28 April 2014 Philippine Stock Exchange 3Rd Floor, Philippine

28 April 2014

Philippine Stock Exchange 3rd Floor, Philippine Stock Exchange Plaza Ayala Triangle, Ayala Avenue Makati City

Attention: Ms. Janet A. Encarnacion Head, Disclosure Department

Gentlemen:

Please find attached Definitive Information Statement for 2014 Annual Meeting of Filinvest Development Corporation.

Thank you.

Very truly yours,

ATTY. SHARON P. PAGALING-REFUERZO Corporate Information Officer

The Beaufort, 5th Avenue corner 23rd Street, Bonifacio Global City, Taguig City

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 20-IS

INFORMATION STATEMENT PURSUANT TO SECTION 20 OF THE SECURITIES REGULATION CODE

1. Check the appropriate box:

[ ] Preliminary Information Statement

[ x ] Definitive Information Statement

2. Name of Registrant as specified in its charter: Filinvest Development Corporation

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

4. SEC Identification Number: 51048

5. BIR Tax Identification Code: 000 - 053 - 167

6. Address of principal office: 6F The Beaufort, 5th Ave. cor. 23rd St., Bonifacio Global City, Taguig City, MM

Postal Code: 1630

7. Registrant’s telephone number, including area code: (02) 7983959

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

Date: May 30, 2014 Time: 9:00 a.m. Place: Ballroom 3 Crimson Hotel Filinvest City, Manila Entrata Urban Complex 2609 Civic Drive, Filinvest City Alabang, Muntinlupa City

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

On or before May 2, 2014

10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA (information on number of shares and amount of debt is applicable only to corporate registrants):

Title of Each Class Number of Shares of Common Stock Outstanding

Common 9,317,473,987

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

Name of such Stock Exchange and the class of securities listed therein:

Philippine Stock Exchange / Common shares

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

PART I INFORMATION REQUIRED IN INFORMATION STATEMENT

A. GENERAL INFORMATION

Item 1. Date, Time and Place of Annual Meeting of Stockholders

The annual stockholders' meeting of FILINVEST DEVELOPMENT CORPORATION (the “Company” or “FDC”) is scheduled to be held on May 30, 2014, 9:00 a.m. at the Ballroom 3, Crimson Hotel Filinvest City, Manila, Entrata Urban Complex, 2609 Civic Drive, Filinvest City, Alabang, Muntinlupa City. The complete mailing address of the principal office of the Company is 6th Floor, The Beaufort, 5th Ave. cor. 23rd St., Bonifacio Global City, Taguig City, MM.

This information statement shall be sent or given to stockholders no later than May 2, 2014.

Item 2. Dissenters’ Right of Appraisal

A stockholder of the Company has 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 stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any 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 of the Philippines (“Corporation Code”); (c) in case of investment of corporate funds in any other corporation or business or for any purpose other than the Company’s primary purpose; and (d) in case of merger or consolidation.

The stockholder concerned must have voted against the proposed corporate action in order to avail himself of the appraisal right. As provided in the Corporation Code, the procedure in the exercise of the appraisal right is as follows: a. The dissenting stockholder files a written demand within thirty (30) days after the date on which the vote was taken. Failure to file the demand within the thirty-day period constitutes a waiver of the right. Within ten (10) days from demand, the dissenting stockholder shall submit the stock certificate/s to the Company for notation that such shares are dissenting shares. From the time of the demand until either the abandonment of the corporate action in question or the purchase of the shares by the Company, all rights accruing to the shares shall be suspended, except the stockholder’s right to receive payment of the fair value thereof. b. If the corporate action is implemented, the Company shall pay the stockholder the fair value of his shares upon surrender of the corresponding certificate/s of stock. Fair value is determined by the value of the shares of the Company on the day prior to the date on which vote is taken on the corporate action, excluding any appreciation or depreciation in value in anticipation of the vote on the corporate action. c. If the fair value is not determined within sixty (60) days from the date of the vote, it will be determined by three (3) disinterested persons (one chosen by the Company, another chosen by the stockholder, and the third one chosen jointly by the Company and the stockholder). The findings of the appraisers will be final, and their award will be paid by the Company within thirty (30) days following such award, provided the Company has sufficient unrestricted retained earnings. Upon such payment, the stockholder shall forthwith transfer his shares to the Company. No payment shall be made to the dissenting stockholder unless the Company has unrestricted retained earnings. d. If the stockholder is not paid within thirty (30) days from such award, his voting and dividend rights shall be immediately restored.

There is no matter to be taken up at the annual meeting on May 30, 2014 which entitles a dissenting stockholder to the exercise of the appraisal right.

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

No director or executive officer of the Company or nominee for election as such director or officer has any substantial interest, direct or indirect, in any matter to be acted upon at the annual stockholders’ meeting, other than election to office (in the case of directors). Likewise, none of the directors has informed the Company of his opposition to any matter to be taken up at the meeting.

B. CONTROL AND COMPENSATION INFORMATION

Item 4. Voting Securities and Principal Holders Thereof

(a) Number of Shares Outstanding

As of February 28, 2014, the total number of shares outstanding and entitled to vote in the annual stockholders' meeting is 9,317,473,987 shares. All of these are common shares, with each share entitled to (1) one vote in accordance with the By- Laws of the Company.

(b) Record Date

The record date for purposes of determining the stockholders entitled to vote is April 25, 2014.

Stockholders are entitled to cumulative voting in the election of directors of the Company, as provided for in the Corporation Code. Under Section 24 of the Corporation Code, a 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 candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit: Provided, That the total number of votes cast by him shall not exceed the number of shares owned by him as shown in the books of the Company multiplied by the whole number of directors to be elected. The stockholder must be a stockholder of record in order that he may exercise cumulative voting rights.

There are no conditions precedent to the exercise of the stockholders’ cumulative voting right.

(d)(i) Security Ownership of Certain Record and Beneficial Owners

The names, addresses, citizenship, number of shares held, and percentage to total of persons owning more than five percent (5%) of the outstanding voting shares of the Company (all common) as of February 28, 2014 are as follows:

Name and Address of Record Name of Beneficial Title of No. of Shares Percentage Owner/ Relationship with Owner/ Relationship Class Citizenship Held Held Company with Record Owner Common A.L. Gotianun, Inc. (“ALGI”)1 (formerly ALG Holdings Corporation) ALGI2 Filipino 8,219,373,037 88.21% The Beaufort, BGC, Taguig City Majority Owner of the Company

Common PCD Nominee Corporation (Filipino) (No single shareholder Filipino 904,533,998 9.7% G/F, Philippine Stock Exchange beneficially owns at least Tower 5% of the total shares) Ayala Avenue, Makati City

Except as stated above, the Board of Directors and Management of the Company have no knowledge of any person who, as of the date of the annual report, was directly or indirectly the beneficial owner of more than five percent (5%) of the Company’s outstanding shares or who has voting power or investment power with respect to shares comprising more than five percent (5%) of the Company’s outstanding common stock.

(d)(ii) Security Ownership of Management

The names, citizenship, number of shares held and percentage to total of persons forming part of the Management of the Company as of February 28, 2014 are as follows:

Title of Amount and Nature of Percentage of Class Name of Beneficial Owner Beneficial Ownership Citizenship Ownership Common Andrew L. Gotianun, Sr. 1,798 (D) Filipino Negligible Common Mercedes T. Gotianun 3,796,472 (D) Filipino Negligible Common Andrew T. Gotianun, Jr. 1,916 (D) Filipino Negligible

1 Mr. Andrew L. Gotianun, Sr. and/or Mrs. L. Josephine G. Yap are typically named by ALGI as its proxy to vote at the annual meeting of stockholders the shares owned and held by it in the Company. 2 Stockholders are the beneficial owners.

Common Jonathan T. Gotianun 12 (D) Filipino Negligible Common Josephine G. Yap3 2,817,323 (D) Filipino Negligible 7,191,022 (I) Common Andrew L. Gotianun, Sr. and/or 33,697,190 (D) Filipino Mercedes T. Gotianun 0.36% Common Michael Edward T. Gotianun 47,131,422 (D) Filipino 0.51% Common Jesus N. Alcordo 1(D) Filipino Negligible 2,885,688 (ID) Common Lamberto U. Ocampo 1 (D) Filipino Negligible Common Cirilo T. Tolosa 1 (D) Filipino Negligible N.A. Eleuterio D. Coronel 0 Filipino N.A N.A. Bernadette M. Ramos 0 Filipino N.A. N.A. Elsa R. Divinagracia 0 Filipino N.A.

Total ownership of all directors and officers as a group is 97,522,846 shares or 1.05% of total outstanding shares.

(d)(iii) Voting Trust Agreement

There is no person who holds more than five percent (5%) of the common stock under a voting trust or similar agreement.

(e) Change in Control

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

Item 5. Directors and Principal Officers

(a)(i) Members of the Board serve for a term of one (1) year and until their successors shall have been duly elected and qualified. The business experience of the directors and officers of the Company named below covers at least the past five (5) years. The following are the current directors and executive officers of the Company:

Andrew L. Gotianun, Sr. Mr. Gotianun, 86, Filipino, is the founder of the Filinvest Group of Companies and is Chairman Emeritus presently serving in various capacities in the member companies of the group. He is Chairman and Director of Filinvest Land, Inc. (“FLI”) and East West Banking Corporation (“EWBC”), and a Director in FDC Utilities, Inc. (“FDCUI”). He is also the Chairman and President of Pacific Sugar Holdings Corporation (“PSHC”).

Jonathan T. Gotianun Mr. Gotianun, 60, Filipino, is a Director of FDC since 1990. He also serves as Chairman and Director Director of FLI. He is the President of Davao Sugar Central Co., Inc. and Cotabato Sugar Central Co., Inc., and Chairman of EWBC. He serves as Director and Chairman of the Executive Committee of FDCUI and some of its subsidiary power companies. He served as director and Senior Vice President of Family Bank & Trust Co. (“Family Bank”) until 1984. He obtained his Master’s Degree in Business Administration from Northwestern University in 1976. He has been a director of the Company for more than five (5) years.

Lourdes Josephine G. Yap Mrs. Yap, 58, Filipino, is also a Director, Co-Vice Chairman, President and Chief President, Chief Executive Executive Officer of FLI. She is also the President of Filinvest Alabang, Inc. (“FAI”) Officer and Director and The Palms Country Club, Inc. (“TPCCI”), and a Director in FDCUI. She obtained her Master’s Degree in Business Administration from the University of Chicago in 1977. She has been President of the Company since 2000.

Mercedes T. Gotianun Mrs. Gotianun, 85, Filipino, is also a Director of FLI and served as its Chairman and Senior Adviser to the Board as Chief Executive Officer from 1997 to 2007. She is also a director of FAI, TPCCI, and Director PSHC, FDCUI and its subsidiary power companies. She was appointed as Senior Adviser to the Board of Directors of the Company on February 16, 2011. She obtained her university degree from the University of the Philippines.

Andrew T. Gotianun, Jr. Mr. Gotianun, 62, Filipino, is also a Director of FLI and FAI, and serves as Chairman Director of FDCUI. He served as director of Family Bank from 1980 to 1984. He has been in the realty business for more than sixteen (16) years. He obtained his Bachelor of

3 2,817,311 shares are registered under the name Joseph M. Yap &/or Lourdes Josephine G. Yap.

Science (Major in Accounting) degree from the Republican College in 1981. He has been a Director of the Company for over five (5) years.

Jesus N. Alcordo Mr. Alcordo, 78, Filipino, is the President of FDCUI and Director of the Company Director since February 16, 2011. He is an energy sector professional and previously served as Commissioner of the Energy Regulatory Commission (ERC) and as President and CEO of National Power Corporation (Napocor). He also served as Chairman, President and CEO of East Asia Power Resources Corporation. Prior to joining the Company, he was concurrent President of Global Business Power Corporation and Cebu Energy Development Corporation.

Lamberto U. Ocampo Mr. Ocampo, 88, Filipino, is also an independent director of FLI. A civil engineer, he Independent Director served as director of DCCD Engineering Corporation from 1957 to April 2001, its Chairman of the Board from 1993 to 1995, and its President from 1970 to 1992. He obtained his Master’s Degree in Engineering from the University of California- Berkeley. He has been a director of the Company for over five (5) years.

Cirilo T. Tolosa Mr. Tolosa, 74, Filipino, is also an independent director of FLI. He was a partner at Independent Director Sycip Salazar Hernandez and Gatmaitan until his retirement in 2005. He is at present a partner in the law firm Tolosa Romulo Agabin and Flores. He has been the chairman of the boards of Daystar Commercial Enterprises, Inc., Daystar Development Corporation, Lou-Bel Development Corporation and GMA Lou-Bel Condominium Corporation for at least 10 years, and corporate secretary of De La Salle University System, Inc. and De La Salle Philippines, Inc. since 2003 and 2005, respectively. Michael Edward T. Mr. Gotianun, 55, is a Director of FAI and Festival Supermall, Inc. He served as the Gotianun general manager of Filinvest Technical Industries from 1987 to 1990 and as loans Vice President officer at Family Bank from 1979 to 1984. He obtained his Bachelor’s Degree in Business Management from the University of San Francisco in 1979. He has been serving the Company as Vice President for more than five (5) years.

Eleuterio D. Coronel Mr. Coronel, 60, Filipino is the EVP and COO of the Company starting April 2013. EVP and Chief Operating He was formerly the President and Chief Executive Officer of a property company Officer and has previously served as President and Chief Operating Officer of a leading investment bank in the country where he spent the bulk of his professional career. Mr. Coronel holds a Bachelor Degree in Arts, major in Mathematics (Cum Laude) from De La Salle University, Manila. He likewise has attended the TMP Asian Institute Management and the executive development program of the World Bank Group.

Bernadette M. Ramos Ms. Ramos, 48, Filipino, rejoined FDC as Vice President for Real Estate Marketing in VP-Marketing 2011. She was head of FLI’s Corporate and Creative Communications Office from 2005-2007 and Special Assistant to the CEO for Advertising from 2002 to 2005. Prior to that, she held executive positions in various advertising agencies and a major property developer in a career spanning over 20 years of experience in the field.

Elsa R. Divinagracia Ms. Divinagracia, 53, Filipino, is FLI’s Deputy General Counsel. Admitted to the Vice President and Acting Philippine Bar in 1986, she holds an A.B. English, cum laude degree from the Corporate Secretary University of the Philippines, a law degree from the same university, and a Master of Laws degree from the University of Pennsylvania. She is a member of the Philippine and New York bars.

The members of the board committees, pursuant to appointments made during the organizational meeting of the Board of Directors of the Company on June 26, 2013, are as follows:

Executive Committee: Jonathan T. Gotianun (Chair), Andrew L. Gotianun, Sr., Mercedes T. Gotianun, Josephine G. Yap, Andrew T. Gotianun, Jr. and Michael Edward T. Gotianun Nomination Committee: Mercedes T. Gotianun (Chair), Josephine G. Yap, Lamberto U. Ocampo and Rizalangela L. Reyes (ex-officio) Audit Committee: Cirilo T. Tolosa (Chair), Lamberto U. Ocampo, Mercedes T. Gotianun and Jonathan T. Gotianun

Remuneration Committee: Mercedes T. Gotianun (Chair), Josephine G. Yap, Jonathan T. Gotianun, Lamberto U. Ocampo and Michael Edward T. Gotianun.

The directors of the Company are elected at the annual stockholders’ meeting to hold office until their respective successors have been duly appointed or elected and qualified. Officers are appointed or elected by the Board of Directors typically at its first meeting following the annual stockholders’ meeting, each to hold office until his successor shall have been duly elected or appointed and qualified.

A certification that none of the above-named directors and officers works in the government is attached herein as Annex “A”.

(a)(ii) Certain Relationships and Related Transactions

In the normal course of business, the Company and the other members of the Filinvest Group of Companies enter into certain related-party transactions. Kindly refer to Note 23 of the Notes to the 2013 Audited Financial Statements of the Company for the summary of related-party transactions among members of the Filinvest Group, including the following:

1. EWBC has loan transactions with investees and with certain directors, officers, stockholders, and related interests (DOSRI). 2. Loans guaranteed by the Company obtained by FLI amounted to P0.68 billion and P1.13 billion as of December 31, 2013 and 2012, respectively. The Company has also guaranteed the $300 million fixed- rate bonds issued by FDCI in 2013. 3. Other transactions with related parties include non-interest bearing cash advances and various charges to and from non-consolidated affiliates for management fees, share of expenses and commission charges. Transactions with related parties are normally settled in cash.

There were no transactions during the last two (2) years, or any proposed transactions, to which the Company was or is to be a party, in which any director or executive officer of the Company, any nominee for election as such director or executive officer, any security holder, or any member of the immediate family of any of the foregoing persons, had or is to have a direct or indirect material interest.

(a)(iii) Election of Members of the Board

There will be an election of the members of the Board during the annual stockholders’ meeting. The stockholders of the Company may nominate individuals to be members of the Board of Directors. The deadline for submission of nominees is April 11, 2014. All nominations for directors, including the independent directors, shall be addressed to the following:

THE NOMINATION COMMITTEE c/o THE ACTING CORPORATE SECRETARY FILINVEST DEVELOPMENT CORP. 79 Epifanio Delos Santos Ave., Highway Hills, Mandaluyong City and signed by the nominating stockholder/s together with the acceptance and conformity by the nominees on or before the close of business day on April 11, 2014. All nominations should include (i) the curriculum vitae of the nominee, (ii) a statement that the nominee has all the qualifications and none of the disqualifications, (iii) information on the relationship of the nominee to the stockholder submitting the nomination, and (iv) all relevant information about the nominee’s qualifications.

The Nomination Committee created under the Company’s Revised Manual on Corporate Governance endorsed the nominees of ALGI to the Board of Directors, as well as the nominees for independent directors of Luis L. Fernandez, a stockholder, for reelection/election at the upcoming annual stockholders’ meeting, in accordance with the qualifications and disqualifications set forth in the Company’s Revised Manual, as follows:

Qualifications

(1) He is a holder of at least one (1) share of stock of the Company;

(2) He shall be at least a college graduate or have sufficient experience in managing the business to substitute for such formal education;

(3) He shall be at least twenty one (21) years old;

(4) He shall have proven to possess integrity and probity; and

(5) He shall be assiduous.

Permanent Disqualifications

The following shall be permanently disqualified for election as director:

(1) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (i) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (ii) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (iii) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house, investment house or as an affiliated person of any of them;

(2) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Securities and Exchange Commission (“Commission”) or any court or administrative body of competent jurisdiction from: (i) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (ii) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (iii) engaging in or continuing any conduct or practice in any of the capacities mentioned in sub- paragraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities.

The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;

(3) Any person convicted by final judgment or order by a court or competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;

(4) Any person who has been adjudged by final judgment or order of the Commission, court, or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law administered by the Commission or BSP, or any of its rule, regulation or order;

(5) Any person earlier elected as independent director who becomes an officer, employee or consultant of the same Corporation;

(6) Any person judicially declared as insolvent;

(7) Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated in sub-paragraphs (1) to (5) above;

(8) Any person who has been convicted by final judgment of an offense punishable by imprisonment for more than six (6) years, or a violation of the Corporation Code committed within five (5) years prior to the date of his election or appointment.

Temporary Disqualification

The following shall be grounds for the temporary disqualification of a director:

(1) Refusal to comply with the disclosure requirements of the Securities Regulation Code and its Implementing Rules and Regulations. The disqualification shall be in effect as long as the refusal persists;

(2) Absence in more than fifty percent (50%) of all regular and special meetings of the Board during his incumbency, or any twelve (12) month period during the said incumbency, unless the absence is due to

illness, death in the immediate family or serious accident. The disqualification shall apply for purposes of the succeeding election;

(3) Dismissal or termination for cause as director of any corporation covered by the Company’s Revised Manual of Corporate Governance. The disqualification shall be in effect until he has cleared himself from any involvement in the cause that gave rise to his dismissal or termination;

(4) If the beneficial equity ownership of an in independent director in the corporation or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock. The disqualification shall be lifted if the limit is later complied with.

(5) If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final.

Nominated Directors for 2014-2015

The Nomination Committee of the Board of Directors of the Company has determined that the following, all of whom are incumbent directors, except Val Antonio B. Suarez, possess all the qualifications and none of the disqualifications for directorship set out in the Company’s Revised Manual on Corporate Governance, duly adopted by the Board pursuant to SRC Rule 38.1 and SEC Memorandum Circular No. 6, Series of 2009. SEC approved the amended By-laws of the Company incorporating the provisions of SRC Rule 38, as amended, on May 14, 2010. Below is a list of candidates prepared by the Nominations Committee:

Mercedes T. Gotianun Jonathan T. Gotianun Lourdes Josephine G. Yap Andrew T. Gotianun, Jr. Jesus N. Alcordo Lamberto U. Ocampo Val Antonio B. Suarez

(a)(iv) Independent Directors

The Nomination Committee, upon nomination by Luis L. Fernandez and following the guidelines provided under the Company’s Revised Manual on Corporate Governance, named Lamberto U. Ocampo and Val Antonio B. Suarez as nominees for this year’s annual meeting as independent directors. Luis L. Fernandez is not related to either of them. The Nomination Committee has determined that these nominees for independent directors possess all the qualifications and have none of the disqualifications for independent directors as set forth in the Revised Manual of Corporate Governance and SEC Memorandum Circular No. 09, Series of 2011.

A copy of the Certification on the Qualifications of the Nominees for Independent Directors is attached herein as Annex “B”.

Before the annual meeting, a stockholder of the Company may nominate individuals to be independent directors, taking into account the following guidelines set forth in the Company’s Revised Manual on Corporate Governance:

A. “Independent director” means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any corporation that meets the requirements of Section 17.2 of the Securities Regulation Code and includes, among others, any person who:

i. is not a director or officer or substantial stockholder of the Company or of its related companies or any of its substantial shareholders (other than as an independent director of any of the foregoing); ii. is not a relative of any director, officer or substantial stockholder of the Company, any of its related companies or any of its substantial stockholders. For this purpose, “relative” includes spouse, parent, child, brother, sister, and the spouse of such child, brother or sister; iii. is not acting as a nominee or representative of a substantial stockholder of the Company, any of its related companies or any of its substantial stockholders; iv. has not been employed in any executive capacity by the Company, any of its related companies or by any of its substantial stockholders within the last two (2) years; v. is not retained as professional adviser by the Company, any of its related companies or any of its substantial stockholders within the last two (2) years, either personally or through his firm;

vi. has not engaged and does not engage in any transaction with the Company or with any of its related companies or with any of its substantial stockholders, whether by himself or with other persons or through a firm of which he is a partner or a company of which he is a director or substantial stockholder, other than transactions which are conducted at arm’s length and are immaterial or insignificant.

B. When used in relation to the Company subject to the requirements above:

i. “Related company” means another company which is: (a) its holding company, (b) its subsidiary, or (c) a subsidiary of its holding company; and ii. “Substantial shareholder" means any person who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of its equity security.

C. An independent director shall have the following qualifications:

i. He shall have at least one (1) share of stock of the Company; ii. He shall be at least a college graduate or he shall have been engaged in or exposed to the business of the Company for at least five (5) years; iii. He shall possess integrity/probity; and iv. He shall be assiduous.

D. An independent director shall be disqualified during his tenure under the following instances or causes:

i. He becomes an officer or employee of the Company, or becomes any of the persons enumerated under item (A) hereof; ii. His beneficial security ownership exceeds ten percent (10%) of the outstanding capital stock of the Company; iii. He fails, without any justifiable cause, to attend at least fifty percent (50%) of the total number of board meetings during his incumbency unless such absences are due to grave illness or death of an immediate family; iv. Such other disqualifications as the Revised Manual on Corporate Governance may provide.

E. Pursuant to SEC Memorandum Circular No. 09, Series of 2011, which took effect on January 2, 2012, the following additional guidelines shall be observed in the qualification of individuals to serve as independent directors:

i. There shall be no limit in the number of covered companies that a person may be elected as independent director, except in business conglomerates where an independent director can be elected to only five (5) companies of the conglomerate, I.e., parent company, subsidiary or affiliate;

ii. Independent directors can serve as such for five (5) consecutive years, provided that service for a period of at least six (6) months shall be equivalent to one (1) year, regardless of the manner by which the independent director position was relinquished or terminated;

iii. After completion of the five-year service period, an independent director shall be ineligible for election as such in the same company unless the independent director has undergone a “cooling off” period of two (2) years, provided, that during such period, the independent director concerned has not engaged in any activity that under existing rules disqualifies a person from being elected as independent director in the same company;

iv. An independent director re-elected as such in the same company after the “cooling off” period can serve for another five (5) consecutive years under the conditions mentioned in paragraph (ii) above;

v. After serving as independent director for ten (10) years, the independent director shall be perpetually barred from being elected as such in the same company, without prejudice to being elected as independent director in other companies outside the business conglomerate;

vi. All previous terms served by existing independent directors shall not be included in the application of the term limits.

The Nomination Committee receives nominations for independent directors as may be submitted by the stockholders. After the deadline for the submission thereof, the Nomination Committee meets to consider the qualifications as well as grounds for disqualification, if any, of the nominees based on the criteria set forth in the Company’s Revised Manual on Corporate Governance, Rule 38 of the Securities Regulation Code, and SEC Memorandum Circular No. 09, Series of 2011. All nominations shall be signed by the nominating stockholders together with the acceptance and conformity by the would-be nominees. The Nomination Committee shall then prepare a Final List of Candidates enumerating the nominees who passed the screening. The name of the person or group of persons who recommends nominees as independent directors shall be

disclosed along with his or their relationship with such nominees. Only nominees whose names appear on the Final List of Candidates shall be eligible for election as independent directors. No other nomination shall be entertained after the Final List of Candidates shall have been prepared. No further nomination shall be entertained or allowed on the floor during the annual meeting.

The conduct of the election of independent directors shall be in accordance with the provisions of the Company’s Revised Manual on Corporate Governance and Amended By-laws consistent with Rule 38 of the Securities Regulation Code. It shall be the responsibility of the Chairman of the meeting to inform all stockholders in attendance of the mandatory requirement of electing independent directors. He shall ensure that independent directors are elected during the annual meeting. Specific slots for independent directors shall not be filled up by unqualified nominees. In case of failure of election for independent directors, the Chairman of the meeting shall call a separate election during the same meeting to fill up the vacancy.

(a)(v) Other Significant Employees

FDC considers all its employees as significant to the growth of the Company.

(a)(vi) Family Relationships

Mr. Andrew L. Gotianun, Sr. is married to Mrs. Mercedes T. Gotianun. They are the parents of Messrs. Andrew T. Gotianun, Jr., Jonathan T. Gotianun, Michael Edward T. Gotianun, and Mrs. Josephine G. Yap.

Other than the foregoing, there are no other family relationships known to the Company.

(a)(vii) Involvement in Certain Legal Proceedings

The Company is not aware of any legal proceedings where its directors or executive officers have been impleaded in their capacity as directors or executive officers of the Company.

The Company is not aware of the occurrence of any of the following events within the past five (5) years up to the date of this information statement: (a) any bankruptcy petition filed by or against any business in which any of its directors or officers was a general partner or officer either at the time of the bankruptcy or within two (2) years prior to that time; (b) any conviction by final judgment in a criminal proceeding, domestic or foreign, of, or any criminal proceeding, domestic or foreign, pending against, any of its directors or officers in his capacity as such director or officer; (c) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any of its directors or officers in any type of business, securities, commodities or banking activities, and (d) any finding by a domestic or foreign court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self-regulatory organization that any of its directors or officers has violated a securities or commodities law, and the judgment has not been reversed, suspended or vacated, which occurred during the past five years.

Item 6. Compensation of Directors and Executive Officers

(a)(i) Summary Compensation Table

(a) (b) (c) (d) (e) Name and Principal Position Year Salary (P) Bonus (P) Other Annual TOTAL Compensation Josephine G. Yap (President/CEO) Jonathan T. Gotianun (Chairman) Mercedes T. Gotianun (Senior Adviser to the Board) Andrew L. Gotianun, Sr. (Chairman Emeritus) Eleuterio D. Coronel (EVP/COO)

CEO and top four (4) highest 2014-Est. 30.2M 4.7M - 34.9M compensated officers 2013 28.8M 4.5M - 33.2M 2012 24.3M 4.0M - 28.3M

All officers and directors as a group 2014-Est. 48.7M 7.8M 56.5M unnamed 2013 46.4M 7.4M - 53.8M 2012 49.5 M 7.8 M - 57.3M

(a)(ii) Compensation as Directors

Except for a per diem of P50,000.00 being paid to each director for every meeting attended, no other compensation or remuneration is paid to the directors in their capacity as such.

(a)(iii) No Action to be Taken on Bonus, Profit Sharing, Warrants, Etc.

There is no action to be taken at the annual meeting of the stockholders on May 30, 2014 with respect to any bonus, profit sharing or other compensation plan, contract or arrangement, and pension or retirement plan, in which any director, nominee for election as a director, or executive officer of the Company will participate. Neither is there any proposed grant or extension to any such person of any option, warrant or right to purchase any securities of the Company.

Item 7. Independent Public Accountants

The auditing firm of Sycip, Gorres, Velayo & Co. (“SGV & Co.”) is the current independent auditor of the Company. The Company has not had any disagreement with SGV & Co. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. The Company, in compliance with SRC Rule 68(3)(b)(iv) relative to the five-year rotation requirement of its external auditors, had a new engagement partner, Dhonabee B. Seneres, starting CY 2013. The representatives of SGV & Co. are expected to be present at the annual meeting where they will have the opportunity to make a statement if they desire to do so. They are expected to be available to respond to appropriate questions at the meeting.

The Audit Committee of the Company has recommended the re-appointment of SGV & Co. as external auditor of the Company for the year 2014.

Item 8. Compensation Plan

There is no action to be taken at the annual stockholders’ 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

No action will be taken at the annual meeting with respect to authorization or issuance of securities other than for exchange.

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 the Company’s securities or the issuance of authorization for issuance of one class of the Company’s securities in exchange for outstanding securities of another class.

Item 11. Financial and Other Information

(a) Information Required

(1) Financial Statements

The audited financial statements of the Company for the year 2013 shall form an integral part hereof.

Pursuant to SRC Rule 68, as amended, the Company undertakes to furnish stockholders of record as of April 25, 2014 copies of its SEC Form 17-Q for the first quarter of 2014 on or before the scheduled date of Annual Stockholders Meeting on May 30, 2014. Attached herewith is the Company’s duly notarized undertaking to provide the stockholders the Company’s SEC Form 17-Q for the first quarter of 2014.

(2) Management’s Discussion and Analysis, and Plan of Operation

The Management’s Discussion and Analysis, and Plan of Operation is attached as Annex “C” hereof.

(3) Legal Proceedings

The Group is subject to lawsuits and legal actions in the ordinary course of its real estate development and other allied activities. However, the Group does not believe that any such lawsuits or legal actions will have a significant impact on the financial position or result of operations of the Group. Noteworthy are the following cases involving the Company and its subsidiaries, Filinvest Land, Inc. (“FLI”) and Pacific Sugar Holdings, Inc. (“PSHC”):

a. FLI vs. Abdul Backy, et al. G.R. No. 174715 Supreme Court

This is a civil action for the declaration of nullity of deeds of conditional and absolute sales of certain real properties located in Tambler, General Santos City covered by free patents and executed between FLI and the plaintiffs' patriarch, Hadji Gulam Ngilay. The Regional Trial Court (“RTC”) of Las Piñas City (Br. 253) decided the case in favor of FLI and upheld the sale of the properties. On appeal, the Court of Appeals rendered a decision partly favorable to FLI but nullified the sale of some properties involved. FLI filed petition for review on certiorari with the Supreme Court to question that portion of the decision declaring as void the deeds of sale of properties covered by patents issued in 1991. The Supreme Court resolved with finality the aforesaid petition in favor of FLI, and Abdul Backy was ordered to return the amount of P14 million to FLI.

b. Emelita Alvarez, et al. vs. FDC DARAB Case No. IV-RI-010-95 Adjudication Board, Department of Agrarian Reform

On or about March 15, 1995 certain persons claiming to be beneficiaries under the Comprehensive Agrarian Reform Program (CARP) of the National Government filed an action for annulment/cancellation of sale and transfer of titles, maintenance of peaceful possession, enforcement of rights under CARP plus damages before the Regional Agrarian Reform Adjudicator, Adjudication Board, Department of Agrarian Reform. The property involved, located in San Mateo, Rizal, was purchased by FDC from the Estate of Alfonso Doronilla. A motion to dismiss is still pending resolution.

c. Republic of the Philippines vs. Rolando Pascual, et al. Civil Case No. 7059 Regional Trial Court

The National Government through the Office of the Solicitor General filed suit against Rolando Pascual, Rogelio Pascual and FLI for cancellation of title and reversion in favor of the Government of properties subject of a joint venture agreement between the said individuals and FLI. The Government claims that the subject properties covering about 73.33 hectares are not alienable and disposable being forest land. The case was dismissed by the RTC of General Santos City (Br. 36) on November 16, 2007 for lack of merit. The Office of the Solicitor General has appealed the dismissal to the Court of Appeals, where it is still pending.

d. FLI vs. Eduardo Adia, et al G.R. 192929 Supreme Court

Various CLOA holders based in Brgy. Hugo Perez, Trece Martirez City filed a complaint with the RTC of Trece Martirez against FLI for recovery of possession with damages, claiming that in 1995 they surrendered possession of their lands to FLI so that the same can be developed pursuant to a joint venture arrangement allegedly entered into with FLI. They now seek to recover possession of said lands pending the development thereof by FLI. The RTC rendered a decision ordering FLI to vacate the subject property. FLI appealed the decision to the Court of Appeals which affirmed the RTC decision. FLI filed a petition for review on certiorari before the Supreme Court.

On 10 January 2011, the Supreme Court granted FLI’s motion to admit a supplemental petition and required respondent to comment on the supplemental petition within 10 days from notice. The case is pending resolution at the Supreme Court.

e. Antonio E. Cenon and Filinvest Land, Inc. vs. San Mateo Landfill, Mayor Jose Rafael Diaz, Brgy. Pintong Bukawe, Director Julian Amador and the Secretary, Department of Environment and Natural Resources Civil Case No. 2273-09

On February 9, 2009, FLI filed an action for injunction and damages against the respondents to stop and enjoin the construction of a 19-hectare landfill in a barangay in close proximity to Timberland Heights in San Mateo, Rizal. FLI sought preliminary and permanent injunctive reliefs and damages and is seeking the complete and permanent closures of the dump site. Trial in this case is ongoing.

f. Coca-Cola Bottlers Philippines, Inc. vs. Pacific Sugar Holdings Corporation Civil Case No. 10-1067 RTC Makati City, Br. 146

On October 28, 2010, Coca-Cola filed a civil case against Pacific Sugar Holdings Corporation demanding the amount of P347,410,104.66 allegedly representing damages sustained by Coca-Cola due the supposed failure by PSHC to deliver certain bags of sugar products. PSHC, accordingly filed its Answer on April 13, 2011 to refutre the claims of Coca-Cola. Trial of the case is ongoing, with Coca-Cola still presenting its evidence-in-chief.

The Company is not aware of any other information as to any other legal proceedings known to be contemplated by government authorities or any other entity.

D. OTHER MATTERS

Item 12. Action with Respect to Reports

The Company’s audited financial statements for the year 2013 will be submitted to the stockholders for approval. The following are the matters to be taken up during the annual meeting:

(1) Approval of the minutes of the annual meeting of stockholders held on May 31, 2013; (2) Presentation of the President’s Report; (3) Approval of the Audited Financial Statements for the year ended December 31, 2013; (4) General ratification of the acts, resolutions and proceedings of the Board of Directors, Executive Committee and the Management up to May 30, 2014; (5) Election of the members of the Board of Directors; and (6) Appointment of External Auditors.

All the above items are part of the agenda of the annual meeting of the Company to be held on May 30, 2014. The minutes of the annual stockholders' meeting held on May 31, 2013 is the record of the matters to be taken up in the said meeting, including the certification of notice and quorum for the transaction of business. The President’s report discusses the operational highlights of the Company since the last annual stockholders’ meeting. The audited financial statements refer to the balance sheet, income statement, statement of cash flows, of the Company for the year ended 2013. The general ratification of the acts, resolutions and proceedings of the Board of Directors, executive committee and the management since the last annual meeting up to May 30, 2014 refers to the approval by the stockholders of all actions and matters taken up and approved by the Board of Directors, executive committee and the management relating to the Company's operations, which include among others application for omnibus credit line, loan facility, offer and issuance of unsecured fixed-rate peso denominated retail bonds, and participation in bidding. The list of major resolutions approved by the Board and the Executive Committee from the last annual stockholders’ meeting up to May 30, 2014 is attached hereto as Annex “D”.

Item 13. Action to be Taken on Matters Not Required to be Submitted

There is no action to be taken at the annual stockholders’ meeting with respect to any matter which is not required to be submitted to a vote of the stockholders.

Item 14. Amendment of Articles of Incorporation and By-Laws Required to be Submitted

There is no action to be taken at the annual stockholders’ meeting with respect to any amendment of the Company’s Articles of Incorporation or By-Laws.

Item 15. Other Proposed Actions

There is no action to be taken with respect to any matter not specifically referred to above.

Item 16. Voting Procedures

(a) Vote required for approval. The approval of the minutes of the annual stockholders’ meeting held on May 31, 2013 and the audited financial statements for the year ended 2013, the ratification of corporate acts, and the appointment of external auditors for 2014, shall be decided by the majority vote of the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present.

The voting procedure shall be as follows:

1. The chairperson announces that the particular item is subject to motion for approval by the stockholders. 2. A stockholder moves for the approval of the item. 3. Another stockholder seconds the motion. 4. The chairperson of the meeting states that the motion is carried in case no objection on the floor is raised. 5. Should there be an objection, the approval or denial of the motion shall be decided by the required vote of stockholders as stated above, a quorum being present.

In the election of the members of the Board of Directors, the candidates garnering the seven (7) highest number of votes shall be declared elected as directors of the Company to serve as such for the year 2014-2015.

(b) Method by which votes will be counted. The vote on any item for consideration need not be by ballot, unless demanded by a stockholder or his proxy. On a vote by ballot, each ballot shall be signed by the stockholder voting, or in his name by his proxy if there be such proxy, and shall state the number of shares voted by the stockholder or proxy concerned. The ballots shall then be counted by the Corporate Secretary with the assistance of representatives of the external auditor. The results of the voting shall be announced after the counting.

Item 17. Market for Issuer’s Common Equity and Related Stockholder Matters

The Shares are traded on the PSE under the symbol “FDC.” The Shares were listed on the PSE on December 22, 1982.

The high and low sales prices for the Shares as reported on the PSE for each quarter in 2012 and 2013, and first quarter of 2014 were as follows: Period High Low End

2012 First Quarter ...... 4.80 3.30 4.69 Second Quarter ...... 5.20 3.87 3.87 Third Quarter ...... 4.33 3.90 4.17 Fourth Quarter ...... 5.10 4.11 4.94

2013 6.32 4.63 5.80 First Quarter ...... Second Quarter ...... 6.99 4.30 5.94 Third Quarter ...... 5.10 4.08 4.57 Fourth Quarter ...... 4.49 4.00 4.40

2014 First Quarter………………………………………………………………………. 5.02 4.98 5.00

As of December 31, 2013 and March 31, 2014, the closing price of the Company’s shares on the PSE was P4.40 per share and P5.0 per share, respectively. The number of shareholders of record as of December 31, 2013 and March 31, 2014 were 4,266 and 4,257, respectively. Total common shares issued and outstanding as of December 31, 2013 and March 31, 2014 is 9,319,872,387and 9,317,473, 987, respectively.

Top 20 Stockholders (common shares) as of February 28, 2014 % to Total NAME No. of Shares held Outstanding 1 A.L. Gotianun, Inc. (formerly ALG Holdings Corporation) 8,219,373,037 88.21% 2 PCD Nominee Corp. (Filipino) 904,533,998 9.71% 3 Michael Edward T. Gotianun 47,131,422 0.51% 4 PCD Nominee Corp. (Non-Filipino) 37,039,851 0.40% 5 Andrew Gotianun, Sr. &/or Mercedes T. Gotianun 33,697,190 0.36% 6 Ricardo Alonzo 28,627,534 0.31% 7 Henry Sy, Sr. 6,272,055 0.07% 8 Mercedes T. Gotianun 3,796,472 0.04% 9 Joseph M. &/or Lourdes Josephine G. Yap 2,817,311 0.03% 10 Helen Reyes 2,692,544 0.03% 11 Emily Benedicto 2,466,400 0.03% 12 H. K. Hedinger 2,023,508 0.02% 13 Santiago Go 1,707,066 0.02% 14 AMA Rural Bank of Mandaluyong, Inc. 616,600 0.01% 15 Lino Sy 616,600 0.01% 16 Manuel Benipayo 527,141 0.01% 17 Salud Borromeo 501,655 0.01% 18 Francisco Benedicto 493,280 0.01% 19 Edan Corporation 387,224 0.00% 20 Ma. Consuelo R. Medrano &/or Victoriano S. Medrano 308,300 0.00% Total 9,295,629,188 99.75%

Recent Sale of Unregistered Securities

There are no securities sold by the Company in the past three (3) years, which were not registered under the Code.

COMPLIANCE WITH LEADING PRACTICES ON CORPORATE GOVERNANCE

The Company is in substantial compliance with its Revised Manual for Corporate Governance as demonstrated by the following: (a) the election of two (2) independent directors to the Board; (b) the appointment of members of the audit, nomination and compensation committees of the Company; (c) the conduct of regular quarterly board meetings and special meetings, the faithful attendance of the directors at these meetings and their proper discharge of duties and responsibilities as such directors; (d) the submission to the SEC of reports and disclosures required under the Securities Regulation Code; (e) the Company’s adherence to national and local laws pertaining to its operations; and (f) the observance of applicable accounting standards by the Company.

On July 1, 2013, the Company filed its Annual Corporate Governance Report pursuant to SEC Memorandum Circular No. 18.

In order to keep itself abreast with the leading practices on corporate governance, the Company encourages the members of top-level management and the Board to attend and participate at seminars on corporate governance initiated by accredited institutions.

The Company welcomes proposals, especially from institutions and entities such as the SEC, PSE and the Institute of Corporate Directors, to improve corporate governance.

There is no known material deviation from the Company’s Revised Manual on Corporate Governance.

UNDERTAKING: The Company will provide without charge its Annual Report on SEC Form 17-A to its stockholders upon receipt of written request addressed to: The Office of the Acting Corporate Secretary, No. 79 Epifanio Delos Santos Avenue, Highway Hills, Mandaluyong City, Metro Manila.

Filinvest Development Corporation and Subsidiaries

Consolidated Financial Statements December 31, 2013 and 2012 and Years Ended December 31, 2013, 2012 and 2011 and

Independent Auditors’ Report

A member firm of Ernst & Young Global Limited SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 28, 2012, valid until December 31, 2015 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-3 (Group A), Philippines November 15, 2012, valid until November 16, 2015

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of Directors Filinvest Development Corporation The Beaufort, 5th Avenue, corner 23rd Street Bonifacio Global City, Taguig City

We have audited the accompanying consolidated financial statements of Filinvest Development Corporation and its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2013 and 2012, and the consolidated statements of income, statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2013, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

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

Auditors’ Responsibility

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

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

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

*SGVFS007153*

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

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Filinvest Development Corporation as at December 31, 2013 and 2012, and their financial performance and their cash flows for each of the three years in the period ended December 31, 2013 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Dhonabee B. Señeres Partner CPA Certificate No. 97133 SEC Accreditation No. 1196-A (Group A), March 8, 2012, valid until March 8, 2015 Tax Identification No. 201-959-816 BIR Accreditation No. 08-001998-98-2012, January 11, 2012, valid until January 10, 2015 PTR No. 4225219, January 2, 2014, Makati City

March 14, 2014

*SGVFS007153*

A member firm of Ernst & Young Global Limited FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in Thousands of Pesos)

December 31 January 1, 2012 2012 (As restated, (As restated, 2013 Note 2) Note 2)

ASSETS (Note 34) Cash and cash equivalents (Notes 6, 35 and 36) P=30,796,212 P=28,360,887 P=23,635,041 Loans and receivables - net Financial and banking services (Notes 3, 7, 35 and 36) 87,498,799 68,571,008 47,115,674 Real estate operations (Notes 3, 8, 14, 23, 35 and 36) 19,030,534 16,646,344 12,675,321 Sugar operations (Notes 3, 9, 35 and 36) 112,792 166,836 173,648 Hotel operations and power generation operations (Notes 3, 10, 35 and 36) 64,124 56,016 27,568 Financial assets at fair value through profit or loss (Notes 13, 35 and 36) 1,948,703 4,260,325 6,016,574 Financial assets at fair value through other comprehensive income (Notes 13, 35 and 36) 137,161 159,038 197,253 Investment securities at amortized cost (Notes 13, 35 and 36) 9,080,320 9,620,505 11,946,992 Subdivision lots, condominium and residential units for sale (Notes 3 and 11) 26,236,833 26,359,710 23,405,148 Sugar and molasses inventories (Notes 3 and 12) 163,755 415,905 198,369 Land and land development (Notes 3, 14 and 21) 25,622,886 21,683,786 20,709,933 Investment properties (Notes 3 and 15) 39,055,000 36,343,386 31,911,416 Property, plant and equipment (Notes 3 and 16) 9,985,421 8,640,370 6,076,845 Deferred tax assets - net (Notes 3 and 33) 1,321,282 1,207,231 1,280,303 Goodwill (Notes 3 and 4) 11,726,591 11,726,591 11,703,113 Other assets - net (Notes 3 and 17) 7,983,591 5,856,279 3,586,080 P=270,764,004 P=240,074,217 P=200,659,278

LIABILITIES AND EQUITY

LIABILITIES (Note 34) Deposit liabilities (Notes 18, 35 and 36) P=95,128,739 P=87,892,832 P=73,638,221 Bills and acceptances payable (Notes 19, 35 and 36) 3,288,935 5,571,387 2,163,188 Accounts payable and accrued expenses (Notes 8, 15, 20, 23, 28, 35 and 36) 20,922,996 18,044,634 14,678,342 Income tax payable 325,037 207,222 212,388 Short-term debt (Notes 21, 35 and 36) 500,000 300,000 500,000 Long-term debt (Notes 21, 22, 35 and 36) 59,093,035 42,204,395 33,351,986 Deferred tax liabilities - net (Note 33) 6,819,928 6,505,015 6,215,742 Total Liabilities 186,078,670 160,725,485 130,759,867

(Forward)

*SGVFS007153* - 2 -

December 31 January 1, 2012 2012 (As restated, (As restated, 2013 Note 2) Note 2)

EQUITY Equity attributable to equity holders of the Parent Company Capital stock - =P1 par value (Note 22) Authorized common shares - 15,000,000,000 Authorized preferred shares - 2,000,000,000 Issued common shares - 9,319,872,387 P=9,319,872 P=9,319,872 P=9,319,872 Additional paid-in capital (Note 22) 11,900,015 11,900,015 11,900,015 Retained earnings (Note 27) 43,807,798 40,027,500 35,772,528 Revaluation reserve on financial assets at fair value through other comprehensive income (Note 13) 52,705 71,929 43,604 Remeasurement gains (losses) on retirement plans (Note 28) (93,287) (96,688) 2,033 Cashflow hedge reserve (Note 36) (54,456) − − Translation adjustment (Note 2) 2,553 (14,188) (7,699) Treasury stock (Notes 22 and 29) (24,220) (24,220) (24,220) Total 64,910,980 61,184,220 57,006,133 Noncontrolling interest (Note 5) 19,774,354 18,164,512 12,893,278 Total Equity 84,685,334 79,348,732 69,899,411 P=270,764,004 P=240,074,217 P=200,659,278

See accompanying Notes to Consolidated Financial Statements.

*SGVFS007153* FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands of Pesos, Except Earnings Per Share Figures)

Years Ended December 31 2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) REVENUES AND OTHER INCOME Real Estate Operations (Note 34) Revenue Sale of lots, condominium and residential units and club shares P=12,638,032 P=11,579,054 P=8,524,631 Mall and rental revenues (Notes 15 and 30) 2,326,353 2,124,903 1,844,360 Other income (Note 26) 1,528,637 1,444,415 1,946,237 16,493,022 15,148,372 12,315,228 Financial and Banking Services (Note 34) Interest income (Notes 7 and 13) 9,828,703 7,751,359 6,725,087 Other income - net (Note 26) 4,772,322 3,695,108 2,390,159 14,601,025 11,446,467 9,115,246 Sugar Operations (Note 34) Sugar sales 2,691,750 2,369,321 2,148,344 Other income (Note 26) 64,305 99,436 131,034 2,756,055 2,468,757 2,279,378 Hotel Operations (Note 34) Hotel revenues 984,393 692,262 554,020 Other income (Note 26) 2,103 14,578 1,907 986,496 706,840 555,927 Power Generation Operations (Note 34) Other income (Note 26) 27 555 4 TOTAL REVENUES AND OTHER INCOME 34,836,625 29,770,991 24,265,783 COSTS (Note 25) Costs of sale of lots, condominium and residential units and club shares (Notes 11 and 14) 6,709,396 6,259,543 4,681,167 Costs of mall and rental services 397,118 379,109 367,338 Costs of financial and banking services (Note 21) 1,801,435 1,681,238 1,816,167 Costs of sugar sales 2,144,601 1,916,530 2,154,011 Costs of hotel operations 351,233 230,870 191,875 11,403,783 10,467,290 9,210,558 EXPENSES (Notes 16 and 24) Real estate operations 3,734,911 3,727,537 3,242,137 Financial and banking services 10,861,509 7,791,391 5,193,548 Sugar operations 208,617 204,956 214,876 Hotel operations 628,953 254,039 186,263 Power generation operations 78,916 55,311 71,883 15,512,906 12,033,234 8,908,707 INCOME BEFORE INCOME TAX 7,919,936 7,270,467 6,146,518 (Forward)

*SGVFS007153* - 2 -

Years Ended December 31 2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) PROVISION FOR INCOME TAX (Note 33) Current P=1,226,316 P=1,005,278 P=1,014,980 Deferred 236,389 422,294 164,492 1,462,705 1,427,572 1,179,472 NET INCOME (Note 34) P=6,457,231 P=5,842,895 P=4,967,046 Attributable to: Equity holders of the Parent Company (Note 29) P=4,279,715 P=4,062,247 P=3,680,175 Noncontrolling interest 2,177,516 1,780,648 1,286,871 P=6,457,231 P=5,842,895 P=4,967,046 Basic/Diluted Earnings Per Share (Note 29) P=0.46 P=0.44 P=0.39

See accompanying Notes to Consolidated Financial Statements.

*SGVFS007153* FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands of Pesos)

Years Ended December 31 2012 2011 (As restated, (As restated, 2013 Note 2) Note 2)

NET INCOME P=6,457,231 P=5,842,895 P=4,967,046

OTHER COMPREHENSIVE INCOME (LOSS) Other comprehensive income to be reclassified to profit or loss in subsequent periods Net movement on cashflow hedges, net of tax (Note 36) (54,456) − − Translation adjustment, net of tax (Note 2) 19,599 (8,652) 46,730 Net other comprehensive income to be reclassified to profit or loss in subsequent period (34,857) (8,652) 46,730 Other comprehensive income not to be reclassified to profit or loss Changes in fair value of financial assets through other comprehensive income (Note 12) (19,224) 28,325 (6,463) Remeasurement gains (losses) on retirement plans, net of tax (Note 28) 3,401 (130,725) (8,088) Net other comprehensive loss not to be reclassified to profit or loss (15,823) (102,400) (14,551) (50,680) (111,052) 32,179

TOTAL COMPREHENSIVE INCOME P=6,406,551 P=5,731,843 P=4,999,225

Attributable to: Equity holders of the Parent Company P=4,226,177 P=3,985,362 P=3,714,284 Noncontrolling interest 2,180,374 1,746,481 1,284,941 P=6,406,551 P=5,731,843 P=4,999,225

See accompanying Notes to Consolidated Financial Statements.

