FARTHER and FASTER C Ebu Holdings, Inc

K C M Y RED 80K 40K K C M Y GREEN 80C 40C K C M Y BLUE 80M 40M K C M Y 80Y 40Y Paper K C M Y RED 80K 40K K C M Y GREEN 80C 40C K C M Y BLUE 80M 40M K C M Y 80Y 40Y Paper K C M Y RED 80K 40K K C M Y GREEN 80C 40C K C M Y BLUE 80M 40M K C M Y 80Y 40Y Paper K C M Y RED 80K 40K K C M Y GREEN FARTHER AND FASTER C ebu Holdings, Inc . • 2017 Integrated Report

FARTHER AND FASTER

CEBU HOLDINGS IS MOVING FARTHER AND FASTER

Farther and Faster reflects the spirit of collaboration that propels the work of Cebu Holdings to expand to emerging economic centers at a pace like never before.

2017 INTEGRATED REPORT

FARTHER AND FASTER 1 ABOUT THIS REPORT

Our pursuit to operate as a Framework and the Global society. We address current and sustainable company guides us to Reporting Initiative (GRI) Standards. future risks to our organization, move farther, reaching more people Our newly-adopted integrated recognize the industry’s outlook and becoming more inclusive than thinking to reporting gives us a and growth opportunities, and ever. This year, we reaffirm our broader perspective on the capitals align our corporate and managerial commitment to delivering shared that we utilize, our key activities strategies to gain more stability and value among our stakeholders by and outputs, the value we deliver, increase our significant contribution publishing a report that follows and the outcomes and impacts that to sustainable development. both Integrated Reporting we have on the environment and

KEY FEATURES AND SCOPE »» Presents consolidated data from (SEC) is reflected in the Information 102-12, 102-45, 102-50, 102-52, 102-54 fiscal year January 1 to December Statement sent to stockholders and is 31, 2017 coming from our internal available at our corporate website, via »» 11th combined report and 1st business units and those of our www.cebuholdings.com. Integrated Report covering our general contractors for property performance on the financial, management (Ayala Property As in our past five reports, this report corporate governance, economic, Management Corporation) and has successfully completed the GRI social, and environment aspects construction (Makati Development Materiality Disclosures Service which »» Insights into our programs and Corporation) verifies that GRI 102: General Standard initiatives that contribute to the »» Where possible, this report provides Disclosures 2016 102-40 to 102-49 17 United Nations (UN) Sustainable three years of historical information were correctly located in both the GRI Development Goals and the Four so that there is sufficient basis for Content Index (see pages 132-137) Focus Areas of our parent company, comparison. and in the pages of this report. Ayala Land FEEDBACK 102-53 »» This Report is prepared in ADDITIONAL REFERENCE accordance with GRI Standards 102-55 and ASEAN Corporate Governance Feedback and comments about our The company’s operational and Scorecard (ACGS) – see pages report can be emailed to financial performance filed with the 138-139 for the ACGS Index. [email protected]. Securities and Exchange Commission

2 Cebu Holdings, Inc. 2017 Integrated Report 04 OUR COMPANY »» Joint message from the Chairman and President »» Message from the Chief Finance Officer »» Who We Are

26 OUR PERFORMANCE »» Seagrove »» »» Cebu Business Park »» »» Cebu I.T. Park »» »» Gatewalk Central »» »» Amara »» »» Amaia Steps

58 STAKEHOLDER ENGAGEMENT

70 CORPORATE GOVERNANCE

116 THE YEAR IN FIGURES »» Appendices »» Indices »» Financial Statements

FARTHER AND FASTER 3 JOINT MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT 102-14

Cebu Holdings, Inc. sustained its growth path in 2017 as we focused on the continuous expansion and enhancement of our mixed-use estates in key cities in Metro Cebu. Through strategic partnerships, we have been able to move faster to build new economic districts that will extend the gains of property development to more communities.

Our company has expanded its footprint across the province of Cebu and is now actively managing and developing four estates. Aside from Cebu Business Park and Cebu I.T. Park in Cebu City, we are now in Gatewalk Central in Mandaue City and Seagrove in Lapu-Lapu City. We are also present in Liloan through our seaside residential community, Amara.

Creating and constantly evolving our mixed-use estates is our way of delivering on our commitment to foster economic growth and create livelihood opportunities for Cebuanos. We take pride in knowing that over 91,000 jobs were created by over 200 local and foreign companies within Cebu

ANNA MA. MARGARITA B. DY CHAIRMAN

4 Cebu Holdings, Inc. 2017 Integrated Report Business Park and Cebu I.T. Park. In as Shopping Center of the Year - Large Meanwhile at Cebu I.T. Park, we are 2017, we also noted over 3,000 small Category in 2017 by the Department of currently constructing Central Bloc, business providing ancillary services Trade and Industry and the Philippine a stacked two-hectare development such as food, transportation, and Retailers Association for its initiatives which will showcase a regional mall accommodation around the estates. to constantly improve the retail offering close to 50,000 square meters experience. of retail space, two more office towers In the same year, we grew our net and another 214-room Seda Hotel. income by 11 percent to P753.4 We completed Tech Tower which million and revenues by 14 percent added 16,214 square meters to our GATEWALK CENTRAL to P3.1 billion. Our performance was total leasing portfolio and finished the The construction of Gatewalk Central driven by solid contributions from our BPI Cebu Corporate Center—an iconic in Subangdaku, Mandaue, is on full leasing business, which accounts for 69 project in partnership with Alveo Land speed and on target, as we expect percent of the total revenue. that offers office units for sale. this mixed-use estate to open its first phase in 2021. The 18-hectare CEBU BUSINESS PARK AND Property sales also improved as we mixed-use estate will offer a dynamic CEBU I.T. PARK sold units of Ayala Land Premier’s 1016 and highly-energized lifestyle Property development and commercial Residences and Park Point Residences, experience with modern residential leasing remained robust as we as well as Alveo’s Sedona Parc also in and commercial components. It will enhance our existing estates, Cebu Cebu Business Park. feature a regional mall which will add Business Park and Cebu I.T. Park. a total gross leasable area of 115,000 In 2018, Cebu Business Park will be square meters to our retail portfolio

Ayala Center Cebu, located at the home to the first Seda Hotel in Cebu. upon its completion. heart of Cebu Business Park, continued The homegrown hotel brand by Ayala to enjoy high occupancy rate of 97 Land will have 301 rooms and will percent, as well as increasing merchant become a central convergence place for sales. The mall was also recognized business travelers. Through strategic partnerships, we have been able to move faster to “ build new economic districts that will extend the gains of property “ development to more communities.

FARTHER AND FASTER 5 As a result of meaningful collaborations, CHI has lived up to its “ promise as a catalyst for progress in the Visayas, driven mainly by local talent. Through our mixed-use estates, we concretize our “ commitment to nation-building and sustainable development.

SEAGROVE innovations in line with the four In the management of our estates, focus areas of Ayala Land, namely Site we constantly strive for efficient The year 2017 was highlighted by Resilience, Pedestrian Mobility and resource use and effective waste the launch of our newest mixed-use Transit Connectivity, Eco-efficiency and management. In 2017, we invested in estate in Punta Engaño, Lapu-Lapu Local Economic Development. various improvements including a new City. Located near Cebu’s airport and wastewater treatment facility to serve seaports, the 14-hectare Seagrove We plan and design our developments the growing community in Cebu I.T. is expected to become an exciting to make it more resilient to changes in Park. bayside, eco-fun destination, adding the environment by creating a healthy a new dimension to the leisure and balance of green open spaces and Our efforts in line with sustainability tourism industry in Cebu. built-up areas. were featured in a publication of the United Nations Development Its initial phase includes the As we prepare for our bayside Programme and the Philippine Business development of the first Holiday Inn development, Seagrove, in Lapu-Lapu, for the Environment. The book called Resort in the Philippines, as well as we initiated environment protection Transformational Business cites Cebu a boardwalk promenade with retail activities such as coastal cleanups with Business Park as the top example and entertainment concepts. We employees and coral reef studies to of how large-scale infrastructure in will be pouring in about P4 billion determine possible areas for nursery provincial capitals can bring inclusive in investment for land cost and and rehabilitation sites in the area. economic growth while driving development, as well as the hotel and We likewise collected wildings and business forward. According to the retail components during this period. seedlings of existing native and book, “CHI has poured in over P55 endemic beach forest tree species billion in land and infrastructure SUSTAINABILITY AND which we will propagate and use for investments to grow and expand Cebu INNOVATION future landscaping requirements. Business Park and Cebu I.T. Park—now As we accomplish our goals as a two of the leading economic hubs in company, it is important that the We also introduced innovations the south.” values of innovation and sustainability that push for pedestrian mobility are well-established in our operations. and transit connectivity, such as the It also cites our shared-value program, completion of new bus stops within Agbayay para sa Kalikupan, as a Our mixed-use estates strive to Cebu Business Park and Cebu I.T. Park, “sustainable solid waste management become models for sustainable serving passengers of a scheduled bus model that bridges waste management development and introduce service that travels to Northern and with entrepreneurship, and CSR with Southern Cebu. inclusive development.”

6 Cebu Holdings, Inc. 2017 Integrated Report COMMITTED TO NATION- BUILDING As a result of meaningful collaborations, CHI has lived up to its promise as a catalyst for progress in the Visayas, driven mainly by local talent. Through our mixed-use estates, we concretize our commitment to nation- building and sustainable development.

As we celebrate our 30th anniversary in 2018, we are inspired to create communities that will contribute to the development and future progress of Cebu and the Visayan region. We are setting up the platform to establish new operational frameworks that will increase our ability to respond to an ever-changing market, starting with the company’s planned merger with its subsidiary, Cebu Property Ventures and Development Corp. We are optimistic that with these advancements, Cebu Holdings is well-positioned for growth to deliver better value to you, our shareholders.

ANICETO V. BISNAR, JR. PRESIDENT

FARTHER AND FASTER 7 MESSAGE FROM THE CHIEF FINANCE OFFICER

The prudent use of resources. Tight internal controls. A sharp long-term vision guided by adherence to the highest governance standards.

These were the touchstones of Cebu Holdings’ 2017 fiscal and growth strategies, resulting in an outstanding year of financial growth for our company.

KEY FIGURES

Nearly 30 years of experience and a strong foundation served our company well as we hit a net income growth of 11 percent—from P679.7 million in 2016 to P753.4 million in 2017. This success was driven mainly by our leasing business, the sale of residential lots in Amara, the sale of developmental rights, savings in operating expenses, and lower interest expenses through wise resource management.

MA. LUISA D. CHIONG CHIEF FINANCE OFFICER

8 Cebu Holdings, Inc. 2017 Integrated Report Our total revenues reached P3.1 GROWTH SEGMENTS last phase by the end of the year. Sales billion, higher than last year’s P2.7 from our other residential segments, billion by 15 percent. This total is such as the condominium units at 1016 Our leasing business—office spaces comprised of commercial and office Residences, Park Point Residences, and and merchant space rentals— space leasing (69%), sale of residential Sedona Parc also continued on a steady continues to lead the pack among our condominiums and lots (11%), sale of pace by year end. income streams. It now accounts for 69 development rights and other income percent of our total revenue this year. (15%), and theater income (5%). SOLID GROWTH AND The main drivers for this high figure EXPANSION are the higher occupancy rate and A total of P2.1 billion was spent for higher sales from various merchants of the development of projects, land To further build up leasing revenues Ayala Center Cebu and The Walk. Our acquisition, improvements and in the years ahead, CHI continued to average occupancy rate for our office priming of our current estates (Cebu construct major flagship, mixed-use leasing, meanwhile, is at 86 percent Business Park and Cebu I.T. Park) and estates. These are Gatewalk Central in (lease out rate at 100%), while Ayala investment in an affiliate. Meanwhile, Mandaue and Seagrove in Lapu-Lapu, Center Cebu is at 97 percent. dividends to our stockholders Mactan. significantly increased, from P230 Our investments on the residential million or P0.12 per share in 2016, to Seagrove is a 13.6-hectare mixed-use front, meanwhile, enable us to extend P288 million or P0.15 per share for this eco-fun destination anchored on a our geographic reach outside Cebu reporting year. By managing our talent boardwalk concept with a network of and increase our income sources. and resources wisely, we were also able central pools and a Holiday Inn Resort. to standardize processes, integrate Gatewalk Central, on the other hand, Through Amaia Southern Properties, front and back offices, and eliminate has been on steady development over Inc. we now have projects in Bacolod. silos. All these enabled us to respond the past years and is expected to have Our income from this stream picked faster to customer demands and up speed, with the sales at Amara’s changing market forces.

FARTHER AND FASTER 9 CEBU HOLDINGS AND SUBSIDIARIES

(YEAR ENDED DECEMBER 31) 102-7

2017 2016 2015 2014 2013 FOR THE YEAR (in million pesos)

Revenues 3,092 2,714 3,740 2,294 2,170 Net Income 753 680 827 531 501 Dividend Amount 288 230 230 230 211

AT YEAR-END (in million pesos)

Total Assets 20,588 19,616 19,733 16,385 12,950

Cash and Cash Equivalents 189 117 234 3,099 1,192

Commercial Loans 6,454 6,148 6,233 6,719 4,378 Stockholder’s Equity 6,989 6,528 6,065 5,466 5,175

PER SHARE

Earnings Per Share 0.39 0.35 0.43 0.28 0.26

Price/ Earnings Per Share (EPS) 14.74 14.00 12.05 18.43 22.04

Dividend Per Share 0.15 0.12 0.12 0.12 0.11

FINANCIAL RATIOS

Current Ratio 0.60 0.59 0.95 1.63 1.21

Commercial Debt- to-Equity Ratio 0.92 0.94 1.03 1.23 0.85

Net Debt-to-Equity Ratio 0.90 0.92 0.99 0.66 0.62

ROE 11% 11% 14% 10% 10%

Stock Price 5.75 4.90 5.18 5.16 5.73

10 Cebu Holdings, Inc. 2017 Integrated Report REVENUE NET INCOME TOTAL ASSETS DIVIDEND AMOUNT 3B 753M 21B 288M

2016 3B 2016 680M 2016 20B 2016 230M 2015 4B 2015 827M 2015 20B 2015 230M 2014 2B 2014 531M 2014 16B 2014 230M

a gross leasable retail area of 115,000 significantly increase from 135,022 country’s economic leaders. According square meters, including 60,000 square square meters (retail) and 105,394 to various local chambers of commerce, meters for the anchor store and an square meters (office spaces) to economic stability and growth were additional 20,000 square meters for 249,000 square meters and 193,000 felt by more local businesses over the office space. square meters respectively. past years. More investors are also coming in, as Cebu experiences a surge In our flagship estates, we likewise 2018-2022 INDUSTRY of outside interest, both as a business continue to expand with the upcoming OUTLOOK and tourist destination. Central Bloc stacked development in Cebu I.T. Park. This new mixed-use This positive outlook is also embodied All these new developments are enclave will carry 45,400 square meters in the recent pronouncements of the set to capitalize on Cebu’s bright of retail spaces, 67,500 square meters National Economic and Development macroeconomic outlook. of office spaces, and 214 hotel rooms Authority, which targets an average under the Seda Hotel brand. growth rate between 7.7 to 8.3 percent Big-ticket infrastructure projects for the Visayas, higher than the further reflect all the optimism – the To further build up leasing revenue, government’s target for national GDP completion of the Mactan International the team continued to construct growth in 2017-2022. This is anchored Airport Terminal 2, the start of the masterplanned, mixed-use on four main growth drivers—travel Cebu-Cordova toll bridge expressway, developments. This includes Gatewalk and tourism, IT-BPO, manufacturing, and the planned Cebu Bus Rapid Central, projected to bring in additional and construction. Cebu Holdings Transit System. All these investments gross leasable area of 115,000 square is at the forefront of three of these representing billions of pesos point meters and 20,000 square meters to industries in the region, and we will to a dynamic and forward-looking both commercial and office leasing continue to explore new pathways economy that will surely buoy our business respectively. in the retail and services industries company upward and onward. to firmly plant our foothold on the Upon completion of these new projects region’s economic surge. In fact, Cebu already pulled out of the our total gross leasable area will pack in 2017 to become one of the

FARTHER AND FASTER 11 SUSTAINABILITY AS AN BUILDING ON PAST GAINS ECONOMIC DRIVER This is my first year to take on the role While our outlook continues to be of CFO for CHI and I am heartened to optimistic, we cannot sustain economic report that we have the challenging growth for our companies if we do not but inspiring task of managing a step back now to look at development company that has been built on strong comprehensively. ideals and principles.

Proper urban planning, sustainable For nearly 30 years, Cebu Holdings transport, solid waste and wastewater has been a solid partner of Cebu in management, and coastal habitat and growing our economy and creating biodiversity protection – these are the more jobs and opportunities for critical sustainability areas that CHI is our people. We have been able to investing on more significantly today constantly generate income for many to prepare us for the challenges of the stakeholders, supported the growth of future. many local businesses, and enriched the value of land. But what matters Our new estates—Seagrove and most is what we do next. Gatewalk Central—are now being built around high standards of sustainable The bigger challenge today for our development. Our flagship estates teams is how to continue innovating at Cebu Business Park and Cebu I.T. while building on past gains and

Park also continue to invest heavily foreseeing any disruptive changes on the latest technology, such as that may affect our sustainability and our sequencing batch reactor to viability. We are confident that with

treat wastewater—another model the able support of our employees and of wastewater management and an stakeholders, we will be able to reach environmental milestone for Cebu. greater heights in the years ahead. In terms of corporate governance, “ we have also revised our charters to bring our standards at par with ASEAN For nearly 30 years, Cebu Holdings has been a solid partner standards. We likewise institutionalized of Cebu in growing our economy and creating more jobs changes in accord with the new and opportunities for our people. Securities and Exchange Commision code. “

12 Cebu Holdings, Inc. 2017 Integrated Report 130M THEATER OPERATIONS 2% PAYMENT TO EMPLOYEES 348M RESIDENTIAL LOT AND CONDO SALES 9% PAYMENT TO GOVERNMENTS 470M INTEREST AND OTHER INCOME 15% PAYMENT TO PROVIDERS OF CAPITAL 2,144M RETAIL/ OFFICE SPACE LEASING INCOME 74% PAYMENT TO SUPPLIERS

P 3B P 5B REVENUE MIX ECONOMIC VALUE DISTRIBUTED

FARTHER AND FASTER 13 WHO WE ARE 102-1

Cebu Holdings, Inc. (CHI) is a listed company with the Philippine Stock Exchange (PSE) since 1994. CHI is compliant with all the rules and regulations of the PSE and the Securities and Exchange Commission (SEC), and to applicable rules and regulations relating to the development of the Philippine capital market.

VISION AND MISSION STATEMENT CORE VALUES 102-16 102-16 »» Focus on Customer »» Pursuit of Excellence We shall be the premier real estate company in »» Bias for Results »» Love of God the region, creating and enhancing integrated, »» Entrepreneurial Drive »» Responsibility to the masterplanned, and sustainable mixed-use Community developments through a customer-focused and »» Teamwork »» Enhancement of Quality empowered team of professionals. »» Concern for People of Life »» Empowerment of People We ensure the trust and confidence of our stakeholders with sustainable growth while improving the quality of life of the communities we serve with passion and integrity.

14 Cebu Holdings, Inc. 2017 Integrated Report OWNERSHIP STRUCTURE D.1, 102-2, 102-5 3% OTHERS 6% PCD NOMINEE CORP. (FILIPINO) 19% PCD NOMINEE CORP. (NON-FILIPINO) CHI is a company engaged in real property ownership, 72% AYALA LAND, INC. development, marketing and management.

The company was registered with the SEC on December 9, 1988, with an authorized capitalization OWNERSHIP of P1.0 billion. As of December 31, 2017, its authorized STRUCTURE capital stock is at P 3.0 billion.

FARTHER AND FASTER 15 CLCI CBPTMI 100% CEBU LEISURE 100% CEBU BUSINESS PARK THEATERS COMPANY INC. MANAGEMENT COMPANY, INC.

Forme in 14, this hollone Registere ith the SEC to engage in CHI subsiiar operates the Aala Cinemas, all aspects o the theatrical an cinematic Foo Choice an Actie Zone entertainment business incluing theather management an other relate unertakings.

CPVDC 76.26% CEBU PROPERTY VENTURES AND DEVELOPMENT CORPORATION Oner an eeloper o Cebu I.T. Park. Registere ith the SEC on August 2, 10.

AIO 100% ASIAN IOFFICE PROPERTIES, INC. A special purpose ehicle that engages in real estate eelopment. It is the oner an operator o the eBloc Toers.

TPEPI 55% TAFT PUNTA ENGAO PROPERTY, INC. Forme in 2013 as a jointenture compan ith Tat Propert Venture Deelopment Corp. to eelop Seagroe, a 14hectare propert in Mactan.

CIHCI 37% CEBU INSULAR HOTEL COMPANY, INC. Incorporate on April 6, 15. A partnership beteen CHI an Aala Lan Hotels an Resorts Corporation.

ASPI SOLINEA SPI 35% AMAIA SOUTHERN 35% SOLINEA, INC. 35% SOUTHPORTAL PROPERTIES, INC. Forme as a jointenture compan PROPERTIES, INC. A partnership beteen CHI an ith Aala Lan, Inc. or the Partnership beteen CHI an Aleo Lan Corporation. Oner eelopment o The Alcoes. Amaia Lan, Inc. or the eelopment an eeloper o Solinea Toers o Amaia Steps in Manaue Cit, Cebu. an BPI Cebu Corporate Center at Cebu Business Park.

CBDI 20% CENTRAL BLOCK DEVELOPMENT, INC. Forme as a jointenture compan Aala Lan, Inc. an CPVDC or the Cebu I.T. Park superblock eelopment Effectie onership inclusie of interest in susiiary D is at 9

CDPEI 10% CEBU DISTRICT PROPERTY ENTERPRISE, INC. Forme as a jointenture compan ith Aala Lan, Inc. CPVDC an AboitiLan to eelop a 17hectare propert in Subangaku, Manaue Cit, Cebu Effectie onership, inclusie of interest in susiiary D is at 14

16 Cebu Holdings, Inc. 2017 Integrated Report OUR COMPANY 102-2, 102-3, 102-6, 102-7

CHI is a leading full-line property developer with headquarters at Cebu Business Park, Cebu City.

CLCI CBPTMI The company is engaged in real estate development, including sale of residential and office units, sports club shares, and lease of commercial spaces. 100% CEBU LEISURE 100% CEBU BUSINESS PARK THEATERS COMPANY INC. MANAGEMENT COMPANY, INC.

Forme in 14, this hollone Registere ith the SEC to engage in For 29 years, our business has allowed us to transform 143 hectares of land into CHI subsiiar operates the Aala Cinemas, all aspects o the theatrical an cinematic integrated, masterplanned and mixed-use eco-zones and business parks, launch Foo Choice an Actie Zone entertainment business incluing theather management an other relate unertakings. 4,567 residential lots and condo units, and lease 137,121 square meters of retail and 105,394 square meters of office spaces. CPVDC 76.26% CEBU PROPERTY VENTURES A more comprehensive discussion of our corporate governance practices, AND DEVELOPMENT CORPORATION Oner an eeloper o Cebu I.T. Park. including our ownership structure, are found on pages 70 to 111 and 15, 86 and Registere ith the SEC on August 2, 10. 119 of this report.

AIO 100% ASIAN IOFFICE PROPERTIES, INC. A special purpose ehicle that engages in OUR BUSINESSES 102-2 real estate eelopment. It is the oner an operator o the eBloc Toers. ESTATE DEVELOPMENT OFFICE CONDOMINIUM SALES AND MANAGEMENT »» BPI Cebu Corporate Center »» Cebu Business Park (via affiliate Solinea, Inc.) TPEPI »» Cebu I.T. Park 55% TAFT PUNTA ENGAO PROPERTY, INC. »» Gatewalk Central Forme in 2013 as a jointenture compan ith OFFICE SPACE LEASING Tat Propert Venture Deelopment Corp. to »» Seagrove eelop Seagroe, a 14hectare propert in Mactan. »» eBloc Towers 1, 2, 3, 4 »» SRP Development »» Ayala Center Cebu Tower »» Tech Tower CIHCI RESIDENTIAL SUBDIVISION »» Central Bloc Towers (under construction) 37% CEBU INSULAR HOTEL COMPANY, INC. AND CONDO SALES Incorporate on April 6, 15. A partnership beteen CHI an Aala Lan Hotels an Resorts Corporation. Ayala Land Premier LEISURE »» Amara »» City Sports Club Cebu ASPI SOLINEA SPI »» 1016 Residences »» Cebu City Marriott Hotel 35% AMAIA SOUTHERN 35% SOLINEA, INC. 35% SOUTHPORTAL PROPERTIES, INC. »» Park Point Residences (via affiliate Cebu Insular Hotel Co., Inc.) Forme as a jointenture compan »» The Alcoves PROPERTIES, INC. A partnership beteen CHI an »» Seda Hotel at Central Bloc (under construction) ith Aala Lan, Inc. or the Partnership beteen CHI an Aleo Lan Corporation. Oner eelopment o The Alcoes. Amaia Lan, Inc. or the eelopment an eeloper o Solinea Toers o Amaia Steps in Manaue Cit, Cebu. an BPI Cebu Corporate Center Alveo RETAIL SPACE / LAND LEASING at Cebu Business Park. »» Solinea Towers 1, 2 and 3 »» Ayala Center Cebu »» Sedona Parc »» The Walk »» eBloc Towers Retail CBDI Avida »» Garden Bloc »» Garden Row 20% CENTRAL BLOCK DEVELOPMENT, INC. »» Avida Towers Cebu 1 and 2 Forme as a jointenture compan Aala Lan, Inc. »» Central Bloc (under construction) an CPVDC or the Cebu I.T. Park superblock eelopment »» Gatewalk Central Mall Effectie onership inclusie of interest in susiiary D is at 9 Amaia »» Amaia Steps Mandaue CDPEI 10% CEBU DISTRICT PROPERTY ENTERPRISE, INC. Forme as a jointenture compan ith Aala Lan, Inc. CPVDC an AboitiLan to eelop a 17hectare propert in Subangaku, Manaue Cit, Cebu Effectie onership, inclusie of interest in susiiary D is at 14

FARTHER AND FASTER 17 UNDP NAMES CHI AS A “TRANSFORMATIVE COMPANY”

Through its new publication series, According to UNDP, the use of the SBR Transformational Business, the UN body technology is one of the biggest business highlights successful programs in the contributions to waste management in Philippines that are leading the way towards Cebu, as nearly all communities in the island sustainability. still have no centralized sewage treatment facility. Published by the United Nations Development Programme and the Philippine In addition, the book describes CHI’s Business for the Environment, the book Agbayay shared-value program as “a features three of CHI’s programs—Cebu sustainable solid waste management model Business Park, a public-private partnership that bridges waste management with program called Agbayay Para Sa Kalikupan entrepreneurship, and CSR with inclusive (Partnership for the Environment), and the development.” construction of a Sequencing Batch Reactor (SBR) at Cebu I.T. Park. A total of 139 business programs from 75 companies are presented through short In its economic chapter, the book cites narratives in this pioneering book. Aside Cebu Business Park as the top example of from featuring best practices, the book also how “large-scale infrastructure in provincial discusses gaps specific SDG target areas capitals” can bring in inclusive economic that are not yet part of entrepreneurial growth while driving business forward. vocabulary.

According to the book, “CHI has poured in The book is slated to be published annually over P55 billion in land and infrastructure in the next 10-15 years and forms part of investments to grow and expand Cebu the U.N.’s advocacy in the Philippines to Business Park and Cebu I.T. Park—now two encourage more companies to discover how of the leading economic hubs in the south.” the SDGs can also be good for the bottom line. The book also cites the P400-million investment to construct an SBR as a significant contribution to SDG 6: Clean Water and Sanitation.

INSPIRING LIVES. UNDP also chose CHI’s Solid Waste Management program for its promotional video series on YouTube. According to the UNDP, CHI’s Agbayay program was chosen for its innovative features, scale, and geographic location. To date, the program’s partner barangay has earned more than P20 million in livelihood since the program started in 2007. Search for “No Waste Left Unturned” in YouTube to watch this powerful video.

18 Cebu Holdings, Inc. 2017 Integrated Report The Sustainable Development Goals (SDGs) are a wake- As a responsible business, we have the inherent ability up call to urgent action. to enrich economies and influence society’s welfare.

Adopted by 193 United Nations Member States in We constantly innovate, develop technologies, create September 2015, these Global Goals seek to end jobs—all key components to deliver developmental poverty, protect the planet, and ensure that everyone solutions at scale. Nevertheless, we recognize that has the right tools to prosper and live in peace. the goals span a broad range of challenges that is impractical for a single business to address. In the past, governments were primarily tasked to work for development. The SDGs today, however, require For maximum impact, we are targeting specific goals concerted action among all sectors, especially from that we can best respond to given our expertise and those in business. Cebu Holdings, Inc. (CHI) is one with reach. The Global Goals that we work for, and our the global network of companies that believe in the corresponding programs and results as of 2017 are transformative power of the SDGs. reflected in this section.

Estate infrastructure upgrades Learning and application of Takakura Mobilization of volunteers through ‘Team up to composting at Cebu Business Park, Cebu I.T. Clean up’ program: Seagrove adventure clean Development programs implemented in Park and Ayala Center Cebu up activities neighboring communities CHI considers Carbon Neutral Printing and Ecosystems awareness trainings: forest / wood-free paper for the 2016 ASR report watersheds/ coral reef and river ecosystems

Conduct of studies / assessments on coral reef, Partnership with neighboring communities on Estates record growth in workforce by 6% with a seagrass and mangroves at Seagrove development programs for livelihood, environment, total of 91,805 direct and indirect employment education, and site resilience

* Agbayay sa Edukasyon/ support to public schools Conduct of studies/ assessments on vegetation Competency building for construction workers and through book drive program inventory of trees in our estates farmers in partner communities

#BrigadaAyala, distribution of school supplies Establishment of tree nursery at Seagrove; planting and lighting fixtures, providing mall space for of native species at our developments institutional activities

Community Partnership for Livelihood Upgrade of wastewater treatment facility Ayala Center Cebu - provision of retail space to SMSEs (Agbayay sa Pag-asenso) providing spaces for (10 millions liters-per-day capacity) and new business entrants to promote local products small businesses to promote local products and services River, Creek and coastal clean ups

FARTHER AND FASTER 19 CAPITALS / RESOURCES ACTIVITES OUTPUTS OUTCOMES

Our masterplanne mieuse estates hae hoste a ast Since 1 e hae put to ork an In aition, inestments OPTIMIZING LAND USE range of businesses in Cebu. To date, our estates have more estimate P55 billion in capital (Cebu put in b our locators Strategic Lan Management We hae masterplanne an eelope mieuse estates Holings an Aala Lan projects in Cebu reache an estimate ith a total o 143 hectares an ensure that lan is use optimall. than 70 (builing locators an oer 200 oreign an local o hich P 2 billion as eploe in 2017. P25.6 billion. CHI companies. � STRATEGIC LAND MANAGEMENT FINANCIAL We hae a reliable operational cash A portion of our financial capital (Ealuation, Negotiation, Due Diligence, Acquisition Notwithstanding the influx of foreign investments in Cebu, our flow and we are able to access (P0.70 billion is ineste in We have optimised the use of our space — at 1.4 Gross Floor Area (GFA) eelopments cater to the nees o local brans. In 2017, 50 affordable financing from debt or subsidiaries and affiliates to more � ESTATE MASTER-PLANNING percent o our mall merchants are Philippine brans hile 14 equit. In 2015, e successull issue eectiel reach ierse market per square meter o lan in 2017, hile keeping open spaces at 30% o the P5 billion in bons or our epansion segments. (Deelopment plans, permits total lan area o our estates. percent are homegron Cebuano brans. 204.1 projects. � CONSTRUCTION & MONITORING In aition, our eelopments hae raise the estate alue o Since our entr into the Cebu market in 1, e hae create a total lan b a thousanol rom 1 to 2017. Lan alue We maintain a team o management We source our human capital or appreciation contributes to LGU’s revenue in the form of real an technical eperts ithin the construction projects an propert of 261,416 sqm - total GLA of offices and retail spaces combined which O , HUMAN propert taes. In 2017, oer P300 million as pai to the local compan ho look ater our ke management rom reliable human makes us the leaing ullline eeloper in the proince. CREATING SPACES FOR goernment, 57 percent higher than the preious ear. business operations. resource proiers that hae the best stanars or emploee BUSINESS AND LIFESTYLE management. Consequentl, this has also raise the rental rates rom P400 Office and retail leasing B en o 2017, 2% o these spaces are lease out, hich ries our leasing income. per square meter to P900 per square meter for office space 77 hectares of developed estates as the platform for our office and retail spaces MANUFACTURED ith 261,416 square meters o leasable area that rie our reenue. � OPERATIONS AND PROPERTY MANAGEMENT Our locators support emploment o 1,05 iniiuals. Base on meian salar rates across arious ke inustr locators e We hae ineste in Aala Lan resiential brans hich eliere to L hae estimate oer P16 billion orth o economic alue that meet growing and diverse demand in Cebu. These products flows to this workforce annually. This economic value also flows For 2 ears, e hae built We hae nurture We uphol the highest CHI'S VALUE CREATION PROCESS CREATION CHI'S VALUE promise to elier back to the econom in consumer spening hich then a reputation or qualit, longterm relationships stanars o corporate reliabilit, an sustainabilit ith ke stakeholers goernance an supports small businesses in the immeiate icinit o our SOCIAL AND hich are important to that support us in compliance an ensure 844 units high en resiential (Aala Lan Premier estates. In 2017, e hae accounte oer 3,000 small RELATIONSHIP maintaining our relationship eliering our alue goo relations 504 lots high en resiential subiision businesses proiing ancillar serices such as oo, proposition inestors, ith goernment. ENTERING DIVERSE MARKETS ith the ke stakeholers 1,886 units mimarket resiential (Aleo transportation, accommoation, an launr an other e sere our locators, business partners, THROUGH PARTNERSHIPS 1,333 units aorable resiential (Aia an Amaia merchants, an customers. suppliers an serices. consultants. Inestments / Equit Holings 165,000 GLA – regional malls (under construction) D The growth in businesses inside our estates has also fueled the 301 hotel rooms operational , emergence o allie businesses such as hotels that hae Our epertise an track recor in Our strong an truste 214 hotel rooms uner construction INTELLECTUAL masterplanning an eeloping bran helps us keep our located around our business districts. To date, there are 2,365 mieuse, integrate groth centers is position in the market. rooms that support accommoation requirements o the area. an important capital that ries our *figures reflect entire inventory success. Oerall, the emergence o business ithin an aroun the estates has contributed significantly to LGU’s revenue in the As a eeloper, our unamental capital is lan. As o 2017, e hae eelope an orm o business taes an licenses. continue to optimall use 143 hectares o lan. We also ensure e continue to NATURAL hae reliable access to resh ater to meet about 242,63 cubic meters o ater nees per ear. We also rel on the gri poer to meet 4,727.01 gigajoules o energ requirement to run our estates, malls, an builings.

OUR INTEGRATED REPORTING FRAMEWORK CAPITALS / RESOURCES ACTIVITES OUTPUTS OUTCOMES

Our masterplanne mieuse estates hae hoste a ast Since 1 e hae put to ork an In aition, inestments OPTIMIZING LAND USE range of businesses in Cebu. To date, our estates have more estimate P55 billion in capital (Cebu put in b our locators Strategic Lan Management We hae masterplanne an eelope mieuse estates Holings an Aala Lan projects in Cebu reache an estimate ith a total o 143 hectares an ensure that lan is use optimall. than 70 (builing locators an oer 200 oreign an local o hich P 2 billion as eploe in 2017. P25.6 billion. CHI companies. � STRATEGIC LAND MANAGEMENT FINANCIAL We hae a reliable operational cash A portion of our financial capital (Ealuation, Negotiation, Due Diligence, Acquisition Notwithstanding the influx of foreign investments in Cebu, our flow and we are able to access (P0.70 billion is ineste in We have optimised the use of our space — at 1.4 Gross Floor Area (GFA) eelopments cater to the nees o local brans. In 2017, 50 affordable financing from debt or subsidiaries and affiliates to more � ESTATE MASTER-PLANNING percent o our mall merchants are Philippine brans hile 14 equit. In 2015, e successull issue eectiel reach ierse market per square meter o lan in 2017, hile keeping open spaces at 30% o the P5 billion in bons or our epansion segments. (Deelopment plans, permits total lan area o our estates. percent are homegron Cebuano brans. 204.1 projects. � CONSTRUCTION & MONITORING In aition, our eelopments hae raise the estate alue o Since our entr into the Cebu market in 1, e hae create a total lan b a thousanol rom 1 to 2017. Lan alue We maintain a team o management We source our human capital or appreciation contributes to LGU’s revenue in the form of real an technical eperts ithin the construction projects an propert of 261,416 sqm - total GLA of offices and retail spaces combined which O , HUMAN propert taes. In 2017, oer P300 million as pai to the local compan ho look ater our ke management rom reliable human makes us the leaing ullline eeloper in the proince. CREATING SPACES FOR goernment, 57 percent higher than the preious ear. business operations. resource proiers that hae the best stanars or emploee BUSINESS AND LIFESTYLE management. Consequentl, this has also raise the rental rates rom P400 Office and retail leasing B en o 2017, 2% o these spaces are lease out, hich ries our leasing income. per square meter to P900 per square meter for office space 77 hectares of developed estates as the platform for our office and retail spaces MANUFACTURED ith 261,416 square meters o leasable area that rie our reenue. � OPERATIONS AND PROPERTY MANAGEMENT Our locators support emploment o 1,05 iniiuals. Base on meian salar rates across arious ke inustr locators e We hae ineste in Aala Lan resiential brans hich eliere to L hae estimate oer P16 billion orth o economic alue that meet growing and diverse demand in Cebu. These products flows to this workforce annually. This economic value also flows For 2 ears, e hae built We hae nurture We uphol the highest promise to elier back to the econom in consumer spening hich then a reputation or qualit, longterm relationships stanars o corporate reliabilit, an sustainabilit ith ke stakeholers goernance an supports small businesses in the immeiate icinit o our SOCIAL AND hich are important to that support us in compliance an ensure 844 units high en resiential (Aala Lan Premier estates. In 2017, e hae accounte oer 3,000 small RELATIONSHIP maintaining our relationship eliering our alue goo relations 504 lots high en resiential subiision businesses proiing ancillar serices such as oo, proposition inestors, ith goernment. ENTERING DIVERSE MARKETS ith the ke stakeholers 1,886 units mimarket resiential (Aleo transportation, accommoation, an launr an other e sere our locators, business partners, THROUGH PARTNERSHIPS 1,333 units aorable resiential (Aia an Amaia merchants, an customers. suppliers an serices. consultants. Inestments / Equit Holings 165,000 GLA – regional malls (under construction) D The growth in businesses inside our estates has also fueled the 301 hotel rooms operational , emergence o allie businesses such as hotels that hae Our epertise an track recor in Our strong an truste 214 hotel rooms uner construction INTELLECTUAL masterplanning an eeloping bran helps us keep our located around our business districts. To date, there are 2,365 mieuse, integrate groth centers is position in the market. rooms that support accommoation requirements o the area. an important capital that ries our *figures reflect entire inventory success. Oerall, the emergence o business ithin an aroun the estates has contributed significantly to LGU’s revenue in the As a eeloper, our unamental capital is lan. As o 2017, e hae eelope an THAT INFORM OUR STRATEGY orm o business taes an licenses. continue to optimall use 143 hectares o lan. We also ensure e continue to MARKET OUTLOOK AND TRENDS NATURAL hae reliable access to resh ater to meet about 242,63 cubic meters o ater nees per ear. We also rel on the gri poer to meet 4,727.01 gigajoules o energ requirement to run our estates, malls, an builings. TRENDS IMPACT TO OUR VALUE CREATION RELEVANT STRATEGY PILLARS

Demographic dividends — 16% of the Increasing demand for residential units, as Diversify portfolio of residential and leasing population in 2017 is within the age range well as leasing spaces for merchants and products to meet demand across different 25-35, which is the age when population locators market segments becomes highly productive.

Middle Class has significantly grown over the past years. Rapid rise in land value, increased Makes land acquisition more difficult and Strategic partnerships for increased land competition in the market expensive holdings

Engage with partnerships for co-development of estates with land owners

Growth in economic activities in emerging Increasing demand for residential units Reach diverse markets through equity provincial centers and leasing spaces. holdings

Grow portfolio through investments in diverse set of brands and products CAPITALS / RESOURCES ACTIVITES OUTPUTS OUTCOMES

Our masterplanne mieuse estates hae hoste a ast Since 1 e hae put to ork an In aition, inestments OPTIMIZING LAND USE range of businesses in Cebu. To date, our estates have more estimate P55 billion in capital (Cebu put in b our locators Strategic Lan Management We hae masterplanne an eelope mieuse estates Holings an Aala Lan projects in Cebu reache an estimate ith a total o 143 hectares an ensure that lan is use optimall. than 70 (builing locators an oer 200 oreign an local o hich P 2 billion as eploe in 2017. P25.6 billion. CHI companies. � STRATEGIC LAND MANAGEMENT FINANCIAL We hae a reliable operational cash A portion of our financial capital (Ealuation, Negotiation, Due Diligence, Acquisition Notwithstanding the influx of foreign investments in Cebu, our flow and we are able to access (P0.70 billion is ineste in We have optimised the use of our space — at 1.4 Gross Floor Area (GFA) eelopments cater to the nees o local brans. In 2017, 50 affordable financing from debt or subsidiaries and affiliates to more � ESTATE MASTER-PLANNING percent o our mall merchants are Philippine brans hile 14 equit. In 2015, e successull issue eectiel reach ierse market per square meter o lan in 2017, hile keeping open spaces at 30% o the P5 billion in bons or our epansion segments. (Deelopment plans, permits total lan area o our estates. percent are homegron Cebuano brans. 204.1 projects. � CONSTRUCTION & MONITORING In aition, our eelopments hae raise the estate alue o Since our entr into the Cebu market in 1, e hae create a total lan b a thousanol rom 1 to 2017. Lan alue We maintain a team o management We source our human capital or appreciation contributes to LGU’s revenue in the form of real an technical eperts ithin the construction projects an propert of 261,416 sqm - total GLA of offices and retail spaces combined which O , HUMAN propert taes. In 2017, oer P300 million as pai to the local compan ho look ater our ke management rom reliable human makes us the leaing ullline eeloper in the proince. CREATING SPACES FOR goernment, 57 percent higher than the preious ear. business operations. resource proiers that hae the best stanars or emploee BUSINESS AND LIFESTYLE management. Consequentl, this has also raise the rental rates rom P400 Office and retail leasing B en o 2017, 2% o these spaces are lease out, hich ries our leasing income. per square meter to P900 per square meter for office space 77 hectares of developed estates as the platform for our office and retail spaces MANUFACTURED ith 261,416 square meters o leasable area that rie our reenue. � OPERATIONS AND PROPERTY MANAGEMENT Our locators support emploment o 1,05 iniiuals. Base on meian salar rates across arious ke inustr locators e We hae ineste in Aala Lan resiential brans hich eliere to L hae estimate oer P16 billion orth o economic alue that meet growing and diverse demand in Cebu. These products flows to this workforce annually. This economic value also flows For 2 ears, e hae built We hae nurture We uphol the highest promise to elier back to the econom in consumer spening hich then a reputation or qualit, longterm relationships stanars o corporate reliabilit, an sustainabilit ith ke stakeholers goernance an supports small businesses in the immeiate icinit o our SOCIAL AND hich are important to that support us in compliance an ensure 844 units high en resiential (Aala Lan Premier estates. In 2017, e hae accounte oer 3,000 small RELATIONSHIP maintaining our relationship eliering our alue goo relations 504 lots high en resiential subiision businesses proiing ancillar serices such as oo, proposition inestors, ith goernment. ENTERING DIVERSE MARKETS ith the ke stakeholers 1,886 units mimarket resiential (Aleo transportation, accommoation, an launr an other e sere our locators, business partners, THROUGH PARTNERSHIPS 1,333 units aorable resiential (Aia an Amaia merchants, an customers. suppliers an serices. consultants. Inestments / Equit Holings 165,000 GLA – regional malls (under construction) D The growth in businesses inside our estates has also fueled the 301 hotel rooms operational , emergence o allie businesses such as hotels that hae Our epertise an track recor in Our strong an truste 214 hotel rooms uner construction INTELLECTUAL masterplanning an eeloping bran helps us keep our located around our business districts. To date, there are 2,365 mieuse, integrate groth centers is position in the market. rooms that support accommoation requirements o the area. an important capital that ries our *figures reflect entire inventory success. Oerall, the emergence o business ithin an aroun the estates has contributed significantly to LGU’s revenue in the As a eeloper, our unamental capital is lan. As o 2017, e hae eelope an orm o business taes an licenses. continue to optimall use 143 hectares o lan. We also ensure e continue to STRATEGY, PERFORMANCE, AND PRINCIPAL RISKS NATURAL hae reliable access to resh ater to meet about 242,63 cubic meters o ater nees per ear. We also rel on the gri poer to meet 4,727.01 gigajoules o STRATEGIC PARTNERSHIPS REACH DIVERSE MARKETS energ requirement to run our estates, malls, an builings. STRATEGY DIVERSIFY PORTFOLIO FOR INCREASED LAND THROUGH EQUITY PILLARS HOLDINGS HOLDINGS Strategic Objectives Diversify portfolio of leasing and Engage with partnerships for co- Grow portfolio through residential products to meet development of estates with land investments in diverse set of high- demand across different market owners performing brands and products segments

Key Performance Market share of residential and New estates being developed Equity holdings in various brands Metrics leasing products through partnerships with land owners Number of customers provided leasing and residential products Utilization level of land (built up floor area/land area) Performance 20% in the Cebu BPO market share 31 hectares (combined) - new 4,567 residential condominium and 14% in the overall Cebu office developments in Mandaue City and units combined (from high-end to market share (BPO and traditional Lapu-Lapu City affordable) office) CAPITALS / RESOURCES ACTIVITES OUTPUTS OUTCOMES

OF LIFE | THE QUALITY IMPROVE reliabilit, an sustainabilit ith ke stakeholers goernance an supports small businesses in the immeiate icinit o our SOCIAL AND hich are important to that support us in compliance an ensure 844 units high en resiential (Aala Lan Premier estates. In 2017, e hae accounte oer 3,000 small RELATIONSHIP maintaining our relationship eliering our alue goo relations 504 lots high en resiential subiision businesses proiing ancillar serices such as oo, proposition inestors, ith goernment. ENTERING DIVERSE MARKETS ith the ke stakeholers 1,886 units mimarket resiential (Aleo transportation, accommoation, an launr an other e sere our locators, business partners, THROUGH PARTNERSHIPS 1,333 units aorable resiential (Aia an Amaia merchants, an customers. suppliers an serices. consultants. Inestments / Equit Holings 165,000 GLA – regional malls (under construction) D The growth in businesses inside our estates has also fueled the 301 hotel rooms operational , emergence o allie businesses such as hotels that hae Our epertise an track recor in Our strong an truste 214 hotel rooms uner construction INTELLECTUAL masterplanning an eeloping bran helps us keep our located around our business districts. To date, there are 2,365 mieuse, integrate groth centers is position in the market. rooms that support accommoation requirements o the area. an important capital that ries our *figures reflect entire inventory success. Oerall, the emergence o business ithin an aroun the estates has contributed significantly to LGU’s revenue in the As a eeloper, our unamental capital is lan. As o 2017, e hae eelope an orm o business taes an licenses. continue to optimall use 143 hectares o lan. We also ensure e continue to STRATEGY, PERFORMANCE, AND PRINCIPAL RISKS NATURAL hae reliable access to resh ater to meet about 242,63 cubic meters o ater nees per ear. We also rel on the gri poer to meet 4,727.01 gigajoules o STRATEGIC PARTNERSHIPS REACH DIVERSE MARKETS energ requirement to run our estates, malls, an builings. STRATEGY DIVERSIFY PORTFOLIO FOR INCREASED LAND THROUGH EQUITY PILLARS HOLDINGS HOLDINGS Principal Risks Land acquisition challenges and risks, Partner selection, scarcity of land, legal / Non-performance of operating unforeseen site conditions, changes compliance risks companies in planning-related regulations; merchant/tenant acquisition and retention Project Execution and Delivery - Market-driven factors, fortuitous events or natural environment conditions may affect the company’s ability to deliver projects within agreed timelines, customer expectations and agreed costs

Changing Market - Changes in the market brought about by macro-economic, social, political and consumer conditions may affect the company’s ability to respond to opportunities in the marketplace, anticipate and respond to the demands of consumers, and maintain or increase revenue and profitability

Competition - Actions of competitors or new entrants may affect the company’s competitive advantage

Financial Risk - Exposure to credit, liquidity, and market risk (i.e., foreign currency risk and interest rate risk) arises in the normal course of the company’s business activities. Ways We Manage Risks »» Improving due diligence and protocols »» Close monitoring of ongoing projects »» Protecting the balance sheet through financial risk »» Expanded partnerships beyond parent company management »» Diversification of product lines »» Monitoring of major market indicators »» Proactive management of environmental risks CHI'S VALUE CREATION

As a real estate company creating and enhancing integrated, masterplanned, and sustainable mixed-use developments, we ensure that we continue to create value for all our stakeholders and the society. OUR CAPITALS OUR KEY ACTIVITIES, RISKS, AND In order for us to deliver value, we depend and draw OUTPUTS from various capitals. We recognize that we may have Drawing from our capitals, we do three key negative impacts on these capitals. It is thus in our best activities to create value. These are (a) strategic land interest to minimize and manage such negative effects, management, (b) leasing for malls and offices, and while enhancing the value of our capitals, through our (c) investment and equity holdings. value-creation processes. Through strategic land management, we ensure These capitals are: that we have enough land to build on for the future. »» Natural capital – the environmental resources that To ensure site resilience and reduce risks against we use and which all other capitals draw from; disasters and other unforeseen site conditions, we »» Intellectual capital – our knowledge base and our brand; have a strict due diligence process in place. We also »» Human capital – our employees, their skills, and build good relationships with private land owners competencies; and local government to ensure that we comply »» Social and relationship capital – our relationships with regulations. Because of this, we have developed with society and our stakeholders; 143 hectares of masterplanned estates with 14 »» Manufactured capital – our man-made assets; and projects under construction. »» Financial capital – the funds that we use to build and provide services. We lease our malls and offices to key locators that enhance economic development and job creation of the localities where we are. We currently have 66 OUTCOMES locators with 91,805 workforce. We employ several Because of the outputs stemming from our management systems to ensure product and service business model, we contribute to an improved quality, and reduce security and safety risks that quality of life in society. By imputing investments our stakeholders, especially our customers, are with our focus areas in mind, we create sustainable exposed to. We also engage our merchants, build and masterplanned estates. These attract investors and sustain good relationships with them to increase and locators, both local and foreign, which impute our ability to attract and retain them, and influence new money into our economy. By locating in our them on our values and sustainability principles developments, these businesses thrive through and practices. As a result, we decreased electricity foot traffic, further giving the local community intensity by 10.95 percent and water intensity by the opportunity to develop ancillary businesses – 11.74 percent from our malls and offices. leading to an improved quality of life for all. As a holding company, we constantly engage with our operating companies and monitor their performance. Our operating companies have historically reflected strong investment portfolios year-on-year. OUR PERFORMANCE

The year 2017 was a turning point for our company as we expanded further to new geographic capitals.

