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) H. V. D E L A C O S T A S T.,,

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2 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

3 1 SECURITIES AND EXCHANGE COMMISSION SEC FORM 17- Q 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 676,042, 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 [ ]

4 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements The financial statements and accompanying notes are filed as part of this form (pages 6 to 22). 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 SEC-registered commercial papers and Home Guaranty Corporation s guaranteed promissory notes. The Company has three prime lots for future development. The latest acquisition is located at EDSA corner Lanutan Alley, Brgy. Veterans Village, Quezon City. The other lots are located along Roxas Boulevard and Samar Ave, Quezon City. Financial Condition (March 31, 2012 vs. December 31, 2011) Total assets amounted to P=2.267B as of the first quarter of 2012 as compared with the previous year s ending balance of P=2.221B. Collection from sales of real estate properties and maturity of short term cash investments increased cash and cash equivalents account. This was partially offset by the decrease in installment contracts receivable and real estate properties for sale. On the liabilities side, the slight decrease was due to payment of accounts payable and accrued expenses and loans and notes payable. Total stockholders equity now stands at P=1.503B as of March 2012, higher by 8.75% from 2011 year end balance due to net income of P=58.39M. As a result of the foregoing, acid test ratio, current ratio and asset to equity ratio were recorded at 1.54:1, 2.14:1 and 1.51:1 as of March 2012, as compared with 1.26:1, 2.00:1 and 1.54:1 in December 2011, respectively. Debt-equity ratio remained stable at 0.21:1 in March 2012, as compared with 0.27:1 in the same quarter of the previous year while interest rate coverage ratio was at 30.05:1 in March 2012 as compared with 37.60:1 in the same period of the previous year. Results of Operation (March 31, 2012 vs. March 31, 2011) Total revenues reached P=206.44M as compared with last year s figure of P=313.42M. The decrease can be attributed to lower sales due to the decrease in inventory of Grand Emerald Tower. This project was already sold at 86.50% last year. On the cost side, lower sales decreased cost of sales, operating expenses and income tax. As a result, net income for the first quarter of 2012 reached P=58.39M as compared with P=71.20M of the same period last year. Altogether this translated to earnings per share and return on equity (both annualized) of 0.35:1 and 15.54% as compared to previous year of 0.42:1 and 22.30%, respectively. Financial Ratios March 2012 December 2011 March 2011 Earnings per share * 0.35 P=0.47 P=0.42 Return on equity * 15.54% 21.95% 22.30% Interest Rate Coverage Ratio Asset to Equity Ratio Current ratio Acid-test ratio Debt-equity ratio *annualized Note: Earnings per share is after retroactive effect of 20% stock dividends in 2011.

5 3 Manner of calculations: Earnings per share = Net Income/ Average Number of Shares Issued and Outstanding Return on equity = Net Income/ Total Stockholders' Equity Current ratio = Total Current Assets / Total Current Liabilities Interest rate coverage ratio = Net Income before tax + Interest Expense +Depreciation Expense Interest Expense Asset to equity ratio = Total Assets Stockholder s Equity (net of Net Changes in Fair Value of AFS Investment) Acid test ratio = Cash and cash equivalents + Short-term Cash Investments + Available-for- Sale Investments + Financial Assets at Fair Value Through Profit and Loss + Installment Contracts Receivable + Other Receivables Total Current Liabilities Debt- Equity ratio = Loans & Notes Payable Total Stockholders' Equity (net of Net Changes in FV of Investments) 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=138.5 million as of March 31, 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.

6 4 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, 2012 representing the cost to complete the development 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. Causes for any Material Changes from Period to Period in One or More Line of the Registrants Financial Statements. a. Increase in Cash and Cash Equivalents was due to collection and maturities of short-term cash investments. b. Decrease in Short-term Cash Investments was due to maturity of placements. c. Increase in Available for Sale Securities was due to increase in market value of stocks. d. Decrease in Other Receivables was due to decrease in accrued interest from short term liquid investments. e. Decrease in Real Estate Properties for Sales (net) was due to sales of real estate properties. f. Increase in Other Assets was due to Meralco refundable deposits. g. Increase in Income Tax Payable was due to first quarter income tax net of prepaid tax. h. Increase in Net Changes in Fair Value of Investments was due to increase in market value of stocks. i. Increase in Retained Earnings was due to first quarter net income. j. Decrease in Sales of Real Estate was due to lower inventory of units available for sale of Grand Emerald Tower. k. Increase in Rent Income was due to increase in units available for lease. l. Increase in Other Revenue was due to increase in miscellaneous income. m. Decrease in Cost of Sales was due to sales. n. Decrease in Operating Expenses was due to sales. o. Decrease in Financial Expenses was due to lower loans and notes payable balance as compared to the same period of the previous year. p. Decrease in Provision for Income Tax was due to lower income tax q. Decrease in Net Income was due to lower revenues.

