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WHAT'S INSIDE

About this Report 01 Corporate Objectives 03 Our 2010 Performance 06 Message to Stockholders 08 Corporate Governance 12 Disclosures on Management Approach 30 Enhancing our Sustainability Management 34 The Business and Economic Environment 40 Providing Opportunities for Economic Development 46 Real Estate Development 50 Retail Business 64 Using our Resources Efficiently 76 Reducing our Emissions and Wastes 82 Managing Biodiversity 86 Engaging our Stakeholders 90 Investing in our People 92 Addressing the Needs of our Customers 100 Partnering with Communities 106 Stakeholders’ Commentaries 114 GRI Index 119 Statement of Management’s Responsibility 123 Report of the Audit Committee to the Board Of Directors 124 Independent Auditor’s Report 125 Financial Statements 126 Shareholder Information 174

We are defined by our sense of commitment. We value the many resilient relationships that we have nurtured over the years. To our customers, we have always held true to our vision of creating extraordinary products of enduring value. To our investors, we are a consistent performer with a track record for growth and strategic excellence. To our stakeholders, we are a firm advocate of sustainable development, ever mindful of our environmental footprint and socio-economic responsibilities. Thanks to this kind of productive synergy, we remain confident that we can sustain our success in the long-term. We will aggressively capitalize on the opportunities presented by a rapidly expanding Cebu market, and a stronger, more globally competitive Philippines. ABOUT THIS REPORT

This integrated annual and sustainability report Third Generation (G3) guidelines as reference. For presents the performance for the year 2010, three years of reporting and reviewing materiality the fourth report since the Company voluntarily of indicators, the Company’s Sustainability Technical adopted triple bottom line reporting that covered Working Group underwent a thorough process the 2007 performance. of reviewing report content and integrating new learning and improvement. The latter part Structure and Approach. As an integrated report, of this report presents our reporting coverage this is structured based on the three pillars of summarized in the GRI index with 54 indicators and sustainability: economic, environmental and social the application level table (B, self-declared). Data responsibility. With the experience we have gained presented in this report underwent reviews via our from reporting our sustainability initiatives, we Quality, Environment, Health and Safety (QEHS) have improved on our data collection process and internal and surveillance audits, and external audits introduced some amendments to our reporting of our financial performance by SGV and Co. These approach, simplifying presentation in a manner help assure the completeness and accuracy of this that can be most understood by our readers. The report, balancing financial and non-financial aspects report is preceded with profile disclosures and the of the business. three main focus areas of our operations: financial growth, environmental stewardship and social Target Audience. With the integration of responsibility. The financial and operational aspects sustainability performance in the report since we of the business are discussed in the earlier section, first published in 2008, we have expanded the reach incorporated in the economic performance, of this report from investors and stockholders to balancing value generation and distribution, but the rest of our external stakeholders. Furthermore, supported with the audited financial statements the report has since been one of the rich sources of in the last section of this report. To feature information for the Company’s internal functional stakeholder feedback, we retained the section teams, having consolidated the Company’s for commentaries from a Company employee, a performance measures that assist us in improving representative of the neighboring communities and our monitoring and reporting systems. This two of our partners in environmental advocacy. report also serves as a material that complements marketing communications for our customers, Scope. This report evidences the Company’s providing an overview and historical perspective of progress in monitoring and measuring our the Company. initiatives over a period of three years – 2010, 2009 and 2008. The report presents consolidated data Reference and Contact Information .Further on economic and environmental performance details of our performance are provided in the encompassing projects, targets and programs Company’s website www.cebuholdings.com. A of the Company and its subsidiaries and affiliate copy of this report can be downloaded in PDF from located in Cebu, Philippines. the Investor Communication section of the website. For comments and suggestions, a feedback form is Standards. The Company has been using the enclosed in this report. We can also be contacted at current standard framework for sustainability [email protected]. reporting, the Global Reporting Initiative (GRI) –

“With the experience we have gained from reporting our sustainability initiatives, we have improved on our data collection process and introduced some amendments to our reporting approach, simplifying presentation in a manner that can be most understood by our readers.”

CORPORATE OBJECTIVES

Financial Growth Pursue new business opportunities, leverage synergies within business units, improve margin, reduce costs and improve efficiencies Customer Satisfaction Maintain market dominance, retain loyal customers and acquire new ones, manage customer feedback, strengthen stakeholder engagement process and sustain external partnerships Management Systems Integration Adherence to best practices in corporate governance, strengthen risk management, continually improve product quality and service delivery, enhance internal business processes and comply with regulatory and statutory requirements Organizational Development Build employee competence, increase productivity, promote health and safety and provide technology infrastructure

STRENGTHENING OUR CORE BUSINESS 4

VISION AND MISSION We shall be the premier real estate company in Cebu creating and providing market-driven products of enduring value through a customer-focused and highly-motivated team of professionals. We ensure the trust and confidence of our shareholders with sustainable and profitable growth while improving the quality of life of the communities in the markets, which we serve with honor and integrity.

CORE VALUES Love of God Bias for Results Focus on Customer Entrepreneurial Drive Concern for People Pursuit of Excellence Responsibility to the Community Enhancement of the Quality of Life Empowerment of People Teamwork

Cebu Holdings, Inc. (CHI) is a publicly-listed company engaged in real property ownership, development, marketing and management. It was registered with the Securities and Exchange Commission on December 9, 1988, with an authorized capitalization of P1.0 billion. As of December 31, 2010, the Company’s capitalization is P3.0 billion.

OWNERSHIP STRUCTURE 47.26% 11.83% AYALA LAND, INC. 11.54% FIRST METRO INVESTMENT CORP. PCD NOMINEE – NON-FILIPINO (ABERDEEN ASSET 15.39% MANAGEMENT ASIA LIMITED) 13.98% BPI CAPITAL CORP. OTHERS 5

OUR BUSINESS

WE ACQUIRE DEVELOP MARKET MANAGE

THE COMPANY’S SEVEN TYPES OF ACTIVITIES:

1 Commercial land sales 2 Office and residential 5 Sale of proprietary sports club shares condominium sales 6 Lease of office space via subsidiary 3 Sale of residential Cebu Property Ventures and subdivisions Development Corporation 4 Rental of retail space 7 Hotel development/operations via an affiliate Cebu Insular Hotel Co., Inc.

CEBU HOLDINGS, INC. SUBSIDIARIES AND AFFILIATE

37% CIHCI CHI CPVDC Cebu Insular Hotel Company, Inc. 76% Cebu Property Ventures and incorporated on April 6, 1995 Development Corporation registered with the Securities and developer and owner of Exchange Commission (SEC) on Cebu City Marriott Hotel August 2, 1990 started as joint venture corporation between the Province of Cebu and ALI owner and developer of Asiatown I.T. Park CLCI 100% Cebu Leisure Company, Inc. formed in 1994, it started as joint venture company 40% AiO between Fun Corporation Asian i-Office CBPTMI Properties, Inc. 100% Cebu Business Park and CHI Theaters Management, Inc. in 1997, Fun Corporation a special purpose sold its shares to CHI vehicle that engages registered with the in real estate Securities and Exchange development Commission to engage in a partnership all aspects of the theatrical between CPVDC and and cinematographic Ayala Land, Inc. entertainment business, including theater management and other related undertakings. OUR 2010 PERFORMANCE

+34% Record High Net Income Net iNcome Cebu Holdings Inc. (CHI) generated P406.2 million in net income after tax in 2010, a record performance in its 22-year history. p406.2m

1.84:1 Healthy Balance Sheet curreNt ratio Total assets registered a growth of five percent, amounting to P6.0 billion while total 0.30:1 liabilities were recorded at P1.3 billion. total debt-to- equity ratio

12.6% Consistent Operating History aNNual For the past five years, CHI registered a net income compounded annual growth rate growth rate of 12.6 percent. This can be attributed to the balance of the recurring and non- recurring business.

No. 1 Market Dominance iN real estate The Company’s projects have maintained overall leadership in the market. CHI’s aNd various projects, both in real estate and retail, enjoy dominance in the markets retail markets they serve.

28.2 Strengthened Organization average iNterNal The CHI organization has been resilient in the face of challenges and has been agile in traiNiNg hours responding to the demands and expectations of the changing markets. The Company per employee has continued to build employee competencies through training and development programs and has encouraged work-life balance through its wellness programs. iso 9001:2008 iso 14001:2004 Integrated Management System Standards CHI continues to conform to the three international standards on Quality, ohsas 18001:2007 Environment and Occupational Health and Safety Management systems. These level b systems are aligned with the Balanced Scorecard and triple bottom line approach gri g3 guideliNes and reported against the Global Reporting Initiative (GRI) G3 framework. These systems which have all been integrated since 2008 have enabled the Company to achieve its strategic objectives.

above 95% Good Governance Practices ratiNg CHI and subsidiary Cebu Property Ventures and Development Corporation received gold award from the Institute of Corporate Directors in 2010. Both companies garnered a rating of over 95 percent for adopting best practices in corporate governance.

100% Compliance with Laws and Regulations The Company has complied with all corporate, environmental, labor, taxation and all other applicable regulatory requirements in its business operations.

1,480,340 kwh Efficient and responsible operations saved Sustainability is central to CHI’s operations. CHI continues to implement programs and initiatives for efficient use of resources and waste reduction. We 397.5 tons also continue to build and strengthen relationships to ensure satisfaction among co2 avoided our various stakeholders. 8

MESSAGE TO STOCKHOLDERS

“It was a record year of economic growth as CHI posted an all-time high of P406.2 million in consolidated net income, 34 percent higher than that of the previous year... This was a result of capitalizing on the onset of the favorable business atmosphere by shifting to a more bullish Dear fellow stockholders, In today’s world of accelerating change and neck-to-neck strategy. The year competition, the need to stay relevant - both to the market and to was marked by new the environment - is more important than ever. Seemingly abstract concepts such as sustainability and governance investments, aggressive have now become more concrete and immediate as stakeholders build-up and expansion, demand added responsibility from corporations. thus generating a As a business, our primary commitment is to deliver quality products and services to the customer, and drive economic growth better portfolio for your for our shareholders. As an entity within a community, it is equally important to operate responsibly in relation to society and to the Company.” environment.

Four years ago, Cebu Holdings, Inc. (CHI) made that commitment to be more transparent about these accountabilities by using the triple bottomline approach in reporting.

As we release our fourth integrated annual and sustainability report this year, we are proud to note that this framework of reporting has helped us track our performance with a more encompassing approach, thus allowing us to set clearer targets and see other possible areas where we can improve on. 9

The Company’s performance in 2010 is set your Company partnered with other Ayala against the backdrop of renewed optimism. Land subsidiaries to produce projects in an Improvement in the performance of industries unprecedented pace. This was strategic to that were badly hit by the global crisis signaled produce the needed capital for the magnitude an economic upturn, and the smooth transition of the development, while capitalizing on the of government after the national elections product expertise of the various brands to bring strengthened confidence of prospective investors in a wider range of options for the customer. to the region. Bringing a wider range of residential offerings It was a record year of economic growth as to the market CHI posted an all-time high of P406.2 million in The entry of the three Ayala Land residential consolidated net income, 34 percent higher than brands created much excitement in Cebu. Avida that of the previous year. Consolidated revenues, Towers Cebu in CHI-subsidiary Cebu Property on the other hand, registered a 12 percent Ventures and Development Corporation’s improvement compared to the 2009 level with Asiatown I.T. Park, experienced fast take-up, P1.4 billion. prompting the accelerated launch of its second tower less than three months later. This was a result of capitalizing on the onset of the favorable business atmosphere by shifting Other brands of Ayala Land have also recently to a more bullish strategy. The year was marked been launched in the Cebu market. In by new investments, aggressive build-up and partnership with Alveo Land, CHI launched expansion, thus generating a better portfolio for Sedona Parc, which will offer 114 residential your Company. condo units attuned to a dynamic, urban lifestyle. To complete the line-up, your Company also The flurry of activity in the property sector partnered with Ayala Land Premier for 1016 has made it a bustling market for developers Residences to bring in distinctive club community and at the same time prime for consumers. living yet unseen in Cebu. The variety of options To take advantage of the market conditions, provides Cebuanos the opportunity to find a home that suits them at the heart of Cebu’s premier business districts.

Continuing infrastructure build-up has helped spur development in Cebu. Premier seaside development – Amara, experienced accelerated take-up due in part to the completion of the Cansaga Bridge and the North Coastal Road, which shortens travel time to and from Lilo-an to Cebu City by half. Amara, an Ayala Land Premier development, continues to enjoy robust take- up with just a few more lots remaining in its inventory.

Promoting business and commercial growth in the region The development of commercial property is also increasing as more new towers are seen rising in the two prime business districts – Asiatown I.T. Park and Cebu Business Park, not to mention in fringe areas in Cebu City.

Cebu Business Park, the flagship project of CHI and the premier business and commercial hub in the Visayas and Minadano, was recently 10 MESSAGE TO STOCKHOLDERS

proclaimed as a PEZA-accredited IT park. we continue to change and enhance the physical Presidential Proclamation 2053, signed on landscape. May 4, 2010 effectively grants fiscal and non-fiscal incentives to encourage investment. This responsibility has become integral to the way As a result of this proclamation, the Cebu we do business as we try to ensure that short term Business Park experienced accelerated returns are not at the expense of environmental build-up. In 2010, gross leasable area at the stability and social development. business park grew by 18.5 percent to a total of 128,662 square meters. Five construction The section on Managing our Footprint details how projects are currently underway and three we as a Company use our resources efficiently, more plans have been submitted for review. reduce our emissions and waste, and manage This will increase gross floor area significantly, biodiversity within our properties. Our systems and attracting more business and investors to the regular monitoring shows that through efficient area. and responsible operations, the Company had even surpassed its targets in 2010. Ayala Center Cebu, the centerpiece of Cebu Business Park, came up with more areas Our customers are our primary concern and we which focus on the customer. These include remain consistently conscious of not only delivering the Active Zone, the Services hub, and a 3D the quality we committed, but getting and acting digital cinema. The Terraces continues to be on their feedback to ensure satisfaction. As part a favorite among Cebuanos and tourists alike of our product responsibility, we use customer with its variety of dining and lifestyle options. surveys and other feedback mechanisms with our The Terraces ended the year with an award internal and external customers to know where we of recognition from the International Council stand and what we can improve on. of Shopping Centers (ICSC) for its outstanding achievement in marketing and design Internally, we continue to build employee development. competence with skills and knowledge enhancement to increase productivity. At the same More businesses in the area bring in more time, we ensure health and safety at the workplace jobs, thus increasing purchasing power and and promote programs for employee wellness to encouraging local economic activity. The help develop well-rounded individuals. increase in local consumption is noted in the expansion of retail markets in Cebu. To cater Strengthening our Management Systems to the needs and changing lifestyle of this Charting the targets we want to reach and the growing population, CHI will embark on a strategy of implementation, we continue to major expansion of Ayala Center Cebu which strengthen our integrated management systems. will bring in more options and signature luxury This encompasses our internal processes and brands to the existing retail offerings. balanced scorecard, set against the benchmark of the triple international standards of quality, Because of the Company’s track record, environment and health and safety, and reported commitment to quality and continuing with the triple bottom line framework of the Global innovations, these developments – both in the Reporting Initiative. retail and real estate business – continue to be leaders in the markets they serve. These additional accountabilities which we have imposed on ourselves and which have become Beyond the Bottomline an integral part of our operations go beyond the But more than two decades of doing business compliances required of us as a business. This in the communities we serve has taught us strengthens our commitment to not only do the that it’s more than just the bottom line. It’s right thing, but more importantly, to do things about the relationships we keep, the lives we right. By being an example of how effective and help change, and the impact we make on the beneficial these systems can be, we also aim to communities who have opened their doors widen our circle of influence and encourage other to us. companies to do the same.

As a property developer, a major challenge At the core of our business are good governance we have is to minimize, if not neutralize the practices which serve as our driving mechanism impacts we have on the environment as 11

“But more than two decades of doing business in the communities we serve has taught us that it’s more than just the bottom line. It’s about the relationships we keep, the lives we help change, and the impact we make to the communities who have opened their doors to us.” for sustainability. They charter the course investors to be used in the business expansion towards ensuring the creation of value while program. The REIT allows an increase of the financial providing for accountability and control capacity of CHI while it continues to earn recurring systems commensurate with possible risks income from the REIT company. to the business. These policies serve to guide the Company, yet remain sufficiently flexible We shall also continue to expand our leasing to stay relevant with the constantly changing portfolio with the redevelopment of Ayala Center environment. Cebu. The major expansion which broke ground early this year will bring in over 36,000 square meters of Looking Forward additional gross leasable space. With Cebu Business These business initiatives and organizational Park declared as an economic zone, we will also be strengthening work towards making your pursuing projects which will provide more office Company a sustainable investment in the long spaces for the BPO industry in this area. haul. As we reap the benefits of the initiatives we started in 2010, we are confident that With Cebu poised to develop full-speed, the need CHI will continue to lead the industry as the for more sophisticated infrastructure and increased premier real estate developer in the region. capacity of support facilities arises. Increasing build- up necessitates a complementary set of built facilities As we ride the economic upturn, growth required in order to serve Cebu’s developmental and in 2011 will continue on all fronts. In Cebu, operational needs. Cebu has become a catchment of most evident are the growth of IT/Business opportunities but the business environment needs Process Outsourcing (BPO) and its by-products to be enhanced to further encourage investment. As – resulting in thriving businesses and higher a stakeholder in Cebu’s development, we are looking purchasing power. The pace at which the at getting involved in our own capacity so that our property industry is growing also serves as a growth as a company will not be constrained. We are multiplier effect providing opportunities for looking at areas where we can collaborate with other the rest of the community. Suffice it to say sectors and contribute in this endeavor which will that we are going through a spiral of progress also translate to the success of our future projects. that will hopefully continue for years to come. As we celebrate a record year in the Company’s To take advantage of this, CHI shall pursue 22-year history, we would like to thank all those land banking more aggressively in the coming who have helped us sustain the Company’s growth years. As we strive to further accelerate the and even surpass targets. We would like to thank pace of development we will also continue to the community, our customers and our partners in partner with the other Ayala Land subsidiaries business, the members of the Board of Directors for to respond to the market demand for more constant guidance, and our shareholders for their residential units. trust and confidence.

Your Company’s plans and strategies have With your support, we confidently forge ahead in been aligned for the eventual implementation this time of opportunity with even more exciting and of the Real Estate Investment Trust (REIT). This dynamic plans for the Company. will bring in additional capital from external

Antonino T. Aquino Francis O. Monera Chairman President 12

CORPORATE GOVERNANCE As a publicly-listed real estate company, we recognize that we are accountable to our stakeholders – especially our shareholders. In conducting our business, we are committed to high standards of governance. We ensure that risks are managed and all laws and regulations are complied with.

This section details the Company’s structure of Decision-making at the Board level adheres to an governance, its practices and internal controls objective process that does not undermine the as contained in the Articles of Incorporation and independence and integrity of judgment of each By-Laws and the Revised Manual of Corporate individual director. Governance approved by the Board of Directors. None of the members of the Company’s Board BOARD STRUCTURE AND PROCESS of directors and management own two percent Key Role and Responsibilities. Overall or more of the outstanding capital stock of the stewardship of the Company rests on the Board Company. of Directors, the highest governing authority within CHI’s management structure. Collectively, the Board of Directors is responsible for the success of the Company and ensures that CHI’s obligations to its stakeholders are met. Executive Committee Board Composition. The Board brings to the Compensation organization a balanced mix of business, Committee legal, and finance competencies, with each President director capable of adding value and rendering Audit and Risk Internal independent judgment in relation to the Chief Finance Committee Audit Officer formulation of sound corporate policies, on Nomination issues of strategy, resources, standards and Compliance Committee performance related to corporate social Officer responsibility, environmental and economic Sustainability Sustainability Committee Council sustainability. Management Committee Business Groups

Real Estate Retail Corporate Development Business Services Group Group Group

Project / Marketing Project / Marketing Finance Human Market Construction Business Development and Business and Resources Research Management Sales Development Operations and Admin

Property Corporate Information Security Management Communications Systems and Customer Affairs 13

Independent Directors. As a publicly-listed The Company defines an independent director company in the Philippine Stock Exchange (PSE), as one holding no interests or relationships with CHI conforms with the legal requirement to have the Company that may hinder his independence at least two independent directors or at least from the Company or management or would twenty percent of its board size, whichever is less. interfere with the exercise of independent CHI has three independent directors, Fr. Roderick judgment in carrying out the responsibilities of C. Salazar, Jr., SVD, Enrique L. Benedicto and a director. The Company complies with the rules Hernando O. Streegan. of the Securities and Exchange Commission (SEC) with regard to the nomination and election of an independent director.

Corporate Officers Chairman. The Chairman of the Board is Antonino T. Aquino, who assumed the position Chairman of the Board Antonino T. Aquino in 2009. Francis O. Monera holds the position of President Francis O. Monera president. The existing board structure provides Treasurer Natividad N. Alejo a clear division between the Board and the Corporate Secretary Sheila Marie U. Tan executive responsibilities. The respective roles Assistant Corporate Secretary Renan R. Osero of the chairman of the Board and the president Chief Finance Officer and Eleanore R. Tomaneng are complementary. This ensures an appropriate Compliance Officer balance of power, increased accountability and Head, Retail Business Group Maria Clavel G. Tongco further provides a greater capacity of the Board Head, Real Estate Jose Ma. D. Lopez for independent decision making. Development Group Head, Marketing and Sales Laurence John I. Visco BOARD PERFORMANCE Head, Human Resources and Ma. Cecilia T. Urbina The Board holds meetings at least thrice a year or Administration as often as necessary to fulfill its role. The Board has separate and independent access to the Board Committees and Memberships Corporate Secretary who, among other functions, oversees the adequate flow of information to the EXECUTIVE COMMITTEE Board prior to meetings and serves as an adviser Chairman Emilio J. Tumbocon to the directors on their responsibilities and Members Antonino T. Aquino obligations. Francis O. Monera Natividad N. Alejo Discussions during Board meetings are open and Jaime E. Ysmael independent views are given due consideration. AUDIT AND RISK COMMITTEE The Board held three meetings, including the Chairman Fr. Roderick C. Salazar, Jr., SVD organizational meeting in 2010. The record of Members Enrique L. Benedicto attendance of the Company’s directors during the Hernando O. Streegan Board meetings is shown on page 15. SUSTAINABILITY COMMITTEE Chairman Francis O. Monera In 2010, the Board of Directors conducted a self- Members Emilio J. Tumbocon assessment of their performance covering the Hernando O. Streegan year, focusing on the level of Board’s compliance COMPENSATION COMMITTEE with leading practices and principles on good Chairman Antonino T. Aquino governance, both as an individual member and Members Francis O. Monera as a Board’s collective governing role. The formal Natividad N. Alejo self-rating system takes into account factors NOMINATION COMMITTEE such as independence, experience, judgment, Chairman Francis O. Monera knowledge, time commitment and teamwork, Members Antonino T. Aquino and identifies areas for improvement. Enrique L. Benedicto 14 CORPORATE GOVERNANCE

BOARD COMMITTEES The committees serve to assist the Board in exercising its authority including monitoring the performance of the business. To aid in good governance, the committees support the Board in the performance of specific functions.

Executive Committee Acts in accordance with the authority granted by the Board or in case of absence of the Board on specific matters within the competence of the Board of Directors as prescribed in the Company’s By-Laws, except with respect to any action for which shareholders’ approval is also required such as distribution of cash dividends; filling of vacancies in the Board or in the Executive Committee; amendment or repeal of By-Laws or the adoption of new By-Laws; amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable; and the exercise of powers delegated by the Board exclusively to other committees. Compensation Committee Establishes a formal and transparent procedure for fixing the remuneration packages of corporate officers and directors. It provides oversight over remuneration of senior management and other key personnel. In 2010, the Compensation Committee considered and approved: 1) the 2009 performance evaluation and promotion of associates, managers and executives; 2) 2009 performance bonus for the associates, managers and executives; 3) the salary adjustments for the qualified managers and executives for the year 2010. Nomination Committee Installs and maintains a process to ensure that all directors to be nominated for election at the annual stockholders’ meeting have all the qualifications and none of the disqualifications for directors as stated in the By-Laws, the Revised Manual of Corporate Governance of the Company and the pertinent rules of the Securities and Exchange Commission, to review and evaluate the qualifications of all persons nominated to positions in the Company which require appointment by the Board.

In 2010, the Nomination Committee considered and approved the final list of nominees for directors for the year 2010-2011. Sustainability Committee With the support of the Sustainability Technical Working Group (STWG) headed by the Corporate Sustainability Officer (CSO), and the three-person core team, the Sustainability Committee provides assistance to the Board of Directors in its responsibility to the Company’s stakeholders that relate to the Company’s growth in the areas of 1) economic performance, 2) environmental stewardship and 3) corporate social responsibility. Audit and Risk Committee Provides assistance to the Board of Directors in fulfilling its oversight responsibility to the shareholders relating to: 1) the Company’s financial statements and the financial reporting process; 2) the systems of internal controls and financial reporting controls; 3) the internal audit activity; 4) the annual independent audit of the Company’s financial statements; 5) compliance with legal and regulatory matters; and 6) the adequacy of risk management. In 2010, the Committee reviewed and approved the following: 1) internal and external audit plans; 2) re-appointment of Sycip, Gorres, Velayo and Company (SGV & Co.), as the external auditors of the Company; 3) quarterly unaudited financial statements; 4) consolidated audited financial statements as prepared by the external auditors SGV & Co.; and 5) internal audit results. For the Committee’s further awareness and appreciation of Company’s initiatives and programs, the committee was also oriented on other aspects of the Company such as the Balanced Scorecard (BSC ) as a strategic management system, overview of the Construction Management Division (CMD), Project Development Group (PDG) and the Innovation and Design Group (IDG). 15

as incentive. Performance assessment of top management and associates is based on the corporate and functional Balanced Scorecard (BSC) Management System in which targets include, but are not limited to the financial aspects of the business. Other key result areas focus on non-financial aspects such as the Company’s customers, internal business processes, and the organization’s learning and growth that cover the requirements of the Company’s Quality, Environment, Health and Safety Management Systems (QEHS MS). DIRECTOR AND SENIOR EXECUTIVE The QEHS Management Systems establish the COMPENSATION processes of implementing and monitoring Non-executive directors, defined as members programs and initiatives related to quality of the Board of Directors who are neither products and services, customer satisfaction, officers nor consultants of the Company, receive environmental sustainability and social remuneration consisting of a per diem of P20,000 responsibility. for each Board meeting attended and P10,000 per Board committee meeting actually attended. The total compensation paid to non-executive The said remuneration of non-executive directors directors as well as officers is disclosed annually was implemented effective April 28, 2006. in the Definitive Information Statement sent to shareholders, together with the Notice of None of the directors, in their personal capacity, Annual General Meeting, 15 business days prior has been contracted and compensated by the to the Annual General Meeting. The total annual Company for services other than those provided compensation includes the basic salary and as a director. other variable pay (i.e. guaranteed bonus and performance-based incentive). The Company adopts a performance-based compensation scheme for its senior executives

Director Regular Meetings Annual Stockholders’ Percentage and Organizational Meeting

March 22 October 27 April 29

Antonino T. Aquino P P P 100% Francis O. Monera P P P 100% Antonio S. Abacan, Jr. P P A 67% Natividad N. Alejo P A P 67% Enrique L. Benedicto P A P 67% Fr. Roderick C. Salazar, Jr., SVD P P P 100% Hernando O. Streegan P P P 100% Emilio J. Tumbocon P P P 100% Jaime E. Ysmael P P A 67%

P- Present A- Absent 16 CORPORATE GOVERNANCE

BOARD OF DIRECTORS

1 2 3 4 5 Antonino T. Aquino Natividad N. Alejo 1 Chairman of the Board 4 Treasurer and Director Antonino T. Aquino, Filipino, 63, has served as chairman of Cebu Holdings, Inc. Natividad N. Alejo, Filipino, 53, has served as (CHI) since April 2009. He also holds the following positions: senior managing director of CHI since 2003 and is currently the director of Ayala Corporation, chairman of the board of directors of Cebu Head of Consumer Banking Group of Bank of Property Ventures and Development Corporation (CPVDC); president and the Philippine Islands (BPI). She has also served CEO of ALI; president of Hero Foundation, Inc. and Bonifacio Arts Foundation, as the president and director of BPI Capital Inc.; and member of the board of directors of Manila Water Co., Inc. He also Corporation and BPI Securities Corporation serves as a member of the board of various corporate social responsibility from 2001 to 2006. She also holds the following foundations such as Ayala Foundation, Manila Water Foundation, and Makati positions: director of BPI Family Savings Bank Environment Foundation. He also served as president of Manila Water Inc., Pilipinas Savings Bank, Beacon Property Company, Inc, and Ayala Property Management Corporation; senior vice Ventures, Inc., BPI Bancasssurance, Santiago president of ALI, and a business unit manager in IBM Philippines, Inc. He Land Development Corporation, Cebu Property was named “Co-Management Man of the Year 2009” by the Management Ventures and Development Corporation, FEB Association of the Philippines for his leadership role in a very successful Speed International, Inc., Shemberg Biotech, waterworks privatization and public-private sector partnership. BPI-Philam Life Assurance Corporation (A subsidiary of Philamlife and an affiliate of BPI Francis O. Monera formerly known as Ayala Life Assurance, Inc.) 2 President and Director and a Private Sector Representative of Leyte Francis O. Monera, Filipino, 56, has served as director of CHI and CPVDC since Normal University. April 2006. He is currently the president of CHI and CPVDC. He was the chief operating officer of CHI before he was elected president of the Company effective January 1, 2007. He also holds the position of vice president of ALI. Before joining ALI, he was the AVP and corporate controller of Philippine Consul Enrique L. Benedicto National Construction Corporation. He served as president of the Cebu 5 Director Chamber of Commerce and Industry from February 2006 to 2008. He is Consul Enrique L. Benedicto, Filipino, 69, has currently a member of the Board of Directors and the vice president for the served as independent director of CHI since Visayas of the Philippine Chamber of Commerce and Industry. He is presently 2003. He is currently the honorary consul the chairman of the board of the Cebu Educational Development Foundation of Belgium. His other regular directorships for IT (CEDF-IT).He is also a member of the board of the Mactan Cebu include: chairman of Mabuhay Filcement, International Airport Authority. Inc., Enrison Land, Inc., Enrison Holdings, Inc., Berbenwood Industries, Inc., Benedict Ventures, Inc., Cebu Grand Industries, Inc. Antonio S. Abacan, Jr. and Grand Steel, Inc. and vice chairman 3 Director of Bernardo Benedicto Foundation, Inc. Antonio S. Abacan, Jr., Filipino, 67, has served as director of CHI since He received the following awards: ‘Officer November 1993. Concurrently, he is the chairman of Metropolitan Bank and in the Order of Leopold II’ by his Majesty Trust Company and Vice Chairman of the Metrobank Group of Companies. Baudowin King of the Belgians; Most He chairs other companies within the Metrobank Group such as First Metro Outstanding Cebuano Citizen per Cebu City Investment Corporation (FMIC), Toyota Financial Services (Phils), Inc. (TFS), Council Resolution dated February 18, 1991 Sumisho Motor Finance, Federal Homes (FHI), Circa 2000 Homes, Inc., Baywatch and presented during the 54th Cebu City’s Realty Corporation and Baywatch Project Management Corporation. He also Charter Day celebration on the same year, holds other significant positions such as president of GT Capital Holdings, Inc., Great Cebuano Award conferred by the honorary chairman of MBTC Technology, Inc., vice chairman and honorary Province of Cebu, Sugbuanong Kumintaristang vice chairman for Global Business Holdings, Inc. and First Metro Travelex, Inc., Nagpakabana (SUKNA), Kapisanan Ng Mga respectively. He sits at the board of Global Business Power Corporation, Cebu Brodkaster Ng Pilipinas (KBP) and Mandaue Energy Development Corporation, Panay Energy Development Corporation Chamber of Commerce and Industry, Inc; and Manila GT Medical Center. He is likewise a director of Bankers Association ‘Most Outstanding Alumnus’ award given of the Philippines, director and vice president for Banking and Finance of the by the University of San Jose-Recoletos, Philippines Chamber of Commerce and Industry, director corporate secretary Agustinian Recollection Awards 4th Centennial and treasurer of the LGU Guarantee Corporation and a member of the board of 1989 Alumni’s Awards. He has been a member governors of Makati Commercial Estate Association (MACEA). He is also in the of the board of trustees of Cebu Investment advisory boards of Metrobank Foundation, Inc., Philippine AXA Life Insurance Promotions Center for 12 consecutive years. Corporation, Toyota Cubao, Inc. and Toyota Manila Bay Corporation. He was awarded The Outstanding Filipino Award (TOFIL) for Banking by the Philippine Jaycee Senate in 2008. He was also the recipient of the 2006 CEO Excel award given by the International Association of Business Communicators (IABC) and 2007 Outstanding Alumnus Award of the Far Eastern University. 17

6 7 8 9

Fr. Roderick C. Salazar, Jr., SVD Hernando O. Streegan 6 Director 7 Director Fr. Roderick C. Salazar Jr., SVD, Filipino, 63, Hernando O. Streegan, Filipino, 76, has served as independent director of has served as an independent director of CHI CHI since 2006. He was the CEO of Rhine Marketing Corporation before his since 2005. He is currently the chairman of the retirement on Aug. 31, 2010. His other significant positions include: regular board of trustees of St. Jude Catholic School in director of Charmaine Corporation, Cebu City Youth Center, Inc. and PBSP Manila and St. Agnes Academy in Legazpi City. Visayas Executive Committee; chairman of the Cebu Council-Boy Scouts He is also member of the board of trustees of of the Phils. and Ten Most Outstanding High School Students of Cebu; St. Paul University in Dumaguete City, Cebu member and former president of the Cebu Chamber of Commerce and Technical University (formerly the Cebu State Industry, the Philippines Foundation, Inc. and the Kiwanis Club of Cebu. In College of Science and Technology) and Center 2007, he received the Bronze Tamaraw Award and was chosen as one of the for Educational Measurement (CEM), member Outstanding Council Chairman of the Boy Scouts of the Philippines. of Provincial Council of SVD Southern Province, Regional Secretary for Asia of the Office Emilio J. Tumbocon Internationale de Enseignment Catholique 8 Director (OIEC) and executive secretary of the Office of Emilio J. Tumbocon, Filipino, 54, has served as director of CHI since 2008. Education and Faith Formation, Federation of He is a senior vice president at ALI and a member of its management Asian Bishops Conferences (OEFF-FABC). He committee. He heads the ALI VisMin Group and concurrently, the served as the university president for twelve technical services director of superblock projects. His other significant years between 1987 and 2008. He was the positions are director of the following companies: Cebu Property Ventures past president of the Catholic Educational and Development Corporation, Cebu Insular Hotel Co., Inc., Accendo Association of the Philippines (CEAP); vice Commercial Corporation, Cagayan de Oro Gateway Corporation, Makati president for Asia of the Office Internationale Development Corporation, Ayala Property Management Corporation, de Enseignment Catholique (OIEC) and Laguna Technopark, Inc., Anvaya Cove Golf and Sports Club, Inc., Asian Academic Affairs-USC; presidential assistant i-Office Properties, Inc., Philippine Integrated Energy Solutions, Inc., for planning and development and university Ecozone Power Management, Inc., Northgate Hotel Ventures, Inc., North chaplain; chairman of the Department of Triangle Hotel Ventures, Inc., Alabang Gateway Property Ventures, Inc., Religious Education of the University of San Bonifacio Hotel Ventures, Inc. and Southcrest Hotel Ventures, Inc. He Carlos, Filipino, Inc. (Filipino Institute for the is a past president of the Philippine Constructors Association, Inc. (PCA) Promotion of Integrity and Nobility), San Carlos and a certified Project Management Professional (PMP) of the Project Community Development Foundation, Divine Management Institute. Word Educational Association (DWEA), Word Broadcasting Corporation and Coordinating Jaime E. Ysmael Council of Private Educational Associations (COCOPEA); chairman of the board of trustees 9 Director of St. Scholastica’s Academy in Talisay City, Jaime E. Ysmael, Filipino, 50, has served as director of CHI since April 2008. Cebu, Liceo del Verbo Divino in Tacloban City He is a senior vice president, chief finance officer and member of the and Divine Word College in Tagbiliran City management committee of ALI. Concurrently, he is a managing director of (later named Holy Name University); member Ayala Corporation. His other significant positions include: chairman of the of the board of trustees of St. Paul College in board of directors of Aprisa Business Process Solutions, Inc.; Director and Pasig, St. Paul University in Tuguegarao and President of CMPI Holdings, Inc. and CMPI Land, Inc.; director and treasurer Daughters of Charity Schools-Visayas Cluster; of Ayala Land International Sales, Inc., Ayala Land Sales, Inc., Alveo Land board of directors of People’s Television Corporation, Laguna Technopark, Inc., Serendra, Inc., Ayala Hotels and Network (PTV4, now National Broadcasting Resorts Corporation and Anvaya Cove Beach and Nature Club, Inc.; director, Network) and First Metro Asset Management, treasurer and excom Member of Ayala Hotels, Inc., Enjay Hotels, Inc.; and Inc. He was ordained priest on June 21, 1974. director of Alabang Commercial Corporation, Avida Land Corporation, Cebu Insular Hotel Company, Inc., First Longfield Investments Ltd., North Triangle Depot Commercial Corporation, Regent Time International, Ltd., Station Square East Commercial Corporation and Ecozone Power Management, Inc. Prior to his stint with ALI, he was an assistant vice president at the Strategic Planning Group of Ayala Corporation. 18 CORPORATE GOVERNANCE

MANAGEMENT TEAM

The Company’s management team is the decision-making body that leads the organization in setting goals and in carrying out the day-to-day business operations. Corporate objectives and targets are set at the beginning of the year guided by the Company’s sustainability framework. Management uses the Balanced Scorecard as a tool to monitor and measure the Company’s progress on the following areas: 1) financial performance 2) customer satisfaction 3) internal business processes and 4) the organization’s learning and growth.