*SGVFS007153* FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in Thousands of Pesos)

Equity Attributable to Equity Holders of the Parent Company Revaluation Remeasurement Reserve on Losses on Cashflow Additional Financial Assets Retirement Hedge Translation Noncontrolling Capital Stock Paid-in Retained at FVTOCI Plans Reserve Adjustment Treasury Interest (Note 21) Capital Earnings (Note 13) (Note 28) (Note 36) (Note 2) Stock Total (Note 5) Total For the Year Ended December 31, 2013 Balances as of December 31, 2012, as previously stated P=9,319,872 P=11,900,015 P=40,036,676 P=71,929 (P=96,688) P=− (P=14,188) (P=24,220) P=61,193,396 P=17,797,205 P=78,990,601 Effect of initial adoption of PFRS 10 and 11 (Note 2) – – (9,176) – – − – – (9,176) 367,307 358,131 Balances as of December 31, 2012, as restated 9,319,872 11,900,015 40,027,500 71,929 (96,688) − (14,188) (24,220) 61,184,220 18,164,512 79,348,732 Net income − − 4,279,715 − − − − − 4,279,715 2,177,516 6,457,231 Other comprehensive income − − (19,224) 3,401 (54,456) 16,741 − (53,538) 2,858 (50,680) Total comprehensive income – – 4,279,715 (19,224) 3,401 (54,456) 16,741 – 4,226,177 2,180,374 6,406,551 Acquisition of noncontrolling interest − − − − − − − − − (7,369) (7,369) Dividends declared (Notes 5 and 22) − − (499,417) − − − − − (499,417) (563,163) (1,062,580) Balances as of December 31, 2013 P=9,319,872 P=11,900,015 P=43,807,798 P=52,705 (P=93,287) (P=54,456) P=2,553 (P=24,220) P=64,910,980 P=19,774,354 P=84,685,334 For the Year Ended December 31, 2012 Balances as of December 31, 2011, as previously stated P=9,319,872 P=11,900,015 P=35,779,385 P=43,604 P=2,033 − (P=7,699) (P=24,220) P=57,012,990 P=12,530,222 P=69,543,212 Effect of initial adoption of PFRS 10 and 11 (Note 2) – – (6,857) – – − – – (6,857) 363,056 356,199 Balances as of January 11, 2012, as restated 9,319,872 11,900,015 35,772,528 43,604 2,033 − (7,699) (24,220) 57,006,133 12,893,278 69,899,411 Net income as previously restated – – 4,064,566 – – − – – 4,064,566 1,722,540 5,787,106 Effect of initial adoption of PFRS 10 and 11 (Note 2) – – (2,319) – – − – – (2,319) 58,108 55,789 Net income as restated 4,062,247 − 4,062,247 1,780,648 5,842,895 Other comprehensive income – – – 28,325 (98,721) − (6,489) – (76,885) (34,167) (111,052) Total comprehensive income – – 4,062,247 28,325 (98,721) − (6,489) – 3,985,362 1,746,481 5,731,843 Effect of dilution of noncontrolling interest in subsidiaries (Note 27) – – 49,205 – – − – – 49,205 (155,324) (106,119) Increase in noncontrolling interest (Note 27) – – 562,806 – – − – – 562,806 4,194,472 4,757,278 Dividends declared (Notes 5 and 22) – – (419,286) – – − – – (419,286) (514,395) (933,681) Balances as of December 31, 2012, as restated P=9,319,872 P=11,900,015 P=40,027,500 P=71,929 (P=96,688) − (P=14,188) (P=24,220) P=61,184,220 P=18,164,512 P=79,348,732 (Forward) *SGVFS007153* 22 - 2 -

Equity Attributable to Equity Holders of the Parent Company Revaluation Remeasurement Reserve on Gains (Losses) Additional Financial Assets on Retirement Translation Noncontrolling Paid-in Retained at FVTOCI Plans Adjustment Treasury Interest Capital Stock Capital Earnings (Note 13) (Note 28) (Note 2) Stock Total (Note 5) Total For the Year Ended December 31, 2011 Balances as of January 1, 2011, as previously restated P=7,508,124 P=11,709,874 P=33,404,578 P=50,067 P=8,191 (P=54,429) (P=24,220) P=52,602,185 P=13,874,706 P=66,476,891 Effect of initial adoption of PFRS 10 and 11 (Note 2) – – (1,238) – – – – (1,238) 348,693 347,455 Balances as of January 1, 2011, as restated 7,508,124 11,709,874 33,403,340 50,067 8,191 (54,429) (24,220) 52,600,947 14,223,399 66,824,346 Net income, as previously stated – – 3,685,794 – – – – 3,685,794 1,227,380 4,913,174 Effect of initial adoption of PFRS 10 and 11 (Note 2) – – (5,619) – − – – (5,619) 59,491 53,872 Net income, as restated − − 3,680,175 − − − − 3,680,175 1,286,871 4,967,046 Other comprehensive income – – – (6,463) (6,158) 46,730 – 34,109 (1,930) 32,179 Total comprehensive income, as restated – – 3,680,175 (6,463) (6,158) 46,730 – 3,714,284 1,284,941 4,999,225 Acquisition of subsidiary (Notes 1 and 4) – – – – – – – – 16,912 16,912 Effect of dilution of noncontrolling interest in subsidiaries (Note 27) – – 807,483 – – – – 807,483 (2,144,664) (1,337,181) Issuance of common shares (Note 22) 49,800 190,141 – – – – – 239,941 – 239,941 Stock dividends (Note 22) 1,761,948 – (1,761,948) – – – – – – – Dividends paid (Note 22) – – (356,522) – – – – (356,522) (487,310) (843,832) Balances as of December 31, 2011, as restated P=9,319,872 P=11,900,015 P=35,772,528 P=43,604 P=2,033 (P=7,699) (P=24,220) P=57,006,133 P=12,893,278 P=69,899,411

See accompanying Notes to Consolidated Financial Statements.

*SGVFS007153* FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands of Pesos)

Years Ended December 31 2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=7,919,936 P=7,270,467 P=6,146,518 Adjustments for: Provision for probable losses (Note 24) 3,137,599 1,554,647 771,549 Depreciation and amortization (Notes 15 and 16) 1,376,818 1,113,653 970,898 Interest expense (Note 24) 876,119 995,797 971,085 Amortization of computer software, customer relatioships and core deposits (Note 24) 142,031 125,659 75,246 Provision for retirement benefits (Notes 24 and 28) 162,374 114,465 70,551 Unrealized foreign currency exchange loss (382) 89,847 5,244 Interest income (Note 26) (548,629) (503,395) (515,373) Loss (gain) on derecognition of investment securities at amortized cost (Notes 13 and 26) (572,490) (276,883) 44,440 Gain on asset foreclosure and dacion transactions (Note 26) (93,784) (42,412) (84,650) Loss (gain) on sale of property, plant and equipment and investment properties (15,161) (4,904) 14,685 Dividend income (3,757) (1,010) (1,047) Loss on redemption of financial assets at FVTOCI – – 1,782 Operating income before changes in operating assets and liabilities 12,380,674 10,435,931 8,470,928 Decrease (increase) in: Loans and receivables (24,424,376) (26,998,565) (10,155,487) Subdivision lots, condominium and residential units for sale 837,833 (1,925,403) (4,498,757) Financial assets at fair value 2,854,460 4,120,951 2,950,021 Land and land development 83,425 1,866,562 586,693 Sugar and molasses inventories 252,150 (217,536) (37,387) Increase (decrease) in: Deposit liabilities 7,235,907 14,254,611 8,749,304 Accounts payable and accrued expenses 2,481,554 3,171,423 (1,752,661) Net cash generated from (used in) operations 1,701,627 4,707,974 4,312,654 Income taxes paid (1,108,501) (1,011,726) (1,022,925) Net cash provided by (used in) operating activities 593,126 3,696,248 3,289,729 CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in: Due from related parties 20,732 53,474 (72,338) Other assets (1,822,647) (2,431,558) (1,686,445) Payments for: Purchases of investments (1,145,598) (1,355,923) (462,479) Acquisitions of investment properties and property, plant and equipment (5,307,528) (8,271,282) (2,497,852) Acquisition of raw land (Note 14) (3,654,647) (2,840,415) (1,053,473) Acquisition of noncontrolling interest (Note 27) (7,369) (114,892) (677,379) Interest received 548,629 503,395 515,373 Acquisition of business - net of cash acquired (Note 4) – (19,700) 268,807 (Forward) *SGVFS007153* 22 - 2 -

Years Ended December 31 2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) Proceeds from disposal of investment properties and foreclosed assets P=415,990 P=297,321 P=228,002 Proceeds from sale of securities at amortized cost 1,718,088 1,564,795 – Dividends received 3,757 1,010 1,047 Net cash used in investing activities (9,230,593) (12,613,775) (5,436,737) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from sale of noncontrolling interest, net of related expenses (Note 27) – 4,752,229 – Proceeds from short-term and long-term debt 28,453,723 16,750,000 11,905,264 Increase (decrease) in bills and acceptances payable (2,282,452) 3,408,199 2,002,047 Issuance of common shares (Note 22) − – 239,940 Payments of: Dividends (1,062,580) (940,584) (843,831) Short-term and long-term debt (11,872,833) (8,097,591) (4,591,639) Interest paid (2,247,965) (2,226,141) (1,424,125) Decrease in due to related parties 84,899 (2,739) (15,643) Net cash provided by financing activities 11,072,792 13,643,373 7,272,013 NET INCREASE IN CASH AND CASH EQUIVALENTS 2,435,325 4,725,846 5,125,005 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 28,360,887 23,635,041 18,510,036 CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 6) P=30,796,212 P=28,360,887 P=23,635,041

See accompanying Notes to Consolidated Financial Statements.

*SGVFS007153* FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Filinvest Development Corporation (FDC or the “Parent Company”) is a stock corporation incorporated under the laws of the Philippines on April 27, 1973. The Parent Company and subsidiaries (collectively referred to as the “Filinvest Group” or the “Group”) are engaged in real estate operations as a developer of residential subdivisions and mixed-use urban projects including condominiums and commercial buildings, industrial and farm estates. The Filinvest Group is also involved in leasing operations, banking and financial services, sugar farming and milling business, resort and hotel operations, and power generation operations. A.L. Gotianun, Inc. (ALG) is the Group’s ultimate parent company.

On August 19, 2011, the SEC approved the Amended Articles of Incorporation of the Parent Company to include in the Primary Purpose the authority of the Company to invest in corporations, associations, partnerships, entities or persons or governmental, municipal or public businesses, domestic or foreign, engaged in utilities, power, energy, transportation on land, air and sea and infrastructure businesses.

The Parent Company’s principal place of business is located at The Beaufort, 5th Avenue, corner 23rd Street, Bonifacio Global City, Taguig City.

On March 12, 2013, the Parent Company incorporated Filinvest Development Cayman Island (FDCI) under the laws of Cayman Islands. FDCI was incorporated to facilitate the Group’s issuance of foreign currency-denominated bonds (see Note 21).

Real Estate Operations In 2011, the Parent Company purchased from outside investors a total of 1.3 billion common shares of Filinvest Land Inc. (FLI). The transaction increased the Parent Company’s effective ownership in FLI from 53% to 59%. The transaction also resulted to an increase in retained earnings of =0.8P billion.

On May 18, 2012, Countrywide Water Services, Inc. (CWSI), a 100% owned subsidiary of FLI was incorporated. CWSI has the technical expertise and skills in the operation, management, maintenance, and rehabilitation of waterworks and sewerage system. On August 2, 2012, FLI has engaged the services of CWSI in order to maintain and further improve the billing, collection and customer relation services in the waterworks and sewerage system of its Residential Projects.

Banking and Financial Services On August 19, 2011, East West Banking Corporation (EW) acquired 84.8% of the voting shares of Green Bank (A Rural Bank), Inc. (GBI). GBI is engaged in the business of extending credit to small farmers and tenants and to deserving rural industries or enterprises and to transact all businesses which may be legally done by rural banks. GBI, as a subsidiary, has been consolidated to EW from the date of acquisition, being the date on which EW obtained control of GBI (see Note 4). The transaction was accounted for as a business combination.

*SGVFS007153* - 2 -

In 2012, EW acquired additional shares from the noncontrolling shareholder amounting to P=8.8 million and from GBI’s unissued capital stock amounting to =19.7P million, increasing its ownership to 96.5% as of December 31, 2012.

In April 2012, EW conducted an Initial Public Offering (IPO) of 282,113,600 common shares at an offer price of P=18.50 per share, which were listed and traded on the First Board of the Philippine Stock Exchange on May 7, 2012. EW operates as a universal bank as approved by the BSP in July 2012 and provides a wide range of financial services to consumer and corporate clients. EW’s principal banking products and services include deposit-taking loan and trade finance, treasury, trust services, credit cards, cash management and custodial services.

In various dates in 2012, FDC sold its 12.5% ownership in EW while another 12.5% of EW shares were sold to the public from the primary shares offering in the IPO of EW resulting to a retained controlling interest of 75% in the bank. The change in Group’s ownership interest in EW from 100% to 75% was accounted for as equity transactions in accordance with PAS27R, Consolidated and Separate Financial Statements. The sale resulted to an increase in equity of P=562.8 million recorded under retained earnings. The transaction costs incurred for the sale of the 25% share amounted to =456.2P million which was treated as deduction from equity in the consolidated financial statements. Further details are discussed in Note 27.

On July 11, 2012, EW acquired 83.2% voting shares of FinMan Rural Bank, Inc. (FRBI). FRBI’s primary purpose is to accumulate deposit and grant loans to various individuals and small-scale corporate entities as well as government and private employees (see Note 4). Subsequently, EW acquired additional shares of FRBI from its unissued capital stock amounting to P=20.0 million. The acquisition of FRBI resulted to a goodwill of P=23.5 million.

In 2013, EW’s deposit for future stock subscription to GBI amounting to P=700.0 million was applied to the 441,000,000 common shares issued by GBI to EW. In addition, EW contributed additional capital amounting to P=1.3 million and acquired noncontrolling interest amounting to P=0.2 million, thereby increasing its ownership to 99.8% as of December 31, 2013. EW’s investment in GBI amounted to =888.5P million and =187.0P million as of December 31, 2013 and 2012, respectively.

On January 23, 2013, EW acquired the remaining shares of 8% of the noncontrolling interest in FRBI increasing its ownership to 100%. On May 21, 2013, the BSP also approved the change to FRBI’s corporate name to East West Rural Bank, Inc. (EWRB).

Hotel Operations On August 9, 2011, the Parent Company filed an application with the Securities and Exchange Commission (SEC) for the incorporation of FDC Hotels Corporation (FHC), whose primary purpose is to purchase, invest in, and engage in hotel and related businesses. Such application was approved by SEC on August 22, 2011.

On February 22, 2012, FHC filed an application with the SEC for the incorporation of its 100% owned subsidiary, Quest Restaurants, Inc. (QRI), whose primary purpose, among others, is to establish, maintain, operate and manage, for its own account or for the account of other entities or individuals, restaurants, cafes, bars, and general food catering services. Such application was approved by the SEC on March 12, 2012.

*SGVFS007153* - 3 -

On November 20, 2012, Filinvest Alabang, Inc. (FAI) filed an application with the SEC for the incorporation of its 100% owned subsidiary, Entrata Hotel Services, Inc. (EHSI), whose primary purpose, among others, is to own, lease, operate and/or manage one or more hotels, resorts, villas, service apartments and condotels, and all adjuncts and accessories and other related activities. Such application was approved by the SEC on November 28, 2012.

On December 17, 2012, FHC filed an application with the SEC for the incorporation of its 100% owned subsidiary, Boracay Seascapes Resort, Inc. (BSRI), whose primary purpose, among others is to develop and administer hotels and resorts and entertainment of all kinds and all related activities. Such application was approved by the SEC on December 28, 2012.

On March 22, 2013 and April 12, 2013, the SEC approved the incorporation of Chinatown Cityscapes Hotel, Inc. (CCHI) and Duawon Seascapes Resort, Inc. (DSRI), respectively, both subsidiaries of FHC. The primary purpose, among others, is to develop and administer hotels and resorts and entertainment of all kinds and all related activities.

Power Generation Business On December 1, 2010, a stockholder assigned to the Parent Company its 100% ownership in ALG Renewable Energy Holdings, Inc. (AREHI) for a consideration of P=1.0 million with Bureau of Internal Revenue (BIR) approval dated June 6, 2011, making the latter a wholly owned subsidiary of the Parent Company. Also in December 2010, the same stockholder transferred its 100% ownership in Eco Renewable Energy Holdings, Inc. (EREHI) and its 100% ownership interest in Green Renewable Power Holdings, Inc. (GRPHI) to AREHI for a consideration of P=1.0 million for each company with BIR approval dated June 3, 2011 and June 6, 2011, respectively. The transfer effectively made EREHI and GRPHI wholly owned subsidiaries of AREHI.

On February 14, 2011, the stockholders and Board of Directors (BOD) of AREHI approved the amendment of its articles of incorporation changing its corporate name to FDC Utilities, Inc. (FDCUI) and its primary purpose, which is to purchase, subscribe for, or otherwise acquire and own, hold, use, invest in, develop, sell, assign, transfer, lease, take options to, mortgage, pledge, exchange, and in all ways deal with, personal and real property of every kind and description, including shares of capital stock of corporation engaged in utilities, bonds, notes, evidence of indebtedness, and other securities, contracts or obligations of any corporation, domestic or foreign, without however engaging in dealership in securities, in the stock brokerage business or in the business of an investment company.

On March 4, 2011, the stockholders and BOD of GRPHI also amended its articles of incorporation changing its primary purpose and its corporate name to Strong Field Energy Corporation (SFEC). In 2011, FDCUI incorporated Cebu Pure Energy, Inc. (CPEI), Strong Field Gas Power Corporation (SFGPC) and Strong Field Gas and Electric Corporation (SFGEC), all to operate under a new business segment engaged in power generation. CPEI was incorporated on March 10, 2011, while SFGPC and SFGEC were both incorporated on March 23, 2011.

On November 21, 2011, FDCUI filed an application with the SEC for the increase in authorized capital stock from =16.0P million to P=4.0 billion, consisting of 40.0 million shares with par value of P=100.0 per share. Such application was approved by the SEC on December 8, 2011. As of December 31, 2013, the Parent Company had subscribed and paid a total of =1.0P billion.

*SGVFS007153* - 4 -

On February 6, 2012, the SEC approved the amended articles of incorporation changing the EREHI’s corporate name to FDC Retail Electricity Sales Corporation (FDC Retail Electricity Sales) and its primary purpose to engage in business of a retail electricity supplier and wholesale aggregator; to develop, construct, commission, own, operate, maintain, rehabilitate, and manage facilities used in connection therewith; and/or provide services necessary or appropriate in connection with the supply and delivery of electricity, such as billing and collection, integrated customer solutions, and consultancy, to such an extent and in such manner as may be permitted by applicable law.

On February 14, 2012, the SEC approved the amended articles of incorporation changing the SFGEC’s corporate name to FDC Casecnan Hydro Power Corporation (FDC Casecnan) and its principal office address to Makati City.

On February 17, 2012, SEC approved the amended articles of incorporation changing the CPEI’s corporate name to FDC Danao Power Corporation (FDC Danao) and its principal office address to Makati City.

On February 29, 2012, the SEC approved the amended articles of incorporation changing the SFGPC’s corporate name to FDC Camarines Power Corporation (FDC Camarines) and its principal office address to Makati City. Also on the same day, the SEC approved the amended articles of incorporation changing the SFEC’s corporate name to FDC Misamis Power Corporation (FDC Misamis) and its principal office address to Makati City.

On May 22, 2012 and July 17, 2012, the SEC approved the incorporation of FDC Negros Power Corporation (FDC Negros) and FDC Davao del Norte Power Corporation (FDC Davao), respectively. The primary purpose of FDC Negros and FDC Davao is to invest, undertake or participate in the development, operation, maintenance and/or rehabilitation of diesel, gas turbine, coal, steam power plants, and other power generating plants of any type and any related facilities, including substation, high voltage lines, interconnection facilities and apparatus, and port facilities together with facilities for the loading, unloading, storage of fuel, and transportation of fuel; and to sell and/or use the energy related thereby and waste and other by-products thereof.

On August 17, 2012, FDC Danao filed an application with the SEC for the increase in authorized capital stock from =16.0P million to P=700.0 million consisting of 7.0 million shares with par value of P=100 per share. This application was approved by the SEC on September 19, 2012. FDCUI had subscribed to =175.0P million of the increase and paid =103.9P million for which 1,039,005 shares were issued. On the same day, an application was filed with the SEC for the increase in authorized capital stock of FDC Camarines from P=4.0 million to P=1.2 billion consisting of 12 million shares at P=100 par value. This application was approved by the SEC on September 17, 2012. The subscribed capital amounted to =300.0P million of which P=75.0 million or 750,005 shares were issued and paid. The authorized paid up capital stock of FDC Misamis, FDC Retail Electricity Sales and FDC Casecnan remains at =16.0P million each, consisting of 160,000 shares at P=100 par value, while each company has P=1.0 million or 10,006 shares issued and paid up.

Approval of Consolidated Financial Statements The consolidated financial statements were approved and authorized for issue by the BOD on March 14, 2014.

*SGVFS007153* - 5 -

2. Summary of Significant Accounting Policies

Basis of Preparation The accompanying consolidated financial statements are prepared using the historical cost basis, except for financial assets at fair value through profit or loss (FVTPL), financial assets at fair value through other comprehensive income (FVTOCI), and derivative financial instruments that have been measured at fair value.

The Group’s consolidated financial statements are presented in Philippine Peso (P=), which is the Group’s functional currency, except for the Foreign Currency Deposit Unit (FCDU) of EW, with functional currency of United States Dollar (USD). For financial reporting purposes, FCDU accounts and foreign currency-denominated accounts of the Group are translated into their equivalents in Philippine Pesos (see accounting policy on foreign currency transactions and translations). Amounts are in thousand pesos except as otherwise indicated.

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

Basis of Consolidation The consolidated financial statements include the financial statements of the Parent Company and its subsidiaries. All of the Parent Company’s subsidiaries were incorporated in the Philippines, except for FDCI which was incorporated under the laws of Cayman Islands. The financial statements of the subsidiaries and joint ventures are prepared for the same reporting period as the Parent Company, except for Pacific Sugar Holdings Corporation (PSHC) whose reporting period starts from October 1 and ends on September 30. Adjustments are made for the effects of significant transactions or events that occur between the reporting period of PSHC and the date of the Group’s consolidated financial statements.

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: (a) power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); (b) exposure, or rights, to variable returns from its involvement with the investee, and, (c) the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: (a) the contractual arrangement with the other vote holders of the investee; (b) rights arising from other contractual arrangements; and, (c) the Group’s voting rights and potential voting rights.

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 statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

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Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in 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 interests · 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 of 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

The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All intercompany balances and transactions, intercompany profits and expenses and gains and losses are eliminated in the consolidation.

The consolidated financial statements include the accounts of the Parent Company and the following subsidiaries, and the corresponding percentages of ownership of the Parent Company as at December 31. The voting rights held by the Group in these entities are in proportion to its ownership interest.

Percentage of Interest in Common Shares 2013 2012 2011 Subsidiaries: FDC Forex Corporation (FFC)(1) 100 100 100 FAI(2) 92 92 92 Subsidiaries: Festival Supermall, Inc. 100 100 100 Northgate Convergence Corporation (NCC) 100 100 100 Proplus, Inc. 100 100 100 Pro Excel Property Managers, Inc. 100 100 100 EHSI 100 100 – FSM Cinemas, Inc. (FCI) 60 60 60 EW(1) 75 75 100 Subsidiaries: GBI(3) 100 97 91 EWRB 100 92 – FLI (Note 27) 59 59 59 Subsidiaries: Cyberzone Properties, Inc. (CPI) 100 100 100 Filinvest AII Philippines, Inc. (FAPI) 100 100 100 Property Maximizer Professional Corp. 100 100 100 Homepro Realty Marketing, Inc. 100 100 100 Property Specialist Resources, Inc. 100 100 100 Leisurepro, Inc. 100 100 100 CWSI 100 100 – Filinvest Asia Corporation (FAC) 60 60 60 (Forward) *SGVFS007153* - 7 -

Percentage of Interest in Common Shares 2013 2012 2011 PSHC 100 100 100 Subsidiaries: Davao Sugar Central Corporation (DSCC) 100 100 100 Cotabato Sugar Central Corporation (CSCC) 100 100 100 High Yield Sugar Farms Corporation (HYSFC) 100 100 100 Filinvest Information Technology, Inc. 100 100 100 Corporate Technologies, Inc. 100 100 100 Seascapes Resort, Inc. (SRI) 100 100 100 FHC 100 100 100 Subsidiaries: QRI 100 100 – BSRI 100 100 – CCHI 100 – – DSRI 100 – – FDCUI 100 100 – Subsidiaries: FDC Casecnan 100 100 100 FDC Retail Electricity Sales 100 100 100 FDCDanao 100 100 100 FDCCamarines 100 100 100 FDCMisamis 100 100 100 FDCNegros 100 100 – FDCDavao 100 100 – FDCI 100 – – Notes: 1. Includes 35% owned through FFC. 2. The percentage ownership in FAI includes 20% share of FLI in FAI. 3. EW acquired 90.8% of GBI in 2011 and acquired 5.7% and 3.3% in 2012 and 2013, respectively.

Noncontrolling Interest Noncontrolling interest represents the portion of profit or loss and net assets not owned, directly or indirectly, by the Group.

Noncontrolling interests are presented separately in the consolidated statement of income, consolidated statement of comprehensive income, and within equity in the consolidated statement of financial position, separately from parent shareholder’s equity. Any losses applicable to the non-controlling interests are allocated against the interests of the noncontrolling interest even if this results in the non-controlling interest having a deficit balance. The acquisition of an additional ownership interest in a subsidiary without a change of control is accounted for as an equity transaction. Any excess or deficit of consideration paid over the carrying amount of the noncontrolling interest is recognized in equity of the parent in transactions where the noncontrolling interest are acquired or sold without loss of control.

Business Combination and Goodwill Business combinations are accounted for using the acquisition method. This involves recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree.

For each business combination, the acquirer measures the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed in the consolidated statement of income.

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When the Group acquires a business, it assesses the financial assets and financial liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

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

Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units or groups of cash generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or group of units. Each unit or group of units to which the goodwill is allocated:

· represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and, · is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with PFRS 8, Operating Segment.

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

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

Acquisitions of noncontrolling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill or profit or loss is recognized as a result. Adjustments to noncontrolling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

Changes in Accounting Policies and Disclosures The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of the following new and amended PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations of International Financial Reporting Interpretations Committee (IFRIC) which became effective on January 1, 2013, except for PAS 19, Employee Benefits (Revised) for which the Group early adopted starting January 1, 2012.

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Except as otherwise indicated, the adoption of these new accounting standards and amendments have no material impact on the Group’s consolidated financial statements.

· PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income or OCI (Amendments) The amendments to PAS 1 change the grouping of items presented in OCI. Items that can be reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or settlement) will be presented separately from items that will never be recycled. The amendments affect presentation only and have no impact on the Group’s financial position or performance.

· PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments) The amendment requires an entity to disclose information about rights to set-off financial instruments and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognized financial instruments that are set off in accordance with PAS 32, Financial Instruments: Presentation.

The disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether the financial instruments are set off in accordance with PAS 32. The amendments have no significant impact on the Group’s financial statements.

· PFRS 10, Consolidated Financial Statements PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements, that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC 12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single control model that applies to all entities including special purpose entities.

The changes introduced by PFRS 10 requires management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in PAS 27.

The adoption of PFRS 10 affected the accounting for the Group’s 60% equity interest in FAC. For all years up to December 31, 2012, FAC was considered as a jointly controlled entity under the previously existing PAS 31, Interest in Joint Ventures, and was accounted for using the proportionate consolidation method. Upon adoption of PFRS 10 effective January 1, 2013, the Group reassessed that it controls FAC based on the factors discussed in Note 3. The assets, liabilities and equity of FAC have been retrospectively consolidated in full in the consolidated financial statements of the Group. The 40% equity of the other investor was accounted for as noncontrolling interest, measured based on the proportionate share of the net assets of FAC. The consolidated statements of financial position as of January 1 and December 31, 2012 have been restated to effect the retrospective application of PFRS 10. The retroactive effect of PFRS 10 has also been reflected in the comparative results of operations for the years ended December 31, 2012 and 2011.

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Impact on the consolidated statements of financial position as of December 31, 2012 and January 1, 2012 (increase/(decrease) in consolidated assets, liabilities and equity):

December 31, January 1, 2012 2012 (In Thousands) Cash and cash equivalents P=4,934 P=4,140 Other receivables 38,131 12,637 Investment properties 603,911 635,621 Deferred income tax assets 10,753 5,644 Other assets 45,668 42,210 Total assets 703,397 700,252 Deposit liabilities (54,071) (38,701) Accounts payable and accrued expenses 121,432 75,810 Income tax payable 6,113 3,891 Loans payable 253,333 286,667 Deferred income tax liabilities 9,283 9,529 Total liabilities 336,090 337,196 Net impact on equity P=367,307 P=363,056 Attributable to: Equity holders of the parent P=– P=– Noncontrolling interest 367,307 363,056

Impact on the consolidated statements of income and statements of comprehensive income for the years ended December 31 (increase in consolidated net income):

2012 2011 (In Thousands) Real estate operations Mall and rental revenues P=109,764 P=109,048 Other income 12,286 23,629 Cost of rental services (22,441) (30,715) Operating expenses - Real estate operations Interest expense (=P12,912) (=P9,420) General and administrative (12,836) (13,617) Marketing (866) (1,707) Income before income tax 72,995 77,218 Provision for income tax (14,886) (17,727) Net income/Total comprehensive income P=58,109 P=59,491 Attributable to: Equity holders of the parent P=– P=– Noncontrolling interest 58,109 59,491

The adoption does not affect the other comprehensive income and the Group’s basic or diluted earnings per share for the period.

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Impact on the consolidated statements of cash flows for the years ended December 31 (increase/(decrease) in cash flows):

2012 2011 (In Thousands) Operating P=100,939 P=109,265 Financing (100,145) (102,846) P=794 P=6,419

· PFRS 11, Joint Arrangements PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method.

Under PAS 31 (prior to the transition to PFRS 11), the Group’s interest in FAC and Fil-archipelago Hospitality, Inc. (FHI) were classified as jointly controlled entities and the Group’s share of the assets, liabilities, revenue, income and expenses were proportionately consolidated in the consolidated financial statements. As discussed above, the Group reassessed its arrangement with respect to FAC and has determined it has sole control over FAC. Accordingly, the investment was retrospectively accounted for as a subsidiary.

For its interest in FHI, based on the factors discussed in Note 3, management has determined that the investment qualify as a joint venture. Accordingly, with the adoption of PFRS 11, the investment was accounted using the equity method of accounting. The adoption was effected retrospectively and after considering the necessary intercompany eliminations and resulting carrying value of the investment in FHI, the consolidated net income of the Group decreased by =2.3P million and =5.6P million in 2012 and 2011, respectively. Resulting decrease in net assets and retained earnings amounted to =9.2P million and P=6.9 million as of December 31 and January 1, 2012, respectively.

The equity in net losses of the joint venture is recognized, after considering intercompany elimination, only to the extent of the carrying value of the investment. As of December 31, 2013 and 2012, the Group has unrecognized share in FHI’s cumulative net losses (after intercompany elimination) amounting to P=18.9 million and =8.2P million, respectively. The Group has no commitment to finance such losses as of December 31, 2013.

· PFRS 12, Disclosure of Interests in Other Entities PFRS 12 includes all of the disclosures related to consolidated financial statements that were previously in PAS 27, as well as all the disclosures that were previously included in PAS 31 and PAS 28, Investments in Associates. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. The new disclosures required by PFRS 12 are discussed in Note 5.

· PFRS 13, Fair Value Measurement PFRS 13 establishes a single source of guidance under PFRSs for all fair value measurements. PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted.

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The application of PFRS 13 has not materially impacted the fair value measurements carried out by the Group. Additional disclosures where required, are provided in the individual notes relating to the assets whose fair values were determined.

· PAS 27, Separate Financial Statements (as revised in 2011) As a consequence of the issuance of the new PFRS 10, and PFRS 12, what remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in the separate financial statements.

· PAS 28, Investments in Associates and Joint Ventures (as revised in 2011) As a consequence of the issuance of the new PFRS 11, Joint Arrangements, and PFRS 12, Disclosure of Interests in Other Entities, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates.

Annual Improvements to PFRSs (2009-2011 cycle) The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessary amendments to PFRSs. The amendments are effective for annual periods beginning January 1, 2013 and are applied retrospectively.

· PAS 1, Presentation of Financial Statements - Clarification of the requirements for comparative information The amendments clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the consolidated financial statements.

An entity must include comparative information in the related notes to the consolidated financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional comparative period does not need to contain a complete set of financial statements. On the other hand, supporting notes for the third balance sheet (mandatory when there is a retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the consolidated financial statements) are not required. The amendments affect disclosures only and have no impact on the Group’s financial position or performance.

· PAS 16, Property, Plant and Equipment - Classification of servicing equipment The amendment clarifies that spare parts, stand-by equipment and servicing equipment should be recognized as property, plant and equipment when they meet the definition of property, plant and equipment and should be recognized as inventory if otherwise. The amendment did not have significant impact on the Group’s financial position or performance.

· PAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equity instruments The amendment clarifies that income taxes relating to distributions to equity holders and to transaction costs of an equity transaction are accounted for in accordance with PAS 12, Income Taxes. The amendment had no impact on the Group’s financial position or performance.

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· PAS 34, Interim Financial Reporting - Interim financial reporting and segment information for total assets and liabilities The amendment clarifies that the total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity’s previous annual financial statements for that reportable segment. The amendment affects disclosures only in the interim consolidated financial statements and has no impact on the Group’s financial position or performance.

· PFRS 1, First-time Adoption of PFRS - Borrowing Costs The amendment does not apply to the Group as it is not a first-time adopter of PFRS.

Standards Issued but not yet Effective Standards, interpretations, amendments to standards and improvements to standards issued but not yet effective up to the date of issuances of the Group’s financial statements are listed below. The Group will adopt these standards and interpretations when these become effective. The Group does not expect the adoption of these new and amended standards and interpretations to have significant impact on its consolidated financial statements.

Effective in 2014

· PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (Amendments) The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments affect presentation only and have no impact on the Group’s financial position or performance.

· PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendments) These amendments remove the unintended consequences of PFRS 13 on the disclosures required under PAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which impairment loss has been recognized or reversed during the period. These amendments are to be applied retrospectively with earlier application permitted, provided PFRS 13 is also applied.

· PAS 39, Financial Instruments: Recognition and Measurement -Novation of Derivatives and Continuation of Hedge Accounting (Amendments) These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The Group has not novated its derivatives during the current period. However, these amendments would be considered for future novations.

· Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27) They provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under PFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. It is not expected that this amendment would be relevant to the Group since none of the entities in the Group would qualify to be an investment entity under PFRS 10.

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· Philippine Interpretation IFRIC 21, Levies (IFRIC 21) IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014.

· PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments) The amendments apply to contributions from employees or third parties to defined benefit plans. Contributions that are set out in the formal terms of the plan shall be accounted for as reductions to current service costs if they are linked to service or as part of the remeasurements of the net defined benefit asset or liability if they are not linked to service. Contributions that are discretionary shall be accounted for as reductions of current service cost upon payment of these contributions to the plans. This amendment is not applicable to the Group for there are no contributions from employee or third parties.

Annual Improvements to PFRSs (2010-2012 cycle) The Annual Improvements to PFRSs (2010-2012 cycle) contain non-urgent but necessary amendments to the following standards:

· PFRS 2, Share-based Payment - Definition of Vesting Condition This amendment currently does not apply to the Group as it has no share-based payments.

· PFRS 3, Business Combinations - Accounting for Contingent Consideration in a Business Combination The amendment clarifies that a contingent consideration that meets the definition of a financial instrument should be classified as a financial liability or as equity in accordance with PAS 32. Contingent consideration that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of PFRS 9 (or PAS 39, if PFRS 9 is not yet adopted) The amendment shall be prospectively applied to business combinations for which the acquisition date is on or after July 1, 2014. The Group shall consider this amendment for future business combinations.

· PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the Total of the Reportable Segments’ Assets to the Entity’s Assets The amendments require entities to disclose the judgment made by management in aggregating two or more operating segments. This disclosure should include a brief description of the operating segments that have been aggregated in this way and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics. The amendments also clarify that an entity shall provide reconciliations of the total of the reportable segments’ assets to the entity’s assets if such amounts are regularly provided to the chief operating decision maker. These amendments are effective for annual periods beginning on or after July 1, 2014 and are applied retrospectively. The amendments affect disclosures only and have no impact on the Group’s financial position or performance.

· PFRS 13, Fair Value Measurement - Short-term Receivables and Payables The amendment clarifies that short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial.

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· PAS 16, Property, Plant and Equipment - Revaluation Method - Proportionate Restatement of Accumulated Depreciation The amendment clarifies how, upon revaluation of an item of property, plant and equipment, the carrying amount of the asset shall be adjusted to the revalued amount, The amendment has no impact on the Group’s financial position or performance as it has no item of property and equipment carried at revalued amounts.

· PAS 24, Related Party Disclosures - Key Management Personnel The amendments clarify that an entity is a related party of the reporting entity if the said entity, or any member of a group for which it is a part of, provides key management personnel services to the reporting entity or to the parent company of the reporting entity. The amendments also clarify that a reporting entity that obtains management personnel services from another entity (also referred to as management entity) is not required to disclose the compensation paid or payable by the management entity to its employees or directors. The reporting entity is required to disclose the amounts incurred for the key management personnel services provided by a separate management entity. The amendments are effective for annual periods beginning on or after July 1, 2014 and are applied retrospectively. The amendments affect disclosures only and have no impact on the Group’s financial position or performance.

· PAS 38, Intangible Assets - Revaluation Method - Proportionate Restatement of Accumulated Amortization The amendments clarify how, upon revaluation of an intangible asset, the carrying amount of the asset shall be adjusted to the revalued amount.

The amendments have no impact on the Group’s financial position or performance as it has currently no intangible assets carried at revalued amounts.

Annual Improvements to PFRSs (2011-2013 cycle) The Annual Improvements to PFRSs (2011-2013 cycle) contain non-urgent but necessary amendments to the following standards:

· PFRS 1, First-time Adoption of Philippine Financial Reporting Standards - Meaning of ‘Effective PFRSs’ This amendment is not applicable to the Group as it is not a first-time adopter of PFRS.

· PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements The amendment clarifies that PFRS 3 does not apply to the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. The amendment is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively.

· PFRS 13, Fair Value Measurement - Portfolio Exception The amendment clarifies that the portfolio exception in PFRS 13 can be applied to financial assets, financial liabilities and other contracts. The amendment is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively. The amendment has no significant impact on the Group’s financial position or performance.

· PAS 40, Investment Property The amendment clarifies the interrelationship between PFRS 3 and PAS 40 when classifying property as investment property or owner-occupied property.

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The amendment stated that judgment is needed when determining whether the acquisition of investment property is the acquisition of an asset or a group of assets or a business combination within the scope of PFRS 3. This judgment is based on the guidance of PFRS 3. This amendment is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively. The amendment has no significant impact on the Group’s financial position or performance.

Effectivity to be determined

· PFRS 9, Financial Instruments:Hedge Accounting and Impairment of Financial Assets PFRS 9, Financial Instruments, as issued, reflects the first and third phases of the project to replace PAS 39 and applies to the classification and measurement of financial assets and liabilities and hedge accounting, respectively. Work on the second phase, which relate to impairment of financial instruments, and the limited amendments to the classification and measurement model is still ongoing, with a view to replace PAS 39 in its entirety.

On hedge accounting, PFRS 9 replaces the rules-based hedge accounting model of PAS 39 with a more principles-based approach. Changes include replacing the rules-based hedge effectiveness test with an objectives-based test that focuses on the economic relationship between the hedged item and the hedging instrument, and the effect of credit risk on that economic relationship; allowing risk components to be designated as the hedged item, not only for financial items, but also for non-financial items, provided that the risk component is separately identifiable and reliably measurable; and allowing the time value of an option, the forward element of a forward contract and any foreign currency basis spread to be excluded from the designation of a financial instrument as the hedging instrument and accounted for as costs of hedging. PFRS 9 also requires more extensive disclosures for hedge accounting.

PFRS 9 currently has no mandatory effective date. The Group had early adopted the first phase of PFRS 9 effective January 1, 2011. The Group will not adopt the third phase of the standard before the completion of the limited amendments and the second phase of the project.

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

The SEC and the Financial Reporting Standards Council (FRSC) have deferred the effectivity of this interpretation until the final Revenue standard is issued by the International Accounting Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed.

The adoption of this Philippine Interpretation will be accounted for retrospectively and will result to the restatement of prior period consolidated financial statements. The adoption of this Philippine Interpretation may significantly affect the determination of the net income and the related statement of financial position accounts as follows: Contract receivables, Real estate inventories, Customer’s deposits, Deferred tax liabilities and Retained earnings.

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Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents include cash and other cash items (COCI), amounts due from BSP and other banks, interbank loans receivable (IBLR) and securities purchased under resale agreement (SPURA) with original maturities of three months or less from dates of placements and are subject to insignificant risk of changes in value.

Financial Instruments Date of Recognition 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, which is the date that an asset is delivered to or by the Group. Securities transactions and related commission income and expense are recorded on a settlement date basis. Deposits, amounts due to banks and customers and loans are recognized when cash is received by the Group or advanced to the borrowers. Derivatives are recognized on trade date basis.

The Group recognized financial instruments when, and only when, the Group becomes a party to the contractual terms of the financial instruments.

Initial recognition of financial instruments Financial assets and financial liabilities are recognized initially at fair value, except for financial assets and liabilities at FVTPL.

Determination of fair value The fair value of investments that are actively traded in organized financial markets is determined by reference to quoted market prices at the close of business on the reporting date, without any deduction for transaction cost. For financial instruments where there is no active market, fair value is determined using valuation techniques.

Such techniques include using recent arm’s-length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis or other valuation models. In the absence of a reliable basis of determining fair value, investments in unquoted equity securities are carried at cost net of impairment, if any.

‘Day 1’ difference Where the transaction price in a non-active market is different from 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 unless it qualifies for recognition as some other type of asset or liability. In cases where transaction price used is 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.

Classification, Reclassification and Measurement of Financial Assets and Financial Liabilities For purposes of classifying financial assets, an instrument is an ‘equity instrument’ if it is a nonderivative and meets the definition of ‘equity’ for the issuer (under PAS 32, Financial Instruments: Presentation), except for certain non-derivative puttable instruments presented as equity by the issuer. All other non-derivative financial instruments are ‘debt instruments’.

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Financial assets at amortized cost Financial assets are measured at amortized cost if both of the following conditions are met:

· the asset is held within the Group’s business model whose objective is to hold assets in order to collect contractual cash flows; and · the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets meeting these criteria are measured initially at fair value plus transaction costs. They are subsequently measured at amortized cost using the effective interest method less any impairment in value, with the interest calculated recognized as Interest income in the consolidated statement of income. The Group classified cash and cash equivalents, other loans and receivables, due from related parties and other investment securities at amortized cost as financial assets at amortized cost (see Notes 35 and 36).

The Group may irrevocably elect at initial recognition to classify a financial asset that meets the amortized cost criteria above as at FVTPL if that designation eliminates or significantly reduces an accounting mismatch had the financial asset been measured at amortized cost. In 2013 and 2012, the Group has not made such designation.

Financial assets at FVTOCI At initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate equity investments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading.

A financial asset is held for trading if:

· it has been acquired principally for the purpose of selling it in the near term; or · on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has evidence of a recent actual pattern of short-term profit-taking; or · it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.

Financial assets at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value, with no deduction for sale or disposal costs. Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in “Revaluation reserve on financial assets at FVTOCI” in the consolidated statement of financial position. Where the asset is disposed of, the cumulative gain or loss previously recognized in “Revaluation reserve on financial assets at FVTOCI” is not reclassified to profit or loss, but is reclassified to Retained earnings.

The Group has designated certain equity instruments that are not held for trading as at FVTOCI on initial application of PFRS 9 (see Notes 13 and 36).

Dividends earned on holding these equity instruments are recognized in the consolidated statement of income when the Group’s right to receive the dividends is established in accordance with PAS 18, Revenue, unless the dividends clearly represent recovery of a part of the cost of the investment.

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Financial assets at FVTPL Debt instruments that do not meet the amortized cost criteria, or that meet the criteria but the Group has chosen to designate as at FVTPL at initial recognition, are measured at fair value through profit or loss.

Equity investments are classified as at FVTPL, unless the Group designates an investment that is not held for trading as at FVTOCI at initial recognition.

The Group’s financial assets at FVTPL include government securities, private bonds and equity securities held for trading purposes as of December 31, 2013 and 2012 (see Notes 13 and 36).

Financial assets at FVTPL are carried at fair value, and realized and unrealized gains and losses on these instruments are recognized as ‘trading and securities gain (losses)’ under Other income in the consolidated statement of income. Interest earned on these investments is reported in the consolidated statement of income under Interest income while dividend income is reported in the consolidated statement of income under Other income when the right of payment has been established. Quoted market prices, when available, are used to determine the fair value of these financial instruments. If quoted market prices are not available, their fair values are estimated based on inputs provided by the BSP, Bureau of Treasury and investment bankers. For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation techniques.

The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the Philippine Dealing Exchange (PDEx) closing rate at the consolidated statement of financial position date. The foreign exchange component forms part of its fair value gain or loss. For financial assets classified as at FVTPL, the foreign exchange component is recognized in the consolidated statement of income. For financial assets designated as at FVTOCI, any foreign exchange component is recognized in other comprehensive income. For foreign currency denominated debt instruments classified at amortized cost, the foreign exchange gains and losses are determined based on the amortized cost of the asset and are recognized in the consolidated statement of income.

Reclassification of financial assets The Group can reclassify financial assets if the objective of its business model for managing those financial assets changes. The Group is required to reclassify the following financial assets:

· from amortized cost to FVTPL if the objective of the business model changes so that the amortized cost criteria are no longer met; and · from FVTPL to amortized cost if the objective of the business model changes so that the amortized cost criteria start to be met and the instrument’s contractual cash flows meet the amortized cost criteria.

Reclassification of financial assets designated as at FVTPL at initial recognition is not permitted.

A change in the objective of the Group's business model must be effected before the reclassification date. The reclassification date is the beginning of the next reporting period following the change in the business model.

Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.

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A financial liability is held for trading if:

· it has been incurred principally for the purpose of repurchasing it in the near term; or, · on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has evidence of a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.

Management may designate a financial liability at FVTPL upon initial recognition when the following criteria are met, and designation is determined on an instrument by instrument basis:

· The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the liabilities or recognizing gains or losses on them on a different basis; or, · The liabilities are part of a group of financial liabilities 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, unless the embedded derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.

As of December 31, 2013 and 2012, the Group has no financial liability at FVTPL.

Financial liabilities at amortized cost Financial liabilities are measured at amortized cost using the effective interest method, except for: a. financial liabilities at FVPTL which are measured at fair value; and, b. financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies.

Issued financial instruments or their components, which are not designated at FVTPL, are classified as financial liabilities at amortized cost under ‘Deposit liabilities’, ‘Bills and acceptances payable’ or other appropriate financial liability accounts, 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, bills payable and similar financial liabilities not qualified as and not designated as FVTPL, 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 issuance and fees that are an integral part of the effective interest rate.

Financial liabilities at amortized cost consist primarily of deposit liabilities, bills and acceptances payable, accounts payable and accrued expenses, short-term and long-term debt (see Note 36).

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Derivative Financial Instruments and Hedge Accounting Initial recognition and subsequent measurement The Group uses derivative financial instruments, such as forward currency contracts, interest rate swaps and forward commodity contracts, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

The purchase contracts that meet the definition of a derivative under PAS 39 are recognized in the statement of profit or loss as cost of sales. Commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the Group’s expected purchase, sale or usage requirements are held at cost.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the recognized effective portion of cash flow hedges, which is recognized in OCI and later reclassified to profit or loss when the hedge item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as: · Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment · Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment · Hedges of a net investment in a foreign operation

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:

Fair value hedges The change in the fair value of a hedging derivative is recognized in the statement of profit or loss as finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the statement of profit or loss as finance costs.

For fair value hedges relating to items carried at amortized cost, any adjustment to carrying value is amortized through profit or loss over the remaining term of the hedge using the EIR method. EIR amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

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If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.

As of December 31, 2013 and 2012, the Group does not have derivative instruments designated as fair value hedge.

Cash flow hedges The effective portion of the gain or loss on the hedging instrument is recognized in OCI in the cash flow hedge reserve, while any ineffective portion is recognized immediately in the statement of profit or loss as other operating expenses.

The Group uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognized in finance costs.

Amounts recognized as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs.

When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognized as OCI are transferred to the initial carrying amount of the non-financial asset or liability.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.

As of December 31, 2013, the Group has cross currency swap that is used to hedge for the exposure of changes in foreign currency translation of the Group’s US$-denominated bonds payable (see Note 36).

Impairment of Financial Assets The Group assesses at each reporting date whether 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 arrears or economic conditions that correlate with defaults.

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For financial assets classified and measured at amortized cost such as loans and receivables, due from other banks and investment securities 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.

For individually assessed financial assets, 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 present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate, adjusted for the original credit risk premium. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

Financial 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. The carrying amount of the asset is reduced through use of an allowance account and the amount of loss is charged to ‘Provision for impairment and credit losses’ in the consolidated statement of income. Interest income continues to be recognized based on the original effective interest rate of the asset. Loans, 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 year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. If a write-off is later recovered, except for credit card receivables, any amounts formerly charged are credited to the ‘Provision for impairment and credit losses’ in the consolidated statement of income. For credit card receivables, if a write-off is later recovered, any amounts previously charged to ‘Provision for impairment and credit losses’ are credited to ‘Miscellaneous income’ in the consolidated statement of income.

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.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of credit risk characteristics such as industry, collateral type, 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 similar credit risk characteristics. Historical lossexperience 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. Estimates of changes in future cash flows reflect, and are directionally consistent with changes in related observable data from period to period (such as changes in property prices, payment status, or other factors that are indicative of incurred losses of the Group and their magnitude).

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.

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For credit cards receivables, the Group is using net flow rate methodology for collective impairment.

Fair Value Measurement 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 by 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.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. · Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable · Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the 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.

Restructured loans Loan restructuring may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews restructured loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subjected to an individual or collective impairment assessment, calculated using the loan’s original effective interest rate. The difference between the recorded value of the original loan and the present value of the restructured cash flows, discounted at the original effective interest rate, is recognized in ‘Provision for impairment and credit losses’ in the consolidated statement of income.

*SGVFS007153* - 25 -

Derecognition of Financial Assets and Financial Liabilities Financial Assets A financial asset is derecognized when (a) the rights to receive cash flows from the asset have 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 rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of an 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 Liabilities A financial liability is derecognized when the obligation under the liability has expired, discharged or cancelled.

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.

Repurchase and Reverse Repurchase Agreements Securities sold under agreements to repurchase at a specified future date (‘repos’) are not derecognized from the consolidated statement of financial position. The corresponding cash received, including accrued interest, is recognized in the consolidated statement of financial position as a loan to the Group, reflecting the economic substance of such transaction.

Conversely, securities purchased under agreements to resell at a specified future date (‘reverse repos’) are not recognized on the consolidated statement of financial position. The corresponding cash paid, including accrued interest, is recognized in the consolidated statement of financial position as SPURA under “Cash and cash equivalents” account, and is considered a loan to the counterparty. The difference between the purchase price and resale price is treated as interest income and is accrued over the life of the agreement using the EIR method.

Offsetting Financial Instruments Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts and the Group intends to either settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, where the related assets and liabilities are presented at gross in the consolidated statement of financial position.

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Interests in Joint Arrangements A joint venture is a contractual agreement whereby two or more parties undertake an economic activity that is subject to joint control. A joint arrangement may either be a joint venture or a joint operation.

Joint Venture The Group’s investments in joint venture are accounted for using the equity method.

Under the equity method, the investment in 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 joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.

The statement of income reflects the Group’s share of the results of operations of the 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 joint venture, the Group recognizes its share of any changes, when applicable, in the statement of comprehensive income and statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.

The aggregate of the Group’s share of net earnings of a joint venture is shown on the face of the statement of income outside operating profit and represents profit or loss after tax. The Group recognizes its share of the losses of the joint venture until its share of losses equals or exceeds the carrying value of its investment in joint venture, at which point the Group discontinues recognizing its share of further losses. The Group restricts the elimination to the amount required to reduce the investment to zero.

The financial statements of the 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 joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in 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 investment in joint venture and its carrying value, then recognizes the loss in the consolidated statement of income.

Upon loss of 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 joint control and the fair value of the retained investment and proceeds from disposal is recognized in the consolidated statement of income.

Joint Operation The Group recognizes in relation to its interest in joint operation its: (a) assets, including its share of any assets held jointly; (b) liabilities, including its share of any liabilities incurred jointly; (c) revenue from sale of its share of the output arising from the joint operation; (d) share of the revenue from the sale of the output by the joint operation; and (e) expenses, including its share of any expenses jointly incurred.

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The Group’s investment in joint arrangements and their respective classification and percentage ownership as of December 31, 2013 and 2012 are as follows:

Percentage Classification of Ownership Filinvest Corporate City (FCC) Joint operation 74 FHI Joint venture 60 South Station Terminal (SST) Joint operation 49

Despite the Group’s interest of above 50% on the above entities, these are treated as joint arrangements due to existence of a contractual arrangements between the parties and certain special voting rights requiring unanimous consent from both the Group and other venturers in making certain strategic and financial decisions.

Subdivision Lots, Condominium and Residential Units for Sale 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 subdivision lots, condominium, and residential units for sale and is measured at the lower of cost or net realizable value (NRV). It also includes investments in club shares accounted as inventory when the Group acts as the developer and its intent is to sell the developed property.

Cost includes: · Land acquisition cost and expenses directly related to acquisition · Amounts paid to contractors for development and construction · Borrowing costs, planning and design costs, costs of site preparation, professional fees, property transfer taxes, construction overheads and other related costs

NRV is the estimated selling price in the ordinary course of the business, based on market prices at the reporting date, less estimated costs of completion and the estimated costs of sale.

Sugar and Molasses Inventories Inventories are stated at the lower of cost and NRV. Cost is determined by the weighted average production cost for sugar and molasses and, by the moving average method for materials and supplies. NRV is the estimated selling price in the ordinary course of business, less estimated cost of completion and expenses necessary to consummate the sale.

Land and Land Development Land and land development consists of properties for future development that are carried at the lower of cost or NRV. The cost of land and land development includes the (a) land acquisition cost, (b) costs incurred relative to the acquisition and transfer of land title in the name of the Group such as transfer taxes and registration fees, (c) costs incurred on initial development of the raw land in preparation for future projects and (d) borrowing costs. They are classified to subdivision lots, condominium and residential units for sale when the project plans and development and construction estimates are completed and necessary permits are secured.

Biological Assets The Group’s biological assets included in the ‘Other assets’ account consist of sugarcane crops. The costs of planting, fertilizers and other maintenance costs incurred for the sugarcane plantations prior to harvest are capitalized to biological assets and are charged to operations as the sugarcane are harvested. Biological assets are carried at cost less any significant and apparent permanent decline in value.

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The Group uses the cost method of valuation since fair value cannot be measured reliably. The Group’s biological assets have no active market. Further, the existing sector benchmarks are determined to be irrelevant and the estimates (i.e., input costs, efficiency values, production) necessary to compute for the present value of expected net cash flows comprises wide range of data which may not result to a reliable basis for determining the fair value.

Once the fair value becomes reliably measurable, the Group will measure the assets at their fair value less estimated point-of-sale costs.

Investment Properties Investment properties consist of commercial mall, land and other properties held for long-term rental yields and for capital appreciation.

Investment properties, are carried at cost less accumulated depreciation and any accumulated impairment losses. Land, comprising the site of where the mall is located, is carried at deemed cost, less any impairment in value, if any. The Group opted to use the revalued amount of investment property as deemed cost at the date of transition to PFRS.

