10. - Filinvest Development Corporation

10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA (information on number of shares and amount of debt is applicable only to corporate registrants):

Title of Each Class Number of Common Shares of Stock Outstanding

Common 9,317,473,987

11. Are any or all of registrant's securities listed in a Stock Exchange? Yes

Name of such Stock Exchange and the class of securities listed therein:

Philippine Stock Exchange / Common shares

WE ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY

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PART IINFORMATION REQUIRED IN INFORMATION STATEMENT

A. GENERAL INFORMATION

Item 1. Date, Time and Place of Annual Meeting of Stockholders

The annual stockholders' meeting of FILINVEST DEVELOPMENT CORPORATION (the “Company” or “FDC”) is scheduled to be held on May 15, 2015, 9:00 a.m. at the Crimson Hotel Filinvest City, Manila, Entrata Urban Complex, 2609 Civic Drive, Filinvest City, Alabang, Muntinlupa City. The complete mailing address of the principal office of the Company is 6 th Floor, The Beaufort, 5th Avenue corner 23rd Street, Bonifacio Global City, Taguig City 1634, Metro Manila.

This information statement shall be sent or given to stockholders no later than April 23, 2015.

Item 2. Dissenters’ Right of Appraisal

A stockholder of the Company has the right to dissent and demand payment of the fair value of his shares in the following instances: (a) in case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any shares of any class, or of extending or shortening the term of corporate existence; (b) in case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code of the Philippines (“Corporation Code”); (c) in case of investment of corporate funds in any other corporation or business or for any purpose other than the Company’s primary purpose; and (d) in case of merger or consolidation.

The stockholder concerned must have voted against the proposed corporate action in order to avail himself of the appraisal right. As provided in the Corporation Code, the procedure in the exercise of the appraisal right is as follows:

a. The dissenting stockholder files a written demand within thirty (30) days after the date on which the vote was taken. Failure to file the demand within the thirty-day period constitutes a waiver of the right. Within ten (10) days from demand, the dissenting stockholder shall submit the stock certificate/s to the Company for notation that such shares are dissenting shares. From the time of the demand until either the abandonment of the corporate action in question or the purchase of the shares by the Company, all rights accruing to the shares shall be suspended, except the stockholder’s right to receive payment of the fair value thereof.

b. If the corporate action is implemented, the Company shall pay the stockholder the fair value of his shares upon surrender of the corresponding certificate/s of stock. Fair value is determined by the value of the shares of the Company on the day prior to the date on which vote is taken on the corporate action, excluding any appreciation or depreciation in value in anticipation of the vote on the corporate action.

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c. If the fair value is not determined within sixty (60) days from the date of the vote, it will be determined by three (3) disinterested persons (one chosen by the Company, another chosen by the stockholder, and the third one chosen jointly by the Company and the stockholder). The findings of the appraisers will be final, and their award will be paid by the Company within thirty (30) days following such award, provided the Company has sufficient unrestricted retained earnings. Upon such payment, the stockholder shall forthwith transfer his shares to the Company. No payment shall be made to the dissenting stockholder unless the Company has unrestricted retained earnings.

d. If the stockholder is not paid within thirty (30) days from such award, his voting and dividend rights shall be immediately restored.

There is no matter to be taken up at the annual meeting on May 15, 2015 which would entitle a dissenting stockholder to exercise the right of appraisal.

Item 3. Interest of Certain Persons in or Opposition to Matters to be Acted Upon

No director or executive officer of the Company or nominee for election as such director or officer has any substantial interest, direct or indirect, in any matter to be acted upon at the annual stockholders’ meeting, other than election to office (in the case of directors). Likewise, none of the directors has informed the Company of his opposition to any matter to be taken up at the meeting.

B. CONTROL AND COMPENSATION INFORMATION

Item 4. Voting Securities and Principal Holders Thereof

(a) Number of Shares Outstanding

As of March 15, 2015, the total number of shares outstanding and entitled to vote in the annual stockholders' meeting is 9,317,473,987 common shares. Each share is entitled to (1) one vote in accordance with the By-Laws of the Company.

(b) Record Date

The record date for purposes of determining the stockholders entitled to vote is April 15, 2015.

(c) Cumulative Voting Rights

Stockholders are entitled to cumulative voting in the election of directors of the Company, as provided for in the Corporation Code. Under Section 24 of the Corporation Code, a stockholder may vote such number of shares for as many persons as there are directors to be elected or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit: Provided, That the total number of votes cast by him shall not exceed the number of shares owned by him as shown in the books of the Company multiplied by the whole number of directors to be elected. The stockholder must be a stockholder of record as of April 15, 2015 in order that he may exercise cumulative voting rights.

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There are no conditions precedent to the exercise of the stockholders’ cumulative voting right.

(d)(i) Security Ownership of Certain Record and Beneficial Owners

The names, addresses, citizenship, number of shares held, and percentage to total of persons owning more than five percent (5%) of the outstanding voting shares of the Company as of March 15, 2015 are as follows:

Title of Class

Name and Address of Record Owner/

Relationship with Company

Name of Beneficial Owner/ Relationship with

Record OwnerCitizenship

No. of Shares Held

% Held

Common A.L. Gotianun, Inc. (“ALGI”)1 (formerly ALG Holdings Corporation)

The Beaufort, 5th Avenue corner 23rd Street, Bonifacio Global City, Taguig City, Metro Manila

Majority Owner of the Company

ALGI2 Filipino 8,219,373,036 (D)

61,274,417 (I)

88.21%

0.66%

Common PCD Nominee Corporation (Filipino)G/F, Philippine Stock Exchange TowerAyala Avenue, Makati City

(No single shareholder beneficially owns at least 5% of the total shares)

Filipino 920,471,959 9.88%

Except as stated above, the Board of Directors and Management of the Company have no knowledge of any person who, as of the date of the annual report, was directly or indirectly the beneficial owner of more than five percent (5%) of the Company’s outstanding shares or who has voting power or investment power with respect to shares comprising more than five percent (5%) of the Company’s outstanding common stock.

Total number of shares of all record and beneficial owners is 9,317,473,987 common shares representing 100% of the total issued and outstanding common shares.

1 Mr. Andrew L. Gotianun, Sr. and/or Mrs. L. Josephine G. Yap are typically named by ALGI as its proxy to vote at the annual meeting of stockholders the

shares owned and held by it in the Company. 2 Stockholders are the beneficial owners.

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As of March 15, 2015, 27,848,462 or 0.30% of the outstanding common shares of the Corporation is owned by foreigners.

(d)(ii) Security Ownership of Management

The names, citizenship, number of shares held and percentage to total of persons forming part of the Management of the Company as of March 15, 2015 as shown in the Public Ownership Report are as follows:

Title of Class Name of Beneficial

Owner

Amount and Nature of Beneficial

Ownership

CitizenshipPercentage of

Ownership

Common Andrew L. Gotianun, Sr. 1,798 (D) 0 (I)

Filipino Negligible

Common Mercedes T. Gotianun 3,796,472 (D) 0 (I)

Filipino 0.04%

Common Andrew T. Gotianun, Jr. 1,916 (D) 0 (I)

Filipino Negligible

Common Jonathan T. Gotianun 12 (D) 0 (I)

Filipino Negligible

Common L. Josephine GotianunYap3

2,817,323 (D)7,191,022 (I)

Filipino 0.03%0.08%

Common Andrew L. Gotianun, Sr. and/or Mercedes T. Gotianun

33,697,190 (D) Filipino0.36%

Common Michael Edward T. Gotianun

47,131,422 (D)0 (I)

Filipino 0.51%

Common Jesus N. Alcordo 1(D)2,885,688 (I)

Filipino Negligible0.03%

Common Lamberto U. Ocampo 1 (D) 0 (I)

Filipino Negligible

Common Val Antonio B. Suarez 1 (D) 0 (I)

Filipino Negligible

N.A. Eleuterio D. Coronel 0 Filipino N.AN.A. Bernadette M. Ramos 0 Filipino N.A.N.A. Andrew L. Huang 0 Filipino N.A.N.A. Elma Christine R.

Leogardo0 Filipino N.A.

Total ownership of all directors and officers as a group is 97,522,846 shares or 1.05% of total outstanding common shares.

3 12 direct shares are registered under the name Lourdes Josephine G. Yap; 2,817,311 direct shares are registered under the name Joseph M. Yap &/or

Lourdes Josephine G. Yap; and 7,191,022 indirect shares are registered under the name Joseph M. Yap &/or Lourdes Josephine G. Yap.

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(d)(iii)Voting Trust Agreement

There is no person who holds more than five percent (5%) of the common stock under a voting trust or similar agreement.

(e) Change in Control

No change in control of the Company has occurred since the beginning of its last fiscal year.

Item 5. Directors and Principal Officers

(a)(i) Members of the Board serve for a term of one (1) year and until their successors shall have been duly elected and qualified. The business experience of the directors and officers of the Company named below covers at least the past five (5) years. The following are the current directors and executive officers of the Company:

Andrew L. Gotianun, Sr.Chairman Emeritus

Mr. Gotianun, 87, Filipino, is the founder of the Filinvest Group of Companies and is presently serving in various capacities in the member companies of the Filinvest Group. He was first elected as Director of the Company on April 27, 1973. He is Chairman Emeritus and Director of Filinvest Land, Inc. (“FLI”) and East West Banking Corporation (“EWBC”), both publicly-listed companies, and a Director in FDC Utilities, Inc. (“FDCUI”) and its subsidiaries. He is also the Chairman and President of Pacific Sugar Holdings Corporation (“PSHC”). He also worked for the Insular Bank of Asia and America from 1980 to1985 and for Filinvest Credit Corporation from 1970 to 1985. He is a graduate of San Beda College with an Associate Degree in Commercial Science.

Jonathan T. GotianunChairman of the Board and Director

Mr. Gotianun, 61, Filipino, was first elected as Director of FDC on July 9, 1993. He also serves as Chairman of the Board and Director of FLI and EWBC, both publicly-listed compnaies. He is the President of Davao Sugar Central Co., Inc. and Cotabato Sugar Central Co., Inc., and a Director and Chairman of the Executive Committee of FDCUI and some of its subsidiary power companies. He served as Director and Senior Vice President of Family Bank & Trust Co. (“Family Bank”) until 1984. He obtained his Master’s Degree in Business Administration from Northwestern University in 1976. He has been a Director of the Company for more than five (5) years.

L. Josephine Gotianun YapPresident, Chief Executive Officer and Director

Mrs. Yap, 59, Filipino, was first elected as Director of FDC on March 30, 1990. She is also a Director, President and Chief Executive Officer of FLI, President of Filinvest Alabang, Inc. (“FAI”) and The Palms Country Club, Inc. (“TPCCI”), and a Director in FDCUI and EWBC. She is currently a Director in three (3) publicly-listed companies: FDC, FLI and EWBC. She obtained her Master’s Degree

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in Business Administration from the University of Chicago in 1977. She has been President of the Company since 2000.

Mercedes T. GotianunSenior Adviser to the Board and Director

Mrs. Gotianun, 86, Filipino, was first elected as a Director of FDC on April 27, 1973. She is also a Director of FLI and served as its Chairman and as Chief Executive Officer from 1997 to 2007. She is also a Director of FAI, TPCCI, PSHC, EWBC, FDCUI and its subsidiary power companies. She was appointed as Senior Adviser to the Board of Directors of the Company on February 16, 2011. She is currently a Director in three (3) publicly-listed companies: FDC, FLI and EWBC. She obtained her university degree from the University of the Philippines.

Andrew T. Gotianun, Jr.Director

Mr. Gotianun, 63, Filipino, was first elected as a Director of FDC on March 31, 1989. He is also a Director of FLI, FAI and FDCUI. He is currently a Director in two (2) publicly-listed companies: FDC and FLI. He served as a Director of Family Bank from 1980 to 1984. He has been in the realty business for more than sixteen (16) years. He obtained his Bachelor of Science (Major in Accounting) degree from the Republican College in 1981. He has been a Director of the Company for over five (5) years.

Jesus N. AlcordoDirector

Mr. Alcordo, 78, Filipino, was first elected as a Director of FDC on May 27, 2011. He is also the Chairman of the Board and Chief Executive Officer of FDCUI. He is an energy sector professional and previously served as Commissioner of the Energy Regulatory Commission (ERC) and as President and CEO of National Power Corporation (Napocor). He also served as Chairman, President and CEO of East Asia Power Resources Corporation. Prior to his appointment as Director of the Company, he was concurrent President of Global Business Power Corporation and Cebu Energy Development Corporation. He obtained his degree of Bachelor of Science in Chemical Engineering from the University of San Carlos in 1961 and is a graduate of the Executive Program in Business Administration by the Columbia University, New York in 1975. He is not serving as a Director of any other publicly-listed company.

Lamberto U. OcampoIndependent Director

Mr. Ocampo, 89, Filipino, was first elected as a Director of FDC on May 26, 2006. He is also an independent director of FLI, a publicly-listed company. A civil engineer, he served as director of DCCD Engineering Corporation from 1957 to April 2001, its Chairman of the Board from 1993 to 1995, and its President from 1970 to 1992. He obtained his Master’s Degree in Engineering from the University of California-Berkeley.

Val Antonio B. SuarezIndependent Director

Mr. Suarez, 56, Filipino, is an independent director of FDC, having been first elected on May 30, 2014. He is the Managing Partner of the Suarez & Reyes Law Offices and was the former President and Chief

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Executive Officer of The Philippine Stock Exchange. Mr. Suarez is also an independent director of Lepanto Consolidated Mining Company, a publicly-listed company, and a member of the Integrated Bar of the Philippines (Makati Chapter) and New York Bar. He obtained his Bachelor of Laws Degree from the Ateneo De Manila University Law School and a Master of Laws from Georgetown University Law Center.

Michael Edward T. GotianunVice President

Mr. Gotianun, 57, is a Director of FAI and Festival Supermall, Inc. He served as the general manager of Filinvest Technical Industries from 1987 to 1990 and as loans officer at Family Bank from 1979 to 1984. He obtained his Bachelor’s Degree in Business Management from the University of San Francisco in 1979. He has been serving the Company as Vice President for more than five (5) years.

Eleuterio D. CoronelExecutive Vice President and Chief Operating Officer

Mr. Coronel, 61, Filipino, is the EVP and COO of the Company starting April 2013. He was formerly the President and Chief Executive Officer of a property company and has previously served as President and Chief Operating Officer of a leading investment bank in the country where he spent the bulk of his professional career. Mr. Coronel holds a Bachelor Degree in Arts, major in Mathematics (Cum Laude) from De La Salle University, Manila. He likewise has attended the TMP Asian Institute of Management and the executive development program of the World Bank Group.

Andrew L. HuangSenior Vice President and Infrastructure Finance Head

Mr. Huang, 58, was appointed by the Board of Directors of FDC as Senior Vice President and Infrastructure Finance Head on October 31, 2014. Prior to joining FDC, Mr. Huang was a Consultant for San Miguel Corporation. He also served as Senior Vice President for Finance and Chief Financial Officer of Philippine Airlines, Inc., and Vice President-Global Trade Finance Manager of The Chase Manhattan Bank. N.A. He is presently a professor in the Asian Institute of Management. He holds a Bachelor of Science Degree, major in Business Administration from the De La Salle University, and a Masters in Business Management from the Asian Institute of Management.

Bernadette M. RamosVice President-Marketing

Ms. Ramos, 49, Filipino, rejoined FDC as Vice President for Real Estate Marketing in 2011. She was head of FLI’s Corporate and Creative Communications Office from 2005-2007 and Special Assistant to the CEO for Advertising from 2002 to 2005. Prior to that, she held executive positions in various advertising agencies and a major property developer in a career spanning over 20 years of experience in the field.

Elma Christine R. LeogardoActing Corporate Secretary and Acting

Atty. Leogardo, 56, Filipino, was appointed by the Board of Directors as Acting Corporate Secretary and Acting Compliance Officer on July 15, 2014. She is also the Acting Corporate Secretary and Acting Compliance Officer of FLI. Prior to joining the Filinvest Group, she

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Compliance Officer was a partner of Villaraza Cruz Marcelo & Angangco. She is a fellow of the Institute of Corporate Directors, a trustee of the Legal Management Council of the Philippines, was former President and current trustee of the Maritime Law Association of the Philippines, and a member of the Integrated Bar of the Philippines and the Philippine Bar Association. She holds a Bachelor of Arts degree, cum laude, from the University of the Philippines, and a Bachelor of Laws degree from the same university.

A Certification that none of the above-named directors and officers works in the government is attached herein as Annex “A”.

The members of the board committees, pursuant to appointments made during the organizational meeting of the Board of Directors of the Company on May 30, 2014, are as follows:

Executive Committee: Jonathan T. Gotianun (Chair), Andrew L. Gotianun, Sr., Mercedes T. Gotianun, L. Josephine Gotianun Yap, Andrew T. Gotianun, Jr. and Michael Edward T. Gotianun

Nomination Committee: Mercedes T. Gotianun (Chair), L. Josephine Gotianun Yap, Lamberto U. Ocampo (Independent Director) and Rizalangela L. Reyes (ex-officio)

Audit Committee: Val Antonio B. Suarez (Chair/Independent Director), Lamberto U. Ocampo (Independent Director), Mercedes T. Gotianun and Jonathan T. Gotianun

Remuneration Committee: Mercedes T. Gotianun (Chair), L. Josephine Gotianun Yap, Jonathan T. Gotianun, Lamberto U. Ocampo (Independent Director) and Michael Edward T. Gotianun.

The directors of the Company are elected at the annual stockholders’ meeting to hold office until their respective successors have been duly elected and qualified. Officers are appointed or elected by the Board of Directors typically at its first meeting following the annual stockholders’ meeting, each to hold office until his successor shall have been duly elected or appointed and qualified.

(a)(ii) Certain Relationships and Related Transactions

In the normal course of business, the Company and the other members of the Filinvest Group of Companies enter into certain related-party transactions. The Group has entered into various transactions with related parties. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party in making financial and operating decisions or the parties are subject to common control or common significant influence (referred to as ‘Affiliates’). Related parties may be individuals or corporate entities.

Significant transactions with related parties as discussed in Note 23 of the Notes to the Audited Financial Statements of the Company for the year ended 31 December 2014 are as follows: are as follows:

a. EW has loan transactions with investees and with certain directors, officers, stockholders and related interests (DOSRI). These transactions usually arise from normal banking activities such

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as lending, borrowing, deposit arrangements and trading of securities, among others. Under existing policies of EW, these transactions are made substantially on the same terms as with other individuals and businesses of comparable risks.

Under current banking regulations, the aggregate amount of loans to DOSRI should not exceed the total capital funds or 15% of the total loan portfolio of EW, whichever is lower. In addition, the amount of direct credit accommodations to DOSRI, of which 70% must be secured, should not exceed the amount of their respective regular and/or quasi-deposits and book value of their respective investments in EW.

BSP Circular No. 560 provides that the total outstanding loans, other credit accommodation and guarantees to each of the bank’s/quasi-bank’s subsidiaries and affiliates shall not exceed 10.0% of the net worth of the lending bank/quasi-bank, provided that the unsecured portion of which shall not exceed 5.0% of such net worth.

Further, the total outstanding loans, credit accommodations and guarantees to all subsidiaries and affiliates shall not exceed 20.0% of the net worth of the lending bank/quasi-bank; and the subsidiaries and affiliates of the lending bank/quasi-bank are not related interest of any director, officer and/or stockholder of the lending institution, except where such director, officer or stockholder sits in the BOD or is appointed officer of such corporation as representative of the bank/quasi-bank. As of December 31, 2014 and 2013, the EW is in compliance with these requirements.

On May 12, 2009, BSP issued Circular No. 654 allowing a separate individual limit of twenty-five (25.0%) of the net worth of the lending bank/quasi-bank to loans of banks/quasi-banks to their subsidiaries and affiliates engaged in energy and power generation. As of December 31, 2014 and 2013, the Group is in compliance with these requirements.

BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. The following table shows information relating to the loans, other credit accommodations and guarantees classified as DOSRI accounts under regulations existing prior to said circular and new DOSRI loans, other credit accommodations granted under said circular:

2014 2013Total outstanding DOSRI accounts (in thousands) 7,759,327 6,394,361Percent of DOSRI accounts granted under regulations

existing prior to BSP Circular No. 423 0.000% 0.000%Percent of DOSRI accounts granted under BSP Circular

No. 423 6.283% 6.494%Percent of DOSRI accounts to total loans 6.283% 6.495%Percent of unsecured DOSRI accounts to total DOSRI

accounts 3.315% 2.499%Percent of past due DOSRI loans to total DOSRI loans 0.001% 0.067%

b. Loans guaranteed by the Parent Company obtained by FLI amounted to 225.0 million and 675.0 million as of December 31, 2014 and 2013, respectively. The Parent Company has also guaranteed the $300.0 million fixed-rate bonds issued by FDCI in 2013.

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c. The compensation of key management personnel consists of short-term employee salaries and benefits amounting to 51.6 million, 53.7 million and 57.3 million in 2014, 2013 and 2012, respectively. Post-employment benefits of key management personnel amounted to 8.8 million in 2013 and 5.4 million in 2012 (nil in 2014).

There are no agreements between the Group and any of its key management personnel providing for benefits upon termination of employment, except for such benefits to which they may be entitled under the Group’s retirement plan.

d. Other transactions with related parties include non-interest bearing cash advances and various charges to and from non-consolidated affiliates for management fees, rent, share of expenses and commission charges. Transactions with related parties are normally settled in cash.

The amounts and the balances arising from the foregoing significant related party transactions are as follows:

2014

Amount/Volume

OutstandingBalance

Due from (Due to) Terms Conditions(In Thousands)

Due from related partiesReal estate operationsParent(a) 703 1,205 Non-interest bearing,

payable on demandUnsecured, no impairment

Affiliates:

Share in expenses 2,382 314,059Non-interest bearing,


3,085 315,264Hotel operationsAffiliates − 10,412 Non-interest bearing,

payable on demandUnsecured

3,085 325,676Due to related partiesAffiliates(a) − (48,791) Non-interest bearing,

payable on demand except for availment of

loan(b)

Unsecured, no impairment

3,085 276,885(a) Share in Group expenses(b) Availment of loan payable within one year, with interest at prevailing market rate

2013

Amount/Volume

OutstandingBalance


Due from related partiesReal estate operationsParent(a) 334 696 Non-interest bearing,


Affiliates: 208,041Share in expenses 299 − Non-interest bearing,


Management fee 816 − Non-interest bearing, Unsecured, no impairment

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payable on demandCommission expense 1,279 − Non-interest bearing,


2,728 208,737Hotel operationsAffiliates(a) − 4,944 Non-interest bearing,


2,728 213,681Due to a related partyParent(a) (101,485) (101,183) Non-interest bearing,

payable on demand except for availment

of loan(b)

Unsecured, no impairment

(98,757) 112,498(a) Share in Group expenses(b) Availment of loan payable within one year, with interest at prevailing market rate

There were no transactions during the last two (2) years, or any proposed transactions, to which the Company was or is to be a party, in which any director or executive officer of the Company, any nominee for election as such director or executive officer, any security holder, or any member of the immediate family of any of the foregoing persons, had or is to have a direct or indirect material interest.

(a)(iii) Election of Members of the Board

There will be an election of the members of the Board during the annual stockholders’ meeting. The stockholders of the Company may nominate individuals to be members of the Board of Directors. The deadline for submission of nominees is on March 24, 2015. All nominations for directors, including the independent directors, shall be addressed to and received by:

THE NOMINATION COMMITTEEc/o THE ACTING CORPORATE SECRETARY

FILINVEST DEVELOPMENT CORPORATION 79 EDSA, Highway Hills

Mandaluyong City 1550, Metro Manila

and signed by the nominating stockholder/s together with the acceptance and conformity by the nominees on or before the close of business day on March 24, 2015. All nominations should include (i) the curriculum vitae of the nominee, (ii) a statement that the nominee has all the qualifications and none of the disqualifications, (iii) information on the relationship of the nominee to the stockholder submitting the nomination, and (iv) all relevant information about the nominee’s qualifications.

The Nomination Committee created under the Company’s Revised Manual on Corporate Governance endorsed the nominees of ALGI to the Board of Directors, as well as the nominees for independent directors of Luis L. Fernandez, a stockholder, for reelection/election at the upcoming annual stockholders’ meeting, in accordance with the qualifications and disqualifications set forth in the Company’s Revised Manual, as follows:

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Qualifications

(1) He is a holder of at least one (1) share of stock of the Company;

(2) He shall be at least a college graduate or have sufficient experience in managing the business to substitute for such formal education;

(3) He shall be at least twenty one (21) years old;

(4) He shall have proven to possess integrity and probity; and

(5) He shall be assiduous. Permanent Disqualifications

The following shall be permanently disqualified for election as director:

(1) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (i) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (ii) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (iii) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house, investment house or as an affiliated person of any of them;

(2) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Securities and Exchange Commission (“Commission”) or any court or administrative body of competent jurisdiction from: (i) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (ii) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (iii) engaging in or continuing any conduct or practice in any of the capacities mentioned in sub-paragraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities.

The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;

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(3) Any person convicted by final judgment or order by a court or competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;

(4) Any person who has been adjudged by final judgment or order of the Commission, court, or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law administered by the Commission or BSP, or any of its rules, regulations or orders;

(5) Any person earlier elected as independent director who becomes an officer, employee or consultant of the same Corporation;

(6) Any person judicially declared as insolvent;

(7) Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated in sub-paragraphs (1) to (5) above;

(8) Any person who has been convicted by final judgment of an offense punishable by imprisonment for more than six (6) years, or a violation of the Corporation Code committed within five (5) years prior to the date of his election or appointment.

Temporary Disqualifications

The following shall be grounds for the temporary disqualification of a director:

(1) Refusal to fully disclose to the extent of his business interest as required under the Securities Regulation Code and its Implementing Rules and Regulations. The disqualification shall be in effect as long as the refusal persists;

(2) Absence or non-participation for whatever reason/s for more than fifty percent (50%) of all regular and special meetings of the Board during his incumbency, or any twelve (12)- month period during the said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. The disqualification shall apply for purposes of the succeeding election;

(3) Dismissal or termination for cause as director of any corporation covered by the Company’s Revised Manual of Corporate Governance. The disqualification shall be in effect until he has cleared himself from any involvement in the cause that gave rise to his dismissal or termination;

(4) If the beneficial equity ownership of an independent director in the corporation or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock. The disqualification shall be lifted if the limit is later complied with;

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(5) If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final.

Nominated Directors for 2015-2016

The Nomination Committee of the Board of Directors of the Company has determined that the following possess all the qualifications and none of the disqualifications for directorship set out in the Company’s Revised Manual on Corporate Governance, duly adopted by the Board pursuant to SRC Rule 38.1 and SEC Memorandum Circular No. 6, Series of 2009. SEC approved the amended By-laws of the Company incorporating the provisions of SRC Rule 38, as amended, on May 14, 2010. Below is a list of candidates prepared by the Nominations Committee:

Mercedes T. GotianunJonathan T. GotianunAndrew T. Gotianun, Jr.L. Josephine Gotianun YapJesus N. AlcordoVal Antonio B. Suarez (Independent Director)Lamberto U. Ocampo (Independent Director)

Following are the qualifications of the nominees for the Board of Directors:

Jonathan T. Gotianun Mr. Gotianun, 61, Filipino, was first elected as Director of FDC on July 9, 1993. He also serves as Chairman of the Board and Director of FLI and EWBC, both publicly-listed compnaies. He is the President of Davao Sugar Central Co., Inc. and Cotabato Sugar Central Co., Inc., and a Director and Chairman of the Executive Committee of FDCUI and some of its subsidiary power companies. He served as Director and Senior Vice President of Family Bank & Trust Co. (“Family Bank”) until 1984. He obtained his Master’s Degree in Business Administration from Northwestern University in 1976. He has been a Director of the Company for more than five (5) years.

Lourdes Josephine G. Yap

Mrs. Yap, 59, Filipino, was first elected as Director of FDC on March 30, 1990. She is also a Director, President and Chief Executive Officer of FLI, President of Filinvest Alabang, Inc. (“FAI”) and The Palms Country Club, Inc. (“TPCCI”), and a Director in FDCUI and EWBC. She is currently a Director in three (3) publicly-listed companies: FDC, FLI and EWBC. She obtained her Master’s Degree in Business Administration from the University of Chicago in 1977. She has been President of the Company since 2000.

Mercedes T. Gotianun Mrs. Gotianun, 86, Filipino, was first elected as a Director of FDC on April 27, 1973. She is also a Director of FLI and served as its Chairman and as Chief Executive Officer from 1997 to 2007. She is also a Director of FAI, TPCCI, PSHC, EWBC, FDCUI and its subsidiary power companies. She was appointed as Senior Adviser to

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the Board of Directors of the Company on February 16, 2011. She is currently a Director in three (3) publicly-listed companies: FDC, FLI and EWBC. She obtained her university degree from the University of the Philippines.

Andrew T. Gotianun, Jr.

Mr. Gotianun, 63, Filipino, was first elected as a Director of FDC on March 31, 1989. He is also a Director of FLI, FAI and FDCUI. He is currently a Director in two (2) publicly-listed companies: FDC and FLI. He served as a Director of Family Bank from 1980 to 1984. He has been in the realty business for more than sixteen (16) years. He obtained his Bachelor of Science (Major in Accounting) degree from the Republican College in 1981. He has been a Director of the Company for over five (5) years.

Jesus N. Alcordo Mr. Alcordo, 79, Filipino, was first elected as a Director of FDC on May 27, 2011. He is also the Chairman of the Board and Chief Executive Officer of FDCUI. He is an energy sector professional and previously served as Commissioner of the Energy Regulatory Commission (ERC) and as President and CEO of National Power Corporation (Napocor). He also served as Chairman, President and CEO of East Asia Power Resources Corporation. Prior to his appointment as Director of the Company, he was concurrent President of Global Business Power Corporation and Cebu Energy Development Corporation. He obtained his degree of Bachelor of Science in Chemical Engineering from the University of San Carlos in 1961 and is a graduate of the Executive Program in Business Administration by the Columbia University, New York in 1975. He is not serving as a Director of any other publicly-listed company.

Lamberto U. OcampoIndependent Director

Mr. Ocampo, 89, Filipino, was first elected as a Director of FDC on May 26, 2006. He is also an independent director of FLI, a publicly-listed company. A civil engineer, he served as director of DCCD Engineering Corporation from 1957 to April 2001, its Chairman of the Board from 1993 to 1995, and its President from 1970 to 1992. He obtained his Master’s Degree in Engineering from the University of California-Berkeley.

Val Antonio B. SuarezIndependent Director

Mr. Suarez, 56, Filipino, is an independent director of FDC, having been first elected on May 30, 2014. He is the Managing Partner of the Suarez & Reyes Law Offices and was the former President and Chief Executive Officer of The Philippine Stock Exchange. Mr. Suarez is also an independent director of Lepanto Consolidated Mining Company, a publicly-listed company and a member of the Integrated Bar of the Philippines (Makati Chapter) and New York Bar. He obtained his Bachelor of Laws Degree from the Ateneo De Manila University Law School and a Master of Laws from Georgetown University Law Center.

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(a)(iv) Independent Directors

The Nomination Committee, upon nomination by Mr. Luis L. Fernandez and following the guidelines provided under the Company’s Revised Manual on Corporate Governance, named Mr. Lamberto U. Ocampo and Mr. Val Antonio B. Suarez as nominees for this year’s annual meeting as independent directors. Mr. Fernandez is not related to either of them. The Nomination Committee has determined that these nominees for independent directors possess all the qualifications and have none of the disqualifications for independent directors as set forth in the Revised Manual of Corporate Governance and SEC Memorandum Circular No. 09, Series of 2011.

A copy of the Certification on the Qualifications of the Nominees for Independent Directors is attached herein as Annex “B”.

Before the annual meeting, a stockholder of the Company may nominate individuals to be independent directors, taking into account the following guidelines set forth in the Company’s Revised Manual on Corporate Governance:

A. “Independent director” means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any corporation that meets the requirements of Section 17.2 of the Securities Regulation Code and includes, among others, any person who:

i. is not a director or officer or substantial stockholder of the Company or of its related companies or any of its substantial shareholders (other than as an independent director of any of the foregoing);

ii. is not a relative of any director, officer or substantial stockholder of the Company, any of its related companies or any of its substantial stockholders. For this purpose, “relative” includes spouse, parent, child, brother, sister, and the spouse of such child, brother or sister;

iii. is not acting as a nominee or representative of a substantial stockholder of the Company, any of its related companies or any of its substantial stockholders;

iv. has not been employed in any executive capacity by the Company, any of its related companies or by any of its substantial stockholders within the last two (2) years;

v. is not retained as professional adviser by the Company, any of its related companies or any of its substantial stockholders within the last two (2) years, either personally or through his firm;

vi. has not engaged and does not engage in any transaction with the Company or with any of its related companies or with any of its substantial stockholders, whether by himself or with other persons or through a firm of which he is a partner or a company of which he is a director or substantial stockholder, other than transactions which are conducted at arm’s length and are immaterial or insignificant.

B. When used in relation to the Company subject to the requirements above:

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i. “Related company” means another company which is: (a) its holding company, (b) its subsidiary, or (c) a subsidiary of its holding company; and

ii. “Substantial shareholder" means any person who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of its equity security.

C. An independent director shall have the following qualifications:

i. He shall have at least one (1) share of stock of the Company;ii. He shall be at least a college graduate or he shall have been engaged in or exposed to the

business of the Company for at least five (5) years; iii. He shall possess integrity/probity; and iv. He shall be assiduous.

D. An independent director shall be disqualified during his tenure under the following instances or causes:

i. He becomes an officer or employee of the Company, or becomes any of the persons enumerated under item (A) hereof;

ii. His beneficial security ownership exceeds ten percent (10%) of the outstanding capital stock of the Company;

iii. He fails, without any justifiable cause, to attend at least fifty percent (50%) of the total number of board meetings during his incumbency unless such absences are due to grave illness or death of an immediate family;

iv. Such other disqualifications as the Revised Manual on Corporate Governance may provide.

E. Pursuant to SEC Memorandum Circular No. 09, Series of 2011, which took effect on January 2, 2012, the following additional guidelines shall be observed in the qualification of individuals to serve as independent directors:

i. There shall be no limit in the number of covered companies that a person may be elected as independent director, except in business conglomerates where an independent director can be elected to only five (5) companies of the conglomerate, i.e., parent company, subsidiary or affiliate;

ii. Independent directors can serve as such for five (5) consecutive years, provided that service for a period of at least six (6) months shall be equivalent to one (1) year, regardless of the manner by which the independent director position was relinquished or terminated;

iii. After completion of the five-year service period, an independent director shall be ineligible for election as such in the same company unless the independent director has undergone a “cooling off” period of two (2) years, provided, that during such period, the independent director concerned has not engaged in any activity that under existing rules disqualifies a person from being elected as independent director in the same company;

iv. An independent director re-elected as such in the same company after the “cooling off” period can serve for another five (5) consecutive years under the conditions mentioned in paragraph (ii) above;

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v. After serving as independent director for ten (10) years, the independent director shall be perpetually barred from being elected as such in the same company, without prejudice to being elected as independent director in other companies outside the business conglomerate;

vi. All previous terms served by existing independent directors shall not be included in the application of the term limits.

The Nomination Committee receives nominations for independent directors as may be submitted by the stockholders. After the deadline for the submission thereof, the Nomination Committee meets to consider the qualifications as well as grounds for disqualification, if any, of the nominees based on the criteria set forth in the Company’s Revised Manual on Corporate Governance, Rule 38 of the Securities Regulation Code, and SEC Memorandum Circular No. 09, Series of 2011. All nominations shall be signed by the nominating stockholders together with the acceptance and conformity by the would-be nominees. The Nomination Committee shall then prepare a Final List of Candidates enumerating the nominees who passed the screening. The name of the person or group of persons who recommends nominees as independent directors shall be disclosed along with his or their relationship with such nominees. Only nominees whose names appear on the Final List of Candidates shall be eligible for election as independent directors. No other nomination shall be entertained after the Final List of Candidates shall have been prepared. No further nomination shall be entertained or allowed on the floor during the annual meeting.

The conduct of the election of independent directors shall be in accordance with the provisions of the Company’s Revised Manual on Corporate Governance and Amended By-laws consistent with Rule 38 of the Securities Regulation Code.

It shall be the responsibility of the Chairman of the meeting to inform all stockholders in attendance of the mandatory requirement of electing independent directors. He shall ensure that independent directors are elected during the annual meeting. Specific slots for independent directors shall not be filled up by unqualified nominees. In case of failure of election for independent directors, the Chairman of the meeting shall call a separate election during the same meeting to fill up the vacancy.

(a)(v) Other Significant Employees

FDC considers all its employees as significant to the growth of the Company.

(a)(vi) Family Relationships

Mr. Andrew L. Gotianun, Sr. is married to Mrs. Mercedes T. Gotianun. They are the parents of Messrs. Andrew T. Gotianun, Jr., Jonathan T. Gotianun, Michael Edward T. Gotianun, and Mrs. L. Josephine Gotianun Yap.

Other than the foregoing, there are no other family relationships known to the Company.

(a)(vii) Involvement in Certain Legal Proceedings

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The Company is not aware of any legal proceedings where its directors or executive officers have been impleaded in their capacity as such directors or executive officers of the Company.

The Company is not aware of the occurrence of any of the following events within the past five (5) years up to the date of this information statement: (a) any bankruptcy petition filed by or against any business in which any of its directors or officers was a general partner or officer either at the time of the bankruptcy or within two (2) years prior to that time; (b) any conviction by final judgment in a criminal proceeding, domestic or foreign, of, or any criminal proceeding, domestic or foreign, pending against, any of its directors or officers in his capacity as such director or officer; (c) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any of its directors or officers in any type of business, securities, commodities or banking activities, and (d) any finding by a domestic or foreign court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self-regulatory organization that any of its directors or officers has violated a securities or commodities law, and the judgment has not been reversed, suspended or vacated, which occurred during the past five years.

Item 6. Compensation of Directors and Executive Officers

(a)(i) Summary Compensation Table

(a)

(b)Year

(c)Salary

(d)Bonus

(e)Other Annual Compensation TOTAL

Name and Principal Position

L. Josephine G. Yap (President /CEO)

Jonathan T. Gotianun (Chairman) Mercedes T. Gotianun (Senior Adviser to the Board)

Andrew L. Gotianun, Sr. (Chairman Emeritus)

Eleuterio D. Coronel (EVP/COO)

CEO and top four (4) highest compensated officers

2015-Estimated P34.7M P5.6M - P40.3M

2014 P33.0M P5.3M - P38.3M2013 P28.8M P4.5M - P33.2M

All officers and directors as a group unnamed

2015-Estimated P46.7M P7.5M - P54.2M

2014 P44.5M P7.1M - P51.6M2013 P46.4M P7.4M - P53.8M

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(a)(ii) Compensation as Directors

Except for a per diem of P50,000.00 being paid to each independent director for every meeting attended, no other compensation or remuneration is paid to the directors in their capacity as such.

(a)(iii) No Action to be Taken on Bonus, Profit Sharing, Warrants, Etc.

There is no action to be taken at the annual meeting of the stockholders on May 15, 2015 with respect to any bonus, profit sharing or other compensation plan, contract or arrangement, and pension or retirement plan, in which any director, nominee for election as a director, or executive officer of the Company will participate. Neither is there any proposed grant or extension to any such persons of any option, warrant or right to purchase any securities of the Company.

Item 7. Independent Public Accountants

The auditing firm of Sycip, Gorres, Velayo & Co. (“SGV & Co.”) is the current independent auditor of the Company. The Company has not had any disagreement with SGV & Co. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

The Company, in compliance with SRC Rule 68(3)(b)(iv) relative to the five-year rotation requirement of its external auditors, had a new engagement partner, Dhonabee B. Seneres, starting CY 2013. The representatives of SGV & Co. shall be present at the annual meeting where they will have the opportunity to make a statement if they desire to do so. They are expected to be available to respond to appropriate questions at the meeting.

The Audit Committee of the Company and its Board of Directors have recommended the re-appointment of Sycip, Gorres, Velayo & Co. (“SGV & Co.”) as external auditor of the Company for the year 2015.

Item 8. Compensation Plan

There is no action to be taken at the annual stockholders’ meeting with respect to any plan pursuant to which cash or non-cash compensation may be paid or distributed.

C. ISSUANCE AND EXCHANGE OF SECURITIES

Item 9. Authorization or Issuance of Securities other than for Exchange

No action will be taken at the annual meeting with respect to authorization or issuance of securities other than for exchange.

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Item 10. Modification or Exchange of Securities

There are no matters or actions to be taken up in the meeting with respect to the modification of the Company’s securities or the issuance of authorization for issuance of one class of the Company’s securities in exchange for outstanding securities of another class.

Item 11. Financial and Other Information

(a) Information Required

(1) Financial Statements

The audited financial statements of the Company for the year 2014 shall form an integral part hereof and is attached hereto as Annex “C”.

(2) Management’s Discussion and Analysis, and Plan of Operation

The Management’s Discussion and Analysis, and Plan of Operation is attached hereto as Annex “D” hereof.

(3) Legal Proceedings

The Group is subject to lawsuits and legal actions in the ordinary course of its real estate development and other allied activities. However, the Group does not believe that any such lawsuits or legal actions will have a significant impact on the financial position or result of operations of the Group. Noteworthy are the following cases involving the Company and its subsidiaries, Filinvest Land, Inc. (“FLI”) and Pacific Sugar Holdings, Inc. (“PSHC”):

(a) FLI vs. Abdul Backy, et. al.G.R. No. 174715Supreme Court

This is a civil action for the declaration of nullity of deeds of conditional and absolute sales of certain real properties located in Tambler, General Santos City covered by free patents and executed between FLI and the plaintiff’s patriarch, Hadji Gulam Ngilay. The Regional Trial Court (“RTC”) of Las Piñas City (Br. 253) decided the case in favor of FLI and upheld the sale of the properties. On appeal, the Court of Appeals rendered a decision partly favorable to FLI but nullified the sale of some properties involved. FLI filed a petition for review on certiorari to question that portion of the decision declaring as void the deeds of sale of properties covered by patents issued in 1991. The Supreme Court affirmed the decision of the Court of Appeals but declared with finality that FLI’s purchase of sales patents issued in 1991 was void and ordered the Ngilays to return P14,000,000.00 to FLI. A motion for execution is still pending resolution before the Regional Trial Court.

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(b) Emelita Alvarez, et. al. vs. FDCDARAB Case No. IV-RI-010-95Adjudication Board, Department of Agrarian Reform

On or about March 15, 1995 certain persons claiming to be beneficiaries under the Comprehensive Agrarian Reform Program (CARP) of the National Government filed an action for annulment/cancellation of sale and transfer of titles, maintenance of peaceful possession, enforcement of rights under CARP plus damages before the Regional Agrarian Reform Adjudicator, Adjudication Board, Department of Agrarian Reform. The property involved, located in San Mateo, Rizal, was purchased by FDC from the Estate of Alfonso Doronilla. A motion to dismiss is still pending resolution.

(c) In the matter of: Filinvest Development CorporationSEC-EIPD Case No. 03-2754(CED-AA-CASE-05-03-25)

On 27 May 2003, FDC was the respondent to an administrative complaint filed by the Compliance and Enforcement Department (“CED”) of the Securities and Exchange Commission (“SEC”) before the Commission En Banc for the alleged violation of Section 27.1 of the Securities Regulation Code. The case was remanded by the Commission En Banc to the Enforcement and Investor Protection Department (“EIPD”) for appropriate action.

(d) Republic of the Philippines vs. Rolando Pascual, et. al. Civil Case No. 7059 Regional Trial Court

The National Government through the Office of the Solicitor General filed suit against Rolando Pascual, Rogelio Pascual, and FLI for cancellation of title and reversion in favor of the Government of properties subject of a joint venture agreement between the said individuals and FLI. The Government claims that the subject properties covering about 73.33 hectares are not alienable and disposable being forest land. The case was dismissed by the RTC of General Santos City (Br. 36) on November 16, 2007 for lack of merit. The Office of the Solicitor General has appealed the dismissal to the Court of Appeals, where it is still pending.

(e) FLI vs. Eduardo Adia, et al.G.R. 192929Supreme Court

Various CLOA holders based in Brgy. Hugo Perez, Trece Martirez City filed a complaint with the RTC of Trece Martirez against FLI for recovery of possession with damages, claiming that in 1995 they surrendered possession of their lands to FLI so that the same can be developed pursuant to a joint venture arrangement allegedly entered into with FLI. They now seek to recover possession of said lands pending the development thereof by FLI. The RTC rendered a decision ordering FLI to vacate the subject property. FLI appealed the decision to the Court of Appeals which affirmed the RTC decision with modification. FLI filed a petition for review on certiorari before the Supreme Court. On

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January 10, 2011, the Supreme Court granted FLI’s motion to admit a supplemental petition and required respondent to comment on the supplemental petition within 10 days from notice. The case is pending resolution at the Supreme Court.

(f) Antonio E. Cenon and Filinvest Land, Inc. vs. San Mateo Landfill, Mayor Rafael Diaz,Brgy. Pintong Bukawe, Director Julian Amador and the Secretary, Department of Environment and Natural Resources Civil Case No. 2273-09

On February 9, 2009, FLI filed an action for injunction and damages against the respondents to stop and enjoin the construction of a 19-hectare landfill in a barangay in close proximity to Timberland Heights in San Mateo, Rizal. FLI sought preliminary and permanent injunctive reliefs and damages and is seeking the complete and permanent closure of the dump site. Trial for this case is ongoing.

(g) Coca-Cola Bottlers Philippines, Inc. vs. Pacific Sugar Holdings Corporation Civil Case No. 10-1067 RTC Makati City, Branch 146

On October 28, 2010, Coca-Cola filed a civil case against Pacific Sugar Holdings Corporation (PSHC) demanding the amount of P347,410,104.66 allegedly representing damages sustained by Coca-Cola due to the supposed failure by PSHC to deliver certain bags of sugar products. PSCH accordingly filed its Answer on April 13, 2011 to refute the claims of Coca-Cola. Plaintiff Coca-Cola has finished presenting its evidence. PSHC is scheduled to present its evidence on February 16, 2015 and March 18, 2015.

The Company is not aware of any other information as to any other legal proceedings known to be contemplated by government authorities or any other entity.

Item 12. No Action to be Taken on Mergers, Consolidations, Acquisitions and Similar Matters

No action will be taken at the annual stockholders’ meeting with respect to any merger or consolidation involving FDC, the acquisition by FDC of another entity, going business or of all of the assets thereof, the sale or other transfer of all or any substantial part of the assets of FDC, or the liquidation or dissolution of FDC.

Item 13. No Action to be Taken on Acquisition or Disposition of Property

No action will be taken at the annual meeting with respect to any acquisition or disposition of property by FDC requiring the approval of the stockholders.

Item 14. No Action to be Taken on Restatement of Accounts

No action will be taken at the annual meeting with respect to any restatement of any asset, capital or surplus account of FDC.

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Part III, Paragraph (B) of Annex “C”, Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

(1) There has been no change during the two most recent fiscal years or any subsequent interim period in independent accountant who was previously engaged as principal accountant to audit FDC’s financial statements.

(2) There has been no disagreement with FDC’s independent accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Information on Independent Accountant

(a) Audit and Audit-Related Fees

In consideration for the following professional services rendered by SGV as the independent auditor of the Group:

1. the audit of the Group’s annual financial statements and such services normally provided by an external auditor in connection with statutory and regulatory filings or engagements for those fiscal years;

2. other assurance and related services by SGV that are reasonably related to the performance of the audit or review of the Group’s financial statements.

The aggregate fees billed to the Group for professional services rendered by SGV, as the Group’s external auditor, for the examination of the annual financial statements amounted to P7.2 million and P7.3 million, net of VAT, in 2014 and 2013, respectively.

In 2014, additional fees for the external auditor on the issuance of subordinated debt amounted to P3.0 million for East West Banking Corporation (“EWBC”).

(b) Tax Fees

For each of the last two fiscal years, SGV did not render services for tax accounting, compliance, advice and planning for which it billed FDC the corresponding professional fees.

(c) All Other Fees

For each of the last two years, SGV did not render services in addition to the services described above for which it billed the Group the corresponding professional fees.

(d) Approval Policies and Procedures of the Management/Audit Committee for Independent Accountant’s Services

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In giving its stamp of approval to the audit services rendered by the independent accountant and the rate of the professional fees to be paid, the Audit Committee, with inputs from the management of FDC, makes a prior independent assessment of the quality of audit services previously rendered by the accountant, the complexity of the transactions subject of the audit, and the consistency of the work output with generally accepted accounting standards. Thereafter, the Audit Committee makes the appropriate recommendation to the Board of Directors of the Company.

D. OTHER MATTERS

Item 15. Action with Respect to Reports

The following are the matters to be taken up during the annual meeting:

(1) Approval of the minutes of the annual meeting of stockholders held on May 30, 2014; (2) Presentation of the President’s Report;(3) Approval of the Audited Financial Statements for the year ended December 31, 2014;(4) General ratification of the acts, resolutions and proceedings of the Board of Directors,

Executive Committee and the Management up to May 15, 2015;(5) Approval of the Amendment of Article III of the Articles of Incorporation to change

the principal address from “Metro Manila” to “6th Floor, The Beaufort, 5th Avenue corner 23rd Street, Bonifacio Global City, Taguig City 1634, Metro Manila”

(6) Election of the members of the Board of Directors; and(7) Appointment of External Auditors.

All the above items are part of the agenda of the annual meeting of the Company to be held on May 15, 2015 and are subject to the approval by the stockholders.

A. Approval of the minutes of the annual meeting of stockholders held on May 30, 2014

The minutes of the annual stockholders' meeting held on May 30, 2014, a copy of which is attached as Annex “E” of the Information Statement, is the record of the matters taken up in the said meeting, including the certification of notice and quorum for the transaction of business.

B. Presentation of the President’s Report and Approval of the Audited Financial Statements for the year ended 2014

The audited financial statements refer to the financial operations, balance sheet and income statement of the Company for the period ended December 31, 2014.

C. General Ratification of the Acts of the Board of Directors and the Management from the date of the last annual meeting up to the date of the upcoming meeting

The general ratification of the acts of the Board of Directors, Executive Committee and management from the date of the last annual meeting up to the date of the upcoming meeting refers to the approval by the stockholders of all actions and matters taken up and approved by the Board of Directors, Executive Committee and management during the said period. The list of the resolutions

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approved and adopted by the Board of Directors and the Executive Committee from the last annual stockholders’ meeting to date is attached as Annex “F” of the Information Statement.

D. Approval of the Amendment of Article III of the Articles of Incorporation to Change the Principal Address from “Metro Manila” to “6th Floor, The Beaufort, 5th Avenue corner 23rd

Street, Bonifacio Global City, Taguig City 1634, Metro Manila”

During the meeting of the Board of Directors held on January 28, 2015, where all the directors were present and acting throughout, the Board unanimously approved the amendment of Article III of the Articles of Incorporation of the Company to change its principal office address from “Metro Manila” to “6th Floor, The Beaufort, 5th Avenue corner 23rd Street, Bonifacio Global City, Taguig City 1634, Metro Manila”.

The proposed amendment of FDC’s Articles of Incorporation is in compliance with SEC Memorandum Circular No. 6, Series of 2014, directing existing corporations and partnerships whose articles of incorporation or articles of partnerships still indicate a general address as their principal office address, such as “Metro Manila”, to file an amended articles of incorporation or articles of partnership in order to specify their complete address, such that it has a street number, street name, barangay, city or municipality, and if applicable, the name of the building, the number of the building, and name or number of the room or unit.

E. Election of the members of the Board of Directors

In accordance with the Company’s Revised Manual on Corporate Governance and the By-Laws of the Company, the stockholders must now elect the members of the Board of Directors of the Company consisting of seven (7) members, including two (2) independent directors, who shall hold office for a term of one (1) year, or until their successors shall have been duly elected and qualified.

There will be an election of the seven (7) members of the Board, including two (2) independent directors, during the annual stockholders’ meeting to serve for the year 2015 to 2016.

The nominees for members of the Board of Directors and their qualifications are discussed in Part I of the Information Statement.

F. Re-Appointment of Sycip Gorres Velayo & Co. (“SGV”) as External Auditors

The auditing firm of Sycip, Gorres, Velayo & Co. (“SGV”) is the current independent auditor of FDC. There have been no disagreements with SGV on any matter regarding accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Sycip, Gorres, Velayo & Co. (“SGV”) is being recommended by the Audit Committee of the Company, as well as the Board of Directors, for re-appointment as external auditor for the year 2015.

Item 16. Action to be Taken on Matters Not Required to be Submitted

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There is no action to be taken at the annual stockholders’ meeting with respect to any matter which is not required to be submitted to a vote of the stockholders.

Item 17. Amendment of Articles of Incorporation and By-Laws Required to be Submitted

During the meeting of the Board of Directors held on January 28, 2015, where all directors were present and acting throughout, the Board unanimously approved the amendment of Article III of the Articles of Incorporation of the Company to change its principal office address from “Metro Manila” to “6th Floor, The Beaufort, 5th Avenue corner 23rd Street, Bonifacio Global City, Taguig City, 1634 Metro Manila.”

The amendment of FDC’s Articles of Incorporation is in compliance with SEC Memorandum Circular No. 6, Series of 2014, directing existing corporations and partnerships whose articles of incorporation or articles of partnerships still indicate a general address as their principal office address, such as “Metro Manila”, to file an amended articles of incorporation or articles of partnership in order to specify their complete address, such that it has a street number, street name, barangay, city or municipality, and if applicable, the name of the building, the number of the building, and name or number of the room or unit.

Pursuant to the provisions of the Corporation Code, the said amendment shall be submitted for stockholders’ approval during their annual meeting on May 15, 2015.

Item 18. Other Proposed Actions

There is no action to be taken with respect to any matter not specifically referred to above.

Item 19. Voting Procedures

(a) Vote required for approval.

The approval of the minutes of the annual stockholders’ meeting held on May 30, 2014 and the audited financial statements for the year ended 2014, the ratification of corporate acts, and the re-appointment of SGV & Co. as external auditors for 2015, shall be decided by the MAJORITY VOTE of the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present.

The approval of the amendment of Article III of the Corporation’s Articles of Incorporation changing the principal office address from “Metro Manila” to “6th Floor, The Beaufort, 5th Avenue corner 23rd

Street, Bonifacio Global City, Taguig City, 1634 Metro Manila” shall be decided by 2/3 of the stockholders present in person or by proxy and entitled to vote thereat.

The voting procedure shall be as follows:

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1. The chairperson announces that the particular item is subject to motion for approval by the stockholders.

2. A stockholder moves for the approval of the item.3. Another stockholder seconds the motion.4. The chairperson of the meeting states that the motion is carried in case no objection on the floor is

raised.5. Should there be an objection, the approval or denial of the motion shall be decided by the required

vote of stockholders as stated above, a quorum being present.

In the election of the members of the Board of Directors, the candidates garnering the seven (7) highest number of votes shall be declared elected as directors of the Company to serve as such for the year 2015-2016.

(b) Method by which votes will be counted. The vote on any item for consideration need not be by ballot, unless demanded by a stockholder or his proxy. On a vote by ballot, each ballot shall be signed by the stockholder voting, or in his name by his proxy if there be such proxy, and shall state the number of shares voted by the stockholder or proxy concerned. The ballots shall then be counted by the Corporate Secretary, with the assistance of representatives of the Company’s external auditor, SGV & Co. which is an independent party. The results of the voting shall be announced after the counting.

Item 20. Market for Issuer’s Common Equity and Related Stockholder Matters

The Shares are traded on the PSE under the symbol “FDC.” The Shares were listed on the PSE on December 22, 1982.

The high and low sales prices for the Shares as reported on the PSE for each quarter in 2013 and 2014 were as follows:

High LowPeriod

End

2013First Quarter............................................................................

6.32 4.63 5.80

Second Quarter........................................................................ 6.99 4.30 5.94Third Quarter........................................................................... 5.10 4.08 4.57Fourth Quarter......................................................................... 4.49 4.00 4.40

2014First Quarter............................................................................ 5.34 4.16 5.00Second Quarter........................................................................ 5.14 4.50 4.76Third Quarter........................................................................... 4.89 4.45 4.72Fourth Quarter......................................................................... 4.75 4.28 4.32

2015March 16, 2015 4.65 4.25 4.55

30

On March 16, 2015, FDC’s shares closed at the price of P4.62 per share. The number of shareholders of record as of said date was 4,193. Common shares outstanding as of March 16, 2015 is 9,317,473,987.

Top 20 Stockholders (common shares) as of March 15, 2015

NAMENo. of Shares

held% to Total

Outstanding1 A.L. Gotianun, Inc. (formerly ALG Holdings Corp.) 8,219,373,036 88.21%2 PCD Nominee Corporation (Filipino) 920,471,959 9.88%3 Michael Edward T. Gotianun 47,131,422 0.51%4 Andrew Gotianun, Sr. &/or Mercedes T. Gotianun 33,697,190 0.36%5 Ricardo Alonzo 28,627,534 0.31%6 PCD Nominee Corporation (Non-Filipino) 27,365,982 0.29%7 Mercedes T. Gotianun 3,796,472 0.04%8 Joseph M. &/or Lourdes Josephine G. Yap 2,817,311 0.03%9 Helen Reyes 2,692,544 0.03%

10 Emily Benedicto 2,466,400 0.03%11 H. K. Hedinger 2,023,508 0.02%12 Santiago Go 1,707,066 0.02%13 Dennis G. Baguyo 800,000 0.01%14 Lino Sy 616,600 0.01%15 AMA Rural Bank of Mandaluyong, Inc. 616,600 0.01%16 Manuel Benipayo 527,141 0.01%17 Salud Borromeo 501,655 0.01%18 Francisco Benedicto 493,280 0.01%19 Edan Corporation 387,224 0.00%

20Ma. Consuelo R. Medrano &/or Victoriano S. Medrano 308,300 0.00% Total 9,296,421,224 99.77%

Recent Sale of Unregistered Securities

No securities were sold by the Company in the past three (3) years, which were not registered under the Code.

Declaration of Dividends

On May 30, 2013, the Board of Directors of FDC approved the declaration and payment of cash dividends of 499.4 million or 0.0536 per share to shareholders of record as of June 27, 2013, payable on July 17, 2013.

On May 30, 2014, the Board of Directors of FDC approved the declaration and payment of cash dividends of 511.5 million or 0.0549 per share to shareholders of record as of June 26, 2014, payable on July 16, 2014.

The payment of cash dividends depends upon the Company’s earnings, cash flow, financial condition, capital investment requirements and other factors (including certain restrictions on dividends imposed

31

by the terms of loan agreements). Pursuant to the loan agreements entered into by the company and certain financial institutions, the Company needs the lenders’ prior consent in cases of cash dividend declaration.COMPLIANCE WITH LEADING PRACTICES ON CORPORATE GOVERNANCE

The Company is in full compliance with its Revised Manual for Corporate Governance as demonstrated by the following: (a) the election of two (2) independent directors to the Board; (b) the appointment of members of the audit, nomination and compensation committees of the Company; (c) the conduct of regular quarterly board meetings and special meetings, the faithful attendance of the directors at these meetings and their proper discharge of duties and responsibilities as such directors; (d) the submission to the SEC of reports and disclosures required under the Securities Regulation Code; (e) the Company’s adherence to national and local laws pertaining to its operations; and (f) the observance of applicable accounting standards by the Company.

On July 1, 2013, the Company filed its Annual Corporate Governance Report pursuant to SEC Memorandum Circular No. 18.

In order to keep itself abreast with the leading practices on corporate governance, the Company encourages the members of top-level management and the Board to attend and participate at seminars on corporate governance conducted by accredited institutions.

The Company welcomes proposals, especially from institutions and entities such as the SEC, PSE and the Institute of Corporate Directors, to improve corporate governance.

There is no known material deviation from the Company’s Revised Manual on Corporate Governance.

UNDERTAKING: The Company will provide without charge its Annual Report on SEC Form 17-A to its stockholders upon receipt of written request addressed to: The Office of the Acting Corporate Secretary, 79 EDSA, Highway Hills, Mandaluyong City, Metro Manila.

PART IISIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this report is true, complete and correct. This report is signed in the City of Mandaluyong on the 1st day of April 2015.