It also puts in place the infrastructure for the Company’s success by establishing the following mechanisms: 1) organizational structures that work effectively and efficiently in attaining the goals of the Company; 2) useful planning, control and risk management systems that assess risks on an integrated cross-functional approach; 3) information systems that are defined and aligned with IT strategy and the business goals of the Company; 4) a plan of succession that formalizes the process of identifying, training and selection of successors in key positions in the Company; and 5) continual improvement of the Company’s Quality, Environment and Health and Safety Management Systems.

Management is primarily accountable to the Board for the operations of the Company. As part of its accountability, it is also obligated to provide the Board with complete and adequate information on the operations and affairs of the Company in a timely manner.

Management Committee

Francis O. Monera Eleanore R. Tomaneng Jose Ma. D. Lopez President Chief Finance Officer Head, Real Estate Development Group

Maria Clavel G. Tongco Laurence John I. Visco Ma. Cecilia T. Urbina Head, Retail Business Head, Marketing and Sales Head, Human Resources and Group Administration 19

Real Estate Development Group Retail Business Group

1 2 3 4 5 6 7 8 1 2 3 4 5 6 7

1 Athena G. Catedral 1 Romulo A. Alajid Marketing Manager Manager, Management Information Services and Project Development 2 Francisco Giovanni O. Traces Project Director, Construction Management 2 Janice A. Parreño 3 Therese T. Borromeo Marketing Manager Sales Manager 3 Jovita R. Polloso 4 Rizalito S. Casinillo General Manager, Ayala Center Cebu Head, Construction Management 4 Wilfredo W. Gonzales 5 Jose Ma. D. Lopez Project Director, Construction Management Head, Real Estate Development Group 5 Celeste Bernardine K. Dy 6 Lydwena R. Eco Operations Manager Project Development Manager 6 Maria Clavel G. Tongco 7 Raul S. Mananquil Head, Retail Business Group Sales and Sales Admin Manager 7 Elvira G. Mawe Finance Manager 8 Laurence John I. Visco Head, Marketing and Sales

Corporate Services Group Property Management Group

1 2 3 4 5 6 1 2 3 4 5 6

1 Vera R. Alejandria 1 Levi L. Lopez Corporate Communication and Manager, Technical Support Group Customer Affairs Manager 2 Rudy I. Reuyan 2 Judyline L. Boholst Head, Property Management, Retail Business Group Accounting Manager 3 Dominador M. Rey 3 Noel F. Alicaya Security Manager Control and Analysis Manager 4 Elson R. Homez 4 Eleanore R. Tomaneng Head, Property Management Group and Chief Finance Officer Corporate Sustainability Officer 5 Ma. Cecilia T. Urbina 5 Clement Gerald A. del Rosario Human Resources and Admin Manager Manager, Property Management 6 Suzette T. Go 6 Ernesto T. Alfante, Jr. Information Systems Manager Manager, Property Management 20 CORPORATE GOVERNANCE

RISK MANAGEMENT The Company’s enterprise-wide risk management (ERM) framework integrates the policy, scope, process and structure of risk management. The scope of ERM encompasses the processes in the value delivery chain and support processes. The risk management process starts from risk identification, measurement, treatment and ends in monitoring and review. The structure highlights the oversight function of the Board of Directors and corporate functions of the ERM committee, management committee, finance and audit.

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r M N e e K e p O t O IS I i R T m C m k o s N C i k R s l U i : ia N R IONS c F UNCT inan O d PORT F F I T n SUP T a A R it IC d TIF O u The members of the audit and risk committee: Hernan O. Streegan N P - A IDE P s (leftmost), Fr. Roderick C. Salazar, Jr. (center) and Consul Enrique L. RISK U or S ct Benedicto (rightmost) with SGV partner Davee M. Zuniga (second from left) ire D and CHI president Francis O. Monera (second from right) of rd oa N: B CTIO FUN OVERSIGHT 21

integration with the achievement of corporate The Audit and Risk Committee is empowered goals and objectives. This cross-functional to independently review the integrity of the committee is headed by the Chief Risk Officer Company’s financial reporting and oversee the (CRO) who reports functionally to the Audit and independence of the external auditors. Risk Committee, and administratively to the President and the Management Committee. The Audit and Risk Committee is responsible for reviewing all financial reports for compliance with The ERM Committee is composed of the internal financial management handbook representatives from the Real Estate and pertinent accounting standards, including Development Group, Retail Business Group, regulatory requirements. It also recommends Property Management Division, Construction to the Board and stockholders the appointment Management Division and the Corporate Services of the external auditors and the setting of Group. appropriate audit fees.

ACCOUNTABILITY AND AUDIT Over the past two years, CHI paid or accrued the The Audit and Risk Committee provides oversight billed fees to its external auditors, SGV & Co., to external and internal auditors. The internal who was engaged to audit the Company’s annual audit function of the Audit and Risk Committee is financial statements. governed by a separate Internal Audit Charter. Internal Audit. The Internal Audit Department Independent Public Accountants. SGV & Co. is provides independent and objective assurance the principal accountant and external auditor and consulting services to the Company with of the Company. Davee M. Zuñiga has been the the objective of adding value and assisting the partner-in-charge since 2009. organization in accomplishing its objectives

Audit and Audit-related fees Tax fees Other fees 2010 P 450k* None None 2009 P 428k* None None 2008 P 558k* None P 210k

*exclusive of VAT and out-of-pocket expenses 22 CORPORATE GOVERNANCE

through effective control, risk management and AWARDS AND RECOGNITION governance processes. Cebu Holdings, Inc. and Ayala Center Cebu Silver Award for Design and The department reports to the Audit and Risk Development Excellence Committee of the Board, and likewise assists International Council of Shopping Centers the Audit and Risk Committee in carrying out November 8, 2010 its duties and responsibilities as provided for in IP Seal Award the Company’s Revised Manual of Corporate Intellectual Property Coalition and DTI-Cebu Governance. Annual audit plans, status updates and Pilipinas Anti-Piracy Team and accomplishment reports are submitted by May 6, 2010 the department to the Audit Committee for review and approval. Cebu Holdings, Inc. Gold Award Regular audits of business and corporate 2009 Corporate Governance Scorecard service groups are conducted in accordance for Publicly-listed companies with the approved Audit Plan. Special audits awarded on July 27, 2010 (Institute of Corporate Directors, CIPE, are undertaken when necessary. The QEHS MS Philippine Stock Exchange and internal audits are conducted every 12 months Ateneo de Manila Law School) and in accordance with the QEHS MS annual audit program. The department also heads a Cebu Property Ventures cross-functional team of QEHS MS auditors. and Development Corporation Gold Awardee Risk-Based Audit Approach. The Internal Audit 2009 Corporate Governance Scorecard Department executed its audit activities for 2010 for Publicly-listed companies in accordance with the risk-based audit approach awarded on July 27, 2010 (Institute of Corporate Directors, CIPE, in conformity with the International Standards Philippine Stock Exchange and for the Professional Practice of Internal Auditing Ateneo de Manila Law School) (ISPPIA) and, at the same time, in compliance with the Securities and Exchange Commission’s Code of Corporate Governance (SEC Memorandum Circular No. 6: Series of 2009). Compliance Officer. Eleanore R. Tomaneng has Quality Assurance Improvement Program been the Compliance Officer of the Company (QAIP). In compliance with ISPPIA and since 2008. She holds the position of Chief the ongoing commitment to growth and Finance Officer with the rank of senior division improvement, the Internal Audit Department manager. As Compliance Officer she reports implemented the five-year Quality Assurance directly to the Board. She is responsible for Improvement Program (QAIP) since 2009. monitoring compliance with the Code of Corporate Governance and the rules and As scheduled, the department conducted regulations of regulatory agencies and, if any assessments involving internal evaluations of the violations are found, reports the matter to internal audit activity, coupled with periodic self- the Board. She recommends the imposition of assessment and/or reviews. appropriate disciplinary action on the responsible parties and the adoption of measures to prevent a repetition of the violation. 23

DISCLOSURE AND TRANSPARENCY In addition to compliance with periodic CHI is committed to high standards of disclosure reportorial requirements, the Company and transparency to enable the investing punctually discloses major and market-sensitive community to understand the true financial information such as dividend declarations, joint condition of the Company and the quality of its ventures and acquisitions, sale and disposition corporate governance. of significant assets, as well as other material information that may affect the investment Ownership Structure. The Company has a decision of the investing public. In 2009, transparent ownership structure. It annually unstructured disclosures were filed involving discloses the top 20 holders of the common matters such as the declaration of P0.07 cash equity securities of the Company. In addition, dividend to common shareholders. disclosure of the security ownership of certain record and beneficial owners owning more Consolidated audited financial statements for the than five percent as well as of directors and latest financial year are submitted to the SEC on management is made annually. This information April 15, as required. The audited annual report is also contained in the Definitive Information is submitted at least 15 working days before the Statement sent to shareholders. Annual General Meeting. In 2010 the audited Annual Report as contained in the Definitive Content and Timing of Disclosures. CHI updates Information Statement was submitted to the SEC the investing public with strategic, operational and the PSE on March 18, 2010, more than three and financial information through adequate and weeks before the April 29, 2010 annual general timely disclosures filed with the SEC and PSE. meeting.

Top Shareholders of the Common Equity Securities of the Company as of December 31, 2010

Title of Class Name and Address Name of Beneficial of Record Owner Owner Common Ayala Land, Inc. Ayala Land, Inc. 907, 350, 833 47.26% 31/F Tower One Bldg. Ayala Ave., Makati City Common BPI Capital Corp. BPI Capital Corp. 295, 499, 857 15.39% 8/F BPI Bldg., 6768 Ayala Ave., Makati City Common First Metro First Metro 227,130,364 11.83% Investment Corp. Investment 4/F G.T. Tower Corporation International, Ayala Ave. cor. H.V. dela Costa St. , Makati City Common PCD Nominee Corp. Aberdeen Asset 221,558,000 11.54% (Non-Filipino) Management G/F MSE Bldg. Asia Limited Ayala Ave., Makati City Common PCD Nominee Corp. PCD participants 162, 431,099 8.46% (Filipino) acting for G/F MSE Bldg. themselves or for Ayala Ave., Makati City their customers 24 CORPORATE GOVERNANCE

Interim (i.e., quarterly financial statements) are Information on the Company’s financial released between 30 and 45 days from the end instruments is accompanied by a presentation of the financial period. The results are disclosed of the Company’s risk management objectives to the SEC and PSE within 24 hours from the and policies to allow for a better assessment of time the Board meets to accept the results. financial performance and cash flows. Significant The results are also sent to financial and stock accounting judgments and estimates are also market analysts via the internet immediately disclosed. upon confirmation by the SEC of its receipt of disclosure, and made available on the Company’s DEALINGS IN SECURITIES corporate website. CHI continues to adopt a uniform policy on securities transactions to reinforce and formalize Financial Reporting. The Company’s financial existing government regulations against insider statements comply with the Philippine trading. Accounting Standards and the Philippine Financial Reporting Standards which are in compliance Reporting of Transactions.CHI is compliant with International Accounting Standards. with the requirement of the PSE for directors and principal officers to report any acquisition, The annual consolidated financial statements disposal or change in their shareholdings of the provide a breakdown of total assets, total Company to the SEC and to report changes in liabilities and equity, revenues, costs and ownership of Company shares within five trading expenses, income before income tax, net income days. attributable to equity holders of CHI and minority interests and earnings per share. The Company expanded coverage of this reporting requirement to include members of A more extensive, transparent disclosure of the management committee. All other officers segment results such as assets, liabilities and are required to submit a quarterly report on their revenues is provided to enable shareholders to trades of Company shares to the Office of the appreciate various businesses and their impact Compliance Officer. on overall value enhancement. The following are disclosed in the Note on Business Segments: Trading Blackouts. The Company continues to adopt a policy on insider trading. Under this • total revenues policy, directors, officers and employees who • operating profit are considered to have knowledge of material • net income facts or changes in the affairs of CHI which have • segment assets not been disclosed to the public, including any • investments in associates and jointly- information likely to affect the market price of controlled entities the securities of the Company are prohibited • segment liabilities from buying or selling the Company’s securities • depreciation and amortization during trading blackout periods. The policy covers the Company’s shares of stocks, options Transactions entered into with associates and to purchase stocks, bonds and other evidence of other related parties in their conduct of business indebtedness. are on an arms-length basis. Sales and purchases of goods and services to and from related parties All members of the Board of Directors, all key are made at normal market prices. Related party officers, consultants, advisers and employees transactions are discussed and quantified in the of the Company who are made aware of Notes to the Consolidated Financial Statements. undisclosed material information, including members of the immediate families of key officers are covered in this policy. 25

During the year, notices of trading blackouts for meetings, conference calls, investor visits and structured disclosures were issued for a period tours, web site and emails or telephone calls. covering ten (10) trading days before and three (3) trading days after the disclosure of quarterly The Company has updated the Investor and annual financial results. Compliance with Relations section of its website to include the these trading blackout periods is strictly enforced. organizational structure, performance, ownership There have been no cases of violation of the and governance of the Company. The section Company’s policy on insider trading. is updated promptly when and as disclosures to the regulatory agencies are made. Proceedings STAKEHOLDER RELATIONS of analysts’ briefings by way of presentations are CHI seeks to adhere to a high level of moral immediately made available on the web. conduct and fair dealings with all its stakeholders. The Company believes this is the basis and Shareholder Meeting and Voting Procedures. foundation for building long-term, mutually- Stockholders are informed at least 15 business beneficial relationships. days in advance of the scheduled date of the general meetings. Notice of regular or special Shareholder and Investor Relations. The meetings contain, in addition to the date, the Company believes that open and transparent hour and place of the meeting, and a statement communication is a requisite for sustained of the matters to be transacted at the meeting. growth and for building investor confidence. The notice to stockholders also sets the date, Our investor communication program seeks to time and place of the validation of proxies which promote greater understanding of the Company’s is prescribed to be no less than five business days long-term value creation proposition. prior to the annual stockholders’ meeting.

The Company, through its Finance Division Each common share of stock entitles the person reporting directly to the President, addresses in whose name it is registered in the books of the the various information requirements of the Company, to one vote, provided the conditions as investing public and communicates with minority regards payment have been complied with. shareholders through timely and full disclosures to the PSE, Annual General Meetings, one-on-one 26 CORPORATE GOVERNANCE

EMPLOYEE RELATIONS management in real state development, CHI is committed to promoting the safety and commercial center operations and management, welfare of its employees. It believes in inspiring property management and office leasing. its employees, developing their talents, and recognizing their needs as business partners. The audit of certifying body, Certification Strong and open lines of communication are International, raised zero non-conformities. maintained to relay the Company’s concern The audit report highlighted top management’s for their welfare and safety, and deepen their involvement and commitment in the understanding of the Company’s value creating implementation and continual improvement proposition. These are all articulated in the of the integrated management system and the Company’s strategic management system, attainment of customer satisfaction, considered the Balanced Scorecard specifically under the as one of the main drivers of management Learning and Growth perspective and also in the policies and programs. Audit results showed Health and Safety Management System certified that the requirements of the three standards to OHSAS 18001: 2007 standard. are “seamlessly embedded into the operational activities and business operations of the Code of Ethical Behavior organization.” The Code of Ethical Behavior outlines the general expectations and set standards for employee behavior and ethical conduct. It covers all CHI employees, and that of its subsidiaries and affiliate. CHI and its employees commit to adhere to the Company’s core values in conducting personal and business affairs. The Code of Ethical Behavior is intended to be read in conjunction with the Company’s Human Resources Manual of Personnel Policies which includes the Code of Conduct governing acceptable office conduct for CHI and CPVDC Management Representative (MR) Rizalito the orderly operation of the Company as well as S. Casinillo (leftmost) with QEHS champion Laurence John for the protection of the rights, safety and benefit I. Visco (rightmost) receive from external QEHS auditors of the total employee force. Leonardo D. del Carmen and Rodolfo C. Viola, Jr. of Certification International (CI) their recommendation for re-certification to the three ISO/OHSAS standards after the Company employees are required to annually surveillance and certification audit on April 22, 2010. disclose any business and family-related transactions to the Company by accomplishing OTHERS the Conflict of Interest Disclosure Statement Anti-Money Laundering. CHI is committed submitted to the Human Resources and Admin to comply with the Anti-Money Laundering Department that monitors compliance of this law. The Company ensures strict compliance policy. to its provisions by instituting internal control procedures. Since the enactment of the law, CHI CERTIFICATIONS has not faced issues of anti-money laundering. In 2010, CHI and its subsidiary Cebu Property Ventures and Development Corporation’s Website (CPVDC) Quality, Environment, Health and Additional information on the Company’s Safety Management Systems (QEHS MS) corporate governance initiatives may be viewed were re-certified to ISO 9001 under the new at www.cebuholdings.com. edition (2008) and continue to be certified to ISO 14001:2004 and OHSAS 18001:2007. This integrated management system covers the design and development for construction 27

MEMBERSHIP IN ASSOCIATIONS Cebu Holdings, Inc. is a member of the following organizations:

Ayala Business Club Cebu, Inc. Geoplan Cebu Foundation, Inc.

Ayala Heights Nature Park Foundation, Inc. Global Reporting Initiative Organizational Stakeholder and Construction and Real Estate Cebu Business Park and Neighboring Sector Supplement Working Group Barangays Altruistic Alliance, Inc. International Council of Shopping Centers Cebu Business Park Association of Building Administrators, Inc. Kapunungan sa Nagkahugpong nga Kanait nga mga Barangay ug ang Ayala, Inc. Cebu Chamber of Commerce and Industry Management Association of the Philippines Cebu Educational Foundation for Information Technology Philippine Quality and Productivity Movement - Visayas Cebu Uniting for Sustainable Water Philippine Retailers Association Central Visayas Information Sharing Network Philippine Chamber of Commerce and Industry

Chamber of Real Estate and Builders’ Pollution Control Association of the Philippines, Associations, Inc. Inc.

Filipinnovation Network: The National Protected Area Management Board Innovation Strategy, Department of Science and Technology Technical Infrastructure Committee of Metro Cebu CHI and CPVDC get 2009 Corporate Governance Gold Recognition

CHI and CPVDC were the only two Cebu-based companies among the gold category awardees, garnering a score of 95 percent and above. Together with CHI and CPVDC, five other Ayala companies made it to the top-tier category. This included Ayala Corporation, Ayala Land, Inc., Bank of the Philippine Islands, Globe Telecom and Manila Water Company, Inc.

CHI president Francis O. Monera (2nd from right) accepts the gold recognition from the Institute of Corporate Directors for the 2009 Corporate Governance Scorecard. Also at the ceremony were Ayala Land head for Vismin Emilio J. Tumbocon (5th from right) accepting for Cebu Property Ventures and Development Corporation (CPVDC), and Antonino T. Aquino (3rd from right) accepting for mother company, Ayala Land, Inc. ENHANCING OUR SUSTAINABIlITy mANAGEmENT CHI recognizes the inherent challenges of the business and strives to operate responsibly and responsively to the needs of its stakeholders. In running the business, its team of professionals is conscious of the effects of the Company’s activities on the natural environment and the community. To contribute to sustainable development in the locality, it shall continue to drive economic growth, manage its ecological footprint and sustain partnerships. 30

DISCLOSURES ON MANAGEMENT APPROACH

This matrix provides a brief overview of the approach of CHI in managing sustainability initiatives. Organizational responsibility in overseeing and implementing activities in the three aspects rests on the Sustainability Technical Working Group (STWG) of the Company.

Economic Goal: Deliver sustained growth

Financial Performance, The Company seeks to improve shareholder value by decent returns on investments while Economic Value improving growth. It also strives to provide opportunities for economic development in Distribution and Cebu, the Company’s area of operations. Indirect Economic Impacts CHI’s Corporate objectives on the financial and operational aspects are found on page 3. These are discussed in the joint message of the chairman and president and expounded in the reports of the Chief Finance Officer (CFO) and business group heads. The objectives are aligned with the 4-pillar strategy of mother company Ayala Land, Inc. (ALI). With Cebu being one of the growth centers in the Visayas-Mindanao area, the Company has pursued new business opportunities and has started to leverage synergies within the other business units of ALI in the development of various product lines: commercial center expansion, residential buildings and office buildings.

A more detailed set of financial objectives is reflected in the Corporate Balanced Scorecard translated in the individual scorecards for each group, division and department.

Contextual This is the first time that review of the Company’s financial and operational results and Information external economic impacts are reported in a single section under the “Delivering Sustained Growth”. Comparative data on a five-year period is presented in the CFO’s report on pages 42 to 45.

This is also reflected in the SEC form 17-A, copies of which were sent to the shareholders and uploaded in the website (www.cebuholdings.com/communications/sec-reports/annual- reports).

A summary of economic value distribution and indirect economic impacts is discussed by the Control and Analysis Manager on pages 46 to 47 . 31

Organizational Economic value generation is hinged on two business groups - the Real Estate Development Responsibility Group (REDG) and Retail Business Group (RBG). The Finance Division handles control and analysis, fund management and accounting. The rest of the units in the value delivery chain and support processes manage their own budgets. Departmental monthly performance reviews are conducted to monitor performance against set targets and make corrective actions as necessary.

Community investment is handled by the Corporate Communication and Customer Affairs Division (CCCAD) via programs on Corporate Social Responsibility. Partnerships with external organizations in the areas of environmental and health awareness, education, wellness, culture and relationship building activities are also handled by CCCAD, Property Management Division and Marketing Departments of both business groups.

Core Value Alignment Bias for Results

Environment Goal: Use resources efficiently and reduce emissions and wastes

Objectives and The Company strives to 1) mitigate land, air and water pollution by addressing the significant Performance environmental impacts of our operations, 2) comply with relevant QEHS laws and regulations 3) review operational processes for resource conservation and waste reduction, 4) mitigate occupational hazards and risks, and 5) improve efficiencies through innovative technologies.

Details of the Company’s objectives, programs and procedures are embodied in the manual on Quality, Environmental, Health and Safety (QEHS) Management Systems that conform to the ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 standards.

Policies The Company’s goals for environment management are summarized in the Environmental, Health and Safety Policy and Climate Change Policy both found on page 76.

Organizational Environmental management planning, monitoring and assessment are handled by the Responsibility Pollution Control Officers (PCOs) composed of the property administrators and technical team of the Property Management Division (PMD). The members of the PCO team are accredited by the Department of Environment and Natural Resources (DENR). The QEHS Management Representative (MR) ensures that the PCO Team is always guided by the environmental goals of the Company. 32 DISCLOSURES ON MANAGEMENT APPROACH

Impact and Risk Impact and risk assessment procedure is found in the QEHS manual as procedure PM- Assessment and EHS-01-001 summarized in a flowchart uploaded in the website (www.cebuholdings. Objective Setting com/sustain). Compliance with all applicable legal, regulatory and statutory requirements Process / Monitoring follows the procedure PM-EHS-01-002 of the QEHS manual. Results of 2010 environmental and Follow up performance are found on pages 76 to 87 of this annual report.

To ensure that objectives and targets are continually monitored, measured and analyzed, these are reported in the departmental monthly performance reviews. As required by law, the PCO team members submit a quarterly Self-Monitoring Report (SMR) to the Environmental Management Bureau of the DENR. Consolidated results are submitted to the Management Committee at least twice a year.

Training and Awareness External and Internal training sessions and workshops are provided for the members of the PCO team and the Health and Safety Committee members. The Company also implements annual campaign for environmental awareness for various stakeholder groups.

Biodiversity Being a priority area in the Company’s Climate Change Policy, the Company, together with Management its partner environmental research organizations: Soil and Water Conservation Foundation (SWCF), Cebu Uniting for Sustainable Water (CUSW) and University of San Carlos – Water Resource Center (USC-WRC), formed the Ayala Heights Nature Park Foundation, Inc. to oversee biodiversity management of the 71-hectare Kan-irag Nature Park. Administration of the nature park is handled by the Property Management Division (PMD) while community engagement is supported by CCCAD .

Core Value Alignment Responsibility to the Community and Enhancement of the Quality of Life

Social Goal: Build and Sustain Relationships

Investing in Our The Company strives to create and sustain an environment in which people are empowered People and are valued for their individuality and contributions.

Organizational The Human Resources (HR) and Admin Department ensures full implementation of Responsibility policies and procedures relating to recruitment, compensation and benefits, training and development, performance, career management and wellness. The HR Manager also serves as chairman of the Health and Safety Committee.

Policies and Channels The HR department handles internal communication of policies and programs based on of Communication a general procedure in the QEHS manual. HR policies and the Company’s code of ethics and employee handbook are found in the website (www.cebuholdings.com/corporate- governance/manuals-and-policies);

Sources of information and channels of communication include the HR e-Bulletin, eNewsletter and Intranet named “Inside CHI”. Communication on organizational developments, policies and corporate initiatives are done through the Company’s townhall meetings or management team meetings cascaded to respective divisions and departments through regular departmental meetings and monthly performance reviews. 33

Core Value Alignment Three core values emphasize the importance of people in the organization: 1) Concern for People; 2) Empowerment of People and 3) Teamwork

Addressing the Needs The Customer is a major component in the Company’s corporate objectives and monitored of Our Customers through the corporate, departmental and individual balanced scorecard on the following (Product measures: customer acquisition, retention, market leadership, internal and external Responsibility) customer satisfaction and stakeholder engagement process.

Organizational Implementation and monitoring of external customer programs are done by the Real Estate Responsibility Development Group, Retail Business Group and Property Management Division. Internal and external customer satisfaction surveys are conducted twice a year.

Policies, Management The Company’s Quality Policy found on page 100 and “Focus on the Customer” as core Systems and Core value, emphasize the importance of the customer and Company’s commitment to fulfill Value Alignment customers’ requirements. The Value Delivery Chain diagram found on page 101 shows the stages in which value is determined, created, communicated, delivered and sustained for the customers’ satisfaction.

Partnering with The scope of the Company’s Corporate Social Responsibility (CSR) strategy starts with Our Neighboring the neighboring communities where the Company’s projects are located and extends Communities to other external organizations and institutions that the Company partners with in the and External implementation of social programs. Organizations Our developments in Cebu directly impact six neighboring barangays. To enable us to better communicate and partner with these communities, we organized an alliance composed of the locators of Cebu Business Park and Asiatown I.T. Park and the leaders of each member barangay. Through this alliance, development programs are better implemented.

Organizational CCCAD handles the implementation of CSR and “Agbayay” volunteer programs. The Responsibility CHI PLUS and Agbayay Match Up is coordinated with the Human Resources and Admin Department. The CSR development programs are jointly implemented by CCCAD with the committee members of the STWG.

Monitoring and Objectives, targets and initiatives are reflected in the Balanced Scorecard and are monitored Follow up through the monthly performance reviews. Results are consolidated and reported at yearend and used as input in target setting for the next calendar year.

Core Value Alignment Responsibility to the Community and Enhancement of the Quality of Life

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P e L r r o s B g h r i U a p m S I s N E E Im S C S p F r O P o in R v a N e n O d c O C A S ia E s h l S s a G M S e r r t e o B h w IC C u o t UST il ld h OMER d e -u r p V a lu E e C Im O p -E E ro FF T ENHANCING OUR ﬀe ve IC N cti d B IE E ve us NC M t R ines Y IRON en nt W eso s Pro ENV agem me at urc cess Man ge s N er e M es versity ana n e Usa an Biodi M atio w ge agem ission gul Eﬃ & D ent Gas Em l Re cie ispo Greenhouse enta SUSTAINABILITY MANAGEMENT nt T sal ironm ech o Env nol Compliance t ge ogies Chan Climate

OUR SUSTAINABILITY JOURNEY

2007-2008 We successfully published our first Integrated Annual and Sustainability Report in 2008, covering the Company’s performance in 2007. This was a Level C, self-declared report, aligned with the “…We place guidelines of the Global Reporting Initiative (GRI G3) framework. The inaugural report provided us the opportunity to disclose sustainability as an aspects on product responsibility, environment, health and safety overarching concept with baseline data. These were consolidated from the regular monitoring of ISO and OHSAS-certified management systems and a broad-based which have been in place since 2006, together with the Balanced Scorecard Performance Management System. The report also system that unifies all gave a historical perspective on our community engagement, from the late 1980s when the Company started its operations until its other management twentieth year of existence.

systems into a 2008-2009 common process and We progressed in our sustainability reporting process when we released Level B, self-declared reports covering the results of a common goal...” 2008 and 2009 with additional indicators on the environmental and social aspects, as well as a more detailed account of our direct and indirect economic impacts. These reports highlighted the Company’s sustainability framework, governance structure and strategy communicated internally and externally through various stakeholder engagement activities. These reports enabled us to track our performance trajectories on all three aspects for the past years.

2010 As we compare the results of our performance in the years 2008, 2009 and 2010, we are pleased to note that the financial and non- Elson R. Homez financial aspects of our operations have consistently improved. Head, Property Management Division In 2010, we surpassed our financial targets, while we decreased Corporate Sustainability Officer our resource usage versus set targets. In addition, we have been able to continually engage our stakeholders – our communities, customers, regulatory agencies, local governments, our employees, and our shareholders.

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d n s T u M i i t b E c y i As a leading real estate company in Cebu, we commit to integrate sustainable development practices into our a l R P i ti t I FRAMEWORK a y N o C r n t n A

P strategy and business operations. We will strive to develop sustainable communities and manage our environmental e L r r o s B g h r i U a p footprint as we optimize value and secure financial growth for our shareholders. m S I s N E E Im S C S p F r O P o in R v a N e n O To achieve this, we focus on: d c O C A S ia E s h l S s a G M S e r r t e o B h w IC C u o t UST il ld h OMER d e -u r p V • Adhering to the best practices of corporate governance, transparency and accountability; a lu E e CO Im - • Integrating our management systems to serve as our tool for strategic execution of our goals towards pr E Eﬀ ov FF T ec ed ICI EN tiv Bu EN M sustainability; e sin CY ON nt t W Re ess ENVIR eme en a sou Proce anag em ter rce sses rsity M nag ns • Improving the quality of our stakeholder engagement and partnerships, providing better mechanisms for open Ne Us Ma Biodive Ma tio w age nage ssion ula Eﬃ & ment as Emi Reg cie Disp Greenhouse G ntal nt osal onme communication; Tech o Envir nol Compliance t ge ogies Chan Climate • Inculcating sustainability in the leadership and corporate culture so that responsibility resides at every level of the organization along the value delivery chain; and • Raising awareness among our suppliers, contractors and outsourced personnel on our sustainability practices.

Sustainability Structure Board (Sustainability Committee)

President

Sustainability Council (Management Committee)

Corporate Sustainability Officer

Sustainability Technical Working Group (STWG)

ECONOMIC ENVIRONMENT SOCIAL Finance | Marketing | CCCAD/CSR PMD | CMD | PDD | PCO HR/Admin | H & S Comm | Marketing | PDD | CCCAD/CSR Our Measures of Performance To measure the effectiveness of our systems, we have tracked our performance on these three areas, as follows: 1 2 3 Delivering Sustained Growth Managing Our Footprint Sustaining Relationships Economic Value Generation Using Our Resources Efficiently Investing in Our People and Distribution - Materials Usage - Health and Safety - Creating Value for the Company - Energy Consumption - Training and Development - Water Consumption - Wellness Indirect Economic Impacts - Providing Opportunities for Reducing Our Emissions and Wastes Addressing the Needs of Our Customers Economic Development - CO2 Emission from - Customer Satisfaction Direct and Indirect Energy - Customer Feedback Legacy Impacts - Non-CO2 Emissions - Solid Waste Generation - Wastewater Quality Partnering with Our Communities - Hazardous Waste - Agbayay Development Programs - External Events and Partnerships Managing Biodiversity - Flora and Fauna Inventory - Nature Park Management

PMD – Property Management Division PCO – Pollution Control Officers CCCAD/CSR – Corporate Communication CMD – Construction Management Division HR/ Admin – Human Resources and Administration and Customer Affairs / Corporate Social PDD – Project Development Division H&S Comm – Health and Safety Committee Responsibility Division 36 ENHANCING OUR SUSTAINABILITY MANAGEMENT

CHALLENGES AND OPPORTUNITIES We, in the real estate sector, face enormous challenges and complexities as we strive to operate responsibly and be more attuned and responsive to the needs of our stakeholders.

Challenge Opportunity Response

Economic - business More vigorous economic Synergy with other Ayala Land competition (entry of new and activity to benefit Company’s subsidiaries (Ayala Land Premier, established real estate industry real estate and retail Alveo Land, and Avida Land) players) businesses

Environment - managing our New and smart ways of doing Explore alternative and efficient materials, energy, and water things technologies efficiently

Social - sustaining and Open up new areas for Widen sphere of influence strengthening relationships collaboration with our stakeholders

Aside from business challenges, all of us are cognizant with the risks related to climate change. The Company formulated responses to these challenges.

Climate Change-Related Risk Assessment

Risk Response 2010 Results

Energy Shortage and Scarcity Mitigation: Energy Indirect energy reduction Management Escalators with Variable Speed Drives Adaptation: Explore other (VSD), planned lighting retrofit to LED energy-efficient technologies

Water Scarcity Mitigation: Water and Wastewater quality within set limits prior Wastewater Management to discharge, better prediction/water targets

Adaptation: Explore rainwater Water reuse integrated into the planning harvesting and water reuse of the Ayala Center Cebu expansion More Intense Typhoons and Floods Mitigation: Emergency Trained personnel for emergencies, preparedness and response, improvement of landscaping and re-greening of managed treescapes properties

Adaptation: Stormwater Tie-up with the city government on the management, rehabilitation of river cleanup and dredging for better protected areas stormwater management, continuing management of protected areas

We recognize that there are still challenges and areas for improvement in our business operations, yet we are optimistic that these challenges and risks can be addressed individually and collectively, and that in the succeeding years, we should be performing better. 37

CEBU HOLDINGS, INC. IDENTIFIED AS GRI ORGANIzATIONAL STAKEHOLDER In August 2010, CHI was identified as one of the Organizational Stakeholders (OS ) by the Global Reporting Initiative (GRI). The OS make up the core of GRI’s multi-stakeholder network. CHI is now a member of the group to help maintain GRI as an independent and democratic organization. CHI’s expressed support of GRI and its mission illustrates the growing importance placed by the Company on sustainability reporting.

