*MRERGMEP - Vista · PDF fileexpanded into further territories, ... Our 6th anniversary as a publicly traded company ... we step into the battlefield knowing we are well-equipped

Highlights

2 13

FROM GOOD TO GREAT

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he cover shows molten gold being poured into the Vista Land mould. This aptly depicts the annual report’s title – gold,

by being honed into Vista Land. Vista Land, which started as one of the trusted companies in Philippine real estate, has emerged as a formidable name in country-wide development. With a presence in 34 provinces, and 73 cities and municipalities across the country, it has expanded into further territories, projects, and business lines – going from good to great.

Our 6th anniversary as a publicly traded company

demand for our properties leading to record-high revenue. Both local and foreign investors are seeing the value of our company, as we continue to grow as one of the strongest Filipino companies.

From Good to Great

Develops luxury houses in masterplanned communities, catering to the high-end

market segment in Mega Manila

Established: 1993

No. of Ongoing projects 19

Area of Ongoing projects (hectares) 107.3



La Posada (Sucat, Muntinlupa)Portofino South (Daang Hari, Alabang)

Portofino Courtyards (Daang Hari, Alabang)Amore (Daang Hari, Alabang)

Georgia Club (Sta. Rosa, Laguna)Augusta (Sta. Rosa, Laguna)Crosswinds (Tagaytay City)

One Alpine Tower (Tagaytay City)

Brescia (Commonwealth, Quezon City)Maia Alta (Antipolo, Rizal)

Marina Heights (Sucat, Muntinlupa)Ponticelli (Daang Hari, Alabang)

Citta Italia (Bacoor, Cavite)Amalfi (Damariñas, Cavite)Valenza (Sta. Rosa, Laguna)Fortezza (Cabuyao, Laguna)

Caters to the upper middle market housing segment in Mega Manila

Established: 1995

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2013 2012 %Change

Reservation Sales 1,763.4 2,217.1 20.5%

Real Estate Revenues 1,446.7 2,129.0 32.0%

Gross Profit 832.2 1,091.6 23.8%

EBIT 343.3 545.3 37.0%

2013 2012 %Change



Gross Profit 1,226.0 1,040.5 17.8%

EBIT 707.0 609.0 16.1%

Launched 35 projects with estimated total value of 26.1

billion

the Philippines’

Largest Homebuilder

At a Glance

02 VISTA LAND ANNUAL REPORT 2013



Wil Tower (Eugenio Lopez Drive, Quezon City)Symphony Tower (South Triangle, Quezon City)

Pinecrest (New Manila, Quezon City)Crown Tower (Sampaloc, Manila)

Avant at the Fort (Bonifacio Global City)KL Mosaic (Legazpi Village, Makati City)

Mosaic (Legazpi Village, Makati City)Trevi Towers (Pasong Tamo, Makati City)

Builds both mid and hi-rise vertical developments.

Acquired: 2009



Grenville Residences (Taguig City)Nova Romania (Caloocan City)

Cerritos Heights (Daang Hari, Alabang)Lessandra Heights (Daang Hari, Alabang)

Tierra Nevada (General Trias, Cavite)Pristina (Imus, Cavite)

Camella Molino (Bacoor, Cavite)Camella Vecina (Cabuyao, Laguna)

Servicing the low-cost, affordable and middle-income housing segment in the

Mega Manila area.

Established: 1977


Area of Ongoing projects (hectares) 1,078

Camella Santiago (Santiago, Isabela)Camella Laoag (Laoag, Ilocos Norte)

Provence (Malolos, Bulacan)Prominenza (Baliuag, Bulacan)

Camella Bohol (Tagbilaran, Bohol)Camella Butuan (Butuan, Agusan del Norte)

The Loop at Limketkai Centre (Cagayan de Oro, Misamis Oriental)

Camella Pagadian (Pagadian, Zamboanga del Sur)

Offers residential properties outside the Mega Manila area in the low-cost, affordable and

middle market segments primarily under the “Camella” and “Lessandra” brands.

Established: 1991

2013 2012 %Change



Gross Profit 2,763.6 2,779.9 0.6%

EBIT 1,635.5 1,734.0 5.7%

2013 2012 %Change



Gross Profit 4,833.4 2,998.7 61.2%

EBIT 2,757.2 1,496.1 84.3%

2013 2012 %Change


Real Estate Revenues 1,181.2 741.2 59.4%

Gross Profit 502.3 416.6 20.6%

EBIT 4.7 75.5 93.8%

Vista LandA N N U A L R E P O RT

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From Good to Great 03

GrowthChart

General Santos

Cagayan

METRO MANILA:Alabang, Las Piñas,

Taguig, Quezon City, Caloocan, Valenzuela,

Pasig

Naga

Cavite

Laguna

Bulacan

IsabelaIlocos Sur

Pangasinan

Tarlac

Nueva Ecija

Leyte

Bohol

Legaspi

Butuan

Pampanga

Batangas

Quezon

IloiloAklan

CapizPalawan

Bacolod

Negros Oriental

Cebu

Cagayan De Oro

Davao del Sur

Davao del Norte

Ozamiz

Pagadian

Ilocos Norte

Bataan Rizal

in 34 provinces, 73 cities and

municipalities around the country

Broadest Philippine

Presence


CorporateValues

Cost is not a question of numbers, but a question of value.

It is not what we can cut out, but what we can save on.

We are lean because we know that success does not depend on the number of people, but on the number of ideas, and the brilliance of those ideas.

We are not cost conscious to increase our profit margins, but to guarantee that we have sufficient resources for tomorrow.

It is not just the cost to us that we must concern ourselves with, but the cost to our customers as well.

Synergy is one of a corporation’s greatest assets.

The solitary genius is nice, but teams are stronger.

We have a common goal, and we need each other to get there.

We have each other’s back.

We have the company’s back.

We need to be trustworthy, and we need to be trusted.

There must be integrity and reliability in our word, and our character.

Honesty necessitates dependability, fairness, probity, and holding on to high principles.

It is the only way we can believe in each other and our customers can believe in us.

Everyday, we step into the battlefield knowing we are well-equipped.

We are a crack team. Better trained. Better skilled. Better motivated.

The competition is there for two reasons: To learn from and to knock out.

We owe it to ourselves to keep building muscle, and we owe it to our customers to keep fighting.

Our future is wrapped up in our customers — along with their dreams, their hopes, their lives.

We must become part of their community — and their family.

What they need is as important as what we do. It is what drives what we do.

To them, we will always listen. From them, we will always learn.

They are the reason we exist.

Cost Consciousness Competitive Spirit

Closeness to Customers

teamwork

Honesty


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Chairmanmanuel B. Villar, Jr.

IT Is my dIsTINcT hONOR TO RETURN As chAIRmAN Of VIsTA LANd. I Am PROUd TO REPORT ThAT ThE cOmPANy’s PERfORmANcE IN 2013 hAs bEEN hIghLy sATIsfAcTORy.

Chairman’s Message Vista Land

A N N U A L R E P O RT13F

rom Good to Great”, the title of this year’s annual report, summarizes Vista Land’s progress and prospects as a record-breaker in the Philippine real estate industry. Almost four decades ago, Vista Land’s first company, Camella, was founded with a straightforward mandate to make quality housing available for every Filipino. In 2013, Vista Land’s companies – namely Brittany, Crown Asia, Camella, Communities Philippines and Vista Residences – have shown its sustained position as the Philippines’

most trusted homebuilder. This proves that Vista Land has remained faithful to its original mandate while exponentially expanding its presence throughout the country -- thus going from good to great.

In the six years since becoming a publicly traded company, Vista Land has evolved with the rapidly diversifying Philippine housing industry. Our forays into the vertical housing market and commercial developments, in addition to our residential communities, have met with positive results. With the growing real estate industry, Vista Land has exceeded its targets with reservation sales, revenues and core earnings having doubled on our fifth year from listing in 2007, continuing its momentum in 2013. Net Income in 2013 jumped by 15% from PHP4.4 billion in 2012 to PHP5.06 billion. As the population and the workforce grow in number and earning capacity, the economic situation in the Philippines remains supportive of continued growth in the real estate market. Vista Land, as a time-tested name in the industry, is a reliable investment.

Macroeconomic factors remain supportive of the Philippine real estate industry. The country’s GDP growth in 2013 grew to 7.2%, higher than the expected 6-7% growth. As one of the best performing economies in the Asian region, the Philippines received a credit-rating upgrade from Fitch, S&P and Moody’s. Inflation remained benign at 3.0% while interest rates were steady. Overseas Filipinos’ remittances remained strong at over US$22 billion for 2013. Business confidence in the Philippines remains positive.

With the foregoing indicators, Vista Land continues to be at the forefront of innovative development. It ensures that each home buyer obtains not merely a residence, but the Vista Land community lifestyle. Its successes have been augmented by decades of experience and the unparalleled quality of the workforce.

Another decisive factor in making Vista Land great is its capacity for social responsiveness. More that our financial achievements, I am proud of the company’s concentrated efforts to aid those affected by the worst of 2013’s natural disasters, from the earthquakes in Bohol to Typhoon Yolanda (international name “Haiyan”) as discussed in depth in this annual report. As Vista Land is at the forefront of homebuilding, re-building remains crucial to our business and our values.

It is my distinct honor to return as Chairman of Vista Land. I am proud to report that the company’s performance in 2013 has been highly satisfactory. Vista Land’s journey through nearly four decades in the housing industry and the changing economic backdrop has gone from good to great, thanks to the hard work and dedication of its people and the enduring trust of the public.

Thank you for your invaluable support.

Dear Fellow Stockholders,

Chairman of the BoardManuel B. Villar, Jr.


5.1 Billion15%

Net INCome

President’s report

VIsTA LANd REmAINs A sOLId INVEsTmENT bEcAUsE IT Is ThE cOmPANy IN ThE bEsT POsITION TO mEET ThE RIsINg dEmANd fOR hOUsINg IN ThE PhILIPPINEs.

President and Chief Executive OfficerManuel Paolo A. Villar

Vista LandA N N U A L R E P O RT13

Dear Fellow Stockholders,

I am pleased to report that Vista Land has maintained its strong and reliable

performance for 2013. This year saw the company reaching new highs for

reservation sales, revenues, and net income, among other highlights. By

the end of the year, reservation sales went up by 15% to PHP46.1 billion,

revenues rose by 2 % to PHP2 billion, and net income increased by 15% to

PHP5.1 billion.

For 2013, we launched 35 projects with an estimated total value of PHP26

billion, an increase from the previous year’s tally of 28 projects with an

estimated total value of PHP25 billion. 31 of these projects were in our

consistently strong-performing low and affordable segments, and four were

in the mid-tier segment. 23 of those projects were located in up-and-coming

areas outside of Metro Manila, where the demand for housing continues to

steadily increase as more Filipinos prosper beyond the traditionally dominant

urban centers. These provinces include Bulacan, Bataan, Batangas, Pampanga,

and Tarlac in Luzon; Aklan, Bacolod, Bohol, Capiz, and Cebu in Visayas; and

Cagayan de Oro, Davao, General Santos, and South Cotabato in Mindanao.

As of 2013, our presence has been established in 34 provinces and 73 cities

and municipalities. Throughout the Philippines, our Camella brand retains its

position as the dominant brand in the housing market, thanks in no small part

to the homebuyers population among active and former overseas Filipinos

and their families. Our flagship developments-- including Evia in Daang

Hari, The Lakefront in Sucat, Sta. Elena in Sta. Rosa, Crosswinds in Tagaytay,

and Savannah in Iloilo -- have added further development phases, adding

more amenities and partnering with more establishments to cater to each

surrounding community.


3 0.0

Our projects for the year entailed a capital expenditure budget of PhP17.2 billion. We carefully studied available funding options, and were able to raise US$100 million and PhP6 billion to finance our growth through dollar offerings and bilateral loans. The interest rate environment and Vista Land’s positive credit profile enabled us to reduce our funding costs and improved our ability to raise capital. We were able to show Vista Land’s creditworthiness, thereby improving the company’s access to funding. We have strengthened our relationships with the banking community, specifically in offering mortgage financing to Vista Land home buyers. The proportion of our home buyers using bank financing has steadily increased, from 60% in 2012 to 65% in 2013.

Vista Land continued its strong financial performance in 2013. Our total assets rose to PHP84.5 billion with PHP14.9 billion in cash and investments. Our current ratio is at 3.88 and net debt to equity is 0.15:1. We have sustained our Return on Equity at 10% in 2013.

Vista Land remains a solid investment because it is the Company in the best position to meet the rising demand for housing in the Philippines. The country’s fundamental housing demand will only grow massively in the next ten years. The Philippines has a relatively young population, with hundreds of thousands of new households being added every year. Housing stock is growing at a rate that is nowhere near the demand for houses -- thus, there is a million-strong backlog that increases every year. Considering that the number of young, upwardly mobile Filipinos grow exponentially, this demographic segment will start their families and buy homes. As our enduring popularity can attest, their first choice will be Vista Land and our brands. After all, we’ve been here for more than 35 years. Decades of expertise, excellent production systems and logistics, and a top-notch workforce dedicated to ensuring the longevity of the brand, are reflected in the quality of

reaL eState reVeNUe

5.88

5.57

0.74

2.02

2.13

16.3

Brittany

Crown Asia

Camella

Communities Philippines

Vista Residences

20.0 Billion23%

up by

President’s report

9.36

5.58

1.18

2.46

1.45

20.0

2012

2013


2012 2013

reVeNUe dIStrIBUtIoN

13%

12%

34%

36%

5%

7%

12%28%

47%

6%

our homes and the satisfaction of our customers. Vista Land remains a symbol of trust, reliability, and customer affinity in the housing industry.

Finally, I would like to thank all our stakeholders for your invaluable support. With your continued confidence, Vista Land will continue to stay the course throughout many more years of prosperity and greatness.

Brittany Crown Asia Camella Communities Philippines Vista Residences

2012

2013

40.1

46.1

President and Chief Executive OfficerManuel Paolo A. Villar

(in Php Billion)15%

up by

reSerVatIoN SaLeS


2 13


Brittany homes cater to those with a taste for

the finer things in life. Each masterplanned

community in Mega Manila exudes luxury and

prestige, with design elements inspired by

some of the world’s most sophisticated locales,

from the Italianate villas of Portofino and

Amore, to the Alpine rusticity of Crosswinds in

Tagaytay, to antebellum Americana in Augusta,

Georgia Club, and La Posada.

Review of operations

Georgia Club – Sta. Rosa, Laguna


Market:High-endPrice:

Above Php 9M

Offering:House & Lot;

(Mega Manila)

Revenue Distribution:• 7% (2013)• 13% (2012)

Real Estate Revenues (in Php Million):• Php 1,446.7 (2013)• Php 2,129.0 (2012)

Crosswinds – Tagaytay

Amore – Daang Hari, Alabang


2 13


Review of Operations

Valenza – Sta. Rosa, Laguna


Market:Middle-income

Price:P3.5M to

P9M



Offering:House & Lot

(Mega Manila)

Crown Asia communities are

ideal for rising professionals

and their growing brood, with

tastefully designed homes, family-

friendly amenities, and strategic

locations near urban centers.

Developments include Brescia

in Quezon City, Marina Heights

in Muntinlupa, Ponticelli and

Amici in Daang Hari, La Marea,

Valenza, and Fortezza in Laguna,

Cottonwoods, Maia Alta, Mia

Vita, Mille Luce, and Woodberry

in Antipolo, and Amalfi, Carmel,

and Citta Italia in Cavite.


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The flagship brand, Camella, is where it all started more than 35 years ago.

Today, as one of the most trusted and enduring brands in Philippine real estate,

the name Camella has become synonymous with high-quality homes. Camella

remains prolific throughout Luzon, Visayas, and Mindanao, with Carmela

(88 sq. m.) and Drina (99 sq. m.) as the most popular model homes.

Camella Tanza – Tanza, Cavite


These include Cerritos East (Pasig City), Grande Vita (Bignay Road, Valenzuela), Nova Romania (Novaliches, Quezon City), Siena Villas (Caloocan City), Tierra del Sueño (San Jose del Monte, Bulacan), Bella Vista (Gen. Trias, Cavite), Cerritos (Daang Hari, Alabang), Colina (San Pedro, Laguna), Lessandra (Bacoor / Dasmariñas, Cavite), Merida (BF Resort, Las Piñas), Siena Villas (Bacoor, Cavite), Terrassa (Imus, Cavite), Tierra del Fuego (Gen. Trias, Cavite).

Market:Low cost & a�ordable

Price:P3.5M - below

Real Estate Revenues (in Php Million): Revenue

Distribution:

O�ering:House & Lot

(Mega Manila)

2 13

FROM GOOD TO GREAT

Camella’s developments in the Mega Manila area

These include Cerritos East (Pasig City), Grande Vita (Bignay Road, Valenzuela), Nova Romania (Novaliches, Quezon City), Siena Villas (Caloocan City), Tierra del Sueño (San Jose del Monte, Bulacan), Bella Vista (Gen. Trias, Cavite), Cerritos (Daang Hari, Alabang), Colina (San Pedro, Laguna), Lessandra (Bacoor / Dasmariñas, Cavite), Merida (BF Resort, Las Piñas), Siena Villas (Bacoor, Cavite), Terrassa (Imus, Cavite), Tierra del Fuego (Gen. Trias, Cavite).

Market:Low cost & a�ordable

Price:P3.5M - below

Real Estate Revenues (in Php Million): Revenue

Distribution:

O�ering:House & Lot

(Mega Manila)


2 13

FROM GOOD TO GREAT 17


Communities Philippines is the division of Vista Land dedicated to establishing communities in developing provincial areas. One of its specific goals is to cater to Overseas Filipinos and their families by building communities in their home provinces. Communities Philippines carries the Camella brand to its developments, which include Camella Northpoint and Solariega in Davao, Camella General Santos, Camella Naga, Camella Tuguegarao, Camella Sto. Tomas in Batangas, and Prominenza and Provence in Bulacan. The Lessandra townhouses, with locations in Bulacan, Batangas, Bicol, Cebu, Iloilo, Bacolod, Davao, and Cagayan de Oro, remain Camella’s most affordable house and lot packages.

Camella Lipa Heights – Lipa, Batangas


Market:All price points; Camella brand



Offering:House & Lot

(Outside Mega Manila)


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Vista Land through its subsidiary, Vista Residences, has become a

formidable player in the fast-growing vertical development sector of

the real estate industry in the ten years since its first condominium, The

Marfori Towers, was launched. Developments in Metro Manila, ranging

from high- to mid-rises, include KL Mosaic, Salcedo Square, Laureano di

Trevi, Pacific Residences Tower, Symphony Tower, Pine Crest, Madison

Place, Wil Tower, Vista Shaw, Vista Katipunan and Crown Tower.

Pine Crest – Quezon City

Pacific Residences – Taguig City20

Market:Low to

High-end

Real Estate Revenues (in Php Million):• Php 1,181.2 (2013)• Php 741.2 (2012)


Offering:Vertical projects

(Mega Manila)

Price:P1.9M to

P16M

Avant – Bonifacio Global City


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Feature

manuel b. Villar : the Chairman returns

After years spent serving in the government arena, former Senate President Manuel B. Villar’s return to the company he founded was an inevitability, and a welcome one at that. “The chairmanship is a

welcome respite from politics. The corporate sector has its own stresses, of course, but I enjoy seeing the fruits of our Company’s labor,” the chairman says, with a visible glint of enthusiasm in his eye.


The fruits of Vista Land’s labor are certainly in abundance, as the Company has sustained its double-digit growth since 2008. Its continued success is a huge source of ful�llment for Villar, who started Camella Homes over 35 years ago as an idealistic graduate of the University of the Philippines. His strong entrepreneurial drive, fostered in early youth by helping his mother sell seafoods in Divisoria, emboldened him to trade a steady corporate job for a loan to start a business. What started as a sand and gravel delivery service eventually segued into a�ordable housing, and the rest, as they say, is history—history that can be seen in the growing number of Vista Land communities across the Philippines.

��

Despite the solid foundations of Vista Land as a company, Villar’s years of experience have taught him never to be complacent. “Business is always challenging, whether we’re talking about today or 35 years ago, but the challenges are what make it rewarding. ”Those challenges, according to the chairman, include a Philippine real estate industry that’s “bigger, better, and more up to world-class

standards than ever before. It’s exciting,” he says. “The bigger those challenges get, the more skilled we become in handling them. Plus, experience is already on our side.”

Adapting to the rapidly evolving real estate arena, says Villar, means going into more areas with little to no presence from competitors, giving more Filipinos access to quality homes. The company is also focusing in the expansion of its commercial division. “We’re very certain about our commercial developments, which include our malls, BPOs, and eventually, hotels. The tourism industry is something I, personally, am very optimistic about.”

Vista Land’s prospects are indeed optimistic, as a whole, now that the man whose idealism and unfailing work ethic started it all has resumed an active role in leadership. For more proof of the company’s positive future, the chairman’s bright outlook says it all: “I’m enjoying every minute of my time here, because I’m a businessman at heart. I feel right at home,” he says, with a con�dent smile. “I’m back.”

2 13

FROM GOOD TO GREAT

The fruits of Vista Land’s labor are certainly in abundance,

years ago as an idealistic graduate of the University of the

job for a loan to start a business. What started as a sand and gravel delivery service eventually segued into a�ordable housing, and the rest, as they say, is history—

I’m enjoying every minute of my time here, because I’m a businessman at heart. I feel right at home,” he says, �ith a con��ent smile. “I’m back”.

malls, BPOs, and eventually, hotels. The tourism industry

enjoying every minute of my time here, because I’m a


2 13

FROM GOOD TO GREAT 23

Feature


EVIA:

In the old days, community life revolved around town plazas. Villagers would emerge from

their nearby homes and gather around these social centers, which were traditional church squares surrounded by bustling markets, cafés, boutiques, and various other establishments. This image of people-oriented spaces evokes a more easy-going time in our society’s history, when the values of community, togetherness, and fellowship were paramount. Today, the evolution of modern culture has resulted in a more complex idea of community, as urban sprawl and vast metropolises dominate our landscape. As the Philippines grows more prosperous, and its population is imbued with a stronger sense of idealism, the demand for homes goes beyond mere bricks and mortar. The emerging class of upwardly mobile Filipinos want communities where their families can settle down and feel safe, stimulated, and fulfilled. Vista Land, as the Philippines’ leading homebuilder, channels nearly four decades of expertise into fulfilling this demand. The result is EVIA, the company’s flagship development. Evia is a masterplanned community situated in Metro Manila’s burgeoning south and extending into Cavite. Vista Land’s

Community, Refined and Redefined

Evia at Night


2 13


residential properties like the upscale Portofino by Brittany, the mid-range Ponticelli by Crown Asia, and the practical Cerritos by Camella—surround a self-contained commercial hub where retail shops, outdoor recreation areas, schools, hospitals, offices, civic centers, churches, and other public spaces will be established.

At the heart of this masterplanned community is the Evia Lifestyle Center, an indoor-outdoor retail and entertainment complex integrated with green spaces for a park-like atmosphere. The first phase of the development, Building 1, is already open to cater to the basic needs of the public, as represented by anchor tenants like Rustan’s Supermarket, Ace Hardware, and PowerBooks. After running errands at Building 1, patrons may recharge at Starbucks, Coffee Bean and Tea Leaf, Bread Talk, McDonald’s, and Shakey’s, just to name a few popular establishments. The next phases of development, Buildings 2 and 3, are dedicated to international retail brands and cinemas, respectively, with a target launch by the end of 2014.

True to the spirit of the traditional town plaza, walkability is an integral part of the community’s design. According to Leni Damasco-Luya, Managing Director of Vista Land’s commercial division, “Evia has a grid-like plan that encourages walking. Driving is not a necessity to explore the city center.” Head Architect Pedro Paolo Estanislao adds, “The abundance of greenery makes time spent outdoors a pleasant proposition, while Italian-inspired design elements add to the warm, village-like feel of the community.” It’s also this idyllic atmosphere that makes Evia conducive to the youthful energy of university life—indeed, one of the developments down the pipeline is to establish a major college campus on the premises, similar to the green environs of the Philippines’ most important universities.

FeatureEVIA

Restaurants, retail outlets and a major supermarket chain in EviaVista Land Commercial Division’s Core Team


Restaurants, retail outlets and a major supermarket chain in Evia


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Ultimately, one of the goals of the community’s walkable design is to promote healthy and wholesome living. In fact, sports fields and jogging tracks are important components of Evia’s plan. According to architect Estanislao, independent bikers and runners, as well as football, Frisbee, and cricket leagues have already made Evia a regular destination. “In Evia, we’ve incorporated areas where athletes and fitness buffs can move about freely and safely. It’s naturally a hub for the rising trend towards active lifestyles.” To cater to this vibrant crowd, weekly organic markets and bazaars have already been established on site to complement existing retail mainstays and chain restaurants.

These developments are just a sliver of what Vista Land has in store for the general public and the increasingly gentrifying south. Damasco-Luya confidently states, “As

FeatureEVIA

A

C

F


the community expands, so will Evia adapt to their needs.” Indeed, the main ethos of Evia is to cater to the lifestyle needs of today’s sophisticated Filipinos, who seek the human connectedness of the communities of yesteryear, while retaining the array of choices and conveniences that modern life entails.

A: Sampling food products at the Evia night marketB: More chain stores and food choices at EviaC: The Evia football fieldD: Mountain biking trail along EviaE: Drifting - a fast-paced adventure in Evia F: A sculpture of national hero Dr. Jose Rizal overlooks the

future site of Evia’s University Town

B

D

E


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Feature

Perseverance and determination

Vista Land’s status as the Philippines’ largest homebuilder was obtained through the hard work of its people. The loyalty of the Company’s brokers and agents, referred to as entrepreneur-

partners, is unsurpassed. This is due to the fact that the Company makes the cultivation of its talent a top priority—after all, its sustained success hinges on highly driven self-starters. In line with this, brokers and agents are trained intensively. Their sales techniques are refined by specially dedicated learning modules and development seminars.

The Story of Vista Land’s Top Broker, Nilo Omillo

Chairman Manny Villar, Mr. & Mrs. Nilo Omillo and the “dream car”


Aside from training, Vista Land provides their entrepreneur-partners with an unrivalled incentive package. Cars, foreign and domestic travel and cash gifts are given periodically (annually, semi-annually and quarterly) to top performers during recognition ceremonies. This ensures that Vista Land’s brokers and agents are motivated to set goals, exceed targets and hold themselves accountable to the Company’s shared values.

Nowhere is this more evident than when Vista Land Chairman Manny Villar awarded a “dream car” – a Mercedes Benz E Class -- to Nilo Omillo, Vista Land’s top broker in 2013. This “dream car,” as Chairman Villar puts it, is an apt reward for over 22 years of loyalty and dedicated service to Vista Land and was given on top of his regular incentives for being a consistent performer in terms of sales delivered. For Nilo Omillo, the car represents the icing on the cake – a concrete representation of his partnership with Vista Land and his wonderful life built from good, old-fashioned perseverance and hard work.

Omillo’s story is a classic Filipino rags-to-riches tale. To augment his family’s income while in high school, he would work as a fishmonger before class hours and as a tricycle driver upon dismissal time. At 17, he decided to join the throngs of hopeful workers from all over the country to make his fortune in Manila. Omillo hopped from job to job, starting out as a dishwasher, a stevedore, a baker, then finally, as a janitor with an uncle’s realty company. He befriended some of the agents at that company, who gave him the task of handing out flyers

during his free time. “You can put your name on them,” he was told. His first sale came from a client riding a Mercedes Benz: Elaine Cuneta, the mother of movie star Sharon Cuneta.

That fortuitous meeting marked a turning point, as Omillo discovered his natural aptitude for sales. In 1991, he passed the Real Estate Broker Licensure Exams and set up offices in Manila and Pasay. Within a year, he was considered one of Camella’s top brokers. In fact, he has collected 15 Toyota Innova vehicles so far—one for every year that he was awarded Number One Broker by the Company. While his career trajectory skyrocketed, it wasn’t always easy—Omillo recalls working hours spent walking long distances, distributing flyers until midnight. He once realized the soles of his shoes already had holes in them when he stepped on a puddle and his feet got wet.

Today, Omillo owns a modest but lovely home, has sent his kids to excellent schools, travelled locally and abroad with his family, saved for his and his wife’s retirement, and even had an office building constructed. This former dishwasher’s current life as a Vista Land broker is a far cry from his hardscrabble beginnings. From making his first sale to a Mercedes Benz passenger to driving one himself, Omillo’s life is a testament to the rewards reaped by an unfailing work ethic, backed by a company that knows how to foster talent and inspire determination—Vista Land. Growth, therefore, becomes two-fold – as Vista Land’s growth is in direct proportion to its entrepreneur-partners’ success.

The symbolic key presentation Nilo driving off in his Mercedes


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Corporate SocialResponsibility

The Business of Rebuilding: Vista Land and Visayas relief efforts in 2013


Chairman Villar oversees renovation work in a typhoon-ravaged home in Iloilo

The business of building homes entails establishing reliability, trust, and affinity not just

with customers, but with entire communities. Vista Land plays an indispensable role in laying the foundations where Filipinos can build stable and fulfilling lives. Thus, the company believes that their mission goes beyond just selling houses. Their commitment to uplifting our countrymen through shelter extends to rebuilding communities in times of need.

This commitment was tested in 2013, when the Bohol earthquakes and Typhoon Yolanda—two of the worst natural disasters in recent Philippine history—devastated much of the Visayas region in all-too-rapid succession. The tragedy of lost homes and lives compelled individuals and institutions to mobilize some of the most massive relief operations ever needed in the country.

Vista Land rose to the occasion beyond the immediate aftermath of both disasters. Red Rosales, Chief Marketing Officer, says, “The entire company, from upper management to sales agents, were active during both relief and rebuilding operations. Fundraising efforts were organized per division, across Brittany, Crown Asia, Camella and Vista Residences. Even regional employees who were directly affected by the calamities volunteered their


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Before After

Homeowners in Camella Leyte check the damage done by the typhoon to their houses.

Chairman Villar established a task force which immediately cleared Camella of typhoon debris and repaired the damaged houses.

time and services. The Bohol earthquake happened in October, then Yolanda happened in November. By January, we were still actively collecting donations.”

Vista Land’s aid e�orts weren’t exclusively undertaken by its employees, either. Property grounds and clubhouses became volunteer bases, making it easy for homeowners and community personnel to participate in the relief e�orts. In Manila, each of these bases

then coordinated with the property management division, which was in charge of collecting relief goods and delivering these to the Villar Foundation o�ce in Las Piñas. From there, they were distributed by volunteers bound for the disaster-stricken areas.

The company’s swift and organized response was necessary in part because of several Camella residents a�ected in the devastated regions. Per Rosales, “We care about our homeowners, no matter how far. While the Yolanda storm surge spared the Camella communities in Leyte, the violent winds still caused considerable damage in the Palo (a town adjacent to Tacloban) and Ormoc properties. The damage was mostly to the roo�ngs of the house. The main structure remained and withstood the strong winds. Most of the houses on the developments were already turned over to the buyers. Vista Land, led by our chairman and CEO, rebuilt and repaired damage sustained by the homes immediately. We commenced paint jobs and the restoration of water and electricity, and we accomplished all of these within a week. We also sent security personnel to reinforce our communities’ safety.”

