2015 Annual Report/Suntrust Home Developers, Inc

1 0 6 8 3

S U N T R U S T H O M E D E V E L O P E R S , I N C .

6 T H F L O O R , T H E W O R L D C E N T R E ,

3 3 0 S E N . G I L P U Y A T A V E N U E

M A K A T I C I T Y , M E T R O M A N I L A

17- A S E C

N/A (632) 867-8826 to 40 N/A

1,613 OCTOBER/LAST TUESDAY DECEMBER/31

[email protected] ROLANDO D. SIATELA 867-8826

22ND FLOOR, THE WORLD CENTRE, 330 SEN. GIL PUYAT AVENUE, MAKATI CITY, METRO MANILA 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 1 of 24

SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF THE CORPORATION CODE

1. For the fiscal year ended 31 December 2015

2. SEC Identification Number: 10683

3. BIR Tax Identification No.: 000-141-166-000

4. SUNTRUST HOME DEVELOPERS, INC. Exact name of issuer as specified in its charter

5. Metro Manila Province, Country or other jurisdiction of incorporation or organization

6. (SEC Use Only) Industry Classification Code

7. 6th Floor, The World Center Bldg. 330 Sen. Gil J. Puyat Avenue Makati City, Philippines 1227 Address of principal office

8. (632) 867-8826 to 40 Issuer’s telephone number, including area code

9. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA

Title of Each Number of Shares of Common Class Stock Outstanding

Common 2,250,000,000

10. Are any or all of these securities listed on a Stock Exchange?

Yes [x] No [ ]

Philippine Stock Exchange Common Shares

11. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding twelve (12) months.

Yes [x] No [ ]

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

12. Aggregate Market Value of Voting Stock held by Non-Affiliates as of close of first quarter of 2015.

Php979,386,730.73 based on the closing price of Php1.13 per share on March 31, 2016

2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 2 of 24

PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

(1) Business Development

History

On 18 January 1956, the Company, then known as Ramie Textiles, Inc. was incorporated to engage in the business of manufacture and sale of all types of ramie products. On 11 February 1959 the Company was listed in The Philippine Stock Exchange, Inc.

On 10 June 1994, the SEC approved the Amendment to the Articles of Incorporation of the Company changing the name from Ramie Textiles Inc. to Gaming Interest and Franchise Technologies, Inc. and its secondary purpose, and including a provision denying pre-emptive rights to existing stockholders for any future issue of shares. Upon its conversion to a holding company, the Company sought to identify investment opportunities which will yield attractive returns.

On 10 April 1995, the Company’s name was changed from Gaming Interest and Franchise Technologies, Inc. to Greater Asia Resources Corporation. Subsequently, the Company acquired two (2) parcels of land situated in Tagaytay City with an approximate total area of 510,479 square meters in exchange for 250,000 shares out of its unissued capital stock.

On 11 August 1998, the SEC approved the Amended AOI of the Company changing the name from Greater Asia Resources Corporation to BW Resource Corporation (BWRC). The primary purpose of BWRC is to acquire interests in tourism or leisure-related enterprises, projects, or ventures.

On 17 August 1999, the SEC approved an increase in authorized capital stock of the Company from PhP450,000,000.00 divided into 450,000,000 shares to PhP2,000,000,000.00 divided into 2,000,000,000 shares with a par value of One Peso (1.00) per share. Out of the increase in authorized capital stock, One Billion Two Hundred Million Pesos (PhP1,200,000,000.00) worth of shares were issued to Megaworld Corporation (Megaworld) in exchange for a parcel of land with improvements with a total area of 7,255.30 square meters located at M.H. del Pilar corner Pedro Gil St., Malate Manila and with a fair market value of One Billion Two Hundred Million Pesos (PhP1,200,000,000.00). With the entry of Megaworld, the SEC, on October 3, 2000, approved the change in name from BWRC to Fairmont Holdings, Inc.

On 02 March 2001, Emerging Market Assets Limited, a global investment company based in Hong Kong, subscribed to 350,000,000 shares of stock of the Company at par value of One Peso (Php1.00) per share.

On 29 June 2002, the Board of Directors of the Company approved the change of the Company’s name from Fairmont Holdings, Inc. to Suntrust Home Developers, Inc. The change of the Company’s name was ratified by the stockholders on November 11, 2005 and was approved by the SEC, on 10 May 2006. The change in name came hand in hand with a change in the Company’s primary purpose or nature of business, from a holding company to a real estate company authorized to engage in real estate development, mass community housing, townhouses and rowhouses development, residential subdivision and other massive horizontal land development. The change in the nature of business of the Company was prompted by the perception that being a holding company no longer appeared to be viable, at least in the next few years. On the same date, the Board likewise approved a PhP1 Billion increase in the Company’s authorized capital stock from PhP2,000,000,000 to PhP3,000,000,000 for the purpose of enabling the Company to finance any acquisitions or projects that it may undertake in the future in line with its new corporate purpose. Out of the PhP1 Billion increase, PhP250,000,000 has been actually subscribed while PhP62,500,000 has been actually paid-up in cash by Megaworld Corporation, an existing stockholder of the Company.

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Sometime in July 2002, the Company acquired from an affiliate, Empire East Land Holdings, Inc. (EELHI), all of the latter’s shareholdings in Empire East Properties, Inc. (“EEPI”). As a result, consolidated financial statements were presented in the third quarter of 2002 and onwards. Prior to such acquisition, EEPI was a wholly-owned subsidiary of EELHI engaged in the development of socialized or low-cost housing projects. In March 2004, the Company’s percentage of ownership in EEPI was reduced from 100% to 60% upon the subscription by EELHI to additional shares of stock of EEPI. On 8 July 2008, EEPI changed its name to Suntrust Properties, Inc. (“SPI”) and increased its authorized capital stock, with EELHI subscribing to such increase. As a result, the Company’s ownership interest in SPI decreased from 60% to 20% and the Company’s control over SPI ceased and, as such, SPI was no longer a subsidiary but was considered an associate of the Company. In June 2013, the Company has sold all its remaining shares in SPI.

On 30 August 2005, the Board of Directors of the Company approved the decrease in the number of members of the Board of Directors from eleven to seven directors and the extension of its corporate term for another fifty (50) years from 18 January 2006. These changes to the Articles of Incorporation were ratified by the stockholders of the Company on 11 November 2005 and were approved by the SEC on 10 May 2006.

In September 2011, the Company acquired 100% of the outstanding shares of stock of First Oceanic Property Management, Inc. (FOPMI). Consequently, FOPMI became the Company’s wholly owned subsidiary and its financial statements were consolidated with the Company’s financial statements starting 2011.

FOPMI was incorporated and registered with the Philippine Securities and Exchange Commission on January 31, 1990. FOPMI is engaged primarily in the management of real estate properties consisting of residential and office condominiums and private estates. FOPMI’s services are covered by management contracts covering the different properties it manages and these contracts assure it of relatively fixed monthly revenues in the form of administrative/management fees. The acquisition of FOPMI was intended to create a new revenue stream for the Company which would complement its existing investments in real estate. FOPMI also holds 100% of the outstanding shares of stock of CityLink Coach Services, Inc. (CityLink), which was incorporated and registered with the Philippine Securities and Exchange Commission on November 7, 2006. CityLink is a domestic company engaged in overland transport, carriage, moving or haulage of passengers, fares, customers and commuters as well as freight, cargo, articles, items, parcels, commodities, goods or merchandise by means of coaches, buses, coasters, jeeps, cars and other similar means of transport.

(2) Business of Issuer

The Company, currently, does not have any business operations and is not offering any product or service. However, its subsidiary FOPMI is engaged in property management of residential and office buildings and private estates.

Thus, the Company is not prepared at this time to identify and describe what business it proposes to do and what products, goods or services will be produced or rendered; its principal products or services and their markets with the relative contribution to sales or revenues of each product or services or group of related products or services; percentage of sales or revenue and net income contributed by foreign sales; distribution methods of products or services; competition; sources and availability of raw materials and the names of principal suppliers; and the Company’s dependency on its customers. Since the Company has not identified the industry in which it will engage in, it is likewise not in the position to discuss any government approval required for its principal products or services or the effect of existing or probable governmental regulations on its business.

FOPMI is engaged in property management and provides vital real estate management services for several residential and office condominium buildings and private estates in Metro Manila. These include basic administrative, housekeeping and security services and special services such as facilities and equipment management, audit and technical support services, finance and account management, and 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 4 of 24 procurement services. FOPMI’s revenue is primarily generated from management fees it charges in connection with its property management services.

FOPMI is very competitive and is determined to perform as the best by assigning dedicated teams to manage over property/building. On-site Property Administrator, Property Engineer and Administrative Assistant/s are assigned to look after each individual property. A pool of experienced professionals – architects, engineers, accountants and other personnel with varying expertise – provides back-up support and services for its individual clients and customer.

CityLink is engaged in overland transport, carriage, moving or haulage of passengers, fares, customers and commuters as well as freight, cargo, articles, items, parcels, commodities, goods or merchandise by means of coaches, buses, coasters, jeeps, cars and other similar means of transport.

The Company or FOPMI is not dependent upon a single or a few customers. No single customer accounts for 20% or more of FOPMI’s sales.

In normal course of business, the Company entered into transactions with related parties, consisting mainly of advances from related parties for working capital purposes and for the settlement of certain liabilities. For more information, please see Note 17 to the Audited Financial Statements.

The Company does not hold any patent, trademark, copyright, license, franchise, concession or royalty agreement upon which their operations are dependent.

Government Approval of Principal Products; Effect of Government Regulations on the Business

The following is a brief description of the principal laws and regulations affecting the real estate business.

Land Title Registration The Philippines uses the Torrens System of land registration, which provides for a certification of title to real property which is binding on all persons. An owner of real property may register title under the Torrens System if, after proper surveying, application, publication, service of notice and hearing, the Regional Trial Court (“RTC”) or, in certain cases, the Municipal Trial Court, the Metropolitan Trial Court or the Municipal Circuit Trial Court (collectively, “MTCs”) within whose jurisdiction the land is situated confirms the owner’s title to the land in a judgment and issues a decree to register the property in the owner’s name. Persons opposing the registration of title may appeal against the judgment of the RTC or MTCs to the Court of Appeals or Supreme Court within 15 days from notice of the RTC’s or MTC’s judgment. After the period for appeal has lapsed and within 15 days from entry of judgment, the appropriate court will order the Administrator of National Land Titles and Deeds Registration Administration (formerly the Land Registration Authority) to issue the corresponding decree of registration and Original Certificate of Title (“OCT”). Notwithstanding the issuance of an OCT, the decree of registration may still be contested within one year from entry of judgment on the grounds of actual fraud.

Claims Against Registered Land Once real property has been registered, it may no longer be acquired by prescription. A Certificate of Title is conclusive evidence of ownership binding against all persons, including the government. The title is not subject to collateral attack and it cannot be altered, modified or cancelled, except in a direct proceeding in accordance with law. If registered land is transferred to another person, the Register of Deeds may cancel the OCT and issue a Transfer Certificate of Title (“TCT”) in the name of the new owner, provided that certain required documents are submitted to him and all the necessary taxes are paid. Subsequent transfers are also registered by the cancellation of the latest TCT and the issuance of a new TCT in the name of the latest transferee.

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“Quieting” of Title Claims which cast doubt over title to real property are relatively common in the Philippines. In particular, the boundaries to a registered title may be disputed, and where there is outstanding litigation against an owner of real property it may be possible for the claim to be annotated on the title to the property. Where a claim against title is unfounded, an action may be brought to remove this claim. Transferees of real property will usually require that all outstanding claims be removed from property before they will accept a transfer of title.

Land Title Transfers An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing Philippine laws and may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. However, a deed, mortgage, lease or other voluntary instrument (except a will purporting to convey or affect a registered land) will not take effect as a conveyance or bind the land, but will operate only as contract between the parties and as evidence of authority to the Register of Deeds to effect registration.

The act of registration is the operative act to convey or affect the land insofar as third persons are concerned. Accordingly, as between two transactions over the same parcel of land, a transaction that is registered in good faith prevails over an earlier unregistered right.

A sale of property that has been registered under the Torrens system typically requires the registered owner of the land to execute a deed of absolute sale in favor of the purchaser. Within ten (10) days after the close of the month when such deed was executed, a documentary stamp tax shall be paid to the Bureau of Internal Revenue (“BIR”), computed at a rate of 1.5% of the purchase price or zonal value of the land as determined by the BIR, whichever is higher. A final tax of 6% based on the gross selling price or current fair market value of the property, whichever is higher, is imposed upon capital gains presumed to have been realized from the sale of such real property and such tax must be paid to the BIR within thirty (30) days after the execution of the deed of absolute sale.

No voluntary instrument can be registered by the Register of Deeds unless the owner’s duplicate certificate is presented with such instrument, except in cases expressly provided for in the Property Registration Decree upon lawful order of a court. The production of the owner’s duplicate certificate, whenever any voluntary instrument is presented for registration, is conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum is binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.

Nuisance Laws Under the Philippine nuisance laws, property owners may be liable for acts, omissions or the condition of property when it endangers the health or safety of others, injures or offends the senses, interferes with free passage of any public highway, street or body of water, or hinders the use of property. If a nuisance has been created by a previous landowner, the current landowner will be liable for such nuisance if such landowner knowingly continues the nuisance.

Taxes Real property taxes are payable annually on the property’s assessed value. The assessed value of property and improvements depends on the nature of the property. Land is ordinarily assessed at 20% to 50% of its fair market value; buildings may be assessed at 0% to 80% of their fair market value; and machinery may be assessed at 40% to 80% of its fair market value. Currently, real property taxes vary by location but do not exceed 2% of the assessed value in the province and 3% of the assessed value in municipalities within Metro Manila and in cities. An additional Special Education Fund Tax of 1% of the assessed value of the property is also levied annually by provinces and by the cities and municipalities within Metro Manila.

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Idle lands are taxed at 5% of the assessed value of the property. Idle lands include any land, other than agricultural land, that is more than 1,000 square meters in area and one-half of which remains unutilized or unimproved by the owner.

Number of employees

As of 31 December 2015, the Group has a total of five hundred twenty three (523) employees. None of the Group’s employees are represented by a labor union or are subject to collective bargaining agreements. The Group intends to hire additional employees if the present workforce becomes inadequate to handle operations but the exact number of additional employees will depend on the needs of the business.

Below is the breakdown of the Group’s employees as of December 31, 2015:

Operations - 106 Administrative - 417

FOPMI maintains a non-contributory post-employment benefit plan that is being administered by a trustee covering substantially all regular full-time employees. Actuarial valuations are made on a regular basis to update the retirement benefit costs and the amount of contributions.

Major Business Risks

The Company and its subsidiaries are exposed to a variety of financial risks in relation to financial instruments that it holds under its investment portfolio. The Company’s risk management is coordinated with its Board of Directors and focuses on actively securing the Company’s short-to-medium term cash flows by minimizing the exposure to financial markets. The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The Company’s financial investments are largely in the form of short-term time deposits.

The business operations of the Company’s subsidiary, FOPMI, is subject to competition. Some competitors may have substantially greater financial and other resources than FOPMI which may allow them to undertake more aggressive marketing and to react more quickly and effectively to changes in the markets and in consumer preferences. In addition, the entry of new competitors into FOPMI’s business segments may affect FOPMI’s revenues and profit margins.

The Company is exposed to risks associated with the Philippines, including the performance of the Philippine economy. The Company’s intended acquisition and development of real property business is highly dependent on the state of the Philippine economy and the Philippine property market. Demand for, and prevailing prices of, developed land and house and lot units are directly related to the economic, political and security conditions in the Philippines. FOPMI is likewise affected by the Philippine property market as demand for property management services are dependent on completion of real properties to be managed and there is a limit on existing and completed properties that can be managed.

Significant competition in their respective industries could adversely affect the Company’s and FOPMI’s business. A number of more established real estate developers are already present in the business and the Company may not be able to compete with them in seeking properties for acquisition, resources for development and prospective clients. Competition from other real estate developers may also adversely affect the Company’s ability to sell its projects. FOPMI is likewise subject to competition for other property management companies as well as companies which offer property management as part of its portfolio of services.

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The Company may be unable to acquire land for future development. The Company’s future growth and development are dependent, in part, on its ability to acquire or enter into agreements to develop tracts of land suitable for the Company’s planned real estate projects. When the Company and its competitors attempt to locate sites for development, the Company may experience difficulty in locating parcels of land of suitable size in locations and at prices acceptable to the Company. In the event the Company is unable to acquire suitable land at acceptable prices with reasonable returns, or at all, its growth prospects could be limited and its business and results of operations could be adversely affected.

To mitigate this risk, the Company intends to invest in strategic land banking, either through joint development agreements or property purchases.

The Company’s reputation will be adversely affected if its projects are not completed on time or if the projects do not meet its customers’ requirements. Any negative effect on the Company’s reputation or its brand could also affect the Company’s ability to pre-sell its housing and land development projects. This would impair the Company’s ability to reduce its capital investment requirements. The Company cannot provide any assurance that such events will not occur in a manner that would adversely affect its results of operations or financial condition.

The Company endeavors to mitigate these risks through carefully planned projects. The Company likewise keeps itself updated on the latest governmental regulations and ensures that it obtains all regulatory requirements.

The Company’s operations may be affected by its previous losses and current deficit The Company has suffered losses and is currently at a deficit and this may affect its operations. However, the acquisition of FOPMI has created a revenue stream for the Company and this gradually decreases the Company’s deficit. The Company manages its liquidity needs by carefully monitoring scheduled payments for financial liabilities as well as its cash outflows due in a day-to-day business.

The Company may not always be able to hire independent contractors who meet its requirements. The Company intends to rely on independent contractors to provide various services, including land clearing and infrastructure development, various construction projects and building and property fitting- out works. There can be no assurance that the Company will be able to find or engage an independent contractor for any particular project or find a contractor that is willing to undertake a particular project within the Company’s budget, which could result in cost increases or project delays. There can be no assurance that the services rendered by any of its independent contractors will always be satisfactory or match the Company’s requirements for quality. Contractors may also experience financial or other difficulties, and shortages or increases in the price of construction materials may occur, any of which could delay the completion or increase the cost of certain housing and land development projects, and the Company may incur additional costs as a result thereof. Any of these factors could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company intends to mitigate this risk by selecting independent contractors based on the contractor’s experience, its financial and construction resources, any previous relationship with Megaworld, its reputation for quality and its track record.

Environmental laws could adversely affect the Company’s business. Real estate developers are required to follow strictly the guidelines of the DENR. There can be no assurance that current environmental laws and regulations applicable to the Company will not increase the costs of operating its facilities above currently projected levels or require future capital expenditures. The introduction of inconsistent application of, or changes in, laws and regulations applicable to the Company’s business could have a material adverse effect on its business, financial condition or results of operations. The Company has and will always comply with environmental laws.

2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 8 of 24

Item 2. Properties

The Company has six condominium units at Sheraton Marina Square located in Malate, Manila with a total area of 496.00 square meters. The Company is currently leasing out these units and generating income from the rental thereof.

FOPMI is a lessee under operating lease covering its office space. The lease has a term of one year and renewable upon terms and conditions as may be agreed by the parties. The future minimum rentals payable under this operating lease as of December 31, 2014 amounted to P2.7 million and NIL in 2015.

Item 3. Legal Proceedings

The Company is not a party to, and none of its properties is the subject of, any material pending litigation or legal proceeding.

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

On 27 October 2015, the Minutes of the Annual Stockholders’ Meeting held last 18 November 2014 and appointment of Punongbayan and Araullo as the external auditors of the Corporation’s financial statements for the year ending December 31, 2015 were approved by the Company’s stockholders. All acts and resolutions of the Board of Directors, Board Committees and Management of the Corporation, during the period up to the date of the meeting of the stockholders were ratified. Finally, the following were elected to the Board of Directors of the Company: Ferdinand B. Masi, Evelyn G. Cacho, Giancarlo C. Ng, Felizardo T. Sapno and Elmer P. Pineda while Eugenio B. Reducindo and Alejo L. Villanueva, Jr., were elected as the Independent Directors.

PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters

Market Information

The Company’s shares of common stock are traded on the Philippine Stock Exchange. Below is a history of the trading prices of said shares.

Year First Quarter Second Quarter Third Quarter Fourth Quarter 2012 High 0.63 0.62 0.57 0.64 Low 0.51 0.51 0.50 0.49 2013 High 0.66 1.00 2.40 1.33 Low 0.54 0.58 0.57 0.87 2014 High 1.15 1.96 1.47 1.62 Low 0.89 0.99 1.11 1.10 2015 High 1.27 1.10 0.86 1.75 Low 1.00 0.81 0.65 0.66 2016 High 1.28 Low 0.70

Holders

There are 1,604 holders of the Company’s 2,250,000,000 outstanding shares of common stock. However, 250,000,000 of these outstanding shares are not yet listed with the Philippine Stock Exchange as the subscription price for these have not been fully paid. Below is a list of the top twenty holders of the Company’s shares of common stock as of 31 March 2016:

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Number of Shares Percent of Total Name of Shareholder Held Outstanding Shares

1. MEGAWORLD CORPORATION 955,834,992 42.482% 2. PCD NOMINEE CORP. (FILIPINO) 694,029,922 30.846% EMERGING MARKET ASSETS 235,000,000 10.444% 3. LIMITED 4. STANLEY HO HUNG SUN 116,100,000 5.160% 5. FIRST CENTRO. INC. 102,987,000 4.577% 6. THE ANDRESONS GROUP, INC. 89,460,000 3.976% 7. EBC PCI TA NO. 203-53106-5 17,000,000 0.756% PCD NOMINEE CORP. (NON- 12,996,465 0.578% 8. FILIPINO) 9. LUCIO L. CO 4,082,563 0.181% 10. GENEVIEVE GO 1,300,000 0.058% PCCI SECURITIES BROKERS 1,000,000 0.044% 11. CORP. 12. ROMULO P. NEY 555,000 0.025% LARCY MARICHI Y. SO &/OR 513,700 0.023% 13. HANSON G. SO 601125 14. YAP SIK KIEONG 500,000 0.022% 15. LUCIANO H. TAN 450,000 0.020% 16. PABLO M. SILVA 437,499 0.019% 17. HANSON G. SO 400,000 0.018% 18. JAIME DY &/OR JULIET DY 399,000 0.018% 19. FRANCIS L. DY &/OR INGRED S. 385,500 0.017% 20. PETER TY 357,000 0.016%

Dividends

The deficit of the Company and its cash position did not merit any declaration of dividends for the last two fiscal years.

The payment of dividends in the future will depend upon the Company's earnings, cash flow and financial condition, among other factors. The Company may declare dividends only out of its unrestricted retained earnings. These represent the net accumulated earnings of the Company, with its capital unimpaired, which are not appropriated for any other purpose.

The Company may pay dividends in cash, by the distribution of property, or by the issue of shares of stock. Dividends paid in cash are subject to the approval by the Board of Directors. Dividends paid in the form of additional shares are subject to approval by both the Board of Directors and at least two- thirds (2/3) of the outstanding capital stock of the shareholders at a shareholders' meeting called for such purpose.

The Corporation Code prohibits stock corporations from retaining surplus profits in excess of one hundred per cent (100%) of their paid-in capital stock, except when justified by definite corporate expansion projects or programs approved by the Board of Directors, or when the corporation is prohibited under any loan agreement with any financial institution or creditor from declaring dividends 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 10 of 24 without its consent, and such consent has not yet been secured, or when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation.

Recent Sales of Unregistered Securities

In the past three (3) years, the Company has not undertaken any sale of unregistered or exempt securities, or issued securities constituting an exempt transaction.

Item 6. Management Discussion and Analysis of Financial Condition and Results of Operations

2015 vs. 2014

RESULTS OF OPERATIONS

Twelve months ended December 31, 2015 compared to Twelve months ended December 31, 2014

The Group's total revenues exhibited an increase of Php57.80 million or 18.81% from Php307.26 million in 2014 to Php365.07 million in 2015 of the same period. Total revenues mostly came from management fees, service income and rental income.

Costs and expenses exhibited an increase of Php50.05 million or 17.97% from Php278.44 million in 2014 to Php328.49 million in 2015. Increase in costs and expenses were mainly due to operating expenses, finance costs and tax expenses.

The Group’s net profit showed an increase of Php7.76 million or 26.92% from Php28.82 million in 2014 to Php36.58 million in 2015.

FINANCIAL CONDITION

As of December 31, 2015 and December 31, 2014

The Group’s total resources amounted to Php563.07 million in 2015 from Php491.41 million in 2014. The Group manages its liquidity needs by carefully monitoring scheduled payments for financial liabilities as well as its cash outflows due in a day-to-day business.

Current assets increased by Php90.51 million or 23.83% from Php379.80 million in 2014 to Php470.31 million in 2015. Cash and cash equivalents increased by Php69.23 million or 30.02% from Php230.66 million in 2014 to Php299.90 million in 2015. Due from related parties increased by Php7.59 million or 16.41% from Php46.27 million in 2014 to Php53.86 million in 2015.

Non-current assets decreased by Php18.85 million or 16.89% from Php111.61 million in 2014 to Php92.76 million in 2015. Investment property decreased by Php1.24 million from Php29.75 million in 2014 to Php28.51 million in 2015. Property and equipment decreased by Php2.23 million or 9.65% from Php23.09 million in 2014 to Php20.86 million in 2015.

Trade and other receivables increased by Php15.43 million or 15.94% from Php96.74 million in 2014 to Php112.17 million in 2015. Other assets decreased by Php1.65 million or 12.63% from Php13.08 million in 2014 to Php11.43 million in 2015.

Current liabilities increased by Php37.44 million or 20.00% from Php187.16 million in 2014 to Php224.60 million in 2015. Trade and other payables exhibited an increase of Php37.22 million or 42.66% from Php87.25 million in 2014 to Php124.48 million in 2015. Due to related parties slightly increased by Php0.37 million or 0.41% from Php90.70 million in 2014 to Php91.08 million in 2015. Income tax payable decreased by Php0.16 million or 1.73% from Php9.21 million in 2014 to Php9.05 million in 2015. 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 11 of 24

Retirement benefit obligation decreased by Php41.10 million or 26.07% from Php157.69 million in 2014 to Php116.58 million in 2015.

2014 vs. 2013

RESULTS OF OPERATIONS

Twelve months ended December 31, 2014 compared to Twelve months ended December 31, 2013

The Group's total revenues exhibited an increase of 24.38 million or 8.62% from 282.89 million in 2013 to 307.26 million in 2014 of the same period. Total revenues mostly came from management fees, service income and rental income.

Costs and expenses exhibited an increase of 15.13 million or 5.75% from 263.31 million in 2013 to 278.44 million in 2014. Increase in costs and expenses were mainly due to operating expenses and tax expense.

The Group’s net profit showed an increase of 9.24 million or 47.22% from 19.58 million in 2013 to28.82 million in 2014.

FINANCIAL CONDITION

As of December 31, 2014 and December 31, 2013

The Group’s total resources amounted to 491.41 million in 2014 from 400.88 million in 2013. The Group manages its liquidity needs by carefully monitoring scheduled payments for financial liabilities as well as its cash outflows due in a day-to-day business.

2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 12 of 24

Current assets increased by 81.06 million or 27.13% from 298.74 million in 2013 to 379.80 million in 2014. Cash and cash equivalents increased by 58.44 million or 33.93% from 172.23 million in 2013 to 230.66 million in 2014. Due from related parties increased by 9.62 million or 26.25% from 36.65 million in 2013 to 46.27 million in 2014.

Non-current assets increased by 9.46 million or 9.27% from 102.14 million in 2013 to 111.61 million in 2014. Investment property decreased by 1.24 million from 30.99 million in 2013 to 29.75 million in 2014. Property and equipment increased by 3.35 million or 16.98% from 19.74 million in 2013 to 23.09 million in 2014.

Trade and other receivables increased by 7.82 million or 8.79% from 88.92 million in 2013 to 96.74 million in 2014. Other Assets increased by 0.35 million or 2.79% from 12.72 million in 2013 to 13.08 million in 2014.

Current liabilities increased by 37.87 million or 25.37% from 149.29 million in 2013 to 187.16 million in 2014. Trade and other payables exhibited an increase of 15.43 million or 21.48% from 71.82 million in 2013 to 87.25 million in 2014. Due to related parties also increased by 13.39 million or 17.33% from 77.31 million in 2013 to 90.70 million in 2014. Income tax payable increased by 9.05 million or 5,640.81% from 0.16 million in 2013 to 9.21 million in 2014.

Retirement benefit obligation increased by 33.65 million or 27.13% from 124.04 million in 2013 to 157.69 million in 2014.

Material Changes in the Financial Statements Items: Increase/(Decrease) of 5% or more versus 2013

Statements of Financial Position

Cash and Cash Equivalents 33.93% Increase is due to timely collection of receivables as of the current period.

Due from Related Parties 26.25% Increase is due to additional advances to related parties of a subsidiary.

Trade and Other Receivables 8.79% Increase due to additional revenues from management fees for the current period.

Property and Equipment 16.98% Increase was mainly due to additional acquisition of equipment by the subsidiaries.

Deferred Tax Asset 30.74% Increase was mainly due to effects of taxable and deductible temporary differences.

Trade and Other Payables 21.48% Due to increase in accrued expenses as of the current period.

Due to Related Parties 17.33% Due to additional advances incurred by the subsidiaries.

Income Tax Payable 5,640.81% Increase is due to higher taxable income tax for the current period.

Retirement Benefit Obligation 27.13% Increase is due to additional accrual of retirement benefits for the current period.

2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 13 of 24

Statements of Income

Management Fees 20.45% Increase due to additional properties managed by the subsidiary.