Depreciation of investment properties are computed using the straight-line method over the estimated useful lives of these assets as follows:

Years Commercial mall and buildings 20-50 Building improvements 15-20

Rental income from investment properties is recognized in the consolidated statement of income on a straight-line basis over the term of the lease or based on a certain percentage of the gross revenue of tenants. Lease incentives are recognized as an integral part of the total rental income.

Expenses with regards to investment properties are treated as ordinary expenses and are recognized when incurred.

Investment property is derecognized when it is either disposed of or permanently withdrawn from use and there is no future economic benefit expected from its disposal or retirement. 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 property when there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property when there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sell. Transfers between investment property, owner-occupied property and inventories do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes.

Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing cost for long-term construction projects if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of property, plant and equipment as a replacement if the recognition criteria are satisfied.

*SGVFS007153* - 29 -

All other repair and maintenance costs are recognized in the consolidated statement of income as incurred.

The present value of the expected cost for the decommissioning of the asset after its use, if any, is included in the cost of the respective asset if the recognition criteria for a provision are met.

The separate recognition of significant components of property, plant and equipment depends on whether these components serve the same purpose as the related items of property, plant and equipment. If the corresponding components do not serve the same purpose, they must be recognized separately. If the component parts serve the same purpose, the need to recognize them separately depends on whether they have the same structure and the same normal useful life as the other component parts of the asset. If the structure and normal useful life are different, the component parts must be recognized individually insofar as they comply with the definition of the assets.

Accordingly, the cost of acquisition must be allocated to the individual components over their respective useful lives. The depreciation of the component parts must be recognized for each component part separately. The subsequent expenses for the exchange or replacement of such assets must be recognized as acquisition costs for a separate asset if it meets the asset recognition criteria and are depreciated over their useful life.

Construction-in-progress, included in property, plant and equipment, is stated at cost. This includes cost of construction and other direct costs. Construction-in-progress is not depreciated until such time as the relevant assets are completed and put into operational use.

Depreciation are calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Years Buildings 20-50 Machinery and equipment 5-20 Transportation equipment 5 Furniture, fixtures and office equipment 3-5 Communication equipment 5

Leasehold improvements included under “Property, plant and equipment” are amortized over the term of the lease or their estimated useful lives (three to 15 years), whichever is shorter.

The useful life and depreciation and amortization method are reviewed at financial year end to ensure that the period and method of depreciation and amortization are consistent with the expected pattern of economic benefits from items of property, plant and equipment.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the consolidated statement of income in the year the asset is derecognized.

Intangible Assets Intangible assets include goodwill, and branch licenses, customer relationship, core deposits and capitalized computer software presented under other assets.

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Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value at the date of acquisition. Following initial recognition, intangible assets, excluding goodwill and branch licenses, are carried at cost less any accumulated amortization and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the consolidated statement of income.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually or more frequently, either individually or at the CGU level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statement of income when the asset is derecognized.

Goodwill Goodwill acquired in a business combination is initially measured at cost, being the excess of the consideration transferred over the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. During the measurement period, the acquirer shall also recognise additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the acquirer receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. The measurement period shall not exceed one year from the acquisition date.

Branch licenses Branch licenses are determined to have indefinite useful lives. These are tested for impairment annually either individually or at the CGU level. Such intangibles are not amortized. The useful life is reviewed annually to determine whether indefinite useful life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. *SGVFS007153* - 31 -

Customer Relationship and Core Deposit Customer relationship and core deposit included under ‘Other assets’ account are intangible assets acquired by the Group through business combination. These intangible assets are initially measured at their fair value at the date of acquisition. The fair value of these intangible assets reflects expectations about the probability that the expected future economic benefits embodied in the asset will flow to the Group.

Following initial recognition, customer relationship and core deposits are measured at cost less accumulated amortization and any accumulated impairment losses. Customer relationship related to the credit cards business is amortized on a straight-line basis over its useful life of 40 years while the customer relationship related to the auto loans business and core deposits are amortized on a straight-line basis over its useful life of 13 and 10 years, respectively.

Capitalized Computer Software Capitalized computer software, included in ‘Other assets,’ as acquired separately is measured at cost on initial recognition. Software and licenses that are integral part of property, plant and equipment is classified as property, plant and equipment. Following initial recognition, capitalized software is carried at cost less accumulated amortization and any accumulated impairment losses. The capitalized software is amortized on a straight-line basis over its useful economic life of five years.

Impairment of Nonfinancial Assets The carrying values of investment properties, property, plant and equipment and other assets are reviewed for impairment when events or changes in circumstances indicate the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets or cash-generating units are written down to their recoverable amounts. The recoverable amount of the asset is the greater of fair value less cost to sell and value in use. 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 assessment of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the consolidated statement of income.

For nonfinancial assets excluding goodwill and branch licenses, an assessment is made at each reporting date to determine 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, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of income. After such a reversal, the depreciation and amortization expense is adjusted in future years to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining life.

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

Goodwill Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

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

Other Intangible Assets Other intangible assets such as customer relationship, core deposits and capitalized computer software are assessed for impairment whenever there is an indication that it may be impaired.

Revenue and Cost Recognition Revenue is recognized to the extent that it is probable that the economic benefits associated with transaction will flow to the Group and the amount can be reliably measured. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. In arrangements where the Group is acting as principal to its customers, revenue is recognized on a gross basis. However, when the Group is acting as an agent to its customers, only the amount of net commission retained is recognized as revenue.

The following specific recognition criteria must also be met before revenue or income is recognized: a. Real Estate Operations

Sale of Subdivision Lots and Housing Units Revenue from sales of substantially completed projects where collectability of sales price is reasonably assured is accounted for using the full accrual method.

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. 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 “Accounts payable and accrued expenses” account in the liabilities section of the consolidated statement of financial position.

Collections from accounts which do not qualify yet for revenue recognition are treated as customer deposits included in the ‘Accounts payable and accrued expenses’ in the consolidated statement of financial position.

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Sale of Condominium Units Sale of condominium units are accounted for under the percentage-of-completion method where the Group has material obligations to complete the development of the condominium project. The percentage of completion is based on the proportion that the actual costs incurred to date bear to the estimated total costs of project development. These estimates are determined and regularly updated by the contractors and Group’s technical personnel. Under this method, revenue is recognized as the related obligation is fulfilled. When conditions for recognizing revenue are not yet met, collections over the recognized receivables are reported as deposit included in “Accounts payable and accrued expenses” in the consolidated statement of financial position.

Cost of condominium units sold before completion of the development is recognized on the same timing and basis as the related revenue.

Sale of Club Shares Sale of club shares is recognized when the risks and rewards of ownership of the shares have passed to the buyer and the amount of revenue can be measured reliably.

Cost of Real Estate Sales Cost of real estate sales is recognized consistent with the revenue recognition method applied. Cost of subdivision lots and housing units and condominium units sold before the completion of the development is determined on the basis of the acquisition cost of the land and its full development costs, which include estimated costs to complete development works, as determined by the Group’s in-house technical staff.

The cost of inventory recognized in profit or loss on disposal is determined with reference to the specific costs incurred on the property, allocated to saleable area based on relative size and takes into account the percentage of completion used for revenue recognition purposes.

Rent Income Rent income from investment properties is recognized in the consolidated statement of income either on a straight-line basis over the lease term, or based on a certain percentage of the gross revenue of tenants, pursuant to the terms of the lease contracts.

Service Fee Income Service fee income is recognized as services are rendered.

Ticket, Food and Beverage Sale Revenue from ticket sales is recognized when theater services are completed and consumed. Revenue from food and beverage sale is recognized when goods are actually sold to customers.

Management Fee Management fee from administrative functions, property management and other fees are recognized when earned.

Interest Income Interest income is recognized as the interest accrues taking into account the effective yield on the underlying assets.

*SGVFS007153* - 34 -

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

Realized Gains and Losses Revenue from deferred income is recognized by reference to the sale of related properties and investments to third parties. b. Financial and Banking Services

Interest Income For all financial instruments measured at amortized cost and interest-bearing financial instruments classified as FVTPL, interest income is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability.

The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options), includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. The adjusted carrying amount is calculated based on the original EIR. The change in carrying amount is recorded as interest income.

Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the original EIR applied to the new carrying amount.

Service charges and penalties Service charges and penalties are recognized only upon collection or accrued when there is a reasonable degree of certainty as to its collectibility.

Fee and commission income The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories:

a) Fee income earned from services that are provided over a certain period of time Fees earned for the provision of services over a period of time are accrued over that period. These fees include investment fund fees, custodian fees, fiduciary fees, commission income and credit related fees.

b) Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for a third party are recognized on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria. Loan syndication fees are recognized in the consolidated statement of income when the syndication has been completed and the Group retains no part of the loans for itself or retains part at the same effective interest rate as for the other participants.

Trading and Securities Gains (Losses) - net Results arising from trading activities include all gains and losses from changes in fair value for financial assets and financial liabilities held for trading.

*SGVFS007153* - 35 -

Commissions Earned on Credit Cards Commissions earned on credit cards are taken up as income upon receipt from member establishments of charges arising from credit availments by credit cardholders. These commissions are computed based on certain agreed rates and are deducted from amounts remittable to member establishments.

Purchases by credit cardholders, collectible on an installment basis, are recorded at the cost of the items purchased plus a certain percentage of cost. The excess over cost is credited to ‘Unearned discount’ and is shown as a deduction from ‘Loans and receivables’ in the consolidated statement of financial position.

The unearned discount is taken up to income over the installment terms and is computed using the EIR method.

Customer loyalty programmes Award credits under customer loyalty programmes are accounted for as a separately identifiable component of the transaction in which they are granted. The fair value of the consideration received in respect of the initial sale is allocated between the award credits and the other components of the sale. Income generated from customer loyalty programmes is recognized as part of ‘Service charges, fees and commissions’ in the consolidated statement of income.

Other Income Income from sale of services is recognized upon rendition of the service. Income from sale of properties is recognized upon completion of the earning process and the collectability of the sales price is reasonably assured. c. Sugar Operations

Sale of Goods Sale is recognized when title to the goods has passed to the buyer through the endorsement of quedans or physical delivery.

Collections from accounts which are not yet qualified for revenue recognition are treated as ‘deposit from customers’ and are included in the “Accounts payable and accrued expenses” account in the consolidated statements of financial position.

Interest income Interest income is recognized as the interest accrues into account the effective yield on the underlying assets. d. Hotel Operations

Food and beverage Revenue from sale of food and beverage is recognized when served.

Rooms Revenue from rooms is recognized when the related services are rendered and/or facilities and amenities are used.

*SGVFS007153* - 36 -

Other operating departments Revenue from other operating departments is recognized when services are rendered.

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

Expense Recognition Expenses are recognized in the consolidated statement of income 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.

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.

Retirement Costs The net defined benefit liability or asset is the aggregate of the present value of the defined benefit obligation at the end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using the projected unit credit method.

Defined benefit costs comprise the following: · Service cost · Net interest on the net defined benefit liability or asset · 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 profit or loss. Past service costs are recognized when plan amendment or curtailment occurs.

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 expense or income in the statement of income.

*SGVFS007153* - 37 -

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. All remeasurements recognized in other comprehensive income account “Remeasurement gains (losses)” on retirement plans are not reclassified to another equity account in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value of plan assets is based on market price information.

When no market price is available, the fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the related obligations).

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognized as a separate asset at fair value when and only when reimbursement is virtually certain.

Termination benefit Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either an entity’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of those benefits and when the entity recognizes related restructuring costs. Initial recognition and subsequent changes to termination benefits are measured in accordance with the nature of the employee benefit, as either post-employment benefits, short- term employee benefits, or other long-term employee benefits.

Employee leave entitlement Employee entitlements to annual leave are recognized as a liability when they are accrued to the employees. The undiscounted liability for leave expected to be settled wholly within twelve months after the end of the annual reporting period is recognized for services rendered by employees up to the end of the reporting period.

Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

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

(a) there is a change in contractual terms, other than a renewal or extension of the arrangement; (b) a renewal option is exercised or extension granted, unless that 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 a substantial change to the asset. *SGVFS007153* - 38 -

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) above, and at the date of renewal or extension period for scenario (b).

Group as a Lessor Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Rental income on operating leases is recognized on a straight line basis over the lease term. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same bases as rental income.

Group as a Lessee Lease payments under operating lease are recognized as expense on a straight line basis over the terms of the lease contract.

Commission Expense Commissions paid to sales or marketing agents on the sale of pre-completed real estate units are deferred when recovery is reasonably expected and are charged to expense in the period in which the related revenue is recognized as earned. Commission expense is included in the “Expenses” account in the consolidated statement of income.

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

Deferred Income Tax Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except; (a) where deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (b) in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carryforward benefit of the excess of minimum corporate income tax (MCIT) over regular corporate income tax (RCIT) and unused net operating loss carryover (NOLCO), to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carryforward of MCIT and unused NOLCO can be utilized.

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

*SGVFS007153* - 39 -

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income tax relating to items recognized directly in other comprehensive income is recognized in other comprehensive income and not in the consolidated statement of income.

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

Borrowing Costs Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Qualifying assets are assets that necessarily take a substantial period of time to get ready for intended use or sale. Interest and other financing costs incurred during the construction period on borrowings used to finance property development are capitalized as part of development costs included under ‘Subdivision lots, condominium and residential units for sale’ and ‘Land and land development’ accounts in the consolidated statement of financial position. Capitalization of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred.

Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the asset for its intended sale are complete. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded. All other borrowing costs are expensed as incurred.

Equity Capital stock is measured at par value for all shares issued. 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.

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. When shares are issued for a consideration other than cash, the proceeds are measured by the fair value of the consideration received.

Direct cost incurred related to the equity issuance, such as underwriting, accounting and legal fees, printing costs and taxes are charged to “Additional paid-in capital” account.

Retained earnings represent accumulated earnings of the Group, and any other adjustments to it as required by other standards, less dividends declared. The individual accumulated earnings of the subsidiaries and associates are available for dividend declaration when these are declared as dividends by the subsidiaries as approved by their respective Board of Directors.

Dividends on common shares are deducted from retained earnings when declared and approved by the BOD or shareholders of the Parent Company. Dividends payable are recorded as liability until paid. Dividends for the year that are declared and approved after the reporting date, if any, are dealt with as an event after the reporting date and disclosed accordingly.

*SGVFS007153* - 40 -

Treasury Shares Own equity instruments which are reacquired are carried at cost and are deducted from consolidated equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. When the shares are retired, the capital stock account is reduced by its par value and excess of cost over par value upon retirement is charged to additional paid-in capital to the extent of the specific or average additional paid in capital when the shares were issued and to retained earnings for the remaining balance.

Earnings Per Share (EPS) Basic EPS amounts are calculated by dividing net income attributable to equity holders of the Parent Company for the year by the weighted average number of ordinary shares outstanding during the year after giving retroactive effect for any stock dividends, stock options or reverse stock splits during the period.

Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period, after giving retroactive effect for any stock dividends, stock splits or reverse stock splits during the period, and adjusted for the effect of dilutive options and dilutive convertible preferred shares. If the required dividends to be declared on convertible preferred shares divided by the number of equivalent common shares, assuming such shares are converted would decrease the basic EPS, then such convertible preferred shares would be deemed dilutive. Where the effect of the assumed conversion of the preferred shares and the exercise of all outstanding options have anti-dilutive effect, basic and diluted EPS are stated at the same amount.

Foreign Currency Transactions and Translations The functional currency of each of the entities in the Group is the Philippine Peso, except for the FCDU of EW. Philippine Peso is also the presentation currency of the consolidated financial statements. For financial reporting purposes, the monetary assets and liabilities of the FCDU and the foreign currency-denominated monetary assets and liabilities of the Group are translated in Philippine peso based on the Philippine Dealing System (PDS) closing rate prevailing at the statement of financial position date and foreign currency-denominated income and expenses, at the prevailing exchange rate at the date of transaction. Foreign exchange differences arising from revaluation and translation of foreign currency-denominated assets and liabilities of the Group are credited to or charged against operations in the period in which the rates change. Exchange differences arising from translation of the accounts of the FCDU to Philippine peso as the presentation currency are taken to the statement of comprehensive income under ‘Translation adjustment’.

Non-monetary items that are measured in terms of historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Fiduciary Activities Assets and income arising from fiduciary activities together with related undertakings to return such assets to customers are excluded from the consolidated financial statements where EW acts in a fiduciary capacity such as nominee, trustee or agent.

*SGVFS007153* - 41 -

Provisions A provision is 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. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognized as interest expense. When the Group expects part or all of provision to be reimbursed or recovered, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain.

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

Events After the Reporting Date Post year-end events 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 when material in the notes to the consolidated financial statements.

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the accompanying consolidated financial statements in compliance with PFRS requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Future events may occur which can cause the assumptions used in arriving at those estimates to change. The effects of any changes in estimates are be reflected in the consolidated financial statements as they become reasonably determinable. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

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:

a. Classification of Financial Instruments The Group classifies financial instruments, or its component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual agreement and the definitions of the instruments. The substance of a financial instrument, rather than its legal form, governs its classification in the consolidated statement of financial position. The Group determines the classification at initial recognition and re- evaluates this designation at every reporting date.

*SGVFS007153* - 42 - b. Real Estate Revenue Recognition Selecting an appropriate revenue recognition method for a real estate sale transaction requires certain judgments based on, among others:

· Buyers’ commitment on sales which may be ascertained through the significance of the buyers’ initial downpayment; and, · Stage of completion of the project development. c. Operating Lease Commitments - the Group as Lessor The Group has entered into various property leases on its investment properties portfolio. The Group has determined that it retains all significant risks and rewards of ownership on these properties hence classified as operating leases. d. Operating Lease Commitments - the Group as Lessee The Group has entered into various leases for its occupied offices. The Group has determined that all significant risks and rewards of ownership are retained by the respective lessors on offices it leases under operating leases and therefore accounts for these leases as operating leases. e. Determining Classification of Investment in Club Project Being a real estate developer, the Group determines how investment in club project shall be accounted for. In determining whether this shall be accounted for as inventories or as financial instruments, the Group considers its role in the development of the Club and its intent for holding the related club shares.

The Group classifies such shares as inventories when the Group acts as the developer and its intent is to sell the developed property. f. Distinction Between Investment Properties and Owner-Occupied Properties The Group determines whether a property qualifies as investment property. In making its judgment, the Group considers whether the property generates cash flows largely independent of the other assets held by an entity. Owner-occupied properties generate cash flows that are attributable not only to property but also to the other assets used in the production or supply process.

When properties comprise a portion that is held to earn rentals or for capital appreciation and another portion is held for use in the production or supply of goods or services or for administrative purpose, and these portions cannot be sold separately, the property is accounted for as investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgment is applied in determining whether ancillary services are so significant that a property does not qualify as investment property. The Group considers each property separately in making judgment. g. Functional Currency PAS 21, The Effects of Changes in Foreign Currency Rates, requires management to use its judgment to determine the entity’s functional currency such that it most faithfully represents the economic effects of the underlying transactions, events and conditions that are relevant to the entity. In making this judgment, the entities within the Group considers the following: a) the currency that mainly influences sales prices and services (this will often be the currency in which sales prices and services are denominated and settled);

*SGVFS007153* - 43 -

b) the currency in which funds from financing activities are generated; and, c) the currency in which receipts from operating activities are usually retained.

The Parent Company, its subsidiaries and joint ventures’ functional currency is Philippine Peso except for FCDU of EW which is in USD. h. Business model for managing financial assets Change in the Business Model Under PFRS 9, the Group can only reclassify financial assets if the objective of its business model for managing those financial assets changes.

In 2012, management deemed it necessary to change the way it manages its investment securities because of significant changes in its strategic plans, funding structure and cash flow profile brought about by the IPO of EW and its branch expansion program. Management considered the previous model not adequate to capture the fast evolution of the Group’s business strategies.

Prior to the change, the Group’s business model for the financial assets carried at amortized cost was focused on minimizing, if not to close, the maturity gap in its consolidated statement of financial position by matching core deposits, taken from the longest tenor bucket of the maturity gap, with longer term debt instruments. In 2012, the Group’s business model was revised and now focuses on asset-liability management based on the Group’s maximum cumulative outflow and expansion of the Group’s investment portfolios to reflect the Group’s investment strategy.

The Group has determined that the changes qualify as a change in business model for managing financial assets that would require reclassifications of certain financial assets.

Accordingly, the Group made certain reclassifications pursuant to the new business model effective July 1, 2012, resulting into P=711.9 million of ‘Trading and securities gain’ in the consolidated statement of income (see Note 26) representing the difference between the aggregate amortized cost of certain securities amounting to P=5.6 billion and their aggregate fair value of =6.3P billion at the reclassification date.

Sale of Investment Securities at Amortized Cost The Group’s business model allows for financial assets to be held to collect contractual cash flows even when sales of certain financial assets occur. PFRS 9, however, emphasizes that if more than an infrequent sale is made out of a portfolio of financial assets carried at amortized cost, the entity should assess whether and how such sales are consistent with the objective of collecting contractual cash flows. In making this judgment, the Group considers the following:

· sales or derecognition of debt instrument under any of the circumstances spelled out under paragraph 7, Section 2 of BSP Circular No. 708, Series of 2011; · sales in preparation for funding a potential aberrant behavior in the depositors’ withdrawal pattern triggered by news of massive withdrawals or massive withdrawal already experienced by other systemically important banks in the industry;

*SGVFS007153* - 44 -

· sales attributable to an anticipated or in reaction of major events in the local and/or international arena that may adversely affect the collectability of the debt instrument and seen to prospectively affect adversely the behavior of deposits or creditors; · sales attributable to a change in EW’s strategy upon completion of the other phases of PFRS 9; and, · sales that Asset-Liability Management Committee (ALCO) deems appropriate to be consistent with managing EW’s balance sheet based upon, but are not limited to, the set risk limits and target ratios that have been approved by the BOD.

On various dates in 2013, EW sold a substantial portion of government securities from one of the portfolios in its hold-to-collect business model. The securities were sold to fund the lending requirement for FDC. As a result of the more than infrequent number of sales of securities out of the portfolio, EW assessed whether such sales are still consistent with the objective of collecting contractual cash flows. EW concluded that although more than infrequent number of sales has been made out of the portfolio, this is not significant enough to be a change in the business model to trigger reclassification of the remaining securities in the portfolio. The EW has now two business models on the affected portfolio, the first for the remaining securities in the portfolio after the sale and the second for the new securities to be acquired under the portfolio after the sale. The remaining securities in the portfolio will remain to be classified as measured at amortized cost and new securities to be acquired after the sale will be classified as at FVTPL.

In 2012, the Group sold government securities classified as investment securities at amortized cost. The sale of investment securities was in response to secure financing for the Group’s future capital expenditures. In 2011, the Group participated in a debt exchange program initiated by the Bureau of Treasury for certain investments in government securities at amortized cost. The exchange of investment securities at amortized cost was executed because of a change in the debt structure initiated by the creditor. The Group has determined that the sale of investment securities in 2012 and its participation in the debt exchange program in 2011 are still consistent with its business model of managing financial assets to collect contractual cash flows. i. Cash flow characteristics test Where the financial assets are classified as at amortized cost, the Group assesses whether the contractual terms of these financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding, with interest representing time value of money and credit risk associated with the principal amount outstanding. The assessment as to whether the cash flows meet the test is made in the currency in which the financial asset is denominated. Any other contractual term that changes the timing or amount of cash flows (unless it is a variable interest rate that represents time value of money and credit risk) does not meet the amortized cost criteria. j. Determination of control over FAC In line with the Group’s adoption of PFRS 10 as discussed in Note 2, the Group determined that it has control over FAC as the Group has the power to direct the relevant activities of FAC despite the existence of a contractual arrangement which grants the other investor rights over certain activities of FAC. Management assessed that the other rights held by the investor through contractual arrangement are only designed to protect the other investor’s interest and are merely held to prohibit fundamental changes in the activities of FAC rather than bestow the power to direct the relevant activities over FAC. Accordingly, the Group considered and accounted for FAC as a subsidiary.

*SGVFS007153* - 45 - k. Determination of joint control over FHI Management has determined that despite having more than 50% ownership interest in FHI, the Group does not have sole control over FHI due to the existence of a contractual arrangement between the parties and certain special voting rights requiring unanimous consent from both the Group and the other venturer in making certain strategic and financial decisions. Accordingly, the Group accounted for its investment in FHI as a joint venture. l. Contingencies The Group is currently involved in various legal proceedings. The estimate of the probable costs for the resolution of these claims has been developed in consultation with outside counsel handling the defense in these matters and based upon analysis of potential results. The Group currently does not believe these proceedings will have material effect on the Group’s financial position. It is possible, however, that future results of operations could be materially affected by changes in the estimates or in the effectiveness of the strategies relating to these proceedings (see Note 31).

Management’s Use of Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: a. Estimate on when the buyer’s investment is qualified for revenue recognition on real estate sales 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 sales recognized based on the percentage of completion are measured principally on the basis of the estimated completion of a physical proportion of the contract work, and by reference to the actual costs incurred to date over the estimated total costs of the project.

Revenue and cost recognized based on percentage of completion are as follows:

2013 2012 2011 (In Thousands) Real estate sales P=7,408,949 P=7,279,753 P=4,643,458 Cost of real estate 4,531,004 4,254,447 2,728,398 b. Fair Value of Financial Assets and Financial Liabilities PFRS requires certain financial assets and financial liabilities to be carried at fair value, 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 rate), the amount of changes in fair value would differ due to usage of different valuation methodology.

Any changes in fair value of these financial assets and financial liabilities would affect directly the consolidated statement of income and other comprehensive income. See Note 35 for the related fair values of the Group’s financial assets and financial liabilities.

*SGVFS007153* - 46 - c. Impairment of Financial Assets at Amortized Cost The Group reviews its nonperforming loans and receivables, other than cash and cash equivalents, at each reporting date to assess whether an allowance for impairment should be recorded in the consolidated financial statements of income. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

In addition to specific allowance against individually significant loans and receivables, other than cash and cash equivalents, the Group also makes a collective impairment allowance against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This collective allowance is based on any deterioration in the internal rating of the loan or investment since it was granted or acquired. These internal ratings take into consideration factors such as any deterioration in country risk and industry, as well as identified structural weaknesses or deterioration in cash flows.

As of December 31, 2013 and 2012, the financial assets at amortized costs and loans and receivables, other than cash and cash equivalents of the Group, amounted to P=109.6 billion and P=90.0 billion, respectively, net of allowance for impairment and credit losses amounting to =4.2P billion and =3.3P billion as of December 31, 2013 and 2012, respectively (see Notes 7, 8 and 9). d. Impairment of Sugar and Molasses Inventories Net realizable values of inventories are assessed regularly based on the prevailing selling prices of inventories, less the estimated costs necessary to sell. Increase in the net realizable values will increase the carrying amount of inventories but only to the extent of their original acquisition costs.

The net realizable values of sugar and molasses inventories amounted to P=163.8 million and P=415.9 million as of December 31, 2013 and 2012, respectively (see Note 12). e. Estimating Useful Lives of Investment Properties and Property, Plant and Equipment The Group estimates the useful lives of its investment properties and property, plant and equipment based on the period over which these assets are expected to be available for use. The estimated useful lives of investment properties and property, plant and equipment are reviewed at least annually and are updated if expectations differ from previous estimates due to physical wear and tear and technical or commercial obsolescence on the use of these assets. It is possible that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above.

The carrying value of investment properties amounted to P=39.1 billion and P=36.3 billion as of December 31, 2013 and 2012, respectively (see Note 15). The carrying value of property, plant and equipment amounted to P=10.0 billion and =8.6P billion as of December 31, 2013 and 2012, respectively (see Note 16).

*SGVFS007153* - 47 - f. Estimating Pension Obligation and Other Retirement Benefits The determination of the Group’s obligation and cost for pension and other retirement benefits is dependent on selection of certain assumptions used by an actuary in calculating such amounts. Those assumptions are described in Note 28 and include among others, discount rates and rates of salary increase. While the Group believes that the assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions materially affect retirement obligations.

As of December 31, 2013 and 2012, the Group has outstanding pension liability amounting to P=469.7 million and P=438.2 million, respectively (see Note 28). g. Evaluation of Impairment on Goodwill Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. The Group’s impairment test for goodwill is based on value-in-use calculations that use a discounted cash flow model.

The cash flows are derived from the forecast as approved by the management and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset base of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rates used, as well as the expected future cash-inflows and the growth rate. In addition, the projected cash flows for value in use is also sensitive to interest margins.

Goodwill from acquisition of PSHC and subsidiaries: The budget period is five (5) years and the cash flows beyond five years are included in the terminal value. The pre-tax discount rate used which is in the range of 5.67% - 5.86% for both years was determined using capital asset pricing model. Key assumptions in value-in-use calculation are most sensitive to discount rate and growth rate within the budget period and beyond the budget period.

The Group assumed a certain growth rate within the budget period based on expected areas to be harvested and surveyed new areas planted and the total harvest per area. A growth rate of 3.75% was assumed after the five-year budget period. The Group ascertains that growth rate beyond the budget period is not above the forecasted industry growth rate.

Goodwill from merger of EW with AIG Philam Savings Bank, PhilAm Auto Finance and Leasing, Inc. and PFLHoldings Inc. in 2009 and acquisition of GBI in 2011 EW has used the cost of equity as the discount rate for the value-in-use computation. EW determined the cost of equity using capital asset pricing model. The pre-tax discount rate used is 13.1% and 12.7% as of December 31, 2013 and 2012, respectively. Key assumptions in value-in-use calculation of CGUs are most sensitive to the following assumptions: a.) interest margin; b.) discount rates; c.) market share during the budget period; and d.) projected growth rates used to extrapolate cash flows beyond the budget period. This requires an estimation of the value-in-use, which requires the Group to make an estimate of the expected future cash flows and to choose a suitable discount rate in order to calculate the present value. Future cash flows from the business are estimated based on the theoretical annual income of the cash generating units. Average growth rate of 5% was derived from the average increase in annual income during the last five years.

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Goodwill from acquisition of CPI The pre-tax discount rate used as of December 31, 2013 and 2012 is 12.0%. Key assumptions used in value-in-use calculations are most sensitive to discount rates and growth rates within the budget period and beyond the budget period.

The growth rates used beyond the budget period for different cash-generating units range from 5% to 10%.

The Group did not recognize any impairment loss on its goodwill in 2013, 2012 and 2011. The carrying value of goodwill amounted to P=11.7 billion as of December 31, 2013 and 2012. h. Deferred Tax The Group reviews the carrying amounts of deferred taxes at each reporting date and reduces deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized. However, there is no assurance that the Group will generate sufficient taxable profit to allow all or part of its deferred tax assets to be utilized.

The carrying value of recognized deferred tax assets amounted to P=2.0 billion and P=1.7 billion as of December 31, 2013 and 2012, respectively . The deductible temporary differences for which no deferred tax assets were recognized amounted to =405.4P million and P=819.0 million as of December 31, 2013 and 2012, respectively (see Note 33). i. Estimating NRV of subdivision lots, condominium and residential units for sale and land and land development costs The Group adjusts the cost of its subdivision lots, condominium and residential units for sale and land and land development costs to NRV based on its assessment of the recoverability of the inventories. In determining the recoverability of the inventories, management considers whether those inventories are damaged or if their selling prices have declined. Likewise, management also considers whether the estimated costs of completion or the estimated costs to be incurred to make the sale have increased. The amount and timing of recorded expenses for any period would differ if different judgments were made or different estimates were utilized.

As of December 31, 2013 and 2012, carrying amount of subdivision lots, condominium and residential units for sale amounted to P=26.2 billion and =26.4P billion, respectively and land and land development amounted to=25.6 P billion and P=21.7 billion, respectively (see Notes 11 and 14). j. Evaluation of Impairment on Nonfinancial Assets The Group reviews plant and equipment, investment properties and other assets for impairment of value. This includes considering certain indications of impairment such as significant change in asset usage, significant decline in asset’s market value, obsolescence or physical damage of an asset, plans of discontinuing the real estate projects, significant negative industry or economic trends. If such indications are present, and where the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired and is written down to recoverable amount. The recoverable amount is calculated as the higher of the asset’s fair value less cost to sell, or its value in use.

*SGVFS007153* - 49 -

The fair value less cost to sell is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present value of estimated future cash flows expected to arise from the nonfinancial assets.

Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash- generating unit to which the asset belongs. The carrying values of the Group’s nonfinancial assets as of December 31 follow:

2012 (As restated, 2013 Note 2) (In Thousands) Investment properties (Note 15) P=39,055,000 P=36,343,386 Property, plant and equipment (Note 16) 9,985,421 8,640,370 Other assets - net of derivative assets (Note 17) 7,553,545 5,814,963

In 2013 and 2012, the Group recognized impairment loss on investment properties amounting to =34.5P million and =44.6P million, respectively.

4. Business Combination and Goodwill

The rollforward analysis of the Group’s goodwill follows:

2013 2012 (In Thousands) Balance at beginning of year P=11,726,591 P=11,703,113 Acquisitions – 23,478 Balance at end of year P=11,726,591 P=11,726,591

Acquisition of EWRB On January 26, 2012, the BOD of EW approved the acquisition of the outstanding shares of EWRB (formerly FRBI, see Note 1), a one-branch rural bank engaged in deposit-taking, rural credit, and consumer lending services to the public. On February 9, 2012, EW entered into a Memorandum of Understanding with the majority shareholders of EWRB to acquire all of the outstanding shares of EWRB.

On June 20, 2012, the BSP approved the acquisition of up to 100% of the total outstanding shares of FRBI. On July 11, 2012, EW obtained control of EWRB through the purchase of 83.2% of the capital stock of EWRB for =34.1P million. In 2013, EW acquired the remaining 8% ownership interest in EWRB.

EW elected to measure the noncontrolling interest in the acquiree at fair value.

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The fair values of the identifiable assets and liabilities acquired at the date of acquisition are as follows (in thousands):

Fair Value recognized on acquisition date Assets Cash and other cash items P=243 Due from BSP 376 Due from other banks 13,779 Investment securities at amortized cost 410 Loans and receivables 6,005 Property and equipment 7,219 Other assets 315 28,347 Liabilities Deposit liabilities 9,895 Accrued taxes, interest and other expenses 383 Other liabilities 547 10,825 Fair value of net assets acquired P=17,522

The goodwill recognized by EW can be attributed to the synergy potential to be gained by the microfinance business from the planned integration of GBI and EWRB.

Consideration transferred P=34,098 Non-controlling interest measured at fair value 6,902 Fair value of the net assets acquired (17,522) Goodwill P=23,478

Analysis of cash flows on acquisition:

Consideration transferred P=34,098 Net cash acquired with the subsidiary* (14,398) Net cash outflow (included in cash flows from investing activities) P=19,700 *includes Cash and other cash items, Due from BSP and Due from other banks.

From the date of acquisition to December 31, 2012, the total operating income and net loss of EWRB consolidated to the Group amounted to P=3.0 million and P=0.3 million, respectively. If the acquisition had taken place at the beginning of the year, the Group’s total operating income would have increased by P=2.0 million, while net income before tax would have increased by P=0.02 million.

Acquisition of GBI On May 5, 2011, the BOD of EW approved the acquisition of the outstanding shares of GBI. GBI is a rural bank in the Caraga region with branches scattered across the Visayas and Mindanao. On May 24, 2011, EW, GBI, and the majority shareholders of GBI entered into a Memorandum of Understanding to acquire the shares, representing 84.8% of the outstanding shares of GBI, and business of the latter.

*SGVFS007153* - 51 -

On August 12, 2011, the BSP approved the acquisition of up to 100.0% of the total outstanding shares of GBI. On the same date, the BSP approved in-principle the granting of certain incentives to EW. Subsequently, on January 30, 2012, EW obtained the final approval of the BSP on the said incentives.

On August 19, 2011, EW acquired 84.8% of the voting shares of GBI. It is on this date that EW effectively obtained control of GBI. Consequently, EW had a tender offer to acquire the shares of the noncontrolling shareholders of GBI. EW acquired noncontrolling interest amounting to P=16.9 million, thereby increasing its ownership to 90.8% as of December 31, 2011.

EW has elected to measure the noncontrolling interest in the acquiree at fair value.

The fair values of the net identifiable liabilities acquired at the date of acquisition are as follows (in thousands):

Fair Value recognized on acquisition date Assets Cash and other cash items P=98,503 Due from BSP 10,843 Due from other banks 318,009 Loans and receivables 1,097,181 Property and equipment 220,035 Investment properties 186,377 Other assets 33,009 1,963,957 Liabilities Deposit liabilities 1,193,553 Bills payable 1,062,878 Unsecured subordinated debt 111,282 Accrued taxes, interest and other expenses 206,388 Other liability 26,633 2,600,734 Fair value of net liabilities acquired (=P636,777)

In addition to the above identifiable assets and liabilities, the Group recognized the fair value of branch licenses acquired as a result of the business combination amounting to P=625.4 million (see Note 17) and the related deferred tax liability of P=187.6 million.

Consideration for the acquisition P=158,548 Noncontrolling interest measured at fair value 16,452 Fair value of net liabilities acquired, including the fair value of branch licenses, net of deferred tax liability 198,996 Goodwill P=373,996

The goodwill recognized by EWwas attributed to factors such as increase in geographical presence and customer base due to branch licenses acquired.

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Analysis of cash flows on acquisition:

Acquisition cost P=158,548 Net cash acquired with the subsidiary* (427,355) Net cash inflow (included in cash flows from investing activities) (=P268,807) *includes Cash and other cash items, Due from BSP and Due from other banks.

From the date of acquisition to December 31, 2011, the total operating income and net loss of GBI consolidated to EW amounted to =89.6P million and =5.0P million, respectively.

If the acquisition had taken place at the beginning of the year, the Group’s revenue from financial and banking services would have increased by P=256.4 million, while the Group’s income before income tax would have decreased by =275.6P million.

5. Subsidiaries with Noncontrolling Interest

As of December 31, 2013 and 2012, noncontrolling interest in FLI and EW represents 41% and 25%, respectively. Financial information of FLI and EW are provided below. Other noncontrolling interest pertains to the 8% equity interest of FAI amounting to P=692.9 million and P=597.0 million as of December 31, 2013 and 2012, respectively.

Accumulated balances of noncontrolling interest in FLI and EW

2012 (As restated, 2013 Note 2) (In Thousands) FLI P=14,066,054 P=13,033,420 EW 5,039,145 4,534,054

Net income allocated to noncontrolling interest of FLI and EW

2012 (As restated, 2013 Note 2) (In Thousands) FLI P=1,572,158 1,318,474 EW 509,329 324,199

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The summarized financial information of these subsidiaries are provided below. This information is based on amounts after consolidation but before intercompany eliminations.

Summarized statements of financial position

2013 2012 (As restated, Note 2) FLI EW FLI EW (In Thousands) Assets: Cash and cash equivalents P=6,390,732 P=27,290,546 P=2,165,456 P=27,311,001 Loans and receivable - net 16,425,052 93,960,575 13,892,480 71,192,741 Financial assets at fair value through profit or loss − 1,948,703 – 4,260,325 Financial assets at fair value through other comprehensive income 17,852 10,733 24,626 9,982 Investment in an associate 4,018,058 − 3,912,092 − Investment securities at amortized cost − 9,080,320 – 9,620,505 Real estate inventories 24,426,958 − 23,677,456 – Investment properties 19,592,830 1,006,716 15,978,511 937,648 Land and land development 18,794,686 − 15,368,369 – Property and equipment 1,150,822 3,452,741 1,327,943 2,740,689 Goodwill 4,567,242 1,316,729 4,567,242 1,316,729 Other assets 2,712,814 4,231,630 1,715,805 4,013,720 Liabilities: Deposit liabilities − (111,176,095) – (91,208,805) Bills and acceptance payable − (3,288,935) – (5,571,387) Accounts payable and accrued expenses (10,837,430) (5,502,009) (8,854,528) (4,410,404) Income tax payable (17,235) (76,935) (24,141) (28,113) Long-term debt (36,069,225) (2,862,500) (25,599,775) (2,863,751) Deferred income tax liabilities - net (2,187,244) − (1,905,582) − Total Equity P=48,985,912 P=19,392,219 P=46,245,954 P=17,320,880

Attributable to: Equity holders of the Parent P=34,919,858 P=14,353,074 P=33,212,534 P=12,786,826 Noncontrolling interest 13,713,017 5,032,523 12,666,113 4,520,501 Noncontrolling interest in subsidiaries 353,037 6,622 367,307 13,553

Summarized statements of comprehensive income for the years ended December 31, 2013 and 2012:

2013 2012 (As restated, Note 2) FLI EW FLI EW (In Thousands) Revenue P=13,817,084 P=13,164,918 P=11,918,813 P=9,783,627 Costs and operating expenses (8,598,548) (10,890,527) (7,370,222) (7,791,244) Interest and other finance charges (474,446) – (412,961) – Income before income tax 4,744,090 2,274,391 4,135,630 1,992,383 Provision for income tax (768,145) (218,656) (646,086) (176,002) Net income 3,975,945 2,055,735 3,489,544 1,816,381 Other comprehensive income (loss) − 22,700 (56,322) (39,018) Total comprehensive income P=3,975,945 P=2,078,435 P=3,433,222 P=1,777,363

Attributable to noncontrolling interest P=1,572,158 P=512,187 P=1,376,583 P=324,199 Dividends paid to noncontrolling interest 563,163 − 514,395 −

*SGVFS007153* - 54 -

Summarized statements of cash flow information for years ended December 31, 2013 and 2012:

2013 2012 (As restated, Note 2) FLI EW FLI EW (In Thousands) Operating activities P=2,905,120 P=2,312,047 (P=1,584,884) (P=6,129,812) Investing activities (5,786,638) (41,703) (3,870,909) (2,300,890) Financing activities 7,106,794 (2,290,799) 6,425,102 7,721,215 Net increase (decrease) in cash and cash equivalents P=4,225,276 (P=20,455) P=969,309 (P=709,487)

As of December 31, 2013 and 2012, there are no significant restrictions, outside the ordinary course of business, on the Parent Company’s ability to access or use assets and settle the liabilities of these subsidiaries.

6. Cash and Cash Equivalents

This account consists of:

2012 (As restated, 2013 Note 2) (In Thousands) Cash on hand and in other banks P=9,142,028 P=5,922,964 Due from BSP 18,537,655 21,855,275 IBLR and SPURA 3,116,529 582,648 P=30,796,212 P=28,360,887

Cash in bank earns interest at the respective bank deposit rates. Short-term deposits are made for varying periods of up to three months and earn interest at the respective short-term deposit rates. Interest income earned on the Group’s cash and cash equivalents amounted to P=82.6 million, P=82.3 million and =32.7P million in 2013, 2012 and 2011, respectively (see Note 26).

There is no cash restriction on the Group’s cash balances as of December 31, 2013 and 2012.

7. Loans and Receivables - Financial and Banking Services

Loans and receivables of the financial and banking services consist of:

2013 2012 (In Thousands) Corporate lending P=42,820,512 P=33,365,818 Consumer lending 46,989,640 38,042,625 Other receivables 2,327,867 1,962,020 92,138,019 73,370,463 Less unearned discounts 636,865 1,645,390 91,501,154 71,725,073 Less allowance for impairment and credit losses 4,002,355 3,154,065 P=87,498,799 P=68,571,008

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Other receivables include unquoted debt securities amounting to =380.1P million and P=379.5 million as of December 31, 2013 and 2012, respectively.

Credit card receivables, under consumer lending, amounted to P=19.4 billion and P=16.3 billion as of December 31, 2013 and 2012, respectively.

Interest income from loans and receivables in 2013, 2012 and 2011 amounted to P=9.2 billion, P=6.8 billion and =5.5P billion, respectively.

Please refer to Note 36 for the maturity profile of the loans and receivables - financial and banking services.

A reconciliation of allowance for impairment and credit losses for loans and receivables per class follows:

2013 Corporate Consumer Lending Lending Others Total (In Thousands) At January 1 P=1,068,639 P=1,429,929 P=655,497 P=3,154,065 Provision for impairment and credit losses (Note 24) 411,967 2,229,435 354,747 2,996,149 Write-off (6,210) (1,911,453) (182,855) (2,100,518) Interest accrued on impaired loans (47,341) − − (47,341) At December 31 P=1,427,055 P=1,747,911 P=827,389 P=4,002,355 Specific impairment P=948,461 P=− P=− P=948,461 Collective impairment 478,594 1,747,911 827,389 3,053,894 P=1,427,055 P=1,747,911 P=827,389 P=4,002,355 Gross amount of individually impaired loans P=963,228 P=− P=− P=963,228

2012 Corporate Consumer Lending Lending Others Total (In Thousands) At January 1 P=1,071,459 P=1,562,535 P=476,049 P=3,110,043 Provision for impairment and credit losses (Note 24) 38,357 1,292,109 179,448 1,509,914 Write-off − (1,424,715) − (1,424,715) Interest accrued on impaired loans (41,177) − − (41,177) At December 31 P=1,068,639 P=1,429,929 P=655,497 P=3,154,065 Specific impairment P=632,691 P=− P=− P=632,691 Collective impairment 435,948 1,429,929 655,497 2,521,374 P=1,068,639 P=1,429,929 P=655,497 P=3,154,065 Gross amount of individually impaired loans P=933,323 P=− P=− P=933,323

The following is a reconciliation of the individual and collective allowances for impairment losses on loans and receivables:

2013 2012 Specific Collective Specific Collective Impairment Impairment Total Impairment Impairment Total (In Thousands) At January 1 P=632,691 P=2,521,374 P=3,154,065 P=812,909 P=2,297,134 P=3,110,043 Provision for impairment and credit losses (Note 24) 369,321 2,626,828 2,996,149 (139,041) 1,648,955 1,509,914 Write-off (6,210) (2,094,308) (2,100,518) − (1,424,715) (1,424,715) Interest accrued on impaired loans (47,341) − (47,341) (41,177) − (41,177) At December 31 P=948,461 P=3,053,894 P=4,002,355 P=632,691 P=2,521,374 P=3,154,065 *SGVFS007153* - 56 -

BSP Reporting Of the total receivables from customers of EW as of December 31, 2013, 2012 and 2011, 33.3%, 34.7% and 37.9%, respectively, are subject to periodic interest repricing. The remaining peso receivables from customers earn annual fixed interest rates ranging from 1.5% to 40.0%, 2.2% to 23.9% and 2.8% to 18.5% in 2013, 2012 and 2011, respectively, while foreign currency- denominated receivables from customers earn annual fixed interest rates ranging from 1.6% to 7.6%, 2.8% to 9.0% and 5.0% to 8.0% in 2013, 2012 and 2011, respectively.

The details of the secured and unsecured loans receivables of the Group follow (amounts in thousands):

2013 2012 Gross Gross Amount % Amount % Loans secured by: Chattel P=10,691,354 11.18 P=8,215,319 11.35 Real estate 12,079,279 12.63 10,683,691 14.76 Hold-out on deposit 6,986,624 7.31 594,035 0.82 Others 4,455,937 4.66 11,561,516 15.97 34,213,194 35.78 31,054,561 42.90 Unsecured 61,421,868 64.22 41,330,225 57.10 P=95,635,062 100.00 P=72,384,786 100.00

Information on the concentration of credit as to industry as reported to the BSP follows (in millions):

2013 2012 Gross Gross Amount % Amount % Personal consumption P=35,819 37.45 P=26,775 36.99 Real estate, renting and business activity 14,108 14.75 6,105 8.43 Wholesale and retail trade 11,871 12.41 10,436 14.42 Manufacturing 6,307 6.60 4,344 6.00 Financial intermediaries 5,941 6.21 4,570 6.31 Agriculture, fisheries and forestry 1,214 1.27 1,150 1.59 Transport, storage and communications 661 0.69 1,346 1.86 Others 19,714 20.62 17,659 24.40 P=95,635 100.00 P=72,385 100.00

BSP Circular No. 351 allows banks to exclude from nonperforming classification receivables classified as ‘Loss’ in the latest examination of the BSP which are fully covered by allowance for credit losses, provided that interest on said receivables shall not be accrued and that such receivables shall be deducted from the total receivable portfolio for purposes of computing NPLs. Subsequently, the BSP issued BSP Circular No. 772, which requires banks to compute their net NPLs by deducting the specific allowance for credit losses on the total loan portfolio from the gross NPLs. The specific allowance for credit losses shall not be deducted from the total loan portfolio in computing the NPL ratio.

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As of December 31, 2013 and 2012, NPLs of the Group as reported to BSP follow:

2013 2012 Gross NPLs P=5,311,975 P=3,998,592 Deductions as required by BSP (2,743,840) (2,452,419) P=2,568,135 P=1,546,173

As of December 31, 2013 and 2012, secured and unsecured NPLs of the Group follow:

2013 2012 Secured P=2,151,441 P=2,046,874 Unsecured 3,160,534 1,951,718 P=5,311,975 P=3,998,592

8. Loans and Receivables - Real Estate Operations

Loans and receivables from real estate operations consist of:

2013 2012 (As restated, Note 2) Due Within Due After Due Within Due After One Year One Year Total One Year One Year Total (In Thousands) Contracts receivable P=4,632,031 P=8,757,060 P=13,389,091 P=4,049,636 P=7,342,667 P=11,392,303 Advances to contractors 1,413,130 – 1,413,130 1,655,195 89 1,655,284 Advances to joint venture partners 274,705 760,764 1,035,469 74,798 773,576 848,374 Receivable from sale of joint venture lots 469,238 444,419 913,657 132,702 – 132,702 Receivable from government and other financial institutions 480,898 – 480,898 477,997 – 477,997 Receivables from tenants 357,034 57,346 414,380 526,817 6,468 533,285 Receivables from sale of condominium units and club shares 315,510 59,799 375,309 445,160 131,102 576,262 Receivables from homeowners association 246,581 – 246,581 182,484 – 182,484 Advances to officers and employees 128,477 – 128,477 92,060 – 92,060 Due from related parties (Note 23) 208,737 – 208,737 229,469 – 229,469 Receivables from investors in projects − − − 33,667 185,201 218,868 Others 610,716 1,173 611,889 462,039 – 462,039 9,137,057 10,080,561 19,217,618 8,362,024 8,439,103 16,801,127 Less allowance for doubtful accounts 187,084 – 187,084 154,783 – 154,783 P=8,949,973 P=10,080,561 P=19,030,534 P=8,207,241 P=8,439,103 P=16,646,344

Contracts receivable are collectible over varying periods up to 10 years. These receivables arising from real estate sales are collateralized by the corresponding real estate properties sold.

Interest income recognized from contracts receivable amounted to P=465.2 million, P=421.3 million and P=424.5 million in 2013, 2012 and 2011, respectively (see Note 26). Interest rates on contracts receivable range from 11.5% to 19.0% per annum in 2013, 2012 and 2011.

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The Group entered into various agreements with financial institutions whereby the Group sold its contracts receivable with a provision that the Group should buy back these receivables when certain conditions happen such as the receivables becoming overdue for two to three consecutive months, when the contract to sell is cancelled, when the accounts remain outstanding after the lapse of the 5-year holding period, when the property covering the receivables becomes subject of complaint or legal action and the account’s interest rate becomes lower than the bank’s interest rate. These receivables are therefore retained as part of the Group’s receivables. The proceeds from the sale were used to fund development and construction of various projects. The Group retains the sold receivables in the ‘Contracts receivable’ account and records the proceeds from these sales as ‘Liabilities on receivables sold to banks’ included in the ‘Accounts payable and accrued expenses’ account amounting to P=37.2 million and P=189.4 million as of December 31, 2013 and 2012, respectively (see Note 20).

Interest paid on the loans obtained from discounting receivables amounted to P=3.6 million and P=84.1 million in 2012 and 2011, respectively (nil in 2013).

The Group has a mortgage insurance contract with Home Guaranty Corporation (HGC), a government insurance company for a retail guaranty line. As of December 31, 2013 and 2012, the contracts covered by the guaranty line amounted to P=0.6 billion and P=1.1 billion, respectively, including receivables sold with buy back provisions. The remaining P=4.6 billion and P=4.7 billion guaranty line was not yet utilized by the Group as of December 31, 2013 and 2012, respectively.

“Receivables from sale of club shares” pertain to sale of shares of affiliated clubs.

“Advances to joint venture partners” are ordinary advances which are normally offset against the share of the joint venture partners from sale of the joint venture properties.

“Receivables from government and other financial institutions” arose from bank and government financed real estate sales. These are collectible within one year.

“Receivables from tenants” represent charges to tenants for rentals and utilities.

“Advances to contractors” represent downpayment to contractors which are usually offset against future billings.

“Receivables from Homeowners’ Association (HOA)” represent claims from HOA of the Group’s projects for the payments of the expenses on behalf of the association.

“Receivable from sale of joint venture lots” arose from sale of joint venture commercial lots. These are due within one year.

“Advances to officers and employees” are advances for project costs, marketing activities, travel and other expenses arising from the ordinary course of business which are liquidated upon accomplishment of the purposes for which the advances were granted.

Others are mostly composed of receivables of P=223.9 million from sale of shares in Asian Hospital, Inc. and receivables from buyers relating to insurance and registration of properties.

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The reconciliation of allowance for impairment losses for individually assessed receivables of the real estate operations of the Group as of December 31, 2013 and 2012 follows:

2013 Receivables Receivables from Tenants from Sale of Total and HOA Joint Ventures Others (In Thousands) Balances at beginning of year P=154,783 P=78,407 P=76,337 P=39 Provisions (Note 24) 32,301 32,301 – − Balances at end of year P=187,084 P=110,708 P=76,337 P=39

2012 (As restated, Note 2) Receivables Receivables from Tenants from Sale of Total and HOA Joint Ventures Others (In Thousands) Balances at beginning of year P=147,112 P=70,736 P=76,337 P=39 Provisions (Note 24) 17,466 17,466 – – Write-off (9,795) (9,795) – – Balances at end of year P=154,783 P=78,407 P=76,337 P=39

9. Loans and Receivables - Sugar Operations

This account consists of:

2013 2012 (In Thousands) Trade P=269 P=53,438 Advances to: Sugar planters 102,877 94,053 Suppliers 11,078 18,109 Officers and employees 5,266 5,271 Contractors 1,827 924 Others 1,521 1,080 122,838 172,875 Less allowance for impairment loss 10,046 6,039 P=112,792 P=166,836

“Trade receivables” mainly consist of receivables arising from sugar sales. Buyers are normally granted a credit period of 30 days.

