COVER SHEET C I T Y & L A N D D E V E L O P E R S, I N C. (Company s Full Name)

Transcription

1 COVER SHEET SEC Registration Number C I T Y & L A N D D E V E L O P E R S, I N C. (Company s Full Name) H. V. D E L A C O S T A S T.,, S A L C E D O V I L L A G E, M A K A T I C I T Y (Business Address: No. Street City/Town/Province) Rufina C. Buensuceso Contact Person Company Telephone Number Q (A) Month Day FORM TYPE Month Day Fiscal Year Annual Meeting (Secondary License Type, If Applicable) C F D Dept. Requiring this Doc. Amended Articles Number / Section Total Amount of Borrowings Total No. of Stockholders Domestic Foreign To be accomplished by SEC Personnel concerned File Number LCU Document ID Cashier S T A M P S Remarks = pls. use black ink for scanning purposes

2 SECURITIES AND EXCHANGE COMMISSION SEC FORM 17- Q (A) QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF THE CORPORATION CODE OF THE PHILIPPINES 1. For the fiscal year ended March 31, SEC Identification Number BIR Tax Identification No Exact name of issuer as specified in its charter CITY & LAND DEVELOPERS, INC. 5. Makati City, Philippines 6. (SEC Use Only) Province, country or other jurisdiction Industry Classification Code of incorporation 7. 3/F Cityland Condominium 10 Tower 1, #156 H.V. Dela Costa St., Salcedo Village, Makati City 1226 Address of Principal Office Postal Code Issuer's telephone number, including area code 9. Former name, former address and former fiscal year, if changed since last report N/A 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock Outstanding Unclassified Common Shares 811,250, Are any or all of these securities listed on a Stock Exchange. Yes [ x ] No [ ] If yes, state the name of such stock exchange and the classes of securities listed therein: Stock Exchange Philippine Stock Exchange Title of Each Class Unclassified Common Shares 12. Check whether the issuer: (a)has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or Sections 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 (or for such shorter period that the registrant was required to file such reports): Yes [ x ] No [ ] (b)has been subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]

3 1 PART I FINANCIAL INFORMATION Item 1. Financial Statements The financial statements and accompanying notes are filed as part of this form (pages 6 to 27). Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation The Manila Residences Bocobo, a 34-storey office, commercial and residential condominium located in Jorge Bocobo St., Ermita, Manila City is ready for occupancy by June 2012, a year in advance from its promised date of turnover to clients. Internal sources of liquidity come from sales of condominiums and real estate projects, collection of installment receivables, maturing short-term investments while external sources come from SECregistered commercial papers and Home Guaranty Corporation s guaranteed promissory notes. The Company has four prime lots for future development. The latest acquisition is located along Taft Avenue, Malate, Manila, and EDSA corner Lanutan Alley, Brgy. Veterans Village, Quezon City. The other lots are located along Roxas Boulevard and Samar Avenue, Quezon City. Financial Condition (March 31, 2013 vs. December 31, 2012) Total assets amounted to P=2.179B as of the first quarter of 2013, as compared with the previous year's ending balance of P=2.186B. Collections decreased installment contracts receivable account, while sales decreased real estate properties for sale-net. The Company's funds were utilized for the development of the projects and to pay its maturing accounts payable and notes and contracts payable resulting to the decrease by 6.90% and 6.92%, respectively. Excess funds were placed in short term investments resulting to the increase by %. Total stockholders' equity stood at P=1.626B as of March 2013, higher by 1.65% from 2012 year end balance of P=1.599B due to net income of P=26.22M plus other adjustments of P=0.24M. As a result of the foregoing, the Company's liquidity position registered an acid test and current ratio of 2.64:1 and 3.02:1 as of the first quarter of 2013 as compared to 2.33:1 and 2.77:1 in December Debt equity ratio also improved to 0.14:1 as of the first quarter of 2013, as compared to 0.21:1 as of the same period of the previous year. Results of Operation (March 31, 2013 vs. March 31, 2012) Net income for the first quarter amounted to P=26.22M, as compared to the same quarter of last year of P=58.39M. The Company s current projects, Manila Residences Bocobo and Grand Emerald Tower were already sold at 90.85% and 95.22%, respectively as of December 31, 2012, resulting to the limited available units for sale which accounted for the decrease in revenues. With the latest acquisition of prime lots, the Company plans to launch new projects in the future to increase inventory and consequently generate more sales. On the cost side, cost of sales and operating expenses decreased by 78.35% and 31.35% as these move in tandem with sales. Financial expenses decreased due to the partial payment of notes payable. On the other hand provision for income tax decreased due to lower revenues. Altogether, net income stood at P=26.22M and translated to earnings per share and return on equity (both annualized) of P=0.13:1 and 6.45% as compared to the same quarter of the previous year of P=0.29:1 and 15.54%, respectively.

