Cebu Holdings, Inc. and Subsidiaries

Consolidated Financial Statements December 31, 2012 and 2011 and Years ended December 31, 2012, 2011 and 2010 and Independent Auditors’ Report SyCip Gorres Velayo & Co.

*SGVMG100137*

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 its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2012 and 2011, and the consolidated statements of income, statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2012, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements

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

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

SyCip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Philippines

Phone: (632) 891 0307 Fax: (632) 819 0872 www.sgv.com.ph BOA/PRC Reg. No. 0001, December 28, 2012, valid until December 31, 2015 SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited

*SGVMG100137*

- 2 - Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cebu Holdings, Inc. and its subsidiaries as at December 31, 2012 and 2011, and their financial performance and their cash flows for each of the three years in the period ended December 31, 2012 in accordance with Philippine Financial Reporting Standards. SYCIP GORRES VELAYO & CO. Jessie D. Cabaluna Partner CPA Certificate No. 36317 SEC Accreditation No. 0069-AR-3 (Group A), February 14, 2013, valid until February 13, 2016 Tax Identification No. 102-082-365 BIR Accreditation No. 08-001998-10-2012, April 11, 2012, valid until April 10, 2015 PTR No. 3669666, January 2, 2013, Makati City March 7, 2013

*SGVMG100137*

CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in Thousands) December 31 2012 2011

ASSETS

Current Assets Cash and cash equivalents (Notes 4 and 23) P=1,864,017 P=1,214,231 Short-term investments (Notes 5 and 23) – 2,956 Accounts receivable (Notes 6, 16 and 23) 541,004 390,697 Inventories (Note 7) 1,257,764 986,936 Other current assets (Note 8) 78,878 17,981 Total Current Assets 3,741,663 2,612,801

Noncurrent Assets Noncurrent accounts receivable (Notes 6, 16 and 23) 489,701 522,526 Property and equipment (Note 9) 49,265 39,432 Investments in associates (Note 10) 773,260 690,354 Investment properties (Note 11) 4,635,201 3,170,576 Deferred tax assets - net (Note 21) 8,638 9,579 Other noncurrent assets (Note 12) 51,335 86,045 Total Noncurrent Assets 6,007,400 4,518,512 P=9,749,063 P=7,131,313

LIABILITIES AND EQUITY

Current Liabilities Accounts and other payables (Notes 13, 16 and 23) P=2,046,332 P=654,135 Current portion of long-term debt (Notes 14 and 23) 163,315 55,000 Income tax payable 16,259 36,609 Other current liabilities (Notes 15 and 23) 502,274 402,115 Total Current Liabilities 2,728,180 1,147,859

Noncurrent Liabilities Long-term debt - net of current portion (Notes 14 and 23) 1,681,747 895,675 Pension liabilities (Note 20) 16,239 18,044 Deferred tax liabilities - net (Note 21) 33,094 28,556 Other noncurrent liabilities (Note 23) 7,557 12,788 Total Noncurrent Liabilities 1,738,637 955,063 Total Liabilities 4,466,817 2,102,922 (Forward)

*SGVMG100137*

- 2 - December 31 2012 2011

Equity (Note 24) Equity attributable to equity holders of Cebu Holdings, Inc. Paid-in capital P=2,776,758 P=2,776,758 Retained earnings 2,177,596 1,928,311 4,954,354 4,705,069 Non-controlling interests 327,892 323,322 Total Equity 5,282,246 5,028,391 P=9,749,063 P=7,131,313 See accompanying Notes to Consolidated Financial Statements.

*SGVMG100137*

CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, except Earnings Per Share) Years Ended December 31 2012 2011 2010

REVENUE Real estate (Note 17) P=1,260,651 P=1,164,625 P=1,273,515 Equity in net earnings of associates (Note 10) 73,901 28,505 29,020 Interest income (Note 18) 83,179 59,384 52,240 Other income (Note 18) 215,303 190,187 167,095 1,633,034 1,442,701 1,521,870

COSTS AND EXPENSES Real estate (Note 19) 751,590 617,901 740,346 General and administrative expenses (Notes 16, 19 and 20) 196,682 190,180 173,541 Interest and other financing charges (Notes 16 and 19) 43,545 22,409 25,347 Other charges 1,528 4,080 1,824 993,345 834,570 941,058

INCOME BEFORE INCOME TAX 639,689 608,131 580,812

PROVISION FOR INCOME TAX (Note 21) Current 161,570 150,066 124,615Deferred 5,463 (6,949) 10,934 167,033 143,117 135,549

NET INCOME P=472,656 P=465,014 P=445,263

Net Income Attributable to: Equity holders of Cebu Holdings, Inc. P=441,292 P=424,333 P=406,200Non-controlling interests 31,364 40,681 39,063

P=472,656 P=465,014 P=445,263

Basic/Diluted Earnings Per Share (Note 22) Net income attributable to equity holders of Cebu Holdings, Inc. P=0.23 P=0.22 P=0.21 See accompanying Notes to Consolidated Financial Statements.

*SGVMG100137*

CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands) Years Ended December 31 2012 2011 2010

Net income P=472,656 P=465,014 P=445,263

Other comprehensive income − − −

Total comprehensive income P=472,656 P=465,014 P=445,263

Total comprehensive income attributable to: Equity holders of Cebu Holdings, Inc. P=441,292 P=424,333 P=406,200 Non-controlling interests 31,364 40,681 39,063 P=472,656 P=465,014 P=445,263 See accompanying Notes to Consolidated Financial Statements.

*SGVMG100137*

CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in Thousands, except Cash Dividends Per Share) Years Ended December 31 2012 2011 2010

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF CEBU HOLDINGS, INC.

Capital Stock - P=1 par value (Note 24) Balance at beginning and end of year P=1,920,073 P=1,920,073 P=1,920,073

Additional Paid-in Capital Balance at beginning and end of year 856,685 856,685 856,685

Total Paid-in Capital 2,776,758 2,776,758 2,776,758

Retained Earnings (Note 24) Appropriated for future expansion 1,300,000 – – Unappropriated: At beginning of year 1,928,311 1,638,384 1,366,590 Net income 441,292 424,333 406,200 Cash dividends - P=0.10 per share in 2012 and P=0.07 per share in 2011 and 2010 (192,007) (134,406) (134,406) Appropriations during the year (1,300,000) – – At end of year 877,596 1,928,311 1,638,384 2,177,596 1,928,311 1,638,384

NON-CONTROLLING INTERESTS At beginning of year 323,322 309,435 297,183 Net income 31,364 40,681 39,063 Dividends paid to non-controlling interests (26,794) (26,794) (26,811) At end of year 327,892 323,322 309,435 P=5,282,246 P=5,028,391 P=4,724,577 See accompanying Notes to Consolidated Financial Statements.

*SGVMG100137*

CEBU HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands) Years Ended December 31 2012 2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P=639,689 P=608,131 P=580,812 Adjustments for:

Depreciation and amortization (Notes 9, 11 and 19) 138,362 137,054 126,355 Interest and other financing charges (Note 19) 43,545 22,409 25,347 Unrealized foreign exchange losses 1,531 4,099 1,903 Provision for doubtful accounts (Note 6) − 1,000 151 Loss (gain) on disposal of property and

equipment (217) 155 (129) Realized profit from downstream sale (Notes 10

and 29) (9,005) (16,920) − Equity in net earnings of associates (Note 10) (73,901) (28,505) (29,020) Interest income (Note 18) (83,179) (59,384) (52,240)

Operating income before working capital changes 656,825 668,039 653,179 Decrease (increase) in:

Accounts receivable (98,241) (381,532) (90,034) Inventories (Note 29) 75,610 (130,755) 30,343 Other current assets (60,897) (4,608) 11,479

Increase (decrease) in: Accounts and other payables (Note 29) 213,284 (180,962) (3,926) Other liabilities 93,454 20,588 26,704 Pension liabilities (1,805) 15,332 160

Net cash generated from operations 878,230 6,102 627,905 Interest received 63,938 58,249 39,773 Interest paid (38,099) (21,387) (19,473) Income taxes paid (181,920) (140,227) (123,698) Net cash provided by (used in) operating activities 722,149 (97,263) 524,507

CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of:

Investment properties (Notes 11 and 29) (757,864) (223,071) (100,916) Property and equipment (Note 9) (22,886) (11,626) (34,874) Investments in associates (Notes 10 and 29) – – (90,454)

Decrease (increase) in: Short-term investments 2,956 22,864 211,690

Other noncurrent assets 34,710 5,588 (7,358) Proceeds from sale of property and equipment 803 10 295 Net cash used in investing activities (742,281) (206,235) (21,617)

(Forward)

*SGVMG100137*

- 2 - Years Ended December 31 2012 2011 2010

CASH FLOWS FROM FINANCING ACTIVITIES Payments of long-term debt (P=55,000) (P=110,000) (P=110,000) Availments of long-term debt 945,250 895,675 − Dividends paid to:

Non-controlling interests (26,794) (26,794) (26,811) Equity holders of Cebu Holdings, Inc. (192,007) (134,406) (134,406)

Net cash provided by (used in) financing activities 671,449 624,475 (271,217)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,531) (4,099) (1,903)

NET INCREASE IN CASH AND CASH EQUIVALENTS 649,786 316,878 229,770

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 4) 1,214,231 897,353 667,583

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) P=1,864,017 P=1,214,231 P=897,353

See accompanying Notes to Consolidated Financial Statements

*SGVMG100137*

CEBU HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL 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, Philippines.

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 CPVDC is at 7th Floor, Cebu Holdings Center, Cebu Business Park, Cebu City, Philippines.

Asian I-Office Properties, Inc. (AiO) is 40%-owned by CPVDC starting in 2008. 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 wholly owned 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, Philippines.

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. The registered office address of CBP Theatre is at 7th Floor, Cebu Holdings Center, Cebu Business Park, Cebu City, Philippines. CBP Theatre has not yet started its operations as of December 31, 2012.

The consolidated financial statements of Cebu Holdings, Inc. and its subsidiaries (the Group) as of December 31, 2012 and 2011 and for each of the three years ended December 31, 2012 were authorized for issue by the Executive Committee of the Board of Directors (BOD) on March 7, 2013.

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 (P=), which is the functional currency of the Parent Company. All values are rounded to the nearest thousand (P=000) except when otherwise indicated. Statement of Compliance The consolidated financial statements of the Group have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

- 2 -

*SGVMG100137*

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) as of December 31, 2012 and 2011:

Effective Percentages

of OwnershipCLCI 100%CBP Theatre 100 CPVDC 76

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. The financial statements of the subsidiaries are prepared for the same reporting year as the Parent Company, using consistent accounting policies. All intercompany balances and transactions, including income, expenses and dividends, are eliminated in full. 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 statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and within equity in the consolidated statements of financial position, separately from the equity attributable to the Parent Company. 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 allocated to “Inventories” 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. Adoption of New and Amended Accounting Standards and Interpretations The accounting policies adopted in the preparation of the Group’s consolidated financial statements are consistent with those of the previous financial year except for the adoption of the following amended PFRS and Philippine Accounting Standard (PAS) which became effective January 1, 2012. Except as otherwise indicated, the adoption of the new and amended standards did not have any significant impact on the Group’s financial statements.

• PFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets (Amendments)

The amendments require additional disclosures about financial assets that have been transferred but not derecognized to enhance the understanding of the relationship between those assets that have not been derecognized and their associated liabilities. In addition, the amendments require disclosures about continuing involvement in derecognized assets to enable users of financial statements to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets. The amendments affect disclosures only and do not have significant impact on the Group’s financial position or performance since the Group does not engage in these types of transfers of financial assets.

- 3 -

*SGVMG100137*

• PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets (Amendments) This amendment to PAS 12 clarifies the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that the carrying amount of investment property measured using the fair value model in PAS 40, Investment Property, will be recovered through sale and, accordingly, requires that any related deferred tax should be measured on a ‘sale’ basis. The presumption is rebutted if the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits in the investment property over time (‘use’ basis), rather than through sale. Furthermore, the amendment introduces the requirement that deferred tax on non-depreciable assets measured using the revaluation model in PAS 16, Property, Plant and Equipment, always be measured on a sale basis of the asset. The amendments have no impact on the Group’s financial position or performance since the Group does not have property and equipment and investment properties measured at fair value.

Future Changes in Accounting Policies The Group will adopt the following amended 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.

Effective 2013

• PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial

Liabilities These amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are set off in accordance with PAS 32, Financial Instruments: Presentation and Disclosure. These disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with PAS 32. The amendments require entities to disclose, in a tabular format unless another format is more appropriate, the following minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period:

a) The gross amounts of those recognized financial assets and recognized financial liabilities; b) The amounts that are set off in accordance with the criteria in PAS 32 when determining

the net amounts presented in the statement of financial position; c) The net amounts presented in the statement of financial position; d) The amounts subject to an enforceable master netting arrangement or similar agreement

that are not otherwise included in (b) above, including: i. Amounts related to recognized financial instruments that do not meet some or all of the offsetting criteria in PAS 32; and ii. Amounts related to financial collateral (including cash collateral); and

e) The net amount after deducting the amounts in (d) from the amounts in (c) above.

The amendments to PFRS 7 are to be retrospectively applied for annual periods beginning on or after January 1, 2013. The amendment affects disclosures only on the Group’s financial position or performance since the Group does not have financial instruments that are set off in accordance with the criteria in PAS 32.

- 4 -

*SGVMG100137*

• PFRS 10, Consolidated Financial Statements PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by PFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in PAS 27.

• PFRS 11, Joint Arrangements PFRS 11 replaces PAS 31, Interests in Joint Ventures and SIC13, Jointly controlled Entities (JCEs) - Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for JCEs using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The application of this new standard will have no impact on the financial position of the Group since the Group does not have JCEs. The Group will adopt the standard when it enters into joint arrangements.

• PFRS 12, Disclosure of Interests with Other Entities PFRS 12 includes all of the disclosures that were previously in PAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in PAS 31, Interest in Joint Ventures and PAS 28, Investment in Associates. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. The adoption of PFRS 12 will affect disclosures only and has no impact on the Group’s financial position or performance since the Group assessed that there will be no significant changes in the disclosures required by PAS 27, 28 and 31.

• PFRS 13, Fair Value Measurement

PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements. PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted. This Standard should be applied prospectively as of the beginning of the annual period in which it is initially applied. Its disclosure requirements need not be applied in comparative information provided for periods before initial application of PFRS 13. The Group does not consider that the definition of fair value that is applied in PFRS 13 differs in a material way from its current approach and consequently anticipates there will not be any impact from this standard on its financial position. However, PFRS 13 does expand the disclosure requirements in respect of fair value measurement.

• PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income or OCI (Amendments) The amendments to PAS 1 change the grouping of items presented in OCI. Items that can be reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or settlement) will be presented separately from items that will never be recycled. The amendments affect presentation only and have no impact on the Group’s financial position or performance. The amendment becomes effective for annual periods beginning on or after July 1, 2012. The amendments will be applied retrospectively and will result to the modification of the presentation of items of OCI including unrealized gains on AFS financial assets and cumulative translation adjustments.

- 5 -

*SGVMG100137*

• PAS 19, Employee Benefits (Revised) Amendments to PAS 19 range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The revised standard also requires new disclosures such as, among others, a sensitivity analysis for each significant actuarial assumption, information on asset-liability matching strategies, duration of the defined benefit obligation, and disaggregation of plan assets by nature and risk. Once effective, the Group has to apply the amendments retroactively to the earliest period presented. The effects are detailed below:

Increase (decrease) As at

December 31, 2012

As at December

31, 2011

As at January 1,

2011 (In Thousands) Consolidated Statements of Financial Position Net defined benefit obligation P=8,408 P=586 P=17,997 Other comprehensive loss (15,366) (7,858) (13,517) Retained earnings (220) 8,294 (2,825)

Increase (decrease) 2012 2011 (In thousands) Consolidated Statements of Income Net benefit cost P=314 (P=11,849) Income tax expense 94 (3,555) Profit (loss) for the year Attributable to the equity holders of Cebu Holdings, Inc.

(220)

8,294

• PAS 27, Separate Financial Statements (as revised in 2011)

As a consequence of the new PFRS 10, Consolidated Financial Statements, and PFRS 12, Disclosure of Interests in Other Entities, what remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The adoption of the amended PAS 27 will not have a significant impact on the separate financial statements of the entities in the Group since the Group’s accounting policy is already consistent with the revised PAS 27.

• PAS 28, Investments in Associates and Joint Ventures (as revised in 2011)

As a consequence of the new PFRS 11, Joint Arrangements and PFRS 12, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates.

Effective 2014

• PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial

liabilities (Amendments) These amendments to PAS 32 clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments affect presentation only on the Group’s financial position or performance. The amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014.

- 6 -

*SGVMG100137*

Effective 2015 • PFRS 9, Financial Instruments

PFRS 9, as issued, reflects the first phase on the replacement of PAS 39, Financial Instruments: Recognition and Measurement and applies to the classification and measurement of financial assets and liabilities as defined in PAS 39. Work on impairment of financial instruments and hedge accounting is still ongoing, with a view to replacing PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is not invoked, be subsequently measured at amortized cost if it is held within a business model that has the objective to hold the assets to collect the contractual cash flows and its contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding. All other debt instruments are subsequently measured at fair value through profit or loss. All equity financial assets are measured at fair value either through OCI or profit or loss. Equity financial assets held for trading must be measured at fair value through profit or loss. For FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. All other PAS 39 classification and measurement requirements for financial liabilities have been carried forward into PFRS 9, including the embedded derivative separation rules and the criteria for using the FVO. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but will potentially have no impact on the classification and measurement of financial liabilities.

• Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate

This Interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The Interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. The SEC and the Financial Reporting Standards Council (FRSC) have deferred the effectivity of this Interpretation until the final Revenue standard is issued by International Accounting Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed.

The adoption of this Philippine Interpretation 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.

Improvements to PFRSs Improvements to PFRSs, an omnibus of amendments to standards, deal primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The amendments are effective for annual periods beginning on or after January 1, 2013 and are applied retrospectively. Earlier application is permitted.

- 7 -

*SGVMG100137*

• PFRS 1, First-time Adoption of PFRS - Borrowing Costs The amendment clarifies that, upon adoption of PFRS, an entity that capitalized borrowing costs in accordance with its previous generally accepted accounting principles, may carry forward, without any adjustment, the amount previously capitalized in its opening statement of financial position at the date of transition. Subsequent to the adoption of PFRS, borrowing costs are recognized in accordance with PAS 23, Borrowing Costs. The amendment does not apply to the Group as it is not a first-time adopter of PFRS.

• PAS 1, Presentation of Financial Statements - Clarification of the requirements for

comparative information The amendments clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional comparative period does not need to contain a complete set of financial statements. On the other hand, supporting notes for the third balance sheet (mandatory when there is a retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements) are not required. The amendments affect disclosures only and have no impact on the Group’s financial position or performance. The amendment will not have significant impact on the Group’s consolidated financial statements since the comparative information disclosures are in accordance with the requirements of PAS 1.

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

• PAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equity

instruments The amendment clarifies that income taxes relating to distributions to equity holders and to transaction costs of an equity transaction are accounted for in accordance with PAS 12, Income Taxes. The Group expects that this amendment will not have any impact on its financial position or performance.

• PAS 34, Interim Financial Reporting - Interim financial reporting and segment information for total assets and liabilities The amendment clarifies that the total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity’s previous annual financial statements for that reportable segment. The amendment affects disclosures only on the Group’s financial position or performance.

Cash and Cash Equivalents and Short-term 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 but within one year are classified as short-term investments.

- 8 -

*SGVMG100137*

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 or liabilities were incurred and whether they are quoted in an active market. Management determines the classification of its financial instruments at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date. 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 23.

“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.

- 9 -

*SGVMG100137*

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 investments” and “Accounts receivable” except advances to contractors.

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

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 method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR. The amortization is included in the “Interest and other financing charges” 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).

Other Liabilities Other liabilities which include 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 “Other liabilities” in the consolidated statement of financial position) and amortized using the straight-line method under the “Real estate” 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 and other financing charges” in the consolidated statement of income.

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

- 10 -

*SGVMG100137*

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 (EIR) of the asset. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. Any

- 11 -

*SGVMG100137*

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, 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.

Inventories Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory and is 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. Cost includes: • Land cost • Amount paid to contractors for construction • Borrowing costs, planning and design costs, cost of site preparation, professional fees,

property transfer taxes, construction overheads and other related costs

The cost of inventory recognized in profit or loss in disposal is determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific cost based on the relative size of the property sold.

Club shares are valued at the lower of cost or NRV. Cost comprise of acquisition and actual development cost incurred plus the estimated development cost to complete the project based on the estimates as determined by in-house engineers, adjusted with the actual cost incurred as the development progresses. NRV is the estimated selling price in the ordinary course of business, less estimated costs to sell. Cost is determined 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.

- 12 -

*SGVMG100137*

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 Buildings 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.

Fully depreciated property ad equipment are retained in the accounts while still in use although no further depreciation is credited or charged to current operations. Investments 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. Cost includes all amounts provided to the associate which are intended to be the associate’s capital. 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.

- 13 -

*SGVMG100137*

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 to 40 years.

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. 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 and commencement of an operating lease to another party. Transfers are made from investment properties when, and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

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

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.

