cover sheet - cityland group of companies preliminary prospectus (… · preliminary prospectus...

7 7 8 2 3SEC Registration Number

C I T Y L A N D D E V E L O P M E N T C O R P O R A T I O N

(Company’s Full Name)

2 n d F l o o r , C i t y l a n d C o n d o m i n i u m

1 0 , T o w e r I , 1 5 6 H . V . d e l a C o s t a

S t r e e t , S a l c e d o V i l l a g e , M a k a t i

C i t y(Business Address: No. Street City/Town/Province)

Rufina C. Buensuceso 893-6060 (Contact Person) (Company Telephone Number)

1 2 3 1 1 2 - 1Month Day (Form Type) Month Day

(Calendar Year) (Annual Meeting)

(Secondary License Type, If Applicable)

CFDDept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 12-1

REGISTRATION STATEMENT UNDER THE SECURITIES REGULATION CODE

1. SEC Identification Number 77823............

2. CITYLAND DEVELOPMENT CORPORATION........................................................................................Exact name of registrant as specified in its character

3. MAKATI CITY, PHILIPPINES 4. 000-527-103............................................................... ..................................................Province, country or other jurisdiction of BIR Tax Identification Numberincorporation or organization

5. REAL ESTATE DEVELOPER.....................................................................General character of business of registrant

6. Industry Classification Code: (SEC Use only)

7. 2F Cityland Condominium 10 Tower 1, 156 H.V. Dela Costa Street, Salcedo Village, Makati City 1226Telephone No.: (632) 893-6060 FAX No.: (632) 892-8656

...........................................................................................................................................................Address, including postal code, telephone number, FAX number including area code of registrant's principal office

8. ...........................................................................................................................................................If registrant is not resident in the Philippines, or its principal business is outside the Philippines, state name and address including postal code, telephone number and FAX number, including area code and email address of resident agent in the Philippines.

9. Fiscal Year Ending Date (Month and Day) : December 31 .....................

COMPUTATION OF REGISTRATION FEE

Title of each class of securities to be registered

Amount to be registered Amount of registration fee

Short Term Commercial Papers Php 1,000,000,000 Php 812,5001% Legal Research Fee 8,125Total Php 820,625

PRELIMINARY PROSPECTUS

CITYLAND DEVELOPMENT CORPORATION(A corporation organized under Philippine laws)

Registration of Philippine Peso Php 1,000,000,000 Short-Term Commercial Papers

Cityland Development Corporation (hereinafter referred to as “CDC”, the “Company” or “Issuer”) is offering for public sale at face value, up to Php 1,000,000,000 worth of its Short-Term Commercial Papers (hereinafter referred to as “STCPs” or the “Offered STCPs”) to be traded over-the-counter

The date of this Prospectus is September 27, 2012

A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BEEN DECLARED EFFECTIVE. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE ACCEPTED OR RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE DATE. AN INDICATION OF INTEREST IN RESPONSE HERETO INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY.

RISK DISCLOSURE STATEMENT

General Risk Warning

The price of securities can and does fluctuate, and any individual security may experience upward or downward movements, and may even become valueless. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling securities.

Past performance is not a guide to future performance.

There is an extra risk of losing money when securities are bought from smaller companies. There may be a big difference between the buying price and the selling price of these securities.

An investor deals in a range of investments each of which may carry a different level of risk.

Prudence Required

This risk disclosure does not purport to disclose all the risks and other significant aspects of investing in these securities. An investor should undertake his or her own research and study on the trading of securities before commencing any trading activity. He / she may request information on the securities and the issuer thereof from the Commission which are available to the public.

Professional Advice

An investor should seek professional advice if he or she is uncertain of, or has not understood any aspect of the securities to invest in or the nature of risks involved in trading of securities specially those high risk securities.

CITYLAND DEVELOPMENT CORPORATION(A corporation organized under Philippine laws)

Registration of Php 1,000,000,000 worth of Short-Term Commercial Papers for public sale at face value.

The Company is registering Php 1,000,000,000 worth of Short-Term Commercial Papers which it is offering for public sale at face value. The gross proceeds that will be raised from the offering is Php1,000,000,000.00 less registration fees, taxes, professional fees and other related expenses.

The net proceeds from the offering of the Short-Term Commercial Papers is Php 994,090,375 which is intended to be used as follows (in order of priority):

1) Project – Related Costs Php 650,000,0002) Payment of Maturing Loans / Notes 306,290,375 3) Interest Expense 37,800,000

Net Proceeds Php 994,090,375

The Company is organized under the laws of the Republic of the Philippines. Its principal office is located at 2nd Floor Cityland Condominium 10 Tower 1, 156 H.V. Dela Costa Street, Salcedo Village, Makati City. Its telephone number is (632) 893-60-60.

Unless otherwise stated, the information contained in this document have been supplied by the Company which accepts full responsibility for the accuracy of the information and confirms, after having made all reasonable inquiries, that to the best of its knowledge and belief, there are no material facts, the omission of which would make any statement in this document misleading in any material respect. Neither the delivery of this document nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof.

No dealer, salesman or any other person has been authorized by the Company to issue any advertisement or to give any information or make any representation in connection with the sale of the Short-Term Commercial Papers other than those contained in this document and, if issued, given or made, such advertisement, information or representation must not be relied upon as having been authorized by the Company.

THE SECURITIES AND EXCHANGE COMMSSION HAS NOT APPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE AND SHOULD BE REPORTED IMMEDIATELY TO THE SECURITIES AND EXCHANGE COMMSSION.

TABLE OF CONTENTS

PageGlossary…………………………………………………………………………………….. 1Summary Information ……………………………………………………………………… 2Risks Factors ……………………………………………………………………………….. 4Use of Proceeds …………………………………………………………………………….. 7Determination of the Offering Price………………………………………………………... 10Offering Period………………………………………………………………….... . ............ 11Plan of Distribution ……………….……….……….……….……….……….…………….. 12Description of Registrant’s Securities ……….……….……….……….……….…………... 13Market Information For Securities Other Than Common Equity ……….……….………… 16Market For Issuer’s Common Equity and Related Stockholders’ Matters ……….………... 17Interests of Named Experts and Independent Counsels ……….……….……….………….. 20Information With Respect to the Registrant

Business ……….……….……….……….……….……….……….……….…………... 21Properties ……….……….……….……….……….……….……….……….…………. 31Legal Proceedings……….……….……….……….……….……….……….…………. 33Management’s Discussion and Analysis or Plan of Operation ……….……….………. 34Changes in and Disagreements With Accountants On Accounting and Financial Disclosure ……….……….……….……….……….……….……….……….………… 46Directors and Executive Officers……….……….……….……….……….…………… 47Executive Compensation ……….……….……….……….……….……….…………... 55Security Ownership of Certain Record and Beneficial Owners and Management ……. 55Certain Relationships and Related Transactions ……….……….……….…………….. 56Corporate Governance …………………………………………………………………. 57

Other Expenses Of Issuance and Distribution ……….……….……….……….…………... 58Financial Information ……….……….……….……….……….……….……….…………. **Exhibits ……….……….……….……….……….……….……….……….……….………. **Signatures ……….……….……….……….……….……….……….……….……………... **

GLOSSARY

In this prospectus, unless the context otherwise requires, the following words or expressions shall have the following corresponding meanings:

“Articles” The Articles of Incorporation of the Company

“Board” The Incumbent Members of the Board of Directors of the Company

“CDC” or “Cityland” or “Company” or “Issuer” or “Registrant”

Cityland Development Corporation

“HLURB” Housing and Land Use Regulatory Board

“IAS” International Accounting Standard

“IFRS” International Financial Reporting Standard

“Offer” The offering for public sale of Php 1,000,000,000 worth of STCPs.

“Offering Period” The offering period shall commence upon the approval of the SEC permit to sell the STCPs and ends upon the expiry of the SEC permit to sell the STCPs.

“Offering Price” The offering price is 100% of the face value of the STCPs.

“PAS” Philippine Accounting Standards

“PFRS” Philippine Financial Reporting Standards

“Php”, “Pesos” The Philippine currency

“SEC” Securities and Exchange Commission

“SGV” SyCip, Gorres, Velayo and Co.

“SRC” Securities Regulations Code

“STCPs”, Offered “STCPs” Short - Term Commercial Papers

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SUMMARY INFORMATION

THE COMPANY

Cityland Development Corporation (CDC) is a domestic publicly-listed corporation which is duly organized and existing under and by virtue of the laws of the Philippines since January 31, 1978 with the primary purpose of engaging in real estate development. CDC was listed with the Manila & Makati Stock Exchange in March 1983. Its more significant subsidiaries are: City & Land Developers, Inc. - a real estate company incorporated under the laws of the Philippines and registered with the Securities and Exchange Commission on June 28, 1988; and, Cityplans, Inc. - a pre-need company incorporated under the laws of the Philippines and registered with the Securities and Exchange Commission on October 27, 1988.

The Company's primary purpose is to acquire and develop suitable land sites for residential, office, commercial, institutional and industrial uses. Its projects include medium to high-rise office, commercial and residential condominiums located in Makati City, Mandaluyong City, Manila City and Pasig City; and residential subdivisions and farmlots in Bulacan and Cavite. Its subsidiary, City & Land Developers, Inc. has condominiums in Manila City and Pasig City. Another subsidiary, Cityplans, Inc. is a pre-need company and also has condominium projects in Pasig City.

CDC recently launched last July 2012 Pines Peak Tower I, a 27-storey residential condominium located at Union corner Pines Sts., Mandaluyong City.

It is also currently developing Makati Executive Tower IV, a 29-storey commercial and residential condominium located at Cityland Square, Sen. Gil Puyat Ave., cor. P. Medina St., Makati City and Grand Central Residences Tower 1, a 40-storey office, commercial and residential condominium located at EDSA cor. Sultan St., Barangay Highway Hills, Mandaluyong City.

Detailed discussion of Company and its Business is found under “Information with Respect to the Registrant.”

RISKS OF INVESTING

Investors should prudently assess all attendant risks, as well as other considerations associated with an investment in this Offer. These include the internal risks such as refinancing risk, credit risk, interest rate risk, market risk and liquidity risk; and external ones arising from the political and economic situation, real estate industry outlook and market competition. These are discussed more extensively under “Risks Factors”.

SUMMARY FINANCIAL INFORMATION

The following selected financial information were derived from the consolidated audited financial statements as of and for the years ended December 31, 2011, 2010 and 2009 and consolidated unaudited financial statements as of and for the six months ended June 30, 2012. The financial statements were audited by SyCip, Gorres, Velayo & Co., in accordance with the Generally Accepted Accounting Principles in the Philippines. The information should be read in conjunction with, and is qualified in its entirety by reference to such financial statements and related notes thereto and "Management's Discussion and Analysis or Plan of Operation".

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As of and for the years ended December 31

(Audited)

June 30(Unaudited)

2010 2011 2012

INCOME STATEMENTRevenues 2,042,727,021 2,097,580,254 961,868,210Expenses 1,330,875,164 1,393,047,409 650,979,851Income before tax 711,851,857 704,532,845 310,888,359Net Income 582,352,213 601,834,373 254,465,604

BALANCE SHEETTotal Assets 7,889,727,983 8,030,430,077 8,024,077,881Total Liabilities 2,987,585,009 2,682,548,835 2,556,396,475Stockholders’ Equity 4,902,142,974 5,347,881,242 5,467,681,406

PER SHARE (Php)Earnings per share Php 0.15 Php 0.15 Php 0.12*

* Annualized

** Based on consolidated financial statements

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RISKS FACTORS

The risk factors in the order of importance are as follows:

REFINANCING RISKS

The Company is primarily engaged in real estate development. Risk Factors are: the moderately aggressive debt level of the Company's borrowings being short-term in nature increase the possibility of refinancing risks. This debt mix in favor of short-term borrowings is a strategy which the Company adopted to take advantage of lower cost of money for short-term loans versus long-term loans. Because the Company has the flexibility to convert its short-term loans to a long-term position by drawing down its credit lines with several banks or sell its receivables, refinancing risk is greatly reduced.

The Company manages such refinancing risks by improving the acid-test ratio and maintaining the current ratio at 1.39:1 and 2.01:1 as of June 30, 2012 from 1.21:1 and 2.01:1 as of December 31, 2011.

CREDIT RISK

This is defined as 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 financial instruments which may be the subject of credit risk are the installment contracts receivables and other financial assets of the Company. The corresponding management strategies for the aforementioned risks are as follows:

1. The credit risk on the installment contracts receivables may arise from the buyers who may default on the payment of their amortizations. The Company manages this risk by dealing only with recognized, credit worthy third parties. Moreover, it is the Company's policy to subject customers who buy on financing to credit verification procedures. Also, receivable balances are monitored on an on-going basis with the result that the Company's exposure to bad debts is insignificant.

2. The credit risk on the financial assets of the Company such as cash and cash equivalents, short-term cash investments, financial assets at fair value through profit or loss and available for sale investments may arise from default of the counterparty. The Company manages such risks by its policy to enter into transactions with a diversity of creditworthy parties to mitigate any significant concentration of credit risks. As such, there are no significant concentrations of credit risks in the Company.

INTEREST RATE RISK

This is the risk arising from uncertain future interest rates.

The Company's financial instruments are:

1. The Company's financial assets mainly consist of installment contract receivables, cash and cash equivalents and short-term investments. Interest rates on these assets

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are fixed at their inception and are therefore not subject to fluctuations in interest rates.

2. For the financial liabilities, the Company only has short-term commercial papers which bear fixed interest rates, thus are not exposed to fluctuations in interest rates.

MARKET RISK

This is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Financial instruments which rely their value on market factors are subject to market risk.

The available-for-sale investments are exposed to market risk. There is a risk for a decline in the value due to changes in the market. The exposure however, is negligible because the amount of the said investment is insignificant as compared to the financial assets of the Company.

LIQUIDITY RISK

This is the current and prospective risk to earnings or capital from a company's inability to meet it obligations when they come due without incurring unacceptable losses.

The Company's treasury has a well-monitored funding and settlement management plan. The following is the liquidity risk management framework maintained by the Company:

1. Asset- Liability Management: Funding sources are abundant and provide a competitive cost advantage. The Company also holds financial assets for which there is a liquid market and are, therefore, readily saleable to meet liquidity needs.

2. Conservative Liability Structure: Funding is widely diversified. There is little reliance on wholesale funding services or other credit-sensitive fund providers. The company accesses funding across a diverse range of markets and counterparties.

3. Excess Liquidity: The Company maintains considerable excess liquidity to meet a broad range of potential cash outflows from business needs including financial obligations.

4. Funding Flexibility: The Company has an objective to maintain a balance between continuity of funding and flexibility through the use of loans from banks and STCPs.

As such, the Company addresses risk on liquidity by maintaining committed borrowing facilities in the form of bank lines and a established record in accessing these markets.

ECONOMIC FACTORS

The Company’s business consists mainly of providing office and housing units in the Philippines and the results of its operations will be influenced by the general conditions of the Philippine economy. Any economic instability or failure to register improved economic

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performance in the future may adversely affect the Company’s operations and eventually its financial performance.

POLITICAL STABILITY

The Company’s business like all other businesses may be influenced by the political situation in the country. Any political instability in the future could have a material adverse effect in the Company’s business and results of operations.

INDUSTRY OUTLOOK

The real estate is characterized by boom-bust cyclical pattern exhibited in the past couple of decades where the industry normally goes through years of robust growth following years of slowdown. The Company believes that the industry is in the boom cycle.

COMPETITION

The demand for housing especially in the medium-cost category has moderately stepped up. The situation has attracted both old and new players to develop projects that cater to this rising demand. As a result of the foregoing, competition in the area of medium-cost development is expected to intensify. The Company believes that it is in a better position to cope with the competition because of the affordability of the projects it offers in the market.

The following preventive measures are being undertaken by the Registrant to manage the aforementioned risks:

1. Conducting assessments of the economic and political situations of the country as well as new developments in the industry. The procedures involved in gathering of information of economic indicators and political events as well as being aware of the new developments in the industry is through media, business conferences, economic briefings and other sources.

2. Maintaining our competitive edge by keeping up to date with the technological advances in the construction industry, improving our marketing strategies and continuously updating the skills of our personnel.

Note: STCPs are not insured with the Philippine Deposit Insurance Corporation (PDIC).

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USE OF PROCEEDS

The gross proceeds that will be derived from the offering is Php 1,000,000,000 less registration fees, taxes, professional fees and other related expenses.

The net proceeds from the offering of the Short-Term Commercial Papers is Php 994,090,375 which is intended to be used as follows (in order of priority):

1) Project – Related Costs Php 650,000,0002) Payment of Maturing Loans / Notes 306,290,375 3) Interest Expense 37,800,000

Net Proceeds Php 994,090,375

The total actual and estimated expenses amounting to Php 5,909,625 is shown under “Other Expenses of Issuance and Distribution on page 58.

1) Project-related costs

The proceeds from the offering will be used to partially finance the construction of Makati Executive Tower IV, Grand Central Residences Tower I and Pines Peak Tower I.

Makati Executive Tower IV (MET IV) is a 29-storey commercial and residential condominium located at Cityland Square, Sen. Gil Puyat Ave., cor. P. Medina St., Makati City. Its percentage of completion as of June 30, 2012 is 75.45%.

Grand Central Residences Tower I (GCR) is a 40-storey office, commercial and residential condominium located at EDSA cor. Sultan St., Barangay Highway Hills, Mandaluyong City. Its percentage of completion as of June 30, 2012 is 13.75%.

Pines Peak Tower I is a 27-storey residential condominium located at Union corner Pines Sts., Mandaluyong City. It was recently launched last July 2012.

The utilization of the P 650 million project-related costs is broken down as follows:

Project 1st Qtr(Dec. 2012-Feb. 2013)

2nd Qtr(Mar. 2013-May. 2013)

3rd Qtr(June 2013-Aug. 2013)

4th Qtr(Sept. 2013-Nov. 2013)

Total

Makati Executive Tower IV P 25.00 M P 25.00 M P 25.00 M P 25.00 M P 100.00 M

Grand Central Residences Tower 1 87.50 M 87.50 M 87.50 M 87.50 M 350.00 M

Pines Peak Tower I 50.00 M 50.00 M 50.00 M 50.00 M 200.00 M

Total P 162.50 M P 162.50 M P 162.50 M P 162.50 M P 650.00 M

The above P 650M project costs is just part of the Php 2,200M total estimated development cost to complete the above projects. The balance of P1,550M will be financed through internally-generated funds. The components of the total development cost are as follows:

Project Labors & Materials Supplied by Contractors

Materials Supplied by Owner

Estimated Development Cost

Makati Executive Tower IV Php 120M Php 80 M Php 200 M

Grand Central Residences Tower 1 620 M 450 M 1,070 M

Pines Peak Tower I 510 M 420 M 930 M

Total Php 1,250 M Php 950 M Php 2,200 M

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Labor & Materials Supplied by Contractors – These are for civil, architectural, electrical, mechanical, plumbing, structural works, fire protection, elevator, garbage chute, sewage treatment, etc.

Materials Supplied by Owner- These are for the purchase of owner- furnished materials like rebars, cements, CHB, pipes, electrical wires, etc.

Extent of financial commitment to complete the projects: The total credit line available for the Company from banks and financial institutions is P2.45B all of which is unavailed. This total P2.45B credit line were all made available to the company by the following banks and financial institutions: Amalgamated Investment Bancorporation, Metrobank, Security Bank and United Coconut Planters Bank.

2) Payment of Maturing Loans/ Notes

The Php306M proceeds from the offering are estimated to be allocated for the payment of short-term promissory notes.

Breakdown of Outstanding Loans as of June 30, 2012:

Financial Institution Original Amount

Outstanding Balance Interest Rate

Maturity Date

Short-Term Commercial Papers * -- 849,250,000 - various- -various-Short-term Promissory Notes ** -- 370,242,885 - various- -various-

Php 1,219,492,885

*(a) Breakdown according to type of investors as of June 30, 2012:

Amount %

Individual P 779,850,000 92%

Corporate 69,400,000 8%

Total P 849,250,000 100%

(b) Breakdown according to SEC Permit to Sell as of June 30, 2012:

Dated November 25, 2011: P 8 33,250,000 Dated December 2, 2010 : 16,000,000 Total P 8 49,250,000

** Short-term Promissory Notes are covered by a contract of guaranty with Home Guaranty Corporation. The guaranty covers the unpaid principal due on the outstanding promissory notes and unpaid interest thereon up to 10% per annum.

3) Interest Expense

Interest expense pertains to this P1B STCP issue computed on the average STCP rate as of June 30, 2012 (rounded-off) as shown below:

Lender Principal Rate Term InterestNew STCP P1,000,000,000 3.78% One year P37.80 M

In the event of any deviation/ adjustment in the planned uses of proceeds, the Company shall inform the Commission and STCP investors within thirty (30) days prior to its implementation.

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Others:

a) If proceeds are substantially less than the maximum proceeds, the Company will just opt to renew the maturing obligations from the existing financial institutions which extended the loans.

b) If material amount of other funds are necessary to accomplish purpose(s), the Company will avail from its existing lines with the financial institutions or banks which has an unavailed balance of P2.45B. This total unavailed credit line were all made available to the company by the following banks and financial institutions: Amalgamated Investment Bancorporation, Metrobank, Security Bank and United Coconut Planters Bank.

c) Proceeds from the offering will not be used to reimburse any officer, director, employee or any shareholder.

d) Proceeds from the offering is not intended to acquire properties within the next twelve months.

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DETERMINATION OF THE OFFERING PRICE

The Offering Price is One Hundred Percent (100%) of the face value.

The interest rates are fixed and are determinable at the time of issuances of the STCPs. The interest rates are based on the prevailing market rates at the time of issue.

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OFFERING PERIOD

The offering period will commence upon approval of the SEC of the STCPs and will end upon the expiry of the Permit to Sell the STCP’s.

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PLAN OF DISTRIBUTION

The Short-Term Commercial Papers will be distributed by the Issuer itself to institutional buyers and general public as follows:

% to Total AmountInstitutional Buyers 30% 300,000,000General Public 70% 700,000,000

Php 1,000,000,000

The projected STCPs to be offered within the offering period is as follows:

AmountWithin the First Quarter Php 250,000,000 Within the Second Quarter 250,000,000Within the Third Quarter 250,000,000Within the Fourth Quarter 250,000,000

Php 1,000,000,000

The securities to be registered are to be offered through the Company's salesmen duly licensed by the Commission. The Company's salesmen have been registered and authorized to act as Fixed Income Market Salesman with a Certificate of Registration issued by the SEC- Company Registration and Monitoring Department (CRMD). Please see Exhibit 18 for the Certificate of Registration of Salesmen. The monthly salaries of these personnel range from Php 18,000.00 to Php 62,000.00. They are also entitled to incentives and bonuses such as mid-year, year-end and performance bonuses.

As in the previously approved issues, the Company requested for exemption from the underwriting agreement as it has demonstrated its capability to sell the STCP’s through its own selling efforts as mentioned in the foregoing paragraph.

Upon approval of the Registration Statement and the request for exemptive relief, the company will provide a statement that its request for exemption from the submission of underwriting agreement has been granted.

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DESCRIPTION OF REGISTRANT'S SECURITIES

1. Total Issue Amount

The issue amount is ONE BILLION PESOS (1,000,000,000) outstanding STCPs at any given time within the validity period granted by the SEC.

2. Provisions:

a.) Instrument

The instrument is Short-Term Commercial Papers (STCPs). STCPs constitute direct, unconditional and general obligations of the Issuer. The STCPs maybe in registered or bearer form.

b.) Issue Date

The issue dates can be one or more dates to commence within the validity period granted by the Securities and Exchange Commission.

c.) Term/Maturity

The STCPs shall have a term/maturity not exceeding 365 days from issue date.

d.) Interest Rates

The interest rate(s) will be fixed and payable in arrears either monthly, quarterly, semi-annually or annually or at the end of the term based on the prevailing market interest rates at the time of issuances. The average interest rate as of June 30, 2012 is 3.7767%.

e.) Redemption

Redemption shall be on a one-time payment at the end of each term.

f.) Minimum Denomination Purchase

The minimum amount of STCP instruments shall not be lower than Php 300,000. The Issuer shall cause the STCP certificates to be made available to the purchaser upon full payment of the offering price.

g.) Penalty Interest

Should any amount payable by the Issuer under the STCPs, whether for principal, interest or otherwise, be not paid on due date, the Issuer shall pay in addition to the computed interest, liquidated damages equivalent to one percent (1%) of the outstanding amount of the note, plus attorney’s fees and cost of collection in case of suit, an amount equal to Php 2,000 or 5% of the principal or interest whichever is higher. The Issuer further agrees that any action for the STCPs shall be instituted in the proper court of Makati City or the proper Regional Trial Court of Metro Manila or the case maybe.

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h.) Tax on the Interest on the STCP

Interest income on the STCPs shall be subject to a twenty percent (20%) final withholding tax or such rate that maybe provided by law or regulation. The tax shall be for the account of the holder of the STCPs. Corporate and institutional purchasers who are exempt from or are not subject to the said tax shall submit pertinent documents evidencing their tax - exempt status.

i.) Documentary Stamps on Original Issuance

The cost of documentary stamps on the original issues shall be for the account of the Issuer. The documentary stamps by reason of the secondary sales/transfers involving the change of the registered holdings shall be for the account of the secondary buyers.

j.) Conversion, amortization, sinking fund, retirement

Conversion, amortization, sinking fund and retirement are not applicable in this STCP issue.

3. Substitution

Substitution is not permitted with or without notice.

4. Material Provisions Giving or Limiting Rights of Debt Holders

a) STCPs are unsecured obligations; as such, STCP debt holders are subordinate to secured creditors.b) There is no limitation on the declaration of dividends; no restrictions on issuance of

additional debt; no maintenance of asset ratios; and no provision on security (collateral).

5. Financial Ratios

2009 2010 2011 Average As of June 30, 2012

Current Ratio 1.57 1.77 2.01 1.78 2.01Acid- Test Ratio 0.87 1.07 1.21 1.05 1.39Asset To Equity Ratio 1.99 1.84 1.75 1.71 1.71Interest Rate Coverage Ratio 9.04 11.78 14.14 11.65 14.76Return on Equity 12.92% 10.47% 9.59% 10.99% 7.62%*Debt-Equity Ratio 0.56 0.46 0.34 0.45 0.33

* Annualized

Manner of Calculation:

Current Ratio = Current Assets / Current LiabilitiesAcid- Test Ratio = Cash & Cash Equivalents + Short-Term Investments + Available-for-sale Investments +

(current portion) Installment Contracts Receivables + (current portion) Other Receivables Total Current Liabilities

Asset to Equity Ratio = Total Assets / Total Stockholders’ Equity (net of Net Change in Fair Value of Investments)

Interest Rate Coverage Ratio = Net Income before Tax + Depreciation + Interest Expense / Interest ExpenseReturn on Equity = Net Income / Total Stockholders' EquityDebt-Equity Ratio = Loans & Notes Payable

Total Stockholders' Equity (net of Net Changes in FV of Investments)

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Significance:

Current Ratio and Acid-Test Ratio are ratios of short-term solvency which measures the ability of the firm to meet recurring and current financial obligations. Current ratio is often associated with net working capital which is the difference between current assets and current liabilities. Acid –test ratio on the other hand is the ratio between quick assets (as enumerated above) and current liabilities. Quick assets are the currents assets that are quickly convertible to cash.

Asset to Equity Ratio measures the financial stability of the company.

Interest Rate Coverage Ratio is used to determine the company's ability to pay interest payments. It determines how easily a company can pay interest expenses on outstanding debt.

Return on Equity or ROE is one of the measures of a company’s profitability from the stockholders’ viewpoint. It indicates the profitability of their investment in a company.

Debt to Equity Ratio provides information about the protection of creditors for insolvency and the ability of the company to obtain additional financing for potentially attractive investment opportunities.

6. Track Record of Securities Registered

SEC Order No. Date Issued Nature of Securities

Amount Registered

Amount Outstanding as of June 30, 2012

1. 344 Series of 2011 November 25, 2011 STCP P 1,000,000,000 P 833,250,000

2. 294 Series of 2010 December 2, 2010 STCP P 1,000,000,000 P 16,000,000

3. 187 Series of 2009 December 7, 2009 STCP P 900,000,000 --


5. 195 Series of 2007 December 14, 2007 STCP P 1,200,000,000 --




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MARKET INFORMATION FOR SECURITIES OTHER THAN COMMON EQUITY

STCPs has no established public trading market from which market information for STCPs can be obtained.

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MARKET FOR ISSUER'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS

1. Dividends Policy

Dividends declared by the Company on its shares of stocks are payable in cash or in additional shares of stock. The payment of dividends in the future will depend upon the earnings, cash flow, and financial condition of the Corporation and other factors.

2. Dividends

2012 2011 2010 2009

Cash Php 0.03 / share Php 0.05 / share Php 0.06 / share Php 0.10 / share

Stock 10.00%* 20.00% 20.00% 20.00%

The Company declared Php 0.03 per share cash dividends on May 18, 2012, given to stockholders of record as of June 15, 2012 and paid on July 11, 2012.

* On August 9, 2012, SEC authorized the issuance of 294,532,105 shares of the par value of P1.00 or P294,532,105.00 to cover the ten percent (10%) stock dividends declared by the BOD on May 7, 2012 and ratified by the stockholders on June 5, 2012 and issuance of the shares to stockholders of record as of August 27, 2012. Payment date is on September 20, 2012.

a) Stock Prices

Unclassified Common Shares

High Low

2012 First Quarter 1.24 1.07

Second Quarter 1.50 1.11



Third Quarter 1.30 1.11

Fourth Quarter 1.25 1.07



Third Quarter 1.88 1.38

Fourth Quarter 1.51 1.30

b) Trading Market

The Company's common equity is traded in the Philippine Stock Exchange.

The Corporation has no plans of acquisition, business combination, or other reorganization that will take effect in the near future that involves issuances of securities.

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c) Price Information on the Latest Practicable Date

The Company’s shares were last traded on September 24, 2012 at P 1.14 per share.

Holders

a. The number of shareholders of record as of June 30, 2012 was 802.

b. Top 20 Stockholders on record as of June 30, 2012:

NameNo. of Unclassified Common Shares %

1. Cityland, Incorporated 1,484,571,007 50.40%2. PCD Nominee Corp. (Filipino) 332,191,317 11.283. Roxas, Stephen C. 217,222,864 7.384. Liuson, Grace C. 157,153,310 5.345. Gohoc, Alice C. 125,133,696 4.256. Fan, Lucy 107,557,356 3.657. Liuson, Andrew I. (Dr.) 90,149,252 3.068. Roxas, Helen C. 44,770,965 1.529. Chiong, Daniel Yen 37,309,210 1.2710. Gohoc, Josef C. 34,461,628 1.1711. Recto, Ester C. 31,967,029 1.0912. Gohoc, Johann 31,356,962 1.0613. Gohoc, Josua 26,535,744 0.9014. Gohoc, Joel 26,438,163 0.9015. Gohoc, Joanna 26,357,033 0.8916. PCD Nominee Corp. (Foreign) 19,439,298 0.6617. Jefcon, Inc. 13,659,345 0.4618. Co, Stephen Vincent 13,540,031 0.4619. Chang, Rita D. 12,740,179 0.4320. Obadiah, Inc. 12,580,161 0.43

Changes in Control

There are no agreement which may result in changes in control of the registrant.

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Recent Sales of Unregistered Securities or Exemption Securities (Including Recent Issuance of Securities Constituting an Exempt Transaction)

The total number of shares issued and outstanding of the Company increased for the past three (3) as a result of stock dividends as follows:

Stock Dividend

Outstanding Shares Date Distributed

From To

2008 -- 1,704,470,182 1,704,470,182 --

2009 20% 1,704,470,182 2,045,364,273 July 22, 2009

2010 20% 2,045,364,273 2,454,436,794 July 08, 2010

2011 20% 2,454,436,794 2,945,323,834 August 02, 2011

Stock dividends are exempted from registration under Section 10.1 (d) of the Securities Regulation Code (SRC).

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INTERESTS OF NAMED EXPERTS AND COUNSELS

The validity of the STCPs Offer and other matters concerning the registration and offering of the STCPs was passed upon for the Company by Abaya Elias Law Firm.

The audited financial statements of the Company as of and for the years ended December 31, 2011, 2010 and 2009 together with the notes thereto, have been audited by SyCip, Gorres, Velayo & Co., independent public accountants, as indicated in their reports with respect thereto included herein, and have been so included in reliance upon the authority of SGV as experts in accounting and auditing in giving such reports.

The expert or independent counsel will not receive a direct or indirect interest in the registrant nor was such expert or independent counsel a promoter, underwriter, voting trustee, director, officer or employee of the registrant.

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INFORMATION WITH RESPECT TO THE REGISTRANT

Business

A. Background Information

1. Brief Company History

Cityland Development Corporation is a domestic publicly listed corporation which is duly organized and existing under and by virtue of the laws of the Philippines since January 31, 1978 with the primary purpose of engaging in real estate development.

2. Listing in Stock Exchange

Cityland Development Corporation was listed with the Manila and Makati Stock Exchange in March 1983.

3. Subsidiaries

a. City & Land Developers, Inc. (Subsidiary)

City & Land Developers, Inc. was incorporated on June 28, 1988 with a primary purpose of acquiring and developing suitable land sites for residential, office, commercial, institutional, and industrial uses. Its principal office is at 3/F Cityland Condominium 10 Tower 1 156 H.V. Dela Costa Street, Salcedo Village, Makati City.

The financial performance:

2010 2011 June 30, 2012 Revenues 940,719,658 1,115,696,076 407,885,387Expenses 608,583,385 740,957,878 238,523,247Income before tax 332,136,273 374,738,198 169,362,140Net Income 265,596,227 316,984,047 149,731,258

SEC Registration No. - 152661

b. Cityplans, Inc. (Subsidiary)

Cityplans, Inc. was incorporated on October 27, 1988 with a primary purpose of establishing, organizing, developing, maintaining, conducting, operating, marketing and selling educational assistance and pensions. Its principal office is at 3F Cityland Condominium 10 Tower II, 154 H.V. Dela Costa Street, Salcedo Village, Makati City.

The financial performance:

2010 2011 June 30, 2012 Revenues 24,660,713 21,121,587 11,287,178Expenses 10,429,613 12,679,414 7,022,855Income before tax 14,231,100 8,442,173 4,264,323Net Income 10,766,213 8,127,860 3,106,074

SEC Registration No. - 156675

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4. Nature of Operations

The Company's primary purpose is to acquire and develop suitable land sites for residential, office, commercial, institutional, and industrial uses.

Its projects include medium to high-rise office, commercial, and residential condominiums located in Makati City, Mandaluyong City, Pasig City and Manila City.

B. Development of Business for the past two (2) years (2010 – 2011)

We present herewith the status of sales and construction of our projects as of the end of the following years:

Cityland Development Corporation

PERCENTAGE SOLD2010 2011 June 30, 2012

Makati Executive Tower II 100.00% 100.00% 99.43%* Launched in 2003Corinthian Executive Regency 98.95 99.84 99.63 * Launched in 2004Rada Regency 99.40 100.00 99.77 * Launched in 2005Manila Executive Regency 98.98 99.89 99.63 * Launched in 2005Makati Executive Tower III 81.83 88.09 89.76 Launched in 2006Mandaluyong Executive Mansion III 32.67 62.72 86.35 Launched in 2008Makati Executive Tower IV 11.58 18.90 28.59 Launched in 2009Grand Central Residences Tower 1 7.92 11.72 15.59 Launched in 2010

* The decrease in percentage sold as of June 30, 2012 as compared with the previous year 2011 was due to cancellation of contracts to sell due to non- payment.