4 2 Financial Ratios March 31, 2013 (Unaudited) December 31, 2012 March 31, 2012 Current Asset-to-equity Debt-to-equity Asset-liability Solvency Interest rate coverage Acid-test ratio Return on equity (%) 6.45% 16.01% 15.54% Manner of calculation: Current ratio = Total Current Assets / Total Current Liabilities Asset-to-equity ratio = Debt-to-equity ratio = Total Assets Stockholder's Equity (net of Net Changes in Fair Value of Investments) Notes and Contracts Payable Stockholder's Equity (net of Net Changes in Fair Value of Investments) Asset-to-liability ratio = Total Assets / Total Liabilities Solvency ratio = Interest rate coverage ratio = Acid-test ratio = Net Income after Tax + Depreciation Expense Total Liabilities Net Income Before Tax + Depreciation Expense + Interest Expense Interest Expense Cash and Cash Equivalents + Short-term Cash Investments + Investments in Trust Fund + Installment Contracts Receivable, current + Other Receivables, current Total Current Liabilities Return on equity ratio = Net Income Attributable to Equity Holders of the Parent Stockholder's Equity Items affecting assets, liabilities, equity, net income, or cash flows that are unusual because of their nature, size or incidents There are no unusual items affecting assets, liabilities, equity, net income or cash flows. Any changes in estimates of amounts reported in prior interim periods of the current financial year or changes in estimates of amounts reported in prior financial years that have a material effect in the current interim period There are no changes in estimates of amounts reported in prior interim periods of the current financial year or changes in estimates of amounts reported in prior financial years that have a material effect in the current interim period. Any issuances, repurchases, and repayments of debt and equity securities The Company issued SEC-Registered Short-Term Commercial Papers during the period. The outstanding balance is P=83.20 million as of March 31, 2013.

5 3 Any material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period There are no material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period. Effect of changes in the composition of the issuer during the interim period, including business combinations, acquisition or disposal of subsidiaries and long-term investments, restructuring, and discontinuing operations. There are no changes in the composition of the issuer during the interim period, including business combinations, acquisition or disposal of subsidiaries and long-term investments, restructuring, and discontinuing operations. Any changes in contingent liabilities or contingent assets since the last annual balance sheet date There are no changes in the contingent liabilities or contingent assets since the last annual balance sheet date. Any Known Trends, Events or Uncertainties (Material impact on liquidity) There is no known trends, events or uncertainties that has a material effect on liquidity. Internal and External Sources of Liquidity Internal sources come from sales of condominium and real estate projects, collection of installment receivables and maturing short-term investments. External sources come from bank loans. Any Material Commitments for Capital Expenditures and Expected Sources of Funds of such Expenditures The estimated development cost of P= million as of March 31, 2013 representing the accrued payable of real estate projects sold will be sourced through: a. Sales of condominium and real estate projects b. Collection of installment receivables c. Maturing short-term investments d. Issuance of commercial papers Any Known Trend or Events or Uncertainties (Material Impact on Net Sales or Revenues or Income from Continuing Operations) There is no known trend, event or uncertainties that has a material effect on the net sales, revenues or income from continuing operations. Any Significant Elements of Income or Loss that did not arise from Registrant s Continuing Operations There are no significant elements of income or loss that did not arise from registrant s continuing operations.

