Item 10. Modification or Exchange of Securities

There are no matters or actions to be taken up in the meeting with respect to the modification of any class of the Company’s securities or the issuance of authorization for issuance of one (1) class of the Company’s securities in exchange for outstanding securities of another class.

Item 11. Financial and Other Information

The audited financial statements as of December 31, 2017, Management’s Discussion and Analysis, Market Price of Shares and Dividends, and other data related to the Company’s financial information are attached hereto as Annex “B”. The Schedules required under Part IV(c) of Rule 68 will be included in the Annual Report (SEC Form 17-A).

Item 12. 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.

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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:

20th 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. 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 Revenues 3,092,234 2,714,473 802,938 694,984 (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 - - - -

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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. f. Valuation

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

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

Share type High 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 Merger7, 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”.

Item 13. Acquisition or Disposition of Property

There are no matters or actions to be taken up in the meeting with respect to acquisition or disposition of any property by the Company.

Item 14. Restatement of Accounts

Changes in Accounting Policies

7 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. ______13

The accounting policies adopted in the preparation of the Group’s consolidated financial statements are consistent with those of the previous financial year except that the Group has adopted the following new accounting pronouncements starting January 1, 2017. Adoption of these new pronouncements did not have any significant impact on the Group’s financial position or performance unless otherwise indicated.

 Amendments to PFRS 12, Disclosure of Interests in Other Entities, Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014−2016 Cycle)

 Amendments to Philippine Accounting Standard (PAS) 7, Statement of Cash Flows, Disclosure Initiative

The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses).

The Group has provided the required information in Note 32 to the consolidated financial statements. As allowed under the transition provisions of the standard, the Group did not present comparative information for the year ended December 31, 2016.

 Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses

Standards and interpretation issued but not yet effective The Group will adopt the following new and amended standards and Philippine Interpretations of International Financial Reporting Interpretations Committee (IFRIC) enumerated below when these become effective. Except as otherwise indicated, the Group does not expect that the future adoption of these new and amended PFRS and Philippine Interpretations to have significant impact on the consolidated financial statements.

Effective beginning on or after 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.

On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and if other criteria are met. Early application of the amendments is permitted.

The Group has assessed that the adoption of these amendments will not have any impact on the 2018 consolidated financial statements since the Group does not have share-based payment transactions.

 PFRS 9, Financial Instruments

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accounting. Retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Group plans to adopt the new standard on the mandatory effective date and is currently assessing the potential impact of adopting PFRS 9 in 2018.

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

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 connected with insurance or issue insurance contracts.

 PFRS 15, Revenue from Contracts with Customers

PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in PFRS 15 provide a more structured approach to measuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under PFRSs. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after January 1, 2018. Early adoption is permitted. The Group plans to adopt the new standard on the required effective date and is currently assessing the potential impact of adopting PFRS 15 in 2018.

 Amendments to PAS 28, 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.

The amendments should be applied retrospectively, with earlier application permitted.

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These amendments are not expected to have any impact in the Group’s 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. The amendments should be applied prospectively to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is only permitted if this is possible without the use of hindsight.

Since the Group’s current practice is in line with the clarifications issued, the Group does not expect any effect on its consolidated financial statements upon adoption of these amendments.

 Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration

The interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may apply the interpretation prospectively to all assets, expenses and income in its scope that are initially recognized on or after the beginning of the reporting period in which the entity first applies the interpretation or the beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation.

Effective beginning on or after January 1, 2019

 Amendments to PFRS 9, Prepayment Features with Negative Compensation

The amendments to PFRS 9 allow debt instruments with negative compensation prepayment features to be measured at amortized cost or fair value through other comprehensive income. An entity shall apply these amendments for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted.

These amendments are not expected to have any impact in the Group’s consolidated financial statements.

 PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (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

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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.

Early application is permitted, but not before an entity applies PFRS 15. 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 28, Long-term Interests in Associates and Joint Ventures

The amendments to PAS 28 clarify that entities should account for long-term interests in an associate or joint venture to which the equity method is not applied using PFRS 9. An entity shall apply these amendments for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted.

These amendments are not expected to have any impact in the Group’s 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 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; and, . 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.

The Group is currently assessing the impact of adopting this interpretation.

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Deferred effectivity

 Amendments to PFRS 10 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, Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council deferred the original effective date of January 1, 2016 of the said amendments until the International Accounting Standards Board completes its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.

D. OTHER MATTERS

Item 15. Action with Respect to Reports a. Approval of the Minutes of the 2017 Annual Meeting of Stockholders held on April 24, 2017 covering the following matters:

(i) Annual Report of Officers (ii) Election of Directors (iii) Election of External Auditor and Fixing of its Remuneration b. Approval of the Annual Report of Management for the year ending December 31, 2017.

Item 16. Matters not required to be Submitted

All matters or actions to be taken up in the meeting will require the vote of the security holders.

Item 17. Amendment of Charter, By-Laws, or Other Documents

There are no matters or actions to be taken up in the meeting with respect to any amendment of the Company’s Articles of Incorporation or By-Laws.

Item 18. Other Proposed Action a. Approval of the Merger of the Company with CPVDC b. Election of the members of the Board of Directors, including the independent directors, for the ensuing year c. Election of the external auditor and fixing of its remuneration

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Item 19. Voting Procedures a. Vote required

The affirmative vote of stockholders representing at least 2/3 of the issued and outstanding capital stock is required for the approval of the Merger. The affirmative vote of at least a majority of the issued and outstanding capital stock entitled to vote and represented at the annual stockholders’ meeting is required for the approval of the other matters presented to the stockholders for decision. The election of directors is by plurality of votes. b. Method of Voting

Straight and Cumulative.

In all items for approval, each voting share of stock entitles its registered owner as of the Record Date to one (1) vote.

In case of election of directors, each stockholder may vote such number of shares for as many persons as there are directors to be elected or he may cumulate said shares and give one (1) nominee as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many nominees as he shall see fit, provided that the whole number of votes cast by him shall not exceed the number of shares owned by him multiplied by the total number of directors to be elected.

Voting will be by poll. Upon registration at the annual stockholders’ meeting, each stockholder will be given a ballot to enable him to vote in writing on each item or proposal in the Agenda. Nonetheless, each stockholder may vote viva voce or by other means of communicating his approval or objection.

All votes will be counted and tabulated by the Office of the Corporate Secretary and the results will be validated by the external auditor of the Company, SGV & Co.

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this report is true, complete and correct. This report is signed in the City of Makati on February 28, 2018.

CEBU HOLDINGS, INC.

By: June Vee D. Monteclaro-Navarro Corporate Secretary

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ANNEX “A” DIRECTORS AND KEY OFFICERS

The write-ups below include positions currently held by the directors and executive officers, as well as positions held during the past five (5) years. All information is as of December 31, 2017 unless otherwise indicated.

Board of Directors

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

Anna Ma. Margarita B. Dy, Filipino, 48, has served as a director of CHI since August 17, 2016 and Chairman of the Board of Directors starting last April 24, 2017. She also holds the position as Chairman of the Board of Directors in another publicly listed Company, Cebu Property Ventures and Development Corporation (CPVDC). 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 in 1990. She earned her Master’s degree in economics from London School of Economics and Political Science UK 1991 and MBA at Harvard Graduate School of Business Administration in Boston, U.S.A. in 1996.

Aniceto V. Bisnar Jr., Filipino, 53, has been the Director and President of CHI since January 1, 2015. He is also a Director and the President of CPVDC, a publicly listed company. Concurrently, he is also a Vice President of ALI and Chief Operating Officer of the Visayas-Mindanao Group of ALI. His other significant positions are: Chairman of Adauge Commercial Corporation and Amaia Southern Properties, Inc.; Chairman and President of North Point Estate Association, Inc., Cebu Leisure Company, Inc., Asian I- Office Properties, Inc., Cebu Business Park Association, Inc. and Asiatown I.T. Park Association, Inc.; and Vice Chairman of Central Block Developers, Inc. He is also the President of Aviana Development Corporation and Lagdigan Land Corporation; and the Vice President of Solinea, Inc. He is a director of Accendo Commercial Corporation, Westview Commercial Ventures Corp., Cagayan de Oro Gateway Corp., Bonifacio Estate Services Corporation, Aurora Properties Incorporated, Ceci Realty, Inc., Vesta Property Holdings, Inc., Avencosouth Corp., Taft Punta Engaño Property, Inc. and Cebu District Property Enterprise, Inc.; and a member of the Board of Trustees of the Hero Foundation, Incorporated. He completed his Master’s 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

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Academy in Baguio City in 1985. He also took up Master Planning and Mixed-Use Development Program at Harvard University School of Urban Design.

Pampio A. Abarintos, Filipino, 74, 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 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; 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, 76, has served as an independent director of CHI since April 25, 2003. He is currently the honorary consul of Belgium. 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 is an Honorary Consul, ad honorem of the Kingdom of Belgium, 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.

Augusto D. Bengzon, Filipino, 54, 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 another publicly listed company, Prime Orion Philippines Inc and the Treasurer of CPVDC. 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., 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. and Vesta Property Holdings Inc.; Director of ALINet.Com, Inc., Alviera Country Club, Inc., Ayalaland Commercial Reit, Inc., Ecozone Power Management Inc., Laguna Technopark Inc., Makati Development Corporation and Nuevocentro Inc.; Treasurer of Avida Land Corp., Hero Foundation Incorporated and Roxas Land Corporation. 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

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was granted the Andres K. Roxas scholarship at the Asian Institute of Management where he received his Master’s in Business Management degree.

Bernard Vincent O. Dy, Filipino, 54, 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. (ALI) and Chairman of the Board of Directors of Prime Orion Philippines, Inc. and MCT Bhd of Malaysia; and Director of CPVDC. His other significant positions include: Chairman of Ayala Property Management Corporation, Makati Development Corporation, Amaia Land Corporation, 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., Portico Land Corp. and Philippine Integrated Energy Solutions, Inc.; Vice Chairman of Ayalaland Estates, Inc., Ayala Greenfield Development Corporation, Alviera Country Club, Inc. and the Junior Golf Association of the Philippines; 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 Alveo Land Corp., Amicass Process Solutions, Inc., Whiteknight Holdings, Inc., AyalaLand Medical Facilities Leasing, Inc., Serendra, Inc., Alveo-Federal Land Communities, Inc., ALI Eton Property Development Corporation and Nuevocentro, 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 and took 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, 50, has served as director of Cebu Holdings Inc. since August 17, 2016. He is a Senior Vice President and a member of the Management Committee of ALI. He is also a Director of Prime Orion Philippines, Inc., a publicly listed company. He is the Group Head of commercial businesses in ALI including malls, offices, hotels, resorts and ALI Capital. His other significant positions include: Chairman of AyalaLand Offices, Inc., AyalaLand Hotels and Resorts Corp., ALI Capital Corp., ALI Makati Hotel and Residences, Inc., ALI Makati Hotel Property, Inc., ALI Triangle Hotel Ventures, Inc., Arcasouth Hotel Ventures, Inc., Ayala Hotels, Inc., Ayalaland Medical Facilities Leasing, Inc., Bay Area Hotel Ventures, Inc., Bonifacio Hotel Ventures, Inc., Capitol Central Hotel Ventures, Inc., Circuit Makati Hotel Ventures, Inc., Cebu Insular Hotel Company, Inc., Directpower 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., Makati North Hotel Ventures, Inc., North Eastern Commercial Corp., 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 Corp., Sicogon Town Hotel, Inc., Laguna Technopark, Inc., Central Block Developers, Inc., Arca South Terminal Inc., ALI Commercial Center, Inc., Soltea Commercial Corp., Southcrest Hotel Ventures, Inc., Tutuban Properties, Inc. and Whiteknight Holdings, Inc. He is also a director of OCLP Holdings, Inc., Alabang Commercial Corporation, Station Square East Commercial Corporation, Accendo Commercial Corp., Philippine Integrated Energy Solutions, Inc., ALI Eton Property Development Corporation, Philippine FamilyMart CVS, Inc., Ayagold Retailers, Inc., Ayala Property Management Corporation, Ayalaland Commercial Reit, Inc., Bacuit Bay Development Corp., Berkshires Holdings, Inc., Bonifacio Land Corporation, Cagayan de Oro Gateway Corp., 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 Corp., Makati Cornerstone Leasing Corp., Makati Development Corporation, North Liberty Resort Ventures Inc., Pangulasian Island Resort Corp., Paragua Eco-Resort Ventures, Inc., Regent Horizons Conservation Company, Inc., Ten Knots Development Corporation and Ten Knots Phils, Inc. He joined ALI in 1996 and held various positions in the company. He graduated with a degr ee of Bachelor of Science in Legal Management from Ateneo de Manila

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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.

Fr. Roderick C. Salazar Jr. SVD, Filipino, 70, 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 is the Mission Director of SVD Mission Philippines. 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). 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 Archdiocese of Cebu, he received the Papal Award Croce Pro Ecclesia et Pontifice for his years of service in Catholic Education.

Emilio Lolito J. Tumbocon, Filipino, 61, 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; President of UP Engineering Research & Development Foundation, Inc.; and Trustee of Project Management Institute, Philippines Chapter. He was previously 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 38 years of extensive work experience in the construction and real estate industry.

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

All above incumbent directors.

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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/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, 45, is the Chief Finance Officer and Compliance Officer of CHI since August 15, 2017. She also holds the same position in CPVDC. Her other significant positions include: Director and Vice President of Integrated Eco-resort Inc.; Director and Treasurer of Adauge Commercial Corporation, Altaraza Prime Realty Corporation, Amorsedia Development Corporation, Asian I-Office Properties Inc., Ayalaland Estates, Inc., Buendia Landholdings, Inc., Crans Montana Property Holdings Corporation, Crimsonfield Enterprises, Inc., HLC Development Corporation, Next Urban Alliance Development Corp. and Red Creek Properties, Incorporated; Director and Chief Finance Officer of Alinet.com, Inc., Director of Ali Capital Corp., Cebu Leisure Company, Inc., CMPI Holdings, Inc. and Directpower Services, Inc.; Treasurer and Chief Finance Officer of Taft Punta Engaño Property, Inc.; Treasurer of Accendo Commercial Corp. and Cagayan de Oro Gateway Corp.; Chief Finance Officer of Lagdigan Land Corporation; Comptroller of Nuevocentro, Inc.; Comptroller, Chief Finance Officer and Compliance Officer of Alveira Country Club, Inc.; and Corporate Finance Officer of Aurora Properties Incorporated, Ceci Realty Inc., and Vesta Property Holdings, 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, 46, is the Corporate Secretary of CHI since February 2014. She is the General Counsel and Assistant Corporate Secretary of ALI. 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 CPVDC, Alveo Land Corp., Avida Land Corp., ALI Eton Property Development Corporation, Prime Orion Philippines, Inc., and Orion Land, 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, 52, has served as the Assistant Corporate Secretary of CHI since February 2014. She is a Senior Counsel of Ayala Group Legal. She is the Assistant Corporate Secretary of listed companies namely: ALI, CPVDC 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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ANNEX “B”

I. MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) OF FINANCIAL CONDITION AND RESULTS OF OPERATION

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.

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.

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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.

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

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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 Current 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.

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.

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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.

 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.

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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 4th 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.

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.

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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.

Key Performance Indicators

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

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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.

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 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 Holdings, Inc. ended the year with an all time high consolidated revenues and net income of P3.7 billion and P827.2 million, respectively.

The company’s consolidated revenues were derived from sale of commercial lots, lease income from Ayala Center Cebu and eBloc Towers and sale of residential lots and condominium units. The company also derived income from interest earnings from short-term investments, interest & other income and equity in net earnings of affiliates.

Earnings before Interest and Taxes (EBIT) posted a significant increase from P0.397 billion in 2014 to P1.117 billion in 2015.

CHI declared cash dividend of P0.12 per share to all shareholders as of record date on December 16, 2015 and paid on December 23, 2015.

Stock price increased from a closing of P5.16 per share in 2014 to P5.18 per share in 2015. Rental Income Commercial Business

For the period ended December 31, 2015, overall gross sales performance of the mall ended at 8% higher versus same period of last year. New expansion’s food and non-food category provided a significant contribution to the overall growth. Land Lease tenant increased also by 6% compared to same period of last year.

Leasing group introduced new concepts and international brands to expand the offerings of the mall and provide what the market needs. New merchants include H&M, Bershka, Pull & Bear, New Balance, Brique. Marks & Spencer also reopened. During this period, the marketing group initiated mallwide events and promos to bring in further foot traffic to augment the sales of merchants like Pink October Sale, Amore Mallwide Sale, Christmas Sale, Pay It Forward Ayala Cebu Digital Promo, Symphony of Lights and Meet & Greet Santa Claus.

In terms of revenue, the mall registered a favorable performance of P1.16 billion versus last year. This is 17% higher than same period of last year while net operating income posted a 25% increase versus 2014.

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

Active Zone continues to post positive sales/sqm performance which was higher by 11% versus last year while Food Choices decreased by 13%. Ayala Cinemas occupancy rate performance of 21.5% is 2%pts higher compared to the same period of last year.

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Total revenue of P209.0 million was 8% higher than last year. Net operating income increased also by 24% due to the favorable financial performance of Active Zone, Food Choices and Cinemas.

The Walk registered total rental revenue of P26.8 million, posting a 2% increase compared to last year’s level of P26.2 million mainly on account of higher lease occupancy which was at 95.8 percent. eBloc Towers contributed P384.8 million in revenues, 27% higher than last year’s level of P302.0 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%.

CITP Land Lease contributed P10.7 million in revenues during the period.

Real Estate Income

Revenue from commercial lot stood at P1.087 billion. This includes a one time sale of commercial to Avida Land Corp and Cebu District Property Enterprise, Inc with total revenue of P759.3 million.

Amara revenue reached P27.6 million derived from prior and current year’s sales computed based on percentage of completion. Compared to the previous year’s level of P34.1 million, it declined by 19%. The Parks at Amara was fully completed as of end of 2015.

Park Point Residences registered total revenue of P250.9 million from current year’s sale units and the prior year’s sale computed based on percentage of completion. Compared to the previous year’s level of P113.8 million, it posted an increase of 121%. As of December 2015 percentage of completion was at 82.93%.

Avida Towers Cebu’s total revenue reached =P 1.9 million. Compared to the previous year’s P9.4 million, it posted a decline. As of end of 2015, both towers were already 100% completed.

The company also generated interest and other income primarily from the well placed short-term investments and other income from fees & recovery charges amounting to P499.7 million. This is 9% higher versus last year’s level of P459.4 million.

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 Bloc Developers, Inc.) reached P106.3 million, 33% higher compared to the previous year’s level of P79.7 million mainly due to higher income from Solinea, Inc.

Net Income reached P827.2 million, 56% higher versus the P530.9 million of the previous year due to higher revenues from sale of commercial lots and leasing income.

Financial Condition

CHI’s Balance Sheet remains strong with total assets amounting to P19.733 billion as of December 31, 2015, P.234 billion of which is cash. It has a current ratio of 0.95: 1 compared to 1.63: 1 in December 2014. Total liabilities as of the period stood at P12.821 billion, P5.518 billion of which is current. Debt-to-equity ratio stood at 2.11: 1 compared to the December 2014 level of 1.86: 1. Bank Debt to equity ratio registered at 1.03: 1 compared to 1.23: 1 in December 2014.

Key Performance Indicators

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

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Indicators 2015 2014 Current Ratio 1 0.95: 1 1.63: 1 Total Debt to Equity Ratio 2 2.11: 1 1.86: 1 Bank Debt to Equity Ratio 3 1.03: 1 1.23: 1 Net Debt /(Cash) to Equity Ratio 4 0.99: 1 0.66: 1 Return on Assets (ROA) 5 4.58% 3.62% Return on Equity (ROE) 6 14.35% 9.98% 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 registered at P.115 billion, 96% lower versus the P2.9 billion as of December 2014. The decrease was primarily brought about by land acquisition, investment in affiliates and payment to contractors and suppliers.

Financial Assets at Fair Value through Profit or Loss amounted to =P 73.6 million, 64% lower than the December 2014’s level of P204.1 million on account of reclassification from Financial Assets at Fair Value through Profit or Loss to Cash and Cash Equivalents.

Short-term Cash Investments registered at P45.3 million higher compared to the previous year’s level.

Accounts Receivable totaled P3.1 billion, 140% higher than the P1.3 billion as of December 2014. The increase was mainly on account of due from affiliates relative to the sale of commercial lot to Avida and collectibles from the sale of condominium units on installment during the period.

Inventories (Subdivided Land for Sale, Condominium Units for Sale and Sports Club Shares) stood at P1.4 billion, 17% higher than the P1.2 billion in December 2014. The increase was mainly due to additional cost estimate for the development of Cebu Business Park and booking of inventory of Park Point Residences & 1016 Residences units as percentage of completion increased for the period.

Other Current Assets reached P561.6 million, 101% higher than December 2014’s level of P278.9 million due to booking of various taxes (VAT Input, Prepaid Taxes and others).

Land and Improvements is stood at P2.2 billion. This pertains to the newly acquired lot at South Road Properties (SRP).

Investments in Associates and a Joint Venture was 29% higher than December 2014’s level of P1.1 billion as it reached P1.4 billion. The increase was primarily due to investment in Southportal Properties, Inc. and Central Bloc Developers, Inc.

Investments Properties registered a 12% (P1.1b) increase versus the December 2014 level of P9.2 billion primarily due to construction of ACC Corporate Center, BPO 400 Building & eBloc Tower 4 and purchase of land.

Noncurrent Accounts Receivable showed an increase of 301% (P319.4m) versus the December 2014’s level of P106.0 million mainly due to sale of CITP commercial lot to Avida Land Corp. on installment basis during the period.

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Other Noncurrent Assets was 48% lower than December 2014’s level of P83.6 million as it reached P43.4 million. The decrease was primarily due to settlement of suspense accounts.

Deferred Tax Assets posted a decrease of 96% (P15.6m) versus the P16.2 million as of December 2014 mainly due to AiO’s deferred tax asset knocked off against CPVDC-parent deferred tax liability.

Accounts & Other Payables totaled P4.7 billion, 98% higher vis-à-vis the P2.4 billion reported in December 2014. The increase was primarily due to payables to various contractors & suppliers and Cebu City government for the purchase of SRP lot, accrued operating expenses and due to affiliates (booking of management fees & systems cost and AiO’s intercompany).

Income Tax Payable reached P61.2 million, 65% higher versus the December 2014 level of P37.1 million due to provision for income tax during the period.

Current Portion of Long-term Debt showed a decrease of 78% (P384.7m) versus the December 2014’s level of P492.6 million mainly due to partial payment of AiO’s bank loan for the period.

Deposits and Other Non-current Liabilities increased by 322% or P727.5 million mainly on account of financial liability for the purchase of SRP lot and various rental deposits from Ayala Center Cebu merchants & eBloc Tower 3 locators.

Deferred Tax Liabilities posted an increase of 117% (P91.3m) versus the December 2014’s level of P77.8 million. The increase was primarily brought about by additional provision of deferred tax from the sale of CITP commercial lot to Avida Land Corp. during the period.

Retained Earnings showed a growth of P596.8 million as a result of the 2015 Net Income net of P230.4 million cash dividend in December 23, 2015.

 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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Upon the written request of the stockholders, the Company undertakes to furnish said stockholder with a copy of SEC Form 17-A free of charge. Any written request for a copy of SEC Form 17-A shall be addressed to the following:

Cebu Holdings, Inc. 20th Floor, Ayala Center Cebu Tower Bohol Street, Cebu Business Park, Cebu City 6000

Attention: Ms. Ma. Luisa D. Chiong Chief Finance Officer and Compliance Officer

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II. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY

A. Principal Market where the Registrant’s Common equity is traded.

Philippine Stock Exchange Prices (in PhP/share)

2017 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

2016 High Low Close 1st Quarter 5.15 5.15 5.15 2nd Quarter 5.10 5.02 5.10 3rd Quarter 5.15 5.08 5.14 4th Quarter 4.90 4.90 4.90

The market capitalization of the Company as of end-2017 based on the closing price of P5.75/share was approximately P11.04 billion.

The price information as of the close of the latest practicable trading date, February 27, 2018, is P6.39 per share.

B. Holders

There are approximately 4,020 registered holders of common equity security of the Company as of January 31, 2018. The following are the top 20 registered holders of the common equity securities of the Company:

Stockholder Name No. of Shares Percentage 1. Ayala Land, Inc. 1,381,733,000 71.96% 2. PCD Nominee Corp. (Non-Filipino) 359,282,828 18.71% 3. PCD Nominee Corp. (Filipino) 121,710,343 6.34% 4. Makati Supermarket Corporation 3,013,265 0.16% 5. Laguna Properties Holdings, Inc. 1,875,000 0.10% 6. Alfonso Lao 1,750,000 0.09% 7. Jose C. Lee 1,000,000 0.05% 8. Aurora E. Panlilio 937,500 0.05% 9. Vicente Jayme Jr. 877,118 0.05% 10. Fermin P. Angcao 670,000 0.03% 11. Victor G. Sy 625,000 0.03% 12. Jose E. Suarez 618,750 0.03% 13. Maximo S. Uy 470,000 0.02% 14. EBC Securities Corporation 389,330 0.02% 15. Alejandra R. Malaya 385,000 0.02% 16. Alberto Mendoza &/or Jeanie C. Mendoza 376,250 0.02% 17. Mercedes A. Tuason 375,000 0.02% 17. Vincent Y. Tan 375,000 0.02% 17. Carolyn Chua 375,000 0.02% 17. Salvador Mariposa 375,000 0.02% ______38

18. Robert Tan 358,750 0.02% 19. Edan Corporation 347,500 0.02% 20. Philippine International Life Insurance Co., Inc. 344,750 0.02%

C. Dividends

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 0.12 December 1, 2015 December 16, 2015 December 23, 2015 0.12 November 17, 2016 December 2, 2016 December 12, 2016 0.15 December 06, 2017 December 20, 2017 December 27, 2017

Dividend policy

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

D. Recent Sale of Securities

The Company has not sold or issued any exempt securities to the public.

E. Corporate Governance

i. 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 Annual Corporate Governance Report to the Securities and Exchange Commission.

ii. 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.

iii. 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.

iv. 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.

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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

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ANNEX “C”

NATURE AND SCOPE OF BUSINESS

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 71.96%-owned subsidiary of ALI and 28.04% 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 39 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 TGIFriday’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.

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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.

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 lotowners 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 started construction of a new office building concept, the Tech Tower, in 2015. 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.

CHI subsidiary, CPVDC, is the developer of the 27-hectare Cebu I.T. Park (formerly Asiatown I.T. Park), only 1.5 kilometers away from Cebu Business 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 12th 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 48,000 – a mixture of engineers, and information and communication technology professionals.

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Cebu’s thriving IT and BPO industry is most evident in the bullish build-up within Cebu I.T. Park with 11 buildings under construction. This will be an addition to the existing 23 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.

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.

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 28 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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SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A), Philippines November 10, 2015, valid until November 9, 2018

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, 2017 and 2016, 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, 2017, 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, 2017 and 2016, and their consolidated financial performance and their cash flows for each of the three years in the period ended December 31, 2017 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.

*SGVFS027143*

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 opinions 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.

Recognition of Real Estate Revenue and Costs

The Group is involved in real estate project developments for which it applies the percentage of completion (POC) method in determining real estate revenue and costs. The POC is based on the physical proportion of work and the cost of sales is determined based on the estimated project development costs applied with the project’s POC. The assessment process for the POC and the estimated project development costs requires technical determination by management’s specialists (project engineers). In addition, the Group requires a certain percentage of buyer’s payments of total selling price (buyer’s equity), to be collected as one of the criteria in order to initiate revenue recognition. It is the reaching of this level of collection that management has assessed that it is probable that economic benefits will flow to the Group because of the buyer’s continuing commitment with the sales agreement. This matter is significant to our audit because the assessment of the stage of completion, total estimated project development costs and the level of buyer’s equity involves significant management judgment.

Refer to Notes 2 and 3 to the consolidated financial statements for the disclosures on revenue recognition.

Audit response

We obtained an understanding of the Group’s process for determining the POC, including the cost accumulation process, and for determining and updating the total estimated project development costs, and performed tests of the relevant controls. We obtained the certified POC reports prepared by the project engineers and assessed the competence and objectivity of the project engineers by reference to their qualifications, experience and reporting responsibilities. We traced cost accumulated to the supporting documents such as invoices. We compared the certified POC reports against supporting documents such as the accomplishment reports from the contractor. We performed test of computation of the POC calculation of management. We conducted ocular inspection of the selected project, together with the project manager, and made relevant inquiries. 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. We obtained the project reserve memorandum approved by the Investment Committee indicating the work breakdown structure and total project development costs as estimated by the project engineers.

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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, 2017, but does not include the consolidated financial statements and our auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2017 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.

