2012 Preliminary Prospectus

8 6 1 8 8SEC Registration Number

C I T Y L A N D , I N C .

(Company’s Full Name)

2 n d a n d 3 r d F l o o r s , 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 86188............

2. CITYLAND, INC.........................................................................................Exact name of registrant as specified in its character

3. MAKATI CITY, PHILIPPINES 4. 000-662-829............................................................... ..................................................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 1226

Telephone 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 1,100,000,000 Php 837,5001% Legal Research Fee 8,375Total Php 845,875

PRELIMINARY PROSPECTUS

CITYLAND, INC.(A corporation organized under Philippine laws)

Registration of Philippine Peso Php 1,100,000,000 Short-Term Commercial Papers

Cityland, Inc. (hereinafter referred to as “CI”, the “Company” or “Issuer”) is offering for public sale at face value, up to Php 1,100,000,000 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 August 28, 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, INC.(A corporation organized under Philippine laws)

Registration of Php 1,100,000,000 worth of Short-Term Commercial Papers for public sale at face value.

The Company is registering Php 1,100,000,000 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 Php 1,100,000,000 less registration fees, taxes, professional fees and other related expenses.

The net proceeds from the offering of the Short-Term Commercial Papers is Php1,093,565,125 which is intended to be used as follows (in order of priority):

1) Project – Related Costs 676,000,0002) Payment of Maturing Loans/ Notes 375,655,1253) Interest Expense 41,910,000

Net Proceeds Php 1,093,565,125

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 COMMISSION 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 COMMISSION.

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 ……….……….……….………….. 19Information With Respect to the Registrant

Business ……….……….……….……….……….……….……….……….…………... 20Properties ……….……….……….……….……….……….……….……….…………. 33Legal Proceedings……….……….……….……….……….……….……….…………. 35Management’s Discussion and Analysis or Plan of Operation ……….……….………. 37Changes in and Disagreements With Accountants On Accounting and Financial Disclosure ……….……….……….……….……….……….……….……….………… 51Directors and Executive Officers……….……….……….……….……….…………… 51Executive Compensation ……….……….……….……….……….……….…………... 56Security Ownership of Certain Record and Beneficial Owners and Management ……. 56Certain Relationships and Related Transactions ……….……….……….…………….. 58Corporate Governance …………………………………………………………………. 59

Other Expenses Of Issuance and Distribution ……….……….……….……….…………... 60Financial Information ……….……….……….……….……….……….……….…………. **Exhibits ……….……….……….……….……….……….……….……….……….………. **Signatures ……….……….……….……….……….……….……….……….……………... **

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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

“CI” or “Cityland” or “Company” or “Issuer” or “Registrant”

Cityland, Inc.

“HLURB” Housing and Land Use Regulatory Board

“IAS” International Accounting Standards

“IFRS” International Financial Reporting Standards

“Offer” The offering for public sale of Php 1,100,000,000 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

“PDST-F” Philippine Dealing System Treasury- Fixing

“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, Inc. is a domestic corporation which is duly organized and existing under and by virtue of the laws of the Philippines since May 15, 1979 with the primary purpose of engaging in real estate development.

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 Mandaluyong City, Pasig City, City of Manila, Makati City and Tagaytay City; and residential subdivisions in Tagaytay City and Cavite. It completed Brentwood Mansion, a residential condominium located at Santolan, Pasig City and The Manila Residences, a commercial, office and residential condominium located at Taft Ave., Malate, City of Manila. It has also completed Cityland Vito Cruz Tower 2 together with City & Land Developers, Inc., a commercial, office and residential condominium located at Pablo Ocampo Sr. Avenue (formerly Vito Cruz), City of Manila. Also together with Cityplans, Inc., it developed Pasig Royale Mansion, Oxford Mansion and Windsor Mansion, all located at Santolan Road, Pasig City.

As to residential subdivision, it has completed Tagaytay Executive Village located at Barangay San Jose (near Rotonda) and Tagaytay Country Homes 2B and 2C situated at Barangay Neogan, Tagaytay City.

It is currently developing Tagaytay Prime Residences, a 21-storey condominium project consisting of two (2) buildings located Brgy. San Jose, Tagaytay City and The Manila Residences Tower II, a 39-storey office, commercial and residential condominium located at Taft Ave, Manila City.

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

RISKS OF INVESTING

Before making an investment decision, investors should carefully assess the risks associated with an investment in this Offer. These include the internal risks such as 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 selected financial information below were derived from the audited financial statements as of and for the years ended December 31, 2011 and 2010 and unaudited financial statements as and for the six months ended June 30, 2012. The audited financial statements were audited by SyCip Gorres, Velayo & Co., in accordance with the Philippine Generally Accepted Accounting Principles. The information should be read in conjunction with, and is qualified in its entirety be reference to such financial statements and related notes thereto and “Management's Discussion and Analysis or Plan of Operations”.

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As of and For the Years Ended December 31

(Audited)June 30

(Unaudited)2010 2011 2012

INCOME STATEMENTRevenues 3,182,898,262 2,714,604,009 1,306,435,068Expenses 2,155,726,867 1,877,170,148 937,028,103Income before tax 1,027,171,395 837,433,861 369,406,965Net Income 822,337,474 726,544,436 313,120,886

BALANCE SHEETTotal Assets 11,476,423,855 11,853,788,813 11,748,509,312Total Liabilities 5,062,982,045 4,912,767,350 4,590,221,271Stockholders’ Equity 6,413,441,810 6,941,021,463 7,194,288,041

PER SHARE (Php)Earnings per share Php 15.49 Php10.12 Php 8.64*

* Annualized

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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 and current ratio at 0.99:1 and 1.64:1 in June 2012 from 0.88:1 and 1.59:1 in December 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 are fixed at their inception and are therefore not subject to fluctuations in interest rates.

2. For the financial liabilities, the Company's loans payable to bank are subject to periodic repricing of interest rates. The Company manages this risk by entering into

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loan agreements with a ceiling on repricing rates (current ceiling from lenders is based on benchmark rates (PDSTF) plus 150 basis points). In this way, the Company can review and analyze the future effects of repricing to the operations and position of the Company, thus mitigating interest rate risk. On the other hand, short-term commercial papers 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 performance in the future may adversely affect the Company’s operations and eventually its financial performance.

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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 the results of operations.

INDUSTRY OUTLOOK

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 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 1,100,000,000 less registration fees, taxes, professional fees and other related expenses.

The net proceeds from the offering of the Short-Term Commercial Papers is Php1,093,565,125 which is intended to be used as follows (in order of priority):

1) Project – Related Costs 676,000,0002) Payment of Maturing Loans/ Notes 375,655,1253) Interest Expense 41,910,000

Net Proceeds Php 1,093,565,125

The total actual and estimated expenses amounting to Php 6,434,875 is shown under “Other Expenses of Issuance and Distribution on page 60.

1) Project-related costs

The proceeds from the offering will be used to partially finance the construction of Tagaytay Prime Residences and The Manila Residences II.

Tagaytay Prime Residences consists of two (2) condominium buildings rising 21-storey high, situated at the Tagaytay Rotunda, Brgy. San Jose, Tagaytay City. Its percentage of completion as of June 30, 2012 is 58.58%

The Manila Residences II is a 39- storey office, commercial and residential condominium located along Taft Ave. Its percentage of completion as of June 30, 2012 is 17.02%.

The utilization of the P 676 million project-related costs is broken down as follows:

Project 1st Qtr(Nov. 2012-Jan. 2013)

2nd Qtr(Feb. 2013-Apr. 2013)

3rd Qtr(May 2013-July 2013)

4th Qtr(Aug. 2013-Oct. 2013)

Total

Tagaytay Prime Residences P 87 million P 87 million P 87 million P 87 million P 348 million

The Manila Residences II P 82 million P 82 million P 82 million P 82 million P 328 million

Total P 169 million P 169 million P 169 million P 169 million P 676 million

The above Php 676 million project costs is just part of the Php 1,722 million total estimated development cost to complete Tagaytay Prime Residences and The Manila Residences II projects. The balance of Php 1,046 million will be financed through internally-generated funds. The components of the total estimated development cost is as follows:

Project Labors & Materials Supplied by Contractors

Materials Supplied /Permits & Licenses

by Owner

Estimated Development Cost

Tagaytay Prime Residences Php 386 M Php 282M Php 668M

The Manila Residences II Php 575M Php 479M Php 1,054M

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

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Materials Supplied / Permits & Licenses by Owner- These are for the purchase of owner- furnished materials like rebars, cements, CHB, pipes, electrical wires, etc. and permits and licenses paid to government agencies like building permit/ local clearance, occupancy permit and others.

Extent of financial commitment to complete the project: The total credit line available for the Company from banks is P2.30B all of which is unavailed. This total P2.30B credit line were all made available to the company by the following banks: Rizal Commercial Banking Corporation, Security Bank, Metrobank and United Coconut Planters Bank.

2) Payment of Maturing Loans/ Notes

The Php 376M proceeds for the payment of loans/ notes are all estimated to be allocated for the payment of maturing Commercial Papers/ Promissory Notes.

Breakdown of Outstanding Loans/ Notes as of June 30, 2012:

Financial Institution Amount Interest Rate Maturity DateShort-term Commercial Papers * 966,300,000 -various- -various- Short-term Promissory Notes ** 491,267,927 - various- -various-

Php 1,457,567,927

.

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

Amount PercentageIndividual: P 794,450,000 82.22%Corporate: P 171,850,000 17.78% Total: P 966,300,000 100.00%

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

Dated November 2, 2010 : P 55,550,000.00Dated October 21, 2011 : P 910,750,000.00

P 966,300,000.00

** 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 P 1.1B STCP issue computed on the average STCP rate as of June 30, 2012 as shown below:

Lender Principal Rate Term InterestNew STCP P 1,100,000,000 3.81% One year P 41.91M

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:

1) If proceeds are substantially less than maximum proceeds, the Company will tap existing lines with the banks.

2) If material amount of other funds are necessary to accomplish purpose(s), the Company will also avail from the existing lines with banks. The total credit line available for the Company from banks is P2.30B all of which is unavailed. This total P2.30B credit line were all made available to the company by the following banks: Rizal Commercial Banking Corporation, Security Bank, Metrobank and United Coconut Planters Bank.

3) The proceeds from this offering will not be used to reimburse any officer, director, employee or shareholder.

4) The 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 STCPs.

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PLAN OF DISTRIBUTION

The Short-Term Commercial Papers will be offered by the Company to local small investors, institutional buyers and general public as follows:

% to Total AmountInstitutional Buyers 30 % 330,000,000General Public 70 % 770,000,000

Php 1,100,000,000

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

AmountWithin the First Quarter Php 275,000,000Within the Second Quarter 275,000,000Within the Third Quarter 275,000,000Within the Fourth Quarter 275,000,000

Php 1,100,000,000

The securities to be registered are to be offered through the Company's salesmen duly licensed by the Commission. The Company's salesmen are 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 compensation of these salesmen will range from Php18,000.00 to Php62,000.00. They are also entitled to incentives and 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 STCPs 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 ONE HUNDRED MILLION PESOS (Php1,100,000,000) 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 3.8110%.

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.

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

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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 secure 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 June 30, 2012

Current Ratio 1.15 1.45 1.59 1.40 1.64

Acid- Test Ratio 0.62 0.90 0.88 0.80 0.99Asset to equity ratio 3.16 2.86 2.75 2.92 2.63Interest rate coverage ratio 7.62 9.57 9.32 8.84 9.65Return on Equity 12.56% 13.42% 9.80% 11.93% 8.02%Debt-Equity Ratio 1.02 0.85 0.70 0.86 0.65

* Annualized

Manner of Calculation:

Current Ratio = Current Assets / Current Liabilities

Acid-Test Ratio = Cash & Cash Equivalents + Short-Term Investments + Available-for-sale Investments + Installment Contracts Receivables + 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 Expense

Return on Equity = Net Income (attributable to equity holders of the parent) / Total Stockholder’s Equity (attributable to equity holders of the parent)

Debt – Equity Ratio = Loans & Notes Payable Total Stockholders' Equity-attributable to equity holders of the parent (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. 317 Series of 2011 October 21, 2011 STCP P 1,100,000,000 P 910,750,000.00

2. 258 Series of 2010 November 2, 2010 STCP P 1,100,000,000 P 55,550,000.00

3. 167 Series of 2009 November 9, 2009 STCP P 900,000,000 --

4. 129 Series of 2008 November 3, 2008 STCP P 1,150,000,000 --

5. 197 Series of 2007 December 17, 2007 STCP P 1,000,000,000 --

6. 183 Series of 2006 December 28, 2006 STCP P 970,000,000 --



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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 STOCKHOLDER’S MATTERS

The Company is not a public corporation and is not listed with the Philippine Stock Exchange. It is a regular corporation engaged in real estate development.

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.

Dividends

2012 2011 2010

Cash Php 3.5900 / share Php 3.7100 / share Php 4.2900 / share

Stock 20% 20% 20%

The record date of P 3.59 per share cash dividends is on July 3, 2012 and for payment on July 27, 2012.

The record date of 20% stock dividends is on July 4, 2012 and for payment of July 30, 2012.

Holders

a. The number of shareholders of record as of June 30, 2012 was 14.

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

Name No. of Shares Held %1. Stephen C. Roxas 11,737,664 28.17%2. Grace C. Liuson 6,126,970 14.703. Andrew I. Liuson 5,655,675 13.574. Daniel Yen Chiong 3,770,449 9.055. Lucy Fan 3,770,449 9.056. Helen C. Roxas 3,770,449 9.057. The Good Seed Sower Foundation Inc. 3,770,438 9.058. Alice C. Gohoc 3,015,935 7.249. Jefferson C. Roxas 22,491 0.0510. Lincoln C. Roxas 22,491 0.0511. Aurora M. Pattugalan 7,538 0.0212. Josef C. Gohoc 414 --13. Peter S. Dee 16 --14. Paul Y. Ung 14 --

Total 41,670,993 100.00%

Changes in Control

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

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Recent Sale of Unregistered Securities (including recent issuance of securities constituting an exempt transactions)

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

2010 20% 28,938,199 34,725,833 October 13, 2010

2011 20% 34,725,833 41,670,933 August 16, 2011

2012 20% 41,670,993 50,005,183 July 30, 2012

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 STCP 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 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, Inc., a domestic corporation which is duly organized and existing under and by virtue of the laws of the Philippines since May 15, 1979 with the primary purpose of engaging in real estate development.

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 Manila City, Mandaluyong City, Pasig City, Makati City and Tagaytay City and residential subdivisions in Tagaytay City and Cavite.

The Company is not involved in any bankruptcy, receivership or similar proceedings. It has not entered in any reclassification, merger, consolidation or purchase or sale of significant assets (not ordinary).

SEC Registration No. - 86188

2. Subsidiaries

As the ultimate parent company, CI prepares consolidated financial statements which consists of its financial statements and that of its subsidiaries.

a. Cityland Development Corporation (Subsidiary)

Cityland Development Corporation was incorporated on January 31, 1978 with the primary purpose of engaging in real estate development. Its principal office is at 2/F Cityland Condominium 10 Tower 1, 156 H.V. Dela Costa Street, Salcedo Village Makati City.

The financial performance:

2010 2011 June 30, 2012Revenues 1,092,567,749 1,001,519,023 536,953,688Expenses 712,849,042 635,324,340 372,857,582Income before tax 379,718,707 366,194,683 164,096,106Net Income 320,223,996 321,564,675 128,462,482


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

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.

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2010 2011 June 30, 2012Revenues 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


c. Cityplans, Inc. (Subsidiary of Cityland Development Corporation)

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 2, 154 H.V. Dela Costa Street, Salcedo Village, Makati City.


2010 2011 June 30, 2012Revenues 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


d. Cityads, Inc. (Subsidiary)

Cityads, Inc. was incorporated on February 20, 1980 for the purpose of engaging in general advertising business. Its principal office is at 2/F Cityland Condominium 10 Tower 1, 156 H.V. Dela Cota Street, Salcedo Village, Makati City.


2010 2011 June 30, 2012Revenues 1,456,257 1,359,487 579,266Expenses 1,327,989 1,255,173 599,983Income(Loss) before tax 128,268 104,314 -20,717Net Income (Loss) 90,920 72,224 -20,808


e. Credit and Land Holdings, Inc. (Subsidiary)

Credit and Land Holdings, Inc. was incorporated on July 16, 1980 for the purpose of purchasing, selling or disposing of real and personal property of any kind including shares of stocks and securities. The company’s registered office and principal place of business is at 2/F Cityland Condominium 10 Tower 1, 156 H.V. Dela Costa Street, Salcedo Village, Makati City.

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2010 2011 June 30, 2012Revenues 195,703 473,846 38,795Expenses 5,904 4,234 15,123Income before tax 189,799 469,612 23,672Net Income 179,688 456,081 15,929


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, Inc. (Parent)PERCENTAGE SOLD

2010 2011 June 30, 2012Tagaytay Executive Village Launched in 2002

Lots Only 98.67% 100.00% 99.55%*House & Lots 100.00 100.00 100.00

Pasig Royale Mansion 96.42 100.00 100.00 Launched in 2003Oxford Mansion 97.91 99.07 98.76* Launched in 2004Manila Residences I 84.71 93.09 97.86 Launched in 2006Tagaytay Country Homes 2B 90.09 92.19 91.64* Launched in 2006Windsor Mansion 84.36 90.15 88.68* Launched in 2007Brentwood Mansion 47.49 59.49 78.36 Launched in 2008Tagaytay Country Homes 2C 58.64 78.36 78.36 Launched in 2010Tagaytay Prime Residences 6.10 10.67 14.16 Launched in 2010Manila Residences II 16.18 23.38 26.31 Launched in 2010Tagaytay Country Homes 2D -- 35.87 53.06 Launched in 2011Naic Country Homes 19.30 20.42 20.75 Launched in 1996

* 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

Tagaytay Executive Village 100.00% 100.00% 100.00%Pasig Royale Mansion 100.00 100.00 100.00Oxford Mansion 100.00 100.00 100.00Manila Residences 100.00 100.00 100.00Tagaytay Country Homes 2B 100.00 100.00 100.00Windsor Mansion 100.00 100.00 100.00Brentwood Mansion 100.00 100.00 100.00Tagaytay Country Homes 2C 100.00 100.00 100.00Tagaytay Prime Residences 4.10 35.89 58.58Manila Residences II 1.17 9.70 17.02Tagaytay Country Homes 2D -- 100.00 100.00Naic Country Homes 100.00 100.00 100.00

Cityland Development Corporation (Subsidiary)

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 2006

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Mandaluyong 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 I 7.92 11.72 15.59 Launched in 2010



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 23.00 91.50Grand Central Residences I 4.68 4.68 13.94

City & Land Developers, Inc. (Subsidiary)


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



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

Cityplans, Inc. (Subsidiary)


Oxford Mansion 95.63% 95.70% 98.23% Launched in 2004Windsor Mansion 86.91 87.46 90.90 Launched in 2007


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, Inc. (Parent)

The Manila Residences II

The Manila Residences II is a 39-storey office, commercial and residential condominium located along Taft Avenue. Amenities include swimming pool, mini-gym, sauna for men and women, function room, viewing deck, children’s playground and 24-hour association security.

Estimated Date of Completion: September 2015

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Tagaytay Prime Residences

Tagaytay Prime Residences consists of two (2) condominium buildings rising 21-storey high. It is situated at the Tagaytay Rotunda, Brgy. San Jose, Tagaytay City. Features and amenities include common viewing balcony for residential floors, swimming pool, multi-purpose area, 24-hour association security and viewing deck with jogging path.

Estimated Completion Date: 2nd half of 2014

The Manila Residences I

The Manila Residences is a 39-storey office, commercial and residential condominium located along Taft Avenue. Amenities include swimming pool, mini-gym, sauna for men and women, function room, viewing deck, children’s playground and 24-hour association security.

Date Completed: September 2010 (completed nine months in advance)

Brentwood Mansion

Brentwood Mansion is an 12-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City. Amenities and facilities include two (2) elevators, administrative office, visitors' lounge, provision for cable TV and telephone line, individual water submeter / Meralco meter and 24- hour association security.

Date Completed: June 2010

Windsor Mansion

Windsor 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. This project is developed together with Cityplans, Inc.

Date Completed: December 2007

Tagaytay Country Homes 2-B

Tagaytay Country Homes 2-B, a residential subdivision located at Barangay Neogan, Tagaytay City. Features include multi-purpose hall, swimming pool and 24-hour association security.

Tagaytay Country Homes 2C

Tagaytay Country Homes 2-C, a residential subdivision located at Barangay Neogan, Tagaytay City. Features include multi-purpose hall, swimming pool and 24-hour association security.

