SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A …suntrusthomedev-com.web37.winsvr.net/Portals/0/PDF/SECFilings/1… · The title is not subject to collateral attack and it cannot

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE

AND SECTION 141 OF THE CORPORATION CODE 1. For the fiscal year ended 31 December 2009 2. SEC Identification Number: 10683 3. BIR Tax Identification No.: 000-141-166-000 4. SUNTRUST HOME DEVELOPERS, INC. Exact name of issuer as specified in its charter 5. Metro Manila Province, Country or other jurisdiction of incorporation or organization 6. (SEC Use Only) Industry Classification Code 7. 6th Floor The World Centre 330 Sen. Gil J. Puyat Avenue Makati City, Philippines 1227 Address of principal office 8. (632) 867-8826 to 40 Issuer’s telephone number, including area code 9. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA Title of Each Number of Shares of Common Class Stock Outstanding Common 2,250,000,000 10. Are any or all of these securities listed on a Stock Exchange? Yes [x] No [ ] Philippine Stock Exchange Common Shares 11. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding twelve (12) months.

Yes [x] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [x] No [ ]

12. Aggregate Market Value of Voting Stock held by Non-Affiliates as of close of first quarter of 2010: Php 1,294,165,008.00

ANNUAL REPORT/SUNTRUST HOME DEVELOPERS, INC. Page 2 of 18

PART I - BUSINESS AND GENERAL INFORMATION Item 1. Business (1) Business Development Suntrust Home Developers, Inc. (“the Company”) was incorporated under Philippine laws and registered with the Securities and Exchange Commission (“SEC”) on 18 January 1956 under the name Ramie Textiles, Inc. It was originally authorized to engage in the manufacturing and sale of all types of ramie products. The Company has since amended its Articles of Incorporation, with the principal changes being highlighted below, as it sought to identify investment opportunities that will yield attractive returns. These changes resulted in the Company’s present nature of business of engaging in the business of real estate development, mass community housing, townhouses and horizontal land development. On 03 October 2000, the SEC approved the change in the Company’s name to Fairmont Holdings, Inc. Thereafter, on 02 March 2001, Emerging Market Assets Limited, a global investment company based in Hong Kong, subscribed to 350,000,000 shares of stock of the Company at par value of One Peso (Php1.00) per share. The said shares were listed on the Philippine Stock Exchange on 28 August 2001. On 29 June 2002, the Board of Directors of the Company approved the amendment of its Articles of Incorporation resulting in a change in name from Fairmont Holdings, Inc. to its present name of Suntrust Home Developers, Inc. The change in name came hand in hand with a corresponding amendment of the Articles of Incorporation and change in the Company’s primary purpose or nature of business, from a holding company to a real estate company authorized to engage in real estate development, mass community housing, townhouses and rowhouses development, residential subdivision and other massive horizontal land development. This change in the nature of business was prompted by the perception that being a holding company no longer appeared to be viable, at least in the next few years, considering the slump in the equities market. Moreover, it was also an opportune time for the Company to re-strategize and take advantage of the huge but untapped potential that the low-cost mass housing sector had to offer. Furthermore, a new secondary purpose was also approved authorizing the Company to acquire interests in tourism and leisure-related enterprises, projects or ventures. On the same date, the Board of Directors of the Company likewise approved an increase in the Company’s authorized capital stock from Php2 Billion to Php3 Billion for the purpose of enabling the Company to finance any acquisitions or projects that it may undertake in the future in line with its new corporate purpose. Out of the Php1 Billion increase, Php250 Million has been actually subscribed while Php62,500,000 out of the amount subscribed has been actually paid-up in cash by Megaworld Corporation, an existing stockholder of the Company. On 18 July 2002, the Company acquired from an affiliate, Empire East Land Holdings, Inc. (“EELHI”), all of the latter’s shareholdings in Empire East Properties, Inc. (“EEPI”). Prior to such acquisition, EEPI was incorporated on 14 November 1997 as a wholly-owned subsidiary of EELHI to engage in the development of socialized or low-cost housing projects. In March 2004, the Company’s percentage of ownership in EEPI was reduced from 100% to 60% upon the subscription by EELHI to the shares of stock of EEPI. On 30 August 2005, the Board of Directors of the Company approved the decrease in the number of members of the Board of Directors from eleven to seven directors and the extension of its corporate term for another fifty (50) years from 18 January 2006. Likewise, the Board of Directors approved the addition of separate sections in the Company’s By-Laws providing for the creation of Committees such as a Nomination Committee as well as the election of Independent Directors of the Company. These changes to the Articles of Incorporation were ratified by the stockholders of the Company on 11 November 2005 and were approved by the SEC on 10 May 2006. On 8 July 2008, the SEC approved the change in name of EEPI to Suntrust Properties, Inc. (“SPI”) and an increase in its authorized capital stock. EELHI subscribed to such increase in authorized capital stock of SPI and, as a result thereof, the Company’s ownership interest in SPI decreased from 60% to 20% Consequently, the Company’s control over SPI ceased and, as such, SPI is no longer a subsidiary but is now considered an associate of the Company.


No purchase of a significant amount of assets not in the ordinary course of business was made by the Company in the past three (3) years. No material reclassification, merger or consolidation involving the Company has occurred in the past three years. Neither has the Company, in the past three years, sold a significant amount of assets not in the ordinary course of business. (2) Business of Issuer The Company currently is not offering any product. Although the Company has expressed preference for mass housing development and is continuing to study a proposal to raise funds for its initial business ventures, it is also in the process of assessing its prospects in other fields. Thus, it is premature, and the Company is not prepared at this time, to identify and describe what business it proposes to do and what products, goods or services will be produced or rendered; its principal products or services and their markets with the relative contribution to sales or revenues of each product or services or group of related products or services; percentage of sales or revenue and net income contributed by foreign sales; distribution methods of products or services; competition; sources and availability of raw materials and the names of principal suppliers; and the Company’s dependency on its customers. Since the Company has not identified the industry in which it will engage in, it is likewise not in the position to discuss any government approval required for its principal products or services or the effect of existing or probable governmental regulations on its business. The Company is currently generating income from the rental of various condominium units in Sheraton Marina Square located in Malate, Manila. The Company’s associate, SPI, is engaged in the real estate business principally offering house-and-lot packages and condominium units. It is currently developing the Governor’s Hills affordable housing project in General Trias, Cavite, the Sunrise Hills project in Dasmariñas, Cavite, and the Sta. Rosa Heights project in Silang, Sta. Rosa, Laguna. Compared to other players in the industry, SPI caters to the low to middle income sector of the market since it focuses on socialized and low-cost housing projects. About 85% of SPI’s revenue is generated from its mass housing subdivisions while the remaining 15% come from sale of condominium units as well as from other income. While SPI does not have established foreign marketing branches, significant portion of its sales is identified with the foreign market particularly composed of overseas contract workers. SPI’s marketing network is comprised of in-house sales force as external brokers and its suppliers are based locally. SPI employs a modern construction technology known as the 3D monolithic panel system. The Company or SPI is not dependent upon a single or a few customers. No single customer accounts for 20% or more of SPI’s sales. In normal course of business, the Company entered into transactions with related parties, consisting mainly of advances from related parties for working capital purposes and for the settlement of certain liabilities. The Company has advances from Empire East Land Holdings, Inc. amounting to P25,503,746. The Company does not hold any patent, trademark, copyright, license, franchise, concession or royalty agreement upon which their operations are dependent.


Government Approval of Principal Products; Effect of Government Regulations on the Business

The following is a brief description of the principal laws and regulations affecting the real estate business. Land Title Registration The Philippines uses the Torrens System of land registration, which provides for a certification of title to real property which is binding on all persons. An owner of real property may register title under the Torrens System if, after proper surveying, application, publication, service of notice and hearing, the Regional Trial Court (“RTC”) or, in certain cases, the Municipal Trial Court, the Metropolitan Trial Court or the Municipal Circuit Trial Court (collectively, “MTCs”) within whose jurisdiction the land is situated confirms the owner’s title to the land in a judgment and issues a decree to register the property in the owner’s name. Persons opposing the registration of title may appeal against the judgment of the RTC or MTCs to the Court of Appeals or Supreme Court within 15 days from notice of the RTC’s or MTC’s judgment. After the period for appeal has lapsed and within 15 days from entry of judgment, the appropriate court will order the Administrator of National Land Titles and Deeds Registration Administration (formerly the Land Registration Authority) to issue the corresponding decree of registration and Original Certificate of Title (“OCT”). Notwithstanding the issuance of an OCT, the decree of registration may still be contested within one year from entry of judgment on the grounds of actual fraud. Claims Against Registered Land Once real property has been registered, it may no longer be acquired by prescription. A Certificate of Title is conclusive evidence of ownership binding against all persons, including the government. The title is not subject to collateral attack and it cannot be altered, modified or cancelled, except in a direct proceeding in accordance with law. If registered land is transferred to another person, the Register of Deeds may cancel the OCT and issue a Transfer Certificate of Title (“TCT”) in the name of the new owner, provided that certain required documents are submitted to him and all the necessary taxes are paid. Subsequent transfers are also registered by the cancellation of the latest TCT and the issuance of a new TCT in the name of the latest transferee. “Quieting” of Title Claims which cast doubt over title to real property are relatively common in the Philippines. In particular, the boundaries to a registered title may be disputed, and where there is outstanding litigation against an owner of real property it may be possible for the claim to be annotated on the title to the property. Where a claim against title is unfounded, an action may be brought to remove this claim. Transferees of real property will usually require that all outstanding claims be removed from property before they will accept a transfer of title. Land Title Transfers An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing Philippine laws and may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. However, a deed, mortgage, lease or other voluntary instrument (except a will purporting to convey or affect a registered land) will not take effect as a conveyance or bind the land, but will operate only as contract between the parties and as evidence of authority to the Register of Deeds to effect registration. The act of registration is the operative act to convey or affect the land insofar as third persons are concerned. Accordingly, as between two transactions over the same parcel of land, a transaction that is registered in good faith prevails over an earlier unregistered right. A sale of property that has been registered under the Torrens system typically requires the registered owner of the land to execute a deed of absolute sale in favor of the purchaser. Within ten (10) days after the close of the month when such deed was executed, a documentary stamp tax shall be paid to the Bureau of Internal Revenue (“BIR”), computed at a rate of 1.5% of the purchase price or zonal value of the land as determined by the BIR, whichever is higher. A final tax of 6% based on the gross selling price or current fair market value of the property, whichever is higher, is imposed upon capital gains presumed to have been realized from the sale of such real property and such tax must be paid to the BIR within thirty (30) days after the execution of the deed of absolute sale.