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8 6 CITY & LAND DEVELOPERS, INC. BALANCE SHEETS UNAUDITED March 2012 December 2011 ASSETS Cash and cash equivalents (Note 4) 658,838, ,540,443 Short-term Cash Investments ,500,000 Available-for-sale financial assets (Note 5) 1,151, ,623 Installment contracts receivable (Note 6) 856,259, ,354,650 Other receivables (Note 7) 8,778,418 9,262,850 Real estate properties for sale (Note 8) 314,775, ,691,341 Real estate properties for future development 238,285, ,780,497 Investment properties (Note 9) 182,481, ,160,682 Other assets 6,455,879 5,174,222 TOTAL ASSETS 2,267,027,873 2,221,425,308 LIABILITIES AND STOCKHOLDERS EQUITY Accounts payable and accrued expenses (Note 10) 363,051, ,198,278 Loans and notes payable (Note 11) 319,103, ,020,561 Income tax payable 11,544,453 7,952,956 Deferred tax liabilities 70,763,157 73,272,398 Total Liabilities 764,462, ,444,193 Stockholders Equity Capital stock P1 par value Authorized 700,000,000 shares Issued 676,042,298 shares 676,042, ,042,298 Additional paid-in capital 105, ,136 Net changes in fair value of investments 881, ,710 Retained earnings (Note 13) Appropriated 100,000, ,000,000 Unappropriated 725,535, ,142,971 Total Stockholders Equity 1,502,565,178 1,443,981,115 TOTAL LIABILITIES & STOCKHOLDERS EQUITY 2,267,027,873 2,221,425,308

9 7 CITY & LAND DEVELOPERS, INC. STATEMENTS OF INCOME UNAUDITED For the 3-month ending March 2012 For the 3-month ending March 2011 REVENUES Sales of real estate 162,471, ,041,090 Financial income (Note 14) 41,486,975 42,149,397 Rent income 1,153, ,441 Other income 1,330,108 1,050, ,441, ,417,173 EXPENSES Cost of real estate sales 98,360, ,432,158 Operating expenses (Note 15) 39,926,262 45,759,738 Financial expenses (Note 17) 2,314,605 2,585, ,601, ,776,949 INCOME BEFORE INCOME TAX 65,840,380 88,640,224 PROVISION FOR INCOME TAX (Note 19) 7,447,513 17,441,230 NET INCOME 58,392,867 71,198,994 Earnings per share * After retroactive effect of 20% stock dividends in 2011.

10 8 CITY & LAND DEVELOPERS, INC. STATEMENT OF COMPREHENSIVE INCOME As of March 2012 As of March 2011 Net Income 58,392,867 71,198,994 Other comprehensive income Changes in fair value of available-for-sale financial assets 191,196 6 Total other comprehensive income 191,196 6 Total Comprehensive Income net 58,584,063 71,199,000 Earnings per share * After retroactive effect of 20% stock dividends in 2011.

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 ,042, , , ,000, ,142,971 1,443,981,115 Total comprehensive income , ,392,867 58,584,063 Ending balance, March ,042, , , ,000, ,535,838 1,502,565,178 Additional Net changes in fair Retained earnings Capital stock paid-in capital value of investments Appropriated Unappropriated Total Beginning balance, January ,368, , , ,000, ,704,324 1,205,890,243 Total comprehensive income ,198,994 71,199,000 Ending balance, March ,368, , , ,000, ,903,318 1,277,089,243