FILINVEST DEVELOPMENT CORPORATION

By:

ELMA CHRISTINE R. LEOGARDO Acting Corporate Secretary

32

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INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsFilinvest Development CorporationThe Beaufort, 5th Avenue, corner 23rd StreetBonifacio Global City, Taguig City

We have audited the accompanying consolidated financial statements of Filinvest DevelopmentCorporation and its subsidiaries, which comprise the consolidated statements of financial position as atDecember 31, 2014 and 2013, and the consolidated statements of income, statements ofcomprehensive income, statements of changes in equity and statements of cash flows for each of thethree years in the period ended December 31, 2014, and a summary of significant accounting policiesand other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

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

Auditors’ Responsibility

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

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

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

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

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

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

A member firm of Ernst & Young Global Limited

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Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Filinvest Development Corporation and its subsidiaries, as at December 31, 2014and 2013, and their financial performance and their cash flows for each of the three years in the periodended December 31, 2014 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Dhonabee B. SeñeresPartnerCPA Certificate No. 97133SEC Accreditation No. 1196-A (Group A), March 8, 2012, valid until March 31, 2015Tax Identification No. 201-959-816BIR Accreditation No. 08-001998-98-2015, January 5, 2015, valid until January 5, 2018PTR No. 4751326, January 5, 2015, Makati City

March 11, 2015


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FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Amounts in Thousands of Pesos)

December 312014 2013

ASSETS (Note 33)Cash and cash equivalents (Notes 6, 34 and 35) P=37,416,817 P=30,796,212Loans and receivables - net

Financial and banking services (Notes 3, 7, 34 and 35) 111,633,840 87,498,799Real estate operations (Notes 3, 8, 14, 23, 34 and 35) 24,305,983 19,030,534Sugar operations (Notes 3, 9, 34, 35 and 40) 108,862 112,792Hotel and power operations (Notes 3, 10, 34 and 35) 2,373,902 64,124

Financial assets at fair value through profit or loss(Notes 13, 34 and 35) 10,182,690 1,948,703

Financial assets at fair value through other comprehensive income(Notes 13, 34 and 35) 159,223 137,161

Investment securities at amortized cost (Notes 3, 13, 34, 35 and 41) 8,794,878 9,080,320Subdivision lots, condominium and residential units for sale

(Notes 3 and 11) 26,588,598 26,236,833Sugar and molasses inventories (Notes 3 and 12) 237,401 163,755Land and land development (Notes 3, 14 and 21) 24,485,526 25,622,886Investment properties (Notes 3, 15 and 34) 46,446,597 39,055,000Property, plant and equipment (Notes 3 and 16) 16,587,858 9,985,421Deferred tax assets - net (Notes 3 and 32) 1,495,394 1,321,282Goodwill (Notes 3 and 4) 11,726,591 11,726,591IPP Administrator rights (Notes 3 and 42) 9,393,673 −Other assets - net (Notes 3 and 17) 11,386,101 7,983,591

P=343,323,934 P=270,764,004

LIABILITIES AND EQUITY

LIABILITIES (Note 33)Deposit liabilities (Notes 18, 34 and 35) P=130,991,789 P=95,128,739Bills and acceptances payable (Notes 19, 34 and 35) 5,317,652 3,288,935Accounts payable and accrued expenses (Notes 8, 15, 20,

23, 28, 34 and 35) 25,001,676 20,922,996Liability on IPP Administrator contract (Notes 2 and 42) 9,296,172 −Income tax payable 346,812 325,037Short-term debt (Notes 21, 34 and 35) 350,000 500,000Long-term debt (Notes 21, 22, 34 and 35) 75,210,953 59,093,035Deferred tax liabilities - net (Note 32) 7,163,918 6,819,928

Total Liabilities 253,678,972 186,078,670

(Forward)

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December 312014 2013

EQUITYEquity attributable to equity holders of the Parent Company

Capital stock - P=1 par value (Note 22)Authorized common shares - 15,000,000,000Authorized preferred shares - 2,000,000,000Issued common shares - 9,319,872,387 P=9,319,872 P=9,319,872

Additional paid-in capital (Note 22) 11,900,015 11,900,015Retained earnings (Notes 22 and 27) 47,040,039 43,807,798Other comprehensive income - net of tax

Revaluation reserve on financial assets at fair value through other comprehensive income (Note 13) 69,951 52,705Remeasurement losses on retirement plans (Note 28) (103,104) (93,287)Cashflow hedge reserve (Note 35) (35,753) (54,456)Translation adjustment (Notes 2 and 3) 4,290 2,553

Treasury stock (Notes 22 and 29) (24,220) (24,220)Total 68,171,090 64,910,980Noncontrolling interest (Note 5) 21,473,872 19,774,354

Total Equity 89,644,962 84,685,334P=343,323,934 P=270,764,004

See accompanying Notes to Consolidated Financial Statements.

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FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Amounts in Thousands of Pesos, Except Earnings Per Share Figures)

Years Ended December 312014 2013 2012

REVENUES AND OTHER INCOME

Real Estate Operations (Note 33)Revenues

Sale of lots, condominium and residential unitsand club shares P=14,093,670 P=12,638,032 P=11,579,054

Mall and rental revenues (Notes 15 and 30) 2,586,775 2,326,353 2,124,903Other income (Note 26) 2,182,164 1,541,309 1,444,415

18,862,609 16,505,694 15,148,372

Financial and Banking Services (Note 33)Interest income (Notes 7 and 13) 11,435,663 9,828,703 7,751,359Other income - net (Note 26) 4,596,329 4,772,322 3,695,108

16,031,992 14,601,025 11,446,467

Sugar Operations (Note 33)Sugar sales 2,362,903 2,691,750 2,369,321Other income (Note 26) 79,907 64,305 99,436

2,442,810 2,756,055 2,468,757

Hotel Operations (Note 33)Hotel revenues 1,112,189 984,393 692,262Other income (Note 26) 2,808 2,103 14,578

1,114,997 986,496 706,840

Power Generation Operations (Note 33)Power revenues 104,375 − −Other income (Note 26) 75 27 555

104,450 27 555

Other Operations (Note 33)Other income 1,062 41,676 −

TOTAL REVENUES AND OTHER INCOME 38,557,920 34,890,973 29,770,991

COSTS (Note 25)Costs of sale of lots, condominium and residential units

and club shares (Notes 11 and 14) 8,195,124 6,709,396 6,259,543Costs of mall and rental services (Note 15) 173,895 397,118 379,109Costs of financial and banking services (Notes 18, 19 and 21) 1,477,707 1,370,702 1,681,238Costs of sugar sales 1,844,669 2,144,601 1,916,530Costs of hotel operations 367,986 351,233 230,870Cost of power (Note 42) 85,523 − −Cost of other operations (Note 21) 567,084 430,733 −

12,711,988 11,403,783 10,467,290

EXPENSES (Notes 16 and 24)Real estate operations 3,791,172 3,303,052 3,033,292Financial and banking services 12,254,305 10,843,731 7,791,391Sugar operations 238,163 208,617 204,956Hotel operations 669,003 628,953 254,039Power generation operations 156,981 78,916 55,311Other operations 836,789 503,985 694,245

17,946,413 15,567,254 12,033,234

(Forward)

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INCOME BEFORE INCOME TAX P=7,899,519 P=7,919,936 P=7,270,467

PROVISION FOR INCOME TAX (Note 32)Current 1,490,084 1,226,316 1,005,278Deferred 192,000 236,389 422,294

1,682,084 1,462,705 1,427,572

NET INCOME (Note 33) P=6,217,435 P=6,457,231 P=5,842,895

Attributable to:Equity holders of the Parent Company (Note 29) P=3,743,770 P=4,279,715 P=4,062,247Noncontrolling interest 2,473,665 2,177,516 1,780,648

P=6,217,435 P=6,457,231 P=5,842,895Basic/Diluted Earnings Per Share (Note 29) P=0.40 P=0.46 P=0.44


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FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Amounts in Thousands of Pesos)


NET INCOME P=6,217,435 P=6,457,231 P=5,842,895

OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income to be reclassified to profitor loss in subsequent periodsNet movement on cashflow hedges, net of tax

(Note 35) 18,703 (54,456) −Translation adjustment, net of tax (Note 2) 2,370 19,599 (8,652)

Net other comprehensive income (loss) to be reclassifiedto profit or loss in subsequent period 21,073 (34,857) (8,652)

Other comprehensive income not to be reclassified toprofit or lossChanges in fair value of financial assets through other

comprehensive income (Note 13) 18,187 (19,224) 28,325Remeasurement gains (losses) on retirement plans,

net of tax (Note 28) (17,098) 3,401 (130,725)Net other comprehensive income (loss) not to be

reclassified to profit or loss 1,089 (15,823) (102,400)22,162 (50,680) (111,052)

TOTAL COMPREHENSIVE INCOME P=6,239,597 P=6,406,551 P=5,731,843

Attributable to:Equity holders of the Parent Company P=3,771,639 P=4,226,177 P=3,985,362Noncontrolling interest 2,467,958 2,180,374 1,746,481

P=6,239,597 P=6,406,551 P=5,731,843


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FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Amounts in Thousands of Pesos)

Equity Attributable to Equity Holders of the Parent Company

Capital Stock(Note 21)

AdditionalPaid-inCapital

RetainedEarnings

RevaluationReserve on

Financial Assetsat FVTOCI

(Note 13)

RemeasurementLosses on

RetirementPlans

(Note 28)

CashflowHedge

Reserve(Note 36)

TranslationAdjustment

(Note 2)Treasury

Stock Total

NoncontrollingInterest(Note 5) Total

For the Year Ended December 31, 2014

Balances as of December31, 2013 P=9,319,872 P=11,900,015 P=43,807,798 P=52,705 (P=93,287) (P=54,456) P=2,553 (P=24,220) P=64,910,980 P=19,774,354 P=84,685,334Net income – – 3,743,770 – – – – – 3,743,770 2,473,665 6,217,435Other comprehensive income – – – 17,246 (9,817) 18,703 1,737 – 27,869 (5,707) 22,162Total comprehensive income – – 3,743,770 17,246 (9,817) 18,703 1,737 – 3,771,639 2,467,958 6,239,597Acquisition of noncontrolling interest

(Note 4) – ––

– – – – – – (6,622) (6,622)Redemption of shares (Note 5) – – – – – – – – – (188,629) (188,629)Dividends declared (Notes 5 and 22) – – (511,529) – – – – – (511,529) (573,189) (1,084,718)Balances as of December 31, 2014 P=9,319,872 P=11,900,015 P=47,040,039 P=69,951 (P=103,104) (P=35,753) P=4,290 (P=24,220) P=68,171,090 P=21,473,872 P=89,644,962

For theYearEnded December31,2013

Balances as of December31, 2012, P=9,319,872 P=11,900,015 P=40,027,500 P=71,929 P=(96,688) P=− P=(14,188) P=(24,220) P=61,184,220 P=18,164,512 P=79,348,732Net income − − 4,279,715 − − − − − 4,279,715 2,177,516 6,457,231Other comprehensive income − − (19,224) 3,401 (54,456) 16,741 − (53,538) 2,858 (50,680)Total comprehensive income – – 4,279,715 (19,224) 3,401 (54,456) 16,741 – 4,226,177 2,180,374 6,406,551Acquisition of noncontrolling interest

(Note 4) − − − − − − − − − (7,369) (7,369)Dividends declared (Notes 5 and 22) − − (499,417) − − − − − (499,417) (563,163) (1,062,580)Balances as of December 31, 2013 P=9,319,872 P=11,900,015 P=43,807,798 P=52,705 (P=93,287) (P=54,456) P=2,553 (P=24,220) P=64,910,980 P=19,774,354 P=84,685,334

22

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Equity Attributable to Equity Holders of the Parent Company

Capital Stock(Note 21)

AdditionalPaid-inCapital

RetainedEarnings

RevaluationReserve on

Financial Assetsat FVTOCI

(Note 13)

RemeasurementLosses on

RetirementPlans

(Note 28)

CashflowHedge

Reserve(Note 36)

TranslationAdjustment

(Note 2)Treasury

Stock Total

NoncontrollingInterest(Note 5) Total

For the Year Ended December 31, 2012Balances as of January 11, 2012 P=9,319,872 P=11,900,015 P=35,772,528 P=43,604 P=2,033 P=− P=(7,699) P= (24,220) P=57,006,133 P=12,893,278 P=69,899,411Net income 4,062,247 − 4,062,247 1,780,648 5,842,895Other comprehensive income – – – 28,325 (98,721) − (6,489) – (76,885) (34,167) (111,052)Total comprehensive income – – 4,062,247 28,325 (98,721) − (6,489) – 3,985,362 1,746,481 5,731,843Effect of dilution of noncontrolling

interest in subsidiaries (Note 27) – – 49,205 – – − – – 49,205 (155,324) (106,119)Increase in noncontrolling interest

(Note 27) – – 562,806 – – − – – 562,806 4,194,472 4,757,278Dividends declared (Notes 5 and 22) – – (419,286) – – − – – (419,286) (514,395) (933,681)Balances as of December 31, 2012 P=9,319,872 P=11,900,015 P=40,027,500 P=71,929 (P=96,688) P=− (P=14,188) (P=24,220) P=61,184,220 P=18,164,512 P=79,348,732See accompanying Notes to Consolidated Financial Statements.

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FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands of Pesos)


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=7,899,519 P=7,919,936 P=7,270,467Adjustments for:

Provision for probable losses (Note 24) 3,324,637 3,137,599 1,554,647Depreciation and amortization (Notes 15 and 16) 1,350,220 1,376,818 1,113,653Interest expense (Note 24) 1,278,826 876,119 995,797Amortization of computer software, customer

relatioships and core deposits and IPPAdministrators rights (Note 24) 210,378 142,031 125,659

Provision for retirement benefits (Notes 24 and 28) 86,291 162,374 114,465Unrealized foreign currency exchange loss (gain) (23,325) (382) 89,847Interest income (Note 26) (751,282) (548,629) (503,395)Gain on derecognition of investment securities at

amortized cost (Notes 13 and 26) (305,997) (572,490) (276,883)Gain on asset foreclosure and dacion transactions

(Note 26) (19,417) (93,784) (42,412)Gain on sale of property, plant and equipment and

investment properties (301,763) (15,161) (4,904)Dividend income – (3,757) (1,010)

Operating income before changes in operating assetsand liabilities 12,748,087 12,380,674 10,435,931Decrease (increase) in:

Loans and receivables (34,934,448) (24,424,376) (26,998,565)Subdivision lots, condominium and residential

units for sale 946,350 837,833 (1,925,403)Financial assets at fair value (8,245,782) 2,854,460 4,120,951Land and land development (106,007) 83,425 1,866,562Sugar and molasses inventories (73,646) 252,150 (217,536)

Increase in:Deposit liabilities 35,863,050 7,235,907 14,254,611Accounts payable and accrued expenses 3,909,728 2,481,554 3,171,423

Net cash generated from operations 10,107,332 1,701,627 4,707,974Income taxes paid (1,468,308) (1,108,501) (1,011,726)Net cash provided by operating activities 8,639,024 593,126 3,696,248

CASH FLOWS FROM INVESTING ACTIVITIESDecrease (increase) in:

Due from related parties (106,527) 20,732 53,474Other assets (3,696,462) (1,822,647) (2,431,558)

Payments for:Purchases of investments (3,383,280) (1,145,598) (1,355,923)Acquisitions of investment properties and property,

plant and equipment (11,774,058) (5,307,528) (8,271,282)Acquisition of raw land (Note 14) (2,309,345) (3,654,647) (2,840,415)

Acquisition of noncontrolling interest (Note 27) (6,622) (7,369) (114,892)Interest received 751,282 548,629 503,395Acquisition of business - net of cash acquired (Note 4) – – (19,700)

(Forward)

22

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Proceeds from disposal of investment properties andforeclosed assets P=504,530 P=415,990 P=297,321

Proceeds from sale of securities at amortized cost 3,974,307 1,718,088 1,564,795Dividends received – 3,757 1,010Net cash used in investing activities (16,046,175) (9,230,593) (12,613,775)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from sale of noncontrolling interest, net of

related expenses (Note 27) – – 4,752,229Proceeds from short-term and long-term debt 36,629,742 28,453,723 16,750,000Increase (decrease) in bills and acceptances payable 2,028,717 (2,282,452) 3,408,199Payments of:

Dividends (1,082,548) (1,062,580) (940,584)Short-term and long-term debt (20,638,499) (11,872,833) (8,097,591)Redemption of shares attributable to noncontrolling interest (188,629) – –

Interest paid (2,668,635) (2,247,965) (2,226,141)Increase (decrease) in due to related parties (52,392) 84,899 (2,739)Net cash provided by financing activities 14,027,756 11,072,792 13,643,373

NET INCREASE IN CASH AND CASHEQUIVALENTS 6,620,605 2,435,325 4,725,846

CASH AND CASH EQUIVALENTS AT BEGINNINGOF YEAR 30,796,212 28,360,887 23,635,041

CASH AND CASH EQUIVALENTS AT ENDOF YEAR (Note 6) P=37,416,817 P=30,796,212 P=28,360,887


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FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Filinvest Development Corporation (FDC or the “Parent Company”) is a stock corporationincorporated under the laws of the Philippines on April 27, 1973. The Parent Company andsubsidiaries (collectively referred to as the “Filinvest Group” or the “Group”) are engaged in realestate operations as a developer of residential subdivisions and mixed-use urban projects,including condominiums and commercial buildings, industrial and farm estates. The FilinvestGroup is also involved in leasing operations, banking and financial services, sugar farming andmilling business, resort and hotel operations, and power generation operations. A.L. Gotianun,Inc. (ALG) is the Group’s ultimate parent company.

On August 19, 2011, the Securities and Exchange Commission (SEC) approved the AmendedArticles of Incorporation of the Parent Company to include in the Primary Purpose the authority ofthe Company to invest in corporations, associations, partnerships, entities or persons orgovernmental, municipal or public businesses, domestic or foreign, engaged in utilities, power,energy, transportation on land, air and sea and infrastructure businesses.

The Parent Company’s principal place of business is located at The Beaufort, 5th Avenue, corner23rd Street, Bonifacio Global City, Taguig City.

Real Estate OperationsOn February 4, 2014, Filinvest Cyberparks, Inc. (FCI), a wholly-owned subsidiary of FilinvestLand, Inc. (FLI), a 59% owned subsidiary of FDC, was incorporated. Its primary purpose is toacquire by purchase, lease, donate and/or to own, use, improve, develop, subdivide, sell,mortgage, exchange, hold for investment and deal with real estate of all kinds.

Banking and Financial ServicesIn 2012, EW acquired additional shares from the noncontrolling shareholder of Green Bank (ARural Bank), Inc. (GBI) amounting to P=8.8 million and from GBI’s unissued capital stockamounting to P=19.7 million, increasing its ownership to 96.5% as of December 31, 2012.

In April 2012, EW conducted an Initial Public Offering (IPO) of 282,113,600 common shares atan offer price of P=18.50 per share, which were listed and traded on the First Board of thePhilippine Stock Exchange on May 7, 2012. EW operates as a universal bank as approved by theBangko Sentral ng Pilipinas (BSP) in July 2012 and provides a wide range of financial services toconsumer and corporate clients. EW’s principal banking products and services include deposit-taking loan and trade finance, treasury, trust services, credit cards, cash management and custodialservices.

In various dates in 2012, FDC sold its 12.5% ownership in EW, while another 12.5% of EWshares were sold to the public from the primary shares offering in the IPO of EW, resulting to aretained controlling interest of 75% in the bank. The change in Group’s ownership interest in EWfrom 100% to 75% was accounted for as equity transactions in accordance with PhilippineAccounting Standards (PAS) 27, Separate Financial Statements. The sale resulted to an increasein equity of P=562.8 million recorded under retained earnings. The transaction costs incurred forthe sale of the 25% share amounted to P=456.2 million which was treated as deduction from equityin the consolidated financial statements. Further details are discussed in Note 27.

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On July 11, 2012, EW acquired 83.2% voting shares of FinMan Rural Bank, Inc. (FRBI). FRBI’sprimary purpose is to accumulate deposit and grant loans to various individuals and small-scalecorporate entities as well as government and private employees (see Note 4). Subsequently, EWacquired additional shares of FRBI from its unissued capital stock amounting to P=20.0 million.The acquisition of FRBI resulted to a goodwill of P=23.5 million.

In 2013, EW subscribed to 441,000,000 common shares of GBI amounting to P=700.0 million. Inaddition, EW contributed additional capital amounting to P=1.3 million and acquired noncontrollinginterest amounting to P=0.2 million, thereby increasing its ownership to 99.8% as ofDecember 31, 2013. EW’s investment in GBI amounted to P=888.5 million and P=187.0 million asof December 31, 2013 and 2012, respectively.

On January 23, 2013, EW acquired the remaining shares of 8% of the noncontrolling interest inFRBI increasing its ownership to 100%. On May 21, 2013, the BSP also approved the change toFRBI’s corporate name to East West Rural Bank, Inc. (EWRB).

In May 2013, GBI and EWRB entered into an asset purchase agreement with assumption ofliabilities (the Purchase and Assumption Agreement) for the transfer of certain assets andliabilities of GBI to EWRB. The transfer of the assets and liabilities took effect on October 31,2013 after the receipt of the required approvals from the regulators. The transfer of the assets andliabilities of GBI to EWRB was part of EW’s plan to combine the rural banking business of itstwo subsidiaries into a single entity. After the transfer, EWRB will continue the rural bankingbusiness of GBI and the remaining assets and liabilities of GBI will be merged to EW, with thelatter as the surviving entity. The merger of EW and GBI will enable EW to achieve brandingleverage and economy in management and operations.

On November 8, 2013, the Philippine Deposit Insurance Corporation approved the proposedmerger of EW and GBI. Subsequently on March 28, 2014 and June 05, 2014, the BSP and theSEC, respectively, approved the merger of EW and GBI. Finally, on July 31, 2014, EW completedits merger with GBI. With the merger, EWRB becomes the only subsidiary of EW as ofDecember 31, 2014.

On July 4, 2014, EW completed its issuance of Basel III- compliant Tier 2 unsecured subordinatednotes with a total face value of P=5.0 billion at a coupon rate of 5.5% maturing in January 2025.Total cost related to the issuance amounted to P=37.6 million, which consisted mainly ofunderwriting fees and documentary stamp taxes.

Hotel OperationsOn February 22, 2012, FDC Hotels Corporation (FHC) filed an application with the SEC for theincorporation of its 100% owned subsidiary, Quest Restaurants, Inc. (QRI), whose primarypurpose, among others, is to establish, maintain, operate and manage, for its own account or forthe account of other entities or individuals, restaurants, cafes, bars, and general food cateringservices. Such application was approved by the SEC on March 12, 2012.

On November 20, 2012, Filinvest Alabang, Inc. (FAI) filed an application with the SEC for theincorporation of its 100% owned subsidiary, Entrata Hotel Services, Inc. (EHSI), whose primarypurpose, among others, is to own, lease, operate and/or manage one or more hotels, resorts, villas,service apartments and condotels, and all adjuncts and accessories and other related activities.Such application was approved by the SEC on November 28, 2012.

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On December 17, 2012, FHC filed an application with the SEC for the incorporation of its 100%owned subsidiary, Boracay Seascapes Resort, Inc. (BSRI), whose primary purpose, among othersis to develop and administer hotels and resorts and entertainment of all kinds and all relatedactivities. Such application was approved by the SEC on December 28, 2012.

On September 30, 2012, the BOD approved the application of FHC for the increase in authorizedcapital stock from P=16.0 million to P=1.5 billion consisting of 15.16 million shares with par valueof P=100 per share. As of December 31, 2014, the Parent Company had subscribed to the proposedincrease in FHC’s authorized capital stock amounting to P=513.1 million.

On March 22, 2013 and April 12, 2013,the SEC approved the incorporation of ChinatownCityscapes Hotel, Inc. (CCHI) and Duawon Seascapes Resort, Inc. (DSRI), respectively, bothsubsidiaries of FHC. The primary purpose, among others, is to develop and administer hotels andresorts and entertainment of all kinds and all related activities.

Power Generation OperationOn May 22, 2012 and July 17, 2012, the SEC approved the incorporation of FDC Negros PowerCorporation (FDC Negros) and FDC Davao del Norte Power Corporation (FDC Davao),respectively. The primary purpose of FDC Negros and FDC Davao is to invest, undertake orparticipate in the development, operation, maintenance and/or rehabilitation of diesel, gas turbine,coal, steam power plants, and other power generating plants of any type and any related facilities,including substation, high voltage lines, interconnection facilities and apparatus, and port facilitiestogether with facilities for the loading, unloading, storage of fuel, and transportation of fuel; and tosell and/or use the energy related thereby and waste and other by-products thereof.

On August 17, 2012, FDC Danao Power Corporation (FDC Danao) filed an application with theSEC for the increase in authorized capital stock from P=16.0 million to P=700.0 million consisting of7.0 million shares with par value of P=100 per share. This application was approved by the SEC onSeptember 19, 2012. FDC Utilities, Inc. (FDCUI) had subscribed to P=175.0 million of theincrease and paid P=103.9 million for which 1.0 million shares were issued. On the same day, anapplication was filed with the SEC for the increase in authorized capital stock of FDC CamarinesPower Corporation (FDC Camarines) from P=4.0 million to P=1.2 billion consisting of 12.0 millionshares at P=100 par value. This application was approved by the SEC on September 17, 2012. Thesubscribed capital amounted to P=300.0 million of which P=75.0 million or 0.8 million shares wereissued and paid. The authorized paid up capital stock of FDC Misamis Power Corporation(FDC Misamis), FDC Retail Electricity Sales Corporation (FDC Retail Electricity Sales) andFDC Casecnan Hydro Power Corporation (FDC Casecnan) remains at P=16.0 million each,consisting of 160,000 shares at P=100 par value, while each company has P=1.0 million or 10,006shares issued and paid up.

On December 3, 2013, the BOD of FDCUI approved the subscription of FDC to additional12.5 million common shares of FDCUI at P=100.0 per share . As of December 31, 2014 and 2013,the subscribed capital stock of FDCUI is P=2.2 billion and P=1.0 billion, respectively.

On December 3, 2013, the BOD and stockholders of FDC Misamis approved the increase in itsauthorized capital stock from P=16.0 million to P=4 billion divided into 20.0 million common shareswith par value of P=100 and 20.0 million preferred shares with a par value of P=100. As ofDecember 31, 2014, FDC Misamis has received total of P=3.6 billion from FDC which wasrecorded as deposit for future subscriptions (nil as of December 31, 2013).

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On January 29, 2014, FDCUI was declared by the Power Sector Assets and LiabilitiesManagement Corporation (PSALM) as one of the winning bidders for the selection andappointment of Independent Power Producer (IPP) Administrators for the strips of energy,equivalent to 40 MW (40 strips of energy), of the Unified Leyte geothermal power plants(ULGPP) in Tongonan, Leyte. Through its wholly owned subsidiary, FDC Misamis, it alsorecently won the bidding for the right to manage around 100 MW of the Mt. Apo 1 and 2geothermal power plants (see Note 42).

Other OperationsOn May 18, 2012, Countrywide Water Services, Inc. (CWSI), was incorporated and started itsoperations on June 6, 2012. CWSI has the technical expertise and skills in the operation,management, maintenance, and rehabilitation of waterworks and sewerage system. On August 2,2012, FLI has engaged the services of CWSI in order to maintain and further improve the billing,collection and customer relation services in the waterworks and sewerage system of its ResidentialProjects.

On March 12, 2013, the Parent Company incorporated Filinvest Development Cayman Island(FDCI) under the laws of Cayman Islands. FDCI was incorporated to facilitate the Group’sissuance of foreign currency-denominated bonds (see Note 21).

On September 29, 2014, the Parent Company subscribed to the remaining unissued 7.5 millioncommon shares of CWSI, giving the Parent Company 75% ownership over CWSI for a totalconsideration at par of P=7.5 million. Furthermore, on October 31, 2014, the Parent Companypurchased from FLI its investment in CWSI for a total consideration of P=2.5 million. The saleresulted to the Parent Company having 100% equity interest in CWSI.

Approval of Consolidated Financial StatementsThe consolidated financial statements were approved and authorized for issue by the BOD onMarch 11, 2015.

2. Summary of Significant Accounting Policies

Basis of PreparationThe accompanying consolidated financial statements are prepared using the historical cost basis,except for financial assets at fair value through profit or loss (FVTPL), financial assets at fairvalue through other comprehensive income (FVTOCI) and derivative financial instruments thathave been measured at fair value.

The Group’s consolidated financial statements are presented in Philippine Peso (P=), which is theGroup’s functional currency, except for the Foreign Currency Deposit Unit (FCDU) of EW, withfunctional currency of United States Dollar (USD). For financial reporting purposes, FCDUaccounts and foreign currency-denominated accounts of the Group are translated into theirequivalents in Philippine Pesos (see accounting policy on foreign currency transactions andtranslations). Amounts are in thousand Pesos, except as otherwise indicated.

Statement of ComplianceThe accompanying consolidated financial statements have been prepared in compliance withPhilippine Financial Reporting Standards (PFRS).

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Basis of ConsolidationThe consolidated financial statements include the financial statements of the Parent Company andits subsidiaries. All of the Parent Company’s subsidiaries were incorporated in the Philippines,except for FDCI, which was incorporated under the laws of Cayman Islands. The financialstatements of the subsidiaries and joint ventures are prepared for the same reporting period as theParent Company, except for Pacific Sugar Holdings Corporation (PSHC) whose reporting periodstarts from October 1 and ends on September 30. Adjustments are made for the effects ofsignificant transactions or events that occur between the reporting period of PSHC and the date ofthe Group’s consolidated financial statements.

Control is achieved when the Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestee. Specifically, the Group controls an investee if and only if the Group has: (a) power overthe investee (i.e., existing rights that give it the current ability to direct the relevant activities of theinvestee); (b) exposure, or rights, to variable returns from its involvement with the investee, and,(c) the ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Groupconsiders all relevant facts and circumstances in assessing whether it has power over an investee,including: (a) the contractual arrangement with the other vote holders of the investee; (b) rightsarising from other contractual arrangements; and, (c) the Group’s voting rights and potentialvoting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicatethat there are changes to one or more of the three elements of control. Consolidation of asubsidiary begins when the Group obtains control over the subsidiary and ceases when the Grouploses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired ordisposed of during the year are included in the statement of comprehensive income from the datethe Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to theequity holders of the parent of the Group and to the noncontrolling interests, even if this results inthe noncontrolling interests having a deficit balance. When necessary, adjustments are made tothe financial statements of subsidiaries to bring their accounting policies in line with the Group’saccounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flowsrelating to transactions between members of the Group are eliminated in full on consolidation.

A change in ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Group loses control over a subsidiary, it:· Derecognizes the assets (including goodwill) and liabilities of the subsidiary· Derecognizes the carrying amount of any noncontrolling interests· Derecognizes the cumulative translation differences recorded in equity· Recognizes the fair value of the consideration received· Recognizes the fair value of any investment retained· Recognizes any surplus of deficit in profit or loss· Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or

retained earnings, as appropriate, as would be required if the Group had directly disposed ofthe related assets or liabilities.

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The consolidated financial statements are prepared using uniform accounting policies for liketransactions and other events in similar circumstances. All intercompany balances andtransactions, intercompany profits and expenses and gains and losses are eliminated in theconsolidation.

The consolidated financial statements include the accounts of the Parent Company and thefollowing subsidiaries, and the corresponding percentages of ownership of the Parent Company asat December 31. The voting rights held by the Group in these entities are in proportion to itsownership interest.

Percentage of Interest in Common Shares2014 2013 2012

Subsidiaries: FDC Forex Corporation (FFC) 100 100 100 FAI(1) 92 92 92 Festival Supermall, Inc. 100 100 100 Northgate Convergence Corporation 100 100 100 Proplus, Inc. 100 100 100 Pro Excel Property Managers, Inc. 100 100 100 EHSI 100 100 100 FSM Cinemas, Inc. 60 60 60 EW(2) 75 75 75 GBI(3) – 100 97 EWRB 100 100 92 FLI (Note 27) 59 59 59 Cyberzone Properties, Inc. (CPI) 100 100 100 Filinvest AII Philippines, Inc. (FAPI) 100 100 100 Property Maximizer Professional Corp. 100 100 100 Homepro Realty Marketing, Inc. 100 100 100 Property Specialist Resources, Inc. 100 100 100 Leisurepro, Inc. 100 100 100 FCI 100 – – Filinvest Asia Corporation (FAC) 60 60 60 PSHC 100 100 100 Davao Sugar Central Corporation (DSCC) 100 100 100 Cotabato Sugar Central Corporation (CSCC) 100 100 100 High Yield Sugar Farms Corporation (HYSFC) 100 100 100 Corporate Technologies, Inc. 100 100 100 Seascapes Resort, Inc. 100 100 100 FHC 100 100 100 QRI 100 100 100 BSRI 100 100 100 CCHI 100 100 – DSRI 100 100 – FDCUI 100 100 100 FDC Casecnan 100 100 100 FDC Retail Electricity Sales 100 100 100 FDC Danao 100 100 100 FDC Camarines 100 100 100 FDC Misamis 100 100 100 FDC Negros 100 100 100 FDC Davao 100 100 100 FDCI 100 100 –

CWSI (4) 100 59 59Notes:1. The percentage ownership in FAI includes 20% share of FLI in FAI.2. Includes 35% owned through FFC.3. On March 28, 2014 and June 5, 2014, the BSP and the SEC, respectively, approved the merger for EW and GBI. On July 31, 2014, EW completed its merger with GBI (see

Note 1).4. The percentage ownership in CWSI for 2013 and 2012 represents indirect ownership through FLI. In 2014, FDC acquired 100% direct equity interest in CWSI (see Note 1).

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Noncontrolling InterestNoncontrolling interest represents the portion of profit or loss and net assets not owned, directly orindirectly, by the Group.

Noncontrolling interests are presented separately in the consolidated statement of income,consolidated statement of comprehensive income, and within equity in the consolidated statementof financial position, separately from parent shareholder’s equity. Any losses applicable to thenoncontrolling interests are allocated against the interests of the noncontrolling interest even if thisresults in the noncontrolling interest having a deficit balance. The acquisition of an additionalownership interest in a subsidiary without a change of control is accounted for as an equitytransaction. Any excess or deficit of consideration paid over the carrying amount of thenoncontrolling interest is recognized in equity of the parent in transactions where thenoncontrolling interest are acquired or sold without loss of control.

Business Combination and GoodwillBusiness combinations are accounted for using the acquisition method. This involves recognizingidentifiable assets (including previously unrecognized intangible assets) and liabilities (includingcontingent liabilities and excluding future restructuring) of the acquired business at fair value.The cost of an acquisition is measured as the aggregate of the consideration transferred, measuredat acquisition date fair value and the amount of any noncontrolling interest in the acquiree.

For each business combination, the acquirer measures the noncontrolling interest in the acquireeeither at fair value or at the proportionate share of the acquiree’s identifiable net assets.Acquisition costs incurred are expensed in the consolidated statement of income.

When the Group acquires a business, it assesses the financial assets and financial liabilitiesassumed for appropriate classification and designation in accordance with the contractual terms,economic circumstances and pertinent conditions as at the acquisition date. This includes theseparation of embedded derivatives in host contracts by the acquiree. If the business combinationis achieved in stages, the acquisition date fair value of the acquirer’s previously held equityinterest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value atthe acquisition date. Subsequent changes to the fair value of the contingent consideration, whichis deemed to be an asset or liability, will be recognized in accordance with PAS 39 either in profitor loss or as a change to other comprehensive income. If the contingent consideration is classifiedas equity, it should not be remeasured until it is finally settled within equity.

Goodwill acquired in a business combination is initially measured at cost, being the excess of thecost of the business combination over the Group’s interest in the net fair value of the acquiree’sidentifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill ismeasured at cost less any accumulated impairment losses. For the purpose of impairment testing,goodwill acquired in a business combination is, from the acquisition date, allocated to each of theGroup’s cash generating units or groups of cash generating units, that are expected to benefit fromthe synergies of the combination, irrespective of whether other assets or liabilities of the Group areassigned to those units or group of units. Each unit or group of units to which the goodwill isallocated:

· represents the lowest level within the Group at which the goodwill is monitored for internalmanagement purposes; and,

· is not larger than a segment based on either the Group’s primary or the Group’s secondaryreporting format determined in accordance with PFRS 8, Operating Segments.

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Where goodwill forms part of a cash-generating unit (group of cash generating units) and part ofthe operation within that unit is disposed of, the goodwill associated with the operation disposedof is included in the carrying amount of the operation when determining the gain or loss ondisposal of the operation. Goodwill disposed of in this circumstance is measured based on therelative values of the operation disposed of and the portion of the cash-generating unit retained.

When subsidiaries are sold, the difference between the selling price and the net assets pluscumulative translation differences and goodwill is recognized in the consolidated statement ofincome.

Acquisitions of noncontrolling interests are accounted for as transactions with owners in theircapacity as owners and therefore no goodwill or profit or loss is recognized as a result.Adjustments to noncontrolling interests arising from transactions that do not involve the loss ofcontrol are based on a proportionate amount of the net assets of the subsidiary.

Changes in Accounting Policies and DisclosuresThe accounting policies adopted are consistent with those of the previous financial years, exceptfor the adoption of the following new and amended PFRS, Philippine Accounting Standards(PAS) and Philippine Interpretations of International Financial Reporting InterpretationsCommittee (IFRIC) which became effective on January 1, 2014. Except as otherwise indicated,the adoption of these new accounting standards and amendments have no material impact on theGroup’s consolidated financial statements.

· Investment Entities (Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12,Disclosure of Interests in Other Entities, and PAS 27, Separate Financial Statements),provides an exception to the consolidation requirement for entities that meet the definition ofan investment entity under PFRS 10. The exception to consolidation requires investmententities to account for subsidiaries at fair value through profit or loss. The amendments mustbe applied retrospectively, subject to certain transition relief. These amendments have noimpact to the Group’s consolidated financial statements since none of the entities in the Groupwould qualify to be an investment entity under PFRS 10.

· PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and FinancialLiabilities (Amendments), clarifies the meaning of ‘currently has a legally enforceable right toset-off’ and the criteria for non-simultaneous settlement mechanisms of clearing houses toqualify for offsetting and are applied retrospectively. The amendments affect presentationonly and have no impact on the Group’s financial position or performance.

· PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives andContinuation of Hedge Accounting (Amendments), provide relief from discontinuing hedgeaccounting when novation of a derivative designated as a hedging instrument meets certaincriteria and retrospective application is required. The Group has not novated its derivativesduring the period. However, these amendments would be considered for future novations.

· PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets(Amendments), remove the unintended consequences of PFRS 13, Fair Value Measurement,on the disclosures required under PAS 36. In addition, these amendments require disclosureof the recoverable amounts for assets or cash-generating units (CGUs) for which impairmentloss has been recognized or reversed during the period. The application of these amendmentshas no material impact on the disclosure in the Group’s consolidated financial statements.

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· Philippine Interpretation IFRIC 21, Levies (IFRIC 21), clarifies that an entity recognizes aliability for a levy when the activity that triggers payment, as identified by the relevantlegislation, occurs. For a levy that is triggered upon reaching a minimum threshold, theinterpretation clarifies that no liability should be anticipated before the specified minimumthreshold is reached. Retrospective application is required for IFRIC 21. This interpretationhas no impact on the Group as it has applied the recognition principles under PAS 37,Provisions, Contingent Liabilities and Contingent Assets, consistent with the requirements ofIFRIC 21 in prior years.

Annual Improvements to PFRSs (2010-2012 cycle)In the 2010 - 2012 annual improvements cycle, seven amendments to six standards were issued,which included an amendment to PFRS 13, Fair Value Measurement. The amendment toPFRS 13 is effective immediately and it clarifies that short-term receivables and payables with nostated interest rates can be measured at invoice amounts when the effect of discounting isimmaterial. This amendment has no impact on the Group.

Annual Improvements to PFRSs (2011-2013 cycle)In the 2011 - 2013 annual improvements cycle, four amendments to four standards were issued,which included an amendment to PFRS 1, First-time Adoption of Philippine Financial ReportingStandards-First-time Adoption of PFRS. The amendment to PFRS 1 is effective immediately. Itclarifies that an entity may choose to apply either a current standard or a new standard that is notyet mandatory, but permits early application, provided either standard is applied consistentlythroughout the periods presented in the entity’s first PFRS financial statements. This amendmenthas no impact on the Group as it is not a first time PFRS adopter.

Future Changes in Accounting PoliciesThe Group will adopt the following relevant standards and interpretations when these becomeeffective. Except as otherwise stated, the Group does not expect the adoption of the followingrelevent standards and interpretations to have a significant impact on its consolidated financialstatements.

· PFRS 9, Financial Instruments - Classification and Measurement (2010 version), reflects thefirst phase on the replacement of PAS 39 and applies to the classification and measurement offinancial assets and liabilities as defined in PAS 39, Financial Instruments: Recognition andMeasurement. PFRS 9 requires all financial assets to be measured at fair value at initialrecognition. A debt financial asset may, if the fair value option (FVO) is not invoked, besubsequently measured at amortized cost if it is held within a business model that has theobjective to hold the assets to collect the contractual cash flows and its contractual terms giverise, on specified dates, to cash flows that are solely payments of principal and interest on theprincipal outstanding. All other debt instruments are subsequently measured at fair valuethrough profit or loss. All equity financial assets are measured at fair value either throughother comprehensive income (OCI) or profit or loss. Equity financial assets held for tradingmust be measured at fair value through profit or loss. For FVO liabilities, the amount ofchange in the fair value of a liability that is attributable to changes in credit risk must bepresented in OCI. The remainder of the change in fair value is presented in profit or loss,unless presentation of the fair value change in respect of the liability’s credit risk in OCIwould create or enlarge an accounting mismatch in profit or loss. All other PAS 39classification and measurement requirements for financial liabilities have been carried forwardinto PFRS 9, including the embedded derivative separation rules and the criteria for using theFVO.

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PFRS 9 (2010 version) is effective for annual periods beginning on or after January 1, 2015.This mandatory adoption date was moved to January 1, 2018 when the final version ofPFRS 9 was adopted by the Philippine Financial Reporting Standards Council (FRSC). Suchadoption, however, is still for approval by the Board of Accountancy (BOA). The Group hadearly adopted the first phase of PFRS 9 effective January 1, 2011.

Effective 2015

· PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments),requires an entity to consider contributions from employees or third parties when accountingfor defined benefit plans. Where the contributions are linked to service, they should beattributed to periods of service as a negative benefit. These amendments clarify that, if theamount of the contributions is independent of the number of years of service, an entity ispermitted to recognize such contributions as a reduction in the service cost in the period inwhich the service is rendered, instead of allocating the contributions to the periods of service.This amendment is effective for annual periods beginning on or after January 1, 2015. It isnot expected that this amendment would be relevant to the Group, since none of the entitieswithin the Group has defined benefit plans with contributions from employees or third parties

Annual Improvements to PFRSs (2010-2012 cycle)The Annual Improvements to PFRSs (2010-2012 cycle) are effective for annual periods beginningon or after January 1, 2015 and are not expected to have a material impact on the Group.

· PFRS 2, Share-based Payment - Definition of Vesting Condition, applied prospectively andclarifies various issues relating to the definitions of performance and service conditions whichare vesting conditions.

· PFRS 3, Business Combinations - Accounting for Contingent Consideration in a BusinessCombination, applied prospectively for business combinations for which the acquisition dateis on or after July 1, 2014. It clarifies that a contingent consideration that is not classified asequity is subsequently measured at fair value through profit or loss whether or not it fallswithin the scope of or PFRS 9, Financial Instruments. The Group shall consider thisamendment for future business combinations.

· PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of theTotal of the Reportable Segments’ Assets to the Entity’s Assets, applied retrospectively andclarifies that: (a) an entity must disclose the judgments made by management in applying theaggregation criteria in the standard; and, (b) reconciliation of segment assets to total assets isonly required to be disclosed if the reconciliation is reported to the chief operating decisionmaker, similar to the required disclosure for segment liabilities.

· PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Revaluation Method- Proportionate Restatement of Accumulated Depreciation and Amortization, amendment isapplied retrospectively and clarifies in PAS 16 and PAS 38 that the asset may be revalued byreference to the observable data on either the gross or the net carrying amount. In addition, theaccumulated depreciation or amortization is the difference between the gross and carryingamounts of the asset.

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· PAS 24, Related Party Disclosures - Key Management Personnel, applied retrospectively andclarifies that a management entity, which is an entity that provides key management personnelservices, is a related party subject to the related party disclosures. In addition, an entity thatuses a management entity is required to disclose the expenses incurred for management


· PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements,appliedprospectively and clarifies that (a) the joint arrangements, not just joint ventures, are outsidethe scope of PFRS 3; and, (b) this scope exception applies only to the accounting in thefinancial statements of the joint arrangement itself.

· PFRS 13, Fair Value Measurement - Portfolio Exception, applied prospectively and clarifiesthat the portfolio exception in PFRS 13 can be applied not only to financial assets andfinancial liabilities, but also to other contracts within the scope of PFRS 9.

· PAS 40, Investment Property, applied prospectively and clarifies that PFRS 3, and not thedescription of ancillary services in PAS 40, is used to determine if the transaction is thepurchase of an asset or business combination. The description of ancillary services in PAS 40only differentiates between investment property and owner-occupied property (i.e., property,plant and equipment).

Effective 2016

· PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification ofAcceptable Methods of Depreciation and Amortization (Amendments), clarifies the principlein PAS 16 and PAS 38 that revenue reflects a pattern of economic benefits that are generatedfrom operating a business (of which the asset is part) rather than the economic benefits that areconsumed through use of the asset. As a result, a revenue-based method cannot be used todepreciate property, plant and equipment and may only be used in very limited circumstancesto amortize intangible assets. The amendments are effective prospectively for annual periodsbeginning on or after January 1, 2016, with early adoption permitted. These amendments arenot expected to have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non-current assets.

· PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants(Amendments), change the accounting requirements for biological assets that meet thedefinition of bearer plants. Under the amendments, biological assets that meet the definitionof bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply.After initial recognition, bearer plants will be measured under PAS 16 at accumulated cost(before maturity) and using either the cost model or revaluation model (after maturity). Theamendments also require that produce that grows on bearer plants will remain in the scope ofPAS 41 measured at fair value less costs to sell. For government grants related to bearerplants, PAS 20, Accounting for Government Grants and Disclosure of GovernmentAssistance, will apply. The amendments are retrospectively effective for annual periodsbeginning on or after January 1, 2016, with early adoption permitted. These amendments arenot expected to have any impact as the Group does not have any bearer plants.

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· PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements(Amendments), will allow entities to use the equity method to account for investments insubsidiaries, joint ventures and associates in their separate financial statements. Entitiesalready applying PFRS and electing to change to the equity method in its separate financialstatements will have to apply that change retrospectively. For first-time adopters of PFRSelecting to use the equity method in its separate financial statements, they will be required toapply this method from the date of transition to PFRS. The amendments are effective forannual periods beginning on or after January 1, 2016, with early adoption permitted. Theseamendments will not have any impact on the Group’s financial statements.

· PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and JointVentures - Sale or Contribution of Assets between an Investor and its Associate or JointVenture, address an acknowledged inconsistency between the requirements in PFRS 10 andthose in PAS 28 (2011) in dealing with the sale or contribution of assets between an investorand its associate or joint venture. The amendments require that a full gain or loss isrecognized when a transaction involves a business (whether it is housed in a subsidiary ornot). A partial gain or loss is recognized when a transaction involves assets that do notconstitute a business, even if these assets are housed in a subsidiary. These amendments areeffective from annual periods beginning on or after 1 January 2016.

·· PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations

(Amendments), require that a joint operator accounting for the acquisition of an interest in ajoint operation, in which the activity of the joint operation constitutes a business must applythe relevant PFRS 3 principles for business combinations accounting. The amendments alsoclarify that a previously held interest in a joint operation is not remeasured on the acquisitionof an additional interest in the same joint operation while joint control is retained. In addition,a scope exclusion has been added to PFRS 11 to specify that the amendments do not applywhen the parties sharing joint control, including the reporting entity, are under commoncontrol of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and theacquisition of any additional interests in the same joint operation and are prospectivelyeffective for annual periods beginning on or after January 1, 2016, with early adoptionpermitted. The Group shall consider this amendment in future acquisition of interest in jointoperation.

· PFRS 14, Regulatory Deferral Accounts, an optional standard that allows an entity, whoseactivities are subject to rate-regulation, to continue applying most of its existing accountingpolicies for regulatory deferral account balances upon its first-time adoption of PFRS.PFRS 14 is effective for annual periods beginning on or after January 1, 2016. Since theGroup is an existing PFRS preparer, this standard would not apply.


· PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes inMethods of Disposal (Amendment), is applied prospectively and clarifies that changing from adisposal through sale to a disposal through distribution to owners and vice-versa should not beconsidered to be a new plan of disposal, rather it is a continuation of the original plan.

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There is, therefore, no interruption of the application of the requirements in PFRS 5. Theamendment also clarifies that changing the disposal method does not change the date ofclassification.

· PFRS 7, Financial Instruments: Disclosures - Servicing Contracts, requires an entity toprovide disclosures for any continuing involvement in a transferred asset that is derecognizedin its entirety. The amendment clarifies that a servicing contract that includes a fee canconstitute continuing involvement in a financial asset. An entity must assess the nature of thefee and arrangement against the guidance in PFRS 7 in order to assess whether the disclosuresare required. The amendment is to be applied such that the assessment of which servicingcontracts constitute continuing involvement will need to be done retrospectively. However,comparative disclosures are not required to be provided for any period beginning before theannual period in which the entity first applies the amendments.

· PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim FinancialStatements (Amendment), is applied retrospectively and clarifies that the disclosures onoffsetting of financial assets and financial liabilities are not required in the condensed interimfinancial report unless they provide a significant update to the information reported in themost recent annual report.

· PAS 19, Employee Benefits- regional market issue regarding discount rate (Amendment), isapplied prospectively and clarifies that market depth of high quality corporate bonds isassessed based on the currency in which the obligation is denominated, rather than the countrywhere the obligation is located. When there is no deep market for high quality corporate bondsin that currency, government bond rates must be used.

· PAS 34, Interim Financial Reporting- disclosure of information ‘elsewhere in the interimfinancial report’ (Amendment) is applied retrospectively and clarifies that the required interimdisclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within thegreater interim financial report (e.g., in the management commentary or risk report).

Effective 2018

· PFRS 9, Financial Instruments - Hedge Accounting and amendments to PFRS 9, PFRS 7 andPAS 39 (2013 version), already includes the third phase of the project to replace PAS 39which pertains to hedge accounting. This version of PFRS 9 replaces the rules-based hedgeaccounting model of PAS 39 with a more principles-based approach. PFRS 9 also requiresmore extensive disclosures for hedge accounting. PFRS 9 (2013 version) has no mandatoryeffective date. The mandatory effective date of January 1, 2018 was eventually set when thefinal version of PFRS 9 was adopted by the FRSC. The adoption of the final version ofPFRS 9, however, is still for approval by BOA.

The adoption of PFRS 9 will have an effect on the classification and measurement of theGroup’s consolidated financial assets but will have no impact on the classification andmeasurement of the Group’s consolidated financial liabilities. The Group had early adoptedthe first phase of PFRS 9 effective January 1, 2011. The Group is currently assessing theimpact of the third phase and the final version of PFRS 9 to present a comprehensive picture.

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· PFRS 9, Financial Instruments (2014 or final version) was issued. PFRS 9 reflects all phasesof the financial instruments project and replaces PAS 39, Financial Instruments: Recognitionand Measurement, and all previous versions of PFRS 9. The standard introduces newrequirements for classification and measurement, impairment, and hedge accounting. PFRS 9is effective for annual periods beginning on or after January 1, 2018, with early applicationpermitted. Retrospective application is required, but comparative information is notcompulsory. Early application of previous versions of PFRS 9 is permitted if the date of initialapplication is before February 1, 2015.

The adoption of PFRS 9 will have an effect on the classification and measurement of theGroup’s financial assets and impairment methodology for financial assets, but will have noimpact on the classification and measurement of the Group’s financial liabilities. The Grouphad early adopted the first phase of PFRS 9 effective January 1, 2011. The Group is currentlyassessing the impact of the third phase and the final version of PFRS 9 to present acomprehensive picture.

Effectivity to be determined

· IFRS 15 Revenue from Contracts with Customers, issued in May 2014 and establishes a newfive-step model that will apply to revenue arising from contracts with customers. Under IFRS15 revenue is recognized at an amount that reflects the consideration to which an entityexpects to be entitled in exchange for transferring goods or services to a customer. Theprinciples in IFRS 15 provide a more structured approach to measuring and recognisingrevenue. The new revenue standard is applicable to all entities and will supersede all currentrevenue recognition requirements under IFRS. Either a full or modified retrospectiveapplication is required for annual periods beginning on or after 1 January 2017 with earlyadoption permitted. The Group is currently assessing the impact of IFRS 15 and plans toadopt the new standard on the required effective date once adopted locally.

· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate, coversaccounting for revenue and associated expenses by entities that undertake the construction ofreal estate directly or through subcontractors. The interpretation requires that revenue onconstruction of real estate be recognized only upon completion, except when such contractqualifies 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 ofcompletion. Contracts involving provision of services with the construction materials andwhere the risks and reward of ownership are transferred to the buyer on a continuous basiswill also be accounted for based on stage of completion.

The SEC and the FRSC have deferred the effectivity of this interpretation until the finalRevenue standard is issued by the IASB and an evaluation of the requirements of the finalRevenue standard against the practices of the Philippine real estate industry is completed. TheGroup is currently assessing the impact of this interpretation on its financial statements.

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents include cash and other cash items(COCI), amounts due from BSP and other banks, interbank loans receivable (IBLR) and securitiespurchased under resale agreement (SPURA) with original maturities of three months or less fromdates of placements and are subject to insignificant risk of changes in value.

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Financial InstrumentsDate of RecognitionPurchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized on the settlement date,which is the date that an asset is delivered to or by the Group. Securities transactions and relatedcommission income and expense are recorded on a settlement date basis. Deposits, amounts dueto banks and customers and loans are recognized when cash is received by the Group or advancedto the borrowers. Derivatives are recognized on trade date basis.

The Group recognized financial instruments when, and only when, the Group becomes a party tothe contractual terms of the financial instruments.

Initial recognition of financial instrumentsFinancial assets and financial liabilities are recognized initially at fair value, except for financialassets and liabilities at FVTPL.

Determination of fair valueThe fair value of investments that are actively traded in organized financial markets is determinedby reference to quoted market prices at the close of business on the reporting date, without anydeduction for transaction cost. For financial instruments where there is no active market, fairvalue is determined using valuation techniques.

Such techniques include using recent arm’s-length market transactions; reference to the currentmarket value of another instrument which is substantially the same; discounted cash flow analysisor other valuation models. In the absence of a reliable basis of determining fair value, investmentsin unquoted equity securities are carried at cost net of impairment, if any.

‘Day 1’ differenceWhere the transaction price in a non-active market is different from the fair value from otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Group recognizes the differencebetween the transaction price and fair value (a ‘Day 1’ difference) in the consolidated statement ofincome unless it qualifies for recognition as some other type of asset or liability. In cases wheretransaction price used is made of data which is not observable, the difference between thetransaction price and model value is only recognized in the consolidated statement of incomewhen the inputs become observable or when the instrument is derecognized. For each transaction,the Group determines the appropriate method of recognizing the ‘Day 1’ difference amount.

Classification, Reclassification and Measurement of Financial Assets and Financial LiabilitiesFor purposes of classifying financial assets, an instrument is an ‘equity instrument’ if it is anonderivative and meets the definition of ‘equity’ for the issuer (under PAS 32, FinancialInstruments: Presentation), except for certain non-derivative puttable instruments presented asequity by the issuer. All other non-derivative financial instruments are ‘debt instruments’.

Financial assets at amortized costFinancial assets are measured at amortized cost if both of the following conditions are met:

· the asset is held within the Group’s business model whose objective is to hold assets in orderto collect contractual cash flows; and

· the contractual terms of the instrument give rise on specified dates to cash flows that are solelypayments of principal and interest on the principal amount outstanding.

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Financial assets meeting these criteria are measured initially at fair value plus transaction costs.They are subsequently measured at amortized cost using the effective interest method less anyimpairment in value, with the interest calculated recognized as Interest income in the consolidatedstatement of income. The Group classified cash and cash equivalents, other loans and receivables,due from related parties and other investment securities at amortized cost as financial assets atamortized cost (see Notes 34 and 35).

The Group may irrevocably elect at initial recognition to classify a financial asset that meets theamortized cost criteria above as at FVTPL if that designation eliminates or significantly reducesan accounting mismatch had the financial asset been measured at amortized cost. In 2014 and2013, the Group has not made such designation.

Financial assets at FVTOCIAt initial recognition, the Group can make an irrevocable election (on an instrument-by-instrumentbasis) to designate equity investments as at FVTOCI. Designation at FVTOCI is not permitted ifthe equity investment is held for trading.

A financial asset is held for trading if:

· it has been acquired principally for the purpose of selling it in the near term; or· on initial recognition it is part of a portfolio of identified financial instruments that the Group

manages together and has evidence of a recent actual pattern of short-term profit-taking; or· it is a derivative that is not designated and effective as a hedging instrument or a financial

guarantee.

Financial assets at FVTOCI are initially measured at fair value plus transaction costs.Subsequently, they are measured at fair value, with no deduction for sale or disposal costs. Gainsand losses arising from changes in fair value are recognized in other comprehensive income andaccumulated in “Revaluation reserve on financial assets at FVTOCI” in the consolidated statementof financial position. Where the asset is disposed of, the cumulative gain or loss previouslyrecognized in “Revaluation reserve on financial assets at FVTOCI” is not reclassified to profit orloss, but is reclassified to Retained earnings.

The Group has designated certain equity instruments that are not held for trading as at FVTOCI oninitial application of PFRS 9 (see Notes 13 and 35).

Dividends earned on holding these equity instruments are recognized in the consolidated statementof income when the Group’s right to receive the dividends is established in accordance withPAS 18, Revenue, unless the dividends clearly represent recovery of a part of the cost of theinvestment.

Financial assets at FVTPLDebt instruments that do not meet the amortized cost criteria, or that meet the criteria but theGroup has chosen to designate as at FVTPL at initial recognition, are measured at fair valuethrough profit or loss.

Equity investments are classified as at FVTPL, unless the Group designates an investment thatisnot held for trading as at FVTOCI at initial recognition.

The Group’s financial assets at FVTPL include government securities, private bonds and equitysecurities held for trading purposes as of December 31, 2014 and 2013 (see Notes 13 and 35).

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Financial assets at FVTPL are carried at fair value, and realized and unrealized gains and losses onthese instruments are recognized as ‘trading and securities gains (losses)’ under Other income inthe consolidated statement of income. Interest earned on these investments is reported in theconsolidated statement of income under Interest income while dividend income is reported in theconsolidated statement of income under Other income when the right of payment has beenestablished. Quoted market prices, when available, are used to determine the fair value of thesefinancial instruments. If quoted market prices are not available, their fair values are estimatedbased on inputs provided by the BSP, Bureau of Treasury and investment bankers. For all otherfinancial instruments not listed in an active market, the fair value is determined by usingappropriate valuation techniques.

The fair value of financial assets denominated in a foreign currency is determined in thatforeigncurrency and translated at the Philippine Dealing Exchange (PDEx) closing rate at theconsolidated statement of financial position date. The foreign exchange component forms part ofits fair value gain or loss. For financial assets classified as at FVTPL, the foreign exchangecomponent is recognized in the consolidated statement of income. For financial assets designatedas at FVTOCI, any foreign exchange component is recognized in other comprehensive income.For foreign currency denominated debt instruments classified at amortized cost, the foreignexchange gains and losses are determined based on the amortized cost of the asset and arerecognized in the consolidated statement of income.

Reclassification of financial assetsThe Group can reclassify financial assets if the objective of its business model for managing thosefinancial assets changes. The Group is required to reclassify the following financial assets:

· from amortized cost to FVTPL if the objective of the business model changes so that theamortized cost criteria are no longer met; and,

· from FVTPL to amortized cost if the objective of the business model changes so that theamortized cost criteria start to be met and the instrument’s contractual cash flows meet theamortized cost criteria.

Reclassification of financial assets designated as at FVTPL at initial recognition is not permitted.

A change in the objective of the Group's business model must be effected before thereclassification date. The reclassification date is the beginning of the next reporting periodfollowing the change in the business model.

Financial liabilities at FVTPLFinancial liabilities are classified as at FVTPL when the financial liability is either held for tradingor it is designated as at FVTPL.

A financial liability is held for trading if:

· it has been incurred principally for the purpose of repurchasing it in the near term; or,· on initial recognition it is part of a portfolio of identified financial instruments that the Group

manages together and has evidence of a recent actual pattern of short-term profit-taking; or itisa derivative that is not designated and effective as a hedging instrument or afinancialguarantee.

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Management may designate a financial liability at FVTPL upon initial recognition when thefollowing criteria are met, and designation is determined on an instrument by instrument basis:

· The designation eliminates or significantly reduces the inconsistent treatment that wouldotherwise arise from measuring the liabilities or recognizing gains or losses on them on adifferent basis; or,

· The liabilities are part of a group of financial liabilities which are managed and theirperformance evaluated on a fair value basis, in accordance with a documented riskmanagement or investment strategy; or,

· The financial instrument contains an embedded derivative, unless the embedded derivativedoes not significantly modify the cash flows or it is clear, with little or no analysis, that itwould not be separately recorded.

As of December 31, 2014 and 2013, the Group has no financial liability at FVTPL.