The OS represents the committed core of in the GRI roster of sustainability reports GRI’s nature and main strength: engaging worldwide. thousands from all regions of the world and various stakeholder groups. CHI has been part of the GRI Construction and Real Estate Sector Supplement (CRESS) CHI is now one of the few companies around Working Group since October 2009 when the the world doing business the holistic way— first of a series of six face-to-face meetings considering financial and non-financial was conducted. This is spread within a performance equally. By being a member two-year period until the supplement of the GRI OS, CHI expresses further its is released by mid-2011. The GRI-CRESS commitment to sustainability and the triple Working Group is composed of 10 industry bottom line approach. representatives from different countries and 10 from the non-government sectors. There CHI, in promoting sustainable development are only two representatives from Asia: in the real estate sector, has for the past India and the Philippines. three years used the GRI G3 framework in the development of its integrated annual By being a member to the GRI OS, CHI is the and sustainability reports for 2007, 2008 first in the Philippines from the business and 2009, duly submitted and registered community to have a voice in GRI.

Building competency on sustainability reporting: CHI STWG LEARNS FROM GRI On June 26, 2010, the Company’s Sustainability Technical Working Group (STWG) , with Ayala Corporation and Ayala Foundation representatives, attended a workshop exclusively conducted for the group facilitated by Global Reporting Initiative (GRI) training officer, Enrique Torres. The activity was part of a continuing education program of the members of the STWG in matters relating to sustainability reporting.

The objectives of the workshop: a) Reintroduce the sustainability reporting process to the STWG; b) Re-learn from GRI facilitator the structured way of the reporting process; c) Learn from colleagues in the STWG team the challenges that the organization encountered in each phase of the reporting process; d) Provide a simplified understanding of the indicators.

One of the most effective points that the group learned was the simplified test of materiality. Though the Company uses the same set of indicators applicable to the business, these have different levels of importance from the organization’s viewpoint. This is where the materiality test comes into play, affecting the way the report will be presented and understood by the reader. DELIVERING SUSTAINED 01GROWTH 39

This section presents the details of our financial performance—how we generated income for the Company, while we balance the economic value we distributed to our stakeholders. These are our investments on our workforce, our neighboring communities and the society at large. Furthermore, this section presents the indirect economic impacts of our business and the legacy impacts of the Company in its 22-year existence as Cebu’s catalyst for growth and development. 40

THE BUSINESS AND ECONOMIC ENVIRONMENT

External Factors That Helped Shape Our Company’s 2010 Performance

Though considered by many as second to the National Capital Region, Cebu has already become a world-class urban center – the proverbial commercial hub and gateway to the Visayas and Mindanao. The growing clarity in economic goals in identified sectors has equipped the city to fuel engines of economic innovation.

• Construction projects mushroomed in • As a result of flourishing businesses, the various parts of the region, suggesting real estate sector took advantage of the that its construction industry remains positive economic momentum. A growing strong. Investment in the tourism and number of new entrants to Cebu’s playing Information Technology (IT) and Business field range from the giants of developers Process Outsourcing (BPO) sectors were to the smallest enterprising realtors the primary stimulants of the growth bringing about approximately 25 percent of the industry. Robust demand for industry growth for residential subdivision residential projects by Overseas Filipino projects, a staggering 81 percent for Workers (OFWs) also helped invigorate the condominium projects, and 29 percent construction industry in Central Visayas. increase in commercial developments currently under construction. All of • Overseas Filipino remittances posted which have contributed to the active an eight percent growth from 2009, on restructuring of Cebu’s landscape in leaps account of the 15 percent increase in and bounds unseen in Cebu’s history. job orders according to the Philippine Overseas Employment Agency (POEA). • Subdivision and Housing Developers The forecast remains rosy as deployment Association Inc. (SHDA) and Philippine outlook for Filipino overseas professionals Association of Realtors Board Inc.-Cebu remain upbeat. Realtors Board Inc. (PAREB-CEREB) credited this advancement to the: • Becoming an even more conducive location for BPO and IT companies, Cebu • Strong surge in overseas remittances has proven to be a legitimate host for the from Filipinos abroad multinational giants in the international • Strong BPO industry BPO industry with above par accredited economic zones the likes of Cebu Business • Continued upward trend in tourism Park and Asiatown I.T. Park, where build- • Public investments and improved up has grown by 36 percent in 2010. infrastructure which allowed • Being an established name in the world developments to reach areas like market, Cebu is a preferred business Consolacion, Liloan, Minglanilla and and leisure destination, despite unstable Naga, among others occurrences in different parts of the country. Cebu continues to benefit from the recovering interest of international travelers around the world with tourism up by eight percent in 2010. Global organizations have indicated that prime property will continue to outperform secondary as well as continued double-digit capital value growth for trophy assets in many of the world’s high-order business hubs. 41

ON THE RETAIL BUSINESS SECTOR

• The increase in tourists visiting Ayala • More retail and commercial spaces Center Cebu was attributed to domestic for lease have been made available in tourists coming from other key cities in strategic locations in Cebu but major the Visayas-Mindanao region, and driven retail operators still prefer to locate in by higher attendance and turn-out in big established malls and office buildings. conventions held in 2010. • Dining continues to be a major driver of • The rising BPO segment and other mall visits, which has given opportunity industry sectors with offices located to other food operators to open more in Cebu Business Park and Asiatown affordable choices in other convenient I.T. Park accounted for the significant locations. Activities meant for families increase in the mall’s share among office and groups of friends, manifests in workers. ambient-driven dining and visits to coffee, yoghurt, ice cream and dessert • More corporate accounts and product shops. launches (from commodity products to appliance brands) improved the • The retail market has engaged more in frequency of the use of exhibit spaces. wellness as seen in the increase in sales for sports and active lifestyle brands and • Shoppers have become well informed of sports events. mall promotions with the aid of social networking and other communication • The retail market has highlighted technologies. Banks have provided the importance of efficiency of basic very competitive and attractive offer amenities and services aside from good in rebates on credit card usage which merchandise mix offerings. also improved mall visits and promo availment via store tie-ups.

With Cebu’s changing skyline as a result of multiple factors, the Company continues to be responsive and resilient, taking advantage of the opportunities that these changes bring to ensure the economic sustainability of the business. 42

GeneratinG economic Value

Net IncomeNet (in Income thousand (in pesos) thousand pesos)

“The significantly 406,200 399,479

high bottom line was 302,190

a result of having a 251,775 balanced source of 206,778 revenues as well as cost management and 2006 2007 2008 2009 2010 efficient operations of our businesses.” Cebu Holdings, Inc. (CHI) closed 2010 with the highest income in its 22-year history, posting a record net income of P406.2 million. This exceeded the previous year’s Eleanore R. Tomaneng performance of P302.2 million by 34 percent. Consolidated Chief Finance Officer revenues for the year reached P1.45 billion exceeding the and Compliance Officer 2009 performance by 12 percent. The significantly high bottom line was a result of having a balanced source of revenues as well as cost management and efficient operations of our businesses.

2010 revenues were a mix of recurring income from leasing business and developmental projects. Fifty-two percent was derived from the leasing business, 31 percent from the sale of residential and commercial lots, five percent from theater income, and 12 percent from equity in net earnings of associates and interest and other income. 43

Leasing Real Estate Development

Commercial Space Leasing Sale of Commercial and Residential Lots Ayala Center Cebu, the centerpiece of Cebu The sale of commercial lots accounted for 12 Business Park, continues to be the main source percent of the Company’s total consolidated of revenues of the Company. In 2010, the mall revenues. In 2010, revenues from this source registered total revenues of P677.3 million, nine registered at P174.4 million, an increase of percent higher than the P624.0 million in 2009 27 percent versus that of 2009. These were on account of higher occupancy rate and sales generated from the sale of lots at Cebu Business growth. As the mall constantly innovates and Park and Asiatown I.T. Park. diversifies its retail mix to address the changing market demand, it continues to be the preferred Amara is CHI’s premiere residential development lifestyle destination in the region. in Catarman, Liloan. It offers a master-planned community nestled by the sea and undulating The Walk, the retail component of CHI-subsidiary hills accentuated by the eternal warmth of a Cebu Property Ventures and Development historical lighthouse. It provides a safe haven for Corporation’s (CPVDC) Asiatown I.T. Park, families and a luxurious seaside living experience contributed total revenues of P19.5 million. In with first-class facilities. Amara continues to lead 2010, new dining concepts as well as exciting the high-end residential open lot category in events were added to the mix, which contributed Cebu at 51 percent market share and generating to the 15 percent growth compared to its 2009 total revenues of P272.9 million. performance of P16.9 million.

Revenues from theater operationsProject/Contractual reached P77.9 million, seven percent higher than last Revenues (in thousand pesos) Revenues (in thousand pesos) year’s P72.7 million with more theater receipts generated by higher average occupancy in 2010.

Office Leasing Operations 1,447,185 1,500,031 eOffice, a one-storey modular building in 1,288,283

Asiatown I.T. Park, is host to BPO and I.T. firms, as 1,281,745 well as conveyor design and software research 1,037,397 multinational companies. It posted total revenues of P49.3 million, lower than last year’s P55.9 million on account of the transfer of one of its locators to eBloc Tower, a property owned by an associate. 2006 2007 2008 2009 2010 44 GENERATING ECONOMIC VALUE

2010 REVENUE MIX 2010 Revenue Mix Current assets registered at P 2.2 billion, a 19 51.6% percent improvement versus last year’s P1.8 31.0% Retail and Oﬃce Commercial and Residential Space Leasing billion. Cash and cash equivalents increased Lot Sales 747 448 by two percent to P923.2 million at the end of the year.

Bank debt at year-end amounted to P165 million, lower by P110 million from the 2009 12.0% year-end balance. Interest and Other Income Our strong performance allowed us to declare 174 5.4% cash dividends equivalent to P0.07 per share Theater Operations 78 in December of 2010, while retaining earnings for planned projects of the Company. With the COSTS AND MARGINS P406.2 million net income registered for the As a leading real estate developer, CHI maintains year, stockholders’ equity increased by seven its track record of embarking on trail-blazing percent net of the total P134.4 million cash projects while still maintaining prudence in the dividend paid. way we do business. The price of CHI stocks increased from a With the business environment just beginning to closing of P2.50 per share in 2009 to P2.70 per recover from the economic crisis of recent years, share in 2010. With the increase in stock price, we continue to implement tighter overhead coupled with the payment of cash dividends, control and cost reduction initiatives in 2010. total shareholder return (TSR) registered at Substantial cost savings were gained from 10.4 percent. the execution of guaranteed maximum price contracts for major CHI and CPVDC construction projects. These and other cost-saving measures Stock Price (Quarterly) have contributed significantly to margin Stock Price improvement for the year. 3.0 STRONG BALANCE SHEET All these resulted in a stronger balance sheet. 2.5 Total assets grew by five percent, reaching P6.0 billion at year-end, while total liabilities of P1.3 2.0 billion was one percent lower than the 2009 level of P1.3 billion. 1.5

Current ratio improved from 1.68 : 1 in 2009 to 1.84 : 1 in 2010. Solvency ratios likewise showed 1.0 improvements as bank debt-to-equity and total Q1 Q2 Q3 Q4 debt-to-equity ratios registered at 0.04 : 1 and 0.30 :1, respectively. 45

The recovering economic conditions in 2010 strengthened market confidence, particularly in real estate which continues to be a stable investment even in times of crisis. These favorable market conditions, together with the Company’s consistent operational efficiency, balanced portfolio, prudent cash management and strong financial position allowed CHI to post a record performance last year and strengthened its position to take advantage of future opportunities.

Cebu Holdings, Inc. and Subsidiaries Year Ended December 31 As Restated 2010 2009 2008 2007 2006 For the Year (in thousand pesos) Revenues 1,447,185 1,288,283 1,500,031 1,281,745 1,037,397 Net Income 406,200 302,190 399,479 251,775 206,778 Cash Dividends (P0.07-2010) a share 134,406 134,406 134,406 96,004 96,004 At Year-End (in thousand pesos) Total Assets 6,038,390 5,773,215 5,658,583 5,327,720 4,694,705 Cash and Cash Equivalents 923,173 905,093 834,752 904,767 532,127 Bank Loans 165,000 275,000 330,000 330,000 199,995 Stockholders’ Equity 4,415,142 4,143,348 3,975,562 3,710,489 3,554,718 Per Share (in pesos) Earnings 0.21 0.16 0.21 0.13 0.11 Cash Dividends 0.07 0.07 0.07 0.05 0.05 Book Value 2.30 2.16 2.07 1.93 1.85 Financial Ratios Current Ratio 1.84 1.68 1.51 2.01 1.93 Bank Debt-to-Equity Ratio 0.04 0.07 0.08 0.09 0.06 Stock Price 2.70 2.50 1.56 3.60 3.20 Total Shareholder Return (TSR) 10.42% 63.68% -55.78% 13.18% 195.69% Total Assets (in thousand pesos) Stockholders’ Equity (in thousand pesos) Total Assets (in thousand pesos) Stockholders’ Equity (in thousand pesos) 6,038,390 4,415,142 5,773,215 4,143,348 5,658,583 3,975,562 5,327,720 3,710,489 4,694,705 3,554,718

2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 46

Providing oPPortunities for economic develoPment

In the past three years since we first published our Integrated Annual and Sustainability Report, we have tracked and measured our economic impacts —the direct and indirect socio- economic benefits extended to our various local stakeholder groups. We have:

• increased our workforce and community investments; • created new business opportunities for local “As a real estate suppliers by sourcing products and services company, we locally; • contributed to the revenue growth of the City continue to create of Cebu through real property and business taxes; a positive impact • stimulated job creation through our locators on our local and partner merchants. INVESTMENTS ON COMMUNITIES, community where INSTITUTIONS AND VARIOUS EXTERNAL ORGANIzATIONS we operate...” In 2010, community investments increased by 63 percent. This is attributed to the increase in the area of infrastructure including the construction of a public utility jeepney and V-hire terminal at Cebu Business Park. Other areas of focus included community development programs on environment, education, livelihood, health and wellness, arts and culture and various relationship-building activities. 2010 Community Investment

Noel F. Alicaya 0.4% 1.4% Education Livelihood Manager, Control and Analysis 5.0% 10.9% Environment Member, Sustainability Technical Relationship-building 0.1% Peace and Order Working Group Activities

82.2% Infrastructure 47

Total Workforce by Project

INDIRECT ECONOMIC IMPACTS Total Workforce by project Having existed for more than 20 years, we have helped shape the economic landscape of our 2.9% Amara local community in Cebu. Our contributions to 1,091 33.0% Cebu Business Park the local economy include: 12,340

1. Property Value Appreciation There has been a considerable increase in land values in the areas around Cebu Business Park and Asiatown I.T. Park since 64.1% Asiatown I.T. Park these projects were developed in the late 23,981 1980s and mid 1990s respectively.

2. Employment Generation 3. Creation of Downstream Service Industries The Company’s projects and partnerships Cebu Business Park and Asiatown I.T. Park have continued to provide employment spurred development of service industries opportunities to the local community. As of such as transport and food services for the yearend 2010, total workforce in the two employees within these business business districts and one residential communities. A number of hotels have community registered at 37,412. been built at the periphery to cater to the needs of the workforce and patrons of the businesses in the area.

Stakeholder Amount distributed Remarks (million pesos) 2008 2009 2010 Workforce Salaries and Benefits 96 99 105 All categories: management team, supervisors, associates and contractual employees Training and Development/ 9 5 5 Includes internal, external trainings, team building and CHI PLUS activities Wellness Programs

Government 195 216 267 Real property, business and income taxes

Contractors and Suppliers 1,458 1,039 1,511 Procurement of goods and services in the area of project design and development, construction and property management; 70 percent or P1.06 billion was paid to local contractors and suppliers

Shareholders 134 134 134 Cash dividends at P0.07 per share

Creditors 11 22 27 Interest expense

Society Partner Communities and 14 17 66 Expenses for corporate citizenship activities External Organizations

Environment - 5 5 Environment-related expenditure: sewage treatment plant operation, landscape maintenance, outsourced personnel trainings

Total Time Contributions

Total volunteer hours 925 1,017 1,250 32 volunteer activities were organized in 2010 focusing on environment, education, rendered livelihood, health and relationship-building activities

Average volunteer hours 7 9 11 Total time contributions divided by the total workforce per person 48 PROVIDING OPPORTUNITIES FOR ECONOMIC DEVELOPMENT

Around the budding metropolis of Cebu, you will find one sleek building rising after another – one seemingly better than the next. Cebu Holdings, Inc. (CHI) brought in the concept of master planning, acknowledging that communities and landmarks are built not in a vacuum but in a changing environment. This emphasizes the need for the Company to fulfill its commitment to shareholders without abandoning our responsibility towards social development.

This is market leadership expanded to balanced leadership – transforming the real estate industry and creating sweeping commercial and social impacts across the region. CHI commits to taking a visionary stance in the pursuit of progress and profit, while ensuring that roles in society are also carried out so that entrepreneurial passion, social responsibility and a sense of environmental stewardship form part of the Company’s existence. 49 CHI started with a single space and a big vision. The deliberate and calculated transformation of this space now spans two decades with a master-planning that has more than enhanced our land – it has enriched lives and formed a new social fabric from where new patterns and textures of community life have begun.

With the progressive fulfillment of CHI’s vision came the lifestyle revolution of the Cebuano.

Changing Cebu’s Landscape CHI has invested over ten billion in its 22 years of presence in Cebu. The company and its projects have changed the physical landscape of Cebu, bringing with it a distinctive lifestyle for a market that aspires world-class.

Ayala’s vision for Cebu Business Park was a perfect fit for Cebu City’s vision of a high- growth zone. The completion of Ayala Center Cebu, the build up of Asiatown I.T. Park and the construction of new projects spurred economic activity even further. Provision of efficient road networks in these developments have helped improve access of motorists and mass transit within the city.

The boom in the Information Technology and Business Process Outsourcing industries has generated an additional growth engine in Metro Cebu with the expansion in Cebu’s workforce noticeable in Cebu Business Park and Asiatown I.T. Park.

The transformation continues. The Company remains committed in its mission to create landmarks, set standards and sustain relationships. 50

REAL ESTATE DEVELOPMENT

“…In 2010, we kicked- Cebu Holdings, Inc. and Cebu Property Ventures and Development Corporation, off a new chapter in the companies behind Cebu’s leading CHI’s history with the business districts, continue to vitalize the local economy. From point of launch of a whole conceptualization as master-planned range of Ayala Land integrated communities, Cebu Business Park and Asiatown I. T. Park have been residential projects in built to fuse modern elements and practical functions to ensure that business, Cebu Business Park residences and the community at large will and Asiatown I.T. Park. thrive in the midst of progress.

These developments • Build-up in both developments is will progressively bring contributing an additional 144,680 square meters of gross leasable area for Business our two business parks Process Outsourcing (BPO) and Information Technology (IT) and 122,712 square meters up to a new exciting of gross floor area for condominium level, to make them developments equivalent to 67 percent of Cebu’s showcases Metro Cebu’s total office area. for mixed-use urban • This construction surge has attracted major foreign direct investments from the likes development.” of Convergys, Qualfon, JP Morgan Chase and Co. as well as Cebu-based locators allowing buildings in Cebu Business Park and Asiatown I.T. Park to enjoy occupancy rates as high as 85 percent in 2010

• Widespread employment comes with these developments, resulting in a 35 percent increase in working population—a majority of which are in the BPO industry. All these make Cebu the second BPO capital in the Philippines next to Metro Manila.

Jose Ma. D. Lopez • Business and developments around these Head, Real Estate Development Group key business locations have also flourished in the last few years. As a result, 15 hotels with some 2,566 rooms or 14 percent of Cebu’s hotel room supply as well as six condominiums were set up within the vicinity of Cebu Business Park and Asiatown I.T. Park. 51

Type of ownership Cebu Business Park (as of 2010)

Type of Ownership

8% 9 Individual

92% 102 Corporate New vs. Repeat

New vs. Repeat Buyers 22% 20 Repeat

78% 71 New

Mode of Acquisition Mode of Acquisition 34% 37 Brokered

66% 71 Direct / Through Property Specialists 5252 REAL ESTATE BUSINESS REAL ESTATE DEVELOPMENT 53

CEBU BUSINESS PARK Cebu Business Park was officially proclaimed as a PEZA-accredited IT Park with Presidential Proclamation 2053, signed by President Gloria Macapagal-Arroyo on May 4, 2010. According to the Special Economic Zone Act of 1995 (as amended in R.A. 7916), all investors and locators in PEZA-accredited IT parks are now entitled to fiscal and non-fiscal incentives.

Among the benefits of an IT park are improvement in international competitiveness, increase in direct investments and capital formation, job creation and an improvement of quality of life.

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

Members of the board of governors of the Cebu Business Park Association, Inc. Consul Samuel Chioson and Ambassador Francisco Benedicto, CHI president Francis Monera, PEZA director general Lilia de Lima, MEZ 2 Zone administrator and PEZA Vismin supervisor Sonny Pinagayao and CHI real estate development group head Jose Ma. Lopez 5454 REAL ESTATE BUSINESS REAL ESTATE DEVELOPMENT 55

New office and residential developments in Cebu Business Park will add 43,000 square meters of gross floor area. This includes Ayala Land’s upscale residential brands:

1016 Residences Cebu Holdings partnered with Ayala Land, Inc. in the development of 1016 Residences, an Ayala Land Premier (ALP) project. ALP is built on the foundation of delivering exclusive and distinctive living experiences. 1016 Residences provides 109 units of country club living in Cebu’s address of choice. Located beside the City Sports Club Cebu, residents will be entitled to club usage rights.

Sedona Parc CHI partnered with Alveo Land in the development of Sedona Parc, a residential condominium of 114 units that will offer upscale lifestyle inspired by style, design and nature. It is set to rise in a tranquil and highly- accessible parkside location in Cebu Business Park . 56 REAL ESTATE DEVELOPMENT 57

ASIATOWN I.T. PARK Workforce grew by 54 percent in 2010. Full- time employees in the area primarily engaged in business process outsourcing (BPO) reached more than 20,000 from just 13,000 the year before. Inventory for BPO spaces will increase to a total gross floor area of 71,000 square meters, with three new towers under construction and projected for completion in 2012, one of which is eBloc Tower 2.

eBloc Tower 2 a project of Asian i-Office Properties in partnership with Ayala Land, is a 16-level office building with a total gross floor area of 34,762 square meters located in Phase 2 of Asiatown I.T. Park. Launched in June 2010, eBloc Tower 2 is a proud manifestation of sustainable design practices. It addresses the increasing demand for office space in Metro Cebu.

Residential development accelerated within Asiatown I.T. Park. There are currently four residential towers under construction. Among them are Avida Towers Cebu 1 and 2.

Avida Towers Cebu is a project of Asian i-Office Properties (a special purpose vehicle of CHI’s subsidiary CPVDC), in partnership with Avida Land (Ayala Land’s best value brand offering affordable living at its best) is the first Ayala Land affordable condo outside Luzon located in Asiatown I.T. Park. Avida Towers Cebu redefines life with exciting options for future residents to enjoy the benefits of home, office and play inside the most vibrant address in town for young professionals and families.

The ongoing construction will bring in a total of 143,000 square meters of gross floor area for BPO, residential and commercial use within the IT Park. 58 REAL ESTATE DEVELOPMENT 59

eBLOC TOWER A 12-storey mid-rise office building, the eBloc Tower was completed in 2009 and is now host to two of the biggest global BPO or IT companies:

1.) NCR Cebu Development Center, Inc., a leading global IT business solutions company with world-class offerings in the areas of financial self-service, store automation, business consumables and IT support service, and

2.) JP Morgan Chase and Co., a leading global financial services firm.

The first among many projects to be pushed for Cebu’s twin-win industries—information and communication technology (ICT) and tourism— the eBloc Tower is a project of the Asian i-Office Properties Inc. (AiO).

Located along Jose Ma. Del Mar Avenue of Asiatown I.T. Park, the eBloc Tower sits on a 4,432-square meter lot. 60 REAL ESTATE DEVELOPMENT 61

AMARA Amara continues to lead the high-end residential open lot category in Cebu at 51 percent market share for 2010. The opening of the North Coastal Road and the Cansaga Bridge in March 2010 reduced travel time from the city to the luxury seaside community by half, bringing the Ayala Land Premier lifestyle closer to the central business district.

In 2010, the Company continued to offer the remaining inventory of Amara North. It is the best choice for luxurious seaside living for the privileged few with its enviable sea access through an existing wharf for yachts and speed boats. Located in an exclusive enclave at the Catarman headland, it offers infinity views of the sea. This phase is designed to complement an active lifestyle with five seamlessly connected open parks that areAmara designed 2010 to heighten the sense ofNew adventure vs. Repeat as residents Buyers will be encouraged to explore the natural terrain.

Amara 2010 New vs. Repeat Buyers 31% 25 Repeat 69% 55 New

A slight increase in repeat buyers illustrates the trend where previous Amara buyers are purchasing even more lots as testament to superior project delivery and customer service. Amara is not just a residence built for people to live in but is now being explored as a second home,High a vacation End Residentialhome and even a worthwhile Lots investment givenMarket its value appreciation Share 2010over the years. High End Residential Lots Market Share 2010 0% Competitor X 33% Competitor Y 0 14 51% Amara 22

16% Competitor Z 7 Amara retains market leadership in the high-end residential segment with 51 percent market share. Despite the year’s economy described as being in “crisis mode”, sales continued to come in. This shows that real estate and to be specific, an Amara property, is indeed an excellent hedge during times of economic uncertainty. 62 REAL ESTATE DEVELOPMENT 63

AMARA

Serenity Park The Serenity Park is an enclave in phase two of Amara. Residents who are far from the view of the sea have this landscaped breather within the enclave. With its Zen-inspired gazebos, the park is meant to be a place for tranquil recreation as its name suggests. A two-level pond adds to the cooling of the area. The softscape mix provides the contrast to the rugged character of the sea cliffs of Amara.

Sports and Recreation Facilities

The sports and recreation facilities are located in an area away from the main clubhouse. The intent is to separate the active sports from the usually more formal events in the main clubhouse. The basketball, badminton, and gym are housed in a complex of three buildings.

The design of the buildings reflects the style of the clubhouse with its cantilevered canopies, bay modules for the façade and white walls contrasted by dark colored louvers. 64

RETAIL BUSINESS

Despite the slowly recovering economy in 2010, the operational initiatives implemented in the mall resulted in a better performance with an increased sales growth of eight percent, a considerably significant increase of seven percent in the average daily traffic and higher usage of our carpark facilities by six percent.

At yearend, we maintained a higher lease “The growth in the occupancy in the mall with an average of 97 percent. Shoppers embraced the opening of mall performance more shops which brought in more foreign, popular and fashion forward brands and specialty allows us to stores that perfectly suit their preferences. identify expansion opportunities FOCUSING ON OUR CUSTOMERS To enhance customer service, signages were even while we installed in elevators and designated seats at the Food Choices area to give priority to senior face challenges citizens and people with disability. Recharging mobile phone stations were set up around in the business the mall for the convenience of the shoppers. All these are part of the “It’s Always U-First” environment...” campaign of the mall. In the delivery of all these enhancements and value services, we work closely with our merchants who constantly support our programs and initiatives. Our annual Merchant Rewards Program recognizes merchants who are innovative and who adhere to the Ayala Malls standards of business management and operations, and give a significant contribution in sales and image building.

Our continuing trainings for the merchants’ personnel on customer service and security reinforce our commitment to provide a rewarding Maria Clavel G. Tongco experience for our shoppers. The annual fellowship night exclusively held for all front liners Head, Retail Business Group of the mall serves as motivation and a venue to strengthen camaraderie among personnel. 65

To solicit feedback, we conduct regular one-on- one meetings with merchants to discuss their plans and programs for their outlets. We hold an annual meeting with owners and managers where we share the mall performance and plans of upcoming projects before these are announced publicly. These fellowships allow merchants to align their own set of programs and strengthen our relationship as partners in business.

The remarkable performance of Ayala Center Cebu proved once more that we are on track in addressing opportunities and gaps as we continue to face challenges within the business environment. We continue to engage our merchant partners who deliver these commitments to the customer. The mall’s Ayalathrust of Centerproviding theCebu market - Mallwith a redefined& Terraces cosmopolitan lifestyle experience keeps Ayala Center CebuRevenue as the top choice (in millions) of the markets it serves.

Ayala Center Cebu - Mall and The Terraces Revenues (in thousands) 677,351 624,023 519,884

Ayala2008 Center Cebu2009 - Mall2010 & Terraces Net Operating Income (in millions)

Ayala Center Cebu - Mall and The Terraces Net Operating Income (in thousands) 453,930 401,639 337,099

2008 2009 2010 6666 RETAIL BUSINESS 67

AYALA CENTER CEBU Aside from having introduced more shopping and dining options, we improved mall facilities for our discerning mall patrons. In 2010, we installed more efficient lighting fixtures at the basement carpark and implemented a better temperature and cooling system around the mall.

Construction of PUV Terminal Another major project was the construction of a new PUV and V-hire terminal at the west side of the mall. The terminal was constructed on a 2,000 square meter lot area designed to accommodate existing routes and improve traffic flow around Cebu Business Park.

Ayala Center Cebu - Mall & Terraces Lease Occupancy “…Our 2010 performance Ayala Center Cebu - Mall and The Terraces proves that growth Lease Occupancy 97% 95%

opportunities 98% continue to emerge even in difficult business environment…”

2008 2009 2010 68 RETAIL BUSINESS 69

THE TERRACES The Terraces continued to stir excitement among Cebuanos. Among the highlights of the year was the much-awaited opening of family entertainment karaoke, Red Box, and the addition of more fresh concepts in dining and other lifestyle outlets.

2010 was a milestone year with Ayala Center Cebu recognized by the International Council of Shopping Centers (ICSC) for its outstanding achievement in marketing and design development of The Terraces. The mall garnered a silver award in the renovation and expansion of an existing project category, where it established new standards in design and construction.

Since it opened in 2008, The Terraces has become a local landmark for dining, entertainment and lifestyle choices. 70 RETAIL BUSINESS 71

In 2010, Ayala Center Cebu introduced major enhancements by improving product offerings and customer service initiatives.

Active zone The Active Zone that opened in the early part of the year, was another first-of-its-kind in Cebu. It features two levels of performance sports brands, fitness equipment, wellness gadgets and other related concepts to cater to the needs of shoppers who engage in an active lifestyle. With a leasable area of 3,000 square meters consisting of more than 20 stores, it exceeded its lease occupancy performance when it ended with 95 percent occupancy in just over a year of operations.

Services To address what the market identified as gaps in the mall, an old cinema was converted into a service hub – a zone for currency conversion, utility bills payments, ticketing, travel arrangements and tutorial services. In just over half of the year’s operations after the Services opened in August, the place remarkably indicated a 100 percent lease out by end of 2010.

Other Enhancements Also at the fourth level, Cinema 3 was converted into a 3D digital cinema that would give a more exhilarating viewing experience for the movie patrons. The grand opening, also done in August, introduced Cebuano movie-goers to a new kind of cinema experience. 72 RETAIL BUSINESS 73

THE WALK This retail facility at Asiatown I.T. Park ended the year with a lease occupancy of 97 percent and 27 percent total sales growth, resulting in a 15 percent increase in both revenues and net operating income.

Since it opened, The Walk retained its freshness and attraction to its market. New restaurants such as Blue Elephant and Golden City Dimsum added to the eclectic selection of dining choices with affordable cuisine and elegant ambiance. The Sports Warehouse opened at the second level offering the best sports brands at affordable prices. Additional service offerings were made available in Xchange (for currency exchange) and Nouveau Salon Spa.

With its convenient surface parking, wide open spaces, safe environment and strategic location, The Walk becomes vibrant at night. Carefully selected events such as live DJ music, popular localThe bands, Walk car shows, Revenue promotions (in formillions) special interests such as photography, travel and sports, make The Walk the most popular place to congregate.

The Walk Revenues (in thousands) 19,455 16,890 6,902 The Walk Net Operating Income (in millions) 2008 2009 2010 Jun-Dec The Walk Net Operating Income (in thousands) 12,238 10,647 3,264

2008 2009 2010 Jun-Dec MANAGING 02 OUR FOOTPRINT 75 mANAGING OUR FOOTPRINT

This section presents the results of our initiatives based on the environmental indicators we view as most relevant to our sustainability goals. We present in detail our programs and initiatives on the following priority areas: the efficient use of our resources, emission and waste reduction and biodiversity management. 76

USING OUR RESOURCES EFFICIENTLY

“We commit to manage our ecological footprint by using our resources efficiently and effectively, managing our input CLIMATE CHANGE PoLICy materials, reducing our We believe that climate change is the greatest threat to mankind and business sustainability, and its effect is global, wastes, managing our local and personal. emissions, introducing We recognize our important role in mitigating climate change refinements in our through our business practices. operational processes, and contributing to As a response we will: biodiversity conservation • Become more energy-efficient in our operations; • Begin to account and reduce the carbon footprint in our in our managed operations and our products and services through our protected areas. These own efforts and by influencing our contractors; and • Continue to ensure the health and viability of our are accomplished controlled protected areas, which serve as carbon sinks. via integration, continuous monitoring environmental, health and measurement of and safety Policy our environmental In providing real estate products and services, we commit to management system…” sustainable development and the safety and health of our employees by:

• Mitigating land, air and water pollution by addressing the significant environmental impacts of our operations; • Mitigating the occupational risks by addressing the significant hazards in the workplace and operations; • Complying with relevant environmental and occupational health and safety laws and regulations; • Continuously reviewing our operational processes for resource conservation, waste reduction and the mitigation of occupational hazards and risks; and • Continually improving efficiencies through new, safe and Levi L. Lopez innovative technologies and processes. Head, Technical Support Group Asiatown I.T. Park Administrator Property Management Division 77

MATERIALS In 2010, construction activities included Amara North, a horizontal development of the latest phase of a residential project, eBloc Tower 2, an office building at Asiatown I.T. Park and the public utility vehicle (PUV) terminal at Cebu Business Park.

A summary of materials used is shown below. During the six-month period of construction, water consumption was 30 percent below the target or an equivalent of 8,000 liters (8 cubic PUV eBloc Amara (unit) Terminal Tower 2 North meters). (GLA: 4,800 sqm) (GLA: 4,800 sqm) (Total Lot Area: 88,048 sqm) Use of Recycled Materials Cement 21,700 111,611 28,324 bags From the three construction projects, only the PUV terminal project used recycled materials. Sand 891 4,240 - cu.m. Seventy percent of the materials used as Gravel 1,782 8,480 - cu.m. formworks and 50 percent of the materials used as scaffoldings for the PUV terminal Steel 146,094 1,510,000 22,790 kg. construction were recycled. Recycled materials Bars used were coco lumber, phenolic boards, and marine plywood. This initiative helped reduce construction cost while resources were RESOURCE CONSERVATION INITIATIVES IN maximized. CONSTRUCTION PROJECTS Water Consumption Reduction via Rainwater Daily Switch Off Catchment To conserve energy, all air-conditioning units, At the PUV terminal project site, a 200-liter drum lights and other electrical equipment in all areas was used to catch rainwater used for washing, at the construction site and personnel offices cleaning and curing of concrete slabs and were switched off at lunch break from twelve concrete samples. noon to one o’clock in the afternoon daily.

PUV TERMINAL CONSTRUCTION Formworks Scaffoldings

Quantity Quantity Unit Quantity Quantity Unit Used Recycled Used Recycled

Phenolic board 400 200 sheets 2” x 3” x 8’ 2,100 1,400 bd ft 3/4” thick (4’ x 8’) Coco lumber

Plywood 350 175 sheets 2” x 3” x 8’ 2,400 1,680 bd ft 3/4” thick (4’ x 8’) Good lumber

Plywood 300 150 sheets 1/2” thick (4’ x 8’) 78 USING OUR RESOURCES EFFICIENTLY

ENERGY Indirect Energy Consumption • The increase in diesel fuel consumption in • Almost all properties achieved their targets 2010 was due to the power shortfall that the except for the Asiatown I.T. Park. This Visayas grid experienced. was due to the increased activity which • Ayala Center Cebu participated in the necessitated the increase of lighting hours interruptible load agreement with local for the streetlights. power utility provider, Visayan Electric • Overall, energy consumption was 13.02 Company (VECO). percent lower than expected, partly • This agreement is between VECO and due to the energy efficiency programs properties with self-generating capacity to implemented. be taken off the grid during peak hours. • Data shows reduced consumption of indirect • The generating sets of all properties supply energy from the grid because of the issue on electrical energy for a certain period so that power deficit, which constrained us to run the utility distribution grid is offloaded. our generator sets.