Service Income (5.89%) Decrease due to lower service income generated by the subsidiary.

Rental Income (6.86%) Decrease due to lower rental income generated by the subsidiary.

Finance Income 46.47% Increase due to higher interest income generated for the current period.

Gain on Sale of AFS (100.00%) Due to non-recurring gain on sale of the parent company’s investment in available-for-sale financial asset.

Operating Expenses 21.44% Increase due to higher administrative and overhead expenses for the current period.

Finance Cost 95.22% Increase due to higher interest expense incurred by the subsidiary.

Tax Expense 209.86% Increase due to higher taxable income for the current period.

KEY PERFORMANCE INDICATORS

Presented below are the top five (5) key performance indicators of the Group:

o Revenue Growth – The Group generated its revenue mostly from management fees, rental income and service income. The group’s revenues showed an increase of 24.38 million or 8.62% from 282.89 million to 307.26 million year-on-year. o Net Profit Growth – measures the percentage change in net profit over a designated period of time. The group’s net profit increase by 9.24 million or 47.22% from 19.58 million in 2013 to 28.82 million in 2014. o Increase in Cash and Cash Equivalents – Cash and cash equivalents increased by 58.44 million or 33.93% from 172.23 million in 2013 to 230.66 million in 2014. o Increase in Trade Receivables – Total trade receivables increased by 7.82 million from 88.92 million in 2013 to 96.74 million in 2014. Increase is due continuous flows of revenues in the form of administrative fees. o Increase in Total Assets – Total assets increased by 90.53 million or 22.58% from 400.88 million in 2013 to 491.41 million in 2014.

There are no other significant changes in the Group's financial position (5% or more) and condition that will warrant a more detailed discussion. Further, there are no material events and uncertainties known to management that would impact or change reported financial information and condition on the Group.

There are no known trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in increasing or decreasing the Group's liquidity in any material way.

There are no other known events that will trigger direct or contingent financial obligation that is currently considered material to the Group, including any default or acceleration of an obligation. 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 14 of 24

The Group does not anticipate having any cash flow or liquidity problems. The Group is not in default or breach of any note, loan, lease or other indebtedness or financing arrangement requiring it to make payments. The Group has no material commitments for capital expenditures.

There are no material off-balance sheet transactions, arrangements, obligations, and other relationships of the Group with unconsolidated entities or other persons created during the reporting period.

The Group has no unusual nature of transactions or events that affects assets, liabilities, equity, net income or cash flows.

There are no other material issuances, repurchases or repayments of debt and equity securities.

There are no seasonal aspects that had a material effect on the financial condition or results of operations of the group.

There are no material events subsequent to the end of the period that have not been reflected in the financial statements for the year 2014.

There are no changes in estimates of amount reported in periods of the current financial year or changes in estimates of amounts reported in prior financial years.

2013 vs. 2012

RESULTS OF OPERATIONS

Twelve months ended December 31, 2013 compared to Twelve months ended December 31, 2012

The Group's total revenues exhibited an increase of 73.85 million or 35.33% from 209.04 million in 2012 to 282.89 million in 2013 of the same period. Total revenues mostly came from management fees, service income, rental income and non-recurring gain on sale of available-for-sale- financial asset.

Costs and expenses exhibited an increase of 60.57 million or 29.88% from 202.74 million in 2012 to263.31 million in 2013. Increase in cost and expenses were mainly due to cost of services and operating expenses.

The Group’s net profit showed an increase of 13.28 million or 210.86% from 6.30 million in 2012 to19.58 million in 2013.

FINANCIAL CONDITION

As of December 31, 2013 and December 31, 2012

The Group’s total resources amounted to 400.88 million in 2013 from 364.84 million in 2012. The Group manages its liquidity needs by carefully monitoring scheduled payments for financial liabilities as well as its cash outflows due in a day-to-day business.

Current assets increased by 122.38 million or 69.39% from 176.36 million in 2012 to 298.74 million in 2013. Cash and cash equivalents increased by 111.69 million or 184.51% from 60.54 million in 2012 to 172.23 million in 2013 due to proceeds from the sale of the parent company’s investment in available- for-sale financial asset. Due from related parties increased by 8.10 million or 28.37% from 28.55 million in 2012 to 36.65 million in 2013.

2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 15 of 24

Non-current assets decreased by 86.34 million or 45.81% from 188.48 million in 2012 to 102.14 million in 2013 mostly due to sale of available-for-sale financial asset which resulted to its decreased by 97.18 million or 100%. Investment property decreased by 1.24 million from 32.22 million in 2012 to 30.99 million in 2013. Property and equipment increased by 8.53 million or 76.03% from 11.21 million in 2012 to 19.74 million in 2013.

Trade and other receivables increased by 3.19 million or 3.72% from 85.73 million in 2012 to 88.92 million in 2013. Other Assets increased by 1.35 million or 11.84% from 11.38 million in 2012 to 12.72 million in 2013.

Current liabilities decreased by 11.69 million or 7.26% from 160.98 million in 2012 to 149.29 million in 2013. Trade and other payables exhibited an increase of 8.71 million or 13.79% from 63.12 million in 2012 to 71.82 million in 2013. Due to related parties decreased by 17.23 million or 18.22% from 94.53 million in 2012 to 77.31 million in 2013. Income tax payable decreased by 3.17 million or 95.18% from 3.33 million in 2012 to 0.16 million in 2013.

Retirement benefit obligation increased by 5.35 million or 4.51% from 118.69 million in 2012 to 124.04 million in 2013.

Material Changes in the Financial Statements Items: Increase/(Decrease) of 5% or more versus 2012

Statements of Financial Position

Cash and Cash Equivalents 184.51% Increase is due to proceeds from sale of the parent company’s investment in available-for-sale financial asset.

Due from Related Parties 28.37% Increase is due to additional advances to related parties.

Other Assets 11.84% Due to increase in security deposits as of the current period.

Available for Sale Financial Asset (100.00%) Due to sale of the parent company’s investment in available-for-sale financial asset.

Property and Equipment 76.03% Increase was mainly due to additional acquisition of equipment by the subsidiaries.

Trade and Other Payables 13.79% Due to increase in accrued expenses as of the current period.

Due to Related Parties (18.22%) Due to payment of advances by the parent company.

Income Tax Payable (95.18%) Decrease is due to higher prepaid taxes offset with gross income tax for the current period.

Statements of Income

Management Fees 28.21% Increase due to additional properties managed by the subsidiary. Gain on Sale of AFS 100% Due to non-recurring gain on sale of the parent company’s investment in available-for-sale financial asset. 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 16 of 24

Service Income 30.62% Increase due to higher service income generated by the subsidiary.

Rental Income 11.74% Increase due to higher rental income generated by the subsidiary.

Finance Income (28.32%) Decrease due to lower interest income generated by the subsidiary.

Cost of Services 13.25% Higher cost of services due to increase in properties managed by the subsidiary.

Operating Expenses 202.76% Increase due to higher administrative and overhead expenses for the current period.

Finance Cost (18.58%) Decrease due to lower interest expense incurred by the subsidiary.

Tax Expense 101.08% Increase due to higher taxable income for the current period.

KEY PERFORMANCE INDICATORS

Presented below are the top five (5) key performance indicators of the Group:

o Revenue Growth – The Group generated its revenue mostly from management fees, rental income, service income and non-recurring gain from sale of available-for-sale financial asset. The group’s revenues showed an increase of 73.85 million or 35.33% from 209.04 million to 282.89 million year-on-year. o Net Profit Growth – measures the percentage change in net profit over a designated period of time. The group’s net profit increase by 13.28 million or 210.86% from 6.30 million in 2012 to 19.58 million in 2013. o Increase in Cash and Cash Equivalents – Cash and cash equivalents increased by 111.69 million or 184.51% from 60.54 million in 2012 to 172.23 million in 2013. o Increase in Total Assets – Total assets increased by 36.04 million or 9.88% from 364.84 million in 2012 to 400.88 million in 2013. o Decrease in Current Liabilities – Total current liabilities decreased by 11.69 million or 7.26% from 160.98 million in 2012 to 149.29 million in 2013.

There are no other known events that will trigger direct or contingent financial obligation that is currently considered material to the Group, including any default or acceleration of an obligation.

2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 17 of 24

The Group has no unusual nature of transactions or events that affects assets, liabilities, equity, net income or cash flows.

There are no other material issuances, repurchases or repayments of debt and equity securities.

There are no seasonal aspects that had a material effect on the financial condition or results of operations of the group.

There are no material events subsequent to the end of the period that have not been reflected in the financial statements for the year 2013.

There are no changes in estimates of amount reported in periods of the current financial year or changes in estimates of amounts reported in prior financial years.

Item 7. Financial Statements

The Company’s Audited Financial Statements for the three years ended 31 December 2015, 2014, and 2013 are attached as exhibits to this report.

Item 8. Information on Independent Accountant and other Related Matters

The present auditor of the Company, Punongbayan & Araullo, was also the auditor of the Company for the years 2013, 2014 and 2015. There have been no disagreements with said auditor on any matter of accounting principles or practices, financial statement disclosures, auditing scope or procedure, which disagreements, if not resolved to their satisfaction, would have caused the auditor to make reference thereto in its respective reports on the Company’s financial statements for aforementioned years.

The external auditor of the Company billed the amounts of Php760,000 in 2015, Php750,000 in 2014, and Php725,000 in 2013, in fees for professional services rendered for the audit of the Company’s annual financial statements and services that are normally provided by the external auditor in connection with statutory and regulatory filings or engagements for 2015, 2014 and 2013. Except as disclosed above, no other services were rendered or fees billed by the external auditor of the Company for 2015, 2014 and 2013. All the above services have been approved by the Audit Committee through its internal policies and procedures of approval.

The Board of Directors, after consultation with the Audit Committee, recommends to the stockholders the engagement of the external auditors of the Company. The selection of external auditors is made on the basis of credibility, professional reputation, accreditation with the Philippine Securities and Exchange Commission, and affiliation with a reputable foreign partner. The professional fees of the external auditors of the Company are approved by the Company’s Audit Committee after approval by the stockholders of the engagement and prior to the commencement of each audit season.

2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 18 of 24

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers1

Following is the list of incumbent directors and executive officers of the Company. The members of the Company’s Board of Directors shall hold office for one (1) year from election and until their successors are elected and qualified. Any director elected to fill a vacancy shall serve only for the unexpired term of his predecessor in office.

Ferdinand B. Masi. Mr. Masi, 53 years old, Filipino, is currently the Chairman and the President of the Company. He was appointed as Chairman of the Board on 09 November 2007 and has served as President since 09 February 2001. Mr. Masi is currently with Consolidated Distillers of the Far East, Inc., a position he has held since 1983 as Accounting Staff, Plant Accountant/Auditor, Chief Accountant, Finance & Administrative Manager and as General Manager. He is concurrently the Chairman and President of Good Earth Technologies International, Inc. and Corporate Secretary of First Centro, Inc. He is a Certified Public Accountant and member of the Philippine Institute of Certified Public Accountants. He also finished his MBA from Ateneo Graduate School of Business.

Evelyn G. Cacho. Ms. Cacho, 54 years old, Filipino, is currently the Treasurer and a member of the Board of Directors of the Company since 29 August 2005. Ms. Cacho is concurrently a director of Empire East Land Holdings, Inc. (“EELHI”), a position she has occupied since February 2009. She joined EELHI in February 1995 and has served as its Vice President for Finance since February 2001. She also currently serves as director of Empire East Communities, Inc., Laguna Bel Air School, Inc., Sonoma Premier Land, Inc., Valle Verde Properties, Inc. and Sherman Oak Holdings, Inc. She holds the position of Treasurer of Megaworld Central Properties, Inc., and Megaworld Newport Property Holdings, Inc. and Assistant Corporate Secretary of Gilmore Property Marketing Associates, Inc. Prior to joining EELHI, she had extensive experience in the fields of financial/operations audit, treasury, and general accounting from banks, manufacturing and trading companies. Ms. Cacho has a bachelor’s degree in Business Administration major in Accounting.

Giancarlo C. Ng. Mr. Ng, 38 years old, Filipino, has served in the Company’s Board of Directors since 23 October 2007. He is currently the Finance and Office Manager of Consolidated Distillers of the Far East, Inc. (“Condis”). He is a graduate of the University of Asia and the Pacific with a degree in Bachelor of Arts in Liberal Arts and Humanities, graduating Magna Cum Laude and Valedictorian of his batch. He also obtained his Masters of Science in Information Technology from the same university. Mr. Ng was at various times from 2003 to 2006 an account officer, sales manager, and inter-team coordinator of Condis. Mr. Ng has handled Customer Relations Management, Sales and Delivery Logistics, and Information Technology Planning and Tactical Coordination for Condis and has extensive experience in work involving business processes and information technology solutions.

He was the project manager for the email and internet connectivity infrastructure project and inventory system database of Condis. Prior to joining Consolidated Distillers of the Far East, Inc., he was a member of the Systems Technology Support of Meralco MTP-CSPT from 1998-1999, where he participated in the company’s Y2K compliance project. Mr. Ng then joined the Software Services Department of the Orient Overseas Container Line Phils, Inc. as a software programmer from 2000- 2003, where he developed web applications and also served as customer EDI programmer and trainer of new recruits. Mr. Ng has attended trainings and seminars on several software languages, Customer Relations Management, Business Orientation for Marketing and Sales, Business Writing, Information Strategy Planning, and on the New Digital Economy and Emerging Technologies for the Philippines in 2020.

Elmer P. Pineda. Mr. Pineda, 58 years old, Filipino, was elected to the Board on 03 February 2012 to serve the unexpired term of Ms. Ma. Vicenta S. Jalandoni. Mr. Pineda was likewise appointed Assistant Corporate Secretary and Assistant Corporate Information Officer of the Corporation. He was responsible for the management of a number of real estate developments. A licensed civil engineer, Mr. Pineda has over a decade of experience in project and construction management with various companies and firms such as Farm System Development Corporation and Megaworld Corporation.

1 Age of Directors and Officers as of 31 March 2016 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 19 of 24

Felizardo T. Sapno. Mr. Sapno, 58 years old, Filipino, has served as Director of the Company since 03 July 2006. He is currently the Plant Manager of the Consolidated Distillers of the Far East, Inc. since August 1990. Mr. Sapno is a licensed Chemical Engineer and a graduate of the Mapua Institute of Technology with a degree in BS Chemical Engineering. He was previously employed with the Philippine Allied Leatherette, Inc. as Production Supervisor from October 1981 to October 1982 and the Central Azucarera de Tarlac as Shift Supervisor from November 1982 to November 1985. He is a member of various professional and socio-civic associations such as the Philippine Institute of Chemical Engineers, Center for Alcohol and Research Development Foundation, Inc., Philippine Association of Alcohol and Fermentation Technologies, Inc., Kiwanis International, Philippine Luzon District and the Knights of Columbus, Council 4668.

Alejo L. Villanueva, Jr. Mr. Villanueva, 74 years old, Filipino was elected as Independent Director on 29 October 2012. He currently serves as Independent Director of Alliance Global Group, Inc., Emperador Inc. and Empire East Land Holdings, Inc. and a Director of First Capital Condominium Corporation, a non-stock non-profit corporation. He is also Chairman of Ruru Courier Systems, Inc. and Vice Chairman of Public Relations Counselors Foundations of the Philippines, Inc. He is a professional consultant who has more than twenty years of experience in the fields of training and development, public relations, community relations, institutional communication, and policy advocacy, among others. He has done consulting work with the Office of the Vice President, the Office of the Senate President, the Commission on Appointments, the Securities and Exchange Commission, the Home Development Mutual Fund, the Home Insurance Guaranty Corporation, Department of Agriculture, Philippine National Railways, International Rice Research Institute, Rustan’s Supermarkets, Louis Berger International (USAID-funded projects on Mindanao growth), World Bank (Subic Conversion Program), Ernst & Young (an agricultural productivity project), Chemonics (an agribusiness project of USAID), Price Waterhouse (BOT program, a USAID project), Andersen Consulting (Mindanao 2000, a USAID project), Renardet S.A. (a project on the Privatization of MWSS, with World Bank funding support), Western Mining Corporation, Phelps Dodge Exploration, and Marubeni Corporation. Mr. Villanueva obtained his bachelor’s degree in Philosophy from San Beda College, summa cum laude. He has a master’s degree in Philosophy from the University of Hawaii under an East-West Center Fellowship. He also took up special studies in the Humanities at Harvard University. He studied Organizational Behavior at INSEAD in Fontainebleau, France. He taught at the Ateneo Graduate School of Business, the UST Graduate School, and the Asian Institute of Journalism.

Eugenio B. Reducindo. Mr. Reducindo, 46 years old, is currently the Managing Director of Choice Gourmet Banquet, Inc., which owns and operates McDonald’s stores and used to operate other restaurants like Shanghai Bistro and SoHo Tea House. He has held the position of Managing Director since 2007. As Managing Director, Mr. Reducindo is responsible for the overall operations and management of 11 McDonald’s outlets located within Metro Manila and other provinces such as Cebu and Iloilo. Prior to being Managing Director, Mr. Reducindo was a branch manager at Choice Gourmet handling the first McDonald’s branch of the company located at Forbestown Center. Mr. Reducindo has considerable experience in the management and operations of quick service and fine dining restaurants, having been involved in the daily operations of a specific branch as well as the overall management and operations of several branches/outlets. He has worked for Golden Arches Development Corporation as branch manager and for McDonald’s Egypt as Operations Consultant and for Makati Shangri-La as Assistant Manager for the coffee shop. Mr. Reducindo graduated in 1989 from the Far Eastern University with a degree in AB Communications.

Rolando D. Siatela. Mr. Siatela, 55 years old, Filipino, has served as Corporate Secretary and Corporate Information Officer of the Company since 23 May 2006. He concurrently serves in PSE- listed companies, Alliance Global Group, Inc., Megaworld Corporation, and Global-Estate Resorts, Inc. as Assistant Corporate Secretary. He is also the Assistant Vice President for Controllership of Megaworld Corporation. Prior to joining Megaworld Corporation, he was employed as Administrative and Personnel Officer with Batarasa Consolidated, Inc. He is a member of the board of Asia Finest Cuisine, Inc. and the Corporate Secretary of ERA Real Estate Exchange, Inc., Oceanic Realty Group International, Inc. and Documentation Officer of Megaworld Foundation.

Maria Cristina D. Gonzales. Ms. Gonzales, 51 years old, Filipino, is the Compliance Officer of the Company. She is presently a First Vice President for Management Services, Asset Management and Administration of Megaworld Corporation, a position she has held since 2007. Previously, she was a Vice President for Audit of Megaworld from 1993 to 2007, Audit Manager for Shoemart, Inc. from 1988 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 20 of 24 to 1993 and Auditor with Sycip, Gorres & Velayo from 1984 to 1987. She is a Certified Public Accountant since 1984 and graduated with a Business Administration degree, Major in Accounting (graduated magna cum laude) from the University of the East.

Directors are elected annually by the stockholders to serve until the election and qualification of their successors.

Significant Employees The Company does not have significant employees, i.e., persons who are not executive officers but expected to make significant contribution to the business.

Family Relationships No director or executive officer is related to each other up to the fourth civil degree whether by consanguinity or affinity.

Involvement in Legal Proceedings The Company has no knowledge of any of the following events that occurred during the past five (5) years up the date of this report that are material to an evaluation of the ability or integrity of any director, nominee for election as director, or executive officer:

o Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

o Any conviction by final judgment in a criminal proceeding, domestic or foreign, or being subject to a pending criminal proceeding, domestic or foreign, excluding traffic violations and other minor offenses;

o Being subject to 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 his involvement in any type of business, securities, commodities or banking activities; and

o Being found by a domestic or foreign court of competent jurisdiction (in a civil action), the Commission or comparable foreign body, or a domestic or foreign Exchange or other organized trading market or self-regulatory organization, to have violated a securities or commodities law or regulation, and the judgment has not been reversed, suspended, or vacated.

Item 10. Executive Compensation

The principal executive officers of the Company are:

Name Position

Ferdinand B. Masi Chairman & President (CEO) Evelyn G. Cacho Treasurer Rolando D. Siatela Corporate Secretary Elmer P. Pineda Asst. Corporate Secretary

The principal executive officers of the Company and members of the Company’s Board of Directors did not receive any compensation from the Company for years, 2013, 2014 and 2015 and neither will there be any compensation for the ensuing year. There are no arrangements in force pursuant to which the officers and directors of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided as such officer or director. 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 21 of 24

There are no standard arrangements pursuant to which directors of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided as a director, including any additional amounts payable for committee participation or special assignments, for the years 2013, 2014 and 2015 and for the ensuing year.

There are no other arrangements, including consulting contracts, pursuant to which any director of the Company was compensated, or is to be compensated, directly or indirectly, for the years 2013, 2014 and 2015 and for the ensuing year, for any service provided as a director. No employment contracts, termination of employment, or change in control arrangements, were effected for the applicable fiscal year.

No warrants or stock options are held by the Company’s CEO, its named executive officers or directors for years 2013, 2014 and 2015 nor are there plans for extending warrants or options for the ensuing year.

Item 11. Security Ownership of Certain Record and Beneficial Owners and Management2

Security Ownership of Owners Holding More than Five Percent (5%) of Voting Securities

TITLE NAME, ADDRESS NAME OF CITIZENSHIP NO. OF PERCENT OF OF RECORD BENEFICIAL SHARES CLASS OWNER AND OWNER AND HELD RELATIONSHIP RELATIONSHIP WITH ISSUER WITH RECORD OWNER Common Megaworld Megaworld Filipino 995,834,992 42.482% Corporation 28/F The Corporation3 (also World Centre 330 Sen. the record owner) Gil J. Puyat Avenue Makati City

Common PCD NOMINEE PCIB Securities, Filipino 694,029,922 30.846% CORPORATION Corporation 8/F G/F Makati Stock PCI Tower 2, Exchange Building Dela Costa St., 6767 Ayala Avenue, Makati City Makati City4

Common Emerging Market Emerging Market Filipino 235,000,000 10.44% Assets Limited Assets Limited (“EMAL”), Rm. (also the record 1028,12/F The Centre owner) Mark, 287-299 Queen’s Road, Central Hong Kong5

2 As of 31 March 2016 3 Mr. Andrew L. Tan has the power to direct the voting and disposition of the shares held by Megaworld Corporation in the Company. 4 PCIB Securities Corporation is a participant of the PCD Nominee Corporation. The beneficial owners of the shares held by PCIB Securities, Inc are not known to the Company. 5 Messrs. Yip Chu Kwong, Yuen Siu, Yip Kwok Cheong, Yip Kwok Wai, Tse Yuen Yuen and Poon Kwok Kuen, all stockholders of EMAL, have the power to direct the voting and disposition of the shares held by EMAL in the Company. They are businessmen 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 22 of 24

Common Stanley Ho Hung-Sun Stanley Ho Hung- Non-Filipino 116,100,000 5.16% c/o Atty. Danilo V. Sun (also the Roleda – Unit 808 record owner) Raffles, Corporate Center, Emerald Avenue, Ortigas Center Pasig City

Security Ownership of Management

Title of Class Name of Owner Amount and Nature of Citizenship Percent of Beneficial Ownership Class Common Ferdinand B. Masi 1 (direct) Filipino 0.00% Common Eugenio B. Reducindo 1 (direct) Filipino 0.00% Common Evelyn G. Cacho 1 (direct) Filipino 0.00% Common Alejo L. Villanueva, Jr. 1 (direct) Filipino 0.00% Common Elmer P. Pineda 1 (direct) Filipino 0.00% Common Giancarlo C. Ng 1 (direct) Filipino 0.00% Common Felizardo T. Sapno 1 (direct) Filipino 0.00% Common Rolando D. Siatela 0 Filipino N/A Common Ma. Cristina D. Gonzales 0 Filipino N/A Common All directors and executive 7 (direct) 0.00% officers

Voting Trust Holders of 5% or More

The Company has no knowledge of persons holding more than 5% of its voting securities under a voting trust or similar agreement.

Change in Control

The Company has no knowledge of any arrangements among stockholders that may result in a change in control of the Company.

Item 12. Certain Relationships and Related Transactions

Except for the material related party transactions described in the notes to the financial statements of the Company for the years 2013, 2014 and 2015 (please see elsewhere in here), there has been no material transaction during the last two years, nor is there any material transaction currently proposed, to which the Company was or is to be a party, in which any director or executive officer, any nominee for election as director, stockholder of more than ten percent (10%) of the Company’s voting shares, and any member of the immediate family (including spouse, parents, children, siblings, and in-laws) of any such director or officer or stockholder of more than ten percent (10%) of the Company’s voting shares had or is to have a direct or indirect material interest.

who are based in Hong Kong and China and who have substantial investments in the manufacturing and real estate industries in Guangzhou, China and Hong Kong. 2015 ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 23 of 24

PART IV – CORPORATE GOVERNANCE 13. ANNUAL CORPORATE GOVERNANCE REPORT FOR 2015 Filed with this report.

PART V - EXHIBITS AND SCHEDULES Item 14. (a) Exhibits

Exhibit No. Description of Exhibit 1 Statement of Management Responsibility for Financial Statement 2 Audited Financial Statements 3 SEC Supplementary Schedules

(b) Reports on SEC Form 17-C Filed During the Last Six Months of the Report Period (July 1 to December 31, 2015)

Date Disclosures 04 September 2015 Notice of Annual Stockholders’ Meeting 27 October 2015 Results of the Annual Stockholders’ Meeting 27 October 2015 Results of the Organizational Meeting of the Board of Directors

2015 ANNUAL REPORT/SUN-. .3T HOME DEVELOPERS, INC. Pageaf of~

SIGNATURES

Pursuant to the requirements of Section 17 of the Securities Regulation Code and Section 141 of the Corporation Code, this report is signed on behalf of the issuer by the undersigned, thereunto duly authorized, in the City of Makati, on this_ day of April2016.

SUNTRUST HOME DEVELOPERS, INC. Company

EVEific~ Chairman and President Treasurer (Principal Executive and Operating Officer)t- (Principal Financial Officer)c--

ALL~SREYES RO ANDO D. SIATELA Principal Accounting Officer v C orate Secretary v SUBSCRIBED AND SWORN to before me this _th day of April 2016, affiants exhibiting to me their Social Security System I.D.s and Tax Identification Numbers, as follows:

NAMES SSSITIN NO.

Ferdinand B. Masi SSS NO. 03-76383529/TIN NO. 125-960-157

Evelyn G. Cacho SSS NO. 03-7189287-9/TIN NO. 127-326-686

Rolando D. Siatela SSS NO. 33-0536180-7/TIN NO. 121-475-619

Allan A. Delos Reyes SSS NO. 34-0366352-0/TIN NO. 249-741-222

APR 1 4 2016

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.•::~.:a:. ::9,2007 ,·: :; ~J::. SJ?.-3' _,,- -... -.>'~ ::;.·.:·:. 'E MA!CATI CITY r.:;.;~: '' : ._!·: t~;r ~. CE, TER MAI(;.;n ;\·::.,COR, JUPITER SUNTRUST HOME DEVELOPERS, INC. 6/F The World Centre Bldg., 330 Sen. Gil Puyat Ave., Makati City Tel867 8826

STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Suntrust Home Developers, Inc. and Subsidiaries is responsible for the preparation and fair presentation of the consolidated flnancial statements for the years ended December 31,2015 and 2014, in accordance with Philippine Financial Reporting Standards (PFRS). including the following additional supplemental information flied separately from the basic flnancial statements:

a. Supplementary Schedules Required under Annex 68-E of the Securities Regulation Code Rule 68 b. Reconciliation of Retained Earnings Available for Dividend Declaration c. Schedule of PFRS Effective as of December 31, 2015 d. Schedule of Financial Indicators for December 31, 2015 and 2014 e. Map Showing the Relationship Between and Among the Company and its Related Entities

Management responsibility on the consolidated flnancial statements includes designing and implementing internal controls relevant to the preparation and fair presentation of flnancial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The Board of Directors reviews and approves the consolidated flnancial statements, and the additional supplementary information, and submits the same to the stockholders.

Punongbayan & Araullo, the independent auditors appointed by the stockholders, has examined the consolidated flnancial statements of the Company in accordance with Philippine Standards on Auditing and, and in its report to the Board of Directors and stockholders, has expressed its opinion on the fairness of presentation upon completion of such examination.

Chairman of the Board and President

S1gnature. : ~~,. ,ow-J EVELYN G. CACH Treasurer APR 1 3 2016 SUBSCRIBED AND SWORN to before me this ___ day of ______at MAKAn ti1'V Philippines, afftants exhibiting to me the following:

NAME SSS/TIN

1. FERDINAND B. MASI TIN 125-960-157

2. EVELYN G. CACHO SSS No. 03-7189287-9 TIN 127-326-686

NOTARY PUBLIC Doc. No. '1.-5/; Page No. "Lea' ; Book No. 'liO ; Series of WlJo.

MCLE COMPU' NCC i ;; '!; "- C -- c: 1 IBP O.R No.7067 2-!Si:Ti:',:: "-'-.:.! _ -~" • • , 7 PTR No. 532 ·::.-:.:> ' •:. -~ :· -~:\'Jd, ;._ . i EXECH;\ir- r: > , - :c "<.

SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2015 AND 2014 (Amounts in Philippine Pesos)

Notes 2015 2014

A S S E T S

CURRENT ASSETS Cash and cash equivalents 5 P 299,896,867 P 230,662,973 Trade and other receivables - net 6 107,934,741 93,170,852 Due from related parties - net 14 53,859,925 46,268,824 Other current assets - net 7 8,616,419 9,698,764

Total Current Assets 470,307,952 379,801,413

NON-CURRENT ASSETS Trade and other receivables 6 4,234,183 3,572,845 Investment property - net 9 28,506,244 29,745,646 Property and equipment - net 8 20,864,983 23,092,490 Deferred tax assets 13 36,341,694 51,817,246 Other non-current assets - net 7 2,810,522 3,380,284

Total Non-current Assets 92,757,626 111,608,511

TOTAL ASSETS P 563,065,578 P 491,409,924

LIABILITIES AND EQUITY

CURRENT LIABILITIES Trade and other payables 10 P 124,478,738 P 87,254,280 Due to related parties 14 91,076,837 90,702,023 Income tax payable 9,048,094 9,207,485

Total Current Liabilities 224,603,669 187,163,788

NON-CURRENT LIABILITY Retirement benefit obligation 12 116,584,200 157,688,710

Total Liabilities 341,187,869 344,852,498

EQUITY 16 221,877,709 146,557,426

TOTAL LIABILITIES AND EQUITY P 563,065,578 P 491,409,924

See Notes to Consolidated Financial Statements. SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (Amounts in Philippine Pesos)

Notes 2015 2014 2013

REVENUES Management fees 4 P 336,409,706 P 279,504,341 P 232,055,178 Service income 2 14,829,452 14,640,357 15,556,533 Rental income 9, 17 9,472,933 8,722,669 9,364,826 Finance income 4,042,604 3,385,507 2,311,440 Gain on sale of available-for-sale financial asset 14 - - 20,627,768 Others 314,070 1,011,215 2,972,172

365,068,765 307,264,089 282,887,917

COSTS AND EXPENSES Cost of services 11 189,415,811 183,800,839 197,113,307 Operating expenses 11 84,906,821 66,263,979 54,566,572 Finance costs 6, 12 29,281,077 13,049,374 6,684,336 Tax expense 13 24,888,917 15,330,731 4,947,678

328,492,626 278,444,923 263,311,893

NET PROFIT P 36,576,139 P 28,819,166 P 19,576,024

Earnings Per Share - Basic and Diluted 15 P 0.016 P 0.013 P 0.009

See Notes to Consolidated Financial Statements. SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (Amounts in Philippine Pesos)

Notes 2015 2014 2013

NET PROFIT P 36,576,139 P 28,819,166 P 19,576,024

OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss Remeasurements of retirement benefit obligation 12 55,348,777 ( 14,025,098 ) 32,571,479 Tax income (expense) 13 ( 16,604,633 ) 4,207,530 ( 9,771,444 )

38,744,144 ( 9,817,568 ) 22,800,035

TOTAL COMPREHENSIVE INCOME P 75,320,283 P 19,001,598 P 42,376,059

See Notes to Consolidated Financial Statements. SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (Amounts in Philippine Pesos)

Revaluation Capital Stock Reserves Total (Note 16) (Notes 12 and 13) Deficit Equity

Balance at January 1, 2015 P 2,062,500,000 ( P 25,899,604 ) ( P 1,890,042,970 ) P 146,557,426 Total comprehensive income for the year - 38,744,144 36,576,139 75,320,283

Balance at December 31, 2015 P 2,062,500,000 P 12,844,540 ( P 1,853,466,831 ) P 221,877,709

Balance at January 1, 2014 P 2,062,500,000 ( P 16,082,036 ) ( P 1,918,862,136 ) P 127,555,828 Total comprehensive income for the year - ( 9,817,568 ) 28,819,166 19,001,598

Balance at December 31, 2014 P 2,062,500,000 ( P 25,899,604 ) ( P 1,890,042,970 ) P 146,557,426

Balance at January 1, 2013 P 2,062,500,000 ( P 38,882,071 ) ( P 1,938,438,160 ) P 85,179,769 Total comprehensive income for the year - 22,800,035 19,576,024 42,376,059

Balance at December 31, 2013 P 2,062,500,000 ( P 16,082,036 ) ( P 1,918,862,136 ) P 127,555,828

See Notes to Consolidated Financial Statements. SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (Amounts in Philippine Pesos)

Notes 2015 2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax P 61,465,056 P 44,149,897 P 24,523,702 Adjustments for: Depreciation and amortization 11 9,157,741 12,966,563 10,093,754 Interest expense 7,397,850 6,091,911 6,684,336 Interest income ( 4,042,604 ) ( 3,385,507 ) ( 2,311,440 ) Impairment of receivables 6 - 6,957,463 - Gain on sale of available-for-sale financial asset 14 - - ( 20,627,768 ) Operating profit before working capital changes 73,978,043 66,780,327 18,362,584 Increase in trade and other receivables ( 15,397,216 ) ( 14,776,630 ) ( 3,192,647 ) Decrease (increase) in other current assets 1,082,345 ( 2,232,860 ) 606,384 Increase in trade and other payables 37,222,208 15,431,113 8,704,331 Increase in retirement benefit obligation 6,848,667 13,533,797 31,240,154 Cash generated from operations 103,734,047 78,735,747 55,720,806 Cash paid for taxes ( 26,177,389 ) ( 14,258,583 ) ( 19,490,231 )

Net Cash From Operating Activities 77,556,658 64,477,164 36,230,575

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment 8 ( 4,526,963 ) ( 15,909,143 ) ( 14,258,576 ) Decrease in due from related parties 14 ( 7,591,101 ) ( 9,619,110 ) ( 8,098,764 ) Interest received 4,014,593 3,385,507 2,311,440 Decrease (increase) in other non-current assets ( 670,000 ) 406,680 ( 5,075,655 ) Proceeds from disposal of property and equipment 8 75,893 2,301,197 - Proceeds from sale of available-for-sale financial assets 14 - - 117,809,201

Net Cash From (Used in) Investing Activities ( 8,697,578 ) ( 19,434,869 ) 92,687,646

CASH FLOWS FROM FINANCING ACTIVITY Increase (decrease) in due to related parties 14 374,814 13,394,521 ( 17,227,090 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 69,233,894 58,436,816 111,691,131

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 230,662,973 172,226,157 60,535,026

CASH AND CASH EQUIVALENTS AT END OF YEAR P 299,896,867 P 230,662,973 P 172,226,157

See Notes to Consolidated Financial Statements.

SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2015, 2014 AND 2013 (Amounts in Philippine Pesos)

1. CORPORATE INFORMATION

1.1 Company Background

Suntrust Home Developers, Inc. (the Company or Parent Company) was incorporated in the Philippines on January 18, 1956 to primarily engage in real estate development. The Parent Company’s corporate life was extended for another 50 years starting January 18, 2006. The Parent Company is presently engaged in leasing activity and is a publicly listed entity in the Philippines.

Megaworld Corporation (Megaworld), also a publicly listed company in the Philippines, is the major stockholder with 42.48% ownership interest in the Parent Company.

The registered office of the Parent Company, which is also its principal place of business, is located at the 6 th Floor, The World Centre Building, 330 Sen. Gil Puyat Avenue, Makati City.

The Parent Company’s administrative functions are being handled by Megaworld at no cost to the Company.

The consolidated financial statements have been prepared on a going concern basis since Megaworld commits to provide continuing financial support for its operating expenses until such time that the Parent Company is able to successfully re-start its commercial operations as a real estate developer.

1.2 Subsidiaries and their Operations

In June 2013, the Company’s ownership interest in Suntrust Properties, Inc. (SPI) was sold to Megaworld. Prior to the sale, the Company held 8% ownership interest in SPI.

The Parent Company holds 100% ownership interest in First Oceanic Property Management, Inc. (FOPMI). FOPMI, which is incorporated in the Philippines, is engaged primarily in the management of real estate properties.

On the other hand, FOPMI holds 100% ownership interest in the shares of stock of Citylink Coach Services, Inc. (Citylink), a domestic company engaged in overland transport, carriage, moving or haulage of passengers, fares, customers and commuters as well as freight, cargo, articles, items, parcels, commodities, goods or merchandise by means of coaches, buses, coasters, jeeps, cars and other similar means of transport.

The registered place of business of FOPMI is located at 7th Floor Paseo Center, 8757 Paseo de Roxas corner Sedeño Street, Makati City while its principal place of business is located at No. 102 L.P. Leviste St., Salcedo Village, Barangay Bel-Air, Makati City. The registered and principal place of business of Citylink is located at G/F McKinley Parking Building, Service Road 2, McKinley Town Center, Fort Bonifacio, Taguig City.

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1.3 Approval of the Consolidated Financial Statements

The consolidated financial statements of Suntrust Home Developers, Inc. and Subsidiaries (the Group) for the year ended December 31, 2015 (including the comparative consolidated financial statements for the years ended December 31, 2014 and 2013) were authorized for issue by the Company’s Board of Directors (BOD) on March 14, 2016.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarized below and in the succeeding pages. The policies have been consistently applied to all years presented, unless otherwise stated.

2.1 Basis of Preparation of Consolidated Financial Statements

(a) Statement of Compliance with Philippine Financial Reporting Standards

The consolidated financial statements of the Group have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). PFRS are adopted by the Financial Reporting Standards Council (FRSC), from the pronouncements issued by the International Accounting Standards Board (IASB), and approved by the Philippine Board of Accountancy.

The consolidated financial statements have been prepared using the measurement bases specified by PFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies that follow.

(b) Presentation of Consolidated Financial Statements

The consolidated financial statements are presented in accordance with Philippine Accounting Standard (PAS) 1, Presentation of Financial Statements . The Group presents consolidated statements of comprehensive income separate from the consolidated statements of income.

The Group presents a third consolidated statement of financial position as at the beginning of the preceding period when it applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items that has a material effect on the information in the consolidated statement of financial position at the beginning of the preceding period. The related notes to the third consolidated statement of financial position are not required to be disclosed.

These consolidated financial statements are presented in Philippine pesos, the functional and presentation currency of the Group, and all values represent absolute amounts except when otherwise indicated.

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Items included in the consolidated financial statements of the Group are measured using its functional currency, the currency of the primary economic environment in which the Group operates.

2.2 Adoption of New and Amended PFRS

(a) Effective in 2015 that are Relevant to the Group

The Group adopted for the first time the following amendment and annual improvements to PFRS, which are mandatorily effective for consolidated financial statements beginning on or after July 1, 2014, for its annual reporting period beginning January 1, 2015:

PAS 19 (Amendment) : Employee Benefits – Defined Benefit Plans – Employee Contributions Annual Improvements : Annual Improvements to PFRS (2010-2012 Cycle) and PFRS (2011-2013 Cycle)

Discussed below and in the succeeding pages are the relevant information about these amended standards and interpretations.

(i) PAS 19 (Amendment), Employee Benefits – Defined Benefit Plans – Employee Contributions . The amendment clarifies that if the amount of the contributions to defined benefit plans from employees or third parties is dependent on the number of years of service, an entity shall attribute the contributions to periods of service using the same attribution method (i.e., either using the plan’s contribution formula or on a straight-line basis) for the gross benefit. The amendment did not have a significant impact on the Group’s consolidated financial statements since the Group’s defined benefit plan does not require employees or third parties to contribute to the benefit plan.

(ii) Annual Improvements to PFRS. Annual improvements to PFRS (2010-2012 Cycle) and PFRS (2011-2013 Cycle) made minor amendments to a number of PFRS. Among those improvements, the following amendments are relevant to the Group but had no material impact on the Group’s consolidated financial statements as these amendments merely clarify the existing requirements:

Annual Improvements to PFRS (2010-2012 Cycle)

• PFRS 3 (Amendment), Business Combinations. This amendment clarifies that an obligation to pay contingent consideration which meets the definition of a financial instrument is classified as a financial liability or as equity in accordance with PAS 32, Financial Instruments: Presentation . It also clarifies that all non-equity contingent consideration should be measured at fair value at the end of each reporting period, with changes in fair value recognized in profit or loss.

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• PFRS 8 (Amendment), Operating Segments. This amendment requires disclosure of the judgments made by management in applying the aggregation criteria to operating segments. This includes a description of the segments which have been aggregated and the economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics. It further clarifies the requirement to disclose for the reconciliations of segment assets to the entity’s assets if that amount is regularly provided to the chief operating decision maker.

• PAS 16 (Amendment), Property, Plant and Equipment, and PAS 38 (Amendment), Intangible Assets. The amendments clarify that when an item of property, plant and equipment and intangible assets is revalued, the gross carrying amount is adjusted in a manner that is consistent with a revaluation of the carrying amount of the asset.

• PAS 24 (Amendment), Related Party Disclosures . The amendment clarifies that an entity providing key management services to a reporting entity is deemed to be a related party of the latter. It also clarifies that the information required to be disclosed in the financial statements are the amounts incurred by the reporting entity for key management personnel services that are provided by a separate management entity and not the amounts of compensation paid or payable by the management entity to its employees or directors.

Annual Improvements to PFRS (2011-2013 Cycle)

• PFRS 3 (Amendment), Business Combination s. It clarifies that PFRS 3 does not apply to the accounting for the formation of any joint arrangement under PFRS 11, Joint Arrangement , in the financial statements of the joint arrangement itself.

• PAS 40 (Amendment), Investment Property . The amendment clarifies the interrelationship of PFRS 3 and PAS 40 in determining the classification of property as an investment property or owner-occupied property, and explicitly requires an entity to use judgment in determining whether the acquisition of an investment property is an acquisition of an asset or a group of asset in accordance with PAS 40 or a business combination in accordance with PFRS 3.

• PFRS 13 (Amendment), Fair Value Measurement . The amendment clarifies that the scope of the exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis (the portfolio exception) applies to all contracts within the scope of and accounted for in accordance with PAS 39, Financial Instruments: Recognition and Measurement , or PFRS 9, Financial Instruments , regardless of whether they meet the definition of financial assets or financial liabilities as defined in PAS 32.

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(b) Effective Subsequent to 2015 but not Adopted Early

There are new PFRS, amendments and annual improvements to existing standards effective for annual periods subsequent to 2015 which are issued by the FRSC. Management will adopt the relevant pronouncements in the succeeding pages in accordance with their transitional provisions, and, unless otherwise stated, none of these are expected to have significant impact on the Group’s consolidated financial statements.

(i) PAS 1 (Amendment), Presentation of Financial Statements – Disclosure Initiative (effective from January 1, 2016). The amendment encourages entities to apply professional judgment in presenting and disclosing information in the financial statements. Accordingly, it clarifies that materiality applies to the whole financial statements and an entity shall not reduce the understandability of the financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures or functions. It further clarifies that, in determining the order of presenting the notes and disclosures, an entity shall consider the understandability and comparability of the financial statements.

(ii) PAS 16 (Amendment), Property, Plant and Equipment, and PAS 38 (Amendment), Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortization (effective from January 1, 2016). The amendment in PAS 16 clarifies that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment. In addition, amendment to PAS 38 introduces a rebuttable presumption that an amortization method that is based on the revenue generated by an activity that includes the use of an intangible asset is not appropriate, which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits of an intangible asset are highly correlated. The amendment also provides guidance that the expected future reductions in the selling price of an item that was produced using the asset could indicate an expectation of technological or commercial obsolescence of an asset, which may reflect a reduction of the future economic benefits embodied in the asset.

(iii) PAS 16 (Amendment), Property, Plant and Equipment and PAS 41 (Amendment) Agriculture – Bearer Plants (effective from January 1, 2016). The amendment defines a bearer plant as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce. On this basis, bearer plant is now included within the scope of PAS 16 rather than PAS 41, allowing such assets to be accounted for as property, plant and equipment and to be measured after initial recognition at cost or revaluation basis in accordance with PAS 16. The amendment further clarifies that produce growing on bearer plants remains within the scope of PAS 41.

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(iv) PFRS 10 (Amendments), Consolidated Financial Statements , PFRS 12, Disclosure of Interests in Other Entities , and PAS 28 (Amendment), Investments in Associates and Joint Ventures – Investment Entities – Applying the Consolidation Exception (effective January 1, 2016). This amendment addresses the concerns that have arisen in the context of applying the consolidation exception for investment entities. It clarifies which subsidiaries of an investment entity are consolidated in accordance with paragraph 32 of PFRS 10 and clarifies whether the exemption to present consolidated financial statements, set out in paragraph 4 of PFRS 10, is available to a parent entity that is a subsidiary of an investment entity. This amendment also permits a non-investment entity investor, when applying the equity method of accounting for an associate or joint venture that is an investment entity, to retain the fair value measurement applied by that investment entity associate or joint venture to its interests in subsidiaries.

(v) PFRS 9 (2014), Financial Instruments (effective from January 1, 2018). This new standard on financial instruments will eventually replace PAS 39 and PFRS 9 (2009, 2010 and 2013 versions). This standard contains, among others, the following:

• three principal classification categories for financial assets based on the business model on how an entity is managing its financial instruments;

• an expected loss model in determining impairment of all financial assets that are not measured at fair value through profit or loss (FVTPL), which generally depends on whether there has been a significant increase in credit risk since initial recognition of a financial asset; and,

• a new model on hedge accounting that provides significant improvements principally by aligning hedge accounting more closely with the risk management activities undertaken by entities when hedging their financial and non-financial risk exposures.

In accordance with the financial asset classification principle of PFRS 9 (2014), a financial asset is classified and measured at amortized cost if the asset is held within a business model whose objective is to hold financial assets in order to collect the contractual cash flows that represent solely payments of principal and interest (SPPI) on the principal outstanding. Moreover, a financial asset is classified and subsequently measured at fair value through other comprehensive income if it meets the SPPI criterion and is held in a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets. All other financial assets are measured at FVTPL.

In addition, PFRS 9 (2014) allows entities to make an irrevocable election to present subsequent changes in the fair value of an equity instrument that is not held for trading in other comprehensive income.

The accounting for embedded derivatives in host contracts that are financial assets is simplified by removing the requirement to consider whether or not they are closely related, and, in most arrangements, does not require separation from the host contract.

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For liabilities, the standard retains most of the PAS 39 requirements which include amortized cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The amendment also requires changes in the fair value of an entity’s own debt instruments caused by changes in its own credit quality to be recognized in other comprehensive income rather than in profit or loss.

Management is currently assessing the impact of PFRS 9 (2014) on the consolidated financial statements of the Group and it will conduct a comprehensive study of the potential impact of this standard prior to its mandatory adoption date to assess the impact of all changes.

(vi) PFRS 10 (Amendments), Consolidated Financial Statements, and PAS 28 (Amendment), Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associates or Joint Venture (effective date deferred indefinitely). The amendment to PFRS 10 requires full recognition in the investor’s financial statements of gains or losses arising on the sale or contribution of assets that constitute a business as defined in PFRS 3 between an investor and its associate or joint venture. Accordingly, the partial recognition of gains or losses (i.e., to the extent of the unrelated investor’s interests in an associate or joint venture) only applies to those sale of contribution of assets that do not constitute a business. Corresponding amendment has been made to PAS 28 to reflect these changes. In addition, PAS 28 has been amended to clarify that when determining whether assets that are sold or contributed constitute a business, an entity shall consider whether the sale or contribution of those assets is part of multiple arrangements that should be accounted for as a single transaction. In December 2015, the IASB deferred the mandatory effective date of these amendments (i.e., from January 1, 2016) indefinitely.

(vii) Annual Improvements to PFRS (2012-2014 Cycle) (effective from January 1, 2016). Among the improvements, the following amendments are relevant to the Group but management does not expect these to have material impact on the Group’s financial statements:

• PFRS 5 (Amendment), Non-current Assets Held for Sale and Discontinued Operations. The amendment clarifies that when an entity reclassifies an asset (or disposal group) directly from being held for sale to being held for distribution (or vice-versa), the accounting guidance in paragraphs 27-29 of PFRS 5 does not apply. It also states that when an entity determines that the asset (or disposal group) is no longer available for immediate distribution or that the distribution is no longer highly probable, it should cease held-for-distribution accounting and apply the guidance paragraphs 27-29 of PFRS 5.

• PFRS 7 (Amendment), Financial Instruments – Disclosures . The amendment provides additional guidance to help entities identify the circumstances under which a contract to “service” financial assets is considered to be a continuing involvement in those assets for the purposes of applying the disclosure requirements of PFRS 7. Such circumstances commonly arise when, for example, the servicing is dependent on the amount or timing of cash flows collected from the transferred asset or when a fixed fee is not paid in full due to non-performance of that asset. - 8 -

• PAS 19 (Amendment), Employee Benefits . The amendment clarifies that the currency and term of the high quality corporate bonds which were used to determine the discount rate for post-employment benefit obligations shall be made consistent with the currency and estimated term of the post-employment benefit obligations.

2.3 Basis of Consolidation

The Parent Company obtains and exercises control through voting rights. The Group’s consolidated financial statements comprise the accounts of the Parent Company and its subsidiaries, after the elimination of material intercompany transactions. All intercompany assets and liabilities, equity, income, expenses and cash flows relating to transaction between entities under the Group, are eliminated in full on consolidation. Unrealized profits and losses from intercompany transactions that are recognized in assets are also eliminated in full. Intercompany losses that indicate impairment are recognized in the consolidated financial statements.

The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting principles. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

Subsidiaries are all entities (including structured entities) over which the Company has control. The Company controls an entity when it is exposed, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date the Company obtains control.

The Company reassesess whether or not it controls an entity if facts and circumstances indicate that there are changes to one or more of the three elements of controls indicated above. Accordingly, entities are deconsolidated from the date that control ceases.

The acquisition method is applied to account for acquired subsidiaries. This requires recognizing and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Company, if any. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred and subsequent change in the fair value of contingent consideration is recognized directly in profit or loss.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any existing equity interest in the acquiree over the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill. If the consideration transferred is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly as gain in profit or loss (see Note 2.11). - 9 -

2.4 Financial Assets

Financial assets are recognized when the Group becomes a party to the contractual terms of the financial instrument. For purposes of classifying financial assets, an instrument is considered as an equity instrument if it is non-derivative and meets the definition of equity for the issuer in accordance with the criteria of PAS 32. All other non-derivative financial instruments are treated as debt instruments. Financial assets other than those designated and effective as hedging instruments are classified into the following categories: FVTPL, held-to-maturity investments, loans and receivables and available-for-sale (AFS) financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired.

Regular purchases and sales of financial assets are recognized on their trade date. All financial assets that are not classified as FVTPL are initially recognized at fair value plus any directly attributable transaction costs.

(a) Classification and Measurement

The Group’s financial assets are currently classified as loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the end of each reporting period, which are classified as non-current assets.

The Group’s financial assets categorized as loans and receivables are presented as Cash and Cash Equivalents, Trade and Other Receivables (except Advances to employees) and Due from Related Parties in the consolidated statement of financial position. Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments with original maturities of three months or less, readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

Loans and receivables are subsequently measured at amortized cost using the effective interest method, less impairment loss, if any.

(b) Impairment of Financial Assets

Impairment loss is provided when there is objective evidence that the Company will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets’ carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset’s original effective interest rate or current effective interest rate determined under the contract if the loan has a variable interest rate.

The carrying amount of the asset shall be reduced either directly or through the use of an allowance account. The amount of the loss shall be recognized in profit or loss.

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If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in the profit or loss.

All income and expenses, including impairment losses, relating to financial assets that are recognized in profit or loss are presented as part of Finance Income or Finance Cost in the consolidated statements of income.

Non-compounding interest, dividend income and other cash flows resulting from holding financial assets are recognized in profit or loss when earned, regardless of how the related carrying amount of financial assets is measured.

(d) Derecognition of Financial Assets

The financial assets (or where applicable, a part of a financial asset or a part of a group of financial assets) are derecognized when the contractual rights to receive cash flows from the financial instruments expire, or when the financial assets and all substantial risks and rewards of ownership have been transferred to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

2.5 Other Assets

Other current assets pertain to other resources controlled by the Group as a result of past events. They are recognized in the consolidated financial statements when it is probable that the future economic benefits will flow to the Group and the asset has a cost or value that can be measured reliably.

Other recognized assets of similar nature, where future economic benefits are expected to flow to the Group beyond one year after the end of the reporting period are classified as non-current assets.

2.6 Investment Property

Investment property pertains to condominium units held for rent and for capital appreciation. Condominium units are stated at cost, less accumulated depreciation and accumulated impairment losses, if any.

The cost of investment property comprise the acquisition cost or construction cost and other directly attributable costs for bringing the asset to working condition for its intended use. Expenditures for additions and major improvements are capitalized while expenditures for repairs and maintenance are charged to expense when incurred.

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Depreciation of condominium units is computed on a straight-line basis over its estimated useful life of 30 years [see Note 3.2(a)]. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see Note 2.16).

Any gain or loss on the retirement or disposal of an investment property is recognized in profit or loss in the year of retirement disposal.

Investment properties are derecognized upon disposal or when permanently withdrawn from use and no future economic benefit is expected from their disposal.

2.7 Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization and any impairment in value.

The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to working condition for its intended use. Expenditures for additions, major improvements and renewals are capitalized while expenditures for repairs and maintenance are charged to expense as incurred.

Depreciation is computed on the straight-line basis over the estimated useful lives of the assets as follows:

Transportation equipment 5 years Office and communication equipment 3-5 years Furniture and fixtures 3-5 years

Leasehold improvements are amortized over their estimated useful life of five years or the term of the lease, whichever is shorter.

Fully depreciated and amortized assets are retained in the accounts until they are no longer in use and no further change for depreciation and amortization is made in respect of these assets.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see Note 2.16).

The residual values, estimated useful lives and method of depreciation of property and equipment are reviewed and adjusted, if appropriate, at the end of each reporting period.

An item of property and equipment, including the related accumulated depreciation and any impairment losses, is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising from the derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the year the item is derecognized.

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2.8 Intangible Assets

Intangible assets, presented as part of other Other Non-current Assets account in the consolidated statement of financial position, pertain acquired computer software applications used in operation and administration which are accounted for under the cost model. The cost of the asset is the amount of cash or cash equivalents paid or the fair value of the other considerations given to acquire an asset at the time of its acquisition. Capitalized costs are amortized on a straight-line basis over an estimated useful life of five years as these intangible assets are considered finite. In addition, intangible assets are subject to impairment testing as described in Note 2.16. Amortization commences upon completion of the asset.

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and install the specific software for its intended use. Costs associated with maintaining computer software are expensed as incurred.

When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the asset and is recognized in profit or loss.

2.9 Financial Liabilities

The financial liabilities of the Group include Trade and Other Payables (excluding customers’ deposits and tax-related payables) and Due to Related Parties.

Financial liabilities are recognized when the Group becomes a party to the contractual terms of the instrument. All interest-related charges are recognized as an expense under the caption Finance Costs in the consolidated statement of income.

Trade and other payables and due to related parties are recognized initially at their fair value and subsequently measured at amortized cost, using the effective interest method for maturities beyond one year, less settlement payments.

Financial liabilities are classified as current liabilities if payment is due to be settled within one year or less after the reporting period (or in the normal operating cycle of the business, if longer), or the Group does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Otherwise, these are presented as non-current liabilities.

Financial liabilities are derecognized from the consolidated statement of financial position only when the obligations are extinguished either through discharge, cancellation or expiration. The difference between the carrying amount of the financial liability derecognized and the consideration paid or payable is recognized in profit or loss.

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2.10 Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the resulting net amount, considered as a single financial asset or financial liability, is reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. The right of set-off must be available at the end of the reporting period, that is, it is not contingent on future event. It must also be enforceable in the normal course of business, in the event of default, and in the event of insolvency or bankruptcy; and must be legally enforceable for both entity and all counterparties to the financial instruments.

2.11 Business Combinations

Business acquisitions are accounted for using the acquisition method of accounting.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.

Negative goodwill, if any, which is the excess of the Company’s interest in the net fair value of acquired identifiable assets, liabilities, and contingent liabilities over cost, is charged directly to income.

For the purpose of impairment testing, goodwill is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The cash-generating units or groups of cash-generating units are identified according to operating segment.

Gains and losses on the disposal of an interest in a subsidiary include the carrying amount of goodwill relating to it.

If the business combination is achieved in stages, the acquirer is required to remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in the profit or loss or other comprehensive income, as appropriate.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with PAS 37, Provisions, Contingent Liabilities and Contingent Assets, either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

2.12 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s strategic steering committee; its chief operating decision-maker. The strategic steering committee is responsible for allocating resources and assessing performance of the operating segments. - 14 -

In identifying its operating segments, management generally follows the Group’s service lines as disclosed in Note 4, which represent the main services provided by the Group.

Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches. All inter-segment transfers are carried out at arm’s length prices.

The measurement policies the Group uses for segment reporting under PFRS 8 are the same as those used in its consolidated financial statements. In addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment.

There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.

2.13 Provisions and Contingencies

Provisions are recognized when present obligations will probably lead to an outflow of economic resources and they can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the end of the reporting period, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. When time value of money is material, long-term provisions are discounted to their present values using a pretax rate that reflects market assessments and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognized in the consolidated financial statements. Similarly, possible inflows of economic benefits to the Group that do not yet meet the recognition criteria of an asset are considered contingent assets, hence, are not recognized in the consolidated financial statements. On the other hand, any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset not exceeding the amount of the related provision.

2.14 Revenue and Expense Recognition

Revenue comprises of income from rental and the rendering of services measured by reference to the fair value of consideration received or receivable by the Group for services rendered excluding value-added tax (VAT).

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Revenue is recognized to the extent that the revenue can be reliably measured; it is probable that the economic benefits will flow to the Group; and the costs incurred or to be incurred can be measured reliably. In addition, the following specific recognition criteria must also be met before revenue is recognized:

(a) Management fees – Revenue is recognized when the performance of contractually agreed tasks have been substantially rendered.

(b) Rental income – Revenue is recognized on a straight-line basis over the duration of the lease term (see Note 2.15). For tax purposes, rental income is recognized based on the contractual terms of the lease.