“Advances to sugar planters” are advances extended to sugar planters for various incentives such as fertilizers, cash loans, cane points and tractor services. These are offset against the planter’s share of sales proceeds.

“Advances to suppliers” are down payments made to the suppliers for acquisitions of materials and supplies, fixed assets and services. These are credited upon full delivery of items and completion of services rendered by the supplier.

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“Advances to officers and employees” represent advances for travel, marketing expense, loans availed by employees and officers, including educational and car loans and other expenses arising from ordinary course of business. These are liquidated upon the accomplishment of the purposes for which the advances were granted or deducted from the salaries of officers and employees.

“Other receivables” include advances to planters for trucking services.

The reconciliation of allowance for doubtful accounts which pertains to the Group’s advances to sugar planters specifically identified to be impaired as of December 31, 2013 and 2012 follows:

2013 2012 (In Thousands) Balance at beginning of year P=6,039 P=567 Provisions (Note 24) 7,656 8,047 Written off (3,649) (2,575) Balance at end of year P=10,046 P=6,039

10. Loans and Receivables - Hotel and Power Generation Operations

Hotel Operations This account consists of:

2012 (As restated, 2013 Note 2) (In Thousands) Trade P=22,848 P=17,621 Advances to suppliers 1,186 3,145 Advances to officers and employees 891 829 Due from a related party (Note 23) 4,944 391 P=29,869 P=21,986

Trade receivables pertain to receivables from credit card companies, travel agents and guests and are collectible within a year.

Power Generation Operations Loans and receivables of the power generation operations amounting to P=34.3 million and P=34.0 million as of December 31, 2013 and 2012, respectively, represent advances to officers and employees for the travel, research and project-related expenses and advances to contractors. Advances to officers and employees are liquidated or charged against monthly salary, as applicable. Advances to contractors are settled in accordance with the terms and conditions of the agreement with the contractors.

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11. Subdivision Lots, Condominium and Residential Units for Sale

This account consists of:

2013 2012 (In Thousands) Subdivision lots, condominium and residential units P=25,186,206 P=25,371,933 Investment in club projects 1,050,627 987,777 P=26,236,833 P=26,359,710

The above inventories are stated at cost. Cost of units sold for the years ended December 31, 2013, 2012 and 2011 amounted to =6.5P billion, =5.9P billion and P=4.5 billion, respectively.

A summary of the movement in inventory is set out below:

2013 2012 Opening balance at January 1 P=25,371,933 P=22,402,661 Land cost transferred from land and land development (Note 14) 289,704 507,716 Project construction/development costs incurred 5,297,791 10,126,275 Borrowing costs capitalized as project costs 714,956 1,029,159 Cost of inventories sold (Note 25) (6,488,178) (5,920,790) Transfer to property and equipment − (1,515,302) Transfer to investment property − (1,257,786) P=25,186,206 P=25,371,933

Borrowing costs capitalized as project costs is related to capitalized interest arising from loans obtained to finance the Group’s on-going projects. The capitalization rates used are 4.2% to 5.0% in 2013 and 4.3% to 8.46% in 2012.

Transfers from inventory to investment property pertain to Entrata Mall and Grand Cenia projects while transfers to property and equipment pertain to Entrata Hotel.

A summary of the movement in investment club project is set out below:

2013 2012 (In Thousands) Balance at beginning of year P=987,777 P=1,002,487 Cost of sale of club shares (Note 25) (21,876) (17,961) Site development and incidental costs 84,726 3,251 P=1,050,627 P=987,777

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12. Sugar and Molasses Inventories

This account consists of:

2013 2012 (In Thousands) Materials and supplies - at NRV P=158,891 P=170,727 Sugar and molasses - at cost (Note 25) 4,864 245,178 P=163,755 P=415,905

Materials and supplies at cost amounting to =162.9P million and =173.0P million as of December 31, 2013 and 2012, respectively, were written down to net realizable value of P=158.9 million and P=170.7 million, respectively.

13. Financial Assets at FVTPL, Financial Assets at FVTOCI and Investment Securities at Amortized Cost

Financial Assets at FVTPL Financial assets at FVTPL of the Group classified as held for trading consist of:

2013 2012 (In Thousands) Government securities P=691,437 P=1,805,939 Private bonds 543,626 1,206,722 Equity securities 713,640 1,247,664 P=1,948,703 P=4,260,325

As of December 31, 2013 and 2012, financial assets at FVTPL include net unrealized gain of P=131.2 million and P=61.8 million, respectively.

Financial assets at FVTOCI Financial assets at FVTOCI of the Group consist of:

2013 2012 (In Thousands) Quoted equity securities P=97,733 P=109,424 Unquoted equity securities 54,496 64,682 152,229 174,106 Allowance for impairment losses (15,068) (15,068) P=137,161 P=159,038

The Group has designated the above equity investments at FVTOCI because they are held for long-term investments rather than for trading. In 2013 and 2012, no dividends were recognized on these equity investments and no cumulative gain or loss was also transferred within equity.

The unrealized gain on financial assets at FVTOCI included under ‘Revaluation reserve on financial assets at FVTOCI’ amounted to P=52.7 million and =71.9P million as of December 31, 2013 and 2012, respectively.

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Investment securities at amortized cost Investment securities at amortized cost of the Group consist of:

2013 2012 (In Thousands) Government securities P=7,667,254 P=8,253,247 Private bonds 1,413,066 1,367,258 P=9,080,320 P=9,620,505

Peso-denominated government bonds bear nominal annual interest rates ranging from 5.7% to 6.0% in 2013 and 2012 and 5.3% to 12.4% in 2011. Foreign currency-denominated bonds have effective interest rates ranging from 2.9% to 7.1% in 2013, 2.9% to 8.1% in 2012, and 2.9% to 9.9% in 2011.

In 2013, the Group sold government securities carried at amortized cost, with aggregate carrying amount of P=1.1 billion, and recognized a gain amounting to P=572.5 million. The gain is presented as ‘Gain on sale of investment securities at amortized cost’ included on other ‘other income’ of financial and banking services in the consolidated statements of income (see Note 26). The securities were sold to fund the lending requirement for the Parent Company. As a result of the sale, subsequent acquisitions of investment securities in the portfolio will be classified as financial assets at FVTPL, while the remaining securities will remain to be classified as investment securities at amortized cost. As of December 31, 2013, the remaining government securities in the portfolio amounted to =231.4P million. There were no additions to the portfolio subsequent to the sale.

In 2012, the Group sold government securities classified as investment securities at amortized cost with carrying amounts of P=1.3 billion and recognized a gain amounting to P=276.9 million presented as ‘Gain on sale or derecognition of investment securities at amortized cost’ included in ‘Other income’ of financial and banking services in the consolidated statements of income (see Note 26). The sale was contemplated to secure financing for EW’s capital expenditures on branch expansion. The Group concluded that the sale is consistent with its business model of managing financial assets to collect contractual cashflows.

In 2011, the Group participated in a debt exchange program for certain investments in government securities classified as financial assets at FVTPL and at amortized cost. The carrying amount of the financial assets at FVTPL surrendered amounted to P=1.3 billion, and the carrying amount of the investment securities at amortized cost surrendered amounted to P=3.3 billion. The fair value of the debt securities received amounted to P=4.5 billion, and EW recognized P=44.4 million of ‘Loss on derecognition of investment securities at amortized cost’ (see Note 26) and P=9.9 million loss on derecognition of financial assets at FVTPL included in ‘Other income’ from financial and banking services in the consolidated statement of income. The exchange of investment securities at amortized cost was executed because of a change in the debt structure initiated by the creditor. Management believes that participation in the bond swap is consistent with its business model of managing financial assets to collect contractual cash flows. Refer to Note 3 for the judgments made related to the sale and derecognition of investments securities at amortized cost.

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Interest income on trading and investment securities follows:

2013 2012 2011 (In Thousands) Investment securities at amortized cost P=426,454 P=656,299 P=664,175 Financial assets at FVTPL 106,912 185,963 444,520 P=533,366 P=842,262 P=1,108,695

Net trading and securities gains for the years ended December 31, 2013, 2012 and 2011 consist of the following (see Note 26):

2013 2012 2011 (In Thousands) Financial assets at FVTPL P=1,005,237 P=988,110 P=447,188 Investment securities at amortized cost 572,490 276,883 (44,440) P=1,577,727 P=1,264,993 P=402,748

On June 25, 2012, the BOD approved the change in the Group’s business model. Management deemed it necessary to change the way it manages its investment securities because of significant changes in its strategic plans, funding structure and cash flow profile brought about by the IPO of EW and its branch expansion program. Accordingly, the Group made certain reclassifications pursuant to the new business model effective July 1, 2012, resulting in =711.9P million of ‘Trading and securities gain’ which was recognized in ‘Other income’ of financial and banking services in the consolidated statements of income representing the difference between the aggregate amortized cost of certain securities amounting to P=5.6 billion and their aggregate fair value of P=6.3 billion at the reclassification date. Refer to Note 3 for the discussion on the change in the business model.

14. Land and Land Development

This account consists of:

2013 2012 (In Thousands) Land P=18,951,998 P=15,399,450 Land development 6,670,888 6,284,336 P=25,622,886 P=21,683,786

The land and land development are stated at cost. The cost of land and land development includes the land acquisition costs and costs incurred relative to acquisition and transfer of land title in the name of the Group and prior to the development of the property into a project such as transfer taxes and registration fees. These are classified to subdivision lots, condominium and residential units for sale when the project plans and development and construction cost estimates are completed and the necessary permits are secured.

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Below are the major acquisitions of land in 2013, 2012 and 2011:

1. In February 2009, the Group signed an agreement with the Cebu City Government to develop 50.6 hectares of the South Road Properties, a 300-hectare reclaimed land project located in Cebu City. The agreement involves:

(a) purchase by the Group of 10.6 hectares of the property to be developed into a modern urban center consisting of residential, office, commercial, hotel and leisure buildings and a public promenade - a 1 kilometer long waterfront lifestyle strip that will offer a range of seaside leisure activities. Payments made to the Cebu City Government in 2013 and 2012 amounted to =234.8P million and P=245.2 million, respectively. The remaining balance of the total purchase price payable over the next two years after December 31, 2013.

As of December 31, 2013, the Group plans to complete the first two phases of waterfront lifestyle strip covering seven hectares within the next two years.

(b) development of the remaining 40 hectares of the property under a profit-sharing arrangement with the Cebu City Government. The profit sharing of FLI and the Cebu City Government is 90% and 10%, respectively. The 40 hectares will be developed in four (4) phases over a 20-year period with the Group contributing the development costs, as well as the marketing and management services. The Group plans to develop the 40 hectares mainly into a residential resort town composed of Italian-inspired residential communities which will also include a central open space area called as The Piazza. The Piazza is patterned after the famous Italian central parks, will contain a church, a school, a soccer field, numerous al fresco restaurants, neighborhood stores and support outlets.

The construction of medium rise buildings on the joint development properties started in 2011. The first building was completed in 2012 while the second and third building were completed in 2013. Additional five buildings is expected to be completed in 2014.

2. In May 2010, the Group purchased land in Cainta, Rizal for =638.2P million, of which P=117.0 million was paid in 2013 and 2012. The Group is committed to pay the remaining balance in monthly installments until May 31, 2015. In 2012, the Group agreed on the adjusted purchase price of the land amounting to P=638.2 million, of which the P=14.5 million increase will be paid on June 30, 2015. As of December 31, 2013, land development on the property is ongoing.

3. In 2012, the Group purchased from various third-party sellers parcels of land located in Manila, Taguig City, Quezon City, Cagayan de Oro City and Las Piñas City amounting to P=1.3 billion, P=0.3 billion, P=0.2 billion, P=0.3 billion and P=0.2 billion, respectively. In 2013, the Group has launched projects in Quezon City, San Juan City and Cagayan de Oro properties.

4. In 2013, the Group purchased a total of 1.35 hectares of land located in Pasay City amounting to P=0.9 billion, of which =62.9P million was paid during the year. The Group is committed to pay the remaining balance amounting to P=309.7 million in equal quarterly installments commencing 30 days from the execution of each contract. The liability was accrued and included in ‘Accounts payable and accrued expenses’ (see Note 20). As of December 31, 2013, the Group has not yet developed nor constructed any project on the land.

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5. In December 2013, the Group’s bid proposal for the purchase of the 0.24 hectare-property including the building constructed thereon located at Ortigas Center, Pasig City has been approved. Total consideration for the said property amounted to P=771.5 million, of which P=48.2 million was paid during the year and the remaining balance payable in 2014. As of December 31, 2013, the Group has not yet developed nor constructed any projects on these properties.

6. In 2013, the Group also purchased parcels of land located in Quezon City. These include seven (7) parcels of land with an approximate aggregate area of 1.2 hectares located along E. Delos Santos Ave. (EDSA) cor. Aurora Blvd. amounting to =1.5P billion and three (3) parcels of land located along EDSA, Diliman with an aggregate area of 0.48 hectares amounting to P=0.4 billion.

In addition, the Group acquired from various third-party sellers parcels of land in Cavite, Valenzuela City and Taguig City. As of December 31, 2013, the Group has not yet developed nor constructed any project on these properties.

A summary of the movement in land and land development costs is set out below:

2013 2012 (In Thousands) Balance at beginning of year P=21,683,786 P=20,709,933 Land acquisitions 3,654,647 2,840,415 Land costs transferred to subdivision lots,condominium and residential units for sale (Note 11) (289,704) (507,716) Cost of lots sold (Note 25) (199,342) (320,792) Transfers to investment property - net (1,051,602) (1,511,541) Site development and incidental costs 1,825,101 473,487 P=25,622,886 P=21,683,786

Capitalized interest related to borrowing costs arising from loans obtained to finance the Group’s projects that are capitalized as part of land development amounted to P=370.7 million and P=0.6 million in 2013 and 2011, respectively (nil in 2012). The capitalization rate used is 2% in 2013 and 5% to 10% in 2011.

15. Investment Properties

The composition of and movements in this account follow:

2013 Furniture, Buildings and Fixtures and Land Improvements Machineries Total (In Thousands) Cost Balances at beginning of year P=23,357,759 P=15,891,038 P=252,390 P=39,501,187 Additions/transfers 2,627,682 2,361,029 4,354 4,993,065 Disposals/reclassifications (1,353,190) (531,933) (113) (1,885,236) Balances at end of year 24,632,251 17,720,134 256,631 42,609,016 (Forward)

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2013 Furniture, Buildings and Fixtures and Land Improvements Machineries Total (In Thousands) Accumulated depreciation and amortization Balances at beginning of year P=– P=2,923,202 P=90,770 P=3,013,972 Depreciation and amortization (Note 24) – 419,069 37,955 457,024 Disposals/reclassifications – (80,709) – (80,709) Balances at end of year – 3,261,562 128,725 3,390,287 Accumulated impairment loss Balances at beginning of year 129,728 14,101 – 143,829 Provision for impairment loss 19,090 15,436 – 34,526 Disposals/reclassifications (6,156) (8,470) – (14,626) Balances at end of year 142,662 21,067 – 163,729 Net book value P=24,489,589 P=14,437,505 P=127,906 P=39,055,000

2012 (As restated, Note 2) Furniture, Buildings and Fixtures and Land Improvements Machineries Total (In Thousands) Cost Balances at beginning of year P=21,454,731 P=12,940,398 P=230,237 P=34,625,366 Additions/transfers 2,467,457 2,486,332 14,170 4,967,959 Disposals/reclassifications (564,429) 464,308 7,983 (92,138) Balances at end of year 23,357,759 15,891,038 252,390 39,501,187 Accumulated depreciation and amortization Balances at beginning of year – 2,494,050 54,616 2,548,666 Depreciation and amortization (Note 24) – 459,643 58,587 518,230 Disposals/reclassifications – (30,491) (22,433) (52,924) Balances at end of year – 2,923,202 90,770 3,013,972 Accumulated impairment loss Balances at beginning of year 139,204 26,079 – 165,283 Provision for impairment loss 32,408 12,155 – 44,563 Disposals/reclassifications (41,884) (24,133) – (66,017) Balances at end of year 129,728 14,101 – 143,829 Net book value P=23,228,031 P=12,953,735 P=161,620 P=36,343,386

The Group’s investment properties include land and buildings utilized in mall operations, buildings and building improvements, land improvements acquired in settlement of loans and receivables from banking operations and other properties held for long-term rental yields and for capital appreciation.

Certain investment properties consisting of real estate properties and land improvements acquired in settlement of loans and receivables from banking operations were impaired since their carrying values exceeded the estimated fair value less cost to sell of these properties.

The Group determined the estimated fair value less cost to sell on the basis of recent sales of similar properties in the same area of the investment properties and taking into account the economic conditions prevailing at the time the Group’s valuations were made. Provision for impairment amounted to =34.5P million and =44.6P million in 2013 and 2012, respectively. The aggregate fair value of the Group’s investment properties amounted to P=50.1 billion and P=44.7 billion as of December 31, 2013 and 2012, respectively, based on a third party appraisal performed in 2010 and are updated using year-end values and assumptions.

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The aggregate fair value of investment properties from real estate operations was determined using the Market Data Approach for land and Income Approach using discounted cash flow analysis for buildings. While aggregate fair values of investment properties from financial and banking services have been determined on the basis of recent sales of similar properties in the same areas as the investment properties taking into account the economic conditions prevailing at the time the valuations were made.

In the Market Data Approach, the value of investment properties is based on sales and listings of comparable property registered within the vicinity. This approach requires establishing comparable property by reducing reasonable comparative sales and listing to a common denominator. This is done by adjusting the difference between the subject properties and those actual sales and listing regarded as comparable. The properties used as basis of comparison are situated within the immediate vicinity of the subject properties. While in Income Approach, all expected cash flow from the use of the assets were projected and discounted using the appropriate discount rate reflective of the market expectations.

Rental income from investment properties amounted to P=2.3 billion in 2013, =2.1P billion in 2012 and P=1.8 billion in 2011. Cost of mall and rental services from investment properties amounted to P=397.1 million in 2013, P=379.1 million in 2012 and =367.3P million in 2011.

As of December 31, 2013 and 2012, there are no contractual restrictions on the realizability and no unusual obligations exist to purchase, construct or develop the Group’s investment properties (see Note 25).

16. Property, Plant and Equipment

The rollforward analysis of this account follows:

December 31, 2013 Furniture Machinery and Fixtures Land and and Transportation Communication Leasehold Construction Buildings Equipment Equipment Equipment Improvements in Progress Total (In Thousands) Cost Balances at beginning of year P=2,758,605 P=3,257,434 P=141,055 P=1,919,242 P=1,720,003 P=2,260,708 P=12,057,047 Additions/transfers 1,730,018 213,896 47,087 411,293 743,539 129,029 3,274,862 Disposals/adjustments (31,421) − (3,049) (91,059) (39,845) − (165,374) Reclassifications 1,399,004 274,234 − − – (2,222,449) (549,211) Balances at end of year 5,856,206 3,745,564 185,093 2,239,476 2,423,697 167,288 14,617,324 Accumulated depreciation and amortization Balances at beginning of year 287,682 1,251,085 90,650 1,177,421 609,839 − 3,416,677 Depreciation and amortization (Notes 24 and 25) 227,972 193,136 8,019 313,118 177,549 – 919,794 Disposals/adjustments (30,458) 311,795 (2,365) 56,306 (39,846) – 295,432 Balances at end of year 485,196 1,756,016 96,304 1,546,845 747,542 – 4,631,903 Net book value P=5,371,010 P=1,989,548 P=88,789 P=692,631 P=1,676,155 P=167,288 P=9,985,421

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December 31, 2012 (As restated, Note 2) Furniture Machinery and Fixtures Land and and Transportation Communication Leasehold Construction Buildings Equipment Equipment Equipment Improvements in Progress Total (In Thousands) Cost Balances at beginning of year P=1,479,664 P=2,589,785 P=106,874 P=1,499,967 P=1,044,427 P=2,235,324 P=8,956,041 Additions/transfers 695,636 69,024 35,251 499,204 726,086 1,451,685 3,476,886 Acquisitions from business combination 6,998 – – 221 – – 7,219 Disposals/adjustments (31,488) (106) (1,070) (80,150) (50,510) (13,933) (177,257) Reclassifications 607,795 598,731 – – – (1,412,368) (205,842) Balances at end of year 2,758,605 3,257,434 141,055 1,919,242 1,720,003 2,260,708 12,057,047 Accumulated depreciation and amortization Balances at beginning of year 212,425 1,134,347 80,638 985,901 465,207 – 2,878,518 Depreciation and amortization (Notes 24 and 25) 75,257 116,738 10,307 235,418 166,970 – 604,690 Disposals/adjustments – – (295) (43,898) (22,338) – (66,531) Balances at end of year 287,682 1,251,085 90,650 1,177,421 609,839 – 3,416,677 Net book value P=2,470,923 P=2,006,349 P=50,405 P=741,821 P=1,110,164 P=2,260,708 P=8,640,370

17. Other Assets

This account consists of:

2012 (As restated, 2013 Note 2) (In Thousands) Input tax P=1,366,532 P=1,100,258 Branch license (Note 4) 1,662,200 1,447,400 Deferred costs 762,809 330,957 Prepaid expenses 755,367 348,176 Creditable withholding tax 570,466 588,390 Capitalized computer software 531,213 479,639 Deposits 521,239 722,789 Construction materials and supplies 445,232 195,199 Derivative asset - net (Note 36) 430,046 41,316 Repossessed asset 172,646 134,877 Customer relationship and core deposit 154,679 163,032 Biological assets (Notes 25 and 40) 109,707 157,516 Hotel inventories 43,629 49,250 Others 457,826 97,480 P=7,983,591 P=5,856,279

“Input taxes” represents the VAT 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 for output VAT on sale of goods and services subjected to VAT.

“Deferred costs” pertains to FDCUI expenditures incurred related to project development and site preparation. This will be reclassified to the appropriate asset account when actual construction of power plants begins.

“Prepaid expenses” includes commissions paid to brokers relating to the sales of real estate inventories which do not qualify yet for revenue recognition. Such amount will be recognized as expense when the qualification for revenue recognition has been met. *SGVFS007153* - 70 -

“Creditable withholding taxes” is the tax withheld by the withholding agents from payment to the sellers which is creditable against the income tax payable.

“Capitalized computer software” pertains to computer software licenses and programs acquired by the Group for its banking operations.

“Deposits” include security deposits of EW representing refundable deposits with Master Card and Visa related to its credit card business and FLI’s deposits in escrow for payments of rawland pending finalization of contract to sell. “Repossessed assets” pertain to other foreclosed properties which do not qualify as land and building.

‘Others’ includes construction costs related to the Build Transfer and Operate (BTO) agreement with The Province of Cebu (Cebu Province) entered into on March 26, 2012. The BTO project relates to development, construction, and operation of Business Process Outsourcing (BPO) Complex by FLI on the land properties owned by Cebu Province located at Salinas, Lahug Cebu City. The construction costs related to this project amounted to =387.6P million and =5.3P million as of December 31, 2013 and 2012, respectively (see Note 31).

The Group’s “biological assets” consist of sugarcane crops.

The rollforward analysis of the Group’s biological assets follows:

2013 2012 (In Thousands) Balance at beginning of year P=157,516 P=161,410 Additions 149,430 122,813 Costs of sales (197,239) (126,707) Balance at end of year P=109,707 P=157,516

The following table shows the estimated physical quantities of the Group’s biological assets and raw sugar production:

2013 2012 Sugarcane crops (in metric tons) 133,077 161,544 Raw sugar (in Lkg) 264,957 298,856

There are no restrictions on the Group’s biological assets as of December 31, 2013 and 2012.

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The rollforward analysis of the Group’s customer relationships and core deposits as of December 31, 2013 and 2012 follows:

2013 2012 (In Thousands) Balance at beginning of year P=163,032 P=171,387 Amortization (Note 24) (8,353) (8,355) Balance at end of year P=154,679 P=163,032

The rollforward analysis of the Group’s capitalized computer software as of December 31, 2013 and 2012 follows:

2013 2012 (In Thousands) Balance at beginning of the year P=479,639 P=349,504 Additions 185,252 247,439 Amortization (Note 24) (133,678) (117,304) Balance at end of the year P=531,213 P=479,639

18. Deposit Liabilities

This account consist of:

2012 (As restated, 2013 Note 2) (In Thousands) Demand P=39,568,923 P=34,129,088 Time (Note 35) 39,134,678 39,317,476 Savings 10,959,135 12,922,490 Long-term negotiable certificates of deposit (LTNCD) (Note 35) 5,466,003 1,523,778 P=95,128,739 P=87,892,832

Non-FCDU deposit liabilities are subject to liquidity reserve equivalent to 11.0% starting July 15, 2005 (under BSP Circular No. 491), and statutory reserve equivalent to 10.0% starting August 5, 2011 (under BSP Circular No. 732). Prior to August 5, 2011, statutory reserve equivalent was 9.0%. In accordance with BSP Circular No. 753 issued in 2012, reserve requirement effective on the April 6, 2012 reserve week shall be 18.0% for deposits and deposit substitutes and 3.0% for long-term negotiable certificates of deposits. As of December 31, 2013 and 2012, EW is in compliance with such regulations.

Due from BSP of the Group amounting to P=15.9 billion and P=13.0 billion were set aside as reserves as of December 31, 2013 and 2012, respectively.

Of the total deposit liabilities of the Group as of December 31, 2013, 2012 and 2011, about 42.9%, 46.3% and 61.7%, respectively, are subject to periodic interest repricing. The remaining deposit liabilities earn annual fixed interest rates ranging from 3.3% to 9.5 and 1.2% to 5.2% in 2013 and 2012, respectively.

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The Group’s interest expense on deposit liabilities amounted to P=1.1 billion in 2013, P=1.4 billion in 2012 and P=1.4 billion in 2011 (see Note 25).

Long-term Negotiable Certificates of Deposits due 2018 (LTNCD Series 1) In 2013 and 2012, EW issued 5.00% fixed coupon rate (average EIR of 4.37%) unsecured LTNCD maturing on May 18, 2018. The first tranche of the LTNCD Series 1 amounting to P=1.5 billion was issued at a discount on November 23, 2012, and the second to seventh tranches aggregating to P=3.1 billion were issued at a premium in February to May 2013. The net premium, net of debt issue costs, related to the issuance of the LTNCD Series 1 in 2013 and 2012 amounted to =107.9P million and =10.6P million, respectively.

Long-term Negotiable Certificates of Deposits due 2019 (LTNCD Series 2) In 2013, EW issued 3.25% fixed coupon rate (average EIR of 3.48%) unsecured LTNCD maturing on June 9, 2019. The first to third tranches of the LTNCD Series 2 aggregating to P=0.7 billion were issued in December 2013. The discount, net of debt issue costs related to the issuance of the LTNCD Series 2 in 2013 amounted to P=8.4 million.

The movements in unamortized net premium (discount) as of December 31, 2013 and 2012 follow:

2013 2012 Beginning balance (P=10,643) P=− Premium (discount) of issuance during the year 99,496 (10,678) Amortization during the year (21,288) 35 Ending balance P=67,565 (=P10,643)

19. Bills and Acceptances Payable

This account consists of borrowings from:

2013 2012 (In Thousands) Banks and other financial institutions P=3,274,219 P=5,536,528 Outstanding acceptances 5,903 34,859 BSP 8,813 − P=3,288,935 P=5,571,387

As of December 31, 2013 and 2012, investments in government securities of the Group (included in investment securities at amortized cost in the statements of financial position) with face value of P=2.9 billion and =4.7P billion, respectively, and fair value of P=3.4 billion and =5.4P billion, respectively, were pledged with other banks as collateral for borrowings amounting to P=2.8 million and =4.6P billion, respectively.

Bills payable to the BSP, other banks and other financial institutions are subject to annual interest rates ranging from 0.60% to 3.50% in 2013, 0.65% to 5.00% in 2012, and 2.63% to 4.00% in 2011.

The Group’s interest expense on bills and acceptances payable amounted to P=40.2 million in 2013, P=66.9 million in 2012 and P=147.3 million in 2011 (see Note 25).

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20. Accounts Payable and Accrued Expenses

The details of this account follow:

2013 2012 (As restated, Note 2) Due Within Due After Due Within Due After One Year One Year Total One Year One Year Total (In Thousands) Accounts payable P=10,020,684 P=1,106,592 P=11,127,276 P=8,837,634 P=842,265 P=9,679,899 Advances from customers 2,018,697 – 2,018,697 1,213,627 244,711 1,458,338 Accrued expenses 1,389,433 2,490 1,391,923 987,050 168,586 1,155,636 Domestic bills purchased 1,363,885 – 1,363,885 1,282,201 – 1,282,201 Deposits for registration and insurance 138,167 989,253 1,127,420 719,207 679,972 1,399,179 Retention fee payable 740,735 359,508 1,100,243 555,103 289,540 844,643 Accrued interest 694,647 – 694,647 406,293 – 406,293 Deposits 385,895 102,816 488,711 454,930 46,674 501,604 Retirement liability (Note 28) – 469,711 469,711 – 438,166 438,166 Deferred income 30,256 343,284 373,540 85,032 212,392 297,424 Liabilities on receivables sold to bank (Note 8) 23,325 13,915 37,240 91,652 97,789 189,441 Due to related parties (Note 23) 101,183 – 101,183 16,284 – 16,284 Other payables 628,520 – 628,520 375,244 282 375,526 P=17,535,427 P=3,387,569 P=20,922,996 P=15,024,257 P=3,020,377 P=18,044,634

‘Accounts payable’ includes the balance of the purchase price for raw land acquired by the Group and is payable upon completion of certain requirements and on agreed scheduled payment date, and retention fees payable to contractors (see Note 14).

‘Advances from customers’ includes collections from accounts which do not yet qualify for revenue recognition as real estate sales and any excess collections over the recognized receivables on real estate sales accounted under percentage-of-completion method.

Out of the accrued expenses, P=56.2 million and P=68.1 million as of December 31, 2013 and 2012, respectively, pertains to accrued taxes.

‘Other payables’ include interest on restructured loans and derivative liability (see Note 36).

21. Short-term and Long-term Debt

Short-term debt consists of the following borrowings of the Group and their contractual settlement dates:

2013 2012 (In Thousands) PSHC a. Unsecured short-term loan obtained from a local bank on August 20, 2013 payable 59 days from the date of loan release and renewable upon maturity. Interest rate is at 4.0% per annum, subject to repricing. P=300,000 P=– b. Unsecured short-term loan obtained from a local bank on December 20, 2013 payable 60 days from the date of loan release and renewable upon maturity. Interest rate is at 3.5%, subject to repricing. 200,000 − c. Unsecured short-term loan obtained from a local bank on December 26, 2012 payable 177 days from the date of loan release and renewable upon maturity. Interest rate is at 4.0% per annum, subject to quarterly repricing. – 300,000 P=500,000 P=300,000

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Total interest incurred from these short-term loans amounted to P=34.2 million and P=21.0 million in 2013 and 2012, respectively (see Note 24).

Long-term debt consists of the following respective borrowings of the Group and their contractual settlement dates:

2012 (As restated, 2013 Note 2) Collateral (In Thousands) Parent Company Loans a. Loan with interest rate per annum equivalent to 5.9% fixed (inclusive of GRT) payable quarterly in arrears. Loan is payable in full in August 2017. P=996,220 P=995,317 Clean b. 5-year loan with interest rate per annum equivalent to 1.0%-1.25% plus 3-month PDST-F; 46% of principal payable in 11 equal quarterly amortizations to start at the end of the 2-year grace period; 54% of principal payable in full on maturity date. Current portion as of December 31, 2013 and 2012 amounted to P=464.2 million and P=1.2 billion, respectively. 711,728 1,905,130 Clean c. 7-year loan with interest rate per annum equivalent to 6.4% fixed (inclusive of GRT) payable semi-annually. Principal is due in December 2018. 596,229 995,604 Clean d. 5-year loan with interest rate per annum equivalent to a maximum of 1.0% spread over the prevailing 3-month PDST-F, repriceable and payable quarterly in arrears. Principal is payable in 12 equal quarterly amortizations commencing at the end of the ninth quarter from the date of loan release. Current portion as of December 31, 2013 and 2012 amounted to P=249.2 million and P=399.2 million, respectively. 560,739 1,106,033 Clean e. Loan with interest rate per annum equivalent to 1.25% spread over 90-day PDST-F; payable quarterly in arrears. Loan is payable in full at maturity in April 2015. 499,268 498,749 Clean f. Loan with interest rate per annum equivalent to 1.25% spread over 90-day PDST-F; payable quarterly in arrears. 50% of principal is payable quarterly and 50% is payable in full at maturity in January 2018. 460,411 − Clean g. Loan with interest rate per annum equivalent to 1.25% spread over 90-day PDST-F; payable quarterly in arrears. 50% of principal is payable quarterly and 50% is payable in full at maturity in November 2017. 448,014 497,560 Clean h. Loan with interest rate per annum equivalent to 1.0% spread over 90-day PDST-F; payable quarterly in arrears. 50% of principal is payable in 3 equal quarterly amortizations at the end of 4-year grace period while 50% balance is payable at maturity in September 2016. 349,989 348,649 Clean i. Loan with interest rate per annum equivalent to a maximum of 1.0% spread over 90-day PDST-F; payable quarterly in arrears. Loan is payable in full at maturity in August 2016. 238,906 249,080 Clean j. 7-year term loan with fixed annual interest equivalent to 6.3% (inclusive of GRT) payable semi-annually. 30% of principal is due at the end of 5-year grace period, while the 70% of principal is payable in full in January 2019. Principal was prepaid in full in April 2013. – 1,991,125 Clean (Forward)

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2012 (As restated, 2013 Note 2) Collateral (In Thousands) k. 7-year loan with fixed interest of 6.3% (inclusive of GRT) fixed payable semi-annually for 7 years. 30% of principal is due at the end of 5-year grace period, while the 70% of principal is payable in full in December 2018. Principal was pre-terminated in April 2013. P=– P=696,910 Clean l. 7-year loan with interest rate per annum equivalent to 6.3% (inclusive of GRT) fixed payable semi-annually. 30% of principal is due at the end of 5-year grace period, while the 70% of principal is payable in full in February 2019. Principal was prepaid in full in April 2013. – 497,732 Clean m. Loan with interest rate per annum equivalent to a maximum of 1.0% spread over the prevailing 3-month PDST-F, repriceable and payable quarterly in arrears. Loan principal is payable quarterly starting January 15, 2011. Princial was paid in full in October 2013. – 416,667 Clean n. Loan with interest rate per annum equivalent to 1.3% spread over 90-day PDST-F; payable in quarterly arrears. 50% of principal is payable in equal amortizations at the end of 2-year grace period while the other 50% of principal is payable in full at maturity on April 2015. The loan was pre-terminated in April 2013. − 305,365 Clean o. Loan with interest rate per annum equivalent to 4.5% fixed payable quarterly in arrears. Principal was paid in full in October 2013. − 199,159 Clean p. Interest rate per annum equivalent to 4.5% fixed payable quarterly in arrears. Principal was paid in full in May 2013. − 149,320 Clean 4,861,504 10,852,400 Subsidiaries’ Loans FAI q. Loan obtained on September 5, 2013 and will mature on September 5, 2020. Interest at 4.8254% for 1st 91-day (inclusive of GRT), to be re-priced. 50% of the loan is payable in twenty equal quarterly amortization and the remaining 50% payable at maturity. 500,000 – Clean r. Loan obtained on July 23, 2012 and will mature on July 23, 2017. Interest at 4.8% for 1st 90-day (inclusive of GRT), to be re-priced and payable in arrears quarterly (with one-time option to change interest to fixed rate anytime during the term of the loan). Partial and full principal prepayment allowed anytime without penalties. 400,000 400,000 Clean s. Loan obtained on November 10, 2011 with two years grace period on principal repayment, and will mature on November 10, 2018. 50% of the loan is payable in twenty (20) equal quarterly amortizations and the remaining principal balance is payable on maturity. Interest for the 1st 92 days is 4.5% per annum (inclusive of GRT) and is subject to quarterly re-pricing. 300,000 300,000 Clean t. Loan obtained on January 10, 2011 with a 5 year term and will mature on December 14, 2015 with two (2)-year grace period on principal repayment. Interest for the 1st 66 days is at 2.1769% per annum. Basic interest is subject to quarterly re-pricing. 250,000 300,000 Clean u. Loan obtained on February 12, 2013 and will mature on February 12, 2018. Interest at 4.1% for 1st 91-day, to be re-priced and payable in 20 equal quarterly installments amounting to P=20.8 million per quarter. 250,000 – Clean (Forward)

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2012 (As restated, 2013 Note 2) Collateral (In Thousands) v. Loan obtained on March 30, 2012 with two (2)-year grace period on principal repayment, and will mature on March 30, 2019. 50% percent of the loan is payable in twenty (20) equal quarterly amortizations and the remaining principal balance is payable on maturity. Interest for the 1st 92 days is 5% per annum (inclusive of GRT) and is subject to quarterly re-pricing. P=200,000 P=200,000 Clean w. Loan with interest payable quarterly of 91-day PDST-rate plus a spread of 1.5% per annum. The term of the loan is 5 years with 2-year grace period on principal payment and will mature on April 8, 2015. 150,000 183,333 Clean x. Loan obtained on December 27, 2011 with a 7 year term and will mature on December 27, 2018. 50% of the loan is payable in twenty (20) equal quarterly amortizations and the remaining fifty (50) percent is payable on maturity. Interest for the 1st 91 days is 5.0% per annum (inclusive of GRT) and is subject to quarterly repricing. 150,000 150,000 Clean y. Loan obtained on December 14, 2010, 50% of the principal is payable in twelve (12) quarterly installments beginning from the ninth (9th) quarter after availment of the loan and the remaining 50% is payable upon maturity on December 15, 2015. Interest rate for the 1st 90 days is 2.1615% per annum payable quarterly to start on March 14, 2011. Interest rate is subject to quarterly re-pricing. 83,333 100,000 Clean z. Term loan with interest payable monthly computed based on latest 91-day T-bill rate plus 2.0% and is subject to quarterly repricing. The loan is payable in 18 equal monthly amortizations after a 2-year grace period will mature on June 27, 2014. 55,826 180,136 Clean aa. Term loan from a local bank. Interest rate is based on a 91-day T-bill rate plus 1.3% subject to quarterly repricing. The principal will mature in June and October 2013. – 300,000 Clean 2,339,159 2,113,469 FLI bb. Fixed rate bonds consisting of i) P=5.0 billion, comprised of three (3) year fixed rate bonds due in 2012 with a term of 3 years from the issue date, with a fixed interest rate equivalent to 7.5% per annum payable quarterly in arrears starting on February 19, 2010 and five (5) year fixed rate bonds due in 2014 with a term of 5 years and one (1) day from the issue date, with a fixed interest rate equivalent to 8.5% per annum payable quarterly in arrears starting February 20, 2010; ii) fixed rate bonds issued on July 7, 2011 amounting to P=3.0 billion with a term of five (5) years from issue date, with a fixed interest rate of 6.2% per annum, payable quarterly in arrears starting on October 19, 2011; iii) fixed rate bonds with aggregate principal amount of P=7.0 billion issued on June 8, 2012 with a term of seven (7) years from the issue date, with a fixed interest rate of 6.3% per annum. Interest is payable quarterly in arrears starting on September 10, 2012. P=0.5 billion bonds were paid in 2012; iv) P=7.0 billion fixed-rate bonds comprised of P=4.3 billion seven (7)-year bonds with interest of 4.8562% per annum due in 2020 and P=2.7 billion ten (10)-year bonds with interest of 5.4333% per annum issued on November 8, 2013 and due in 2023. Interest for both bonds is payable quarterly in arrears starting on February 8, 2014. 21,318,088 14,364,924 Clean (Forward)

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2012 (As restated, 2013 Note 2) Collateral (In Thousands) cc. Developmental loans granted by local banks. Interest rates are equal to 91-day PDST-F rate plus a spread of 1.0% - 2.0% per annum. Include loans obtained from business combination. P=14,076,208 P=10,109,851 Clean dd. Guaranteed loan amounting to P=1.1 billion and P=1.1 billion obtained in October 2005 and July 2007, respectively. Both loan principal is payable in 10 semi-annual installments commencing December 2010 and ending June 2015. The loans carry a fixed interest rate of 7.72% and 7.90% per annum, respectively. 675,000 1,125,000 Clean 36,069,296 25,599,775 PSHC ee. Loan granted by a local bank with principals of P=400.0 million on December 22, 2012 and P=100.0 million February 16, 2011. The principal is payable in 12 quarterly amortizations to start at the end of the 9th quarter from the date of the release with then prevailing interest rate of 2.2% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of the release of the loan. 383,333 500,000 Clean ff. Loan granted by a local bank with principal of P=1.0 million on February 12, 2013, payable in 12 quarterly amortizations to start at the end of the 9th quarter from the date of the release with then prevailing interest rate of 4.32% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of the release of the loan. 1,000 − Clean gg. Developmental loan granted by a local bank with principals of P=650.0 million on July 8, 2008 and P=450.0 million on July 13, 2008, payable in 5 years, inclusive of 2-year grace period. The principal is payable in twelve (12) quarterly amortizations to start at the end of ninth (9th) quarter from the date of initial release with prevailing interest rate of 7.4% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of the release of the loan. – 275,000 Clean 384,333 775,000 EW hh. Lower tier 2 unsecured subordinated notes callable with Step-up interest, in 2016 in minimum denominations of P=500,000 and in integral multiples of P=100,000 thereafter, due January 2, 2021. Interest rate is at 7.5% per annum. 1,500,000 1,500,000 Clean ii. Lower tier 2 unsecured subordinated notes callable, with Step-up interest, in 2014 in minimum denominations of P=500,000 and integral multiples of P=100,000 thereafter, due January 26, 2019. Interest rate is at 8.6% per annum. 1,250,000 1,250,000 Clean jj. Lower tier 2 unsecured subordinated notes, with Step-up interest, due March 13, 2018. Interest rate is at 9.7% per annum. 112,500 113,751 Clean 2,862,500 2,863,751 (Forward)

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2012 (As restated, 2013 Note 2) Collateral (In Thousands) FDCI kk. Fixed rate bonds with original issuance amount of $300 million on April 2, 2013. The bonds have a term of 7 years from the issue date, with a fixed interest rate of 4.25% per annum. Interest is payable semi-annually in arrears starting on October 2, 2013. P=12,576,243 P=– Clean P=59,093,035 P=42,204,395

Below are the current and non-current portion of the long-term debt:

2012 (As restated, 2013 Note 2) (In Thousands) Current P=7,336,189 P=6,022,402 Non-current 51,756,846 36,181,993 P=59,093,035 P=42,204,395

The details of foregoing long-term debt of the Group follow:

Parent Company a. On August 16, 2012, the Parent Company availed of a fixed-rate loan from a local financial institution amounting to P=1.0 billion payable in August 2017. As of December 31, 2013, the outstanding balance of the loan amounted to P=996.2 million, presented net of unamortized deferred financing cost amounting to P=3.8 million. b. In March 2007, November 2007 and 2008, the Parent Company issued corporate notes to a local financial institution in the aggregate principal amount of P=500.0 million, P=1.5 billion and P=350.0 million, respectively. In January 2011, the Parent Company issued additional corporate notes to the same financial institution in the amount of P=350.0 million bringing the total corporate notes issued to P=2.7 billion. The corporate notes have annual interest rates equivalent to 1.0% to 1.25% spread over the prevailing 3-month PDST-F, repriceable and payable quarterly in arrears. 46% of principal is payable in 11 equal amortizations commencing at the end of 2-year grace period on principal repayment, while 54% of principal is payable in full at maturity date. In 2013 and 2012, the Parent Company paid principal amortizations amounting to P=1.2 billion and P=391.7 million, respectively. c. In December 2011, the Parent Company entered into a fixed-rate corporate notes facility with a local financial institution to which it had issued corporate notes amounting to P=1.0 billion. The principal is payable at maturity in December 2018. On April 24, 2013, the Parent Company prepaid principal amounting to P=400 million. As of December 31, 2013 and 2012, the outstanding balance of the notes amounted to P=596.2 million and P=995.6 million, presented net of deferred financing cost amounting to P=3.8 million and P=4.4 million, respectively.

*SGVFS007153* - 79 - d. In June 2008, the Parent Company entered into a notes facility agreement with a local financial institution which it has issued corporate notes in the aggregate principal amounting to =1.2P billion. In December 2010 and March 2011, the Parent Company issued additional corporate notes to the same financial institution in the amount of P=600.0 million and P=150.0 million respectively. The corporate notes bear annual interest rate equivalent to a maximum of 1.0% spread over the prevailing 3-month PDST-F, repriceable and payable quarterly in arrears. e. In 2010, the Parent Company availed of a loan from a local financial institution amounting to P=500.0 million maturing in April 2015. As of December 31, 2013 and 2012, the outstanding balance of the loan amounted to =499.3P million and =498.7P million, respectively, presented net of unamortized deferred financing cost amounting to P=0.7 million and =1.3P million, respectively. f. In January 2013, the Parent Company obtained a term loan from a local financial institution amounting to P=500.0 million; 50% of principal is payable quarterly and 50% is payable in full at maturity in January 2018. As of December 31, 2013, the outstanding balance of the loan amounted to =460.4P million, presented net of deferred financing cost amounting to P=2.1 million. g. In November 2012, the Parent Company entered into a fixed-rate corporate notes facility with a local financial institution to which it had issued corporate notes amounting to P=500 million. The principal is payable at maturity in November 2017. As of December 31, 2013, the outstanding balance of the notes amounted to =448.0P million, presented net of deferred financing cost amounting to =2.0P million. h. In 2011, the Parent Company availed of a loan from a local financial institution amounting to P=350.0 million; 50% of principal is payable in 3 equal quarterly amortizations starting at the end of 4-year grace period and 50% balance payable at maturity. As of December 31, 2013 and 2012, the outstanding balance of the loan amounted to P=350.0 million and =348.6P million, presented net of unamortized deferred financing cost amounting to P=1.0 million and P=1.4 million, respectively. i. In 2011, the Parent Company availed of a loan from a local financial institution amounting to P=250.0 million payable in full at maturity in August 2016. As of December 31, 2013 and 2012, the outstanding balance of the loan amounted to P=238.9 million and =249.1P million, presented net of unamortized deferred financing cost amounting to P=0.7 million and P=0.9 million, respectively. j. In January 2012, the Parent Company obtained loan from a local financial institution amounting to P=2.0 billion, 30% of principal is payable at the end of a 5-year grace period while 70% of principal is payable in full at maturity. The loan was pre-terminated in April 2013. k. In 2011, the Parent Company obtained additional loan from a local financial institution amounting to P=700.0 million; 30% of principal payable in 4 equal semi-annual amortizations at the end of the 5-year grace period while 70% of principal is payable in full at maturity in December 2018. The loan was pre-terminated in April 2013.

*SGVFS007153* - 80 - l. In February 2012, the Parent Company obtained additional term loan from a local financial institution amounting to P=500 million, 30% of principal is payable at the end of a 5-year grace period while 70% of principal is payable in full at maturity in February 2019. The term loan was fully paid in April 2013. m. In 2007, the Parent Company entered into a loan facility agreement with a local financial institution availing of loans amounting to P=1.3 billion. Loan principal is payable in 12 equal quarterly payments starting January 15, 2011 and matured on October 15, 2013. n. In 2010, the Parent Company obtained a term loan from a local financial institution amounting to an aggregate total of P=350.0 million and will mature in April 2015. The loan was pre- terminated in April 2013. o. In 2010, the Parent Company availed of a fixed-rate term loan from a local financial institution amounting to P=200.0 million payable in November 2011, renewed and matured on October 24, 2013. p. In 2011, the Parent Company availed of a fixed-rate term loan from a local financial institution amounting to P=150.0 million payable in May 2012, renewed and matured in May 2013.

FAI q. On September 5, 2013, FAI obtained P=500.0 million that will mature on September 5, 2020, 50% of principal is payable in 20 equal quarterly amortization and remaining 50% payable at maturity. r. On July 23, 2012, FAI obtained a 5-year loan of P=400.0 million that will mature on July 23, 2017 with 2-year grace period on principal repayment. Interest for the first 90 days is 4.8% quarterly. Basic interest is subject to quarterly re-pricing. s. On November 10, 2011, FAI obtained a loan amounting to =300.0P million with 2-year grace period on principal repayment that will mature on November 10, 2018. 50% of the loan is payable in twenty (20) equal quarterly amortizations and the remaining principal balance is payable on maturity. Interest for the first 92 days is 4.5% per annum and is subject to quarterly re-pricing. t. On January 10, 2011, FAI, obtained a 5-year loan of =300.0P million that will mature on December 14, 2015 with 2-year grace period on principal repayment. Interest for the first 66 days is 2.2% per annum. Basic interest is subject to quarterly re-pricing. u. On February 12, 2013, FAI obtained a loan and will mature on February 12, 2018. Interest at 4.1% for 1st 91-day, to be re-priced and payable in 20 equal quarterly installments amounting to =20.8P million per quarter. v. On March 30, 2012, FAI, obtained a 7-year loan of =200.0P million that will mature on March 30, 2019 with 2-year grace period on principal repayment. 50% of the principal is payable in 20 equal quarterly installments starting on and 50% payable at maturity. Interest for the first 92 days is 5% per annum and is subject to quarterly re-pricing.

*SGVFS007153* - 81 - w. On April 8, 2010, FAI obtained a 5-year term loan maturing on April 8, 2015 amounting to P=200.0 million. 50% of the principal is payable in 12 equal monthly installments starting on July 8, 2012 and 50% payable at maturity. x. On December 27, 2011, FAI obtained a 7-year loan with principal amount of P=150.0 million that will mature on December 27, 2018. 50% of the loan is payable in twenty (20) equal quarterly amortizations and the remaining 50% is payable on maturity. Interest for the first 91 days is 5.0% per annum and is subject to quarterly repricing. y. On December 14, 2010, FAI obtained a 5-year loan maturing on December 14, 2015. 50% of the principal is payable in 12 equal monthly installments to commence at the start of the ninth quarter from the initial drawdown and 50% payable at maturity. z. On June 27, 2007, FAI was granted a 7-year loan with a principal amount of P=0.5 billion which will mature on June 27, 2014. In 2013 and 2012, FAI paid the principal loan amortizations amounting to P=107.6 million and =102.4P million, respectively. aa. On June 19, 2008, FAI availed of a 6-year loan from a local bank with principal amount of P=0.1 billion which will mature on June 19, 2013. On October 17, 2008, FAI availed of additional P=0.9 billion from the same bank which will mature on October 17, 2013. In 2013 and 2012, FAI paid the principal loan amortizations amounting to P=316.7 million and P=333.3 million, respectively.

FLI bb. On November 19, 2009, FLI issued fixed rate bonds, with aggregate principal amount of P=5.0 billion, comprised of three (3)-year fixed rate bonds due in 2012 and five (5)-year fixed rate bonds due in 2014. Of the P=5.0 billion three (3)-year fixed rate bonds, P=500.0 million was paid by FLI on November 16, 2012.

On July 7, 2011, FLI issued another fixed rate bonds with principal amount of P=3.0 billion and term of five (5) years from the issue date. The fixed interest rate is 6.2% per annum, payable quarterly in arrears starting on October 19, 2011, to finance its capital requirements in 2011 and 2012.

On June 8, 2012, FLI issued another fixed rate bonds with aggregate principal amount of P=7.0 billion and term of seven (7) years from the issue date. The fixed interest rate is 6.3% per annum, payable quarterly in arrears starting on September 10, 2012.

On November 8, 2013, FLI issued fixed rate bonds with principal amount of P=7.0 billion comprised of seven (7) year fixed rate bonds of 4.9% per annum due in 2020 and ten year fixed rate bonds of 5.4% per annum.

Unamortized debt issuance cost on bonds payable amounted to P=182.0 million and P=136.4 million as of December 31, 2013 and 2012, respectively. Accretion in 2013 and 2012 included as part of ‘Interest expense’ amounted to P=36.0 million and =33.9P million, respectively (see Note 24).