No voluntary instrument can be registered by the Register of Deeds unless the owner’s duplicate certificate is presented with such instrument, except in cases expressly provided for in the Property Registration Decree upon lawful order of a court. The production of the owner’s duplicate certificate, whenever any voluntary instrument is presented for registration, is conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum is binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith. Nuisance Laws Under the Philippine nuisance laws, property owners may be liable for acts, omissions or the condition of property when it endangers the health or safety of others, injures or offends the senses, interferes with free passage of any public highway, street or body of water, or hinders the use of property. If a nuisance has been created by a previous landowner, the current landowner will be liable for such nuisance if such landowner knowingly continues the nuisance. Land Use Laws- Subdivisions and Condominiums Philippine land use laws regarding subdivisions and condominiums include zoning laws, which regulate land use, laws which specify standards and technical requirements for the development of subdivisions and laws requiring a license to be obtained before subdivided lots can be sold. For land zoned for residential development by a city or municipality prior to June 1988, obtaining the necessary authorizations to allow housing development to take place is relatively straightforward. The city or municipality issues a certificate stating the allowable land use for a particular land title and the Housing and Land Use Regulatory Board (“HLURB”) then confirms that this land use is permissible. For land not zoned for residential use prior to June 1988, the procedure for obtaining permission to change the allowed use of land is lengthy and time consuming and requires various levels of local and central governmental approvals. In certain instances, the Company acquires land zoned for agriculture use, which is less expensive, and seeks to get approvals for a change of use. In addition to obtaining confirmation that land is zoned for residential use, it is also necessary to obtain development permission before a subdivision can commence. The approval of the development plan of a residential subdivision must be obtained from the relevant municipal or city authority. Applications for development permission can be made only after title to the project site has been obtained by the developer. There are essentially two different types of residential subdivision developments, which are distinguished by different development standards issued by the HLURB. The first type of subdivision, aimed at low-cost housing, must comply with Batas Pambansa Blg. 220, which allows for a higher density of building and relaxes some of the construction standards. Other subdivisions must comply with Presidential Decree No. 957, which sets out standards for lower density developments. Both types of subdivision must comply with standards regarding the suitability of the site, road access, necessary community facilities, open spaces, water supply, the sewage disposal system, electricity supply, lot sizes, the length of the housing blocks and house construction. When an application for development permission is submitted to a municipal or city authority, it must be accompanied by detailed plans of the proposed development. The authority will determine whether the plans comply with the applicable standards and will also conduct a preliminary inspection of the site. Development permits are normally granted within one month of an application being made and are valid for one year. Developers must deliver a performance bond in favor of the relevant local authority. This bond will usually be limited to 10% of the development cost and will become due if a project is not commenced within one year of the issue of the development permit. Local authorities are required to monitor the progress of subdivision projects and to inspect projects following their completion to determine whether or not they comply with the approved plans. Under Presidential Decree No. 957, which covers subdivision projects for residential, commercial, industrial or recreational purposes and condominium projects for residential or commercial purposes, the HLURB,


together with local government units, has jurisdiction to regulate the real estate trade and business. All subdivision plans are required to be filed with and approved by the local government unit concerned, while condominium project plans are required to be filed with and approved by HLURB. Approval of such plans is conditioned on, among other things, completion of the acquisition of the project site and the developer’s financial, technical and administrative capabilities. Alterations of approved plans that affect significant areas of the project, such as infrastructure and public facilities, also require the prior approval of the relevant government unit. Development must comply with standards regarding the suitability of the site, road access, necessary community facilities, open spaces, water supply, the sewage disposal system, electricity supply, lot sizes and house construction. Owners or dealers of real estate projects are required to obtain licenses to sell before making sales or other disposition of lots or real estate projects. Licenses will be granted only after a property has been legally subdivided into lots. Once a license to sell has been obtained, the sale of subdivided lots for housing development can commence. Dealers, brokers and salesmen are also required to register with the HLURB. Project permits and licenses to sell may be suspended, cancelled or revoked by the HLURB sua sponte or upon complaint from an interested party. Under current regulations, a developer of a residential subdivision is required to reserve at least 30% of the gross land area of such subdivision as open space for common uses such as roads and recreational facilities. A developer of a commercial subdivision is required to reserve at least 3.5% of the gross project area for parking and pedestrian malls. Republic Act No. 7279, known as the Urban Development and Housing Act of 1992 (“R.A. 7279”), contains a number of provisions relating to socialized housing, which as currently defined, must not have a selling price greater than Php180,000 per unit. In particular, the Act provides that a subdivision developer must develop areas of socialized housing equivalent to at least 20% of either the total subdivision area or project cost, at the option of the developer. This additional development must be located within the same city or municipality whenever feasible. Subdivision projects exceeding a specified density (currently 100 units per hectare) are exempt from the requirement that an additional area of socialized housing be provided. R.A. 7279 also provides that income from socialized housing projects are tax-exempt (as described below under “Taxation-Incentives for Private Sector Participation in Developing Socialized Housing”). Taxes Real property taxes are payable annually on the property’s assessed value. The assessed value of property and improvements depends on the nature of the property. Land is ordinarily assessed at 20% to 50% of its fair market value; buildings may be assessed at 0% to 80% of their fair market value; and machinery may be assessed at 40% to 80% of its fair market value. Currently, real property taxes vary by location but do not exceed 2% of the assessed value in the province and 3% of the assessed value in municipalities within Metro Manila and in cities. An additional Special Education Fund Tax of 1% of the assessed value of the property is also levied annually by provinces and by the cities and municipalities within Metro Manila. Idle lands are taxed at 5% of the assessed value of the property. Idle lands include any land, other than agricultural land, that is more than 1,000 square meters in area and one-half of which remains unutilized or unimproved by the owner. Incentives for Private Sector Participation in Developing Socialized Housing R.A. 7279 was enacted to encourage greater private sector participation in the provision of socialized housing in the Philippines and to further reduce housing costs for the underprivileged and the homeless. Pursuant to R.A. 7279, the government extended a number of incentives to developers in the private sector. These incentives include reducing and simplifying the qualification and accreditation requirements for participating private developers, creating one-stop offices in different regions in the Philippines to process, approve and issue requisite clearances, permits and licenses, simplifying financing procedures for private developers and exempting from payment of project-related income tax, capital gains tax on raw land used for the project, value-added tax for project contractors, transfer taxes for both raw land and completed projects and donor taxes for lands certified by local government units as having been donated for socialized housing.


Such tax exemptions are granted, however, subject to satisfaction of a number of conditions, including prior approval by the applicable government agencies of a pertinent socialized housing loan. In addition, property owners who voluntarily provide resettlement sites to illegal occupants of their sites are entitled to tax credits (subject to implementing guidelines jointly issued by HUDCC and the Department of Finance) equivalent to the actual non-recoverable expenses incurred in connection with the resettlement. Development and Environmental Permits In general, developers of residential subdivisions are required to submit project descriptions to regional offices of the Department of Environment and Natural Resources (“DENR”). This description sets out the background of the proposed project and identifies any significant environment risks and possible alternative sites. In exceptional cases such as environmentally critical projects or at the discretion of the regional office of the DENR, a detailed Environmental Impact Assessment may be required and the developer will be required to obtain an Environmental Compliance Certificate to certify that the project will not cause an unacceptable environmental impact. Compliance with the terms of this certificate will be monitored by the appropriate DENR regional office and failure to comply can lead to the imposition of fines and the temporary cessation of project operations. The Company has not spent any significant amount on research and development activities or for compliance with environmental laws. As of 31 December 2009, the Company has a total of two (2) employees. None of the employees are subject to collective bargaining agreements. The Company does not anticipate hiring more employees within the ensuing twelve (12) months. Political stability and interest rates are major factors which directly correlate to the general performance of the real estate industry. Item 2. Properties The principal property of the Company is two adjoining parcels of land with a total area of 510,479 square meters located in San Jose, Tagaytay City, which are classified as raw land and have a scenic view of the Taal Lake. These parcels of land are mortgaged in favor of the Philippine National Bank (“PNB”) to secure a Php600 Million loan of which the Company is a co-borrower. The Company, together with PNB, is finalizing the details of the dacion en pago for the full settlement of the principal borrower’s account with the bank. The Company also has six condominium units at Sheraton Marina Square located in Malate, Manila with a total area of 496.00 square meters. The Company is currently leasing out these units and generating income from the rental thereof. Item 3. Legal Proceedings The Company is not a party to, and none of its properties is the subject of, any material pending litigation or legal proceeding. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted during the fourth quarter of the year 2009 to a vote of the security holders of the Company.


PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters Market Information The Company’s shares of common stock are traded on the Philippine Stock Exchange. Below is a history of the trading prices of said shares. Year First Quarter Second Quarter Third Quarter Fourth Quarter 2007 High 0.91 1.24 1.04 0.72 Low 0.58 0.64 0.47 0.50 2008 High 0.58 0.41 0.37 0.28 Low 0.36 0.34 0.28 0.14 2009 High 0.28 0.61 0.58 0.77 Low 0.16 0.20 0.40 0.40 2010 High 0.59 Low 0.43

Holders There are 1,680 holders of the Company’s 2,250,000,000 outstanding shares of common stock. However, 250,000,000 of these outstanding shares are not yet listed with the Philippine Stock Exchange as the subscription price for these have not been fully paid. Below is a list of the top twenty holders of the Company’s shares of common stock as of 31 March 2010:

Rank Name No. of Shares Percentage of

Ownership 1 PCD Nominee Corporation (Filipino) 877,276,796 38.99% 2 Megaworld Corporation 705,834,992 31.37% 3 Emerging Market Assets Limited 235,000,000 10.44% 4 Stanley Ho Hung-Sun 116,100,000 5.16% 5 PCD Nominee Corporation (Non-Filipino) 17,384,566 0.77% 6 EBC PCI TA No. 203-53106-5 17,000,000 0.75% 7 Lucio L. Co 4,082,563 0.18% 8 Genevieve Go 1,300,000 0.05% 9 PCCI Securities Brokers Corp. 1,000,000 0.04% 10 Romulo P. Ney 555,000 0.02% 11 Rosendo Dr. Lim 550,000 0.02% 12 Larcy Marichi Y. So &/or Hanson G. So 513,700 0.02% 13 Sik Keong Yap 500,000 0.02% 14 Goldwell Properties Tagaytay, Inc. 450,000 0.02% 15 Luciano H. Tan 450,000 0.02% 16 Pablo M. Silva 437,499 0.02% 17 Lucena B. Enriquez 420,000 0.02% 18 Hanson G. So 400,000 0.02% 19 Jaime Dy &/or Juliet Dy 399,000 0.02% 20 Francis L. Dy &/or Ingred S. Sy 385,500 0.02%


Dividends The deficit of the Company and its cash position did not merit any declaration of dividends for the last two fiscal years. The payment of dividends in the future will depend upon the Company's earnings, cash flow and financial condition, among other factors. The Company may declare dividends only out of its unrestricted retained earnings. These represent the net accumulated earnings of the Company, with its capital unimpaired, that are not appropriated for any other purpose. The Company may pay dividends in cash, by the distribution of property, or by the issuance of shares of stock. Dividends paid in cash are subject to the approval by the Board of Directors. Dividends paid in the form of additional shares are subject to approval by both the Board of Directors and at least two-thirds (2/3) of the outstanding capital stock of the shareholders at a shareholders' meeting called for such purpose. The Corporation Code prohibits stock corporations from retaining surplus profits in excess of one hundred per cent (100%) of their paid-in capital stock, except when justified by definite corporate expansion projects or programs approved by the Board of Directors, or when the corporation is prohibited under any loan agreement with any financial institution or creditor from declaring dividends without its consent, and such consent has not yet been secured, or when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation. Recent Sales of Unregistered Securities In the past three (3) years, the Company has not undertaken any sale of unregistered or exempt securities, or issued securities constituting an exempt transaction. Item 6. Management Discussion and Analysis of Financial Condition and Results of Operations 2009 vs. 2008 RESULTS OF OPERATION Twelve months ended December 31, 2009 compared to Twelve months ended December 31, 2008 The Company's total revenues exhibited an increase of 7.98 million from 9.72 thousand in 2008 to 7.99 million in 2009 of the same period. Total revenues this 2009 mostly came from equity share of 6.08 million in net earnings of an associate and rental income of 1.91 million from various condominium units. Cost and expenses decreased by 70.24 million or 94.52% from 74.31 million in 2008 to 4.07 million in 2009. Major decrease in expenses is mainly due to 2008 reported loss on dilution of interest in a subsidiary. The net results of the Company shows an increase of 78.21 million or 105.27% from 74.30 million net loss in 2008 to 3.92 million net profit in 2009. FINANCIAL CONDITION As of December 31, 2009 and December 31, 2008 Current assets increased by 4.13 million or 349.38% from 1.18 million in 2008 to 5.31 million in 2009. Cash & Cash Equivalents decreased by 482.83 thousand or 81.19% from 594.68 thousand in 2008 to 111.85 thousand in 2009. Prepayments increased by 4.61 million or 785.47% from 587.14 thousand in 2008 to 5.20 million in 2009 due to input tax recognized from acquisition of investment property during the current period.


Investment in associate increased by 6.08 million or 7.33% from 83.01 million in 2008 to 89.09 million in 2009. Investment property increased by 35.94 million or 8.23% from 436.85 million in 2008 to 472.79 million in 2009. Other non-current assets decreased by 57.56 million or 95.93% from 60.00 million in 2008 to 2.44 million in 2009 due to application of miscellaneous deposits as payment for the acquisition of various condominium units during the current period. Trade & Other Payables exhibited an increase of 490.77 thousand or 80.69% from 608.25 thousand in 2008 to 1.10 million in 2009. Advances from related parties decreased by 15.81 million or 38.27% from 41.32 million in 2008 to 25.50 million in 2009 due to payment made during the current period. Material Changes in the Financial Statement Items: Increase/(Decrease) of 5% or more versus 2008 Balance Sheet Cash & Cash Equivalents. (81.19%) Decrease is due to payment of current obligations and expenditures to finance the operations. Prepayments & Other Current Assets 785.47% Increase is due to input tax recognized from acquisition of investment property during the current period. Investment in Associate 7.33% Increase due to equity share in net earnings of an associate for the current period. Investment Property - Net 8.23% Increase due to acquisition of various condominium units during the current period. Other Non-Current Assets (95.93)% Decrease due to application of a portion of company’s deposits for the acquired condominium units during the current period. Trade and other payables 80.69% Increase is mainly due to accrual of expenses for the current period. Advances from Related Parties (38.27%) Decrease due to application of a portion of company’s deposit as payment of advances during the current period. Income Statement Equity Share in Net Earnings/(Losses) of an Associate 657.82% Increase due to company reported equity share in net earnings of an associate for the current period while equity share in net loss of an associate in the previous period. Rental Income 100% Increase due to income generated from acquired investment property for the current period.