(c) Service income – Revenue is recognized when the services related to technical projects, telephone services and transport of passengers have been substantially rendered.

(d) Interest Income – Revenue is recognized as the interest accrues taking into account the effective yield on the asset.

Costs and expenses are recognized in profit or loss upon utilization of goods or services or at the date they are incurred. Finance costs are reported in profit or loss on accrual basis.

2.15 Leases

The Group accounts for its leases as follows:

(a) Group as Lessee

Leases which do not transfer to the Group substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are recognized as expense in the consolidated statements of income on a straight-line basis over the lease term. Associated costs, such as repairs and maintenance and insurance, are expensed as incurred.

(b) Group as Lessor

Leases which do not transfer to the lessee substantially all the risks and benefits of ownership of the asset are classified as operating leases. Lease income from operating leases is recognized in profit or loss on a straight-line basis over the lease term.

The Group determines whether an arrangement is, or contains, a lease based on the substance of the arrangement. It makes 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.

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2.16 Impairment of Non-financial Assets

The Group’s property and equipment, investment property, intangible assets (presented under Other Non-current Assets account) and other non-financial assets are subject to impairment testing. All other individual assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, assets are tested for impairment either individually or at the cash-generating unit level.

Impairment loss is recognized for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amounts which is the higher of its fair value less costs to sell and its value in use. In determining value in use, management estimates the expected future cash flows from each cash-generating unit and determines the suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management’s assessment of respective risk profiles, such as market and asset-specific risk factors.

All assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment loss is reversed if the asset’s or cash generating unit’s recoverable amount exceeds its carrying amount.

2.17 Employee Benefits

The Group’s post-employment benefits to employees through a defined benefit plan and defined contribution plans, and other employee benefits are recognized as follows:

(a) Post-employment Defined Benefit Plan

A defined benefit plan is a post-employment plan that defines an amount of post-employment benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligation for any benefits from this kind of post-employment benefit plan remains with the Group. The Group’s post-employment defined benefit plan covers all regular full-time employees.

The liability recognized in the consolidated statement of financial position for defined benefit plans is the present value of the defined benefit obligation (DBO) at the end of the reporting period less the fair value of plan assets. The DBO is calculated annually by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the estimated future cash outflows using a discount rate derived from the interest rates of a zero coupon government bonds as published by the Philippine Dealing & Exchange Corporation, that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related post-employment liability.

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Remeasurements, comprising of actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions and the return on plan assets (excluding amount included in net interest) are reflected immediately in the consolidated statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they arise. Net interest is calculated by applying the discount rate at the beginning of the period, taking account of any changes in the net defined benefit liability or asset during the period as a result of contributions and benefit payments. Net interest is reported as part of Finance Costs or Finance Income account in the consolidated statement of income.

Past-service costs are recognized immediately in profit or loss in the period of a plan amendment and curtailment.

(b) Post-employment Defined Contribution Plans

A defined contribution plan is a post-employment plan under which the Group pays fixed contributions into an independent entity (such as Social Security System). The Group has no legal or constructive obligations to pay further contributions after payment of the fixed contribution. The contributions recognized in respect of defined contribution plans are expensed as they fall due. Liabilities and assets may be recognized if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally of a short-term nature.

Compensated absences are recognized for the number of paid leave days (including holiday entitlement) remaining at the end of the reporting period. They are included in Trade and Other Payables account in the consolidated statement of financial position at the undiscounted amount that the Group expects to pay as a result of the unused entitlement.

2.18 Income Taxes

Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity, if any.

Current tax assets or liabilities comprise those claims from, or obligations to, fiscal authorities relating to the current or prior reporting period, that are uncollected or unpaid at the end of reporting period. They are calculated using the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognized as a component of tax expense in profit or loss.

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Deferred tax is accounted for using the liability method on temporary differences at the end of each reporting period between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Under the liability method, with certain exceptions, deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences and the carryforward of unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will be available to allow such deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, provided such tax rates have been enacted or substantially enacted at the end of the reporting period.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would flow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Most changes in deferred tax assets or liabilities are recognized as a component of tax expense in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

Deferred tax assets and deferred tax liabilities are offset if the Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred taxes relate to the same entity and the same taxation authority.

2.19 Related Party Relationship and Transactions

Related party transactions are transfers of resources, services or obligations between the Group and its related parties, regardless whether a price is charged.

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. These parties include: (a) individuals owning, directly or indirectly through one or more intermediaries, control or are controlled by, or under common control with the Group; (b) associates; and, (c) individuals owning, directly or indirectly, an interest in the voting power of the Group that gives them significant influence over the Group and close members of the family of any such individual.

In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely on the legal form.

2.20 Equity

Capital stock represents the nominal value of shares that have been issued.

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Subscription receivable represents the unpaid portion of the subscribed capital stock due from stockholders.

Revaluation reserves comprise accumulated actuarial gains and losses arising from remeasurement of post-employment defined benefit plan, net of tax.

Deficit includes all current and prior period results of operations as disclosed in the consolidated statement of income.

2.21 Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net profit by the weighted average number of common shares subscribed and issued during the year adjusted retroactively for any stock dividend, stock split or reverse stock split declared in the current year, if any.

Diluted EPS is computed by adjusting the weighted average number of ordinary shares outstanding to assume conversion of dilutive potential shares. Currently, the Group does not have dilutive potential shares outstanding; thus, dilutive EPS is the same to the basic EPS.

2.22 Events After the End of the Reporting Period

Any post-year-end event that provides additional information about the Group’s consolidated financial position at the end of the reporting period (adjusting event) is reflected in the consolidated financial statements. Post-year-end events that are not adjusting events, if any, are disclosed when material to the consolidated financial statements.

3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of the Group’s consolidated financial statements in accordance with PFRS requires management to make judgments and estimates that affect amounts reported in the consolidated financial statements and related notes. Judgments and estimates 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. Actual results may ultimately differ from these estimates.

3.1 Critical Management Judgments in Applying Accounting Policies

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimation, which have the most significant effect on the amounts recognized in the consolidated financial statements:

(a) Distinction Between Investment Properties and Owner-managed Properties

The Group determines whether a property qualifies as investment property. In making its judgment, the entity considers whether the property generates cash flows largely independently of the other assets held by an entity. Owner-managed properties generate cash flows that are attributable not only to property but also to other assets used in the production or supply process.

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(b) Distinction Between Operating and Finance Leases

The Group has entered into various lease agreements either as a lessor or as lessee. Critical judgment was exercised by management to distinguish each lease agreement as either an operating or finance lease by looking at the transfer or retention of significant risk and rewards of ownership of the properties covered by the agreements. Failure to make the right judgment will result in either overstatement or understatement of assets and liabilities.

Management has determined that the Group’s current lease agreements are operating leases.

Judgment is exercised by management to distinguish between provisions and contingencies. Policies on recognition of provisions and contingencies are discussed in Note 2.13 and disclosures on relevant provisions and contingencies are presented in Note 17.

3.2 Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period:

(a) Estimating Useful Lives of Condominium Units (presented as Investment Property), Property and Equipment and Computer Software

The Group estimates the useful lives of condominium units, property and equipment and computer software based on the period over which the assets are expected to be available for use. The estimated useful lives of these assets are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the assets.

The carrying amounts of computer software (under other non-current asset), property and equipment and investment property are analyzed in Notes 7, 8 and 9, respectively. Based on management’s assessment as at December 31, 2015 and 2014, there are no changes in the estimated useful lives of those assets during those years. Actual results, however, may vary due to changes in estimates brought about by changes in factors mentioned above.

(b) Impairment of Trade and Other Receivables

Adequate allowance is provided for specific and groups of accounts, where an objective evidence of impairment exists. The Group evaluates these accounts based on available facts and circumstances, including, but not limited to, the length of the Group’s relationship with the customers, customers’ credit status, average age of accounts, collection experience and historical loss experience. The methodology and assumptions used in estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience. - 21 -

The carrying value of trade and other receivables and the analysis of allowance for impairment on such financial assets are shown in Note 6.

The Group reviews its deferred tax assets at the end of each reporting period and reduces the carrying amount 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. Based on management’s assessment, the Group has assessed that the deferred tax assets recognized as at December 31, 2015 and 2014 will be fully utilized in the coming years. The carrying amount of deferred tax assets as of those dates is disclosed in Note 13.

(d) Impairment of Non-financial Assets

In assessing impairment, management estimates the recoverable amount of each asset or a cash-generating unit based on expected future cash flows and uses an interest rate to calculate the present value of those cash flows. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate (see Note 2.16). Though management believes that the assumptions used in the estimation of fair values reflected in the consolidated financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse effect on the results of operations.

No impairment losses were recognized on the Group’s non-financial assets in 2015, 2014 and 2013.

(e) Fair Value Measurement of Investment Property

The Group’s condominium units, classified as Investment Property, are carried at cost at the end of the reporting period. The fair value disclosed in Note 9 is determined by the Group using the discounted cash flows valuation technique since the information on current or recent prices of investment property is not available. The Group uses assumptions that are mainly based on market conditions existing at each reporting period, such as: the receipt of contractual rentals; expected future market rentals; void periods; maintenance requirements; and appropriate discount rates. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market. The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

(f) Valuation of Post-employment Defined Benefit Obligation

The determination of the Group’s obligation and cost of post-employment defined benefit is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include, among others, discount rates and salary increase rate. A significant change in any of these actuarial assumptions may generally affect the recognized expense, other comprehensive income or loss and the carrying amount of the post-employment benefit obligation in the next reporting period.

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The amounts of retirement benefit obligation and expense analysis of the movements in the estimated present value of post-employment benefit obligation are presented in Note 12.2.

(g) Business Combination

On initial recognition, the assets and liabilities of the acquired business and the consideration paid for them are included in the consolidated financial statements at their fair values. In measuring fair value, management uses estimates of future cash flows and discount rates. Any subsequent change in these estimates would affect the amount of goodwill, if any, if the change qualifies as a measurement period adjustment. Any other change would be recognized in profit or loss in the subsequent period.

4. SEGMENT REPORTING

4.1 Business Segments

The Group’s operating businesses are organized and managed separately according to the services provided, with each segment represent unit that offers different services and serves different markets. For management purposes, the Group is organized into two major business segments, namely property management and rental and other activities. These are also the basis of the Group in reporting to its strategic steering committee for its strategic decision-making activities.

(a) Property Management – is the operation, control of (usually on behalf of an owner), and oversight of commercial, industrial or residential real estate as used in its most broad terms. Management indicates a need to be cared for, monitored and accountability given for its usable life and condition.

(b) Rental and Others – consists of rental from leasing activity of Parent Company and transportation services of Citylink.

4.2 Segment Assets and Liabilities

Segment assets include all operating assets used by a segment and consist principally of operating cash and cash equivalents, receivables, net of allowances and due from related parties. Segment liabilities include all operating liabilities and consist principally of trade and other payables, due to related parties and retirement benefit obligation.

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The business segment information of the Group as of and for the years ended December 31, 2015, 2014 and 2013 follows:

Property Rental and Management Others Total

2015 Revenues: Management fees P 336,409,706 P - P 336,409,706 Service income - 14,829,452 14,829,452 Rental income - 9,472,933 9,472,933 Finance income 1,844,937 2,197,667 4,042,604 Others 303,070 11,000 314,070 Gross revenues 338,557,713 26,511,052 365,068,765 Expenses 241,586,133 32,736,499 274,322,632 Finance costs 29,278,827 2,250 29,281,077 Profit (loss) before tax 67,692,753 ( 6,227,697) 61,465,056 Tax expense (income) 25,359,528 ( 470,611) 24,888,917

Net profit (loss) P 42,333,225 (P 5,757,086) P 36,576,139

Segment assets P 395,656,575 P 167,409,003 P 563,065,578

Segment liabilities P 275,497,549 P 65,690,320 P 341,187,869

2014 Revenues: Management fees P 279,504,341 P - P 279,504,341 Service income - 14,640,357 14,640,357 Rental income - 8,722,669 8,722,669 Finance income 1,821,216 1,564,291 3,385,507 Others 991,612 19,603 1,011,215 Gross revenues 282,317,169 24,946,920 307,264,089 Expenses 219,932,265 30,132,553 250,064,818 Finance costs 13,047,724 1,650 13,049,374 Profit (loss) before tax 49,337,180 ( 5,187,283) 44,149,897 Tax expense 14,979,257 351,474 15,330,731

Net profit (loss) P 34,357,923 ( P 5,538,757) P 28,819,166

Segment assets P 320,646,174 P 170,763,750 P 491,409,924

Segment liabilities P 281,564,517 P 63,287,981 P 344,852,498

2013 Revenues: Management fees P 232,055,178 P - P 232,055,178 Gain on sale of available-for-sale financial assets - 20,627,768 20,627,768 Service income - 15,556,533 15,556,533 Rental income - 9,364,826 9,364,826 Finance income 1,494,155 817,285 2,311,440 Others 2,960,363 11,809 2,972,172 Gross revenues 236,509,696 46,378,221 282,887,917 Expenses 227,873,005 23,806,874 251,679,879 Finance costs 6,682,086 2,250 6,684,336 Profit before tax 1,954,605 22,569,097 24,523,702 Tax expense 497,194 4,450,484 4,947,678

Net profit P 1,457,411 P 18,118,613 P 19,576,024

Segment assets P 216,469,479 P 184,415,308 P 400,884,787

Segment liabilities P 219,990,676 P 53,338,283 P 273,328,959 - 24 -

5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include the following components as of December 31:

2015 2014

Cash on hand and in banks P 130,157,543 P 76,787,317 Short-term placements 169,739,324 153,875,656

P 299,896,867 P 230,662,973

Cash in banks generally earn interest based on daily bank deposit rates. Short-term placements are made for varying periods from 15 to 90 days and earn effective interest ranging from 1.63% to 2.75% in 2015 and 1.00% to 1.75% in 2014.

6. TRADE AND OTHER RECEIVABLES

The details of this account as of December 31 are as follows:

2015 2014

Current: Trade receivables P 102,879,454 P 98,699,380 Car and housing loans receivables 3,378,865 3,856,383 Advances to employees 410,098 2,817,431 Others 1,266,324 1,434,117 107,934,741 106,807,311 Allowance for impairment - ( 13,636,459 ) 107,934,741 93,170,852

Non-current – Car and housing loans receivables 4,234,183 3,572,845

P 112,168,924 P 96,743,697

Trade receivables are usually due within 30 to 60 days and do not bear any interest. All trade receivables are subject to credit risk exposure. However, the Group does not identify specific concentrations of credit risk with regard to trade and other receivables, as the amounts recognized resemble a large number of receivables from various customers.

Advances to employees pertain to unliquidated advances to employees for business-related expenditures subject to liquidation.

Car and housing loans receivables pertain to interest-bearing loans granted to employees which have interest rates ranging from 6% to 10% per annum and are payable through salary deduction for a period of 10 years from the date the loan was extended. Related interest income from such transactions is shown as part of Finance Income in the consolidated statements of income.

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All of the Group’s trade and other receivables have been reviewed for indicators of impairment. Certain receivables were found to be impaired; hence, adequate amounts of allowance for impairment have been recognized. In 2015, the Group has written off certain receivables with carrying amount of P35.5 million as management deemed that they are no longer collectible. Of the receivables written off in 2015, P13.6 million has previously been provided with allowance. In 2014, additional impairment loss of P7.0 million was recognized. The recognized impairment loss in both years is presented as part of Finance Costs in the consolidated statements of income.

7. OTHER ASSETS

The composition of this account is shown below.

2015 2014

Current: Input VAT - net P 5,317,232 P 5,388,044 Advances to contractors 1,573,092 2,046,118 Prepaid expenses 1,018,815 1,713,728 Deferred input VAT 296,527 90,000 Tax credits 250,872 227,389 Others 159,881 233,485

8,616,419 9,698,764

Non-current: Security deposits 1,751,386 694,666 Computer software - net 508,394 2,045,775 Rental deposits 437,852 403,995 Others 112,890 235,848

2,810,522 3,380,284

P 11,426,941 P 13,079,048

Advances to contractors include downpayments made by FOPMI to the contractors for the completion of the contracted projects on properties being managed by FOPMI.

In 2015, computer software with carrying amount of P0.2 million was reclassified to property and equipment (see Note 8), while certain computer software with carrying amount of P0.3 million was written off. There were no similar transactions in 2014. Amortization of computer software amounted to P1.1 million in 2015, P1.4 million in 2014 and P3.1 million in 2013, while accumulated amortization amounted to P0.2 million and P2.1 million as of December 31, 2015 and 2014, respectively.

Intangible assets are subject to impairment testing whenever there is an indication of impairment. Based on management’s evaluation, no impairment loss on intangible assets needs to be recognized in 2015, 2014 and 2013.

Deferred input VAT represents the unamortized portion of input VAT on capital goods subject to amortization.

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8. PROPERTY AND EQUIPMENT

The gross carrying amounts and accumulated depreciation and amortization of property and equipment at the beginning and end of 2015 and 2014 are shown below.

Office and Transportation Communication Furniture Leasehold Equipment Equipment and Fixtures Improvements Total

December 31, 2015 Cost P 57,127,783 P 18,604,000 P 3,206,787 P 8,657,867 P 87,596,437 Accumulated depreciation and amortization ( 39,217,391 ) ( 17,047,042 ) ( 1,813,195 ) ( 8,653,826 ) ( 66,731,454 )

Net carrying amount P 17,910,392 P 1,556,958 P 1,393,592 P 4,041 P 20,864,983

December 31, 2014 Cost P 57,326,445 P 16,305,646 P 1,375,804 P 8,682,421 P 83,690,316 Accumulated depreciation and amortization ( 37,545,635 ) ( 15,058,481 ) ( 1,244,031 ) ( 6,749,679 ) ( 60,597,826 )

Net carrying amount P 19,780,810 P 1,247,165 P 131,773 P 1,932,742 P 23,092,490

January 1, 2014 Cost P 55,541,635 P 16,480,904 P 1,390,367 P 8,601,240 P 82,014,146 Accumulated depreciation and amortization ( 41,234,701 ) ( 14,182,703 ) ( 1,165,257 ) ( 5,691,313 ) ( 62,273,974 )

Net carrying amount P 14,306,934 P 2,298,201 P 225,110 P 2,909,927 P 19,740,172

A reconciliation of the carrying amounts of property and equipment at the beginning and end of 2015 and 2014 is shown below.

Office and Transportation Communication Furniture Leasehold Equipment Equipment and Fixtures Improvements Total

Balance at January 1, 2015, net of accumulated depreciation and amortization P 19,780,810 P 1,247,165 P 131,773 P 1,932,742 P 23,092,490 Additions 1,162,945 1,557,589 1,806,429 - 4,526,963 Disposals - net ( 75,893 ) - - - ( 75,893 ) Reclassifications - 160,715 24,554 ( 24,554 ) 160,715 Depreciation and amortization charges for the year ( 2,957,470 ) ( 1,408,511 ) ( 569,164 ) ( 1,904,147 ) ( 6,839,292 )

Net carrying amount P 17,910,392 P 1,556,958 P 1,393,592 P 4,041 P 20,864,983

Balance at January 1, 2014, net of accumulated depreciation and amortization P 14,306,934 P 2,298,201 P 225,110 P 2,909,927 P 19,740,172 Additions 14,249,988 421,175 1,156,799 81,181 15,909,143 Disposals - net ( 2,250,000 ) ( 51,197 ) - - ( 2,301,197 ) Depreciation and amortization charges for the year ( 6,526,112 ) ( 1,421,014 ) ( 1,250,136 ) ( 1,058,366 ) ( 10,255,628 )

Net carrying amount P 19,780,810 P 1,247,165 P 131,773 P 1,932,742 P 23,092,490

In 2015 and 2014, the Group sold certain property and equipment with carrying amount of P0.1 million and P2.3 million, respectively, at net book value.

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In 2015, certain intangible asset with carrying amount of P0.2 million was reclassified to property and equipment (see Note 7). There was no similar transaction in 2014.

The cost of the Group’s fully depreciated property and equipment that are still being used in operations amounted to P34.0 million and P25.2 million as of December 31, 2015 and 2014, respectively.

9. INVESTMENT PROPERTY

The gross carrying amounts and accumulated depreciation of investment property at the beginning and end of 2015 and 2014 are shown below.

December 31, December 31, January 1, 2015 2014 2014

Cost P 1,456,194,860 P 1,456,194,860 P 1,456,194,860 Accumulated amortization ( 1,427,688,616 ) ( 1,426,449,214 ) ( 1,425,209,812 )

Net carrying amount P 28,506,244 P 29,745,646 P 30,985,048

A reconciliation of the carrying amounts of investment property at the beginning and end of 2015 and 2014 is shown below.

2015 2014

Balance at January 1, net of accumulated amortization P 29,745,646 P 30,985,048 Depreciation charge for the year ( 1,239,402 ) ( 1,239,402 )

Balance at December 31, net of accumulated amortization P 28,506,244 P 29,745,646

Rental income from condominium units under operating lease agreements not exceeding one year, amounted to P1.2 million in 2015, and P1.3 million both in 2014 and 2013, and is presented as part of Rental Income in the consolidated statements of income. There was no contingent rent recognized as of those dates. The operating lease commitments of the Group as a lessor are fully disclosed in Note 17.2.

There are no direct operating expenses incurred with respect to investment properties except for depreciation charges presented as part of Cost of Services in the consolidated statements of income (see Note 11).

The fair market values of these properties are P29.2 million and P32.8 million as of December 31, 2015, and 2014, respectively. These are determined by calculating the present value of the cash inflows anticipated until the end of the life of the investment properties using a discount rate of 10% both in 2015 and 2014.

Other information about the fair value measurement and disclosures related to the investment properties are presented in Note 20.3.

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10. TRADE AND OTHER PAYABLES

The details of this account are as follows:

Note 2015 2014

Trade payables P 48,458,106 P 26,232,987 Accrued expenses 38,558,778 23,348,873 Non-trade payable 25,503,746 25,503,746 Withholding taxes payable 3,060,618 4,388,681 Customers’ deposits 2,395,796 2,395,796 Output VAT payable 1,755,853 2,125,401 Others 14.4 4,745,841 3,258,796

P 124,478,738 P 87,254,280

Non-trade payable pertains to a liability payable on demand to a third party which was initially payable to Empire East Land Holdings, Inc. (EELHI), a related party under common ownership.

Accrued expenses mainly include utilities, professional fees and other accruals.

Others include advances from customers and unpaid rentals.

11. OPERATING EXPENSES BY NATURE

The details of operating expenses by nature are shown below.

Notes 2015 2014 2013

Salaries and employee benefits 12 P 191,814,660 P 186,187,958 P 204,126,206 Outside services 13,345,039 15,077,636 3,897,682 Service costs 12,659,512 13,205,789 14,213,193 Depreciation and amortization 7, 8, 9 9,157,741 12,966,563 10,093,754 Taxes and licenses 8,761,746 3,045,688 1,750,816 Utilities 7,621,455 4,753,154 7,314,700 Professional fees 3,258,931 2,448,010 1,418,550 Rentals 14.4 7,922,229 3,169,382 1,274,205 Representation and entertainment 3,329,267 1,368,081 239,240 Repairs and maintenance 17.1 3,751,294 4,008,970 3,055,676 Others 12,700,758 3,833,587 4,295,857

P 274,322,632 P 250,064,818 P 251,679,879

Others include office supplies, dues and charges, insurance, trainings and seminars and printing and photocopying.

These expenses are classified in the consolidated statements of income as follows:

2015 2014 2013

Cost of services P 189,415,811 P 183,800,839 P 197,113,307 Operating expenses 84,906,821 66,263,979 54,566,572

P 274,322,632 P 250,064,818 P 251,679,879

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12. EMPLOYEE BENEFITS

12.1 Salaries and Employee Benefits

Expenses recognized as salaries and employee benefits (see Note 11) are presented below.

2015 2014 2013

Salaries and wages P 125,100,878 P 114,860,897 P 110,657,580 Retirement benefits 9,976,673 13,535,447 31,240,154 Other employment benefits 56,737,109 57,791,614 62,228,472

P 191,814,660 P 186,187,958 P 204,126,206

12.2 Post-employment Benefit Obligation

The Parent Company has not yet established a formal post-employment benefit plan and does not accrue post-employment benefits for its two employees due to insignificance of the amount. However, the Parent Company’s subsidiary, FOPMI, maintains an unfunded non-contributory post-employment benefit plan covering all its regular full-time employees.

(a) Explanation of Amounts Presented in the Consolidated Financial Statements

Actuarial valuations are made annually to update the retirement benefit costs and the amount of contributions. All amounts presented below are based on the actuarial valuation report obtained from an independent actuary in 2015 and 2014.

The movements in present value of the retirement benefit obligation recognized are as follows:

2015 2014

Balance at beginning of year P 157,688,710 P 124,037,904 Current service 9,976,673 13,535,447 Interest costs 7,395,600 6,090,261 Remeasurements – Actuarial losses (gains) arising from : Experience adjustments ( 37,479,593 ) 7,147,443 Change in financial assumptions ( 17,869,184 ) 6,877,655 Benefits paid ( 3,128,006 ) -

Balance at end of year P 116,584,200 P 157,688,710

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The components of amounts recognized in profit or loss and in other comprehensive income in respect of the defined benefit post-employment plan are as follows:

2015 2014 2013

Reported in profit or loss: Current service costs P 9,976,673 P 13,535,447 P 31,240,154 Interest costs 7,395,600 6,090,261 6,682,086

P 17,372,273 P 19,625,708 P 37,922,240

Reported in other comprehensive income (loss) – Actuarial gains (losses) arising from: Experience adjustments P 37,479,593 ( P 7,147,443 ) P 50,616,217 Change in financial assumption 17,869,184 ( 6,877,655 ) ( 18,044,738 )

P 55,348,777 ( P 14,025,098 ) P 32,571,479

The amounts of post-employment benefit expense are allocated as follows:

Note 2015 2014 2013

Cost of services P 8,000,524 P 11,099,067 P 25,616,926 Operating expenses 1,976,149 2,436,380 5,623,228

12.1 P 9,976,673 P 13,535,447 P 31,240,154

The interest costs is included in Finance Costs under Cost and Expenses section in the consolidated statements of income.

Amounts recognized in other comprehensive income were included within items that will not be reclassified subsequently to profit or loss.

In determining the amounts of the defined benefit post-employment obligation, the following significant actuarial assumptions were used:

2015 2014

Discount rates 5.40% 4.69% Expected rate of salary increases 10.00% 10.00%

Assumptions regarding future mortality are based on published statistics and mortality tables. The average expected remaining working life of employees retiring at 60 is 22 years for both male and female. These assumptions were developed by management with the assistance of an independent actuary. Discount factors are determined close to the end of each reporting period by reference to the interest rates of a zero coupon government bonds with terms to maturity approximating to the terms of the post-employment obligation. Other assumptions are based on current actuarial benchmarks and management’s historical experience.

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(b) Risks Associated with the Retirement Plan

The plan exposes the Group to actuarial risks such as interest rate risk, longevity risk and salary risk.

(i) Interest Rate Risks

The present value of the defined benefit obligation is calculated using a discount rate determined by reference to market yields of government bonds. Generally, a decrease in the interest rate of a reference government bonds will increase the plan obligation.

(ii) Longevity and Salary Risks

The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of the plan participants both during and after their employment, and to their future salaries. Consequently, increases in the life expectancy and salary of the plan participants will result in an increase in the plan obligation.

The information on the sensitivity analysis for certain significant actuarial assumptions are described below and in the succeeding page.

(i) Sensitivity Analysis

The following table summarizes the effects of changes in the significant actuarial assumptions used in the determination of the defined benefit obligation:

Impact on Post-employment Benefit Obligation Change in Increase in Decrease in Assumption Assumption Assumption

December 31, 2015

Discount rate +/-0.5 % (P 10,938,754 ) P 12,273,691 Salary growth rat e +/-1.0 % 23,968,974 ( 19,641,475 )

December 31, 2014

Discount rate +/-0.5 % (P 15,137,492 ) P 17,012,926 Salary growth rat e +/-1.0 % 32,234,840 ( 26,491,032 )

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. This analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation recognized in the consolidated statements of financial position.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous years. - 32 -

(ii) Funding Arrangements and Expected Contributions

The Group has no formal retirement benefit plan as of December 31, 2015; hence, it does not expect to make any contributions in 2016.

The maturity profile of undiscounted expected benefit payments for the next 10 years as of December 31 are as follows:

2015 2014

More than one year to five years P 13,309,294 P 4,923,645 More than five years to ten years 14,440,224 13,668,228

P 27,749,518 P 18,591,873

The weighted average duration of the defined benefit obligation at the end of the reporting period is 20 years.