- 14 -

*SGVMG100137*

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. 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. Capitalization rate ranged from 1.3% to 6.5% in 2012, 2011, and 2010 (see Note 14).

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 discounting 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 rather than establishment of a corporation, partnership or other entity; and the expenses that it incurs and the revenue that it earns from real estate sales.

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

- 15 -

*SGVMG100137*

Revenue and Cost Recognition 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 “Other current liabilties” 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 “Other current liabilities” 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 from noncancellable 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. Theater income is recognized when earned. 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).

Recoveries are recognized as they accrue.

Service income is recognized when the services are rendered.

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

- 16 -

*SGVMG100137*

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. 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.

- 17 -

*SGVMG100137*

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.

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

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

3. Significant Accounting Judgments and Estimates

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

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 Group 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. Club shares 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.

- 18 -

*SGVMG100137*

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.

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, 2012 and 2011, the outstanding net trade receivable from real estate sales amounted to P=450.1 million and P=459.9 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 EIR. 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, 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.

As of December 31, 2012 and 2011, receivables, net of allowance for impairment losses, amounted to P=1,030.7 million and P=913.2 million, respectively (see Note 6).

- 19 -

*SGVMG100137*

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. See Notes 9 and 11 for the related balances.

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, 2012 and 2011, deferred tax assets recognized amounted to P=27.5 million and P=26.5 million, respectively (see Note 21). 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 20 and include among others, discount rates, expected return on plan assets and salary increase rate. 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, 2012 and 2011, the net pension liabilities amounted to P=16.2 million and P=18.0 million, respectively (see Note 20).

- 20 -

*SGVMG100137*

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 23 for the related balances.

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:

2012 2011 (In Thousands) Cash on hand and in banks P=63,323 P=68,173 Cash equivalents 1,800,694 1,146,058 P=1,864,017 P=1,214,231

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=51.7 million, P=34.8 million and P=38.6 million in 2012, 2011 and 2010, respectively (see Note 18).

5. Short-term 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 investments amounted to P=0.4 million, P=0.8 million and P=0.3 million in 2012, 2011 and 2010, respectively (see Note 18).

- 21 -

*SGVMG100137*

6. Accounts Receivable

This account consists of:

2012 2011 (In Thousands) Trade

Residential development P=365,540 P=374,757 Commercial development 84,517 85,124 Shopping centers 71,548 40,126 Corporate business 1,186 12,590

Others 1,178 426

Advances to contractors (Note 16) 342,405 300,385 Receivable from related parties (Note 16) 135,861 63,634 Receivables from employees 27,162 17,804 Others 14,885 31,954 1,044,282 926,800 Less allowance for impairment losses 13,577 13,577 1,030,705 913,223 Less noncurrent portion 489,701 522,526 P=541,004 P=390,697

The classes of trade receivables of the Group are as follows: • Residential development pertains to receivables arising from sale of high-end residential lots

and condominium units. • 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,

movie theaters, food courts, entertainment facilities and carparks. • Corporate business pertains to receivables arising from lease of office buildings. • Others pertain substantially to advances to joint venture partners (see Note 27).

Terms and conditions of receivables are as follows:

• The sales contract receivables, included under residential development, are noninterest-

bearing and are collectible in monthly installments over a period of one to two years. • 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 leases of office spaces, included under corporate business, are noninterest-bearing and are collectible monthly based on the terms of the lease contracts.

• Advances to contractors are recouped upon every progress billing payment depending on the percentage of accomplishment.

• Receivables from related parties are noninterest-bearing and collectible within one year. • Receivable from employees are generally noninterest-bearing and are collectible over a period

of one year. • Other receivables are noninterest-bearing and collectible over a period of one to ten years.

- 22 -

*SGVMG100137*

As of December 31, 2012 and 2011, commercial development and residential development trade receivables, receivable from employees and others (included in other receivables) with a nominal amount of P=422.5 million and P=553.7 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 5.1% to 11.9% and 6.1% to 11.9% in 2012 and 2011, respectively. The aggregate unamortized discount amounted to P=17.8 million and P=33.7 million as of December 31, 2012 and 2011, respectively.

Movements in the unamortized discount as of December 31, 2012 and 2011 are as follows:

2012 2011 (In Thousands) Balance at beginning of the year P=33,678 P=39,222 Additions 15,203 18,204 Accretion (Note 18) (31,037) (23,748) Balance at end of the year P=17,844 P=33,678

Movements in the allowance for impairment losses are as follows: 2012

Shopping

Centers Others Total (In Thousands) At January 1 P=7,611 P=5,966 P=13,577 Provisions – – – Write offs – – – At December 31 P=7,611 P=5,966 P=13,577 Gross amounts of individually impaired receivables P=7,611 P=5,966 P=13,577

2011

Shopping

Centers Others Total (In Thousands) At January 1 P=9,347 P=5,966 P=15,313 Provisions 1,000 – 1,000 Write offs (2,736) – (2,736) At December 31 P=7,611 P=5,966 P=13,577 Gross amounts of individually impaired receivables P=7,611 P=5,966 P=13,577

As of December 31, 2012 and 2011, the Group has not recognized impairment on receivables based on collective assessment.

- 23 -

*SGVMG100137*

7. Inventories

This account consists of:

2012 2011 (In Thousands) Subdivision land for sale and development P=735,083 P=592,648 Club shares 357,340 357,864 Condominium units under development 165,341 36,424 P=1,257,764 P=986,936

The rollforward of inventories follows:

2012 2011 (In Thousands) At January 1 P=986,936 P=993,638 Construction cost incurred 476,618 129,309 Transfers from investment properties (Note 11) 14,108 – Cost of real estate from downstream sales (Note 16) 14,476 28,780 Disposals (recognized in cost of real estate sales) (234,374) (164,791) At December 31 P=1,257,764 P=986,936

8. Other Current Assets

This account consists of:

2012 2011 (In Thousands) Value-added input tax P=55,360 P=189 Prepaid expenses 21,721 15,956 Creditable withholding tax 1,306 1,462 Others 491 374 P=78,878 P=17,981

The value-added input tax is applied against value-added output tax. The balance is recoverable in future periods. Prepaid expenses consist of advance payments for project management fees, business taxes, office supplies, rentals, commissions and employee benefits of the Group.

- 24 -

*SGVMG100137*

9. Property and Equipment

The rollforward analyses of this account follow:

2012

Buildings and

Improvements

Furniture, Fixtures and

Equipment Transportation

Equipment Total (In Thousands) Cost At January 1 P=88,338 P=82,793 P=28,438 P=199,569 Additions 1,016 16,647 5,223 22,886 Disposals – (1,337) (676) (2,013)At December 31 P=89,354 P=98,103 P=32,985 P=220,442 Accumulated Depreciation

and Amortization At January 1 74,911 65,557 19,669 160,137 Depreciation and amortization

(Note 19) 2,432 7,300 2,735 12,467 Disposals – (1,166) (261) (1,427)At December 31 77,343 71,691 22,143 171,177 Net Book Value P=12,011 P=26,412 P=10,842 P=49,265

2011

Buildings and

Improvements

Furniture, Fixtures and

Equipment Transportation

Equipment Total (In Thousands) Cost At January 1 P=87,014 P=79,110 P=23,117 P=189,241 Additions 1,324 4,602 5,700 11,626 Disposals – (919) (379) (1,298)At December 31 88,338 82,793 28,438 199,569 Accumulated Depreciation

and Amortization At January 1 71,495 58,559 16,131 146,185 Depreciation and amortization

(Note 19) 3,416 7,883 3,786 15,085 Disposals – (885) (248) (1,133)At December 31 74,911 65,557 19,669 160,137 Net Book Value P=13,427 P=17,236 P=8,769 P=39,432

Depreciation and amortization charged to general and administrative expenses amounted to P=12.5 million, P=15.1 million and P=12.6 million for the years ended December 31, 2012, 2011 and 2010, respectively (see Note 19).

As of December 31, 2012 and 2011, there are no capital commitments for property and equipment.

- 25 -

*SGVMG100137*

10. Investments in Associates

This account consists of:

2012 2011 (In Thousands) Acquisition cost P=800,819 P=800,819 Accumulated equity in net income: At beginning of year (110,465) (54,458) Equity in net earnings for the year 73,901 28,505 Realized profit for the year (Note 16) 9,005 16,920 Elimination of intercompany profit for the year – (101,432) At end of year (27,559) (110,465) P=773,260 P=690,354

The Group’s equity in net assets of associates and the related percentages of ownership are shown below.

Percentages of

Ownership Carrying Amounts 2012 2011 2012 2011 (In Thousands) Solinea, Inc. (Solinea) 35% 35% P=316,673 P=289,534 AiO 40 40 263,670 221,716 Cebu Insular Hotel Company, Inc. (CIHCI) 37 37 192,917 179,104 P=773,260 P=690,354

In 2011, CHI purchased 35% stake in Solinea amounting to P=291.1 million. The remaining shares equivalent to 65% of ownership were purchased by Alveo Land Corporation (Alveo), a subsidiary of ALI.

In 2010, 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).

The following table presents the summarized financial information for equity investment in Solinea, AiO and CIHCI as of and for the years ended December 31, 2012 and 2011:

Solinea

2012 2011 (In Thousands) Current assets P=861,961 P=377,139 Noncurrent assets 659,466 584,214 Total assets P=1,521,427 P=961,353 Current liabilities P=1,415,208 P=295,281 Noncurrent liabilities 14,298 651,274 Equity 91,921 14,798 Total liabilities and equity P=1,521,427 P=961,353 (Forward)

- 26 -

*SGVMG100137*

2012 2011 (In Thousands)

Revenue P=315,782 P=– Costs and expenses 238,242 4,369 Net income (loss) P=77,540 (P=4,369)

AiO

2012 2011 (In Thousands) Current assets P=371,756 P=304,341 Noncurrent assets 2,427,233 2,263,985 Total assets P=2,798,989 P=2,568,326 Current liabilities P=689,547 P=524,104 Noncurrent liabilities 1,283,747 1,302,087 Equity 825,695 742,135 Total liabilities and equity P=2,798,989 P=2,568,326 Revenue P=427,198 P=226,076 Costs and expenses 342,833 195,369 Net income P=84,365 P=30,707

CIHCI

2012 2011 (In Thousands) Current assets P=158,391 P=156,834 Noncurrent assets 696,665 706,216 Total assets P=855,056 P=863,050 Current liabilities P=87,706 P=68,482 Noncurrent liabilities 258,581 323,122 Equity 508,769 471,446 Total liabilities and equity P=855,056 P=863,050 Revenue P=423,385 P=387,965 Costs and expenses 386,113 353,623 Net income P=37,272 P=34,342

- 27 -

*SGVMG100137*

11. Investment Properties

The rollforward analyses of this account follow:

2012

Land Buildings and

Improvements Construction

in Progress Total (In Thousands) Cost At January 1 P=802,317 P=3,351,832 P=232,022 P=4,386,171 Additions 2,435 59,580 1,542,613 1,604,628 Transfers (Note 29) (14,108) – – (14,108) At December 31 790,644 3,411,412 1,774,635 5,976,691 Accumulated Depreciation and Amortization At January 1 – 1,215,595 – 1,215,595 Depreciation and amortization

(Note 19) – 125,895 – 125,895 At December 31 – 1,341,490 – 1,341,490 Net Book Value P=790,644 P=2,069,922 P=1,774,635 P=4,635,201

2011

Land Buildings and Improvements

Construction in Progress Total

(In Thousands) Cost At January 1 P=802,317 P=3,302,375 P=84,910 P=4,189,602 Additions – 69,750 153,321 223,071 Transfers/disposals – (20,293) (6,209) (26,502) At December 31 802,317 3,351,832 232,022 4,386,171 Accumulated Depreciation and

Amortization At January 1 – 1,120,128 – 1,120,128 Depreciation and amortization

(Note 19) – 121,969 – 121,969 Transfers/disposals – (26,502) – (26,502)At December 31 – 1,215,595 – 1,215,595 Net Book Value P=802,317 P=2,136,237 P=232,022 P=3,170,576

The Group’s investment properties are currently held for commercial leasing. Depreciation and amortization on buildings and improvements charged to operations amounted to P=125.9 million, P=122.0 million and P=113.7 million for the years ended December 31, 2012, 2011 and 2010, respectively (see Note 19).