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· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

· Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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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-A (Group A), April 21, 2016, valid until April 21, 2019 Tax Identification No. 925-713-249-000 BIR Accreditation 08-001998-119-2016 February 15, 2016, valid until February 15, 2019 PTR No. 6621303, January 9, 2018, Makati City

February 26, 2018

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

December 31 2017 2016 ASSETS Current Assets Cash and cash equivalents (Notes 5 and 27) P=176,788 P=94,908 Short-term investments (Note 6) 2,543 − Financial assets at fair value through profit or loss (Notes 7, 22 and 27) 10,129 21,908 Receivables (Notes 8, 20, 22 and 27) 2,002,141 1,937,557 Inventories (Note 9) 751,084 723,851 Other current assets (Note 10) 430,736 524,074 Total Current Assets 3,373,421 3,302,298 Noncurrent Assets Noncurrent portion of receivables (Notes 8 and 27) 475,973 434,758 Available-for-sale financial assets (Note 11) 304,333 318,574 Property and equipment (Note 12) 289,795 79,560 Investments in associates and a joint venture (Note 13) 2,567,710 1,854,694 Investment properties (Note 14) 10,881,060 11,011,106 Land and improvements (Note 15) 2,636,277 2,580,250 Deferred tax assets - net (Note 25) 4,557 18,836 Other noncurrent assets (Notes 16 and 27) 55,034 15,547 Total Noncurrent Assets 17,214,739 16,313,325 P=20,588,160 P=19,615,623

LIABILITIES AND EQUITY Current Liabilities Accounts and other payables (Notes 17, 20, 27 and 28) P=4,705,560 P=4,371,300 Current portion of long-term debt (Notes 18 and 27) 59,942 442,279 Income tax payable 50,381 10,149 Deposits and other current liabilities (Notes 19 and 27) 820,956 799,299 Total Current Liabilities 5,636,839 5,623,027 Noncurrent Liabilities Long-term debt - net of current portion (Notes 18 and 27) 6,393,634 5,706,032 Pension liabilities (Note 24) 32,269 32,199 Deferred tax liabilities - net (Note 25) 261,306 236,165 Deposits and other noncurrent liabilities (Notes 17, 19, 27) 316,479 591,366 Total Noncurrent Liabilities 7,003,688 6,565,762 Total Liabilities 12,640,527 12,188,789 Equity (Note 28) Equity attributable to equity holders of Cebu Holdings, Inc. Capital stock 1,920,074 1,920,074 Additional paid-in capital 856,684 856,684 Retained earnings 4,250,293 3,784,856 Equity reserves (9,474) (9,474) Remeasurement loss on defined benefit plan (Note 24) (28,444) (24,249) 6,989,133 6,527,891 Non-controlling interests (Note 4) 958,500 898,943 Total Equity 7,947,633 7,426,834 P=20,588,160 P=19,615,623

See accompanying Notes to Consolidated Financial Statements. *SGVFS027143* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, except Earnings Per Share Figures)

Years Ended December 31 2017 2016 2015 REVENUE Real estate (Notes 14, 21 and 30) P=2,621,733 P=2,278,689 P=3,134,246 Equity in net earnings of associates and a joint venture (Note 13) 14,713 161,310 106,303 Interest income (Notes 5, 6, 8 and 22) 41,533 35,915 98,119 Other income (Note 22) 414,255 238,559 401,591 3,092,234 2,714,473 3,740,259 COSTS AND EXPENSES Real estate (Note 23) 1,437,580 1,295,847 1,793,984 Interest expense (Note 18) 345,214 247,716 346,215 General and administrative expenses (Note 23) 212,083 199,021 223,177 Other charges (Note 23) 22,916 64,886 102,893 2,017,793 1,807,470 2,466,269 INCOME BEFORE INCOME TAX 1,074,441 907,003 1,273,990 PROVISION FOR INCOME TAX (Note 25) Current 251,143 132,071 207,432 Deferred 10,294 43,161 121,220 261,437 175,232 328,652 NET INCOME P=813,004 P=731,771 P=945,338 Net Income Attributable to: Equity holders of Cebu Holdings, Inc. P=753,447 P=679,663 P=827,207 Non-controlling interests (Note 4) 59,557 52,108 118,131 P=813,004 P=731,771 P=945,338 Basic/Diluted Earnings Per Share (Note 26) P=0.39 P=0.35 P=0.43

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027143* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands)

Years Ended December 31 2017 2016 2015 Net income P=813,004 P=731,771 P=945,338 Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent years: Remeasurement gain (loss) on defined benefit plan (Note 24) (5,993) 19,095 3,201 Tax effect relating to components of other comprehensive gain (loss) 1,798 (5,729) (960) Total other comprehensive income (loss) (4,195) 13,366 2,241 Total comprehensive income P=808,809 P=745,137 P=947,579 Total comprehensive income attributable to: Equity holders of Cebu Holdings, Inc. P=749,252 P=693,029 P=829,448 Non-controlling interests 59,557 52,108 118,131 P=808,809 P=745,137 P=947,579

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027143* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in Thousands)

Attributable to Parent Total Equity Remeasurement Attributable to Additional Gain (Loss) on Equity Holders Non-controlling Capital Stock Paid-in Capital Equity Reserve Retained Earnings (Note 28) Defined Benefit of Parent Interest (Note 28) (Note 28) (Note 28) Appropriated Unappropriated Total Obligation Company (Note 4) Total For the Year Ended December 31, 2017 Balance as of January 1, 2017 P=1,920,074 P=856,684 (P=9,474) P=1,300,000 P=2,484,856 P=3,784,856 (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=9,474) P=1,300,000 P=2,950,293 P=4,250,293 (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=9,474) P=1,300,000 P=2,035,602 P=3,335,602 (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=9,474) P=1,300,000 P=2,484,856 P=3,784,856 (P=24,249) P=6,527,891 P=898,943 P=7,426,834

For the Year Ended December 31, 2015 Balance as of January 1, 2015 P=1,920,074 P=856,684 (P=9,474) P=1,300,000 P=1,438,804 P=2,738,804 (P=39,856) P=5,466,232 P=755,498 P=6,221,730 Comprehensive income: Net Income − − − − 827,207 827,207 − 827,207 118,131 945,338 Other comprehensive income − − − − − − 2,241 2,241 − 2,241 Total Comprehensive income: − − − − 827,207 827,207 2,241 829,448 118,131 947,579 Dividends declared (Note 28) − − − − (230,409) (230,409) − (230,409) (26,794) (257,203) Balance as of December 31, 2015 P=1,920,074 P=856,684 (P=9,474) P=1,300,000 P=2,035,602 P=3,335,602 (P=37,615) P=6,065,271 P=846,835 P=6,912,106 See accompanying Notes to Consolidated Financial Statements.

*SGVFS027143* CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)

Years Ended December 31 2017 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=1,074,441 P=907,003 P=1,273,990 Adjustments for: Depreciation and amortization (Notes 12, 14 and 23) 495,610 402,070 358,025 Interest expense (Note 18) 345,214 247,716 346,215 Interest income (Note 22) (41,533) (35,915) (98,119) Equity in net earnings of associates and a joint venture (Note 13) (14,713) (161,310) (106,303) Pension expense (contribution) - net (Notes 23 and 24) (5,923) (4,738) 3,499 Unrealized foreign exchange gain (105) (68) (1,315) Unrealized loss (gain) on financial assets at fair value through profit or loss (93) 438 (38) Loss (gain) on disposal of property and equipment − 13 (40) Loss on disposal of investment properties − − 2,114 Operating income before working capital changes 1,852,898 1,355,209 1,778,028 Decrease (increase) in: Receivables (76,749) 1,146,215 (2,028,888) Financial assets at fair value through profit or loss 11,872 51,219 130,550 Inventories (12,992) (5,664) (144,803) Other current assets 93,338 37,528 (282,682) Increase (decrease) in: Accounts and other payables (Notes 17 and 32) 738,530 (899,799) 1,693,518 Deposits and other liabilities (256,981) 135,476 5,455 Net cash generated from operations 2,349,916 1,820,184 1,151,178 Interest paid (386,099) (285,480) (248,211) Interest received 12,955 24,214 51,681 Income taxes paid (179,987) (183,131) (198,691) Net cash provided by operating activities 1,796,785 1,375,787 755,957 CASH FLOWS FROM INVESTING ACTIVITIES Additions to: Investment properties (Notes 14 and 32) (560,035) (109,435) (1,321,780) Associates and a joint venture (Note 13) (698,303) (325,000) (203,800) Land and improvements (Notes 15 and 32) (56,027) (325,964) (1,199,579) Property and equipment (Notes 12 and 32) (15,764) (26,455) (12,548) Short-term investment (3,015) − (45,318) Decrease (increase) in other noncurrent assets (39,487) 27,893 (3,032) Proceeds from sale/redemption of: Property and equipment − 300 129 Short-term investments − 45,318 − Investment properties − 3,558 30 Net cash used in investing activities (1,372,631) (709,785) (2,785,898)

(Forward)

*SGVFS027143* Years Ended December 31 2017 2016 2015 CASH FLOWS FROM FINANCING ACTIVITIES Availments of long-term debt P=756,200 P=378,100 P=− Payments: Long-term debt (459,000) (470,875) (493,875) Purchased land (351,569) (351,569) − Dividends paid (288,010) (242,329) (257,203) Net cash provided by (used in) financing activities (342,379) (686,673) (751,078) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 105 68 1,315 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 81,880 (20,603) (2,779,704) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 5) 94,908 115,511 2,895,215 CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=176,788 P=94,908 P=115,511

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027143* CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Group Information

Cebu Holdings, Inc. (the Parent Company) is domiciled and was incorporated on December 9, 1988 in the Republic of the Philippines. The Parent Company is a 71.96%-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 48.96%-owned by Mermac, Inc., 10.17%-owned by Mitsubishi Corporation 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, 2017.

· 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 publicly traded in the PSE. The registered office address of CPVDC is at 20th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City.

· Asian I-Office Properties, Inc. (AiO), wholly owned by CPVDC, 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.

The consolidated financial statements of Cebu Holdings Inc. and its subsidiaries (the Group) as of December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017 were endorsed for approval by the Audit and Risk Committee on February 13, 2018 and were approved and authorized for issue by the Board of Directors (BOD) on February 26, 2018.

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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 available-for-sale financial assets 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 (PFRS).

Basis of Consolidation The consolidated financial statements comprise the financial statements of the Parent Company and the following wholly owned and partially-owned subsidiaries, and the corresponding percentage of ownership of the Parent Company as of December 31:

Percentage of ownership December 31 2017 2016 2015 CLCI 100 100 100 CBP Theatre 100 100 100 CPVDC 76 76 76 AiO* 76 76 76 TPEPI 55 55 55 * wholly owned by CPVDC

The Parent Company and all its subsidiaries are incorporated and are operating in the Philippines.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. 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.

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All intra-group balances and transactions, including income, expenses and dividends relating to transactions between members of the Group, are eliminated in full on consolidation.

Non-controlling interests (NCI) represent the portion of profit or loss and net assets in subsidiaries not wholly owned by the Parent Company and are presented separately in the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and within equity in the consolidated statement of financial position, separately from the equity attributable to the Parent Company.

Total comprehensive income within a subsidiary is attributed to the NCI even if that results in a deficit balance.

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

· Derecognizes the assets (including goodwill) and liabilities of the subsidiary · Derecognizes the carrying amount of any non-controlling interest · Derecognizes the cumulative translation differences recorded in equity · Recognizes the fair value of the consideration received · Recognizes the fair value of any investment retained · Recognizes any surplus or deficit in profit or loss · Reclassifies the parent’s share of components previously recognized in other comprehensive income (OCI) to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities

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, 2017. Adoption of these pronouncements did not have any significant impact on the Group’s financial position or performance unless otherwise indicated.

· Amendments to PFRS 12, Disclosure of Interests in Other Entities, Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014−2016 Cycle)

· Amendments to Philippine Accounting Standard (PAS) 7, Statement of Cash Flows, Disclosure Initiative

· Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses

Standards and interpretation issued but not yet effective The Group will adopt the following new and amended standards and Philippine Interpretation of International Financial Reporting Interpretations Committee (IFRIC) enumerated below when these become effective. Except as otherwise indicated, the Group does not expect that the future adoption of these new and amended PFRS and Philippine Interpretations to have significant impact on the consolidated financial statements.

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Effective beginning on or after 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.

The Group has assessed that the adoption of these amendments will not have any impact on the 2018 consolidated financial statements since the Group does not have share-based payment transactions.

· PFRS 9, Financial Instruments

PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. Retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Group plans to adopt the new standard on the mandatory effective date and is currently assessing the potential impact of adopting PFRS 9 in 2018.

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

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

· PFRS 15, Revenue from Contracts with Customers

The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under PFRSs. *SGVFS027143* - 5 -

Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after January 1, 2018. Early adoption is permitted. The Group plans to adopt the new standard on the required effective date and is currently assessing the potential impact of adopting PFRS 15 in 2018.

· Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014−2016 Cycle)

The amendments should be applied retrospectively, with earlier application permitted.

These amendments are not expected to have any impact in the Group’s consolidated financial statements.

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

Since the Group’s current practice is in line with the clarifications issued, the Group does not expect any effect on its consolidated financial statements upon adoption of these amendments.

· Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration

*SGVFS027143* - 6 -

Effective beginning on or after January 1, 2019

· Amendments to PFRS 9, Prepayment Features with Negative Compensation

These amendments are not expected to have any impact in the Group’s consolidated financial statements.

· PFRS 16, Leases

PFRS 16 also requires lessees and lessors to make more extensive disclosures than under PAS 17.

The Group is currently assessing the impact of adopting PFRS 16.

· Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

These amendments are not expected to have any impact in the Group’s consolidated financial statements.

*SGVFS027143* - 7 -

· Philippine Interpretation IFRIC-23, Uncertainty over Income 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; and, § How an entity considers changes in facts and circumstances.

The Group is currently assessing the impact of adopting this interpretation.

Deferred effectivity

· Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

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; · 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.

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The Group classifies all other liabilities as noncurrent.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

Fair Value Measurement The Group measures financial instruments such as financial assets at FVPL 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.

· 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.

The Group’s management determines the policies and procedures for recurring fair value measurement of financial assets at FVPL 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. *SGVFS027143* - 9 -

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 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 available-for-sale (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, 2017 and 2016, 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 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.

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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, 2017 and 2016, 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. Equity investments classified as AFS are those 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.

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, 2017 and 2016, the Group’s loans and receivables include cash and cash equivalents, short-term investments and receivables (except advances to contractors).

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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 and 2016, 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 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.

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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.

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.

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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.

Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

The Group assesses that it has a currently enforceable right to offset if the right is not contingent on a future event, and is legally enforceable in the normal course of business, event of default, and event of insolvency or bankruptcy of the Group.

Inventories Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory and is carried at the lower of cost or net realizable value (NRV). NRV is the estimated selling price in the ordinary course of business, less estimated costs to complete and sell.

Cost includes: · Land cost; · Land improvement cost; · Amount paid to contractors for construction and development of the properties (i.e. planning and design costs, cost of site preparation, professional fees, property transfer taxes, construction overheads and other related costs); and, · Borrowing costs on loans directly attributable to the projects which were capitalized during construction.

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.

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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, 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 development rights purchased by the Group which represents the gross floor area of a structure in a particular lot which is allowed to be developed in the future.

These are measured on initial recognition at cost. After initial recognition, the intangible assets - development rights 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.

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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 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.

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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.

Land and Improvements Land and improvements are carried at cost less any impairment in value. Land and improvement deal with land assets that were acquired and will be used as site for future developments. These are assets neither classified as inventories or investment properties since these are undeveloped land and has no definite use as of reporting date and to whether these are held to earn rentals or for capital appreciation to be classified as investment properties or are held for sale in the ordinary course of business. Its use is yet to be determined by management as approved by the BOD.

All capitalizable expenses related to the land acquisition are recorded to “Land and improvements” once a Contract to Sell/Purchase Agreement has been executed between the parties.

Transfers are made to inventories or investment properties when, and only when, there is a definite use as evidenced by commencement of development with a view to sale or commencement of an operating lease to another party, respectively.

Impairment of Nonfinancial Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, 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.

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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.

Equity reserves Equity reserves pertain to the difference between the consideration transferred and the equity acquired in a common control business combination.

Revenue and Cost Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be 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.

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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 and the terms of the lease, respectively, 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 liabilities section of 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 liabilities section of 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.

Theater income Theater income is recognized when earned.

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.

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Cost and Expense Recognition Cost and expenses are recognized in the consolidated statement of income when a decrease in the future economic benefit related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably.

Cost and expenses are recognized in the consolidated statement of income: · On the basis of a direct association between the costs incurred and the earning of specific items of income; · On the basis of systematic and rational allocation procedures when economic benefits are expected to arise over several accounting periods and the association can only be broadly or indirectly determined; or · Immediately when expenditure produces no future economic benefits or when, and to the extent that, future economic benefits do not qualify or cease to qualify, for recognition in the consolidated statement of financial position as an asset.

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).

*SGVFS027143* - 20 -

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 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.

*SGVFS027143* - 21 -

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.

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.

*SGVFS027143* - 22 -

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 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 PFRS 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:

*SGVFS027143* - 23 -

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.

≅ρ νε Χδβδλαδθ 20+ 1/06 µχ 1/05+ σγδ Φθντο ρρδρρδχ σγσ σγδθδ θδ µν ηµχηβσνθρ νε ηλοηθλδµσ+ σγτρ+ σγδ Φθντο χηχ µνσ θδβνφµηψδ µξ ηλοηθλδµσ κνρρ νµ ησρ µνµεηµµβηκ ρρδσρ ∋ρδδ Μνσδρ 02 µχ 03(−

Assessment of control of an investment and the type of investment An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee; thus, the principle of control sets out the following three elements of control: · power over the investee; · exposure, or rights, to variable returns from involvement with the investee; and, · the ability to use power over the investee to affect the amount of the investor's returns.

In 2016, management assessed that the Group does not have control over Central Block Developers, Inc. (CBDI) even with 57% effective ownership interest because the Group has no control over CBDI’s relevant activities and it does not have the majority representation in its BOD. In 2017, the Group’s effective ownership in CBDI was down to 48%.

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.

*SGVFS027143* - 24 -

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:

Revenue and cost recognition The Group’s revenue recognition policies require management to make use of estimates and assumptions that may affect the reported amounts of revenues and costs. The Group’s revenue from real estate is recognized based on the percentage-of-completion measured principally on the basis of the estimated completion of a physical proportion of the contract work. See Notes 21 and 23 for the related balances.

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 2017 and 2016. 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. *SGVFS027143* - 25 -

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 % 2017 2016 2017 2016 2015 (In Thousands) (In Thousands) CPVDC 24% P=507,797 P=449,165 P=58,632 P=50,707 P=118,043 TPEPI 45% 450,703 449,778 925 1,401 88 P=958,500 P=898,943 P=59,557 P=52,108 P=118,131

The summarized financial information of CPVDC and TPEPI is provided below. This information is based on amounts before intercompany eliminations.

2017 1/05 CPVDC TPEPI ΒΟΥΧΒ ΣΟ∆ΟΗ (In Thousands) (In Thousands) Statements of financial position Βτθθδµσ ρρδσρ P=931,899 P=149,438 P= 663+/17 P= 115+358 Μνµβτθθδµσ ρρδσρ 4,823,022 860,309 3+620+337 665+36/ Βτθθδµσ κηαηκησηδρ 1,854,893 16,677 1+471+708 00+815 Μνµβτθθδµσ κηαηκησηδρ 1,757,032 − 0+/15+524 −

Statements of comprehensive income Θδυδµτδ P=802,938 P=3,962 P= 583+873 P= 3+687 Μ δσ ηµβνλδ.Σνσκ βνλοθδγδµρηυδ ηµβνλδ σσθηατσακδ σν9 ∆πτησξ νε γνκχδθρ νε σγδ οθδµσ 188,343 1,131 βνλοµξ 051+775 0+601

Μνµ,βνµσθνκκηµφ ηµσδθδρσρ 58,632 925 4/+6/6 0+3/0

Statement of cash flows

Βργ οθνυηχδχ αξ ∋τρδχ ηµ(9 Νοδθσηµφ βσηυησηδρ P=107,410 P=74,277 P= 6/1+384 ∋P= 5+675( Ηµυδρσηµφ βσηυησηδρ (390,506) (83,839) ∋5/8+617( ∋6+/75(

Εηµµβηµφ βσηυησηδρ 299,766 − ∋0/1+684( −

Μδσ ηµβθδρδ ∋χδβθδρδ( ηµ βργ µχ βργ δπτηυκδµσρ P=16,670 (P=9,562) ∋P= 0/+/17( ∋P= 02+761(

5. Cash and Cash Equivalents

This account consists of:

2017 1/05 (In Thousands) Βργ νµ γµχ µχ ηµ αµϕρ P=144,471 P= 62+/48 Βργ δπτηυκδµσρ 32,317 10+738 P=176,788 P= 83+8/7

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.

*SGVFS027143*

- 26 -

Total interest income earned from cash and cash equivalents amounted to P=1.0 million, P=0.8 million and P=8.0 million in 2017, 2016 and 2015, 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 2017 and 2016, the Group entered into a short-term investment with BPI to be used for short-term cash requirements. These investment earns an annual interest of 1.25% and 1.13% in 2017 and 2016, respectively.

As of December 31, 2017 and 2016, the Group’s short term investments amounted to P=2.5 million and nil, respectively.

Interest income earned from short-term investments amounted to P=0.2 million, P=0.5 million and P=1.0 million in 2017, 2016 and 2015, respectively (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”. Realized and unrealized gains recognized from changes in fair value through profit or loss amounted to P=0.2 million, P=0.3 million and P=2.8 million in 2017, 2016 and 2015, respectively (see Note 22).

8. Receivables

This account consists of:

2017 2016 (In Thousands) Receivables from related parties (Note 20) P=1,487,762 P=1,704,568 Trade: Residential development (Note 27) 201,354 160,587 Commercial development (Notes 16 and 22) 136,819 11,115 Shopping centers (Note 27) 113,348 114,665 Corporate business (Note 27) 69,088 36,592 Accrued receivable 309,297 162,657 Advances to contractors (Note 20) 101,016 117,627 Receivables from employees 16,741 18,424 Others 59,372 62,763 2,494,797 2,388,998 Less allowance for impairment losses 16,683 16,683 2,478,114 2,372,315 Less noncurrent portion 475,973 434,758 P=2,002,141 P=1,937,557

*SGVFS027143* - 27 -

The nature of trade receivables of the Group are as follows:

· Residential development pertains to receivables arising from the sale of residential lots and condominium units. · Commercial development pertains to receivables arising from the sale of commercial lots and development rights. · Shopping centers pertain to receivables arising from the lease of retail space and land therein, movie theaters, food courts, entertainment facilities and carparks. · Corporate business pertains to receivables arising from the lease of office buildings and accrued rent receivable. · 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. · Advances to contractors are recouped every progress billing payment depending on the percentage of accomplishment. · 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 consist 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.

As of December 31, 2017 and 2016, “sales contract receivables” under residential development trade receivables with a nominal amount of P=201.4 million and P=160.6 million, respectively. “Receivables from the sale of development rights” under commercial development trade receivables were initially recorded at fair value as of December 31, 2017. The fair value of the receivables was obtained by discounting future cash flows using the applicable rates of similar types of instruments.

As of December 31, 2017 and 2016, the aggregate unamortized discount on “sales contract receivables” under residential development trade receivables amounted to P=47.5 million and P=50.5 million, respectively, and on “receivables from the sale of development rights” under commercial development trade receivables amounted to P=7.4 million and nil, respectively.

*SGVFS027143* - 28 -

Movements in the unamortized discount on trade receivables in 2017 and 2016 are as follows:

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

2016 Residential Commercial development development Total (In Thousands) At January 1 P=16,241 P=− P=16,241 Additions 57,186 − 57,186 Accretion (Note 22) (22,903) − (22,903) At December 31 P=50,524 P=− P=50,524

Allowance for impairment losses pertains to trade receivables that are individually and collectively identified as impaired. No provision for impairment losses was recognized in 2017, 2016 and 2015. As of December 31, 2017 and 2016, allowance for impairment losses amounted to P=16.7 million.

9. Inventories

This account consists of:

2017 2016 (In Thousands) Subdivision lot for sale and development P=554,627 P=441,764 Condominium units for sale 196,457 282,087 P=751,084 P=723,851

The subdivision lot and condominium units are carried at cost.

A summary of the movements in inventories is set out below:

2017 Subdivision lot Condominium for sale and units under development 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

*SGVFS027143* - 29 -

2016 Subdivision lot Condominium for sale and units under development development Total (In Thousands) At January 1 P=725,682 P=334,384 P=1,060,066 Transfers to investment properties (Note 14) (231,727) − (231,727) Disposals (recognized as cost of real estate sales) (Note 23) (22,442) (156,893) (179,335) Construction/development costs incurred − 104,596 104,596 Other adjustments (29,749) − (29,749) At December 31 P=441,764 P=282,087 P=723,851

The Group transferred P=231.7 million worth of subdivision lot to investment properties from inventories in 2016 (see Note 14).

The amount of inventories recognized as cost of real estate sales in the consolidated statements of income amounted to P=205.4 million, P=179.3 million and P=571.9 million in 2017, 2016 and 2015, respectively (see Note 23).

There are no inventories as of December 31, 2017 and 2016 that are pledged as securities to liabilities.

10. Other Current Assets

This account consists of:

2017 2016 (In Thousands) Input VAT P=344,938 P=454,460 Prepaid expenses 51,740 25,683 CWT 28,335 42,569 Others 5,723 1,362 P=430,736 P=524,074

Input VAT is applied against output VAT. The remaining balance is recoverable in future periods. This also includes input VAT deferred pertaining to unpaid services which are incurred and billings which had been received as of date.

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.

CWTs are applied against income tax payable and are recoverable in future periods.

11. Available-for-sale financial assets

AFS financial assets consist of investments in unquoted club shares of City Sports Club Cebu (CSCC) amounting to ₱304.3 million and ₱318.6 million as of December 31, 2017 and 2016, respectively. There is no change in the fair value of the investments in club shares in 2017 and 2016.

*SGVFS027143* - 30 -

12. Property and Equipment

The rollforward analysis of this account follows:

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

2016 Buildings Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands) Cost At January 1 P=124,757 P=115,568 P=26,650 P=266,975 Transfers to investment properties (Note 14) − (23) − (23) Additions 329 20,688 5,438 26,455 Reclassifications (3,301) 3,301 − − Disposals − (1,387) (1,225) (2,612) At December 31 121,785 138,147 30,863 290,795 Accumulated Depreciation At January 1 89,930 87,962 15,760 193,652 Depreciation and amortization (Note 23) 6,062 9,919 3,917 19,898 Reclassifications (4,436) 4,436 − − Transfers to investment properties (Note 14) − (16) − (16) Disposals − (1,358) (941) (2,299) At December 31 91,556 100,943 18,736 211,235 Net Book Value P=30,229 P=37,204 P=12,127 P=79,560

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).

Depreciation and amortization charged to general and administrative expenses amounted to P=28.2 million, P=19.9 million and P=18.9 million in 2017, 2016 and 2015, respectively (see Note 23).

Fully depreciated assets that are still in use amounted to P=142.7 million and P=245.3 million as of December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, there are no property and equipment items that are pledged as security to liabilities.

*SGVFS027143* - 31 -

13. Investments in Associates and a Joint Venture

The movements in investments in associates and a joint venture accounted for under equity method follow:

2017 2016 (In Thousands) Cost At January 1 P=1,496,426 P=1,171,426 Additional capital infusion 698,303 325,000 At December 31 2,194,729 1,496,426 Accumulated equity in net income At January 1 359,346 198,036 Equity in net income for the year 14,713 161,310 At December 31 374,059 359,346 Accumulated equity in other comprehensive loss At January 1 and December 31 (1,078) (1,078) P=2,567,710 P=1,854,694

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 2017 2016 2017 2016 (In Thousands) Associates: Solinea, Inc. (Solinea) 35% 35% P=388,918 P=421,107 Cebu Insular Hotels Company, Inc. (CIHCI) 37 37 313,453 247,243 Central Block Developers, Inc. (CBDI)* 48 57 1,189,738 489,409 Amaia Southern Properties, Inc. (ASPI) 35 35 129,102 136,802 Southportal Properties, Inc. (SPI) 35 35 103,678 113,950 Joint Venture: CDPEI 14 14 442,821 446,183 P=2,567,710 P=1,854,694 *Direct ownership and indirect ownership of the Parent Company is 25% and 47.9%, and 30% and 56.6% as of December 31, 2017 and 2016, respectively.

The significant transactions affecting the Group’s investments in associates and a joint venture are as follows:

2017 In 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.

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.