Of course, the company’s e�orts beyond its own communities. Vista Land, in partnership with the


Before After

the damage done by

houses.

in the relief e�orts. In Manila, each of these bases

and delivering these to the Villar Foundation o�ce

mostly to the roo�ngs of the houses. The main structure

over to the buyers. Vista Land, led by our chairman and


Chairman Villar, accompanied by Philippine Science High School (PSHS)-East Visayas Director Reynaldo Gamace, checked the damage wrought by typhoon Yolanda in the Palo, Leyte campus.

Roofs blown away, fallen posts and

felled trees were seen in Camella Ormoc after the

typhoon hit.

Chairman Villar personally inspecting the repairs done in Camella Ormoc.

After Chairman Villar pledged to shoulder

the cost of roofing materials and school

rebuilding, the PSHS-East Visayas

campus stands proud again.

Before

After

Before

After

Villar Foundation, prioritized repairs and renovation of the Philippine Science High School, Eastern Visayas campus in Palo, Leyte, after it suffered significant damage during typhoon Yolanda.

It stands to reason that the company’s handling of these recent crises has been good from a business point of view. “When the people saw how quickly we came to our

communities’ aid, how we prioritized their needs, and how efficient our repairs and rebuilding efforts were, sales actually went up,” says Rosales. Practical gains, however, pale in comparison to the unparalleled demonstration of human compassion during those challenging times. Vista Land, as a leader in the homebuilding industry, is proud to have served as an example of timely corporate social responsibility in the face of adversity.


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community service through the environment

Today, more than ever, businesses are demonstrating their commitment to environmentalism. As more people realize

that the earth’s natural resources are finite, sustainability has become an essential thrust of corporate social responsibility. As a key player in the real estate industry, Vista Land takes proactive steps to be accountable not just to its customers and shareholders, but to our planet. The company achieves this through Greenviron, a comprehensive program dedicated to implementing eco-friendly practices in its communities and beyond.

Greenviron activities in the Vista Land communities


The establishment of these practices quite literally starts in our own backyards. Vista Land homeowners are educated, year-round, on the importance of waste segregation through organized efforts like seminars, association meetings, and information campaigns. This is because each Vista Land property implements a Zero Waste program managed by our property management division. On-site Materials Recovery Facilities (MRFs) manage different types of waste according to their usefulness: certain biodegradable wastes produce excellent fertilizers when fed to earthworms for vermiculture or composted, while the water drained from wet garbage can be treated and used for plants. Non-biodegradable trash is sorted for recycling and repurposing. Today, more MRFs are being built on more properties, including Vista Land commercial developments, so that shops and restaurants can also aim for Zero Waste.

Another goal of Greenviron is to explore the use of alternative, renewable materials in the building industry. One successful example, as of 2013, is the company’s use and promotion of coco coir, a versatile, heavy-duty textile made from the typically discarded husks of the coconut. Coco coir netting has been promoted by environmental advocates as a sustainable material to prevent soil erosion, which is crucial in the property development business. Coir blocks are also useful for horticultural purposes, such as potted planting and landscaping.

No CSR program would be complete without making trees and green spaces a priority. Greenviron has already been successful in implementing its One Million in Five pledge to plant a million trees every five years. This milestone was reached in 2012, and will continue onto the next five years and onwards. Greenscapes, another horticulture initiative, is focused on growing and proliferating endemic plant species on property grounds, not just for aesthetic purposes but for noticeably better air quality and cooler surroundings compared to other areas.

After all, to sum up the overall purpose of Greenviron, more green spaces means healthier people, surroundings, and, in the long view for Vista Land, our industry. As a company, the commitment we make to sustainable practices ensures the longevity of our business and the planet’s shared resources.


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CorporateGovernance

A PERsPEcTIVE fOR gROWTh: GoVerNaNCe SHoULd Be LIVed

Within Vista Land, Corporate Governance is singled out as a necessary component of sound strategic business management. The company has seen how its internal governance processes have helped in winning the public’s confidence, attract investors and enhance shareholder value.

The Vista Land “Manual on Corporate Governance” was drawn up in March of 2007 and since then, is continuously refined to adapt to the changes within the organization, as well as global evolutions in the field.

Their Governance Code dictates that the company and its employees maintain a holistic approach to ethics and values, and requires regular assessments and benchmarking. Beyond guiding and regulating behavior, the company sees that living compliance day in and out has somehow resulted in increased profitability – largely in part to the fact that its compliance spending has shifted from needing to fix problems as they happen, to improving compliance performance instead.

Being true to this code has allowed the company to reap more than expected: Increased profits, better quality of employees, more streamlined compliance activities, unprecedented growth, and a reputation that has proven to be of immense value to all their partners, as well as the company as a whole.

THE VISTA LAND GOVERNANCE CODE

Board of DirectorsThe Board of Directors (the “Board”) shall be primarily responsible for the governance of the Corporation. In addition to setting the policies for the accomplishment of the Corporate objectives, it shall provide an independent check on Management. The term “Management,” as used herein, shall refer to the body given authority by the Board to implement the policies it has laid down in the conduct of business of the Corporation.

CompositionThe Board shall be composed of at least five (5), but not more than fifteen (15), members who are elected by the stockholders; and at least two (2) Independent Directors or such number of independent directors that constitute twenty percent (20%) of the members of the Board, whichever is lesser, but in no case less than two (2).

The membership of the Board may be a combination of Executive and Non-executive Directors (which include Independent Directors) in order that no Director or small group of Directors can dominate the decision making process.

The Non-executive Directors should possess such qualifications and stature that would enable them to participate effectively in the deliberations of the Board.


ChairmanThe Chairman of the Board, President and Chief Executive Officer have been separated to foster an appropriate balance of power, increased accountability, and better capacity for independent decision making by the Board.

Board PerformanceThe Board holds regular meetings. To assist the Directors in the discharge of their duties, each Director is given access to the Corporate Secretary and Assistant Corporate Secretary, who serve as counsel to the Board of Directors and at the same time communicate with the Board, Management, the Company’s Shareholders, and the Investing Public.

In 2012, the Board held 8 number of meetings. The record of attendance is indicated in the chart below:

Director’s NanmeMar

19

Apr

30

May

8

Jun

4

Jun

17

Sep

11

Sep

16

Nov

11

Manuel B. Villar, Jr. - - - - - - P P

Marcelino C. Mendoza P P P P P P P P

Ricardo B. Tan, Jr. - - - - P - - -

Benjamarie Therese N. Serrano A A A A - - - -

Cynthia J. Javarez P P P P P P P P

Maribeth C. Tolentino P P P P P P P P

Manuel Paolo A. Villar P P P P P P P P

Ruben O. Fruto P* P P P P P - P

Marilou O. Adea P P P P P P P P

*via teleconference

Legend : (A) Absent, (P) Present, (-) Not applicable

Board CommitteesTo assist the Board in complying with the principles of good Corporate Governance, the Board created three Committees.

Nomination Committee. Three (3) Directors comprise the Compensation and Remuneration Committee, one of whom is an Independent Director: Benjamarie Therese N. Soriano (Chairman), Manual Paolo A. Villar and Marilou O. Adea (Independent Director). This committee establishes the formal and transparent procedure for developing a policy on executive remunerations, and fixing remuneration packages of Corporate Officers and Directors. It also provides oversight over remuneration of senior management and other key personnel, ensuring

that compensation is consistent with the Corporation’s culture, strategy and control environment.

Audit Committee. The Audit Committee is composed of three (3) members, two (2) of which are Independent Directors: Marilou O. Adea (Independent Director), Ruben O. Fruto (Independent Director) and Cynthia J. Javarez. This committee assists the Board in providing oversight for the financial reporting process; system of internal control; audit process; and monitoring of compliance with applicable laws, rules and regulations. It also provides oversight over Management’s activities in managing credit, the market, liquidity, operations, legal, and other risks of the Corporation. This includes regularly receiving information on risk exposures and risk management activities from Management.

In compliance with SEC Memo Circular No. 4 series of 2012, the Board approved and adopted the Audit Committee Charter. The Audit Committee will hereafter meet to assess its compliance with the aforementioned SEC Memo Circular.

ManagementManagement is primarily responsible for the day-to-day operations and business of the Company. The annual compensation of the Chairman, CEO and the top eight (8) Senior Executives of the Company are set out in the Definitive Information Statement distributed to Shareholders.

Compliance MonitoringThe Compliance Officer is responsible for monitoring compliance by the Company with the provisions and requirements of good Corporate Governance.

On June 2010, the Board of Directors amended its “Manual of Corporate Governance” in compliance with the revised code of Corporate Governance issued by the Securities and Exchange Commission.

WebsiteUp-to-date information on the Company’s corporate structure, products and services, results of business operations, financial statements, career opportunities, and other relevant information on the Company may be found on its official website: www.vistaland.com.ph.


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Manuel B. Villar, Jr. Chairman of the Board

Mr. Villar was Senator of the Philippines from 2001 to June 2013. He served as Senate President from 2006 to 2008. He also served as a Congressman from 1992 to 2001 and as Speaker of the House of Representatives from 1998 to 2000. A Certified Public Accountant, Mr. Villar graduated from the University of the Philippines in 1970 with the degree of Bachelor of Science in Business Administration and in 1973 with the degree of Masters in Business Administration. He founded Camella Homes in the early 1970s and successfully managed said company over the years, to become the largest homebuilder in the Philippines now known as the Vista Land Group. Mr. Villar is also Chairman of the Board of Starmalls, Inc.

Manuel Paolo A. Villar President & Chief Executive Officer

Mr. Villar graduated from the Wharton School of the University of Pennsylvania, Philadelphia, USA with a Bachelor of Science in Economics and Bachelor of Applied Science in 1999. He was a consultant for McKinsey & Co. in the United States from 1999 to 2001. He joined Crown Asia in 2001 as Head of Corporate Planning. He was elected President and Chief Executive Officer of the Company in July 2011.

Cynthia J. Javarez Controller and Interim Chief Financial Officer

Marcelino C. Mendoza Director

Ms. Javarez graduated from the University of the East with a degree in Bachelor of Science in Business Administration, major in Accounting. She is a Certified Public Accountant. She took a Management Development Program at the Asian Institute of Management. She is currently the Controller of Vista Land and Head of the Tax and Audit group after holding various other positions in the MB Villar Group of Companies since 1985.

Mr. Mendoza is the Chief Operating Officer of MGS Corporation. He was President of Camella Homes, Inc. from 2001 to 2003, and Chief Operating Officer of Communities Philippines, Inc. from 1992 to 1995. He has a Masters Degree in Business Administration from Ateneo de Manila University and a Certificate in Advance Course in Successful Communities from the Harvard University Graduate School of Design. Mr. Mendoza is a member of the Phi Kappa Phi International Honor Society. Well respected in the Philippine real estate industry, Mr. Mendoza has served as President and Chairman of the Board (1996 to 1998) and Board Adviser (1999 to present) of the Subdivision and Housing Developers Association (SHDA).

“The Board of Directors shall be

primarily responsible for the governance of

the corporation.” - THE VISTA LAND

GOVERNANCE CODE

Board ofdirectors

From Left to Right:


Marilou O. Adea Independent Director

Ms. Adea is currently a consultant for FBO Management Network, Inc. and is Independent Director for Malarayat Rural Bank. She was until recently the Court Appointed Rehabilitation Receiver of Anna-Lynns, Inc. and Manuela Corporation. Ms. Adea served previously as Project Director for Site Acquisition of Digital Telecommunications Phils. Inc. from 2000 to 2002, Executive Director for FBO Management Network, Inc. from 1989 to 2000 and BF Homes Inc. in Receivership from 1988 to 1994 and Vice President for Finance & Administration for L&H Resources Management Corporation from 1986 to 1988. Ms. Adea holds a Degree in Bachelor of Science in Business Administration Major in Marketing Management from the University of the Philippines.

Maribeth C. Tolentino Director and President, Vista Residences, Inc. and Camella Homes, Inc.

Ms. Tolentino, a Certified Public Accountant, is currently the President of Vista Residences, Inc. and Camella Homes, Inc. She is also the President of Household Development Corporation. Ms. Tolentino was previously the General Manager of Golden Haven Memorial Park, Inc. from 1999 to 2005. She holds a Bachelor of Science degree in Business Administration Major in Accounting, Magna Cum Laude, from the University of the East, Manila.

Gemma M. Santos Corporate Secretary

Atty. Santos graduated cum laude with the degree of Bachelor of Arts, Major in History, from the University of the Philippines in 1981, and with the degree of Bachelor of Laws also from the University of the Philippines in 1985. She is a practicing lawyer and Senior Partner of Picazo Buyco Tan Fider & Santos Law Offices and Corporate Secretary of various Philippine companies, including public companies Roxas Holdings, Inc., Pancake House, Inc., and Maybank ATR KimEng Financial Corporation.

Ruben O. Fruto Independent Director

Mr. Fruto graduated with the degree of Bachelor of Laws from the Ateneo de Manila University in 1961. He was formerly a partner in the law firm of Feria, Feria, Lugtu & La O’ and the Oben, Fruto & Ventura Law Office. In February 1987, he was the Chief Legal Counsel and Senior Vice President of the Development Bank of the Philippines and Director from 1991 to 1998. He was the Undersecretary of Finance from March 1990 to May 15, 1991. Presently aside from private practice in corporate and civil litigation, he is also a consultant and the designated Corporate Secretary of the Subic Bay Metropolitan Authority. He is also currently General Counsel of Wallem Philippines Shipping, Inc. and Wallem Maritime Services, Inc.; Vice-Chairman of Toyota Balintawak, Inc.; Director and Vice-President of China Shipping Manila Agency, Inc. and Director and Chairman of Padre Burgos Realty, Inc.


From Left to Right:

manuel Paolo a. VillarPresident & Chief Executive Officer

Cynthia J. JavarezController

maribeth C. tolentinoPresident, - Vista Residences

Jerylle Luz C. QuismundoPresident - Communities Philippines

Camille Lydia a. VillarManaging Director - Britanny

mary Lee S. SadiasaManaging Director - Crown Asia

ManagementCommittee



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ManagementCommitteeFrom Left to Right:

ric a. PallescoManaging Director - Camella Homes

elizabeth m. KalawManaging Director - Vista Residences, Pasig/Quezon City

dante m. JulongbayanManaging Director - Communities Philippines, North Luzon

rizalito J. rosalesChief Marketing Officer

ma. Leni damasco-LuyaManaging Director - Vista Commercial

ma. Nalen S.J. rosero-GalangChief Legal Counsel

edgardo G. SantosVice President for Sales, Camella Homes

44 VISTA LAND ANNUAL REPORT 2013 From Good to Great 45


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REVIEW OF YEAR END 2013 VS YEAR END 2012RESULTS OF OPERATIONS

Revenues

Real EstateThe Company recorded revenue from real estate sales amounting to 20,024.6 million for the year ended December 31, 2013, an increase of 23% from 16,335.6 million in same period last year. This was primarily attributable to the increase in the overall completion rate of sold inventories of its business units particularly of Communities Philippines, Vista Residences and Crown Asia. The Company uses the Percentage of completion method of revenue recognition where revenue is recognized in reference to the stages of development of the properties.

• Real estate revenue of Communities Philippines increased by 59% to 9,358.61 million for the year ended December 31, 2013 from 5,877.9 for the year ended December 31, 2012. This increase was principally attributable to the increase in the number of homes outside of Mega Manila completed or under construction in the low-cost and affordable housing segment.

• Real estate revenue from Vista Residences increased by 59% to 1,181.2 million for the year ended December 31, 2013 from 741.2 million for the year ended December 31, 2012. This increase was principally attributable to the increase in the number of condominium units completed or under construction in the middle-income housing segment. Vista Residences is the business unit of Vista Land that develops and sells vertical projects across the Philippines.

• Real estate revenue of Crown Asia increased by 22% to 2,460.4 million for the year ended December 31, 2013 from 2,016.4 million for the year ended December 31, 2012. This increase was principally attributable to the increase in the number of homes in Mega Manila completed or under construction in the middle-income housing segment

• Real estate revenue of Camella Homes slightly increased to 5,577.8 million for the year ended December 31, 2013 from 5,571.2 million for the

year ended December 31, 2012. This increase was principally attributable to the increase in the number of homes in Mega Manila completed or under construction in the low-cost and affordable housing segment.

• Real estate revenue of Brittany decreased by 32% to 1,446,7 million for the year ended December 31, 2013 from 2,129.0 million in the same period last year. This decrease was principally attributable to the decrease in the number of homes in Mega Manila completed or under construction in the high-end housing segment, which was a reflection of the Company’s focus on meeting the increased demand for housing in the low-cost and affordable and middle-income housing segments serviced by its other business units.

Interest incomeInterest income increased by 4% from 928.6 million for the year ended December 31, 2012 to 961.2 million for the year ended December 31, 2013. This increase was primarily attributable to the number of home buyers taking possession of and making payments on their homes in 2013 as compared to 2012. The increase in interest income from installment contracts receivable increased, however, at a rate significantly below that of the increase in real estate revenue primarily because more home buyers sought financing options outside of the Company’s in-house financing programme. The increase is attributable also to the increase in interest income from short-term and long-term cash investments during the year.

Miscellaneous and other incomeMiscellaneous and other income increased by 40% from

449.7million for the year ended December 31, 2012 to 628.9 million for the year ended December 31, 2013.

This increase was primarily attributable to the increase in both rental revenues and forfeited reservation fees.

Costs and Expenses including interest & financing charges

Cost and expenses including interest & financing charges increased by 21% to 16,085.6 million for the year ended December 31, 2013 from 13,250.6 million for the year ended December 31, 2012. Costs and expenses as a percentage of real estate revenue decreased from 81% for the year ended December 31, 2012 to 80% for the year ended December 31, 2013. The 21% increase in the account was primarily attributable to the following:

Management Discussion and analysis


• Cost of real estate sales increased by 23% from 8,009.4 million for the year ended December

31, 2012 to 9,867.2 million for the year ended December 31, 2013 primarily due to the increase in the overall recorded sales of Vista Land’s business units.

• Operating expenses increased by 23% from 3,983.6 million for the year ended December 31, 2012 to

4,883.7 million for the year ended December 31, 2013 primarily due to the following:

an increase in advertising and promotions expenses to 1,462.1 million for the year ended December 31, 2013 from 1,105.0 million for the year ended December 31, 2012 as a result of increased marketing activities implemented by the Company during the period in connection with launch of new projects.

an increase in commissions from 913.3 million in the year ended December 31, 2010 to 1,112.8 million in the year ended December 31, 2011 resulting from increase in sales of the Company during the period.

an increase in salaries, wages and employee benefits from 613.8 million for the year ended December 31, 2012 to 717.5 million for the year ended December 31, 2013 resulting from the increase in total number of employees hired to keep pace with the Company’s expansion into new geographic areas and new projects.

• Interest and financing charges increased by 6% from 1,257.6 million for the year ended December 31, 2012 to 1,334.7 million for the year ended December 31, 2013 due to the increase in interest bearing liabilities during the period.

Provision for Income Tax

Provision for income tax increased by 303.7 million from 108.6 million for the year ended December 31, 2012 to 412.3 million for the year ended December 31, 2013

primarily due to a higher taxable base for the year.

Net Income

As a result of the foregoing, the Company’s net income increased by 15% to 5,062.5 million for the year ended December 31, 2013 from 4,385.7 million for the year ended December 31, 2012.

For the year ended December 31, 2013, there were no seasonal aspects that had a material effect on the financial condition or results of operations of the Company. Neither were there any trends, events or uncertainties that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations. The Company is not aware of events that will cause a material change in the relationship between the costs and revenues.

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

FINANCIAL CONDITION

As of December 31, 2013 vs. December 31, 2012

Total assets as of December 31, 2013 were 84,529.6 million compared to 71,323.1 million as of December 31, 2012, or a 19% increase. This was due to the following:

• Cash and cash equivalents including short term and long-term cash investments, available-for-sale financial assets (excluding unquoted equity securities) and held-to-maturity investments increased by 97% from 7,533.1 million as of December 31, 2012 to 14,856.7 million as of December 31, 2013 primarily due to the proceeds from the issuance of dollar notes payable in the second half of 2013.

• Receivables increased by 16% from 22,608.0 million to 26,314.0 million due to the revenue recognized during for the period.

• Due from related parties increased by 13% from 177.9 million as of December 31, 2012 to 200.4

million as of December 31, 2013 due to advances made to affiliates during the period.

• Real estate inventories increased by 5% from 14,752.5 million as of December 31, 2012 to 15,473.3 million as of December 31, 2013 due to

the opening of new projects during the period.


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• Investment properties increased by 15% from 4,063.3 million as of December 31, 2012 to 4,691.2 million as of December 31, 2013 due

to acquisition of land, construction of building and improvements and transfers from real estate inventories and property & equipment during the year.

• Property and equipment increased by 11% from 278.2 million to 307.5 million due to acquisitions

made during the year.

• Investments and advances in project development costs Interests in joint ventures increased by 13% from 1,589.1 million as of December 31, 2012 to 1,793.7 million as of December 31, 2013 due primarily to advances made during the period.

Total liabilities as of December 31, 2013 were 36,004.1 million compared to 27,688.7 million as of December 31, 2012, or a 30% increase. This was due to the following:

• Accounts and other payables and other noncurrent liabilities increased by 9% from 6,804.8 million as of December 31, 2012 to 7,408.2 million as of December 31, 2011 due to accruals made during the period.

• Customers’ advances and deposits increased by 31% from 1,293.4 million as of December 31, 2012 to

1,695.3 million as of December 31, 2013 due to the increase in advances and deposits required from buyers during the initial stage of a sale transaction.

• Income tax payable decreased by 24% million from 44.7 million as of December 31, 2012 to 34.0

million as of December 31, 2013 primarily due to payments made during the year.

• Bank loans increased by 4,451.2 million from 4,009.8 million as of December 31, 2012 to 8,461.1 million as of December 31, 2013 due to

availments made during the period.

• Loans payable (representing the sold portion of the Company’s installment contracts receivables with recourse), increased by 12% from 2,800.2 million as of December 31, 2012 to 3,149.2 million as of December 31, 2013 due to the increase in sold receivables during the year.

• Notes payable increased by 24% from 10,912.7 million as of December 31, 2012 to 13,554.3

million as of December 31, 2013 due primarily to the issuance of dollar notes in the second half of 2013.

• Deferred tax liabilities – net decreased by 10%

from 1,630.8 million as of December 31, 2012 to 1,466.7 million as of December 31, 2013 due to

adjustments of previously recorded deferred tax liabilities.

Total stockholder’s equity increased by 11% from 43,634.5 million as of December 31, 2012 to 48,525.4 million as of December 31, 2013 due to the net

income recorded for the year ended December 31, 2013.

Considered as the top five key performance indicators of the Company as shown below:

Key Performance Indicators 12/31/2013 12/31/2012Current ratio (a) 3.88:1 2.20:1Debt-to-equity ratio (b) 0.74:1 0.63:1Interest expense/Income before Interest expense (c)

19.6% 21.9%

Return on assets (d) 6.0% 6.1%

Return on equity (e) 10.4% 10.1%

Notes:(a) Current Ratio: This ratio is obtained by dividing

the Current Assets of the Company by its Current liabilities. This ratio is used as a test of the Company’s liquidity.

(b) Liability-to-equity ratio: This ratio is obtained by dividing the Company’s Total Liabilities by its Total Equity. The ratio reveals the proportion of liability and equity a company is using to finance its business. It also measures a company’s borrowing capacity.

(c) Interest expense/Income before interest expense: This ratio is obtained by dividing interest expense for the period by its income before interest expense. This ratio shows whether a company is earning enough profits before interest to pay its interest cost comfortably

(d) Return on assets: This ratio is obtained by dividing the Company’s net income by its total assets. This measures the Company’s earnings in relation to all of the resources it had at its disposal.

(e) Return on equity: This ratio is obtained by dividing the Company’s net income by its total equity. This measures the rate of return on the ownership interest of the Company’s stockholders.

Because there are various calculation methods for the performance indicators above, the Company’s

Management Discussion and analysis


presentation of such may not be comparable to similarly titled measures used by other companies.

Current ratio as of December 31, 2013 increased from that of December 31, 2012 due primarily to the increase in cash and cash investments.

Debt-to-equity ratio increased due to the increase in the total liabilities brought by the issuance of dollar notes payable in the second half of 2013.

Interest expense as a percentage of income before interest expense decreased in the year ended December 31, 2013 compared to the ratio for the year ended December 31, 2012 due to the increase in income before interest expense resulting from higher real estate revenues and interest income.

Return on asset decreased for December 31, 2013 compared to that on December 31, 2012 due primarily to the increase in total assets resulting from the increase in total cash and cash investments for the period.

Return on equity increased due primarily to the higher net income reported for the year ended December 31, 2013.

Material Changes to the Company’s Balance Sheet as of December 31, 2013 compared to December 31, 2012 (increase/decrease of 5% or more)

Cash and cash equivalents including short term and long-term cash investments, available-for-sale financial assets (excluding unquoted equity securities) and held-to-maturity investments increased by 97% from 7,533.1 million as of December 31, 2012 to 14,856.7 million as of December 31, 2013 primarily due to the proceeds from the issuance of dollar notes payable in the second half of 2013.

Receivables increased by 16% from 22,608.0 million to 26,314.0 million due to the revenue recognized during for the period.

Due from related parties increased by 13% from 177.9 million as of December 31, 2012 to 200.4

million as of December 31, 2013 due to advances made to affiliates during the period.

Real estate inventories increased by 5% from 14,752.5 million as of December 31, 2012 to 15,473.3 million as of December 31, 2013 due to

the opening of new projects during the period.

Investment properties increased by 15% from 4,063.3 million as of December 31, 2012 to 4,691.2 million as of December 31, 2013 due

to acquisition of land, construction of building and improvements and transfers from real estate inventories and property & equipment during the year.

Property and equipment increased by 11% from 278.2 million to P307.5 million due to acquisitions

made during the year. Investments and advances in project development costs Interests in joint ventures increased by 13% from 1,589.1 million as of December 31, 2012 to 1,793.7 million as of December 31, 2013 due primarily to advances made during the period.

Accounts and other payables and other noncurrent liabilities increased by 9% from 6,804.8 million as of December 31, 2012 to 7,408.2 million as of December 31, 2011 due to accruals made during the period.

Customers’ advances and deposits increased by 31% from 1,293.4 million as of December 31, 2012 to 1,695.3 million as of December 31, 2013 due to the increase in advances and deposits required from buyers during the initial stage of a sale transaction.

Income tax payable decreased by 24% million from 44.7 million as of December 31, 2012 to 34.0 million as of December 31, 2013 primarily

due to payments made during the year.

Bank loans increased by 4,451.2 million from 4,009.8 million as of December 31, 2012 to 8,461.1 million as of December 31, 2013 due to

availments made during the period.

Loans payable (representing the sold portion of the Company’s installment contracts receivables with recourse), increased by 12% from 2,800.2 million as of December 31, 2012 to 3,149.2 million as of December 31, 2013 due to the increase in sold receivables during the year.

Notes payable increased by 24% from 10,912.7 million as of December 31, 2012 to 13,554.3 million as of December 31, 2013 due primarily to the issuance of dollar notes in the second half of 2013.


2 13


Deferred tax liabilities – net decreased by 10% from 1,630.8 million as of December 31, 2012 to

1,466.7 million as of December 31, 2013 due to adjustments of previously recorded deferred tax liabilities.

Total stockholder’s equity increased by 11% from 43,634.5 million as of December 31, 2012 to 48,525.4 million as of December 31, 2013 due

to the net income recorded for the year ended December 31, 2013.

Material Changes to the Company’s Statement of income for the year ended December 31, 2013 compared to the year ended December 31, 2012 (increase/decrease of 5% or more)

Revenue from real estate sales amounting to 20,024.6 million for the year ended December 31,

2013, an increase of 23% from 16,335.6 million in same period last year.

Interest income increased by 4% from 928.6 million for the year ended December 31, 2012 to

961.2 million for the year ended December 31, 2013. This increase was primarily attributable to the number of home buyers taking possession of and making payments on their homes in 2013 as compared to 2012. The increase in interest income from installment contracts receivable increased, however, at a rate significantly below that of the increase in real estate revenue primarily because more home buyers sought financing options outside of the Company’s in-house financing programme. The increase is attributable also to the increase in interest income from short-term and long-term cash investments during the year.

Miscellaneous and other income increased by 40% from 449.7million for the year ended December 31, 2012 to 628.9 million for the year ended December 31, 2013. This increase was primarily attributable to the increase in both rental revenues and forfeited reservation fees.

Cost of real estate sales increased by 23% from 8,009.4 million for the year ended December

31, 2012 to 9,867.2 million for the year ended December 31, 2013 primarily due to the increase in the overall recorded sales of Vista Land’s business units.

Operating expenses increased by 23% from 3,983.6 million for the year ended December

31, 2012 to 4,883.7 million for the year ended December 31, 2013 primarily due to the increase in advertising and promotions expenses as a result of increased marketing activities implemented by the Company during the period in connection with launch of new projects, increase in commissions resulting from increase in sales of the Company during the period and increase in salaries, wages and employee benefits resulting from the increase in total number of employees hired to keep pace with the Company’s expansion into new geographic areas and new projects.

Interest and financing charges increased by 6% from 1,257.6 million for the year ended December 31, 2012 to 1,334.7 million for the year ended December 31, 2013 due to the increase in interest bearing liabilities during the period.

Provision for income tax increased by 303.7 million from 108.6 million for the year ended December 31, 2012 to 412.3 million for the year ended December 31, 2013 primarily due to a higher taxable base for the year.

There are no other material changes in the Company’s financial position (changes of 5% or more) and condition that will warrant a more detailed discussion. Further, there are no material events and uncertainties known to management that would impact or change reported financial information and condition on the Company.

Management Discussion and Analysis


The management of Vista Land & Lifescapes, Inc. and Subsidiaries is responsible for the preparation and fair presentation of the financial statements for the years ended December 31, 2013 and 2012, including the additional components attached therein, in accordance with Philippine Financial Reporting Standards. This responsibility includes designing and implementing internal controls relevant to the preparation and fair presentation of the consolidated financial statement that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The Board of Directors reviews and approves the consolidated financial statements and submits the same to the stockholders.

SyCip, Gorres, Velayo & Co., the independent auditors appointed by the stockholders has examined the consolidated financial statements of the Company in accordance with Philippine Standards on Auditing, and in its report to the stockholders, has expressed its opinion on the fairness of presentation upon completion of such examination.

MANUEL B. VILLAR, JR.Chairman of the Board

MANUEL PAOLO A. VILLAR President and Chief Executive Officer

STATEMENT OF MANAGEMENT’S RESPONSIBILITYFOR FINANCIAL STATEMENTS

Controller/Interim Chief Financial OfficerCYNTHIA J. JAVAREZ



2 13

*SGVFS006042*

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsVista Land & Lifescapes, Inc.