12 10 CITY & LAND DEVELOPERS, INC. STATEMENTS OF CASH FLOWS UNAUDITED As of March 2012 As of March 2011 CASH FLOW FROM OPERATING ACTIVITIES Income before income tax 65,840,380 88,640,224 Adjustments for: Interest expense net of amounts capitalized 2,289,705 2,440,242 Interest income (41,483,776) (42,147,461) Dividend income (3,199) (1,936) Depreciation 678, ,716 Changes in operating assets and liabilities Decrease (increase) in: Installment Contracts Receivable 15,095,039 (77,053,162) Other receivables (483,342) (1,618,397) Real estate properties for sale 76,915,661 94,446,054 Real estate properties for future development (1,505,278) (577,871) Other assets (1,281,657) (109,200) Increase (decrease) in accounts payable and accrued expenses (11,713,926) 32,032,125 Cash from (used in) operations 104,348,323 96,729,334 Interest received 42,451,550 42,714,629 Income taxes paid (6,365,256) (8,836,413) Net cash flows from (used in) operating activities 140,434, ,607,550 CASH FLOWS FROM INVESTING ACTIVITIES Dividends received 3,199 1,936 Proceeds from (purchase of) short-term cash investment 211,500,000 99,500,000 Net cash from (used in) investing activities 211,503,199 99,501,936 CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (1,984,725) (3,770,891) Cash dividends and fractional shares paid 262,555 (739) Net proceeds from (payments of) notes payable (2,917,364) (7,949,825) Net cash flows from (used in) financing activities (4,639,534) (11,721,455) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 347,298, ,388,031 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 311,540,443 93,589,832 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 658,838, ,977,863

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 69 as of March 31, 2012 and 70 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 adoption of the following new and amended Philippine Accounting Standards (PAS), PFRS and new Philippine Interpretations based on International Financial Reporting Interpretations Committee (IFRIC) interpretations effective in The adoption of the following revised PAS is relevant but does not have a significant impact on the financial statements: Revised PAS 24, Related Party Disclosures, simplifies the identification of related party relationships, particularly in relation to significant influence and joint control. The amendment emphasizes a symmetrical view on related party relationships as well as clarifies in which circumstances persons and key management personnel affect the related party relationships of an entity. The amendment also introduces an exemption from the general related party disclosure requirements, for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position and performance of the Company. The adoption of the following new and amended PFRS, PAS and Philippine Interpretations are either not relevant to or have no significant impact on the financial statements: Amended PAS 32, Financial Instruments: Presentation - Clarification of Rights Issues Amended IFRIC 14, Prepayments of a Minimum Funding Requirement Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments

14 Improvements to PFRS The annual improvements process has been adopted by the International Accounting Standards Board (IASB) to deal with non-urgent but necessary amendments to PFRS. The following summarizes the amendments that are effective on or after January 1, The adoption of the following amendments is relevant but does not have a significant impact on the financial statements: PFRS 7, Financial Instruments Disclosures, emphasizes the interaction between quantitative and qualitative disclosures and the nature and extent of risks associated with financial instruments. PAS 1, Presentation of Financial Statements, clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. PAS 34, Interim Financial Reporting, provides guidance to illustrate how to apply disclosure principles in PAS 34 and requires additional disclosures on: (a) the circumstances likely to affect fair values of financial instruments and their classification, (b) transfers of financial instruments between different levels of the fair value hierarchy, (c) changes in the classification of financial assets and (d) changes in contingent liabilities and assets. Other amendments resulting from the 2011 improvements to PFRS, PAS and Philippine Interpretations to the following standards did not have any significant impact on the accounting policies, financial position or performance of the Company. PFRS 3, Business Combinations PAS 27, Consolidated and Separate Financial Statements Philippine Interpretation IFRIC 13, Customer Loyalty Programmes 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: Sale 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. Costs of Real Estate Sales Costs of real estate sales are recognized consistent with the revenue recognition method applied. Cost of condominium units sold before the completion of the development is determined on the basis of the acquisition cost of the land plus its full development costs, which include estimated costs for future development works as determined by the Company s in-house technical staff. In addition, cost of real estate sales of 100% completed projects represents the proportionate share of the sold units to the total of the development cost which includes land, direct materials, labor cost and other indirect costs related to the project. If the project is still under construction, the cost of real estate sales of the sold units is multiplied by the percentage of completion. The cost referred to is the same total 12