2016 In 2016, CHI and CPVDC made additional capital infusion to CBDI amounting to P=150.0 million and P=175.0 million, respectively, in relation to the latter’s increase in authorized capital stock.

*SGVFS027143* - 32 -

As of December 31, 2017 and 2016, the statements of financial position of these investments in associates and a joint venture are as follows:

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

2016 CBDI CIHCI Solinea CDPEI (In Thousands) Current assets P=238,448 P=189,719 P=2,324,322 P=226,531 Noncurrent assets 914,085 592,180 1,477,482 3,258,004 Total assets P=1,152,533 P=781,899 P=3,801,804 P=3,484,535

Current liabilities P=399,591 P=117,661 P=2,809,976 P=181,949 Noncurrent liabilities − 10,816 127,129 328,027 Equity 752,942 653,422 864,699 2,974,559 Total liabilities and equity P=1,152,533 P=781,899 P=3,801,804 P=3,484,535

Σγδ ρσσδλδµσρ νε βνλοθδγδµρηυδ ηµβνλδ νε σγδρδ ηµυδρσλδµσρ ενθ σγδ ξδθρ δµχδχ Χδβδλαδθ 20+ 1/06+ 1/05 µχ 1/04 θδ ρ ενκκνϖρ9

CBDI CIHCI Solinea CDPEI (In Thousands) 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)

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)

*SGVFS027143* - 33 -

For the year ended December 31, 2015 Revenue P=298 P=484,342 P=1,572,557 P=4,282 Costs and expenses 403 431,079 1,358,889 7,276 Net income (loss) (105) 53,263 213,668 (2,994) Other comprehensive loss − − − − Total comprehensive income (loss) (P=105) P=53,263 P=213,668 (P=2,994)

The Group’s total equity in net earnings of associates and a joint venture amounted to P=14.7 million, P=161.3 million and P=106.3 million in 2017, 2016 and 2015, respectively.

The aggregate financial information on associates on which the Group has immaterial interests in ASPI and SPI as of and for the years ended December 31 follows:

2017 2016 2015 (In Thousands) Carrying amount P=232,780 P=250,753 P=212,232 Share in net income/total comprehensive income 2,802 38,521 12,297

14. Investment Properties

The rollforward analysis of this account follows:

2017 Land Buildings and Construction-in- Land Improvements Improvements Progress Total (In Thousands) Cost At January 1 P=2,348,305 P=14,059 P=9,506,002 P=1,756,645 P=13,625,011 Additions 97,686 326 1,315,308 (780,380) 632,940 Transfers to: Property and equipment (Note 12) − − − (222,691) (222,691) Inventories (Note 9) (72,963) − − − (72,963) At December 31 2,373,028 14,385 10,821,310 753,574 13,962,297 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=2,373,028 P=9,230 P=7,745,228 P=753,574 P=10,881,060

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2016 Land Buildings and Construction-in- Land Improvements Improvements Progress Total (In Thousands) Cost At January 1 P=2,113,440 P=− P=8,507,125 P=1,947,581 P=12,568,146 Additions 3,349 14,059 194,807 641,808 854,023 Transfers from inventories (Note 9) 231,727 − − − 231,727 Reclassification (211) − 832,744 (832,744) (211) Transfers from property and equipment (Notes 12 and 32) − − 23 − 23 Disposals − − (28,697) − (28,697) At December 31 2,348,305 14,059 9,506,002 1,756,645 13,625,011 Accumulated Depreciation At January 1 − − 2,256,856 − 2,256,856 Depreciation and amortization (Note 23) − 2,343 379,829 − 382,172 Transfers from property and equipment (Notes 12 and 32) − 16 − 16 Disposals − − (25,139) − (25,139) At December 31 − 2,343 2,611,562 − 2,613,905 Net Book Value P=2,348,305 P=11,716 P=6,894,440 P=1,756,645 P=11,011,106

The Group’s investment properties consist of land and building held for commercial leasing to earn rentals.

In 2017, the Group transferred P=222.7 million from investment properties to property and equipment in 2017 (see Note 12).

In 2016, the Group also transferred P=231.7 million worth of subdivision lot from inventories to investment properties which was leased out by CPVDC to various tenants for its Garden Bloc project (see Note 9).

Depreciation charged to operations amounted to P=467.4 million, P=382.2 million and P=339.1 million in 2017, 2016 and 2015, respectively (see Note 23).

Total rental income from investment properties amounted to P=2,144.4 million, P=1,849.0 million and P=1,653.6 million in 2017, 2016 and 2015, respectively (see Note 21). Total direct operating expenses related to investment properties that generated rental income amounted to P=906.2 million, P=915.5 million and P=844.7 million in 2017, 2016 and 2015, respectively. Borrowing costs capitalized to construction-in-progress amounted to P=55.1 million in 2016 (see Note 18). Capitalization rate used for general borrowings is 4.75% in 2016. The Group no longer have qualifying asset in 2017.

As of December 31, 2017 and 2016, 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=38,121.7 million and P=25,672.7 million as of December 31, 2017 and 2016, 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. *SGVFS027143* - 35 -

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.

Description of valuation techniques used and key inputs to valuation on land and buildings included under investment properties as of December 31, 2017 and 2016 follows:

Significant Property Valuation technique unobservable inputs Range 2017 2016 Land Sales comparison approach Price per square meter P=13,000−P=250,000 P=7,000−P=96,000

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. Land and Improvements

On February 9, 2016, the Group purchased two (2) parcels of land located in Lahug, Cebu City for a total consideration of P=257.0 million and incurred additional related costs amounting to P=6.8 million.

On August 7, 2015, the Group, together with Ayala Land, Inc. (Ayala Group), in consortium with SM Group, purchased the South Road Property Lot 8-B-1 from the City Government of Cebu for P=2.3 billion payable in equal annual installments until August 7, 2018. In 2017 and 2016, the Group incurred additional land development costs amounting to P=55.7 million and P=59.2 million, respectively.

As of December 31, 2017 and 2016, the Group’s land and improvements amounted to P=2.6 billion. Outstanding liability for land acquisition amounted to P=351.6 million and P=703.1 million as of December 31, 2017 and 2016, respectively (see Notes 17 and 19).

16. Other Noncurrent Assets

This account consists of:

2017 2016 (In Thousands) Development rights (Note 14) P=29,395 P=− Deferred input VAT 23,927 13,762 Deposits 1,199 1,208 Others 513 577 P=55,034 P=15,547 *SGVFS027143* - 36 -

Development rights pertain to the saleable and non-saleable development rights acquired by the Parent Company. The non-saleable portion is allocated to the gross floor area of a structure in a particular lot that can be developed in the future. The development rights are capitalized as additional cost of the structure once the development commences.

Deferred input VAT arises from the purchase of capital goods and is recoverable in future periods. This is amortized over five (5) years or the assets’ useful life, whichever is lower, and is applied against output VAT.

Deposits include advance payments made by the Group for future land and building developments.

17. Accounts and Other Payables

This account consists of:

2017 2016 (In Thousands) Payable to related parties (Note 20) P=2,406,878 P=1,567,261 Accrued expenses 722,952 991,691 Accrued project costs (Note 20) 695,441 872,754 Liability for purchased land (Notes 15 and 19) 351,569 703,138 Retentions payable 212,768 250,399 Taxes payable 211,949 245,974 Interest payable 4,386 48,315 Dividends payable 1,751 1,751 Others (Note 20) 97,866 41,586 4,705,560 4,722,869 Noncurrent portion of liability purchased (Notes 15 and 19) − 351,569 P=4,705,560 P=4,371,300

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.

Dividends payable pertains to dividends declared by CPVDC payable to non-controlling interests (see Note 28).

Noncurrent portion of liability for land purchased is presented as part of “Deposits and other noncurrent liabilities” in the consolidated statements of financial position.

Other payables are noninterest-bearing and are normally settled within one year. This also includes the Parent Company’s payable to a related party for the purchase of commercial units (see Note 20).

*SGVFS027143* - 37 -

18. Long-term Debt

This account consists of long-term bonds and bank loans of the Group as follows:

2017 2016 (In Thousands) Bonds: Due 2021 (Note 18a) 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 (Note 18b) 404,250 − Fixed rate corporate notes with interest rate of 4.75% per annum (Note 18c) 378,000 399,000 BSP Overnight Reverse repurchase Repurchase Agreement Rate plus 0.25% per annum, inclusive of gross receipts tax (Note 18d) 363,875 378,125 At 0.70% per annum spread over the 90-day PDST-R2 (Note 18e) 340,000 − At 0.65% per annum spread over the average floating rate of 91-day treasury bill rate; Interest payable every quarter, 50% of principal is payable in equal quarterly installment and the remaining 50% is payable on maturity date (Note 18f) − 405,000 At 0.50% per annum spread over the average fixed rate of 7-year treasury bond rate on PDST-R2 rate (Notes 18f) − 3,000 6,486,125 6,185,125 Less unamortized debt issue cost 32,549 36,814 6,453,576 6,148,311 Less current portion 59,942 442,279 P=6,393,634 P=5,706,032

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:

2017 2016 (In Thousands) At January 1 P=36,814 P=43,460 Additions 3,800 1,900 Amortization (Note 23) (8,065) (8,546) At December 31 P=32,549 P=36,814

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 was 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.

*SGVFS027143* - 38 -

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. The related outstanding balance amounted to P=404.3 million as of December 31, 2017. 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 included under “Investment properties” (see Note 14). The interest is payable every quarter. Twenty five percent (25%) of principal is payable in twenty (20) installments starting on the first quarter of 2016 and the remaining seventy five percent (75%) is payable on maturity date.

The related outstanding balance amounted to P=378.0 million and P=399.0 million as of December 31, 2017 and 2016, respectively. Total payments related to this loan amounted to P=21.0 million in 2017 and 2016. 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. The related outstanding balance amounted to P=363.9 million and P=378.1 million as of December 31, 2017 and 2016, 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, 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. Outstanding balance amounted to nil and P=3.0 million as of December 31, 2017 and 2016, respectively.

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 and P=405.0 million as of December 31, 2017 and 2016, respectively. The interest is payable every quarter. Fifty percent (50%) of principal is payable in equal quarterly installments and the remaining balance is payable on maturity date.

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=345.2 million, P=247.7 million, and P=346.2 million in 2017, 2016 and 2015, respectively.

For the years ended December 31, 2017 and 2016, the Group has capitalized interest from borrowed funds as part of the “Investment properties” account amounting to nil and P=115.9 million, respectively (see Note 14).

*SGVFS027143* - 39 -

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. These restrictions and requirements were complied with by the Group as of December 31, 2017 and 2016.

19. Deposits and Other Liabilities

This account consists of the following:

2017 2016 (In Thousands) Tenants’ deposits P=793,870 P=782,399 Customers’ deposits 258,204 189,719 Construction bond 85,361 66,978 Liability for purchased land (Notes 15 and 17) − 351,569 1,137,435 1,390,665 Less noncurrent portion 316,479 591,366 P=820,956 P=799,299

The rollforward analysis of deferred credits under tenants’ deposits follows:

2017 2016 At January 1 P=15,750 P=16,486 Additions 7,629 4,858 Amortization (Note 23) (3,751) (5,594) At December 31 P=19,628 P=15,750

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

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.

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 Group does not provide any allowance relating to receivable from related parties. 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.

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 2017 2016 2017 2016 (In Thousands) Subsidiaries of ALI P=884,719 P=953,436 P=1,383,870 P=966,372 Associates: SPI 267,082 395,253 − − Solinea 251,367 251,295 − − CBDI 52,044 72,501 − − CIHC − 8,144 − − Parent Company - ALI 30,946 22,009 1,023,008 600,869 Joint venture - CDPEI 1,604 1,551 − − Others − 379 − 20 P=1,487,762 P=1,704,568 P=2,406,878 P=1,567,261

Revenue Costs/Expenses 2017 2016 2015 2017 2016 2015 (In Thousands) (In Thousands) Associates - SPI P=− P=− P=330,711 P=− P=− P=− Joint venture - CDPEI − − 122,978 − − − Parent Company - ALI 14,945 5,635 8,115 69,989 168,636 180,268 Subsidiaries of ALI 26,570 8,876 635,769 184,665 30,755 27,046 P=41,515 P=14,511 P=1,097,573 P=254,654 P=199,391 P=207,314

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, 2017 and 2016.

The nature and amounts of material transactions with related parties as of December 31, 2017 and 2016 are as follows:

· 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 and was recognized at present value.

· Included under the accrued project costs in “Accounts and other payables” are construction costs payable to MDC amounting to P=342.9 million and P=381.1 million as of December 31, 2017 and 2016, respectively. Advances to MDC, which are included under advances to contractors in “Accounts receivable” (see Note 8) amounted to P=47.0 million and P=61.3 million as of December 31, 2017 and 2016, respectively.

*SGVFS027143* - 41 -

· Expenses to ALI pertain to management fees, professional fees and systems costs.

§ Management and service fees charged by ALI amounted to P=162.3 million, P=125.0 million and P=133.1 million in 2017, 2016 and 2015, 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=15.9 million, P=27.6 million and P=25.1 million in 2017, 2016 and 2015, respectively.

· As of December 31, 2017 and 2016, 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 payable in installment until May 2018.

Compensation of key management personnel by benefit type follows:

2017 2016 2015 (In Thousands) Short-term employee benefits P=18,740 P=24,073 P=21,336 Post-employment pension and other benefits 817 924 1,025 P=19,557 P=24,997 P=22,361

21. Real Estate Revenue This account consists of: 2017 2016 2015 (In Thousands) Rental income (Notes 14 and 30) P=2,144,414 P=1,848,997 P=1,653,632 Real estate sales (Note 20) 347,712 297,610 1,337,422 Theater income 129,607 132,082 143,192 P=2,621,733 P=2,278,689 P=3,134,246

*SGVFS027143* - 42 -

22. Interest and Other Income

Interest income consists of: 2017 2016 2015 (In Thousands) Interest income derived from: Cash and cash equivalents (Note 5) P=1,047 P=841 P=8,049 Short-term investments (Note 6) 200 472 971 Intercompany loans 10,734 10,482 − Accretion of receivables (Note 8) 25,623 22,903 22,542 Others 3,929 1,217 66,557 P=41,533 P=35,915 P=98,119

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: 2017 2016 2015 (In Thousands) Recoveries - net P=206,193 P=175,379 P=311,482 Gain on sale of development rights (Notes 8 and 16) 168,195 − − Service income 18,847 5,082 29,389 Beverage 5,825 4,112 5,659 Realized and unrealized gain on financial assets at FVPL (Note 7) 244 316 2,820 Others 14,951 53,670 52,241 P=414,255 P=238,559 P=401,591

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).

Service income pertains to the various management fees charged by the Group to various parties.

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.

*SGVFS027143* - 43 -

23. Costs and Expenses

Real estate, rental and theater expenses consist of:

2017 2016 2015 (In Thousands) Cost of real estate sales (Note 9) P=205,427 P=179,335 P=571,945 Depreciation and amortization (Note 14) 467,390 382,172 339,141 Marketing and management fees (Note 20) 230,838 199,567 246,609 Producers’ film share 72,830 74,051 79,159 Manpower cost (Note 20) 23,020 22,838 17,640 Rental 1,956 2,540 2,661 Direct operating expenses: Security and janitorial 137,063 101,935 88,830 Repairs and maintenance 109,037 100,160 90,292 Taxes and licenses 81,510 79,208 55,739 Commission 54,445 17,579 28,152 Light and water 14,649 86,454 179,159 Dues and fees 12,172 11,320 10,537 Insurance 8,321 6,188 16,562 Professional fees 6,487 6,689 8,763 Transportation and travel 647 588 691 Representation 177 399 230 Provision for impairment loss − − 36,518 Others 11,611 24,824 21,356 P=1,437,580 P=1,295,847 P=1,793,984

General and administrative expenses consist of:

2017 2016 2015 (In Thousands) Manpower cost (Notes 20 and 24) P=105,576 P=120,623 P=119,526 Depreciation and amortization (Note 12) 28,220 19,898 18,884 Stockholders' meeting 13,399 11,171 9,948 Professional fees 10,330 7,956 5,814 Repairs and maintenance 9,850 6,542 7,030 Transportation and travel 5,363 5,072 5,414 Trainings 4,336 3,336 3,548 Postal and communication 4,190 3,625 3,801 Dues and fees 4,121 1,082 1,132 Utilities 4,028 3,568 2,143 Security and janitorial 3,101 2,899 2,029 Representation 3,165 1,561 1,163 Supplies 2,805 2,844 2,880 Advertising 2,615 2,601 2,112 Taxes and licenses 746 892 806 Insurance 726 510 621 Rental 436 2,487 2,370 Provision for impairment loss (Note 8) − − 3,106 Others 9,076 2,354 30,850 P=212,083 P=199,021 P=223,177

*SGVFS027143* - 44 -

Other charges consist of:

2017 2016 2015 (In Thousands) Provisions and other expenses P=11,100 P=50,746 P=88,983 Amortization of discount on long-term debt (Note 18) 8,065 8,546 6,935 Amortization of deferred credits (Note 19) 3,751 5,594 6,975 P=22,916 P=64,886 P=102,893

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 2017 and 2016 are as follows:

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

2016 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, 2016 service cost service cost Net interest Subtotal plan assets the Group Settlement plan assets assumptions adjustments Subtotal 2016 Present value of defined benefit obligation P=89,242 P=7,596 P=− P=4,420 P=12,016 (P=1,989) P=− P=− P=− (P=21,646) P=1,075 (P=20,571) P=78,698 Fair value of plan assets (33,210) − − (1,749) (1,749) 1,989 (15,005) − 1,476 − − 1,476 (46,499) Net defined benefit liability (asset) P=56,032 P=7,596 P=− P=2,671 P=10,267 P=− (P=15,005) P=− P=1,476 (P=21,646) P=1,075 (P=19,095) P=32,199

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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=6.0 million to its retirement fund in 2018.

The major categories of the Group’s plan asset follows:

2017 2016 Government Securities 93.95% 38.16% Unit Investments Trust Fund 5.20 5.15 Cash and Cash equivalents 0.85 0.16 Mutual Fund 0.00 56.53 100.00% 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:

2017 2016 2015 Discount rate 5.00% 5.25% 5.00% Salary increase rate 5.00 5.00 7.00

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 2017 2016 Discount rate 1.0% increase (8.92%) (9.45%) Discount rate 1.0% decrease 10.23% 11.19% Rate of salary increase 1.0% increase 10.23% 11.11% Rate of salary increase 1.0% decrease (9.00%) (9.55%)

The weighted average duration of the defined benefit obligation at the end of the reporting period is 11 years and 12 years as of December 31, 2017 and 2016, respectively.

The following table shows the maturity profile of the Group’s defined benefit obligation based on undiscounted benefit payments:

2017 2016 (In Thousands) Within 1 year P=1,844 P=4,727 More than 1 year to 5 years 23,032 16,231 More than 5 years to 10 years 25,933 2,362 More than 10 years − 38,920 P=50,809 P=62,240

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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=251.1 million, P=132.1 million and P=207.4 million in 2017, 2016 and 2015, respectively.

Reconciliation between the statutory income tax rate and the effective income tax rate follows:

2017 2016 2015 Statutory income tax rate 30.00% 30.00% 30.00% Tax effects of: Income subjected to lower income tax rates (6.22) (13.27) (2.44) Equity in net earnings of associates and a joint venture (0.41) (7.28) (9.60) Interest income and capital gains taxed at lower rates (0.02) (0.03) (0.03) Expired NOLCO and MCIT 0.97 3.54 1.30 Others 0.01 6.36 6.57 Effective income tax rate 24.33% 19.32% 25.80%

The components of net deferred tax assets as of December 31 are as follow:

2017 2016 (In Thousands) Deferred tax assets on: Unapplied NOLCO P=21,668 P=24,329 Advance rent 13,530 15,304 Unamortized discount on intercompany payable 5,873 7,708 MCIT 3,543 2,193 Unamortized discount on customers’ deposits 1,763 79 Allowance for impairment losses 642 641 Others 3,065 181 50,084 50,435 Deferred tax liabilities on: Accrued rental income 20,685 9,377 Capitalized interest 17,079 16,892 Difference between tax and book basis of accounting for real estate transactions 2,322 2,322 Others 5,441 3,008 45,527 31,599 P=4,557 P=18,836

The components of net deferred tax liabilities as of December 31 are as follows:

2017 2016 (In Thousands) Deferred tax assets on: Allowance for impairment losses P=28,635 P=25,458 Accrued expenses 21,215 20,020 Unamortized discount on sale of land 6,599 13,794 Retirement benefits 3,737 8,117 Unrealized foreign exchange loss 717 715 Advance rent 667 1,195 Interest accretion on rental deposits 32 10 Others 786 2,329 62,388 71,638

(Forward)

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2017 2016 (In Thousands) Deferred tax liabilities on: Unrealized gross profit on lot sale P=114,907 P=145,813 Unamortized capitalized interest 90,024 92,215 Difference between tax and book basis of accounting for real estate transactions 58,665 63,615 Others 60,098 6,160 323,694 307,803 P=261,306 P=236,165

As of December 31, 2017 and 2016, deferred tax assets arising from NOLCO and MCIT amounting to P=1.9 million and P=4.8 million, respectively, and P=0.17 million and P=0.09 million, respectively, have not been recognized by TPEPI 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, 2017 and 2016 follow:

NOLCO

Year Incurred Amount Expired Balance Expiry Date 2017 P=25,599,407 P=− P=25,599,407 2020 2015 48,495,209 − 48,495,209 2018 2014 37,354,687 (37,354,687) − 2017 2013 32,131,800 (32,131,800) − 2016 P=143,581,103 (P=69,486,487) P=74,094,616

MCIT

Year Incurred Amount Expired Balance Expiry Date 2017 P=1,324,094 P=− P=1,324,094 2020 2016 2,192,808 − 2,192,808 2019 2015 194,886 − 194,886 2018 2014 76,948 (76,948) − 2017 P=3,788,736 (P=76,948) P=3,711,788

RA No.10963 or the Tax Reform for Acceleration and Inclusion Act (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. The TRAIN changes existing tax law and includes several provisions that will generally affect businesses on a prospective basis. Although the TRAIN changes existing tax law and includes several provisions that will generally affect businesses on a prospective basis, the management assessed that the same did not have any significant impact on the consolidated financial statement balances as of the reporting date.

The Group’s management is currently assessing the impact of the TRAIN Law on its 2018 consolidated financial statement balances.

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26. Basic/Diluted Earnings Per Share

The following table presents information necessary to compute EPS:

2017 2016 2015 (In Thousands, except EPS) a. Net income attributable to the equity holders of the Parent Company P=753,447 P=679,663 P=827,207 b. Weighted average number of outstanding shares 1,920,074 1,920,074 1,920,074 c. Basic/Diluted Earnings per share (a/b) P=0.39 P=0.35 P=0.43

There were no potential dilutive shares in 2017, 2016 and 2015.

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, 2017 and 2016. · AFS financial assets: The fair value of AFS financial assets is determined based on the available selling price in the market. · 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 5.3% as of December 31, 2017 and 2016.

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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, 2017 December 31, 2016 Carrying Carrying Value Fair Value Value Fair Value (In Thousands) Loans and Receivables Trade residential development P=201,354 P=289,793 P=160,587 P=173,320 Receivable from related parties 1,487,762 590,904 1,704,568 803,718 Other Financial Liabilities Long-term debt P=6,486,125 P=6,453,576 P=6,185,125 P=6,148,311 Tenants’ deposits under deposits and other liabilities 820,956 790,726 799,299 783,549

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 disclosure on fair value measurement hierarchy for financial instruments as of December 31 follow:

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

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2016 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, 2016 P=318,574 P=318,574 P=− P=− P=318,574 FVPL December 31, 2016 21,908 21,908 − 21,908 − Assets for which fair values are disclosed Trade residential development December 31, 2016 160,587 173,320 − − 173,320 Receivable from related parties December 31, 2016 1,704,568 803,718 − − 803,718 Investment properties December 31, 2016 11,011,106 25,672,676 − − 25,672,676 Liabilities for which fair values are disclosed Long-term debt December 31, 2016 6,185,125 6,148,311 − − 6,148,311 Tenants’ deposits under deposits and other liabilities December 31, 2016 799,299 783,549 − − 783,549

The Group categorized the fair value of long-term debt and deposits and other noncurrent liabilities under Level 3 as of December 31, 2017 and 2016. 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.

There have been no reclassifications between Level 1, 2 and 3 categories in 2017 and 2016.

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.

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.

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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.

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, 2017 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=201,354 P=289,793 P=− P=289,793 Commercial development 136,819 − 136,819 − Shopping centers 113,348 774,242 − 113,348 Corporate business 69,088 179,583 − 69,088 P=520,609 P=1,243,618 P=136,819 P=472,229

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December 31, 2016 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=160,587 P=53,049 P=107,538 P=53,049 Shopping centers 114,665 696,194 − 114,665 Corporate business 36,592 121,116 − 36,592 Commercial development 11,115 − 11,115 − P=322,959 P=870,359 P=118,653 P=204,306

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 Past Due or Grade Grade Grade Impaired Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=144,176 P=− P=− P=− P=144,176 Financial assets at FVPL 10,129 − − − 10,129 Trade receivables: Residential development 201,354 − − − 201,354 Commercial development 136,819 − − − 136,819 Shopping centers 64,729 2,243 − 46,376 113,348 Corporate business 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=2,439,776 P=2,243 P=304,333 P=106,067 P=2,852,419

December 31, 2016

Neither Past Due nor Impaired High Medium Low Past Due or Grade Grade Grade Impaired Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=94,538 P=− P=− P=− P=94,538 Financial assets at FVPL 21,908 − − − 21,908 Trade receivables: Residential development 134,891 − − 25,696 160,587 Shopping centers 27,129 6,947 9,008 71,581 114,665 Corporate business 18,870 − − 17,722 36,592 Commercial development 1,488 − − 9,627 11,115 Receivable from related parties 1,541,607 − − 162,961 1,704,568 Receivables from employees 18,424 − − − 18,424 Accrued receivable 162,657 − − − 162,657 Others 62,763 − − − 62,763 AFS financial assets − − 318,574 − 318,574 P=2,084,275 P=6,947 P=327,582 P=287,587 P=2,706,391

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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:

§ 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.

§ 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, 2017 and 2016, 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. As of December 31, 2017 and 2016, 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 Individually 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 136,819 − − − − − − 136,819 Commercial 66,972 5,969 4,744 5,226 7,009 6,745 16,683 113,348 development 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

December 31, 2016

Neither Past Past Due but not Impaired Due nor 30-60 60-90 90-120 Individually Impaired <30 days days days days >120 days Impaired Total (In Thousands) Trade receivables: Residential development P=134,891 P=− P=− P=− P=8,231 P=17,465 P=− P=160,587 Shopping centers 43,084 8,702 6,286 5,957 10,167 23,786 16,683 114,665 Corporate business 18,870 − 1,444 7,237 4,835 4,206 − 36,592 Commercial development 1,488 − − − 214 9,413 − 11,115 Receivable from related 1,541,607 − 33,051 76,093 434 53,383 − 1,704,568 parties Receivable from 18,424 − − − − − − 18,424 employees Accrued receivable 162,657 − − − − − − 162,657 Others 62,763 − − − − − − 62,763 P=1,983,784 P=8,702 P=40,781 P=89,287 P=23,881 P=108,253 P=16,683 P=2,271,371

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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, 2017 and 2016, current ratio is 0.60:1 and 0.59:1, respectively, with cash and cash equivalents, short-term investments and financial assets at FVPL of P=189.5 million and P=116.8 million, respectively, accounting for 6.5% and 3.5% of the total current assets, respectively, and resulting in a negative net working capital of P=2,263.4 million and P=2,320.7 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 and financial liabilities as of December 31 based on the contractual undiscounted payments.

December 31, 2017

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=144,176 P=− P=− P=− P=144,176 Short-term investments 2,543 − − − 2,543 Financial assets at fair value through profit or loss 10,129 − − − 10,129 Receivable 1,901,125 113,049 202,434 177,173 2,393,781 Total financial assets P=2,057,973 P=113,049 P=202,434 P=177,173 P=2,550,629 Accounts and other payables P=4,493,611 P=− P=− P=− P=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 P=5,652,133 P=415,435 P=407,199 P=6,743,838 P=13,218,605

December 31, 2016

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=94,538 P=− P=− P=− P=94,538 Financial assets at fair value through profit or loss 21,908 − − − 21,908 Receivable 1,222,696 364,921 408,969 274,785 2,271,371 Total financial assets P=1,339,142 P=364,921 P=408,969 P=274,785 P=2,387,817 Accounts and other payables P=4,125,326 P=− P=− P=− P=4,125,326 Long-term debt 442,279 39,451 78,931 5,587,650 6,148,311 Interest payable - long-term debt 55,111 297,136 295,416 861,545 1,509,208 Deposits and other liabilities 782,025 527,803 21,348 59,489 1,390,665 Total other financial liabilities P=5,404,741 P=864,390 P=395,695 P=6,508,684 P=13,173,510

Cash and cash equivalents, financial assets at FVPL and accounts receivable 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.