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cc. Details of the developmental loans are as follows:

2012 (As restated, 2013 Note 2) (In Thousands) Unsecured loan obtained in July 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 5.07% per annum, payable quarterly in arrears. The principal is payable at maturity on July 2018. P=1,500,000 P= – Unsecured loan obtained in June 2013 with a fixed interest rate of 4.98% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting September 2015 up to June 2018. 1,148,500 – Unsecured loan obtained in August 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum GRT 5 years (fixed rate) 4.28% per annum, payable quarterly in arrears. The 50% balance is payable in twenty (20) equal quarterly installments starting August 2015 up to May 2020 and the remaining 50% balance is paid in August 2020. 1,000,000 – Unsecured loan obtained in January 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum GRT 5 years (fixed rate) 6.39% per annum. The principal is payable at maturity on January 2017. 1,000,000 1,000,000 Unsecured loan obtained in April 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 6.12% per annum, payable quarterly in arrears. The principal is payable at maturity on January 2017. 1,000,000 1,000,000 Unsecured loan obtained in November 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 5.50% per annum , payable quarterly in arrears. The principal is payable at maturity on November 2017. 1,000,000 1,000,000 Unsecured loan obtained in February 2013 with interest at prevailing market rate, payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting May 2015 to February 2018. 750,000 – Unsecured loan obtained in December 2013 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus 1% per annum plus GRT (Fixed rate of 4.62% per annum), payable quarterly in arrears. The 50% balance is payable in nineteen (19) quarterly installments starting March 2016 up to September 2020 and the remaining balance is payable at maturity on December 2020. 700,000 – Unsecured loan obtained in March 2011 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to 1% per annum, payable quarterly in arrears. The 50% of principal payable in 12 equal quarterly amortization to commence on June 2013 and 50% payable at maturity on March 2016. Current portion amounted to P=125.0 million and P=93.8 million as of December 31, 2013 and 2012, respectively. 656,250 750,000 Unsecured loan obtained in June 2011 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to1% per annum, payable quarterly in arrears. The 50% balance is paid in July 2011 and the remaining 50% balance is payable in twelve (12) equal quarterly installments starting September 2013 up to June 2016. Current portion as of December 31, 2013 and 2012 amounted to P=250.0 million and P=125.0 million, respectively. 625,000 750,000 (Forward)

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2012 (As restated, 2013 Note 2) (In Thousands) Unsecured loans obtained in August 15,2012 with interest of 5.79% per annum (inclusive of GRT), subject to repricing either via floating rate or fixed rate on the 90th day, payable quarterly in arrears. The loan has a fixed term of 7 years, inclusive of 2 year grace period on principal repayment, 50% principal balance is payable in 20 equal quarterly installments to commence on Nov ember 2014 and 50% payable at maturity on August 2019. P=600,000 P=600,000 Unsecured loan obtained in October 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT (fixed rate of 4.21% per annum), payable quarterly in arrears. The 50% of principal payable in 20 equal quarterly amortization to commence on January 2016 and 50% payable at maturity on October 2020. 550,000 − Unsecured loan obtained in August 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) 1 plus GRT (Fixed rate) 4.27%, payable quarterly in arrears. The 50% of principal payable in 20 equal quarterly amortization to commence on November 2015 and 50% payable at maturity on August 2020. 500,000 – Unsecured loan obtained in March 2013 with interest rate of 4.32% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable at maturity on March 2014. 500,000 – Unsecured loan obtained in December 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 5.29% per annum, payable quarterly in arrears. The principal is payable at maturity on December 2017. 500,000 500,000 Unsecured loan obtained in December 2011 with interest at prevailing market 4.2% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting March 2014 to December 2016. Current portion as of December 31, 2013 amounted to P=116.7 million. 350,000 350,000 Unsecured loan obtained in October 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT (fixed rate of 6.03% per annum), payable quarterly in arrears. The principal is payable at maturity on October 2017. 300,000 300,000 Unsecured loan obtained in May 2013 with interest rate equal to BSP 1 plus GRT (fixed rate 4.74% per annum), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting August 2015 up to May 2018. 300,000 – Unsecured loan obtained in May 17, 2012 with interest at prevailing market rate, subject to repricing and payable quarterly in arrears. The loan has a fixed term of 7 years, inclusive of 2 year grace period on principal repayment, 50% principal balance is payable in 20 equal quarterly installments to commence on August 2014 and 50% payable at maturity on May 2019. 300,000 300,000 Unsecured loan obtained in May 2013 with a fixed interest rate of 4.74% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting August 2015 up to May 2018. 250,000 – Unsecured loan granted in November 10, 2011 with a term of 7 years with 2 years grace period on principal repayment. Interest is based on prevailing market rate , subject to quarterly repricing and payable quarterly in arrears. 50% of principal is payable in 12 quarterly amortization commencing on February 10, 2014 and 50% is payable on maturity. 200,000 200,000 (Forward)

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2012 (As restated, 2013 Note 2) (In Thousands) Unsecured loan granted in May 2010 with a term of five years with 50% of principal payable in 12 equal quarterly amortization to commence on August 2012 and 50% payable at maturity in May 2015. The loan carries interest August 2014 and 50% payable at maturity on May 2019. The loan carries interest at prevailing market rate payable quarterly in arrears P=150,000 P=183,333 Unsecured loan granted in December 2012 with a term of five years with 50% of principal payable in 20 equal quarterly amortization to commence on March 2013 and 50% payable at maturity on December 2017. The loan carries interest August 2014 and 50% payable at maturity on May 2019. The loan carries interest at prevailing market rate.. 135,000 150,000 Unsecured loan granted in May 2012 payable over 7-year period inclusive of 2 year grace period; 50% of principal is payable in 20 equal quarterly amortizations to commence on August 2014 and 50% payable at maturity on May 2019. The loan carries interest at prevailing market rate. 100,000 100,000 Unsecured loan obtained in February 2013 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to 1% per annum plus GRT, payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting May 2015 to February 2018. 500 – Unsecured loan obtained in October 2008 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to1.25% per annum, payable quarterly in arrears. 50% of the principal is payable in twelve (12) equal quarterly installments starting January 2011 up to October 2013 and lump sum full payment of the remaining balance on October 2013. − 666,667 Unsecured loan obtained in November 2008 with interest equal to 91-day PDST-F rate plus a spread of up to 1.25% per annum, payable quarterly in arrears. 50% of the principal is payable in twelve (12) equal quarterly installments starting February 2011 up to November 2013 and lump sum full payment on the balance in November 2013. − 333,333 Unsecured loan obtained in April 2011 with interest rate equal to 91-day PDST-F plus a spread of 1% per annum, payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting July 2013 up to April 2016. − 500,000 Unsecured 5-year loan obtained in September 2008. 50% of the principal is payable in twelve (12) quarterly amortizations starting December 2010 with the balance due on maturity date in September 2013. − 406,250 Unsecured loan granted in November 2011 with a term of five years with interest at prevailing market rate , payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting February 2014 up to November 2016. − 400,000 Unsecured loan obtained in June 2008 with interest rate equal to 91-day PDST-F rate plus a spread of up to 1.5% per annum, payable quarterly in arrears. 50% of the principal is payable in twelve (12) equal quarterly installments starting September 2010 up to June 2013 and lump sum full payment on the balance in June 2013. − 291,667 Unsecured loans obtained in August 2008 with interest rate equal to 91-day PDST-F rate plus a spread of up to 1% per annum. The principal is payable in twelve (12) equal quarterly installments starting November 2010 up to August 2013. − 187,500 Unsecured loan obtained by the Group in October 2008 with interest rate equal to 91-day PDST-F rate plus a spread of up to 1.25% per annum. The principal is payable in twelve (12) quarterly equal installments starting January 2011 up to October 2013. − 166,667 P=14,115,250 P=10,135,417

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As of December 31, 2013 and 2012, the unamortized deferred charges related to developmental loans from local banks amounted to P=39.0 million and =25.6P million, respectively. dd. On June 17, 2005, FLI entered into a Local Currency Loan Agreement with a foreign financial institution whereby FLI was granted a credit line facility amounting to P=2.3 billion. In October 2005, FLI availed of =1.1P billion or half of the total amount granted. The loan is payable in 10 semi-annual installments commencing December 2010 and ending June 2015. This loan carries a fixed interest rate of 7.72% per annum.

In July 2007, FLI availed the remaining balance of the facility amounting to P=1.1 billion. The loan is also payable in 10 semi-annual installments commencing December 2010 and ending June 2015. This loan has a fixed annual interest rate of 7.90%. Both loans were guaranteed by the Parent Company (see Note 23). Principal payments made in 2013 and 2012 amounted to =450.0P million in each year.

PSHC ee. On December 22, 2010, PSHC availed of a P=500.0 million loan from a local bank payable in 5 years inclusive of 2 years grace period. The principal is payable in 12 quarterly amortizations to start at the end of the 9th quarter from the date of the release with then prevailing interest rate of 2.23% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of the release of the loan. ff. On February 12, 2013, PSHC obtained a term loan granted by a local bank with principal of P=1.0 million payable in 12 quarterly amortizations to start at the end of the 9th quarter from the date of the release with then prevailing interest rate of 4.32% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of the release of the loan. gg. On July 8 and 13, 2008, PSHC obtained loans from a local bank amounting to P=650.0 million and P=450.0 million, respectively, payable in 5 years, inclusive of 2-year grace period to fund operations of its subsidiaries. Principal payments made in 2013 and 2012 amounted to P=275.0 million and P=366.7 million, respectively.

PSHC’s interest expense on the above loans in 2013 and 2012 amounted to P=26.4 million and P=45.5 million, respectively (see Note 24).

EW hh. On July 2, 2010, EW issued 7.50% coupon rate Lower Tier 2 unsecured subordinated note (the 2021 Notes) with par value of =1.5P billion, maturing on January 2, 2021 but callable on January 2, 2016, and with step-up in interest if not called.

Unless the 2021 Notes are previously redeemed, the 2021 Notes are repayable to the Noteholders at 100.00% of their face value or at par on the maturity date of January 2, 2021.

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From and including the issue date to, but excluding the optional redemption date of January 2, 2016, the 2021 Notes bear interest at the rate of 7.50% per annum and shall be payable semi-annually in arrears on January 2 and July 2 of each year, commencing on January 2, 2011. Unless the 2021 Notes are previously redeemed, the interest rate from and including January 2, 2016 to, but excluding January 2, 2021, will be reset and such Step-Up interest shall be payable semi-annually in arrears on January 2 and July 2 of each year, commencing on July 2, 2016.

The Step-Up interest rate shall be computed as the higher of:

a. 80.00% of the 5-year on-the-run Philippine Treasury benchmark bid yield (PDST-F) on optional redemption date plus the Step-Up spread of 3.44% per annum. The Step-Up spread is defined as follows:

Step-Up spread = 150.00% of the difference between the Interest Rate and 80.00% of the 5-year PDST-F on the Pricing Date, preceding the initial Issue Date, equivalent to 3.44% per annum.

b. 150.00% of the difference between the interest rate and the 5-year PDST-F on the pricing date preceding the initial issue date plus the 5-year PDST-F on the optional redemption date. ii. On July 25, 2008, EW issued 8.63% coupon rate Lower Tier 2 unsecured subordinated note (the 2019 Notes) with par value of =1.50P billion, maturing on January 26, 2019 but callable on January 25, 2014, and with step-up in interest if not called.

Unless the 2019 Notes are previously redeemed, the 2019 Notes are repayable to the Noteholders at 100.00% of their face value or at par on the maturity date of January 26, 2019.

From and including the issue date to, but excluding the optional redemption date of January 25, 2014, the 2019 Notes bear interest at the rate of 8.63% per annum and shall be payable semi-annually in arrears on January 25 and July 25 of each year, commencing on January 25, 2009. Unless the 2019 Notes are previously redeemed, the interest rate from and including January 25, 2014 to, but excluding January 26, 2019, will be reset and such Step-Up interest shall be payable semi-annually in arrears on January 25 and July 25 of each year, commencing on July 25, 2014.

The Step-Up rate shall be computed as the higher of:

a. 80.00% of the 5-year on-the-run Philippine Treasury benchmark bid yield (PDST-F) on optional redemption date plus the Step-Up spread. The Step-Up spread is defined as follows:

Step-Up spread = 150.00% [8.25% - 80.00% (5-year PDST-F on the pricing date before the initial issue date)]

b. 150.00% of the difference between the interest rate and the 5-year PDST-F on the pricing date preceding the initial issue date plus the 5-year PDST-F on the optional redemption date.

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jj. On March 12, 2008, GBI, EW’s subsidiary, issued 9.72% per annum Lower Tier 2 unsecured subordinated notes (the 2018 Notes) in favor of Land Bank of the Philippines (LBP) with par value of =112.50P million, maturing on March 13, 2018 but callable on March 13, 2013, and with step-up in interest if not called. The issuance of the 2018 Notes under the terms approved by the BOD was approved by the BSP on February 14, 2008.

Among the significant terms and conditions of the issuance of the Notes are:

a. The 2018 Notes must be issued and fully paid up. Only the net proceeds received from the issuance of the 2018 Notes shall be included as capital. b. The 2018 Notes bear interest at 9.72% per annum for the first five years of the term, payable quarterly. On the next 5 years, the rate will be reset at 5-year PDST-F at the time of extension plus a spread of 4.00% per annum or 10.00% per annum, whichever is higher, subject to allowable interest rate step-up regulation of the BSP. Upon resetting in 2013, the interest rate has been fixed at 10.72%. c. The 2018 Notes are neither secured nor covered by a guarantee by GBI or related party of GBI or other arrangement that legally or economically enhances the priority of the claim of any holder of the 2018 Notes as against depositors and other creditors. d. The 2018 Notes shall not have a priority claim, in respect of principal and coupon payments in the event of winding up of the Issuer, which is higher than or equal with that of depositors and other creditors. e. The 2018 Notes cannot be terminated by LBP before maturity date. f. LBP cannot set off any amount that it may owe to GBI against the 2018 Notes. g. The payment of principal may be accelerated only in the event of insolvency of GBI. h. The coupon rate or the formulation for calculating coupon payments shall be fixed at the time of the issuance of the 2018 Notes and may not be linked to the credit standing of GBI.

The Group’s interest expense on subordinated debt amounted to P=232.2 million in 2013, P=232.4 million in 2012 and P=224.0 million in 2011.

FDCI

kk. On April 2, 2013, the Group issued through FDCI (see Note 1) issued fixed-rate bonds with original issuance amount of $300.0 million and term of seven (7) years from the issue date. The bonds bear a fixed interest rate of 4.3% per annum and is payable semi-annually in arrears starting on October 2, 2013.

In 2013, the Group repurchased $13.5 million (P=577.3 million) of the $300.0 million fixed- rate bonds at a discount. Total gain on repurchased bonds, included as part of ‘Other income’ of real estate operation, amounted to P=41.7 million (see Note 26).

As of December 31, 2013, the outstanding balance of the bonds amounted to $283.3 million (P=12.6 billion), net of unamortized deferred financing cost of $3.2 million (P=141.9 million). In 2013, FDCI’s interest expense on the fixed-rate bonds included in the costs of financial and banking services amounted to =430.7P million (see Note 25).

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The Group’s long-term debts are unsecured and no assets are held as collateral for these debts. The agreements covering the abovementioned loans provide for restrictions and requirements with respect to, among others, making distribution on its share capital; purchase, redemption or acquisition of any share of stock; incurrence or assumption of indebtedness; sale or transfer and disposal of all or a substantial part of its capital assets; restrictions on use of funds; maintaining certain financial ratios; and entering into any partnership, merger, consolidation or reorganization.

For the periods covered by these consolidated financial statements, the Group was able to comply with all provisions, restrictions and requirements of the banks and is not in default nor breach of the loan agreements mentioned above.

Interest expense and amortization of debt discounts and expenses follow:

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Long-term debt and bonds payable P=1,539,007 P=1,228,157 P=1,195,045 Amortization of deferred financing costs 112,382 41,410 18,839 Bank charges and other financing cost 20,256 62,769 23,918 P=1,671,645 P=1,332,336 P=1,237,802

Interest expense on subordinated debt of EW included in the “Cost of financial and banking services” amounted to P=232.2 million, =232.4P million and =224.0P million in 2013, 2012 and 2011, respectively (see Note 25).

Interest expense on the fixed-rate bonds of FDCI included in the costs of financial and banking services amounted to =430.7P million in 2013 (see Note 25).

Interest expense on loans and bonds payable included in operating expenses of the Group amounted to =876.1P million, P=995.8 million and =971.1P million in 2013, 2012 and 2011, respectively.

22. Equity

Capital Stocks and Additional Paid-in Capital On December 22, 1982, the SEC approved the registration of 5,300,000 shares, divided into 5,200,000 Class A shares, and 100,000 class B shares with par value of P=10.0 per share.

On April 13, 1992, the SEC approved the registration of 144,575,000 common shares with par value of =10.0P per share.

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Below is the summary of the Group’s track record of registration of securities with the SEC as of December 31, 2013 (Amount in thousands, except for issue/offer price):

Number Number of holders of Shares of securities Year Registered as of year end January 1, 2011 7,505,725 4,524 Add/(Deduct) Movement 1,811,749 (124) December 31, 2011 9,317,474 4,400 Add/(Deduct) Movement – (83) December 31, 2012 9,317,474 4,317 Add/(Deduct) Movement – (51) December 31, 2013 9,317,474 4,266 Note: Exclusive of 2,398 treasury shares.

On October 15, 2010, the Stockholders and BOD of the Parent Company approved the increase in the authorized capital stock of the Parent Company from =10.0P billion, divided into 10.0 billion common shares with a par value of P=1 per share to =17P billion, divided into 15.0 billion common shares with a par value of =1P per share and 2 billion non-voting and redeemable preferred shares with a par value of =1P per share. Article Seven of the Amended Articles of Incorporation of the Parent Company was amended to effect the increase in the authorized capital stock of the Parent Company. On August 19, 2011, the SEC approved the increase in the authorized capital stock of the Parent Company.

In 2011, ALG purchased additional 365.6 million shares from other investors and 49.8 million unissued shares of the Parent Company. These transactions increased the effective ownership of ALG in FDC from 91.3% in 2010 to 95.5% in 2011. Proceeds from the issuance of shares to ALG amounted to =239.9P million which increased the Parent Company’s “Common stock” and “Additional paid-in capital” accounts by P=49.8 million and P=190.1 million, respectively, in 2011.

On August 19, 2011, the SEC approved the increase in the authorized capital stock of the Parent Company from =10.0P billion to P=17.0 billion, consisting of 15.0 billion common shares with a par value of =1.0P per share and 2.0 billion preferred shares with a par value of =1.0P per share. The preferred shares have the following features: a) not entitled to any voting right or privelege, except in those cases expressly provided by law; b) redeemable subject to the terms and conditions to be fixed by the BOD; c) entitled to dividends at the rate to be determined by the BOD prior to the issuance of shares, to be payable out of the surplus profits of the Corporation so long as the preferred shares are outstanding; d) may be subject to such other additional terms and conditions to be fixed by the BOD.

Dividend Declaration On April 11, 2011, the Parent Company’s BOD approved the declaration of stock dividends equivalent to 23.32% or two-thirds (2/3) of the issued and outstanding capital stock to stockholders of record as of September 18, 2011. The SEC authorized the Parent Company’s issuance of the P=1.8 billion stock dividends on August 26, 2011.

On May 27, 2011 the Parent Company’s BOD approved the declaration and payment of cash dividends of =356.5P million or =0.0475P per share for every common share payable on July 14, 2011 to stockholders of record as of June 22, 2011.

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On May 25, 2012, the Parent Company’s BOD approved the declaration and payment of cash dividends of =419.3P million or =0.045P per share for every common share payable on July 16, 2012 to stockholders of record as of June 22, 2012.

On May 30, 2013, the Parent Company’s BOD approved the declaration and payment of cash dividends of =499.5P million or =0.0536P per share to shareholders of record as of June 27, 2013, payable on July 17, 2013.

Retained Earnings Retained Earnings include undistributed earnings representing accumulated equity in net earnings of subsidiaries, which are not available for dividend declaration until received in the form of dividends from such subsidiaries and associates. Retained earnings are further restricted for the payment of dividends to the extent of the cost of the shares held in treasury and deferred tax asset recognized as of December 31, 2013 and 2012.

The Parent Company’s retained earnings available for dividend declaration as of December 31, 2013, 2012 and 2011 amounted to =6.4P billion, =6.5P billion and P=3.9 billion, respectively.

Capital Management The Group prudently monitors its capital and cash positions and cautiously manages its expenditures and disbursements. Furthermore, the Group may also, from time to time seek other sources of funding, which may include debt or equity issues depending on its financing needs and market conditions.

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. No changes were made in capital management objectives, policies or processes for the years ended December 31, 2013, 2012 and 2011.

The Group monitors capital using debt-to-equity ratio, which is the long-term debt divided by total equity. The Group’s policy is to keep the debt to equity ratio not to exceed 2:1.

2012 (As restated, 2013 Note 2) (In Thousands) Long-term debt P=59,093,035 P=42,204,395 Total equity 84,685,334 79,348,732 Debt to equity ratio 0.70:1.00 0.53:1.00

23. Related Party Transactions

The Group has entered into various transactions with related parties. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party in making financial and operating decisions or the parties are subject to common control or common significant influence (referred to as ‘Affiliates’). Related parties may be individuals or corporate entities.

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Significant transactions with related parties are as follows: a. EW has loan transactions with investees and with certain directors, officers, stockholders and related interests (DOSRI). These transactions usually arise from normal banking activities such as lending, borrowing, deposit arrangements and trading of securities, among others. Under existing policies of EW, these transactions are made substantially on the same terms as with other individuals and businesses of comparable risks.

Under current banking regulations, the aggregate amount of loans to DOSRI should not exceed the total capital funds or 15% of the total loan portfolio of EW, whichever is lower. In addition, the amount of direct credit accommodations to DOSRI, of which 70% must be secured, should not exceed the amount of their respective regular and/or quasi-deposits and book value of their respective investments in EW.

BSP Circular No. 560 provides that the total outstanding loans, other credit accommodation and guarantees to each of the bank’s/quasi-bank’s subsidiaries and affiliates shall not exceed 10.0% of the net worth of the lending bank/quasi-bank, provided that the unsecured portion of which shall not exceed 5.0% of such net worth.

Further, the total outstanding loans, credit accommodations and guarantees to all subsidiaries and affiliates shall not exceed 20.0% of the net worth of the lending bank/quasi-bank; and the subsidiaries and affiliates of the lending bank/quasi-bank are not related interest of any director, officer and/or stockholder of the lending institution, except where such director, officer or stockholder sits in the BOD or is appointed officer of such corporation as representative of the bank/quasi-bank. As of December 31, 2013 and 2012, the EW is in compliance with these requirements.

On May 12, 2009, BSP issued Circular No. 654 allowing a separate individual limit of twenty- five (25.0%) of the net worth of the lending bank/quasi-bank to loans of banks/quasi-banks to their subsidiaries and affiliates engaged in energy and power generation. As of December 31, 2013 and 2012, the Group is in compliance with these requirements.

BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. The following table shows information relating to the loans, other credit accommodations and guarantees classified as DOSRI accounts under regulations existing prior to said circular and new DOSRI loans, other credit accommodations granted under said circular:

2013 2012 Total outstanding DOSRI accounts (in thousands) P=6,394,361 P=1,596,916 Percent of DOSRI accounts granted under regulations existing prior to BSP Circular No. 423 0.000% 0.010% Percent of DOSRI accounts granted under BSP Circular No. 423 6.494% 2.27% Percent of DOSRI accounts to total loans 6.495% 2.27% Percent of unsecured DOSRI accounts to total DOSRI accounts 2.499% 19.71% Percent of past due DOSRI loans to total DOSRI loans 0.067% 0.00%

*SGVFS007153* - 92 - b. Loans guaranteed by the Parent Company obtained by FLI amounted to P=0.68 billion and P=1.13 billion as of December 31, 2013 and 2012, respectively. The Parent Company have also guaranteed the $300.0 million fixed-rate bonds issued by FDCI in 2013. c. The compensation of key management personnel consists of short-term employee salaries and benefits amounting to =53.7P million, P=57.3 million and P=59.1 million in 2013, 2012 and 2011, respectively. Post-employment benefits of key management personnel amounted to P=8.8 million in 2013, =5.4P million in 2012 and P=3.9 million in 2011.

There are no agreements between the Group and any of its key management personnel providing for benefits upon termination of employment, except for such benefits to which they may be entitled under the Group’s retirement plan. d. Other transactions with related parties include non-interest bearing cash advances and various charges to and from non-consolidated affiliates for management fees, share of expenses and commission charges. Transactions with related parties are normally settled in cash.

The amounts and the balances arising from the foregoing significant related party transactions are as follows:

2013 Outstanding Amount/ Balance Volume Due from (Due to) Terms Conditions (In Thousands) Due from related parties Real estate operations Parent(a) P=334 P=696 Non-interest bearing, Unsecured, no payable on demand impairment Affiliates: Share in expenses 299 208,041 Non-interest bearing, Unsecured, no payable on demand impairment Management fee 816 − Non-interest bearing, Unsecured, no payable on demand impairment Commission expense 1,279 − Non-interest bearing, Unsecured, no payable on demand impairment 2,728 208,737 Hotel operations Affiliates(a) − 4,944 Non-interest bearing, Unsecured, no payable on demand impairment − 213,681 Due to a related party Parent(a) (101,485) (101,183) Non-interest bearing, Unsecured, no payable on demand except for impairment availment of loan(b) (P=98,757) P=112,498 (a) Share in Group expenses (b) Availment of loan payable within one year, with interest at prevailing market rate

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2012 (As restated, Note 2) Outstanding Amount/ Balance Volume Due from (Due to) Terms Conditions (In Thousands) Due from related parties Real estate operations Parent(a) P=223 P=2,157 Non-interest bearing, Unsecured, no payable on demand impairment Affiliates: Share in expenses 34,771 227,300 Non-interest bearing, Unsecured, no payable on demand impairment Management fee 968 12 Non-interest bearing, Unsecured, no payable on demand impairment Commission expense 410 – Non-interest bearing, Unsecured, no payable on demand impairment 36,372 229,469 Hotel operations Affiliates(a) 752 391 Non-interest bearing, Unsecured, no payable on demand impairment 37,124 229,860 Due to a related party Parent(a) − (16,284) Non-interest bearing, Unsecured, no payable on demand impairment P=37,124 P=213,576 (a) Share in Group expenses

24. Expenses

This account consists of:

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Real estate operations Interest expense (Note 21) P=736,034 P=926,558 P=913,872 General and administrative: Salaries, wages and employee benefits 484,385 449,536 368,021 Taxes and licenses 255,685 198,205 194,114 Depreciation and amortization (Notes 15 and 16) 194,684 173,356 155,391 Outside services 137,293 128,752 110,679 Travel and transportation 112,467 108,017 89,345 Bank charges 109,949 107,638 37,552 Insurance 99,557 59,571 26,714 Repairs and maintenance 105,830 85,930 43,271 Rent (Note 30) 80,893 93,486 39,141 Film rentals 59,456 60,657 54,950 Retirement costs (Note 28) 49,499 42,676 28,665 Provision for probable losses (Note 8) 32,301 17,466 36,014 Entertainment, amusement and recreation 21,049 62,452 56,912 Utilities 56,131 73,794 76,232 Others 188,732 195,627 142,514 1,987,911 1,857,163 1,459,515 (Forward) *SGVFS007153* - 94 -

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Marketing expenses Commission expense P=382,121 P=401,566 P=279,378 Marketing fee 383,208 163,684 156,313 Advertising expense 245,637 378,566 433,059 1,010,966 943,816 868,750 3,734,911 3,727,537 3,242,137 Financial and banking services General and administrative: Salaries, wages and employee benefits 2,612,199 1,934,247 1,388,448 Taxes and licenses 865,315 722,607 527,439 Depreciation and amortization (Notes 15 and 16) 575,615 435,388 325,950 Rent (Note 30) 542,474 410,178 291,049 Service charges, fees and commission 494,454 363,630 258,217 Outside services 457,066 363,542 233,929 Advertising 395,164 420,140 320,898 Postage, telephone and telegraph 282,808 156,897 118,049 Brokerage fees 239,503 161,194 135,327 Insurance 211,207 185,392 156,190 Travel and transportation 189,705 151,026 111,444 Technological fees 179,279 143,240 106,446 Utilities expense 165,633 122,271 78,572 Amortization of computer software, customer relationships and core deposits 142,031 125,659 75,246 Retirement costs (Note 28) 102,158 49,369 52,941 Stationery and supplies 74,742 95,917 62,422 Entertainment, amusement and recreation 47,970 45,705 28,900 Repairs and maintenance 40,525 43,377 46,373 Others 146,020 330,816 143,860 7,763,868 6,260,595 4,461,700 Provision for probable losses 3,097,641 1,530,796 731,848 10,861,509 7,791,391 5,193,548 Sugar operations Interest expense (Note 21) 68,198 69,239 57,212 General and administrative: Salaries, wages and employee benefits 38,639 34,513 36,357 Outside services 18,259 22,939 29,558 Depreciation and amortization (Note 16) 13,743 13,569 13,066 Retirement costs (Note 28) 8,535 9,670 10,109 Provision for probable losses (Note 9) 7,656 8,047 3,687 Taxes and licenses 7,182 10,202 17,919 Travel and transportation 6,148 4,792 3,207 Entertainment, amusement and recreation 5,404 5,583 4,312 Supplies 4,100 4,853 3,611 Repairs and maintenance 3,180 2,741 2,926 Communication 2,591 2,688 2,836 Others 24,982 16,120 30,076 140,419 135,717 157,664 208,617 204,956 214,876 (Forward)

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2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Hotel operations Interest expense (Note 21) P=71,887 P=– P=– General and administrative: Utilities 112,287 72,509 57,561 Salaries, wages and employee benefits (Note 28) 107,885 56,428 31,599 Depreciation (Note 16) 98,141 23,959 13,764 Management fees 28,755 9,857 9,662 Rent 13,823 1,280 – Repairs and maintenance 9,876 7,693 5,250 Credit card commission 12,214 6,280 3,694 Security services 7,635 7,022 5,745 Travel and transportation 13,169 4,174 5,962 Taxes and licenses 12,038 5,522 3,948 Insurance 7,861 2,397 2,856 Representationandentertainment 3,691 2,798 4,568 Administrative expenses 2,090 737 5,669 Outside services 36,863 514 2,273 Others 31,089 44,407 23,706 497,417 245,577 176,257 Marketing expenses 59,649 8,462 10,006 628,953 254,039 186,263 Power generation operations General and administrative: Salaries, wages and employee benefits (Note28) 41,409 26,154 25,044 Depreciation (Note16) 8,659 4,108 961 Rent 7,344 2,919 1,589 Travel and transportation 2,249 697 5,533 Outside services 1,103 98 491 Repairs and maintenance 959 1,428 354 Representation and entertainment 650 1,823 986 Taxes and licenses 185 510 8,294 Professional fee 7,437 9,265 26,042 Others 8,921 8,309 2,589 78,916 55,311 71,883 P=15,512,906 P=12,033,234 P=8,908,707

25. Costs

Cost of sale of lots, condominium and residential units and club shares consists of:

2013 2012) 2011 (In Thousands) Subdivision lots, condominium and residential units (Note 11) P=6,488,178 P=5,920,790 P=4,470,372 Land and land development costs (Note 14) 199,342 320,792 183,350 Club shares (Note 11) 21,876 17,961 27,445 P=6,709,396 P=6,259,543 P=4,681,167

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Cost of mall and rental services consists of:

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Depreciation (Note 15) P=268,393 P=245,241 P=242,434 Mall operations 128,725 133,868 124,904 P=397,118 P=379,109 P=367,338

Cost of financial and banking services consists of:

2013 2012 2011 (In Thousands) Interest on deposit liabilities, fixed-rate dollar bonds and other borrowings: Deposit liabilities (Note 18) P=1,078,891 P=1,378,001 P=1,443,921 Fixed-rate dollar bonds (Note 21) 430,733 − − Subordinated debt, bills payable and other borrowings (Note 19) 291,811 303,237 372,246 P=1,801,435 P=1,681,238 P=1,816,167

Cost of sugar sales consists of:

2013 2012 2011 (In Thousands) Costs of quedan purchases P=1,007,151 P=1,156,362 P=1,272,629 Materials and supplies 192,119 178,881 200,521 Salaries, wages and employee benefits 175,762 170,661 181,145 Depreciation (Note 16) 174,744 175,762 169,667 Cane hauling 93,715 80,535 82,688 Outside services 77,374 71,167 73,387 Repairs and maintenance 18,199 21,663 31,281 Liens 15,417 10,922 9,716 Communications, light and water 12,579 13,262 18,734 Development costs 13,873 12,629 8,635 Taxes and licenses 7,978 6,432 7,802 Trucking and handling charges 7,161 5,781 14,327 Rent (Note 30) 1,906 2,280 635 Others 58,500 26,078 85,577 Cost of goods manufactured 1,856,478 1,932,415 2,156,744 Decrease (increase) in: Sugar and molasses inventories (Note 12) 240,314 (19,779) (49,004) Biological assets (Note 17) 47,809 3,894 46,271 P=2,144,601 P=1,916,530 P=2,154,011

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Cost of hotel operations consists of:

2013 2012 2011 (In Thousands) Salaries, wages and employee benefits P=141,248 P=76,050 P=57,941 Food and beverage 98,515 71,920 47,965 Depreciation (Note 16) 42,840 42,269 49,665 Guest transportation 8,840 1,940 1,662 Guest amenities 6,397 6,843 8,945 Replacements 7,087 – – Guest laundry and linen 5,089 4,276 3,426 Kitchen fuels 4,655 4,357 2,902 Printing and office supplies 3,188 3,098 1,664 Cleaning supplies 2,600 2,987 2,487 Complimentary food and services 2,242 2,783 1,907 Gift shop 2,088 2,078 1,508 Equipment rental 1,642 1,785 1,548 Paper and plastics 1,636 1,705 1,398 Contract services 140 7,612 1,316 Others 23,026 1,167 7,541 P=351,233 P=230,870 P=191,875

26. Other Income

Other income from real estate operations consist of:

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Interest income (Notes 6 and 8) P=548,266 P=503,395 P=515,373 Forfeited reservations and payments 202,093 139,395 276,943 Income from amusement centers, parking and other lease related activities 169,169 158,370 205,648 Service income 145,746 146,731 107,777 Ticket, food and beverage sales 125,448 126,519 118,339 Water supply income 109,096 90,326 41,706 Processing fees 87,461 45,891 55,450 Gain on repurchase of bonds (Note 21) 41,676 − − Sewer treatment services 34,623 29,585 19,898 Amortization of deferred income − 54,150 457,444 Others 65,059 150,053 147,659 P=1,528,637 P=1,444,415 P=1,946,237

‘Amortization of deferred income’ represents realized gains from property and investment exchange transactions between subsidiaries in previous years. The deferred gain on exchange is being amortized based on the sales of the related properties to third parties while the deferred income related to investments in shares of stock is realized when the shares are sold to third parties.

Major items included in the ‘Others’ are membership and maintenance dues and other fees from tenants.

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Other income - net from financial and banking services consist of:

2013 2012 2011 (In Thousands) Service charges, fees and commissions P=2,528,470 P=1,860,223 P=1,536,774 Trading and securities gains - net Financial assets at FVTPL (Notes 3 and 13) 1,005,237 988,110 447,188 Investment securities at amortized cost (Note 13) 572,490 276,883 (44,440) Recovery on charged-off bank assets 299,399 183,537 111,382 Foreign currency exchange gains - net 121,236 222,727 184,416 Gain on asset foreclosure and dacion transactions 93,784 42,412 84,650 Trust income (Note 42) 29,017 27,842 31,103 Gain (loss) on sale of assets 15,161 4,904 (15,580) Miscellaneous 107,528 88,470 54,666 P=4,772,322 P=3,695,108 P=2,390,159

Other income from sugar operations consist of:

2013 2012 2011 (In Thousands) Interest income P=120 P=197 P=187 Others 64,185 99,239 130,847 P=64,305 P=99,436 P=131,034

Other income from sugar operations include fertilizers assistance, storage and handling fee, sales of scrap and other miscellaneous income.

Other income from hotel and power generation operations consists of:

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Interest income P=363 P=23 P=246 Others 1,767 15,110 1,665 P=2,130 P=15,133 P=1,911

27. Changes in Equity Interest in Subsidiaries

On January 20, 2012, EW filed for the amendment of its articles of incorporation and by-laws and the application for increase in capital stock from =8.0P billion to P=20.0 billion, divided into 1.5 billion common shares and 0.5 billion preferred shares with par value each of =10.0P per share, with the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC). This was subsequently approved by the BSP and the SEC on March 2, 2012 and March 6, 2012, respectively.

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On January 6, 2012, the stockholders and BOD of EW authorized the public offer of twenty (20) to thirty (30) percent of EW’s outstanding capital stock. Subsequently, EW filed its application for listing with the Philippine Stock Exchange (PSE) on January 27, 2012 and was approved on March 14, 2012, while the Registration Statement was filed with the SEC on January 23, 2012 and was approved on March 14, 2012. On April 20 to 26, 2012, a total of 245,316,200 common shares with P=10 par value, representing 21.7% of outstanding capital stock was offered and subscribed through an initial public offering at P=18.50 per share.

The common shares comprise of (a) 141,056,800 new shares issued by EW by way of primary offer, and (b) 104,259,400 existing shares offered by the Parent Company, the selling shareholder of EW, pursuant to a secondary offer. Subsequently, on June 5, 2012, 36,715,300 shares coming from the over-allotment option were exercised at a price of P=18.50 per share that brought the subscriptions to 25% of the outstanding capital stock. Listing date and commencement of trading of EW was on May 7, 2012, as approved by the PSE.

The total proceeds raised by the Group (Parent Company and EW) from the sale of primary and secondary offer shares amounted to a total of P=5,219.1 million, while the net proceeds (after deduction of fees and expenses) amounted to =P 4,752.2 million.

The 25% of outstanding capital stock of EW offered to and subscribed by outside investors at P=18.50 per share resulted to a decrease in Group’s effective ownership in EW from 100% to 75%.

In 2012, the Parent Company purchased an additional 0.4% of noncontrolling interest in FLI. This resulted to a decrease in noncontrolling interest by P=155.3 million and a charge to equity under “retained earnings” of =49.2P million. EW also purchased additional noncontrolling interest in GBI with cash outflow of P=8.0 million.

28. Retirement Plan

The Group has a funded noncontributory defined benefit retirement plan (the Plan) covering substantially all of its officers and regular employees. Under the Plan, all covered officers and employees are entitled to cash benefits after satisfying certain age and service requirements. The retirement plan provides retirement benefits (equivalent to 70% to 125%. of the final monthly salary for every year of service after satisfying certain age and service requirements.

For the Group other than EW, the funds are administered by the Company Treasury under the supervision of the Board of Trustees of the plan who are responsible for investment strategy of the plan.

For EW, the funds are administered by EW Trust Department under the supervision of the Retiremet Committee of the plan who are responsible for investment strategy of the plan.

Republic Act 7641 requires a provision for retirement pay to qualified private sector employees in the absence of any retirement plan in the entity, provided that the employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided under the law. The law does not require minimum funding of the plan.The Group updates the actuarial valuation every year by hiring the services of a third party professionally qualified actuary.

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Changes to the net pension liabilities recognized in the statements of financial position follows:

For the year ended December 31, 2013

Present value of Net defined defined benefit Fair value of benefit obligation plan asset liabilities (In Thousands) Balance as at December 31, 2012 P=839,403 P=401,237 P=438,166 Net benefit costs in profit or loss Current service cost 116,033 – 116,033 Loss on settlement 24,647 − 24,647 Net interest 45,773 24,079 21,694 186,453 24,079 162,374 Remeasurements in other comprehensive income Return on plan assets (excluding amount included in net interest) – 41,050 (41,050) Actuarial changes arising from experience adjustments 75,822 – 75,822 Actuarial changes arising from changes in demographic assumptions (185,747) – (185,747) Actuarial changes arising from changes in financial assumptions 155,833 – 155,833 45,908 41,050 4,858 Benefits paid (79,928) (28,562) (51,366) Contribution – 84,321 (84,321) Balance as of December 31, 2013 (Note 20) P=991,836 P=522,125 P=469,711

For the year ended December 31, 2012

Present value of Net defined defined benefit Fair value of benefit obligation plan asset liabilities (In Thousands) Balance as at December 31, 2011 P=620,091 P=398,502 P=221,589 Net benefit costs in profit or loss Current service cost 96,541 – 96,541 Net interest 46,952 29,027 17,925 143,493 29,027 114,466 Remeasurements in other comprehensive income Return on plan assets (excluding amount included in net interest) – (43,902) 43,902 Actuarial changes arising from changes in demographic assumptions 22,140 – 22,140 Actuarial changes arising from changes in financial assumptions 120,706 – 120,706 142,846 (43,902) 186,748 Benefits paid (67,027) (67,027) – Contribution – 84,637 (84,637) Balance as of December 31, 2012 (Note 20) P=839,403 P=401,237 P=438,166

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The percentage of fair value of plan assets by each class are as follows:

2013 2012 (In Thousands) Cash and cash equivalents P=366,448 P=157,738 Debt instruments Government securities 54,502 153,426 Private securities 30,330 25,432 Equity instruments Holding 23,801 16,895 Financial institutions 12,684 12,476 Telecommunications 8,319 7,176 Real estate 7,273 16,189 Power 4,970 3,149 Services 4,343 4,396 Manufacturing 3,358 3,311 Mining 2,008 982 Others 4,089 67 Fair value of plan assets P=522,125 P=401,237

The Group’s plan assets are carried at fair value. All equity and debt instruments held have quoted prices in active market. The fair value of other assets which include deposits in banks, accrued interest and other receivables approximates carrying amount due to the short-term nature of these accounts. The plan assets have diverse investments and do not have any concentration risk.

In 2013, 2012 and 2011, the principal assumptions used in determining pension benefits includes discount rates of 4.7% to 8.8% and salary increase rates of 5.0% to 8.0%.

The sensitivity analysis that follow has been determined based on reasonably possible changes of the assumption occurring as of the end of the reporting period, assuming if all other assumptions were held constant. Management believes that as of the reporting date, it is only the decline in discount rate that could significantly affect the pension obligation. Management believes that pension obligation will not be sensitive to the salary rate increases because it is expected to be at the same level of the remaining life of the obligation. If the discount rate would be 50 basis points lower, the defined benefit obligation would increase by P=54.4 million and P=50.7 million in 2013 and 2012, respectively.

The Group expects to contribute P=162.7 million to the plan in 2014.

Each year, an Asset-Liability Matching Study (ALM) is performed with the result being analyzed in terms of risk-and-return profiles. EW’s current strategic investment strategy consists of 70% of equity instruments, 25% of debt instruments, and 5% cash. For the Group other than EW, the principal technique of the Group’s ALM is to ensure the expected return on assets to be sufficient to support the desired level of funding arising from the defined benefit plans. The Group’s current investment strategy consists of 100% short-term deposit placements.

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Cash and cash equivalents of the fund include savings deposit with EW amounting to P=90.5 million and =88.2P million as of December 31, 2013 and 2012, respectively. Debt instruments include investments in EW’s LTNCD amounting to P=62.2 million and P=46.2 million as of December 31, 2013 and 2012, respectively. Equity instruments include investments in EW shares amounting to P=0.7 million, equivalent to 30,000 shares with fair market value of P=24.3 per share as of December 31, 2013, and =0.9P million equivalent to 30,000 common shares with fair market value of 29.0 per share as of December 31, 2012.

The following are the amounts recognized by the retirement plan arising from its transactions with EW for the years ended December 31, 2013 and 2012.

2013 2012 2011 (In Thousands) Trust fees P=2,095 P=1,265 P=1,351 Interest income on savings deposits 4,796 149 − Interest income on LTNCD 2,669 45 − Gain on investments in equity shares 1,232 91 −

Aside from the transactions above, the Group has no other transactions with the retirement funds.

29. Earnings Per Share (EPS)

The following reflects the income and share data used in the basic EPS computations:

2012 2011 (As restated, (As restated, 2013 Note 2 Note 2 (In Thousands, Except Per Share Figures) a. Net income - attributable to equity holders of the parent P=4,279,715 P=4,062,247 P=3,680,175 b. Weighted average number of outstanding common shares* 9,317,474 9,317,474 9,281,650 c. EPS - Basic/Diluted (a/b)** P=0.46 P=0.44 P=0.40 *Retrospectively adjusted for the issuance of stock dividend in 2011 **The effect on the 2012 and 2011 earnings per share related to the restatements arising from adoption of new standards in 2013 resulted to a reduction of =0.0002P and =0.0006,P respectively.

Treasury shares are deducted from the total outstanding shares in computing the weighted average number of outstanding common shares.

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30. Lease Commitments

The Group, as a lessor, has future minimum rental receivables under renewable operating leases as of December 31, 2013 and 2012 as follows:

2012 (As restated, 2013 Note 2) (In Thousands) Within one year P=1,912,491 P=2,056,578 After one year but not more than five years 3,615,930 3,177,209 More than five years 247,603 243,211 P=5,776,024 P=5,476,998

The Group entered into lease agreements with third parties covering real estate properties. These leases generally provide for either (a) fixed monthly rent (b) minimum rent or a certain percentage of gross revenue, whichever is higher. Most lease terms on commercial mall are renewable within one year except for anchor tenants.

Rental income recognized based on a percentage of the gross revenue of mall tenants amounted to P=322.4 million, P=223.9 million and P=217.0 million in 2013, 2012 and 2011, respectively.

The Group, as a lessee, has future minimum rental payables under operating leases as of December 31, 2013 and 2012 as follows:

2013 2012 (In Thousands) Within one year P=679,963 P=538,722 After one year but not more than five years 2,752,041 2,127,521 More than five years 3,317,443 3,182,248 P=6,749,447 P=5,848,491

EW leases several premises occupied by its head office and branches. Some leases are subject to annual escalation of 5.00% to 10.00% and for periods ranging from five (5) to fifteen years, renewable upon mutual agreement of both parties.

As lessee, rent payable is computed based on a straight-line method and based on certain percentages of gross income generated. In 2013, 2012 and 2011, rent expense recognized in the consolidated statements of income amounted to P=644.5 million, =506.6P million and P=331.8 million, respectively.

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31. Contingencies and Commitments

The Group is involved in various legal actions, claims and contingencies incident to its ordinary course of the business. Management believes that any amount the Group may have to pay in connection with any of these matters would not have a material adverse effect on the Group’s financial position or operating results.

FLI In connection with the joint venture agreement entered into by FLI with Cebu City Government, the Group is committed to (a) purchase 10.6 hectares of the property payable in six (6) years, to be developed into a modern urban center and (b) develop 40 hectares of the property in four (4) phases, mainly mid-rise residential buildings, over a 20-year period (see Note 14).

In connection with the BTO Agreement with the Cebu Province, FLI is committed to develop and construct a BPO Complex the properties owned by Cebu Province located at Salinas, Lahug, Cebu City and transfer the ownership of the BPO Complex to the Cebu Province upon completion in exchange of the right to operate and manage the BPO Complex for the entire term of the agreement and its renewal (see Note 17).

In May 2010, FLI purchased land in Cainta, Rizal and paid a portion of the purchase price in 2010. The Group is committed to pay the remaining portion of the purchase price as follows: (a) second downpayment on May 31, 2011 and (b) remaining balance in monthly installments starting June 30, 2011 until May 31, 2015 (see Note 14).

EW EW has several loan related suits and claims that remain unsettled. It is not practicable to estimate the potential financial impact of these contingencies. However, in the opinion of the management, the suits and claims, if decided adversely, will not involve sums having a material effect on the consolidated financial statements.

The following is a summary of contingencies and commitments at their peso-equivalent contractual amounts arising from off-statement of financial position items of EW:

2013 2012 2011 (In Thousands) Unused credit line - credit card P=26,932,813 P=22,108,158 P=15,549,780 Trust department accounts (Note 28) 7,819,270 13,803,205 8,857,411 Forward exchange sold 2,308,540 7,150,910 15,119,147 Treasurer/cashier/manager’s checks 4,867,487 5,258,228 − Spot exchange sold 1,711,332 1,429,038 9,325,935 Unused commercial letters of credit 2,965,080 1,348,261 612,741 Outstanding guarantees 957,760 483,008 568,910 Inward bills for collection 930,110 68,507 88,054 Late deposits/payments received 37,132 20,202 3,620 Outward bills for collection 12,581 14,010 47,814 Others 730 600 502

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PSHC The Group’s milling contracts with planters provide for a certain sharing ratio between the planters and the Group for the resulting sugar and molasses produced from canes milled (see Note 40).

As of December 31, 2013 and 2012, the Group has in its custody certain volumes of sugar owned by the quedan holders. These are not reflected in the Group’s consolidated statements of financial position since these are not assets of the Group. The Group is accountable to the quedan holders for the value of these trusted sugar or their sales proceeds.

In 2011, in relation with an ongoing case involving PSHC, the latter’s subsidiaries DSCC, HYSFC and CSCC received Notice of Garnishment from the court covering their respective money, goods, effects, stocks, interest in stocks/shares/credits/accounts receivables and any other personal properties in each of the entities’ possession or control belonging to PSHC including the shares of common stock of each entity.

32. Project Investment Agreements

FAI entered into project investment agreements (PIAs) with various investors to undertake the various developments (the Projects) on FAI’s properties (except for Pioneer Pointe where FAI acts only as project manager). Under the PIA, the investors (co-owners and co-developers of the projects) committed to invest in the Projects by contributing a proportionate share in the total project cost through capital contributions.

Simultaneous with the signing of the PIAs, each investor opened a trust account to be maintained in the investor’s name. EW acts as the trustee and will receive, hold, manage and disburse the fund in trust for the investor and in a manner set forth in the PIAs and Trust Agreements. The trustee will also hold in trust for the investor, the latter’s undivided pro-rata interest and title to the related project until the same is transferred to the name of the investor or his assignee.

FAI, as owner of the parcels of land grants in favor of the investors an option to purchase the said lots subject to the terms and conditions as specified in the PIAs.

In consideration of the services to be rendered, FAI as the Manager of the Projects. it will receive a management fee computed at certain percentages of the total project cost.

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33. Income Tax

The components of net deferred tax assets follow:

2012 (As restated, 2013 Note 2) (In Thousands) Deferred income tax assets on: Allowance for impairment and credit losses P=1,327,162 P=1,041,281 NOLCO 41,905 141,480 Unrealized foreign exchange loss 172,824 117,340 Depreciation of assets foreclosed or dacioned 80,892 71,681 Provision for accruals 46,949 53,394 MCIT 43,164 44,569 Provision for retirement and unamortized past service cost 47,331 36,324 Cash flow hedge reserve 23,338 − Others 33,397 42,024 1,816,962 1,548,093 Deferred income tax liabilities on: Branch license acquired from business combination (187,620) (187,620) Gain on asset foreclosure and dacion transactions (134,346) (83,084) Excess of fair value over cost of investment property and property and equipment acquired in business combination (46,577) (49,084) Revaluation increment in land (19,856) (19,856) Net retirement plan assets – (92) Unrealized foreign exchange gain (94,984) (1,126) Others (12,297) − (495,680) (340,862) P=1,321,282 P=1,207,231

The components of the net deferred tax liabilities follow:

2012 (As restated, 2013 Note 2) (In Thousands) Deferred income tax liabilities on: Deemed cost revaluation increment in investment properties and property, plant and equipment P=4,093,377 P=4,010,671 Capitalized borrowing costs 2,633,565 2,489,055 Excess of fair value over cost of investment property and property and equipment acquired in business combination 143,273 114,930 Future taxable rent income 28,173 20,285 Others 99,700 8,559 6,998,088 6,643,500 (Forward) *SGVFS007153* - 107 -

2012 (As restated, 2013 Note 2) (In Thousands) Deferred income tax assets on: Allowance for probable losses (P=26,754) (=P56,775) Provision for retirement and unamortized past service cost (99,239) (51,365) NOLCO – (20,661) MCIT – (3,305) Others (52,167) (6,379) (178,160) (138,485) P=6,819,928 P=6,505,015

The Group did not recognize deferred tax assets on the following temporary differences, carryforward benefits of NOLCO and MCIT of subsidiaries since management believes that the benefit will not be realized through income tax deductions in the near future.

2013 2012 (In Thousands) Allowance for credit and impairment losses P=394,890 P=686,379 NOLCO 10,378 128,596 Excess MCIT over RCIT 100 3,545 Accrued expenses – 474

Details of the Group’s NOLCO and MCIT are as follows (in thousands):

Year Incurred NOLCO MCIT Expiry Date 2013 P=36,662 P=12,666 December 31, 2016 2012 118,895 23,206 December 31, 2015 2011 75,202 17,340 December 31, 2014 P=230,759 P=53,212

The following are the movements in NOLCO and MCIT:

NOLCO MCIT 2013 2012 2013 2012 (In Thousands) NOLCO Balance at beginning of year P=551,101 P=1,264,320 P=50,334 P=101,269 Addition 44 118,894 10,545 23,203 Expired/applied (320,386) (832,113) (7,667) (74,138) Balance at end of year P=230,759 P=551,101 P=53,212 P=50,334

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The reconciliation of the provision for income tax computed at the statutory tax rate to the actual provision for income tax follows:

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Income tax at statutory rate P=2,375,981 P=2,181,140 P=1,843,955 Adjustments for: Expired MCIT 9,599 183,321 5,878 Nondeductible expenses 213,897 133,882 153,985 Expired NOLCO 80,273 12,925 1,850 Tax-free realized gross profit on sales of BOI-registered property (383,841) (292,643) (186,855) Nontaxable income (594,770) (247,171) (121,191) FCDU Income (73,524) (186,543) (97,998) Rent income covered by Philippine Economic Zone Authority (PEZA) (146,121) (119,317) (90,138) Income subjected to final tax (84,720) (118,422) (154,278) ITH incentive availed (41,143) (53,511) (38,550) Tax-free realized gross profit on sold socialized housing units (28,030) (26,283) (118,188) Movements in unrecognized deferred tax assets 124,088 (23,575) 5,934 Capital gains tax 704 (193) (1,401) Others 10,312 (16,038) (23,531) P=1,462,705 P=1,427,572 P=1,179,472

Under Philippine tax laws, EW is subject to percentage and other taxes as well as income taxes, principally consisting of GRT and documentary stamp taxes.

34. Segment Information

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments.

The Group derives its revenues from the following reportable segments:

Real Estate This involves acquisition of land, planning and development of large-scale fully integrated residential and commercial communities; development and sale of residential and commercial lots and the development and leasing of retail and office space and land in these communities; construction and sale of residential, housing and condominium and office buildings; development of farm estates, industrial and business parks; operation of cinema and mall; and property management.

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Banking and Financial Services This involves commercial banking operations, including savings and time deposits in pesos and foreign currencies; commercial mortgage and agribusiness loans; payment services, fund transfers, international trade settlements and remittances from overseas workers; trust and investment services including portfolio management, unit funds, trust administration and estate planning; and safety deposit facilities.

Sugar Operations This involves operation of agricultural lands for planting and cultivating farm products and operation of a complete sugar central for the purpose of milling or converting sugar canes to centrifugal or refined sugar.

Hotel Operations This involves operation of hotels, including management of resorts, villas, service apartment and other services for the pleasure, comfort and convenience of guests in said establishments under its management.

Power Generation Operations This involves the establishment, construction, operation and supply of power to offtakers. This segment is still under various stage to include pre-operating, research, development and construction of facilities.

The financial information on the operations of these business segments as shown below are based on the measurement principles that are similar with those used in measuring the assets, liabilities, income and expenses in the consolidated financial statements which is in accordance with PFRS except for the adjusted EBITDA.