Financial liabilities at amortized costFinancial liabilities are measured at amortized cost using the effective interest method,except for:a. financial liabilities at FVPTL which are measured at fair value;and,b. financial liabilities that arise when a transfer of a financial asset does not qualify

forderecognition or when the continuing involvement approach applies.

Issued financial instruments or their components, which are not designated at FVTPL, areclassified as financial liabilities at amortized cost under ‘Deposit liabilities’, ‘Bills andacceptances payable’ or other appropriate financial liability accounts, where the substance of thecontractual arrangement results in the Group having an obligation either to deliver cash or anotherfinancial asset to the holder, or to satisfy the obligation other than by the exchange of a fixedamount of cash or another financial asset for a fixed number of own equity shares. Thecomponents of issued financial instruments that contain both liability and equity elements areaccounted for separately, with the equity component being assigned the residual amount afterdeducting from the instrument as a whole the amount separately determined as the fair value of theliability component on the date of issue.

After initial measurement, bills payable and similar financial liabilities not qualified as and notdesignated as FVTPL, are subsequently measured at amortized cost using the effective interestmethod. Amortized cost is calculated by taking into account any discount or premium on theissuance and fees that are an integral part of the effective interest rate.

Financial liabilities at amortized cost consist primarily of deposit liabilities, bills and acceptancespayable, accounts payable and accrued expenses, short-term and long-term debt (see Note 35).

Derivative Financial Instruments and Hedge AccountingInitial recognition and subsequent measurementThe Group uses derivative financial instruments, such as forward currency contracts, interest rateswaps and forward commodity contracts, to hedge its foreign currency risks, interest rate risks andcommodity price risks, respectively. Such derivative financial instruments are initially recognizedat fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positiveand as financial liabilities when the fair value is negative.

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The purchase contracts that meet the definition of a derivative under PAS 39 are recognized in thestatement of profit or loss as cost of sales. Commodity contracts that are entered into and continueto be held for the purpose of the receipt or delivery of a non-financial item in accordance with theGroup’s expected purchase, sale or usage requirements are held at cost.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to profitor loss, except for the recognized effective portion of cash flow hedges, which is recognized inOCI and later reclassified to profit or loss when the hedge item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as:· Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset

or liability or an unrecognized firm commitment· Cash flow hedges when hedging the exposure to variability in cash flows that is either

attributable to a particular risk associated with a recognized asset or liability or a highlyprobable forecast transaction or the foreign currency risk in an unrecognized firm commitment

· Hedges of a net investment in a foreign operation

At the inception of a hedge relationship, the Group formally designates and documents the hedgerelationship to which the Group wishes to apply hedge accounting and the risk managementobjective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item ortransaction, the nature of the risk being hedged and how the entity will assess the effectiveness ofchanges in the hedging instrument’s fair value in offsetting the exposure to changes in the hedgeditem’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to behighly effective in achieving offsetting changes in fair value or cash flows and are assessed on anongoing basis to determine that they actually have been highly effective throughout the financialreporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:

Fair value hedgesThe change in the fair value of a hedging derivative is recognized in the statement of profit or lossas finance costs. The change in the fair value of the hedged item attributable to the risk hedged isrecorded as part of the carrying value of the hedged item and is also recognized in the statement ofprofit or loss as finance costs.

For fair value hedges relating to items carried at amortized cost, any adjustment to carrying valueis amortized through profit or loss over the remaining term of the hedge using the EIR method.EIR amortization may begin as soon as an adjustment exists and no later than when the hedgeditem ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

If the hedged item is derecognized, the unamortized fair value is recognized immediately in profitor loss.

When an unrecognized firm commitment is designated as a hedged item, the subsequentcumulative change in the fair value of the firm commitment attributable to the hedged risk isrecognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.

As of December 31, 2014 and 2013, the Group does not have derivative instruments designated asfair value hedge.

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Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognized in OCI in thecash flow hedge reserve, while any ineffective portion is recognized immediately in the statementof profit or loss as other operating expenses.

The Group uses forward currency contracts as hedges of its exposure to foreign currency risk inforecast transactions and firm commitments. The ineffective portion relating to foreign currencycontracts is recognized in finance costs.

Amounts recognized as OCI are transferred to profit or loss when the hedged transaction affectsprofit or loss, such as when the hedged financial income or financial expense is recognized orwhen a forecast sale occurs.

When the hedged item is the cost of a non-financial asset or non-financial liability, the amountsrecognized as OCI are transferred to the initial carrying amount of the non-financial asset orliability.

If the hedging instrument expires or is sold, terminated or exercised without replacement orrollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when thehedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previouslyrecognized in OCI remains separately in equity until the forecast transaction occurs or the foreigncurrency firm commitment is met.

As of December 31, 2014 and 2013, the Group has cross currency swap that is used to hedge forthe exposure of changes in foreign currency translation of the Group’s US$-denominated bondspayable (see Note 35).

Impairment of Financial AssetsThe Group assesses at each reporting date whether a financial asset or group of financial assets isimpaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if,there is objective evidence of impairment as a result of one or more events that has occurred afterthe initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has animpact on the estimated future cash flows of the financial asset or the group of financial assets thatcan be reliably estimated. Evidence of impairment may include indications that the borrower or agroup of borrowers is experiencing significant financial difficulty, default or delinquency ininterest or principal payments, the probability that they will enter bankruptcy or other financialreorganization and where observable data indicate that there is measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

For financial assets classified and measured at amortized cost such as loans and receivables, duefrom other banks and investment securities at amortized cost, the Group first assesses whetherobjective evidence of impairment exists individually for financial assets that are individuallysignificant, or collectively for financial assets that are not individually significant.

For individually assessed financial assets, the amount of the loss is measured as the differencebetween the asset’s carrying amount and the present value of the estimated future cash flows(excluding future credit losses that have not been incurred). The present value of the estimatedfuture cash flows is discounted at the financial asset’s original effective interest rate. If a loan hasa variable interest rate, the discount rate for measuring any impairment loss is the current effective

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interest rate, adjusted for the original credit risk premium. The calculation of the present value ofthe estimated future cash flows of a collateralized financial asset reflects the cash flows that mayresult from foreclosure less costs for obtaining and selling the collateral, whether or notforeclosure is probable.

Financial assets that are individually assessed for impairment and for which an impairment loss is,or continues to be, recognized are not included in a collective assessment for impairment. Thecarrying amount of the asset is reduced through use of an allowance account and the amount ofloss is charged to ‘Provision for impairment and credit losses’ in the consolidated statement ofincome. Interest income continues to be recognized based on the original effective interest rate ofthe asset. Loans, together with the associated allowance accounts, are written off when there is norealistic prospect of future recovery and all collateral has been realized. If, in a subsequent year,the amount of the estimated impairment loss decreases because of an event occurring after theimpairment was recognized, the previously recognized impairment loss is reduced by adjusting theallowance account. If a write-off is later recovered, except for credit card receivables, anyamounts formerly charged are credited to the ‘Provision for impairment and credit losses’ in theconsolidated statement of income. For credit card receivables, if a write-off is later recovered, anyamounts previously charged to ‘Provision for impairment and credit losses’ are credited to ‘Otherincome’ in the consolidated statement of income.

If the Group determines that no objective evidence of impairment exists for individually assessedfinancial asset, whether significant or not, it includes the asset in a group of financial assets withsimilar credit risk characteristics and collectively assesses for impairment. Those characteristicsare relevant to the estimation of future cash flows for groups of such assets by being indicative ofthe debtors’ ability to pay all amounts due according to the contractual terms of the assets beingevaluated.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basisof credit risk characteristics such as industry, collateral type, past-due status and term. Future cashflows in a group of financial assets that are collectively evaluated for impairment are estimated onthe basis of historical loss experience for assets with similar credit risk characteristics. Historicalloss experience is adjusted on the basis of current observable data to reflect the effects of currentconditions that did not affect the period on which the historical loss experience is based and toremove the effects of conditions in the historical period that do not exist currently. Estimates ofchanges in future cash flows reflect, and are directionally consistent with changes in relatedobservable data from period to period (such as changes in property prices, payment status, or otherfactors that are indicative of incurred losses of the Group and their magnitude).

The methodology and assumptions used for estimating future cash flows are reviewed regularly bythe Group to reduce any differences between loss estimates and actual loss experience.

For credit cards receivables, the Group is using net flow rate methodology for collectiveimpairment.

Fair Value MeasurementFair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:· In the principal market for the asset or liability, or,· In the absence of a principal market, in the most advantageous market for the asset or liability

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The principal or the most advantageous market must be accessible to by the Group. The fair valueof an asset or a liability is measured using the assumptions that market participants would usewhen pricing the asset or liability, assuming that market participants act in their economic bestinterest.

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statementsare categorized within the fair value hierarchy, described as follows, based on the lowest levelinput that is significant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, theGroup determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

Restructured loansLoan restructuring may involve extending the payment arrangements and the agreement of newloan conditions. Once the terms have been renegotiated, the loan is no longer considered past due.Management continuously reviews restructured loans to ensure that all criteria are met and thatfuture payments are likely to occur. The loans continue to be subjected to an individual orcollective impairment assessment, calculated using the loan’s original effective interest rate. Thedifference between the recorded value of the original loan and the present value of the restructuredcash flows, discounted at the original effective interest rate, is recognized in ‘Provision forprobable losses’ in the consolidated statement of income.

Derecognition of Financial Assets and Financial LiabilitiesFinancial AssetsA financial asset is derecognized when (a) the rights to receive cash flows from the asset haveexpired, (b) the Group retains the right to receive cash flows from the asset, but has assumed anobligation to pay them in full without material delay to a third party under a pass-througharrangement, or (c) the Group has transferred its rights to receive cash flows from the asset andeither has transferred substantially all the risks and rewards of the asset, or has neither transferrednor retained substantially all the risks and rewards of the asset, but has transferred control of theasset.

Where the Group has transferred its rights to receive cash flows from an asset and has neithertransferred nor retained substantially all the risks and rewards of an asset nor transferred control ofthe asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset.Continuing involvement that takes the form of a guarantee over the transferred asset is measuredat the lower of the original carrying amount of the asset and the maximum amount ofconsideration that the Group could be required to repay.

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Financial LiabilitiesA financial liability is derecognized when the obligation under the liability has expired, dischargedor cancelled.

Where an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a newliability, and the difference in the respective carrying amounts is recognized in the consolidatedstatement of income.

Repurchase and Reverse Repurchase AgreementsSecurities sold under agreements to repurchase at a specified future date (‘repos’) are notderecognized from the consolidated statement of financial position. The corresponding cashreceived, including accrued interest, is recognized in the consolidated statement of financialposition as a loan to the Group, reflecting the economic substance of such transaction.

Conversely, securities purchased under agreements to resell at a specified future date (‘reverserepos’) are not recognized on the consolidated statement of financial position. The correspondingcash paid, including accrued interest, is recognized in the consolidated statement of financialposition as SPURA under “Cash and cash equivalents” account, and is considered a loan to thecounterparty. The difference between the purchase price and resale price is treated as interestincome and is accrued over the life of the agreement using the EIR method.

Offsetting of Financial InstrumentsFinancial assets and financial liabilities are only offset and the net amount reported in theconsolidated statement of financial position when there is a legally enforceable right to offset therecognized amounts and the Group intends to either settle on a net basis, or to realize the asset andsettle the liability simultaneously. This is not generally the case with master netting agreements,where the related assets and liabilities are presented at gross in the consolidated statement offinancial position.

Interests in Joint ArrangementsA joint venture is a contractual agreement whereby two or more parties undertake an economicactivity that is subject to joint control. A joint arrangement may either be a joint venture or a jointoperation.

Joint VentureThe Group’s investments in joint venture are accounted for using the equity method.

Under the equity method, the investment in a joint venture is initially recognized at cost. Thecarrying amount of the investment is adjusted to recognize changes in the Group’s share of netassets of the joint venture since the acquisition date. Goodwill relating to the joint venture isincluded in the carrying amount of the investment and is neither amortized nor individually testedfor impairment.

The consolidated statement of income reflects the Group’s share of the results of operations of thejoint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. Inaddition, when there has been a change recognized directly in the equity of the joint venture, theGroup recognizes its share of any changes, when applicable, in the consolidated statement ofcomprehensive income and consolidated statement of changes in equity. Unrealized gains andlosses resulting from transactions between the Group and the joint venture are eliminated to theextent of the interest in the joint venture.

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The aggregate of the Group’s share of net earnings of a joint venture is shown on the face of theconsolidated statement of income outside operating profit and represents profit or loss after tax.The Group recognizes its share of the losses of the joint venture until its share of losses equals orexceeds the carrying valueofits investment injoint venture, at which point the Group discontinuesrecognizing its share of further losses. The Group restricts the elimination to the amount requiredto reduce the investment to zero.

The financial statements of the joint venture are prepared for the same reporting period as theGroup. When necessary, adjustments are made to bring the accounting policies in line with thoseof the Group.

After application of the equity method, the Group determines whether it is necessary to recognizean impairment loss on its investment in joint venture. At each reporting date, the Groupdetermines whether there is objective evidence that the investment in joint venture is impaired.If there is such evidence, the Group calculates the amount of impairment as the difference betweenthe recoverable amount of the investment in joint venture and its carrying value, then recognizesthe loss in the consolidated statement of income.

Upon loss of joint control over the joint venture, the Group measures and recognizes any retainedinvestment at its fair value. Any difference between the carrying amount of the associate or jointventure upon loss of joint control and the fair value of the retained investment and proceeds fromdisposal is recognized in the consolidated statement of income.

Joint OperationThe Group recognizes in relation to its interest in joint operation its: (a) assets, including its shareof any assets held jointly; (b) liabilities, including its share of any liabilities incurred jointly;(c) revenue from sale of its share of the output arising from the joint operation; (d) share of therevenue from the sale of the output by the joint operation; and (e) expenses, including its share ofany expenses jointly incurred.

The Group’s investment in joint arrangements and their respective classification and percentageownership as of December 31, 2014 and 2013 are as follows:

ClassificationPercentage

of OwnershipFilinvest Corporate City (FCC) Joint operation 74Filarchipelago Hospitality, Inc. (FHI) Joint venture 60South Station Terminal (SST) Joint operation 49

Despite the Group’s interest of above 50% on the above entities, these are treated as jointarrangements due to existence of a contractual arrangements between the parties and certainspecial voting rights requiring unanimous consent from both the Group and other venturers inmaking certain strategic and financial decisions.

Subdivision Lots, Condominium and Residential Units for SaleProperty acquired or being constructed for sale in the ordinary course of business, rather than to beheld for rental or capital appreciation, is held as subdivision lots, condominium, and residentialunits for sale and is measured at the lower of cost and net realizable value (NRV). It also includesinvestments in club shares accounted as inventory when the Group acts as the developer and itsintent is to sell the developed property.

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Cost includes:· Land acquisition cost and expenses directly related to acquisition· Amounts paid to contractors for development and construction· Borrowing costs, planning and design costs, costs of site preparation, professional fees,

property transfer taxes, construction overheads and other related costs

NRV is the estimated selling price in the ordinary course of the business, based on market pricesat the reporting date, less estimated costs of completion and the estimated costs of sale.

Sugar and Molasses InventoriesInventories are stated at the lower of cost and NRV. Cost is determined by the weighted averageproduction cost for sugar and molasses and, by the moving average method for materials andsupplies. NRV is the estimated selling price in the ordinary course of business, less estimated costof completion and expenses necessary to consummate the sale.

Land and Land DevelopmentLand and land development consists of properties for future development that are carried at thelower of cost and NRV. The cost of land and land development includes the (a) land acquisitioncost, (b) costs incurred relative to the acquisition and transfer of land title in the name of theGroup such as transfer taxes and registration fees, (c) costs incurred on initial development of theraw land in preparation for future projects and (d) borrowing costs. They are classified tosubdivision lots, condominium and residential units for sale when the project plans anddevelopment and construction estimates are completed and necessary permits are secured.

Biological AssetsThe Group’s biological assets included in the ‘Other assets’ account consist of sugarcane crops.The costs of planting, fertilizers and other maintenance costs incurred for the sugarcaneplantations prior to harvest are capitalized to biological assets and are charged to operations as thesugarcane are harvested. Biological assets are carried at cost less any significant and apparentpermanent decline in value.

The Group uses the cost method of valuation since fair value cannot be measured reliably. TheGroup’s biological assets have no active market. Further, the existing sector benchmarks aredetermined to be irrelevant and the estimates (i.e., input costs, efficiency values, production)necessary to compute for the present value of expected net cash flows comprises wide range ofdata which may not result to a reliable basis for determining the fair value.

Once the fair value becomes reliably measurable, the Group will measure the assets at their fairvalue less estimated point-of-sale costs.

Investment PropertiesInvestment properties consist of commercial mall, land and other properties held for long-termrental yields and for capital appreciation.

Investment properties, are carried at cost less accumulated depreciation and any accumulatedimpairment losses. Land, comprising the site of where the mall is located, is carried at deemedcost, less any impairment in value, if any. The Group opted to use the revalued amount ofinvestment property as deemed cost at the date of transition to PFRS.

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Depreciation of investment properties are computed using the straight-line method over theestimated useful lives of these assets as follows:

YearsCommercial mall and buildings 20-50Building improvements 15-20

Rental income from investment properties is recognized in the consolidated statement of incomeon a straight-line basis over the term of the lease or based on a certain percentage of the grossrevenue of tenants. Lease incentives are recognized as an integral part of the total rental income.

Expenses with regards to investment properties are treated as ordinary expenses and arerecognized when incurred.

Investment property is derecognized when it is either disposed of or permanently withdrawn fromuse and there is no future economic benefit expected from its disposal or retirement. Any gains orlosses on the retirement or disposal of an investment property are recognized in the consolidatedstatement of income in the year of retirement or disposal.

Transfers are made to investment property when there is a change in use, evidenced by ending ofowner-occupation, commencement of an operating lease to another party or ending of constructionor development. Transfers are made from investment property when there is a change in use,evidenced by commencement of owner-occupation or commencement of development with a viewto sell. Transfers between investment property, owner-occupied property and inventories do notchange the carrying amount of the property transferred and they do not change the cost of thatproperty for measurement or disclosure purposes.

Property, Plant and EquipmentProperty, plant and equipment are stated at cost, net of accumulated depreciation and accumulatedimpairment losses, if any. Such cost includes the cost of replacing part of the property, plant andequipment and borrowing cost for long-term construction projects if the recognition criteria aremet. Likewise, when a major inspection is performed, its cost is recognized in the carryingamount of property, plant and equipment as a replacement if the recognition criteria are satisfied.

All other repair and maintenance costs are recognized in the consolidated statement of income asincurred.

The present value of the expected cost for the decommissioning of the asset after its use, if any, isincluded in the cost of the respective asset if the recognition criteria for a provision are met.

The separate recognition of significant components of property, plant and equipment depends onwhether these components serve the same purpose as the related items of property, plant andequipment. If the corresponding components do not serve the same purpose, they must berecognized separately. If the component parts serve the same purpose, the need to recognize themseparately depends on whether they have the same structure and the same normal useful life as theother component parts of the asset. If the structure and normal useful life are different, thecomponent parts must be recognized individually insofar as they comply with the definition of theassets.

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Accordingly, the cost of acquisition must be allocated to the individual components over theirrespective useful lives. The depreciation of the component parts must be recognized for eachcomponent part separately. The subsequent expenses for the exchange or replacement of suchassets must be recognized as acquisition costs for a separate asset if it meets the asset recognitioncriteria and are depreciated over their useful life.

Construction-in-progress, included in property, plant and equipment, is stated at cost. Thisincludes cost of construction and other direct costs. Construction-in-progress is not depreciateduntil such time as the relevant assets are completed and put into operational use.

Depreciation are calculated on a straight-line basis over the estimated useful lives of the assets asfollows:

YearsBuildings 20-50Machinery and equipment 5-20Transportation equipment 5Furniture, fixtures and office equipment 3-5Communication equipment 5

Leasehold improvements included under “Property, plant and equipment” are amortized over theterm of the lease or their estimated useful lives (3 to 15 years), whichever is shorter.

The useful life and depreciation and amortization method are reviewed at financial year end toensure that the period and method of depreciation and amortization are consistent with theexpected pattern of economic benefits from items of property, plant and equipment.An item of property, plant and equipment is derecognized upon disposal or when no futureeconomic benefits are expected from its use or disposal. Any gain or loss arising on derecognitionof the asset is included in the consolidated statement of income in the year the asset isderecognized.

Intangible AssetsIntangible assets include goodwill, and branch licenses, customer relationship, core deposits andcapitalized computer software which are presented under other assets and rights from IndependentPower Producer Administrator (IPPA) contract which is presented in the statements of financialposition.

Intangible assets acquired separately are measured on initial recognition at costs. The cost ofintangible assets acquired in a business combination or contracted arrangements is their fair valueat the date of acquisition. Following initial recognition, intangible assets, excluding goodwill andbranch licenses, are carried at cost less any accumulated amortization and any accumulatedimpairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed forimpairment whenever there is an indication that the intangible assets may be impaired. Theamortization period and the amortization method for an intangible asset with a finite useful life arereviewed at least at each financial year-end. Changes in the expected useful life or the expectedpattern of consumption of future economic benefits embodied in the asset is accounted for bychanging the amortization period or method, as appropriate, and treated as changes in accountingestimates. The amortization expense on intangible assets with finite lives is recognized in theconsolidated statement of income.

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Intangible assets with indefinite useful lives are not amortized, but are tested for impairmentannually or more frequently, either individually or at the CGU level. The assessment of indefinitelife is reviewed annually to determine whether the indefinite life continues to be supportable. Ifnot, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from the derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized in theconsolidated statement of income when the asset is derecognized.

GoodwillGoodwill acquired in a business combination is initially measured at cost, being the excess of theconsideration transferred over the net fair value of the acquiree’s identifiable assets, liabilities andcontingent liabilities. Following initial recognition, goodwill is measured at cost less anyaccumulated impairment losses. Goodwill is reviewed for impairment annually or morefrequently if events or changes in circumstances indicate that the carrying value may be impaired.

If the initial accounting for a business combination is incomplete by the end of the reportingperiod in which the combination occurs, the acquirer shall report in its financial statementsprovisional amounts for the items for which the accounting is incomplete. During themeasurement period, the acquirer shall retrospectively adjust the provisional amounts recognizedat the acquisition date to reflect new information obtained about facts and circumstances thatexisted as of the acquisition date and, if known, would have affected the measurement of theamounts recognized as of that date. During the measurement period, the acquirer shall alsorecognise additional assets or liabilities if new information is obtained about facts andcircumstances that existed as of the acquisition date and, if known, would have resulted in therecognition of those assets and liabilities as of that date. The measurement period ends as soon asthe acquirer receives the information it was seeking about facts and circumstances that existed asof the acquisition date or learns that more information is not obtainable. The measurement periodshall not exceed one year from the acquisition date.

Branch licensesBranch licenses are determined to have indefinite useful lives. These are tested for impairmentannually either individually or at the CGU level. Such intangibles are not amortized. The usefullife is reviewed annually to determine whether indefinite useful life assessment continues to besupportable. If not, the change in the useful life assessment from indefinite to finite is made on aprospective basis.

Customer Relationship and Core DepositCustomer relationship and core deposit included under ‘Other assets’ account are intangible assetsacquired by the Group through business combination. These intangible assets are initiallymeasured at their fair value at the date of acquisition. The fair value of these intangible assetsreflects expectations about the probability that the expected future economic benefits embodied inthe asset will flow to the Group.

Following initial recognition, customer relationship and core deposits are measured at cost lessaccumulated amortization and any accumulated impairment losses. Customer relationship relatedto the credit cards business is amortized on a straight-line basis over its useful life of 40 yearswhile the customer relationship related to the auto loans business and core deposits are amortizedon a straight-line basis over its useful life of 13 and 10 years, respectively.

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Capitalized Computer SoftwareCapitalized computer software, included in ‘Other assets’, as acquired separately is measured atcost on initial recognition. Software and licenses that are integral part of property, plant andequipment is classified as property, plant and equipment. Following initial recognition,capitalized software is carried at cost less accumulated amortization and any accumulatedimpairment losses. The capitalized software is amortized on a straight-line basis over its usefuleconomic life of five years.

IPP Administrator RightsThe Group’s IPP Administrator rights pertain to the rights granted by PSALM to FDC Misamis tomanage the output of Mt. Apo 1 and 2 geothermal power plants. The rights provided under theIPP Administrator contract is carried at cost less accumulated amortization and any accumulatedimpairment losses. This is amortized using the straight-line method over the term of the IPPadministrator contract and assessed for impairment whenever there is an indication that the assetmay be impaired. The amortization period and method are reviewed at least at each reportingdate.

Changes in the expected useful life or unexpected pretermination of the IPP Administratorcontract will be accounted for by changing the amortization period or method, as appropriate, andare treated as changes in accounting estimates. The amortization expense is recognized in profitor loss in the expense category consistent with the function of the intangible asset.

The IPP Administrator rights is derecognized on disposal or when no further economic benefitsare expected from its use or disposal. Gain or loss from derecognition of the right is measured asthe difference between the net disposal proceeds and the carrying amount of the asset, and isrecognized in profit or loss.

Impairment of Nonfinancial AssetsThe carrying values of investment properties, property, plant and equipment, IPP Administratorrights and other assets are reviewed for impairment when events or changes in circumstancesindicate the carrying values may not be recoverable. If any such indication exists and where thecarrying values exceed the estimated recoverable amounts, the assets or cash-generating units arewritten down to their recoverable amounts. The recoverable amount of the asset is the greater offair value less cost to sell and value in use. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current marketassessment of the time value of money and the risks specific to the asset. For an asset that doesnot generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the consolidatedstatement of income.

For nonfinancial assets excluding goodwill and branch licenses, an assessment is made at eachreporting date to determine whether there is any indication that previously recognized impairmentlosses may no longer exist or may have decreased. If such indication exists, the recoverableamount is estimated. A previously recognized impairment loss is reversed only if there has been achange in the estimates used to determine the asset’s recoverable amount since the last impairmentloss was recognized. If that is the case, the carrying amount of the asset is increased to itsrecoverable amount. That increased amount cannot exceed the carrying amount that would havebeen determined, net of depreciation, had no impairment loss been recognized for the asset in prioryears. Such reversal is recognized in the consolidated statement of income. After such a reversal,the depreciation and amortization expense is adjusted in future years to allocate the asset’s revisedcarrying amount, less any residual value, on a systematic basis over its remaining life.

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

GoodwillGoodwill is reviewed for impairment, annually or more frequently if events or changes incircumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the cash generatingunit (or group of cash-generating units) to which the goodwill relates. Where the recoverableamount of the cash generating unit (or group of cash-generating units) is less than thecarryingamount of the cash generating unit (or group of cash-generating units) to which goodwillhas been allocated, an impairment loss is recognized immediately in the consolidated statement ofincome. Impairment losses relating to goodwill cannot be reversed for subsequent increases in itsrecoverable amount in future periods.

Other Intangible AssetsOther intangible assets such as customer relationship, core deposits, capitalized computer softwareand IPP Administrator rights are assessed for impairment whenever there is an indication that itmay be impaired.

Revenue and Cost RecognitionRevenue is recognized to the extent that it is probable that the economic benefits associated withtransaction will flow to the Group and the amount can be reliably measured. The Group assessesits revenue arrangements against specific criteria in order to determine if it is acting as principal oragent. In arrangements where the Group is acting as principal to its customers, revenue isrecognized on a gross basis. However, when the Group is acting as an agent to its customers, onlythe amount of net commission retained is recognized as revenue.

The following specific recognition criteria must also be met before revenue or income isrecognized:

a. Real Estate Operations

Sale of Subdivision Lots and Housing UnitsRevenue from sales of substantially completed projects where collectability of sales price isreasonably assured is accounted for using the full accrual method.

The percentage-of-completion method is used to recognize revenue from sales of projectswhere the Group has material obligations under the sales contract to complete the project afterthe property is sold. Under this method, revenue is recognized as the related obligations arefulfilled, measured principally on the basis of the estimated completion of a physicalproportion of the contract work.

Any excess of collections over the recognized receivables are included in the “Accountspayable and accrued expenses” account in the liabilities section of the consolidated statementof financial position.

Collections from accounts which do not qualify yet for revenue recognition are treated ascustomer deposits included in the “Accounts payable and accrued expenses” in theconsolidated statement of financial position.

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Sale of Condominium UnitsSale of condominium units are accounted for under the percentage-of-completion methodwhere the Group has material obligations to complete the development of the condominiumproject. The percentage of completion is based on the proportion that the actual costs incurredto date bear to the estimated total costs of project development. These estimates aredetermined and regularly updated by the contractors and Group’s technical personnel. Underthis method, revenue is recognized as the related obligation is fulfilled. When conditions forrecognizing revenue are not yet met, collections over the recognized receivables are reportedas deposit included in “Accounts payable and accrued expenses” in the consolidated statementof financial position.

Cost of condominium units sold before completion of the development is recognized on thesame timing and basis as the related revenue.

Sale of Club SharesSale of club shares is recognized when the risks and rewards of ownership of the shares havepassed to the buyer and the amount of revenue can be measured reliably.

Cost of Real Estate SalesCost of real estate sales is recognized consistent with the revenue recognition method applied.Cost of subdivision lots and housing units and condominium units sold before the completionof the development is determined on the basis of the acquisition cost of the land and its fulldevelopment costs, which include estimated costs to complete development works, asdetermined by the Group’s in-house technical staff.

The cost of inventory recognized in profit or loss on disposal is determined with reference tothe specific costs incurred on the property, allocated to saleable area based on relative sizeand takes into account the percentage of completion used for revenue recognition purposes.

Mall and Rental RevenuesRent income from investment properties is recognized in the consolidated statement of incomeeither on a straight-line basis over the lease term, or based on a certain percentage of the grossrevenue of tenants, pursuant to the terms of the lease contracts. Leases under contingent rentsare recognized as income in the period in which they are earned.

Service Fee IncomeService fee income is recognized as services are rendered.

Ticket, Food and Beverage SaleRevenue from ticket sales is recognized when theater services are completed and consumed.Revenue from food and beverage sale is recognized when goods are actually sold tocustomers.

Management FeeManagement fee from administrative functions, property management and other fees arerecognized when earned.

Interest IncomeInterest income is recognized as the interest accrues taking into account the effective yield onthe underlying assets.

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Dividend IncomeDividend income is recognized when the Group’s right to receive payment is established.

Realized Gains and LossesRevenue from deferred income is recognized by reference to the sale of related properties andinvestments to third parties.

b. Financial and Banking Services

Interest IncomeFor all financial instruments measured at amortized cost and interest-bearing financialinstruments classified as FVTPL, interest income is recorded at the effective interest rate,which is the rate that exactly discounts estimated future cash payments or receipts through theexpected life of the financial instrument or a shorter period, where appropriate, to the netcarrying amount of the financial asset or financial liability.

The calculation takes into account all contractual terms of the financial instrument (forexample, prepayment options), includes any fees or incremental costs that are directlyattributable to the instrument and are an integral part of the EIR, but not future credit losses.The adjusted carrying amount is calculated based on the original EIR. The change in carryingamount is recorded as interest income.

Once the recorded value of a financial asset or group of similar financial assets has beenreduced due to an impairment loss, interest income continues to be recognized using theoriginal EIR applied to the new carrying amount.

Service Charges and PenaltiesService charges and penalties are recognized only upon collection or accrued when there is areasonable degree of certainty as to its collectibility.

Fee and Commission IncomeThe Group earns fee and commission income from a diverse range of services it provides to itscustomers. Fee income can be divided into the following two categories:

a) Fee income earned from services that are provided over a certain period of timeFees earned for the provision of services over a period of time are accrued over thatperiod. These fees include investment fund fees, custodian fees, fiduciary fees,commission income and credit related fees.

b) Fee income from providing transaction servicesFees arising from negotiating or participating in the negotiation of a transaction for a thirdparty are recognized on completion of the underlying transaction. Fees or components offees that are linked to a certain performance are recognized after fulfilling thecorresponding criteria. Loan syndication fees are recognized in the consolidatedstatement of income when the syndication has been completed and the Group retains nopart of the loans for itself or retains part at the same effective interest rate as for the otherparticipants.

Trading and Securities Gains (Losses) - netResults arising from trading activities include all gains and losses from changes in fair valuefor financial assets and financial liabilities held for trading.

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Commissions Earned on Credit CardsCommissions earned on credit cards are taken up as income upon receipt from memberestablishments of charges arising from credit availments by credit cardholders. Thesecommissions are computed based on certain agreed rates and are deducted from amountsremittable to member establishments.

Purchases by credit cardholders, collectible on an installment basis, are recorded at the cost ofthe items purchased plus a certain percentage of cost. The excess over cost is credited to‘Unearned discount’ and is shown as a deduction from ‘Loans and receivables’ in theconsolidated statement of financial position.

The unearned discount is taken up to income over the installment terms and is computed usingthe EIR method.

Customer Loyalty ProgrammesAward credits under customer loyalty programmes are accounted for as a separatelyidentifiable component of the transaction in which they are granted. The fair value of theconsideration received in respect of the initial sale is allocated between the award credits andthe other components of the sale. Income generated from customer loyalty programmes isrecognized as part of ‘Service charges, fees and commissions’ in the consolidated statement ofincome.

Other IncomeIncome from sale of services is recognized upon rendition of the service. Income from sale ofproperties is recognized upon completion of the earning process and the collectability of thesales price is reasonably assured.

c. Sugar Operations

Sale of GoodsSale is recognized when title to the goods has passed to the buyer through the endorsement ofquedans or physical delivery.

Collections from accounts which are not yet qualified for revenue recognition are treated as‘deposit from customers’ and are included in the “Accounts payable and accrued expenses”account in the consolidated statements of financial position.

Interest IncomeInterest income is recognized as the interest accrues into account the effective yield on theunderlying assets.

d. Hotel Operations

Food and BeverageRevenue from sale of food and beverage is recognized when served.

RoomsRevenue from rooms is recognized when the related services are rendered and/or facilities andamenities are used.

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Other Operating DepartmentsRevenue from other operating departments is recognized when services are rendered.

Interest incomeRevenue is recognized as the interest accrues taking into account the effective yield on theasset.

e. Power Generation Operations

Power RevenueRevenue from power generation is recognized in the period when actual capacity is generatedand transmitted to the customers, net of related discounts.

Interest IncomeInterest income is recognized as the interest accrues into account the effective yield on theunderlying assets.

Cost and Expense RecognitionCost and expenses are recognized in the consolidated statement of income when decrease in futureeconomic benefit related to a decrease in an asset or an increase in a liability has arisen that can bemeasured reliably.

Cost and expenses are recognized in the consolidated statement of income:

· On the basis of a direct association between the costs incurred and the earning of specificitems of income;

· On the basis of systematic and rational allocation procedures when economic benefits areexpected to arise over several accounting periods and the association can only be broadly orindirectly determined; or,

· Immediately when expenditure produces no future economic benefits or when, and to theextent that, future economic benefits do not qualify or cease to qualify, for recognition in theconsolidated statement of financial position as an asset.

Retirement CostsThe net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the reporting period reduced by the fair value of plan assets (if any),adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceilingis the present value of any economic benefits available in the form of refunds from the plan orreductions in future contributions to the plan.

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

Defined benefit costs comprise the following:· Service cost· Net interest on the net defined benefit liability or asset· Remeasurements of net defined benefit liability or asset

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

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Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income in thestatement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in other comprehensive income in the period in which they arise. Remeasurementsare not reclassified to profit or loss in subsequent periods. All remeasurements recognized inother comprehensive income account “Remeasurement gains (losses)” on retirement plans are notreclassified to another equity account in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Group, nor can they be paid directly tothe Group. Fair value of plan assets is based on market price information.

When no market price is available, the fair value of plan assets is estimated by discountingexpected future cash flows using a discount rate that reflects both the risk associated with the planassets and the maturity or expected disposal date of those assets (or, if they have no maturity, theexpected period until the settlement of the related obligations).

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

Termination benefitTermination benefits are employee benefits provided in exchange for the termination of anemployee’s employment as a result of either an entity’s decision to terminate an employee’semployment before the normal retirement date or an employee’s decision to accept an offer ofbenefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity canno longer withdraw the offer of those benefits and when the entity recognizes related restructuringcosts. Initial recognition and subsequent changes to termination benefits are measured inaccordance with the nature of the employee benefit, as either post-employment benefits, short-term employee benefits, or other long-term employee benefits.

Employee leave entitlementEmployee entitlements to annual leave are recognized as a liability when they are accrued to theemployees. The undiscounted liability for leave expected to be settled wholly within twelvemonths after the end of the annual reporting period is recognized for services rendered byemployees up to the end of the reporting period.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance ofthe arrangement and requires an assessment of whether the fulfillment of the arrangement isdependent on the use of a specific asset or assets and the arrangement conveys a right to use theasset.

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A reassessment is made after inception of the lease only if one of the following applies:

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

extension was initially included in the lease term;(c) there is a change in the determination of whether fulfillment is dependent on a specified asset;

or,(d) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) above, and at thedate of renewal or extension period for scenario (b).

Group as a LessorLeases where the Group does not transfer substantially all the risks and benefits of ownership ofthe asset are classified as operating leases. Rental income on operating leases is recognized on astraight line basis over the lease term. Initial direct costs incurred in negotiating an operating leaseare added to the carrying amount of the leased asset and recognized over the lease term on thesame bases as rental income.

Group as a LesseeLease payments under operating lease are recognized as expense on a straight line basis over theterms of the lease contract.

Commission ExpenseCommissions paid to sales or marketing agents on the sale of pre-completed real estate units aredeferred when recovery is reasonably expected and are charged to expense in the period in whichthe related revenue is recognized as earned. Commission expense is included in the “Expenses”account in the consolidated statement of income.

Income TaxesCurrent Income TaxCurrent income tax assets and liabilities for the current and prior periods are measured at theamount expected to be recovered from or paid to the taxation authorities. The tax rates and taxlaws used to compute the amount are those that are enacted or substantively enacted at thereporting date.

Deferred Income TaxDeferred income tax is provided on all temporary differences at the reporting date between the taxbases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except;(a) where deferred income tax liability arises from the initial recognition of goodwill or of an assetor liability in a transaction that is not a business combination and, at the time of the transaction,affects neither the accounting profit nor taxable profit or loss; and (b) in respect of taxabletemporary differences associated with investments in subsidiaries, associates and interests in jointventures, where the timing of the reversal of the temporary differences can be controlled and it isprobable that the temporary differences will not reverse in the foreseeable future.

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Deferred income tax assets are recognized for all deductible temporary differences, carryforwardbenefit of the excess of minimum corporate income tax (MCIT) over regular corporate income tax(RCIT) and unused net operating loss carryover (NOLCO), to the extent that it is probable thattaxable profit will be available against which the deductible temporary differences andcarryforward of MCIT and unused NOLCO can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reducedto the extent that it is no longer probable that sufficient taxable profit will be available to allow allor part of the deferred income tax assets to be utilized. Unrecognized deferred income tax assetsare reassessed at each reporting date and are recognized to the extent that is has become probablethat future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to applyto the year when the asset is realized or the liability is settled, based on tax rates (and tax laws)that have been enacted or substantively enacted at the reporting date. Income tax relating to itemsrecognized directly in other comprehensive income is recognized in other comprehensive incomeand not in the consolidated statement of income.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceableright exists to offset current income tax assets against current income tax liabilities and thedeferred income taxes relate to the same taxable entity and the same taxation authority.

Borrowing CostsBorrowing costs are capitalized if they are directly attributable to the acquisition, construction orproduction of a qualifying asset. Qualifying assets are assets that necessarily take a substantialperiod of time to get ready for intended use or sale. Interest and other financing costs incurredduring the construction period on borrowings used to finance property development are capitalizedas part of development in the consolidated statement of financial position. Capitalization ofborrowing costs commences when the activities to prepare the asset are in progress andexpenditures and borrowing costs are being incurred.

Capitalization of borrowing costs ceases when substantially all the activities necessary to preparethe asset for its intended sale are complete. If the carrying amount of the asset exceeds itsrecoverable amount, an impairment loss is recorded. All other borrowing costs are expensed asincurred.

EquityCapital stock is measured at par value for all shares issued. When the Group issues more than oneclass of stock, a separate account is maintained for each class of stock and the number of sharesissued.

When the shares are sold at a premium, the difference between the proceeds and the par value iscredited to “Additional paid-in capital” account. When shares are issued for a consideration otherthan cash, the proceeds are measured by the fair value of the consideration received.

Direct cost incurred related to the equity issuance, such as underwriting, accounting and legal fees,printing costs and taxes are charged to “Additional paid-in capital” account.

Retained earnings represent accumulated earnings of the Group, and any other adjustments to it asrequired by other standards, less dividends declared. The individual accumulated earnings of thesubsidiaries and associates are available for dividend declaration when these are declared asdividends by the subsidiaries as approved by their respective BOD.

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Dividends on common shares are deducted from retained earnings when declared and approved bythe BOD or shareholders of the Parent Company. Dividends payable are recorded as liability untilpaid. Dividends for the year that are declared and approved after the reporting date, if any, aredealt with as an event after the reporting date and disclosed accordingly.

Treasury SharesOwn equity instruments which are reacquired are carried at cost and are deducted fromconsolidated equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue orcancellation of the Group’s own equity instruments. When the shares are retired, the capital stockaccount is reduced by its par value and excess of cost over par value upon retirement is charged toadditional paid-in capital to the extent of the specific or average additional paid in capital whenthe shares were issued and to retained earnings for the remaining balance.

Earnings Per Share (EPS)Basic EPS amounts are calculated by dividing net income attributable to equity holders of theParent Company for the year by the weighted average number of ordinary shares outstandingduring the year after giving retroactive effect for any stock dividends, stock options or reversestock splits during the period.

Diluted EPS is computed by dividing net income by the weighted average number of commonshares outstanding during the period, after giving retroactive effect for any stock dividends, stocksplits or reverse stock splits during the period, and adjusted for the effect of dilutive options anddilutive convertible preferred shares and bonds. If the required dividends to be declared onconvertible preferred shares divided by the number of equivalent common shares, assuming suchshares are converted would decrease the basic EPS, then such convertible preferred shares wouldbe deemed dilutive. Where the effect of the assumed conversion of the preferred shares and theexercise of all outstanding options have anti-dilutive effect, basic and diluted EPS are stated at thesame amount.

Foreign Currency Transactions and TranslationsThe functional currency of each of the entities in the Group is the Philippine Peso, except for theFCDU of EW. Philippine Peso is also the presentation currency of the consolidated financialstatements. For financial reporting purposes, the monetary assets and liabilities of the FCDU andthe foreign currency-denominated monetary assets and liabilities of the Group are translated inPhilippine peso based on the Philippine Dealing System (PDS) closing rate prevailing at thestatement of financial position date and foreign currency-denominated income and expenses, at theprevailing exchange rate at the date of transaction. Foreign exchange differences arising fromrevaluation and translation of foreign currency-denominated assets and liabilities of the Group arecredited to or charged against operations in the period in which the rates change. Exchangedifferences arising from translation of the accounts of the FCDU to Philippine peso as thepresentation currency are taken to the statement of comprehensive income under ‘Translationadjustment’.

Non-monetary items that are measured in terms of historical cost are translated using the exchangerates as at the dates of the initial transactions. Non-monetary items measured at fair value in aforeign currency are translated using the exchange rates at the date when the fair value wasdetermined.

Fiduciary ActivitiesAssets and income arising from fiduciary activities together with related undertakings to returnsuch assets to customers are excluded from the consolidated financial statements where EW actsin a fiduciary capacity such as nominee, trustee or agent.

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ProvisionsA provision is recognized when the Group has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation. If the effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessmentof the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognizedas interest expense. When the Group expects part or all of provision to be reimbursed orrecovered, the reimbursement is recognized as a separate asset, but only when the reimbursementis virtually certain.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements. They aredisclosed unless the possibility of an outflow of resources embodying economic benefits isremote. Contingent assets are not recognized in the consolidated financial statements but aredisclosed when an inflow of economic benefits is probable.

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

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements in compliance with PFRS requiresmanagement to make judgments, estimates and assumptions that affect the amounts reported in theconsolidated financial statements and accompanying notes. Future events may occur which cancause the assumptions used in arriving at those estimates to change. The effects of any changes inestimates are reflected in the consolidated financial statements as they become reasonablydeterminable. Estimates and judgments are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to bereasonable under the circumstances.

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

a. Classification of Financial InstrumentsThe Group classifies financial instruments, or its component parts, on initial recognition as afinancial asset, a financial liability or an equity instrument in accordance with the substance ofthe contractual agreement and the definition of the instruments. The substance of a financialinstrument, rather than its legal form, governs its classification in the consolidated statementof financial position. The Group determines the classification at initial recognition and re-evaluates this designation at every reporting date.

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b. Real Estate Revenue RecognitionSelecting an appropriate revenue recognition method for a real estate sale transaction requirescertain judgments based on, among others:

· Buyers’ commitment on sales which may be ascertained through the significance of thebuyers’ initial downpayment; and,

· Stage of completion of the project development.

c. Operating Lease Commitments - the Group as LessorThe Group has entered into various property leases on its investment properties portfolio. TheGroup has determined that it retains all significant risks and rewards of ownership on theseproperties hence classified as operating leases.

d. Operating Lease Commitments - the Group as LesseeThe Group has entered into various leases for its occupied offices. The Group has determinedthat all significant risks and rewards of ownership are retained by the respective lessors andtherefore accounts for these leases as operating leases.

e. Determining Classification of Investment in Club ProjectBeing a real estate developer, the Group determines how investment in club project shall beaccounted for. In determining whether this shall be accounted for as inventories or asfinancial instruments, the Group considers its role in the development of the Club and itsintent for holding the related club shares.

The Group classifies such shares as inventories when the Group acts as the developer and itsintent is to sell the developed property, together with the related club shares.

f. Distinction Between Subdivision Lots, Condominium and Residential Units for Sale,Investment Properties, and Property, Plant and EquipmentThe Group determines whether a property qualifies as subdivision lots, condominium andresidential units for sale, investment property, and property, plant and equipment. In makingits judgment, the Group considers whether the property is held for sale in the ordinary courseof business (subdivision lots, condominium and residential units for sale), generates cashflows largely independent of the other assets held by an entity (investment property), orgenerate cash flows that are attributable not only to property but also to the other assets usedin the production or supply process (property, plant and equipment).

When properties comprise a portion that is held to earn rentals or for capital appreciation andanother portion is held for use in the production or supply of goods or services or foradministrative purpose, and these portions cannot be sold separately, the property is accountedfor as investment property only if an insignificant portion is held for use in the production orsupply of goods or services or for administrative purposes. Judgment is applied indetermining whether ancillary services are so significant that a property does not qualify asinvestment property. The Group considers each property separately in making judgment.

g. Accounting for the IPP Administrator ContractsThe IPP Administrator contract for the output of Mt. Apo 1 and 2 geothermal power plantsentered in 2014 requires the Group to pay monthly fixed payments and generation payments toPSALM while the IPP Administrator contract for the strips of energy of ULGPP requiresgeneration payments to PSALM. The Group determines that the rights under the

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IPP Administrator contracts qualify as an intangible asset based on the requirements ofPAS 38, Intangible Assets. The Group considers these rights as an identifiable asset that lacksphysical substance and that control can be demonstrated through the rights legally granted byPSALM wherein the Group is expected to gain economic benefit through future sale ofelectricity (see Note 42).

Judgment was further exercised in determining the components of acquiring these rights.Management determined that monthly fixed payment is attributable to the cost of acquiringthese rights and as such, has been accounted for as an intangible asset. The generationpayments represent the consideration for the actual capacity received by the IPP Administratorand is accounted in the consolidated statement of income when incurred.

As of December 31, 2014, the IPP Administrator rights amounted to P=9.4 billion and therelated liability amounted to P=9.3 billion (see Note 42).

h. Functional CurrencyPAS 21, The Effects of Changes in Foreign Currency Rates, requires management to use itsjudgment to determine the entity’s functional currency such that it most faithfully representsthe economic effects of the underlying transactions, events and conditions that are relevant tothe entity. In making this judgment, the entities within the Group considers the following:a) the currency that mainly influences sales prices and services (this will often be the

currency in which sales prices and services are denominated and settled);b) the currency in which funds from financing activities are generated; and,c) the currency in which receipts from operating activities are usually retained.

The Parent Company, its subsidiaries and joint ventures’ functional currency is PhilippinePeso, except for FCDU of EW which is in USD.

i. Business Model forMmanaging Financial AssetsChange in the Business ModelUnder PFRS 9, the Group can only reclassify financial assets if the objective of its businessmodel for managing those financial assets changes.

In 2012, management deemed it necessary to change the way it manages the investmentsecurities of its banking and financial services operations because of significant changes in itsstrategic plans, funding structure and cash flow profile brought about by the IPO of EW andits branch expansion program. Management considered the previous model not adequate tocapture the fast evolution of the Group’s business strategies. Prior to the change, the Group’sbusiness model for the financial assets carried at amortized cost was focused on minimizing, ifnot to close, the maturity gap in its consolidated statement of financial position by matchingcore deposits, taken from the longest tenor bucket of the maturity gap, with longer term debtinstruments. In 2012, the Group’s business model was revised and now focuses on asset-liability management based on the Group’s maximum cumulative outflow and expansion ofthe Group’s investment portfolios to reflect the Group’s investment strategy.

The Group has determined that the changes qualify as a change in business model formanaging financial assets that would require reclassifications of certain financial assets.Accordingly, the Group made certain reclassifications pursuant to the new business modeleffective July 1, 2012, resulting into P=711.9 million of ‘Trading and securities gain’recognized in 2012 consolidated statement of income (see Note 26), representing thedifference between the aggregate amortized cost of certain securities amounting to P=5.6 billionand their aggregate fair value of P=6.3 billion at the reclassification date.

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j. Sale of Investment Securities at Amortized CostThe Group’s business model allows for financial assets to be held to collect contractual cashflows even when sales of certain financial assets occur. PFRS 9, however, emphasizes that ifmore than an infrequent sale is made out of a portfolio of financial assets carried at amortizedcost, the entity should assess whether and how such sales are consistent with the objective ofcollecting contractual cash flows. In making this judgment, the Group considers thefollowing:

· sales or derecognition of debt instrument under any of the circumstances spelled out underparagraph 7, Section 2 of BSP Circular No. 708, Series of 2011;

· sales in preparation for funding a potential aberrant behavior in the depositors’ withdrawalpattern triggered by news of massive withdrawals or massive withdrawal alreadyexperienced by other systemically important banks in the industry;

· sales attributable to an anticipated or in reaction of major events in the local and/orinternational arena that may adversely affect the collectability of the debt instrument andseen to prospectively affect adversely the behavior of deposits or creditors;

· sales attributable to a change in EW’s strategy upon completion of the other phases ofPFRS 9; and,

· sales that Asset-Liability Management Committee (ALCO) deems appropriate to beconsistent with managing EW’s balance sheet based upon, but are not limited to, the setrisk limits and target ratios that have been approved by the BOD.

In 2014, EW sold various securities from different portfolios in its hold-to-collect businessmodel. The sale was primarily driven by the need to improve EW’s capital position in view ofthe significant change in the regulatory capital requirements caused by the Basel IIIimplementation. Also, on various dates in 2013, EW sold a substantial portion of governmentsecurities from one of the portfolios in its hold-to-collect business model. The securities weresold to fund the lending requirement for the Group.

As a result of the more than infrequent number of sales of securities, EW assessed whethersuch sales are still consistent with the objective of collecting contractual cash flows. EWconcluded that although more than infrequent number of sales has been made out of theportfolio, this is not significant enough to be a change in the business model to triggerreclassification of the remaining securities in the portfolio. EW has now two business modelson the affected portfolios, the first for the remaining securities in the portfolios after the saleand the second for the new securities to be acquired under the portfolios after the sale. Theremaining securities in the portfolios will remain to be classified as measured at amortizedcost and new securities to be acquired after the sale will be classified as at FVTPL.

In 2012, EW sold government securities classified as investment securities at amortized cost.The sale of investment securities was contemplated to secure financing for the ParentCompany’s future capital expenditures. EW has determined that the sale of investmentsecurities in 2012 is still consistent with its business model of managing financial assets tocollect contractual cash flows.

k. Cash Flow Characteristics TestWhere the financial assets are classified as at amortized cost, the Group assesses whether thecontractual terms of these financial assets give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal outstanding, with interestrepresenting time value of money and credit risk associated with the principal amount

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outstanding. The assessment as to whether the cash flows meet the test is made in thecurrency in which the financial asset is denominated. Any other contractual term that changesthe timing or amount of cash flows (unless it is a variable interest rate that represents timevalue of money and credit risk) does not meet the amortized cost criteria.

l. Determination of Control over FACThe Group determined that it has control over FAC as the Group has the power to direct therelevant activities of FAC despite the existence of a contractual arrangement which grants theother investor rights over certain activities of FAC. Management assessed that the other rightsheld by the investor through contractual arrangement are only designed to protect the otherinvestor’s interest and are merely held to prohibit fundamental changes in the activities ofFAC rather than bestow the power to direct the relevant activities over FAC. Accordingly, theGroup considered and accounted for FAC as investment in a subsidiary.

m. Determination of Joint Control over FHIManagement has determined that despite having more than 50% ownership interest in FHI, theGroup does not have sole control over FHI due to the existence of a contractual arrangementbetween the parties and certain special voting rights requiring unanimous consent from boththe Group and the other venturer in making certain strategic and financial decisions.Accordingly, the Group accounted for its investment in FHI as a joint venture.

n. ContingenciesIn the normal course of business, the Group is currently involved in various legal proceedings.The estimate of the probable costs for the resolution of these claims has been developed inconsultation with outside counsel handling the defense in these matters and based uponanalysis of potential results. The Group currently does not believe these proceedings willhave material effect on the Group’s financial position. It is possible, however, that futureresults of operations could be materially affected by changes in the assessment of probabilityand estimates of potential outflow or in the effectiveness of the strategies relating to theseproceedings (see Note 31).

Management’s Use of EstimatesThe key assumptions concerning the future and other key sources of estimation at the reportingdate, that have a significant risk of causing a material adjustment to the carrying amounts of assetsand liabilities within the next financial year are discussed below:

a. Estimate on when the Buyer’s Investment is Qualified for Revenue Recognition on Real EstateSalesThe Group’s revenue recognition policy require management to make use of estimates andassumptions that may affect the reported amounts of revenues and costs. The Group’s revenuefrom real estate sales recognized based on the percentage of completion are measuredprincipally on the basis of the estimated completion of a physical proportion of the contractwork, and by reference to the actual costs incurred to date over the estimated total costs of theproject.

Revenue and cost recognized based on percentage of completion are as follows:

2014 2013 2012(In Thousands)

Real estate sales P=8,885,343 P=7,408,949 P=7,279,753Cost of real estate 5,381,694 4,531,004 4,254,447

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b. Fair Value of Financial Assets and Financial LiabilitiesPFRS requires certain financial assets and financial liabilities to be carried at fair value anddisclosure of certain fair value information, the determination of which requires the use ofextensive accounting estimates and judgments. While significant components of fair valuemeasurement were determined using verifiable objective evidence (i.e., foreign exchange rateand interest rate), the amount of changes in fair value would differ due to usage of differentvaluation methodology.

Any changes in fair value of these financial assets and financial liabilities would affectdirectly the consolidated statement of income, other comprehensive income or the disclosedfair value. See Note 34 for the related fair values of the Group’s financial assets and financialliabilities.

c. Impairment of Financial Assets at Amortized CostThe Group reviews its nonperforming financial assets at amortized cost, other than cash andcash equivalents, at each reporting date to assess whether an allowance for impairment shouldbe recorded in the consolidated financial statements of income. In particular, judgment bymanagement is required in the estimation of the amount and timing of future cash flows whendetermining the level of allowance required. Such estimates are based on assumptions about anumber of factors and actual results may differ, resulting in future changes to the allowance.

In addition to specific allowance against individually significant financial assets at amortizedcost, other than cash and cash equivalents, the Group also makes a collective impairmentallowance against exposures which, although not specifically identified as requiring a specificallowance, have a greater risk of default than when originally granted. This collectiveallowance is based on any deterioration in the internal rating of the loan or investment since itwas granted or acquired. These internal ratings take into consideration factors such as anydeterioration in country risk and industry, as well as identified structural weaknesses ordeterioration in cash flows.

As of December 31, 2014 and 2013, the financial assets at amortized costs and loans andreceivables, other than cash and cash equivalents of the Group, amounted to P=139.8 billionand P=111.1 billion, respectively, net of allowance for impairment and credit losses amountingto P=4.0 billion and P=4.2 billion as of December 31, 2014 and 2013, respectively (see Notes 7,8, 9, 10 and 13).

d. Estimating NRV of Subdivision Lots, Condominium and Residential Units for Saleand Land and Land Development CostsThe Group adjusts the cost of its subdivision lots, condominium and residential units for saleand land and land development costs to NRV based on its assessment of the recoverability ofthe inventories. In determining the recoverability of the inventories, management considerswhether those inventories are damaged or if their selling prices have declined.

Likewise, management also considers whether the estimated costs of completion or theestimated costs to be incurred to make the sale have increased. The amount and timing ofrecorded expenses for any period would differ if different judgments were made or differentestimates were utilized.

As of December 31, 2014 and 2013, carrying amount of subdivision lots, condominium andresidential units for sale amounted to P=26.6 billion and P=26.2 billion, respectively, and landand land development amounted to P=24.5 billion and P=25.6 billion, respectively (see Notes 11and 14).

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e. Net Realizable Value of Sugar and Molasses InventoriesNet realizable values of sugar and molasses inventories are assessed regularly based on theprevailing selling prices of inventories, less the estimated costs necessary to sell. Increase inthe net realizable values will increase the carrying amount of inventories but only to the extentof their original acquisition costs.

As of December 31, 2014 and 2013, materials and supplies, carried at NRV, amounted toP=178.2 million and P=159.0 million while sugar and molasses, carried at cost, amounted toP=59.2 million and P=4.9 million, respectively (see Note 12).

f. Estimating Fair Value of the IPP Adminstrator RightsThe fair value of the IPP Administrator rights is determined using the present value of theexpected monthly fixed payments to PSALM throughout the term of the IPP Administratorcontract discounted using effective interest rates of 7.72%. As of December 31, 2014, theintangible asset on IPP Administrator rights, net of related amortization, amounted to P=9.4billion and the related liability on IPP Adminstrator contracts amounted toP=9.3 billion in the Group’s consolidated statement of financial position (see Note 42).

g. Evaluation of Impairment on GoodwillGoodwill is tested for impairment annually and when circumstances indicate that the carryingvalue may be impaired. The Group’s impairment test for goodwill is based on value-in-usecalculations that use a discounted cash flow model.

The cash flows are derived from the forecast as approved by the BOD and do not includerestructuring activities that the Group is not yet committed to or significant future investmentsthat will enhance the asset base of the cash generating unit being tested. The recoverableamount is most sensitive to the discount rates used, as well as the expected future cash-inflowsand the growth rate. In addition, the projected cash flows for value in use is also sensitive tointerest margins.

Goodwill from acquisition of PSHC and subsidiaries:The budget period is five (5) years and the cash flows beyond five years are included in theterminal value. The pre-tax discount rates used which is in the range of 4.44% - 5.86% forboth years was determined using capital asset pricing model. Key assumptions in value-in-usecalculation are most sensitive to discount rate and growth rate within the budget period andbeyond the budget period.

The Group assumed a certain growth rate within the budget period based on expected areas tobe harvested and the total harvest per area. Growth rates of 2.90% and 3.75% were assumedafter the five-year budget period as of December 31, 2014 and 2013, respectively. The Groupascertains that growth rates beyond the budget period is not above the forecasted industrygrowth rate.

Goodwill from various bank acquisitions (including EWRB and GBI)EW determined the cost of equity using capital asset pricing model. The pre-tax discountrates used is 11.7% and 13.1% as of December 31, 2014 and 2013, respectively. Keyassumptions in value-in-use calculation of CGUs are most sensitive to the followingassumptions: a.) interest margin; b.) discount rates; c.) market share during the budget period;and d.) projected growth rates used to extrapolate cash flows beyond the budget period.Future cash flows from the business are estimated based on the theoretical annual income ofcash generating unit. Average growth rate was derived from average increase in annualincome during the last five years.

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Goodwill from acquisition of CPIThe pre-tax discount rates used as of December 31, 2014 and 2013 is 10% and 12.0%,respectively. Key assumptions used in value-in-use calculations are most sensitive to discountrates and growth rates within the budget period and beyond the budget period. The growthrates used beyond the budget period for different cash-generating units range from 5% to 10%.

The Group did not recognize any impairment loss on its goodwill in 2014 and 2013. Thecarrying value of goodwill amounted to P=11.7 billion as of December 31, 2014 and 2013.

h. Estimating Useful Lives of Depreciable Investment Properties, Property, Plant andEquipment, Repossessed Assets and Intangible Assets (excluding Goodwill and BranchLicenses)The Group estimates the useful lives of its depreciable investment properties, property, plantand equipment, repossessed assets and intangible assets based on the period over which theseassets are expected to be available for use as anchored on business plans and strategies thatalso consider expected future technological developments and market behavior.