15 development costs and not only actual expenditures. The percentage of completion is based on the technical evaluation of the project engineers as well as management s monitoring costs, progress and improvements of the projects. Future Changes in Accounting Policies The Company will adopt the following standards and interpretations when these become effective subsequent to Except as otherwise indicated, the Company does not expect the adoption of these new, and amended and improvements to PFRS, PAS and Philippine Interpretations to have significant impact on the financial statements. Effective in 2012 PFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements, requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the Company s financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. Amended PAS 12, Income Taxes - Deferred Taxes: Recovery of Underlying Assets, introduces a rebuttable presumption that deferred tax on investment properties measured at fair value will be recognized on a sale basis, unless an entity has a business model that would indicate the investment property will be consumed in the business. If consumed, an own use basis must be adopted 13 Effective in 2013 PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities, requires an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are offset in accordance with PAS 32. PFRS 10, Consolidated Financial Statements, replaces the portion of PAS 27 that addresses the accounting for consolidated financial statements. The changes introduced by PFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in PAS 27. PFRS 11, Joint Arrangements, replaces PAS 31, Interests in Joint Ventures and SIC-13, Jointlycontrolled Entities Non-monetary Contributions by Ventures. PFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. PFRS 12, Disclosure of Interests with Other Entities, includes all of the disclosures that were previously in PAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in PAS 31 and PAS 28. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. PFRS 13, Fair Value Measurement, establishes a single source of guidance under PFRS for all fair value measurements. PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted. PAS 1, Financial Statements Presentation - Presentation of Items of Other Comprehensive Income, changes the grouping of items presented in other comprehensive income (OCI). Items that would be reclassified (or recycled) to profit or loss at a future point in time (e.g., upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment only affects the presentation and has therefore no impact on the Company s financial position or performance. Revised PAS 19, Employee Benefits, includes a number of amendments that range from fundamental changes to simple clarifications and re-wording.

16 PAS 27, Separate Financial Statements (Revised). As a consequence of the new PFRS 10 and PFRS 12 what remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. PAS 28, Investments in Associates and Joint Ventures. As a consequence of the new PFRS 11 and PFRS 12, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine ( production stripping costs ) and provides guidance on the recognition of production stripping costs as an asset and measurement of the stripping activity asset. Effective in 2014 Amendments to PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities, clarifies the meaning of currently has a legally enforceable right to set-off and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. Effective in 2015 PFRS 9, Financial Instruments - Classification and Measurement, as issued reflects the first phase on the replacement of PAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in PAS 39. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture. After consideration of the result of its impact evaluation, the Group has decided not to early adopt either PFRS 9 (2009) of PFRS 9 (2010) for its 2012 financial reporting, thus the interim report as of March 31, 2012 does not reflect the application of the requirements and does not contain a qualitative and quantitative discussion of the result of the company s impact evaluation. Standard Issued but not yet Effective Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estates, covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. The SEC and the Financial Reporting Standards Council (FRSC) have deferred the effectivity of this interpretation until the final Revenue standard is issued by IASB and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed. The Company will quantify the effect when the final Revenue standard is issued. Additional disclosures required by these amendments will be included in the financial statements when these amendments are adopted. Events After the Balance Sheet Date 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. Segment Reporting The Company s operating business are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Company s asset-producing revenues are located in the Philippines (i.e., one geographical location). Therefore, geographical segment information is no longer presented. 14

17 15 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. 4. Cash and Cash Equivalents March 2012 Dec Cash on hand and in banks 4,838,725 6,040,443 Cash equivalents 654,000, ,500, ,838, ,540,443 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= as of December 31, 2011 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 Investments Available-for-sale investments pertain to the fair value of the investments in equity securities amounting to P= 1.15 million and P=0.96 million as of March 31, 2012 and December 31, 2011, respectively. The recovery (decline) in value of these securities is presented as Net changes in fair values of available-for-sale investments 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 2012 and P= million in December Other Receivables March 2012 Dec Advances to customers 3,942,651 2,101,579 Accrued interest 1,133,805 3,821,367 Retention 990, ,200 Others 2,711,762 2,419,704 8,778,418 9,262,850 The portion due within one year amounted to P=7.28 million in March 2012 and P=8.07 million in December 2011.

