C R O W EQUITIES 1 N C O R P O R A T E D

13 April 2011

PHILIPPINE STOCIC EXCHANGE, INC. 3F Philippine Stock Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1226

Attention: Ms. Janet A. Encarnacion Head, Disclosure Department

Re: Amended Annual Report on SEC Form 17-A of Crown Equities, Inc.

Gentlemen:

We attached with this letter the amended Annual Report on SEC Form 17-A of Crown Equities, Inc. (the "Corporation") incorporating the revisions to the previous Annual Report filed with the Securities and Exchange Commission on 8 April 2011 and disclosed to the Philippine Stock Exchange on 11 April 2011. All revisions are underlined for ease of reference.

Thank you.

Very truly yours,

Corporate hformation Officer 1'

COVER SHEET

I I I I I I I I I I J

S.E.C. Registration Number

(Company's Full Name)

(Business Address: No. Street1 City/ Town/ Province)

Atty. Elmer B. Serrano

Contact Person

Fiscal Year

- Dept. Requiring this Doc.

Total No. of Stockholders

Company Telephone Number

Amended SEC Form 17-A

FORM TYPE

Secondary License Type, If Applicable

Annual Meeting

Amended Articles NumberISection

Total Amount of Borrowings

I - Domestic Foreign

To be accompanied by SEC Personnel concerned

Document I.D.

STAMPS I I

I-----------------------------------------------------------------,

SECURITIES AND EXCHANGE COMMISSIO

AMENDED SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SEC

OF THE CORPORATION CODE OF THE PHILIPPINES ,I

1. For the fiscal year ended: December 31,2010

2. SEC Identification Number: 39745 3. BIR Tax Identification No.: 002-837-461

4. Exact name of registrant as specified in its charter: CROWN EOUITIES, INC.

5. P h i l i ~ ~ i n e s 6. 1 I (SEC Use Only) Province, Country or other jurisdiction of Industry Classification Code: incorporation or organization

7. 4'h Floor Crown Center, 158 N. Garcia corner Jupiter Streets, Makati City 1209 Address of principal office Postal Code

8. 899-04-55 Registrant's telephone number, including area code

9. N.A. Former name, former address, and former fiscal year, if changed since last report.

10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sections 4 and 8 of the RSA

Title of Each Class Number of Shares of Common Stock

Outstanding and Amount of Debt Outstanding

Common shares 13,599,999,960 shares

11. Are any or all of these securities listed on the Philippine Stock Exchange.

Yes [ X I No [ 1

12. Check whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or Section 11 of the Revised Securities Act (RSA) and RSA Rule 1 l(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding 12 months (or for such shorter period that the registrant was required to file such reports);

Yes [ X I No [ 1

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

Yes [ X I No [ 1

TABLE OF CONTENTS

Page No.

PART I - BUSINESS AND GENERAL INFORMATION

Item 1 Business Item 2 Properties Item 3 Legal Proceedings Item 4 Submission of Matters to a Vote of Security Holders

PART I1 - OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuer's Common Equity and Related Stockholders Matters

Item 6 Management's Discussion and Analysis Item 7 Financial Statements Item 8 Changes in and Disagreements With Accountants on

Accounting and Financial Disclosures

PART I11 - CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Corporation Item 10 Executive Compensation Item 11 Security Ownership of Certain Record and Beneficial Owners

and Management Item 12 Certain Relationships and Related Transactions

PART IV- CORPORATE GOVERNANCE

Item 13 Corporate Governance

PART V - EXHIBITS AND SCHEDULES

Item 14 Exhibits and Reports on SEC Form 17-C (a) Exhibits (b) Reports on SEC Form 17-C (Current Report)

SIGNATURES

PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

(1) Business Development

Crown Equities, Inc. (CEI or the Corporation) was incorporated on October 24, 1969 to engage in, among others, the exploration, development and mining of mineral claims, under the original corporate name of Leyte Base Metal Corporation, Inc. In 1993, when a new set of shareholders assumed control, the corporate name was changed to Pacific Rim Oil and Resources Corporation.

On May 22, 1995, the stockholders and the Board of Directors approved the strategic shift in the Corporation's primary business activity from oil exploration to investment holding. The corporate name was further changed to Southeast Pacific Rim Resources and Development Corporation. Finally, to deliberately focus on the Corporation's investing activities, the corporate name was changed to Crown Equities, Inc. in 1996.