Tagaytay Country Homes 2D

Tagaytay Country Homes 2-D, a residential subdivision located at Barangay Neogan, Tagaytay City. Features include multi-purpose hall, swimming pool and 24-hour association security.

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Oxford Mansion

Oxford Mansion, an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City is being developed together with Cityplans, Inc. 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.

Naic Country Homes

Naic Country Homes is a completed residential subdivision located at Baranggay Malaenen, Luma, Cavite. This subdivision has the following features: main entrance with guardhouse, concrete hollow block perimeter fence, common shallow walls, concrete roads, Meralco supplied electricity, basketball / tennis court and lined open canal.

Cityland Development Corporation (Subsidiary)

Grand Central Residences I

Grand Central Residences I is a 40-storey office, commercial and residential condominium located at EDSA corner Sultan St., (fronting MRT Shaw), Mandaluyong City. It is in close proximity to schools, churches, malls, and hospitals. It is equipped with swimming pool, multi-purpose function room, gym, multi-purpose deck, CCTV and 24-hour association security.

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

Makati Executive Tower III

Makati Executive Tower III is a 40-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

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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.

Estimated Date of Completion: June 2012 (completed one year in advance )

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 of Completion: 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

PERCENTAGE2010 2011 June 30, 2012

Cityland, Inc. (Parent)Tagaytay Executive Village 0.45% 0.44% --Oxford Mansion -- -- 0.16%Manila Residences 30.21 9.89 8.63%Tagaytay Country Homes 2B 1.10 1.02 0.47%Tagaytay Country Homes 2C 1.92 0.78 --Tagaytay Country Homes 2D -- 0.13 0.23%Windsor Mansion 0.05 0.08 0.04%Brentwood Mansion 3.92 2.06 0.97%Tagaytay Prime Residences 0.22 3.80 5.95%Manila Residences II 0.19 2.47 3.86%Others 0.02 0.24 5.38%

Cityland Development Corporation (Subsidiary)Cityland Makati Executive Tower II 1.07 0.58 0.74%Corinthian Executive Regency 0.89 1.20 0.64%Rada Regency 0.62 0.57 0.45%Manila Executive Regency 2.76 1.74 0.67%Cityland Makati Executive Tower III 15.68 8.69 7.08%Mandaluyong Executive Mansion III 3.86 8.88 16.98%Cityland Makati Executive Tower IV 1.57 8.26 9.81%Grand Central Residences I 0.30 0.67 2.85%Others 2.47 1.25 0.65%

City & Land Developers, Inc. (Subsidiary)Pacific Regency 0.03 0.49 0.20%Grand Emerald Tower 23.42 18.45 13.31%Manila Residences Bocobo 9.07 28.08 20.03%Others 0.14 0.23 0.03%

Cityplans, Inc. (Subsidiary)Pasig Royale Mansion -- -- --Oxford Mansion 0.04 -- 0.22%Windsor Mansion -- -- 0.65%

Total 100.00% 100.00% 100.00%

4. Domestic and Foreign Sales Contribution to Total Sales

2010 2011 June 30, 2012Sales

Filipino Citizens 90.23% 89.75% 90.39%Foreign Citizens 9.77 10.25 9.61%

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 Manila, Makati, Pasig, Mandaluyong and Tagaytay cities and in the province of Cavite. The Company builds high-rise condominium projects and residential subdivisions catering to middle and high- income groups.

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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: price; product or the type of development (i.e. high, middle, low-end); service or property management after the project is turned over to the buyers.

Cityland sell its products which consist of condominium projects, to both end-users and investors. City & Land projects are offered at affordable prices. It foresees that the demand for real estate products such as residential units will remain underserved due to: I) continued shift from rural to urban areas; ii) continued increase in number of Overseas Filipino Workers (OFW) who have shown growing propensity for home purchase; and iii) population growth.

Manila Residences Towers I and II are located along Taft Avenue, Manila City. The condominium similar in terms of classification and location to Manila Residences Towers I and II are Green Residences along Taft Ave., Manila City. This is a project of SM Development Corporation (SMDC). In terms of size, financial and market strengths, said developer is one of the major developers in the country having launched several projects. SM Development Corporation (SMDC) is part of the business conglomerate of Henry Sy.

Brentwood Mansion is located at Evangelista Street, New Santolan, Pasig City. The condominiums similar in terms of classification and location to Brentwood are Villa Sole Condominium Tower I, II and III, a project of Earth Chef Residences, located along Amang Rodriguez, Pasig City.

Tagaytay Country Homes 2-B, 2-C and 2-D are a residential and commercial subdivisions located along Barangay Neogan, Tagaytay City. The subdivision which is similar in terms of classification of the projects is Pueblo del Sol, a project of Sta. Lucia Realty and Development, Inc., located at Heroes’ Farm, Barangay Patutong, Tagaytay City. In terms of size, financial and market strengths, Sta. Lucia Realty and Development, Inc., is one of the established subdivision developers in the country having launched several projects.

Tagaytay Prime Residences is located at Prime Rotunda, Brgy. San Jose, Tagaytay City. The condominium similar in terms of classification and location to Tagaytay Prime Residences is Wind Residences which is located along Aguinaldo Highway, Brgy. Maharlika West, Tagaytay City, a project of SMDC. In terms of size, financial and market strengths, said developer is one of the major developers in the country having launched several projects. SM Development Corporation (SMDC) is part of the business conglomerate of Henry Sy.

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 single or few customers. It has no single customer that accounts for 20% or more of its sales. Like wise, there are no major existing sales contracts.

7. Purchases of Raw Materials and Supplies

Cityland engaged the services of JDBEC, Inc. and Millennium Erectors Corporation for the civil and architectural in the development of Tagaytay Prime Residences and The Manila Residences Tower II, respectively.

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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, Inc. has a total of 88 personnel composed of 9 officers and 79 employees as of June 30, 2012. It is expected to increase by 11% 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. CI compensates the group for the actual costs of these services.

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

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 in the past three (3) years.

9. Government Approval Projects

Status of Approval ofOn-going Projects

Government Agency: Tagaytay Prime

ResidencesThe Manila Residences

Tower IIa. 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, Sidewalk Approved Approved

- Fire Protection Approved Approved3. Occupancy Permit (Electrical, Fire, Mechanical, Civil, Sanitary)

To be applied upon completion

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

(included in Building Permit)

Not Applicable

- Permit to Operate STP For Application after completion

For Application

d. Laguna Lake Development Authority- Permit to Construct Sewage Treatment Plant (STP)

For Application For Application

- Permit to Operate STP For Application To be applied upon completion

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10. Effect of Existing Government Regulations on the Business

The Company has complied with all the appropriate government regulations for the development and marketing of its projects. Compliance with these requirements symbolize the unrelenting commitment of the management to service and protection of its community and environment.

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.

11. Amount Spent for Research/Development Activities

There is no amount spent on research and development activities.

12. Cost and effect of Compliance with Environmental Laws

Payments made for environmental clearances to the Department of Environment & Natural Resources are as follows: 2012 No payment was made.

2011 No payment was made.

2010 Payment of 458,055 to WET Consultancy Inc and 419,030 to LAQ Consulting for ECC and LLDA clearance of Tagaytay Country Homes 2-C and 2-D, Pasig Royal Townhomes, Tagaytay Prime Residences, Manila Residences II and Manila Grand Residences. Additional payment of 141,706 to Laguna Lake Development Authority for LLDA clearance of Tagaytay Prime Residences.

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 Development Corporation, its subsidiary.

The Registrant's affiliates are Cityland Development Corporation (CDC), City and Land Developers, Inc. (CLDI) and Cityplans, Inc. (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. Additional Requirement on Debt Issues

The Registrant’s net worth exceeds P25 Million and that the Registrant has been in business for more than thirty (30) years.

16. 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

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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 current ratio at 0.99:1 and 1.64:1 in June 2012 from 0.88:1 and 1.59:1 in December 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 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's loans payable to bank are subject to periodic repricing of interest rates. The Company manages this risk by entering into loan agreements with a ceiling on repricing rates (current ceiling from lenders is based on benchmark rates (PDSTF) plus 150 basis points). In this way, the Company can review and analyze the future effects of repricing to the operations and position of the Company, thus mitigating interest rate risk. On the other hand, short-term commercial papers bear fixed interest rates, thus are not exposed to fluctuations in interest rates.

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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 already has 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 risk 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.

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

Properties

Investment in Real Estate Properties as of June 30, 2012 are as follows:

Particular LocationTotal Area(in sq.m.) Description

Mortgagee/ Limitation

1. Land Brgy. Talipusngo,Maragondon,Cavite

2,496,532 Located along Maragondon Magallanes boundary line. Title for 2,456,350 sq.m. is still in process.

---

2. Land Doña Concha Cruz Drive, Las Piñas City

52,705 Land within Alabang-Zapote Road. Land is partially mortgaged with the bank.

RCBC/350M

3. Land & building Evangelista St., Santolan, Pasig

40,469 Land & building within Evangelista St., Pasig City. Land is mortgaged with the bank.

Union Bank / 215M

4. Land Brgy. Malainen Luma, Naic, Cavite

220,165 Raw land in Naic, Cavite.Title for 150,822 sq.m. is still in process.

---

5. Land & building Taft Ave., Malate, Manila

1,118 Land and building along Taft Ave.

---

Investment in Real Estate Properties of Cityland Development Corporation, a subsidiary:1. Land & building Corner of Pioneer and

Reliance Sts., partly located in Mandaluyong 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 banks.

Metrobank/200M

&

Security Bank/

1,600M

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 Baranggay Punungyanan, Gen.Trias, Cavite

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

---

4. Land Brgy.Sabang, Naic, Cavite

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

---

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/

1,600M

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Particular LocationTotal Area(in sq.m.) Description

Mortgagee/ Limitation

6. Office Condo H.V.dela Costa Street,Salcedo Village,Makati City

3,493 This is an office condominium for lease and office use located at Cityland 10 Tower I & II in H.V.Dela Costa cor. Geronimo and Valero Sts.,Makati City. Only 1,683.42 sqm of property is mortgaged with bank.

Metrobank/200M

7. Land Baranggay Sabang,Naic, Cavite

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

---

8. Land Baranggay AlmanzaUno, Las Piñas

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

---

9. Land Brgy. Highway Hills, Mandaluyong City

2,864 Lot is located near EDSA Central & Shangri-La Mall in Shaw Blvd.

---

Investment in Real Estate Properties of City & Land Developers, Inc., a subsidiary of CDC: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

3. Land

4. Parking

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

Mega Plaza, Ortigas Center, Pasig City

1,661

50 slots

Lot is located in Veterans Village, Quezon City

This parking lots are being leased to tenants and visitors.

---

Investment in Real Estate Properties of Cityads, Inc., a subsidiary:1. Land Brgy. San Jose,

Tagaytay City310 Located along Tagaytay

Sta. Rosa Road.---

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 P 2.30B.

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Lease Contracts

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

Rental IncomePioneer – Warehouse / Parking 4,576,105Makati Executive Towers – Units / Parking 2,491,163Grand Emerald Tower – Units/ Storage 2,120,891Evangelista, Santolan, Pasig City 1,938,411Cityland Condominium 10 Towers I and II - Units/Parking 1,951,095Roxas Boulevard – Lot 740,453Edsa 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 259,311Prince Plaza II – Units 141,904Vito Cruz Properties 139,961Doña Concha Cruz Drive, Las Piñas City 93,780Mega Plaza – Parking 23,214Others 312,408Total 16,222,493

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

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).

2) Subsidiaries

a) Cityland Development Corporation (CDC)

Esmeraldo Balosa vs. Cityland Development Corporation(Civil Case No. MC08 – 3563)

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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.

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

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.Motion to Revive Case with Motion to Dismiss were granted in an Order dated October 4, 2011.

3) Property

There was no any 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's subsidiaries 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

a) 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 is selling the following projects:

Brentwood Mansion, an 8-storey residential condominium located along Evangelista St. , New Santolan, Pasig City.

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

Oxford Mansion, an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City, a joint project of CI and CPI.

The Manila Residences, a 39-storey office, commercial and residential condominium located along Taft Avenue, Metro Manila.

The Manila Residences Tower II, a 39-storey office, commercial and residential condominium located along Taft Avenue, Metro Manila, an on-going project of CI.

Tagaytay Prime Residences is a 21-storey commercial and residential condominium located at Tagaytay Prime Rotunda, Brgy. San Jose, Tagaytay City, an on-going project of CI.

Tagaytay Country Homes 2 (phase B and C), a residential subdivision located at Barangay Neogan, Tagaytay City.

Naic Country Homes, a residential subdivision located in Malainen Luma, Naic Cavite.

The Company’s subsidiaries are selling the following projects:

Grand Central Residences I, a 40-storey office, commercial and residential condominium located at EDSA corner Sultan St., (fronting MRT Shaw), Mandaluyong City, an on-going project of Cityland Development Corporation (CDC).

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

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

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

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.

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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 bank loans.

The estimated development cost of 531.94 million as of June 30, 2011 representing the cost to complete the development of real estate projects sold and the contract payable amounting to 20.37 million representing the liabilities from the contracts to purchase land held to future development will be sourced through:

a. Sales of condominium and real estate projectsb. Collection of installment receivablesc. Maturing short-term investmentsd. Availment of bank linese. Issuance of commercial papers

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.

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.

On June 2011, the Company launched Tagaytay Country Homes 2-D, a completed residential subdivision located at Barangay Neogan, Tagaytay City.

On February 2011, City & Land Developers, Inc. (CLDI), the Company’s subsidiary, completed four months ahead of schedule, Grand Emerald Tower, a 39-storey office, residential and commercial condominium located along Emerald Avenue corner Garnet and Ruby Roads, Ortigas Center, Pasig City, and is now selling its remaining unsold units.

The Company and its subsidiaries are selling the following projects:



Oxford Mansion, an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City, a joint project of CI and CPI.


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The Manila Residences Tower II, a 39-storey office, commercial and residential condominium located along Taft Avenue, Metro Manila, an on-going project of CI.

Tagaytay Prime Residences is a 21-storey commercial and residential condominium located at Tagaytay Prime Rotunda, Brgy. San Jose, Tagaytay City, an on-going project of CI.

Tagaytay Country Homes 2 (phase B and C), a residential subdivision located at Barangay Neogan, Tagaytay City.


Grand Central Residences I, a 40-storey office, commercial and residential condominium located at EDSA corner Sultan St., (fronting MRT Shaw), Mandaluyong City, an on-going project of Cityland Development Corporation (CDC).

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

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

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

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


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 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.


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For the year 2010, the Company launched 3 projects, namely, Tagaytay Prime Residences, a 21-storey commercial and residential condominium located at Prime Rotunda, Brgy. San Jose, Tagaytay City; The Manila Residences Tower II, a 39-storey commercial and residential condominium located along Taft Ave., Malate, Manila; and Tagaytay Country Homes 2-C, a horizontal project located at Brgy. Neogan, Tagaytay City.

The Company’s subsidiary, Cityland Development Corporation (CDC), also launched Grand Central Residences I, a 40-storey commercial and residential condominium, located at EDSA corner Sultan St., Mandaluyong City.

The Company and its subsidiaries are selling the following projects:



Oxford Mansion, an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City, a joint project of CI and CPI.The Manila Residences, a 39-storey office, commercial and residential condominium located along Taft Avenue, Metro Manila.

Tagaytay Country Homes 2B, a residential subdivision located at Barangay Neogan, Tagaytay City.

Tagaytay Executive Village, a residential subdivision located along 41st Division Ave., Brgy. San Jose, Tagaytay City.


Makati Executive Tower IV is a 29-storey commercial, office, and residential condominium located at Cityland Square, Sen. Gil Puyat Avenue, Pio Del Pilar, Makati City, an on-going project of CDC.

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

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

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

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

Manila Residences Bocobo, a 34-storey office, residential and commercial condominium located at J. Bocobo St., Ermita, City of Manila, an on-going project of City and Land Developers, Inc. (CLDI).

Grand Emerald Tower, a 39 storey office, residential and commercial condominium located along Emerald Ave. corner Garnet & Ruby Roads Ortigas Center, Pasig City, an almost

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completed project of CLDI.




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 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.


For the year 2009, the Group launched 2 new condominium projects. These are: Makati Execuitve Tower IV, a 29 storey commercial , office and residential condominium located at Cityland Square, Senator Gil puyat Avenue, corner P. Medina St., Makati City, ( a project of CDC) and Manila Residences Bocobo, a 34-storey office, commercial and residential condominium located at Jorge Bocobo St,. Ermita Manila City, (a project of CLDI). These projects were well received and are expected to boost the Company’s sales and revenues.

The Company is selling the following projects:

Brentwood Mansion , an 8-storey residential condominium located along Evangelista St., New Santolan, Pasig City.


Tagaytay Country Homes 2B, a residential subdivision located at Barangay Neogan, Tagaytay City.

Tagaytay Executive Village, a residential subdivision located along 41st division Avenue, Barangay San Jose, Tagaytay City.

Naic Country Homes, a residential subdivision located at Malainen Luma, Naic Cavite.

The Company’s subsidiaries are selling the following projects:

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Mandaluyong Executive Mansion III, a residential condominium located at Mandaluyong Executive Mansion Subdivision, G. Enriquez St., Barangay Vergara, Mandaluyong City, a project of Cityland Development Corporation (CDC).

Makati Executive Tower III is a 37-storey commercial, office, and residential condominium located at Cityland Square, Sen. Gil Puyat Avenue, Pio Del Pilar, Makati City, a project of its subsidiary, Cityland Development Corporation (CDC).

Grand Emerald Tower, a 39 storey office, residential and commercial condominium located along Emerald Ave. corner Garnet & Ruby Roads Ortigas Center, Pasig City, a project of City and Land Developers, Inc. (CLDI), a subsidiary of CDC.

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

Rada Regency, a 24-storey condominium located along 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, Pasig City, a project of CDC.

Also, the Company and Cityplans Inc. (CPI), a subsidiary of Cityland Development Corporation (CDC) are selling the last few units of the following completed and operational projects (these are joint projects of Cityland Inc. and CPI)

Windsor Mansion, an 8-storey commercial and residential condominium located at New Santolan, Pasig City.

Oxford Mansion, an 8-storey commercial and residential condominium located along Evangelista St., New Santolan, Pasig City.

Pasig Royale Mansion, an 8-storey commercial and residential condominium located at New Santolan, Pasig City.



b) Financial Condition

June 30, 2012 vs. December 31, 2011

Total assets amounted to 11.79B as of June 2012 as compared with 11.85B in December 2011. The slight decrease in assets 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 a 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, payable to stockholders and income tax resulting to the decline in liabilities.

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Total stockholders’ equity now stands at 7.194B as of June 2012 which is higher than 6.941B in December 2011 due to net income of 313.12M plus other adjustments of 5.16M less cash dividends of 64.85M. As a result of the foregoing, the company’s liquidity position improved with acid-test and current ratio at 0.99:1 and 1.64:1 in June 2012 from 0.88:1 and 1.59:1 in December 2011.

December 2011 vs. December 2010

The Company’s balance sheet remained to be healthy with total assets of 11.854B in 2011, higher than the previous year's level of 11.476B. 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 and were also used to purchase properties, partially settle loans and notes payable and pay cash dividends. As a result of the foregoing, the group’s liquidity position remained stable with current and acid test ratio of 1.59:1 and 0.88:1 as compared to 2010 of 1.45:1 and 0.90:1, respectively. The decrease in liabilities improved its solvency position with asset and debt ratio at 2.41:1 and 0.70:1 compared with the previous year of 2.27:1 and 0.85:1, respectively.

Total stockholders' equity stood at 6.941B, higher by 8.23% as compared with 2010 of 6.413B. The increase was due to net income of 726.54M less cash dividends of 204.88M plus other adjustments of 5.92M.


The Company’s balance sheet remained solid with total assets of 11.476B in 2010, higher by 171.00M compared with last year’s level of 11.305B. Short term cash investments increased by 1.193B due to net cash inflows from operating activities and reinvestment of held to maturity investments. Collection of receivables and higher unrealized gross profit of newly launched projects led to the decrease in installment contract’s receivable (net) by 11.27%. Majority of the funds were used for project development resulting to the completion of The Manila Residences Tower I, Makati Executive Tower III (project of CDC) and Mandaluyong Executive Mansion III (a project of CDC). The stable cash flow has also enabled the Group to purchase a prime lot, pay cash dividends and reduce accounts payable and accrued expenses by 158.14M as well as notes and loans payable by 243.00M

Total stockholders’ equity stood at 6.413B compared to the previous level of 5.798B. The increase was due to the following: (1) increase in net income of 822.34M; (2) decrease by 202.65M due to cash dividends; and (3) decrease by P4.13M due to other adjustments. As a result of the foregoing, the group strengthened its liquidity position with current and acid test ratio of 1.45:1 and 0.90:1 as compared with 2009 of 1.15:1 and 0.62:1, respectively. Debt equity ratio likewise improved to 0.85:1 as compared with 2009 of 1.02:1.