Interest Income (85.07%) Decrease due to maturity of temporary investment during the previous period. Administrative Expenses 11.64% Due to increase in operating expenditures for the current period. Cost of Rentals 100% Due to direct operating expense incurred with respect to investment property during the current period. Loss on Dilution of Interest in a Subsidiary (100%) Due to decrease in ownership in a subsidiary during the previous period. Income Tax Expense (35.60%) Decrease due to lower interest income during the period. There are no other significant changes in the Company's financial position (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. There are no known trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in increasing or decreasing the Company's liquidity in any material way. There are no material off-balance sheet transactions, arrangements, obligations, and other relationships of the Company with unconsolidated entities or other persons created during the reporting period. The Company has no unusual nature of transactions or events that affects assets, liabilities, equity, net income or cash flows. There are no seasonal aspects that had a material effect on the financial condition or results of operations of the company. There are no material events subsequent to the end of the period that have not been reflected in the financial statements for the period. There are no changes in estimates of amount reported in periods of the current financial year or changes in estimates of amounts reported in prior financial years. 2008 vs. 2007 In July 2008, the Company's ownership interest in Suntrust Properties, Inc (SPI), formerly Empire East Properties, Inc (EEPI) declined from 60% to 20% due to non-subscription on SPI's total increase in authorized capital stock. Due to the decrease in ownership, net assets, revenues and expenses relating to the disposed subsidiary have been excluded from the company's continuing results that resulted to major changes in its financial statements as of December 31, 2008. Below are the major decreases on the company's results of operation and financial condition due to the above incident.


RESULTS OF OPERATION Twelve months ended December 31, 2008 Compared to Twelve months ended December 31, 2007 The company's total revenues exhibited a decrease of 100% or 361.44 million from 2007 to 2008. Costs and expenses also decreased by 88.29% or P560.01 million to P74.31 million in 2008 from P634.31 million in 2007. The net loss attributable to company is P 74.30 million in 2008 and P277.95 million in 2007 or P203.65 million decrease. FINANCIAL CONDITION As of December 31, 2008 and December 31, 2007 Total current assets decreased by 99.93% from P1.60 billion year-end balances in 2007 to P1.18 million in 2008. Total non-current assets decreased by 42.78% or P433.53 million from P1.01 billion in 2007 to P579.85 million in 2008. Total current liabilities decreased by 79.23% or P1.83 billion from P2.30 billion in 2007 to P478.77 million in 2008. Total non-current liabilities decreased by 100% or P57.26 million. Equity decreased by P144.19 million from P246.46 million in 2007 to P102.26 million in 2008. Material Changes in the Financial Statements Items: (Increase/Decrease) of 5% or more versus 2007 As of December 31, 2007 SPI was consolidated in company's financial statement but starting July 2008 due to dilution of interest from 60% to 20%, SPI'S financial statement was deconsolidated and this results to major decreases on financial statements of the company. There is no explanatory comment on the seasonality or cyclicality of interim operations. There are no material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period. Item 7. Financial Statements The Company’s Audited Financial Statements for the three years ended 31 December 2009, 2008, and 2007 are attached as exhibits to this report. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The present auditor of the Company, Punongbayan & Araullo, was also the auditor of the Company for the year 2001 to 2009. There have been no disagreements with said auditor on any matter of accounting principles or practices, financial statement disclosures, auditing scope or procedure, which disagreements, if not resolved to their satisfaction, would have caused the auditor to make reference thereto in its respective reports on the Company’s financial statements for aforementioned years.


PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers Following is the list of incumbent directors and executive officers of the Company. The members of the Company’s Board of Directors shall hold office for one (1) year from election and until their successors are elected and qualified. Any director elected to fill a vacancy shall serve only for the unexpired term of his predecessor in office. Ferdinand B. Masi. Mr. Masi, 48 years old, Filipino, is currently the Chairman of the Board of Directors and the President of the Company. He was appointed as Chairman of the Board on 09 November 2007 and has served as President since 09 February 2001. Mr. Masi is currently with the Distillery Division of the Consolidated Distillers of the Far East, Inc. where he has been connected for the past 26 years, holding positions such as Accounting Staff, Plant Accountant/Auditor, Chief Accountant, Finance & Administrative Manager and, currently, as General Manager. He is a Certified Public Accountant and member of the Philippine Institute of Certified Public Accountants. He finished his Masters Degree in Business Administration from the Ateneo Graduate School of Business in 2004.

Evelyn G. Cacho. Ms. Cacho, 48 years old, Filipino, is currently the Treasurer and a member of the Board of Directors of the Company since 29 August 2005. Ms. Cacho is currently a member of the Board of Directors of Empire East Land Holdings, Inc. (“EELHI”), a position she has occupied since February 2009. She joined EELHI in February 1995 and has served as its Vice President for Finance since February 2001. She also currently serves as director of Laguna Bel Air School, Inc., Sonoma Premier Land, Inc., Valle Verde Properties, Inc. and Sherman Oak Holdings, Inc. Prior to joining the Company, she gained extensive experience in the fields of financial/operations audit, treasury, and general accounting from banks, manufacturing and trading companies. Ms. Cacho has a bachelor’s degree in Business Administration major in Accounting. Giancarlo C. Ng. Mr. Ng, 32 years old, Filipino, was elected as a Director on 23 October 2007. He is currently the Officer-in-Charge for Finance & Administration of Consolidated Distillers of the Far East, Inc. (“Condis”), a position he has held since March 2006. He is a graduate of the University of Asia and the Pacific with a degree in Bachelor of Arts in Liberal Arts and Humanities, graduating Magna Cum Laude and Valedictorian of his batch. He also obtained his Masters of Science in Information Technology from the same university. Prior to being OIC for Finance and Administration, Mr. Ng was at various times from 2003 to 2006 an account officer, sales manager, and inter-team coordinator of Condis. Mr. Ng has handled Customer Relations Management, Sales and Delivery Logistics, and Information Technology Planning and Tactical Coordination for Condis and has extensive experience in work involving business processes and information technology solutions. He was the project manager for the email and internet connectivity infrastructure project and inventory system database of Condis. Prior to joining the Consolidated Distillers of the Far East, Inc., he was a member of the Systems Technology Support of Meralco MTP-CSPT from 1998-1999, where he participated in the company’s Y2K compliance project. Mr. Ng then joined the Software Services Department of the Orient Overseas Container Line Phils, Inc. as a software programmer from 2000-2003, where he developed web applications and also served as customer EDI programmer and trainer of new recruits. Mr. Ng has attended trainings and seminars on several software languages, Customer Relations Management, Business Orientation for Marketing and Sales, Business Writing, Information Strategy Planning, and on the New Digital Economy and Emerging Technologies for the Philippines in 2020. Ma. Vicenta S. Jalandoni. Ms. Jalandoni, 43 years old, Filipino, has been a member of the Company’s Board of Directors since 29 August 2005 and is currently the Assistant Corporate Secretary and Assistant Corporate Information Officer of the Company. She is currently First Vice President and group head of the Marketing Department 3 of Megaworld Corporation. She was previously a First Vice President for Sales, Marketing and Operations of Empire East Land Holdings, Inc. for six and a half years. Her previous


employments include stints with the United Coconut Planters Bank (Manager/Product Officer), Raffles Inc. (Group Product Manager), Mondragon Phils., and Norwich Eaton. She is a graduate of the De La Salle University. Felizardo T. Sapno. Mr. Sapno, 51 years old, Filipino, was elected as Director on 03 July 2006. He is currently the Plant Manager of the Consolidated Distillers of the Far East, Inc., a position he has held since August 1990. Mr. Sapno is a licensed Chemical Engineer and a graduate of the Mapua Institute of Technology with a degree in BS Chemical Engineering. He was previously employed with the Philippine Allied Leatherette, Inc. as Production Supervisor from October 1981 to October 1982 and the Central Azucarera de Tarlac as Shift Supervisor from November 1982 to November 1985. He is a member of various professional and socio-civic associations such as the Philippine Institute of Chemical Engineers, Center for Alcohol and Research Development Foundation, Inc., Philippine Association of Alcohol and Fermentation Technologies, Inc., Kiwanis International, Philippine Luzon District and the Knights of Columbus, Council 4668. Cresencio P. Aquino. Mr. Aquino, 56 years old, Filipino, was elected as an Independent Director on 29 June 2007. He is currently the Managing Partner of The Law Firm of CP Aquino and Partners Law Office, a position he has held since June 1998. He is a graduate of the San Sebastian College Manila with degrees in Bachelor of Arts and Bachelor of Laws. Atty. Aquino has extensive experience in both the public and private sector and the former positions he has held are: Corporate Legal Counsel of MBF Card and One Card Corporation from June 1998 to May 2004, the Special Assistant and Chief Legal Counsel of the Government Service Insurance System from September 1992 to June 1998, member of the Board of Directors of the Meat Packaging Corporation of the Philippines from September 1992 to June 1998, Personnel and Administrative Manager, Corporate Secretary and Chief Legal Counsel of ComSavings Bank from September 1992 to June 1998, Executive Director of the Department of Interior and Local Government (DILG) from 1998 to 1992, and Ex-Officio Commissioner of the DILG with the Housing and Land Use Regulatory Board also for the same period. Atty. Aquino has extensive experience in legal and corporate restructuring, management, human resources management, and litigation/collection matters and was formerly an Associate Professor with the San Sebastian College. Atty. Aquino has been a member of the Integrated Bar of the Philippines since 1978 and is also a member of the Capitol Bar Association, Knights of Columbus and the Lawyers League of the Philippines. Amelia A. Austria. Ms. Austria, 56 years old, Filipino, was elected as an Independent Director on 09 November 2007. She is currently the General Manager of Good Earth Technologies International, Inc., a company engaged in General Merchandising and other commercial activities, a position she has held since November 2004. She is also the Corporate Secretary and a member of the Board of Directors of Zenith Synergy Realty and Development Corporation. She is a licensed Chemist and placed second in the Chemistry Licensure Examination in 1976. Ms. Austria is a graduate of the University of Santo Tomas with a Degree in BS Chemistry and is an undergraduate of the Masteral Program-MS Chemistry from the same university. Prior to joining Good Earth Technologies, Ms. Austria had extensive experience in work involving research and development and quality control. Rolando D. Siatela. Mr. Siatela, 48 years old, Filipino, was appointed Corporate Secretary of the Company on 23 May 2006 and is concurrently the Corporate Information Officer. He is currently an Assistant Vice President for Corporate Management of Megaworld Corporation. He is presently a member of the Board of Directors of Asia Finest Cuisine, Inc., the Assistant Corporate Secretary of Alliance Global Group, Inc. and Megaworld Corporation, and the Corporate Secretary of ERA Real Estate Exchange, Inc. and Oceanic Realty Group International, Inc. He obtained both his AB Political Science and Bachelor of Laws degrees from the Lyceum of the Philippines.