18 16 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, 2012 and December 31, 2011, respectively. Condominium units and residential houses for sale accounts include borrowing costs incurred in connection with the development of the properties amounting to P=0.56 million as of March 2012 and P=2.11 million as of December The capitalization rate used to determine the amount of borrowing costs eligible for capitalization was 3.90% in March 2012 and 3.86% in December In 2011, 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 2012 Dec Trade payables 26,006,109 28,764,654 Deposits 10,861,532 10,062,434 Accrued expenses: Development costs 293,398, ,228,188 Director s fee 17,816,860 14,841,537 Interest 1,648,668 1,343,688 Taxes, premiums, others 4,202, ,561 Withholding taxes 1,025,334 2,279,132 Dividends 1,323,332 1,060,777 Others 6,769,645 3,848, ,051, ,198,278 The portion due within one year amounted to P=193.4 million in March 2012 and P=209.9 million in December Loans and Notes Payable Short-term commercial papers (STCP) with various maturities and interest rate ranging from 2.94% to 4.84% as of March 2012 and 3.50% to 4.77% in Dec Short-term promissory notes enrolled with HGC with various maturities and interest rate ranging from 2.30% to 3.40% as of March 2012 and 1.70% to 3.40% in Dec March 2012 Dec ,500, ,450, ,603, ,570, ,103, ,020,561 On September 12, 2011 and September 3, 2010, the Philippine Securities and Exchange Commission (SEC) authorized the Company to issue P= million worth of STCP registered with the SEC in both years, in accordance with the provision of the Securities Regulation Code and its implementing rules and regulations, the Code of Corporate Governance and other applicable laws and orders.

19 In 2011 and 2010, the Company entered into a contract of guaranty under a Revolving Cash Guaranty Line with HGC in the amount of P= million coverage on the Company s STCP. The guaranty covers the unpaid principal due on the outstanding STCP and unpaid interest thereon of 10% per annum. The guaranty premium paid was 0.90% per annum based on enrolled commercial papers in 2011 and Related Party Disclosures Parties are considered to be related if one party has the ability to control, directly or indirectly, the other party or exercise significant influence over the other party in making financial and operating decisions. It includes companies in which one or more of the directors and/or shareholder of the Company either has a beneficial controlling interest or are in a position to exercise significant influence therein. The Company discloses the nature of the related party relationship and information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements, including, as a minimum, the amount of outstanding balances and its terms and conditions including whether they are secured, and the nature of the consideration to be provided in settlement. The following transactions have been entered into with related parties in the normal course of business: Interest Income for Advances to Related Parties (s) Interest Expense for Advances from Related Parties (a) Amounts Owed by Related Parties (b) Amounts Owed to Related Parties (b) Related Party Cityland Development Mar , ,533 Corporation (Parent company) Dec ,217 72, ,060,034 Cityland Inc. (Ultimate parent company) Mar , ,831 Dec ,112 29, ,663 Cityplans, Inc. (Affiliate under common Mar control) Dec , Mar , ,364 Dec , ,755 23,182 2,014,697 (a) Accrued interest on interest-bearing advances. (b) Non-interest bearing advances for reimbursable expenses. 13. Stockholders Equity Dividends declared and paid by the Company from retained earnings were as follows: Cash dividends: Stockholders of Date Approved Per share Record Date Date Paid June 03, 2011 P=0.14 June 17, 2011 July 13, 2011 June 07, 2010 P=0.05 July 07, 2010 August 02, 2010 June 05, 2009 P=0.07 June 22, 2009 July 16, 2009 June 06, 2008 P=0.10 June 23, 2008 July 17, 2008 Stock dividends: Stockholders of Date Approved Percentage Record Date Date Issued May 2, % July 14, 2011 September 9, 2011 April 30, % June 18, 2010 July 14, 2010 May 28, % June 26, 2009 July 22, 2009 On May 28, 2009, the Securities and Exchange Commission (SEC) approved the Company s Amended Articles of Incorporation on the application for increase in capital stock from P=400,000,000 to P=700,000,000 with par value of P=1 each. The SEC also authorized the issuance of 20% stock dividends declared by the BOD on April 30, 2008 and ratified by the stockholders on June 10, 2008.