The estimated useful lives of depreciable investment properties, property, plant andequipment, repossess assets and intangible assets are reviewed at least annually and areupdated if expectations differ from previous estimates due to physical wear and tear andtechnical or commercial obsolescence on the use of these assets. It is possible that futureresults of operations could be materially affected by changes in estimates brought about bychanges in factors mentioned above.

There have been no change in the estimated useful lives of depreciable investment properties,property, plant and equipment, repossessed assets and intangible assets for the years endedDecember 31, 2014, 2013 and 2012. As of December 31, 2014 and 2013, the carrying valuesof depreciable investment properties, property, plant and equipment, repossessed assets andintangible assets of the Group follow:

2014 2013(In Thousands)

Investment properties (Note 15) P=17,687,917 P=14,515,411Property, plant and equipment (Note 16) 4,636,823 4,447,123Intangible assets (Note 17) 949,650 685,892Repossessed assets (Note 17) 204,546 172,646

i. Evaluation of Impairment on Nonfinancial AssetsThe Group reviews property, plant and equipment, investment properties, IPP Administratorrights and other assets (excluding derivative assets) for impairment of value. This includesconsidering certain indications of impairment such as significant change in asset usage,significant decline in asset’s market value, obsolescence or physical damage of an asset, plansof discontinuing the real estate projects, significant negative industry or economic trends. Ifsuch indications are present, and where the carrying amount of the asset exceeds itsrecoverable amount, the asset is considered impaired and is written down to recoverableamount. The recoverable amount is calculated as the higher of the asset’s fair value less costto sell, or its value in use.

The fair value less cost to sell is the amount to be received from the sale of an asset in anarm’s length transaction, while value in use is the present value of estimated future cash flowsexpected to arise from the nonfinancial assets.

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Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs. The carrying values of the Group’s nonfinancialassets as of December 31 follow:


Investment properties (Note 15) P=46,446,597 P=39,055,000Property, plant and equipment (Note 16) 16,587,858 9,985,421IPP Administrator rights (Note 42) 9,393,673 −Other assets - net of derivative assets (Note 17) 10,770,004 7,553,545

In 2013 and 2012, the Group recognized impairment loss on investment properties amountingto P=34.5 million and P=44.6 million, respectively (nil in 2014).

j. Estimating Pension ObligationThe determination of the Group’s obligation and cost for pension benefits is dependent onselection of certain assumptions used by the actuaries in calculating such amounts. Thoseassumptions used are described in Note 28 and include among others, discount rates and ratesof salary increase. While the Group believes that the assumptions are reasonable andappropriate, significant differences in actual experience or significant changes in assumptionsmaterially affect retirement obligations.

As of December 31, 2014 and 2013, the Group has outstanding pension liability amounting toP=580.4 million and P=469.7 million,respectively (see Note 28).

k. Recognition of Deferred Tax AssetsThe Group reviews the carrying amounts of deferred taxes at each reporting date and reducesdeferred tax assets to the extent that it is no longer probable that sufficient taxable profit willbe available to allow all or part of the deferred tax assets to be utilized. However, there is noassurance that the Group will generate sufficient taxable profit to allow all or part of itsdeferred tax assets to be utilized.

The Group’s recognized deferred tax assets amounted to P=4.9 billion and P=2.0 billion as ofDecember 31, 2014 and 2013, respectively. The tax effect of deductible temporary differencesand carryforward benefits of NOLCO and MCIT for which no deferred tax assets wererecognized amounted to P=195.2 million and P=179.9 million as of December 31, 2014 and2013, respectively (see Note 32).

4. Business Combination and Goodwill

As of December 31, 2014 and 2013, goodwill arising from business combinations in the Group’sconsolidated statements of financial position consists of (amounts in thousands):

PSHC P=10,083,310CPI 326,553EWRB 23,478GBI 373,996Other bank acquisitions 919,254

P=11,726,591

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Goodwill from other bank acquisitions resulted from business combinations between EW andAIG Philam Savings Bank (AIGPASB) Group in 2009 amounting to P=769.0 million and withEcology Savings Bank (ESBI) in 2003 amounting to P=150.2 million.

Acquisition of EWRBOn January 26, 2012, the BOD of EW approved the acquisition of the outstanding shares ofEWRB (formerly FRBI, see Note 1), a one-branch rural bank engaged in deposit-taking, ruralcredit, and consumer lending services to the public. On February 9, 2012, EW entered into aMemorandum of Understanding with the majority shareholders of EWRB to acquire all of theoutstanding shares of EWRB.

On June 20, 2012, the BSP approved the acquisition of up to 100.0% of the total outstandingshares of FRBI. On July 11, 2012, EW obtained control of EWRB through the purchase of 83.2%of the capital stock of EWRB for P=34.1 million. The Parent Company acquired additional sharesof EWRB amounting to P=20.0 million, thereby increasing its ownership to 91.6% as ofDecember 31, 2012. On January 23, 2013, the Parent Company acquired the remaining non-controlling interest amounting to P=6.9 million, thereby increasing its ownership to 100.0%.

EW elected to measure the noncontrolling interest in the acquiree at fair value.

The fair values of the identifiable assets and liabilities acquired at the date of acquisition are asfollows (in thousands):

Fair Valuerecognized on

acquisition dateAssetsCash and other cash items P=243Due from BSP 376Due from other banks 13,779Investment securities at amortized cost 410Loans and receivables 6,005Property and equipment 7,219Other assets 315

28,347LiabilitiesDeposit liabilities P=9,895Accrued taxes, interest and other expenses 383Other liabilities 547

10,825Fair value of net assets acquired P=17,522

The goodwill recognized by EW can be attributed to the synergy potential to be gained by themicrofinance business from the planned integration of GBI and EWRB.

Consideration transferred P=34,098Non-controlling interest measured at fair value 6,902Fair value of the net assets acquired (17,522)Goodwill P=23,478

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Analysis of cash flows on acquisition:

Consideration transferred P=34,098Net cash acquired with the subsidiary* (14,398)Net cash outflow (included in cash flows from investing activities) P=19,700*includes Cash and other cash items, Due from BSP and Due from other banks.

From the date of acquisition to December 31, 2012, the total operating income and net loss ofEWRB consolidated to the Group amounted to P=3.0 million and P=0.3 million, respectively.

If the acquisition had taken place at the beginning of the year, EW’s total operating income wouldhave increased by P=2.0 million, while net income before tax would have increased byP=0.02 million for the year ended December 31, 2012.

Acquisition of GBIOn May 5, 2011, the BOD of EW approved the acquisition of the outstanding shares of GBI. GBIis a rural bank in the Caraga region with branches scattered across the Visayas and Mindanao. OnMay 24, 2011, EW, GBI, and the majority shareholders of GBI entered into a Memorandum ofUnderstanding to acquire the shares, representing 84.8% of the outstanding shares of GBI, andbusiness of the latter.

On August 12, 2011, the BSP approved the acquisition of up to 100.0% of the total outstandingshares of GBI. On the same date, the BSP approved in-principle the granting of certain incentivesto EW. Subsequently, on January 30, 2012, EW obtained the final approval of the BSP on the saidincentives.

On August 19, 2011, EW acquired 84.8% of the voting shares of GBI. It is on this date that EWeffectively obtained control of GBI. The acquisition provides the Parent Company the opportunityto expand its nationwide footprint, given GBI’s wide network of 46 branches and 94microfinance-oriented other banking offices, and to pursue the microfinance model of GBI.

EW has elected to measure the noncontrolling interest in the acquiree at fair value.

The fair values of the net identifiable liabilities acquired at the date of acquisition are as follows(in thousands):


acquisition dateAssetsCash and other cash items P=98,503Due from BSP 10,843Due from other banks 318,009Loans and receivables 1,097,181Property and equipment 220,035Investment properties 186,377Other assets 33,009

1,963,957

(Forward)

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acquisition dateLiabilitiesDeposit liabilities P=1,193,553Bills payable 1,062,878Unsecured subordinated debt 111,282Accrued taxes, interest and other expenses 206,388Other liability 26,633

2,600,734Fair value of net liabilities acquired (P=636,777)

In addition to the above identifiable assets and liabilities, the Group recognized the fair value ofbranch licenses acquired as a result of the business combination amounting to P=625.4 million (seeNote 17) and the related deferred tax liability of P=187.6 million (see Note 32).

Consideration for the acquisition P=158,548Noncontrolling interest measured at fair value 16,452Fair value of net liabilities acquired, including the fair value of branch

licenses, net of deferred tax liability 198,996Goodwill P=373,996

The goodwill recognized by EW can be attributed to factors such as increase in geographicalpresence and customer base due to branch licenses acquired.

Merger of Green Bank, Inc. with EWOn June 21, 2013, EW and GBI entered into a Plan of Merger Agreement. Under the agreement,GBI will be merged to EW upon completion of its equity restructuring and the transfer of certainassets and liabilities to EWRB. GBI’s equity restructuring and the transfer of assets and liabilitiesto EWRB were completed in 2013.

On March 28, 2014 and June 5, 2014, the BSP and the SEC, respectively, approved the merger ofEW and GBI. On July 31, 2014, EW and GBI concluded its merger. The merger of EW and GBIhas no impact on the consolidated financial statements of the Group.

5. Subsidiaries with Noncontrolling Interest

As of December 31, 2014 and 2013, noncontrolling interest in FLI and EW represents 40.6% and24.8%, respectively. Financial information of FLI and EW are provided below. Othernoncontrolling interest pertains to the 8.1% equity interest of FAI amounting to P=714.2 millionand P=692.9 million as of December 31, 2014 and 2013, respectively.

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Accumulated balances of noncontrolling interest in FLI and EW


FLI P=15,216,263 P=14,066,054EW 5,543,410 5,039,145

Net income allocated to noncontrolling interest of FLI and EW


FLI P=1,938,671 P=1,572,158EW 513,653 509,329

The summarized financial information of these subsidiaries are provided below. This informationis based on amounts after consolidation but before intercompany eliminations.

Summarized statements of financial position

2014 2013FLI EW FLI EW

(In Thousands)Assets: Cash and cash equivalents P=4,245,687 P=35,596,089 P=6,390,732 P=27,290,546 Loans and receivable - net 20,716,336 121,423,411 16,425,052 93,960,575

Financial assets at fair value through profitor loss − 10,182,690 − 1,948,703

Financial assets at fair value through othercomprehensive income 23,852 14,419 17,852 10,733

Investment in an associate 3,974,854 − 4,018,058 − Investment securities at amortized cost − 8,794,878 − 9,080,320 Real estate inventories 24,238,988 − 24,426,958 − Investment properties 26,311,332 912,687 19,592,830 1,006,716 Land and land development 17,388,474 − 18,794,686 − Property and equipment 1,323,190 3,513,104 1,150,822 3,452,741 Goodwill 4,567,242 1,316,729 4,567,242 1,316,729 Other assets 3,617,625 6,508,576 2,712,814 4,231,630Liabilities: Deposit liabilities − (147,687,479) − (111,176,095) Bills and acceptance payable − (5,317,652) − (3,288,935) Accounts payable and accrued expenses (11,341,014) (7,161,337) (10,837,430) (5,502,009) Income tax payable (120,431) (184,577) (17,235) (76,935) Long-term debt (40,306,593) (6,463,731) (36,069,225) (2,862,500) Deferred income tax liabilities - net (2,557,968) − (2,187,244) −Total Equity P=52,081,574 P=21,447,807 P=48,985,912 P=19,392,219Attributable to: Equity holders of the Parent P=36,865,311 P=15,904,397 P=34,919,858 P=14,353,074 Noncontrolling interest 15,081,532 5,543,410 13,713,017 5,032,523 Noncontrolling interest in subsidiaries 134,731 − 353,037 6,622

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Summarized statements of comprehensive income for the years ended December31, 2014 and2013:


(In Thousands)Revenue P=16,899,919 P=16,527,512 P=13,817,084 P=13,164,918Costs and operating expenses (10,574,530) (13,889,989) (8,598,548) (10,890,527)Interest and other finance charges (647,617) – (474,446) –Income before income tax 5,677,772 2,637,523 4,744,090 2,274,391Provision for income tax (1,073,795) (564,145) (768,145) (218,656)Net income 4,603,977 2,073,378 3,975,945 2,055,735Other comprehensive income (loss) (7,198) (11,168) − 22,700Total comprehensive income P=4,596,779 P=2,062,210 P=3,975,945 P=2,078,435

Attributable to noncontrolling interest P=1,935,749 P=510,887 P=1,572,158 P=512,187Dividends paid to noncontrolling interest 573,189 − 563,163 −

Summarized statements of cash flow information for the years ended December 31, 2014 and2013:


(In Thousands)Operating activities P=3,279,349 P=3,753,182 P=2,474,732 P=2,312,047Investing activities (6,031,791) (670,965) (5,786,638) (41,703)Financing activities 589,397 5,623,326 7,537,182 (2,290,799)Net increase (decrease) in cash and cashequivalents (P=2,163,045) P=8,705,543 P=4,225,276 (P=20,455)Redemption of shares attributable to noncontrolling interest P=188,629 P=− P=− P=−

As of December 31, 2014 and 2013, there are no significant restrictions, outside the ordinarycourse of business, on the Parent Company’s ability to access or use assets and settle the liabilitiesof these subsidiaries.

6. Cash and Cash Equivalents

This account consists of:


Cash on hand and in banks P=11,394,755 P=9,142,028Due from BSP 23,128,678 18,537,655IBLR and SPURA 2,893,384 3,116,529

P=37,416,817 P=30,796,212

Cash in bank earns interest at the respective bank deposit rates. Short-term deposits are made forvarying periods of up to three months and earn interest at the respective short-term deposit rates.Interest income earned on the Group’s cash and cash equivalents amounted to P=55.2 million,P=82.6 million and P=82.3 million in 2014, 2013 and 2012, respectively (see Note 26).

There is no cash restriction on the Group’s cash balances as of December 31, 2014 and 2013.

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7. Loans and Receivables - Financial and Banking Services

Loans and receivables of the financial and banking services consist of:


Corporate lending P=48,816,301 P=42,820,512Consumer lending 64,163,475 46,989,640Other receivables 2,647,241 2,327,867

115,627,017 92,138,019Unearned discounts (182,014) (636,865)

115,445,003 91,501,154Allowance for impairment and credit losses (3,811,163) (4,002,355)

P=111,633,840 P=87,498,799

Other receivables include unquoted debt securities amounting to P=391.5 million andP=380.1 million as of December 31, 2014 and 2013, respectively.

Credit card receivables, under consumer lending, amounted to P=21.6 billion and P=19.4 billion as ofDecember 31, 2014 and 2013, respectively.

Interest income from loans and receivables in 2014, 2013 and 2012 amounted to P=11.1 billion,P=9.2 billion and P=6.8 billion, respectively.

Please refer to Note 35 for the maturity profile of the loans and receivables- financial and bankingservices.

A reconciliation of allowance for impairment and credit losses for loans and receivables per classfollows:

2014Corporate

LendingConsumer

Lending Others Total(In Thousands)

At January 1 P=1,427,055 P=1,747,911 P=827,389 P=4,002,355Provision for impairment and

credit losses (Note 24) 196,637 2,922,177 149,119 3,267,933Write-off (274,927) (3,028,855) (131,125) (3,434,907)Interest accrued on impaired loans (24,218) − − (24,218)At December 31 P=1,324,547 P=1,641,233 P=845,383 P=3,811,163Specific impairment P=558,859 P=− P=171,655 P=730,514Collective impairment 765,688 1,641,233 673,728 3,080,649

P=1,324,547 P=1,641,233 P=845,383 P=3,811,163Gross amount of individually impaired loans P=931,129 P=− P=380,752 P=1,311,881

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2013Corporate

LendingConsumer

Lending Others Total(In Thousands)

At January 1 P=1,068,639 P=1,429,929 P=655,497 P=3,154,065Provision for impairment and

credit losses (Note 24) 411,967 2,229,435 354,747 2,996,149Write-off (6,210) (1,911,453) (182,855) (2,100,518)Interest accrued on impaired loans (47,341) − − (47,341)At December 31 P=1,427,055 P=1,747,911 P=827,389 P=4,002,355Specific impairment P=948,461 P=− P=− P=948,461Collective impairment 478,594 1,747,911 827,389 3,053,894

P=1,427,055 P=1,747,911 P=827,389 P=4,002,355Gross amount of individually impaired loans P=963,228 P=− P=− P=963,228

The following is a reconciliation of the individual and collective allowances for impairment losseson loans and receivables:

2014 2013Specific

ImpairmentCollective

Impairment TotalSpecific

ImpairmentCollective

Impairment Total(In Thousands)

At January 1 P=948,461 P=3,053,894 P=4,002,355 P=632,691 P=2,521,374 P=3,154,065Provision for impairment and

credit losses (Note 24) 81,198 3,186,735 3,267,933 369,321 2,626,828 2,996,149Write-off (274,927) (3,159,980) (3,434,907) (6,210) (2,094,308) (2,100,518)Interest accrued on impaired loans (24,218) − (24,218) (47,341) − (47,341)At December 31 P=730,514 P=3,080,649 P=3,811,163 P=948,461 P=3,053,894 P=4,002,355

BSP ReportingOf the total receivables from customers of EW as of December 31, 2014, 2013 and 2012, 33.4%,33.3% and 34.7%, respectively, are subject to periodic interest repricing. The remaining pesoreceivables from customers earn annual fixed interest rates ranging from 1.1% to 45.0%, 1.5% to40.0% and 2.2% to 23.9% in 2014, 2013 and 2012, respectively, while foreign currency-denominated receivables from customers earn annual fixed interest rates ranging from 3.1% to7.6%, 1.6% to 7.6% and 2.8% to 9.0% in 2014, 2013 and 2012, respectively.

The details of the secured and unsecured loans receivables of the Group follow (amounts inthousands):

2014 2013Gross

Amount %Gross

Amount %Loans secured by:

Chattel P=21,509,682 17.61 P=10,691,354 11.18Real estate 18,275,599 14.96 12,079,279 12.63Hold-out on deposit 6,129,665 5.02 6,986,624 7.31Others 2,266,396 1.86 4,455,937 4.66

48,181,342 39.45 34,213,194 35.78Unsecured 73,950,689 60.55 61,421,868 64.22

P=122,132,031 100.00 P=95,635,062 100.00

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Information on the concentration of credit as to industry as reported to the BSP follows(in millions):

2014 2013Gross

Amount %Gross

Amount %Personal consumption P=51,501 42.17 P=35,819 37.45Real estate, renting and business

activity 19,132 15.67 14,108 14.75Wholesale and retail trade 14,245 11.66 11,871 12.41Manufacturing 6,800 5.57 6,307 6.60Financial intermediaries 5,697 4.66 5,941 6.21Agriculture, fisheries and forestry 2,347 1.92 1,214 1.27Transport, storage and communications 955 0.78 661 0.69Others 21,455 17.57 19,714 20.62

P=122,132 100.00 P=95,635 100.00

BSP Circular No. 351 allows banks to exclude from nonperforming classification receivablesclassified as ‘Loss’ in the latest examination of the BSP which are fully covered by allowance forcredit losses, provided that interest on said receivables shall not be accrued and that suchreceivables shall be deducted from the total receivable portfolio for purposes of computing NPLs.Subsequently, the BSP issued BSP Circular No. 772, which requires banks to compute their netNPLs by deducting the specific allowance for credit losses on the total loan portfolio from thegross NPLs. The specific allowance for credit losses shall not be deducted from the total loanportfolio in computing the NPL ratio.

As of December 31, 2014 and 2013, NPLs of the Group as reported to BSP follow:

2014 2013Gross NPLs P=5,769,505 P=5,311,975Deductions as required by BSP (2,112,161) (2,743,840)

P=3,657,344 P=2,568,135

As of December 31, 2014 and 2013, secured and unsecured NPLs of the Group follow:

2014 2013Secured P=3,214,825 P=2,151,441Unsecured 2,554,680 3,160,534

P=5,769,505 P=5,311,975

8. Loans and Receivables - Real Estate Operations

Loans and receivables from real estate operations consist of:

2014 2013Due Within

One YearDue AfterOne Year Total

Due WithinOne Year

Due AfterOne Year Total

(In Thousands)Contracts receivable P=5,967,280 P=12,444,369 P=18,411,649 P=4,632,031 P=8,757,060 P=13,389,091Advances to contractors 2,215,237 – 2,215,237 1,413,130 – 1,413,130Advances to joint venture partners 338,187 59,799 397,986 274,705 760,764 1,035,469Receivable from sale of joint venture

lots 196,615 456,475 653,090 469,238 444,419 913,657Receivable from government and other

financial institutions 515,091 – 515,091 480,898 – 480,898

(Forward)

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2014 2013Due Within


Due WithinOne Year


(In Thousands)Receivables from tenants P=417,666 P=12,746 P=430,412 P=357,034 P=57,346 P=414,380Receivables from sale of condominium

units and club shares 251,869 79,147 331,016 315,510 59,799 375,309Receivables from homeowners

association 228,811 – 228,811 246,581 – 246,581Advances to officers and employees 201,943 – 201,943 128,477 – 128,477Due from related parties (Note 23) 315,264 – 315,264 208,737 – 208,737Others 249,852 548,968 798,820 610,716 1,173 611,889

10,897,815 13,601,504 24,499,319 9,137,057 10,080,561 19,217,618Less allowance for impairment loss 193,336 – 193,336 187,084 – 187,084

P=10,704,479 P=13,601,504 P=24,305,983 P=8,949,973 P=10,080,561 P=19,030,534

Contracts receivable are collectible over varying periods up to 10 years. These receivables arisingfrom real estate sales are collateralized by the corresponding real estate properties sold.

Interest income recognized from contracts receivable amounted to P=672.4 million, P=465.2 millionand P=421.3 million in 2014, 2013 and 2012, respectively (see Note 26). Interest rates on contractsreceivable range from 11.5% to 19.0% per annum in 2014, 2013 and 2012.

The Group entered into various agreements with financial institutions whereby the Group sold itscontracts receivable with a provision that the Group should buy back these receivables whencertain conditions happen such as the receivables becoming overdue for two to three consecutivemonths, when the contract to sell is cancelled, when the accounts remain outstanding after thelapse of the 5-year holding period, when the property covering the receivables becomes subject ofcomplaint or legal action and the account’s interest rate becomes lower than the bank’s interestrate. These receivables are therefore retained as part of the Group’s receivables. The proceedsfrom the sale were used to fund development and construction of various projects. The Groupretains the sold receivables in the ‘Contracts receivable’ account and records the proceeds fromthese sales as ‘Liabilities on receivables sold to banks’ included in the “Accounts payable andaccrued expenses” account amounting to P=8.5 million and P=37.2 million as ofDecember 31, 2014 and 2013, respectively (see Note 20).

Interest paid on the loans obtained from discounting receivables amounted to P=84.1 million in2012 (nil in 2014 and 2013).

The Group has a mortgage insurance contract with Home Guaranty Corporation (HGC), agovernment insurance company for a retail guaranty line. As of December 31, 2014 and 2013, thecontracts covered by the guaranty line amounted to P=0.2 billion and P=0.6 billion, respectively,including receivables sold with buy back provisions. The remaining P=4.6 billion guaranty linewas not yet utilized by the Group as of December 31, 2014 and 2013, respectively.

“Receivables from sale of club shares” pertain to sale of shares of affiliated clubs.

“Advances to joint venture partners” are advances which are normally offset against the share ofthe joint venture partners from the sale of the joint venture properties.

“Receivables from government and other financial institutions” arose from bank and governmentfinanced real estate sales. These are collectible within one year.

“Receivables from tenants” represent charges to tenants for rentals and utilities.

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“Advances to contractors” represent downpayment to contractors which are usually offset againstfuture billings.

“Receivables from Homeowners’ Association (HOA)” represent claims from HOA of theGroup’s projects for the payments of the expenses on behalf of the association.

“Receivable from sale of joint venture lots” arose from sale of joint venture commercial lots.These are due within one year.

“Advances to officers and employees” are advances for project costs, marketing activities, traveland other expenses arising from the ordinary course of business which are liquidated uponaccomplishment of the purposes for which the advances were granted.

“Others” are composed mostly of receivable from sale of shares of stock of Asian Hospital, Inc.amounting of P=223.9 million as of December 31, 2014 and 2013, and receivables from buyersrelating to insurance and registration of properties.

The reconciliation of allowance for impairment losses for individually assessed receivables of thereal estate operations of the Group as of December 31, 2014 and 2013 follows:

2014

Total

Receivablesfrom Tenants

and HOA

Receivablesfrom Sale of

Joint Ventures Others(In Thousands)

Balances at beginning of year P=187,084 P=110,708 P=76,337 P=39Provisions (Note 24) 6,252 6,252 – –Balances at end of year P=193,336 P=116,960 P=76,337 P=39

2013

Total

Receivablesfrom Tenants

and HOA

Receivablesfrom Sale of

Joint Ventures Others(In Thousands)

Balances at beginning of year P=154,783 P=78,407 P=76,337 P=39Provisions (Note 24) 32,301 32,301 – −Balances at end of year P=187,084 P=110,708 P=76,337 P=39

9. Loans and Receivables - Sugar Operations



Trade P=198 P=269Advances to:

Sugar planters (Note 40) 99,465 102,877Suppliers 6,275 11,078Officers and employees 4,573 5,266Contractors 2,685 1,827

Others 1,515 1,521114,711 122,838

Less allowance for impairment loss 5,849 10,046P=108,862 P=112,792

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“Trade receivables” consist of receivables arising from sugar sales. Buyers are normally granted acredit period of 30 days.

“Advances to sugar planters” are advances extended to sugar planters for various incentives suchas fertilizers, cash loans, cane points and tractor services. These are offset against the planter’sshare of sales proceeds.

“Advances to suppliers” are down payments made to the suppliers of materials and supplies, fixedassets and services acquired. These are credited upon full delivery of items and completion ofservices rendered by the supplier.

“Advances to officers and employees” represent advances for travel, marketing expense, loansavailed by employees and officers, including educational and car loans and other expenses arisingfrom ordinary course of business. These are liquidated upon the accomplishment of the purposesfor which the advances were granted or deducted from the salaries of officers and employees.

“Other receivables” include advances to planters for trucking services.

The reconciliation of allowance for doubtful accounts which pertains to the Group’s advances tosugar planters specifically identified to be impaired as of December 31, 2014 and 2013 follows:


Balances at beginning of year P=10,046 P=6,039Provisions (Note 24) 2,072 7,656Written off (6,269) (3,649)Balances at end of year P=5,849 P=10,046

10. Loans and Receivables - Hotel and Power Generation Operations

Hotel OperationsThis account consists of:


Trade P=26,229 P=22,848Advances to contractors and suppliers 126,652 1,186Advances to officers and employees 2,965 891Due from a related party (Note 23) 10,412 4,944

P=166,258 P=29,869

“Trade receivables” pertain to receivables from credit card companies, travel agents and guestsand are collectible within a year.

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Power Generation OperationsThis account consists of:


Trade P=104,369 P=799Advances to contractors 2,070,436 −Advances to officers and employees 1,266 4,013Other receivables 31,573 29,443

P=2,207,644 P=34,255

“Trade receivables” pertains to receivables from electric cooperative for the transmitted power.

“Advances to contractors” pertain to down payments made by the Group for the construction ofthe Misamis Power Plant, which will be applied against future billings in accordance with theterms and conditions of the agreement with the contractors. Current portion of the advances tocontractors amounted to P=1.9 billion as of December 31, 2014.

“Advances to officers and employees” are for the travel, research and project-related expenses.These are liquidated or charged against monthly salary, as applicable.

11. Subdivision Lots, Condominium and Residential Units for Sale



Subdivision lots, condominium and residential units P=25,522,706 P=25,186,206Investment in club projects 1,065,892 1,050,627

P=26,588,598 P=26,236,833

The above inventories are stated at cost. Cost of units sold for the years ended December 31,2014, 2013 and 2012 amounted to P=8.2 billion, P=6.5 billion and P=5.9 billion, respectively.

A summary of the movement in subdivision lots, condominium and residential units inventory isset out below:


Balances at beginning of year P=25,186,206 P=25,371,933Land acquired during the year 181,178 −Land cost transferred from land and land

development (Note 14) 802,503 289,704Project construction/development costs incurred 7,013,027 5,297,791Borrowing costs capitalized as project costs 495,612 714,956Cost of inventories sold (Note 25) (8,155,820) (6,488,178)Balances at end of year P=25,522,706 P=25,186,206

Borrowing costs capitalized as project are interests from loans obtained to finance the Group’s on-going projects. The capitalization rates used are 2.0% to 6.2% in 2014 and 4.2% to 5.0% in 2013.

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A summary of the movement in investment club project is set out below:


Balance at beginning of year P=1,050,627 P=987,777Cost of sale of club shares (Note 25) (7,890) (21,876)Site development and incidental costs 23,155 84,726Balance at end of year P=1,065,892 P=1,050,627

12. Sugar and Molasses Inventories



Materials and supplies - at NRV P=178,193 P=158,891Sugar and molasses - at cost (Note 25) 59,208 4,864

P=237,401 P=163,755

Materials and supplies at cost amounting to P=183.8 million and P=162.9 million as ofDecember 31, 2014 and 2013, respectively, were written down to net realizable value ofP=178.2 million and P=158.9 million, respectively.

13. Financial Assets at FVTPL, Financial Assets at FVTOCI and Investment Securities atAmortized Cost

Financial Assets at FVTPLFinancial assets at FVTPL of the Group classified as held for trading consist of:


Government securities P=7,391,724 P=691,437Private bonds 2,565,307 543,626Equity securities 225,659 713,640

P=10,182,690 P=1,948,703

As of December 31, 2014 and 2013, financial assets at FVTPL include net unrealized gain ofP=52.7 million and P=131.2 million, respectively.

Financial assets at FVTOCIFinancial assets at FVTOCI of the Group consist of:


Quoted equity securities P=110,277 P=97,733Unquoted equity securities 48,946 54,496

159,223 152,229Allowance for impairment losses – (15,068)

P=159,223 P=137,161

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The Group has designated the above equity investments at FVTOCI because they are held forlong-term investments rather than for trading. In 2014 and 2013, no dividends were recognized onthese equity investments and no cumulative gain or loss was also transferred within equity.

The cumulative unrealized gain (loss) on financial assets at FVTOCI presented as ‘Revaluationreserve on financial assets at FVTOCI’ amounted to P=70.0 million and P=52.7 million as ofDecember 31, 2014 and 2013, respectively.

Investment securities at amortized costInvestment securities at amortized cost of the Group consist of:


Government securities P=7,536,445 P=7,667,254Private bonds 1,258,433 1,413,066

P=8,794,878 P=9,080,320

Peso-denominated government bonds have effective annual interest rates ranging from 5.7% to6.0% in 2014, 2013 and 2012. Foreign currency-denominated bonds have effective interest ratesranging from 2.9% to 7.1% in 2014 and 2013 and 2.9% to 8.1% in 2012.

In 2014, the Group sold government securities carried at amortized cost, with aggregate carryingamount of P=3.6 billion, and recognized a gain amounting to P=306.0 million. The sale was drivenby the need to improve the capital position of the EW in relation to the change in the regulatorycapital requirements caused by the Basel III implementation. As a result of the sale in 2014,subsequent acquisitions of investment securities in the affected portfolios will be classified asfinancial assets at FVTPL while the remaining securities will remain to be classified as investmentsecurities at amortized cost. As of December 31, 2014, the remaining investment securities in theaffected portfolios amounted to P=926.7 million. Additions to the portfolios subsequent to the saleamounted to P=106.5 million and is carried at fair value through profit or loss.

In 2013, the Group sold government securities classified as investment securities carried atamortized cost with carrying amounts of P=1.1 billion and recognized a gain amounting toP=572.5 million presented as ‘Gain on sale or derecognition of investment securities at amortizedcost’ included in ‘Other income’ of financial and banking services in the consolidated statementsof income (see Note 26). The securities were sold to fund the lending requirement for the Group.As a result of the sale in 2013, subsequent acquisitions of investment securities in the affectedportfolio will be classified as financial assets at FVTPL while the remaining securities will remainto be classified as investment securities at amortized cost. As of December 31, 2014 and 2013, theremaining government securities in the portfolio amounted to P=233.6 million and P=231.4 million,respectively. There were no additions to the portfolio subsequent to the sale.

In 2012, the Group sold government securities classified as investment securities at amortized costwith carrying amounts of P=1.3 billion and recognized a gain amounting to P=276.9 millionpresented as ‘Gain on sale or derecognition of investment securities at amortized cost’ included in‘Other income’ of financial and banking services in the consolidated statements of income(see Note 26). The sale was contemplated to secure financing for EW’s capital expenditures onbranch expansion. The Group concluded that the sale is consistent with its business model ofmanaging financial assets to collect contractual cashflows.

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Interest income on trading and investment securities follows:

2014 2013 2012(In Thousands)

Investment securities at amortized cost P=169,745 P=426,454 P=656,299Financial assets at FVTPL 391,861 106,912 185,963

P=561,606 P=533,366 P=842,262

Net trading and securities gains for the years ended December 31, 2014, 2013 and 2012 consist ofthe following (see Note 26):

2014 2013 2012(In Thousands)

Financial assets at FVTPL P=497,352 P=1,005,237 P=988,110Interest rate swaps 2,173 – –

499,525 1,005,237 988,110Investment securities at amortized cost 305,997 572,490 276,883

P=805,522 P=1,577,727 P=1,264,993

On June 25, 2012, the BOD approved the change in the Group’s business model. Managementdeemed it necessary to change the way it manages its investment securities because of significantchanges in its strategic plans, funding structure and cash flow profile brought about by the IPO ofEW and its branch expansion program. Accordingly, the Group made certain reclassificationspursuant to the new business model effective July 1, 2012, resulting in P=711.9 million of ‘Tradingand securities gain’ which was recognized in ‘Other income’ of financial and banking services inthe consolidated statements of income representing the difference between the aggregateamortized cost of certain securities amounting to P=5.6 billion and their aggregate fair value ofP=6.3 billion at the reclassification date. Refer to Note 3 for the discussion on the change in thebusiness model.

14. Land and Land Development



Land P=17,233,371 P=18,951,998Land development 7,252,155 6,670,888

P=24,485,526 P=25,622,886

The land and land development are stated at cost. The cost of land and land development includesthe land acquisition costs and costs incurred relative to acquisition and transfer of land title in thename of the Group and prior to the development of the property into a project such as transfertaxes and registration fees. These are classified to subdivision lots, condominium and residentialunits for sale when the project plans and development and construction cost estimates arecompleted and the necessary permits are secured.

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In February 2009, the Group signed an agreement with the Cebu City Government to develop 50.6hectares of the South Road Properties, a 300-hectare reclaimed land project located in Cebu City.

The agreement involves:(a) purchase by the Group of 10.6 hectares of the property to be developed into a modern urban

center consisting of residential, office, commercial, hotel and leisure buildings and a publicpromenade - a 1 kilometer long waterfront lifestyle strip that will offer a range of seasideleisure activities. Payments made to the Cebu City Government in 2014 and 2013 amountedto P=224.4 million and P=234.8 million, respectively, with the remaining balance of the totalpurchase price to be payable in 2015.

As of December 31, 2014, the Group plans to complete the first two phases of waterfrontlifestyle strip covering seven hectares in 2015.

(b) development of the remaining 40 hectares of the property under a profit-sharing arrangementwith the Cebu City Government. The profit sharing of FLI and the Cebu City Government is90% and 10%, respectively. The 40 hectares will be developed in four (4) phases over a 20-year period with the Group contributing the development costs, as well as the marketing andmanagement services. The Group plans to develop the 40 hectares mainly into a residentialresort town composed of Italian-inspired residential communities.

A summary of the movement in land and land development costs is set out below:


Balances at beginning of year P=25,622,886 P=21,683,786Land acquisitions 2,309,345 3,654,647Land costs transferred to subdivision lots, condominium

and residential units for sale (Note 11) (802,503) (289,704)Cost of lots sold (Note 25) (31,414) (199,342)Transfers to investment property - net (3,022,900) (1,051,602)Site development and incidental costs 410,112 1,825,101Balances at end of year P=24,485,526 P=25,622,886

Borrowing costs capitalized as part of land and land development, where activities necessary toprepare it for its intended use is ongoing, amounted to P=272.7 million and P=370.7 million in 2014and 2013, respectively (nil in 2012). Capitalization rate is 1.4% and 2.2% in 2014 and 2013,respectively.

As of December 31, 2014 and 2013, the Group committed to pay land acquisition costs amountingto P=141.8 million and P=791.8 million as of December 31, 2014 and 2013, respectively. There areno other purchase commitments as of December 31, 2014 and 2013.

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15. Investment Properties

The composition of and movements in this account follow:

2014

LandBuildings and

Improvements

Furniture,Fixtures andMachineries Total

(In Thousands)CostBalances at beginning of year P=24,632,251 P=17,720,134 P=256,631 P=42,609,016Additions/transfers 4,360,866 3,488,717 8,390 7,857,973Disposals/reclassifications (149,178) (94,463) – (243,641)Balances at end of year 28,843,939 21,114,388 265,021 50,223,348Accumulated depreciation and amortizationBalances at beginning of year – 3,261,562 128,723 3,390,285Depreciation and amortization (Notes 24 and 25) – 308,121 25,815 333,936Disposals/reclassifications – (47,211) − (47,211)Balances at end of year – 3,522,472 154,538 3,677,010Accumulated impairment lossBalances at beginning of year 142,662 21,067 – 163,729Disposals/reclassifications (57,403) (6,585) – (63,988)Balances at end of year 85,259 14,482 – 99,741Net book value P=28,758,680 P=17,577,434 P=110,483 P=46,446,597

2013

LandBuildings andImprovements

Furniture,Fixtures andMachineries Total

(In Thousands)CostBalances at beginning of year P=23,357,759 P=15,891,038 P=252,390 P=39,501,187Additions/transfers 2,627,682 2,361,029 4,354 4,993,065Disposals/reclassifications (1,353,190) (531,933) (113) (1,885,236)Balances at end of year 24,632,251 17,720,134 256,631 42,609,016Accumulated depreciation and amortizationBalances at beginning of year – 2,923,202 90,770 3,013,972Depreciation and amortization (Notes 24 and 25) – 419,069 37,955 457,024Disposals/reclassifications – (80,709) – (80,709)Balances at end of year – 3,261,562 128,725 3,390,287Accumulated impairment lossBalances at beginning of year 129,728 14,101 – 143,829Provision for impairment loss (Note 25) 19,090 15,436 – 34,526Disposals/reclassifications (6,156) (8,470) – (14,626)Balances at end of year 142,662 21,067 – 163,729Net book value P=24,489,589 P=14,437,505 P=127,906 P=39,055,000

The Group’s investment properties include land and buildings utilized in mall operations,buildings and building improvements, land improvements acquired in settlement of loans andreceivables from banking operations and other properties held for long-term rental yields and forcapital appreciation.

Certain investment properties consisting of real estate properties and land improvements acquiredin settlement of loans and receivables from banking operations were impaired since their carryingvalues exceeded the estimated fair value less cost to sell of these properties.

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The Group determined the estimated fair value less cost to sell on the basis of recent sales ofsimilar properties in the same area of the investment properties and taking into account theeconomic conditions prevailing at the time the Group’s valuations were made. Provision forimpairment amounted to P=34.5 million in 2013 and P=44.6 million in 2012 (nil in 2014). Theaggregate fair value of the Group’s investment properties amounted to P=68.7 billion andP=50.1 billion as of December 31, 2014 and 2013, respectively, based on a third party appraisalsperformed in 2010 and were updated using year-end values and assumptions.

The aggregate fair value of investment properties from real estate operations was determined usingthe Market Data Approach for land and Income Approach using discounted cash flow analysis forbuildings. While aggregate fair values of investment properties from financial and bankingservices have been determined on the basis of recent sales of similar properties in the same areasas the investment properties taking into account the economic conditions prevailing at the time thevaluations were made.

In the Market Data Approach, the value of investment properties is based on sales and listings ofcomparable property registered within the vicinity. This approach requires establishingcomparable property by reducing reasonable comparative sales and listing to a commondenominator. This is done by adjusting the difference between the subject properties and thoseactual sales and listing regarded as comparable. The properties used as basis of comparison aresituated within the immediate vicinity of the subject properties. While in Income Approach, allexpected cash flow from the use of the assets were projected and discounted using the appropriatediscount rate reflective of the market expectations.

Rental income from investment properties amounted to P=2.6 billion in 2014, P=2.3 billion in 2013and P=2.1 billion in 2012. Cost of mall and rental services from investment properties amounted toP=173.9 million in 2014, P=397.1 million in 2013 and P=379.1 million in 2012 (see Note 25).

As of December 31, 2014 and 2013, there are no contractual restrictions on the realizability and nounusual obligations exist to purchase, construct or develop the Group’s investment properties.

16. Property, Plant and Equipment

The rollforward analysis of this account follows:

December 31, 2014

Land andBuildings

Machineryand

EquipmentTransportation

Equipment

Furnitureand Fixtures

CommunicationEquipment

LeaseholdImprovements

Constructionin Progress

(Note 31) Total(In Thousands)

CostBalances at beginning of year P=5,856,206 P=3,745,564 P=185,093 P=2,239,476 P=2,423,697 P=167,288 P=14,617,324Additions/transfers 170,308 204,423 10,739 274,559 549,477 6,647,070 7,856,576Disposals/adjustments – (800) (429) (445,017) (194) – (446,440)Reclassifications (180,096) − – – – (99,689) (279,785)Balances at end of year 5,846,418 3,949,187 195,403 2,069,018 2,972,980 6,714,669 21,747,675Accumulated depreciation

and amortizationBalances at beginning of year 485,196 1,756,016 96,304 1,546,845 747,542 – 4,631,903Depreciation and amortization

(Notes 24 and 25) 178,814 233,043 62,685 278,769 262,973 – 1,016,284Disposals/adjustment (53,959) − (11) (434,339) (61) (488,370)Balances at end of year 610,051 1,989,059 158,978 1,391,275 1,010,454 – 5,159,817Net book value P=5,236,367 P=1,960,128 P=36,425 P=677,743 P=1,962,526 P=6,714,669 P=16,587,858

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December 31, 2013

Land andBuildings

Machineryand

EquipmentTransportation

Equipment

Furnitureand Fixtures

CommunicationEquipment

LeaseholdImprovements

Constructionin Progress Total

(In Thousands)CostBalances at beginning of year P=2,758,605 P=3,257,434 P=141,055 P=1,919,242 P=1,720,003 P=2,260,708 P=12,057,047Additions/transfers 1,730,018 213,896 47,087 411,293 743,539 129,029 3,274,862Disposals/adjustments (31,421) − (3,049) (91,059) (39,845) − (165,374)Reclassifications 1,399,004 274,234 − − – (2,222,449) (549,211)Balances at end of year 5,856,206 3,745,564 185,093 2,239,476 2,423,697 167,288 14,617,324Accumulated depreciation

and amortizationBalances at beginning of year 287,682 1,251,085 90,650 1,177,421 609,839 − 3,416,677Depreciation and amortization

(Notes 24 and 25) 227,972 193,136 8,019 313,118 177,549 – 919,794Disposals/adjustments (30,458) 311,795 (2,365) 56,306 (39,846) – 295,432Balances at end of year 485,196 1,756,016 96,304 1,546,845 747,542 – 4,631,903Net book value P=5,371,010 P=1,989,548 P=88,789 P=692,631 P=1,676,155 P=167,288 P=9,985,421

As of December 31, 2014 and 2013, the cost of fully depreciated property and equipment still in use by the Group amounted to P=852.4 million and P=988.1 million, respectively.

17. Other Assets



Branch license (Note 4) P=2,167,396 P=1,662,200Input tax 1,909,554 1,366,532Capitalized computer software 803,326 531,213Prepaid expenses 741,767 611,663Deposits 686,140 377,857Returned cash and other cash items 632,970 39,536Derivative asset - net (Notes 34, 35 and 36) 616,093 430,046Creditable withholding tax 361,684 570,466Repossessed assets 204,546 172,646Customer relationship and core deposits 146,324 154,679Card acquisition cost 145,479 136,555Biological assets (Notes 25, 39 and 40) 113,136 109,707Construction materials and supplies 82,287 57,610Hotel inventories 31,779 43,629Deferred costs 25,319 762,809Others (Note 31) 2,718,301 956,443

P=11,386,101 P=7,983,591

“Branch licenses” of the Group amounting to P=2.2 billion as of December 31, 2014 represents:25 branch licenses acquired by EW from the BSP amounting to P=505.2 million in 2014, 10 branchlicenses acquired by EW from the BSP amounting to P=214.8 million in 2013, 42 branch licensesacquired by EW from the BSP amounting to P=822.0 million in 2012 and 46 branch licensesacquired by EW from the acquisition of GBI amounting to P=625.4 million in 2011.

“Input taxes” represents the VAT due or paid on purchases of goods and services subjected toVAT that the Group can claim against any future liability to the Bureau of Internal Revenue foroutput VAT on sale of goods and services subjected to VAT.

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“Capitalized computer software” pertains to costs of computer software licenses and programsacquired by the Group for its banking operations.

“Prepaid expenses” includes commissions paid to brokers relating to the sales of real estateinventories which do not qualify yet for revenue recognition. Such amount will be recognized asexpense when the qualification for recognition has been met for the related revenue.

“Creditable withholding taxes” is the tax withheld by the withholding agents from payment to theGroup which is creditable against the income tax payable.

“Deposits” include security deposits of EW representing refundable deposits with Master Cardand Visa related to its credit card business and FLI’s deposits in escrow for payments of raw landpending finalization of contract to sell.

“Repossessed assets” pertain to other foreclosed properties which do not qualify as land andbuilding.

“Customer relationship and core deposits” resulted from the business combination between EWand AIGPASB Group in 2009.

“Deferred costs” pertains to FDCUI expenditures incurred related to project development and sitepreparation. This will be reclassified to the appropriate asset account when actual construction ofpower plants begins.

Other assets include: (a) cost related to the Build Transfer and Operate (BTO) agreement with TheProvince of Cebu (Cebu Province) entered into on March 26, 2012; and, (b) sundry debits andinteroffice floats amounting to P=805.7 million and P=120.9 million as of December 31, 2014 and2013, respectively.

The BTO project relates to the development, construction and operation of Business ProcessOutsourcing (BPO) Complex by the Group at the land properties owned by Cebu Province locatedat Salinas, Lahug Cebu City. The construction costs related to this project amounted toP=1.3 billion and P=393.7 million as of December 31, 2014 and 2013, respectively (see Note 31).

“Biological assets” of the Group consist of sugarcane crops. The rollforward analysis of theGroup’s biological assets follows:


Balances at beginning of year P=109,707 P=157,516Additions 124,502 149,430Costs of sales (121,073) (197,239)Balances at end of year P=113,136 P=109,707

The following table shows the estimated physical quantities of the Group’s biological assets andraw sugar production:

2014 2013Sugarcane crops (in metric tons) 113,959 133,077Raw sugar (in Lkg) 221,969 264,957

There are no restrictions on the Group’s biological assets as of December 31, 2014 and 2013.

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The rollforward analysis of the Group’s customer relationships and core deposits as ofDecember 31, 2014 and 2013 follows:


Balances at beginning of year P=154,679 P=163,032Amortization (Note 24) (8,355) (8,353)Balances at end of year P=146,324 P=154,679

The rollforward analysis of the Group’s capitalized computer software as of December 31, 2014and 2013 follows:


Balance at beginning of the year P=531,213 P=479,639Additions 456,522 185,252Amortization (Note 24) (184,409) (133,678)Balance at end of the year P=803,326 P=531,213

Included in the 2014 and 2013 acquisitions are software licenses acquired by the Group for theupgrade of EW’s core banking systems amounting to P=438.3 million and P=153.7 million,respectively.

18. Deposit Liabilities

This account consist of:


Time (Note 34) P=69,027,909 P=39,134,678Demand 45,356,947 39,568,923Savings 8,573,310 10,959,135Long-term negotiable certificates of deposit

(LTNCD) (Note 34) 8,033,623 5,466,003P=130,991,789 P=95,128,739

BSP Circular No. 753, which took effect April 6, 2012, promulgated the unification of thestatutory/ legal and liquidity reserve requirement effective on non-FCDU deposit liabilities from8.0% to 6.0% and reserve requirement on long-term negotiable certificates of deposits from 3.0%to 7.0%. With the new regulations, only demand deposit accounts maintained by banks with theBSP are eligible for compliance with reserve requirements. This was tantamount to the exclusionof government securities and cash in vault as eligible reserves. On April 11, 2014, BSP Circular830 took effect which increased the reserve requirements on non-FCDU deposit liabilitiesby 1-percentage-point to 7.0%. BSP Circular 832 further increased the reserve requirements ofnon-FCDU deposit liabilities to 8.0% starting on the reserve week of May 30, 2014. As ofDecember 31, 2014 and 2013, EW is in compliance with such regulations.

As of December 31, 2014 and 2013, due from BSP of the Group amounting to P=23.1 billion andP=15.9 billion, respectively, were set aside as reserves for deposit liabilities, as reported to the BSP.

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Of the total deposit liabilities of the Group as of December 31, 2014, 2013 and 2012, about 52.2%,43.0% and 46.3%, respectively, are subject to periodic interest repricing. The remaining depositliabilities earn annual fixed interest rates ranging from 0.5% to 6.3% in 2014, 3.3% to 9.5% in2013, and 1.2% to 5.2% in 2012.

The Group’s interest expense on deposit liabilities amounted to P=1.2 billion, P=1.1 billion andP=1.4 billion in 2014, 2013, and 2012, respectively (see Note 25).

Long-term Negotiable Certificates of Deposits due in 2018 (LTNCD Series 1)In 2013 and 2012, EW issued 5.00% fixed coupon rate (average EIR of 4.37%) unsecuredLTNCD maturing on May 18, 2018. The first tranche of the LTNCD Series 1 amounting toP=1.5 billion was issued at a discount on November 23, 2012, and the second to seventh tranchesaggregating to P=3.1 billion were issued at a premium in February to May 2013. The net premium,net of debt issue costs, related to the issuance of the LTNCD Series 1 in 2013 and 2012 amountedto P=107.9 million and P=10.6 million, respectively.

Long-term Negotiable Certificates of Deposits due in 2019 (LTNCD Series 2)In 2013, EW issued 3.25% fixed coupon rate (average EIR of 3.48%) unsecured LTNCD maturingon June 9, 2019. The first to third tranches of the LTNCD Series 2 aggregating to P=0.7 billionwere issued in December 2013. The discount, net of debt issue costs related to the issuance of theLTNCD Series 2 in 2013 amounted to P=8.4 million. The fourth and fifth tranches of the LTNCDSeries 2 aggregating to P=1.7 billion were issued in February and April 2014, respectively. Thediscount, net of debt issue costs, related to the issuance of the LTNCD Series 2 in 2014 amountedto P=85.1 million.

Long-term Negotiable Certificates of Deposits due in 2020 (LTNCD Series 3)In 2014, the EW issued 4.50% fixed coupon rate (average EIR of 4.42%) unsecured LTNCDmaturing on April 24, 2020. The first tranche of the LTNCD Series 3 amounting toP=0.9 billion was issued in October 2014. The discount, net of debt issue costs, related to theissuance of the LTNCD Series 3 in 2014 amounted to P=4.6 million.

The movements in unamortized net premium (discount) as of December 31, 2014 and 2013follow:

2014 2013Beginning balances P=67,565 (P=10,643)Premium (discount) of issuance during the year (89,675) 99,496Amortization during the year (3,408) (21,288)Ending balances (P=25,518) P=67,565

19. Bills and Acceptances Payable

This account consists of borrowings from:


Banks and other financial institutions P=5,289,389 P=3,274,219Outstanding acceptances 28,263 5,903BSP − 8,813

P=5,317,652 P=3,288,935

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As of December 31, 2014 and 2013, investments in government securities of the Group (includedin investment securities at amortized cost in the statements of financial position) with face value ofP=3.3 billion and P=2.9 billion, respectively, and fair value of P=4.0 billion and P=3.4 billion,respectively, were pledged with other banks as collateral for borrowings amounting toP=3.3 million and P=2.8 billion, respectively.

Bills payable to the BSP, other banks and other financial institutions are subject to annual interestrates ranging from 0.50% to 3.22% in 2014, 0.60% to 3.50% in 2013, and 0.65% to 5.00% in2012.

The Group’s interest expense on bills and acceptances payable amounted to P=39.9 million in 2014,P=40.2 million in 2013 and P=66.9 million in 2012 (see Note 25).

20. Accounts Payable and Accrued Expenses

The details of this account follow:

2014 2013Due Within


Due WithinOne Year


(In Thousands)Accounts payable P=11,689,321 P=1,178,968 P=12,868,289 P=10,020,684 P=1,106,592 P=11,127,276Advances from customers 1,668,719 − 1,668,719 2,018,697 – 2,018,697Accrued expenses 1,533,928 − 1,533,928 1,389,433 2,490 1,391,923Domestic bills purchased 993,784 − 993,784 1,363,885 – 1,363,885Deposits for registration and insurance 189,855 1,359,327 1,549,182 138,167 989,253 1,127,420Retention fee payable 1,207,140 676,229 1,883,369 740,735 359,508 1,100,243Accrued interest (Note 21) 990,732 − 990,732 694,647 – 694,647Deposits 1,102,929 164,462 1,267,391 385,895 102,816 488,711Retirement liabilities (Notes 3 and 28) − 580,428 580,428 – 469,711 469,711Deferred income 722,199 − 722,199 30,256 343,284 373,540Liabilities on receivables sold to bank

(Note 8) 5,585 2,919 8,504 23,325 13,915 37,240Due to related parties (Note 23) 48,791 − 48,791 101,183 – 101,183Other payables 798,453 87,907 886,360 628,520 – 628,520

P=20,951,436 P=4,050,240 P=25,001,676 P=17,535,427 P=3,387,569 P=20,922,996

“Accounts payable” includes the balance of the purchase price for raw land acquired by the Groupand is payable upon completion of certain requirements and on agreed scheduled payment date,and retention fees payable to contractors (see Note 14). This account also includes amountspayable to contractors and suppliers for the construction and development cost incurred by theGroup and unpaid operating expenses.

“Advances from customers” includes collections from accounts which do not yet qualify forrevenue recognition as real estate sales and any excess collections over the recognized receivableson real estate sales accounted under percentage-of-completion method.

Out of the accrued expenses, P=130.2 million and P=56.2 million as of December 31, 2014 and2013, respectively, pertains to accrued taxes.

“Deposits for registration and insurance” pertain to amounts collected from buyers for payment ofregistration and insurance of real estate properties.

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“Deferred income” include deferral and release of loyalty points program transactions andmembership fees and dues.

“Other payables” include interest on restructured loans and derivative liabilities (see Notes 34and 36).

21. Short-term and Long-term Debt

Short-term debt consists of the following borrowings of the Group and their contractual settlementdates:


PSHCa. Unsecured short-term loan obtained from a local bank on August 12,

2014 payable 59 days from the date of loan release and renewable uponmaturity. Interest rate is at 3.75% per annum, subject to repricing. P=150,000 P=–

b. Unsecured short-term loan obtained from a local bank on December 20,2013 payable 60 days from the date of loan release and renewable uponmaturity. Interest rate is at 3.5% per annum, subject to repricing. 200,000 200,000

c. Unsecured short-term loan obtained from a local bank on August 20,2013 payable 59 days from the date of loan release and renewable uponmaturity. Interest rate is at 4.0% per annum, subject to repricing. – 300,000

P=350,000 P=500,000

Total interest incurred from these short-term loans amounted to P=12.1 million, P=34.2 million andP=21.0 million in 2014, 2013 and 2012, respectively (see Note 24).