Directors are elected annually by the stockholders to serve until the election and qualification of their successors. Two independent directors, Mr. Cresencio P. Aquino and Ms. Amelia A. Austria and the other members of the Board were elected in the last annual stockholders’ meeting on October 26, 2009. Significant Employee The business of the Company is not highly dependent on the services of certain key personnel. Family Relationships No director or executive officer of the Company is related to each other up to the fourth civil degree either by consanguinity or affinity. Involvement in Legal Proceedings The Company is not aware of any event which has occurred during the past five years up to 31 March 2010 material to an evaluation of the ability or integrity of any of its present directors or executive officers. Item 10. Executive Compensation The principal executive officers of the Company are: Name Position Ferdinand B. Masi Chairman & President (CEO) Evelyn G. Cacho Treasurer Rolando D. Siatela Corporate Secretary Ma. Vicenta S. Jalandoni Asst. Corporate Secretary No compensation was received from the Company and neither will there be any compensation for the ensuing year. There are no arrangements in force pursuant to which the officers of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided as such officer. There are no standard arrangements pursuant to which directors of the Company are compensated, or are to be compensated, directly or indirectly, for any services provided as a director, including any additional amounts payable for committee participation or special assignments, for the year 2009 and for the ensuing year. There are no other arrangements, including consulting contracts, pursuant to which any director of the Company was compensated, or is to be compensated, directly or indirectly, for the year 2009 and for the ensuing year, for any service provided as a director. No employment contracts, termination of employment, or change in control arrangements, were effected for the applicable fiscal year. No warrants or stock options are held by the Company’s CEO, its named executive officers or directors for year 2009 nor are there plans for extending warrants or options for the ensuing year.


Item 11. Security Ownership of Certain Record and Beneficial Owners and Management1 Security Ownership of Owners Holding More than Five Percent (5%) of Voting Securities TITLE OF CLASS

NAME, ADDRESS OF RECORD OWNER AND RELATIONSHIP WITH ISSUER

NAME OF BENEFICIAL OWNER AND RELATIONSHIP WITH RECORD OWNER

CITIZENSHIP NO. OF SHARES HELD

PERCENT

Common Megaworld Corporation 28/F The World Centre 330 Sen.J. Gil Puyat Avenue, Makati City

Megaworld Corporation2 (also the record owner)

Filipino 705,834,992

35.29%

Common PCD NOMINEE CORPORA-TION G/F Makati Stock Exchange Building 6767 Ayala Avenue, Makati City3

PCIB Securities, Corporation 8/F PCI Tower 2, Dela Costa St., Makati City

Filipino 330,369,557

14.68%

Common Emerging Market Assets Limited (“EMAL”), Rm. 1028, 12/F The Centre Mark, 287-299 Queen’s Road, Central Hong Kong4

Emerging Market Assets Limited (also the record owner)

Non-Filipino 235,000,000 11.75%

Common Stanley Ho Hung-Sun c/o Suntrust Home Developers, Inc., 6/F World Centre Building, 330 Sen. Gil Puyat Avenue, Makati City

Stanley Ho Hung-Sun (also the record owner)

Non-Filipino 116,100,000 5.81%

1 As of 31 March 2010. 2 Mr. Andrew L. Tan has the power to direct the voting and disposition of the shares held by Megaworld Corporation in the Company. 3 Beneficiaries are brokers and custodian bank participants of PCD. 4 Messrs. Yip Chu Kwong, Yuen Siu, Yip Kwok Cheong, Yip Kwok Wai, Tse Yuen Yuen and Poon Kwok Kuen, all stockholders of EMAL, have the power to direct the voting and disposition of the shares held by EMAL in the Company. They are businessmen who are based in Hong Kong and China and who have substantial investments in the manufacturing and real estate industries in Guangzhou, China and Hong Kong.


Security Ownership of Management

Title of Class Name of Owner Amount and Nature of Beneficial Ownership

Citizenship Percent of Class

Common Ferdinand B. Masi 1 (direct) Filipino 0.00% Common Amelia A. Austria 1 (direct) Filipino 0.00% Common Evelyn G. Cacho 1 (direct) Filipino 0.00% Common Cresencio P. Aquino 1 (direct) Filipino 0.00% Common Ma. Vicenta S. Jalandoni 1 (direct) Filipino 0.00% Common Giancarlo C. Ng 1 (direct) Filipino 0.00% Common Felizardo T. Sapno 1 (direct) Filipino 0.00% Common Rolando D. Siatela 0 Filipino N/A Common All directors and

executive officers 7 (direct) 0.00%

Voting Trust Holders of 5% or More The Company is not aware of the existence of persons holding more than five percent (5%) of its common shares under a voting trust or similar agreement. Changes in Control The Company is not privy to any arrangements which may result in a change in control of the Company. Item 12. Certain Relationships and Related Transactions No transaction involving the Company or its affiliate in which a director, executive officer, or stockholder owning 10% or more of total outstanding shares and member of their immediate family had for the past 2 years or is to have a direct or indirect material interest.

PART IV – CORPORATE GOVERNANCE The Company conducts a year-end evaluation to measure or determine the level of compliance of the Board of Director and top-level management of its Manual of Corporate Governance. This will also ensure that the Company is fully complying with the adopted leading practices on good corporate governance. As of this date, no significant deviation has been reported from the Manual of Corporate Governance. The Company expects that in the near future, the evaluations can be done on a more frequent manner during the year.

PART V – EXHIBITS AND SCHEDULES Item 14. Exhibits and Reports on SEC Form 17-C Exhibit No. Description of Exhibit 1 Statement of Management Responsibility for Financial Statement 2 Audited Financial Statements of Subsidiary 3 SEC Supplementary Schedules

Notes 2009 2008

CURRENT ASSETS

Cash 111,847 P 594,676 P

Prepayments and other current assets 4 5,199,010 587,144

Total Current Assets 5,310,857 1,181,820

NON-CURRENT ASSETS

Investment in an associate 6 89,085,995 83,005,235

Investment property - net 5 472,791,144 436,848,488

Other non-current assets 7 2,442,773 60,000,645

Total Non-current Assets 564,319,912 579,854,368

TOTAL ASSETS 569,630,769 P 581,036,188 P

CURRENT LIABILITIES

Trade and other payables 8 1,099,020 P 608,250 P

Advances from related parties 14 25,503,746 41,317,052

Provision 5 436,848,488 436,848,488

Total Liabilities 463,451,254 478,773,790

EQUITY

Capital stock 2,062,500,000 2,062,500,000

Deficit 1,956,320,485 )( 1,960,237,602 )(

Total Equity 106,179,515 102,262,398

TOTAL LIABILITIES AND EQUITY 569,630,769 P 581,036,188 P

LIABILITIES AND EQUITY

A S S E T S

See Notes to Financial Statements.

STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, 2009 AND 2008

(Amounts in Philippine Pesos)

SUNTRUST HOME DEVELOPERS, INC.

2009 2008

(Company only - (Company only - 2007

Notes see Note 1) see Note 1) (Consolidated)

REVENUES

Equity share in net earnings of an associate 6 6,080,760 - -

Rental income 5 1,905,594 - -

Interest income 1,451 9,716 1,852,978

Real estate sales - - 213,932,302

Interest on in-house financing - - 80,436,345

Realized gross profit on prior years' sales - - 51,439,303

Other operating income 10 - - 13,785,381

7,987,805 9,716 361,446,309

COSTS AND EXPENSES

Administrative expenses 11 2,178,401 1,951,193 377,259,611

Cost of rentals 5 1,891,719 -

Loss on dilution of interest in a subsidiary 6 - 71,265,399 -

Equity share in net losses of an associate 6 - 1,090,087 -

Cost of real estate sales 9 - - 143,893,876

Selling and distribution costs 11 - - 40,977,852

Finance costs - - 35,021,075

Deferred gross profit - - 32,102,605

Other operating expenses 11 - - 44,704

Income tax expense 13 568 882 5,013,241

4,070,688 74,307,561 634,312,964

NET PROFIT (LOSS) FOR THE YEAR 3,917,117 P 74,297,845 )( P 272,866,655 )( P

Attributable to:

Parent company's shareholders 3,917,117 P 74,297,845 )( P 277,951,017 )( P

Non-controlling interest - - 5,084,362

3,917,117 P 74,297,845 )( P 272,866,655 )( P

Earnings (Loss) Per Share Attributable to Parent

Company's Shareholders 15 0.002 P 0.033 )( P 0.124 )( P



STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007


PP P

2009 2008


see Note 1) see Note 1) (Consolidated)

NET PROFIT (LOSS) FOR THE YEAR 3,917,117 P 74,297,845 )( P 272,866,655 )( P

OTHER COMPREHENSIVE INCOME - - -

TOTAL COMPREHENSIVE

INCOME (LOSS) FOR THE YEAR 3,917,117 P 74,297,845 )( P 272,866,655 )( P

Attributable to:

Parent company's shareholders 3,917,117 P 74,297,845 )( P 277,951,017 )( P

Non-controlling interest - - 5,084,362

3,917,117 P 74,297,845 )( P 272,866,655 )( P



STATEMENTS OF COMPREHENSIVE INCOME



2009 2008


see Note 1) see Note 1) (Consolidated)

EQUITY ATTRIBUTABLE TO PARENT COMPANY'S

SHAREHOLDERS

CAPITAL STOCK - P1 par value

Authorized - 3 billion shares

Issued and outstanding - 2 billion shares 2,000,000,000 P 2,000,000,000 P 2,000,000,000 P

Subscribed capital - 250 million shares 250,000,000 250,000,000 250,000,000

Subscription receivable 187,500,000 )( 187,500,000 )( 187,500,000 )(

62,500,000 62,500,000 62,500,000

2,062,500,000 2,062,500,000 2,062,500,000

DEFICIT

Balance at beginning of year 1,960,237,602 )( 1,885,939,757 )( 1,607,988,740 )(

Net profit (loss) for the year 3,917,117 74,297,845 )( 277,951,017 )(

Balance at end of year 1,956,320,485 )( 1,960,237,602 )( 1,885,939,757 )(

106,179,515 102,262,398 176,560,243

NON-CONTROLLING INTEREST

Balance at beginning of year - - 64,810,965

Net profit for the year - - 5,084,362

Balance at end of year - - 69,895,327

TOTAL EQUITY 106,179,515 P 102,262,398 P 246,455,570 P



STATEMENTS OF CHANGES IN EQUITY



2009 2008


Notes see Note 1) see Note 1) (Consolidated)

CASH FLOWS FROM OPERATING ACTIVITIES

Profit (loss) before tax 3,917,685 P 74,296,963 )( P 267,853,414 )( P

Adjustments for:

Equity share in net losses (earnings) of an associate 6 6,080,760 )( 1,090,087 -

Depreciation 11 1,892,364 1,290 287,675,535

Interest income 1,451 )( 9,716 )( 82,289,322 )(

Loss on dilution of interest in a subsidiary 6 - 71,265,399 -

Interest expense - - 35,021,075

Impairment loss on trade and other receivables 11 - - 8,636,575

Dividend income 10 - - 2,010,676 )(

Operating loss before working capital changes 272,162 )( 1,949,903 )( 20,820,227 )(

Increase in trade and other receivables - - 61,778,031 )(

Increase in property development costs - - 169,719,591 )(

Increase in land held for future development - - 500,000 )(

Increase in prepayments and other current assets 71,741 )( 48,054 )( 24,654,633 )(

Increase in advances to landowners and joint ventures - - 24,000 )(

Increase in trade and other payables 490,492 74,539 18,477,724

Increase in customers' deposits - - 42,096,990

Decrease in deferred income on real estates sales - - 19,336,698 )(

Increase in retirement benefit obligation - - 2,780,206

Cash generated from (used in) operations 146,589 1,923,418 )( 233,478,260 )(

Cash paid for taxes 290 )( 882 )( 5,100,291 )(

Net Cash From (Used in) Operating Activities 146,299 1,924,300 )( 238,578,551 )(

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 1,451 9,716 82,657,032

Acquisitions of property and equipment - - 6,182,498 )(

Dividends received - - 2,010,676

Net Cash From Investing Activities 1,451 9,716 78,485,210

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in advances from related parties 630,579 )( 1,702,005 217,761,572

Payments of interest-bearing loans - - 35,012,361 )(

Interest paid - - 35,021,075 )(

Net Cash From (Used in) Financing Activities 630,579 )( 1,702,005 147,728,136

NET DECREASE IN CASH

AND CASH EQUIVALENTS 482,829 )( 212,579 )( 12,365,205 )(

CASH AND CASH EQUIVALENTS OF A

FORMER SUBSIDIARY - 20,946,317 )( -

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 594,676 21,753,572 34,118,777

CASH AND CASH EQUIVALENTS

AT END OF YEAR 111,847 P 594,676 P 21,753,572 P

Supplemental Information

A portion of the Company's deposit to Megaworld Corporation as of December 31, 2008 was applied against the total contract price (VAT-inclusive) of the

condominium units acquired from the latter in 2009 (see Note 7) and also against the Company's outstanding liability to the former (see Note 14) amounting to

P42.37 million and P15.18 million, respectively.