13. TAXES

The components of tax expense relating to profit or loss and other comprehensive income follow:

2015 2014 2013

Reported in consolidated statements of income: Current tax expense: Regular corporate income tax (RCIT) at 30% P 25,335,402 P 22,837,172 P 12,696,824 Final tax 646,002 429,894 3,626,194 Minimum corporate income tax (MCIT) at 2% 36,594 38,616 1,332 26,017,998 23,305,682 16,324,350 Deferred tax income relating to origination and reversal of temporary differences ( 1,129,081 ) ( 7,974,951 ) ( 11,376,672 )

P 24,888,917 P 15,330,731 P 4,947,678

Reported in consolidated statements of comprehensive income – Deferred tax income (expense) relating to origination and reversal of temporary differences (P 16,604,633) P 4,207,530 ( P 9,771,444 )

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A reconciliation of tax on pretax profit computed at the applicable statutory rates to tax expense reported in the consolidated statements of income is as follows:

2015 2014 2013

Tax on pretax profit at 30% P 18,439,517 P 13,244,969 P 7,357,111 Adjustment for income subjected to lower income tax rates ( 323,001 ) ( 214,947 ) ( 3,117,651) Tax effects of: Deferred tax assets related to valuation allowance 2,568,137 788,316 708,218 Non-deductible expenses 4,204,264 1,512,393 -

P 24,888,917 P 15,330,731 P 4,947,678

The Parent Company and Citylink did not recognize deferred tax assets on the following valuation allowance based on management’s evaluation that such deferred tax assets may not be recovered in future years:

2015 2014 Amount Tax Effect Amount Tax Effect

Net operating loss carryover (NOLCO) P 14,425,065 P 4,327,520 P 6,841,387 P 2,052,416 MCIT 76,542 76,542 60,605 60,605

P 14,501,607 P 4,404,062 P 6,901,992 P 2,113,021

The details of NOLCO, which can be claimed as deduction by the Parent Company and Citylink from future taxable income within three years from the year such loss was incurred, are shown below.

Year Original Expired Remaining Valid Incurred Amount Amount Balance Until

2015 P 9,560,770 P - P 9,560,770 2018 2014 2,508,008 - 2,508,008 2017 2013 2,356,287 - 2,356,287 2016 2012 1,977,092 1,977,092 -

P 16,402,157 P 1,977,092 P 14,425,065

The breakdown of MCIT which can be claimed as a credit against the Parent Company’s and Citylink’s RCIT is as follows:

Year Original Expired Remaining Valid Incurred Amount Amount Balance Until

2015 P 36,594 P - P 36,594 2018 2014 38,616 - 38,616 2017 2013 1,332 - 1,332 2016 2012 20,657 20,657 -

P 97,199 P 20,657 P 76,542

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The Group is subject to MCIT which is computed at 2% of gross income, as defined under the tax regulations or RCIT, whichever is higher. The Parent Company reported MCIT in 2014 and 2013 while no MCIT or RCIT was reported in 2015 as the Parent Company is in a gross loss position. Citylink reported MCIT in 2015 and 2014, since they are in a taxable loss position in those years, while it reported RCIT in 2013. FOPMI, on the other hand, did not report any MCIT in 2015, 2014 and 2013 as the RCIT is higher than MCIT in such years.

The deferred tax assets recognized by FOPMI and Citylink as of December 31, 2015 and 2014 relate to the following:

2015 2014

Retirement benefit obligation P 34,975,260 P 47,306,613 Allowance for impairment 419,695 4,510,633 NOLCO 946,739 -

P 36,341,694 P 51,817,246

Consolidated Consolidated Profit or Loss Other Comprehensive Income 2015 2014 2013 2015 2014 2013

Retirement benefit obligation P 4,273,280 P 5,887,712 P 11,376,672 (P16,604,633) P 4,207,530 (P 9,771,444 ) Allowance for impairment ( 4,090,938 ) 2,087,239 - - - - NOLCO 946,739 - - - - -

Deferred tax income (expense) P 1,129,081 P 7,974,951 P 11,376,672 (P16,604,633) P 4,207,530 (P 9,771,444 )

In 2015, 2014 and 2013, the Group opted to continue claiming itemized deductions in computing for its income tax due.

14. RELATED PARTY TRANSACTIONS

The Group’s transactions with related parties, which include a stockholder, related parties by common ownership and the Group’s key management, are described below.

2015 2014 Related Party Amount of Outstanding Amount of Outstanding Category Notes Transaction Balance Transaction Balance

Stockholder: Subscription receivable 14.1 P - P 187,500,000 P - P 187,500,000 Obtaining of advances 14.3 - 6,364,603 - 6,364,603

Related Parties Under Common Ownership: Granting of advances 14.2 7,591,101 53,859,925 9,619,110 46,268,824 Obtaining of advances 14.3 374,814 84,712,234 13,994,521 84,337,420 Lease of properties 14.4 1,852,536 883,929 1,342,092 79,645

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14.1 Subscription Receivable

On November 11, 2005, the BOD approved the increase in the Company’s authorized capital stock by P1.0 billion divided into 1,000,000,000 shares at P1.0 par value per share. Out of the total increase, 25% was subscribed by one of the investors with a total value of P250.0 million, of which P62.5 million was paid to the Company representing 25% of the subscription. The subscription receivable, which is unsecured, noninterest-bearing and payable in cash remains outstanding as of December 31, 2015 and 2014.

14.2 Due from Related Parties

The Group grants unsecured and noninterest-bearing cash advances to its related parties for working capital requirements. These advances have no repayment terms and are payable in cash on demand. The details of due from related parties as of December 31, 2015 and 2014 are as follows:

2015 2014

Due from related parties P 53,979,534 P 46,388,433 Allowance for impairment ( 119,609) ( 119,609)

P 53,859,925 P 46,268,824

The movement in due from related parties is as follows:

2015 2014

Balance at beginning of year P 46,268,824 P 36,649,714 Additions 7,591,101 9,619,110

Balance at end of year P 53,859,925 P 46,268,824

Based on management’s assessment, no impairment loss is necessary to be recognized in 2015 and 2014 on these advances.

14.3 Due to Related Parties

The Group obtains unsecured, and noninterest-bearing advances from Megaworld and related parties under common ownership for working capital purposes. These advances have no repayment terms and payable in cash on demand.

2015 2014

Stockholder P 6,364,603 P 6,364,603 Other related parties 84,712,234 84,337,420

P 91,076,837 P 90,702,023

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The movements in due to related parties are as follows:

2015 2014

Balance, beginning of year P 90,702,023 P 77,307,502 Additions 374,814 15,783,923 Repayments - ( 2,389,402 )

Balance, end of year P 91,076,837 P 90,702,023

14.4 Lease of Properties

The subsidiary has existing agreements with related parties under common ownership for the lease of its office facilities for a period of 12 months renewable annually at the subsidiary’s option. Rental charges arising from these transactions are presented as part of Rentals under Operating Expenses account in the consolidated statements of income (see Note 11). The unpaid rentals are shown as part of Others under Trade and Other Payables account in the consolidated statements of financial position (see Note 10).

14.5 Sale of AFS Securities

In June 2013, the Parent Company sold its remaining investment in SPI to Megaworld for a consideration of P117.8 million, the related gain on sale of investment amounting to P20.6 million is presented as Gain on Sale of Available-for-Sale Financial Asset in the 2013 consolidated statement of income.

14.6 Key Management Personnel Compensation

The compensation of Group’s key management personnel in 2015 and 2014 are broken down as follows:

2015 2014

Salaries and short-term benefits P 11,907,869 P 8,751,222 Retirement benefit 1,167,362 619,843

P 13,075,231 P 9,371,065

The Parent Company’s administrative functions are being handled by Megaworld, a significant stockholder, with no cost to the Parent Company.

15. EARNINGS PER SHARE

The basic and diluted EPS is computed as follows:

2015 2014 2013

Net profit P 36,576,139 P 28,819,166 P 19,576,024 Divided by the weighted average number of outstanding shares 2,250,000,000 2,250,000,000 2,250,000,000

Basic and diluted EPS P 0.016 P 0.013 0.009

The Group has no potentially dilutive shares as of the end of each reporting period. - 37 -

16. EQUITY

The details of this account as of December 31 are as follows:

2015 2014 2013

Capital stock P 2,062,500,000 P 2,062,500,000 P 2,062,500,000 Revaluation reserves 12,844,540 ( 25,899,604 ) ( 16,082,036 ) Deficit ( 1,853,466,831 ) ( 1,890,042,970 ) ( 1,918,862,136 )

P 221,877,709 P 146,557,426 P 127,555,828

The details of the Company’s capital stock as of December 31, 2105 and 2014 follows:

Shares Amount

Common stock – P1 par value, Authorized 3.0 billion shares, Issued and outstanding 2,000,000,000 P 2,000,000,000

Subscribed capital stock 250,000,000 250,000,000 Subscription receivable ( 187,500,000 ) 62,500,000

P2,062,500,000

On June 9, 2006, the SEC approved the listing of the Company’s shares totalling P2.0 billion. The shares were initially issued at an offer price of P1.00 per share. There was no additional listing of shares subsequent to initial listing. As of December 31, 2015 and 2014, there are 1,605 and 1,616 holders of the listed shares, respectively, which closed at P0.84 and P1.15 per share, respectively.

On August 14, 2013, the BOD approved a pre-emptive rights offer to holders of its common shares which will entitle them to subscribe to 2.5 new shares for every common share held as of record date, to be set by the Company after approval by the Philippine Stock Exchange (PSE) of the listing of the rights shares.

The rights shares will be offered at the price of one peso per share, equivalent to the par value of the Company’s common shares. 25% of the subscription price shall be payable upon submission of the application for subscription and the balance of 75% shall be payable upon call by the BOD to be made not later than three years from the approval by the stockholders of the increase in capital stock. Subscribers shall have the option of paying 100% of the subscription price upon application for subscription.

Proceeds of the rights offer will be used to fund various investment opportunities. As of December 31, 2015, the said issuance of stock rights has not yet been approved by the PSE.

In September and November 2014, the BOD and the stockholders, respectively, approved an increase in authorized capital stock from 3.0 billion common shares with par value of P1 per share to 23.0 billion common shares with par value of P1 per share. As of December 31, 2015, the application for the increase in authorized capital stock has not been filed with the SEC.

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17. COMMITMENTS AND CONTINGENCIES

17.1 Operating Lease Commitment – Group as a Lessee

The Group is a lessee under several operating leases covering its office facilities. The lease agreements have terms ranging from one month to one year and renewable upon the terms and conditions as may be agreed by the parties. In 2015, the long-term leases were pre-terminated. Further, Citylink is a lessee covering its bus units. The lease agreements have a one year term and may be renewed or extended by mutual agreement of the parties which shall be executed in writing. The future minimum rentals payable within five years under these operating leases as of December 31, 2014 amounted to P2.7 million. Total rental expense in 2015, 2014 and 2013 from these operating leases shown as Rentals under Operating Expenses account in the consolidated statements of income amounted to P7.9 million, P3.2 million and P1.3 million, respectively (see Note 11).

17.2 Operating Lease Commitment – Group as a Lessor

The Group is a lessor under several operating leases covering its condominium units. The lease agreements have terms ranging from one month to one year and renewable upon the terms and conditions as may be agreed by the parties. The future minimum rentals receivable within one year under these operating leases as of December 31, 2015 and 2014 amounted to P1.1 million and P0.4 million, respectively. Total rental income in from these operating leases shown as part of Rental Income account under Revenues section in the consolidated statements of income amounted to P1.2 million in 2015, and P1.3 million both in 2014 and 2013.

Also, the Group is a lessor under various service transport lease agreements covering its transportation equipment. The lease agreements are short-term in nature but can be renewed upon mutual agreements by the parties and; accordingly, no future minimum rental receivables are disclosed. Total rental from these lease agreements amounted to P8.3 million, P7.4 million and P8.1 million in 2015, 2014 and 2013, respectively, and is presented as part of Rental Income account under Revenues section in the consolidated statements of income.

17.3 Others

The Group has other commitments and contingencies that may arise in the normal course of the Group’s operations which have not been reflected in the consolidated financial statements. Management is of the opinion that losses, if any, from these other commitments will not have material effects on the Group’s consolidated financial statements.

18. RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group is exposed to a variety of financial risks in relation to financial instruments. The Group’s risk management is coordinated with the BOD and focuses on actively securing the Group’s short- to medium-term cash flows by minimizing the exposure to financial markets.

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The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The relevant financial risks to which the Group is exposed to are described below and in the succeeding pages.

18.1 Interest Rate Risk

As at December 31, 2015 and 2014, the Group is exposed to changes in market interest rates through its cash and cash equivalents which are subject to variable interest rates (see Note 5).

The following describes the sensitivity of the profit before tax in 2015 and 2014 to a reasonably possible change in interest rates of +/- 0.29% and +/- 0.46%, respectively, with effect from the beginning of the year. This percentage has been determined based on the average market volatility in interest rate in the previous 12 months, estimated at 95% level of confidence.

The sensitivity analysis is based on the Group’s financial instruments held at December 31, 2015 and 2014 with effect estimated from the beginning of the year. All other variables held constant, if interest rate increased by 0.29% and 0.46% in 2015 and 2014, the profit before tax in 2015 and 2014 would have increased by P0.9 million and P1.1 million, respectively. Conversely, if the interest rate decreased by same percentage, profit before tax in 2015 and 2014 would have been lowered by the same amount.

18.2 Credit Risk

Credit risk is the risk that a counterparty may fail to discharge an obligation to the Group. The maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the consolidated statements of financial position or in the detailed analysis provided in the notes to consolidated financial statements. As of December 31, 2015 and 2014, the Group has the following financial assets:

Notes 2015 2014

Cash and cash equivalents 5 P 299,896,867 P 230,662,973 Trade and other receivables – net 6 104,145,778 86,497,038 Due from related parties – net 14.2 53,859,925 46,268,824

P 457,902,570 P 363,428,835

None of the Group’s financial assets are secured by collateral or other credit enhancements except for cash and cash equivalents as described below.

(a) Cash and Cash Equivalents

The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. Cash in bank, which are insured by the Philippine Deposit Insurance Corporation up to a maximum coverage of P500,000 per depositor per banking unit as provided for under Republic Act 9302, Charter of Philippine Deposit Insurance Corporation, are still subject to credit risk.

- 40 -

(b) Trade and Other Receivables

In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Based on historical default rates, the balance of receivables, which are not impaired relates to reputable companies that have a good track record with the Group.

Some of the unimpaired trade receivables are past due as at the end of the reporting period. No other financial assets are past due at the end of the reporting period. Trade receivables that are past due but not impaired as of December 31, 2015 and 2014 are shown below.

2015 2014

Not more than 3 months P 37,559,532 P 21,415,936 More than 3 months but not more than 6 months 16,534,946 8,423,954 More than 6 months but not more than one year 16,058,737 14,207,968 More than one year 17,950,472 34,181,875

P 88,103,687 P 78,229,733

In respect of due from related parties, the Group is not exposed to any significant credit risk exposure because management considers the credit quality of receivables from related parties to be good.

18.3 Liquidity Risk

The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash outflows due in a day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a six months and one year period are identified monthly.

The Group maintains cash to meet its liquidity requirements for up to 60-day periods. Excess cash are invested in time deposits. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities.

As at December 31, 2015, the Group’s consolidated financial liabilities have contractual maturities which are presented below.

Within Within 6 months 6 - 12 months

Trade and other payables P 84,368,274 P 32,898,197 Due to related parties 91,076,837 -

P 175,445,111 P 32,898,197

- 41 -

As at December 31, 2014, the Group consolidated financial liabilities have contractual maturities which are presented below.

Within Within 6 months 6 - 12 months

Trade and other payables P 47,697,796 P 30,646,606 Due to related parties 90,702,023 -

P 138,399,819 P 30,646,606

The Group does not have noncurrent financial liabilities as of December 31, 2015 and 2014.

The above contractual maturities reflect the gross cash flows, which may differ from the carrying values of the liabilities at the end of each reporting periods.

19. CATEGORIES AND OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

19.1 Carrying Amounts and Fair Values by Category

The carrying amounts and fair values of the categories of financial assets and financial liabilities presented in the consolidated statements of financial position are shown below.

2015 2014 Notes Carrying Values Fair Values Carrying Values Fair Values Financial Assets Loan and receivables:

Cash and cash equivalents 5 P 299,896,867 P 299,896,867 P 230,662,973 P 230,662,973 Trade and other receivables - net 6 104,145,778 104,145,778 86,497,038 86,497,038

Due from related parties 14.2 53,859,925 53,859,925 46,268,824 46,268,824

P 457,902,570 P 457,902,570 P 363,428,835 P 363,428,835

Financial liabilities Financial liabilities at amortized cost: Trade and other payables 10 P 117,266,471 P 117,266,471 P 78,344,402 P 78,344,402 Due to related parties 14.3 91,076,837 91,076,837 90,702,023 90,702,023

P 208,343,308 P 208,343,308 P 169,046,425 P 169,046,425

See Notes 2.4 and 2.9 for a description of the accounting policies for each category of financial instruments. A description of the Group’s risk management objectives and policies for financial instruments is provided in Note 18.

- 42 -

19.2 Offsetting of Financial Assets and Financial Liabilities

The Group does not have relevant offsetting arrangements, except as disclosed in Notes 14.2 and 14.3. Currently, all other financial assets and financial liabilities are settled on a gross basis; however, each party to the financial instrument (particularly related parties) will have the option to settle all such amounts on a net basis in the event of default of the other party through approval by both parties’ BOD and shareholders. As such, the Group’s outstanding receivables from and payables to the same related parties can be potentially offset to the extent of their corresponding outstanding balances.

20. FAIR VALUE MEASUREMENT AND DISCLOSURES

20.1 Fair Value Hierarchy

In accordance with PFRS 13, the fair value of financial assets and liabilities and non-financial assets which are measured at fair value on a recurring or non-recurring basis and those assets and liabilities not measured at fair value but for which fair value is disclosed in accordance with other relevant PFRS, are categorized into three levels based on the significance of inputs used to measure the fair value. The fair value hierarchy has the following levels:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity can access at the measurement date;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and,

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.

For purposes of determining the market value at Level 1, a market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

20.2 Financial Instruments Measured at Amortized Cost for which Fair Value is Disclosed

The Group’s financial assets which are not measured at fair value in the consolidated statements of financial position but for which fair value is disclosed include cash and cash equivalents, which are categorized as Level 1, and trade and other receivables and due from related parties, which are categorized as Level 3. Financial liabilities which are not measured at fair value but for which fair value is disclosed pertain to trade and other payables and due to related parties which are categorized under Level 3.

- 43 -

For financial assets with fair values included in Level 1, management considers that the carrying amounts of these financial instruments approximate their fair values due to their short-term duration.

The fair values of the financial assets and financial liabilities included in Level 3, which are not traded in an active market, are determined based on the expected cash flows of the underlying net asset or liability based on the instrument where the significant inputs required to determine the fair value of such instruments are not based on observable market data.

20.3 Fair Value Measurement for Investment Property

Investment property comprising condominium units has fair value amounted to P29.2 million and P32.8 million as of December 31, 2015 and 2014, respectively. The fair value of investment property is determined by calculating the present value of the cash inflows anticipated until the end of the life of the investment property using a discount rate of 10% both in 2015 and 2014.

21. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Group’s capital management objectives are to:

• Ensure the Group’s ability to continue as a going concern; and,

• Provide an adequate return to shareholders in the future.

The Group also monitors capital on the basis of the carrying amount of equity as presented on the consolidated statements of financial position. It sets the amount of capital in proportion to its overall financing structure, i.e., equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES December 31, 2015

Report of Independent Auditors on Supplementary Schedules Filed Separately from the Basic Financial Statements

Schedule Contents Page No.

Schedules Required under Annex 68-E of the Securities Regulation Code Rule 68

A Financial Assets Financial Assets at Fair Value Through Profit or Loss N/A Held-to-maturity Investments N/A Available-for-sale Financial Assets N/A

B Amounts Receivables/Accounts Payables from/to Directors, Officers, Employees, Related Parties, and Principal Stockholders (Other than Related Parties) 1

C Amounts Receivable from Related Parties which are Eliminated during Consolidation of Financial Statements N/A

D Intangible Assets - Other Assets 2

E Long-term Debt N/A

F Indebtedness to Related Parties 3

G Guarantees of Securities of Other Issuers N/A

H Capital Stock 4

Other Required Information

I Reconciliation of Retained Earnings Available for Dividend Declaration 5

J Schedule of Philippine Financial Reporting Standards and Interpretations 6 Adopted by the Securities and Exchange Commission and the Financial Reporting Standards Council as of December 31, 2015

K Map Showing the Relationship Between the Company and its Related Entities 7

L Summary of Application of Initial Public Offering Proceeds N/A

M Schedule of Financial Soundness Indicator 8 SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES SCHEDULE B - Amounts Receivables/Accounts Payable from/to Directors, Officers, Employees, Related Parties, and Principal Stockholders (Other than Related Parties) DECEMBER 31, 2015

Deductions Ending Balance Name and designation of Balance at Amounts Amounts Balance at the Additions Current Not Current debtor beginning of period Collected written off end of period

Officers and Employees P 10,246,659 ( P 2,223,513 ) P 3,788,963 P 4,234,183 P 8,023,146

- 1 - SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES Schedule D - Intangible Assets - Other Assets December 31, 2015

Deduction Other Additions at Charged to cost Charged to Description Beginning balance charges Ending balance cost and expenses other accounts additions (deductions)

Computer software - net P 2,045,775 - ( P 1,079,047 ) ( P 458,334 ) P 508,394

- 2 - SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES Schedule F - Indebtedness to Related Parties December 31, 2015

Balance at the Balance at the end of Name of related party beginning of year year

Empire East Landholdings, Inc. P 34,449,016 P 34,449,016 Golden Hands Multipurpose Corporation 12,252,064 12,627,064 Megaworld Corporation 6,364,603 6,364,603 Eastwood Cyber One Corporation 3,904,593 3,904,593 Megaworld Land, Inc. 4,000,000 4,000,000 Others 29,731,747 29,731,561

Total P 90,702,023 P 91,076,837

- 3 - SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES Schedule H - Capital Stock December 31, 2015

Number of shares held by Number of shares issued Number of shares Number of Directors, and outstanding as reserved for options, Title of Issue shares Related parties officers and Others shown under related warrants, conversion authorized employees balance sheet caption and other rights Common 3,000,000,000 2,250,000,000 - 1,148,281,992 7 1,101,718,001

- 4 - SUNTRUST HOME DEVELOPERS, INC. 6th Floor, The World Centre Building 330 Sen. Gil Puyat Avenue, Makati City

Schedule I - Reconciliation of Retained Earnings Available for Dividend Declaration For the Year Ended December 31, 2015

Deficit, at beginning of year ( P 1,940,079,285 )

Net Income Realized during the Year Net income per audited financial statements ( 6,841,224 )

Deficit, at end of year ( P 1,946,920,509 )

- 5 - SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES

Schedule of Philippine Financial Reporting Standards and Interpretations Adopted by the Securities and Exchange Commission and the Financial Reporting Standards Council as of December 31, 2015

Not Not PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Adopted Applicable

Framework for the Preparation and Presentation of Financial Statements ! Conceptual Framework Phase A: Objectives and Qualitative Characteristics ! Practice Statement Management Commentary !

Philippine Financial Reporting Standards (PFRS)

First-time Adoption of Philippine Financial Reporting Standards ! Amendments to PFRS 1: Additional Exemptions for First-time Adopters !

PFRS 1 Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for ! (Revised) First-time Adopters Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for ! First-time Adopters Amendment to PFRS 1: Government Loans** ! Share-based Payment ! PFRS 2 Amendments to PFRS 2: Vesting Conditions and Cancellations ! Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions ! PFRS 3 Business Combinations ! (Revised) Insurance Contracts ! PFRS 4 Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ! PFRS 5 Non-current Assets Held for Sale and Discontinued Operations ! PFRS 6 Exploration for and Evaluation of Mineral Resources ! Financial Instruments: Disclosures ! Amendments to PFRS 7: Transition ! Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets !

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date ! and Transition PFRS 7 Amendments to PFRS 7: Improving Disclosures about Financial Instruments ! Amendments to PFRS 7: Disclosures – Transfers of Financial Assets !

Amendments to PFRS 7: Disclosures – Offsetting Financial Assets and Financial Liabilities !

Amendment to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures* ! (effective when PFRS 9 is first applied) PFRS 8 Operating Segments ! PFRS 9 Financial Instruments (2014)* (effective January 1, 2018) ! Consolidated Financial Statements ! Amendment to PFRS 10: Transition Guidance ! Amendment to PFRS 10: Investment Entities ! PFRS 10 Amendment to PFRS 10: Investment Entities – Applying the Consolidation Exception* ! (effective January 1, 2016) Amendment to PFRS 10: Sale or Contribution of Assets between an Investor and its ! Associate or Joint Venture* (effective date deferred indefinitely) Joint Arrangements !

PFRS 11 Amendment to PFRS 11: Transition Guidance ! Amendment to PFRS 11: Accounting for Acquisitions of Interests in Joint Operations* ! (effective January 1, 2016)

- 6 - Not Not PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Adopted Applicable

Disclosure of Interests in Other Entities ! Amendment to PFRS 12: Transition Guidance ! PFRS 12 Amendment to PFRS 12: Investment Entities !

Amendment to PFRS 10: Investment Entities – Applying the Consolidation Exception* ! (effective January 1, 2016) PFRS 13 Fair Value Measurement ! PFRS 14 Regulatory Deferral Accounts* (effective January 1, 2016) !

Philippine Accounting Standards (PAS)

Presentation of Financial Statements !

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising ! PAS 1 on Liquidation (Revised) Amendment to PAS 1: Presentation of Items of Other Comprehensive Income ! Amendment to PAS 1: Disclosure Initiative* (effective January 1, 2016) ! PAS 2 Inventories ! PAS 7 Statement of Cash Flows ! PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors ! PAS 10 Events After the Reporting Period ! PAS 11 Construction Contracts ! Income Taxes ! PAS 12 Amendment to PAS 12 - Deferred Tax: Recovery of Underlying Assets ! Property, Plant and Equipment ! ! PAS 16 Amendment to PAS 16: Bearer Plants* (effective January 1, 2016) Amendment to PAS 16: Clarification of Acceptable Methods of Depreciation and ! Amortization* (effective January 1, 2016) PAS 17 Leases ! PAS 18 Revenue ! PAS 19 Employee Benefits ! (Revised) Amendment to PAS 19: Defined Benefit Plans - Employee Contributions ! PAS 20 Accounting for Government Grants and Disclosure of Government Assistance ! The Effects of Changes in Foreign Exchange Rates ! PAS 21 Amendment: Net Investment in a Foreign Operation ! PAS 23 Borrowing Costs ! (Revised) PAS 24 Related Party Disclosures ! (Revised) PAS 26 Accounting and Reporting by Retirement Benefit Plans ! Separate Financial Statements ! PAS 27 Amendment to PAS 27: Investment Entities ! (Revised) Amendment to PAS 27: Equity Method in Separate Financial Statements* ! (effective January 1, 2016) Investments in Associates and Joint Ventures !

PAS 28 Amendment to PFRS 10: Sale or Contribution of Assets between an Investor and its ! (Revised) Associate or Joint Venture* (effective January 1, 2016) Amendment to PAS 28: Investment Entities - Applying the Consolidation Exception* ! (effective January 1, 2016) PAS 29 Financial Reporting in Hyperinflationary Economies ! Financial Instruments: Presentation !

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising ! PAS 32 on Liquidation Not Not PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Adopted Applicable

Amendment to PAS 32: Classification of Rights Issues ! Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities ! PAS 33 Earnings Per Share ! PAS 34 Interim Financial Reporting ! Not Not PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Adopted Applicable

Impairment of Assets ! PAS 36 Amendment to PAS 36: Recoverable Amount Disclosures for Non-financial Assets ! PAS 37 Provisions, Contingent Liabilities and Contingent Assets ! Intangible Assets ! PAS 38 Amendment to PAS 38: Clarification of Acceptable Methods of Depreciation and ! Amortization* (effective January 1, 2016) Financial Instruments: Recognition and Measurement !

Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and ! Financial Liabilities Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup ! Transactions** Amendments to PAS 39: The Fair Value Option ! Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ! PAS 39 Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets !

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets – Effective Date ! and Transition Amendments to Philippine Interpretation IFRIC 9 and PAS 39: Embedded Derivatives** !

Amendment to PAS 39: Eligible Hedged Items** !

Amendment to PAS 39: Novation of Derivatives and Continuation of Hedge Accounting** !

PAS 40 Investment Property ! Agriculture ! PAS 41 Amendment to PAS 41: Bearer Plants* (effective January 1, 2016) !

Philippine Interpretations - International Financial Reporting Interpretations Committee (IFRIC)

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities ! IFRIC 2 Members' Share in Co-operative Entities and Similar Instruments ! IFRIC 4 Determining Whether an Arrangement Contains a Lease ! Rights to Interests Arising from Decommissioning, Restoration and Environmental IFRIC 5 ! Rehabilitation Funds Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic IFRIC 6 ! Equipment Applying the Restatement Approach under PAS 29, Financial Reporting in IFRIC 7 ! Hyperinflationary Economies Reassessment of Embedded Derivatives** ! IFRIC 9 Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives** !

IFRIC 10 Interim Financial Reporting and Impairment ! IFRIC 12 Service Concession Arrangements ! IFRIC 13 Customer Loyalty Programmes !

PAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their ! Interaction IFRIC 14 Amendments to Philippine Interpretations IFRIC - 14, Prepayments of a Minimum Funding ! Requirement and their Interaction IFRIC 16 Hedges of a Net Investment in a Foreign Operation** ! IFRIC 17 Distributions of Non-cash Assets to Owners ! IFRIC 18 Transfers of Assets from Customers ! IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments ! IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine** ! IFRIC 21 Levies ! Not Not PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Adopted Applicable

Philippine Interpretations - Standing Interpretations Committee (SIC)

SIC-7 Introduction of the Euro ! SIC-10 Government Assistance - No Specific Relation to Operating Activities ! SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers ! SIC-15 Operating Leases - Incentives ! SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders ! SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease ! SIC-29 Service Concession Arrangements: Disclosures ! SIC-31 Revenue - Barter Transactions Involving Advertising Services** ! SIC-32 Intangible Assets - Web Site Costs** !

* These standards will be effective for periods subsequent to 2015 and are not early adopted by the Company.