We have audited the accompanying consolidated financial statements of Vista Land & Lifescapes, Inc.and its subsidiaries, which comprise the consolidated statements of financial position as at December31, 2013 and 2012, and the consolidated statements of comprehensive income, statements ofchanges in equity and statements of cash flows for the years ended December 31, 2013, 2012 and2011, 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 financialstatements in accordance with Philippine Financial Reporting Standards, and for such internal controlas management determines is necessary to enable the preparation of consolidated financialstatements 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 ouraudits. We conducted our audits in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin 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 financialstatements, whether due to fraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entity’s preparation and fair presentation of the consolidated financialstatements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements.

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

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 28, 2012, valid until December 31, 2015SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited *SGVFS006042*

- 2 -

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Vista Land & Lifescapes, Inc. and its subsidiaries as at December 31, 2013 and2012, and their financial performance and their cash flows for the years ended December 31, 2013,2012 and 2011 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Michael C. SabadoPartnerCPA Certificate No. 89336SEC Accreditation No. 0664-AR-1 (Group A), March 11, 2011, valid until March 10, 2014Tax Identification No. 160-302-865BIR Accreditation No. 08-001998-73-2012, April 11, 2012, valid until April 10, 2015PTR No. 4225212, January 2, 2014, Makati City

March 7, 2014

A member firm of Ernst & Young Global Limited

FROM GOOD TO GREAT

2 13

*SGVFS006042*

VISTA LAND & LIFESCAPES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31 January 1,

2013

2012(As restated -

Notes 3 and 28)

2012(As restated -

Notes 3 and 28)

ASSETS

Current AssetsCash and cash equivalents (Notes 7

and 32) P=4,532,562,020 P=1,958,729,622 P=2,052,566,048Short-term cash investments

(Notes 8 and 32) 1,056,744,918 915,194,634 1,597,723,506Receivables (Notes 9 and 32) 18,448,189,523 14,611,580,900 11,330,062,090Held-to-maturity (HTM) investments

(Notes 8 and 32) 342,675,577 − −Due from related parties (Notes 30

and 32) 200,420,543 177,938,993 −Real estate inventories (Note 10) 15,473,288,259 14,752,482,297 14,901,418,372Other current assets (Note 11) 1,735,465,856 1,696,843,849 1,415,007,286 Total Current Assets 41,789,346,696 34,112,770,295 31,296,777,302

Noncurrent AssetsNoncurrent receivables (Notes 9

and 32) 7,865,846,194 7,996,386,610 7,419,448,579Long-term cash investments (Notes 8

and 32) 5,038,832,500 4,659,175,000 4,975,840,000Available-for-sale (AFS) financial assets

(Notes 8 and 32) 1,364,755,117 41,499,183 41,309,183Held-to-maturity (HTM) investments

(Notes 8 and 32) 2,562,601,115 − −Investment properties (Notes 14

and 32) 4,691,233,985 4,063,300,281 2,291,697,514Land and improvements (Note 12) 18,569,437,497 18,107,037,673 15,762,930,368Investment in an associate (Note 13) − − 689,915,634Property and equipment (Note 15) 307,456,534 278,174,706 178,808,544Investments and advances in project

development costs (Note 16) 1,793,667,199 1,589,147,576 1,645,263,459Deferred tax assets - net (Note 29) 39,317,127 5,121,411 2,028,374Other noncurrent assets (Note 17) 507,092,696 470,641,709 363,577,781 Total Noncurrent Assets 42,740,239,964 37,210,484,149 33,370,819,436

P=84,529,586,660 P=71,323,254,444 P=64,667,596,738

(Forward)


*SGVFS006042*

- 2 -

December 31 January 1,

2013

2012(As restated -

Notes 3 and 28)

2012(As restated -

Notes 3 and 28)

LIABILITIES AND EQUITY

Current LiabilitiesAccounts and other payables

(Notes 18 and 32) P=6,381,405,702 P=4,849,858,842 P=5,575,482,335Customers’ advances and deposits

(Note 19) 1,695,273,994 1,293,421,582 1,221,018,858Due to related parties (Note 30) − − 182,802,367Income tax payable 33,999,068 44,724,920 52,258,595Current portion of: Notes payable (Notes 21 and 32) 729,411,765 6,164,633,560 − Bank loans (Notes 20 and 32) 1,414,384,885 2,317,128,962 1,730,351,181 Loans payables (Notes 20 and 32) 527,070,533 868,136,619 738,198,961 Total Current Liabilities 10,781,545,947 15,537,904,485 9,500,112,297

Noncurrent LiabilitiesBank loans - net of current portion

(Notes 20 and 32) 7,046,697,287 1,692,714,602 2,402,261,903Loans payable - net of current portion

(Notes 20 and 32) 2,622,105,683 1,932,104,402 1,711,031,644Notes payable - net of current portion

(Notes 21 and 32) 12,824,903,522 4,748,095,715 7,393,784,649Pension liabilities (Note 28) 185,419,873 187,064,300 157,421,500Deferred tax liabilities - net (Note 29) 1,506,005,518 1,635,901,259 2,014,926,223Other noncurrent liabilities

(Notes 22 and 32) 1,037,469,871 1,954,953,672 799,546,716 Total Noncurrent Liabilities 25,222,601,754 12,150,833,950 14,478,972,635 Total Liabilities 36,004,147,701 27,688,738,435 23,979,084,932

Equity (Note 23)Capital stock

Common stock 8,538,740,614 8,538,740,614 8,538,740,614Preferred stock 33,000,000 − −

Additional paid-in capital 19,454,976,328 19,328,509,860 19,328,509,860Other comprehensive income 27,501,167 (2,791,816) 7,306,625Retained earnings 20,471,220,850 16,279,663,710 12,936,162,332Treasury shares − (509,606,359) (122,207,625) Total Equity 48,525,438,959 43,634,516,009 40,688,511,806

P=84,529,586,660 P=71,323,254,444 P=64,667,596,738

See accompanying Notes to Consolidated Financial Statements.



2 13

*SGVFS006042*

VISTA LAND & LIFESCAPES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2013

2012(As restated -

Notes 3 and 28)

2011(As restated -

Notes 3 and 28)

REVENUEReal estate P=20,024,646,851 P=16,335,642,258 P=13,513,424,829Interest income from installment contracts

receivable (Note 24) 679,127,107 693,525,432 628,980,424Miscellaneous income (Note 25) 615,352,806 367,941,764 386,246,298

21,319,126,764 17,397,109,454 14,528,651,551

COSTS AND EXPENSESCosts of real estate sales (Notes 10 and 26) 9,867,165,963 8,009,354,026 6,611,347,721Operating expenses (Note 26) 4,883,723,134 3,983,644,435 3,266,293,370

14,750,889,097 11,992,998,461 9,877,641,091

OTHER INCOME (EXPENSES)Interest income from investments (Note 24) 282,045,752 235,068,888 224,132,283Interest and other financing charges (Note 24) (1,334,740,651) (1,257,586,795) (1,347,679,105)Others (Notes 8, 13, 16, 21 and 27) (40,751,243) 112,721,099 55,996,661

(1,093,446,142) (909,796,808) (1,067,550,161)

INCOME BEFORE INCOME TAX 5,474,791,525 4,494,314,185 3,583,460,299

PROVISION FOR INCOME TAX(Note 29) 412,282,842 108,613,085 62,782,897

NET INCOME 5,062,508,683 4,385,701,100 3,520,677,402

OTHER COMPREHENSIVE INCOME (LOSS)Other comprehensive loss to be reclassified to

profit or loss in subsequent periods:Cumulative translation adjustments (3,137,348) − −Changes in fair value of AFS financial

assets (Note 8) (8,594,066) − −

Other comprehensive income not to bereclassified to profit or loss in subsequentperiods:Actuarial gains (losses) on pension

liabilities 42,024,397 (10,098,441) 7,306,625

OTHER COMPREHENSIVE INCOME, NETOF TAX 30,292,983 (10,098,441) 7,306,625

TOTAL COMPREHENSIVE INCOME P=5,092,801,666 P=4,375,602,659 P=3,527,984,027

Basic/Diluted Earnings Per Share (Note 31) P=0.593 P=0.522 P=0.413



*SGVFS006042*

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2 13

*SGVFS006042*

VISTA LAND & LIFESCAPES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS


2013

2012(As restated -

Notes 3 and 28)

2011(As restated -

Notes 3 and 28)

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=5,474,791,525P=4,494,314,185P=3,583,460,299Adjustments for: Interest and other financing charges (Note 24) 1,334,740,651 1,257,586,795 1,347,679,105 Depreciation and amortization (Notes 14, 15, 17 and 26) 235,055,822 154,717,814 101,754,628 Unrealized foreign exchange losses (gains) (Note 27) 39,793,386 (1,011,381) 26,032,480 Current service cost (Note 28) 84,791,952 58,516,734 41,421,300 Equity in net loss (income) of an associate and joint venture (Notes 13, 16 and 27) (13,586,274) 2,155,663 6,172,562 Dividend income – – (151,342) Gain from disposal of an associate (Notes 13 and 27) – (83,881,058) – Interest income (Note 24) (961,172,859) (928,594,320) (853,112,707)Operating income before working capital changes 6,194,414,203 4,953,804,432 4,253,256,325 Decrease (increase) in: Receivables (3,609,189,107)(3,854,950,331) (2,901,036,254) Due from related parties (196,339,608) (177,938,993) – Real estate inventories 2,172,422,635 2,196,948,131 (318,463,210) Other current assets (38,622,007) (281,836,563) (481,989,703) Increase (decrease) in: Accounts and other payables (22,018,467) 33,187,525 441,725,127 Due to related parties – (182,802,367) (202,946,843) Customers’ advances and deposits 401,852,412 72,402,724 91,732,696 Contributions paid (Note 28) (54,871,439) (53,580,566) (52,980,800)Net cash flows provided by operations 4,847,648,622 2,705,233,992 829,297,338Interest received 866,138,924 1,145,132,967 728,371,061Dividend received – – 151,342Income tax paid (591,433,993) (493,936,858) (348,399,743)Interest paid (1,734,786,549)(1,441,101,725) (1,695,108,616)Net cash flows provided by (used in) operatingactivities 3,387,567,004 1,915,328,376 (485,688,618)

CASH FLOWS FROM INVESTING ACTIVITIESAdditions to land and improvements (Note 12) (2,381,776,456)(4,617,818,669) (859,759,647)Acquisition of long-term cash investments – – (3,180,345,000)Proceeds from long-term cash investments – 308,720,000 –Acquisition of short-term cash investments (168,844,918) (201,882,689) (233,837,622)Proceeds from short-term cash investments 94,194,634 883,011,561 295,574,433Decrease (increase) in project development costs (17,075,291) 55,992,632 (90,603,754)

(Forward)


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2013

2012(As restated -

Notes 3 and 28)

2011(As restated -

Notes 3 and 28)Acquisition of: Property and equipment (Note 15) (P=164,209,976) (P=221,229,525) (P=159,128,801) System development costs (Note 17) (37,739,943) (38,491,554) (38,425,168) Investment properties (Note 14) (505,720,107) (1,183,660,478) (13,889,125) AFS financial assets (Note 8) (1,331,850,000) (190,000) – HTM investments (Note 8) (2,907,121,857) – –Increase in other noncurrent assets (57,961,990) (94,319,806) (72,006,792)Proceeds from disposal of investment in an associate (Note 13) – 771,764,280 –Net cash flows used in investing activities (7,478,105,904)(4,338,104,248) (4,352,421,476)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from: Bank loans 5,917,799,989 1,754,706,095 1,625,395,010 Loans payable 2,149,055,868 2,128,887,530 1,545,664,338 Notes payable 4,404,618,734 4,316,452,762 3,067,952,652Payments of: Notes payable (762,103,824) (790,888,792) – Bank loans (3,065,388,494)(1,877,475,615) (210,013,226) Loans payable (1,800,120,673)(1,777,877,114) (1,604,498,264)Payment of dividends declared (Note 23) (870,951,543) (1,037,113,067) (893,423,988)Sale (acquisition) of treasury shares (Note 23) 636,072,827 (387,398,734) (122,207,625)Proceeds from issuance of shares 33,000,000 – –Net cash flows provided by financing activities 6,641,982,884 2,329,293,065 3,408,868,897

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,551,443,984 (93,482,807) (1,429,241,197)

EFFECT OF CHANGE IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 22,388,414 (353,619) –

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,958,729,622 2,052,566,048 3,481,807,245

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 7) P=4,532,562,020P=1,958,729,622P=2,052,566,048




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VISTA LAND & LIFESCAPES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Vista Land & Lifescapes, Inc. (the Parent Company) was incorporated in the Republic of thePhilippines and registered with the Securities and Exchange Commission (SEC) onFebruary 28, 2007. The Parent Company’s registered office address and principal place ofbusiness is at 3rd Level Starmall Las Piñas, CV Starr Avenue, Pamplona, Las Piñas City. TheParent Company is a publicly-listed investment holding company which is 66.57% owned by FineProperties, Inc. (ultimate Parent Company) and its subsidiaries, 33.13% owned by PCD NomineeCorporation and the rest by the public.

The Parent Company is the holding company of the Vista Group (the Group) which is engaged inthe development of residential subdivisions and construction of housing and condominium units.The Group has six (6) wholly-owned subsidiaries, namely: Brittany Corporation (Brittany), CrownAsia Properties, Inc. (CAPI), Vista Residences, Inc. (VRI), Camella Homes, Inc. (CHI),Communities Philippines, Inc. (CPI) and VLL International, Inc. (VII). The Group offers a range ofproducts from socialized and affordable housing to middle income and high-end subdivision houseand lots and condominium projects.

2. Basis of Preparation

The accompanying consolidated financial statements of the Group have been prepared on ahistorical cost basis, except for the available-for-sale (AFS) financial assets which have beenmeasured at fair value. The consolidated financial statements are presented in Philippine Peso(P=) which is the functional and presentation currency of the Parent Company, and all amounts arerounded to the nearest Philippine Peso unless otherwise indicated.

Statement of ComplianceThe consolidated financial statements of the Group have been prepared in compliance withPhilippine Financial Reporting Standards (PFRS). An additional consolidated statement offinancial position as at January 1, 2012, is presented due to retrospective application ofaccounting policies as a result of the adoption of new accounting standards (Note 3).

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Companyand its subsidiaries (the Group) as at December 31, 2013 and 2012 and January 1, 2012 and forthe years ended December 31, 2013, 2012 and 2011.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Groupobtains control, and continue to be consolidated until the date when such control ceases. TheGroup controls an entity when it is exposed, or has rights, to variable returns from its involvementwith the entity and has the ability to affect those returns through its power over the entity. Thefinancial statements of the subsidiaries are prepared for the same reporting period as the ParentCompany, using consistent accounting policies. All intra-group balances, transactions, unrealizedgains and losses resulting from intra-group transactions and dividends are eliminated in full.


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Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries notwholly-owned and are presented separately in the consolidated statements of comprehensiveincome, consolidated statements of changes in equity and consolidated statements of financialposition, separately from the Parent Company’s equity.

Losses within a subsidiary are attributed to the non-controlling interests even if that results in adeficit balance.

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

· Derecognizes the assets (including goodwill) and liabilities of the subsidiary· Derecognizes the carrying amount of any non-controlling interest· Derecognizes the cumulative translation differences recorded in equity· Recognizes the fair value of the consideration received· Recognizes the fair value of any investment retained· Recognizes any surplus or deficit in profit or loss· Reclassifies the parent’s share of components previously recognized in other comprehensive

income to profit or loss or retained earnings, as appropriate.

The Group’s consolidated financial statements comprise the financial statements of the ParentCompany and the following subsidiaries:

Percentage of Ownership2013 2012 2011

Brittany 100.00% 100.00% 100.00%CAPI 100.00 100.00 100.00VRI 100.00 100.00 100.00CHI 100.00 100.00 100.00 Household Development Corp. (HDC) 100.00 100.00 100.00 Mandalay Resources Corp. 100.00 100.00 100.00 C&P International Limited 100.00 100.00 100.00CPI 100.00 100.00 100.00 Communities Batangas, Inc. 100.00 100.00 100.00 Communities Bulacan, Inc. 100.00 100.00 100.00 Communities Cagayan, Inc. 100.00 100.00 100.00 Communities Cebu, Inc. 100.00 100.00 100.00 Communities Davao, Inc. 100.00 100.00 100.00 Communities General Santos, Inc. 100.00 100.00 100.00 Communities Iloilo, Inc. 100.00 100.00 100.00 Communities Isabela, Inc. 100.00 100.00 100.00 Communities Leyte, Inc. 100.00 100.00 100.00 Communities Naga, Inc. 100.00 100.00 100.00 Communities Negros Occidental, Inc. 100.00 100.00 100.00 Communities Pampanga, Inc. 100.00 100.00 100.00 Communities Pangasinan, Inc. 100.00 100.00 100.00 Communities Tarlac, Inc. 100.00 100.00 100.00 Communities Zamboanga, Inc. 100.00 100.00 100.00 Communities Ilocos, Inc. 100.00 100.00 100.00

(Forward)



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Percentage of Ownership2013 2012 2011

Communities Bohol, Inc. * 100.00 100.00 100.00 Communities Quezon, Inc. * 100.00 100.00 100.00 Communities Palawan, Inc. * 100.00 100.00 100.00 Communities Panay, Inc. ** 100.00 – –VII** 100.00 – –* incorporated in 2011

**incorporated in 2013

With the exception of C&P International Limited and VII, which are located in Cayman Islands, therest of the subsidiaries are all domiciled in the Philippines.

As discussed in Note 3, the functional currency of C&P International Limited and VII is theUS$ Dollar. As of reporting date, the assets and liabilities of foreign subsidiaries, with functionalcurrencies other than the functional currency of the Parent Company, are translated into thepresentation currency of the Group using the closing foreign exchange rate prevailing at thereporting date, and their respective income and expenses at the weighted average rates for theyear. The exchange differences arising on the translation are recognized in OCI. On disposal of aforeign operation, the component of OCI relating to that particular foreign operation shall berecognized in profit or loss in the consolidated statement of comprehensive income.

3. Changes in Accounting Policies

The accounting policies adopted in the preparation of the Group’s consolidated financialstatements are consistent with those of the previous financial years except for the adoption of thefollowing new and amended PFRS and Philippine Interpretations which became effectivebeginning January 1, 2013. Except as otherwise stated, the adoption of these new and amendedStandards and Philippine Interpretations did not have any impact on the consolidated financialstatements.

· Revised PAS 19, Employee Benefits (effective for annual periods beginning on or afterJanuary 1, 2013)

On January 1, 2013, the Group adopted the Revised PAS 19.

For defined benefit plans, the Revised PAS 19 requires all actuarial gains and losses to berecognized in other comprehensive income (OCI) and unvested past service costs previouslyrecognized over the average vesting period to be recognized immediately in profit or losswhen incurred.

Prior to adoption of the Revised PAS 19, the Group recognized actuarial gains and lossesimmediately to profit or loss, while past service cost, if any, is recognized immediately to profitor loss, unless the changes to the pension plan are conditional on the employees remaining inservice for a specified period of time (the vesting period). In this case, the past service cost isamortized on a straight-line basis over the vesting period. Upon adoption of the RevisedPAS 19, the Group changed its accounting policy to recognize all actuarial gains and losses inOCI and all past service costs in profit or loss in the period they occur. Moving forward, theGroup will retain the recognized actuarial gains and losses in OCI and will not be reclassifiedto profit or loss in a subsequent period but permanently remains in equity.


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The Revised PAS 19 replaced the interest cost and expected return on plan assets with theconcept of net interest on defined benefit liability or asset which is calculated by multiplyingthe net balance sheet defined benefit liability or asset by the discount rate used to measurethe employee benefit obligation, each as at the beginning of the annual period.

The Revised PAS 19 also amended the definition of short-term employee benefits andrequires employee benefits to be classified as short-term based on expected timing ofsettlement rather than the employee’s entitlement to the benefits. In addition, the RevisedPAS 19 modifies the timing of recognition for termination benefits. The modification requiresthe termination benefits to be recognized at the earlier of when the offer cannot be withdrawnor when the related restructuring costs are recognized.

Changes to definition of short-term employee benefits and timing of recognition for terminationbenefits do not have any impact on the Group’s financial position and financial performance.

The changes in accounting policies have been applied retrospectively. The effects of first timeadoption of the Revised PAS 19 on the consolidated financial statements are as follows:

December 31,2012

January 1,2012

Consolidated statements of financial positionIncrease (decrease) in:

Other comprehensive income (P=2,791,816) P=7,306,625Retained earnings 2,791,816 (7,306,625)

2012Consolidated statements of comprehensive incomeIncrease (decrease) in:

Pension expense (P=14,426,344)Provision for income tax 4,327,903Net income 10,098,441Other comprehensive income for the year (10,098,441)

The adoption did not have any significant impact on the statement of cash flows or the basicand diluted earnings per share.

Restatement in Prior Year’s Financial StatementsThe statements of financial position as at December 31, 2012 and January 1, 2012 and thestatements of comprehensive income, changes in equity and cash flows for the year endedDecember 31, 2012 have been restated to effect the retrospective application of RevisedPAS 19.



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The effects of the above restatements on the January 1, 2012 pension liability, retainedearnings, net income and other comprehensive loss for the year ended December 31, 2012follow:

As at January 1, 2012

Deferred tax assetRetainedearnings

Othercomprehensive

gainAs previously reported P=2,028,374 P=12,943,468,957 P=–Effect of change on accounting for

employee benefits: Actuarial losses transferred to OCI – (10,438,036) 10,438,036 Deferred tax asset on adjustment to

pension expense 3,131,411 3,131,411 – Deferred tax asset on actuarial losses

transferred to OCI (3,131,411) – (3,131,411)– (7,306,625) 7,306,625

As restated P=2,028,374 P=12,936,162,332 P=7,306,625

As at December 31, 2012

Deferred taxasset

Retainedearnings Net income

Othercomprehensive

lossAs previously reported P=5,121,411 P=16,276,871,894 P=4,375,602,659 P=–Effect of change on accounting for

employee benefits: Actuarial losses transferred to

OCI – – – (3,988,308) Adjustments on: Pension expense – 14,426,344 14,426,344 –

Actuarial losses recognized as part of pension expense (3,131,411) (7,306,625) – –

Deferred tax asset onadjustment to pension expense 4,327,903 (4,327,903) (4,327,903) –

Deferred tax asset on actuarial losses transferred to OCI (1,196,492) – – 1,196,492

– 2,791,816 10,098,441 (2,791,816)As restated P=5,121,411 P=16,279,663,710 P=4,385,701,100 (P=2,791,816)

Change of presentationUpon adoption of the Revised PAS 19, the presentation of the statement of comprehensiveincome was updated to reflect these changes. Net interest cost is now known as interestincome/expense (previously under compensation and benefits under operating expenses).This presentation better reflects the nature of net interest cost since it corresponds to thecompounding effect of the long term net defined benefit liability.


- 6 -

*SGVFS006042*

· PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and FinancialLiabilities (effective for annual periods beginning on or after January 1, 2013)These amendments require an entity to disclose information about rights of set-off and relatedarrangements (such as collateral agreements). The new disclosures are required for allrecognized financial instruments that are set off in accordance with PAS 32, FinancialInstruments: Presentation. These disclosures also apply to recognized financial instrumentsthat 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 requireentities to disclose, in a tabular format unless another format is more appropriate, the followingminimum quantitative information. This is presented separately for financial assets andfinancial liabilities recognized at the end of the reporting period:

a) The gross amounts of those recognized financial assets and recognized financialliabilities;

b) The amounts that are set off in accordance with the criteria in PAS 32 when determiningthe net amounts presented in the consolidated statement of financial position;

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

that are not otherwise included in (b) above, including:i. Amounts related to recognized financial instruments that do not meet some or all of

the offsetting criteria in PAS 32; andii. Amounts related to financial collateral (including cash collateral); and

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

As the Group is not setting off financial instruments in accordance with PAS 32 and does nothave relevant offsetting arrangements, the amendment did not have an impact on the Group.

· PFRS 10, Consolidated Financial Statements (effective for annual periods beginning on orafter January 1, 2013)PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements,which addresses the accounting for consolidated financial statements. It also includes theissues raised in SIC-12, Consolidation - Special Purpose Entities. PFRS 10 establishes asingle control model that applies to all entities including special purpose entities. The changesintroduced by PFRS 10 will require management to exercise significant judgment to determinewhich entities are controlled, and therefore, are required to be consolidated by a parent,compared with the requirements that were in PAS 27. As subsidiaries are wholly owned, theadoption of PFRS 10 had no impact on the consolidated financial statements of the Group.

· PFRS 11, Joint Arrangements (effective for annual periods beginning on or afterJanuary 1, 2013)PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled Entities- Non-Monetary Contributions by Venturers. PFRS 11 removes the option to account forjointly controlled entities using proportionate consolidation. Instead, jointly controlled entitiesthat meet the definition of a joint venture must be accounted for using the equity method. Theadoption of PFRS 11 had no impact on the Group’s financial position and performance as theGroup already accounts its jointly controlled entity using the equity method. The Groupprovides these disclosures in Note 16.



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· PFRS 12, Disclosures of Interests with Other Entities (effective for annual periods beginningon or after January 1, 2013)This standard includes all of the disclosures that were previously in PAS 27 related toconsolidated financial statements, as well as all of the disclosures that were previouslyincluded in PAS 31 and PAS 28, Investment in Associates and Joint Ventures. Thesedisclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates andstructured entities. A number of new disclosures are also required. The adoption of PFRS 12affects disclosures only and had no impact on the Group’s financial position or performance.

· PFRS 13, Fair Value Measurement (effective for annual periods beginning on or afterJanuary 1, 2013)PFRS 13 establishes a single source of guidance under PFRSs for all fair valuemeasurements. PFRS 13 does not change when an entity is required to use fair value, butrather provides guidance on how to measure fair value under PFRS when fair value isrequired or permitted. This standard should be applied prospectively as of the beginning of theannual period in which it is initially applied. Its disclosure requirements need not be applied incomparative information provided for periods before initial application of PFRS 13. Theadoption of PFRS 13 did not have significant impact on the Group's consolidated financialstatements, except for the additional fair value disclosures on AFS financial assets in Note 8and investment properties in Note 14.

· PAS 1, Financial Statement Presentation - Presentation of Items of Other ComprehensiveIncomeThe amendments to PAS 1 change the grouping of items presented in OCI. Items that couldbe reclassified (or “recycled”) to profit or loss at a future point in time (for example, uponderecognition or settlement) would be presented separately from items that will never bereclassified. The amendment affects presentation only and the Group’s financial statementsshowed the grouping in the consolidated statement of comprehensive income.

· Revised PAS 27, Separate Financial Statements (effective for annual periods beginning on orafter January 1, 2013)As a consequence of the issuance of the new PFRS 10 and PFRS 12, what remains ofPAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates inthe separate financial statements. The adoption of the amended PAS 27 did not have asignificant impact on the separate financial statements of the entities in the Group.

· Revised PAS 28, Investment in Associates and Joint Ventures (effective for annual periodsbeginning on or after January 1, 2013)As a consequence of the issuance of the new PFRS 11, and PFRS 12, PAS 28 has beenrenamed PAS 28, Investments in Associates and Joint Ventures, and describes theapplication of the equity method to investments in joint ventures in addition to associates. Therevisions had no significant impact on the consolidated financial statements of the Group.

· Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine(effective for annual periods beginning on or after January 1, 2013)This interpretation applies to waste removal (stripping) costs incurred in surface miningactivity, during the production phase of the mine. The interpretation addresses the accountingfor the benefit from the stripping activity. This new interpretation is not relevant to the Group.


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Improvements to PFRS 2012The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessaryamendments to PFRSs. The Group adopted these amendments for the current year. Except asotherwise indicated, the following new and amended PFRS and Philippine Interpretations did nothave significant impact on the consolidated financial statements of the Group:

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

· PAS 1, Presentation of Financial Statements - Clarification of the requirements forcomparative informationThe amendments clarify the requirements for comparative information that are disclosedvoluntarily and those that are mandatory due to retrospective application of an accountingpolicy, or retrospective restatement or reclassification of items in the consolidated financialstatements. An entity must include comparative information in the related notes to thefinancial statements when it voluntarily provides comparative information beyond the minimumrequired comparative period. The additional comparative period does not need to contain acomplete set of consolidated financial statements. On the other hand, supporting notes for thethird balance sheet (mandatory when there is a retrospective application of an accountingpolicy, or retrospective restatement or reclassification of items in the financial statements) arenot required. An additional consolidated statement of financial position as at January 1, 2012is presented due to retrospective application of accounting policies as a result of the adoptionof PAS 19 Revised.

· PAS 16, Property, Plant and Equipment - Classification of servicing equipmentThe amendment clarifies that spare parts, stand-by equipment and servicing equipmentshould be recognized as property, plant and equipment when they meet the definition ofproperty, plant and equipment and should be recognized as inventory if otherwise. The Grouphas no spare parts, stand-by equipment and servicing equipment.

· PAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equityinstrumentsThe amendment clarifies that income taxes relating to distributions to equity holders and totransaction costs of an equity transaction are accounted for in accordance with PAS 12,Income Taxes. The adoption did not impact the consolidated financial statements.

· PAS 34, Interim Financial Reporting - Interim financial reporting and segment information fortotal assets and liabilitiesThe amendment clarifies that the total assets and liabilities for a particular reportable segmentneed to be disclosed only when the amounts are regularly provided to the chief operatingdecision maker and there has been a material change from the amount disclosed in theentity’s previous annual consolidated financial statements for that reportable segment. Theadoption did not have material impact in the consolidated financial statements.



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Future Changes in Accounting PoliciesThe Group has not applied the following new and amended PFRS and Philippine Interpretationswhich are not yet effective for the year ended December 31, 2013. Except as otherwise indicated,the following new and amended PFRS and Philippine Interpretations will not have significantimpact to the consolidated financial statements of the Group:

Effective 2014

· PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets(Amendments) (effective for annual periods beginning on or after January 1, 2014)These amendments remove the unintended consequences of PFRS 13 on the disclosuresrequired under PAS 36. In addition, these amendments require disclosure of the recoverableamounts for the assets or cash-generating units (CGUs) for which impairment loss has beenrecognized or reversed during the period. These amendments are effective retrospectively forannual periods beginning on or after January 1, 2014 with earlier application permitted,provided PFRS 13 is also applied. The amendments will affect disclosures only and will haveno impact on the Group’s financial position or performance.

· Philippine Interpretation IFRIC 21, Levies (effective for annual periods beginning on or afterJanuary 1, 2014)IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggerspayment, as identified by the relevant legislation, occurs. For a levy that is triggered uponreaching a minimum threshold, the interpretation clarifies that no liability should be anticipatedbefore the specified minimum threshold is reached. The Group does not expect that IFRIC 21will have material financial impact in the consolidated financial statements.

· Amendments to PFRS 10, PFRS 12 and PAS 27, Investment Entities(effective for annualperiods beginning on or after January 1, 2014)These amendments provide an exception to the consolidation requirement for entities thatmeet the definition of an investment entity under PFRS 10. The exception to consolidationrequires investment entities to account for subsidiaries at fair value through profit or loss. TheGroup does not expect that these amendments will have material financial impact in theconsolidated financial statements.

· PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives andContinuation of Hedge Accounting (Amendments)(effective for annual periods beginning on orafter January 1, 2014)These amendments provide relief from discontinuing hedge accounting when novation of aderivative designated as a hedging instrument meets certain criteria. The Group does notexpect that these amendments will have material financial impact in future financialstatements.

· PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and FinancialLiabilities (effective for annual periods beginning on or after January 1, 2014)The amendments clarify the meaning of “currently has a legally enforceable right to set-off”and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such ascentral clearing house systems) which apply gross settlement mechanisms that are notsimultaneous. The amendments will affect presentation only and will have no impact on theGroup’s financial position or performance.


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Effective 2015

· PFRS 9, Financial Instruments: Classification and Measurement (effective for annual periodsbeginning on or after January 1, 2015)PFRS 9, as issued, reflects the first phase on the replacement of PAS 39 and applies to theclassification and measurement of financial assets and liabilities as defined in PAS 39,Financial Instruments: Recognition and Measurement. Work on impairment of financialinstruments and hedge accounting is still ongoing, with a view to replacing PAS 39 in itsentirety. PFRS 9 requires all financial assets to be measured at fair value at initial recognition.A debt financial asset may, if the fair value option (FVO) is not invoked, be subsequentlymeasured at amortized cost if it is held within a business model that has the objective to holdthe assets to collect the contractual cash flows and its contractual terms give rise, on specifieddates, to cash flows that are solely payments of principal and interest on the principaloutstanding. All other debt instruments are subsequently measured at fair value through profitor loss. All equity financial assets are measured at fair value either through othercomprehensive income (OCI) or profit or loss. Equity financial assets held for trading must bemeasured at fair value through profit or loss. For FVO liabilities, the amount of change in thefair value of a liability that is attributable to changes in credit risk must be presented in OCI.The remainder of the change in fair value is presented in profit or loss, unless presentation ofthe fair value change in respect of the liability’s credit risk in OCI would create or enlarge anaccounting mismatch in profit or loss. All other PAS 39 classification and measurementrequirements for financial liabilities have been carried forward into PFRS 9, including theembedded derivative separation rules and the criteria for using the FVO.

The Group will assess the impact of PFRS 9 in its consolidated financial statements uponcompletion of all phases of PFRS 9.

· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real EstateThis Philippine Interpretation, which may be early applied, covers accounting for revenue andassociated expenses by entities that undertake the construction of real estate directly orthrough subcontractors. This Philippine Interpretation requires that revenue on construction ofreal estate be recognized only upon completion, except when such contract qualifies asconstruction contract to be accounted for under PAS 11, Construction Contracts, or involvesrendering 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 risksand reward of ownership are transferred to the buyer on a continuous basis will also beaccounted for based on stage of completion. The SEC and the Financial Reporting StandardsCouncil (FRSC) have deferred the effectivity of this interpretation until the final Revenuestandard is issued by the International Accounting Standards Board (IASB) and an evaluationof the requirements of the final Revenue standard against the practices of the Philippine realestate industry is completed.

The adoption of this interpretation may significantly affect the determination of the Group’srevenue from real estate sales and the corresponding costs, and the related trade receivables,deferred tax liabilities and retained earnings accounts. The Group is in the process ofquantifying the impact of adoption of this interpretation.



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4. Summary of Significant Accounting Policies

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash with original maturities of three(3) months or less from dates of placement and that are subject to an insignificant risk of changesin value.

Short-term and Long-term Cash InvestmentsShort-term cash investments consist of money market placements made for varying periods ofmore than three (3) months and up to nine (9) months while long-term cash investments consist ofmoney market placements made for varying periods of more than one (1) year. Theseinvestments earn interest at the respective short-term and long-term investment rates.

Financial InstrumentsDate of recognitionThe Group recognizes a financial asset or a financial liability in the consolidated statement offinancial position when it becomes a party to the contractual provisions of the instrument.Purchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized on the trade date,which is the date when the Group commits to purchase or sell the asset.

Initial recognition of financial instrumentsAll financial assets and financial liabilities are initially recognized at fair value. Except for financialassets and liabilities at fair value through profit or loss (FVPL), the initial measurement of financialassets and liabilities include transaction costs. The Group classifies its financial assets in thefollowing categories: financial assets at FVPL, held-to-maturity (HTM) investments, AFS financialassets, and loans and receivables.

The Group classifies its financial liabilities as financial liabilities at FVPL or other financialliabilities.

The classification depends on the purpose for which the investments were acquired and whetherthese are quoted in an active market. The financial assets of the Group are of the nature of loansand receivable, AFS financial assets and HTM financial assets, while its financial liabilities are ofthe nature of other financial liabilities. Management determines the classification at initialrecognition and re-evaluates such designation, where allowed and appropriate, at every reportingdate.

Financial instruments are classified as liability or equity in accordance with the substance of thecontractual arrangement. Interest, dividends, gains and losses relating to a financial instrument ora component that is a financial liability, are reported as expense or income. Distributions toholders of financial instruments classified as equity are charged directly to equity, net of anyrelated income tax benefits.

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


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

“Day 1”differenceWhere the transaction price in a non-active market is different from the fair value from otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Group recognizes the differencebetween the transaction price and fair value (a “Day 1” difference) in profit or loss under “Interestincome” and “Interest and other financing charges” accounts unless it qualifies for recognition assome other type of asset or liability. In cases where fair value is determined using data which isnot observable, the difference between the transaction price and model value is only recognized inprofit or loss when the inputs become observable or when the instrument is derecognized. Foreach transaction, the Group determines the appropriate method of recognizing the “Day 1”difference amount.

Loans and receivablesLoans and receivables are nonderivative financial assets with fixed or determinable payments thatare not quoted in an active market. They are not entered into with the intention of immediate orshort-term resale and are not classified as financial assets held-for-trading, designated as AFS oras financial assets at FVPL. Receivables are recognized initially at fair value, which normallypertains to the billable amount. After initial measurement, loans and receivables are subsequentlymeasured at cost or at amortized cost using the effective interest method, less allowance forimpairment losses. Amortized cost is calculated by taking into account any discount or premiumon acquisition and fees that are an integral part of the effective interest rate (EIR). Theamortization, if any, is included in profit or loss. The losses arising from impairment of receivablesare recognized in profit or loss. These financial assets are included in current assets if maturity iswithin 12 months from the reporting date. Otherwise, these are classified as noncurrent assets.

This accounting policy applies primarily to the Group’s cash and cash equivalents, short-term cashinvestments, long-term cash investments and receivables except for receivable from contractorsand receivable from brokers.

HTM investmentsHTM investments are quoted non-derivative financial assets with fixed or determinable paymentsand fixed maturities for which management has the positive intention and ability to hold tomaturity. Where the Group sells or reclassifies other than an insignificant amount of HTMinvestments, the entire category would be tainted and reclassified at fair value as AFS financialassets. After initial measurement, these financial assets are subsequently measured at amortizedcost using the effective interest method, less allowance for impairment. Amortized cost iscalculated by taking into account any discount or premium on acquisition and fees that are anintegral part of the EIR. The amortization is included as part of interest income in the statement ofcomprehensive income. Gains and losses are recognized in profit or loss in the statement ofcomprehensive income when the HTM investments are derecognized. Any impairment losses arecharged to current operations.

As of December 31, 2013, the Group has investments in HTM.



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AFS financial assetsAFS financial assets are nonderivative financial assets that are designated as such or do notqualify to be classified or designated as financial assets at FVPL, HTM investments or loans andreceivables. These are purchased and held indefinitely, and may be sold in response to liquidityrequirements or changes in market conditions.

After initial measurement, AFS financial assets are measured at fair value. The unrealized gainsand losses arising from the fair valuation of AFS financial assets are excluded from reportedearnings and are reported in OCI.

When the investment is disposed of, the cumulative gain or loss previously recognized in OCI isrecognized as gain or loss on disposal in profit or loss. Where the Group holds more than oneinvestment in the same security these are deemed to be disposed of on a first-in first-out basis.Interest earned on holding AFS financial assets are reported as interest income using the EIR.Dividends earned on holding AFS financial assets are recognized in profit or loss as part ofmiscellaneous income when the right to receive payment has been established. The lossesarising from impairment of such investments are recognized as provisions for impairment losses inprofit or loss.

When the fair value of AFS equity financial assets cannot be measured reliably because of lack ofreliable estimates of future cash flows and discount rates necessary to calculate the fair value ofunquoted equity instruments, these investments are carried at cost, less any impairment losses.

As of December 31, 2013 and 2012, AFS financial assets comprise of unquoted and quoted equitysecurities.

Other financial liabilitiesOther financial liabilities are initially recognized at the fair value of the consideration received lessdirectly attributable transaction costs.

After initial recognition, other financial liabilities are subsequently measured at amortized costusing the effective interest method. Amortized cost is calculated by taking into account anydiscount or premium on the issue and fees that are an integral part of the EIR. Gains and lossesare recognized in profit or loss when the liabilities are derecognized (redemption is a form ofderecognition), as well as through the amortization process. Any effects of restatement of foreigncurrency-denominated liabilities are recognized in profit or loss.

The financial liabilities measured at cost are accounts and other payables and payable to relatedparties and other liabilities. The financial liabilities measured at amortized cost are bank loans,loans payable, liabilities for purchased land, long-term notes and notes payable.

Derecognition of Financial Assets and Financial LiabilitiesFinancial assetA financial asset (or, where applicable, a part of a group of financial assets) is derecognizedwhere: (a) the rights to receive cash flows from the assets have expired; (b) the Group retains theright to receive cash flows from the asset, but has assumed an obligation to pay them in fullwithout material delay to a third-party under a “pass-through” arrangement; or (c) the Group hastransferred its right to receive cash flows from the asset and either: (i) has transferred substantiallyall the risks and rewards of the asset, or (ii) has neither transferred nor retained the risks andrewards of the asset but has transferred control of the asset.


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Where the Group has transferred its rights to receive cash flows from an asset or has entered intoa pass-through arrangement, and has neither transferred nor retained substantially all the risksand rewards of the asset nor transferred control of the asset, the asset is recognized to the extentof the Group’s continuing involvement in the asset. Continuing involvement that takes the form ofa guarantee over the transferred asset is measured at the lower of the original carrying amount ofthe asset and the maximum amount of consideration that the Group could be required to repay.

Financial liabilityA financial liability is derecognized when the obligation under the liability is discharged orcancelled or has expired. Where an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liabilityand the recognition of a new liability, and the difference in the respective carrying amounts isrecognized in profit or loss.

Impairment of Financial AssetsThe Group assesses at each reporting date whether there is objective evidence that a financialasset or group of financial assets is impaired. A financial asset or a group of financial assets isdeemed to be impaired if, and only if, there is objective evidence of impairment as a result of oneor more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’)and that loss event (or events) has an impact on the estimated future cash flows of the financialasset or the group of financial assets that can be reliably estimated. Evidence of impairment mayinclude indications that the borrower or a group of borrowers is experiencing significant financialdifficulty, default or delinquency in interest or principal payments, and where observable dataindicate that there is measurable decrease in the estimated future cash flows, such as changes inarrears or economic conditions that correlate with defaults.

Financial assets carried at amortized costThe Group first assesses whether an objective evidence of impairment exists individually forfinancial assets that are individually significant. If there is objective evidence that an impairmentloss on a financial asset carried at amortized cost (i.e., loans and receivables or HTMinvestments) has been incurred, the amount of the loss is measured as the difference between theassets’ carrying amount and the present value of the estimated future cash flows discounted at theassets original EIR (excluding future credit losses that have not been incurred). If it is determinedthat no objective evidence of impairment exists for an individually assessed financial asset, theasset, together with the other assets that are not individually significant and were thus notindividually assessed for impairment, is included in a group of financial assets with similar creditrisk 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 orcontinues to be recognized are not included in a collective assessment of impairment.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basisof credit risk characteristics such as selling price of the lots and residential houses, past-duestatus and term.

Future cash flows in a group of financial assets that are collectively evaluated for impairment areestimated on the basis of historical loss experience for assets with credit risk characteristicssimilar to those in the group. Historical loss experience is adjusted on the basis of currentobservable data to reflect the effects of current conditions that did not affect the period on whichthe historical loss experience is based and to remove the effects of conditions in the historicalperiod that do not exist currently. The methodology and assumptions used for estimating futurecash flows are reviewed regularly by the Group to reduce any differences between loss estimates



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and actual loss experience.

The carrying amount of the asset is reduced through the use of an allowance account and theamount of loss is charged to profit or loss. Financial assets carried at amortized costs, togetherwith the associated allowance accounts, are written off when there is no realistic prospect of futurerecovery and all collateral has been realized. If, in a subsequent year, the amount of theestimated impairment loss decreases because of an event occurring after the impairment wasrecognized, the previously recognized impairment loss is reversed. Any subsequent reversal ofan impairment loss is recognized in profit or loss, to the extent that the carrying value of the assetdoes not exceed its amortized cost at the reversal date.

AFS financial assets carried at fair valueIn case of equity investments classified as AFS financial assets, impairment indicators wouldinclude a significant or prolonged decline in the fair value of the investments below theircorresponding cost. Where there is evidence of impairment, the cumulative loss - measured asthe difference between the acquisition cost and the current fair value, less any impairment loss onthat financial asset previously recognized in OCI is removed from OCI and recognized in profit orloss. Reversals of impairment losses in respect of equity instruments classified as AFS financialassets are not recognized in the profit or loss. Increases in fair value after impairment arerecognized directly in OCI.

AFS financial assets carried at costIf there is an objective evidence that an impairment loss on an unquoted equity instrument that isnot carried at fair value because its fair value cannot be reliably measured, the amount of the lossis measured as the difference between the carrying amount and the present value of estimatedfuture cash flows discounted at the current market rate of return for a similar financial asset.

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

Real Estate InventoriesReal estate inventories consist of subdivision land, residential houses and lots and condominiumunits for sale and development. These are properties acquired or being constructed for sale in theordinary course of business rather than to be held for rental or capital appreciation. These areheld as inventory and are measured at the lower of cost and net realizable value (NRV).

Cost includes:· Acquisition cost of subdivision land· Amounts paid to contractors for construction and development of subdivision land and

residential and condominium units· Capitalized borrowing costs, planning and design costs, cost of site preparation, professional

fees for legal services, property transfer taxes, construction overheads and other relatedcosts.

Nonrefundable commissions paid to sales or marketing agents on the sale of real estate units areexpensed when paid.


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NRV is the estimated selling price in the ordinary course of the business, based on market pricesat the reporting date, less costs to complete and the estimated costs of sale. The carryingamount of inventories is reduced through the use of allowance account and the amount of loss ischarged to profit or loss.

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

Model house accessoriesModel house accessories are measured at the lower of cost and NRV.

Land and ImprovementsLand and improvements consists of properties for future developments and are carried at thelower of cost or NRV. Costs include cost incurred for development and improvements of theproperties. Upon start of development, the related cost of the land is transferred to real estateinventories.

Prepaid ExpensesPrepaid expenses are carried at cost less the amortized portion. These typically compriseprepayments for marketing fees, taxes and licenses, rentals and insurance.

Creditable Withholding TaxThis pertains to the tax withheld at source by the Group’s customer and is creditable against theincome tax liability of the Group.

Construction materialsConstruction materials are valued at the lower of cost or NRV. Cost is determined using themoving average method. NRV is the replacement cost.

Value-Added Tax (VAT)The input value-added tax pertains to the 12% indirect tax paid by the Group in the course of theGroup’s trade or business on local purchase of goods or services.

Output VAT pertains to the 12% tax due on the local sale of goods or services by the Group.

If at the end of any taxable month, the output VAT exceeds the input VAT, the outstandingbalance is included under “Accounts and other payables” account. If the input VAT exceeds theoutput VAT, the excess shall be carried over to the succeeding months and included under “Othercurrent asset” account.

Investment in an AssociateThe investment in an associate is accounted for under the equity method of accounting. Anassociate is an entity in which the Group has significant influence and which is neither a subsidiarynor a joint venture.

An investment in an associate is accounted for using the equity method from the day it becomesan associate. On acquisition of investment, the excess of the cost of investment over theinvestor’s share in the net fair value of the investee’s identifiable assets, liabilities and contingentliabilities is included in the carrying amount of the investment and not amortized. Any excess ofthe investor’s share of the net fair value of the associate’s identifiable assets, liabilities andcontingent liabilities over the cost of the investment is excluded from the carrying amount of theinvestment, and is instead included as income in the determination of the share in the earnings ofthe investees.



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Under the equity method, the investment in an associate is carried in the consolidated statementof financial position at cost plus post-acquisition changes in the Group’s share in the net assets ofthe associate, less any impairment in values. The profit or loss reflects the share of the results ofthe operations of the investee companies reflected as “Equity in net income (loss) of an associate”under “Others” in the consolidated statement of comprehensive income. The Group’s share ofpost-acquisition movements in the investee’s equity reserves is recognized directly in equity.Profits and losses resulting from transactions between the Group and the investee company areeliminated to the extent of the interest in the investee company and for unrealized losses to theextent that there is no evidence of impairment of the asset transferred. Dividends received aretreated as a reduction of the carrying value of the investment.

The reporting date of the investee company and the Group is identical and its accounting policiesconform to those used by the Group for like transactions and events in similar circumstances.

Upon loss of significant influence over the associate, the Group measures and recognizes anyretained investment at its fair value. Any difference between the carrying amount of the associateupon loss of significant influence and the fair value of the retained investment and proceeds fromdisposal is recognized in profit or loss.

The Group has a reciprocal holding in Starmalls, Inc. (Starmalls) (formerly Polar PropertyHoldings, Inc.). The Group takes up its share on its associate’s profit excluding the equity incomearising on the reciprocal holding. An adjustment is also made to reduce the Group’s equitybalance and its investment in an associate by its effective percentage of ownership on its ownshares. In August 2012, the Group disposed of its ownership in Starmalls (Note 13).

Investment PropertiesInvestment properties comprise completed property and property under construction orre-development that are held to earn rentals or for capital appreciation or both. Investmentproperties, except for land, are carried at cost less accumulated depreciation and amortization andany impairment in value. Land is carried at cost less any impairment in value.

Expenditures incurred after the investment property has been put in operation, such as repairsand maintenance costs, are normally charged against income in the period in which the costs areincurred.

Construction-in-progress (CIP) is stated at cost. This includes cost of construction and otherdirect costs. CIP is not depreciated until such time as the relevant assets are completed and putinto operational use. Construction-in-progress are carried at cost and transferred to the relatedinvestment property account when the construction and related activities to prepare the propertyfor its intended use are complete, and the property is ready for occupation.

Depreciation and amortization are computed using the straight-line method over the estimateduseful lives (EUL) of the assets, regardless of utilization. The EUL and the depreciation andamortization method are reviewed periodically to ensure that the period and method ofdepreciation and amortization are consistent with the expected pattern of economic benefits fromitems of investment properties.

The EUL of buildings and building improvements is 20 years.


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Investment properties are derecognized when either they have been disposed of or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal. Any gain or loss on the retirement or disposal of an investmentproperty is recognized in profit or loss in the year of retirement or disposal.

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

Property and EquipmentProperty and equipment are carried at cost less accumulated depreciation and amortization andany impairment in value.

The initial cost of property and equipment consists of its purchase price, including import duties,taxes and any directly attributable costs of bringing the asset to its working condition and locationfor its intended use. Expenditures incurred after the property and equipment have been put intooperation, such as repairs and maintenance are normally charged against operations in the periodin which the costs are incurred.

Depreciation and amortization of property and equipment commences once the property andequipment are available for use and computed using the straight-line basis over the EUL ofproperty and equipment as follows:

YearsBuilding and building improvements 20Transportation equipment 2 to 5Office furniture, fixtures and equipment 2 to 5Construction equipment 2 to 5Other fixed assets 1 to 5

Building improvements are amortized on a straight-line basis over the term of the lease or the EULof the asset, whichever is shorter.

The useful lives and depreciation and amortization method are reviewed annually to ensure thatthe period and method of depreciation and amortization are consistent with the expected patternof economic benefits from items of property and equipment.

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

Fully depreciated and amortized property and equipment are retained in the accounts until theyare no longer in use. No further depreciation and amortization is charged against currentoperations.



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Investments in Project Development CostsInvestments in project development costs pertain to costs incurred on various on-going projectsunder the land development agreements (LDAs) entered into by the Group with individuals,corporate entities and related parties for the development of real estate projects.

Investment in a Joint VentureJoint venture involves the establishment of a corporation, partnership or other entity in which theventure has an interest. A jointly controlled entity controls the assets of the joint venture, incursliabilities and expenses and earns income. Each venture is entitled to a share of the results of thejointly controlled entity. The Group accounts for its share in the jointly controlled entity under theequity method.

Systems Development CostsCosts associated with developing or maintaining computer software programs are recognized asexpense as incurred. Costs that are directly associated with identifiable and unique softwarecontrolled by the Group and will generate economic benefits exceeding costs beyond one year,are recognized as intangible assets to be measured at cost less accumulated amortization andprovision for impairment losses, if any.

System development costs recognized as assets are amortized using the straight-line methodover their useful lives, but not exceeding a period of three years. Where an indication ofimpairment exists, the carrying amount of computer system development costs is assessed andwritten down immediately to its recoverable amount.

Impairment of Nonfinancial AssetsThis accounting policy relates to property and equipment, investment properties, investment in anassociate, investments in project development costs and a Joint Venture, model houseaccessories and systems development costs.

The Group assesses as at reporting date whether there is an indication that nonfinancial assetsmay be impaired. If any such indication exists, or when annual impairment testing for an asset isrequired, the Group makes an estimate of the asset’s recoverable amount. An asset’srecoverable amount is calculated as the higher of the asset’s or cash-generating unit’s fair valueless costs to sell and its value in use and is determined for an individual asset, unless the assetdoes not generate cash inflows that are largely independent of those assets or groups of assets.Where the carrying amount of an asset exceeds its recoverable amount, the asset is consideredimpaired and is written down to its recoverable amount. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using a pre-tax discount rate that reflectscurrent market assessment of the time value of money and the risks specific to the asset.Impairment losses of continuing operations are recognized in profit or loss in those expensecategories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is an indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indicationexists, the recoverable amount is estimated. A previously recognized impairment loss is reversedonly if there has been a change in the estimates used to determine the asset’s recoverableamount since the last impairment loss was recognized. If that is the case, the carrying amount ofthe asset is increased to its recoverable amount. That increased amount cannot exceed thecarrying amount that would have been determined, net of depreciation and amortization, had noimpairment loss been recognized for the asset in prior years. Such reversal is recognized in profitor loss unless the asset is carried at revalued amount, in which case the reversal is treated asrevaluation increase in OCI. After such reversal, the depreciation and amortization charge is


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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.

The following criteria are also applied in assessing impairment of specific assets:

Investment in an associateAfter application of the equity method, the Group determines whether it is necessary to recognizeany additional impairment loss with respect to the Group’s net investment in the investeecompanies. The Group determines at each reporting date whether there is any objective evidencethat the investment in an associate is impaired. If this is the case, the Group calculates theamount of impairment as being the difference between the recoverable amount and the carryingvalue of the investee company and recognizes the difference in profit or loss.

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

Retained earnings represent accumulated earnings of the Group less dividends declared. Itincludes the accumulated equity in undistributed earnings of consolidated subsidiaries which arenot available for dividends until declared by the subsidiaries (Note 23).

Own equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issueor cancellation of the Group’s own equity instruments. Any difference between the carryingamount and the consideration, if reissued, is recognized in additional paid-in capital. Voting rightsrelated to treasury shares are nullified for the Group and no dividends are allocated to themrespectively. When the shares are retired, the capital stock account is reduced by its par valueand the excess of cost over par value upon retirement is debited to additional paid-in capital to theextent of the specific or average additional paid-in capital when the shares were issued and toretained earnings for the remaining balance.

The retained earnings account is restricted to payments of dividends to the extent of the cost oftreasury shares (Note 23).

Revenue and Cost RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured.

Real estate revenueFor real estate sales, the Group assesses whether it is probable that the economic benefits willflow to the Group when the sales prices are collectible. Collectability of the sales price isdemonstrated by the buyer’s commitment to pay, which in turn is supported by substantial initialand continuing investments that give the buyer a stake in the property sufficient that the risk ofloss through default motivates the buyer to honor its obligation to the seller. Collectability is alsoassessed by considering factors such as the credit standing of the buyer, age and location of theproperty.



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Revenue from sales of completed real estate projects is accounted for using the full accrualmethod. In accordance with Philippine Interpretations Committee, Q&A 2006-01, the percentage-of-completion (POC) method is used to recognize income from sales of projects where the Grouphas material obligations under the sales contract to complete the project after the property is sold,the equitable interest has been transferred to the buyer, construction is beyond preliminary stage(i.e., engineering, design work, construction contracts execution, site clearance and preparation,excavation and the building foundation are finished, and the costs incurred or to be incurred canbe measured reliably). Under this method, revenue is recognized as the related obligations arefulfilled, measured principally on the basis of the estimated completion of a physical proportion ofthe contract work.

Any excess of collections over the recognized receivables are included in the “Customers’advances and deposits” account in the liabilities section of the consolidated statement of financialposition.

When a sale of real estate does not meet the requirements for revenue recognition, the sale isaccounted for under the deposit method. Under this method, revenue is not recognized, and thereceivable from the buyer is not recorded. The real estate inventories continue to be reported onthe consolidated statement of financial position as “Real estate inventories” and the related liabilityas deposits under “Customers’ advances and deposits”.

Cost of real estate sales is recognized consistent with the revenue recognition method applied.Cost of subdivision land and condominium units sold before the completion of the development isdetermined on the basis of the acquisition cost of the land plus its full development costs, whichinclude estimated costs for future development works, as determined by the Group’s in-housetechnical staff.

Income from Forfeited Reservations and CollectionsIncome from forfeited reservation and collections is recognized when the deposits from potentialbuyers are deemed nonrefundable due to prescription of the period for entering into a contractedsale. Such income is also recognized, subject to the provisions of Republic Act 6552, RealtyInstallment Buyer Act, upon prescription of the period for the payment of required amortizationsfrom defaulting buyers.

Rental incomeRental income from investment property is accounted for on a straight-line basis over the leaseterm.

Interest incomeInterest is recognized using the effective interest method, i.e, the rate, that exactly discountsestimated future cash receipts through the expected life of the financial instrument to the netcarrying amount of the financial asset.

Unearned discount is recognized as income over the terms of the financial assets at amortizedcost (i.e., loans and receivables or HTM investments) using the effective interest method and isshown as deduction for the financial assets.

Dividend and miscellaneous incomeDividend and miscellaneous income are recognized when the Group’s right to receive payment isestablished.


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Pension CostDefined benefit planThe net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the reporting period reduced by the fair value of plan assets, adjusted forany effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is thepresent value of any economic benefits available in the form of refunds from the plan or reductionsin future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit (PUC) method.

Defined benefit costs comprise the following:(a) service cost;(b) net interest on the net defined benefit liability or asset; and(c) remeasurements of net defined benefit liability or asset.

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on high quality corporate bonds to the net defined benefit liabilityor asset. Net interest on the net defined benefit liability or asset is recognized as expense orincome in profit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in OCI in the period in which they arise. Remeasurements are not reclassified toprofit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Group, nor can they be paid directlyto the Group. Fair value of plan assets is based on market price information. When no marketprice is available, the fair value of plan assets is estimated by discounting expected future cashflows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expectedperiod until the settlement of the related obligations).

The Group’s right to be reimbursed of some or all of the expenditure required to settle a definedbenefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Income TaxCurrent taxCurrent tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted by the reporting date.



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Deferred taxDeferred tax is provided using the liability method on temporary differences, with certainexceptions, at the reporting date between the tax bases of assets and liabilities and their carryingamounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, with certainexceptions. Deferred tax liabilities shall be recognized for all taxable temporary differencesassociated with investments in subsidiaries, associates and interests in joint ventures when thetiming of reversal of the temporary differences can be controlled and it is probable that thetemporary differences will not reverse in foreseeable future. Otherwise, no deferred tax liability isset up.Deferred tax assets are recognized for all deductible temporary differences, carryforward benefitof unused tax credits from excess of minimum corporate income tax (MCIT) over the regularcorporate income tax and unused net operating loss carryover (NOLCO), to the extent that it isprobable that taxable income will be available against which the deductible temporary differencesand carryforward benefits of unused tax credits from MCIT and NOLCO can be utilized.

Deferred tax assets shall be recognized for deductible temporary differences associated withinvestments in subsidiaries, associates and interests in joint ventures only to the extent that it isprobable that the temporary differences will reverse in the foreseeable future and taxable profit willbe available against which the temporary differences can be utilized.

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

Deferred tax assets and liabilities are measured at the tax rate that is expected to apply in theperiod when the asset is realized or the liability is settled, based on tax rates and tax laws thathave been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or lossin the consolidated statement of comprehensive income. Deferred tax items recognized incorrelation to the underlying transaction either in other comprehensive income or directly in equity.

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

CommissionsThe Group recognizes commissions when services are rendered by the broker. The commissionexpense is accrued upon receipt of down payment from the buyer comprising a substantial portionof the contract price and the capacity to pay and credit worthiness of buyers have beenreasonably established for sales under the deferred cash payment arrangement.

Borrowing CostsBorrowing costs directly attributable to the acquisition or construction of an asset that necessarilytakes a substantial period of time to get ready for its intended use or sale are capitalized as part ofthe cost of the respective assets (included in “Real estate inventories” account in the consolidatedstatement of financial position). All other borrowing costs are expensed in the period in which


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they occur. Borrowing costs consist of interest and other costs that an entity incurs in connectionwith the borrowing of funds.

The interest capitalized is calculated using the Group’s weighted average cost of borrowings afteradjusting for borrowings associated with specific developments. Where borrowings areassociated with specific developments, the amounts capitalized is the gross interest incurred onthose borrowings less any investment income arising on their temporary investment.

Interest is capitalized from the commencement of the development work until the date of practicalcompletion. The capitalization of finance costs is suspended if there are prolonged periods whendevelopment activity is interrupted. Interest is also capitalized on the purchase cost of a site ofproperty acquired specifically for redevelopment but only where activities necessary to prepare theasset for redevelopment are in progress.

Operating ExpensesOperating expenses constitute costs of administering the business. These are recognized asexpenses when incurred.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance ofthe arrangement at inception date, and requires an assessment of whether the fulfillment of thearrangement is dependent on the use of a specific asset or assets and the arrangement conveys aright to use the asset. A reassessment is made after inception of the lease only if one of thefollowing applies:

(a) there is a change in contractual terms, other than a renewal or extension of the arrangement;a renewal option is exercised or extension granted, unless that term of the renewal orextension was initially included in the lease term;

(b) there is a change in the determination of whether fulfillment is dependent on a specified asset;or

(c) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date whenthe change in circumstances gave rise to the reassessment for any of the scenarios above, and atthe date of renewal or extension period for the second scenario.

Group as a lesseeLeases where the lessor retains substantially all the risks and benefits of ownership of the assetare classified as operating leases. Operating lease payments are recognized as an expense inprofit or loss in the statement of comprehensive income on a straight-line basis over the leaseterm. Indirect costs incurred in negotiating an operating lease are added to the carrying value ofthe leased asset and recognized over the lease term on the same bases as the lease income.Minimum lease payments are recognized on a straight-line basis while the variable rent isrecognized as an expense based on the terms of the lease contract.