Long-term debt consists of the following respective borrowings of the Group and their contractualsettlement dates:

2014 2013 Collateral(In Thousands)

Parent Company Loansa. Fixed rate bonds due in 2024 with aggregate principal amount of

P=8.8 billion issued on January 24, 2014 with a term of ten (10) yearsfrom the issue date, with a fixed interest rate of 6.1% per annum.Interest is payable quarterly in arrears starting on April 24, 2014. P=8,757,875 P=– Clean

b. Loan with interest rate per annum equivalent to 5.9% fixed (inclusiveof GRT) payable quarterly in arrears. Loan is payable in full inAugust 2017. This loan was preterminated in April 2014. – 996,220 Clean

c. 5-year loan with interest rate per annum equivalent to 1.0%-1.25%plus 3-month PDST-F; 46% of principal payable in 11 equal quarterlyamortizations to start at the end of the 2-year grace period; 54% ofprincipal payable in full on maturity date. This loan waspreterminated in July 2014. – 711,728 Clean

d. 7-year loan with interest rate per annum equivalent to 6.4% fixed(inclusive of GRT) payable semi-annually. Principal is due inDecember 2018. This loan was preterminated in June 2014. – 596,229 Clean

e. 5-year loan with interest rate per annum equivalent to a maximum of1.0% spread over the prevailing 3-month PDST-F, repriceable andpayable quarterly in arrears. Principal is payable in 12 equal quarterlyamortizations commencing at the end of the ninth quarter from thedate of loan release. In July 2014, the loan balance was preterminated. – 560,739 Clean

(Forward)

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f. Loan with interest rate per annum equivalent to 1.25% spread over90-day PDST-F; payable quarterly in arrears. Loan is payable in fullat maturity in April 2015 but was preterminated in June 2014. P=– P=499,268 Clean

g. Loan with interest rate per annum equivalent to 1.25% spread over90-day PDST-F; payable quarterly in arrears. 50% of principal ispayable quarterly and 50% is payable in full at maturity in January2018. This loan was preterminated in August 2014. – 460,411 Clean

h. Loan with interest rate per annum equivalent to 1.25% spread over90-day PDST-F; payable quarterly in arrears. 50% of principal ispayable quarterly and 50% is payable in full at maturity in November2017. In August 2014, the full loan balance was preterminated. – 448,014 Clean

i. Loan with interest rate per annum equivalent to 1.0% spread over 90-day PDST-F; payable quarterly in arrears. 50% of principal ispayable in 3 equal quarterly amortizations at the end of 4-year graceperiod while 50% balance is payable at maturity in September 2016.This loan was preterminated in July 2014. – 349,989 Clean

j. Loan with interest rate per annum equivalent to a maximum of 1.0%spread over 90-day PDST-F; payable quarterly in arrears. Loan ispayable in full at maturity in August 2016. This loan waspreterminated in July 2014. – 238,906 Clean

8,757,875 4,861,504Subsidiaries’ LoansFAIk. Loan obtained on September 5, 2013 and will mature on September

5, 2020. Interest at 4.8254% for 1st 91-day (inclusive of GRT), to bere-priced. 50% of the loan is payable in twenty equal quarterlyamortization and the remaining 50% payable at maturity. 500,000 500,000 Clean

l. Loan obtained on July 23, 2012 and will mature on July 23, 2017.Interest at 4.8% for 1st 90-day (inclusive of GRT), to be re-pricedand payable in arrears quarterly (with one-time option to changeinterest to fixed rate anytime during the term of the loan). Partial andfull principal prepayment allowed anytime without penalties. 383,333 400,000 Clean

m. Loan obtained on November 10, 2011 with two years grace period onprincipal repayment, and will mature on November 10, 2018. 50% ofthe loan is payable in twenty (20) equal quarterly amortizations andthe remaining principal balance is payable on maturity. Interest forthe 1st 92 days is 4.5% per annum (inclusive of GRT) and is subjectto quarterly re-pricing. 270,000 300,000 Clean

n. Loan obtained on February 12, 2013 and will mature onFebruary 12, 2018. Interest at 4.1% for 1st 91-day, to be re-pricedand payable in 20 equal quarterly installments amounting toP=20.8 million per quarter. 250,000 250,000 Clean

o. Loan obtained on January 10, 2011 with a 5 year term and willmature on December 14, 2015 with two (2)-year grace period onprincipal repayment. Interest for the 1st 66 days is at 2.1769% perannum. Basic interest is subject to quarterly re-pricing. 200,000 250,000 Clean

p. Loan obtained on December 15, 2014 with a 5 year term and willmature on March 30, 2019 with two (2)-year grace period onprincipal repayment. Fifty percent (50%) of the loan is payable inequal quarterly amortizations to commence at the end of the secondyear and fifty percent (50%) payable on maturity. Interest is fixed at4.50% per annum. 200,000 – Clean

(Forward)

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*SGVFS011426*


q. Loan obtained on March 30, 2012 with two (2)-year grace period onprincipal repayment, and will mature on March 30, 2019. 50%percent of the loan is payable in twenty (20) equal quarterlyamortizations and the remaining principal balance is payable onmaturity. Interest for the 1st 92 days is 5% per annum (inclusive ofGRT) and is subject to quarterly re-pricing. P=185,000 P=200,000 Clean

r. Loan obtained on December 27, 2011 with a 7 year term and willmature on December 27, 2018. 50% of the loan is payable in twenty(20) equal quarterly amortizations and the remaining fifty (50)percent is payable on maturity. Interest for the 1st 91 days is 5.0%per annum (inclusive of GRT) and is subject to quarterly re-pricing. 135,000 150,000 Clean

s. Loan with interest payable quarterly of 91-day PDST-rate plus aspread of 1.5% per annum. The term of the loan is 5 years with 2-year grace period on principal payment and will mature onApril 8, 2015. 116,667 150,000 Clean

t. Loan obtained on December 14, 2010, 50% of the principal is payablein twelve (12) quarterly installments beginning from the ninth (9th)quarter after availment of the loan and the remaining 50% is payableupon maturity on December 15, 2015. Interest rate for the 1st 90days is 2.1615% per annum payable quarterly to start on March 14,2011. Interest rate is subject to quarterly re-pricing. 66,667 83,333 Clean

u. Term loan with interest payable monthly computed based on latest91-day T-bill rate plus 2.0% and is subject to quarterly repricing. Theloan is payable in 18 equal monthly amortizations after a 2-year graceperiod will mature on June 27, 2014. – 55,826 Clean

2,306,667 2,339,159FLI

v. Fixed rate bonds consisting of i) P=5.0 billion, comprised of three (3)year fixed rate bonds due in 2012 with a term of 3 years from theissue date, with a fixed interest rate equivalent to 7.5% per annumpayable quarterly in arrears starting on February 19, 2010 and five (5)year fixed rate bonds due in 2014 with a term of 5 years and one (1)day from the issue date, with a fixed interest rate equivalent to 8.5%per annum payable quarterly in arrears starting February 20, 2010; ii)fixed rate bonds issued on July 7, 2011 amounting to P=3.0 billionwith a term of five (5) years from issue date, with a fixed interest rateof 6.2% per annum, payable quarterly in arrears starting on October19, 2011; iii) fixed rate bonds with aggregate principal amount ofP=7.0 billion issued on June 8, 2012 with a term of seven (7) yearsfrom the issue date, with a fixed interest rate of 6.3% per annum.Interest is payable quarterly in arrears starting on September 10,2012. P=0.5 billion bonds were paid in 2012; iv) P=7.0 billion fixed-rate bonds comprised of P=4.3 billion seven (7)-year bonds withinterest of 4.8562% per annum due in 2020 and P=2.7 billion ten (10)-year bonds with interest of 5.4333% per annum issued on November8, 2013 and due in 2023. Interest for both bonds is payable quarterlyin arrears starting on February 8, 2014. 23,786,796 21,318,088 Clean

w. Developmental loans granted by local banks. Interest rates are equalto 91-day PDST-F rate plus a spread of 1.0%- 2.0% per annum.Include loans obtained from business combination. 16,294,797 14,076,208 Clean

x. Guaranteed loan amounting to P=1.1 billion and P=1.1 billion obtainedin October2005 and July 2007, respectively. Both loan principal ispayable in 10 semi-annual installments commencing December 2010and ending June 2015. The loans carry a fixed interest rate of 7.72%and 7.90% per annum, respectively. 225,000 675,000 Clean

40,306,593 36,069,296

(Forward)

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PSHCy. Loan granted by a local bank with principals of P=400.0 million on

December 22, 2012 and P=100.0 million February 16, 2011. Theprincipal is payable in 12 quarterly amortizations to start at the end ofthe 9th quarter from the date of the release with then prevailinginterest rate of 2.2% per annum, subject to quarterly repricing.Interest is payable quarterly in arrears to start at the end of the firstquarter from the date of the release of the loan. P=175,000 P=383,333 Clean

z. Loan granted by a local bank with principal of P=1.0 million onFebruary 12, 2013, payable in 12 quarterly amortizations to start atthe end of the 9th quarter from the date of the release with thenprevailing interest rate of 4.32% per annum, subject to quarterlyrepricing. Interest is payable quarterly in arrears to start at the end ofthe first quarter from the date of the release of the loan. 1,000 1,000 Clean

176,000 384,333EW

aa. Lower tier 2 unsecured subordinated notes due January 4, 2025.Interest rate is at 5.5% per annum. 5,000,000 – Clean

bb. Lower tier 2 unsecured subordinated notes callable with Step-upinterest, in 2016 in minimum denominations of P=500,000 and inintegral multiples of P=100,000 thereafter, due January 2, 2021.Interest rate is at 7.5% per annum. 1,500,000 1,500,000 Clean

cc. Lower tier 2 unsecured subordinated notes callable, with Step-upinterest, in 2014 in minimum denominations of P=500,000 and integralmultiples of P=100,000 thereafter, due January 26, 2019. Interest rateis at 8.6% per annum. – 1,250,000 Clean

dd. Lower tier 2 unsecured subordinated notes, with Step-up interest, dueMarch 13, 2018. Interest rate is at 9.7% per annum. – 112,500 Clean

6,500,000 2,862,500FDCI

ee. Fixed rate bonds with original issuance amount of $300million onApril 2, 2013. The bonds have a term of 7 years from the issue date,with a fixed interest rate of 4.25% per annum. Interest is payablesemi-annually in arrears starting on October 2, 2013. 12,691,951 12,576,243 Clean

FDCUIff. Secured loan granted by a local bank amounting to P=643.4 million

and P=1,189.7 million on September 26, 2014 and December 1, 2014,respectively. The principal is payable in 42 quarterly amortizationsto start at the end of the 42nd month from initial loan availment or 6months from project completion date, whichever comes first. Theseloans bear interest of 6.1% and 6.0% per annum, subject to repricingafter the 7th year anniversary from initial loan availment untilmaturity date. Interest is payable quarterly in arrears to start at theend of the first quarter from the date of the release of the loan. 1,823,928 –

Realproperties

and realrights

gg. Secured loan granted by a local bank amounting to P=934.0 millionand P=1,726.9 million on September 26, 2014 and December 1, 2014,respectively. The principal is payable in 42 quarterly amortizationsto start at the end of the 42nd month from initial loan availment or 6months from project completion date, whichever comes first. Theseloans bear interest rate of 6.1% and 6.0% per annum, subject torepricing after the 7th year anniversary from initial loan availmentuntil maturity date. Interest is payable quarterly in arrears to start atthe end of the first quarter from the date of the release of the loan. 2,647,939 –

Realproperties

and realrights

4,471,867 −P=75,210,953 P=59,093,035

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Below are the current and non-current portion of the long-term debt:


Current P=3,017,543 P=7,336,189Non-current 72,193,410 51,756,846

P=75,210,953 P=59,093,035

The details of foregoing long-term debt of the Group follow:

Parent Company

a. On January 24, 2014, the Parent Company issued and listed fixed rate bonds, with aggregateprincipal amount of P=8.8 billion, payable in January 2024. Interest is payable quarterly inarrears starting April 24, 2014. The proceeds from the bonds issuance were used to financecapital requirements and refinance debt obligations.

b. On August 16, 2012, the Parent Company availed of a fixed-rate loan from a local financialinstitution amounting to P=1.0 billion payable in August 2017. The loan was preterminated inApril 2014.

c. In March 2007, November 2007 and 2008, the Parent Company issued corporate notes to alocal financial institution in the aggregate principal amount of P=500.0 million, P=1.5 billion andP=350.0 million, respectively. In January 2011, the Parent Company issued additionalcorporate notes to the same financial institution in the amount of P=350.0 million bringing thetotal corporate notes issued to P=2.7 billion. The corporate notes have annual interest ratesequivalent to 1.0% to 1.25% spread over the prevailing 3-month PDST-F, repriceable andpayable quarterly in arrears. 46% of principal is payable in 11 equal amortizationscommencing at the end of 2-year grace period on principal repayment, while 54% of principalis payable in full at maturity date. The loan was preterminated in July 2014.

d. In December 2011, the Parent Company entered into a fixed-rate corporate notes facility witha local financial institution to which it had issued corporate notes amounting to P=1.0 billion.The principal is payable at maturity in December 2018. On April 24, 2013, the ParentCompany prepaid principal amounting to P=400 million. The loan balance was preterminated inJune 2014.

e. In June 2008, the Parent Company entered into a notes facility agreement with a localfinancial institution which it has issued corporate notes in the aggregate principal amountingto P=1.2 billion. In December 2010 and March 2011, the Parent Company issued additionalcorporate notes to the same financial institution in the amount of P=600.0 million andP=150.0 million respectively. The corporate notes bear annual interest rate equivalent to amaximum of 1.0% spread over the prevailing 3-month PDST-F, repriceable and payablequarterly in arrears. The loan balance was preterminated in July 2014.

f. In 2010, the Parent Company availed of a loan from a local financial institution amounting toP=500.0 million maturing in April 2015. The loan balance was preterminated in June 2014.

g. In January 2013, the Parent Company obtained a term loan from a local financial institutionamounting to P=500.0 million; 50% of principal is payable quarterly and 50% is payable in fullat maturity in January 2018. The loan balance was preterminated in August 2014.

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h. In November 2012, the Parent Company entered into a fixed-rate corporate notes facility witha local financial institution to which it had issued corporate notes amounting to P=500 million.The principal is payable at maturity in November 2017. The loan balance was preterminatedin August 2014.

i. In 2011, the Parent Company availed of a loan from a local financial institution amounting toP=350.0 million; 50% of principal is payable in 3 equal quarterly amortizations starting at theend of 4-year grace period and 50% balance payable at maturity. The loan balance waspreterminated in July 2014.

j. In 2011, the Parent Company availed of a loan from a local financial institution amounting toP=250.0 million payable in full at maturity in August 2016. The loan balance waspreterminated in July 2014.

FAI

k. On September 5, 2013, FAI obtained P=500.0 million that will mature on September 5, 2020,50% of principal is payable in 20 equal quarterly amortization and remaining 50% payable atmaturity.

l. On July 23, 2012, FAI obtained a 5-year loan of P=400.0 million that will mature onJuly 23, 2017 with 2-year grace period on principal repayment. Interest for the first 90 days is4.8% quarterly. Basic interest is subject to quarterly re-pricing.

m. On November 10, 2011, FAI obtained a loan amounting to P=300.0 million with 2-year graceperiod on principal repayment that will mature on November 10, 2018. 50% of the loan ispayable in twenty (20) equal quarterly amortizations and the remaining principal balance ispayable on maturity. Interest for the first 92 days is 4.5% per annum and is subject toquarterly re-pricing.

n. On February 12, 2013, FAI obtained a loan and will mature on February 12, 2018. Interest at4.1% for 1st 91-day, to be re-priced and payable in 20 equal quarterly installments amountingto P=20.8 million per quarter.

o. On January 10, 2011, FAI, obtained a 5-year loan of P=300.0 million that will mature onDecember 14, 2015 with 2-year grace period on principal repayment. Interest for the first66 days is 2.2% per annum. Basic interest is subject to quarterly re-pricing.

p. On December 15, 2014, FAI obtained a 5-year loan with principal amount of P=200.0 millionthat will mature on March 30, 2019. 50% of the loan is payable in equal quarterlyamortizations to commence at the end of the second year and fifty percent (50%) payable onmaturity. Interest is fixed at 4.50% per annum.

q. On March 30, 2012, FAI, obtained a 7-year loan of P=200.0 million that will mature onMarch 30, 2019 with 2-year grace period on principal repayment. 50% of the principal ispayable in 20 equal quarterly installments starting on and 50% payable at maturity. Interestfor the first 92 days is 5% per annum and is subject to quarterly re-pricing.

r. On December 27, 2011, FAI obtained a 7-year loan with principal amount of P=150.0 millionthat will mature on December 27, 2018. 50% of the loan is payable in twenty (20) equalquarterly amortizations and the remaining 50% is payable on maturity. Interest for the first91 days is 5.0% per annum and is subject to quarterly repricing.

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*SGVFS011426*

s. On April 8, 2010, FAI obtained a 5-year term loan maturing on April 8, 2015 amounting toP=200.0 million. 50% of the principal is payable in 12 equal monthly installments starting onJuly 8, 2012 and 50% payable at maturity.

t. On December 14, 2010, FAI obtained a 5-year loan maturing on December 14, 2015. 50% ofthe principal is payable in 12 equal monthly installments to commence at the start of the ninthquarter from the initial drawdown and 50% payable at maturity.

u. On June 27, 2007, FAI was granted a 7-year loan with a principal amount of P=0.5 billionwhich will mature on June 27, 2014. In 2014 and 2013, FAI paid the principal loanamortizations amounting to P=55.8 million and P=107.6 million, respectively.

FLI

v. On November 19, 2009, FLI issued fixed rate bonds, with aggregate principal amount ofP=5.0 billion, comprised of three (3)-year fixed rate bonds due in 2012 and five (5)-year fixedrate bonds due in 2014. The P=0.5 billion and P=4.5 billion three-year fixed rate bond was paidby FLI on November 16, 2012 and November 19, 2014, respectively.

On July 7, 2011, FLI issued another fixed rate bonds with principal amount of P=3.0 billion andterm of five (5) years from the issue date. The fixed interest rate is 6.2% per annum, payablequarterly in arrears starting on October 17, 2011, to finance its capital requirements in 2011and 2012.

On June 8, 2012, FLI issued another fixed rate bonds with aggregate principal amount ofP=7.0 billion and term of seven (7) years from the issue date. The fixed interest rate is 6.3%per annum, payable quarterly in arrears starting on September 8, 2012.

On November 8, 2013, FLI issued fixed rate bonds with principal amount of P=7.0 billioncomprised of seven (7) year fixed rate bonds of 4.9% per annum due in 2020 and ten yearfixed rate bonds of 5.4% per annum.

On December 4, 2014, FLI issued unsecured fixed-rate retail bonds with an aggregateprincipal amount of P=7.0 billion comprising of P=5.3 billion seven (7) year fixed rate bonds duein 2021 and P=1.7 billion (10) year fixed rate bonds due in 2024. The seven-year bonds carry afixed rate of 5.4% per annum while the ten-year bonds have a fixed interest rate of 5.6% perannum.

Unamortized debt issuance cost on bonds payable amounted to P=213.0 million,P=182.0 million and P=136.4 million as of December 31, 2014, 2013 and 2012 respectively.Accretion in 2014, 2013 and 2012 included as part of ‘Interest expense’ amounted toP=35.8 million, P=36.0 million and P=33.9 million, respectively (see Note 24).

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w. Details of the developmental loans are as follows:


Unsecured loan obtained in July 2013 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years(fixed rate) 5.07% per annum, payable quarterly in arrears. Theprincipal is payable at maturity on July 2018. P=1,500,000 P=1,500,000

Unsecured loan obtained in June 2013 with a fixed interest rate of 4.98%per annum (inclusive of GRT), payable quarterly in arrears. Theprincipal is payable in twelve (12) equal quarterly installmentsstarting September 2015 up to June 2018. 1,148,500 1,148,500

Unsecured loan obtained in August 2013 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum GRT 5 years (fixedrate) 4.28% per annum, payable quarterly in arrears. The 50%balance is payable in twenty (20) equal quarterly installments startingAugust 2015 up to May 2020 and the remaining 50% balance ispayable in August 2020. 1,000,000 1,000,000

Unsecured loan obtained in January 2012 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum GRT 5 years (fixedrate) 6.39% per annum. The principal is payable at maturity onJanuary 2017. 1,000,000 1,000,000

Unsecured loan obtained in April 2012 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years(fixed rate) 6.12% per annum, payable quarterly in arrears. Theprincipal is payable at maturity on January 2017. 1,000,000 1,000,000

Unsecured loan obtained in November 2012 with interest rate equal toPDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5years (fixed rate) 5.50% per annum , payable quarterly in arrears.The principal is payable at maturity on November 2017. 1,000,000 1,000,000

Unsecured loan obtained in September 2014 with interest at prevailingmarket rate 3.00%, payable quarterly in arrears. The principal ispayable at maturity on August 2015. 1,000,000 −

Unsecured loan obtained in February 2013 with interest at prevailingmarket rate, payable quarterly in arrears. The principal is payable intwelve (12) equal quarterly installments starting May 2015 toFebruary 2018. 750,000 750,000

Unsecured loan obtained in December 2013 with interest rate equal toPDS Treasury Fixing (PDST-F) rate plus 1% per annum plus GRT(Fixed rate of 4.62% per annum), payable quarterly in arrears. The50% balance is payable in twenty (20) quarterly installments startingMarch 2016 up to December 2020 and the remaining balance ispayable at maturity on December 2020. 700,000 700,000

Unsecured loan obtained in July 2014 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate)4.30% per annum, payable quarterly in arrears. The 50% of principalpayable in 20 equal quarterly amortization to commence on October 2016and 50% payable at maturity on July 2021. 700,000 −

Unsecured loan obtained in July 2014 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate)5.52% per annum, payable quarterly in arrears. The 50% of principalpayable in 20 equal quarterly amortization to commence on October 2016and 50% payable at maturity on July 2021. 600,000 −

Unsecured loans obtained in August 15,2012 with interest of 5.79% perannum (inclusive of GRT), subject to repricing either via floating rateor fixed rate on the 90th day, payable quarterly in arrears. The loanhas a fixed term of 7 years, inclusive of 2 year grace period onprincipal repayment, 50% principal balance is payable in 20 equalquarterly installments to commence on November 2014 and 50%payable at maturity on August 2019. 585,000 600,000

(Forward)

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*SGVFS011426*


Unsecured loan obtained in October 2013 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (fixed rateof 4.21% per annum), payable quarterly in arrears. The 50% ofprincipal payable in 20 equal quarterly amortization to commence onJanuary 2016 and 50% payable at maturity on October 2020. P=550,000 P=550,000

Unsecured loan obtained in March 2011 with interest rate equal toPDS Treasury Fixing (PDST-F) rate plus a spread of up to 1% perannum, payable quarterly in arrears. The 50% of principal payable in12 equal quarterly amortization to commence on June 2013 and 50%payable at maturity on March 2016. 531,250 656,250

Unsecured loan obtained in August 2013 with interest rate equal to PDSTreasury Fixing (PDST-F) 1 plus GRT (Fixed rate) 4.28%, payablequarterly in arrears. The 50% of principal payable in 20 equalquarterly amortization to commence on November 2015 and 50%payable at maturity on August 2020. 500,000 500,000

Unsecured loan obtained in December 2012 with interest rate equal toPDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5years (fixed rate) 5.29% per annum, payable quarterly in arrears. Theprincipal is payable at maturity on December 2017. 500,000 500,000

Unsecured loan obtained in November 2014 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate)4.80% per annum, payable quarterly in arrears. The principal is payableupon maturity in November 2019. 500,000 −

Unsecured loan obtained in March 2014 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate)4.27% per annum, payable quarterly in arrears. The 50% of principalpayable in 20 equal quarterly amortization to commence on November2015 and 50% payable at maturity on August 2020. 500,000 −

Unsecured loan obtained in June 2011 with interest rate equal to 91-dayPDS Treasury Fixing (PDST-F) rate plus a spread of up to1% perannum, payable quarterly in arrears. The 50% balance is paid in July2011 and the remaining 50% balance is payable in twelve (12) equalquarterly installments starting September 2013 up to June 2016. 375,000 625,000

Unsecured loan obtained in October 2012 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (fixed rateof 6.03% per annum), payable quarterly in arrears. The principal ispayable at maturity on October 2017. 300,000 300,000

Unsecured loan obtained in May 2013 with interest rate equal to BSP 1plus GRT (fixed rate 4.74% per annum), payable quarterly in arrears.The principal is payable in twelve (12) equal quarterly installmentsstarting August 2015 up to May 2018. 300,000 300,000

Unsecured loan obtained in May 17, 2012 with interest at prevailingmarket rate, subject to repricing and payable quarterly in arrears. Theloan has a fixed term of 7 years, inclusive of 2 year grace period onprincipal repayment, 50% principal balance is payable in 20 equalquarterly installments to commence on August 2014 and 50%payable at maturity on May 2019. 285,000 300,000

Unsecured loan obtained in May 2013 with a fixed interest rate of 4.74%per annum (inclusive of GRT), payable quarterly in arrears. Theprincipal is payable in twelve (12) equal quarterly installmentsstarting August 2015 up to May 2018. 250,000 250,000

Unsecured loan obtained in December 2011 with interest at prevailingmarket 4.2% per annum (inclusive of GRT), payable quarterly inarrears. The principal is payable in twelve (12) equal quarterlyinstallments starting March 2014 to December 2016. 233,333 350,000

(Forward)

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*SGVFS011426*


Unsecured loan granted in November 10, 2011 with a term of 7 yearswith 2 years grace period on principal repayment. Interest is basedon prevailing market rate , subject to quarterly repricing and payablequarterly in arrears. 50% of principal is payable in 12 quarterlyamortization commencing on February 10, 2014 and 50% is payableon maturity. P=180,000 P=200,000

Unsecured loan granted in December 2012 with a term of five yearswith 50% of principal payable in 20 equal quarterly amortization tocommence on March 2013 and 50% payable at maturity onDecember 2017. The loan carries interest August 2014 and 50%payable at maturity on May 2019. The loan carries interest atprevailing market rate. 120,000 135,000

Unsecured loan granted in May 2010 with a term of five years with50% of principal payable in 12 equal quarterly amortization tocommence on August 2012 and 50% payable at maturity in May2015. The loan carries interest August 2014 and 50% payable atmaturity on May 2019. The loan carries interest at prevailing marketrate payable quarterly in arrears 116,667 150,000

Unsecured loan granted in May 2012 payable over 7-year periodinclusive of 2 year grace period; 50% of principal is payable in 20equal quarterly amortizations to commence on August 2014 and 50%payable at maturity on May 2019. The loan carries interest atprevailing market rate. 95,000 100,000

Unsecured loan obtained in February 2013 with interest rate equal to91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to1% per annum plus GRT, payable quarterly in arrears. The principalis payable in twelve (12) equal quarterly installments starting May2015 to February 2018. 500 500

Unsecured loan obtained in March 2013 with interest rate of 4.32% perannum (inclusive of GRT), payable quarterly in arrears. The principalis payable at maturity on March 2014. − 500,000

P=16,320,250 P=14,115,250

As of December 31, 2014 and 2013, the unamortized deferred charges related todevelopmental loans from local banks amounted to P=25.5 million and P=39.0 million,respectively.

x. On June 17, 2005, FLI entered into a Local Currency Loan Agreement with a foreign financialinstitution whereby FLI was granted a credit line facility amounting to P=2.3 billion. InOctober 2005, FLI availed of P=1.1 billion or half of the total amount granted. The loan ispayable in 10 semi-annual installments commencing December 2010 and ending June 2015.This loan carries a fixed interest rate of 7.72% per annum.

In July 2007, FLI availed the remaining balance of the facility amounting to P=1.1 billion. Theloan is also payable in 10 semi-annual installments commencing December 2010 and endingJune 2015. This loan has a fixed annual interest rate of 7.90%. Both loans were guaranteedby the Parent Company (see Note 23). Principal payments made in 2014 and 2013 amountedto P=450.0 million of each year.

PSHC

y. On December 22, 2010, PSHC availed of a P=500.0 million loan from a local bank payable in5 years inclusive of 2 years grace period. The principal is payable in 12 quarterlyamortizations to start at the end of the 9th quarter from the date of the release with thenprevailing interest rate of 2.23% per annum, subject to quarterly repricing. Interest is payablequarterly in arrears to start at the end of the first quarter from the date of the release of theloan.

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z. On February 12, 2013, PSHC obtained a term loan granted by a local bank with principal ofP=1.0 million payable in 12 quarterly amortizations to start at the end of the 9th quarter fromthe date of the release with then prevailing interest rate of 4.32% per annum, subject toquarterly repricing. Interest is payable quarterly in arrears to start at the end of the firstquarter from the date of the release of the loan.

PSHC’s interest expense on the above loans in 2014 and 2013 amounted to P=62.42 million andP=26.4 million, respectively (see Note 24).

EW

aa. On July 4, 2014, EW issued 5.5% coupon rate Lower Tier 2 unsecured subordinated note (the2025 Notes) with par value of P=5.0 billion, maturing on January 4, 2025, but callable onJanuary 4, 2020. The 2025 Notes qualify as Tier 2 capital pursuant to BSP Circular No. 781(Basel III), BSP Circular No. 826 on risk disclosure requirements for the loss absorptionfeatures of capital instruments, and other related circulars and issuances of the BSP.

Unless the 2025 Notes are previously redeemed, the 2025 Notes are repayable to theNoteholders at 100.0% of their face value or at par on the maturity date of January 4, 2025.

From and including the issue date to, but excluding the optional redemption date of January 4,2020, the 2025 Notes bear interest at the rate of 5.5% per annum and shall be payablequarterly in arrears on January 4, April 4, July 4, and October 4 of each year, whichcommenced on October 4, 2014. Unless the 2025 Notes are previously redeemed, the interestrate will be reset at the equivalent of the prevailing 5-year PDST-R2 at reset date plus initialspread (i.e. the difference between the Initial interest rate and the prevailing 5-year PDST R2at the pricing date of the initial tranche).The 2025 Notes are redeemable at the option of EW in whole but not in part on the call optiondate at 100% of the face value plus accrued but unpaid interest, subject to the followingconditions:a. EW has obtained prior written approval and complied with the requirements of the BSP

prior to redemption of the 2025 Notesb. the 2025 Notes are replaced with capital of the same or better quality and the replacement

of this capital is done at conditions which are sustainable for the income capacity of EW,or

c. EW demonstrates that its capital position is above the minimum capital requirements afterredemption is exercised

d. EW is not in breach of (and would not, following such redemption, be in breach) ofapplicable regulatory capital requirements (including regulatory capital buffers)

e. EW is solvent at the time of redemption of the 2025 Notes and immediately thereafter.

Furthermore, upon the occurrence of a Tax Redemption Event or a Regulatory RedemptionEvent, the Parent Company may, subject to compliance with BSP rules and BSP approval, andupon prior approval of the BSP and with prior written notice to the Noteholders on record,redeem all and not less than all of the outstanding 2025 Notes prior to the stated maturity bypaying the Noteholder the Redemption Option Amount which, (a) in the case of a TaxRedemption Event is an amount equal to 100% of the face value of the 2025 Notes plusaccrued interest at the interest rate relating to the then current interest period up to butexcluding the date of such redemption, and (b) in the case of a Regulatory RedemptionEvent is an amount equal to 100% of the face value of the 2025 Notes plus accruedinterest at the interest rate relating to the then current Interest Period up to butexcluding the date of such redemption (the “Redemption Option Date”).

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The 2025 Notes have a loss absorption feature which means that the 2025 Notes are subject toa Non-Viability Write-Down in case of a Non-Viability Event. Non-viability is defined as adeviation from a certain level of Common Equity Tier 1 (CET1) Ratio or inability of EW tocontinue business (closure) or any other event as determined by the BSP, whichever comesearlier. A Non-Viability Event is deemed to have occurred when EW is considered non-viableas determined by the BSP.

Upon the occurrence of a Non-Viability Event, EW shall write-down the principal amount ofthe 2025 Notes to the extent required by the BSP, which could go to as low as zero. AdditionalTier 1 (AT1) capital instruments shall be utilized first before Tier 2 capital instruments arewritten-down, until the viability of the Issuer is re-established. In the event the ParentCompany does not have AT1 capital instruments, then the write-down shall automaticallyapply to Tier 2 capital.

Loss absorption measure is subject to the following conditions:a. the principal amount of all series of Tier 1 Loss Absorbing Instruments outstanding

having been Written-Down to zero or converted into common equity of the ParentCompany (where possible) irrevocably, in accordance with, and to the extent possiblepursuant to, their terms (the “Tier 1 Write-Down”)

b. the Tier 1 Write-Down having been insufficient to cure the Non-Viability Eventc. the Parent Company giving the relevant Non-Viability Notice to the Public Trustee and

the Registrar and Paying Agent

Each Noteholder irrevocably agrees and acknowledges that it may not exercise or claim anyright of set-off in respect of any amount owed to it by EW arising under or in connection withthe 2025 Notes and it shall, to the fullest extent permitted by applicable law, waive and bedeemed to have waived all such rights of set-off.

bb. On July 2, 2010, EW issued 7.50% coupon rate Lower Tier 2 unsecured subordinated note(the 2021 Notes) with par value of P=1.5 billion, maturing on January 2, 2021 but callable onJanuary 2, 2016, and with step-up in interest if not called.


From and including the issue date to, but excluding the optional redemption date ofJanuary 2, 2016, the 2021 Notes bear interest at the rate of 7.50% per annum and shall bepayable semi-annually in arrears on January 2 and July 2 of each year, commencing onJanuary 2, 2011. Unless the 2021 Notes are previously redeemed, the interest rate from andincluding January 2, 2016 to, but excluding January 2, 2021, will be reset and such Step-Upinterest shall be payable semi-annually in arrears on January 2 and July 2 of each year,commencing on July 2, 2016.

The Step-Up interest rate shall be computed as the higher of:

a. 80.00% of the 5-year on-the-run Philippine Treasury benchmark bid yield (PDST-F) onoptional redemption date plus the Step-Up spread of 3.44% per annum. The Step-Upspread is defined as follows:

Step-Up spread = 150.00% of the difference between the Interest Rate and 80.00% of the5-year PDST-F on the Pricing Date, preceding the initial Issue Date, equivalent to 3.44%per annum.

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b. 150.00% of the difference between the interest rate and the 5-year PDST-F on the pricingdate preceding the initial issue date plus the 5-year PDST-F on the optional redemptiondate.

cc. On July 25, 2008, EW issued 8.63% coupon rate Lower Tier 2 unsecured subordinated note(the 2019 Notes) with par value of P=1.50 billion, maturing on January 26, 2019 but callableon January 25, 2014, and with step-up in interest if not called.


From and including the issue date to, but excluding the optional redemption date ofJanuary 25, 2014, the 2019 Notes bear interest at the rate of 8.63% per annum and shall bepayable semi-annually in arrears on January 25 and July 25 of each year, commencing onJanuary 25, 2009. Unless the 2019 Notes are previously redeemed, the interest rate from andincluding January 25, 2014 to, but excluding January 26, 2019, will be reset and such Step-Upinterest shall be payable semi-annually in arrears on January 25 and July 25 of each year,commencing on July 25, 2014.

The Step-Up rate shall be computed as the higher of:

a. 80.00% of the 5-year on-the-run Philippine Treasury benchmark bid yield (PDST-F) onoptional redemption date plus the Step-Up spread. The Step-Up spread is defined asfollows:

Step-Up spread = 150.00% [8.25% - 80.00% (5-year PDST-F on the pricing date beforethe initial issue date)]

b. 150.00% of the difference between the interest rate and the 5-year PDST-F on the pricingdate preceding the initial issue date plus the 5-year PDST-F on the optional redemptiondate.

dd. On March 12, 2008, GBI, EW’s subsidiary, issued 9.72% per annum Lower Tier 2 unsecuredsubordinated notes (the 2018 Notes) in favor of Land Bank of the Philippines (LBP) with parvalue of P=112.50 million, maturing on March 13, 2018 but callable on March 13, 2013, andwith step-up in interest if not called. The issuance of the 2018 Notes under the termsapproved by the BOD was approved by the BSP on February 14, 2008.

Among the significant terms and conditions of the issuance of the Notes are:a. The 2018 Notes must be issued and fully paid up. Only the net proceeds received from

the issuance of the 2018 Notes shall be included as capital.b. The 2018 Notes bear interest at 9.72% per annum for the first five years of the term,

payable quarterly. On the next 5 years, the rate will be reset at 5-year PDST-F at the timeof extension plus a spread of 4.00% per annum or 10.00% per annum, whichever ishigher, subject to allowable interest rate step-up regulation of the BSP. Upon resetting in2013, the interest rate has been fixed at 10.72%.

c. The 2018 Notes are neither secured nor covered by a guarantee by GBI or related party ofGBI or other arrangement that legally or economically enhances the priority of the claimof any holder of the 2018 Notes as against depositors and other creditors.

d. The 2018 Notes shall not have a priority claim, in respect of principal and couponpayments in the event of winding up of the Issuer, which is higher than or equal with thatof depositors and other creditors.

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e. The 2018 Notes cannot be terminated by LBP before maturity date.f. LBP cannot set off any amount that it may owe to GBI against the 2018 Notes.g. The payment of principal may be accelerated only in the event of insolvency of GBI.h. The coupon rate or the formulation for calculating coupon payments shall be fixed at the

time of the issuance of the 2018 Notes and may not be linked to the credit standing ofGBI.

The Group’s interest expense on subordinated debt amounted to P=258.7 million in 2014,P=232.2 million in 2013 and P=232.4 million in 2012.

FDCI

ee. On April 2, 2013, the Group issued through FDCI (see Note 1) issued fixed-rate bonds withoriginal issuance amount of $300.0million and term of seven (7) years from the issue date.The bonds bear a fixed interest rate of 4.3% per annum and is payable semi-annually in arrearsstarting on October 2, 2013.

In 2013, the Group repurchased $13.5 million (P=577.3 million) of the $300.0 million fixed-rate bonds at a discount. Total gain on repurchased bonds, included as part of ‘Other income’of other operation, amounted to P=41.7 million (see Note 26).

As of December 31, 2014, the outstanding balance of the bonds amounted to $283.6 million(P=12.7 billion), net of unamortized deferred financing cost of $2.9 million (P=129.7 million).In 2014, FDCI’s interest expense on the fixed-rate bonds included in the costs of otheroperations amounted to P=567.1 million and P=430.7 million in 2014 and 2013, respectively (seeNote 25).

FDCUI

FDC Misamis entered into the following loan facility agreements with local financialinstitution to partially finance the construction and operation of the 405 MW circulatingfluidized bed coal-fired thermal power plant to be located inside the PHIVIDEC IndustrialEstate in Villanueva, Misamis Oriental.

ff. On October 8, 2013, FDC Misamis entered into term loan facility agreement amounting toP=6.2 billion. Total drawdown as of December 31, 2014 amounted to P=1.8 billion (nil as ofDecember 31, 2013).

gg. On October 9, 2013, FDC Misamis entered into another term loan facility agreementamounting to P=9.0 billion. Total drawdown as of December 31, 2014 amounted toP=2.6 billion (nil as of December 31, 2013).

hh. On March 12, 2014, FDC Misamis entered into term loan facility agreement amounting toP=5.0 billion. As of December 31, 2014, there is no drawdown on this facility.

These loan facility agreements provide for a scheduled loan availments within a certainperiod. These loans are payable in 42 quarterly variable payments. The first installment willbe due 42 months from initial availment date or 6 months from the project completion date,whichever comes first. These loans bear interest of 7-year PDST-F (subject to repricing onthe 7th year anniversary from initial availment date) plus applicable credit spread.

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These loans are secured with real properties and real rights, inclusive of FDC Misamis’buildings and other improvements and its rights provided under certain agreements (e.g.,Electric Power Purchase Agreements (EPPAs), insurance and lease contracts), chattels,movables and personal properties.

The Group’s loans payable are unsecured and no assets are held as collateral for these debts,except for the loan of FDC Misamis. The agreements covering the abovementioned loans requiremaintaining certain financial ratios including debt-to-equity ratio of 1.0x to 4.0x; debt servicecoverage ratio of 1.0x to 1.5x; interest coverage ratio of 2.0x to 3.0x; minimum current ratio of2.0x; and limit in single mortgage, unhedged foreign currency open position, and loans to relatedparties of 1%, 10% and 15% of shareholders’ equity, respectively.

The agreements also provide for restrictions and requirements with respect to, among others,making distribution on its share capital; purchase, redemption or acquisition of any share of stock;incurrence or assumption of indebtedness outside the normal course of business; sale or transferand disposal of all or a substantial part of its capital assets; restrictions on use of funds; andentering into any partnership, merger, consolidation or reorganization.

The Group has complied with these contractual agreements. There was neither default nor breachnoted as of December 31, 2014 and 2013.

Interest expense and amortization of debt discounts and expenses follow:

2014 2013 2012(In Thousands)

Long-term debt and bonds payable P=2,087,934 P=1,539,007 P=1,228,157Amortization of deferred financing costs 177,844 112,382 41,410Bank charges and other financing cost 19,608 20,256 62,769

P=2,285,386 P=1,671,645 P=1,332,336

Interest expense on subordinated debt of EW included in the “Cost of financial and bankingservices” amounted to P=258.7 million, P=232.2 million and P=232.4 million in 2014, 2013 and 2012,respectively (see Note 25).

Interest expense on the fixed-rate bonds of FDCI included in the costs of other operations servicesamounted to P=567.1 million and P=430.7 million in 2014 and 2013, respectively (seeNote 25).

Interest expense on loans and bonds payable included in operating expenses of the Groupamounted to P=1.3 billion, P=876.1 million and P=995.8 million in 2014, 2013 and 2012, respectively.

22. Equity

Capital Stock and Additional Paid-in CapitalOn December 22, 1982, the SEC approved the registration of 5,300,000 shares, divided into5,200,000 Class A shares, and 100,000 class B shares with par value of P=10.0 per share.

On April 13, 1992, the SEC approved the registration of 144,575,000 common shares with parvalue of P=10.0 per share.

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Below is the summary of the Group’s track record of registration of securities with the SEC as ofDecember 31, 2014 (Amount in thousands, except for issue/offer price):

Year

Numberof Shares

Registered

Numberof holders

of securitiesas of year end

January 1, 2012 9,317,474 4,400Add/(Deduct) Movement – (83)December 31, 2012 9,317,474 4,317Add/(Deduct) Movement – (51)December 31, 2013 9,317,474 4,266Add/(Deduct) Movement – (59)December 31, 2014 9,317,474 4,207Note: Exclusive of 2,398 treasury shares.

On October 15, 2010, the Stockholders and BOD of the Parent Company approved the increase inthe authorized capital stock of the Parent Company from P=10.0 billion, divided into 10.0 billioncommon shares with a par value of P=1 per share to P=17 billion, divided into 15.0 billion commonshares with a par value of P=1 per share and 2 billion non-voting and redeemable preferred shareswith a par value of P=1 per share. Article Seven of the Amended Articles of Incorporation of theParent Company was amended to effect the increase in the authorized capital stock of the ParentCompany. On August 19, 2011, the SEC approved the increase in the authorized capital stock ofthe Parent Company.

On August 19, 2011, the SEC approved the increase in the authorized capital stock of the ParentCompany from P=10.0 billion to P=17.0 billion, consisting of 15.0 billion common shares with a parvalue of P=1.0 per share and 2.0 billion preferred shares with a par value of P=1.0 per share. Thepreferred shares have the following features:a) not entitled to any voting right or privelege, except in those cases expressly provided by law;b) redeemable subject to the terms and conditions to be fixed by the BOD;c) entitled to dividends at the rate to be determined by the BOD prior to the issuance of shares, to

be payable out of the surplus profits of the Corporation so long as the preferred shares areoutstanding; and,

d) may be subject to such other additional terms and conditions to be fixed by the BOD.

Dividend DeclarationOn May 25, 2012, the Parent Company’s BOD approved the declaration and payment of cashdividends of P=419.3 million or P=0.045 per share for every common share payable on July 16, 2012to stockholders of record as of June 22, 2012.

On May 30, 2013, the Parent Company’s BOD approved the declaration and payment of cashdividends of P=499.4 million or P=0.0536 per share to shareholders of record as of June 27, 2013,payable on July 17, 2013.

On May 30, 2014, the Parent Company’s BOD approved the declaration and payment of cashdividends of P=511.5 million or P=0.0549 per share to shareholders of record as of June 26, 2014,payable on July 16, 2014.

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Retained EarningsRetained Earnings include undistributed earnings representing accumulated equity in net earningsof subsidiaries, which are not available for dividend declaration until received in the form ofdividends from such subsidiaries and associates. Retained earnings are further restricted for thepayment of dividends to the extent of the cost of the shares held in treasury and deferred tax assetrecognized as of December 31, 2014 and 2013.

The Parent Company’s retained earnings available for dividend declaration as of December 31,2014, 2013 and 2012 amounted to P=6.6 billion, P=6.4 billion and P=6.5 billion, respectively.

Capital ManagementThe Group prudently monitors its capital and cash positions and cautiously manages itsexpenditures and disbursements. Furthermore, the Group may also, from time to time seek othersources of funding, which may include debt or equity issues depending on its financing needs andmarket conditions.

The primary objective of the Group’s capital management is to ensure that it maintains a strongcredit rating and healthy capital ratios in order to support its business and maximize shareholdervalue. No changes were made in capital management objectives, policies or processes for theyears ended December 31, 2014, 2013 and 2012.

The Group monitors capital using debt-to-equity ratio, which is the long-term debt divided by totalequity. The Group’s policy is to keep the debt to equity ratio not to exceed 2:1.


Long-term debt P=75,210,953 P=59,093,035Total equity 89,644,962 84,685,334Debt to equity ratio 0.84:1.00 0.70:1.00

23. Related Party Transactions

The Group has entered into various transactions with related parties. Parties are considered to berelated if one party has the ability, directly or indirectly, to control the other party in makingfinancial and operating decisions or the parties are subject to common control or commonsignificant influence (referred to as ‘Affiliates’). Related parties may be individuals or corporateentities.

Significant transactions with related parties are as follows:

a. EW has loan transactions with investees and with certain directors, officers, stockholders andrelated interests (DOSRI). These transactions usually arise from normal banking activitiessuch as lending, borrowing, deposit arrangements and trading of securities, among others.Under existing policies of EW, these transactions are made substantially on the same terms aswith other individuals and businesses of comparable risks.

Under current banking regulations, the aggregate amount of loans to DOSRI should notexceed the total capital funds or 15% of the total loan portfolio of EW, whichever is lower. Inaddition, the amount of direct credit accommodations to DOSRI, of which 70% must besecured, should not exceed the amount of their respective regular and/or quasi-deposits andbook value of their respective investments in EW.

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BSP Circular No. 560 provides that the total outstanding loans, other credit accommodationand guarantees to each of the bank’s/quasi-bank’s subsidiaries and affiliates shall not exceed10.0% of the net worth of the lending bank/quasi-bank, provided that the unsecured portion ofwhich shall not exceed 5.0% of such net worth.

Further, the total outstanding loans, credit accommodations and guarantees to all subsidiariesand affiliates shall not exceed 20.0% of the net worth of the lending bank/quasi-bank; and thesubsidiaries and affiliates of the lending bank/quasi-bank are not related interest of anydirector, officer and/or stockholder of the lending institution, except where such director,officer or stockholder sits in the BOD or is appointed officer of such corporation asrepresentative of the bank/quasi-bank. As of December 31, 2014 and 2013, the EW is incompliance with these requirements.

On May 12, 2009, BSP issued Circular No. 654 allowing a separate individual limit of twenty-five (25.0%) of the net worth of the lending bank/quasi-bank to loans of banks/quasi-banks totheir subsidiaries and affiliates engaged in energy and power generation. As ofDecember 31, 2014 and 2013, the Group is in compliance with these requirements.

BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. Thefollowing table shows information relating to the loans, other credit accommodations andguarantees classified as DOSRI accounts under regulations existing prior to said circular andnew DOSRI loans, other credit accommodations granted under said circular:

2014 2013Total outstanding DOSRI accounts (in thousands) P=7,759,327 P=6,394,361Percent of DOSRI accounts granted under

regulations existing prior to BSP CircularNo. 423 0.000% 0.000%

Percent of DOSRI accounts granted under BSPCircular No. 423 6.283% 6.494%

Percent of DOSRI accounts to total loans 6.283% 6.495%Percent of unsecured DOSRI accounts to total

DOSRI accounts 3.315% 2.499%Percent of past due DOSRI loans to total DOSRI

loans 0.001% 0.067%

b. Loans guaranteed by the Parent Company obtained by FLI amounted to P=225.0 million andP=675.0 million as of December 31, 2014 and 2013, respectively. The Parent Company hasalso guaranteed the $300.0 million fixed-rate bonds issued by FDCI in 2013.

c. The compensation of key management personnel consists of short-term employee salaries andbenefits amounting to P=51.6 million, P=53.7 million and P=57.3 million in 2014, 2013 and 2012,respectively. Post-employment benefits of key management personnel amounted toP=8.8 million in 2013 and P=5.4 million in 2012 (nil in 2014).

There are no agreements between the Group and any of its key management personnelproviding for benefits upon termination of employment, except for such benefits to which theymay be entitled under the Group’s retirement plan.

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d. Other transactions with related parties include non-interest bearing cash advances and variouscharges to and from non-consolidated affiliates for management fees, rent, share of expensesand commission charges. Transactions with related parties are normally settled in cash.

The amounts and the balances arising from the foregoing significant related party transactions areas follows:

2014

Amount/Volume

OutstandingBalance


Due from related partiesReal estate operationsParent(a) P=703 P=1,205 Non-interest bearing,

payable on demandUnsecured, no

impairmentAffiliates:

Share in expenses 2,382 314,059Non-interest bearing,


impairment3,085 315,264

Hotel operationsAffiliates − 10,412 Non-interest bearing,

payable on demandUnsecured

3,085 325,676Due to related partiesAffiliates(a) − (48,791) Non-interest bearing,

payable on demandexcept for availment of

loan(b)

Unsecured, noimpairment

P=3,085 P=276,885(a) Share in Group expenses(b) Availment of loan payable within one year, with interest at prevailing market rate

2013

Amount/Volume

OutstandingBalance


Due from related partiesReal estate operationsParent(a) P=334 P=696 Non-interest bearing,


impairmentAffiliates: 208,041 Share in expenses 299 − Non-interest bearing,


impairment Management fee 816 − Non-interest bearing,


impairment Commission expense 1,279 − Non-interest bearing,



Hotel operationsAffiliates(a) − 4,944 Non-interest bearing,



Due to a related partyParent(a) (101,485) (101,183) Non-interest bearing,

payable on demandexcept for availment

of loan(b)

Unsecured, noimpairment

(P=98,757) P=112,498(a) Share in Group expenses(b) Availment of loan payable within one year, with interest at prevailing market rate

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24. Expenses


2014 2013 2012(In Thousands)

Real estate operationsInterest expense (Note 21) P=635,705 P=476,742 P=345,036

General and administrative:Salaries, wages and employee benefits 571,920 462,148 432,216Taxes and licenses 224,685 195,400 190,591Depreciation and amortization

(Notes 15 and 16) 223,770 194,002 172,100Travel and transportation 115,649 101,476 102,027Outside services 109,430 129,169 125,563Repairs and maintenance 106,282 102,700 83,180Insurance 93,036 99,557 59,571Bank charges 76,448 89,949 65,015Rent (Note 30) 73,963 80,893 93,486Entertainment, amusement and recreation 72,174 63,522 56,773Film rentals 64,935 59,456 60,657Utilities 62,197 56,131 73,794Retirement costs (Note 28) 51,226 40,723 37,295Provision for probable losses (Note 8) 7,211 32,301 17,466Others 142,833 107,917 174,706

1,995,759 1,815,344 1,744,440Marketing expenses:

Commission expense 540,002 382,121 401,566Advertising expense 214,200 245,637 378,566Marketing fee 405,506 383,208 163,684

1,159,708 1,010,966 943,8163,791,172 3,303,052 3,033,292

Financial and banking servicesGeneral and administrative:

Salaries, wages and employee benefits 2,918,617 2,612,199 1,934,247Taxes and licenses 974,893 865,315 722,607Depreciation and amortization

(Notes 15 and 16) 670,291 575,615 435,388Service charges, fees and commission 657,067 494,454 363,630Rent (Note 30) 629,291 542,474 410,178Outside services 548,502 457,066 363,542Advertising 407,578 395,164 420,140Postage, telephone and telegraph 323,304 282,808 156,897Insurance 264,238 211,207 185,392Technological fees 242,537 179,279 143,240Brokerage fees 206,896 239,503 161,194Travel and transportation 194,571 189,705 151,026Amortization of computer software, customer relationships and core deposits (Note 17) 191,661 142,031 125,659Utilities expense 183,769 165,633 122,271Retirement costs (Note 28) 89,238 102,158 49,369

(Forward)

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2014 2013 2012(In Thousands)

Stationery and supplies P=79,992 P=74,742 P=95,917Repairs and maintenance 74,303 40,525 43,377Entertainment, amusement and recreation 48,223 47,970 45,705Others 237,985 128,242 330,816

8,942,956 7,746,090 6,260,595Provision for probable losses 3,311,349 3,097,641 1,530,796

12,254,305 10,843,731 7,791,391Sugar operations

Interest expense (Note 21) 62,420 68,198 69,239General and administrative:

Salaries, wages and employee benefits 36,501 38,639 34,513Taxes and licenses 19,353 7,182 10,202Outside services 17,224 18,259 22,939Depreciation and amortization (Note 16) 12,967 13,743 13,569Retirement costs (Note 28) 9,282 8,535 9,670Travel and transportation 6,605 6,148 4,792Provision for probable losses and

write-off (Note 9) 6,077 7,656 |8,047Entertainment, amusement and recreation 5,410 5,404 5,583Supplies 4,122 4,100 4,853Repairs and maintenance 3,837 3,180 2,741Communication 2,415 2,591 2,688Others 51,950 24,982 16,120

175,743 140,419 135,717238,163 208,617 204,956

Hotel operationsInterest expense (Note 21) 23,135 71,887 −General and administrative:

Depreciation (Note16) 119,696 98,141 23,959Utilities 115,923 112,287 72,509Salaries, wages and employee benefits

(Note 28) 104,075 107,885 56,428Outside services 57,819 36,863 514Management fees 28,387 28,755 9,857Repairs and maintenance 23,639 9,876 7,693Administrative expenses 21,452 2,090 737Rent 15,254 13,823 1,280Credit card commission 14,931 12,214 6,280Travel and transportation 8,632 13,169 4,174Security services 8,233 7,635 7,022Insurance 8,210 7,861 2,397Taxes and licenses 8,065 12,038 5,522Representation and entertainment 3,412 3,691 2,798Others 75,165 31,089 44,407

612,893 497,417 245,577Marketing expenses 32,975 59,649 8,462

669,003 628,953 254,039

(Forward)

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2014 2013 2012(In Thousands)

Power generation operationsInterest expense (Note 21) P=12,084 P=− P=−General and administrative:

Salaries, wages and employee benefits (Note 28) 55,883 41,409 26,154Professional fee 49,814 7,437 9,265Depreciation and amortization (Note16) 9,117 8,659 4,108Rent 6,342 7,344 2,919Taxes and licenses 5,419 185 510Travel and transportation 4,709 2,249 697Repairs and maintenance 1,451 959 1,428Representation and entertainment 758 650 1,823Others 11,404 10,024 8,407

144,897 78,916 55,311156,981 78,916 55,311

Other operationsInterest expense (Note 21) 545,482 259,292 581,522General and administrative:

Bank charges 121,978 20,000 42,623Salaries, wages, and employee benefits

(Note 28) 26,482 22,237 17,320Taxes and licenses 11,476 60,285 7,614Entertainment, amusement and recreation 11,273 11,875 5,679Travel and transportation 9,820 10,991 5,990Outside services 5,131 8,124 3,189Depreciation and amortization (Note 16) 147 682 1,256Others 105,000 110,499 29,052

291,307 244,693 112,723836,789 503,985 694,245

P=17,946,413 P=15,567,254 P=12,033,234

25. Costs

Cost of sale of lots, condominium and residential units and club shares consists of:

2014 2013 2012(In Thousands)

Subdivision lots, condominium andresidential units (Note 11) P=8,155,820 P=6,488,178 P=5,920,790

Land and land development costs (Note 14) 31,414 199,342 320,792Club shares (Note 11) 7,890 21,876 17,961

P=8,195,124 P=6,709,396 P=6,259,543

Cost of mall and rental services consists of:

2014 2013 2012(In Thousands)

Depreciation (Note 15) P=57,075 P=268,393 P=245,241Mall operations 116,820 128,725 133,868

P=173,895 P=397,118 P=379,109

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Cost of financial and banking services consists of:

2014 2013 2012(In Thousands)

Interest on deposit liabilities and otherborrowings:Deposit liabilities (Note 18) P=1,164,018 P=1,078,891 P=1,378,001Subordinated debt, bills payable and

other borrowings (Notes 19 and 21) 313,689 291,811 303,237P=1,477,707 P=1,370,702 P=1,681,238

Cost of sugar sales consists of:

2014 2013 2012(In Thousands)

Costs of quedan purchases P=1,092,255 P=1,007,151 P=1,156,362Depreciation and amortization (Note 16) 214,888 174,744 175,762Materials and supplies 187,458 192,119 178,881Salaries, wages and employee benefits 173,620 175,762 170,661Cane hauling 80,603 93,715 80,535Outside services 60,540 77,374 71,167Repairs and maintenance 24,909 18,199 21,663Communications, light and water 14,818 12,579 13,262Development costs 13,674 13,873 12,629Liens 11,952 15,417 10,922Trucking and handling charges 10,542 7,161 5,781Taxes and licenses 9,825 7,978 6,432Rent (Note 30) 3,989 1,906 2,280Others 22,671 58,500 26,078Cost of goods manufactured 1,921,447 1,856,478 1,932,415Decrease (increase) in:

Sugar and molasses inventories (Note 12) (73,349) 240,314 (19,779)Biological assets (Note 17) (3,429) 47,809 3,894

P=1,844,669 P=2,144,601 P=1,916,530

Cost of hotel operations consists of:

2014 2013 2012(In Thousands)

Food and beverage P=152,827 P=98,515 P=71,920Salaries, wages and employee benefits 100,381 141,248 76,050Depreciation and amortization (Note 16) 42,269 42,840 42,269Guest amenities 6,861 6,397 6,843Kitchen fuels 4,732 4,655 4,357Guest laundry and linen 4,345 5,089 4,276Cleaning supplies 2,920 2,600 2,987Paper and plastics 2,833 1,636 1,705Complimentary food and services 2,727 2,242 2,783Gift shop 2,585 2,088 2,078Equipment rental 2,297 1,642 1,785Guest transportation 1,817 8,840 1,940

(Forward)

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2014 2013 2012(In Thousands)

Printing and office supplies P=1,780 P=3,188 P=3,098Contract services 339 140 7,612Replacements – 7,087 –Others 39,273 23,026 1,167

P=367,986 P=351,233 P=230,870

Cost of power generation operations consists of cost of purchased electricity and amortization ofIPP Administrator rights amounting to P=66.8 million and P=18.7 million in 2014, respectively.

Cost of other operations pertains to FDCI’s interest expense on fixed-rate dollar bonds amountingto P=567.1 million and P=430.7 million in 2014 and 2013, respectively (see Note 21).

26. Other Income

Other income from real estate operations consist of:

2014 2013 2012(In Thousands)

Interest income (Notes 6 and 8) P=749,996 P=548,266 P=503,395Forfeited reservations and payments 277,081 202,093 139,395Service income 178,524 145,746 146,731Income from amusement centers, parking

and other lease related activities 156,256 223,517 158,370Processing fees 124,271 87,461 45,891Ticket, food and beverage sales 120,720 125,448 126,519Water supply income 78,637 109,096 90,326Sewer treatment services 34,532 34,623 29,585Amortization of deferred income 236,259 − 54,150Others 225,888 65,059 150,053

P=2,182,164 P=1,541,309 P=1,444,415

Major items included in the ‘Others’ are membership and maintenance dues and other fees fromtenants.

Other income - net from financial and banking services consist of:

2014 2013 2012(In Thousands)

Service charges, fees and commissions P=3,297,839 P=2,528,470 P=1,860,223Trading and securities gains - net

Financial assets at FVTPL (Notes 3 and 13) 499,525 1,005,237 988,110Investment securities at amortized cost

(Note 13) 305,997 572,490 276,883Recovery on charged-off bank assets 150,192 299,399 183,537

(Forward)

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2014 2013 2012(In Thousands)

Foreign currency exchange gains - net P=193,517 P=121,236 P=222,727Gain (loss) on sale of assets 37,631 15,161 4,904Trust income (Note 41) 20,372 29,017 27,842Gain on asset foreclosure and dacion

transactions 19,417 93,784 42,412Others 71,839 107,528 88,470

P=4,596,329 P=4,772,322 P=3,695,108

Other income from sugar operations consist of:

2014 2013 2012(In Thousands)

Interest income P=176 P=120 P=197Others 79,731 64,185 99,239

P=79,907 P=64,305 P=99,436

Other income from sugar operations include fertilizers assistance, storage and handling fee, salesof scrap and other miscellaneous income.

Other income from hotel, power generation and other operations consists of:

2014 2013 2012(In Thousands)

Interest income P=1,110 P=363 P=23Gain on repurchase of bonds (Note 21) − 41,676 −Others 2,835 1,767 15,110

P=3,945 P=43,806 P=15,133

27. Changes in Equity Interest in Subsidiaries

On January 20, 2012, EW filed for the amendment of its articles of incorporation and by-lawsand the application for increase in capital stock from P=8.0 billion to P=20.0 billion, divided into1.5 billion common shares and 0.5 billion preferred shares with par value each of P=10.0 per share,with the BSP and the SEC. This was subsequently approved by the BSP and the SEC on March 2,2012 and March 6, 2012, respectively.

On January 6, 2012, the stockholders and BOD of EW authorized the public offer of twenty (20)to thirty (30) percent of EW’s outstanding capital stock. Subsequently, EW filed its applicationfor listing with the Philippine Stock Exchange (PSE) on January 27, 2012 and was approved onMarch 14, 2012, while the Registration Statement was filed with the SEC on January 23, 2012 andwas approved on March 14, 2012. On April 20 to 26, 2012, a total of 245,316,200 common shareswith P=10 par value, representing 21.7% of outstanding capital stock was offered and subscribedthrough an initial public offering at P=18.5 per share.

The common shares comprise of (a) 141,056,800 new shares issued by EW by way of primaryoffer, and (b) 104,259,400 existing shares offered by the Parent Company, the selling shareholder

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of EW, pursuant to a secondary offer. Subsequently, on June 5, 2012, 36,715,300 shares comingfrom the over-allotment option were exercised at a price of P=18.5 per share that brought thesubscriptions to 25% of the outstanding capital stock. Listing date and commencement of tradingof EW was on May 7, 2012, as approved by the PSE.

The total proceeds raised by the Group (Parent Company and EW) from the sale of primary andsecondary offer shares amounted to a total of P=5,219.1 million, while the net proceeds (afterdeduction of fees and expenses) amounted to P= 4,752.2 million.

The 25% of outstanding capital stock of EW offered to and subscribed by outside investors atP=18.5 per share resulted to a decrease in Group’s effective ownership in EW from 100% to 75%.

In 2012, the Parent Company purchased an additional 0.4% of noncontrolling interest in FLI. Thisresulted to a decrease in noncontrolling interest by P=155.3 million and a charge to equity under“retained earnings” of P=49.2 million. EW also purchased additional noncontrolling interest in GBIwith cash outflow of P=8.0 million.

28. Retirement Plan

The Group has a funded, noncontributory defined benefit retirement plan (the “Plan") coveringsubstantially all of its officers and regular employees. Under the Plan, all covered officers andemployees are entitled to cash benefits after satisfying certain age and service requirements. Theretirement plan provides retirement benefits equivalent to 70% to 125% of the final monthly salaryfor every year of service.

The funds are administered by the Group’s Treasurer under the supervision of the Board ofTrustees of the Plan and are responsible for investment strategy of the Plan.

Republic Act 7641 requires a provision for retirement pay to qualified private sector employeesprovided that the employee’s retirement benefits under any collective bargaining and otheragreements shall not be less than those provided under the law. The law does not require minimumfunding of the plan. The Group updates the actuarial valuation every year by hiring the services ofa third party professionally qualified actuary.

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Changes to the net pension liabilities recognized in the statements of financial position follows:

For the year ended December 31, 2014

Present value ofdefined benefit

obligationsFair value of

plan assets

Net definedbenefit

liabilities(In Thousands)

Balances as at December 31, 2013 P=991,836 P=522,125 P=469,711Net benefit costs in profit or loss

Current service cost 151,501 − 151,501Net interest 47,193 23,601 23,592

198,694 23,601 175,093Remeasurements in other comprehensive

incomeReturn on plan assets (excluding amount

included in net interest) − 36,232 (36,232)Actuarial changes arising from

experience adjustments 32,574 − 32,574Actuarial changes arising from changes

in demographic assumptions 314 − 314Actuarial changes arising from changes

in financial assumptions 27,770 − 27,77060,658 36,232 24,426

Benefits paid (19,149) (19,149) −Contributions − 88,802 (88,802)Balances as of December 31, 2014 (Note 20) P=1,232,039 P=651,611 P=580,428

For the year ended December 31, 2013

Present value ofdefined benefit

obligationsFair value of

plan assets

Net definedbenefit

liabilities(In Thousands)

Balances as at December 31, 2012 P=839,403 P=401,237 P=438,166Net benefit costs in profit or loss

Current service cost 116,033 – 116,033Loss on settlement 24,647 − 24,647Net interest 45,773 24,079 21,694

186,453 24,079 162,374Remeasurements in other comprehensive

incomeReturn on plan assets (excluding amount

included in net interest) – 41,050 (41,050)Actuarial changes arising from

experience adjustments 75,822 – 75,822Actuarial changes arising from changes

in demographic assumptions (185,747) – (185,747)Actuarial changes arising from changes

in financial assumptions 155,833 – 155,83345,908 41,050 4,858

Benefits paid (79,928) (28,562) (51,366)Contributions – 84,321 (84,321)Balances as of December 31, 2013 (Note 20) P=991,836 P=522,125 P=469,711

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The fair value of plan assets by each class are as follows:


Cash and cash equivalents P=407,952 P=366,448Debt instruments:

Private securities 81,097 30,330Government securities 56,475 54,502

Equity instruments:Financial services 66,685 12,684Holding 9,879 23,801Real estate 8,859 7,273Telecommunications 8,662 8,319Retail 3,720 3,032Utilities 3,714 4,970Mining 1,493 2,008Manufacturing 1,062 3,358Services − 4,343Transportation − 234

Others 2,013 823Fair value of plan assets P=651,611 P=522,125

The Group’s plan assets are carried at fair value. All equity and debt instruments held have quotedprices in active market. The fair value of other assets which include accrued interest and otherreceivables approximates carrying amount due to the short-term nature of these accounts. Theplan assets have diverse investments and do not have any concentration risk.