6 4 Causes for any Material Changes from Period to Period in One or More Line of the Registrants Financial Statements. a) Decrease in Cash and Cash Equivalents was due to the shift of funds to short-term cash investments. b) Increase in Short term Cash Investments was due to placements. c) Increase in Available for Sale Financial Assets- was due to increase in value of stocks. d) Decrease in Installment Contract Receivables was due to collection. e) Increase in Other Receivables was due to increase in due from affiliates. f) Decrease in Real Estate Properties for Sale was due to sales. g) Increase in Real Estate held for Future Development was due to development costs. h) Decrease in Other Assets was due to input vat. i) Decrease in Accounts Payable and Accrued Expenses was due to payment. j) Decrease in Notes and Contracts Payable was due to payment. k) Increase in Income Tax Payable was due to accrual of first quarter of 2013 tax payable. l) Decrease in Deferred Income Tax was due to decrease in accounting income. m) Increase in Net Changes in Fair Value of Investments was due to increase in value of stocks. n) Increase in Retained Earnings was due to net income and other adjustments. o) Decrease in Sales of Real Estate was due to decrease in inventory available for sale. p) Decrease in Financial Income was due to lower interest income from sales of real estate properties. q) Decrease in Rent Income was due to sale of properties under lease. r) Decrease in Other Revenues was due to lower miscellaneous income. s) Decrease in Cost of Sales was due to lower sales. t) Decrease in Operating Expenses was due to lower sales. u) Decrease in Financial Expenses was due to decrease in loans and interest rates. v) Decrease in Provision for Income Tax was due to lower revenues. w) Decrease in Net Income was due to lower revenues. Any seasonal aspects that had a material effect on the financial condition and results of operation There are no seasonal aspects that had a material effect on the financial condition and results of operations. Compliance to Philippine Accounting Standard (PAS) 34, Interim Financial Reporting The Company s unaudited interim consolidated financial statements is in compliance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. The same accounting policies and methods of computation are followed as compared with the most recent annual consolidated financial statements. However, the consolidated financial statements as of March 31, 2013 do not include all of the information and disclosures required in the annual consolidated financial statements and therefore, should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, There are no any events or transactions that are material to an understanding of the current interim period.

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8 6 CITY & LAND DEVELOPERS, INCORPORATED BALANCE SHEETS UNAUDITED March 2013 December 2012 ASSETS Cash and Cash Equivalents (Note 4) P=379,608,063 P=602,310,127 Short-term Cash Investments 355,000,000 51,000,000 Available-for-sale Financial Assets (Note 5) 1,796,156 1,556,652 Installment Contracts Receivable (Note 6) 737,238, ,080,536 Other Receivables (Note 7) 19,349,883 14,217,291 Real Estate Properties for Sale (Note 8) 122,744, ,058,055 Real Estate Properties for Future Development 363,993, ,205,168 Investment Properties (Note 9) 180,603, ,603,685 Other Assets 18,370,514 18,765,028 TOTAL ASSETS P=2,178,704,762 P=2,185,796,542 LIABILITIES AND STOCKHOLDERS EQUITY Accounts Payable and Accrued Expenses (Note 10) P=232,584,082 P=249,818,557 Notes and Contracts Payable (Note 11) 234,854, ,319,445 Income Tax Payable 24,479,741 20,285,173 Deferred Tax Liabilities 61,166,770 64,216,270 Total Liabilities 553,084, ,639,445 Stockholders Equity Capital stock 1 par value Authorized 1,200,000,000 shares Issued 811,250,476 shares 811,250, ,250,476 Additional paid-in capital 105, ,136 Net changes in fair value of available-for-sale financial assets 1,526,243 1,286,739 Retained earnings (Note 13) 812,738, ,514,746 Total Stockholders Equity 1,625,620,102 1,599,157,097 TOTAL LIABILITIES & STOCKHOLDERS EQUITY P=2,178,704,762 P=2,185,796,542 See accompanying Notes to Financial Statements.

9 7 CITY & LAND DEVELOPERS, INCORPORATED STATEMENTS OF INCOME UNAUDITED For the 3-month ending March 2013 For the 3-month ending March 2012 REVENUES Sales of real estate properties P=46,270,210 P=162,471,131 Financial income (Note 14) 34,368,846 41,486,975 Rent income 762,799 1,153,293 Other income 270,359 1,330,108 81,672, ,441,507 EXPENSES Cost of real estate sales 21,299,652 98,360,260 Operating expenses (Note 15) 27,408,053 39,926,262 Financial expenses (Note 17) 1,643,655 2,314,605 50,351, ,601,127 INCOME BEFORE INCOME TAX 31,320,854 65,840,380 PROVISION FOR INCOME TAX (Note 19) 5,097,353 7,447,513 NET INCOME P=26,223,501 P=58,392,867 Earnings per share P=0.032 P=0.072* See accompanying Notes to Financial Statements. * After retroactive effect of 20% stock dividends in 2012.

10 8 CITY & LAND DEVELOPERS, INC. STATEMENT OF COMPREHENSIVE INCOME As of March 2013 As of March 2012 Net Income P=26,223,501 P=58,392,867 Other comprehensive income Changes in fair value of available-for-sale financial assets 239, ,196 Total other comprehensive income 239, ,196 Total Comprehensive Income net P=26,463,005 P=58,584,063 Earnings per share P=0.033 P=0.072* * After retroactive effect of 20% stock dividends in 2012.