Indirect Energy Saved and CO2 Avoided Direct Energy Consumption The Company and its managed properties saved • The Company and its managed properties a total of 1,480,340 kilowatt hours in 2010, 13 consumed 312,934 liters of diesel in 2010. percent lower than what was targeted for the • Diesel consumption was largely the fuel year. This resulted in eliminating 397.47 tons of consumed by the generating sets of the CO2 emissions, and brought in a total of P11.10 managed and owned buildings. million (at P7.50 per kilowatt hour) in savings for the Company and its managed properties.

Pollution Control Officers

Corporate Sustainability Officer, QEHS* Technical Consultant, and Pollution Control Officer Sustainability Technical Working Group (STWG) Environment Management Committee PCO Team Leader

Mall / Retail Cebu Business Park Residential Subdivisions Asiatown I.T. Park Construction Sites

Ayala Center City Sports Club Cebu Amara eOffice Amara Cebu Part Towers 1 and 2 Garden Ridge Village eBloc Tower Asiatown I.T. Park The Walk (Residential Buildings) eBloc Tower 2 Cebu Business Park eBloc Tower Cebu Holdings Center and Retail Ayala Life-FGU Center (Office Buildings) *QEHS - Quality, Environment, Health, and Safety

Organization Formed in 2005, the Company’s Pollution Control Officers’ (PCO) To further strengthen the functional link between the QEHS MS and Team is composed of the Property Administrators and Technical the STWG, the Corporate Sustainability Officer (CSO), who was the Supervisors/Assistants of the Property Management Division former QEHS Management Representative, was also appointed as the (PMD), which handle these focused areas. The QEHS Management QEHS Technical Consultant. Representative (MR) ensures that the PCO Team is always guided and aligned with the overall environmental goals of the Company. Compliance with Environmental Laws These personnel are also accredited Pollution Control Officers by the The Pollution Control Officers continually monitor the compliance of Department of Environment and Natural Resources (DENR). environmental laws, statutes and regulations.

A complementary structure is the Sustainability Technical Working The Company has no history of non-compliance with environmental Group (STWG), with which the PCO Team is responsible for laws. Likewise, the Company has no recorded fines due to violations to implementing, monitoring and reporting the environmental initiatives environmental regulations. and programs under the sustainability framework. 79

Properties GLA Direct Indirect Indirect (sq.m) (liters) (kwh) Energy saved Target Actual Estate Cebu Business Park 304,358 450,879 409,490 41,386 Asiatown I.T. Park 127,469 161,093 169,082 (7,989) Office Buildings Cebu Holdings Center 8,307 2,031 138,168 124,671 13,497 Ayala Life-FGU Center 9,032 4,753 532,560 521,184 11,376 eOffice 11,370 12,046 300,000 184,320 115,680 eBloc Tower 20,945 12,579 1,823,856 1,251,074 572,782 Residentials Park Tower 1 9,162 2,228 182,400 175,001 5,280 Park Tower 2 7,632 1,248 161,495 146,456 9,981 Amara 214,719 172 9,154 30 Sports Club City Sports Club Cebu 14,500 7,000 1,354,140 Mall / Retail Ayala Center Cebu 94,091 262,280 7,621,356 6,910,188 711,168 The Walk 2,110 8,597 115,910 Construction Sites PUV Terminal 4,800 9,996 475 Not quantified Not quantified eBloc Tower 2 27,795 1,599 499 Amara North 88,048 177,408 (total lot area) Not applicable

Energy Intensity Energy Intensity In 2010, the Company started computing its Properties GLA Energy energy intensity for the Company-owned and (sq.m) Intensity managed buildings. (kwh/sq.m) Estate As shown in the table, similar building property Cebu Business Park 304,358 1.4 use or configuration has almost the same Asiatown I.T. Park 127,469 1.3 intensity. Office Buildings Residential condominiums Park Towers 1 Cebu Holdings Center 8,307 15.0 and 2 have almost the same intensity. Office Ayala Life-FGU Center 9,032 57.7 condominiums eBloc Tower and Ayala Life- eOffice 11,370 16 .2 FGU Center, which have central airconditioning eBloc Tower 20,945 59 .7 systems, have a significantly higher intensity Residentials compared to Cebu Holdings Center and eOffice which do not have centralized airconditioning. Park Tower 1 9,162 19.1 Cebu Business Park and Asiatown I.T. Park, both Park Tower 2 7,632 19 .2 estates, have similar energy intensities. Amara 214,719 0 Sports Club City Sports Club Cebu 14,500 93.4 Mall / Retail Ayala Center Cebu 94,091 73.4 The Walk 2,110 54.9

The picture above shows the emergency generator sets that are being checked to ascertain the genset’s readiness in case there are power interruptions. 80 USING OUR RESOURCES EFFICIENTLY

DirectDirect Energy Consumption Consumption IndirectIndirect Energy Consumption Consumption ENERGY AUDIT: AYALA LIFE-FGU CENTER (liters) (kwh) Ayala Life-FGU Center, a CHI-managed property, qualified as an energy efficient building after an energy audit was conducted jointly by the

Department of Energy (DOE) and experts of the 11,370,669 Energy Conservation Center of Japan (ECCJ) on 9,093,960 312,934 September 8, 2010. 9,013,552

The energy audit is one of the activities 185,476 implemented under the Promotion of Energy Efficiency and Conservation (ASEAN PROMEEC Project) in Southeast Asia championed by DOE in 31, 185 cooperation with the ASEAN Centre for Energy (ACE) and ECCJ.

The objectives of PROMEEC are as follows: 2008 2009 2010 2008 2009 2010 The full effect of the power The significant increase in 1. Establishment of a standardized evaluation criteria for energy conservation (buildings and crisis that started in 2009 consumption can be attributed major industries); was felt in 2010. Rotational to new properties at Asiatown I.T. 2. Development of energy management power interruptions lasted Park managed by the Company In dissemination tools such as the technical for two hours per day and at 2010. These are eBloc Tower and directory and the in-house database; least three times per week for The Walk. 3. Introduction and dissemination of energy about six months. conservation technologies and best practices through national and regional workshops; 4. Awarding of model buildings that demonstrate INITIATIVES TO REDUCE INDIRECT ENERGY CONSUMPTION energy savings and best practices; and For the year 2010, the Company’s property management division 5. Providing recommendations to improve implemented energy management measures to reduce the energy management and thus reduce energy consumption (buildings and industries) energy consumption, as follows:

With these objectives, Ayala Life-FGU Center Ayala Center Cebu was chosen as one of the buildings for audit, to a. Use of Variable Speed Drives (VSD) for escalators: when the benchmark this building with other similar buildings in the ASEAN region and in Japan. The audit also mall opens, escalators are turned on and left running, even served to identify possible energy efficiency if no one is using, until the mall closes. With the introduction and conservation improvement measures for of variable speed drive and sensor, the escalator reduces its the building, hence the Property Management speed once it senses that no one is using it. The reduction of Division of the Company presented the building as the subject of this audit to test and continually speed means a reduction of power consumption. When it improve the Company’s energy efficiency policy senses a person about to get on the escalator, it ramps up the and programs. speed for faster travel. b. Implementation of schedules for switching on or off of lights The audit team studied the structure of electrical power consumption and characteristics of energy and equipment consumption of Ayala Life-FGU Center. It was found that the air-conditioning system consumes Other Managed Properties: 58 percent of the total building load, consistent c. Chiller optimization at eBloc Tower: it has been observed with the typical office building consumption characteristic. that during peak hours, two chillers are programmed to run to achieve the cooling load needed. Further investigation The ECCJ-DOE’s finding showed that the building’s showed that each chiller only supplies 45 percent of the energy performance (in kilowatt hour/square meter-year) is at 199 kwh/sqm-yr (in 2008) and 187 building load, so instead of running the two chillers, only kwh/sqm-yr (in 2009), lower than Japan’s energy one is made operational, but to increase the heat transfer intensity benchmark of 236 kwh/sqm-yr. efficiency of the condenser system, two cooling towers are operated in parallel. This results in an optimized chiller The audit team also cited further improvements that the building can adapt, which include: operation at 90 percent, and faster heat removal rate as the condenser water volume is increased. Operating one chiller a. controlling outdoor air intake with two cooling towers is cheaper as compared to operating b. condenser water temperature adjustment two chillers and two cooling towers. c. installation of VSD for condenser water pump

Ayala Life-FGU Center Cebu is now implementing these recommendations. 81

d. Continued re-lamping of exit lights from fluorescent to Compact Flourescent Lamps (CFLs), and for some properties, relamping of “EXIT” signs from fluorescent to Light Emitting Diodes (LEDs).

These initiatives resulted in net savings of 769,173 kilowatt hours for the Company and its managed properties. Water Consumption

WATER Water Consumption Water Consumption in Managed Properties and Construction Sites (cubic meters) The main source of water of the Company and its managed properties and construction sites is the Metro Cebu Water District (MCWD). In 2010, 834,759 a total of 834, 759 cubic meters was supplied by MCWD. 377,864 614,070 The significant increase in water consumption in 2010 can be attributed to two newly-managed properties at Asiatown I.T. Park. These are the eBloc Tower and The Walk.

In 2010, we also started to measure water consumption in our construction sites. 2008 2009 2010

Asiatown I.T. Park has its own deepwells and is supplying the water needs of its locators. The water consumption for Asiatown I.T. Park is equivalent to the volume of water that it withdraws from the area’s aquifers.

Properties GLA (sq. m) H2O consumption H2O Source H2O Intensity (cu. m) (cu. m/sq. m) Estate Cebu Business Park 304,358 1,013 MCWD 0 Asiatown I.T. Park 127,469 293,598 Deep Well 2.3 Office Buildings Cebu Holdings Center 8,307 5,567 MCWD 0.7 Ayala Life-FGU Center 9,032 10,625 MCWD 1.2 eOffice 11,370 19,254 Deep Well 1.7 eBloc Tower 20,945 45,034 Deep Well 2.2 Residentials Park Tower 1 9,162 2,685 MCWD 0.3 Park Tower 2 7,632 1,479 MCWD 0.2 Amara 214,719 576 MCWD 0 Sports Club City Sports Club Cebu 14,500 11,601 MCWD 0.8 Mall / Retail Ayala Center Cebu 94,091 336,452 Mactan Rock 4.5 83,158 MCWD The Walk 2,110 18,432 8.7 Construction Sites PUV Terminal 4,800 1,322 MCWD and Deepwell eBloc Tower 2 27,755 3,856 MCWD and Deepwell Not quantified Amara 88,048 108 MCWD (total lot area) 82

REDUCING OUR EmISSIONS AND WASTES

EMISSIONS MANAGEMENT

One of the largest sources of CO2 emission from the Company’s operations is the emission from indirect energy consumption or the purchased electrical energy from the power utility company,

Visayan Electric Company (VECO), amounting to 3,053 tons of CO2.

Our carbon emissions are from the following sources:

Direct Energy of 11.2 megawatts) are sized to accommodate all

In 2010, the total CO2 emission from direct energy the load requirements of the mall. (generating sets) is at 849 metric tons. This is about 21.8 percent of the total CO emission 2 Non-CO2 Emissions from the Company’s direct and indirect energy Total methane emission from direct energy is at sources. 114.23 kilograms, while nitrous oxide emission from direct energy is at 6.85 kilograms.

Of the total CO2 emission from direct energy source, Ayala Center Cebu accounts Converting this in CO2 equivalent, methane for 84 percent, at 710 metric tons. This is emission (at 21 global warming potential) is at 2.4 understandable since Ayala Center Cebu’s backup tons, and nitrous oxide (at 310 global warming generating sets (with a total generating capacity potential) is at 2.12 tons.

CO2 Emissions Non-CO2 Emissions

Properties Direct (tons) Indirect (tons) CH4 (kgs) NOx (kgs) Estate Cebu Business Park 110 .0 not quantified Asiatown I.T. Park 45.4 Office Buildings Cebu Holdings Center 5 .5 33.5 0.7 0 Ayala Life-FGU Center 15.1 139.9 2.0 0.1 eOffice 32.6 49.5 4.4 0.3 eBloc Tower 33.7 335.9 4.6 0.3 Residentials Park Tower 1 6.0 47.0 0.8 0.1 Park Tower 2 3.4 39.3 0.5 0 Amara 0.5 2.5 0.1 0 Sports Club City Sports Club Cebu 19.0 363.6 2.6 0.2 Mall / Retail Ayala Center Cebu 710.0 1,855.4 95.9 5.8 The Walk 23.3 31.1 3.1 0.2 83

Earth Hour 2010:

Over 4000 kwh Saved and 888 kg of CO2 Avoided Cebu Holdings Inc. (CHI) and subsidiary Cebu Property Ventures and Development Indirect Energy Corporation (CPVDC) joined the rest of the global community for the earth hour switch Total emission from indirect energy is at 3,053 off and saved 4,626.70 kilowatt hours. Two tons, with Ayala Center Cebu having the largest major business parks and other properties emission at 1,855 tons. participated in the hour-long switch-off of selected lighting and electrical equipment. Ozone-depleting Substances (Refrigerants) These are Cebu Business Park, Asiatown I.T. Park and CHI-managed properties including There is no ozone depleting substance emitted Ayala Center Cebu, Cebu Holdings Center, Ayala by the Company. The refrigerant used in the new Life-FGU Center, City Sports Club Cebu, Park chillers is R134a. The Company is also prepared Towers 1 and 2, Amara, Garden Ridge Village, for the phase-out of chloro-floro carbons (CFCs) eOffice, eBloc Tower and The Walk. Other Cebu by scouting for retrofill refrigerants. Business Park locators that joined the initiative were Pioneer House Cebu, Pag-ibig Tower, Cebu IT Tower, Innove Plaza, 8990 Building CO2 Emissions from Business Travel - Distance and Lexmark Plaza 1, 2 and 3. The savings

Traveled Approach. translated to an equivalent CO2 emission reduction of 887.86 kilograms. Total CO2 emissions from business travel in 2010 reached 82.22 metric tons.

Step 1 Step 2 Step 3 Year: 2010 ABC D E F

Mode of Description Distance Unit CO2 emission kg/unit CO2 emissions CO2 emissions Transportation Traveled factor kg/unit in kg in metric tons E=AxC Short Flight 0 km 0.15 kg/km 0 0

Air Medium Flight 688,620 km 0.12 kg/km 82,221 82 Long Flight 0 km 0.11 kg/km 0 0

Step 4: Sum CO2 emissions: 82

CO2 EMISSION INTENSITY To further appreciate the information on carbon Properties Indirect Direct Intensity Intensity emission, a new metric, CO2 emission intensity, was introduced in 2010. (kg/sq. m) (kg/sq. m) Estate As with the energy intensity, this serves to further Cebu Business Park 0.4 0 correlate the intensities of similar building uses Asiatown I.T. Park 0.4 0 and characteristic. Office Buildings As with the energy intensity, it can be observed Cebu Holdings Center 4.0 0.3 that similar properties with similar use or Ayala Life-FGU Center 15.5 1.7 eOffice 4.4 2.8 configurations have similar 2CO intensity. eBloc Tower 16.0 1.7

On the total CO2 intensity (direct and indirect Residentials emissions), the only difference here with Cebu Park Tower 1 5.1 0.7 Holdings Center and eOffice is that the Cebu Holdings Center’s emergency backup generating Park Tower 2 5.2 1.3 set covers only the building’s life support system Amara 0 0 plus 30 percent of the tenant loads, while for Sports Club eOffice, it is designed to carry 100 percent of the City Sports Club Cebu 25.1 1.3 building load. Mall / Retail Ayala Center Cebu 19.7 7.6 The Walk 14.8 11.0 84 REDUCING OUR EMISSIONS AND WASTES

WASTE MANAGEMENT

Solid Waste Hazardous Waste Since the year 2007, the Solid Waste Flourescent lamps (with mercury content) and Management Program of the Cebu Business used oil from generating sets are the hazardous Park has been implemented in partnership wastes the Company has identified. To comply with Barangay Luz, one of the neighboring with the provisions and guidelines of the Republic communities of Cebu Business Park. Barangay Act 6069 or the Hazardous and Nuclear Wastes Apas started collecting waste from Asiatown Act, these are stored separately then transported I.T. Park in the year 2009. These communities and disposed of by a transporter and waste have earned from the recyclables which are treatment specialist. either sold or made into products marketed abroad. Biodegradable materials collected from Significant Spills the dining outlets and grocery stores of the mall After completing the documentation of the are brought to Cebu Business Park’s composting Company’s Quality, Environment and Health and facility called Tugkaran. Details of this initiative Safety Manual in 2006, CHI started implementing can be found on the section “Partnering with the procedure to control or prevent the damage Communities” on page 106 . caused by oil and diesel spills. Since then, the Company and its managed properties have not experienced any oil or diesel spills.

The table below shows consolidated data on solid waste, hazardous waste and spills from all Company- managed properties.

Solid Waste Hazardous waste Properties Volume Disposal Method bulb (kg) used oil (liters) Storage/Disposal Spills (kg) Method Estate Cebu Business Park 1,800,551 Daily collection by no data in Barangay Luz kg (172pcs) Asiatown I.T. Park 75,415 Daily collection by 2 Storage Barangay Apas Office Buildings Cebu Holdings Center 20,052 Daily collection by 80 Disposed by a DENR None Barangay Luz accredited hauler Ayala Life-FGU Center 13,663 Daily collection by 14 180 Storage None Barangay Luz eOffice 10,318 Daily collection by 13 200 Storage None Barangay Apas eBloc Tower Not quantified Residentials Park Tower 1 15,923 Daily collection by 6 60 Storage None Barangay Luz Park Tower 2 15,456 Daily collection by 9 40 Storage None Barangay Luz Amara 172 Daily collection by 32 N/A N/A N/A Barangay Luz Sports Club City Sports Club Cebu 44,496 Daily collection by no data in Barangay Luz kg (658pcs) Mall / Retail Ayala Center Cebu 648,097 Daily collection by 445 Not disposed. Did Storage None Barangay Luz not reach minimum volume requirement. The Walk 61,880 Daily collection by 206 N/A Storage None Barangay Apas 85

Wastewater Wastewater Quality The table shows the wastewater quality that is discharged to the sewage treatment plant by the Properties min. max. average managed properties of the Company. Estate The wastewater discharges are actually domestic Cebu Business Park 8 78 30 wastewater (sewer) conveyed via the sewerage Asiatown I.T. Park 52 772 197 system and treated at the sewage treatment Office Buildings plants (STP) of the properties prior to discharge Cebu Holdings Center 55 864 234 to the city’s drainage system. Ayala Life-FGU Center 22 600 130 eOffice 6 428 159 eBloc Tower Not quantified Residentials Park Tower 1 35 522 242 Park Tower 2 41 397 172 Amara Sports Club City Sports Club Cebu 52 387 182 Mall / Retail Ayala Center Cebu 755 3476 1497 The Walk 331 5260 1500

The figure below shows the five-day Biochemical Oxygen Demand (BOD5) of the treated wastewater that is discharged to the nearest receiving body of water. The figures are the average on a quarterly basis. Wastewater Quality 5-Day BOD (mg/li) Wastewater Quality 5-Day BOD (mg/li) 2008 2009 2010 46 35 23 23 35 35 29 29 18 18 XXXXX XXXXX 17 17 13 13 17 13 12 12 7

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

A third party laboratory accredited by the Department of Environment and Natural Resources- Environmental Management Bureau (DENR-EMB) is commissioned to get and analyze the Company’s water quality samples monthly. The results are documented in the Self-Monitoring Report submitted on a quarterly basis to the DENR-EMB. In addition, water is treated through chlorination to kill the microorganisms prior to discharge. A part of the treated wastewater is also recycled for Cebu Business Park’s irrigation purposes. 86

mANAGING BIODIVERSITy

KAN-IRAG NATURE PARK Kan-irag Nature Park is a 71-hectare area which is part of the Central Cebu Protected Landscape. Cebu Holdings, Inc. with mother company Ayala Land, Inc. engaged environment research organizations and formed a foundation to manage the property.

Field and Facility Maintenance In 2010, field activities were continued through constant monitoring. To prioritize facility maintenance, care of planted trees, nursery work and safety check, the park was closed in June, temporarily disallowing public visits to the park.

As part of the maintenance management scheme, the park was divided into three major areas namely: the interpretive trail loop (or trail 1), the biodiversity trail loop (trail 2), and the adventure trail loop (trail 3). Employee volunteers, complementing park workers, Tree Planting/ Pruning were divided into three groups and assigned Since August of 2010, tree planting activities to the different loops for a focused task. were done, concentrating on areas where Mobilizing employee volunteers worked well thinning of overgrown wildlings were observed. for trail maintenance . The more skilled workers At the end of the year, about 20 percent of the were then able to focus on the area of facility planted species survived. maintenance.

Barred Rail or commonly called Tikling seen at the nature park on February 6, 2010 87

Biodiversity Biodiversity Biodiversity At yearend, while the number of bird species remained at 38, an increased population of birds Indigenous Tree Species Bird Species present at the park was observed. An example is the emerald pigeon which were seen in flocks 89 feeding within the nursery area and in water 89 catchments. 71 38 The park’s vegetation condition in general is 38 fairly remarkable. Growth rates were consistently 27 impressive in the last three years. Dipterocarp species and other indigenous species introduced in 2009 adopted well to the park’s condition and 2008 2009 2010 are growing rapidly. Nursed trees borne out of Assisted Natural Regeneration activities were seen to require continued care and maintenance to prevent growth of weeds and vines.

Contour Beds at the Nursery Remnants from harvested exotic species used the soil known to move and transport volumes in the rehabilitation of the facilities such as large of sediments during wet season. These logs crooked branches were used as hedgerows to are temporary contour supports until the soil form contour lines. Logs were vertically piled compacts. Natural vegetative filtering strips then to form contour lines for a sturdy support of follow, allowing an acceptable root accumulation before the rotting of the logs. This is to ensure that the contour beds are stable enough to withstand rainy conditions.

Seed Collection Seed collection at the park took place in summer when most indigenous trees started to bear fruit. The seeds are prepared for growing at seed beds and transferred into plastic bags for field planting preparation. SUSTAINING 03RELATIONSHIPS 89

SUSTAINING RElATIONSHIPS

This section provides detailed information on the Company’s initiatives that relate to the people in our organization, our customers and our partner communities. By engaging with these stakeholders, we obtain various perspectives that aid us in our decision- making process. At the end of this section, we present commentaries of our stakeholders: a representative from our workforce and our partners in environmental advocacy, technological innovation initiatives and community development. 90

ENGAGING OUR STAKEHOLDERS

Our success as a Company hinges on our ability to sustain the relationships we’ve built. We engage people who have a stake in our business, with varying approaches and issues in which we engage them.

Engagement is based on their relevance to the business, the nature of interest and finding the most practical and meaningful ways to identify and meet their needs and expectations. Our continuing partnerships with our internal and external stakeholders are borne from our regular constructive dialogues, focused group discussions, meetings, regular process and performance reviews and customer surveys. Over the years, working in partnership with our stakeholders has helped us deliver our strategic objectives.

EMPLOYEES SHAREHOLDERS/ HOMEOWNERS AND BUSINESS/IT INSTITUTIONAL INVESTORS PARK ASSOCIATIONS/CONDOMINIUM The Company’s important AND ANALYSTS CORPORATIONS resource to achieve its goals. An individual or institution or Owners and tenants of the Company’s townhall meetings, climate survey, corporation that legally owns developments. CHI provides them with employee volunteer program, one or more shares of stocks continued services while they occupy the internal publication, internal in the Company. property they bought from the Company. customer survey, health and safety management system, training and sale of shares of stocks, property management services, conduct of development programs briefings, annual stockholders’ regular membership meetings, customer meeting, annual report and surveys other correspondences

BUSINESS PARTNERS SECURITIES AND EXCHANGE PROPERTY BUYERS COMMISSION/PHILIPPINE AND LESSEES Partners in strategic move for STOCK EXCHANGE landbanking which is critical to End-users of real estate quality products and the business CHI complies with regulatory services requirements as a publicly- joint venture partnership listed company to assure integrated marketing and sales initiatives, shareholders of good after-sales service, customer surveys and corporate governance complaints handling submission of reports, disclosures and other requirements, involvement in SEC/ICD programs and BROKERS AND PROPERTY SPECIALISTS initiatives, transparency and adequacy of disclosure Partners in offering the Company’s products

to the market Employees

Business Partners  sales meetings, project orientations, annual  sales rally, surveys Shareholders  MEDIA  Institutional Investors  Financial Analysts Vehicles of communication  Media through which CHI promotes its BANKS AND OTHER FINANCIAL INSTITUTIONS/ CHI brand, image and reputation INSURERS/INSURANCE BROKERS conduct of press conferences,  They provide for the Company’s depository funding  Securities and Exchange Commissionfellowships, placement of paid needs, insurance coverage of assets Philippine Stock Exchange advertisements     Property Buyers and Lessees loans, deposits, and other banking transactions,   Brokers and Property Specialists Homeowners Association Business Park Association insurance coverage for Company properties and I.T. Park Associations Condo Corporations employees’ healthcare Local Gov’t Units / National Gov’t Agencies / Regulatory Bodies Overseas Filipino Professionals / Tourists91

Local Communities

  Mall Merchants Mall Merchants’ Employees  Third Party Organizers / Exhibitors  LOCAL COMMUNITIES MALL MERCHANTS/MERCHANTS’ SHOPPERS Shoppers EMPLOYEES AND THIRD PARTY  Neighbors beyond the ORGANIzERS/EXHIBITORS End-users of the mall’s  Company’s fencelines quality products and  They provide products and services which services Utility Companies 

   implementation of development cater to shoppers’ needs   programs on education, mall experience, employment, environment, leasing of spaces, merchant relations, shoppers’ satisfaction peace and order, livelihood and marketing events, surveys, trainings, surveys, market Event and Talent Agencies alliance-strengthening initiatives fellowships and meetings research

Service Contractors Allied Industries Industries Allied

Business Organizations

Contractors / Suppliers / Service Providers Institutions Educational

OVERSEAS FILIPINO LOCAL GOVERNMENT UNITS/ Non-Government Organizations PROFESSIONALS/TOURISTS NATIONAL GOVERNMENT

AGENCIES/REGULATORY BODIES Organizations Charitable / Socio-Civic The Company’s important market segment to which it can likewise They monitor compliance with all promote tourism and investments in applicable statutory and regulatory Cebu and the Visayas region requirements balikbayan program, mall privileges, payment of taxes, business permits online marketing innovations, and licenses, partnerships/co- tactical promotions, turista sponsored events, regular reviews program, events sponsorship for this market

UTILITY COMPANIES (power, water EVENT AND TALENT AGENCIES CONTRACTORS, SUPPLIERS AND SERVICE PROVIDERS and telecommunications) They have the expertise in the They provide products and services for the Company to They provide utilities for locators, lot execution of creative concepts for implement projects, programs and initiatives and unit owners and tenants events and promotions accreditation, bidding, payment, establishment of and contract agreements, regular accreditation, booking and conformity with Process Cycle Time (PCT) standards, communication coordination programs to educate and orient contractors and suppliers on QEHS best practices and benefits

NON-GOVERNMENT BUSINESS ORGANIzATIONS SERVICE CONTRACTORS FOR JANITORIAL, ORGANIzATIONS (NGOs) SECURITY, MAINTENANCE AND OTHER MANPOWER CHI’s partners to promote the general REQUIREMENTS They provide technical expertise well-being of the communities it and networking capabilities serves. The Company shares socio- CHI’s partners in the delivery of services to the locators, political advocacies for the benefit of owners, office buildings, tenants, mall merchants, partnerships, meetings, agreements the community. exhibitors and shoppers and provision of venue for activities membership and active involvement contractor accreditation, performance management in these organizations, attendance to conferences and conventions, support to programs and initiatives

ALLIED INDUSTRIES (e.g. tourism, retailers association) SOCIO-CIVIC/CHARITABLE ORGANIzATIONS EDUCATIONAL INSTITUTIONS Vehicles to promote tourism and retail industries which have direct significant impact to the business Project beneficiaries with whom They respond to the training needs the Company can create linkages of employees, outsourced personnel, cross-branding, cross-promotion events, tie-ups with and tap their assistance and merchants’ employees and fenceline expertise for better service to the communities community consultation, agreements/contracts, meetings, volunteer participation, needs assessment, selection and pre- provision of venue for activities screening process

LEGEND: STAKEHOLDER WHY WE ENGAGE HOW WE ENGAGE 92

INVESTING IN OUR PEOPlE

The key element in our sustainability agenda is our people. Behind the Company’s success and proven track record in its 22-year history is a set of talented people who we value. We commit to nourish such talent and reinforce our people’s ability to work effectively and ensure that they are recognized and rewarded for their contributions.

In 2010, our workforce investment supported programs that benefit our employees and address issues that are most relevant to their jobs. We focused our energies and resources in: “We commit to a) Promoting a safe working environment. The Company’s health enhance a person’s and safety management system has established a structure and mechanism to mitigate occupational risks and hazards in the effectiveness through workplace and operations. competency- b) Developing employee competencies. To achieve business and organizational growth, a competency development plan has based training been established for each employee. The Company provides learning opportunities through varied approaches: coaching, and development immersion programs, cross-posting and through participation in in-house and external/public seminars. These help employees programs. We believe gain knowledge and develop skills that contribute to their current job and career advancement. in empowerment, c) Supporting work-life balance. Through the Company’s wellness enabling employees program (CHI PLUS) and employee volunteer activities, the Company helps employees stay healthy, manage the demands to own their work and of work and personal life, and appreciate the value of helping people in the community. take responsibility for d) Encouraging open communication. The Company provides a the results.” wide range of communication channels to enable employees to gather information, give feedback and exchange ideas. Employees are given access to resources and activities that help them learn about the Company’s programs, policies and performance, know more about their colleagues and about the external environment that directly and indirectly impacts our Company’s operations.

e) Building productive and harmonious relationships. The Company provides opportunities for people in the organization to interact and collaborate in various projects other than Ma. Cecilia T. Urbina those established in each of the functional teams. These Head, Human Resources and interactions highlight the importance of values while they foster Administration Chairman, Health and Safety camaraderie, creativity and innovation. All these elements help Committee create a high-performance culture within the organization. Member, Sustainability Technical Working Group 93

Total WorkforceEMPLOYMENT By Category TYPE as of December 31, 2010

Employment Type 4% 20% 4 Contractuals 23 Management Team Members

44% 32% 50 Associates 36 Supervisors

2008 2009 MTs: 28 (21%) MTs: 21 (18%) Supervisors: 41 (31%) Supervisors: 39 (34%) Associates: 53 (40%) Associates: 52 (46%) Contractuals: 10 (8%) Contractuals: 2 (2%)

AGEAge ProfilePROFILE 5% 51 yrs. old & up = 5 43% 16% 21-30 yrs. old = 49 41-50 yrs. old = 18

36% 31-40 yrs. old = 41

2008 2009 21-30: 62 (47%) 21-30: 53 (46%) 31-40: 44 (33%) 31-40: 39 (34%) 41-50: 19 (15%) 41-50: 18 (16%) 51 and up: 7 (5%)GENDER 51PROFILE and up: 4 (4%)

Gender Profile 40% 45 Males

60% 68 Females

2008 2009 Male: 50 (38%) Male: 45 (39%) Female: 82 (62%) Female: 69 (61%) 94 INVESTING IN OUR PEOPLE Outsourced Personnel EMPLOYEE TURNOVER RATE Outsourced Personnel Rate of Employee Turnover by Age and Gender

34% 10 427 Indirectly Outsourced 2010 (via contractors in construction sites) Male Female 50% 624 Directly 3 2 Outsourced 1 2008 20-30 yrs. old 31-40 yrs. old

16% 2008 2009 209 Indirectly Outsourced (via park associations and condo corporations) 20-30 yrs. old 31-40 yrs. old 20-30 yrs. old 31-40 yrs. old Male: 1 Male: 2 Male: 1 Male: 0 Female: 4 Female: 3 Female: 9 Female: 2 41-50 yrs. old 41-50 yrs. old 51-60 yrs. old Male: 1 Male: 2 Male: 1 Female: 1 Female: 1 Female: 0

Composition of Governance Bodies

Category Male Female 21-30 31-40 41-50 51 yrs. 21-30 31-40 41-50 51 yrs. yrs. old yrs. old yrs. old old & up yrs. old yrs. old yrs. old old & up A. Board of Directors CHI - - 1 7 - - - 1 CPVDC - - 1 5 - - - 1 B. Management Team - 1 8 3 1 5 4 1 C. Supervisors 3 11 2 - 6 12 2 - D. Associates 9 6 2 1 26 6 -- E. Contractual Employees 4 ------

The following summarizes the Company’s policies relating to its human resources:

Human Rights and Labor Policy. CHI supports and Working Hours. CHI does not require workers respects the protection of human rights within to work more than the maximum hours of daily the circle of the Company’s influence, and ensures labor set by local laws. The Company complies that the institution does not tolerate human rights with overtime pay requirements. abuses. Entry Level Wages. All employees hired are paid Provision of a Good and Safe Working Place. The above minimum wage. Those hired to fill entry- Company identifies, evaluates and eliminates any level positions are paid about 40 to 50 percent kind of risk to a safe working place. It provides more than the minimum wage. appropriate access to needed resources, fair remuneration, training, education and satisfaction Benefits to Full-Time Employees. On top of the of basic needs. regular statutory benefits, permanent employees receive medical and clothing allowances and are Percentage of Local Senior Management. Four entitled to vacation, emergency and sick leaves. out of six (or 67 percent) management committee They are also covered under a group life, health members are from Cebu. insurance and retirement program.

Performance and Career Development Reviews. Yearend performance reviews are regularly conducted in the Company. All regular employees 95

as of October 2010 were covered in this and after, to the president. In addition, the review. On a similar basis, probationary Company’s Quality, Environment, Health employees are given a performance review and Safety procedures on accreditation, at least a month prior to the end of their purchasing and bidding, evaluate and probationary period. Contractual employees accredit technical and financial capability of undergo the same review to determine the suppliers and service providers prior to whether their contract is to be renewed, business transactions. extended or terminated. Training on Anti-corruption Policies and Retirement Plan. The Company has a funded, Procedures. The Company’s Code of Ethics non-contributory retirement plan covering all covers the Conflict of Interest Policy, which its regular employees. The benefits are based states that all employees are expected to on the employees’ years of service and final promote primarily the Company’s interest. No monthly salary. employee shall compete with the Company, nor shall he or she allow business dealings Non-discrimination. There are no incidents on behalf of CHI to be influenced, or even of discrimination in the workplace. Equal appear to be influenced, by personal or family opportunity is given from hiring employees to interests. The Code of Ethics covers the transfers or movements, promotions, cross- Company’s stand on anti-corruption. posting and training and development. The Company prohibits discrimination of race, Annually, the Company releases the color, age, gender, sexual orientation, gender Disclosure Statement form to all employees identity and expression, ethnicity, religion, before yearend in compliance with the disability and political affiliation. Conflict of Interest Policy. The policy covers areas such as: 1) abuse of authority for No Child Labor. The Company does not personal advantage; 2) personal or business practice child labor in the workplace. There involvement or vested interest with CHI or are no risks related to child labor in any of competitors, suppliers and customers; 3) its operations and development sites. CHI vested interest with the Company’s suppliers, strictly adheres to local minimum age laws and competitors and customers; 4) unauthorized requirements. disbursement of funds; 5) use of Company resources and information for personal gain; Freely-chosen Employment. The Company and 6) acceptance of gifts or bribes. This ensures that the overall terms of employment applies to all employees. are voluntary. There has been no significant risk for incidents of forced or compulsory Monetary value of significant fines and total labor in all areas of operations. number of non-monetary sanctions for non- compliance with laws and regulations. The Percentage and Total Number of Business Company is steadfastly compliant with the Units Analyzed for Risks Related to applicable laws and regulations of its business, Corruption. aside from the environmental and product The Company, through its audit department responsibility laws. Hence, the Company continues to conduct audits and risk was not sanctioned nor fined by regulatory assessments for all departments in relation to agencies for non-compliance with laws and corruption. These audit results are reported regulations. and discussed with the head of the division 96 INVESTING IN OUR PEOPLE

EMPLOYEE HEALTH AND SAFETY b. Automation of Environment, Health and The Health and Safety Committee is the Safety (EHS) Significant Aspect Recording Company’s planning group in all matters System pertaining to employee health and safety. A workshop on the EHS Automated System The total workforce is fully represented in was held on August 10, 2010. The EHS this committee with representatives from automation was pursued to do away with the all categories: associates, supervisors and manual updating of significant EHS aspects management team levels. by each department. The orientation was attended by the Health and Safety Committee a. Work Assessment Measurement (WEM) members and department process owners. WEM is conducted by the Health and Safety Committee annually to identify hazards in the c. Corporate Emergency Preparedness Plans workplace and to recommend and implement All managed properties have completed their appropriate corrective actions for the respective emergency preparedness plans improvement of the work environment. including the updating of Emergency Brigade Teams. For the year 2010, WEM conducted on July 5 to 9 covered offices at Cebu Holdings Center, Property Management established problem CHI-managed properties Ayala Center Cebu, escalation chart and checklists to guide the The Terraces, eBloc Tower, The Walk, Amara, concerned personnel on emergency response. Park Tower One and Park Tower Two.