December 31, 2013 Banking and Power Real Estate Financial Sugar Hotel Generation Operations Services Operations Operations Business Combined Eliminating Consolidated (In Thousands) Revenues and Other Income External customers P=16,493,021 P=14,601,025 P=2,756,056 P=986,496 P=27 P=34,836,625 P=– P=34,836,625 Inter-segment 2,519,500 46,417 2,638,925 4,267 484 5,209,593 (5,209,593) – P=19,012,521 P=14,647,442 P=5,394,981 P=990,763 P=511 P=40,046,218 (P=5,209,593) P=34,836,625 Adjusted EBITDA P=8,717,130 P=2,557,042 P=651,888 P=115,753 (P=70,311) P=11,971,502 (P=1,656,598) P=10,314,904 Net income (loss) P=6,281,146 P=1,620,739 P=333,435 (P=97,112) (P=78,970) P=8,059,238 (P=1,602,007) P=6,457,231 Assets Operating assets P=179,976,911 P=158,570,429 P=3,328,501 P=1,085,931 P=960,827 P=343,922,599 (P=73,158,593) P=270,764,006 Less deferred tax asset 283,948 995,125 16,816 – 2,055 1,297,944 23,338 1,321,282 Net operating assets P=179,692,963 P=157,575,304 P=3,311,685 P=1,085,931 P=958,772 P=342,624,655 (P=73,181,931) P=269,442,724 Liabilities Operating liabilities P=79,262,905 P=138,537,511 P=2,469,995 P=211,074 P=55,397 P=220,536,882 (P=34,458,211) P=186,078,671

December 31, 2012 (As restated, Note 2) Banking and Power Real Estate Financial Sugar Hotel Generation Operations Services Operations Operations Business Combined Eliminating Consolidated (In Thousands) Revenues and Other Income External customers P=15,148,372 P=11,446,467 P=2,468,757 P=706,840 P=555 P=29,770,991 P=– P=29,770,991 Inter-segment 3,783,773 491,958 920,881 22,519 840 5,219,971 (5,219,971) – P=18,932,145 P=11,938,425 P=3,389,638 P=729,359 P=1,395 P=34,990,962 (P=5,219,971) P=29,770,991 Adjusted EBITDA P=9,823,829 P=2,980,288 P=590,972 P=195,606 (P=53,490) P=13,537,205 (P=4,031,629) P=9,505,576 Net income (loss) P=7,220,273 P=2,243,239 P=253,643 P=130,688 (P=57,598) P=9,790,245 (P=3,947,350) P=5,842,895

(Forward)

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December 31, 2012 (As restated, Note 2) Banking and Power Real Estate Financial Sugar Hotel Generation Operations Services Operations Operations Business Combined Eliminating Consolidated (In Thousands) Assets Operating assets P=158,046,121 P=125,379,397 P=3,466,983 P=976,564 P=591,659 P=288,460,724 (P=48,386,507) P=240,074,217 Less deferred tax asset 223,762 973,137 6,967 1,310 2,055 1,207,231 – 1,207,231 Net operating assets P=157,822,359 P=124,406,260 P=3,460,016 P=975,254 P=589,604 P=287,253,493 (P=48,386,507) P=238,866,986 Liabilities Operating liabilities P=61,390,016 P=107,458,811 P=2,737,925 P=203,636 P=55,275 P=171,845,663 (P=11,120,178) P=160,725,485

December 31, 2011 (As restated, Note 2) Banking and Power Real Estate Financial Sugar Hotel Generation Operations Services Operations Operations Business Combined Eliminating Consolidated (In Thousands) Revenues and Other Income External customers P=12,315,228 P=9,115,246 P=2,279,378 P=555,927 P=4 P=24,265,783 P=– P=24,265,783 Inter-segment 4,080,372 173,262 500 15,837 1,944 4,271,915 (4,271,915) – P=16,395,600 P=9,288,508 P=2,279,878 P=571,764 P=1,948 P=28,537,698 (P=4,271,915) P=24,265,783 Adjusted EBITDA P=9,193,198 P=2,646,168 P=149,373 P=152,323 (P=71,311) P=12,069,751 (P=3,906,004) P=8,163,747 Net income (loss) P=6,991,898 P=1,865,474 (P=93,485) P=73,617 (P=72,272) P=8,765,232 (P=3,798,186) P=4,967,046 Assets Operating assets P=140,655,018 P=98,781,193 P=3,419,573 P=772,195 P=184,627 P=243,812,606 (P=43,153,328) P=200,659,278 Less deferred tax asset 322,637 928,158 22,405 1,459 – 1,274,659 – 1,274,659 Net operating assets P=140,332,381 P=97,853,035 P=3,397,168 P=770,736 P=184,627 P=242,537,947 (P=43,153,328) P=199,384,619 Liabilities Operating liabilities P=49,243,043 P=87,384,747 P=2,406,102 P=172,321 P=13,595 P=139,219,808 (P=8,459,941) P=130,759,867

The Group’s chief operating decision-maker also use net income per segment after elimination in assessing performance of the identified reportable segments, as follows:

Net Income Net Income (Loss) Before Eliminating (Loss) After Elimination Entries Elimination (In Thousands) December 31, 2013 Real estate operations P=6,281,146 (P=1,815,594) P=4,465,552 Financial and banking services 1,620,739 98,685 1,719,424 Sugar operations 333,435 11,397 344,832 Hotel operations (97,112) 103,424 6,312 Power generation operations (78,970) 81 (78,889) P=8,059,238 (P=1,602,007) P=6,457,231 December 31, 2012 (As restated, Note 2) Real estate operations P=7,220,273 (P=3,626,738) P=3,593,535 Financial and banking services 2,243,239 (445,403) 1,797,836 Sugar operations 253,643 29,396 283,039 Hotel operations 130,688 92,553 223,241 Power generation operations (57,598) 2,842 (54,756) P=9,790,245 (P=3,947,350) P=5,842,895 December 31, 2011 (As restated, Note 2) Real estate operations P=6,991,898 (P=3,796,552) P=3,195,346 Financial and banking services 1,865,474 (139,441) 1,726,033 Sugar operations (93,485) 40,441 (53,044) Hotel operations 73,617 96,973 170,590 Power generation operations (72,272) 393 (71,879) P=8,765,232 (P=3,798,186) P=4,967,046

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The following table shows a reconciliation of the total adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to total income before income tax:

2012 2011 (As restated, (As restated, 2013 Note 2) Note 2) (In Thousands) Adjusted EBITDA for reportable segments P=10,314,904 P=9,505,576 P=8,163,747 Depreciation and amortization (1,518,849) (1,239,312) (1,046,144) Operating profit 8,796,055 8,266,264 7,117,603 Interest expense (876,119) (995,797) (971,085) Income before income tax P=7,919,936 P=7,270,467 P=6,146,518

35. Fair Value Measurement

The following table sets forth the fair value hierarchy of the Group’s assets and liabilities measured at fair value and those for which fair values are required to be disclosed:

2013 Fair Value Quoted Prices Significant Significant in active observable unobservable Carrying market inputs inputs Value Total (Level 1) (Level 2) (Level 3) (In Thousands) Assets measured at fair value Financial assets Financial assets at FVTPL Government securities P=691,437 P=691,437 P=691,437 P=– P=– Private bonds 543,626 543,626 543,626 – – Equity securities 713,640 713,640 713,640 – – 1,948,703 1,948,703 1,948,703 – – Derivative assets 430,046 430,046 – 430,046 – Financial assets at FVTOCI Quoted equity securities 97,733 97,733 97,733 – – Unquoted equity securities 39,428 39,428 – – 39,428 137,161 137,161 97,733 – 39,428 Assets for which fair values are disclosed Financial assets Investment securities at amortized cost Government securities 7,667,254 7,778,029 7,778,029 – – Private bonds 1,413,066 1,752,318 1,752,318 – – 9,080,320 9,530,347 9,530,347 – – Loans and receivables Real estate operations Contracts receivable 13,389,091 13,624,352 – – 13,624,352 Receivables from sale of condominium units and club shares 375,309 375,309 – – 375,309 Receivables from tenants 414,380 414,380 – – 414,380 14,178,780 14,414,041 – – 14,414,041 Financial and banking services Corporate lending 41,393,457 40,817,118 – – 40,817,118 Consumer lending 44,604,864 49,835,496 – – 49,835,496 Unquoted debt securities 380,081 380,081 – – 380,081 86,378,402 91,032,695 – – 91,032,695 Non-financial assets Investment properties 39,055,000 50,119,732 – – 50,119,732 Total assets P=151,208,412 P=167,612,725 P=11,576,783 P=430,046 P=155,605,896

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2013 Fair Value Quoted Prices Significant Significant in active observable unobservable Carrying market inputs inputs Value Total (Level 1) (Level 2) (Level 3) (In Thousands) Liabilities measured at fair value Financial liabilities Derivative liabilities P=22,017 P=22,017 P=– P=22,017 P=– Liabilities for which fair values are disclosed Financial liabilities at Amortized Costs Deposit liabilities Time 39,134,678 41,314,743 – – 41,314,743 LTNCD 5,466,003 6,997,876 – – 6,997,876 44,600,681 48,312,619 – – 48,312,619 Accounts Payable and Accrued Expenses Accounts payable 11,127,276 10,707,187 – – 10,707,187 Accrued expenses 1,391,923 1,391,923 – – 1,391,923 Deposits for registration and insurance 1,127,420 1,127,420 – – 1,127,420 Retention fee payable 1,100,243 1,100,243 – – 1,100,243 Deposits 488,711 488,711 – – 488,711 Liabilities on receivables sold to bank 37,240 33,716 – – 33,716 15,272,813 14,849,200 – – 14,849,200 Long-term debt 59,093,035 62,290,717 – – 62,290,717 P=118,988,546 P=125,474,553 P=– P=22,017 P=125,452,536

2012 Fair Value Quoted Significant Significant Prices in observable unobservable Carrying active market inputs inputs Value Total (Level 1) (Level 2) (Level 3) (In Thousands) Assets measured at fair value Financial assets Financial assets at FVTPL: HFT investments: Government securities P=1,805,939 P=1,805,939 P=1,805,939 P=− P=− Private bonds 1,206,722 1,206,722 1,206,722 − − Equity securities 1,247,664 1,247,664 1,247,664 − − 4,260,325 4,260,325 4,260,325 − − Derivative assets 41,316 41,316 − 41,316 − Financial assets at FVTOCI Quoted equity securities 109,424 109,424 109,424 − − Unquoted equity securities 49,614 49,614 − − 49,614 159,038 159,038 109,424 − 49,614− Assets for which fair values are disclosed Financial assets Investment securities at amortized cost Government securities 7,923,922 7,778,029 7,778,029 − − Private bonds 1,696,583 1,752,318 1,752,318 − − 9,620,505 9,530,347 9,530,347 − − Loans and receivables Real estate operations Contracts receivable 11,392,303 10,955,169 − − 10,955,169 Receivables from sale of condominium units and club shares 576,262 576,262 − − 576,262 Receivables from tenants 533,285 533,285 − − 533,285 Receivables from investors in projects 218,868 218,868 − − 218,868 12,720,718 12,283,584 − − 12,283,584

(Forward)

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2012 Fair Value Quoted Significant Significant Prices in observable unobservable Carrying active market inputs inputs Value Total (Level 1) (Level 2) (Level 3) (In Thousands) Financial and banking services Corporate lending P= 32,297,179 P=33,170,656 P=− P=− P=33,170,656 Consumer lending 34,967,306 35,964,451 − − 35,964,451 Unquoted debt securities 375,837 375,837 − − 375,837 67,640,322 69,510,944 − − 69,510,944 Non-financial assets Investment properties 36,343,386 44,731,028 44,731,028 Total assets P=130,785,610 P=140,516,582 P=13,900,096 P=41,316 P=126,575,170

Liabilities measured at fair value Financial liabilities Derivative liabilities P=97,684 P=97,684 P=− P=97,684 P=− Liabilities for which fair values are disclosed Financial liabilities at Amortized Costs Deposit liabilities Time 39,134,678 41,314,743 − − 41,314,743 LTNCD 5,466,003 6,997,876 − − 6,997,876 44,600,681 48,312,619 48,312,619 Accounts Payable and Accrued Expenses Accounts payable 9,679,899 9,490,207 9,490,207 Accrued expenses 1,155,636 1,155,636 1,155,636 Deposits for registration and insurance 1,399,179 1,399,179 1,399,179 Retention fee payable 944,643 944,643 944,643 Deposits 430,793 430,793 430,793 Liabilities on receivables sold to bank 189,441 176,601 176,601 13,799,591 13,597,059 13,597,059 Long-term debt 42,204,395 41,085,958 41,085,958 P=100,702,351 P=103,093,320 P= − P=97,684 P=102,995,636

The methods and assumptions used by the Group in estimating the fair value of the financial instruments are:

· FVTPL Financial Assets: Fair value is based on quoted prices as of reporting dates.

· Loans and Receivables: Fair values of loans and receivables is based on the discounted value of future cash flows using the prevailing interest rates and current incremental lending rates for similar types of receivables for real estate operations and financial and banking services, respectively. Carrying amounts of cash and cash equivalents approximate fair values considering that these consist mostly of overnight deposits and floating rate placements.

· Debt securities - Fair values are generally based upon quoted market prices. If the market prices are not readily available, fair values are estimated using either values obtained from independent parties offering pricing services or adjusted quoted market prices of comparable investments or using the discounted cash flow methodology.

· Equity securities - Fair values of quoted equity securities are based on quoted market prices. The costs of unquoted equity investments approximate their fair values since there is insufficient more recent information available to determine fair values and there are no indicators that cost might not be representative of fair value.

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· Due To/From Related Parties: The carrying amounts approximate fair values due to short- term nature of transactions.

· Deposit Liabilities: Fair values of liabilities approximate their carrying amounts due either to the demand nature or the relatively short-term maturities of these liabilities except for time deposit liabilities whose fair value are estimated using the discounted cash flow methodology using EW’s incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being valued.

· Bills and Acceptances Payable: The carrying amounts approximate fair values due to short- term nature of transactions.

· Accounts Payable and Accrued Expenses: On accounts due within one year, the fair value of accounts payable and accrued expenses approximates the carrying amounts. On accounts due for more than one year, estimated fair value is based on the discounted value of future cash flows using the prevailing interest rates on loans and similar types of payables.

· Long-term Debt: Estimated fair value on debts with fixed interest and not subjected to quarterly repricing is based on the discounted value of future cash flows using the applicable risk free rates for similar types of loans adjusted for credit risk. Long-term debt subjected to quarterly repricing is not discounted since it approximates fair value.

The discount rates used ranged from 3.8% to 7.7% and 5.0% to 18.4% in 2013 and 2012, respectively.

During the years ended December 31, 2013 and 2012, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

36. Financial Risk Management Objectives and Policies

The Group’s principal financial instruments are composed of cash and cash equivalents, FVTPL, FVTOCI and investment securities at amortized cost, loans from financial institutions, mortgage and contracts receivables and other receivables. The main purpose of these financial instruments is to raise financing for the Group’s operations.

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.

Financial and Banking Operations Risk Management To ensure that corporate goals and objectives and business and risk strategies are achieved, EW utilizes a risk management process that is applied throughout the organization in executing all business activities. Employees’ functions and roles fall into one of the three categories where risk must be managed in the business units, operating units and governance units.

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EW’s activities are principally related to the use of financial instruments and are exposed to credit risk, liquidity risk and market risk, the latter being subdivided into trading and non-trading risks. It is also subject to operating risks. Forming part of a coherent risk management system are the risk concepts, trading tools, analytical models, statistical methodologies, historical researches and market analysis, which are being employed by EW. These tools support the key risk process that involves identifying, measuring, controlling and monitoring risks.

Risk Management Structure a. BOD EW’s risk culture is practiced and observed across EW putting the prime responsibility on the BOD. It establishes the risk culture and the risk management organization and incorporates the risk process as an essential part of the strategic plan of EW. The BOD approves EW’s articulation of risk appetite which is used internally to help management understand the tolerance for risk in each of the major risk categories, its measurement and key controls available that influence EW’s level of risk taking. All risk management policies and policy amendments, risk-taking limits such as but not limited to credit and trade transactions, market risk limits, counterparty limits, trader’s limits and activities are based on EW’s established approving authorities which are approved by EW’s BOD. At a high level, the BOD also approves EW’s framework for managing risk. b. Executive Committee This is a Board level committee, which reviews the bank-wide credit strategy, profile and performance. It approves the credit risk-taking activities based on EW’s established approving authorities and likewise reviews and endorses credit-granting activities, including the Credit Risk Rating System. All credit proposals beyond the credit approving limit of the Loan and Investments Committee passes through this committee for final approval. c. Asset-Liability Management Committee (ALCO) ALCO, a management level committee, meets on a weekly basis and is responsible for the over-all management of EW’s market, liquidity, and statement of financial position related risks. It monitors EW’s liquidity position and reviews the impact of strategic decisions on liquidity. It is responsible for managing liquidity risks and ensuring exposures remain within established tolerance levels. The ALCO’s primary responsibilities include, among others, (a) ensuring that EW and each business unit holds sufficient liquid assets of appropriate quality and in appropriate currencies to meet short-term funding and regulatory requirements, (b) managing statement of financial position and ensuring that business strategies are consistent with its liquidity, capital and funding strategies, (c) establishing asset and/or liability pricing policies that are consistent with statement of financial position objectives, (d) recommending market and liquidity risk limits to the Risk Management Committee and BOD and (e) approving the assumptions used in contingency and funding plans. It also reviews cash flow forecasts, stress testing scenarios and results, and implements liquidity limits and guidelines. d. Risk Management Committee (RMC) This Board level committee oversees the effectiveness of EW’s over-all risk management strategies, practices and policies. The RMC reviews and approves principles, policies, strategies, processes and control frameworks pertaining to risk management and recommends to the BOD, as necessary, changes in strategies and amendments in policies. The RMC also evaluates EW’s risk exposures and estimates its impact to EW, evaluates the magnitude, direction and distribution of risks across EW and uses this as basis in the determination of risk tolerances that it subsequently recommends to the BOD for approval.

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It reports to the BOD EW’s overall risk exposures and the effectiveness of its risk management practices and processes recommending further policy revisions as necessary. e. Loan and Investments Committee This committee is headed by the Chairman of EW whose primary responsibility is to oversee EW’s credit risk-taking activities and overall adherence to the credit risk management framework, review business/credit risk strategies, quality and profitability of EW’s credit portfolio and recommends changes to the credit evaluation process, credit risk acceptance criteria and the minimum and target return per credit or investment transaction. All credit risk-taking activities based on EW’s established approving authorities are evaluated and approved by this committee. It establishes infrastructure by ensuring business units have the right systems and adequate and competent manpower support to effectively manage its credit risk. f. Audit Committee (Audit Com) The Audit Com assists the BOD in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process, and EW’s process for monitoring compliance with laws and regulation and the code of conduct. It retains oversight responsibility for operational risk, the integrity of EW’s financial statements, compliance, legal risk and overall policies and practices relating to risk management. It is tasked to discuss with management of EW’s major risk exposures and ensures accountability on the part of management to monitor and control such exposures including EW’s risk assessment and risk management policies. The Committee discusses with management and the independent auditor the major issues regarding accounting principles and financial statement presentation, including any significant changes in EW’s selection or application of accounting principles; and major issues as to the adequacy of EW’s internal controls; and the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of EW. g. Corporate Governance and Compliance Committee (CGCC) The CGCC is responsible for ensuring the BOD’s effectiveness and due observance of corporate governance principles and guidelines. It reviews and assesses the adequacy of the CGCCs charter and Corporate Governance Manual and recommends changes as necessary. It oversees the implementation of EW’s compliance program and ensures compliance issues are resolved expeditiously. It assists Board members in assessing whether EW is managing its compliance risk effectively and ensures regular review of the compliance program. h. Risk Management Division (RMD) RMD performs an independent risk governance function within EW. RMD is tasked with identifying, measuring, controlling and monitoring existing and emerging risks inherent in EW’s overall portfolio (on- or off-balance sheet). RMD develops and employs risk assessment tools to facilitate risk identification, analysis and measurement. It is responsible for developing and implementing the framework for policies and practices to assess and manage enterprise-wide market, credit, operational, and all other risks of EW.

It also develops and endorses risk tolerance limits for BOD approval, as endorsed by the RMC, and monitors compliance to approved risk tolerance limits. Finally, it regularly apprises the BOD, through the RMC, the results of its risk monitoring.

*SGVFS007153* - 117 - i. Internal Audit Division (IAD) IAD provides an independent assessment of EW’s management and effectiveness of existing internal control systems through adherence testing of processes and controls across the organization. The IAD audits risk management processes throughout EW annually or in a cycle depending on the latest audit rating. It employs a risk-based audit approach that examines both the adequacy of the procedures and EW’s compliance with the procedures. It discusses the results of all assessments with management, and reports its findings and recommendations to the Aud Com which in turn, conducts the detailed discussion of the findings and recommendations during its regular meetings. IAD’s activities are suitably designed to provide the BOD with reasonable assurance that significant financial and operating information is materially complete, reliable and accurate; internal resources are adequately protected; and employee performance is in compliance with EW’s policies, standards, procedures and applicable laws and regulations. j. Compliance Division Compliance Division is responsible for reviewing any legal or regulatory matters that could have a significant impact on EW’s financial statements, EW’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies. It reviews the effectiveness and adequacy of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) for any instances of noncompliance.

Credit Risk Credit risk refers to the potential loss of earnings or capital arising from an obligor/s, customer/s or counterparty’s failure to perform and/or to meet the terms of any contract with EW. Credit risks may last for the entire tenor and set at the full amount of a transaction and in some cases may exceed the original principal exposures. The risk may arise from lending, trade financing, trading, investments and other activities undertaken by EW. To identify and assess this risk, EW has a structured and standardized credit rating, and approval process according to the borrower or business and/or product segment.

For large corporate credit transactions, EW has a comprehensive procedure for credit evaluation, risk assessment and well-defined concentration limits, which are established for each type of borrower. At the portfolio levels, which may be on an overall or by product perspective, RMD manages EW’s credit risk.

Credit concentration Excessive concentration of lending plays a significant role in the weakening of asset quality. EW reduces this risk by diversifying its loan portfolio across various sectors and borrowers. EW believes that good diversification across economic sectors and geographic areas, among others, will enable it to ride through business cycles without causing undue harm to its asset quality.

RMD reviews EW’s loan portfolio in line with EW’s policy of not having significant concentrations of exposure to specific industries or group of borrowers. Management of concentration of risk is by client/counterparty and by industry sector. For risk concentration monitoring purposes, the financial assets are broadly categorized into loans and receivables, loans and advances to banks, and investment securities. RMD ensures compliance with BSP’s limit on exposure to any single person or group of connected persons by closely monitoring large exposure and top 20 borrowers for both single and group accounts.

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Aside from ensuring compliance with BSP’s limit on exposures to any single person or group of connected persons, it is EW’s policy to keep the expected loss (determined based on the credit risk rating of the account) of large exposure accounts to, at most, one percent (1%) of their aggregate outstanding balance. This is to maintain the quality of EW’s large exposures. With this, accounts with better risk grades are given priority in terms of being granted a bigger share in EW’s loan facilities.

Aligned with the Manual of Regulations for Banks definition, EW considers its loan portfolio concentrated if it has exposures more than thirty percent (30%) to a particular industry.

Credit concentration profile as of December 31, 2013 and 2012 Maximum credit risk exposures The following table shows EW’s maximum exposure to credit risk without taking into account any collateral held or other credit enhancements (amounts in thousands):

2013 2012 Maximum Financial Maximum Financial Carrying Fair Value Exposure to Effect of Carrying Fair Value Exposure to Effect of Amount of Collateral Credit Risk Collateral Amount of Collateral Credit Risk Collateral Loans and receivables Receivables from customers Corporate lending P=47,588,271 P=13,143,982 P=38,940,835 P=8,647,436 P=31,720,228 P=6,422,793 P=25,297,435 P=6,422,793 Consumer lending 44,871,825 20,544,130 38,413,862 6,457,963 38,165,990 14,304,823 31,119,961 7,046,029 P=92,460,096 P=33,688,112 P=77,354,697 P=15,105,399 P=69,886,218 P=20,727,616 P=56,417,396 P=13,468,822

For off-balance sheet items, the figures presented below summarize EW’s maximum exposure to credit risk:

2013 2012 Credit Equivalent Credit Risk Net Credit Credit Equivalent Credit Risk Net Credit Amount Mitigation Exposure Amount Mitigation Exposure Off-balance sheet items Direct credit substitutes P=400,119 P=− P=400,119 P=214,973 P=− P=214,973 Transaction-related contingencies 711,373 − 711,373 254,741 − 254,741 Trade-related contingencies arising from movement of goods and commitments with an original maturity of up to one (1) year 419,995 − 419,995 221,363 − 221,363 P=1,531,487 P=− P=1,531,487 P=691,077 P=− P=691,077

Large exposures and top 20 borrowers The table below summarizes large exposure and top 20 borrowers of EW (amounts in billions):

2013 Top 20 Borrowers Large Exposures Single Group Single Group Borrowers Borrowers Borrowers Borrowers Aggregate Exposure 20.03 24.09 13.83 16.49 Composite Risk Rating 3.25 3.4 2.8 2.93 Total Expected Loss/Aggregate Exposure 0.68% 0.82% 0. 54% 0.58%

2012 Top 20 Borrowers Large Exposures Single Group Single Group Borrowers Borrowers Borrowers Borrowers Aggregate Exposure P=15.63 P=17.50 P=9.58 P=11.41 Composite Risk Rating 3.71 3.79 3.87 3.72 Total Expected Loss/Aggregate Exposure 0.81% 0.90% 0.88% 0.81%

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As of December 31, 2013 and 2012, the maximum credit exposure to any client or counterparty is about =4.5P billion and P=3.9 billion, respectively. These maximum credit exposures, after due consideration of the allowed credit enhancements of EW, are all compliant with the regulatory single borrower’s limit and considered to be the maximum credit exposure to any client or counterparty.

Concentration by industry An industry sector analysis of the financial assets of EW follows (amounts in thousands):

2013 Loans and Loans and Advances to Investment Receivables* Banks** Securities*** Total Financial intermediaries P=27,311,023 P=23,564,450 P=11,039,756 P=61,915,229 Real estate and renting and business activity 24,897,531 − − 24,897,531 Private households with employed persons 61,426,923 − − 61,426,923 Wholesale and retail trade, repair of motor vehicles 15,129,128 − − 15,129,128 Manufacturing 14,848,725 − − 14,848,725 Agriculture, fisheries and forestry 1,424,364 − − 1,424,364 Transportation, storage and communication 1,632,873 − − 1,632,873 Others**** 33,371,803 − − 33,371,803 180,042,370 23,564,450 11,039,756 214,646,576 Allowance for credit losses (4,002,355) − − (4,002,355) P=176,040,015 P=23,564,450 P=11,039,756 P=210,644,221 * Includes commitments and contingent accounts. ** Comprised of Other cash items, Due from BSP, Due from other banks and IBLR. *** Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost. **** Pertains to unclassified loans and receivables, commitments and contingent accounts.

2012 Loans and Loans and Advances to Investment Receivables* Banks** Securities*** Total Financial intermediaries P=36,928,126 P=24,089,624 P=13,890,812 P=74,908,562 Real estate and renting and business activity 14,725,528 − − 14,725,528 Private households with employed persons 49,136,103 − − 49,136,103 Wholesale and retail trade, repair of motor vehicles 13,922,230 − − 13,922,230 Manufacturing 6,590,972 − − 6,590,972 Agriculture, fisheries and forestry 4,911,807 − − 4,911,807 Transportation, storage and communication 1,955,996 − − 1,955,996 Others**** 26,480,558 − − 26,480,558 154,651,320 24,089,624 13,890,812 192,631,756 Allowance for credit losses (3,154,065) − − (3,154,065) P=151,497,255 P=24,089,624 P=13,890,812 P=189,477,691 * Includes commitments and contingent accounts. ** Comprised of Other cash items, Due from BSP, Due from other banks and IBLR. *** Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost. **** Pertains to unclassified loans and receivables, commitments and contingent accounts.

Collateral and other credit enhancements Collaterals are taken into consideration during the loan application process as they offer an alternative way of collecting from the client should a default occur. The percentage of loan value attached to the collateral offered is part of EW’s lending guidelines. Such percentages take into account safety margins for foreign exchange rate exposure/fluctuations, interest rate exposure, and price volatility.

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Collaterals are valued according to existing credit policy standards and, following the latest appraisal report, serve as the basis for the amount of the secured loan facility.

Premium security items are collaterals that have the effect of reducing the estimated credit risk for a facility. The primary consideration for enhancements falling under such category is the ease of converting them to cash.

EW is not permitted to sell or re-pledge the collateral in the absence of default by the owner of the collateral. It is the Parent Company’s policy to dispose foreclosed assets in an orderly fashion.

The proceeds of the sale of the foreclosed assets, included under Investment Properties, are used to reduce or repay the outstanding claim. In general, the Parent Company does not occupy repossessed properties for business use.

As part of the Parent Company’s risk control on security/collateral documentation, standard documents are made for each security type and deviation from the pro-forma documents are subject to Legal Services Division’s approval prior to acceptance.

Credit collaterals profile The table below provides the collateral profile of the outstanding loan portfolio of EW:

Security Corporate Loans Consumer Loans 2013 2012 2013 2012 REM* 11.13% 12.53% 14.80% 16.50% Other Collateral** 24.50% 13.83% 23.74% 33.96% Unsecured 64.37% 73.65% 61.46% 49.54% * Real Estate Mortgage ** Consists of government securities, stocks and bonds, hold-out on deposits, assignment of receivables and inventories, etc.

As for the computation of credit risk weights, collaterals of the back-to-back and Home Guaranty covered loans, and Philippine sovereign guarantees are the only credit risk mitigants considered as eligible.

Internal Credit Risk Rating System EW employs a credit scoring system for all corporate borrowers to assess risks relating to the borrower and the loan exposure. Borrower risk is evaluated by considering (a) quantitative factors under financial condition and (b) qualitative factors, such as management quality and industry outlook.

Financial condition assessment focuses on profitability, liquidity, capital adequacy, sales growth, production efficiency and leverage. Management quality determination is based on EW’s strategies, management competence and skills and management of banking relationship. On the other hand, industry prospect is evaluated based on its importance to the economy, growth, industry structure and relevant government policies. Based on these factors, each borrower is assigned a Borrower Risk Rating (BRR), an 11-scale scoring system that ranges from 1 to 10, including SBL. In addition to the BRR, EW assigns a Facility Risk Rating (FRR) to determine the risk of the prospective (or existing) exposure with respect to each credit facility that it applied for (or under which the exposure is accommodated). The FRR focuses on the quality and quantity of the collateral applicable to the underlying facility, independent of borrower quality. Consideration is given to the availability and amount of any collateral and the degree of control, which the lender has over the collateral. FRR applies both to balance sheet facilities and contingent liabilities.

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One FRR is determined for each individual facility taking into account the different security arrangements or risk influencing factors to allow a more precise presentation of risk. A borrower with multiple facilities will have one BRR and multiple FRRs. The combination of the BRR and the FRR results to the Adjusted Borrower Risk Rating (ABRR).

The credit rating for each borrower is reviewed annually. A more frequent review is warranted in cases where the borrower has a higher risk profile or when there are extraordinary or adverse developments affecting the borrower, the industry and/or the Philippine economy.

The following is a brief explanation of the Parent Company’s risk grades:

Rating Description Account/Borrower Characteristics 1 Excellent · low probability of going into default within the coming year; very high debt service capacity and balance sheets show no sign of any weakness · has ready access to adequate funding sources · high degree of stability, substance and diversity · of the highest quality under virtual economic conditions 2 Strong · low probability of going into default in the coming year · access to money markets is relatively good · business remains viable under normal market conditions · strong market position with a history of successful financial performance · financials show adequate cash flows for debt servicing and generally conservative balance sheets 3 Good · sound but may be susceptible, to a limited extent, to cyclical changes in the markets in which they operate · financial performance is good and capacity to service debt remains comfortable · cash flows remain healthy and critical balance sheet ratios are at par with industry norms · reported profits in the past three years and expected to sustain profitability in the coming year 4 Satisfactory · clear risk elements exist and probability of going into default is somewhat greater, as reflected in the volatility of earnings and overall performance · normally have limited access to public financial markets · able to withstand normal business cycles, but expected to deteriorate beyond acceptable levels under prolonged unfavorable economic period · combination of reasonably sound asset and cash flow protection 5 Acceptable · risk elements for the Parent Company are sufficiently pronounced, but would still be able to withstand normal business cycles · immediate deterioration beyond acceptable levels is expected given prolonged unfavorable economic period · there is sufficient cash flow either historically or expected in the future in spite of economic downturn combined with asset protection

(Forward)

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Rating Description Account/Borrower Characteristics 5B Acceptable · financial condition hard to ascertain due to weak validation of financial statements coupled by funding leakages to other business interests whose financial condition is generally unknown · continuous decline in revenues and margins due to competition; increasing debt levels not commensurate to growth in revenues and funding requirements · thin margin business with banks financing bulk of working capital and capex requirements coupled by substantial dividend pay-outs · chronically tight cashflows with operating income negative or barely enough for debt servicing · lines with banks maxed out and availments evergreen with minimal payments made over time or with past record of past due loans with other banks, cancelled credit cards and court cases 6 Watchlist · affected by unfavorable industry or company-specific risk factors · operating performance and financial strength may be marginal and ability to attract alternative sources of finance is uncertain · difficulty in coping with any significant economic downturn; some payment defaults encountered · net losses for at least two consecutive years 7 Special Mention · ability or willingness to service debt are in doubt · weakened creditworthiness · expected to experience financial difficulties, putting the Parent Company’s exposure at risk 8 Substandard · collectability of principal or interest becomes questionable by reason of adverse developments or important weaknesses in financial cover · negative cash flows from operations and negative interest coverage · past due for more than 90 days · there exists the possibility of future loss to the Parent Company unless given closer supervision 9 Doubtful · unable or unwilling to service debt over an extended period of time and near future prospects of orderly debt service are doubtful · with non-performing loan (NPL) status · previously rated ‘Substandard’ by the BSP · loss on credit exposure unavoidable 10 Loss · totally uncollectible · prospect of re-establishment of creditworthiness and debt service is remote · lender shall take or has taken title to the assets and is preparing foreclosure and/or liquidation although partial recovery may be obtained in the future · considered uncollectible or worthless and of such little value that continuance as bankable assets is not warranted although the loans may have some recovery or salvage value

It is EW’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This facilitates a focused management of the applicable risk and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of financial analytics, combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with EW’s rating policy. The risk ratings are assessed and updated regularly.

Credit Quality Profile as of December 31, 2013 and 2012 External ratings EW also uses external ratings, such as Standard & Poor’s, Moody’s, and Fitch, to evaluate its counterparties and in its assignment of credit risk weights to its banking book exposures. Transactions falling under this category are normally of the following nature: placements with other banks, money market lending, debt security investments, and to some extent, equity security investments.

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Credit quality profile as of December 31, 2013 and 2012 External ratings EW also uses external ratings, such as Standard & Poor’s, Moody’s, and Fitch, to evaluate its counterparties and in its assignment of credit risk weights to its banking book exposures. Transactions falling under this category are normally of the following nature: placements with other banks, money market lending, debt security investments, and to some extent, equity security investments.

Investments and Financial Securities The table below shows credit quality, based on external ratings, per class of financial assets that are neither past due nor impaired of EW (amounts in thousands):

2013 AA/A BB/B Unrated Total Due from BSP P=18,537,655 P=− P=− P=18,537,655 Due from other banks 1,309,675 375,143 67,006 1,751,824 IBLR 1,340,729 1,775,800 – 3,116,529 Financial assets at FVTPL Government securities 691,437 – – 691,437 Private bonds 74,483 376,855 92,288 543,626 Equity securities 190,915 – 522,725 713,640 956,835 376,855 615,013 1,948,703 Investment securities at amortized cost Government securities 7,667,254 – – 7,667,254 Private bonds 928,394 484,259 413 1,413,066 8,595,648 484,259 413 9,080,320 Financial assets at FVTOCI Quoted equity securities – – 7,486 7,486 Unquoted equity securities 127 – 3,120 3,247 127 – 10,606 10,733 P=30,740,669 P=3,012,057 P=693,038 P=34,445,764

2012 AA/A BB/B Unrated Total Due from BSP P=− P=21,855,275 P=− P=21,855,275 Due from other banks 585,695 856,812 195,410 1,637,916 IBLR and SPURA 582,648 − − 582,648 Financial assets at FVTPL Government securities 215,853 1,590,086 − 1,805,939 Private bonds − 1,072,180 134,542 1,206,722 Equity securities 120,627 999,998 127,039 1,247,664 336,480 3,662,264 261,581 4,260,325 Investment securities at amortized cost Government securities 249,698 8,003,549 − 8,253,247 Private bonds 865,932 51,194 450,132 1,367,258 1,115,630 8,054,743 450,132 9,620,505 Financial assets at FVTOCI Unquoted equity securities − 127 9,855 9,982 P=2,620,453 P=34,429,221 P=916,978 P=37,966,652

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The tables below show the credit quality, based on the credit rating system, by class of loans and receivables that are neither past due nor impaired of EW:

2013 Standard Substandard High Grade Grade Grade Unrated Total Receivables from customers Corporate lending P=21,207,719 P=22,489,408 P= − P=− P=43,697,127 Consumer lending 5,933,895 20,580,491 19,207,950 − 45,722,336 27,141,614 43,069,899 19,207,950 − 89,419,463 Unquoted debt securities − − − 208,132 208,132 Accounts receivable 9,064 7,548 781 860,571 877,964 Accrued interest receivable 51,290 3,435 270 622,055 677,050 Sales contract receivable 2,247 421 2,797 162,797 168,262 62,601 11,404 3,848 1,853,555 1,931,408 P=27,204,215 P=43,081,303 P=19,211,798 P=1,853,555 P=91,350,871

2012 Standard Substandard High Grade Grade Grade Unrated Total Receivables from customers Corporate lending P=15,218,079 P=15,911,806 P=104,912 P=17,755 P=31,252,552 Consumer lending 1,997,023 16,462,502 16,809,692 188,889 35,458,106 17,215,102 32,374,308 16,914,604 206,644 66,710,658 Unquoted debt securities − − − 207,935 207,935 Accounts receivable − − − 280,614 280,614 Accrued interest receivable − − − 614,635 614,635 Sales contract receivable − − − 119,534 119,534 − − − 1,222,718 1,222,718 P=17,215,102 P=32,374,308 P=16,914,604 P=1,429,362 P=67,933,376

Borrowers with unquestionable repaying capacity and to whom the Parent Company is prepared to lend on an unsecured basis, either partially or totally, are generally rated as High Grade borrowers. Included in the High Grade category are those accounts that fall under ‘Excellent’, ‘Strong’, ‘Good’ and ‘Satisfactory’ categories under ICRRS (with rating of 1-4).

Standard rated borrowers normally require tangible collateral, such as real estate mortgage (REM), to either fully or partially secure the credit facilities as such accounts indicate a relatively higher credit risk than those considered as High Grade. Included in Standard Grade category are those accounts that fall under ‘Acceptable’, ‘Watchlist’ and ‘Special mention’ categories under ICRRS (with rating of 5-7).

Substandard Grade accounts pertain to corporate accounts falling under the ‘Substandard,’ ‘Doubtful’ and ‘Loss’ categories under ICRRS (with rating of 8-10) and unsecured revolving credit facilities.

Those accounts that are classified as unrated includes consumer loans, unquoted debt securities, accounts receivable, accrued interest receivable and sales contract receivable for which EW has not yet established a credit rating system.

Impairment Assessment On a regular basis, EW conducts an impairment assessment exercise to determine expected losses on its loans portfolio.

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The main considerations for the loan impairment assessment include whether any payments of principal or interest are overdue by more than 90 days or if there are any known difficulties in the cash flows of counterparties, credit rating downgrades, or infringement of the original terms of the contract. EW addresses impairment assessment in two areas: specific or individually assessed allowances and collectively assessed allowances. a. Specific Impairment Testing Specific impairment testing is the process whereby classified accounts are individually subject to impairment testing. Classified accounts are past due accounts and accounts whose credit standing and/or collateral has weakened due to varying circumstances. This present status of the account may adversely affect the collection of both principal and interest payments.

Indicators of impairment testing are past due accounts, decline in credit rating from independent rating agencies and recurring net losses.

The net recoverable amount is computed using the present value approach. The discount rate used for loans with fixed and floating interest rate is the original EIR and last repriced interest rate, respectively. Net recoverable amount is the total cash inflows to be collected over the entire term of the loan or the expected proceeds from the sale of collateral. Specific impairment testing parameters include the account information (original and outstanding loan amount), interest rate (nominal and historical effective) and the business plan. Also included are the expected date of recovery, expected cash flows, probability of collection, and the carrying value of loan and net recoverable amount.

EW conducts specific impairment testing on all classified and restructured corporate accounts. b. Collective Impairment Testing All other accounts which were not individually assessed are grouped based on similar credit characteristics and are collectively assessed for impairment under the Collective Impairment Testing. This is also in accordance with PAS 39, which provides that all loan accounts not included in the specific impairment test shall be subjected to collective testing.

Collective impairment testing of corporate accounts Corporate accounts, which are unclassified and with current status are grouped in accordance with EW’s internal credit risk rating. Each internal credit risk rating would fetch an equivalent loss impairment where the estimated loss is determined in consideration of the EW’s historical loss experience. Impairment loss is derived by multiplying the outstanding loan balance on a per internal credit risk rating basis against a factor rate. The factor rate, which estimates the expected loss from the credit exposure, is the product of the Default Rate (DR) and the Loss Given Default Rate (LGDR). DR is estimated based on the 3-year historical average default experience by internal credit risk rating of the EW, while, LGDR is estimated based on loss experience (net of recoveries from collateral) for the same reference period.

Collective impairment testing of consumer accounts Consumer accounts, both in current and past due status are collectively tested for impairment as required under PAS 39. Accounts are grouped by type of product - personal loans, salary loans, housing loans, auto loans and credit cards.

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The estimation of the impaired consumer products’ estimated loss is based on three major concepts: age buckets, probability of default and recoverability. Per product, exposures are categorized according to their state of delinquency - (1) current and (2) past due (which is subdivided into 30, 60, 90, 120, 150, 180 and more than 180 days past due). Auto, housing and salary loans have an additional bucket for its items in litigation accounts. EW partitions its exposures as it recognizes that the age buckets have different rates and/ or probabilities of default. The initial estimates of losses per product due to default are then adjusted based on the recoverability of cash flows, to calculate the expected loss of EW. Auto and housing loans consider the proceeds from the eventual sale of foreclosed collaterals in approximating its recovery rate; while credit cards, salary loans and personal loans depend on the collection experience of its receivables. Further for housing loans, due to the nature of the assets offered as security, and as the exposures are limited to a certain percentage of the same, this product possess the unique quality of obtaining full recoverability. These default and recovery rates are based on EW’s historical experience, which covers a minimum of two to three (2-3) years cycle, depending on the availability and relevance of data.

The table below shows the aging analysis of the past due but not impaired loans and receivables per class of EW. Under PFRS 7, a financial asset is past due when a counterparty has failed to make payments when contractually due.

2013 Less than 31 to 61 to 91 to More than 30 days 60 days 90 days 180 days 180 days Total Loans and receivables Corporate lending P=– P=– P=– P=– P=77,232 P=77,232 Consumer lending – – 85,037 261,972 807,377 1,154,386 P=– P=– P=85,037 P=261,972 P=884,609 P=1,231,618

2012 Less than 31 to 61 to 91 to More than 30 days 60 days 90 days 180 days 180 days Total Loans and receivables Corporate lending P=36,152 P=– P=– P=– P=– P=36,152 Consumer lending 152,989 8,254 120,837 150,281 623,330 1,055,691 P=189,141 P=8,254 P=120,837 P=150,281 P=623,330 P=1,091,843

Collaterals of past due but not impaired loans mostly consist of real estate mortgage (REM) of industrial, commercial, residential and developed agricultural real estate properties.

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Credit risk weighting as of December 31, 2013 and 2012 Total credit risk exposure after risk mitigation The table below shows the different credit risk exposures of EW after credit risk mitigation, by risk weight applied in accordance with BSP Circular No. 538:

2013 Capital Risk Buckets Deduction 0% 20% 50% 75% 100% 150% Total Credit risk exposure after risk mitigation On-balance sheet assets P=2,462,822 P=22,413,466 P=3,663,390 P=4,514,002 P=6,933,876 P=85,758,201 P=3,823,801 P=127,106,736 Off-balance sheet assets – – – – – 1,531,487 – 1,531,487 Counterparty in the banking book (derivatives and repo-style transactions) – – – – – 2,029,162 – 2,029,162 Counterparty in the trading book (derivatives and repo-style transactions) – – 2,177 – – 20,777 – 22,954 Credit-linked notes in the banking book – – – – – – – – Securitization exposures – – – – – – – – 2,462,822 22,413,466 3,665,567 4,514,002 6,933,876 89,339,627 3,823,801 130,690,339 Credit Risk Weighted Assets P= – P= – P=733,113 P=2,257,001 P=5,200,407 P=89,339,628 P=5,735,702 P=103,265,851

2012 Capital Risk Buckets Deduction 0% 20% 50% 75% 100% 150% Total Credit risk exposure after risk mitigation On-balance sheet assets P=− P=26,145,142 P=882,578 P=3,922,097 P=5,963,410 P=69,818,770 P=2,937,661 P=109,669,658 Off-balance sheet assets − − − − − 691,077 −- 691,077 Counterparty in the banking book (derivatives and repo-style transactions) − 1,376,530 − − − 3,230,922 − 4,607,452 Counterparty in the trading book (derivatives and repo-style transactions) − − 14,391 6,190 − 88,732 − 109,313 Credit-linked notes in the banking book − − − − − − − − Securitization exposures − − − − − − − − – 27,521,672 896,969 3,928,287 5,963,410 73,829,501 2,937,661 115,077,500 Credit Risk Weighted Assets P=– P=− P=179,394 P=1,964,144 P=4,472,557 P=73,829,501 P=4,406,491 P=84,852,087

Liquidity Risk Liquidity risk is the risk that sufficient funds are unavailable to adequately meet all maturing liabilities, including demand deposits and off-balance sheet commitments. The main responsibility of daily asset liability management lies with the Treasury Group, specifically the Liquidity Desk, which is tasked to manage EW’s balance sheet and have a thorough understanding of the risk elements involved in the business. EW’s liquidity risk management is then monitored through ALCO. Resulting analysis of the balance sheet along with the recommendation is presented during the weekly ALCO meeting where deliberations, formulation of actions and decisions are made to minimize risk and maximize EW returns. Discussions include actions taken in the previous ALCO meeting, economic and market status and outlook, liquidity risk, pricing and interest rate structure, limit status and utilization. To ensure that EW has sufficient liquidity at all times, the ALCO formulates a contingency plan which sets out the amount and the sources of funds (such as unutilized credit facilities) available to EW and the circumstances under which such funds will be used.

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By way of the Maximum Cumulative Outflow (MCO) limit, EW is able to manage its short-term liquidity risks by placing a cap on the outflow of cash on a cumulative basis. EW takes a multi- tiered approach to maintaining liquid assets. EW’s principal source of liquidity is comprised of COCI, due from BSP, due from other banks and IBLR and SPURA with maturities of less than one year. In addition to regulatory reserves, EW maintains a sufficient level of secondary reserves in the form of liquid assets such as short-term trading and investment securities that can be realized quickly.

Analysis of financial assets and liabilities by remaining contractual maturities The table below shows the maturity profile of EW’s financial assets and liabilities, based on its internal methodology that manages liquidity based on contractual undiscounted cash flows (amounts in millions):

2013 Up to >1 to 3 >3 to 6 >6 to 12 Beyond 1 On demand 1 month months months months year Total Financial Assets Cash and cash equivalents* P=21,780 P=5,451 P= – P= – P= – P=210 P=27,441 Investments and trading securities** – 881 759 244 665 13,942 16,491 Loans and receivables – 12,526 9,937 8,077 4,146 68,917 103,603 P=21,780 P=18,858 P=10,696 P=8,321 P=4,811 P=83,069 P=147,535 Financial Liabilities Deposit liabilities*** P= – P=12,213 P=15,398 P=12,633 P=6,676 P=66,271 P=113,191 Bills and acceptances payable – 2,379 588 – – 460 3,427 Subordinated debt – 1,250 – – – 1,613 2,863 Other liabilities 919 56 18 22 12 5,006 6,033 Contingent liabilities – 713 553 681 1,093 (1,753) 1,287 P=919 P=16,611 P=16,557 P=13,336 P=7,781 P=71,597 P=126,801 ***Consist of cash and cash other items, due from BSP, due from other banks and IBLR ***Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables from investment securities at amortized cost. ***Consist of demand and savings deposit, time certificate of deposit, long term negotiable certificates of deposit and interest payable for these deposit liabilities.

2012 Up to >1 to 3 >3 to 6 >6 to 12 Beyond On demand 1 month months months months 1year Total Financial Assets Cash and cash equivalents* P=18,156 P=9,155 P=– P=– P=– P=– P=27,311 Investments and trading securities** – 51 48 2,296 3,052 18,226 23,673 Loans and receivables – 10,833 9,067 5,128 4,809 41,355 71,192 P=18,156 P=20,039 P=9,115 P=7,424 P=7,861 P=59,581 P=122,176 Financial Liabilities Deposit liabilities*** P=– P=8,785 P=14,050 P=12,007 P=4,069 P=54,733 P=93,644 Bills and acceptances payable – 3,868 1,669 – – 35 5,572 Subordinated debt – – 113 1 – 2,750 2,864 Other liabilities 733 32 55 65 52 3,523 4,460 Contingent liabilities – 464 777 595 776 (1,098) 1,514 P=733 P=13,149 P=16,664 P=12,668 P=4,897 P=59,943 P=108,054 * Consist of cash and cash other items, due from BSP, due from other banks and interbank loans receivable and SPURA ** Consist of financial assets at FVTPL, financial assets at amortized cost and financial assets at FVTOCI *** Consist of demand, savings and time deposit, and long term negotiable certificates of deposit

EW manages liquidity by maintaining sufficient liquid assets in the form of cash and cash equivalents, investments securities and loan receivables with what it assesses to be sufficient of short-term loans. As of December 31, 2013 and 2012, =35.6P billion and P=32.1 billion, respectively, or 37.5% and 42.3%, respectively, of EW’s total gross loans and receivables had remaining maturities of less than one (1) year. The total portfolio of trading and investment securities is comprised mostly of sovereign-issued securities that have high market liquidity.

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EW was fully compliant with BSP’s limits on FCDU Asset Cover and FCDU Liquid Assets Cover, having reported ratios above 100.0% and 30.0%, respectively, as of December 31, 2013 and 2012. With the above presented liquidity profile, EW remains to be inhibited from liquidity risk that it can’t adequately manage.

Market Risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, and equity prices. EW treats exposures to market risk as either trading portfolio or balance sheet exposure. The market risk for the trading portfolio is managed and monitored based on a VaR methodology which reflects the interdependency between risk variables. Balance sheet exposures are managed and monitored using sensitivity analyses.

Market Risk in the Trading Books The Board has set limits on the level of risk that may be accepted. Price risk limits are applied at the business unit level and approved by the BOD based on, among other things, a business unit’s capacity to manage price risks, the size and distribution of the aggregate exposure to price risks and the expected return relative to price risks.

EW applies a VaR methodology to assess the market risk positions held and to estimate the potential economic loss based upon a number of parameters and assumptions on market conditions. VaR is a method used in measuring financial risk by estimating the potential negative change in the market value of a portfolio at a given confidence level and over a specified time horizon.

Objectives and limitations of the VaR Methodology EW uses the parametric VaR model, using one-year historical Bloomberg data set to assess possible changes in the market value of the trading portfolio. The VaR model is designed to measure market risk in a normal market environment.

The model assumes that any change occurring in the risk factors affecting the normal market environment will create outcomes that follow a normal distribution. The use of VaR has limitations because correlations and volatilities in market prices are based on historical data and VaR assumes that future price movements will follow a statistical distribution. Due to the fact that VaR relies heavily on historical data to provide information and may not clearly predict the future changes and modifications of the risk factors, the probability of large market moves may be underestimated if changes in risk factors fail to align with the normal distribution assumption.

VaR may also be under or over estimated due to assumptions placed on risk factors and the relationship between such factors for specific instruments. Even though positions may change throughout the day, the VaR only represents the risk of the portfolio at the close of each business day, and it does not account for any losses that may occur beyond the 99.0% confidence level.

In practice, actual trading results will differ from the VaR calculation and, in particular, the calculation does not provide a meaningful indication of profits and losses in stressed market conditions. To determine the reliability of the VaR model, actual outcomes are monitored through actual backtesting to test the accuracy of the VaR model.

Stress testing provides a means of complementing VaR by simulating the potential loss impact on market risk positions from extreme market conditions, such as 500 bps increase in Philippine peso interest rates and 300 bps increase in US dollar interest rates (based on the uniform stress testing framework of BSP). *SGVFS007153* - 130 -

VaR assumptions The VaR that EW measures is an estimate, using a confidence level of 99.0% of the potential loss that is not expected to be exceeded if the current market risk positions were to be held unchanged for 5 days. The use of a 99.0% confidence level means that within a five-day horizon, losses exceeding the VaR figure should occur, on average, not more than once every hundred days.

VaR is an integral part of EW’s market risk management and encompasses investment positions held for trading. VaR exposures form part of the market risk monitoring which is reviewed daily against the limit approved by the Board. If the Market Risk Limit is exceeded, such occurrence is promptly reported to the Treasurer, Chief Risk Officer and the President, and further to the Board through the RMC.

The VaR below pertains to interest rate risk of EW’s trading books.

2013 2012 Year-end VaR P=13,122 P=47,534 Average VaR 67,046 66,490 Highest VaR 324,284 166,946 Lowest VaR 3,392 13,725

The year-end VaR for 2013 was based on a portfolio position size equal to P=1.20 billion with an average yield of 3.56% and average maturity of 5 years and 5 months. The year-end VaR for 2012 had a position size equal to =2.46P billion with an average yield of 4.18 % and average maturity of 10 years and 3 months.

In 2012, EW bought preferred shares for its trading portfolio. The VaR methodology is likewise applied in measuring the potential loss arising from the price fluctuations of these shares at a 99.0% confidence level with a 10-day horizon.

The VaR below pertains to the equity risk of the trading books of EW.