PERCENTAGE OF COMPLETION 2010 2011 June 30, 2012

Makati Executive Tower II 100.00% 100.00% 100.00%Corinthian Executive Regency 100.00 100.00 100.00Rada Regency 100.00 100.00 100.00Manila Executive Regency 100.00 100.00 100.00Makati Executive Tower III 100.00 100.00 100.00Mandaluyong Executive Mansion III 100.00 100.00 100.00Makati Executive Tower IV 23.00 75.06 75.45Grand Central Residences Tower 1 4.68 7.22 13.75

City and Land Developers, Inc. (Subsidiary)PERCENTAGE SOLD

2010 2011 June 30, 2012

Pacific Regency 99.67% 99.79% 99.78% * Launched in 2004Grand Emerald Tower 68.24 86.50 93.61 Launched in 2006Manila Residences Bocobo 58.61 72.52 83.52 Launched in 2009

* The decrease in percentage sold as of June 30, 2012 as compared with the previous year 2011 was due to cancellation of contracts to sell due to non- payment.

PERCENTAGE OF COMPLETION2010 2011 June 30, 2012

Pacific Regency 100.00% 100.00% 100.00%Grand Emerald Tower 97.52 100.00 100.00Manila Residences Bocobo 38.10 96.36 100.00

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Cityplans, Inc. (Subsidiary)

PERCENTAGE SOLD2010 2011 June 30, 2012

Oxford Mansion 95.63% 95.71% 98.23% Launched in 2004Windsor Mansion 86.91 87.46 90.89 Launched in 2007

PERCENTAGE OF COMPLETION2009 2010 June 30, 2012

Oxford Mansion 100.00% 100.00% 100.00%Windsor Mansion 100.00 100.00 100.00

The details of the above projects are as follows:

Cityland Development Corporation (Parent)

Pines Peak Tower I (launched July 2012)

Pines Peak is a 27-storey residential condominium located at Union corner Pines Sts., Central Business District of Mandaluyong, a block away from the major thoroughfare of EDSA, near Shaw Blvd., Pioneer and MRT Station. The project is easily accessible to various commercial centers and other places of interest. Amenities include swimming pool, gym, multi-purpose function room with movable playset, viewing deck and 24-hour association security, among others.

Estimated Date of Completion: March 2016

Grand Central Residences Tower 1

Grand Central Residences Tower 1 is a 40-storey office, commercial and residential condominium strategically located fronting MRT Shaw Station and steps away from malls, schools, churches and hospitals. Its amenities include multi-purpose function room with movable children's playset, swimming pool, gym, central information assistance counter at the lobby, closed circuit TV system, 24-hour association security and multi-purpose deck.

Estimated Date of Completion: March 2015

Makati Executive Tower IV

Makati Executive Tower IV is a 29-storey commercial and residential condominium located at Cityland Square, Sen. Gil Puyat Ave., cor. P. Medina St., Makati City. It is in close proximity to schools, malls, hypermarkets and hospitals. Its amenities include swimming pool, gym, playground, function room, roof deck and 24-hour association security.

Estimated Date of Completion: December 2013

Mandaluyong Executive Mansion III

Mandaluyong Executive Mansion III is a 7-storey office, commercial and residential condominium located at Mandaluyong Executive Subdivision, G. Emriquez St., Brgy. Vergara, Mandaluyong City, with close proximity to Don Bosco Technical College, Rockwell, SM Megamall, Podium, Shangri-la Plaza, Puregold, Market Place, Robinson's Pioneer, Edsa Central and Starmall. Its amenities include playground, basketball court and 24-hour association security.

Date Completed: January 2011

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Makati Executive Tower III

Makati Executive Tower III is a 38-storey commercial, office, and residential condominium located at Cityland Square, Sen. Gil Puyat Avenue, Pio Del Pilar, Makati City. Its amenities include swimming pool, sauna, viewing deck, jogging area, mini-gym, children’s playground, function room, and 24-hour association security.

Date Completed: April 2010 (completed three months advance)

Manila Executive Regency

Manila Executive Regency is a 39-story office, commercial and residential condominium situated along J. Bocobo St. Ermita. This property has close proximity to churches, malls, parks, party places, historical places, government institutions, and commercial establishments. Its amenities and facilities include swimming pool, gym, spa, function room, children’s playground, and Manila Bay viewing deck.

Date Completed: August 2009 (completed 4 months advance)

Rada RegencyRada Regency is a 24-storey commercial and residential condominium located along Rada St. corner Dela Rosa St., Legaspi Village, Makati City. Its close proximity to various schools (Don Bosco Technical Institute, Ateneo and La Salle Graduate School), shopping malls (The Landmark, Glorietta, Greenbelt), hospitals, fire station, post office, banks, restaurants and other leisure centers truly makes it an excellent investment opportunity. Its amenities and facilities include swimming pool, separate sauna for men and women, roofdeck / viewing / jogging deck, gym, children’s playground, function room, drying area, laundromat and 24-hour association security.

Date Completed: July 2008 (completed six months in advance)

Corinthian Executive Regency

Corinthian Executive Regency is a 39-storey office, commercial and residential condominium located along Ortigas Avenue, Pasig City. It has an excellent location and close proximity to various schools (La Salle Greenhills, Poveda), churches, hospitals (the new Medical City), banks, shopping malls (Robinson Galleria), SM Megamall, the Podium, Shangrila), restaurants and other leisure centers. Its amenities and facilities include swimming pool, gym, sauna for men and women, viewing deck, function room, laundromat, provision for children’s playground, and 24-hour association security.

Date Completed: May 2008 (completed one month in advance)

Makati Executive Tower II

Makati Executive Tower II is a 35-storey office, commercial and residential condominium located at Cityland Square, Dela Rosa Street, corner P. Medina Street, Makati City, with close proximity to the establishments such as Makati Medical Center, Makati Post Office, Glorietta and Greenbelt, Assumption College, AMA University, Don Bosco Technical Institute and Makati Gospel Church. Amenities and facilities include swimming pool, gym, men and female sauna, roof deck/viewing deck, children’s playground and function room. Other service facilities include laundromat and 24-hour association.

Date Completed: March 2007 (completed three months in advance)

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City & Land Developers, Inc. (Subsidiary of Cityland Development Corporation)

Manila Residences Bocobo

Manila Residences Bocobo is a 34-storey commercial, office and residential building located at 1160 Jorge Bocobo St., Ermita, Manila City. Its amenities and features include swimming pool, gymnasium, function room, multi-purpose deck, children's play area and 24-hour association security.

Date Completed: June 2012 (completed 1 year ahead of schedule)

Grand Emerald Tower

Grand Emerald Tower , a 39-storey commercial, office and residential condominium located along Emerald corner Ruby and Garnet Streets, Ortigas Center, Pasig City. Its amenities and facilities include swimming pool, gymnasium, viewing deck, sauna, children’s playground, multi purpose function room, and 24-hour association security. It is proximate to schools, hospitals, shopping malls, banks, restaurants, hotels , churches and other leisure and business establishments.

Date Completed: February 2011 (completed four months in advance)

Pacific Regency

Pacific Regency is a 38-storey commercial, office, and residential condominium located at Pablo Ocampo Sr. Ave. (formerly Vito Cruz Street) in front of Rizal Memorial Sports Complex in Manila. Amenities and facilities include swimming pool, gymnasium, separate sauna for male and female, function room, children’s playground, 24-hour association security, viewing area, and jogging areas at the roof deck.

Date Completed: October 2007 (completed eight months in advance)

Cityplans, Inc. (Subsidiary of Cityland Development Corporation)

Oxford Mansion

Oxford Mansion is an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City. Amenities and facilities include 2 elevators, administrative office, visitor’s lounge, provision for cable TV and telephone line, individual water submeter / Meralco meter and 24-hour association security.

Date Completed: October 2006

Windsor Mansion

Windsor Mansion is a joint project of the Company and Cityplans. It is a commercial and residential condominium located at Santolan, Pasig City. Amenities include common clubhouse, swimming pool and 24-hours association security for the whole complex. It is proximate to schools, commercial establishments, business and office centers.

Date Completed: December 2007

2. Marketing

All projects are sold by direct company salesmen and independent brokers.

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3. Revenue Contribution to Total Revenues on Sales of Real Estate

P E R C E N T A G E2010 2011 June 30, 2012

Cityland Development CorporationCityland Makati Executive Tower II 1.72% 0.73% 0.99%Corinthian Executive Regency 1.44 1.52 0.87Rada Regency 1.01 0.73 0.61Manila Executive Regency 4.45 2.21 0.91Cityland Makati Executive Tower III 25.32 10.99 9.53Mandaluyong Executive Mansion III 6.24 11.22 22.84Makati Executive Tower IV 2.54 10.45 13.19Grand Central Residences I 0.49 0.85 3.84Others 4.00 1.57 0.87

City & Land Developers, Inc.Pacific Regency 0.04 0.62 0.27Grand Emerald Tower 37.82 23.33 17.91Manila Residences Bocobo 14.65 35.50 26.95Others 0.22 0.28 0.04

Cityplans, Inc.Pasig Royale Mansion -- -- --Oxford Mansion 0.06 -- 0.30Windsor Mansion -- -- 0.88

Total 100.00% 100.00% 100.00%

4. Domestic and Foreign Sales Contribution to Total Sales

P E R C E N T A G E2010 2011 June 30, 2012

SalesFilipino Citizens 86.44% 88.53% 88.58%Foreign Citizens 13.56 11.47 11.42

Total 100.00% 100.00% 100.00%

5. Competition

The property development industry in the Philippines where the Registrant is selling its products and services is characterized by boom-bust cyclical pattern exhibited in the past couple of decades where the industry normally goes through years of robust growth following years of slowdown. Currently, the industry is in the middle of this cycle.

The geographical area/ location of the Company's projects are in Makati, Manila, Pasay and Mandaluyong cities. The Company builds high- rise condominium projects catering to middle and high- income groups.

Cityland's projects are offered at affordable prices and affordable payment schemes. The Company has proven its track record in the timely turn-over or even advanced turn-over of its projects in line with its, “We commit, we deliver” slogan.

In the property development industry, the principal methods of competition among the developers are as follows:

a. price; b. product or the type of development i.e. high, middle, low-end; and c. service or property management after the project is turned over to the buyers.

The present projects of the registrant and the competitors' projects which are quite similar in terms of classification and proximity to the registrant's projects are:

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Grand Central Residences Tower 1 is located at EDSA cor. Sultan St., Brgy. Highway Hills, Mandaluyong City. Other condominium project which is quite similar in terms of classification and proximity to Grand Central Residences Tower 1 is the Light Residences, a project of SM Development Corporation. In terms of size, financial and market strengths, said developer is one of the major developers in the country.

Makati Executive Towers III and IV are located at Sen. Gil Puyat Ave., Makati City. Other condominium project which is quite similar in terms of classification and proximity to Makati Executive Towers III and IV is The Linear which is located at corner Yakal, Malugay and Mayapis Sts., Makati City, a project of Filinvest Land, Inc. In terms of size, financial and market strengths, said developer is one of the major developers in the country.

Mandaluyong Executive Mansion III is a 7-storey commercial and residential condominium located at G. Enriquez St., Brgy. Namayan, Mandaluyong City. Other condominium project that is quite similar in classification and proximity to Mandaluyong Executive Mansion III is the Tivoli Garden Towers which is located along Coronado St., Mandaluyong City. This is a project of DMCI. In terms of size, financial and market strengths, said developer is one of the major developers in the country.

The Registrant's competitors have their own respective financial and market strengths. However, Cityland believes it can effectively compete with other companies because of good location, affordable pricing, and quality development.

6. Customers

Cityland has a broad market base and is not dependent upon a single or few customers. It has no single customer that accounts for 20% or more of its sales. Likewise, there are no major existing sales contracts.

7. Purchases of Raw Materials and Supplies

Cityland engaged the services of Millennium Erectors Corporation and CapCons Philippines Corporation for the civil and architectural works in the development of its on-going projects.

As to the construction materials, Cityland has no major existing supply contracts for its projects. The major construction materials like steel bars, cement, etc. are sourced through canvassing and bidding from its list of accredited suppliers. Cityland then buys the materials from the lowest bidder.

8. Number of Employees

Cityland has a total of 143 employees as of June 30, 2012 classified as follows:

Managerial 34 Administrative 82

Rank & File 109 Operations 61

Total 143 Total 143

The number of employees is expected to increase by 7% within the next 12 months. The Company maintains an organizational framework whereby important management functions as well as administrative tasks are shared within the Cityland group.

The Company gives bonuses to its employees. Also, employees are entitled to vacation and sick leave and are covered by a retirement plan.

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All employees are not subject to collective bargaining agreement.

The Company's employees are not on strike or are threatening to strike nor they have been on strike for the past three (3) years.

9. Government Approval of Projects

Status of Approval of On- going Projects

Government Agency: Makati Executive Tower IV Grand Central Residences

Tower 1 a. Housing and Land Use Regulatory Board -Certificate of Registration/ License to Sell

Approved Approved

b. City/Municipal Building Official / Department of Public Works and Highways.

1. Development Permit by HLRB /Location

Approved Approved

2. Building Permit - Excavation, Civil Works Approved Approved

- Mechanical, Electrical, Sanitary, Fire,Sidewalk

Approved Approved

3. Occupancy Permit (Electrical, Fire, Mechanical,Civil, Sanitary)

To be applied upon completion


c. Department of Environment and Natural Resources -Environmental Compliance Certificate

Approved Approved

-Permit to Construct Sewage Treatment Plant (STP)

Not Applicable(to be connected to

METIII STP)

Not Applicable (included in ECC)

- Permit to Operate STP Not Applicable(to be connected to

METIII STP)


d. Laguna Lake Development Authority

-Permit to Construct Sewage Treatment Plant (STP)

Not Applicable Not Applicable

- Permit to Operate STP Not Applicable Not Applicable

10. Effect of Existing Government Regulations on the Business

The Company has complied with all the appropriate government regulations prior to the development and marketing of its projects.

The effect of the various regulations on the business of the issuer are projects developed in accordance with the high quality standards required by the various regulatory agencies of the government. Compliance with these requirements symbolizes the unrelenting commitment of the management to service and protection of its community and environment.

11. Amount Spent for Research/Development Activities

There is no amount spent on research and development activities.

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12. Cost and Effect of Compliance with Environmental Laws

Costs:

Payments made for environmental clearances to the Department of Environment & Natural Resources are as follows:

2012 Payment of Php33,600.00 to Wet Consultancy, Inc. as downpayment for securing ECC and LLDA Clearance of Citynet.

2011 Final payment of Php159,985.00 to Wet Consultancy Inc. in securing the ECC of Pines Peak project.

2010 Paid Php653,115 to Wet Consultancy, Inc. for ECC of Grand Central Residences and Pines Peak project.

Effects:

Obtained Environmental Clearance Certificates for the aforementioned projects.

13. Transactions with and/or dependence on related parties

Transactions with related parties are confined to cash advances and non-interest-bearing advances for reimbursable expenses from and to the registrant which the Company enters into with its affiliates in the regular course of its business. It also includes an existing management agreement with Cityland, Inc., its parent company.

The Registrant's affiliates are Cityland, Inc. (CI), its parent company and City and Land Developers, Inc. (CLDI) and Cityplans, Incorporated (CPI), its subsidiaries.

14. Principal Terms and Expiration Dates of All Patents, Trademarks, Copyrights, Licenses and Royalty Agreements Held

The Company holds no patents, trademarks, copyrights, licenses, franchises, concessions and royalty agreements.

15. Major Risks Involved in Each of the Businesses of the Company

The Company is primarily engaged in real estate development. Risk factors are:

Refinancing Risk: The Company is primarily engaged in real estate development. Risk Factors are: the moderately aggressive debt level of the Company's borrowings being short-term in nature increase the possibility of refinancing risks. This debt mix in favor of short-term borrowings is a strategy which the Company adopted to take advantage of lower cost of money for short-term loans versus long-term loans. Because the Company has the flexibility to convert its short-term loans to a long-term position by drawing down its credit lines with several banks or sell its receivables, refinancing risk is greatly reduced.

The Company manages such refinancing risks by improving the acid-test ratio and maintaining the current ratio at 1.39:1 and 2.01:1 as of June 30, 2012 from 1.21:1 and 2.01:1 as of December 31, 2011.

Credit Risk: This is defined as 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 financial instruments which may be the subject of credit risk are the installment contracts receivables and other financial assets of the Company.

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The corresponding management strategies for the aforementioned risks are as follows:

1. The credit risk on the installment contracts receivables may arise from the buyers who may default on the payment of their amortizations. The Company manages this risk by dealing only with recognized, credit worthy third parties. Moreover, it is the Company's policy to subject customers who buy on financing to credit verification procedures. Also, receivable balances are monitored on an on-going basis with the result that the Company's exposure to bad debts is insignificant.

2. The credit risk on the financial assets of the Company such as cash and cash equivalents, short-term cash investments, financial assets at fair value through profit or loss and available for sale investments may arise from default of the counterparty. The Company manages such risks by its policy to enter into transactions with a diversity of creditworthy parties to mitigate any significant concentration of credit risks. As such, there are no significant concentrations of credit risks in the Company.

Interest Rate This is the risk arising from uncertain future interest rates. Risk:

The Company's financial instruments are:

1. The Company's financial assets mainly consist of installment contract receivables, cash and cash equivalents and short-term investments. Interest rates on these assets are fixed at their inception and are therefore not subject to fluctuations in interest rates.

2. For the financial liabilities, the Company only has short-term commercial papers which bear fixed interest rates, thus are not exposed to fluctuations in interest rates.

Market Risk: This is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Financial instruments which rely their value on market factors are subject to market risk.

The available for sale investments are exposed to market risk. There is a risk for a decline in the value due to changes in the market. The exposure however, is negligible because the amount of the said investment is insignificant as compared to the financial assets of the Company.

Liquidity Risk: This is the current and prospective risk to earnings or capital from a company's inability to meet it obligations when they come due without incurring unacceptable losses.

The Company's treasury has a well-monitored funding and settlement management plan. The following is the liquidity risk management framework maintained by the Company:

1. Asset- Liability Management: Funding sources are abundant and provide a competitive cost advantage. The Company also holds financial assets for which there is a liquid market and are, therefore, readily saleable to meet liquidity needs.

2. Conservative Liability Structure: Funding is widely diversified. There is little reliance on wholesale funding services or other credit-sensitive fund providers. The company accesses funding across a diverse range of markets and counterparties.

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3. Excess Liquidity: The Company maintains considerable excess liquidity to meet a broad range of potential cash outflows from business needs including financial obligations.

4. Funding Flexibility: The Company has an objective to maintain a balance between continuity of funding and flexibility through the use of loans from banks and STCPs. As such, the Company addresses risk on liquidity by maintaining committed borrowing facilities in the form of bank lines and a established record in accessing these markets.

Economic: Results of operations is influenced by the general condition of the Philippine economy. Any economic instability or failure to register improved economic performance may adversely affect the Company’s operations.

Political: The Company’s business like all other business may be influenced by the political situation in the country. Any political instability in the future could have a material adverse effect in the Company’s business.

Industry: The real estate industry is characterized by boom-bust cyclical pattern exhibited in the past couple of decades where the industry normally goes through years of robust growth following years of slowdown.

The management manages the above risks by:

Conducting assessments of the economic and political situations of the country as well as new developments in the industry. The procedures involved in gathering of information of economic indicators and political events as well as being aware of the new developments in the industry is through media, business conferences, economic briefings and other sources.

With this information, the Company is able to assess and manage the risks mentioned above.

Debt Issues

The registrant's net worth exceeds P 25 million and the registrant has been in business for more than thirty (30) years.

Properties

Investment in real estate properties as of June 30, 2012 are as follows:Particular Location Total Area

(in sq.m.)Description Mortgagee /

Limitation1. Land &

buildingCorner of Pioneer and Reliance Sts., partly located in Mandaluyong City& Pasig City

12,502 The property is located near MRT3 Boni Station; about a km. away from Ortigas Center and presently improved with warehouse buildings. Portion of property is mortgaged with bank.

Metrobank /P 200M

&Security Bank /

P 1600M

2. Land Corner Union and Pines Sts.,Mandaluyong City

6,130 The land is located in an area where land development is for commercial and industrial purposes.

---

3. Land Barangay Punungyanan, Gen. Trias, Cavite City

501,832 The land is adjacent to Eagle Ridge Golf Course and Gateway Business Park.

---

4. Land Brgy. Sabang, Naic, Cavite

670,891 The land is for mixed commercial and residential use.

---

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5. Land Bo. Wack-WackMandaluyong City

2,367 The land is located near POEA in front of Robinson's Galleria; along EDSA very near MRT3 Ortigas Station. Property is mortgaged with bank.

Security Bank /P 1600M

6. Office Condominium

H.V. Dela Costa St., Salcedo Village, Makati City

3,493This is an office condominium for lease and office use located at Cityland 10 Tower I&II in H.V.dela Costa corner Geronimo St.,Makati City. Only 1,683.42 sq.m. of property is mortgaged with bank.

Metro Bank /P 200M

7. Land Brgy. Sabang, Naic, Cavite

513,705 Lot is near subdivisions like Coastal City and Retirement Village

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8. Land Brgy. Almanza, Uno, Las Piñas

1,400 Lot is located in front of Alabang-Zapote road near Madrigal Business Park.

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9. Land Brgy. Highway Hills, Mandaluyong City

2,837 Lot is located near EDSA Central & Shangri-La Mall in Shaw Blvd.

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Investment in Real Estate Properties of subsidiary: City and Land Developers, Inc.;1. Land Roxas Blvd. Cor.

Seaside Drive, Brgy. Tambo, Parañaque City

3,154 Lot is located along Roxas Blvd. Property.

---

2. Land Samar Ave. cor. Eugenio Lopez Ave., Quezon City

3,096 Lot is located along Samar Ave., Quezon City

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3. Land EDSA cor. Lanutan Alley, Brgy. Veterans Village, Quezon City

1,661 Lot is located along EDSA cor. Lanutan Alley, Brgy. Veterans Village, Quezon City

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Ownership

The Company has complete ownership of the above-mentioned properties.

Plan to Purchase

The Company has intentions to acquire property(ies) in the next twelve (12) months within the vicinity of Metro Manila. Actual acquisition is dependent on the outcome of negotiation with prospective seller(s). The source of financing the Company expects to use is the unavailed credit line of the company amounting to P2.45B.

Lease Contracts

Leased properties as of June 30, 2012 are as follows:

Project Rental IncomePioneer – Warehouse / Parking Php 4,576,105Makati Executive Towers 2,491,163Grand Emerald Tower- Units/Parking 2,120,891Cityland Condominium 10 Towers I and II - Units/Parking 1,951,095Roxas Boulevard – Lot 740,453

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Edsa Ortigas – Lot 402,102Mandaluyong Executive Mansion III- Units/Parking 394,215Cityland Dela Rosa Condominium – Parking/Storage 357,251Cityland Herrera Tower – Parking/Storage 280,229Rada Regency - Parking 259,311Manila Executive Regency 120,727Vito Cruz Properties 108,166Cityland Mega Plaza – Parking 23,214Others 21,360Total Php 13,846,282

Note : Term of lease contracts ranges from 1 month to 1 year.

Renewal Options

Lease contracts are renewable upon written agreement of the parties.

Legal Proceedings

The material legal proceedings to which the registrant, its subsidiaries or affiliates is a party or of which any of their property is the subject as of June 30, 2012 are as follows:

1.) Registrant

Esmeraldo Balosa vs. Cityland Development Corporation(Civil Case No. MC08 – 3563)Mandaluyong Regional Trial Court- Branch 208Date Instituted: April 11, 2008

Esmeraldo Balosa filed a case for preliminary Mandatory Injunction with damages against Cityland after the Business and License Department of Mandaluyong City closed his stalls due to Balosa’s failure to secure the necessary permits. He alleged that he has not been paying the lease because another entity is also claiming ownership of the leased property and that property cannot be used for his business. Balosa claims Cityland illegally ejected him. Trial of the case is on going.

2) Affiliates

a. Cityland, Inc. (CI) - parent company

Tagaytay Executive Village Homeowners’ Association, Inc. vs Cityland, Inc.Case No. REM-A-11-01574

Tagaytay Executive Village Homeowners’ Association, Inc. (TEVHAI) filed an Appeal Memorandum dated November 9, 2011 with the HLURB Board of Commissioners and received by Cityland last November 19, 2011. The case involves a petition to revoke the certificate of completion (“COC”) dated March 10, 2010 issued by the Regional Office, HLURB, Southern Tagalog Region, in favor of Cityland, Inc., owner and developer of Tagaytay Executive Village located at Brgy. San Jose, Tagaytay City. TEVHAI wants the Court to recall/cancel the COC and that Cityland be ordered to fully complete the alleged deficiencies in the amenities.

The case was dismissed by the HLURB Region IV office. Consequently, the TEVHAI filed an appeal with the HLURB Board of Commissioners (which was dismissed in a Decision dated February 2, 2012).

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b. City & Land Developers, Inc. (CLDI)- subsidiary

Angapat Realty vs. CLDIManila Regional Trial Court- Branch 11Date Instituted: March 16, 2004

This is a complaint for injunction and damages with a prayer for preliminary injunction with temporary restraining order filed by Angapat Realty and Development Corporation (“Angapat”) against CLDI to enjoin the corporation from further constructing a billboard that allegedly blocks the view of Angapat’s billboard. Angapat is asking for actual damages in the amount of P100,000 a month, exemplary damages to P 500,000 and attorney’s fees amounting to P 250,000.

The prayer for preliminary injunction was denied and the case was subsequently archived in an Order dated May 18, 2007.

3) Property

There was no case filed wherein any of its property/ies as the subject.

The Company does not expect that the outcome of the above material legal proceedings involving the registrant and its subsidiary will have a material adverse effect on the financial condition of the Company.

During the past five years up to present, there is no bankruptcy petition filed by or against any business of which such person was a general partner or executive officer of the Registrant either at a time of the bankruptcy or within two years prior to that time.

During the past five years up to present, the Registrant, any of its directors or executive officers has no conviction by final judgment, domestic or foreign, or is not subject to a pending criminal proceeding, domestic or foreign.

During the past five years up to present, the Registrant, any of its directors or executive officers is not subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, commodities or banking activities.

During the past five years up to present, the Registrant, any of its directors or executive officers has not been found by a domestic or foreign court of competent jurisdiction (in civil action), the Commission or comparable foreign body, or a domestic or foreign exchange or other organized trading market or self- regulatory organization, to have violated a securities or commodities law or regulation and the judgment has not been reversed, suspended, or vacated.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

1. Financial Performance

For the Six Months Ended June 30, 2012

On June 2012 the Company’s subsidiary, City & Land Developers, Inc. (CLDI) turned over, one year ahead of schedule, Manila Residences Bocobo, a 34-storey office, commercial and residential condominium located in Jorge Bocobo St., Ermita, Manila City. CLDI is now selling its remaining unsold units.

The Company and its subsidiaries are pre-selling the following on-going projects:

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Grand Central Residences, a 40-storey office, commercial and residential condominium located at EDSA corner Sultan St., Mandaluyong City, a project of CDC.

Makati Executive Tower IV, a 29-storey office, commercial and residential condominium located at Cityland Square, Senator Gil Puyat Avenue, Pio del Pilar Makati City, a project of CDC.

Also, the Company and its subsidiaries are selling the following completed and operational projects:

Grand Emerald Tower, a 39-storey commercial, office and residential condominium located along Emerald corner Ruby and Garnet Streets, Ortigas Center, Pasig City, a project of CLDI.

Makati Executive Tower III, a 37-storey office, commercial and residential condominium located at Cityland Square, Senator Gil Puyat Avenue, Pio del Pilar Makati City, a project of CDC.

Mandaluyong Executive Mansion III, a residential condominium located at Mandaluyong Executive Mansion Subdivision, G. Enriquez St., Brgy. Vergara, Mandaluyong City, a project of CDC.

Oxford Mansion, an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City, a joint project of Cityplans, Inc. (CPI), a subsidiary of CDC and Cityland, Inc. (CI).

Windsor Mansion, an 8-storey commercial and residential condominium located at New Santolan, Pasig City, a joint project of CPI and CI.

The Company has also a number of prime lots reserved for future projects. Its land bank is situated in strategic locations ideal for horizontal and vertical developments.

Internal sources come from sales of condominiums and real estate projects, collection of installment receivables, maturing short-term investments and other sources such as rental income, interest income and dividend income. External sources come from SEC-registered commercial papers and Home Guaranty Corporation’s guaranteed promissory notes.

The estimated development cost of 2,200 million as of June 30, 2012 representing the cost to com-plete the Makati Executive Tower IV, Grand Central Residences and Pines Peak Tower I will be sourced through:

1. Sales of condominium and real estate projects2. Collection of installment receivables3. Maturing short-term investments4. Issuance of commercial papers5. Availment of bank lines (bank lines as of June 30, 2012 amounted to 2.45 billion all of which is still unavailed).

For the Year Ended December 31, 2011

The Philippine economy as measured by the gross domestic product (GDP) posted a modest 3.7 percent growth in 2011. The slowdown can be attributed to the typhoons and the decline in foreign trade due to the poorly performing U.S economy, the European debt crisis and the Japan earthquake. In addition, political tensions in the Middle East resulted to high oil prices. The government is now pushing for a more robust growth rate in 2012 by increasing tax collection, implementing sound monetary policies and pledging to boost public spending on infrastructure development through public-private partnership. Amidst the economic slowdown, the Company’s sales remained stable indicating a sustained demand for condominium projects. At present, low interest rates encouraged availment of loans resulting to investments in real estate properties. The Company projects that sales will further increase with the stable macroeconomic environment and the gradual recovery of the world economy.

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The Company and its subsidiaries are pre-selling the following on-going projects:

Grand Central Residences I, launched last year is a 40-storey commercial, office and residential condominium located at EDSA corner Sultan St. (fronting MRT Shaw), Mandaluyong City.

Makati Executive Tower IV, a 29-storey office, commercial and residential condominium located at Cityland Square, Senator Gil Puyat Avenue, Pio del Pilar Makati City.

Manila Residences Bocobo, a 34-storey commercial, office and residential condominium project located at Jorge Bocobo St., Ermita, Manila City, a project of CLDI.

In addition, the Company and its subsidiaries are selling the following completed projects:


Makati Executive Tower III, a 37-storey office, commercial and residential condominium located at Cityland Square, Senator Gil Puyat Avenue, Pio del Pilar, Makati City.

Mandaluyong Executive Mansion III, a 7-storey commercial and residential condominium located at G. Enriquez St., Brgy. Vergara, Mandaluyong City.

Oxford Mansion, an 8-storey commercial and residential condominium located in Santolan, Pasig City, a joint project of Cityplans, Inc. (CPI) and Cityland, Inc. (CI). CPI is a subsidiary of CDC.

Windsor Mansion, an 8-storey commercial and residential condominium located in Santolan, Pasig City, a joint project of CPI and CI.


Internal sources of liquidity come from sales of condominiums and real estate projects, collection of installment receivables, maturing short-term investments while external sources come from SEC-registered commercial papers and Home Guaranty Corporation’s promissory notes.


The country’s economy grew dramatically from 0.9% in 2009 to 7.3 % in 2010, the highest in more than two decades. The high gross domestic product (GDP) rate came during a peaceful political transition of a new administration. The strong growth can be attributed to improved investor’s confidence, government and election expenditures, continued inflow of overseas remittances, growth of the business outsourcing sector and the high rate of foreign trade due to the improving global economy. At present, real estate sales remained strong as bank interest rates remained low while inflation rate remained manageable at below 5%. The Company is optimistic that the favorable political and business environment combined with the recovery of the world economy will bring more investments in the real estate industry.

The Company launched Grand Central Residences on August 2010. This is a 40-storey commercial, office, and residential condominium located at Shaw Boulevard, Mandaluyong City.

The Company and its subsidiaries are selling the following on-going projects:

Makati Executive Tower IV, a 29-storey office, commercial and residential condominium located at Cityland Square, Senator Gil Puyat Avenue, Pio del Pilar Makati City, a project of CDC.

Mandaluyong Executive Mansion III, a residential condominium located at Mandaluyong Executive Mansion Subdivision, G. Enriquez St., Brgy. Vergara, Mandaluyong City, a project

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of CDC.Grand Emerald Tower, a 39-storey office, residential and commercial condominium project

located along Emerald Avenue corner Garnet and Ruby Roads, Ortigas Center, Pasig City, a project of City & Land Developers, Inc. (CLDI).

Manila Residences Bocobo, a 34-storey commercial, office, and residential condominium project located at Jorge Bocobo St., Ermita, Manila City, a project of CLDI.

Also, the Company and its subsidiaries are selling the following finished projects:

Makati Executive Tower III, a 37-storey office, commercial and residential condominium, located at Cityland Square, Senator Gil Puyat Avenue, Pio del Pilar Makati City, a recently completed and turned over project of CDC.

Corinthian Executive Regency, a 39-storey office, commercial and residential condominium located along Ortigas Avenue, Ortigas Center, Pasig City, a project of CDC.

Manila Executive Regency, a 39-storey office, commercial and residential condominium located along J. Bocobo St., Malate, Manila, a project of CDC.

Windsor Mansion, an 8-storey commercial and residential condominium located at New Santolan, Pasig City, a joint project of Cityplans, Inc. (CPI), a subsidiary of CDC and Cityland, Inc. (CI)


Internal sources come from sales of condominiums and real estate projects, collection of install-ment receivables, maturing short-term investments and other sources such as rental income, inter-est income and dividend income. External sources come from bank loans.


The Philippine gross domestic product registered a 0.9% growth in 2009, the slowest pace in 11 years amid the global financial crisis and after being devastated by two strong typhoons during the year. The growth was still within the government’s target showing the economy’s resilience as compared with other economies experiencing a negative growth rate. A large fiscal stimulus, an accommodative monetary policy and strong remittances from increasing overseas Filipinos helped the economy elude a recession. The government aims to achieve a better growth rate in 2010 and plans to implement appropriate policies that will continue to provide the right environment to boost economic growth. At present, the low interest rates, the availability of capital to investors and borrowers, the continued influx of dollars from overseas workers, the growth of the business outsourcing sector and the rapidly expanding population continued to fuel the demand of real estate properties. It is for this reason that despite the odds, the Company posted a respectable performance in 2009. It is hopeful that the year 2010 will bring in fresh mandates that will usher in new energy and opportunities of growth that will be beneficial to the real estate industry and to the entire business community. The Company managed to achieve financial stability by maintaining a cautious stance given the current environment. The Company will continue to offer quality projects in convenient locations at affordable and easy payment terms. For the year 2009, the Group launched 2 new condominium projects. These are: Makati Executive Tower IV, a 29 storey commercial , office and residential condominium located at Cityland Square, Senator Gil puyat Avenue, corner P. Medina St., Makati City and Manila Residences Bocobo, a 34-storey office, commercial and residential condominium located at Jorge Bocobo St,. Ermita Manila City. These projects were well received and are expected to boost the Company’s sales and revenues.

In addition to the above, the Company and its subsidiaries are pre-selling the following on-going projects:

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Mandaluyong Executive Mansion III is a 7-storey commercial and residential condominium located at G. Enriquez St., Brgy. Vergara, Mandaluyong City.

Makati Executive Tower III, a 37-storey office, commercial and residential condominium located at Cityland Square, Senator Gil Puyat Avenue, Pio del Pilar, Makati City.


In addition, the Company and its subsidiaries are selling the last few units of the following completed projects:

Manila Executive Regency, a 39-storey office, commercial and residential condominium located along J. Bocobo St., Ermita Manila., a project of CDC. This project was completed in the third quarter of 2009 and was ahead of its scheduled turnover.

Rada Regency, a 24-storey condominium located along Thailand St. (formerly Rada St.) corner Dela Rosa St., Legaspi Village, Makati City, a project of CDC.

Corinthian Executive Regency, a 39-storey office, commercial and residential condominium located along Ortigas Avenue, Ortigas Center, Pasig Ctiy , a project of CDC.

Oxford Mansion, an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City, a joint project of Cityplans, Inc (CPI) and Cityland, Inc. (CI). CPI is a subsidiary of CDC.