** These standards have been adopted in the preparation of financial statements but the Company has no significant transactions covered in both years presented. ALLIANCE GLOBAL GROUP, INC. Schedule K - Map Showing the Relationship Between and Among the Company and Its Related Parties December 31, 2015

Alliance Global Group, Inc. (Parent Company)

A M Emperador, Inc. and C Travellers International Hotel Golden Arches Development, Inc. Greenspring Investment Holdings Megaworld Corporation and Adams Properties, Inc. Travellers Group, Ltd. Subsidiaries**** B Group, Inc. and Subsidiaries** and Subsidiaries*** Properties, Ltd. Subsidiaries* (1) (1) (1) (1) (1) (1) N (1) D C ****see schedule K-5 *see schedule K-1 **see schedule K-2 ***see schedule K-3

Alliance Global Group Cayman B First Centro, Inc. Alliance Global Brands, Inc. Megaworld Resort Estates, Inc. Westside City Resorts World, Inc. Venezia Universal, Ltd. Islands A (1) (1) (1) (1) (1) (1) C

Oceanic Realty Group Int'l, Inc. Tradewinds Estate, Inc.. Townsquare Development, Inc. Shiok Success International, Ltd. Q (1) (1) (1) Purple Flamingos Amusement (1) and Leisure Corporation (1)

ERA Real Estate Exchange, Inc. Golden Panda-ATI Realty Dew Dreams International, Ltd. (1) Corporation Red Falcon Amusement and (1) (1) Leisure Corporation (1)

A Great American Foods, Inc. McKester Pik-Nik International, R (1) Ltd. E (1)

G McKester America, Inc. (1)

P Newtown Land Partners, Inc. (1) A

Legend

(1) Subsidiary A Megaworld, Corp. F Manila Bayshore Property Holdings, Inc. K Megaworld Global Estates, Inc. P Sonoma Premier Land, Inc. (2) Associate B Adams Properties, Inc. G Westside City Resorts World, Inc. L Megaworld Central Properties, Inc. Q Gilmore Property Marketing Associates, Inc. (3) Jointly Controlled Entity C First Centro, Inc. H Townsquare Development, Inc. M Shiok Success International, Ltd. R Emperador Inc. D Newtown Land Partners, Inc. I Megaworld Resort Estates, Inc. N Dew Dreams International, Ltd. E Travellers International Hotel Group, Inc. J Twin Lakes, Corp. O File-Estate Properties, Inc.

- 7 - ALLIANCE GLOBAL GROUP, INC. Schedule K-1 - Map Showing the Relationship Between and Among the Company and Megaworld Corporation Group December 31, 2015

Alliance Global Group, Inc. (Parent Company)

Megaworld, Corp. (1)

Megaword Bacolod Properties, Mactan Oceanview Properties Global One Hotel Group, Inc. Oceantown Properties, Inc. Arcovia Properties, Inc. Inc. and Holdings, Inc. (1) (1) (1) (1) (1)

Palm Tree Holdings Eastwood Cyber One Megaworld Newport Property Megaworld Cayman Islands, Inc. Megaworld Cebu Properties, Inc. Development Corp. Corporation Holdings, Inc. (1) (1) (2) (1) (1)

Piedmont Property Ventures, Megaworld Globus Asia, Inc. Stonehaven Land, Inc. Streamwood Property, Inc. Inc. Megaworld Daewoo Corporation (1) (1) (1) (1) (1)

Philippine International Richmonde Hotel Group E G I J K L Suntrust Home Developers, Inc. Suntrust Properties, Inc. Properties, Inc. International Ltd. (2) (1) (1) (1)

First Oceanic Property Suntrust Ecotown Developers, Governor's Hills Science School, Sunrays Property Management, Citylink Coach Services, Inc. Management, Inc. Inc. Inc. Inc. (2) (2) (1) (1) (1)

Luxury Global Hotels and Lucky Chinatown Cinemas, Inc. Eastwood Cinema 2000, Inc. Suntrust One Shanata, Inc. Suntrust Two Shanata, Inc. Leisures, Inc. (1) (1) (1) (1) (1)

Global One Integrated Business Empire East Land Holdings, Inc. La Fuerza, Inc. Uptown Cinemas, Inc. McKinley Cinemas, Inc. Services Inc. (1) (1) (1) (1) (1)

Gilmore Property Marketing Valle Verde Properties, Inc. Empire East Communities, Inc. Sonoma Premier Land, Inc. C Associates, Inc. (1) (1) H (1) (1)

Eastwood Property Holdings, Laguna BelAir School, Inc. Sherman Oak Holdings, Inc. Inc. Megaworld Central Properties, (1) (1) (1) A Inc. (1)

Bonifacio West Development Pacific Coast Mega City, Inc. 20th Century Nylon Shirt, Inc. Corporation (3) (1) (2)

Belmont Newport Luxury Manila Bayshore Property Luxury Global Malls, Inc. Megaworld Land, Inc. Prestige Hotels and Resorts, Inc. Hotels, Inc. Holdings, Inc. (1) (1) (1) E (1) (1)

Davao Park District Holdings, Forebestown Commercial Center Citywalk Building Adminstration, Paseo Center Building Uptown Commercial Center Inc. Administration, Inc. Inc. Administration, Inc. Administration, Inc. (1) (1) (1) (1) (1)

Global-Estate Resorts, Inc. and Valley Peaks Property Valley Peaks Property Newtown Commercial Center Ilo-ilo Center Mall Subsidiaries K Management, Inc. Management, Inc. Administration, Inc. Administration, Inc. (1) (1) (1) (1) (1) O Legend

(1) Subsidiary (2) Associate (3) Jointly Controlled Entity A Megaworld, Corp. K Megaworld Global Estates, Inc. B Adams Properties, Inc. L Megaworld Central Properties, Inc. C First Centro, Inc. M Shiok Success International, Ltd. D Newtown Land Partners, Inc. N Dew Dreams International, Ltd. E Travellers International Hotel Group, Inc. O File-Estate Properties, Inc. F Manila Bayshore Property Holdings, Inc. P Sonoma Premier Land, Inc. G Westside City Resorts World, Inc. Q Gilmore Property Marketing Associates, Inc. H Townsquare Development, Inc. R Emperador Inc. I Megaworld Resort Estates, Inc. S Megaworld Land Inc's Subsidiaries J Twin Lakes, Corp. ALLIANCE GLOBAL GROUP, INC. Schedule K-2 - Map Showing the Relationship Between and Among the Company and Travellers Group December 31, 2015

Alliance Global Group, Inc. (Parent Company)

Travellers International Hotel Group, Inc. (1)

Entertainment City Integrated GrandVenture Management Net Deals, Inc. APEC Assets Limited Bright Leisure Management, Inc. Resorts and Leisure, Inc. Services, Inc. (1) (1) (1) (1) (1)

Front Row Theatre Management Grand Integrated Hotels and Majestic Sunrise Leisure and GrandServices, Inc. Newport Star Lifestyle, Inc. Inc. Recreation, Inc. Recreation, Inc. (1) (1) (3) (1) (1)

Royal Bayshore Hotels and Lucky Star Hotels and FHTC Entertainment and Bright Pelican Leisure and Golden Peak Leisure and Amusement, Inc. Recreation, Inc. Production, Inc. Recreation, Inc. Recreation, Inc. (1) (1) (1) (1) (1)

Front Row Theatre Deluxe Hotels and Recreation, Agile Fox Amusement and Aquamarine Delphinium Leisure Brilliant Apex Hotels and Management, Inc Inc. Leisure Corporation Corporation Leisure Corporation (3) (1) (1) (1) (1)

Coral Primrose Leisure and Lucky Panther Amusement and Limimescent Vertex Hotels and Sapphire Carnation Leisure and Megenta Centaurus Amusement Recreation Corporation Recreation Corporation Leisure Corporation Leisure Corporation and Leisure Corporation (1) (1) (1) (1) (1)

Valiant Leopard Amusement and Vermillion Triangulum Scarlet Milky Way Amusement Sparkling Summit Hotels and Westside Theater, Inc. Leisure Corporation Amusement and Leisure and Leisure Corporation Leisure Corporation (1) (1) (1) (1) Corporation (1)

A B C

Westside City Resorts World, Inc. (1)

Purple Flamingos Amusement Red Falcon Amusement and and Leisure Corporation Leisure Corporation (1) (1)

Legend

(1) Subsidiary (2) Associate (3) Jointly Controlled Entity

A Megaworld, Corp. J Twin Lakes, Corp. B Adams Properties, Inc. K Megaworld Global Estates, Inc. C First Centro, Inc. L Megaworld Central Properties, Inc. D Newtown Land Partners, Inc. M Shiok Success International, Ltd. E Travellers International Hotel Group, Inc. N Dew Dreams International, Ltd. F Manila Bayshore Property Holdings, Inc. O File-Estate Properties, Inc. G Westside City Resorts World, Inc. P Sonoma Premier Land, Inc. H Townsquare Development, Inc. Q Gilmore Property Marketing Associates, Inc. I Megaworld Resort Estates, Inc. R Emperador Inc. ALLIANCE GLOBAL GROUP, INC. Schedule K-4 - Map Showing the Relationship Between and Among Megaworld and Global Estate Resorts Inc. Group December 31, 2015

Megaworld Corporation

Global Estate Resorts, Inc. (1)

Fil-Estate Urban Development, Fil-Estate Realty and Sales Novo Sierra Holdings, Corp. Megaworld Global Estates, Inc. Inc. Associates, Inc. Oceanfront Properties, Inc. A (1) (1) (1) (2) (1)

Fil-Estate Network, Inc. File-Estate Sales, Inc. Fil-Estate Realty Corp. Nasugbu Properties, Inc. Twin Lakes Corp. A (2) (2) (2) (2) (1)

Fil-Estate Golf and Global Homes and Southwoods Mall, Inc. Development, Inc. Communities, Inc. (1) (1) (1)

Golforce Inc. Southwoods Ecocentrum Corp. (1) (1)

Philippine Acquatic Leisure Corp. (1)

Fil-Estate Properties, Inc. (1)

Fil-Estate Subic Development Pioneer L-5 Realty Corp. Blu Sky Airways, Inc.. Aklan Holdings, Inc. Prime Airways, Inc. Corp. (1) (1) (1) (1) (1)

Fil-Power Concrete Blocks, Sto. Domingo Place Golden Sun Airways, Inc. Fil-Power Construction Fil-Estate Industrial Park. Corp. Development Corp. (1) Equipment Leasing Corp. (1) (1) (1) (1)

Sherwood Hills Development, La Compaña De Sta. Barbara, MCX Corp. Boracay Newcoast Hotel Group, J Inc. Inc. (1) Inc. (1) (1) (2)

Legend

(1) Subsidiary (2) Associate (3) Jointly Controlled Entity

A Megaworld, Corp. J Twin Lakes, Corp. B Adams Properties, Inc. K Megaworld Global Estates, Inc. C First Centro, Inc. L Megaworld Central Properties, Inc. D Newtown Land Partners, Inc. M Shiok Success International, Ltd. E Travellers International Hotel Group, Inc. N Dew Dreams International, Ltd. F Manila Bayshore Property Holdings, Inc. O File-Estate Properties, Inc. G Westside City Resorts World, Inc. P Sonoma Premier Land, Inc. H Townsquare Development, Inc. Q Gilmore Property Marketing Associates, Inc. I Megaworld Resort Estates, Inc. R Emperador Inc. ALLIANCE GLOBAL GROUP, INC. Schedule K-3 - Map Showing the Relationship Between and Among the Company and Golden Arches Development Corporation Group December 31, 2015

Alliance Global Group, Inc. (Parent Company)

Golden Arches Development, Corp. (1)

First Golden Laoag Foods, Clark Mac Enterprises, Inc. Golden Laoag Foods, Corp. Retiro Golden Foods, Inc. Davao City Food Industries, Inc. Corp. (1) (1) (1) (1) (1)

Golden City Food Industries, Advance Food Concepts McDonald's Puregold Taguig McDonald's Bench Building Golde Arches Realty, Corp. Inc. Manufacturing, Inc. (1) (1) (1) (1) (1)

Onzal Development Corp. Red Asian Food, Inc. (1) (1)

Legend

(1) Subsidiary (2) Associate (3) Jointly Controlled Entity

A Megaworld, Corp. J Twin Lakes, Corp. B Adams Properties, Inc. K Megaworld Global Estates, Inc. C First Centro, Inc. L Megaworld Central Properties, Inc. D Newtown Land Partners, Inc. M Shiok Success International, Ltd. E Travellers International Hotel Group, Inc. N Dew Dreams International, Ltd. F Manila Bayshore Property Holdings, Inc. O File-Estate Properties, Inc. G Westside City Resorts World, Inc. P Sonoma Premier Land, Inc. H Townsquare Development, Inc. Q Gilmore Property Marketing Associates, Inc. I Megaworld Resort Estates, Inc. R Emperador Inc. ALLIANCE GLOBAL GROUP, INC. Schedule K-5 - Map Showing the Relationship Between and Among the Company and Emperador Inc. December 31, 2015

Alliance Global Group, Inc. (Parent Company)

Emperador Inc. (1)

Emperador Distillers, Inc. (1)

Cocos Vodka Distillers The Bar Beverage, Inc. Anglo Watsons Glass Inc. Philippines, Inc. (1) (1) (1)

Emperador International Ltd. (1)

Emperador Asia Ptd Inc. Emperador Europe Sarl Emperador Holdings Limited (1) (1) (1)

Grupo Emperador Spain, SA. (1) Emperador UK Limited (1)

Bodegas Fundador S.L.U. Bodega Las Copas S.L. Bodega San Bruno SL. Whyte and Mackay (1) (3) (1) (1)

Alcoholera de la Mancha Vinicola Vinedos del Rio Tajo SL. Whyte and Mackay Limited SL. (3) (1) (3)

Whyte and Mackay Warehousing Limited (1)

Whyte and Mackay Property Limited (1)

KI Trustees Limited (1)

Legend

(1) Subsidiary (2) Associate (3) Jointly Controlled Entity

A Megaworld, Corp. J Twin Lakes, Corp. B Adams Properties, Inc. K Megaworld Global Estates, Inc. C First Centro, Inc. L Megaworld Central Properties, Inc. D Newtown Land Partners, Inc. M Shiok Success International, Ltd. E Travellers International Hotel Group, Inc. N Dew Dreams International, Ltd. F Manila Bayshore Property Holdings, Inc. O File-Estate Properties, Inc. G Westside City Resorts World, Inc. P Sonoma Premier Land, Inc. H Townsquare Development, Inc. Q Gilmore Property Marketing Associates, Inc. I Megaworld Resort Estates, Inc. R Emperador Inc. SUNTRUST HOME DEVELOPERS, INC. AND SUBSIDIARIES SCHEDULE M - FINANCIAL SOUNDNESS INDICATORS DECEMBER 31, 2015 AND 2014

DECEMBER 31, 2015 DECEMBER 31, 2014 Current ratio 2.09 : 1.00 2.03 : 1.00 Quick ratio 1.34 : 1.00 1.23 : 1.00 Debt-to-equity ratio 1.54 :1.00 2.35 :1.00 Asset-to-equity ratio 2.54 : 1.00 3.35 : 1.00 Return on assets 6.94% 6.46% Return on equity/investment 19.85% 21.03%

LIQUIDITY RATIOS measure the business' ability to pay short-term debt. Current ratio - computed as current assets divided by current liabilities Quick ratio - computed as cash and cash equivalents divided by current liabilities

SOLVENCY RATIOS measure the business' ability to pay all debts, particularly long-term debt. Debt to equity ratio- computed as total liabilities divided by stockholders' equity.

ASSET-TO-EQUITY RATIOS measure financial leverage and long-term solvency. It shows how much of the assets are owned by the Company. It is computed as total assets divided by stockholders' equity.

PROFITABILITY RATIOS Return on assets - net profit divided by average total assets Return on investment - net profit divided by average stockholders' equity

- 8 -

ANNUAL CORPORATE GOVERNANCE REPORT (SEC FORM-ACGR) FOR YEAR 2015

6th Floor, The World Centre, 330 Sen. Gil Puyat Avenue, Makati City 1200, Philippines Tels: (632) 867-8826 to 40 www.suntrusthomedev.com

1 SUN-SEC FORM-ACGR 2015

SECURITIES AND EXCHANGE COMMISSION

SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

1. Report is Filed for the Year 2015 Date of Report

2. SEC Identification Number: 10683 3. BIR Tax Identification Number: 000-141-166-000

4. SUNTRUST HOME DEVELOPERS, INC. Exact name of registrant as specified in its charter

5. Metro Manila, Philippines Province, country or other jurisdiction of incorporation

6. (SEC Use Only) Industry Classification Code:

7. 6/F The World Centre Bldg., #330 Sen. Gil J. Puyat Avenue, Makati City Address of Principal Office

8. (632) 867-8826 to 40 Registrant’s Telephone Number, including area code

2 SUN-SEC FORM-ACGR 2015

TABLE OF CONTENTS A. BOARD MATTERS …..……………………..……………………………………………………… 5 1) BOARD OF DIRECTORS (a) Composition of the Board………………………………………………………………………… 5 (b) Directorship in Other Companies…………………………………………………………….. 6 (c) Shareholding in the Company……………………………………….…………………………. 7 2) CHAIRMAN AND CEO………………………………………………………………………………………………. 7 3) OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS…………………….. 8 4) CHANGES IN THE BOARD OF DIRECTORS…………………………………………………………………. 9 5) ORIENTATION AND EDUCATION PROGRAM……………………………………………………………. 12

B. CODE OF BUSINESS CONDUCT & ETHICS……………………………………………………………………………… 12 1) POLICIES…………………………………………………………………………………………………………………… 12 2) DISSEMINATION OF CODE………………………………………………………………………………………… 14 3) COMPLIANCE WITH CODE………………………………………………………………………………………… 14 4) RELATED PARTY TRANSACTIONS………………………………………………………………………………. 14 (a) Policies and Procedures……………………………………………………………………………. 14 (b) Conflict of Interest……………………………………………………………………………………. 15 5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS………………………………………….. 16 6) ALTERNATIVE DISPUTE RESOLUTION……………………………………………………………………….. 16

C. BOARD MEETINGS & ATTENDANCE……………………………………………………………………………………… 17 1) SCHEDULE OF MEETINGS…………………………………………………………………………………………. 17 2) DETAILS OF ATTENDANCE OF DIRECTORS………………………………………………………………… 17 3) SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS……………………………………………… 17 4) MINIMUM QUORUM REQUIREMENT ………………………………………………………………………. 17 5) ACCESS TO INFORMATION………………………………………………………………………………………. 17 6) EXTERNAL ADVICE……………………………………………………………………………………………………. 19 7) CHANGES IN EXISTING POLICIES………………………………………………………………………………. 19

D. REMUNERATION MATTERS ………………………………………………………………………………………. 19 1) REMUNERATION PROCESS…………………………………………………………………………………….. 19 2) REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS…………………………………… 20 3) AGGREGATE REMUNERATION …………………………………………………………………………………. 20 4) STOCK RIGHTS, OPTIONS AND WARRANTS……………………………………………………………….. 21 5) REMUNERATION OF MANAGEMENT…………………………………………………………………………. 21

E. BOARD COMMITTEES………………………………………………………………………………………………………… 22 1) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES……………………………………. 22 2) COMMITTEE MEMBERS……………………………………………………………………………………………. 23 3) CHANGES IN COMMITTEE MEMBERS……………………………………………………………………….. 25 4) WORK DONE AND ISSUES ADDRESSED……………………………………………………………………… 26 5) COMMITTEE PROGRAM……………………………………………………………………………………………. 26

F. RISK MANAGEMENT SYSTEM……………………………………………………………………………………………… 26 1) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM…………………………… 26 2) RISK POLICY……………………………………………………………………………………………………………… 27 3) CONTROL SYSTEM……………………………………………………………………………………………………. 28

3 SUN-SEC FORM-ACGR 2015

G. INTERNAL AUDIT AND CONTROL………………………………………………………………………………………… 30 1) STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM…………………………… 30 2) INTERNAL AUDIT………………………………………………………………………………………………………..30 (a) Role, Scope and Internal Audit Function…………………………………………………… 30 (b) Appointment/Removal of Internal Auditor………………………………………………… 30 (c) Reporting Relationship with the Audit Committee…………………………………….. 31 (d) Resignation, Re-assignment and Reasons………………………………………………….. 31 (e) Progress against Plans, Issues, Findings and Examination Trends………………………………………………………..….……………………… 31 (f) Audit Control Policies and Procedures………………………………………………………. 32 (g) Mechanisms and Safeguards……………………………………………………………………… 32 (h) Attesting Officers on Company’s Full Compliance with the SEC Code of Corporate Governance……………………………………………………………………………….32

H. ROLE OF STAKEHOLDERS…………………………………………………………………………………………………… 32 1) COMPANY’S POLICY AND ACTIVITIES………………………………………………………………………… 32 2) CORPORATE RESPONSIBILITY REPORT …………………………………………………….……………….. 33 3) PERFORMANCE-ENHANCING MECHANISMS… …………………………………………………………. 33 4) COMPANY PROCEDURE ON COMPLAINTS……………………………………………………….……….. 33

I. DISCLOSURE AND TRANSPARENCY ………………………….……………………………………………………… 34 1) OWNERSHIP STRUCTURE ………………………………………………………………………………………… 34 2) ANNUAL REPORT …………………………………………………………………………………………………. 34 3) EXTERNAL AUDITOR’S FEE ……………………………………………………………………………………. 35 4) MEDIUM OF COMMUNICATION ……………………………………………………………………….. 35 5) DATE OF RELEASE OF AUDITED FINANCIAL REPORT ……………………………………………… 35 6) COMPANY WEBSITE ………………………………………………………………………………………………… 35 7) DISCLOSURE OF RPT ……………………………………………………………………………………………….. 35

J. RIGHTS OF STOCKHOLDERS …………………………………………………………………………………. 36 K. INVESTORS RELATIONS PROGRAM …………………………………………………………………………………. 41 L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES…………………………………………………………….. 41 M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL……………………………………………………… 42 N. INTERNAL BREACHES AND SANCTIONS……………………………………………………………………………… 42

4 SUN-SEC FORM-ACGR 2015

A. BOARD MATTERS

1) Board of Directors

Number of Directors per Articles of Incorporation Seven (7)

Actual number of Directors for the year Seven (7)

(a) Composition of the Board

Complete the table with information on the Board of Directors (updated as of 31 December 2015):

Type If Nominator Date last No. of [Executive nominee, in the last elected (if Elected years (ED), Non- identify election (if Date ID, state the when served Director’s Name Executive the ID, state the first number of (Annual as (NED) or principal relationship elected years /Special director Independent with the served as Meeting) Director (ID)] nominator) ID)

Ferdinand B. Masi ED N/A Megaworld 09 Feb 27 Oct 2015 Annual 15 Corporation 2001 Eugenio B. ID N/A Ferdinand B. 27 Oct 27 Oct 2015 Annual 1 Reducindo Masi, no 2015 relationship Evelyn G. Cacho ED N/A Megaworld 29 Aug 27 Oct 2015 Annual 11 Corporation 2005 Giancarlo C. Ng NED N/A Megaworld 23 Oct 27 Oct 2015 Annual 9 Corporation 2007 Felizardo T. Sapno NED N/A Megaworld 03 July 27 Oct 2015 27 Oct 10 Corporation 2006 2015 Alejo L. Villanueva, ID N/A Giancarlo C. 22 Aug 27 Oct Annual 4 Jr. Ng, no 2012 20151 relationship Elmer P. Pineda NED N/A Megaworld 03 Feb 27 Oct 2015 Annual 4 Corporation 2012

(i) Provide a brief summary of the corporate governance policy that the board of directors has adopted. Please emphasize the policy/ies relative to the treatment of all shareholders, respect for the rights of minority shareholders and of other stakeholders, disclosure duties, and board responsibilities.

The Board believes that corporate governance is a necessary component of sound strategic business management and is committed to create awareness of the principles of good corporate governance within the company. Thus, the Board of Directors has adopted a Manual of Corporate Governance in order to institutionalize the rules and principles of good corporate governance in accordance with the Code of Corporate Governance promulgated by the Securities and Exchange Commission.

The Board respects the rights of stockholders as provided in the Corporation Code, such as right to vote on

1 4 years since 2012 5 SUN-SEC FORM-ACGR 2015 all matters that require their consent or approval, right to inspect, right to information and appraisal right. The Board takes appropriate steps to remove excess or unnecessary costs and other administrative impediments to allow all stockholders meaningful participation in meetings. It likewise ensures that accurate and timely information is made available to stockholders to enable them to make a sound judgment on all matters for their consideration and approval.

(ii) How often does the Board review and approve the vision and mission?

Annually

(b) Directorship in Other Companies

(i) Directorship in the Company’s Group2

Identify, as and if applicable, the members of the company’s Board of Directors who hold the office of director in other companies within its Group:

Type of Directorship Corporate Name of the (Executive, Non-Executive, Director’s Name Group Company Independent). Indicate if director is also the Chairman. None

(ii) Directorship in Other Listed Companies

Identify, as and if applicable, the members of the company’s Board of Directors who are also directors of publicly-listed companies outside of its Group:

Type of Directorship (Executive, Non-Executive, Director’s Name Name of Listed Company Independent). Indicate if director is also the Chairman. Alejo L. Villanueva, Jr. Alliance Global Group, Inc. Independent Empire East Land Holdings, Inc. Independent Emperador Inc. Independent Evelyn G. Cacho Empire East Land Holdings, Inc Executive

(iii) Relationship within the Company and its Group. None

Provide details, as and if applicable of any relation among the members of the Board of Directors, which links them to significant shareholders in the company and/or in its group:

Name of the Description of the Director’s Name Significant Shareholder relationship N/A

(iv) Has the company set a limit on the number of board seats in other companies (publicly listed, ordinary and companies with secondary license) that an individual director or CEO may hold simultaneously? In particular, is the limit of five board seats in other publicly listed companies imposed and observed? If yes, briefly describe other guidelines:

2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the company. 6 SUN-SEC FORM-ACGR 2015

Maximum Number of Guidelines Directorships in other companies Executive Director N/A Non-Executive Director N/A CEO N/A

The Company has not set a limit on the number of board seats that its Executive Directors, Non-Executive Directors and CEO may hold in other companies. The Company allows its directors to serve in its subsidiaries and affiliates with oversight functions. For Independent Directors, the Company observes the limitation set forth in SEC Circular Memorandum No. 9 Series of 2011 and has not elected any Independent Director with more than five directorships within the Group. Further, directorship outside of the Group is discouraged.

Complete the following table on the members of the company’s Board of Directors who directly and indirectly own shares in the company:

Number of Number of Direct Name of Director Indirect shares / Through % of Capital Stock shares (name of record owner) Ferdinand B. Masi 1 0 0.00% Eugenio B. Reducindo 1 0 0.00% Evelyn G. Cacho 1 0 0.00% Giancarlo C. Ng 1 0 0.00% Felizardo T. Sapno 1 0 0.00% Alejo L. Villanueva, Jr. 1 0 0.00% Elmer P. Pineda 1 0 0.00%

2) Chairman and CEO

(a) Do different persons assume the role of Chairman of the Board of Directors and CEO? If no, describe the checks and balances laid down to ensure that the Board gets the benefit of independent views.

Yes (v) No X

Identify the Chair and CEO:

Chairman of the Board Ferdinand B. Masi CEO/President Ferdinand B. Masi

Although the positions of Chairman of the Board and CEO are held by one individual, the duties and responsibilities of each are clearly defined and delineated under the By-Laws and Manual of Corporate Governance. The President also participates in the decision-making process and can express his views to the Chairman/CEO and the Board.

(b) Roles, Accountabilities and Deliverables

Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO.

7 SUN-SEC FORM-ACGR 2015 Chairman Chief Executive Officer Ensure that the meetings of the Board are held in accordance with the by-laws or as the Chair may deem necessary. General supervision of the business

affairs and property of the Company Supervise the preparation of the agenda

of the meeting in coordination with the Perform such duties as may be Corporate Secretary, taking into Role assigned to him by the Board consideration the suggestions of the

CEO, Management and the directors.

Maintain qualitative and timely lines of

the communication and information between the Board and Management.

Accountabilities To the Board and Management To the stockholders and the Board Agenda of the meetings

Report of the yearly operations of Minutes of Stockholders’ Meetings the Company and the state of its Deliverables affairs to the Board and the Various regulatory submissions that may stockholders require the signature of the Chairman of the Board of Directors.

Explain how the board of directors plans for the succession of the CEO/Managing Director/President and the top key management positions?

The Board plans to put in place a succession planning program for key management positions.

3) Other Executive, Non-Executive and Independent Directors

Does the company have a policy of ensuring diversity of experience and background of directors in the board? Please explain.

The membership of the Board is a combination of executive and non-executive directors (which includes independent directors) in order that no director or small group of directors can dominate the decision- making process. The non-executive directors should possess such qualifications and stature that would enable them to effectively participate in the deliberations of the Board. Currently, the Board has a mix of directors with expertise in the fields of real estate development, finance and administration, marketing and sales, manufacturing, property management, and financing.

Does it ensure that at least one non-executive director has an experience in the sector or industry the company belongs to? Please explain.

The non-executive directors possess such qualifications and stature that would enable them to effectively participate in the deliberations of the Board. Additional qualifications include a practical understanding of the business of the Company and membership in a relevant industry, business or professional organization.

Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors:

8 SUN-SEC FORM-ACGR 2015 Independent Executive Non-Executive Director Involved in operational and day-to-day Oversees the Acts as check and affairs of the Company performance of balance within the Role Executive directors Board. Acts as chairman of the various committees To the Board and management to ensure To the stockholders To the stockholders Accountabilities that lines of communication are open

Reports to the Board on operational matters Review and evaluate As members of the of the Company executive directors’ Audit Committee, recommendations performs oversight functions over the financial reporting Deliverables process, risk management and internal control and internal audit.

Provide the company’s definition of "independence" and describe the company’s compliance to the definition.

“Independence”, as a qualification of an independent director, means the freedom to exercise judgment in the carrying out of responsibilities as a director from any interference by any other persons or other considerations other than the duties enjoined on directors by law and the By-laws, as well as possession of the qualifications and none of the disqualifications provided by law.

The Company’s Manual of Corporate Governance provides that the Board should be composed of at least two (2) independent directors and the Company has complied with this.

Does the company have a term limit of five consecutive years for independent directors? If after two years, the company wishes to bring back an independent director who had served for five years, does it limit the term for no more than four additional years? Please explain.

The Company complies with the provisions of SEC Memorandum Circular No. 9, Series of 2011 on term limits for independent directors. No independent director has violated the required term limit under this circular.

4) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors)

(a) Resignation/Death/Removal

Indicate any changes in the composition of the Board of Directors that happened during the period:

Name Position Date of Cessation Reason None

(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension

Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement and suspension of the members of the Board of Directors. Provide details of the processes adopted (including the frequency of election) and the criteria employed in each procedure:

9 SUN-SEC FORM-ACGR 2015 Procedure Process Adopted Criteria a. Selection/Appointment Nomination is conducted by the Nomination Committee Qualifications are provided for in (i) Executive Directors prior to a stockholders’ the Company’s By-laws and meeting pursuant to the Manual of Corporate Governance. provisions of SRC Rule 38. (ii) Non-Executive Same as above Same as above Directors (iii) Independent Directors Same as above Same as above and SRC Rule 38. b. Re-appointment Re-appointment is allowed. The same criteria are imposed for The procedure is the same appointment and re-appointment. (i) Executive Directors as the Qualifications are provided for in selection/appointment the Company’s By-Laws and process above. Manual of Corporate Governance. Re-appointment is allowed. The procedure is the same (ii) Non-Executive as the Same as above Directors selection/appointment process above. Re-appointment is allowed as long as the term limit for Independent Directors in SEC Memorandum Circular No. 9, (iii) Independent Directors Series of 2011 has not been Same as above and SRC Rule 38. breached. The procedure is the same as the selection/appointment process above. c. Permanent Disqualification The Company follows the The Grounds are provided for in (i) Executive Directors procedure provided for in the Company’s Manual of the Corporation Code. Corporate Governance (ii) Non-Executive Same as above Same as above Directors Same as above. The Company also follows the (iii) Independent Directors Same as above and SRC Rule 38. procedure provided in SRC Rule 38. d. Temporary Disqualification A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take the appropriate action to The Grounds are provided for in (i) Executive Directors remedy or correct the the Company’s Manual of disqualification. If he fails or Corporate Governance. refuses to do so for unjustified reasons, the disqualification shall become permanent. 10 SUN-SEC FORM-ACGR 2015 (ii) Non-Executive Same as above. Same as above Directors (iii) Independent Directors Same as above. Same as above e. Removal Removal may be due to death, voluntary resignation and/or The Company follows the permanent disqualification from (i) Executive Directors procedure provided for in office consistent with the grounds the Corporation Code. provided for in the Company’s Manual of Corporate Governance. (ii) Non-Executive Same as above Same as above Directors Same as above. The Company also follows the (iii) Independent Directors Same as above and SRC Rule 38. procedure provided in SRC Rule 38. f. Re-instatement A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take the Satisfactory corrective action appropriate action to performed by the director within (i) Executive Directors remedy or correct the the 60 day period, addressing the disqualification. If he fails or specific cause of action. refuses to do so for unjustified reasons, the disqualification shall become permanent. (ii) Non-Executive Same as above. Same as above Directors (iii) Independent Directors Same as above. Same as above g. Suspension The Company follows the The Grounds are provided for in (i) Executive Directors procedure provided for in the Company’s Manual of the Corporation Code Corporate Governance. (ii) Non-Executive Same as above Same as above Directors (iii) Independent Directors Same as above Same as above

(c) Voting Result of the last Annual General Meeting Name of Director Votes Received Ferdinand B. Masi 1,383,503,108 shares Eugenio B. Reducindo 1,383,503,108 shares Evelyn G. Cacho 1,383,503,108 shares Giancarlo C. Ng 1,383,503,108 shares FeLlizardo T. Sapno 1,383,503,108 shares Alejo L. Villanueva, Jr. 1,383,503,108 shares Elmer P. Pineda 1,383,503,108 shares

11 SUN-SEC FORM-ACGR 2015 5) Orientation and Education Program

(a) Disclose details of the company’s orientation program for new directors, if any.

The Company has no specific training program for new directors. New directors are given an orientation on the business of the Company. They are also given access to the Company's directors and officers to address any questions or clarifications that new directors may raise.

(b) State any in-house training and external courses attended by Directors and Senior Management3 for the past three (3) years.

In compliance with the SEC Memorandum Circular No. 20, Series of 2013, the Company’s Directors and Senior Management attended an in-house seminar(s) on Corporate Governance on November 25, December 8, and 11 2015

(c) Continuing education programs for directors: programs and seminars and roundtables attended during the year. Name of Name of Training Institution Date of Training Program Director/Officer Ferdinand B. Masi 11 December 2015 Amelia A. Austria 11 December 2015 Evelyn G. Cacho 11 December 2015 Giancarlo C. Ng 11 December 2015 Risks, Opportunities, Assessment and Management Felizardo T. Sapno 11 December 2015 Corporate Governance (ROAM), Inc. Alejo L. Villanueva, Jr. 11 December 2015

Elmer P. Pineda 11 December 2015 Rolando D. Siatela 25 November 2015 Ma. Cristina D. Gonzales 8 December 2015

B. CODE OF BUSINESS CONDUCT & ETHICS

1) Discuss briefly the company’s policies on the following business conduct or ethics affecting directors, senior management and employees (for management and employees applicable to subsidiary in the group):

Business Conduct & Directors Senior Management Employees Ethics A director should not use An employee should An employee should his position to profit or disclose any relationship or disclose any relationship or gain some benefit or association to the association to the proposed advantage for himself proposed supplier or supplier or contractor or its and/or his related contractor or its authorized authorized representative interest. If an actual or representative to avoid to avoid possible conflict of (a) Conflict of potential conflict of possible conflict of interest. Interest interest may arise on the interest. part of a director, he should fully and immediately disclose it and should not participate in the

3 Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the company.

12 SUN-SEC FORM-ACGR 2015 decision-making process. A director should not use They are prohibited from They are prohibited from his position to profit or using their authority or using their authority or gain some benefit or position to favor a supplier position to favor a supplier advantage for himself or contractor in or contractor in and/or his related anticipation of a personal anticipation of a personal interest. If an actual or gain or benefit. gain or benefit. (b) Conduct of potential conflict of Business and interest may arise on the Fair Dealings part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. Must not solicit or Must not solicit or accept Must not solicit or accept accept any gift, any gift, regardless of any gift, regardless of regardless of value, from value, from any supplier, value, from any supplier, any supplier, contractor contractor or business contractor or business (c) Receipt of gifts or business partner, partner, except gifts of partner, except gifts of from third except gifts of minimal minimal value. If it is not minimal value. If it is not parties value. If it is not practical practical to return, such practical to return, such gift to return, such gift must gift must be shared with must be shared with other be shared with other other employees. employees. employees. Ensure through their Ensure the Company’s Ensure the Company’s functions, the faithful compliance with all faithful compliance with all (d) Compliance Company’s faithful applicable laws, applicable laws, regulations with Laws & compliance with all regulations and best and best business Regulations applicable laws, business practices. practices. regulations and best business practices. Keep secure and Keep secure and Keep secure and confidential trade confidential trade secrets confidential trade secrets secrets and all non- and all non-public and all non-public (e) Respect for public information information acquired or information acquired or Trade acquired or learned by learned by reason of learned by reason of Secrets/Use of reason of position. position. Should not reveal position. Should not reveal Non-public Should not reveal confidential information to confidential information to Information confidential information unauthorized persons unauthorized persons to unauthorized persons without authority of the without authority of the without authority of the Board. Board. Board. Observe discretion in Observe discretion in use Observe discretion in use of use of funds and assets. of funds and assets. Be funds and assets. Be (f) Use of Be mindful of eliminating mindful of eliminating mindful of eliminating Company unnecessary unnecessary consumption unnecessary consumption Funds, Assets consumption and and wasteful practices. and wasteful practices. and wasteful practices. Confidential information Confidential information Information Confidential information must not be disclosed must not be disclosed must not be disclosed to without the proper without the proper unauthorized persons. authority. authority.

13 SUN-SEC FORM-ACGR 2015 Ensure the Company’s The Company seeks to The Company seeks to faithful compliance with reasonably assist its and its reasonably assist its and its (g) Employment employment and labor subsidiaries and affiliates’ subsidiaries and affiliates’ &Labor Laws & law & policies. employee and his family in employee and his family in Policies providing for their providing for their economic security. economic security.

The Company strictly Rules and regulations shall Rules and regulations shall observes the provisions be enforced fairly and be enforced fairly and on disqualification and consistently by the consistently by the temporary respective subsidiaries and respective subsidiaries and disqualification of affiliates. Violations shall affiliates. Violations shall directors as provided in result in disciplinary result in disciplinary actions (h) Disciplinary the Company’s Manual actions depending on depending on frequency, action of Corporate frequency, seriousness and seriousness and Governance. circumstances of the circumstances of the offense. The employee offense. The employee shall be given the shall be given the opportunity to present his opportunity to present his side. side. Reports of wrongdoing For each subsidiary or For each subsidiary or may be made directly to affiliate, reports of affiliate, reports of the Chairman for proper wrongdoing may be made wrongdoing may be made disposition to ensure directly to the Chairman or directly to the Chairman or confidentiality of President for proper President for proper (i) Whistle Blower information and disposition to ensure disposition to ensure protection of the confidentiality of confidentiality of identity of the whistle information and protection information and protection blower. of the identity of the of the identity of the whistle blower. whistle blower. Amicable settlement Amicable settlement Amicable settlement (j) Conflict through alternative through alternative through alternative dispute Resolution dispute resolution dispute resolution resolution

2) Has the code of ethics or conduct been disseminated to all directors, senior management and employees?

YES.

3) Discuss how the company implements and monitors compliance with the code of ethics or conduct.

The Company has a compliance officer who monitors compliance of ethics or conduct.

Directors submit annually a list of business and professional affiliating through which provide conflicts-of- interest may be determined. Relative to senior management and employees, the Human Resources Department of each subsidiary and affiliate implements and monitors compliance with the code of ethics or conduct.

4) Related Party Transactions

(a) Policies and Procedures

Describe the company’s policies and procedures for the review, approval or ratification, monitoring and recording of related party transactions between and among the company and its parent, joint ventures, subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships of members of the Board. 14 SUN-SEC FORM-ACGR 2015

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. These parties include: (a) individuals owning, directly or indirectly through one or more intermediaries, control or are controlled by, or under common control with the Group; (b) associates; and (c) individuals owning directly or indirectly, an interest in the voting power of the Group that gives them significant influence over the Group and close members of the family of any such individual (2.20, Financial Statements and Independent Auditors’ Reports).

Except for the material related party transactions described in the notes to the financial statements of the Company for the years 2014, 2013 and 2012, there has been no material transaction during the last two years, nor is there any material transaction currently proposed, to which the Company was or is to be a party, in which any director or executive officer, any nominee for election as director, stockholder of more than ten percent.

Related Party Transactions Policies and Procedures (1) Parent Company (2) Joint Ventures (3) Subsidiaries Ensure that the transactions are entered on terms comparable to those available from unrelated third parties. (4) Entities Under Common Control (5) Substantial Stockholders (6) Officers including spouse/children/siblings/parents Ensure that the transactions are entered on terms comparable (7) Directors including to those available from unrelated third parties. Disclosure of spouse/children/siblings/parents relationship or association is required to be made before (8) Interlocking director relationship entering into transaction. No participation in the approval of of Board of Directors the transaction.

(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders.

None.

Identify any actual or probable conflict of interest to which directors/officers/5% or more shareholders may be involved.

Details of Conflict

of Interest (Actual or Probable) Name of Director/s N/A Name of Officer/s N/A Name of Significant Shareholders N/A

(ii) Mechanism

Describe the mechanism laid down to detect, determine and resolve any possible conflict of interest between the company and/or its group and their directors, officers and significant shareholders.

Directors/Officers/Significant Shareholders Company Independent Directors are required to submit a list of Group positions/other directorships to determine any conflict. 15 SUN-SEC FORM-ACGR 2015 Directors, officers and employees must voluntarily disclose any conflict prior to occurrence of the same.

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family,4 commercial, contractual or business nature that exists between the holders of significant equity (5% or more), to the extent that they are known to the company:

Names of Related Brief Description of the Type of Relationship Significant Shareholders Relationship NONE

There has been no material transaction, nor is there any material transaction currently proposed, to which the Company was or is to be a party, in which any member of the immediate family (including spouse, parents, children, sibling and in-laws) of any such director or officer or stockholder of more than ten (10) percent of the Company’s voting shares had or is to have a direct and indirect material interest.

(b) Indicate, if applicable, any relation of a commercial, contractual or business nature that exists between the holders of significant equity (5% or more) and the company:

Names of Related Type of Relationship Brief Description Significant Shareholders NONE

The Company has no knowledge of persons holding more than five (5) percent of its voting securities under a voting trust or similar agreement.

(c) Indicate any shareholder agreements that may impact on the control, ownership and strategic direction of the company:

% of Capital Stock affected Brief Description of the Name of Shareholders (Parties) Transaction NONE

The Company has no knowledge of any arrangements among stockholders that may result in a change in control of the Company.

6) Alternative Dispute Resolution

Describe the alternative dispute resolution system adopted by the company for the last three (3) years in amicably settling conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including regulatory authorities.

Alternative Dispute Resolution System Pursue settlement outside court and Corporation & Stockholders compromise Pursue settlement outside court and Corporation & Third Parties compromise Pursue settlement outside court and Corporation & Regulatory Authorities compromise

4Family relationship up to the fourth civil degree either by consanguinity or affinity. 16 SUN-SEC FORM-ACGR 2015 C. BOARD MEETINGS & ATTENDANCE

1) Are Board of Directors’ meetings scheduled before or at the beginning of the year?

Meetings of the Board are held at such time and place as the Board may prescribe, but the Board endeavors to meet monthly, or if not possible, quarterly.

2) Attendance of Directors (updated as of 31 December 2015)

No. of No. of Date of Meetings Board Name Meetings % Election Held during Attended the year Chairman Ferdinand B. Masi 27 Oct 2015 4 4 100% Member Evelyn G. Cacho 27 Oct 2015 4 3 75% Member Giancarlo C. Ng 27 Oct 2015 4 3 75% Member Felizardo T. Sapno 27 Oct 2015 4 4 100% Member Elmer P. Pineda 27 Oct 2015 4 4 100% Independent Eugenio B. Reducindo 27 Oct 2015 4 N/A N/A Independent Alejo L. Villanueva, Jr. 27 Oct 2015 4 4 100%

3) Do non-executive directors have a separate meeting during the year without the presence of any executive? If yes, how many times?

NO.

4) Is the minimum quorum requirement for Board decisions set at two-thirds of board members? Please explain.

The Company follows the quorum requirement in the Corporation Code. Thus, when majority of the directors are present, the Board proceeds with transaction of business.

5) Access to Information

(a) How many days in advance are board papers5 for board of directors meetings provided to the board?

These are distributed together with the notices in accordance with the Company’s By-laws.

(b) Do board members have independent access to Management and the Corporate Secretary?

YES.

(c) State the policy of the role of the company secretary. Does such role include assisting the Chairman in preparing the board agenda, facilitating training of directors, keeping directors updated regarding any relevant statutory and regulatory changes, etc?

Art. III, Sec. 5 of the By-Laws states that the Corporate Secretary “shall maintain and be the custodian of the corporate books and records. He shall be the recorder of the formal actions and transactions of the Corporation. He shall have the following specific powers and duties:

a) To record or see to the proper recording of the minutes and transactions of all meetings of the Board of Directors, the Executive Committee, the stockholders, and the special and standing committees of the Board, and to maintain minute books of such meetings in the

5 Board papers consist of complete and adequate information about the matters to be taken in the board meeting. Information includes the background or explanation on matters brought before the Board, disclosures, budgets, forecasts and internal financial documents. 17 SUN-SEC FORM-ACGR 2015 form and manner required by law.

b) To keep or cause to be kept records showing the details required by law with respect to the stock certificates of the Corporation, including ledgers and transfer books showing all shares of the Corporation issued and transferred, and the date of such issuance and transfer.

c) To keep the corporate seal and affix it to all papers and documents requiring a seal, and to attest by his signature to all corporate documents requiring the same.

d) To give, or cause to be given, all notices required by law or by these By-Laws, as well as notices required of meetings of the Directors and of the stockholders.

e) To certify to such corporate acts, countersign corporate documents o certificates, and make reports or statements as may be required of him by law or regulation.

f) To determine during meetings the number of shares of stock outstanding and entitled to vote, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and to receive votes, ballots or consents, hear and determine all contests, challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results and to do such acts as are proper to conduct the election or vote. The Secretary may assign the exercise or performance of any or all of the foregoing duties, powers, and functions to any other person or persons, subject always to his supervision and control. The decision of the Secretary on the validity and effect of the proxies shall be final and binding until set aside by a court of competent jurisdiction.

g) To perform such other duties as are incident to his office or as may be assigned to him by the Board of Directors.

(d) Is the company secretary trained in legal, accountancy or company secretarial practices? Please explain should the answer be in the negative.

YES.

(e) Committee Procedures

Disclose whether there is a procedure that Directors can avail of to enable them to get information necessary to be able to prepare in advance for the meetings of different committees:

Yes X No

Committee Details of the procedures Executive N/A Audit Upon request made thru the Corporate Secretary, Directors shall Nomination be provided with complete, adequate and timely information Remuneration about the matters to be taken up in their meetings. The Committee is afforded full access to management, personnel and records in the performance of its duties and responsibilities. Others (specify) None

6) External Advice

18 SUN-SEC FORM-ACGR 2015 Indicate whether or not a procedure exists whereby directors can receive external advice and, if so, provide details:

Procedures Details Obtain external legal counsel or independent The committee members may obtain external professional advisors as may be needed in the legal counsel or independent professional performance of its functions advisors as may be needed in the performance of its functions

7) Change/s in existing policies

Indicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) on existing policies that may have an effect on the business of the company and the reason/s for the change:

Existing Policies Changes Reason N/A

D. REMUNERATION MATTERS

1) Remuneration Process

Disclose the process used for determining the remuneration of the CEO and the four (4) most highly compensated management officers:

No compensation was received by the principal executive officers from the Company. There are no arrangements in force pursuant to which the officers or directors of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided by such officer or director. There are no standard arrangements pursuant to which directors or officers of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided as a director or officer, including services for committee participation or special assignments.

Top 4 Highest Paid Management Process CEO Officers (1) Fixed remuneration N/A N/A (2) Variable remuneration N/A N/A (3) Per diem allowance N/A N/A (4) Bonus N/A N/A (5) Stock Options and other financial N/A N/A instruments (6) Others (specify) N/A N/A

2) Remuneration Policy and Structure for Executive and Non-Executive Directors

Disclose the company’s policy on remuneration and the structure of its compensation package. Explain how the compensation of Executive and Non-Executive Directors is calculated.

There are no arrangements in force pursuant to which the directors of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided by such director. There are no standard arrangements pursuant to which directors of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided as a director, including services for committee participation or special 19 SUN-SEC FORM-ACGR 2015 assignments. There are no per diems granted to directors for attendance at meetings.

Structure of Remuneration How Compensation is Compensation Policy Calculated Packages N/A N/A N/A

N/A N/A N/A

Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits- in-kind and other emoluments) of board of directors? Provide details for the last three (3) years.

Date of Remuneration Scheme Stockholders’ Approval N/A N/A

N/A N/A

3) Aggregate Remuneration

Complete the following table on the aggregate remuneration accrued during the most recent year:

Non-Executive Directors Executive Independent Remuneration Item (other than independent Directors Directors directors) (a) Fixed Remuneration N/A N/A N/A

(b) Variable Remuneration N/A N/A N/A

(d) Bonuses N/A N/A N/A (e) Stock Options and/or other financial N/A N/A N/A instruments (f) Others (Specify) N/A N/A N/A

Total N/A N/A N/A

Non-Executive Director Executive Independent Other Benefits (other than independent Directors Directors directors) 1) Advances N/A N/A N/A 2) Credit granted N/A N/A N/A 3) Pension Plan/s N/A N/A N/A Contributions (d) Pension Plans, N/A N/A N/A Obligations incurred (e) Life Insurance Premium N/A N/A N/A 20 SUN-SEC FORM-ACGR 2015 (f) Hospitalization Plan N/A N/A N/A (g) Car Plan N/A N/A N/A (h) Others (Specify) N/A N/A N/A

Total N/A N/A N/A

4) Stock Rights, Options and Warrants

N/A

(a) Board of Directors

Complete the following table, on the members of the company’s Board of Directors who own or are entitled to stock rights, options or warrants over the company’s shares:

Number of Number of Direct Number of Indirect Total % from Director’s Name Option/Rights/ Equivalent Option/Rights/ Capital Stock Warrants Shares Warrants N/A

(b) Amendments of Incentive Programs

Indicate any amendments and discontinuation of any incentive programs introduced, including the criteria used in the creation of the program. Disclose whether these are subject to approval during the Annual Stockholders’ Meeting:

Date of Incentive Program Amendments Stockholders’ Approval N/A

5) Remuneration of Management

Identify the five (5) members of management who are not at the same time executive directors and indicate the total remuneration received during the financial year:

There are no arrangements in force pursuant to which the officers of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided by such officer. There are no standard arrangements pursuant to which officers of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided as an officer, including services for committee participation or special assignments. Name of Officer/Position Total Remuneration

N/A N/A

E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities

21 SUN-SEC FORM-ACGR 2015

Provide details on the number of members of each committee, its functions, key responsibilities and the power/authority delegated to it by the Board:

No. of Members Non- Executive Independent Committee Key Committee executive Functions Power Director Director Charter Responsibilities Director (ED) (ID) (NED) Executive N/A Audit Ensure that all The Committee financial report Performs Committee Charter comply with oversight shall have internal financial responsibilities the and management for the authority standards, following: to conduct performing or order oversight financial (a) Financial the investi- management Reporting; gation into Audit 1 0 2 functions, pre- (b) Risk any matter approving all Management; within the audit plans, scope (c) Internal scope of its and frequency Control; responsibili and performing (d) Internal ties. direct interface Audit; functions with (e) External internal and Audit. external auditors Reviews and Prescreens evaluates the nominees qualifications of and all persons prepares nominated to final list of the Board and candidate other Prescreens and appointments shortlists all that require candidates Board approval Nomination 0 2 1 nominated to , and assesses become a the member of the effectiveness of Board. the Board’s processes and procedures in the election and replacement of directors Responsible for Establishes a Establishes establishing a formal and a formal formal and transparent and trans- Remuneration 1 0 2 transparent procedure for parent procedure for developing a procedure developing a policy on for policy on remuneration developing

22 SUN-SEC FORM-ACGR 2015 executive of directors and a policy on remuneration and officers to remune- for fixing the ensure that ration of remuneration their directors packages of compensation and corporate officers is consistent officers to and directors, as with the ensure that well as providing Company’s their oversight over culture, compensati remuneration of strategy and on is senior business consistent management and environment. with the other key Company’s personnel culture, ensuring that strategy compensation is and consistent with business the Company’s environ- culture, strategy ment. and control environment. Others N/A (specify)

2) Committee Members

(a) Executive Committee – N/A.

Length of No. of No. of Date of Service in Office Name Meetings Meetings % Appointment the Held Attended Committee Chairman Member (ED) Member (NED) Member (ID) Member

(b) Audit Committee

Length of No. of Date of No. of Service in Office Name Meetings Meetings % Appointment the Held Attended Committee Chairman (ID) Alejo L. Villanueva, Jr. 29 Oct 2012 1 1 100% 3 years Member (ID) Eugenio B. Reducindo 27 Oct 2015 1 1 100% 1 year Member (ED) Evelyn G. Cacho 25 Oct 2011 1 1 100% 4years

Disclose the profile or qualifications of the Audit Committee members.

Each member of the Committee shall have the qualifications and none of the disqualifications of a director provided under the Manual. The members of the Committee shall preferably have accounting and finance

23 SUN-SEC FORM-ACGR 2015 backgrounds. At least one member shall be an independent director and another shall have audit experience. The members of the Committee must have a good understanding of the Corporation’s business and the industry in which it operates.

Alejo L. Villanueva, Jr.

Mr. Villanueva, 74 years old, Filipino was elected as Independent Director on 29 October 2012. He currently serves as Independent Director of Alliance Global Group, Inc., Emperador Inc. and Empire East Land Holdings, Inc. and a Director of First Capital Condominium Corporation, a non-stock non-profit corporation. He is also Chairman of Ruru Courier Systems, Inc. and Vice Chairman of Public Relations Counselors Foundations of the Philippines, Inc. He is a professional consultant who has more than twenty years of experience in the fields of training and development, public relations, community relations, institutional communication, and policy advocacy, among others. He has done consulting work with the Office of the Vice President, the Office of the Senate President, the Commission on Appointments, the Securities and Exchange Commission, the Home Development Mutual Fund, the Home Insurance Guaranty Corporation, Department of Agriculture, Philippine National Railways, International Rice Research Institute, Rustan’s Supermarkets, Louis Berger International (USAID-funded projects on Mindanao growth), World Bank (Subic Conversion Program), Ernst & Young (an agricultural productivity project), Chemonics (an agribusiness project of USAID), Price Waterhouse (BOT program, a USAID project), Andersen Consulting (Mindanao 2000, a USAID project), Renardet S.A. (a project on the Privatization of MWSS, with World Bank funding support), Western Mining Corporation, Phelps Dodge Exploration, and Marubeni Corporation. Mr. Villanueva obtained his bachelor’s degree in Philosophy from San Beda College, summa cum laude. He has a master’s degree in Philosophy from the University of Hawaii under an East-West Center Fellowship. He also took up special studies in the Humanities at Harvard University. He studied Organizational Behavior at INSEAD in Fontainebleau, France. He taught at the Ateneo Graduate School of Business, the UST Graduate School, and the Asian Institute of Journalism.

Eugenio B. Reducindo.

Mr. Reducindo, 46 years old, is currently the Managing Director of Choice Gourmet Banquet, Inc., which owns and operates McDonald’s stores and used to operate other restaurants like Shanghai Bistro and SoHo Tea House. He has held the position of Managing Director since 2007. As Managing Director, Mr. Reducindo is responsible for the overall operations and management of 11 McDonald’s outlets located within Metro Manila and other provinces such as Cebu and Iloilo. Prior to being Managing Director, Mr. Reducindo was a branch manager at Choice Gourmet handling the first McDonald’s branch of the company located at Forbestown Center. Mr. Reducindo has considerable experience in the management and operations of quick service and fine dining restaurants, having been involved in the daily operations of a specific branch as well as the overall management and operations of several branches/outlets. He has worked for Golden Arches Development Corporation as branch manager and for McDonald’s Egypt as Operations Consultant and for Makati Shangri-La as Assistant Manager for the coffee shop. Mr. Reducindo graduated in 1989 from the Far Eastern University with a degree in AB Communications.

Evelyn G. Cacho.

Ms. Cacho, 54 years old, Filipino, is currently the Treasurer and a member of the Board of Directors of the Company since 29 August 2005. Ms. Cacho is concurrently a director of Empire East Land Holdings, Inc. (“EELHI”), a position she has occupied since February 2009. She joined EELHI in February 1995 and has served as its Vice President for Finance since February 2001. She also currently serves as director of Empire East Communities, Inc., Laguna Bel Air School, Inc., Sonoma Premier Land, Inc., Valle Verde Properties, Inc. and Sherman Oak Holdings, Inc. She holds the position of Treasurer of Megaworld Central Properties, Inc., and Megaworld Newport Property Holdings, Inc. and Assistant Corporate Secretary of Gilmore Property Marketing Associates, Inc. Prior to joining EELHI, she had extensive experience in the fields of financial/operations audit, treasury, and general accounting from banks, manufacturing and trading companies. Ms. Cacho has a bachelor’s degree in Business Administration major in Accounting.

24 SUN-SEC FORM-ACGR 2015 The Committee has the responsibility to review with the management and external auditors the results of the audit, including any difficulties encountered and other issues warranting the attention of the Committee, and resolve any disagreements between management and external auditors regarding financial reporting. The Audit Committee shall ensure that, in the performance of the work, the external auditor shall be free from interference by outside parties.