11 9 CITY & LAND DEVELOPERS, INC STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY Additional Net changes in fair Retained earnings Capital stock paid-in capital value of investments Appropriated Unappropriated Total Beginning balance, January 2013 P=811,250,476 P=105,136 P=1,286,739 P=786,514,746 P=1,599,157,097 Total comprehensive income 239,504 26,223,501 26,463,005 Ending balance, March 2013 P=811,250,476 P=105,136 P=1,526,243 P=812,738,247 P=1,625,620,102 Additional Net changes in fair Retained earnings Capital stock paid-in capital value of investments Appropriated Unappropriated Total Beginning balance, January 2012 P=676,042,298 P=105,136 P=690,710 P=100,000,000 P=667,142,971 P=1,443,981,115 Total comprehensive income 191,196 58,392,867 58,584,063 Ending balance, March 2012 P=676,042,298 P=105,136 P=881,906 P=100,000,000 P=725,535,838 P=1,502,565,178

12 10 CITY & LAND DEVELOPERS, INC. STATEMENTS OF CASH FLOWS UNAUDITED As of March 2013 As of March 2012 CASH FLOW FROM OPERATING ACTIVITIES Income before income tax P=31,320,854 P=65,840,380 Adjustments for: Interest expense net of amounts capitalized 1,574,904 2,289,705 Interest income (34,364,999) (41,483,776) Dividend income (3,847) (3,199) Depreciation 678,716 Changes in operating assets and liabilities Decrease (increase) in: Installment contracts receivable 65,841,730 15,095,039 Other receivables (4,973,828) (483,342) Real estate properties for sale 29,313,407 76,915,661 Real estate properties for future development (1,787,839) (1,505,278) Other assets 394,515 (1,281,657) Increase (decrease) in accounts payable and accrued expenses (17,035,549) (11,713,926) Cash from (used in) operations 70,279, ,348,323 Interest received 34,206,235 42,451,550 Income taxes paid (3,952,286) (6,365,256) Net cash flows from (used in) operating activities 100,533, ,434,617 CASH FLOWS FROM INVESTING ACTIVITIES Dividends received 3,847 3,199 Proceeds from (purchase of) short-term cash investment (304,000,000) 211,500,000 Net cash from (used in) investing activities (303,996,153) 211,503,199 CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (2,110,426) (1,984,725) Cash dividends and fractional shares paid 336, ,555 Net proceeds from (payments of) notes payable (17,465,378) (2,917,364) Net cash flows from (used in) financing activities (19,239,208) (4,639,534) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (222,702,064) 347,298,282 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 602,310, ,540,443 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD P=379,608,063 P=658,838,725

13 11 CITY & LAND DEVELOPERS, INC. NOTES TO FINANCIAL STATEMENTS 1. Corporate Information City & Land Developers, Incorporated (the Company) was incorporated in the Philippines on June 28, Its primary purpose is to establish an effective institutional medium for acquiring and developing suitable land sites for residential, office, commercial, institutional and industrial uses primarily, but not exclusively, in accordance with the subdivision, condominium, and cooperative concepts of land-utilization and landownership. The average number of employees was 73 as of March 31, 2013 and 72 as of December 31, The Company s registered office and principal place of business is 3 rd Floor, Cityland Condominium 10, Tower I, 156 H. V. de la Costa Street, Ayala North, Makati City. The Company is 49.73% owned by Cityland Development Corporation (CDC), a publicly listed company incorporated and domiciled in the Philippines. The Company s ultimate parent is Cityland, Inc. (CI), a company incorporated and domiciled in the Philippines, which prepares consolidated financial statements and that of its subsidiaries. 2. Summary of Significant Accounting and Financial Reporting Policies Basis of Preparation The financial statements of the Company have been prepared using the historical cost basis, except for available-for-sale financial assets which are carried at fair values. The financial statements are presented in Philippine peso (Peso), which is the Company s functional currency, and rounded to the nearest Peso except when otherwise indicated. Statement of Compliance The financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS). Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous financial year except for the following amended Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS) effective as of January 1, The following amended PAS and PFRS have no significant impact on the Company s financial statements: PAS 12, Income Taxes - Recovery of Underlying Assets. The amendment clarified the determination of deferred tax on investment property measured at fair value and introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in PAS 40, Investment Property, should be determined on the basis that its carrying amount will be recovered through sale. It implies the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in PAS 16, Property, Plant and Equipment, always be measured on a sale basis of the asset. The amendment has no effect on the entity s performance or in its disclosures because the tax rate for these assets in the jurisdictions in which they are located does not differ if they are recovered by sale or use. PFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements. The amendment requires additional disclosures about financial assets that have been transferred but not derecognized to enable the user of the Company s financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risks associated with, the entity s continuing involvement in those derecognized assets. The entity did not have any assets with these characteristics, so there has not been any effect in the presentation of its financial statements.