Windsor Mansion, an 8-storey commercial and residential condominium located in Santolan, Pasig City, a joint project of CPI and CI.


Internal sources of liquidity come from sales of condominiums and real estate projects, collection of installment receivables, maturing short-term investments while external sources come from loans obtained from financial institutions.

Financial Condition

June 30, 2012 vs. December 31, 2011

Total assets amounted to 8.024B as of June 2012 as compared with 8.030B in December 2011. The slight decrease can be attributed to the decrease in real estate properties for sale and installment contracts receivable. Collections decreased installment contracts receivable while sales decreased real estate properties for sale. The decrease in these accounts were partially offset by the increase in cash and cash equivalents. Cash and cash equivalents increased due to the net cash flows from operating activities and the shift of investments to shorter period resulting to reclassification of account. Majority of the company’s funds were used for project development and for the partial payment of accounts payable and accrued expenses, loans and notes payable, and income tax resulting to the decline of total liabilities.

Total stockholders’ equity now stands at 5.468B as of June 2012 which is higher than 5.348B in December 2011 due to net income of 254.47M plus other adjustments of 4.87M less cash dividends of 139.34M. As a result of the foregoing, acid test ratio, current ratio and asset to equity ratio were recorded at 1.21:1, 2.01:1 and 1.75:1 as of June 2012, as compared with 1.39:1, 2.01:1 and 1.71:1 in December 2011, respectively. Debt-equity ratio remained stable at 0.33:1 in June 2012, as compared with 0.39:1 in the same quarter of the previous year while interest rate

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coverage ratio was at 14.76:1 in June 2012 as compared with 13.12:1 in the same period of the previous year.

December 31, 2011 vs. December 31, 2010

The Company’s balance sheet remains to be healthy with total assets of 8.043B in 2011, higher than the previous year's level of 7.890B. Cash and cash equivalents increased due to net cash inflows from operating activities and the shift of investments to shorter period resulting to the reclassification of account. The Company’s funds were substantially utilized for the construction of condominium projects, was used to purchase a prime lot, partially settle loans and notes payable and pay cash dividends. As a result of the foregoing, the group strengthened its liquidity position with current and acid test ratio of 2.01:1 and 1.21:1 as compared to 2010 of 1.77:1 and 01.07:1, respectively. The decrease in liabilities improved its solvency position with asset and debt ratio at 2.99:1 and 0.34:1 compared with the previous year of 2.64:1 and 0.46:1, respectively.

Total stockholders' equity stood at 5.356B, higher by 9.27% as compared with 2010 of 4.902B. The increase was due to net income of 610.40M less cash dividends of 161.68M plus other adjustments of 5.59M.


The Company’s balance sheet remained solid with total assets of 7.890B in 2010, slightly higher than the previous year's level of 7.864B. Short term cash investments increased by 826.05M due to net cash inflows from operating activities and re-investment of held to maturity investments. Majority of the Company's funds were used for project development resulting to the increase in completion rates of projects and the completion of two condominium projects, namely, Makati Executive Tower III and Mandaluyong Executive Mansion III. The stable cash flow has also enabled the Company to purchase a prime lot, pay cash dividends and reduce accounts payable and accrued expenses by 62.81M as well as notes and loans payable of 266.26M. As a result of the foregoing, the group strengthened its liquidity position with current and acid test ratio of 1.77:1 and 1.07:1 as compared to 2009 of 1.57:1 and 0.87:1, respectively. Asset and debt ratio likewise improved to 2.64:1 and 0.46:1 from the previous year of 2.33:1 and 0.56:1, respectively.

Total stockholders' equity stood at 4.902B, higher by 9.28% as compared with 2009 of 4.486B. The increase was due to net income of 582.35M less cash dividends of 161.20M less other adjustments of 4.97M.


Total assets amounted to 7.864B in 2009 slightly higher than last year’s level of 7.838B. Sales of real estate properties resulted to the decline in real estate properties for lease and for future development. The Company’s funds were utilized for the development of the projects and a substantial portion was used to pay its loans amounting to 532.38M. Although cash and cash equivalents decreased by 307.43M, this was offset by the increase in short-term cash investments 411.40M. Total stockholders’ equity stands at 4.486B, higher than in 2008 of 4.081B. The 9.92% increase was due to net income of 579.82M, less cash dividends of 184.08M plus other adjustments of 9.26M. As a result of the foregoing, the group strengthened its liquidity position with current and acid test ratio of 1.51:1 and 0.87:1 as compared with 2008 of 1.23:1 and 0.69:1, respectively. Asset ratio and debt equity ratio likewise improved to 2.33:1 and 0.56:1 from the previous year of 2.09:1 and 0.76:1, respectively.

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Results of Operation

June 30, 2012 vs. June 30, 2011

Total revenues reached 961.87M as compared to the previous year of 1.003B. Lower revenues were due to lower sales of CLDI because of the decreased in inventory of Grand Emerald Tower which was already sold at 86.50% last year. On the cost side, lower sales decreased cost of sales and operating expenses. The company’s payment of notes payable decreased financial expense by 14.14%. Altogether the financial performance for the first semester of 2012 resulted to a net income of 254.47M as compared to the previous year of 269.32M. This translated to earnings per share and return on equity (both annualized) of 0.12 and 7.62% as compared to the previous year of 0.14 and 9.46%, respectively.


The Company’s sales of real estate properties increased by 8.26% to 1.574B from the previous year of 1.454B. The sales growth can be attributed to sales and the construction accomplishment of several projects. The Company’s on going project, Makati Executive Tower IV reached 75.06% completion, while the subsidiary’s projects, Grand Emerald Tower and Manila Residences Bocobo reached a completion rate of 100% and 96.36%, respectively. Meantime, the Company’s other completed projects like the Makati Executive Tower III and Mandaluyong Executive Mansion continued to contribute modestly to total revenues and provided stable cash flows. Grand Central Residences, the newest addition, is still in the initial stages of construction. Other sources of revenues are financial income and rent income. Financial income which is substantially composed of interest income from sale of real estate properties accounted for 22.82% of total revenues. On the cost side, the Company remained prudent in managing costs and other disbursements during the year. Cost of sales and operating expenses increased since these move in tandem with sales. Cost of sales was recorded at 971.07M in 2011 as compared with 965.27B in 2010. Operating expenses also increased by 19.85% due to higher personnel and professional fees. However, payment of loans and notes payable eased interest payments resulting to the decline in financial expenses by 20.26%, while lower taxable income decreased income tax by 17.86%.

Altogether, financial performance for the year 2011 resulted to a net income of 610.40M, as compared to the previous year of 582.35M, while net income attributable to equity holders of the parent amounted to 449.91M, slightly higher as compared to the previous year of 447.87M. This translated to an earnings per share and return on equity of 0.15 and 9.76% in 2011 as compared with 0.15 and 10.47% in 2010.


The Company ended 2010 with a consolidated net income of 582.35M, slightly higher as compared to the previous year’s 579.82M. Makati Executive Tower III and Mandaluyong Executive Mansion III continued to contribute modestly to total revenues as they both reached a 100 % completion in 2010. However, two of the Company's new projects are still in the initial stages of construction. These are Grand Central Residences I and Makati Executive Tower IV, launched in 2010 and 2009, respectively. It should be noted that realized gross profit on sales are determined by sales and the timing of development and completion of the projects. Although revenues declined, this will eventually improve as the construction of the projects advances.

Meantime, sales of the subsidiary company, City and Land Developers, Inc. continued to contribute significantly to the Company's revenues. Grand Emerald Tower and Manila Residences Bocobo continued to contribute a significant 37.82% and 14.65%, respectively. The decrease in revenues was offset by lower cost of sales, operating expenses and provision for

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income tax. In addition, partial maturity of loans and notes payable led to the decline in financial expenses by 26.43%. Other revenue contributors are financial and rent income. Financial income which is substantially derived from interest from sales of real estate properties amounted to 544.52M accounting for 26.66% of total revenues, higher by 4.13% from the previous year.

As a result of the foregoing, the Company still posted a respectable net income translating to earnings per share and return on equity of 0.18 and 10.47% as compared to the previous year of 0.21 and 12.92%.


Revenue on sales reached 1.881B, higher by 2.29% from last year’s figure of 1.838B despite the economic and business uncertainties during the year. Revenue growth was driven by sales and and high completion rates of vertical projects.

Revenue on sales were substantially generated from seven (7) high-rise projects namely, Makati Executive III and IV, and Rada Regency located in Makati City; Manila Executive Regency and Manila Residences Bocobo (a project of CLDI) located in Manila City; Grand Emerald Tower (a project of CLDI) located in Ortigas Center, Pasig City ; and Mandaluyong Executive Mansion III located in Mandaluyong City. In addition, financial income which is substantially composed of interest on sales of real estate properties reached 522.91M in 2009 as compared with 527.30M in 2008, accounting for 21.44% and 21.79% , respectively of total revenues.

On the cost side, cost of sales was recorded at 1.235B in 2009 as compared with 1.228B in 2008. Operating expenses on the other hand, increased due to higher sales. The Company’s payment of loans payable eased interest expense payments resulting to the decline of financial expenses by 13.56%. Lower tax rate and taxable income decreased income tax by 11.57%.

Altogether, financial performance for the year 2009 resulted to a net income of 579.82M, higher than the previous year of 572.10M, while net income attributable to equity holders of the parent amounted to 513.10M, almost reaching the same level in 2008 of 520.33M. This translated to an earnings per share and return on equity of 0.25 and 12.86% in 2009 as compared with 0.25 and 14.33% in 2008.

Key Performance Indicators

Cityland Development Corporation (Consolidated) June 2012 2011 2010 2009Earnings per share 0.12 0.15 0.15 0.17Return on equity 7.62% 9.59% 10.47% 12.92%Interest rate coverage ratio 14.76 14.14 11.78 9.04Asset to liability ratio 3.14 2.99 2.64 2.33Asset to equity ratio 1.71 1.75 1.84 1.99Debt to equity ratio 0.33 0.34 0.46 0.56Current ratio 2.01 2.01 1.77 1.57Acid – test ratio 1.39 1.21 1.07 0.87

City & Land Developers, Inc. (Subsidiary)Earnings per share 0.44 0.47 0.39 0.19Return on equity 20.06% 21.95% 22.02% 13.38%Interest rate coverage ratio 31.39 36.95 493.80 864.52Asset to liability ratio 2.85 2.86 2.71 2.79Asset to equity ratio 1.54 1.54 1.59 1.56Debt to equity ratio 0.21 0.22 0.29 0.30Current ratio 1.68 2.00 2.10 2.23Acid – test ratio 1.38 1.26 1.20 0.88

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Cityplans, Incorporated (Subsidiary)Earnings per share 0.05 0.07 0.09 0.18Return on equity 2.24% 3.01% 4.14% 7.20%Interest rate coverage ratio -- -- -- --Asset to liability ratio 6.35 5.91 5.39 4.88Asset to equity ratio 1.24 1.23 1.25 1.27Debt to equity ratio 0.19 -- -- --Current ratio 16.10 22.93 22.41 17.01Acid – test ratio 14.81 21.09 21.15 15.95

Manner of CalculationsEarnings Per Share = Net Income attributable to equity holders / Ave. # of Shares Issued & OutstandingReturn on Equity = Net Income attributable to equity holders

Total Stockholder’s Equity (net of minority interest)Interest Rate Coverage Ratio = Net Income before Tax + Depreciation + Interest Expense / Interest ExpenseAsset to Liability Ratio = Total Assets / Total LiabilitiesAsset to Equity Ratio = Total Assets / Total Stockholders’ Equity (net of Net Changes in Fair Value of Investments)Debt – Equity Ratio = Loans & Notes Payable ____________

Total Stockholder’s Equity (net of Net Changes in Fair Value of Investments)Current Ratio = Total Current Assets/ Total Current LiabilitiesAcid Test Ratio = Cash and Cash Equivalents + Short-term Investments + Available for Sale Investments +

Financial Asset at Fair Value + Installment Contracts Receivable + Other Receivables

Total Current Liabilities

1. Items affecting assets, liabilities, equity, net income, or cash flows that are unusual because of their nature, size or incidents

There are no unusual items affecting assets, liabilities, equity, net income or cash flows.

2. Any changes in estimates of amounts reported in prior interim periods of the current financial year or changes in estimates of amounts reported in prior financial years that have a material effect in the current interim period

There are no changes in estimates of amounts reported in prior interim periods of the current financial year or changes in estimates of amounts reported in prior financial years that have a material effect in the current interim period.

3. Any issuances, repurchases, and repayments of debt and equity securities

The Parent Company and its subsidiary issued SEC-Registered Short-Term Commercial Papers during the period with outstanding balance of 849.25 million and 134.45 million, respectively as of June 30, 2012.

4. Any material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period

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

5. Effect of changes in the composition of the issuer during the interim period, including business combinations, acquisition or disposal of subsidiaries and long-term investments, restructuring, and discontinuing operations.

There are no changes in the composition of the issuer during the interim period, including business combinations, acquisition or disposal of subsidiaries and long-term investments, restructuring, and discontinuing operations.

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6. Any changes in contingent liabilities or contingent assets since the last annual balance sheet date

There are no changes in the contingent liabilities or contingent assets since the last annual balance sheet date.

7. Any Known Trends, Events or Uncertainties (Material impact on liquidity)

There is no known trends, events or uncertainties that has a material effect on liquidity.

8. Internal and External Sources of Liquidity

Internal sources come from sales of condominium and real estate projects, collection of installment receivables and maturing short-term investments. External sources come from bank loans.

9. Any Material Commitments for Capital Expenditures and Expected Sources of Funds of such Expenditures

The total estimated development costs of P2,200M representing the cost to complete Makati Executive Tower IV, Grand Central Residences Tower I as of June 30, 2012 and Pines Peak Tower I (launched July 2012) will be sourced through:

a. Sales of condominium and real estate projectsb. Collection of installment receivables c. Maturing short-term investments

d. Proceeds from the sale of commercial papers

10. Any Known Trend or Events or Uncertainties (Material Impact on Net Sales or Revenues or Income from Continuing Operations)

There is no known trend, event or uncertainties that has a material effect on the net sales, revenues or income from continuing operations.

11. Any Significant Elements of Income or Loss that did not arise from Registrant’s Continuing Operations

There are no significant elements of income or loss that did not arise from registrant’s continuing operations.

12. Any Known Trends or Events or Uncertainties (Direct or Contingent Financial Obligation)

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

13. Any Known Trends or Events or Uncertainties (Material off-balance sheet transactions, arrangements, obligations and other relationships)

There are no material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities created during the reporting period.

43

Causes for any Material Changes from Period to Period in One or More Line of the Registrant's Financial Statements

Material Changes (+/-5% or more) in the Financial Statements

Interim Periods:

June 30, 2012 vs. December 31, 2011

a. Increase in Cash and Cash Equivalents was due to collection and maturity of short-term cash investments.

b. Decrease in Short-term Cash Investments was due to maturity of placements.c. Decrease in Investments in Trust Fund was due to maturity and termination of pension plans.d. Decrease in Installment Contracts Receivable was due to collection of receivables.e. Decrease in Other Receivables was due to collection of real estate taxes from clients and

accrued interest and other receivable from contractors.f. Decrease in Real Estate Properties for Sale was due to sales.g. Decrease in Property and Equipment was due to depreciation.h. Decrease in Accounts Payable and accrued Expenses was due to payment.i. Decrease in Income Tax Payable was due to payment.j. Decrease in Pre-need Reserves was due to maturity and termination of pension plans.k. Decrease in Net Changes in Fair Value of Investments was due to decrease in value of trust

fund.l. Increase in Retained Earnings was due to net income and other adjustments less cash

dividends.

June 30, 2012 vs. June 30, 2011

m. Decrease in Financial Income was due to decrease in interest income from sales of real estate properties.

n. Increase in Rental Income was due to increase in units available for lease.o. Increase in Other Revenues was due to increase in miscellaneous and trust fund income.p. Decrease in Operating Expenses was due to decrease in professional fees, repairs and

maintenance, donations and contribution, association dues, taxes and licenses, and insurance expenses.

q. Decrease in Financial Expenses was due to decrease in loans and notes payable and interest rate.

r. Increase in Provision for Income Tax was due to increase in provision for deferred income tax.s. Decrease in Net Income After Tax was due to decrease in revenues.

Full Fiscal Years:


a. Increase in Cash and Cash Equivalents was due to reclassification of investments to shorter period.

b. Decrease in Short-term Cash Investments was due to maturity of investments.c. Decrease in Investments in Trust Funds was due to maturity and termination of plans.d. Increase in Other Receivables was due to increase in advances to customers.e. Increase in Real Estate Properties held for Future Development was due to the purchase of a

lot.f. Decrease in Property and Equipment was primarily due to depreciation.g. Increase in Other Assets was due to increase in electric meter deposits.h. Increase in Accounts Payable and Accrued Expenses was due to developments costs, trade

payables and accrued director’s fee.i. Decrease in Notes and Loans Payable was due to payment.j. Decrease in Deferred tax liabilities was due to lower accounting income as compared with

taxable income.

44

k. Increase in Capital Stock was due to 20% stock dividends.l. Decrease in Retained Earnings was due to stock and cash dividendsm. Increase in Non-controlling Interests was due to net income of subsidiaries.n. Increase in Revenue on Sales of Real Estate was due to sales and high completion rate of

projects.o. Decrease in Financial Income was due to lower interest income from sales of real estate

properties.p. Increase in Rent Income was due to increase in units available for lease.q. Decrease in Other Income was due to decrease in miscellaneous income.r. .Increase in Operating Expenses was due to higher personnel expenses, professional fee,

membership dues and rent expense.s. Decrease in Financial Expenses was due to termination of loans and notes payable.t. Decrease in Provision for Income Tax was due to lower taxable income.


a. Decrease in Cash and Cash Equivalents was due to payment of notes and loans payable and reinvestment in short term cash investments.

b. Increase in Short-term Cash Investments was due to sales and collection of installment contracts receivable.

c. Decrease in Financial Assets at Fair Value through Profit and Loss was due to maturity and termination of plans.

d. Decrease in Held to Maturity Investments was due to maturity of investments.e. Decrease in Installment Contracts Receivables ( net of estimated development cost) was due to

collection of receivables and payment of development costs.f. Increase in Real Estate for Sale was due to launching of a new project – Grand Central

Residences I.g. Decrease in Real Estate Properties held for future development was due to reclassification of

lot cost to Real Estate for Sale of the new project.h. Decrease in Property and Equipment was primarily due to depreciation.i. Increase in Other Assets was due to increase in electric meter deposits.j. Decrease in Accounts Payable and Accrued Expenses was due to payment of trade payables,

accrued director’s fee, deposits and VAT payable.k. Decrease in Notes and Loans Payable was due to payment.l. Decrease in Pre-Need Reserves was due to maturity and termination of contracts.m. Decrease in Deferred tax liabilities was due to lower accounting income as compared with

taxable income.n. Increase in Capital Stock was due to 20% stock dividends.o. Decrease in Net Changes in Fair Value of Investments was due to recognition of realized gain

on sale of stocks and impairment loss in the statements of income.p. Increase in Minority Interests was due to net income of subsidiaries.q. Decrease in Revenue on Sales of Real Estate was due to sales and low percentage of

completion of the new projects.r. Increase in Other Income was due to increase in scrap and other miscellaneous income.s. Decrease in Cost of Sales was due to lower revenue on sales of real estate properties.t. Decrease in Operating Expenses was due to lower sales.u. Decrease in Financial Expenses was due to payment of loans and notes payable.v. Decrease in Provision for Income Tax was due to lower taxable income.


a. Decrease in Cash and Cash Equivalents was due to placements in short-term cash investments and payment of loans and notes payable.

b. Increase in Short-term Cash Investments was due to placements.c. Decrease in Financial Assets at Fair Value through Profit and Loss was due to decrease in

market value.

45

d. Increase in Available-for-Sale Investments was due to increase in market value of stocks.e. Increase in Real Estate for Sale was due to launching of two new projects – Manila

Residences Bocobo and Makati Executive Tower IV.f. Decrease in Real Estate Properties for Lease was due to sale of property and reclassification of

lot cost of the newly launched project.g. Decrease in Property and Equipment was due to depreciation.h. Increase in Other Assets was due to net income from retirement plan assets.i. Increase in Accounts Payable and Accrued Expenses was due to accrued development costs.j. Decrease in Notes and Loans Payable was due to payment of contracts and loans payable.k. Increase in Income Tax Payable was due to lower prepaid taxes.l. Decrease in Pre-Need Reserves and other reserves was due to maturity and termination of

contracts.m. Increase in Capital Stock was due to 20% stock dividends.n. Decrease in Revaluation Increment was due to sale of inventory with appraised values.o. Increase in Net Changes in Fair Value of Investments was due to increase in value of stocks.p. Increase in Minority Interests was due to net income of subsidiaries.q. Decrease in Rent Income was due to expiration of lease contracts.r. Decrease in Other Revenues was due to decrease in miscellaneous income and recovery of

impairment loss.s. Increase in Operating Expenses was due to higher sales.t. Decrease in Financial Expenses was due to lower loan balance.u. Decrease in Provision for Income Tax was due to lower taxable income and tax rate.

Information On Independent Accountant

External Audit Fees 2011 2010

Audit and Audit-Related Fees 800,000 765,000Tax Fees -- --All Other Fees -- --Total 800,000 765,000

SyCip, Gorres, Velayo & Co. is the Registrant's external auditor for the calendar year 2011 & 2012.

The Audit Committee’s approval policies and procedures consist of:

a) Discussion with the external auditors of the Audited Financial Statements.

b) Recommendation to the Board of Directors for the approval and release of the Audited Financial Statements.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

There is no change in and disagreements with accountants on accounting and financial disclosure.

46

Directors and Executive Officers

i. Identify Directors and Executive Officers:

Name Citizenship Position Periodof

Service

Termof

Office(Year)

Age FamilyRelationship

Washington SyCip American Chairman of the Board/ Independent Director

06/13/01 to Present/1997 to Present

1 91 ---

Stephen C. Roxas Filipino Chairman of theExecutive Committee/ Director

07/01/97 to Present 1 71 Husband of Helen Roxas; brother of Grace Liuson and Alice Gohoc; brother-in-law of Andrew I. Liuson; and uncle of Josef C. Gohoc

Andrew I. Liuson Filipino Vice Chairman of the Board/ Director

01/16/08 to Present 1 68 Husband of Grace Liuson; brother-in-law of Stephen C. Roxas and Alice C. Gohoc

Grace C. Liuson Filipino Deputy Vice-Chairman of the Board/ Director

02/01/11 to Present 1 66 Wife of Andrew Liuson; sister of Stephen Roxas and Alice Gohoc; aunt of Josef C. Gohoc; and sister-in-law of Helen C. Roxas

Josef C. Gohoc Filipino President/ Director 02/01/11 to Present 1 42 Son of Alice Gohoc; and nephew of Stephen Roxas, Helen C. Roxas, Grace Liuson and Andrew I. Liuson

Atty. Sabino R. Padilla Filipino Director 2006 to Present 1 76 ---Peter S. Dee Filipino Independent Director 1982 to Present 1 70 ---Alice C. Gohoc Filipino Director 1996 to Present 1 70 Sister of Stephen

Roxas and Grace Liuson; mother of Josef C. Gohoc; and sister-in-law of Andrew Liuson and Helen C. Roxas

Helen C. Roxas Filipino Director 1979 to Present 1 63 Wife of Stephen Roxas; sister-in-law of Grace C. Liuson, Andrew I. Liuson and Alice C. Gohoc

Rufina C.Buensuceso Filipino Executive Vice President

02/01/11 to Present 1 63 ---

Emma A. Choa Filipino Senior Vice President/ Treasurer

02/01/11 to Present 1 51 ---

Eden F. Go Filipino Vice President 01/16/08 to Present 1 59 ---Rudy Go Filipino Vice President 08/16/07 to Present 1 52 ---Melita M. Revuelta Filipino Vice President 01/16/08 to Present 1 53 ---Romeo E. Ng Filipino Vice President 01/10/05 to Present 1 51 ---Josie T. Uy Filipino Vice President – Mla 02/16/04 to Present 1 57 ---Melita L. Tan Filipino Vice President 02/21/04 to Present 1 52 ---

47

Name Citizenship Position Periodof

Service

Termof

Office(Year)

Age FamilyRelationship

Emma G. Jularbal Filipino Vice President – Legal Affairs/ Corporate Secretary

07/01/01 to Present/ 1997 to Present

1 56 ---

2. Positions in Other Private Institutions:

1. Washington SyCip

Present positions in other private institutions:

Name of Office Position Date AssumedAsian Eye Institute Independent Director September 2000Asian Institute of Management Chairman EmeritusAsian Terminals Inc. Adviser to the Board October 2010Banco De Oro Adviser to the Board October 2009Belle Corporation Independent Director July 1996Century Properties Group, Inc. Independent Director July 2011Commonwealth Foods, Inc. Independent Director June 2000First Philippine Holdings Corp. Independent Director November 1997Gokongwei Brothers Foundation TrusteeHighlands Prime, Inc. Independent Director January 2002I-Academy Board of Governors January 2002Investment and Capital Corp. of the Phils. Senior Adviser to the Board July 1987JG Summit Holdings Adviser to the Board August 2001Jollibee Food Corporation Adviser to the Board July 2011Lopez Holdings Corp. (formerly Benpres Holdings Corp.) Independent Director April 1997Lufthansa Technik Philippines, Inc. Chairman July 2000MacroAsia Corporation Chairman November 1996Metrobank Bank & Trust Co. Adviser to the Board April 1996Metrobank Foundation, Inc. TrusteeMetro Pacific Investment Corp. Independent Director May 2012Phil. Equity Management Inc. Independent Director October 1998Philippine Airlines, Inc. Director February 1997Philippine Hotelier, Inc. Independent Director September 1997Philippine Long Distance Telephone Co. Adviser to the Board January 2011Philippine National Bank Director December 1999Philamlife, Inc. Independent Director April 2001Realty Investment, Inc. Independent Director April 1950The PHINMA Group Independent Director September 1996PinoyMe Foundation TrusteeRealty Investment, Inc. Independent Director April 1950Stateland, Inc. Independent Director July 1996

Past positions in other private institutions:

Name of Office Position DurationAboitiz Transport Systems, Inc. Independent Director Aug. 1996 to Dec. 2010Century Properties, Inc. Independent Director Feb. 2010 to July 2011Global Business Holdings, Inc. Independent Director June 2003 to Sept. 2007Manila Electric Co. (MERALCO) Director Aug. 1996 to May 2008

2. Stephen C. Roxas


Name of Office Position Date AssumedCityland, Inc. Director/ Chairman of the Board July 1997

48

City & Land Developers, Inc Director/ Chairman of the Executive Committee

July 1997

Cityplans, Inc. Director/ President October 1988Cityland Asset-Backed Securities (SPC), Inc. Director/ Chairman December 2005MGC New Life Christian Academy ChairmanCenter for Community Transformation Vice- Chairman

3. Andrew I. Liuson


Name of Office Position Date AssumedCityland, Inc. Director/ Vice Chairman of the Board January 2008City & Land Developers, Inc. Director/ Vice Chairman of the Board January 2008Cityplans, Inc. Director/ Chairman of the Board September 2006Cityland Asset-Backed Securities (SPC), Inc. Director/ President December 2005Febias College of Bible ChairmanInternational Graduate School of Leadership ChairmanGrace Christian College ChairmanPhilippine Council of Evangelical Churches Chairman


Name of Office Position DurationCityland, Inc. President 1997 to January 2008City & Land Developers, Inc President 1997 to January 2008Cityplans, Inc. Vice Chairman of the Board/

Exec. Vice President 1988 to Sept. 24, 2006

4. Grace C. Liuson


Name of Office Position Date AssumedCityland, Inc. Director/ Deputy Vice Chairman

of the BoardFebruary 1, 2011

City & Land Developers, Inc. Director/ Deputy Vice Chairman of the Board

February 1, 2011

Cityplans, Inc. Director/ Exec. Vice President/ Treasurer

September 2006

Cityland Asset-Backed Securities (SPC), Inc.

Director/ Exec. Vice President/ Treasurer

December 2005

Youth Gospel Center Treasurer/ TrusteeMakati Gospel Church Treasurer

Past position in other private institutions:

Name of Office Position DurationCityland, Inc. President/

Exec. Vice President/ TreasurerFeb. 14, 2008 to Jan. 31, 20111997 to Feb. 13, 2008

City & Land Developers, Inc. President/Exec. Vice President/ Treasurer

Feb. 14, 2008 to Jan. 31, 20111997 to Feb. 13, 2008

Cityplans, Inc. Senior Vice President 1988 to Sept. 24, 2006

5. Josef C. Gohoc

Present position in other private institutions:

Name of Office Position Date AssumedCityland, Inc. Director/ President Feb. 2011City & Land Developers, Inc. Director/ President Feb. 2011

49

Cityland Asset-Backed Securities (SPC), Inc. Director December 2005Cityland Foundation Inc. Director 2002Asian Business Solutions, Inc. Director 1996Philippine Trading & Investment Corporation

Director 1997

Atlas Agricultural & Mercantile Development Corp.

Director 1997

Past position in other private institutions:

Name of Office Position DurationCityland, Inc. Senior Vice President/

TreasurerFirst Vice President

Jan. 16, 2008 to Jan. 31, 2011/June 11, 2008 to Jan. 31, 2011Sept. 2006 to Jan. 15, 2008

City & Land Developers, Inc. Senior Vice President/ TreasurerFirst Vice President

Jan. 16, 2008 to Jan. 31, 2011/June 11, 2008 to Jan. 31, 2011Sept. 2006 to Jan. 15, 2008

6. Atty. Sabino R. Padilla Jr.

Present position in other private institutions:

Name of Office Date Assumed Date AssumedPadilla Law Office Partner Past 5 years up to Present Apostolic Nunciature to the Phils. Legal Counsel -do-Catholic Bishops’ Conference of the Phils. (CBCP) and various archdioceses, dioceses and prelatures

Legal Counsel -do-

Association of Major Religious Superiors of the Philippines

Legal Counsel

Philippine Association of Religious Treasurers

Legal Counsel

Grace Christian College Legal Counsel -do-Various Catholic religious congregations, orders and societies for men and women (Dominicans, Augustinians, Franciscans, Columbans, Religious of the Virgin Mary, Daughters of Charity, Sisters of St. Paul of Chartres, Carmelite Sisters, Holy Spirit Sisters, etc.)

Legal Counsel -do-

Bank of the Philippine Islands and its subsidiaries

Legal Counsel -do-

Ayala Land, Inc. Legal Counsel -do-City & Land Developers, Inc. Director/ Chairman of the Board -do-State Investment Trust, Inc Legal Counsel -do-Stateland Investment, Inc. Chairman of the Board/ Legal Counsel -do-Mother Seton Hospital Legal Counsel -do-Our Lady of Lourdes Hospital Legal Counsel -do-St. Paul Hospital Cavite Legal Counsel/ Trustee -do-Various Catholic universities, colleges, schools and foundations

Trustee


Name of Office Position DurationBank of the Philippine Islands Director 1982 to 1994BPI – Family Bank Director 1982 to 1994

50

7. Peter S. Dee


Name of Office Position Date AssumedAsean Finance Corporation Ltd. Director Past 5 years up to PresentAlpolac, Inc. Director - do -Bankers Association of the Philippines Director - do -China Banking Corp. Director / President & CEO - do -CBC Forex Corp. Director / Chairman of the Board - do -CBC Insurance Brokers, Inc. Chairman of the Board - do -CBC Properties & Computer Center, Inc. Director / President - do -Cityplans, Incorporated Independent Director / Member-

Nominations Committee- do -

Cityland, Inc. Independent Director - do -City and Land Developers, Inc. Independent Director - do -GDSK Development Corp. Director - do -Hydee Management & Resources

CorporationDirector - do -

Kemwerke, Inc. Director - do -Makati Curbs Holding Corp. DirectorSilver Falcon Insurance Agency Director - do -


Name of Office Position DurationCan Lacquer, Inc. * Director CBC Finance, Inc. Director 1986 to 2001CBC Venture Capital Director 1986 to 2001First CBC Capital (Asia) Ltd. Director 1986 to 2001GPL Holdings, Inc. * DirectorKK Converters Co. Ltd. DirectorMSD Company Inc. * Director Sinclair (Phils.) Inc. * Director Sol Mar Y Tierra Resources * Director

* ceased operations

8. Alice C. Gohoc


Name of Office Position Date AssumedCityland, Inc. Director September 2001City & Land Developers, Inc. Director 1996Philippine Trading & Investment Corp. Director 1997Atlas Agricultural & Mercantile Development Corp.

Director 1997

Makati Hope Christian School Director Asian Business Solutions, Inc. Director 1996


Name of Office Position DurationCityland, Inc. Vice President June 11, 2008 to Jan. 31, 2011City & Land Developers, Inc. Vice President June 11, 2008 to Jan. 31, 2011

9. Helen C. Roxas


Name of Office Position Date AssumedCityland, Inc. Director January 1997City & Land Developers, Inc. Director 1979

51

Cityplans, Inc. Director October 1988Cityland Asset-Backed Securities (SPC), Inc.

Director December 2005

Good Tidings Foundation Inc. Treasurer 1992MGC New Life Christian Academy Board of Trustee 1992

10. Rufina C. Buensuceso Present positions in other private institutions:

Name of Office Position Date AssumedCityland, Inc. Executive Vice President February 2011City & Land Developers, Inc. Executive Vice President February 2011Cityplans, Inc. Comptroller September 1990


Name of Office Position DurationCityland, Inc. Senior Vice President June 1997 to January 2011City & Land Developers, Inc Senior Vice President June 1997 to January 2011 11. Emma A. Choa


Name of Office Position Date AssumedCityland, Inc. Senior Vice President/ Treasurer February 2011City & Land Developers, Inc. Senior Vice President/ Treasurer February 2011

Past positions in other private institutions:Name of Office Position Duration

Cityland, Inc. Vice President/Asst. to the Exec. Vice President

Feb. 1, 2006 to Jan. 31, 2011July 1, 1997 to Jan. 31, 2006

City & Land Developers, Inc Vice President/Asst. to the Exec. Vice President

Feb. 1, 2006 to Jan. 31, 2011July 1, 1997 to Jan. 31, 2006

12. Eden F. Go

Present positions in other private institutions:Name of Office Position Date Assumed

Cityland, Inc. Vice President January 2008City & Land Developers, Inc. Vice President January 2008

13. Rudy GoPresent positions in other private institutions:

Name of Office Position Date AssumedCityland, Inc. Vice President August 2007City & Land Developers, Inc. Vice President August 2007


Name of Office Position DurationCityland, Inc. Asst. to the President Dec. 2004 to Aug. 15, 2007City & Land Developers, Inc. Asst. to the President Dec, 2004 to Aug. 15, 2007

14. Melita M. Revuelta


Name of Office Position Date AssumedCityland, Inc. Vice President & Asst. Corporate January 2008

52

SecretaryCity & Land Developers, Inc. Vice President January 2008


Name of Office Position DurationCityland, Inc. Asst. to the President July 1, 2001 to Jan. 15, 2008City & Land Developers, Inc. Asst. to the President July 1, 2001 to Jan. 15, 2008

15. Romeo E. NgPresent positions in other private institutions:

Name of Office Position Date AssumedCityland, Inc. Vice President January 2005City & Land Developers, Inc. Vice President January 2005


Name of Office Position DurationCityland, Inc. Assistant Vice President July 1, 2002 to Jan. 9, 2005City & Land Developers, Inc. Assistant Vice President July 1, 2002 to Jan. 9, 2005

16. Josie T. UyPresent positions in other private institutions:

Name of Office Position Date AssumedCityland, Inc. Vice President-Manila Branch February 2004City & Land Developers, Inc. Vice President-Manila Branch February 2004

17. Melita L. TanPresent positions in other private institutions:

Name of Office Position Date AssumedCityland, Inc. Vice President February 21, 2004City & Land Developers, Inc. Vice President February 21, 2004

Past positions in other private institutions:Name of Office Position Duration

Cityland, Inc. Senior Manager 1994 to Feb. 20, 2004

18. Emma G. JularbalPresent positions in other private institutions:

Name of Office Position Date AssumedCityland, Inc. Corporate Secretary July 1997City and Land Developers, Inc. Asst. Corporate Secretary July 1997Cityland Asset-Backed Securities (SPC), Inc. Corporate Secretary December 2005

i. Identify Significant Employees

There is no identifiable significant employee because the Company expects each employee to do his / her share in achieving the corporation’s set goal.

ii. Involvement in Certain Legal Proceedings of Any of the Directors and Executive Officers, during the past five years:

During the past five years and up to the latest date, there is no involvement in certain legal proceedings of any of the directors and executive officers such as:

53

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

b) Any conviction by final judgment, including the nature of the offense, in a criminal proceeding, domestic or foreign, or being subject to a pending criminal proceeding, domestic or foreign;

c) Being subject to any order, judgment, or decree, not subsequently reversed suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, commodities or banking activities; and

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

i. Independent Directors

The independent directors of the company are:a. Washington SyCipb. Peter Dee

Executive Compensation

Executive Compensation Summary Table

Name Position 2010 2011 2012 (estimate)Josef C. Gohoc President effective Feb. 1, 2011 x xGrace C. Liuson President up to Jan. 31, 2011 xRufina C. Buensuceso Executive Vice Pres. x x xEmma G. Jularbal VP-Legal x x xJosie T. Uy VP – Manila x x xDorothy U. So AVP-Internal Audit x xAlvin Albert Anthony

OcampoLegal Counsel x

Salaries 3,608,052.00 3,878,556.00 4,262,057.00Bonus 4,289,980.00 4,836,496.00 1,067,298.00Others 5,793,787.93 2,679,116.26 711,770.26Total (Top 5) 13,691,819.93 11,394,168.26 6,041,125.26Salaries 13,547,697.00 15,200,109.00 15,732,378.00Bonus 10,135,834.00 9,835,639.00 4,178,309.00Others 17,571,621.63 16,468,730.59 16,288,310.59All officers & directors as a group unnamed 41,255,152.63 41,504,478.59 36,198,997.59

X= represents the top five officers for the specific or given year

The Company has no standard arrangements with regards to the remuneration of its directors. In 2011 and 2010, the Board of Directors received a total of 16,549,677.85 and 19,815,786.56 respectively, including a total per diem of 14,400.00 per annum for each director for the board meetings attended, as part of the compensation under all officers and directors as a group unnamed. Moreover, the Company has no standard arrangement with regards to the remuneration of its existing officers aside from the compensation received nor any other arrangement with employment contracts, compensatory plan and stock warrants or options.