Total rental income from investment properties amounted to P=854.9 million, P=838.1 million and P=746.8 million for the years ended December 31, 2012, 2011 and 2010, respectively (see Note 17). Total operating expenses related to investment properties that generated rental income amounted to P=280.1 million, P=248.5 million and P=240.3 million for the years ended December 31, 2012, 2011 and 2010, respectively.

- 28 -

*SGVMG100137*

The aggregate fair value of the Group’s investment properties amounted to P=7,508.2 million and P=7,324.1 million as of December 31, 2012 and 2011, respectively.

The fair values 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, 2012 and 2011, capital commitments for investment properties amounted to P=1.9 billion.

12. Other Noncurrent Assets

This account consists of:

2012 2011 (In Thousands) Dividends receivable (Note 16) P=27,943 P=33,677 Deferred input tax 20,699 47,908 Deposits 2,154 2,324 Others 539 2,136 P=51,335 P=86,045

Deferred input tax arises from purchase of capital goods and is recoverable in future periods.

13. Accounts and Other Payables

This account consists of:

2012 2011 (In Thousands) Accrued project costs P=1,260,184 P=81,090 Accounts payable (Note 27) 290,724 140,560 Accrued expenses 194,784 262,115 Retentions payable 140,928 54,328 Payable to related parties (Note 16) 114,897 18,899 Taxes payable 24,206 82,481 Dividends payable (Note 24) 16,434 5,277 Interest payable 1,562 1,726 Others 2,613 7,659 P=2,046,332 P=654,135

- 29 -

*SGVMG100137*

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

Accounts payable consists of estimated liabilities or costs to complete.

Accrued expenses consist mainly of direct operating and administrative expenses, payroll, systems cost and marketing expenses.

Retentions payable pertains to the portion of the progress billings of constructions retained by the Group. Taxes payable pertains to amusement taxes and net output tax payable. Dividends payable pertain to dividends declared by CPVDC in 2012 and 2011 (see Note 24).

Accounts payable and 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:

2012 2011 (In Thousands) At 0.60% per annum spread over the floating rate of

average 91-day treasury bill rate P=1,840,000 P=890,000 At 0.60% per annum spread over the fixed rate of

average 5-year treasury bond rate 10,000 10,000 At 0.50% per annum spread over the fixed rate based

on PDST-R1 rate – 30,000 At 0.50% per annum spread over the fixed rate of

average 5-year treasury bond rate – 25,000 1,850,000 955,000 Less unamortized debt issue cost 4,938 4,325 1,845,062 950,675 Less current portion of long-term debt 163,315 55,000 P=1,681,747 P=895,675

Portion of the 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 “Investment properties” account in the consolidated statements of financial position) with carrying value of P=4,116.0 million and P=2,638.0 million as of December 31, 2012 and 2011, respectively (see Note 11). Such loans have been fully paid and the related indenture has been terminated as of December 31, 2012.

The loan agreements provide for certain restrictions and requirements with respect to, among others, major disposal of property, pledge of assets, liquidation, merger or consolidation and maintenance of ratio between debt and the tangible net worth not to exceed 3:1. These restrictions and requirements were complied with by the Parent Company as of December 31, 2012 and 2011.

- 30 -

*SGVMG100137*

As of December 31, 2012 and 2011, the Group has capitalized interest as part of the investment properties account amounting to P=12.0 million and P=3.0 million, respectively. The rollforward of unamortized debt issue cost follows:

2012 2011

(In Thousands) At beginning of year P=4,325 P=– Additions 4,750 4,500 Accretions (4,137) (175) At end of year P=4,938 P=4,325

15. Other current liabilities

This account consists of advances from customers of real estate transactions, tenants’ deposits and construction bonds which are to be refunded by the Group. Total other current liabilities amounted to P=502.3 million and P=402.1 million as of December 31, 2012 and 2011, respectively.

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, among others, one party has the ability, directly or indirectly, to control the other party in making financial and operating decisions, the parties are subject to common control or the party is an associate or a joint venture. 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 following tables provide the total amount of transactions that have been entered into with related parties for the relevant financial year (in thousands):

Amounts owed by related parties

Amount owed to related parties

2012 2011 2012 2011 Associates

Solinea P=84,387 P=55,075 P=– P=– AiO 28,339 5,099 – –

Joint Venture Partner VH Properties 9,394 – – –

Shareholder ALI 3,049 1,836 44,672 3,419

Subsidiaries of ALI Avida 7,865 836 51,041 – Alveo 376 788 18,132 15,180

Others 2,451 – 1,052 – Total P=135,861 P=63,634 P=114,897 P=18,599

- 31 -

*SGVMG100137*

Revenues Expenses 2012 2011 2012 2011 Associate

AiO P=19,752 P=114,702 P=– P=39,481 Shareholder

ALI – – 58,925 58,888 Joint Venture

VH Properties Philippines, Inc. (VH) 55,261 – – – Total P=99,801 P=83,949 P=73,401 P=87,668

Receivables from/payables to Solinea, Avida and Alveo pertain mostly to advances and reimbursements of operating expenses related to joint venture agreements including development costs and land acquisitions. Other related party receivables and payables pertain to advances and reimbursements arising from the Group’s ordinary course of business. These are generally trade related, non-interest bearing and payable within one year. The following describes the nature of the material transactions of the Group with related parties as of December 31, 2012 and 2011: Income and expenses from AiO pertain to management fees, utility charges and sales of commercial lots. Management fees charged to AiO amounted to P=15.8 million and P=5.9 million in 2012 and 2011, respectively. In 2011, CPVDC sold commercial lots to AiO with total selling price of P=105.7 million. Related cost of sales from the transaction amounted to P=63.4 million. Receivables from these sales are noninterest-bearing and collectible in annual installments starting 2009 until 2013. The Group’s “Accounts Receivable” account includes the receivable from sale of lot to AiO amounting to P=204.4 million and P=307.7 million as of December 31, 2012 and 2011, respectively. The Group also recognized income from utility charges to AiO amounting to P=3.9 million and P=3.1 million in 2012 and 2011, respectively.

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

Management and service agreement with ALI, amounted to P=44.4 million and P=43.1 million in 2012 and 2011, respectively. Payable to ALI as of December 31, 2012 and 2011 arising from this transaction amounted to P=42.9 million and P=24.3 million, respectively.

Professional fees to ALI amounted to P=0.6 million and nil in 2012 and 2011, respectively. Systems costs which were included in the Group’s manpower costs amounted to P=13.9 million and P=15.8 million in 2012 and 2011, respectively.

Income from VH pertains to service income from joint venture agreements.

Included in the Group’s other noncurrent assets is a dividend receivable from CIHCI amounting to P=27.9 million and P=33.7 million as of December 31, 2012 and 2011, respectively which is collectible until 2015.

- 32 -

*SGVMG100137*

Compensation of key management personnel by benefit type follows:

2012 2011 2010 (In Thousands) Short-term employee benefits P=18,832 P=20,376 P=17,388 Post-employment pension and other benefits 2,807 5,412 3,847 P=21,639 P=25,788 P=21,235

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 except for those indicated under Note 6. 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.

17. Real Estate Revenue

This account consists of:

2012 2011 2010 (In Thousands) Rental income P=854,939 P=838,133 P=746,781 Real estate sales 309,682 246,235 448,868 Theater income 96,030 80,257 77,866 P=1,260,651 P=1,164,625 P=1,273,515

18. Interest and Other Income

Interest income consists of:

2012 2011 2010 (In Thousands) Interest income:

Cash in banks (Note 4) P=239 P=205 P=257 Cash equivalents (Note 4) 51,503 34,624 38,386 Short-term investments (Note 5) 400 807 266

Accretion of receivables (Note 6) 31,037 23,748 13,331 P=83,179 P=59,384 P=52,240

Other income consists of:

2012 2011 2010 (In Thousands) Recoveries P=110,785 P=109,700 P=90,704 Service income 79,210 27,831 21,260 Penalties 15,300 40,597 46,100 Beverage 4,533 4,723 4,310 Others 5,475 7,336 4,721 P=215,303 P=190,187 P=167,095

- 33 -

*SGVMG100137*

Recoveries pertain to income from sewer, light and power and water charges from its rental operations. These are recognized when earned. Service income pertains to various management fees charged by the Group. Penalties represent payments made by a lot buyer in relation to certain construction violations. The lot buyer has agreed to comply with the specified restrictions. Penalties are based on the contractual terms of the agreement.