The Corporation eventually divested its remaining interests in oil exploration and focused its resources on other fields of investment. The Corporation started its healthcare business by opening its ambulatory care clinics in Makati City in 1997 and in Sta. Rosa, Laguna in 1998. Also in 1998, the development of a property in Biilan, Laguna into a middle-class residential subdivision commenced. Also in 2005, the development of a property in Taguig City into a medium rise residential condominium was started.

At present, the Corporation maintains its investments in the healthcare business and pursues its real estate businesses in joint venture with major companies in this industry.

(2) Business of Issuer

CEI is a Filipino-owned publicly listed investment holding corporation. The Corporation, through its subsidiaries, acquired various real estate properties to be developed into commercial, industrial, residential, or mixed-use areas. The Corporation also has investments in the healthcare business particularly in two medical ambulatory care clinics located in Makati and Sta. Rosa, Laguna.

The subsidiaries of the Corporation that are already in the operating stage are Healthcare Systems of Asia Philippines, Inc. (HSAPI), CEI Development Corporation, Ceres Property Venture, Inc., and Crown Central Properties Corporation.

The Corporation, through its subsidiaries, currently has the Palma Real Residential Estates project, the Cypress Towers project, and the FortMed clinics in its list of business ventures. The Corporation and its subsidiaries employ professionals to work on different aspects of the businesses of the Corporation. The Cornoration's accounting staff works on the books of the Cornoration and all of its subsidiaries. The Corporation also has an analyst who conducts feasibility studies on possible new ventures and a business development officer whose primary objective is to plan businesses for the Corporation.

FortMed Medical Clinics Makati, Inc. ("FortMed"), a subsidiary of HSAPI, employs doctors, nurses, and other healthcare professionals for its onsite and offsite clinical operations. This group of 47 healthcare professionals is supported by FortMed's administrative and marketing team composed of 19 professionals.

Property development businesses involve significant risks including the risks that construction may not be completed on schedule or within the allocated budget; and that such projects may not achieve the anticipated sales. In addition, real estate development projects typically require substantial capital expenditure during construction and it may take years before the projects generate cash flows.

a. Real Estate and Property Development

1. Crown Central Properties Corporation

Crown Central Properties Corporation (CCPC) was incorporated on September 3, 1996 as a result of a joint venture agreement between the Corporation and Solid Share Holdings, Inc., an affiliate of a major banking group. In October 2003, CCPC entered into a Memorandum of Agreement (MOA) with Sta. Lucia Realty and Development, Inc. whereby the former shall contribute land and its improvements while the latter shall be responsible for completing the development of the subdivision. The agreement calls for a 60%-40% sharing in favor of CCPC. The project has secured the necessary clearances and permits including environmental compliance certificate (ECC) from the Department of Environment and Natural Resources. A monetary penalty of Fifty Thousand Pesos (950,000.00) andlor suspension or cancellation of the ECC would resuIt from non- compIiance of the terms and conditions of the permit/s. The project was completed and marketing was started in May 2004.

The subdivision, named Palma Real Residential Estates is strategically located near the boundary of Sta. Rosa and Bifian, in the province of Laguna, a few meters away from exclusive schools such as Don Bosco, De La Salle University and St. Scholastics's College. Among middle class residential subdivisions, Palma Real is the nearest to these educational institutions, next to San Jose Village. Although competition is considered tight given the number of residential subdivisions within its five-kilometer radius, Palma Real enjoys considerable advantage given its proximity to the schools, the industrial park, the booming commercial district in the area, and the access road from the Mamplasan exit of the South Luzon Expressway connecting to the Sta. Rosa-Tagaytay highway.

In 2010, the Corporation transferred its entire shareholding in CCPC to Ceres Property Venture, Inc. (CPVI), a subsidiary of the Corporation in exchange for common shares of stock of CPVI.

2. CEI Development Corp.

CEI Development Corp. (CEIDC) was incorporated on July 10, 1996 primarily to acquire, develop and sell real estate properties. A wholly-owned subsidiary of the Corporation, CEIDC owns over 40 hectares of real estate property in Sto. Tomas, Batangas. Some of the acquired properties are still in the process of titling.

The properties are mostly located in Brgy. San Miguel, Sto. Tomas, Batangas, about 43 kilometers from the central business district of Makati City. It is accessible by any land transport from Manila via the South Luzon Expressway and the Maharlika highway.

CEIDC started its operations in late 2010 initially selling housing units.