Group as a lessorLeases where the lessor does not transfer substantially all the risks and benefits of ownership ofthe assets are classified as operating leases. Initial direct costs incurred in negotiating operatingleases are added to the carrying amount of the leased asset and recognized over the lease termon the same basis as the rental income. Contingent rents are recognized as revenue in the periodin which they are earned.



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Foreign Currency TranslationEach entity in the Group determines its own functional currency and items included in theconsolidated financial statements of each entity are measured using that functional currency.Transactions in foreign currencies are initially recorded in the functional currency rate ruling at thedate of the transaction. Monetary assets and liabilities denominated in foreign currencies areretranslated at the functional currency rate of exchange ruling at the reporting date. Exchangegains or losses arising from foreign exchange transactions are credited to or charged againstoperations for the period.

The functional currency of C&P International Limited and VII is the US$ Dollar. As of reportingdate, the assets and liabilities of foreign subsidiaries, with functional currencies other than thefunctional currency of the Parent Company, are translated into the presentation currency of theGroup using the closing foreign exchange rate prevailing at the reporting date, and their respectiveincome and expenses at the weighted average rates for the year. The exchange differencesarising on the translation are recognized in OCI. On disposal of a foreign operation, thecomponent of OCI relating to that particular foreign operation shall be recognized in profit or lossin the consolidated statement of comprehensive income.

Basic and Diluted Earnings Per Share (EPS)Basic EPS is computed by dividing net income for the year attributable to common stockholdersby the weighted average number of common shares issued and outstanding during the yearadjusted for any subsequent stock dividends declared. Diluted EPS is computed by dividing netincome for the year by the weighted average number of common shares issued and outstandingduring the year after giving effect to assumed conversion of potential common shares. Thecalculation of diluted EPS does not assume conversion, exercise, or other issue of potentialcommon shares that would have an antidilutive effect on earnings per share.

As of December 31, 2013 and 2012, the Group has no potential dilutive common shares (Note31).

Segment ReportingThe Group’s operating businesses are organized and managed separately according to the natureof the products and services provided, with each segment representing a strategic business unitthat offers different products and serves different markets. Financial information on operatingsegments is presented in Note 6 to the consolidated financial statements.

ProvisionsProvisions are recognized when the Group has a present legal or constructive obligation as aresult of past events, it is more likely than not that an outflow of resources will be required to settlethe obligation, and the amount can be reliably estimated. Provisions are not recognized for futureoperating losses.

Provisions are measured at the present value of the expenditures expected to be required to settlethe obligation using a pre-tax rate that reflects the current market assessment of the time value ofmoney and the risk specific to the obligation. Where discounting is used, the increase in theprovision due to the passage of time is recognized as interest expense. Where the Group expectssome or all of a provision to be reimbursed, the reimbursement is recognized only when thereimbursement is virtually certain. The expense relating to any provision is presented in statementof comprehensive income net of any reimbursement.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements. These aredisclosed unless the possibility of an outflow of resources embodying economic benefits is


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remote. Contingent assets are not recognized in the consolidated financial statements butdisclosed when an inflow of economic benefits is probable.

Events After the Reporting DatePost year-end events that provide additional information about the Group’s position at thereporting date (adjusting events) are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are disclosed in the consolidated financial statementswhen material.

5. Significant Accounting Judgments and Estimates

The preparation of accompanying consolidated financial statements in compliance with PFRSrequires management to make estimates and assumptions that affect the amounts reported in theconsolidated financial statements and accompanying notes. The estimates and assumptions usedin the consolidated financial statements are based upon management’s evaluation of relevantfacts and circumstances as at the date of the consolidated financial statements. Actual resultscould differ from such estimates.

Estimates and judgments are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances.

JudgmentsIn the process of applying the Group’s accounting policies, management has made the followingjudgments, apart from those involving estimations, which have the most significant effect on theamounts recognized in the consolidated financial statements:

Revenue and cost recognitionSelecting an appropriate revenue recognition method for a particular real estate sale transactionrequires certain judgments based on, among others:

· Buyer’s commitment on the sale which may be ascertained through the significance of thebuyer’s initial investment; and

· Stage of completion of the project.

Collectability of the sales priceFor real estate sales, in determining whether the sales prices are collectible, the Group considersthat initial and continuing investments by the buyer of about 5% would demonstrate the buyer’scommitment to pay.

Classification of financial instrumentsThe Group exercises judgment in classifying a financial instrument, or its component parts, on theinitial recognition as a financial asset, a financial liability or an equity instrument in accordancewith the substance of the contractual arrangement and the definitions of a financial asset, afinancial liability or an equity instrument. The substance of the financial instrument, rather than itslegal form, governs its classification in the consolidated statement of financial position.

In addition, the Group classifies financial assets by evaluating, among other, whether the asset isquoted or not in an active market. Included in the evaluation on whether a financial asset isquoted in an active market is the determination of whether quoted prices are readily and regularly



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available, and whether those prices represent actual and regularly occurring market transactionson an arm’s length basis.

The Group classifies certain quoted nonderivative financial assets with fixed or determinablepayments and fixed maturities as HTM investments. This classification required significantjudgment. In making this judgment, the group evaluates its intention and ability to hold suchinvestments to maturity. If the Group fails to keep these investments to maturity other than incertain specific circumstances, the Group will be required to reclassify the entire portfolio as AFSfinancial assets. Consequently, the investment would therefore be measured at fair value and notat amortized cost.

Distinction between real estate inventories and land and improvementsThe Group determines whether a property will be classified as Real estate inventories or Land andimprovements. In making this judgment, the Group considers whether the property will be sold inthe normal operating cycle (Real estate inventories) or whether it will be retained as part of theGroup’s strategic landbanking activities for development or sale in the medium or long-term (Landand improvements). Land and improvements that are to be developed in the subsequent year areclassified as part of the current assets.

Operating lease commitments - the Group as lesseeThe Group has entered into contract of lease for some of the office space it occupies. The Grouphas determined that all significant risks and benefits of ownership on these properties will beretained by the lessor. In determining significant risks and benefits of ownership, the Groupconsidered, among others, the significance of the lease term as compared with the EUL of therelated asset. The Group accordingly accounted for these as operating leases.

Operating lease commitments - Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The

Group has determined that it retains all significant risks and rewards of ownership of theseproperties as the Group considered among others the length of the lease term as compared withthe EUL of the assets.

Classification of property as investment property or real estate inventoriesThe Group determines whether a property is classified as investment property or inventoryproperty as follows:

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

· Inventory comprises property that is held for sale in the ordinary course of business.Principally, this is residential and commercial property that the Group develops and intends tosell before or on completion of construction.

Distinction between investment properties and land and improvementThe Group determines a property as investment property if such is not intended for sale in theordinary course of business, but are held primarily to earn rental income and capital appreciation.Land and improvement comprises property that is retained as part of the Group’s strategiclandbanking activities for development or sale in the medium or long-term.


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Distinction between investment properties and owner-occupied propertiesThe Group determines whether a property qualifies as an investment property. In making itsjudgment, the Group considers whether the property generates cash flows largely independent ofthe other assets held by an entity. Owner-occupied properties generate cash flows that areattributable not only to property but also to the other assets used in the production or supplyprocess.

Some properties comprise a portion that is held to earn rentals or for capital appreciation andanother portion that is held for use in the production or supply of goods or services or foradministrative purposes. If these portions cannot be sold separately, the property is accounted foras an investment property only if an insignificant portion is held for use in the production or supplyof goods or services or for administrative purposes. Judgment is applied in determining whetherancillary services are so significant that a property does not qualify as investment property. TheGroup considers each property separately in making its judgment.

ContingenciesThe Group is currently involved in various legal proceedings. The estimate of probable costs forthe resolution of these claims has been developed in consultation with outside counsel handlingthe defense in these matters and is based upon an analysis of potential results. The Groupcurrently does not believe that these proceedings will have a material effect on the Group’sfinancial position (Note 35).

Management’s Use of EstimatesThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below.

Revenue and cost recognitionThe Group’s revenue recognition policies require management to make use of estimates andassumptions that may affect the reported amounts of revenue and costs. The Group’s revenuefrom real estate is recognized based on the POC measured principally on the basis of the actualcosts incurred to date over the estimated total costs of the project.

The related balances from real estate transactions follow:

2013 2012 2011Real estate sales P=20,024,646,851 P=16,335,642,258 P=13,513,424,829Costs of real estate sales (Notes10 and 26) 9,867,165,963 8,009,354,026 6,611,347,721

Determining fair values of financial assets and liabilitiesFair value determinations for financial assets and liabilities are based generally on listed marketprices or broker or dealer quotations. If prices are not readily determinable or if liquidating thepositions is reasonably expected to affect market prices, fair value is based on either internalvaluation models or management’s estimate of amounts that could be realized under currentmarket condition, assuming an orderly liquidation over a reasonable period of time. Fair valuedisclosures are provided in Note 32.

Impairment of financial assets(i) AFS equity securities

The Group determines that AFS equity securities are impaired when there has been asignificant or prolonged decline in the fair value below its cost. This determination of what is



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significant or prolonged requires judgment. The Group treats ‘significant’ generally as 20% ormore of the original cost of investment, and ‘prolonged’, greater than six (6) months. In makingthis judgment, the Group evaluates among other factors, the normal volatility in share price ofsimilar equity securities.

In addition, in the case of unquoted equity securities, impairment may be appropriate whenthere is evidence of deterioration in the financial health of the investee, dismal industry andsector performance, adverse changes in technology, and negative operational and financingcash flows.

The carrying values of AFS financial assets amounted to P=1,364.76 million andP=41.50 million as of December 31, 2013 and 2012, respectively (Note 8).

(ii) Loans and receivablesThe Group reviews its receivables on a periodic basis to assess impairment of receivables atan individual and collective level. In assessing for impairment, the Group determines whetherthere is any objective evidence indicating that there is a measurable decrease in the estimatedfuture cash flows of its loans and receivables. This evidence may include observable dataindicating that there has been an adverse change in the payment status of borrowers, orindustry-wide or local economic conditions that correlate with defaults on receivables. Thesefactors include, but are not limited to age of balances, financial status of counterparties,payment behavior and known market factors. The Group reviews the age and status ofreceivables, and identifies individually significant accounts that are to be provided withallowance.

For the purpose of a collective evaluation of impairment, loans are grouped on the basis ofsuch credit risk characteristics as type of borrower, collateral type, past-due status and term.

The amount and timing of recorded expenses for any period would differ if the Group madedifferent judgments or utilized different estimates. An increase in allowance for impairmentwould increase recorded expenses and decrease net income.

Loans and receivables, net of allowance for impairment losses, amounted toP=26,314.04 million and P=22,607.97 million as of December 31, 2013 and 2012, respectively(Note 9). The allowance for impairment on loans and receivables amounted toP=324.99 million and P=323.15 million as of December 31, 2013 and 2012, respectively(Note 9).

(iii) HTM investmentsThe Group assesses at end of each reporting period whether there is any objective evidencethat its HTM investments is impaired. Objective evidence that a financial asset is impairedincludes observable data that comes to the attention of the holder of the assets about thefollowing loss events:

a. significant financial difficulty of the issuer or the obligor;b. a breach of contract, such as a default or delinquency in interest or principal payments;c. the lender, for the economic or legal reasons relating to the borrower’s financial difficulty,

granting to the borrower a concession that the lender would not otherwise consider;d. it becoming probable that the borrower will enter bankruptcy or other financial

reorganization;e. the disappearance of an active market for that financial asset because of the financial

difficulties; or


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f. observable data indication that there is a measurable decrease in the estimated futurecash flows ranging from a group of financial assets since the initial recognition of thoseassets, although the decrease cannot yet be identified with the individual financial assetsin the group.

HTM investments as of December 31, 2013 amounted to P=2,905.28 million (Note 8).

Estimating allowance for impairment losses on receivablesThe Group maintains allowances for impairment losses based on the results of the individual andcollective assessments under PAS 39. For both individual and collective assessment, the Groupis required to obtain the present value of estimated cash flows using the receivable’s original EIR.The estimated cash flows considers the management’s estimate of proceeds from the disposal ofthe collateral less cost to repair, cost to sell and return of deposit due to the defaulting party. Thecost to repair and cost to sell are based on historical experience. The methodology andassumptions used for the individual and collective assessments are based on management’sjudgments and estimates made for the year. Therefore, the amount and timing of recordedexpense for any period would differ depending on the judgments and estimates made for the year.

The balance of the Group’s receivables, net of allowance for impairment loss, amounted toP=26,314.04 million and P=22,607.97 million as of December 31, 2013 and 2012, respectively(Note 9).

Evaluation of net realizable value of real estate inventories and land and improvementsReal estate inventories and land and improvements are valued at the lower of cost or NRV. Thisrequires the Group to make an estimate of the real estate for sale inventories and land andimprovements’ estimated selling price in the ordinary course of business, cost of completion andcosts necessary to make a sale to determine the NRV. The Group adjusts the cost of its realestate inventories and land and improvements to NRV based on its assessment of therecoverability of these assets. In determining the recoverability of these assets, managementconsiders whether these assets are damaged, if their selling prices have declined andmanagement’s plan in discontinuing the real estate projects. Estimated selling price is derivedfrom publicly available market data and historical experience, while estimated selling costs arebasically commission expense based on historical experience. Management would also obtainthe services of an independent appraiser to determine the fair value of undeveloped land basedon the latest selling prices of the properties of the same characteristics of the land andimprovements.

Real estate inventories amounted to P=15,473.29 million and P=14,752.48 million as ofDecember 31, 2013 and 2012, respectively (Note 10). Land and improvements amounted toP=18,569.44 million and P=18,107.04 million as of December 31, 2013 and 2012, respectively(Note 12).

Evaluation of impairmentThe Group reviews investment in an associate, investments in project development costs,investment properties, property and equipment and system development costs for impairment ofvalue. This includes considering certain indications of impairment such as significant changes inasset usage, significant decline in assets’ market value, obsolescence or physical damage of anasset, significant underperformance relative to expected historical or projected future operatingresults and significant negative industry or economic trends.

The Group estimates the recoverable amount as the higher of the fair value les cost to sell andvalue in use. In determining the present value of estimated future cash flows expected to begenerated from the continued use of the assets, the Group is required to make estimates and



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assumptions that may affect investment in an associate, investments in project developmentcosts, investment properties, property and equipment and system development cost.

The fair value less costs to sell calculation is based on available data from binding salestransactions in an arm’s length transaction of similar assets or observable market prices lessincremental costs for disposing of the asset. The value in use calculation is based on adiscounted cash flow model. The cash flows are derived from the budget for the next five yearsand do not include restructuring activities that the Group is not yet committed to or significantfuture investments that will enhance the asset’s performance of the cash generating unit beingtested. The recoverable amount is most sensitive to the discount rate used for the discountedcash flow model as well as the expected future cash inflows and the growth rate used forextrapolation purposes.

Based on management assessment as of December 31, 2013 and 2012, no indicators ofimpairment exist for investment in associate, investments in project development costs and a jointventure, investment properties, property and equipment, and systems development costs.

The aggregate carrying values of investment in an associate, investment properties, property andequipment, investments in project development costs and system development costs amounted toP=6,822.80 million and P=5,982.58 million as of December 31, 2013 and 2012, respectively(Notes 13, 14, 15, 16 and 17).

Estimating useful lives of investment properties, property and equipment and systemsdevelopment costsThe Group estimates the useful lives of property and equipment, investment properties andsystems development cost based on the period over which the assets are expected to beavailable for use. The EUL of property and equipment, investment properties and systemdevelopment cost are reviewed at least annually and are updated if expectations differ fromprevious estimates due to physical wear and tear and technical or commercial obsolescence onthe use of these property and equipment. It is possible that future results of operations could bematerially affected by changes in these estimates brought about by changes in factors mentionedabove.

The aggregate carrying value of investment properties, property and equipment and systemdevelopment cost amounted to P=5,029.14 million and P=4,393.43 million as of December 31, 2013and 2012, respectively (Notes 14, 15 and 17).

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

As of December 31, 2013 and 2012, the Group has unrecognized deferred tax assets amountingP=23.22 million and P=3,019.50 million, respectively (Note 29).

Estimating pension obligation and other retirement benefitsThe determination of the Group’s pension liabilities is dependent on selection of certainassumptions used by actuaries in calculating such amounts. Those assumptions are described inNote 28 and include among others, discount rates and rates of salary increase. While the Groupbelieves that the assumptions are reasonable and appropriate, significant differences in actual


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experience or significant changes in assumptions may materially affect retirement obligations.See Note 28 to the consolidated financial statements for the related balances.

Fair value of financial instrumentsWhere the fair values of financial assets and financial liabilities recorded in the consolidatedstatement of financial position cannot be derived from active markets, they are determined usinginternal valuation techniques using generally accepted market valuation models. The inputs tothese models are taken from observable markets where possible, but where this is not feasibleestimates are used in establishing fair values. These estimates may include considerations ofliquidity, volatility, and correlation. Certain financial assets and liabilities were initially recorded atits fair value by using the discounted cash flow methodology. See Note 32 to the consolidatedfinancial statements for the related balances.

6. Segment Information

For management purposes, the Group’s operating segments are organized and managedseparately according to the nature of the products provided, with each segment representing astrategic business unit that offers different products and serves different markets. The Group hasthree reportable operating segments as follows:

Horizontal ProjectsThis segment pertains to the housing market segment of the Group. It caters on the developmentand sale of residential lots and units.

Vertical ProjectsThis segment caters on the development and sale of residential high-rise condominium projectsacross the Philippines. Vertical home projects involve dealing with longer gestation periods andhas requirements that are different from those of horizontal homes.

OthersThis segment pertains to activities from holding companies and others.

Management monitors the operating results of its business units separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment performanceis evaluated based on segment operating income or loss before income tax and earnings beforeincome tax, depreciation and amortization (EBITDA). Segment operating income or loss beforeincome tax is based on the same accounting policies as consolidated operating income or loss.The Group has no intersegment revenues. No operating segments have been aggregated to formthe above reportable operating business segments. The chief operating decision-maker (CODM)has been identified as the chief executive officer. The CODM reviews the Group’s internal reportsin order to assess performance of the Group.

Transfer prices between operating segments are on an arm’s length basis in a manner similar totransactions with third parties.

The amount of segment assets and liabilities are based on the measurement principles that aresimilar with those used in measuring the assets and liabilities in the consolidated statements offinancial position which is in accordance with PFRS.



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The financial information about the operations of these business segments is summarized below:

December 31, 2013

Horizontal Vertical OthersIntersegmentAdjustments Consolidated

(Amounts in thousands)Real Estate Revenue P=16,636,677 P=3,387,970 P=– P=– P=20,024,647Costs and Operating Expenses* 12,154,175 2,175,849 250,150 (64,341) 14,515,833Segment Income (Loss) Before

Income Tax 4,482,502 1,212,121 (250,150) 64,341 5,508,814Interest income (Note 24) 678,565 36,457 246,151 – 961,173Miscellaneous income (Note 25) 328,470 112,452 99,043 75,388 615,353Others (Notes 8, 13, 16, 21 and 27) 1,131 – 2,655,288 (2,697,170) (40,751)EBITDA 5,490,668 1,361,030 2,750,332 (2,557,441) 7,044,589Interest and other financing charges (Note 24) (256,656) (30,213) (1,047,872) – (1,334,741)Depreciation and amortization (Notes 14, 15,

17 and 26) (175,439) (39,846) (19,771) – (235,056)Income before income tax 5,058,573 1,290,971 1,682,689 (2,557,441) 5,474,792Provision for income tax (Note 29) 374,788 8,713 28,782 – 412,283Net Income P=4,683,785 P=1,282,258 P=1,653,907 (P=2,557,441) P=5,062,509Other InformationSegment assets P=77,636,439 P=11,950,379 P=4,099,579 (P=13,666,580) P=80,019,817Due from related parties (Notes 30 and 32) 10,231,625 1,942,051 12,183,534 (24,156,789) 200,421AFS financial assets (Note 8) 41,499 – 1,323,256 – 1,364,755HTM investments (Note 8) – – 2,905,277 – 2,905,277Deferred tax assets - net (Note 29) 37,239 – 2,078 – 39,317Total Assets P=87,946,802 P=13,892,430 P=20,513,724 (P=37,823,369) P=84,529,587Segment liabilities P=26,348,839 P=2,521,072 P=5,617,513 P=– P=34,487,424Due to related parties (Notes 30 and 32) 18,043,314 6,113,475 – (24,156,789) –Deferred tax liabilities - net (Note 29) 1,208,563 237,070 61,292 – 1,506,925Total Liabilities P=45,600,716 P=8,871,617 P=5,678,805 (P=24,156,789) P=35,994,349Capital expenditures** P=14,607,505 P=3,105,695 P=– P=– P=17,713,200Depreciation and amortization (Notes 14, 15,

17 and 26) 175,439 39,846 19,771 – 235,056Provision for impairment losses (Note 26) 1,282 – 1,800 – 3,082* Cost and expenses include costs of real estate sales and operating expenses less depreciation and amortization amounting P=235.06 million (Note 26).** Capital expenditures is inclusive of the amounts of construction/development costs.

December 31, 2012


(Amounts in thousands)Real Estate Revenue P=13,520,435 P=2,815,207 P=– P=– P=16,335,642Costs and Operating Expenses* 9,563,077 2,119,545 197,285 (41,627) 11,838,280Segment Income (Loss) Before Income Tax 3,957,358 695,662 (197,285) 41,627 4,497,362Interest income (Note 24) 670,948 28,065 229,581 – 928,594Miscellaneous income (Note 25) 261,679 78,471 (29,536) 57,328 367,942Others (Notes 8, 13, 16, 21 and 27) 70,420 – 2,072,173 (2,029,872) 112,721EBITDA 4,960,405 802,198 2,074,933 (1,930,917) 5,906,619Interest and other financing charges (Note 24) (92,628) (62,774) (1,074,376) (27,809) (1,257,587)Depreciation and amortization (Notes 14, 15,

17 and 26) (122,523) (26,642) (5,553) – (154,718)Income before income tax 4,745,254 712,782 995,004 (1,958,726) 4,494,314Provision for income tax (Note 29) 89,945 (15,078) 29,418 4,328 108,613Net Income P=4,655,309 P=727,860 P=965,586 (P=1,963,054) P=4,385,701Other InformationSegment assets P=56,070,311 P=6,183,405 P=8,845,079 (P=99) P=71,098,696Due from related parties (Notes 30 and 32) – 1,262,738 – (1,084,800) 177,938AFS financial assets (Note 8) 41,499 – – – 41,499Deferred tax assets - net (Note 29) 5,121 – – – 5,121Total Assets P=56,116,931 P=7,446,143 P=8,845,079 (P=1,084,899) P=71,323,254Segment liabilities P=8,277,845 P=2,217,102 P=15,545,206 P=12,684 P=26,052,837Due to related parties (Notes 30 and 32) 1,878,389 3,508,988 (6,472,177) 1,084,800 –Deferred tax liabilities - net (Note 29) 1,348,742 234,941 58,667 (6,449) 1,635,901Total Liabilities P=11,504,976 P=5,961,031 P=9,131,696 P=1,091,035 P=27,688,738Capital expenditures** P=12,387,989 P=2,579,411 P=– P=– P=14,967,400Depreciation and amortization (Notes 14, 15,

17 and 26) 122,523 26,642 5,553 – 154,718Provision for impairment losses (Note 26) 27,749 – – – 27,749* Cost and expenses include costs of real estate sales and operating expenses less depreciation and amortization amounting P=154.72 million (Note 26).** Capital expenditures is inclusive of the amounts of construction/development costs.


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December 31, 2011


(Amounts in thousands)Real Estate Revenue P=11,462,925 P=2,051,192 P=– (P=692) P=13,513,425Costs and Operating Expenses* 8,149,680 1,529,994 163,878 (67,666) 9,775,886Segment Income (Loss) Before Income Tax 3,313,245 521,198 (163,878) 66,974 3,737,539Interest income (Note 24) 613,799 19,515 218,060 1,738 853,112Miscellaneous income (Note 25) 272,329 29,654 96,158 (11,895) 386,246Others (Notes 8, 13, 16, 21 and 27) 63 – 1,729,422 (1,673,488) 55,997EBITDA 4,199,436 570,367 1,879,762 (1,616,671) 5,032,894Interest and other financing charges (Note 24) (186,447) (234,097) (952,194) 25,059 (1,347,679)Depreciation and amortization (Notes 14, 15,

17 and 26) (93,265) (8,490) – – (101,755)Income before income tax 3,919,724 327,780 927,568 (1,591,612) 3,583,460Provision for income tax (Note 29) (124,293) 95,100 30,179 61,797 62,783Net Income P=4,044,017 P=232,680 P=897,389 (P=1,653,409) P=3,520,677Other InformationSegment assets P=74,012,537 P=7,542,978 P=34,338,593 (P=51,021,863) P=64,872,245AFS financial assets (Note 8) – – 41,309 – 41,309Investment in an associate (Note 13) – – 749,598 (59,682) 689,916Deferred tax assets - net (Note 29) 2,028 – – – 2,028Total Assets P=74,014,565 P=7,542,978 P=35,129,500 (P=51,081,545) P=65,605,498Segment liabilities P=16,389,810 P=2,904,447 P=3,417,071 P=7,930 P=22,719,258Due to related parties (Notes 30 and 32) 12,943,213 1,127,446 8,236,301 (22,124,158) 182,802Deferred tax liabilities - net (Note 29) 924,589 257,756 829,033 3,548 2,014,926Total Liabilities P=30,257,612 P=4,289,649 P=12,482,405 (P=22,112,680) P=24,916,986Capital expenditures** P=7,558,793 P=3,574,764 P=– P=– P=11,133,557Depreciation and amortization (Notes 14, 15,

17 and 26) 93,265 8,490 – – 101,755* Cost and expenses include costs of real estate sales and operating expenses less depreciation and amortization amounting P=101.76 million (Note 26).** Capital expenditures is inclusive of the amounts of construction/development costs.

No operating segments have been aggregated to form the above reportable segments.

Capital expenditure consists of construction costs, land acquisition and land development costs.

The Group has no revenue from transactions with a single external customer amounting to 10% ormore of the Group’s revenue.

7. Cash and Cash Equivalents

This account consists of:

2013 2012Cash on hand P=26,403,625 P=25,700,728Cash in banks 4,078,055,940 1,711,349,512Cash equivalents 428,102,455 221,679,382

P=4,532,562,020 P=1,958,729,622



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

2013 2012Philippine Peso 0.25% to 5.00% 0.25% to 5.00%US Dollar 0.25% to 1.50% 0.25% to 1.00%

None of the cash and cash equivalents are used to secure the obligations of the Group.

8. Investments

Short-term cash investmentsShort-term cash investments consist of money market placements with maturities of more thanthree (3) months up to one (1) year and earn annual interest at the respective short-terminvestment rates, as follows:

2013 2012P=1,056,744,918 P=915,194,634

Philippine Peso 5.00% 5.00%US Dollar 1.75% to 4.00% 1.75% to 4.00%

These investments are not used to secure any obligations of the Group.

Long-term cash investmentsLong-term cash investments consist of money market placements made for varying periods ofmore than one (1) year up to three (3) years. These investments earn interest at the respectivelong-term investment rates, as follows:

2013 2012P=5,038,832,500 P=4,659,175,000

US Dollar 3.75% to 4.00% 3.75% to 4.00%

The investments are used as collateral to secure the bank loans of the Parent Companyaggregating P=1,600.00 million and P=3,909.41 million as of December 31, 2013, and 2012,respectively, (Note 20). The fair values of the aggregate amount of investments used as collateralamounted to P=1,775.60 million and P=3,715.02 million, respectively.

AFS financial assetsThis account consists of equity securities as follow:

2013 2012Quoted P=1,323,255,934 P=−Unquoted 41,499,183 41,499,183

P=1,364,755,117 P=41,499,183


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Quoted equity securitiesThis account consists of investment in mutual fund. As of December 31, 2013, the investment hasan aggregate cost of P=1,331.85 million. The excess of its cost over the aggregate fair valueamounted to P=8.59 million in 2013. This is shown under “Unrealized losses on AFS financialassets” account in the equity section in the consolidated statements of financial position. The yearon year movement in the market values thereof are shown as part of “Changes in fair value ofAFS financial assets” in the consolidated statement of comprehensive income.

The movement in the unrealized losses for the year ended December 31, 2013 follows:

Balance at beginning of year P=−Changes in fair value of AFS financial assets 8,594,066Balance at end of year P=8,594,066

In 2013 and 2012, there has been no disposal of AFS financial assets that resulted to a gain orloss. Accordingly, no transfer from the cumulative unrealized gains to the profit or loss occurred in2013 and 2012.

Unquoted equity securitiesThis account pertains to unlisted preferred shares in a public utility company which the Group willcontinue to carry as part of the infrastructure that it provides for its real estate developmentprojects and other operations. These are carried at cost less impairment, if any. These amountedto P=41.50 million as of December 31, 2013 and 2012.

The rollforward analysis of this account follows:

2013 2012Balance at beginning of year P=41,499,183 P=41,309,183Acquisitions during the year − 190,000Balance at end of year P=41,499,183 P=41,499,183

In 2013 and 2012, there were no AFS financial assets writedown transferred to the profit or loss.

HTM investmentsThis account consists of the Group’s investments in various US dollar-denominated securities withinterest rates ranging from 1.88% to 9.50%. Interest income from HTM investments amounted toP=15.58 million in 2013 (Note 24).

In 2013, there was no impairment losses recognized for these investments.

The following presents the breakdown of debt securities classified as HTM investments bycontractual maturity dates as of December 31, 2013.

Due in one (1) year or less P=342,675,577Due after one (1) year through five (5) years 2,562,601,115Balance at end of year P=2,905,276,692



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9. Receivables


2013 2012Installment contracts receivable at

amortized cost P=22,933,176,127 P=19,495,284,889Accrued interest receivable 118,176,415 71,020,894Accounts receivable at amortized cost: Contractors 1,323,796,544 696,642,997 Buyers 871,765,923 798,486,842 Brokers 154,659,672 90,802,899 Others 1,237,454,179 1,778,875,763

26,639,028,860 22,931,114,284Less allowance for impairment losses (324,993,143) (323,146,774)

26,314,035,717 22,607,967,510Less noncurrent portion at amortized cost 7,865,846,194 7,996,386,610

P=18,448,189,523 P=14,611,580,900

Installment contracts receivableInstallment contracts receivable consist of accounts collectible in equal monthly installments withvarious terms up to a maximum of fifteen (15) years. These are carried at amortized cost. Thecorresponding titles to the subdivision or condominium units sold under this arrangement aretransferred to the buyers only upon full payment of the contract price. The installment contractsreceivable are interest-bearing except for those with installment terms within two years. Annualinterest rates on installment contracts receivables range from 16.00% to 19.00%. Total interestincome recognized amounted to P=679.13 million, P=693.53 million and P=628.98 million in 2013,2012 and 2011, respectively (Note 24).