Health and Safety Committee 2010

Human Resources and Admin Manager Chairperson

Head , Construction Management Division Head, Property Management Division Quality, Environment, Health and Safety Technical Consultant Management Representative (MR)

Technical Support Group Manager/ concurrent Asiatown I.T. Park Administrator Health and Safety Officer

Security Construction HR & Admin HR & Admin Property Property Management Property Management Manager Management Supervisor Assistant Management Real Estate Real Estate Rep 1 Employee Secretariat Ayala Center Development Group Development Group Representative Cebu Rep 1 Rep 2 Rep 1 Cebu Holdings Center/ Park Towers 1 & 2/ City Sports Club Cebu Ayala Life-FGU Center Construction Management Rep 2 Construction Management Rep 3 Ex-Officio Property Administrator Member Cebu Business Park 97

Average Training Hours Per Year Members of the Crisis Management Team Average Training Hours Per Year attended the crisis communication management briefing and workshop on August 19, 2010, 28.2 27.5 facilitated by the Corporate Communication 35.0 team. The seminar discussed the different types of crisis, the crisis communication procedure and incident response communication guidelines. The workshop culminated with an exercise on media handling during crisis situations.

Safety Statistics 2008 2009 2010 In 2010, CHI registered zero (0) lost-time from work accidents and injuries while work illnesses are reported as follows: Employee Development In 2010, CHI pursued competency-based training programs related to leadership, effective selling, Work Accidents SAP systems, effective business writing, customer service, frontline skills on telephone handling, CHI Employees = O incidents crisis communication and Quality, Environment, Lost Time = O incidents Health and Safety (QEHS) - related programs. These were the priority programs identified Work Illness during the competency- based training needs 2008 2009 2010 assessment done by the management team. During the process, individual competency profiles and individual development plans were 79 54

51 developed per employee. 56 35 31 30 31 In 2010, the Company recorded 28.2 average

28 in-house training hours. Total Average Hours Per Employee 0 0 0

Fever Flu Headache Stomach Ache Average Hours Per Category 42.6 Management Team There were no reported accidents nor incidents involving outsourced personnel for the year. 30.2 Awareness of Workforce regarding Serious 76.0 Supervisors Diseases Project/Contractual 15.7 As of 2010, CHI had fully implemented four Associates Health and Safety programs on serious diseases namely: the Drug Free Workplace, TB Prevention and Control in the Workplace, Anti- Sexual Harrassment, and HIV/AIDS Prevention and Control. 98

EMPLOYEE WELLNESS CHI PLUS. For the year 2010, the Company’s employee wellness program, CHI PLUS expanded with more events and activities of which 70 percent of the employees enlisted and participated in.

Health and Wellness Bulletin. On the first quarter of 2010, the Human Resources and Administration Department released the maiden issue of the Company’s wellness bulletin “In Fitness & In Health: Your Guide to a Better You”. This is a bi-monthly e-publication that aims to promote better health and wellness habits among employees. The publication also chronicles events and activities of CHI PLUS. 99

CHI PLUS 2010 Activities:

Shape UP CHI (Yoga, aerobic exercises and fitness workout) City Sports Club Cebu April – October 2010

Self Defense Program City Sports Club Cebu November 2010

Wheels of Fun Minglanilla to Naga Route September 2010

Reel Load (Movie Watching and Reviews) Cebu Holdings Center, 7F Boardroom August 2010

DIVErsion (Kayak, snorkeling and diving) Talima Island September 2010

Trek and Climb Ga-as, Balamban September 2010

Running Club Run4 Kids (July 2010) Eco Dash (November 2010)

Shall We Dance? (Latest dance routines) City Sports Club Cebu December 2010

Acoustic Jive (Glee club) December 2010 100

ADDRESSING THE NEEDS OF OUR CUSTOmERS

The concept of product stewardship is anchored on the Company’s core value, “Focus on Customer” achieved through the organization’s “CHI now brings to the Quality Policy and objectives.

Cebu market the full Being in the business of real estate development, range of Ayala Land’s mall operations and property management, consistent product quality and customer residential brands, satisfaction are important in Cebu Holdings, Inc.’s by forging synergies strategy. with other Ayala Land In the past two years, the business environment has changed along with the markets’ needs and subsidiaries. CHI is proud preferences. Hence the need to respond to such to offer Ayala Land changing demands. With the customer as the first and foremost consideration in our Quality Premier’s distinctive Policy, the Company pursued new opportunities, planned for further expansion, created and communities, Alveo’s sustained customer care programs. innovative projects and Avida’s affordable QUALITY POLICY living at its best. This is all in line with the vision For us, the CUSTOMER is FIRST and QUALITY IS EVERYONE’S JOB. of ‘Enhancing Land, We commit to: Enriching Lives for More • deliver our products and services People.” to continually satisfy ever changing expectations of our customers; • design our products and deliver our services to meet all applicable statutory and regulatory requirements; • provide our employees with competence building programs to improve productivity; and • continually improve the Quality Management System’s effectiveness through a regular review process. Laurence John I. Visco Head, Marketing and Sales 101

THE VALU E DELI VER Y CHAIN

IDENTIFICATION OF CUSTOMER NEEDS

DETERMINING CUSTOMER VALUE Market Research Value Proposition

CREATING THE VALUE Project Conceptualization Marketing and Sales Consultative Collaboration Construction Management “…We put more Quality, Time and Cost Monitoring emphasis on the MARKETING AND COMMUNICATING THE VALUE Real Estate Operations delivery of our Marketing and Sales Retail Operations Marketing and Leasing customers’ needs

DELIVERING AND SUSTAINING THE VALUE and expectations… Sales / Lease / Admin / Property Management Customer Satisfaction Monitoring We are committed to

DELIVERY OF CUSTOMER NEEDS make Ayala Center the mall of choice for MANAGEMENT PROCESSES Audit Management Strategic Planning Customer Surveys / our merchants and Review and Review Customer Complaints Handling Corrective Control of Documents/ shoppers…” Preventive Action Records

CORPORATE PROCESSES Human Resource Processes Information Systems Finance Processes Processes Corporate Communication Accreditation, Bidding Security Processes Processes and Purchasing Processes

The Company’s Quality, Environment, Health and Safety Manual covers the entire spectrum of documented processes and procedures that Jovita R. Polloso serves as the Company’s guide in the delivery of products and services that meet the needs of its General Manager, Ayala Center Cebu Member, Sustainability Technical customers. Working Group The teams in the value delivery chain execute these processes at various stages in its operations. They continually seek to address customer needs, environmental impacts, social issues, health and safety, compliance with applicable statutory and regulatory laws across the products’ life cycle beginning from identification, creation to delivery of customer value.

The primary activities in each link of the chain are supported by the corporate services processes, providing the systems, technologies, human resources and communication support. 102 ADDRESSING THE NEEDS OF OUR CUSTOMERS

CUSTOMER SATISFACTION MANAGEMENT Customer satisfaction goes beyond the conversion from prospect to sale or lease. We connect with EXTERNAL CUSTOMER our customers to build a meaningful relationship as future INTERNALpartners in the communitiesCUSTOMER we build. We SATISFACTION SURVEY continually improve our system of measuring customer satisfaction through our annual surveys and complaints handling system. SATISFACTION SURVEY 8.74

9.0 8.80 8.75 INTERNAL CUSTOMER SATISFACTION SURVEY 8.9 The performance of the value delivery chain is 9.0 8.8 8.9 8.7 measured through the company-wide internal 8.8 8.6 customer surveys (ICS) done twice a year through an 8.7 8.5 8.6 8.4 online system developed in-house. Survey results 8.5

8.5 8.4 8.3 form part of each department’s performance for the 8.4 8.2 8.3 first and second half of the year. 8.3 8.1 8.2 8.0

8.1 EXTERNAL CUSTOMER SATISFACTION SURVEY 8.0 2008 2009 2010 Separate surveys are done for the real estate 2008 2009 2010 development, retail business and property management groups. The different respondents include: newly-acquired customers of residential development, mall merchants and shoppers, lot and unit owners, occupants and locators of the company-managed properties. The survey generates satisfactionECS levels Survey of all these customers in various aspects (with a rating scale of 1 to 10, 10 being highest).

Property Buyers Satisfaction Survey For real estate development, the survey covers pre and post-sales experiences from marketing collaterals, sales and customer service, sales administration and documentation and turn 9.1 9.0 9.0 8.8 over (product quality, expectation-setting vs. 8.8

9.0 8.4 8.1 actual product delivered). 8.0

7.0

Feedback was gathered through purposive 6.0 sampling with the use of an interview 5.0 guide for telephone calls, and a four-page 4.0 questionnaire for those who received facsimilies or emails. Respondents of thisLot Owners,Marketing Unit Owners, Materials SiteOccupants, Oﬃcer and Locators survey were Amara clients who bought the Propertyof CHI-managed Specialists Security Properties Services property within the year 2010. Broker Overall Amara Rating Sales Administration Lot and Unit Owners, Buyers and Locators Satisfaction Survey For property management, customer surveys are conducted in all managed properties: two residential condominium buildings, two office 9.2 9.1 8.9 8.7 8.5 8.7 8.6 8.8 buildings, one residential 8.3 8.9 8.7 8.7 8.7 8.7 8.5

9.0 8.5 8.4 8.3 8.1 subdivision and two mix- 8.1 used developments. 8.0 7.5

7.0

6.0

5.0

Park Tower 1 Park Tower 2Ayala ALAI-FGU Life-FGU Center Center Cebu Holdings Cebu Business Asiatown I.T. Garden Ridge Center Park Park Village

2008 2009 2010

102 103

In the survey for retail business, the set of criteria includes product offerings, marketing activities, personnel, building facilities, utilities, systems and procedures.

Shoppers Satisfaction Survey Merchants Satisfaction Survey To obtain customer feedback and respond to the ever- Our merchants are our patners in achieving Ayala Center changing needs of the shoppers of Ayala Center Cebu, we Cebu’s thrust of providing excellent customer service to conduct an annual customer satisfaction survey. This helps shoppers. us better understand how we can improve our services and offerings to meet or exceed their expectations. The survey helps us understand how the merchants perceive the standard of service that we want to provide All the insights gathered from the survey are taken into to our shoppers. It aids us in determining their level of account when new initiatives are identified and projects are appreciation for our thrust on customer service, and in developed. validating the effectiveness of the trainings and seminars that we extend throughout the year. Through the survey, The survey is conducted in line with the mall’s commitment we are givenRetail a better Feedback picture our Respondents merchants’ and their to provide a rewarding experience to all of its customers. store personnel’s level of understanding on the standards of customer service that we want to deliver to our Done through purposive sampling, respondents were shoppers. interviewed in the mall and pre-qualified to have visited and used the mall facilities four times within the previous four Survey Respondents weeks. 47% 97 Owners The results of the survey in 2010 show general satisfaction of the mall’s services and offerings particularly on the variety 32% and quality of brands, merchandise, entertainment and 65 Supervisors amusement facilities. 21% 44 Managers Marketing events and activities were rated to be relevant and effective. Ayala Center Cebu was also recognized for its In generating a more extensive feedback from this group, pro-environmental events and initiatives. the survey in 2010 was further classified to include not just the merchant owners, but also the managers, Completing the respondents’ shopping experience are the supervisors and operations staff or the front liners who mall’s facilities and customer service. These areas were also deliver the kind of customer service that we want our highlightedShoppers as having satisfied Survey the needs of the customers in shoppersMerchants to experience. Survey the mall.

Shoppers Satisfaction Survey Merchants Satisfaction Survey

9.0 9.0 8.2 8.1 7.9 7.8 7.7 8.0 8.0 7.1 7.1 7.1 7.0 7.0

7.0 7.0

6.0 6.0

5.0 5.0

4.0 4.0

Eco Initiatives Solid Waste Management, Merchant Programs Merchants’ Sta Trainings/Seminars, Landscape Enhancements Fellowhips and Recognition Customer Service Customer Feedback Management, Marketing Programs, Events and Activities, “U-First” Program/PWD facilities Info Channels Marketing Events, Promotions and Loyalty Programs, Systems/Procedures Operations, Leasing, Accounting Turista Desk, A-Card, eGC Utilities Water, Emergency Power, Solid Product Oﬀerings Zoning, Merchandise Mix, Food Waste Management Choices, Cinema Safety/Security Emergency Exits/Directions, Security Mall Facilities Security, Transport Facilities, Inspections, Drills, Crime Prevention Restrooms/Lounge, Common Areas 104 ADDRESSING THE NEEDS OF OUR CUSTOMERS

The results of the survey indicated that the merchant The Company uses its internally-developed Total programs which include staff training, seminars, Customer Satisfaction Management System (TCSMS) fellowship and recognitions are aspects that are well and text feedback system to elicit faster response to appreciated by the respondents. Facilities, parking, customer complaints. These systems track creation, ambiance and lighting were areas that were regarded deployment and resolution of complaints as well as by the managers and owners as those that highly generate reports for analysis. contributed to shopping convenience. CUSTOMER SAFETY AND HEALTH Water supply and emergency power, both rated as The safety of the Company’s customers, employees ‘very good’, were recognized as essentials to merchant and outsourced personnel is one of the most operations, especially to food establishments. important considerations at every stage in the project development process and in our area of operations. Marketing initiatives and merchant programs were two areas that managers and supervisors found to be very 1. Land Acquisition Process. The property, including effective and engaging. its periphery, is evaluated for natural (e.g. flood, earth faults) and man-made (e.g. proximity to industrial The survey also showed that owners are confident areas, landfill, fuel storage and others) hazards. These on the safety equipment and facilities used in the are key elements in determining project feasibility. mall. This aspect is important to both shoppers and merchants. 2. Planning. The design process considers all the relevant regulations, such as the building codes. The merchants, in particular, found the operational Vertical structures (buildings) for example, are systems and procedures established by the mall as designed to withstand earthquakes as provided for helpful to them. in the structural codes, the Philippines being at the “Pacific Ring of Fire”. Exit areas are properly defined COMPLAINTS MANAGEMENT SYSTEM and sized accordingly. The Company strives to provide immediate customer feedback for internal and external clients. Process cycle 3. Construction. The project is considered as off-limits times have been instituted to provide enough lead time to unauthorized personnel. Guests and prospective for employees to resolve issues and to set expectations buyers are issued Personal Protective Equipment (PPE) for clients. The customer feedback mechanisms put and guided accordingly during site visits. in place encourage interaction, thereby allowing the Company to improve its products and services and 4. Property Management. When the project is to resolve issues and concerns in the most efficient operational, property management, in coordination mannerCOMPLAINTS possible. MGMT SYSTEM 2010 with security and other operations personnel, ensure that the area is cleared of hazards and operational Complaints Management System Results control measures are in place to ensure the safety and well-being of customers, merchants and employees. 2008 2009 2010 2,099 63% 1,501 63% 1,332 945 45% 552 250

Total number of cases Cases solved within the day Percentage of cases solved within the day 105

PRODUCT INFORMATION AND MARKETING CUSTOMER PRIVACY COMMUNICATIONS The Company values the privacy of its customers, The Company ensures that all selling materials ensuring that their information is handled are distributed only when required licenses with the utmost care and confidentiality. The have been issued. For real estate products Company’s Code of Ethics covers guidelines and services, all marketing collaterals reflect on the use of Company resources, including License To Sell (LTS) numbers as provided by classified or confidential information, particularly the Housing and Land Use Regulatory Board corporate plans and customer data. Controls (HLURB). The project is described according to on the disclosure of classified information are in the facilities and amenities the Company intends place as the first line of defense against a privacy to deliver as end-product. One hundred percent breach. Current procedures as documented of committed products and services as externally in the management system provide sufficient communicated were delivered in 2010. The guidance for individual access to privacy value proposition for each project has been information. Data is protected via stringent upheld not only as enforced by the HLURB, but file access restrictions. Customer database as a continued commitment to buyers to provide and records are held in a fireproof vault, with quality products and services. limited access rights issued only as needed. Implementation of policy, training, performance All marketing collaterals include a disclaimer evaluations and data access acknowledgements stating that the details and visuals shown in such are done so that all individuals have sufficient collaterals are intended to give a general idea of awareness that casual inappropriate access may the project and as such are not to be relied upon be deterred. This control measure curbs the as statements of fact. While such particulars abuse of right to information access. and details are based on present plans, which have been prepared with utmost care and given In 2010, there were no substantiated complaints in good faith, buyers are invited to verify their regarding breaches of customer privacy and factual correctness and subsequent changes. losses of customer data.

For the retail business operations, print COMPLIANCE WITH LAWS AND REGULATIONS ads, merchandising collaterals, posters and CHI is adamant about making certain that all flyers carry the permit number issued by procedures are in compliance with regulations the Department of Trade and Industry (DTI). as stipulated by law. Projects and supporting The volume of promotional items promised materials are pursuant to policies to enhance for shopper distribution and the discounts consumer confidence in our products and committed in the application for mall-wide processes. sale activities are provided. Corresponding taxes required of prizes for promotions are In 2010 and in the previous years, the Company also paid to the Bureau of Internal Revenue was not sanctioned nor fined by regulatory (BIR). All regulations concerning marketing agencies for non-compliance with laws and communications, advertising, promotion and regulations. sponsorships are complied with. 106

PARTNERING WITH COMMUNITIES

Apas Population: 20,492

Asiatown “…Our alliance with IT Park

our neighbors around Mabolo Population: 27,498

the Cebu Business Luz Population: 27,493 Park highlights the

value of partnership. Kamputhaw Cebu Population: 32,000 Business From beneficiaries Park as they were known Hipodromo Population: 17,687 22 years ago, these Carreta Population: 10,400 communities have become our partners in Cebu Holdings, Inc.’s (CHI) ability to deliver community building…” programs is founded on the partnership the Company has built with the neighboring communities of Cebu Business Park and Asiatown I.T. Park, organized as an alliance since the year 2000. The Cebu Business Park and Neighboring Barangays Altruistic Alliance, Inc. (CBPNBAAI) is composed of community leaders, the Company’s employee volunteers and locators of Cebu Business Park and Asiatown I.T. Park. The alliance has continued to implement development programs.

Vera R. Alejandria Cebu Business Park and Neighboring Barangays Manager, Corporate Communications Altruistic Alliance, Inc. and Customer Affairs We are building a larger community of people with Member, Sustainability Technical varied resources, yet common and collective in Working Group goals and aspirations. 107

This report paints a better panorama of how our social performance has changed and evolved. We have gained wider participation from our employees through our volunteer program known as “Agbayay”, a Visayan term suggesting partnership. Through this program, we encourage our employees to participate in community programs to gain better understanding and appreciation of community partnership.

In 2010, we applied the concept of “Agbayay” in all our development programs relating to environment, education, employment, livelihood, health, and peace and order and we intend to carry on the same strategy in our continuing social initiatives in the future as we sustain and enhance our relationship with our neighbors in the community.

Volunteer time rendered for the year 2010 increased by 23 percent. Eighty-nine employees rendered volunteer work for a total of 1,250 hours spread across 32 activities on the followingVOLUNTEER areas: HOURS 2010 Volunteer Activities

30% 45% Environment: 381 Relationship-Building Activities: 557

19% Education: 240 3% 3% Health: 32 Entrepreneurship: 40

Agbayay depicts an intimate fellowship among equals, evocative of empathy, kinship and easy warmth. A relatively common Visayan term but deep in its meaning. Agbay is among friends, peers or those who have found a connection that breaches borders. It suggests brotherhood, which is what the spirit of true volunteerism encourages. 108 PARTNERING WITH COMMUNITIES

Agbayay Para sa Kalikupan (Partnership for the Environment) CHI’s continued partnership with its neighboring communities has become a model for public-private partnership. Since December 2007, CHI has tapped the neighboring communities to achieve the objectives of the solid waste management program that covers Ayala Center Cebu, Cebu Business Park and Asiatown I.T. Park. Thirty six barangay folks have been tasked to handle garbage collection and composting activities done at Cebu Business Park’s green facility called “Tugkaran”. The rest of the barangay residents are provided training sessions on solid waste management facilitated by employee volunteers.Recyclables?

Solid Waste Generation 2010 Cebu Business Park 18% 59% Recyclables Biodegradable

The team heading the Solid Waste Management 23% Program of Cebu Business Park and Asiatown I.T. Residuals Recyclables? Park. L-R (standing) Barangay Luz Captain Rian C. Tante, Barangay Apas Captain Ramil V. Ayuman, Asiatown I.T. Park administrator Levi L. Lopez, Cebu Solid Waste Generation 2010 City Councilor Nida C. Cabrera, Cebu Business Park Ayala Center Cebu administrator Clement A. del Rosario and head of 49% property management division Elson R. Homez with Biodegradable the team of garbage collectors and composting facility 35% workers (seated) in their uniforms. Recyclables

16% Recyclables Collected, etc... Residuals Recyclables Collected and Income Generated from Cebu Business Park and Ayala Center Cebu In the first full year of garbage collection, Barangay Luz collected a 2008 2009 2010 total of 190,333 kilos of recyclables from both Ayala Center Cebu and Cebu Business Park. Recyclables collected in 2008 had an equivalent cash conversion of P750,351.95.

763,387 While the volume of recyclables collected in 2009 increased by 23 percent with the opening of The Terraces, income generated 750,352 from the sale of recyclables decreased considerably by 41 percent. Buying price of recyclables decreased during the said year. 440,865 218,418

234,909 In 2010, the volume of recyclables collected decreased by seven

190,333 percent as more merchants have started to recycle garbage generated by their establishments. Recyclables collected generated an income of P763,386.50, a 73 percent increase compared to the Recyclables in kilos Peso Cash Conversion income generated in 2009. 109

Agbayay sa Pag-asenso (Partnership for Advancement) At the workplace, employee volunteers continue institution accredited by the Technical Education to collect and donate recyclables to support the and Skills Development Authority (TESDA). livelihood program of making products from waste among the women in the community. Scholarship grantees selected by the In 2010, recyclables collected by employee Sustainability Technical Working Group Education volunteers increased by 52 percent compared to and Livelihood Committee attended a two- the previous year’s collection, with a total 1,478 month commercial cooking course and passed kilos of paper and plastics. These were used by the required NCII Examination administered by the members of the Barangay Luz Multi-purpose TESDA. They completed 420 on-the-job training Cooperative to produce the Company’s corporate hours at food establishments, one of which was Christmas giveaways – coasters made out of used City Sports Club Cebu. office paper encased in a woven container made out of the glossy side of sticker paper. The Company assisted five students of Barangay Hipodromo who took up a basic electricity In 2010, the Company granted scholarships to course. All the scholars who completed the eight out-of-school youth who are immediate vocational courses gathered for a fellowship and family members of our outsourced personnel. learning session. The scholars who completed the barista course in 2009 are now employed The scholarship provided deserving beneficiaries in various coffee shops and hotels. The first with an opportunity to attend a commercial batch of scholars who completed the basic cooking course at a technical-vocational electricity course also found work in the various construction projects within Cebu Business Park. 110 PARTNERING WITH COMMUNITIES

Volunteers and children from Kamputhaw Elementary School after the film showing and lecture

Agbayay Para sa Edukasyon (Partnership for Education) Agbayay volunteers partnered with Quota International-Metro Cebu for the “Inspire a Child: Share a Book” project which benefited children from special education centers in six public schools in Cebu City. Other beneficiaries of the employee volunteer program were Budlaan Elementary School, Garing Elementary School and the children supported by Tsinelas Association Inc., a local organization supporting education programs.

Volunteers help assemble bookshelves for the Budlaan Elementary School Library 111

Emergency Preparedness Workshops on basic firefighting and barangay tanod and safety officers skills training were conducted for 12 barangays as part of the Company’s annual emergency preparedness plan involving members of the surrounding communities. Partner organizations for these Agbayay and CHI PLUS activities were the Bureau of Fire Protection, In 2010, CHI launched Agbayay and CHI PLUS Match Up, to put Department of Interior and Local Government together activities and resources for the benefit of the members and the Philippine National Police. of the community. Teams with special interest in film reviews (Reel Load), physical exercises (Shape Up), pop dance (Shall We Dance?) and food preparation (What’s Cooking?) organized activities that benefited children from elementary schools of Barangay Hipodromo and Kamputhaw.

CHI employee volunteers helped facilitate the activities during the family day organized by Down Syndrome Association of the Philippines (DSAPI) Cebu Chapter held at Ayala Center Cebu in November 2010. The following month, the volunteers assisted Quota International of Metro Cebu for the Christmas activity organized for the special children of San Nicolas Special Education Center.

In 2010, the Company formalized its partnership with Sweet Alert Society in the fight against juvenile diabetes. Free blood sugar testing was conducted for the children from the five upland communities of Budlaan, Sirao, Pung-ol Sibugay, Taptap and Malubog. The activity was facilitated by members of the organization and Company employee volunteers. 112 PARTNERING WITH COMMUNITIES

CAMPAIGNING FOR ENVIRONMENTAL AWARENESS IN THE COMMUNITY To promote environmental awareness in the community, the Company represented by its Corporate Sustainability Officer, participated in the different forums and focused group discussions organized by various government and non- government sectors, namely: a. As a reactor for the “Forum on Climate Change,” organized by the Integrated Bar of the Philippines and the University of Cebu; b. As a representative of the business sector on Sustainability, organized by the Integrated Bar of the Philippines and the University of Cebu; and c. As a presentor on the Company’s practices on sustainability, organized by the Cebu City Local Government Unit

The Company also brought in the Training Manager of the Global Reporting Initiative (GRI) to talk about sustainability reporting during the Visayas Area Business Conference of the Philippine Chamber of Commerce and Industry in June 2010. Greenology A month-long celebration and promotion of an environment-friendly lifestyle among merchants and shoppers. Ayala Center Cebu launched the “No Plastic Bag” Campaign and Online Green Campaign highlighted by its “Green Mall Wide Sale”. Other activities included the live green concert, a green art and fashion show.

Eco Dash: Bottle School Run Earth Hour On November 14, Ayala Center Cebu encouraged Merchants, employees and shoppers at Ayala running enthusiasts to run for a real solution Center Cebu supported the global campaign on for the environment with Eco Dash: The Bottle March 27, 2010. The countdown to the switch- School Run for the benefit of the Law of Nature off was led by Cebu Holdings, Inc. and the Foundation and the Bottle School Project, Philippine Retailers Association-Cebu Chapter an environmentally sound and sustainable at The Terraces. From March 15 to 27, shoppers solution to the country’s shortage of classrooms. and the general public converged at the Active Proceeds of the registration will help build Zone where computer terminals were set up for Cebu’s first bottle school, a structure that makes participants to register at the Earth Hour site and use of recycled 1.5 and 2-liter polyethylene make a virtual lantern as a show of support. To terephthalate (PET) bottles to replace hollow promote early awareness in a fun way for the blocks. This groundbreaking project is also a way young ones, two terminals for a game found in of fighting climate change through sustainable, the Earth Hour site were made available for kids eco-friendly, low-cost, and disaster-resistant 12 years old and below. On March 27, a forum structures as well as reducing the landfill waste. on energy conservation for mall merchants was conducted. Discussions on electricity Over a thousand runners, including members conservation, carbon emission calculation and of the CHI PLUS Running Club, joined the event efficient use of resources were highlighted. which kicked off at The Terraces. A total of 2,500 PET bottles were collected and will be used for Earth Day the construction of the School of the Seas in This was another global campaign to help save Bantayan Island, Cebu. the environment and encourage the general public to participate in the activities which included the collection of recyclables, and plastic bags, an ecoproducts exhibit, an eco photo exhibit and a concert for a cause. Merchants participated by giving discounts to shoppers who brought recyclables. 113

COMMUNITY EVENTS AND EXTERNAL HEALTH AWARENESS PROGRAMS PARTNERSHIPS Think Pink Balik Cebu A month-long celebration which consisted of a The annual Balik-Cebu dinner party is hosted series of events celebrating life despite having by Cebu Holdings, Inc. at The Terraces in Ayala breast cancer. Activities included auction for a Center Cebu. In 2010, it gathered over a hundred cause, a photo exbihit, a fashion exhibit and the balikbayans who paid homage to Sr. Sto. Nino dinner for a cause. and joined in the Sinulog festivities. The guests witnessed the Handumanan and Lakbit Sudo-ong sa Kulturang Bahandi, a showcase of the best Cebuano talents. Partners in this event included the Department of Tourism, Cebu City Tourism Commission, Sinulog Foundation, Inc., and the Balik Cebu Committee.

Cebu Business Month Cebu Holdings, Inc. and Ayala Center Cebu, in partnership with Cebu Chamber of Commerce and Industry (CCCI), hosted the opening salvo of the celebration of Cebu Business Month. Beauty, Health and Wellness An annual partnership with the Mandaue Green Forum and Expo Chamber of Commerce and Industry in Cebu Holdings, Inc. partnered with the Philippine promoting beauty, health and wellness industries Retailers Association(PRA)-Cebu Chapter in of Cebu. raising awareness among retailers and shoppers on the challenges of resource conservation, Stand Up for the Downs waste reduction and application of innovative Ayala Center Cebu, in partnership with the technologies relevant to the retail business. Down Syndrome Association of the Philippines, Inc., hosted a family day for children with Down Syndrome in November 2010.

PRA Cebu’s Mary Ann Alcordo-Solomon and Evelyn Salire, Ayala Center Cebu’s Joy Polloso, Reese Fernandez (Rags to Riches), Chester Lim, CCCI board of trustee and former Cebu City councilor for the Committee on Environment Nestor Archival, CHI sustainability officer Elson Homez, Echo Store’s Chit Juan and PRA Cebu’s Melanie Ng during the opening of the PRA exhibit at the Active Zone in Ayala Center Cebu. 114

STAKEHOLDERS' COMMENTARIES

“…CHI has provided avenues for Engr. Rene Burt N. Llanto knowledge sharing and linkage Regional Director development among key players Department of Science and Technology Region VII in the science and technology community. Collaborative endeavors have always proven to be essential in cultivating and diffusing new ideas, technologies and practices, thus, the potential for innovation toward economic gains can be exponential.”

Some quarters may think that government is As a showcase of environmentally-sound a monolith and can be left on its own. With technologies, CHI opens its doors to all sectors the sophisticated requirements necessary in of the society that wish to learn and duplicate keeping pace with the fast whirling dynamics its experience. Its ability to combine science of a globalizing economy, it cannot act alone. and art is both an inspiration and an influence. A parallel thought can be applied to other In the process, the Company’s S&T advocacy as institutions like in business. seen in both practice and rhetoric has stirred the development of S&T consciousness in the larger Cebu Holdings, Inc. (CHI) as a leading business community. organization places partnership at the core of its existence. I have witnessed how its Perhaps the ultimate benefit of synergy that collaboration with government, civic groups resulted from alliances as demonstrated by CHI and communities effect change and long- is serving the basic interest of the civil society lasting impact among its stakeholders, — that is the merging of the latter’s value with including the environment. social values and environmental sustainability. With the common good in mind, nothing can Through the years, CHI has been supportive of go wrong. Needless to say, CHI is able to make our department. It has provided avenues for profitable business without compromising knowledge sharing and linkage development the welfare of its shareholders. After all, as among key players in the science and Patricia Fripp, the leading speech mentor, puts technology (S&T) community. Collaborative it, “technology does not run an enterprise, endeavors have always proven to be relationships do.” essential in cultivating and diffusing new ideas, technologies, and practices, thus, the potential for innovation toward economic gains can be exponential. 115

Always demanding the best of oneself, GREENING CEBU: A LANDSCAPE ARCHITECT’S living with honor, devoting one’s talents and SHARED LIFETIME DREAM gifts to the benefit of others -- these are “The benefits from the resources of nature that the measures of success that endure when we are now enjoying do not actually belong to us, material things have passed away. but that we just borrowed them from the future generations”, as what one well-renowned UN The future presents many challenges to our Secretary General puts it. nation. From the ravages of global climate change, the demands of a fast growing Such a powerful statement does not only remind population, the pressures of dwindling us of the reality, but also enjoins everyone to resources to the social costs of urbanization, change our mindset, in the manner that we it is reassuring to know that corporations like utilize the resources from the environment. CHI exist that take the initiative to address The element of sustainability should always these issues. We look forward to a greater be a major consideration in all our planning and more fulfilling cooperation with CHI. and development activities and must be a responsibility. Sustainability takes cognizance of the existence of the web of life, as exemplified by “Indeed, there is dire the role it plays in the continuum of biodiversity. need to address the long Over the years, governments, institutions, standing requirement for an organizations, civil societies, professionals, and environmentally-oriented individuals, around the world have started to philosophy in the planning and respond to the call for responsible stewardship design of Cebu. To be able to of the natural environment at various levels of interests and intensities. do that, we have to adopt the ‘Greening Cebu Approach’ to More particularly, in the Philippines, the development. Models of such architects and physical planners under the development approaches are Green Architecture Movement, look at ecology exemplified in planned mixed- and planning (one of the domains of landscape architecture), as part of the Continuing use urban centers introduced Professional Education (CPE). The said architects by Cebu Holdings, Inc. such as do not only consider the CPE, per se, as an the Cebu Business Park and imperative from the Professional Regulations Asiatown I.T. Park.” Commission, but the opportunity of a new thrust of services (in partnership with the government) as well as their social responsibility to present and future generations.

Personally, as a professional architect and as a landscape architect, I have always been advocating and promoting the concept of planning and design with nature. Being the program director of Landscape Architecture (LA), University of San Carlos, under the College of Architecture and Fine Arts, I have the great opportunity to contribute to the LA curriculum design. As a matter of application, environmental education comes with the development of Urban Arch. Socorro B. Atega Professional Architect and Landscape Architect 116 STAKEHOLDERS’ COMMENTARIES

and Rural Landscapes with sensitivity to the In all these foregoing efforts, if I may speak “spirit of the space or sense of place”. The humbly of my optimism, I believe that main objective of the profession is responsible community engagement in participative land stewardship. governance, putting premium on accountability and transparency in all public Indeed, there is dire need to address the long transactions, is the key to making Cebu the standing requirement for an environmentally- pride of every Cebuano. oriented philosophy in the planning and design of Cebu. To be able to do that, we have to adopt the ‘Greening Cebu Approach’ to “We are proud of the work we development. Models of such development do and the partnership we have approaches are exemplified in planned mixed use urban centers introduced by Cebu built. We hold our head high Holdings, Inc. such as the Cebu Business Park knowing we have delivered and and Asiatown I.T. Park. These are some of the exceeded expectations of our Company’s implemented projects that I had partner and our neighboring been involved. Moreover, with my personal business community.” experience in Metro Cebu, some resorts, hotels, restaurants, offices, and private residences have already opted to tap the Rian C. Tante services for professional landscape architects Barangay Captain, Barangay Luz for their various designs and developments. President, Cebu Business Park Neighboring Barangays Altruistic Alliance, Inc. Obviously, the great job of environmental orientation for all sectors of the society can not be left alone to the government to undertake. The major stakeholders that have the capacity to help, must be involved in the process and slowly but surely, we have been getting positive responses. Relentless effort in the advocacy for the Greening of Cebu is in the path of its set goals and objectives.