3. CEI Properties, Inc.

Incorporated on July 10, 1996, CEI Properties, Inc. (CEIPI) was organized to invest in, purchase or acquire, own and hold, use, sell or dispose property of every kind and description. CEIPI owned a property with an area of over one (1) hectare in Taguig, Metro

Manila but it transferred the ownership of the said property to CPVI in 2010 in exchange for common shares of stock of CPVI. CEIPI has not started its commercial operation and has no significant business development during the last three (3) years. CEIPI also has no intention to develop its real properties within the next twelve (12) months.

4. Parkfield Land Holdings, Inc.

Parkfield Land Holdings, Inc. (PLHI), a 75%-owned subsidiary of the Corporation, was incorporated on April 11, 2001 primarily to acquire, develop, and seIl real estate properties. PLHI owns 92 hectares of land located in San Jose del Monte, Bulacan.

PLHI has not started its commercial operations and has no significant business developments involving the properties. PLHI is studying the possibility of entering into a joint venture for a low cost or medium cost housing development.

5. Ceres Property Venture, Inc.

Ceres Property Venture, Inc. (CPVI) was organized primarily to acquire, develop and sell real estate properties. It was incorporated on March 24, 1999 but started commercial operations in 20 10. CEI owns 6 1% of CPVI while the remaining shares are owned by three (3) subsidiaries of CEI, namely, Fort Bonifacio Medical Center, Inc., CEIPI and Ceres Holdings, Inc.

CPVI owns real properties in Taguig City, Metro Manila. It owns a 1.44-hectare land on the southeast interior of Levi B. Mariano Avenue, 850 meters northeast from the Cypress Towers in Taguig City. CPVI also owns a 1.91-hectare land on the southeast interior of Levi B. Mariano Avenue, 80 meters southeast fi-om its 1.44-hectare property.

The Corporation and Fort Bonifacio Medical Center, Inc. transferred their ownership interest in the Cypress Towers project to CPVI in exchange for common shares of stock of CPVI. This was part of the Corporation's efforts to consolidate its real estate operations in CPVI. The Corporation intends CPVI to be its primary subsidiary for its real estate projects.

6. Sky Leisure Properties, Inc.

Sky Leisure Properties, Inc. (SLPI), a 50% owned associate of the Corporation, was incorporated on August 26, 1998 as a result of a joint venture between the Corporation and Perfect Sites, Inc. primarily to acquire, develop and sell real estate properties. SLPI owns a land with a total area of 107 hectares in Tagaytay City, Cavite.

SLPI has not yet started its commercial operations and has no significant business developments during the last three (3) years. There are also no plans yet to implement a project within the next twelve (12) months.

b. Healthcare

1. Healthcare System of Asia Phils., Inc.

Healthcare System of Asia, Phils. (HSAPI), h c . was established on July 26, 1996 to deliver medical and health care services and healthcare systems, in general. Presently, HSAPI has two operational ambulatory care clinics: the Fortmed Medical Clinics - Makati, which started operations in 1997, and Fortmed Medical Clinics - Sta. Rosa, which started operations in 1998.

The two Fomned clinics provide a wide range of medical services at reasonable costs. These clinics house state-of-the-art diagnostic and ambulatory treatment apparatus including the recent imaging techniques, modem laboratory equipment and with up-to-date cardio-pulmonary testing capabilities, contemporary day surgery and full-service consultation rooms. The Fortmed clinics have in-house pharmacies.

Competition in this type of business is generally dictated by factors such as the reputation of doctors associated with and actually practicing in the clinic, availability of highly effective facilities, and the level of professional service. Location and accessibility are also critical competitive factors.

The Fortmed clinics have a group of competent doctors who are prominent in their respective fields of expertise. It boasts of a wide range of sophisticated diagnostic apparatus, including a 4-D ultrasound equipment. The Fortmed Makati clinic is strategically located within the vicinity of the Bel-Air Village in Makati, which is easily accessible to both residents and workers in the Makati business district, while the Fortmed Sta. Rosa clinic is in Paseo de Sta. Rosa, a booming commercial district in the vicinity of the Ayala Laguna Technopark - a light industrial park which is home to multinational companies producing light vehicles and computer components.