2013 2012 Year-end VaR P=39,759 P=58,842 Average VaR 60,457 58,531 Highest VaR 87,143 60,107 Lowest VaR 39,759 55,692

Foreign Currency Risk EW holds foreign currency denominated assets and liabilities, thus, fluctuations on the foreign exchange rates can affect the financial and cash flows of EW. Managing the foreign exchange exposure is important for banks with exposures in foreign currencies. It includes managing foreign currency positions in order to control the impact of changes in exchange rates on the financial position of EW.

As noted above, EW likewise applies the VaR methodology in estimating the potential loss of EW due to foreign currency fluctuations. EW uses a 99.0% confidence level with one-day horizon in estimating the foreign exchange (FX) VaR. The use of a 99.0% confidence level means that within a one-day horizon, losses exceeding the VaR figure should occur, on average, not more than once every hundred days.

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EW’s policy is to maintain foreign currency exposure within acceptable limits and within existing regulatory guidelines. In 2013 and 2012, EW’s profile of foreign currency exposure on its assets and liabilities is within limits for financial institutions engaged in the type of businesses in which EW is engaged.

The VaR below pertains to foreign exchange risk of EW.

2013 2012 Year-end VaR P=1,962 P=1,826 Average VaR 2,423 2,073 Highest VaR 8,364 8,514 Lowest VaR 13 9

Some of EW’s transactions exposed to foreign currency fluctuations include spots and forwards contracts, investments in bonds and due from other banks. The FX position emanates from both the RBU and FCDU books. BSP requires banks to match the foreign currency assets with the foreign currency liabilities. Banks are required to maintain at all times a 100.00% cover for their currency liabilities held through FCDU. In addition, the BSP requires a 30.00% liquidity reserve on all foreign currency liabilities held through FCDU.

Total foreign exchange currency position is monitored through the daily BSP FX position reports, which are subject to the overbought and oversold limits set by the BSP at 20.00% of unimpaired capital or $50.00 million, whichever is lower. Internal limit regarding the end-of-day trading positions in FX, which take into account the trading desk and the branch FX transactions, are also monitored.

The table below summarizes the exposure to foreign exchange risk of EW as of December 31, 2013 and 2012:

2013 Other USD Currencies Total Assets Gross FX assets $494,222 $1,203 $495,425 Contingent FX assets 31,524 − 31,524 525,746 1,203 526,949 Liabilities Gross FX liabilities 462,080 81 462,161 Contingent FX liabilities 59,000 24 59,024 521,080 105 521,185 Net exposure $4,666 $1,098 $5,764

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2012 Other USD Currencies Total Assets Gross FX assets $453,371 $909 $454,280 Contingent FX assets 81,300 − 81,300 534,671 909 535,580 Liabilities Gross FX liabilities 413,440 − 413,440 Contingent FX liabilities 127,700 − 127,700 541,140 − 541,140 Net exposure ($6,469) $909 ($5,560)

The table below indicates the currencies to which EW had significant exposures as of December 31, 2013 and 2012 (amounts in millions). The analysis calculates the effect of a reasonably possible movement of the currency rate against Peso, with all other variables held constant on the statement of income. A negative amount reflects a potential net reduction in statement of income while a positive amount reflects net potential increase. There is no other impact on EW’s equity other than those already affecting the statements of income.

Foreign currency appreciates 2013 (depreciates) USD GBP EUR JPY +10.00% P=20.72 P=1.96 P=1.85 P=0.25 -10.00% (20.72) (1.96) (1.85) (0.25)

Foreign currency appreciates 2012 (depreciates) USD GBP EUR JPY +10.00% (P=26.56) P=0.56 P=1.2 P=2.05 -10.00% 26.56 (0.56) (1.2) (2.05)

Market Risk in the Non-Trading Books

Interest rate risk A critical element of risk management program consists of measuring and monitoring the risks associated with fluctuations in market interest rates on EW’s net interest income. The short-term nature of the business of its assets and liabilities reduces the exposure of its net interest income to such risks.

EW employs ‘Gap Analysis’ on a monthly basis to measure the interest rate sensitivity of its assets and liabilities. The asset/liability gap analysis measures, for any given period, any mismatches between the amounts of interest-earning assets and interest-bearing liabilities that would re-price, or mature (for contracts that do not re-price), during that period. Non-maturing deposits are treated as non repricing liabilities by EW. The re-pricing gap is calculated by first distributing the assets and liabilities contained in EW’s statement of financial position into tenor buckets according to the time remaining to the next re-pricing date (or the time remaining to maturity if there is no re-pricing), and then obtaining the difference between the total of the re-pricing (interest rate sensitive) assets and re-pricing (interest rate sensitive) liabilities. If there is a positive gap, there is asset sensitivity which generally means that an increase in interest rates would have a positive effect on EW’s net interest income. If there is a negative gap, this generally means that an increase in interest rates would have a negative effect on net interest income.

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The following table provides for the average effective interest rates by period of re-pricing (or by period of maturity if there is no re-pricing) of EW as of December 31, 2013 and 2012:

2013 Up to >1 month >3 months >6 months 1 month to 3 months to 6 months to 12 months >12 months RBU Financial assets Cash and cash equivalents 1.99% − − − − Loans and receivables 4.82% 5.23% 5.21% 7.15% 8.04% Investment securities 2.49% 2.49% − − 3.08% Financial liabilities Deposit liabilities 1.08% 1.43% 1.65% 4.01% 4.26% Bills payable 0.77% 0.68% − − − Subordinated debt 8.63% − − − 7.65% FCDU Financial assets Cash and cash equivalents 0.19% − − − − Loans and receivables 1.49% − 3.55% 5.35% 6.77% Investment securities 3.15% 3.15% 3.15% − 3.24% Financial liabilities Deposit liabilities 1.34% 1.37% 1.43% 1.63% 2.54%

2012 Up to >1 month >3 months >6 months 1 month to 3 months to 6 months to 12 months >12 months RBU Financial assets Cash and cash equivalents 3.55% − − − − Loans and receivables 5.50% 5.34% 7.47% 7.00% 11.43% Investment securities − − − − 4.92% Financial liabilities Deposit liabilities 3.32% 3.83% 3.89% 4.71% 5.41% Bills payable 0.81% 0.78% − − − Subordinated debt − 10.08% − − 8.18% FCDU Financial assets Cash and cash equivalents 0.83% − − − − Loans and receivables 3.02% 5.23% 4.07% 2.66% 7.56% Investment securities 4.23% − − − 5.11% Financial liabilities Deposit liabilities 1.57% 1.52% 1.83% 1.60% 2.02%

The following table sets forth the asset-liability gap position of EW as of December 31, 2013 and 2012 (amounts in millions):

2013 Up to > 1 to > 3 to >6 to 1 month 3 months 6 months 12 months >12 months Total Financial assets Cash and cash equivalents P=2,512 P=– P=– P=– P=– P=2,512 Loans and receivables 30,721 4,136 4,549 4,470 30,548 74,424 Investment securities 870 708 13 – 8,173 9,764 Total financial assets 34,103 4,844 4,562 4,470 38,721 86,700 Financial liabilities Deposit liabilities 29,768 3,619 545 360 14,462 48,754 Bills and acceptances payable 2,251 1,032 – – – 3,283 Other liabilities – – – – – – Subordinated debt 1,250 – – – 1,613 2,863 Contingent liabilities 22 – – – – 22 Total financial liabilities 33,291 4,651 545 360 16,075 54,922 Asset-liability gap P=812 P=193 P=4,017 P=4,110 P=22,646 P=31,778

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2012 Up to > 1 to > 3 to >6 to 1 month 3 months 6 months 12 months >12 months Total Financial assets Cash and cash equivalents P=8,815 P=− P=− P=− P=− P=8,815 Loans and receivables 21,957 5,884 2,866 5,569 16,938 53,214 Investment securities 51 − − − 8,585 8,636 Total financial assets 30,823 5,884 2,866 5,569 25,523 70,665 Financial liabilities Deposit liabilities 31,191 7,534 1,162 451 3,261 43,599 Bills and acceptances payable 3,047 1,669 − − − 4,716 Other liabilities − − − − − - Subordinated debt - 114 − − 2,750 2,864 Contingent liabilities 84 777 145 273 15 1,294 Total financial liabilities 34,322 10,094 1,307 724 6,026 52,473 Asset-liability gap (P=3,499) (P=4,210) P=1,559 P=4,845 P=19,497 P=18,192

With the above positive re-pricing profile, Ew could expect positive returns from the following months after the end of 2013 should there be an upward movement in interest rates.

EW also monitors its exposure to fluctuations in interest rates by using scenario analysis to estimate the impact of interest rate movements on its interest income. This is done by modeling the impact to EW’s interest income and interest expenses of different parallel changes in the interest rate curve, assuming the parallel change only occurs once and the interest rate curve after the parallel change does not change again for the next twelve months.

The following table sets forth, for the period indicated, the impact of changes in interest rates on EW’s non-trading net interest income before tax (amounts in millions). There is no other impact on EW’s equity other than those already affecting the statements of income.

Change in basis points 2013 2012 +100bps P=44.8 (=P46.7) - 100bps (44.8) 46.7

Market risk weighting as of December 31, 2013 and 2012 The table below shows the different market risk weighted assets (in millions) of EW using the standardized approach:

Type of Market Risk Exposure 2013 2012 Interest Rate Exposure P=1,874 P=5,243 Foreign Exposure 256 266 Equity Exposure 7 27 P=2,137 P=5,536

Operational Risk Operational risk is the loss resulting from inadequate or failed internal processes, people and systems or from external events. It includes legal, compliance and reputational risks but excludes strategic risk.

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Adopting the Basic Indicator Approach in computing, below is the total operational risk-weighted assets of EW (amounts in millons).

2013 2012 Total operational risk-weighted assets P=15,338 P=12,973

Other Risk Exposures EW risk exposures other than credit, market, liquidity and operational while existent are deemed insignificant relative to the mentioned risks and if taken in isolation. Hence, management of these risks are instead collectively performed and made an integral part of EW’s internal capital adequacy assessment process (ICAAP) and enterprise risk management initiatives.

The last internal capital adequacy assessment results of EW show that these other risks remains insignificant to pose a threat on EW’s capacity to comply with the minimum capital adequacy ratio of 10.0% as prescribed by BSP.

Financial and Banking Services Capital Management EW actively manages its capital to comply with regulatory requirements. The primary objective of EW’s capital management is to ensure that it maintains adequate capital to cover risks inherent to its banking activities without prejudice to optimizing shareholder’s value. EW adopts the capital adequacy requirements of the New Capital Accord or Basel II, as contained in the implementation guidelines of BSP Circular No. 538, which took effect in July 2007. Under this rule, risk weight ratings shall be based on external rating agencies and total risk weighted assets shall be computed based on credit, market and operational risks.

Regulatory Qualifying Capital Under existing BSP regulations, the determination of EW’s compliance with regulatory requirements and ratios is based on the amount of EW’s ‘unimpaired capital’ (regulatory net worth) reported to the BSP, which is determined on the basis of regulatory policies. In addition, the risk-based Capital Adequacy Ratio (CAR) of a bank, expressed as a percentage of qualifying capital to risk-weighted assets, should not be less than 10.0% for both solo basis (head office and branches) and consolidated basis (EW and subsidiaries engaged in financial allied undertakings). Qualifying capital and risk-weighted assets are computed based on BSP regulations.

The regulatory Gross Qualifying Capital of EW consists of Tier 1 (core) and Tier 2 (supplementary) capital. Tier 1 capital comprises share capital, retained earnings (including current year profit) and non-controlling interest less required deductions such as deferred income tax and unsecured credit accommodations to DOSRI. Tier 2 capital includes unsecured subordinated debts, revaluation reserves and general loan loss provision. Certain items are deducted from the regulatory Gross Qualifying Capital, such as but not limited to equity investments in unconsolidated subsidiary banks and other financial allied undertakings, but excluding investments in debt capital instruments of unconsolidated subsidiary banks (for solo basis) and equity investments in subsidiary and non-financial allied undertakings.

Risk-weighted assets are determined by assigning defined risk weights to the statement of financial position exposure and to the credit equivalent amounts of off-balance sheet exposures. Certain items are deducted from risk-weighted assets, such as the excess of general loan loss provision over the amount permitted to be included in Tier 2 capital. The risk weights vary from 0.00% to 150.00% depending on the type of exposure, with the risk weights of off-balance sheet exposures being subjected further to credit conversion factors.

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Below is a summary of risk weights and selected exposure types:

Risk weight Exposure/Asset type* 0.00% Cash on hand; claims collateralized by securities issued by the national government, BSP; loans covered by the Trade and Investment Development Corporation of the Philippines; real estate mortgages covered by the Home Guarantee Corporation

20.00% COCI, claims guaranteed by Philippine incorporated banks/quasi-banks with the highest credit quality; claims guaranteed by foreign incorporated banks with the highest credit quality; loans to exporters to the extent guaranteed by Small Business Guarantee and Finance Corporation

50.00% Housing loans fully secured by first mortgage on residential property; Local Government Unit (LGU) bonds which are covered by Deed of Assignment of Internal Revenue allotment of the LGU and guaranteed by the LGU Guarantee Corporation

75.00% Direct loans of defined Small Medium Enterprise (SME) and microfinance loans portfolio; non-performing housing loans fully secured by first mortgage

100.00% All other assets (e.g., real estate assets) excluding those deducted from capital (e.g., deferred income tax)

150.00% All non-performing loans (except non-performing housing loans fully secured by first mortgage) and all non-performing debt securities * Not all inclusive

With respect to off-balance sheet exposures, the exposure amount is multiplied by a credit conversion factor (CCF), ranging from 0.0% to 100.0%, to arrive at the credit equivalent amount, before the risk weight factor is multiplied to arrive at the risk-weighted exposure. Direct credit substitutes (e.g., guarantees) have a CCF of 100.0%, while items not involving credit risk has a CCF of 0.0%.

In the case of derivatives, the credit equivalent amount (against which the risk weight factor is multiplied to arrive at the risk-weighted exposure) is generally the sum of the current credit exposure or replacement cost (the positive fair value or zero if the fair value is negative or zero) and an estimate of the potential future credit exposure or add-on. The add-on ranges from 0.0% to 1.5% (interest rate-related) and from 1.0% to 7.5% (exchange rate-related), depending on the residual maturity of the contract. For credit-linked notes and similar instruments, the risk- weighted exposure is the higher of the exposure based on the risk weight of the issuer’s collateral or the reference entity or entities.

The risk-weighted CAR is calculated by dividing the sum of its Tier 1 and Tier 2 capital, as defined under BSP regulations, by its risk-weighted assets. The risk-weighted assets, as defined by the BSP regulations, consist of all of the assets on the balance sheet at their respective book values, together with certain other off-balance sheet items, weighted by certain percentages depending on the risks associated with the type of assets. The determination of compliance with regulatory requirements and ratios is based on the amount of EW’s ‘unimpaired capital’ (regulatory net worth) as reported to the BSP, which is determined on the basis of regulatory accounting practices which differ from PFRS in some respects. *SGVFS007153* - 137 -

In 2013 and 2012, EW has complied with the 10.0% BSP required capital adequacy ratio.

The capital-to-risk assets ratio of EW as reported to the BSP as of December 31, 2013 and 2012 are shown in the table below (amounts in millions).

2013 2012 Actual Required Actual Required Tier 1 capital P=19,128 P=16,836 Tier 2 capital 3,896 3,489 Gross qualifying capital 23,024 20,325 Less required deductions 2,463 2,389 Total qualifying capital P=20,561 P=17,936 Risk weighted assets P=120,725 P=103,361 Tier 1 capital ratio 13.80% 13.98% Total capital ratio 17.03% 10% 17.35% 10%

Presented below are the composition of qualifying capital and the related deductions as reported to the BSP (amounts in millions):

2013 2012 Tier 1 capital Paid up common stock P=11,284 P=11,284 Additional paid-in capital 979 979 Retained earnings 4,804 2,749 Undivided profits 2,050 1,827 Cumulative foreign currencytranslation 5 (17) Minority interest 6 14 Core Tier 1 capital P=19,128 P=16,836 Deductions from Tier 1 capital Total outstanding unsecured credit accommodation to a DOSRI P=160 P=315 Deferred income tax (net) 986 965 Goodwill 1,317 1,109 Total Deductions 2,463 2,389 Total Tier 1 Capital 16,665 14,447 Tier 2 capital General loan loss provision 1,033 626 Unsecured subordinated debt 2,863 2,863 Total Tier 2 capital 3,896 3,489 Qualifying capital Net Tier 1 capital 16,665 14,447 Net Tier 2 capital 3,896 3,489 Total qualifying capital 20,561 17,936 Capital requirements Credit risk 10,325 8,485 Market risk 214 553 Operational risk 1,534 1,297 Total capital requirements P=12,073 P=10,335

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The policies and processes guiding the determination of the sufficiency of capital of EW have been incorporated in EW’s Internal Capital Adequacy Assessment Process (ICAAP) which supplements the BSP’s risk-based capital adequacy framework under BSP Circular Nos. 538 and 639 to comply with the requirements of the BSP. While EW has added the ICAAP to its capital management policies and processes, there were no changes made on the objectives and policies for the years ended December 31, 2013 and 2012.

On January 15, 2013, the BSP issued Circular No. 781, Basel III Implementing Guidelines on Minimum Capital Requirements, which provides the implementing guidelines on the revised risk-based capital adequacy framework particularly on the minimum capital and disclosure requirements for universal banks and commercial banks, as well as their subsidiary banks and quasi-banks, in accordance with the Basel III standards. The circular is effective on January 1, 2014.

The Circular sets out a minimum Common Equity Tier 1 (CET1) ratio of 6.0% and Tier 1 capital ratio of 7.5%. It also introduces a capital conservation buffer of 2.5% comprised of CET1 capital. The BSP’s existing requirement for Total CAR remains unchanged at 10% and these ratios shall be maintained at all times.

Further, existing capital instruments as of December 31, 2010 which do not meet the eligibility criteria for capital instruments under the revised capital framework shall no longer be recognized as capital upon the effectivity of Basel III. Capital instruments issued under BSP Circular Nos. 709 and 716 (the circulars amending the definition of qualifying capital particularly on Hybrid Tier 1 and Lower Tier 2 capitals), starting January 1, 2011 and before the effectivity of BSP Circular No. 781, shall be recognized as qualifying capital until December 31, 2015. In addition to changes in minimum capital requirements, this Circular also requires various regulatory adjustments in the calculation of qualifying capital.

EW has taken into consideration the impact of the foregoing requirements to ensure that the appropriate level and quality of capital are maintained on an ongoing basis.

The Group (excluding EW) Interest Rate Risk The Group’s exposure to the risk for changes in market interest rates relates primarily to the Group’s long-term debt obligations with a floating interest rate. The Group’s interest rate exposure management policy centers on reducing the Group’s overall interest expense and exposure to changes in interest rates. The Group’s policy is to manage its interest cost using a mix of fixed and floating interest-rate debts. The Group regularly monitors available loans in the market which is of cheaper interest rate and substitutes high-rate debts of the Group. The Group’s long-term debt with floating interest rate usually mature after three to five years from the date of availment, while fixed term-loans mature after five to seven years.

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The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax and equity (through the impact on floating rate borrowings). There is no other impact on the Group’s other comprehensive income other than those already affecting the profit and loss.

Effect on income Increase (decrease) before income tax in basis points (In Thousands) 2013 +200 (P=341,124) -200 341,124 2012 +200 (337,630) -200 337,630

The following table sets out the carrying amount by maturity, of the Group’s long-term debts that are exposed to interest rate risk:

91-Day Treasury Bills/91-Day PDST plus 1% to 2% margin Below 1 Year 1-2 Years 2-3 Years 3-4 Years Over 4 Years Total As of December 31, 2013 P=3,528,591 P=2,485,395 P=1,997,660 P=2,784,490 P=6,260,044 P=17,056,180 As of December 31, 2012 5,092,407 1,973,321 2,644,789 1,667,436 5,217,877 16,595,830

Liquidity Risk The Group seeks to manage its liquidity profile to be able to finance capital expenditures and service maturing debts. To cover its financing requirements, the Group uses internally generated funds and available long-term and short-term credit facilities.

As part of its liquidity risk management, the Group regularly evaluates its projected and actual cash flows. It also continuously assesses conditions in the financial markets for opportunities to pursue fund raising activities, in case any requirements arise. Fund raising activities may include bank loans and capital market issues. Accordingly, its loan maturity profile is regularly reviewed to ensure availability of funding through an adequate amount of credit facilities with financial institutions.

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 following table summarizes the maturity profile of the Group’s financial assets held to manage liquidity as of December 31, 2013 and 2012 based on contractual undiscounted payments

December 31, 2013 Less than 3 months 1 to 3 to Over On demand 3 months to 1 year 3 years 5 years 5 years Total (In Thousands) Real Estate Loans and receivable Cash in bank P=3,505,667 P=− P=− P=− P=− P=− P=3,505,667 Contracts receivable 596,337 1,975,278 2,060,416 2,092,083 1,420,002 5,244,975 13,389,091 Receivable from sale of condominium units and club shares 57,001 88,469 170,040 49,156 10,643 − 375,309 Receivable from government and other financial institutions − − 480,898 − − − 480,898 (Forward)

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December 31, 2013 Less than 3 months 1 to 3 to Over On demand 3 months to 1 year 3 years 5 years 5 years Total (In Thousands) Due from related parties P=208,737 P=− P=− P=− P=− P=− P=208,737 Receivable from tenants 299,633 38,994 18,407 18,838 23,105 15,403 414,380 Receivable from joint venture lots 78,103 81,936 309,199 444,418 − − 913,656 Receivable from homeowners association 246,581 − − − − − 246,581 Others 577,384 32,879 453 1,078 95 − 611,889 5,569,443 2,217,556 3,039,413 2,605,573 1,453,845 5,260,378 20,146,208 Sugar Trade receivables 269 − − − − − 269 Others 1,521 − − − − − 1,521 1,790 − − − − − 1,790 Hotel and Energy Trade receivables 22,848 − − − − − 22,848 Due from a related party 2,857 1,721 366 − − − 4,944 25,705 1,721 366 − − − 27,792 P=5,596,938 P=2,219,277 P=3,039,779 P=2,605,573 P=1,453,845 P=5,260,378 P=20,175,790

December 31, 2012 (As restated, Note 2) Less than 3 months 1 to 3 to Over On demand 3 months to 1 year 3 years 5 years 5 years Total (In Thousands) Real Estate Loans and receivable Cash in bank P=1,044,993 P=– P=– P=– P=– P=– P=1,044,993 Contracts receivable 234,099 2,135,333 1,680,204 2,048,615 1,466,874 3,827,178 11,392,303 Receivable from sale of condominium units and club shares 81,132 311,610 52,418 131,102 – – 576,262 Receivable from government and other financial institutions – – 477,997 – – – 477,997 Due from related parties 229,469 – – – – – 229,469 Receivable from tenants 339,051 170,551 17,215 5,475 993 – 533,285 Receivable from investors in projects 23,977 1,997 7,693 – 185,201 – 218,868 Receivable from joint venture lots 84,672 48,030 – – – – 132,702 Receivable from homeowners association 182,484 – – – – – 182,484 Others 214,321 241,735 5,983 – – – 462,039 2,434,198 2,909,256 2,241,510 2,185,192 1,653,068 3,827,178 15,250,402 Sugar Trade receivables 53,438 – – – – – 53,438 Others 1,080 – – – – – 1,080 54,518 – – – – – 54,518 Hotel and Energy Trade receivables 13,197 3,028 1,396 – – – 17,621 Due from a related party 391 – – – – – 391 13,588 3,028 1,396 – – – 18,012 P=2,502,304 P=2,912,284 P=2,242,906 P=2,185,192 P=1,653,068 P=3,827,178 P=15,322,932

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The tables below summarize the maturity profile of the Group’s financial liabilities as of December 31, 2013 and 2012 based on contractual undiscounted payments.

December 31, 2013 Less than 3 months >1 to >3 to Over On demand 3 months to 1 year 3 years 5 years 5 years Total (In Thousands) Accounts payable and accrued expenses Accounts payable P=6,145,761 P=954,281 P=830,581 P=1,092,864 P=13,728 P= – P=9,037,215 Receivables sold to bank – – 23,325 13,915 – – 37,240 Accrued expenses 440,355 108,770 27,160 – 2,490 578,775 Deposits for registration and insurance – 334 137,833 504,679 192,760 291,814 1,127,420 Retention fees payable 413,697 269,146 57,892 4,690 226,143 128,675 1,100,243 Accrued interest 95,002 91,397 284,585 – – – 470,984 Deposits 109,604 47,717 228,574 102,816 – – 488,711 Other payables 195,086 – – – – 195,086 7,399,505 1,471,645 1,589,950 1,718,964 435,121 420,489 13,035,674 Short-term debt − 500,000 − − − − 500,000 Long-term debt 1,340,000 6,018,742 10,534,685 8,762,748 29,953,817 56,609,992 P=7,399,505 P=3,311,645 P=7,608,692 P=12,253,649 P=9,197,869 P=30,374,306 P=70,145,666

December 31, 2012 (As restatetd, Note 2) Less than 3 months >1 to >3 to Over On demand 3 months to 1 year 3 years 5 years 5 years Total (In Thousands) Accounts payable and accrued expenses Accounts payable P=6,501,600 P=835,609 P=78,703 P=790,760 P=11,779 P=39,726 P=8,258,177 Receivables sold to bank – – 91,652 97,789 – – 189,441 Accrued expenses 136,559 80,896 88,228 – 168,586 – 474,269 Deposits for registration and insurance – 496,904 222,303 363,037 176,208 140,727 1,399,179 Retention fees payable 334,054 10,674 210,375 187,676 – 101,864 844,643 Accrued interest 158,640 – – – – – 158,640 Deposits 325,153 93,723 36,054 46,674 – – 501,604 Due to related parties 16,284 – – – – – 16,284 Other payables 51,069 − − 133 149 – 51,351 7,523,359 1,517,806 727,315 1,486,069 356,722 282,317 11,893,588 Short-term debt – 300,000 – – – – 300,000 Long-term debt – 647,012 5,375,390 13,140,040 13,162,749 7,015,453 39,340,644 P=7,523,359 P=2,464,818 P=6,102,705 P=14,626,109 P=13,519,471 P=7,297,770 P=51,534,232

Credit Risk It is the Group’s policy that buyers who wish to avail the in-house financing scheme are subject to credit verification procedures. Receivable balances are being monitored on a regular basis and subjected to appropriate actions to manage credit risk.

With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents and financial assets at amortized costs, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

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The table below shows the comparative summary of maximum credit risk exposure on assets as of December 31, 2013 and 2012.

2012 (As restated, 2013 Note 2) (In Thousands) Real estate Loans and Receivables Cash and cash equivalents P=3,505,667 P=1,044,993 Contracts receivable 13,389,091 11,392,303 Receivables from sale of condominium units and club shares 375,309 576,262 Receivable from government and other financial institutions 480,898 477,997 Receivables from tenants 414,380 533,285 Due from related parties 208,737 229,469 Receivables from investors in projects − 218,868 Receivables from homeowners association 246,581 182,484 Receivable from sale of joint venture lots – net 913,657 132,702 Others 611,889 462,039 20,146,209 15,250,402 Sugar Trade receivables 269 53,438 Others 1,521 1,080 1,790 54,518 Hotel and Enery Trade receivables 22,848 17,621 20,170,847 15,322,541 Financial assets at FVTOCI Quoted equity securities 90,120 102,687 Unquoted equity securities 36,308 46,370 126,428 149,057 P=20,297,275 P=15,471,598

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The table below shows the credit quality by class of asset for loan-related statement of financial position lines, based on the real estate operation’s credit rating system as of December 31, 2013 and 2012, based on the Group’s credit rating system.

2013 Neither Past Due nor Impaired Past Due or Standard Substandard Individually High Grade Grade Grade Impaired Total (In Thousands) Cash and cash equivalents P=3,505,667 P=− P=− P=− P=3,505,667 Loans and receivables Contracts receivable − 13,105,867 − 283,224 13,389,091 Receivables from sale of condominium units and club shares 318,306 − − 57,003 375,309 Receivable from government and other financial institutions 480,898 − − − 480,898 Receivables from tenants 60,921 304,640 − 48,819 414,380 Due from related parties 208,737 − − − 208,737 Receivables from homeowners association − 168,567 − 78,014 246,581 Receivable from sale of joint venture lots – net 837,320 − − 76,337 913,657 Others 273,154 337,643 − 76,891 687,688 P=5,685,003 P=13,916,717 P=− P=620,288 P=20,222,008

2012 (As restated, Note 2) Neither Past Due nor Impaired Past Due or Standard Substandard Individually High Grade Grade Grade Impaired Total (In Thousands) Cash and cash equivalents P=1,044,993 P=– P=– P=– P=1,044,993 Loans and receivables Contracts receivable – 11,171,216 – 221,087 11,392,303 Receivables from sale of condominium units and club shares 465,649 110,613 – – 576,262 Receivable from government and other financial institutions 477,997 – – – 477,997 Receivables from tenants 204,666 293,881 – 34,738 533,285 Due from related parties 200,264 29,205 – – 229,469 Receivables from investors in projects 211,143 7,725 – – 218,868 Receivables from homeowners association – 134,470 – 48,014 182,484 Receivable from sale of joint venture lots – net 99,460 6,687 – 76,337 182,484 Others 197,751 264,218 – 70 462,039 P=2,901,923 P=12,018,015 P=– P=380,246 P=15,300,184

The analysis of financial assets as of December 31, 2013 and 2012 is as follow:

2013 Neither past Past due but not impaired due nor Less than 30 to 60 to 90 to Over impaired 30 days 60 days 90 days 120 days 120 days Subtotal Impaired Total Cash and cash equivalents P=3,505,667 P=− P=− P=− P=− P=− P=− P=− P=3,505,667 Loans and receivables Contracts receivable 13,105,867 27,664 13,978 8,075 6,355 227,152 283,224 − 13,389,091 Receivable from government and other financial institutions 480,898 − − − − − − − 480,898 Receivables from sale of condominium units and club shares 318,306 1,620 24,237 629 3,349 27,168 57,003 − 375,309 Receivables from tenants 365,561 8,755 9,671 − − − 18,426 30,393 414,380 Due from related parties 208,737 − − − − − − − 208,737 Receivables from homeowners association 168,567 − − − − − − 78,014 246,581 Receivable from sale of joint venture lots – net 837,320 − − − − − − 76,337 913,657 Others 610,797 71,077 3,317 216 332 1,910 76,852 39 687,688 P=19,601,720 P=109,116 P=51,203 P=8,920 P=10,036 P=256,230 P=435,505 P=184,783 P=20,222,008

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2012 (As restated, Note 2) Neither past Past due but not impaired due nor Less than 30 to 60 to 90 to Over impaired 30 days 60 days 90 days 120 days 120 days Subtotal Impaired Total Cash and cash equivalents P=1,044,993 P=– P=– P=– P=– P=– P=– P=– P=1,044,993 Loans and receivables Contracts receivable 11,171,216 21,593 10,912 6,304 4,961 177,317 221,087 − 11,392,303 Receivable from government and other financial institutions 477,997 – – – – – – – 477,997 Receivables from investors in projects 218,868 – – – – – – – 218,868 Receivables from sale of condominium units and club shares 576,262 – – – – – – – 576,262 Receivables from tenants 497,626 – – – – 5,266 5,266 30,393 533,285 Due from related parties 229,469 – – – – – – – 229,469 Receivables from homeowners association 134,470 – – – – – – 48,014 182,484 Receivable from sale of joint venture lots - net 153,132 – – – – – – 76,337 229,469 Others 461,969 – – – – 31 31 39 462,039 P=14,966,002 P=21,593 P=10,912 P=6,304 P=4,961 P=182,614 P=226,384 154,783 P=15,347,169

The Group’s high-grade receivables pertain to receivables from related parties and third parties which, based on experience, are highly collectible or collectible on demand, and of which exposure to bad debt is not significant. Receivables assessed to be of standard grade are those which had passed a certain set of credit criteria, and of which the Group has not noted any extraordinary exposure which calls for a substandard grade classification.

Real Estate Operation Capital Management Real estate operation’s primary objective is to maintain its current sound financial condition and strong debt service capabilities as well as to continuously implement a prudent financial management program.

Real estate operation manage their capital structure and makes adjustments to it, in light of changes in economic conditions. It closely monitors its capital and cash positions and carefully manages its capital expenditures such as land acquisitions, constructions and project developments and fixed charges. Real estate operation prefers to enter into joint venture arrangements with landowners to develop land rather than purchasing land outright, which reduces its capital requirements and can increase returns. Furthermore, real estate operation may also, from time to time, seek other sources of funding, which may include debt or equity issues depending on its financing needs and market conditions. Real estate operation continues to fund its project developments using medium to long-term financing, which can help mitigate any negative effects of a sudden downturn in the Philippine economy or a sudden rise in interest rates.

When getting financing from the banks on a project-to-project basis, real estate operation usually follows a gearing ratio of at least 60% loanable value versus total project costs.

Sugar Operation Capital Management Sugar operation manages their capital structure and makes adjustments to it in light of changes in economic conditions. It closely monitors its capital and cash positions and carefully manages its expenditures and disbursements. Furthermore, sugar operation also, from time to time seeks other sources of funding, which may include internal or external borrowings depending on its financing needs and market conditions.

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Sugar operation monitors capital using a gearing ratio which is total debt divided by total equity. They include within debt, accounts payable and accrued expenses, income tax payable, due to related parties, short-term loan and long-term debt. Their policy is to keep the gearing ratio not to exceed 2.0:1.0.

Hotel Operation Capital Management Hotel operation’s primary objective is to improve their profitability and continuously implement a prudent financial management program. Capital and cash positions are closely monitored and carefully manages their expenditures and disbursements are carefully managed. Hotel operation considers their equity as capital.

SRI is subject to an externally imposed capital requirements by the BOI. Such requirements prescribed that SRI shall increase its equity to P=391.0 million equivalent to 25% of the total project cost. As of December 31, 2013 and 2012, SRI was able to comply with the said requirement upon receipt of contribution of assets from the Parent Company.

Derivative Financial Instruments The table below sets out information about the Group’s derivative financial instruments and the related mark-to-market gain (derivative asset)/loss (derivative liability) as of and for the years ended December 31, 2013 and 2012:

2013 2012 (In Thousands) Notional amount $182,000 $209,000 Derivative assets P=430,046 P=41,316 Derivative liabilities 22,017 97,684

The net movements in fair value changes of all derivative instruments are as follows:

2013 2012 (In Thousands) Balance at beginning of year (P=56,368) P=449 Net changes in fair value of derivatives Designated as accounting hedges 429,956 – Not designated as accounting hedges (3,585,414) (8,324,636) (3,585,414) (8,324,636) Fair value of settled instruments Not designated as accounting hedges 3,619,855 8,267,819 Balance at end of year P=408,029 (=P56,368)

The derivative liability as of December 31, 2013 and 2012 are recorded under ‘other payable’ account.

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Derivatives Designated as Accounting Hedges In 2013, the Parent Company entered into two (2) seven (7)-year cross curreny swaps (CCS) with an aggregate notional amount of $150.0 million to hedge its foreign currency risk arising from the $300.0 million fixed rate bonds issued by FDCI. The Group applies hedge accounting treatment on these cross currency swaps after complying with hedge accounting requirements, specifically on hedge documentation designation and effectiveness testing.

Under the CCS agreements, the Parent Company receives fixed interest of USD at the rate of 4.25% of the $150.00 million total notional amount and pay fixed interest in Philippine Peso at 5.98% and 5.78% of P=2,060.0 million and =4,091.0P million, respectively, semi-annually on a 30/360 day count basis. The notional amount of the cross-currency swap equals that of the debt, and all cash flows dates and interest rates coincide between the debt and the CCS.

The maturity date of the CCS contracts coincides with the maturity date of the hedged bonds (see Note 21).

Pertinent details of the CCS are as follows:

Notional amount Trade date Effective date Maturity date Swap rate US$100.00 April 3 2013 April 4, 2013 April 20, 2020 40.91 US$50.00 May17, 2013 May 20, 2013 April 20, 2020 41.21

As of December 31, 2013, the fair value of the cross currency swaps designated as hedging instruments amounted to P=430.0 million and are presented as part of “Other assets” in the consolidated statement of financial position. The unrealized loss on hedging contracts amounting to =54.5P million, net of deferred tax of =23.3P million, for the year ended December 31, 2013 is included under “Net movement on cashflow hedges” in the consolidated statement of comprehensive income.

Hedge Effectiveness Results Since the critical terms of the hedged bonds and the CCS match, except for one to two days timing difference on the interest dates, the hedges were assessed to be highly effective. As such, the aggregate fair value changes on these CCS amounting to P=54.5 million was recognized by the Group under “Net movement on cashflow hedges” account in the consolidation statement of comprehensive income. No ineffectiveness was recognized in the Group’s statement of income for the year ended December 31, 2013.

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37. Offsetting of Financial Assets and Liabilities

The amendments to PFRS 7, which is effective January 1, 2013, require the Group to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments subject to enforceable master netting agreements or similar arrangements. The effects of these arrangements are disclosed in the succeeding tables.

Financial assets

December 31, 2013 Effect of remaining rights of set-off Net amount (including rights to set off financial Gross amounts presented in collateral) that do not meet PAS 32 Financial assets offset in statements of offsetting criteria recognized at Gross carrying accordance with financial Fair value of end of reporting amounts (before the offsetting position Financial financial Net exposure period by type offsetting) criteria [a-b] instruments collateral [c-d] [a] [b] [c] [d] [e] Derivative assets (Note 36) P=430,046 P=– P=430,046 P=– P=– P=430,046 Total P=430,046 P=– P=430,046 P=– P=– P=430,046

December 31, 2012 Effect of remaining rights of set-off Net amount (including rights to set off financial Gross amounts presented in collateral) that do not meet PAS 32 Financial assets offset in statements of offsetting criteria recognized at Gross carrying accordance with financial Fair value of end of reporting amounts (before the offsetting position Financial financial Net exposure period by type offsetting) criteria [a-b] instruments collateral [c-d] [a] [b] [c] [d] [e] Derivative assets (Note 36) P=41,316 P=– P=41,316 P=– P=– P=41,316 Total P=41,316 P=– P=41,316 P=– P=– P=41,316

Financial liabilities

December 31, 2013 Effect of remaining rights of set-off Net amount (including rights to set off financial Gross amounts presented in collateral) that do not meet PAS 32 Financial liabilities offset in statements of offsetting criteria recognized at Gross carrying accordance with financial Fair value of end of reporting amounts (before the offsetting position Financial financial Net exposure period by type offsetting) criteria [a-b] instruments collateral [c-d] [a] [b] [c] [d] [e] Derivative liabilities (Note 36) P=22,017 P=– P=22,017 P=– P=– P=22,017 Bills payable* (Note 19) 63,752 – 63,752 – 63,572 – Total P=85,769 P=– P=85, 769 P=– P=63,572 P=22,017

December 31, 2012 Effect of remaining rights of set-off Net amount (including rights to set off financial Gross amounts presented in collateral) that do not meet PAS 32 Financial liabilities offset in statements of offsetting criteria recognized at Gross carrying accordance with financial Fair value of end of reporting amounts (before the offsetting position Financial financial Net exposure period by type offsetting) criteria [a-b] instruments collateral [c-d] [a] [b] [c] [d] [e] Derivative liabilities (Note 36) P=97,684 P=– P=97,684 P=– P=– P=97,684 Bills payable* (Note 19) 4,571,853 – 4,571,853 – 4,571,853 – Total P=4,669,537 P=– P=4,669,537 P=– P=4,571,853 P=97,684 * Included in bills and acceptances payable in the statements of financial position

The amounts disclosed in column (d) include those rights to set-off amounts that are only enforceable and exercisable in the event of default, insolvency or bankruptcy. This includes amounts related to financial collateral both received and pledged, whether cash or non-cash collateral, excluding the extent of over-collateralization.

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38. Registrations with the PEZA

On May 29, 2000, FAI was registered with PEZA pursuant to the provisions of Republic Act (R.A.) No. 7916 as an Ecozone Developer/Operator to establish, develop, construct, administer and operate a special ECOZONE to be known as the Northgate Cyber Zone - Special Economic Zone at the FCC.

On June 6, 2000, CPI was registered with the PEZA pursuant to the provisions of R.A. No. 7916 as an Ecozone Facilities Enterprise.

On June 11, 2001, FAC was registered with PEZA as the developer/operator of PBCom Tower and as such it will not be entitled to any incentives however, IT enterprises which shall locate in PBCom Tower shall be entitled to tax incentives pursuant to RA No. 7916.

On February 13, 2002, FLI was registered with PEZA pursuant to the provisions of R.A. No. 7916 as the Ecozone Developer/Operator to lease, sell, assign, mortgage, transfer or otherwise encumber the area designated as an Ecozone to be known as Filinvest Technology Park - Calamba.

As registered enterprises, these subsidiaries are entitled to certain tax benefits and nontax incentives such as VAT zero-rating with their local suppliers and exemption from national and local taxes and in lieu thereof, a special five percent (5%) income tax rate based on gross income.

39. Registration with the Board of Investments

The Group is registered with the Board of Investments (BOI) as a New Operator of a Mass Housing development on a non-pioneer status under the Omnibus Investments Code of 1987 (Executive Order No. 226). As a registered enterprise, the Group is entitled to certain tax and nontax incentives, subject to certain conditions.

The Group has registered the following projects:

Date Name Reg. No. Registered Type of Registration One Oasis - Ortigas (F to M) 2011-120 06/15/11 New Developer of Low-Cost Mass Housing Project La Brisa Townhomes 2011-117 06/09/11 New Developer of Low-Cost Mass Housing Project The Linear 2011-121 06/15/11 New Developer of Low-Cost Mass Housing Project Bali Oasis 3 & 4 2011-134 06/27/11 New Developer of Low-Cost Mass Housing Project Ocean Cove 2011-133 06/27/11 New Developer of Low-Cost Mass Housing Project Villa Montserrat – Expansion 2011-132 06/27/11 New Developer of Low-Cost Mass Housing Project Escala @ Corona del Mar 2011-167 07/29/11 New Developer of Low-Cost Mass Housing Project Filinvest Homes Tagum Phase 1 2011-171 08/02/11 New Developer of Low-Cost Mass Housing Project Filinvest Homes Tagum Phase 2 2011-214 09/26/11 New Developer of Low-Cost Mass Housing Project One Oasis Davao 1, 2, 3 2011-194 09/02/11 New Developer of Low-Cost Mass Housing Project (Forward)

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Date Name Reg. No. Registered Type of Registration Villa Mercedita 2011-154 07/19/11 New Developer of Low-Cost Mass Housing Project Villa San Ignacio 2011-148 07/14/11 New Developer of Low-Cost Mass Housing Project Tierra Vista 2011-191 08/31/11 New Developer of Low-Cost Mass Housing Project Tamara Lane 2011-215 09/26/11 New Developer of Low-Cost Mass Housing Project Austine Homes 2011-252 11/25/11 New Developer of Low-Cost Mass Housing Project The Glens Phase 2 2011-216 09/26/11 New Developer of Low-Cost Mass Housing Project The Glens Phase 2 2011-217 09/26/11 New Developer of Low-Cost Mass Housing Project The Glens Phase 4 2011-218 09/26/11 New Developer of Low-Cost Mass Housing Project Somerset Lane 2011-273 12/21/11 New Developer of Low-Cost Mass Housing Project Aldea del Sol Ph 5 & 6 2011-276 12/22/2011 New Developer of Low-Cost Mass Housing Project Capri Oasis: Bldg Albero, Brezza, Solare, Cielo, Fiori, Vento 2012-036 3/5/2012 New Developer of Low-Cost Mass Housing Project Studio City Tower 1 2012-044 3/19/2012 New Developer of Low-Cost Mass Housing Project Anila Park 1 2012-052 3/26/2012 New Developer of Low-Cost Mass Housing Project San Remo Oasis - Bldgs. 1-8 2012-069 5/14/2012 New Developer of Low-Cost Mass Housing Project One Oasis Cebu- Bldgs. 1-3 2012-082 5/28/2012 New Developer of Low-Cost Mass Housing Project Filinvest Homes-Butuan 2012-094 6/7/2012 New Developer of Low-Cost Mass Housing Project Sorrento Oasis- Bldgs. A- H2 2012-095 6/7/2012 New Developer of Low-Cost Mass Housing Project Maui Oasis- Bldgs. 2 & 3 2012-096 6/7/2012 New Developer of Low-Cost Mass Housing Project One Oasis Davao - Bldg. 4 2012-093 6/7/2012 New Developer of Low-Cost Mass Housing Project Amare Homes 2013-014 1/18/13 New Developer of Low-Cost Mass Housing Project Castillon Homes – The Residences 2013-064 3/11/13 New Developer of Low-Cost Mass Housing Project Woodville Ph 2 2013-65 3/11/13 New Developer of Low-Cost Mass Housing Project

Under Certificate of Registration No. 2009-200 dated December 29, 2009, SRI was registered with the BOI as Operator of Tourist Accommodation Facility under the Modernization Program on a Pioneer status under the Omnibus Investments Code.

40. Milling Contracts

DSCC and CSCC (Millers) have milling contracts with various planters which provide for a certain sharing ratio between the Millers and the planters for the resulting sugar and molasses produced in their respective sugar mills. The milling contracts are effective for a period of 15 agricultural crop years, subject to an extension of another 15 crop years at the option of the Millers.

41. Development Agreements

HYSFC entered into several Development Agreements (the Agreements) with various landowners for the development and cultivation of certain parcels of agricultural land into a sugarcane production. The Agreements are effective for periods ranging from five (5) to 15 agricultural crop years and renewable for such additional periods under conditions mutually agreed upon by the parties. Under the Agreements, HYSFC shall have the rights and authority to enter into possession of the properties, and to do all acts, deeds, matter and things necessary for its proper and profitable development, cultivation and improvement as viable sugarcane plantation.

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Other provisions of the Agreements follow:

· HYSFC shall furnish necessary management expertise, equipment and technology for the agricultural development and cultivation; · Parties shall be entitled to receive from the income derived from the property during the effectivity of the Agreements; · HYSFC shall advance to the party in the Agreements a portion of the latter’s share in the profits from the Agreements; · After satisfying the advance in full, the succeeding annual share in the profits of the party in the Agreements shall be paid on the first day of the crop year following complete deduction of advanced made; and · The remaining amount in the income from the property shall pertain to the HYSFC as its share in the income on the agricultural development undertaken.

Impacted by the development agreements are the advances to planters and biological assets recorded in the consolidated statements of financial position. The carrying values of the Group’s advances to planters and biological assets, included in ‘Loans and receivables’ account of sugar operations and ‘Other assets’ account in the consolidated statements of financial position, amounted to =102.9P million and =94.1P million (see Note 9), respectively, as of December 31, 2013 and P=94.1 million and P=157.5 million (see Note 15), respectively in December 31, 2012.

42. Trust Operations

Securities and other properties held by EW in fiduciary or agency capacity for clients and beneficiaries are not included in the accompanying consolidated statement of financial position since these are not assets of EW. The combined trust and managed funds operated by the Trust Department of EW amounted to =7.8P billion and P=13.8 billion as of December 31, 2013 and 2012, respectively.

Government securities with a total face value of =161.9P million and =181.8P million as of December 31, 2013 and 2012, respectively, are deposited with the BSP in compliance with current banking regulations related to EW’s trust functions. These government securities are recorded as part of investment securities at amortized costs as of December 31, 2013 and 2012.

In accordance with BSP regulations, 10% of the profits realized by EW from its trust operations are appropriated to surplus reserves. The yearly appropriation is required until the surplus reserves for trust operations amounts to 20% of EW’s authorized capital stock.

EW’s income from its trust operations amounted P=29.0 million, P=27.8 million and P=31.1 million in 2013, 2012 and 2011, respectively.

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43. Events After Reporting Date

The Group had the following significant transactions subsequent to December 31, 2013:

· On January 24, 2014, FDC issued and listed P=8.8 billion unsecured fixed-rate peso retail bonds due on 2024 with annual coupon rate of 6.1458%.

· On February 4, 2014, the Group incorporated Filinvest Cyberparks, Inc., a wholly-owned subsidiary which will be operating as a real estate developer.

· On January 25, 2014, EW exercised its call option on the P=1.3 billion 2019 Notes due on January 26, 2019 and with optional redemption date of January 25, 2014.

The redemption was approved by the EW’s BOD on August 29, 2013 and by the BSP on November 7, 2013. The call option amount was the sum of the face value of the Notes, plus accrued interest amounting to P=53.9 million, covering the 11th interest period from July 25, 2013 to January 25, 2014 at the interest rate of 8.625%, as of but excluding the call option date.

· In February 2014, EWBC issued the fourth tranche of its 3.3% fixed coupon rate unsecured LTNCD maturing on June 9, 2019 amounting to =0.83P billion. The discount, net of debt issue costs related to the issuance of the LTNCD Series 2, amounted to =34.8P million.

*SGVFS007153* SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 28, 2012, valid until December 31, 2015 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-3 (Group A), Philippines November 15, 2012, valid until November 16, 2015

INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY SCHEDULES

Filinvest Development Corporation The Beaufort, 5th Avenue, corner 23rd Street Bonifacio Global City, Taguig City

We have audited in accordance with Philippine Standards on Auditing, the consolidated financial statements of Filinvest Development Corporation and its subsidiaries (collectively, the Group) as at December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013 included in this Form 17-A and have issued our report thereon dated March 14, 2014. 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 Consolidated Financial Statements and Supplementary Schedules are the responsibility of the Group’s management. These schedules are presented for purposes of complying with the 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.

March 14, 2014

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A member firm of Ernst & Young Global Limited FILINVEST DEVELOPMENT CORPORATION INDEX TO PARENT COMPANY FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

SUPPLEMENTARY SCHEDULES

Independent Auditor’s Report on Supplementary Schedules

Parent Company Supplementary Information and Disclosures Required on SRC Rule 68 and 68.1 as Amended

Parent Company Unappropriated Retained Earnings Available for Dividend Distribution FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION AND DISCLOSURES REQUIRED ON SRC RULE 68 AND 68.1 AS AMENDED DECEMBER 31, 2013

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 information and schedule requirements for issuers of securities to the public.

Below are the additional information and schedules required by SRC Rule 68 and 68.1 as amended that are relevant to the Group. This information is presented for purposes of filing with the SEC and is not required part of the basic financial statements.