54

Security Ownership of Certain Beneficial Owners and Management

a. Security Ownership of Record and Beneficial Owner owning more than 5% of the outstanding capital stock of the Registrant as of June 30, 2012:

Title of Class Name, Address & Relationship with Issuer

Beneficial Owner & Relationship

Citizenship No. of Shares Held

%

Unclassified common shares

Cityland, Inc. *2F Cityland Condo 10 T1156 H.V. Dela Costa St., Makati City- Principal Stockholder

Filipino 1,484,571,007 50.40%


PCD Nominee Corp.- Filipino **37F Tower 1, The Enterprise Centre, 6766 Ayala Ave., cor. Paseo de Roxas, Makati City- Stockholder

-Various- ** Filipino 332,191,317 11.28%


Stephen C. Roxas1392 Campañilla St., Dasmariñas Village, Makati- Director/ Chairman of

Executive Committee

Lincoln Roxas

Jefcon, IncObadiah Inc.

Immediate family sharing the same householdCorporation of w/c record owner is a controlling shareholder

Filipino 217,222,864 7.38%


Grace C. Liuson2072 Lumbang cor. CypressDasmariñas Village, Makati-Director/ Deputy Vice- Chairman of the Board

- NA - Filipino 157,153,310 5.34%

* The following directors direct the voting or disposition of the shares held by Cityland, Inc.:

(Beneficial Owners) Name Position Stephen C. Roxas Chairman of the Board Andrew I. Liuson Vice Chairman of the BoardGrace C. Liuson Deputy Vice Chairman of the BoardJosef C. Gohoc President

** PCD Nominee Corp.- Filipino is a wholly-owned subsidiary of the Philippine Central Depository. It is the registered owner of the shares in the books of the Company's transfer agent and holds such shares in behalf of the beneficial owners.

The Corporation knows no person holding more than 5% of the Company's shares registered under the name of PCD Nominee Corp.- Filipino.

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

c. Security Ownership of Management as of June 30, 2012.

Title of Class Name of Beneficial Owner / Position

No. of Shares Held

Nature of Ownership

Citizenship %

Directors:Unclassified

common sharesWashington SyCipDirector/ Chairman of the Board

811 Direct American 0.00003%

55

Title of Class Name of Beneficial Owner / Position

No. of Shares Held

Nature of Ownership

Citizenship %


Stephen C. RoxasDirector/ Chairman of the Executive Committee

249,088,228 Direct / Indirect Filipino 8.45707%


Andrew I. LiusonDirector/ Vice Chairman of the Board



Grace C. LiusonDirector/ Deputy Vice Chairman of the Board

157,153,310 Direct Filipino 5.33569%


Josef C. GohocDirector/ President

35,246,428 Direct/ Indirect Filipino 1.19669%


Sabino R. Padilla, Jr.Director

53,799 Direct Filipino 0.00183%


Peter S. DeeIndependent Director



Alice C. GohocDirector



Helen C. RoxasDirector

44,770,965 Direct Filipino 1.52007%

Executive Officers:Unclassified

common sharesRufina C. BuensucesoExecutive Vice President



Emma A. ChoaSenior Vice President/ Treasurer



Eden F. GoVice President



Rudy GoVice President



Melita M. RevueltaVice President



Romeo E. NgVice President



Josie T. UyVice President – Manila Branch



Melita L. TanVice President


Note: The above security ownership of management consists of Unclassified Common Shares amounting to Php 731,658,975 which is equivalent to 24.84%.

d. The Corporation knows no person holding more than 5% of common shares under a voting trust or similar agreement.

Certain Relationships and Related Transactions

1) Transactions of Registrant with Any Director, Executive Officer of the Registrant and Any Nominee for Election as a Director

There is no transaction (or series of similar transactions) with or involving the registrant or any of each subsidiary with a director, executive officer, and a nominee for election as a director.

2) Transactions with Cityland Inc, a stockholder which owns more than 10% of the registrant’s outstanding shares and other related parties:

a) Interest-bearing cash advances and non-interest-bearing advances for reimbursable expenses from and to the registrant which the Company enters into with its affiliates in the regular course of its business.

The Registrant's affiliates are its parent company, Cityland, Inc. (CI), and its subsidiaries, City and Land Developers, Inc. ( CLDI) and Cityplans, Inc. (CPI).

56

Interest rates used by the parties for the interest- bearing cash advances were the prevailing market interest rates for loans averaged by the parties.

b) Existing management contract with Cityland, Inc. (CI), its parent company.

Business Purpose / Nature of the transaction:

Cityland, Inc. provides management services for the business of the Registrant. The agreement is for a period of five years renewable automatically for another five years unless either party notifies the other six months prior to expiration. The management fee is based on a certain percentage of net income as mutually agreed upon by both parties. The management fees for 2011, 2010 and 2009 were waived by CI.

3) Parent of the Registrant

Cityland, Inc. owns 50.40% of the outstanding capital stock of the Registrant.

Corporate Governance

The evaluation system employed by the Corporation is through a periodic self-rating system based on the criteria on the leading practices and principles on good governance.

1. Measures being Undertaken by the Company to fully comply with the Adopted Leading Practices on Good Corporate Governance.

We are implementing the periodic self-rating system on an annual basis.

2. Any Deviation from the Company’s Manual of Corporate Governance (including a disclosure of the name and position of the persons involved and sanctions imposed on said individual.)

There were no major deviations that require sanctions.

3. Any Plan to improve Corporate Governance of the Company.

Based on the outcome of the periodic self-rating, we will come up with necessary actions / procedures to improve the corporate governance of the Company.

In compliance with SEC Memorandum Circular No. 6, Series of 2009, the Company has started implementing the applicable rules of the Revised Code of Corporate Governance in its aim to continually improve its corporate governance system.

57

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Actual Fees and Expenses:

Registration Fee:Filing Fee Php 812,500Legal Research Fee 8,125 Php 820,625

Legal and Accounting Fee 30,000Publication 29,000

Estimated Fees and Expenses:

Printing Costs of STCPs (estimate) 30,000Documentary Stamps (estimate) 5,000,000Total Php 5,909,625

There is no insurance premium paid by the Registrant in connection with this offering.

58

CITYLAND DEVELOPMENT CORPORATION

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULESAudited for Year 2011, 2010 and 2009 and

Unaudited As of and For the Six Months Ended June 30, 2012

Financial Statements Page

Statement of Management’s Responsibility for Financial StatementsReport of Independent Public AccountantConsolidated Balance Sheets as of December 31, 2011 and 2010Consolidated Statements of Income for the Years Ended December 31, 2011, 2010 and 2009Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2011, 2010 and 2009Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2011, 2010 and 2009Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009Notes to Consolidated Financial StatementsConsolidated Balance Sheets as of June 30, 2012 and December 31, 2011Consolidated Statements of Income for the Six Months Ending June 30, 2012 and June 30, 2011Consolidated Statements of Comprehensive Income for the Six Months Ending June 30, 2012 and June 30, 2011Consolidated Statements of Changes in Stockholders’ Equity as of June 30, 2012 and 2011Consolidated Statements of Cash Flows as of June 30, 2012 and 2011Notes to Consolidated Financial Statements

Supplementary Schedules

A. Financial AssetsB. Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal

Stockholders (Other than Related Parties)C. Amounts Receivable from Related Parties which are Eliminated during the Consolidation

of Financial StatementsD. Intangible Assets – Other AssetsE. Long-Term DebtF. Indebtedness to Related PartiesG. Guarantees of Securities of Other IssuersH. Capital Stock

OthersAnnex “A” Retained Earnings Available for Dividend DeclarationAnnex “B” Map of the Relationships of the Companies within the GroupAnnex “C” Supplementary Schedule of All Effective Standards and Interpretations (Part 1, 4j)Index to Exhibits

***

************

__________*** These schedules, which are required by Part II of SRA Rule 68, as amended, have been

omitted because they are either not required, not applicable or the information required to be presented is included in the Company’s financial statements or the notes to financial statements.

59

*SGVMC312904*

7 7 8 2 3

SEC Registration Number

C I T Y L A N D D E V E L O P M E N T C O R P O R A T I O N A N D S U B S I D I A R I E S

(Company’s Full Name)

2 n d F l o o r , C i t y l a n d C o n d o m i n i u m 1 0 , T o w e r I , 1 5 6 H . V . d e l a C o s t a S t r e e t , A y a l a N o r t h , M a k a t i C i t y

(Business Address: No. Street City/Town/Province)

Rufina C. Buensuceso 893-6060 (Contact Person) (Company Telephone Number)

1 2 3 1 A A C F S Month Day (Form Type) Month Day

(Calendar Year) (Annual Meeting)

(Secondary License Type, If Applicable)

Dept. Requiring this Doc. Amended Articles Number/Section Total Amount of Borrowings

746 Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

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*SGVMC312904*

- 2 -

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cityland Development Corporation and its subsidiaries as at December 31, 2011 and 2010, and their financial performance and their cash flows for each of the three years in the period ended December 31, 2011 in accordance with Philippine Financial Reporting Standards. SYCIP GORRES VELAYO & CO. Aileen L. Saringan Partner CPA Certificate No. 72557 SEC Accreditation No. 0096-AR-2 (Group A), March 18, 2010, valid until March 17, 2013 Tax Identification No. 102-089-397 BIR Accreditation No. 08-001998-58-2009, June 1, 2009, valid until May 31, 2012 PTR No. 3174828, January 2, 2012, Makati City March 21, 2012

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*SGVMC312904*

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31 2011 2010 2009 REVENUE Sales of real estate properties P=1,574,293,008 P=1,454,122,153 P=1,880,570,472 Financial income (Note 19) 478,693,976 544,519,894 522,912,688 Rent income (Note 10) 23,077,618 15,520,120 14,862,065 Other income (Note 21) 21,515,652 28,564,854 21,000,738 2,097,580,254 2,042,727,021 2,439,345,963

EXPENSES Cost of real estate sales 971,074,045 965,266,466 1,235,462,795 Operating expenses (Note 16) 365,402,991 294,664,300 372,005,001 Financial expenses (Note 20) 56,570,373 70,944,398 96,434,076 1,393,047,409 1,330,875,164 1,703,901,872

INCOME BEFORE INCOME TAX 704,532,845 711,851,857 735,444,091

PROVISION FOR INCOME TAX (Note 23) 102,698,472 129,499,644 155,627,166

NET INCOME P=601,834,373 P=582,352,213 P=579,816,925

Attributable to: Equity holders of the parent P=441,337,900 P=447,868,346 P=513,099,506 Non-controlling interests 160,496,473 134,483,867 66,717,419 P=601,834,373 P=582,352,213 P=579,816,925

BASIC/DILUTED EARNINGS PER SHARE (Note 28) P=0.15 P=0.15 P=0.17

See accompanying Notes to Consolidated Financial Statements.

*SGVMC312904*

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31 2011 2010 2009

NET INCOME P=601,834,373 P=582,352,213 P=579,816,925 OTHER COMPREHENSIVE INCOME

(LOSS) Changes in fair value of available-for-sale

financial assets (Note 12) (2,050) 279,600 9,796,245 Realized gain on sale of available-for-sale

financial assets recognized in the consolidated statements of income (Note 12) – (11,750,260) (4,947,533)

Loss on impairment of available-for-sale financial assets recognized in the consolidated statements of income (Note 12) – 1,370,236 –

(2,050) (10,100,424) 4,848,712

TOTAL COMPREHENSIVE INCOME P=601,832,323 P=572,251,789 P=584,665,637

Attributable to: Equity holders of the parent P=441,346,532 P=437,302,183 P=517,770,281 Non-controlling interests 160,485,791 134,949,606 66,895,356 P=601,832,323 P=572,251,789 P=584,665,637 See accompanying Notes to Consolidated Financial Statements.

*SGVMC312904*

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 and 2009 Attributable to Equity Holders of the Parent Net Changes in Fair Values of Capital Additional Available-for-sale Retained Treasury

Stock

(Note 15) Paid-in Capital

financial assets (Note 12)

Earnings (Note 15)

Stock (Note 15) Total

Non-controlling Interests Total

BALANCES AT DECEMBER 31, 2008 P=1,706,408,129 P=7,277,651 P=6,408,174 P=1,941,812,749 (P=32,004,722) P=3,629,901,981 P=451,050,670 P=4,080,952,651 Net income – – – 513,099,506 – 513,099,506 66,717,419 579,816,925 Other comprehensive income – – 4,670,775 – – 4,670,775 177,937 4,848,712 Total comprehensive income – – 4,670,775 513,099,506 – 517,770,281 66,895,356 584,665,637 Transfer of deferred tax liability on deemed cost adjustment of property and equipment absorbed through depreciation – – – 2,871,518 – 2,871,518 – 2,871,518 Transfer of deferred tax liability on deemed cost adjustment of properties realized through sale – – – (8,168,523) – (8,168,523) 9,832,701 1,664,178 Parent Company shares of stock held by CPI’s investments in trust fund – – – – (218,289) (218,289) – (218,289) Stock dividends - 20% 340,894,091 – – (340,894,091) – – – – Fractional shares – – – – – – (21) (21) Cash dividends - P=0.10 per share – – – (170,447,018) – (170,447,018) – (170,447,018) Cash dividends declared by subsidiaries – – – – – – (13,630,668) (13,630,668) Cash dividends received by CPI on Parent Company shares of stock – – – 99,403 – 99,403 – 99,403 BALANCES AT DECEMBER 31, 2009 2,047,302,220 7,277,651 11,078,949 1,938,373,544 (32,223,011) 3,971,809,353 514,148,038 4,485,957,391 Net income – – – 447,868,346 – 447,868,346 134,483,867 582,352,213 Other comprehensive income (loss) – – (10,566,163) – – (10,566,163) 465,739 (10,100,424) Total comprehensive income – – (10,566,163) 447,868,346 – 437,302,183 134,949,606 572,251,789 Transfer of deferred tax liability on deemed cost adjustment

of property and equipment absorbed through depreciation – – – 2,871,517 – 2,871,517 – 2,871,517 Transfer of deferred tax liability on deemed cost adjustment

of properties realized through sale – – – 12,130,482 – 12,130,482 (9,832,701) 2,297,781 Parent Company shares of stock held by CPI’s investments

in trust fund – – – – (36,764) (36,764) – (36,764) Stock dividends - 20% 409,072,521 – – (409,072,521) – – – – Fractional shares – – – (333) – (333) (229) (562) Cash dividends - P=0.06 per share – – – (147,266,208) – (147,266,208) – (147,266,208) Cash dividends declared by subsidiaries – – – – – – (14,020,029) (14,020,029) Cash dividends received by CPI on Parent Company shares of stock – – – 88,059 – 88,059 – 88,059 BALANCES AT DECEMBER 31, 2010 P=2,456,374,741 P=7,277,651 P=512,786 P=1,844,992,886 (P=32,259,775) P=4,276,898,289 P=625,244,685 P=4,902,142,974 (Forward)

*SGVMC312904*

- 2 - Attributable to Equity Holders of the Parent Net Changes in Fair Values of Capital Additional Available-for-sale Retained Treasury

Stock

(Note 15) Paid-in Capital

financial assets (Note 12)

Earnings (Note 15)

Stock (Note 15) Total

Non-controlling Interests Total

BALANCES AT DECEMBER 31, 2010 P=2,456,374,741 P=7,277,651 P=512,786 P=1,844,992,886 (P=32,259,775) P=4,276,898,289 P=625,244,685 P=4,902,142,974 Net income – – – 441,337,900 – 441,337,900 160,496,473 601,834,373 Other comprehensive income (loss) – – 8,632 – – 8,632 (10,682) (2,050) Total comprehensive income – – 8,632 441,337,900 – 441,346,532 160,485,791 601,832,323 Transfer of deferred tax liability on deemed cost adjustment

of property and equipment absorbed through depreciation – – – 2,871,517 – 2,871,517 – 2,871,517 Transfer of deferred tax liability on deemed cost adjustment

of properties realized through sale – – – 2,794,372 – 2,794,372 – 2,794,372 Parent Company shares of stock held by CPI’s investments

in trust fund – – – – (146,138) (146,138) – (146,138) Stock dividends - 20% 490,887,040 – – (490,887,040) – – – – Fractional shares – – – (318) – (318) (292) (610) Cash dividends - P=0.05 per share – – – (122,721,840) – (122,721,840) – (122,721,840) Cash dividends declared by subsidiaries – – – – – – (38,962,927) (38,962,927) Cash dividends received by CPI on Parent Company shares of stock – – – 71,571 – 71,571 – 71,571 BALANCES AT DECEMBER 31, 2011 P=2,947,261,781 P=7,277,651 P=521,418 P=1,678,459,048 (P=32,405,913) P=4,601,113,985 P=746,767,257 P=5,347,881,242 See accompanying Notes to Consolidated Financial Statements.

*SGVMC312904*

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31 2011 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=704,532,845 P=711,851,857 P=735,444,091 Adjustments for: Interest income (Note 19) (478,657,522) (526,594,758) (517,806,397) Interest expense - net of amounts capitalized (Note 20) 55,051,749 67,836,489 93,876,703 Depreciation (Note 18) 18,842,759 19,119,585 19,089,437

Retirement benefits cost (income) (Note 22) 841,757 149,537 (9,834,069) Decrease in pre-need reserves (2,548,858) (5,279,339) (11,995,491) Trust fund income (Note 21) (2,213,192) (2,669,444) (3,212,279) Dividend income (Note 19) (36,454) (154,895) (158,758) Gain on sale of available-for-sale financial assets (Note 19) – (17,770,241) (4,947,533) Impairment loss on available-for-sale financial assets (Note 20) – 1,370,236 – Recovery of impairment loss on real estate properties for lease (Notes 10 and 21) – (767,390) (2,267,220) Gain on sale of property and equipment – (59,999) (76,999) Operating income before working capital changes 295,813,084 247,031,638 298,111,485 Decrease (increase) in: Installment contracts receivable 9,930,666 291,940,402 (63,011,893) Other receivables (14,217,214) 3,280,815 (2,740,878) Real estate properties for sale (Note 8) 80,324,236 158,504,810 143,713,526 Real estate properties held for future development (131,270,607) (130,741,407) (12,934,286) Deposits and others 9,510,255 (10,614,344) (378,254) Increase (decrease) in: Accounts payable and accrued expenses 154,564,035 (60,765,835) 175,721,158 Other reserve (50,502) (76,930) (177,530) Cash generated from operations 404,603,953 498,559,149 538,303,328 Interest received 480,919,527 523,994,348 519,000,427 Income taxes paid, including creditable and final withholding taxes (167,630,548) (182,495,373) (156,692,846) Contributions to the plan (118,683) (141,314) (390,259) Net cash flows from operating activities 717,774,249 839,916,810 900,220,650 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Matured short-term cash investments (Note 4) 729,700,028 − – Sale of available-for-sale financial assets (Note 12) – 13,225,531 5,377,240 Matured held-to-maturity investments – 150,344,747 260,028 Sale of property and equipment – 60,000 77,000 Withdrawals from investments in trust funds (Note 5) 7,932,724 8,388,256 15,422,893 Contributions to investments in trust fund (Note 5) (2,430,147) (747,509) (1,940,761) Additions to: Investment properties (Note 10) (6,800,632) (343,907) (651,039)

Available-for-sale investments – (227) − Property and equipment (Note 11) – (1,792,428) – Dividends received 36,454 154,895 158,758 Purchases of short-term cash investments (Note 4) – (826,050,028) (411,400,000) Net cash flows from (used in) investing activities 728,438,427 (656,760,670) (392,695,881)

(Forward)

*SGVMC312904*

- 2 -

Years Ended December 31 2011 2010 2009 CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (P=161,031,325) (P=160,529,862) (P=183,433,000) Net availments (payments) of short-term notes (Note 14) (373,252,226) 22,110,433 94,702,565 Interest paid (Note 14) (59,095,590) (70,551,950) (99,138,508) Payments of long-term loans (Note 14) (10,000,000) (293,374,955) (377,107,560) Availments of long-term loans (Note 14) – 5,000,000 44,000,000 Payments of contracts payable (Note 14) – − (293,976,561) Net cash flows used in financing activities (603,379,141) (497,346,334) (814,953,064) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 842,833,535 (314,190,194) (307,428,295)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 590,992,564 905,182,758 1,212,611,053

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) P=1,433,826,099 P=590,992,564 P=905,182,758

See accompanying Notes to Consolidated Financial Statements.

*SGVMC312904*

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate Information Cityland Development Corporation (the Parent Company) was incorporated in the Philippines on

January 31, 1978. It has two subsidiaries, Cityplans, Incorporated (CPI) and City & Land Developers, Incorporated (CLDI), a publicly listed company, all domiciled in the Philippines. The Parent Company’s and CLDI’s primary business purpose is to acquire, develop, improve, subdivide, cultivate, lease, sublease, sell, exchange, barter and/or dispose of agricultural, industrial, commercial, residential and other real properties, as well as to construct, improve, lease, sublease, sell and/or dispose of houses, buildings and other improvements thereon, and to manage and operate subdivisions and housing projects or otherwise engage in the financing and trading of real estate. CPI is engaged in the business of establishing, organizing, developing, maintaining, conducting, operating, marketing and selling pension plans. The Parent Company is 50.40% owned by Cityland, Inc. (CI), the ultimate parent company incorporated in the Philippines, which also prepares consolidated financial statements.

The Parent Company’s and its subsidiaries’ (the Group) registered office and principal place of

business is 2nd Floor, Cityland Condominium 10, Tower I, 156 H. V. de la Costa Street, Ayala North, Makati City.

The consolidated financial statements of the Group were authorized for issuance by the Board of

Directors (BOD) on March 21, 2012. 2. Summary of Significant Accounting and Financial Reporting Policies Basis of Preparation

The consolidated financial statements of the Group have been prepared using the historical cost basis, except for financial assets at fair value through profit or loss and available-for-sale financial assets that have been measured at fair values and certain items of property and equipment which are stated at revalued amounts. These consolidated financial statements are presented in Philippine peso (Peso), which is the Parent Company’s functional currency, and rounded to the nearest Peso except when otherwise indicated.

Statement of Compliance

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

Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the following new and amended Philippine Accounting Standards (PAS), PFRS and new Philippine Interpretations based on International Financial Reporting Interpretations Committee (IFRIC) interpretations effective in 2011. The adoption of the following revised PAS is relevant but does not have a significant impact on the consolidated financial statements: • Revised PAS 24, Related Party Disclosures, simplifies the identification of related party

relationships, particularly in relation to significant influence and joint control. The amendment emphasizes a symmetrical view on related party relationships as well as clarifies in which circumstances persons and key management personnel affect the related party relationships of an entity. The amendment also introduces an exemption from the general

- 2 -

*SGVMC312904*

related party disclosure requirements, for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position and performance of the Group.

The adoption of the following new and amended PFRS, PAS and Philippine Interpretations are either not relevant to or have no significant impact on the consolidated financial statements: • Amended PAS 32, Financial Instruments: Presentation - Clarification of Rights Issues • Amended IFRIC 14, Prepayments of a Minimum Funding Requirement • Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity

Instruments Improvements to PFRS

The annual improvements process has been adopted by the International Accounting Standards Board (IASB) to deal with non-urgent but necessary amendments to PFRS. The following summarizes the amendments that are effective on or after January 1, 2011. The adoption of the following amendments is relevant but does not have a significant impact on the consolidated financial statements:

• PFRS 7, Financial Instruments Disclosures, emphasizes the interaction between quantitative

and qualitative disclosures and the nature and extent of risks associated with financial instruments.

• PAS 1, Presentation of Financial Statements, clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements.

• PAS 27, Consolidated and Separate Financial Statements (Amended), clarifies that the

consequential amendments from PAS 27 made to PAS 21, The Effect of Changes in Foreign Exchange Rates, PAS 28, Investment in Associates, and PAS 31, Interest in Joint Ventures, apply prospectively.

• PAS 34, Interim Financial Reporting, provides guidance to illustrate how to apply disclosure

principles in PAS 34 and requires additional disclosures on: (a) the circumstances likely to affect fair values of financial instruments and their classification, (b) transfers of financial instruments between different levels of the fair value hierarchy, (c) changes in the classification of financial assets and (d) changes in contingent liabilities and assets.

Other amendments resulting from the following 2011 improvements to PFRS, PAS and Philippine Interpretations did not have any significant impact on the accounting policies, financial position or performance of the Group. • PFRS 3, Business Combinations • Philippine Interpretation IFRIC 13, Customer Loyalty Programmes

Basis of Consolidation The consolidated financial statements consist of the financial statements of the Parent Company

and its subsidiaries as of December 31 of each year. The financial statements of the subsidiaries are prepared for the same reporting year as the Parent Company using consistent accounting policies.

- 3 -

*SGVMC312904*

These subsidiaries, all incorporated and domiciled in the Philippines, and the percentage of ownership of the Parent Company in 2011, 2010 and 2009 are as follows:

Percentage of Nature of Ownership Activity CPI 90.81 Pre-need pension plans CLDI 49.73 Real estate

Subsidiaries are entities over which the Parent Company has the power to govern the financial and

operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of any potential voting rights that are currently exercisable or convertible are considered when assessing whether the Parent Company controls another entity.

Subsidiaries are consolidated from the date on which control is transferred to the Parent Company

and cease to be consolidated from the date on which control is transferred out of the Parent Company.

The accounts of CLDI were consolidated since the Parent Company, some of its stockholders and

affiliates (whose stockholders also own equity ownership in the Parent Company) collectively own more than 50% of the equity of CLDI, thereby giving the Parent Company effective control over the financial and operating policies of CLDI.

The equity, net income and total comprehensive income attributable to non-controlling interests of the consolidated subsidiaries are shown separately in the consolidated balance sheet, consolidated statement of income and consolidated statement of comprehensive income, respectively.

All significant intercompany accounts and transactions are eliminated.

Non-controlling Interests

Non-controlling interest represents the portion of the net assets of consolidated subsidiaries not held by the Group, and are presented separately in the consolidated statement of income, consolidated statement of comprehensive income and within the equity section of the consolidated balance sheet, separate from the Parent company’s equity. The losses applicable to the minority in a consolidated subsidiary may exceed the non-controlling interest’s equity in the subsidiary even if the losses exceed the non-controlling equity investment in the subsidiary.

The acquisition of non-controlling interests is not considered a business combination under PFRS 3, Business Combinations, and therefore, the re-measurement of the net assets acquired is not permissible and is not performed. Subsequent to January 1, 2010, changes in the parent's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests shall be adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests is adjusted and the fair value of the consideration paid or received shall be recognized directly in equity and attributed to the owners of the parent. This is applied on a prospective basis. Prior to January 1, 2010, acquisitions of non-controlling interests are accounted for using the parent entity extension concept method, wherein any excess of the consideration given up over the book value of the net assets acquired is recognized as goodwill. Any excess of the book value of the net assets acquired over the consideration given up is recognized as negative goodwill referred to as “Excess of net book value of non-controlling interests acquired over acquisition cost” in the consolidated statement of income.

Non-controlling interests represent the interests in CPI and CLDI not held by the Parent Company.

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*SGVMC312904*

Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid

investments that are readily convertible to known amounts of cash with original maturities of three months or less from dates of acquisition, and are subject to an insignificant risk of change in value.

Short-term Cash Investments Short-term cash investments are investments with maturities of more than three months but not

exceeding one year from dates of acquisition. Financial Assets and Financial Liabilities Date of recognition The Group recognizes a financial asset or a financial liability in the consolidated balance sheet

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 settlement date accounting.

Initial recognition of financial instruments Financial instruments are recognized initially at fair value, which is the fair value of the

consideration given (in case of an asset) or received (in case of a liability). The initial measurement of financial instruments, except for those designated at fair value through profit or loss, includes directly attributable transaction cost.

Classification of financial instruments Subsequent to initial recognition, the Group classifies its financial instruments in the following

categories: financial assets and financial liabilities at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets and other financial liabilities. The classification depends on the purpose for which the instruments are acquired and whether they are quoted in an active market. Management determines the classification at initial recognition and, where allowed and appropriate, re-evaluates this classification at each end of reporting period.

a. Financial Assets or Financial Liabilities at Fair Value through Profit or Loss

A financial asset or financial liability is classified in this category if acquired principally for the purpose of selling or repurchasing in the near term or upon initial recognition it is designated by management as at fair value through profit or loss.

Financial assets or financial liabilities classified in this category are designated as at fair value through profit or loss by management on initial recognition when the following criteria are met:

• The designation eliminates or significantly reduces the inconsistent treatment that would

otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or

• The assets or liabilities are part of a group of financial assets or financial liabilities, or both financial assets and financial liabilities, which are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or

• The financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.

- 5 -

*SGVMC312904*

Financial assets or financial liabilities classified under this category are carried at fair value in the consolidated balance sheet. Changes in the fair value of such assets and liabilities are recognized in the consolidated statement of income.

The Group designated its investments in trust funds as financial assets at fair value through

profit or loss. The Group’s investments in trust funds directly relate to the Pre-need Reserves accounts.

b. Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivables. Loans and receivables are carried at cost or amortized cost in the consolidated balance sheet. Amortization is determined using the effective interest rate method. Loans and receivables are included in current assets if maturity is within 12 months from the end of reporting period. Otherwise, these are classified as noncurrent assets.

The Group’s cash in banks and cash equivalents, short-term cash investments, installment

contracts receivable and other receivables are classified under this category.

c. Held-to-maturity Investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities wherein the Group has positive intention and ability to hold to maturity. Held-to-maturity investments are carried at cost or amortized cost in the consolidated balance sheet. Amortization is determined using the effective interest rate method. Assets under this category are classified as current assets if maturity is within 12 months from the end of reporting period and noncurrent assets if maturity is more than one year. The Group has no held-to-maturity investments as of December 31, 2011 and 2010.

d. Available-for-sale Financial Assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Available-for-sale financial assets are carried at fair value in the consolidated balance sheet. Changes in the fair value of such assets are accounted in the consolidated statement of comprehensive income and in equity. These financial assets are classified as noncurrent assets unless the intention is to dispose such assets within 12 months from the end of reporting period.

The Group’s available-for-sale financial assets consist of investments in quoted equity

securities that are traded in liquid markets, held for the purpose of investing in liquid funds and not generally intended to be retained on a long-term basis.

e. Other Financial Liabilities

Other financial liabilities are non-derivative financial liabilities with fixed or determinable payments that are not quoted in an active market. They arise when the Group owes money, goods or services directly to a creditor with no intention of trading the payables. Other financial liabilities are carried at cost or amortized cost in the consolidated balance sheet. Amortization is determined using the effective interest rate method. Other financial liabilities

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are included in current liabilities if maturity is within 12 months from the end of reporting period, otherwise, these are classified as noncurrent. The Group’s other financial liabilities consist of accounts payable and accrued expenses and notes and loans payable.

Determination of fair value The fair value of financial instruments traded in active markets at the end of reporting period 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 asking 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 traded 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, option pricing models, and other relevant valuation models.

“Day 1” Difference Where the transaction price in a non-active market is different from the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Group recognizes the difference between the transaction price and fair value (a “Day 1” difference) in the consolidated statement of income unless it qualifies for recognition as some other type of asset. In cases where inputs are made of data which are not observable, the difference between the transaction price and model value is only recognized in the consolidated statement of income when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the “Day 1” difference. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet 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. Derecognition of Financial Assets and Financial Liabilities Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized where: • the rights to receive cash flows from the asset have expired; or • 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

• the Group has transferred its right to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the

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asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Financial liabilities

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

Where an existing financial liability is replaced by another from the same lender on substantially

different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated statement of income.

Impairment of Financial Assets

The Group assesses at each reporting period whether a financial asset or a group of financial assets is impaired.

Assets carried at amortized cost

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. Objective evidence includes observable data that comes to the attention of the Group about loss events such as, but not limited to significant financial difficulty of the counterparty, a breach of contract, such as default or delinquency in interest or principal payments, probability that the borrower will enter bankruptcy or other financial reorganization. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in the group of financial assets with similar credit risk and characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is recognized are not included in a collective assessment of impairment. The impairment assessment is performed at each end of reporting period. For the purpose of collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics such as customer type, payment history, past-due status and term. If there is an objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rates (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through the use of an allowance account. The amount of loss, if any, is recognized in the consolidated statement of income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in the consolidated statement of income. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral, if any, has been realized or has been transferred to the Group. 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

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loss is increased or reduced by adjusting the allowance for impairment losses account. If a future write off is later recovered, the recovery is recognized in the consolidated statement of income under “Other income” account. Any subsequent reversal of an impairment loss is recognized in the consolidated statement of income to the extent that the carrying value of the asset does not exceed its amortized cost at reversal date. Assets carried at cost If there is an objective evidence that an impairment loss of an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Available-for-sale financial assets In the case of debt instruments classified as available-for-sale financial assets, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of “Financial income” in the consolidated statement of income. If, in subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the consolidated statement of income, the impairment loss is reversed through the consolidated statement of income.

In case of equity investments classified as available-for-sale financial assets, this would include a significant or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the consolidated statement of income - is removed from equity and recognized in the consolidated statement of income. Increases in fair value after impairment are recognized in the consolidated statement of comprehensive income and directly in the consolidated statement of changes in equity.