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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:

2017 2016 Php Php US Dollar Equivalent US Dollar Equivalent (In Thousands) Cash and cash equivalents $520 P=26,265 $263 P=13,076

In translating the foreign-currency-denominated monetary assets into Peso amounts, the exchange rates used were P=50.51 to US$1.00 and P=49.72 to US$1.00, the Philippine Peso-US Dollar exchange rates as of December 31, 2017 and 2016, respectively.

The following table demonstrates the sensitivity to a reasonable possible change in the US dollar rate, with all variables held constant, of the Group’s profit before tax (due to changes in the Peso equivalent of the dollar-denominated cash and cash equivalents and short-term investments). There is no other impact on the Group’s equity other than those already affecting the profit or loss.

Increase (Decrease) Effect on Profit in exchange rate Before Tax (In Thousands) December 31, 2017 P=1.00 P=520 (1.00) (520) December 31, 2016 1.00 263 (1.00) (263)

Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Group’s interest rate exposure management policy centers on reducing the Group’s overall interest expense and exposure to changes in interest rates. Changes in market interest rates relate primarily to the Group’s interest-bearing debt obligations with floating interest rate as it can cause a change in the amount of interest payments.

The Group manages its interest rate risk by leveraging on its premier credit rating and maintaining a debt portfolio mix of both fixed and floating interest rates. The portfolio mix is a function of historical, current trend and outlook of interest rates, volatility of short term interest rates, the steepness of the yield curve and degree of variability of cash flows.

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The following tables demonstrate the sensitivity of the Group’s income before income tax and equity to a reasonable possible change in interest rates, with all variables held constant, (through the impact on floating rate borrowings) as of December 31:

Βγµφδ ηµ αρηρ ονηµσρ 2017 1/05 ∋Ηµ Σγντρµχρ( Ηµβθδρδ ∋χδβθδρδ(9 ∆εεδβσ νµ ηµβνλδ αδενθδ 0// αρηρ ονηµσρ (P=11,031) ∋P= 6+73/( ηµβνλδ σω 0// αρηρ ονηµσρ 11,031 6+73/

+ -

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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, 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 bond + 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

December 31, 2016 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=94,538 P=94,538 P=− P=94,538 Accounts receivable Fixed at the date of sale Date of sale 2,271,371 1,222,696 1,048,675 2,271,371 P=2,365,909 P=1,317,234 P=1,048,675 P=2,365,909 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=4,966,530 P=4,966,530 Peso Fixed rate corporate notes Maturity date 399,000 20,704 377,070 397,774 Peso Fixed rate 7-year treasury bond + 0.50 spread Maturity date 3,000 2,997 − 2,997 Floating Peso Floating rate of average 91-day treasury bill rate + 0.65% spread Maturity date 405,000 404,591 − 404,591 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 378,125 13,987 362,432 376,419 P=6,185,125 P=442,279 P=5,706,032 P=6,148,311

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The maturities of long-term debt at nominal values are as follow:

2017 2016 (In Thousands) Due in: 2017 P=− P=443,250 2018 61,000 40,000 2019 61,000 40,000 2020 78,000 40,000 2021 5,372,000 5,334,000 2022 57,000 19,000 2023 585,125 268,875 2024 17,000 − 2025 17,000 − 2026 17,000 − 2027 221,000 − P=6,486,125 P=6,185,125

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=404.3 million as of December 31, 2017 (see Note 18).

In March 2016, the Group obtained a credit facility amounting to P=800.0 million. As of December 31, 2017 and 2016, the undrawn amount amounted to P=380.0 million and P=420.0 million, respectively (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, 2017 and 2016, 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 2017 and 2016, respectively, a 1.0% change in NAVPU will increase/decrease net income and equity by P=0.01 million and P=0.02 million for the years ended December 31, 2017 and 2016, respectively.

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28. Equity

Capital Stock The details of the Parent Company’s common shares as of December 31, 2017 and 2016 follow:

Authorized shares 3,000,000,000 Par value per share P=1.0 Shares issued and outstanding 1,920,073,623

In accordance with Securities Regulation Code Rule 68, As Amended (2011), Annex 68-D, below is a summary of the Parent Company’s track record of registration of securities as of December 31:

2017 2016 Number of Number of Number of shares Issue/offer Date of holders of holders of registered price approval securities securities Common shares 3,000,000,000 P=1.00 par value February 14, 4,029 4,150 P=4.00 issue price 1994

Additional paid-in capital (APIC) The excess of subscription received over the par value were charged to APIC amounted to P=856.7 million as of December 31, 2017 and 2016.

Unappropriated retained earnings The retained earnings available for dividend distribution of the Parent Company amounted to P=1,868.6 million and P=1,478.8 million as of December 31, 2017 and 2016, respectively.

Retained earnings include undistributed net earnings of subsidiaries and associates amounting P=1,852.3 million and P=1,307.7 million as of December 31, 2017 and 2016, respectively. These amounts are not available for dividend declaration until declared by the subsidiaries and affiliates.

In December 2017, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling 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 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.

On December 1, 2015, the Parent Company’s BOD declared P=0.12 per share cash dividends totaling P=230.4 million from unappropriated retained earnings to all its issued and outstanding shares as of record date December 16, 2015, and paid on December 23, 2015.

On December 11, 2015, CPVDC’s BOD declared P=0.12 per share cash dividends from unappropriated retained earnings to all its issued and outstanding shares as of record date December 16, 2015, and paid on December 23, 2015.

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.

In 2015, the Parent Company bought a land amounting to P=2.3 billion with remaining unpaid balance of P=351.6 million and P=703.1 million as of December 31, 2017 and 2016, respectively (see Note 15). However, the appropriation was not yet released since the development has not started as of December 31, 2017.

*SGVFS027143* - 61 -

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:

2017 2016 (In Thousands) Long-term debt P=6,453,576 P=6,148,311 Less: Cash and cash equivalents 176,788 94,908 Short-term investments 2,543 − Financial assets at fair value through profit or loss 10,129 21,908 Net debt P=6,264,116 P=6,031,495 Equity attributable to equity holders of Cebu Holdings, Inc. P=6,989,133 P=6,527,891 Debt to equity 92.34% 94.19% Net debt to equity 89.63% 92.40%

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, 2017, 2016 and 2015 revenue and expense information for the three- year year ended December 31, 2017. 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

*SGVFS027143* - 64 -

2015

Eliminations Commercial Residential Shopping Corporate and Development Development Centers Business Others Adjustments Total (In Thousands) Revenue Sales to external customers P=330,711 P=883,733 P=1,437,466 P=496,028 P=455,324 (P=469,016) P=3,134,246 Equity in net earnings of associates and a joint venture − − − − 106,303 − 106,303 Total revenue 330,711 883,733 1,437,466 496,028 561,627 (469,016) 3,240,549 Operating expenses (228,054) (358,366) (637,436) (520,021) (280,317) 7,033 (2,017,161) Operating profit (loss) 102,657 525,367 800,030 (23,993) 281,310 (461,983) 1,223,388 Interest income 591 45,080 2,341 46,268 3,839 − 98,119 Other income − 3,778 235,472 95,232 67,109 − 401,591 Interest expense − − − − (346,215) − (346,215) Other charges − − − − (102,893) − (102,893) Provision for (benefit from) income tax (31,059) (23,309) (127,910) (11,808) (134,445) (121) (328,652) Net income (loss) P=72,189 P=550,916 P=909,933 P=105,699 (P=231,295) (P=462,104) P=945,338 Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. P=59,830 P=517,890 P=856,213 P=87,162 (P=231,784) (P=462,104) P=827,207 Non-controlling interests 12,359 33,026 53,720 18,537 489 − 118,131 P=72,189 P=550,916 P=909,933 P=105,699 (P=231,295) (P=462,104) P=945,338 Other Information Segment assets P=519,725 P=2,542,693 P=5,225,776 P=5,611,795 P=4,316,037 P=148,125 P=18,364,151 Investments in associates and a joint venture − − − − 1,368,384 – 1,368,384 Deferred tax assets − − − − 652 − 652 Total assets P=519,725 P=2,542,693 P=5,225,776 P=5,611,795 P=5,685,073 P=148,125 P=19,733,187 Segment liabilities P=71,418 P=531,946 P=1,398,228 P=3,231,185 P=7,518,899 (P=99,686) P=12,651,990 Deferred tax liabilities − − − − 153,603 15,488 169,091 Total liabilities P=71,418 P=531,946 P=1,398,228 P=3,231,185 P=7,672,502 (P=84,198) P=12,821,081 Segment additions to property and equipment and investment properties P=633,563 P=− P=168,408 P=607,737 P=431 P=− P=1,410,139 Depreciation and amortization P=− P=− P=209,937 P=145,295 P=2,793 P=− P=358,025

*SGVFS027143* - 65 -

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 2017 2016 (In Thousands) Within one year P=599,699 P=397,758 After one year but not more than five years 1,746,529 879,110 More than five years 997,482 1,003,876 P=3,343,710 P=2,280,744

The total rent income amounted to P=2,144.4 million, P=1,849.0 million and P=1,653.6 million in 2017, 2016 and 2015, respectively (see Note 21). Contingent rent recognized in December 31, 2017, 2016 and 2015 amounted to P=111.2 million, P=102.9 million and P=107.1 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, 2017 to December 31, 2017, renewable every year thereafter under new terms and conditions. The total rent expense amounted to P=2.4 million, P=2.5 million and P=2.7 million in 2017, 2016 and 2015, 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.

*SGVFS027143* - 66 -

32. Supplemental Cash Flow Information

Changes in liabilities arising from financing activities follow:

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 property and equipment to investment properties with a net book value amounting to P=0.02 million in 2016; · Transfers from inventories to investment properties amounting to ₱231.7 million in 2016; · Transfers from investment properties to property and equipment and inventories amounting to ₱222.7 million and ₱73.0 million, respectively, in 2017; and · Assignment of club shares, classified as "Available-for-sale financial assets", to the condominium corporation which formed part of the cost of the Group's residential projects amounted to P14.2 million.

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. The information usually required under PAS 37 is not disclosed on the ground that it may prejudice the outcome of the legal proceeding.

*SGVFS027143* SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A), Philippines November 10, 2015, valid until November 9, 2018

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, 2017 and 2016 and for each of the three years in the period ended December 31, 2017, included in this Form 17-A, and have issued our report thereon dated February 26, 2018. 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, 2018

*SGVFS027143*

A member firm of Ernst & Young Global Limited 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, 2017

Receivable Payable Balance per Balance per Current CHI Parent CHI Subsidiaries Portion CPVDC and Subsidiary P=88,619,008 P=88,619,008 P=88,619,008 CLCI 33,113,778 33,113,778 33,113,778 TPEPI 57,800,000 57,800,000 57,800,000 Total Eliminated Receivables P=179,532,786 P=179,532,786 P=179,532,786 SCHEDULE I

CEBU HOLDINGS, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION DECEMBER 31, 2017

Unappropriated Retained Earnings, as adjusted, beginning P=1,478,753,439 Net income based on the face of AFS 659,507,516 Other adjustments: Dividends declared during the year (288,011,043) Deferred tax liabilities that increased the amount of provision for income tax 18,465,064 Fair value adjustments on financial assets at FVPL (93,977) Unappropriated Retained Earnings, end available for dividend distribution P=1,868,620,999 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, 2017

MERMAC, Inc.

48.96%

10.17% 40.87% MITSUBISHI CORPORATION Ayala Corporation Public

47.17%

52.83% 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, 2017

Ayala Land, Inc. (71.96%)

PCD Nominee Corp. Public (2.73%) (Filipino) (6.35%)

Cebu Holdings, Inc.

Laguna Properties Holdings, Makati Supermarket Inc (0.10%) Corp (0.16%)

PCD Nominee Corp (Non- Filipino) (18.70%) - 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.

Cebu Property Taft Punta CBP Theatre Ventures and Cebu Leisure Engaño Management Development Company, Inc. Property, Inc. Company, Inc. Corporation 100.00% 55.00 % 100.00% 76.26%

Asian I- Cebu Insular Amaia Office Hotel, Solinea, Inc. Southern Properties, Company, Inc. 35.00% Properties, Inc. 37.06% Inc. 100.00% 35.00%

Cebu District Property Enterprise Central Block Inc. Developer’s CHI 10.00%; Inc. CPVDC 5.00% CHI 25.00%; CPVDC 30.00% SCHEDULE K CEBU HOLDINGS, INC. AND SUBSIDIARIES SCHEDULE OF ALL EFFECTIVE STANDARDS AND INTERPRETATIONS UNDER PHILIPPINE FINANCIAL REPORTING STANDARDS DECEMBER 31, 2017

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, 2017:

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Framework for the Preparation and Presentation of Financial Statements Conceptual Framework Phase A: Objectives and qualitative characteristics ü PFRSs Practice Statement Management Commentary ü Philippine Financial Reporting Standards PFRS 1 First-time Adoption of Philippine Financial (Revised) Reporting Standards ü Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate ü Amendments to PFRS 1: Additional Exemptions for First-time Adopters ü Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time Adopters ü Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First-time Adopters ü Amendments to PFRS 1: Government Loans ü Amendments to PFRS 1: Borrowing costs ü Amendments to PFRS 1: Meaning of ‘Effective PFRSs Not early adopted PFRS 2 Share-based Payment ü Amendments to PFRS 2: Vesting Conditions and Cancellations ü Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions ü Amendments to PFRS 2: Definition of Vesting Condition* ü - 2 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Amendments to PFRS 2: Classification and Measurement of Share-based Payment Transactions Not adopted PFRS 3 Business Combinations ü (Revised) Amendment to PFRS 3: Accounting for Contingent Consideration in a Business Combination* ü Amendment to PFRS 3: Scope Exceptions for Joint Arrangements* ü PFRS 4 Insurance Contracts ü Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ü Applying PFRS 9, Financial Instruments with PFRS 4, Insurance Contracts Not early adopted Amendments to PFRS 4: Applying PFRS 9, Financial Instruments, with PFRS 4, Insurance Not adopted PFRS 5 Non-current Assets Held for Sale and Discontinued Operations ü Amendments to PFRS 5: Changes in Methods of Disposal Not early adopted PFRS 6 Exploration for and Evaluation of Mineral Resources ü PFRS 7 Financial Instruments: Disclosures ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition ü Amendments to PFRS 7: Improving Disclosures about Financial Instruments ü Amendments to PFRS 7: Disclosures - Transfers of Financial Assets ü Amendments to PFRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities ü Amendments to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures Not early adopted Amendments to PFRS 7: Disclosures - Servicing ü Contracts Applicability of the Amendments to PFRS 7 to ü Condensed Interim Financial Statements PFRS 8 Operating Segments ü Amendments to PFRS 8: Aggregation of ü - 3 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 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) Not early adopted Financial Instruments - Hedge Accounting and amendments to PFRS 9, PFRS 7 and PAS 39 (2013 version) Not early adopted Financial Instruments (2014 or final version) Not early adopted Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 and Transition Disclosures Not early adopted Amendments to PFRS 9: Prepayment Features with Negative Compensation Not adopted PFRS 10 Consolidated Financial Statements ü Amendments to PFRS 10: Investment Entities ü Amendments to PFRS 10: Sale or Contribution of Assets between an Investor and its Associate or Not early adopted Joint Venture Amendments to PFRS 10: Investment Entities: Applying the Consolidation Exception ü PFRS 11 Joint Arrangements ü Amendments to PFRS 11: Accounting for ü Acquisitions of Interests in Joint Operations PFRS 12 Disclosure of Interests in Other Entities ü Amendments to PFRS 12: Investment Entities ü Amendment to PFRS 12: Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014-2016 Cycle) ü PFRS 13 Fair Value Measurement ü Amendments to PFRS 13: Short-term receivable and payables ü Amendments to PFRS 13: Portfolio Exception ü PFRS 14 Regulatory Deferral Accounts ü PFRS 15 Revenue from Contracts with Customers Not early adopted PFRS 16 Leases Not adopted Philippine Accounting Standards PAS 1 Presentation of Financial Statements ü (Revised) Amendment to PAS 1: Capital Disclosures ü Amendments to PAS 32 and PAS 1: Puttable ü - 4 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Financial Instruments and Obligations Arising on Liquidation Amendments to PAS 1: Presentation of Items of ü Other Comprehensive Income Amendments to PAS 1: Clarification of the ü requirements for comparative information Amendments to PAS 1: Disclosure Initiative ü PAS 2 Inventories ü PAS 7 Statement of Cash Flows ü Disclosure Initiative ü PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors ü PAS 10 Events after the Reporting Date ü PAS 11 Construction Contracts ü PAS 12 Income Taxes ü Amendment to PAS 12-Deferred Tax: Recovery of Underlying Assets ü Amendments to PAS 12: Recognition of Deferred Tax Assets for Unrealized Losses ü PAS 16 Property, Plant and Equipment ü Amendment to PAS 16: Classification of servicing equipment ü Amendment to PAS 16: Revaluation Method - Proportionate Restatement of Accumulated Depreciation ü Amendment to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization ü Amendment to PAS 16: Bearer Plants ü PAS 17 Leases ü PAS 18 Revenue ü PAS 19 Employee Benefits ü Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures ü PAS 19 Employee Benefits ü (Amended) Amendments to PAS 19: Defined Benefit Plans: ü Employee Contributions Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures ü - 5 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Amendments to PAS 19: Regional Market Issue regarding Discount Rate ü PAS 20 Accounting for Government Grants and Disclosure of Government Assistance ü PAS 21 The Effects of Changes in Foreign Exchange Rates ü Amendment: Net Investment in a Foreign Operation ü PAS 23 Borrowing Costs (Revised) ü PAS 24 Related Party Disclosures ü (Revised) Amendments to PAS 24: Key Management Personnel ü PAS 26 Accounting and Reporting by Retirement Benefit Plans ü PAS 27 Consolidated and Separate Financial Statements ü PAS 27 Separate Financial Statements ü (Amended) Amendments to PAS 27: Investment Entities ü Amendments to PAS 27: Equity Method in ü Separate Financial Statements PAS 28 Investment in Associate and Joint Venture ü Amendments to PAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture ü Amendments to PAS 28: Investment Entities: Applying the Consolidation Exception ü Amendments to PAS 28: Long-term Interests in Associates and Joint Ventures Not adopted Amendment to PAS 28: Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014-2016 Cycle) Not adopted PAS 29 Financial Reporting in Hyperinflationary Economies ü PAS 31 Interests in Joint Ventures ü PAS 32 Financial Instruments: Disclosure and Presentation ü Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation ü Amendment to PAS 32: Classification of Rights Issues ü - 6 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities ü PAS 33 Earnings per Share ü PAS 34 Interim Financial Reporting ü Amendments to PAS 34: Interim financial reporting and segment information for total assets and liabilities ü Amendments to PAS 34: - Disclosure of information ‘elsewhere in the interim financial report ü PAS 36 Impairment of Assets ü Amendments to PAS 36: Recoverable Amount Disclosures for Non-Financial Assets ü PAS 37 Provisions, Contingent Liabilities and Contingent Assets ü PAS 38 Intangible Assets ü Amendments to PAS 38: Revaluation Method - Proportionate Restatement of Accumulated Amortization ü Amendments to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization ü PAS 39 Financial Instruments: Recognition and Measurement ü Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and Financial Liabilities ü Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions ü Amendments to PAS 39: The Fair Value Option ü Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition ü Amendments to Philippine Interpretation IFRIC-9 and PAS 39: Embedded Derivatives ü Amendment to PAS 39: Eligible Hedged Items ü Amendment to PAS 39: Novation of Derivatives ü - 7 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 and Continuation of Hedge Accounting PAS 40 Investment Property ü Amendment to PAS 40: Interrelationship between PFRS 3 and PAS 40 ü Transfer of Investment Property Not early adopted PAS 40 Investment Property (Amended) ü PAS 41 Agriculture ü Amendment to PAS 41: Bearer Plants ü Philippine Interpretations IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities ü IFRIC 2 Members’ Share in Co-operative Entities and Similar Instruments ü IFRIC 4 Determining Whether an Arrangement Contains a Lease

ü IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds ü IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment ü IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies ü IFRIC 8 Scope of PFRS 2 ü IFRIC 9 Reassessment of Embedded Derivatives ü Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives ü IFRIC 10 Interim Financial Reporting and Impairment ü IFRIC 11 PFRS 2 - Group and Treasury Share Transactions ü IFRIC 12 Service Concession Arrangements ü IFRIC 13 Customer Loyalty Programmes ü IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction ü Amendments to Philippine Interpretations IFRIC - 14, Prepayments of a Minimum Funding Requirement ü - 8 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 IFRIC 15 Agreements for the Construction of Real Estate*** Not early adopted IFRIC 16 Hedges of a Net Investment in a Foreign Operation ü IFRIC 17 Distributions of Non-cash Assets to Owners ü IFRIC 18 Transfers of Assets from Customers ü IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments ü IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine ü IFRIC 22 Foreign Currency Transactions and Advance Consideration Not early adopted IFRIC 23 Uncertainty over Income Tax Treatments Not adopted SIC-7 Introduction of the Euro ü SIC-10 Government Assistance - No Specific Relation to Operating Activities ü SIC-12 Consolidation - Special Purpose Entities ü Amendment to SIC - 12: Scope of SIC 12 ü SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers ü SIC-15 Operating Leases - Incentives ü SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders ü SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease ü SIC-29 Service Concession Arrangements: Disclosures ü SIC-31 Revenue - Barter Transactions Involving Advertising Services ü SIC-32 Intangible Assets - Web Site Costs ü * 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, 2017.

Standards tagged as “Not adopted” are standards issued but not yet effective as of December 31, 2017. 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, 2017

December 31 2017 2016

CURRENT / LIQUIDITY RATIOS Current assets P= 3,373,421 P= 3,302,298 Current liabilities 5,636,839 5,623,027 Current Ratios 0.60 0.59

Current assets P= 3,373,421 P=3,302,298 Less: Receivables 2,002,141 1,937,557 Inventories 751,084 723,851 Other current assets 430,736 524,074 Quick assets 189,460 116,816 Current liabilities 5,636,839 5,623,027 Quick Ratios 0.03 0.02

December 31 2017 2016 SOLVENCY / DEBT-TO-EQUITY RATIOS Current portion of long-term debt P= 59,942 P=442,279 Long-term debt - net of current portion 6,393,634 5,706,032 Debt P=6,453,576 P=6,148,311 Equity 7,947,633 7,426,834 Less: Non-controlling interests 958,500 898,943 Equity attributable to parent 6,989,133 6,527,891 Add: Unrealized gain - FVTPL and foreign exchange 93,977 30,446 Less: Unrealized foreign exchange loss 127,074 − Equity, Net of Unrealized Gain (Loss) 6,956,036 6,558,337 Debt to Equity Ratio 0.93 0.94

Debt P=6,453,576 P=6,148,311 Less: Cash and cash equivalents 176,788 94,908 Short-term investments 2,543 − Financial assets at fair value through profit or loss 10,129 21,908 Net Debt 6,264,116 6,031,495 Equity, Net of Unrealized Gain (Loss) 6,956,036 6,558,337 Net Debt to Equity Ratio 0.90 0.92

December 31 2017 2016 ASSET TO EQUITY RATIOS Total assets P= 20,588,160 P=19,615,623 Total equity attributable to equity holders of CHI 6,989,133 6,527,891 Asset to Equity Ratios 2.95 3.00 - 2 -

December 31 2017 2016

INTEREST RATE COVERAGE RATIO NET INCOME P= 813,004 P=731,771 Add: Provision for income tax 261,437 175,232 Interest and other financing charges 368,130 312,602 1,442,571 1,219,605 Less: Interest income 41,533 35,915 EBIT 1,401,038 1,183,690 Depreciation and amortization 495,610 402,070 EBITDA 1,896,648 1,585,760 Interest and other financing charges 368,130 312,602 Interest expense coverage ratio 5.15 5.07

December 31 2017 2016 PROFITABILITY RATIOS Net income attributable to parent P= 753,447 P=679,663 Revenue 3,092,234 2,714,473 Net Income Margin 24.37% 25.04%

Net Income P=813,004 P=731,771 Total assets CY 20,588,160 19,615,623 Total assets PY 20,101,892 19,733,187 Average Total Assets 20,145,704 19,674,405 Return on Total Assets 4.04% 3.72%

Net Income P=813,004 P=731,771 Total equity CY 7,947,633 7,426,834 Total equity PY 7,426,834 6,912,106 Average Total Equity 7,687,234 7,169,470 Return on Equity 10.58% 10.21% 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

Balance of Proceeds as of 12.31.2017 P19.32M

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 ACC Corporate Center, 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, 2017

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 422,000,000 224,571,459 197,428,541 Sedona Parc 29,000,000 3,533,107 25,466,893 ACC Corporate Center 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 1,373,592,423 (198,092,423) 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 4,930,675,138 19,324,862 Annex "D"

Annex “E”

INFORMATION REQUIRED ON THE ABSORBED ENTITY, CEBU PROPERTY VENTURES & DEVELOPMENT CORPORATION (CPVDC)

A. Description of Business, Properties and Legal Proceedings of the Absorbed Entity

Cebu Property Ventures and Development Corporation (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:

CPVDC is the developer of the 27-hectare called Cebu I.T. Park (formerly Asiatown I.T. Park) which is only 1.5 kilometers away from CHI’s Cebu Business Park. It is a well-planned IT economic zone and hosts a good mix of businesses such as software research and development, BPOs, and contact centers, all of which bring in millions of pesos in investments and employing thousands of people.

CPVDC’s wholly-owned subsidiary, Asian i-Office Properties Inc., operates the eBloc Towers, composed of four (4) office buildings with gross leasable space of about 76,000sqm.

CPVDC is also a shareholder in Central Block Developers Inc. and Cebu District Property Enterprise Inc.

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.

As of end-2017, CPVDC is not involved in any litigation it considers material or will have adverse effect on the Company’s financial position and results of operation. In any event, below is the legal proceeding involving CPDVC that may be significant. CPVDC is a respondent in a Petition for Declaration of Nullity of Contract with a locator at Cebu I.T. Park. The case was filed on December 7, 2012 and is currently pending before the Regional Trial Court of Cebu City.

B. Market Price of and Dividends on the Absorbed Entity’s Common Equity

I. Principal Market where CPVDC’s Common equity is traded.

Philippine Stock Exchange Prices (in PhP/share)

2017 High Low Close CPV 1Q 5.92 5.92 5.92 2Q 5.97 5.66 5.97 3Q 5.89 5.60 5.89 4Q 6.20 6.00 6.20 CPVB 1Q 6.09 6.09 6.09 2Q 5.99 5.30 5.99 3Q 5.99 5.60 5.99 4Q 6.20 6.18 6.20

2016 High Low Close CPV 1Q 5.99 5.99 5.99 2Q 5.45 5.45 5.45 3Q 5.50 5.50 5.50 4Q 5.99 5.99 5.99 CPVB 1Q 6.09 5.60 6.09 2Q 5.80 5.73 5.73 3Q 6.34 6.34 6.34 4Q 6.33 6.30 6.33

The market capitalization of CPVDC “A” and “B” shares as of end-2017, based on the closing prices of P6.20 per share was approximately P5.83 billion.

As of the close of the latest practicable trading date, the market price per share of CPV shares and CPVB shares on February 27, 2018 were P7.20 and P7.98, respectively.

II. Holders of Common Shares

There were approximately 461 registered holders of common shares of CPVDC as of January 31, 2018. The following are the top 20 registered holders:

No. of Common Stockholder Name Percentage Shares 1. Cebu Holdings, Inc. 717,064,047 76.26% 2. The Province of Cebu 77,865,406 8.28% 3. Ayala Land, Inc. 73,341,993 7.80% 4. PCD Nominee Corp. (Filipino) 41,795,191 4.44% 5. Ronald S. Po 7,088,800 0.75% 6. Robert Coyiuto, Jr. 1,457,540 0.16% 7. Mark C. Tan 994,000 0.11% 8. Socorro C. Ramos or Cecilia R. Licauco 721,554 0.08% 9. Luis Moro, Jr. 710,000 0.08% 10. Jimmy T. Sy 505,000 0.05% 11. Douglas Luym 500,000 0.05% 12. Antonio Tan Torres 497,753 0.05% 12. MDR Securities, Inc. 497,753 0.05% 13. Ernesto Evangelista, Sr. 445,508 0.05% 14. John Gaisano, Jr. 400,000 0.04% 14. Nanette R. Avila 400,000 0.04% 15. Te Tiong Chuan 381,600 0.04% 16. Gwendolyn F. Garcia 320,000 0.03% 17. Julius Z. Neri &/or Nelia G. Neri 305,000 0.03% 18. Patrick Tan 300,000 0.03% 19. Aquilina C. Tan 298,651 0.03% 20. Joseph T. Sy 277,000 0.03%

III. Dividends

To the extent feasible, it is the policy of CPVDC 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 will depend on the its earnings, cash flow, investment program, and other factors. Management aims to declare dividends at a minimum of 40% of prior year’s net income subject to board approval every dividend declaration.