In Lapu-Lapu City, Cebu we broke ground for our latest estate, Seagrove.

In Mandaue City, we continued to push onward with the development of Mandaue’s new dynamic city center, Gatewalk Central.

Our flagship estates, Cebu Business Park and Cebu I.T. Park, likewise moved from strength to strength, as we opened new office and residential towers and expanded our retail offerings with fresh concepts.

In this section, we discuss our performance in 2017 towards developing more livable and sustainable growth centers that uplift entire communities and strengthen our local economy.

26 Cebu Holdings, Inc. 2017 Integrated Report THE VALUE WE DELIVER 102-15, 203-2

FOUR FOCUS AREAS PERFORMANCE METRICS

STRONG AND RESILIENT OPERATIONAL BUILDINGS ESTATE Maintaining a dynamic, efficient, Keeping spaces open, growing and accessible built environment native tree species, and for our locators, merchants, enhancing estate-wide disaster clients, and other stakeholders readiness program CONSTRUCTION PROJECTS / INNOVATIONS FOR OPERATIONAL PROPERTIES PEDESTRIAN MOBILITY AND Addressing a growing demand TRANSIT CONNECTIVITY for residential, office, and Implementing best practices commercial spaces to support in estate management by Cebu’s economic growth providing safe and comfortable expressed in: walkways and transport »» Gross Floor Area (GFA) terminals in our estates »» Gross Leasable Area (GLA) »» Common Areas CONTRIBUTION TO LOCAL »» Constructed Floor Area ECONOMIC DEVELOPMENT WORKFORCE Ensuring economic value Investing in our people by flows to our key stakeholders, providing development generating employment directly programs in a work environment and indirectly, enabling local that is creative, healthy, and safe communities, and providing which makes our people more spaces for micro entrepreneurs productive; high-performing employees bring more success EFFICIENT RESOURCE USE to our business AND WASTE MANAGEMENT Keeping track of our GREEN AND OPEN SPACES environmental impacts, Creating a healthy balance of optimizing resource use through leasable spaces, common areas resource efficiency programs and green spaces to deliver higher value to our tenants and customers

FARTHER AND FASTER 27 Punta Engaño Lapu-Lapu City

RESOURCES OUTPUTS OUTCOMES

P4 billion 135,748 sqm 13,000 Projected capital expenditures Total land area Jobs projected to be generated over for Phase 1 (Land cost and the lifespan of the project development, hotel and retail) 245,095 sqm 14 hectares Development Programs Maximum gross floor area Total land area for resort, leisure, Livelihood and environmental retail and other uses stewardship with partner communities 7,436 sqm Retail gross leasable area Engagement of experts and consultants For full technical due diligence and site 200 rooms (Minimum) assessments for geo-hazard threats Hotel and for survey on existing ecosystems (mangroves, seagrass and coral reef) 15-meter wide Pedestrian spine

500 linear meters

Boardwalk

28 Cebu Holdings, Inc. 2017 Integrated Report EXPLORE

As we widen our reach and grow our but also proudly bring to Cebu, and footprint, CHI launched its newest the Philippines, the very first Holiday estate in Mactan Island, the prime Inn Resort. leisure corridor of the Philippines. In the tradition of CHI’s integrated, Surrounded by generous open spaces, mixed-use developments, Seagrove is protected mangroves, and a view set to be the country’s next world-class of scenic Magellan Bay, Seagrove is leisure estate. envisioned to be a seafront eco-fun destination that will highlight the This distinct brand of leisure company’s commitment to preserve development will not only feature the environment while fostering socio- the best-in-class, waterside retail and economic progress. entertainment properties in the area,

FARTHER AND FASTER 29 PROJECT HIGHLIGHTS

THE SEAGROVE SEAGROVE LAGOON MANGROVE FOREST BOARDWALK

This 500-meter seafront promenade will The Seagrove Lagoon brings new Nature’s majesty is on full display as bring in an exciting and fresh mix of retail adventures and fun with its network of Seagrove opens a panorama of Magellan and entertainment concepts to Cebu. interconnected nature-inspired themed Bay and its lush mangrove forest. The Reminiscent of the great boardwalks of pools—truly an attraction for all ages. This mangrove forest will allow visitors to the world, travelers will be treated to top watercourse will run through the center of kayak, kitesurf, paddle board, and snorkel shops and dining options—from the best in Seagrove and will serve as the focal point to fully appreciate this grand stage of Cebuano cuisine, to iconic handicraft shops, of the estate. aquatic wildlife and biodiversity. to top global lifestyle and adventure brands.

30 Cebu Holdings, Inc. 2017 Integrated Report ECO-FEATURES »» Swale system and raingardens spanning 1.0 kilometers that allow surface rainwater to percolate to the ground and recharge the water table »» Roughly 50 percent of the project is planned to be dedicated for open spaces, 60 percent of which use permeable hardscape materials to allow percolation of surface run-off »» Use of native and endemic plants for landscaping to help bring back biodiversity »» Retaining natural depressions on site to serve as rainwater detention while also serving as showcase of the existing flora and fauna »» Collection of existing beach forest trees to replant on site as part of landscaping for cost efficiency and preservation of existing diversity »» Maintain cleanliness of the sea to encourage regeneration of the coastal ecosystem including the mangrove, seagrass and coral reef »» Minimize disturbance of the existing terrain/topographic profile to mitigate impacts »» Use of grey water for irrigation and flushing to promote water conservation »» Coral regrowth plans to revive the underwater diversity

PEDESTRIAN CORRIDOR HOLIDAY INN RESORT COMMITMENT TO SUSTAINABILITY

The corridor begins at the Entry Plaza, with Holiday Inn will operate their very first resort With the spotlight on sustainability, Cebu its 40-meter frontage facing a four-lane, hotel in the Philippines under their Holiday Holdings, and Taft Properties will build tree-lined road. From here, travelers step Inn Resort brand at Seagrove. With nearly Seagrove seamlessly with nature. Eco- into a 15-meter wide pedestrian spine that 1,200 hotels worldwide, the Holiday Inn efficiency, sound waste management, and cuts across the entire estate. This will lead brand is the largest and most recognized minimal impact to the environment are to various pathways of retail clusters, all hotel brand in the world. ideals Seagrove will uphold. blanketed and embraced by canopies of trees and various island blooms.

FARTHER AND FASTER 31 SEAGROVE: MACTAN'S SEAFRONT ECO-FUN DESTINATION

CHI and Taft Punta Engano Properties unveil a first-of-its-kind coastal destination in Punta Engaño *Artist's perspective

using world-class resort areas for bazaars, concerts, and other help in coral replanting and various amenities with Cebu’s rich exciting entertainment concepts. environmental programs. Fheritage and the finest shopping and dining trends, Seagrove Eco-efficiency, sound waste The initial phase of the project, which will bring in an exciting brand of management, and minimal impact to consists of the boardwalk, support leisure development in Mactan. the environment are ideals Seagrove restaurants and shops, a portion of will uphold. the lagoon, an events ground, and Cebu’s first mixed-use boardwalk, the pedestrian corridor, is targeted for a central network of lagoons, an Fronting a 40-hectare mangrove forest, completion in 2020. expansive mangrove forest and a Seagrove offers a wealth of natural leisure-inspired pedestrian corridor will attractions providing new adventures The total investment for the project anchor the estate. to tourists and locals who frequent is estimated at P35 billion, of which the island. An interconnected circuit P4 billion will be allocated for its first Facilities for new water activities and of tree-lined pathways will allow phase. Seagrove is also expected to adventures will be built, alongside visitors to enjoy the entire estate’s generate 13,000 jobs throughout its various themed zones and multi-use beauty by foot. By the bay, visitors development cycle. can kayak around the mangroves, and

32 Cebu Holdings, Inc. 2017 Integrated Report SEAGROVE UNVEILED In November of 2017, CHI in partnership with one of the most dynamic Cebu real estate developers, Taft Properties, joined forces to break ground for Seagrove, its 14-hectare leisure development in Punta Engaño, Lapu-Lapu City.

FARTHER AND FASTER 33 MANAGING

BIODIVERSITY 304-3 We use native and endemic plant and tree species for landscaping and preserving the existing special natural site features to help bring back biodiversity.

22 Species tree biodiversity with 17 Species of native and endemic trees which can be reproduced and propagated

Collection of existing native and endemic species (wildlings and saplings) for production of the landscaping planting requirements

Establishment of a tree nursery and recovery chamber

34 Cebu Holdings, Inc. 2017 Integrated Report ECO-INITIATIVES 304-3

In 2017, assessments were conducted on the following areas:

»» Coral reef survey was conducted to determine existing conditions of the coral’s biophysical characteristics and to determine possible areas for coral collection, nursery and rehabilitation sites »» 10.3 hectares of seagrass bed fronting the property to determine seagrass vegetation cover and species »» 6-hectare stretch of mangrove vegetation fronting the property to determine population density and identify species of mangrove- associated flora and fauna In addition, mangrove and underwater clean ups were conducted by employee volunteers at Seagrove in 2017.

FARTHER AND FASTER 35 Cardinal Rosales Avenue Cebu Business Park

RESOURCES OUTPUTS OUTCOMES

Close to P 50 B 50 hectares 39,390 Capital for land Masterplanned integrated estate Jobs generated development, CHI projects and other locators since 1990 41 Operational 4% Buildings Increase in workforce 50 hectares With 656, 773 sqm GFA Provided spaces Total land area 9 Under For small, medium Construction enterprises and farmers Partnership With 210,801 sqm GFA from partner communities Local suppliers, communities, and stakeholders Increase in property value From P14,000 per sqm in 1990 to P170,000 per sqm (based on the last closed sale)

3,123 Ancillary Services Small business providing ancillary services such as food, transportation, accommodation, laundry and other services around the estate within the five neighboring communities

36 Cebu Holdings, Inc. 2017 Integrated Report ENGAGE

As we move farther to build new In 2017, we completed two office estates, we continue to enhance our towers – Tech Tower and the BPI Cebu established developments. CHI’s Corporate Center – expected to bring flagship development, Cebu Business in more jobs in addition to over 39,000 Park, remains the central business and workers within Cebu Business Park. lifestyle district in Cebu. To enhance mobility and pedestrian With 41 existing developments and experience within the estate, we nine buildings under construction, established transit stops and built this 50-hectare estate is home to covered walkways connecting regional headquarters, banking key areas. In addition, the estate institutions, IT and BPO multi-national strengthened signature events to companies, upscale residential establish its position as the premier condominiums, and the iconic Ayala lifestyle destination in the city. Center Cebu.

FARTHER AND FASTER 37 18% Ongoing Constructions (9 buildings)

3 Residential 82% Operational Buildings 6 Office/ retail (41 buildings)

28 BPO Offices

8 Residential

3 Retail

2 Hotel/ recreational

38 Cebu Holdings, Inc. 2017 Integrated Report NEW OFFICE TOWERS RISE IN CEBU BUSINESS PARK

To enhance the offerings within our mixed-use estate, CHI completed two office towers within Cebu Business Park.

Tech Tower is an innovative IT/BPO office building designed to maximize operational efficiencies. Now on its fit-out stage, this building adds 16,058 square meters to our office leasing portfolio.

The BPI Cebu Corporate Center is Alveo Land’s first office condominium in the Southern Philippines in partnership with CHI, offering professional work spaces available for ownership.

FARTHER AND FASTER 39 AYALA CENTER CEBU WINS SHOPPING CENTER OF THE YEAR AWARD

The regional mall bested other retailers in the Large Category and bagged the Shopping Center of the Year award.

he region’s premier lifestyle on July 26, 2017 at the Solaire Resort offerings for Cebuanos and tourists. destination, Ayala Center Cebu, and Casino. Strategically located at the heart Tcontinues to excel in the retail of the city's premier business and industry, winning the 2016 Shopping With its sterling performance, Ayala commercial hub, the mall welcomes Center of the Year Award. Center Cebu bested other retailers in an average of 100,000 customers daily. the Large Category and bagged the The Department of Trade and Shopping Center of the Year Award. Ayala Malls also received a special Industry and the Philippine Retailers This is the first time that the mall has recognition for winning in the Association (PRA) acknowledged received this award from PRA. International Council of Shopping model retailers during the 20th Centers Awards. They also received a Outstanding Filipino Retailers and With almost 500 tenants, Ayala Center gold award for their Blooms campaign Shopping Centers of the Year Awards Cebu has continued to grow its and silver for the Little Free Library.

40 Cebu Holdings, Inc. 2017 Integrated Report AYALA CENTER CEBU 2017 Performance

RESOURCE USE WASTE MANAGEMENT

5% 4,267,396 kg Decrease in power consumption Total waste collected, 7% higher than last year 11% Increase in recyclables 24% 7% Decrease in water consumption Decrease in residual waste

WORKFORCE SKILLS TRAINING DISASTER READINESS

270 Mall personnel 52 Emergency Brigade Trained on safety and security, customer Team drills service, crime prevention, common illness prevention, foreign language, work ethics and personal development 12 Complex drills

127, 000 sqm 99% 97% 105, 346 7,245 Gross Leasable Area Lease out rate Occupancy rate Daily foot traffic Daily vehicle count

AYALA CENTER CEBU’S GREENOLOGY CAMPAIGN PUTS A SPOTLIGHT ON GREEN INITIATIVES

Ayala Center Cebu highlighted its held on September 22 to 24, and was commitment to sustainability through partcipated in by Red Cross Cebu the annual Greenology campaign. Chapter, Boy Scouts of the Philippines, and our neighboring barangays. Held last September, the campaign focuses on various initiatives such as More significantly, Ayala Center Cebu the Green Movement Sale, Eco Bag also implemented a no plastic policy Promo and recyclables fair. for its merchants earlier in 2017. This was carried out across all Ayala Malls, To cap off the month-long activities, further strengthening our initiatives for an Emergency Preparedness Fair was a more sustainable environment.

FARTHER AND FASTER 41 CEBU BUSINESS PARK SUSTAINABILITY PERFORMANCE

Despite our continued expansion of Cebu Business Park, we continue to abide by the belief that upholding planetary boundaries and conserving natural resources is the only way to further grow our estate.

This is evident in our achievements in waste management, pedestrianization and mass transport, and the provision of green open spaces throughout the estate.

Our management of resources in the areas of energy, water, reduction of emissions, and reuse of materials also continue to yield good results despite the construction of new commercial buildings and the expansion of our malls.

STRONG AND RESILIENT ESTATE

2,715 52 Number of trees Emergency brigade drills, complex drills and 2 park-wide drills 55 84,727 sqm Native Species Space used as evacuation area

INNOVATIONS FOR PEDESTRIAN MOBILITY AND TRANSIT CONNECTIVITY

FOR WALKING FOR BIKING FOR PUBLIC COMMUTE

36 23 4,210 sqm Marked Bike racks Space for PUV crosswalks terminal/ 565 PUV daily 27 137,812 sqm Pedestrian Enhanced priority signs Street signs Private road servicing motorist everyday 487 linear meters Sidewalks and covered walks Street lights 32 Upgrade Traffic calming device: steel humps and speed tables 75 PWD Ramps

48, 624 sqm Green and open spaces

Improvements Road and landscape

To improve pedestrian-transit connectivity, we completed two bus stops 2 within Cebu Business Park. These are comfortable and convenient areas where Bus stops passengers can wait for the scheduled bus service plying towards Northern and Southern Cebu, in partnership with Ceres.

42 Cebu Holdings, Inc. 2017 Integrated Report CONTRIBUTION TO LOCAL ECONOMIC DEVELOPMENT 102-8

7,674 Traditional offices/ banks

Workforce Ongoing increased construction 5,344 to 39,390, 6% higher Residential 164 Workforce than in 2016 breakdown 16,454 BPO/ IT/ Telco Retail 9,547 207 Hotel/ Leisure

EFFICIENT RESOURCE USE AND WASTE MANAGEMENT 301-2 , 302-1, 302-3, 305-4

1,197 gigajoules 0.0062 gigajoules/sqm ENERGY Total Energy consumption 17% increase vs. 2016 17% increase vs. 2016

EMISSION 201 tonnes CO2 0.001 tonnes CO2/ sqm 17% increase vs. 2016 Emission intesity 17% increase vs. 2016

16,309 kg 21% Reduction in waste WASTE Total recyclable waste generated in collected in common areas common areas

1,922 cu.m WATER 2% Reduction vs. 2016 Total water consumption

FARTHER AND FASTER 43 J.M. del Mar Ave. Cebu I.T. Park

RESOURCES OUTPUTS OUTCOMES

P 38 B 28 hectares 51,611 Land development, Masterplanned, integrated estate Jobs generated CHI projects and all locators 24 Operational 6% Buildings Increase in workforce 28 hectares With 362,375 sqm GFA Total land area 624% increase in 12 Under property value Construction With 337,000 sqm GFA From P21,000 per sqm in 1996 to P152,000 per sqm (based on the last closed sale)

563 Ancillary Services Small business providing ancillary services such as food, transportation, accommodation, laundry and other services around the estate within the two neighboring communities

44 Cebu Holdings, Inc. 2017 Integrated Report EXPERIENCE

We continue to capitalize on the In 2017, we focused on diversifying fast-moving information technology our portfolio with a larger retail play industry as an agile organization with the continuing construction of ready to address market needs. Central Bloc. We also added more dining and entertainment options at Build-up continues at Cebu I.T. Park the Garden Bloc and the new Garden with 12 buildings in construction, in Row. addition to the park’s 24 buildings. This increased the workforce in the IT As the community at the IT Park Park to 51,611, a six percent increase continues to grow, we enhanced from the previous year. support facilities such as established transit stops and pedestrian crossings. Subsidiary Cebu Property Ventures We also invested in an enhanced and Development Corporation’s eBloc sewage treatment plant and Tower series continues to be the wastewater management system. address of choice of multi-national IT and BPO companies and are fully leased-out.

FARTHER AND FASTER 45 CENTRAL BLOC AND GARDEN ROW GARDEN BLOC

The Central Bloc is a stacked two-hectare superblock, The refreshed Garden Bloc continues to be a which will include a regional mall, a hotel, and popular destination among the growing IT Park office towers. This new project will also enhance community. New dining and entertainment the pedestrian experience, connecting the growing choices including Park Social, The Pyramid, number of buildings within the park. Buffalo Brad’s Hot Wings, Sushi Boy, Baguio Brewery and Shaka opened in 2017. Progress on construction as of the end of 2017 was at 59 percent, with the mall set to be completed in 2019. Connecting Central Bloc to The Walk is the Garden Row – a landscaped promenade punctuated by popular dining outlets. The first store on the strip, 10 Dove Street, opened in December 2017.

eBLOC TOWERS

Subsidiary Cebu Property Ventures and Development Corporation’s eBloc Tower series continues to be the address of choice of multi- national IT and BPO companies. All four eBloc Towers are fully leased out, while their retail shops at the ground level add to the vibrant atmosphere in the IT Park.

46 Cebu Holdings, Inc. 2017 Integrated Report PROJECT HIGHLIGHTS

CENTRAL BLOC GARDEN ROW GARDEN BLOC Retail /hotel/ office towers »» 100% completed »» 10,687 sqm gross leasable area »» Percentage of completion 59% »» 1,589 sqm gross leasable area »» 10,279 sqm leased space (96% »» 125,796 sqm constructed »» 70% leased out leased out) floor area »» 86% homegrown (Cebu) brands »» 67, 021 sqm gross floor area »» 44, 840 sqm gross leasable area

eBLOC TOWERS

eBloc Tower 1 eBloc Tower 2 eBloc Tower 4 »» 20,817 sqm gross leasable area »» 27,851 sqm gross leasable area »» 16,224 gross leasable area »» 100% occupancy »» 100% occupancy »» 100% occupancy »» 15% reduction in energy use »» 14% reduction in energy use »» 60% increase in energy use (due to 85% increase in occupancy ebloc Tower 3 vs. 2016) »» 15,760 gross leasable area »» 100% occupancy »» 2% reduction in energy use

33% Ongoing Construction 67% Operational Buildings

FARTHER AND FASTER 47 CEBU IT PARK SUSTAINABILITY PERFORMANCE

Cebu I.T. Park continues to shine as a model of sustainable development in the Visayas.

Our recent and larger investments in wastewater facilities, and support facilities for public transport and pedestrian mobility, are testaments to our commitment to continue growing our estate alongside the preservation of the planet.

As we move at an even faster pace, we will remain as active advocates of sustainability, always mindful of our impacts on society and our natural environment.

48 Cebu Holdings, Inc. 2017 Integrated Report STRONG AND RESILIENT ESTATE

16,356 sqm 1,592 sqm 35,730 sqm Green space Tree nursery Space used as evacuation area 871 21,840 sqm Number of trees Open space 1 Police Precinct 17% 52 Native species Emergency brigade drills, complex drills and 2 park-wide drills

INNOVATIONS FOR PEDESTRIAN MOBILITY AND TRANSIT CONNECTIVITY

FOR WALKING FOR BIKING FOR PUBLIC COMMUTE

22 4 23 Marked Bike racks at the Traffic calming crosswalks Garden Bloc device: steel humps and speed tables 8 76,157 sqm 2 Pedestrian priority Private roads servicing Bus stops signs motorists everyday

6,369 linear meters 1 Sidewalks and covered New access road walkways 11 PWD Ramps

Improvements Road and landscape

CONTRIBUTION TO LOCAL ECONOMIC DEVELOPMENT 102-8

44,420 BPO/ IT/ Telco 1,181 Retail 585 Residential 4,457 Ongoing construction

Workforce 968 Traditional offices/ banks Breakdown

EFFICIENT RESOURCE USE AND WASTE MANAGEMENT 302-3, 305-4

403 gigajoules 0.0034 tonnes /sqm ENERGY Total Energy consumption 32% increase vs. 2016 46% increase vs. 2016

EMISSION 68 tonnes 0.0006 tonnes CO2/ sqm 0.0004 tonnes in 2016 Emission intesity

43,030 kg 9% Reduction in waste WASTE Total recyclables generated in collected common areas

1,537.2 m3 0.01 m3/ sqm WATER Water consumption in Water intensity common areas

FARTHER AND FASTER 49 SOLID WASTE MANAGEMENT AT CEBU I.T. PARK

In 2017, CHI conducted training workshops on Takakura composting among the maintenance personnel of Cebu IT Park, including those of Cebu Business Park and Ayala Center Cebu.

This initiative aims to further reduce residual waste and to make use of yard waste to generate good quality soil enhancers and fertilizers for the estates' landscaping.

»» 1,592 sqm tree nursery »» 34 sqm composting area »» 582 bamboo propagated »» 20,597 kgs of biodegradable waste for compost production

50 Cebu Holdings, Inc. 2017 Integrated Report WASTEWATER FACILITY AT CEBU IT PARK COMPLETED

The ‘Design and Build’ Sewage Treatment Plant (STP) Project at Cebu I.T. Park was completed in 2017, by Manila Water Total Solutions, a wholly-owned corporation of Manila Water Company.

The facility includes Sequencing Batch Reactors (SBR) designed to operate in sequence with 1 SBR at 2.5 million liters per day (MLD) or 2,500 cubic meters per day with cycle time or treatment process of six hours.

STP COMPONENTS »» 1 unit Anaerobic Baffled Reactor (ABR), 1 unit wastewater motorized bar screen, 1 unit lift station, 4 units SBR, 1 unit sludge storage tank, 1 unit sludge belt press and 1 unit disinfection tank

TOTAL SBR CAPACITY »» 10 MLD or 10,000 cubic meters/day (in two phases), while current accommodated volume is at 1,741 cu. m. average daily

CURRENT STATUS »» One phase of the facility (5 MLD) is operational and passes the Department of Environment and Natural Resources (DENR) requirements since January 2017. Discharge permit effectivity is until April 2018.

RECEIVING BODY OF WATER »» Classified as: Class D

FARTHER AND FASTER 51 Gatewalk Central Mandaue City

RESOURCES OUTPUTS OUTCOMES

P 10 billion 169,795 sqm GFA Workforce Projected Capital Expenditures Mall and office (Phase 1) 9,000 workers 1,300 workers Requirement Requirement 174,589 sqm at operations at construction 18 hectares Developable lots, roads, Total land area utilities and open spaces 101 workers (Land development) BERDE standards- as of end of 2017 compliant Mall structure (For construction)

52 Cebu Holdings, Inc. 2017 Integrated Report EXCITE

Gatewalk Central, launched in June friendly parks, refreshing retail of 2016, was CHI’s first venture selections and an Ayala Mall. These outside Cebu City. This project is a components will be seamlessly collaboration with parent company, anchored on the development’s main Ayala Land, and AboitizLand. feature – a 30-meter pedestrian-only spine which runs through the entire Located in Subangdaku, Mandaue, estate. this 18-hectare masterplanned estate will provide a highly-energized The development is currently under lifestyle experience with office construction with the mall set to open buildings, residential spaces, family- in 2021.

FARTHER AND FASTER 53 PROJECT HIGHLIGHTS

ESPLANADE The Esplanade is a long, open space of intersecting crosswalks that provide more opportunity for socialization. The tree-lined lawn showcasing public art acts as a major pedestrian corridor that encourages visitors to move freely between the other districts of the site.

GATEWALK PLAZA The Plaza is the estate's focal point for vibrant leisure concepts and bright celebrations. This designated recreational environment encourages the mental and physical health of the individual while also providing large audiences a constant venue for entertainment.

GARDEN DISTRICT The Garden District is a more intimate space that provides a smooth transition between the indoor and outdoor circulation of the site. Visitors enjoy ample seating while conversing or simply watching the recreational activities of others on the lawn. Ample street space offers safe movement for all users and features continuous shade on either edge, provided by the buildings and tree canopy.

GATEWALK AVENUE Located in an industrial area, Gatewalk Avenue contextually reflects its surroundings with its repurposed shipping containers that house a mix of dining and retail shops. These containers are boutique spaces that will encourage the growth of small business and start-ups. This community-centered district is an alternative to the crowded, oversaturated city climate.

54 Cebu Holdings, Inc. 2017 Integrated Report RESOURCE MANAGEMENT 301-1, 302-1, 303-1, 306-2

MATERIALS WASTE

2,658 bags 740,705 m3 Cement Total waste generated

75 m3 153,302 m3 Sand Waste recycled 171 m3 Gravel

115 tons Rebars

ENERGY WATER

65 MWh 22,174 m3 Land Development 445 m3 Mall construction

RAINWATER HARVESTING AT THE PROJECT SITE

We constructed a sedimentation tank beside the main gate of the construction site. Rainwater from the excavated area is directed to the sedimentation tank which allows suspended particles to settle out of water or to clear water from impurities.

This sedimentation tank connects to the existing drainage line of the Department of Public Works and Highways at M. Logarta Avenue in Mandaue City.

Stored water can be used for the wash bay area for heavy equipment and vehicles and for cleaning purposes at the project site.

FARTHER AND FASTER 55 Our premier seaside residential This latest phase was 69 percent sold development, Amara, launched a new as of the end of 2017. phase towards the end of 2016. Amara, an Ayala Land Premier Designed as a truly distinctive community, is a joint development community, it complements the first- project of CHI with Coastal Highpoint class resort amenities of earlier sold out Ventures Development Inc. (CHVI). This phases including the grand clubhouse scenic community sits on a 46-hectare which features infinity pools, a Jacuzzi, property located at Barangay social hall, function room, a beach bar Catarman Liloan, Cebu, approximately and view decks with spectacular views 18 kilometers from the city. of the Mactan channel.

56 Cebu Holdings, Inc. 2017 Integrated Report Amaia Steps Mandaue is the first mid- rise residential development of CHI with Amaia Land Corporation in Cebu. The development is composed of two 9-storey towers with their own retail support at the ground level for the convenience of residents. The North Tower was turned over to unit owners in 2017, while the South Tower is set to be launched by mid-2018.

FARTHER AND FASTER 57 STAKEHOLDER ENGAGEMENT

CHI views its leadership role in Cebu as an opportunity to engage a wide host of groups to work for a more sustainable province.

We develop enduring and meaningful relationships with our stakeholders to enrich our economy and extend inclusive growth to more Cebuanos.

In 2017, we held a diverse series of stakeholder sessions to open transparent communication channels, inspire a clearer understanding of our work, and explore more areas of collaboration.

In this section, we discuss in detail our stakeholder engagement process, our supply chain management and value delivery chain, and our core programs for our employees and other key publics.

58 Cebu Holdings, Inc. 2017 Integrated Report 102-40, 102-42

INVESTORS Investors provide capital Revenues generated by invested in employee merchants, locators and development, project planning customers ow back to the and execution employees, and investors

EMPLOYEES MERCHANTS COMMUNITY CONSULTANTS LOCATORS CUSTOMERS SUPPLIERS Locators and merchants deliver Develop products to meet their products to their Customers are part of the the requirements of customers community at large locators and merchants

A portion of the revenues is paid to government in the form of taxes and a portion is GOVERNMENT investment for the community REGULATORS We ensure that all processes across the value chain meet minimum standards of government and regulators

HOW THE VALUE WE CREATE FLOWS ACROSS OUR STAKEHOLDERS

CHI maintains a list of key stakeholders to engage, listen, and respond to. These stakeholder groups were identified according to their level of influence on or interest in the organization, as well as the extent of the impact of the company's operations to them.

FARTHER AND FASTER 59 PEOPLE DEVELOPMENT

Our push for greater profitability and creating a work environment where our their current jobs and future roles and sustainability are driven mainly by our people are emotionally connected and responsibilities through training and employees. have a genuine stake on the growth of other career growth opportunities. By our company. providing them with opportunities to We therefore aim to cultivate a develop their skills, we empower them culture of collaboration and Invest The company commits to enhance the to contribute to achieving our collective in improving employee skills, while effectiveness of its employees both in business goals while furthering their personal growth.

CONTINUING PEOPLE DEVELOPMENT AND CAPACITY BUILDING CENTERED ON THE FOLLOWING AREAS:

»» Project Development and other Technical Skills »» Business Continuity and Internal Business Process »» Information Technology »» Disaster Readiness: evacuation drills and crisis communication »» Health and Safety »» Leadership »» Behavioral / Values Formation

60 Cebu Holdings, Inc. 2017 Integrated Report 42% 102-8

64%

64% ASSOCIATE MANAGERS STAFF MANAGERS

OUR 25% 30-50 BELOW 30 OVER 50

AGE YRS. OLD YRS. OLD YRS. OLD RANK PEOPLE GENDER

36% FEMALE MALE

11%

16% 42%

PERFORMANCE HIGHLIGHTS 404-1

35 Hrs 32 Hrs 1 % 38 Hrs 19 % 32 Hrs 19 % Per senior management Per middle management Per associate Average training hours employee employee 17 % 33 Hrs 18 % 39 Hrs 11 % Increase in average Per female employee Per male employee training hours

Forest, river and coastal ecosystems awareness trainings

TOPICS DISCUSSED:

»» Introduction to Sustainability Integrated Reporting Framework SUSTAINABILITY LEARNING AND WORKING SESSIONS »» Intro/Background: Transition to GRI Standards The strength of our sustainability In 2017, we conducted learning and »» Efficient resource use program rests on the ability of working sessions with the company’s »» Ecosystems services awareness and our people to bring them to sustainability council, construction introduction to Assisted Natural Regeneration life. We implement a wide array and property management teams. »» Introduction / orientation on and of educational sessions and contribution to Ayala Land’s Carbon workshops to enrich our people’s NeutrALIty project understanding of our sustainability »» Review on sustainability key result areas goals and operating principles. for 2017 »» Sustainability data management »» Waste Analysis and Characterization Study

FARTHER AND FASTER 61 EMPLOYEE ENGAGEMENT We focus on issues that matter most to our employees. We genuinely value their opinion, and commit to honest, open communication lines that support both their personal and professional paths in life.

Our ultimate goal is to retain the best talents while ensuring that their best interests are upheld.

GREEN MEETINGS

MOOD WALL #GREENOVATION LIVING THE VALUES Encourage sharing of employees' Greening the workplace with CHI CHI’s entry won in parent company ideas and interest by participating in Rethink Recycling Plastic Waste Ayala Land’s, ‘Who is your Leader’ activities posted in the mood wall. Collection Program and maximizing photo contest. This initiative is in line Aside from organizational the use of the company's video with ALI’s 29th anniversary celebration. announcements and corporate conferencing facility to reduce business The entry was submitted by the updates, the moodwall also serves travel. Business Development Team’s Romulo as a venue for employees to express M. Alajid. ideas and interest by participating in activities posted in the moodwall.

62 Cebu Holdings, Inc. 2017 Integrated Report FITNESS, HEALTH AND WELLNESS The company continues to initiate programs and activities to help employees maintain a healthy and active lifestyle despite hectic work schedules. In 2017, activities included:

»» Health and Wellness Talks »» Vital Statistics Measurements »» Juicing »» MMA Wednesdays & Fridays »» Badminton Wednesdays »» Basketball Mondays »» Zumba Tuesdays & Thursdays »» 10,000 Steps »» Sportsfest

SPORTSFEST The Yellow Team, composed of Cebu-based Ayala Land companies, placed overall first runner-up during the culminating activity of the 2017 Ayala Business Club of Cebu (ABCCI) Sportsfest. Events included volleyball, badminton, swimming, track and field, bowling, dance sport, amazing race, and a basketball tournament. This biennial sportsfest aims to strengthen the camaraderie and synergy among employees of the Ayala Group in Cebu through friendly sports competitions.

TEAM BUILDING With the aim to strengthen corporate teamwork and cooperation and reinforce the team as a wellspring of creativity and innovativeness, the CHI team gathers every year for a team building activity.

FARTHER AND FASTER 63 EMPLOYEE VOLUNTEER PROGRAM PERFORMANCE HIGHLIGHTS We provide our employees meaningful opportunities to support the environmental aspects of our business. Our 836 volunteer hours volunteer programs simultaneously protect our natural resources while creating more shared values for our In 2017, CHI expanded its volunteer participation to include employees company and key stakeholder groups. of sister companies Ayala Property Management Corporation (APMC) and Makati Development Corporation (MDC).

AGBAYAY FOR THE ENVIRONMENT

CLEAN UPS CHI, through Agbayay for the »» Mahiga Creek Clean Up in TREE GROWING Environment, organized four major celebration of Earth Day on April Employee volunteers of CHI, MDC, clean ups in partnership with 22, 2017  130 volunteers from 11 and APMC took part in establishing a neighboring communities of Cebu groups tree nursery and a recovery chamber Business Park, Cebu I.T. Park and »» Punta Engaño Cleanup in at Seagrove in September 2017. Seagrove. These include: celebration of the International Volunteers collected wildings and Coastal Clean Up Day on September seedlings of native tree species »» Barangay Apas Clean Up Drive 16, 2017  65 volunteers from CHI, onsite. These will be used as planting at Camp Lapu-Lapu Road in MDC and APMC materials for the project's landscaping. celebration of Zero-Waste Month »» Seagrove adventures in stand-up (January)  50 volunteers from CHI, paddles, kayaks and underwater APMC, MDC and Barangay Apas clean up on September 30 to celebrate the International Coastal Clean Up Month

64 Cebu Holdings, Inc. 2017 Integrated Report FARTHER AND FASTER 65 BEST PRACTICES IN CONSTRUCTION SITES

The health and safety of the people in our construction sites is an important component in the regular routine at the project sites. Our daily activities include : »» Toolbox meetings »» Health and safety training sessions »» Project coordination meetings

In 2017, a total of 3,564 health and safety-related meetings were conducted at our project sites, participated in by safety officers, project engineers and construction workers.

In addition, a total of 4,577 new workers were oriented with environment, occupational health and safety procedures and programs.

SKILLS TRAINING A total of 106 construction workers completed the training program in 2017. Participants improved on their skills in tile setting, plumbing and masonry.

EMERGENCY DRILLS Fourteen drills were conducted in 2017 across all projects participated in by 3,361 workers.

66 Cebu Holdings, Inc. 2017 Integrated Report SHAREHOLDERS, INVESTORS AND ANALYSTS We engage investors and shareholders to the general public. We also address In 2017, we refreshed our company with updates of the company concerns directly brought to the website, providing a tool that not and its projects, whether through company through visits, phone calls or only reaches out to our shareholders, regular meetings, disclosures and online inquiries. but also serves as a vehicle for direct publications, or through news released queries from various stakeholder groups.

MERCHANTS AND SHOPPERS Ayala Center Cebu continues to engage engaged through programs and its merchants by conducting regular initiatives that center on health and meetings, merchants' employees wellness, arts and culture, climate fellowships and annual satisfaction resilience, environmental stewardship surveys. The mall's shoppers are and promotion of local products.

SURVEY RATINGS (in a scale of 1 to 5, 5 being the highest)

3.49 Merchants Survey 2017 3.65 Shoppers Survey 2017

3.25 Merchants Survey 2016 3.63 Shoppers Survey 2016

FARTHER AND FASTER 67 We partner with various communities Our community engagement programs COMMUNITY to enable them to achieve more today focus on site resilience, through CHI’s existing economic and entrepreneurship, and people ENGAGEMENT social platforms. This also ensures empowerment. that we are able to extend progress inclusively.

1% STAKEHOLDER ENGAGEMENT / MARKET SHAPING 4% ENVIRONMENT 4% HEALTH AND WELLNESS EMERGENCY PREPAREDNESS AND 5% RELIEF OPERATIONS 5% EDUCATION COMMUNITY 7% TOURISM, ARTS, CULTURE 11% ADVOCACY FOR CHILDREN INVESTMENT 201-1 ENTREPRENEURSHIP/ SUPPORTING 63% LOCAL BUSINESSES

Our community investments for 2017 directly addressed demands for retail spaces for civic uses and to promote local products and services by small, medium enterprises in Cebu and the rest of M the Visayas and Mindanao regions. P 32 Communit Inestment

In 2017, community engagement activities were conducted with stakeholder groups particularly our neighboring communities in Mactan and Punta Engaño, the communities around the business district and the operators and drivers of public utility vehicles with routes passing through our estates. Activities were centered on ecosystems services awareness, traffic management, road safety, coastal resource management and potential livelihood programs.

68 Cebu Holdings, Inc. 2017 Integrated Report Manu Manu of Barangay Luz Joins Ayala Land Community Livelihood Bazaar in Makati and Taguig

Barangay Luz was alongside other Ayala Land partner communities in Porac Pampanga, Sicogon in Iloilo and Laguna of Ayala Land. This provided an opportunity to introduce and promote upcycled items and other products.

CAPACITY BUILDING FOR COMMUNITY PARTNERS FROM UPLAND BARANGAYS

CHI initiated learning sessions for The event was held in time for the upland farmers who sold fresh produce opening of Tinda Locale. This venue at the Farm Fresh Market at Cebu provides opportunities for our farmers Business Park. to grow their businesses on a bigger stage. They were taught basic accounting skills, product display and some tips on how to manage and grow their small business.

FARTHER AND FASTER 69 CORPORATE GOVERNANCE

Given the large impact of Cebu Holdings, Inc.’s (CHI’s) operations on Cebu, our company’s governance should always be inclusive and responsive to the needs of all stakeholders.

Toward this end, CHI maximizes the capacity of good governance to guarantee that stakeholder rights and the company’s core values are upheld over short-term gains.

CHI follows a comprehensive set of oversight controls to achieve these goals. We also advance shared-value strategies and have voluntarily embedded global sustainability frameworks in our operations.

70 Cebu Holdings, Inc. 2017 Integrated Report Corporate Governance Practices

Governance Structure

Board of Directors

Management Committee

Management Team

Enterprise-wide Risk Management

Mechanisms for Enforcement and Compliance

FARTHER AND FASTER 71 CHI has been listed with the Philippine Stock Exchange (PSE) since 1994. The company fully complies with the Code of Corporate Governance as mandated by the Securities and Exchange Commission (SEC). This code specifies the role, duties, and responsibilities of our Board of Directors in line with Philippine laws, and is fully consistent with the recognized principles of good corporate governance. D.2.12, 102-5

We regard corporate governance as the primary system of stewardship and control to guide CHI in fulfilling its long-term economic, moral, legal, and social obligations. By constantly aiming for high governance standards, the company’s Board and Management are held accountable for upholding ethical behavior at all times. This in turn guarantees CHI’s long-term ability to create value for shareholders, stakeholders, and the nation.

We adopt the ASEAN Corporate Governance Scorecard for assessing our performance and reporting on other matters related to governance. The scorecard allows us to communicate our practices related to upholding shareholder rights, fostering equitable treatment of shareholders, promoting the role of stakeholders, advancing transparency in disclosure, and streamlining board responsibilities and processes.

Further information on our corporate governance may be accessed through our company website.

72 Cebu Holdings, Inc. 2017 Integrated Report 2017 BEST PRACTICES IN CORPORATE

GOVERNANCE 102-17

HIGHLIGHTS

These initiatives were implemented to »» In compliance with the Revised »» We established and strengthened ensure transparency, independence of Code of Corporate Governance our social media presence with the board, and the protection of the for PLCs, the company did the a Facebook page for our flagship interests of our shareholders. following: project, Cebu Business Park, and »» Revised its Corporate subsidiary CPVDC’s Cebu IT Park, »» We revised our Corporate Governance Manual which serves as a channel to Governance Manual in compliance »» Updated the Charters for the disseminate relevant and timely with SEC and implemented/ following Committees: Audit information about the estate. strengthened the following: Committee, Risk Oversight Our stakeholders, in turn, are Committee, Corporate able to give feedback with their • Appointment of Lead Director Governance & Nomination comments on posts or private to ensure independent views Committee messages. We have a “within the and perspective, avoid abuse »» Created a Related Party hour” response rate to concerns of power and authority and Transactions Review Committee, and question on our page. With potential conflict of interest in and the Corporate Governance & more stakeholders going digital, the Board. Nomination Committee this allows for a wider audience • Set term limit of independent reach, encourages stakeholder directors to nine years. This »» We implemented a Non-Disclosure engagement, and provides a faster allows progressive refreshing Policy that requires that all feedback mechanism. Among the of the Board and maintains an information pertaining to the notable instances where we were appropriate balance of skills and company’s business affairs are able to react quickly to stakeholder experience. strictly confidential. All employees concerns is in adapting our bus • Set limit of five board seats are required to sign a Non- service to fit the needs of the riding for independent directors to Disclosure Undertaking annually. public, and enhancing security in ensure that adequate time and attention is given to fulfillment of each director’s duties and that We regard corporate governance as the primary system members of the BOD are able of stewardship and control to guide CHI in fulfilling its to commit themselves to the long-term economic, moral, legal, and social obligations. performance of their roles and responsibilities.