Real Estate Properties for Sale and Real Estate Properties Held for Future Development Real estate properties for sale and real estate properties held for future development are valued at

the lower of cost and net realizable value. Cost consists of all expenditures incurred which are directly attributable to the acquisition, development, and construction of the real estate properties. Interest on loans (borrowing costs) incurred during the development or construction phase is also capitalized as part of the cost of the real estate properties. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale.

Investment Properties

Investment properties which represent real estate properties for lease are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of existing investment properties at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day-to-day servicing of the property. The carrying values of revalued properties transferred to real estate properties for lease on January 1, 2004 were considered as the assets’ deemed cost as of said date. Subsequent to initial measurement, investment properties are carried at cost less accumulated depreciation and impairment loss.

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Investment properties, except 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. Buildings for lease are depreciated over their useful life of 25 years using the straight-line method.

Investment properties are derecognized when either they have been disposed of or when the

property 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 investment properties are recognized in the statement of income in the year of retirement or disposal. Transfers are made to investment properties when, and only when, there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party, or ending of construction or development. Transfers are made from investment properties when, and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

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

Property and Equipment Property and equipment, except for office premises, are stated at cost less accumulated

depreciation and any impairment in value. Office premises are stated at appraised values as determined by independent firms of appraisers on various dates, less accumulated depreciation and any impairment in value. Subsequent additions prior to the next regular appraisal are stated at cost.

The initial cost of property and equipment consists of the purchase price and any directly

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

Depreciation of an item of property and equipment begins when the asset becomes available for

use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation ceases at the earlier of the date that the item is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations, and the date the asset is derecognized.

Depreciation is computed using the straight-line method over the estimated useful lives of the

properties as follows:

Years Office premises 25 Furniture, fixtures and office equipment 5 Transportation and other equipment 5

The assets’ useful lives and depreciation method are reviewed periodically to ensure that these are

consistent with the expected pattern of economic benefits from items of property and equipment.

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When property and equipment are sold or retired, the cost and related accumulated depreciation and any impairment in value are removed from the accounts, and any gains or losses from their disposal is included in the consolidated statement of income.

Impairment of Nonfinancial Assets The carrying values of investment properties and property and equipment are reviewed for

impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the assets are either written down to their recoverable amount or provided with valuation allowance. The recoverable amount of the assets is the greater of fair value less costs to sell and value-in-use. Valuation allowances are provided for the carrying amounts of assets which are not expected to be recovered. Impairment losses, if any, are recognized in the consolidated statement of income.

The Group assesses at each reporting period whether there is an indication that previously

recognized impairment losses may no longer exist or may have decreased. The Group considers external and internal sources of information in its assessment of the reversal of previously recognized impairment losses. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of income. After such a reversal, the depreciation 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.

Value-added Tax (VAT) Revenue, expenses, assets and liabilities are recognized, net of the amount of VAT, except where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable.

The net amount of VAT recoverable from or payable to, the taxation authority is included as part of “Other assets” or “Accounts payable and accrued expenses,” respectively, in the consolidated balance sheet.

Pre-need Reserves (PNR) Pre-need reserves for pension plans are calculated on the following basis of the methodology and

assumptions set out in the Pre-need Rule 31, as amended: The amount of provision is the present value of the funding expected to be required to settle the

obligation with due consideration of the different probabilities as follows:

On Currently-being-paid Plans i. Provision for termination values applying the inactivity and surrender rate experience of CPI. ii. For the portion of currently-being-paid plans that will reach full payment, applying the full

payment experience of CPI, the liability is equivalent to the present value of future maturity benefits reduced by the present value of future trust fund contributions required per Product Model discounted at the approved hurdle rate per Product Model of CPI.

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On Lapsed Plans within the Allowable Reinstatement Period i. Provision for termination values applying the reinstatement experience of CPI.

On Fully Paid Plans i. For those due for payment within the next five years, the reserve is the present value of future

maturity benefits discounted at the attainable rate, as determined and certified by CPI’s trustee using industry best practices and principles which shall be indicated in such certification;

ii. For those not yet due for payment within the next five years, the reserves is the present value of future maturity benefits discounted at the approved hurdle rate per Product Model of CPI.

The rates of surrender, cancellation, reinstatement, utilization, and inflation considered the actual experience of CPI in the last three years.

The computation of the foregoing assumptions has been validated by a qualified actuary of CPI.

Based on CPI’s experience, the probability of pre-termination on surrender of fully paid plans is below 5% and therefore considered insignificant. As such, no pretermination rate was considered in determining the PNR of fully paid plans. The derecognition of liability shall be recorded at pretermination date. Capital Stock Capital stock is measured at par value for all shares issued and outstanding. When the Parent Company issues more than one class of stock, a separate account is maintained for each class of stock and the number of shares issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax. When the shares are sold at premium, the difference between the proceeds and the par value is credited to the “Additional paid-in capital” account. When shares are issued for a consideration other than cash, the proceeds are measured by the fair value of the consideration received. In case the shares are issued to extinguish or settle the liability of the Parent Company, the shares shall be measured either at the fair value of the shares issued or fair value of the liability settled, whichever is more reliably determinable. The Parent Company’s shares which are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in the consolidated statement of income on the purchase, sale, issue or cancellation of the Parent Company’s own equity instruments. Any difference between the carrying amount and the consideration is recognized as additional paid-in capital.

Retained Earnings Retained earnings represent the cumulative balance of net income or loss, dividend distributions, effects of changes in accounting policy and other capital adjustments. Unappropriated retained earnings represent that portion which is free and can be declared as dividends to stockholders. Appropriated retained earnings represent that portion which has been restricted and therefore is not available for any dividend declaration. Dividend Distributions Dividends on common shares are recognized as a liability and deducted from retained earnings when approved by the shareholders of the Group. Dividends for the year that are approved after

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the end of the reporting period but before the approval for issuance of the financial statements are dealt with as an event after the reporting period.

Revenue and Costs Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the

Group and the amount of revenue can be reliably measured. Revenue is measured at the fair value of the consideration received excluding VAT. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognized: Sales of real estate properties Sales of condominium units and residential houses where the Group has material obligations under the sales contract to provide improvements after the property is sold are accounted for under the percentage of completion method. Under this method, revenue on sale is recognized as the related obligations are fulfilled. Revenue from sales of completed residential lots and housing units, where a sufficient down payment has been received, the collectability of the sales price is reasonably assured, the refund period has expired, the receivables are not subordinated and the seller is not obligated to complete improvements, is accounted for under the full accrual method. If the criterion of full accrual method was not satisfied, any cash received by the Group is included in the “Accounts payable and accrued expenses” in the consolidated balance sheet until all the conditions for recording a sale are met.

Cost of real estate sales Costs of real estate sales are recognized consistent with the revenue recognition method applied. Cost of condominium units sold before the completion of the development is determined on the basis of the acquisition cost of the land plus its full development costs, which include estimated costs for future development works as determined by the Group’s in-house technical staff. In addition, cost of real estate sales of 100% completed projects represents the proportionate share of the sold units to the total of the development cost which includes land, direct materials, labor cost and other indirect costs related to the project. If the project is still under construction, the cost of real estate sales of the sold units is multiplied by the percentage of completion. The cost referred to is the same total development costs and not only actual expenditures. The percentage of completion is based on the technical evaluation of the project engineers as well as management’s monitoring costs, progress and improvements of the projects.

Sales of pre-need plans Premiums from sale of pre-need plans, included under “Other income” account in the consolidated

statement of income are recognized as earned when collected.

Cost of contracts issued account pertains to (a) the increase in PNR as at the current year as compared to the provision for the same period of the previous year. If there is a decrease in the PNR as a result of new information or new developments, the amount shall be deducted from the cost of contracts issued of the current period. In case of material prior period errors, the requirements of PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, shall be complied with by the pre-need company; (b) amount of trust funds contributed during the year; and (c) documentary stamp taxes and SEC registration fees.

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Interest income Interest income from cash in banks, cash equivalents, short-term cash investments and installment

contracts receivables is recognized as the interest accrues taking into account the effective yield on interest.

Dividend income Dividend income is recognized when the Group’s right to receive the payment is established. Operating leases Operating leases represent those leases under which substantially all risks and rewards of

ownership of the leased assets remain with the lessor. Rent income from operating leases is recognized as income when earned on a straight-line basis over the term of the lease agreement. Initial direct costs incurred specifically to earn revenue from an operating lease are recognized as an expense in the consolidated statement of income in the period in which they are incurred.

Operating expenses Operating expenses constitute costs of administering the business. These costs are expensed as

incurred. Financial expenses Financial expenses consist of interest incurred from loans and notes payable. Interest attributable to a qualifying asset is capitalized as part of the cost of the property; otherwise, these are expensed as incurred.

Interest costs are capitalized if they are directly attributable to the acquisition, development and construction of real estate projects as part of the cost of such projects. Capitalization of interest cost (1) commences when the activities to prepare the assets for their intended use are in progress and expenditures and interest costs are being incurred, (2) is suspended during extended periods in which active development is interrupted, and (3) ceases when substantially all the activities necessary to prepare the assets for their intended use are complete. Other Comprehensive Income Other comprehensive income comprises items of income and expense (including items previously presented under the consolidated statement of changes in equity) that are not recognized in the consolidated statement of income for the year in accordance with PFRS.

Retirement Benefits Cost Retirement benefits cost is actuarially determined using the projected unit credit method. Actuarial gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses for the plan at the end of the previous reporting year exceeded 10% of the higher of the present value of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognized over the expected average remaining working lives of the employees participating in the plan. Past service cost is recognized as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits are already vested immediately following the introduction of, or changes to, a retirement plan, past service cost is recognized immediately. The retirement plan liability is the aggregate of the present value of the defined benefit obligation and actuarial gains and losses not recognized, reduced by past service cost not yet recognized, and the fair value of plan assets out of which the obligations are to be settled directly. If such

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aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of cumulative unrecognized net actuarial losses and past service cost and the present value of any economic benefits available in the form of refunds from the plans or reductions in the future contributions to the plan. If the asset is measured at the aggregate of cumulative unrecognized net actuarial losses and past service cost and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan, net actuarial losses of the current period and past service cost of the current period are recognized immediately to the extent that they exceed any reduction in the present value of those economic benefits. If there is no change or increase in the present value of economic benefits, the entire net actuarial losses of the current period and past service cost of the current period are recognized immediately. Similarly, net actuarial gains of the current period after the deduction of past service cost of the current period exceeding any increase in the present value of the economic benefits stated above are recognized immediately if the asset is measured at the aggregate of cumulative unrecognized net actuarial losses and past service cost at the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. If there is no change or decrease in the present value of the economic benefits, the entire net actuarial gains of the current period after the deduction of past service cost of the current period are recognized immediately. Provisions and Contingencies 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. If the effect of the time value of money is material, provisions are determined by discounting the effective future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized in the consolidated financial statements but disclosed when an inflow of economic benefits is probable.

Income Taxes

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

Current income tax for current and prior periods shall, to the extent unpaid, be recognized as a liability under “Income tax payable” account in the consolidated balance sheet. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess shall be recognized as an asset under “Other assets” account in the consolidated balance sheet.

Deferred income tax Deferred income tax is recognized on all temporary differences at the end of reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

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Deferred income tax liabilities are recognized for all taxable temporary differences, including assets revaluations. Deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that sufficient future taxable profits will be available against which the deductible temporary differences can be utilized. Deferred income tax assets and deferred income tax liabilities are not recognized when it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred income tax liabilities are not provided on nontaxable temporary differences associated

with investments in subsidiaries and affiliates. The carrying amount of deferred income tax assets is reviewed at each end of reporting period and

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

Deferred income tax assets and deferred income tax 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 at the end of reporting period.

Income tax relating to items recognized directly in equity is recognized in the consolidated

statement of comprehensive income and consolidated statement of changes in equity and not in the consolidated statement of income.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable

right exists to offset current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Earnings Per Share

Basic earnings per share based on net income is computed by dividing the net income for the year attributable to equity holders of the Parent Company by the weighted average number of ordinary shares issued and outstanding after considering the retroactive effect, if any, of stock dividends declared during the year. Diluted earnings per share is calculated by dividing the net income for the year attributable to equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year, excluding treasury shares and adjusted for the effects of all dilutive potential common shares, if any. In determining both the basic and diluted earnings per share, the effect of stock dividends, if any, is accounted for retrospectively.

Segment Reporting The Group’s operating businesses are organized and managed separately according to the nature

of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Financial information on business segments is presented in Note 29 to the consolidated financial statements. The Group’s asset-producing revenues are located in the Philippines (i.e., one geographical location). Therefore, geographical segment information is no longer presented.

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Events After the Reporting Period Post year-end events that provide additional information about the Group’s position at the end of reporting period (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. Future Changes in Accounting Policies The Group will adopt the following standards and interpretations when these become effective subsequent to 2011. Except as otherwise indicated, the Group does not expect the adoption of these new, and amended and improvements to PFRS, PAS and Philippine Interpretations to have significant impact on the consolidated financial statements.

Effective in 2012

• PFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements, requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the consolidated financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets.

• Amended PAS 12, Income Taxes - Deferred Taxes: Recovery of Underlying Assets, introduces a rebuttable presumption that deferred tax on investment properties measured at fair value will be recognized on a sale basis, unless an entity has a business model that would indicate the investment property will be consumed in the business. If consumed, an own use basis must be adopted. The amendment also introduces the requirement that deferred tax on non-depreciable assets measured using the revaluation model in PAS 16, Property, Plant and Equipment, should always be measured on a sale basis.

Effective in 2013

• PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities, requires an entity to disclose information about rights of offset and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are offset in accordance with PAS 32. 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 offset 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 offset in accordance with the criteria in PAS 32 when determining

the net amounts presented in the consolidated balance sheet; c) The net amounts presented in the consolidated balance sheet; 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.

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The amendments to PFRS 7 are to be applied retrospectively.

• PFRS 10, Consolidated Financial Statements, replaces the portion of PAS 27 that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12, Consolidation - Special Purpose Entities resulting in SIC-12 being withdrawn. It 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, replaces PAS 31, Interests in Joint Ventures and SIC-13,

Jointly-controlled Entities - Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method.

• PFRS 12, Disclosure of Interests with Other Entities, 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 and PAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required.

• PFRS 13, Fair Value Measurement, 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.

• PAS 1, Financial Statements Presentation - Presentation of Items of Other Comprehensive

Income, changes the grouping of items presented in other comprehensive income (OCI). Items that would be reclassified (or recycled) to profit or loss at a future point in time (e.g., upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendments affect the presentation only and have therefore no impact on the financial position or performance.

• Revised PAS 19, Employee Benefits, includes a number of amendments that range from fundamental changes to simple clarifications and re-wording. The more significant changes include the following: o For defined benefit plans, the ability to defer recognition of actuarial gains and losses has

been removed. o Objectives for disclosures of defined benefit plans are explicitly stated in the revised

standard, along with new or revised disclosure requirements. o Termination benefits will be recognized at the earlier of when the offer of termination

cannot be withdrawn or when the related restructuring costs are recognized under PAS 27, Provisions, Contingent Liabilities and Contingent Assets.

o The distinction between short-term and other long-term employee benefits will be based on expected timing of settlement rather than the employee’s entitlement of the benefits.

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

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• PAS 28, Investments in Associates and Joint Ventures. As a consequence of the new PFRS 11 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.

• Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (“production stripping costs”) and provides guidance on the recognition of production stripping costs as an asset and measurement of the stripping activity asset.

Effective in 2014 • Amendments to PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets

and Financial Liabilities, clarifies the meaning of “currently has a legally enforceable right to offset” 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.

Effective in 2015 • PFRS 9, Financial Instruments - Classification and Measurement, as issued reflects the first

phase on the replacement of PAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in PAS 39. In subsequent phases, hedge accounting and impairment of financial assets will be addressed with the completion of this project expected on the first half of 2012. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Company’s financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.

Standard Issued but not yet Effective • Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estates, 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 IASB and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed. The Group will quantify the effect when the final Revenue standard is issued.

Additional disclosures required by these amendments will be included in the consolidated financial statements when these amendments are adopted.

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3. Significant Accounting Judgments, Estimates and Assumptions The preparation of the consolidated financial statements requires management to make judgments,

estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

In the opinion of management, these consolidated financial statements reflect all adjustments necessary to present fairly the results for the period presented. 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 has the most significant effect on the amounts recognized in the consolidated financial statements:

Determination of the Group’s functional currency The Group, based on the relevant economic substance of the underlying circumstances, has

determined its functional currency to be Peso. It is the currency that influences the Group’s sale of real estate properties and the cost of selling the same. Classification of financial instruments The Group classifies a financial instrument, or its component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial asset, a financial liability or an equity instrument. The substance of a financial instrument, rather than its legal form, governs its classification in the Group’s consolidated balance sheet.

The Group determines the classification at initial recognition and, where allowed and appropriate, re-evaluates this designation at every end of reporting period.

Classification of leases - Group as lessor The Group has entered into property leases of its investment properties where it has determined

that the risks and rewards of ownership are retained with the Group. As such, these lease agreements are accounted for as operating leases.

The Group determines the classification at initial recognition and, where allowed and appropriate,

re-evaluates this designation at every reporting period.

Classification of real estate properties The Group determines whether a property is classified as for investments for sale, for future development and for capital appreciation as follows.

Real estate properties which the Group develops and intends to sell before or on completion of construction are classified as real estate properties for sale and for future development. Carrying values of real estate properties for sale and for future development amounted to P=2,774.38 million and P=2,723.43 million as of December 31, 2011 and 2010, respectively (see Notes 8 and 9).

Real estate properties which are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation are classified as investment properties. Investment properties amounted to P=986.04 million and P=984.20 million as of December 31, 2011 and 2010, respectively (see Note 10).

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Provisions The Group provides for present obligations (legal or constructive) where it is probable that there

will be an outflow of resources embodying economic benefits that will be required to settle said obligations. An estimate of the provision is based on known information at the end of reporting period, net of any estimated amount that may be reimbursed to the Group. If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects the risks specific to the liability. The amount of provision is being re-assessed at least on an annual basis to consider new relevant information. There are no provisions recognized in 2011, 2010 and 2009.

Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the

end of reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Determination of fair value of financial instruments

Financial assets and financial liabilities, on initial recognition, are accounted for at fair value. The fair values of financial assets and financial liabilities, on initial recognition, are normally the transaction prices. In the case of those financial assets and financial liabilities that have no active markets, fair values are determined using an appropriate valuation technique.

As of December 31, 2011 and 2010, the carrying values, which is equal to total fair values, of financial assets amounted to P=4,184.51 million and P=4,072.42 million, respectively, while the carrying values of financial liabilities amounted to P=2,251.57 million and P=2,480.21 million, respectively (see Note 25). Estimation of allowance for impairment of receivables The level of this allowance is evaluated by management based on past collection history and other factors, which include, but not limited to the length of the Group’s relationship with customer, the customer’s payment behavior and known market factors that affect the collectability of the accounts. As of December 31, 2011 and 2010, installment contracts receivable and other receivables aggregated to P=2,200.18 million and P=2,198.15 million, respectively. There was no impairment of receivables in 2011 and 2010 (see Notes 6 and 7).

Impairment of available-for-sale financial assets

An impairment issue arises when there is an objective evidence of impairment, which involves significant judgment. The Group evaluates the financial health of the issuer, among others. The Group treats available-for-sale equity financial assets as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires judgment. The Group treats “significant” generally as 20% or more of cost and “prolonged” as greater than 12 months for quoted equity securities. In addition, the Group evaluates other factors, including normal volatility in share price for quoted equities and the future cash flows and the discount factors for unquoted equities.

In 2010, the Group recognized impairment loss amounting to P=1.37 million on available-for-sale

investments (see Note 20). No impairment was recognized in 2011. Available-for-sale financial assets amounted to P=1.35 million and P=1.36 million as of

December 31, 2011 and 2010, respectively (see Note 12).

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Estimation of percentage of completion of projects The Group estimates the percentage of completion of ongoing projects for purposes of accounting for the estimated costs of development as well as revenue to be recognized. The percentage of completion is based on the technical evaluation of the independent project engineers as well as management’s monitoring of the costs, progress and improvements of the projects. As of December 31, 2011 and 2010, installment contracts receivable from sales of real estate properties amounted to P=2,147.94 million and P=2,157.87 million, respectively (see Note 6). Gross profit on sales of real estate properties amounted to P=603.22 million, P=488.86 million and P=645.11 million in 2011, 2010 and 2009, respectively.

Determination of net realizable value of real estate properties for sale and held for future development The Group’s estimates the net realizable value of inventories based on the most reliable evidence available at the time the estimates are made, or the amount that the inventories are expected to be realized. These estimates consider the fluctuations of price or cost directly relating to events occurring after the end of the reporting period to the extent that such events confirm conditions existing at the end of the period. A new assessment is made of net realizable value in each subsequent period. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is a clear evidence of an increase in net realizable value because of changes in economic circumstances, the amount of the write-down is reversed so that the new carrying amount is the lower of the cost and the revised net realizable value. The Group’s real estate properties for sale and held for future development as of December 31, 2011 and 2010 amounted to P=2,774.38 million and P=2,723.43 million, respectively (see Notes 8 and 9).

Estimation of useful lives of investment properties and property and equipment The Group determines whether its investment properties are impaired when impairment indicators

exist such as significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. When an impairment indicator is noted, the Group makes an estimation of the value-in-use of the cash-generating units to which the assets belong. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose an appropriate discount rate in order to calculate the present value of those cash flows. As of December 31, 2011 and 2010, net book value of depreciable investment properties amounted to P=18.62 million and P=11.09 million, respectively (see Note 10). On the other hand, the carrying value of property and equipment amounted to P=55.40 million and P=69.28 million as of December 31, 2011 and 2010, respectively (see Note 11). Impairment of investment properties and property and equipment

The Group determines whether its nonfinancial assets such as investment properties and property and equipment are impaired when impairment indicators exist such as significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. This requires an estimation of the value-in-use of the cash-generating units to which the assets belong. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose an appropriate discount rate in order to calculate the present value of those cash flows. Net book value of investment properties as of December 31, 2011 and 2010 amounted to P=986.04 million and P=984.20 million, respectively (see Note 10). On the other hand, the net book value property and equipment amounted to P=55.40 million and P=69.28 million as of December 31, 2011 and 2010, respectively (see Note 11).

Impairment loss of P=16.57 million was recognized in 2006 to reduce the carrying values of certain

investment properties to their recoverable amounts, which is the estimated net selling price. In

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2010 and 2009, recovery of the impairment loss amounting to P=0.77 million and P=2.27 million, respectively, was recognized (see Notes 10 and 21). Recoverable amounts of the impaired properties were established as the ultimate estimated selling price based on an independent valuation by a third party. Estimation of retirement benefits cost The determination of the Group’s obligation and costs for retirement benefits depends on management’s selection of certain assumptions used by actuaries in calculating such amounts. The assumptions for retirement benefits cost include, among others, discount rates, expected annual rates of return on plan assets and rates of salary increase. Actual results that differ from assumptions are accumulated and amortized over future periods and therefore, generally affect the Group’s recognized expenses and recorded obligation in such future periods. While management believes that the assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in management assumptions may materially affect the Group’s retirement obligations. Net retirement benefits cost amounted to P=0.84 million and P=0.15 million in 2011 and 2010, respectively, while net retirement benefits income amounted to P=9.83 million in 2009 (see Note 22). Retirement plan assets as of December 31, 2011 and 2010 amounted to P=10.89 million and P=11.61 million, respectively (see Notes 12 and 22). Estimation of pre-need reserves The determination of CPI’s PNR is based on the actuarial formula, methods and assumptions allowed by applicable SEC circulars. This is dependent on management’s selection of certain assumptions used by actuaries in computing this amount. Management believes that the amount of PNR recorded in the books closely reflect potential plan claims as of end of reporting period. As of December 31, 2011 and 2010, the PNR amounted to P=46.15 million and P=48.39 million, respectively (see Note 5).

The following are the assumptions used in the computation of PNR: December 31, 2011:

a. Currently-Being-Paid Pension Plans - Actively Paying Plans

Plans issued prior to 2006 - 12 % (hurdle rate) discount rate and no surrender/lapse rates were used. Plans issued in 2006 and after - 10% (hurdle rate) discount rate and surrender /lapse rates were used as per original assumptions.

b. Currently-Being-Paid Pension Plans - Lapsed Plans

Plans issued prior to 2006 - reserves equal the termination values (as originally computed) at the date of lapse and no reinstatement rate was assumed.

Plans issued in 2006 and after - reserves equal the termination values (as originally computed)

at the date of lapse and no reinstatement rate was assumed.

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c. Fully paid plans - Availing and Not Yet Availing

Plans with maturity dates in years 2011 to 2015 - 6.0306% discount rate (average rate of return of the three trustee banks) and no surrender rates were assumed for fully paid plans.

Plans with maturity dates in years 2016 and after - 12% (hurdle rate) discount rate and no

surrender rates were assumed for fully paid plans. December 31, 2010:

a. Currently-Being-Paid Pension Plans - Actively Paying Plans

Plans issued prior to 2006 - 12 % (hurdle rate) discount rate and no surrender/lapse rates were used.

Plans issued in 2006 and after - 10% (hurdle rate) discount rate and surrender /lapse rates were

used as per original assumptions.

b. Currently-Being-Paid Pension Plans - Lapsed Plans

Plans issued prior to 2006 - reserves equal the termination values (as originally computed) at the date of lapse and no reinstatement rate was assumed.

Plans issued in 2006 and after - reserves equal the termination values (as originally computed)

at the date of lapse and no reinstatement rate was assumed.

c. Fully paid plans - Availing and Not Yet Availing

Plans with maturity dates in years 2010 to 2014 - 6.3452% discount rate (average rate of return of the two trustee banks) and no surrender rates were assumed for fully paid plans.

Plans with maturity dates in years 2015 and after - 12% (hurdle rate) discount rate and no

surrender rates were assumed for fully paid plans.

Recognition of deferred income tax assets The Group reviews the carrying amounts at the end of each reporting period and reduces deferred income tax assets to the extent that it is no longer probable that sufficient future taxable profits will be available to allow deferred income tax assets to be utilized. As of December 31, 2011 and 2010, deferred tax assets amounted to P=9.36 million and P=6.07 million, respectively (see Note 23).

4. Cash and Cash Equivalents and Short-term Cash Investments

Cash and cash equivalents consist of:

2011 2010 Cash on hand and in banks P=14,849,936 P=23,321,291 Cash equivalents 1,418,976,163 567,671,273 P=1,433,826,099 P=590,992,564

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Cash in banks earn interest at the respective bank deposit rates. Cash equivalents are made for varying periods up to three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term investment rates. Short-term cash investments amounting to P=507.75 million and P=1,237.45 million as of December 31, 2011 and 2010, respectively, are investments in banks with maturities of more than three months to one year from dates of acquisition and earn interest at the prevailing market rates.

Interest income earned from cash and cash equivalents and short-term cash investments amounted to P=91.04 million, P=69.57 million and P=56.08 million in 2011, 2010 and 2009, respectively (see Note 19).

5. Investments in Trust Funds Pursuant to the provisions of SEC Memorandum Circular No. 6, Guidelines on the Management of

the Trust Fund of Pre-Need Corporation (SEC Circular No. 4), the SEC requires, among others, that companies engaged in the sale of pre-need plans and similar contracts set up a trust fund to guarantee the delivery of property or performance of service in the future. Withdrawals from these trust funds are limited to, among others, payments of pension plan benefits, bank charges and investment expenses in the operation of the trust funds, termination value payable to planholders, contributions to the trust funds of cancelled plans and final taxes on investment income of the trust funds. In accordance with the SEC requirements, CPI had funds deposited with two local trustee banks amounting to P=47.14 million and P=50.12 million as of December 31, 2011 and 2010, respectively.

Total contributions to the trust funds amounted to P=2.43 million in 2011 and P=0.75 million in

2010. Based on the actuarial reports, the required balances of the trust funds as of December 31, 2011 and 2010 amounted to P=44.22 million and P=46.04 million, respectively. As of December 31, 2011 and 2010, CPI has trust fund assets amounting to about P=47.14 million and P=50.12 million, respectively (including contributions and related trust fund income of pension holders) and recorded reserve liabilities (shown in the consolidated balance sheets as “Pre-need and other reserves” account) of P=46.50 million and P=48.79 million, respectively (composed of actuarially computed liabilities of P=44.22 million and P=46.04 million as of December 31, 2011 and 2010, respectively, other reserves amounting to P=0.35 million and P=0.40 million as of December 31, 2011 and 2010, respectively, and pension bonus owing to pension holders amounting to P=1.92 million and P=2.35 million as of December 31, 2011 and 2010). In the opinion of management and the independent actuary, CPI’s net contractual liabilities of about P=44.22 million and P=46.04 million as of December 31, 2011 and 2010, respectively, closely reflect actual potential plan claims as of those dates. In accordance with the Pre-Need New Rules, should the Insurance Commission discover a deficiency in the trust fund, it shall give notice to CPI and require CPI to make additional deposits to the trust fund. CPI shall have 30 days from receipt of notice to make the said deposits and correct the deficiency.

The current portion of pre-need reserves amounted to P=3.84 million and P=4.51 million as of

December 31, 2011 and 2010, respectively (see Note 26).

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The details of CPI’s investments in trust funds as of December 31 are as follows:

2011 2010 Assets Debt and listed equity securities P=26,440,344 P=24,989,402 Others 19,675,422 24,400,153 46,115,776 49,389,555 Liabilities (424,093) (573,084) P=45,691,673 P=48,816,471

6. Installment Contracts Receivable Installment contracts receivable arise from sales of real estate properties.

The installment contracts receivable on sales of real estate properties are collectible in monthly installments for periods ranging from one to 10 years and bear monthly interest rates of 0.67% to 2.00% in 2011, 2010 and 2009 computed on the diminishing balance. Interest income earned from installment contracts receivable amounted to P=385.66 million, P=441.83 million and P=451.10 million in 2011, 2010 and 2009, respectively (see Note 19).

The portion due within one year amounted to P=426.08 million and P=689.24 million as of December 31, 2011 and 2010, respectively (see Note 26).

The Group and CI entered into a contract of guaranty under Retail Guaranty Line in the amount of

P=2,000.00 million in 2010 with Home Guaranty Corporation (HGC) (see Note 14). The amount of installment contracts receivable enrolled by the Group amounted to P=1,844.00 million and P=2,472.00 million in 2011 and 2010, respectively. The Group paid a guarantee premium of 0.90%, based on outstanding principal balance of the receivables enrolled in 2011 and 2010 (see Note 16).

7. Other Receivables Other receivables consist of:

2011 2010 Accrued interest P=7,158,793 P=9,420,798 Advances to: Customers 32,255,888 13,051,713 Contractors 4,289,589 4,350,280 Others (Note 24) 8,531,354 13,457,624 P=52,235,624 P=40,280,415

Advances to customers are receivables of the Group for the real estate property taxes of sold units

whereas advances to contractors are advances made by the Group for the contractor’s supply requirements.

Other receivables include receivables from customers relating to registration and real estate taxes initially paid by the Company on behalf of the buyers and employees’ advances.

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Other receivables due within one year amounted to P=46.17 million and P=33.47 million as of December 31, 2011 and 2010, respectively (see Note 26).

8. Real Estate Properties for Sale Real estate properties for sale consist of cost incurred in the development of condominium units

and residential houses for sale amounting to P=1,591.55 million and P=1,669.93 million as of December 31, 2011 and 2010, respectively.

Real estate properties for sale account includes capitalized interest costs incurred during each year

in connection with the development of the properties amounting to P=11.57 million, P=17.67 million and P=36.42 million in 2011, 2010 and 2009 respectively (see Notes 14 and 20). The average capitalization rate used to determine the amount of interest costs eligible for capitalization is 3.86%, 4.07% and 4.97% in 2011, 2010 and 2009, respectively.

As of December 31, 2011 and 2010, some real estate properties for sale of the Group with carrying

value of P=395.40 million serve as collaterals of loans availed from financial institutions by the Parent Company and CLDI’s specific credit lines in 2010 (see Note 14).

Shown below are the aggregate cash price values and related aggregate carrying costs of condominium units and residential houses for sale as of December 31, 2011 and 2010 (in millions).

2011 2010 Aggregate cash price values P=4,617 P=5,531 Less aggregate carrying costs 2,637 3,426 Excess of aggregate cash price values over

aggregate carrying costs P=1,980 P=2,105

Real estate properties for sale includes deemed cost adjustment amounting to P=170.21 million and P=202.42 million as of December 31, 2011 and 2010, respectively (see Note 15). The deemed cost adjustment arose when the Group transitioned to PFRS in 2005.

9. Real Estate Properties Held for Future Development

Movements in real estate properties held for future development are as follows:

2011 2010 Balance at beginning of the year P=1,053,501,489 P=1,127,236,834 Additions 131,270,607 130,741,407 Transfers to real estate properties for sale (1,942,095) (204,476,752) Balance at end of the year P=1,182,830,001 P=1,053,501,489

Real estate properties held for future development includes land properties reserved by the Group for its future condominium projects. During 2011 and 2010, the Group transferred portion of its real estate properties held for future development to its newly launched projects accounted for under real estate properties for sale.

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10. Investment Properties

Investment properties represent real estate properties for lease consist of:

2011 Land Building Total Costs Balances at beginning of year P=973,103,522 P=58,618,046 P=1,031,721,568 Additions 6,800,632 – 6,800,632 Reclassification (12,488,347) 12,488,347 – Balances at end of year 967,415,807 71,106,393 1,038,522,200 Accumulated Depreciation Balance at beginning of year P=– P=47,525,865 P=47,525,865 Depreciation for the year

(Notes 16 and 18) – 4,960,329 4,960,329 Balance at end of year – 52,486,194 52,486,194 Net Book Values P=967,415,807 P=18,620,199 P=986,036,006

2010 Land Building Total Costs Balances at beginning of year P=1,009,557,153 P=58,618,046 P=1,068,175,199 Additions 343,907 − 343,907 Transfers to real estate properties

for sale (37,564,928) − (37,564,928) Reversal of impairment loss

(Note 21) 767,390 − 767,390 Balances at end of year 973,103,522 58,618,046 1,031,721,568 Accumulated Depreciation Balance at beginning of year − 42,565,542 42,565,542 Depreciation for the year

(Notes 16 and 18) − 4,960,323 4,960,323 Balance at end of year − 47,525,865 47,525,865 Net Book Values P=973,103,522 P=11,092,181 P=984,195,703

The net book values of land include net deemed cost adjustment amounting to

to P=267.85 million as of December 31, 2011 and 2010 (see Note 15). The deemed cost adjustment arose when the Group transitioned to PFRS in 2005.

Investment properties are rented out at different rates generally for a one-year term renewable

every year. Rent income from real estate properties for lease amounted to P=23.08 million, P=15.52 million and P=14.86 million in 2011, 2010 and 2009, respectively.

Based on the appraisal reports by independent firms of appraisers using market data approach at

various dates in 2011 and 2010, the appraised values of these real estate properties are P=1,369.80 million and P=1,308.44 million as of dates of appraisal.

In 2006, impairment loss of P=16.57 million was recognized to reduce the carrying value of real

estate properties for lease to its recoverable amount. Recovery of the impairment loss was recognized in 2010 and 2009 amounting to P=0.77 million and P=2.27 million, respectively, which is included under “Other income” account in the consolidated statements of income (see Note 21).

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Some real estate properties for lease with carrying values of P=581.76 million were used as collateral for loans availed by the Group and CI from the omnibus credit line in 2010, (see Note 14). No loans were availed from omnibus credit line in 2011.