Schedule A. Financial Assets in Equity Securities Below is the detailed schedule of financial assets in equity securities of the Group as of December 31, 2013:

Number of Amount Shown Value Based Shares/Principal in the Statement on Market Income Name of Issuing entity and association Amount of of Financial Quotation at Received and of each issue Bonds and Notes Position end of year Accrued (In Thousands) Financial assets at FVTPL Government and Private Bonds: Rizal Commercial Banking Corporation 362,441 P=376,855 P=376,855 P=13,739 United States Treasury 443,950 434,724 434,724 176 Bureau of Treasury 219,541 217,372 217,372 20,388 First Pacific Company Ltd 88,790 92,287 92,287 2,644 SM Investment Corp 67,214 69,934 69,934 4,378 Credit Suisse 43 19,280 19,280 n/a Republic of the Philippines 14,295 14,952 14,952 28,320 Banco De Oro 4,440 4,550 4,550 361 Citibank Manila 48 4,262 4,262 n/a PSALM 710 847 847 26 1,235,063 1,235,063 70,032 Equity Securities: San Miguel Corporation 4,983 379,493 379,493 − Visa, Inc. 361 177,647 177,647 − Victorias Milling Corporation 70,000 133,000 133,000 − Mastercard, Inc. 18,216 13,268 13,268 − LGU Guarantee Corporation 50 10,213 10,213 − Mabuhay Vinyl Corporation 19 19 19 − 713,640 713,640 − P=1,948,703 P=1,948,703 P=70,032 Financial assets at FVTOCI Quoted: Manila Golf 2 P=60,000 P=60,000 P= – Manila Polo Club 1 13,000 13,000 Sta Elena Properties Inc. 2 5,800 5,800 – The Palms Country Club 1 3,060 3,060 − Alabang Country Club 2,000 2,200 2,200 – Roxas Holdings, Inc. 914,290 2,725 2,725 – Phil. Clearing House Corp. 1 2,582 2,582 − PDSH 1 1,555 1,555 – Manila Electric Company (MERALCO) 156,000 1,557 1,557 – PLDT 46,100 459 459 − (Forward) - 2 -

Number of Amount Shown Value Based Shares/Principal in the Statement on Market Income Name of Issuing entity and association Amount of of Financial Quotation at Received and of each issue Bonds and Notes Position end of year Accrued (In Thousands) Aboitiz Transport System Corporation 241,539 P=411 P=411 P= – Valle Verde 1 370 370 – Empire East Land Holdings, Inc. 3 213 213 – 93,932 93,932 – Unquoted: Manila Electric Company (MERALCO) 1,153,694 11,537 11,537 3,757 H.B. Fuller 1,903,767 15,500 15,500 – Riviera Golf 1 4,500 4,500 – Caliraya Golf 1 3,120 3,120 − Kewalram Realty, Inc. 1,500 150 150 – KRL Land, Inc. 1,500 150 150 – Asiatrust Development Bank 18,200 127 127 – Pacesetter Homes Dev't Corp. 1 25 25 – Discovery Homes Realty 1 25 25 – Pilipino Telephone Corp. 1,800 8 8 – Others – 8,087 8,087 – 43,229 43,229 – P=137,161 P=137,161 P=3,757 Investment Securities at Amortized Cost National Power Corp. 3,761,588 4,013,477 4,249,617 149,741 Republic of the Philippines 2,116,922 2,712,985 2,792,496 96,887 Citigroup, Inc. 443,950 472,268 511,919 19,727 Bank of America Corporation 443,950 456,126 506,090 22,404 Development Bank of The Philippines 346,281 355,163 369,094 13,092 FPT Finance Ltd 301,886 303,146 313,364 18,258 PSALM 220,921 225,809 233,471 13,505 Philippine Power Trust I 231,065 225,942 228,755 15,086 First Pacific Company, Ltd. 173,141 181,113 191,777 10,338 Republic of Indonesia 133,185 133,878 133,351 2,752 Small Business Corporation 400 413 413 8 P=9,080,320 P=9,530,347 P=361,798

Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal Stockholders (other than related parties) Below is the schedule of advances to employees of the Group with balances above P=100,000 as of December 31, 2013:

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Abigail Bernice Valmonte P=137 P=44 P=72 P=111 Abigail Joan Cairo 387 – 127 260 Adelaida Gusi – 117 – 117 Adrian Wilson Salazar 445 – 109 336 Aerol Paul Banal – 169 – 169 Alan Atienza – 1,200 – 1,200 Alan John Ching – 271 – 271 Albert De Leon – 112 112 0 Albert Jude Bautista 107 96 23 180 Alberto L Cataluña 68 33,946 27,308 6,706 Alessandro Villaraza 2,965 – 106 2,859 (Forward) - 3 -

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Alexander Glen Bautista P=– P=280 P=– P=280 Allan John Tumbaga 3,622 – 244 3,378 Allan Kim Villanueva 53 213 27 239 Allan Pe·Aloza 249 – 43 206 Allan Penarubia 259 54 51 262 Allan Vivo 173 50 48 175 Almira Rabor – 250 – 250 Amada Ma. Laarni Soller 232 – 44 188 Amelia F Encarnacion 752 387,070 375,083 12,739 Ana Jean Agcaoili 535 – 199 336 Ana Liza Leonardo 113 60 35 138 Ana Maria Loterio - Paras 620 2,192 201 2,611 Ana Venus A Mejia – 307 40 267 Andrew Gotianun III – 199 50 149 Angela Reyes – 143 – 143 Angeles Capili 214 17 65 166 Angelico Israel Benitez 306 – 133 173 Ann Grace Sigua – 185 – 185 Anna Liza De Leon 266 221 46 441 Anna Marie Capobianco 162 – 57 105 Anne Rachelle Cruz – 287 – 287 Anthony Olalia 250 – 42 208 Anthony Vergel De Dios – 228 – 228 Antonio E Cenon 8,809 307,067 307,229 8,647 Antonio Patungan 287 – 161 126 Archibald Villa 118 270 49 339 Archie M Igot 159 852 180 831 Ariann Arintok – 169 – 169 Arlene Lamarroza 2,760 – 258 2,502 Arlene Trinidad 135 174 51 258 Arlene Viernes – 269 – 269 Arnel Suico – 226 – 226 Arnold Esguerra – 223 – 223 Arnold Thomas Rafael David – 283 – 283 Arthur Golez Jr. 222 – 45 177 Arvin L Pamalaran 695 41,817 29,196 13,316 Arvin Santos 283 – 49 234 Aubrey F Ortega 55 19,111 6,555 12,611 Aylwin Herminia Tamayo – 149 – 149 Baltazar Randy De Luna 280 189 50 419 Benizi Ranola 244 – 85 159 Broderick Santos – 313 – 313 Buen Rabuya – 247 – 247 Carla Teresa Regio 243 – 43 200 Carlo Enanosa 335 – 61 274 Carlota Medina 273 – 65 208 Carmichael Manuel 216 – 71 145 Catalino Hilario 176 – 49 127 Catherine Cariaga – 235 – 235 Catherine Cortez 74 73 46 101 Catherine Joy Camat – 106 – 106 Catherine Ong 255 – 67 188 Catherine Sangalang 259 – 51 208 Catherine Tan 425 – 77 348 Cecilia Viray – 396 – 396 Cesarine Janette C. Manla 1,996 5,293 7,184 105 Charisse Tubu – 368 – 368 Cherry Ann Vanessa Kimpo – 251 – 251 Christian Cruz – 250 – 250 (Forward) - 4 -

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Christina Ong P=279 P=– P=59 P=220 Christine Saman 262 167 69 360 Ciara Ann Yu – 114 – 114 Cindy Carreon 247 – 74 173 Claudette Makilan – 235 – 235 Conrad Anthony Dominic Banal – 328 – 328 Conrad Paul Pascual Jr – 419 – 419 Corazon A Rollon 10 397 19 388 Crispin Reyes 313 – 152 161 Cristina Pama 292 215 63 444 Cyrus Morales – 233 – 233 Danilo Palo 226 – 44 182 Dave Arreglado 161 195 46 310 December Iremedio – 217 – 217 Denise Corpuz – 236 – 236 Dino Antonio Salvador – 239 – 239 Divine Grace Dagoy – 209 – 209 Djhoanna Zepeda – 335 – 335 Dondon Mari Ubaldo 220 27 247 0 Dyan Ann Yuson 197 – 44 153 Editha San Jose 409 – 145 264 Eduardo Aribon 163 – 58 105 Eduardo Dimla Jr. 2,009 – 195 1,814 Edward Serrano 204 400 534 70 Edwin Tamayo 193 – 44 149 Edwin Villegas 318 – 101 217 Eileen Genevieve Catolos – 100 – 100 Elamor Flores 214 – 65 149 Elsa N Marquez 78 36 1 113 Emanuele Santos 244 – 42 202 Emmanuel Ramon Zamora Itf Canillas 241 38 62 217 Ephraim Vincent Yuson – 236 – 236 Eric Cariaga 230 – 44 186 Ericson Bautista 226 – 39 187 Erlie Soliven 257 111 55 313 Ermelyn Escoses 480 – 109 371 Ernesto De Guzman 251 – 55 196 Ernesto Santiago 384 – 68 316 Esther Sta Maria 367 – 153 214 Estrella Ng – 233 – 233 Eufrocina Jaucian 2,523 – 196 2,327 Eugenio Verzosa – 219 – 219 Evangeline Atilano 100 – 100 0 Evangeline Mosqueda 674 – 213 461 Evangeline Pe·afiel 249 – 43 206 Evelyn See 229 – 44 185 Felipe Ignacio 231 80 63 248 Ferdinand Hilario 376 – 102 274 Fernando D. Luzaran 34 464 75 423 Flordeliza Cruz 221 – 45 176 Florence Cruz 242 – 43 199 Florence Pe Benito – 292 – 292 Frances Lea Guino 345 – 60 285 Francesco Michael Purugganan 240 171 43 368 Francis Alexandre Salvador – 221 – 222 Frederick Reyes 205 – 90 115 Frederick Voltaire Rosal – 161 – 161 G Fulton Acosta 321 44 143 223 Gay Biscocho – 240 – 240 (Forward) - 5 -

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Gemma Lacambra P=– P=279 P=– P=279 Gemma Vedasto – 112 – 112 George Molina 269 – 60 209 Geraldine Marie C De Goro 1,936 10,124 10,916 1,144 Geraldine Tuason – 233 – 233 Gerard John Presingular – 314 – 314 Gerardo Magdales 259 – 51 208 Gerardo Susmerano 1,994 – 358 1,636 German Pacat – 243 – 243 Gerna Joanne Ramiscal 403 – 104 299 Gina Bunyi 113 37 150 0 Ginalyn Caberoy – 235 – 235 Gisela Michelle Maningas 267 – 106 161 Glenda Gaba – 119 – 119 Glenn Lotho 190 220 66 344 Glennmore Dela Cruz – 289 – 289 Grace Borja 290 107 58 339 Gracia Regina Ricaforte 222 – 45 177 Harold Olarte – 337 – 337 Henry Episcope 274 157 47 384 Herman Nonato 275 – 91 184 Ian Daleo Andrade 308 – 56 252 Imelda Bernabe – 242 – 242 Irene Go 295 – 60 235 Irene Rito 235 142 44 333 Ires Guzman 383 – 48 335 Israel Jr. Yadao – 491 – 491 Ivah Marizol Landrito – 187 – 187 Ivy Uy 8,637 – 406 8,231 Jacinto Guinto 272 – 41 231 Jacobo Foja 449 – 158 291 Jacqueline Fernandez 12,024 – 1,063 10,961 Jaharra Go 349 – 125 224 Jahil Macapagal 326 – 61 265 Jake Gattoc – 100 – 100 James Carijutan – 236 – 236 Janette Laguda 622 – 110 512 Jannet Saguinsin 80 255 48 287 Janus Anonuevo – 268 – 268 Jasmin Mae Marcelo – 250 – 250 Jasmine Bautista 409 – 175 234 Jason Anthony Atienza 475 – 102 373 Jason Vives – 247 – 247 Jayson Siocson 223 – 42 181 Jean Margarette Lee 280 – 49 231 Jeannette Maglaki 416 110 147 379 Jeffrey John M Cortes − 559 45 514 Jeffrey M Nisnisan 114 3,770 3,068 816 Jenice Chua 351 – 109 242 Jennifer Arnaldo 284 – 133 151 Jerome Villocillo 172 – 49 123 Jessie Bandol 337 – 60 277 Jeziel Basilio – 161 – 161 Jimhar A Hamid – 1,995 − 1,995 Jimmy John Santos – 154 – 154 Jimmy Tarnate Jr. 280 231 46 465 Jizell Magadia – 150 – 150 Joanne Deocampo 272 – 69 203 Job Lizada – 111 – 111 (Forward) - 6 -

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Jocelyn Legaspi P=4,564 P=– P=218 P=4,346 Jocelyn Soliongco 211 247 89 369 Joeffrey Manalangsang – 134 – 134 Joel Joven 235 – 91 144 Joel Ugsimar 235 – 77 158 John Andrew Ladores 195 142 47 290 John Benecer Lariosa III 159 – 34 125 John Delmer P Vitaliz 260 2,698 2,652 306 John Gil Geronimo 67 300 67 300 John Ramon Lopez 174 – 53 121 John Salcedo 284 – 106 178 Johnell Gutierrez – 174 – 174 Johoanna Cadano – 397 – 397 Joji Malana – 102 – 102 Jolly Allan Cheng – 211 – 211 Jonathan Auza – 306 – 306 Jonathan Caldozo 281 – 106 175 Jose Hrothgard Navarro 268 57 61 264 Jose Ma. Oscar Navidad – 316 – 316 Joseph Hulguin – 226 – 226 Joseph M Yap 863 200 858 205 Jovito Viernes 265 – 51 214 Jovito Zamora 266 – 60 206 Joy Samson – 184 – 184 Juan Christian Arevalo 248 – 55 193 Juancho Tomboc 418 – 188 230 Judy Ulysses Lacsamana – 232 – 232 Julie Adelyn Nayve 210 2 46 166 Justin Robert Ladaban – 396 – 396 Karleen Manuel 548 – 33 515 Karren Bernaldo 246 – 45 201 Karsten Tinio – 254 – 254 Katherine Manguiat 1,172 – 125 1,047 Katherine Tamondong 170 127 49 248 Kathryn Ann R Lao 15,812 33,092 45,004 3,900 Kathryn Que 260 – 51 209 Kervin John Torchiva – 226 – 226 Kerwin Lim 180 – 48 132 Kristel Ojales – 106 – 106 Kristine Karen Leuterio – 226 – 226 Kristoffer Alexis Borres 271 118 58 331 Laudemer Generoso – 105 – 105 Leila Soriano 203 36 37 202 Leovelino Ebora – 242 – 242 Liang -Ta C Chien – 4,595 4,447 148 Liberty Valderrama 268 – 50 218 Lizette Badando 352 – 119 233 Lope Austria – 244 – 244 Lorita Tee 270 – 66 204 Lourdes Ona 138 304 73 369 Lovelle Lizette Valenzuela – 113 – 113 Lovely Manaois 374 – 67 307 Ma. Barbara Lima – 250 – 250 Ma. Christina Puno 319 – 56 263 Ma. Edwina Pineda – 184 – 184 Ma. Ellen Victor 185 – 67 118 Ma. Jessica Madeleine Dalusung 462 – 148 314 Ma. Karen Junio 219 130 45 304 Ma. Leonora Reyes 311 209 68 452 (Forward) - 7 -

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Ma. Margarita Dela Cruz P=– P=110 P=– P=110 Ma. Noemi Ong 237 38 43 232 Ma. Rio Luz Pili – 104 – 104 Ma. Ruby Rosa Coligado 191 – 83 108 Ma. Susana Editha Lumbres 236 – 43 193 Ma. Teresa Bayani – 396 – 396 Madel Suansing 139 370 179 330 Mai Sangalang – 236 – 236 Malcolm Cobarrubias 236 56 44 248 Manilyn Novio 214 999 528 685 Mara Siena Castillo 223 137 45 315 Marchito Nonato – 101 – 101 Marco Vicente P. Fernandez 1,648 8,863 9,446 1,065 Margareth De Peralta – 277 – 277 Maria Aileen Capili – 412 – 412 Maria Aileen Villarama 373 – 92 281 Maria Cecilia De Leon 188 – 67 121 Maria Cecilia Lim-Marohombsar – 215 – 215 Maria Corazon Villegas – 267 – 267 Maria Cristina Cobarrubias – 380 – 380 Maria Cristina Gomez 253 – 114 139 Maria Cristina Maribojoc – 124 – 124 Maria Cristina Ty – 200 – 200 Maria Deborah Fernandez 223 – 71 152 Maria Gloria Dulce Erana 265 – 47 218 Maria Jocelyn Balatbat 234 240 75 399 Maria Kristina Joanna Saulog – 258 – 258 Maria Kristina Mortel – 254 – 254 Maria Laarni Alcasid – 125 – 125 Maria Leah Tumao – 217 – 217 Maria Luisa Clutario 305 – 57 248 Maria Luisa Dolina – 231 – 231 Maria Regina Bautista – 298 – 298 Maria Rosita Calderon 203 108 47 264 Maria Theresa Sibug 258 195 51 402 Maria Zheena Lopez – 106 – 106 Maribeth De Leon 479 – 205 274 Maricel Panganiban – 105 – 105 Maricel Soriano 214 209 55 368 Marichu Teng 209 – 55 154 Marie Angeline C Joven 20 94 1 113 Marie Antoinette Teves 196 – 42 154 Marilou Bermudez 284 127 149 262 Marinela Hebron – 236 – 236 Marinella Dela Cruz – 214 – 214 Marissa Bauson 353 516 144 725 Marissa Sandro 349 – 162 187 Marita Papag – 217 – 217 Mark Anthony Valino 239 – 53 186 Mark Manlulu 205 – 73 132 Marvin James – 399 – 399 Mary Ann Lama 275 33 50 258 Mary Ann Topacio – 247 – 247 Mary Anne Resurreccion – 217 – 217 Mary Gay Asuncion – 232 – 232 Mary Jane Alcala 87 279 87 279 Mary Jane Chan 316 – 75 241 Mary Joy Aquino – 169 – 169 May-Ann Montaño 245 18 227 (Forward) - 8 -

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Maylin Flores P=– P=293 P=18 P=275 Melias Tumbiga 156 50 68 138 Melvin Mendros – 115 – 115 Meybel Bautista – 315 – 315 Michael Navarro 182 – 68 114 Michael Thomas Hart 140 25 115 Mina Gracia Sayson – 101 – 101 Mineleo Serrano 434 – 184 250 Minnie Ceniza 177 53 49 181 Moises Lampano 216 – 55 161 Mylene Pilares – 316 – 316 Myra Nicasio – 214 – 214 Napoleon Cruz Jr. – 543 – 543 Neil Allen Sen 383 – 70 313 Neliechel Rosario 170 – 49 121 Nico Valenzuela 58 351 29 380 Nida Malinao 223 – 160 63 Niel Aquino − 604 20 584 Nilo Guerrero 330 – 67 263 Nina May Reynoso 404 – 136 268 Nina Paz Adlawan 169 59 100 128 Noel Pangan – 238 – 238 Noel Ramos – 113 – 113 Noel V Advincula 5,235 87,789 92,641 383 Noemi Canedo 243 – 52 191 Nova Delos Santos 303 – 77 226 Odelon Francia Jr 1,378 81 107 1,352 Odelon Logarta – 226 – 226 Ofelia Marqueses – 154 – 154 Olivia Galicia 238 – 53 185 Pablito A. Perez 425 695 562 558 Pamela Bite 208 223 46 385 Pamela Cabalquinto 263 153 263 153 Paolo Juan Miguel Maipid 237 134 43 328 Paolo Narciso – 233 – 233 Patricia Espiritu 285 – 59 226 Patrik Konrad Ticzon 330 – 49 281 Paulina Chua 286 – 68 218 Paulino Mamalayan 239 – 43 196 Paulo Jose Rodriguez 424 – 136 288 Pedro Catalino Ba·ez – 233 – 233 Percival O Flores 22 258 131 149 Perla Arevalo 373 – 111 262 Peter Augustus Mallari – 321 – 321 Portia Gilda Florendo 263 – 43 220 Pricilla De Guzman – 239 – 239 Rachelle De Guzman 229 179 44 364 Racquel Magnaye – 267 – 267 Ralph Eduardo Yambao – 315 – 315 Ramon Macaraeg 180 – 55 125 Raoul Antonio Abreu 245 – 62 183 Raquel Balatbat – 284 – 284 Raquel Del Rosario – 217 – 217 Raquel Malapad 140 – 13 127 Raul Raymund Locsin 337 – 68 269 Ravi Rivera Jr. 234 – 54 180 Ray Karlo Borromeo – 232 – 232 Raymond Reboredo 1,216 – 259 957 Reginald Andal – 391 – 391 (Forward) - 9 -

Balance at Collections/ Balance at Name beginning of year Additions Liquidations end of year (In Thousands) Reginald Dennis Kosca P=– P=231 P=– P=231 Remilyn M Magallon – 244 139 105 Renato Sampang 854 – 124 730 Rey Ferdinand C Maribao 106 84,782 81,571 3,317 Reynaldo Valeros 199 – 36 163 Rhoda Joven 272 – 50 222 Richard Benjamin Munoz – 176 – 176 Richard De Jesus 1,364 – 95 1,269 Rico Ramirez – 167 – 167 Riconoel Calimbahin 250 – 29 221 Riza Santiago – 102 – 102 Rizalangela L. Reyes 884 786 1,352 318 Rizel Alonde – 232 – 232 Roberto Paul Catane – 217 – 217 Robin Melchor Jon Villano 378 – 169 209 Robin Melchor Villano – 277 – 277 Rod Louie Jefferson Isidro 455 – 246 209 Rodney Jardiel 413 – 180 233 Roland Estacio – 128 – 128 Roland Savellano 195 – 56 139 Romeo M Estrella 34 1,682 956 760 Rosalina Gacasan – 247 – 247 Rosemarie Bombais – 267 – 267 Rosemarie Dumalaog 333 – 72 261 Rosemarie Sy 290 – 60 230 Rowena Caro – 226 – 226 Ruben Dario V. Vidamo 107 64 43 Rufina Anabelle Velasco 222 – 54 168 Ruth M. Olalo 128,436 186,720 172,895 142,261 Sally Marie Macaraeg 400 68 112 356 Shane Kristian R. Mendoza – 565 272 293 Sharon Que – 247 – 247 Sheena Sangkula – 219 – 219 Sheila Salvador 224 173 51 346 Sherwin Zarasa – 262 262.00 Sheryl Anne Mata – 114 – 114 Simeon Canto 153 40 51 142 Soraya Perez 272 207 66 413 Tomas Nanquil 264 – 122 142 Toni Regina Ortiz – 211 – 211 Tootsie Honorico 601 – 165 436 Ursulo Cuaton Jr. II – 391 – 391 Valerie Mariflor Valera 312 146 56 402 Victor Apaliso Jr – 543 – 543 Violeta Carlos – 236 – 236 Wilbert Aldrin Bajo – 641 – 641 Wilbert Go 213 – 90 123 Wilfredo C. Abuena 738 5,179 5,045 872 Wilroy Ticzon – 338 – 338 Windy Gutierrez – 233 – 233 Winnie Quinto 539 200 568 171 Winnifred H Lim 834 5,033 5,132 735 Xavier Ramos 1,668 – 272 1,396 Yolanda Contreras 78 222 47 253 Yvette Rhodora Siongco 320 – 61 259 Zaida Angelita Lazaro 131 214 48 297 P=276,153 P=1,288,955 P=1,212,259 P=352,849 - 10 -

These advances to officers and employees consist of advances for expenses and disbursements necessary in carrying out their functions in the ordinary course of business such as for selling and marketing activities, official business trips, emergency and COD purchases of materials, equipment and supplies, repair of Company’s vehicles, model units and housing units, registration of titles, etc and short term loans. The advances will be liquidated when the purposes for which these advances were granted are accomplished or completed or deducted from the officers’/employees’ salaries.

Schedule C. Amounts Receivable from Related Parties which are Eliminated During the Consolidation of Financial Statements Below is the schedule of receivables from (payables to) related parties which are eliminated in the consolidated financial statements as of December 31, 2013 (amounts in thousands):

Volume of Transactions Receivables Terms FDC Forex Share in expenses P=3,386 P=2,908,168 Non-interest bearing and to be settled within one year Pacific Sugar Holdings, Corp. Share in expenses 14,729 951,291 Non-interest bearing Interest income and to be settled Dividend income within one year, Filinvest Alabang, Inc Share in expenses 32,298 194,367 Non-interest bearing Management fee and to be settled Rental income within one year, except for sale of lots* Filinvest Land, Incorporated Share in expenses 716,856 123,706 Non-interest bearing Rental income and to be settled Dividend income within one year except for sale of lots* Filinvest Hotels Corporation Share in expenses 38,627 56,222 Non-interest bearing and to be settled within one year Seascapes Resort Inc. Share in expenses 257,532 17,287 Non-interest bearing Rental income and to be settled Dividend income within one year FDC Utilities, Inc. Share in expenses 25,182 19,360 Non-interest bearing Rental expense and to be settled within one year Festival Supermall, Inc. Rental income 209 168 Non-interest bearing and to be settled within one year East West Banking Corporation Share in expenses (5,567,987) (5,583,130) Non-interest bearing Rental expense and to be settled Loan within one year except for loan** Filinvest Development Cayman Operational advances (6,502,974) (6,502,974) May be settled Islands at any date (P=10,982,142) ( P= 7,815,535) *Interest bearing receivables from sale of lots to FAI and FLI that are due within two years and nine years, respectively. ** Interest-bearing loan with interest rate per annum equivalent to 4.059% fixed (inclusive of GRT) payable semi-annually. Principal is due on March 31, 2020. - 11 -

Balance at beginning Collections/ Balance at of period Additions Reclassification end of period FDC Forex P=3,376,334 P=5,602 (P=473,768) P=2,908,168 Pacific Sugar Holdings, Corp. 936,563 14,728 – 951,291 FilinvestAlabang, Inc 200,770 42,717 (49,120) 194,367 Filinvest Land, Incorporated 127,036 718,215 (721,547) 123,704 Filinvest Hotels Corporation 41,466 38,627 (23,871) 56,222 Seascapes Resort Inc. 31,517 377,105 (391,335) 17,287 FDC Utilities, Inc. 9,149 44,617 (34,406) 19,360 Festival Supermall, Inc. (41) 209 – 168 Filinvest Development Cayman Islands – – (6,502,974) (6,502,974) East West Banking Corporation 5,558 26,016 (5,614,702) (5,583,128) P=4,728,352 P=1,267,836 (P=13,811,723) P=7,815,535

The intercompany transactions between FDC and the subsidiaries pertain to share in expenses, rental charges, marketing fee and management fee. There were no amounts written off during the year and all amounts are expected to be settled within the year except for; (a) FAI and FLI, which are inclusive of receivables from sale of lots that are due within two years and nine years, respectively, with interest of 90-day T billion plus 1% spread, subject to quarterly re-pricing; and (b) EW, which pertains to interest-bearing loans with interest rate per annum equivalent to 4.059% fixed (inclusive of GRT) payable semi-annually. Principal is due on March 31, 2020.

Related Party Transactions Due from related parties Below is the list of outstanding payables to related parties of the Group presented in the consolidated statements of financial position as of December 31, 2013 (amount in thousands):

Balance at Relationship Nature end of period Timberland Sports and Nature Club Affiliate A P=186,464 KRL Land Inc and Kewalram Realty Inc. Associate B 21,171 A.L. Gotianun, Inc. Parent Company A 696 The Palms Country Club Affiliate A 218 GCK Realty Affiliate A, C, D 188 P=208,737

Nature of intercompany transactions The nature of the intercompany transactions with the related parties is described below:

(a) Expenses - these pertain to the share of the Group’s related parties in various common selling and marketing and general and administrative expenses. (b) Advances - these pertain to temporary advances to/from related parties for working capital requirements (c) Management and marketing fee (d) Reimbursable commission expense

The outstanding balances of intercompany transactions are due and demandable as of December 31, 2013. - 12 -

Schedule D. Intangible Assets As of December 31, 2013, the Group’s intangible assets consist of Goodwill and other intangible assets. Intangible assets in the Group’s consolidated statements of financial position follow (amounts in thousands):

Balance at Charged to beginning cost and Balance at of period Additions expenses end of period Goodwill: PSHC P=10,083,310 P= – P=− P=10,083,310 AIGPASB, PAFLI and PFLHI 769,042 – – 769,042 GBI 373,996 – – 373,996 CPI 326,553 – – 326,553 Ecology Saving Bank, Inc. 150,212 – – 150,212 Finman Rural Bank, Inc 23,478 – – 23,478 P=11,726,591 P= – P=− P=11,726,591 Other assets: Customer relationship P=136,987 P=− (P=3,199) P=133,788 Branch license 1,447,400 214,800 − 1,662,200 Core deposits 26,046 – (5,155) 20,891 Capitalized software 479,639 185,252 (133,678) 531,213 P=2,090,072 P=400,052 (P=142,032) P=2,348,092

Schedule E. Long-term Debt Below is the schedule of long-term debt of the Group:

Amount Current Noncurrent (In Thousands) Parent Company Loans Loan with interest rate per annum equivalent to 5.9% fixed (inclusive of GRT) payable quarterly in arrears. Loan is payable in full in August 2017. P=996,220 P= – P=996,220 5-year loan with interest rate per annum equivalent to 1.0%-1.25% plus 3-month PDST-F; 46% of principal payable in 11 equal quarterly amortizations to start at the end of the 2-year grace period; 54% of principal payable in full on maturity date. Current portion as of December 31, 2013 and 2012 amounted to P=464.2 million and P=1.2 billion, respectively. 711,728 463,931 247,797 7-year loan with interest rate per annum equivalent to 6.4% fixed (inclusive of GRT) payable semi-annually. Principal is due in December 2018. 596,229 – 596,229 5-year term loan with interest rate per annum equivalent to a maximum of 1.0% spread over the prevailing 3-month PDST-F, repriceable and payable quarterly in arrears. Principal is payable in 12 equal quarterly amortizations commencing at the end of the ninth quarter from the date of loan release. 560,739 248,586 312,152 Loan with interest rate per annum equivalent to 1.25% spread over 90-day PDST-F; payable quarterly in arrears. Loan is payable in full at maturity in April 2015. 499,268 – 499,268 Term loan with interest rate per annum equivalent the prevailing market rate; payable quarterly in arrears. 50% of principal is payable quarterly and 50% is payable in full at maturity in January 2018. 460,411 49,156 411,255 Term loan with interest rate per annum equivalent to 1.25% spread over 90-day PDST-F; payable quarterly in arrears. 50% of principal is payable quarterly and 50% is payable in full at maturity in November 2017. 448,014 49,146 398,868 (Forward) - 13 -

Amount Current Noncurrent (In Thousands) Loan with interest rate per annum equivalent to 1.0% spread over 90-day PDST-F, payable quarterly in arrears. 50% of principal is payable in 3 equal quarterly amortizations at the end of 4-year grace period while 50% balance is payable at maturity in September 2016. P=348,989 P=57,706 P=291,283 Term loan with interest rate per annum equivalent to a maximum of 1.0% spread over 90-day PDST-F; payable quarterly in arrears. Loan is payable in full in August 2016. 238,906 41,217 197,689 4,861,504 909,742 3,951,762 Subsidiaries’ Loans FAI Loan obtained on September 5, 2013 and will mature on September 5, 2020. Interest at 4.8254% (inclusive of GRT) for 1st 91-day, to be re-priced. 50% of the loan is payable in twenty equal quarterly amortization and the remaining 50% payable at maturity. 500,000 − 500,000 Loan obtained on July 23, 2012 and will mature on July 23, 2017. Interest at 4.8% for 1st 90-day (inclusive of GRT), to be re-priced and payable in arrears quarterly (with one-time option to change interest to fixed rate anytime during the term of the loan). Partial and full principal prepayment allowed anytime without penalties. 400,000 16,667 383,333 Loan obtained on November 10, 2011 with two years grace period on principal repayment, and will mature on November 10, 2018. 50% of the loan is payable in twenty (20) equal quarterly amortizations and the remaining principal balance is payable on maturity. Interest for the 1st 92 days is 4.5% per annum (inclusive of GRT) and is subject to quarterly re-pricing. 300,000 30,000 270,000 Term loan obtained on January 10, 2011 with a 5 year term and will mature on December 14, 2015 with two (2) years grace period on principal repayment. Interest for the 1st 66 days is 2.1769% per annum. Basic interest is subject to quarterly re-pricing. 250,000 50,000 200,000 Loan obtained on February 12, 2013 and will mature on February 12, 2018. Interest at 4.1% for 1st 91-day, to be re-priced and payable in 20 equal quarterly installments amounting to P20.8M per quarter. 250,000 − 250,000 Term loan obtained on March 30, 2012 with two (2) years grace period on principal repayment, and will mature on March 30, 2019. Fifty (50) percent of the loan is payable in twenty (20) equal quarterly amortizations and the remaining principal balance is payable on maturity. Interest for the 1st 92 days is 5% per annum (inclusive of GRT) and is subject to quarterly re-pricing.. 200,000 15,000 185,000 Term loan with interest payable quarterly of 91-day PDST- rate plus a spread of 1.5% per annum. The term of the loan is 5 years with 2-year grace period on principal payment and will mature on April 8, 2015. 150,000 33,333 116,667 Term loan obtained on December 27, 2011 with a 7 year term and will mature on December 27, 2018. Fifty (50) percent of the loan is payable in twenty (20) equal quarterly amortizations and the remaining fifty (50) percent is payable on maturity. Interest for the 1st 91 days is 5.000% per annum (inclusive of GRT) and is subject to quarterly re-pricing. 150,000 15,000 135,000 (Forward) - 14 -

Amount Current Noncurrent (In Thousands) Term loan obtained on December 14, 2010, 50% of the principal is payable in twelve (12) quarterly installments beginning from the ninth (9th) quarter after availment of the loan and the remaining 50% is payable upon maturity on December 14, 2015. Interest rate for the 1st 90 days is 2.1615% per annum payable quarterly to start on March 14, 2011. Interest rate is subject to quarterly repricing. P=83,333 P=16,667 P=66,667 Loan with interest payable monthly computed based on latest 91-day T-bill rate plus 2.0% and is subject to quarterly repricing. The loan is payable in 18 equal monthly amortizations after a 2-year grace period will mature on June 27, 2014. 55,826 55,826 − 2,339,159 232,492 2,106,667 FLI Fixed rate bonds with principal amount of 7.00 billion and term of seven (7) years from the issue date was issued by the Company on June 8, 2012. The fixed interest rate is 6.27% per annum, payable quarterly in arrears starting on September 10, 2012. 6,938,102 – 6,938,102 Fixed rate bonds with aggregate principal amount of P= 7.00 billion issued by the Group on November 8, 2013. This comprised of P4.3 billion seven (7) year fixed rate bonds due in 2020 with a fixed interest rate of 4.8562% per annum, and P=2.7 billion ten (10) year fixed rate bonds due in 2023 with a fixed interest rate of 5.4300% per annum. 6,918,931 – 6,918,931 Fixed rate bonds with aggregate principal amount of P=4.50 billion, comprised of five (5)–year fixed rate bonds due in 2014 was issued by the Company on November 19, 2009. The bonds have a term of 5 years and one (1) day from the issue date, with a fixed interest rate of 8.4615% per annum. Interest is payable quarterly in arrears starting on February 20, 2010. 4,489,084 4,489,084 – Fixed rate bonds with principal amount of P=3.00 billion and term of five (5) years from the issue date was issued by the Company on July 7, 2011. The fixed interest rate is 6.1962% per annum, payable quarterly in arrears starting on October 7, 2011. 2,971,900 – 2,971,900 Unsecured loan obtained in July 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 5.07% per annum, payable quarterly in arrears. The principal is payable at maturity on July 2018. 1,493,336 – 1,493,336 Unsecured loan obtained in June 2013 with a fixed interest rate of 4.98% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting September 2015 up to June 2018. 1,143,509 – 1,143,509 Unsecured loan obtained in January 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum GRT 5 years (fixed rate) 6.39% per annum, payable quarterly in arrears. The principal is payable at maturity on January 2017 997,063 – 997,063 Unsecured loan obtained in April 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 6.12% per annum, payable quarterly in arrears. The principal is payable at maturity on January 2017. 996,841 – 996,841 (Forward) - 15 -

Amount Current Noncurrent (In Thousands) Unsecured loan obtained in November 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 5.50% per annum, payable quarterly in arrears. The principal is payable at maturity on November 2017. P=996,003 P=– P=996,003 Unsecured loan obtained in August 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) 1 plus GRT (Fixed rate) 4.27%, payable quarterly in arrears. The 50% of principal payable in 20 equal quarterly amortization to commence on November 2015 and 50% payable at maturity on August 2018. 995,811 – 995,811 Unsecured loan obtained in February 2013 with interest at prevailing market rate, payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting May 2015 to February 2018. 747,569 – 747,569 Unsecured loan obtained in December 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate of 4.62% per annum), payable quarterly in arrears. The 50% of principal payable in 20 equal quarterly amortization to commence on March 2016 and 50% payable at maturity on December 2020. 700,000 – 700,000 Guaranteed loan amounting to P=1.13 billion and P=1.12 billion obtained in October 2005 and July 2007, respectively. Both loan principal is payable in 10 semi–annual installments commencing December 2010 and ending June 2015. The loans carry a fixed interest rate of 7.72% and 7.90% per annum, respectively. 675,000 450,000 225,000 Unsecured loan obtained in March 2011 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to 1% per annum, payable quarterly in arrears. The 50% of principal payable in 12 equal quarterly amortization to commence on June 2013 and 50% payable at maturity on March 2016. 654,880 124,289 530,591 Unsecured loan obtained in June 2011 with interest rate equal to 91-day PDST-F rate plus a spread of 1% per annum, payable quarterly in arrears. The 50% balance is paid in July 2011 and the remaining 50% balance is payable in twelve (12) equal quarterly installments starting September 2013 up to June 2016. 622,737 248,584 374,153 Unsecured loans obtained in August 15, 2012 with interest of 5.79% per annum (inclusive of GRT), subject to repricing and payable quarterly in arrears. The loan has a term of 7 years, inclusive of 2 year grace period on principal repayment, 50% principal balance is payable in 20 equal quarterly installments to commence on Nov ember 2014 and 50% payable at maturity on August 2019. 600,000 15,000 585,000 Unsecured loan obtained in October 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate of 4.21% per annum), payable quarterly in arrears. The 50% of principal payable in 20 equal quarterly amortization to commence on January 2016 and 50% payable at maturity on October 2020. 547,360 – 547,360 Unsecured loan obtained in August 2013 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate) 4.27% per annum, payable quarterly in arrears. The 50% of principal payable in 20 equal quarterly amortization to commence on November 2015 and 50% payable at maturity on August 2020. 500,000 – 500,000 (Forward) - 16 -

Amount Current Noncurrent (In Thousands) Unsecured loan obtained in March 2013 with interest rate of 4.32% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable at maturity on March 2014. P=499,467 P=499,467 P=– Unsecured loan obtained in December 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years (fixed rate) 5.29% per annum, payable quarterly in arrears. The principal is payable at maturity on December 2017. 497,965 – 497,965 Unsecured loan obtained in December 2011 with interest at prevailing market rate 4.2% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting March 2014 to December 2016. 349,207 116,241 232,966 Unsecured loan obtained in May 2013 with interest rate equal to BSP overnight reverse repurchase agreement plus 1% per annum plus GRT (Fixed rate of 4.74% per annum), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting August 2015 up to May 2018. 300,000 – 300,000 Unsecured loan obtained in October 2012 with interest rate equal to PDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate of 6.03% per annum), payable quarterly in arrears. The principal is payable at maturity on October 2017. 300,000 – 300,000 Unsecured loan obtained in May 17, 2012 with interest at prevailing market rate, subject to repricing and payable quarterly in arrears. The loan has a term of 7 years, inclusive of 2 year grace period on principal repayment, 50% principal balance is payable in 20 equal quarterly installments to commence on August 2014 and 50% payable at maturity on May 2019. 300,000 15,000 285,000 Unsecured loan obtained in May 2013 with a fixed interest rate of 4.74% per annum (inclusive of GRT), payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting August 2015 up to May 2018. 248,960 – 248,960 Unsecured loan granted in November 10, 2011 with a term of 7 years with 2 years grace period on principal repayment. Interest is based on prevailing market rate, subject to quarterly repricing and payable quarterly in arrears. 50% of principal is payable in 12 quarterly amortization commencing on February 10, 2014 and 50% is payable on maturity. 200,000 20,000 180,000 Unsecured loan granted in May 2010 with a term of five years with 50% of principal payable in 12 equal quarterly amortization to commence on August 2012 and 50% payable at maturity in May 2015. The loan carries interest at prevailing market rate payable quarterly in arrears. 150,000 33,333 116,667 Unsecured loan granted in December 2012 with a term of five years with 50% of principal payable in 20 equal quarterly amortization to commence on March 2013 and 50% payable at maturity on December 2017. The loan carries interest at prevailing market rate payable quarterly in arrears. 135,000 15,000 120,000 Unsecured loan granted in May 2012 payable over 7-year period inclusive of 2 year grace period; 50% of principal is payable in 20 equal quarterly amortizations to commence on August 2014 and 50% payable at maturity on May 2019. The loan carries interest at prevailing market rate. 100,000 5,000 95,000 (Forward) - 17 -

Amount Current Noncurrent (In Thousands) Unsecured loan obtained in February 2013 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to 1% per annum, payable quarterly in arrears. The principal is payable in twelve (12) equal quarterly installments starting May 2015 to February 2018. P=500 P=− P=500 36,069,225 6,030,998 30,038,227 PSHC Term loan granted by a local bank with principals of 400.0 million on December 22, 2012 and 100.0 million on February 16, 2011. The principal is payable in 12 quarterly amortizations to start at the end of the 9th quarter from the date of the release with then prevailing interest rate of 2.2% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of the release of the loan. P=383,333 P=166,667 P=216,667 Term loan of P=1.0 million granted by a local by on February 12, 2013. The principal is payable in twelve quarterly amortizations to start at the end of the 9th quarter from the date of release with then prevailing interest rate of 4.1% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of release of the loan. 1,000 – 1,000 P=384,333 P=166,667 P=217,667 EWBC Lower tier 2 unsecured subordinated notes callable with Step-up interest, in 2016 in minimum denominations of 500,000 and in integral multiples of 100,000 thereafter, due January 2, 2021.Interest rate is at 7.5% per annum. P=1,500,000 P=– P=1,500,000 Lower tier 2 unsecured subordinated notes callable, with Step- up interest, in 2014 in minimum denominations of 500,000 and integral multiples of 100,000 thereafter, due January 26, 2019. Interest rate is at 8.6% per annum. 1,250,000 – 1,250,000 Lower tier 2 unsecured subordinated notes, with Step-up interest, due March 13, 2018. Interest rate is at 9.7% per annum. 112,500 – 112,500 P=2,862,500 P=– P=2,862,500 FDCI Fixed rate bonds with original issuance amount of $300 million on April 2, 2013. The bonds have a term of 7 years from the issue date, with a fixed interest rate of 4.25% per annum. Interest is payable semi-annually in arrears starting on October 2,2013. P=12,576,243 P=– P=12,576,243 P=59,093,035 P=7,336,189 P=51,756,847

Amounts are presented net of unamortized deferred costs.

Schedule F. Indebtedness to Related Parties Below is the list of outstanding payables to related parties of the Group presented in the consolidated statements of financial position as of December 31, 2013 (amount in thousands):

Balance at the Beginning Relationship of the period Balance at end of period A.L. Gotianun, Inc. Parent Company P=16,284 P=101,183

Indebtedness to the Parent Company pertains to the loans and share of the Group’s related parties in various common selling and marketing and general and administrative expenses. The balance increased due to loan availments during the period. The outstanding balance is due within one year. - 18 -

Schedule G. Guarantees of Securities of Other Issuers The Group does not have guarantees of securities of other issuers as of December 31, 2013.

Schedule H. Capital Stock

Number of Number of shares issued Shares and reserved for outstanding options, as shown warrants, Number of Number of under related conversion shares held Directors, shares balance sheet and other by related Officers and Title of issue authorized caption rights parties Employees Others (In Thousands) Common Shares 15,000,000 9,317,474 − 8,280,770 97,523 939,181 Preferred Shares 2,000,000 − − − − − - 19 -

Group Structure Below is a map showing the relationship between and among the Group and its ultimate parent company, subsidiaries, and associates as of December 31, 2013: .A.L. GOTIANUN, INC. (Formerly ALG Holdings Corporation) Group Structure (As of December 31, 2013)

A.L. Gotianun, Inc.(Formerly ALG Holdings Corporation)

Filinvest Development Corporation (FDC)

Pacific Sugar East West Banking Filinvest Land Inc. Holdings Filinvest Land, Inc. Filinvest Alabang, Inc. FDC Hotels Corporate Corporation (EW)*** FDC Forex Corp. (FLI) Seascapes Resort, FDC Utilities, Inc. Corporation (FLI) (FAI)** Corporation Technologies, Inc. FDC 40%; (FFC) FDC 59%; Inc. (FUI) (PSHC) FDC 69.5%; FDC 80%; FDC 100% FDC 100% FDC 100% FDC Forex 35%; FDC 100% Others 41% FDC 100% FDC 100% Others 25% Others 30.5% FLI 20%

Festival Supermall Inc. Cotabato Sugar Property Maximizer Green Bank, Inc. Professional Corp. (Management) -FSI Central Co., Inc. Festival Supermall Inc. CebuFDC Pure Danao Energy, Quest Restaurant, Filarchipelago EW 99.84% FLI 100% FAI - 100% PSHC 100% FAI 100.00% Power Inc.Corporation Inc. Hospitality Inc. FUIFUI 100% 100% FDC Hotels 100% FDC 60%; Archipelago International Pte Ltd Homepro Realty FSM Cinemas, Inc. 40% High Yield Sugar East West Rural FSM Cinemas, Inc. Marketing, Inc. FSI (60%) Farms Corporation Bank Inc. FAI 60%; FDC Misamis Boracay Seascapes FLI 100% Cinema Services Chain Strong Field Energy Resort, Inc.. PSHC 100% (formerly Finman Cinema Services Chain Power Corporation Corp. 40% Corporation FDC Hotels 100% Rural Bank, Inc.) Corp. 40% FUIFUI 100% 100% EW 100% Property Specialist Filinvest Development Davao Sugar Resources, Inc. Cayman Islands Central Company, . 61% Filinvest 39% FLI 100% FDC Camarines Pow er Chinatown FDC 100% Information Northgate Strong Field Gas Cityscapes Hotel, Inc. Corporation Technology Inc. Convergence Power Corporation Inc. PSHC 100% (FITI) FUI 100% Corporation FUI 100% FDC Hotels 100% Leisurepro, Inc. FAI 100% FLI 100%

FDCStrong Casecnan Field GasHydro Duawon Seascapes Powerand CorporationElectric Resort, Inc. Proplus, Inc Corporation Filinvest Asia Corp. FAI100% FUI 100% FDC Hotels 100% FLI 60%; FUI 100% Reco Hererra 40%

Pro Excel Property FDCEco Retail Renewable Electricity Holdings Cyberzone Managers, Inc. Sales Corporation Properties, Inc. Corporation FAI 100% FUI 100% FLI 100% FUI 100%

CountrywideCoutrywide WaterWater Entrata Hotel FDC Negros Services, Inc. Services, Inc. Power Corporation FLIFLI 100%100% FAI 100% FUI 100%

Filinvest AII FDC Davao del Norte Supplementary Information: Philippines, Inc. Power Corporation *FDC's and EW's investment in FITI amounted to P304,950 and P195,000, FLI 100% FUI 100% respectively. FITI, a dormant entity, ceased operations since 2003. ** FDC's effective ownership in FAI is 92% (80% direct ownership and 11.8% indirect ownership through FLI) ***FDC's effective ownership in EW is 75% (40% direct ownership and 35% indirect ownership through FFC) Standards adopted by the Group

Below is the list of all effective Philippine Financial Reporting Standards (PFRS), Philippine Accounting Standards (PAS) and Philippine Interpretations of International Financial Reporting Interpretations Committee (IFRIC) as of December 31, 2013 that were adopted and not applicable to the Group:

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Early Not INTERPRETATIONS Adopted Applicable Framework for the Preparation and Presentation of Financial Statements p Conceptual Framework Phase A: Objectives and qualitative characteristics PFRSs Practice Statement Management Commentary p Philippine Financial Reporting Standards First-time Adoption of Philippine Financial Reporting p Standards Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or p Associate Amendments to PFRS 1: Additional Exemptions for First- PFRS 1 p (Revised) time Adopters Amendment to PFRS 1: Limited Exemption from p Comparative PFRS 7 Disclosures for First-time Adopters Amendments to PFRS 1: Severe Hyperinflation and p Removal of Fixed Date for First-time Adopters Amendments to PFRS 1: Government Loans p Share-based Payment p Amendments to PFRS 2: Vesting Conditions and p PFRS 2 Cancellations Amendments to PFRS 2: Group Cash-settled Share-based p Payment Transactions PFRS 3 Business Combinations p (Revised) Insurance Contracts p PFRS 4 Amendments to PAS 39 and PFRS 4: Financial Guarantee p Contracts Non-current Assets Held for Sale and Discontinued PFRS 5 p Operations PFRS 6 Exploration for and Evaluation of Mineral Resources p Financial Instruments: Disclosures p Amendments to PAS 39 and PFRS 7: Reclassification of p Financial Assets PFRS 7 Amendments to PAS 39 and PFRS 7: Reclassification of p Financial Assets - Effective Date and Transition Amendments to PFRS 7: Improving Disclosures about p Financial Instruments - 2 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Early Not INTERPRETATIONS Adopted Applicable Amendments to PFRS 7: Disclosures - Transfers of p Financial Assets Amendments to PFRS 7: Disclosures - Offsetting Financial p Assets and Financial Liabilities Amendments to PFRS 7: Mandatory Effective Date of p PFRS 9 and Transition Disclosures PFRS 8 Operating Segments p Financial Instruments p PFRS 9 Amendments to PFRS 9: Mandatory Effective Date of p PFRS 9 and Transition Disclosures PFRS 10 Consolidated Financial Statements p PFRS 11 Joint Arrangements p PFRS 12 Disclosure of Interests in Other Entities p PFRS 13 Fair Value Measurement p Philippine Accounting Standards Presentation of Financial Statements p Amendment to PAS 1: Capital Disclosures p PAS 1 Amendments to PAS 32 and PAS 1: Puttable Financial p (Revised) Instruments and Obligations Arising on Liquidation Amendments to PAS 1: Presentation of Items of Other p Comprehensive Income PAS 2 Inventories p PAS 7 Statement of Cash Flows p Accounting Policies, Changes in Accounting Estimates PAS 8 p and Errors PAS 10 Events after the Reporting Period p PAS 11 Construction Contracts p Income Taxes p PAS 12 Amendment to PAS 12 - Deferred Tax: Recovery of p Underlying Assets PAS 16 Property, Plant and Equipment p PAS 17 Leases p PAS 18 Revenue p Employee Benefits p PAS 19 Amendments to PAS 19: Actuarial Gains and Losses, p Group Plans and Disclosures PAS 19 Employee Benefits p (Amended) - 3 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Early Not INTERPRETATIONS Adopted Applicable Accounting for Government Grants and Disclosure of PAS 20 p Government Assistance The Effects of Changes in Foreign Exchange Rates p PAS 21 Amendment: Net Investment in a Foreign Operation p PAS 23 Borrowing Costs p (Revised) PAS 24 Related Party Disclosures p (Revised) PAS 26 Accounting and Reporting by Retirement Benefit Plans p PAS 27 Consolidated and Separate Financial Statements p PAS 27 Separate Financial Statements p (Amended) PAS 28 Investments in Associates p PAS 28 Investments in Associates and Joint Ventures p (Amended) PAS 29 Financial Reporting in Hyperinflationary Economies p PAS 31 Interests in Joint Ventures p Financial Instruments: Disclosure and Presentation p Amendments to PAS 32 and PAS 1: Puttable Financial p Instruments and Obligations Arising on Liquidation PAS 32 Amendment to PAS 32: Classification of Rights Issues p Amendments to PAS 32: Offsetting Financial Assets and p Financial Liabilities PAS 33 Earnings per Share p PAS 34 Interim Financial Reporting p PAS 36 Impairment of Assets p PAS 37 Provisions, Contingent Liabilities and Contingent Assets p PAS 38 Intangible Assets p Financial Instruments: Recognition and Measurement p Amendments to PAS 39: Transition and Initial p Recognition of Financial Assets and Financial Liabilities Amendments to PAS 39: Cash Flow Hedge Accounting of p Forecast Intragroup Transactions PAS 39 Amendments to PAS 39: The Fair Value Option p Amendments to PAS 39 and PFRS 4: Financial Guarantee p Contracts Amendments to PAS 39 and PFRS 7: Reclassification of p Financial Assets Amendments to PAS 39 and PFRS 7: Reclassification of p - 4 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Early Not INTERPRETATIONS Adopted Applicable Financial Assets - Effective Date and Transition Amendments to Philippine Interpretation IFRIC-9 and p PAS 39: Embedded Derivatives Amendment to PAS 39: Eligible Hedged Items p PAS 40 Investment Property p PAS 41 Agriculture p Philippine Interpretations Changes in Existing Decommissioning, Restoration and IFRIC 1 p Similar Liabilities Members' Share in Co-operative Entities and Similar IFRIC 2 p Instruments IFRIC 4 Determining Whether an Arrangement Contains a Lease p Rights to Interests arising from Decommissioning, IFRIC 5 p Restoration and Environmental Rehabilitation Funds Liabilities arising from Participating in a Specific Market - IFRIC 6 p Waste Electrical and Electronic Equipment Applying the Restatement Approach under PAS 29 IFRIC 7 p Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of PFRS 2 p Reassessment of Embedded Derivatives p IFRIC 9 Amendments to Philippine Interpretation IFRIC–9 and p PAS 39: Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment p IFRIC 11 PFRS 2- Group and Treasury Share Transactions p

IFRIC 12 Service Concession Arrangements p IFRIC 13 Customer Loyalty Programmes p

The Limit on a Defined Benefit Asset, Minimum Funding p Requirements and their Interaction IFRIC 14 Amendments to Philippine Interpretations IFRIC- 14, p Prepayments of a Minimum Funding Requirement IFRIC 16 Hedges of a Net Investment in a Foreign Operation p IFRIC 17 Distributions of Non-cash Assets to Owners p IFRIC 18 Transfers of Assets from Customers p

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments p

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine p - 5 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Early Not INTERPRETATIONS Adopted Applicable SIC-7 Introduction of the Euro p Government Assistance - No Specific Relation to SIC-10 p Operating Activities

Consolidation - Special Purpose Entities p SIC-12 Amendment to SIC - 12: Scope of SIC 12 p Jointly Controlled Entities - Non-Monetary Contributions SIC-13 p by Venturers

SIC-15 Operating Leases - Incentives p Income Taxes - Changes in the Tax Status of an Entity or SIC-25 p its Shareholders Evaluating the Substance of Transactions Involving the SIC-27 p Legal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures. p Revenue - Barter Transactions Involving Advertising SIC-31 p Services SIC-32 Intangible Assets - Web Site Costs p

Standards tagged as “Not applicable” have been adopted by the Group but have no significant covered transactions for the year ended December 31, 2013.

Standards tagged as “Not early adopted” are standards issued but not yet effective as of December 31, 2013. The Group will adopt the Standards and Interpretations when these become effective. - 6 -

Financial Soundness Indicator

Below are the financial ratios that are relevant to the Group for the period ended December 31, 2013:

As of and for theYears Ended December 31 Financial ratios 2013 2012

Net Income Attributable to Equity Earnings per share Holders Weighted Average Number of 0.459 0.436 Outstanding Shares

Price Earnings Ratio Closing price* Earnings per share 9.58 11.33

Return on revenue Net income Total revenue 19% 20%

Long term debt-to-equity ratio Long term debt Equity 0.70 0.53

Total liabilities-to-equity ratio Total liabilities** Equity 1.03 0.85

EBITDA to total interest expense EBITDA Total interest expense 11.77 9.56

Current Ratio a. Including EW Total current assets Total current liabilities 1.26 1.09 b. Excluding EW Total current assets Total current liabilities 3.84 2.67

Asset-to-equity ratio Total assets Equity 3.20 3.03

*Closing price at December 27, 2013 and December 28, 2012 **excluding deposit liabilities and bills and acceptances payable FILINVEST DEVELOPMENT CORPORATION UNAPPROPRIATED RETAINED EARNINGS AVAILABLE FOR DIVIDEND DISTRIBUTION (Amounts in Thousands of Pesos)

Unappropriated Retained Earnings, beginning P=40,027,500

Adjustments: Equity in net income of subsidiaries and joint venture (33,321,966) Reclassification of revaluation reserve on land at deemed cost (46,331) Deferred tax assets recognized in prior years (189,999)

Unappropriated Retained Earnings as adjusted, beginning 6,469,204

Net income actually earned/realized during the year

Net income during the year closed to Retained Earnings 4,279,715

Less: Non-actual/unrealized income, net of tax Equity in net income of subsidiaries and joint venture (3,773,698) Unrealized foreign exchange gain - net – Unrealized actuarial gain – Fair value adjustment (M2M gains) – Fair value adjustment of Investment Property resulting to gain – Adjustment due to deviation from PFRS/GAAP - gain – Other unrealized gains or adjustments to the retained earnings as a result of certain transactions accounted for under the PFRS – Movements in deferred tax assets (72,153) Add: Non-actual losses Depreciation on revaluation increment (after tax) – Adjustment due to deviation from PFRS/GAAP - loss – Loss on fair value adjustment of investment property (after tax) – 433,864

Less: Dividend declarations during the year Cash dividends (499,417)

Total Unappropriated Retained Earnings Available For Dividend Distribution, December 31, 2013 P=6,403,651