FARTHER AND FASTER 73 poorly lit areas at the perimeter of With our position as the leading real our property for the safety of the estate developer in Cebu, we hope community. to be able to influence our partners and stakeholders to maintain the same standards in conducting their »» To encourage collaboration and businesses as well. creativity in the workplace, we introduced the activity-based »» To ensure transparency with our workplace in our new corporate shareholders and timeliness of office. The open space concept information disclosed, we adhere to allows employees to easily interact, the required timelines in disclosure thus resulting in better productivity. to the Securities and Exchange Commission and the Philippine »» As a real estate company, we realize Stock Exchange and uploaded on that our impacts to the economic, the company website within three social and physical environments trading days from date of event. In are significant and long lasting. addition, information is disclosed We strictly monitor compliance in the SEC ACGR within five trading to reporting and disclosure days from date of event. requirements of bodies that regulate the industry. »» We used technology to our advantage in actively engaging »» We ensure the privacy of customer the company’s shareholders. data entrusted to us as part of our We developed an electronic business transactions – whether it is Registration and Voting System personal data in relation to buying during Annual Stockholders property, shopper data or details of Meeting to determine quorum corporations we deal with. and vote on items on the agenda. The system, which was designed IMPROVEMENTS IN in-house, allows shareholders to see GOVERNANCE PROCESSES voting turnout for significant items in the agenda in real time while the We enhanced our existing systems and meeting is being conducted. processes to further strengthen the governance framework that leads our organization. We enhanced our existing systems and processes to further strengthen the governance framework that leads our CHI strives to maintain a culture organization. of transparency, compliance with regulatory requirements and observance of best practices in corporate governance in the ASEAN region.

74 Cebu Holdings, Inc. 2017 Integrated Report »» To keep our Board and key officers reportable on the homepage safety and wellness programs abreast on relevant corporate of the company’s website. with various fitness activities, governance practices, laws, Stakeholders can use this volunteerism programs and channel to voice their concerns, safety drills. regulations and changing risks, we inquiries or complaints for ensure 100 percent attendance possible violation of their rights; to the Ayala Group continuing and »» The company adopts high standards education program on corporate »» Regularly updating disclosures of business ethics through various governance. In August 2017, and Investor Relations materials programs and policies to ensure the all nine members of the Board on the company website for integrity of the way we conduct our easier access. and three key officers from business. These include: management attended the Ayala »» The Code of Ethical Behavior Group Corporate Governance and »» We enhanced our Stakeholder and Code of Conduct outlines Risk Management Summit. Engagement Program with policies and practices that allow the the general expectations and company to engage, listen and standards of behavior and »» The company provides equal, respond to its key stakeholders. ethical conduct of everyone in timely and cost efficient access the company. to relevant information to its »» We have established various two- »» Conflict of Interest Policy various stakeholders. It also way communications channels provides the parameters by which employees are guided in adopts transparency and open – both online and offline – to the propriety of their actions, communication to the public. allow our customers and other decisions and business practices. These are done through: stakeholders to give feedback on All employees are required »» Regular media and analyst our products and services. to sign an Annual Conflict of briefings to allow investors to »» Internally, we implemented Interest Disclosure. make informed decisions and the activity-based workplace »» The company’s Insider Trading show transparency and open at our new corporate offices Policy covers all directors, communication to the public; to promote collaboration and officers and employees. »» Making the Investor Relations productivity. We also continue to Trading blackout periods are and other concerns easily enhance our employee health, consistently observed.

FARTHER AND FASTER 75 »» Non-Disclosure Policy requires The company has a Related Party that all information pertaining Transactions Review Committee to to the company’s business review material and significant Related affairs are strictly confidential. Party Transactions to determine All employees are required to sign annually a Non-Disclosure whether these are in the best interest Undertaking. of the company.

To ensure that the company is on »» Vendor Integrity Program. As a track with its goals and compliances, major real estate player in the the Board of Directors undergoes an region, we acknowledge that we can annual Performance Appraisal as a influence the industry in upholding body as part of its regular assessment the highest standard of quality process. and business integrity. Thus, we have implemented the Vendor In growing globally as a company, Code of Ethics applicable to the we benchmark with best practices in vendors of CHI and its subsidiaries. corporate governance not only in the We enhanced the program by Philippines, but with the rest of the integrating the Vendor Code of ASEAN. We conducted self-checks and Ethics into our purchasing process implemented policies and programs so that violations are flagged to align with corporate governance before any further transaction with standards within the ASEAN region. possible erring suppliers. SUSTAINABILITY »» The company’s Whistleblowing We continue to develop programs Policy encourages transparency and and initiatives that contribute to empowers all employees, third-party sustainable development, always business partners and stakeholders keeping in mind the well-being of all to report any suspected or known our stakeholders. These include: illegal or unethical activity. Our Online Whistleblowing Report »» Promoting local hiring to address allows reporting through the manpower requirements »» Forging partnerships beyond the website making it open and easily parent company accessible to all stakeholders. We »» Conducting intensified disaster have an identified Ethics Committee readiness program at both the management and Board »» Implementing sustainability impact level to handle complaints. projects based on Four Focus Areas namely: Site resilence, Pedestrian We observe best practices in the Mobility and Transit Connectivity, composition of Board committees. Eco-efficiency and Local Economic CHI’s Audit Committee is comprised Development. entirely of independent directors.

Read more from pages 28 to 57 of this report.

76 Cebu Holdings, Inc. 2017 Integrated Report

MARKETING

AND LEGAL AFFAIRS

FINANCE MEDIA RELATIONS

BUSINESS AND DESIGN COMMUNICATIONS,

RETAIL INNOVATION CORPORATE

MANAGEMENT

FUNDS OFFICE LEASING SYSTEMS

SECURITY TREASURY/ SALES AND INFORMATION

RELATIONS

DEVELOPMENT COMMUNITY

MARKETING PROJECT ACCOUNTING SUSTAINABILITY/

AND ADMIN

ACQUISITION OPERATIONS AND ANALYSIS RESOURCES

LAND LEASING CONTROL HUMAN

GROUP GROUP GROUP

DEVELOPMENT BUSINESS SERVICES GROUP

BUSINESS RETAIL CORPORATE FINANCE

RI CI

R R RCI

ICR C

CRR III

III CI

CHI RI ICR CR COMMITTEE

RI RIH CI

MANAGEMENT

CI CI

II CI

CRR RC

IR I R

I CI

OFFICER

CI CI

PRESIDENT CHIEF FINANCE

DIRECTORS BOARD OF

102-18 BOARD OF DIRECTORS PRESIDENT CHIEF FINANCE CI CI I CI OFFICER IR I R CRR RC II CI R CI CI RI RIH CI MANAGEMENT CHI RI ICR CR COMMITTEE III CI CRR III ICR C R R RCI RI CI

BUSINESS RETAIL CORPORATE FINANCE DEVELOPMENT BUSINESS SERVICES GROUP GROUP GROUP GROUP

LAND LEASING HUMAN CONTROL ACQUISITION OPERATIONS RESOURCES AND ANALYSIS AND ADMIN

PROJECT MARKETING SUSTAINABILITY/ ACCOUNTING DEVELOPMENT COMMUNITY RELATIONS

SALES AND SECURITY INFORMATION TREASURY/ OFFICE LEASING SYSTEMS FUNDS MANAGEMENT

INNOVATION CORPORATE RETAIL AND DESIGN COMMUNICATIONS, BUSINESS MEDIA RELATIONS FINANCE AND LEGAL AFFAIRS

MARKETING

FARTHER AND FASTER 77 CORPORATE GOVERNANCE PRACTICES CHI maximizes the capacity of good governance to guarantee that stakeholder rights and the company's core values are upheld over short-term goals.

I. RIGHTS OF SHAREHOLDERS

A. RIGHT TO SHARE IN PROFITS OR DIVIDENDS A.1, D.2.5 Whenever feasible, CHI has made it a policy to declare a portion of its unrestricted retained earnings as dividends to shareholders, either in the form of stock or cash, or both.

The payment of dividends depends on our company’s earnings, cash flow, investment program, and other factors. Management strives to declare annual dividends, subject to Board approval. On December 6, 2017, we declared a dividend of P 0.15 per share to all stockholders on record as of December 20, 2017, paid on December 27 of the same year.

78 Cebu Holdings, Inc. 2017 Integrated Report Members of the Board and CHI Management held a briefing with the press on the company's performance and plans after the 2017 stockholders' meeting.

B. RIGHT TO PARTICIPATE opportunity to ask questions relevant All voting and tabulation procedures IN DECISIONS CONCERNING to our company and its performance are clearly disclosed, and the minutes FUNDAMENTAL CORPORATE and prospects. During the Annual of every Annual Stockholders’ CHANGES A.2 Shareholders’ Meeting held on April Meeting are posted on the company We respect the rights of shareholders 24, 2017, for instance, we allowed all website. We document the whole to participate in decisions concerning shareholders to vote in approving proceeding including the opportunity fundamental corporate changes, such the remuneration (fees, allowances, for shareholders to ask questions or as but not limited to: and benefits-in-kind) or any increases raise issues, as well as the answers »» amendments to the company’s in remuneration of non-executive provided by each Board member. We constitution; directors. A.3.1 also record the resolutions, and the »» authorization for the issuance of voting results—including approving, additional shares of the company; Shareholders have the right to dissenting and abstaining votes for and nominate, elect, remove and replace each agenda item—and the list of »» sale or purchase (or transfer) of directors, and vote on certain Board members who attended. A.3.3 significant share of corporate assets corporate acts in accordance with the that may result in a change in the Corporation Code. All shareholders Furthermore, CHI encourages character of the company. are also given the opportunity to shareholders, including institutional individually elect the members of the shareholders, to attend general C. RIGHT TO PARTICIPATE Board of Directors. A.3.2 meetings or engagements with the EFFECTIVELY AND VOTE IN company. A.5.1 GENERAL SHAREHOLDER In each election of directors by ballot, MEETINGS A.3, A.5, 102-21, 102-37, Goal 16 shareholders are entitled to cast as We welcome the participation of many votes as their number of shares. all shareholders by giving them an

FARTHER AND FASTER 79 II. EQUITABLE TREATMENT at least 21 days before the scheduled OF SHAREHOLDERS date. In 2017, the notice was sent 62 We treat all shareholders equitably, calendar days prior to the meeting and recognize, protect, and facilitate date, well ahead of the standard the exercise of their rights through number of days required. For the constant and open communication. convenience of stockholders, we held Adequate protection is given to the meeting at Sinulog Ballrooms 1 minority shareholders against any and 2 of the City Sports Club Cebu, unfair conduct on the part of the located at the Cebu Business Park of majority. We impose well-defined Cebu City, Philippines. A.3.18 rules and explicitly prohibit any shareholder, officer or employee The notice specifies the agenda from unfairly gaining advantages and rationale for each item, and the by withholding information from date, time and place for validation minority shareholders and the general of proxies, which should be no later public. than five business days prior to the Annual Stockholders’ Meeting. A proxy A. SHARES AND VOTING RIGHTS B.1 form is attached to every notice. The We respect each of our shareholder’s notice likewise includes the profiles right to participate and vote in of directors seeking election or re- the Annual Stockholders’ Meeting. election. Our Board’s Audit Committee Shareholders are entitled to one clearly identified and recommended vote per common share of stock. our principal accountant and external CHI adopts and observes the basic auditor of the company, SyCip, Gorres, principle of “one vote per one Velayo & Company (SGV& Co.), for re- common share.” B.1.1 election at the meeting. A.3.19, B.2.3, B.2.4, E.3.11 The vote may be made in person, in proxy, or electronically. Strict C. PROHIBITION OF INSIDER adherence to applicable rules and TRADING B.3, D.4 regulations is followed in cases of We adhere to a uniform Insider proxy voting or voting in absentia. Trading Policy in all securities dealings. This means that directors, B. NOTICE OF ANNUAL officers and employees who are STOCKHOLDERS’ MEETING considered to have knowledge of A.3, B.2.4, E.3.11 material facts or changes in the affairs We mail a Notice of Annual of CHI that have not been disclosed to Stockholders’ Meeting to shareholders the public—including any information

80 Cebu Holdings, Inc. 2017 Integrated Report likely to affect the market price of requires employees to accomplish family related transactions to the the securities of the company—are an annual disclosure statement. We company and/or its subsidiaries to prohibited from buying or selling the were in full compliance with all laws ensure that potential conflicts of company’s securities during trading and regulations, and thus no case interest are immediately brought to blackout periods. was found of any violation of the the attention of management. The company’s policy in 2017. company also prohibits the grant of Trading blackouts are required loans to directors. covering 10 trading days before, and D. RELATED PARTY TRANSACTIONS three trading days after, the disclosure B.4, B.5, D.3 Should there be any related party of quarterly and annual reports. CHI’s Related party transactions (RPTs) are transaction, it is identified, reviewed, shares of stocks, options to purchase conducted on an arm’s length basis and approved by the Related Party stocks, bonds and other evidence of and in a manner that ensures fairness Transactions Review Committee. indebtedness are all covered under to the company’s best interest, Material or significant related party this policy, as are all members of and no less favorable than those transactions will have to be endorsed the Board of Directors, key officers generally available to non-related to the Board for approval. The Board (including their immediate families), parties under the same or similar may, at its option, also require that consultants, advisers and employees circumstances. We require directors a related party transaction that has who are made aware of undisclosed and key management personnel to been approved be also submitted to material information. inhibit themselves from participating the stockholders for consideration in discussions on a particular agenda and ratification. In 2017, no RPTs In 2017, our company required all when they are conflicted. were classified as financial assistance directors and officers to disclose their to entities other than wholly owned transactions in shares of the company All directors and employees of CHI subsidiary companies. More details within five trading days from the date and its subsidiaries are required to on this subject can be found on Note of the transaction. Our company also promptly disclose any business and 20 of our Audited Financial Statement found on pages 200 to202.

Resolution of Disputes CHI abides by Republic Act No. 9285, otherwise known as the Alternative Dispute Resolution Act of 2004, as a way to settle disputes without resorting to excessive litigation. The company has a team that handles investor relations to ensure constant engagement with its shareholders. This sets up an avenue to receive feedback, complaints, and queries from shareholders and assures their active participation with regard to activities and policies of the company.

FARTHER AND FASTER 81 82 Cebu Holdings, Inc. 2017 Integrated Report III. ROLE OF STAKEHOLDERS C.1, C.3, C.4, 102-40, 102-42, 102-43, 205-3, 307-1, 419-1, Goal 16 CUSTOMERS LOCAL COMMUNITIES We honor all our legal and voluntary »» The company has a Customer »» We strive to be socially responsible commitments to stakeholder rights First Policy that prioritizes added in all our dealings in the areas and provide all our key stakeholders value in the delivery of products we operate. We ensure that our with the opportunity to obtain and services to continually satisfy interactions serve our environment effective and prompt redress whenever the changing expectations of and stakeholders in a positive their rights are at risk or violated. customers. and progressive manner, fully supportive of comprehensive and Furthermore, our sustainability »» Details of our customer balanced development. framework, strategy, and policy ensure engagement programs conducted that the company’s growth is geared in 2017 are found on page 67. »» We regularly engage towards conscientious and inclusive representatives from our local development. CREDITORS communities to assess their »» CHI presents creditors with all the needs, pursue possible areas of More details of our stakeholder information required to properly collaboration, and use shared engagement outcomes are found on evaluate our credit standing. resources as leverage for programs pages 126 to 127. that benefit our larger community.

EMPLOYEES SUPPLIERS AND CONTRACTORS COMPLIANCE »» Our employees are integral to our »» The company implements »» The company complies with all corporate governance processes. standard procurement policies legal, consumer, and financial For instance, our Health, Safety and and procedures across its reporting requirements against Welfare Policy keeps our people business units. Regular supplier corruption, including extortion and well-informed about CHI’s policies accreditation and annual bribery. on hiring, employee engagement, performance evaluation are training, health, safety, and welfare. observed. »» The company is in compliance with »» The highlights of our 2017 CHI »» Data on local sourcing and all applicable laws and regulations. Personality and Lifestyle Upliftment workforce count of all our units To this end, there has been no Strategy (PLUS) Program and are on page 126. reported incident of any violation. other human capital initiatives are outlined in pages 62 to 63.

FARTHER AND FASTER 83 IV. SUSTAINABILITY VI. WHISTLEBLOWING Our business integrity channels are spearheaded by our company’s Ethics REPORTING POLICY 102-17, 102-33, Goal 16 Committee. These channels enable To ensure transparency and availability We adopt a Whistleblowing Policy our stakeholders to freely report of information, we adopt the GRI to encourage and empower all our fraud, violations of laws, rules and Standards Sustainability Reporting employees, third-party business regulations, or misconduct, without Guidelines and publish an Integrated partners, and other stakeholders to fear of retaliation. Our ultimate goal is Report. report any suspected or known illegal to give all stakeholders every possible or unethical activity. means to come forward so that they V. RIGHT TO VOICE provide information directly to top CONCERNS AND This policy covers any of the following management or the Board of Directors. COMPLAINTS concerns: Contact details are provided on the »» conflicts of interest; Whistleblowers may report via our inside back cover of this report and on »» misconduct or policy violations; website, face-to-face meetings, email, or the company website for stockholders »» theft, fraud or misappropriation; this link: http://chiwhistle.cebuholdings. and stakeholders to access in the »» falsification of documents; com/chiwhistle/. event of concerns and/or complaints »» financial reporting concerns, and of possible violation of rights. »» retaliation complaints. No grievances related to our environmental performance and labor practices were filed in 2017.

84 Cebu Holdings, Inc. 2017 Integrated Report DISCLOSURE AND TRANSPARENCY We follow a disclosure policy and in the company’s ownership procedure that are practical and structure and business group aligned with best practices and structure. The website has a regulatory expectations. downloadable Integrated Annual and Sustainability Report as well as To ensure the adequacy and notices of the Annual Stockholders’ comprehensiveness of each disclosure, Our ultimate goal is to give all Meeting, current by-laws, articles of we adopt the following disclosure stakeholders every possible means incorporation, and other standard practices: to come forward so that they provide disclosures. We likewise aim to »» We aim to release our financial information directly to top management or provide accurate and current statement 60 calendar days after the Board of Directors. information on our company’s the close of the financial year. history, governance, products and In no case shall the issuance of services, investor information, the audited financial statement and sustainability programs in our be later than 90 business days website. after the close of the financial »» We address investor concerns year. In addition, the Board of through the joint effort of our Directors shall issue a certification Control and Analysis Department together with the audited financial and the Corporate Communications statement declaring the report to Department. The names and be fair and accurate. For 2017, the contact details of the assigned Board has reviewed and affirmed officers in these offices for such the true and fair representation concerns are made available to the of the annual financial statement public. report. D.7 »» We update our company Stakeholders may also contact the website to provide information Stakeholders Information Desk for on the financial as well as non- assistance. Contact details are found financial results of CHI’s business on the inside back cover page of this operations—including any changes report. C.2.1, D.9.1

FARTHER AND FASTER 85 All disclosures are immediately posted DATE DISCLOSURE on the Investor Relations section of March 7, 2017 SEC Form 23-B of Ayala Land, Inc. – 66.98% ownership our website and may be accessed dated Feb. 28, 2017 through the following link: http:// Results of Annual Stockholders’ Meeting (Ms. Anna Ma. www.cebuholdings.com/disclosure_ April 24, 2017 Margarita B. Dy replaced Mr. Bernard Vincent O. Dy as list/1/. Chairman of the Board)

Results of Board of Directors Meeting (Mr. Augusto D. Furthermore, all information about Bengzon replaced Mr. Jaime E. Ysmael as member of the August 15, 2017 our corporate governance practices Board and Ms. Maria Luisa D. Chiong replaced Mr. Enrique B. are found on this link: http://www. Manuel, Jr. as Chief Finance Officer & Compliance Officer) cebuholdings.com/governance_ list/1/. D.6.1, D.6.2 September 20, SEC Form 23-B of Ayala Land, Inc. – 71.96% ownership 2017 dated Sept. 18, 2017 To better communicate CHI’s Results of Board of Directors Meeting: 1. The creation of a programs and initiatives, the company Related Party Transactions (RPT) Review Committee and has further enhanced its website by the Charter of the Committee, 2. The appointment of the presenting information in a way that Members of the RPT Review Committee, 3. The declaration is easier for the public to read and and payment of cash dividend of P0.15 per share to all stockholders of record as of Dec. 20, 2017, payable on December 06, access. Corporate Governance and Dec. 27, 2017, 4. Setting of the 2018 Annual Stockholders’ 2017 investor relations disclosures are also Meeting on April 4, 2018, 5. The renaming of the Risk regularly updated online for easy Committee to the Risk Oversight Committee, and 6. The access. revised Internal Audit Charter and the revised charters of the following committees: Risk Oversight Committee, Audit Committee and Corporate Governance & Nomination Committee)

A. TRANSPARENT OWNERSHIP foreign ownership in the company on external auditor, and exercise effective STRUCTURE D.1 a monthly basis. oversight on the process to strengthen We regularly disclose the top 100 the external auditor’s independence holders of our common shares, the As of December 31, 2017, the total and enhance audit quality. security ownership of beneficial number of shares owned by the public owners having more than five percent amounted to 538,174,392 shares, Following our Revised Manual of of the company’s total outstanding equivalent to 28.03 percent of total Corporate Governance, the external stock, and the shareholdings of outstanding shares. auditor position rotates every five members of the Board of Directors (5) years or earlier, or the handling and key management officers. We continue to strictly implement partner is replaced within the said These are submitted to the SEC, guidelines covering securities time period. PSE and Philippine Dealing and dealings to comply with government Exchange Corporation (PDEx), and regulations. C. INDEPENDENT PUBLIC made available to the general public ACCOUNTANTS regularly through postings on our Details of this report are found on SGV & Co. is the principal accountant Investor Relations website page, the page 123. and external auditor of CHI, with SEC’s Annual Corporate Governance Dolmar C. Montañez as the partner-in- Report, and the Definitive Information B. EXTERNAL AUDIT charge for the 2017 audit year. Statement sent to our shareholders. We have established appropriate We also disclose the percentage of standards for the selection of an

86 Cebu Holdings, Inc. 2017 Integrated Report The Audit Committee is empowered value and assisting the organization in through a teleconference facility. We to independently review the integrity accomplishing its objectives through have recorded at least six separate of financial reporting and oversee the effective control, risk management, engagements with analysts and independence of external auditors. and governance processes. investors in 2017. The list of our The Committee, in its oversight briefings can be found at our website function, is likewise responsible E. RISK-BASED AUDIT APPROACH at http://www.cebuholdings.com/ for reviewing all financial reports IAD conducts its audits in compliance investor_rel_list/11/. for compliance with the internal with the International Standards for G. MEDIA BRIEFINGS D.6.4 financial management handbook the Professional Practice of Internal Our Corporate Communications, and pertinent accounting standards, Auditing (ISPPIA). An external quality Media Relations and Legal Affairs including regulatory requirements. It assurance review, conducted in 2014 Department regularly engages the also recommends to the Board and by Punongbayan & Araullo, concluded media through multiple channels, stockholders the appointment of that the company’s internal audit such as media conferences, briefings, external auditors and the setting of activities generally conformed with news releases, fact sheets, social appropriate audit fees. the ISPPIA as issued by the Institute of gatherings and one-on-one meetings. Internal Auditors. An external quality C.1 Audit and Audit Related Fees D.5 We occasionally support media- assurance review is conducted every Our company and its various initiated causes and events that five years. subsidiaries and affiliates paid SGV the are aligned with our principles and following fees in the past three years: advocacies. In 2017, IAD activities were executed in accordance with the risk-based and Audit Audit and Other In 2017, aside from the Annual process-focused approach. Regular year audit-related fees fees Stockholders’ Meeting, we met with audits of the key processes of the representatives from local media 2017 1,488 706 company’s business and corporate outlets, business reporters, and service groups were conducted in 2016 1,079 466 marketing and social or lifestyle accordance with an approved Internal writers and bloggers to disseminate 2015 1,032 369 Audit Plan, and special audits were information on our new development, undertaken as necessary. Figures are in thousand pesos and are exclusive of Seagrove, as well as the Ayala Land VAT and out-of-pocket expenses. Premier developments in Cebu. Jennifer G. Sia serves as the company’s D. INTERNAL AUDIT E.3 Internal Audit Manager Data on media briefings are made The Internal Audit Department (IAD) available in the company’s website at is an independent unit which reports F. ANALYSTS’ BRIEFINGS D.6.3 www.cebuholdings.com/investor_rel_ to the Audit Committee. Through We conduct quarterly briefings list/12/. this committee, IAD assists the Board for both equity and credit analysts in the discharge of its duties and and communicate directly with H. COMPANY WEBSITE D.8 responsibilities as provided for in the institutional and individual investors All information on matters related to July 2014 Revised Code of Corporate through one-on-one meetings, Corporate Governance and Investor Governance. conference calls, and written Relations are available online at communications such as email. www.cebuholdings.com. The department provides independent and objective assurance Analysts and investors who are unable and consultancy services to the to attend our quarterly briefings company with the objective of adding in person are invited to participate

FARTHER AND FASTER 87 RESPONSIBILITIES OF THE BOARD The overall stewardship of our company rests on the Board of Directors, the highest governing authority within CHI’s management structure. The Board is responsible for the company’s long-term success and sustained global competitiveness. It ensures that CHI’s obligations to its stakeholders are met while adhering to the principles of sound corporate governance as a model of best practices in the corporate sector.

Through this report, we attempt to make known to our stockholders and other stakeholders the fiduciary roles, responsibilities, and accountabilities of the Board as provided under the law, the company’s articles and by- laws, and other legal pronouncements and guidelines.

BOARD DUTIES AND RESPONSIBILITIES E.1 and evaluating management’s age for directors and key officers The duties and responsibilities of the performance; as part of management succession Board of Directors include, but are not »» Oversee the development of and and to promote dynamism in the limited to, the following: approve the corporation’s business corporation; objectives and strategy, and »» Align the remuneration of key »» Act on a fully informed basis, in monitor their implementation, in officers and board members with good faith, with due diligence and order to sustain the corporation’s the long-term interests of the care, and in the best interest of the long-term viability and strength; company; corporation, its shareholders and »» Ensure that it is headed by »» Be primarily responsible for other stakeholders; a competent and qualified approving the selection and »» Ensure good governance of the chairperson; assessing the performance of the corporation and establish the »» Adopt an effective succession management led by the Chief vision and mission, strategic planning program for directors, key Executive Officer (CEO), and objectives and key policies and officers and management to ensure control functions led by their procedures for the management growth and a continued increase respective heads (Chief Risk Officer, of the corporation, as well as in shareholder value. This includes Compliance Officer, and Chief Audit the mechanism for monitoring adopting a policy on the retirement Executive);

88 Cebu Holdings, Inc. 2017 Integrated Report »» Establish an effective performance »» Oversee that a sound enterprise Thus far, the Board has approved management framework that will risk management (ERM) framework and adopted the company’s mission ensure that the management, is in place to effectively identify, and core values as well as a Board including the Chief Executive monitor, assess, and manage key calendar which allows for a periodic Officer, and personnel’s business risks. This framework review of the company’s governance performance is at par with the guides the Board in identifying charter and its corporate strategy map standards set by the Board and units/business lines and enterprise- with its corresponding performance senior management; level risk exposures, as well as the scorecards. »» Guarantee that an appropriate effectiveness of risk management internal control system is in place, strategies. Our management committee and set up a mechanism for keeps the Board updated on issues monitoring and managing potential The Board has a charter which concerning the company’s strategy, conflicts of interest of management, contains clear and specific guidelines risk management, and compliance, Board members, and shareholders; on internal processes, particularly the and explains any deviation from the approved plans and targets. »» Approve the Internal Audit Charter types of decisions requiring Board upon endorsement by the Audit approval. Committee; and

FARTHER AND FASTER 89 BOARD STRUCTURE E.2.4 The Board is composed of nine members, three of whom are independent directors. The Board designated a Lead Director among the independent directors who, as per the Corporate Governance provision, should the Chairman not be an independent director. Consul Enrique L. Benedicto is the Lead Director of CHI. The functions of the lead director include, among others, the following:

»» Serve as intermediary between the Chairman and the other directors when necessary; »» Convene and chair meetings of non-executive directors; and »» Contribute to the performance evaluation of the Chairman, as required.

A. INDEPENDENT DIRECTORS E.2.5, B. BOARD COMMITTEES E.2, E.3, Goal 5, Committee Charters available at our Goal 16 E.2.6, E.2.7 website. The company defines independent As the Board of Directors is directors as having no interests, responsible to shareholders in The Board has created committees to relationships, or previous ensuring that value is created which it delegates parts of its rights engagements with CHI in any and sustained, Committees assist and responsibilities. The committees capacity that may interfere with their the Board of Directors to fulfill its are composed of Board members exercise of independent judgment. responsibility for oversight of the specifically chosen for their particular Independent directors may serve for corporation’s corporate governance background and areas of expertise a period of not more than nine years processes, particularly with respect suitable to the functions assigned to and may hold only up to five board to audit, risk management, related the committee. seats simultaneously. party transactions, and other key corporate governance concerns, such These committees are: Executive We comply with the SEC rules on as nomination and remuneration. Committee, Audit Committee, the nomination and election of an Corporate Governance and independent director, and with The composition, functions, and Nomination Committee, Personnel the PSE requirement. CHI has three responsibilities of all committees and Compensation Committee, Risk independent directors. are contained in their respective Oversight Committee, Related Party

90 Cebu Holdings, Inc. 2017 Integrated Report Transactions Review Committee and either in person or via teleconference D. AUDIT COMMITTEE E.2.21, E.2.22, E.2.23, Sustainability Committee. They all or video conferencing. The presence of E.2.24, E.2.25, E.2.26, E.2.27, E.2.28, E.2.29, Goal 16 have free and full access to relevant two-thirds of the members constitutes CHI’s Audit Committee is composed information, data, records, and a quorum, and the majority vote of all of three members, all of whom are personnel of the company. members is necessary to carry an act independent directors. The Chairman or resolution. of the Audit Committee is not the In 2017, the Board has created Chairman of the Board or of any other a Corporate Governance and The chairman, or his designate, committee. Nomination Committee and Related reports to the Board all actions of the Party Transactions Review Committee committee during their subsequent The committee meets at least with respective charters. The Risk meeting. Although any act of the quarterly, either in person or via Committee was renamed as Risk committee that is within the scope of teleconference or video conferencing. Oversight Committee. The Risk its powers does not require approval The presence of two-thirds of the Oversight Committee and Audit by the Board, such acts may be members constitutes a quorum, and Committee also updated their subject to revision or alteration by the the majority vote of all members respective charters. Board—provided that no rights or acts is necessary to carry an act or of third parties shall be affected. resolution. The number of meetings C . EXECUTIVE COMMITTEE and attendance of each member are Members of the Executive Committee The committee may be granted detailed in page 122. are appointed by the Board, and one authority by the Board to act on of them is designated as chairman. In specific matters on its behalf, except Governed by its charter, the Audit CHI, the committee is composed of for the following: Committee is responsible for five members with one independent »» those which also require overseeing the senior management director. The committee is governed shareholders’ approval; in establishing and maintaining an by its own charter. »» filling of vacancies in the Board or in adequate, effective, internal control the Executive Committee; framework. It ensures that systems The committee is composed in such »» amendment or repeal of by-laws, or and processes are designed to a way that it possesses, as a group, the adoption of new by-laws; provide assurance in areas including the necessary knowledge, skills and reporting, monitoring compliance »» amendment or repeal of any experience required to properly with laws, regulations, and internal resolution by the Board, which perform its duties. It is required to policies, efficiency and effectiveness is expressly not repealable or regularly review its composition, of operations, and safeguarding of amendable; taking into account the company’s assets. changing requirements. »» distribution of cash dividends; and »» exercise of powers delegated by The committee meets at such times the Board exclusively to other and frequency as may be necessary, committees.

FARTHER AND FASTER 91 The Audit Committee is responsible for: of internal control activities shall establish and identify the »» Financial Reporting throughout the corporation; reporting line of the CAE so • Reviewing the financial • Elevating to international that the reporting levels allow statements and all related standards the accounting and the internal audit activity to disclosures and reports auditing processes, practices and fulfill its responsibilities. The certified by the Chief Finance methodologies; CAE shall report directly to the Officer and released to the • Ensuring that actions and Committee functionally. The public and/or submitted to measures in case of finding of Committee, having appointed the SEC and for compliance error or fraud in the financial the CAE, shall also concur in his/ with both the internal financial statements and related her replacement, re-assignment management handbook and disclosures are in place and or dismissal. The Committee shall pertinent accounting standards, followed; set up the qualification criteria including legal and regulatory • Reviewing unusual or complex for internal auditors; requirements; transactions including all related • Ensuring that the Internal • Reviewing the quarterly, half- party transactions; and Auditors have free and full access year and annual financial • Communicating with legal to all the corporation’s records, statements before submission to counsel covering litigation, properties and personnel the Board, focusing on changes claims, contingencies or other relevant to and required by their in accounting policies and significant legal issues that function and that the Internal practices, major judgment areas, impact the financial statements. Audit Division shall be free from significant adjustments resulting interference in determining its from the audit, going concern Internal audit scope, performing its work and assumptions, compliance • Reviewing and approving the communicating its results; with accounting standards, Internal Audit Charter and • Ensuring that the Internal tax, legal, and stock exchange subsequent revisions thereto Auditors have free and full access requirements; for approval of the Board. The to all the corporation’s records, • Reviewing and approving Internal Audit Charter shall be properties and personnel management representation periodically reviewed to ensure relevant to and required by their letter before submission to the alignment with the International function and that the Internal independent auditor; Standards for the Professional Audit Division shall be free from • Ensuring that a transparent Practice of Internal Auditing interference in determining its financial management system, (ISPPIA); scope, performing its work and supported by a Procedures and • Set up the Internal Audit communicating its results; Policies Handbook that will be Division, including the • Reviewing reports of the used by the entire organization appointment of the Chief Audit Internal Auditors and regulatory is established, for the integrity Executive (CAE). The Committee agencies, where applicable,

92 Cebu Holdings, Inc. 2017 Integrated Report ensuring that management is • Instituting special investigations and scope of the audit, and taking appropriate corrective as necessary and, if appropriate, ensure cooperation when more actions in a timely manner, hiring special counsel or experts than one professional service including addressing internal to provide the necessary firm is needed. In addition, control and compliance issues; assistance; and the Committee shall review • Reviewing the Internal Audit • Reviewing the evaluation of compliance of the independent Division’s periodic reports compliance with the Code of auditor with auditing standards; and the Internal Audit Annual Conduct for management. • Monitoring the coordination of Report. Periodic reports shall efforts between the independent highlight the status of projects in Independent Audit and internal auditors; accordance with the audit plan • Recommending the • Ensuring that the Independent approved by the Committee, as appointment, reappointment Auditors have free and full access well as any unplanned projects. and removal of the Independent to all the corporation’s records, Such reports shall include a Auditors and the fixing of their properties and personnel summary of key findings and remuneration to the Board. The relevant to and required by their recommendations, including the Committee shall conduct an function; status of implementation. The assessment of independence and • Reviewing the reports of the Annual Report shall discuss the professional qualifications and Independent Auditors and Internal Audit Division’s activities competence of the independent regulatory agencies, where and performance relative to auditor and ensure that a applicable, and ensuring the audit plans and strategies rotation process is observed in that management is taking approved by the Committee; the engagement of independent appropriate corrective actions • Conducting separate meetings auditor; in a timely manner, including with the CAE to discuss any • Reviewing and pre-approving addressing control, governance matter that the Committee or the the Independent Auditor’s and compliance issues; auditors may deem necessary to plans one (1) month before the • Conducting a separate meeting be discussed privately; conduct of external audit to in executive session, with the • Providing inputs on understand the basis for their Independent Auditors to discuss the performance of the risk assessment and financial any matter that the Committee Internal Audit Division and statement materiality, including or Independent Auditors believe communicating/discussing the scope and frequency of the should be discussed privately, such inputs with the Chief audit; including the results of the audit, Finance Officer (CFO) who shall • In this regard, the Committee year-end financial statements, then translate these into a shall discuss with the the quality of management, performance appraisal applicable Independent Auditors, before financial and accounting to the CAE and the Internal the audit commences, the nature controls; and Auditors taken as a whole;

FARTHER AND FASTER 93 • Reviewing and approving the »» Oversee the periodic performance proportion of audit versus evaluation of the Board and its non-audit work, both in relation committees and the executive to their significance to the management; Independent Auditor and in »» Ensure that the results of the Board relation to the corporation’s year- evaluation are shared and discussed, end financial statements, and and address identified areas for total expenditure on consultancy, improvement; to ensure that non-audit work will »» Recommend continuing education/ not be in conflict with the audit training programs for directors, functions of the Independent assignment of tasks, and succession Auditor. The amount of both planning for board members and audit and non-audit work of senior officers; Independent Auditors shall be »» Adopt corporate governance disclosed in the annual report. policies and ensure that these are reviewed and updated regularly, and CORPORATE GOVERNANCE AND consistently implemented; NOMINATION COMMITTEE E.2.9, E.2.10, E.2.11, E.2.12, E.2.13, E.2.14 »» Propose and plan relevant trainings Governed by its charter, the Corporate for members of the Board; Governance and Nomination »» Determine the nomination and Committee consists of at least election process for the corporation’s three members, one of whom is an directors and has the special duty independent director. The Board of defining the general profile of designates the chairman, who is an board members that the corporation independent director. The committee may need and ensuring appropriate meets at least twice a year, either in knowledge, competencies, and person or via teleconference or video expertise that complement the teleconferencing. Two thirds of the existing skills of the Board; members shall constitute a quorum »» Establish a formal and transparent and majority vote of all it's members is procedure to develop a policy for necessary to carry an act or resolution. determining the remuneration of The committee is governed by its own directors and officers consistent charter and is required to regularly with the corporation’s culture review its composition, taking into and strategy and the business account the company’s changing environment where it operates; requirements. »» Establish and maintain a process to This committee has the following ensure that all candidates/nominees powers, duties and responsibilities: to be nominated for election as »» Oversee the implementation and directors at the Annual Stockholders’ periodical review of the Corporate Meeting are qualified in accordance Governance framework;

94 Cebu Holdings, Inc. 2017 Integrated Report with the By-laws, Manual of representation of women in the or advisors and develop, update Corporate Governance and relevant Board, subject to the possession as necessary and recommend to laws, rules and regulations, and of the knowledge, abilities and the Board policies for considering possess none of the disqualifications experience determined by the nominees for directors, officers or stated in the Corporation’s Revised Board as necessary for the Board to advisors. Code of Corporate Governance; properly perform its functions; Process and Criteria for Nominations »» Encourage the selection of a mix »» Review and evaluate the to the Board Goal 5, Goal 16 of competent directors, each qualifications of persons nominated The Corporate Governance and of whom can add value and to positions in the corporation which Nomination Committee ensures contribute independent judgment require appointment by the Board, adherence to pertinent rules and to the formulation of sound and provide guidance and advice regulations in evaluating the corporate strategies and policies. as necessary for the appointments qualifications of nominees for the In the selection of candidates, of persons nominated to other following positions: the objectives set by the Board positions. regarding its composition are to be »» Review and disclose succession »» Board of Directors seriously considered, as well as the plans for members of the Board, and »» President and Chief Executive Officer required knowledge, abilities and officers for the position of Group »» Chief Finance Officer or Treasurer experience needed to successfully Directors to the President/CEO; and »» Group Directors or Vice President manage the Corporation. Careful »» Provide assessment on the Board's »» Corporate Secretary attention must be given to ensure effectiveness in directing the process »» Assistant Corporate Secretary that there is independence of renewing and replacing Board »» Other executive officers of the and diversity, and appropriate members and in appointing officers company whose appointments require the Board’s approval

FARTHER AND FASTER 95 Nomination Process for All Directors Process adopted business or professional organizations. »» Establish a transparent procedure for The Corporate Governance and They must also possess integrity and developing a policy on remuneration Nomination Committee develops and diligence. packages and provide for the full maintains a process that ensures all disclosure of the executive officers’ directors nominated for election at the F. PERSONNEL AND compensation whenever necessary; COMPENSATION COMMITTEE E.2.15, annual stockholders’ meetings have »» Enforce full business interest E.2.16, E.2.17, E.2.18, E.2.19, E.2.20, E.3.14 all the qualifications (and none of the disclosure as a pre-employment The Compensation Committee is disqualifications) to become directors requirement for all officers; and composed of at least three members, as required by all applicable rules. »» Review and recommend changes to one of whom is an independent the Human Resources Development director. The Board designates the After passing this process, directors are or Personnel Handbook whenever chairman, who is an independent then elected by company stockholders necessary. director. who are entitled to vote. Such No member of the committee is shareholders also have the right to allowed to set their own compensation The committee meets at least twice a elect, remove, and replace directors, except for uniform compensation to all year, or as often as necessary, either in and vote on certain corporate acts in directors as members of the Board. person or via teleconference or video accordance with the Corporation Code. conference. The presence of two- G. RISK OVERSIGHT COMMITTEE thirds of the members constitutes a Cumulative voting shall be used in E.3.19, E.3.20, E.3.21, E.3.22, Goal 16 quorum, and the majority vote of all the election of directors. Directors The Board established a separate members is necessary to carry an act may be removed with or without board-level Risk Oversight Committee or resolution. The number of meetings cause, but directors shall not be on its April 24, 2015 meeting to provide and attendance of each member are removed without cause if it will deny assistance in fulfilling the Board’s detailed on page 122. minority shareholder representation oversight responsibilities in relation in the Board. The removal of directors, with risk governance. Governed by its own charter, the moreover, requires an affirmative vote committee has the following powers, of two-thirds of the outstanding capital The committee is composed duties and responsibilities: of the corporation. of three members, and all are independent directors. Its chairman »» Designate remuneration packages Criteria is an independent director, and each for corporate executives, officers and To qualify for nomination, a director member possesses an adequate directors, and provide oversight over must own at least one share of capital understanding of the management, remuneration of senior management stock and be a college graduate or assessment and mitigation of risks and other key personnel, ensuring have sufficient understanding of to which the company is exposed to. consistency with the corporate the fundamentals of, or extensive The Chairman of the Risk Oversight culture, long term interests of the experience in, managing a business. Committee is not the Chairman of the corporate leadership, business Candidates for directorial posts must Board or of any other committee. also possess relevant qualifications, competitiveness, and a fair and transparent performance evaluation such as previous business experience, Governed by its charter, the committee process; membership in good standing in meets at least quarterly, or as often relevant industries, and membership in

96 Cebu Holdings, Inc. 2017 Integrated Report as necessary, either in person or via teleconference or video conferencing. The presence of two-thirds of the members constitutes a quorum. The committee conducted separate executive sessions with the Chief Risk Officer (CRO), Chief Finance Officer (CFO), Chief Audit Executive (CAE), or other members of the management team or external auditors as may be necessary. The number of meetings and attendance of each member are detailed on page 122.

Renamed to Risk Oversight Committee and with an updated charter in 2017, the following constitute its authority, roles and responsibilities: »» Develop a formal enterprise risk management plan which contains: • Common language or register of risks; • Well-defined risk management goals, objectives, and oversight; • Uniform processes of assessing risks and developing strategies to manage prioritized risks; • Designing and implementing risk management strategies; and • Continuing assessments to improve risk strategies, processes, and measures. »» Oversee the implementation of the enterprise risk management plan through a Management Risk Oversight Committee; »» Review the adequacy of the corporation’s risk management framework to ensure that an overall set of risk management policies and

FARTHER AND FASTER 97 procedures exist for the corporation, and oversee its implementation through the Risk Management Group. »» Evaluate the risk management plan to ensure its continued relevance, comprehensiveness, and effectiveness. The Board Risk Oversight Committee revisits defined risk management strategies, looks for emerging or changing material exposures, and stays abreast of significant developments that seriously impact the livelihood of harm or loss; »» Advise the Board on its risk appetite levels and risk tolerance limits; »» Review at least annually the corporation’s risk appetite levels and risk tolerance limits based on changes and developments in the business, regulatory framework, »» Provide oversight over »» Meet periodically with management external economic and business Management’s activities in to discuss the Committee’s environment, and other major managing credit, market, liquidity, observations on and evaluation of its events considered to have major operational, legal and other risk risk management activities, and impacts on the corporation; exposures of the Corporation and »» Report to the Board on a regular »» Conduct discussions on the evaluate the effectiveness of the basis, or as deemed necessary, the corporation’s prioritized and residual risk mitigation strategies and action corporation’s material risk exposures, risk exposures, including their plans, with the assistance of the the actions taken to reduce the risks, impact or potential impact on the internal auditors. This includes and recommend further action or corporation and its subsidiaries, ensuring that the corporation plans, as necessary. and how they are addressing and maintains a framework for fraud managing these risks; This policy notwithstanding, prevention and detection (i.e. management remains primarily »» Assess the probability of each Whistleblower Program) and plans responsible for the development, identified risk becoming a reality for business continuity (i.e. Business implementation and reporting the and estimate its possible significant Continuity Plan); results of the entire risk management financial impact and likelihood of framework. occurrence;

98 Cebu Holdings, Inc. 2017 Integrated Report RELATED PARTY TRANSACTIONS The committee is governed by a »» Oversee the implementation of the REVIEW COMMITTEE charter, which sets out all policies, system for identifying, monitoring, CHI’s Related Party Transactions Review responsibilities, and authority of the measuring, controlling and reporting Committee was created in 2017 to committee. This charter is reviewed RPTs by management, including provide assistance to the Board in its by the committee annually, with any periodic review of the corporation’s oversight responsibility, related to the changes or revisions subject to the RPT policy and procedures; and following: Board’s approval. »» Annually review the committee’s »» Review of all Related Party The Committee is responsible for: own performance. Transactions (RPTs), except those »» Constantly evaluating existing already approved as detailed in CHI’s relations between and among current RPT Policy; businesses and counterparties to »» Formulation, revision, and approval guarantee that all related parties are of policies on RPTs; identified; »» Conduct of any investigation, »» Evaluate material agreements of required to fulfill the Board’s any kind with a related party and responsibilities on RPTs. determine any potential reputational risks that may arise as a result of, or The committee is chaired by an in connection with, the transactions; independent director, and is made »» Assist the Board in determining up of three members, all of whom whether to approve, ratify, are independent. It meets as often as disapprove or reject an RPT; necessary, whether in person or through »» Evaluate whether an RPT entered electronic channels. The presence of into is on terms no less favorable two-thirds of the members during a to the company than terms meeting constitutes a quorum. generally available to an affiliated third party under the same or To fulfill these responsibilities, the similar circumstances; and review Committee shall communicate openly all information provided by and freely with CHI’s management and management, including all relevant compliance team. facts and circumstances; »» Review results of the appraisal, The committee has the power to valuation method, and alternative investigate any matter brought to approaches for transactions its attention, with full access to all involving the sale of CHI’s assets; records, books of accounts, facilities, »» Endorse significant or material RPTs and personnel of CHI. It may seek to the Board for approval; outside counsel or expert opinion in the conduct of such investigations.