14 12 Revenue and Costs Recognition Revenue is recognized to the extent that it is probable that the economic benefit will flow to the Company and the amount of revenue can be reliably measured. Revenue is measured at the fair value of the consideration received excluding VAT. The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Company has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognized: Sales of real estate properties Sales of condominium units and residential houses where the Company has material obligations under the sales contract to provide improvements after the property is sold are accounted for under the percentage of completion method. Under this method, revenue on sale is recognized as the related obligations are fulfilled. Revenue from sales of completed residential lots and housing units, where a sufficient down payment has been received, the collectability of the sales price is reasonably assured, the refund period has expired, the receivables are not subordinated and the seller is not obliged to complete improvements, is accounted for under the full accrual method. If the criterion of full accrual method was not satisfied, any cash received by the Company is included in Accounts payable and accrued expenses in the balance sheet until all the conditions for recording a sale are met. Cost of real estate sales Cost of real estate sales is recognized consistent with the revenue recognition method applied. Cost of subdivision land and condominium units sold before the completion of the development is determined on the basis of the acquisition cost of the land plus its full development costs, which include estimated costs for future development works, as determined by the Company s in-house technical staff. The cost of inventory recognized in profit or loss on disposal is determined with reference to the specific costs incurred on the property, allocated to saleable area based on relative size and takes into account the percentage of completion used for revenue recognition purposes. Segment Reporting The Company s operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Financial information on business segments is presented in Note 24 in the financial statements. The Company s asset-producing revenues are located in the Philippines (i.e., one geographical location). Therefore, geographical segment information is no longer presented. Events After the Reporting Period Post year-end events that provide additional information about the Company s position at the end of reporting period (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the financial statements when material. New Accounting Standards, Interpretations and Amendments to Existing Standards Effective Subsequent to December 31, 2012 The Company will adopt the standards and interpretations enumerated below when these become effective. Except as otherwise indicated, the Company does not expect the adoption of these new changes in PFRS to have a significant impact on the financial statements. The relevant disclosures will be included in the notes to the financial statements when these become effective. Effective in 2013 PAS 1, Financial Statement Presentation - Presentation of Items of Other Comprehensive Income. The amendments to PAS 1 change the grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled ) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment becomes effective for annual periods beginning on or after July 1, The amendment affects presentation only and has therefore no impact on the Company s financial position and performance.

15 13 Amendments to PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities, require an entity to disclose information about rights of offset and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are offset in accordance with PAS 32. These disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with PAS 32. The amendments require entities to disclose, in a tabular format unless another format is more appropriate, the following minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period: a) The gross amounts of those recognized financial assets and recognized financial liabilities; b) The amounts that are offset in accordance with the criteria in PAS 32 when determining the net amounts presented in the balance sheet; c) The net amounts presented in the balance sheet; d) The amounts subject to an enforceable master netting arrangement or similar agreement that are not otherwise included in (b) above, including: i. Amounts related to recognized financial instruments that do not meet some or all of the offsetting criteria in PAS 32; and ii. Amounts related to financial collateral (including cash collateral); and e) The net amount after deducting the amounts in (d) from the amounts in (i) above. The amendments to PFRS 7 are to be applied retrospectively for annual periods beginning on or after January 1, The amendment affects disclosures only and will have no impact on the Company s financial position and performance. PFRS 10, Consolidated Financial Statements, replaces the portion of PAS 27, Consolidated and Separate Financial Statements, that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by PFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in PAS 27. This standard becomes effective for annual periods beginning on or after January 1, This standard will not impact the Company s financial position and performance. PFRS 11, Joint Arrangements, replaces PAS 31, Interests in Joint Ventures and SIC-13, Jointlycontrolled Entities - Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. This standard becomes effective for annual periods beginning on or after January 1, This standard will not impact the Company s financial position and performance. PFRS 12, Disclosure of Interests with Other Entities, includes all of the disclosures that were previously included in PAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in PAS 31 and PAS 28. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. This standard becomes effective for annual periods beginning on or after January 1, This standard will not impact the Company s financial position and performance. PFRS 13, Fair Value Measurement, establishes a single source of guidance under PFRS for all fair value measurements. PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted. This standard becomes effective for annual periods beginning on or after January 1, The Company is currently assessing the impact that this standard will have on the financial position and performance.