Accounts receivablesThe accounts receivables at amortized cost are non-interest bearing and collectible within oneyear. This consists of the following:

Receivable from contractorsReceivable from contractors are recouped from settlement of progress billings which occur withinone year from the date the receivables arose.

Receivable from buyersReceivables from buyers represent the share of the joint venture partners from the proceeds ofreal estate sale. The arrangement is covered by a marketing agreement that is separate anddistinct from LDAs. These sales do not form part of the Group's revenue. Collections from buyersare remitted to the joint venture partners net of any marketing fees agreed by the parties.

Receivable from brokersReceivable from brokers are recouped from progress billing settlement.

OthersOther receivables consist mainly of receivables from various individuals and private entities andother nontrade receivables. These are due and demandable.


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Receivables amounting P=324.99 million and P=323.15 million as of December 31, 2013 and 2012,respectively, are provided fully with impairment allowance. Details follow:

InstallmentContracts

ReceivableAccounts

Receivable TotalAt December 31, 2011 P=34,116,449 P=280,214,645 P=314,331,094Charge for the year (Note 26) – 27,748,795 27,748,795Amounts written off – (18,933,115) (18,933,115)At December 31, 2012 34,116,449 289,030,325 323,146,774Charge for the year (Note 26) – 1,846,369 1,846,369At December 31, 2013 P=34,116,449 P=290,876,694 P=324,993,143

The impairment losses above pertain to individually impaired accounts. These are presented atgross amounts before directly deducting impairment allowance. No impairment losses resultedfrom performing collective impairment test.

In 2013 and 2012, installment contracts receivables with a total nominal amount ofP=2,297.26 million and P=1,119.95 million, respectively, were recorded at amortized cost amountingP=2,278.06 million and P=1,083.28 million, respectively. These are installment contracts receivablesthat are to be collected in 2 years which are noninterest-bearing. The fair value upon initialrecognition is derived using discounted cash flow model using the discount rates ranging from1.33% to 3.00% for those recognized in 2013 and 1.86% to 4.00% for those recognized in 2012.Interest income recognized from these receivables amounted to P=41.65 million, P=57.23 million andP=68.56 million in 2013, 2012 and 2011, respectively (Note 24). The unamortized discountamounted to P=19.20 million and P=36.67 million as of December 31, 2013 and 2012, respectively.

Movement in unamortized discount arising from noninterest-bearing receivables is as follows:

2013 2012Balance at beginning of year P=36,675,242 P=57,706,384Additions 24,169,395 36,196,120Accretion (Note 24) (41,647,059) (57,227,262)Balance at end of year P=19,197,578 P=36,675,242

In 2013 and 2012, the Group entered into various purchase agreements with financial institutionswhereby the Group sold its installment contracts receivables on a with recourse basis. Thepurchase agreements provide substitution of contracts that became in default. The Group stillretains the sold receivables in the installment contracts receivables account and records theproceeds from these sales as loans payable (Note 20). The carrying value of installmentcontracts receivables sold and the corresponding loans payable amounted to P=2,489.67 millionand P=2,194.16 million as of December 31, 2013 and 2012, respectively. Receivables with arecourse basis are used as collateral to secure the corresponding loans payables obtained.

In 2013 and 2012, the Group entered into agreement with various financial institutions wherebythe Group sold their installment contracts receivables on a without recourse basis at discount rateof 10.00% to 12.00%. The carrying value of sold receivables amounted to nil in 2013 andP=74.20 million in 2012. The Group has no continuing involvement over the sold receivables.Proceeds received from the purchasing financial institutions and discount on sold receivablesrecorded by the Group amounted to P=62.12 million and P=2.67 million in 2012, respectively. Thediscount has been included under “Interest and other financing charges” account in profit or loss.



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The carrying value of receivables that has been converted from a “with recourse basis” to “withoutrecourse basis” amounted to nil and P=74.20 million in 2013 and 2012, respectively.

10. Real Estate Inventories


2013 2012Balance at beginning of year P=14,752,482,297 P=14,901,418,372Land acquired during the year 895,001,304 1,168,649,132Land costs transferred from land and improvements (Note 12) 2,470,820,748 2,643,061,364Construction/development costs incurred 6,800,355,944 4,423,711,606Borrowing costs capitalized (Note 24) 585,498,174 220,045,157Cost of real estate sales (Note 26) (9,867,165,963) (8,009,354,026)Transfer to investment property (Note 14) (163,090,325) (595,049,308)Write down of inventories (Note 26) (613,920) –

P=15,473,288,259 P=14,752,482,297

The real estate inventories are carried at cost. There is no allowance to recognize amounts ofinventories that are lower than cost.

The breakdown of real estate inventories follows:

2013 2012Subdivision land for sale and development P=17,671,929,934 P=17,552,949,527Less reserve for land development costs 7,461,959,294 7,748,049,785

10,209,970,640 9,804,899,742Condominium units for sale and development 4,164,422,397 3,767,879,627Residential house units for sale and development 1,098,895,222 1,179,702,928

5,263,317,619 4,947,582,555P=15,473,288,259 P=14,752,482,297

Subdivision land for sale and development represents real estate subdivision projects in which theGroup has been granted license to sell by the Housing and Land Use Regulatory Board of thePhilippines and raw land inventories.

As of December 31, 2012, subdivision land for sale and development of Brittany and CAPI with anaggregate carrying value of P=492.51 million, were mortgaged to secure the bank loans of theParent Company (Note 20). The loan was fully paid in 2013.

Real estate inventories recognized as cost of sales amounted to P=9,867.17 million in 2013,P=8,009.35 million in 2012 and P=6,611.35 million in 2011, and are included as cost of real estatesales in the consolidated statements of comprehensive income. Cost of real estate sales includesacquisition cost of subdivision land, amount paid to contractors, development costs, capitalizedborrowing costs and other costs attributable to bringing the real estate inventories to its intendedcondition.

Development costs represent approximately 75% to 85% of the cost of sales.


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There was no provision for impairment and reversal recognized in 2013, 2012 and 2011.

Borrowing cost capitalized in 2013 and 2012 amounted to P=585.50 million and P=220.05 million,respectively (Note 24). The capitalization rate used to determine the borrowing costs eligible forcapitalization is 8.41% in 2013 and 8.31% in 2012.

Except as stated, there are no other real estate inventories used as collateral or pledged assecurity to secure liabilities (Note 20).

11. Other Current Assets


2013 2012Prepaid expenses P=1,040,506,784 P=896,689,893Creditable withholding taxes 416,841,484 593,311,033Input VAT 155,774,194 147,553,025Construction materials and others 118,354,327 55,275,830Deposits for real estate purchases 3,989,067 4,014,068

P=1,735,465,856 P=1,696,843,849

The Group will be able to apply the creditable withholding taxes against income tax payable. As ofDecember 31, 2013 and 2012, the Group applied creditable withholding taxes amountingP=468.44 million and P=506.53 million, respectively.

Prepaid expenses mainly include prepayments for marketing fees, taxes and licenses, rentals andinsurance.

The input VAT is applied against output VAT. The remaining balance is recoverable in futureperiods.

Deposits for real estate purchases substantially represent the Group’s payments to real estateproperty owners for the acquisition of certain real estate properties. Although the terms of theagreements provided that the deeds of absolute sale for the subject properties are to be executedonly upon fulfillment by both parties of certain undertakings and conditions, including the paymentby the Group of the full contract prices of the real estate properties, the Group already hasphysical possession of the original transfer certificates of title of the said properties.

12. Land and Improvements

The rollforward analysis of this account follows:

2013 2012Balance at beginning of year P=18,107,037,673 P=15,762,930,368Acquisition 2,933,220,572 4,987,168,669Transfers (Note 10) (2,470,820,748) (2,643,061,364)Balance at end of year P=18,569,437,497 P=18,107,037,673



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This account consists of properties for future development and carried at cost or NRV.

Transfers pertain to properties to be developed for sale and these are included under “Real estateinventories” account.

Further analysis of land and improvements follows:

2013 2012At cost P=8,807,090,725 P=9,524,219,860At NRV 10,683,285,777 9,257,659,703

P=19,490,376,502 P=18,781,879,563

The cost of land and improvements carried at NRV amounted to P=8.70 billion and P=9.68 billion asof December 31, 2013 and 2012, respectively. The Group recorded no provision for impairment in2013, 2012 and 2011.

The land and improvements are not used to secure the borrowings of the Group.

13. Investment in an Associate

As of December 31, 2011, investment in an associate represents HDC’s 10.05% equity inStarmalls. The investment is accounted for under the equity method as Althorp Holdings, Inc.’s11.55% voting rights in Starmalls was assigned to HDC. As of December 31, 2013 and 2012,Starmalls holds nil and 399.40 million common shares of the Parent Company, respectively.

The investment in associate was disposed in August 2012 for P=771.76 million and the gain ondisposal amounting P=83.88 million was recognized in 2012 (Note 27).

14. Investment Properties

Movement in this account follows:

December 31, 2013

Land

Building andBuilding

ImprovementsConstruction in

Progress TotalCostBalance at beginning of year P=3,494,177,173 P=313,717,904 P=273,847,679 P=4,081,742,756Transfers from real estate

inventories (Note 10) 163,090,325 – – 163,090,325Additions 107,491,387 56,572,039 341,656,681 505,720,107Reclassification to – 381,496,999 (381,496,999) –Balance at end of year 3,764,758,885 751,786,942 234,007,361 4,750,553,188Accumulated Depreciation

and AmortizationBalance at beginning of year – 18,442,475 – 18,442,475Depreciation and amortization

(Note 26) – 40,876,728 – 40,876,728Balance at end of year – 59,319,203 – 59,319,203Net Book Value P=3,764,758,885 P=692,467,739 P=234,007,361 P=4,691,233,985


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December 31, 2012

Land


ImprovementsConstruction in

Progress TotalCostBalance at beginning of year P=2,177,489,374 P=101,253,871 P=13,889,125 P=2,292,632,370Transfers from:

Real estate inventories(Note 10) 595,049,308 – – 595,049,308

Property and equipment(Note 15) – – 10,400,600 10,400,600

Additions 721,638,491 212,464,033 249,557,954 1,183,660,478Balance at end of year 3,494,177,173 313,717,904 273,847,679 4,081,742,756Accumulated Depreciation

and AmortizationBalance at beginning of year – 934,856 – 934,856Depreciation and amortization

(Note 26) – 17,507,619 – 17,507,619Balance at end of year – 18,442,475 – 18,442,475Net Book Value P=3,494,177,173 P=295,275,429 P=273,847,679 P=4,063,300,281

The investment properties consist mainly of land and commercial center that are held to earnrental.

Rental income earned from investment properties amounted to P=60.78 million, P=24.29 million andP=5.71 million in 2013, 2012 and 2011, respectively (Note 25). Repairs and maintenance costsarising from investment properties amounted to P=7.98 million, P=4.86 million and P=0.49 million forthe years ended December 31, 2013, 2012 and 2011, respectively (Note 26). Cost of propertyoperations amounted to P=97.88 million, P=41.35 million and P=10.95 for the years endedDecember 31, 2013, 2012 and 2011.

There are no investment properties and other investments as of December 31, 2013 and 2012that are pledged as security to liabilities.

The Group has no restrictions on the realizability of its investment properties and no contractualobligations to either purchase or construct or develop investment properties or for repairs,maintenance and enhancements.

In 2013 and 2012, real estate inventories with book value amounting P=163.09 million andP=595.05 million, respectively, (Note 10) and property and equipment with book value amountingnil and P=10.40 million, respectively, (Note 15) were reclassified to investment properties as theseare intended to be developed for commercial and retail purposes and to be subsequently leasedout to third parties. These are under development as of December 31, 2013.

The fair value of the land amounted to P=8,644.78 million as of December 31, 2013. This is basedon the most recent selling price of similar property.

As at December 31, 2013 and 2012, the aggregate fair values of investment properties amountedto P=9,304.92 and P=4,988.05 million, respectively. Fair value is the price that would be received tosell an asset in an orderly transaction between market participants at the measurement date.

The valuation techniques adopted for the measurement of fair values are the market approach forthe land and cost approach for the buildings and land improvements.



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The market price per square meter of these investment properties ranged from P=15,000 to P=30,000. The estimated useful life on the investment properties other than land is twenty (20)years.

The percentage of completion of various constructions in progress ranges from 30% to 90% in2013 and from 80% to 90% in 2012. These constructions in progress are due to be completed onvarious dates starting January 2014 up to July 2014.

The previously capitalized borrowing costs that were transferred from real estate inventories toinvestment properties in 2013 and 2012 amounted to nil and P=4.52 million, respectively (Note 10).

15. Property and Equipment

The rollforward analyses of this account follow:

December 31, 2013


ImprovementsTransportation

Equipment

OfficeFurniture,

Fixtures andEquipment

ConstructionEquipment

Other FixedAssets Total

CostBalance at beginning of year P=60,583,559 P=309,416,008 P=228,362,982 P=103,461,810 P=111,033,337 P=812,857,696Additions − 20,797,356 140,313,536 2,310,675 788,409 164,209,976Balance at end of year 60,583,559 330,213,364 368,676,518 105,772,485 111,821,746 977,067,672Accumulated Depreciation

and AmortizationBalance at beginning of year 40,945,482 198,450,898 175,514,645 44,104,311 75,667,654 534,682,990Depreciation and amortization

(Note 26) 950,367 41,285,715 72,918,958 8,840,256 10,932,852 134,928,148Balance at end of year 41,895,849 239,736,613 248,433,603 52,944,567 86,600,506 669,611,138Net Book Value P=18,687,710 P=90,476,751 P=120,242,915 P=52,827,918 P=25,221,240 P=307,456,534

December 31, 2012


ImprovementsTransportation

Equipment

OfficeFurniture,

Fixtures andEquipment

ConstructionEquipment

Other FixedAssets Total

CostBalance at beginning of year P=51,580,956 P=228,691,968 P=175,338,041 P=47,004,747 P=102,013,209 P=604,628,921Additions 22,003,353 80,724,040 53,024,941 56,457,063 9,020,128 221,229,525Transfers to investment

properties (Note 14) (13,000,750) – – – – (13,000,750)Balance at end of year 60,583,559 309,416,008 228,362,982 103,461,810 111,033,337 812,857,696Accumulated Depreciation

and AmortizationBalance at beginning of year 25,301,494 152,174,066 141,136,873 40,871,208 66,336,736 425,820,377Depreciation and amortization

(Note 26) 18,244,138 46,276,832 34,377,772 3,233,103 9,330,918 111,462,763Transfers to investment

properties (Note 14) (2,600,150) − − − − (2,600,150)Balance at end of year 40,945,482 198,450,898 175,514,645 44,104,311 75,667,654 534,682,990Net Book Value P=19,638,077 P=110,965,110 P=52,848,337 P=59,357,499 P=35,365,683 P=278,174,706

As of December 31, 2013 and 2012, fully depreciated assets that are still actively in use amountedto P=138.88 million and P=99.43 million, respectively.


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The Group’s transportation equipment with a carrying value of P=115.11 million andP=63.31 million as of December 31, 2013 and 2012, respectively, were pledged as collateral underchattel mortgage to secure the car loans of the Group with various financial institutions (Note 20).

There are no temporary idle property and equipment.

16. Investments and Advances in Project Development Costs

This account consists of interests in:

2013 2012Investment in project development P=1,573,560,217 P=1,556,484,926Interest and advances in joint venture 220,106,982 32,662,650

P=1,793,667,199 P=1,589,147,576

Investments in Project Development CostInvestments in project development costs pertain to deposits, cash advances and other charges inconnection with the LDA entered into by the Group with individuals, corporate entities and relatedparties for the development of real estate projects. The LDA provides, among others, thefollowing: a) the Group will undertake the improvement, subdivision and development of the realestate project within a certain period as prescribed by the LDA, subject to certain conditions to befulfilled by the real estate property owner; and b) the parties shall divide among themselves allsaleable inventory of the real estate project in accordance with the ratio mutually agreed. Thisaccount was presented as “Interest in Jointly Controlled Operations” in 2012. In 2013, the Groupchanged the account title to “Investments in Project Development Cost”. This did not affect thepresentation in the consolidated statements of financial position.

The following are the subsidiaries that have outstanding LDAs accounted for as investments inproject development costs:

Entity Project 2013 2012Brittany Horizontal P=728,936,348 P=726,369,129CAPI Horizontal 581,775,466 581,393,066HDC Horizontal 111,581,104 97,455,432VRI Vertical 88,370,000 88,370,000CPI Horizontal 62,897,299 62,897,299

P=1,573,560,217 P=1,556,484,926

The amounts represent deposits and advances made which were used to partially finance theacquisition of properties which remained under transition.

Interests and Advances in Joint VentureIn 2012, the Group invested P=24.83 million representing 50.92% interest in Lumina Homes, Inc.,the venture. In 2013 and 2012, the Group has advances to Lumina Homes, Inc. amountingP=181.69 million and P=7.84 million, respectively.



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Financial information of Lumina Homes, Inc. follows:

2013 2012Total assets P=600,729,724 P=42,701,859Total liabilities 550,156,276 17,875,110Net income (loss) 26,682,461 (123,251)

The statement of comprehensive income follows:

2013 2012Revenue P=132,158,280 P=19,093Cost and expenses 105,472,000 257,331Income (loss) before income tax 26,686,280 (238,238)Provision for income tax 3,819 3,819Net income (loss) P=26,682,461 (P=242,057)

The Group has not incurred any contingent liabilities nor entered into any capital in relation to itsinterest in a joint venture.

The Group recognized its share in net income (loss) in the amount of P=13.59 million and(P=0.12 million) in 2013 and 2012 respectively (Note 27).

17. Other Noncurrent Assets


2013 2012Deposits P=258,351,554 P=253,024,536Model house accessories at cost 218,295,506 165,660,534Systems development costs - net of accumulated amortization 30,445,636 51,956,639

P=507,092,696 P=470,641,709

Deposits include deposits to utility companies which will either be recouped against future billingsor refunded upon completion of the real estate projects. Such deposits are necessary for theconstruction and development of real estate projects of the Group.

The cost of model house accessories amounted to P=218.30 million and P=165.66 million as ofDecember 31, 2013 and 2012, respectively. In 2013, model house accessories amountingP=0.60 million was written off due to damages caused by Typhoon Yolanda (Note 26).

The rollforward analyses of system development costs follow:

2013 2012Balance at beginning of year P=51,956,639 P=39,212,517Additions 37,739,943 38,491,554Amortization (Note 26) (59,250,946) (25,747,432)Balance at end of year P=30,445,636 P=51,956,639


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Amortization of system development costs amounted to P=59.25 million, P=25.75 million andP=15.34 million in 2013, 2012 and 2011, respectively, are included in the “Depreciation andamortization” account under “Operating expenses” in profit or loss (Note 26).

18. Accounts and Other Payables


2013 2012Accounts payable - contractors P=2,126,796,160 P=1,349,958,797Accrued expenses 1,116,438,343 954,317,786Retentions payable 689,902,809 574,663,273Liabilities for purchased land 867,219,442 327,922,225Deferred output tax 272,460,184 257,170,138Commissions payable 582,335,870 460,579,947Accounts payable - suppliers 213,946,584 663,358,199Accounts payable - buyers 115,173,715 48,067,736Accounts payable - others 397,132,595 213,820,741

P=6,381,405,702 P=4,849,858,842

Accounts payable - contractor pertains to contractors’ billings for services related to thedevelopment of various projects of the Group. These are expected to be settled within a year afterthe reporting date. Deposits and advances to contractors are recognized from the settlementamounts due to contractors. These are applied within one year from the date the deposits andadvances were made.

Accrued expenses consist mainly of accruals for project cost estimate, interest, light and power,marketing costs, professional fees, postal and communication, supplies, repairs and maintenance,transportation and travel, security and insurance. The majority of the accrued expenses accountpertains to marketing costs with amounts of P=528.96 million and P=355.77 million as ofDecember 31, 2013 and 2012, respectively.

Retentions payable pertains to 10% retention from the contractors’ progress billings which will belater released after the completion of contractors’ project. The 10% retention serves as a securityfrom the contractor should there be defects in the project.

Liabilities for purchased land are payables to various real estate property sellers. Under the termsof the agreements executed by the Group covering the purchase of certain real estate properties,the titles of the subject properties shall be transferred to the Group only upon full payment of thereal estate loans.

On various dates in 2013 and 2012 the Group acquired certain land properties which are payableover a period of one to three years. Such liabilities for purchased land with a nominal amount ofP=689.31 million and P=1,411.36 million in 2013 and 2012, respectively, were initially recorded atfair value resulting to a discount of P=8.47 million and P=35.04 million, respectively.



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The fair value of liabilities for purchased land is derived using the discounted cash flow modelusing the discount rate ranging from 0.73% to 3.65% with EIR ranging from 0.73% to 2.85%. Theunamortized discount as of December 31, 2013, and 2012 amounted to P=66.47 million andP=62.81 million, respectively. The related accretion amounted to P=25.55 million, P=17.21 million andP=16.32 million in 2013, 2012 and 2011, respectively (Note 24).

Deferred output tax pertains to the VAT charged to the buyers on installment upon contracting butwhich were not yet collected as of reporting date. Further, upon collection on the installmentreceivables, the equivalent output tax is being included in the current VAT payable on the monthwhere such collection is made.

Commissions payable pertain to fees paid to brokers for services rendered.

Accounts payable, accrued expenses, retentions payable and commissions payable arenoninterest-bearing and are expected to be settled within a year after the reporting date.

Accounts payable - supplier represents construction materials, marketing collaterals, officesupplies and property and equipment ordered and delivered but not yet due. These are expectedto be settled within a year after the recognition period.Accounts payable - buyer pertain to refunds related to the cancellation of contract to sellagreement in which a reasonable refund is required by the Maceda Law and excess of paymentsfor accounts settled by bank financing.

Others include amounts pertaining to other non-trade liabilities such as salaries related premiums,withholding taxes, VAT payable and dividends payable. The majority of this pertains towithholding taxes and VAT payable with amounts of P=87.21 million and P=81.02 million as ofDecember 31, 2013 and 2012, respectively.

19. Customers’ Advances and Deposits

This account consists of customers’ reservation fees, downpayments and excess of collectionsover the recognized receivables based on POC.

The Group requires buyers of residential houses and lots to pay a minimum percentage of thetotal selling price before the two parties enter into a sale transaction. In relation to this, thecustomers’ advances and deposits represent payment from buyers which have not reached theminimum required percentage. When the level of required payment is reached by the buyer, asale is recognized and these deposits and downpayments will be applied against the relatedinstallment contracts receivable.

The excess of collections over the recognized receivables is applied against the POC in thesucceeding years.


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20. Bank Loans and Loans Payable

Bank LoansBank loans pertain to the borrowings of the Group from various local financial institutions.Details follow:

2013 2012Parent company P=8,413,696,564 P=3,909,407,800Subsidiaries 47,385,608 100,435,764

8,461,082,172 4,009,843,564Less current portion 1,414,384,885 2,317,128,962

P=7,046,697,287 P=1,692,714,602

In June 2013, the Parent Company obtained P=1,000.00 million and P=6,000.00 million peso-denominated bank loans from local banks which bear annual fixed interest rate of 5.90% and5.75%, respectively. The loans will mature in June 2018. The principal balance of the loans willbe paid in twelve (12) and twenty (20) equal quarterly installments, respectively.

On April 17, 2013 the Parent Company entered into a bilateral loan agreement with local banks. Aportion of the corporate notes was terminated and bank loans with principal amount ofP=1.60 billion was issued during the year which bear fixed annual interest rate of 7.27% and willmature on April 17, 2017.

On various dates in 2012, the Parent Company obtained P=2,020.00 million peso-denominatedbank loans from a local bank which bear fixed annual interest rate of 5.30% and secured by aholdout on the US dollar deposits amounting US$50.50 million in 2012 (Note 8). The loan wasfully paid in 2013.

On December 9, 2010, the Parent Company obtained a peso-denominated bank loan from a localbank amounting P=1,600 million which bear fixed annual interest rate of 6.50% and will mature onDecember 6, 2015. The loan is secured by a hold-out on the US dollar deposits amountingUS$40.00 million (Note 8).

On November 2, 2010, the Parent Company obtained a peso-denominated bank loan from a localbank amounting P=199.23 million which bear fixed annual interest rate of 7.83% and will mature onOctober 31, 2013. The loan was secured by real estate mortgage of a parcel of land owned byCAPI with a book value amounting P=284.61 million (Note 10). The loan was fully paid in 2013.

On July 30, 2010, the Parent Company obtained a peso-denominated bank loan from a local bankamounting P=207.34 million which bear annual fixed interest rate of 8.39%. The loan was securedby real estate mortgage of certain properties of Brittany and CAPI aggregating P=207.90 million(Note 10). As of December 31, 2012, the bank loan amounted to P=90.18 million. The loan wasfully paid in 2013.

The bank loans of the Parent Company and certain subsidiaries provide for certain restrictions andrequirements with respect to, among others, payment of dividends, incurrence of additionalliabilities, investment and guaranties, mergers or consolidations or other material changes in theirownership, corporate set-up or management, acquisition of treasury stock, disposition andmortgage of assets and maintenance of financial ratios at certain levels. These restrictions andrequirements were complied with by the Group as of December 31, 2013 and 2012.



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Banks loans amounting P=35.34 million and P=30.73 million as of December 31, 2013 and 2012,respectively, were secured by a chattel mortgage on the Group’s transportation equipment(Note 15).

Interest expense on bank loans amounted to P=826.62 million , P=613.56 million andP=871.17 million in 2013, 2012 and 2011, respectively (Note 24).

Loans PayableAs discussed in Note 9 to the consolidated financial statements, loans payable pertain to theremaining balance of “Installment contracts receivable” of Subsidiaries that were sold on a withrecourse basis. These loans bear annual fixed interest rates ranging from 7.00% to 12.00% in2013 and 2012 and 9.50% to 13.00% in 2011, payable on equal monthly installments over amaximum period of 3 to 15 years. The installment contracts receivables serve as the collateral forthe loans payable. This will mature on various dates beginning May 2012 up to December 2027.

21. Notes Payable


2013 2012Dollar denominated bonds P=10,881,861,179 P=6,164,633,560Corporate note facility 2,523,089,195 4,729,842,748Homebuilder bonds 149,364,913 18,252,967

13,554,315,287 10,912,729,275Less current portion 729,411,765 6,164,633,560

P=12,824,903,522 P=4,748,095,715

Homebuilder BondsOn November 16, 2012, the Parent Company offered and issued to the public unsecuredHomebuilder Peso bonds (the Bonds) of up to P=2.5 billion with an initial offering ofP=500.40 million for funding general corporate purposes.

The first tranche was issued in equal monthly installments of up to P=13.9 million over a period ofthirty-six (36) months, commencing on November 16, 2012 at a fixed interest rate of 5.00% perannum and shall mature three (3) years from the initial issue date. For the years endedDecember 31, 2013 and 2012, total bonds issued by the Parent Company amounted toP=159.92 million and P=27.64 million, respectively. The carrying value of the bonds as ofDecember 31, 2013 and 2012 amounted to P=149.36 million and P=18.25 million, respectively.

Other pertinent provisions of the bonds follow:

Redemption at the option of the issuerAt any time prior to November 16, 2015, the Parent Company may redeem the bonds if thebondholder selects the application of payment for the purchase of Vista Land property providedthat: (i) early application of payment is only available to eligible bondholders allowed by law topurchase the selected Vista Land property; (ii) the bondholder expresses his intention to apply thepayment for the purchase of a Vista Land property through written notice to the Parent Company;and (iii) the Parent Company approves the early application of payment. However, the


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bondholder can avail itself of this early application of payment only if: (i) such bondholder is able tofully pay or obtain firm bank or in-house financing; and (ii) the property of the bondholder’s choiceis from what the Parent Company makes available to the bondholder to choose from.

Extension optionThe bondholder may opt to extend the maturity of the bonds held and subscribe additional bondsfor another twenty four (24) months, for and at the same monthly subscription payment, with thefollowing terms:

· The first tranche of the bonds will have a maximum aggregate principal amount ofP=834.00 million, including any and all additional subscriptions;

· All subscriptions held by bondholders who exercised the extension option shall mature on thefifth (5th) anniversary of the initial issue date;

· Upon exercise of the extension option at least six (6) months prior to the initial maturity date,all subscriptions held shall bear interest on principal amount at a fixed rate of 6.75% perannum, applied prospectively from the initial maturity date to the extended maturity date; and

· Interest will not be compounded and shall be payable on the relevant maturity date or on theearly redemption date, as may be applicable, less the amount of any applicable withholdingtaxes.

Corporate Note FacilityOn April 20, 2012, the Parent Company secured a Peso Corporate Note Facility of up toP=4.50 billion from certain financial institutions to fund the Parent Company’s on-going real estatedevelopment projects, to refinance or replace existing borrowings and for general corporatepurposes. The Corporate Notes shall bear fixed interest rate based on applicable bench mark rateon drawdown date plus a certain spread and will mature five (5) years from drawdown date.

On April 24, 2012, the Parent Company fully utilized the credit facility and issued Corporate Notesthat bear annual fixed interest rate of 7.27% and shall mature on April 25, 2017.On June 26, 2012, the Company exercised the over-subscription option and issued additionalcorporate notes amounting P=300.00 million.

CovenantThe Corporate Note Facility provides for the Parent Company to observe certain covenantsincluding, among others, incurrence of additional debt; dividend restrictions; maintenance offinancial ratios; granting of loans; and certain other covenants. These were complied with by theParent Company in 2013 and 2012.

On May 17, 2013, the Company solicited consent from its existing bondholders to amend certainterms and conditions of the Notes. As of June 27, 2013, at least 51% of outstanding amount votedin favor to such amendments.

US$150.34 million NotesOn September 30, 2010, the Parent Company issued US$100.00 million notes with a term of fiveyears from the issue date. The interest rate is 8.25% per annum payable semi-annually in arrearson March 30 and September 30 of each year commencing on March 30, 2011.

On March 30, 2011, an additional note, with the same terms and conditions with the above notes,were issued by the Parent Company amounting US$75.00 million.



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On June 19, 2012, the Parent Company redeemed US$22.00 million out of the US$100.00 millionnotes.

On September 26, 2013, the Parent Company redeemed US$2.66 million out of theUS$75.00 million notes as part of the redemption at the option of the noteholders.

The Notes are unconditionally and irrevocably guaranteed by the subsidiaries of the ParentCompany (Note 30). Other pertinent provisions of the Notes follow:

Redemption at the option of noteholdersAt the option of any noteholder, the Parent Company will redeem the portion of the US$ Notescheduled for redemption on September 30, 2013 at its principal amount. On September 26,2013, the Parent Company redeemed US$2.66 million of the notes as part of this redemptionoption. As of December 31, 2013, the aggregate balance of these notes amounted to P=6,597.74million and is presented as noncurrent portion of notes payable as the redemption option hasalready lapsed.

Redemption at the option of the issuerAt any time prior to September 30, 2013, the Parent Company may redeem up to 35% of theaggregate principal amount of the US Notes originally issued at a redemption price equal to108.25% of the principal amount, plus accrued and unpaid interest, if any, to the date ofredemption with the net cash proceeds of an equity offering; provided that: (i) at least 65% of theaggregate principal amount of US Notes originally issued remains outstanding immediately afterthe occurrence of such redemption and (ii) the redemption occurs within 60 days of the date of theclosing of such equity offering. The Notes contains an equity clawback option. However, noderivative asset was recognized on the prepayment option since the possibility of an equityoffering by the Parent Company is remote.