FARTHER AND FASTER 99 H. SUSTAINABILITY COMMITTEE 102-19, 102-20,102-29 With the support of the Sustainability »» initiatives and recommendations of Technical Working Group (STWG) the company’s STWG; This committee oversees the establishment headed by the Sustainability Manager, »» stakeholder engagement processes of goals, strategies, and the integration of the Sustainability Committee provides and external partnerships; sustainability initiatives into daily business assistance to the Board of Directors in »» new and innovative technologies activities across the company’s operations. the areas of economic performance, applied in the company’s new environmental stewardship, and projects and managed properties; »» communication of strategies relating corporate social responsibility. to sustainability goals, targets and initiatives; and This committee oversees the »» annual sustainability performance establishment of goals, strategies, of the Sustainability Committee, and the integration of sustainability Sustainability Council, and the initiatives into daily business activities STWG. across the company’s operations. It is tasked to evaluate the following:

100 Cebu Holdings, Inc. 2017 Integrated Report ACTIVITIES OF THE BOARD

COMMITTEES AND MEMBERS RESPONSIBILITIES ACCOMPLISHMENTS Executive Committee • Exercises the powers and attributes of the Developed resolutions on the strategic and tactical objectives of Anna Ma. Margarita B. Dy Board of Directors during the intervening period the company (Chairman) between the Board’s meetings, and shall report all resolutions adopted by it to the Board of Bernard Vincent O. Dy Directors at the first meeting that the latter may Aniceto V. Bisnar, Jr subsequently hold. Pampio A. Abarintos Audit Committee • Provides checks and balances; reviews • Reviewed and discussed the quarterly unaudited consolidated financial statements and related disclosures; financial statements and the annual audited consolidated Fr. Roderick C. Salazar, Jr., SVD ensures transparency in the company’s financial financial statements of CHI and subsidiaries; (Chairman) management system; and elevates the company’s • Discussed and approved the overall scope and the respective accounting and auditing process audit plans of the company’s Internal Auditors and SGV & Co. Enrique L. Benedicto • Oversees the efficient implementation of internal Also discussed the results of their audits and their assessment Pampio A. Abarintos control mechanisms and processes of the company’s internal controls and the overall quality of the • Ensures efficiency of the company’s overall financial reporting process; internal audit system • Reviewed the reports of the Internal Auditors, ensuring that • Recommends the appointment of external management is taking appropriate corrective actions in a timely auditors, their remuneration, and performance of manner, including addressing internal controls and compliance functions issues; • Ensures that the company complies with rules • Recommended to the Board of Directors the re-appointment and regulations, monitors compliance, and acts on of SGV & Co., as independent external auditors for 2017, based non-compliance on the review of their performance and qualifications, including consideration of management’s recommendation; • Reviewed and approved all audit services provided by SGV & Co. to Cebu Holdings, Inc. and related fees for such services • Revised its Charter

Corporate Governance and • Enforces the required qualifications and • Considered and approved the final list of nominees for directors Nomination Committee recommends policies for considering nominees for the year 2017-2018. for positions requiring Board approval Pampio A. Abarintos • Encourages the selection of a mix of competent (Chairman) directors, and ensures adequate representation of Bernard Vincent O. Dy women on the Board Aniceto V. Bisnar, Jr. • Reviews and discloses succession plans for members of the Board and key officers Personnel and Compensation • Designates remuneration packages and Considered and approved the: Committee provides oversight over remuneration of senior 1) 2017 performance evaluation and promotion of associates, management and other key personnel managers and executives; Pampio A. Abarintos (Chairman) • Establishes a transparent procedure for 2) 2017 performance bonus of associates, managers and Bernard Vincent O. Dy developing remuneration packages executives; and Aniceto V. Bisnar, Jr. • Reviews and recommends changes to the 3) salary adjustments for qualified managers and executives for Personnel Handbook 2017.

Risk Oversight Committee • Ensures that a comprehensive set of risk • Ensured that an overall set of risk management policies and management policies and procedures is in place, procedures exist for the corporation. Enrique L. Benedicto and monitors its effectiveness • Reviewed the results of the annual assessment done by the (Chairman) • Evaluates risk assessment reports, mitigation Chief Risk Officer (CRO), including the risks identified, their strategies, and action plans impact or potential impact on the corporation’s business, and Fr. Roderick C. Salazar, Jr., SVD the corresponding measures to address such risks. Pampio A. Abarintos • Evaluated the CRO’s periodic risk assessment reports that may cover existing and emerging risks faced by the corporation and/ or its subsidiaries as well as the risk mitigation strategies and action plans adopted by management. • Monitored the risk management activities of the corporation and evaluated the effectiveness of the risk mitigation strategies and action plans, with the assistance of the internal auditors. • Met periodically with management to discuss the Committee’s observations and evaluation on its risk management activities. • Revised of its Charter

Sustainability Committee • Oversees the establishment of goals, strategies, • Published the company’s first Integrated Report (CHI and the integration of sustainability initiatives 2017) adopting the International Integrated Reporting Aniceto V. Bisnar, Jr. • Evaluates the initiatives and recommendations Framework. applies principles and concepts that are (Chairman) of the STWG, stakeholder engagement focused on bringing greater cohesion and efficiency to the Emilio J. Tumbocon processes and partnerships, new technologies, reporting process, and adopting ‘integrated thinking’ as a way Fr. Roderick C. Salazar, Jr., SVD communication strategies relating to of breaking down internal silos and reducing duplication. Its sustainability goals, and the company’s triple- focus on value creation, and the ‘capitals’ used by the business bottom line performance to create value over time, contributes towards a more financially stable economy.

Through the support of the Sustainability Council headed by the Sustainability Manager. The committee crafted the company’s Framework and reviewed the company’s sustainability framework and discussed targets, plans, programs and initiatives. The agenda included materiality assessment, CSV workshop and stakeholder engagement process and alignment of these initiatives to the four focus areas of the parent company Ayala Land.

FARTHER AND FASTER 101 BOARD PROCESSES

BOARD MEETINGS AND »» Assists the Board and the Board illness, death in the immediate ATTENDANCE E.3.1, E.3.2, E.3.3, E.3.4, E.3.5 committees in the conduct of their family and serious accidents, Board meetings are scheduled meetings, including preparing prevent him/her from doing so; at the beginning of the year. The an annual schedule of Board and »» Performs required administrative presence of two-thirds of all Board committee meetings and the functions; members constitutes a quorum. The annual Board calendar, and assisting »» Oversees the drafting of the by-laws dissemination of agenda, presentation the chairs of the Board and its and ensures that they conform with materials and items for approval are committees to set agendas for those regulatory requirements; and made available at least three business meetings. »» Performs such other duties and days prior to the meeting schedule. »» Safekeeps and preserves the responsibilities as may be provided integrity of the minutes of the by the SEC. In 2017, the Board had five regular and meetings of the Board and its organizational meetings. All the board committees, as well as other official The Board has separate and members attended 100 percent of the records of the corporation; independent access to the Corporate meetings for the year. The Executive »» Keeps abreast on relevant laws, Secretary. Committee likewise convenes regularly regulations, all governance in lieu of the Board. Attendance of all issuances, relevant industry BOARD APPOINTMENTS AND directors is detailed in the table found developments and operations of RE-ELECTION E.3.9, E.3.10, E.3.11, 102-24 on page 122. the corporation, and advises the The directors are elected by ballot, and Board and the Chairman on all each shareholder is entitled to cast THE CORPORATE SECRETARY relevant issues as they arise; as many votes as the number of his/ E.3.7, E.3.8 »» Works fairly and objectively with her shares, multiplied by the number The Corporate Secretary plays a key the Board, management and of slots for election. Pursuant to the role in supporting the Board in the stockholders and contributes to the Corporation Code, any shareholder— discharge of its functions and must flow of information between the including minority shareholders—shall share the visions and decisiveness of Board and management, the Board have the right to nominate candidates the CEO. He or she is a Filipino with and its committees, and the Board to the Board. For the election of excellent legal, financial, accounting, and its stakeholders, including directors, it is necessary for one-half administrative, and interpersonal skills. shareholders; plus one of the outstanding shares of »» Advises on the establishment of stock to be represented. The Corporate Secretary is tasked to Board committees and their terms attend to the correspondences and of reference; The Committee of Inspectors of Proxies files of the company, and signs jointly »» Informs members of the Board, in and Ballots appointed by the Board with the president all stock certificates. accordance with the By-Laws, of the supervises the election. The position also is tasked to record agenda of their meetings at least and process all movements of stock five (5) working days in advance, Directors hold office for the term of certificates. and ensures that the members have one year or until their successors shall before them accurate information have been elected and qualified, in The Corporate Secretary is primarily that will enable them to arrive at accordance with the by-laws. responsible to the Corporation and intelligent decisions on matters that its stakeholders and has, among require their approval; In 2017, SGV & Co. was appointed to others, the following duties and »» Attends all Board meetings, except validate the records. responsibilities: when justifiable causes, such as

102 Cebu Holdings, Inc. 2017 Integrated Report BOARD INDEPENDENCE AND REMUNERATION D.2.11, E.3.12, E.3.13, E.3.14, the Personnel and Compensation CONFLICT OF INTEREST E.3.15, 102-35, 102-36 Committee. The committee establishes E.2, 102-25 Remuneration Policy a formal and transparent procedure Members of the Board are obligated The Board of Directors determines for fixing the remuneration packages to follow high ethical standards while a level of remuneration for its of corporate officers and directors, and bearing in mind the interests of all members that is sufficient to provides oversight over remuneration stakeholders. attract and retain those who are of senior management and other key competent, and compensate them personnel. Directors are expected to act only not only for their performance of in the best interest of the company numerous responsibilities but also for None of the directors, in their personal and are required to comply with the undertaking certain risks as a Board capacity, has been contracted and Code of Ethics. Thus, they are required member. compensated by the company for to disclose annually any conflict of services other than those provided as interest through a Disclosure Form. The compensation is determined a director. Any material conflict of interest found through a resolution of the Board, who shall cause disqualification from the may provide that only non-executive DIVERSITY, SKILLS AND Board. Moreover, directors are required directors shall be entitled to such COMPETENCIES E.4.5, E.4.6 to abstain from participating in compensation. Moreover, the company The company is headed by a discussions and voting on any matter may purchase insurance coverage for competent, working board that fosters where they are in conflict of interest. its directors at its own expense. its long-term competitiveness and No director should be involved in profitability in a manner consistent In line with the insider trading policy of deciding his or her own remuneration. with its corporate objectives and the the company, each director is required Furthermore, the company does long-term interests of its shareholders to notify the Board at least one day not have stock rights, options, and and other stakeholders. before dealing in the company’s shares warrants for directors, executives, and of stock. employees. The company has a policy ensuring diversity of experience and No person shall qualify or be eligible Non-executive directors, defined background of directors in the Board. for nomination or election to the Board as members of the Board who are if he or she is engaged in any business neither officers nor consultants of The Revised Manual of Corporate which competes with, or is antagonistic the company, receive a per diem Governance reflects the relevant to, that of the company in accordance of P40,000 for each Board meeting qualifications of directors, including with the company’s by-laws. attended and P20,000 per Board their membership to the Board’s committee meeting actually attended. various committees. Apart from Directors should keep the information These amounts were implemented educational requirements, a director contained in confidential reports or effective April 28, 2006. should have sufficient understanding discussions for at least two years, of business fundamentals and and ensure that all persons who have Details about remuneration matters experience in managing a business. access to this information on their are found on page 124. behalf comply with this rule. The CHI Board brings to the Remuneration Process Discussion and organization a balanced mix approval of remuneration for CEO and of business, legal, and finance management officers are done through competencies, with each director

FARTHER AND FASTER 103 capable of adding value and rendering optimal decision-making is achieved. The results are compiled by the independent judgment in relation to Diversity is not limited to gender and Compliance Officer and submitted the formulation of sound corporate includes age, ethnicity, culture, skills, back to the Board for discussion policies on issues of strategy, competence and knowledge. and appropriate action through resources, standards and performance the corporate secretary. This self- related to corporate social DEVELOPMENT AND TRAINING D.2.8, assessment survey basically covers E.5.5, E.5.6, E.5.7, 102-27 responsibility, and environmental and compliance to the Corporate economic sustainability. The company encourages Board Governance Manual, individual members to participate in continuing committee charters, and performance The company also requires that at professional education programs scorecard for the president/CEO. The least one of its non-executive directors particularly on corporate governance. survey questions are reviewed regularly should have prior working experience An orientation program for new and administered in May each year. in the sector or broad industry group directors is held whenever necessary to which our company belongs. to properly equip and prepare them for PEOPLE ON THE BOARD their role as members of the Board. CHAIRMAN AND PRESIDENT AND The Board’s composition must CEO E.4, 102-23 reflect the necessary knowledge, Aside from the regular corporate The chairman and the CEO have skills and experience required to governance training facilitated by the separate roles to ensure Board properly perform its duties. Thus, it ICD, we ensured the perfect attendance independence from management, regularly reviews its own composition, of all members of the Board to the an appropriate balance of power taking into account the evolving Ayala group of companies’ annual and increased accountability. Of the requirements of the company and best SEC-accredited corporate governance nine members of the Board, only the practices in corporate governance. summit in 2017. The Corporate president and CEO is an executive CHI encourages the selection of a Governance and Risk Management director. The rest are non-executive or mix of competent directors, where Summit was held on August 11, 2017 at independent directors who are neither each can add value and contribute the Fairmont Hotel. officers nor consultants of the company. independent judgment to the PERFORMANCE APPRAISAL E.5.5, E.5.6, formulation of sound corporate The current chairman of the Board E.5.7, E.5.8, E.5.9, E.5.10, 102-28 strategies and policies. is Anna Ma. Margarita B. Dy who Following best practices, the Board assumed the position in April 24, 2017. measures its assessment process and The corporation seriously considers As chairman,she acts as the legal regularly carries out evaluations to the objectives set by the Board representative of the company and has appraise its performance and ensure regarding its composition, as well as the following roles and responsibilities: the required knowledge, abilities and a balanced composition or mix of backgrounds and competencies. experience needed to successfully »» Makes certain that the meeting manage the corporation. CHI gives agenda focuses on strategic matters, One of the tools used by the Board to careful attention to ensure that there including the overall risk appetite monitor and improve its performance is independence and diversity, and of the corporation, considering is an annual self-assessment exercise. appropriate representation of women the development in the business This peer review is implemented in in the Board, subject to possession and regulatory environments, the form of a formal questionnaire of knowledge, abilities, skills and key governance concerns, and and cuts across each top management experience determined by the Board contentious issues that will group based on four review clusters. as necessary for the Board to properly significantly affect operations; The Assessment covers the Board perform its functions. »» Guarantees that the Board of Directors, the Board Committees, receives accurate, timely, relevant, individual directors, and the president It is important to have Board diversity information to avoid groupthink and ensure that and CEO.

104 Cebu Holdings, Inc. 2017 Integrated Report »» Facilitates discussions on key »» Manages the corporation’s resources COMPLIANCE OFFICER issues by fostering an environment prudently and ensures a proper Ma. Luisa D. Chiong is currently CHI’s conducive for constructive debate balance of the same; Chief Finance Officer and Compliance and leveraging on skills and »» Provides the Board with timely Officer effective August 15, 2017. She expertise of individual directors; information and interfaces between ensures strict adherence to the Code of »» Ensures that the Board sufficiently the Board and the employees; Corporate Governance and to the rules challenges and inquires on reports »» Builds the corporate culture and and regulations of regulatory agencies. submitted and representations motivates the employees of the He is also responsible for reporting any made by management; corporation; and violations to the Board. »» Assures the availability of »» Serves as the link between proper orientation for first-time internal operations and external To ensure stricter monitoring and directors and continuing training stakeholders. timely compliance with regulations, opportunities for all directors; and we have also identified all regulatory CORPORATE OBJECTIVES D.2 requirements of our business Makes sure that performance of the The Board and management operations and put in place an Board is evaluated at least once a year committee ensure that the company electronic monitoring system for Moreover, the chairman shall ensure achieves its objectives with the compliance. The system covers all our that all directors are allowed to freely implementation of set strategies, units, including our business partners express their opinions about any matter maximizing efficiency of operations, or contractors. being discussed. exploring ways to grow the business, and ensuring the sustainability of the CODE OF ETHICAL BEHAVIOR E.2.1, The current president and CEO is company. E.2.2, E.2.3 Aniceto V. Bisnar, Jr. who assumed the The Code of Ethical Behavior outlines position in January 2015. SHAREHOLDER VALUE CREATION the general expectations and standards D.2 of behavior and ethical conduct of The CEO has the following roles and Our company seeks to consistently everyone in the company—including responsibilities: improve its business fundamentals that of subsidiaries and affiliates. It is and prospects to deliver increasing implemented in conjunction with the »» Determines the corporation’s value to our shareholders’ investments. company’s Human Resources Manual strategic direction and formulates Our strategies, business models, of Personnel Policies, and includes the and implements its strategic plan and operating plans are all oriented Code of Conduct on acceptable office on the direction of the business; towards achieving consistent progress behavior for the orderly operation »» Communicates and implements the in all aspects of the business and the of the company and the protection corporation’s vision, mission, values value we create. of the rights, safety and benefit and overall strategy and promotes of the entire workforce. Company any organization or stakeholder We focus on growth, profitability, employees are required to annually change in relation to the same; return on equity, asset efficiency, and disclose any business and family- »» Oversees the operations of total shareholder return as key result related transactions to the company the corporation and manages areas for our management team on a by submitting a Conflict of Interest human and financial resources in corporate, divisional, and individual Disclosure Statement to the Human accordance with the strategic plan; level. These form the basis of incentives Resources and Admin Division. »» Has a good working knowledge such as management promotions, Our company’s Code of Ethics and of the corporation’s industry and allocation of a performance-based cash Conflict of Interest Policy may be market and keeps up-to-date with bonus, and executive stock ownership accessed through our website link: its core business purpose; plan grants. http://www.cebuholdings.com/ »» Directs, evaluates and guides the governance_list/12/. work of the key officers of the corporation;

FARTHER AND FASTER 105 BOARD OF DIRECTORS

AUGUSTO EMILIO LOLITO JOSE EMMANUEL ANICETO D. BENGZON J. TUMBOCON H. JALANDONI V. BISNAR, JR.

106 Cebu Holdings, Inc. 2017 Integrated Report ANNA MA. BERNARD FR. RODERICK C. PAMPIO ENRIQUE MARGARITA B. DY VINCENT O. DY SALAZAR, JR., SVD A. ABARINTOS L. BENEDICTO

FARTHER AND FASTER 107 2 3

5 4 1

108 Cebu Holdings, Inc. 2017 Integrated Report MANAGEMENT COMMITTEE In addition to the various Board-level committees, the company has established a management committee to guide critical decision-making and key governance processes in overseeing individual business units, projects, and support functions.

1. ANICETO V. BISNAR, JR. 4. MARIA CLAVEL G. Flipino, 53, has been the President of TONGCO Cebu Holdings, Inc. (CHI) since January Filipino, 50, is the Vice President and 1, 2015. He is also the President Head of the Retail Business Group of of Cebu Property Ventures and CHI and CPVDC. Concurrently, she is Development Corp. (CPVDC) a publicly an Assistant Vice President of ALI. listed company. Concurrently, he is the Vice President and Chief Operating 5. MA. CECILIA CRISPINA T. Officer of the Visayas-Mindanao Group URBINA of Ayala Land, Inc. (ALI). Filipino, 48, is the Assistant Vice President and Head of Corporate 2. MA. LUISA D. CHIONG Services Group and Human Resources Filipino, 45, is Chief Finance Officer and Administration Division. She is (CFO) and Compliance Officer of CHI Chairperson of the Health and Safety and subsidiary, CPVDC. She assumed Committee of CHI. the position in August 15, 2017. She is also currently the CFO of the Ayala Land Vismin Group and Strategic Landbank Management Group and an Assistant Vice President in ALI.

3. NERISSA N. JOSEF- MEDIANO Filipino, 46, is the Vice President and Head of the Business Development Group of CHI and CPVDC. Concurrently, she is the Assistant Vice President of ALI.

FARTHER AND FASTER 109 MANAGEMENT TEAM

110 Cebu Holdings, Inc. 2017 Integrated Report (From left to right)

FINANCE GROUP Jasmin R. Calero (Funds Management), Jennifer G. Sia (Internal Audit), Izabelle A. Alagon (Accounting), Noel F. Alicaya (Finance and Control Officer / Chief Risk Officer), Judyline L. Boholst (Accounting)

RETAIL BUSINESS GROUP Celeste Bernardine K. Dy (General Manager), Edwin F. Layese (Security)

BUSINESS DEVELOPMENT GROUP Fraulien T. Quijada (Land Acquisition) seated, Catrina C. Martinez (Marketing) seated, Marie Anne Katherine C. Climaco (Marketing), Grant Norihide B. Saito (Project Development), Romulo M. Alajid (Project Development) seated, Jonas R. Suan (Innovation & Design), Raul S. Mananquil (Land Acquisition/Office Leasing)

CORPORATE SERVICES GROUP Maria Jeanette A. Japzon (Corporate Communication, Media Relations and Legal Affairs), Ma. Cecilia Crispina T. Urbina (Human Resources and Admin) seated, Suzette T. Go (Information Systems), Joseph Francisco A. Dee (Network and Systems Admin), Vera R. Alejandria (Sustainability and Community Relations)

FARTHER AND FASTER 111 ENTERPRISE-WIDE RISK

MANAGEMENT D.2, E.3, 102-30, Goal 4 At CHI, effective risk management is integral to our business’ sustainability and the preparedness and resiliency of our operations, facilities and project sites. We take strategic approaches in managing current and perceived risks to an acceptable level—both holistically and individually—at all levels of the company.

EMBEDDED IN OUR CORPORATE GUIDED BY A FRAMEWORK CULTURE Our ERM framework details the process of identifying risks Our Enterprise-wide Risk Management (ERM) program for the company and its subsidiaries. This is supported by adopts a top-driven, bottom-focused approach. Risk comprehensive risk identification, review, monitoring and awareness is embedded in our corporate culture with reporting process at all levels in the company. management taking on an active role in managing risks. The identification, management and monitoring of key Our framework focuses on four main categories: strategic, risks are done on all levels of the company and are part operational, financial and environmental risks. of daily operations.

KEY CHARACTERISTICS OF THE EN S VI COMPANY'S RISK MANAGEMENT SK RO RI N L M PROCESSES A E N N O K T I IS A A T R N L A Y A IF R R LY T I »» Board-level understanding and commitment to E N Z S P E E K R O ID S Risk Management as an integral aspect in decision I S making and driving value K »» Transparency of risk communication COMMUNICATION CONSULTATION

»» A risk culture that encourages accountability at all M REPORTING O levels N I T O S »» A Chief Risk Officer and team who drives key T R R R K S S A IS I management processes T K R K E T IS G EA TR R »» Identification of existing and emerging risks IC L R IA I C S N »» Use of both operational and financial risk KS A FIN information in decision making processes »» Formal collection and incorporation of operational and financial risk information into decision- making and governance processes »» Moving beyond risk avoidance and mitigation to finding value-creating opportunities in risk management

112 Cebu Holdings, Inc. 2017 Integrated Report CHIEF RISK OFFICER (CRO) The Chief Risk Officer and his team are responsible for creating a culture that actively recognizes and addresses risks to our operations. Together with management, the company takes charge of building its capacity to formulate strategies and execute decisions that will make our business sustainable and relevant.

Specifically, the CRO has the following tasks:

»» Establish the risk culture in the company »» Implement continuous improvement of and create the vision and purpose of the risk management policies and processes risk function »» Set acceptable levels of risk appetite »» Oversee risk-identification and mitigation »» Set an effective control environment activities

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

PROTECTED BY LINES OF DEFENSE We have identified the company’s three main risks: Competitor Risk, Project Execution and Delivery Risk, and Changing Market Risk. Please see sidebar on page 114 for definitions of these key risks.

To manage these risks, we apply three lines of defense in ERM and internal controls:

RISK MANAGEMENT AND RISK GOVERNANCE RISK OVERSIGHT ACCOUNTABILITY AT SOURCE ERM Team Board Committees/Audit (Internal and Risk Owners/Business Group Level External) »» Chief Risk Officer leads the ERM »» Risk management embedded Team to ensure risks are effectively »» Risk Oversight Committee provides within critical processes managed and relevant risks are oversight on risk management »» Risk owners take active role in addressed activities, approves ERM policy, identifying, assessing, and treating »» Periodic review and monitoring of reviews status of top corporate risks in daily operations key risks and indicators risks and effectiveness of the ERM »» Processes, procedures, control process instituted at business group level »» Periodic reporting of key risks and mitigation plans to Risk Oversight »» Audit Committee provides Committee oversight functions on financial reporting, internal control, internal audit, external audit, and compliance »» Internal audit periodically reviews processes and controls and recommends areas for improvement through its assurance and consulting activities »» External audit conducts periodic independent assessment of financial controls and processes in conjunction with the preparation of the financial statements

FARTHER AND FASTER 113 KEY RISKS 102-15

COMPETITOR RISKS PROTECTING THE BALANCE from the combined financial strength, Actions of competitors or new entrants SHEET THROUGH FINANCIAL RISK technical expertise, and real estate to the market may affect the company’s MANAGEMENT experience of the companies. competitive advantage and may pose We continue to take advantage of difficulties in achieving our business the current low but slowly increasing DIVERSIFICATION OF PRODUCT LINES objective. We manage these risks by interest rates by maximizing its regularly monitoring market indicators leverage and converting our short-term Since 2013, we have been diversifying and use this as basis for informed to long-term debt at favorable rates to our portfolio with the introduction decisions and possible opportunities. fund the construction of our leasing of the Amaia brand for affordable We also analyze current and future projects. This allows us to better housing, and office condominiums for situations and develop plans and balance our debt capacity and maturity sale, thus extending our market reach. programs accordingly. with a steady recurring income. ACTIVE MANAGEMENT OF ENVIRONMENTAL RISKS 102-11 PROJECT EXECUTION AND MONITORING OF MAJOR MARKET DELIVERY RISK INDICATORS Our operations have a major impact Market-driven factors (e.g. costs We rely on close monitoring of major on the environment and social and availability of labor), fortuitous market indicators for guidance in conditions in the areas where we events (e.g. earthquakes, typhoons) or project investments. Forecasts, operate. Together with parent natural environment conditions (e.g. industry, and sales reports are regularly company Ayala Land, we outlined our soil type) may affect the company’s monitored and reported to the project sustainability focus areas where we ability to deliver projects within agreed teams and senior management to can affect positive change through timelines, customer expectations and provide them a clearer perspective of our developments. These include: agreed costs. We regularly monitor the prevailing market conditions and issues (1) site resilience, (2) eco-efficiency, status of our projects to ensure that we on the ground for a more informed (3) pedestrian-transit connectivity meet our customer’s needs and achieve decision-making process. and (4) local economic development. our sales targets. Programs have been implemented in CLOSE MONITORING OF ONGOING 2017 for these focus areas. CHANGING MARKET RISK PROJECTS Changes in the market brought about The early identification and We also continue to adapt measures to by macro-economic, social, political management of delivery risk allows us reinforce our Business Continuity Plan. and consumer conditions (e.g. lifestyle to move our projects on the right track, Our Crisis Management Team ensures demands) may affect the company’s meet our customers’ requirements, and continuous operations, or at least ability to respond to opportunities achieve our sales and turnover targets. minimal disruption, during calamities in the marketplace, anticipate and and unforeseen events. Improvements EXPANDED PARTNERSHIPS respond to the demands of our on our services and facilities have also BEYOND PARENT COMPANY consumers, and maintain or increase been implemented to ensure the safety our revenue and profitability in the Strong synergies diversify risk and of our stakeholders and enhance our specific business environment where create the opportunity for us to readiness in times of emergencies and we operate. We respond by pursuing increase our reach and depth in the calamities. These allow us to protect various opportunities to partner with Cebu market. our assets, especially our employees, strong local developers and diversify customers, and locators in our facilities. our product lines. In 2017, our continued partnership with strong local developers, Taft ASSESSING OUR RISK A DRIVER OF KEY STRATEGIC Punta Engaño Property, Inc. with MATURITY Gaisano Group in Mactan, and Cebu ACTIONS Aon PLC, the leading global provider District Property Enterprise with Ayala Through our ERM program, CHI of risk management, insurance and Land and Aboitizland in Mandaue, directed the following key strategic reinsurance brokerage, and human allowed us to maintain a strong market actions in 2017: resources solutions and outsourcing presence and expand our portfolio services, designed the Aon Risk through solid synergies, advanced Maturity Index—an innovative master-planning, stronger combined tool to assess an organization’s risk branding, and deeper market management practices through a Risk knowledge. These partnerships benefit Maturity Rating.

114 Cebu Holdings, Inc. 2017 Integrated Report This assessment tool focuses on the »» Conduct a robust assessment »» Confirm that risk management 10 characteristics of risk maturity, as of emerging risks with key practices add value and support follows: stakeholders (internal and external); in identification of opportunities »» Board Understanding and »» Confirm and enhance risk reporting as well as risk avoidance and Commitment to Risk Management frameworks at management, mitigation. »» Risk Management Stewardship executive and Board levels; »» Risk Communication »» Implement a risk management »» Risk Culture Engagement & technology solution; Accountability »» Expand understanding of the »» Risk Identification impact of employee life cycle and »» Risk Management Strategy employee engagement; and Development »» Risk information & Decision Making MECHANISMS FOR ENFORCEMENT AND COMPLIANCE Processes »» Risk Information & Human Capital We strive to achieve full compliance of all pertinent laws and regulations Processes affecting our operations. The identification and our compliance to specific orders and rules, such as those related to labor practices, human rights, and »» Risk Analysis & Quantification environmental laws, are championed by CHI’s various units and support »» Risk Management Focus & Strategy teams based on their respective functions and areas of expertise.

Using this tool to self-assess our AREA PRACTICE 2017 PERFORMANCE existing risk management approach, Labor practices HR-Admin Department ensures the full No cases filed against 102-41, 406-1, 408-1, implementation of all policies and procedures CHI for discrimination findings showed that the company is at 409-1 related to employee hiring, development, and and non-observance an Operational Level of Risk Maturity. retention of labor standards and employment contract In lieu of a formal employee union, an HR clauses There is a clear understanding of the Committee is organized among employee organization’s key risks and also a representatives from all levels. The group acts as an alternative vehicle for employee participation consistent execution of activities to in management address these risks. Some functional Human rights HR Officer orients all employees on policies, None to report areas employ more sophisticated 412-3, 411-1 processes and procedures related to human techniques whenever necessary. rights provisions »» Predetermined or developing set of Compliance is extended to general contractors, suppliers, and service providers loss and tolerance guidelines A stringent supplier accreditation process is in »» Explicit consideration of risk and place to ensure all investment agreements and risk management information in key contracts do not violate human rights decisions Environmental Business Development Group coordinates closely No reported incident »» Consistent application of analysis 307-1 with APMC and MDC to ensure compliance to of violation pertinent environmental laws with incorporation of both CHI leverages on the comprehensive monitoring qualitative and quantitative system of both companies to identify and record techniques incidents of violation Aon’s recommendations to further Pollution Control Officers submit a quarterly Self-Monitoring Report to the Environmental develop risk management capabilities Management Bureau of the Department of Environment and Natural Resources. were as follows: Consolidated results are submitted to the »» Incorporate risk management management committee at least twice a year responsibilities into job descriptions Product responsibility Retail Business Group champions customer No reported incidents and performance evaluations; 417-2, 417-3, 418-1, programs for merchants and shoppers of violation to »» Formalize risk tolerances, including 419-1 marketing, information The Information Systems Department manages and labeling, and other metrics and reporting requirements; our existing customer complaints handling products and services »» Identify opportunities for efficiency, system regulations including customers privacy consistency and collaboration APMC directly handles concerns from unit among risk-based functions and owners and office building occupants processes; Community The Community Relations/Sustainability None to report »» Incorporate risk correlation Engagement Department, through the employee volunteer 419-1 program, executes the company’s community within existing risk quantification development programs approaches;

FARTHER AND FASTER 115 APPENDICES

CORPORATE GOVERNANCE

MATERIAL ASPECT AND BOUNDARIES

ECONOMIC VALUE GENERATION AND DISTRIBUTION

STAKEHOLDER ENGAGEMENT

INDICES WORKFORCE SUPPORTED

EMPLOYEE STATISTICS

ECO-EFFICIENCY DATA

GRI CONTENT INDEX

ASEAN CORPORATE GOVERNANCE INDEX

116 Cebu Holdings, Inc. 2017 Integrated Report APPENDIX 1. DIRECTORSHIP IN LISTED COMPANIES OTHER DIRECTORSHIPS/ POSITIONS DIRECTORS' PROFILE President, Cebu Holdings, Inc. CHAIRMAN B.2, D.2, E.2, E.4, E.4.5 President, Cebu Property Ventures & Ayala Property Management Corporation Development Corporation Makati Development Corporation Amaia Land Corporation ANNA MA. MARGARITA B. DY, OTHER DIRECTORSHIPS/ POSITIONS Ayalaland Commercial Reit, Inc. FILIPINO, 48 Vice President, Ayala Land, Inc. Bellavita Land Corporation DIRECTOR OF CEBU HOLDINGS INC. (CHI) Chief Operating Officer of the Visayas- Ayagold Retailers, Inc. SINCE AUGUST 17, 2016 AND CHAIRMAN OF Mindanao Group, Ayala Land, Inc. Station Square East Commercial Corporation THE BOARD OF DIRECTORS STARTING LAST Aviana Development Corporation APRIL 24, 2017. CHAIRMAN AND PRESIDENT Cagayan De Oro Gateway Corp. North Point Estate Association, Inc. BGSouth Properties, Inc. EDUCATION Cebu Leisure Company, Inc. BGNorth Properties, Inc. BS of Arts, Degree in Economics Honors Asian i-Office Properties, Inc. BGWest Properties, Inc. Program, Magna Cum Laude, Ateneo De Portico Land Corp. Manila University, Philippines 1990 CHAIRMAN Philippine Integrated Energy Solutions, Inc. Master’s Degree in Economics, London Adauge Commercial Corporation School of Economics and Political Science, Amaia Southern Properties, Inc. VICE CHAIRMAN UK (’91) Ayalaland Estates, Inc. Masters in Business Administration, Harvard VICE CHAIRMAN Ayala Greenfield Development Corporation Graduate School of Business Administration South Portal Properties, Inc. Alviera Country Club, Inc. in Boston, U.S.A 1996 Central Block Developers, Inc. Junior Golf Association of the Philippines

DIRECTORSHIP IN LISTED COMPANIES PRESIDENT DIRECTOR AND PRESIDENT CHAIRMAN OF THE BOARD OF DIRECTORS CBP Theatre Management Company, Inc. Bonifacio Land Corporation Cebu Holdings, Inc. Lagdigan Land Corporation Emerging City Holdings, Inc. Cebu Property Ventures & Development Columbus Holdings, Inc. Corp. VICE PRESIDENT Berkshires Holdings, Inc. Solinea, Inc. Fort Bonifacio Development Corporation OTHER DIRECTORSHIPS/POSITIONS Aurora Properties Incorporated SENIOR VICE PRESIDENT DIRECTOR Vesta Property Holdings, Inc. Ayala Land, Inc. Accendo Commercial Corporation Ceci Realty Inc. Westview Commercial Ventures Corporation Alabang Commercial Corporation MEMBER, MANAGEMENT COMMITTEE, Cagayan de Oro Gateway Corporation Accendo Commercial Corporation Ayala Land, Inc. Bonifacio Estates Services Corporation Aurora Properties, Inc. PRESIDENT HEAD, STRATEGIC LANDBANK MANAGEMENT Ceci Realty, Inc. Hero Foundation, Inc. GROUP (SLMG) Vesta Property Holdings, Inc. Bonifacio Art Foundation, Inc. Ayala Land, Inc. Cebu District Property Enterprise, Inc. AvencoSouth Corporation DIRECTOR DIRECTOR & PRESIDENT Taft Punta Engano Property, Inc. Alveo Land Corporation Nuevocentro, Inc. Amicassa Process Solutions, Inc. Alviera Country Club, Inc. AFFILIATIONS Whiteknight Holdings, Inc. Cebu Business Park Association, Inc., Ayalaland Medical Facilities Leasing, Inc. DIRECTOR & EXECUTIVE VICE PRESIDENT Chairman and President (January 1, 2015) Serendra, Inc. Fort Bonifacio Development Corporation Asiatown I.T. Park Association, Inc., Chairman Alveo-Federal Land Communities, Inc. and President (January 1, 2015) ALI Eton Property Development Corp. DIRECTOR Hero Foundation, Inc., Board of Trustee Nuevocentro, Inc. Aurora Properties, Inc. Vesta Properties Holdings, Inc. BERNARD VINCENT O. DY, BOARD MEMBER Ceci Realty, Inc. FILIPINO, 54 Ayala Foundation, Inc. AyalaLand Medical Facilities Leasing, Inc. DIRECTOR OF CEBU HOLDINGS INC. (CHI) Ayala Group Club, Inc. Next Urban Alliance Development Corp. SINCE AUGUST 2014 AND CHAIRMAN OF THE Anvaya Cove Beach and Nature Club BOARD OF DIRECTORS FROM AUGUST 2014 PAST MEMBER TO APRIL 2017. Advisory Council of the National Advisory PRESIDENT Group for the Police Transformation ALI Eton Property Development Corporation EDUCATION Development of the Philippine National Police-2015 B.B.A Accountancy (BBAA ‘85), University of PAST VICE PRESIDENT Notre Dame Benpres Holdings Corporation Master’s Degree in Business Administration JOSE EMMANUEL H. (MBA ’89), University of Chicago JALANDONI, ANICETO V. BISNAR, JR., Master’s Degree in International Relations FILIPINO, 50 FILIPINO, 53 (MIR ’95), University of Chicago DIRECTOR OF CEBU HOLDINGS INC. (CHI) PRESIDENT OF CEBU HOLDINGS INC. (CHI) SINCE AUGUST 17, 2016 SINCE JANUARY 1, 2015 DIRECTORSHIP IN LISTED COMPANIES Director, President & Chief Executive Officer, EDUCATION EDUCATION Ayala Land, Inc. B.S. in Legal Management (BSLM ’89), Ateneo Philippine Military Academy, Bachelor of Director, Cebu Holdings, Inc. de Manila University, Philippines Science (PMA BS ’85, top 5% of class), Baguio Director, Cebu Property Ventures & Master’s Degree in Business Administration City, Philippines Development Corp. (MBA ‘92), Asian Institute of Management, Master’s in Business Management (MBM ‘89), Chairman of the Board, Prime Orion Makati City, Philippines Asian Institute of Management, Makati City, Philippines, Inc. and MCT Bhd of Malaysia Chartered Financial Analyst Philippines Master Planning and Mixed-Use Development Program, Harvard University School of Urban Design

FARTHER AND FASTER 117 DIRECTORSHIP IN LISTED COMPANIES DIRECTORSHIP IN LISTED DIRECTOR COMPANIES PAST VICE PRESIDENT AND CREDIT OFFICER Cebu Holdings, Inc. DIRECTOR AND TREASURER Citibank N.A. (16 yrs. in various line Cebu Holdings, Inc. management roles covering Treasury, PRESIDENT (until February 19, 2018) Corporate Finance and Relationship Prime Orion Philippines, Inc. DIRECTOR Management) Prime Orion Philippines, Inc. OTHER DIRECTORSHIPS/POSITIONS EMILIO LOLITO J. TUMBOCON, SENIOR VICE PRESIDENT OTHER DIRECTORSHIPS/POSITIONS FILIPINO, 61 Ayala Land, Inc. SENIOR VICE PRESIDENT DIRECTOR OF CEBU HOLDINGS INC. (CHI) Ayala Land, Inc. SINCE APRIL 29, 2008 MEMBER, MANAGEMENT COMMITTEE, Ayala Land, Inc. CHIEF FINANCE OFFICER EDUCATION Ayala Land, Inc. B.S. in Civil Engineering (BSCE ’79), University GROUP HEAD, COMMERCIAL MALLS, of the Philippines OFFICES, HOTELS AND RESORTS CHIEF INFORMATION OFFICER Master’s in Business Administration (MBA ‘85), Ayala Land, Inc. Ayala Land, Inc. University of the Philippines Construction Executive Program (CEPS ’87), VARIOUS POSITIONS SINCE 1996 CHIEF COMPLIANCE OFFICER Stanford University, California, U.S.A Ayala Land, Inc. Ayala Land, Inc. Senior Business Executive Program (SBEP ’91), University of Asia & the Pacific CHAIRMAN OF THE BOARD OF DIRECTORS TREASURER The Executive Program (TEP’97), Darden AyalaLand Offices Ayala Land, Inc. Graduate School of Business Administration, AyalaLand Hotels and Resorts Corporation Cebu Property Ventures and Development University of Virginia, U.S.A. ALI Commercial Center, Inc. Corporation Arca South Integrated Terminal, Inc. DIRECTORSHIP IN LISTED COMPANIES Arvo Commercial Corporation VARIOUS POSITIONS SINCE 2004 DIRECTOR Bacuit Bay Development Corporation Ayala Land, Inc. Cebu Holdings, Inc. Bonifacio Hotel Ventures, Inc. Cebu Insular Hotel Company, Inc. CHAIRMAN OTHER DIRECTORSHIPS/ POSITIONS Central Block Developers, Inc. Aprisa Business Process Solutions, Inc. PAST GROUP HEAD OF THE CONSTRUCTION Chirica Resorts Corporation MANAGEMENT GROUP, ALI VISMIN GROUP, Direct Power Services, Inc. VICE CHAIRMAN HUMAN RESOURCES & PUBLIC AFFAIRS Ecoholdings Company, Inc. CMPI Holdings, Inc. GROUP Laguna Technopark, Inc. Ayala Land, Inc. Lio Resort Ventures, Inc. DIRECTOR, TREASURER AND COMPLIANCE North Liberty Resort Ventures, Inc. OFFICER PAST MEMBER, MANAGEMENT COMMITTEE, North Triangle Depot Commercial Anvaya Cove Golf and Sports Club, Inc. Ayala Land, Inc. Corporation Pangulasian Island Resort Corporation DIRECTOR AND PRESIDENT PAST SENIOR VICE PRESIDENT Paragua Eco-Resort Ventures, Inc. CMPI Land, Inc. Ayala Land, Inc. Sicogon Town Hotel, Inc. Ten Knots Development Corporation DIRECTOR AND TREASURER COMMISSIONER Ten Knots Philippines, Inc. ALI Eton Property Development Corporation Construction Industry Arbitration Tutuban Properties, Inc. Amaia Land Corporation Commission Aurora Properties, Inc. CHAIRMAN Ayala Property Management Corporation MANAGING DIRECTOR ALI Capital Corporation Bellavita Land Corporation Datem, Inc. BGNorth Properties, Inc. DIRECTOR BGSouth Properties, Inc. DIRECTOR Accendo Commercial Corporation BGWest Properties, Inc. Keyland Corporation ALI-Eton Property Development Corporation Ceci Realty, Inc. Alabang Commercial Corporation Next Urban Alliance Development PRESIDENT Ayala Property Management Corporation Corporation UP Engineering Research & Development Fort Bonifacio Development Corporation Philippine Integrated Energy Solutions, Inc. Foundation, Inc. Integrated Eco-Resort, Inc. Vesta Property Holdings, Inc. Makati Development Corporation BOARD OF TRUSTEES OCLP Holdings, Inc. DIRECTOR AND ASSISTANT TREASURER Project Management Institute, Philippine Philippine FamilyMart CVS, Inc. Ayala Greenfield Development Corporation Chapter Philippine Integrated Energy Solutions, Inc. Station Square East Commercial Corporation DIRECTOR ALINet.Com, Inc. PAST DIRECTOR AUGUSTO D. BENGZON, Alviera Country Club, Inc. Various companies under the ALI Group FILIPINO, 54 Ayala Land Commercial Reit, Inc. Ecozone Power Management, Inc. DIRECTOR OF CEBU HOLDINGS INC. (CHI) PAST PRESIDENT Laguna Technopark, Inc. SINCE AUGUST 15, 2017 Makati Development Corporation Makati Development Corporation Ayala Property Management Corporation EDUCATION Nuevocentro, Inc. Bachelor of Science Degree in Business FR. RODERICK C. SALAZAR, JR., Management, Ateneo de Manila University, TREASURER Avida Land Corporation SVD, and he is graduate of the Philippine Trust FILIPINO, 70 Institute Hero Foundation, Inc. INDEPENDENT DIRECTOR OF CEBU Master’s Degree in Business Management Roxas Land Corporation HOLDINGS INC. (CHI) SINCE APRIL 29, 2005 and he was granted the Andres K. Roxas scholarship, Asian Institute of Management (AIM), Makati City, Philippines EDUCATION Divine Word Seminary, Master of Philosophy (M.Phil.), Tagaytay City MA/MS Mass Communications, University of Leicester, England

118 Cebu Holdings, Inc. 2017 Integrated Report Honorary Doctorate in the Humanities (Hon. RECOGNITION OTHER DIRECTORSHIPS/POSITIONS D. Hum, ’10), St. Paul University, Tuguegarao Croce Pro Ecclesia et Pontifice, Papal Current Member, Regional Advisory Council City award for his years of service to Catholic of the Philippine National Police (PNP) Region Honorary Doctorate in the Humanities (Hon. Education conferred August 14, 2010, in the 7 D. Hum, ‘11), Aquinas University, Legazpi City Archdiocese of Cebu Current Member, Management Committee (MANCOM) and DIRECTORSHIP IN LISTED COMPANIES ENRIQUE L. BENEDICTO, Current Chairman, Committee on Discipline Independent Director, Cebu Holdings, Inc. FILIPINO, 76 and Arbitrator, Alta Vista Golf and Country INDEPENDENT DIRECTOR OF CEBU Club, Cebu City OTHER DIRECTORSHIPS/POSITIONS HOLDINGS INC. (CHI) SINCE APRIL 25, 2003 Current Director, South Hills Residents’ DIRECTOR Association (SHRA), Cebu City First Metro Asset Management, Inc. (FAMI) EDUCATION SVD Mission Philippines BS Commerce (BSC '64), University of San PRIOR GOVERNMENT POSITIONS HELD Jose-Recoletos Executive Justice, Court of Appeals, Visayas CHAIRMAN, BOARD OF TRUSTEES Station (2004-2013) St. Agnes Academy, Legazpi City DIRECTORSHIP IN LISTED COMPANIES Presiding Judge, Regional Trail Court in Center for Educational Measurement (CEM) Independent Director, Cebu Holdings, Inc. Negros Oriental and in Cebu City (1987-2013) Independent Director, KEPCO-SPC Power Executive Judge, RTC Cebu Province (2012- MEMBER, BOARD OF TRUSTEES Corporation 2014) Immaculate Conception Academy, Manila OTHER DIRECTORSHIPS/POSITIONS RECOGNITIONS MEMBER, BOARD OF DIRECTORS CURRENT HONORARY CONSUL Presiding Justice Award, Court of Appeals, St. Jude Catholic School, Manila Belgium given in Manila in 2005 for speedy case disposal VICE-PRESIDENT for Asia CURRENT CHAIRMAN Judicial Excellence Award, Most Outstanding Office Internationale de l’Enseignement Mabuhay Filcement, Inc. Judge of the Philippines (2003) Catholique (OIEC) Enrison Land, Inc. Recognition on Retirement with Zero Backlog Enrison Holdings, Inc. of Cases (2013) REGIONAL SECRETARY for Asia Benedict Ventures, Inc. Office Internationale de l’Enseignement AFFILIATIONS Catholique (OIEC) CURRENT VICE-CHAIRMAN Past Officer, Integrated Bar of the Philippines, Bernardo Benedicto Foundation, Inc. Cebu City Chapter PAST CHAIRMAN, BOARD OF TRUSTEES Past President, Rotary Club of Cebu, St. Jude Catholic School, Manila RECOGNITIONS University District St. Scholastica’s College, Westgrove Officer in the Order of Leopold II’ by his St. Scholastica’s Academy in Tabunok, Talisay Majesty Baudowin King of the Belgians City, Cebu Officer in the Order of Leopold II’ by his Divine Word University (now Liceo del Verbo Majesty King Albert II of the Kingdom of Divino), Tacloban City Belgium, this is the highest award that can be Divine Word College of Tagbilaran (now Holy given to civilians, Belgian or non-Belgian Name University) Garbo sa Sugbu Awardee given by Coordinating Council of Private Educational the Province of Cebu for outstanding Associations (COCOPEA) (three terms) achievement in International Relations as Honorary Consul of Belgium PAST MEMBER, BOARD OF DIRECTORS Cebu City Council Resolution, Most People’s Television Network (PTV4) Outstanding Cebuano Citizen, February 18, 1991 PAST PRESIDENT Great Cebuano Award (conferred by) University of San Carlos (four 3-year terms: The Province of Cebu, Sugbuanong 1987-1990; 1990-1993; 2002-2005; 2005- Kumintaristang Nagpakabana (SUKNA), 2008) Kapisanan Ng Mga Brodkaster Ng Pilipinas Catholic Educational Association of the (KBP) and Mandaue Chamber of Commerce Philippines (CEAP) (1992-2008) and Industry, Inc. Awardee of the Asia Pacific Enterprise Awards PAST MEMBER in 2017 FILIPINO, Inc. (Filipino Institute for the Entrepreneur of the Year Award, Cebu Promotion of Integrity and Nobility) Chamber of Commerce and Industry on its San Carlos Community Development Centennial +10 Anniversary Foundation University of San Jose-Recoletos, Most Divine Word Educational Association (DWEA) Outstanding Alumnus’ Award Philippine Accrediting Association of Schools, Colleges, and Universities (PAASCU) Private Educational Advisory Council (PEAC) PAMPIO A. ABARINTOS, Word Broadcasting Corporation FILIPINO, 74 INDEPENDENT DIRECTOR OF CEBU PAST MEMBER, BOARD OF TRUSTEES HOLDINGS INC. (CHI) SINCE APRIL 08, 2014 St. Paul University, Tuguegarao St. Paul College, Pasig EDUCATION St. Paul College, Iloilo Bachelor of Arts, (BA ’65) Cum Laude, St. Paul College, Dumaguete University of San Jose-Recoletos St. Paul College, Surigao Bachelor of Laws, (Class ’69), University of the Visayas Cluster, Daughters of Charity (DC) Visayas Schools Master’s Degree Units in Business Administration (MBA ’81), Southwestern PAST EXECUTIVE SECRETARY University Office of Education and Faith Formation of the Federation of Asian Bishops Conferences DIRECTORSHIP IN LISTED COMPANIES (FABC-OEFF) Independent Director, Cebu Holdings, Inc.