16 14 Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine ( production stripping costs ) and provides guidance on the recognition of production stripping costs as an asset and measurement of the stripping activity asset. This interpretation becomes effective for annual periods beginning on or after January 1, This interpretation will not impact the Company s financial position and performance. Amendments to PAS 19, Employee Benefits, range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The revised standard also requires new disclosures such as, among others, a sensitivity analysis for each significant actuarial assumption, information on asset-liability matching strategies, duration of the defined benefit obligation, and disaggregation of plan assets by nature and risk. The amendment becomes effective for annual periods beginning on or after January 1, Once effective, the Company has to apply the amendments retroactively to the earliest period presented. PAS 27, Separate Financial Statements (as revised in 2011). As a consequence of the new PFRS 10 and PFRS 12, what remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The Company does not present separate financial statements. The amendment becomes effective for annual periods beginning on or after January 1, PAS 28, Investments in Associates and Joint Ventures (as revised in 2011). As a consequence of the new PFRS 11 and PFRS 12, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The amendment becomes effective for annual periods beginning on or after January 1, The Company expects that this amendment will not have any impact on the Company s financial position and performance. Annual Improvements to PFRSs ( cycle) The Annual Improvements to PFRSs ( cycle) contain non-urgent but necessary amendments to PFRS. The amendments are effective for annual periods beginning on or after January 1, 2013 and are applied retrospectively. Earlier application is permitted. PFRS 1, First-time Adoption of PFRS - Borrowing Costs, clarifies that, upon adoption of PFRS, an entity that capitalized borrowing costs in accordance with its previous generally accepted accounting principles, may carry forward, without any adjustment, the amount previously capitalized in its opening statement of financial position at the date of transition. Subsequent to the adoption of PFRS, borrowing costs are recognized in accordance with PAS 23, Borrowing Costs. The amendment does not apply to the Company as it is not a first-time adopter. PAS 1, Presentation of Financial Statements - Clarification of the Requirements for Comparative Information, clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional comparative period does not need to contain a complete set of financial statements. On the other hand, supporting notes for the third balance sheet (mandatory when there is a retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements) are not required. The amendments affect disclosures only and have no impact on the Company s financial position or performance. PAS 16, Property, Plant and Equipment - Classification of Servicing Equipment, clarifies that spare parts, stand-by equipment and servicing equipment should be recognized as property, plant and equipment when they meet the definition of property, plant and equipment and should be recognized as inventory if otherwise. The Company is currently assessing impact of the amendments to PAS 16. PAS 32, Financial Instruments: Presentation - Tax Effect of Distribution to Holders of Equity Instruments, clarifies that income taxes relating to distributions to equity holders and to transaction costs of an equity transaction are accounted for in accordance with PAS 12, Income Taxes. The

17 15 Company expects that this amendment will not have any impact on its financial position and performance. PAS 34, Interim Financial Reporting - Interim Financial Reporting and Segment Information for Total Assets and Liabilities, clarifies that the total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity s previous annual financial statements for that reportable segment. The amendment affects disclosures only and has no impact on the Company s financial position and performance. Effective in 2014 PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities, clarifies the meaning of currently has a legally enforceable right to offset and also the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, Effective in 2015 PFRS 9, Financial Instruments - Classification and Measurement, as issued, reflects the first phase on the replacement of PAS 39 and applies to the classification and measurement of financial assets and liabilities as defined in PAS 39, Financial Instruments: Recognition and Measurement. Work on impairment of financial instruments and hedge accounting is still ongoing, with a view to replacing PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair value at initial recognition. The Company has made an evaluation of the impact of the adoption of this standard. The Company decided not to early adopt PFRS 9 for its 2012 reporting ahead of its effectivity date on January 1, 2015 and therefore the financial statements and as of December 31, 2012 and 2011 do not reflect the impact of the said standard. Based on this evaluation, loans and receivables and other financial liabilities, both carried at amortized cost, will not be significantly affected. The Company shall conduct another impact assessment at the end of the 2013 reporting period using the financial statements as of and for the year ended December 31, Given the amendments on PFRS 9, the Company at present, does not plan to early adopt in 2013 financial reporting. It plans to reassess its current position once the phases of PFRS 9 on impairment and hedge accounting become effective. Deferred Effectivity Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate, covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. This Interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. The SEC and the Financial Reporting Standards Council have deferred the effectivity of this interpretation until the final Revenue standard is issued by the International Accounting Standards Board and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed. The Company will quantify the effect when the final Revenue standard is issued. Additional disclosures required by these amendments will be included in the consolidated financial statements when these amendments are adopted.