In 2008, the beginning balance of cash and cash equivalents of Suntrust Properties, Inc. (SPI), a former subsidiary, now an associate, was deconsolidated

as a result of the dilution of the Company's ownership interest in SPI (see Note 1).



STATEMENTS OF CASH FLOWS



SUNTRUST HOME DEVELOPERS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009, 2008 AND 2007


1. CORPORATE INFORMATION

Suntrust Home Developers, Inc. (the Company) was incorporated in the Philippines to primarily engage in real estate development. The Company is a publicly listed entity in the Philippine Stock Exchange. As of December 31, 2009, 2008, and 2007, Megaworld Corporation (Megaworld), also a publicly listed Company, is the major stockholder with 42.48% ownership interest in the Company. The registered office of the Company, which is also its principal place of business, is located at the 6th Floor, The World Centre Building, 330 Sen. Gil Puyat Avenue, Makati City. The Company’s administrative functions are being handled by Megaworld. In 2008, the Company’s ownership interest in Suntrust Properties, Inc. (SPI), formerly Empire East Properties, Inc., decreased from 60% to 20%. Consequently, the Company’s control over SPI ceased and as such, SPI is no longer a subsidiary but instead became an associate of the Company, which eventually resulted in the deconsolidation of SPI from the Company’s financial statements in 2008 (see Note 6).

The financial statements have been prepared on a going concern basis since Megaworld commits to provide continuing financial support on its operating expenses until such time that the Company is able to successfully re-start its commercial operations as a real estate developer.

The financial statements of the Company for the year ended December 31, 2009 (including the comparatives for the year ended December 31, 2008 and the comparative consolidated financial statements for the year ended December 31, 2007) were authorized for issue by the Board of Directors (BOD) on March 15, 2010.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been used in the preparation of these financial statements are summarized in the succeeding paragraphs. The policies have been consistently applied to all years presented, unless otherwise stated.

2.1 Basis of Preparation of Financial Statements (a) Statement of Compliance with Philippine Financial Reporting Standards

The financial statements of the Company have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). PFRS are adopted by the Financial Reporting Standards Council (FRSC) from the pronouncements issued by the International Accounting Standards Board.

The financial statements have been prepared using the measurement bases specified by PFRS for each type of asset, liability, income and expense. These financial statements have been prepared on the historical cost basis. The measurement bases are more fully described in the accounting policies that follow.

- 2 -

(b) Presentation of Financial Statements The financial statements are presented in accordance with Philippine Accounting Standard (PAS) 1 (Revised 2007), Presentation of Financial Statements. The Company presents all items of income and expense in two statements: a statement of income and a statement of comprehensive income. Two comparative periods are presented for the statement of financial position when the Company applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements, or reclassifies items in the financial statements.

(c) Functional and Presentation Currency

These financial statements are presented in Philippine pesos, the functional currency of the Company and SPI, and all values represent absolute amounts except when otherwise indicated.

2.2 Basis of Consolidation (For the 2007 Consolidated Financial Statements) The consolidated financial statements for 2007 comprised the accounts of the Company and its then 60% owned subsidiary, SPI, after the elimination of material intercompany transactions. All intercompany balances and transactions with SPI including income, expenses and dividends, were eliminated in full. Unrealized profits and losses from intercompany transactions that were recognized in assets were also eliminated in full. Intercompany losses that indicated an impairment were recognized in the consolidated financial statements.

The 2007 financial statements of SPI were prepared for the same reporting period as the Company using consistent accounting principles. A subsidiary is consolidated from the date the Company obtains control until such time that such control ceases. The 2009 and 2008 financial statements of the Company do not include the accounts of SPI since the Company has no longer control over SPI since 2008. Hence, starting 2008, SPI is no longer a subsidiary of the Company; it is now an associate. On the other hand, the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year ended December 31, 2007 included the accounts of SPI because the Company had control over SPI as of that date and during that year.

The Company accounts for its investment in a subsidiary, non-controlling interest and interest in joint ventures in 2007 as follows:

(a) Investment in a Subsidiary

A subsidiary is an entity over which the Company has the power to control the financial and operating policies. The Company obtains and exercises control through voting rights.

A subsidiary is consolidated from the date the Company obtains control until such time that such control ceases..

- 3 -

An acquired subsidiary is subject to the application of the purchase method for acquisitions. This involves the revaluation at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated statement of financial position at their revalued amounts, which are also used as the bases for subsequent measurement in accordance with the Company accounting policies.

(b) Transactions with Non-controlling Interests

The Company applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Company. Disposals of equity investments to non-controlling interests result in gains and losses for the Company that are recorded in the statement of income. Non-controlling interests represent the interests not held by the Company.

(c) Interests in Jointly Controlled Assets

SPI has interests in jointly controlled assets that arise from joint development agreements entered into with landowners of certain parcels of land under development.

In jointly controlled assets, SPI’s share of jointly controlled assets and its share of any liabilities incurred jointly with other venturers in relation to the joint venture are recognized in the financial statements. Income from the sale of its share in the developed residential and condominium units are recognized in the books using the percentage of completion method (see Note 2.6). Any expenses incurred related to the joint venture are recorded in the financial statements.

2.3 Adoption of New Interpretations, Revisions and Amendments to PFRS (a) Effective in 2009 that are Relevant to the Company

In 2009, the Company adopted the following new revisions and amendments to PFRS that are relevant to the Company and effective for financial statements for the annual period beginning on or after January 1, 2009:

PAS 1 (Revised 2007) : Presentation of Financial Statements PAS 23 (Revised 2007) : Borrowing Costs PAS 32 and PAS 1 (Amendment) : Financial Instruments: Presentation And Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation PFRS 1 and PAS 27 (Amendments) : PFRS 1 – First Time Adoption of PFRS

and PAS 27 – Consolidated and Separate Financial Statements

Various Standards : 2008 Annual Improvements to PFRS

- 4 -

Discussed below are the effects on the financial statements of the new and amended standards.

(i) PAS 1 (Revised 2007), Presentation of Financial Statements, requires an entity to present all items of income and expense recognized in the period in a single statement of comprehensive income or in two statements: a separate statement of income and a statement of comprehensive income. Income and expense recognized in profit or loss is presented in the statement of income in the same way as the previous version of PAS 1. The statement of comprehensive income includes the profit or loss for the period and each component of income and expense recognized outside of profit or loss or the “non-owner changes in equity,” which are no longer allowed to be presented in the statements of changes in equity, classified by nature (e.g., gains or losses on available-for-sale assets or translation differences related to foreign operations). A statement showing an entity’s financial position at the beginning of the previous period is also required when the entity retrospectively applies an accounting policy or makes a retrospective restatement, or when it reclassifies items in its financial statements. The Company’s adoption of PAS 1 (Revised 2007) did not result in any material adjustments in its financial statements as the change in accounting policy only affects presentation aspects. The Company has elected to present separate statements of income and comprehensive income (see Note 2.1).

(ii) PAS 23 (Revised 2007), Borrowing Costs. Under the revised PAS 23, all

borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalized as part of the cost of that asset. The option of immediately expensing borrowing costs that qualify for asset recognition has been removed. The adoption of this new standard did not have any significant effect on the 2009 financial statements, as well as for prior periods, as the Company’s existing accounting policy is to capitalize all interest directly related to qualifying assets.

(iii) PAS 32 (Amendment), Financial Instruments: Presentation and PAS 1

(Amendment), Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation. The amendments require certain financial instruments that represent a residual interest in the net assets of an entity, which would otherwise be classified as financial liabilities, to be classified as equity, if both the financial instrument and the capital structure of the issuing entity meet certain conditions. The adoption of this standard did not have a significant impact on the Company’s financial statements.

(iv) PFRS 1(Amendment), First-time Adoption of PFRS and PAS 27(Amendment),

Consolidated and Separate Financial Statements. The amended standards allow first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from PAS 27, and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. This amendment had no significant effect on the 2009 financial statements.

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(v) 2008 Annual Improvements to PFRS. The FRSC has adopted the Improvements to Philippine Financial Reporting Standards 2008 which became effective for the annual periods beginning on or after January 1, 2009. Among those improvements, the following are the amendments relevant to the Company:

• PAS 1 (Amendment), Presentation of Financial Statements. The amendment clarifies that financial instruments classified as held for trading in accordance with PAS 39, Financial Instruments: Recognition and Measurement are not necessarily required to be presented as current assets or current liabilities. Instead, normal classification principles under PAS 1 should be applied. This amendment had no impact on the Company’s 2009 financial statements.

• PAS 19 (Amendment), Employee Benefits. The amendment includes the following:

- Clarification that a curtailment is considered to have occurred to

the extent that benefit promises are affected by future salary increases and a reduction in the present value of the defined benefit obligation results in negative past service cost.

- Change in the definition on return of plan assets to require the

deduction of plan administration costs in the calculation of plan assets return only to the extent that such costs have been excluded from measurement of the defined benefit obligation.

- Distinction between short-term and long-term employee

benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered.

- Removal of the reference to recognition in relation to contingent

liabilities in order to be consistent with PAS 37, Provisions, Contingent Liabilities and Contingent Assets, which requires contingent liabilities to be disclosed and not recognized.

This amendment did not have an impact on the 2009 financial statements.

• PAS 23 (Amendment), Borrowing Costs. The amendment clarifies the definition of borrowing costs to include interest expense determined using the effective interest method under PAS 39. This amendment had no significant effect on the 2009 financial statements.

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• PAS 39 (Amendment), Financial Instruments: Recognition and Measurement. The definition of financial asset or financial liability at fair value through profit or loss as it related to items that are held for trading was changed. A financial asset or liability that is part of a portfolio of financial instruments managed together with evidence of an actual recent pattern of short-term profit taking is included in such a portfolio on initial recognition. The Company determined that adoption of this amendment had no material effect on its 2009 financial statements.

• PAS 40 (Amendment), Investment Property. PAS 40 is amended to include property under construction or development for future use as investment property in its definition of investment property. This results in such property being within the scope of PAS 40; previously, it was within the scope of PAS 16. Also, if an entity’s policy is to measure investment property at fair value, but during construction or development of an investment property the entity is unable to reliably measure its fair value, then the entity would be permitted to measure the investment property at cost until construction or development is complete. At such time, the entity would be able to measure the investment property at fair value. The adoption had no material effect on its 2009 financial statements as the Company has no property under construction or development for future use as investment property.

(b) Effective in 2009 but not Relevant to the Company

The following amendments, interpretations and improvements to published standards are mandatory for accounting periods beginning on or after January 1, 2009 but are not relevant to the Company’s financial statements:

PFRS 2 (Amendment) : Share-based Payment PFRS 8 : Operating Segments Philippine Interpretations IFRIC 13 : Customer Loyalty Programmes IFRIC 16 : Hedges of a Net Investment in a

Foreign Operation 2008 Annual Improvements PAS 16 (Amendment) : Property, Plant and Equipment PAS 20 (Amendment) : Accounting for Government Grants and Disclosure of Government Assistance PAS 27 (Amendment) : Consolidated and Separate Financial Statements PAS 28 (Amendment) : Investment in Associates PAS 29 (Amendment) : Financial Reporting in Hyperinflationary Economies PAS 31 (Amendment) : Interest in Joint Ventures PAS 36 (Amendment) : Impairment of Assets PAS 41 (Amendment) : Agriculture PFRS 2 (Amendment) : Share-based Payment

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PFRS 5 (Amendment) : Non-current Assets Held-for-sale and Discontinued Operations PFRS 7 (Amendment) : Financial Instruments: Disclosures

(c) Effective Subsequent to 2009 There are new PFRS, revisions, amendments, annual improvements and interpretations to existing standards that are effective for periods subsequent to 2009. Among those, management has initially determined the following, which the Company will apply in accordance with their transitional provisions, to be relevant to its financial statements: (i) PAS 27 (Revised), Consolidated and Separate Financial Statements (effective from

July 1, 2009). The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the equity is re-measured to fair value, and a gain or loss is recognized in profit or loss. The Company will apply this revised standard prospectively from January 1, 2010 to all transactions with non-controlling interests.