FARTHER AND FASTER 119 APPENDIX 2. JUNE VEE D. MONTECLARO- Corporation (Publicly-Listed Company) NAVARRO, Chirica Resorts Corporation CORPORATE OFFICERS’ Darong Agricultural Development Corp. FILIPINO, 46 DirectPower Services, Inc. PROFILE CORPORATE SECRETARY OF CEBU Ecoholdings Company, Inc. HOLDINGS INC. (CHI) SINCE FEBRUARY 27, 2014 Fort Bonifacio Development Corp. MA. LUISA D. CHIONG Honda Cars Cebu, Inc. FILIPINO, 45 EDUCATION HRMall, Inc. Bachelor of Arts with a major in Economics HCX Technology Partners, Inc. EDUCATION (’93), University of St. La Salle, Bacolod City Isuzu Benguet Corporation Bachelor of Science in Commerce Major in Bachelor of Commerce with a major in Data Lio Resort Ventures, Inc. Accounting (BSC ’91), De La Salle University Processing (’93), University of St. La Salle, Makati Development Corporation Completed the academic requirements for Bacolod City Michigan Holdings, Inc. a Master in Business Administration degree Bachelor of Laws (L.L.B. ’97), University of the MWC Foundation, Inc. (MBA ’98), De La Salle University Philippines Orion Land, Inc. Certified Public Accountant (CPA), 5th Place Pameka Holdings, Inc. May 1992 CPA Board Examinations CURRENT CORPORATE SECRETARY Pangulasian Island Resort Corp. Cebu Holdings, Inc. (Publicly-Listed Paragua Eco-Resort Ventures, Inc. CURRENT POSITIONS HELD Company) PFIL Ltd. Chief Finance Officer, Compliance Officer, and Cebu Property Ventures and Development Philippine Integrated Energy Solutions, Inc. Member, Management Committee effective Corporation (Publicly-Listed Company) PPI Prime Venture, Inc. August 15, 2017, Alveo Land Corp. Prime Orion Philippines, Inc. (Publicly-Listed Cebu Holdings, Inc.-publicly-listed company Avida Land Corp. Company) Cebu Property Ventures and Development Prime Orion Philippines, Inc. (Publicly-Listed Regent Horizon Conservation Company, Inc. Corporation- publicly-listed company Company) Technopark Land, Inc. Orion Land, Inc. Ten Knots Development Corporation DIRECTOR AND VICE PRESIDENT ALI Eton Property Development Corporation Ten Knots Philippines, Inc. Integrated Eco-resort, Inc. CURRENT DIRECTOR* AND CURRENT CORPORATE SECRETARY DIRECTOR AND TREASURER CORPORATE SECRETARY Abreeza Central Estate Association, Inc. Adauge Commercial Corporation AG Counselors Corporation Accendo Commercial Corporation Altaraza Prime Realty Corporation *a management position of AG Counselors Adauge Commercial Corporation Amorsedia Development Corporation Corporation Alabang Commercial Corporation Asian i-Office Properties, Inc. ALI Capital Corp. Ayalaland Estates, Inc. CURRENT ASSISTANT CORPORATE ALI Commercial Center, Inc. Buendia Landholdings, Inc. SECRETARY AND GENERAL COUNSEL ALI Makati Hotel & Residences, Inc. Crans Montana Property Holdings Ayala Land, Inc. (Publicly-Listed Company) ALI Makati Hotel Property, Inc. Corporation ALI Triangle Hotel Ventures, Inc. Crimsonfield Enterprises, Inc. ALO Prime Realty Corporation HLC Development Corporation CURRENT DIRECTOR AyalaLand Commercial Reit, Inc. Altaraza Prime Realty Corporation Next Urban Alliance Development Corp. Alveo-Federal Land Communities, Inc. Red Creek Properties, Incorporated PAST SENIOR ASSOCIATE Alviera Country Club, Inc. Amaia Land Corp. SyCip Salazar Hernandez & Gatmaitan DIRECTOR AND CHIEF FINANCE OFFICER Amaia Southern Properties, Inc. Alinet.com, Inc. NIMFA AMBROSIA L. PEREZ- Amicassa Process Solutions, Inc. PARAS, Amorsedia Development Corporation DIRECTOR Aprisa Business Process Solutions, Inc. ALI Capital Corporation FILIPINO, 52 Arca South Integrated Terminal, Inc. Cebu Leisure Company, Inc. ASSISTANT CORPORATE SECRETARY OF Arcasouth Hotel Ventures, Inc. CMPI Holdings, Inc. CEBU HOLDINGS INC. (CHI) SINCE FEBRUARY Arvo Commercial Corporation Directpower Services, Inc. 27, 2014 Asian I-Office Properties, Inc. Asterion Technopod Incorporated TREASURER AND CHIEF FINANCE OFFICER EDUCATION Aurora Properties, Inc. Taft Punta Engano Property, Inc. Bachelor of Laws ('90), Manuel L. Quezon Avencosouth Corp. School of Law, Philippines Aviana Development Corporation TREASURER Avida Sales Corp. Accendo Commercial Corporation CURRENT ASSISTANT CORPORATE AyaGold Retailers, Inc. Cagayan De Oro Gateway Corporation SECRETARY Ayala Hotels, Inc. AC Automotive Business Services, Inc. Ayala Land International Sales, Inc. CHIEF FINANCE OFFICER Affinity Express Philippines, Inc. Ayala Land Sales, Inc. Lagdigan Land Corporation AG Counselors Corporation Ayala Theaters Management, Inc. Alveo Land Corporation AyalaLand Hotels and Resorts Corp. COMPTROLLER Anvaya Cove Golf and Sports Club, Inc. AyalaLand Malls NorthEast, Inc. Nuevocentro, Inc. Asiacom (Phils.), Inc AyalaLand Malls Synergies, Inc. Avida Land Corporation AyalaLand Malls VisMin, Inc. COMPTROLLER, CHIEF FINANCE OFFICER & Automobile Central Enterprises, Inc. AyalaLand Malls, Inc. COMPLIANCE OFFICER Ayala Aviation Corporation AyalaLand Medical Facilities Leasing, Inc. Alviera Country Club, Inc. Ayala Greenfield Golf & Leisure Club, Inc. AyalaLand Metro North, Inc. Ayala Land, Inc. (Publicly-Listed Company) AyalaLand Offices, Inc. CORPORATE FINANCE OFFICER Ayala Property Management Corporation Bellavita Land Corp. Aurora Properties Incorporated AYC Finance, Ltd. Berkshires Holdings, Inc. Ceci Realty, Inc. AYC Holdings, Ltd. Bonifacio Estate Services Corporation Vesta Property Holdings, Inc. Bacuit Bay Development Corporation Bonifacio Global City Estate Association, Inc. BGNorth Properties, Inc. Bonifacio Hotel Ventures, Inc. AFFILIATIONS BGSouth Properties, Inc. Bonifacio Land Corporation Member of the Philippine Institute of BGWest Properties, Inc. Bonifacio Transport Corporation Certified Public Accountants (PICPA) Bonifacio Arts Foundation, Inc. Bonifacio Water Corporation Member of the Lectors and Commentators Cebu District Property Enterprise, Inc. Buendia Landholdings, Inc. Guild of Malate Catholic Church Cebu Holdings, Inc. (Publicly-Listed Company) Buklod Bahayan Realty and Development Corp. Cebu Property Ventures and Development Cagayan De Oro Gateway Corp.

120 Cebu Holdings, Inc. 2017 Integrated Report Capitol Central Hotel Ventures, Inc. MDC Conqrete, Inc. South Innovative Theater Management, Inc. Cavite Commercial Towncenter, Inc. MDC Equipment Solutions, Inc. Southcrest Hotel Ventures, Inc. Cebu Insular Hotel Company, Inc. MDC-Subic, Inc. Southgateway Development Corporation Cebu Leisure Company, Inc. MG Construction Ventures Holdings, Inc. SouthPortal Properties, Inc. Ceci Realty, Inc. Next Urban Alliance Development Corp. Station Square East Commercial Corporation Central Block Developers, Inc. North Beacon Commercial Corporation Subic Bay Town Center, Inc. Circuit Makati Hotel Ventures, Inc. North Point Estate Association, Inc. Summerhill Commercial Ventures Corp. CMPI Land, Inc. North Triangle Depot Commercial Sunnyfield E-Office, Inc. Columbus Holdings, Inc. Corporation Sunshine Plaza Mall Association (SPMAI), Inc. Crans Montana Property Holdings Corp. North Triangle Hotel Ventures, Inc. Taft Punta Engano Property, Inc. Crimson Field Enterprises, Inc. North Ventures Commercial Corp. Tower One Condo Corp. Econorth Resort Ventures, Inc. Northgate Hotel Ventures, Inc. TPI Holdings Corporation Ecosouth Hotel Ventures, Inc. Nuevocentro, Inc. Tutuban Properties, Inc. Ecozone Power Management, Inc. OE Holdings, Inc. UP North Property Holdings, Inc. Emerging City Holdings, Inc. OLC Development Corporation Vesta Property Holdings, Inc. Enjay Hotels, Inc. One Dela Rosa Property Development, Inc. Westview Commercial Ventures Corp. First Gateway Real Estate Corporation Orion Beverage, Inc. White Knight Holdings, Inc. Five Star Cinema, Inc. Orion I Holdings Philippines, Inc. ZHI Holdings, Inc. FLT Prime Insurance Corp. Orion Maxis Inc. (For dissolution) Glensworth Development, Inc. Orion Solutions, Inc. (For dissolution) CURRENT SENIOR COUNSEL Greenhaven Property Ventures, Inc. Park Terraces Condominium Corporation Ayala Group Legal Hero Foundation, Inc. Philippine Family Mart CVS, Inc. Hillsford Property Corp. Portico Land Corp. PAST ASSISTANT CORPORATE HLC Development Corporation Primavera Town Center, Inc. SECRETARY Integrated Eco-Resort, Inc. Prime Support Services, Inc. Integrated Micro-Electronics, Inc. (April 2014 Isuzu Cebu, Inc. Red Creek Properties, Inc. - April 2015) Lagdigan Land Corporation Roxas Land Corporation Laguna Technopark, Inc. Sentera Hotel Ventures, Inc. PRIOR GOVERNMENT POSITION HELD Leisure and Allied Industries Phils., Inc. Serendra, Inc. State Counsel, Department of Justice Lepanto Ceramics, Inc. Sicogon Island Tourism Estate Corp. Legal Counsel at the Regional Trial Courts of Luck Hock Venture Holdings, Inc. Sicogon Town Hotel, Inc. Makati and Quezon City Makati Hotel and Residences Condo. Corp. Solinea, Inc. MDC Buildplus, Inc. Soltea Commercial Corp. PAST LEGAL COUNSEL Coca-Cola Bottlers Philippines, Inc. RFM Corporation Roasters Philippines, Inc. APPENDIX 3. BOARD COMPOSITION1 102-22

No. of Directors per Articles of Incorporation: 9 Actual No. of Directors for the year: 9

PRINCIPAL NOMINATOR DATE NO. OF YEARS DATE LAST DIRECTORS’ NAME TYPE FOR IN THE LAST FIRST ELECTED WHEN SERVED AS ELECTED NOMINATION ELECTION ELECTED DIRECTOR

Nomination August 17, Annual Stockholders’ 2 years and 4 ANNA MA. MARGARITA B. DY* NED Ayala Land, Inc. April 2017 Committee 2016 Meeting months

Nomination January 1, Annual Stockholders’ ANICETO V. BISNAR, JR. ED Ayala Land, Inc. April 2017 3 years Committee 2015 Meeting Nomination August 15, Annual Stockholders’ 3 years and 4 BERNARD VINCENT O. DY* NED Ayala Land, Inc. April 2017 Committee 2014 Meeting months Nomination Annual Stockholders’ JAIME E. YSMAEL** NED Ayala Land, Inc. April 2008 April 2017 9 years Committee Meeting Nomination Annual Stockholders’ EMILIO LOLITO J. TUMBOCON NED Ayala Land, Inc. April 2008 April 2017 9 years Committee Meeting Nomination August 17, Annual Stockholders’ 2 years and 4 JOSE EMMANUEL H. JALANDONI NED Ayala Land, Inc. April 2017 Committee 2016 Meeting months Nomination August 15, August 15, AUGUSTO D. BENGZON** NED Ayala Land, Inc. Board Meeting new Committee 2017 2017 FR. RODERICK C. SALAZAR, JR., Nomination Annual Stockholders’ ID N.A. April 2005 April 2017 12 years SVD Committee Meeting Nomination Annual Stockholders’ ENRIQUE L. BENEDICTO ID N.A. April 2003 April 2017 14 years Committee Meeting Nomination Annual Stockholders’ PAMPIO A. ABARINTOS ID N.A. April 2014 April 2017 3 years Committee Meeting * Ms. Anna Ma. Margarita B. Dy replaced Mr. Bernard Vincent O. Dy as Chairman of the Board of Directors effective April 24, 2017 ** Mr. Augusto D. Bengzon replaced Mr. Jaime E. Ysmael as member of the Board of Directors effective August 15, 2017

1As of end December 31, 2017 2 These nominees were formally nominated to the Nomination Committee by a shareholder of the Company, Ms. Judilyne L. Boholst. Messrs. Abarintos, Benedicto and Salazar, all incumbent directors, were nominated as independent directors. Ms. Boholst is not related to any of the nominees for independent directors.

FARTHER AND FASTER 121 APPENDIX 4. BOARD OF DIRECTORS’ ATTENDANCE E.2.14, E.2.20, E.2.28, E.3.2, E.3.3, 102-23

COMMITTEE BOARD CORPORATE BOARD DIRECTOR’S NAME MEETINGS AUDIT RISK OVERSIGHT GOVERNANCE & SUSTAINABILITY NOMINATION

Chairman ANNA MA. MARGARITA B. DY* 3/4

Member BERNARD VINCENT O. DY* 5/5 4/4 Member ANICETO V. BISNAR, JR. 5/5 4/4 1/1

Member JOSE EMMANUEL H. JALANDONI 5/5

Member EMILIO LOLITO J. TUMBOCON 5/5 1/1 Member JAIME E. YSMAEL** 3/3

Member AUGUSTO D. BENGZON** 2/2

Independent FR. RODERICK C. SALAZAR, JR., SVD 5/5 5/5 4/4 1/1

Independent ENRIQUE L. BENEDICTO 5/5 5/5 4/4 4/4

Independent PAMPIO A. ABARINTOS 5/5 5/5 4/4

* Ms. Anna Ma. Margarita B. Dy replaced Mr. Bernard Vincent O. Dy as Chairman of the Board of Directors effective April 24, 2017 ** Mr. Augusto D. Bengzon replaced Mr. Jaime E. Ysmael as member of the Board of Directors effective August 15, 2017

APPENDIX 5. DIRECTOR TRAINING AND CONTINUING EDUCATION PROGRAM D.2, E.5.1, E.5.2

NAME OF DATE OF NAME OF DIRECTOR / OFFICER PROGRAM TRAINING TRAINING INSTITUTION

ANNA MA. MARGARITA B. DY* August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD

BERNARD VINCENT O. DY* August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD

ANICETO V. BISNAR, JR. August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD

JOSE EMMANUEL H. JALANDONI August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD

EMILIO LOLITO J. TUMBOCON August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD

JAIME E. YSMAEL August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD FR. RODERICK C. SALAZAR, JR., SVD August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD ENRIQUE L. BENEDICTO August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD PAMPIO A. ABARINTOS August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD

MA. LUISA D. CHIONG** Chief Finance Officer/Compliance Officer August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD (effective August 15, 2017)

ENRIQUE B. MANUEL, JR.** August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD Chief Finance Officer/Compliance Officer

JUNE VEE D. MONTECLARO-NAVARRO August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD Corporate Secretary NIMFA AMBROSIA L. PEREZ-PARAS August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD Assistant Corporate Secretary NOEL F. ALICAYA August 11, 2017 Ayala Corporate Governance and Risk Management Summit ICD Finance & Control Officer/Chief Risk Officer

* Ms. Anna Ma. Margarita B. Dy replaced Mr. Bernard Vincent O. Dy as Chairman of the Board of Directors effective April 24, 2017 ** Ms Ma. Luisa D. Chiong replaced Mr. Enrique B. Manuel, Jr. as Chief Finance Officer and Compliance Officer effective August 15, 2017

3 The Board of Directors’ meetings are scheduled at the beginning of the year. Scheduling is coordinated through the office of the Corporate Secretary of the company. Information provided is as of end December 31, 2017 E.3.1, E .3.7

122 Cebu Holdings, Inc. 2017 Integrated Report APPENDIX 6. APPENDIX 7. OWNERSHIP STRUCTURE OWNERSHIP STRUCTURE (LIST OF TOP 20 D.1 STOCKHOLDERS)

Holding 5% or more as of December 31, 2017

SHAREHOLDING NO. OF BENEFICIAL STOCKHOLDER NAME NO. OF SHARES % % COMPANY SHARES OWNER 1. Ayala Land, Inc. 1,381,733,000 71.96% Ayala Land, Inc. 1,381,733,000 71.96% Ayala Land, Inc. PCD Nominee Corp. (Non- Aberdeen Asset 2. 359,282,828 18.70% PCD Nominee Corp. Filipino) 359,282,828 18.70% Management Asia (Non-Filipino) Limited 3. PCD Nominee Corp. (Filipino) 121,710,343 6.35%

PCD Nominee Corp. PCD Nominee Corp. Makati Supermarket 121,939,158 6.35% 4. 3,013,265 0.16% (Filipino) (Filipino) Corporation Laguna Properties Holdings, 5. 1,875,000 0.10% Inc.

6. Alfonso Lao 1,750,000 0.09%

7. Jose C. Lee 1,000,000 0.05%

8. Aurora E. Panlilio 937,500 0.05%

9. Vicente Jayme Jr. 877,118 0.05%

10. Fermin P. Angcao 670,000 0.03%

11. Victor G. Sy 625,000 0.03%

12. Jose E. Suarez 618,750 0.03%

13. Maximo S. Uy 470,000 0.02%

14. EBC Securities Corporation 389,330 0.02%

15. Alejandra R. Malaya 385,000 0.02%

Alberto Mendoza &/or Jeanie 16. 376,250 0.02% C. Mendoza

17. Mercedes A. Tuason 375,000 0.02%

17. Vincent Y. Tan 375,000 0.02%

17. Carolyn Chua 375,000 0.02%

17. Salvador Mariposa 375,000 0.02%

18. Robert Tan 358,750 0.02%

19. Edan Corporation 347,500 0.02%

Philippine International Life 20. 344,750 0.02% Insurance Co., Inc.

Shares of Directors in the company

NO. OF NO. OF % OF INDIRECT DIRECTOR’S NAME DIRECT CAPITAL SHARES / SHARES STOCK THROUGH ANNA MA. MARGARITA B. DY 1 - 0.0000% BERNARD VINCENT O. DY 1 - 0.0000% ANICETO V. BISNAR, JR. 1 - 0.0000% JOSE EMMANUEL H. 1 - 0.0000% JALANDONI AUGUSTO D. BENGZON 1 - 0.0000% EMILIO LOLITO J. TUMBOCON 112,500 - 0.0059% ENRIQUE L. BENEDICTO 1 - 0.0000% FR. RODERICK C. SALAZAR, 1 - 0.0000% JR., SVD PAMPIO A. ABARINTOS 1,000 - 0.0001% TOTAL 113,507 - 0.0060%

FARTHER AND FASTER 123 APPENDIX 8. REMUNERATION MATTERS D.2.11

Executive Officers

The company has no other arrangement with regard to the remuneration of its existing directors and officers aside from the compensation received as herein stated.

OTHER VARIABLE NAME AND PRINCIPAL POSITION YEAR SALARY PAY ANICETO V. BISNAR, JR. President *MA. LUISA D. CHIONG Chief Finance Officer / Compliance Officer (effective August 15, 2017)

*ENRIQUE B. MANUEL, JR. Vice President and Chief Finance Officer / Compliance Officer

MA. CLAVEL G. TONGCO Vice President and Head, Retail Business Group NERISSA N. JOSEF-MEDIANO Vice President and Head, Business Development and Office Leasing Group MA. CECILIA CRISPINA T. URBINA Assistant Vice President and Head, Corporate Services Group and Human Resources and Administration ALL ABOVE-NAMED OFFICERS AS A GROUP Actual 2016 P24.07 million P0.92 million Actual 2017 P18.74 million P0.82 million Projected 2018 P19.68 million P0.86 million ALL OTHER OFFICERS9 AS A GROUP Actual 2016 P19.20 million P1.44 million UNNAMED Actual 2017 P20.52 million P1.39 million Projected 2018 P21.55 million P1.45 million *Ms. Chiong replaced Mr. Manuel effective August 15, 2017

The total annual compensation was all paid in cash. The total annual compensation included the basic salary and other variable pay (performance bonus). The executive officers are composed of regular employees of the Company and four (4) are seconded personnel from ALI.

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

Remuneration matters are discussed in detail in the company’s SEC Annual Corporate Governance Report (ACGR) which is accessible from our website.

5 Senior Personnel with pay class of SP-C

124 Cebu Holdings, Inc. 2017 Integrated Report APPENDIX 9. TABLE OF MATERIAL ASPECTS AND THEIR BOUNDARIES 102-46, 102-47, 102-49

MATERIAL TOPICS RELEVANCE AFFECTED ENTITIES

Economic

Capital Investment Delivering returns for our shareholders and remunerating Business operations our other key stakeholders is our top responsibility. Economic Value Generated Stockholders

Economic Value Distributed

Economic Value Retained

Significant Indirect Economic Impacts We rely on two keys to a thriving business: creating shared Suppliers value and the practice of inclusive growth by helping Impacts of use of products or services enable local economic development. Local communities

Impact on poverty and/or vulnerable group Customers Products for BOP/low income segment

Impact in supply chain

Jobs supported in supply chain

Shift to local sourcing

Stimulating Foreign Direct Investment

Total Foreign direct investments enabled

Financial Impact to Climate Change We practice due diligence in making sure that our sites Business operations are resilient against climate change impacts and other Demand of products and services hazards. Customers

Social

Employee Management We invest in our people and create a healthy and safe Business operations working environment for them. We believe that high per- Attrition rate (new hires vs. turn-over) forming employees bring success to the business. Employees

Training & Development

Diversity, Equal Opportunity & Anti-Discrimination

Labor Management Relations Workplace Conditions & Compliance to Labor Standards, including We adhere to labor laws and hold the health and safety of Business operations suppliers our workers as paramount. We do not tolerate child and forced labor in our operations and suppliers. Employees Organizational Health and Safety Child/Forced Labor Suppliers

Relationship with Community We uphold a healthy relationship with our communities Business operations and promote local economic development with them in Policy on Indigenous Peoples mind. Communities

Human Rights Assessment

Security Practices

Customer Management Our customers are very important to us and their welfare Business operations Customers is a priority. Health and Safety

Marketing and Labeling

Privacy

Environmental

Resource Management Resources, such as energy (fuel and electricity), water, and Business operations materials are natural capital that we need to construct and Energy run our products. Environment

Water

Materials

Ecosystems & Biodiversity As a real estate company, especially with some products Business operations hinged on tourism, we are dependent on ecosystem Watersheds services that provide natural capital and aesthetic value to Environment our developments. Marine ecosystems

IUCN/KBA

Environmental Impact We recognize that we have impacts to the environment in Business operations every stage of our value chain – from construction all the GHG Emissions way to the operations of our estates, buildings, malls and Environment residential projects. NOx, SOx, Particulate Matter

Effluents

Solid Wastes

Hazardous Wastes

FARTHER AND FASTER 125 APPENDIX 10. APPENDIX 13. ECONOMIC VALUE GENERATION AND OUTCOMES OF STAKEHOLDER DISTRIBUTION 201-1 ENGAGEMENT PROGRAM 102-40, 102-42, 102-43, 102-44

STAKEHOLDER AND CHANNELS OF EXPRESSED NEEDS INTEREST AREAS HOW WE RESPOND BREAKDOWN OF ECONOMIC REASON FOR ENGAGEMENT ENGAGEMENT 2015 2016 2017 VALUES (IN MILLION PESOS) CUSTOMERS: SHOPPERS, MERCHANTS, Text feedback and integrated marketing, • On-time completion of building construction • Minimizing heavy traffic • Discounts, promotional offers, and various payment terms LOCATORS, customer surveys and complaints handling, • One-day resolution of complaints • Extended market services for C, D, and • Customer satisfaction surveys, complaints handling process ECONOMIC VALUE GENERATED 3,740 2,314 4,742 OFFICE LESSEES and conduct of stakeholder engagement • Immediate or time- bound help response E sectors • Farmers’ Market sessions • Safety in all areas • Venue for family activities • External customer feedback system End users of real estate products and • Building and site resilience • Customer involvement in waste and recycling • Training for emergency response personnel ECONOMIC VALUE DISTRIBUTED 2,519 1,766 4,578 services • On-time turnover of residential units efforts • Conduct of emergency drills in all our developments and • Reliable maintenance of utilities (i.e. water and • Emergency preparedness construction sites Payments to suppliers10 1,428 870 3,411 electricity) • Partnerships and collaboration for • Regular coordination and continuing engagement sustainability • Conduct of sustainability learning sessions Payments to employees 134 140 100 REGULATORS: SEC/PSE Submission of reports, disclosures and • Compliance to existing rules, regulations, and • Beyond compliance on economic, social, and • Transparency and full disclosure including the provision of Payments to providers of capital 680 478 671 other requirements; involvement in SEC/ICD environmental laws. environmental regulations. this report Compliance of regulatory requirements to programs and initiatives; transparency and • Prompt submission of requirements Payments to governments 266 255 394 assure shareholders of good adequacy of disclosure • Review of reports prior to submission corporate governance Payments to communities 13 22 1

INDIVIDUAL / INSTITUTIONAL Sale of shares of stocks, shareholder • Improving shareholder value • Dividends • Analysts and investor briefings; declaration of dividends ECONOMIC VALUE RETAINED 1,221 548 164 SHAREHOLDERS: inquiries and updates; report of company • Increased investment opportunities • Monetizing sustainability (quantifying it as an • Communication of sustainability performance and initiatives performance through stockholders’ indicator of shareholder and company value) through this report and through stakeholder engagement Protect the interests of meetings and annual reports, and conduct • CHI as a green investment sessions shareholders by increasing shareholder of stakeholder engagement session3 • Environmental sustainability APPENDIX 11. value; continue our position as an COMMUNITY INVESTMENTS 201-1 excellent investment vehicle GOVERNMENT: LGUS AND NATIONAL Payment of taxes, business permits and • Communication of sustainability performance through • Health, safety, employment, environment, and • Prompt payment of taxes and submission of reports BREAKDOWN OF PAYMENTS GOVERNMENT AGENCIES licenses, partnerships/co-sponsored this report and through stakeholder engagement local traffic conditions • Regular reviews of compliance with regulatory requirements TO COMMUNITIES 2015 2016 2017 events, and regular reviews; neighboring sessions • Venue for civic interaction • Provision and maintenance of good road networks (IN THOUSAND PESOS) Compliance monitoring of all applicable communities as partners and/or • Availability of new and efficient technology • Practice transparency and full disclosure including the statutory and regulatory requirements beneficiaries to the company’s development that minimizes environmental impacts provision of this report DIRECT COST OF SOCIAL programs, and conduct of stakeholder • Job and partnership opportunities for local • Sharing of best sustainability practices PROGRAMS engagement sessions. farmers, businessmen, and employees • Attendance to seminars, conferences, and meetings • Partnerships and collaboration for • Regular coordination and continuing engagement Education11 P 3,191 P 2,276 P 1,542 sustainability (urbanizing and greening the • Conduct of sustainability learning sessions city) Entrepreneurship 171 1,294 20,315

Environment (GRI 308-1) 491 906 1,419 EMPLOYEES: ORGANIC AND GENERAL Townhall meetings, climate survey, volunteer • Proper training, adequate compensation and benefits, • Wellness and work-life balance • Benefits upgrade; merit increases CONTRACTORS programs, and conduct of stakeholder health and safety, and employee development • General contractor: Data Management System • Wellness program (CHI P.L.U.S.) Tourism, Arts, Culture, and engagement sessions • Property Management: Uniformity in data • Competency development programs 2,010 1,379 2,127 Religion Our important resource to achieve the gathering, monitoring, reporting, and • Health and safety programs company’s goals. presentation • Conduct of sustainability learning sessions Health and Wellness 1,352 226 1,630 EXTERNAL: EMPLOYEES OF Accreditation, bidding, payment conformity • Continuing employment • Equal opportunities for local contractors • Establishment of and compliance to PCT standards Stakeholder Engagement / 3,168 7,035 1,263 MERCHANTS, CONTRACTORS, PARK with Process Cycle Time (PCT) standards, • Training and development • Identify and develop sustainable water • Implement programs to educate and orient contractors and Market Shaping ASSOCIATIONS AND SUPPLIERS. programs to educate and orient contractors • Work tools to enable effective work sources (finite ground water resource) suppliers on QEHS best practices and benefits Relief Operations12 40 3,686 309 and suppliers on QEHS best practices • Health and safety • Solid Waste Management Program • Conduct of sustainability learning and work sessions Provide products and services for the and benefits, and conduct of stakeholder • Traffic improvement Advocacy for Children 615 3,302 3,622 company; implement projects, programs engagement sessions. and initiatives. TOTAL 11,038 20,104 32,228 MEDIA PARTNERS: Conduct of press conferences, fellowships, • Truthfulness and usefulness of information shared • Publicity • Media briefings and placement of paid advertisements • High courtesy/reliability rating of media relations • Issues-handling • Regular fellowships APPENDIX 12. Means of communication through which • personnel or any company representative • Media relations • Regular updates on new developments CHI promotes its brand, image and • Provide sufficient information about the company’s 102-8 WORKFORCE SUPPORTED reputation. projects and understanding of its brands • Open communication lines WORKFORCE HEADCOUNT 2015 201614 2017

BPO / IT / Telecom 53,291 67,480 60,874 LOCAL COMMUNITIES: BARANGAY Implementation of development programs • Local employment • Stringent selection process/implementation • Partnerships with LGU or the local communities for Solid Retail / Hotel / Sports Club 10,813 10,421 19,577 ALLIANCE on education, employment, environment, • Livelihood assistance of policy for subcontractors Waste Management (SWM) programs peace and order, livelihood, and alliance • Environmental program • Traffic congestion • Strengthening of the alliance Construction 8,276 7,607 10,605 Neighbors beyond the strengthening initiatives, and conduct of • Scholarship program • Sidewalk vendors and fragmented access • Implementation of programs aligned to the needs of the company’s fencelines stakeholder engagement sessions • Encouraging small entrepreneurs by supporting their roads community Traditional Offices / Banks 4,868 164 - products • Suspected illegal drug use by BPO • Local employment prioritization Residential 596 727 749 • Increase in barangay income through barangay employees • Conduct of sustainability learning sessions permits from mall merchants and locators • High fuel consumption used in waste Others 880 441 - • Inclusive growth collection • Child-friendly Cebu • Reporting of the number of employees per TOTAL 78,724 86,840 91,805 barangay • Drainage systems repairs • Solid waste management

126 Cebu Holdings, Inc. 2017 Integrated Report APPENDIX 13. OUTCOMES OF STAKEHOLDER ENGAGEMENT PROGRAM 102-40, 102-42, 102-43, 102-44

STAKEHOLDER AND CHANNELS OF EXPRESSED NEEDS INTEREST AREAS HOW WE RESPOND REASON FOR ENGAGEMENT ENGAGEMENT CUSTOMERS: SHOPPERS, MERCHANTS, Text feedback and integrated marketing, • On-time completion of building construction • Minimizing heavy traffic • Discounts, promotional offers, and various payment terms LOCATORS, customer surveys and complaints handling, • One-day resolution of complaints • Extended market services for C, D, and • Customer satisfaction surveys, complaints handling process OFFICE LESSEES and conduct of stakeholder engagement • Immediate or time- bound help response E sectors • Farmers’ Market sessions • Safety in all areas • Venue for family activities • External customer feedback system End users of real estate products and • Building and site resilience • Customer involvement in waste and recycling • Training for emergency response personnel services • On-time turnover of residential units efforts • Conduct of emergency drills in all our developments and • Reliable maintenance of utilities (i.e. water and • Emergency preparedness construction sites electricity) • Partnerships and collaboration for • Regular coordination and continuing engagement sustainability • Conduct of sustainability learning sessions

REGULATORS: SEC/PSE Submission of reports, disclosures and • Compliance to existing rules, regulations, and • Beyond compliance on economic, social, and • Transparency and full disclosure including the provision of other requirements; involvement in SEC/ICD environmental laws. environmental regulations. this report Compliance of regulatory requirements to programs and initiatives; transparency and • Prompt submission of requirements assure shareholders of good adequacy of disclosure • Review of reports prior to submission corporate governance

INDIVIDUAL / INSTITUTIONAL Sale of shares of stocks, shareholder • Improving shareholder value • Dividends • Analysts and investor briefings; declaration of dividends SHAREHOLDERS: inquiries and updates; report of company • Increased investment opportunities • Monetizing sustainability (quantifying it as an • Communication of sustainability performance and initiatives performance through stockholders’ indicator of shareholder and company value) through this report and through stakeholder engagement Protect the interests of meetings and annual reports, and conduct • CHI as a green investment sessions shareholders by increasing shareholder of stakeholder engagement session3 • Environmental sustainability value; continue our position as an excellent investment vehicle

GOVERNMENT: LGUS AND NATIONAL Payment of taxes, business permits and • Communication of sustainability performance through • Health, safety, employment, environment, and • Prompt payment of taxes and submission of reports GOVERNMENT AGENCIES licenses, partnerships/co-sponsored this report and through stakeholder engagement local traffic conditions • Regular reviews of compliance with regulatory requirements events, and regular reviews; neighboring sessions • Venue for civic interaction • Provision and maintenance of good road networks Compliance monitoring of all applicable communities as partners and/or • Availability of new and efficient technology • Practice transparency and full disclosure including the statutory and regulatory requirements beneficiaries to the company’s development that minimizes environmental impacts provision of this report programs, and conduct of stakeholder • Job and partnership opportunities for local • Sharing of best sustainability practices engagement sessions. farmers, businessmen, and employees • Attendance to seminars, conferences, and meetings • Partnerships and collaboration for • Regular coordination and continuing engagement sustainability (urbanizing and greening the • Conduct of sustainability learning sessions city)

EMPLOYEES: ORGANIC AND GENERAL Townhall meetings, climate survey, volunteer • Proper training, adequate compensation and benefits, • Wellness and work-life balance • Benefits upgrade; merit increases CONTRACTORS programs, and conduct of stakeholder health and safety, and employee development • General contractor: Data Management System • Wellness program (CHI P.L.U.S.) engagement sessions • Property Management: Uniformity in data • Competency development programs Our important resource to achieve the gathering, monitoring, reporting, and • Health and safety programs company’s goals. presentation • Conduct of sustainability learning sessions

EXTERNAL: EMPLOYEES OF Accreditation, bidding, payment conformity • Continuing employment • Equal opportunities for local contractors • Establishment of and compliance to PCT standards MERCHANTS, CONTRACTORS, PARK with Process Cycle Time (PCT) standards, • Training and development • Identify and develop sustainable water • Implement programs to educate and orient contractors and ASSOCIATIONS AND SUPPLIERS. programs to educate and orient contractors • Work tools to enable effective work sources (finite ground water resource) suppliers on QEHS best practices and benefits and suppliers on QEHS best practices • Health and safety • Solid Waste Management Program • Conduct of sustainability learning and work sessions Provide products and services for the and benefits, and conduct of stakeholder • Traffic improvement company; implement projects, programs engagement sessions. and initiatives.

MEDIA PARTNERS: Conduct of press conferences, fellowships, • Truthfulness and usefulness of information shared • Publicity • Media briefings and placement of paid advertisements • High courtesy/reliability rating of media relations • Issues-handling • Regular fellowships Means of communication through which • personnel or any company representative • Media relations • Regular updates on new developments CHI promotes its brand, image and • Provide sufficient information about the company’s reputation. projects and understanding of its brands • Open communication lines

LOCAL COMMUNITIES: BARANGAY Implementation of development programs • Local employment • Stringent selection process/implementation • Partnerships with LGU or the local communities for Solid ALLIANCE on education, employment, environment, • Livelihood assistance of policy for subcontractors Waste Management (SWM) programs peace and order, livelihood, and alliance • Environmental program • Traffic congestion • Strengthening of the alliance Neighbors beyond the strengthening initiatives, and conduct of • Scholarship program • Sidewalk vendors and fragmented access • Implementation of programs aligned to the needs of the company’s fencelines stakeholder engagement sessions • Encouraging small entrepreneurs by supporting their roads community products • Suspected illegal drug use by BPO • Local employment prioritization • Increase in barangay income through barangay employees • Conduct of sustainability learning sessions permits from mall merchants and locators • High fuel consumption used in waste • Inclusive growth collection • Child-friendly Cebu • Reporting of the number of employees per barangay • Drainage systems repairs • Solid waste management

FARTHER AND FASTER 127 APPENDIX 14. APPENDIX 17. EMPLOYEE STATISTICS 102-8, 405-1 EMPLOYEE TRAINING HOURS 404 -1

COMPETENCY-BASED BREAKDOWN OF 14 2015 2016 2017 TRAINING HOURS 2015 2016 2017 TOTAL EMPLOYEES (IN MAN-HOURS)

BY GENDER OVERALL

Male 22 20 16 Total training hours provided to 1,665 2,218 2,134 employees Female 56 54 29 Total number of employees 78 74 45 TOTAL 78 74 45 AVERAGE (404-1) 21 30 35

BY AGE BY GENDER Below 30 Years Old 21 21 11 Total training hours provided to 561 700 757 male employees 30 - 50 Years Old 49 47 29 Total number of male employees 22 20 16 Over 50 Years Old 8 6 5 AVERAGE (404-1) 26 35 39 TOTAL 78 74 45 Total training hours provided to 1,088 1,519 1,377 female employees BY EMPLOYEE CATEGORY Total number of female employees 56 54 29 Managers 23 26 19 AVERAGE (404-1) 19 28 33 Associate Managers 31 29 19 BY EMPLOYEE CATEGORY Staff 24 19 7 Total training hours provided to 554 780 7,36 Senior management TOTAL 78 74 45 Total number of probationary/ 23 26 19 regular management team members APPENDIX 15. AVERAGE (404-1) 24 30 32 NEW HIRES 401-1 Total training hours provided to 602 919 1,036 Middle Management HEADCOUNT 2015 2016 2017 Total number of supervisors 31 29 19 BY GENDER AVERAGE (404-1) 19 32 38 Male 1 2 1 Total training hours provided to 479 519 363 Female 1 - 2 rank-and-file TOTAL (401-1) 2 2 3 Total number of associates 24 19 7 BY AGE AVERAGE (404-1) 20 27 32

Below 30 years old 1 1 1 8 Data is derived from reported cases at CHI Corporate Office only. 30 to 50 years old 1 1 2 APPENDIX 18. TOTAL 2 2 3 REPORTED CASES OF WORK ILLNESSES8 403-2

APPENDIX 16. WORK ILLNESSES15 2015 2016 2017 EMPLOYEE TURNOVER 401-1 Fever 34 27 10 HEADCOUNT 2015 2016 2017 Flu 23 14 11 BY GENDER Headache 22 30 11

Male 1 3 4 Stomach Ache 19 26 7 Female 7 2 27 Migraine 6 TOTAL 8 5 31 Muscle pain 6 BY AGE

Below 30 years old 4 1 10 APPENDIX 19. 30 to 50 years old 3 4 20 DIRECT ENERGY CONSUMPTION 302-1, 302-2

Above 50 0 0 1 FUEL CONSUMED 2015 2016 2017 TOTAL 7 5 31 (IN GIGAJOULES) Retail Ayala Center Cebu 739.00 168.85 748.81 The Walk 16.00 3.65 38.75 Under Construction Gatewalk Central (Retail & Land - 109.06 64.40 Development) Tech Tower - - 322.85 BPI Cebu Corporate Center 85.78 47.92 71.51 The Alcoves - - 144.62 7 Totals do not include project hires. Solinea Towers 96.22 97.95 Central Bloc / Garden Row 474.67 130.47 189.29 Amara Phase 3B - - 732.78 128 Cebu Holdings, Inc. 2017 Integrated Report APPENDIX 20. APPENDIX 22. INDIRECT ENERGY CONSUMPTION 302-1, 302-2 DIRECT GHG EMISSIONS (SCOPE 1) 305-1

In Gigajoules (GJ) In tonnes of CO2e 2015 2016 2017 2015 2016 2017 Estates (Common Areas) Retail Cebu Business Park 563.98 1,022.64 1,196.97 Ayala Center Cebu 51.00 26.00 52.99 Cebu IT Park 395.00 276.00 403.24 The Walk 1.00 0.24 2.74 Retail Under Construction Ayala Center Cebu 32,803.34 32,390.24 26,910.91 Gatewalk Central - 7.72 4.56 (Land development and retail) Garden Bloc - 31.00 24.48 Central Bloc / Garden Row 33.59 9.23 13.40 The Walk 414.36 448.67 844.06 Tech Tower - - 22.85 Offices BPI Cebu Corporate Center 6.07 3.39 5.06 Ayala Center Cebu Tower - - 5,784.25 The Alcoves - - 10.23 eBloc Tower 1 2,640.79 3,273.71 2,796.18 Solinea Towers 6.81 6.93 eBloc Tower 2 5,014.74 4,743.05 4,056.61 Amara Phase 3B 51.86 eBloc Tower 3 4,529.02 4,695.35 4,590.75 eBloc Tower 4 - 832.00 1,332.00 Under Construction APPENDIX 23. Gatewalk Central (2016 covers land - 51.82 232.80 INDIRECT GHG EMISSIONS (SCOPE 2) 305-2, 305-3 development, 2017 includes retail,

when it became operational) In tonnes of CO2e Central Bloc /Garden Row 29.67 3.05 4,012.44 2015 2016 2017 Tech Tower - - 41.20 Estates (Common Areas) BPI Cebu Corporate Center 82.20 713.08 1,040.39 Cebu Business Park 94.50 171.35 200.56 The Alcoves - - 1,113.48 Cebu IT Park 66.18 46.25 67.56 Solinea Towers 1,597.01 2,360.41 2,864.17 Retail Amara Phase 3B - - 32.26 Ayala Center Cebu 5,496.38 5,427.16 4,509.07

APPENDIX 21. Garden Bloc - 5.19 4.10 INDIRECT ENERGY INTENSITY The Walk 69.43 75.18 141.43 302-3, CRE1 Offices

Ayala Center Cebu Tower - - 969.18 In Gigajoules (GJ) per square meter eBloc Tower 1 442.48 548.53 468.52 2015 2016 2017 eBloc Tower 2 840.25 794.72 679.71 Estates (Common Areas) Cebu Business Park 0.0029 0.0053 0.0062 eBloc Tower 3 758.86 786.73 769.21 Cebu IT Park 0.0033 0.0023 0.0034 eBloc Tower 4 - 139.41 223.18