11. Property and Equipment Property and equipment consist of:

2011 Furniture, Fixtures and Transportation Office Office and Other Premises Equipment Equipment Total At Cost P=– P=28,530,802 P=5,715,606 P=34,246,408 Accumulated Depreciation Balances at beginning of year – 27,177,681 3,750,887 30,928,568 Depreciation for the year

(Notes 16 and 18) – 736,895 507,235 1,244,130 Balances at end of year – 27,914,576 4,258,122 32,172,698 Net Book Values – 616,226 1,457,484 2,073,710 At Deemed Cost 259,448,852 – – 259,448,852 Accumulated Depreciation Balances at beginning of year 193,489,171 – – 193,489,171 Depreciation for the year

(Notes 16 and 18) 12,638,300 – – 12,638,300 Balances at end of year 206,127,471 – – 206,127,471 Net Deemed Cost 53,321,381 – – 53,321,381 Total P=53,321,381 P=616,226 P=1,457,484 P=55,395,091

2010 Furniture, Fixtures and Transportation Office Office and Other Premises Equipment Equipment Total At Cost Balances at beginning of year P=– P=28,530,802 P=4,236,814 P=32,767,616 Additions − − 1,792,428 1,792,428 Disposals − − (313,636) (313,636) Balances at end of year − 28,530,802 5,715,606 34,246,408 Accumulated Depreciation Balances at beginning of year – 26,086,652 3,634,592 29,721,244 Depreciation for the year

(Notes 16 and 18) − 1,091,029 429,930 1,520,959 Disposal − − (313,635) (313,635) Balances at end of year − 27,177,681 3,750,887 30,928,568 Net Book Values − 1,353,121 1,964,719 3,317,840 (Forward)

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2010 Furniture, Fixtures and Transportation Office Office and Other Premises Equipment Equipment Total At Deemed Cost P=259,448,852 P=– P=– P=259,448,852 Accumulated Depreciation Balances at beginning of year 180,850,868 – – 180,850,868 Depreciation for the year

(Notes 16 and 18) 12,638,303 − − 12,638,303 Balances at end of year 193,489,171 − − 193,489,171 Net Deemed Cost 65,959,681 − − 65,959,681 Total P=65,959,681 P=1,353,121 P=1,964,719 P=69,277,521

For the office premises, the Group elected to apply the optional exemption under PFRS 1, First-

Time Adoption of PFRS, to use the revalued amount as deemed cost as at January 1, 2005, the date of transition to PFRS. As of December 31, 2011 and 2010, the balances at pre-PFRS cost of the office premises as of December 31 are as follows:

2011 2010 Office premises P=61,858,970 P=61,858,970 Less accumulated depreciation 46,672,058 43,605,480 P=15,186,912 P=18,253,490

Difference between the net deemed cost and the net pre-PFRS cost amounting to P=38.13 million

and P=47.71 million as of December 31, 2011 and 2010, respectively, represents the remaining balance of the deemed cost adjustment (see Note 15).

The cost of fully depreciated property and equipment amounted to P=29.74 million and

P=24.29 million as of December 31, 2011 and 2010, respectively. 12. Other Assets Other assets consist of:

2011 2010 Available-for-sale financial assets P=1,354,728 P=1,356,778 Retirement plan assets (Note 22) 10,887,820 11,610,894 Deposits and others 14,936,345 24,446,600 P=27,178,893 P=37,414,272

Available-for-sale financial assets consist of investments in quoted equity securities. The fair

values of available-for-sale financial assets were determined based on published prices in an active market.

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*SGVMC312904*

The movement in “Net changes in fair values of available-for-sale financial assets” account presented in the equity section of the consolidated balance sheets is as follows:

2011 2010 Balance at beginning of year P=512,786 P=11,078,949 Mark-to-market gain 8,632 156,762 Disposals – (11,750,260) Impairment loss (Note 20) – 1,027,335 Balance at end of year P=521,418 P=512,786

Net changes in fair values of available-for-sale financial assets pertaining to the non-controlling interests amounted to a net decrease of P=0.01 million in 2011 and net increase of P=0.46 million in 2010.

Deposits and others represent payments made by the Group to various utility companies for the

installation of electric and water meters for condominium units still unsold.

The portion of other assets due within one year aggregated to P=16.01 million and P=21.85 million as of December 31, 2011 and 2010, respectively (see Note 26).

13. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of:

2011 2010 Trade payables P=63,810,250 P=51,760,498 Deposits 24,469,238 27,345,476 Accrued expenses: Development costs 542,275,766 403,898,176 Director’s fee (Note 24) 30,879,836 19,866,781 Interest payable 7,794,265 11,838,107 Taxes, premiums, others 3,119,398 3,641,138 Withholding taxes payable 6,426,370 6,343,238 Dividends payable 6,301,664 5,719,183 VAT payable 414,822 4,009,007 Others (Note 24) 6,632,537 6,599,868 P=692,124,146 P=541,021,472

Trade payables consist of payables to contractors and other counterparties, whereas deposits

consist of rental deposits and collected deposits for water and electric meters of the sold units. Accrued expenses represent various accrual of the Group for its expenses and real estate projects. Accrued development costs represent the corresponding accrued expenses for the sold and completed real estate projects of the Group. Other payables consist of customers’ reservation fees and employees’ payables.

Accounts payable and accrued expenses due within one year amounted to P=429.55 million and

P=433.45 million as of December 31, 2011 and 2010, respectively (see Note 26).

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*SGVMC312904*

14. Notes and Loans Payable The details of notes and loans payable are as follows:

2011 2010 Notes payable:

Short-term promissory notes with varying maturities and annual interest rates ranging from 2.19% to 5.39% in 2011 and 2.50% to 5.47% in 2010 P=967,050,000 P=858,200,000

Short-term promissory notes enrolled with HGC with varying maturities and annual interest rates ranging from 1.70% to 3.40% in 2011 and 2.00% to 3.40% in 2010 599,410,772 1,081,512,998

1,566,460,772 1,939,712,998

Loans payable from financial institutions with annual average interest rates from 5.41% to 9.25% in 2010 – 10,000,000

P=1,566,460,772 P=1,949,712,998 On various dates in 2011 and 2010, the SEC authorized the Group to issue P=1,200.00 million

worth of STCP registered with the SEC in accordance with the provision of the Securities Regulation Code and its implementing rules and regulations, the code of Corporate Governance and other applicable laws and orders. Outstanding STCP issued by the Group as of December 31, 2011 and 2010 aggregated to P=967.05 million and P=858.20 million, respectively. In 2011 and 2010, the Group entered a contract of guaranty under a Revolving Cash Guaranty Line with HGC in the amount of P=1,400.0 million. The guaranty covers the unpaid principal due on the outstanding STCP and unpaid interest thereon of 10.00% per annum. The guaranty premium paid was 0.90% per annum based on enrolled commercial papers in 2011 and 2010, respectively. Outstanding STCP covered by the guaranty amounted to P=599.41 million and P=1,081.51 million as of December 31, 2011 and 2010, respectively. The Group has omnibus credit line with financial institutions aggregating to about P=2,165.00 million as of December 31, 2011 and 2010, which is available for drawing by any of the companies within the Group. In addition, the Parent Company and CLDI have specific credit lines as follows (amounts in millions):

2011 2010 Parent Company P=200.00 P=200.00CLDI – 735.00 P=200.00 P=935.00

Outstanding balances of loans from financial institutions availed from the omnibus and specific

credit lines for the Parent Company and CLDI as of December 31, 2010 follow (amounts in millions):

Parent Company P=5.00CLDI 5.00 P=10.00

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*SGVMC312904*

The Company has no outstanding balances of loans from financial institutions as of December 31, 2011. Outstanding balances of loans from financial institutions and carrying values of collaterals as of December 31 follow (amounts in millions): Outstanding Loan Balances Carrying Values of Collaterals 2011 2010 Description 2011 2010

Secured P=– P=5.00

Group’s real estate properties for sale and lease P=418.39 P=813.80

Unsecured – 5.00 – – Total P=– P=10.00 P=418.39 P=813.80

Long-term loans obtained from financial institutions aggregating P=10.00 million in 2010 which

shall mature at various dates from January 2012 to December 2016, have been fully paid in 2011. Interest expense related to short-term notes amounted to P=65.39 million, P=77.63 million and

P=92.77 million in 2011, 2010 and 2009, respectively, while interest expense related to long-term loans amounted to P=0.30 million, P=7.78 million and P=36.93 million in 2011, 2010 and 2009, respectively (see Note 20). Capitalized interests in 2011, 2010 and, 2009 amounted to P=11.57 million, P=17.67 million and P=36.42 million, respectively (see Notes 8 and 20).

The portion of notes and loans payable due within one year amounted to P=1,566.46 million and

P=1,939.71 million as of December 31, 2011 and 2010, respectively (see Note 26). 15. Equity

a. The following table summarizes the reconciliation of the issued and outstanding shares of capital stock for each of the following: 2011 2010 2009 Authorized - P=1 par value 3,000,000,000 3,000,000,000 3,000,000,000 Issued, beginning 2,456,374,741 2,047,302,220 1,706,408,129 Treasury stock (3,655,633) (3,369,362) (3,130,785) Outstanding 2,452,719,108 2,043,932,858 1,703,277,344 Stock dividends 490,887,040 409,072,521 340,894,091 2,943,606,148 2,453,005,379 2,044,171,435 Treasury stock 3,655,633 3,369,362 3,130,785 Issued, ending 2,947,261,781 2,456,374,741 2,047,302,220

Treasury stock includes 1,717,686 and 1,431,415 shares in 2011 and 2010 held by CPI.

The Company registered with SEC 10,000,000 shares on June 15, 1978 with an initial offer price of P=10.00. As of December 31, 2011 and 2010, the Company has 2,947,261,781 shares held by 746 equity holders and 2,456,374,741 shares held by 714 equity holders, respectively.

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b. Dividends declared and issued/paid by the Parent Company in 2011, 2010 and 2009 are as follows:

Stockholders of Dividends Date Approved Per Share Record Date Date Issued/Paid Cash May 30, 2011 P=0.05 June 13, 2011 July 8, 2011 May 31, 2010 0.06 June 30, 2010 July 26, 2010 June 1, 2009 0.10 June 17, 2009 July 13, 2009 Stock June 7, 2011 20% July 7, 2011 August 2, 2011 June 1, 2010 20% June 11, 2010 July 8, 2010

May 28, 2009 20% June 26, 2009 July 22, 2009

Fractional shares of stock dividends were paid in cash based on the par value. On May 28, 2009, the SEC approved the Amended Articles of Incorporation on the application for increase in authorized capital stock from P=1,900.00 million to P=3,000.00 million with a par value of P=1.00 each. The SEC also authorized the issuance of 20% stock dividends declared by the BOD last April 29, 2008 and ratified by the stockholders on June 3, 2008.

c. As of December 31, 2011 and 2010, the retained earnings attributable to equity holders of the Parent Company and the non-controlling interest include the remaining balance of deemed cost adjustment which arose when the Group transitioned to PFRS in 2005.

The components of the net deemed cost adjustment as of December 31 are as follows:

2011 2010 Real estate properties for sale (Note 8) P=170,206,549 P=202,417,452 Investment properties (Note 10) 267,845,684 267,845,684 Property and equipment (Note 11) 38,134,466 47,706,191 Deemed cost adjustment 476,186,699 517,969,327 Deferred tax liability (Note 23) (142,856,010) (155,390,798) Net deemed cost adjustment P=333,330,689 P=362,578,529

The net deemed cost adjustment is allocated in the consolidated statement of changes in equity as

follows:

2011 2010 Attributable to:

Equity holders of the Parent Company P=327,386,072 P=356,633,912 Non-controlling interest 5,944,617 5,944,617 P=333,330,689 P=362,578,529

The deemed cost adjustment has yet to be realized through additional depreciation in profit or loss

in case of depreciable assets (classified under property and equipment) and building (classified under investment properties) and through sales in case of inventory (classified under real estate properties for sale) and land (classified under investment properties).

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*SGVMC312904*

The balance of retained earnings is restricted for the payment of dividends to the extent of the Parent Company’s shares of stock held in treasury, net deemed cost adjustment in properties and undistributed earnings of subsidiaries as follows:

2011 2010 Undistributed earnings of subsidiaries P=807,101,513 P=681,228,586 Net deemed cost adjustment in properties 327,386,072 356,633,912 Cost of treasury shares 32,405,913 32,259,775 P=1,166,893,498 P=1,070,122,273

16. Operating Expenses Operating expenses consist of:

2011 2010 2009 Personnel (Notes 17 and 22) P=155,258,575 P=128,772,009 P=157,720,436 Taxes and licenses 52,023,492 50,734,646 58,838,040 Professional fees 48,607,854 23,446,269 53,612,801 Depreciation (Note 18) 18,842,759 19,119,585 19,089,437 Membership dues 18,812,757 10,722,583 5,592,671 Insurance (Notes 6 and 14) 17,758,594 24,556,583 24,580,107 Outside services 8,577,753 6,288,535 8,496,751 Brokers’ commission 6,787,361 5,711,863 6,447,646 Advertising and promotions 6,208,824 6,356,320 8,733,502 Donations 5,003,000 1,124,695 600,000 Light, power and water 4,068,586 3,262,808 3,583,855 Repairs and maintenance 3,414,874 980,305 5,206,224 Postage, telephone and telegraph 2,163,449 1,997,770 2,821,905 Stationery and office supplies 1,333,493 319,619 663,766 Others 16,541,620 11,270,710 16,017,860 P=365,402,991 P=294,664,300 P=372,005,001

17. Personnel Expenses Personnel expenses consist of:

2011 2010 2009 Salaries and wages P=61,424,961 P=45,569,283 P=68,484,680 Commissions 40,341,147 44,105,291 45,826,576 Bonuses and other employee

benefits (Note 22) 53,492,467 39,097,435 43,409,180 P=155,258,575 P=128,772,009 P=157,720,436

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*SGVMC312904*

18. Depreciation Depreciation consists of:

2011 2010 2009 Investment properties (Note 10) P=4,960,329 P=4,960,323 P=4,960,323 Property and equipment (Note 11) 13,882,430 14,159,262 14,129,114 P=18,842,759 P=19,119,585 P=19,089,437

19. Financial Income Financial income consists of:

2011 2010 2009 Interest income from: Installment contracts receivable

relating to sales of real estate (Note 6) P=385,658,918 P=441,830,423 P=451,102,168

Cash equivalents and short-term cash investments (Note 4) 90,915,532 69,351,960 55,494,274

Cash in banks (Note 4) 123,549 218,632 590,269 Held-to-maturity investments – 12,513,759 10,516,306 Others (Note 24) 1,959,523 2,679,984 103,380 Dividend income (Note 12) 36,454 154,895 158,758 Gain on sale of available-for-sale

financial assets – 17,770,241 4,947,533 P=478,693,976 P=544,519,894 P=522,912,688

20. Financial Expenses Financial expenses consist of:

2011 2010 2009 Interest expense on: Notes payable (Note 14) P=65,385,026 P=77,625,787 P=92,771,234 Loans payable

(Notes 8 and 14) 304,974 7,782,835 36,930,097 65,690,000 85,408,622 129,701,331 Capitalized interest

(Notes 8 and 14) (11,574,197) (17,671,147) (36,420,748) 54,115,803 67,737,475 93,280,583 Others 935,946 99,014 596,120 55,051,749 67,836,489 93,876,703 Finance charges (Note 8) 1,518,624 1,737,673 2,557,373 Impairment loss on available-for-

sale financial assets (Note 12) – 1,370,236 – P=56,570,373 P=70,944,398 P=96,434,076

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*SGVMC312904*

21. Other Income Other income consists of:

2011 2010 2009 Trust fund income P=2,213,192 P=2,669,444 P=3,212,279 Recovery of loss on impairment of

investment properties (Note 10) – 767,390 2,267,220

Others 19,302,460 25,128,020 15,521,239 P=21,515,652 P=28,564,854 P=21,000,738

Other income includes premium revenue, penalties for customers’ late payments, forfeiture of

reservations and downpayment on sales which were not consummated, sale of scraps and miscellaneous income.

22. Retirement Benefits Cost The Group, jointly with affiliated companies, has funded, noncontributory defined benefit

retirement plan, administered by trustee covering all of its permanent employees.

The latest actuarial valuation report was as of December 31, 2011. The following tables summarize the components of the net retirement benefits cost (income) recognized in the consolidated statements of income and the funded status and amounts recognized in the consolidated balance sheets.

The details of net retirement benefits cost (income), which is included in “Personnel expense” account, are as follows:

2011 2010 2009 Current service cost P=1,164,396 P=1,027,984 P=111,923 Interest cost on benefit obligation 2,589,382 2,238,458 810,732 Expected return on plan assets (4,832,879) (4,380,680) (4,020,055) Net actuarial loss (gain) 7,045 8,223 (764,866) Actuarial loss recognized immediately 12,241,971 – – Effect of asset limit (10,328,158) 1,255,552 (5,971,803) Net retirement benefits cost (income) P=841,757 P=149,537 (P=9,834,069) Actual return on plan assets P=134,135 P=4,380,680 P=3,369,025

The details of the retirement plan assets are as follows:

2011 2010 2009 Defined benefit obligation P=52,930,403 P=24,115,276 P=20,848,834 Fair value of plan assets 48,309,001 48,328,791 43,806,797 4,621,402 (24,213,515) (22,957,963) Unrecognized net actuarial

gains (losses) (15,509,222) 2,274,463 2,266,240 Amount not recognized because

of limit – 10,328,158 9,072,606 Retirement plan assets (P=10,887,820) (P=11,610,894) (P=11,619,117)

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*SGVMC312904*

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

2011 2010 2009 Defined benefit obligation,

January 1 P=24,115,276 P=20,848,834 P=2,917,883 Current service cost 1,164,396 1,027,984 111,923 Interest cost on benefit obligation 2,589,382 2,238,458 810,732 Benefits paid (272,608) – (153,034) Actuarial losses 25,333,957 – 17,161,330 Defined benefit obligation,

December 31 P=52,930,403 P=24,115,276 P=20,848,834 Changes in fair value of plan assets are as follows:

2011 2010 2009 Fair value of plan assets, January 1 P=48,328,791 P=43,806,797 P=40,200,547 Expected return on plan assets 4,832,879 4,380,680 4,020,055 Contributions to the plan 118,683 141,314 390,259 Benefits paid (272,608) – (153,034) Actuarial losses (4,698,744) – (651,030) Fair value of plan assets,

December 31 P=48,309,001 P=48,328,791 P=43,806,797 The major categories of plan assets of the Group with its affiliated companies as a percentage of

the fair value of net plan assets are as follows:

2011 2010 2009 Cash and cash equivalents 0.00% 0.47% 0.06% Investments in securities 8.35% 15.85% 36.89% Receivables 91.78% 83.72% 63.09% Liabilities (0.13%) (0.04%) (0.04%) 100.00% 100.00% 100.00%

The overall expected return on the plan assets is determined based on the market prices prevailing

on the date applicable to the period over which the obligation is to be settled. There has been no change in the expected rate of return on plan assets.

The principal assumptions used in determining retirement benefits costs for the Group’s plans are

as follows as of January 1 of each year:

2011 2010 2009 Discount rate per annum 10.74% 10.74% 27.78% Expected annual rate of return

on plan assets 10.00% 10.00% 10.00% Future annual increase in salary 6.00% 6.00% 6.00%

As of December 31, 2011, the discount rate is 5.90%, future increase in salary is 6.00% and the

expected annual rate of return on plan assets is 6%. There are 221, 203 and 209 employees in the plan as of December 31, 2011, 2010 and 2009,

respectively.

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*SGVMC312904*

The present value of defined benefit obligation, fair values of plan assets and experience adjustments for the current and previous four years are as follows:

2011 2010 2009 2008 2007 Fair value of plan assets P=48,309,001 P=48,328,791 P=43,806,797 P=40,200,547 P=36,804,179 Defined benefit obligation 52,930,403 24,115,276 20,848,834 2,917,882 22,132,726 Surplus (Deficit) (4,621,402) 24,213,515 22,957,963 37,282,665 14,671,453 Experience adjustment on plan liabilities - gain (loss) – – 1,467,292 (239,206) (144,738) Experience adjustment on plan assets - loss (gain) 4,698,744 – (651,030) (674,309) 3,113,190

The Group expects to contribute P=0.14 million to the retirement fund in 2012. 23. Income Taxes a. Provision for income tax consists of:

2011 2010 2009 Current P=129,620,127 P=167,313,192 P=153,493,086 Deferred (45,129,470) (54,230,418) (11,186,090) 84,490,657 113,082,774 142,306,996 Final tax on interest income 18,207,815 16,416,870 13,320,170 P=102,698,472 P=129,499,644 P=155,627,166

b. The components of the net deferred tax liabilities are as follows:

2011 2010 Deferred tax assets: Accrued expenses and others P=9,363,034 P=6,067,398 Deferred tax liabilities: Deemed cost adjustment in properties

(Note 15) 142,856,010 155,390,798 Unrealized gain on real estate transactions 204,824,514 231,846,341 Capitalized interest 9,012,512 16,738,698 Retirement plan assets 3,266,346 3,483,268 359,959,382 407,459,105 Net deferred tax liabilities P=350,596,348 P=401,391,707

c. The reconciliation of income tax computed at the statutory tax rate to provision for income tax

follows:

2011 2010 2009 Income tax at statutory tax rate P=211,359,853 P=213,555,557 P=220,633,227 Additions to (reductions in) income tax resulting from: Income entitled to tax holiday

(Note 30) (68,910,859) (25,680,643) (8,295,401) Tax-exempt interest income (43,698,374) (58,163,305) (58,256,210) Interest income subjected to

final tax (27,311,724) (24,625,305) (19,980,255) Final tax on interest income 18,207,815 16,416,870 13,320,170

(Forward)

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*SGVMC312904*

2011 2010 2009 Nondeductible interest expense P=8,235,827 P=7,408,779 P=5,892,662 Nondeductible decrease in

pre-need reserves - net (671,446) (1,046,279) (3,598,647) Trust fund income already

subjected final tax (663,958) (800,833) (963,684) Nontaxable dividend income (10,934) (46,468) (47,627) Others - net 6,162,272 2,481,271 6,922,931 Provision for income tax P=102,698,472 P=129,499,644 P=155,627,166

For income tax purposes, full revenue recognition for the sale of real estate properties is

applied when more than 25% of the contract price has been collected in the year of sale; otherwise, the installment method is applied where gain from sales is recognized based on collection multiplied by the gross profit rates of individual sales contract.

24. Related Party Transactions

Parties are considered to be related if one party has the ability to control, directly or indirectly, the other party or exercise significant influence over the other party in making financial and operating decisions. It includes companies in which one or more of the directors and/or shareholder of the Parent Company either has a beneficial controlling interest or are in a position to exercise significant influence therein. The Group discloses the nature of the related party relationship and information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the consolidated financial statements, including, as a minimum, the amount of outstanding balances and its terms and conditions including whether they are secured, and the nature of the consideration to be provided in settlement.

The Group, in the normal course of business, has transactions and account balances with related

parties consisting mainly of the following: a. The Parent Company’s interest-bearing cash advances and non interest-bearing advances for

reimbursable expenses are unsecured and to be settled on cash.

Interest Interest Amounts Amounts Income on Expense on Owed Owed Advances to Advances from by Related to Related Related Party Relationship Year Related Parties Related Parties Parties Parties CI Parent Company 2011 P=66,266 P=209,143 P=– P=– 2010 94,425 50,315 2,959,849 76,805 CLDI Subsidiary 2011 72,204 98,217 1,060,034 – 2010 122,320 42,191 780,829 37,359 CPI Subsidiary 2011 – – – – 2010 – – – 109,276 Others Affiliates 2011 146 – – – 2010 – – 10,000 – Total 2011 P=138,616 P=307,360 P=1,060,034 P=– Totals 2010 P=216,745 P=92,506 P=3,750,678 P=223,440

An affiliate is an entity under common control of the Parent Company.

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*SGVMC312904*

Parent Company’s transactions with CLDI and CPI are eliminated in the consolidated balance sheets and statement of income.

Interest income on advances to CI, which is included in “Financial income” account,

amounted to P=0.07 million in 2011, P=0.09 million in 2010 and P=0.07 million in 2009 (see Note 19).

b. The Parent Company also has an existing management contract with CI, wherein CI provides

management services to the Parent Company. The agreement is for a period of five years renewable automatically for another five years unless either party notifies the other party six months prior to expiration. The management fee is based on a certain percentage of the net income as mutually agreed upon by both parties. The management fees for 2011, 2010 and 2009 were waived by CI.

c. The Parent Company’s shares held by members of the BOD aggregated to 721,695,328 and

608,268,938 as of December 31, 2011 and 2010, respectively. On the other hand, shares held by the ultimate parent and affiliate totaled to 1,486,288,693 and 1,238,573,911 as of December 31, 2011 and 2010, respectively.

d. The Group, jointly with affiliated companies under common control, has a trust fund for the

retirement plan of their employees. In 2011 and 2010, contributions to the fund amounted to P=0.12 million and P=0.14 million, respectively, while the net fund assets amounted to P=48.31 million and P=48.33 million as of December 31, 2011 and 2010, respectively (see Note 22).

e. Compensation of key management personnel are as follows:

2011 2010 2009 Salaries P=27,745,084 P=25,172,183 P=23,741,227 Bonuses 26,044,679 21,911,600 19,520,338 Other benefits 31,890,045 29,621,835 32,065,434 P=85,679,808 P=76,705,618 P=75,326,999 The Group has no standard arrangements with regards to the remuneration of its directors. In 2011, 2010 and 2009, the BOD received a total of P=28.26 million, P=23.97 million and P=25.93 million, respectively. Moreover, the Group has no standard arrangement with regards to the remuneration of its existing officers aside from the compensation received or any other arrangements in the employment contracts and compensatory plan. The Group does not have any arrangements for stock warrants or options offered to its employees.

25. Financial Instruments Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise cash and cash equivalents, short-term cash

investments, notes payable, bank loans and contracts payable. The main purpose of these financial instruments is to finance the Group’s operations. The Group’s other financial instruments consist of financial assets at fair value through profit or loss and available-for-sale financial assets, which are held for investing purposes. The Group has various other financial instruments such as installment contracts receivables, other receivables and accounts payable and accrued expenses which arise directly from its operations.

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*SGVMC312904*

It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Company’s financial instruments are market risk (i.e., cash flow interest rate risk and equity risk), credit risk and liquidity risk. The BOD reviews and approves policies for managing these risks and they are summarized as follows:

Market risk Cash flow interest rate risk Cash flow interest rate risk is the risk that the fair value or future cash flows of a financial

instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk for changes in market interest rates relates primarily to the Group’s short-term and long-term loans payables, all with repriced interest rates.

The Group’s policy in addressing volatility in interest rates includes maximizing the use of operating cash flows to be able to fulfill principal and interest obligations even in periods of rising interest rates. The following table demonstrates the sensitivity of the Group’s income before income tax to a reasonably possible change in interest rates based on forecasted and average movements of interest rates (with all other variables held constant):

Change in

Basis Points (bps) Effect on Income

before Income Tax December 31, 2011 -/+6 bps +/-P=939,876

December 31, 2010 -/+5 bps +/-5,000 There is no impact on the Group’s equity other than those already affecting income before

income tax. Equity price risk Equity price risk is the risk that the fair values of investments in equity securities will decrease as

a result of changes in the market values of individual shares of stock. The Group is exposed to equity price risk because of investments held by the Group classified as available-for-sale financial assets included under “Other assets” in the consolidated balance sheets. The Group employs the service of a third-party stock broker to manage its investments in shares of stock.

The following table demonstrates the sensitivity analysis of the Group’s equity to a reasonably

possible change in equity price based on forecasted and average movements of equity prices (with all other variables held constant):

Change in

Equity Price Effect on Equity 2011 +/-P=0.05 +/-P=65,599 2010 +/-P=0.24 +/-P=322,068

Credit risk The Group trades only with recognized, creditworthy third parties. Credit risk arises when the

Group will incur a loss because its customers, clients or counterparties failed to discharge their obligations. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis with the objective that the Group’s exposure to bad debts is not significant. The

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Group’s policy is to enter into transactions with a diversity of creditworthy parties to mitigate any significant concentration of credit risk. There are no significant concentrations of credit risk within the Group.

The tables below show the Group’s exposure to credit risk for the components of the consolidated

balance sheets. The exposure as of December 31, 2011 and 2010 is shown at gross, before taking the effect of mitigation through the use of collateral agreements, and at net, after taking the effect of mitigation through the use of collateral agreements.

December 31, 2011:

Gross Net Financial assets at fair value through profit or loss: Investments in trust funds P=45,691,673 P=– Loans and receivables: Cash and cash equivalents, excluding

cash on hand 1,433,659,318 628,589,896 Short-term cash investments 507,750,000 411,750,000 Installment contracts receivable 2,147,940,019 – Other receivables: Accrued interest 7,158,793 – Advances to customers 32,255,888 11,975,319 Others 8,531,354 794,978 Available-for-sale financial assets 1,354,728 – Total credit risk exposure P=4,184,341,773 P=1,053,110,193

December 31, 2010:

Gross Net Financial assets at fair value through profit or loss Investments in trust funds P=48,816,494 P=– Loans and receivables: Cash and cash equivalents, excluding

cash on hand 590,816,871 352,243,134 Short-term cash investments 1,237,450,028 1,123,450,000 Installment contracts receivable 2,157,870,685 − Other receivables: Accrued interest 9,420,798 − Advances to customers 13,051,713 12,260,107 Others 13,457,624 326,609 Available-for-sale financial assets 1,356,778 – Total credit risk exposure P=4,072,240,991 P=1,488,279,850

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The following tables summarize the aging analysis of receivables:

December 31, 2011:

Past due But Not Impaired

Current < 30 days 31 - 60 days 61- 90 days Over

90 days > One year

Total Installment contracts

receivable P=400,900,318 P=8,332,729 P=2,061,817 P=1,500,809 P=13,285,579 P=1,721,858,767 P=2,147,940,019 Other receivables: Accrued interest 7,158,793 – – – – – 7,158,793 Advances to customers 20,280,569 – 712,514 468,543 10,794,262 – 32,255,888 Others 5,964,002 794,978 – – – 1,772,374 8,531,354 P=434,303,682 P=9,127,707 P=2,774,331 P=1,969,352 P=24,079,841 P=1,723,631,141 P=2,195,886,054

December 31, 2010:

Past due But Not Impaired

Current < 30 days 31 - 60 days 61- 90 days Over

90 days > One year

Total Installment contracts

receivable

P=668,040,506

P=6,021,207

P=2,072,655

P=2,434,109

P=10,671,600

P=1,468,630,608

P=2,157,870,685 Other receivables: Accrued interest 9,420,798 – – – – – 9,420,798 Advances to customers 791,606 886,383 540,265 239 10,833,220 – 13,051,713 Others 10,666,808 326,609 – – – 2,464,207 13,457,624 P=688,919,718 P=7,234,199 P=2,612,920 P=2,434,348 P=21,504,820 P=1,471,094,815 P=2,193,800,820

The tables below show the credit quality by class of asset for loan-related balance sheet lines, based on the Group’s credit rating system:

December 31, 2011:

Medium Past Due but High Grade* Grade** not Impaired Total Financial asset at fair value through profit

or loss Investments in trust funds P=45,691,673 P=– P=– P=45,691,673 Loans and receivables: Cash and cash equivalents, excluding cash on hand 1,433,659,318 – – 1,433,659,318 Short-term cash investments 507,750,000 – – 507,750,000 Installment contracts receivable 2,122,759,085 – 25,180,934 2,147,940,019 Other receivables: Accrued interest 7,158,793 – – 7,158,793 Advances to customers 20,280,569 – 11,975,319 32,255,888 Others 7,341,755 394,621 794,978 8,531,354 4,098,949,520 394,621 37,951,231 4,137,295,372 Total P=4,144,641,193 P=394,621 P=37,951,231 P=4,182,987,045 ** High Grade - financial assets with reputable counterparties and which management believes to be reasonably assured to be

recoverable. ** Medium Grade - financial assets for which there is low risk of default of counterparties.

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*SGVMC312904*

December 31, 2010:

Medium Past Due but High Grade* Grade** not Impaired Total Financial asset at fair value through profit

or loss Investments in trust funds P=48,816,494 P=– P=– P=48,816,494 Loans and receivables: Cash and cash equivalents, excluding cash on hand 590,816,871 − − 590,816,871 Short-term cash investments 1,237,450,028 − − 1,237,450,028 Installment contracts receivable 2,136,671,114 − 21,199,571 2,157,870,685 Other receivables: Accrued interest 9,420,798 − − 9,420,798 Advances to customers 791,606 − 12,260,107 13,051,713 Others 12,160,747 970,268 326,609 13,457,624 3,987,311,164 970,268 33,786,287 4,022,067,719 Total P=4,036,127,658 P=970,268 P=33,786,287 P=4,070,884,213 ** High Grade - financial assets with reputable counterparties and which management believes to be reasonably assured to be

recoverable. ** Medium Grade - financial assets for which there is low risk of default of counterparties. The main considerations for impairment assessment include whether any payments are overdue or if there are any known difficulties in the cash flows of the counterparties. The Group assesses impairment into two areas: individually assessed allowances and collectively assessed allowances.

The Group determines allowance for each significant receivable on an individual basis. Among the factors that the Group considers in assessing impairment is the inability to collect from the counterparty based on the contractual terms of the receivables. The Group also considers the fair value of the real estate collateralized in computing the impairment of the receivables. Receivables included in the specific assessment are those receivables under the installment contracts receivable accounts. For collective assessment, allowances are assessed for receivables that are not individually significant and for individually significant receivables where there is no objective evidence of individual impairment. Impairment losses are estimated by taking into consideration the age of the receivables, past collection experience and other factors that may affect collectability.

No impairment has been recognized because the Group holds the title to the real estate properties

with outstanding installment contracts receivable balance and the Group can repossess such real estate properties upon default of the customer in paying the outstanding balance.

Liquidity risk

Liquidity risk is defined as the risk that the Group would not be able to settle or meet its obligations on time or at a reasonable price. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of STCPs and bank loans (Note 14).

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*SGVMC312904*

The tables below summarize the maturity analysis of the Group’s financial assets held for managing liquidity and financial liabilities based on contractual undiscounted payments: December 31, 2011:

30 days 31-90 days 91-180 days 181-360 days Above 1 year Total Financial Assets Cash and cash equivalents P=1,117,776,099 P=316,050,000 P=– P=– P=– P=1,433,826,099 Short-term cash investments 158,950,000 348,800,000 – – – 507,750,000 Installment contract receivable 69,439,932 85,393,976 94,832,552 227,122,779 1,774,269,553 2,251,058,792 1,346,166,031 750,243,976 94,832,552 227,122,779 1,774,269,553 4,192,634,891 Financial Liabilities Accounts payable and accrued

expenses* 108,869,048 53,831,452 112,560,890 147,268,815 262,576,277 685,106,482 Notes payable** 654,803,717 662,709,547 292,795,293 16,617,600 – 1,626,926,157 763,672,765 716,540,999 405,356,183 163,886,415 262,576,277 2,312,032,639 Liquidity Position P=582,493,266 P=33,702,977 (P=310,523,631) P=63,236,364 P=1,511,693,276 P=1,880,602,252 ** Excludes statutory liabilities amounting to P=7,017,664. ** Includes interest expense amounting to P=60,465,386.