Total assets amounted to 11.305B in 2009, higher by 6.39% than last year’s level of 10.626B. The increase in assets can be attributed to higher short-term cash investments, installment contracts receivable and real estate properties for sale and for future development. The opening of two condominium projects in 2009 increased real estate properties for sale and installment contracts receivable. The Company’s funds were utilized for the development of the project and a substantial portion was used to purchase prime lots in Manila resulting to the increase in real estate properties for future development. Excess funds were placed in short-term cash investments totaling 485.40M.

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Total stockholders’ equity now stands at 5.798B from 5.257B as of 2009 and 2008, respectively due to the following: (1) increase in net income of 739.01M; (2) decrease by 118.65M due to cash dividends; (3) decrease by 89.84M due to cash dividends of subsidiaries (4) increase by 5.11M due to transfer of revaluation increment to retained earnings through sale and depreciation and; (5) plus other adjustments of 5.37M As a result of the foregoing, the group strengthened its liquidity position with current and and acid test ratio of 1.15:1 and 0.62:1 as compared with 2008 of 1.06:1 and 0.52:1, respectively. Debt equity ratio likewise improved to 1.02:1 as compared with 2008 of 1.13:1.

c) Results of Operation

June 30, 2012 vs. June 30, 2011

Total revenues reached 1.306B as compared to the previous year of 1.336B. Lower revenues were due to lower sales and interest income from sales of real estate. On the cost side, lower sales decreased cost of sales and operating expenses. The Company’s payment of notes payable decreased financial expense by 16.21%. Altogether the financial performance for the first semester of 2012 resulted to a net income of 313.12M as compared to the previous year of 347.61M. This translated to earnings per share and return on equity (both annualized) of 8.64 and 8.02% as compared to the previous year of 10.53 and 10.69%, respectively.

December 2011 vs December 2010

Despite the global crisis, the Company’s sale of real estate properties reached 1.989B, as compared to last year's 2.348B. Lower sales can be attributed to the projects launched last year which are still in the initial stages of construction. These are The Manila Residences Tower II and Tagaytay Prime Residences. However, the last few units of the completed condominium project, The Manila Residences Tower I, continued to contribute to total sales which reached a 93.09% sell-out rate at the end of the year. In addition, Brentwood Mansion, a condominium located in Pasig City and other horizontal projects in Tagaytay continued to contribute modestly to the Company's sales.

Meantime, the construction activities of the subsidiaries were on full blast, leading to the 75.06% completion rate of Makati Executive Tower IV, while Grand Emerald Tower and Manila Residences Bocobo, reached a completion rate of 100% and 96.36%, respectively. The high completion rate and sales of these projects contributed significantly to revenues. Other completed projects like the Makati Executive Tower III and Mandaluyong Executive Mansion III continued to contribute to revenue on sales and provided stable cash flows. 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 24.58% of total revenues.

The Company remained prudent in managing costs and other disbursements during the year. Cost of sales decreased since this move in tandem with sales. Cost of sales was recorded at 1.209B in 2011 as compared with 1.546B in 2010. On the other hand, operating expenses increased by 16.52% due to higher professional fees, membership dues and donations. However, payment of loans and notes payable eased interest payments resulting to the decline in financial expenses by 16.97%, while lower net income before tax decreased provision for income tax by 45.86%.

Altogether, financial performance for the year 2011 resulted to a net income of 726.54M, as compared to the previous year of 822.34M, while net income attributable to equity holders of the parent amounted to 421.93M, as compared to the previous year of 538.08M. This translated an earning per share and return on equity of 10.13 and 9.80% in 2011 as compared with 12.91 and 13.42% in 2010. The Company is optimistic that sales and revenues will improve as the projects near their completion dates.

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December 2010 vs December 2009

The Company’s total revenues on sales reached 2.348B from 2.329B in 2009, slightly higher by 18.56M. Revenue growth was driven by sales and high project completion rates of the group’s projects. Revenue on sales of Manila Residences I continued to contribute significantly to total sales since its launching in 2006. The completion of this project this year prompted the opening in of Manila Residences Tower II in September 2010. In addition, the new vertical project, Tagaytay Prime Residences and the other horizontal projects, Tagaytay Country Homes 2B and 2C also contributed modestly to total revenues. .

Its subsidiaries’ projects which contributed significantly to the Company’s sales and revenues in 2010 are: Makati Executive Tower III and IV, both are located in Makati City, Mandaluyong Executive Mansion III in Mandaluyong City; Manila Executive Residences and Manila Residences Bocobo in Manila; and Grand Emerald Tower in Ortigas Center, Pasig City. In addition, financial income which is substantially composed of interest on sales of real estate properties increased to 691.73M from 651.52M, higher by 6.17%, accounting for 21.73% of total revenues. Moreover, recovery of impairment loss of real estate properties increased other revenues.

On the cost side, cost of sales was recorded at 1.546B in 2010 as compared with 1.519B in 2009. Higher revenues increased cost of sales, operating expenses and provision for income tax. On the other hand, reduction of notes and loans payable eased interest payments consequently reducing financial expenses by 13.97%.

Altogether, financial performance for the year 2010 resulted to a net income of 822.34M, 11.28% higher than the previous year of 739.01M, while net income attributable to equity holders of the parent amounted to 538.08M higher by 19.36% than the previous year. This translated to an earnings per share of 15.49 and return on equity of 13.42% in 2010 as compared with 12.98 and 12.56% in 2009, respectively.


Revenue on sales of real estate reached 2.329B as compared with last year’s figure of 2.339B despite the economic and business uncertainties that prevailed during the year. Revenue on sales was driven by sales and high project completion rates of real estate projects.

The projects which contributed to the Company’s sales and revenues in 2009 are: The Manila Residences and Brentwood Mansion, both are vertical projects, while Tagaytay Executive Village and Tagaytay Country Homes 2B (phase B) are horizontal projects. In addition, three projects that were co-developed with Cityplans Inc., namely, Oxford Mansion and Windsor Mansion are vertical projects which contributed modestly to sales and revenues for the year.

The Company’s subsidiary (CDC), which contributed significantly to the Company’s sales and revenues in 2009 are: Makati Executive Tower III and IV and Rada Regency, which are located in Makati City; Manila Executive Regency and Manila Residences Bocobo (a project of CLDI) in Manila City; Corinthian Executive Regency and Grand Emerald Tower ( a project of CLDI) in Ortigas Center, Pasig City and; Mandaluyong Executive Mansion III in Mandaluyong City.

In addition, financial income which is substantially composed of interest on sales of real estate properties reached 651.52M in 2009 as compared with 653.12M in 2008, accounting for 21.29% and 21.08% , respectively of total revenues.On the cost side, cost of sales was recorded at 1.519B in 2009 as compared with 1.544B in

46

2008. Operating expenses on the other hand increased due to higher taxes paid. The Company’s partial termination of loans eased interest expense payments resulting to the decline of financial expenses by 9.47%. Lower tax rate and taxable income decreased income tax by 12.54%.

Altogether, financial performance for the year 2009 resulted to a net income of 739.01M, higher than the previous year of 729.48M, while net income attributable to equity holders of the parent amounted to 450.80M higher than 440.99M. This translated to an per share and return on equity of 15.58 and 12.56% in 2009 as compared with 15.24 and 13.53% in 2008.

Key Performance IndicatorsJune 30, 2012 2011 2010 2009

Cityland, Inc. (Consolidated)Earnings per share 8.64 10.13 15.49 12.98Return on equity 8.02% 9.80% 13.42% 12.56%Asset to liability ratio 2.57 2.41 2.27 2.05Debt – equity ratio 0.65 0.70 0.85 1.02Current ratio 1.64 1.59 1.45 1.15Acid – test ratio 0.99 0.88 0.90 0.62

Cityland Development Corp. (Consolidated)Earnings per share 0.12 0.15 0.18 0.21Return on equity 7.62% 9.59% 10.47% 12.86%Asset to liability ratio 3.14 2.99 2.64 2.33Debt – 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 0.47 0.23Return on equity 20.06% 21.95% 22.02% 13.38%Asset to liability ratio 2.85 2.86 2.71 2.79Debt – 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

Cityplans, Inc. (Subsidiary)Earnings per share 0.05 0.07 0.11 0.18Return on equity 2.24% 3.01% 4.14% 7.20%Asset to liability ratio 6.35 5.91 5.39 4.88Debt – equity ratio -- -- -- --Current ratio 16.10 22.93 22.41 17.01Acid – test ratio 14.81 21.09 21.23 15.95

Manner of Calculations

Earnings 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)

Asset to Liability Ratio = Total Assets / Total Liabilities

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 Liabilities

Acid 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

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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 subsidiaries issued SEC-Registered Short-Term Commercial Papers during the period with outstanding balance of 966.30 million and 983.70 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.

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 estimated development cost of 509.87 million as of June 30, 2012 representing the cost to complete the development of real estate projects sold and the contract payable amounting to 6.78 million representing the liabilities from the contracts to purchase land held to future de-velopment will be sourced through:

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

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d. Availment of bank linese. Issuance 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.

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

June 30, 2012 vs. December 31, 2011a) Increase in Cash and Cash Equivalents was due to net cash flows from operating activities and

reinvestment of matured short term investments to shorter period.b) Decrease in Short Term Cash Investments was due to maturity.c) Decrease in Investments in Trust Funds 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, accrued

interest and other receivables from contractors.f) Decrease in Real Estate Properties for Sale was due to sales.g) Decrease in Other Assets was due to donation of investment in real estate properties and input

VAT to real estate properties for sale.h) Decrease in Account 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 Payable to Stockholders was due to payment.l) Increase in Retained Earnings was due net income and other adjustments less cash dividends.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) Increase in Cost of Sales was due to cost adjustment.q) Decrease in Operating Expenses was due to decrease in professional fees, repairs and

maintenance, association dues, taxes and licenses, and insurance expenses.r) Decrease in Financial Expenses was due to decrease in loans and notes payable and interest

rate.

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s) Increase in Provision for Income Tax was due to increase in provision for deferred income tax and final tax.

t) Decrease in Net Income After Tax was due to lower revenues, higher cost of sales and provision for income tax.

Full Fiscal Years:

December 31, 2011 vs. December 31, 2010

a) Decrease in Cash and Cash Equivalents was to 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 net cash flows from operations and reinvestment of maturity of held-to-maturity investments.

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 increase in unrealized gross profit account which is deducted in this account.f) 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.g) Decrease in Property and Equipment was primarily due to depreciation.h) Decrease in Accounts Payable and Accrued Expenses was due to payment of

development costs, accrued director’s fee, and deposits.i) Decrease in Notes and Loans Payable was due to payment.j) Decrease in Pre-need Reserves was due to termination and maturity of contracts.k) Increase in Capital Stock was due to 20% stock dividends.l) 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.m) Increase in Retained Earnings was due to net income – net of dividends.n) Increase in Minority Interests was due to net income of subsidiaries.o) Increase in Financial Income was due to gain on sale of stocks and higher interests from

sale of real estate properties, cash equivalents and short-term cash investments.p) Increase in Other Income was due to full recovery of the remaining impairment loss on

real estate properties.q) Increase in Operating Expenses was due to higher sales.r) Decrease in Financial Expenses was due to lower interest rates and payment of loans.s) Increase in Provision for Income Tax was due to higher taxable income.


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

u) Increase in Short-term Cash Investments was due to net cash flows from operations and reinvestment of maturity of held-to-maturity investments.

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

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

due to increase in unrealized gross profit account which is deducted in this account.y) 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.z) Decrease in Property and Equipment was primarily due to depreciation.aa) Decrease in Accounts Payable and Accrued Expenses was due to payment of

development costs, accrued director’s fee, and deposits.ab) Decrease in Notes and Loans Payable was due to payment.ac) Decrease in Pre-need Reserves was due to termination and maturity of contracts.

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ad) Increase in Capital Stock was due to 20% stock dividends.ae) 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.af) Increase in Retained Earnings was due to net income – net of dividends.ag) Increase in Minority Interests was due to net income of subsidiaries.ah) Increase in Financial Income was due to gain on sale of stocks and higher interests from

sale of real estate properties, cash equivalents and short-term cash investments.ai) Increase in Other Income was due to full recovery of the remaining impairment loss on

real estate properties.aj) Increase in Operating Expenses was due to higher sales.ak) Decrease in Financial Expenses was due to lower interest rates and payment of loans.al) Increase in Provision for Income Tax was due to higher taxable income.


a) Decrease in Cash and Cash Equivalents was due to placements and payment of loans and contract payable.

b) Increase in Short-Term Cash Investments was due to placements.c) Decrease in Financial Assets through Profit and Loss was due to decrease in market

value.d) Increase in Other Receivables was due to increase in receivable from real estate

transactions and advances.e) Increase in Real Estate Properties for Sale and decrease in Real Estate Properties for

Lease was due to the launching of a new projects.f) Increase in Real Estate Properties Held for Future Development was due to purchase of

properties.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 accrual of development

costs.j) Increase in Income Tax Payable was due to lower prepaid tax.k) Decrease in Pre-need Reserves was due to termination and maturity of contracts.l) Decrease in Advances from Stockholders was due to payment.m) Increase in Net Changes in Fair Value of Investments was due to increase in value of

stocks.n) Increase in Retained Earnings was due to net income – net of cash dividends.o) Increase in Minority Interests was due to net income of subsidiaries.p) Decrease in Rental Income was due to expiration of lease contracts.q) Decrease in Other Revenues was due to decrease in recovery of impairment loss.r) Decrease in Financial Expenses was due to decrease in loans.s) Decrease in Provision for Income Tax was due to lower taxable income and tax rate.

Information On Independent Accountant

The company's external auditor is SyCip, Gorres, Velayo & Company.

External Audit Fees 2012 2011

Audit and Audit-Related Fees 410,000 390,000Tax Fees -- --All Other Fees -- --Total 410,000 390,000

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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. SyCip, Gorres, Velayo and Company is the external auditor of the company.

Directors and Executive Officers

1. Identify Directors, Independent Directors and Executive Officers:

Name Citizenship Position Term of Office (Year)

Period of Service Age Family Relationship

Stephen C. Roxas Filipino Director/ Chairman of the Board

1 07/01/97 to Present 70 Husband of Helen Roxas, brother of Grace Liuson and Alice Gohoc

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

1 01/16/08 to Present 68 Husband of Grace Liuson

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

1 02/01/11 to Present 66 Wife of Andrew Liuson and sister of Stephen Roxas & Alice Gohoc

Josef C. Gohoc Filipino Director/ President 1 02/01/11 to Present 42 Nephew of Stephen Roxas and Grace Liuson & Son of Alice Gohoc

Peter S. Dee Filipino Independent Director 1 11/22/04 to Present 70 ---Paul Y. Ung Filipino Independent Director 1 11/18/08 to Present 69 ---

Alice C. Gohoc Filipino Director 1 9/01/01 to Present 70 Sister of Stephen Roxas & Grace Liuson

Helen C. Roxas Filipino Director 1 1979 to Present 63 Wife of Stephen RoxasRufina C. Buensuceso Filipino Executive Vice

President/ Compliance Officer

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

Emma A. Choa Filipino Senior Vice President/ Treasurer 1

02/01/11 to Present 51 ---

Eden F. Go Filipino Vice President 1 1/16/08 to Present 59 ---Rudy Go Filipino Vice President 1 8/16/07 to Present 52 ---Melita M. Revuelta Filipino Vice President &

Assistant Corporate Secretary

1 1/16/06 to Present 53 ---

Romeo E. Ng Filipino Vice President 1 1/10/05 to Present 50 ---Melita L. Tan Filipino Vice President 1 2/16/04 to Present 52 ---Josie T. Uy Filipino Vice President-Manila

Branch1 2/16/04 to Present 57 ---

Emma G. Jularbal Filipino Corporate Secretary -- 2/15/01 to Present 56 ---

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1. Stephen C. Roxas

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

Cityland Development Corporation Director / Chairman of the Executive Committee

July 1997

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 of the Board December 2005MGC New Life Christian Academy ChairmanCenter for Community Transformation Vice- Chairman

Past positions in other private institutions:City & Land Developers, Inc Director / President 1988 to June 1997Cityland Development Corporation Director / President 1978 to June 1997

2. Andrew I. Liuson

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

Cityland Development Corporation Director / Vice Chairman of the Board

January 2008

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

January 2008

Cityplans, Inc. Director / Chairman 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

Past positions in other private institutions:City & Land Developers, Inc Director / President 1997 to Jan. 2008Cityland Development Corporation Director / President 1997 to Jan. 2008Cityplans, Inc. Director / Vice Chairman / Exec. Vice

President1988 to September 2006

3. Grace C. Liuson

Present positions in other private institutions:

Name of Office Position Date AssumedCity & Land Developers, Inc Director / Deputy Vice-

Chairman of the BoardFebruary 1, 2011

Cityland Development Corporation Director / Deputy Vice-Chairman of the Board

February 1, 2011

Cityplans, Inc. Director / Executive Vice President

September 2006

Cityland Asset-Backed Securities (SPC), Inc. Director / Executive Vice President / Treasurer

December 2005

Youth Gospel Center Treasurer / TrusteeMakati Gospel Church Treasurer

Past positions in other private institutions:City & Land Developers, Inc President

Executive Vice President & Treasurer

February 2008 to January 20111997 to February 2008

53

Cityland Development Corporation PresidentExecutive Vice President & Treasurer

February 2008 to January 20111997 to February 2008

Cityplans, Inc. Senior Vice President 1988 to September 2006

4. Josef C. GohocPresent positions in other private institutions:

Name of Office Position Date AssumedCityland Development Corporation Director / President February 1, 2011City & Land Developers, Inc. Director / President February 1, 2011Cityland Asset-Backed Securities (SPC), Inc. Director December 2005Cityland Foundation Inc. Director 2002Asian Business Solutions, Inc. Director 1996Philippine Trading & Investment Corporation Director 1997Atlas Agricultural & Mercantile Development

Corp.Director 1997

Past positions in other private institutions:City & Land Developers, Inc. Senior Vice President/

TreasurerFirst Vice President

Jan. 2008 to Jan. 2011June 2008 to Jan. 2011Sept. 2006 to Jan. 2008

Cityland Development Corporation Senior Vice President/TreasurerFirst Vice President

Jan. 2008 to Jan. 2011June 2008 to Jan. 2011Sept. 2006 to Jan. 2008

5. Peter S. Dee Present positions in other private institutions:

Name of Office Position DurationAsean Finance Corporation Limited Independent 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 - do -Cityland Development Corp. Independent Director - do -City And Land Developers, Inc. Independent Director - do -GDSK Development Corp. Director - do -Hydee Management & Resources Corporation Director - do -Kemwerke, Inc. Director - do -Makati Curbs Holdings Corp. DirectorSilver Falcon Insurance Agency Director - do -

6. Paul Y. Ung Present positions in other private institutions:

Name of Office Position DurationSecurity Bank Corporation Director / Vice Chairman Present

Past positions in other private institutions:Pacific Paint & Oil Mfg. Inc. President / Gen. Manager 1988 – 2002JWL Chemical Corporation President / Gen. Manager 1988 – 2005

54

Century Chemical CorporationPacific Land Atlantic CoatingsEm-Pol Corporation

ChairmanPresident / Gen. ManagerVice PresidentChairman

1989 – 2005 1989 – 2005 1989 – 2005 1989 – 2005

7. Alice C. Gohoc


Name of Office Position Date AssumedCityland Development Corporation Director 09/01/2001City & Land Developers, Inc. Director 09/01/2001Philippine Trading & Investment Corp. Director 1997Atlas Agricultural & Mercantile Development Corp.