Thus, it is exciting to note that the current trend in Metro Cebu, on harnessing funds for the Corporate Social Responsibility (CSR) from the business sector, is already geared towards the Green Economy Movement. If I were to describe how our barangay Dreaming of Cebu as a world-class city, at par residents felt about the entry of Ayala in Cebu with some developed countries, is something in the late 1980s with the development of that I personally see from a different the Cebu Business Park, it was more of fear perspective. What makes Cebu my pride, is of eviction and of uncertainty of our family’s its uniqueness as a province, endowed with future. rich history and heritage, a cultural melting pot in the Central Philippines, hospitable and Looking back, the people in our barangay participative civil and business communities, consider new development in the area as a an exciting tourist destination indeed. To menace to the residents who from the very date, Cebu is never short of wonderful, start struggled in securing tenure of our land. safe, enjoyable, and potential eco-tourism The utmost fear was rooted from the notion destinations such as the Kan-irag Nature Park. that once development starts, we would be 117

displaced and the land where our homes were We are proud of the work we do and the built would be taken from us. While we feel partnership we have built. We hold our head that displacement has somehow remained to high knowing we have delivered and exceeded be a concern, with the help of the forerunners expectations of our partner and our neighboring of our barangay, negotiations are now in business community. We will continue to move place to help us acquire the land that we are forward. standing on right now.

The need to involve people was the solution that the barangay leaders thought of to “… I am proud of how our clear assuage the fear of our barangay folks and to provide opportunities for advancement. focus for superior customer service With this involvement, partnerships were has paved ways for improvement, formed. One of which was the partnership of not only in the delivery of quality the barangay and Cebu Holdings, Inc. (CHI). products and services but also As a member of the private sector, CHI has in the relationships within the been a major stakeholder in the governance of Barangay Luz as a local government unit. organization, with our partner CHI has helped provide the foundation for merchants and the rest of our economic growth and development through stakeholders.” employment generation, livelihood and trade, among others.

With Barangay Luz’s Kwarta sa Basura program in place, our barangay has accepted the challenge of managing solid waste from Ayala Center Cebu and the Cebu Business Park. This program, in the process, has built our capability and provided opportunities for employment and livelihood.

The people involved, once in the margins, now work in partnership with the mainstream business, being provided with the space, the resources and partly the technology to make the program work.

With the success of this public-private collaboration, Barangay Luz was one of the Stephanie T. Go few barangays in the country who earned Operations Assistant - Retail Business Group the prestigious Galing Pook award for its Cebu Holdings, Inc. participatory environment engagement. Through this partnership, not only did I have been working in Cebu Holdings Inc. since the Company meet its corporate social 2007 – and four years after, I am still learning responsibility goals but it has been able to and growing each day with the Company, and reduce the cost of waste management. This having fun doing it! partnership has indeed gone a long way and it doesn’t stop there. Being in the operations department of the Company’s mall division has enabled me to meet a wide range of personalities and entrepreneurs. My function has provided 118 STAKEHOLDERS’ COMMENTARIES

me exposure to different fields from lease me, and I try my best to use the stairs operations to the mall’s project development, when going around the mall. Though construction, and even customer there is still much to be said about my engagement, particularly focusing on our athletic skills, I believe that I am now much merchants. I have learned so much about the more fit and well-rounded than when I different facets in today’s very competitive first joined the Company. Best of all, I get retail industry. Being immersed in my work additional perks at yearend through our is a much better practical learning exprience CHI PLUS program. Volunteering in the than getting a formal MBA education. I am Company’s community programs brings a very proud to be part of the prestigious Ayala sense of fulfillment at the end of the day, Malls family, and more so for having been part with the knowledge that time and energy of the project team for developments and was spent in projects that benefit the landmarks that have become Cebu City’s top community. dining and entertainment destinations – The Terraces and The Walk. The Company’s well-established systems and internal processes serve as helpful Aside from having a very good excuse to guides for attaining financial and be in the mall every day, my job has its own productivity targets. With our monthly unique benefits as I get to keep abreast of departmental reviews, we are reminded the latest trends and bargains and become of our commitments and are able to a wiser shopper. On an interpersonal level, develop stop-gaps to manage negative my function has enhanced my self esteem variances, as well as preventive and and helped me become more bold and corrective actions. Most importantly, I am confident in dealing with space applicants proud of how our clear focus for superior and merchants. I am lucky to be among customer service has paved ways for competent colleagues who are proactive, improvement, not only in the delivery of always strive for excellence and continual quality products and services but also in improvement. In spite of the occasional stress the relationships within the organization, and differing opinions, our organizational with our partner merchants and the rest of culture still retains its own brand of warmth our stakeholders. and camaraderie, emphasizing the value of the person more than the function.

Having sports-oriented colleagues has also encouraged me to be more athletic and move towards a healthier lifestyle as I now have companions for jogs or at least, brisk walks after work. My involvement with the Active Zone has piqued my interest to join weekend runs, Wednesday badminton sessions, and the weekly Shape Up sessions. The Company- organized events have exposed me to new activities such as community outreach and tree planting while I also have fun in bowling and snorkeling. Even our day-to-day mall rounds have become a form of exercise for GRI INDEX KEY INDICATORS 119

Global Reporting Initiative (GRI) INDEX Reference Page

PROFILE DISCLOSURE ITEMS 1. Strategy and Analysis 1.1 Statement from the most senior decision maker(s) of the organization 8-11 1.2 Description of the main impacts, risks and opportunities 20-21, 36-37 2. Organizational Profile 2.1 Name of the organization 4-5 2.2 Primary brands, products, and/or services 4-5 2.3 Operational structure and major divisions 12 2.4 Location of the company headquarters IBC 2.5 Countries of operations N/A 2.6 Nature of ownership and legal form 4-5 2.7 Markets served 4-5, 40-41 2.8 Scale of the reporting organization 12 2.9 Significant changes during the reporting period N/A 2.10 Awards and recognitions received during the reporting period 22 3. Report Parameters 3.1 Reporting period 1 3.2 Date of most recent previous report 1 3.3 Reporting cycle 1 3.4 Contact point for questions about the report and its contents 1, IBC Report Scope and Boundary 3.5 Process for defining report content 1 3.6 Boundary of the report 1 3.7 Limitations on the scope or boundary of the report 1 3.8 Basis for reporting on joint ventures, subsidiaries, and other related entities 1 3.9 Assessment methods for data and bases for estimates in data compilation 1 3.10 Explanation of the effect of any re-statements of information provided in previous N/A reports 3.11 Signficant changes from previous reporting period N/A 3.13 Current policy and practice dealing with external verification 1 GRI Content Index 3.12 GRI Content Index Page 119-121 4. Governance, Commitments, and Engagement 4.1 Governance structure of the organization 12-26 4.2 Indicate if the Chair of the highest governance body is also an Executive Officer 12-13 4.3 Number of independent and non-executive members 13 4.4 Mechanisms for shareholders and employees to provide recommendations 25-26 4.5 Association between the compensation of the members of top management, high 14-15 directors and the peformance of the organization including environmental and social performance 4.6 Procedures for avoiding conflict of interest in top management 26 4.7 Procedures for determining qualifications and experience of top management for guiding 15 the organization in economic, environmental and social aspects 4.8 Statement concerning missions and values implemented internally, codes of conduct 4, 26, 76-85, 100- and standards for economic, environmental, and social performance, and the status of 104 implementation 4.9 Procedures for top management to supervise the identification and management of the 3, 20-22, 26, 30-33, organization’s economic, environmental, and social performance, including assessment of 36, 96-97, 104 risks and opportunities, as well as adherence to international level codes of conduct and standards 4.10 Process to assess the performance of top management, especially with respect to 15, 18, 35 economic, environmental and social performance 20-22, 36, 96-97, 4.11 Explanation of how the organization has adopted the precautionary principle 104 120 GRI INDEX KEY INDICATORS

Global Reporting Initiative (GRI) INDEX Reference Page

4.12 Externally developed economic, environmental, and social standards adopted or any 7, 26, 37 other related initiatives 4.13 Listing of groups of interest included by the organization 90-91 Stakeholders Engagement 4.14 List of stakeholders groups 90-91 4.15 Basis for identification and selection of stakeholders groups 90-91 4.16 Approaches used to include interest groups, including frequency of participation 90-91 according to the type of group of interest 4.17 Main concerns and topics raised by stakeholders and how the organization has responded 90-91 to these concerns ECONOMIC EC1 Economic value generated and distributed, including revenues, operating costs, employee 42-47 compensation, donations and other community investments, retained earnings and payments to capital providers and governments EC2 Financial implications and other risks and opportunities for the organization’s activities due to 36 climate change EC3 Coverage of the organization’s defined benefit plan obligations. 95 EC5 Standard entry level wage compared to local minimum wage in locations of operations 94 EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations 46-47 of operation EC7 Procedures for local hiring and proportion of senior management hired from the local 94 community at significant locations of operation EC8 Development and impact of infrastructure investments and services provided primarily for 46-47 public benefit through commercial, in-kind, or pro bono engagement EC9 Understanding and describing significant indirect economic impacts, including the extent of 47 impacts. ENVIRONMENT EN1 Materials used by weight or volume 77 EN2 Percentage of materials used that are recycled input materials 77 EN3 Direct energy consumption by primary energy source 78 EN4 Indirect energy consumption by primary source 78 EN5 Energy saved due to conservation and efficiency improvement 78 EN6 Initiatives for using energy-efficient or renewable based products and services 77, 80 EN7 Initiatives to reduce indirect energy consumption 80-81 EN8 Total water withdrawal by source 81 EN10 Percentage and total volume of water recycled and reused 85 EN13 Habitats protected or restored 86-87 EN16 Total direct and indirect greenhouse gas emissions by weight 82-83 EN17 Other relevant indirect greenhouse gas emissions by weight 82-83 EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved 82-83, 112 EN19 Ozone-depleting substances 82 EN20 NOx, SOx, and other significant air emissions by type and weight 82 EN21 Total water discharged by quality and destination 85 EN22 Total weight of waste by type and disposal method 84 EN23 Total number and volume of significant spills 84 EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the 84 terms of the Basel Convention Annex I, II, III, and VIII and percentage of transported waste shipped internationally EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact 82-85, 108 mitigation. EN28 Monetary value of significant fines and total number of monetary sanctions for non- 78 compliance with environmental laws and regulations EN30 Total environmental protection expenditures and investments by type 47 SOCIAL LA1 Total workforce by employment type 93 LA2 Total number and rate of employee turnover by gender, age 93 LA3 Benefits provided to full-time (permanent) employees 94 121

Global Reporting Initiative (GRI) INDEX Reference Page

LA6 Percentage of total workforce represented in joint management and worker health and 96 safety committees LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work 97 related fatalities LA8 Education, training, counseling, prevention and risk-control programs in place to assist 97 workforce members, their families, or community members regarding serious diseases LA10 Average hours of training per year per employee by employee category 97 LA12 Percentage of employees receiving regular performance and career development reviews 94-95 LA13 Composition of governance bodies and breakdown of employees per category 94 LA 14 Ratio of basic salary of men to women by employee category 95 HR 4 Total number of incidents of discrimination and actions taken 95 HR6 Operations identified as having significant risk for incidents of child labor and measures 95 taken to contribute to the elimination of child labor HR 7 Operations identified as having significant risk for incidents of forced or compulsory labor, 95 and measures to contribute to the elimination of forced or compulsory labor SO1 Nature, scope and effectiveness of any programs and practices that assess and manage the 106-110 impacts of operations on communities, including entering, operating and exiting SO3 Percentage of employees trained in organization’s anti-corruption policies and procedures 95 SO8 Monetary value of significant fines and total number of non-monetary sanctions for non- 95 compliance with laws and regulations PR1 Life cycle stages in which health and safety impacts of products and services are assessed 100-105 for improvement, and percentage of significant products and services categories subject to such procedures PR2 Total number of incidents of non-compliance with regulations and voluntary codes 104 concerning health and safety impacts of products and services during their life cycle, by type of outcomes PR3 Type of product and service information required by procedures, and percentage of 105 significant products and services subject to such information requirements PR5 Practices related to customer satisfaction, including results of surveys measuring customer 102-104 satisfaction PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing 105 communications, including advertising, promotion and sponsorship PR7 Total number of incidents of non-compliance with regulations and voluntary codes 105 concerning marketing communications, including advertising, promotion and sponsorship by type of outcomes PR8 Total number of substantiated complaints regarding breaches of customer privacy and 105 losses of customer data PR9 Monetary value of significant fines for non-compliance with laws and regulations 105 concerning the provision and use of products and services

Cebu Holdings, Inc. is a registered Organizational Stakeholder of the Global Reporting Initiative (GRI) and supports the mission of the GRI to develop globally-accepted sustainability reporting guidelines through a global, multi-stakeholder process.

We include this GRI Application Level table in our report to support our self-declaration of this report at Application Level B.

Report on: Report on all criteria 1.1 listed for Level C plus: G3 Profile 2.1-2.10 1.2 Same as requirement Disclosures 3.1-3.8, 3.10-3.12 3.9, 3.13 for Level B 4.1-4.4, 4.14-4.15 4.5-4.13, 4.16-4.17

Management Approach Management Approach G3 Management Not Required Disclosures for each Indicator Disclosures for each Indicator Approach Disclosures Category Cate gory

Report on each core G3 and Report on a mimimum of Report on a minimum of Sector Supplement Indicator G3 Performance Indicators 10 Performance Indicators, 20 Performance Indicators, with due regard to the including at least one from at least one from each: & Sector Supplement Economic, Environmental, Materiality Principle by either: Performance Indicators each: Economic, Social, and (a) reporting on the Indicator Environmental Human Rights, Labor, Social, or (b) explaining the reason for Product Responsibility. the omission. 122

FINANCIAl REPORT

• Statement of Management’s Responsibility for Financial Statements • Report of the Audit Committee to the Board of Directors • Independent Auditors’ Report • Consolidated Statements of Financial Position • Consolidated Statements of Income • Consolidated Statements of Comprehensive Income • Consolidated Statements of Changes in Equity • Consolidated Statements of Cash Flows

123

STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Cebu Holdings, Inc. and Subsidiaries is responsible for all information and representations contained in the consolidated financial statements for the years ended December 31, 2010, 2009 and 2008. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the Philippines and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration to materiality.

In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized. The management likewise discloses to the Company’s audit committee and to its external auditor: (i) all significant deficiencies in the design or operation of internal controls that could adversely affect its ability to record, process, and report financial data; (ii) material weaknesses in the internal controls; and (iii) any fraud that involves management or other employees who exercise significant roles in internal controls.

The Board of Directors reviews the consolidated financial statements before such statements are approved and submitted to the stockholders of the Company.

SyCip Gorres Velayo & Co., the independent auditors appointed by the stockholders, has examined the consolidated financial statements of Cebu Holdings, Inc. and Subsidiaries in accordance with generally accepted auditing standards in the Philippines and has expressed its opinion on the fairness of presentation upon completion of such examination, in its report to the Board of Directors and stockholders.

Signed under oath by the following:

ANTONINO T. AQUINO Chairman, Board of Directors

FRANCIS O. MONERA President

ELEANORE R. TOMANENG Chief Finance Officer and Compliance Officer 124

REPORT OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS FOR THE YEAR ENDED DECEMBER 31, 2010

The Audit & Risk Committee’s roles and responsibilities are defined in the Audit & Risk Committee Charter approved by the Board of Directors. The Audit & Risk Committee provides assistance to the Board of Directors in fulfilling its oversight responsibility to the shareholders relating to: a.) the Company’s financial statements and the financial reporting process, b.) the systems of internal controls and financial reporting controls, c.) the internal audit activity, d.) the annual independent audit of the Company’s financial statements, e.) compliance with legal and regulatory matters, and f.) the adequacy of risk management.

In compliance with the Audit & Risk Committee Charter, we confirm that: • An independent director chairs the Audit &Risk Committee; • We had five (5) meetings for the year. All members were present; • We recommended to the Board of Directors the re-appointment of SGV & Co. as independent external auditor for 2010, based on the review of their performance and qualifications, including consideration of management’s recommendation; • We reviewed and discussed the quarterly consolidated financial statements and annual consolidated financial statements of Cebu Holdings, Inc. and subsidiaries (the “Company”, including Management’s Discussion and Analysis of Financial Condition and Results of Operations) as of and for the year ended December 31, 2010, with the Company’s management and SGV & Co.. We confirm the report of the external auditors and the results of the review of the 2010 audited financial statements. These activities were performed in the following context: • That management has the primary responsibility for the financial statements and the reporting process, • That SGV & Co. is responsible for expressing the opinion on the conformity of the Company’s consolidated audited financial statements with the Philippine Financial Reporting Standards; • We discussed and approved the overall scope and the respective audit plans of the Company’s Internal Auditors and SGV & Co. We have also discussed the results of their audits and their assessment of the Company’s internal controls and the overall quality of the financial reporting process; • We reviewed and approved all audit services provided by SGV & Co. to the Company and have concluded that such services do not impair their independence; • We reviewed the reports of the Internal Auditors, ensuring that management is taking appropriate corrective actions in a timely manner, including addressing internal control and compliance with legal and regulatory issues; • The Committee was also oriented on other aspects of the Company apart from internal audit, financial reporting and external audit. This is for the Committee’s further awareness and appreciation of the Company’s initiatives and programs. An overview of the following were taken up in 2010: (1) Balanced Scorecard (BSC) Strategic Management System, (2) Construction Management Division and (3) Real Estate Project Development Group (PDG) and Innovation and Design Group (IDG). The Audit & Risk Committee will continue to get sessions on the other initiatives and programs in the succeeding years.

Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities referred to above, the Audit & Risk Committee recommended to the Board of Directors the inclusion of the Company’s consolidated financial statements as of and for the year ended December 31, 2010 in the Company’s Annual Report to the Stockholders and for filing with the Securities and Exchange Commission.

February 8, 2011

FR. RODERICK C. SALAZAR, JR. , SVD ENRIQUE L. BENEDICTO HERNANDO O. STREEGAN Committee Chair Member Member 125

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of Directors Cebu Holdings, Inc.

We have audited the accompanying consolidated financial statements of Cebu Holdings, Inc. and Subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2010 and 2009, 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, 2010, and a summary of significant accounting policies and other explanatory information.

ManageMenT’S ReSponSIBIlITy foR THe ConSolIDaTeD fInanCIal STaTeMenTS

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with philippine financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. auDIToRS’ ReSponSIBIlITy our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with philippine Standards on auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cebu Holdings, Inc. and Subsidiaries as at December 31, 2010 and 2009, and their financial performance and their cash flows for each of the three years in the period ended December 31, 2010 in accordance with philippine financial Reporting Standards.

SyCIp goRReS Velayo & Co.

Davee M. Zuñiga partner Cpa Certificate no. 88990 SeC accreditation no. 0665-aR-1 Tax Identification no. 160-302-953 BIR accreditation no. 08-001998-77-2009, June 1, 2009, Valid until May 31, 2012 pTR no. 0853404, January 3, 2011, Cebu City

March 16, 2011 126

CEBU HOLDINGS, INC. AND SUBSIDIARIES CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED(Amounts in Thousands, except STATEMENTS for Par Value, Authorized OF and FINANCIAL Issued Shares) POSITION (Amounts in Thousands, except for Par Value, Authorized and Issued Shares)

December 31 2010 2009

ASSETS

Current Assets Cash and cash equivalents (Notes 4 and 24) P=897,353 P=667,583 Short-term cash investments (Notes 5 and 24) 25,820 237,510 Receivables (Notes 6, 16 and 24) 262,110 230,275 Subdivision land for sale and development - at cost (Note 7) 635,774 321,447 Sports club shares for sale - at cost 357,864 357,864 Other current assets (Note 8) 13,373 24,852 Total Current Assets 2,192,294 1,839,531

Noncurrent Assets Noncurrent portion of receivables - net (Notes 6, 16 and 24) 231,143 158,384 Deferred tax assets (Note 22) 10,938 9,540 Land and improvements - at cost (Note 7) − 656,579 Property and equipment (Note 9) 56,727 34,065 Investments in associates (Note 10) 393,575 278,107 Investment properties (Note 11) 3,055,801 2,708,218 Other noncurrent assets (Note 12) 97,912 88,792 Total Noncurrent Assets 3,846,096 3,933,685 P=6,038,390 P=5,773,216

LIABILITIES AND EQUITY

Current Liabilities Accounts and other payables (Notes 13, 16, 21 and 24) P=789,217 P=738,025 Customers’ deposits and deferred credits (Notes 15 and 24) 266,036 221,999 Income tax payable 26,770 25,853 Current portion of long-term debt (Notes 14 and 24) 110,000 110,000 Total Current Liabilities 1,192,023 1,095,877

Noncurrent Liabilities Customers’ deposits and deferred credits (Notes 15 and 24) 30,742 48,075 Deferred tax liabilities (Note 22) 36,048 23,733 Long-term debt - net of current portion (Notes 14 and 24) 55,000 165,000 Total Noncurrent Liabilities 121,790 236,808 Total Liabilities 1,313,813 1,332,685 Equity (Note 25) Equity attributable to equity holders of Cebu Holdings, Inc. Capital stock - P=1 par value Authorized - 3,000,000,000 shares Issued and outstanding - 1,920,073,623 shares P=1,920,073 P=1,920,073 Additional paid-in capital 856,685 856,685 Retained earnings 1,638,384 1,366,590 4,415,142 4,143,348 Non-controlling interests 309,435 297,183 Total Equity 4,724,577 4,440,531 P=6,038,390 P=5,773,216

See accompanying Notes to Consolidated Financial Statements. 127

CEBU HOLDINGS, INC. AND SUBSIDIARIES CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED(Amounts in Thousands, except STATEMENTS Earnings Per Share) OF INCOME (Amounts in Thousands, except Earnings Per Share)

Years Ended December 31 2010 2009 2008

REVENUE Real estate (Note 16) P=448,868 P=413,945 P=738,357 Rental income (Notes 11 and 27) 746,781 697,950 594,802 Theater income 77,866 72,747 66,542 Equity in net earnings of associates (Note 10) 29,020 19,687 14,909 Interest and other income (Note 17) 144,650 83,955 85,421 1,447,185 1,288,284 1,500,031

COSTS AND EXPENSES Real estate, rental and theater expenses (Note 18) 662,733 671,029 713,951 General and administrative (Notes 16, 19 and 21) 176,469 161,732 161,582 Interest and other charges (Notes 14, 15 and 20) 27,171 22,060 11,164 866,373 854,821 886,697

INCOME BEFORE INCOME TAX 580,812 433,463 613,334

PROVISION FOR INCOME TAX (Note 22) 135,549 103,920 172,041

NET INCOME P=445,263 P=329,543 P=441,293

Net Income Attributable to: Equity holders of Cebu Holdings, Inc. P=406,200 P=302,192 P=399,479 Non-controlling interests 39,063 27,351 41,814 P=445,263 P=329,543 P=441,293

Basic/Diluted Earnings Per Share (Note 23) P=0.21 P=0.16 P=0.21

See accompanying Notes to Consolidated Financial Statements. 128

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

Years Ended December 31 2010 2009 2008

NET INCOME FOR THE PERIOD P=445,263 P=329,543 P=441,293

OTHER COMPREHENSIVE INCOME − − −

TOTAL COMPREHENSIVE INCOME P=445,263 P=329,543 P=441,293

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Equity holders of Cebu Holdings, Inc. P=406,200 P=302,192 P=399,479 Non-controlling interests 39,063 27,351 41,814 P=445,263 P=329,543 P=441,293

See accompanying Notes to Consolidated Financial Statements. 129

CEBU HOLDINGS, INC. AND SUBSIDIARIES CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY CONSOLIDATED(Amounts in Thousands, except STATEMENTS Cash Dividends Per Share)OF CHANGES IN EQUITY (Amounts in Thousands, except Cash Dividends Per Share)

Years Ended December 31 2010 2009 2008

ATTRIBUTABLE TO EQUITY HOLDERS OF CEBU HOLDINGS, INC.

Capital Stock (Note 25) P=1,920,073 P=1,920,073 P=1,920,073

Additional Paid-in Capital (Note 25) 856,685 856,685 856,685

Retained Earnings (Note 25) At beginning of year 1,366,590 1,198,804 933,731 Net income 406,200 302,192 399,479 Cash dividends - P=0.07 per share (134,406) (134,406) (134,406) At end of year 1,638,384 1,366,590 1,198,804 4,415,142 4,143,348 3,975,562

NON-CONTROLLING INTERESTS At beginning of year 297,183 292,170 272,694 Net income 39,063 27,351 41,814 Dividends paid to non-controlling interest (26,811) (22,338) (22,338) At end of year 309,435 297,183 292,170 P=4,724,577 P=4,440,531 P=4,267,732

See accompanying Notes to Consolidated Financial Statements.

130

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

Years Ended December 31 2010 2009 2008

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=580,812 P=433,463 P=613,334 Adjustments for: Depreciation and amortization (Notes 9, 11, 18 and 19) 130,509 135,801 117,193 Interest expense (Note 20) 24,755 17,647 11,164 Foreign exchange losses (gains) (Notes 17 and 20) 1,824 4,292 (8,536) Gain on disposal of property and equipment (Note 17) (129) − (301) Equity in net earnings of associates (Note 10) (29,020) (19,687) (14,909) Interest income (Note 17) (52,240) (51,648) (65,993) Operating income before working capital changes 656,511 519,868 651,952 Decrease (increase) in: Receivables (88,121) (68,918) 17,784 Subdivision land for sale and development (22,878) 52,177 212,986 Sports club shares for sale − − 1,686 Other current assets 11,479 5,256 39,725 Increase (decrease) in: Accounts and other payables 45,910 (39,922) 39,533 Customers’ deposits and deferred credits 26,704 14,121 17,409 Net cash generated from operations 629,605 482,582 981,075 Interest received 39,773 37,796 49,725 Interest paid (19,473) (16,689) (21,774) Income taxes paid (123,715) (87,767) (162,952) Net cash provided by operating activities 526,190 415,922 846,074

CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of: Investment properties (Note 11) (100,916) (186,233) (93,954) Property and equipment (Note 9) (34,874) (5,200) (480,560) Decrease (increase) in: Short-term cash investments 211,690 (153,347) (84,163) Land and improvements (Note 7) – – (52,208) Other noncurrent assets (9,120) 55,633 63,035 Investments in associates (Note 10) (90,454) − (173,750) Proceeds from sale of property and equipment 295 6,255 454 Cash of deconsolidated subsidiary − − (6,250) Net cash provided by(used in) investing activities (23,379) (282,892) (827,396)

(Forward) 131

- 2 -

Years Ended December 31 2010 2009 2008

CASH FLOWS FROM FINANCING ACTIVITIES Payments of long-term debt (P=110,000) (P=55,000) P=− Dividends paid to: Non-controlling interests (26,811) (22,338) (22,338) Equity holders of Cebu Holdings, Inc. (134,406) (134,406) (134,406) Decrease in amounts due to related parties − − (24,648) Net cash used in financing activities (271,217) (211,744) (181,392)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,824) (4,292) 8,536

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 229,770 (83,006) (154,178)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 4) 667,583 750,589 904,767

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) P=897,353 P=667,583 P=750,589

See accompanying Notes to Consolidated Financial Statements. 132 CEBU HOLDINGS, INC. AND SUBSIDIARIES CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTESNOTES TO CONSOLIDATED TO CONSOLIDATED FINANCIAL FINANCIAL STATEMENTS STATEMENTS

1. Group Information

Cebu Holdings, Inc. (the Parent Company) was incorporated in the Republic of the Philippines on December 9, 1988 and is engaged in real estate development, sale of subdivided land, residential and office condominium units, sports club shares, and lease of commercial spaces. The registered office address of the Parent Company is at 7th Floor, Cebu Holdings Center, Cebu Business Park, Cebu City.

Cebu Property Ventures and Development Corporation (CPVDC), a subsidiary, is engaged in real estate development and sale of subdivision land and residential units. The registered office address of the Company is at 7th Floor, Cebu Holdings Center, Cebu Business Park, Cebu City.

Asian I-Office Properties, Inc. (AiO) is 40%-owned by CPVDC starting in 2008 and 100%-owned in 2007. Its purpose is to engage in all aspects of real estate development and in leasing of corporate spaces. The registered office address of AiO is at 7th Floor, Cebu Holdings Center, Cebu Business Park, Cebu City, Philippines. AiO was incorporated on September 24, 2007 and has commenced its operations in May 2009.

Cebu Leisure Company, Inc. (CLCI), a subsidiary, is engaged in subleasing of commercial spaces, food courts and entertainment facilities. The registered office address of CLCI is at 7/F Cebu Holdings Center, Cebu Business Park, Cebu City.

CBP Theatre Management Company, Inc. (CBP Theatre), a subsidiary, was registered with the Securities and Exchange Commission to engage 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.

The consolidated financial statements of Cebu Holdings, Inc. and Subsidiaries (the Group) as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2009 were endorsed for approval by the Audit Committee on February 8, 2011 and were authorized for issue by the Executive Committee of the Board of Directors (BOD) on March 16, 2011.

2. Summary of Significant Accounting Policies

Basis of Preparation The accompanying consolidated financial statements of the Group have been prepared on a historical cost basis. The consolidated financial statements are presented in Philippine Peso, and all values are rounded to the nearest thousand (P=000) except when otherwise indicated. The Group’s functional currency is Philippine Peso.

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 majority-owned subsidiaries (the Group):

Effective Percentages of Ownership

2010 2009 Cebu Leisure Company, Inc. 100% 100% CBP Theatre Management Company, Inc. 100 100 Cebu Property Ventures & Development Corporation 76 76

The financial statements of the subsidiaries are prepared for the same reporting year as the Parent Company, using consistent accounting policies.

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All intercompany balances and transactions, including income, expenses and dividends, are eliminated in full.

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 such control ceases. Due to the change in CPVDC’s interest in AiO from 100% in 2007 to 40% in 2008, the Group deconsolidated its former subsidiary in 2008, and accounted for its investment under the equity method of accounting.

The excess of the Parent Company’s cost of investment in CPVDC over its proportionate share in the underlying net assets at date of acquisition was identified, and thus allocated to “Subdivision land for sale”, “Land and improvements” and “Investment properties” accounts in the consolidated statement of financial position. The purchase premium is amortized in proportion to the area of lots (in square meters) sold by CPVDC.

Non-controlling interests represent the portion of profit or loss and net assets in CPVDC not held 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.

Changes in Accounting Policies and Disclosures The accounting policies adopted are consistent with those of the previous financial year except for the following new and amended PFRS and Philippine Interpretations which were adopted as of January 1, 2010:

New Standards and Interpretations • PFRS 3, Business Combinations (Revised) and PAS 27, Consolidated and Separate Financial Statements (Amended) effective July 1, 2009 • Philippine Interpretation IFRIC 17, Distributions of Non-Cash Assets to Owners effective July 1, 2009

Amendments to Standards • PAS 39 Amendment, Financial Instruments: Recognition and Measurement - Eligible Hedged Items effective July 1, 2009 • PFRS 2 Amendments, Group Cash-settled Share-based Payment Transactions effective January 1, 2010 • Improvements to PFRSs issued in 2009 effective January 1, 2010

Standards or interpretations that have been adopted and that are deemed to have no impact on the consolidated financial statements or performance of the Group are described below:

New Standards and Interpretations PFRS 3, Business Combinations (Revised) and PAS 27, Consolidated and Separate Financial Statements (Amended) PFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after becoming effective. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. PAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by PFRS 3 (Revised) and PAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non- controlling interests. PFRS 3 (Revised) was applied prospectively while PAS 27 (Amended) was applied retrospectively with a few exceptions. The Group has concluded that these changes will have no impact on the financial position or performance of the Group, as the Group has not entered into any acquisitions and transactions with non-controlling interests.

Philippine Interpretation IFRIC 17, Distributions of Non-Cash Assets to Owners This Interpretation provides guidance on how to account for non-cash distributions to owners. The interpretation clarifies when to recognize a liability, how to measure it and the associated assets, and when to derecognize the asset and liability. The Interpretation has no effect on the consolidated financial statements as the Group has not made non-cash distributions to shareholders.

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

Amendments to Standards PAS 39 Amendment, Financial Instruments: Recognition and Measurement - Eligible Hedged Items The amendment to PAS 39, Financial Instruments: Recognition and Measurement, clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Group has concluded that the amendment will have no impact on the consolidated financial position or performance of the Group, as the Group has not entered into any such hedges.

PFRS 2 Amendments, Group Cash-settled Share-based Payment Transactions The amendments to PFRS 2, Share-based Payments, clarify the scope and the accounting for group cash-settled share- based payment transactions. The Group has concluded that the amendment did not have an impact on the consolidated financial position or performance of the Group as the Group did not enter into any such share-based payment transactions.

Improvements to PFRSs The omnibus amendments to PFRSs issued in 2009 were issued primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies but did not have any impact on the financial position or performance of the Group.

• PFRS 8, Operating Segment Information, clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. As the Group’s chief operating decision maker does review segment assets and liabilities, the Group has continued to disclose this information in Note 26.

• PAS 7, Statement of Cash Flows, explicitly states that only expenditure that results in a recognized asset can be classified as a cash flow from investing activities.

• PAS 17, Leases, removes the specific guidance on classifying land as a lease. Prior to the amendment, leases of land were classified as operating leases. The amendment now requires that leases of land are classified as either ‘finance’ or ‘operating’ in accordance with the general principles of PAS 17.

Other amendments resulting from Improvements to PFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:

• PFRS 2, Share-based Payment • PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations • PAS 1, Presentation of Financial Statements • PAS 36, Impairment of Assets • PAS 38, Intangible Assets • PAS 39, Financial Instruments • Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives • Philippine Interpretation IFRIC 16, Hedge of a Net Investment in a Foreign Operation

Standards Issued but not yet Effective The Group will adopt the following standards and Philippine Interpretations enumerated below when these become effective. Except as otherwise indicated, the Group does not expect the adoption of these new and amended PFRS and Philippine Interpretations to have significant impact on the consolidated financial statements.

New Standards and Interpretations PFRS 9, Financial Instruments: Classification and Measurement PFRS 9, as issued in 2010, reflects the first phase on the replacement of PAS 39 and applies to classification and measurement of financial assets as defined in PAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. In subsequent phases, hedge accounting and derecognition will be addressed. The completion of this project is expected in early 2011. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Group’s financial assets. The Group will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.

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Philippine Interpretation IFRIC 15, Agreement for Construction of Real Estate This Interpretation, effective for annual periods beginning on or after 1 January 2012, covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The Interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. The adoption of this Philippine Interpretation will be accounted for retrospectively, and will result to restatement of prior period consolidated financial statements.

The adoption of this Philippine Interpretation may significantly affect the determination of the revenue from real estate sales and the corresponding costs, and the related trade receivables, deferred tax liabilities and retained earnings accounts. The Group is in the process of quantifying the impact of adoption of this Interpretation and will disclose the impact when it becomes available.

Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments This Interpretation, effective for annual periods beginning on or after 1 July 2010, clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognized immediately in profit or loss.

Amendments to Standards PAS 12 Amendment, Income Taxes - Deferred Tax: Recovery of Underlying Assets The Amendment to PAS 12 is effective for annual periods beginning on or after 1 January 2012. It provides a practical solution to the problem of assessing whether recovery of an asset will be through use or sale. It introduces a presumption that recovery of the carrying amount of an asset will normally be through sale.

PAS 24 Amendment, Related Party Disclosures The amended standard is effective for annual periods beginning on or after 1 January 2011. It clarified the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government related entities. Early adoption is permitted for either the partial exemption for government-related entities or for the entire standard.

PAS 32 Amendment, Financial Instruments: Presentation – Classification of Rights Issues The amendment to PAS 32 is effective for annual periods beginning on or after 1 February 2010 and amended the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency.