19. Cost and Expenses

Real estate, rental and theater expenses consist of:

2012 2011 2010 (In Thousands) Cost of real estate sales (Notes 7 and 16) P=234,374 P=164,791 P=296,090 Depreciation and amortization (Note 11) 125,895 121,969 113,737 Marketing and management fees (Note 16) 91,969 78,200 71,426 Rental 27,714 26,386 24,036 Manpower cost (Notes 16 and 20) 10,494 10,010 10,344 Direct operating expenses: Light and water 92,856 82,255 53,591 Security and janitorial 44,189 40,246 30,711 Taxes and licenses 41,504 34,492 37,925 Repairs and maintenance 30,268 25,220 45,134 Dues and fees 17,351 5,830 7,246 Commission 12,635 8,475 13,227 Insurance 8,598 9,096 8,470 Professional fees 610 346 18,273 Transportation and travel 475 548 214 Entertainment, amusement and recreation 227 836 192 Others 12,431 9,201 9,730 P=751,590 P=617,901 P=740,346

Direct operating expenses consist of direct costs charged to the Group’s operations. General and administrative expenses consist of:

2012 2011 2010 (In Thousands) Manpower cost (Notes 16 and 20) P=123,961 P=118,238 P=107,782 Depreciation and amortization (Note 9) 12,467 15,085 12,618 Stockholders' meeting 7,807 6,327 5,536 Professional fees 7,643 4,584 5,347 Transportation and travel 6,938 7,514 7,333 Repairs and maintenance 6,813 4,074 3,176 Utilities 4,495 5,723 4,090 Postal and communication 4,304 3,851 3,458 (Forward)

- 34 -

*SGVMG100137*

2012 2011 2010 (In Thousands) Advertising P=3,973 P=8,667 P=5,880 Security and janitorial 3,265 2,491 2,424 Insurance 2,591 430 405 Supplies 2,251 2,221 2,265 Rental 1,507 1,735 1,733 Entertainment, amusement and recreation 1,304 1,107 1,330 Dues and fees 1,287 1,219 1,306 Taxes and licenses 285 325 242 Others 5,791 6,589 8,616 P=196,682 P=190,180 P=173,541

Interest expense and other financing charges consist of:

2012 2011 2010 (In Thousands) Interest expense on long-term debt (Note 14) P=29,959 P=17,650 P=19,473 Other financing charges 13,586 4,759 5,874 P=43,545 P=22,409 P=25,347

20. 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=10.5 million, P=18.3 million and P=3.4 million for the years ended December 31, 2012, 2011 and 2010, respectively.

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:

2012 2011 2010 (In Thousands) Current service cost P=2,003 P=4,934 P=3,295 Interest cost on benefit obligation 2,676 3,099 1,640 Expected return − (1,413) (1,118)Past service cost 226 226 − Net actuarial loss (gain) (540) 11,476 (457)Adjustment due to curtailment 6,135 − − Total pension expense P=10,500 P=18,322 P=3,360

- 35 -

*SGVMG100137*

The amounts recognized as pension liabilities in the consolidated statements of financial position for the pension plan as of December 31, 2012 and 2011 are as follows:

2012 2011 (In Thousands) Benefit obligation P=24,647 P=39,358 Plan assets − (20,728) Unrecognized actuarial gain (loss) (4,887) 3,161 Unrecognized past service cost (3,521) (3,747) Net pension liabilities P=16,239 P=18,044

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

2012 2011 (In Thousands) At January 1 P=39,358 P=41,607 Current service cost 2,003 4,934 Interest cost 2,676 3,099 Actuarial gain (13,220) (5,322) Benefits paid (12,305) (4,960) Curtailment 6,135 − At December 31 P=24,647 P=39,358

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

2012 2011 (In Thousands) At January 1 P=20,728 P=20,938 Expected return − 1,413 Contributions 12,305 3,000 Benefits paid (12,305) (4,960) Actuarial gain (loss) (20,728) 337 At December 31 P=− P=20,728 Actual return on plan assets (P=20,728) P=1,750

The Group expects to make P=3.8 million contributions to its retirement fund in 2013.

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

2012 2011

(In Thousands) Balance at beginning of year P=3,161 (P=13,974) Actuarial gain (loss) (8,048) 17,135 Balance at end of year (P=4,887) P=3,161

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

2012 2011 2010 Investment in trust funds 99.9% 99.9% 99.9% Others 0.1 0.1 0.1

- 36 -

*SGVMG100137*

The assumptions used to determine pension benefits for the Group for the years ended December 31, 2012, 2011 and 2010 are as follows:

2012 2011 2010 Discount rate 6.8% 6.8% 7.4% Expected return on plan assets 8.8 8.8 6.7 Salary increase rate 7.0 7.0 7.0

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

2012 2011 2010 2009 2008 (In Thousands) Defined benefit obligation P=24,647 P=39,358 P=41,607 P=17,322 P=21,979 Plan assets − (20,728) (20,938) (15,965) (20,076) P=24,647 P=18,630 P=20,669 P=1,357 P=1,903 Experience adjustments on

plan liabilities (P=17,408) P=1,389 P=14,008 P=1,324 P=1,405 Experience adjustments on

plan assets (P=20,728) P=337 P=1,773 P=6,399 P=171 21. Income Taxes Reconciliation between the statutory income tax rate and the effective income tax rate follows:

2012 2011 2010 Statutory income tax rate 30.00% 30.00% 30.00% Tax effect of: Income subjected to lower income tax

rates (1.47) (5.42) (6.12) Equity in net earnings of associates (3.47) (1.41) (1.50) Interest income and capital gains taxed at

lower rates (0.83) (2.10) (0.70) Others 1.88 2.46 1.65 Effective income tax rate 26.11% 23.53% 23.33%

The components of net deferred tax assets as of December 31, 2012 and 2011 follow:

2012 2011 (In Thousands) Deferred tax assets on: Difference between tax and book basis of accounting for real estate transactions P=3,750 P=5,143 Allowance for probable losses 2,102 1,894 Advance rent 1,175 563 Unrealized foreign exchange loss 923 1,071 Accrued expenses 295 295 Others 422 897 8,667 9,863 Deferred tax liability on deferred credits 29 284

P=8,638 P=9,579

- 37 -

*SGVMG100137*

The components of net deferred tax liabilities as of December 31, 2012 and 2011 are as follows:

2012 2011 (In Thousands) Deferred tax assets on: Discounting losses P=6,325 P=4,994 Allowance for probable losses 4,623 4,539 Retirement benefits 4,555 4,127 Unrealized foreign exchange loss 3,309 2,945 18,812 16,605 Deferred tax liabilities on: Capitalized interest and other expenses 21,477 20,238

Excess of acquisition cost over the net assets of a subsidiary 15,441 15,705 Difference between tax and book basis of accounting for real estate transactions 13,759 8,042

Others 1,229 1,176 51,906 45,161 P=33,094 P=28,556

22. Earnings Per Share

The following table presents information necessary to compute EPS:

2012 2011 2010 (In Thousands, except EPS) a. Net income attributable to the equity

holders of the Parent Company P=441,292 P=424,333 P=406,200 b. Weighted average number of outstanding

shares 1,920,073 1,920,073 1,920,073 c. Earnings per share (a/b) P=0.23 P=0.22 P=0.21

- 38 -

*SGVMG100137*

23. Financial Instruments

Fair Value Information The following tables set forth the carrying values and estimated fair values of all of the Group’s financial instruments recognized as of December 31:

2012 2011 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) FINANCIAL ASSETS Loans and Receivables Cash and cash equivalents (excluding cash on hand) P=1,862,914 P=1,862,914 P=1,213,981 P=1,213,981 Short-term investments – – 2,956 2,956 Trade receivables Residential development 365,540 408,431 374,757 373,076 Commercial development 84,517 94,352 85,124 85,124 Shopping centers 63,937 63,937 32,515 32,515 Corporate business 1,186 1,186 12,590 12,590 Others 1,178 1,178 426 426 Receivable from related parties 135,861 135,861 63,634 63,634 Dividends receivable 27,943 27,943 33,677 33,677 Receivables from employees 27,162 27,162 17,804 17,804 Others 8,919 8,919 25,988 25,988 Total Financial Assets P=2,579,157 P=2,631,883 P=1,863,452 P=1,861,771

OTHER FINANCIAL LIABILITIES Accounts and other payables Accrued project costs P=1,260,184 P=1,260,184 P=81,090 P=81,090 Accounts payable 290,724 290,724 140,560 140,560 Accrued expenses 194,784 194,784 262,115 262,115 Retentions payable 140,928 140,928 54,328 54,328 Payable to related parties 114,897 114,897 18,899 18,899 Dividends payable 16,434 16,434 5,277 5,277 Interest payable 1,562 1,562 1,726 1,726 Others 2,613 2,613 7,659 7,659 Long-term debt 1,845,062 1,796,763 950,675 935,766 Other liabilities 509,831 509,264 414,903 418,392 Total Financial Liabilities P=4,377,019 P=4,328,153 P=1,937,232 P=1,925,812

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 investments and current accounts receivable - The carrying amounts approximate fair values due to the relatively short-term maturities of these instruments.

Noncurrent accounts and dividends receivable - The fair values are estimated based on the discounted cash flow methodology using the applicable discount rates for similar types of instruments. The discount rates used ranged from 1.4% to 2.8% and 4.3% to 5.3% as of December 31, 2012 and 2011, respectively.

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

- 39 -

*SGVMG100137*

Noncurrent portion of other liabilities 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 2.1% to 4.8% and 2.2% to 7.2% as of December 31, 2012 and 2011, 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 prices (unadjusted) in active markets for identical assets or liabilities

Level 2: inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly

Level 3: inputs for the asset or liability that are not based on observable market data

As of December 31, 2012, the Group has no financial instruments recorded at fair value.

Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise of cash and cash equivalents, short-term investments and long-term debt. The main purpose of the Group’s financial instruments is to fund its operations, capital expenditures and finance the projects. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. Exposure to credit risk, liquidity risk and market risk (i.e., foreign currency risk and interest rate risk) arises in the normal course of the Group’s business activities. The main objectives of the Group’s financial risk management are as follows:

• to identify and monitor such risks on an ongoing basis; • to minimize and mitigate such risks; and • to provide a degree of certainty about costs.

The Group’s financing and treasury function operates as a centralized service for managing financial risks and activities as well as providing optimum investment yield and cost-efficient funding for the Group. The Group’s BOD reviews and approves policies for managing each of these risks.

Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group’s credit risks are primarily attributable to financial assets such as cash and cash equivalents, 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.

- 40 -

*SGVMG100137*

Cash and cash equivalents and short-term 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. The Group’s exposure to credit risk from these financial assets arise from the default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

Commercial development, corporate business and residential development 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. 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.

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 help 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.