Director 1997

Asian Business Solutions, Inc. Director 1996

8. Helen C. Roxas


Name of Office Position Date AssumedCityland Development Corporation Director 1978City & Land Developers, Inc. Director 1979Cityplans, Inc. Director October 1988Cityland Asset-Backed Securities (SPC), Inc. Director December 2005Good Tidings Foundation Inc Treasurer 1992MGC New Life Christian Academy Board of Trustee 1992

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

Name of Office Position Date AssumedCityland Development Corporation Executive Vice President February 1, 2011City & Land Developers, Inc Executive Vice President February 1, 2011Cityplans, Inc. Comptroller September 12, 1990

Past positions in other private institutions:Cityland Development Corporation Senior Vice President 1997 to 2011City & Land Developers, Inc Senior Vice President 1997 to 2011

10. Emma A. ChoaPresent positions in other private institutions:

Name of Office Position Date AssumedCityland Development Corporation Senior Vice President / Treasurer February 1, 2011City & Land Developers, Inc. Senior Vice President / Treasurer February 1, 2011

11. Eden F. GoPresent positions in other private institutions:

Name of Office Position Date AssumedCityland Development Corporation Vice President January 2008City & Land Developers, Inc. Vice President January 2008

12. Rudy GoPresent positions in other private institutions:

55

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

13. Melita M. RevueltaPresent positions in other private institutions:

Name of Office Position Date AssumedCityland Development Corporation Vice President January 2008City & Land Developers, Inc. Vice President January 2008

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

Name of Office Position Date AssumedCity & Land Developers, Inc. Vice President January 2005Cityland Development Corporation Vice President January 2005

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

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

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

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

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

Name of Office Position Date AssumedCity & Land Developers, Inc Asst. Corporate Secretary July 1997Cityland Development Corporation Corporate Secretary July 1997Cityland Asset-Backed Securities (SPC), Inc. Corporate Secretary December 2005

2. Identify Significant Employees

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

3. 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:

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;

56

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.

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 xEmma A. Choa Senior Vice President x x xEden F. Go Vice President x x xMelita M. Revuelta Vice President xRudy Go Vice President x x xMa. Riza Q. Sta Ana Manager x x

Salaries 3,652,846.00 3,615,570.00 3,874,404.00Bonus 4,918,883.00 6,007,832.00 968,601.00Others 9,406,662.30 4,824,736.32 711,487.32

Total (Top 5) 17,978,391.30 14,448,138.32 5,554,492.32Salaries 6,020,820.00 6,254,481.00 5,857,757.00Bonus 5,585,185.00 5,172,525.00 2,436,319.00Others 1,733,282.26 3,429,027.43 2,970,096.43

All officers & directors as a group unnamed 13,339,287.26 14,856,033.43 11,264,172.43

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 2,030,634.75 and 1,439,412.56 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.

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

Percentage

Unclassified Common Shares

Stephen C. Roxas3F Cityland Condo 10 Tower II, 154 H.V. Dela Costa St., Ayala North, Makati City / Director

--- Filipino 11,737,664 28.17%

57

Title of Class Name, Address & Relationship with Issuer

Beneficial Owner & Relationship

Citizenship No. of Shares Held

Percentage


Grace C. Liuson2F Cityland Condo 10 Tower I, 156 H.V. Dela Costa St., Ayala North, Makati City / Director

--- Filipino 6,126,970 14.70%


Andrew I. Liuson3F Cityland Condo 10 Tower I, 156 H.V. Dela Costa St., Ayala North, Makati City / Director

--- Filipino 5,655,675 13.57%


Helen C. Roxas3F Cityland Condo 10 Tower II, 154 H.V. Dela Costa St., Ayala North, Makati City / Director

--- Filipino 3,770,449 9.05%


Daniel Yen Chiong1148 Tamarind Road, Dasmariñas Village, Makati City / Stockholder

--- Filipino 3,770,449 9.05%


Lucy Fan47 Cambridge Circle, North Forbes Park, Makati City / Stockholder

--- American 3,770,449 9.05%


The Good Seed Sower Foundation Inc.3F Cityland Condo 10 Tower II, 154 H.V. Dela Costa St., Ayala North, Makati City / Stockholder

--- Filipino 3,770,438 9.05%


Alice Gohoc24 Pili Ave., Forbes Park, Makati City / Director

--- Filipino 3,015,935 7.24%

The person who will vote the shares of Good Seed Sower Foundation, Inc. is Winnie Go, the treasurer and director of the foundation.

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

Nature & Amount of Ownership

Citizenship Percentage

DIRECTORS:Unclassified Common Shares

Stephen C. RoxasDirector/ Chairman of the Board

Direct/ Indirect

11,737,664 Filipino 28.18%


Andrew I. LiusonDirector/ Vice Chairman of the Board

Direct 5,655,675 Filipino 13.57%


Grace C. LiusonDirector/ Deputy Vice- Chairman of the Board

Direct/ Indirect

6,126,970 Filipino 14.70%

58

Title of Class Name of Beneficial Owner / Position

Nature & Amount of Ownership

Citizenship Percentage


Josef C. GohocDirector/ President

Direct 414 Filipino ---


Peter S. DeeIndependent Director



Paul Y. UngIndependent Director



Alice C. GohocDirector

Direct/ Indirect

3,015,935 Filipino 7.24%


Helen C. RoxasDirector

Direct 3,770,449 Filipino 9.05%

EXECUTIVE OFFICERS:Unclassified Common Shares

Rufina C. BuensucesoExecutive Vice President

--- --- Filipino ---


Emma A. ChoaSenior Vice President/ Treasurer



Eden F. GoVice President



Rudy GoVice President



Melita M. RevueltaVice President



Romeo E. NgVice President



Melita L. TanVice President



Josie T. UyVice President – Mla



Emma G. JularbalCorporate Secretary


Security Ownership of all Directors & Officers 30,307,137 72.74%

d) Voting Trust Holders of 5% or More

There is no voting trust or similar arrangement holding 5% of a class securities.

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. Significant Transactions with 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.

59

The Registrant's affiliates are its subsidiaries, Cityland Development Corporation (CDC), City and Land Developers, Inc. ( CLDI) and Cityplans, Inc. (CPI).

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 Incorporated (CI), its parent company.

Business Purpose / Nature of the transaction:

CI, a major stockholder of Cityland Development Corporation (CDC), has an existing management agreement with CDC wherein CI provides management services to CDC. 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.

Corporate Governance

The evaluation system employed by the Corporation is thru 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 have started implementing the periodic self-rating system.

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.

60

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Actual Fees and Expenses:

Registration Fee:Filing Fee Php 837,500Legal Research Fee 8,375 845,875

Legal and Accounting Fees 30,000Publication Fee 29,000

Estimated Fees and Expenses:

Printing Costs of STCPs (estimate) 30,000Documentary Stamps (estimate) 5,500,000

Total Php 6,434,875

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

61

CITYLAND, INC.

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 PageStatement of Management’s Responsibility for Financial StatementsReport of Independent Public AccountantBalance Sheets as of December 31, 2011 and 2010Statements of Income for the Years Ended December 31, 2011, 2010 and 2009Statements of Changes in Stockholders’ Equity for the Years Ended

December 31, 2011, 2010 and 2009Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009Notes to Financial StatementsBalance Sheets as of June 30, 2012 and December 31, 2011Statements of Income for the Six Months Ended June 30, 2012 and June 30, 2011Statements of Comprehensive Income for the Six Months Ended June 30, 2012 and June 30,

2011Statements of Changes in Stockholders’ Equity as of June 30, 2012 and June 30, 2011Statements of Cash Flows as of June 30, 2012 and June 30, 2011Notes to Financial Statements

Supplementary Schedules

Report of Independent Public Accountants on 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

Others Annex “A” Retained Earnings Available for Dividend Declaration Annex “B” Map of the Relationships of the Companies within the Group

Annex “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.

*SGVMC312822*

8 1 6 1 8 8 SEC Registration Number

C I T Y L A N D , I N C . A N D S U B S I D I A R I E S

(Company’s Full Name)

2 n d a n d 3 r d F l o o r s , 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 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)

Not Applicable (Secondary License Type, If Applicable)

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

14 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

A member firm of Ernst & Young Global Limited

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*SGVMC312822*

INDEPENDENT AUDITORS’ REPORT The Stockholders and the Board of Directors Cityland, Inc. 2nd and 3rd Floors, 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 Inc. and its subsidiaries, which comprise the consolidated balance sheets as at December 31, 2011 and 2010, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the three years in the period ended December 31, 2011, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

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

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

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

Phone: (632) 891 0307 Fax: (632) 819 0872 www.sgv.com.ph BOA/PRC Reg. No. 0001, January 25, 2010, valid until December 31, 2012 SEC Accreditation No. 0012-FR-2 (Group A), February 4, 2010, valid until February 3, 2013


*SGVMC312822*

- 2 - Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cityland, Inc. 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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*SGVMC312822*

CITYLAND, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31 2011 2010 2009

NET INCOME P=726,544,436 P=822,337,474 P=739,008,253

OTHER COMPREHENSIVE INCOME (LOSS) Changes in fair value of available-for-sale financial

assets (Note 12) (78,821) 446,253 10,346,048 Realized loss on sale of available-for-sale financial

assets recognized in the consolidated statements of income (Note 12) – (12,892,158) (5,031,251)

Loss on impairment of available-for-sale financial assets recognized in the consolidated statements of income (Notes 12 and 20) – 1,752,711 –

(78,821) (10,693,194) 5,314,797

TOTAL COMPREHENSIVE INCOME P=726,465,615 P=811,644,280 P=744,323,050

Attributable to: Equity holders of the parent P=421,848,208 P=532,431,035 P=453,934,012 Non-controlling interests 304,617,407 279,213,245 290,389,038 P=726,465,615 P=811,644,280 P=744,323,050 See accompanying Notes to Consolidated Financial Statements.

*SGVMC312822*

CITYLAND, INC. 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 Available- Capital for-sale Stock Financial assets Retained Earnings (Note 15) Non-controlling (Note 15) (Note 12) Appropriated Unappropriated Total Interests Total

BALANCES AT DECEMBER 31, 2008 P=289,381,990 P=3,392,346 P=– P=2,967,642,474 P=3,260,416,810 P=1,996,520,684 P=5,256,937,494 Net income – – – 450,786,567 450,786,567 288,221,686 739,008,253 Other comprehensive income – 3,147,445 – – 3,147,445 2,167,352 5,314,797 Total comprehensive income – 3,147,445 – 450,786,567 453,934,012 290,389,038 744,323,050 Transfer of deferred income tax liability on

deemed cost adjustments realized through sale – – – (7,469,447) (7,469,447) 9,705,572 2,236,125 Net decrease in deemed cost adjustment in

properties of a subsidiary – – – 1,447,971 1,447,971 1,423,496 2,871,467 Cash dividends - P=4.10 per share – – – (118,646,616) (118,646,616) – (118,646,616) Cash dividends declared by subsidiaries – – – – – (89,835,368) (89,835,368) Appropriation of retained earnings – – 100,000,000 (100,000,000) – – –

BALANCES AT DECEMBER 31, 2009 289,381,990 6,539,791 100,000,000 3,193,760,949 3,589,682,730 2,208,203,422 5,797,886,152 Net income – – – 538,075,506 538,075,506 284,261,968 822,337,474 Other comprehensive income – (5,644,471) – – (5,644,471) (5,048,723) (10,693,194) Total comprehensive income – (5,644,471) – 538,075,506 532,431,035 279,213,245 811,644,280 Increase in market value of stocks held by CPI’s

investments in trust fund – – – – – (36,764) (36,764) Transfer of deferred income tax liability on

deemed cost adjustment realized through sale – – – 12,915,170 12,915,170 (6,315,388) 6,599,782 Stock dividends - 20% 57,876,340 – – (57,876,340) – – – Fractional shares – – – (58) (58) (229) (287) Cash dividends - P=4.29 per share – – – (124,144,874) (124,144,874) – (124,144,874) Cash dividends declared by subsidiaries – – – – – (78,506,479) (78,506,479)

(Forward)

*SGVMC312822*

- 2 -

Attributable To Equity Holders of the Parent Net Changes in Fair Values of Available- Capital for-sale Stock Financial assets Retained Earnings (Note 15) Non-controlling (Note 15) (Note 12) Appropriated Unappropriated Total Interests Total

BALANCES AT DECEMBER 31, 2010 P=347,258,330 P=895,320 P=100,000,000 P=3,562,730,353 P=4,010,884,003 P=2,402,557,807 P=6,413,441,810 Net income – – – 421,926,905 421,926,905 304,617,531 726,544,436 Other comprehensive income (loss) – (78,697) – – (78,697) (124) (78,821) Total comprehensive income – (78,697) – 421,926,905 421,848,208 304,617,407 726,465,615 Increase in market value of stocks held by CPI’s

investments in trust fund – – – – – (146,138) (146,138) Transfer of deferred income tax liability on

deemed cost adjustments realized through sale and depreciation – – – 3,335,800 3,335,800 2,810,283 6,146,083

Appropriation – – 100,000,000 (100,000,000) – – – Stock dividends - 20% 69,451,600 – – (69,451,600) – – – Fractional shares – – – (66) (66) – (66) Cash dividends - P=3.71 per share – – – (128,832,840) (128,832,840) – (128,832,840) Cash dividends declared by subsidiaries – – – – – (76,053,001) (76,053,001)

BALANCES AT DECEMBER 31, 2011 P=416,709,930 P=816,623 P=200,000,000 P=3,689,708,552 P=4,307,235,105 P=2,633,786,358 P=6,941,021,463 See accompanying Notes to Consolidated Financial Statements.

*SGVMC312822*

CITYLAND, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31 2011 2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=837,433,861 P=1,027,171,395 P=933,791,845 Adjustments for: Interest income (Note 19) (667,307,814) (671,914,669) (646,093,404) Interest expense - net of amounts capitalized (Note 20) 103,291,729 122,520,248 144,596,418

Donation of real estate property 30,611,833 – – Depreciation (Note 18) 21,659,334 23,301,123 23,270,974

Retirement benefits cost (income) (Note 22) (1,689,687) 188,730 (14,275,459) Loss on demolition of investment properties 5,588,239 – –

Decrease in pre-need reserves (Note 5) (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) (51,118) (207,791) (397,090) Recovery of impairment loss on real estate properties

for lease (Notes 10 and 21) – (86,937,620) (28,992,020) Gain on sale of available-for-sale financial assets

(Notes 19 and 20) – (19,607,724) (5,031,251) Impairment loss of available-for-sale financial assets

(Note 20) – 1,752,711 – Gain on sale of property and equipment – (59,999) (76,999)

Operating income before working capital changes 324,774,327 388,257,621 391,585,244 Decrease (increase) in: Installment contracts receivable 86,707,970 339,691,380 (129,665,103) Other receivables (21,380,699) 4,793,618 (4,426,589) Real estate properties for sale (275,869,218) 481,946,239 60,627,226

Real estate properties held for future development (111,975,937) (184,739,867) (188,785,442) Deposits and others (4,284,368) (12,560,520) (1,263,651) Increase (decrease) in: Accounts payable and accrued expenses 302,129,959 (155,741,013) 188,500,353 Other reserve (50,502) (76,930) (177,530) Cash generated from operations 300,051,532 861,570,528 316,394,508 Interest received 669,858,935 667,679,431 647,692,661 Income taxes paid, including creditable and

final withholding taxes (200,586,881) (237,093,389) (182,779,720) Contribution to plan assets (Note 22) (118,683) (180,507) (860,586) Net cash flows from operating activities 769,204,903 1,291,976,063 780,446,863

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Matured short-term cash investments (Note 4) 967,068,028 – –

Demolition of investment properties 6,696,429 Disposal of property and equipment – 60,000 76,999

Sale of available-for-sale financial assets (Note 12) – 14,671,265 5,524,369 Matured held-to-maturity investments – 150,949,247 3,123,478 Withdrawals from investments in trust funds (Note 5) 7,932,725 8,388,256 15,422,893 Additions to: Investment properties (Note 10) (6,800,632) (343,907) (651,039) Property and equipment (Note 11) – (1,792,428) – Contributions to investments in trust funds (Note 5) (2,430,147) (747,509) (1,940,761) Dividends received (Note 19) 51,118 207,791 397,090 Purchases of short-term cash investments (Note 4) – (1,193,100,028) (485,400,000) Net cash flows from (used in) investing activities 972,517,521 (1,021,707,313) (463,446,971)

(Forward)

*SGVMC312822*

- 2 -

Years Ended December 31 2011 2010 2009

CASH FLOWS FROM FINANCING ACTIVITIES Net availments (payments) of short-term notes and loans

(Note 14) (P=370,253,021) P=55,734,293 P=682,828,659 Dividends paid (Note 15) (204,302,314) (201,983,096) (207,936,701)Interest paid (Note 14) (108,500,647) (125,590,590) (140,787,914)Increase in (payments of) payable to stockholders (Note 24) 66,665,888 (990,241) (26,400,909)Payments of long-term loans (Note 14) (46,000,000) (303,735,023) (455,595,006)Availments of long-term loans – 5,000,000 44,000,000 Payments of contracts payable (Note 14) – – (293,984,572)Net cash flows used in financing activities (662,390,094) (571,564,657) (397,876,443)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,079,332,330 (301,295,907) (80,876,551)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 882,491,430 1,183,787,337 1,264,663,888

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) P=1,961,823,760 P=882,491,430 P=1,183,787,337

See accompanying Notes to Consolidated Financial Statements.

*SGVMC312822*

CITYLAND, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate Information

Cityland, Inc. (the Parent Company) was incorporated in the Philippines on May 15, 1979. The Parent Company has a majority owned subsidiary, namely, Cityland Development Corporation (CDC), a publicly listed company, and two wholly owned subsidiaries, namely, Credit & Land Holding, Inc. (CLHI) and Cityads Incorporated (CAI). CDC has two majority owned subsidiaries, namely, City & Land Developers, Incorporated (CLDI), another publicly listed company, and Cityplans, Incorporated (CPI). The primary purpose of the Parent Company and its subsidiaries (the Group), which are all domiciled in the Philippines, 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. In addition, CPI is engaged in the business of establishing, organizing, developing, maintaining, conducting, operating, marketing and selling pension plans.

The Group’s registered office and principal place of business is 2nd and 3rd Floors, Cityland

Condominium 10, Tower I, 156 H.V. de la Costa Street, Ayala North, Makati City.

The consolidated financial statements of Cityland, Inc. were authorized for issue 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, 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

- 2 -

*SGVMC312822*

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 Philippine Interpretation 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 consolidated statement of changes in equity or in the notes to the consolidated financial statements.

• PAS 27, Consolidated and Separate Financial Statements (Amended), clarifies 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 (Revised) • Philippine Interpretation IFRIC 13, Customer Loyalty Programmes

- 3 -

*SGVMC312822*

Basis of Consolidation The consolidated financial statements include 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. 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 Ownership Nature of

Activity Direct: CAI 100.00 Advertising CLHI 100.00 Holding CDC 50.40 Real estate Indirect through CDC (including direct ownership of

the Parent Company in CLDI of 29.54% and CPI of 9.18%):

CLDI 54.60 Real estate

CPI 54.95 Pre-need

pension plans 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 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 sheets, 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

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*SGVMC312822*

of non-controlling 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 interests in CDC, CLDI and CPI not held by the Group.

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 costs.

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 the 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

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*SGVMC312822*

• 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.

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 loans and receivables consist of cash in banks and cash equivalents, short-term cash investments, installment contracts receivable and other receivables.

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 the 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 the reporting period and noncurrent assets if maturity is more than a 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.

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*SGVMC312822*

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 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, notes and loans payable and payables to stockholders.

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

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 of 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 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.

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*SGVMC312822*

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 when:

• 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.

When the Group has transferred its rights to receive cash flows from a financial asset and has

neither transferred nor retained substantially all the risks and rewards of the financial asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the financial 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 end of the 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 the reporting period. For the purpose of a 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.

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*SGVMC312822*

If there is an objective evidence that an impairment loss on loans and receivable 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 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 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” account 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.

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*SGVMC312822*

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. Interests on loans (borrowing costs) incurred during the development or construction phase are also capitalized as part of the cost of 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 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 investment properties on January 1, 2004 were considered the assets’ deemed cost as of said date. Subsequent to initial measurement, investment properties are carried at cost less accumulated depreciation and impairment loss.

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 consolidated statement of income in the year of retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use,

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

Transfers between investment properties, owner-occupied property and real estate properties for

sale 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 operation, 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.

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*SGVMC312822*

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. 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 allowance is provided for the carrying amount of assets which is 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.

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*SGVMC312822*

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 basis of the methodology and

assumptions set out in the Pre-need Rule 31, as Amended, as follows: 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.

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.

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*SGVMC312822*

Retained Earnings Retained earnings represent the cumulative balance of net income or loss, dividend distributions, effects of the 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 the end of 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 or receivable 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 is 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 Company’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.

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*SGVMC312822*

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 from 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 tax and SEC registration fees.

Interest income

Interest income from cash in banks, cash equivalents, short-term cash investments and installment contracts receivable 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 short-term leases under which substantially all risks and rewards

of ownership of the leased assets remain with the lessors. 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 notes and loans payable. Interest attributable to a qualifying asset is capitalized as part of the cost of the property while others 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 costs (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. Other comprehensive income of the Group includes gains and losses on remeasuring available-for-sale financial assets.

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

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*SGVMC312822*

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 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

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*SGVMC312822*

laws used to compute the amount are those that are enacted or substantively enacted at the end of the 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.