PFRS 7 Amendment, Financial Instruments: Disclosures - Transfer of Financial Assets The amendments to PFRS 7 are effective for annual periods beginning on or after 1 July 2011. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred th e assets. The amendments also require additional disclosures if a disproportionate amounts of transfer transactions are undertaken around the end of a reporting period.

Philippine Interpretation IFRIC 14 Amendment, Prepayments of a minimum funding requirement The amendment to Philippine Interpretation IFRIC 14 is effective for annual periods beginning on or after 1 January 2011 with retrospective application. The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset.

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

Improvements to PFRSs 2010 The omnibus amendments to PFRSs issued in 2010 were issued primarily with a view to removing inconsistencies and clarifying wording. The amendments are effective for annual periods financial years 1 January 2011 except otherwise stated. The Group has not yet adopted the following amendments and anticipates that these changes will have no material effect on the consolidated financial statements.

• PFRS 3, Business Combinations • PFRS 7, Financial Instruments: Disclosures • PAS 1, Presentation of Financial Statements • PAS 27, Consolidated and Separate Financial Statements • Philippine Interpretation IFRIC 13, Customer Loyalty Programmes

Cash and Cash Equivalents and Short-term Cash Investments Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amount of cash with original maturities of three (3) months or less from date of placement and that are subject to an insignificant risk of changes in value. Cash investments with original maturities beyond three months are classified as short-term cash investments.

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. In the case of a regular way purchase or sale of financial assets, recognition and derecognition, as applicable, is done using the settlement date accounting.

Initial recognition Financial assets and financial liabilities are recognized initially at fair value. Transaction costs are included in the initial measurement of all financial assets and liabilities, except for financial instruments measured at fair value through profit or loss (FVPL).

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

Determination of fair value The fair value for financial instruments traded in active markets at the reporting date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. When current bid and ask prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models, and other relevant valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 24.

Day 1 profit 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” profit) in the consolidated statement of income 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’ profit amount.

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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. This accounting policy relates to the consolidated statement of financial position captions “Cash and cash equivalents”, “Short-term cash investments” and “Receivables”.

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. The amortization is included in “Interest and other 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.

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. After initial measurement, other financial liabilities are subsequently measured at amortized cost using the effective interest rate 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 effective interest rate. The amortization is included in the “Interest expense” account in the consolidated statement of income.

This accounting policy applies primarily to the Group’s “Accounts and other payables”, “Long-term debt” and other obligations that meet the above definition (other than liabilities covered by other accounting standards, such as income tax payable).

Derivative Financial Instruments Derivative instruments (including bifurcated embedded derivatives) are initially recognized at fair value on the date in which a derivative transaction is entered into or bifurcated, and are subsequently re-measured at fair value. Changes in fair value of derivative instruments not accounted for as hedges are recognized immediately in the consolidated statement of income. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Derivative financial instruments also include bifurcated embedded derivatives. An embedded derivative is separated from the hybrid or combined contract if all the following conditions are met: (a) the economic characteristics and risks of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the host contract; (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and (c) the hybrid instrument is not recognized at FVPL.

The Group assesses whether embedded derivatives are required to be separated from the host contracts when the Group first becomes a party to the contract. Reassessment of embedded derivatives is only done when there are changes in the contract that significantly modifies the contractual cash flows.

Where derivatives are designated as effective hedging instruments, provisions of hedge accounting apply. Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly to net profit or loss for the year.

The Group has no derivatives as of December 31, 2010 and 2009.

Customers’ Deposits and Deferred Credits Customers’ deposits are measured initially at fair value. The difference between the cash received and the fair value of customers’ deposits is recognized as deferred credits (included in “Customers’ deposit and deferred credits” in the consolidated statement of financial position) and amortized using the straight-line method under the “Rental income” account in the consolidated statement of income. After initial recognition, customers’ deposits are subsequently measured at amortized cost using effective interest method. Accretion of discount is recognized under “Interest expense” in the consolidated statement of income.

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

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

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

Financial liability A financial liability is derecognized when the obligation under the liability is discharged, cancelled or 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.

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 use of an allowance account and the amount of loss is charged to the consolidated statement of income. Interest income continues to be recognized based on the original effective interest rate 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 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, customer location, credit history, past-due status and term.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

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. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the consolidated statement of financial position.

Subdivision Land for Sale and Development Subdivision land for sale and development is valued 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 those incurred for the acquisition and development of the properties and is measured using the average cost method.

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Sports Club Shares for Sale These are assets held for sale in the ordinary course of business. Sports club shares for sale are valued at the lower of cost or NRV. Cost comprise of acquisition, development and improvement of the sports club facilities while NRV is the selling price in the ordinary course of business, less estimated cost to sell. Cost is determined using the average cost method.

Land and Improvements Land and improvements consist of properties acquired exclusively for future development and are carried at the lower of aggregate cost or NRV. Cost includes those incurred for the acquisition, start-up development and improvement of the properties. NRV is the estimated selling price in the ordinary course of business, less estimated costs to complete and sell. Cost is measured using the average cost method.

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

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

Major repairs are capitalized as property and equipment only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the items can be measured reliably. All other repairs and maintenance are charged against current operations as incurred.

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

Years Office condominium and improvements 40 Furniture, fixtures and equipment 3 - 10 Transportation equipment 3 - 5

The useful lives and depreciation and amortization method 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.

Investment in Associates Investment in associates is accounted for under the equity method of accounting. An associate is an entity in which the Group has significant influence.

Under the equity method, the investment in associates is carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Group’s share in the net assets of the investee companies. The consolidated statement of income includes the Group’s share in the results of the operations of the associate. Profit and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The reporting date of the associate and the Group are identical and the associate’s accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

Investment Properties Investment properties consist of properties that are held to earn rentals and for capital appreciation or both. Investment properties, except for land, are carried at cost less accumulated depreciation and amortization and any impairment in value. Land is carried at cost less any impairment in value. The initial cost of investment properties consists of any directly attributable costs of bringing the investment properties to its intended location and working condition, including borrowing costs.

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

Depreciation and amortization is computed using the straight-line method over its useful life. The estimated lives of investment properties under buildings and improvements are 5 - 40 years.

Investment properties are derecognized when either they have been disposed of or when they are is 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, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment properties when, and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

Transfers between investment properties, owner-occupied properties and inventories do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes.

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

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.

Investments in associates 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 is impaired. If this is the case, the Group calculates the amount of impairment as being the difference between the fair value of the investee company and the carrying value, and recognizes the amount in the consolidated statement of income.

Borrowing Costs Interest and other financing costs incurred during the construction period on borrowings used to finance property development are capitalized as part of development costs of the specific asset (included in “Subdivision land for sale”, “Investment properties” and “Property and equipment” accounts in the consolidated statement of financial position). Capitalization of borrowing costs commences when the activities to prepare the asset are in progress, and expenditures and borrowing costs are being incurred. Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the asset for its intended use or sale are complete. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded. Capitalized borrowing cost is based on applicable weighted average borrowing rate.

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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, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where disc ounting is used, the increase in the provision due to the passage of time is recognized as a borrowing cost. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates.

Interest in Joint Venture For joint ventures, the Group accounts for its transactions under jointly-controlled operations. The Group recognizes its own assets that it controls and the liabilities that it incurs; and the expenses that it incurs and its share of the income that it earns from the sale by the joint venture.

Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies:

(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 does not transfer 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.

Revenue and Cost Recognition Real estate sales Revenue from sales of completed subdivision land and sports club shares are accounted for under the full accrual method. The percentage of completion method is used to recognize revenue from sales of projects where the Group have material obligations under the sales contract to complete the project after the property is sold. Under this method, revenue is recognized as the related obligations are fulfilled, measured principally on the basis of the estimated completion of a physical proportion of the contract work.

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

When a sale of real estate does not meet the requirements for revenue recognition, the sale is accounted for under the deposit method. Under this method, revenue is not recognized, and the receivable from the buyer is not recorded. Cash received is recognized under “Customers’ deposits and deferred credits” account in the consolidated statement of financial position.

Cost of real estate sales include land and development costs. Expected losses are recognized immediately when it is probable that the cost will exceed the related contract price. Revisions in estimated costs are accounted for starting in the year the change is made. Commissions for pre-completed real estate units are deferred and are charged to expense when the related revenue is recognized.

Rental income Rental income from non-cancellable and cancellable leases are recognized in the consolidated statement of income on a straight-line basis and the terms of the lease, respectively, or based on a certain percentage of the gross revenue of the tenants, as provided for under the terms of the lease contract.

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

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

Theater income Theater income is recognized when earned.

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

Pension Cost Pension cost is actuarially determined using the projected unit credit method. This method reflects services rendered by employees up to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Actuarial valuations are conducted with sufficient regularity, with option to accelerate when significant changes to underlying assumptions occur. Pension cost includes current service cost, interest cost on benefit obligation, expected return on any plan assets, actuarial gains and losses and the effect of any curtailment or settlement.

The liability recognized in the consolidated statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the reporting date less the fair value of the plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using risk-free interest rates of government bonds that have terms to maturity approximating to the terms of the related pension liability or applying a single weighted average discount rate that reflects the estimated timing and amount of benefit payments.

Actuarial gains and losses is recognized as income or expense if the cumulative unrecognized actuarial gains and losses at the end of the previous reporting period exceeded the greater of 10% of the present value of defined benefit obligation or 10% of the fair value of plan assets. These gains and losses are recognized over the expected average remaining working lives of the employees participating in the plans.

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

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

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

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 recovered.

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.

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.

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Foreign Currency Denominated Transactions/Translations The consolidated financial statements are presented in Philippine Peso, which is the Group’s functional and presentation currency. Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded using the exchange rate, based on the Philippine Dealing System (PDS) rate, at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are restated using the closing PDS rate prevailing at reporting dates. Exchange gains or losses arising from foreign exchange transactions are credited to or charged against operations for the year.

Commission The Company recognizes commission in the statement of income when services are rendered.

Earnings Per Share (EPS) Basic EPS is computed by dividing net income for the year attributable to common stockholders 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 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 26.

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 Period Post year-end events up to the date of auditors’ report 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 and Estimates

The preparation of the consolidated financial statements in conformity with PFRS requires management to make judgments and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. The judgments and estimates used in the consolidated financial statements are based upon management’s evaluation of relevant facts and circumstances as of the date of the consolidated financial statements. Actual results could differ from such estimates.

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:

Operating lease commitments - Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all significant risks and rewards of ownership of these properties. The Gr oup considered, among others, the length of the lease term as compared with the estimated life of the assets.

A number of the Group’s operating lease contracts are accounted for as non-cancellable operating leases and the rest are cancellable. In determining whether a lease contract is cancellable or not, the Group considered, among others, the significance of the penalty, including economic consequence to the lessee.

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

Sport club shares for sale Being a real estate developer, the Group determines how these shares shall be accounted for. In determining whether these shares shall be accounted for as inventories or as financial instruments, the Group considers its role in the development of the Club and its intent for holding these shares.

The Group classifies such shares as inventories when the Group acted as the developer and its intent is to sell a developed property.

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

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of services or for administrative purposes. If these portions cannot be sold separately as of reporting date, the property is accounted for as investment property only if an insignificant portion is held for use in the supply of services or for administrative purposes. Judgment is applied in determining whether ancillary services are so significant that a property does not qualify as investment property. The Group considers each property separately in making its judgment.

Distinction between land and improvements, subdivision land for sale, and investment properties The Group determines whether a property will be classified as Subdivision land for sale, Investment properties or Land and improvements. In making this judgment, the Group considers whether the property will be sold in the normal operating cycle (Subdivision land for sale), will be held to earn rentals and for capital appreciation or both (investment properties), or whether it will be retained as part of the Group’s strategic landbanking activities for development or sale in the medium or long-term (Land and improvements).

Management’s Use of Estimates The key assumptions concerning the future and other key sources of estimation and uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below.

Revenue and cost recognition The Group’s revenue recognition policies require management to make use of estimates and assumptions that may affect the reported amounts of revenues and costs. The Group’s revenue from real estate is recognized based on the percentage of completion measured principally on the basis of the estimated completion of a physical proportion of the contract work, and by reference to the actual costs incurred to date over the estimated total costs of the project.

As of December 31, 2010 and 2009, the outstanding net trade receivable from real estate sales amounted to P=379.4 million and P=246.7 million, respectively (see Note 6).

Estimating allowance for impairment losses The Group maintains allowance for impairment losses based on the result of the individual and collective assessment under PAS 39. Under the individual assessment, the Group is required to obtain the present value of estimated cash flows using the receivable’s original effective interest rate. Impairment loss is determined as the difference between the receivables’ carrying balance and the computed present value. Factors considered in individual assessment are payment history, past due status and term. The collective assessment would require the Group to group its receivables based on the credit risk characteristics (customer type, customer location, credit history, past-due status and term) of the customers. Impairment loss is then determined based on historical loss experience of the receivables grouped per credit risk profile. 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 the individual and collective assessments are based on management’s judgment and estimate. Therefore, the amount and timing of recorded expense for any period would differ depending on the judgments and estimates made for the year.

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As of December 31, 2010 and 2009, receivables, net of allowance for impairment losses, amounted to P=493.3 million and P=388.7 million, respectively (see Note 6).

Estimating useful lives of property and equipment and investment properties The Group estimates the useful lives of its property and equipment and investment properties based on the period over which these assets are expected to be available for use. The estimated useful lives of property and equipment and investment properties are reviewed at least annually and are updated if expectations differ from previous estimates due to physical wear and tear and technical or commercial obsolescence on the use of these assets. It is possible that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above.

As of December 31, 2010 and 2009, the net book value of property and equipment amounted to P=56.7 million and P=34.1 million, respectively (see Note 9).

As of December 31, 2010 and 2009, the net book value of investment properties amounted to P=3,055.8 million and P=2,708.2 million, respectively (see Note 11).

Evaluating impairment of nonfinancial assets The Group reviews investments in associates, property and equipment, investment properties and other noncurrent assets (other than financial assets, such as dividends receivable) for impairment of value. This includes considering certain indications of impairment such as significant changes in asset usage, significant decline in assets’ market value, obsolescence or physical damage of an asset, plans in the real estate projects, significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends.

As described in the accounting policy, the Group estimates the recoverable amount as the higher of an asset’s fair value less costs to sell and value in use. In determining the present value of estimated future cash flows expected to be generated from the continued use of the assets, the Group is required to make estimates and assumptions that may affect investments in associates, investment properties, property and equipment and other noncurrent assets. See Notes 9, 10, 11 and 12 for the related balances.

Deferred tax assets The Group reviews the carrying amounts of deferred taxes at each reporting date and reduces deferred tax assets to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax assets to be utilized. However, there is no assurance that the Group will generate sufficient taxable income to allow all or part of deferred tax assets to be utilized. The Group looks at its projected performance in assessing the sufficiency of future taxable income.

As of December 31, 2010 and 2009, deferred tax assets recognized amounted to P=10.9 million and =9.5P million, respectively (see Note 22).

Estimating pension obligation and other retirement benefits The determination of the Group’s obligation and cost for pension and other retirement benefits is dependent on selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 21 and include among others, discount rates, expected returns on plan assets and rates of salary increase. While the Group believes that the assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions materially affect retirement obligations.

As of December 31, 2010 and 2009, the net pension liabilities amounted to P=2.7 million and P=2.6 million, respectively (See Note 21).

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 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 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 24 for the related balances.

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

Contingencies The Group is contingently liable arising from various claims. The estimate of the probable costs for the resolution of these 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. It is possible, however, that the results of operations could be materially affected by changes in the estimates.

4. Cash and Cash Equivalents

This account consists of:

2010 2009 (In Thousands) Cash on hand and in banks P=55,240 P=35,244 Cash equivalents 842,113 632,339 P=897,353 P=667,583

Cash in banks earns interest at the respective 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=38.6 million, P=35.9 million and P=48.2 million in 2010, 2009 and 2008, respectively (see Note 17).

5. Short-term Cash Investments

This account consists of money market placements made for varying periods of more than three (3) months and up to six (6) months and earn interest at the respective short-term investment rates. Interest income earned from short-term cash investments amounted to P=0.2 million,P=2.3 million and P=1.4 million in 2010, 2009 and 2008, respectively (see Note 17).

6. Receivables

Receivables are summarized as follows:

2010 2009 (In Thousands) Trade Commercial development Related party (Note 16) P=279,178 P=144,856 Third parties 92,166 88,298 Shopping centers 54,628 62,130 Leasing business 12,850 16,980 Residential 8,057 13,567 Non-trade Advances to officers and employees 19,515 15,363 Related parties (Note 16) 16,000 25,778 Others 26,172 39,530 508,566 406,502 Less allowance for impairment losses 15,313 17,843 493,253 388,659 Less noncurrent portion 231,143 158,384 P=262,110 P=230,275

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

• Commercial development pertains to receivables arising from sale of commercial lots and club shares. • Shopping centers pertain to receivables arising from lease of retail space and land therein, food courts and entertainment facilities. • Leasing business pertains to receivables arising from lease of office buildings.

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• Residential pertains to receivables arising from sale of high-end residential lots. • Others pertain substantially to advances to joint venture partner (see Note 28).

Terms and conditions of receivables are as follows:

• Receivables from sale of commercial lots, included under commercial development are noninterest-bearing and are collectible in monthly or quarterly installments over a period ranging from two to four years. Titles to real estate properties are not transferred to buyers until full payment has been made. • The lease 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. • The sales contract receivables, included under residential, are noninterest-bearing and are collectible in monthly installments over a period of one to two years. • The leases of office spaces, included under leasing business, are noninterest-bearing and are collectible monthly bases on the terms of the lease contracts. • Advances to officers and employees are generally noninterest-bearing and are collectible over a period of one year. • Receivables from related parties are noninterest-bearing and collectible within one year • Other receivables are noninterest-bearing and collectible over a period of one to ten years.

As of December 31, 2010 and 2009, commercial development and residential trade receivables, advances to officers and employees and others (included in other receivables) with a nominal amount of P=468.4 million and P=350.5 million, respectively, were initially recorded at fair value. The fair value of the receivables was obtained by discounting future cash flows using the applicable rates of similar types of instruments ranging from 6.9% to 7.4% and 6.8% to 10.5% in 2010 and 2009, respectively. The aggregate unamortized discount amounted to P=39.2 million and P=48.9 million as of December 31, 2010 and 2009, respectively.

Movements in the unamortized discount as of December 31, 2010 and 2009 are as follows (in thousands):

2010

Advances to Commercial Officers and Development Residential Employees Others Total At January 1 P=43,337 P=1,676 P=339 P=3,518 P=48,870 Additions 2,384 1,306 – – 3,690 Accretion (Note 17) (11,334) (1,898) (46) (53) (13,331) At December 31 P=34,387 P=1,084 P=293 P=3,465 P=39,229

2009

Advances to Commercial Officers and Development Residential Employees Others Total At January 1 P=11,559 P=1,997 P=385 P=4,616 P=18,557 Additions 41,844 1,861 – – 43,705 Accretion (Note 17) (10,066) (2,182) (46) (1,098) (13,392) At December 31 P=43,337 P=1,676 P=339 P=3,518 P=48,870

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

Movements in the allowance for impairment losses are as follows (in thousands):

2010

Shopping Leasing Related Centers Business Parties Others Total At January 1 P=8,696 P=856 P=2,325 P=5,966 P=17,843 Provisions 2,109 – – – 2,109 Reversal of provision (1,958) – – (1,958) Write offs (Note 16) – (356) (2,325) – (2,681) At December 31 P=8,847 P=500 P=– P=5,966 P=15,313

Individually impaired P=8,847 P=500 P=– P=5,966 P=15,313 Gross amounts of individually impaired receivables P=8,847 P=500 P=– P=5,966 P=15,313

2009

Shopping Leasing Related Centers Business Parties Others Total At January 1 P=11,820 P=356 P=2,325 P=5,966 P=20,467 Provisions – 500 – – 500 Reversal of provision (3,124) – – – (3,124) At December 31 P=8,696 P=856 P=2,325 P=5,966 P=17,843

Individually impaired P=8,696 P=856 P=2,325 P=5,966 P=17,843 Gross amounts of individually impaired receivables P=8,696 P=856 P=2,325 P=5,966 P=17,843

In 2010, the Group recorded provision for impairment amounting P=2.1 million for shopping center receivables which may no longer be recovered. Reversal of impairment loss amounting P=2.0 million pertains to receivables which were collected in 2010.

In 2009, the Group recorded provision for impairment amounting P=0.5 million for leasing business receivables which may no longer be recovered. Reversal of impairment loss amounting P=3.1 million pertains to receivables which were collected in 2009.

7. Real Estate Inventories

Subdivision land for sale and development consist of:

2010 2009 (In Thousands) Completed P=458,180 P=194,927 Land for development 177,594 126,520 P=635,774 P=321,447

No interest capitalized on subdivision land for sale for the year ended December 31, 2010. Interest capitalized on subdivision land for sale amounted to P=0.5 million for the year ended December 31, 2009 (see Note 14).

Land and improvements consist of:

2010 2009 (In Thousands) Balance at beginning of year P=656,579 P=888,868 Transfers to investment properties and subdivision land for sale and development (656,579) (232,289) P=− P=656,579

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Real estate inventories charged to costs of real estate and rental operations amounted to P=277.6 million, P=287.6 million and P=371.9 million in 2010, 2009 and 2008, respectively (see Note 18).

8. Other Current Assets

This account consists of:

2010 2009 (In Thousands) Value-added input tax P=6,845 P=7,556 Prepaid expenses 6,408 16,235 Creditable withholding tax 120 594 Others – 467 P=13,373 P=24,852

The value-added input tax is applied against value-added output tax. The remaining balance is recoverable in future periods.

Prepaid expenses consist of advance payments for business taxes, office supplies, commissions and employee benefits of the Company.

9. Property and Equipment

The rollforward analyses of this account follow:

2010

Office Condominium Furniture, and Fixtures and Transportation Improvements Equipment Equipment Total (In Thousands) Cost At January 1 P=56,788 P=65,049 P=20,334 P=142,171 Additions 17,394 14,697 2,783 34,874 Transfers/disposals – (636) – (636) At December 31 74,182 79,110 23,117 176,409 Accumulated Depreciation and Amortization At January 1 42,127 51,440 14,539 108,106 Depreciation and amortization (Note 19) 2,866 7,587 1,593 12,046 Transfers/disposals – (470) – (470) At December 31 44,993 58,557 16,132 119,682 Net Book Value P=29,189 P=20,553 P=6,985 P=56,727

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

2009

Office Furniture, Condominium Fixtures and Transportation Construction- and Improvements Equipment Equipment in-Progress Total (In Thousands) Cost At January 1 P=55,280 P=61,606 P=23,207 =2,197 P P=142,290 Additions 1,508 3,679 1,700 – 6,887 Transfers/disposals – (236) (4,573) (2,197) (7,006) At December 31 56,788 65,049 20,334 – 142,171 Accumulated Depreciation and Amortization At January 1 39,915 44,277 11,504 – 95,696 Depreciation and amortization (Note 19) 2,212 7,206 3,637 – 13,055 Transfers/disposals – (43) (602) – (645) At December 31 42,127 51,440 14,539 – 108,106 Net Book Value P=14,661 P=13,609 P=5,795 P=– P=34,065

Depreciation and amortization charged to general and administrative expenses amounted to P=12.1 million, P=13.1 million and P=12.4 million for the years ended December 31, 2010, 2009 and 2008, respectively (see Note 19).

As of December 31, 2010 and 2009, there are no capital commitments for property and equipment.

10. Investments in Associates

This account consists of:

2010 2009 (In Thousands) Acquisition cost: Cebu Insular Hotel Company, Inc. (CIHCI - 37% ownership) P=239,302 P=239,302 Asian i-Office Properties, Inc. (AiO - 40% ownership) 180,000 180,000 Additional investments - AiO 90,454 – 509,756 419,302 Accumulated equity in net losses: At beginning of year (13,682) (33,369) Equity in net earnings for the year 29,020 19,687 At end of year 15,338 (13,682) 525,094 405,620 Less: Dividends 69,796 69,796 Elimination of intercompany sale 61,723 57,717 P=393,575 P=278,107

In 2010, the CPVDC infused additional investment in AiO amounting to P=90.5 million which is equivalent to 40% in AiO’s total increase of capital stock. AiO’s capital stock increased by 226,135,100 common shares with a par value of P=100 per share. The remaining shares equivalent to 60% of ownership were subscribed by Ayala Land, Inc (ALI).

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The following table presents the summarized financial information for equity investment in CIHCI and AiO as of and for the years ended December 31, 2010 and 2009:

CIHCI

2010 2009 (In Thousands) Current assets P=144,855 P=166,365 Noncurrent assets 744,153 782,493 Total assets P=889,008 P=948,858

Current liabilities P=171,045 P=206,378 Noncurrent liabilities 280,860 351,413 Equity 437,104 391,067 Total liabilities and equity P=889,009 P=948,858

Revenue P=411,289 P=358,732 Costs and expenses 364,908 322,799 Net income P=46,381 P=35,933

AiO

2010 2009 (In Thousands) Current assets P=557,398 P=51,157 Noncurrent assets 1,202,892 1,107,602 Total assets P=1,760,290 P=1,158,759

Current liabilities P=399,913 P=216,664 Noncurrent liabilities 648,958 475,610 Equity 711,419 466,485 Total liabilities and equity P=1,760,290 P=1,158,759

Revenue P=169,817 P=71,136 Costs and expenses 151,018 55,212 Net income P=18,799 P=15,924

Retained earnings include undistributed net earnings of subsidiaries and associates amounting P=487.1 million and P=410.4 million as of December 31, 2010 and 2009, respectively.

11. Investment Properties

The rollforward analyses of this account follows:

2010

Buildings and Construction Land Improvements -in-Progress Total (In Thousands) Cost At January 1 P=437,184 P=3,197,689 P=75,010 P=3,709,883 Additions – 37,034 63,882 100,916 Transfers 365,130 40,642 (40,642) 365,130 At December 31 802,314 3,275,365 98,250 4,175,929 Accumulated Depreciation and Amortization At January 1 – 1,001,665 – 1,001,665 Depreciation and amortization (Note 18) – 118,463 – 118,463 At December 31 – 1,120,128 – 1,120,128 Net Book Value P=802,314 P=2,155,237 P=98,250 P=3,055,801 152 CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2009

Buildings and Construction Land Improvements -in-Progress Total (In Thousands) Cost At January 1 P=437,184 P=3,084,363 P=– P=3,521,547 Additions – 93,299 94,931 188,230 Disposals – (2,091) – (2,091) Transfers – 22,118 (22,118) – Transfers from property and equipment – – 2,197 2,197 At December 31 437,184 3,197,689 75,010 3,709,883 Accumulated Depreciation and Amortization At January 1 – 878,919 – 878,919 Depreciation and amortization (Note 18) – 122,746 – 122,746 At December 31 – 1,001,665 – 1,001,665 Net Book Value P=437,184 P=2,196,024 P=75,010 P=2,708,218

Interest capitalized on investment properties amounted to P=3.7 million for the year ended December 31, 2009 (see Note 14).

Depreciation and amortization on buildings and improvements charged to operations amounted to P=118.5 million, P=122.7 million and P=104.8 million for the year ended December 31, 2010, 2009 and 2008, respectively (see Note 18).

Total rental income from investment properties amounted to P=746.8 million, P=698.0 million and =594.8P million for the years ended December 31, 2010, 2009 and 2008, respectively. Total operating expenses related to investment properties that generated rental income amounted to =220.6P million, P=223.5 million and P=188.0 million for the years ended December 31, 2010, 2009 and 2008, respectively.

The aggregate fair value of the Group’s investment properties amounted to P=6,277.3 million and P=6,080.2 million as of December 31, 2010 and 2009, respectively.

The fair value of the investment properties were determined by independent professionally qualified appraisers. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and knowledgeable, willing seller in an arm’s length transaction at the date of valuation.

The value of the investment properties was arrived using the Market Data Approach. In this approach, the value of the investment properties is based on sales and listings of comparable property registered within the vicinity. The technique of this approach requires the establishing of comparable property by reducing reasonable comparative sales and listings to a common denominator. This is done by adjusting the differences between the subject property and those actual sales and listings regarded as comparable. The properties used as basis of comparison are situated within the immediate vicinity of the subject property.

As of December 31, 2010 and 2009, there are no capital commitments for investment properties.

12. Other Noncurrent Assets

This account consists of:

2010 2009 (In Thousands) Dividends receivable (Note 16) P=40,144 P=47,562 Deferred input tax 26,642 22,930 Deposits (Note 31) 20,572 10,494 Advances to contractors (Note 16) 6,278 4,516 Others 4,276 3,290 P=97,912 P=88,792

Deferred input tax arises from purchase of capital goods.

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13. Accounts and Other Payables

This account consists of:

2010 2009 (In Thousands) Payable to contractors P=208,343 P=126,556 Accrued expenses 176,659 130,896 Accrued project cost (Note 28) 155,858 116,861 Retention payable (Note 16) 53,769 53,857 Accrued taxes and licenses 32,151 17,561 Advances from customers 28,907 122,043 Accrued management fees (Note 16) 25,819 28,523 Output tax payable 24,101 27,623 Accrued repairs and maintenance 24,031 18,809 Accrued utilities 21,525 18,058 Accrued manpower cost 9,568 13,493 Related parties (Note 16) 6,802 38,041 Dividends payable 2,888 6,452 Accrued retirement (Note 21) 2,722 2,562 Payable to customers 4,864 5,016 Others 11,210 11,674 P=789,217 P=738,025

The classes of accounts and other payables of the Group are as follows:

• Payable to contractors arises from progress billings or unbilled completed work on the development of commercial projects. • Accrued expenses consist mainly of direct operating and administrative expenses, payroll, management fees, systems costs and marketing expenses. • Advances from customers pertain to unrealized portion of collected residential receivables. • Retention payable pertains to the portion of the progress billings of constructions retained by the Group.

Terms and conditions of the financial liabilities are as follows:

• Accrued expenses are noninterest-bearing and are normally settled on 30 to 180-day terms. • Other payables are noninterest-bearing and are normally settled within one year.

14. Long-term Debt

This account consists of long-term bank loans availed by the Parent Company as follows:

2010 2009 (In Thousands) At 0.50% per annum spread over the fixed rate of average 5- year treasury bond rate P=75,000 P=125,000 At 0.50% per annum spread over the fixed rate based on PDST-R1 rate 90,000 150,000 165,000 275,000 Less current portion 110,000 110,000 P=55,000 P=165,000

The maturities of long-term debt at nominal values as of December 31 follow:

2010 2009 (In Thousands) Due in: 2010 P=− P=110,000 2011 110,000 110,000 2012 55,000 55,000 P=165,000 P=275,000 154 CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These loans, which were availed from a local bank, are secured by mortgage trust indenture on Ayala Center Cebu and other prime lots in the Cebu Business Park (included under “Land and improvements” and “Investment properties” accounts in the consolidated statements of financial position) with carrying value of P=343.4 million as of December 31, 2010 and 2009 (see Note 11).

The loan agreements provide for certain restrictions and requirements with respect to, among others, payment of dividends, major disposal of property, pledge of assets, liquidation, merger or consolidation and maintenance of ratio between debt and the tangible net worth not to exceed 3:1. These restrictions and requirements were complied with by the Parent Company.

No interest was capitalized in 2010. Interest capitalized amounted P=4.2 million in 2009 (see Notes 7 and 11). The weighted average effective capitalization rate was 6.9% in 2009.

15. Customers’ Deposits and Deferred Credits

This account consists of:

2010 2009 (In Thousands) Customers’ deposits P=291,522 P=263,451 Less current portion 266,036 221,999 25,486 41,452 Deferred credits 5,256 6,623 P=30,742 P=48,075

Customers’ deposits on rental are recorded initially at fair value, which was obtained by discounting its future cash flows using the applicable rates of similar types of instruments. The difference between the cash received and its fair values is included under “Deferred credits”.

Movements in the unamortized discount of the customers’ deposit included under “Deferred credits” follow:

2010 2009 (In Thousands) At beginning of year P=6,200 P=9,884 Additions 2,009 909 Accretions (Note 20) (5,282) (4,593) At end of year P=2,927 P=6,200

16. Related Party Transactions

The Group in its regular conduct of business has entered into transactions with related parties. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party in making financial and operating decisions or the parties are subject to common control or common significant influence. 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. The significant transactions with related parties follow:

a. Management and service agreement with Ayala Land, Inc. (ALI), a major shareholder amounted to P=47.3 million, =P 39.8 million and P=44.9 million in 2010, 2009 and 2008, respectively. Payable to ALI as of December 31, 2010 and 2009 arising from this transaction amounted to P=25.8 million and =28.5P million, respectively.

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b. Construction contracts with Makati Development Corporation (MDC), a subsidiary of ALI, with total expenditures amounted to P=86.9 million, P=149.1 million and P=141.7 million in 2010, 2009 and 2008, respectively. Amount due to/from MDC are recorded as follows:

2010 2009 (In Thousands) Advances to contractors (Note 12) P=281 P=3,196 Retention payable (Note 13) 27,064 26,065

The advances to contractors shall be settled through recoupment against the contractors’ billings. c. Noninterest-bearing advances and reimbursement of expenses due within one year. The Group’s “Receivables” account includes the following:

2010 2009 (In Thousands) Avida Land Corporation (Avida) Subsidiary of ALI P=5,645 P=4,348 AiO Associate 4,383 16,207 ALI Major shareholder 4,168 654 Cebu Business Park & Association, Inc. Common key management personnel 1,438 4,569 AsiaTown IT Park Association, Inc. Common key management personnel 241 − Cebu City Sports Club Common key management personnel 99 − AC Parent of ALI 26 − P=16,000 P=25,778 d. Noninterest bearing advances from related parties to be settled within one year. The Group’s “Accounts and other payables” account includes the following: 2010 2009 (In Thousands) ALI Parent of ALI P=6,802 P=36,799 Avida Subsidiary of ALI − 1,242 P=6,802 P=38,041 e. In 2010, CPVDC’s receivable from Avida amounting to =2.3P million was written off. f. Sales to AiO amounting P=91.9 million and P=97.3 million in 2010 and 2009, respectively. The Group’s “Receivables” account includes the fair value of the receivable from sale of lot to AiO amounting to P=279.2 million and P=144.9 million in 2010 and 2009, respectively (see Note 6). The receivable is noninterest-bearing and collectible in annual installments starting 2011 until 2013. g. Management fees charged to AiO amounted to =1.2P million in 2010 and P=16.0 million in 2009. h. Professional fees to ALI amounted to P=0.9 million and P=0.7 million in 2010 and 2009, respectively. i. Dividends receivable from CIHCI amounted to P=40.1 million and P=47.6 million in 2010 and 2009, respectively (see Note 12).

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

j. Compensation of key management personnel by benefit type follows:

2010 2009 2008 (In Thousands) Short-term employee benefits P=17,388 P=16,722 P=11,251 Post-employment pension and other benefits 3,847 8,680 3,102 P=21,235 P=25,402 P=14,353

Terms and conditions of transactions with related parties There have been no guarantees provided or received for any related party receivables or payables. These accounts are noninterest-bearing and are generally unsecured. Impairment assessment is undertaken each financial year through a review of the financial position of the related party and the market in which the related party operates. In 2008, the Group recognized impairment losses on related party receivables amounting to =2.3P million.

17. Interest and Other Income

Interest income consists of:

2010 2009 2008 (In Thousands) Interest income: Cash in banks (Note 4) P=257 P=149 P=334 Cash equivalents (Note 4) 38,386 35,799 47,878 Short-term cash investments (Note 5) 266 2,308 1,428 Accretion of receivables (Note 6) 13,331 13,392 16,353 P=52,240 P=51,648 P=65,993

Other income consists of:

2010 2009 2008 (In Thousands) Penalties P=46,100 P=− P=− Service income 21,261 18,256 − Utility charges 16,020 7,931 5,476 Beverage 4,310 4,388 2,622 Gain on sale of equipment 129 − 301 Foreign exchange gain − − 8,536 Others 4,590 1,732 2,493 P=92,410 P=32,307 P=19,428

Penalties represent payments made by a lot buyer in relation to certain construction violations, rectification of which until 2012 has been agreed in order to achieve 100% compliance to the agreed restrictions. Penalties recognized from January 1, 2011 to March 16, 2011 amounted to =5.1P million.