Retail Under Construction

Ayala Center Cebu 0.6314 0.6235 0.5180 Gatewalk Central - 8.68 39.01 Garden Bloc - 0.0005 0.0004 (Land Development and Retail) The Walk 0.1377 0.1491 0.2804 Gatewalk Central (retail) - - 34.34 Offices Tech Tower - - 6.90 Ayala Center Cebu Tower - - 0.4738 BPI Cebu Corporate Center 13.77 119.48 174.32 eBloc Tower 1 0.5277 0.6542 0.5588 The Alcoves - - 186.57 eBloc Tower 2 0.7198 0.6808 0.5823 Solinea Towers 267.59 395.50 479.91 eBloc Tower 3 0.7426 0.7699 0.7527 Amara Phase 3B 5.41 eBloc Tower 4 - 0.1342 0.2148 Under Construction Gatewalk Central - 0.0019 (Land development and retail) Central Bloc / Garden Row 0.0884 Tech Tower 0.0029 BPI Cebu Corporate Center 0.0659 The Alcoves 0.0742 Solinea Towers 0.0784 Amara Phase 3B 0.0010

FARTHER AND FASTER 129 APPENDIX 24. APPENDIX 25. GHG EMISSION INTENSITY (SCOPES 1 AND 2) WATER CONSUMPTION 305-4, CRE3 303-1

In tonnes of CO2e per square meter In cubic meters 2015 2016 2017 2015 2016 2017 Estates (Common Areas) Estates (Common Areas) Cebu Business Park 0.0005 0.0009 0.0010 Cebu Business Park 4,546.00 1,967.00 1,922.00

Cebu IT Park 0.0006 0.0004 0.0006 Cebu IT Park 3,017.00 2,970.00 1,537.20

Retail Retail

Ayala Center Cebu 0.1068 0.1047 0.0878 Ayala Center Cebu 399,149.00 252,263.00 192,546.00

Garden Bloc - 0.0001 0.0001 Garden Bloc 400.00 318.00

The Walk 0.0281 0.0251 0.0479 The Walk 22,059.75 7,733.00 7,471.00

Offices Offices

Ayala Center Cebu Tower - - 0.0794 Ayala Center Cebu Tower - - 6,638.82

eBloc Tower 1 0.0884 0.1096 0.0936 eBloc Tower 1 7,499.83 5,115.31 6,835.60

eBloc Tower 2 0.1206 0.1141 0.0976 eBloc Tower 2 11,977.50 10,751.05 14,913.70 eBloc Tower 3 6,226.49 3,881.40 8,398.74 eBloc Tower 3 0.1244 0.1290 0.1261 eBloc Tower 4 - 3,404.00 2,058.40 eBloc Tower 4 - 0.0225 0.0360 Under Construction Under Construction Gatewalk Central - 513.49 445.17 Gatewalk Central - 0.0004 (Land Development and Retail) (Land Development and Retail) Central Bloc /Garden Row 1,548.00 11,191.00 12,974.40 Central Bloc /Garden Row 0.0151 Tech Tower - - 3,809.00 Tech Tower - - 0.0021 BPI Cebu Corporate Center 588.58 2,780.36 3,303.41 BPI Cebu Corporate Center 0.0114 The Alcoves - - 7,296.00 The Alcoves - - 0.0131 Solinea Towers 5,707.00 6,448.00 18,278.00 Solinea Towers 0.0133 Amara Phase 3B 190.00 Amara Phase 3B 0.0018

APPENDIX 26. WATER INTENSITY CRE-2 In cubic meter per square meter

2015 2016 2017 Estates (Common Areas)

Cebu Business Park 0.0236 0.0102 0.0100

Cebu IT Park 0.0252 0.0248 0.0128

Retail

Ayala Center Cebu 7.6830 4.8557 3.7062

Garden Bloc - 0.0186 0.0148

The Walk 7.3288 2.5691 2.4821

Offices

Ayala Center Cebu Tower - - 0.5438 eBloc Tower 1 1.4988 1.0222 1.3660

eBloc Tower 2 1.7192 1.5431 2.1406

eBloc Tower 3 1.0209 0.6364 1.3771

eBloc Tower 4 - 0.3320

Under Construction

Gatewalk Central 0.0036 (Land Development and Retail) Central Bloc /Garden Row 0.2859

Tech Tower - - 0.2646 BPI Cebu Corporate Center 0.2092 The Alcoves - - 0.4862 Solinea Towers 0.5004 Amara Phase 3B 0.0060

130 Cebu Holdings, Inc. 2017 Integrated Report APPENDIX 27. SOLID WASTE GENERATED FROM OPERATIONAL PROPERTIES 306-2 In tonnes

SOLID WASTE SOLID WASTE RECYCLABLES RECYCLABLES NON-RECYCLABLES TOTAL Aluminum Cans 16,486.78 Estates (Common Areas) Cardboards 369,093.31 Cebu Business Park 16.31 7.92 *46.60 Glass 13,728.47 Cebu IT Park 43.03 20.70 63.73 Metal 13,675.64 Retail Papers 250,047.84 Ayala Center Cebu 818.38 3,449.02 4,267.40 Plastic Container 36,266.84 Garden Bloc 15.74 152.70 168.44 Plastic 261,341.99 The Walk 87.12 856.09 943.21 Styropor 9,747.00 Offices Textiles 1,683.25 ACC Tower 7.88 4.89 12.77 Tin Cans 68,099.00 eBloc Tower 1 55.40 79.64 135.04 Wood 23,218.00 eBloc Tower 2 7.97 137.32 145.29 eBloc Tower 3 5.50 113.74 119.24 eBloc Tower 4 2.12 35.00 37.12

* including 22.37 tonnes of unclassified solid waste

APPENDIX 28. APPENDIX 29. SOLID WASTE GENERATED FROM TOTAL WASTE GENERATED AND RECYCLED CONSTRUCTION SITES 306-2 FROM CONSTRUCTION SITES In cubic meters (PER TYPE OF WASTE) 306-2

WASTE In cubic meters RECYCLED GENERATED WASTE GENERATED RECYCLED Under Construction Concrete 1,132.50 28.20 Gatewalk Central (Land Development) - Wood 534.08 307.63 Gatewalk Central (retail) 587,430.73 153,274.00 Mixed Waste 24,109.04 1,879.62 Central Bloc /Garden Row 22,797.52 303.42 Soil 610,562.73 168,866.40 Tech Tower 1,127.50 179.00 Metal 1,788.84 1,492.67 BPI Cebu Corporate Center 782.50 - Paper 27.93 16.98 The Alcoves 16.10 8.32 Plastic 34.59 10.95 Solinea Towers 5,011.87 1,836.00 Tiles and Ceramics 72.70 1.50 Amara Phase 3B 14,862.00 741.95 Paver Blocks 202.80 78.30 APPENDIX 30. Acotec Panel 1.00 - RECYCLABLES COLLECTED BY COMMUNITY Total 638,466.20 172,682.26 PARTNER FROM MALL OPERATIONS Results of continuing Solid Waste Management Program Partnership of Ayala Center Cebu and Barangay Luz MEMBERSHIP IN ASSOCIATIONS Business and Management In tonnes »» Ayala Business Club Cebu, Inc. RECYCLED WASTE 2015 2016 2017 »» Cebu Business Park and Cebu I.T. Park Neighboring Barangays Alliance Dry Carton 173.20 331.35 381.81 »» Cebu Business Park Association, Inc. Mixed Waste 51.93 66.84 93.40 »» Cebu Chamber of Commerce and Industry »» Chamber of Real Estate and Builders’ Association, Inc. Assorted Plastic 30.33 33.04 32.40 »» Geoplan Cebu Foundation, Inc. Glass 28.27 25.22 25.39 »» International Council of Shopping Centers »» Management Association of the Philippines Tin Cans 26.08 31.72 33.02 »» Philippine Quality and Productivity Movement – Visayas Mineral 22.83 30.40 35.03 »» Philippine Retailers Association »» Philippine Chamber of Commerce and Industry Cups 22.53 18.83 15.22 »» Financial Executives Institute of Cebu, Inc. Others 58.66 55.92 69.75 Sustainability Reporting Total 413.83 593.32 686.01 »» Global Reporting Initiative GOLD Community Recyclables Collected and Income Generated by community partners Environmental and Ecosystems Conservation RECYCLED WASTE 2016 2017 »» Philippine Business for the Environment Kilos (kg) 593.32 686.01 »» Cebu Uniting for Sustainable Water Foundation Income (Php) PHP 2,470,066.00 PHP 2,797,328.00

FARTHER AND FASTER 131 GRI CONTENT INDEX

GRI Standard Disclosure Page number/direct answers GRI 101: Foundation 2016 General Disclosures GRI 102: Organizational Profile General Disclosures 2016 102-1 Name of the organization 14 102-2 Activities, brands, products, and services 15, 17 102-3 Location of headquarters 17 102-4 Location of operations Within the Philippines only. 102-5 Ownership and legal form 15, 72 102-6 Markets served 17 102-7 Scale of the organization 10, 17 102-8 Information on employees and other workers 43, 49, 61, 126, 128 102-9 Supply chain 2015 CHI Annual and Sustainability Report pages 9, 158, 160 102-10 Significant changes to the organization and its supply No significant changes during the reporting chain. period. 102-11 Precautionary Principle or approach 114 102-12 External initiatives 2 102-13 Membership of associations 131

Strategy 102-14 Statement from senior decision-maker 4 102-15 Key impacts, risks, and opportunities 27, 114 Ethics and integrity 102-16 Values, principles, standards, and norms of behavior 14 102-17 Mechanisms for advice and concerns about ethics 73, 84 Governance 102-18 Governance structure 77 102-19 Delegating authority 100 102-20 Executive-level responsibility for economic, 100 environmental, and social topics 102-21 Consulting stakeholders on economic, environmental, 79 and social topics 102-22 Composition of the highest governance body and its 121 committees 102-23 Chair of the highest governance body 104, 122 102-24 Nominating and selecting the highest governance body 102 102-25 Conflicts of interest 103 102-27 Collective knowledge of highest governance body 104 102-28 Evaluating the highest governance body's performance 104 102-29 Identifying and managing economic, environmental, 100 and social impacts 102-30 Effectiveness of risk management processes 112 - 115 102-33 Communicating critical concerns 84 102-35 Remunerations policies 103 102-36 Process for determining remuneration 103 102-37 Stakeholders’ involvement in remuneration 79 Stakeholder engagement 102-40 List of stakeholder groups 59, 83, 126 102-41 Collective bargaining agreements 115 102-42 Identifying and selecting stakeholders 59, 83, 126 102-43 Approach to stakeholder engagement 83, 126 102-44 Key topics and concerns raised 127

132 Cebu Holdings, Inc. 2017 Integrated Report GRI Standard Disclosure Page number/direct answers GRI 101: Foundation 2016 General Disclosures Reporting practice 102-45 Entities included in the consolidated financial 2; In the financial statements, entities included statements are Cebu Holdings, subsidiaries, and affiliates. 102-46 Defining report content and topic Boundaries 125 102-47 List of material topics 125 102-48 Restatements of information There are no restatements of information in this report. 102-49 Changes in reporting 125 102-50 Reporting period 2 102-51 Date of most recent report April 2017 102-52 Reporting cycle 2 102-53 Contact point for questions regarding the report 2 102-54 Claims of reporting in accordance with the GRI 2; This report has been prepared in accordance Standards with the GRI Standards: Core option 102-55 GRI Content Index 2 102-56 External assurance No external assurance was conducted for this report.

MATERIAL TOPICS GRI Standard Disclosure Page number/direct answers GRI 200 Economic Standard Series Economic Performance GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management Approach 2016 103-2 The management approach and its components 8-13 103-3 Evaluation of the management approach 8-13 GRI 201: Economic 201-1 Direct economic value generated and distributed 68, 126 Performance 2016 Indirect Economic Impacts GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management Approach 2016 103-2 The management approach and its components 26-57 103-3 Evaluation of the management approach 100

GRI 203: 203-2 Significant indirect economic impacts 27 Indirect Economic Impacts 2016

Procurement Practices GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management Approach 2016 103-2 The management approach and its components 76 103-3 Evaluation of the management approach No evaluation conducted yet.

Anti-corruption GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach has been successful as there are no reported incidents. GRI 205: Anti- 205-3 Confirmed incidents of corruption and actions taken 83 corruption 2016 Anti-competitive Behavior GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach has been successful as there are no reported incidents. GRI 206: Anti- 206-1 Legal actions for anti-competitive behavior, anti- 83 competitive Behavior trust, and monopoly practices 2016

FARTHER AND FASTER 133 GRI Standard Disclosure Page number/direct answers GRI 300 Environmental Standard Series Materials GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management 103-2 The management approach and its components 42 Approach 2016 103-3 Evaluation of the management approach 100 GRI 301: 301-1 Materials used by weight or volume 55 Materials 2016 301-2 Recycled input materials used 43 Energy GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management 103-2 The management approach and its components 114 Approach 2016 103-3 Evaluation of the management approach 100 GRI 302: 302-1 Energy consumption within the organization 43, 49, 55, 128, 129 Energy 2016 302-2 Energy consumption outside of the organization 128, 129 302-3 Energy intensity 43, 49 GRI G4 CRE Sector CRE1 Building Energy Intensity 129 Disclosure Water GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management 103-2 The management approach and its components 114 Approach 2016 103-3 Evaluation of the management approach 100 GRI 303: Water 2016 303-1 Water withdrawal by source 55, 130 GRI G4 CRE Sector CRE2 Building Water Intensity 130 Disclosure

Biodiversity GRI 103: 103-1 Explanation of the material topic and its Boundary 20-22, 125 Management 103-2 The management approach and its components 20-22, 25-26 Approach 2016 103-3 Evaluation of the management approach No evaluation was conducted yet because this is a new project. 304-3 Habitats protected or restored 34, 35 Emissions GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 114 103-3 Evaluation of the management approach 100 GRI 305: Emissions 305-1 Direct (Scope 1) GHG emissions 129 2016 305-2 Energy indirect (Scope 2) GHG emissions 129 305-3 Other indirect (Scope 3) GHG emissions 129 305-4 GHG emissions intensity 43, 49, 130 GRI G4 CRE Sector CRE3 Greenhouse gas emissions intensity from buildings 130 Disclosure Effluents and Waste GRI 103: 103-1 Explanation of the material topic and its Boundary 125 Management 103-2 The management approach and its components 32, 34, 40 Approach 2016 103-3 Evaluation of the management approach 100 GRI 306: Effluents and 306-2 Waste by type and disposal method 55,131 Waste 2016 Environmental Compliance GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83,115 103-3 Evaluation of the management approach 100 GRI 307: 307-1 Non-compliance with environmental laws and 83,115 Environmental regulations Compliance 2016

134 Cebu Holdings, Inc. 2017 Integrated Report GRI Standard Disclosure Page number/direct answers GRI 400 Social Standard Series Employment GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach No employee engagement survey was conducted this year GRI 401: Employment 401-1 New employee hires and employee turnover 128 2016 Labor/Management Relations GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 115 103-3 Evaluation of the management approach Management approach is successful as no cases filed against CHI for discrimination and non-observance of labor standards and employment contract clauses GRI 402: Labor/ 402-1 Minimum notice periods regarding operational We observe notice period of at least 30 days. Management changes Relations 2016 Occupational Health and Safety GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 60, 83, 115 103-3 Evaluation of the management approach 100 GRI 403: Occupational 403-2 Types of injury and rates of injury, occupational 128 Health and Safety diseases, lost days, and absenteeism, and number of 2016 work-related fatalities Training and Education GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 60 103-3 Evaluation of the management approach 100 GRI 404: Training and 404-1 Average hours of training per year per employee 61, 128 Education 2016 Diversity and Equal Opportunity GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 60 103-3 Evaluation of the management approach 100 GRI 405: Diversity and 405-1 Diversity of governance bodies and employees 128 Equal Opportunity 2016 Non-discrimination GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach is successful as no cases filed against CHI for discrimination and non-observance of discrimination in the workplace. GRI 406: Non- 406-1 Incidents of discrimination and corrective actions 115 discrimination 2016 taken Child Labor GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach has been successful as there are no reported risks and incidents of child labor. GRI 408: Child Labor 408-1 Operations and suppliers at significant risk for 115 2016 incidents of child labor

FARTHER AND FASTER 135 GRI Standard Disclosure Page number/direct answers Forced or Compulsory Labor GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach has been successful as there are no reported risks and incidents of forced labor. GRI 409: Forced or 409-1 Operations and suppliers at significant risk for 115 Compulsory Labor incidents of forced or compulsory labor 2016 Rights of Indigenous Peoples GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach has been successful as there are no reported incidents of violations involving rights of indigenous people. GRI 411: Rights of 411-1 Incidents of violations involving rights of indigenous 115 Indigenous Peoples peoples 2016 Human Rights Assessment GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components HR Officer orients all employees on policies, processes and procedures related to human rights provisions.

Compliance is extended to general contractors, suppliers, and service providers

A stringent supplier accreditation process is in place to ensure all investment agreements and contracts do not violate human rights 103-3 Evaluation of the management approach Management approach is successful as there are no reported violations on human rights. GRI 412: Human 412-3 Significant investment agreements and contracts 115 Rights Assessment that include human rights clauses or that underwent 2016 human rights screening Local Communities GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 58-59, 83 103-3 Evaluation of the management approach 58-59, 83 GRI 413: Local 413-1 Operations with local community engagement, The company has a dedicated Sustainability Communities 2016 impact assessments, and development programs and Community Relations Department which is responsible for implementing various local community programs and monitor its progress as well as impacts. Customer Health and Safety GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach is successful as there are no incidents of non-compliance on customer health and safety GRI 416: Customer 416-2 Incidents of non-compliance concerning the health None to report. Health and Safety and safety impacts of products and services 2016 Marketing and Labelling GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach is successful as there are no incidents of non-compliance on marketing and labelling.

136 Cebu Holdings, Inc. 2017 Integrated Report GRI Standard Disclosure Page number/direct answers GRI 417: Marketing 417-2 Incidents of non-compliance concerning product 115 and Labelling 2016 and service information and labeling 417-3 Incidents of non-compliance concerning marketing 115 communications Customer Privacy GRI 103: Management 103-1 Explanation of the material topic and its Boundary 125 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach Management approach is successful as there are no complaints on customer privacy. GRI 418: Customer 418-1 Substantiated complaints concerning breaches of 115 Privacy 2016 customer privacy and losses of customer data Socioeconomic Compliance GRI 103: Management 103-1 Explanation of the material topic and its Boundary 74-75 Approach 2016 103-2 The management approach and its components 83, 115 103-3 Evaluation of the management approach 100 GRI 419: 419-1 Non-compliance with laws and regulations in the 83, 115 Socioeconomic social and economic area Compliance 2016

FARTHER AND FASTER 137 ASEAN CORPORATE GOVERNANCE INDEX

Description Page no. / Description Page no. / Direct answer Direct answer A. Rights of Shareholders C. Role of Stakeholders A.1 Basic shareholder rights 78 C.1 The rights of stakeholders that are 83 established by law or through mutual A.2 Right to participate in decisions 79 agreements are to be respected concerning fundamental corporate changes C.2 Where stakeholder interests are protected 84 by law, stakeholders should have the A.3 Right to participate effectively in and 79, 80 opportunity to obtain effective redress for vote in general shareholder meetings and violation of their rights should be informed of the rules, including voting procedures that govern general C.2.1 Contact details via the company’s website 85 shareholder meetings or Annual Report which stakeholders can use to voice their concerns and/or A.3.1 Shareholders as having the opportunity, 79 complaints for possible violation of their evidenced by an agenda item, to rights approve remuneration or any increases in remuneration for non-executive C.3 Performance-enhancing mechanisms 83 directors/commissioners for employee participation should be permitted to develop A.3.2 Whether the company provides 79 non-controlling shareholders a right C.4 Stakeholders including individual 83, 84 to nominate candidates for board of employees and their representative directors/commissioners bodies, should be able to freely communicate their concerns about illegal A.3.3 Whether the company allow shareholders 79 or unethical practices to the board and to elect directors/commissioners their rights should not be compromised individually for doing this A.3.18 Whether the company provides at least 80 D. Disclosure and Transparency 21 days’ notice for all resolutions D.1 Transparent ownership structure 15, 86, 123 A.3.19 Whether the company provides the 80 D.2 Quality of annual report 112, 117, 122 rationale and explanation for each agenda item which require shareholders’ D.2.5 Dividend policy 78 approval in the notice of AGM/circulars D.2.6 Details of whistle-blowing policy 84 and/or the accompanying statement D.2.8 Training and/or continuing education 80 A.5 The exercise of ownership rights by all 79 programme attended by each director/ shareholders, including institutional commissioner investors, should be facilitated D.2.11 Details of remuneration of each member 124 A.5.1 Whether the company publicly disclose 79 of the board of directors/commissioners its policy/practice to encourage shareholders including institutional D.2.12 Statement of full compliance with the 72 shareholders to attend the general Code of Corporate Governance meetings or engagement with the D.3 Disclosure of related party transactions 81 company D.4 Directors and commissioners dealings in 80 B. Equitable Treatment of Shareholders shares of the company B.1 Shares and voting rights 80 D.5 External auditor and auditor report 87 B.1.1 Whether the company’s ordinary or 80 D.6 Medium of communications common shares have one vote for one share D.6.1 Quarterly reporting 86 B.2 Notice of AGM 80 D.6.2 Company website 86 B.2.3 Whether the profiles of directors/ 80 D.6.3 Analyst's briefing 87 commissioners in seeking election/re- D.6.4 Media briefing/press conferences 87 election are included in the notice of AGM D.7 Timely filing/release of annual/financial 85 B.2.4 Whether the auditors seeking 80 reports appointment/re-appointment are clearly D.8 Company website 87 identified in the notice of AGM D.9 Investor Relations Inside back B.3 Policy on insider trading and abusive 80 cover self-dealing B.4 Related party transactions by directors 81 D.9.1 Contact details of the officer/office 85 and key executives responsible for investor relations B.5 Protecting minority shareholders from 81 abusive actions

138 Cebu Holdings, Inc. 2017 Integrated Report Description Page no. / Description Page no. / Direct answer Direct answer E. Responsibilities of the Board E.3.7 Whether the company secretary plays a 102 significant role in supporting the board in E.1 Clearly-defined board responsibilities and 88 discharging its responsibilities corporate governance policy E.3.8 Whether the company secretary is 102 E.2.1 Details of the Code of Ethics 105 trained in legal, accountancy or company E.2.2 Compliance of directors, senior 105 secretarial practices management, and employees to the Code E.3.9 Criteria in selecting new directors 94 E.2 E.3.10 Process in appointing new directors 94 E.2.3 Compliance monitoring mechanism 105 E.3.11 Re-election 80 E.2.4 Composition of the Board of Directors 90 E.3.12 The company’s remuneration policy/ 94 E.2.5 Definition of independent directors 90 practices for its executive directors and E.2.6 Term limit for independent directors 90 CEO E.2.7 Board seat limit for independent directors 90 E.3.13 Fee structure for non-executive directors/ 103 commissioners E.2.9 Details of the company's Nomination 94 Committee E.3.14 Shareholders or the Board of Directors’ 96 approval of the remuneration for E.2.10 Composition of the Nomination 94 executive directors and/or the senior Committee executives E.2.11 Chairman of the Nomination Committee 94 E.3.15 Whether independent non-executive 103 E.2.12 Nomination Committee Charter 94 directors/commissioners receive options, performance shares or bonuses E.2.13 Nomination Committee Meetings 94 E.3.19 Internal control procedures and risk 96 E.2.14 Attendance details of Nomination 94 management systems Committee Meetings E.3.20 Board review of the company's material 96 E.2.15 Details of the company's Compensation 96 controls and risk management systems Committee E.3.21 Risk management 96 E.2.16 Composition of the Compensation 96 Committee E.3.22 Statement from the Board or Audit 96 Committee on the adequacy of the E.2.17 Chairman of the Compensation 96 company's internal controls Committee E.4 People on the Board 117, 121 E.2.18 Compensation Committee Charter 96 E.4.5 Whether at least one non-executive 117 E.2.19 Compensation Committee Meetings 96 director/commissioner have prior E.2.20 Attendance details of Compensation 96,122 working experience in the major sector Committee Meetings that the company is operating in E.2.21 Details of the company's Audit 91 E.4.6 Company’s disclosure of board of 94 Committee directors/commissioners diversity policy E.2.22 Composition of the Audit Committee 91 E.5 Board Performance E.2.23 Chairman of the Audit Committee 91 E.5.1 Orientation programs for new directors/ 122 commissioners E.2.24 Audit Committee Charter 91 E.5.2 Company policy that encourages 94,122 E.2.25 Audit Committee Members 91 directors/commissioners to attend E.2.26 Expertise of Audit Committee Members 91 on-going or continuous professional education programmes E.2.27 Audit Committee Meetings 91 E.5.5 Annual performance assessment 94 E.2.28 Attendance details of Audit Committee 91, 122 conducted by the board of directors/ Meetings commissioners E.2.29 Responsibilities of the Audit Committee 91 E.5.6 Process followed in conducting the board 94 E.3 Board Processes 87, 90, 112 assessment

E.3.1 Scheduling of Board Meeting 122 E.5.7 Criteria used in the board assessment 94 E.3.2 Details of the Meetings of the Board 122 E.5.8 Annual performance assessment 94 E.3.3 Attendance details of Board Meetings 122 conducted of individual director/ commissioner E.3.4 Board quorum requirement 102 E.5.9 Process followed in conducting the 94 E.3.5 Meeting details of non-executive 102 director/commissioner assessment directors E.5.10 Criteria used in the director/ 94 commissioner assessment

FARTHER AND FASTER 139 140 Cebu Holdings, Inc. 2017 Integrated Report FINANCIAL REPORTS

STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

REPORT OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS

REPORT OF THE RISK OVERSIGHT COMMITTEE TO THE BOARD OF DIRECTORS

INDEPENDENT AUDITOR’S REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SHAREHOLDER INFORMATION

FARTHER AND FASTER 141 CEBU HOLDINGS, INC AND SUBSIDIARIES STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

142 Cebu Holdings, Inc. 2017 Integrated Report CEBU HOLDINGS, INC AND SUBSIDIARIES REPORT OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS Report of the Audit Committee to the Board of Directors For the Year Ended December 31, 2017

As Audit Committee members, our roles and responsibilities are defined in the Audit Committee Charter approved by the Board of Directors. We assist the Board of Directors in fulfilling its oversight responsibility to the shareholders relating to:  the integrity of Cebu Holdings Inc.’s (the “Company”) financial statements and the financial reporting process;  the appointment, re-appointment, remuneration, qualifications, independence and performance of the independent auditors and the integrity of the audit process as a whole;  the effectiveness of the systems of internal control and the risk management process;  the performance and leadership of the internal audit function;  the Company’s compliance with applicable legal and regulatory requirements; and  the preparation of a year-end report of the Committee for approval of the Board and to be included in the annual report.

In compliance with the Audit Committee Charter, we confirm that:  An independent director chairs the Audit Committee. All members of the Committee are independent directors.

 We had five (5) meetings in 2017, with the following attendance rate: Committee Member No. of Meetings Attended/Held Percent Present Fr.Roderick C. Salazar, Jr., SVD (Chairman) 5/5 100% Enrique L. Benedicto 5/5 100% Pampio A. Abarintos 5/5 100%

 We reviewed and revised the Committee’s Charter and endorsed the same for the approval of the Board of Directors.

 We recommended to the Board of Directors the re-appointment of SGV & Co., as independent external auditors for 2018, based on the review of their performance and qualifications, including consideration of management’s recommendation. The Committee delegates to management the negotiation and finalization of fees;

 We reviewed and discussed the quarterly unaudited consolidated financial statements and the annual audited consolidated financial statements of Cebu Holdings, Inc. and subsidiaries,

FARTHER AND FASTER 143 CEBU HOLDINGS, INC AND SUBSIDIARIES REPORT OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS

including Management’s Discussion Analysis of Financial Condition and Results of Operations as of and for the year ended December 31, 2017, with the Company’s management and SGV & Co. these activities were performed in the following context: - That management has the primary responsibility for the financial statements and the CEBU HOLDINGS, INCreporting AND process SUBSIDIARIES REPORT OF THE- That AUDIT SGV &COMMITTEE Co. is responsible TO for THE expressing BOARD an opinion OF DIRECTORS on the conformity of the CEBU HOLDINGS, INC AND SUBSIDIARIES CEBU HOLDINGS,Company’s INC AND consolidated SUBSIDIARIES audited financial statements with Philippine Reporting Standards. REPORTREPORT OF THE AUDITOF THE COMMITTEE AUDIT COMMITTEE TO THE BOARDTO THE OFBOARD DIRECTORS OF DIRECTORS  We discussed and approved the overall scope and the respective audit plans of the Company’s • We discussed and approved the overall scope and the respective audit plansInternal of Auditorsthe Company’sand SGV & Co. Internal We have alsoAuditors discussed andthe results SGV of& their Co audits. We and havetheir also discussed the results of their audits and their assessment of the • assessment of the Company’s internal controls and the overall quality of the financial reporting We discussedCompany’s• We discussed and internal approved and controls approvedthe overall and the the overallscope overall and scope thequality andrespective theof therespective auditfinancial audit process; plansreporting ofplans the Company’sofprocess; the Company’s Internal InternalAuditors Auditorsand SGV and& Co SGV. We& Cohave. Wealso have also discussed discussed the results the resultsof their of auditstheir andaudits their and assessmenttheir assessment of the of the Company’sCompany’s internal internalcontrols controlsand the andoverall the overallquality qualityof the financialof the financial • We also reviewed the reports of the Internal Auditors, ensuring that reporting Wereporting process; also reviewed process; the reports of the Internal Auditors, ensuring that management is taking management is taking appropriate corrective actions in a timely manner,

includingappropriate addressing corrective actions internal in a timely controls manner, including and compliance addressing internal issues. controls and All the • • We alsoactivities complianceWereviewed also issues.conducted reviewedthe Allreports the activitiestheby Internalreportsof conducted the InternalbyofAudit Internal the wereAudit InternalAuditors, were conducted conducted Auditors, ensuring in inconformance conformance ensuringthat that managementmanagement is taking is appropriatetaking appropriate corrective corrective actions inactions a timely in a manner,timely manner, withwith thethe International International Standards forStandards the Professional for Practice the of InternalProfessional Auditing. Based Pract on theice of includingInternalincluding addressing Auditing. addressing internal Based internalcontrols on the controls andassurance compliance and provided compliance issues. by Internal issues. All the Audit All the activitiesas assurancewellactivities conducted as provided SGV conducted &byby Co.,Internal Internal as Auditby a as Internalresult Auditwell as SGVwereof Audit &their Co.,conducted aswere activities,a result conducted ofin their conformance activities, the in Committee theconformance with the International Standards for the Professional Practice of assessedCommitteewith the thatassessed International the that theCompany’s Company’s Standards systemssystems of internalfor of thecontrols,internal Professional risk management controls, Practand riskice of Internal InternalAuditing. Auditing. Based on Basedthe assuranceon the assurance provided providedby Internal by InternalAudit Audit managementgovernance andprocesses governance are adequate. processes are adequate. as well asas wellSGV &as Co., SGV as& Co.,a result as a ofresult their of activities, their activities, the Committee the Committee assessed assessedthat thethat Company’s the Company’s systems systemsof internal of internalcontrols, controls, risk risk • We reviewed and approved all audit services provided by SGV & Co. to management management and governance and governance processes processes are adequa arete. adequa te. CebuWe Holdings, reviewed and approvedInc. and all auditrelated services fees provided for by SGVsuch & Co.services. to Cebu Holdings, Inc. and

related fees for such services. • We reviewed• We reviewedand approved and approvedall audit all services audit servicesprovided providedby SGV &by Co. SGV to & Co. to BasedCebu on Holdings,theCebu reviews Holdings, Inc. and and discussions Inc.related and feesrelated undertaken, for feessuch forservices.and suchsubject services. to the limitations

on ourBased roleson the reviewsand responsibilitiesand discussions undertaken, referr and edsubject to to above,the limitations the on Auditour roles Committeeand recommended to the Board of Directors the inclusion of the Company’s Basedconsolidated on Basedresponsibilitiesthe reviewson thefinancial referred andreviews to discussions above, statements and the Auditdiscussions Committee undertaken,as of recommendedandundertaken, forand thesubject to the yearand Board endedtosubject of Directorsthe December limitationsto the theinclusion 31,limitations 2016 on ourin ontherolesof the our Company’sCompany’s androles responsibilities consolidated Annualand responsibilities financialReport statements referrto the ased of referrStockholdersandto for theabove,ed yearto ended theabove,and December Auditfor the filing31, Committee2017Audit inwith the Committee the recommendedrecommended to the toBoard the ofBoard Directors of Directors the inclusion the inclusion of the ofCompany’s the Company’s SecuritiesCompany’s and Annual Exchange Report to theCommission. Stockholders and for filing with the Securities and Exchange Commission. consolidated consolidated financial financial statements statements as of and as forof theand yearfor theended year December ended December31, 2016 31, 2016 in theFebruary Company’sin the 8 , Company’s2016 Annual ReportAnnual toReport the Stockholdersto the Stockholders and for andfiling for withfiling th ewith the Securities and Exchange Commission. SecuritiesFebruary 13, 2018 and Exchange Commission.

February February8, 2016 8, 2016

FR.FR. RODERICK RODERICK C.C. SALAZAR,SALAZAR, JR., JR., SVD SVD Committee Chairman Committee Chairman

FR. RODERICKFR. RODERICKC. SALAZAR, C. SALAZAR,JR., SVD JR., SVD CommitteeCommittee Chairman Chairman

CONSUL ENRIQUE L. BENEDICTO JUSTICE PAMPIO A. ABARINTOS (RET) Committee Member Committee Member

CONSUL ENRIQUECONSUL CONSUL L.ENRIQUE ENRIQUE BENEDICTO L. L. BENEDICTOBE NEDICTO JUSTICE JUSTICE PAMPIOJUSTICE PAMPIO A. A.PAMPIO ABARINTOSABARINTOS A. (RET)ABARINTOS (RET) (RET) Committee Committee Member Member Committee Committee Member Member Committee Member Committee Member

144 Cebu Holdings, Inc. 2017 Integrated Report

204 2016 Annual and Sustainability Report FINANCIAL REPORT

204 2016 Annual204 and2016 Sustainability Annual and Report Sustainability Report FINANCIAL REPORTFINANCIAL REPORT Report of the Risk Oversight Committee to the Board of Directors For the Year Ended December 31, 2017 CEBU HOLDINGS, INC AND SUBSIDIARIES REPORTRepo OFrt o THEf th eRISK Ris OVERSIGHTk Oversigh COMMITTEEt Committee TO to the Board of Directors THEReAsp BOARD oRiskrt oCommitteef t hOFe RDIRECTORS members,isk OForv eour rthes rolesig Yearh tand C Ended oresponsibilitiesmm iDecemberttee tareo tdefined h31,e B2017 oina therd Riskof DOversightirecto Committeers Charter approved by theFor Board the ofYear Directors. Ended WeDecember assist the 31, Board 2017 in the performance of its oversight Asfunctions Risk Committeeof the Company’s members, risk ourmanagement roles and activitiesresponsibilities through are continuous defined input,in the evaluationRisk Oversight and feedback Committee on

As RiskCharterthe effectiveness Committee approved members, of by the the Company’s Boardour roles of risk Directors. and management responsibilities We process.assist are the defined Board in in the the Risk performance Oversight ofCommittee its oversight

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February 13, 2018 February 8, 2016 Committee Chairman February 8, 2016

CONSUL ENRIQUE L. BENEDICTO CONSUL ENRIQUE L. BENEDICTO Committee Chairman CONSUL ENRIQUE L. BENEDICTO CommitteeCONSUL Chairman ENRIQUE L. BENEDICTO Committee Chairman Committee Chairman

FR. RODERICK C. SALAZAR, JR., SVD JUSTICE PAMPIO A. ABARINTOS (RET.)

Committee Member Committee Member FR. RODERICK FR. C. FR.RODERICK SALAZAR,RODERICK C. C.JR., SALAZAR, SVD JR., JR., SVD SVD JUSTICE JUSTICE PAMPIO PAMPIO JUSTICE A.A. ABARINTOS ABARINTOSPAMPIO (RET.)A. (RET.)ABARINTOS (RET.) Committee Member Committee Member Committee Member Member Committee Member Committee Member

FR. RODERICK C. SALAZAR, JR., SVD JUSTICE PAMPIO A. ABARINTOSFARTHER (RET.) AND FASTER 145 Committee Member Committee Member

2016 Annual and Sustainability Report FINANCIAL REPORT 205 2016 Annual and Sustainability2016 Annual Report and Sustainability Report FINANCIAL REPORTFINANCIAL205 REPORT 205 INDEPENDENT AUDITOR’S REPORT

CEBU HOLDINGS, INC AND SUBSIDIARIES INDEPENDENT AUDITOR'S REPORT

The Stockholders and Board of Directors Cebu Holdings, Inc. and Subsidiaries 20th Floor, Ayala Center Cebu Tower, Bohol Street Cebu Business Park, Cebu City

Opinion

We have audited the consolidated financial statements of Cebu Holdings, Inc. (the “Parent Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statements of financial position as at December 31, 2017 and 2016, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in

equity and consolidated statements of cash flows for each of the three years in the period ended December 31, 2017, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2017 and 2016, and their consolidated financial performance and their cash flows for each of the three years in the period ended

December 31, 2017 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audits included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

Provisions and Contingencies

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

Audit response

146 WeCebu discussedHoldings, Inc. the2017 Integratedstatus of Report the legal proceeding with the management and the Group’s external legal counsel for the status of the legal proceeding and obtained opinions of their external legal counsel. We reviewed management’s assessment on the possible outcome of the legal proceeding and the need to recognize any provision based on the status of the case and considering relevant local rules and regulations.

Recognition of Real Estate Revenue and Costs

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

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

Audit response

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

Audit response

We discussed the status of the legal proceeding with the management and the Group’s external legal counsel for the status of the legal proceeding and obtained opinions of their external legal counsel. We reviewed management’s assessment on the possible outcome of the legal proceeding and the need to recognize any provision based on the status of the case and considering relevant local rules and regulations.

Recognition of Real Estate Revenue and Costs

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

Audit response

Other Information

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

Annual Report for the year ended December 31, 2017 are expected to be made available to us after the date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. FARTHER AND FASTER 147 In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits, or otherwise appears to be materially misstated.

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

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

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

our auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and

Annual Report for the year ended December 31, 2017 are expected to be made available to us after the

date of this auditor’s report.

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

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits, or otherwise appears to be materially misstated.

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

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

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. · Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

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

· Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are 148 Cebuinadequate, Holdings, Inc. 2017 to Integrated modify Reportour opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. · Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

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

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

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

SYCIP GORRES VELAYO & CO.

Dolmar C. Montañez Partner CPA Certificate No. 112004 SEC Accreditation No. 1561-A (Group A), April 21, 2016, valid until April 21, 2019 Tax Identification No. 925-713-249-000

BIR Accreditation 08-001998-119-2016 February 15, 2016, valid until February 15, 2019 PTR No. 6621303, January 9, 2018, Makati City

February 26, 2018

FARTHER AND FASTER 149 CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in Thousands)

December 31 2017 2016 ASSETS Current Assets Cash and cash equivalents (Notes 5 and 27) P=176,788 P=94,908 Short-term investments (Note 6) 2,543 − Financial assets at fair value through profit or loss (Notes 7, 22 and 27) 10,129 21,908

Receivables (Notes 8, 20, 22 and 27) 2,002,141 1,937,557

Inventories (Note 9) 751,084 723,851 Other current assets (Note 10) 430,736 524,074 Total Current Assets 3,373,421 3,302,298 Noncurrent Assets Noncurrent portion of receivables (Notes 8 and 27) 475,973 434,758 Available-for-sale financial assets (Note 11) 304,333 318,574

Property and equipment (Note 12) 289,795 79,560 Investments in associates and a joint venture (Note 13) 2,567,710 1,854,694 Investment properties (Note 14) 10,881,060 11,011,106 Land and improvements (Note 15) 2,636,277 2,580,250 Deferred tax assets - net (Note 25) 4,557 18,836 Other noncurrent assets (Notes 16 and 27) 55,034 15,547 Total Noncurrent Assets 17,214,739 16,313,325 P=20,588,160 P=19,615,623

LIABILITIES AND EQUITY Current Liabilities Accounts and other payables (Notes 17, 20, 27 and 28) P=4,705,560 P=4,371,300 Current portion of long-term debt (Notes 18 and 27) 59,942 442,279

Income tax payable 50,381 10,149

Deposits and other current liabilities (Notes 19 and 27) 820,956 799,299 Total Current Liabilities 5,636,839 5,623,027 Noncurrent Liabilities Long-term debt - net of current portion (Notes 18 and 27) 6,393,634 5,706,032 Pension liabilities (Note 24) 32,269 32,199

Deferred tax liabilities - net (Note 25) 261,306 236,165 Deposits and other noncurrent liabilities (Notes 17, 19, 27) 316,479 591,366 Total Noncurrent Liabilities 7,003,688 6,565,762 Total Liabilities 12,640,527 12,188,789 Equity (Note 28) Equity attributable to equity holders of Cebu Holdings, Inc. Capital stock 1,920,074 1,920,074

Additional paid-in capital 856,684 856,684 Retained earnings 4,250,293 3,784,856 Equity reserves (9,474) (9,474) Remeasurement loss on defined benefit plan (Note 24) (28,444) (24,249) 6,989,133 6,527,891 Non-controlling interests (Note 4) 958,500 898,943 Total Equity 7,947,633 7,426,834 P=20,588,160 P=19,615,623

See accompanying Notes to Consolidated Financial Statements.

150 Cebu Holdings, Inc. 2017 Integrated Report CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, except Earnings Per Share Figures)

Years Ended December 31 2017 2016 2015

REVENUE Real estate (Notes 14, 21 and 30) P=2,621,733 P=2,278,689 P=3,134,246 Equity in net earnings of associates and a joint venture (Note 13) 14,713 161,310 106,303 Interest income (Notes 5, 6, 8 and 22) 41,533 35,915 98,119

Other income (Note 22) 414,255 238,559 401,591 3,092,234 2,714,473 3,740,259

COSTS AND EXPENSES Real estate (Note 23) 1,437,580 1,295,847 1,793,984 Interest expense (Note 18) 345,214 247,716 346,215

General and administrative expenses (Note 23) 212,083 199,021 223,177 Other charges (Note 23) 22,916 64,886 102,893

2,017,793 1,807,470 2,466,269

INCOME BEFORE INCOME TAX 1,074,441 907,003 1,273,990

PROVISION FOR INCOME TAX (Note 25) Current 251,143 132,071 207,432

Deferred 10,294 43,161 121,220 261,437 175,232 328,652

NET INCOME P=813,004 P=731,771 P=945,338

Net Income Attributable to: Equity holders of Cebu Holdings, Inc. P=753,447 P=679,663 P=827,207 Non-controlling interests (Note 4) 59,557 52,108 118,131 P=813,004 P=731,771 P=945,338

Basic/Diluted Earnings Per Share (Note 26) P= 0 . 3 9 P= 0 . 3 5 P= 0 . 4 3

See accompanying Notes to Consolidated Financial Statements.

FARTHER AND FASTER 151 CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands)

Years Ended December 31 2017 2016 2015

Net income P=813,004 P=731,771 P=945,338

Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent years: Remeasurement gain (loss) on defined benefit plan (Note 24) (5,993) 19,095 3,201

Tax effect relating to components of other comprehensive gain (loss) 1,798 (5,729) (960) Total other comprehensive income (loss) (4,195) 13,366 2,241 Total comprehensive income P=808,809 P=745,137 P=947,579

Total comprehensive income attributable to: Equity holders of Cebu Holdings, Inc. P=749,252 P=693,029 P=829,448 Non-controlling interests 59,557 52,108 118,131 P=808,809 P=745,137 P=947,579

See accompanying Notes to Consolidated Financial Statements.

152 Cebu Holdings, Inc. 2017 Integrated Report CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in Thousands)

Attributable to Parent Total Equity Remeasurement Attributable to Additional Gain (Loss) on Equity Holders Non-controlling Capital Stock Paid-in Capital Equity Reserve Retained Earnings (Note 28) Defined Benefit of Parent Interest (Note 28) (Note 28) (Note 28) Appropriated Unappropriated Total Obligation Company (Note 4) Total For the Year Ended December 31, 2017 Balance as of January 1, 2017 P=1,920,074 P=856,684 (P=9,474) P=1,300,000 P=2,484,856 P=3,784,856 (P=24,249) P=6,527,891 P=898,943 P=7,426,834 Comprehensive income: Net Income − − − − 753,447 753,447 − 753,447 59,557 813,004 Other comprehensive income − − − − − − (4,195) (4,195) − (4,195) Total Comprehensive income: − − − − 753,447 753,447 (4,195) 749,252 59,557 808,809 Dividends declared (Note 28) − − − − (288,010) (288,010) − (288,010) − (288,010) Balance as of December 31, 2017 P=1,920,074 P=856,684 (P=9,474) P=1,300,000 P=2,950,293 P=4,250,293 (P=28,444) P=6,989,133 P=958,500 P=7,947,633

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

For the Year Ended December 31, 2015 Balance as of January 1, 2015 P=1,920,074 P=856,684 (P=9,474) P=1,300,000 P=1,438,804 P=2,738,804 (P=39,856) P=5,466,232 P=755,498 P=6,221,730 Comprehensive income: Net Income − − − − 827,207 827,207 − 827,207 118,131 945,338 Other comprehensive income − − − − − − 2,241 2,241 − 2,241 Total Comprehensive income: − − − − 827,207 827,207 2,241 829,448 118,131 947,579 Dividends declared (Note 28) − − − − (230,409) (230,409) − (230,409) (26,794) (257,203) Balance as of December 31, 2015 P=1,920,074 P=856,684 (P=9,474) P=1,300,000 P=2,035,602 P=3,335,602 (P=37,615) P=6,065,271 P=846,835 P=6,912,106 See accompanying Notes to Consolidated Financial Statements. FARTHER AND FASTER 153 CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)

Years Ended December 31 2017 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=1,074,441 P=907,003 P=1,273,990 Adjustments for: Depreciation and amortization (Notes 12, 14 and 23) 495,610 402,070 358,025 Interest expense (Note 18) 345,214 247,716 346,215

Interest income (Note 22) (41,533) (35,915) (98,119) Equity in net earnings of associates and a joint venture (Note 13) (14,713) (161,310) (106,303) Pension expense (contribution) - net (Notes 23

and 24) (5,923) (4,738) 3,499 Unrealized foreign exchange gain (105) (68) (1,315) Unrealized loss (gain) on financial assets at fair value through profit or loss (93) 438 (38) Loss (gain) on disposal of property and equipment − 13 (40) Loss on disposal of investment properties − − 2,114 Operating income before working capital changes 1,852,898 1,355,209 1,778,028 Decrease (increase) in: Receivables (76,749) 1,146,215 (2,028,888) Financial assets at fair value through profit or loss 11,872 51,219 130,550 Inventories (12,992) (5,664) (144,803) Other current assets 93,338 37,528 (282,682) Increase (decrease) in: Accounts and other payables (Notes 17 and 32) 738,530 (899,799) 1,693,518 Deposits and other liabilities (256,981) 135,476 5,455

Net cash generated from operations 2,349,916 1,820,184 1,151,178 Interest paid (386,099) (285,480) (248,211) Interest received 12,955 24,214 51,681 Income taxes paid (179,987) (183,131) (198,691) Net cash provided by operating activities 1,796,785 1,375,787 755,957

CASH FLOWS FROM INVESTING ACTIVITIES Additions to: Investment properties (Notes 14 and 32) (560,035) (109,435) (1,321,780) Associates and a joint venture (Note 13) (698,303) (325,000) (203,800) Land and improvements (Notes 15 and 32) (56,027) (325,964) (1,199,579)

Property and equipment (Notes 12 and 32) (15,764) (26,455) (12,548) Short-term investment (3,015) − (45,318) Decrease (increase) in other noncurrent assets (39,487) 27,893 (3,032) Proceeds from sale/redemption of: Property and equipment − 300 129 Short-term investments − 45,318 − Investment properties − 3,558 30 Net cash used in investing activities (1,372,631) (709,785) (2,785,898)

(Forward)

154 Cebu Holdings, Inc. 2017 Integrated Report Years Ended December 31 2017 2016 2015 CASH FLOWS FROM FINANCING ACTIVITIES Availments of long-term debt P=756,200 P=378,100 P=− Payments: Long-term debt (459,000) (470,875) (493,875) Purchased land (351,569) (351,569) − Dividends paid (288,010) (242,329) (257,203) Net cash provided by (used in) financing activities (342,379) (686,673) (751,078)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 105 68 1,315

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 81,880 (20,603) (2,779,704) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 5) 94,908 115,511 2,895,215

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=176,788 P=94,908 P=115,511

See accompanying Notes to Consolidated Financial Statements.