20 On May 10, 2011, the Board of Directors authorized the transfer of appropriated retained earnings for the development cost of Grand Emerald Tower, which was 100% completed to appropriated retained earnings to finance the development costs of Manila Residences Bocobo has the same amount of P= million. Manila Residences Bocobo is 96.36% complete as of March 31, As of March 31, 2012, the unappropriated retained earnings include the remaining balance of deemed cost adjustment amounting top=11.83 million, net of related deferred tax of P=5.07 million, related to real estate properties for lease which rose when the Company transitioned to PFRS in This amount has yet to be absorbed through sales and is restricted for the payment of dividends. The Company s objectives in capital management is to maintain an optimal capital structure by ensuring that debt and equity capital are mobilized efficiently and to provide returns for stockholders and benefit for other stakeholders. The Company manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. It monitors capital using leverage ratios on both gross debt and net debt basis Financial Income March 2012 March 2011 Interest income 41,483,776 42,147,461 Dividend income 3,199 1,936 41,486,975 42,149, Operating Expenses March 2012 March 2011 Personnel (see Note 16) 14,783,510 21,342,234 Taxes and licenses 14,271,937 12,280,025 Professional fees 3,576,690 3,053,190 Insurance Expense 2,262,056 3,724,946 Membership dues 1,307, ,035 Brokers commission 917, ,495 Depreciation 678, ,716 Outside services 537, ,994 Advertising and promotion 451, ,334 Postage, telephone and telegraph 195, ,419 Transportation 101, ,289 Power, light and water 55, Repairs and Maintenance 1, ,432 Office supplies ,684 Others 787,305 1,362,945 39,926,262 45,759,738 Revenue Regulations (RR) No defines expenses to be classified as entertainment, amusement and recreation (EAR) expenses and sets a limit for the amount that is deductible for tax purposes. EAR expenses are limited to 0.5% of net sales for sellers of goods or properties or 1% of net revenues for sellers of services. For sellers of both goods or properties and services, an apportionment formula is used in determining the ceiling on such expenses.

21 Personnel Expenses March 2012 March 2011 Salaries and wages 6,253,500 8,609,112 Employee Benefits and Commissions 8,006,999 12,012,341 Benefits and other social expenses 523, ,781 14,783,510 21,342, Financial Expense March 2012 March 2011 Interest expense net of amounts capitalized 2,289,705 2,440,242 Finance Charge 24, ,811 2,314,605 2,585, Retirement Plan The Company, jointly with affiliated companies, has a funded, noncontributory defined benefit retirement plan covering all of its permanent employees. 19. Income Taxes Provision for income tax consists of: March 2012 March 2011 Current 8,615,129 13,578,836 Deferred (2,509,240) 2,767,183 Final tax on interest income 1,341,624 1,095,211 7,447,513 17,441, Earnings Per Share Earnings per share amounts were computed as follows: March 2012 March 2011 a. Net income 58,392,867 71,198,994 b. Weighted average number of shares 676,042, ,042,298 c. Earnings per share (a/b) *After retroactive effect of 20% stock dividends in Financial Instruments Financial Risk Management Objectives and Policies The Company s principal financial instruments comprise of loans and notes payable, cash and cash equivalents, and short-term cash investments. The main purpose of these financial instruments is to finance the Company s operations. The Company s other financial instruments, which include available-for-sale investments, are held for investing purposes. The Company has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been throughout the year under review, the Company s policy that no trading in financial instruments shall be undertaken. The Company has no investment in foreign securities.