The Fortmed Makati clinic enjoys a substantial share of the Makati residents and employees market. This is attributed to what the Fortmed clinics offer: state-of-the-art facilities, top caliber medical specialists and staff, and hassle-free service delivery system bereft of long queue that is common to hospitals. The Fomned Sta. Rosa clinic has an advantage of accessibility from various locations in the neighboring industrial estates. Its patients include foreign expatriates and factory workers located within the industrial park.

The Fortmed clinics are accredited by the Department of Health (DOH) and such accreditation is renewed annually with a minimal fee. Environmental Compliance Certificate (ECC) issued to the clinics requires, among others, agreement with a waste management contractor to handle disposal and treatment of the clinics' waste. Noncompliance with the ECC provisions will subject the clinics to monetary penalties amounting to Fifty Thousand Pesos (P50,000.00) per violation andlor suspension/cancellation of the clinics' permit to operate. Necessary licenses have been secured from the DOH to operate the different x-ray facilities of the clinics, while the laboratory facilities are licensed by the Dangerous Drug Board (DDB). For the pharmacies, annual license to operate is secured from the Food and Drugs Administration of the DOH.

The clinics employ at least 66 medical and administrative personnel composed of 47 medicalloperations staff and 19 administrative and marketing employees. There is no existing collective bargaining agreement between management and the employees. There are no supplemental benefits or incentive arrangements with the employees, aside from those provided by law.

The unique focus of medical practice at FortMed is to assist the patient and family in obtaining comprehensive interdisciplinary health care that is both accessible and acceptable. The concepts of patient participation, patient education, health promotion and illness prevention are basic parts of the integrated treatment plan. The professional staff recognizes the importance of technological and cultural dimensions of health and their influences on the individual, families and communities served. The physicians also recognize their responsibility to respect each patient without bias, assisting the patient to make sound decisions about hislher health care.

In 2010, the FortMed clinics generated revenues of 467.17 million, a 30.23% increase in revenues fiom the previous year's M3.9 million. With a new marketing team formed in 2010 and FortMed's expansion plans, the business is expected to do better in the years to come.

2. Fort Bonifacio Medical Center, Inc.

Fort Bonifacio Medical Center, Inc. (FBMCI), a wholly owned subsidiary of the Corporation, was incorporated on October 21, 1997. Currently, its primary business is to provide medical and health care delivery services and systems in general. FBMCI previously owned a parcel of land near Circumferential Road 5 in Brgy. Fort Bonifacio, Taguig City, Metro Manila. FBMCI then entered into a joint venture project with DM Consunji, Inc. wherein the latter shall develop a medium-rise residential condominium complex on the 3,969 square meters property, with a provision for an ambulatory care clinic in one of the buildings. The joint venture project has completed construction of what is now called the Cypress Towers.

In 20 10, FBMCI transferred its ownership interest in the Cypress Towers project to Ceres Property Venture Lnc. in exchange for common shares of stock of CPVI. This was part of the Corporation's plan to focus its real estate operations in CPVI.

Item 2. Properties

Some of the properties owned by certain subsidiaries of the Corporation are still in the process of titling and are free fiom liens or mortgages. The Corporation intends to complete the consolidation of its existing land bank.

Aside from the properties owned by the Corporation's subsidiaries discussed in Item 1 above, the Corporation purchased in April 2007 a property located in Jupiter comer N. Garcia streets, Makati City just behind Mapua Lnstitute of Technology. A 5-storey building was built on the property in 2009 and it now serves as the main office of the Corporation and most of its subsidiaries. The name of the building is Crown Center.

Item 3. Legal Proceedings

There are no material legal proceedings which involve the Corporation or any of its subsidiaries or affiliates.

Item 4. Submission of Matters to a Vote of Security Holders

There is no matter submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

PART I1 - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer's Common Equity and Related Stockholder Matters

(1) Market Information

The Corporation's securities are traded only in the Philippine Stock Exchange and no market for the shares is expected to be developed outside the Philippines. For the last two (2) years, the highs and lows of stock market prices for Crown Equities, Inc.'s equity shares are as follows:

For the period January l ,20 1 1 through March 3 1, 20 1 1, the shares of the Corporation recorded a high price of PO.087 per share and a low of P0.052 per share.