18 16 3. Significant Accounting Judgments, Estimates and Assumptions The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. In the opinion of management, these financial statements reflect all adjustments necessary to present fairly the results for the periods presented. Actual results could differ from such estimates. Judgments In the process of applying the Company s accounting policies, management has made the following judgments, apart from those involving estimations, which has the most significant effect on the amounts recognized in the financial statements: Determination of the Company s functional currency The Company, based on the relevant economic substance of the underlying circumstances, has determined its functional currency to be Peso. It is the currency that influences the sale of real estate properties and services and the costs of selling the same. Classification of financial instruments The Company classifies a financial instrument, or its component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial asset, a financial liability or an equity instrument. The substance of a financial instrument, rather than its legal form, governs its classification in the Company s balance sheet (see Note 20). The Company determines the classification at initial recognition and, where allowed and appropriate, reevaluates this designation at every reporting date. Classification of leases - Company as lessor The Company has entered into the property leases of its investment properties where it has determined that the risks and rewards of ownership are retained with the Company. As such, these lease agreements are accounted for as operating leases. Classification of real estate properties The Company determines whether a property is classified as for lease or for sale or for future development and for capital appreciation. Real estate properties which are not occupied substantially for use by, or in the operations of, the Company, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation are classified as investment properties. Real estate properties which the Company develops and intends to sell before or on completion of construction are classified as real estate properties for sale and for future development. Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the end of reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Determination of fair value of financial instruments Financial assets and financial liabilities, on initial recognition, are accounted for at fair value. The fair values of financial assets and financial liabilities, on initial recognition, are normally the transaction prices. In the case of those financial assets and financial liabilities that have no active markets, fair values are determined using an appropriate valuation technique. The carrying values of financial assets and liabilities are equal to fair values. Estimation of allowance for impairment of receivables The level of this allowance is evaluated by management based on past collection history and other factors which include, but are not limited to the length of the Group s relationship with the customer, the customer s payment behavior and known market factors that affect the collectability of the accounts

19 17 Impairment of available-for-sale financial assets An impairment issue arises when there is an objective evidence of impairment, which involves significant judgment. In making this judgment, the Company evaluates the financial health of the issuer, among others. The Company treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. Estimation of percentage of completion of projects The Company estimates the percentage of completion of ongoing projects for purposes of accounting for the estimated costs of development as well as revenue to be recognized. The percentage of completion is based on the technical evaluation of the independent project engineers as well as management s monitoring of the costs, progress and improvements of the projects. Determination of net realizable value of real estate properties for sale and held for future development The Company s estimates of the net realizable value of real estate properties are based on the most reliable evidence available at the time the estimates are made, or the amount that the inventories are expected to be realized. These estimates consider the fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. A new assessment is made of net realizable value in each subsequent period. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is a clear evidence of an increase in net realizable value because of changes in economic circumstances, the amount of the write-down is reversed so that the new carrying amount is the lower of the cost and the revised net realizable value. Estimation of useful lives of investment properties The Company estimates the useful lives of investment properties based on the internal technical evaluation and experience with similar assets. Estimated lives of investment properties are reviewed periodically and updated if expectations differ from previous estimates due to wear and tear, technical and commercial obsolescence and other limits on the use of the assets. Impairment of investment properties The Company determines whether its investment properties are impaired when impairment indicators exist such as significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. When an impairment indicator is noted, the Company makes an estimation of the value-in-use of the cash-generating units to which the assets belong. Estimating the value-in-use requires the Company to make an estimate of the expected future cash flows from the cashgenerating unit and also to choose an appropriate discount rate in order to calculate the present value of those cash flows. Estimation of retirement benefits cost The determination of the Company s obligation and costs for retirement benefits depends on management s selection of certain assumptions used by actuaries in calculating such amounts. The assumptions for retirement benefits cost include, among others, discount rates, expected annual rates of return on plan assets and rates of salary increase. Actual results that differ from assumptions are accumulated and amortized over future periods and therefore, generally affect the Company s recognized expenses and recorded obligation in such future periods. While management believes that the assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in management assumptions may materially affect the Company s retirement obligations. Recognition of deferred income tax assets The Company reviews the carrying amounts of deferred income tax assets at the end of each reporting period and reduces deferred income tax assets to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred income tax assets to be utilized.