22 The main risks arising from the Company s financial instruments are cash flow interest rate risks, credit risk, foreign currency risks, equity price risk and liquidity risk. The Board of Directors is mainly responsible for the overall risk management approach and for the approval of risk strategies and principles of the Company and they are summarized as follows: Cash flow interest rate risk The Company s exposure to the risk for changes in market interest rates relates primarily to the Company s short-term and long-term loans payable all with floating interest rates. This means that the Company assumes the concurrent movements in interest rates and parallel shift in the yield curves. The Company manages its interest rate risk by maintaining credit lines with financial institutions and limiting borrowings to the Company s cash requirements. A sensitivity analysis to a reasonable change in the interest rates (with all other variables held constant) of % higher or lower, would increase or decrease the Groups income before income tax of P=154,765. Credit risk The Company trades only with recognized, creditworthy third parties. It is the Company s policy that all customers that wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis with the result that the Company s exposure to bad debts is not significant. The table below shows the Company exposure to credit risk for the components of the balance sheet. The exposure as of March 31, 2012 is shown at gross, before taking the effect of mitigation through the use of and collateral agreements and at net, after taking the effect of mitigation through the use of collateral agreements. Gross Net Loans and receivables: Cash and cash equivalents, excluding cash on hand 658,817, ,697,418 Installment contract receivables 856,259, Other receivables 8,154,907 1,958,960 Total credit risk exposure 1,523,232, ,656,378 The following table summarizes the aging analysis of receivables and the credit quality of the receivables as of March 31, 2012: Past Due But Not Impaired Current > One Year < 30days days days > 90 days Total Installment contracts rec. 133,547, ,714,049 1,800, ,291 1,448, ,259,611 Other receivables: Accrued interest 1,133, ,133,805 Customers 2,104, , ,824 1,694,067 3,942,651 Retention - 870, , ,200 Others 2,087, ,088, ,873, ,584,049 1,801, ,428 1,588,802 1,814, ,414,518 The table below shows the credit quality by class of asset for loan-related balance sheet lines as of March 31, 2012, based on the Company s credit rating system. Medium** Past due but High Grade* Grade not impaired Total Cash and cash equivalents (excluding cash on hand) 658,817, ,817,725 Installment contract receivables 852,261, ,997, ,259,611 Other receivables 6,160,576 35,371 1,958,960 8,154,907 1,517,240,005 35,371 5,956,867 1,523,232,243 * High Grade - financial assets with reputable counterparties and which management believes to be reasonably assured to be recoverable. ** Medium Grade - financial assets for which there is low risk on default of counterparties. 20

23 The main considerations for impairment assessment include whether any payments are overdue or if there are any known difficulties in the cash flows of the counterparties. The Company assesses impairment into two areas: individually assessed allowances and collectively assessed allowances. The Company determines allowance for each significant receivable on an individual basis. Among the items that the Company considers in assessing impairment is the inability to collect from the counterparty based on the contractual terms of the receivables. The Company also considers the fair value of the real estate collateralized in computing the impairment of the receivables. Receivables included in the specific assessment are those receivables under the installment contracts receivable accounts. Because the Company holds the title to the real estate properties with outstanding installment contracts receivable balance and can repossess such real estate properties upon default of the customer in paying the outstanding balance, the Company does not provide for allowance for impairment of its installment contracts receivable. For collective assessment, allowances are assessed for receivables that are not individually significant and for individually significant receivables where there is not yet objective evidence of individual impairment. Impairment losses are estimated by taking into consideration the age of the receivables, past collection experience and other factors that may affect collectibility. Concentration Risk The Company s policy is to enter into transactions with a diversity of creditworthy parties to mitigate any significant concentration of risk. Foreign currency risk The Company s transactional currency exposures arise from purchases in currencies other than its functional currency. However, the Company s exposure to foreign currency risk is minimal. There are no outstanding foreign currency-denominated assets and liabilities. Equity Price Risk Equity price risk is the risk that the fair values of equities decrease as a result of changes in the market value of individual stock. The Company is exposed to equity securities price risk because of investments held by the Company, which are classified on the balance sheets as available-for-sale investments. A sensitivity analysis to a reasonable change in the equity price (with all other variables held constant) of P= 0.24 higher or lower, would increase or decrease the equity by P=278,564. Liquidity risk Liquidity is defined as the risk that the Company could not be able to settle or meet its obligations on time or at a reasonable price. The Company s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans. The table below summarizes the maturity analysis of the Company s financial liabilities as of March 31, 2012: Up to One Year Above One Year Total Accounts payable and accrued expenses * 187,225, ,646, ,872,679 Notes payable** 331,563, ,563, ,789, ,646, ,436,537 * Excludes statutory liabilities amounting to P=6,179,209 and P=2,343,105 as of March 2012 and December 2011, respectively. ** Includes interest expense amounting to P=12,460,