Deferred income tax liabilities are recognized for all taxable temporary differences, including asset 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 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 taxable profits will be available to allow all or part of the deferred income 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 in the 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 set off current tax assets against current 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 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 retrospective effect, if any, of stock dividends declared during the year.

Diluted earnings per share is calculated by dividing the net income attributable to equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the

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*SGVMC312822*

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.

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 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 set-off 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 set-off in accordance with PAS 32. The amendments require entities to disclose, in a tabular format unless another format is more appropriate, the following minimum quantitative information.

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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.

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 Ventures. 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 presentation only and have therefore no impact on the Group’s financial position or performance.

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• Revised PAS 19, Employee Benefits, includes a number of amendments that range from fundamental changes to simple clarifications and re-wording. 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 37, 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.

• 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 set-off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous.

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 Group’s financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Group 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

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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 impact 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.

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 periods 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 Parent Company’s functional currency The Parent Company, 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 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 (see Note 25). The Group determines the classification at initial recognition and, where allowed and appropriate, and re-evaluates this designation at every reporting date.

Classification of leases - Group as Lessor The Group has entered into property leases of its investment properties where it has determined that the risk and rewards related to those properties are retained with the Group. As such, these lease agreements are accounted for as operating leases.

Classification of real estate properties The Group determines whether a property is classified as for investment or for sale and for future development.

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Real estate properties which are not occupied substantially for use by, or in the operations of, the Company, 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=2,493.11 million and P=2,506.37 million as of December 31, 2011 and 2010, respectively (see Note 10).

Real estate properties which the Company develops and intends to sell before or on completion of construction are classified as real estate properties for sale and for future development. Real estate properties for sale and for future development amounted to P=3,833.43 million and P=3,456.81 million, respectively as of December 31, 2011 and 2010, respectively (see Notes 8 and 9).

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 pre-tax 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 as of and for the years ended December 31, 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 total carrying values, which are equal to total fair values, of financial assets recognized in the consolidated balance sheets amounted to P=5,370.34 million and P=5,328.12 million, respectively, while the total carrying values of financial liabilities amounted to P=4,045.81 million and P=4,092.32 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 are not limited to the length of the Group’s relationship with the 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=2,655.38 million and P=2,723.26 million, respectively. There was no impairment of receivables in 2011 and 2010 (see Notes 6 and 7).

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=2,588.82 million and P=2,675.53 million, respectively (see Note 6). Gross profit on

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sales of real estate properties amounted to P=780.06 million, P=801.94 million and P=810.09 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 of the net realizable value of real estate properties for sale and held for future development are 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 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 change 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=3,833.43 million and P=3,456.81 million, respectively (see Notes 8 and 9).

Estimation of useful lives of investment properties and property and equipment The Group estimates the useful lives of investment properties and property and equipment based

on the internal technical evaluation and experience with similar assets. Estimated lives of investment properties and property and equipment are reviewed periodically and updated if expectations differ from previous estimates due to wear and tear, technical and commercial obsolescence and other limits on the use of the assets. As of December 31, 2011 and 2010, net book value of depreciable investment properties amounted to P=24.31 million and P=31.88 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 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. When an impairment indicator is noted, the Company 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. Net book value of investment properties as of December 31, 2011 and 2010 amounted to

2,493.11 million and P=2,506.37 million, respectively (see Notes 10 and 21). On the other hand, 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=176.50 million was recognized in 2006 to reduce the carrying value of certain investment properties to their recoverable amount, which is the estimated net selling price as of that date. In 2010 and 2009, a partial recovery of the impairment loss was recognized amounting to P=86.94 million and P=28.99 million, respectively (see Note 10). Recoverable amounts of the impaired properties were established as the ultimate selling price based on an independent valuation by a third party.

Impairment of available-for-sale financial assets

An impairment issue arises when there is an objective evidence of impairment, which involves significant judgment. In making this judgment, the Group evaluates the financial health of the

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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 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 amounted to P=1.75 million on available-for-sale

financial assets. No impairment loss was recognized in 2011 and 2009 (see Note 12).

Available-for-sale financial assets amounted to P=1.98 million and P=2.06 million as of December 31, 2011 and 2010, respectively (see Note 12).

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 income amounted to P=1.69 million and P=14.28 million in 2011 and 2009, respectively, while net retirement benefits cost amounted to P=0.19 million in 2010. (see Note 22). Retirement plan assets amounted to P=18.59 million and P=16.79 million, as of December 31, 2011 and 2010, respectively (see Notes 12 and 22).

Estimation of pre-need reserves (PNR)

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 actual

potential plan claims as of end of reporting period. As of December 31, 2011 and 2010, PNR amounted to P=46.14 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.

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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 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 of deferred income tax assets 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 all or part of deferred income tax assets to be utilized. As of December 31, 2011 and 2010, deferred income tax assets amounted to P=9.49 million and P=6.22 million, respectively (see Note 23).

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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=19,747,597 P=30,195,157 Cash equivalents 1,942,076,163 852,296,273 P=1,961,823,760 P=882,491,430

Cash in banks earn interest at the respective bank deposit rates. Cash equivalents are made for varying periods of 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=711.43 million and P=1,678.50 million as of December 31, 2011 and 2010, respectively, are investments placed 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=123.40 million, P=84.28 million and P=68.77 million in 2011, 2010 and 2009, respectively (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 aggregating 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 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, other reserves amounting to P=0.36 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 in 2011 and P=2.35 million in 2010).

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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 the 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). 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 46,115,766 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=542.08 million, P=572.58 million and P=563.33 million in 2011, 2010 and 2009, respectively (see Note 19).

The portion due within one year amounted to P=448.99 million and P=941.76 million as of December 31, 2011 and 2010, respectively (see Note 26).

The Group entered a contract of guaranty under Retail Guaranty Line in the amount of P=2,000.00

million in 2010, with Home Guaranty Corporation (HGC). The amount of installment contracts receivable enrolled by the Group amounted to P=2,497.00 million and P=3,239.00 million in 2011 and 2010, respectively. The Group paid a guarantee premium of 0.90% based on the 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=10,106,929 P=12,658,050

(Forward)

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2011 2010 Advances to: Customers P=38,417,228 P=14,824,537 Contractors 6,084,089 7,004,832 Retention 3,561,104 4,140,285 Others 8,388,144 9,100,212 P=66,557,494 P=47,727,916

Advances to customers are receivables of the Group for the real estate property taxes of sold units where as advances to contractors are advances made by the Group for the contractor’s supply requirements. Other receivables include receivables from customers relating to registration initially paid by the Group and employee’s advances.

Other receivables due within one year amounted to P=57.09 million and P=37.28 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 costs incurred in the development of condominium units

and residential houses for sale amounting to P=2,532.61 million and P=2,159.08 million as of December 31, 2011 and 2010, respectively.

Condominium units and residential houses for sale account includes capitalized interest costs

incurred during each year in connection with the development of the properties (see Note 14). The capitalization rates used to determine the amount of borrowing costs eligible for capitalization were 3.86%, 4.07% and 4.97% in 2011, 2010 and 2009, respectively.

In 2011, the Parent Company purchased various condominium units for P=105.19 million of which

P=50.00 million were paid out of the purchase rights (see Note 12). Some real estate properties for sale with carrying values of P=395.40 million as of

December 31, 2010 were used as collateral of loans availed from financial institutions 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=8,675 P=9,974 Less aggregate carrying costs 5,006 6,084 Excess of aggregate cash price values over aggregate carrying costs P=3,669 P=3,890

Real estate properties for sale includes deemed cost adjustment amounting to P=176.91 million and P=211.08 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.

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9. Real Estate Properties Held for Future Development Movements of real estate properties held for future development are follows:

2011 2010 Balances at beginning of the year P=1,297,732,082 P=1,499,497,908 Additions 111,975,937 184,739,867 Transfer to real estate properties for sale (47,660,200) (386,505,693) Transfer to other assets (61,223,666) – Balances at end of the year P=1,300,824,153 P=1,297,732,082

Real estate properties held for future development includes land properties reserved by the Group for its future condominium projects. During 2011 and 2010, CLDI acquired a parcel of land amounting to P=109.81 million and P=125.71 million, respectively, held for future development. 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. In 2011, the Parent Company’s property amounting to P=61.22 million intended for donation was reclassified to other assets.

10. Investment Properties Investment properties consist of:

2011 2010 Real estate properties for lease P=1,544,412,715 P=2,506,373,655 Real estate properties held for capital appreciation 948,700,000 – P=2,493,112,715 P=2,506,373,655

Real estate properties amounting to P=948.70 million were determined by management as held for

capital appreciation starting in 2011.

Movements of investment properties follow:

2011 Land Building Total Cost Balances at beginning of year P=2,474,494,751 P=145,950,055 P=2,620,444,806 Additions 6,800,632 – 6,800,632 Demolition – (57,328,273) (57,328,273) Reclassification (12,488,347) 12,488,347 – Balances at end of year 2,468,807,036 101,110,129 2,569,917,165 Accumulated Depreciation Balances at beginning of year – 114,071,151 114,071,151 Demolition – (45,043,605) (45,043,605) Depreciation for the year – 7,776,904 7,776,904 Balances at end of year – 76,804,450 76,804,450 Net Book Value P=2,468,807,036 P=24,305,679 P=2,493,112,715

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2010 Land Building Total Cost Balances at beginning of year P=2,424,778,152 P=145,950,055 P=2,570,728,207 Additions 343,907 – 343,907 Transfers to real estate properties

for sale (37,564,928) – (37,564,928) Reversal of impairment loss

(Note 21) 86,937,620 – 86,937,620 Balances at end of year 2,474,494,751 145,950,055 2,620,444,806 Accumulated Depreciation Balances at beginning of year – 104,929,290 104,929,290 Depreciation for the year – 9,141,861 9,141,861 Balances at end of year – 114,071,151 114,071,151 Net Book Value P=2,474,494,751 P=31,878,904 P=2,506,373,655

The net book values of land and building includes deemed cost adjustment amounting to P=1,500.06 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 investment properties amounted to P=29.36 million, P=22.24 million and P=22.32 million in 2011, 2010 and 2009, respectively. The related cost of real estate for lease amounted to P=17.78 million, P=19.23 million and P=15.20 million, respectively.

Based on the appraisal reports by independent firms of appraisers using market data approach at

various dates in 2011 and 2010, the appraised value of these investment properties amounted to P=3,134.86 million and P=2,979.30 million as of the dates of appraisal.

In 2006, impairment loss of P=176.50 million was recognized to reduce the carrying value of

investment properties to its recoverable amount. Recovery of the impairment loss was recognized in 2010 and 2009 amounting to P=86.94 million and P=28.99 million, respectively, which is included under “Other income” in the consolidated statements of income (see Note 21).

Some real estate properties for lease with carrying values of P=581.75 million as of

December 31, 2011 and 2010 were used as collateral for loans availed from financial institution in 2010 (see Note 14).

11. Property and Equipment Property and equipment consist of:

2011 Furniture, Fixtures and Transportation Office Office and Other Premises Equipment Equipment Total At Cost Balances at beginning and end of year P=– P=28,970,381 P=5,734,531 P=34,704,912

(Forward)

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2011 Furniture, Fixtures and Transportation Office Office and Other Premises Equipment Equipment Total Accumulated Depreciation Balances at beginning of year P=– P=27,617,043 P=3,769,812 P=31,386,855 Depreciation for the year – 736,895 507,235 1,244,130 Balances at end of year – 28,353,938 4,277,047 32,630,985 Net Book Value – 616,443 1,457,484 2,073,927 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 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=616,443 P=1,457,484 P=55,395,308

2010 Furniture, Fixtures and Transportation Office Office and Other Premises Equipment Equipment Total At Cost Balances at beginning of year P=– P=28,970,381 P=4,255,739 P=33,226,120 Additions – – 1,792,428 1,792,428 Disposals – – (313,636) (313,636) Balances at end of year – 28,970,381 5,734,531 34,704,912 Accumulated Depreciation Balances at beginning of year – 26,526,014 3,653,517 30,179,531 Disposals – – (313,635) (313,635) Depreciation for the year – 1,091,029 429,930 1,520,959 Balances at end of year – 27,617,043 3,769,812 31,386,855 Net Book Value – 1,353,338 1,964,719 3,318,057 At Deemed Cost 259,448,852 – – 259,448,852 Accumulated Depreciation Balances at beginning of year 180,850,868 – – 180,850,868 Depreciation for the year 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=1,353,338 P=1,964,719 P=69,277,738

For the office premises, the Group elected to apply the optional exemption under PFRS 1, First-

Time Adoption of PFRS, to use the previous revaluation as deemed cost at January 1, 2005, date of transition to PFRS.

As at December 31, 2011 and 2010, the balances at cost of the office premises 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).

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The cost of fully depreciated property and equipment as of December 31, 2011 and 2010 amounted to P=29.74 million and P=24.29 million, respectively.

12. Other Assets Other assets consist of:

2011 2010 Available-for-sale financial assets P=1,981,595 P=2,060,416 Retirement plan assets (Note 22) 18,594,814 16,786,444 Deposits and others (Notes 8 and 9) 76,948,341 92,052,140 P=97,524,750 P=110,899,000

Available-for-sale financial assets consist of investments in quoted equity securities.

The movement in “Net changes in fair values of available-for-sale financial assets” presented in the equity section of the consolidated balance sheets, are as follows:

2011 2010 Balances at beginning of year P=895,320 P=6,539,791 Mark-to-market gain (loss) (78,697) 317,834 Disposals – (7,064,028) Impairment loss – 1,101,723 Balances at end of year P=816,623 P=895,320

Net changes in fair values of available-for-sale financial assets pertaining to the non-controlling

interests amounted to P=124.00 and P=5.05 million in 2011 and 2010, respectively. The fair values of available-for-sale financial assets were determined based on published prices in

the active market. As of December 31, 2010, deposits include payment of P=50.00 million purchase rights by the

Parent Company for the five parcels of land to ASB Realty Corporation (ASB) in 2000. In 2011, these purchase rights were used to buy various condominium units in BSA Twin Towers classified as real estate properties for sale (see Note 8). The application of deposit is a noncash activity in the 2011 consolidated statement of cash flows.

On March 3, 2006, the Parent Company and ASB reached an agreement wherein: (a) ASB shall reserve and allocate in favor of the Parent Company an aggregate area of 16,670 square meters from ASB’s percentage interest in the joint venture between ASB and Sta. Lucia Properties; and (b) a portion of the receivable amounting to P=1.00 million shall be converted to equity of the joint venture while the full conversion shall be implemented upon the completion of the joint venture project. In 2011, the joint venture was did not push through.

In 2011, the Parent Company reclassified its real estate properties amounting to P=61.22 million

intended for donation from held for future development to other assets. Of the total amount, the Parent Company donated property amounting to P=30.61 million (see Note 9). Outstanding cost of property intended for donation amounted to P=30.61 million as of December 31, 2011.

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The portion of other assets due within one year aggregated to P=75.64 million and P=40.15 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=77,688,413 P=82,540,113 Deposits 27,041,287 30,858,052 Accrued expenses:

Development costs 735,127,486 434,684,775 Director’s fee (Note 24) 30,879,836 19,866,781 Interest payable 15,542,739 20,751,657 Taxes, premiums, others 5,325,024 6,499,508

Withholding taxes payable 10,436,712 11,149,586 Dividends payable 6,302,776 5,719,183 Output VAT payable 414,822 5,279,258 Others 13,397,549 7,303,097 P=922,156,644 P=624,652,010

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 customer’s reservation, and employees’ payable.

Accounts payable and accrued expenses due within one year amounted to P=509.78 million and

P=498.68 million as of December 31, 2011 and 2010, respectively (see Note 26). 14. Notes and Loans Payable Notes and Loans payable consist of:

2011 2010 Notes payable P=2,995,522,273 P=3,365,775,294 Loans payable – 46,000,000 2,995,522,273 3,411,775,294 Contracts payable 6,804,433 6,804,433 P=3,002,326,706 P=3,418,579,727

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The details of notes and loans payable are as follows:

2011 2010 Short-term commercial papers (STCP):

Short-term promissory notes with varying maturities and annual interest rates ranging from 2.13% to 5.39% in 2011 and 2.50% to 5.47% in 2010 P=1,963,500,000 P=2,039,400,000

Short-term promissory notes enrolled with HGC with varying maturities and annual interest rates ranging from 1.70% to 3.45% in 2011 and 2.00% to 3.40% in 2010 1,032,022,273 1,326,375,294

Loans from financial institutions: Long-term loans with annual average interest

rates from 5.41% to 9.25% in 2010 – 46,000,000 P=2,995,522,273 P=3,411,775,294

At various dates in 2011 and 2010, the SEC authorized the Group to issue P=2,300.00 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=1,963.50 million and P=2,039.40 million, respectively.

In 2011 and 2010, the Group entered a contract of guaranty under a Revolving Cash Guaranty

Line with HGC amounting to P=1,900.00 million and P=1,650.00 million, respectively. The guaranty covers the unpaid principal due on the outstanding STCP and unpaid interest thereon of 10% 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=1,032.02 million and P=1,326.38 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 of the Group. In addition, the Parent Company, CDC and CLDI have specific credit lines as follows (amounts in millions):

2011 2010 CI P=350.00 P=350.00 CDC 200.00 200.00 CLDI – 735.00 P=550.00 P=1,285.00

Outstanding balances of loans from financial institutions availed from the omnibus and specific credit lines for each company as of December 31, 2010 follow (amounts in millions):

CI P=36.00 CDC 5.00 CLDI 5.00 P=46.00

The Company has no outstanding loan from financial institutions as of December 31, 2011.

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Outstanding balances of loans from financial institutions and collaterals as of December 31 follow (amounts in millions):

Outstanding Loan Balances Collaterals Carrying Values 2011 2010 Description 2011 2010 Secured P=– P=5.00 Real estate properties

Unsecured – 41.00 for sale, lease and investment P=581.76 P=977.15

Total P=– P=46.00 P=581.76 P=977.15 Long-term loans obtained from financial institutions aggregating P=46.00 million as of

December 31, 2010, which shall mature at various dates from January 2012 to December 2016, were fully paid in 2011. In 2010, the Group paid loans amounting to P=303.74 million.

Contracts payable represent liabilities arising from contracts to purchase land for future development. Title of the properties purchased will be transferred to the Group upon full payment of the contracts payable.

Interest expense related to short-term notes amounted to P=120.13 million, P=130.54 million and

P=151.14 million in 2011, 2010 and 2009, respectively, while interest expense related to long-term loans amounted to P=1.15 million, P=11.28 million and P=45.12 million in 2011, 2010 and 2009, respectively (see Note 20). Capitalized interest in 2011, 2010 and 2009 amounted to P=18.68 million, P=19.31 million and P=52.02 million, respectively (see Notes 8 and 20).

The portion of notes and loans payable due within one year amounted to P=3,002.33 million and

P=3,372.58 million as of December 31, 2011 and 2010, respectively (see Note 26). 15. Equity Capital stock consists of:

Shares Amount 2011 2010 2011 2010 Common stock - P=10 par value:

Authorized - beginning of the year 53,000,000 30,000,000 P=530,000,000 P=300,000,000 Increase in authorized capital stock – 23,000,000 – 230,000,000 Authorized - end of year 53,000,000 53,000,000 P=530,000,000 P=530,000,000

The following summarizes the reconciliation of the issued and outstanding shares of capital stock

for each of the following:

Shares Amount 2011 2010 2011 2010 Issued, beginning 34,725,833 28,938,199 P=347,258,330 P=289,381,990 Stock dividends 6,945,100 5,787,634 69,451,600 57,876,340 Issued, ending 41,670,933 34,725,833 P=416,709,930 P=347,258,330

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*SGVMC312822*

Dividends declared and issued/paid by the Parent Company in 2011, 2010 and 2009 are as follows:

Dividends Date Approved Per Share Stockholders of

Record Date Date Issued/Paid Cash June 15, 2011 P=3.71 June 24, 2011 July 20, 2011 July 19, 2010 4.29 July 30, 2010 August 13, 2010 July 30, 2009 4.10 August 11, 2009 September 8, 2009 Stock June 21, 2011 20% July 21, 2011 August 16, 2011 October 7, 2010 20% October 13, 2010 October 13, 2010

Fractional shares of stock dividends are paid in cash based on the par value.

On October 7, 2010, the SEC approved the Amended Articles of Incorporation on the application

for increase in authorized capital stock from P=300.00 million to P=530.00 million with a par value of P=10.00 each. The SEC also authorized the issuance of 20% stock dividend to stockholders of record as of October 13, 2010, to cover stock dividend declared last August 17, 2010 and ratified by the stockholders on August 24, 2010.