(ii) Philippine Interpretation IFRIC 15, Agreements for Construction of Real Estate,

(effective from January 1, 2012). This Interpretation provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of PAS 11, Construction Contracts, or PAS 18, Revenue, and accordingly, when revenue from the construction should be recognized. It is likely to result in PAS 18 being applied to a wider range of transactions. IFRIC 15 will be applied by the Company on future real estate revenue transactions.

(iii) Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments (effective on or after July 1, 2010). It addresses accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor to extinguish all or part of the financial liability. These transactions are sometimes referred to as “debt for equity” exchanges or swaps, and have happened with increased regularity during the financial crisis. The interpretation requires the debtor to account for a financial liability which is extinguished by equity instruments as follows:

• the issue of equity instruments to a creditor to extinguish all (or part of a financial liability) is consideration paid in accordance with PAS 39;

• the entity measures the equity instruments issued at fair value, unless this cannot be reliably measured;

• if the fair value of the equity instruments cannot be reliably measured, then the fair value of the financial liability extinguished is used; and,

• the difference between the carrying amount of the financial liability extinguished and the consideration paid is recognized in profit or loss.

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Management has determined that the adoption of the interpretation will not have a material effect on it financial statements as it does not normally extinguish financial liabilities through equity swap.

(iv) 2009 Annual Improvements to PFRS. The FRSC has adopted the Improvements to Philippine Financial Reporting Standards 2009. Most of these amendments became effective for annual periods beginning on or after July 1, 2009, or January 1, 2010. Among those improvements, only the following amendments were identified to be relevant to the Company’s financial statements:

• PAS 1 (Amendment), Presentation of Financial Statements (effective from January 1, 2010). The amendment clarifies the current and non-current classification of a liability that can, at the option of the counterparty, be settled by the issue of the entity’s equity instruments. The Company will apply the amendment in its 2010 financial statements but expects it to have no material impact in the Company’s financial statements.

• PAS 7 (Amendment), Statement of Cash Flows (effective from January 1, 2010). The amendment clarifies that only an expenditure that results in a recognized asset can be classified as a cash flow from investing activities. The amendment will not have a material impact on the financial statements since only recognized assets are classified by the Company as cash flow from investing activities.

• PAS 17 (Amendment), Leases (effective from January 1, 2010). The amendment clarifies that when a lease includes both land and building elements, an entity assesses the classification of each element as finance or an operating lease separately in accordance with the general guidance on lease classification set out in PAS 17. Management has initially determined that this will not have material impact on the financial statements since the Company currently does not have a lease agreement that includes both land and building.

• PAS 18 (Amendment), Revenue (effective from January 1, 2010). The amendment provides guidance on determining whether an entity is acting as a principal or as an agent. Management will apply this amendment prospectively in its 2010 financial statements.

2.4 Financial Assets

Financial assets, which are recognized when the Company becomes a party to the contractual terms of the financial instrument, include cash and other financial instruments. Financial assets are classified into the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired. The designation of financial assets is re-evaluated at every reporting date at which date a choice of classification or accounting treatment is available, subject to compliance with specific provisions of applicable accounting standards.

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Regular purchases and sales of financial assets are recognized on their trade date. All financial assets that are not classified as at fair value through profit or loss are initially recognized at fair value, plus any directly attributable transaction costs. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs related to it are recognized in profit or loss. The financial asset category currently relevant to the Company is loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are subsequently measured at amortized cost using the effective interest method, less impairment loss, if any. Any change in their value is recognized in profit or loss. Impairment loss is provided when there is objective evidence that the Company will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets’ carrying amount and the present value of estimated cash flows. The Company’s financial assets categorized as loans and receivables are presented as Cash and Advances to Officers and Employees (presented under Prepayments and Other Current Assets) in the statement of financial position. Non-compounding interest, dividend income and other cash flows resulting from holding financial assets are recognized in profit or loss when earned, regardless of how the related carrying amount of financial assets is measured.

Derecognition of financial assets occurs when the rights to receive cash flows from the financial instruments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.

2.5 Real Estate Transactions Acquisition costs of land acquired for development, including other costs and expenses incurred to effect the transfer of the title of the property, are charged to the Property Development Costs account. Related property development costs are then accumulated in this account.

Land held for future development are carried at cost less any impairment in value. The

cost of the asset is comprised of its purchase price and any directly attributable acquisition costs. They are transferred to Property Development Costs account once a substantial development of the project occurred.

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Revenues on sales of residential units are recognized using the percentage-of-completion method when at least 25% of the total contract price is collected. Under this method, revenue is recognized by reference to the stage of development of the properties, i.e., revenue is recognized in the period in which the work is performed. Revenue relating to the uncompleted portion of residential units sold with at least 25% collection of the total contract price is presented in the Deferred Income on Real Estate Sales account in the statement of financial position and is recognized as income under the Realized Gross Profit on Prior Years’ Sales in the statement of income by reference to its percentage of completion in such year. Subsequent cancellations of prior years’ real estate sales are deducted from revenues and cost of real estate sold in the year in which such cancellations are made.

For income tax purposes, revenue on sale of the units is recognized in full in the year of sale when more than 25% of the net selling price is received. Otherwise, taxable income for the year is computed based on collections from the sales. If the transaction does not qualify yet as sale, the deposit method is applied until all the conditions for recording a sale are met. Pending recognition of sale, cash received from buyers are presented under the Customers’ Deposits account in the liabilities section of the statement of financial position. Cost of real estate property sold before completion of the development is determined based on the actual costs incurred to date plus estimated costs to complete the development of the property. The estimated expenditures for the development of real estate property sold, as determined by the project engineers, are charged to the cost of residential units sold with a corresponding credit to the Reserve for Property Development account presented under liabilities in the statement of financial position. The Property Development Costs account, representing the accumulated costs of real estate units for sale, is carried at the lower of cost and net realizable value. Considering the entity’s pricing policies, cost is considerably lower than the net realizable values of the unsold units. The effect of revisions in the total estimated project cost of the real estate projects is recognized in the year in which these changes become known. Any impairment losses from the projects are charged to operations in the period in which the losses are determined. 2.6 Accounting for Interests in Jointly Controlled Assets

Transactions in co-development projects are accounted for using joint venture accounting. These transactions involve the joint control of certain assets. In accounting for the jointly controlled assets, the entity recognizes the following: (a) its share of the jointly controlled assets; (b) any liabilities which it has incurred;

(c) its share of any liabilities incurred jointly with the other venturer in relation to the

joint venture;

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(d) any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and,

(e) any expense which it has incurred in respect of its interest in the joint venture.

Actual disbursements incurred in relation to the joint venture are presented as part of the Property Development Costs account in the statement of financial position. 2.7 Investment in an Associate Investment in an associate is initially recognized at cost and subsequently accounted for using the equity method. Changes resulting from the profit or loss generated by the associate are shown as Equity Share in Net Earnings (Losses) of an Associate in the Company’s statement of income and therefore affect the net results of the Company. These changes include subsequent depreciation and amortization or impairment of the fair value adjustments of assets and liabilities. Items that have been directly recognized in the associate’s equity, for example, resulting from the associate’s accounting for available-for-sale financial assets, are recognized in the equity of the Company. Any non-income related equity movements of the associate that arise, for example, from the distribution of dividend or other transactions with the associate’s shareholders are charged against the proceeds received or granted. No effect on the Company’s net result or equity is recognized in the course of these transactions. An associate is an entity over which the Company is able to exert significant influence but which is neither a subsidiary nor an interest in a joint venture.

2.8 Investment Property

Investment property consists of condominium units and land held for capital appreciation. Condominium units are stated at cost, less accumulated depreciation and any accumulated impairment losses, while land is stated at cost less accumulated impairment losses, if any. Depreciation of condominium units is computed on a straight-line basis over the estimated useful life of 20 years (see Note 3.2). An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see Note 2.14). Investment property is derecognized upon disposal or when permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognized in profit or loss in the year of retirement or disposal. 2.9 Financial Liabilities

Financial liabilities, which include trade and other payables and advances from related parties, are recognized when the entity becomes a party to the contractual terms of the instrument. All interest-related charges are recognized as an expense under the caption Finance Costs in the statement of income. Trade and other payables and advances from related parties are recognized initially at their fair value and subsequently measured at amortized cost less settlement payments. Financial liabilities are derecognized from the statement of financial position only when the obligations are extinguished either through discharge, cancellation or expiration.

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2.10 Provisions Provisions are recognized when present obligations will probably lead to an outflow of economic resources and they can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the end of the reporting period, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. When time value of money is material, long-term provisions are discounted to their present values using a pretax rate that reflects market assessments and the risks specific to the obligation. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognized in the financial statements. Similarly, possible inflows of economic benefits to the Company that do not yet meet the recognition criteria of an asset are considered contingent assets, hence, are not recognized in the financial statements. On the other hand, any reimbursement that the Company can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset not exceeding the amount of the related provision. 2.11 Revenue and Expense Recognition Revenue comprises revenue from the sale of house and lot units and rental of investment property measured by reference to the fair value of consideration received or receivable by the Company, excluding value-added tax (VAT) and trade discounts. Revenue is recognized to the extent that the revenue can be reliably measured, it is probable that the economic benefits will flow to the Company, and the costs incurred or to be incurred can be measured reliably. In addition, the following specific recognition criteria must also be met before revenue is recognized: (a) Rental income – Revenue is recognized on a straight-line basis over the duration of

the lease term. (b) Real estate sales – Revenue recognition on sale of real estate property is discussed in

Note 2.5. (c) Forfeited payments and penalties on delinquent accounts – Revenue is recognized in the year

the contract was cancelled or penalties were received from the buyer.

(d) Interest – Revenue is recognized as the interest accrues taking into account the effective yield on the asset.

(e) Dividends – Revenue is recognized when the Company’s right to receive payment is

established.

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Cost and expenses are recognized in profit or loss upon utilization of goods or services or at the date they are incurred. All finance costs are reported in profit or loss on an accrual basis except capitalized borrowing costs which are included as part of the cost of the related qualifying asset (see Note 2.16).

2.12 Leases The Company accounts for its leases as follows: (a) Company as Lessee

Leases which do not transfer to the Company substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as expense in the statement of income on a straight-line basis over the lease term. Associated costs, such as repairs and maintenance and insurance, are expensed as incurred.

(b) Company as Lessor

Leases which do not transfer to the lessee substantially all the risks and benefits of ownership of the asset are classified as operating leases. Lease income from operating leases is recognized in profit or loss on a straight-line basis over the lease term.

The entity determines whether an arrangement is, or contains a lease based on the substance of the arrangement. It makes an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. 2.13 Foreign Currency Transactions

The accounting records of the Company are maintained in Philippine pesos. Foreign currency transactions during the year are translated into the functional currency at exchange rates which approximate those prevailing on transaction dates.

Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income as part of income or loss from operations. 2.14 Impairment of Non-financial Assets The Company’s investment in an associate, property and equipment and investment property are subject to impairment testing. All other individual assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

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Impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an internal discounted cash flow evaluation.

All assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist and the carrying amount of the asset is adjusted to the recoverable amount resulting in the reversal of the impairment loss. 2.15 Employee Benefits (a) Post-employment Benefits

Post-employment benefits are provided to employees through a defined benefit plan. A defined benefit plan is a post-employment plan that defines an amount of post-employment benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligation for any benefits from this kind of post-employment plan remains with the Company, even if plan assets for funding the defined benefit plan have been acquired. Plan assets may include assets specifically designated to a long-term benefit fund, as well as qualifying insurance policies. The Company’s post-employment defined benefit pension plan covers all regular full-time employees. The liability recognized in the statement of financial position for post-employment defined benefit pension plans is the present value of the defined benefit obligation (DBO) at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The DBO is calculated annually by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related post-employment liability. Actuarial gains and losses are not recognized as an income or expense unless the total unrecognized gain or loss exceeds 10% of the greater of the obligation and related plan assets. The amount exceeding this 10% corridor is charged or credited to profit or loss over the employees’ expected average remaining working lives. Actuarial gains and losses within the 10% corridor are disclosed separately. Past service costs are recognized immediately in profit or loss, unless the changes to the post-employment plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortized on a straight-line basis over the vesting period.

(b) Compensated Absences

Compensated absences are recognized for the number of paid leave days (including holiday entitlement) remaining at the end of the reporting period. They are included in the Trade and Other Payables account in the statement of financial position at the undiscounted amount that the entity expects to pay as a result of the unused entitlement.