YEAR 20 10

2009

(2) Holders

There were 40 1 shareholders of CEI as of December 3 1,2010. The top 20 stockholders on record as of December 3 l ,20 10 are as follows:

PERIOD October - December July - September April - June January - March

October - December July - September April -June January - March

HIGH 0.050 0.047 0.041 0.044

0.050

0.049 0.044 0.038

8

9 10 10

1 1 12 13 13 14

15

15

16

17 18 19 20

LOW 0.039 0.035 0.035 0.035

0.041

0.035 0.032 0.028

GINAFE DELA CRUZ (Filipino) FINVEST SECURITIES CO., INC. (Fi1ipino)ANDRES N. BORJA (Filipino) ANDRES N. BORJA (Filipino) TONY YU ANG &/OR ROSEMARIE F. ANG (Filipino) CHIT0 M. FRANC0 111 (Filipino) ROSARIO S. LOPEZ (Filipino) DAVID GO SECURITIES, COW! (Filipino) -- NICANOR M. MAYORALGO (Filipino) GCV MANAGEMENT & CONSULTING CORPORATION (Filipino) ARLENE H. CRISOSTOMO &/OR FE H. CRISOSTOMO (Filipino) CAROLYN H. CRISOSTOMO &/OR FE H. CRISOSTOMO (Filipino) WILFRIDO V. VERGARA (Filipino) JEROME H. CRISOSTOMO &/OR FE H. CRISOSTOMO (Filipino) EMMANUEL E. ACUNA (Filipino) ALBERT0 A. LINCO (Filipino) TRANS-ASIA SECURITIES, 1NC. (Filipino)

62,s 16,960

46,080,000 40,000,000

40,000,000 3 1,200,000 28,800,000

28,000,000

0.462%

0.339% 0.294%

0.294% 0.229% 0.212% 0.206%

1 28,000,000

2 1,896,000

20,800,000

20,800,000 19,296,000

19,200,000 18,376,000 15,905,440 12,868,000

0.206%

0.161%

0.153%

0.153% 0.142%

0.141% 0.135% 0.1 17% 0.095%

(3) Dividends

(a) No dividends have been declared on common shares for the last two (2) fiscal years.

(b) There is no restriction that limits the ability of the Corporation to pay dividends on common equity and no such restriction is expected to arise in the future.

(4) Recent Sales of Unregistered Securities

No sale of unregistered securities has been made by the Corporation within the period covered by this report.

Item 6. Management's Discussion and Analysis

The Corporation has adopted all the relevant Philippine Financial Reporting Standards (PFRS) in its financial statements. The Corporation's financial statements for 2010 and the comparatives presented for 2009 and 2008 comply with all presentation and disclosure requirements.

Management's discussion of the Corporation's financial condition and results of operation presented below should be read in conjunction with the attached audited consolidated financial statements of CEI and its subsidiaries.

(1) Financial Position and Changes in Financial Position

As of December 3 1,2010, total assets increased by 1.03% or P34.16 million from P1.86 billion in 2009 to P1.90 billion in 20 10. The increase mostly went to the Corporation's current assets which increased by 10.33%. The Corporation's higher collection of receivables during the year significantly contributed to the increase of its assets. The higher collection of receivables was caused by the improved sales of the Corporation.

Total current assets increased by 10.33% in 2010 from P545.51 million in 2009. Cash increased from P76.15 million in 2009 to P135.02 million. This is mostly due to the collection of receivables and improvement in operations. Financial assets at fair value through profit and loss increased by 16.5% to P17.18 million. The recovery of the equities market in 2010 led to this increase. The reclassification of the Corporation's holdings in AHDC to available-for-sale investments also contributed to the increase in current assets by P44.85 million. Current installment contracts receivables increased by 11.25% to P22.56 million. This was also linked to the higher sales during the year. Current receivables and advances increased by 15% to P78.8 million. The increase came from the sale of a portion of the Corporation's stake in Asian Alliance Holdings and Development Corporation (AHDC) and the additional revenues from leasing out office space. The increase was also due to the higher sales of the Corporation's healthcare business. Prepaid commission, under other current assets, was also a contributor to the increase of the Corporation's current assets. Prepaid commissions increased by 123.19% to P8.71 million. Although inventories significantly decreased by 21.72% or from P316.85 million in 2009 to P248.02 million, the increase in the other current asset accounts more than compensated for the decrease in inventory.