December 31, 2010:

30 days 31-90 days 91-180 days 181-360 days Above 1 year Total Financial Assets Cash and cash equivalents P=462,892,564 P=128,100,000 P=– P=– P=– P=590,992,564 Short-term cash investments 393,350,000 700,100,028 139,000,000 5,000,000 − 1,237,450,028 Installment contract receivable 58,109,680 79,379,841 363,727,274 188,023,282 1,468,630,608 2,157,870,685 914,352,244 907,579,869 502,727,274 193,023,282 1,468,630,608 3,986,313,277 Financial Liabilities Accounts payable and accrued

expenses* 88,659,935 51,162,371 107,100,560 175,994,723 107,575,067 530,492,656 Notes payable** 768,786,113 969,753,195 256,565,681 23,519,413 − 2,018,624,402 Loans payable*** − − − − 10,406,820 10,406,820 857,446,048 1,020,915,566 363,666,241 199,514,136 117,981,887 2,559,523,878 Liquidity Position P=56,906,196 (P=113,335,697) P=139,061,033 (P=6,490,854) P=1,350,648,721 P=1,426,789,399 *** Excludes statutory liabilities amounting to P=10,528,816. *** Includes interest expense amounting to P=78,911,404. *** Includes interest expense amounting to P=406,820. Fair Values The carrying amounts of recorded financial assets and financial liabilities as of December 31 are as follows: 2011 2010 Carrying Fair Carrying Fair Value Value Value Value Financial Assets Cash on hand P=166,781 P=166,781 P=175,693 P=175,693 Financial asset at fair value through profit or loss Investments in trust funds 45,691,673 45,691,673 48,816,494 48,816,494 Loans and receivables: Cash in banks and cash equivalents 1,433,659,318 1,433,659,318 590,816,871 590,816,871 Short-term cash investments 507,750,000 507,750,000 1,237,450,028 1,237,450,028 Installment contracts receivable 2,147,940,019 2,147,940,019 2,157,870,685 2,157,870,685 Other receivables: Accrued interest 7,158,793 7,158,793 9,420,798 9,420,798 Advances to customers 32,255,888 32,255,888 13,051,713 13,051,713 Others 8,531,354 8,531,354 13,457,624 13,457,624 4,137,295,372 4,137,295,372 4,022,067,719 4,022,067,719 Available-for-sale financial assets 1,354,728 1,354,728 1,356,778 1,356,778 P=4,184,508,554 P=4,184,508,554 P=4,072,416,684 P=4,072,416,684 (Forward)

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*SGVMC312904*

2011 2010 Carrying Fair Carrying Fair Value Value Value Value Financial Liabilities Other financial liabilities: Accounts payable and accrued

expenses* P=685,106,482 P=685,106,482 P=530,492,656 P=530,492,656 Notes and loans payable 1,566,460,772 1,566,460,772 1,949,712,998 1,949,712,998 P=2,251,567,254 P=2,251,567,254 P=2,480,205,654 P=2,480,205,654 * Excludes statutory liabilities amounting to P=7,017,664 and P=10,528,816 as of December 31, 2011 and 2010,

respectively. Cash and cash equivalents, short-term cash investments, other receivables, and accounts payable and accrued expenses Due to the short-term nature of the transactions, the fair values of cash and cash equivalents, short-term cash investments, other receivables and accounts payable and accrued expenses approximate their carrying amounts.

Financial assets at fair value through profit or loss and available-for-sale financial assets Financial assets at fair value through profit or loss and available-for-sale financial assets are stated at fair value based on quoted market prices.

Installment contracts receivable The fair value of installment contracts receivable cannot be reasonably estimated due to the significant volume of transactions and the varied terms and maturities.

Notes and loans payable

The fair value of floating rate borrowings is estimated by discounting future cash flows using rates currently available for debt or similar terms and remaining maturities. The fair value approximates their carrying values gross of unamortized transaction costs

Fair Value Hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: • Level 1 - quoted (unadjusted) prices in active markets for identical assets or liabilities;

• Level 2 - other techniques for which all inputs which have a significant effect on the recorded

fair value are observable, either directly or indirectly; and

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

As of December 31, 2011 and 2010, the Group’s financial asset measured at fair value under the Level 1, which consists of available-for-sale financial assets aggregated to P=1.35 million and P=1.36 million, respectively. There are no available-for-sale financial assets that are measured at Level 2 and 3. The Group does not have transfers of financial instruments from Level 1 to Level 2 and Level 2 to Level 3 in 2011 and 2010.

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*SGVMC312904*

26. Current Assets and Current Liabilities The Group’s current assets and current liabilities:

2011 2010 Current Assets: Cash and cash equivalents (Note 4) P=1,433,826,099 P=590,992,564 Short-term cash investments (Note 4) 507,750,000 1,237,450,028 Investments in trust funds (Note 5) 45,691,673 48,816,494 Installment contracts receivable (Note 6) 426,081,252 689,240,077 Other receivables (Note 7) 46,173,659 33,465,928 Real estate properties for sale (Note 8) 1,591,546,671 1,669,928,812 Other assets (Note 12) 16,005,010 21,846,062 P=4,067,074,364 P=4,291,739,965

Current Liabilities: Accounts payable and accrued expenses (Note 13) P=429,547,869 P=433,446,405 Notes and loans payable (Note 14) 1,566,460,772 1,939,712,998 Income tax payable 26,865,178 46,667,784 Pre-need reserves (Note 5) 3,840,320 4,513,460 P=2,026,714,139 P=2,424,340,647

27. Capital Management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit and healthy capital ratios in order to support its business and maximize shareholder value.

The Group manages its capital structure and makes adjustment to it in light of changes in economic conditions. It monitors its use of capital using leverage ratios on both gross debt and net debt basis. Debt consists of short-term and long-term debt. Net debt includes short-term and long-term debt less cash and cash equivalents and short-term cash investments. The Group considers as capital the total equity less net changes in fair values of available-for-sale financial assets. As of December 31, 2011 and 2010, the Group had the following ratios:

2011 2010 Notes and loans payable P=1,566,460,772 P=1,949,712,998

Total equity P=4,601,113,985 P=4,276,898,289 Less net changes in fair values of

available-for-sale financial assets 521,418 512,786 P=4,600,592,567 P=4,276,385,503 Debt to equity ratio 0.34 0.46 Notes and loans payable P=1,566,460,772 P=1,949,712,998 Less: Cash and cash equivalents 1,433,826,099 590,992,564 Short-term cash investments 507,750,000 1,237,450,028 (P=375,115,327) P=121,270,406

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*SGVMC312904*

2011 2010 Total equity P=4,601,113,985 P=4,276,898,289 Less net changes in fair values of

available-for-sale financial assets 521,418

512,786 P=4,600,592,567 P=4,276,385,503 Net debt to equity ratio (0.08) 0.03

As of December 31, 2011 and 2010, the Group has no externally imposed capital requirements.

28. Basic/Diluted Earnings Per Share Basic/diluted earnings per share amounts were computed as follows:

2011 2010 2009 Net income attributable to equity

holders of the Parent

P=441,337,900

P=447,868,346

P=513,099,506 Weighted average number of shares 2,945,323,834 2,945,323,834 2,945,323,834 Basic/diluted earnings

per share (a/b) P=0.15 P=0.15* P=0.17* * After retroactive effect of 20% stock dividend in 2011.

The Company has no potential dilutive common shares for the years ended December 31, 2011, 2010 and 2009. Thus, the basic and diluted earnings per share are the same as of those dates.

29. Business Segments The Group derives its revenues primarily from the sale and lease of real estate properties and

marketing of pension plans. The Group does not have any major customers and all sales and leases of real estate properties and sales of pension plans are made to external customers.

Segment Revenue and Expenses

2011 Sales of Real

Estate Properties Lease of Real

Estate Properties Pension Plan

Operations Total Revenue: Sales of real estate P=1,574,293,008 P=– P=– P=1,574,293,008 Financial income 475,449,808 – 3,244,168 478,693,976 Rent income – 23,077,618 – 23,077,618 Other income 18,746,298 – 2,769,354 21,515,652 Cost of sales 971,074,045 – – 971,074,045 Operating expenses: Personnel 153,571,575 – 1,687,000 155,258,575 Taxes and licenses 48,156,604 3,255,070 611,818 52,023,492 Professional fees 47,840,969 – 766,885 48,607,854 Insurance 17,757,635 – 959 17,758,594 Depreciation 13,882,430 4,960,329 – 18,842,759 Others 66,563,902 1,123,346 5,224,469 72,911,717 Financial expenses 56,570,373 – – 56,570,373 Provision for (benefit from) income tax 99,260,093 4,121,662 (683,283) 102,698,472 Net income 593,811,488 9,617,211 (1,594,326) 601,834,373

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*SGVMC312904*

2010 Sales of Real

Estate Properties Lease of Real

Estate Properties Pension Plan

Operations Total Revenue: Sales of real estate P=1,454,122,153 P=– P=– P=1,454,122,153 Financial income 540,915,543 − 3,604,351 544,519,894 Rent income − 15,520,120 − 15,520,120 Other income 24,838,114 − 3,726,740 28,564,854 Cost of sales 965,266,466 − − 965,266,466 Operating expenses: Personnel 126,854,122 − 1,917,887 128,772,009 Taxes and licenses 47,514,156 2,890,105 330,385 50,734,646 Professional fees 22,439,715 − 1,006,554 23,446,269 Insurance 24,555,236 − 1,347 24,556,583 Depreciation 14,159,262 4,960,323 − 19,119,585 Others 42,954,611 1,333,347 3,747,250 48,035,208 Financial expenses 70,944,398 − − 70,944,398 Provision for (benefit from) income tax 127,863,447 1,900,903 (264,706) 129,499,644 Net income 577,324,397 4,435,442 592,374 582,352,213

2009

Sales of Real Estate Properties

Lease of Real Estate Properties

Pension Plan Operations Total

Revenue: Sales of real estate P=1,880,570,472 P=– P=– P=1,880,570,472 Financial income 518,442,985 – 4,469,703 522,912,688 Rent income – 14,862,065 – 14,862,065 Other income 16,217,493 – 4,783,245 21,000,738 Cost of sales 1,235,462,795 – – 1,235,462,795 Operating expenses: Personnel 154,932,467 – 2,787,969 157,720,436 Taxes and licenses 58,502,723 149,471 185,846 58,838,040 Professional fees 53,300,951 – 311,850 53,612,801 Insurance 24,580,107 – – 24,580,107 Depreciation 15,745,139 3,344,298 – 19,089,437 Others 46,524,457 6,930,052 4,709,671 58,164,180 Financial expenses 96,434,076 – – 96,434,076 Provision for income tax 153,918,409 1,331,474 377,283 155,627,166 Net income 575,829,826 3,106,770 880,329 579,816,925 Segment Assets and Liabilities

December 31, 2011:

Sales of Real

Estate Properties



Total assets P=6,840,810,643 P=986,036,006 P=203,583,428 P=8,030,430,077 Total liabilities 2,628,621,880 5,618,366 48,308,589 2,682,548,835 December 31, 2010:

Sales of Real

Estate Properties



Total assets P=6,781,295,496 P=984,195,703 P=124,236,784 P=7,889,727,983 Total liabilities 2,938,444,753 3,190,867 45,949,389 2,987,585,009

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*SGVMC312904*

30. Income Subject to Income Tax Holiday The Group has been duly registered by the Board of Investments as a New Developer of Low-cost Mass Housing Project on a Non-pioneer Status under the Omnibus Investments Code of 1987 (Executive Order No. 226). The Group is entitled to Income Tax Holiday (ITH) for a period of four years from date of registration or actual start of commercial operations, whichever is earlier. The ITH is limited only to revenue generated from these registered projects. Revenues from units with selling price exceeding P=3.00 million shall not be covered by ITH.

The income (loss) of projects registered under BOI for the year ended December 31, 2011 are as

follows:

CDC - Mandaluyong Executive Mansion III

Income Subject to

Tax Holiday

Adjustment due to Percentage of

Completion

Income based on Percentage of

Completion Revenues from sale of condominium

units

P=155,270,116

P=−

P=155,270,116 Cost of sales (72,738,240) − (72,738,240) Gross profit 82,531,876 − 82,531,876 Other income: Interest income 19,937,565 − 19,937,565 Others 381,591 − 381,591 20,319,156 − 20,319,156 Expenses: Operating expenses 23,657,220 − 23,657,220 Net income P=79,193,812 P=– P=79,193,812

CDC - Makati Executive Tower IV

Income Subject to

Tax Holiday


Completion



units

P=60,692,661

P=28,687,909

P=89,380,570 Cost of sales (33,801,617) (28,876,140) (62,677,757) Gross profit 26,891,044 (188,231) 26,702,813 Other income: Interest income P=8,055,373 P=− P=8,055,373 Others 161,744 − 161,744 8,217,117 − 8,217,117 Expenses: Operating expenses 8,576,336 − 8,576,336 Financial expenses 937,194 − 937,194 9,513,530 − (9,513,530) Net income P=25,594,631 (P=188,231) P=25,406,400

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*SGVMC312904*

CDC - Grand Central Residences

Income Subject to

Tax Holiday


Completion



units P=115,870,236 (P=105,533,116) P=10,337,120 Cost of sales (93,051,219) 84,592,505 (8,458,714) Gross profit 22,819,017 (20,940,611) 1,878,406 Other income: Interest income 6,430,604 − 6,430,604 Others 200,108 − 200,108 6,630,712 − 6,630,712 Expenses: Operating expenses 15,159,463 − 15,159,463 Financial expenses 240,483 − 240,483 15,399,946 − 15,399,946 Net income (loss) P=14,049,783 (P=20,940,611) (P=6,890,828)

CLDI - Manila Residences Bocobo

Income Subject to

Tax Holiday


Completion



units P=112,043,827 P=205,206,314 P=317,250,141 Cost of sales (58,767,728) (135,272,754) (194,040,482) Gross profit 53,276,099 69,933,560 123,209,659 Other income: Interest income 24,973,906 – 24,973,906 Others 254,602 – 254,602 25,228,508 – 25,228,508 Expenses: Operating expenses 15,402,380 – 15,402,380 Financial expenses 1,042,308 – 1,042,308 16,444,688 – 16,444,688 Net income P=62,059,919 P=69,933,560 P=131,993,479

The reconciliation of consolidated income for the year ended December 31, 2011 which is entitled

to the ITH from revenue from sale of residential units with selling price not exceeding P=3.00 million to amounts as shown in consolidated statement of income is presented as follows:

BOI Registered

Activities

Non-BOI Registered Activities

Income As Shown In Consolidated

Statement of Income Revenues from sale of condominium

units P=572,237,947 P=1,002,055,061 P=1,574,293,008 Cost of sales 337,915,193 633,158,852 971,074,045 Gross profit 234,322,754 368,896,209 603,218,963 Other income: Financial income 59,397,448 419,296,528 478,693,976 Rent income − 23,077,618 23,077,618 Others 998,044 20,517,608 21,515,652 60,395,492 462,891,754 523,287,246 (Forward)

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*SGVMC312904*

BOI Registered

Activities

Non-BOI Registered Activities

Income As Shown In Consolidated

Statement of Income Less: Operating expenses P=62,795,399 P=302,607,592 P=365,402,991 Financial expenses 2,219,985 54,350,388 56,570,373 65,015,384 356,957,980 421,973,364 Income before income tax 229,702,862 474,829,983 704,532,845 Provision for income tax – 102,698,472 102,698,472 Net income P=229,702,862 P=372,131,511 P=601,834,373

31. Contingencies The Group is contingently liable for certain lawsuits or claims filed by third parties which are

either pending decisions by the courts or are under negotiation, the outcomes of which are not presently determinable. In the opinion of management and its legal counsel, the eventual liability under these lawsuits or claims, if any, will not have a material effect on the consolidated financial statements. Hence, no provision for contingencies was recognized as of December 31, 2011 and 2010.

INDEPENDENT AUDITORS’ REPORT The Stockholders and the Board of Directors Cityland Development Corporation 2nd Floor, Cityland Condominium 10, Tower I 156 H.V. de la Costa Street Ayala North, Makati City We have audited the accompanying consolidated financial statements of Cityland Development Corporation as at and for the year ended December 31, 2011, on which we have rendered the attached report dated March 21, 2012.

In compliance with Securities Regulation Code Rule 68, we are stating that the above Company has 744 stockholders owning 100 or more shares each. SYCIP GORRES VELAYO & CO. Aileen L. Saringan Partner CPA Certificate No. 72557 SEC Accreditation No. 0096-AR-2 (Group A), March 18, 2010, valid until March 17, 2013 Tax Identification No. 102-089-397 BIR Accreditation No. 08-001998-58-2009, June 1, 2009, valid until May 31, 2012 PTR No. 3174828, January 2, 2012, Makati City March 21, 2012

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, January 25, 2010, valid until December 31, 2012 SEC Accreditation No. 0012-FR-2 (Group A), February 4, 2010, valid until February 3, 2013

A member firm of Ernst & Young Global Limited

*SGVMC312904*

INDEPENDENT AUDITORS’ REPORT The Stockholders and the Board of Directors Cityland Development Corporation 2nd Floor, Cityland Condominium 10, Tower I 156 H.V. de la Costa Street Ayala North, Makati City We have audited in accordance with Philippine Standards on Auditing, the consolidated financial statements of Cityland Development Corporation and its subsidiaries as at December 31, 2011 and 2010 and for each of the three years in the period ended December 31, 2011, included in this Form 17-A, and have issued our report thereon dated March 21, 2012. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the Index to the Consolidated Financial Statements and Supplementary Schedules are the responsibility of the Company’s management. These schedules are presented for purposes of complying with Securities Regulation Code Rule 68, As Amended (2011) and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state, in all material respects, the information required to be set forth therein in relation to the basic financial statements taken as a whole. Aileen L. Saringan Partner CPA Certificate No. 72557 SEC Accreditation No. 0096-AR-2 (Group A), March 18, 2010, valid until March 17, 2013 Tax Identification No. 102-089-397 BIR Accreditation No. 08-001998-58-2009, June 1, 2009, valid until May 31, 2012 PTR No. 3174828, January 2, 2012, Makati City March 21, 2012

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, January 25, 2010, valid until December 31, 2012 SEC Accreditation No. 0012-FR-2 (Group A), February 4, 2010, valid until February 3, 2013

A member firm of Ernst & Young Global Limited

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIESDECEMBER 31, 2011

Schedule A. Financial Assets

Name of Issuing Entity and Description of Each Issue Number of Shares or Principal Amount of Bonds and Notes

Amount Shown in the Balance Sheet

Value Based on Market Quotations at Balance

Sheet Date

Income Received and Accrued

Cash and Cash EquivalentsCash on hand and in banks 14,849,936 123,549Temporary Investments

Rizal Commercial Banking Corporation 278,000,000 3,168,618China Bank Corporation 250,000,000 8,574,163United Coconut Planters Bank 200,450,000 10,263,449East West Bank 137,800,000 1,820,214Allied Bank 136,413,716 4,299,701Planters Development Bank 108,000,000 3,651,097Security Bank 73,000,000 4,188,260Union Bank 67,500,000 4,535,087Amalgamated Bancorporation 54,150,000 2,431,454Philippine Savings Bank 36,200,000 9,127,359Philippine National Bank 23,000,000 6,194,302Bank of Commerce 20,500,000 4,280,887Banco De Oro 19,000,000 5,110,220Philippine Commercial Capital Investments 14,962,447 3,722,234Other maturities during the year -- 4,518,535

1,433,826,099 76,009,129Short-term Cash Investments

Union Bank 191,600,000 3,395,269Philippine Savings Bank 120,800,000 3,271,983Planters Development Bank 64,650,000 1,262,633United Coconut Planters Bank 60,700,000 2,333,727Philippine Commercial Capital Investments 41,000,000 158,637Amalgamated Bancorporation 29,000,000 495,174Other maturities during the year -- 4,112,529

507,750,000 15,029,952Available-for-sale Investments

Ayala Land “B” 33,750 257,513 257,513Ayala Corporation “B” 903 210,463 210,463First Holding “B” 5,126 315,249 315,249

Swift 1,866 220 220Empire East 300,301 177,177 177,177PLDT 74 188,108 188,108Filinvest Land 1,445 1,430 1,430Union Bank 415 27,390 27,390Empire East 300,301 177,178 177,178

1,354,728 1,354,728Investments in Trust Funds 45,691,673 45,691,673Installment Contract Receivables 2,147,940,019 2,147,940,019Others Receivables 47,946,035 47,946,035

4,184,508,554 4,184,508,554

Schedule C. Amounts Receivable from Related Parties which are Eliminated during Consolidation of Financial Statements

Name andDesignation of Debtor

Balance at beginning of period Additions Amounts collected

Amounts written-off Current Non-current

Balance at end of period

CI (parent company) 2,959,849 9,807,085 12,766,934 -- -- -- --CLDI (subsidiary) 780,829 29,357,889 29,078,684 -- 1,060,034 - 1,060,034CPI (subsidiary) -- 60,215 60,215 -- -- -- --CAI (affiliate) 10,000 1,385 11,385 -- -- -- --CLHI (affiliate) 109 109 -- -- -- --

Parent Company’s transactions with CDC, CLDI, CPI, CAI and CLHI are eliminated in the consolidated balance sheets.

Schedule H. Capital Stock

Title of Issue Number of Shares Authorized

Number of Shares Issued and

Outstanding

Number of Shares Reserved for Options, Warrants, Conversion

and Other Rights

Number of Shares Held By

Affiliates Directors, Officers and Employees

Others

Common Stock – P1 par value 3,000,000,000 2,945,323,834 -- 1,486,288,693 739,419,963 719,615,178

Annex “A”

CITYLAND DEVELOPMENT CORPORATIONRETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATIONAS OF DECEMBER 31, 2011

The SEC issued Memorandum Circular No. 11 series of 2008 on December 5, 2008, which provides guidance on the determination of retained earnings available for dividend declaration.

The table below presents the reconciliation of retained earnings available for dividend declaration as of December 31, 2011:

Unappropriated, Retained Earnings as restated, beginning 1,157,736,169Adjustments: net of tax

Deferred tax assets (3,442,139)Unrealized deemed cost adjustment on real estate properties (350,753,152)Treasury shares (28,524,728) (382,720,019

Unappropriated, Retained Earnings available for dividend declaration, beg. 775,016,150Net income during the period closed to retained earnings 330,134,054Add (Less): Non-actual / unrealized loss (income) net of tax

Deemed cost adjustment on real estate properties realized through depreciation and sale 34,913,731Movement in deferred tax assets (1,378,505)

Net income actually earned during the period 363,669,280Add (Less):

Dividends declarations during the period (613,609,198)Unappropriated, Retained Earnings Available for Dividends

Declaration, Ending 525,076,232

Annex “B”CITYLAND DEVELOPMENT CORPORATIONMAP OF THE RELATIONSHIPS OF THE COMPANIES WITHIN THE GROUP

50.40%

29.54% 9.18%

49.73% 90.81%

CITYLAND, INC. (CI) (ultimate parent)

CITY & LAND DEVELOPERS, INCORPORATED (CLDI)

(subsidiary of CDC)

CITYPLANS, INCORPORATED (CPI) (subsidiary of CDC)

CREDIT & LAND HOLDINGS, INCORPORATED (CLHI)

(subsidiary of CI)

CITYADS, INC. (CAI) (subsidiary of CI)

CITYLAND DEVELOPMENT CORPORATION (CDC) (subsidiary of CI)

100.00% ↓

100.00% ↓

“Annex C”

CITYLAND DEVELOPMENT CORPORATIONSUPPLEMENTARY SCHEDULE OF ALL EFFECTIVE STANDARDS AND INTERPRETATIONS (PART 1, 4J)

List of Philippine Financial Reporting Standards (PFRSs) [which consist of PFRSs, Philippine Accounting Standards (PASs) and Philippine Interpretations] and Philippine Interpretations Committee (PIC) Q&As effective as of December 31, 2011:

PFRSs and PIC Q&As Adopted/Not adopted/Not applicablePFRS 1, First-time Adoption of Philippine Financial Reporting Standards

Not Applicable

PFRS 2, Share-based Payment Not ApplicablePFRS 3, Business Combinations Not ApplicablePFRS 4, Insurance Contracts Not ApplicablePFRS 5, Non-current Assets Held for Sale and Discontinued Operations

Not Applicable

PFRS 6, Exploration for and Evaluation of Mineral Resources Not ApplicablePFRS 7, Financial Instruments: Disclosures AdoptedPFRS 8, Operating Segments AdoptedPAS 1, Presentation of Financial Statements AdoptedPAS 2, Inventories AdoptedPAS 7, Statement of Cash Flows AdoptedPAS 8, Accounting Policies, Changes in Accounting Estimates and Errors

Adopted

PAS 10, Events after the Reporting Period AdoptedPAS 11, Construction Contracts Not ApplicablePAS 12, Income Taxes AdoptedPAS 16, Property, Plant and Equipment AdoptedPAS 17, Leases AdoptedPAS 18, Revenue AdoptedPAS 19, Employee Benefits AdoptedPAS 20, Accounting for Government Grants and Disclosure of Government Assistance

Not Applicable

PAS 21, The Effects of Changes in Foreign Exchange Rates AdoptedPAS 23, Borrowing Costs AdoptedPAS 24, Related Party Disclosures AdoptedPAS 26, Accounting and Reporting by Retirement Benefit Plans

Not Applicable

PAS 27, Consolidated and Separate Financial Statements AdoptedPAS 28, Investments in Associates Not ApplicablePAS 29, Financial Reporting in Hyperinflationary Economies Not ApplicablePAS 31, Interests in Joint Ventures Not ApplicablePAS 32, Financial Instruments: Presentation AdoptedPAS 33, Earnings per Share AdoptedPAS 34, Interim Financial Reporting AdoptedPAS 36, Impairment of Assets AdoptedPAS 37, Provisions, Contingent Liabilities and Contingent Assets

Adopted

PAS 38, Intangible Assets Not ApplicablePAS 39, Financial Instruments: Recognition and Measurement

Adopted

PAS 40, Investment Property AdoptedPAS 41, Agriculture Not ApplicablePhilippine Interpretation IFRIC–1, Changes in Existing Decommissioning, Restoration and Similar Liabilities

Not Applicable

Philippine Interpretation IFRIC–2, Members' Shares in Co- Not Applicable

PFRSs and PIC Q&As Adopted/Not adopted/Not applicableoperative Entities and Similar InstrumentsPhilippine Interpretation IFRIC–4, Determining whether an Arrangement contains a Lease

Adopted

Philippine Interpretation IFRIC–5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

Not Applicable

Philippine Interpretation IFRIC–6, Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

Not Applicable

Philippine Interpretation IFRIC–7, Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies

Not Applicable

Philippine Interpretation IFRIC–9, Reassessment of Embedded Derivatives

Not Applicable

Philippine Interpretation IFRIC–10, Interim Financial Reporting and Impairment

Adopted

Philippine Interpretation IFRIC–12, Service Concession Arrangements

Not Applicable

Philippine Interpretation IFRIC–13, Customer Loyalty Programmes

Not Applicable

Philippine Interpretation IFRIC–14, PAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

Adopted

Philippine Interpretation IFRIC–16, Hedges of a Net Investment in a Foreign Operation

Not Applicable

Philippine Interpretation IFRIC–17, Distributions of Non-cash Assets to Owners

Adopted

Philippine Interpretation IFRIC–18, Transfers of Assets from Customers

Not Applicable

Philippine Interpretation IFRIC–19, Extinguishing Financial Liabilities with Equity Instruments

Adopted

Philippine Interpretation SIC–7, Introduction of the Euro Not ApplicablePhilippine Interpretation SIC–10, Government Assistance - No Specific Relation to Operating Activities

Not Applicable

Philippine Interpretation SIC–12, Consolidation - Special Purpose Entities

Not Applicable

Philippine Interpretation SIC–13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers

Not Applicable

Philippine Interpretation SIC–15, Operating Leases – Incentives

Not Applicable

Philippine Interpretation SIC–21, Income Taxes - Recovery of Revalued Non-Depreciable Assets

Adopted

Philippine Interpretation SIC–25, Income Taxes - Changes in the Tax Status of an Entity or its Shareholders

Not Applicable

Philippine Interpretation SIC–27, Evaluating the Substance of Transactions Involving the Legal Form of a Lease

Not Applicable

Philippine Interpretation SIC–29, Service Concession Arrangements: Disclosures

Not Applicable

Philippine Interpretation SIC–31, Revenue - Barter Transactions Involving Advertising Services

Not Applicable

Philippine Interpretation SIC–32, Intangible Assets - Web Site Costs

Not Applicable

PIC Q&A No. 2006-01: PAS 18, Appendix, paragraph 9 – Revenue recognition for sales of property units under pre-completion contracts

Adopted

PIC Q&A No. 2006-02: PAS 27.10(d) – Clarification of criteria for exemption from presenting consolidated financial statements

Adopted

PIC Q&A No. 2007-03: PAS 40.27 – Valuation of bank real Not Applicable

PFRSs and PIC Q&As Adopted/Not adopted/Not applicableand other properties acquired (ROPA)PIC Q&A No. 2008-01 (Revised): PAS 19.78 – Rate used in discounting post-employment benefit obligations

Not Applicable

PIC Q&A No. 2008-02: PAS 20.43 – Accounting for government loans with low interest rates under the amendments to PAS 20

Not Applicable

PIC Q&A No. 2009-01: Framework.23 and PAS 1.23 – Financial statements prepared on a basis other than going concern

Not Applicable

PIC Q&A No. 2010-01: PAS 39.AG71-72 – Rate used in determining the fair value of government securities in the Philippines

Adopted

PIC Q&A No. 2010-02: PAS 1R.16 – Basis of preparation of financial statements

Adopted

PIC Q&A No. 2011-01: PAS 1.10(f) – Requirements for a Third Statement of Financial Position

Adopted

INDEX TO EXHIBITS

Form 17-A

No. Page No.

(3) Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession

*

(5) Instrument Defining the Rights of Security Holders, Including Indentures *

ARTICLE IV : CERTIFICATE OF STOCK 102 ARTICLE V : TRANSFER OF SHARES OF STOCK 102 ARTICLE VII : STOCKHOLDERS MEETING 102 ARTICLE VIII : AMENDMENTS 103

(8) Voting Trust Agreement *

(9) Material Contracts *

(10) Annual Report to Security Holders, Form 11-Q or Quarterly Report to Security Holders

*

(13) Letters re Change in Certifying Accountant *

(16) Report Furnished to Security Holders *

(18) Subsidiaries of the Registrant 103

(19) Published Report Regarding Matters Submitted to Vote of Security Holders *

(20) Consent of Experts and Independent Counsel *

(21) Power of Attorney *

(29) Additional Exhibits *

* These exhibits are either not applicable to the Company or require no answer.

ARTICLE IVCERTIFICATE OF STOCK

Each stockholder whose share of stock has been paid in full shall be entitled to a stock certificate or certificates for such shares of stock.

The certificate of stock shall be in such form and design as may be determined by the Board of Directors. Every certificate shall be signed by the President and countersigned by the Secretary and shall be sealed with the Corporate seal and shall state on its face its number, the date of issue, the number of shares for which it was issued, and the name of the person in whose favor it was issued.

Each share of stock will represent a pro-rate equity in the assets of the Corporation and the rights represented in each and every share of stock shall be identical in all respects and shall be stated herein.

The stockholders shall have no pre-emptive right to subscribe to any issue or disposition of shares of any class and all the stockholders, their transferees and/or assignees take the shares subject to this condition.

ARTICLE VTRANSFER OF SHARES OF STOCK

Shares of stock shall be transferred by delivery of the certificate endorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer, but no transfer shall be valid except as between the parties until the transfer is annotated in the books of the Corporation.

No surrendered certificate shall be cancelled by the Secretary before a new certificate in lieu thereof is issued, and the Secretary shall keep the cancelled certificate as a proof of substitution. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit of that fact and shall advertise the same in such manner as the Board may require, and shall give the Corporation a bond of indemnity, in the form and with the sureties satisfactory to the Board, in the sum at least double the par value of such certificate in lieu of the one alleged to be lost or destroyed, always subject to the approval of the Board, and provided further that the requirements of Republic Act No. 201 are first complied with.

ARTICLE VIISTOCKHOLDERS’ MEETING

1. Place – All meetings of the stockholders shall be held at the principal office of the Corporation, unless written notices of such meetings should fix another place within the City of Manila.

2. Proxy – Stockholders may vote at all meetings either in person or by proxy. All proxies, voting trusts, and other voting arrangements must be received by the Corporate Secretary or the Assistant Corporate Secretary at the corporation's head office not later than five (5) working days before the date of the meeting. Before the deadline such proxies, voting trusts and other voting arrangements may be accepted or rejected by a special committee of inspectors if they do not have the appearance of prima facie authenticity.

3. Quorum – No stockholders’ meeting shall be competent to decide any matter or to transact any business unless a majority of the subscribed capital stock is present or represented thereat, except in those cases in which the Corporation law requires the affirmative vote of a greater proportion.

4. Vote – Voting upon all questions at all meetings of the stockholders shall be by shares of stock and not per capital.

5. Annual Meeting – The annual meeting of the stockholders shall be held on the first Tuesday of June of each calendar year, when the Board of Directors shall be elected by plurality of votes by ballot system or viva voce.

Written notice of the annual meeting of the Corporation shall be sent to each registered stockholder at least fifteen (15) working days prior to the date of such meeting. Waiver of such notice may only be made in writing.

Only stockholders of record at the close of business hours thirty (30) calendar days prior to the date of such meeting shall be entitled to receive the notice of said meeting and to vote and be voted thereat.

6. Special Meeting – Special meetings of the stockholders may be called by the President at his discretion, or on demand of stockholders holding the majority of the subscribed capital stock of the Corporation.

A written notice stating the day and place of the meeting and the general nature of the business to be transacted shall be sent to each stockholder at least fifteen (15) working days before the date of such special meeting; provided, that this requisite may be waived in writing by the stockholders.

Only stockholders of record at the close of business hours thirty (30) calendar days prior to the date of such meeting shall be entitled to receive the notice of said meeting and to vote and be voted thereat.

7. Minutes – Minutes of all meeting of the stockholders shall be kept and carefully preserved as a record of the business transacted at such meetings. The minutes shall contain such entries as may be required by law.

ARTICLE VIII

AMENDMENTS

The provisions of these By-Laws may be amended or repealed by a majority vote of the Board of Directors and the owners of at least a majority of the outstanding capital stock at a regular or special meeting called for the purpose.

The power to amend or repeal these By-Laws may be delegated to the Board of Directors in the manner provided by law.

EXHIBIT 18 SUBSIDIARIES OF THE REGISTRANT

Cityland Development Corporation has one (1) majority-owned subsidiaries, as follow:

Name Jurisdiction

CITYPLANS, INC. Philippines

I

MBMP4dkhrdFfuk6Pbd'

irnb€!ttutr!@didi!6tu.n

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

UNAUDITED2nd Qtr2012

2nd Qtr2011

For the 6-month ending June ‘12


REVENUESSales from real estate 358,372,032 284,298,680 713,382,093 739,874,228Financial income (Note 18) 109,717,701 120,785,434 224,413,352 244,139,705Rental income 6,899,722 5,192,045 13,846,282 10,341,936Other revenues 4,791,090 5,513,133 10,226,483 9,251,698

479,780,545 415,789,292 961,868,210 1,003,607,567

EXPENSESCost of sales 224,342,530 159,494,740 439,957,685 448,137,636Operating expenses (Note 15) 82,845,948 92,426,425 187,171,794 211,690,699Financial expenses (Note 18) 12,271,652 14,117,895 23,850,372 27,777,452

319,460,130 266,039,060 650,979,851 687,605,787

INCOME BEFORE INCOME TAX 160,320,415 149,750,232 310,888,359 316,001,780

PROVISION FOR INCOME TAX (Note 20) 31,924,261 18,817,339 56,422,755 46,681,419

NET INCOME 128,396,154 130,932,893 254,465,604 269,320,361Attributable to: Equity holders of the parent 178,910,253 206,489,723 Minority interests 75,555,351 62,830,638

EARNINGS PER SHARE 0.061 0.070*After retroactive effect of 20% stock dividends in 2011.

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

UNAUDITED2nd Qtr2012

2nd Qtr2011


For the 6-monthending June ‘11

Net Income 128,396,154 130,932,893 254,465,604 269,320,361Other comprehensive income (loss):Changes in fair value of available-for-sale

financial assets (262,745) (1,140,488) (381,020) 27,738Total other comprehensive income (loss) (262,745) (1,140,488) (381,020) 27,738Total Comprehensive Income – net 128,133,409 129,792,405 254,084,584 269,348,099

Attributable to:Equity holders of the parent 178,431,763 206,524,574Minority interests 75,652,821 62,823,525

Earnings per share 0.061 0.070*After retroactive effect of 20% stock dividends in 2011.