In 2014, 2013 and 2012, the principal assumptions used in determining pension benefits includesdiscount rates of 4.2% to 8.8% and salary increase rates of 5.0% to 8.0%.

The sensitivity analysis that follow has been determined based on reasonably possible changes ofthe assumption occurring as of the end of the reporting period, assuming if all other assumptionswere held constant. Management believes that as of the reporting date, it is only the decline indiscount rate that could significantly affect the pension obligation. Management believes thatpension obligation will not be sensitive to the salary rate increases because it is expected to be atthe same level for the remaining life of the obligation. If the discount rate would be 100 basispoints lower, the defined benefit obligation would increase by P=130.6 million and P=50.3 million in2014 and 2013, respectively. If the discount rate would be 100 basis points higher, the definedbenefit obligation would decrease by P=112.8 million and P=50.3 million in 2014 and 2013,respectively.

The Group expects to contribute P=88.7 million to the plan in 2015.

Each year, an Asset-Liability Matching Study (ALM) is performed with the result being analyzedin terms of risk-and-return profiles. EW’s current strategic investment strategy consists of 70% ofequity instruments, 25% of debt instruments, and 5% cash. For the Group other than EW, theprincipal technique of the Group’s ALM is to ensure the expected return on assets to be sufficientto support the desired level of funding arising from the defined benefit plans. The Group’s currentinvestment strategy consists of 100% short-term deposit placements.

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As of December 31, 2014 and 2013, cash and cash equivalents of the fund include savings depositwith EW amounting to P=122.4 million and P=90.5 million, respectively, debt instruments includeinvestments in LTNCD amounting to P=62.1 million and P=62.2 million, respectively. Equityinstruments include investments in EW’s PhilEquity Institutional Feeder Fund amounting toP=61.4 million, equivalent to 61,273 shares with fair market value of P=1,001.4 per share and EWequity securities amounting to P=0.7 million, equivalent to 30,000 common shares with fair marketvalue of P=24.0 per share as of December 31, 2014, and P=0.7 million equivalent to 30,000 commonshares with fair market value of P=24.3 per share as of December 31, 2013.

The following are the amounts recognized by the retirement plan arising from its transactions withEW for the years ended December 31, 2014, 2013 and 2012.

2014 2013 2012(In Thousands)

Trust fees P=2,462 P=2,095 P=1,265Interest income on savings deposits 136 4,796 149Interest income on LTNCD 2,942 2,669 45Gain (loss) on investments in equity shares (30) 1,232 91

Aside from the transactions above, the Group has no other transactions with the retirement funds.

29. Earnings Per Share (EPS)

The following reflects the income and share data used in the basic EPS computations:

2014 2013 2012(In Thousands, Except Per Share Figures)

a. Net income - attributable to equity holders of the parent P=3,743,770 P=4,279,715 P=4,062,247b. Weighted average number of

outstanding common shares 9,317,474 9,317,474 9,317,474c. EPS - Basic/Diluted (a/b) P=0.40 P=0.46 P=0.44

Treasury shares are deducted from the total outstanding shares in computing the weighted averagenumber of outstanding common shares.

30. Lease Commitments

The Group, as a lessor, has future minimum rental receivables under renewable operating leases asof December 31, 2014 and 2013 as follows:


Within one year P=2,250,835 P=1,912,491After one year but not more than five years 3,244,496 3,615,930More than five years 1,024,604 247,603

P=6,519,935 P=5,776,024

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The Group entered into lease agreements with third parties covering real estate properties. Theseleases generally provide for either (a) fixed monthly rent (b) minimum rent or a certain percentageof gross revenue, whichever is higher. Most lease terms on commercial mall are renewable withinone year except for anchor tenants.

Rental income recognized based on a percentage of the gross revenue of mall tenants amounted toP=276.60 million, P=322.4 million and P=223.9 million in 2014, 2013 and 2012, respectively.

The Group, as a lessee, has future minimum rental payables under operating leases as ofDecember 31, 2014 and 2013 as follows:


Within one year P=834,097 P=679,963After one year but not more than five years 3,123,981 2,752,041More than five years 3,286,979 3,317,443

P=7,245,057 P=6,749,447

EW leases several premises occupied by its head office and branches. Some leases are subject toannual escalation of 5.00% to 10.00% and for periods ranging from five (5) to fifteen years,renewable upon mutual agreement of both parties.

FDC Misamis entered into a noncancellable lease agreement with Phividec Industrial Authorityfor the lease of undivided parcel of lands containing an aggregate area of 844,921 square meters tobe used for its power generation operation with a term of 25 years, exclusive of three yearconstruction period. Construction period and lease period shall commence on August 18, 2013and August 18, 2016, respectively.

As lessee, rent payable is computed based on a straight-line method and based on certainpercentages of gross income generated. In 2014, 2013 and 2012, rent expense recognized in theconsolidated statements of income amounted to P=724.9 million, P=644.5 million andP=506.6 million, respectively.

31. Contingencies and Commitments

The Group is involved in various legal actions, claims and contingencies incident to its ordinarycourse of the business. Management believes that any amount the Group may have to pay inconnection with any of these matters would not have a material adverse effect on the Group’sfinancial position or operating results. The information normally required by PAS 37 is notdisclosed as it may prejudice the outcome of the proceedings.

FLIIn connection with the joint venture agreement entered into by FLI with Cebu City Government,the Group is committed to (a) purchase 10.6 hectares of the property payable in six (6) years, to bedeveloped into a modern urban center and (b) develop 40 hectares of the property in four (4)phases, mainly mid-rise residential buildings, over a 20-year period (see Note 14).

In connection with the BTO Agreement with the Cebu Province, FLI is committed to develop andconstruct a BPO Complex the properties owned by Cebu Province located at Salinas, Lahug, CebuCity and transfer the ownership of the BPO Complex to the Cebu Province upon completion inexchange of the right to operate and manage the BPO Complex for the entire term of theagreement and its renewal (see Note 17).

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As part of its land banking activities, FLI has commitments and obligations with respect toacquisitions of various properties (see Note 14).

EWEW has several loan related suits and claims that remain unsettled. It is not practicable to estimatethe potential financial impact of these contingencies. However, in the opinion of the management,the suits and claims, if decided adversely, will not involve sums having a material effect on theconsolidated financial statements.

The following is a summary of contingencies and commitments at their peso-equivalentcontractual amounts arising from off-statement of financial position items of EW:

2014 2013 2012(In Thousands)

Unused credit line - credit card P=28,580,201 P=26,932,813 P=22,108,158Trust department accounts (Note 28) 6,914,400 7,819,270 13,803,205Forward exchange sold 4,516,250 2,308,540 7,150,910Treasurer/cashier/manager’s checks 2,424,865 4,867,487 5,258,228Unused commercial letters of credit 2,194,609 2,965,080 1,348,261Spot exchange sold 1,703,870 1,711,332 1,429,038Outstanding guarantees 1,149,045 957,760 483,008Outward bills for collection 350,747 12,581 14,010Inward bills for collection 240,497 930,110 68,507Late deposits/payments received 111,494 37,132 20,202Items held for safekeeping 756 676 555Unsold traveler’s check 27 27 25Others 2,097 730 600

PSHCThe Group’s milling contracts with planters provide for a certain sharing ratio between theplanters and the Group for the resulting sugar and molasses produced from canes milled(see Note 39).

As of December 31, 2014 and 2013, the Group has in its custody certain volumes of sugar ownedby the quedan holders. These are not reflected in the Group’s consolidated statements of financialposition since these are not assets of the Group. The Group is accountable to the quedan holdersfor the value of these trusted sugar or their sales proceeds.

In 2011, in relation with an ongoing case involving PSHC, the latter’s subsidiaries DSCC, HYSFCand CSCC received Notice of Garnishment from the court covering their respective money, goods,effects, stocks, interest in stocks/shares/credits/accounts receivables and any other personalproperties in each of the entities’ possession or control belonging to PSHC including the shares ofcommon stock of each entity.

FDCUIIn relation to the IPP Administrator contracts of Unified Leyte and Mt Apo 1 and 2, FDCUI andFDC Misamis are required to maintain an irrevocable standby letter of credit amounting toP=151.0 million and P=400.0 million which serve as an on-demand security to PSALM (seeNote 42).

In September 2013, FDC Misamis has entered into construction, engineering and procurementcontracts with third party contractors for the construction of the Misamis Power Plant. As ofDecember 31, 2014, construction of the Misamis Power Plant is still ongoing (see Note 16).

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32. Income Tax

The components of net deferred tax assets follow:


Deferred income tax assets on:Liability on IPP Administrator rights P=2,788,852 P=−Allowance for impairment and credit losses 1,082,718 1,327,162NOLCO 329,425 41,905Unrealized foreign exchange loss 148,955 172,824Provision for accruals 136,894 46,949Depreciation of assets foreclosed or dacioned 94,596 80,892Provision for retirement and unamortized

past service cost 50,943 47,331MCIT 34,621 43,164Cash flow hedge reserve 15,323 23,338Others 22,971 33,397

4,705,298 1,816,962Deferred income tax liabilities on:

IPP Administrator rights (2,818,102) −Branch license acquired from business combination (187,620) (187,620)Gain on asset foreclosure and dacion transactions (105,380) (134,346)Excess of fair value over cost of investment property

and property and equipment acquired in businesscombination (44,939) (46,577)

Revaluation increment in land (19,856) (19,856)Unrealized foreign exchange gain (9,060) (94,984)Others (24,947) (12,297)

(3,209,904) (495,680)P=1,495,394 P=1,321,282

The components of the net deferred tax liabilities follow:


Deferred income tax liabilities on:Deemed cost revaluation increment in investment

properties and property, plant and equipment P=4,070,436 P=4,093,377Capitalized borrowing costs 3,019,110 2,633,565Excess of fair value over cost of investment property

and property and equipment acquired in businesscombination 137,318 143,273

Future taxable rent income 17,622 28,173Others 106,913 99,700

7,351,399 6,998,088Deferred income tax assets on:

Provision for retirement and unamortized past service cost (108,498) (99,239)Allowance for probable losses (27,524) (26,754)Others (51,459) (52,167)

(187,481) (178,160)P=7,163,918 P=6,819,928

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The Group did not recognize deferred tax assets on the following temporary differences, NOLCOand MCIT of subsidiaries since management believes that their carryforward benefits may not berealized before they expire or through income tax deductions.


Allowance for credit and impairment losses P=388,550 P=394,890NOLCO 243,126 202,782Pension liabilities 8,077 1,767Excess MCIT over RCIT − 100

Details of the Group’s NOLCO and MCIT are as follows (in thousands):

Year Incurred NOLCO MCIT Expiry Date2014 P=1,738,127 P=7,908 December 31, 20172013 113,471 10,545 December 31, 20162012 40,297 16,168 December 31, 2015

P=1,891,895 P=34,621

The following are the movements in NOLCO and MCIT:

NOLCO MCIT2014 2013 2014 2013

(In Thousands)Balance at beginning of year P=230,759 P=551,101 P=53,212 P=50,334Additions 1,738,127 44 7,908 10,545Expired/applied (76,991) (320,386) (26,499) (7,667)Balance at end of year P=1,891,895 P=230,759 P=34,621 P=53,212

The reconciliation of the provision for income tax computed at the statutory tax rate to theactual provision for income tax follows:

2014 2013 2012(In Thousands)

Income tax at statutory rate P=2,369,856 P=2,375,981 P=2,181,140Adjustments for:

Expired MCIT 15,145 9,599 183,321Nondeductible expenses 369,432 213,897 133,882Expired NOLCO 2,055 80,273 12,925Tax-free realized gross profit on sales of

BOI-registered property (371,960) (383,841) (292,643)Nontaxable income (147,715) (594,770) (247,171)FCDU Income (250,539) (73,524) (186,543)Rent income covered by Philippine

Economic Zone Authority (PEZA) (200,695) (146,121) (119,317)Income subjected to final tax (49,107) (84,720) (118,422)ITH incentive availed (43,176) (41,143) (53,511)Tax-free realized gross profit on sold

socialized housing units (20,485) (28,030) (26,283)Movements in unrecognized deferred tax

assets 16,935 124,088 (23,575)Capital gains tax 206 704 (193)Others (7,868) 10,312 (16,038)

P=1,682,084 P=1,462,705 P=1,427,572

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Under Philippine tax laws, EW is subject to percentage and other taxes as well as income taxes,principally consisting of GRT and documentary stamp taxes.

33. Segment Information

Operating segments are components of an enterprise about which separate financial information isavailable that is evaluated regularly by the chief operating decision-maker in deciding how toallocate resources and in assessing performance. Generally, financial information is required to bereported on the basis that is used internally for evaluating segment performance and deciding howto allocate resources to segments.

The Group derives its revenues from the following reportable segments:

Real EstateThis involves acquisition of land, planning and development of large-scale fully integratedresidential and commercial communities; development and sale of residential and commercial lotsand the development and leasing of retail and office space and land in these communities;construction and sale of residential, housing and condominium and office buildings; developmentof farm estates, industrial and business parks; operation of cinema and mall; and propertymanagement.

Banking and Financial ServicesThis involves commercial banking operations, including savings and time deposits in pesos andforeign currencies; commercial mortgage and agribusiness loans; payment services, fund transfers,international trade settlements and remittances from overseas workers; trust and investmentservices including portfolio management, unit funds, trust administration and estate planning; andsafety deposit facilities.

Sugar OperationsThis involves operation of agricultural lands for planting and cultivating farm products andoperation of a complete sugar central for the purpose of milling or converting sugar canes tocentrifugal or refined sugar.

Hotel OperationsThis involves operation of hotels, including management of resorts, villas, service apartment andother services for the pleasure, comfort and convenience of guests in said establishments under itsmanagement.

Power Generation OperationsThis involves the establishment, construction, operation and supply of power to offtakers. Thissegment is still under various stage to include pre-operating, research, development andconstruction of facilities.

Other OperationThis involves other operations of the Group including CWSI and FDCI. FDCI was incorporatedto facilitate the Group’s issuance of foreign currency-denominated bonds while CWSI wasincorporated to provide maintenance, operation, management and rehabilitation of waterworkssewerage and sanitation system and services specifically for the distribution, supply and sale ofpotable water to domestic, commercial and industrial

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The financial information on the operations of these business segments as shown below are basedon the measurement principles that are similar with those used in measuring the assets, liabilities,income and expenses in the consolidated financial statements which is in accordance with PFRSexcept for the adjusted EBITDA.

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December 31, 2014

Real EstateOperations

Banking andFinancialServices

SugarOperations

HotelOperations

PowerGenerationOperations

OtherOperations Combined

EliminatingEntries Consolidated

(In Thousands)Revenues and Other Income External customers P=18,862,609 P=16,031,992 P=2,442,810 P=1,114,997 P=104,450 P=1,062 P=38,557,920 P=− P=38,557,920 Inter-segment 307,527 495,531 2,202,069 2,940 3,557 1,441,369 4,452,993 (4,452,993) −

P=19,170,136 P=16,527,523 P=4,644,879 P=1,117,937 P=108,007 P=1,442,431 P=43,010,913 (P=4,452,993) P=38,557,920

Adjusted EBITDA P=7,805,096 P=3,499,475 P=646,335 P=159,230 (P=99,543) P=578,509 P=12,589,102 (P=1,850,159) P=10,738,943

Net income (loss) P=5,450,820 P=2,073,378 P=288,518 (P=25,870) (P=131,307) (P=29,723) P=7,625,816 (P=1,408,381) P=6,217,435

AssetsOperating assets P=191,357,078 P=192,238,649 P=3,138,975 P=1,488,873 P=21,133,974 P=12,445,148 P=421,802,697 (P=78,478,763) P=343,323,934Less deferred tax asset 330,440 977,546 24,188 − 10,822 73 1,343,069 152,325 1,495,394Net operating assets P=191,026,638 P=191,261,103 P=3,114,787 P=1,488,873 P=21,123,152 P=12,445,075 P=420,459,628 (P=78,631,088) P=341,828,540

LiabilitiesOperating liabilities P=87,367,615 P=168,645,832 P=2,157,060 P=323,819 P=16,876,771 P=13,316,587 P=288,687,684 (P=35,008,712) P=253,678,972

December 31, 2013



SugarOperations

HotelOperations




(In Thousands)Revenues and Other Income External customers P=16,505,694 P=14,601,025 P=2,756,055 P=986,496 P=27 P=41,676 P=34,890,973 P=– P=34,890,973 Inter-segment 2,517,096 27,279 2,638,925 4,267 484 21,542 5,209,953 (5,209,593) –

P=19,022,790 P=14,628,304 P=5,394,980 P=990,763 P=511 P=63,218 P=40,100,566 (P=5,209,593) P=34,890,973

Adjusted EBITDA P=7,337,996 P=2,555,682 P=651,888 P=115,753 (P=70,311) P=1,380,494 P=11,971,502 (P=1,656,598) P=10,314,904

Net income (loss) P=5,264,692 P=2,050,112 P=333,436 (P=97,115) (P=78,970) P=587,083 P=8,059,238 (P=1,602,007) P=6,457,231

AssetsOperating assets P=179,973,909 P=146,274,748 P=3,328,501 P=1,085,931 P=960,827 P=12,298,681 P=343,922,597 (P=73,158,593) P=270,764,004Less deferred tax assets 283,948 995,125 16,816 – 2,055 − 1,297,944 23,338 1,321,282Net operating assets P=179,689,961 P=145,279,623 P=3,311,685 P=1,085,931 P=958,772 P=12,298,681 P=342,624,653 (P=73,181,931) P=269,442,722

LiabilitiesOperating liabilities P=79,262,541 P=122,906,472 P=2,469,995 P=211,074 P=55,397 P=15,631,402 P=220,536,881 (P=34,458,211) P=186,078,670

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December 31, 2012



SugarOperations

HotelOperations




(In Thousands)Revenues and Other Income External customers P=15,148,372 P=11,446,467 P=2,468,757 P=706,840 P=555 P=− P=29,770,991 P=– P=29,770,991 Inter-segment 3,783,773 491,958 920,881 22,519 840 − 5,219,971 (5,219,971) –

P=18,932,145 P=11,938,425 P=3,389,638 P=729,359 P=1,395 P=− P=34,990,962 (P=5,219,971) P=29,770,991

Adjusted EBITDA P=10,010,821 P=2,980,288 P=590,972 P=195,606 (P=53,490) (P=186,992) P=13,537,205 (P=4,031,629) P=9,505,576

Net income (loss) P=8,204,693 P=2,243,239 P=253,643 P=130,688 (P=57,598) (P=984,420) P=9,790,245 (P=3,947,350) P=5,842,895

AssetsOperating assets P=158,042,908 P=121,403,341 P=3,466,983 P=976,564 P=591,659 3,979,269 P=288,460,724 (P=48,386,507) P=240,074,217Less deferred tax assets 223,762 973,137 6,967 1,310 2,055 1,207,231 – 1,207,231Net operating assets P=157,819,146 P=120,430,204 P=3,460,016 P=975,254 P=589,604 P=3,979,269 P=287,253,493 (P=48,386,507) P=238,866,986

LiabilitiesOperating liabilities P=61,389,334 P=104,082,460 P=2,737,925 P=203,636 P=55,275 P=3,377,033 P=171,845,663 (P=11,120,178) P=160,725,485

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The Group’s chief operating decision-maker also use net income per segment after elimination inassessing performance of the identified reportable segments, as follows:

Net Income(Loss) Before

EliminationEliminating

Entries

Net Income(Loss) AfterElimination

(In Thousands)December 31, 2014Real estate operations P=5,450,820 P=29,280 P=5,480,100Financial and banking services 2,073,378 (332,061) 1,741,317Sugar operations 288,518 3,918 292,436Hotel operations (25,870) 103,879 78,009Power generation operations (131,307) 1,406 (129,901)Other operations (29,723) (1,214,803) (1,244,526)

P=7,625,816 (P=1,408,381) P=6,217,435December 31, 2013Real estate operations P=5,264,692 (P=410,202) P=4,854,490Financial and banking services 2,050,112 98,685 2,148,797Sugar operations 333,436 11,397 344,833Hotel operations (97,115) 103,424 6,309Power generation operations (78,970) 81 (78,889)Other operations 587,083 (1,405,392) (818,309)

P=8,059,238 (P=1,602,007) P=6,457,231December 31, 2012Real estate operations P=8,204,693 (P=3,768,262) P=4,436,431Financial and banking services 2,243,239 (445,403) 1,797,836Sugar operations 253,643 29,396 283,039Hotel operations 130,688 92,553 223,241Power generation operations (57,598) 2,842 (54,756)Other operations (984,420) 141,524 (842,896)

P=9,790,245 (P=3,947,350) P=5,842,895

The following table shows a reconciliation of the total adjusted earnings before interest, taxes,depreciation and amortization (EBITDA) to total income before income tax:

2014 2013 2012(In Thousands)

Adjusted EBITDA for reportable segments P=10,738,943 P=10,314,904 P=9,505,576Depreciation and amortization (1,560,598) (1,518,849) (1,239,312)Operating profit 9,178,345 8,796,055 8,266,264Interest expense (1,278,826) (876,119) (995,797)Income before income tax P=7,899,519 P=7,919,936 P=7,270,467

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34. Fair Value Measurement

The following table sets forth the fair value hierarchy of the Group’s assets and liabilitiesmeasured at fair value and those for which fair values are required to be disclosed:

2014Fair Value

CarryingValue Total

Quoted Pricesin active

market(Level 1)

Significantobservable

inputs(Level 2)

Significantunobservable

inputs(Level 3)

(In Thousands)Assets measured at fair valueFinancial assetsFinancial assets at FVTPL

Government securities P=7,391,724 P=7,391,724 P=7,391,724 P=– P=– Private bonds 2,565,307 2,565,307 2,565,307 – – Equity securities 225,659 225,659 225,659 – –

10,182,690 10,182,690 10,182,690 – –Derivative assets 616,093 616,093 – 616,093 –Financial assets at FVTOCI Quoted equity securities 110,277 110,277 110,277 – – Unquoted equity securities 48,946 48,946 – – 48,946

159,223 159,223 110,277 – 48,946Assets for which fair values are disclosedFinancial assetsInvestment securities at amortized cost

Government securities 7,536,445 7,536,445 7,536,445 – –Private bonds 1,258,433 1,258,433 1,258,433 – –

8,794,878 8,794,878 8,794,878 – –Loans and receivables

Real estate operations Contracts receivable 18,411,649 17,956,251 – – 17,956,251 Receivables from sale of condominium

units and club shares 331,016 331,016 – – 331,016 Receivables from tenants 430,412 430,412 – – 430,412

19,173,077 18,717,679 – – 18,717,679

Financial and banking services Corporate lending 47,491,754 47,349,123 – – 47,349,123 Consumer lending 62,340,228 57,134,650 – – 57,134,650 Unquoted debt securities 391,491 380,752 – – 380,752

110,223,473 104,864,525 – – 104,864,525Non-financial assets

Investment properties 46,446,597 68,706,795 – – 68,706,795Total assets P=195,596,031 P=212,041,883 P=19,087,845 P=616,093 P=192,337,945Liabilities measured at fair valueFinancial liabilities

Derivative liabilities P=101,290 P=101,290 P=– P=101,290 P=–Liabilities for which fair values are disclosedFinancial liabilities at Amortized Costs

Deposit liabilities Time 69,027,909 69,029,018 – – 69,029,018 LTNCD 8,033,623 8,825,239 – 8,825,239

77,061,532 77,854,257 – – 77,854,257 Accounts Payable and Accrued Expenses Accounts payable 12,868,289 12,648,518 – – 12,648,518 Accrued expenses 1,533,928 1,533,928 – – 1,533,928 Deposits for registration and insurance 1,549,182 1,482,945 – – 1,482,945 Retention fee payable 1,883,369 1,827,589 – – 1,827,589 Liabilities on receivables sold to bank 8,504 7,928 7,928

17,843,272 17,500,908 – – 17,500,908Liability on IPP Administrator contract 9,296,172 9,365,696 – – 9,365,696Long-term debt 75,560,953 84,376,445 – – 84,376,445

P=179,863,219 P=189,198,596 P=– P=101,290 P=189,097,306

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2013Fair Value

CarryingValue Total

Quoted Prices inactive market

(Level 1)

Significantobservable

inputs(Level 2)

Significantunobservable

inputs(Level 3)

(In Thousands)Assets measured at fair valueFinancial assetsFinancial assets at FVTPL

Government securities P=691,437 P=691,437 P=691,437 P=– P=– Private bonds 543,626 543,626 543,626 – – Equity securities 713,640 713,640 713,640 – –

1,948,703 1,948,703 1,948,703 – –Derivative assets 430,046 430,046 – 430,046 –Financial assets at FVTOCI Quoted equity securities 97,733 97,733 97,733 – – Unquoted equity securities 39,428 39,428 – – 39,428

137,161 137,161 97,733 – 39,428Assets for which fair values are disclosedFinancial assetsInvestment securities at amortized cost

Government securities 7,667,254 7,778,029 7,778,029 – –Private bonds 1,413,066 1,752,318 1,752,318 – –

9,080,320 9,530,347 9,530,347 – –Loans and receivables

Real estate operations Contracts receivable 13,389,091 13,624,352 – – 13,624,352 Receivables from sale of condominium

units and club shares 375,309 375,309 – – 375,309 Receivables from tenants 414,380 414,380 – – 414,380

14,178,780 14,414,041 – – 14,414,041

Financial and banking services Corporate lending 41,393,457 40,817,118 – – 40,817,118 Consumer lending 44,604,864 49,835,496 – – 49,835,496 Unquoted debt securities 380,081 380,081 – – 380,081

86,378,402 91,032,695 – – 91,032,695Non-financial assets

Investment properties 39,055,000 50,119,732 – – 50,119,732Total assets P=151,208,412 P=167,612,725 P=11,576,783 P=430,046 P=155,605,896Liabilities measured at fair valueFinancial liabilities

Derivative liabilities P=22,017 P=22,017 P=– P=22,017 P=–Liabilities for which fair values are disclosedFinancial liabilities at Amortized Costs

Deposit liabilities Time 39,134,678 41,314,743 – – 41,314,743 LTNCD 5,466,003 6,997,876 – – 6,997,876

44,600,681 48,312,619 – – 48,312,619 Accounts Payable and Accrued Expenses Accounts payable 11,127,276 10,707,187 – – 10,707,187 Accrued expenses 1,391,923 1,391,923 – – 1,391,923 Deposits for registration and insurance 1,127,420 1,127,420 – – 1,127,420 Retention fee payable 1,100,243 1,100,243 – – 1,100,243 Liabilities on receivables sold to bank 37,240 33,716 – – 33,716

14,784,102 14,360,489 – – 14,360,489Long-term debt 59,093,035 62,290,717 – – 62,290,717

P=118,499,835 P=124,985,842 P=– P=22,017 P=124,963,825

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The methods and assumptions used by the Group in estimating the fair value of the financialinstruments are:

· FVTPL Financial Assets: Fair value is based on quoted prices as of reporting dates.

· Loans and Receivables: Fair values of loans and receivables is based on the discounted valueof future cash flows using the prevailing interest rates and current incremental lending ratesfor similar types of receivables for real estate operations and financial and banking services,respectively. Carrying amounts of cash and cash equivalents approximate fair valuesconsidering that these consist mostly of overnight deposits and floating rate placements.

· Debt securities - Fair values are generally based upon quoted market prices. If the marketprices are not readily available, fair values are estimated using either values obtained fromindependent parties offering pricing services or adjusted quoted market prices of comparableinvestments or using the discounted cash flow methodology.

· Equity securities - Fair values of quoted equity securities are based on quoted market prices.The costs of unquoted equity investments approximate their fair values since there isinsufficient more recent information available to determine fair values and there are noindicators that cost might not be representative of fair value.

· Due To/From Related Parties: The carrying amounts approximate fair values due to short-term nature of transactions.

· Deposit Liabilities: Fair values of liabilities approximate their carrying amounts due either tothe demand nature or the relatively short-term maturities of these liabilities except for timedeposit liabilities whose fair value are estimated using the discounted cash flow methodologyusing EW’s incremental borrowing rates for similar borrowings with maturities consistentwith those remaining for the liability being valued.

· Bills and Acceptances Payable: The carrying amounts approximate fair values due to short-term nature of transactions.

· Accounts Payable and Accrued Expenses: On accounts due within one year, the fair value ofaccounts payable and accrued expenses approximates the carrying amounts. On accounts duefor more than one year, estimated fair value is based on the discounted value of future cashflows using the prevailing interest rates on loans and similar types of payables.

· Long-term Debt: Estimated fair value on debts with fixed interest and not subjected toquarterly repricing is based on the discounted value of future cash flows using the applicablerisk free rates for similar types of loans adjusted for credit risk. Long-term debt subjected toquarterly repricing is not discounted since it approximates fair value.

The discount rates used ranged from 3.5 % to 7.7% and 3.8% to 7.7% in 2014 and 2013,respectively.

During the years ended December 31, 2014 and 2013, there were no transfers between Level 1 andLevel 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

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35. Financial Risk Management Objectives and Policies

The Group’s principal financial instruments are composed of cash and cash equivalents, FVTPL,FVTOCI and investment securities at amortized cost, loans from financial institutions, mortgageand contracts receivables and other receivables. The main purpose of these financial instrumentsis to raise financing for the Group’s operations.

The main objectives of the Group’s financial risk management are as follows:

· To identify and monitor such risks on an ongoing basis;· To minimize and mitigate such risks; and,· To provide a degree of certainty about costs.

Financial and Banking OperationsRisk ManagementTo ensure that corporate goals and objectives and business and risk strategies are achieved, EWutilizes a risk management process that is applied throughout the organization in executing allbusiness activities. Employees’ functions and roles fall into one of the three categories where riskmust be managed in the business units, operating units and governance units.

EW’s activities are principally related to the use of financial instruments and are exposed to creditrisk, liquidity risk and market risk, the latter being subdivided into trading and non-trading risks.It is also subject to operating risks. Forming part of a coherent risk management system are therisk concepts, trading tools, analytical models, statistical methodologies, historical researches andmarket analysis, which are being employed by EW. These tools support the key risk process thatinvolves identifying, measuring, controlling and monitoring risks.

Risk Management Structurea. BOD

EW’s risk culture is practiced and observed across EW putting the prime responsibility on theBOD. It establishes the risk culture and the risk management organization and incorporatesthe risk process as an essential part of the strategic plan of EW. The BOD approves EW’sarticulation of risk appetite which is used internally to help management understand thetolerance for risk in each of the major risk categories, its measurement and key controlsavailable that influence EW’s level of risk taking. All risk management policies and policyamendments, risk-taking limits such as but not limited to credit and trade transactions, marketrisk limits, counterparty limits, trader’s limits and activities are based on EW’s establishedapproving authorities which are approved by EW’s BOD. At a high level, the BOD alsoapproves EW’s framework for managing risk.

b. Executive CommitteeThis is a Board level committee, which reviews the bank-wide credit strategy, profile andperformance. It approves the credit risk-taking activities based on EW’s establishedapproving authorities and likewise reviews and endorses credit-granting activities, includingthe Credit Risk Rating System. All credit proposals beyond the credit approving limit of theLoan and Investments Committee passes through this committee for final approval.

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c. Asset-Liability Management Committee (ALCO)ALCO, a management level committee, meets on a weekly basis and is responsible for theover-all management of EW’s market, liquidity, and statement of financial position relatedrisks. It monitors EW’s liquidity position and reviews the impact of strategic decisions onliquidity. It is responsible for managing liquidity risks and ensuring exposures remain withinestablished tolerance levels. The ALCO’s primary responsibilities include, among others,(a) ensuring that EW and each business unit holds sufficient liquid assets of appropriatequality and in appropriate currencies to meet short-term funding and regulatory requirements,(b) managing statement of financial position and ensuring that business strategies areconsistent with its liquidity, capital and funding strategies, (c) establishing asset and/orliability pricing policies that are consistent with statement of financial position objectives,(d) recommending market and liquidity risk limits to the Risk Management Committee andBOD and (e) approving the assumptions used in contingency and funding plans. It alsoreviews cash flow forecasts, stress testing scenarios and results, and implements liquiditylimits and guidelines.

d. Risk Management Committee (RMC)This Board level committee oversees the effectiveness of EW’s over-all risk managementstrategies, practices and policies. The RMC reviews and approves principles, policies,strategies, processes and control frameworks pertaining to risk management and recommendsto the BOD, as necessary, changes in strategies and amendments in policies. The RMC alsoevaluates EW’s risk exposures and estimates its impact to EW, evaluates the magnitude,direction and distribution of risks across EW and uses this as basis in the determination of risktolerances that it subsequently recommends to the BOD for approval. It reports to the BODEW’s overall risk exposures and the effectiveness of its risk management practices andprocesses recommending further policy revisions as necessary.

e. Loan and Investments CommitteeThis committee is headed by the Chairman of EW whose primary responsibility is to overseeEW’s credit risk-taking activities and overall adherence to the credit risk managementframework, review business/credit risk strategies, quality and profitability of EW’s creditportfolio and recommends changes to the credit evaluation process, credit risk acceptancecriteria and the minimum and target return per credit or investment transaction. All creditrisk-taking activities based on EW’s established approving authorities are evaluated andapproved by this committee. It establishes infrastructure by ensuring business units have theright systems and adequate and competent manpower support to effectively manage its creditrisk.

f. Audit Committee (Audit Com)The Audit Com assists the BOD in fulfilling its oversight responsibilities for the financialreporting process, the system of internal control, the audit process, and EW’s process formonitoring compliance with laws and regulation and the code of conduct. It retains oversightresponsibility for operational risk, the integrity of EW’s financial statements, compliance,legal risk and overall policies and practices relating to risk management. It is tasked todiscuss with management of EW’s major risk exposures and ensures accountability on the partof management to monitor and control such exposures including EW’s risk assessment andrisk management policies. The Committee discusses with management and the independentauditor the major issues regarding accounting principles and financial statement presentation,including any significant changes in EW’s selection or application of accounting principles;and major issues as to the adequacy of EW’s internal controls; and the effect of regulatory andaccounting initiatives, as well as off-balance sheet structures, on the financial statements ofEW.

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g. Corporate Governance and Compliance Committee (CGCC)The CGCC is responsible for ensuring the BOD’s effectiveness and due observance ofcorporate governance principles and guidelines. It reviews and assesses the adequacy of theCGCCs charter and Corporate Governance Manual and recommends changes as necessary. Itoversees the implementation of EW’s compliance program and ensures compliance issues areresolved expeditiously. It assists Board members in assessing whether EW is managing itscompliance risk effectively and ensures regular review of the compliance program.

h. Risk Management Division (RMD)RMD performs an independent risk governance function within EW. RMD is tasked withidentifying, measuring, controlling and monitoring existing and emerging risks inherent inEW’s overall portfolio (on- or off-balance sheet). RMD develops and employs riskassessment tools to facilitate risk identification, analysis and measurement. It is responsiblefor developing and implementing the framework for policies and practices to assess andmanage enterprise-wide market, credit, operational, and all other risks of EW.

It also develops and endorses risk tolerance limits for BOD approval, as endorsed by theRMC, and monitors compliance to approved risk tolerance limits. Finally, it regularlyapprises the BOD, through the RMC, the results of its risk monitoring.

i. Internal Audit Division (IAD)IAD provides an independent assessment of EW’s management and effectiveness of existinginternal control systems through adherence testing of processes and controls across theorganization. The IAD audits risk management processes throughout EW annually or in acycle depending on the latest audit rating. It employs a risk-based audit approach thatexamines both the adequacy of the procedures and EW’s compliance with the procedures.It discusses the results of all assessments with management, and reports its findings andrecommendations to the Aud Com which in turn, conducts the detailed discussion of thefindings and recommendations during its regular meetings. IAD’s activities are suitablydesigned to provide the BOD with reasonable assurance that significant financial andoperating information is materially complete, reliable and accurate; internal resources areadequately protected; and employee performance is in compliance with EW’s policies,standards, procedures and applicable laws and regulations.

j. Compliance DivisionCompliance Division is responsible for reviewing any legal or regulatory matters that couldhave a significant impact on EW’s financial statements, EW’s compliance with applicablelaws and regulations, and inquiries received from regulators or governmental agencies. Itreviews the effectiveness and adequacy of the system for monitoring compliance with lawsand regulations and the results of management’s investigation and follow-up (includingdisciplinary action) for any instances of noncompliance.

Credit RiskCredit risk refers to the potential loss of earnings or capital arising from an obligor/s, customer/sor counterparty’s failure to perform and/or to meet the terms of any contract with EW. Creditrisks may last for the entire tenor and set at the full amount of a transaction and in some cases mayexceed the original principal exposures. The risk may arise from lending, trade financing, trading,investments and other activities undertaken by EW. To identify and assess this risk, EW has astructured and standardized credit rating, and approval process according to the borrower orbusiness and/or product segment. For large corporate credit transactions, EW has acomprehensive procedure for credit evaluation, risk assessment and well-defined concentration

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limits, which are established for each type of borrower. At the portfolio levels, which may be onan overall or by product perspective, RMD manages EW’s credit risk.

Credit concentrationExcessive concentration of lending plays a significant role in the weakening of asset quality.EW reduces this risk by diversifying its loan portfolio across various sectors and borrowers.EW believes that good diversification across economic sectors and geographic areas, amongothers, will enable it to ride through business cycles without causing undue harm to its assetquality.

RMD reviews EW’s loan portfolio in line with EW’s policy of not having significantconcentrations of exposure to specific industries or group of borrowers. Management ofconcentration of risk is by client/counterparty and by industry sector. For risk concentrationmonitoring purposes, the financial assets are broadly categorized into loans and receivables, loansand advances to banks, and investment securities. RMD ensures compliance with BSP’s limit onexposure to any single person or group of connected persons by closely monitoring large exposureand top 20 borrowers for both single and group accounts.

Aside from ensuring compliance with BSP’s limit on exposures to any single person or group ofconnected persons, it is EW’s policy to keep the expected loss (determined based on the credit riskrating of the account) of large exposure accounts to, at most, one and a half percent (1.5%) of theiraggregate outstanding balance. This is to maintain the quality of EW’s large exposures. Withthis, accounts with better risk grades are given priority in terms of being granted a bigger share inEW’s loan facilities.

Aligned with the Manual of Regulations for Banks definition, EW considers its loan portfolioconcentrated if it has exposures more than thirty percent (30.0%) to a particular industry.

Credit concentration profile as of December 31, 2014 and 2013Maximum credit risk exposuresThe following table shows EW’s maximum exposure to credit risk without taking into account anycollateral held or other credit enhancements (amounts in thousands):

2014 2013

CarryingAmount

Fair Valueof Collateral

MaximumExposure toCredit Risk

FinancialEffect of

CollateralCarryingAmount

Fair Valueof Collateral

MaximumExposure toCredit Risk

FinancialEffect of

CollateralLoans and receivables Receivables from

customers Corporate lending P=55,161,693 P=6,617,435 P=47,750,198 P=7,411,495 P=47,588,271 P=13,143,982 P=38,940,835 P=8,647,436 Consumer lending 64,004,558 27,095,096 46,777,781 17,226,777 44,871,825 20,544,130 38,413,862 6,457,963

P=119,166,251 P=33,712,531 P=94,527,979 P=24,638,272 P=92,460,096 P=33,688,112 P=77,354,697 P=15,105,399

For off-balance sheet items, the figures presented below summarize EW’s maximum exposure tocredit risk:

2014 2013Credit Equivalent

AmountCredit Risk

MitigationNet Credit

ExposureCredit Equivalent

AmountCredit RiskMitigation

Net CreditExposure

Off-balance sheet itemsDirect credit substitutes P=243,729 P=− P=243,729 P=400,119 P=− P=400,119Transaction-related contingencies 619,081 − 619,081 711,373 − 711,373Trade-related contingencies

arising from movement ofgoods and commitments withan original maturity of up toone (1) year 372,352 − 372,352 419,995 − 419,995

P=1,235,162 P=− P=1,235,162 P=1,531,487 P=− P=1,531,487

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Large exposures and top 20 borrowersThe table below summarizes large exposure and top 20 borrowers of EW (amounts in billions):

2014Top 20 Borrowers Large Exposures

SingleBorrowers

GroupBorrowers

SingleBorrowers

GroupBorrowers

Aggregate Exposure P=25.6 P=32.7 P=18.9 P=25.9Composite Risk Rating 3.4 3.6 3.3 3.4Total Expected Loss/Aggregate Exposure 0.73% 0.87% 0.69% 0.72%

2013Top 20 Borrowers Large Exposures

SingleBorrowers

GroupBorrowers

SingleBorrowers

GroupBorrowers

Aggregate Exposure P=20.0 P=24.1 P=13.8 P=16.5Composite Risk Rating 3.3 3.4 2.8 2.9Total Expected Loss/Aggregate Exposure 0.68% 0.82% 0.54% 0.58%

As of December 31, 2014 and 2013, the maximum credit exposure to any client or counterparty isabout P=4.6 billion and P=4.5 billion, respectively. These maximum credit exposures, after dueconsideration of the allowed credit enhancements of EW, are all compliant with the regulatorysingle borrower’s limit and considered to be the maximum credit exposure to any client orcounterparty.

Concentration by industryAn industry sector analysis of the financial assets of EW follows (amounts in thousands):

2014

Loans andReceivables*

Loans andAdvances to

Banks**Investment

Securities*** TotalFinancial intermediaries P=16,736,056 P=30,085,290 P=18,991,987 P=65,813,333Real estate, renting and business activity 19,206,893 − − 19,206,893Private households with employed persons 81,835,479 − − 81,835,479Wholesale and retail trade, repair of motor

vehicles 15,387,384 − − 15,387,384Manufacturing 7,880,310 − − 7,880,310Agriculture, fisheries and forestry 2,347,987 − − 2,347,987Transportation, storage and communication 1,023,348 − − 1,023,348Others**** 26,213,540 − − 26,213,540

170,630,997 30,085,290 18,991,987 219,708,274Allowance for credit losses (Note 14) (3,811,163) − − (3,811,163)

P=166,819,834 P=30,085,290 P=18,991,987 P=215,897,111* Includes commitments and contingent accounts.** Comprised of Other cash items, Due from BSP, Due from other banks and IBLR.*** Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost.**** Pertains to unclassified loans and receivables, commitments and contingent accounts.

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2013

Loans andReceivables*

Loans andAdvances to

Banks**Investment

Securities*** TotalFinancial intermediaries P=27,311,023 P=23,564,450 P=11,039,756 P=61,915,229Real estate and renting and business activity 24,897,531 − − 24,897,531Private households with employed persons 61,426,923 − − 61,426,923Wholesale and retail trade, repair of motor

vehicles 15,129,128 − − 15,129,128Manufacturing 14,848,725 − − 14,848,725Agriculture, fisheries and forestry 1,424,364 − − 1,424,364Transportation, storage and communication 1,632,873 − − 1,632,873Others**** 33,371,803 − − 33,371,803

180,042,370 23,564,450 11,039,756 214,646,576Allowance for credit losses (4,002,355) − − (4,002,355)

P=176,040,015 P=23,564,450 P=11,039,756 P=210,644,221* Includes commitments and contingent accounts.** Comprised of Other cash items, Due from BSP, Due from other banks and IBLR.*** Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost.**** Pertains to unclassified loans and receivables, commitments and contingent accounts.

Collateral and other credit enhancementsCollaterals are taken into consideration during the loan application process as they offer analternative way of collecting from the client should a default occur. The percentage of loan valueattached to the collateral offered is part of EW’s lending guidelines. Such percentages take intoaccount safety margins for foreign exchange rate exposure/fluctuations, interest rate exposure, andprice volatility.

Collaterals are valued according to existing credit policy standards and, following the latestappraisal report, serve as the basis for the amount of the secured loan facility.

Premium security items are collaterals that have the effect of reducing the estimated credit risk fora facility. The primary consideration for enhancements falling under such category is the ease ofconverting them to cash.

EW is not permitted to sell or re-pledge the collateral in the absence of default by the owner of thecollateral. It is EW’s policy to dispose foreclosed assets in an orderly fashion. The proceeds ofthe sale of the foreclosed assets, included under Investment Properties, are used to reduce or repaythe outstanding claim. In general, EW does not occupy repossessed properties for business use.

As part of the EW’s risk control on security/collateral documentation, standard documents aremade for each security type and deviation from the pro-forma documents are subject to LegalServices Division’s approval prior to acceptance.

Credit collaterals profileThe table below provides the collateral profile of the outstanding loan portfolio of EW:

Security Corporate Loans Consumer Loans2014 2013 2014 2013

REM* 15.33% 11.13% 14.29% 14.80%Other Collateral** 17.86% 24.50% 34.41% 23.74%Unsecured 66.81% 64.37% 51.30% 61.46%* Real Estate Mortgage** Consists of government securities, stocks and bonds, hold-out on deposits, assignment of receivables, etc.

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As for the computation of credit risk weights, collaterals of the back-to-back and Home Guarantycovered loans, and Philippine sovereign guarantees are the only credit risk mitigants considered aseligible.

Internal Credit Risk Rating SystemEW employs a credit scoring system for all corporate borrowers to assess risks relating to theborrower and the loan exposure. Borrower risk is evaluated by considering (a) quantitative factorsunder financial condition and (b) qualitative factors, such as management quality and industryoutlook.

Financial condition assessment focuses on profitability, liquidity, capital adequacy, sales growth,production efficiency and leverage. Management quality determination is based on EW’sstrategies, management competence and skills and management of banking relationship. On theother hand, industry prospect is evaluated based on its importance to the economy, growth,industry structure and relevant government policies. Based on these factors, each borrower isassigned a Borrower Risk Rating (BRR), an 11-scale scoring system that ranges from 1 to 10,including SBL. In addition to the BRR, EW assigns a Facility Risk Rating (FRR) to determine therisk of the prospective (or existing) exposure with respect to each credit facility that it applied for(or under which the exposure is accommodated). The FRR focuses on the quality and quantity ofthe collateral applicable to the underlying facility, independent of borrower quality. Considerationis given to the availability and amount of any collateral and the degree of control, which the lenderhas over the collateral. FRR applies both to balance sheet facilities and contingent liabilities. OneFRR is determined for each individual facility taking into account the different securityarrangements or risk influencing factors to allow a more precise presentation of risk. A borrowerwith multiple facilities will have one BRR and multiple FRRs. The combination of the BRR andthe FRR results to the Adjusted Borrower Risk Rating (ABRR).

The credit rating for each borrower is reviewed annually. A more frequent review is warranted incases where the borrower has a higher risk profile or when there are extraordinary or adversedevelopments affecting the borrower, the industry and/or the Philippine economy.

The following is a brief explanation of the EW’s risk grades:

Rating Description Account/Borrower Characteristics1 Excellent · low probability of going into default within the coming year; very high debt

service capacity and balance sheets show no sign of any weakness· has ready access to adequate funding sources· high degree of stability, substance and diversity· of the highest quality under virtual economic conditions

2 Strong · low probability of going into default in the coming year· access to money markets is relatively good· business remains viable under normal market conditions· strong market position with a history of successful financial performance· financials show adequate cash flows for debt servicing and generally

conservative balance sheets3 Good · sound but may be susceptible, to a limited extent, to cyclical changes in the

markets in which they operate· financial performance is good and capacity to service debt remains comfortable· cash flows remain healthy and critical balance sheet ratios are at par with

industry norms· reported profits in the past three years and expected to sustain profitability in the

coming year

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Rating Description Account/Borrower Characteristics4 Satisfactory · clear risk elements exist and probability of going into default is somewhat

greater, as reflected in the volatility of earnings and overall performance· normally have limited access to public financial markets· able to withstand normal business cycles, but expected to deteriorate beyond

acceptable levels under prolonged unfavorable economic period· combination of reasonably sound asset and cash flow protection

5 Acceptable · risk elements for the Parent Company are sufficiently pronounced, but wouldstill be able to withstand normal business cycles

· immediate deterioration beyond acceptable levels is expected given prolongedunfavorable economic period

· there is sufficient cash flow either historically or expected in the future in spiteof economic downturn combined with asset protection

5B Acceptable · financial condition hard to ascertain due to weak validation of financialstatements coupled by funding leakages to other business interests whosefinancial condition is generally unknown

· continuous decline in revenues and margins due to competition; increasing debtlevels not commensurate to growth in revenues and funding requirements

· thin margin business with banks financing bulk of working capital and capexrequirements coupled by substantial dividend pay-outs

· chronically tight cashflows with operating income negative or barely enough fordebt servicing

· lines with banks maxed out and availments evergreen with minimal paymentsmade over time or with past record of past due loans with other banks, cancelledcredit cards and court cases

6 Watchlist · affected by unfavorable industry or company-specific risk factors· operating performance and financial strength may be marginal and ability to

attract alternative sources of finance is uncertain· difficulty in coping with any significant economic downturn; some payment

defaults encountered· net losses for at least two consecutive years

7 Special Mention · ability or willingness to service debt are in doubt· weakened creditworthiness· expected to experience financial difficulties, putting the Parent Company’s

exposure at risk8 Substandard · collectability of principal or interest becomes questionable by reason of adverse

developments or important weaknesses in financial cover· negative cash flows from operations and negative interest coverage· past due for more than 90 days· there exists the possibility of future loss to the Parent Company unless given

closer supervision9 Doubtful · unable or unwilling to service debt over an extended period of time and near

future prospects of orderly debt service are doubtful· with non-performing loan (NPL) status· previously rated ‘Substandard’ by the BSP· loss on credit exposure unavoidable

10 Loss · totally uncollectible· prospect of re-establishment of creditworthiness and debt service is remote· lender shall take or has taken title to the assets and is preparing foreclosure

and/or liquidation although partial recovery may be obtained in the future· considered uncollectible or worthless and of such little value that continuance as

bankable assets is not warranted although the loans may have some recovery orsalvage value

It is EW’s policy to maintain accurate and consistent risk ratings across the credit portfolio. Thisfacilitates a focused management of the applicable risk and the comparison of credit exposuresacross all lines of business, geographic regions and products. The rating system is supported by avariety of financial analytics, combined with processed market information to provide the main

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inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the variouscategories and are derived in accordance with EW’s rating policy. The risk ratings are assessedand updated regularly.

Credit Quality Profile as of December 31, 2014 and 2013External ratingsEW also uses external ratings, such as Standard & Poor’s, Moody’s, and Fitch, to evaluate itscounterparties and in its assignment of credit risk weights to its banking book exposures.Transactions falling under this category are normally of the following nature: placements withother banks, money market lending, debt security investments, and to some extent, equity securityinvestments.

Investments and Financial SecuritiesThe table below shows credit quality, based on external ratings, per class of financial assets thatare neither past due nor impaired of EW (amounts in thousands):

2014AA/A BB/B Unrated Total

Due from BSP P=23,128,678 P=− P=− P=23,128,678Due from other banks 3,379,539 81,062 119,927 3,580,528IBLR 2,893,384 – – 2,893,384Financial assets at FVTPL: Government securities 7,391,724 – – 7,391,724 Private bonds 1,307,094 367,339 901,338 2,565,307 Equity securities – – 225,659 225,659

8,698,818 367,339 1,116,533 10,182,690Investment securities at amortized cost: Government securities 7,536,445 – – 7,536,445 Private bonds 1,258,433 – – 1,258,433

8,794,878 – – 8,794,878Financial assets at FVTOCI:

Quoted equity securities – – 7,273 7,273 Unquoted equity securities 127 – 7,019 7,146

127 – 14,292 14,419P=46,895,424 P=448,401 P=1,250,752 P=48,594,577

2013AA/A BB/B Unrated Total

Due from BSP P=18,537,655 P=− P=− P=18,537,655Due from other banks 1,309,675 375,143 67,006 1,751,824IBLR and SPURA 1,340,729 1,775,800 – 3,116,529Financial assets at FVTPL Government securities 691,437 – – 691,437 Private bonds 74,483 376,855 92,288 543,626 Equity securities 190,915 – 522,725 713,640

956,835 376,855 615,013 1,948,703Investment securities at amortized cost Government securities 7,667,254 – – 7,667,254 Private bonds 928,394 484,259 413 1,413,066

8,595,648 484,259 413 9,080,320Financial assets at FVTOCI

Quoted equity securities – – 7,486 7,486 Unquoted equity securities 127 – 3,120 3,247

127 – 10,606 10,733P=30,740,669 P=3,012,057 P=693,038 P=34,445,764

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The tables below show the credit quality, based on the credit rating system, by class of loans andreceivables that are neither past due nor impaired of EW:

2014

High GradeStandard

GradeSubstandard

Grade Unrated TotalReceivables from customers:

Corporate lending P=24,852,588 P=28,538,405 P=– P=– P=53,390,993Consumer lending 9,902,051 28,089,398 22,749,148 – 60,740,597

34,754,639 56,627,803 22,749,148 – 114,131,590Unquoted debt securities – – – 209,513 209,513Accounts receivable – – – 763,501 763,501Accrued interest receivable – – – 1,066,830 1,066,830Sales contract receivable – – – 64,913 64,913

– – – 2,104,757 2,104,757P=34,754,639 P=56,627,803 P=22,749,148 P=2,104,757 P=116,236,347

2013

High GradeStandard

GradeSubstandard

Grade Unrated TotalReceivables from customers

Corporate lending P=21,207,719 P=22,489,408 P=− P=− P=43,697,127Consumer lending 5,933,895 20,580,491 19,207,950 − 45,722,336

27,141,614 43,069,899 19,207,950 − 89,419,463Unquoted debt securities − − − 208,132 208,132Accounts receivable 9,064 7,548 781 860,571 877,964Accrued interest receivable 51,290 3,435 270 622,055 677,050Sales contract receivable 2,247 421 2,797 162,797 168,262

62,601 11,404 3,848 1,853,555 1,931,408P=27,204,215 P=43,081,303 P=19,211,798 P=1,853,555 P=91,350,871

Borrowers with unquestionable repaying capacity and to whom EW is prepared to lend on anunsecured basis, either partially or totally, are generally rated as High Grade borrowers. Includedin the High Grade category are those accounts that fall under ‘Excellent’, ‘Strong’, ‘Good’ and‘Satisfactory’ categories under ICRRS (with rating of 1-4).

Standard rated borrowers normally require tangible collateral, such as real estate mortgage (REM),to either fully or partially secure the credit facilities as such accounts indicate a relatively highercredit risk than those considered as High Grade. Included in Standard Grade category are thoseaccounts that fall under ‘Acceptable’, ‘Watchlist’ and ‘Special mention’ categories under ICRRS(with rating of 5-7).

Substandard Grade accounts pertain to corporate accounts falling under the ‘Substandard,’‘Doubtful’ and ‘Loss’ categories under ICRRS (with rating of 8-10) and unsecured revolvingcredit facilities.

Those accounts that are classified as unrated includes consumer loans, unquoted debt securities,accounts receivable, accrued interest receivable and sales contract receivable for which EW hasnot yet established a credit rating system.

Impairment AssessmentOn a regular basis, EW conducts an impairment assessment exercise to determine expected losseson its loans portfolio.

The main considerations for the loan impairment assessment include whether any payments ofprincipal or interest are overdue by more than 90 days or if there are any known difficulties in thecash flows of counterparties, credit rating downgrades, or infringement of the original terms of thecontract. EW addresses impairment assessment in two areas: specific or individually assessedallowances and collectively assessed allowances.

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a. Specific Impairment TestingSpecific impairment testing is the process whereby classified accounts are individually subjectto impairment testing. Classified accounts are past due accounts and accounts whose creditstanding and/or collateral has weakened due to varying circumstances. This present status ofthe account may adversely affect the collection of both principal and interest payments.

Indicators of impairment testing are past due accounts, decline in credit rating fromindependent rating agencies and recurring net losses.

The net recoverable amount is computed using the present value approach. The discount rateused for loans with fixed and floating interest rate is the original EIR and last repriced interestrate, respectively. Net recoverable amount is the total cash inflows to be collected over theentire term of the loan or the expected proceeds from the sale of collateral. Specificimpairment testing parameters include the account information (original and outstanding loanamount), interest rate (nominal and historical effective) and the business plan. Also includedare the expected date of recovery, expected cash flows, probability of collection, and thecarrying value of loan and net recoverable amount.

EW conducts specific impairment testing on all classified and restructured corporate accounts.

b. Collective Impairment TestingAll other accounts which were not individually assessed are grouped based on similar creditcharacteristics and are collectively assessed for impairment under the Collective ImpairmentTesting. This is also in accordance with PAS 39, which provides that all loan accounts notincluded in the specific impairment test shall be subjected to collective testing.

Collective impairment testing of corporate accountsCorporate accounts, which are unclassified and with current status are grouped in accordancewith EW’s internal credit risk rating. Each internal credit risk rating would fetch anequivalent loss impairment where the estimated loss is determined in consideration of theEW’s historical loss experience. Impairment loss is derived by multiplying the outstandingloan balance on a per internal credit risk rating basis against a factor rate. The factor rate,which estimates the expected loss from the credit exposure, is the product of the Default Rate(DR) and the Loss Given Default Rate (LGDR). DR is estimated based on the 3-yearhistorical average default experience by internal credit risk rating of the EW, while, LGDR isestimated based on loss experience (net of recoveries from collateral) for the same referenceperiod.

Collective impairment testing of consumer accountsConsumer accounts, both in current and past due status are collectively tested for impairmentas required under PAS 39. Accounts are grouped by type of product - personal loans, salaryloans, housing loans, auto loans and credit cards.

The estimation of the impaired consumer products’ estimated loss is based on three majorconcepts: age buckets, probability of default and recoverability. Per product, exposures arecategorized according to their state of delinquency - (1) current and (2) past due (which issubdivided into 30, 60, 90, 120, 150, 180 and more than 180 days past due). Auto, housingand salary loans have an additional bucket for its items in litigation accounts. EW partitionsits exposures as it recognizes that the age buckets have different rates and/ or probabilities ofdefault. The initial estimates of losses per product due to default are then adjusted based on therecoverability of cash flows, to calculate the expected loss of EW. Auto and housing loans

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consider the proceeds from the eventual sale of foreclosed collaterals in approximating itsrecovery rate; while credit cards, salary loans and personal loans depend on the collectionexperience of its receivables. Further for housing loans, due to the nature of the assets offeredas security, and as the exposures are limited to a certain percentage of the same, this productpossess the unique quality of obtaining full recoverability. These default and recovery ratesare based on EW’s historical experience, which covers a minimum of two to three (2-3) yearscycle, depending on the availability and relevance of data.

The table below shows the aging analysis of the past due but not impaired loans and receivablesper class of EW. Under PFRS 7, a financial asset is past due when a counterparty has failed tomake payments when contractually due.

2014Less than

30 days31 to

60 days61 to

90 days91 to

180 daysMore than

180 days TotalLoans and receivables

Corporate lending P=7,294 P=– P=– P=– P=– P=7,294Consumer lending 10,777 390,374 6,862 435,502 466,046 1,309,561

P=18,071 P=390,374 P=6,862 P=435,502 P=466,046 P=1,316,855

2013Less than

30 days31 to

60 days61 to

90 days91 to

180 daysMore than

180 days TotalLoans and receivables

Corporate lending P=– P=– P=– P=– P=77,232 P=77,232Consumer lending – – 85,037 261,972 807,377 1,154,386

P=– P=– P=85,037 P=261,972 P=884,609 P=1,231,618

Collaterals of past due but not impaired loans mostly consist of real estate mortgage (REM) ofindustrial, commercial, residential and developed agricultural real estate properties.