Length of No. of Date of No. of Service in Office Name Meetings Meetings % Appointment the Held Attended Committee Chairman Giancarlo C. Ng 25 Oct 2011 1 1 100% 5 year Member (ID) Alejo L. Villanueva, Jr. 29 Oct 2012 1 1 100% 4 year Member Elmer S. Pineda 03 Feb 2012 1 1 100% 4 years

(d) Remuneration Committee

Length of Date of Service in No. of No. of Office Name Appointme Meetings % the Meetings Held nt Attended Committe e Chairman Ferdinand B. Masi 25 Oct 2011 0 0 0 5 years Member (ID) Alejo L. Villanueva, Jr. 29 Oct 2012 0 0 0 4 year

Member (ID) Eugenio B. Reducindo 27 Oct 2015 0 0 0 1 year

(e) Others (Specify)

Provide the same information on all other committees constituted by the Board of Directors:

Length of No. of No. of Date of Service in Office Name Meetings Meetings % Appointment the Held Attended Committee Chairman Member (ED) Member (NED) N/A Member (ID) Member

3) Changes in Committee Members

Indicate any changes in committee membership that occurred during the year and the reason for the changes:

Name of Committee Name Reason Executive N/A Audit None Nomination None

Remuneration None 25 SUN-SEC FORM-ACGR 2015 Others (specify) N/A

4) Work Done and Issues Addressed

Describe the work done by each committee and the significant issues addressed during the year.

Name of Committee Work Done Issues Addressed Executive N/A Audit Approved audited financials None Nomination Approval of nominees for election None Remuneration None None Others (specify) N/A

5) Committee Program

Provide a list of programs that each committee plans to undertake to address relevant issues in the improvement or enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be Addressed Executive N/A Audit May adopt a self-rating system to Monitor performance of committee review its performance Nomination May adopt a self-rating system to Monitor performance of committee review its performance Remuneration May adopt a self-rating system to Monitor performance of committee review its performance Others (specify) N/A

F. RISK MANAGEMENT SYSTEM

1) Disclose the following:

(a) Overall risk management philosophy of the company; (b) A statement that the directors have reviewed the effectiveness of the risk management system and commenting on the adequacy thereof; (c) Period covered by the review; (d) How often the risk management system is reviewed and the directors’ criteria for assessing its effectiveness; and (e) Where no review was conducted during the year, an explanation why not.

The Board, thru the Audit Committee, reviews the effectiveness of the Company’s, including its subsidiaries and affiliates, risk management system with emphasis on monitoring of existing and emerging risks as well as risk mitigation measures and on identifying risks before these cause significant trouble for the business. Based on the set guidelines, directors are assigned specific subsidiaries, affiliates or business where they monitor compliance of the risk management system. A review of the risk management system is ongoing as the Company awaits reports from each subsidiary, affiliate and business segment. Criteria used for review are compliance with established guidelines and controls and the appropriateness of risk management and risk mitigation measures taken.

2) Risk Policy

(a) Company

26 SUN-SEC FORM-ACGR 2015 Give a general description of the company’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

Risk Exposure Risk Management Policy Objective 1. Hazards and natural Have an emergency response Allow the different business segments or other plan/action to continue operations or minimize catastrophes downtime during natural disaster or calamity 2. Regulatory Review of new laws and Ensure the Company is compliant with developments regulations all laws and regulations 3. Philippine Review of business/political Ensure the Company can immediately economic/political situation adapt to changes in economic/political conditions conditions and can devise strategies to meet these changes 4. Liquidity Minimize exposure to financial Actively secure short-to medium-term markets cash flow

(b) Group

Give a general description of the Group’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

The Board, thru the Audit Committee, reviews the effectiveness of the Company’s, including its subsidiaries and affiliates, risk management system with emphasis on monitoring of existing and emerging risks as well as risk mitigation measures and on identifying risks before these cause significant trouble for the business. Based on the set guidelines, directors are assigned specific subsidiaries, affiliates or business where they monitor compliance of the risk management system. Criteria used for review are compliance with established guidelines and controls and the appropriateness of risk management and risk mitigation measures taken.

Risk Exposure Risk Management Policy Objective 1. Hazards and natural Have an emergency response Allow the different business segments or other catastrophes plan/action to continue operations even during natural disaster or calamity 2. Regulatory Review of new laws and Ensure the different business developments regulations segments are compliant with all laws and regulations 3. Money laundering Constant security check and Minimize situations when these and cheating at monitoring, check and balance activities can happen gaming areas system 4. Supply of raw Maintain diverse group of Prevent overdependence on a single materials and suppliers, get at least 3 supplier, ensure the best price possible packaging materials quotations from suppliers 5. Consumer taste, Market study and analysis Be aware of trends and preferences to trends and develop new products or adapt preferences existing strategy 6. Competition Market study and analysis; Be aware of trends and preferences to Maintain a diversified earnings develop new products or adapt base; existing strategy; Constant product innovation Revenue and property diversification

7. Interests of joint Not applicable Not applicable 27 SUN-SEC FORM-ACGR 2015 development partners 8. Land for future Not applicable Not applicable developments 9. Philippine Review of business/political Ensure the different business economic/political situation segments can immediately adapt to conditions changes in economic/political conditions and can devise strategies to meet these changes

Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority Shareholders The majority shareholder’s voting power in the Company may affect the ability of minority shareholders to influence and determine corporate strategy.

3) Control System Set Up

(a) Company

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:

Risk Assessment Risk Management and Control Risk Exposure (Monitoring and Measurement (Structures, Procedures, Actions Process) Taken) 1. Hazards and Have an emergency response Allow the different business segments natural or other plan/action to continue operations or minimize catastrophes downtime during natural disaster or calamity 2. Regulatory Review of new laws and regulations Ensure the Company is compliant with developments all laws and regulations 3. Philippine Review of business/political Ensure the Company can immediately economic/political situation adapt to changes in economic/political conditions conditions and can devise strategies to meet these changes 4. Liquidity Minimize exposure to financial Actively secure short-to medium-term markets cash flow

(b) Group

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:

Risk Assessment Risk Management and Control Risk Exposure (Monitoring and Measurement (Structures, Procedures, Actions Process) Taken)

28 SUN-SEC FORM-ACGR 2015 1. Hazards and Have an emergency response Allow the different business segments natural or other plan/action to continue operations even during catastrophes natural disaster or calamity

2. Regulatory Review of new laws and regulations Ensure the different business developments segments are compliant with all laws and regulations 3. Money Constant security check and Minimize situations when these laundering and monitoring, check and balance activities can happen cheating at system gaming areas 4. Supply of raw Maintain diverse group of Prevent overdependence on a single materials and suppliers, get at least 3 quotations supplier, ensure the best price packaging from suppliers possible materials 5. Consumer taste, Market study and analysis Be aware of trends and preferences trends and to develop new products or adapt preferences existing strategy 6. Competition Market study and analysis; Be aware of trends and preferences to develop new products or adapt Maintain a diversified earnings existing strategy; base; Revenue and property diversification Constant product innovation. 7. Interests of joint Not applicable Not applicable development partners 8. Land for future Not applicable Not applicable developments 9. Philippine Review of business/political Ensure the different business economic/political situation segments can immediately adapt to conditions changes in economic/political conditions and can devise strategies to meet these changes

Identify the committee or any other body of corporate governance in charge of laying down and supervising these control mechanisms, and give details of its functions:

Committee/Unit Control Mechanism Details of its Functions Board Audit Committee Provides oversight over the Provides oversight over the Company’s and its subsidiaries, Company’s and its subsidiaries, affiliates and business affiliates and business segments risk management segments risk management process, financial reporting process, financial reporting process and internal audit. process and internal audit.

G. INTERNAL AUDIT AND CONTROL

1) Internal Control System

29 SUN-SEC FORM-ACGR 2015 Disclose the following information pertaining to the internal control system of the company:

(a) Explain how the internal control system is defined for the company; (b) A statement that the directors have reviewed the effectiveness of the internal control system and whether they consider them effective and adequate; (c) Period covered by the review; (d) How often internal controls are reviewed and the directors’ criteria for assessing the effectiveness of the internal control system; and (e) Where no review was conducted during the year, an explanation why not.

Internal audit is a systematic and independent examination which determines whether activities and related results comply with planned arrangements and whether these arrangements are implemented effectively and are suitable to achieve objectives. The directors of the Company have reviewed the effectiveness of the Company’s and its subsidiaries, affiliates and business segments internal control system and consider them effective and adequate. For each subsidiary, affiliate and business segment, internal controls are reviewed annually and are handled at that level. Any major findings that cannot be resolved at that level are elevated to the Company through the Audit Committee of the Board. For the past year, there has been no matter elevated to the Company level by any subsidiary, affiliate or business segment.

2) Internal Audit

(a) Role, Scope and Internal Audit Function

Give a general description of the role, scope of internal audit work and other details of the internal audit function.

The directors of the Company have reviewed the effectiveness of the Company’s and its subsidiaries, affiliates and business segments internal control system and consider them effective and adequate. For each subsidiary, affiliate and business segment, internal controls are reviewed annually and are handled at that level. Any major findings that cannot be resolved at that level are elevated to the Company through the Audit Committee of the Board. For the past year, there has been no matter elevated to the Company level by any subsidiary, affiliate or business segment.

Indicate whether Name of Chief In-house or Internal Reporting Role Scope Outsource Auditor/Auditing process Internal Audit Firm Function See above

(b) Do the appointment and/or removal of the Internal Auditor or the accounting /auditing firm or corporation to which the internal audit function is outsourced require the approval of the audit committee?

For the Company, the internal audit function is handled directly by the audit committee. For the subsidiaries, affiliates and business segments, these are handled directly at their levels and only major findings that cannot be resolved at that level are elevated to the Company through the Audit Committee of the Board.

(c) Discuss the internal auditor’s reporting relationship with the audit committee. Does the internal auditor have direct and unfettered access to the board of directors and the audit committee and to all records, properties and personnel?

30 SUN-SEC FORM-ACGR 2015 findings that cannot be resolved at that level are elevated to the Company through the Audit Committee of the Board.

(d) Resignation, Re-assignment and Reasons

Disclose any resignation/s or re-assignment of the internal audit staff (including those employed by the third-party auditing firm) and the reason/s for them. NONE

Name of Audit Staff Reason

N/A

(e) Progress against Plans, Issues, Findings and Examination Trends

State the internal audit’s progress against plans, significant issues, significant findings and examination trends.

Progress Against Plans see above Issues6 see above Findings7 see above Examination Trends see above

[The relationship among progress, plans, issues and findings should be viewed as an internal control review cycle which involves the following step-by-step activities:

1) Preparation of an audit plan inclusive of a timeline and milestones; 2) Conduct of examination based on the plan; 3) Evaluation of the progress in the implementation of the plan; 4) Documentation of issues and findings as a result of the examination; 5) Determination of the pervasive issues and findings (“examination trends”) based on single year result and/or year-to-year results; 6) Conduct of the foregoing procedures on a regular basis.]

(f) Audit Control Policies and Procedures

Disclose all internal audit controls, policies and procedures that have been established by the company and the result of an assessment as to whether the established controls, policies and procedures have been implemented under the column “Implementation.”

6“Issues” are compliance matters that arise from adopting different interpretations. 7“Findings” are those with concrete basis under the company’s policies and rules. 31 SUN-SEC FORM-ACGR 2015 the Audit Committee of the Board. For the past year, there has been no matter elevated to the Company level by any subsidiary, affiliate or business segment.

Policies & Procedures Implementation See above

(g) Mechanism and Safeguards -

State the mechanism established by the company to safeguard the independence of the auditors, financial analysts, investment banks and rating agencies (example, restrictions on trading in the company’s shares and imposition of internal approval procedures for these transactions, limitation on the non-audit services that an external auditor may provide to the company):

The Audit Committee reports directly to the Board and is independent from the Management.

Auditors Financial Analysts Investment Banks Rating Agencies (Internal and External) See above None None None

(h) State the officers (preferably the Chairman and the CEO) who will have to attest to the company’s full compliance with the SEC Code of Corporate Governance. Such confirmation must state that all directors, officers and employees of the company have been given proper instruction on their respective duties as mandated by the Code and that internal mechanisms are in place to ensure that compliance.

Chairman and CEO and the Compliance Officer.

H. ROLE OF STAKEHOLDERS

1) Disclose the company’s policy and activities relative to the following:

Policy Activities The Company’s and its subsidiary are Upgrading of skills and expertise so committed to ensure utmost that people can provide customers satisfaction of their respective with service of the highest quality customers through high quality Customers' welfare products conceived in the spirit of Institutionalization of the Customer innovation and born out of continuous Feedback System research and development and provide excellent service to its customers. Customer Delight Activities Selection of suppliers and contractors Canvassing activities which ensure Supplier/contractor selection on the basis of quality products selection on the basis of quality practice products that The Company and its subsidiary Selection of suppliers and endeavor to use environment-friendly contractors whose manufacturing design, procedures and materials in procedures assure clients that each Environmentally friendly value-chain their respective businesses. item is made in an environment- friendly manner and which produce environmental friendly products

The Company and its subsidiary aims to Foundation’s scholarship program provide scholarship grants to financially and institution partnerships through Community interaction handicapped but academically sponsorship and donations. deserving students and to provide

32 SUN-SEC FORM-ACGR 2015 financial assistance to foundations and socio-civic organizations. The Company endeavors to cultivate a The Company has set up a reporting culture of integrity that does not channel through which violation of Anti-corruption programmes and tolerate conflict-of-interest and unfair the Company or any of its procedures? business dealings. subsidiaries or affiliates culture of integrity may be reported, investigated and acted upon. The Company is committed to honoring Timely settlement of financial Safeguarding creditors' rights its obligations financial obligations and obligations and faithful compliance loan covenants. with loan covenants.

2) Does the company have a separate corporate responsibility (CR) report/section or sustainability report/section?

The Company’s Annual Report has a corporate responsibility report/section; however, these activities are undertaken directly at the subsidiary level. Some of the Company’s directors and officers may render some form of community service or social responsibility activity in connection with the activities of the respective subsidiaries and affiliates that they handle.

3) Performance-enhancing mechanisms for employee participation.

(a) What are the company’s policy for its employees’ safety, health, and welfare?

The Company and its subsidiary are committed to maintain a safety and security program for their respective employees, which are periodically updated and revised.

(b) Show data relating to health, safety and welfare of its employees.

The Company’s subsidiary provides free health care coverage to their respective employees.

The Company’s subsidiary provides training and development programs to their respective employees.

(d) State the company’s reward/compensation policy that accounts for the performance of the company beyond short-term financial measures

None

4) What are the company’s procedures for handling complaints by employees concerning illegal (including corruption) and unethical behaviour? Explain how employees are protected from retaliation.

Persons may report directly to the Chairman about illegal or unethical behavior and this ensures that the identity of the reporting person is protected.

I. DISCLOSURE AND TRANSPARENCY

1) Ownership Structure

(a) Holding 5% shareholding or more (as of December 31, 2015)

Shareholder Number of Shares Percent Beneficial Owner

33 SUN-SEC FORM-ACGR 2015 Megaworld 995,834,992 42.48% Megaworld Corporation Corporation PCD Nominee 694,029,92 30.84% PCIB Securities, Corporation Corporation Emerging Market 235,000,000 10.44% Emerging Market Assets Limited Assets Limited Stanley Ho Hung-Sun 116,100,000 5.16% Stanley Ho Hung-Sun

Number of Number of Direct % of Capital Name of Senior Management Indirect shares / Through shares Stock (name of record owner) Ferdinand B. Masi 1 0 0.00% Eugenio B. Reducindo 1 0 0.00% Evelyn G. Cacho 1 0 0.00% Alejo L. Villanueva, Jr. 1 0 0.00% Elmer P. Pineda 1 0 0.00% Giancarlo C. Ng 1 0 0.00% Felizardo T. Sapno 1 0 0.00% Rolando D. Siatela 0 0 0.00% Ma. Cristina D. Gonzales 0 0 0.00% TOTAL 7 0 0.00%

2) Does the Annual Report disclose the following:

Key risks YES Corporate objectives YES Financial performance indicators YES Non-financial performance indicators YES Dividend policy YES Details of whistle-blowing policy Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any other directorships of listed companies) of YES directors/commissioners Training and/or continuing education programme attended by each YES director/commissioner Number of board of directors/commissioners meetings held during the year YES

Attendance details of each director/commissioner in respect of meetings held YES Details of remuneration of the CEO and each member of the board of YES directors/commissioners

Should the Annual Report not disclose any of the above, please indicate the reason for the non-disclosure.

3) External Auditor’s fee (updated as of 31 December 2015)

Name of auditor Audit Fee Non-audit Fee

34 SUN-SEC FORM-ACGR 2015 Punongbayan and Araullo Php760,000.00 Php0.00

4) Medium of Communication

List down the mode/s of communication that the company is using for disseminating information.

Company Website, Investor Relations, Press Release, Annual Report, Information Statement

5) Date of release of audited financial report:

Not yet determined8

6) Company Website

Does the company have a website disclosing up-to-date information about the following?

Business operations YES Financial statements/reports (current and prior years) YES

Materials provided in briefings to analysts and media YES

Shareholding structure YES

Group corporate structure YES Downloadable annual report YES

Notice of AGM and/or EGM YES Company's constitution (company's by-laws, memorandum and YES articles of association)

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

7) Disclosure of RPT

These involve RPT where the Company is a party and excludes RPTs between and among subsidiaries, affiliates, etc. (as of December 31, 2015)

RPT Relationship Nature Value N/A

When RPTs are involved, what processes are in place to address them in the manner that will safeguard the interest of the company and in particular of its minority shareholders and other stakeholders?

The Company ensures that the transactions are entered on terms comparable to those available from unrelated third parties

J. RIGHTS OF STOCKHOLDERS

1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

(a) Quorum

8 As of 31 December 2015 35 SUN-SEC FORM-ACGR 2015

Give details on the quorum required to convene the Annual/Special Stockholders’ Meeting as set forth in its By-laws.

Majority of outstanding capital Quorum Required stock

(b) System Used to Approve Corporate Acts

Explain the system used to approve corporate acts.

System Used For matters not requiring stockholder approval, board approval is used Description Majority of the directors present in the meeting, provided there is a quorum

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting that differ from those laid down in the Corporation Code. None

Stockholders’ Rights under Stockholders’ Rights not in The Corporation Code The Corporation Code The rights of the stockholders under the Corporation Code are duly recognized by the Company. No deviations or modifications were implemented by the Company.

Dividends

Declaration Date Record Date Payment Date N/A

(d) Stockholders’ Participation

1. State, if any, the measures adopted to promote stockholder participation in the Annual/Special Stockholders’ Meeting, including the procedure on how stockholders and other parties interested may communicate directly with the Chairman of the Board, individual directors or board committees. Include in the discussion the steps the Board has taken to solicit and understand the views of the stockholders as well as procedures for putting forward proposals at stockholders’ meetings.

Measures Adopted Communication Procedure Open Forum, Feedback Mechanism in Company Allows active participation of stockholders in Website, Investor Relations Department which meetings handle stockholders’ concerns

2. State the company policy of asking shareholders to actively participate in corporate decisions regarding: a. Amendments to the company's constitution b. Authorization of additional shares c. Transfer of all or substantially all assets, which in effect results in the sale of the company

The Company complies with the requirements of the Corporation Code.

3. Does the company observe a minimum of 21 business days for giving out of notices to the AGM where

36 SUN-SEC FORM-ACGR 2015 items to be resolved by shareholders are taken up? Yes

a. Date of sending out notices: 6 October 2015

b. Date of the Annual/Special Stockholders’ Meeting: Annual Meeting of Stockholders was held on 27 October 2015.

4. State, if any, questions and answers during the Annual/Special Stockholders’ Meeting.

Below is a summary of the questions asked and answers given during the open forum.

Alfred Reiterrer: Good morning Mr. Chairman, may I have the floor? My name is Alfred Reiterrer, I am the Treasurer of the Greenbelt Chancellor Condominium Association. We are one of the properties which are managed by FOPM and we have some complaints. We became shareholder of Suntrust to raise our complaints because in previous meetings it was never heard. I’m speaking these two halves because I am also representing Foreign Investors Advisory Group in Hongkong which invest money in the stock market. As a shareholder we believe a company should grow revenue but the company should also provide the best job quality to satisfied customers. Mr. Pineda knows me, we had meeting already. FOPM cost damages of approximately Three Million Pesos to our Association which we have claimed and until now we did not receive any answer to our complaints and I want to bring it to the attention of the Board that we would appreciate if the problems could be solved because we believe good business is only if the client and the company is happy. If the client is not happy it will not be good long term business. So I would really hope that we can address these concerns in the next few months before the end of the year so that we do not have to claim any more money from FOPM and the problems are settled.

Mr. Masi : Thank you very much. I believe the intention of your question is to help us manage the business better, so we appreciate it. Perhaps Mr. Pineda who handles FOPM could give some light into your question.

Mr. Pineda: Good morning ladies and gentlemen. Good morning Mr. Reiterrer. The case you are saying, we are trying to address your problem and so many meetings occurred and now that you brought it with us, to the Board, maybe we can push First Oceanic to concentrate on the problem about Chancellor’s issue. Thank you very much.

Mr. Masi: Thank you very much. I guess there are no other questions so.

Steven Solliven: Mr. Chairman my name is Steven Solliven. First of all I would like to congratulate the company for having a good working capital ratio to 2:1 but I would like to know since we are also a condominium unit lessee, I would like to know the occupancy rate. Thank you.

Mr. Masi: Would you be willing to answer it Mr. Pineda?

Mr. Pineda: We don’t have the actual occupancy report as of this moment, however, in general, the average occupancy of all Megaworld properties, Suntrust (Properties) and Empire East is not less than 85%, average. So if you will ask what particular property are you asking, we will answer it once we have the data and just give us your cellphone or contact information.

Steven Solliven: I am not asking for a particular property.

Mr. Pineda: Okay Sir. It is relatively high. The investment you invested in has a good occupancy percentage. The individual occupancy per property can be asked to our building administrator.

Mr. Masi: Okay. Anyway, just to clarify a bit also, First Oceanic actually is engaged in property management not so much as lessor. We are giving the service for a fee, so we are not actually the lessor

37 SUN-SEC FORM-ACGR 2015 of these properties. That is why categorically, we cannot answer your question now about the percentage of the occupancy.

5. Result of Annual/Special Stockholders’ Meeting’s Resolutions:

Resolution Approving Dissenting Abstaining Approval of the Minutes of the

Previous Annual Stockholders’ N/A N/A 1,383,503,108 Meeting Appointment of Independent 1,383,503,108 N/A N/A Auditors Ratification of Acts of the Board of Directors, Board 1,383,503,108 N/A N/A Committees and Management Election of Directors Ferdinand B. Masi 1,383,503,108 N/A N/A Evelyn G. Cacho 1,383,503,108 N/A N/A Giancarlo C. Ng 1,383,503,108 N/A N/A Elmer P. Pineda 1,383,503,108 N/A N/A Felizardo T. Sapno 1,383,503,108 N/A N/A Alejo L. Villanueva, Jr. – 1,383,503,108 N/A N/A Independent Director Eugenio B. Reducindo – 1,383,503,108 N/A N/A Independent Director

6. Date of publishing of the result of the votes taken during the most recent AGM for all resolutions:

October 27, 2015

(e) Modifications

State, if any, the modifications made in the Annual/Special Stockholders’ Meeting regulations during the most recent year and the reason for such modification: None

Modifications Reason for Modification N/A

(f) Stockholders’ Attendance

(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held:

Names of Board Voting members / Officers Procedure % of SH Total % Type of Date of % of SH present (by poll, Attending of SH Meeting Meeting in Proxy show of in Person attendance hands, etc.) Annual 1. Ferdinand B. Masi 27 Oct Show of 2. Alejo L. Villanueva, 2015 hands 0.01% Jr. 38 SUN-SEC FORM-ACGR 2015 3. Evelyn G. Cacho 61.48% 61.49% 4. Elmer P. Pineda 5. Amelia A. Austria 6. Giancarlo C. Ng 7. Felizardo T. Sapno 8. Rolando D. Siatela N/A

(ii) Does the company appoint an independent party (inspectors) to count and/or validate the votes at the ASM/SSMs?

Yes, the Company’s stock and transfer agent.

(iii) Do the company’s common shares carry one vote for one share? If not, disclose and give reasons for any divergence to this standard. Where the company has more than one class of shares, describe the voting rights attached to each class of shares.

YES

(g) Proxy Voting Policies

The Company does not solicit proxies and does not require a proxy.

State the policies followed by the company regarding proxy voting in the Annual/Special Stockholders’ Meeting.

Company’s Policies

Must be signed by authorized signatory of the stockholder Execution and acceptance of proxies with accompanying resolutions designating the proxy/representative Notary Not required Must be submitted at least 10 days before the scheduled Submission of Proxy meeting Several Proxies Allowed Appointments shall not exceed 5 years from date of grant Validity of Proxy and may be revoked by the stockholder at any time before the right granted is exercised. Proxies executed abroad Allowed

Invalidated Proxy Share/s shall not be counted for quorum

Validation of Proxy At least 10 days before scheduled meeting

Violation of Proxy Vote/s shall not be counted

(h) Sending of Notices

State the company’s policies and procedure on the sending of notices of Annual/Special Stockholders’ Meeting.

The Company complies with the procedure provided in the Corporation Code and the Securities Regulation Code. 39 SUN-SEC FORM-ACGR 2015

Policies Procedure See above

(i) Definitive Information Statements and Management Report

Number of Stockholders entitled to receive Definitive Information Statements and 1,608 Stockholders Management Report and Other Materials Date of Actual Distribution of Definitive Information Statement and Management 06 October 2015 Report and Other Materials held by market participants/certain beneficial owners Date of Actual Distribution of Definitive Information Statement and Management Report 06 October 2015 and Other Materials held by stockholders State whether CD format or hard copies were distributed CD format.

If yes, indicate whether requesting stockholders Hard copies were made available to requesting were provided hard copies stockholders, if any..

(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

Each resolution to be taken up deals with only one item. YES

Profiles of directors (at least age, qualification, date of first appointment, experience, and directorships in other listed companies) nominated for YES election/re-election.

The auditors to be appointed or re-appointed. YES

An explanation of the dividend policy, if any dividend is to be declared. YES

The amount payable for final dividends. YES

Documents required for proxy vote. YES

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

2) Treatment of Minority Stockholders

(a) State the company’s policies with respect to the treatment of minority stockholders.

Policies Implementation Publication of Notice, Agenda and information Transparency statement for meeting Investor Relations group and feedback portion in Accessibility of the Company Company website

(b) Do minority stockholders have a right to nominate candidates for board of directors? 40 SUN-SEC FORM-ACGR 2015

Yes. All shareholders have the right to nominate candidates for the board of directors. However, they must conform to the eligibility requirements under the Corporation Code and Manual of Corporate Governance, as well as the guidelines set by the Nomination Committee.

K. INVESTORS RELATIONS PROGRAM

1) Discuss the company’s external and internal communications policies and how frequently they are reviewed. Disclose who reviews and approves major company announcements. Identify the committee with this responsibility, if it has been assigned to a committee.

Internal communications policies are handled by the subsidiary. External communications policies and major company announcements are reviewed by the Corporate Information Officer and if feasible, with the President and CEO.

2) Describe the company’s investor relations program including its communications strategy to promote effective communication with its stockholders, other stakeholders and the public in general. Disclose the contact details (e.g. telephone, fax and email) of the officer responsible for investor relations.

Details (1) Objectives To keep stockholders informed of important developments in the Company (2) Principles Transparency and accessibility to investors (3) Modes of Communications Press Releases; Company Website; Investor Presentations (4) Investors Relations Officer Johann Quiazon, Tel No. 867-8048, fax no. 867-8803, [email protected]

3) What are the company’s rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets?

The Company takes guidance from the applicable law, the rules and regulations of the Securities and Exchange Commission and the Philippine Stock Exchange with respect to the approval, pricing and disclosure of acquisitions of corporate control in the capital markets and extraordinary transactions. Acquisitions and other extraordinary transactions are approved by the Board using its sound discretion taking into consideration the best interest of the Company.

Name of the independent party the board of directors of the company appointed to evaluate the fairness of the transaction price.

None. The Company may engage an independent appraiser as the need arises.

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Discuss any initiative undertaken or proposed to be undertaken by the company.

These activities are undertaken directly at the subsidiary and associate level. Some of the Company’s directors and officers may render some form of community service or social responsibility activity in connection with the activities of the respective subsidiaries and affiliates that they handle.

Initiative Beneficiary See above

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL 41 SUN-SEC FORM-ACGR 2015

Disclose the process followed and criteria used in assessing the annual performance of the board and its committees, individual director, and the CEO/President.

Process Criteria Board of Directors None Board Committees None Minimum attendance required Individual Directors Attendance at meetings under Manual of Corporate Governance CEO/President None None

N. INTERNAL BREACHES AND SANCTIONS

Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manual involving directors, officers, management and employees.

The Company substantially complied with its Manual of Corporate Governance and did not materially deviate from its provisions.

No sanctions have been imposed on any director, officer or employee on account of non-compliance.

Violations Sanctions N/A

42 SUN-SEC FORM-ACGR 2015 Pursuant to the requt~'flent of the Securities and Exchange Commission, this Annual Corporate Governance Report is signed ~'"\:-.;/\~~ ,bf the registrant by the undersigned, thereunto duly authorized, in the City of >i•i\\V"' on 2016.

, j ' L.\J i ~ SIGNATURES

FERDINAND B. MASI Chairman ofthe Board and Chief Executive Officer v' Independent Director//'

~~~ d·~latn MARIA CRISTINA D. GOiiALEs Compliance Officer I"'

SUBSCRIBED AND SWORN to before me this ___ day of __ 2016, affiant(s) exhibiting to me their SSS/TIN Nos., as follows:

TIN/SSS NOS.

Ferdinand B. Masi SSS No. 03-7638352-9

Alejo L. Villanueva, Jr. SSS No. 03-0714112-5

Eugenio B. Reducindo TIN 127-563-918

Ma. Cristina D. Gonzales TIN 119-349-625

NOTARY PUBUC

Doc No. t-1' ; Page No.~ BookNo. ~1; ; Series of 2016.

43 SUN-SEC FORM-ACGR2015