CovenantsThe Notes provide for the Parent Company and Subsidiaries to observe certain covenantsincluding, among others, incurrence of additional debt; grant of security interest; payment ofdividends; mergers, acquisitions and disposals; and certain other covenants. These werecomplied with by the Parent Company and Subsidiaries in 2013 and 2012.

On May 8, 2013, the Company solicited consent from its existing bondholders to amend certainterms and conditions of the Notes. As of May 29, 2013, 97.6% of outstanding amount voted infavor to such amendments.

US$100.00 million NotesOn October 4, 2013, VII issued US$100.00 million bonds with a term of five years from the issuedate. The interest rate is 6.75% per annum payable semi-annually in arrears on April 4 andOctober 4 of each year commencing on April 4, 2014.

The Notes are unconditionally and irrevocably guaranteed by the Parent Company andSubsidiaries. Other pertinent provisions of the Notes follow:

Redemption at the option of the issuer - equity clawbackAt any time prior to September 30, 2013, the Parent Company may redeem up to 35% of theaggregate principal amount of the US Notes originally issued at a redemption price equal to106.75% of the principal amount, plus accrued and unpaid interest, if any, to the date ofredemption with the net cash proceeds of an equity offering; provided that: (i) at least 65% of theaggregate principal amount of US Notes originally issued remains outstanding immediately afterthe occurrence of such redemption and (ii) the redemption occurs within 60 days of the date of the


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closing of such equity offering. The Notes contains an equity clawback option. However, noderivative asset was recognized on the prepayment option since the possibility of an equityoffering by the Parent Company is remote.

Redemption at the option of the issuer - early redemptionAt any time the Parent Company may redeem all or part of the Notes, at a redemption price equalto 100% of the principal amount of the notes redeemed, plus the applicable premium as of, andaccrued and unpaid interest, if any, to the date of the redemption, subject to the rights of noteholders on the relevant record date to receive interest due on the relevant interest payment date.

CovenantsThe Notes provide for the Group to observe certain covenants including, among others, incurrenceof additional debt; grant of security interest; payment of dividends; mergers, acquisitions anddisposals; and certain other covenants. These were complied with by the Parent Company in2013.

Interest expense on notes payable amounted to P=1,056.41 million, P=836.58 million andP=747.31 million in 2013, 2012 and 2011, respectively (Note 24).

22. Other Noncurrent Liabilities


2013 2012Liabilities for purchased land P=678,461,892 P=1,587,106,201Retentions payable 180,684,956 201,908,717Deferred output tax 178,323,023 165,938,754

P=1,037,469,871 P=1,954,953,672

The fair value of liabilities for purchased land is derived using the discounted cash flow modelusing the discount rate ranging from 0.73% to 3.65% with EIR ranging from 0.73% to 2.85%.

23. Equity

Capital StockThe details of the Parent Company’s capital stock follow:

2013 2012 2011CommonAuthorized shares 11,900,000,000 11,900,000,000 11,000,000,000Par value per share P=1.00 P=1.00 P=1.00Issued shares 8,538,740,614 8,538,740,614 8,538,740,614Treasury shares − 133,910,000 39,643,000

PreferredAuthorized shares 10,000,000,000 10,000,000,000 10,000,000,000Par value per share P=0.01 P=0.01 P=0.10Issued shares 3,300,000,000 − −



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Preferred sharesOn March 21, 2013, the Parent Company issued in favor of Fine Properties, Inc. (“Fine Properties”),3,300.00 million new preferred shares out of the unissued portion of its authorized capital stock atpar or an aggregate issue price of P=33.00 million. The subscription price was fully paid on thesame date.

On October 5, 2012, the Parent Company’s Board of Directors (BOD) approved the amendment ofthe Articles of Incorporation decreasing the par value of the Parent Company’s authorized preferredshares from P=0.10 per share with an aggregate par value of P=1.00 billion to P=0.01 per share with anaggregate par value of P=100.00 million, and the corresponding increase in the number and amountof the Parent Company’s authorized common shares from 11.00 billion common shares withaggregate par value of P=11.00 billion to11.90 billion common shares with aggregate par value ofP=11.90 billion. Thus, as amended, the authorized capital stock of the Parent Company shall beP=12.00 billion divided into 11.90 billion common shares with par value of P=1.00 per share and10 billion preferred shares with par value of P=0.01 per share.

The BOD also approved the revision of certain features of the same preferred shares, morespecifically: (i) the maximum amount of dividend that may be declared and paid on the preferredshares will be reduced from 10% per annum to 5% per annum or the 1-year PDST-R1 rate,whichever is lower; and (ii) the preferred shares shall no longer be entitled to cumulative dividends.

The amended Articles of Incorporation was duly approved by the SEC on November 27, 2012.

The new preferred shares are voting, non-cumulative, non-participating, non-convertible and non-redeemable. The BOD may determine the dividend rate which shall in no case be more than10% per annum.

Registration Track RecordOn July 26, 2007, the Parent Company launched its follow-on offer where a total of8,538,740,614 common shares were offered at an offering price of P=6.85 per share. Theregistration statement was approved on June 25, 2007. The Parent Company has 1,045 and1,074 existing certified shareholders as of December 31, 2013 and 2012, respectively.

Treasury SharesOn January 3, 2013, the Parent Company sold, as authorized by the BOD, all of its existing133,910,000 treasury shares at P=4.75 per share or P=636.07 million. The cost of the treasuryshares and the related additional paid-in capital recognized amounted to P=509.61 million andP=126.47 million, respectively.

On June 15, 2011, the BOD of the Parent Company approved the buyback of its common sharesup to the extent of the total purchase price of P=1.5 billion subject to the prevailing market price atthe time of the buyback over a 24-month period but subject to periodic review by the management.As of December 31, 2012 and 2011, treasury stocks acquired represent 133,910,000 and39,643,000 common shares that amounted to P=509.61 million and P=122.21 million, respectively.

The movements in the Parent Company’s outstanding number of common shares follow:

2013 2012 2011At January 1 8,404,830,614 8,499,097,614 8,538,740,614Treasury shares acquired − (94,267,000) (39,643,000)Treasury shares sold 133,910,000 − −At December 31 8,538,740,614 8,404,830,614 8,499,097,614


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Retained EarningsIn accordance with SRC Rule No. 68, as Amended (2011), Annex 68-C, the Parent Company’sretained earnings available for dividend declaration as of December 31, 2013 amounted toP=3,002.49 million.

Retained earnings include the accumulated equity in undistributed earnings of consolidatedsubsidiaries of P=16.97 billion and P=14.63 billion in 2013 and 2012, respectively. These are notavailable for dividends until declared by the subsidiaries.

Also, the retained earnings is restricted to payments of dividends to the extent of cost of treasuryshares in the amount of P=509.61 million as of and for the year ended December 31, 2012.

Under the Tax Code of the Philippines, publicly listed companies are allowed to accumulateretained earnings in excess of capital stock and are exempt from improperly accumulatedearnings tax. Nonetheless, the retained earnings available for dividend declaration, afterreconciliation, as of and for the year ended December 31, 2013 amounted to P=20,471.22 million,which is below the paid-up capital of P=28,026.72 million. The paid up capital includes capital stockand additional paid in capital.

On September 11, 2013, the BOD approved the declaration of a regular cash dividend amountingP=870.95 million or P=0.102 per share, payable to all stockholders of record as of September 26,2013. The said dividends were paid on October 22, 2013.

On June 15, 2012, the BOD approved the declaration of a special cash dividend amountingP=336.90 million or P=0.04 per share, payable to all stockholders of record as of July 2, 2012. Thesaid dividends were paid on July 26, 2012. Subsequently, on September 17, 2012, the BODapproved the declaration and payment of cash dividends from the unrestricted retained earningsof the Parent Company amounting P=705.30 million or P=0.084 per share payable to stockholders ofrecord at the close of business on October 2, 2012. The said dividends were paid on October 26,2012.

On May 17, 2011, the BOD approved the declaration and payment of cash dividends from theretained earnings of the Parent Company amounting P=298.86 million or P=0.035 per share payableto stockholders of record at the close of business on June 1, 2011. The said dividends were paidon June 28, 2011. Subsequently, on September 13, 2011, the BOD approved the declaration andpayment of cash dividends from the unrestricted retained earnings of the Parent Companyamounting P=594.95 million or P=0.07 per share payable to stockholders of record at the close ofbusiness on September 28, 2011. The said dividends were paid on October 24, 2011.

Capital ManagementThe primary objective of the Group’s capital management policy is to ensure that debt and equitycapital are mobilized efficiently to support business objectives and maximize shareholder value.The Group establishes the appropriate capital structure for each business line that properlyreflects its premier credit rating and allows it the financial flexibility, while providing it sufficientcushion to absorb cyclical industry risks.

The Group considers debt as a stable source of funding. The Group lengthened the maturityprofile of its debt portfolio and makes it a point to spread out its debt maturities by not having asignificant percentage of its total debt maturing in a single year.



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The Group manages its capital structure and makes adjustments to it, in the light of changes ineconomic conditions. It monitors capital using leverage ratios on both a gross debt and net debtbasis. As of December 31, 2013 and 2012, the Group had the following ratios:

2013 2012Current ratio 388% 220%Debt-to-equity ratio 45% 34%Net debt-to-equity ratio 15% 17%Asset-to-equity ratio 174% 163%

As of December 31, 2013 and 2012, the Group had complied with all externally imposed capitalrequirements (Notes 20 and 21). No changes were made in the objectives, policies or processesfor managing capital during the years ended December 31, 2013 and 2012.

The Group considers as capital the equity attributable to equity holders of the Group.

The following table shows the component of the Parent Company’s equity which it manages ascapital as of December 31, 2013 and 2012:

2013 2012Total paid-up capital P=28,026,716,942 P=27,867,250,474Retained earnings 20,471,220,850 16,279,663,710Other comprehensive income (loss) 27,501,167 (2,791,816)Treasury shares − (509,606,359)

P=48,525,438,959 P=43,634,516,009

Financial risk assessmentThe Group’s financial condition and operating results would not be materially affected by thecurrent changes in liquidity, credit, interest, currency and market conditions.

Credit risks continue to be managed through defined credit policies and continuing monitoring ofexposure to credit risks. The Group’s base of counterparties remains diverse. As such, it is notexposed to large concentration of credit risk.

Exposure to changes in interest rates is reduced by regularly availing of short-term loans as itrelates to its sold installment contracts receivables in order to cushion the impact of potentialincrease in loan interest rates.

Exposure to foreign currency holdings are as follows:

2013 2012Cash and cash equivalents US$8,238,175 US$5,864,723Short-term cash investments 20,000,000 20,000,000Long-term cash investments 113,500,000 113,500,000AFS financial assets 29,806,418 −HTM investments 65,441,529 −Notes payable 250,340,000 150,173,777

Liquidity risk is addressed with long-term funding already locked in, while funds are placed on ashort-term placement.


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24. Interest Income and Interest and Other Financing Charges

Below are the details of interest income:

2013 2012 2011Installment contracts receivable P=637,480,048 P=636,298,170 P=560,416,037Accretion of unamortized discount

(Note 9) 41,647,059 57,227,262 68,564,387679,127,107 693,525,432 628,980,424

Cash, short-term and long-term cash investments 266,465,994 235,068,888 224,132,283HTM investments 15,579,758 − −

P=961,172,859 P=928,594,320 P=853,112,707

Interest and other financing charges consist of:

2013 2012 2011Interest expense on:

Bank loans (Note 20) P=826,624,123 P=613,563,496 P=871,166,749Notes payable (Note 21) 1,056,413,105 836,583,148 747,312,940

1,883,037,228 1,450,146,644 1,618,479,689Amounts capitalized (Note 10) (585,498,174) (220,045,157) (305,593,326)Accretion of unamortized discount (Note 18) 25,545,646 17,205,020 16,323,402Interest cost on benefit obligation (Note 28) 11,655,951 10,280,288 18,469,340

P=1,334,740,651 P=1,257,586,795 P=1,347,679,105

The capitalization rate used to determine the borrowings eligible for capitalization is 8.41% in 2013and 8.31% in 2012, 8.94% in 2011.

25. Miscellaneous Income

Miscellaneous income mostly pertains to income from forfeited reservation fees and partialpayments from customers whose sales contracts are cancelled before completion of requireddownpayment. It also includes rental income earned from investment properties amountingP=60.78 million, P=24.29 million and P=5.71 million in 2013, 2012 and 2011, respectively (Note 14).

26. Cost and Expenses

Cost of real estate salesCost includes acquisition cost of subdivision land, construction and development cost andcapitalized borrowing costs.

Development cost as a percentage of cost of real estate sale is approximately 75% to 85% as ofDecember 31, 2013, 2012 and 2011, respectively.



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Operating expensesThis account consists of:

2013

2012(As restated -

Note 3)

2011(As restated -

Note 3)Advertising and promotions P=1,462,051,797 P=1,105,034,248 P=764,626,235Commissions 1,112,812,320 913,303,471 898,590,725Salaries, wages and employees

benefits (Notes 28 and 30) 717,500,749 613,843,607 400,924,126Repairs and maintenance 383,328,476 307,661,963 262,501,350Depreciation and amortization (Notes 14, 15 and 17) 235,055,822 154,717,814 101,754,628Occupancy costs 232,681,730 204,752,617 182,415,835Professional fees 216,003,627 174,254,869 248,707,614Taxes and licenses 149,846,881 89,961,803 65,958,957Representation and entertainment 112,083,184 87,677,999 65,643,955Transportation and travel 86,536,174 88,788,802 74,402,883Office expenses 38,413,956 47,096,329 50,203,790Provision for impairment losses on receivables (Note 9) 1,846,369 27,748,795 –Provision for losses on writedownof inventory (Notes 10 and 17) 1,235,771 – –Miscellaneous 134,326,278 168,802,118 150,563,272

P=4,883,723,134 P=3,983,644,435 P=3,266,293,370

Operating expenses represent the cost of administering the business of the Group. These arerecognized when the related services and costs have been incurred.

Rent expensesThe Group entered into various lease agreements for administrative and selling purposes. Theseagreements are renewed on an annual basis with advanced deposits. Rent expenses includedunder “Occupancy costs” amounted to P=59.45 million, P=54.59 million and P=41.81 million in 2013,2012 and 2011, respectively (Note 33).

Miscellaneous expensesMiscellaneous expenses include dues and subscriptions, donations and other expenditures.

27. Others


2013 2012 2011Equity in net income (loss) of jointventure (Note 16) P=13,586,274 (P=123,251) P=−Dividend income (Note 8) 2,625 − 151,342Foreign exchange gains (losses) -

net(Note 21) (54,340,142) 30,995,704 62,017,881

Gain on disposal of an associate (Note 13) − 83,881,058 −Equity in net loss of an associate

(Note 13) − (2,032,412) (6,172,562)(P=40,751,243) P=112,721,099 P=55,996,661


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28. Retirement Plan

The Group has noncontributory defined benefit pension plan covering substantially all of its regularemployees. The benefits are based on current salaries and years of service and relatedcompensation on the last year of employment. The retirement is the only long-term employeebenefit.

The principal actuarial assumptions used to determine the pension benefits with respect to thediscount rate, salary increases and return on plan assets were based on historical and projectednormal rates.

The components of pension expense follow:

2013

2012(As restated -

Note 3)

2011(As restated -

Note 3)Current service cost (Note 26) P=84,791,952 P=58,516,734 P=41,421,300Interest cost (Note 24) 11,655,951 10,280,288 18,469,340Total pension expense P=96,447,903 P=68,797,022 P=59,890,640

Funded status and amounts recognized in the consolidated statements of financial position for thepension plan follow:

2013 2012 2011Defined benefit obligation P=436,120,506 P=377,205,899 P=286,591,400Plan assets (250,700,633) (190,141,599) (129,169,900)Liability recognized in the

consolidated statements offinancial position P=185,419,873 P=187,064,300 P=157,421,500

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

2013 2012 2011Balance at beginning of year P=377,205,899 P=286,591,400 P=232,154,800Current service cost 84,791,952 58,516,734 41,421,300Interest cost 23,405,525 20,145,913 22,062,900Actuarial loss (gain) (49,282,870) 11,951,852 (9,047,600)Balance at end of year P=436,120,506 P=377,205,899 P=286,591,400

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

2013

2012(As restated -

Note 3)

2011(As restated -

Note 3)Balance at January 1 P=190,141,599 P=129,169,900 P=71,205,104Interest income included in net

interest cost 11,749,574 9,865,630 6,182,279Actual return excluding amount

included in net interest cost (6,061,979) (2,474,497) (1,198,283)Contributions 54,871,439 53,580,566 52,980,800Balance at December 31 P=250,700,633 P=190,141,599 P=129,169,900



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The movements in the combined net pension liabilities follow:

2013

2012(As restated -

Note 3)

2011(As restated -

Note 3)Balance at beginning of year P=187,064,300 P=157,421,500 P=160,949,696Pension expense 96,447,903 68,797,022 59,890,640Total amount recognized in OCI (43,220,891) 14,426,344 (10,438,036)Contributions (54,871,439) (53,580,566) (52,980,800)Balance at end of year P=185,419,873 P=187,064,300 P=157,421,500

The Group immediately recognized to income actuarial gains and losses.

The assumptions used to determine the pension benefits for the Group are as follows:

2013 2012Discount rates 4.48% 5.75%Salary increase rate 9.00% 8.07%

The distribution of the plan assets at year end follows:

2013 2012AssetsCash P=195,727,908 P=136,995,950Investments in government securities 54,227,150 52,380,396Receivables 1,007,340 765,253

P=250,962,398 P=190,141,599

LiabilitiesTrust fee payable P=261,765 P=−

P=250,700,633 P=190,141,599

The carrying amounts disclosed above reasonably approximate fair value at year-end. The overallexpected rate of return on assets is determined based on the market prices prevailing on thatdate, applicable to the period over which the obligation is to be settled. The actual return on planassets amounted to P=6.06 million, P=2.35 million and P=4.98 million in 2013, 2012 and 2011,respectively.

The net unrealized gains (losses) on investments in government securities amounted toP=1.85 million and P=1.05 million as of December 31, 2013 and 2012, respectively.

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

2013 2012 2011 2010 2009Defined benefit obligation P=436,120,506 P=377,205,899 P=286,591,400 P=232,154,800 P=150,440,899Plan assets (250,700,633) (190,141,599) (129,169,900) (71,205,104) (17,986,869)Excess P=185,419,873 P=187,064,300 P=157,421,500 P=160,949,696 P=132,454,030


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Gains (losses) on experience adjustments are as follows:

2013 2012 2011 2010 2009Defined benefitobligation

(P=27,192,897) P=16,662,348 (P=43,004,100) P=27,762,700 P=1,526,400

Plan assets – – 1,386,296 – –

The Group expects to contribute P=53.96 million to its retirement fund in 2014.

The sensitivity analyses that follow has been determined based on reasonably possible changesof the assumption occurring as at December 31, 2013, assuming if all other assumptions wereheld constant.

Rates PVO

Discount rate 7.33% +1% (P=69,598,982)-1% 124,669,301

Salary increase 10.00% +1% P=105,627,707-1% (83,058,763)

Each year, an Asset-Liability Matching Study (ALM) is performed with the result being analyzed interms of risk-and-return profiles. Union Bank’s (UB) current strategic investment strategy consistsof 78.13% of cash, 21.65% of investments in government securities, and 0.22% receivables. Forthe Group other than UB, the principal technique of the Group’s ALM is to ensure the expectedreturn on assets to be sufficient to support the desired level of funding arising from the definedbenefit plans.

29. Income Tax

Provision for income tax consists of:

2013

2012(As restated -

Note 3)

2011(As restated -

Note 3)Current: RCIT/MCIT P=555,002,939 P=468,540,954 P=319,599,409 Final 22,567,852 17,862,229 18,020,227Deferred (165,287,949) (377,790,098) (274,836,739)

P=412,282,842 P=108,613,085 P=62,782,897



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The components of the Group’s deferred taxes are as follows:

Net deferred tax assets:

2013

2012(As restated -

Note 3Deferred tax assets on: NOLCO P=28,727,762 P=32,737,064 Accrual of retirement costs 10,660,416 2,636,718 Excess of tax basis over book basis of deferred gross profit on real estate sales 3,124,152 – Unamortized discount on receivables 1,537,852 749,063

44,050,182 36,122,845Deferred tax liabilities on:

Excess of book basis over tax basis of deferred gross profit on real estate sales – 31,001,434Capitalized interest and other expenses 4,733,055 –

4,733,055 31,001,434P=39,317,127 P=5,121,411

Net deferred tax liabilities:

2013

2012(As restated -

Note 3Deferred tax assets on: Allowance for probable losses P=109,782,284 P=109,782,284 NOLCO 69,047,429 61,464,482 Accrual of retirement costs 56,863,364 1,725,066 Carryforward benefit of MCIT 26,568,594 16,820,385 Unamortized discount on receivables 15,956,762 8,605,393 Unrealized foreign exchange losses – 1,326,482

278,218,433 199,724,092Deferred tax liabilities on:

Excess of book basis over tax basis of deferred gross profit on real estate sales 1,552,835,669 1,738,482,831 Capitalized interest and other expenses 170,091,397 31,708,615 Unamortized bond transaction cost 60,995,385 58,667,450 Discount on rawlands payable – 6,670,461 Unrealized foreign exchange gain 301,500 95,994

1,784,223,951 1,835,625,351P=1,506,005,518 P=1,635,901,259


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As of December 31, 2013 and 2012, the Group has deductible temporary differences, NOLCO andMCIT that are available for offset against future taxable income for which no deferred tax assetshave been recognized as follows:

2013 2012NOLCO P=1,949,009,223 P=2,128,596,329Accrual of retirement cost 12,061,944 7,058,698MCIT 1,314,771 –Allowance for probable losses 2,133,124 1,579,213Unamortized discount on receivables – 182,252Writedown on land and improvements – 839,183,299Unrealized foreign exchange loss (16,641,254) 44,484,340

P=1,947,877,808 P=3,021,084,131

Deferred tax assets are recognized only to the extent that taxable income will be available againstwhich the deferred tax assets can be used. The subsidiaries will recognize a previouslyunrecognized deferred tax asset to the extent that it has become probable that future taxableincome will allow the deferred tax asset to be recovered.

As of December 31, 2013, the details of the unused tax credits from the excess of the MCIT overRCIT and NOLCO, which are available for offset against future income tax payable and taxableincome, respectively, over a period of three (3) years from the year of inception, follow:

NOLCO

Inception Year Amount Used/Expired Balance Expiry Year2009 P=390,938,827 (P=390,938,827) P=– 20122010 265,586,951 (265,586,951) – 20132011 1,004,356,663 (70,581,930) 933,774,733 20142012 1,251,385,275 (3,086,550) 1,248,298,725 20152013 1,197,544,475 – 1,197,544,475 2016

P=4,109,812,191 (P=730,194,258) P=3,379,617,933

MCIT

Inception Year Amount Used/Expired Balance Expiry Year2009 P=530,299 (P=530,299) P=– 20122010 1,936,966 (1,936,966) – 20132011 8,389,046 (1,806,416) 6,582,630 20142012 8,298,866 – 8,298,866 20152013 13,001,869 – 13,001,869 2016

P=32,157,046 (P=4,273,681) P=27,883,365



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The reconciliation of the provision for income tax computed at the statutory income tax rate to theprovision for income tax shown in profit or loss follows:

2013 2012 2011Provision for income tax computed at the statutory income tax rate 30.00% 30.00% 30.00%Additions to (reductions in) income tax resulting from: Nondeductible interest and other expenses 6.92% 2.43% 4.72% Change in unrecognized deferred tax assets (14.07%) (22.82%) (9.74%) Tax-exempt income (19.21%) (12.12%) (14.47%) Expired MCIT and NOLCO 8.87% 9.96% (2.26%) Interest income already subjected to final tax (0.99%) (1.55%) (1.06%) Equity in net loss (income) of an associate 0.01% 0.05% Others (3.99%) (3.49%) (5.49%)Provision for income tax 7.53% 2.42% 1.75%

Board of Investments (BOI) IncentivesThe BOI issued in favor of certain subsidiaries in the Group a Certificate of Registration asDeveloper of Mass Housing Projects for its 19 projects in 2012 and 13 real estate projects in 2011,in accordance with the Omnibus Investment Code of 1987. Pursuant thereto, the projects havebeen granted an Income Tax Holiday for a period of either three years for new projects, or fouryears for expansion projects, commencing from the date of issuance of the Certificate ofRegistration.

30. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party in making financial and operating decisions or the parties are subject to commoncontrol or common significant influence (referred to herein as “affiliates”). Related parties may beindividuals or corporate entities.

The Group in their regular conduct of business has entered into transactions with affiliates andother related parties principally consisting of advances and reimbursement of expenses andpurchase and sale of real estate properties. The Group’s policy is to settle its intercompanyreceivables and payables on a net basis.

The consolidated statement of financial position include the following amounts resulting from theforegoing transactions which represent amounts receivable (payable) to related parties as ofDecember 31, 2013 and 2012:


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December 31, 2013

Related Party Relationship Nature of TransactionAmount/Volume

OutstandingBalance Terms Conditions

Brittany EstatesCorporations

Entities underCommon Control Nontrade Receivables P=5,620,868 P=131,449,597 Non-interest bearing

Unsecured, Noimpairment

Fine Properties, Inc. Ultimate Parent Nontrade Payables (37,593,119) (11,867,014) Non-interest bearing Unsecured

Masterpiece Asia, Inc.Entities underCommon Control Nontrade Receivables (7,760,392) 9,957,137 Non-interest bearing


Manuela CorporationEntities underCommon Control Nontrade Receivables 1,211,666 9,878,297 Non-interest bearing


Bria Homes, IncEntities underCommon Control Nontrade Receivables 61,055,553 61,055,553 Non-interest bearing


Vista Land SingaporeEntities underCommon Control Nontrade Receivables (53,027) (53,027) Non-interest bearing Unsecured

P=22,481,549 P=200,420,543

December 31, 2012

Related Party Relationship Nature of TransactionAmount/Volume

OutstandingBalance Terms Conditions

Brittany Estates, Corp.Entities undercommon control Nontrade receivables P=23,500,000 P=125,828,729 Non-interest bearing

Unsecured, noimpairment

Fine Properties, Inc. Ultimate Parent Nontrade receivables 25,726,105 25,726,105 Non-interest bearingUnsecured, no

impairment

Nontrade payables 311,392,535 − Non-interest bearingUnsecured, no

impairment

Masterpiece Asia, Inc.Entities undercommon control Nontrade receivable – 17,717,529 Non-interest bearing


Manuela CorporationEntities undercommon control Nontrade receivables 122,720 8,666,630 Non-interest bearing


P=360,741,360 P=177,938,993

As discussed in Note 21, the US$100 million Notes issued by VII are unconditionally andirrevocably guaranteed by the Parent Company and Subsidiaries. No fees are charged for theseguarantee agreements.

Terms and conditions of transactions with related parties Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash.

These principally consist of dividends, advances, reimbursement of expenses and managementincome. As of December 31, 2013 and 2012, the Group has not made any provision forimpairment loss relating to amounts owed by related parties. This assessment is undertaken eachfinancial year by examining the financial position of the related party and the market in which therelated party operates.

Except as stated in Notes 18 and 20 to the consolidated financial statements, there have been noguarantees provided or received for any related party receivables or payables.

The compensation of key management personnel by benefit type follows:

2013 2012 2011Short-term employee benefits P=87,101,718 P=82,954,017 P=75,680,388Post-employment benefits 14,029,115 13,361,061 12,080,609

P=101,130,833 P=96,315,078 P=87,760,997



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31. Earnings Per Share

The following table presents information necessary to compute the EPS:

2013

2012(As restated -

Note 3

2011(As restated -

Note 3Basic and Diluted EPSa) Net income attributable to

equity holders of Parent P=5,062,508,683 P=4,385,701,100 P=3,520,677,402b) Weighted average common

shares 8,538,004,845 8,397,740,377 8,525,434,414c) Earnings per share (a/b) P=0.593 P=0.522 P=0.413

The 2011 EPS have been retroactively computed to consider the effects of the reciprocal holdingsattributable to Starmalls’s ownership in the Parent Company which was disposed in August 2012(Note 13).

There were no potential dilutive common shares for the years ended December 31, 2013, 2012and 2011.

32. Financial Assets and Liabilities

The Group uses the following three-level hierarchy for determining and disclosing the fair value offinancial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;Level 2: other valuation techniques involving inputs other than quoted prices included in

Level 1 that are observable for the asset or liability, either directly or indirectly; andLevel 3: other valuation techniques involving inputs for the asset or liability that are not

based on observable market data (unobservable inputs).

The following methods and assumptions were used to estimate the fair value of each class offinancial instrument for which it is practicable to estimate such value:

Cash and cash equivalents and short-term cash investments: Due to the short-term nature of theaccount, the fair value of cash and cash equivalents and short-term cash investments approximatethe carrying amounts in the consolidated statements of financial position.

Installment contracts receivables: Estimated fair value of installment contracts receivables isbased on the discounted value of future cash flows using the prevailing interest rates for similartypes of receivables as of the reporting date using the remaining terms of maturity. The discountrate used ranged from 1.33% to 3.00% in 2013 and 1.86% to 4.00% in 2012.


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Other receivables: due to the short-term nature of the account, the fair value of other receivablesapproximates the carrying amounts.

Receivable from related parties: Due to the short-term nature of the account, carrying amountsapproximate their fair values.

Long-term cash investments: The fair values are based on the discounted value of future cashflows using the applicable rates for similar types of instruments. The discount rate used rangesfrom 3.75% to 4.00% in 2013 and 2012.

AFS financial assets: for AFS investment in unquoted equity securities, these are carried andpresented at cost since fair value is not reasonably determine due to the unpredictable nature offuture cash flows and without any other suitable methods of arriving at a reliable fair value.

The AFS financial assets carried at cost are preferred shares of a utility company issued to theGroup as a consequence of its subscription to the electricity services of the said utility companyneeded for the Group’s residential units. The said preferred shares have no active market and theGroup does not intend to dispose these because these are directly related to the continuity of itsbusiness.

For shares in open ended investment companies, fair value is by reference to net asset value pershare.

HTM investments: The fair value of HTM investments that are actively traded in organizedfinancial markets is determined by reference to quoted market bid prices, at the close of businesson the reporting date.

Investment properties: The valuation techniques adopted for the measurement of fair values arethe market approach for the land and cost approach for the buildings and building improvements.

Accounts and other payables: fair values of accounts and other payables approximate theircarrying amounts in the consolidated statement of financial position due to the short-term nature ofthe transactions.

Bank loans, loans payable, notes payable and liabilities for purchased land: estimated fair valuesof bank loans and liabilities for purchased land are based on the discounted value of future cashflows using the applicable rates for similar types of loans. Interest rates used in discounting cashflows ranges from 5.00% to 12.00% in 2013 and 5.30% to 12.00% in 2012 using the remainingterms to maturity.