Non-current assets decreased by 1.68% from P1.32 billion in 2009 to P1.3 billion in 201 0. The non-current assets that had significant movement in 2010 were installment contracts receivable, investments in and advance to associates, and other non-current assets. Installment contracts receivable increased by 38.28% from P54.55 million in 2009 to P75.43 million. It increased because of the 171.84% increase in real estate sales from P54.94 million in 2009 to P149.36 million. On the other hand, investments in and advances to associates decreased by 28.29% from P326.93 million in 2009 to P234.44 million. This is mostly due to the reduction in the Corporation's stake in AHDC and the reclassification of the remaining shares of AHDC to current

assets. Other non-current assets increased by 295.92% from P8.28 million in 2009 to P32.79 million mostly because of the Corporation's receivable from its sale of its stake in AHDC.

Total liabilities in 2010 increased by 9.85% to P242.97 million compared to P221.19 million in 2009. This is mostly because of the increase in the Corporation's accounts payable and other current liabilities. The primary accounts that led to the 35.55% increase in accounts payable and other current liabilities are customer's deposits, payable to developer, specific taxes and other taxes payable, and trade payables. These are all operating in nature since the Corporation acquires inventory on credit and deposits are made by real estate property buyers. A payable to a related party decreased by 23.82% because of the payment made by Crown Central Properties Corporation (CCPC), a subsidiary of the Corporation, to Solid Share Holdings, Inc., a major shareholder of CCPC. Income tax payable also significantly increased by 5 1.49% from P3.81 million in 2009 to P5.77 million. This is because of the higher earnings of the Corporation. The Corporation's retirement obligation, which is its only non-current liability account, increased by 45.01% from P3.94 million in 2009 to P5.72 million in 2010.

In 2009, total assets decreased by 1.62% or by P30.64 million. Total assets in 2009 were P1.86 billion fkom P1.89 billion in 2008. This is because total current assets decreased by 11.26% or P69.21 million from P614.72 million in 2008 to P545.51 million in 2009. This is mostly attributable to the decrease in cash and cash equivalents amounting to P135.30 million during the period. The amount of cash was used mainly to finance the cost of additional property and equipment and to pay outstanding liabilities. The cash was also used to cover overhead expenses. Short-term installinellt corllracls receivable also decreased to P20.28 million from P38.95 million in 2008. This was caused by the lower amount of sales during the year. The impact of the decline in cash and short-term installment contracts receivable was mitigated by the increase in receivables and advances of P22.7 1 million, the increase in inventory of P18.72 million, and the increase in the market value of financial assets at fair value through profit or loss of 69.35% or by P6.04 million. Short-term installment contracts receivable increased because of the revenues from the real estate operations. On the other hand, inventory increased due to a re-classification of investment property to saleable inventories. Other current assets also increased by P37.28 million from P11.67 million in 2008. However, the significant decreases in many current asset accounts still led to an overall decrease in current assets.

Total non-current assets in 2009 increased by 3.01% or P38.57 million from P1.28 billion in 2008 to P1.32 billion. This is largely attributable to the increase in property and equipment amounting to P148.53 million. This pertains to the cost of construction of the Crown Center that houses the Corporation's and most of its subsidiaries' offices. This also includes the cost of construction of the building in Laguna that houses the ambulatory care clinic of FortMed.

In 2009, total liabilities decreased by 13.01% or fkom P254.28 million in 2008 to P221.19 million in 2009. This is because of the decrease in the Corporation's current liabilities. Accounts payable and other current liabilities decreased by 23.17% fkom P129.02 million in 2008 to P99.13 million. This pertains to the payment of the outstanding balance of the purchase price of land properties. Repayment of due to related parties was P8.00 million. This also caused a significant decrease in the Corporation's liabilities.

In 2008, total assets increased by 3% or P59.88 million from P1.83 billion in 2007 to P1.89 billion. Total current assets increased by P30.19 million or 5.16% in 2008. This is mostly because of the increase in inventories of P59.49 million which pertains to the cost of condominium units from Cypress Towers and cost of medical supplies of clinics. The Palma Real and Cypress Towers projects continued to realize sales thereby converting inventories into higher value cash and receivables. This also contributed to the increase in assets of P23.95 million as current installment contracts receivable. In addition, there was a couple of properties in Taguig City which were acquired partially finance on credit. Although cash and cash equivalents decreased by

P65.35 million to P211.45 million, total current assets still increased because of the significant increases in the other accounts.

Non-current assets in 2008 recorded a net increase of 2.37% or P29.69 million. This was caused by the P77- million increase in property and equipment. Goodwill was also recorded for the fust time in 2008 from the Corporation's additional investment in Healthcare Systems of Asia Philippines, Inc., an associate, resulting to a significant takeover of the Corporation. This added P21.74 million in the Corporation's non-current assets. However, non-current receivables decreased by 12.69% to P39.88 million. Investments in and advances to related parties likewise decreased by 24.9% to P330.40 million. Despite the decrease in these 2 accounts, total non- current assets managed to grow by 2.38%.