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Capital stockStock dividends

distributableAdditional

paid-in capital

Net changes in fair value

of investmentsRetained earnings

Treasury stock

Minority interests Total

Balance, January 1 2,947,261,781 - 7,277,651 521,418 1,678,459,048 (32,405,913) 746,767,257 5,347,881,242Cash dividends (88,359,714) (50,976,970) (139,336,684)Parent Company shares of stocks held

by CPI’s Inv in trust fund (16,544) (16,544)Transfer of rev. inc. through sale &

depreciation5,068,808 5,068,808

Total comprehensive income (478,490) 178,910,253 75,652,821 254,084,584Balance as of June 30, 2012 2,947,261,781 - 7,277,651 42,928 1,774,078,395 (32,422,457) 771,443,108 5,467,681,406

Capital stockStock dividends

distributableAdditional

paid-in capital

Net changes in fair value

of investmentsRetained earnings

Treasury stock

Minority interests Total

Balance, January 1 2,456,374,741 -- 7,277,651 512,786 1,844,992,886 (32,259,775) 625,244,685 4,902,142,974Cash dividends (122,721,840) (39,648,772) (162,370,612)Stock dividends 490,887,040 (490,887,040) --Fractional shares (318) (318)Parent Company shares of stocks held

by CPI’s Inv in trust fund (206,800) (206,800)Transfer of rev. inc. through sale &

depreciation-- --

3,278,562 3,278,562Total comprehensive income -- -- 34,851 206,489,723 62,823,525 269,348,099Balance as of June 30, 2011 2,456,374,741 490,887,040 7,277,651 547,637 1,441,151,973 (32,466,575) 648,419,438 5,012,191,905

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited2nd Qtr2012

2nd Qtr2011

As of June2012

As of June 2011

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax 160,320,415 149,750,232 310,888,359 316,001,780Adjustments for:

Interest expense – net of amounts capitalized 12,491,777 13,560,028 23,850,372 26,842,558Depreciation and amortization 4,687,782 4,784,102 9,312,707 9,592,906Interest income (109,701,526) (120,765,351) (224,393,977) (244,117,371)Trust fund income (730,895) (568,026) (1,361,990) (1,082,489)Dividend income (16,175) (20,083) (19,375) (22,334)Decrease in pre-need reserves (4,217,313) (1,457,073) (3,773,215) (2,619,682)

Changes in operating assets and liabilitiesDecrease (increase) in:

Installment contracts receivable – net 31,799,155 112,589,514 114,074,661 83,781,487Other receivables 37,997,627 5,410,209 17,218,142 (945,546)Real estate properties for sale 110,326,570 45,164,143 266,109,256 168,235,475Real estate properties for future development 3,675,401 (216,333) (1,861,877) (794,205)

Increase (decrease) in:Accounts payable and accrued expenses (102,866,883) (59,845,300) (214,521,504) (53,382,367)

Net cash from (used in) operation 143,765,935 148,386,062 295,521,559 301,490,212Interest received 109,321,142 122,648,062 227,024,588 248,495,816Income taxes paid (56,409,222) (77,797,452) (72,720,256) (95,619,745)Net cash flows from(used in) operating activities 196,677,855 193,236,672 449,825,891 454,366,283CASH FLOWS FROM INVESTING ACTIVITIESDividends received 16,175 20,083 19,375 22,334Additions to property and equipment -- -- (1,257,143) --Proceeds from (purchase of) short-term cash inv. -- 631,650,000 507,750,000 1,103,650,028Purchase of available-for-sale investments (2,531) -- (2,531) --Contributions to trust funds (70,867) 2,075,424 (529,673) 3,975,488Withdrawals from trust funds 3,365,216 (119,131) 5,581,867 (214,405)Decrease (increase) in:

Investment properties (771,328) (182,093) (1,019,259) (622,760)Other assets (78,758) 1,114,454 116,804 6,266,903

Net cash flows from (used in) investing activities 2,457,907 634,558,737 510,659,440 1,113,077,588CASH FLOWS FROM FINANCING ACTIVITIESNet proceeds from (payment to) availment of loans 36,158,083 (1,581,218) (27,359,592) (230,778,102)Interest paid (11,387,917) (12,012,069) (22,939,248) (29,539,032)Cash dividends paid (28,964) (13,089) 721,292 (18,787)Net cash flows used in financing activities 24,741,202 (13,606,376) (49,577,548) (260,335,921)NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 223,876,964 814,189,033 910,907,783 1,307,107,950CASH AND CASH EQUIVALENTS AT

BEGINNING OF PERIOD 2,120,856,918 1,083,911,481 1,433,826,099 590,992,564CASH AND CASH EQUIVALENTS AT END OF

THE PERIOD 2,344,733,882 1,898,100,514 2,344,733,882 1,898,100,514

CITYLAND DEVELOPMENT CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

City land Development Corporation (the Parent Company) was incorporated in the Philippines on January 31, 1978. It has two domestic subsidiaries, Cityplans, Incorporated (CPI) and City & Land Developers, Incorporated (CLDI). The Parent Company’s and its subsidiaries’ (the Group) primary business purpose is to acquire, develop, improve, subdivide, cultivate, lease, sublease, sell, exchange, barter and/or dispose of agricultural, industrial, commercial, and residential and other real properties, as well as to construct, improve, lease, sublease, sell and/or dispose of houses, buildings and other improvements thereon, and to manage and operate subdivisions and housing projects or otherwise engage in the financing and trading of real estate. In addition, CPI is engaged in the business of establishing, organizing, developing, maintaining, conducting, operating, marketing and selling educational assistance and pension plans. The Company is 50.40% owned by Cityland, Inc. (CI), the ultimate parent company incorporated in the Philippines, which also prepares consolidated financial statements.

The average number of employees of the Group was 216 as of June 30, 2012 and 220 as of December 31, 2011. The Group’s registered office and principal place of business is at 2nd floor, Cityland Condominium 10, Tower 1, 156 H.V. Dela Costa Street, Ayala North, Makati City.

CPI’s securities, amounting to 600 million worth of pension plans, are registered with the Securities and Exchange Commission (SEC) subject to the terms and conditions provided in SEC Circular No. 2, Series of 1984. CPI obtained from the SEC the permit to sell the said pension plans. As of June 30, 2012 and December 31, 2011, CPI has sold about P 297M worth of securities, respectively.

2. Summary of Significant Accounting and Financial Reporting Policies

Basis of PreparationThe consolidated financial statements of the Group have been prepared using the historical cost basis, except for investments in trust fund and available-for-sale financial assets that have been measured at fair values and certain items of property and equipment which are stated at revalued amounts. These consolidated financial statements are presented in Philippine peso (Peso), which is the Parent Company’s functional currency, and rounded to the nearest Peso except when otherwise indicated.

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

Changes in Accounting PoliciesThe accounting policies adopted are consistent with those of the previous financial year except for the adoption of the following new and amended Philippine Accounting Standards (PAS), PFRS and new Philippine Interpretations based on International Financial Reporting Interpretations Committee (IFRIC) interpretations effective in 2011. The adoption of the following revised PAS is relevant but does not have a significant impact on the consolidated financial statements:

• Revised PAS 24, Related Party Disclosures, simplifies the identification of related party relationships, particularly in relation to significant influence and joint control. The amendment emphasizes a symmetrical view on related party relationships as well as clarifies in which circumstances persons and key management personnel affect the related party relationships of an entity. The amendment also introduces an exemption from the general related party disclosure requirements, for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position and performance of the Group.

The adoption of the following new and amended PFRS, PAS and Philippine Interpretations are either not relevant to or have no significant impact on the consolidated financial statements:

• Amended PAS 32, Financial Instruments: Presentation - Clarification of Rights Issues• Amended IFRIC 14, Prepayments of a Minimum Funding Requirement

• Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments

Improvements to PFRSThe annual improvements process has been adopted by the International Accounting Standards Board (IASB) to deal with non-urgent but necessary amendments to PFRS. The following summarizes the amendments that are effective on or after January 1, 2011. The adoption of the following amendments is relevant but does not have a significant impact on the consolidated financial statements:

• PFRS 7, Financial Instruments Disclosures, emphasizes the interaction between quantitative and qualitative disclosures and the nature and extent of risks associated with financial instruments.

• PAS 1, Presentation of Financial Statements, clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements.

• PAS 27, Consolidated and Separate Financial Statements (Amended), clarifies that the consequential amendments from PAS 27 made to PAS 21, The Effect of Changes in Foreign Exchange Rates, PAS 28, Investment in Associates, and PAS 31, Interest in Joint Ventures, apply prospectively.

• PAS 34, Interim Financial Reporting, provides guidance to illustrate how to apply disclosure principles in PAS 34 and requires additional disclosures on: (a) the circumstances likely to affect fair values of financial instruments and their classification, (b) transfers of financial instruments between different levels of the fair value hierarchy, (c) changes in the classification of financial assets and (d) changes in contingent liabilities and assets.

Other amendments resulting from the following 2011 improvements to PFRS, PAS and Philippine Interpretations did not have any significant impact on the accounting policies, financial position or performance of the Group.

• PFRS 3, Business Combinations• Philippine Interpretation IFRIC 13, Customer Loyalty Programmes

Basis of ConsolidationThe consolidated financial statements consist of the financial statements of the Parent Company and its subsidiaries as of December 31 of each year. The financial statements of the subsidiaries are prepared for the same reporting year as the Parent Company using consistent accountingpolicies.

The subsidiaries and the percentage of ownership are as follows:

Percentage of Nature ofOwnership Activity

CPI 90.81 Pre-need pension plansCLDI 49.73 Real estate

Subsidiaries are entities over which the Parent Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of any potential voting rights that are currently exercisable or convertible are considered when assessing whether the Parent Company controls another entity.

Subsidiaries are consolidated from the date on which control is transferred to the Parent Company and cease to be consolidated from the date on which control is transferred out of the Parent Company.

The accounts of CLDI were consolidated since the Parent Company, some of its stockholders and affiliates (whose stockholders also own equity ownership in the Parent Company) collectively own more than 50% of the equity of CLDI, thereby giving the Parent Company effective control over the financial and operating policies of CLDI.

The equity, net income and total comprehensive income attributable to non-controlling interests of the consolidated subsidiaries are shown separately in the consolidated balance sheet, consolidated statement of income and consolidated statement of comprehensive income, respectively.

All significant intercompany accounts and transactions are eliminated.

Revenue and Costs RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the amount of revenue can be reliably measured. Revenue is measured at the fair value of the consideration received excluding VAT. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognized:

Sales of real estate propertiesSales of condominium units and residential houses where the Group has material obligations under the sales contract to provide improvements after the property is sold are accounted for under the percentage of completion method. Under this method, revenue on sale is recognized as the related obligations are fulfilled.

Revenue from sales of completed residential lots and housing units, where a sufficient down payment has been received, the collectability of the sales price is reasonably assured, the refund period has expired, the receivables are not subordinated and the seller is not obligated to complete improvements, is accounted for under the full accrual method. If the criterion of full accrual method was not satisfied, any cash received by the Group is included in the “Accounts payable and accrued expenses” in the consolidated balance sheet until all the conditions for recording a sale are met.

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

In addition, cost of real estate sales of 100% completed projects represents the proportionate share of the sold units to the total of the development cost which includes land, direct materials, labor cost and other indirect costs related to the project. If the project is still under construction, the cost of real estate sales of the sold units is multiplied by the percentage of completion. The cost referred to is the same total development costs and not only actual expenditures. The percentage of completion is based on the technical evaluation of the project engineers as well as management’s monitoring costs, progress and improvements of the projects.

Future Changes in Accounting PoliciesThe Group will adopt the following standards and interpretations when these become effective subsequent to 2011. Except as otherwise indicated, the Group does not expect the adoption of these new, and amended and improvements to PFRS, PAS and Philippine Interpretations to have significant impact on the consolidated financial statements.Effective in 2012• PFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements, requires

additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the consolidated financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities.

• Amended PAS 12, Income Taxes - Deferred Taxes: Recovery of Underlying Assets, introduces a rebuttable presumption that deferred tax on investment properties measured at fair value will be recognized on a sale basis, unless an entity has a business model that would indicate the investment property will be consumed in the business.

Effective in 2013• PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities, requires an

entity to disclose information about rights of offset and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are offset in accordance with PAS 32.

• PFRS 10, Consolidated Financial Statements, replaces the portion of PAS 27 that addresses the accounting for consolidated financial statements. 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, replaces PAS 31, Interests in Joint Ventures and SIC-13, Jointly-controlled Entities - Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method.

• PFRS 12, Disclosure of Interests with Other Entities, 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 and PAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required.

• PFRS 13, Fair Value Measurement, 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.

• PAS 1, Financial Statements Presentation - Presentation of Items of Other Comprehensive Income, changes the grouping of items presented in other comprehensive income (OCI). Items that would be reclassified (or recycled) to profit or loss at a future point in time (e.g., upon derecognition or settlement) would be presented separately from items that will never be reclassified

• Revised PAS 19, Employee Benefits, includes a number of amendments that range from fundamental changes to simple clarifications and re-wording.

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

• PAS 28, Investments in Associates and Joint Ventures. As a consequence of the new PFRS 11 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.

• Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (“production stripping costs”) and provides guidance on the recognition of production stripping costs as an asset and measurement of the stripping activity asset.

Effective in 2014• Amendments to PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial

Liabilities, clarifies the meaning of “currently has a legally enforceable right to offset” 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.

Effective in 2015• PFRS 9, Financial Instruments - Classification and Measurement, as issued reflects the first phase on the

replacement of PAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in PAS 39. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.

After consideration of the result of its impact evaluation, the Group has decided not to early adopt either PFRS 9 (2009) of PFRS 9 (2010) for its 2012 financial reporting, thus the interim report as of March 31, 2012 does not reflect the application of the requirements and does not contain a qualitative and quantitative discussion of the result of the company’s impact evaluation.

Standard Issued but not yet Effective• Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estates, 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. The SEC and the Financial Reporting Standards Council (FRSC) have deferred the effectivity of this interpretation until the final Revenue standard is issued by IASB and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed. The Group will quantify the effect when the final Revenue standard is issued.

Additional disclosures required by these amendments will be included in the consolidated financial statements when these amendments are adopted.

Events After the Balance Sheet DatePost year-end events that provide additional information about the Group’s position at the end of reporting period (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.

Segment ReportingThe Group’s operating business are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Group’s asset-producing revenues are located in the Philippines (i.e., one geographical location). Therefore, geographical segment information is no longer presented.

3. Significant Accounting Judgments and Estimates

The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

In the opinion of management, these consolidated financial statements reflect all adjustments necessary to present fairly the results for the period presented. Actual results could differ from such estimates.

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

4. Cash and Cash Equivalents

June 2012 Dec. 2011Cash on hand and in banks 9,683,163 14,849,936Cash equivalents 2,335,050,719 1,418,976,163

2,344,733,882 1,433,826,099

Cash in banks earn interest at the respective bank deposit rates. Short-term deposits are made for varying periods up to three months depending on the immediate cash requirements of the Group and earn interest at the respective short-term investment rates.

Short-term cash investments amounting 507.75 million as of December 31, 2011, are investments in banks with maturities of more than three months to one year from dates of acquisition and earn interest at the prevailing market rates.

5. Investment in Trust Funds

Pursuant to the provisions of SEC Memorandum Circular No. 6, Guidelines on the Management of the Trust Fund of Pre-Need Corporation (SEC Circular No. 4), the SEC requires, among others, that companies engaged in the sale of pre-need plans and similar contracts set up a trust fund to guarantee the delivery of property or performance of service in the future. Withdrawals from these trust funds are limited to, among others, payments of pension plan benefits, bank charges and investment expenses in the operation of the trust funds, termination value payable to planholders, contributions to the trust funds of cancelled plans and final taxes on investment income of the trust funds.

6. Installment Contracts Receivable - Net

Installment contracts receivable arise from sales of real estate properties.

The installment contracts receivable on sales of real estate are collectible in monthly installments for periods ranging from one to 10 years and bear monthly interest rates of 0.67% to 2% computed on the diminishing balance.

The portion due within one year (net of current unrealized gross profit, estimated development cost for sold units and deferred vat) amounted to 539.14 million in June 2012 and 426.08 million in December 2011. The Group and CI entered into a contract of guaranty under Retail Guaranty Line in the amount of 2,000.00 million in 2010 with Home Guaranty Corporation (HGC). The Group paid a guarantee premium of 0.90%, based on outstanding principal balance of the receivables enrolled in 2011 and 2010.

7. Other Receivables

This account consists of:

The portion due within one year amounted to 29.10 million in June 2012 and 46.17 million in December 2011.

8. Real Estate Properties for Sale and Held for Future Development

Real estate properties for sale consist of cost incurred in the development of condominium units and residential houses for sale. This includes borrowing costs incurred in connection with the development of the properties. The capitalization rates used to determine the amount of borrowing costs eligible for capitalization were 3.76% and 3.86% as of June 2012 and December 2011, respectively.

Cost of real estate sales include all direct materials and labor cost and those indirect costs related to contract performance. In addition, cost of real estate sales of 100% completed projects represents the proportionate share of the sold units to the total of the development cost which includes land, direct materials, labor cost and other indirect costs related to the project. If the project is still under construction, cost of real estate sales of the sold unit is multiplied by the percentage of completion. The percentage of completion is based on the technical evaluation of the project engineers as well as management’s monitoring of costs, progress and improvements of the projects.

Real estate properties held for future development includes land properties reserved by the Group for its future condominium projects. During 2011 and 2010, the Group transferred portion of its real estate properties held for future development to its newly launched projects accounted for under real estate properties for sale.

9. Investment Properties

Investment properties are rented out at different rates generally for a one-year term renewable every year. These real estate properties were appraised by independent firms of appraisers at various dates. Some investment properties of the Group were used as collateral for loans availed from the omnibus credit line.

10. Property and Equipment

Office Premises

Furniture, Fixtures and

Office Equip.Transportation

EquipmentTotal

June 2012Total

Dec. 2011At costBeginning balances -- 28,530,802 5,715,606 34,246,408 34,246,408Additions (disposals) -- -- 1,257,143 1,257,143 --Ending balances -- 28,530,802 6,972,749 35,503,551 34,246,408Accumulated depreciationBeginning balances -- 27,914,576 4,258,122 32,172,698 30,928,568Depreciation for the year -- 208,080 305,314 513,394 1,244,130Disposals -- -- -- -- --Ending balances -- 28,122,656 4,563,436 32,686,092 32,172,698Net Book Value -- 408,146 2,409,313 2,817,459 2,073,710At revalued amountsBeginning balances 259,448,852 -- -- 259,448,852 259,448,852

June 2012 Dec. 2011Customers 17,449,311 32,255,888Contractors 1,713,925 4,289,589Accrued interest 4,528,182 7,158,793Others 8,695,453 8,531,354

32,386,871 52,235,624

Ending balances 259,448,852 -- -- 259,448,852 259,448,852

Accumulated depreciationBeginning balances 206,127,471 -- -- 206,127,471 193,489,171Depreciation for the year 6,319,149 -- -- 6,319,149 12,638,300Ending balances 212,446,620 -- -- 212,446,620 206,127,471Net Revalued Amount 47,002,232 -- -- 47,002,232 53,321,381Total 47,002,232 408,146 2,409,313 49,819,691 55,395,091

As of June 30, 2012 the balances at cost of the office premises above are as follows:

March 2012 Dec. 2011Office premises 61,858,970 61,858,970Less: Accumulated depreciation 48,205,346 46,672,058

13,653,624 15,186,912

Office premises were appraised by independent firms of appraisers on various dates. The cost of fully depreciated property and equipment amounted to 29.74 million as of June 30, 2012.

11. Other Assets

June 2012 Dec. 2011Available-for-sale financial assets 1,768,953 1,354,728Retirement plan assets 10,887,820 10,887,820Deposits and others 14,819,541 14,936,345

27,476,314 27,178,893

12. Accounts Payable and Accrued Expenses

June 2012 Dec. 2011Trade payables 60,943,016 63,810,250Deposits 17,808,877 24,469,238Accrued expenses:

Development costs 342,664,009 542,275,766Director’s fee 18,188,727 30,879,836Interest payable 8,736,247 7,794,265Taxes, premiums, others 11,850,001 3,119,398

Withholding taxes 2,668,222 6,426,370Dividends 146,359,641 6,301,664VAT payable 3,207,231 414,822Others 6,144,935 6,632,537

618,570,906 692,124,146

13. Loans and Notes Payable

June 2012 Dec. 2011Short-term commercial papers (STCP) with various

maturities and interest rate ranging from 2.94% to 5.31% in June 2012 and from 2.19% to 5.39% in Dec. 2011

983,700,000 967,050,000

Short-term promissory notes with various maturities and annual interest rates ranging 1.70% to 3.25% in June 2012 and from 1.70% to 3.40% in Dec. 2011

555,401,180 599,410,772

1,539,101,180 1,566,460,772

On various dates in 2011 and 2010, the SEC authorized the Group to issue 1,200.00 million worth of STCP registered with the SEC in accordance with the provision of the Securities Regulation Code and its implementing rules and regulations, the code of Corporate Governance and other applicable laws and orders.

In 2011 and 2010, the Group entered a contract of guaranty under a Revolving Cash Guaranty Line with HGC in the amount of 1,400.0 million. The guaranty covers the unpaid principal due on the outstanding STCP and unpaid interest thereon of 10.00% per annum.

14. Stockholders' Equity

Dividends declared by the Parent Company from retained earnings were as follows:

Cash dividends:Stockholders of

Date Approved Per Share Record Date Date PaidMay 18, 2012 0.03000 June 15, 2012 July 11, 2012May 30, 2011 0.05000 June 13, 2011 July 8, 2011May 31, 2010 0.06000 June 30, 2010 July 26, 2010June 01, 2009 0.10000 June 17, 2009 July 13, 2009

Stock dividends:Stockholders of

Date Ratified Percentage Record Date Distribution DateJune 7, 2011 20% July 7, 2011 August 2, 2011June 1, 2010 20% June 11, 2010 July 8, 2010May 28, 2009 20% June 26, 2009 July 22, 2009

On May 28, 2009, the Securities and Exchange Commission (SEC) approved the Amended Articles of Incorporation on the application for increase in capital stock from 1,900,000,000 to 3,000,000,000 with a par value of 1 each. The SEC also authorized the issuance of 20% stock dividends declared by the BOD last April 29, 2008 and ratified by the stockholders on June 3, 2008.

On July 27, 2012 the Securities and Exchange Commission approved the application of increase of capital stock from 3,000,000,000 divided into 3,000,000,000 shares with par value of 1.00 each, to 4,000,000,000 divided into 4,000,000,000 shares with par value of 1.00 each and the amendment of the Seventh provision of the Articles of Incorporation by increasing the capital stock to 4,000,000,000 divided into 4,000,000,000 shares with a par value of 1.00 per share.

On June 5, 2012, the stockholders approved and ratified the ten percent (10%) stock dividends from the unappropriated retained earnings as of December 31, 2011 which will come from an increase in authorized capital stock. Record date of stock dividends shall be fixed by the SEC after clearance and approval;

As of June, 2012, the unappropriated retained earnings include the remaining balance of deemed cost adjustment amounting to 308.48 million, net of related deferred tax of 132.20 million, related to real estate properties for sale and lease which rose when the Company transitioned to PFRS in 2005. This amount has yet to be absorbed through sales and depreciation and is restricted for the payment of dividends.

15. Operating Expenses

June 2012 June 2011Personnel expenses (Note 16) 92,893,535 88,430,015Taxes and licenses 31,586,276 35,619,333Professional fees 14,121,167 27,013,657Depreciation (Note 17) 9,312,707 9,592,906Insurance 9,261,732 12,147,475Membership dues 7,261,010 9,346,236Outside services 4,860,017 3,765,918Advertising and promotions 2,921,260 3,379,101Brokers’ commission 2,741,398 4,116,320Light, power and water 1,936,056 1,905,814Postage, telephone and telegraph 1,196,503 1,166,376(Forward)

Donations 710,000 5,003,000Repairs and maintenance -- 2,789,877Stationery and office supplies 208,374 794,184Others 8,161,759 6,620,487

187,171,794 211,690,699

Revenue Regulations (RR) No. 10-2002 defines expenses to be classified as entertainment, amusement and recreation (EAR) expenses and sets a limit for the amount that is deductible for tax purposes. EAR expenses are limited to 0.5% of net sales for sellers of goods or properties or 1% of net revenues for sellers of services. For sellers of both goods or properties and services, an apportionment formula is used in determining the ceiling on such expenses.

16. Personnel Expenses

June 2012 June 2011Employee benefits and commissions 57,130,035 54,159,195Salaries and wages 32,883,630 30,156,962Other social charges 2,879,870 4,113,858

92,893,535 88,430,015

17. Depreciation

This consists of depreciation pertaining to the following:

June 2012 June 2011Investments in real estate properties under lease 2,480,164 2,480,165Property and equipment 6,832,543 7,112,741

9,312,707 9,592,906

18. Financial Income (Expenses)

June 2012 June 2011Financial Income

Interest income 224,393,977 244,117,371Dividend income 19,375 22,334

224,413,352 244,139,705Financial Expenses

Interest expense (23,266,238) (26,842,558)Finance charges (584,134) (934,894)

(23,850,372) (27,777,452)200,562,980 216,362,253

19. Retirement Costs

The Group, jointly with affiliated companies, has a funded, noncontributory defined benefit retirement plan covering substantially all of its employees.

20. Income Taxes

Provision for income tax consists of:

June 2012 June 2011Current 54,304,289 59,967,751Deferred (7,282,321) (21,462,532)Final tax on interest income 9,400,787 8,176,200

56,422,755 46,681,419

21. Related Party Transactions

Parties are considered to be related if one party has the ability to control, directly or indirectly, the other party or exercise significant influence over the other party in making financial and operating decisions. It includes companies in which one or more of the directors and/or shareholder of the Parent Company either has a beneficial controlling interest or are in a position to exercise significant influence therein.

The Group discloses the nature of the related party relationship and information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the consolidated financial statements, including, as a minimum, the amount of outstanding balances and its terms and conditions including whether they are secured, and the nature of the consideration to be provided in settlement.

In the normal course of business, the Group has the following transactions with related parties:

1)Interest-bearing cash advances, which are always settled in full on the subsequent month, and non-interest-bearing advances for reimbursable expenses.

Related Party Year Amounts Owed by Related Parties

Amounts Owed to Related Parties

Cityland, Inc. (Parent) June 2012 -- --Dec. 2011 -- --

Others (Affiliates) June 2012 -- 89,978(a)

Dec. 2011 1,060,034 --Totals -- 89,978Totals 1,060,034 --

(a) Non-interest bearing advances for reimbursable expenses

The Group has no standard arrangements with regards to the remuneration of its directors. Moreover, the Group has no standard arrangement with regards to the remuneration of its existing officers aside from the compensation received or any other arrangements in the employment contracts and compensatory plan. The Group does not have any arrangements for stock warrants or options offered to its employees.

22. Earnings Per Share

Basic earnings per share amounts were computed as follows:June 2012 June 2011

a. Net income 178,910,253 206,489,723b. Weighted average number of shares 2,947,261,781 2,947,261,781c. Earnings per share (a/b) 0.061 0.070 *After retroactive effect of 20% stock dividends in 2011.

23. Financial Instruments

Financial Risk Management Objectives and PoliciesThe Group’s principal financial instruments comprise of bank loans and notes payables, cash and cash equivalents and short-term cash investments. The main purpose of these financial instruments is to finance the Company’s operations. The Group has other financial instruments such as available-for-sale investments, held-to-maturity investments and financial assets at fair value through profit or loss, which are held for investing purposes. The Group has various other financial assets and liabilities such as installment contracts receivable and trade payables, which arise directly from its operations.

It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The Group has no investments in foreign securities.

The main risks arising from the Group’s financial instruments are cash flow interest rate risks, credit risk, foreign currency risks and liquidity risk. The BOD reviews and approves policies for managing these risks and they are summarized as follows:

Cash flow interest rate riskThe Group’s exposure to the risk for changes in market interest rates relates primarily to the Group’s short-term and long-term loans payable, all with repriced interest rates. The Group’s policy in addressing volatility in interest rates includes maximizing the use of operating cash flows to be able to fulfill principal and interest obligations even in periods of rising interest rates.

A sensitivity analysis to a reasonable change in the interest rates (with all other variables held constant) of 0.0959% higher or lower, would increase or decrease the Groups’ income before income tax of 1,475,998.

Credit riskThe Group trades only with recognized, creditworthy third parties. It is the Group’s policy that all customers that wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis with the result that the Group’s exposure to bad debts is not significant. The Group’s policy is to enter into transactions with a diversity of creditworthy parties to mitigate any significant concentration of credit risk. There is no significant concentration of credit risk within the Group.

The table below shows the Group’s exposure to credit risk for the components of the balance sheets. The exposure as of June 30, 2012 is shown at gross, before taking the effect of mitigation through the use of and collateral agreements and at net, after taking the effetc of mitigation through the use of collateral agreements.

Gross NetLoans and receivables:

Cash and cash equivalents, excluding cash on hand 2,344,553,543 914,420,357Installment contract receivables 2,033,865,358 --Other receivables 30,672,946 11,700,843

Investment in trust funds 41,091,368 --Total credit risk exposure 4,450,183,215 926,121,200

The following table summarizes the aging analysis and credit quality of the receivables as of June 30, 2012:

Past due But Not ImpairedCurrent >One Year <30 days 31 - 60 days 61 - 90 days Over 90 days Total

Installment contract rec. 521,637,267 1,494,728,153 7,036,968 2,907,574 1,202,993 6,352,403 2,033,865,358

Other receivables:Accrued interest 4,528,182 - - - - - 4,528,182Customers 6,102,289 - - 1,104,938 542,495 9,699,589 17,449,311Retention 450,000 1,520,989 - - - 312,046 2,283,035Others 6,322,205 48,438 41,775 - - - 6,412,418

539,039,943 1,496,297,580 7,078,743 4,012,512 1,745,488 16,364,038 2,064,538,304

The table below shows the credit quality by class of asset for loan-related balance sheet lines, based on the Group’s credit rating system as of June 30, 2012:

High Grade Medium GradePast due but not impaired Total

Cash and cash equivalents 2,344,553,543 -- -- 2,344,553,543Investment in trust funds 41,091,368 41,091,368Installment contract receivables 2,016,365,420 -- 17,499,938 2,033,865,358Other receivables: 18,423,529 548,574 11,700,843 30,672,946

4,420,433,860 548,574 29,200,781 4,450,183,215* High Grade - financial assets with reputable counterparties and which management believes to be reasonably assured to be recoverable. ** Medium Grade - financial assets for which there is low risk on default of counterparties.

The main considerations for impairment assessment include whether any payments are overdue or if there are any known difficulties in the cash flows of the counterparties. The Group assesses impairment into two areas: individually assessed allowances and collectively assessed allowances.

The Group determines allowance for each significant receivable on an individual basis. Among the items that the Group considers in assessing impairment is the inability to collect from the counterparty based on the contractual terms of the receivables. The Company also considers the fair value of the real estate collateralized in computing the impairment of the receivables. Receivables included in the specific assessment are those receivables under the installment contracts receivable accounts.

Because the Group holds the title to the real estate properties with outstanding installment contracts receivable balance and can repossess such real estate properties upon default of the customer in paying the outstanding balance, the Group does not provide for allowance for impairment of its installment contracts receivable.

For collective assessment, allowances are assessed for receivables that are not individually significant and for individually significant receivables where there is not yet objective evidence of individual impairment. Impairment losses are estimated by taking into consideration the age of the receivables, past collection experience and other factors that may affect collectibility.

Equity Price RiskEquity price risk is the risk that the fair values of equities decrease as a result of changes in the market value of individual stock. The Group is exposed to equity securities price risk because of investments held by the Group, which are classified in the balance sheets as available-for-sale investments.

A sensitivity analysis to a reasonable change in the equity price (with all other variables held constant) of 0.05, higher or lower, would increase or decrease the equity by 85,733.

Foreign currency riskThe Group’s transactional currency exposure arises from sales and purchases in currencies other than its functional currency. However, the Group’s exposure to foreign currency risk is minimal.

Liquidity riskThe Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans.

The table below summarizes the maturity analysis of the Group’s financial liabilities as of June 30, 2012:

Up to One Year Above One Year TotalAccounts payable and accrued expenses* 514,958,422 97,364,601 612,323,023Notes payable** 1,596,979,080 1,596,979,080

2,111,937,502 97,364,601 2,209,302,103

Fair ValuesAs defined in PAS 39, fair value approximate the carrying amounts of recorded financial assets and liabilities as of June 30, 2012 and December 31, 2011:

June 2012 December 2011Carrying value Carrying value Carrying value Fair value

Financial AssetsCash and cash equivalents 2,344,733,882 2,344,733,882 1,433,826,099 1,433,826,099Short-term cash investments -- -- 507,750,000 507,750,000Installment contracts receivables 2,033,865,358 2,033,865,358 2,147,940,019 2,147,940,019Other receivables 30,672,946 30,672,946 47,946,035 47,946,035Investment in trust funds 41,091,368 41,091,368 45,691,673 45,691,673Available-for-sale investments 1,768,953 1,768,953 1,354,728 1,354,728

4,452,132,507 4,452,132,507 4,184,508,554 4,184,508,554

Financial LiabilitiesAccounts payable and accrued

expenses * 612,323,023 612,323,023 685,106,482 685,106,482Notes payable 1,539,101,180 1,539,101,180 1,566,460,772 1,566,460,772

2,151,424,203 2,151,424,203 2,251,567,254 2,251,567,254* Excludes statutory liabilities amounting to 6,247,883 and 7,017,664 as of June 30, 2012 and December 2011, respectively.** Includes interest expense amounting to 57,877,900.

Cash and cash equivalents, short-term cash investments, other receivables and accounts payable and accrued expenses

Due to the short-term nature of the transactions, the fair value of cash and cash equivalents, short-term cash investments, other receivables and accounts payable and accrued expenses approximate amount of consideration at the time of initial recognition.

Financial assets at fair value through profit or loss and available-for-sale investments Financial assets at fair value through profit or loss and available-for-sale investments are stated at fair value based on quoted market prices.

Installment contracts receivableThe fair value of installment contracts receivable cannot be reasonably estimated due to the significant volume of transactions and the varied terms and maturities.

Loans and notes payableDue to the monthly/quarterly repricing of interest, loans and notes payable are stated at fair value.

24. Business Segments

The Group derives its revenues primarily from the sale and lease of real estate properties and marketing of pension plans.

The Group does not have any major customers and all sales and leases of real estate properties and sales of pension plans are made to external customers.

Segment revenues and expenses:June 2012 June 2011

Sales of real estate 889,756,020 92.50% 942,132,338 93.87%Rental income 13,846,282 1.44% 10,341,936 1.04%Others 58,265,908 6.06% 51,133,293 5.09%

961,868,210 100.00% 1,003,607,567 100.00%

Except for the following expenses directly relating to the leasing and pension plan operations, operating expenses pertain primarily to the real estate sales.

25. Contingencies

The Group is contingently liable for lawsuits or claims filed by third parties which are either pending decisions by the courts or are under negotiation, the outcomes of which are not presently determinable. In the opinion of management and its legal counsel, the eventual liability under these lawsuits or claims, if any, will not have a material effect on the consolidated financial statements.

CITYLAND DEVELOPMENT CORPORATIONSCHEDULE OF FINANCIAL SOUNDNESS INDICATORSAs of and for the Period Ending June 30, 2012, December 31, 2011 & June 30, 2011

Financial Ratios June 30, 2012(Unaudited) December 31, 2011 June 30, 2011

Earnings per share* P 0.12 P 0.15 P0.14

Return on Equity* 7.62% 9.59% 9.46%

Interest Rate Coverage Ratio 14.76 14.14 13.12

Asset-to-equity Ratio 1.71 1.75 1.79

Debt-to-equity Ratio 0.33 0.34 0.39

Current ratio 2.01 2.01 1.90

Acid-test Ratio 1.39 1.21 1.17

* annualized

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