Cash Dividends

Peso Amount Declaration Date Record Date Payment Date (per share) 0.12 October 9, 2013 November 5, 2013 November 29, 2013 0.12 November 11, 2014 November 25, 2014 December 9, 2014 0.12 December 1, 2015 December 16, 2015 December 23, 2015

IV. Recent Sale of Securities

CPVDC has not sold or issued any exempt securities to the public.

C. Management’s Discussion and Analysis (MD&A)

2017 vs. 2016 Results of Operations

CPVDC generated consolidated revenues of P802.9 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 =695.0P 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 =179.8P 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 =5.99P per share in 2016 to =6.20P per share in 2017. While, CPVB stock price decreased from a closing of =6.33P per share in 2016 to =6.20P per share in 2017.

Financial Condition

CPVDC’s Balance Sheet remains strong with total assets amounting to =5.7P billion as of December 31, 2017, =43.6P 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 =3.6P billion, =1.8P 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 CPVDC:

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 0.67: 1 0.61: 1 Ratio 4 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 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 December 2016’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 =3.9P million, 79% lower than the year-end level of =18.2P 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 =155.3 P 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 =1.420P 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.

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 =247.0P 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.

D. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The principal accountant and external auditor of CPVDC is the accounting firm of SyCip Gorres Velayo & Co. (SGV & Co.). The same accounting firm is being recommended for re-election at the scheduled annual meeting for almost the same remuneration as in the previous year.

There were no disagreements with SGV & Co. on any matter of accounting and financial disclosure.

E. Board of Directors and Executive Officers

I. Board of Directors and Officers

Board of Directors Anna Ma. Margarita B. Dy Bernard Vincent O. Dy Aniceto V. Bisnar Jr. Francis O. Monera Rt. Rev. Msgr. Roberto F. Alesna, P.A.* Anastacio T. Muntuerto Jr. * Francisco L. Benedicto * * Independent Directors

Anna Ma. Margarita B. Dy, Filipino, 48, has been the Chairman of the Board of Directors of CPVDC since April 24, 2017. She also holds the position as Chairman of the Board of Directors in another publicly listed Company, Cebu Holdings, Inc. (CHI). She is also a Senior Vice President and member of the Management Committee of Ayala Land, Inc. 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 in 1990. She earned her Master’s degree in economics from London School of Economics and Political Science UK 1991 and MBA at Harvard Graduate School of Business Administration in Boston, U.S.A. in 1996.

Aniceto V. Bisnar Jr., Filipino, 53, has been the Director and President of CPVDC since January 1, 2015. He is also a Director and the President of CHI, a publicly listed company. Concurrently, he is also a Vice President of Ayala Land, Inc. and Chief Operating Officer of the Visayas- Mindanao Group of Ayala Land, Inc. His other significant positions are: Chairman of Adauge Commercial Corporation and Amaia Southern Properties, Inc.; Chairman and President of North Point Estate Association, Inc., Cebu Leisure Company, Inc., Asian I-Office Properties, Inc., Cebu Business Park Association, Inc. and Asiatown I.T. Park Assosciation, Inc.; and Vice Chairman of Central Block Developers, Inc. He is also the President of Aviana Development Corporation and Lagdigan Land Corporation; and the Vice President of Solinea, Inc. He is a director of Accendo Commercial Corporation, Westview Commercial Ventures Corp., Cagayan de Oro Gateway Corp., Bonifacio Estates Services Corporation, Aurora Properties Incorporated, Ceci Realty, Inc., Vesta Property Holdings, Inc., Avencosouth Corp., Taft Punta Engaño Property, Inc. and Cebu District Property Enterprise, Inc.; and a member of the Board of Trustees of the Hero Foundation, Incorporated. He completed his Master’s 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.

Rt. Rev. Msgr. Roberto F. Alesna, P.A., Filipino, 67, has served as an independent director of CPVDC since April 24, 2015. He is the Parish Priest of the Archdiocesan Shrine of St. Therese of the Child Jesus in Lahug, Cebu City. He also holds the following positions: Administrator and Associate Judge of the Metropolitan Matrimonial Tribunal of Cebu; presently, a member of the Presbyteral Council of Cebu and of the Diocesan Board of Consultors in the Archdiocese, and the Episcopal Vicar for the Retired Priests in Cebu (2017 up to present); Chairman of the Finance Committee of the 51st International Eucharistic Congress 2016; Trustee of the 51st 2016 International Eucharistic Congress Foundation; Member and Church Representative in the Regional Peace and Order Council VII - Central Visayas (2001 up to the present); Member of Cebu Provincial Anti- Drug Abuse Commission (2011 up to present) and member of the Board of Trustees of the Cebu Lay Formation Center (2012 up to present). He was also co-Chairman of Regional Development Council VII- Central Visayas (2001-2004); Vice President of Cebu Caritas, Inc. (1991-2014); and Board Member of the Cebu Normal University Board of Regents representing the prominent citizens' sector of Cebu (2009-2013). He also held various positions as: Co-Chairman and Official spokesperson of Cebu-Citizens' Involvement and Maturation in People's Empowerment and Liberation (C-CIMPEL) (1992-2014); member and CBCP representative of Regional Multi-Sectoral Monitoring Team (RMMT) of DILG VII on justice, other forms of illegal gambling and illegal drug trade (2004-2008). He received the following awards: First, Ecclesiastical Conferment as Honorary Prelate in Nov. 22, 1996 and as Protonotary Apostolic Supernumerary in June 8, 2007, Episcopal Vicar - District 1 Metro Cebu North (1998-2009) and Vicar General- Metro Cebu (North & South Districts) (2009-2014) and secondly, Plaque of Commendation from the Board of Regents of Cebu Normal University as member of the Board of Regents from December 2009 to December 2013 and a Plaque of Mayor's Special Award for Pastoral Service in the 78th Cebu City Charter Day. He graduated with a degree of Bachelor of Arts Major in English and Philosophy from Seminario Mayor de San Carlos, Cebu City and he also took post- graduate studies in Theology.

Francisco L. Benedicto, Filipino, 78, has served as an independent director of CPVDC since April 22, 2013. He served as Ambassador Extraordinary and Plenipotentiary of the Philippines for 25 years from 1986 to April 2011 to the following countries: Singapore, South Korea, Brazil, Canada, India and China with concurrent accreditation to six (6) other countries namely: Colombia, Venezuela, Suriname, Nepal, Mongolia and DPRK. He also served as Undersecretary for Foreign Affairs from December 2005 to July 2008. Prior to his diplomatic service, he served as Regional Governor of the Philippine Chamber of Commerce & Industry, Inc. from 1977 to 1983. He was President of Cebu Chamber of Commerce & Industry, Inc. from 1971 to 1974; Cebu Filipino- Chinese Chamber of Commerce, Inc. from 1972 to 1986; Hardwares Consolidated (Association), Inc. from 1968 to 1976; and Mandaue Chamber of Commerce & Industry, Inc. from 1980 to 1986. He is currently Chairman of several corporations including B. Benedicto & Sons Co., Inc., Benedicto College, Bernardo Benedicto Foundation, Inc., FLB Industries, Inc. and FLB Prime Holdings, Inc.. He received various special awards: “Pontifical Order of the Knights of St. Sylvester” by his Holiness Pope John Paul ll (1979); “Most Outstanding Alumnus of the Year” (two times) by the University of San Jose-Recoletos (1968 & 1982); CSJ-R Alumni Association, Inc. Special Presidential Award given for exemplary performance in business, humanitarian, civic and religious fields enhancing the goals of the association - Cebu City (December 5, 1982); “Most Outstanding Son of Cadiz City” by the Cadiz City Government, 1991 Sangguniang Panlungsod, City of Cebu Resolution No. 2492 expressing thanks and gratitude for selfless dedication as public servant and as private citizen bringing benefits to the City and people of Cebu, Cebu City (April 17, 1995); Diplomatic Service Medal “KWANGWHAJANG AWARD” By H.E. President Kim Young-Sam, Republic of Korea (1995); Outstanding Individual Award conferred by Cebu City Government for exemplary service as country’s top diplomat earning the distinction as the longest serving politically appointed Ambassador Extraordinary & Plenipotentiary of the Philippines covering five Presidencies - 73rd Charter Day, City of Cebu (February 24, 2010); “Outstanding Cebuano” in the field of Foreign Service by the Province of Cebu (August 2000); Cebu City Council Resolution No. 05-1465 recognizing his excellent record in diplomatic service - giving much pride to fellow Cebuanos (November 23, 2006); “Grand Chamber Award of Distinction” for his commendable leadership, integrity and service as a respectable diplomat in National and International Affairs by the Cebu Chamber of Commerce & Industry (June 27, 2007). He earned his degree in Engineering at the Cebu Institute of Technology in 1960, he also earned a degree in Bachelor of Science in Commerce from the University of San Jose Recoletos in 1964. He has an honorary Doctorate degree in the Humanities “Honoris Causa” granted by the University of San Jose-Recoletos in 1987. He was awarded “Mentor of the Year” by Mandaue Chamber of Commerce, Inc. on November 24, 2017.

Bernard Vincent O. Dy, Filipino, 54, has been a Director of CPVDC since August 2014 and served as its Chairman of the Board of Directors 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. (ALI); Chairman of the Board of Directors of Prime Orion Philippines, Inc. and MCT Bhd of Malaysia and Director of Cebu Holdings, Inc. . His other significant positions include: Chairman of Ayala Property Management Corporation, Makati Development Corporation, Amaia Land Corporation, 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., Portico Land Corp. and Philippine Integrated Energy Solutions, Inc.; Vice Chairman of Ayalaland Estates, Inc., Ayala Greenfield Development Corporation, Alviera Country Club, Inc. and the Junior Golf Association of the Philippines; 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 Alveo Land Corp., Amicass Process Solutions, Inc., Whiteknight Holdings, Inc., AyalaLand Medical Facilities Leasing, Inc., Serendra, Inc., Alveo-Federal Land Communities, Inc., ALI Eton Property Development Corporation and Nuevocentro, 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 and took his Master’s Degree in Business Administration in 1989 and in International Relations in 1995, both at the University of Chicago.

Francis O. Monera, Filipino, 63, has served as director of CPVDC. since April 28, 2006 until present. He also served as president of CHI and CPVDC which are publicly listed companies from January 2007 until December 31, 2014. He was also a director of CHI from April 2006 to December 31, 2014. Prior to his becoming President, he also served as Executive Vice President, Chief Operating Officer and Director from 2005 to 2006. He was also a Vice President of Ayala Land, Inc. Served as President of the Cebu Chamber of Commerce and Industry from February 2006 to 2008, Regional Governor for Central Visayas of the Philippine of Chamber of Commerce and Industry (PCCI) from 2009 to 2010 and Vice President of PCCI for Visayas from 2011 to 2014. Presently, he is the Chairman of the Board of the Cebu IT Business Organization (CIB.O) Foundation, formerly Cebu Educational Development Foundation for Information Technology (CEDFIT) up to present and he was the former Vice President and Board Director of American Chamber of Commerce and Industry from 2015 to 2017. He is the President of Sustainable and Inclusive Growth Network for Asia Foundation (SIGN Asia) from 2013 to present. He is the JCI Senator of Junior Chamber International from 1994 to present and Vice Chairman of PNP Region 7 Advisory Council from 2012 to present. He graduated with a degree of BS Commerce Major in Accounting (Magna Cum Laude) from Manuel L. Quezon University in 1978 and he studied his Master’s in Business Administration at the Ateneo Graduate School of Business. Mr. Monera is a Certified Public Accountant.

Anastacio T. Muntuerto Jr., Filipino, 66, has served as an independent director of CPVDC since April 28, 2006. He is currently a senior partner at Muntuerto Miel Duyongco Cavada Law Offices. His other significant positions include: President of Big Brother Home Depot, Inc., and San Fernando Integrated Services & Equipment Corp., Chairman of Muntuerto Management & Development Corp., Big Brother Water & Gaz Corporation; Metro Cebu Resources, Inc., MCRI Global Corp., Total Health Check Diagnostics Corp. and Total Health Medical Services JV Corp.; Director of Coastal Highpoint Ventures, Inc., Mactan Rock Industries Inc., Aquapure Resources, Inc., Pollution Abatement Specialists Inc., Pilipinas Bulk Water Resources Corporation and Singfil Hydro Builders Corp. His current civic involvements are as Trustee of Cathedral Museum of Cebu, Inc., Director of Crocolandia Foundation, Inc., Member of Philippine Jaycee Senate, Inc., and Member of Philippine Jaycee Senate Foundation, Inc. He finished college at University of San Carlos – Bachelor of Arts major in History in 1970 - Magna Cum Laude and Bachelor of Laws in 1974 - Cum Laude.

All above incumbent directors of the CPVDC are nominated for re-election at its Annual Stockholders’ Meeting to be held on April 10, 2018.

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 * Member of the Board of Directors

Augusto D. Bengzon, Filipino, 54, has served as Treasurer of CPVDC since April 24, 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 another publicly listed companies, Prime Orion Philippines Inc and Cebu Holdings, Inc. 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., 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. and Vesta Property Holdings Inc.; Director of ALINet.Com, Inc., Alviera Country Club, Inc., Ayalaland Commercial Reit, Inc., Ecozone Power Management Inc., Laguna Technopark Inc., Makati Development Corporation and Nuevocentro Inc.; Treasurer of Avida Land Corp., Hero Foundation Incorporated and Roxas Land Corporation. 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.

Ma. Luisa D. Chiong, Filipino, 45, is the Chief Finance Officer and Chief Compliance Officer of CHI since August 15, 2017. She also holds the same position in CPVDC. Her other significant positions include: Director and Vice President of Integrated Eco-resort Inc.; Director and Treasurer of Adauge Commercial Corporation, Altaraza Prime Realty Corporation, Amorsedia Development Corporation, Asian I-Office Properties Inc., Ayalaland Estates, Inc., Buendia Landholdings, Inc., Crans Montana Property Holdings Corporation, Crimsonfield Enterprises, Inc., HLC Development Corporation, Next Urban Alliance Development Corp. and Red Creek Properties, Incorporated; Director and Chief Finance Officer of Alinet.com, Inc., Director of Ali Capital Corp., Cebu Leisure Company, Inc., CMPI Holdings, Inc. and Directpower Services, Inc.; Treasurer and Chief Finance Officer of Taft Punta Engaño Property, Inc.; Treasurer of Accendo Commercial Corp. and Cagayan de Oro Gateway Corp.; Chief Finance Officer of Lagdigan Land Corporation; Comptroller of Nuevocentro, Inc.; Comptroller, Chief Finance Officer and Compliance Officer of Alveira Country Club, Inc.; and Corporate Finance Officer of Aurora Properties Incorporated, Ceci Realty Inc., and Vesta Property Holdings, 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, 46, is the Corporate Secretary of CPVDC since February 2014. She is the General Counsel and Assistant Corporate Secretary of ALI. She is a Director (management position) and Corporate Secretary of AG Counselors Corporation. Currently, she holds the position of Director of AyalaLand Commercial Reit, Inc.; Corporate Secretary of CHI, Alveo Land Corp., Avida Land Corp., ALI Eton Property Development Corporation, Prime Orion Philippines, Inc., and Orion Land, 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, 52, has served as the Assistant Corporate Secretary of CPVDC since February 2014. She is a Senior Counsel of Ayala Group Legal. She is the Assistant Corporate Secretary of listed companies namely: ALI, CHI. 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.

For the past five (5) years and the preceding years, none of the directors or executive officers or any of their property is involved in any pending legal proceeding in any court or administrative agency of the government.

II. Significant Employees

CPVDC considers its entire work force as significant employees. Everyone is expected to work together as a team to achieve its goals and objectives.

III. Family Relationships

None of the directors and executive officers of CPVDC is related up to the fourth civil degree either by consanguinity or affinity.

F. Attached is the Audited Financial Statement of CPVDC for the period ending December 31, 2017. SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A), Philippines November 10, 2015, valid until November 9, 2018

INDEPENDENT AUDITOR’S REPORT

The Stockholders and Board of Directors Cebu Property Ventures and Development Corporation and Subsidiary 20th Floor, Ayala Center Cebu Tower, Bohol Street Cebu Business Park, Cebu City

Opinion

We have audited the consolidated financial statements of Cebu Property Ventures and Development Corporation (the “Parent Company”) and its subsidiary (collectively referred to as the“Group”), which comprise the consolidated statements of financial position as at December 31, 2017 and 2016, and the 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, 2017, and notes to the consolidated financial statements, including a summary of significant accounting policies.

Basis for Opinion

Key Audit Matter

*SGVFS027144*

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

Provisions and Contingencies

As disclosed in Note 27 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 estimate 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.

Other Information

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

*SGVFS027144*

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

Auditor’s Responsibilities for the Audit of the 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:

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

A member firm of Ernst & Young Global Limited - 4 -

The engagement partner on the audit resulting in this independent auditor’s report is Dolmar C. Montañez.

SYCIP GORRES VELAYO & CO.

February 26, 2018

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A member firm of Ernst & Young Global Limited CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31 2017 2016

ASSETS

Current Assets Cash and cash equivalents (Notes 4, 17 and 24) P=39,988,430 P=23,318,088 Short-term investments (Notes 5 and 24) 2,543,123 − Financial assets at fair value through profit or loss (Notes 6, 17 and 24) 1,096,662 1,155,635 Receivables (Notes 7 and 24) 634,477,324 512,371,480 Inventories (Note 8) 17,359,142 17,359,142 Other current assets (Note 9) 236,434,250 219,823,432 Total Current Assets 931,898,931 774,027,777

Noncurrent Assets Noncurrent portion of receivables (Notes 7 and 24) 293,057,971 352,052,807 Land and improvements (Note 10) 267,095,421 266,791,041 Property and equipment (Note 11) 2,178,653 1,878,611 Investment properties (Note 12) 3,459,041,996 3,679,084,926 Investment in an associate and a joint venture (Note 13) 796,542,791 412,255,869 Deferred tax assets - net (Note 21) 3,906,208 18,185,361 Other noncurrent assets 1,199,447 1,199,447 Total Noncurrent Assets 4,823,022,487 4,731,448,062 P=5,754,921,418 P=5,505,475,839

LIABILITIES AND EQUITY

Current Liabilities Accounts and other payables (Notes 14, 17 and 24) P=1,735,320,369 P=1,977,896,564 Current portion of long-term debt (Notes 15, 17 and 24) 59,941,642 442,279,365 Income tax payable 5,942,266 7,372,860 Deposits and other current liabilities (Notes 16 and 24) 53,689,114 155,270,143 Total Current Liabilities 1,854,893,391 2,582,818,932

Noncurrent Liabilities Long-term debt - net of current portion (Notes 15, 17 and 24) 1,420,273,500 739,502,063 Deferred tax liabilities - net (Note 21) 94,477,515 120,764,582 Deposits and other noncurrent liabilities (Notes 16 and 24) 242,280,491 166,368,631 Total Noncurrent Liabilities 1,757,031,506 1,026,635,276 Total Liabilities 3,611,924,897 3,609,454,208

Equity (Note 25) Paid-in capital 940,350,000 940,350,000 Equity reserves (9,472,899) (9,472,899) Retained earnings 1,212,119,420 965,144,530 Total Equity 2,142,996,521 1,896,021,631 P=5,754,921,418 P=5,505,475,839

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027144* CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

. Years Ended December 31 2017 2016 2015

REVENUE Real estate (Notes 12, 18 and 26) P=616,064,091 P=490,810,384 P=1,057,970,390 Interest income (Notes 4, 5, 7, 19 and 26) 16,275,966 19,268,589 25,784,537 Equity in net earnings of an associate and a joint venture (Notes 13 and 26) − 741,425 − Other income (Notes 6 ,19 and 26) 170,597,530 184,164,015 180,165,401 802,937,587 694,984,413 1,263,920,328

COSTS AND EXPENSES Real estate and rental costs (Notes 20 and 26) 417,424,893 351,230,889 430,437,387 General and administrative expenses (Notes 20 and 26) 18,869,144 19,869,608 21,430,373 Share in net loss of an associate and a joint venture (Notes 13 and 26) 14,078 − 186,433 Interest expense (Notes 15, 17, 20 and 26) 83,180,223 74,325,622 73,104,694 Other expense (Note 20) 9,568,596 14,569,760 72,235,647 529,056,934 459,995,879 597,394,534

INCOME BEFORE INCOME TAX 273,880,653 234,988,534 666,525,794

PROVISION FOR (BENEFIT FROM) INCOME TAX (Notes 21 and 26) Current 38,913,677 17,075,670 55,339,670 Deferred (12,007,914) 4,319,766 113,949,930 26,905,763 21,395,436 169,289,600

NET INCOME 246,974,890 213,593,098 497,236,194

OTHER COMPREHENSIVE INCOME – − −

TOTAL COMPREHENSIVE INCOME P=246,974,890 P=213,593,098 P=497,236,194

Basic/Diluted Earnings Per Share (Note 23) P=0.26 P=0.23 P=0.53

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027144* CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Equity Retained Capital Stock Reserves Earnings (Note 25) (Note 25) (Note 25) Total

For the Year Ended December 31, 2017 Balance as of January 1, 2017 P=940,350,000 (P=9,472,899) P=965,144,530 P=1,896,021,631 Comprehensive income Net income − − 246,974,890 246,974,890 Other comprehensive income − − − − Total comprehensive income − − 246,974,890 246,974,890 Balances as of December 31, 2017 P=940,350,000 (P=9,472,899) P=1,212,119,420 P=2,142,996,521

For the Year Ended December 31, 2016 Balance as of January 1, 2016 P=940,350,000 (P=9,472,899) P=751,551,432 P=1,682,428,533 Comprehensive income Net income − − 213,593,098 213,593,098 Other comprehensive income − − − − Total comprehensive income − − 213,593,098 213,593,098 Balances as of December 31, 2016 P=940,350,000 (P=9,472,899) P=965,144,530 P=1,896,021,631

For the Year Ended December 31, 2015 Balance as of January 1, 2015 P=940,350,000 (P=9,472,899) P=367,157,238 P=1,298,034,339 Comprehensive income Net income − − 497,236,194 497,236,194 Other comprehensive income − − − − Total comprehensive income − − 497,236,194 497,236,194 Dividends declared − − (112,842,000) (112,842,000) Balances as of December 31, 2015 P=940,350,000 (P=9,472,899) P=751,551,432 P=1,682,428,533

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027144* CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31 2017 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=273,880,653 P=234,988,534 P=666,525,794 Adjustments for: Depreciation (Notes 11, 12 and 20) 223,182,618 185,140,724 154,196,630 Interest expense (Notes 15, 17 and 20) 83,180,223 74,325,622 73,104,694 Interest income (Notes 4, 5, 7 and 19) (16,275,966) (19,268,589) (25,784,537) Unrealized gain on financial assets at FVPL (Note 19) (22,783) (82,813) (578,485) Share in net loss (income) of an associate and a joint venture (Note 13) 14,078 (741,425) 186,433 Loss on disposal of assets − − 73,143 Operating income before changes in working capital 563,958,823 474,362,053 867,723,672 Decrease (increase) in: Receivables (56,186,932) 93,118,977 (548,828,950) Inventories − − 20,567,257 Other current assets (16,610,818) (23,424,471) (76,918,113) Other noncurrent assets − 9,025,064 19,520,474 Increase (decrease) in: Accounts and other payables (216,766,461) 195,869,907 848,724,554 Deposits and other liabilities (25,669,169) 59,774,413 46,504,463 Net cash generated from operations 248,725,443 808,725,943 1,177,293,357 Interest received 70,127 779,672 1,236,088 Interest paid (59,469,967) (69,377,777) (143,792,829) Income taxes paid (39,918,778) (37,632,908) (36,363,575) Net cash provided by operating activities 149,406,825 702,494,930 998,373,041

CASH FLOWS FROM INVESTING ACTIVITIES Additions to: Short-term investments (2,543,123) − (10,405,976) Financial assets at FVPL (5,518,411) (1,149,862) (59,000,599) Land and improvements (304,380) (266,791,041) − Property and equipment (1,750,679) (2,246,887) (431,478) Investment properties (41,119,057) (203,095,942) (366,375,314) Investment in an associate and a joint venture (Note 13) (384,301,000) (175,000,000) (87,500,000) Proceeds from: Disposal of financial assets at FVPL 5,600,167 28,149,785 83,932,208 Matured short-term investments − 10,405,976 − Net cash used in investing activities (429,936,483) (609,727,971) (439,781,159)

CASH FLOWS FROM FINANCING ACTIVITIES Availments of long-term debt (Note 15) 756,200,000 380,000,000 − Payments of: Long-term debt (Note 15) (459,000,000) (470,875,000) (493,875,000) Dividends (Notes 14 and 25) − (11,920,347) (111,126,760) Net cash provided by (used in) financing activities 297,200,000 (102,795,347) (605,001,760)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,670,342 (10,028,388) (46,409,878)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 23,318,088 33,346,476 79,756,354

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) P=39,988,430 P=23,318,088 P=33,346,476

See accompanying Notes to Consolidated Financial Statements. *SGVFS027144* CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Cebu Property Ventures and Development Corporation (the Parent Company) is domiciled and was incorporated on August 2, 1990 in the Repubic of the Philippines. The Parent Company is 76.26%- owned by Cebu Holdings, Inc. (CHI), 8.28%-owned by the province of Cebu, 7.80%-owned by Ayala Land, Inc. (ALI) and the rest by the public. CHI, a publicly listed company, is a subsidiary of ALI. ALI is a subsidiary of Ayala Corporation (AC), a publicly listed company which is 48.96%-owned by Mermac, Inc., 10.17%-owned by Mitsubishi Corporation and the rest by public.

The Parent Company’s 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 and sale of subdivision land and residential units.

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

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

Asian I-Office Properties, Inc. (AiO) is a wholly owned subsidiary of the Parent Company starting April 16, 2013. It was incorporated and domiciled in the Philippines and was registered with the Securities and Exchange Commission (SEC) on September 24, 2007 primarily to develop, invest, own, acquire, lease, hold, mortgage, administer or otherwise deal, with commercial, residential, industrial or agricultural lands, buildings, structures or apertures, or in any other profitable business enterprise, venture or establishment, alone or jointly with other persons, natural or artificial. The registered office address of AiO is at Unit 701 at 7th Floor, Cebu Holdings Center, Cebu Business Park, Cebu City.

The consolidated financial statements of the Parent Company and its wholly owned subsidiary, AiO, collectively referred to as “the Group” as of December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017 endorsed for approval by the Audit Committee on February 12, 2018 and were approved and authorized for issue by the Board of Directors (BOD) on February 26, 2018.

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) 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 Peso, unless otherwise indicated.

Statement of Compliance The consolidated financial statements of the Group have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Basis of Consolidation The consolidated financial statements comprise the financial statements of the Parent Company and its wholly owned subsidiary as of December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017.

The Parent Company and its subsidiary are incorporated and operating in the Philippines.

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Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. 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 or excluded in the consolidated financial statements from the date the Group gains control or until the date the Group ceases to control the subsidiary.

A subsidiary is fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continues to be consolidated until the date such control ceases. The financial statements of the subsidiary 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, are eliminated in full.

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 assets (including goodwill) and liabilities of the subsidiary · Derecognizes the carrying amount of any non-controlling interest · Derecognizes the cumulative translation differences recorded in equity · Recognizes the fair value of the consideration received · Recognizes the fair value of any investment retained · Recognizes any surplus or deficit in profit or loss · Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities

· Amendments to PFRS 12, Disclosure of Interests in Other Entities, Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014−2016 Cycle)

· Amendments to Philippine Accounting Standard (PAS) 7, Statement of Cash Flows, Disclosure Initiative

The Group has provided the required information in Note 28 to the consolidated financial statements. As allowed under the transition provisions of the standard, the Group did not present comparative information for the year ended December 31, 2016.

· Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses *SGVFS027144* - 3 -

Effective beginning on or after 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.

The Group has assessed that the adoption of these amendments will not have any impact on the 2018 consolidated financial statements since the Group does not have share-based payment transactions.

· PFRS 9, Financial Instruments

The Group plans to adopt the new standard on the mandatory effective date and is currently assessing the potential impact of adopting PFRS 9 in 2018.

· Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with PFRS 4 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 connected with insurance or issue insurance contracts.