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18. Real Estate, Rental and Theater Expenses

This account consists of:

2010 2009 2008 (In Thousands) Development costs (Note 7) P=231,090 P=235,991 P=262,283 Depreciation and amortization (Note 11) 118,463 122,746 104,781 Management fees (Note 16) 47,320 39,804 44,913 Producer’s booking and film share 42,296 39,742 34,620 Utilities 37,951 51,955 38,649 Taxes and licenses 37,928 42,151 31,386 Repairs and maintenance 31,384 28,959 24,487 Land cost (Note 7) 27,028 26,558 78,078 Amortization of purchase premium (Note 7) 19,433 25,014 31,489 Advertising and promotions 19,193 18,215 25,580 Commission 13,228 11,595 13,750 Dues and fees 7,246 7,073 590 Provision for impairment losses 58 − − Others 30,115 21,226 23,345 P=662,733 P=671,029 P=713,951

Other than the real estate inventories recognized under “Real estate, rental and theater expenses” account, no other inventory cost was recognized as expense during the period (See Note 7).

19. General and Administrative Expenses

This account consists of:

2010 2009 2008 (In Thousands) Manpower cost (Notes 16 and 21) P=107,782 P=102,898 P=95,911 Depreciation and amortization (Note 9) 12,046 13,055 12,412 Utilities 7,796 7,850 7,436 Travel and transportation 7,333 6,552 5,848 Advertising 5,880 6,220 5,655 Stockholders’ meeting 5,536 5,805 5,224 Professional fees 5,518 6,274 7,366 Trainings and seminars 4,045 3,983 5,223 Postal and communications 3,542 3,422 3,858 Janitorial and security services 2,116 2,308 2,361 Office supplies 2,061 3,073 2,422 Representation and entertainment 1,526 1,411 1,386 Dues and fees 1,093 727 737 Insurance 507 436 540 Provision for (reversal of) impairment losses 93 (2,624) 2,325 Others 9,595 342 2,878 P=176,469 P=161,732 P=161,582

20. Interest and Other Charges

This account consists of:

2010 2009 2008 (In Thousands) Interest expense on long-term debt (Note 14) P=19,473 P=13,054 P=5,500 Amortization of discount (Note 15) 5,282 4,593 5,664 Foreign exchange loss 1,824 4,292 − Others 592 121 − P=27,171 P=22,060 P=11,164

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

21. Pension Plan

The Group has a funded, noncontributory retirement plan covering all its regular employees. The benefits are based on the employees’ years of service and final monthly salary. Retirement costs charged to operations amounted to P=3.4 million, P=4.1 million and P=2.6 million for the years ended December 31, 2010, 2009 and 2008, respectively (see Note 19).

The principal actuarial assumptions used to determine retirement benefits with respect to the discount rate, salary increases and return on plan assets were based on historical and projected normal rates. Actuarial valuations are made at least every three years. The Group’s annual contribution to the retirement plan consists of a payment covering the current service cost for the year plus a payment toward funding the actuarial accrued liability.

The components of pension expense (included in manpower costs under “General and administrative expenses”) in the consolidated statements of income are as follows:

2010 2009 2008 (In Thousands) Current service cost P=3,295 P=3,822 P=2,520 Interest cost on benefit obligation 1,640 2,151 2,440 Net actuarial gain (1,575) (1,913) (2,407) Total pension expense P=3,360 P=4,060 P=2,553

The amounts recognized in the consolidated statements of financial position for the pension plan as of December 31, 2010 and 2009 are as follows (see Note 13):

2010 2009 (In Thousands) Benefit obligation P=41,607 P=17,322 Plan assets (20,938) (15,965) Unrecognized actuarial gain (loss) (13,974) 1,205 Unrecognized past service cost (3,973) − Net pension liabilities P=2,722 P=2,562

Changes in the present value of the defined benefit obligation are as follows:

2010 2009 (In Thousands) At January 1 P=17,322 P=21,979 Current service cost 3,295 3,822 Interest cost 1,640 2,151 Actuarial (gain) loss 15,377 (10,630) Experience adjustments - Plan change 3,973 − At December 31 P=41,607 P=17,322

Actual return on plan assets P=2,891 (P=6,400)

Changes in the fair value of plan assets are as follows:

2010 2009 (In Thousands) At January 1 P=15,965 P=20,076 Contributions 3,200 3,694 Actuarial gain (loss) 1,773 (7,805) At December 31 P=20,938 P=15,965

The Group expects to make no contributions to its retirement fund in 2011.

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The rollforward analysis of unrecognized actuarial gains (losses) follows:

2010 2009 Balance at beginning of year P=1,205 P=293 Actuarial gains (losses) (15,179) 912 Balance at end of year (P=13,974) P=1,205

The allocations of the fair value of plan assets are as follows:

2010 2009 2008 Investment in trust funds 99.9% 93.6% −% Investments in government instruments − − 55.6 Investments in deposit instruments − − 24.9 Others 0.1 6.4 19.5

The assumptions used to determine pension benefits for the Group for the years ended December 31, 2010, 2009 and 2008 are as follows:

2010 2009 2008 Discount rate 9.5% 9.5% 13.5% Salary increase rate 7.0 7.5 8.0

Amounts for the current and the previous periods are as follows:

2010 2009 2008 2007 2006 (In Thousands) Defined benefit obligation P=41,607 P=17,322 P=21,979 P=18,519 P=14,613 Plan assets (20,938) (15,965) (20,076) (17,455) (13,476) P=20,669 P=1,357 P=1,903 P=1,064 P=1,137

Experience adjustments on plan liabilities (P=14,008) P=1,324 P=1,405 P=58 P=58

22. Income Taxes

Provision for income tax consists of:

2010 2009 2008 (In Thousands) Current tax: Corporate income tax P=117,049 P=97,995 P=157,294 Final withholding tax on interest income 7,566 6,840 8,804 124,615 104,835 166,098 Deferred tax 10,934 (915) 5,943 P=135,549 P=103,920 P=172,041

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

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

2010 2009 2008 Statutory income tax rate 30.00% 30.00% 35.00% Tax effect of: Income subjected to lower income tax rates (Note 30) (6.12) (6.19) (8.01) Equity in net earnings of associates (1.28) (1.41) (0.85) Interest income and capital gains taxed at lower rates (0.70) (1.07) (1.19) Others 1.44 2.64 3.07 Effect of change in statutory income tax rate − − 0.03 Effective income tax rate 23.34% 23.97% 28.05%

The components of net deferred tax assets as of December 31, 2010 and 2009 are as follows:

2010 2009 (In Thousands) Deferred tax assets on: Difference between tax and book basis of accounting for real estate transactions P=7,901 P=3,234 Allowance for impairment losses 2,584 2,505 Others 453 3,801 P=10,938 P=9,540

The components of net deferred tax liabilities as of December 31, 2010 and 2009 are as follows:

2010 2009 (In Thousands) Deferred tax assets on: Difference between tax and book basis of accounting for real estate transactions P=6,433 P=13,365 Allowance for impairment losses 2,983 2,966 Others 1,281 1,151 10,697 17,482 Deferred tax liabilities on: Unamortized capitalized interest 21,477 22,716 Excess of acquisition cost over the net assets of a subsidiary 16,573 17,201 Others 8,695 1,298 46,745 41,215 Net deferred tax liabilities P=36,048 P=23,733

Republic Act (RA) No. 9337 RA No. 9337 was enacted into law which amended various provisions in the existing 1997 National Internal Revenue Code, among the reforms introduced by the said RA were the reduction in the regular corporate income tax rate from 35% to 30% beginning January 1, 2009.

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23. Earnings Per Share

The following table presents information necessary to compute EPS:

2010 2009 2008 (In Thousands, except EPS) a. Net income attributable to the equity holders of CHI P=406,200 P=302,192 P=399,479 b. Weighted average number of outstanding shares 1,920,073 1,920,073 1,920,073 c. Earnings per share (a/b) P=0.21 P=0.16 P=0.21

24. Financial Assets and Liabilities

Fair Value Information The following tables set forth the carrying values and estimated fair values of the Group’s financial assets and liabilities recognized as of December 31, 2010 and 2009:

2010 2009 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) LOAN AND RECEIVABLES Cash and cash equivalents P=897,353 P=897,353 P=667,583 P=667,583 Short-term cash investments 25,820 25,820 237,510 237,510 Trade receivables Commercial development 371,344 363,772 233,154 222,817 Shopping centers 45,781 45,781 53,434 53,434 Leasing business 12,350 12,350 16,124 16,124 Residential 8,057 8,057 13,567 13,567 Total trade receivables 437,532 429,960 316,279 305,942 Non-trade receivables Advances to officers and employees 19,515 19,515 15,363 15,363 Related parties 16,000 16,000 23,453 23,453 Others 20,206 20,206 33,564 33,564 Total non-trade receivables 55,721 55,721 72,380 72,380 Total Financial Assets P=1,416,426 P=1,408,854 P=1,293,752 P=1,283,415 OTHER FINANCIAL LIABILITIES Accounts and other payables Accrued expenses P=448,333 P=448,333 P=346,763 P=346,763 Payable to contractors 208,343 208,343 126,556 126,556 Retention payable 53,769 53,769 53,857 53,857 Advances from customers 28,907 28,907 122,043 122,043 Related parties 6,802 6,802 38,041 38,041 Payable to customers 4,864 4,864 5,016 5,016 Dividends payable 2,888 2,888 6,452 6,452 Others 11,210 11,210 11,674 11,674 Long-term debt 165,000 170,023 275,000 284,223 Customers’ deposits 291,522 296,927 263,451 264,853 Total Financial Liabilities P=1,221,638 P=1,232,066 P=1,248,853 P=1,259,478

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

The methods and assumptions used by the Group in estimating the fair value of the financial instruments are as follows:

Cash and cash equivalents, short-term cash investments and current receivables - Carrying amounts approximate fair values due to the relatively short-term maturities of these investments.

Noncurrent receivables - The fair values are based on the discounted value of future cash flows using the applicable rates for similar types of instruments. The discount rates used ranged from 4.25% to 5.25% and 6.8% to 10.5% as of December 31, 2010 and 2009, respectively.

Accounts and other payables and current portion of customers’ deposits and long-term debt - The fair values approximate the carrying amounts due to the short-term nature of these transactions.

Noncurrent portion of customers’ deposits and long-term debt - The fair value of fixed rate instruments are estimated using the discounted cash flow methodology using the Group’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being valued. The discount rates used ranged from 2.2% to 7.2% and 4.9% to 8.1% as of December 31, 2010 and 2009, respectively.

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 (unadjusted prices) in active markets for identical assets and liabilities

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data

As of December 31, 2010 and 2009, the Group has no financial assets and liabilities measured and carried at fair value.

Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise of cash and cash equivalents, short-term cash investments and bank loans. The main purpose of the Group’s financial instruments is to fund its operations, capital expenditures and finance the projects. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

Exposure to credit, liquidity, foreign currency and interest rate risks arise 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 counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group’s credit risks are primarily attributable to financial assets such as cash and cash equivalents, short-term cash investments and receivables. To manage credit risk, the Group maintains defined credit policies and monitors on a continuous basis the Group’s exposure to credit risks.

Cash and cash equivalents and short-term cash investments. The Group adheres to fixed limits and guidelines in its dealing with counterparty banks and its investment in financial instruments. Bank limits are established on the basis of the Group’s rating that covers the area of liquidity, capital adequacy and financial stability. Given the high credit standing of its accredited counterparty banks, management does not expect any of these financial institutions to fail in meeting their obligation.

Commercial development, leasing business and residential trade receivables. With respect to trade receivables from the sale of real estate properties, credit risk is managed primarily through credit reviews and monitoring of receivables on a continuous basis. The Group undertakes supplemental credit review procedures to ensure the adequacy of provisioning for certain installment payment structures. Customer payments are facilitated through various collection modes including the use of post-dated checks and auto-debit arrangements. Exposure to bad debts is not significant and the requirement for remedial procedures is minimal given the profile of buyers.

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Shopping center trade receivables. 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.

The table below shows the maximum exposure to credit risk for the components of the consolidated statements of financial position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.

2010 2009 (In Thousands) Financial position items Cash and cash equivalents (excluding cash on hand) P=897,093 P=667,375 Short-term cash investments 25,820 237,510 Receivables 493,253 388,659 Total P=1,416,166 P=1,293,544

As for the sale of lots, the Group includes in the contract to sell provisions that the title to the properties will only be transferred to the buyers upon full payment of the contract price.

The table below shows the credit quality of the Company’s financial assets.

2010

Neither Past Due nor Impaired Past Due or High Grade Medium Grade Low Grade Impaired Total (In Thousands) Cash and cash equivalents P=897,093 P=− P=− P=− P=897,093 Short-term cash investments 25,820 − − − 25,820 Trade Commercial development 371,344 − − − 371,344 Shopping centers 24,429 2,349 − 27,850 54,628 Leasing business 10,270 805 204 1,571 12,850 Residential 8,057 − − − 8,057 Advances to officers and employees 19,515 − − − 19,515 Related parties 16,000 − − − 16,000 Others 20,206 − − 5,966 26,172 P=1,392,734 P=3,154 P=204 P=35,387 P=1,431,479

2009

Neither Past Due nor Impaired Past Due or High Grade Medium Grade Low Grade Impaired Total (In Thousands) Cash and cash equivalents P=667,375 P=− P=− P=− P=667,375 Short-term cash investments 237,510 − − − 237,510 Trade Commercial development 232,603 − − 551 233,154 Shopping centers 35,164 2,105 7,890 16,971 62,130 Leasing business 9,661 − − 7,319 16,980 Residential 13,567 − − − 13,567 Advances to officers and employees 15,363 − − − 15,363 Related parties 16,375 − − 9,403 25,778 Others 33,564 − − 5,966 39,530 P=1,261,182 P=2,105 P=7,890 P=40,210 P=1,311,387

The credit quality of the financial assets was determined as follows:

Cash and cash equivalents and short-term cash investments - based on the nature of the counterparty and the Group’s rating procedure.

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

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, 2010 and 2009, 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 contract 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, 2010 and 2009, the aging analysis of receivables presented per class, is as follows:

2010

Neither Past Due nor Past Due but not Impaired Individually <30 30-60 60-90 90-120 >120 Impaired days days days days days Impaired Total (In Thousands) Trade Commercial development P=371,344 P=− P=− P=− P=− P=− P=− P=371,344 Shopping centers 26,778 8,807 3,756 2,481 2,196 1,763 8,847 54,628 Leasing business 11,279 312 280 110 6 363 500 12,850 Residential 8,057 − − − − − − 8,057 Advances to officers and employees 19,515 − − − − − − 19,515 Related parties 16,000 − − − − − − 16,000 Others 20,206 − − − − − 5,966 26,172 Total P=473,179 P=9,119 P=4,036 P=2,591 P=2,202 P=2,126 P=15,313 P=508,566

2009

Neither Past Due nor Past Due but not Impaired Individually 30-60 60-90 90-120 >120 Impaired <30 days days days days days Impaired Total (In Thousands) Trade Commercial development P=232,603 =− P P=− P=− P=551 P=− P=− P=233,154 Shopping centers 45,159 1,126 3,151 747 1,022 2,229 8,696 62,130 Leasing business 9,661 6,253 119 130 105 212 856 17,336 Residential 13,567 − − − − − − 13,567 Advances to officers and employees 15,363 − − − − − − 15,363 Related parties 16,375 183 − − − 6,895 2,325 25,778 Others 33,564 − − − − − 5,966 39,530 Total P=366,292 P=7,562 P=3,270 P=877 P=1,678 P=9,336 P=17,843 P=406,858

The Group has no collaterals held for the past due or impaired financial assets as of December 31, 2010 and 2009.

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from either the inability to sell financial assets quickly at their fair values; or the counterparty failing on repayment of a contractual obligation; or inability to generate cash inflows as anticipated.

The Group monitors its cash flow position, debt maturity profile and overall liquidity position in assessing its exposure to liquidity risk. The Group maintains a level of cash and cash equivalents deemed sufficient to finance operations and to mitigate the effects of fluctuation in cash flows. Accordingly, its loan maturity profile is regularly reviewed to ensure availability of funding through an adequate amount of credit facilities with financial institutions.

165

As of December 31, 2010, current ratio is 1.8:1.0, with cash and cash equivalents and short-term cash investments of P=923.2 million accounting for 42.1% of the total current assets, and resulting in a net working capital of P=1,000.3 million.

As of December 31, 2009, current ratio is 1.7:1.0, with cash and cash equivalents and short-term cash investments of P=905.1 million accounting for 49.2% of the total current assets, and resulting in a net working capital of P=743.6 million.

Overall, the Group’s funding arrangements are designed to keep an appropriate balance between equity and debt, to give financing flexibility while continuously enhancing the Group’s businesses.

The table below summarizes the maturity profile of the Group’s financial assets and financial liabilities at December 31, 2010 and 2009 based on contractual undiscounted payments.

2010

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Cash and cash equivalents P=897,353 P=− P=− P=− P=897,353 Short-term cash investments 25,820 − − − 25,820 Receivables 316,300 252,656 568,956 Total financial assets P=1,239,473 P=252,656 P=− P=− P=1,492,129 Accounts and other payables P=757,066 P=− P=− P=− P=757,066 Long-term debt 110,000 55,000 − − 165,000 Customers’ deposits 266,036 30,742 − − 296,778 Total other financial liabilities P=1,133,102 P=85,742 P=− P=− P=1,218,844 Interest payable P=1,335 P=− P=− P=− P=1,335

2009

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Cash and cash equivalents P=667,583 P=− P=− P=− P=667,583 Short-term cash investments 237,510 − − − 237,510 Receivables 384,638 189,145 573,783 Total financial assets P=1,289,731 P=189,145 P=− P=− P=1,478,876 Accounts and other payables P=720,464 P=− P=− P=− P=720,464 Long-term debt 110,000 110,000 55,000 − 275,000 Customers’ deposits 221,999 26,630 15,789 5,233 269,651 Total other financial liabilities P=1,052,463 P=136,630 P=70,789 P=5,233 P=1,265,115 Interest payable P=17,021 P=9,011 P=1,502 P=− P=27,534

Cash and cash equivalents, short-term cash investments and receivables are used for the Group's liquidity requirements. Please refer to the terms and maturity profile of these financial assets under the maturity profile of the interest-bearing financial assets and liabilities disclosed under interest rate risk section.

Foreign currency risk 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, 2010 and 2009:

2010 2009 US Dollar Php Equivalent US Dollar Php Equivalent (In Thousands) Cash and cash equivalents $355 P=15,563 $994 P=45,906 Short-term cash investments 587 25,734 295 13,669 $942 P=41,297 $1,289 P=59,575

In translating the foreign currency-denominated monetary assets into peso amounts, the exchange rates used were P=43.84 to US$1.00 and P=46.20 to US$1.00, the Philippine Peso-US Dollar exchange rates as at December 31, 2010 and 2009, respectively.

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

The following table demonstrates the sensitivity to a reasonably 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 cash investments). There is no other impact on the Group’s equity other than those already affecting the profit or loss.

Increase (Decrease) Effect on Profit in US $ Before Tax (In Thousands) 2010 P=1.00 P=942 (P=1.00) (P=942)

2009 P=1.00 P=1,289 (P=1.00) (P=1,289)

Interest rate risk The Group’s interest rate exposure management policy focuses on reducing the Group’s overall interest expense and exposure to changes in interest rates.

The Group manages its interest rate risk by converting its debt portfolio mix of both fixed and floating interest rates to debts with fixed interest rates in order to mitigate the Group’s exposure to fluctuating interest rates.

As of December 31, 2010 and 2009, all of the Group’s debt obligations are at fixed rates. As such, it is no longer subject to cash flow interest rate risk.

. 167

25,820 90,000 320,144 352,845 237,510 150,000 =75,000 P =897,353 =667,583 =1,225,237 =1,225,237 =1,276,018 =1,276,018

– – – =– P P= P =182,180 P =265,731 P

25,820 25,820 90,000 60,000 30,000 237,510 237,510 150,000 60,000 90,000 385,607 119,876 265,731 364,639 182,459 182,180 =75,000 P=50,000 P=25,000 P =897,353 P=897,353 =667,583 P=667,583 =165,000 P=110,000 P=55,000 P=165,000 =275,000 P=110,000 P=165,000 P=275,000 =125,000 P=50,000 P=75,000 P=125,000 P P P P P =1,269,732 =1,269,732 P=1,087,552 P =1,308,780 =1,308,780 P=1,043,049 P P P Nominal Amount < 1 year 1 to 5 years Carrying Value

Various Various Various Various

Date of sale Date of sale Maturity date date Maturity Maturity date date Maturity date Maturity Maturity date date Maturity - 36 - - 36 - Rate Fixing Period Fixing Rate Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value

+ 0.50% spread + 0.50% spread + 0.50% spread + 0.50% spread Interest terms (p.a.) Interest terms (p.a.) Fixed at the date of sale Fixed at the date of sale Fixed rate based on PDST-R1 Fixed rate based on PDST-R1 Fixed at the date of investment Fixed at the date of investment Fixed rate based on 5-years T-bill Fixed rate based on 5-years T-bill

Peso Peso Peso Peso

Receivables Receivables Short-term cash investments Fixed at the date of investment Cash and cash equivalents Long-term debt Cash and cash equivalents Short-term cash investments Long-term Fixed debtat the date of investment Fixed Fixed Fixed Parent Company Company Parent Company Parent Group Group The terms and maturity profile of the interest-bearing financial assets and liabilities,the following together table: with its corresponding nominal amounts and carrying values (in thousands) are shown in 2010 2009

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

25. 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 fully complied with the externally imposed capital requirements (see Note 14). 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 short-term cash investments. The Group considers as capital the equity attributable to equity holders of the Parent Company. As of December 31, 2010 and 2009, the Group had the following ratios:

2010 2009 (In Thousands) Long-term debt P=165,000 P=275,000 Less: Cash and cash equivalents 897,353 667,583 Short-term cash investments 25,820 237,510 Net debt (758,173) (630,093) Equity attributable to equity holders of the Parent Company P=4,415,142 P=4,143,348 Debt to equity 3.7% 6.6% Net debt to equity (17.2%) (15.2%)

26. Segment Information

The business segments where the Group operates are as follows:

Core business: • Commercial development - sale of commercial lots • Residential - development and sale of high-end residential lots • Shopping center - 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 • Leasing business - development and lease of office buildings • Others - other investing activities

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. Starting 2010, intersegment accounts of the reportable business segments are reported on a gross basis, this resulted in the increase of the amounts under the reportable business segments.

169

)

=151 P Total 839,202 ( =445,263 =135,790 =130,509 =6,038,390 =6,038,390 =1,313,813 =1,313,813 =5,633,877 =5,633,877 =1,277,765 =1,277,765 =1,273,515 =1,273,515 P 92,410 P ) ) 52,240 (27,171) 39,063 393,575 10,938 P P )

– – – – – – – – P= P= P= 628 628 (135,549) and and 86,047 ( =87,663 P ( =1,253,184 P ( Eliminations Adjustments 37,317 ) )

– – – P= 32,659 ( =14,526 =38,994 =857,925 P ( P ) 11,831 ) 17,189 29,020 19,475 16,573 36,048

– – – – P= =1,270 P 198,876 Leasing Leasing ( =146,807 =273,357 (P=855,022) (P=1,253,184) P =268,599 P Business Business Others ( (In Thousands)

) 17,081 (27,171) 21,828 4,642 15,532 4,758 2,903

– – – – – – – =151 P 320,693 =68,114 P=37,034 P=30,642 Centers ( =108,753 P Shopping Shopping =4,984,372 =4,984,372 P =4,984,372 =4,984,372 P

) (6,897) (116,262) (7,244) P P

– – – – – – – – – – – P= P= P= 239,923 ( =354,916 P =354,916 P Residential Residential (see Note 28)

)

– – – – – P= P= 3,277 3,277 (5,774) 84,368 48,580 48,580 1,998 2,871 108,989 16,019 89,988 32,929 463,713 (129,444) 8,391 (2,244) 463,333 18,889 13,331 =5,960 P ( 393,575 174,356 272,852 784,406 69,432 41,050 (39,561) 1,302,535 =452,905 (P=30,366) P=572,958 P=47,075 P=310,343 (P=39,102) P =146,125 P=34,927 P=459,687 (P=146,807) P=38,994 (P=87,663) P=445,263 =146,125 P=34,927 P=459,687 =452,905 (P=30,366) P=572,958 P=47,075 P=290,868 (P=55,675) P =127,236 P=34,927 P=459,687 (P=151,449) P=23,462 (P=87,663) P=406,200 =174,356 P=272,852 P=784,406 P=69,432 P=29,219 (P=56,750) P P P P P P P =2,533,951 =2,533,951 P =2,137,099 =2,137,099 P P P Commercial Commercial Development Development

) ) assets ( liabilities s of associates ( interests g

g ) attributable to: attributable ) loss loss ( ( Information in net earnin

y r

Non-controllin investment properties Equity holders of Cebu Holdings, Inc, Inc, Holdings, Cebu of holders Equity ment assets g Investments in associates Total revenue revenue Total (assets) liabilities Total Interest expense Other income Deferred tax assets assets Total Operating profit (loss)

Benefit from (provision for) income tax for) income (provision from Benefit Revenue Revenue Costs and expenses Interest income Net income Othe Se Segment liabilities (assets) Deferred tax liabilities Segment additions to property and equipment and Depreciation and amortization Provision for impairment losses Net income Sales to external customers Equit Business Segments Segments Business The following tables regarding business segments present assetsended and liabilitiesDecember 31,as 2010. of December 31, 2010 and 2009 and revenue and expense information for the three years period 2010

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

Total =2,530) =195,117 =135,801 =5,773,216 =5,773,216 =1,332,685 =1,332,685 =5,485,569 =5,485,569 =1,184,642 =1,184,642

– 27,351 – (22,060) – 9,540 – 51,648 – 278,107 – 32,307 – P =– (P =– P =– P=1,308,952 P P P =872) P =3,899) P Adjustments Eliminations and

=– P =806 P =1,001 =1,145 (P =1,241,545 =1,241,545 (P

– 278,107 – (5,675) – 24,751 – 14,423 (17,201) 23,733 – 6,370 13,317 19,687 (175) (1,191) =500 =1,584 Leasing Leasing Business Business Others =257,344 P =257,519 P=964,629 (P=872) P (In Thousands)

– 13,175 2,490 – – =3,124) P Centers Shopping Shopping =188,806 P =2,351,374 =2,351,374 P =2,349,744 =2,349,744 P

– – – – 1,630 =– (P P 908 908 6,254 7,094 17,689 = 6,793 P=111,916 P=14,600 P =149,915 P =149,915 P Residential (see Note 28)

– – =– P 362 362 (710) (4,924) (10,751) =494 P=3,427 P P 9,276 9,276 (2,668) 9,177 (83,663) (2,647) (25,310) 1,191 (103,920) 11,686 12,909 12,909 4,378 9,610 21,039 (18,614) 347,138 51,002 (17,300) 16,102 (11,697) (10,792) 371,568 21,201 =1,491 P P 137,107 137,107 276,838 700,669 72,782 7,515 9,418 1,204,329 =30,932 (P=9,075) P=268,588 P=55,449 (P=5,845) (P=10,506) P=329,543 =30,932 (P=9,075) P=268,588 P=55,449 (P=5,845) (P=10,506) P=329,543 P P (116,068) (295,452) (353,531) (21,780) (24,815) (21,115) (832,761) = 19,246 (P=9,075) P=268,588 P=42,274 (P=8,335) (P=10,506) P=302,192 P =323,500 P=332,274 P=667,217 P=44,359 (P=17,464) (P=17,201) P =307,398 P=343,066 P=646,016 P=44,359 (P=31,887) =137,107 P=276,838 P=700,669 P=72,782 P P P P =1,773,910 =1,773,910 P =1,764,634 =1,764,634 P P P Commercial Development

Information

Non-controlling interests investment properties Equity holders of Cebu Holdings, Inc, Inc, Holdings, Cebu of holders Equity Total assets Interest expense Other income Benefit from (provision for) income tax (loss) income Net

Investments in associates Deferred tax assets (liabilities) Total liabilities (assets) Operating profit (loss) 2009 Revenue Costs and expenses Interest income to: (loss) attributable income Net Othe Segment assets Segment liabilities (assets) Deferred tax liabilities (assets) Segment additions to property and equipment and Depreciation and amortization Provision for (reversal of) impairment losses Commercial development sales made to significanta million. customer amounted to P=319.1

Sales to external customers Equity in net earnings of associates Total revenue revenue Total

171

Total Total =2,325) =580,155 =117,193 =1,390,851 =1,390,851 =1,368,043 =1,368,043 =5,356,711 =5,356,711 =1,399,701 =1,399,701 =5,658,583 =5,658,583

– 41,814 – (11,164) – 35,781 – 49,640 – 7,910 – (172,041) =– =– P P =– (P P P P =19,644) P =1,022,204) P Adjustments Eliminations and

316 316 =795 =2,325) =1,052 =2,817 (P =2,543,338 =2,543,338 (P

– 149,105 (149,974) 14,909 – (5,837) – (18,748) 18,392 22,808 – 25,015 – 1,620,466 (1,366,726) 293,962 =– (P P (266) Leasing Leasing Business Business Others =210,097 P=922,556 P=344,522 P =209,831 P (In Thousands)

– 12,066 1,030 =– P (553) Centers =89,789 P=18,084 P Shopping Shopping =550,124 P=16,440 P =2,394,009 =2,394,009 P =2,435,703 =2,435,703 P

– – 15,778 – 40,222 – 1,472 =– P =235,267 P =235,267 P Residential (see Note 28)

– – =– P 4,827 4,827 3,728 16,070 6,388 6,388 (3,007) (1,767) 28,718 13,748 13,748 4,358 4,452 3,552 17,179 9,671 (13,633) 19,618 =8,587 =5,539 P=3,952 P=2,986 P P P P (53,343) 7,474 (90,135) (4,956) (31,081) 262,337 (27,251) 335,928 52,197 97,329 (181,463) 539,077 552,667 552,667 183,270 621,849 74,520 151,922 (169,618) 1,414,610 (290,330) (210,521) (285,921) (22,323) (54,593) (11,845) (875,533) =224,562 (P=13,458) P=265,762 P=50,793 P=95,097 (P=181,463) P=441,293 =241,716 P=395,183 P=600,005 P=50,660 P=105,707 (P=25,228) P =258,895 P=381,550 P=619,623 P=50,660 P=86,959 (P=6,836) P =195,844 (P=13,458) P=265,762 P=38,727 P=94,067 (P=181,463) P=399,479 =224,562 (P=13,458) P=265,762 P=50,793 P=95,097 (P=181,463) P=441,293 =552,667 P=183,270 P=606,071 74,520 P= P P P P P P P =1,250,260 =1,250,260 P =1,256,648 =1,256,648 P P P Commercial Development Information

Non-controlling interests investment properties Equity holders of Cebu Holdings, Inc, Inc, Holdings, Cebu of holders Equity

Benefit from (provision for) income tax Interest expense Other income 2008 Net income (loss) Operating profit (loss) Revenue Revenue Costs and expenses Interest income to: (loss) attributable income Net Other Segment assets Segment liabilities (assets) Deferred tax liabilities (assets) Segment additions to property and equipment and Depreciation and amortization Provision for (reversal of) impairment losses Sales to external customers (assets) liabilities Total Investments in associates Deferred tax assets (liabilities) Total assets Total revenue revenue Total Equity in net earnings of associates

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

27. Leases

The Group enters into lease agreements with third parties covering rentals of commercial and office spaces and land therein. These leases generally provide for either (a) fixed monthly rent, or (b) minimum rent on a certain percentage of gross revenue, 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 non-cancellable operating leases of the Group are as follows:

2010 2009 (In Thousands) Within one year P=47,669 P=47,039 After one year but not more than five years 40,844 77,346 P=88,513 P=124,385

Contingent rent recognized in 2010, 2009 and 2008 amounted to P=85.5 million, P=81.0 million and P=81.7 million, respectively.

28. Joint Development Agreement

The Parent Company entered into a Joint Development Agreement (the Project) with Coastal Highpoint Ventures, Inc. (CHVI) on April 5, 2004, where both jointly undertake the development of a portion of the CHVI Property with an aggregate area of approximately 47.16 hectares more or less into a primarily residential community with mixed support uses such as a school and a commercial area, called Amara. In order to undertake the aforesaid development, the Parent Company has agreed to finance the development of the Project, and CHVI has agreed to contribute the land, and to distribute and allocate among themselves the developed property corresponding to their respective interests in the Project.

The Project consists of the planning of the Project Site and development of a subdivision thereon into an integrated and controlled community primarily for residential uses and supplemented by educational, commercial and recreational uses in such a manner contemplated in the master plan and the Site Development Plan, as well as the marketing, sale and/or lease of Saleable Lots therein.

The Amara Project started in 2005. The amounts disclosed in segment information under residential relates to this joint development agreement (see Note 26). Capital commitments amounted to P=187.1 million and P=303.0 million as of December 31, 2010 and 2009 respectively.

Accrued project costs related to this project amounted to P=155.9 million and P=116.9 million as of December 31, 2010 and 2009, respectively (Note 13).

29. Philippine Economic Zone Authority (PEZA) Registration

CPVDC is 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.

173

30. Notes to Consolidated Statements of Cash Flows

Noncash investing activities follow (in thousands):

• Transfer of land and improvements to investment properties and subdivision land for sale and development due to change in management intention and commencement of development of land and improvements amounting to P=656.6 million and P=232.3 million in 2010 and 2009, respectively. • Elimination of intercompany profit arising from a transaction on account amounting to P=25.2 million and P=14.4 million in 2010 and 2009, respectively.

Details of the decrease in consolidated noncash net assets (in thousands) resulting from the deconsolidation of AiO in 2008 (see Note 10) follows:

Assets Other current assets P=68 Construction-in-progress 10,633 Total Assets P=10,701

Liabilities Due to related parties P=10,701

31. Other Matter

On November 26, 2010, the Parent Company advanced P=10.0 million to Bigfoot Palms, Inc. (Bigfoot). On January 25, 2011, Bigfoot acknowledged this amount as deposits on its own shares. Also, the Parent Company paid P=111.8 million to Bigfoot representing further deposits on future subscription. The amounts paid would translate to a non- controlling equity interest. The Parent Company intends to have a 30% stake in Bigfoot.

174 shareholder information

Corporate Headquarters

7/F Cebu Holdings Center Cardinal Rosales Avenue, Cebu Business Park Cebu City 6000 Philippines Tel (6332) 231 5301 Fax (6332) 231 5300

Shareholder Information

For inquiries from institutional investors, analysts, and the financial and business community on the financial report and feedback from various stakeholder groups on the sustainability report, please write or call:

Cebu Holdings, Inc. 7/F Cebu Holdings Center Cardinal Rosales Avenue, Cebu Business Park Cebu City 6000 Philippines Tel (6332) 231 5301 Fax (6332) 231 5300

4/F Tower One and Exchange Plaza Ayala Triangle, Ayala Avenue Makati City 1226 Philippines Tel (632) 908 3575 Fax (632) 750 6647

Shareholder Services and Assistance

For inquiries regarding dividend payments, change of address and account status, and lost or damaged stock certificates, please write or call:

Stock Transfer Service, Inc. 34/F Unit D Rufino Pacific Tower 6784 Ayala Avenue Makati City 1226 Philippines Tel (632) 403 2410 (632) 403 2412 Fax (632) 403 2414 [email protected] Publication Team

Adviser Francis O. Monera, President

Editorial Team

Vera R. Alejandria Corporate Communication Manager Noel F. Alicaya Control and Analysis Manager Elson R. Homez Sustainability Officer and Head – Property Management Group Jeanette A. Japzon Corporate Communication Officer Archie T. Obeso Analyst

Contributors Sustainability Technical Working Group

Photography Raul V. Arambulo Landscape / Portraiture Wig Tysmans Portraiture Operations: Christina A. Co Levi L. Lopez Heidi L. Mantilla Fraulein T. Quijada Grace L. Ventic

Concept, Design and Layout Cebu Holdings, Inc. Red Apple Studio K2 Interactive (Asia), Inc.

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