FARTHER AND FASTER 155 CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Group Information

Cebu Holdings, Inc. (the Parent Company) is domiciled and was incorporated on December 9, 1988 in the Republic of the Philippines. The Parent Company is a 71.96%-owned subsidiary of Ayala Land, Inc. (ALI), a publicly listed company. ALI is a subsidiary of Ayala Corporation (AC), a publicly listed company which is 48.96%-owned by Mermac, Inc., 10.17%-owned by Mitsubishi Corporation and the rest by public.

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

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

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

• Cebu Leisure Company, Inc. (CLCI), a wholly owned subsidiary, is engaged in subleasing of commercial spaces, food courts and entertainment facilities. The registered office address of CLCI is at Admin Office, Level 4, Ayala Center Cebu, Cebu Business Park, Cebu City.

• CBP Theatre Management Company, Inc. (CBP Theatre), a wholly owned subsidiary, is engaged in all aspects of the theatrical and cinematographic entertainment business, including theatre management and other related undertakings. CBP Theatre has not yet started its operations as of December 31, 2017.

• Cebu Property Ventures and Development Corporation (CPVDC), a partially-owned subsidiary, is engaged in real estate development and sale of subdivision land and residential units. The shares of stocks of CPVDC are also publicly traded in the PSE. The registered office address of CPVDC is at 20th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City.

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

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

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

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2. Basis of Preparation, Statement of Compliance and Summary of Significant Accounting Policies

Basis of Preparation The consolidated financial statements of the Group have been prepared using the historical cost basis, except for financial assets at fair value through profit or loss (FVPL) and available-for-sale financial assets which have been measured at fair value. The consolidated financial statements are presented in Philippine Peso (P=), which is also the functional currency of the Parent Company. All values are rounded to the nearest thousand (P=000) except when otherwise indicated.

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

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

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

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

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee, if and only, if the Group has: • Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); • Exposure, or rights, to variable returns from its involvement with the investee; and • The ability to use its power over the investee to affect its returns.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies.

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

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

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

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

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

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

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

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

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

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

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

158 Cebu Holdings, Inc. 2017 Integrated Report - 4 -

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

Effective beginning on or after January 1, 2018

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

The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share- based payment transaction with net settlement features for withholding tax obligations; and the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.

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

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

• PFRS 9, Financial Instruments

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

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

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

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

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

• PFRS 15, Revenue from Contracts with Customers

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

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

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

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

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

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

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

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

The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. The amendments should be applied prospectively to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is only permitted if this is possible without the use of hindsight.

160 Cebu Holdings, Inc. 2017 Integrated Report - 6 -

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

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

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

Effective beginning on or after January 1, 2019

• Amendments to PFRS 9, Prepayment Features with Negative Compensation

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

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

• PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of- use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right- of-use asset.

FARTHER AND FASTER 161 - 7 -

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under PAS 17. Lessors will continue to classify all leases using the same classification principle as in PAS 17 and distinguish between two types of leases: operating and finance leases.

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

Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.

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

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

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

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

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

The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of PAS 12 and does not apply to taxes or levies outside the scope of PAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The interpretation specifically addresses the following: . Whether an entity considers uncertain tax treatments separately; . The assumptions an entity makes about the examination of tax treatments by taxation authorities; . How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and, . How an entity considers changes in facts and circumstances.

An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.

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

162 Cebu Holdings, Inc. 2017 Integrated Report - 8 -

Deferred effectivity

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

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves a business as defined in PFRS 3, Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture.

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

Current and Noncurrent Classification The Group presents assets and liabilities in the consolidated statement of financial position based on current/noncurrent classification. An asset is current when it is: • Expected to be realized or intended to be sold or consumed in the normal operating cycle; • Held primarily for the purpose of trading; • Expected to be realized within twelve months after the reporting period; or, • Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as noncurrent.

A liability is current when: • It is expected to be settled in the normal operating cycle; • It is held primarily for the purpose of trading; • It is due to be settled within twelve months after the reporting period; or, • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as noncurrent.

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

Fair Value Measurement The Group measures financial instruments such as financial assets at FVPL at fair value and discloses the fair value of its other financial instruments as well as investment properties at each reporting date.

FARTHER AND FASTER 163 - 9 -

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • In the principal market for the asset or liability, or • In the absence of a principal market, in the most advantageous market for the asset or liability.

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

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

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

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

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

For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re- assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

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

External valuers are involved for the valuation of significant assets, such as investment properties. Involvement of external valuers is decided upon annually by management after discussion with and approval by the Group’s audit committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The management decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case.

164 Cebu Holdings, Inc. 2017 Integrated Report - 10 -

At each reporting date, the Group analyzes the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies.

For this analysis, the Group verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Group, in conjunction with its external valuers, also compares each of the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Financial Assets and Financial Liabilities Date of recognition The Group recognizes a financial asset or a financial liability in the consolidated statement of financial position when it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date.

Initial recognition Financial assets and financial liabilities are initially recognized at fair value. The initial measurement of all financial assets includes transaction costs except for financial instruments measured at FVPL.

The Group classifies its financial assets within the scope of PAS 39 in the following categories: financial assets at FVPL, loans and receivables, held-to-maturity financial assets, or available-for-sale (AFS) financial assets. Financial liabilities are classified into financial liabilities at FVPL or other financial liabilities. The classification depends on the purpose for which the financial assets were acquired or financial liabilities were incurred and whether they are quoted in an active market. Management determines the classification of its financial instruments at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date.

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

“Day 1” difference Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Group recognizes the difference between the transaction price and fair value (a “Day 1” difference) in the consolidated statement of income under “Interest income” and “Other charges” accounts unless it qualifies for recognition as some other type of asset. In cases where variables used are made of data which is not observable, the difference between the transaction price and model value is only recognized in the consolidated statement of income when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the “Day 1” difference amount.

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

Financial assets and financial liabilities are classified as held for trading if they are acquired for the purpose of selling and repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments or a financial guarantee contract.

Fair value gains or losses on investments held for trading, net of interest income accrued on these assets, are recognized in the consolidated statement of income under “Other income” or “Other charges”.

Financial assets may be designated at initial recognition as FVPL if any of the following criteria are met: • the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or • the assets are part of a group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or • the financial instrument contains an embedded derivative that would need to be separately recorded.

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

Available-for-sale financial assets AFS financial assets pertain to equity investments. Equity investments classified as AFS are those that are neither classified as held for trading nor designated at FVPL.

After initial measurement, AFS financial assets are subsequently measured at fair value with unrealized gains or losses recognized in OCI and credited to unrealized gain (loss) on AFS financial assets account until the investment is derecognized, at which time the cumulative gain or loss is recognized in other income, or the investment is determined to be impaired, when the cumulative loss is reclassified from unrealized gain (loss) on AFS financial assets account to the consolidated statement of comprehensive income. Dividend earned whilst holding AFS financial assets is reported as dividend income.

The Group evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if the management has the ability and intention to hold the assets for the foreseeable future or until maturity.

Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS financial assets or financial assets at FVPL.

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After initial measurement, the loans and receivables are subsequently measured at amortized cost using the effective interest method, less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate (EIR). The amortization is included in “Interest income” account in the consolidated statement of income. The losses arising from impairment of such loans and receivables are recognized under “General and administrative expenses” account in the consolidated statement of income.

Loans and receivables are included in current assets if maturity is within twelve months from the reporting date. Otherwise, these are classified as noncurrent assets.

As of December 31, 2017 and 2016, the Group’s loans and receivables include cash and cash equivalents, short-term investments and receivables (except advances to contractors).

Other financial liabilities Other financial liabilities are financial liabilities not designated as at FVPL where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or other financial asset for a fixed number of own equity shares. The components of issued financial instrument that contain both liability and equity element are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as fair value of the liability component on the date of issue.

After initial measurement, other financial liabilities are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR. The amortization is included in the “Other charges” account in the consolidated statement of income.

As of December 31, 2017 and 2016, the Group’s other financial liabilities include accounts and other payables, long-term debt, deposits and other liabilities, and excluding statutory liabilities and other obligations that meet the above definition (other than liabilities covered by other accounting standards such as income tax payable).

Deposits and Other Liabilities Deposits and other liabilities which include tenants’ deposits are measured initially at fair value. The difference between the cash received and the fair value of tenants’ deposits is recognized in “Tenants deposits” under “Deposits and other liabilities” in the consolidated statement of financial position and amortized using the straight-line method under the “Real estate revenue” account in the consolidated statement of income. After initial recognition, tenants’ deposits are subsequently measured at amortized cost using effective interest method. Accretion of discount is recognized under “Other financing charges” in the consolidated statement of income.

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Derecognition of Financial Assets and Financial Liabilities

Financial asset A financial asset (or, where applicable, a part of a group of financial assets) is derecognized when: a. the right to receive cash flows from the assets has expired; b. the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third-party under a “pass-through” arrangement; or c. the Group has transferred its right to receive cash flows from the asset and either: (i) has transferred substantially all the risks and rewards of the asset; or (ii) has neither transferred nor retained the risks and rewards of the asset but has transferred control of the asset.

When the Group has transferred its right to receive cash flows from an asset or has entered into a “pass-through” arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Financial liability A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated statement of income.

Impairment of Financial Assets The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in economic conditions that correlate with defaults.

AFS financial assets The Group treats AFS financial assets as impaired when there has been a significant or prolonged decline in fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. The Group treats ‘significant’ generally as 20% or more and ‘prolonged’ as greater than 12 months for unquoted securities. In addition, the Group evaluates other factors, including normal volatility in secondary price for unquoted equities.

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Loans and receivables For loans and receivables carried at amortized cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is charged to the consolidated statement of income under the “Costs and expenses” account. Interest income continues to be recognized based on the EIR of the asset. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognized in the consolidated statement of income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as customer type, credit history, past-due status and term.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

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

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

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

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

The cost of inventory recognized in the consolidated statement of income as disposal is determined with reference to the specific costs incurred on the property sold and is allocated to saleable area based on relative size.

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

Input VAT represents taxes due or paid on purchases of goods and services subjected to VAT that the Group can claim against any future liability to the Bureau of Internal Revenue (BIR) for output VAT received from sale of goods and services subjected to VAT. The input VAT can also be recovered as tax credit against future income tax liability of the Group upon approval of the BIR. A valuation allowance is provided for any portion of the input tax that cannot be claimed against output tax or recovered as tax credit against future income tax liability.

CWT represents the amount withheld by the payee. These are recognized upon collection of the related sales and are utilized as tax credits against income tax due.

Prepaid expenses are carried at cost less the amortized portion. These typically comprise prepayments for commissions, marketing fees, advertising and promotion, taxes and licenses, rentals and insurance.

Property and Equipment Property and equipment are carried at cost less accumulated depreciation and amortization and any impairment in value. The initial cost of property and equipment comprises its construction cost or purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use, including borrowing costs.

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Expenditures incurred after the fixed assets have been put into operations, such as repairs and maintenance are normally charged to expenses in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as additional cost of the related property and equipment.

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

Years Buildings and improvements 40 Furniture, fixtures and equipment 3−10 Transportation equipment 3−5

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

When property and equipment are retired or otherwise disposed of, the cost of the related accumulated depreciation and amortization, and accumulated provision for impairment losses, if any, are removed from the accounts and any resulting gain or loss is credited or charged against current operations.

Fully depreciated property and equipment are retained in the accounts while still in use although no further depreciation is credited or charged to current operations.

Intangible Assets The Group’s development rights included under “Other noncurrent assets” pertain to the development rights purchased by the Group which represents the gross floor area of a structure in a particular lot which is allowed to be developed in the future.

These are measured on initial recognition at cost. After initial recognition, the intangible assets - development rights are carried at cost less any accumulated impairment losses. The development rights are capitalized as additional cost of the structure once the development commences.

Investments in Associates and a Joint Venture An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

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

The Group’s investments in associates and a joint venture is accounted for using the equity method.

Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate or joint venture since the acquisition date.

Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually.

The consolidated statement of comprehensive income reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, the Group recognizes its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the consolidated statement of income and represents profit or loss after tax and non- controlling interests in the subsidiaries of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

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

Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognized in the consolidated statement of income.

Investment Properties Investment properties consist of completed properties and properties under construction or re- development that are held to earn rentals and for capital appreciation or both and are not occupied by the companies in the Group. The Group uses the cost model in measuring investment properties since this represents the historical value of the properties subsequent to initial recognition. Investment properties, except for land, are carried at cost less accumulated depreciation and amortization and any impairment in value. Land is carried at cost less any impairment in value.

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The initial cost of investment properties consists of any directly attributable costs of bringing the investment properties to their intended location and working condition, including borrowing costs.

Investment properties are depreciated using the straight-line method over their estimated useful lives as follows:

Years Land and improvements Up to 25 Buildings and improvements Up to 40

Expenditure incurred after the investment property has been put in operation, such as repairs and maintenance costs, are normally charged against income in the period in which the costs are incurred.

Construction in progress is stated at cost. This includes cost of construction and other direct costs. Construction in progress is not depreciated until such time that the relevant assets are available for their intended use.

Investment properties are derecognized when either they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the consolidated statement of income in the year of retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use, evidenced by ending of owner-occupation and commencement of an operating lease to another party. Transfers are made from investment properties when, and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale. Transfers between investment properties, owner-occupied properties and inventories do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes.

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

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

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

Impairment of Nonfinancial Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

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An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses of continuing operations are recognized in the consolidated statement of income in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation and amortization, had no impairment loss been recognized for the asset in prior years.

Such reversal is recognized in the consolidated statement of income unless the asset is carried at revalued amount, in which case, the reversal is treated as a revaluation increase. After such reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

For investments in associates and a joint venture, after application of the equity method, the Group determines whether it is necessary to recognize any additional impairment loss with respect to the Group’s net investment in the investee companies. The Group determines at each reporting date whether there is any objective evidence that the investment in associates or joint venture is impaired. If this is the case, the Group calculates the amount of impairment as being the difference between the recoverable amount of the investee companies and the carrying value, and recognizes the amount in the consolidated statement of income.

Equity Capital stock and additional paid-in capital Capital stock is measured at par value for all shares issued. When the shares are sold at a premium, the difference between the proceeds and the par value is credited to “Additional paid-in capital” account. Direct costs incurred related to equity issuance are chargeable to “Additional paid-in capital” account. If additional paid-in capital is not sufficient, the excess is charged against retained earnings. When the Group issues more than one class of stock, a separate account is maintained for each class of stock and the number of shares issued.

Retained earnings Retained earnings represent net accumulated earnings (losses) of the Group less dividends declared and any adjustments arising from the application of new accounting standards or policies applied retrospectively. The individual accumulated earnings of the subsidiaries are available for dividends only after declared by their respective BOD.

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Unappropriated retained earnings Unappropriated retainedretained earningsearnings represent the portion of retained earnings that is free and can be declaredUnappropriated as dividends retained to stockholders. earnings represent the portion of retained earnings that is free and can be declared as dividends to stockholders. Appropriated retained earnings Appropriated retained earningsearnings represent the portion of retained earnings which has been restrictedAppropriated and retained therefore earnings is not available represent for thedividend portion declaration. of retained earnings which has been restricted and therefore is not available for dividend declaration. Dividend distributions DividendsDividend distributions on common shares are recognized as a liability and deducted from equity when approved byDividends the BOD on of common the Group. shares Dividends are recognized for the year as athat liability are approved and deducted after thefrom reporting equity when date approvedare dealt withby the as BOD a non-adjusting of the Group. event Dividends after the for reporting the year that date. are approved after the reporting date are dealt with as a non-adjusting event after the reporting date. Equity reserves Equity reserves pertain to the difference between the consideration transferred and the equity acquiredEquity reserves in a common pertain controlto the difference business combination.between the consideration transferred and the equity acquired in a common control business combination. Revenue and Cost Recognition Revenue andis recognized Cost Recognition to the extent that it is probable that the economic benefits will flow to the GroupRevenue and is therecognized revenue to can the be extent measured that it reliably, is probable regardless that the of economicwhen the paymentbenefits willis being flow tomade. the RevenueGroup and is themeasured revenue at can the be fair measured value of the reliably, consideration regardless received of when or the receivable, payment taking is being into made. accountRevenue contractually is measured atdefined the fair terms value of of payment the consideration and excluding received taxes or or receivable, duties. The taking Group into assesses itsaccount revenue contractually arrangements defined against terms specific of payment criteria and in order excluding to determine taxes or ifduties. it is acting The Groupas a principal assesses or anits revenueagent. In arrangements arrangements against where specificthe Group criteria is acting in order as a toprincipal determine to its if customers,it is acting asrevenue a principal is or recognizedan agent. In on arrangements a gross basis. where the Group is acting as a principal to its customers, revenue is recognized on a gross basis. The following specific recognition criteria must also be met before revenue is recognized: The following specific recognition criteria must also be met before revenue is recognized: Rental income Rental income from noncancellable and cancellable leases is recognized in the consolidated statementRental income of income from noncancellable on a straight-line and basis cancellable over the leases lease termis recognized and the termsin the consolidatedof the lease, respectively,statement of or income based onon aa straight-linecertain percentage basis over of the the gross lease revenueterm and of the the terms tenants, of the as provided lease, for underrespectively, the terms or based of the on lease a certain contract. percentage of the gross revenue of the tenants, as provided for under the terms of the lease contract. Contingent rents are recognized as revenue in the period in which they are earned. Contingent rents are recognized as revenue in the period in which they are earned. Real estate sales ForReal real estate estate sales sales, the Group assesses whether it is probable that the economic benefits will flow toFor the real Group estate when sales, the the sales Group prices assesses are collectible. whether it Collectabilityis probable that of the the sales economic price isbenefits demonstrated will flow byto thethe Groupbuyer’s when commitment the sales toprices pay, arewhich collectible. in turn is Collectability supported by of substantial the sales price initial is anddemonstrated continuing investmentsby the buyer’s that commitment give the buyer to pay, a stake which in inthe turn property is supported sufficient by thatsubstantial the risk initial of loss and through continuing defaultinvestments motivates that givethe buyerthe buyer to honor a stake its inobligation the property to the sufficient seller. Collectability that the risk isof also loss assessed through by consideringdefault motivates factors the such buyer as the to honor credit its standing obligation of the to thebuyer, seller. age Collectability and location isof alsothe property.assessed by Revenueconsidering from factors sales suchof completed as the credit real standingestate projects of the isbuyer, accounted age and for location using the of fullthe accrualproperty. method. InRevenue accordance from withsales PICof completed No. Q&A 2006-01, real estate the projectspercentage-of-completion is accounted for using method the full is used accrual to method. recognizeIn accordance income with from PIC No.sales Q&A of projects 2006-01, where the percentage-of-completion the Group has material obligations method is underused to the sales contractrecognize to income complete from the sales project of projects after the where property the Groupis sold, has the materialequitable obligations interest has under been the sales transferredcontract to completeto the buyer, the construction project after isthe beyond property preliminary is sold, the stage equitable (i.e., engineering, interest has design been work, constructiontransferred to contracts the buyer, execution, construction site clearanceis beyond andpreliminary preparation, stage excavation (i.e., engineering, and the design building work, foundationconstruction are contracts finished), execution, and the costs site clearance incurred orand to preparation,be incurred canexcavation be measured and the reliably. building foundation are finished), and the costs incurred or to be incurred can be measured reliably.

FARTHER AND FASTER 175 - 21 -

Under this method, revenue is recognized as the related obligations are fulfilled, measured principally on the basis of the estimated completion of a physical proportion of the contract work.

Any excess of collections over the recognized receivables are included in the “Deposits and other current liabilities” account in the liabilities section of the consolidated statement of financial position.

If any of the criteria under the full accrual or percentage-of-completion method is not met, the deposit method is applied until all the conditions for recording a sale are met. Pending recognition of sale, cash received from buyers are presented under the “Deposits and other current liabilities” account in the liabilities section of the consolidated statement of financial position.

Cost of real estate sales is recognized consistent with the revenue recognition method applied. Cost of residential and commercial lots and units sold before the completion of the development is determined on the basis of the acquisition cost of the land plus its full development costs, which include estimated costs for future development works, as determined by the Group’s in-house technical staff.

Theater income Theater income is recognized when earned.

Interest income Interest income is recognized as it accrues using the effective interest method.

Other income Recoveries are recognized as they accrue.

Net gain or loss from the sale of development rights is recognized when risk and reward are transferred to the buyer.

Others are recognized when earned.

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

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

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Borrowing Costs Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets (included in “Investment properties” account in the consolidated statement of financial position). All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

The interest capitalized is calculated using the Group’s weighted average cost of borrowings after adjusting for borrowings associated with specific developments. Where borrowings are associated with specific developments, the amounts capitalized is the gross interest incurred on those borrowings less any investment income arising on their temporary investment. Interest is capitalized from the commencement of the development work until the date of practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded.

The borrowing costs capitalized as part of “Investment properties” are depreciated using straight- line method over the estimated useful life of the assets.

Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. A reassessment is made after inception of the lease only if one of the following applies:

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement; (b) A renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term; (c) There is a change in the determination of whether fulfillment is dependent on a specified asset; or (d) There is substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios (a), (c), or (d) and at the date of renewal or extension period for scenario (b).

Group as lessor Leases where the Group retains substantially all the risk and benefits of ownership of the assets are classified as operating leases. Lease payments received are recognized as an income in the consolidated statement of income on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as the rental income. Contingent rents are recognized as revenue in the period in which they are earned.

Group as lessee Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.

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Fixed lease payments are recognized as an expense in the consolidated statement of income on a straight-line basis, while the variable rent is recognized as an expense based on terms of the lease contract.

Pension Cost The Group maintains a defined contribution (DC) plan that covers all regular full-time employees. Under its DC plan, the Group pays fixed contributions based on the employees’ monthly salaries. The Group, however, is covered under Republic Act (RA) No. 7641, The Philippine Retirement Law, which provides for its qualified employees a defined benefit (DB) minimum guarantee. The DB minimum guarantee is equivalent to a certain percentage of the monthly salary payable to an employee at normal retirement age with the required credited years of service based on the provisions of RA No. 7641.

In accordance with PIC Q&A No. 2013-03, the obligation for post-employment benefits of an entity that provides a DC plan as its only post-employment benefit plan, is not limited to the amount it agrees to contribute to the fund, if any. In this case, therefore, the Group’s retirement plan shall be accounted for as a defined benefit plan. Accordingly, the Group accounts for its retirement obligation under the higher of the DB obligation relating to the minimum guarantee and the obligation arising from the DC plan.

The DC liability is measured at the fair value of the DC assets upon which the DC benefits depend, with an adjustment for margin on asset returns, if any, where this is reflected in the DC benefits.

For the DB minimum guarantee plan, the liability is determined based on the present value of the excess of the projected DB obligation over the projected DC obligation at the end of the reporting period. The DB obligation is calculated annually by a qualified independent actuary using the projected unit credit method.

Pension costs comprise: • Service cost; • Net interest on the net defined benefit liability or asset; and, • Remeasurements of net defined benefit liability or asset.

Service costs which include current service costs, past service costs and gains or losses on non- routine settlements are recognized as expense in the consolidated statement of income. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to the net defined benefit liability or asset. Net interest on the net defined benefit liability or asset is recognized as an expense or income in the consolidated statement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately in other comprehensive income in the period in which they arise. Remeasurements are not reclassified to profit or loss in subsequent periods.

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The liability recognized in the consolidated statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the reporting date less fair value of the plan assets. The present value of the defined benefit obligation is determined by using risk-free interest rates of long-term government bonds that have terms to maturity approximating the terms of the related pension liabilities or applying a single weighted average discount rate that reflects the estimated timing and amount of benefit payments.

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

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

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

Deferred tax liabilities are not provided on nontaxable temporary differences associated with investments in associates and a joint venture.

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted as of reporting date. Movements in the deferred income tax assets and liabilities arising from changes in tax rates are charged against or credited to income for the period.

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

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

Foreign-Currency-Denominated Transactions The consolidated financial statements are presented in Philippine Peso, which is the Parent Company’s functional currency.

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Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded using the exchange rate at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are restated using the closing exchange rate prevailing at reporting dates. Exchange gains or losses arising from foreign exchange transactions are credited to or charged against operations for the year.

Earnings Per Share (EPS) Basic EPS is computed by dividing net income for the year attributable to common stockholders of the Parent Company by the weighted average number of common shares issued and outstanding during the year adjusted for any subsequent stock dividends declared. Diluted EPS is computed by dividing net income for the year attributable to common stockholders of the Parent Company by the weighted average number of common shares issued and outstanding during the year after giving effect to assumed conversion of potential common shares, if any.

Segment Reporting The Group’s operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Financial information on business segments is presented in Note 29 of the consolidated financial statements.

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

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

Events after the Reporting Date Post year-end events up to the date of the consolidated financial statements were authorized for issue that provide additional information about the Group’s position at the reporting date (adjusting events) are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the consolidated financial statements when material.

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements of the Group in conformity with PFRS requires management to make judgments and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes.

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The judgments and estimates used in the consolidated financial statements are based upon management’s evaluation of relevant facts and circumstances as of the date of the consolidated financial statements. Actual results could differ from such estimates.

Management believes the following represent a summary of these significant judgments, estimates and assumptions:

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

Distinction between investment properties and inventories The Group determines whether a property is classified as investment property or inventory as follows:

• Investment properties comprises land and buildings (principally offices, commercial and retail property) which are not occupied substantially for use by, or in the operations of the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation.

• Inventory comprises property that is held for sale in the ordinary course of business. Principally, this is a residential or industrial property that the Group develops and intends to sell before or on completion of construction.

In making this judgment, the Group considers whether the property will be sold in the normal operating cycle (Inventories) or whether it will be retained as part of the Group’s leasing activities or for future development or sale which are yet to be finalized by the Group (Investment properties).

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

As of December 31, 2017 and 2016, the Group assessed that there are no indicators of impairment, thus, the Group did not recognize any impairment loss on its nonfinancial assets (see Notes 13 and 14).

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

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

Assessment of joint control of an arrangement and the type of arrangement Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Management assessed that the Group has joint control over Cebu District Property Enterprise, Inc. (CDPEI) by virtue of a contractual agreement with other shareholders.

The Group applies judgment when assessing whether a joint arrangement is a joint operation or a joint venture.

In making this judgment, the Group determines the type of joint arrangement in which it is involved by considering its rights and obligations arising from the arrangement. The Group assesses its rights and obligations by considering the structure and legal form of the arrangement, the terms agreed by the parties in the contractual arrangement and, when relevant, other facts and circumstances. Management assessed that CDPEI is a joint venture arrangement as it is a separate legal entity and its stockholders have rights to its net assets.

Collectability of the sales price Revenue and cost recognition on real estate sales and selecting an appropriate revenue recognition method for a particular real estate sale transaction requires certain judgment based on, among others:

• Buyer’s commitment on the sale which may be ascertained through the significance of the buyer’s initial investment; and, • Stage of completion of the project.

The Group has set a certain percentage (%) of collection over the total selling price in determining buyer’s commitment on the sale. It is when the buyer’s investment is considered adequate to meet the probability criteria that economic benefits will flow to the Group.

Provisions and contingencies The Group is involved in a legal proceeding and contingently liable for various claims. The estimate of the probable costs for the resolution of these legal proceeding and claims has been developed in consultation with the legal counsels and based upon an analysis of potential results. The Group currently does not believe these proceedings will have a material adverse effect on the Group’s financial position (see Note 33).

Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation and uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are as follows:

Revenue and cost recognition The Group’s revenue recognition policies require management to make use of estimates and assumptions that may affect the reported amounts of revenues and costs.

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The Group’s revenue from real estate is recognized based on the percentage-of-completion measured principally on the basis of the estimated completion of a physical proportion of the contract work. See Notes 21 and 23 for the related balances.

Estimating the NRV of inventories Inventories are valued at the lower of cost or NRV. To determine the NRV, the Group is required to make an estimate of the inventories’ estimated selling price in the ordinary course of business, costs of completion and costs necessary to make a sale. NRV for completed real estate inventories is assessed with reference to market conditions and prices existing at the reporting date and is determined by the Group in light of recent market transactions. NRV, in respect of real estate inventories under construction, is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and less estimated costs to sell. In the event that NRV is lower than the cost, the decline is recognized as an expense. The amount and timing of recorded expenses for any period would differ if different judgments were made or different estimates were utilized.

No provision for inventory obsolescence was recognized in 2017 and 2016. The Group’s inventories carried at cost are disclosed in Note 9.

Fair value of financial instruments PFRS requires certain financial assets and liabilities to be carried at fair value or have the fair values disclosed in the notes, which requires the use of extensive accounting estimates and judgments.

While significant components of fair value measurement were determined using verifiable objective evidence (i.e., foreign exchange rates and interest rates), the amount of changes in fair value would differ if the Group utilized a different valuation methodology. Any changes in fair value of these financial assets and liabilities would affect directly the consolidated statement of income and consolidated statement of changes in equity.

Certain financial assets and liabilities of the Group were initially recorded at its fair value by using the discounted cash flow methodology. See Note 27 for the related balances.

4. Non-controlling Interests

The Group has two subsidiaries with material NCI. Additional information regarding the subsidiaries is as follows:

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

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

2017 2016 CPVDC TPEPI CPVDC TPEPI (In Thousands) (In Thousands)

Statements of financial position Current assets P=931,899 P=149,438 P=774,028 P=226,469 Noncurrent assets 4,823,022 860,309 4,731,448 776,470 Current liabilities 1,854,893 16,677 2,582,819 11,926 Noncurrent liabilities 1,757,032 − 1,026,635 −

Statements of comprehensive income Revenue P=802,938 P=3,962 P=694,984 P=4,798 Net income/Total comprehensive income attributable to: Equity of holders of the parent 188,343 1,131 company 162,886 1,712 Non-controlling interests 58,632 925 50,707 1,401

Statement of cash flows Cash provided by (used in): Operating activities P=107,410 P=74,277 P=702,495 (P=6,786) Investing activities (390,506) (83,839) (609,728) (7,086) Financing activities 299,766 − (102,795) − Net increase (decrease) in cash and cash equivalents P=16,670 (P=9,562) (P=10,028) (P=13,872)

5. Cash and Cash Equivalents

This account consists of:

2017 2016 (In Thousands) Cash on hand and in banks P=144,471 P=73,059 Cash equivalents 32,317 21,849 P=176,788 P=94,908

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term, highly liquid investments that are made for varying periods of up to three (3) months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term rates.

Total interest income earned from cash and cash equivalents amounted to P=1.0 million, P=0.8 million and P=8.0 million in 2017, 2016 and 2015, respectively (see Note 22).

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6. Short-term Investments

Short-term investments consist of money market placements with maturity date of more than 90 days and up to one (1) year and earn at the respective short-term investment rates.

In 2017 and 2016, the Group entered into a short-term investment with BPI to be used for short-term cash requirements. These investment earns an annual interest of 1.25% and 1.13% in 2017 and 2016, respectively.

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

Interest income earned from short-term investments amounted to P=0.2 million, P=0.5 million and P=1.0 million in 2017, 2016 and 2015, respectively (see Note 22).

7. Financial Assets at Fair Value through Profit or Loss

This account pertains to investments in BPI Short Term Fund (the Fund), a money market unit investment trust fund (UITF) which the Group holds for trading and is a portfolio of funds invested and managed by professional managers. The Fund aims to generate liquidity and stable income by investing in a diversified portfolio of primarily short-term fixed income instruments. This is measured at fair value with gains or losses arising from changes in fair value recognized in the consolidated statements of income under “Other income”. Realized and unrealized gains recognized from changes in fair value through profit or loss amounted to P=0.2 million, P=0.3 million and P=2.8 million in 2017, 2016 and 2015, respectively (see Note 22).

8. Receivables

This account consists of:

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

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

• Residential development pertains to receivables arising from the sale of residential lots and condominium units. • Commercial development pertains to receivables arising from the sale of commercial lots and development rights. • Shopping centers pertain to receivables arising from the lease of retail space and land therein, movie theaters, food courts, entertainment facilities and carparks. • Corporate business pertains to receivables arising from the lease of office buildings and accrued rent receivable. • Other receivables pertain to receivable related to interests.

Terms and conditions of receivables are as follows:

• Sales contract receivables, included under residential development, are noninterest-bearing and are collectible in monthly installments over a period of one (1) to two (2) years. Titles to real estate properties are transferred to the buyers once full payment has been made. • Leases of retail space and land therein, included under shopping centers, are noninterest- bearing and are collectible monthly based on the terms of the lease contracts. These are unpaid billed receivables as of reporting date. • Leases of office spaces, included under corporate business, are noninterest-bearing and are collectible monthly based on the terms of the lease contracts. These are unpaid billed receivables as of reporting date. • Receivables from the sale of commercial lots and development rights, included under commercial development are noninterest-bearing and are collectible in monthly or quarterly installments over a period ranging from two (2) to four (4) years. Titles to real estate properties and development rights are not transferred to buyers until full payment has been made. • Advances to contractors are recouped every progress billing payment depending on the percentage of accomplishment. • Receivables from related parties are both interest and noninterest-bearing, and are due for collection within one year. • Receivables from employees are composed of both interest and noninterest-bearing advances and are collectible over a period of one year through salary deduction. • Accrued receivable consist of receivables from rental income arising from operating lease on investment properties which is accounted for on a straight-line basis over the lease term and accrual of interest income. • Other receivables are due and demandable.

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

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

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

2017 Residential Commercial development development Total (In Thousands) At January 1 P=50,524 P=− P=50,524 Additions 22,597 7,420 30,017 Accretion (Note 22) (25,623) − (25,623) At December 31 P=47,498 P=7,420 P=54,918

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

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

9. Inventories

This account consists of:

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

The subdivision lot and condominium units are carried at cost.

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

2017 Subdivision lot for sale Condominium and units under development development Total (In Thousands) At January 1 P=441,764 P=282,087 P=723,851 Transfers from investment properties (Note 14) 72,963 − 72,963 Disposals (recognized as cost of real estate sales) (Note 23) (119,797) (85,630) (205,427) Construction/development costs incurred 159,995 − 159,995 Other adjustments (298) − (298) At December 31 P=554,627 P=196,457 P=751,084

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

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

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

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

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10. Other Current Assets

This account consists of:

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

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

Prepaid expenses consist of advance payments for project management fees, business taxes, office supplies, rentals, advertising and promotions, commissions, energy supply paid to a local utility provider and other expenses.

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

11. Available-for-sale financial assets

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

12. Property and Equipment

The rollforward analysis of this account follows:

2017 Buildings Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands) Cost At January 1 P=121,785 P=138,147 P=30,863 P=290,795 Transfers from investment properties (Note 14) 222,691 − − 222,691 Additions 5,375 8,330 2,324 16,029

Retirement − (1,336) (556) (1,892) At December 31 349,851 145,141 32,631 527,623 Accumulated Depreciation At January 1 91,556 100,943 18,736 211,235 Depreciation and amortization (Note 23) 9,296 14,735 4,189 28,220 Retirement − (1,042) (306) (1,348)

Adjustments − (279) − (279) At December 31 100,852 114,357 22,619 237,828 Net Book Value P=248,999 P=30,784 P=10,012 P=289,795

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2016 Buildings Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands)

Cost At January 1 P=124,757 P=115,568 P=26,650 P=266,975 Transfers to investment properties (Note 14) − (23) − (23) Additions 329 20,688 5,438 26,455

Reclassifications (3,301) 3,301 − − Disposals − (1,387) (1,225) (2,612) At December 31 121,785 138,147 30,863 290,795 Accumulated Depreciation At January 1 89,930 87,962 15,760 193,652 Depreciation and amortization (Note 23) 6,062 9,919 3,917 19,898 Reclassifications (4,436) 4,436 − −

Transfers to investment properties (Note 14) − (16) − (16) Disposals − (1,358) (941) (2,299)

At December 31 91,556 100,943 18,736 211,235 Net Book Value P=30,229 P=37,204 P=12,127 P=79,560

The Group transferred P=222.7 million from investment properties to property and equipment in 2017 which pertains to portion of building being used as office space of the Parent Company (see Note 14).

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

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

13. Investments in Associates and a Joint Venture

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

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

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

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

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

2017 In 2017, CHI and CPVDC made additional capital infusion to CBDI amounting to P=314.0 million and P=384.3 million, respectively, in relation to the latter’s additional equity call to fund its ongoing project.

However, the Group waived its pre-emptive rights to the additional equity call in favor of ALI, the intermediate parent company, which resulted in a 5% reduction for both the Parent Company and CPVDC’s ownership interest in CBDI as of December 31, 2017.

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

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

2017 CBDI CIHCI Solinea CDPEI (In Thousands)

Current assets P=875,000 P=285,161 P=2,568,093 P=254,760 Noncurrent assets 2,310,738 549,043 1,503,223 3,840,363 Total assets P=3,185,738 P=834,204 P=4,071,316 P=4,095,123 Current liabilities P=1,116,228 P=97,766 P=3,020,162 P=451,035 Noncurrent liabilities 5,751 16,104 205,248 691,983 Equity 2,063,759 720,334 845,906 2,952,105 Total liabilities and equity P=3,185,738 P=834,204 P=4,071,316 P=4,095,123

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2016 CBDI CIHCI Solinea CDPEI (In Thousands)

Current assets P=238,448 P=189,719 P=2,324,322 P=226,531 Noncurrent assets 914,085 592,180 1,477,482 3,258,004 Total assets P=1,152,533 P=781,899 P=3,801,804 P=3,484,535

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

The statements of comprehensive income of these investments for the years ended December 31, 2017, 2016 and 2015 are as follows:

CBDI CIHCI Solinea CDPEI (In Thousands)

For the year ended December 31, 2017 Revenue P=4,983 P=568,924 P=2,270,614 P=4,538 Costs and expenses 1,287 515,430 2,289,407 26,992 Net income (loss) 3,696 53,494 (18,793) (22,454) Other comprehensive loss − − − − Total comprehensive income (loss) P=3,696 P=53,494 (P=18,793) (P=22,454)

For the year ended December 31, 2016 Revenue P=3,744 P=513,662 P=2,150,599 P=690 Costs and expenses 702 500,613 1,816,469 7,155 Net income (loss) 3,042 13,049 334,130 (6,465) Other comprehensive loss − − − − Total comprehensive income (loss) P=3,042 13,049 P=334,130 (P=6,465)

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

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

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

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

14. Investment Properties

The rollforward analysis of this account follows:

2017 Land Buildings and Construction-in- Land Improvements Improvements Progress Total (In Thousands) Cost At January 1 P=2,348,305 P=14,059 P=9,506,002 P=1,756,645 P=13,625,011 Additions 97,686 326 1,315,308 (780,380) 632,940 Transfers to: Property and equipment (Note 12) − − − (222,691) (222,691) Inventories (Note 9) (72,963) − − − (72,963) At December 31 2,373,028 14,385 10,821,310 753,574 13,962,297 Accumulated Depreciation At January 1 − 2,343 2,611,562 − 2,613,905 Depreciation and amortization (Note 23) − 2,812 464,578 − 467,390 Adjustments − − (58) − (58) At December 31 − 5,155 3,076,082 − 3,081,237 Net Book Value P=2,373,028 P=9,230 P=7,745,228 P=753,574 P=10,881,060

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

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

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

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

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

Total rental income from investment properties amounted to P=2,144.4 million, P=1,849.0 million and P=1,653.6 million in 2017, 2016 and 2015, respectively (see Note 21). Total direct operating expenses related to investment properties that generated rental income amounted to P=906.2 million,

P=915.5 million and P=844.7 million in 2017, 2016 and 2015, respectively.

Borrowing costs capitalized to construction-in-progress amounted to P=55.1 million in 2016 (see Note 18). Capitalization rate used for general borrowings is 4.75% in 2016. The Group no longer have qualifying asset in 2017.

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

The aggregate fair value of the Group’s investment properties amounted to P=38,121.7 million and P=25,672.7 million as of December 31, 2017 and 2016, respectively, which is based on the latest appraisal report. The fair values were classified under Level 3 of the fair value hierarchy (see Note 27).

The fair values of the investment properties were determined by independent professionally qualified appraisers. The fair values of the land and buildings were arrived at using the Sales Comparison Approach and Cost Approach, respectively.

Sales comparison approach is a comparative approach to value that considers the sales of similar or substitute properties and related market data and establishes a value estimate by processes involving comparison. Listings and offerings may also be considered.

Cost Approach is a comparative approach to the value of property or another asset that considers as a substitute for the purchase of a given property, the possibility of constructing another property that is a replica of, or equivalent to, the original or one that could furnish equal utility with no undue cost resulting from delay. It is based on the reproduction/replacement cost (new) of the subject property or asset, less total (accrued) depreciation, plus the value of the land to which an estimate of entrepreneurial incentive or developer’s profit/loss is commonly added.

194 Cebu Holdings, Inc. 2017 Integrated Report - 40 -

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

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

Buildings Cost approach Reproduction cost Current cost of constructing a replica of the existing structures, employing the same design and similar building materials. The current cost of an identical new item

Replacement cost Cost of replacing an asset with an equally satisfactorily substitute asset. Normally derived from the current acquisition cost of a similar asset, new or used, or of an equivalent productive capacity or service potential.

The Group has no restrictions on the realizability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

15. Land and Improvements

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

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

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

16. Other Noncurrent Assets

This account consists of:

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

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

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

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

17. Accounts and Other Payables

This account consists of:

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

Accrued expenses consist mainly of utilities, marketing and management fees, professional fees and repairs and maintenance. These are noninterest-bearing and are normally settled within a year.

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

Retentions payable pertains to the portion of the progress billings of constructions retained by the Group which will be released after the completion of the contractor’s projects. The retention serves as a security from the contractor in case of defects in the project.

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

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

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

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

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

18. Long-term Debt

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

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

The Group’s long-term debt are all unsecured. Debt issue costs are deferred and amortized using effective interest method over the term of the loans.

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The rollforward analysis of the unamortized debt issue cost follow:

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

a. On June 6, 2014, the Parent Company issued P=5.0 billion fixed rate bonds. These bonds have a term of 7 years, payable in 2021, with a fixed rate of 5.32% per annum. The proceeds was used to fund the Group’s projects in the pipeline, including on-going projects within the Cebu Business Park and Cebu I.T. Park and land banking initiatives.

b. In March 2017, the Group availed the second drawdown from the P=800.0 million credit facility amounting to P=420.0 million which will mature in 2023.

The loan bears a floating interest rate based on the average yield for the 91-day treasury bills on PDST-R2 plus a spread of 70 basis points per annum or 95% of the BSP Overnight Reverse Repurchase Agreement rate, inclusive of gross receipts tax, whichever is higher. The related outstanding balance amounted to P=404.3 million as of December 31, 2017.

c. In December 2013, the Group obtained a loan with a principal amount of P=420.0 million which are due in 2021. The loan is subject to a fixed interest rate of 4.75% per annum. This loan was used to finance the construction of eBloc 3 and eBloc 4 commercial buildings included under “Investment properties” (see Note 14). The interest is payable every quarter. Twenty five percent (25%) of principal is payable in twenty (20) installments starting on the first quarter of 2016 and the remaining seventy five percent (75%) is payable on maturity date.

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

d. In March 2016, the Group obtained a credit facility amounting to P=800.0 million. In 2016, the Group made the first drawdown amounting to P=380.0 million which will mature in 2023 and was used to finance the construction of eBloc 3. The loan bears a floating interest rate based on the average yield for the 91-day treasury bills on PDST-R2 plus a spread of 70 basis points per annum or 95% of the BSP Overnight Reverse Repurchase Agreement rate, inclusive of gross receipts tax, whichever is higher. The related outstanding balance amounted to P=363.9 million and P=378.1 million as of December 31, 2017 and 2016, respectively.

e. In September 2017, the Group obtained a credit facility amounting to P=375.0 million. In October 2017, the Group made the first drawdown amounting to P=340.0 million which is due in installments until 2027. Proceeds were used to refinance existing loans and for general corporate purposes. The loan is subject to floating interest rate of 90-day PDST-R2 plus 0.70% per annum spread, or a floor rate of equivalent to the average of the BSP Overnight Deposit Facility Rate and Term Deposit Facility Rate of the tenor nearest to the interest period. The related outstanding balance amounted to P=340.0 million as of December 31, 2017.

198 Cebu Holdings, Inc. 2017 Integrated Report - 44 -

f. In October 2010, the Group obtained various loans with a total principal amount of P=680.0 million which are due in 2017. In respect with the fixed rate portion of these loans, fixed interest is the weighted average yield of the 7-year treasury bonds based on PDST-R2 plus a spread of 50 basis points per annum. Outstanding balance amounted to nil and P=3.0 million as of December 31, 2017 and 2016, respectively.

In respect of the floating interest portion, floating interest rate is based on the weighted average yield for the 91-day treasury bills based on PDST-R2 plus a spread of 65 basis points per annum. Outstanding balance amounted to nil and P=405.0 million as of December 31, 2017 and 2016, respectively. The interest is payable every quarter. Fifty percent (50%) of principal is payable in equal quarterly installments and the remaining balance is payable on maturity date.

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

Interest on long-term debt recognized in the consolidated statements of income amounted to P=345.2 million, P=247.7 million, and P=346.2 million in 2017, 2016 and 2015, respectively.