Credit risk weighting as of December 31, 2014 and 2013Total credit risk exposure after risk mitigationThe table below shows the different credit risk exposures of EW after credit risk mitigation, byrisk weight applied in accordance with BSP Circular No. 538:

2014Capital Risk Buckets

Deduction 0% 20% 50% 75% 100% 150% TotalCredit risk exposure after risk

mitigation On-balance sheet assets P=6,264,965 P=28,977,799 P=3,565,001 P=2,363,843 P=2,763,221 P=116,881,268 P=6,010,306 P=160,561,438 Off-balance sheet assets – – – – – 1,235,163 – 1,235,163 Counterparty in the banking

book (derivatives andrepo-style transactions) – – – – – 2,157,060 – 2,157,060

Counterparty in the tradingbook (derivatives andrepo-style transactions) – – – – – 23,897 – 23,897

Credit-linked notes in thebanking book – – – – – – – –

Securitization exposures – – – – – – – –6,264,965 28,977,799 3,565,001 2,363,843 2,763,221 120,297,388 6,010,306 163,977,558

Credit Risk Weighted Assets P=– P=– P=713,000 P=1,181,922 P=2,072,416 P=120,297,388 P=9,015,459 P=133,280,185

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2013Capital Risk Buckets

Deduction 0% 20% 50% 75% 100% 150% TotalCredit risk exposure after risk

mitigation On-balance sheet assets P=2,462,822 P=22,413,466 P=3,663,390 P=4,514,002 P=6,933,876 P=85,758,201 P=3,823,801 P=127,106,736 Off-balance sheet assets – – – – – 1,531,487 – 1,531,487 Counterparty in the banking

book (derivatives andrepo-style transactions) – – – – – 2,029,162 – 2,029,162

Counterparty in the tradingbook (derivatives andrepo-style transactions) – – 2,177 – – 20,777 – 22,954

Credit-linked notes in thebanking book – – – – – – – –

Securitization exposures – – – – – – – –2,462,822 22,413,466 3,665,567 4,514,002 6,933,876 89,339,627 3,823,801 130,690,339

Credit Risk Weighted Assets P=– P=– P=733,113 P=2,257,001 P=5,200,407 P=89,339,628 P=5,735,702 P=103,265,851

Liquidity RiskLiquidity risk is the risk that sufficient funds are unavailable to adequately meet all maturingliabilities, including demand deposits and off-balance sheet commitments. The mainresponsibility of daily asset liability management lies with the Treasury Group, specifically theLiquidity Desk, which is tasked to manage EW’s balance sheet and have a thorough understandingof the risk elements involved in the business. EW’s liquidity risk management is then monitoredthrough ALCO. Resulting analysis of the balance sheet along with the recommendation ispresented during the weekly ALCO meeting where deliberations, formulation of actions anddecisions are made to minimize risk and maximize EW returns. Discussions include actions takenin the previous ALCO meeting, economic and market status and outlook, liquidity risk, pricingand interest rate structure, limit status and utilization. To ensure that EW has sufficient liquidity atall times, the ALCO formulates a contingency plan which sets out the amount and the sources offunds (such as unutilized credit facilities) available to EW and the circumstances under whichsuch funds will be used.

By way of the Maximum Cumulative Outflow (MCO) limit, EW is able to manage its short-termliquidity risks by placing a cap on the outflow of cash on a cumulative basis. EW takes a multi-tiered approach to maintaining liquid assets. EW’s principal source of liquidity is comprised ofCOCI, due from BSP, due from other banks and IBLR and SPURA with maturities of less thanone year. In addition to regulatory reserves, EW maintains a sufficient level of secondary reservesin the form of liquid assets such as short-term trading and investment securities that can berealized quickly.

Analysis of financial assets and liabilities by remaining contractual maturitiesThe table below shows the maturity profile of EW’s financial assets and liabilities, based on itsinternal methodology that manages liquidity based on contractual undiscounted cash flows(amounts in millions):

2014

On demandUp to

1 month>1 to 3

months>3 to 6

months>6 to 12months

Beyond 1year Total

Financial AssetsCash and cash equivalents* P=35,510 P=– P=– P=– P=– P=720 P=36,230Investments and trading

securities** – 2,483 2,320 2,427 3,678 14,179 25,087Loans and receivables*** – 18,997 13,550 10,054 7,834 90,613 141,048

P=35,510 P=21,480 P=15,870 P=12,481 P=11,512 P=105,512 P=202,365

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2014

On demandUp to

1 month>1 to 3

months>3 to 6

months>6 to 12months

Beyond 1year Total

Financial LiabilitiesDeposit liabilities**** P=– P=4,990 P=7,231 P=7,243 P=2,901 P=133,237 P=155,602Bills and acceptances payable – 5,396 – – – 28 5,424Subordinated debt – – – – – 6,500 6,500Other liabilities 1,383 90 9 9 3 5,647 7,141Contingent liabilities – 1,656 65 41 297 (1,336) 723

P=1,383 P=12,132 P=7,305 P=7,293 P=3,201 P=144,076 P=175,390*** Consist of cash and cash other items, due from BSP, due from other banks and IBLR*** Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables

from investment securities at amortized cost.*** Consist of loans and receivables, sales contract receivables, bills purchased, accrued interest receivables, accounts receivables,

unearned discounts, allowance for probable losses, investment properties, other intangible assets and other assets.****Consist of demand and savings deposit, time certificate of deposit, long term negotiable certificates of deposit and interest payable

for these deposit liabilities.

2013

On demandUp to

1 month>1 to 3months

>3 to 6months

>6 to 12months

Beyond1year Total

Financial AssetsCash and cash equivalents* P=21,780 P=5,451 P=– P=– P=– P=210 P=27,441Investments and trading

securities** – 881 759 244 665 13,942 16,491Loans and receivables – 12,526 9,937 8,077 4,146 68,917 103,603

P=21,780 P=18,858 P=10,696 P=8,321 P=4,811 P=83,069 P=147,535Financial LiabilitiesDeposit liabilities*** P=– P=12,213 P=15,398 P=12,633 P=6,676 P=66,271 P=113,191Bills and acceptances payable – 2,379 588 – – 460 3,427Subordinated debt – 1,250 – – – 1,613 2,863Other liabilities 919 56 18 22 12 5,006 6,033Contingent liabilities – 713 553 681 1,093 (1,753) 1,287

P=919 P=16,611 P=16,557 P=13,336 P=7,781 P=71,597 P=126,801* Consist of cash and cash other items, due from BSP, due from other banks and interbank loans receivable and SPURA** Consist of financial assets at FVTPL, financial assets at amortized cost and financial assets at FVTOCI*** Consist of demand, savings and time deposit, and long term negotiable certificates of deposit

EW manages liquidity by maintaining sufficient liquid assets in the form of cash and cashequivalents, investments securities and loan receivables with what it assesses to be sufficient ofshort-term loans. As of December 31, 2014 and 2013, P=49.3 billion and P=35.6 billion,respectively, or 39.28% and 37.50%, respectively, of EW’s total gross loans and receivables hadremaining maturities of less than one (1) year. The total portfolio of trading and investmentsecurities is comprised mostly of sovereign-issued securities that have high market liquidity.EW was fully compliant with BSP’s limits on FCDU Asset Cover and FCDU Liquid AssetsCover, having reported ratios above 100.0% and 30.0%, respectively, as of December 31, 2014and 2013. With the above presented liquidity profile, EW remains to be inhibited from liquidityrisk that it can’t adequately manage.

Market RiskMarket risk is the risk that the fair value or future cash flows of financial instruments will fluctuatedue to changes in market variables such as interest rates, foreign exchange rates, and equity prices.EW treats exposures to market risk as either trading portfolio or balance sheet exposure. Themarket risk for the trading portfolio is managed and monitored based on a VaR methodologywhich reflects the interdependency between risk variables. Balance sheet exposures are managedand monitored using sensitivity analyses.

Market Risk in the Trading BooksThe Board has set limits on the level of risk that may be accepted. Price risk limits are applied atthe business unit level and approved by the BOD based on, among other things, a business unit’scapacity to manage price risks, the size and distribution of the aggregate exposure to price risksand the expected return relative to price risks.

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EW applies a VaR methodology to assess the market risk positions held and to estimate thepotential economic loss based upon a number of parameters and assumptions on marketconditions. VaR is a method used in measuring financial risk by estimating the potential negativechange in the market value of a portfolio at a given confidence level and over a specified timehorizon.

Objectives and limitations of the VaR MethodologyEW uses the VaR model of Bloomberg Portfolio Analytics using one-year historical data set toassess possible changes in the market value of the Fixed Income, Equities, and Foreign Exchangetrading portfolio. The Interest Rate Swaps (IRS) trading portfolio’s market risk is measured usingMonte Carlo VaR. The Bloomberg and Monte Carlo VaR models are designed to measure marketrisk in a normal market environment. The use of VaR has limitations because correlations andvolatilities in market prices are based on historical data and VaR assumes that future pricemovements will follow a statistical distribution. Due to the fact that VaR relies heavily onhistorical data to provide information and may not clearly predict the future changes andmodifications of the risk factors, the probability of large market moves may be underestimated ifchanges in risk factors fail to align with the normal distribution assumption.

VaR may also be under or over estimated due to assumptions placed on risk factors and therelationship between such factors for specific instruments. Even though positions may changethroughout the day, the VaR only represents the risk of the portfolio at the close of each businessday, and it does not account for any losses that may occur beyond the 99.0% confidence level.

In practice, actual trading results will differ from the VaR calculation and, in particular, thecalculation does not provide a meaningful indication of profits and losses in stressed marketconditions. To determine the reliability of the VaR model, actual outcomes are monitored throughactual backtesting to test the accuracy of the VaR model.

Stress testing provides a means of complementing VaR by simulating the potential loss impact onmarket risk positions from extreme market conditions, such as 500 bps increase in Philippine pesointerest rates and 300 bps increase in US dollar interest rates adopted from the uniform stresstesting framework of BSP.

VaR assumptionsThe VaR that EW measures is an estimate, using a confidence level of 99.0% of the potential lossthat is not expected to be exceeded if the current market risk positions were to be held unchangedfor a given holding period. Foreign exchange VaR is measured using one day holding periodwhile fixed income VaR has holding period of five (5) days. Furthermore, EW’s equity andInterest Rate Swap (IRS) trading positions are assumed to be closed out in ten (10) days. The useof a 99.00% confidence level means that within the set time horizon, losses exceeding the VaRfigure should occur, on average, not more than once every hundred days.

VaR is an integral part of EW’s market risk management and encompasses investment positionsheld for trading. VaR exposures form part of the market risk monitoring which is reviewed dailyagainst the limit approved by the Board. The trading activities are controlled through the MarketRisk Limit (MRL), which is a function of EW’s qualifying capital and the trading incomegenerated throughout the year. RMD reports compliance to the MRL and trader’s VaR limits on adaily basis. If the MRL of individual trader’s limit is exceeded, such occurrence is promptlyreported to the Treasurer, Chief Risk Officer and the President, and further to the Board throughthe RMC.

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The VaR below pertains to interest rate risk of EW’s fixed income trading portfolio.

2014 2013Year-end VaR P=200,969 P=13,122Average VaR 107,839 67,046Highest VaR 233,073 324,284Lowest VaR 8,023 3,392

The year-end VaR for 2014 was based on EW’s fixed trading book valued at P=9.9 billion withaverage yields of 3.73% and 3.90% for the Peso and Foreign currency denominated bondsrespectively. Its average maturities are 8 years and 5 months for the Peso portfolio and 11 yearsand 2 months for the foreign currency portfolio. The year-end VaR for 2014 was based on aportfolio position size equal to P=1.2 billion with an average yield of 3.56% and average maturityof 5 years and 5 months.

The market risk in EW’s IRS trading positions is shown in the table below:

2014Year-end VaR P=8,674Average VaR 4,521Highest VaR 8,674Lowest VaR 3,789

EW commenced entering into IRS in 2014 and its outstanding IRS deals have a total notionalamount of $10 million where EW pays fixed rate and receives floating rate interest.

The table below pertains to the market risk of the EW’s equity trading positions:

2014 2013Year-end VaR P=664 P=39,759Average VaR 13,618 60,457Highest VaR 49,371 87,143Lowest VaR 664 39,759

Foreign Currency RiskEW holds foreign currency denominated assets and liabilities, thus, fluctuations on the foreignexchange rates can affect the financial and cash flows of EW. Managing the foreign exchangeexposure is important for banks with exposures in foreign currencies. It includes managingforeign currency positions in order to control the impact of changes in exchange rates on thefinancial position of EW.

The VaR below pertains to foreign exchange risk of EW.

2014 2013Year-end VaR P=4,369 P=1,962Average VaR 1,780 2,423Highest VaR 6,571 8,364Lowest VaR 10 13

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EW foreign currency exposures emanate from its net open spot and forward FX purchase and selltransactions, and net foreign currency income accumulated over the years of its operations.Foreign currency-denominated deposits are generally used to fund EW’s foreign currency-denominated loan and investment portfolio in the FCDU. In the FDCU books, BSP requires banksto match the foreign currency assets with the foreign currency liabilities. Thus, banks are requiredto maintain at all times a 100.00% cover for their currency liabilities held through FCDU. EW isin compliance with said regulation as of December 31, 2014 and 2013.

Total foreign exchange currency position is monitored through the daily BSP FX position reports,which are subject to the overbought and oversold limits set by the BSP at 20.0% of unimpairedcapital or $50.00 million, whichever is lower. Internal limit regarding the end-of-day tradingpositions in FX, which take into account the trading desk and the branch FX transactions, are alsomonitored.

The table below summarizes the exposure to foreign exchange risk of EW as of December 31,2014 and 2013:

2014

USDOther

Currencies TotalAssetsGross FX assets $624,465 $13,224 $637,689Contingent FX assets 58,080 – 58,080

682,545 13,224 695,769LiabilitiesGross FX liabilities 573,872 11,028 584,900Contingent FX liabilities 98,000 78 98,078

671,872 11,106 682,978Net exposure $10,673 $2,118 $12,790

2013

USDOther

Currencies TotalAssetsGross FX assets $494,222 $1,203 $495,425Contingent FX assets 31,524 − 31,524

525,746 1,203 526,949LiabilitiesGross FX liabilities 462,080 81 462,161Contingent FX liabilities 59,000 24 59,024

521,080 105 521,185Net exposure $4,666 $1,098 $5,764

The table below indicates the sensitivity currencies to which EW had significant exposures as ofDecember 31, 2014 and 2013 (amounts in millions).

Foreign currency appreciates 2014(depreciates) USD GBP EUR JPY

+10.00% P=47.73 P=1.09 P=3.41 P=.60-10.00% (47.73) 1.09 3.41 .60

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Foreign currency appreciates 2013(depreciates) USD GBP EUR JPY

+10.00% P=20.72 P=1.96 P=1.85 P=.25-10.00% 20.72 (1.96) (1.85) (.25)

The analysis calculates the effect of a reasonably possible movement of the currency rate againstPeso, with all other variables held constant on the statement of income. A negative amountreflects a potential net reduction in statement of income while a positive amount reflects netpotential increase. There is no other impact on EW’s equity other than those already affecting thestatements of income.

Market Risk in the Banking Books

Interest rate riskA critical element of risk management program consists of measuring and monitoring the risksassociated with fluctuations in market interest rates on EW’s net interest income. The short-termnature of the business of its assets and liabilities reduces the exposure of its net interest income tosuch risks.

EW employs re-pricing gap analysis on a monthly basis to measure the interest rate sensitivity ofits assets and liabilities. The re-pricing gap analysis measures, for any given period, anymismatches between the amounts of interest-earning assets and interest-bearing liabilities thatwould re-price, or mature (for contracts that do not re-price), during that period. The re-pricinggap is calculated by first distributing the assets and liabilities contained in EW’s statement offinancial position into tenor buckets according to the time remaining to the next re-pricing date (orthe time remaining to maturity if there is no re-pricing), and then obtaining the difference betweenthe total of the re-pricing (interest rate sensitive) assets and re-pricing (interest rate sensitive)liabilities. If there is a positive gap, there is asset sensitivity which generally means that anincrease in interest rates would have a positive effect on EW’s net interest income. If there is anegative gap, this generally means that an increase in interest rates would have a negative effecton net interest income.

The following table provides for the average effective interest rates by period of re-pricing (or byperiod of maturity if there is no re-pricing) of EW as of December 31, 2014 and 2013:

2014Up to

1 month>1 month

to 3 months>3 months


to 12 months >12 monthsRBUFinancial assets

Cash and cash equivalents − − − − −Loans and receivables 2.27% 4.55% 4.86% 6.46% 9.25%Investment securities − 3.63% − − 3.10%

Financial liabilitiesDeposit liabilities 1.59% 1.92% 2.43% 4.23% 3.60%Bills payable 1.51% − − − −Subordinated debt − − − − 6.03%

FCDUFinancial assets

Cash and cash equivalents − − − − −Loans and receivables 3.04% 2.79% 3.78% 4.86% 6.72%Investment securities 0.61% − − − 4.00%

Financial liabilitiesDeposit liabilities 1.36% 1.27% 1.56% 1.68% 2.56%

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2013Up to

1 month>1 month



to 12 months >12 monthsRBUFinancial assets

Cash and cash equivalents 1.99% − − − −Loans and receivables 4.82% 5.23% 5.21% 7.15% 8.04%Investment securities 2.49% 2.49% − − 3.08%

Financial liabilitiesDeposit liabilities 1.08% 1.43% 1.65% 4.01% 4.26%Bills payable 0.77% 0.68% − − −Subordinated debt 8.63% − − − 7.65%

FCDUFinancial assets

Cash and cash equivalents 0.19% − − − −Loans and receivables 1.49% − 3.55% 5.35% 6.77%Investment securities 3.15% 3.15% 3.15% − 3.24%

Financial liabilitiesDeposit liabilities 1.34% 1.37% 1.43% 1.63% 2.54%

The following table sets forth the interest rate re-pricing gap position of EW as of December 31,2014 and 2013 (amounts in millions):

2014Up to

1 month> 1 to

3 months> 3 to

6 months>6 to

12 months >12 months TotalFinancial assets

Cash and cash equivalents P=− P=− P=− P=− P=− P=−Loans and receivables 29,634 6,030 3,753 2,207 55,609 97,233Investment securities 2,422 2,212 2,201 3,246 7,455 17,536Contingent assets 2 672 4 678

Total financial assets 32,058 8,914 5,954 5,457 63,064 115,447Financial liabilities

Deposit liabilities 42,730 14,504 2,183 1,285 16,423 77,125Bills and acceptances payable 5,289 − − − − 5,289Subordinated debt − − − − 6,500 6,500Contingent liabilities − − 6 − 669 675

Total financial liabilities 48,019 14,504 2,189 1,285 23,592 89,589Asset-liability gap (P=15,961) (P=5,590) P=3,765 P=4,172 P=39,472 P=25,858

2013Up to

1 month> 1 to

3 months> 3 to

6 months>6 to

12 months >12 months TotalFinancial assets

Cash and cash equivalents P=2,512 P=– P=– P=– P=– P=2,512Loans and receivables 30,721 4,136 4,549 4,470 30,548 74,424Investment securities 870 708 13 – 8,173 9,764

Total financial assets 34,103 4,844 4,562 4,470 38,721 86,700Financial liabilities

Deposit liabilities 29,768 3,619 545 360 14,462 48,754Bills and acceptances payable 2,251 1,032 – – – 3,283Subordinated debt 1,250 – – – 1,613 2,863Contingent liabilities 22 – – – – 22

Total financial liabilities 33,291 4,651 545 360 16,075 54,922Asset-liability gap P=812 P=193 P=4,017 P=4,110 P=22,646 P=31,778

With the above positive re-pricing profile, EW could expect positive returns from the followingmonths after the end of 2013 should there be an upward movement in interest rates.

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EW also monitors its exposure to fluctuations in interest rates by using scenario analysis toestimate the impact of interest rate movements on its interest income. This is done by modelingthe impact to EW’s interest income and interest expenses of different parallel changes in theinterest rate curve, assuming the parallel change only occurs once and the interest rate curve afterthe parallel change does not change again for the next twelve months.

The following table sets forth, for the period indicated, the impact of changes in interest rates onEW’s non-trading net interest income before tax (amounts in millions). There is no other impacton EW’s equity other than those already affecting the statements of income.

Change in basis points 2014 2013+100bps (P=165.5) P=44.8-100bps 165.5 (44.8)

Market risk weighting as of December 31, 2014 and 2013The table below shows the different market risk weighted assets (in millions) of EW using thestandardized approach:

Type of Market Risk Exposure 2014 2013Interest Rate Exposure P=7,791 P=1,874Foreign Exposure 572 256Equity Exposure − 7

P=8,363 P=2,137

Operational RiskOperational risk is the loss resulting from inadequate or failed internal processes, people andsystems or from external events. It includes legal, compliance and reputational risks but excludesstrategic risk.

Adopting the Basic Indicator Approach in computing, below is the total operational risk-weightedassets of EW (amounts in millions).

2014 2013 2012Total operational risk-weighted assets P=18,151 P=15,338 P=12,973

Other Risk ExposuresEW risk exposures other than credit, market, liquidity and operational while existent are deemedinsignificant relative to the mentioned risks and if taken in isolation. Hence, management of theserisks are instead collectively performed and made an integral part of EW’s internal capitaladequacy assessment process (ICAAP) and enterprise risk management initiatives.

The last internal capital adequacy assessment results of EW show that these other risks remainsinsignificant to pose a threat on EW’s capacity to comply with the minimum capital adequacyratio of 10.0% as prescribed by BSP.

Financial and Banking Services Capital ManagementEW actively manages its capital to comply with regulatory requirements. The primary objectiveof EW’s capital management is to ensure that it maintains adequate capital to cover risks inherentto its banking activities without prejudice to optimizing shareholders’ value

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Regulatory Qualifying CapitalUnder existing BSP regulations, the determination of EW’s compliance with regulatoryrequirements and ratios is based on the amount of EW’s ‘unimpaired capital’ (regulatory networth) reported to the BSP, which is determined on the basis of regulatory policies. In addition,the risk-based Capital Adequacy Ratio (CAR) of a bank, expressed as a percentage of qualifyingcapital to risk-weighted assets, should not be less than 10.0% for both solo basis (head office andbranches) and consolidated basis (EW and subsidiaries engaged in financial allied undertakings).Qualifying capital and risk-weighted assets are computed based on BSP regulations.

Effective January 1, 2014, EW complied with BSP issued Circular No. 781, Basel IIIImplementing Guidelines on Minimum Capital Requirements, which provides the implementingguidelines on the revised risk-based capital adequacy framework particularly on the minimumcapital and disclosure requirements for universal banks and commercial banks, as well as theirsubsidiary banks and quasi-banks, in accordance with the Basel III standards. The Circular setsout a minimum Common Equity Tier 1 (CET1) ratio of 6.0% and Tier 1 capital ratio of 7.5%. Italso introduces a capital conservation buffer of 2.5% comprised of CET1 capital. The BSP’sexisting requirement for Total CAR remains unchanged at 10% and these ratios shall bemaintained at all times.

Further, existing capital instruments as of December 31, 2010 which do not meet the eligibilitycriteria for capital instruments under the revised capital framework shall no longer be recognizedas capital. Capital instruments issued under BSP Circular Nos. 709 and 716 (the circularsamending the definition of qualifying capital particularly on Hybrid Tier 1 and Lower Tier 2capitals), and before the effectivity of BSP Circular No. 781, shall be recognized as qualifyingcapital only until December 31, 2015. In addition to changes in minimum capital requirements,this Circular also requires various regulatory adjustments in the calculation of qualifying capital.

Prior to January 1, 2014, the risk-based capital ratio of EW is computed in accordance with thecapital adequacy requirements of the New Capital Accord or Basel II, as contained in theimplementation guidelines of BSP Circular No. 538.

The capital-to-risk assets ratio reported to the BSP as of December 31, 2014 and 2013 based onBasel III and Basel II, respectively, are shown in the table below (amounts in millions):

2014 2013Tier 1 capital P=21,209 P=19,128CET1 capital 21,209 –Less required deductions 6,264 2,463Subtotal 14,945 16,665Less: deductions from Tier 1 capital – –Net Tier 1 Capital 14,945 16,665Tier 2 capital 6,023 3,896Less deductions from Tier 2 capital – –Net Tier 2 Capital 6,023 3,896Total Qualifying capital P=20,968 P=20,561

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Presented below are the composition of qualifying capital and the related deductions as reported tothe BSP (amounts in millions):

2014 2013Tier 1 capital

Paid up common stock P=11,284 P=11,284Additional paid-in capital 979 979Retained earnings 6,849 4,804Undivided profits 2,084 2,050Cumulative foreign currency translation 13 5Minority interest – 6

Core Tier 1 capital 21,209 19,128Deductions from Tier 1 capitalTotal outstanding unsecured credit accommodation

to a DOSRI and subsidiary 583 160Investments in equity securities 240 –

Defined benefit asset 26 –Deferred income tax 990 986Goodwill and other intangible assets 4,425 1,317

Total Deductions 6,264 2,463Total Tier 1 Capital 14,945 16,665Tier 2 capital

General loan loss provision 1,060 1,033Unsecured subordinated debt 4,963 2,863

Total Tier 2 capital 6,023 3,896Deductions from Tier 1 and Tier 2 capital – –Qualifying capital

Net Tier 1 capital 14,945 16,665Net Tier 2 capital 6,023 3,896

Total qualifying capital 20,968 20,561Capital requirementsCredit risk 133,495 103,266Market risk 8,363 2,137Operational risk 18,152 15,322

Total capital requirements P=160,010 P=120,725

CET1 capital ratio 9.34% –Tier 1 capital ratio 9.34% 13.80%Total capital ratio 13.10% 17.03%

Qualifying capital and risk-weighted assets (RWA) are computed based on BSP regulations.

Under Basel III, the regulatory Gross Qualifying Capital of EW consists of Tier 1 (core) and Tier2 (supplementary) capital. Tier 1 capital comprises share capital, retained earnings (includingcurrent year profit) and non-controlling interest less required deductions such as deferred incometax and unsecured credit accommodations to DOSRI. Tier 2 capital includes unsecuredsubordinated debts, revaluation reserves and general loan loss provision. Certain items arededucted from the regulatory Gross Qualifying Capital, such as but not limited to equityinvestments in unconsolidated subsidiary banks and other financial allied undertakings, butexcluding investments in debt capital instruments of unconsolidated subsidiary banks (for solobasis) and equity investments in subsidiary and non-financial allied undertakings.

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Risk-weighted assets are determined by assigning defined risk weights to the statement offinancial position exposure and to the credit equivalent amounts of off-balance sheet exposures.Certain items are deducted from risk-weighted assets, such as the excess of general loan lossprovision over the amount permitted to be included in Tier 2 capital. The risk weights vary from0.00% to 150.00% depending on the type of exposure, with the risk weights of off-balance sheetexposures being subjected further to credit conversion factors. Below is a summary of riskweights and selected exposure types:

Risk weight Exposure/Asset type*0.00% Cash on hand; claims collateralized by securities issued by the national

government, BSP; loans covered by the Trade and InvestmentDevelopment Corporation of the Philippines; real estate mortgages coveredby the Home Guarantee Corporation

20.00% COCI, claims guaranteed by Philippine incorporated banks/quasi-bankswith the highest credit quality; claims guaranteed by foreign incorporatedbanks with the highest credit quality; loans to exporters to the extentguaranteed by Small Business Guarantee and Finance Corporation

50.00% Housing loans fully secured by first mortgage on residential property;Local Government Unit (LGU) bonds which are covered by Deed ofAssignment of Internal Revenue allotment of the LGU and guaranteed bythe LGU Guarantee Corporation

75.00% Direct loans of defined Small Medium Enterprise (SME) and microfinanceloans portfolio; non-performing housing loans fully secured by firstmortgage

100.00% All other assets (e.g., real estate assets) excluding those deducted fromcapital (e.g., deferred income tax)

150.00% All non-performing loans (except non-performing housing loans fullysecured by first mortgage) and all non-performing debt securities

* Not all inclusive

With respect to off-balance sheet exposures, the exposure amount is multiplied by a creditconversion factor (CCF), ranging from 0.00% to 100.00%, to arrive at the credit equivalentamount, before the risk weight factor is multiplied to arrive at the risk-weighted exposure. Directcredit substitutes (e.g., guarantees) have a CCF of 100.00%, while items not involving credit riskhas a CCF of 0.00%.

In the case of derivatives, the credit equivalent amount (against which the risk weight factor ismultiplied to arrive at the risk-weighted exposure) is generally the sum of the current creditexposure or replacement cost (the positive fair value or zero if the fair value is negative or zero)and an estimate of the potential future credit exposure or add-on. The add-on ranges from 0.00%to 1.50% (interest rate-related) and from 1.00% to 7.50% (exchange rate-related), depending onthe residual maturity of the contract. For credit-linked notes and similar instruments, the risk-weighted exposure is the higher of the exposure based on the risk weight of the issuer’s collateralor the reference entity or entities.

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The risk-weighted CAR is calculated by dividing the sum of its Tier 1 and Tier 2 capital, asdefined under BSP regulations, by its risk-weighted assets. The risk-weighted assets, as definedby the BSP regulations, consist of all of the assets on the balance sheet at their respective bookvalues, together with certain other off-balance sheet items, weighted by certain percentagesdepending on the risks associated with the type of assets. The determination of compliance withregulatory requirements and ratios is based on the amount of EW’s ‘unimpaired capital’(regulatory net worth) as reported to the BSP, which is determined on the basis of regulatoryaccounting practices which differ from PFRS in some respects.

In 2014 and 2013, EW has complied with the required 10.00% capital adequacy ratio of the BSP.

The policies and processes guiding the determination of the sufficiency of capital of EW havebeen incorporated in EW’s Internal Capital Adequacy Assessment Process (ICAAP) whichsupplements the BSP’s risk-based capital adequacy framework under BSP Circular Nos. 538 and639 to comply with the requirements of the BSP. While EW has added the ICAAP to its capitalmanagement policies and processes, there were no changes made on the objectives and policies forthe years ended December 31, 2014 and 2013.

EW has taken into consideration the impact of the foregoing requirements to ensure that theappropriate level and quality of capital are maintained on an ongoing basis.

The Group (excluding EW)Interest Rate RiskThe Group’s exposure to the risk for changes in market interest rates relates primarily to theGroup’s long-term debt obligations with a floating interest rate. The Group’s interest rateexposure management policy centers on reducing the Group’s overall interest expense andexposure to changes in interest rates. The Group’s policy is to manage its interest cost using a mixof fixed and floating interest-rate debts. The Group regularly monitors available loans in themarket which is of cheaper interest rate and substitutes high-rate debts of the Group. The Group’slong-term debt with floating interest rate usually mature after three to five years from the date ofavailment, while fixed term-loans mature after five to ten years.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates,with all other variables held constant, of the Group’s profit before tax and equity (through theimpact on floating rate borrowings). There is no other impact on the Group’s othercomprehensive income other than those already affecting the profit and loss.

Increase (decrease)in basis points

Effect on incomebefore income tax

(In Thousands)2014 +200 (P=128,857)

-200 128,8572013 +200 (P=341,124)

-200 341,124

The following table sets out the carrying amount by maturity, of the Group’s long-term debts thatare exposed to interest rate risk:

91-Day Treasury Bills/91-Day PDST plus 1% to 2% marginBelow 1 Year 1-2 Years 2-3 Years 3-4 Years Over 4 Years Total

As of December 31, 2014 P=2,461,222 P=1,284,111 P=1,008,222 P=618,438 P=1,070,861 P=6,442,855As of December 31, 2013 3,528,591 2,485,395 1,997,660 2,784,490 6,260,044 17,056,180

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Liquidity RiskThe Group seeks to manage its liquidity profile to be able to finance capital expenditures andservice maturing debts. To cover its financing requirements, the Group uses internally generatedfunds and available long-term and short-term credit facilities.

As part of its liquidity risk management, the Group regularly evaluates its projected and actualcash flows. It also continuously assesses conditions in the financial markets for opportunities topursue fund raising activities, in case any requirements arise. Fund raising activities may includebank loans and capital market issues. Accordingly, its loan maturity profile is regularly reviewedto ensure availability of funding through an adequate amount of credit facilities with financialinstitutions.

Overall, the Group’s funding arrangements are designed to keep an appropriate balance betweenequity and debt, to give financing flexibility while continuously enhancing the Group’sbusinesses.

The following table summarizes the maturity profile of the Group’s financial assets held tomanage liquidity as of December 31, 2014 and 2013 based on contractual undiscounted payments:

December 31, 2014

On demandLess than3 months

3 monthsto 1 year

1 to3 years

3 to5 years

Over5 years Total

(In Thousands)Real EstateLoans and receivable Cash in bank P=1,609,392 P=− P=− P=− P=− P=− P=1,609,392 Contracts receivable 427,361 1,637,254 3,083,853 2,163,240 1,424,876 9,675,065 18,411,649 Receivable from sale of

condominium units andclub shares 195,149 5,853 50,867 46,742 32,405 − 331,016

Receivable from governmentand other financialinstitutions − − 515,091 − − − 515,091

Due from related parties 315,264 − − − − − 315,264 Receivable from tenants 384,278 31,632 1,756 1,839 10,907 − 430,412 Receivable from joint

venture lots 82,025 20,310 94,280 108,611 347,864 − 653,090 Receivable from

homeowners association 228,811 − − − − − 228,811 Others 538,120 24,699 235,401 600 − − 798,820

3,780,400 1,719,748 3,981,248 2,321,032 1,816,052 9,675,065 23,293,545Sugar Trade receivables 198 − − − − − 198 Others 1,515 − − − − − 1,515

1,713 − − − − − 1,713Hotel and Energy Trade receivables 130,598 − − − − − 130,598 Due from a related party 10,412 − − − − − 10,412

141,010 − − − − − 141,010P=3,923,123 P=1,719,748 P=3,981,248 P=2,321,032 P=1,816,052 P=9,675,065 P=23,436,268

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December 31, 2013


3 monthsto 1 year

1 to3 years

3 to5 years

Over5 years Total

(In Thousands)Real EstateLoans and receivable Cash in bank P=3,505,667 P=− P=− P=− P=− P=− P=3,505,667 Contracts receivable 596,337 1,975,278 2,060,416 2,092,083 1,420,002 5,244,975 13,389,091 Receivable from sale of

condominium units andclub shares 57,001 88,469 170,040 49,156 10,643 − 375,309

Receivable from governmentand other financialinstitutions − − 480,898 − − − 480,898

Due from related parties 208,737 − − − − − 208,737 Receivable from tenants 299,633 38,994 18,407 18,838 23,105 15,403 414,380 Receivable from joint

venture lots 78,103 81,936 309,199 444,418 − − 913,656 Receivable from

homeowners association 246,581 − − − − − 246,581 Others 577,384 32,879 453 1,078 95 − 611,889

5,569,443 2,217,556 3,039,413 2,605,573 1,453,845 5,260,378 20,146,208Sugar Trade receivables 269 − − − − − 269 Others 1,521 − − − − − 1,521

1,790 − − − − − 1,790Hotel and Energy Trade receivables 22,848 − − − − − 22,848 Due from a related party 2,857 1,721 366 − − − 4,944

25,705 1,721 366 − − − 27,792P=5,596,938 P=2,219,277 P=3,039,779 P=2,605,573 P=1,453,845 P=5,260,378 P=20,175,790

The tables below summarize the maturity profile of the Group’s financial liabilities as ofDecember 31, 2014 and 2013 based on contractual undiscounted payments.

December 31, 2014


3 monthsto 1 year

>1 to3 years

>3 to5 years

Over5 years Total

(In Thousands)Accounts payable and accrued

expenses Accounts payable P=8,422,166 P=675,878 P=369,869 P=96,668 P=− P=− P=9,564,581 Receivables sold to bank − − 5,585 2,919 − − 8,504 Accrued expenses 541,009 − − − − − 541,009 Deposits for registration and

insurance − 458 189,396 693,477 264,871 400,980 1,549,182 Retention fees payable 803,009 367,353 79,016 149,705 308,659 175,627 1,883,369 Accrued interest 642,375 − − − − − 642,375 Deposits 1,267,391 − − − − − 1,267,391 Other payables 100,588 − − − − − 100,588

11,776,538 1,043,689 643,866 942,769 573,530 576,607 15,556,999Short-term debt − 350,000 − − − − 350,000Long-term debt − − 3,079,041 14,020,726 12,012,877 39,660,965 68,773,609Liability on IPP

Administrator contract − 390,883 1,094,621 2,627,530 2,252,641 2,930,497 9,296,172P=11,776,538 P=1,784,572 P=4,817,528 P=17,591,025 P=14,839,048 P=43,168,069 P=93,976,780

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December 31, 2013


3 monthsto 1 year

>1 to3 years

>3 to5 years

Over5 years Total

(In Thousands)Accounts payable and accrued

expenses Accounts payable P=6,145,761 P=954,281 P=830,581 P=1,092,864 P=13,728 P=– P=9,037,215 Receivables sold to bank – – 23,325 13,915 – – 37,240 Accrued expenses 440,355 108,770 27,160 – 2,490 578,775 Deposits for registration and

insurance – 334 137,833 504,679 192,760 291,814 1,127,420 Retention fees payable 413,697 269,146 57,892 4,690 226,143 128,675 1,100,243 Accrued interest 95,002 91,397 284,585 – – – 470,984 Deposits 109,604 47,717 228,574 102,816 – – 488,711 Other payables 195,086 – – – – 195,086

7,399,505 1,471,645 1,589,950 1,718,964 435,121 420,489 13,035,674Short-term debt − 500,000 − − − − 500,000Long-term debt 1,340,000 6,018,742 10,534,685 8,762,748 29,953,817 56,609,992

P=7,399,505 P=3,311,645 P=7,608,692 P=12,253,649 P=9,197,869 P=30,374,306 P=70,145,666

Credit RiskIt is the Group’s policy that buyers who wish to avail the in-house financing scheme are subject tocredit verification procedures. Receivable balances are being monitored on a regular basis andsubjected to appropriate actions to manage credit risk.

With respect to credit risk arising from the other financial assets of the Group, which comprisecash and cash equivalents and financial assets at amortized costs, the Group’s exposure to creditrisk arises from default of the counterparty, with a maximum exposure equal to the carryingamount of these instruments.

The table below shows the comparative summary of maximum credit risk exposure on assets as ofDecember 31, 2014 and 2013.


Real estateLoans and Receivables

Cash and cash equivalents P=1,609,392 P=3,505,667Contracts receivable 18,411,649 13,389,091Receivables from sale of condominium units and club

shares 331,016 375,309Receivable from government and other financial

institutions 515,091 480,898Receivables from tenants 430,412 414,380Due from related parties 315,264 208,737Receivables from homeowners association 228,811 246,581Receivable from sale of joint venture lots - net 653,090 913,657Others 798,820 611,889

23,293,545 20,146,209SugarTrade receivables 198 269Others 1,515 1,521

1,713 1,790Hotel and EnergyTrade receivables 130,598 22,848Due from a related party 10,412 4,944

141,010 27,792

(Forward)

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Financial assets at FVTOCIQuoted equity securities P=110,277 P=90,120Unquoted equity securities 48,946 36,308

159,223 126,428P=23,595,491 P=20,302,219

The table below shows the credit quality by class of asset for loan-related statement of financialposition lines, based on the real estate operation’s credit rating system as of December 31, 2014and 2013, based on the Group’s credit rating system.

2014Neither Past Due nor Impaired Past Due or

High GradeStandard

GradeSubstandard

GradeIndividually

Impaired Total(In Thousands)

Cash and cash equivalents P=1,609,392 P=− P=− P=− P=1,609,392Loans and receivables Contracts receivable − 17,984,289 − 427,360 18,411,649 Receivables from sale of condominium units and

club shares 166,486 − − 164,530 331,016 Receivable from government and other financial

institutions 515,091 − − − 515,091 Receivables from tenants 54,689 315,894 − 59,829 430,412 Due from related parties 315,264 − − 315,264 Receivables from homeowners association − 142,797 − 86,014 228,811 Receivable from sale of joint venture lots 494,728 − − 158,362 653,090 Others 345,127 157,736 − 295,957 798,820

P=3,500,777 P=18,600,716 P=− P=1,192,052 P=23,293,545

2013Neither Past Due nor Impaired Past Due or

High GradeStandard

GradeSubstandard

GradeIndividually

Impaired Total(In Thousands)

Cash and cash equivalents P=3,505,667 P=− P=− P=− P=3,505,667Loans and receivables Contracts receivable − 13,105,867 − 283,224 13,389,091 Receivables from sale of condominium units and

club shares 318,306 − − 57,003 375,309 Receivable from government and other financial

institutions 480,898 − − − 480,898 Due from related parties 60,921 304,640 − 48,819 414,380 Receivables from investors in projects 208,737 − − − 208,737 Receivables from homeowners association − 168,567 − 78,014 246,581 Receivable from sale of joint venture lots – net 837,320 − − 76,337 913,657 Others 273,154 337,643 − 76,891 687,688

P=5,685,003 P=13,916,717 P=− P=620,288 P=20,222,008

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The analysis of financial assets as of December 31, 2014 and 2013 is as follow:

2014Neither past

due norimpaired

Past due but not impairedLess than

30 days30 to

60 days60 to

90 days90 to

120 daysOver

120 days Subtotal Impaired TotalCash and cash equivalents P=1,609,392 P=− P=− P=− P=− P=− P=− P=− P=1,609,392Loans and receivables Contracts receivable 17,984,289 92,925 21,394 13,166 11,520 288,355 427,360 − 18,411,649 Receivable from

government and otherfinancial institutions 515,091 − − − − − − − 515,091

Receivables from sale ofcondominium units andclub shares 166,486 26,914 4,714 1,387 2,738 128,777 164,530 − 331,016

Receivables from tenants 370,583 16,437 4,403 3,110 3,971 919 28,840 30,989 430,412 Due from related parties 315,264 − − − − − − − 315,264 Receivables from

homeownersassociation 142,801 − − − − − − 86,010 228,811

Receivable from sale ofjoint venture lots - net 494,728 54,305 27,720 − − − 82,025 76,337 653,090

Others 502,863 279,102 11,066 52 1,140 4,597 295,957 − 798,820P=22,101,497 P=469,683 P=69,297 P=17,715 P=19,369 P=422,648 P=998,712 P=193,336 P=23,293,545

2013Neither past

due norimpaired

Past due but not impairedLess than

30 days30 to

60 days60 to

90 days90 to

120 daysOver

120 days Subtotal Impaired TotalCash and cash equivalents P=3,505,667 P=− P=− P=− P=− P=− P=− P=− P=3,505,667Loans and receivables Contracts receivable 13,105,867 27,664 13,978 8,075 6,355 227,152 283,224 − 13,389,091 Receivable from

government and otherfinancial institutions 480,898 − − − − − − − 480,898

Receivables from sale ofcondominium units andclub shares 318,306 1,620 24,237 629 3,349 27,168 57,003 − 375,309

Receivables from tenants 365,561 8,755 9,671 − − − 18,426 30,393 414,380 Due from related parties 208,737 − − − − − − − 208,737 Receivables from

homeownersassociation 168,567 − − − − − − 78,014 246,581

Receivable from sale ofjoint venture lots - net 837,320 − − − − − − 76,337 913,657

Others 610,797 71,077 3,317 216 332 1,910 76,852 39 687,688P=19,601,720 P=109,116 P=51,203 P=8,920 P=10,036 P=256,230 P=435,505 P=184,783 P=20,222,008

The Group’s high-grade receivables pertain to receivables from related parties and third partieswhich, based on experience, are highly collectible or collectible on demand, and of whichexposure to bad debt is not significant. Receivables assessed to be of standard grade are thosewhich had passed a certain set of credit criteria, and of which the Group has not noted anyextraordinary exposure which calls for a substandard grade classification.

Real Estate Operation Capital ManagementReal estate operation’s primary objective is to maintain its current sound financial condition andstrong debt service capabilities as well as to continuously implement a prudent financialmanagement program.

Real estate operation manage their capital structure and makes adjustments to it, in light ofchanges in economic conditions. It closely monitors its capital and cash positions and carefullymanages its capital expenditures such as land acquisitions, constructions and project developmentsand fixed charges. Real estate operation prefers to enter into joint venture arrangements withlandowners to develop land rather than purchasing land outright, which reduces its capitalrequirements and can increase returns. Furthermore, real estate operation may also, from time totime, seek other sources of funding, which may include debt or equity issues depending on its

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financing needs and market conditions. Real estate operation continues to fund its projectdevelopments using medium to long-term financing, which can help mitigate any negative effectsof a sudden downturn in the Philippine economy or a sudden rise in interest rates.

When getting financing from the banks on a project-to-project basis, real estate operation usuallyfollows a gearing ratio of at least 60% loanable value versus total project costs.

Sugar Operation Capital ManagementSugar operation manages their capital structure and makes adjustments to it in light of changes ineconomic conditions. It closely monitors its capital and cash positions and carefully manages itsexpenditures and disbursements. Furthermore, sugar operation also, from time to time seeks othersources of funding, which may include internal or external borrowings depending on its financingneeds and market conditions.

Sugar operation monitors capital using a gearing ratio which is total debt divided by total equity.They include within debt, accounts payable and accrued expenses, income tax payable, due torelated parties, short-term loan and long-term debt. Their policy is to keep the gearing ratio not toexceed 2.0:1.0.

Hotel Operation Capital ManagementHotel operation’s primary objective is to improve their profitability and continuously implement aprudent financial management program. Capital and cash positions are closely monitored andcarefully manages their expenditures and disbursements are carefully managed. Hotel operationconsiders their equity as capital.

SRI is subject to an externally imposed capital requirements by the BOI. Such requirementsprescribed that SRI shall increase its equity to P=391.0 million equivalent to 25% of the totalproject cost. As of December 31, 2014 and 2013, SRI was able to comply with the saidrequirement upon receipt of contribution of assets from FDC.

Power Generation OperationPower operation’s primary objective is to effectively manage its cash flow position. For its IPPAdministrator contracts, cash flows are managed by ensuring that billings are prepared anddelivered promptly and by working closely with electric cooperatives to ensure timely collectionof receivables.

For the Group’s Misamis Power Plant, cash is sourced from the equity provided by the ParentCompany and from project finance loans provided by local banks. Expenditures anddisbursements are closely monitored to ensure that funds are available when needed.

Derivative Financial InstrumentsThe Group’s freestanding derivative financial instruments, which mainly consist of foreigncurrency forward contracts and swaps, and interest rate swaps, are transactions not designated ashedges.

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The table below sets out information about the Group’s derivative financial instruments and therelated fair value as of December 31, 2014 and 2013:

Foreign Currency Forward Contracts and Swaps 2014 2013(In Thousands)

Notional amount $190,000 $182,000Derivative assets P=519,086 P=430,046Derivative liabilities 6,450 22,017

Interest Rate Swaps 2014 2013(In Thousands)

Notional amount $10,000 $–Derivative assets P=97,007 P=–Derivative liabilities 94,840 –

The net movements in fair value changes of all derivative instruments are as follows:


Balance at beginning of year P=408,029 (P=56,368)Net changes in fair value of derivatives

Designated as accounting hedges 75,469 429,956Not designated as accounting hedges (827,779) (3,585,414)

(344,281) (3,211,826)Fair value of settled instruments

Not designated as accounting hedges 859,084 3,619,855Balance at end of year P=514,803 P=408,029

The derivative liability as of December 31, 2014 and 2013 are recorded under ‘other payable’account (see Note 20).

Derivatives Designated as Accounting HedgesIn 2013, the Parent Company entered into two (2) seven (7)-year cross currency swaps (CCS) withan aggregate notional amount of $150.0 million to hedge its foreign currency risk arising from the$300.0 million fixed rate bonds issued by FDCI. The Group applies hedge accounting treatmenton these cross currency swaps after complying with hedge accounting requirements, specificallyon hedge documentation designation and effectiveness testing.

Under the CCS agreements, the Parent Company receives fixed interest of USD at the rate of4.25% of the $150.00 million total notional amount and pay fixed interest in Philippine Peso at5.98% and 5.78% of P=2,060.0million and P=4,091.0 million, respectively, semi-annually on a30/360 day count basis. The notional amount of the cross-currency swap equals that of the debt,and all cash flows dates and interest rates coincide between the debt and the CCS.

The maturity date of the CCS contracts coincides with the maturity date of the hedged bonds (seeNote 21).

Pertinent details of the CCS are as follows:

Notional amount Trade date Effective date Maturity date Swap rateUS$100.00 April 3 2013 April 4, 2013 April 20, 2020 40.91

US$50.00 May17, 2013 May 20, 2013 April 20, 2020 41.21

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As of December 31, 2014 and 2013, the fair value of the cross currency swaps designated ashedging instruments amounted to P=505.4 million and P=430.0 million, respectively, presented aspart of “Other assets” in the consolidated statement of financial position (see Note 20). Theunrealized gain (loss) on hedging contracts amounted to P=18.7 million, net of deferred tax ofP=8.0 million and P=54.5 million, net of deferred tax of P=23.3 million, for the years endedDecember 31, 2014 and 2013, respectively, and is presented as “Net movement on cashflowhedges” in the consolidated statement of comprehensive income.

Hedge Effectiveness ResultsSince the critical terms of the hedged bonds and the CCS match, except for one to two days timingdifference on the interest dates, the hedges were assessed to be highly effective. As such, theaggregate fair value changes on these CCS amounting to P=18.7 million and P=54.5 million in 2014and 2013, respectively, were recognized by the Group under “Net movement on cashflow hedges”account in the consolidation statement of comprehensive income. No ineffectiveness wasrecognized in the Group’s statement of income for the years ended December 31, 2014 and 2013.

36. Offsetting of Financial Assets and Liabilities

The amendments to PFRS 7, which is effective January 1, 2013, require the Group to discloseinformation about rights of offset and related arrangements (such as collateral postingrequirements) for financial instruments subject to enforceable master netting agreements or similararrangements. The effects of these arrangements are disclosed in the succeeding tables.

Financial assets

December 31, 2014

Financial assetsrecognized at

end of reportingperiod by type

Gross carryingamounts (before

offsetting)

Gross amountsoffset in

accordance withthe offsetting

criteria

Net amountpresented instatements of

financialposition

[a-b]

Effect of remaining rights of set-off(including rights to set off financialcollateral) that do not meet PAS 32

offsetting criteria

Net exposure[c-d]

Financialinstruments

Fair value offinancialcollateral

[a] [b] [c] [d] [e]Derivative assets (Note 5) P=616,093 P=– P=616,093 P=– P=– P=616,093Total P=616,093 P=– P=616,093 P=– P=– P=616,093

December 31, 2013

Financial assetsrecognized at



offsetting)



criteria


financialposition

[a-b]


offsetting criteria

Net exposure[c-d]



[a] [b] [c] [d] [e]Derivative assets (Note 5) P=430,046 P=– P=430,046 P=– P=– P=430,046Total P=430,046 P=– P=430,046 P=– P=– P=430,046

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Financial liabilities

December 31, 2014

Financial liabilitiesrecognized at



offsetting)



criteria


financialposition

[a-b]


offsetting criteria

Net exposure[c-d]



[a] [b] [c] [d] [e]Derivative liabilities (Note 5) P=101,290 P=– P=101,290 P=– P=– P=101,290Bills payable* (Note 16 ) 3,265,389 – 3,265,389 3,265,389 – –Total P=3,366,679 P=– P=3,366,679 P=3,265,389 P=– P=101,290

December 31, 2013

Financial liabilitiesrecognized at



offsetting)



criteria


financialposition

[a-b]


offsetting criteria

Net exposure[c-d]



[a] [b] [c] [d] [e]Derivative liabilities (Note 5) P=22,017 P=– P=22,017 P=– P=– P=22,017Bills payable* (Note 16) 63,752 – 63,752 – 63,572 –Total P=85,769 P=– P=85, 769 P=– P=63,572 P=22,017

* Included in bills and acceptances payable in the statements of financial position

The amounts disclosed in column (d) include those rights to set-off amounts that are onlyenforceable and exercisable in the event of default, insolvency or bankruptcy. This includesamounts related to financial collateral both received and pledged, whether cash or non-cashcollateral, excluding the extent of over-collateralization.

37. Registrations with the PEZA

On May 29, 2000, FAI was registered with PEZA pursuant to the provisions of Republic Act(R.A.) No. 7916 as an Ecozone Developer/Operator to establish, develop, construct, administerand operate a special ECOZONE to be known as the Northgate Cyber Zone - Special EconomicZone at the FCC.

On June 6, 2000, CPI was registered with the PEZA pursuant to the provisions of R.A. No. 7916as an Ecozone Facilities Enterprise.

On June 11, 2001, FAC was registered with PEZA as the developer/operator of PBCom Towerand as such it will not be entitled to any incentives however, IT enterprises which shall locate inPBCom Tower shall be entitled to tax incentives pursuant to RA No. 7916.

On February 13, 2002, FLI was registered with PEZA pursuant to the provisions of R.A. No. 7916as the Ecozone Developer/Operator to lease, sell, assign, mortgage, transfer or otherwiseencumber the area designated as an Ecozone to be known as Filinvest Technology Park -Calamba.

As registered enterprises, these subsidiaries are entitled to certain tax benefits and nontaxincentives such as VAT zero-rating with their local suppliers and exemption from national andlocal taxes and in lieu thereof, a special five percent (5%) income tax rate based on gross income.

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38. Registration with the Board of Investments

The Group has registered the following New Developer of Low-Cost Mass Housing Projects withthe BOI under the Omnibus Investments Code of 1987 (Executive Order No. 226) as ofDecember 31, 2014:

Name Reg. No. Date RegisteredOne Oasis - Ortigas (F to M) 2011-120 06/15/11La Brisa Townhomes 2011-117 06/09/11The Linear 2011-121 06/15/11Bali Oasis 3 & 4 2011-134 06/27/11Ocean Cove 2011-133 06/27/11Villa Montserrat - Expansion 2011-132 06/27/11Escala @ Corona del Mar 2011-167 07/29/11Filinvest Homes Tagum Phase 1 2011-171 08/02/11Filinvest Homes Tagum Phase 2 2011-214 09/26/11One Oasis Davao 1, 2, 3 2011-194 09/02/11Villa MerceditaVilla San Ignacio 2011-148 07/14/11Tierra Vista 2011-191 08/31/11Tamara Lane 2011-215 09/26/11Austine Homes 2011-252 11/25/11The Glens Phase 2The Glens Phase 4 2011-218 09/26/11Somerset Lane 2011-273 12/21/11Aldea del Sol Phases 5 & 6 2011-276 12/22/11Capri Oasis: Bldg Albero, Brezza,Solare, Cielo, Fiori, Vento 2012-036 03/05/12Studio City Tower 1Anila Park 1 2012-052 03/26/12San Remo Oasis - Bldgs. 1-8One OasisCebu- Bldgs. 1-3 2012-082 05/28/12Filinvest Homes-Butuan 2012-094 06/07/12Sorrento Oasis- Bldgs. A- H2Maui Oasis- Bldgs. 2 & 3One Oasis Davao - Bldg. 4 2012-093 06/07/12Amare Homes 2013-014 01/18/13Castillon Homes - The Residences 2013-064 03/11/13Woodville Phase 2 2013-065 03/11/13Maui Oais - Bldg.4 2014-143 08/29/14One Spatial (Fairmont and Greenwich) 2014-141 08/29/14Sorrento Oasis - Bldg. K,L,N 2014-142 08/29/14Valle Dulce Phase 1 2014-140 08/29/14Sorrento Oasis - Bldg. M1 & M2 2014-204 11/12/14Vinia Residences 2014-205 11/12/14One Oasis CDO - Bldg. 1 2014-212 12/04/14

The Group also has registered the 405 MW Misamis Power Plant as New Operator of Coal FiredPower Project with the BOI under the Omnibus Investments Code of 1987 (Executive Order No.226) on August 30, 2013.

As a registered enterprise, the Group is entitled to certain tax and nontax incentives, subject tocertain conditions.

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39. Milling Contracts

DSCC and CSCC (Millers) have milling contracts with various planters which provide for acertain sharing ratio between the Millers and the planters for the resulting sugar and molassesproduced in their respective sugar mills. The milling contracts are effective for a period of15 agricultural crop years, subject to an extension of another 15 crop years at the option of theMillers.

40. Development Agreements

HYSFC entered into several Development Agreements (the Agreements) with various landownersfor the development and cultivation of certain parcels of agricultural land into a sugarcaneproduction. The Agreements are effective for periods ranging from five (5) to 15 agricultural cropyears and renewable for such additional periods under conditions mutually agreed upon by theparties. Under the Agreements, HYSFC shall have the rights and authority to enter intopossession of the properties, and to do all acts, deeds, matter and things necessary for its properand profitable development, cultivation and improvement as viable sugarcane plantation.Other provisions of the Agreements follow:

· HYSFC shall furnish necessary management expertise, equipment and technology for theagricultural development and cultivation;

· Parties shall be entitled to receive from the income derived from the property during theeffectivity of the Agreements;

· HYSFC shall advance to the party in the Agreements a portion of the latter’s share in theprofits from the Agreements;

· After satisfying the advance in full, the succeeding annual share in the profits of the party inthe Agreements shall be paid on the first day of the crop year following complete deduction ofadvanced made; and

· The remaining amount in the income from the property shall pertain to the HYSFC as its sharein the income on the agricultural development undertaken.

Impacted by the development agreements are the advances to planters and biological assetsrecorded in the consolidated statements of financial position. The carrying values of the Group’sadvances to planters and biological assets, included in ‘Loans and receivables’ account of sugaroperations and ‘Other assets’ account in the consolidated statements of financial position,amounted to P=99.5 million and P=113.1 million (see Note 9), respectively, as of December 31, 2014and P=102.9 million and P=109.7 million (see Note 17), respectively as of December 31, 2013.

41. Trust Operations

Securities and other properties held by EW in fiduciary or agency capacity for clients andbeneficiaries are not included in the accompanying consolidated statement of financial positionsince these are not assets of EW. The combined trust and managed funds operated by the TrustDepartment of EW amounted to P=6.9 billion and P=7.8 billion as of December 31, 2014 and 2013,respectively.

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Government securities with a total face value of P=119.8 million and P=161.9 million as ofDecember 31, 2014 and 2013, respectively, are deposited with the BSP in compliance with currentbanking regulations related to EW’s trust functions. These government securities are recorded aspart of investment securities at amortized costs as of December 31, 2014 and 2013.

In accordance with BSP regulations, 10% of the profits realized by EW from its trust operationsare appropriated to surplus reserves. The yearly appropriation is required until the surplusreserves for trust operations amounts to 20% of EW’s authorized capital stock.

EW’s income from its trust operations amounted P=20.4 million, P=29.0 million and P=27.8 million in2014, 2013 and 2012, respectively.

42. IPP Administrator Contracts and Electric Power Purchase Agreements (EPPA)

In 2014, PSALM conducted open public biddings wherein the Group participated and wasselected as the winning bidder of the following IPP Administrator contracts:

· IPP Administrator contract for the Strips of Energy of the Unified Leyte Geothermal PowerPlant - On January 29, 2014, PSALM issued the Notice of Award to FDCUI as one of theIPPA for the strips of energy of the ULGPP located in Tongonan, Leyte. The ULGPP IPPAshall expire on July 25, 2021.

· IPP Administrator contract for output of Mindanao I and II (Mt. Apo 1 and 2) GeothermalPower Plants - On October 24, 2014, FDC Misamis won the bidding for the selection andappointment of the IPPA for the output of the Mindanao I and II (Mt. Apo 1 and 2)Geothermal Power Plants located in Kidapawan City, North Cotabato. The IPPA contract isco-terminus with the Mt. Apo 1 and 2 Power Producer Agreements (PPAs) which shall expireon February 15, 2022 and June 17, 2024, respectively.

These IPP Administrator contracts include, among others, the following common rights and obligations:

a. The right to enter into bilateral contracts with third parties and ancillary services contracts,and to trade, sell or transact for its own account and at its own risk and cost.

b. The rights which are reasonably necessary for or incidental to the performance of IPPAdministrator’s obligations under the IPPA contract within PSALM’s authority to grant.

c. The obligation to pay PSALM all sums due under the IPPA contracts including:i. Mt. Apo 1 and 2 - monthly fixed payments and generation payments based on actual

metered quantity generated and delivered to the IPPA; and,ii. ULGPP - generation payments based on actual metered quantity generated and

delivered to the IPPA.d. The obligation to observe the existing nomination arrangement between PSALM and the IPP;

and,e. The obligation to maintain performance bond in full force and effect with a qualified bank.

These IPP Administrator contracts took effect on December 26, 2014. Since the effectivity of theIPP Administrator contracts, EPPAs were signed and agreed with electric cooperatives for aperiod of one (1) to nine (9) years.

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In 2014, the Group recognized an intangible asset on the IPP Administrator rights based on thepresent value of the fixed monthly payment to PSALM in relation to the IPP Administratorcontract of the output of Mt. Apo 1 and 2 geothermal power plants. As of December 31, 2014IPP Administrator rights amounted to P=9.4 billion and amortization in 2014 amounted toP=18.7 million (recognized as part of the cost of power generation operations in the Group’sconsolidated statement of income). As of December 31, 2014, the related financial liabilityamounting to P=9.3 billion is payable up to the expiration of the IPP Administrator contract.Current portion of the liability on IPP Administrator contract amounted to P=1.5 billion as ofDecember 31, 2014.

43. Events After Reporting Date

On January 29, 2015, the EW’s Board of Directors, in its regular meeting, approved a rightsoffering to be offered first to certain eligible shareholders of EW (“Stock Rights Offer”) subject tomarket conditions and receipt of regulatory approvals. The Stock Rights Offer will be conductedby way of offering common shares from unissued portion of EW’s authorized capital stock.

On January 12, 2015, the SEC approved FHC’s application for the increase in authorized capitalstock from P=16.0 million to P=1,516.00 million consisting of 15.16 million shares with par value ofP=100 per share.