As for the receivables from related parties, receivable from employees, dividends receivable and other receivables, the maximum exposure to credit risk from these financial assets arise from the default of the counterparty with a maximum exposure equal to their carrying amounts. An analysis of the maximum exposure to credit risk from the Group’s trade receivables and the fair values of the related collaterals are shown below:

2012

Maximum exposure to credit risk

Fair value ofcollaterals Net Exposure

Financial effect of collateral or credit

enhancement (In Thousands) Trade receivables

Residential development P=365,540 P=879,084 P=18,726 P=346,814 Commercial development 84,517 328,291 – 84,517 Shopping centers 63,937 58,576 7,767 56,170 Corporate business 1,186 7,563 198 988 Total P=515,180 P=1,273,514 P=26,691 P=488,489

- 41 -

*SGVMG100137*

2011

Maximum exposure to credit risk

Fair value ofcollaterals Net Exposure

Financial effect of collateral or credit

enhancement (In Thousands) Trade receivables

Residential development P=374,757 P=489,585 P=– P=374,757 Commercial development 85,124 369,658 – 85,124 Shopping centers 32,515 60,150 11,041 21,474 Corporate business 12,590 – 12,590 – Total P=504,986 P=919,393 P=23,631 P=481,355

The table below shows the credit quality by class of the Group’s financial assets (gross of allowance for impairment losses):

2012

Neither Past Due nor Impaired Past Due or

Impaired Total High Grade Medium Grade Low Grade (In Thousands) Cash and cash equivalents (excluding cash on hand) P=1,862,914 P=– P=– P=– P=1,862,914 Short-term investments – – – – – Trade

Residential development 365,540 – – – 365,540 Commercial development 84,517 84,517 Shopping centers 43,788 14,552– 5,597 7,611 71,548

Corporate business – – – 1,186 1,186 Others 1,178 – – – 1,178 Receivable from related parties 135,861 – – – 135,861 Dividends receivable 27,943 – – – 27,943 Receivables from employees 27,162 – – – 27,162 Others 8,919 – – 5,966 14,885 P=2,557,822 P=14,552 P=5,597 P=14,763 P=2,592,734

2011

Neither Past Due nor Impaired Past Due or

Impaired Total High Grade Medium Grade Low Grade (In Thousands) Cash and cash equivalents (excluding cash on hand) P=1,213,981 P=− P=− P=− P=1,213,981 Short-term cash investments 2,956 − − − 2,956 Trade

Residential development 374,757 − − − 374,757 Commercial development 85,124 − − − 85,124 Shopping centers 4,303 1,877 5,449 28,497 40,126

Corporate business 12,590 − − − 12,590 Others 426 − − − 426 Receivable from related parties 63,634 − − − 63,634 Dividends receivable 33,677 − − − 33,677 Receivables from employees 17,804 − − − 17,804 Others 25,988 − − 5,966 31,954 P=1,835,240 P=1,877 P=5,449 P=34,463 P=1,877,029

Others includes non-trade receivables from sewer and management fees, receivable from SSS and accrued interest receivable from money market placements.

- 42 -

*SGVMG100137*

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

Cash and cash equivalents and short-term investments - based on the nature of the counterparty and the Company’s rating procedure. These are held by counterparty banks with minimal risk of bankruptcy and are therefore classified as high grade..

Accounts and dividends 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, 2012 and 2011, 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, 2012 and 2011, the aging analysis of receivables presented per class, is as follows:

2012

Neither Past

Due nor Past Due but not Impaired Individually Impaired <30 days 30-60 days 60-90 days 90-120 days >120 days Impaired Total

(In Thousands) Trade Residential development P=365,540 P=− P=− P=− P=− P=− P=− P=365,540 Commercial development 84,517 − − − − − − 84,517 Shopping centers 43,788 6,453 3,946 4,153 344 5,253 7,611 71,548 Corporate business − 1,186 − − − − − 1,186 Others 1,178 − − − − − − 1,178 Receivable from employees 135,861 − − − − − − 135,861 Dividends receivable 27,943 − − − − − − 27,943 Receivable from related parties 27,162 − − − − − − 27,162 Others 8,919 − − − − − 5,966 14,885 Total P=694,908 P=7,639 P=3,946 P=4,153 P=344 P=5,253 P=13,577 P=729,820

2011

Neither Past

Due nor Past Due but not Impaired Individually Impaired <30 days 30-60 days 60-90 days 90-120 days >120 days Impaired Total

(In Thousands) Trade Residential development P=374,757 P=− P=− P=− P=− P=− P=− P=374,757 Commercial development 85,124 − − − − − − 85,124 Shopping centers 11,629 8,261 3,147 1,290 885 7,303 7,611 40,126 Corporate business 12,590 − − − − − − 12,590 Others 426 − − − − − − 426 Receivable from related parties 63,634 − − − − − − 63,634 Dividends receivable 33,677 − − − − − − 33,677 Receivable from employees 17,804 − − − − − − 17,804 Others 25,988 − − − − − 5,966 31,954 Total P=625,629 P=8,261 P=3,147 P=1,290 P=885 P=7,303 P=13,577 P=660,092

The Group has no collaterals held for the past due or impaired financial assets as of December 31, 2012 and 2011.

- 43 -

*SGVMG100137*

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

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

As of December 31, 2012, current ratio is 1.4:1.0, with cash and cash equivalents and short-term investments of P=1,864.0 million accounting for 49.8% of the total current assets, and resulting in a net working capital of P=1,013.5 million. As of December 31, 2011, current ratio is 2.3:1.0, with cash and cash equivalents and short-term investments of P=1,217.2 million accounting for 46.6% of the total current assets, and resulting in a net working capital of P=1,464.9 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, 2012 and 2011 based on contractual undiscounted payments.

2012

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total

(In Thousands) Cash and cash equivalents (excluding cash on hand) P=1,862,914 P=– P=– P=– P=1,862,914 Short-term investments – – – – – Accounts receivable 618,813 198,032 – – 816,845 Dividends receivable 1,591 1,525 24,827 – 27,943 Total financial assets P=2,483,318 P=199,557 P=24,827 P=– P=2,707,702 Accounts and other payables P=2,022,126 P=− P=− P=− P=2,022,126 Long-term debt 218,815 447,029 435,136 744,082 1,845,062 Other liabilities 502,274 7,557 – – 509,831 Total other financial liabilities P=2,743,215 P=454,586 P=435,136 P=744,082 P=4,377,019 Interest payable P=139 P=335 P=335 P=753 P=1,562

- 44 -

*SGVMG100137*

2011

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total (In Thousands) Cash and cash equivalents (excluding cash on hand) P=1,213,981 P=− P=− P=− P=1,213,981 Short-term investments 2,956 − − − 2,956 Accounts receivable 425,525 271,402 75,031 − 771,958 Dividends receivable 1,967,007 1,911,153 1,812,945 27,986,190 33,677,295 Total financial assets P=3,609,469 P=2,182,555 P=1,887,976 P=27,986,190 P=35,666,190 Accounts and other payables P=571,654 P=− P=− P=− P=571,654 Long-term debt 55,000 51,259 191,810 652,606 950,675 Other liabilities 402,116 12,788 − − 414,904 Total other financial liabilities P=1,028,770 P=64,047 P=191,810 P=652,606 P=1,937,233 Interest payable P=154 P=370 P=370 P=832 P=1,726

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

Foreign currency risk 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, 2012 and 2011:

2012 2011 US Dollar Php Equivalent US Dollar Php Equivalent (In Thousands) Cash and cash equivalents $516 P=21,818 $723 P=31,708 Short-term investments – – 67 2,945

$516 P=21,818 $790 P=34,653

In translating the foreign currency-denominated monetary assets into peso amounts, the exchange rates used were P=41.05 to US$1.00 and P=43.84 to US$1.00, the Philippine Peso-US Dollar exchange rates as at December 31, 2012 and 2011.

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 investments). There is no other impact on the Group’s equity other than those already affecting the profit or loss.

Increase (Decrease)

in US $ Effect on Profit

Before Tax (In Thousands) 2012 P=1.00 P=516 (P=1.00) (P=516) 2011 P=1.00 P=790 (P=1.00) (P=790)

- 45 -

*SGVMG100137*

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

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

The floating portion of the loan portfolio comprises the newly availed loan with which the Group has the option to convert from floating to fixed rate within one year from drawdown date. The current trend of interest rate is at its low and is forecasted to stay low during the duration of the loan term.

The following tables demonstrate the sensitivity of the Group’s profit before tax and equity to a reasonably possible change in interest rates on December 31, 2012 and 2011, with all variables held constant, (through the impact on floating rate borrowings):

2012

Effect on income before income tax

Increase (decrease) Change in basis points + 100 basis points - 100 basis points (In Thousands) Floating rate borrowings (P=12,880) P=12,880

2011

Effect on income before income tax

Increase (decrease) Change in basis points + 100 basis points - 100 basis points (In Thousands) Floating rate borrowings (P=885) P=885

- 46 -

*SGVMG100137*

The terms and maturity profile of the interest-bearing financial assets and liabilities, together with its corresponding nominal amounts and carrying values (in thousands) are shown in the following table:

2012

Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Group

Cash and cash equivalents Fixed at the date of investment Various P=1,862,914 P=1,862,914 P=– P=1,862,914 Accounts receivable Fixed at the date of sale Date of sale 397,330 151,893 198,032 349,925

P=2,260,244 P=2,014,807 P=198,032 P=2,212,839 Parent Company

Long-term debt Fixed

Peso Fixed rate of average 5-year treasury bond + 0.60% spread Maturity date P=10,000 P=– P=11,435 P=9,969

Floating Peso Floating rate of average 91-day treasury

bill rate + 0.60% spread Maturity date 1,840,000 218,815 1,616,278 1,835,093 P=1,850,000 P=218,815 P=1,627,713 P=1,845,062

2011

Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value Group

Cash and cash equivalents Fixed at the date of investment Various P=1,214,231 P=1,214,231 P=– P=1,214,231 Short-term investments Fixed at the date of investment Various 2,956 2,956 – 2,956 Accounts receivable Fixed at the date of sale Date of sale 652,508 323,446 281,978 605,424

P=1,869,695 P=1,540,633 P=281,978 P=1,822,611 (Forward)

- 47 -

*SGVMG100137*

Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying ValueParent Company

Long-term debt Fixed

Peso Fixed rate based on 5-years T-bill + 0.50% spread Maturity date P=25,000 P=25,000 P=– P=25,000

Peso Fixed rate based on PDST-R1 + 0.50% spread Maturity date 30,000 30,000 – 30,000

Peso Fixed rate of average 5-year treasury bond + 0.60% spread Maturity date 10,000 – 9,958 9,958

Floating Peso Floating rate of average 91-day treasury

bill rate + 0.60% spread Maturity date 889,842 – 885,717 885,717 P=954,842 P=55,000 P=895,675 P=950,675

- 48 -

*SGVMG100137*

24. Equity

Capital Stock The details of the Parent Company’s common shares are as follows:

2012 2011 Authorized shares 3,000,000,000 3,000,000,000 Par value per share P=1.0 P=1.0 Shares issued and outstanding 1,920,073,623 1,920,073,623

In accordance with SRC Rule 68, as Amended (2011), Annex 68-D, below is a summary of the Company’s track record of registration of securities.