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2.16 Borrowing Costs Borrowing costs are recognized as expense in the period in which they are incurred, except to the extent that they are capitalized. Borrowing cost that are attributable to the acquisition of a qualifying asset (i.e., an asset that takes a substantial period of time to get ready for its intended use or sale) are capitalized as part of the cost of such asset. The capitalization of borrowing cost commences when expenditures for the asset and borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalization ceases when substantially all such activities are complete. 2.17 Income Taxes Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity, if any. Current tax assets or liabilities comprise those claims from, or obligations to, fiscal authorities relating to the current or prior reporting period, that are uncollected or unpaid at the reporting period. They are calculated using the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognized as a component of tax expense in profit or loss. Deferred tax is provided, using the liability method on temporary differences at the end of the reporting period between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Under the liability method, with certain exceptions, deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences and the carryforward of unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deferred income tax asset can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled provided such tax rates have been enacted or substantively enacted at the end of the reporting period. Most changes in deferred tax assets or liabilities are recognized as a component of tax expense in profit or loss. Only changes in deferred tax assets or liabilities that relate to items recognized in other comprehensive income or directly in equity are recognized in other comprehensive income or directly in equity. 2.18 Equity Capital stock represents the nominal value of shares that have been issued.

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Deficit includes all current and prior period results of operations as disclosed in the statement of income. Non-controlling interest represents the portion of the equity interest in the subsidiary not owned by the Company. 2.19 Earnings or Loss Per Share Basic earnings or loss per share is determined by dividing net income by the weighted average number of common shares subscribed and issued during the year after giving retroactive effect to any stock dividends, stock split or reverse stock split declared in the current year, if any. Diluted earnings or loss per share is computed by adjusting the weighted average number of ordinary shares outstanding to assume conversion of dilutive potential shares. The Company does not have dilutive potential shares outstanding, thus dilutive earnings per share is equal to the basic earnings per share.

3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The Company’s financial statements prepared in accordance with PFRS require management to make judgments and estimates that affect amounts reported in the financial statements and related notes. Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under circumstances. Actual results may ultimately differ from these estimates: 3.1 Critical Management Judgments in Applying Accounting Policies

In the process of applying the Company’s accounting policies, management has made the following judgments, apart from those involving estimation, which have the most significant effect on the amounts recognized in the financial statements. (a) Distinction Between Investment Properties and Owner-managed Properties

The Company determines whether a property qualifies as investment property. In making its judgment, the entity considers whether the property generates cash flows largely independently of the other assets held by an entity. Owner-occupied properties generate cash flows that are attributable not only to property but also to other assets used in the production or supply process. (b) Operating and Finance Leases The Company has entered into various lease agreements. Critical judgment was exercised by management to distinguish each lease agreement as either an operating or finance lease by looking at the transfer or retention of significant risk and rewards of ownership of the properties covered by the agreements. Failure to make the right judgment will result in either overstatement or understatement of assets and liabilities.

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(c) Provisions and Contingencies Judgment is exercised by management to distinguish between provisions and contingencies. Policies on recognition and disclosure of provision and disclosure of contingencies are discussed in Note 2.10 and relevant disclosures are presented in Notes 5 and 17. 3.2 Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year: (a) Revenue Recognition using Percentage-of-Completion Method The use of the percentage-of-completion method requires estimate of the portion completed to date as a proportion of the total budgeted cost of the project. Where the proportion of the percentage of completed projects differs from management’s estimates, the amount of realized gross profit recognized would have changed. (b) Useful Life of Condominium Units (presented under Investment Property)

The Company estimates the useful life of its condominium units based on the period over which the assets are expected to be available for use. The estimated useful life of these assets are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the assets. Based on management’s collective assessment of industry practice, internal technical evaluation and experience with similar assets as at December 31, 2009, the estimated useful life of the condominium units is 20 years. Actual results, however, may vary due to changes in estimates brought about by changes in factors mentioned above. (c) Impairment of Non-financial Assets The Company’s policy on estimating the impairment of non-financial assets is discussed in detail in Note 2.14. Though management believes that the assumptions used in the estimation of fair values reflected in the financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse effect on the results of operations. (d) Post-employment Benefits The determination of SPI’s obligation and cost of pension is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 12 and include, among others, discount rate, and salary increase rate. In accordance with PFRS, actual results that differ from the assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. The estimated present value, net of unrecognized losses, and other relevant assumptions are presented in Note 12.

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The composition of this account is shown below.

2009 2008 Input VAT P 4,973,726 P 524,743 Others 225,284 62,401 P 5,199,010 P 587,144 5. INVESTMENT PROPERTY

The gross carrying amounts and accumulated depreciation at the beginning and end of 2009 and 2008 are shown below.

Condominium Units Land Total December 31, 2009 Cost P 1,456,194,860 P 436,848,488 P 1,893,043,348 Accumulated depreciation ( 1,420,252,204 ) - ( 1,420,252,204 ) Net carrying amount P 35,942,656 P 436,848,488 P 472,791,144 December 31, 2008 Cost P 1,418,360,485 P 436,848,488 P 1,855,208,973 Accumulated depreciation ( 1,418,360,485 ) - ( 1,418,360,485 ) Net carrying amount P - P 436,848,488 P 436,848,488

January 1, 2008 Cost P 1,418,360,485 P 436,848,488 P 1,855,208,973 Accumulated depreciation ( 1,418,360,485 ) - ( 1,418,360,485 ) Net carrying amount P - P 436,848,488 P 436,848,488

A reconciliation of the carrying amounts of investment property at the beginning and end of 2009 and 2008 is shown below.

Condominium Units Land Total

Balance at January 1, 2009, net of accumulated depreciation P - P 436,848,488 P 436,848,488 Additions 37,834,375 - 37,834,375 Depreciation charges for the year ( 1,891,719 ) - ( 1,891,719 ) Balance at December 31, 2009, net of accumulated depreciation P 35,942,656 P 436,848,488 P 472,791,144 Balance at December 31, 2008, net of accumulated depreciation P - P 436,848,488 P 436,848,488

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The Company’s land with a carrying value of P436.8 million was used as a collateral for a loan of Best World Gaming and Entertainment Corporation, a co-venturer, amounting to P600 million, to a local bank. The co-venturer had ceased operations but negotiations with the creditor bank are still ongoing to settle the debt. In anticipation of an acceptable arrangement, the Company recorded a provision for losses, shown under the current liabilities section of the statement of financial position, equivalent to the carrying value of the land. The Company is liable only up to the extent of the carrying value of the land used as collateral. Rental income from condominium units under operating lease agreements amounted to P1.9 million in 2009 and is presented as Rental Income in the 2009 statement of income. No rental income was recognized on the Company’s investment property in 2008 and 2007. There are no direct operating expenses incurred with respect to investment property except for depreciation charges presented as Cost of Rentals in the 2009 statement of income (see Note 11). The fair value of the Investment Property as of December 31, 2009 and 2008 amounted to P482.2 million and P445.6 million, respectively, which was based on appraised values as of those dates as determined by independent appraisers.

6. INVESTMENT IN AN ASSOCIATE

In 2008, SPI increased its authorized capital stock from 200 million shares to 500 million shares. Out of this increase, 262.5 million shares of stock at P1 par value were subscribed and paid-up by another related party. The Company did not exercise its right of pre-emption with regard to the increase in SPI’s authorized capital stock resulting in the decrease in its ownership interest in SPI from 60% to 20%. This resulted in a loss on dilution of ownership interest in SPI amounting to P51.1 million, which is included as part of Loss on Dilution of Interest in a Subsidiary account in the 2008 statement of income. Because of this, the accounts of SPI were deconsolidated from the Company’s financial statements in 2008 and the investment was reclassified to the Investment in an Associate account. The Company’s investment in SPI is now accounted for using the equity method. Subsequent to this transaction, an impairment loss amounting to P20.2 million was recognized using the amount paid by the buyer of SPI’s shares as fair value reference which is lower than the remaining carrying value of the investment in SPI. Such impairment loss is also included as part of Loss on Dilution of Interest in a Subsidiary account in the 2008 statement of income.

- 20 -

The comparative statements of income of the Company, with the accounts of SPI accounted for under the equity method, for each of the three years in the period ended December 31, 2009 are as follows:

2009 2008 2007 Equity share in net earnings (losses) of an associate P 6,080,760 ( P 1,090,087) P 7,626,543 Rental income 1,905,594 - - Interest income 1,451 9,716 14,431 Administrative expenses ( 2,178,401 ) ( 1,951,193) ( 1,873,932 ) Depreciation of investment property ( 1,891,719 ) - ( 283,672,097 ) Loss on dilution of interest in a subsidiary - ( 71,265,399) - Other operating expenses - - ( 44,704 ) Tax expense ( 568 ) ( 882) ( 1,258 ) Net profit (loss) attributable to parent company’s shareholders P 3,917,117 ( P 74,297,845) (P 277,951,017 )

The movements in the Company’s investment in an associate accounted for under the equity method as of December 31, 2009 and 2008 are as follows:

2009 2008 Balance at beginning of year P 83,005,235 P 155,360,721 Loss on dilution of interest in a subsidiary - ( 71,265,399) Equity share in net earnings (losses) of SPI 6,080,760 ( 1,090,087) Balance at end of year P 89,085,995 P 83,005,235

7. OTHER NON-CURRENT ASSETS

This account consists of the following: Note 2009 2008 Deposits 14.1 P 2,442,773 P 60,000,000 Property and equipment - net - 645 P 2,442,773 P 60,000,645

The carrying amount of the deposits is a reasonable approximation of its fair value as of December 31, 2009 and 2008.

- 21 - 8. TRADE AND OTHER PAYABLES

The details of this account are as follows: 2009 2008 Accrued expenses P 614,040 P 583,200 Deferred rent 397,400 - Income tax payable 278 - Others 87,302 25,050 P 1,099,020 P 608,250

Significant portion of accrued expenses mainly consists of accrued professional fees amounting to P611,520 and P582,400 as of December 31, 2009 and 2008, respectively. Deferred rent pertains to the advance rentals received from lessees of the Company’s investment property, which will be applied to the last months of the lessees’ respective lease terms. Due to their short duration, the Company’s management considers the carrying amounts of trade and other payables recognized in the statements of financial position to be a reasonable approximation of their fair values.

9. COST OF REAL ESTATE SALES

The details of the Cost of Real Estate Sales account presented in the 2007 consolidated statement of income are shown below (see Note 11). Property development costs at beginning of year P 990,096,834 Additions 339,704,916 Decrease in reserve for property development ( 46,387,748 ) Property development costs at end of year ( 1,139,520,126 ) Cost of real estate sales P 143,893,876

Cost of real estate sales for 2007 arose from the real estate sales of SPI. The Company has no real estate sales for 2009 and 2008.

10. OTHER OPERATING INCOME

Presented below are the details of this account for the year ended December 31, 2007. Forfeited payments and penalties P 11,774,705 Dividend income 2,010,676 P 13,785,381

- 22 - 11. OPERATING EXPENSES BY NATURE

The details of operating expenses by nature are shown below. 2009 2008 2007 Notes ( Company only) ( Company only ) ( Consolidated ) Depreciation 5, 7 P 1,892,364 P 1,290 P 287,675,535 Professional fees 690,906 665,341 6,260,352 Employee benefits 12 554,966 514,350 40,986,885 Registration fees 250,000 252,626 203,187 Taxes and licenses 152,436 135,188 1,550,787 Training and development 35,000 60,000 3,607,889 Office supplies 18,178 15,749 3,737,353 Loss on dilution of interest in a subsidiary 6 - 71,265,399 - Equity share in net losses of an associate 6 - 1,090,087 -

Materials, labor and overhead 9 - - 143,893,876 Commission - - 27,529,627 Advertising - - 15,493,225 Impairment loss on trade and other receivables - - 8,636,575

Repairs and maintenance - - 7,232,196 Rental - - 4,605,632 Utilities - - 4,068,025 Others 476,270 306,649 6,694,899

P 4,070,120 P 74,306,679 P 562,176,043

These expenses are classified in the statements of income as follows: 2009 2008 2007 Notes ( Company only) ( Company only ) ( Consolidated )

Administrative expenses P 2,178,401 P 1,951,193 P 377,259,611 Cost of rentals 1,891,719 - - Loss on dilution of interest in a subsidiary 6 - 71,265,399 - Equity share in net losses of an associate 6 - 1,090,087 - Cost of real estate sales 9 - - 143,893,876 Selling and distribution costs - - 40,977,852 Other operating expenses - - 44,704

P 4,070,120 P 74,306,679 P 562,176,043

- 23 - 12. EMPLOYEE BENEFITS

Expenses recognized as employee benefits (see Note 11) are presented below.