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INDEPENDENT AUDITORS’ REPORTON SUPPLEMENTARY SCHEDULES

Filinvest Development CorporationThe Beaufort, 5th Avenue, corner 23rd StreetBonifacio Global City, Taguig City

We have audited in accordance with Philippine Standards on Auditing, the consolidated financialstatements of Filinvest Development Corporation and its subsidiaries (the Group) as at December 31,2014 and 2013 and for each of the three years in the period ended December 31, 2014 included in thisForm 17-A and have issued our report thereon dated March 11, 2015. Our audits were made for thepurpose of forming an opinion on the basic consolidated financial statements taken as a whole. Theschedules listed in the Index to Consolidated Financial Statements and Supplementary Schedules arethe responsibility of the Group’s management. These schedules are presented for purposes ofcomplying with the Securities Regulation Code Rule 68, as Amended (2011), and are not part of thebasic consolidated financial statements. These schedules have been subjected to the auditingprocedures applied in the audit of the basic consolidated financial statements and, in our opinion,fairly state in all material respects, the financial data required to be set forth therein in relation to thebasic consolidated financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Dhonabee B. SeñeresPartnerCPA Certificate No. 97133SEC Accreditation No. 1196-A (Group A), March 8, 2012, valid until March 31, 2015Tax Identification No. 201-959-816BIR Accreditation No. 08-001998-98-2015, January 5, 2015, valid until January 4, 2018PTR No. 4751326, January 5, 2015, Makati City

March 11, 2015

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

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

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


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FILINVEST DEVELOPMENT CORPORATION AND SUBSIDIARIESSUPPLEMENTARY INFORMATION AND DISCLOSURES REQUIREDON SRC RULE 68 AND 68.1 AS AMENDEDDECEMBER 31, 2014

Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation CodeRule SRC Rule 68 and 68.1 which consolidates the two separate rules and labeled in the amendment as“Part I” and “Part II”, respectively. It also prescribes the additional information and schedule requirementsfor issuers of securities to the public.

Below are the additional information and schedules required by SRC Rule 68 and 68.1 as amended that arerelevant to the Group. This information is presented for purposes of filing with the SEC and is not requiredpart of the basic financial statements.

Schedule A. Financial Assets in Equity SecuritiesBelow is the schedule of financial assets in equity securities of the Group as of December 31, 2014:

Name of Issuing entity and associationof each issue

Number ofShares/Principal

Amount ofBonds and Notes

Amount Shownin the Statement

of Financial Position

Value Basedon Market

Quotation atend of year

IncomeReceived and

Accrued(In Thousands)

Financial assets at FVTPLGovernment and Private Bonds:

Bureau of Treasury 4,068,876 P=4,153,447 P=4,153,447 P=11,085Republic of the Philippines 1,840,094 2,812,791 2,812,791 51,551First Pacific Company Ltd 775,445 780,800 780,800 7,809International Container Terminal

Services 633,906 657,060 657,060 6,846Republic of Indonesia 313,040 377,926 377,926 5,394RCBC 365,094 367,339 367,339 10,540Pertamina 223,600 233,560 233,560 1,644SM Investment Corp 223,600 223,600 223,600 7,358FPT Finance Limited 100,620 110,074 110,074 294Korean Development Bank 89,440 88,640 88,640 372Banco De Oro 4,472 4,555 4,555 161PSALM 716 856 856 27Credit Suisse 78 25,826 25,826 n/aCitibank Manila 43 20,878 20,878 n/aOthers 100 99,680 99,680 421

9,957,032 9,957,032 103,502Equity Securities: San Miguel Corporation 2,847 215,195 215,195 − LGU Guarantee Corporation 50 10,213 10,213 −

Victoria Milling Corporation 50 229 229 −Mabuhay Vinyl Corporation 9 21 21 −

P=10,182,690 P=10,182,690 P=103,502Financial assets at FVTOCIQuoted:

Manila Golf 2 P=74,000 P=74,000 P=–Manila Polo Club 1 11,000 11,000 –Sta Elena Properties Inc. 2 6,200 6,200 –Roxas Holdings, Inc. 914,290 6,126 6,126 –Cebu Country Club 1 6,000 6,000 –The Palms Country Club 1 3,060 3,060 −Manila Electric Company 156,000 1,557 1,557 –PLDT 46,100 827 827 −Aboitiz Transport System

Corporation 241,539 808 808 –Empire East Land Holdings, Inc. 3 213 213 –Valle Verde 1 360 360 –Others 1 126 126 –

P=110,277 P=110,277 P=–

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Name of Issuing entity and associationof each issue

Number ofShares/Principal

Amount ofBonds and Notes

Amount Shownin the Statement

of Financial Position

Value Basedon Market

Quotation atend of year

IncomeReceived and

Accrued(In Thousands)

Unquoted:Manila Electric Company

(MERALCO) 1,153,694 P=11,537 P=11,537 P=–H.B. Fuller 1,903,767 15,500 15,500 –Riviera Golf 1 4,500 4,500 –Caliraya Golf 1 3,120 3,120 –Timberland Sports and Nature Club 3 2,994 2,994 –Phil. Clearing House Corp. 1 2,469 2,469 –Alabang Country Club 2,000 2,200 2,200 –PDSH 1 1,556 1,556 –Kewalram Realty, Inc. 1,500 150 150 –KRL Land, Inc. 1,500 150 150 –Asiatrust Development Bank 18,200 127 127 –Pacesetter Homes Dev’t Corp. 1 25 25 –Discovery Homes Realty 1 25 25 –Pilipino Telephone Corp. 1,800 8 8 –Others – 4,585 4,585 –

P=48,946 P=48,946 P=–P=159,223 P=159,223 P=–

Investment Securities at AmortizedCost

Republic of the Philippines 3,037,283 P=4,046,260 P=4,033,094 P=117,816 National Power Corp. 2,894,726 3,037,300 3,168,711 147,851

International Container TerminalsServices 894,400 910,943 912,288 9,131

Bank of China 347,686 347,490 346,367 2,991 PSALM 220,921 223,560 226,511 13,378 Philippine Power Trust I 186,206 182,837 184,343 34,209 Republic of Indonesia 44,720 46,488 47,507 22,976 Bank of America Corporation – – – 5,868 Citigroup, Inc. – – – 5,165 FPT Finance Ltd – – – 4,858 Development Bank of The

Philippines– – –

4,578 First Pacific Company, Ltd. – – – 2,789

P=8,794,878 P=8,918,821 P=371,610

The Group has no income received and accrued related to the financial assets at FVTOCI during the period.

Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Partiesand Principal Stockholders (other than related parties)Below is the schedule of advances to employees of the Group with balances above P=100,000 as ofDecember 31, 2014:

NameBalance at

beginning of year AdditionsCollections/Liquidations

Balance atend of year

(In Thousands)Abalon, Edgar Allan C. P=– P=296 P=– P=296Abella, Maria Melanie L. – 288 – 288Abreu, Raoul Antonio J. 183 – 65 118Abulencia, Maria Veronica L. – 230 – 230Afable, Ruby Charo T. – 240 – 240Agcaoili, Ana Jean E. 182 – 73 108Alcala, Mary Jane D. 279 – 48 230Alcazar, Jose Gerardo D. – 277 – 277Alonde, Rizel A. 232 108 44 296

(Forward)

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*SGVFS011426*

NameBalance at



(In Thousands)Amora, Michael Angelo B. P=– P=226 P=– P=226Andal, Reginald R. 201 – 42 159Andrade, Ian Daleo R. 252 – 61 190Angga, Emiliana A. – 383 – 383Anonuevo, Janus C. 268 – 47 221Antonio, Mary Grace M. – 146 – 146Apaliso, Victor F. Jr. 543 – 221 322Apuli, Ranulfo T. Jr. – 142 – 142Aquino, Grace V. – 121 – 121Aquino, Lorna M. – 250 – 250Arevalo, Perla R. 204 164 46 322Arintok, Ariann O. 169 – 35 134Arnaldo, Jennifer A. – 125 – 125Asuncion, Mary Gay T. 232 – 44 188Asuncion, Rodolfo V. – 247 – 247Atienza, Alan E. 1,200 – 578 622Atienza, Jason Anthony V. 269 – 59 210Auza, Jonathan L. 306 – 55 251Bajo, Wilbert Aldrin R. 641 – 21 620Balatbat, Maria Jocelyn B. 240 – 49 190Baldoman, Rogelio A. – 111 – 111Bales, Joel C. – 137 – 137Banal, Aerol Paul B. 169 – 55 114Banal, Conrad Anthony Dominic L. 328 – 67 261Bandol, Jessie C. 276 – 65 211Banez, Pedro Catalino P. 233 – 44 189Baro, Rexie G. – 133 – 133Basilio, Jeziel P. 161 – 35 126Basilio, Pelagio III G. – 117 – 117Bauson, Marissa A. 710 – 150 559Bautista, Alexander Glen E. 280 216 49 447Bautista, Ericson H. 186 165 41 310Bautista, John Rey A. – 114 – 114Bautista, Maria Regina J. 213 – 40 173Bautista, Meybel L. 315 – 55 261Bayani, Ma Teresa L. 396 – 71 325Bayot, Emilia B. – 101 – 101Bernabe, Imelda F. 216 – 42 174Billedo, Ma Christina L. − 191 – 191Biscocho, Gay A. 240 – 43 197Bombais, Rosemarie C. 267 – 49 217Bondoc, Priscilla F. – 247 – 247Borja, Grace M. 232 – 63 169Borres, Kristoffer Alexis N. 214 – 46 168Borromeo, Ray Karlo R. 232 – 44 188Buenaventura, Imelda M. – 188 – 188Buendia, Angelica S. – 316 – 316Cabahug, Janet C. – 111 – 111Caberoy, Ginalyn D. 235 – 43 193Cabusao, Ma Jerreza D. – 247 – 247Cadano, Johoanna R. 397 – 136 261Cairo, Abigail Joan U. 201 179 46 333Calixto, Tristan Jorel R. – 194 – 194Camilo, Virgilio L. – 447 – 447Campanera, Ma Riezl R. – 193 – 193Canedo, Noemi S. 191 – 57 134Canillas, Emmanuel Ramon Zamora Itf. 179 – 67 112Capili, Maria Aileen M. 260 – 51 209Capobianco, Anna Marie F. – 198 – 198Cariaga, Catherine M. 235 180 43 372Cariaga, Eric V. 186 – 48 138Carlos, Violeta A. 236 – 25 211Caro, Rowena R. 226 – 44 181Casambros, Nympha D. – 221 – 221Castillo, Mara Siena L. 178 – 48 130Castro, Angelene Elvira L. – 215 – 215Castro, John Philip M. – 219 – 219Castro, Ma Francesca H. – 273 – 273

(Forward)

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*SGVFS011426*

NameBalance at



(In Thousands)Catane, Roberto Paul D. P=217 P=– P=44 P=174Catapang, Ritchie C. – 233 – 233Cayabyab, Pamela Shiela M. – 211 – 211Ceniza, Minnie P. – 126 – 126Cenon, Antonio E. 94 12 – 105Chan, Mary Jane C. 241 – 72 169Cheng, Jolly Allan O. 211 – 45 166Ching, Alan John P. 271 – 49 222Ching, Jean Margarette L. 231 – 53 178Ching, Zulaika Jane D. – 219 – 219Chua, Catherine Ann H. – 219 – 219Chua, Jenice D. – 479 – 479Chua, Paulina L. 218 – 65 153Chua, Tan Guat Dolores L. – 222 – 222Claveria, Leah P. – 100 – 100Clutario, Ma Luisa T. 248 – 58 190Co, Aris G. – 296 – 296Co, Renato D. – 225 – 225Co, Ruth G. – 289 – 289Cobarrubias, Malcolm A. 193 – 47 146Cobarrubias, Maria Cristina S. 250 – 42 208Concepcion, Anna Lorraine G. – 111 – 111Contreras, Yolanda G. 222 – 45 178Corpuz, Denise S. 236 – 43 193Cruz, Anne Rachelle R. 287 – 48 239Cruz, Christian C. 250 – 41 208Cruz, Flordeliza M. 177 – 47 129Cruz, Florence G. 199 – 45 154Cruz, Napoleon S. Jr. 543 – 142 401Cuaton, Ursulo L. Jr. II 371 130 90 411Dagoy, Divine Grace F. 209 – 37 172David, Arnold Thomas Rafael L. 283 – 48 235De, Guzman Pricilla G. 239 – 42 197De, Guzman Rachelle D. 184 – 46 138De, Leon Anna Liza D. 441 – 126 315De, Leon Maribeth N. 238 – 62 176De, Luna Baltazar Randy B. 419 – 127 291De, Peralta Margareth M. 277 161 49 388Del, Rosario Raquel Y. 217 – 44 174Dela Cruz, Efren O. Jr. – 550 – 550Dela, Cruz Adonis S. – 393 – 393Dela, Cruz Glennmore G. 289 – 58 231Dela, Cruz Marinella A. 214 – 40 173Delos Santos, Nova B. 166 – 49 116Deocampo, Joanne B. 184 – 46 138Detubio, Carmen Q. – 246 – 246Dimla, Eduardo S. Jr. 1,680 – 91 1,590Dogillo, Shella A. – 120 – 120Dolina, Maria Luisa M. 222 – 45 178Ducado, Mary Nell A. – 213 – 213Dumalaog, Rosemarie R. 260 – 78 183Dumlao, Philip C. – 244 – 244Dytuco, Dona Marie R. – 223 – 223Ebora, Leovelino D. 242 – 42 200Enanosa, Carlo I. 274 – 67 206Encarnacion, Maria Esmeralda E. – 219 – 219Episcope, Henry C. 227 – 49 178Erana, Maria Gloria Dulce F. 217 – 51 166Escalicas, Ma Isabel G. 250 – 41 208Escoses, Ermelyn D. 264 – 59 205Esguerra, Arnold B. 223 – 42 181Fajardo, Annaliza O. – 124 – 124Fernandez, Jacqueline S. 10,668 1,077 963 10,782Filomeno, Gay S. – 230 – 230Florendo, Portia Gilda D. 221 – 53 168Flores, Gerald H. – 252 – 252Francia, Odelon T. Jr. 1,257 284 52 1,488Foja, Jacobo G. 205 231 55 381

(Forward)

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*SGVFS011426*

NameBalance at



(In Thousands)Gaba, Glenda S. P=– P=247 P=– P=247Gacasan, Rosalina C. 247 – 39 207Galicia, Olivia S. 185 – 55 130Galita, Gina Marie C. – 600 – 600Gasco, Brian Lesly Hegel S. – 116 – 116Geronimo, John Gil M. 300 – 62 238Gloez, Arthur S. Jr. 178 – 48 129Go, Irene Q. 235 – 55 180Gonzales, Edylene D. – 215 – 215Guerrero, Nilo B. 151 – 43 107Guino, Frances Lea C. 286 – 65 221Gutierrez, Johnell T. – 289 – 289Gutierrez, Windy B. 233 – 44 189Hebron, Marinela C. 236 – 43 193Hementera, Jonah M. – 317 – 317Honorico, Tootsie I. 250 – 60 191Hulguin, Joseph A. 226 – 44 181Ignacio, Felipe A. – 102 – 102Iremedio, December E. 217 – 44 174Isidro, Rod Louie Jefferson C. – 347 – 347James, Marvin A. 399 – 88 311Jaucian, Eufrocina B. 2,328 – 136 2,192Jonsay, Jayvee B. – 247 – 247Jose, Hannah Guitar G. – 211 – 211Joven, Marie Angeline C. 113 42 – 155Joven, Rhoda T. 222 – 54 168Junio, Ma Karen B. 174 – 49 125Kimpo, Cherry Ann Vanessa C. 251 – 52 200Kosca, Reginald Dennis B. 231 – 41 190Lacambra, Gemma C. 279 – 59 221Lacea, Jonne Ann R. − 244 – 244Lacsamana, Judy Ulysses A. 232 – 44 188Ladaban, Justin Robert G. 396 296 120 572Laguda, Janette S. 511 – 119 392Lama, Mary Ann B. 225 – 52 172Lampano, Moises G. 162 – 57 104Landrito, Ivah Marizol D. 187 284 85 387Laus, Willeth L. – 225 – 225Layug, Jennifer G. – 230 – 230Lazaro, Zaida Angelita P. 214 – 44 170Legaspi, Jocelyn C. 4,251 – 198 4,053Legaspina, Joanne Marie R. – 237 – 237Leuterio, Kristine Karen R. 226 – 41 185Ligayo, Michael H. – 192 – 192Lim, Karen D. – 234 – 234Lim, Stanley Jason G. – 244 – 244Lima, Ma Barbara V. 250 – 42 208Lim−Marohombsar, Maria Cecilia M. 215 – 45 170Lingad, Alexander F. – 237 – 237Locsin, Raul Raymund C. 269 – 65 204Lopez, Anna Lyn M. – 102 – 102Lopez, Maylene R. – 280 – 280Lopez, Paul John B. – 247 – 247Lotho, Glenn B. 220 – 95 125Lumbres, Ma Susana Editha G. 193 – 43 150Lumuthang, Rodney A. – 244 – 244Macaballug, Carmina D. – 122 – 122Macapagal, Jahil L. 265 – 66 199Macaraeg, Sally Marie D. 265 – 60 205Magadia, Jizell P. 150 – 47 103Magadia, Marlowe L. – 211 – 211Magdales, Gerardo C. 208 – 54 154Maglaki, Jeannette D. 211 378 18 571Magnaye, Racquel F. 267 291 50 508Maipid, Paolo Juan Miguel D. 193 – 47 146Makilan, Claudette G. 235 – 43 193Mamalayan, Paulino O. 196 – 46 150Mancilla, Rose Elizabeth B. – 203 – 203

(Forward)

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*SGVFS011426*

NameBalance at



(In Thousands)Manggalo, Debbie T. P=– P=250 P=– P=250Manguiat, Katherine N. 1,048 – 131 917Maningas, Gisela Michelle S. – 210 – 210Manuel, Karleen L. 501 – 17 483Maramag, Maria Katrina N. – 129 – 129Marcelo, Jasmin Mae C. 250 – 42 208Maribojoc, Maria Cristina L. – 237 – 237Marqueses, Ofelia D. – 174 – 174Marquez, Elsa N. 114 6 38 82Mateo, Maria Romina M. – 147 – 147Medina, Carlota A. 208 – 70 138Medina, Iv Aristeo N. – 251 – 251Medina, Lizel N. – 247 – 247Mendez, Mary Joy C. – 201 – 201Mercado, Joel M. – 756 – 756Minoza, Eliza Grace C. – 225 – 225Mirabueno, Jo−Anne G. – 206 – 206Molina, George T. 209 309 63 455Morales, Cyrus C. 233 – 44 189Mortel, Maria Kristina A. 254 – 50 204Mosqueda, Evangeline A. 261 245 108 398Munoz, Richard Benjamin S. 176 – 60 116Narciso, Paolo D. 233 – 41 192Narvacan, Genalyn M. – 103 – 103Nasol, Severino D. – 237 – 237Natividad, Noel U. – 244 – 244Navarrete, Marife S. – 211 – 211Navarro, Michael B. – 104 – 104Navidad, Jose Ma Oscar. 316 – 56 261Nayve, Julie Adelyn A. 164 – 48 116Ng, Estrella B. 233 – 44 189Nicasio, Myra P. 214 – 44 170Nonato, Herman D. 184 – 65 119Nufable, Emerson B. – 107 – 107Olalia, Agnes M. – 272 – 272Olalia, Anthony M. 208 – 46 162Olarte, Harold T. 243 – 42 201Ona, Lourdes A. 304 300 58 547Ong, Catherine C. 188 – 73 115Ong, Christina J. 219 – 62 158Ong, Ma Noemi S. 193 – 47 146Ong, Michael S. – 204 – 204Orcine, Iii William Cipriano D. – 219 – 219Ortiz, Toni Regina L. 211 – 46 166Pagtakhan, Mark Alvin A. – 161 – 161Palo, Danilo N. 182 – 48 134Palomo, Jesus Enrico L. – 128 – 128Pama, Cristina O. 444 – 151 293Pamfilo, Ma Anna Lourdes D. – 280 – 280Pangan, Noel S. 238 279 103 415Panganiban, Maricel G. – 101 – 101Panganiban, Rogel L. – 237 – 237Papag, Marita B. 217 – 44 174Paragas, Lex C. – 200 – 200Paras, Ana Maria L. 2,482 149 132 2,499Pascual, Conrad Paul D. Jr. 419 – 108 310Payawal, Roberto A. – 124 – 124Pe, Benito Florence Y. 292 – 56 236Penafiel, Evangeline S. 206 – 45 162Penaloza, Allan M. 206 – 45 162Penarubia, Allan T. 208 – 54 154Perez, Soraya F. 207 299 36 470Pilares, Mylene L. 316 439 62 693Pineda, Edgardo B. – 121 – 121Posadas, Jomar N. – 134 – 134Presingular, Gerard John C. 206 – 43 163Prudente, Sarah Melissa A. – 244 – 244Puno, Ma Christina C. 264 – 59 205

(Forward)

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*SGVFS011426*

NameBalance at



(In Thousands)Purugganan, Francesco Michael D. P=368 P=– P=117 P=251Que, Kathryn . 209 – 55 154Que, Sharon D. 247 – 42 204Rabor, Almira D. 250 – 44 206Ramirez, Claire L. – 260 – 260Ramiscal, Gerna Joanne G. 196 123 46 273Ramos, Harold D. – 116 – 116Ramos, Karren B. 200 – 43 158Ramos, Xavier C. 1,396 – 318 1,079Raymundo, Redentor E. – 234 – 234Reboredo, Raymond T. 212 – 88 124Reburiano, Ma Carina L. – 244 – 244Regalado, Daphne Xandra Z. – 222 – 222Resurreccion, Mary Anne L. 217 – 44 174Reyes, Annabelle M. – 241 – 241Reyes, Crispin A. – 260 – 260Reyes, Frederick D. – 384 – 384Reyes, Lovely M. 307 – 67 240Reyes, Ma Leonora Y. 209 – 78 132Reyes, Rosselyn Grace P. – 213 – 213Reynoso, Nina May Q. 216 – 56 160Ricaforte, Gracia Regina E. 177 – 47 130Ringor, Rowena Y. – 195 – 195Rito, Irene D. 192 – 46 146Rivano, Lucas Andre A. – 115 – 115Rivera, Ravi P. Jr. 180 – 56 124Rodriguez, Paulo Jose L. 187 263 56 394Rojas, Jocelyn D. − 223 – 223Rosal, Frederick Voltaire J. 161 – 47 114Rosario, Suzette C. − 275 – 275Saguinsin, Jannet D. 255 191 51 395Salazar, Adrian Wilson E. 229 221 52 398Salvador, Dino Antonio A. 239 – 42 196Salvador, Francis Alexandre A. 221 – 44 177Salvador, Sheila C. 173 – 53 120Sampang, Renato Z. 693 151 286 558Samson, Joy P. 184 247 68 363San, Agustin Maria Luz R. – 223 – 223San, Jose Alina F. – 215 – 215San, Jose Editha N. – 287 – 287Sangalang, Catherine D. 208 – 54 154Sangalang, Mai G. 236 – 78 158Sangkula, Sheena E. 219 – 42 177Santos, Broderick C. 313 – 56 257Santos, Silvino C. Jr. – 208 – 208Savellano, Roland M. – 185 – 185See, Evelyn O. 185 – 48 138Sen, Neil Allen A. 313 – 73 240Serrano, Mineleo C. 201 – 65 135Sibug, Maria Theresa C. 402 – 130 273Sierra, Abigail G. – 1,030 – 1,030Sigua, Ann Grace D. 185 – 34 151Siochi, Alberto Antonio E. – 237 – 237Siongco, Ma Liza C. – 303 – 303Siongco, Yvette Rhodora A. 259 – 64 196Sisican, Lilibeth R. – 154 – 154Soliongco, Jocelyn V. 247 – 52 195Soliven, Erlie G. 202 – 57 145Soller, Amada Ma Laarni C. 188 – 46 142Soriano, Leila V. 166 – 40 125Soriano, Maricel C. 209 – 92 117Sta, Maria Esther S. – 144 – 144Suerte, Felipe Rowen G. – 451 – 451Sugay, Rachel Joy R. – 107 – 107Suico, Arnel T. 226 – 44 181Susmerano, Gerardo . 1,636 – 417 1,219Sy, Rosemarie G. 230 – 55 175Tan, Catherine T. 201 – 53 148

(Forward)

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*SGVFS011426*

NameBalance at



(In Thousands)Tee, Lorita C. P=203 P=– P=69 P=134Teves, Elmer A. – 333 – 333Teves, Marie Antoinette G. 154 – 46 108Ticzon, Wilroy V. 288 – 49 239Tinio, Karsten T. 254 283 51 486Tomboc, Juancho A. 181 – 62 119Topacio, Mary Ann E. 247 166 42 371Trangia, Jude Thaddeus T. – 224 – 224Trinidad, Arlene R. 174 – 64 111Tuason, Geraldine M. 233 – 44 189Tubu, Charisse C. 249 – 41 208Tumao, Maria Leah L. 217 – 44 174Tumbaga, Allan John M. 3,378 – 309 3,069Ty, Maria Cristina C. 200 – 40 160Uy, Ernesto T. – 796 – 796Uy, Ivy B. 8,231 − 529 7,702Uy, Wennievic Y. – 230 – 230Valderrama, Liberty B. 217 274 54 436Valencia, Ma Shenie S. – 301 – 301Valenzuela, Nico B. 233 – 44 189Valera, Valerie Mariflor G. 256 – 61 196Valoria, Elzon P. – 462 – 462Velasco, Rufina Anabelle M. 168 – 59 109Vergel, De Dios Anthony V. 228 138 43 324Verzosa, Eugenio C. 219 – 45 174Viernes, Jovito M. 214 – 55 159Villa, Archibald V. 270 – 61 209Villano, Robin Melchor Jon V. 209 – 63 146Villano, Robin Melchor V. 277 – 87 190Villar, Rhamil B. – 217 – 217Villarama, Maria Aileen A. 182 – 48 134Villaraza, Alessandro L. 2,859 – 135 2,724Villegas, Maria Corazon R. 267 – 50 216Viray, Cecilia P. 288 – 49 239Vives, Jason P. 247 – 42 204Yadao, Israel C. Jr. 491 – 118 373Yambao, Ralph Eduardo A. 185 – 38 147Young, Christian Irving B. – 189 – 189Yuson, Dyan Ann D. 153 – 45 108Yuson, Ephraim Vincent M. 236 – 43 193Zamora, Jovito N. 206 382 65 523Zepeda, Djhoanna R. 242 152 45 349

P=99,355 P=42,988 P=17,322 P=125,020

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*SGVFS011426*

These advances to officers and employees consist of aggregate advances of more than P100,000 or one percent of total assets, whichever is less, is owed. This excludes all the amounts receivable from such personsfor purchases subject to usual terms, for ordinary travel and expense advances and for other such itemsarising in the ordinary course of business

Schedule C. Amounts Receivable from Related Parties which are Eliminated Duringthe Consolidation of Financial Statements

Below is the schedule of receivables (payables) with related parties which are eliminated in theconsolidated financial statements as of December 31, 2014 (amounts in thousands):

Volume of Transactions Receivable TermsFDC Forex Share in expenses P=7,824 P=1,830,993 Non-interest bearing

and to be settledwithin one year

Pacific Sugar Holdings, Corp. Share in expenses 930 951,764 Non-interest bearingand to be settledwithin one year

Filinvest Alabang, Inc Share in expensesManagement fee

26,562 175,148 Non-interest bearingand to be settled

within one year exceptfor sale of lots*

Filinvest Land, Incorporated Share in expenses 784,543 126,836 Non-interest bearingand to be settled

within one year exceptfor sale of lots*

Dividend income

FDC Hotels Corporation Share in expenses 31,957 80,806 Non-interest bearingand to be settledwithin one year

FDC Utilities, Inc. Share in expenses 25,329 41,706 Non-interest bearingand to be settledwithin one year

Seascapes Resort Inc. Share in expenses 10,892 5,892 Non-interest bearingand to be settledwithin one year

Rental income

Festival Supermall, Inc. Share in expenses 81 168 Non-interest bearingand to be settledwithin one year

Filinvest Development CaymanIslands

Forex gain/loss 1,526,500 (4,976,474) Non-interest bearingand to be settledwithin one year

East West Banking Corporation Share in expensesLoan

23,858 (5,606,988) Non-interest bearingand to be settled

within one year exceptfor loan**

P=2,438,476 (P=7,370,149) *Interest-bearing receivable from sale of lots to FAI an d FLI that are due within two years and nine years, respectively ** Interest-bearing loan with interest rate per annum equivalent to 4.059% Fixed (inclusive of GRT) payable semi-annually. Principal is due on March 31, 2020.

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*SGVFS011426*

Balance atbeginningof period

Additions/Reclassifications

Collections/Reclassification

Balance atend of period

FDC Forex P=2,908,168 P=7,825 (P=1,085,000) P=1,830,993Pacific Sugar Holdings, Corp. 951,292 931 (459) 951,764Filinvest Alabang, Inc. 194,367 28,080 (47,299) 175,148Filinvest Land, Incorporated 123,706 784,542 (781,412) 126,836FDC Hotels Corporation 56,222 31,956 (7,373) 80,805FDC Utilities, Inc. 19,360 22,580 (234) 41,706Seascapes Resort Inc. 17,287 10,892 (22,287) 5,892Festival Supermall, Inc. 168 162 (162) 168Filinvest Development Cayman Islands (6,502,974) 1,526,501 – (4,976,473)East West Banking Corporation (5,583,130) – (23,858) (5,606,988)

(P=7,815,534) P=2,413,469 (P=1,968,084) (P=7,370,149)

The intercompany transactions between FDC and the subsidiaries pertain to share in expenses, rentalcharges and management fee. There were no amounts written off during the year and all amounts areexpected to be settled within the year except for; (a) FAI and FLI, which are inclusive of receivables fromsale of lots that are due within two years and nine years, respectively, with interest of 90-day T billion plus1% spread, subject to quarterly re-pricing; and (b) EW, which pertains to interest-bearing loans withinterest rate per annum equivalent to 4.059% fixed (inclusive of GRT) payable semi-annually. Principal isdue on March 31, 2020.

Related Party TransactionsDue from related partiesBelow is the list of outstanding receivables from related parties of the Group presented in the consolidatedstatements of financial position as of December 31, 2014 (amount in thousands):

Relationship NatureBalance at

end of periodTimberland Sports and Nature Club Affiliate A P=192,044The Palms Country Club Affiliate A 111,231KRL Land Inc and Kewalram Realty Inc. Associate B 21,171A.L. Gotianun, Inc. Parent Company A 1,205GCK Realty Affiliate A, C, D 22Other Affiliate A 2

P=325,676

Nature of intercompany transactionsThe nature of the intercompany transactions with the related parties is described below:

(a) Expenses – these pertain to the share of the Group’s related parties in various common selling andmarketing and general and administrative expenses.

(b) Advances – these pertain to temporary advances to/from related parties for working capitalrequirements

(c) Management and marketing fee(d) Reimbursable commission expense

The outstanding balances of intercompany transactions are due and demandable as of December 31, 2014.

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Schedule D. Intangible Assets

As of December 31, 2014, the Group’s intangible assets consist of Goodwill and other intangible assets.Intangible assets in the Group’s consolidated statements of financial position follow (amounts inthousands):

Balance atbeginningof period Additions

Charged tocost and

expensesBalance at

end of periodGoodwill:

PSHC P=10,083,310 P=– P=− P=10,083,310AIGPASB, PAFLI and PFLHI 769,042 – – 769,042GBI 373,996 – – 373,996CPI 326,553 – – 326,553Ecology Saving Bank, Inc. 150,212 – – 150,212East West Rural Bank 23,478 – – 23,478

P=11,726,591 P=– P=− P=11,726,591IPP Administrator rights P=– P=9,393,673 P=– P=9,393,673Other assets:

Branch license P=1,662,200 P=505,196 P=− P=2,167,396Capitalized software 531,213 456,522 (184,409) 803,326Customer relationship 133,788 − (4,312) 129,476Core deposits 20,891 − (4,043) 16,848

P=2,348,092 P=10,355,391 (P=192,764) P=12,510,719

Schedule E. Long-term debtBelow is the schedule of long-term debt of the Group:

Amount Current Noncurrent(In Thousands)

Parent Company Loans

Fixed rate bonds due in 2024 with principal amount of 8.80 billion andterm of ten (10) years from the issue date was issued by the Companyon January 24, 2014. The fixed interest rate is 6.1458% per annum,payable quarterly in arrears starting on April 24, 2014. P=8,757,875 P=– P=8,757,875

P=8,757,875 P=– P=8,757,875Subsidiaries’ LoansFAILoan obtained on September 5, 2013 and will mature on September 5,

2020. Interest at 4.8254% inclusive of GRT for 1st 91-day, to be re-priced. 50% of the loan is payable in twenty equal quarterlyamortization and the remaining 50% payable at maturity. P=500,000 25,000 P=475,000

Loan obtained on July 23, 2012 and will mature on July 23, 2017. Interest at 4.8% for 1st 90-day inclusive of GRT, to be re-priced and payable in arrears quarterly (with one-time option to change interest to fixed rate anytime during the term of the loan). Partial and full principal prepayment allowed anytime without penalties. 383,333 66,667 316,666Loan obtained on November 10, 2011 with two years grace period on principal repayment, and will mature on November 10, 2018. 50% of the loan is payable in twenty (20) equal quarterly amortizations and the remaining principal balance is payable on maturity. Interest for the 1st 92 days is 4.5% per annum inclusive of GRT and is subject to quarterly re-pricing. 270,000 30,000 240,000Loan obtained on February 12, 2013 and will mature on February 12, 2018. Interest at 4.1% for 1st 91-day, to be re-priced and payable in 20 equal quarterly installments amounting to P20.8M per quarter. 250,000 62,500 187,500(Forward)

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*SGVFS011426*


Loan obtained on December 16, 2014 with a 5 year term and will matureon December 14, 2019 with two years grace period on the principal.50% of the loan is payable in equal quarterly amortization tocommence at the end of the second year and the remaining 50%payable at maturity. Interest is fixed at 4.50% per annum. 200,000 − 200,000

Term loan obtained on January 10, 2011 with a 5 year term and willmature on December 14, 2015 with two (2) years grace period onprincipal repayment. Interest for the 1st 66 days is 2.1769% perannum. Basic interest is subject to quarterly re-pricing. 200,000 200,000 −

Term loan obtained on March 30, 2012 with two (2) yearsgrace period on principal repayment, and will mature on March 30,2019. Fifty (50) percent of the loan is payable in twenty (20) equalquarterly amortizations and the remaining principal balance ispayable on maturity. Interest for the 1st 92 days is 5% per annuminclusive of GRT and is subject to quarterly re-pricing. 185,000 20,000 165,000

Term loan obtained on December 27, 2011 with a 7 year term and will mature on December 27, 2018. Fifty (50) percent of the loan is payable in twenty (20) equal quarterly amortizations and the remaining fifty (50) percent is payable on maturity. Interest for the 1st 91 days is 5.000% per annum inclusive of GRT and is subject to quarterly re-pricing. 135,000 15,000 120,000Term loan with interest payable quarterly of 91-day PDST- rate plus a spread of 1.5% per annum. The term of the loan is 5 years with 2- year grace period on principal payment and will mature on April 8, 2015. 116,667 116,667 −Term loan obtained on December 14, 2010, 50% of the principal is payable in twelve (12) quarterly installments beginning from the ninth (9th) quarter after availment of the loan and the remaining 50% is payable upon maturity on December 14, 2015. Interest rate for the 1st 90 days is 2.1615% per annum payable quarterly to start on March 14, 2011. Interest rate is subject to quarterly re-pricing. 66,667 66,667 −

P=2,306,667 P=602,501 P=1,704,166FLI

Fixed rate bonds with aggregate principal amount of 7.00 billion issuedby FLI on June 8, 2012. The bonds have a term of 7 years from theissue date, with a fixed interest rate of 6.2731% per annum. Interest ispayable quarterly in arrears starting on September 10, 2012. P=6,951,093 P=– P=6,951,093

Fixed rate bonds with aggregate principal amount of 7.00 billion issuedby FLI on November 8, 2013. This comprised of P4.3 billion seven (7)year fixed rate bonds due in 2020 with a fixed interest rate of 4.8562%per annum, and P 2.7 billion ten (10) year fixed rate bonds due in 2023with a fixed interest rate of 5.4300% per annum. 6,931,229

– 6,931,229

Fixed rate bonds with aggregate principal amount of 7.00 billion issuedby FLI on November 8, 2013. This comprised of P4.3 billion seven (7)year fixed rate bonds due in 2020 with a fixed interest rate of 4.8562%per annum, and P 2.7 billion ten (10) year fixed rate bonds due in 2023with a fixed interest rate of 5.4300% per annum. 6,923,020 – 6,923,020

Fixed rate bonds with principal amount of 3.00 billion and term of five(5) years from the issue date was issued by FLI on July 7, 2011. Thefixed interest rate is 6.20% per annum, payable quarterly in arrearsstarting on October 19, 2011 2,981,454 – 2,981,454

Unsecured loan obtained in July 2013 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years(fixed rate) 5.07% per annum, payable quarterly in arrears. Theprincipal is payable at maturity on July 2018. 1,494,950 – 1,494,950

(Forward)

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Unsecured loan obtained in June 2013 with a fixed interest rate of4.98% per annum inclusive of GRT, payable quarterly in arrears.The principal is payable in twelve (12) equal quarterly installmentsstarting September 2015 up to June 2018. P=1,145,095 P=189,908 P=955,187

Unsecured loan obtained in September 2014 with interest at prevailingmarket rate 3.00%, payable quarterly in arrears. The principal ispayable at maturity on August 2015. 1,000,000 1,000,000 –

Unsecured loan obtained in January 2012 with interest rate equal toPDS Treasury Fixing (PDST-F) plus 1% per annum GRT 5 years(fixed rate) 6.39% per annum, payable quarterly in arrears. Theprincipal is payable at maturity on January 2017. 998,064 – 998,064

Unsecured loan obtained in August 2013 with interest rate equal toPDS Treasury Fixing (PDST-F) 1 plus GRT (Fixed rate) 4.28%,payable quarterly in arrears. The 50% of principal payable in 20equal quarterly amortization to commence on August 2015 up toMay 2020 and 50% payable at maturity on August 2020. 997,926 49,145 947,781

Unsecured loan obtained in April 2012 with interest rate equal to PDSTreasury Fixing (PDST-F) 1 plus GRT (Fixed rate) 6.12%, payablequarterly in arrears. The principal is payable at maturity on January2017. 997,840 – 997,840

Unsecured loan obtained in November 2012 with interest rate equal toPDS Treasury Fixing (PDST-F) 1 plus GRT (Fixed rate) 5.50%,payable quarterly in arrears. The principal is payable at maturity onNovember 2017 997,000 – 997,000

Unsecured loan obtained in February 2013 with interest at prevailingmarket rate plus GRT, payable quarterly in arrears. The principal ispayable in twelve (12) equal quarterly installments starting May 2015to February 2018. 748,134 186,545 561,589

Unsecured loan obtained in December 2013 with interest rate equal toPDS Treasury Fixing (PDST-F) 1 plus GRT (Fixed rate of 4.62% perannum), payable quarterly in arrears. The 50% of principal payable in20 equal quarterly amortization to commence on March 2016 and50% payable at maturity on December 2020. 700,000 – 700,000

Unsecured loan obtained in July 2014 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate)4.30% per annum, payable quarterly in arrears. The 50% of principalpayable in 20 equal quarterly amortization to commence on October2016 and 50% payable at maturity on July 2021. 700,000 – 700,000

Unsecured loan obtained in July 2014 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate)5.52% per annum, payable quarterly in arrears. The 50% of principalpayable in 20 equal quarterly amortization to commence on October2016 and 50% payable at maturity on July 2021. 600,000 – 600,000

Unsecured loans obtained in August 15, 2012 with interest of 5.79% perannum (inclusive of GRT), subject to repricing and payable quarterlyin arrears. The loan has a fixed term of 7 years, inclusive of 2 yeargrace period on principal repayment, 50% principal balance is payablein 20 equal quarterly installments to commence on November 2014and 50% payable at maturity on August 2019. 585,000 60,000 525,000

Unsecured loan obtained in October 2013 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rateof 4.21% per annum), payable quarterly in arrears. The 50% ofprincipal payable in 20 equal quarterly amortization to commence onJanuary 2016 and 50% payable at maturity on October 2020. 547,876 – 547,876

Unsecured loan obtained in March 2011 with interest rate equal to 91-dayPDS Treasury Fixing (PDST-F) rate plus a spread of up to 1% perannum, payable quarterly in arrears. The 50% of principal payable in12 equal quarterly amortization to commence on June 2013 and 50%payable at maturity on March 2016 530,691 124,526 406,165

(Forward)

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Unsecured loan obtained in August 2013 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT 5 years(Fixed rate) 4.28%, payable quarterly in arrears. The 50% balance ispayable in twenty (20) equal quarterly installments starting August2015 up to May 2020 and the remaining 50% balance is paid inAugust 2020. P=500,000 P=25,000 P=475,000

Unsecured loan obtained in March 2014 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rate)4.27% per annum, payable quarterly in arrears. The 50% of principalpayable in 20 equal quarterly amortization to commence onNovember 2015 and 50% payable at maturity on August 2020. 500,000 – 500,000

Unsecured loan obtained in November 2014 with interest rate equal toPDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixedrate) 4.80% per annum, payable quarterly in arrears. The principal ispayable upon maturity in November 2019. 500,000 – 500,000

Unsecured loan obtained in December 2012 with interest rate equal toPDS Treasury Fixing (PDST-F) plus 1% per annum plus GRT 5years (Fixed rate) 5.29% per annum, payable quarterly in arrears.The principal is payable at maturity on December 2017. 498,437 – 498,437

Unsecured loan obtained in June 2011 with interest rate equal to 91-dayPDS Treasury Fixing (PDST-F) rate plus a spread of 1% per annum,payable quarterly in arrears. The 50% balance is paid in July 2011and the remaining 50% balance is payable in twelve (12) equalquarterly installments starting September 2013 up to June 2016. 374,255 249,360 124,895

Unsecured loan obtained in October 2012 with interest rate equal to PDSTreasury Fixing (PDST-F) plus 1% per annum plus GRT (Fixed rateof 6.03% per annum), payable quarterly in arrears. The principal ispayable at maturity on October 2017. 300,000 – 300,000

Unsecured loan obtained in May 2013 with interest rate equal to BSPovernight reverse repurchase agreement plus 1% per annum plusGRT (Fixed rate of 4.74% per annum), payable quarterly in arrears.The principal is payable in twelve (12) equal quarterly installmentsstarting August 2015 up to May 2018. 300,000 – 300,000

Unsecured loan obtained in May 17, 2012 with interest at prevailingmarket rate, subject to repricing and payable quarterly in arrears.The loan has a fixed term of 7 years, inclusive of 2 year grace periodon principal repayment, 50% principal balance is payable in 20equal quarterly installments to commence on August 2014. 285,000 30,000 255,000

Unsecured loan obtained in May 2013 with a interest rate equal to BSPovernight reverse repurchased agreement plus 1% per annum plusGRT (fixed rate of 4.74% per annum), payable quarterly in arrears.The principal is payable in twelve (12) equal quarterly installmentsstarting August 2015 up to May 2018. 249,295 41,333 207,962

Unsecured loan obtained in December 2011 with interest at prevailingmarket rate 4.2% per annum inclusive of GRT, payable quarterly inarrears. The principal is payable in twelve (12) equal quarterlyinstallments starting March 2014 to December 2016. 233,067 116,500 116,567

Unsecured loan granted in November 10, 2011 with a term of 7 yearswith 2 years grace period on principal repayment. Interest is basedon prevailing market rate, subject to quarterly repricing and payablequarterly in arrears. 50% of principal is payable in 12 quarterlyamortization commencing on February 10, 2014 and 50% is payableon maturity. 180,000 20,000 160,000

Unsecured loan granted in December 2012 with a term of five yearswith 50% of principal payable in 20 equal quarterly amortization tocommence on March 2013 and 50% payable at maturity onDecember 2017. The loan carries interest at prevailing market rate. 120,000 15,000 105,000

(Forward)

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Unsecured loan granted in May 2010 with a term of five years with 50%of principal payable in 12 equal quarterly amortization to commenceon August 2012 and 50% payable at maturity in May 2015. Theloan carries interest at prevailing market rate payable quarterly inarrears P=116,667 P=116,667 P=–

Unsecured loan granted in May 2012 payable over 7-year periodinclusive of 2 year grace period; 50% of principal is payable in 20equal quarterly amortizations to commence on August 2014 and50% payable at maturity on May 2019. The loan carries interest atprevailing market rate. 95,000 10,000 85,000

Unsecured loan obtained in February 2013 with interest rate equal to 91-day PDS Treasury Fixing (PDST-F) rate plus a spread of up to 1%per annum plus GRT, payable quarterly in arrears. The principal ispayable in twelve (12) equal quarterly installments starting May2015 to February 2018. 500 125 375

P=40,306,593 P=2,509,109 P=37,797,484PSHCLoan granted by a local bank with principals of P=400.0 million on

December 22, 2012 and P=100.0 million February 16, 2011. Theprincipal is payable in 12 quarterly amortizations to start at the end ofthe 9th quarter from the date of the release with then prevailing interestrate of 2.2% per annum, subject to quarterly repricing. Interest ispayable quarterly in arrears to start at the end of the first quarter fromthe date of the release of the loan. P=175,000 P=125,000 P=50,000

Term loan of P=1.0 million granted by a local by on Feb. 12, 2013. The principal is payable in twelve quarterly amortizations to start at the end of the 9th quarter from the date of release with then prevailing interest rate of 4.1% per annum, subject to quarterly repricing. Interest is payable quarterly in arrears to start at the end of the first quarter from the date of release of the loan. 1,000 1,000 –

P=176,000 P=126,000 P=50,000EWBCLower tier 2 unsecured subordinated notes due January 4, 2025. Interest rate is at 5.5% per annum. P=5,000,000 P=– P=5,000,000Lower tier 2 unsecured subordinated notes callable with Step-

up interest, in 2016 in minimum denominations of 500,000 and inintegral multiples of 100,000 thereafter, due January 2, 2021.Interestrate is at 7.5% per annum. 1,500,000 – 1,500,000

P=6,500,000 P=– P=6,500,000FDCIFixed rate bonds with original issuance amount of $300 million on April 2, 2013. The bonds have a term of 7 years from the

issue date, with a fixed interest rate of 4.25% per annum. Interest ispayable semi-annually in arrears starting on October 2,2013. P=12,691,951 P=– P=12,691,951

P=12,691,951 P=– P=12,691,951

FDCUISecured loan granted by a local bank amounting to P=643.4 million and P=

1,189.7 million on September 26, 2014 and December 1, 2014,respectively. The principal is payable in 42 quarterly amortizationsto start at the end of the 42nd month from initial loan availment or 6months from project completion date, whichever comes first. Theseloans bear interest of 6.1% and 6.0% per annum, subject to repricingafter the 7th year anniversary from initial loan availment untilmaturity date. Interest is payable quarterly in arrears to start at theend of the first quarter from the date of the release of the loan. P=1,823,928 P=– P=1,823,928

(Forward)

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Secured loan granted by a local bank amounting to P=934.0 million andP=1,726.9 million on September 26, 2014 and December 1, 2014,respectively. The principal is payable in 42 quarterly amortizationsto start at the end of the 42nd month from initial loan availment or 6months from project completion date, whichever comes first. Theseloans bear interest rate of 6.1% and 6.0% per annum, subject torepricing after the 7th year anniversary from initial loan availmentuntil maturity date. Interest is payable quarterly in arrears to start atthe end of the first quarter from the date of the release of the loan. P=2,647,939 P=– P=2,647,939

4,471,867 – 4,471,867P=75,210,953 P=3,237,610 P=71,973,343

Amounts are presented net of unamortized deferred costs.

Schedule F. Indebtedness to Related Parties

The Group does not have indebtedness to related parties as of December 31, 2014.

Schedule G. Guarantees of Securities of Other IssuersThe Group does not have guarantees of securities of other issuers as of December 31, 2014.

Schedule H. Capital Stock

Title of issue

Number ofshares

authorized

Number ofshares issued

andoutstanding

as shownunder relatedbalance sheet

caption

Number ofShares

reserved foroptions,

warrants,conversion

and otherrights

Number ofshares heldby related

parties

Directors,Officers andEmployees Others

(In Thousands)

Common Shares 15,000,000 9,317,474 − 8,280,770 97,523 939,181

Preferred Shares 2,000,000 − − − − −

Schedule of Bonds Issuances

Proceeds from the local bonds were used for repayments of loans amounting to P=4,877.1 million and thebalance was used for the Hotel and Power's capital expenditures.

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FILINVEST DEVELOPMENT CORPORATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSAND SUPPLEMENTARY SCHEDULES

SUPPLEMENTARY SCHEDULES

Independent Auditor’s Report on Supplementary Schedules

Group Supplementary Information and Disclosures Required on SRC Rule 68 and 68.1, as Amended (2011)

Schedule of All Effective Standards and Interpretations under PFRS as of December 31, 2014

Group Unappropriated Retained Earnings Available for Dividend Distribution

Financial Soundness Indicators

Group Structure

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Standards adopted by the Group

Below is the list of all effective Philippine Financial Reporting Standards (PFRS), PhilippineAccounting Standards (PAS) and Philippine Interpretations of International Financial ReportingInterpretations Committee (IFRIC) as of December 31, 2014 that were adopted and not applicable tothe Group:

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONS

Adopted NotAdopted

NotApplicable

Framework for the Preparation and Presentation of FinancialStatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

p

PFRSs Practice Statement Management Commentary p

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine FinancialReporting Standards p

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly ControlledEntity or Associate

p

Amendments to PFRS 1: Additional Exemptionsfor First-time Adopters p

Amendment to PFRS 1: Limited Exemption fromComparative PFRS 7 Disclosures for First-timeAdopters

p

Amendments to PFRS 1: Severe Hyperinflation andRemoval of Fixed Date for First-time Adopters p

Amendments to PFRS 1: Government Loans p

PFRS 2

Share-based Payment p

Amendments to PFRS 2: Vesting Conditions andCancellations p

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions p

PFRS 3(Revised) Business Combinations p

PFRS 4Insurance Contracts p

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts p

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations p

PFRS 6 Exploration for and Evaluation of MineralResources p

PFRS 7

Financial Instruments: Disclosures p

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets p

Amendments to PAS 39 and PFRS 7: p

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Adopted NotAdopted

NotApplicable

Reclassification of Financial Assets - EffectiveDate and Transition

Amendments to PFRS 7: Improving Disclosuresabout Financial Instruments p

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets p

Amendments to PFRS 7: Disclosures - OffsettingFinancial Assets and Financial Liabilities p

Amendments to PFRS 7: Mandatory Effective Dateof PFRS 9 and Transition Disclosures p

PFRS 8 Operating Segments p

PFRS 9

Financial Instruments p

Amendments to PFRS 9: Mandatory Effective Dateof PFRS 9 and Transition Disclosures p

Financial Instruments (2013 version) p

Financial Instruments (2014 version) p

PFRS 10

Consolidated Financial Statements p

Amendments to PFRS 10, PFRS 12 and PAS 27:Investment Entities p

Amendments to PFRS 10 and PAS 28: Sale orContribution of Assets between an Investor and itsAssociate or Joint Venture

p

PFRS 11(Amended)

Joint Arrangements p

Amendments to PFRS 11: Accounting forAcquisitions of Interests in Joint Operations p

PFRS 12Disclosure of Interests in Other Entities p

Amendments to PFRS 10, PFRS12 and PAS27:Investment Entities p

PFRS 13 Fair Value Measurement p

PFRS 14 Regulatory Deferral Accounts p

IFRS 15 Revenue from Contracts with Customers p

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements p

Amendment to PAS 1: Capital Disclosures p

Amendments to PAS 32 and PAS 1: PuttableFinancial Instruments and Obligations Arising onLiquidation

p

Amendments to PAS 1: Presentation of Items ofOther Comprehensive Income p

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Adopted NotAdopted

NotApplicable

PAS 2 Inventories p

PAS 7 Statement of Cash Flows p

PAS 8 Accounting Policies, Changes in AccountingEstimates and Errors p

PAS 10 Events after the Reporting Period p

PAS 11 Construction Contracts p

PAS 12Income Taxes p

Amendment to PAS 12 - Deferred Tax: Recoveryof Underlying Assets p

PAS 16

Property, Plant and Equipment p

Amendments to PAS 16 and PAS 38: Clarificationof Acceptable Methods of Depreciation andAmortization

p

Amendments to PAS 16 and PAS 41: Bearer Plants p

PAS 17 Leases p

PAS 18 Revenue p

PAS 19(Amended)

Employee Benefits p

Amendments to PAS 19: Actuarial Gains andLosses, Group Plans and Disclosures p

Amendments to PAS 19: Defined Benefit Plans:Employee Contributions p

PAS 20 Accounting for Government Grants and Disclosureof Government Assistance p

PAS 21The Effects of Changes in Foreign Exchange Rates p

Amendment: Net Investment in a ForeignOperation p

PAS 23(Revised) Borrowing Costs p

PAS 24(Revised) Related Party Disclosures p

PAS 26 Accounting and Reporting by Retirement BenefitPlans p

PAS 27(Amended)

Separate Financial Statements p

Amendments to PFRS 10, PFRS12 and PAS27:Investment Entities p

Amendments to PAS 27: Equity Method inSeparate Financial Statements p

PAS 28(Amended) Investments in Associates and Joint Ventures p

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Adopted NotAdopted

NotApplicable

PAS 29 Financial Reporting in HyperinflationaryEconomies p

PAS 31 Interests in Joint Ventures p

PAS 32

Financial Instruments: Disclosure and Presentation p

Amendments to PAS 32 and PAS 1: PuttableFinancial Instruments and Obligations Arising onLiquidation

p

Amendment to PAS 32: Classification of RightsIssues p

Amendments to PAS 32: Offsetting FinancialAssets and Financial Liabilities p

PAS 33 Earnings per Share p

PAS 34

Interim Financial Reporting p

Amendment to PAS 34: Interim FinancialReporting and Segment Information for TotalAssets and Liabilities

p

PAS 36Impairment of Assets p

Amendments to PAS 36: Recoverable AmountDisclosures for Non-Financial Assets p

PAS 37 Provisions, Contingent Liabilities and ContingentAssets p

PAS 38

Intangible Assets p

Amendments to PAS 16 and PAS 38: Clarificationof Acceptable Methods of Depreciation andAmortization

p

PAS 39

Financial Instruments: Recognition andMeasurement p

Amendments to PAS 39: Transition and InitialRecognition of Financial Assets and FinancialLiabilities

p

Amendments to PAS 39: Cash Flow HedgeAccounting of Forecast Intragroup Transactions p

Amendments to PAS 39: The Fair Value Option p

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts p

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets p

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets - EffectiveDate and Transition

p

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Adopted NotAdopted

NotApplicable

Amendments to Philippine Interpretation IFRIC 9and PAS 39: Embedded Derivatives p

Amendment to PAS 39: Eligible Hedged Items p

Amendment to PAS 39: Novation of Derivativesand Continuation of Hedge Accounting p

PAS 40Investment Property p

Amendment to PAS 40: Investment Property p

PAS 41 Agriculture p

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restorationand Similar Liabilities p

IFRIC 2 Members' Share in Co-operative Entities andSimilar Instruments p

IFRIC 4 Determining Whether an Arrangement Contains aLease p

IFRIC 5Rights to Interests arising from Decommissioning,Restoration and Environmental RehabilitationFunds

p

IFRIC 6Liabilities arising from Participating in a SpecificMarket - Waste Electrical and ElectronicEquipment

p

IFRIC 7Applying the Restatement Approach under PAS 29Financial Reporting in HyperinflationaryEconomies

p

IFRIC 8 Scope of PFRS 2 p

IFRIC 9Reassessment of Embedded Derivatives p

Amendments to Philippine Interpretation IFRIC 9and PAS 39: Embedded Derivatives p

IFRIC 10 Interim Financial Reporting and Impairment p

IFRIC 11 PFRS 2- Group and Treasury Share Transactions p

IFRIC 12 Service Concession Arrangements p

IFRIC 13 Customer Loyalty Programmes p

IFRIC 14

The Limit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction p

Amendments to Philippine Interpretations IFRIC14, Prepayments of a Minimum FundingRequirement

p

IFRIC 15 Agreements for the Construction of Real Estate p

IFRIC 16 Hedges of a Net Investment in a Foreign Operation p

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Adopted NotAdopted

NotApplicable

IFRIC 17 Distributions of Non-cash Assets to Owners p

IFRIC 18 Transfers of Assets from Customers p

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments p

IFRIC 20 Stripping Costs in the Production Phase of aSurface Mine p

IFRIC 21 Levies p

SIC-7 Introduction of the Euro p

SIC-10 Government Assistance - No Specific Relation toOperating Activities p

SIC-12Consolidation - Special Purpose Entities p

Amendment to SIC - 12: Scope of SIC 12 p

SIC-13 Jointly Controlled Entities - Non-MonetaryContributions by Venturers p

SIC-15 Operating Leases - Incentives p

SIC-25 Income Taxes - Changes in the Tax Status of anEntity or its Shareholders p

SIC-27 Evaluating the Substance of Transactions Involvingthe Legal Form of a Lease p

SIC-29 Service Concession Arrangements: Disclosures. p

SIC-31 Revenue - Barter Transactions InvolvingAdvertising Services p

SIC-32 Intangible Assets - Web Site Costs p

Standards tagged as “Not applicable” have been adopted by the Group but have no significant coveredtransactions for the period ended December 31, 2014.

Standards tagged as “Not adopted” are standards issued but not yet effective as of December 31, 2014.The Group will adopt the Standards and Interpretations when these become effective.

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FILINVEST DEVELOPMENT CORPORATIONUNAPPROPRIATED RETAINED EARNINGS AVAILABLE FORDIVIDEND DISTRIBUTION(Amounts in Thousands of Pesos)

Unappropriated Retained Earnings, beginning P=43,807,798

Adjustments:Equity in net income of subsidiaries and joint venture (37,095,663)Reclassification of revaluation reserve on land at deemed cost (46,331)Deferred tax assets recognized in prior years (262,153)

Unappropriated Retained Earnings as adjusted, beginning 6,403,651

Net income actually earned/realized during the year

Net income during the year closed to Retained Earnings 3,743,770

Less: Non-actual/unrealized income, net of taxEquity in net income of subsidiaries and joint venture (2,787,173)Unrealized foreign exchange gain - net –Unrealized actuarial gain –Fair value adjustment (M2M gains) –Fair value adjustment of Investment Property resulting

to gain –Adjustment due to deviation from PFRS/GAAP - gain –Other unrealized gains or adjustments to the retained

earnings as a result of certain transactionsaccountedfor under the PFRS –

Movements in deferred tax assets (199,829)Add: Non-actual losses

Depreciation on revaluation increment (after tax) –Adjustment due to deviation from PFRS/GAAP - loss –Loss on fair value adjustment of investment property

(after tax) –756,768

Less: Dividend declarations during the yearCash dividends (511,529)

Total Unappropriated Retained Earnings Available For DividendDistribution, December 31, 2014 P=6,648,890

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Financial Soundness Indicator

Below are the financial ratios that are relevant to the Group for the period ended December 31, 2014

As of and for the yearended December 31, 2014

As of and for the yearended December 31, 2013Performance Indicators

Earning per share

Net Income Attributable toEquity Holders (Annualized)

Weighted Average Number ofOutstanding Shares 0.402 /share 0.459 /share

Price Earnings RatioClosing Price (1)

Earnings Per Share 10.75 Times 9.58 Times

Return on RevenuesNet Income

Total Revenues 16% 19%

Return on Equity (average)Net Income

Average Equity 7% 8%

Long-term Debt to Equity RatioLong-term Debt

Total Stockholders’ Equity 0.84 : 1 0.70 : 1

Total Liabilities to Equity RatioTotal Liabilities (2)

Total Stockholders’ Equity 1.20 : 1 1.03 : 1

EBITDA to Total Interest ExpenseEBITDA

Total Interest Expense 8.37 Times 11.77 Times

Current Ratioa. Including EW

Current AssetsCurrent Liabilities (3) 1.14 :1 1.11 :1

b. Excluding EWCurrent Assets

Current Liabilities (3) 3.03 :1 2.91 :1

Quick Ratio - Excluding EWCurrent Asset - Inventories

Current Liabilities (3) 1.11 :1 1.02 :1

Asset to Equity RatioTotal AssetsTotal Equity 3.83 :1 3.20 :1

(1) Closing price at December 29, 2014 and December 27, 2013.(2) Excluding deposit liabilities, bills and acceptances payable and liability on IPP Administrator contract.(3) Excluding current portion of liability on IPP Administrator contract.

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Group StructureBelow is a map showing the relationship between and among the Group and its ultimate parent company, subsidiaries, and associates as of December 31,2014:

10. - Filinvest Development Corporation

Documents

Transcript of 10. - Filinvest Development Corporation