2012 2011

Number of shares registered Issue/offer price Date of approval

Number of holders of

securities as of December 31

Number of holders of

securities as of December 31

Common shares 3,000,000,000 P=1.00 par value P=4.00 issue price

February 14, 1994 4,498 4,698

Retained Earnings The retained earnings available for dividend distribution amounted to P=619.7 million and P=1,739.7 million as of December 31, 2012 and 2011, respectively. Retained earnings include undistributed net earnings of subsidiaries and associates amounting P=508.2 million and P=539.1 million as of December 31, 2012 and 2011, respectively. On November 7, 2012, the Parent Company’s BOD declared P=0.10 per share cash dividends from unappropriated retained earnings to all its issued and outstanding shares as of record date December 7, 2012, and paid on December 21, 2012. On October 20, 2011, the BOD declared P=0.07 per share cash dividends to all issued and outstanding shares as of record date November 18, 2011, and paid on December 14, 2011. In 2012 and 2011, the BOD of CPVDC declared P=0.12 per share cash dividends from unappropriated retained earnings of which P=16.4 million and P=5.3 million remained outstanding as of December 31, 2012 and 2011, respectively. On November 22, 2012, the Parent Company’s BOD approved the appropriaton of retained earnings amounting to P=1,300.0 million for future expansion. In the normal course of business of the Group, it represents continuing appropriation for land banking activities, planned building construction projects. Each year, the Group incurs residential capital expenditures for property development which includes among others land banking and building construction projects. The annual appropriation is being fully utilized to cover part of the annual expenditure requirement of the Group. In 2013, it is expected that the capital expenditure requirement will exceed the P=1,300.0 million appropriations, hence the Group will provide future appropriation as the need arises. 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

- 49 -

*SGVMG100137*

its premier credit rating and allows it the financial flexibility, while providing it sufficient cushion to absorb cyclical industry risks. The Parent Company is not subject to externally imposed capital requirements. No changes were made in the objectives, policies and processes from the previous years.

The Group monitors its capital structure using leverage ratios on both a gross and net basis, and makes adjustments to it in light of economic conditions. Debt consists of long-term debt. Net debt includes long-term debt less cash and cash equivalents and short-term investments. The Group considers as capital the equity attributable to equity holders of the Parent Company. As of December 31, 2012 and 2011, the Group had the following ratios:

2012 2011

(In Thousands) Long-term debt P=1,845,062 P=950,675 Less:

Cash and cash equivalents 1,864,017 1,214,231 Short-term investments – 2,956

Net debt (18,955) (266,512) Equity attributable to equity holders of Cebu

Holdings, Inc.

P=4,954,354

P=4,705,069 Debt to equity 37.24% 20.21%Net debt to equity (0.38%) (5.66%)

25. Segment Information

The business segments where the Group operates are as follows:

Core business: • Commercial development - sale of commercial lots and club shares • Residential development - sale of high-end residential lots and condominium units • Shopping centers - development of shopping centers and lease to third parties of retail space

and land therein; operation of movie theaters, food courts, entertainment facilities and carparks in these shopping centers; management and operation of malls

• Corporate business - development and lease of office buildings • Others - other investing activities such as investment in joint ventures and sale of non-core

assets

No business segments have been aggregated to form the reportable business segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. The accounting and measurement policies used are consistent with the policies used in preparing general-purpose financial statements. Sales, costs and expenses include amounts that are directly attributable to each segment. Items that are not directly identified are allocated based on the segment’s proportionate share on the total revenue. 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.

- 50 -

*SGVMG100137*

Business Segments

The following tables regarding business segments present assets and liabilities as of December 31, 2012 and 2011 and revenue and expense information for the three years period ended December 31, 2012.

2012

Commercial Development

Residential Development

Shopping Centers

Corporate Business Others

Eliminations and

Adjustments Total (In Thousands) Revenue Sales to external customers P=86,876 P=283,587 P=886,581 P=29,508 P=– (P=25,901) P=1,260,651 Equity in net earnings of associates – – – – 194,026 (120,125) 73,901 Total revenue 86,876 283,587 886,581 29,508 194,026 (146,026) 1,334,552 Operating expenses (59,137) (279,090) (470,989) (8,425) (151,251) 20,620 (948,272) Operating profit (loss) 27,739 4,497 415,592 21,083 42,775 (125,406) 386,280 Interest income 4,461 15,331 – – 63,387 – 83,179 Other income – 24,562 11,056 1,387 264,346 (86,048) 215,303 Interest and other financing charges – – – – (43,545) – (43,545) Other charges – – – – (1,528) – (1,528) Benefit from (provision for) income tax – (23,228) (81,915) (3,876) (58,278) 264 (167,033) Net income (loss) P=32,200 P=21,162 P=344,733 P=18,594 P=267,157 (P=211,190) P=472,656 Net income (loss) attributable to:

Equity holders of Cebu Holdings, Inc, P=32,200 P=14,410 P=342,906 P=14,176 P=248,790 (P=211,190) P=441,292 Non-controlling interests 6,752 1,827 4,418 18,367 – 31,364

P=32,200 P=21,162 P=344,733 P=18,594 P=267,157 (P=211,190) P=472,656 Other Information Segment assets P=718,012 P=1,339,559 P=4,262,438 P=520,031 P=1,903,994 P=215,874 P=8,959,908 Investments in associates – – – – 2,213,957 (1,433,440) 780,517 Deferred tax assets – – 849 – 7,789 – 8,638 Total assets P=718,012 P=1,339,559 P=4,263,287 P=520,031 P=4,125,740 (P=1,217,566) P=9,749,063 Segment liabilities P=– P=197,090 P=135,404 P=22,285 P=4,056,629 P=22,315 P=4,433,723 Deferred tax liabilities – 13,759 (4,623) – 8,517 15,441 33,094 Total liabilities P=– P=210,849 P=130,781 P=22,285 P=4,065,146 P=37,756 P=4,466,817 Segment additions to property and equipment and

investment properties P=– P=– P=1,604,628 P=– P=22,886 P=– P=1,627,514 Depreciation and amortization P=– P=– P=125,660 P=235 P=12,467 P= P=138,362

- 51 -

*SGVMG100137*

2011

Commercial Development

Residential Development

Shopping Centers

Corporate Business Others

Eliminations and

Adjustments Total (In Thousands) Revenue Sales to external customers P=131,333 P=114,902 P=855,273 P=88,133 P=– (P=25,016) P=1,164,625 Equity in net earnings of associates – – – – 17,307 11,198 28,505 Total revenue 131,333 114,902 855,273 88,133 17,307 (13,818) 1,193,130 Operating expenses (62,485) (118,302) (433,050) (15,287) (187,776) 8,819 (808,081) Operating profit (loss) 68,848 (3,400) 422,223 72,846 (170,469) (4,999) 385,049 Interest income – – 1,863 – 57,521 – 59,384 Other income 32,300 16,769 85,833 – 141,332 (86,047) 190,187 Interest and other financing charges – – (462) – (21,947) – (22,409) Other charges – – – – (4,080) – (4,080) Benefit from (provision for) income tax (9,500) (4,011) (157,342) (5,581) 32,449 868 (143,117) Net income (loss) P=91,648 P=9,358 P=352,115 P=67,265 P=34,806 (P=90,178) P=465,014 Net income (loss) attributable to:

Equity holders of Cebu Holdings, Inc, 74,555 9,358 352,115 51,283 27,200 (90,178) P=424,333 Non-controlling interests 17,093 – – 15,982 7,606 – 40,681

P=91,648 P=9,358 P=352,115 P=67,265 P=34,806 (P=90,178) P=465,014 Other Information Segment assets P=1,168,464 P=209,983 P=2,982,013 P=515,093 P=1,345,467 P=210,360 P=6,431,380 Investments in associates − − − − 2,247,998 (1,557,644) 690,354 Deferred tax assets 2,813 − 843 3,893 2,030 − 9,579 Total assets P=1,171,277 P=209,983 P=2,982,856 P=518,986 P=3,595,495 (P=1,347,284) P=7,131,313 Segment liabilities (assets) P=277,453 P=208,005 P=1,406,168 P=39,812 P=208,896 (P=65,968) P=2,074,366 Deferred tax liabilities (assets) − 20,968 (15,740) − 7,623 15,705 28,556 Total liabilities (assets) P=277,453 P=228,973 P=1,390,428 P=39,812 P=216,519 (P=50,263) P=2,102,922 Segment additions to property and equipment and

investment properties P=− P=29 P=222,294 P=1,684 P=10,690 P=− P=234,697 Depreciation and amortization P=− P=3 P=116,363 P=5,603 P=15,085 P=− P=137,054 Provision for impairment losses P=− P=− P=− P=1,000 P=− P=− P=1,000

- 52 -

*SGVMG100137*

2010

Commercial Development

Residential Development

Shopping Centers

Corporate Business Others

Eliminations and

Adjustments Total (In Thousands) Revenue Sales to external customers P=174,356 P=272,852 P=784,406 P=69,432 P=29,219 (P=56,750) P=1,273,515 Equity in net earnings of associates – – – – 11,831 17,189 29,020 Total revenue 174,356 272,852 784,406 69,432 41,050 (39,561) 1,302,535 Operating expenses (84,368) (239,923) (395,378) (198,876) (32,659) 37,317 (913,887) Operating profit (loss) 89,988 32,929 389,028 (129,444) 8,391 (2,244) 388,648 Interest income 13,331 – – 17,081 21,828 – 52,240 Other income 48,580 1,998 77,556 108,989 16,019 (86,047) 167,095 Interest and other financing charges – – – (25,347) – – (25,347) Other charges – – – – (1,824) – (1,824) Benefit from (provision for) income tax (5,774) – (6,897) (116,262) (7,244) 628 (135,549) Net income (loss) P=146,125 P=34,927 P=459,687 (144,983) P=37,170 (P=87,663) P=445,263 Net income (loss) attributable to:

Equity holders of Cebu Holdings, Inc, P=127,236 P=34,927 P=459,687 (P=149,625) P=21,638 (P=87,663) P=406,200 Non-controlling interests 18,889 – – 4,642 15,532 – 39,063

P=146,125 P=34,927 P=459,687 (P=144,983) P=37,170 (P=87,663) P=445,263 Other Information Segment assets P=2,137,099 P=354,916 P=4,984,372 P=268,599 (P=857,925) (P=1,253,184) P=5,633,877 Investments in associates 393,575 – – – – – 393,575 Deferred tax assets 3,277 – – 4,758 2,903 – 10,938 Total assets P=2,533,951 P=354,916 P=4,984,372 P=273,357 (P=855,022) (P=1,253,184) P=6,038,390 Segment liabilities P=452,905 (P=30,366) P=572,958 P=47,075 P=290,868 (P=55,675) P=1,277,765 Deferred tax liabilities – – – – 19,475 16,573 36,048 Total liabilities P=452,905 (P=30,366) P=572,958 P=47,075 P=310,343 (P=39,102) P=1,313,813 Segment additions to property and equipment and

investment properties P=– P=– P=68,114 P=37,034 P=30,642 P=– P=135,790 Depreciation and amortization P=5,960 P=– P=108,753 P=1,270 P=14,526 P=– P=130,509 Provision for impairment losses P=– P=– P=151 P=– P=– P=– P=151 Commercial development sales made to a significant customer amounted to P=319.1 million.