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The following table provides the fair value measurement hierarchy of the Group’s financial assetsand liabilities recognized as of December 31, 2013 and 2012:

December 31, 2013Level 1 Level 2 Level 3 Total

AssetsFinancial assets measured at fair value: AFS financial assets - mutual funds P=1,323,255,934 P=− P=− P=1,323,255,934Assets for which fair values aredisclosed: Installment contract receivables − − 22,939,872,600 22,939,872,600 Investment properties – land − 8,644,780,892 − 8,644,780,892 Long-term cash investments − − 5,348,984,130 5,348,984,130 HTM investments 2,891,900,873 − − 2,891,900,873LiabilitiesOther financial liabilities for which fair

values are disclosed: Bank loans P=− P=− P=8,547,750,882 P=8,547,750,882 Loans payables − − 3,171,482,881 3,171,482,881 Liabilities for purchased land − − 1,515,032,565 1,515,032,565 Notes payable − − 13,826,707,976 13,826,707,976

December 31, 2012Level 1 Level 2 Level 3 Total

AssetsAssets for which fair values are disclosed: Installment contract receivables P=− P=− P=19,578,200,113 P=19,578,200,113 Investment properties - land − 8,437,287,407 − 8,437,287,407 Long-term cash investments − − 4,692,127,632 4,692,127,632LiabilitiesOther financial liabilities for which fair values

are disclosed: Bank loans P=− P=− P=4,351,786,668 P=4,351,786,668 Loans payables − − 3,041,780,681 3,041,780,681 Liabilities for purchased land − − 1,859,626,061 1,859,626,061 Notes payable − − 13,687,711,026 13,687,711,026

There were no transfers among Levels 1, 2 and 3 in 2013.

Financial Risk Management Objectives and PoliciesFinancial riskThe Group’s principal financial liabilities comprise of bank loans, loans payable, notes payable,accounts and other payables and liabilities for purchased land. The main purpose of the Group’sfinancial liabilities is to raise financing for the Group’s operations. The Group has various financialassets such as installment contracts receivables, cash and cash equivalents and short-term, long-term cash investments, HTM investments and AFS financial assets which arise directly from itsoperations. The main risks arising from the use of financial instruments are interest rate risk,foreign currency risk, credit risk, equity price risk and liquidity risk.

The BOD reviews and approves with policies for managing each of these risks. The Groupmonitors market price risk arising from all financial instruments and regularly report financialmanagement activities and the results of these activities to the BOD.

The Group’s risk management policies are summarized below. The exposure to risk and how theyarise, as well as the Group’s objectives, policies and processes for managing the risk and themethods used to measure the risk did not change from prior years.

Cash flow interest rate riskThe Group’s exposure to market risk for changes in interest rates, relates primarily to its financialassets and liabilities that are interest-bearing.


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The Group’s policy is to manage its interest cost by entering into fixed rate debts. The Group alsoregularly enters into short-term loans as it relates to its sold installment contracts receivables inorder to cushion the impact of potential increase in loan interest rates.

The table below shows the financial assets and liabilities that are interest-bearing:

December 31, 2013 December 31, 2012Effective

Interest Rate AmountEffective

Interest Rate AmountFinancial assetsFixed rateCash and cash equivalents (excluding

cash on hand) 0.25% to 5.00% P=4,506,158,395 1.00% to 3.00% P=1,933,028,894Short-term cash investments 1.75% to 4.00% 1,056,744,918 1.75% to 4.00% 915,194,634Long-term cash investments 3.75% to 4.00% 5,038,832,500 3.75% to 4.00% 4,659,175,000HTM investments 1.62% to 9.50% 2,905,276,692 − −Installment contracts receivable 1.33% to 2.97% 22,933,176,127 1.86% to 4.00% 19,495,284,889

P=36,440,188,632 P=27,002,683,417

Financial liabilitiesFixed rateNotes payable 5.00% to10.31% P=13,554,315,287 8.25% P=10,912,729,275Bank loans 5.75% to 7.50% 8,461,082,172 5.30% to 8.40% 4,009,843,564Loans payable 7.00% to12.00% 3,149,176,216 9.39% to 15.94% 2,800,241,021Liabilities for purchased land 7.00% to12.00% 1,545,681,334 8.25% 1,915,028,426

P=26,710,255,009 P=19,637,842,286

As of December 31, 2013 and 2012, the Group’s income and operating cash flows aresubstantially independent of changes in market interest rates.

Foreign exchange riskThe Group’s foreign exchange risk results primarily from movements of the Philippine pesoagainst the United States Dollar (USD). Approximately 20.46% and 27.50% of the debt of theGroup as of December 31, 2013 and 2012, respectively, are denominated in USD. The Group’sforeign currency-denominated debt comprises of the Bonds in 2013 and 2012. Below are thecarrying values and the amounts in US$ of these foreign currency denominated financial assetsand liabilities.

December 31, 2013 December 31, 2012Peso US$ Peso US$

Cash and cash equivalents P=365,733,779 US$8,238,175 P=240,746,879 US$5,864,723Short-term cash investments 887,900,000 20,000,000 821,000,000 20,000,000Long-term cash investments 5,038,832,500 113,500,000 4,659,175,000 113,500,000AFS financial assets 1,323,255,927 29,806,418 − −HTM investments 2,905,276,680 65,441,529 − −Notes payable (11,113,844,300) (250,340,000) 6,164,633,546 150,173,777

In translating the foreign currency- denominated monetary assets in peso amounts, the PhilippinePeso - US dollar exchange rates as of December 31, 2013 and 2012 used were P=44.39 andP=41.05 to US$1.00.



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The following table demonstrates the sensitivity to a reasonably possible change in the US dollarexchange rate until its next annual reporting date, with all other variables held constant, of theGroup’s 2013 and 2012 profit before tax (due to changes in the fair value of monetary assets andliabilities) as of December 31, 2013 and 2012.

December 31, 2013 December 31, 2012Increase/Decrea

sein US Dollar rate

Effect onincome

before tax

Increase/Decrease

in US Dollar rate

Effect onincome

before taxCash and cash equivalents +1.45% 5,303,140 +1.20% 2,888,963

-1.45% (5,303,140) -1.20% (2,888,963)Short-term cash investments +1.45% 12,874,550 +1.20% 9,852,000

-1.45% (12,874,550) -1.20% (9,852,000)Long-term cash investments +1.45% 73,063,071 +1.20% 55,910,100

-1.45% (73,063,071) -1.20% (55,910,100)HTM investments +1.45% 42,126,512 − −

-1.45% (42,126,512) − −AFS financial assets +1.45% 19,187,211 − −

-1.45% (19,187,211) − −Notes payable +1.45% (161,150,742) +1.20% (73,975,603)

-1.45% 161,150,742 -1.20% 73,975,603

The assumed movement in basis points for foreign exchange sensitivity analysis is based on thecurrently observable market environment, showing no material movements as in prior years.

There are no items affecting equity except for those having impact on profit or loss.

Credit riskThe Group transacts only with recognized and creditworthy third parties. The Group’s receivablesare monitored on an ongoing basis resulting to manageable exposure to bad debts. Real estatebuyers are subject to standard credit check procedures, which are calibrated based on thepayment scheme offered. The Group’s respective credit management units conduct acomprehensive credit investigation and evaluation of each buyer to establish creditworthiness.

Receivable balances are being monitored on a regular basis to ensure timely execution ofnecessary intervention efforts. In addition, the credit risk for installment contracts receivables ismitigated as the Group has the right to cancel the sales contract without need for any court actionand take possession of the subject house in case of refusal by the buyer to pay on time the dueinstallment contracts receivable. This risk is further mitigated because the corresponding title tothe subdivision units sold under this arrangement is transferred to the buyers only upon fullpayment of the contract price and the requirement for remedial procedures is minimal given theprofile of buyers.

With respect to credit risk arising from the other financial assets of the Group, which arecomprised of cash and cash equivalents, short-term and long-term cash investments and AFSfinancial assets, the Group’s exposure to credit risk arises from default of the counterparty, with amaximum exposure equal to the carrying amount of these instruments. The Group manages itscash by maintaining cash accounts with banks which have demonstrated financial soundness forseveral years. The Group’s investments in AFS are incidental to its housing projects and areconsidered by the Group to be of high quality because these are investments with the biggestelectric utility company in the country.


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The table below shows the comparative summary of maximum credit risk exposure on financialassets as of December 31, 2013 and 2012:

2013Maximum

Credit ExposureFair Value of

CollateralNet Exposure to

Credit RiskFinancial

EffectLoans and ReceivablesCash and cash equivalents

(excluding cash on hand) P=4,506,158,395 P=– P=4,506,158,395 P=–Short-term cash investments 1,056,744,918 – 1,056,744,918 –Receivables

Installment contractsreceivables 22,933,176,127 32,325,715,534 79,411,140 22,933,176,127

Others 3,504,014,861 – 3,504,014,861 –Long-term cash investments 5,038,832,500 – 5,038,832,500 –

37,038,926,801 32,325,715,534 14,185,161,814 22,933,176,127HTM investments 2,905,276,692 – 2,905,276,692 –AFS Financial AssetsInvestments in mutual funds 1,323,255,934 – 1,323,255,934 –Investments in unquoted equity

shares 41,499,183 – 41,499,183 –P=41,308,958,610 P=32,325,715,534 P=18,455,193,623 P=22,933,176,127

2012Maximum

Credit ExposureFair Value of

CollateralNet Exposure to

Credit RiskFinancial

EffectLoans and ReceivablesCash and cash equivalents

(excluding cash on hand) P=1,933,028,894 P=– P=1,933,028,894 P=–Short-term cash investments 915,194,634 – 915,194,634 –Receivables

Installment contractsreceivables 19,495,284,888 34,344,963,867 85,606,482 19,495,284,888

Others 3,263,834,407 – 3,263,834,407 –Long-term cash investments 4,659,175,000 – 4,659,175,000 –

30,266,517,823 34,344,963,867 10,856,839,417 19,495,284,888AFS Financial AssetsInvestments in unquoted equity

shares 41,499,183 – 41,499,183 –P=30,308,017,006 P=34,344,963,867 P=10,898,338,600 P=19,495,284,888

Given the Group’s diverse base of counterparties, it is not exposed to large concentrations ofcredit risk.

As of December 31, 2013 and 2012, the aging analyses of past due but not impaired receivables,presented per class are as follows:

December 31, 2013

Neither Past Total of Past ImpairedDue Nor Past Due But Not Impaired Due But Not Financial

Impaired <30 days 30-60 days 60-90 days >90 days Impaired Assets TotalInstallment contract

receivables P=21,925,311,841 P=135,728,642 P=125,215,479 P=86,647,366 P= 626,156,350 P=973,747,837 P=34,116,449 P=22,933,176,127Other receivables 3,164,054,956 12,813,535 1,796,853 11,553,301 22,919,522 49,083,211 290,876,694 3,504,014,861Total P=25,089,366,797 P=148,542,177 P=127,012,332 P=98,200,667 P=649,075,872 P=1,022,831,048 P=324,993,143 P=26,437,190,988

- 71 -

*SGVFS006042*

December 31, 2012

Neither Past Total of Past ImpairedDue Nor Past Due But Not Impaired Due But Not FinancialImpaired <30 days 30-60 days 60-90 days >90 days Impaired Assets Total

Installment contractreceivables P=17,991,974,414 P=887,975,265 P=346,371,760 P=42,624,860 P=192,222,140 P=1,469,194,025 P=34,116,449 P=19,495,284,888

Other receivables 2,945,979,403 9,500,992 4,327,799 949,421 14,046,467 28,824,679 289,030,325 3,263,834,407Total P=20,937,953,817 P=897,476,257 P=350,699,559 P=43,574,281 P=206,268,607 P=1,498,018,704 P=323,146,774 P=22,759,119,295

Those accounts that are considered neither past due nor impaired are receivables without anydefault in payments and those accounts wherein the management has assessed thatrecoverability is high.



2 13

- 72

-

*SGVFS006042*

The

tabl

es b

elow

sho

w th

e cr

edit

qual

ity o

f the

Gro

up’s

fina

ncia

l ass

ets

as o

f Dec

embe

r 31,

201

3 an

d 20

12, g

ross

of a

llow

ance

for i

mpa

irmen

t los

ses:

Dec

embe

r 31,

201

3N

eith

er p

ast d

ue n

or im

paire

d

Past

due

but

Hig

h gr

ade

Med

ium

gra

deLo

w g

rade

Tota

l no

t im

paire

dIm

paire

dTo

tal

Cas

h an

d ca

sh e

quiv

alen

ts

(exc

ludi

ng c

ash

on h

and)

P=4,5

06,1

58,3

95P=–

P=–

P=4,5

06,1

58,3

95P=–

P=–P=4

,506

,158

,395

Shor

t-ter

m c

ash

inve

stm

ents

1,05

6,74

4,91

8–

– 1,

056,

744,

918

––

1,05

6,74

4,91

8R

ecei

vabl

es

Inst

allm

ent c

ontra

cts

rece

ivab

le21

,657

,740

,453

40,5

60,5

52

227,

010,

836

21,9

25,3

11,8

4197

3,74

7,83

734

,116

,449

22,9

33,1

76,1

27

Oth

ers

3,16

4,05

4,95

6–

– 3,

164,

054,

956

49,0

83,2

11

29

0,87

6,69

43,

504,

014,

861

Long

-term

cas

h in

vest

men

ts5,

038,

832,

500

––

5,03

8,83

2,50

0–

–5,

038,

832,

500

Tota

l loa

ns a

nd re

ceiv

able

s35

,423

,531

,222

40,5

60,5

52

227,

010,

836

35,6

91,1

02,6

10

1,02

2,83

1,04

832

4,99

3,14

337

,038

,926

,801

HTM

inve

stm

ents

2,90

5,27

6,69

2–

– 2,

905,

276,

692

––

2,90

5,27

6,69

2A

FS F

inan

cial

Ass

ets

Inve

stm

ents

mut

ual f

unds

1,32

3,25

5,93

4–

– 1,

323,

255,

934

––

1,32

3,25

5,93

4In

vest

men

ts in

unq

uote

d eq

uity

sha

res

41,4

99,1

83–

–41

,499

,183

––

41,4

99,1

83P=3

9,69

3,56

3,03

1P=4

0,56

0,55

2 P=2

27,0

10,8

36

P=39,

961,

134,

419

P=1,0

22,8

31,0

48

P=324

,993

,143

P=4

1,30

8,95

8,61

0

Dec

embe

r 31,

201

2N

eith

er p

ast d

ue n

or im

paire

d

Past

due

but

Hig

h gr

ade

Med

ium

gra

deLo

w g

rade

Tota

lno

t im

paire

dIm

paire

dTo

tal

Cas

h an

d ca

sh e

quiv

alen

ts

(exc

ludi

ng c

ash

on h

and)

P=1,9

33,0

28,8

94P=–

P=–

P=1,9

33,0

28,8

94P=–

P=–P=1

,933

,028

,894

Shor

t-ter

m c

ash

inve

stm

ents

915,

194,

634

––

915,

194,

634

––

915,

194,

634

Rec

eiva

bles

In

stal

lmen

t con

tract

s re

ceiv

able

17,9

91,9

74,4

14–

– 17

,991

,974

,414

1,

469,

194,

025

34,1

16,4

4919

,495

,284

,888

O

ther

s2,

598,

129,

190

347,

850,

213

– 2,

945,

979,

403

28,8

24,6

7928

9,03

0,32

53,

263,

834,

407

Long

-term

cas

h in

vest

men

ts4,

659,

175,

000

––

4,65

9,17

5,00

0–

–4,

659,

175,

000

Tota

l loa

ns a

nd re

ceiv

able

s28

,097

,502

,132

347,

850,

213

– 28

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,352

,345

1,

498,

018,

704

323,

146,

774

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66,5

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23AF

S fi

nanc

ial a

sset

s41

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––

41,4

99,1

83–

–41

,499

,183

P=28,

139,

001,

315

P=347

,850

,213

P=–

P=28,

486,

851,

528

P=1,4

98,0

18,7

04

P=323

,146

,774

P=3

0,30

8,01

7,00

6


- 73 -

*SGVFS006042*

High grade cash and cash equivalents and short-term and long-term cash investments are moneymarket placements and working cash fund placed, invested or deposited in local banks belongingto the top ten banks in the Philippines in terms of resources and profitability.

The Group’s high-grade receivables pertain to receivables from related parties and third partieswhich, based on experience, are highly collectible or collectible on demand, and of whichexposure to bad debt is not significant. Installment contract receivables under bank-financing areassessed to be high grade since accounts under bank-financing undergone credit evaluationperformed by two parties, the Group and the respective bank, thus credit evaluation underwent amore stringent criteria resulting to higher probability of having good quality receivables.

Medium grade accounts are active accounts with minimal to regular instances of payment default,due to ordinary/common collection issues. These accounts are typically not impaired as thecounterparties generally respond to credit actions and update their payments accordingly.

Low grade accounts are accounts which have probability of impairment based on historical trend.

Based on the Group’s experience, its loans and receivables are highly collectible or collectible ondemand. The receivables are collateralized by the corresponding real estate properties. In fewcases of buyer defaults, the Group can repossess the collateralized properties and held it for salein the ordinary course of business at the prevailing market price. The total of repossessedproperties included in the “Real estate inventories” account in the consolidated statement offinancial position amounted to P=506.77 million and P=434.69 million as of December 31, 2013 and2012, respectively. The Group performs certain repair activities on the said repossessed assets inorder to put their condition at a marketable state. Costs incurred in bringing the repossessedassets to its marketable state are included in their carrying amounts.

The Group did not accrue any interest income on impaired financial assets.

Liquidity RiskThe Group monitors its cash flow position, debt maturity profile and overall liquidity position inassessing its exposure to liquidity risk. The Group maintains a level of cash deemed sufficient tofinance its cash requirements. Operating expenses and working capital requirements aresufficiently funded through cash collections. The Group’s loan maturity profile is regularlyreviewed to ensure availability of funding through adequate credit facilities with banks and otherfinancial institutions.

The extent and nature of exposures to liquidity risk and how they arise as well as the Group’sobjectives, policies and processes for managing the risk and the methods used to measure therisk are the same for 2013 and 2012.

Equity Price RiskThe Group's equity price risk exposure relates to financial assets whose values will fluctuate as aresult of changes in market prices, principally investment in mutual funds classified as AFSfinancial assets. Such securities are subject to price risk due to possible adverse changes inmarket values of instruments arising from factors specific to individual instruments or their issuersor factors affecting all instruments traded in the market. The Group invests in equity securities forvarious reasons, including reducing its overall exposure to interest rate risk.



2 13

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*SGVFS006042*

In 2013, the Group determined the reasonably possible change in index using the specificadjusted data for each equity security the Group holds as of the reporting dates. The adjusteddata is the forecasted measure of the volatility of security or a portfolio in comparison to themarket as a whole.

The analysis below is performed for reasonably possible movements in NAV per share with allother variables held constant, showing the impact on equity (that reflects adjustments due tochanges in fair value of AFS financial assets):

Change inNAV per

ShareImpact on

EquityDecember 31, 2013 +0.52% P=4,787,326

-0.52% (4,787,326)

In 2013, the Group determined the reasonably possible change in NAV per share using thehistorical NAV year-end values for the past three years.

Maturity Profile of Financial Assets and LiabilitiesThe tables below summarize the maturity profile of the Group’s financial assets and liabilities as ofDecember 31, 2013 and 2012 based on undiscounted contractual payments, including interestreceivable and payable.

December 31, 2013

On Demand1 to

3 Months3 to

12 Months1 to

5 Years TotalFinancial AssetsLoans and receivablesCash and cash equivalents P=4,154,586,149 P=377,975,871 P=− P=− P=4,532,562,020Short-term cash investments − 81,219,360 − 975,525,558 1,056,744,918Due from related parties − − − 200,420,543 200,420,543Receivables

Installment contractsreceivables 1,046,204,173 2,288,753,133 6,640,269,225 12,957,949,597 22,933,176,128

Others 737,185,573 220,182,442 237,577,828 2,309,069,018 3,504,014,861Long-term cash investment 1,250,000 1,250,000 1,250,000 5,035,082,500 5,038,832,500HTM investments − 66,914,078 275,761,499 2,562,601,115 2,905,276,692AFS Financial Assets

Investments mutual funds 1,323,255,934 − − − 1,323,255,934Investments in unquoted

equity shares 41,499,183 − − − 41,499,183Total undiscounted financial assets P=7,303,981,012 P=3,036,294,884 P=7,154,858,552 P=24,040,648,331 P=41,535,782,779Financial LiabilitiesFinancial liabilities at amortizedcostBank loans P=584,391 P=253,956,084 P=1,161,142,965 P=7,045,398,732 P=8,461,082,172Loans payable 18,088,543 219,525,228 664,606,497 2,246,955,948 3,149,176,216Liabilities for purchased land 33,051,247 334,134,468 616,845,814 561,649,805 1,545,681,334Accounts payable and otherpayables 669,459,893 965,393,042 2,529,186,453 1,010,445,731 5,174,485,119Notes payable − − 729,411,765 12,824,903,522 13,554,315,287Total undiscounted financialliabilities P=721,184,074 P=1,773,008,822 P=5,701,193,494 P=23,689,353,738 P=31,884,740,128


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*SGVFS006042*

December 31, 2012

On Demand1 to

3 Months3 to

12 Months1 to

5 Years TotalFinancial AssetsLoans and receivablesCash and cash equivalents P=1,958,729,622 P=− P=− P=− P=1,958,729,622Short-term cash investments − 36,272,442 376,680,940 502,241,252 915,194,634Due from related parties 177,938,993 − − − 177,938,993Receivables

Installment contractsreceivables 344,506,630 701,364,652 9,947,374,878 8,502,038,728 19,495,284,888

Others 3,091,916,166 7,705,922 164,212,319 − 3,263,834,407Long-term cash investment − − − 4,659,175,000 4,659,175,000Total undiscounted financial assets P=5,573,091,411 P=745,343,016 P=10,488,268,137 P=13,663,454,980 P=30,470,157,544Financial LiabilitiesFinancial liabilities at amortized costBank loans P=− P=248,715 P=746,144 P=4,008,848,705 P=4,009,843,564Loans payable 2,360,149 89,292,342 214,628,141 2,493,960,389 2,800,241,021Liabilities for purchased land 409,123,919 910,570,744 504,967,455 90,366,308 1,915,028,426Accounts payable and other payables 29,424,886 51,013,357 95,362,539 4,112,249,873 4,288,050,655Notes payable − 7,447,012 19,800,413 10,885,481,850 10,912,729,275Total undiscounted financial liabilities P=440,908,954 P=1,058,572,170 P=835,504,692 P=21,590,907,125 P=23,925,892,941

33. Lease Commitments

The Group as Lessee The Group has entered into noncancelable operating lease agreements for its several branch

offices with terms of one (1) to five (5) years. The lease agreements include escalation clausesthat allow a reasonable increase in rates. The leases are payable on a monthly basis and arerenewable under certain terms and conditions.

Future minimum rentals payable under noncancelable operating leases as of December 31, 2013and 2012 follow:

2013 2012Within one (1) year P=61,237,659 P=37,213,083After one (1) year but not more than five (5) years 60,907,118 10,579,675

P=122,144,777 P=47,792,758

Rent expense included in the statements of comprehensive income for the years endedDecember 31, 2013, 2012 and 2011 amounted to P=59.45 million and P=54.59 million andP=41.81 million, respectively.

The Group as LessorThe Group has entered into property leases on its investment property portfolio, consisting of theGroup’s surplus office spaces. These noncancelable leases have remaining lease terms of belowfifteen (15) years. All leases include a clause to enable upward revision of the rental charge on anannual basis based on prevailing market conditions.



2 13

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*SGVFS006042*

Future minimum rentals receivable under noncancelable operating leases as of December 31,2013 and 2012 follow:

2013 2012Within one (1) year P=101,453,361 P=66,988,151After one (1) year but not more than five (5) years 413,514,054 429,994,437More than five (5) years 174,520,383 119,946,996

P=689,487,798 P=616,929,584

Rental income included in the statements of comprehensive income for the years endedDecember 31, 2013, 2012 and 2011 amounted to P=60.78 million, P=24.29 million andP=5.71 million, respectively (Note 25).

34. Notes to Consolidated Statements of Cash Flows

The Group’s noncash investing and financing activities pertain to the following:

a) Conversion of sold receivables from a “with recourse basis” to “without recourse basis” withtotal carrying value of P=74.20 million and P=1,030.05 million in 2012 and 2011, respectively;

b) Transfers from land and improvements to real estate inventories amounting to P=2,470.82million, P=2,643.06 million and P=3,405.14 million in 2013, 2012 and 2011, respectively; and

c) Transfers from property and equipment to investment property amounting P=10.40 million in2012.

d) Purchase of interest from a joint venture partner in exchange for advances to joint venturepartners amounting to P=333.00 million in 2011.

e) Purchase of land that are payable from one to three years amounting P=369.35 million,P=337.72 million and P=425.69 million in 2013, 2012 and 2011, respectively.

f) Transfer from real estate inventories to investment property amounting P=163.09 million in2013.

g) Reclassification of bilateral loans from notes payable to bank loans with a principal net ofunamortized discount amounting P=1,578.53 million.

Under the receivable discounting arrangements, the Group applies collections from installmentcontracts receivables against loans payable. The group considers the turnover of the receipts andpayments under this type of arrangement as quicker and relatively shorter. Where the Groupconsiders a quick turnaround, the receipts and payments are reported on a net basis. The effectson the cash flows arising from financing activities presented on a net basis follow:

2013 2012 2011Proceeds from loans payable P=2,149,055,868 P=2,128,887,530 P=1,545,664,338Collection of installment contract receivables (1,800,120,673) (1,777,877,114) (1,604,498,264)Proceeds from loans payable -net P=348,935,195 P=351,010,416 (P=58,833,926)

2013 2012 2011Payments of loans payable (P=1,800,120,673) (P=1,777,877,114) (P=1,604,498,264)Collection of installment contract receivables 1,800,120,673 1,777,877,114 1,604,498,264Payments of loans payable - net P=− P=− P=−


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*SGVFS006042*

35. Commitments and Contingencies

The Group has entered into several contracts with contractors for the development of its realestate properties. As of December 31, 2013 and 2012, these contracts have an estimatedaggregate cost of P=3,835.36 million and P=2,748.59 million, respectively. These contracts are dueto be completed on various dates starting January 2013 up to May 2015.

The progress billings are settled within one year from date of billings. These are unsecuredobligations and carried at cost.

The Group has various contingent liabilities from legal cases arising from the ordinary course ofbusiness which are either pending decision by the courts or are currently being contested by theGroup, the outcome of which are not presently determinable.

In the opinion of the management and its legal counsel, the eventual liability under these lawsuitsor claims, if any, will not have a material or adverse effect in the Group’s financial position andresults of operations.

36. Reclassifications

In 2013, the Group’s management reclassified some of its receivable and liability accounts fromcurrent to noncurrent. Accordingly, receivables and liabilities presented in prior years as currentwere reclassified to noncurrent to conform with the current year presentation. Details follow:

20132012

(As restated)2011

(As restated)Effect of reclassification:Assets Other Receivables (Note 9) P=476,251,956 P=553,580,031 P=563,710,957Liabilities (Note 22)

Retentions payable 180,684,956 201,908,717 185,489,686Deferred output tax 178,323,023 165,938,754 156,202,595

The Group’s management believes that the above presentation would be more useful to the usersof the consolidated financial statements.

37. Approval of the Financial Statements

The consolidated financial statements of the Group as of December 31, 2013 and 2012 and forthe years ended December 31, 2013, 2012 and 2011 were authorized for issue by the BOD onMarch 7, 2014.



2 13

VISTA LAND & LIFESCAPES, INC.

COMMUNITIES PHILIPPINES, INC.

VISTA RESIDENCES, INC.

Registered Address3rd Level Starmall Las PiñasC.V. Starr Avenue, Pamplona1746 Las Piñas CityPhilippines

Office AddressUGF Worldwide Corporate CenterShaw Boulevard1552 Mandaluyong CityPhilippines

Tel +63 2 CAMELLA +63 2 2263552Fax +63 2 CAMELLA +63 2 2263552 ext. 0066

www.vistaland.com.ph

CAMELLA HOMES, INC.Head OfficeUGF Worldwide Corporate CenterShaw Boulevard1552 Mandaluyong CityPhilippines

Tel +63 2 CAMELLA +63 2 2263552

Mega Manila-based Communities3rd Level Starmall AlabangAlabang, Muntinlupa CityPhilippines

Tel +63 2 CAMELLA +63 2 2263552

www.camella.com.ph

BRITTANY CORPORATION

CROWN ASIA PROPERTIES, INC.

2nd Floor The Marfori TowerLakefront, East Service Road, Sucat1770 Muntinlupa CityPhilippines

Tel +63 2 7949988 to 94Fax +63 2 7949995

www.brittany.com.ph

2nd Floor The Wharf at LakefrontKm. 20, East Service Road, Sucat 1770 Muntinlupa CityPhilippines

Tel +63 2 88CROWN +63 2 8827696Fax +63 2 8371399

www.crownasia.com.ph

UGF Worldwide Corporate CenterShaw Boulevard1552 Mandaluyong CityPhilippines

Tel +63 2 CAMELLA +63 2 2263552

www.camella.com.ph

UGF Worldwide Corporate CenterShaw Boulevard1552 Mandaluyong CityPhilippines

Tel +63 2 5841183Fax +63 2 5841178 ext. 1039

www.vistaresidences.com.ph

ShareholderInformation


2 13INSTITUTIONAL INVESTOR INQUIRIESUGF Worldwide Corporate CenterShaw Boulevard1552 Mandaluyong CityPhilippines Tel +63 2 CAMELLA +63 2 2263552 ext. 0088Fax +63 2 CAMELLA +63 2 2263552 ext. 0070

Email [email protected]

SHAREHOLDER SERVICESAND ASSISTANCEFor inquiries regarding dividend payments,change of address and account status, lost ordamaged stock certificates, please write or call:

Securities Transfer Services, Inc.G/F Benpres BuildingExchange Road corner Meralco AvenueOrtigas Center, Pasig CityMetro Manila, Philippines

Tel +63 2 4900060

Fax +63 2 6317148

Concept, Content Design and LayoutArtOne Design & Communications, Inc.

Photography Portraiture Rxandy CapinpinOperations A.G De MesaStyling M De Mesa

he cover shows molten gold being poured into the Vista Land mould. This aptly depicts the annual report’s title – gold,

by being honed into Vista Land. Vista Land, which started as one of the trusted companies in Philippine real estate, has emerged as a formidable name in country-wide development. With a presence in 34 provinces, and 73 cities and municipalities across the country, it has expanded into further territories, projects, and business lines – going from good to great.

Our 6th anniversary as a publicly traded company

demand for our properties leading to record-high revenue. Both local and foreign investors are seeing the value of our company, as we continue to grow as one of the strongest Filipino companies.

From Good to Great

Documents

*MRERGMEP - Vista · PDF fileexpanded into further territories, ... Our 6th anniversary as a publicly traded company ... we step into the battlefield knowing we are well-equipped