2009 2008 2007 ( Company only) ( Company only ) ( Consolidated )

Salaries and wages P 367,450 P 346,470 P 27,201,224 Short-term medical benefits 141,679 125,622 9,137,531 Social security costs 45,837 42,258 1,867,925 Post-employment benefits - - 2,780,205

P 554,966 P 514,350 P 40,986,885

The Company has not yet established a formal post-employment benefit plan and does not accrue post-employment benefits due to the insignificance of related amount. SPI, on the other hand, accrues its estimated cost of post-employment benefits using the projected unit credit method as computed by an independent actuary.

The amount of post-employment benefits of SPI recognized in the 2007 consolidated statement of income is as follows:

Current service cost P 1,961,328 Interest cost 808,276 Net actuarial loss recognized during the year 10,601 P 2,780,205

In determining its post-employment benefit obligation, SPI used a discount rate of 8% and an expected rate of salary increase of 10% in 2007. Assumptions regarding future mortality are based on published statistics and mortality tables. The average expected remaining working life of SPI’s employees retiring at the age of 60 is 27 for both males and females.

- 24 - 13. TAXES

13.1 Current and Deferred Tax

The components of tax expense as reported in the statements of income are as follows:

2009 2008 2007 ( Company only) ( Company only ) ( Consolidated ) Current tax expense: Minimum corporate income tax (MCIT) at 2% P 278 P - P - Regular corporate income tax (RCIT) at 30% in 2009 and 35% in 2008 and 2007 - - 4,701,991 Final tax at 20% and 7.5% 290 882 368,967 568 882 5,070,958 Deferred tax income relating to origination and reversal of temporary differences - - ( 57,717 ) P 568 P 882 P 5,013,241

A reconciliation of tax on pretax profit (loss) computed at the applicable statutory rates to tax expense reported in the statements of income is as follows:


Tax on pretax profit (loss) at 30% in 2009 and 35% in 2008 and 2007 P 1,175,306 (P 26,003,937 ) ( P 93,748,695 )

Adjustment for income subjected to lower income tax rates ( 146 ) ( 4,283 ) ( 279,575 )

Tax effects of: Non-taxable income ( 1,824,228 ) - ( 1,185,512 ) Unrecognized temporary differences 649,636 585,358 99,285,234 Non-deductible expenses - 25,324,420 - Reduction in deferred tax rate - 97,560 - Non-deductible interest expense - - 941,789 Tax expense reported in statement of income P 568 P 882 P 5,013,241

- 25 -

The Company did not recognize deferred tax assets on the following deductible temporary differences based on management’s evaluation that such deferred tax assets may not be recovered in future years.

2009 2008 Amount Tax Effect Amount Tax Effect Net operating loss carryover (NOLCO) P 6,056,059 P 1,816,818 P 11,334,041 P 3,400,212 MCIT 278 278 - -

P 6,056,337 P 1,817,096 P 11,334,041 P 3,400,212

The details of NOLCO, which can be claimed as deduction by the Company from future taxable income within three years from the year such loss was incurred, are shown below.

Year Original Expired Remaining Valid Incurred Amount Amount Balance Until 2009 P 2,164,526 P - P 2,164,526 2012 2008 1,959,391 - 1,959,391 2011 2007 1,932,142 - 1,932,142 2010 2006 7,442,508 7,442,508 - 2009 P 13,498,567 P 7,442,508 P 6,056,059

The Company and SPI are subject to the MCIT which is computed at 2% of gross income, as defined under the tax regulations. MCIT for 2009, which can be applied as deduction from future regular corporate income tax payable within three years from the year when paid, amounted to P278. The Company had no MCIT in 2008 and 2007 as the Company had no taxable revenues in those years. SPI had no MCIT in 2007 as SPI’s RCIT was higher than MCIT in that year. No RCIT was reported in 2009 and 2008 since the Company was in tax loss position in those years. In 2008 and 2007, the Company’s MCIT amounting to P73 and P68,835, respectively, which were incurred in 2005 and 2004, respectively, had expired. 13.2 Optional Standard Deduction

In July 2008, Republic Act (RA) 9504 was approved giving corporate taxpayers an option to claim itemized deduction or optional standard deduction (OSD) equivalent to 40% of gross sales. Once the option to use OSD is made, it shall be irrevocable for the taxable year for which the option was made.

In 2009 and 2008, the Company opted to continue claiming itemized deductions.

13.3 Change in Applicable Tax Rate

Effective January 1, 2009, in accordance with RA 9337, RCIT rate was reduced from 35% to 30% and nonallowable deductions for interest expense from 42% to 33% of interest income subjected to final tax.

- 26 - 14. RELATED PARTY TRANSACTIONS

The Company’s transactions with related parties, which include Megaworld, Empire East Land Holdings, Inc. (EELHI) and the Company’s key management, are described in the succeeding paragraphs. 14.1 Noninterest-bearing Cash Advances

The Company obtains unsecured, noninterest-bearing advances from related parties for working capital purposes and for the settlement of certain liabilities. The fair values of these financial liabilities were not individually determined as the carrying amounts are a reasonable approximation of fair values. The details of noninterest-bearing advances made to the Company, shown as Advances from Related Parties account in the statements of financial position, are as follows:

Note 2009 2008 Advances from EELHI: Balance at beginning of year P 25,503,746 P 787,565,818 Cash advances of SPI from EELHI (deconsolidated) - ( 762,062,072 )

Balance at end of year 25,503,746 25,503,746 Advances from Megaworld:

Balance at beginning of year 15,813,306 24,395,180 Additions 1,901,087 1,702,005 Repayments 7 ( 17,714,393 ) - Cash advances of SPI from Megaworld (deconsolidated) - ( 10,283,879 ) Balance at end of year - 15,813,306

P 25,503,746 P 41,317,052

In 2009, the Company and Megaworld agreed to apply a portion of the Company’s existing deposits with the latter (see Note 7) against the outstanding balance of the Company’s liability to the former amounting to P15.18 million.

14.2 Key Management Personnel Compensation

As discussed in Note 1, the administrative functions of the Company are being handled by Megaworld; hence, the Company’s key management personnel compensation is nil. Short-term benefits granted to key management personnel of SPI amounted to P1.5 million as of December 31, 2007 while post-employment benefits for SPI’s key management personnel recognized in 2007 amounted to P745,996.

- 27 - 15. EARNINGS (LOSS) PER SHARE

The basic earnings (loss) per share is computed as follows:


Net profit (loss) for the year attributable to parent company’s shareholders P 3,917,117 (P 74,297,845 ) ( P 277,951,017 ) Divided by the weighted average number of outstanding shares 2,250,000,000 2,250,000,000 2,250,000,000

Earnings (loss) per share P 0.002 (P 0.033 ) (P 0.124 )

The Company has no dilutive potential shares as of the end of the reporting periods.

16. SEGMENT INFORMATION

The operating businesses of the Company (and of SPI in 2007) are organized and managed separately according to the product and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Company and SPI are engaged in the development and marketing of affordable and mass housing projects either in the form of condominium communities or house and lot packages, and to a limited extent, commercial and office space and mixed-use complexes. It classifies its projects into high-rise and horizontal. High-rise projects refer to condominiums and other medium scale properties which cater to middle-income market while the horizontal projects refer to house and lot packages and subdivision lots which are intended both for low and middle-income markets.

The corporate and other segment includes general and corporate income and expense items. Segment accounting policies are the same as the policies described in Note 2. The Company and SPI generally accounts for inter-segment sales and transfers as if the sales or transfers were to third parties at current market prices. No segment information is presented for 2009 and 2008 since the Company’s 2009 operations revolved around the lease of its investment property while it is non-operating in 2008. The 2007 segment information mainly pertained to SPI’s operations.

- 28 -

The following table presents revenue and profit information regarding industry segments for the year ended December 31, 2007, and certain asset and liability information regarding industry segments as of December 31, 2007.

2007

(Consolidated)

High-Rise Horizontal Corporate

Projects Projects and Others Consolidated

TOTAL REVENUES

Sale to external customers P 122,718,631 P 171,650,016 P 13,785,383 P 308,154,030

RESULTS

Segment results P 8,345,047 P 120,488,570 P 13,785,383 P 142,619,000

Unallocated expenses 377,304,317 ( 377,304,317 )

Loss from operations ( 234,685,317 )

Finance costs - 14,958,915 20,062,160 ( 35,021,075 )

Interest income 1,852,978 1,852,978

Loss before tax and non-controlling interest ( 267,853,414 )

Income tax expense ( 5,013,241 )

Loss before non-controlling interest ( 272,866,655 )

Income applicable to non-controlling interest ( 5,084,362 )

Net loss attributable to parent company’s shareholders ( P 277,951,017 )

ASSETS AND LIABILITIES

Segment assets P 3,924,145 P 1,693,047,274 P 413,339,905 P 2,110,311,324

Unallocated assets - - 498,196,769 498,196,769

Total assets P 3,924,145 P 1,693,047,274 P 911,536,674 P 2,608,508,093

Segment liabilities P 573,144 P 1,630,934,602 P 253,547,531 P 1,885,055,277

Unallocated liabilities - - 476,997,246 476,997,246

Total liabilities P 573,144 P 1,630,934,602 P 730,544,777 P 2,362,052,523

OTHER SEGMENT INFORMATION

Capital expenditure P - P - P 6,182,498 P 6,182,498

Depreciation and amortization - - 287,675,535 287,675,535

- 29 - 17. COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies involving the Company and SPI are described in the succeeding paragraphs.

17.1 Joint Venture Agreements

SPI has several joint venture agreements with the landowners of certain parcels of land under development. These agreements were initially entered into by an associate of Megaworld with the landowners and subsequently assigned to SPI. Under the terms of the agreements, SPI, in addition to providing specified portion of the total project development costs, also commits to advance mutually agreed-upon amounts to the landowners. Repayment of these advances shall be made upon completion of the project development either in the form of the developed lots corresponding to the owner’s share in saleable lots or in the form of cash to be derived from the sales of the landowners’ share in the saleable lots and residential units. The Company itself has no joint venture agreements in 2009, 2008 and 2007. 17.2 Others There are commitments, guarantees, litigations and contingent liabilities that arise in the normal course of the Company’s operations which are not reflected in the accompanying financial statements. Management is of the opinion that losses, if any, from these commitments and contingencies will not have material effects on the financial statements.

18. RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company is exposed to a variety of financial risks in relation to financial instruments. The Company’s risk management is coordinated with the BOD and focuses on actively securing the Company’s short-to medium-term cash flows by minimizing the exposure to financial markets. The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The financial risks to which the Company is exposed to are described below. 18.1 Credit Risk

Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the face of the statements of financial position under Cash account and the Advances to Officers and Employees (shown as part of Prepayment and Other Current Assets account in the statement of financial position). The Company is also exposed to credit risk to the extent of financial guarantee provided to a co-venturer (see Note 5). None of the financial assets are secured by collateral or other credit enhancements.

- 30 -

19.2 Liquidity Risk

The Company manages its liquidity needs by carefully monitoring cash outflows due in a day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 6-month and one-year period are identified monthly. The Company maintains cash to meet its liquidity requirements for up to 60-day periods. Excess cash is invested in time deposits or short-term marketable securities. As at December 31, 2009 and 2008, the Company’s trade and other payables amounting to P1.10 million and P0.61 million, respectively, have contractual maturities of within six months after the end of the reporting period. These contractual maturities reflect the gross cash flows, which may differ from the carrying values of the liabilities at the end of the reporting period.

19. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Company’s capital management objectives are:

• To ensure the Company’s ability to continue as a going concern; and,

• To provide an adequate return to shareholders in the future.

The Company monitors capital on the basis of the carrying amount of equity as presented on the statement of financial position. It sets the amount of capital in proportion to its overall financing structure, i.e., equity and financial liabilities. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. As of December 31, 2009 and 2008, the Company’s debt-to-equity ratio is 0.25 and 0.41, respectively.

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