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

Debt covenant The loan agreements provide for certain restrictions and requirements with respect to, among others, major disposal of property, pledge of assets, liquidation, merger or consolidation and maintenance of ratio between debt and the tangible net worth not to exceed 3:1. These restrictions and requirements were complied with by the Group as of December 31, 2017 and 2016.

19. Deposits and Other Liabilities

This account consists of the following:

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

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

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

Tenants’ deposits consist of rental security deposits to be refunded by the Group at the end of the lease contracts. These are initially recorded at fair value, which was obtained by discounting its future cash flows using the applicable rates for similar types of instruments.

Customers’ deposits include customers’ down payments related to real estate sales and excess of collections over the recognized receivables based on percentage-of-completion. The Group requires buyers of condominium units to pay a minimum percentage of the total selling price before the two parties enter into a sale transaction. In relation to this, the customers’ deposits represent payment from buyers which have not reached the minimum required percentage.

When the level of required payment is reached by the buyer, a sale is recognized and these deposits and down payments are considered as payments to the total contract price.

Construction bond pertains to deposits made by tenants as security for the construction and design of the leased premises, to be refunded upon completion, which usually takes less than a year.

20. Related Party Transactions

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

Terms and Conditions of Transactions with Related Parties Except as otherwise indicated, the outstanding accounts with related parties shall be settled in cash. The transactions are made at terms and prices agreed upon by the parties.

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

The Group does not provide any allowance relating to receivable from related parties. This assessment is undertaken each financial year through examining the financial position of the related parties and the markets in which the related parties operate.

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

Amounts owed by Amounts owed to related parties related parties 2017 2016 2017 2016 (In Thousands)

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

Revenue Costs/Expenses 2017 2016 2015 2017 2016 2015 (In Thousands) (In Thousands)

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

Receivables from/payables to Solinea, Avida and Alveo pertain mostly to advances for and reimbursements of operating expenses, development costs and land acquisitions. Other related party receivables and payables pertain to advances and reimbursements arising from the Group’s ordinary course of business.

These are generally trade-related, unsecured with no impairment, noninterest-bearing and payable within one year. The loans from DPSI, MDC and Serendra, Inc. bear interest ranging from 2.3% to 2.5% and are due and demandable as of December 31, 2017 and 2016.

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

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

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

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

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

. Professional fees charged by ALI amounted to P=20.7 million in 2016.

. Systems costs which were included in the Group ’s manpower costs amounted to P=15.9 million, P=27.6 million and P=25.1 million in 2017, 2016 and 2015, respectively.

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

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

• In December 2017, the Parent Company purchased commercial units with a floor area of 11,478.52 sq. m. from SPI’s The Alcoves project amounting to P=125.9 million, which is noninterest- bearing and payable in installment until May 2018.

Compensation of key management personnel by benefit type follows:

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

21. Real Estate Revenue

This account consists of:

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

202 Cebu Holdings, Inc. 2017 Integrated Report - 48 -

22. Interest and Other Income

Interest income consists of:

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

P=41,533 P=35,915 P=98,119

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

Others includes interest earned from intercompany and employee loans and interest and penalty charges on real estate sales.

Other income consists of:

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

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

Gain on sale of development rights pertains to the net gain earned by the Parent Company from selling the development rights, which represents a portion of the gross floor area of a structure in a particular lot that is allowed to be developed by the buyers in the future (see Notes 8 and 16).

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

Others include annexation and service fees wherein, on July 31, 2015, a third party owning a land adjacent to Cebu IT Park, paid for annexation fee amounting to P=29.5 million to gain an access on roads and IT Park Association membership. The land was subsequently sold to another third party on August 26, 2016 which requires service fee to the Group amounting to P=27.1 million for processing of titles as well as application with Philippine Economic Zone Authority (PEZA) and Housing and Land Use Regulatory Board.

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23. Costs and Expenses

Real estate, rental and theater expenses consist of:

2017 2016 2015 (In Thousands) Cost of real estate sales (Note 9) P=205,427 P=179,335 P=571,945 Depreciation and amortization

(Note 14) 467,390 382,172 339,141 Marketing and management fees (Note 20) 230,838 199,567 246,609 Producers’ film share 72,830 74,051 79,159

Manpower cost (Note 20) 23,020 22,838 17,640 Rental 1,956 2,540 2,661

Direct operating expenses: Security and janitorial 137,063 101,935 88,830 Repairs and maintenance 109,037 100,160 90,292 Taxes and licenses 81,510 79,208 55,739 Commission 54,445 17,579 28,152 Light and water 14,649 86,454 179,159 Dues and fees 12,172 11,320 10,537 Insurance 8,321 6,188 16,562 Professional fees 6,487 6,689 8,763 Transportation and travel 647 588 691 Representation 177 399 230 Provision for impairment loss − − 36,518 Others 11,611 24,824 21,356 P=1,437,580 P=1,295,847 P=1,793,984

General and administrative expenses consist of:

2017 2016 2015 (In Thousands) Manpower cost (Notes 20 and 24) P=105,576 P=120,623 P=119,526 Depreciation and amortization

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

204 Cebu Holdings, Inc. 2017 Integrated Report - 50 -

Other charges consist of:

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

24. Pension Plan

As discussed in Note 2, the Group maintains a DC plan which is accounted for as a defined benefit (DB) plan with minimum guarantee due to the requirements of RA No. 7641, The Retirement Pay

Law, covering all regular and permanent employees. The retirement plan is intended to provide for benefit payments to employees equivalent to the higher of the retirement fund credit or 150% of plan salary for every year of credited services. Benefits are paid in lump sum payable immediately.

The plan assets are being managed by BPI. The asset allocation of the plan is set and reviewed from time to time by the Plan Trustees taking into account the membership profile, the liquidity requirements of the Plan and the risk appetite of the Plan sponsor.

The Group contributes to the fund based on the provision of the DC Plan. The Group updates the actuarial valuation every year by hiring the services of a third party professional qualified actuary. The latest actuarial valuation report was as of reporting date.

FARTHER AND FASTER 205 206 Cebu Holdings, Inc. 2017Cebu Integrated Inc. Holdings, Report

- 51 -

Changes in net defined liability in 2017 and 2016 are as follows:

2017 Net benefit cost in consolidated statements of comprehensive income Remeasurement in other comprehensive income

Actuarial changes arising from Benefits Benefits paid Curtailment changes January 1, Current Past paid from directly by and Return on in financial Experience December 31, 2017 service cost service cost Net interest Subtotal plan assets the Group Settlement plan assets assumptions adjustments Subtotal 2017 Present value of defined benefit obligation P=78,698 P=5,176 P= − P=3,627 P=8,803 (P=6,263) ( P= 9 3 ) (P=15,915) P= − P=1,632 P=2,511 P=4,143 P=69,373 Fair value of plan assets (46,499) − − (2,507) (2,507) 6,263 (4,000) 7,789 1,850 − − 1,850 (37,104) Net defined benefit liability (P=8,126) (asset) P=32,199 P=5,176 P= − P=1,120 P=6,296 P= − (P=4,093) P=1,850 P=1,632 P=2,511 P=5,993 P=32,269

2016 Net benefit cost in consolidated statements of comprehensive income Remeasurement in other comprehensive income Actuarial changes arising from Benefits Benefits paid Curtailment changes January 1, Current Past paid from directly by and Return on in financial Experience December 31, 2016 service cost service cost Net interest Subtotal plan assets the Group Settlement plan assets assumptions adjustments Subtotal 2016 Present value of defined benefit obligation P=89,242 P=7,596 P= − P=4,420 P=12,016 (P=1,989) P= − P= − P= − (P=21,646) P= 1 , 0 7 5 (P=20,571) P=78,698 Fair value of plan assets (33,210) − − (1,749) (1,749) 1,989 (15,005) − 1,476 − − 1,476 (46,499) Net defined benefit liability (asset) P=56,032 P=7,596 P= − P=2,671 P=10,267 P= − (P=15,005) P= − P=1,476 (P=21,646) P= 1 , 0 7 5 (P=19,095) P=32,199 - 52 -

The Group’s fund is in the form of a trust fund being maintained by BPI Asset Management. The primary objective of the Retirement Fund is to achieve the highest total rate of return possible, consistent with a prudent level of risk. The investment strategy articulated in the asset allocation policy has been developed in the context of long-term capital market expectations, as well as multi- year projections of actuarial liabilities. Accordingly, the investment objectives and strategies emphasize a long-term outlook, and interim performance fluctuations will be viewed with the corresponding perspective.

The Group expects to contribute P=6.0 million to its retirement fund in 2018.

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

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

All debt instrument held have quoted prices in an active market.

The cost of defined benefit pension plans and other post-employment medical benefits as well as the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation involves making various assumptions. The principal assumptions used in determining pension and post-employment medical benefit obligations for the defined benefit plans are shown below:

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

The sensitivity analysis below has been determined based on reasonable possible changes of each significant assumption on the defined benefit obligation as of the end of the reporting period, assuming all other assumptions were held constant, as of December 31:

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

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

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

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

25. Income Taxes

The provision for current income tax represents 30% RCIT, 2% MCIT and 5% rate on gross income tax (GIT) amounting to P=251.1 million, P=132.1 million and P=207.4 million in 2017, 2016 and 2015, respectively.

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

2017 2016 2015 Statutory income tax rate 30.00% 30.00% 30.00% Tax effects of: Income subjected to lower income tax rates (6.22) (13.27) (2.44) Equity in net earnings of associates and a joint

venture (0.41) (7.28) (9.60)

Interest income and capital gains taxed at lower rates (0.02) (0.03) (0.03) Expired NOLCO and MCIT 0.97 3.54 1.30 Others 0.01 6.36 6.57 Effective income tax rate 24.33% 19.32% 25.80%

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

2017 2016 (In Thousands) Deferred tax assets on: Unapplied NOLCO P=21,668 P=24,329 Advance rent 13,530 15,304 Unamortized discount on intercompany payable 5,873 7,708 MCIT 3,543 2,193 Unamortized discount on customers’ deposits 1,763 79 Allowance for impairment losses 642 641

(Forward)

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2017 2016 (In Thousands) Others P=3,065 P=181 50,084 50,435 Deferred tax liabilities on: Accrued rental income 20,685 9,377 Capitalized interest 17,079 16,892 Difference between tax and book basis of accounting for real estate transactions 2,322 2,322 Others 5,441 3,008 45,527 31,599 P=4,557 P=18,836 The components of net deferred tax liabilities as of December 31 are as follows:

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

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

As of December 31, 2017 and 2016, deferred tax assets arising from NOLCO and MCIT amounting to P=1.9 million and P=4.8 million, respectively, and P=0.17 million and P=0.09 million, respectively, have not been recognized by TPEPI since management believes that no sufficient taxable income will be available in the year these are expected to be reversed, settled or realized.

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The Group has deductible temporary differences, NOLCO and MCIT, that are available for offset against future income tax liabilities for which deferred tax assets have not been recognized. These deductible temporary differences, NOLCO and MCIT, as of December 31, 2017 and 2016 follow:

NOLCO

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

MCIT

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

RA No.10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) was signed into law on December 19, 2017 and took effect January 1, 2018, making the new tax law enacted as of the reporting date. The TRAIN changes existing tax law and includes several provisions that will generally affect businesses on a prospective basis. Although the TRAIN changes existing tax law and includes several provisions that will generally affect businesses on a prospective basis, the management assessed that the same did not have any significant impact on the consolidated financial statement balances as of the reporting date.

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

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26. Basic/Diluted Earnings Per Share

The following table presents information necessary to compute EPS:

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

(a/b) P= 0 . 3 9 P= 0 . 3 5 P= 0 . 4 3

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

27. Financial Information and Financial Instruments

Fair Value Information The carrying amount of cash and cash equivalents, short-term investments, financial assets at FVPL, receivables (except trade residential development and certain receivables from related parties), accounts and other payables (excluding statutory liabilities) and deposits and other liabilities (except tenants’ deposits) are approximately equal to their fair value due to the short-term nature of the transaction.

The methods and assumptions used by the Group in estimating the fair value of the financial instruments are as follows:

• Cash and cash equivalents and short-term investments: The fair value of cash and cash equivalents and short-term investment approximate the carrying amounts at initial recognition due to the short-term maturities of these instruments. • Financial assets at FVPL: The fair value estimates are based on net assets value of the reporting date. • Receivables: The fair value of receivables due within one year approximates its carrying amounts. Noncurrent portion of receivables are discounted using the applicable discount rates for similar types of instruments. The discount rates used ranged from 3.7% to 5.0% as of December 31, 2017 and 2016. • AFS financial assets: The fair value of AFS financial assets is determined based on the available selling price in the market. • Accounts and other payables: The fair values of accounts and other payables approximate the carrying amounts due to the short-term nature of these transactions. • Long-term debt and deposits and other liabilities: Current portion of long-term debt and deposits and other liabilities approximates its fair value due to its short-term maturity. The fair value of fixed rate instruments are estimated using the discounted cash flow methodology using the Group’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being value. The discount rates used ranged from 1.8% to 5.3% as of December 31, 2017 and 2016.

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The following tables set forth the carrying values and estimated fair values of the Group’s financial assets and liabilities carried at fair values and those which fair value are disclosed:

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

Fair Value Hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly Level 3: inputs for the asset or liability that are not based on observable market data

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

2017 Fair value measurements using Quoted prices in active Significant markets for offer Significant identical observable unobservable Carrying assets inputs inputs Date of valuation Values Total (Level 1) (Level 2) (Level 3) Assets measured at fair value AFS December 31, 2017 P=304,333 P=304,333 P=− P=– P=304,333 FVPL December 31, 2017 10,129 10,129 – 10,129 – Assets for which fair values are disclosed Trade residential development December 31, 2017 201,354 289,793 – – 289,793 Receivable from related parties December 31, 2017 1,487,762 590,904 – – 590,904 Investment properties December 31, 2017 10,881,060 38,121,748 − − 38,121,748 Liabilities for which fair values are disclosed Long-term debt December 31, 2017 6,486,125 6,453,576 – – 6,453,576 Tenants’ deposits under deposits and other liabilities December 31, 2017 820,956 790,726 – – 790,726

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2016 Fair value measurements using Quoted prices in active Significant markets for offer Significant identical observable unobservable Carrying assets inputs inputs Date of valuation Values Total (Level 1) (Level 2) (Level 3) Assets measured at fair value AFS December 31, 2016 P=318,574 P=318,574 P=− P=− P=318,574 FVPL December 31, 2016 21,908 21,908 − 21,908 − Assets for which fair values are disclosed Trade residential development December 31, 2016 160,587 173,320 − − 173,320 Receivable from related parties December 31, 2016 1,704,568 803,718 − − 803,718 Investment properties December 31, 2016 11,011,106 25,672,676 − − 25,672,676 Liabilities for which fair values are disclosed Long-term debt December 31, 2016 6,185,125 6,148,311 − − 6,148,311 Tenants’ deposits under deposits and other liabilities December 31, 2016 799,299 783,549 − − 783,549

The Group categorized the fair value of long-term debt and deposits and other noncurrent liabilities under Level 3 as of December 31, 2017 and 2016. The fair value of these financial instruments was determined by discounting future cash flows using the applicable rates of similar types of

instruments plus a certain spread. This spread is the unobservable input and the effect of changes to this is that the higher the spread, the lower the fair value.

For land, significant increases (decreases) in the price per square meter, in isolation, would result in a significantly higher (lower) fair value of the properties.

For buildings, significant increases (decreases) in the replacement and reproduction costs, in isolation, would result in a significantly higher (lower) fair value of the properties.

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

Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise cash and cash equivalents, financial assets at FVPL, AFS financial assets and long-term debt.

The main purpose of the Group’s financial instruments is to fund its operations, capital expenditures and finance the projects. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

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Exposure to credit risk, liquidity risk and market risk (i.e., foreign currency risk and interest rate risk) arises in the normal course of the Group’s business activities. The main objectives of the Group’s financial risk management are as follows: • to identify and monitor such risks on an ongoing basis; • to minimize and mitigate such risks; and • to provide a degree of certainty about costs.

The Group’s financing and treasury function operates as a centralized service for managing financial risks and activities as well as providing optimum investment yield and cost-efficient funding for the Group. The Group’s BOD reviews and approves policies for managing each of these risks.

Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group’s credit risks are primarily attributable to financial assets such as cash and cash equivalents, financial assets and FVPL and receivables.

To manage credit risk, the Group maintains defined credit policies and monitors its exposure to credit risks on a continuous basis.

In respect of receivable from the sale of properties, credit risk is managed primarily through credit reviews and an analysis of receivables on a continuous basis. The Group also undertakes supplemental credit review procedures for certain installment payment structures. The Group’s stringent customer requirements and policies in place contribute to lower customer default than its competitors. Customer payments are facilitated through various collection modes including the use of postdated checks and auto-debit arrangements. Exposure to bad debts is not significant as title to real estate properties are not transferred to the buyers until full payment has been made and the requirement for remedial procedures is minimal given the profile of buyers.

Credit risk arising from rental income from leasing properties is primarily managed through a tenant selection process. Prospective tenants are evaluated on the basis of payment track record and other credit information. In accordance with the provisions of the lease contracts, the lessees are required to deposit with the Group security deposits and advance rentals which helps reduce the Group’s credit risk exposure in case of defaults by the tenants. For existing tenants, the Group has put in place a monitoring and follow-up system. Receivables are aged and analyzed on a continuous basis to minimize credit risk associated with these receivables. Regular meetings with tenants are also undertaken to provide opportunities for counseling and further assessment of paying capacity.

Other financial assets are comprised of cash and cash equivalents excluding cash on hand, short- term investments, financial assets at FVPL and AFS financial assets. The Group adheres to fixed limits and guidelines in its dealings with counterparty banks and its investment in financial instruments. Bank limits are established on the basis of an internal rating system that principally covers the areas of liquidity, capital adequacy and financial stability. The rating system likewise makes use of available international credit ratings. Given the high credit standing of its accredited counterparty banks, management does not expect any of these financial institutions to fail in meeting their obligations. Nevertheless, the Group closely monitors developments over counterparty banks and adjusts its exposure accordingly while adhering to pre-set limits.

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As for the receivables from related parties, receivable from employees and other receivables, the maximum exposure to credit risk from these financial assets arise from the default of the counterparty with a maximum exposure equal to their carrying amounts.

An analysis of the maximum exposure to credit risk from the Group’s trade receivables and the fair values of the related collaterals are shown below:

December 31, 2017 Financial effect Maximum of collateral exposure to Fair value of or credit credit risk collaterals Net Exposure enhancement (In Thousands) Trade receivables: Residential development P=201,354 P=289,793 P=− P=289,793 Commercial development 136,819 − 136,819 − Shopping centers 113,348 774,242 − 113,348 Corporate business 69,088 179,583 − 69,088 P=520,609 P=1,243,618 P=136,819 P=472,229

December 31, 2016 Financial effect Maximum of collateral exposure to Fair value of Net or credit credit risk collaterals Exposure enhancement (In Thousands) Trade receivables: Residential development P=160,587 P=53,049 P=107,538 P=53,049 Shopping centers 114,665 696,194 − 114,665 Corporate business 36,592 121,116 − 36,592 Commercial development 11,115 − 11,115 − P=322,959 P=870,359 P=118,653 P=204,306

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The table below shows the credit quality by class of the Group’s financial assets (gross of allowance for impairment losses):

December 31, 2017

Neither Past Due nor Impaired High Medium Low Past Due or Grade Grade Grade Impaired Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=144,176 P= − P= − P= − P=144,176 Financial assets at FVPL 10,129 − − − 10,129 Trade receivables: Residential development 201,354 − − − 201,354 Commercial development 136,819 − − − 136,819 Shopping centers 64,729 2,243 − 46,376 113,348 Corporate business 27,859 − − 41,229 69,088 Receivable from related parties 1,469,300 − − 18,462 1,487,762 Receivables from employees 16,741 − − − 16,741 Accrued receivable 309,297 − − − 309,297 Others 59,372 − − − 59,372 AFS financial assets − − 304,333 − 304,333 P=2,439,776 P=2,243 P=304,333 P=106,067 P=2,852,419

December 31, 2016

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

Others includes non-trade receivables from sewer and management fees, receivable from SSS and accrued interest receivable from money market placements.

The credit quality of the financial assets was determined as follows:

. Cash and cash equivalents and financial assets at FVPL - based on the nature of the counterparty and the Group’s rating procedure. These are held by counterparty banks with minimal risk of bankruptcy and are therefore classified as high grade.

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. Receivables - high grade pertains to receivables with no default in payment; medium grade pertains to receivables with up to 3 defaults in payment; and low grade pertains to receivables with more than 3 defaults in payment.

As of December 31, 2017 and 2016, the Group does not have restructured financial assets. The Group has no significant credit risk concentrations on its receivables. Policies are in place to ensure that lease contracts and contracts to sell are made with customers with good credit history.

Given the Group’s diverse base of counterparties, it is not exposed to large concentration of credit risk. As of December 31, 2017 and 2016, the aging analysis of receivables presented per class, is as follow:

December 31, 2017

Neither Past Past Due but not Impaired Due nor 30-60 60-90 90-120 Individually Impaired <30 days days days days >120 days Impaired Total (In Thousands) Trade receivables: Residential P=201,354 P= − P= − P= − P= − P= − P= − P=201,354 development Shopping centers 136,819 − − − − − − 136,819 Commercial 66,972 5,969 4,744 5,226 7,009 6,745 16,683 113,348 development Corporate business 27,859 − 6,516 14,560 8,221 11,932 − 69,088 Receivable from related 1,469,300 − 365 14,269 2,463 1,365 − 1,487,762 parties Receivable from 16,741 − − − − − − 16,741 employees Accrued receivable 309,297 − − − − − − 309,297 Others 59,372 − − − − − − 59,372 P=2,287,714 P=5,969 P=11,625 P=34,055 P=17,693 P=20,042 P=16,683 P=2,393,781

December 31, 2016

Neither Past Past Due but not Impaired Due nor 30-60 60-90 90-120 Individually Impaired <30 days days days days >120 days Impaired Total (In Thousands)

Trade receivables: Residential development P=134,891 P= − P= − P= − P=8,231 P= 1 7 , 4 6 5 P= − P=160,587 Shopping centers 43,084 8,702 6,286 5,957 10,167 23,786 16,683 114,665 Corporate business 18,870 − 1,444 7,237 4,835 4,206 − 36,592 Commercial development 1,488 − − − 214 9,413 − 11,115 Receivable from related 1,541,607 − 33,051 76,093 434 53,383 − 1,704,568 parties Receivable from 18,424 − − − − − − 18,424 employees Accrued receivable 162,657 − − − − − − 162,657 Others 62,763 − − − − − − 62,763 P=1,983,784 P=8,702 P=40,781 P=89,287 P=23,881 P=108,253 P=16,683 P=2,271,371

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from either the inability to sell financial assets quickly at their fair values; or the counterparty failing on repayment of a contractual obligation; or inability to generate cash inflows as anticipated.

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The Group monitors its cash flow position, debt maturity profile and overall liquidity position in assessing its exposure to liquidity risk. The Group maintains a level of cash and cash equivalents deemed sufficient to finance operations and to mitigate the effects of fluctuation in cash flows. Accordingly, its loan maturity profile is regularly reviewed to ensure availability of funding through an adequate amount of credit facilities with financial institutions.

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

Overall, the Group’s funding arrangements are designed to keep an appropriate balance between equity and debt, to give financing flexibility while continuously enhancing the Group’s businesses.

The table below summarizes the maturity profile of the Group’s financial assets and financial liabilities as of December 31 based on the contractual undiscounted payments.

December 31, 2017

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=144,176 P= − P= − P= − P=144,176 Short-term investments 2,543 − − − 2,543

Financial assets at fair value through profit or loss 10,129 − − − 10,129 Receivable 1,901,125 113,049 202,434 177,173 2,393,781

Total financial assets P=2,057,973 P=113,049 P=202,434 P=177,173 P=2,550,629 Accounts and other payables P=4,493,611 P=− P=− P=− P=4,493,611 Long-term debt 59,942 59,956 76,963 6,256,715 6,453,576 Interest payable - long-term debt 277,624 355,479 330,236 170,644 1,133,983 Deposits and other liabilities 820,956 − − 316,479 1,137,435 Total other financial liabilities P=5,652,133 P=415,435 P=407,199 P=6,743,838 P=13,218,605

December 31, 2016

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands)

Cash and cash equivalents (excluding cash on hand) P=94,538 P= − P= − P= − P=94,538 Financial assets at fair value

through profit or loss 21,908 − − − 21,908 Receivable 1,222,696 364,921 408,969 274,785 2,271,371

Total financial assets P=1,339,142 P=364,921 P=408,969 P=274,785 P=2,387,817 Accounts and other payables P=4,125,326 P=− P=− P=− P=4,125,326 Long-term debt 442,279 39,451 78,931 5,587,650 6,148,311 Interest payable - long-term debt 55,111 297,136 295,416 861,545 1,509,208 Deposits and other liabilities 782,025 527,803 21,348 59,489 1,390,665 Total other financial liabilities P=5,404,741 P=864,390 P=395,695 P=6,508,684 P=13,173,510

Cash and cash equivalents, financial assets at FVPL and accounts receivable are used for the Group's liquidity requirements.

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Please refer to the terms and maturity profile of these financial assets under the maturity profile of the interest-bearing financial assets and liabilities disclosed under interest rate risk section.

Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

Majority of the Group’s transactions are denominated in Philippine Peso. There are only minimal placements in foreign currencies and the Group does not have any foreign-currency-denominated debt. As such, the Group’s foreign currency risk is minimal.

The following table shows the Group’s consolidated foreign-currency-denominated monetary assets and their Peso equivalents as of December 31:

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

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

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

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

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

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

The Group manages its interest rate risk by leveraging on its premier credit rating and maintaining a debt portfolio mix of both fixed and floating interest rates.

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The portfolio mix is a function of historical, current trend and outlook of interest rates, volatility of short term interest rates, the steepness of the yield curve and degree of variability of cash flows.

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

Change in basis 2017 2016 points (In Thousands) Increase (decrease): Effect on income before + 100 basis points (P=11,031) (P=7,840) income tax - 100 basis points 11,031 7,840

FARTHER AND FASTER 221 222 Cebu Holdings, Inc. 2017Cebu Integrated Inc. Holdings, Report

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The terms and maturity profile of the interest-bearing financial assets and liabilities, together with its corresponding nominal amounts and carrying values (in thousands) are shown in the following table:

December 31, 2017 Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Group Cash and cash equivalents Fixed at the date of investment Various P=144,176 P=144,176 P=− P=144,176 Accounts receivable Fixed at the date of sale Date of Sale 2,393,781 1,901,125 492,656 2,393,781 P=2,537,957 P=2,045,301 P=492,656 P=2,537,957 Parent Company Long-term debt Fixed Peso Fixed rate of average 5-year treasury bond + 0.60% spread Maturity date P=5,000,000 P= − P= 4,973,361 P=4,973,361 Peso Fixed rate corporate notes with interest of 4.75% per annum Maturity date 378,000 20,708 356,362 377,070 Floating Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 404,250 20,672 381,741 402,413 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 363,875 18,742 343,689 362,431 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 340,000 (180) 338,481 338,301 P=6,486,125 P=59,942 P=6,393,634 P=6,453,576 - 68 -

December 31, 2016 Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Group Cash and cash equivalents Fixed at the date of investment Various P=94,538 P=94,538 P=− P=94,538 Accounts receivable Fixed at the date of sale Date of sale 2,271,371 1,222,696 1,048,675 2,271,371 P=2,365,909 P=1,317,234 P=1,048,675 P=2,365,909 Parent Company Long-term debt Fixed Peso Fixed rate of average 5-year treasury bond + 0.60% spread Maturity date P=5,000,000 P= – P=4,966,530 P=4,966,530 Peso Fixed rate corporate notes Maturity date 399,000 20,704 377,070 397,774 Peso Fixed rate 7-year treasury bond + 0.50 spread Maturity date 3,000 2,997 − 2,997 Floating Peso Floating rate of average 91-day treasury bill rate + 0.65% spread Maturity date 405,000 404,591 − 404,591 Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 378,125 13,987 362,432 376,419 P=6,185,125 P=442,279 P=5,706,032 P=6,148,311 FARTHER AND FASTER 223 - 69 -

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

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

In September 2017, the Group obtained a credit facility amounting to P=375.0 million. In October 2017, the Group made the first drawdown amounting to P=340.0 million which is due in installment until 2027. Proceeds were used to refinance existing loans and for general corporate purposes. The loan is subject to floating interest rate of 90-day PDST-R2 plus 0.70% per annum spread, or a floor rate of equivalent to the average of the BSP Overnight Deposit Facility Rate and Term Deposit Facility Rate of the tenor nearest to the interest period (see Note 18).

In March 2017, the Group availed the second drawdown from the P=800.0 million credit facility amounting to P=420.00 million which will mature in 2023. The related outstanding balance amounted to P=404.3 million as of December 31, 2017 (see Note 18).

In March 2016, the Group obtained a credit facility amounting to P=800.0 million. As of December 31, 2017 and 2016, the undrawn amount amounted to P=380.0 million and P=420.0 million, respectively (see Note 18).

In June 2014, the Group acquired a P=5.0 billion bonds to partially finance its capital expenditure requirements. As of December 31, 2017 and 2016, the Group’s outstanding liability is P=5.0 billion, which is due for payment in 2021 (see Note 18).

Equity price risk Financial assets at FVPL are acquired at a certain price in the market. Such investment securities are subject to price risk due to changes in market values of instruments arising either from factors specific to individual instruments or their issuers or factors affecting all instruments traded in the market. Depending on several factors such as interest rate movements, country’s economic performance, political stability, domestic inflation rates, these prices change, reflecting how market participants view the developments.

The Group measures the sensitivity of its investment securities based on the average historical fluctuation of the investment securities’ net asset value per unit (NAVPU). All other variables held constant, with a duration of 0.12 year and 0.09 year for 2017 and 2016, respectively, a 1.0% change in NAVPU will increase/decrease net income and equity by P=0.01 million and P=0.02 million for the years ended December 31, 2017 and 2016, respectively.

224 Cebu Holdings, Inc. 2017 Integrated Report - 70 -

28. Equity

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

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

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

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

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

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

Retained earnings include undistributed net earnings of subsidiaries and associates amounting P=1,852.3 million and P=1,307.7 million as of December 31, 2017 and 2016, respectively. These amounts

are not available for dividend declaration until declared by the subsidiaries and affiliates.

In December 2017, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling P=288.0 million from unappropriated retained earnings to all its issued and outstanding shares as of record date December 20, 2017, and paid on December 27, 2017.

On November 17, 2016, the Parent Company’s BOD declared P=0.12 per share cash dividends totaling P=230.4 million from unappropriated retained earnings to all its issued and outstanding shares as of record date December 2, 2016, and paid on December 12, 2016.

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

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

FARTHER AND FASTER 225 - 71 -

Appropriated retained earnings On November 22, 2012, the Parent Company’s BOD approved and authorized the appropriation of retained earnings amounting to P=1.3 billion which shall be used for land acquisition and future development projects.

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

Capital Management The primary objective of the Group’s capital management policy is to ensure that debt and equity capital are mobilized efficiently to support business objectives and maximize shareholder value. The Group establishes the appropriate capital structure for each business line that properly reflects its premier credit rating and allows it the financial flexibility, while providing it sufficient cushion to absorb cyclical industry risks.

The Parent Company is not subject to externally imposed capital requirements. No changes were made in the objectives, policies and processes from the previous years.

The Group monitors its capital structure using leverage ratios on both a gross and net basis, and makes adjustments to it in light of economic conditions. Debt consists of long-term debt. Net debt includes long-term debt less cash and cash equivalents and financial assets at FVPL. The Group considers as capital the equity attributable to equity holders of the Parent Company.

As of December 31, the Group had the following ratios:

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

Debt to equity 92.34% 94.19%

Net debt to equity 89.63% 92.40%

226 Cebu Holdings, Inc. 2017 Integrated Report - 72 -

29. Segment Information

The business segments where the Group operates are as follows:

Core business: • Commercial development - sale of commercial lots, club shares and development rights • Residential development - sale of residential lots and condominium units • Shopping centers - development of shopping centers and lease to third parties of retail space and land therein; operation of movie theaters, food courts, entertainment facilities and carparks in these shopping centers; management and operation of malls • Corporate business - development and lease of office buildings • Others - other investing activities such as investment in joint ventures and sale of non-core assets

No business segments have been aggregated to form the reportable business segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. The accounting and measurement policies used are consistent with the policies used in preparing general-purpose financial statements.

Sales, costs and expenses include amounts that are directly attributable to each segment. Items that are not directly identified are allocated based on the segment’s proportionate share on the total revenue.

FARTHER AND FASTER 227 228 Cebu Holdings, Inc. 2017Cebu Integrated Inc. Holdings, Report

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Business Segments

The following tables regarding business segments present assets and liabilities as of December 31, 2017, 2016 and 2015 revenue and expense information for the three-year year ended December 31, 2017.

2017 Eliminations Commercial Residential Shopping Corporate and Development Development Centers Business Others Adjustments Total (In Thousands) Revenue Sales to external customers P=− P=347,712 P=1,351,061 P=644,398 P=30,219 P=248,343 P=2,621,733 Equity in net earnings of associates and a joint venture − − − − 278,938 (264,225) 14,713 Total revenue − 347,712 1,351,061 644,398 309,157 (15,882) 2,636,446 Operating expenses (20,335) (292,072) (675,914) (499,274) (180,826) 18,758 (1,649,663) Operating profit (loss) (20,335) 55,640 675,147 145,124 128,331 2,876 986,783 Interest income 1,945 12,134 5,693 4,105 20,271 (2,615) 41,533 Other income 160,679 − 67,200 155,036 41,165 (9,825) 414,255 Interest and other financing charges − − − − (368,130) − (368,130) Provision for (benefit from) income tax (43,166) (20,510) (207,446) 1,712 7,973 − (261,437) Net income (loss) P=99,123 P=47,264 P=540,594 P=305,977 (P=170,390) (P=9,564) P=813,004 Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. P=99,123 P= 38,488 P=506,725 P=289,823 (P=171,148) (P=9,564) P=753,447 Non-controlling interests − 8,776 33,869 16,154 758 − 59,557 P=99,123 P=47,264 P=540,594 P=305,977 (P=170,390) (P=9,564) P=813,004 Other Information Segment assets P=1,057,939 P=1,097,367 P=9,694,284 P=6,803,056 P=3,327,539 (P=3,932,837) P=18,047,348 Investments in associates and a joint venture − − − − 2,567,710 − 2,567,710 Deferred tax assets − − − − 4,557 − 4,557 Total assets P=1,057,939 P=1,097,367 P=9,694,284 P=6,803,056 P=5,899,806 (P=3,932,837) P=20,619,615 Segment liabilities P=842,816 P=181,572 P=2,461,979 P=2,103,550 P=7,265,317 (P=444,558) P=12,410,676 Deferred tax liabilities − − − − 245,938 15,368 261,306 Total liabilities P=842,816 P=181,572 P=2,461,979 P=2,103,550 P=7,511,255 (P=429,190) P=12,671,982 Segment additions to property and equipment and investment properties P=411,575 P= − P=10,125 P=290,086 P=14,173 P= − P=725,959 Depreciation and amortization P=− P=− P=226,653 P=247,068 P=21,889 P=− P=495,610 - 74 -

2016

Eliminations Commercial Residential Shopping Corporate and Development Development Centers Business Others Adjustments Total (In Thousands) Revenue Sales to external customers P=578 P=296,437 P=1,560,935 P=431,229 P=17,520 (P=28,010) P=2,278,689 Equity in net earnings of associates and a joint venture − − − − 388,741 (227,431) 161,310 Total revenue 578 296,437 1,560,935 431,229 406,261 (255,441) 2,439,999 Operating expenses (10,640) (260,910) (737,742) (491,934) (37,369) 43,727 (1,494,868) Operating profit (loss) (10,062) 35,527 823,193 (60,705) 368,892 (211,714) 945,131 Interest income 2,418 2,051 4,181 37,727 407 (10,869) 35,915 Other income − 732 54,964 180,201 18,379 (15,717) 238,559 Interest expense − − − (31,895) (226,690) 10,869 (247,716) Other charges − − − − (64,886) − (64,886) Provision for (benefit from) income tax 1,060 (6,609) (144,658) 14,433 (39,458) − (175,232) Net income (loss) (P=6,584) P=31,701 P=737,680 P=139,761 P=56,644 (P=227,431) P=731,771 Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. (P=6,597) P=25,004 P=702,419 P=130,020 P=56,248 (P=227,431) P=679,663 Non-controlling interests 13 6,697 35,261 9,741 396 − 52,108 (P=6,584) P=31,701 P=737,680 P=139,761 P=56,644 (P=227,431) P=731,771 Other Information Segment assets P=1,449,883 P=1,690,695 P=7,091,013 P=4,869,829 P=2,550,362 P=90,311 P= 17,742,093 Investments in associates and a joint venture − − − − 4,291,683 (2,436,989) 1,854,694 Deferred tax assets − − − − 18,836 − 18,836 Total assets P=1,449,883 P=1,690,695 P=7,091,013 P=4,869,829 P=6,860,881 (P=2,346,678) P=19,615,623 Segment liabilities P=285,906 P=73,172 P=2,486,215 P=7,996,516 P=1,223,904 (P=113,089) P=11,952,624 Deferred tax liabilities − − − − 249,946 (13,781) 236,165 Total liabilities P=285,906 P=73,172 P=2,486,215 P=7,996,516 P=1,473,850 (P=126,870) P=12,188,789 FARTHER AND FASTER Segment additions to property and equipment and investment properties P=652,572 P=19,474 P=51,089 P=157,138 P=214 P= − P=880,487 Depreciation and amortization P=1,713 P=17 P=212,897 P=178,939 P=8,504 P=− P=402,070 229 230 Cebu Holdings, Inc. 2017Cebu Integrated Inc. Holdings, Report

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2015

Eliminations Commercial Residential Shopping Corporate and Development Development Centers Business Others Adjustments Total (In Thousands)

Revenue Sales to external customers P=330,711 P=883,733 P=1,437,466 P=496,028 P=455,324 (P=469,016) P=3,134,246 Equity in net earnings of associates and a joint venture − − − − 106,303 − 106,303 Total revenue 330,711 883,733 1,437,466 496,028 561,627 (469,016) 3,240,549 Operating expenses (228,054) (358,366) (637,436) (520,021) (280,317) 7,033 (2,017,161) Operating profit (loss) 102,657 525,367 800,030 (23,993) 281,310 (461,983) 1,223,388 Interest income 591 45,080 2,341 46,268 3,839 − 98,119 Other income − 3,778 235,472 95,232 67,109 − 401,591 Interest expense − − − − (346,215) − (346,215) Other charges − − − − (102,893) − (102,893) Provision for (benefit from) income tax (31,059) (23,309) (127,910) (11,808) (134,445) (121) (328,652) Net income (loss) P=72,189 P=550,916 P=909,933 P=105,699 (P=231,295) (P=462,104) P=945,338 Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. P=59,830 P=517,890 P=856,213 P=87,162 (P=231,784) (P=462,104) P=827,207 Non-controlling interests 12,359 33,026 53,720 18,537 489 − 118,131 P=72,189 P=550,916 P=909,933 P=105,699 (P=231,295) (P=462,104) P=945,338 Other Information Segment assets P=519,725 P=2,542,693 P=5,225,776 P=5,611,795 P=4,316,037 P=148,125 P=18,364,151 Investments in associates and a joint venture − − − − 1,368,384 – 1,368,384 Deferred tax assets − − − − 652 − 652 Total assets P=519,725 P=2,542,693 P=5,225,776 P=5,611,795 P=5,685,073 P=148,125 P=19,733,187 Segment liabilities P=71,418 P=531,946 P=1,398,228 P=3,231,185 P=7,518,899 (P=99,686) P=12,651,990 Deferred tax liabilities − − − − 153,603 15,488 169,091 Total liabilities P=71,418 P=531,946 P=1,398,228 P=3,231,185 P=7,672,502 (P=84,198) P=12,821,081 Segment additions to property and equipment and investment properties P=633,563 P= − P=168,408 P=607,737 P=431 P= − P=1,410,139 Depreciation and amortization P=− P=− P=209,937 P=145,295 P=2,793 P=− P=358,025 - 76 -

30. Leases

Operating Leases - Group as Lessor The Group enters into lease agreements with third parties covering rentals of commercial and office spaces and land therein. (a) fixed monthly rent, or (b) minimum rent payment or fixed rent plus percentage of gross sales, whichever is higher. All leases include a clause to enable upward revision on its rental charge on annual basis based on prevailing market conditions.

Future minimum rentals receivable under noncancellable operating leases of the Group are as follows:

December 31 2017 2016 (In Thousands) Within one year P=599,699 P=397,758 After one year but not more than five years 1,746,529 879,110 More than five years 997,482 1,003,876

P=3,343,710 P=2,280,744

The total rent income amounted to P=2,144.4 million, P=1,849.0 million and P=1,653.6 million in 2017, 2016 and 2015, respectively (see Note 21). Contingent rent recognized in December 31, 2017, 2016 and 2015 amounted to P=111.2 million, P=102.9 million and P=107.1 million, respectively.

Operating Leases - Group as Lessee The Group entered into short-term operating lease of parking space for a period of one (1) year starting January 1, 2017 to December 31, 2017, renewable every year thereafter under new terms and conditions. The total rent expense amounted to P=2.4 million, P=2.5 million and P=2.7 million in 2017, 2016 and 2015, respectively.

31. Philippine Economic Zone Authority (PEZA) Registration

CPVDC was registered with PEZA on April 6, 2000 as an Information Technology (IT) Park developer or operator and was granted approval by PEZA on October 10, 2001. The PEZA registration entitled CPVDC to a four-year tax holiday from the start of approval of registered activities. At the expiration of its four-year tax holiday, CPVDC pays income tax at the special rate of 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and local income taxes.

On December 18, 2007, PEZA approved the registration of AiO, the subsidiary, as an Economic Zone Information Technology (IT) Facility Enterprise. As a registered ecozone facilities enterprise, the subsidiary is entitled to establish, develop, construct, administer, manage and operate a 12-storey building and 17-storey building located at Asia Town IT Park, in accordance with the terms and conditions of the Registration Agreement with PEZA. The Group shall pay income tax at the special tax rate of 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and local income taxes. Gross income earned refers to gross sales or gross revenues derived from any business activity, net of returns and allowances, less cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses. Income generated from sources outside of the PEZA economic zone shall be subject to regular internal revenue taxes.

FARTHER AND FASTER 231 - 76 -

30. Leases

Future minimum rentals receivable under noncancellable operating leases of the Group are as follows:

December 31 2017 2016 (In Thousands) Within one year P=599,699 P=397,758 After one year but not more than five years 1,746,529 879,110 More than five years 997,482 1,003,876

P=3,343,710 P=2,280,744

31. Philippine Economic Zone Authority (PEZA) Registration

It is certified by the Bureau of Internal Revenue under Section 4.106-6 and 4 108-6 of Revenue Regulation No. 16-2005 that the enterprise is conducted for purposes of its VAT zero-rating transactions with its local suppliers of goods, properties and services.

32. Supplemental Cash Flow Information

Changes in liabilities arising from financing activities follow:

Non-cash changes January 1, Amortization December 31, 2017 Cash Flows of DIC Other 2017 (In Thousands) Current portion of long- P=442,279 (P=459,000) P=412 P=76,251 P=59,942 term debt (Note 18) Long-term debt - net of 5,706,032 756,200 7,653 (76,251) 6,393,634 current portion Interest payable 48,315 (181,373) − 137,344 4,286 Dividends payable 1,751 (288,010) − 288,010 1,751 Total liabilities from financing activities P=6,198,377 (172,183) P=8,065 P=425,354 P=6,459,613

The ‘Other’ column includes the effect of reclassification of non-current portion of interest-bearing loans and borrowings and the effect of accrued but not yet paid interest on interest-bearing loans and borrowings. The Group classifies interest paid as cash flows from operating activities.

The noncash investing and financing activities of the Group pertain to:

232 Cebu •Holdings,Transfers Inc. 2017 from Integrated investment Report properties to property and equipment and inventories amounting to P=222.7 million and P=73.0 million, respectively, in 2017; and • Assignment of club shares, classified as "Available-for-sale financial assets", to the condominium corporation which formed part of the cost of the Group's residential projects amounted to P=14.2 million.

33. Provisions and Contingencies

The Group is currently involved in a legal proceeding and the outcome of this legal proceeding is not presently determinable.

In the opinion of management and its legal counsel, the eventual liability under this legal proceeding, if any, will not have a material effect on the Group’s financial position and results of operations. The information usually required under PAS 37 is not disclosed on the ground that it may prejudice the outcome of the legal proceeding. - 77 -

32. Supplemental Cash Flow Information

Changes in liabilities arising from financing activities follow:

The noncash investing and financing activities of the Group pertain to:

• Transfers from property and equipment to investment properties with a net book value amounting to P=0.02 million in 2016; • Transfers from inventories to investment properties amounting to P=231.7 million in 2016; • Transfers from investment properties to property and equipment and inventories amounting to P=222.7 million and P=73.0 million, respectively, in 2017; and • Assignment of club shares, classified as "Available-for-sale financial assets", to the condominium corporation which formed part of the cost of the Group's residential projects amounted to P=14.2 million.

33. Provisions and Contingencies

The Group is currently involved in a legal proceeding and the outcome of this legal proceeding is not presently determinable.

FARTHER AND FASTER 233 PUBLICATION TEAM

ADVISER

Aniceto V. Bisnar, Jr. President

EDITORIAL TEAM

Ma. Cecilia Crispina T. Urbina Assistant Vice President and Head, HR and Administration

Noel F. Alicaya Finance and Control Officer / Chief Risk Officer Vera R. Alejandria Sustainability Officer / Community Relations Manager

Maria Jeanette A. Japzon Corporate Communications, Media Relations and Legal Affairs Manager Jennifer G. Sia Audit Manager Archie T. Obeso Control and Analysis Officer Jonjay O. Camson Control and Analysis Officer Andrea Denise H. Chua Corporate Communications Assistant

CONTRIBUTORS CHI Sustainability Council Makati Development Corporation Ayala Property Management Corporation

Ayala Land Malls, Inc.

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CORPORATE HEADQUARTERS 20F Ayala Center Cebu Tower Bohol St., Cebu Business Park Cebu City, Cebu 6000 Philippines Tel (6332) 888 3700

STAKEHOLDER INFORMATION For inquiries from institutional investors, analysts, the financial and business community on the financial report and feedback from our various stakeholder groups on the annual and sustainability report, please write or call:

Cebu Holdings, Inc. 20F Ayala Center Cebu Tower 28F, Vismin Group Bohol St., Cebu Business Park Tower One & Exchange Plaza Cebu City, Cebu 6000 Philippines Ayala Triangle, Ayala Avenue, 1226 Tel (6332) 888 3700 Makati City, Metro Manila, Philippines www.cebuholdings.com Tel (632) 750 6647 [email protected]

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