*SGVFS027144* - 4 -

· PFRS 15, Revenue from Contracts with Customers

· Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014−2016 Cycle)

The amendments should be applied retrospectively, with earlier application permitted.

These amendments are not expected to have any impact in the Group’s consolidated financial statements.

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

Since the Group’s current practice is in line with the clarifications issued, the Group does not expect any effect on its consolidated financial statements upon adoption of these amendments.

· Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration

*SGVFS027144* - 5 -

If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may apply the interpretation prospectively to all assets, expenses and income in its scope that are initially recognized on or after the beginning of the reporting period in which the entity first applies the interpretation or the beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation.

Effective beginning on or after January 1, 2019

· Amendments to PFRS 9, Prepayment Features with Negative Compensation

These amendments are not expected to have any impact in the Group’s consolidated financial statements.

· PFRS 16, Leases

PFRS 16 also requires lessees and lessors to make more extensive disclosures than under PAS 17.

The Group is currently assessing the impact of adopting PFRS 16.

· Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments to PAS 28 clarify that entities should account for long-term interests in an associate or joint venture to which the equity method is not applied using PFRS 9.

*SGVFS027144* - 6 -

An entity shall apply these amendments for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted.

These amendments are not expected to have any impact in the Group’s consolidated financial statements.

· Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments

The Group is currently assessing the impact of adopting this interpretation.

Deferred effectivity

· Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

· Expected to be realized or intended to be sold or consumed in the normal operating cycle; · Held primarily for the purpose of trading; · 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.

*SGVFS027144* - 7 -

A liability is current when:

· It is expected to be settled in 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.

The principal or the most advantageous market must be accessible to the Group.

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

The Group’s management determines the policies and procedures for recurring fair value measurement of financial assets at FVPL and investment properties.

*SGVFS027144* - 8 -

External valuers are involved for 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 analyze 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.

Financial Instruments 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 are requires delivery or assets within the time frame establish by regulation or convention in the marketplace are recognized on the settlement date.

As of December 31, 2017 and 2016, the Group’s financial assets are of the nature of loans and receivables and financial assets at FVPL.

“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 profit or loss except if it qualifies for recognition as some other type of asset or liability. 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 profit or loss when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the “Day 1” difference amount.

*SGVFS027144* - 9 -

Financial assets and liabilities at FVPL Financial assets and financial liabilities at FVPL, financial assets and financial liabilities held for trading and financial assets and financial liabilities designated upon initial recognition as at FVPL.

Financial assets and 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 or expense accrued on these assests, are recognized in the consolidated statement of comprehensive 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 is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or · The financial instrument contains an embedded derivative that would need to be separately recorded.

As of December 31, 2017 and 2016, the Group holds investment in Unit Investment Trust Fund (UITF) for trading and classified these as financial assets at FVPL.

After initial measurement, 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 the “Interest income” account in the consolidated statement of comprehensive income. The losses arising from impairment of such loans and receivables are recognized as “Provision for impairment loss” under “General and administrative expenses” account in the consolidated statement of comprehensive 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, 2017 and 2016, the Group’s loans and receivables include cash and cash equivalents, short-term investments and receivables except “Advances to contractors”.

Other financial liabilities Issued financial instruments or their components, which are not designated as at FVPL are classified as other financial liabilities 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 another financial asset for a fixed number of own equity shares. The components of issued financial instruments that contain both liability and equity elements 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 the 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.

*SGVFS027144* - 10 -

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 “Interest and other expenses” account in profit or loss.

As of December 31, 2017 and 2016, the Group’s other financial liabilities include accounts and other payables (excluding statutory liabilities), long-term debt, deposits and other liabilities except for “Advance rent” and “Customers deposits” 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 security deposits are initially measured at fair value. The difference between the cash received and the fair value of security deposits is recognized as deferred credits (included 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 comprehensive income. After initial recognition, security deposits are subsequently measured at amortized cost using effective interest method. Accretion of discount is recognized under “Interest and other expenses” in the consolidated statement of comprehensive income.

Derecognition of Financial Assets and Financial Liabilities Financial asset A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized when: a. the rights to receive cash flows from the asset have expired; b. the Group has retain 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: (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained the risks and rewards of the asset but has transferred the control of the asset.

Where 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 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, 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 comprehensive income.

*SGVFS027144* - 11 -

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.

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) discounted at the financial asset’s original effective interest rate (i.e, the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through use of an allowance account and the amount of loss is charged to profit or loss. Interest income continues to be recognized based on the original 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 and all collateral has been realized. If, in a subsequent period, 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 profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.

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. 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 Assets Other assets include input value-added tax (VAT), creditable withholding tax (CWT) and prepaid expenses.

*SGVFS027144* - 12 -

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 of prepayments for association dues in the current year.

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) · Borrowing costs on loans directly attributable to the projects which were capitalized during construction.

The cost of inventory recognized in the consolidated statement of comprehensive 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.

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 purchase price and any directly attributable costs of bringing the property and equipment to its intended location and working condition, 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 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.

Depreciation commences once the property and equipment are available for their intended use and is computed on a straight-line basis over the estimated useful lives as follows:

Years Furniture, fixtures and equipment 3 Transportation equipment 5

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

*SGVFS027144* - 13 -

When property and equipment are retired or otherwise disposed of, the cost of the related accumulated depreciation and accumulated impairment losses, if any, 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.

Investment Properties Investment properties consist of land and building that are held to earn rentals and for capital appreciation or both and are not occupied by 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 its intended location and working condition, including borrowing costs.

Depreciation is computed using the straight-line method over its useful life. The estimated lives of investment properties under buildings and improvements are 5 to 20 years.

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 (including borrowing cost). This includes cost of construction, equipment 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 profit or loss in the year of retirement or disposal.

Land and Improvements Land and improvements are carried at cost less any impairment in value. Land and improvement deal with land assets that were acquired and will be used as site for future developments. These are assets neither classified as inventories or investment properties since these are undeveloped land and has no definite use as of reporting date as to whether these are held to earn rentals or for capital appreciation to be classified as investment properties or are held for sale in the ordinary course of business. Its use is yet to be determined by management as approved by the BOD.

All capitalizable expenses related to the land acquisition are recorded to Land and improvements once a Contract to Sell/Purchase Agreement has been executed between the parties.

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Investment in an Associate 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.

The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

The Group’s investment in an associate 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 recognise 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 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 comprehensive income and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.

After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in associates and a joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognizes the loss as ‘Equity in net earnings (losses) of associates and a joint venture’ in the consolidated statement of comprehensive income.

*SGVFS027144* - 15 -

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, 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 comprehensive 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 profit or loss 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.

The following criteria are also applied in assessing impairment of specific assets:

Investment in an associate 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 and the carrying value of the investee company and recognizes the difference in the consolidated statement of comprehensive 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 premium, the difference between the proceeds at 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 of the Group less dividends declared and any adjustments arising from 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.

*SGVFS027144* - 16 -

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 Parent Company. Dividends for the year that are approved after the reporting date are dealt with as a non-adjusting event after the reporting date.

Equity reserves Equity reserves pertain to the difference between the consideration transferred and the equity acquired in common control business combination.

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 comprehensive of income on a straight-line basis over the lease term and the terms of the lease, respectively, 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. Collectibility 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. Collectibility 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 inventories is accounted for under the full accrual method. In accordance with Philippine Interpretations Committee (PIC) Q&A No. 2006-01, the percentage of completion method is used to recognize revenue 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.

*SGVFS027144* - 17 -

Cost of real estate sales is recognized consistent with the revenue recognition method applied. Cost of condominium 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.

Interest income Interest income is recognized as it accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial assets).

Other income Recoveries are recognized as they accrue. Penalties are recognized based on the contractual terms of the agreement.

Cost and Expense Recognition Cost and expenses are recognized in the profit or loss when decrease in future economic benefit related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably.

Cost and expenses are recognized in the consolidated statement of comprehensive income: · On the basis of a direct association between the costs incurred and the earning of specific items of income; · On the basis of systematic and rational allocation procedures when economic benefits are expected to arise over several accounting periods and the association can only be broadly or indirectly determined; or · Immediately when expenditure produces no future economic benefits or when, and to the extent that, future economic benefits do not qualify or cease to qualify, for recognition in the consolidated statement of financial position as an asset.

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 as 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 capitzalized as part of investment properties are depreciated using straight-line method over estimated useful lives of the assets.

*SGVFS027144* - 18 -

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. A reassessment is made after inception of the lease only if one of the following applies:

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 comprehensive 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.

Deferred tax Deferred tax is provided, using the liability method, on temporary differences with certain exceptions, at the reporting date between the tax bases of assets and liabilities and its carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences with certain assumptions. Deferred tax assets are recognized for all deductible temporary differences and carryforward benefits of unused tax credits from excess of minimum corporate income tax (MCIT) over the regular corporate income tax 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 investment deferred the tax asset to be utilized.

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 the end of 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.

*SGVFS027144* - 19 -

Deferred tax relating to items recognized outside profit or loss is recognized in the OCI. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.

Foreign-Currency-Denominated Transactions The consolidated financial statements are presented in Philippine Peso, which is the Group’s functional and presentation 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 Philippine Dealing System rate prevailing at the 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 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 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 segment is presented in Note 26 of the consolidated financial statements.

Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of the provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the consolidated statement of comprehensive net of any reimbursement. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates.

Contingencies The Group is involved in a legal proceeding. The estimate of the probable costs for the resolution of the legal proceeding has been developed in consultation with the legal counsels and based upon an analysis of potential results. The Group currently does not believe this proceeding will have a material adverse effect on the Group’s financial position. It is possible, however, that the results of operations could be materially affected by changes in the estimates.

Events after the Reporting Date Post year-end events up to the date the 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.

*SGVFS027144* - 20 -

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the Group’s consolidated financial statements in conformity with PFRS requires management to make judgments, estimates and assumptions 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:

Revenue and cost recognition Revenue and cost recognition on real estate sales 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 wich 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 that revenue is recognized.

*SGVFS027144* - 21 -

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 discussed below.

Revenue and cost recognition The Group’s revenue recognition policies require management to make use of estimates and assumptions that may affect the reported amounts of revenue and costs. The Group’s real estate sales revenue is recognized based on the percentage-of-completion measured principally on the basis of the estimated completion of a physical proportion of the contract work. See Notes 18 and 20 for the related balances.

Provisions and contingencies The Group is involved in a legal proceeding. The estimate of the probable costs for the resolution of this claim has been developed in consultation with the legal counsel and based upon an analysis of potential results. The Group currently does not believe this proceeding will have a material adverse effect on the Group’s financial position (see Note 27).

Evaluating impairment of nonfinancial assets The Group reviews its investment properties and investment in an associate and a joint venture for impairment of value. This includes considering certain indications of impairment such as significant changes in asset usage, obsolescence or physical damage of an asset, significant underperformance relative to expected historical or projected future operating results of the investees and significant negative industry or economic trends.

As described in the accounting policy, the Group estimates the recoverable amount as the higher of an asset’s fair value less costs to sell and value in use. In determining the present value of estimated future cash flows expected to be generated from the continued use of the assets, the Group is required to make estimates and assumptions that may affect its investment properties and investments in associates and a joint venture.

4. Cash and Cash Equivalents

This account consists of:

2017 2016 Cash on hand P=100,000 P=80,000 Cash in banks 38,288,430 20,738,338 Cash equivalents 1,600,000 2,499,750 P=39,988,430 P=23,318,088

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amount of cash with original maturities of three (3) months or less from the date of placement and that are subject to an insignificant risk of changes in value. Cash in banks and cash equivalents earn interest at the respective bank deposit rates and short-term rates, respectively. These earn interest at the respective short-term investment rate.

Total interest income earned from cash and cash equivalents amounted to P=0.3 million, P=0.2 million and P=0.1 million in 2017, 2016 and 2015, respectively (see Note 19).

5. Short-term Investments

Short-term investments are short term, highly liquid investments with maturities of more than three (3) months and are intended for short-term cash requirements of the Group. *SGVFS027144* - 22 -

As of December 31, 2017 and 2016, the Group’s short-term investments amounted to P=2.5 million and nil, respectively. Interest income earned from short-term investments amounted to P=2,446, P=0.2 million and P=0.9 million in 2017, 2016 and 2015, respectively (see Note 19).

6. Financial Assets at Fair Value Through Profit or Loss

This pertains to investment 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 comprehensive income under “Other Income”. Realized and unrealized gains recognized from changes in FVPL amounted to P=22,783, P=82,813 and P=0.6 million in 2017, 2016 and 2015, respectively (see Note 19).

As of December 31, 2017 and 2016, the Group’s financial assets at FVPL amounted to P=1.1 million and P=1.2 million, respectively.

7. Receivables

This account consists of:

2017 2016 Receivable from related parties (Note 17) P=721,754,592 P=702,054,435 Trade: Corporate business 38,290,829 36,592,371 Shopping centers 8,050,641 10,120,080 Accrued receivables 109,632,522 59,177,778 Advances to contractors 38,474,164 45,666,196 Receivables from employees 561,675 296,876 Others 12,270,872 12,016,551 929,035,295 865,924,287 Less allowance for impairment losses 1,500,000 1,500,000 927,535,295 864,424,287 Less noncurrent portion 293,057,971 352,052,807 P=634,477,324 P=512,371,480

The nature of trade receivables of the Group are as follows:

· Corporate business receivable pertains to receivables arising from the lease of office buildings. · Shopping centers receivable pertains to receivables arising from the lease of retail space and land therein, food courts, entertainment facilities and carparks. · Other receivables pertain to payments made by the Group for various taxes, water and electricity consumption that are chargeable to third parties.

Terms and conditions of receivables are as follows:

· 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. · 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.

*SGVFS027144* - 23 -

· Sales contract receivables, included under corporate business, 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. · Receivable from related parties are composed of interest and noninterest-bearing which are collectible within one year. · Accrued receivables consist of receivable from rental income arising from operating leases on investment properties which is accounted for on a straight-line basis over the lease term and accrual of interest income. · Advances to contractors are recouped every progress billing payment depending on the percentage of accomplishment. · Receivables from employees are generally noninterest-bearing advances for the Group’s operation-related expenses and are subject for liquidation within 15 days.

As of December 31, 2017 and 2016, receivables with a nominal amount of P=311.4 million and P=431.0 million, respectively, were initially recorded at fair value. The fair value of the receivables was obtained by discounting future cash flows using the applicable rates of similar types of instruments.

The aggregate unamortized discount on receivables amounted to P=21.7 million and P=35.2 million as of December 31, 2017 and 2016, respectively.

Movements in the unamortized discount on receivables as of December 31 are as follows:

2017 2016 At January 1 P=35,168,701 P=53,802,375 Accretion (Note 19) (13,469,198) (18,633,674) At December 31 P=21,699,503 P=35,168,701

Receivables from shopping centers amounting to P=1.5 million as of December 31, 2017 and 2016, were individually impaired and provided with allowance for impairment loss in full amount.

8. Inventories

This account consists of:

2017 2016 Condominium units (parking spaces) P=17,359,142 P=17,359,142

The Group’s inventories pertain to the parking spaces available for sale and are carried at cost.

*SGVFS027144* - 24 -

The rollforward of inventories follows:

2017 2016 At January 1 P=17,359,142 P=278,835,528 Transfers to investment properties (Note 12) − (231,726,628) Other adjustments − (29,749,758) At December 31 P=17,359,142 P=17,359,142

In 2016, the Group transferred P=231.7 million worth of subdivision lot from inventories to investment properties which was leased out by the Group to various tenants for its Garden Bloc project (see Note 12).

The amount of inventories recognized as cost of real estate sales in the consolidated statements of comprehensive income amounted to nil in 2017 and 2016, and P=101.6 million in 2015 (see Note 20).

There are no inventories as of December 31, 2017 and 2016 that are pledged as securities to liabilities.

The Group’s inventories are not impaired and no provision for impairment loss was recognized in 2017, 2016 and 2015.

9. Other Current Assets

This account consists of:

2017 2016 Input VAT P=203,471,335 P=185,350,800 Creditable withholding taxes (CWT) 26,814,009 34,472,438 Deposits 5,227,747 − Prepaid expenses 921,159 194 P=236,434,250 P=219,823,432

CWTs are applied against income tax payable and are recoverable in future periods.

10. Land and improvements

On February 9, 2016, the Group purchased two (2) parcels of land located in Lahug, Cebu City from individual land owners for a total consideration of P=260.0 million and incurred additional related costs amounting to P=6.8 million. In 2017, the Group incurred additional cost of P=0.3 million.

As of December 31, 2017 and 2016, the Group’s land and improvements amounted to P=267.1 million and P=266.8 million, respectively.

*SGVFS027144* - 25 -

11. Property and Equipment

The rollforward analyses of this account follow:

2017 Furniture, Fixtures and Transportation Equipment Equipment Total Cost At January 1 P=14,982,840 P=759,739 P=15,742,579 Additions 1,750,679 − 1,750,679 At December 31 16,733,519 759,739 17,493,258 Accumulated Depreciation At January 1 13,105,701 758,267 13,863,968 Depreciation (Note 20) 1,450,269 368 1,450,637 Transfers (1,104) 1,104 − At December 31 14,554,866 759,739 15,314,605 Net Book Value P=2,178,653 P=− P=2,178,653

2016 Furniture, Fixtures and Transportation Equipment Equipment Total Cost At January 1 P=12,944,763 P=759,739 P=13,704,502 Additions 2,246,887 − 2,246,887 Retirement (208,810) − (208,810) At December 31 14,982,840 759,739 15,742,579 Accumulated Depreciation At January 1 12,510,981 753,852 13,264,833 Depreciation (Note 20) 803,530 4,415 807,945 Retirement (208,810) − (208,810) At December 31 13,105,701 758,267 13,863,968 Net Book Value P=1,877,139 P=1,472 P=1,878,611

Depreciation charged to general and administrative expenses amounted to P=1.5 million, P=0.8 million and P=0.5 million in 2017, 2016 and 2015, respectively (see Note 20).

Fully depreciated assets that are still in use amounted to P=12.37 million and P=11.31 million in 2017 and 2016, respectively.

As of December 31, 2017 and 2016, there are no property and equipment items that are pledged as security to liabilities.

*SGVFS027144* - 26 -

12. Investment Properties

The rollforward analyses of this account follow:

2017 Land Buildings and Construction- Land Improvements Improvements in-Progress Total Cost At January 1 P=650,608,203 P=14,058,775 P=3,781,875,850 − P=4,446,542,828 Additions 13,847,240 325,893 26,945,924 − 41,119,057 Adjustments (Note 14) − − (39,430,006) − (39,430,006) At December 31 664,455,443 14,384,668 3,769,391,768 − 4,448,231,879 Accumulated Depreciation At January 1 − 2,343,129 765,114,773 − 767,457,902 Depreciation (Note 20) − 2,811,755 218,920,226 − 221,731,981 At December 31 − 5,154,884 984,034,999 − 989,189,883 Net Book Value P=664,455,443 P=9,229,784 P=2,785,356,769 P=− P=3,459,041,996

2016 Land Buildings and Construction- Land Improvements Improvements in-Progress Total Cost At January 1 P=418,881,575 P=− P=2,950,982,207 P=635,408,614 P=4,005,272,396 Additions − 14,058,775 138,066,250 80,720,674 232,845,699 Transfers (Note 8) 231,726,628 − 716,129,288 (716,129,288) 231,726,628 Disposal − − (23,301,895) − (23,301,895) At December 31 650,608,203 14,058,775 3,781,875,850 − 4,446,542,828 Accumulated Depreciation At January 1 − − 606,427,018 − 606,427,018 Depreciation (Note 20) − 2,343,129 181,989,650 − 184,332,779 Disposal − − (23,301,895) − (23,301,895) At December 31 − 2,343,129 765,114,773 − 767,457,902 Net Book Value P=650,608,203 P=11,715,646 P=3,016,761,077 P=− P=3,679,084,926

The Group’s investment properties consist of land and building held for commercial leasing to earn rentals.

In 2017, the Group adjusted P=39.4 million costs of existing building representing adjustment to the final construction costs.

Depreciation charged to operations amounted to P=221.7 million, P=184.3 million and P=153.7 million in 2017, 2016 and 2015, respectively (see Note 20).

Total rental income derived from investment properties amounted to P=616.1 million, P=490.8 million and P=422.4 million in 2017, 2016 and 2015, respectively (see Note 18). Other operating expenses related to investment properties amounted to P=416.3 million, P=286.3 million and P=264.2 million in 2017, 2016 and 2015, respectively (see Note 20).

Borrowing costs capitalized in construction-in-progress amounted to nil and P=5.2 million in 2017 and 2016, respectively (see Note 15). Capitalization rate used for general borrowings is at nil and 3.92% in 2017 and 2016, respectively. The Group no longer have qualifying asset in 2017.

The aggregate fair value of the Group’s investment properties amounted to P=18,439.0 million as of December 31, 2017 which is based on the latest appraisal reports. The fair values were classified under Level 3 of the fair value hierarchy.

*SGVFS027144* - 27 -

Description of valuation techniques used and key inputs to valuation on land and buildings included under investment properties as of December 31, 2017 follows:

Significant Valuation Unobservable Property Technique Inputs Range Land Sales comparison Price per square P=40,000−P=250,000 approach meter Buildings Cost approach Reproduction Current cost of constructing a replica of the cost existing structures, employing the same design and similar building materials. The current cost of an identical new item

Replacement Cost of replacing an asset with an equally cost 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 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.

As of December 31, 2017 and 2016, there are no investment properties that are pledged as security to liabilities.

*SGVFS027144* - 28 -

13. Investment in an Associate and a Joint Venture

The movements in investment in an associate and a joint venture accounted for under equity method follow:

2017 2016 Cost Balance at January 1 P=412,500,000 P=237,500,000 Additions 384,301,000 175,000,000 Balance at December 31 796,801,000 412,500,000 Accumulated equity in net income (loss) Balance at January 1 (244,131) (985,556) Share in net income (loss) for the year (14,078) 741,425 Balance at December 31 (258,209) (244,131) P=796,542,791 P=412,255,869

There were no dividend income in 2017, 2016 and 2015.

The details of the Group’s investment in an associate and a joint venture and the related percentages of ownership are shown below:

Percentages of Ownership Carrying Amounts December 31 December 31 2017 2016 2017 2016 Associate Central Block Developers Inc. (CBDI) 30% 35% P=648,937,561 P=263,527,941 Joint Venture CDPEI 5% 5% 147,605,230 148,727,928 P=796,542,791 P=412,255,869

CDPEI In 2014, a joint venture agreement was made and executed between ALI and AboitizLand, Inc. to incorporate with 50% interest each, a new company (CDPEI) which will take the development and operation of mixed-use developments with residential, commercial and retail components within the parcels of land located in the City of Mandaue, Province of Cebu and other areas. ALI subsequently assigned 5% interests to the Group for a total consideration of P=150.0 million.

CDPEI was incorporated on February 20, 2014 and operates in the Philippines.

CDPEI’s summarized financial information follows:

2017 2016 Current assets P=254,759,392 P=226,530,865 Noncurrent assets 3,840,363,366 3,258,003,932 Total assets P=4,095,122,758 P=3,484,534,797

Current liabilities P=451,035,049 P=181,949,461 Noncurrent liabilities 691,983,119 328,026,784 Total liabilities P=1,143,018,168 P=509,976,245

*SGVFS027144* - 29 -

For the year ended December 31 2017 2016 2015 Revenue P=4,538,156 P=689,880 P=4,281,551 Costs and expenses 26,992,116 7,154,525 7,275,885 Net loss / total comprehensive loss P=22,453,960 P=6,464,645 P=2,994,334 Group’s share in net loss / total comprehensive loss P=1,122,698 P=323,232 P=149,717

CBDI In 2017, Parent Company made additional capital infusion to CBDI amounting to P=384.3 million in relation to the latter’s equity call to fund the increase in cost of its ongoing project. However, the Parent Company waived its pre-emptive rights to the additional equity call in favor of ALI, the intermediate parent company, which resulted to a 5% reduction of the Parent Company’s ownership interest in CBDI as of December 31, 2017.

In 2016, the Group made additional investments to CBDI amounting to P=175.0 million.

2017 2016 Current assets P=874,999,965 P=237,695,657 Noncurrent assets 2,310,738,095 913,793,429 Total assets P=3,185,738,060 P=1,151,489,086

Current liabilities P=1,116,227,933 P=398,547,110 Noncurrent liabilities 5,750,750 − Total liabilities P=1,121,978,683 P=398,547,110

CBDI’s summarized financial information follows:

For the year ended December 31 2017 2016 2015 Revenue P=4,982,788 P=3,744,348 P= 297,926 Costs and expenses 1,287,388 702,471 402,828 Net income (loss) / total comprehensive income (loss) P=3,695,400 P=3,041,877 (P= 104,902) Group’s share in net income (loss) / total comprehensive income (loss) P=1,108,620 P=1,064,657 (P= 36,716)

*SGVFS027144* - 30 -

14. Accounts and Other Payables This account consists of: 2017 2016 Payable to related parties (Note 17) P=1,327,401,541 P=1,498,532,078 Accrued expenses 206,139,517 181,880,302 Taxes payable 72,285,190 78,920,968 Retention payables 53,114,099 88,448,484 Accrued project costs (Note 12) 49,996,612 111,125,023 Trade payables 21,230,802 4,329,032 Interest payable (Note 15) 3,401,152 12,909,221 Dividends payable (Note 25) 1,751,456 1,751,456 P=1,735,320,369 P=1,977,896,564

Trade and accrued expenses arise from regular transactions with suppliers and service providers. Accrued expenses includes utitities, marketing and management fees, repairs and maintenance, and professional fees. These are noninterest-bearing and are normally settled on 15 to 60 day terms.

Taxes payable includes expanded withholding taxes and deferred output VAT on uncollected receivables. These are settled on a monthly basis.

Retention payables pertain 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.

Accrued project costs arise from progress billings or unbilled completed work on the development of residential and commercial projects.

Interest payable pertains to unpaid interest expense on long-term debt as of reporting date.

15. Long-term Debt

This account consists of long-term bank loans availed by the Group from local banks as follows:

2017 2016 BSP overnight reverse repurchase agreement rate plus 0.25% per annum inclusive of gross receipts tax (Note 15a) P=404,250,000 P=− Fixed rate corporate notes with interest rate of 4.75% per annum (Note 15b) 378,000,000 399,000,000 BSP overnight reverse repurchase agreement rate plus 0.25% per annum inclusive of gross receipts tax (Note 15c) 363,875,000 378,125,000 At 0.70% per annum spread over the 90-day PDST- R2 (Note 15d) 340,000,000 − Interest payable every quarter, 50% of principal is payable in equal quarterly installment and the remaining 50% is payable on maturity date (Note 15e) − 405,000,000 At 0.50% per annum spread over the fixed rate based on 7-year treasury bond rate (Note 15e) − 3,000,000 1,486,125,000 1,185,125,000 Less unamortized discount on transaction costs 5,909,858 3,343,572 1,480,215,142 1,181,781,428 Less current portion of long-term debt 59,941,642 442,279,365 P=1,420,273,500 P=739,502,063 *SGVFS027144* - 31 -

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 of unamortized discount on transaction costs follows:

2017 2016 At January 1 P=3,343,572 P=3,437,770 Capitalized during the year 3,800,000 1,900,000 Accretion (1,233,714) (1,994,198) At December 31 P=5,909,858 P=3,343,572 a.) 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 Banko Sentral ng Pilipinas Overnight Reverse Repurchase Agreement rate, inclusive of gross receipts tax, whichever is higher. The related outstanding balance amounted to P=404.3 million as of December 31, 2017. b.) In December 2013, the Group obtained a loan with a principal amount of P=420.0 million which is due in installments until 2021. The loan is subject to fixed interest rate of 4.75% per annum. This loan was used to finance the construction of the Group’s commercial buildings included under “Investment properties” (see Note 12). The interest is payable every quarter. Twenty five percent (25%) of principal is payable in twenty (20) installments starting on the first quarter of 2016 and the remaining seventy five percent (75%) is payable on maturity date.

The related outstanding balance of the loan with fixed interest amounted to P=378.0 million and P=399.0 million as of December 31, 2017 and 2016, respectively. In 2017 and 2016, the Group made repayments amounting to P=21.0 million. c.) 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 the Group’s commercial buildings. 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 Banko Sentral ng Pilipinas Overnight Reverse Repurchase Agreement rate, inclusive of the Gross Receipts Tax, whichever is higher. The related outstanding balance amounted to P=363.9 million and P=378.1 million as of December 31, 2017 and 2016, respectively. d.) 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 Bangko Sentral ng Pilipinas Overnight Deposit Facility (ODF) Rate and Term Deposit Facility (TDF) Rate of the tenor nearest to the interest period. The related outstanding balance amounted to P=340.0 million as of December 31, 2017. e.) In 2010 and 2011, the Group obtained various loans with a total principal amount of P=680.0 million which will mature in 2017. With respect to 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. The related outstanding balance of the loan with floating interest amounted to nil and P=405.0 million as of December 31, 2017 and 2016, respectively. With respect to the fixed rate portion, 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. The related outstanding balance of the loan with fixed rate interest amounted to nil and P=3.0 million as of December 31, 2017 and 2016, respectively.