On May 25, 2009, the Parent Company’s BOD approved to appropriate the amount of P=100.00 million from the balance of its unappropriated retained earnings as of December 31, 2008 to finance the cost of the development of its project, The Manila Residences, located at 2320 Taft Avenue, Manila.

On May 9, 2011, the Parent Company’s BOD authorized the transfer of appropriated retained earnings for the development costs of The Manila Residences, which was 100% completed, to appropriated retained earnings to finance the development costs of The Manila Residences Tower II in the same amount of P=100.00 million. Also, an additional appropriation amounting to P=100.00 million was authorized for the development costs of its newly launched project, the Tagaytay Prime Residences. As of December 31, 2011, the completion rate of The Manila Residences Tower II and Tagaytay Prime Residences is 9.70% and 35.89%, respectively.

As of December 31, 2011 and 2010, the unappropriated 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 deemed cost adjustment as of December 31 are as follows:

2011 2010 Real estate properties for sale (Note 8) P=176,912,049 P=211,082,638 Investment properties (Note 10) 1,500,055,190 1,500,055,190 Property and equipment (Note 11) 38,134,466 47,706,191 1,715,101,705 1,758,844,019 Deferred income tax liability (Note 23) (514,530,511) (527,653,206) Net deemed cost adjustment P=1,200,571,194 P=1,231,190,813

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*SGVMC312822*

The deemed cost adjustment is allocated in the consolidated statements of changes in equity as follows:

2011 2010 Attributable to:

Equity holders of the Parent P=1,035,736,304 P=1,051,848,991 Non-controlling interest 164,834,890 179,341,822

P=1,200,571,194 P=1,231,190,813 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).

The balance of retained earnings is restricted for the payment of dividends to the extent of the following:

2011 2010 Undistributed earnings of subsidiaries P=2,266,077,744 P=2,036,364,136 Net deemed cost adjustment in properties 1,035,736,304 1,051,848,991 P=3,301,814,048 P=3,088,213,127

16. Operating Expenses Operating expenses consist of:

2011 2010 2009 Personnel (Note 17) P=223,384,830 P=233,299,916 P=188,771,416 Taxes and licenses 78,531,677 77,532,603 82,205,800 Donations and contributions 60,414,833 12,828,439 1,800,000 Professional fees 53,178,379 28,444,053 55,719,442 Insurance (Notes 6 and 14) 24,160,848 32,203,157 32,106,527 Membership dues 24,062,117 13,201,793 6,938,628 Depreciation (Note 18) 21,659,334 23,301,123 23,270,974 Outside services 15,128,900 12,511,314 13,639,827 Brokers’ commission 10,459,681 9,455,673 8,987,876 Advertising and promotions 10,417,123 10,245,052 11,774,711 Loss on demolition of building 5,588,239 – – Repairs and maintenance 5,290,426 3,949,507 6,707,009 Light, power and water 4,271,347 4,143,729 4,491,272 Postage, telephone and telegraph 2,950,683 3,233,881 3,297,526 Transportation and travel 1,362,685 1,174,858 1,131,682 Stationery and office supplies 1,345,722 828,795 1,036,597 Others 20,074,634 16,192,754 17,399,303 P=562,281,458 P=482,546,647 P=459,278,590

Other expenses include representation, rent and miscellaneous expenses.

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17. Personnel Expenses Personnel expenses consist of:

2011 2010 2009 Salaries and wages P=88,385,418 P=83,873,409 P=81,446,818 Commission 61,051,029 77,353,435 58,501,126 Bonuses and other employee benefits (Note 22) 73,948,383 72,073,072 48,823,472 P=223,384,830 P=233,299,916 P=188,771,416

18. Depreciation Depreciation consists of:

2011 2010 2009 Investment properties (Note 10) P=7,776,904 P=9,141,861 P=9,141,861 Property and equipment (Note 11) 13,882,430 14,159,262 14,129,113 P=21,659,334 P=23,301,123 P=23,270,974

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=542,079,081 P=572,583,893 P=563,325,420

Cash equivalents and short-term cash investments (Note 4) 123,224,414 84,008,316 68,126,469

Cash in banks (Note 4) 171,172 273,815 638,768 Held-to-maturity investments – 12,513,759 10,516,306 Others 1,833,147 2,534,886 3,486,441 Dividend income 51,118 207,791 397,090 Gain on sale of available-for-sale

financial assets – 19,607,724 5,031,251 P=667,358,932 P=691,730,184 P=651,521,745

Held-to-maturity investments amounting to P=151.01 million matured in various dates from July to September 2010. Interest rates of held-to-maturity investments ranges from 10.65% to 10.88% in 2010 and 2009.

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20. Financial Expenses Financial expenses consist of:

2011 2010 2009 Interest expense on (Note 14): Notes payable P=120,132,938 P=130,538,672 P=151,143,316 Loans payable 1,147,033 11,280,123 45,121,629 121,279,971 141,818,795 196,264,945 Capitalized interest (18,682,142) (19,310,873) (52,017,063) 102,597,829 122,507,922 144,247,882 Others 693,900 12,326 348,536 Finance charges 2,165,785 2,737,892 3,042,555 Impairment loss on available-for- sale financial assets (Note 12) – 1,752,711 – P=105,457,514 P=127,010,851 P=147,638,973

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 real estate properties for lease (Note 10) – 86,937,620 28,992,020

Others 26,186,737 31,216,000 24,571,074 P=28,399,929 P=120,823,064 P=56,775,373

Other income includes premium revenue, penalties for customers’ late payments, forfeiture of reservations and down payments received on sales which were not consummated, sale of scraps and miscellaneous income.

22. Retirement Benefits Cost The Group, jointly with affiliated companies, has a funded, noncontributory defined benefit

retirement plans, administered by a 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) are as follows:

2011 2010 2009 Current service cost P=1,362,370 P=1,278,794 P=229,078 Interest cost on benefit obligation 2,858,809 2,845,465 2,678,142

(Forward)

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2011 2010 2009 Expected return on plan assets (P=6,154,698) (P=5,935,745) (P=5,833,203) Net actuarial loss (gain)

recognized during the year (92,414) 5,812 (964,510) Actuarial loss recognized immediately 12,241,971 − − Effect of asset limit (11,905,725) 1,994,404 (10,384,966) Net retirement benefits cost

(income) (P=1,689,687) P=188,730 (P=14,275,459) Actual return (loss) on plan assets (P=279,994) P=5,935,745 P=4,547,582

The details of retirement plan assets are as follows:

2011 2010 2009 Defined benefit obligation P=62,338,478 P=26,564,609 P=26,367,080 Fair value of plan assets 61,113,057 61,546,976 59,357,454 1,225,421 (34,982,367) (32,990,374) Unrecognized net actuarial gains (losses) (20,017,773) 6,092,660 6,086,848 Amount not recognized because

of limit 197,538 12,103,263 10,108,859 Retirement plan assets (P=18,594,814) (P=16,786,444) (P=16,794,667)

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

2011 2010 2009 Defined benefit obligation,

January 1 P=26,564,609 P=26,367,080 P=8,332,233 Current service cost 1,362,370 1,278,794 229,078 Interest cost on benefit obligation 2,858,809 2,845,465 2,678,142 Benefits paid (272,608) (3,926,730) (4,382,745) Actuarial loss on obligation 31,825,298 – 19,510,372 Defined benefit obligation,

December 31 P=62,338,478 P=26,564,609 P=26,367,080 Changes in fair value of plan assets are as follows:

2011 2010 2009 Fair value of plan assets,

January 1 P=61,546,976 P=59,357,454 P=58,332,031 Expected return on plan assets 6,154,698 5,935,745 5,833,203 Contributions to the plan 118,683 180,507 860,586 Benefits paid (272,608) (3,926,730) (4,382,745) Actuarial loss on plan assets (6,434,692) – (1,285,621) Fair value of plan assets,

December 31 P=61,113,057 P=61,546,976 P=59,357,454

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The major categories of plan assets of the Group as a percentage of the fair value of net plan assets are as follows:

2011 2010 2009 Cash and cash equivalents – 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. The principal assumptions used in determining retirement benefits costs for the Group’s plan as of

January 1 are as follows:

2011 2010 2009 Discount rate per annum 10.83% 10.83% 32.14% Expected annual rate of return on

plan assets 10% 10% 10% Future annual increase in salary 6% 6% 6%

As of December 31, 2011, the discount rate is 5.97%, the future increase in salary is 6% and the expected annual rate of return on plan assets is 6%.

There are 311 employees as of December 31, 2011 while there are 290 employees in the plan as of

December 31, 2010 and 2009. Amounts for the current and previous years are as follows:

2011 2010 2009 2008 2007 Defined benefit obligation P=62,338,478 P=26,564,609 P=26,367,080 P=8,332,233 P=30,587,688 Fair value of plan assets 61,113,057 61,546,976 59,357,454 58,332,031 53,828,233 Deficit (surplus) 1,225,421 (34,982,367) (32,990,374) (49,999,798) (23,240,545) Experience adjustment on plan

liabilities - gain (loss) – – 1,021,655 452,136 (482,374) Experience adjustment on

plan assets - loss (gain) (6,434,692) – (1,285,621) (1,739,611) 4,535,083 The Group expects to contribute P=0.18 million to the retirement fund in 2012. 23. Income Taxes

a. Provision for income tax consists of:

2011 2010 2009 Current P=148,637,752 P=218,976,338 P=177,519,698 Deferred (62,427,443) (33,501,595) 1,407,586 86,210,309 185,474,743 178,927,284 Final tax on interest income 24,679,116 19,359,178 15,856,308 P=110,889,425 P=204,833,921 P=194,783,592

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b. The components of the net deferred income tax liabilities are as follows:

2011 2010 Deferred income tax assets: Accrued expenses and others P=9,491,643 P=6,220,712 Deferred income tax liabilities: Deemed cost adjustment in properties (Note 15) 514,530,511 527,653,206 Unrealized gain on real estate transactions 261,333,053 305,064,883 Capitalized interest 10,529,018 19,519,599 Retirement plan assets 5,578,444 5,035,933 791,971,026 857,273,621 Net deferred income tax liabilities P=782,479,383 P=851,052,909

c. The reconciliation of income tax computed at statutory tax rates to the provision for income

tax follows:

2011 2010 2009 Income tax at statutory tax rates P=251,230,158 P=308,151,419 P=280,137,554 Additions to (reductions in)

income tax resulting from: Tax-exempt interest income (58,419,922) (75,387,353) (75,999,049) Interest income subjected to

final tax (37,018,676) (29,038,767) (23,784,463) Income entitled to tax holiday

(Note 30) (88,088,987) (27,460,555) (10,789,542) Final tax on interest income 24,679,116 19,359,178 15,856,308 Nondeductible interest expense 11,431,957 8,859,095 7,140,918 Trust fund income already

subjected to final tax (663,958) (800,833) (963,684) Non-taxable dividend income (15,336) (62,337) (119,127) Others - net 7,755,073 1,214,074 3,304,677 Provision for income tax P=110,889,425 P=204,833,921 P=194,783,592

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 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 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

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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. Shares of stock of the Parent Company held by members of the BOD aggregated to

30,311,015 shares equivalent to P=303.11 million and 25,259,183 shares equivalent to P=252.59 million as of December 31, 2011 and 2010, respectively.

b. The Parent Company has outstanding payables to stockholders amounting to

P=132.43 million and P=65.77 million as of December 31, 2011 and 2010, respectively, representing cash advances which are due and demandable. There were no collateral for these advances.

c. The Group has a trust fund for the retirement plan of its employees. Contributions to the fund amounted to P=0.12 million and P=0.18 million in 2011 and 2010, respectively, while the net fund assets amounted to P=61.11 million and P=61.55 million as of December 31, 2011 and 2010, respectively (see Note 22).

d. Compensation of key management personnel are as follows:

2011 2010 2009 Salaries P=37,615,135 P=34,845,849 P=34,149,021 Bonuses 37,225,036 32,415,668 29,863,929 Other benefits 40,143,809 40,761,780 40,439,871 P=114,983,980 P=108,023,297 P=104,452,821

The Group has no standard arrangement with regards to the remuneration of its directors. In

2011, 2010 and 2009, the BOD received a total of P=29.54 million, P=25.40 million and P=26.83 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.

The following transactions of the Parent Company with its subsidiaries are eliminated in the consolidated financial statements:

a. Interest-bearing cash advances, which are settled and noninterest-bearing cash advances for reimbursable expenses are unsecured and are to be settled in cash.

Related Party Relationship

Interest Income on

Advances to Related Parties

Interest Expense

on Advances from Related

Parties

Amounts Owed By

Related Parties

Amounts Owed To

Related Parties

CDC Subsidiary 2011 P=209,143 P=66,266 P=– P=– 2010 50,315 94,425 76,805 2,959,849 CLDI Subsidiary 2011 29,551 60,111 954,663 2010 36,371 50,674 – – CPI Subsidiary 2011 5,410 – – – 2010 – – – – Total 2011 P=244,104 P=126,377 P=954,663 P=– Total 2010 P=86,686 P=145,099 P=76,805 P=2,959,849

b. The Parent Company also has an existing management contract with CDC, wherein the Parent

Company provides management services to CDC. The agreement is for a period of five years renewable automatically for another five years unless either party notifies the other six months

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*SGVMC312822*

prior to expiration. The management fee is based on a certain percentage of net income of CDC as mutually agreed upon by both parties. The management fees for 2011 and 2010 were waived by the Parent Company.

c. In 2011, CPI purchased condominium units from CI and CDC amounting to P=20.20 million and P=19.81 million, respectively.

25. Financial Instruments Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise of cash and cash equivalents, and short-term

cash investments, notes and loans payable 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, held-to-maturity investments and available-for-sale financial assets, which are held for investing purposes. The Group has various other financial instruments such as installment contracts receivable, other receivables, accounts payable and accrued expenses and advances from stockholders, 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 main risks arising from the Group’s financial instruments are cash flow interest rate risk,

credit risk, equity price risk and liquidity risk. The BOD reviews and approves policies for managing these risks and they are summarized as follows:

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 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.

The following table demonstrates the sensitivity of the Group’s income before income tax to a reasonable change in 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=1,797,313 December 31, 2010 -/+ 5 bps +/- P=23,000

There is no impact on the Group’s equity other than those already affecting income before income

tax. Credit risk 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

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*SGVMC312822*

monitored on an on-going basis with the objective that the Group’s exposure to bad debts is not significant. The Group’s policy is to enter into transactions with a diversity of credit-worthy 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 1,961,639,193 777,220,782

Short-term cash investments 711,432,000 589,432,000 Installment contracts receivable 2,588,819,755 – Other receivables:

Accrued interest 10,106,929 – Advances to customers 38,417,228 13,926,420 Retention 3,561,104 224,159 Others 8,388,144 821,556

Total credit risk exposure P=5,368,056,026 P=1,381,624,917 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 882,297,468 577,806,202

Short-term cash investments 1,678,500,028 1,519,343,000 Installment contracts receivable 2,675,527,725 – Other receivables:

Accrued interest 12,658,050 – Advances to customers 14,824,537 13,800,797 Retention 4,140,285 103,767 Others 9,100,212 336,389

Total credit risk exposure P=5,325,864,799 P=2,111,390,155

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*SGVMC312822*

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=416,118,545 P=10,497,883 P=2,596,779 P=2,610,131 P=17,162,818 P=2,139,833,599 2,588,819,755 Other receivables:

Accrued interest 10,106,929 – – – – – 10,106,929 Advances to customers 24,490,808 1,158 730,747 739,381 12,455,134 – 38,417,228 Retention – 224,159 – – – 3,336,945 3,561,104 Others 7,516,029 821,556 – – – 50,559 8,388,144

P=458,232,311 P=11,544,756 P=3,327,526 P=3,349,512 P=29,617,952 P=2,143,221,103 P=2,649,293,160 *classified as neither past due nor impaired December 31, 2010:


Current* < 30 days 31-60 days 61-90 days Over 90

days > One year* Total Installment contracts receivable P=914,920,153 P=8,309,127 P=2,457,786 P=3,014,195 P=13,062,396 P=1,733,764,068 P=2,675,527,725 Other receivables:

Accrued interest 12,658,050 – – – – – 12,658,050 Advances to customers 1,023,740 886,383 679,904 239 12,234,271 – 14,824,537 Retention 2,160,561 103,767 – – – 1,875,957 4,140,285 Others 7,199,188 336,389 – – – 1,564,635 9,100,212

P=937,961,692 P=9,635,666 P=3,137,690 P=3,014,434 P=25,296,667 P=1,737,204,660 P=2,716,250,809 *classified as neither past due nor impaired

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:

High Grade* Medium Grade**

Past due but not impaired Total

Financial Assets 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 1,961,639,193 – – 1,961,639,193 Short-term cash investments 711,432,000 – – 711,432,000 Installment contracts receivable 2,555,952,144 – 32,867,611 2,588,819,755 Other receivables: Accrued interest 10,106,929 – – 10,106,929 Advances to customers 24,490,808 – 13,926,420 38,417,228 Retention 3,336,945 – 224,159 3,561,104 Others 7,075,475 491,113 821,556 8,388,144 5,274,033,494 491,113 47,839,746 5,322,364,353 Total P= 5,319,725,167 P=491,113 P=47,839,746 P=5,368,056,026

** 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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*SGVMC312822*

December 31, 2010:

High Grade* Medium Grade**

Past due but not impaired Total

Financial Assets 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 882,297,468 – – 882,297,468 Short-term cash investments 1,678,500,028 – – 1,678,500,028 Installment contracts

receivable 2,648,684,221 – 26,843,504 2,675,527,725 Other receivables: Accrued interest 12,658,050 – – 12,658,050 Advances to customers 1,023,740 – 13,800,797 14,824,537 Retention 4,036,518 – 103,767 4,140,285 Others 7,782,051 981,772 336,389 9,100,212 5,234,982,076 981,772 41,084,457 5,277,048,305 Total P=5,283,798,570 P=981,772 P=41,084,457 P=5,325,864,799

** 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.

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 value 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 stockbroker to manage its investments in shares of stock.

- 46 -

*SGVMC312822*

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 the equity prices (with all other variables held constant):

Change in equity price Effect on equity 2011 P=0.03 +/-P=67,148 2010 +/-P=0.25 +/-P=508,894

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 bank loans and STCPs (see Note 14). The tables below summarize the maturity analysis of the Group’s financial assets held for

managing liquidity and financial liabilities based on contractual discounted 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=1,557,273,760 P=404,550,000 P=– P=– P=– P=1,961,823,760 Short-term cash investments 285,450,000 424,300,000 1,682,000 – – 711,432,000 Installment contracts receivable 85,779,765 102,804,024 125,354,888 265,167,998 2,359,309,214 2,938,415,889 1,928,503,525 931,654,024 127,036,888 265,167,998 2,359,309,214 5,611,671,649

Financial Liabilities Accounts payable and accrued

expenses* 128,147,735 59,426,658 132,206,159 178,894,054 412,376,808 911,051,414 Notes payable** 1,099,199,165 1,268,166,010 651,141,138 92,643,120 – 3,111,149,433 Contracts payable – – – 6,804,433 – 6,804,433 Payables to stockholders 11,036,229 22,072,458 33,108,688 66,217,375 – 132,434,750

1,238,383,129 1,349,665,126 816,455,985 344,558,982 412,376,808 4,161,440,030 P=690,120,396 (P=418,011,102) (P=689,419,097) (P=79,390,984) P=1,946,932,406 P=1,450,231,619

* Excludes statutory liabilities amounting to P=11,105,230 ** Include future interest expense amounting to P=115,627,160.