20 18 4. Cash and Cash Equivalents and Short-Term Cash Investments Cash and cash equivalents consist of: March 2013 Dec Cash on hand and in banks P=3,108,063 P=3,210,127 Cash equivalents 376,500, ,100,000 P=379,608,063 P=602,310,127 Cash in banks earn interest at the respective bank deposit rates. Short-term investments are made for varying periods of up to three months depending on the immediate cash requirements of the Company, and earn interest at the respective short-term investment rates. Short-term cash investments amounting to P= million as of March 31, 2013 and P=51.00 million as of December 31, 2012, respectively, are investments in banks with maturities of more than three months to one year from the dates of acquisition and earn interest at the prevailing market rates. 5. Available-for-sale Financial Assets Available-for-sale financial assets consist of investments in quoted equity securities amounting to P=1.80 million and P=1.56 million as of March 31, 2013 and December 31, 2012, respectively. The recovery (decline) in value of these securities is presented as Net changes in fair values of available-for-sale financial assets in the stockholder s equity section of the balance sheet. 6. Installment Contracts Receivable This account consists of installment contracts receivable arising from the sale of real estate properties. The installment contracts receivable on sales of real estate are collectible in monthly installments for periods ranging from one (1) to ten (10) years and bear monthly interest rates of 0.67% to 2% computed on the diminishing balance. The portion due within one year (net of current portion of unrealized gross profit, estimated development costs for unsold units, and deferred vat) amounted to P= million in March 2013 and P= million in December Other Receivables Other receivables consist of: March 2013 Dec Advances to customers P=5,133,081 P=8,664,698 Accrued interest 2,166,379 2,007,615 Retention 130, ,200 Others 11,920,423 3,394,778 P=19,349,883 P=14,217,291 Advances to customers are receivables of the Company for the real estate property taxes of sold units. Other receivables include receivables from customers relating to initial registration initially paid by the Company and employees advances. The portion due within one year amounted to P=19.14 million in March 2013 and P= million in December 2012.

21 19 8. Real Estate Properties for Sale and Held for Future Development Real estate properties for sale consist of cost incurred in the development of condominium units and residential houses for sale amounting to P= million and P= million as of March 31, 2013 and December 31, 2012, respectively. In 2012, the Company acquired a parcel of land amounting to P= million for future development. 9. Investment Properties Investment properties are rented out at different rates generally for a one-year term renewable every year. These investment properties were appraised by independent firms of appraisers at various dates. 10. Accounts Payable and Accrued Expenses March 2013 Dec Trade payables P=25,693,467 P=34,657,142 VAT payable 2,362,771 Deposits 2,697,573 2,714,128 Accrued expenses: Development costs 182,882, ,675,109 Director s fee 11,658,452 10,405,196 Interest 704,576 1,240,098 Taxes, premiums, others 3,318, ,915 Withholding taxes payable 604,934 1,826,338 Dividends payable 1,644,174 1,307,578 Others 1,017,619 1,528,053 P=232,584,082 P=249,818,557 Trade payables consist of payables to contractors and other counterparties, whereas deposits consist of rental deposits and collected deposits for water and electric meters of the sold units. Accrued expenses represent various accruals of the Company for its expenses and real estate projects. Accrued development costs represent the corresponding accrued expenses for the sold and completed real estate projects of the Company. Other payables consist of customers reservation and employees payable. Accounts payable and accrued expenses due within one year amounted to P= million in March 2013 and P= million in December Notes and Contracts Payable The details of notes and contracts payable are as follows: Short-term commercial papers (STCP) with various maturities and interest rate ranging from 1.31% to 3.91% as of March 2013 and 2.37% to 4.61% in Dec Short-term promissory notes enrolled with HGC with various maturities and interest rate ranging from 1.45% to 2.55% as of March 2013 and 1.85% to 2.75% in Dec March 2013 Dec P=83,200,000 P=83,650, ,639, ,288, ,839, ,938,195 Contracts payable 14,545 17,381,250 P=234,854,067 P=252,319,445