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The interest is payable every quarter. Fifty percent (50%) of the principal is payable in equal quarterly installments and the remaining balance is payable on maturity date.

On October 6, 2017, both loans with floating interest and fixed rate portion matured and fully paid the said loans amounting to P=408.0 million in 2017.

Interest on long-term debt amounted to P=49.9 million, P=37.1 million and P=51.2 million in 2017, 2016 and 2015, respectively (see Note 20).

Portion of interest expense amounting to nil and P=5.2 million in 2017 and 2016, respectively, was capitalized to investment properties (see Note 12).

Debt Covenant The loan agreements provide for certain restrictions and requirements with respect to, among others, payment of dividends, 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. These restrictions and requirements were complied with by the Group as of December 31, 2017 and 2016.

16. Deposits and Other Liabilities

This account consists of:

2017 2016 Tenants’ deposits P=173,025,139 P=172,267,639 Advance rent 106,298,491 134,070,325 Construction bond 16,645,975 15,300,810 295,969,605 321,638,774 Less noncurrent portion 242,280,491 166,368,631 P=53,689,114 P=155,270,143

The rollfoward analysis of deferred credits under tenants’ deposits follow:

2017 2016 At January 1 P=10,603,057 P=10,560,247 Additions 4,227,507 4,771,467 Amortization (Note 20) (3,271,042) (4,728,657) At December 31 P=11,559,522 P=10,603,057

Tenants’ deposits consist of rental security deposits to be refunded from 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.

Advance rent pertains to tenants’ advances which are to be applied by the Group against the rent and service due at the end of the lease terms.

Construction bond payable 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.

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17. Related Party Transactions

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

Terms and Conditions of Transactions with Related Parties Except as otherwise indicated, the outstanding accounts with related parties shall be settled in cash. The transactions are made at terms and prices agreed upon by the parties. There have been no guarantees provided or received for any related party receivables or payables and are generally unsecured. Furthermore, these accounts are noninterest-bearing except for intercompany loans.

The following tables provide the total amount of transfers that have been entered into with related parties for the relevant financial year:

Receivable from related parties Payable to related parties 2017 2016 2017 2016 Shareholder ALI P=70,861 P=70,861 P=505,783,573 P=458,612,520 Subsidiaries of ALI Avida Land Corp. (Avida) 608,391,430 669,702,424 23,715,003 23,234,192 Amaia Land Corp. (Amaia) 30,800,000 − − − Avencosouth Corp. (AC) 24,800,000 − − − Summerhill Com Ventures Corp. (SCVC) 14,610,832 − − − Airswift Transport, Inc. (ATI) 13,200,000 − − − Arvo Commercial Corp. (ACC) 8,070,137 − − − Ayala Land Intl Sales,Inc. (ALISI) 5,000,000 − − − Eco North Resort Ventures (ENRV) 4,962,173 − − − Makati Development Corporation (MDC) 1,118,895 1,118,895 81,234,693 248,341,781 North Triangle Hotel Ventures 18,783 − − − Vesta Property Holdings Inc. (VPHI) − − 185,000,000 68,000,000 Serendra Inc. (SI) − − 156,200,000 131,000,000 Ayala Hotels Inc. (AHI) − − 73,500,000 − Taft Punta Engaño Property, Inc. (TPEPI) − − 57,800,000 57,800,000 North Ventures Comm Corp. (NVCC) − − 34,300,000 − Cebu Leisure Company, Inc. (CLCI) − − 33,113,778 46,063,994 UP North Property Holdings, Inc. (UNPHI) − − 20,000,000 9,000,000 ALI CII Development Corporation (ALI CDC) − − 19,000,000 30,000,000 Glensworth Devt Inc. (GDI) − − 10,600,000 − First Gateway Real Estate (FGRE) − − 10,000,000 − Arca South Integrated Terminal Inc. (ASITI) − − 10,000,000 −

(Forward)

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Receivable from related parties Payable to related parties 2017 2016 2017 2016 Direct Power Services Inc. (DPSI) P=− P=− P=9,775,082 P=24,389,908 Lepanto Ceramics Inc. (LCI) − − 6,000,000 − Orion Land Inc. (OLI) − − 2,700,000 − Ayala Property Management Corp − − 58,960 2,252,840 ALI Commercial Center − − 1,444 1,444 Aurora Properties Inc. (API) − − − 215,900,000 Phil Integrated Energy Sol Inc. (PIESI) − − − 36,500,000 CECI Realty Corp. (CRC) − − − 20,000,000 Asterion Technopad Inc. (ATI) − − − 15,500,000 Crans Montana Properties (CMP) − − − 11,700,000 North Triangle Depot (NTD) − − − 10,900,000 Southgateway Development Corp. (SDC) − − − 8,500,000 Aviana Development Corporation (ADC) − − − 6,400,000 Parent CHI 6,375 − 88,619,008 74,435,399 Associate CBDI 10,655,916 P=31,113,065 − − Other affiliates 49,190 49,190 − − P=721,754,592 P=702,054,435 P=1,327,401,541 P=1,498,532,078

Revenue Expenses 2017 2016 2017 2016 Subsidiaries of ALI ALC P=2,775,654 P=2,506,414 P=− P=− Shareholder ALI 200,682 − 33,553,846 36,423,366 Parent CHI − − 16,633,936 21,820,471 P=2,976,336 P=2,506,414 P=50,187,782 P=58,243,837

Accrued Project Cost 2017 2016 Subsidiaries of ALI MDC P=49,996,612 P=111,125,023

· On various dates in 2017, the Group extended short-term intercompany loans to Avida, Amaia, AC, SCVC, ATI, ACC, ALISI and ENRV, with principal amounts ranging from P=1.5 million− P=24.8 million subject to 3.00%-3.27% interest per annum. In 2017, interest income from these loans amounted to P=2.5 million (see Note 19). As of December 31, 2017, outstanding balance of these loans amounted to P=163.5 million (see Note 7).

· On various dates in 2017, the Group obtained short-term intercompany loans from ALI, MDC, VPHI, SI, AHI, TPEPI, NVCC, CLCI, UNPHI, ALI CC, GDI, FGRE, ASITI, DPSI, LCI and OLI, with principal amounts ranging from P=2.7 million−P=126.2 million subject to 3.00%−3.34% interest per annum. In 2017, interest expense from these loans amounted to P=30.0 million (see Note 20). As of December 31, 2017, outstanding balance of these loans amounted to P=1,035.9 million (see Note 14).

· On various dates in 2017, the Group paid the short-term intercompany loans outstanding as of December 31, 2016 from ALI, MDC, VPHI, SI, TPEPI, CLCI, UNPHI, ALI CDC, API, PIESI, CRC, ATI, CMP, NTD, SDC, DPSI and ADC.

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· Receivables from/payables to ALC, ALI, CHI and other affiliates pertain mostly to advances for and reimbursements of development costs and operating expenses such as manpower, marketing, association dues, light and power, insurance, systems cost and management fees.

· 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 (see Note 18). The related receivable is noninterest- bearing and was recognized at present value (see Note 7).

· In 2016, the Group obtained short-term intercompany loan from MDC for a principal amount of P=161.7 million which is still outstanding as of December 31, 2017 and is due and demandable. Interest rate is 2.80% per annum and interest expense incurred in 2016 amounted to P=2.7 million (see Note 20). In addition, the Group has other outstanding payables to MDC reported under ‘Accrued project costs pertaining to costs of services for new project infrastructures of the Group.

· In 2016, the Group availed short-term intercompany loans amounting to P=545.9 million from Aurora Properties, Serendra, Inc., Vesta Property, CECI Realty, ALI CII, Aviana Development Corporation, North Triangle Depot, Asterion Technopod Inc., Philippine Integrated Energy Solutions Inc. and Crans Montana Property Holdings. These loans were availed during December 2016 and bear interest ranging from 2.80% and are due and demandable (see Note 20).

· Payable to Direct Power pertains to payable for eBloc 1 and 2 light and power expenses, DU security deposits and short-term intercompany loan amounting to P=15.0 million. The short-term loan availed in December 2016 and earns interest at 2.80% per annum, payable from 30 to 365 days from the date of availment (see Note 20).

· The Group engaged Ayala Property Management Corporation to administer, manage and maintain the common areas and facilities in the commercial buildings of the Group. Management fees and other expenses from this agreement are payable on demand.

· Payables to CHI pertain to the charged expenses for manpower, utilities, lease, management and marketing fees and other expenses. In addition, the Group availed a short-term loan from CHI amounting to P=2.6 million during the year. Interest rate is 2.80% per annum and is due and demandable (see Note 20).

· In 2016, payable to other affiliates includes short-term intercompany loans availed by the Group from Taft Punta Engaňo Property, Inc., Cebu Leisure Company, Inc., UP North Property Holdings and Southgateway Devt. Corporation amounting to P=111.3 million. Interest rate is at 2.80% per annum and is due and demandable (see Note 20).

As of December 31, 2017 and 2016, the Group has entered into transactions with BPI, an affiliate, consisting of cash and cash equivalents, financial assets at FVPL and long-term debt with carrying amounts as follows:

2017 2016 Cash and cash equivalents (Note 4) P=35,524,765 P=16,091,953 Financial assets at FVPL (Note 6) 1,096,662 1,155,635 Long-term debt (Note 15) 1,480,215,142 1,181,781,428 P=1,516,836,569 P=1,199,029,016

Key management compensation The key management personnel of the Group are employees of its Parent Company, CHI. The compensation of the said employees is paid by CHI and as such, the necessary disclosures required by PAS 24, Related Party Disclosures, are included in CHI’s consolidated financial statements.

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18. Real Estate Revenue

This account consists of:

2017 2016 2015 Rental income (Notes 12 and 22) P=616,064,091 P=490,810,384 P=422,436,119 Real estate sales (Note 17) − − 635,534,271 P=616,064,091 P=490,810,384 P=1,057,970,390

19. Interest and Other Income

Interest income are derived from:

2017 2016 2015 Accretion of receivables (Note 7) P=13,469,198 P=18,633,674 P=24,533,157 Intercompany loan (Note 17) 2,490,698 − − Cash and cash equivalents (Note 4) 313,624 165,337 136,981 Short-term investments (Note 5) 2,446 243,949 866,967 Others − 225,629 247,432 P=16,275,966 P=19,268,589 P=25,784,537

Accretion of receivables includes interest accretion from the sale of land and condominium units.

Other income consists of:

2017 2016 2015 Recoveries - net P=169,572,874 P=151,898,754 P=149,253,984 Realized and unrealized gain on financial assets at FVPL (Note 6) 22,783 82,813 578,485 Others 1,001,873 32,182,448 30,332,932 P=170,597,530 P=184,164,015 P=180,165,401

Recoveries pertain to excess collection from sewer, light and power and water charges from its rental operations. These are recognized when earned.

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20. Costs and Expenses

Real estate and rental costs consist of:

2017 2016 2015 Depreciation (Note 12) P=221,731,981 P=184,332,779 P=153,660,081 Marketing and management fees 65,460,018 58,481,598 53,080,228 Cost of real estate sales (Note 8) − − 101,603,727 Direct operating expenses: Repairs and maintenance 43,180,978 40,085,668 29,788,022 Security and janitorial 36,007,906 26,984,579 21,121,231 Taxes and licenses 19,666,588 19,827,025 13,899,068 Commission 16,838,146 3,404,124 11,583,469 Dues and fees 5,807,712 5,788,004 5,172,445 Insurance 2,951,825 2,308,473 2,481,585 Professional fees 2,857,839 3,394,881 8,096,717 Light and water − 2,027,939 25,484,408 Others 2,921,900 4,595,819 4,466,406 P=417,424,893 P=351,230,889 P=430,437,387

General and administrative expenses consist of:

2017 2016 2015 Meeting P=5,591,990 P=4,256,639 P=4,269,002 Manpower cost 2,481,650 8,850,787 9,518,669 Professional fees 2,214,323 1,517,810 1,725,631 Repairs and maintenance 1,782,717 1,201,195 1,175,403 Depreciation (Note 11) 1,450,637 807,945 536,549 Transportation and travel 1,275,427 1,176,000 1,640,351 Entertainment, amusement and recreation 1,027,877 229,656 278,427 Advertising 595,260 469,625 358,537 Security and janitorial 516,222 411,337 426,261 Trainings 477,994 106,784 266,442 Dues and fees 471,191 100,429 134,803 Supplies 356,182 334,627 35,067 Utilities 200,000 62,485 44,867 Taxes and licenses 105,456 40,496 77,611 Others 322,218 303,793 942,753 P=18,869,144 P=19,869,608 P=21,430,373

Interest expense consist of:

2017 2016 2015 Interest on long-term debt (Note 15) P=49,862,548 P=37,148,387 P=51,217,625 Interest on intercompany loans (Note 17) 30,046,633 32,448,578 17,733,782 Amortization on tenants’ deposits (Note 16) 3,271,042 4,728,657 4,153,287 P=83,180,223 P=74,325,622 P=73,104,694

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Other expense consist of: 2017 2016 2015 Interest on various taxes P=7,789,243 P=12,680,094 P=1,435,490 Other expenses 1,779,353 1,889,666 70,800,157 P=9,568,596 P=14,569,760 P=72,235,647

Other expenses include provision for various claims, write-off of assets, etc.

21. Income Tax

The provision for current income tax represents 30% RCIT, 2% MCIT, 5% rate on gross income and final withholding tax on gross interest income as follows:

2017 2016 2015 RCIT P=24,496,147 P=2,597,173 11,079,620 Gross income tax 13,114,261 12,296,209 43,882,180 MCIT 1,246,577 2,101,774 194,886 Final tax 56,692 80,514 182,884 P=38,913,677 P=17,075,670 P=55,339,670

The components of net deferred tax assets as of December 31 follow:

2017 2016 Deferred tax assets on: Unapplied NOLCO P=21,668,105 P=24,328,063 Advance rent 13,530,313 15,304,116 Unamortized discount on intercompany payable 5,873,226 5,873,226 MCIT 3,543,238 2,373,608 Unamortized discount on rental deposits 1,314,234 1,324,403 45,929,116 49,203,416 Deferred tax liabilities on: Accrued rent 20,339,205 9,377,196 Borrowing cost 15,380,747 16,205,763 Difference between tax and book basis of accounting for real estate transactions 2,322,067 2,322,066 Capitalized transaction cost 1,582,827 710,046 Amortized deferred income 1,435,922 1,435,922 Others 962,140 967,062 42,022,908 31,018,055 P=3,906,208 P=18,185,361

The components of net deferred tax liabilities as of December 31 follow:

2017 2016 Deferred tax assets on: Allowance for impairment losses on receivables and other losses P=13,794,232 P=13,794,232 Unamortized discount on sale of land 6,621,487 10,616,813 Unrealized foreign exchange loss 715,508 715,527 Advance rent 576,814 1,195,128 Accrued fees 294,939 294,939 Unamortized discount on rental deposits 9,519 9,519 Others 103,207 103,207 P=22,115,706 P=26,729,365 *SGVFS027144* - 39 -

2017 2016 Deferred tax liabilities on: Unrealized gross profit on lot sale P=114,907,257 P=145,813,007 Difference between tax and book basis of accounting for real estate transactions 1,515,383 1,515,383 Unrealized gain on UITF 170,581 165,557 116,593,221 147,493,947 (P=94,477,515) (P=120,764,582)

The Group has deductible temporary differences, NOLCO and MCIT, that are available for offset against future income and income tax due, respectively. These deductible temporary differences, NOLCO and MCIT, as of December 31 follow:

Year Expiry At December 31, At December 31, Incurred Date 2016 Additions Applied Expired 2017 NOLCO 2017 2020 P=– P=25,599,407 P=– P=– P=25,599,407 2015 2018 46,627,610 – – – 46,627,610 2014 2017 34,465,935 – – (34,465,935) – P=81,093,545 P=25,599,407 P=– (P=34,465,935) P=72,227,017

Year Expiry At December 31, At December 31, Incurred Date 2016 Additions Applied Expired 2017 MCIT 2017 2020 P=– P=1,246,578 P=– P=– P=1,246,578 2016 2019 2,101,774 – – – 2,101,774 2015 2018 194,886 – – – 194,886 2014 2017 76,948 – – (76,948) – P=2,373,608 P=1,246,578 P=– (P=76,948) P=3,543,238

Reconciliation between the statutory income tax rate and the effective income tax rate follows:

2017 2016 2015 Statutory income tax rate 30.00% 30.00% 30.00% Tax effect of: Expired NOLCO and MCIT 3.80 2.74 2.41 Income covered by lower tax rates (24.35) (26.16) (7.18) Interest income subject to final tax (0.01) (0.02) (0.01) Nondeductible expenses 0.38 2.64 0.19 Equity in net income – (0.09) (0.01) Effective income tax rate 9.82% 9.11% 25.40%

The Parent Company 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 the Parent Company to a four-year tax holiday from the start of approval of registered activities. At the expiration of its four-year tax holiday, the Parent Company 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.

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.

The Group’s management is currently assessing the impact of the TRAIN Law on its 2018 consolidated financial statement balances.

22. Lease Commitment

Operating Leases - Group as Lessor The Group has entered into commercial and office spaces and land leasing on its investment property portfolio. These noncancellable leases have remaining noncancellable lease terms of between 1 to 5 years. All leases include a clause to enable upward revision of the rental charges on an annual basis based on prevailing market conditions.

The leases provide for either (a) fixed monthly rent, or (b) minimum rent payment or fixed rent plus percentage of gross sales, whichever is higher. The total rent income amounted to P=616.1 million, P=490.8 million and P=422.4 million in 2017, 2016 and 2015, respectively (see Note 18). Total percentage rent recognized as income amounted to P=3.6 million, P=16.1 million and P=16.1 million in 2017, 2016 and 2015, respectively.

Future minimum rentals receivable under noncancellable operating leases of the Group are as follows:

2017 2016 2015 Within one year P=369,181,914 P=320,220,712 P=391,235,713 After one year but not more than five years 828,876,494 492,396,878 686,423,315 P=1,198,058,408 P=812,617,590 P=1,077,659,028

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23. Basic/Diluted Earnings Per Share

Earnings per share amounts were computed as follows: 2017 2016 2015 a. Net income P=246,974,890 P=213,593,098 P=497,236,194 b. Weighted average number of outstanding shares: Class A 564,210,000 564,210,000 564,210,000 Class B 376,140,000 376,140,000 376,140,000 940,350,000 940,350,000 940,350,000 c. Basic/diluted EPS (a/b) P=0.26 P=0.23 P=0.53

There were no potential dilutive shares in 2017, 2016 and 2015.

24. Financial Information and Financial Instruments

The methods and assumptions used by the Group in estimating the fair value of the financial instruments are as follows:

2017 2016 Carrying Value Fair Value Carrying Value Fair Value Loans and Receivables Short-term investments P=2,543,123 P=2,543,123 P=− P=− Financial assets at FVPL 1,096,662 1,096,662 1,155,635 1,155,635 Receivable from related parties 180,884,450 311,442,212 276,128,687 430,985,412 P=184,524,235 P=315,081,997 P=277,284,322 P=432,141,047

Other Financial Liabilities Long-term debt P=1,480,215,142 P=1,486,125,000 P=1,181,781,428 P=1,259,151,220 Tenants’ deposit under deposit and other liabilities 173,025,139 161,465,617 172,267,639 161,664,582 P=1,653,240,281 P=1,647,590,617 P=1,354,049,067 P=1,420,815,802

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, 2017 and 2016, respectively.

*SGVFS027144* - 42 -

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.

Deposits and other liabilities - The fair values of tenats’ deposits are estimated using the discounted cash flow methodology using the applicable rates for similar type of instruments. The discount rates used ranged from 2.10% to 2.32% as of December 31, 2017 and 2016, respectively.

Long-term debt - 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 valued. The discount rates used ranged from 2.38% to 3.90% as of December 31, 2017 and 2016, respectively.

Fair Value Hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

The Group categorized trade receivable classified as loans and receivables, long-term debt and deposits and other noncurrent liabilities under Level 3 as of December 31, 2017 and 2016. 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.

2017 Fair value measurements using Significant Quoted prices in offer Significant active markets observable unobservable Carrying for identical inputs inputs Date of Valuation Values Total assets (Level 1) (Level 2) (Level 3) Assets measured at fair value Short-term investments December 31, 2017 P=2,543,123 P=2,543,123 P=2,543,123 P=– P=– FVPL December 31, 2017 1,096,662 1,096,662 – 1,096,662 – Assets for which fair values are disclosed Investment properties December 31, 2017 3,459,041,996 18,439,000,000 − − 18,439,000,000 Receivable from related parties December 31, 2017 180,884,450 311,442,212 − − 311,442,212 Liabilities for which fair values are disclosed Long-term debt December 31, 2017 1,480,215,142 1,486,125,000 − − 1,486,125,000 Tenants’ deposit under deposit and other liabilities December 31, 2017 173,025,139 161,465,617 − − 161,465,617

2016 Fair value measurements using Significant Quoted prices in offer Significant active markets for observable unobservable Carrying identical assets inputs inputs Date of Valuation Values Total (Level 1) (Level 2) (Level 3) Assets measured at fair value FVPL December 31, 2016 P=1,155,635 P=1,155,635 P=− P=1,155,635 P=– Assets for which fair values are disclosed Investment properties December 31, 2016 3,679,084,926 8,373,962,134 − − 8,373,962,134 Receivable from related parties December 31, 2016 276,128,687 430,985,412 − − 430,985,412 Liabilities for which fair values are disclosed Long-term debt December 31, 2016 1,181,781,428 1,259,151,220 − − 1,259,151,220 Tenants’ deposit under deposit and other liabilities December 31, 2016 172,267,639 161,664,582 − − 161,664,582

*SGVFS027144* - 43 -

Financial assets at FVPL amounting to P=1.1 million and P=1.2 million as of December 31, 2017 and 2016, respectively, are classified under Level 1 (see Note 6).

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.

There have been no reclassifications between Level 1, 2 and 3 categories in 2017 and 2016.

Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise of cash and cash equivalents, short-term investments, financial assets at FVPL, accounts and other payables, long-term debt and deposits and other liabilities. 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, equity price 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.

There were no changes in the Group’s financial risk management objectives and policies in 2017 and 2016.

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Other financial assets are comprised of cash and cash equivalents excluding cash on hand, short- term investments, and financial assets at FVPL. 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, 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.

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:

2017 Financial Effect of Maximum Collateral or Exposure to Fair Value of Net Credit Credit Risk Collaterals Exposure Enhancement Trade receivables: Corporate business P=38,290,829 P=128,414,219 P=− P=38,290,829 Shopping centers 8,050,641 19,073,796 − 8,050,641 P=46,341,470 P=147,488,015 P=− P=46,341,470

2016 Financial Effect of Maximum Collateral or Exposure to Fair Value of Net Credit Credit Risk Collaterals Exposure Enhancement Trade receivables: Corporate business P=36,592,371 P=121,115,564 P=− P=36,592,371 Shopping centers 10,120,080 18,692,037 − 10,120,080 P=46,712,451 P=139,807,601 P=− P=46,712,451

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Given the Group’s diverse base of counterparties, it is not exposed to large concentration of credit risk. As of December 31, 2017 and 2016, the aging analyses of receivables presented per class, is as follows:

2017

Neither Past Due nor Past Due but not Impaired Individually Impaired <30 days 30-60 days 60-90 days 90-120 days >120 days Total Impaired Total Receivable from related parties P=721,754,592 P=− P=− P=− P=− P=− P=− P=− P=721,754,592 Trade: Corporate business 7,282,842 − 2,950,039 11,110,234 5,016,150 11,931,564 31,007,987 − 38,290,829 Shopping centers 2,680,025 − 356,644 235,166 780,954 2,497,852 3,870,616 1,500,000 8,050,641 Accrued receivable 109,632,522 − − − − − − − 109,632,522 Receivable from employees 561,675 − − − − − − − 561,675 Others 12,270,872 − − − − − − − 12,270,872 P=854,182,528 P=− P=3,306,683 P=11,345,400 P=5,797,104 P=14,429,416 P=34,878,603 P=1,500,000 P=890,561,131

2016

Neither Past Due nor Past Due but not Impaired Individually Impaired <30 days 30-60 days 60-90 days 90-120 days >120 days Total Impaired Total Receivable from related parties P=702,054,435 P=− P=− P=− P=− P=− P=− P=− P=702,054,435 Trade: Corporate business 19,507,601 − 1,443,851 7,237,137 4,834,878 3,568,904 17,084,770 − 36,592,371 Shopping centers 2,977,108 − 492,217 278,208 392,119 4,480,428 5,642,972 1,500,000 10,120,080 Accrued receivable 59,177,778 − − − − − − − 59,177,778 Receivable from employees 296,876 − − − − − − − 296,876 Others 12,016,551 − − − − − − − 12,016,551 P=796,030,349 P=− P=1,936,068 P=7,515,345 P=5,226,997 P=8,049,332 P=22,727,742 P=1,500,000 P=820,258,091

The Group has no collaterals held for the past due or impaired financial assets as of December 31, 2017 and 2016.

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The table below shows the credit quality by class of the Group’s financial assets (gross of allowance for impairment losses):

2017

Neither Past Due nor Impaired Past Due High Grade Medium Grade Low Grade or Impaired Total Cash and cash equivalents (excluding cash on hand) P=39,888,430 P=− P=− P=− P=39,888,430 Short-term investments 2,543,123 − − − 2,543,123 Financial assets at FVPL 1,096,662 − − − 1,096,662 Receivable from related parties 721,754,592 − − − 721,754,592 Trade: Corporate business 7,282,843 − − 31,007,986 38,290,829 Shopping centers 2,680,026 − − 5,370,615 8,050,641 Accrued receivables 109,632,522 − − − 109,632,522 Receivables from employees 561,675 − − − 561,675 Others 12,270,872 − − − 12,270,872 P=897,710,745 P=− P=− P= 36,378,601 P=934,089,346

2016

Neither Past Due nor Impaired Past Due High Grade Medium Grade Low Grade or Impaired Total Cash and cash equivalents (excluding cash on hand) P=23,238,088 P=− P=− P=− P=23,238,088 Short-term investments − − − − − Financial assets at FVPL 1,155,635 − − − 1,155,635 Receivable from related parties 702,054,435 − − − 702,054,435 Trade: Corporate business 19,507,601 − − 17,084,770 36,592,371 Shopping centers 2,977,108 − − 7,142,972 10,120,080 Accrued receivables 59,177,778 − − − 59,177,778 Receivables from employees 296,876 − − − 296,876 Others 12,016,551 − − − 12,016,551 P=820,424,072 P=− P=− P=24,227,742 P=844,651,814

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The credit quality of the financial assets was determined as follows:

Cash and cash equivalents, short-term investments and financial assets at FVPL - based on the nature of the counterparty and the Group’s internal rating procedure. These are held by counterparty banks with minimal risk of bankruptcy and are therefore classified as high grade.

Trade receivable - 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, 2017 and 2016, 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.

As of December 31, 2017, current ratio is 0.50:1, with cash and cash equivalents, short-term investments and financial assets at FVPL of P=43.6 million accounting for 4.68% of the total current assets, and resulting in a net working deficit of P=923.0 million.

As of December 31, 2016, current ratio is 0.30:1, with cash and cash equivalents, short-term investments and financial assets at FVPL of P=24.5 million accounting for 3.16% of the total current assets, and resulting in a net working deficit of P=1,808.8 million.

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 tables below summarize the maturity profile of the Group’s financial assets and liabilities at December 31, 2017 and 2016 based on contractual undiscounted payments. The tables also provide analysis on the maturity profile of the Group’s financial assets in order to provide a complete view of the Group’s contractual commitments. The analysis into relevant maturity groupings is based on the remaining period at the end of the reporting period to the contractual maturity dates.