- 53 -

*SGVMG100137*

26. Leases

Operating Leases - Group as Lessor The Group enters into lease agreements with third parties covering rentals of commercial and office spaces and land therein. 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:

2012 2011 (In Thousands) Within one year P=12,005 P=21,719 After one year but not more than five years – 1,584 P=12,005 P=23,303

Contingent rent recognized in 2012, 2011 and 2010 amounted to P=52.1 million, P=92.9 million and P=85.5 million, respectively. Operating Leases - Group as Lessee The Group entered into lease agreements with third parties. These leases generally provide for either (a) fixed monthly rent, or (b) minimum rent or a certain percentage of gross revenue, whichever is higher.

27. Interest in Joint Ventures

The Group has entered into joint venture agreements with various landowners which include related parties. The Group’s share in the joint ventures ranges from 25% to 34%. These joint venture agreements relate to the development and sale of subdivision lots and condominium projects with certain specified lots or units allocated to the joint venture partner. The Group’s joint venture arrangements typically require the joint venture partner to contribute the land free from any lien, encumbrance and tenants or informal settlers to the project with the Group bearing costs related to land development and the construction of subdivision and condominium facilities. Sales and marketing costs are allocated to both the Group and the joint venture partners. The projects covering the joint venture agreements are expected to be completed in 2014.

The amounts disclosed in segment information under residential development relate to the joint venture agreements. Capital commitments amounted to P=924.0 million and P=726.1 million as of December 31, 2012 and 2011, respectively.

- 54 -

*SGVMG100137*

28. Philippine Economic Zone Authority (PEZA) Registration

CPVDC was registered with PEZA on April 6, 2000 as an Information Technology (IT) Park developer or operator and was granted approval by PEZA on October 10, 2001. The PEZA registration entitled CPVDC to a four-year tax holiday from the start of approval of registered activities. At the expiration of its four-year tax holiday, CPVDC pays income tax at the special rate of 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and local income taxes.

29. Notes to Consolidated Statements of Cash Flows

Noncash activities of the Group pertain to:

• Transfers from investment properties to inventories amounting to P=14.1 million in 2012. • Elimination of intercompany profit arising from a downstream sale transaction amounting to

P=101.4 million in 2011. • Equity in realized profit from an associate amounting to P=9.0 million and P=16.9 million in

2012 and 2011, respectively. • Accrued construction billings (included in accounts and other payables) recognized under

inventories amounted to P=332.1 million and P=146.0 million in 2012 and 2011, respectively. Accrued construction billings under investment properties amounted to P=846.8 million in 2012.

*SGVMG100137*

INDEX TO THE FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES Schedule I : Reconciliation of retained earnings available for dividend declaration Schedule II : Map showing the relationships between and among the companies in the

Group, its ultimate parent company and co-subsidiaries Schedule III : Schedule of all effective standards and interpretations under Philippine Financial

Reporting Standards

*SGVMG100137*

SCHEDULE I

CEBU HOLDINGS, INC AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2012

Unappropriated Retained Earnings, beginning P=1,851,753,309 Adjustments: (See adjustments in previous year’s Reconciliation) (112,035,688) Unappropriated Retained Earnings, as adjusted, beginning 1,739,717,621 Net income based on the face of AFS 367,233,353 Less: Non-actual / unrealized income net of tax – Equity in net income of associate/joint venture –

Other unrealized gains or adjustments to the retained earnings as a result of certain transactions accounted for under the PFRS –

Net income actually earned during the year 367,233,353 Other adjustments: Amount of provision for deferred tax during the year 4,802,973 Dividends declared (192,007,362) Appropriation during the year (1,300,000,000) (1,487,204,389) Unappropriated Retained Earnings, end available for dividend

distribution P=619,746,585

*SGVMG100137*

SCHEDULE II CEBU HOLDINGS INC. AND SBUBSIDIARIES MAP SHOWING THE RELATIONSHIPS BETWEEN AND AMONG THE COMPANIES IN THE GROUP, ITS ULTIMATE PARENT COMPANY AND CO-SUBSIDIARIES

First Metro Investment

Corp. 9.72%

PCD Nominee Corporation

(Non-Filipino) 14.36%

PCD Nominee

Corporation (Filipino) 22.02%

Others 4.10%

Ayala Land,

Inc. 49.80%

CEBU HOLDINGS, INC.

Asian I- Office

Properties, Inc.

40.00%

Cebu Property Ventures,

Inc. 76.26%

CBP Theatre Management

Company, Inc.

100.00%

Solinea, Inc. 35.00%

Cebu Insular Hotel,

Company, Inc.

37.06%

Cebu Leisure

Company, Inc.

100.00%

*SGVMG100137*

SCHEDULE III Cebu Holdings, Inc. and Subsidiaries List of Applicable Standards and Interpretations December 31, 2012

PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2012

Adopted Not Adopted

Not Applicable

Framework for the Preparation and Presentation of Financial Statements Conceptual Framework Phase A: Objectives and qualitative characteristics ü

PFRSs Practice Statement Management Commentary ü

Philippine Financial Reporting Standards

PFRS 1 (Revised)

First-time Adoption of Philippine Financial Reporting Standards ü

Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate ü

Amendments to PFRS 1: Additional Exemptions for First-time Adopters ü

Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time Adopters ü

Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First-time Adopters ü

Amendments to PFRS 1: Government Loans ü

PFRS 2 Share-based Payment ü

Amendments to PFRS 2: Vesting Conditions and Cancellations ü

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions ü

PFRS 3 (Revised)

Business Combinations ü

PFRS 4 Insurance Contracts ü

Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ü

PFRS 5 Non-current Assets Held for Sale and Discontinued Operations ü

PFRS 6 Exploration for and Evaluation of Mineral Resources ü

PFRS 7 Financial Instruments: Disclosures ü

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ü

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets – Effective Date and Transition ü

*SGVMG100137*

- 2 - PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2012

Adopted Not Adopted

Not Applicable

Amendments to PFRS 7: Improving Disclosures about Financial Instruments ü

Amendments to PFRS 7: Disclosures - Transfers of Financial Assets ü

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

Amendments to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures ü

PFRS 8 Operating Segments ü

PFRS 9 Financial Instruments ü

Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 and Transition Disclosures ü

PFRS 10 Consolidated Financial Statements ü

PFRS 11 Joint Arrangements ü

PFRS 12 Disclosure of Interests in Other Entities ü

PFRS 13 Fair Value Measurement ü

Philippine Accounting Standards

PAS 1 (Revised)

Presentation of Financial Statements ü

Amendment to PAS 1: Capital Disclosures ü

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation ü

Amendments to PAS 1: Presentation of Items of Other Comprehensive Income ü

PAS 2 Inventories ü

PAS 7 Statement of Cash Flows ü

PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors ü

PAS 10 Events after the Reporting Date ü

PAS 11 Construction Contracts ü

PAS 12 Income Taxes ü

Amendment to PAS 12 - Deferred Tax: Recovery of Underlying Assets ü

PAS 16 Property, Plant and Equipment ü

PAS 17 Leases ü

PAS 18 Revenue ü

PAS 19 Employee Benefits ü

Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures ü

*SGVMG100137*

- 3 - PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2012

Adopted Not Adopted

Not Applicable

PAS 19 (Amended)

Employee Benefits ü

PAS 20 Accounting for Government Grants and Disclosure of Government Assistance ü

PAS 21 The Effects of Changes in Foreign Exchange Rates ü

Amendment: Net Investment in a Foreign Operation ü

PAS 23 (Revised)

Borrowing Costs ü

PAS 24 (Revised)

Related Party Disclosures ü

PAS 26 Accounting and Reporting by Retirement Benefit Plans ü

PAS 27 Consolidated and Separate Financial Statements ü

PAS 27 (Amended)

Separate Financial Statements ü

PAS 28 Investment in Associates ü

PAS 28 (Amended)

Investments in Associates and Joint Ventures ü

PAS 29 Financial Reporting in Hyperinflationary Economies ü

PAS 31 Interests in Joint Ventures ü

PAS 32 Financial Instruments: Disclosure and Presentation ü

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation ü

Amendment to PAS 32: Classification of Rights Issues ü

Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities ü

PAS 33 Earnings per Share ü

PAS 34 Interim Financial Reporting ü

PAS 36 Impairment of Assets ü

PAS 37 Provisions, Contingent Liabilities and Contingent Assets ü

PAS 38 Intangible Assets ü

PAS 39 Financial Instruments: Recognition and Measurement ü

Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and Financial Liabilities ü

Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions ü

Amendments to PAS 39: The Fair Value Option ü

*SGVMG100137*

- 4 - PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2012

Adopted Not Adopted

Not Applicable

Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts ü

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ü

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets – Effective Date and Transition ü

Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives ü

Amendment to PAS 39: Eligible Hedged Items ü

PAS 40 Investment Property ü

PAS 41 Agriculture ü

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities ü

IFRIC 2 Members' Share in Co-operative Entities and Similar Instruments ü

IFRIC 4 Determining Whether an Arrangement Contains a Lease ü

IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds ü

IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment ü

IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies ü

IFRIC 8 Scope of PFRS 2 ü

IFRIC 9 Reassessment of Embedded Derivatives ü

Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives ü

IFRIC 10 Interim Financial Reporting and Impairment ü

IFRIC 11 PFRS 2- Group and Treasury Share Transactions ü

IFRIC 12 Service Concession Arrangements ü

IFRIC 13 Customer Loyalty Programmes ü

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction ü

Amendments to Philippine Interpretations IFRIC- 14, Prepayments of a Minimum Funding Requirement ü

IFRIC 16 Hedges of a Net Investment in a Foreign Operation ü

IFRIC 17 Distributions of Non-cash Assets to Owners ü

IFRIC 18 Transfers of Assets from Customers ü

*SGVMG100137*

- 5 - PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2012

Adopted Not Adopted

Not Applicable

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments ü

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine ü

SIC-7 Introduction of the Euro ü

SIC-10 Government Assistance - No Specific Relation to Operating Activities ü

SIC-12 Consolidation - Special Purpose Entities ü

Amendment to SIC - 12: Scope of SIC 12 ü

SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers ü

SIC-15 Operating Leases - Incentives ü

SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders ü

SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease ü

SIC-29 Service Concession Arrangements: Disclosures. ü

SIC-31 Revenue - Barter Transactions Involving Advertising Services ü

SIC-32 Intangible Assets - Web Site Costs ü