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=651,891,430 P=230,600,000 P=– P=– P=– P=882,491,430 Short-term cash investments 498,350,000 931,650,028 243,500,000 5,000,000 – 1,678,500,028 Installment contracts receivable 84,863,404 269,880,795 424,615,446 305,814,481 2,040,760,620 3,125,934,746 1,235,104,834 1,432,130,823 668,115,446 310,814,481 2,040,760,620 5,686,926,204

Financial Liabilities Accounts payable and

accrued expenses* 109,839,430 65,850,415 128,890,510 177,421,603 125,971,365 607,973,323 Notes payable** 1,191,924,078 1,639,991,618 560,942,084 109,843,985 – 3,502,701,765 Loans payable*** – – – – 47,871,372 47,871,372 Contracts payable – – – 6,804,433 – 6,804,433 Advances from stockholders 5,480,738 10,961,477 16,442,216 32,884,431 – 65,768,862

1,307,244,246 1,716,803,510 706,274,810 326,954,452 173,842,737 4,231,119,755 (P=72,139,412) (P=284,672,687) (P=38,159,364) (P=16,139,971) P=1,866,917,883 P=1,455,806,449

* Excludes statutory liabilities amounting to P=16,678,687 ** Includes future interest expense amounting to P=136,926,471 *** Includes future interest expense amounting to P=1,871,372

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*SGVMC312822*

Fair Values The carrying amounts of recorded financial assets and financial liabilities as of December 31,

2011 and 2010 are as follows:

2011 2010 Carrying Value Fair Value Carrying Value Fair Value Financial Assets Cash on hand P=184,567 P=184,567 P=193,962 P=193,962 Financial assets 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 1,961,639,193 1,961,639,193 882,297,468 882,297,468 Short-term cash investments 711,432,000 711,432,000 1,678,500,028 1,678,500,028 Installment contracts receivable 2,588,933,555 2,588,933,555 2,675,527,725 2,675,527,725 Other receivables:

Accrued interest 10,106,929 10,106,929 12,658,050 12,658,050 Advances to customers 38,417,228 38,417,228 14,824,537 14,824,537 Retention 3,561,104 3,561,104 4,140,285 4,140,285 Others 8,388,144 8,388,144 9,100,212 9,100,212

5,322,478,153 5,322,478,153 5,277,048,305 5,277,048,305 Available-for-sale financial assets* 1,981,595 1,981,595 2,060,416 2,060,416 P=5,370,335,988 P=5,370,335,988 P=5,328,119,177 P=5,328,119,177 Financial Liabilities Other financial liabilities: Accounts payable and

accrued expenses** P=911,051,414 P=911,051,414

P=607,973,323

P=607,973,323 Notes and loans payable 3,002,326,706 3,002,326,706 3,418,579,727 3,418,579,727 Payables to stockholders 132,434,750 132,434,750 65,768,862 65,768,862 P=4,045,812,870 P=4,045,812,870 P=4,092,321,912 P=4,092,321,912 ** Included under “Other assets” in the consolidated balance sheets. ** Excludes statutory liabilities amounting to P=11,105,230 and P=16,678,687 as of December 31, 2011 and 2010, respectively.

Cash and cash equivalents, short-term cash investments, other receivables,

accounts payable and accrued expenses and payable to stockholders Due to the short-term nature of the transactions, the fair values of cash and cash equivalents,

short-term cash investments, other receivables, accounts payable and accrued expenses and payable to stockholders approximate their carrying amounts.

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.

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.

Notes and loans payable Due to monthly quarterly repricing of interest, loans and notes payable are stated at fair value. 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

- 48 -

*SGVMC312822*

• 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 consists of financial assets at fair value through profit or loss and available-for-sale financial assets. There are no financial assets that are measured at Level 2 and 3.

26. Current Assets and Current Liabilities The Group’s current assets and current liabilities are as follows:

2011 2010 Current Assets Cash and cash equivalents P=1,961,823,760 P=882,491,430 Short-term cash investments 711,432,000 1,678,500,028 Investments in trust funds 45,691,673 48,816,494 Installment contracts receivable 448,986,156 941,763,657 Other receivables 57,085,901 37,282,492 Real estate properties for sale 2,532,607,205 2,159,077,787 Other assets 75,643,876 40,147,991 P=5,833,270,571 P=5,788,079,879

Current Liabilities Accounts payable and accrued expenses P=509,779,836 P=498,680,645 Notes and loans payable 3,002,326,706 3,372,579,727 Income tax payable 26,867,476 54,137,489 Pre-need reserves 3,840,320 4,513,460 Payables to stockholders 132,434,750 65,768,862 P=3,675,249,088 P=3,995,680,183

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 adjustments to it, in the light of changes in economic conditions. It monitors capital using leverage ratios on both gross debt and net debt basis.

As of December 31, 2011 and 2010, the Group had the following ratios:

2011 2010 Notes and loans payable P=3,002,326,706 P=3,418,579,727

Total equity attributable to parent P=4,307,235,105 P=4,010,884,003 Less net changes in fair values of available-

for-sale financial assets 816,623 895,320 P=4,306,418,482 P=4,009,988,683

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*SGVMC312822*

2011 2010 Debt to equity ratio 0.70 0.85

Notes and loans payable P=3,002,326,706 P=3,418,579,727 Less: Cash and cash equivalents 1,961,823,760 882,491,430 Short-term cash investments 711,432,000 1,678,500,028 P=329,070,946 P=857,588,269

Total equity attributable to parent P=4,307,235,105 P=4,010,884,003 Less net changes in fair values of available-

for-sale financial assets

816,623 895,320 P=4,306,418,482 P=4,009,988,683

Net debt to equity ratio 0.08 0.21

As of December 31, 2011 and 2010, the Group has no externally imposed capital requirements.

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 investments. The Group considers as capital the total equity of the Parent Company less net changes in fair values of available-for-sale financial assets.

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=421,926,905 P=538,075,506 P=450,786,567 Weighted average number of shares 41,670,933 41,670,933 41,670,933 Basic/diluted earnings per share P=10.12 P=12.91* P=10.82* *After retroactive effect of 20% stock dividends in 2011

The Group has no dilutive common shares as of December 31, 2011, 2010 and 2009. Thus, the

basic and diluted earnings per share are the same as of those date. 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.

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*SGVMC312822*

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=1,989,488,893 P=– P=– P=1,989,488,893 Interest income 664,063,647 – 3,244,168 667,307,815

Rent income – 29,356,255 – 29,356,255 Other income 25,681,692 – 2,769,354 28,451,046

Cost of real estate sales 1,209,431,176 – – 1,209,431,176 Operating expenses Personnel 221,697,830 – 1,687,000 223,384,830 Taxes and licenses 69,848,265 8,071,594 611,818 78,531,677 Insurance 24,159,889 – 959 24,160,848 Professional fees 52,411,494 – 766,885 53,178,379 Depreciation 13,882,430 7,776,904 – 21,659,334 Others 154,208,363 1,933,558 5,224,469 161,366,390 Financial expense 105,457,514 – – 105,457,514 Provision for income tax (benefit from) 108,100,448 3,472,260 (683,283) 110,889,425 Net income 720,036,823 8,101,939 (1,594,326) 726,544,436

2010

Sales of Real



Operations Total Revenue: Sales of real estate P=2,348,105,064 P=– P=– P=2,348,105,064 Interest income 668,310,318 – 3,604,351 671,914,669 Rent income – 22,239,950 – 22,239,950 Other income 136,911,839 – 3,726,740 140,638,579 Cost of real estate sales 1,546,169,369 – – 1,546,169,369 Operating expenses: Personnel 231,382,029 – 1,917,887 233,299,916 Taxes and licenses 70,127,665 7,074,553 330,385 77,532,603 Insurance 32,201,810 – 1,347 32,203,157 Professional fees 27,437,499 – 1,006,554 28,444,053 Depreciation 14,159,262 9,141,861 – 23,301,123 Others 81,003,624 3,014,921 3,747,250 87,765,795 Financial expense 122,520,248 – – 122,520,248 Provision for income tax (benefit from) 204,196,042 902,585 (264,706) 204,833,921 Net income 819,639,070 2,106,030 592,374 822,337,474

2009

Sales of Real



Operations Total Revenue: Sales of real estate P=2,329,548,848 P=– P=– P=2,329,548,848 Interest income 641,623,701 – 4,469,703 646,093,404 Rent income – 22,321,121 – 22,321,121 Other income 57,420,469 – 4,783,245 62,203,714 Cost of real estate sales 1,519,457,679 – – 1,519,457,679 Operating expenses: Personnel 185,983,447 – 2,787,969 188,771,416 Taxes and licenses 81,859,667 160,287 185,846 82,205,800 Professional fees 55,407,592 – 311,850 55,719,442 Insurance 32,104,506 – – 32,104,506 Depreciation 19,926,676 3,344,298 – 23,270,974 Others 57,510,815 11,700,301 7,995,336 77,206,452

(Forward)

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*SGVMC312822*

2009

Sales of Real



Operations Total Financial expense P=144,596,418 P=– P=– P=144,596,418 Provision for income tax 192,223,352 2,182,957 377,283 194,783,592 Net income 733,034,361 5,093,565 880,327 739,008,253

Segment Assets and Liabilities December 31, 2011:

Sales of Real Estate Properties

Lease of Real Estate Properties

Pension Plan Operations Total

Total assets P=10,105,792,670 P=1,544,412,715 P=203,583,428 P=11,853,788,813 Total liabilities 4,857,776,502 6,682,259 48,308,589 4,912,767,350

December 31, 2010:

Sales of Real Estate Properties

Lease of Real Estate Properties

Pension Plan Operations Total

Total assets P=8,845,270,625 P=2,506,373,655 P=124,779,575 P=11,476,423,855 Total liabilities 5,007,755,839 4,475,966 50,750,240 5,062,982,045

30. Income Subject to Tax Holiday

In 2010, the Group has an additional registration with the Board of Investments (BOI) as a New Developer of Low-Cost Mass Housing Project (Tagaytay Prime Residences-Tagaytay Prime Rotunda, Brgy. San Jose, Tagaytay City with Registration No. 2010-123 dated July 5, 2010; The Manila Residences Tower II-2310 Taft Ave., Malate, Manila with Registration No. 2010-151 dated August 23, 2010; and Grand Central Residences I-EDSA cor Sultan St., Brgy. Highway Hills, Mandaluyong City with Registration No. 2010-117 dated June 16, 2010) on a Non-Pioneer Status under the Omnibus Investments Code of 1987 (Executive Order No. 226). The Group shall be 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 shall be limited only to revenue generated for these registered projects. Revenue from units with selling price exceeding P=3.00 million shall not be covered by ITH.

The income (loss) on projects registered under BOI for the year ended December 31, 2011 are as follows:

CI - Brentwood Mansion:

Income Subject to

Tax Holiday

Adjustment due to Percentage of

Completion

Income based on Percentage of

Completion Revenues from sale of condominium

units

P=35,990,907

P=–

P=35,990,907 Cost of sales (9,305,616) (1,600,635) (10,906,251) Gross profit 26,685,291 (1,600,635) 25,084,656 Other income: Interest income 13,485,459 – 13,485,459 Others 142,829 – 142,829 13,628,288 – 13,628,288

(Forward)

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*SGVMC312822*

Income Subject to

Tax Holiday


Completion


Completion Expenses:

Operating expenses (P=6,839,971) P=– (P=6,839,971) (6,839,971) – (6,839,971) Net income (loss) P=33,473,608 (P=1,600,635) P=31,872,973

CI - Tagaytay Prime Residences:

Income Subject to

Tax Holiday


Completion



units

P=86,309,319

(P=20,424,276)

P=65,885,043 Cost of sales (50,413,561) 12,021,661 (38,391,900) Gross profit 35,895,758 (8,402,615) 27,493,143 Other income: Interest income 9,731,358 – 9,731,358 Others 126,681 – 126,681 9,858,039 – 9,858,039 Expenses:

Operating expenses (12,800,249) – (12,800,249) Financial expenses (445,282) – (445,282)

(13,245,531) – (13,245,531) Net income (loss) P=32,508,266 (P=8,402,615) P=24,105,651

CI - The Manila Residences Tower II:

Income Subject to

Tax Holiday


Completion



units

P=135,600,898

(P=102,915,438)

P=32,685,460 Cost of sales (88,019,348) 65,525,296 (22,494,052) Gross profit 47,581,550 (37,390,142) 10,191,408 Other income: Interest income 16,962,888 – 16,962,888 Others 96,313 – 96,313 17,059,201 – 17,059,201 Expenses: Operating expenses (18,635,993) – (18,635,993) Financial expenses (666,145) – (666,145) (19,302,138) – (19,302,138) Net income (loss) P=45,338,613 (P=37,390,142) P=7,948,471

CDC - Grand Central Residences 1:

Income Subject to

Tax Holiday


Completion



units P=115,870,236 (P=105,533,116) P=10,337120 Cost of sales (93,051,219) 84,592,505 (8,458,714) Gross profit 22,819,017 (20,940,611) 1,878,406

(Forward)

- 53 -

*SGVMC312822*

Income Subject to

Tax Holiday


Completion


Completion Other income: Interest income P=6,430,604 P=– P=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)

CDC - Mandaluyong Executive Mansion III:

Income Subject to

Tax Holiday


Completion



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 381,590 − 381,590 20,319,155 − 20,319,155 Expenses: Operating expenses (23,657,220) − (23,657,220) (23,657,220) − (23,657,220) Net income P=79,193,811 P=− P=79,193,811

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 8,055,373 − 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 (loss) P=25,594,631 (P=188,231) P=25,406,400

- 54 -

*SGVMC312822*

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 (loss) P=62,059,919 P=69,933,560 P=131,993,479

The consolidated income for the year ended December 31, 2011 which is entitled to the ITH from

revenues from sale of residential units with selling price not exceeding P=3.00 million is presented as follows:

BOI Registered

Activities

Non-BOI Registered Activities

Income as Shown in Statement of Income

Revenues from sale of condominium units

P=706,799,357

P=1,282,689,536

P=1,989,488,893

Cost of sales 409,707,396 799,723,780 1,209,431,176 Gross profit 297,091,961 482,965,756 780,057,717 Other income: Interest income 99,577,153 567,730,661 667,307,814 Rent income – 29,356,255 29,356,255 Dividend income – 51,118 51,118 Others 1,363,867 27,036,062 28,399,929 100,941,020 624,174,096 725,115,116 Less: Operating expenses 101,071,612 461,209,846 562,281,458 Financial expenses 3,331,412 102,126,102 105,457,514 104,403,024 563,335,948 667,738,972 Income before income tax 293,629,957 543,803,904 837,433,861 Provision for income tax – 110,889,425 110,889,425 Net income P=293,629,957 P=432,914,479 P=726,544,436

All common operating expenses not specifically identifiable to the project, except for brokers’ commission, depreciation and advertising expenses are shared based on sales.

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.

*SGVMC312822*

INDEPENDENT AUDITORS’ REPORT The Stockholders and the Board of Directors Cityland, Inc. 2nd and 3rd Floors, 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, Inc. 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 12 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




*SGVMC312822*

INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY SCHEDULES The Stockholders and the Board of Directors Cityland, Inc. 2nd and 3rd Floors, 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, Inc. and 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. 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




CITYLAND INC. 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 19,747,597 171,172Temporary Investments

Rizal Commercial Banking Corporation 345,000,000 3,803,459United Coconut Planters Bank 339,550,000 14,655,080China Bank Corporation 250,000,000 8,574,163Philippine National Bank 162,000,000 8,231,751East West Savings Bank 161,300,000 2,761,358Allied Bank 136,413,716 4,959,478Planters Development Bank 129,500,000 5,405,882Amalgamated Bancorporation 104,150,000 5,034,531Union Bank 85,500,000 7,435,195Security Bank 82,000,000 6,831,007Philippine Savings Bank 40,200,000 13,226,586Bank of Commerce 37,500,000 5,741,613Banco De Oro 37,000,000 6,873,062Philippine Commercial Capital Inc. 31,962,447 4,331,661Other maturities during the year -- 5,198,639

1,961,823,760 103,234,637Short-term Cash Investments

Union Bank 301,100,000 5,586,515Philippine Savings Bank 124,300,000 3,758,343Planters Development Bank 105,650,000 1,947,204United Coconut Planters Bank 70,382,000 2,468,335Philippine Commercial Capital Inc. 46,000,000 222,092Amalgamated Bancorporation 39,000,000 769,870East West Savings Bank 25,000,000 294,774Other maturities during the year -- 5,113,816

711,432,000 20,160,949

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

Available-for-sale InvestmentsAyala Land “B” 33,750 257,513 257,513Ayala Corporation “B” 903 210,463 210,463First Holding “B” 5,126 315,249 315,249Swift 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 300,301 177,178 177,178Ayala Land 16,874 128,749 128,749Cebu Holdings 13,125 32,813 32,813Filinvest Land 270,995 268,285 268,285A. Brown 22,312 60,242 60,242URC 759 36,432 36,432Negros Navigation 2,625 971 971Empire East 168,203 99,240 99,240Mondragon 1,350 135 135

1,981,595 1,981,595Investment in Trust Funds 45,691,673 45,691,673Installment Contract Receivables 2,588,933,555 2,588,933,555Other Receivables 60,473,405 60,473,405

5,370,335,988 5,370,335,988

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

CDC (subsidiary) 76,805 68,701 145,506 -- -- -- --CLDI (subsidiary) -- 4,748,871 3,794,208 -- 954,663 -- 954,663CPI (subsidiary) -- 2,102 2,102 -- -- -- --CAI (wholly owned) -- 180 180 -- -- -- --CLHI (wholly owned) -- -- -- -- -- -- --

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 – P10 par value 53,000,000 41,670,993 -- -- 30,311,015 11,359,978

Annex “A”

CITYLAND, INC.RETAINED 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 1,343,129,510Adjustments:

Deferred tax assets (153,314)Revaluation reserves related to assets carried at deemed cost (868,812,285) (868,765,599)

Unappropriated, Retained Earnings available for dividend declaration, beg. 474,363,911Net income during the period closed to retained earnings 217,360,158Add (Less): Non-actual / unrealized loss (income) net of tax

Movement in deferred tax assets 24,706Net income actually earned during the period 217,384,864Add (Less):

Appropriations (100,000,000)Dividends declarations during the period (198,284,506)Realized revaluation reserves related to assets carried at deemed cost 1,851,962

Unappropriated, Retained Earnings Available for Dividends Declaration, Ending 395,316,231

Annex “B”CITYLAND, INC.MAP 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, INC.SUPPLEMENTARY 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 Applicable

PFRSs and PIC Q&As Adopted/Not adopted/Not applicablePhilippine Interpretation IFRIC–1, Changes in Existing Decommissioning, Restoration and Similar Liabilities

Not Applicable

Philippine Interpretation IFRIC–2, Members' Shares in Co-operative Entities and Similar Instruments

Not Applicable

Philippine 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 – Adopted

PFRSs and PIC Q&As Adopted/Not adopted/Not applicableRevenue recognition for sales of property units under pre-completion contractsPIC 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 and other properties acquired (ROPA)

Not Applicable

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 101 ARTICLE V : TRANSFER OF SHARES OF STOCK 101 ARTICLE VII : STOCKHOLDERS MEETING 101 ARTICLE VIII : AMENDMENTS 102

(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 *

(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.

CITYLAND, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

UNAUDITED2nd Qtr2012

2nd Qtr2011

For the 6-months ending June 2012


REVENUESSales from real estate 447,232,864 411,373,055 959,908,272 968,013,457Financial income (Note 18) 153,777,784 169,281,716 315,152,983 342,047,161Rental income 8,113,421 6,670,494 16,222,493 13,557,197Other revenues 6,539,562 7,042,311 15,151,320 12,275,762

615,663,631 594,367,576 1,306,435,068 1,335,893,577

EXPENSESCost of sales 277,496,041 221,584,312 601,016,600 567,726,181Operating expenses (Note 15) 118,455,566 130,538,091 291,361,240 312,337,016Financial expenses (Note 18) 21,981,993 25,942,545 44,650,263 53,289,428

417,933,600 378,064,948 937,028,103 933,352,625

INCOME BEFORE INCOME TAX 197,730,031 216,302,628 369,406,965 402,540,952

PROVISION FOR INCOME TAX (Note 20) 31,948,876 27,999,655 56,286,079 54,930,504

NET INCOME 165,781,155 188,302,973 313,120,886 347,610,448

Attributable to:Equity holders of the parent 180,026,217 219,374,485Minority interest 133,094,669 128,235,963

EARNINGS PER SHARE 4.320 5.264*After retroactive effect of 20% stock dividends in 2011.

8

CITYLAND, INC. AND SUBSIDIARIESSTATEMENT OF COMPREHENSIVE INCOME

2nd Qtr2012

2nd Qtr2011



Net income for the period 165,781,155 188,302,973 313,120,886 347,610,448Other comprehensive income:

Net changes in fair value of stocks (269,178) (1,118,061) (165,161) 12,580Total other comprehensive income (269,178) (1,118,061) (165,161) 12,580Total Comprehensive Income – net 165,511,977 187,184,912 312,955,725 347,623,028

Attributable to:Equity holders of the parent 180,028,172 219,372,749Minority interests 132,927,553 128,250,279

Earnings per share 4.320 5.264*After retroactive effect of 20% stock dividends in 2011.