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2017

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total Cash and cash equivalents (excluding cash on hand) P=39,888,430 P=− P=− P=− P=39,888,430 Short-term investments 2,543,123 − − − 2,543,123 Financial assets at FVPL 1,096,662 − − − 1,096,662 Receivable 635,977,324 23,880,139 202,434,020 28,269,648 890,561,131 Total financial assets P=679,505,539 P=23,880,139 P=202,434,020 P=28,269,648 P=934,089,346

Accounts and other payables P=1,663,035,179 P=− P=− P=− P=1,663,035,179 Long-term debt 59,941,642 59,955,987 76,962,934 1,283,354,579 1,480,215,142 Interest payable on long-term debt 11,624,486 88,750,562 64,236,235 38,008,134 202,619,417 Deposits and other liabilities 64,964,898 23,130,690 387,005 101,188,521 189,671,114 Total other financial liabilities P=1,799,566,205 P=171,837,239 P=141,586,174 P=1,422,551,234 P=3,535,540,852

2016

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total Cash and cash equivalents (excluding cash on hand) P=23,238,088 P=− P=− P=− P=23,238,088 Financial assets at FVPL 1,155,635 − − − 1,155,635 Receivable 443,063,476 131,198,127 147,597,893 98,398,595 820,258,091 Total financial assets P=467,457,199 P=131,198,127 P=147,597,893 P=98,398,595 P=844,651,814

Accounts and other payables P=1,898,975,596 P=− P=− P=− P=1,898,975,596 Long-term debt 442,279,365 39,450,824 78,930,686 621,120,553 1,181,781,428 Interest payable on long-term debt 55,110,664 31,135,671 29,416,171 63,544,921 179,207,427 Deposits and other liabilities 155,270,143 85,530,932 21,348,204 59,489,495 321,638,774 Total other financial liabilities P=2,551,635,768 P=156,117,427 P=129,695,061 P=744,154,969 P=3,581,603,225

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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 are shown in the following table:

December 31, 2017 Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Cash and cash equivalents Fixed at the date of investment Various P=39,888,430 P=39,888,430 P= P=39,888,430 Receivable Fixed at the date of sale Date of Sale 890,561,131 890,561,131 − 890,561,131 P=930,449,561 P=930,449,561 P=− P=930,449,561 Long-term debt Fixed Peso Fixed rate corporate notes Maturity date P=378,000,000 P=20,708,356 P=356,361,741 P=377,070,097 Floating Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Quarterly 404,250,000 20,672,491 381,740,587 402,413,079 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Quarterly 363,875,000 18,742,468 343,689,497 362,431,966 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Quarterly 340,000,000 (181,674) 338,481,674 338,300,000 P=1,486,125,000 P=59,941,641 P=1,420,273,499 P=1,480,215,142

December 31, 2016 Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Cash and cash equivalents Fixed at the date of investment Various P=23,238,088 P=23,238,088 P=− P=23,238,088 Receivable Fixed at the date of sale Date of sale 820,258,091 820,258,091 − 820,258,091 P=843,496,179 P=843,496,179 P=− P=843,496,179 Long-term debt Fixed Peso Fixed rate corporate notes Maturity date P=399,000,000 P=20,703,808 P=377,070,097 P=397,773,905 Peso Fixed rate 7-year treasury bond + 0.50 spread Maturity date 3,000,000 2,997,216 − 2,997,216 Floating Peso Floating rate of average 91-day treasury bill rate + 0.65% spread Quarterly 405,000,000 404,591,203 − 404,591,203 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Quarterly 378,125,000 13,987,138 362,431,966 376,419,104 P=1,185,125,000 P=442,279,365 P=739,502,063 P=1,181,781,428

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The maturities of long-term debt at nominal values as of December 31, 2017 and 2016 follow:

2017 2016 Due in: 2017 P=− P= 443,250,000 2018 61,000,000 40,000,000 2019 61,000,000 40,000,000 2020 78,000,000 40,000,000 2021 372,000,000 334,000,000 2022 57,000,000 19,000,000 2023 585,125,000 268,875,000 2024 17,000,000 − 2025 17,000,000 − 2026 17,000,000 − 2027 221,000,000 − P=1,486,125,000 P=1,185,125,000

In September 2017, AiO obtained a credit facility amounting to P= 375.0 million. In October 2017, AiO made the first drawdown amounting to P= 340.0 million which is due in installments until 2027. Proceeds was 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 Bangko Sentral ng Pilipinas Overnight Deposit Facility Rate and Term Deposit Facility Rate of the tenor nearest to the interest period.

In March 2017, AiO availed the second drawdown from the P= 800.0 million credit facility amounting to P= 420.0 million which will mature in 2023. The related outstanding balance amounted to P= 404.3 million as of December 31, 2017.

In March 2016, the Group obtained a credit facility amounting to P=800.0 million. As of December 31, 2017 and 2016, the undrawn amount amounted to P=420.0 million.

Cash and cash equivalents, short-term investments, financial assets at FVPL and accounts receivable 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.

The following table shows the Group’s consolidated foreign-currency-denominated monetary assets and their Peso equivalents as of December 31, 2017 and 2016:

2017 2016 US Dollar Php Equivalent US Dollar Php Equivalent Cash and cash equivalents $3,551 P=177,286 $53,827 P=2,676,318 Short-term investments 50,934 2,543,123 − −

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In translating the foreign-currency-denominated monetary assets into Peso amounts, the exchange rates used were P=49.93 to US$1.00 and P=49.72 to US$1.00, the Philippine Peso-US Dollar exchange rates as of December 31, 2017 and 2016.

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 income 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 profit or loss.

Increase (Decrease) in Effect on Profit exchange rate Before Tax 2017 1.00 P=54,485 (1.00) (54,485) 2016 1.00 53,827 (1.00) (53,827)

Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates

The Group’s interest rate risk management policy centers on reducing the overall interest expense and exposure to changes in interest rates. Changes in market interest rates relate primarily to the Group’s interest-bearing debt obligations with floating interest rate as it can cause a change in the amount of interest payments.

The following table demonstrates the sensitivity of the Group’s income before tax to a reasonable possible change in interest rates on December 31, 2017 and 2016, with all variables held constant, (through the impact on floating rate borrowings):

Effect on income before income tax increase (decrease) + 100 basis - 100 basis Change in basis points points points 2017 (P=11,031,450) P=11,031,450 2016 (7,840,075) 7,840,075

The assumed change in the rate is based on the currently observable market environment. There is no other impact on the Group’s equity other than those already affecting profit or loss.

*SGVFS027144* - 52 -

25. Equity

Capital Stock The details of the Parent Company’s common shares as of December 31, 2017 and 2016 are as follows:

Authorized, issued and outstanding - P=1 par value Class A - 564,210,000 shares P=564,210,000 Class B - 376,140,000 shares 376,140,000 P=940,350,000

In accordance with Securities Regulation Code Rule 68, As Amended (2011), Annex 68-D, below is a summary of the Parent Company’s track record of registration as securities.

Number of shares Issue/offer Date of Number of holders of securities registered price approval as of December 31 2017 2016 Common shares 940,350,000 P=1.00 par value March 3, 1992 462 477 P=1.00 issue price

Class A and Class B shares are identical, except that issuance of Class A shares is limited to Philippine nationals. Class B shares may be issued to any person, corporation, partnership or association regardless of nationality provided that the amount of Class B shares outstanding shall not exceed 40% of the entire amount of capital stock then issued and outstanding.

Equity Reserve The equity reserve resulted from the common control in business combination in 2013. Under the pooling of interest method, the Group recognized the total excess cost of investments over the net assets under equity reserve presented in the equity section amounting to P=9.47 million.

Retained Earnings The retained earnings available for dividend distribution of the Parent Company amounted to P=747.8 million and P=465.1 million as of December 31, 2017 and 2016, respectively.

Retained earnings include undistributed net earnings of subsidiary amounting P=251.1 million and P=207.7 million as of December 31, 2017 and 2016, respectively. These amounts are not available for dividend declaration until declared by the subsidiary.

On December 11, 2015, the Parent Company’s BOD declared P=0.12 per share cash dividends from unappropriated retained earnings to all its issued and outstanding shares as of record date December 16, 2015, and paid on December 23, 2015. Out of the said dividends, P=11.92 million and P=99.17 million were paid in 2016 and 2015, respectively.

The Group considers as capital its total equity amounting to P=2,143.0 million and P=1,896.0 million as of December 31, 2017 and 2016, respectively.

The Group manages its capital structure and makes adjustments in the light of changes in economic conditions and the requirements of the loan agreements.

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Loan agreements provide for certain restrictions and requirements with respect to, among others, payment of dividends, 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. There have been no breaches of the loan covenants in the current period.

No changes were made in the objectives, policies and processes for managing capital in 2017 and 2016.

As of December 31, 2017 and 2016, the Group had the following ratios:

2017 2016 Long-term debt P=1,480,215,142 P=1,181,781,428 Less: Cash and cash equivalents 39,988,430 23,318,088 Short-term investments 2,543,123 − Financial assets at FVPL 1,096,662 1,155,635 Net debt 1,436,586,927 1,157,307,705 Equity P=2,142,996,521 P=1,896,021,631 Debt to equity 69.07% 62.33% Net debt to equity 67.04% 61.04%

26. Segment Information

The business segments where the Group operates are as follows:

Core business: · Residential development - sale of high-end residential lots and condominium units · Shopping centers - development of shopping centers and lease to third parties of retail space and land therein; 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.

*SGVFS027144* - 54 -

The following tables regarding business segments present assets and liabilities as of December 31, 2017, 2016 and 2015 and revenue and expense information for the each of the three years in the period ended December 31, 2017:

2017

Residential Shopping Corporate Development Centers Business Others Total Revenue Sales to external customers P=− P=47,922,192 P=537,924,023 P=30,217,876 P=616,064,091 Total revenue − 47,922,192 537,924,023 30,217,876 616,064,091 Operating expenses 590,918 34,995,882 374,641,984 7,196,109 417,424,893 Operating profit (loss) (590,918) 12,926,310 163,282,039 23,021,767 198,639,198 Interest income − − 146,231 16,129,735 16,275,966 Other income − 13,297,307 155,032,812 2,267,411 170,597,530 Interest expense − − (32,665,016) (50,515,207) (83,180,223) Other expense − − (4,490,368) (5,078,228) (9,568,956) Share in net loss of an associate and a joint venture − − (14,078) − (14,078) General administrative expenses − − (18,177,141) (692,003) (18,869,144) Provision for income tax − − 1,768,127 (28,673,890) (26,905,763) Net income (loss) (P=590,918) P=26,223,617 P=264,882,606 (P=43,540,415) P=246,974,890

Other Information Segment assets P=15,549,618 P=210,327,020 P=4,368,585,571 P=363,916,418 P=4,958,378,627 Investment in an associate − − 796,542,791 − 796,542,791 Total assets P=15,549,618 P=210,327,020 P=5,165,128,362 P=363,916,418 P=5,754,921,418

Total liabilities P=68,039,367 P=88,851,320 P=1,904,320,730 P=1,550,713,480 P=3,611,924,897

Segment additions to property and equipment and investment properties P=− P=1,752,649 P=26,943,953 P=14,173,134 P=42,869,736

Depreciation and amortization P=− P=17,878,702 P=202,492,159 P=2,811,757 P=223,182,618

*SGVFS027144* - 55 -

2016

Residential Shopping Corporate Development Centers Business Others Total Revenue Sales to external customers P=− P=44,298,717 P=430,429,252 P=16,082,415 P=490,810,384 Total revenue − 44,298,717 430,429,252 16,082,415 490,810,384 Operating expenses − 25,868,422 293,813,546 31,548,921 351,230,889 Operating profit (loss) − 18,430,295 136,615,706 (15,466,506) 139,579,495 Interest income − 35,024 18,593,989 639,576 19,268,589 Other income − 9,086,816 156,697,064 18,380,135 184,164,015 Interest expense − − (4,728,657) (69,596,965) (74,325,622) Other expense − − − (14,569,760) (14,569,760) Share in net income of a joint venture − − 741,425 − 741,425 General administrative expenses − − (19,132,169) (737,439) (19,869,608) Provision for income tax − − (6,765,926) (14,629,510) (21,395,436) Net income (loss) P=− P=27,552,135 P=282,021,432 (P=95,980,469) P=213,593,098

Other Information Segment assets P=582,672,663 P=177,288,465 P=2,529,300,856 P=1,803,957,986 P=5,093,219,970 Investment in an associate − − − 412,255,869 412,255,869 Total assets P=582,672,663 P=177,288,465 P=2,529,300,856 P=2,216,213,855 P=5,505,475,839

Total liabilities P=136,506,712 P=67,985,089 P=2,188,715,293 P=1,216,247,114 P=3,609,454,208

Segment additions to property and equipment and investment properties P=− P=576,029 P=234,303,353 P=213,204 P=235,092,586

Depreciation and amortization P=− P=10,613,160 P=166,023,948 P=8,503,616 P=185,140,724

*SGVFS027144* - 56 -

2015

Residential Shopping Corporate Development Centers Business Others Total Revenue Sales to external customers P=635,534,271 P=41,357,008 P=370,296,278 P=10,782,833 P=1,057,970,390 Total revenue 635,534,271 41,357,008 370,296,278 10,782,833 1,057,970,390 Operating expenses (102,604,989) (84,718,623) (191,246,452) (51,867,323) (430,437,387) Operating profit (loss) 532,929,282 (43,361,615) 179,049,826 (41,084,490) 627,533,003 Interest income − − − 25,784,537 25,784,537 Other income − 54,196,069 58,861,569 67,107,763 180,165,401 Interest expense − − − (73,104,694) (73,104,694) Other expense − − − (72,235,647) (72,235,647) General administrative expenses − − − (21,430,373) (21,430,373) Share in net loss of a joint venture − − − (186,433) (186,433) Provision for income tax − − − (169,289,600) (169,289,600) Net income (loss) P=532,929,282 P=10,834,454 P=237,911,395 (P=284,438,937) P=497,236,194

Other Information Segment assets P=709,322,587 P=157,503,470 P=2,858,861,228 P=1,169,936,305 P=4,895,623,590 Investment in an associate − − − 236,514,444 236,514,444 Total assets P=709,322,587 P=157,503,470 P=2,858,861,228 P=1,406,450,749 P=5,132,138,034

Total liabilities P=7,336,605 P=76,399,661 P=2,052,673,766 P=1,313,299,469 P=3,449,709,501

Segment additions to property and equipment and investment properties P=‒ P=1,075,910 P=467,984,059 P=431,477 P=469,491,446

Depreciation and amortization P=‒ P=14,942,690 P=138,912,868 P=341,072 P=154,196,630

*SGVFS027144* - 57 -

27. Provisions and Contingencies

The Group is currently involved in a legal proceeding and the outcome of this legal proceeding is not presently determinable.

28. Supplemental Cash Flow Information

Changes in liabilities arising from financing activities follow:

Non-cash changes Amortization December 31, January 1, 2017 Cash Flows of DIC Other 2017 (In Thousands) Current portion of long- P=442,279,365 (P=459,000,000) P=411,581 P=76,250,696 P=59,941,642 term debt (Note 18) Long-term debt - net of current portion 739,502,063 756,200,000 822,133 (76,250,696) 1,420,273,500 Total liabilities from financing activities P=1,181,781,428 297,200,000 P=1,233,714 P= − P=1,480,215,142

*SGVFS027144* SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A), Philippines November 10, 2015, valid until November 9, 2018

INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY SCHEDULES

The Stockholders and Board of Directors Cebu Property Ventures and Development Corporation and Subsidiary 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 Property Ventures and Development Corporation and Subsidiary (the Group) as at December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017, included in this Form 17-A, and have issued our report thereon dated February 26, 2018. 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, 2018

*SGVFS027144*

A member firm of Ernst & Young Global Limited SCHEDULE C

CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY SUPPLEMENTARY SCHEDULE OF AMOUNTS RECEIVABLE FROM RELATED PARTIES WHICH ARE ELIMINATED DURING THE CONSOLIDATION OF FINANCIAL STATEMENTS DECEMBER 31, 2017

Receivable Payable Balance per Balance per CPVDC Parent Subsidiary Current Portion Asian I-Office Properties, Inc. P=151,345,632 P=151,345,632 P=1,345,632 SCHEDULE I

CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS DECEMBER 31, 2017

Unappropriated Retained Earnings, as adjusted, beginning P=465,099,364 Net income based on the face of AFS 300,155,187 Other adjustments: Interest income on accretion (13,469,198) Deferred income tax assets that reduced the amount of provision for income tax (3,995,345) Fair value adjustment on financial assets at FVPL (16,746) Unappropriated Retained Earnings, end available for dividend distribution P=747,773,262 1 SCHEDULE J

CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY MAP SHOWING THE RELATIONSHIPS BETWEEN AND AMONG THE COMPANIES IN THE GROUP, ITS ULTIMATE PARENT COMPANY AND CO-SUBSIDIARIES DECEMBER 31, 2017

Cebu Holdings, The Ayala Others Province Land, 7.66% Inc. 76.26% of Cebu Inc. 8.28% 7.80%

CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION

ASIAN I-OFFICE PROPERTIES, INC. 100% Cebu District Property Enterprise, Inc. CPVDC 5%; CHI 10%

CENTRAL BLOCK DEVELOPERS, INC. CPVDC 30%; CHI 25%; ALI 45% - 2 -

Ayala Land, Inc. (71.96%)

PCD Nominee Corp. (Filipino) (6.35%)

Public Makati Supermarket (2.73%) Corp. (0.16%)

Laguna Properties PCD Nominee Corp. Holdings, Inc. (0.10%) (Non-Filipino) (18.70%)

Cebu Holdings, Inc.

Cebu District Taft Punta CBP Theatre Property Cebu Leisure Engaño Management Enterprise, Inc. Company, Inc. Property, Inc. Company, Inc. CHI 10%; 100.00% 55.00% 100.00% CPVDC5%

Cebu Insular Amaia Hotel, Solinea, Inc. Southern Company, 35.00% Properties, Inc. Inc. 37.06% 35.00%

Asian Cebu Property Ventures and I- Office Development Corporation Central v Properties, 76.26% Block Inc. Developers, 100.00% Inc. CPVDC 30.00%; CHI 25% - 3 - - 4 - MERMAC, Inc.

48.96%

40.87% 10.17% MITSUBISHI Ayala Corporation Public CORPORATION

47.17% 52.83% Ayala Land, Inc. Public SCHEDULE K

CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION AND SUBSIDIARY LIST OF EFFECTIVE STANDARDS AND INTERPRETATIONS DECEMBER 31, 2017

Amendments to PFRS 2: Definition of Vesting ü

Approved for printing by: ______Date: ______- 2 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Condition*

Amendments to PFRS 2: Classification and Measurement of Share-based Payment Transactions Not adopted PFRS 3 Business Combinations ü (Revised) Amendment to PFRS 3: Accounting for Contingent Consideration in a Business Combination* ü Amendment to PFRS 3: Scope Exceptions for Joint Arrangements* ü PFRS 4 Insurance Contracts ü Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ü Applying PFRS 9, Financial Instruments with PFRS 4, Insurance Contracts Not early adopted Amendments to PFRS 4: Applying PFRS 9, Financial Instruments, with PFRS 4, Insurance Not adopted PFRS 5 Non-current Assets Held for Sale and Discontinued Operations ü Amendments to PFRS 5: Changes in Methods of Disposal Not early adopted PFRS 6 Exploration for and Evaluation of Mineral Resources ü PFRS 7 Financial Instruments: Disclosures ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition ü Amendments to PFRS 7: Improving Disclosures about Financial Instruments ü Amendments to PFRS 7: Disclosures - Transfers of Financial Assets ü Amendments to PFRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities ü Amendments to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures Not early adopted Amendments to PFRS 7: Disclosures - Servicing ü Contracts Applicability of the Amendments to PFRS 7 to ü Condensed Interim Financial Statements - 3 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 PFRS 8 Operating Segments ü Amendments to PFRS 8: Aggregation of Operating Segments and Reconciliation of the Total of the Reportable Segments’ Assets to the Entity’s Assets ü PFRS 9 Financial Instruments: Classification and Movement (2010 version) Not early adopted Financial Instruments - Hedge Accounting and amendments to PFRS 9, PFRS 7 and PAS 39 (2013 version) Not early adopted Financial Instruments (2014 or final version) Not early adopted Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 and Transition Disclosures Not early adopted Amendments to PFRS 9: Prepayment Features with Negative Compensation Not adopted PFRS 10 Consolidated Financial Statements ü Amendments to PFRS 10: Investment Entities ü Amendments to PFRS 10: Sale or Contribution of Assets between an Investor and its Associate or Not early adopted Joint Venture Amendments to PFRS 10: Investment Entities: Applying the Consolidation Exception ü PFRS 11 Joint Arrangements ü Amendments to PFRS 11: Accounting for ü Acquisitions of Interests in Joint Operations PFRS 12 Disclosure of Interests in Other Entities ü Amendments to PFRS 12: Investment Entities ü Amendment to PFRS 12: Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014-2016 Cycle) ü PFRS 13 Fair Value Measurement ü Amendments to PFRS 13: Short-term receivable and payables ü Amendments to PFRS 13: Portfolio Exception ü PFRS 14 Regulatory Deferral Accounts ü PFRS 15 Revenue from Contracts with Customers Not early adopted PFRS 16 Leases Not adopted Philippine Accounting Standards PAS 1 Presentation of Financial Statements ü - 4 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 (Revised) Amendment to PAS 1: Capital Disclosures ü Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation ü Amendments to PAS 1: Presentation of Items of Other ü Comprehensive Income Amendments to PAS 1: Clarification of the ü requirements for comparative information Amendments to PAS 1: Disclosure Initiative ü PAS 2 Inventories ü PAS 7 Statement of Cash Flows ü Disclosure Initiative ü PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors ü PAS 10 Events after the Reporting Date ü PAS 11 Construction Contracts ü PAS 12 Income Taxes ü Amendment to PAS 12-Deferred Tax: Recovery of Underlying Assets ü Amendments to PAS 12: Recognition of Deferred Tax Assets for Unrealized Losses ü PAS 16 Property, Plant and Equipment ü Amendment to PAS 16: Classification of servicing equipment ü Amendment to PAS 16: Revaluation Method - Proportionate Restatement of Accumulated Depreciation ü Amendment to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization ü Amendment to PAS 16: Bearer Plants ü PAS 17 Leases ü PAS 18 Revenue ü PAS 19 Employee Benefits ü Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures ü PAS 19 Employee Benefits ü (Amended) Amendments to PAS 19: Defined Benefit Plans: ü Employee Contributions - 5 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures ü Amendments to PAS 19: Regional Market Issue regarding Discount Rate ü PAS 20 Accounting for Government Grants and Disclosure of Government Assistance ü PAS 21 The Effects of Changes in Foreign Exchange Rates ü Amendment: Net Investment in a Foreign Operation ü PAS 23 Borrowing Costs (Revised) ü PAS 24 Related Party Disclosures ü (Revised) Amendments to PAS 24: Key Management Personnel ü PAS 26 Accounting and Reporting by Retirement Benefit Plans ü PAS 27 Consolidated and Separate Financial Statements ü PAS 27 Separate Financial Statements ü (Amended) Amendments to PAS 27: Investment Entities ü Amendments to PAS 27: Equity Method in ü Separate Financial Statements PAS 28 Investment in Associate and Joint Venture ü Amendments to PAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture ü Amendments to PAS 28: Investment Entities: Applying the Consolidation Exception ü Amendments to PAS 28: Long-term Interests in Associates and Joint Ventures Not adopted Amendment to PAS 28: Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014-2016 Cycle) Not adopted PAS 29 Financial Reporting in Hyperinflationary Economies ü PAS 31 Interests in Joint Ventures ü PAS 32 Financial Instruments: Disclosure and Presentation ü Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation ü - 6 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Amendment to PAS 32: Classification of Rights Issues ü Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities ü PAS 33 Earnings per Share ü PAS 34 Interim Financial Reporting ü Amendments to PAS 34: Interim financial reporting and segment information for total assets and liabilities ü Amendments to PAS 34: - Disclosure of information ‘elsewhere in the interim financial report ü PAS 36 Impairment of Assets ü Amendments to PAS 36: Recoverable Amount Disclosures for Non-Financial Assets ü PAS 37 Provisions, Contingent Liabilities and Contingent Assets ü PAS 38 Intangible Assets ü Amendments to PAS 38: Revaluation Method - Proportionate Restatement of Accumulated Amortization ü Amendments to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization ü PAS 39 Financial Instruments: Recognition and Measurement ü Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and Financial Liabilities ü Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions ü Amendments to PAS 39: The Fair Value Option ü Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ü Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition ü Amendments to Philippine Interpretation IFRIC-9 and PAS 39: Embedded Derivatives ü - 7 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2017 Amendment to PAS 39: Eligible Hedged Items ü Amendment to PAS 39: Novation of Derivatives and Continuation of Hedge Accounting ü PAS 40 Investment Property ü Amendment to PAS 40: Interrelationship between PFRS 3 and PAS 40 ü Transfer of Investment Property Not early adopted PAS 40 Investment Property (Amended) ü PAS 41 Agriculture ü Amendment to PAS 41: Bearer Plants ü Philippine Interpretations IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities ü IFRIC 2 Members’ Share in Co-operative Entities and Similar Instruments ü IFRIC 4 Determining Whether an Arrangement Contains a Lease ü IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds ü IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment ü IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies ü IFRIC 8 Scope of PFRS 2 ü IFRIC 9 Reassessment of Embedded Derivatives ü Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives ü IFRIC 10 Interim Financial Reporting and Impairment ü IFRIC 11 PFRS 2 - Group and Treasury Share Transactions ü IFRIC 12 Service Concession Arrangements ü IFRIC 13 Customer Loyalty Programmes ü IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction ü Amendments to Philippine Interpretations IFRIC - 14, Prepayments of a Minimum Funding Requirement ü - 8 -

Standards tagged as “Not Applicable” have been adopted by the Group but have no significant covered transactions for the year ended December 31, 2017.

Financial Soundness Indicator 2017 2016 a. Current/ liquidity ratios Current ratios 50.24% 29.97% Quick ratios 49.30% 29.30%

b. Solvency/ Debt-to-Equity Ratios Debt-to equity ratios 69.07% 62.33% Net debt-to equity ratios 67.04% 61.04%

c. Asset -to equity ratios 268.55% 290.37%

d. Interest rate coverage ratios 5.02 4.38

e. Profitability ratios Net Income Margin 30.76% 30.73% Return on total assets 4.39% 4.02% Return on equity 12.23% 11.94%

f. Other relevant ratios None None

Cebu Property Ventures & Development Corp. & Subsidiary a. Current/ liquidity ratios 2017 2016 Current asset 931,899 774,028 Current Liabilities 1,854,893 2,582,819 Current ratios 50% 30%

Current Asset 931,899 774,028 Inventory 17,359 17,359 Quick Assets 914,540 756,669 Current Liabilities 1,854,893 2,582,819 Quick Ratios 49% 29%

b. Solvency/Debt-to-Equity Ratios Short term Debt - - Current Portion of Long Term Debt 59,942 442,279 Long-term Debt - net of current portion 1,420,273 739,502 Bank Debt 1,480,215 1,181,781 Equity 2,142,997 1,896,022 Less: Noncontrolling interest - - Equity attributable to parent 2,142,997 1,896,022 Less: Unrealized gain- AFS - - Equity, net of unrealized gain 2,142,997 1,896,022 Debt to-equity ratios 69% 62%

Bank Debt 1,480,215 1,181,781 Cash and cash equivalent 39,988 23,318 Short term investments 2,543 - Financial Assets at FV through P&L 1,097 1,156 Net Debt 1,436,587 1,157,308 Equity 2,142,997 1,896,022 Net Debt ot equity ratios 67% 61% c. Asset -to equity ratios Total Asset 5,754,921 5,505,476 Total Equity 2,142,997 1,896,022 Asset to Equity Ratio 269% 290% d. Interest rate coverage ratios 5.02 4.38 e. Profitability ratios Net Income after tax 246,975 213,593 Revenue 802,938 694,984 Net Income Margin 31% 31%

Net Income after tax 246,975 213,593 Total Assets CY 5,754,921 5,505,476 Total Assets PY 5,505,476 5,132,138 Average Total Assets 5,630,199 5,318,807 Return on total assets 4.39% 4.02%

Net Income after tax 246,975 213,593 Total Equity- CY 2,142,997 1,896,022 Total Equity- PY 1,896,022 1,682,429 Average total equity 2,019,509 1,789,225 Return on Equity 12.23% 11.94% Cebu Property Ventures & Development Corp. & Subsidiary

2017 2016

Interest Rate Coverage Ratios =EBITDA/Interest Expense

Net Income after tax 246,974,889.40 213,593,099.49 Add: Provision for income tax 26,905,764.30 21,395,435.32 Interest expense and other financing charges 92,748,819.21 88,895,382.05 119,654,583.51 110,290,817.37 Less: Interest and investment income 186,873,496.02 203,432,604.92 Other income - - 186,873,496.02 203,432,604.92 EBIT 179,755,976.89 120,451,311.94 Add: Depreciation & Amortization 221,731,980.65 184,332,779.46 EBITDA 401,487,957.54 304,784,091.40 Interest Expense - Loan 79,909,181.16 69,596,965.00 Interest Rate Coverage Ratio 5.02 4.38