9

CITYLAND, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Capital stock

Stock dividends

distributable

Net changes in fair value of

investmentsRetained earnings

Appropriated Unappropriated Minority interest TotalBalance, January 1, 2011 416,709,930 - 816,623 200,000,000 3,689,708,552 2,633,786,358 6,941,021,463Cash dividends (64,847,954) (64,847,954)Parent’s shares of stocks held by

CPI’s trust fund (16,544) (16,544)Transfer of deferred tax on

deemed cost adjustment 2,661,222 2,514,129 5,175,351Total comprehensive income 1,954 180,026,218 132,927,553 312,955,725Balance, As of June 30, 2012 416,709,930 - 818,577 200,000,000 3,872,395,992 2,704,363,542 7,194,288,041

Capital stock

Stock dividends

distributable

Net changesIn fair value of

investmentsRetained earnings

Appropriated Unappropriated Minority interest TotalBalance, January 1, 2011 347,258,330 -- 895,320 100,000,000 3,562,730,353 2,402,557,807 6,413,441,810Cash dividends (128,832,840) (77,220,123) (206,052,963)Stock dividends 69,451,600 (69,451,600) --Fractional shares (66) (66)Appropriation 100,000,000 (100,000,000) --Parent company shares of stock

held by CPI’s trust fund (206,799) (206,799)Transfer of deferred tax on

deemed cost adjustment 1,940,451 1,626,165 3,566,616Total comprehensive income (1,736) 219,374,485 128,250,279 347,623,028Balance, As of June 30, 2011 347,258,330 69,451,600 893,584 200,000,000 3,485,760,783 2,455,007,329 6,558,371,626

CITYLAND, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS

2nd Qtr2012

2nd Qtr2011

As of June2012

As of June2011

CASH FLOW FROM OPERATING ACTIVITIESIncome before income tax 197,730,031 216,302,628 369,406,965 402,540,952Adjustments for:

Interest expense – net of amount capitalized 21,981,993 25,168,573 44,650,263 51,902,726Depreciation 5,050,685 5,829,486 10,038,513 11,683,675Interest income (153,747,215) (169,248,949) (315,118,290) (342,011,738)Trust fund income (730,895) (568,026) (1,361,990) (1,082,489)Dividend income (30,570) (32,767) (34,693) (35,423)

Decrease in pre-need reserves (4,217,313) (1,457,073) (3,773,215) (2,619,682)Decrease (increase) in:

Installment contracts receivable 88,349,959 155,282,325 184,183,963 (9,873,192)Other receivables 35,709,695 8,257,690 15,942,055 (3,072,198)Real estate properties for sale 57,149,483 (24,310,935) 196,520,120 65,731,527Real estate properties for future development 3,607,434 (39,849,458) (2,089,272) (40,884,960)

Increase (decrease) in:Accounts payable and accrued expenses (97,327,968) (60,684,738) (236,946,199) 110,653,512

Cash generated from (used in) operations 153,525,319 114,688,756 261,418,220 242,932,710Interest received 153,467,465 172,791,484 319,255,907 347,901,851Income taxes paid (69,402,385) (91,185,536) (87,461,983) (114,618,661)Net cash flows from operating activities 237,590,399 196,294,704 493,212,144 476,215,900CASH FLOWS FROM INVESTING ACTIVITIESDividends received 30,570 32,767 34,693 35,423Additions to property and equipment -- -- (1,257,143) --Purchase of short-term cash investments 452,000 1,005,000,000 710,202,000 1,529,550,028Purchase of available-for-sale investments (2,531) -- (2,531) --Contributions to trust fund (70,867) (119,131) (529,673) (214,405)Withdrawals from trust fund 3,365,216 2,075,424 5,581,867 3,975,488Decrease (increase) in:

Investment properties (798,831) (182,090) (1,046,763) (622,764)Other assets 21,347,805 23,701,382 46,759,495 28,617,321

Net cash flows from (used in) investing activities 24,323,362 1,030,508,352 759,741,945 1,561,341,091CASH FLOW FROM FINANCING ACTIVITIESNet proceeds from (payments of) loans payable (6,321,410) (60,357,889) (79,152,373) (282,354,515)Payable to stockholders (34,726,000) (20,071,120) (32,834,000) 3,185,888Interest paid (22,843,956) (29,420,924) (43,608,483) (59,685,046)Dividends paid (28,964) (12,837) 721,292 (18,535)Net cash flows from (used in) financing activities (63,920,330) (109,862,770) (154,873,564) (338,872,208)NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 197,993,431 1,116,940,286 1,098,080,525 1,698,684,783CASH AND CASH EQUIVALENTS AT

BEGINNING OF PERIOD 2,861,910,854 1,464,235,927 1,961,823,760 882,491,430CASH AND CASH EQUIVALENTS AT END OF

THE PERIOD 3,059,904,285 2,581,176,213 3,059,904,285 2,581,176,213

CITYLAND, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Cityland Inc. (the Parent Company) was incorporated in the Philippines on May 15, 1979. The Parent Company has a majority-owned domestic subsidiary, namely Cityland Development Corporation (CDC), and the two wholly owned domestic subsidiaries, namely, Credit & Land Holding, Inc. (CLHI), Cityads Incorporated (CAI). The primary purpose of the Parent Company and its subsidiaries (the Group) 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, a subsidiary of CDC, is engaged in the business of establishing, organizing, developing, maintaining, conducting, operating, marketing and selling educational assistance and pension plans.

The average number of employees of the Group was 306 as of June 2012 and 310 as of December 2011. The Group’s registered office and principal place of business is at 2nd floor and 3rd Floors, 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, CPI has sold about P 297M worth of securities.

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 financial assets at fair value through profit or loss and available-for-sale investments that have been measured at fair values, and office premises which are stated at revalued amounts. These consolidated financial statements are presented in Philippine peso, which is the Parent Company’s functional currency, rounded to the nearest peso except when otherwise indicated.

Statement of ComplianceThe accompanying 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, particu-larly in relation to significant influence and joint control. The adoption of the amendment did not have any im-pact 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

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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 dis-closures 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 compre-hensive 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 amend-ments 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 instru-ments and their classification, (b) transfers of financial instruments between different levels of the fair value hi-erarchy, (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 accounting policies.

Percentage of Ownership Nature of Activity

Direct:CAI 100.00 AdvertisingCLHI 100.00 HoldingCDC 50.40 Real estate

Indirect through CDC (including direct ownership of the Parent Company in CLDI of 29.54% and CPI of 9.18%)

CLDI 54.60 Real estateCPI 54.95 Pre-need pension plans

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.

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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 addi-

tional 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 derecog-nized and their associated liabilities.

• Amended PAS 12, Income Taxes - Deferred Taxes: Recovery of Underlying Assets, introduces a rebuttable pre-sumption 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 busi-ness.

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 sig-nificant 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 Enti-ties - 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, asso-ciates 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 mea-surements. 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 recy-cled) to profit or loss at a future point in time (e.g., upon derecognition or settlement) would be presented sepa-rately 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.

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• 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 measure-ment of the stripping activity asset.

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

bilities, clarifies the meaning of “currently has a legally enforceable right to offset” and also clarify the applica-tion 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 re-

placement 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 rev-

enue and associated expenses by entities that undertake the construction of real estate directly or through sub-contractors. The SEC and the Financial Reporting Standards Council have deferred the effectivity of this inter-pretation 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 quan-tify 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, 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.

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4. Cash and Cash Equivalents

June 2012 Dec. 2011Cash on hand and in banks 12,453,566 19,747,597Cash equivalents 3,047,450,719 1,942,076,163

3,059,904,285 1,961,823,760

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 to 1.23 million and 711.43 million as of June 30, 2012 and December 31, 2011, 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.

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.

6. Installment Contracts Receivable

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 2.00% 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 491.58 million in June 2012 and 448.99 million in December 2011.

The Group entered into a contract of guaranty under Retail Guaranty Line in the amount of 2.00 billion 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 receivables relating to:June 2012 Dec. 2011

Customers 20,416,711 38,417,228Contractors 3,858,764 6,084,089Accrued interest 5,969,312 10,106,929Retention 4,083,216 3,561,104Advances and others 12,149,819 8,388,144

46,477,822 66,557,494

The portion due within one year amounted to 39.00 million in June 2012 and 57.09 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.

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Real estate properties held for future development includes land properties reserved by the Group for its future condominium projects. During 2011, the Company’s subsidiary acquired a parcel of land amounting to 109.81 million for future development. During 2011, 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 consist of real estate for lease and held for capital appreciation. Real estate properties for lease 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 real estate properties for lease of the Group were used as collateral for loans availed from the omnibus credit line.

Real estate properties amounting to ₱948.70 million were determined by management as held for capital appreciation starting in 2011.

10. Property and Equipment

Office PremisesFurniture, Fixtures

EquipmentTransportation

equipmentTotal

June 2012Total

Dec. 2011At costBeginning balance -- 28,970,381 5,734,531 34,704,912 34,704,912Additions -- -- 1,257,143 1,257,143Ending balance -- 28,970,381 6,991,674 35,962,055 34,704,912Accum. DepreciationBeginning balance -- 28,353,938 4,277,047 32,630,985 31,386,855Depreciation -- 208,080 305,314 513,394 1,244,130Ending balance -- 28,562,018 4,582,361 33,144,379 32,630,985Net book value -- 408,363 2,409,313 2,817,676 2,073,927At revalued amountsBeginning balance 259,448,852 -- -- 259,448,852 259,448,852Ending balance 259,448,852 -- -- 259,448,852 259,448,852Accum. DepreciationBeginning balance 206,127,471 -- -- 206,127,471 193,489,171Depreciation 6,319,148 -- -- 6,319.148 12,638,300Ending balance 212,446,619 -- -- 212,446,619 206,127,471Net revalued amounts 47,002,232 -- -- 47,002,232 53,321,381Total 47,002,233 408,363 2,409,313 49,819,909 55,395,308

As of June 30, 2012 the balances at cost of the office premises above are as follows:

June 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 March 31, 2012.

11. Other Assets

June 2012 Dec. 2011Available-for-sale investments 2,612,459 1,981,595Retirement plan assets 18,594,814 18,594,814Deposits and others 30,188,843 76,948,341

51,396,119 97,524,750

12. Accounts Payable and Accrued Expenses

June 2012 Dec. 2011Trade payables 80,042,159 77,688,413Deposits 20,773,648 27,041,287

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Accrued expenses:Development costs 509,869,946 735,127,486Interest payable 16,647,727 15,542,739Director’s fee 18,188,727 30,879,836Taxes, premiums, others 17,909,073 5,325,024

Withholding tax 4,314,454 10,436,712Dividends 71,872,022 6,302,776Others 12,203,652 13,812,371

751,821,408 922,156,644

13. Loans and Notes Payable

June 2012 Dec. 2011Short-term commercial papers (STCP) with

various maturities and interest rate ranging from 2.19% to 5.39% in June 2012 and from 2.19% to 5.39% in Dec. 2011

1,950,000,000 1,963,500,000

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

966,393,936 1,032,022,273

Contract payable 6,780,397 6,804,4332,923,174,333 3,002,326,706

At various dates in 2011 and 2010, the SEC authorized the Group to issue 2.30 billion 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 1.90 billion and 1.65 billion, respectively. The guaranty covers the unpaid principal due on the outstanding STCP and unpaid interest thereon of 10.00% per annum.

The Group has no outstanding loan from financial institutions as of June 30, 2012.

14. Stockholders' Equity

Cash dividends declared and paid by the Parent Company from retained earnings were as follows:

Date Approved Per Share Stockholders of Record Date

Date Paid

June 15, 2012 3.59 July 03, 2012 July 27, 2012June 15, 2011 3.71 June 24, 2011 July 20, 2011July 19, 2010 4.29 July 30, 2010 August 13, 2010July 30, 2009 4.10 August 11, 2009 September 8, 2009

Stock dividends declared and paid by the Parent Company from retained earnings were as follows:

Date Ratified Percentage Stockholders of Record Date

Date Paid

June 19, 2012 20% July 04, 2012 July 30, 2012June 21, 2011 20% July 21, 2011 August 16, 2011October 7, 2010 20% October 13, 2010 October 13, 2010

On October 7, 2010, the SEC approved the Amended Articles of Incorporation on the application for increase in authorized capital stock from 300 million to 530 million with par value of 10 each. The SEC also authorized the issuance of 20% stock dividend declared last August 17, 2010 and ratified by the stockholders on August 24, 2010.

On May 9, 2011, the Parent Company’s BOD authorized the transfer of appropriated retained earnings for the development costs of The Manila Residences, which was 100% completed, to appropriated retained earnings to finance the development costs of The Manila Residences Tower II in the same amount of ₱100.00 million. Also, an additional appropriation amounting to ₱100.00 million was authorized for the development costs of its newly

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launched project, the Tagaytay Prime Residences. As of June 30, 2012, the completion rate of The Manila Residences Tower II and Tagaytay Prime Residences is 14.81% and 45.40%, respectively.

As of June 30, 2012, the unappropriated retained earnings include the remaining balance of deemed cost adjustment amounting to 1.465B, net of related deferred tax of 0.440B, 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.

The Company’s objectives in capital management is to maintain an optimal capital structure by ensuring that debt and equity capital are mobilized efficiently and to provide returns for stockholders and benefit for other stakeholders.

The Company manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. It monitors capital using leverage ratios on both gross debt and net debt basis.

As part of our goal to provide returns for shareholders, the company declares dividends depending on the earnings, cash flows and financial condition of the corporation and other factors.

15. Operating Expenses

June 2012 June 2011Personnel expenses (see Note 16) 130,029,064 128,761,231Taxes and licenses 46,000,400 52,034,282Donations 33,786,131 26,203,000Professional fees 17,372,086 30,226,634Insurance expense 12,000,166 15,275,809Depreciation (see Note 17) 10,038,513 11,683,675Membership dues 9,588,186 12,318,305Outside services 7,796,398 6,752,412Brokers’ commission 5,360,230 6,435,263Advertising and promotions 4,792,160 5,589,941Light, power and water 2,097,106 2,128,547Postage, telephone and telegraph 1,604,437 1,590,041Transportation and Travel 725,578 657,546Stationery and office supplies 212,742 623,151Repairs and maintenance 45,093 4,022,941Miscellaneous 9,912,950 8,034,238

291,361,240 312,337,016

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 80,509,862 79,656,404Salaries and wages 45,505,262 43,220,566Other social charges 4,013,940 5,884,261

130,029,064 128,761,231

17. Depreciation

This consists of depreciation pertaining to the following:

June 2012 June 2011Investment in real estate properties under lease 3,205,968 4,570,934Property and equipment 6,832,545 7,112,741

10,038,513 11,683,675

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18. Financial Income (Expenses)

June 2012 June 2011Interest income 315,118,290 342,011,738Dividend income 34,693 35,423

Total financial income 315,152,983 342,047,161Interest expense – net (43,863,334) (51,902,726)Finance charges (786,929) (1,386,702)

Total financial expenses 44,650,263 (53,289,428)270,502,720 288,757,733

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 57,604,687 70,498,738Deferred (14,057,010) (27,155,372)Final tax on interest income 12,738,402 11,587,138

56,286,079 54,930,504

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. The Group, in the normal course of business, has transactions and account balances with related parties consisting mainly of the following:

The omnibus credit lines of the Parent Company, CDC and CLDI amounting to about 2,715 million as of June 2012 and December 2011, are partly secured by investment properties, condominium units for sale, and office premises of the Group. There is no outstanding availment of these credit lines.

The Group has a trust fund for the retirement plan of its employees with Insular Life Savings and Trust Company.

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. Financial Instruments

Financial Risk Management Objectives and PoliciesThe Group’s principal financial instruments comprise of bank loans and notes payables and cash and cash equivalents and short-term cash investments. The main purpose of these financial instruments is to finance the Group’s operations. The Group’s other financial instruments consist of investments in trust funds and available-for-sale investments 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.

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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 Group’s financial instruments are cash flow interest rate risk, equity price risk, credit risk, foreign currency risk 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 and notes payable all with repriced interest rates.

The Group manages its interest rate risk by maintaining credit lines with financial institutions and limiting borrowings to the Group’s cash requirements.

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 2,803,324.

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 objective 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 are no significant concentrations of credit risk with in 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 effect of mitigation through the use of collateral agreements.

Gross NetLoans and receivables:

Cash and cash equivalents, excluding cash on hand 3,059,705,276 1,199,920,357Short-term cash investments 1,230,000 730,000Installment contract receivables 2,404,635,792Other receivables 42,619,058 13,606,473Investment in trust funds 41,091,368

Total credit risk exposure 5,549,281,494 1,214,256,830

The following table summarizes the aging analysis of receivable and the credit quality of the receivables as of June 30, 2012:


Current > One Year < 30 days31 – 60

days61 – 91

days > 90 days TotalInstallment contracts receivable 466,030,030 1,913,060,340 9,251,979 5,326,783 1,667,970 9,298,690 2,404,635,792Other receivables:

Accrued interest 5,969,312 5,969,312Customers 7,228,250 -- -- 1,127,131 788,729 11,272,601 20,416,711Retention 450,000 3,296,945 -- -- -- 336,271 4,083,216Others 12,019,640 48,438 81,741 -- -- -- 12,149,819

491,697,232 1,916,405,723 9,333,720 6,453,914 2,456,699 20,907,562 2,447,254,850

The table below shows the credit quality by class of asset for loan-related balance sheet lines, based on the Company’s credit rating system.

Past due but * High Grade ** Medium Grade not impaired Total

Cash and cash equivalent 3,059,705,276 -- -- 3,059,705,276Short-term cash investments 1,230,000 -- -- 1,230,000Investment in trust funds 41,091,368 -- -- 41,091,368Installment contract receivables 2,379,090,370 -- 25,545,422 2,404,635,792Other receivables: 30,324,113 594,102 11,700,843 42,619,058

5,511,441,127 594,102 37,246,265 5,549,281,494* 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.

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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 Company 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 Company 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.

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 collectability.

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, the Group does not provide for allowance for impairment of its installment contracts receivable.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. The Group employs the service of a third-party stockholder to manage its investments in shares of stocks.

A sensitivity analysis to a reasonable change in the equity price (with all other variables held constant) of 0.35, higher or lower, would increase or decrease the equity by 920,332.

Foreign currency riskThe Group’s transactional currency exposures arise from 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 and STCP. The table below summarizes the maturity analysis of the Group’s financial liabilities as of June 30, 2012:

Up toOne Year

AboveOne Year Total

Accounts payable and accrued expenses * 359,164,806 409,657,698 768,822,504Payable to stockholders 134,326,750 -- 134,326,750Loans and notes payable: Notes 3,036,844,457 -- 3,036,844,457Contracts 6,780,397 -- 6,780,397

3,537,116,410 409,657,698 3,946,774,108

Fair ValuesThe carrying amounts of recorded financial assets and liabilities as of March 31, 2012 and December 31, 2011 are as follows:

March 31, 2012 December 31, 2011Carrying value Fair value Carrying value Fair value

Financial assetsCash and cash equivalents 2,861,910,854 2,861,910,854 1,961,823,760 1,961,823,760Short-term cash investments 1,682,000 1,682,000 711,432,000 711,432,000Installment contracts receivable 2,492,985,751 2,492,985,751 2,588,819,755 2,588,819,755Other receivables 76,680,913 76,680,913 60,473,405 60,473,405Investments in trust funds 44,358,555 44,358,555 45,691,673 45,691,673Available-for-sale investments 2,436,795 2,436,795 1,981,595 1,981,595

5,480,054,868 5,480,054,868 5,370,335,988 5,370,335,988

Financial liabilitiesAccounts payable & accrued

expenses* 768,822,504 768,822,504 911,051,414 911,051,414Loans and notes payable 2,929,495,743 2,929,495,743 3,002,326,706 3,002,326,706

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Payables to stockholders 134,326,750 134,326,750 132,434,750 132,434,7503,832,644,997 3,832,644,997 4,045,812,870 4,045,812,870

* Excludes statutory liabilities amounting to 16,368,586and 11,105,230 as of March 31, 2012 and December 2011, respectively.

Cash and cash equivalents, short-term cash investments, other receivables, accounts payable and accrued expenses and payable to stockholdersDue to the short-term nature of the transactions, the fair value of cash and cash equivalents, short-term cash investments, other receivables, accounts payable and accrued expenses and payable to stockholders approximate amount of consideration at the time of initial recognition.

Investments in trust funds and available-for-sale investmentsInvestments in trust funds and available for-sale financial assets 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. Earnings Per Share

Basic earnings per share amounts were computed as follows:

June 2012 June 2011a. Net income 219,374,485b. Weighted average number of shares 34,725,833c. Earnings per share (a/b) 6.32

*After retroactive effect of 20% stock dividends in 2011.

25. 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 2011Sales of real estate 1,251,098,292 93.66%Rental income 13,557,197 1.01%Others 71,238,088 5.33%

1,335,893,577 100.00%

Except for the following expenses directly relating to the leasing and pension plan operations, operating expenses pertain primarily to the real estate sales.

26. 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.

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2012 Preliminary Prospectus

Documents

Transcript of 2012 Preliminary Prospectus