Total liabilities increased by 24.13% to P254.28 million in 2008 from P204.85 million. It was mainly due to an increase in accounts payable and other liabilities which increased by P58 million from the previous year's level. The net increase in total liabilities of P49 million was recorded after P11 million was paid to a related party. The net increase was a combined effect of an increase in liability from an acquisition of a piece of property and from a short term advances from an associate.

Finally, stockholders' equity moved up by 0.75% to P1.65 billion in 2010. Net income of P12.38 million realized during the year was an improvement compared to the net income of P2.46 million in 2009. In 2008, stockholders' equity stood at P1.64 billion which is higher by 0.61% compared to the 2007 balance of P1.63 billion. This is due to the recorded net income of P9.63 million in 2008.

(2) Results of Operation

Net income increased by 403.99% in 2010 from P2.46 million in 2009 to P12.38 million. This is largely attributable to the Corporation's improved real estate sales which increased by 171.84%. Real estate sales reached P149.36 million in 2010. P100.88 million came from the Cypress Towers project while P48.47 million came from the Palma Real project. Furthermore, revenue from medical services also improved. It increased by 3 1.08% to P56.22 million.

In 2009, however, net income declined by 74.51%. This was generally the transitional effect of transferring the clinic locations of the healthcare business. The income generated by the real estate operation, however, mitigated the impact of the healthcare business on the consolidated statements. In 2008, net income also declined from P30.44 million in 2007 to P9.63 million. This was due to higher operating expenses. Operating expenses in 2008 increased by 41.32% or by P23.94 million.

Revenues and Other Income

In 2010, the main contributors of income were the real estate operations and medical sales and services. Moreover, the Corporation's rental income fiom its Crown Center building in Makati City and FortMed building in Sta. Rosa City in Laguna provided additional income by contributing P7.15 million. Also, interest income from installment contracts increased by 21.76%. Other income, however, decreased by P5.47 million mostly because of the lower gain realized on the Corporation's value of fmancial assets at FPVL coupled with the disposal of AHDC.

In 2009, the clinic operation generated revenue of P43.90 million fiom sales of medical goods and services. However, real estate sales of lot and condominium units decreased by 30.33% or P23.92 million. Interest income earned on cash and cash equivalents declined by 58.59% or P6.65 million. This was the result of the decrease in cash in bank and short-term placements during the year. On the other hand, interest on installment contracts receivable rose by 171.34% or P4.10

million. Also, a recovery on the market value of marketable securities amounting to P5.47 million was recognized during the year as compared to a P8.45 million decline in market value in 2008.

Total revenues for 2008 increased by 20.53% to P111.89 million from P92.83 million generated in 2007. In 2008, real estate sales already included sales generated from the Cypress Towers Project amounting to P3 1.05 million out of the total of P78.86 million. Interest income of P11.35 million also added to revenues. Despite the increase in revenues, the net income declined by 68% to P9.63 million from P30.44 million in 2007. The decrease in net income was due to the absence of a non-recurring income previously recognized in 2007. This was the gain on sale of investment in stocks of MTDME amounting to P26.2 million and the realized gain from trading securities amounting to P12.6 million.

Real estate sales are no longer the only primary source of the Corporation's revenues. A significant portion of its revenues started to come from its healthcare business in 2009. This improved the position of the Corporation since its revenue sources has become more diversified. Additional projects are expected to bring the Corporation more sources of income.

Cost and Expenses

Operating costs and expenses in 2010 were relatively lower as a percentage of total revenues compared to 2009 operating costs and expenses. The operating costs and expenses in 2010 were just 89.37% of total revenues while in 2009, it was 99.23%. This was one factor for the improvement of the Corporation's net income in 20 10.

In 2010, cost of real estate sales was the biggest cost of the Corporation at P71.59 million. This account increased from P30.00 million in 2009. Cost of services was likewise a significant portion of the Corporation's costs. Although it only increased by P0.55 million in 2010, it was still the third biggest contributor to the costs and expenses at P22.90 million. Moreover, commission greatly increased by 136.35% or P8.06 million to P13.97 million. All of these accounts increased because of the higher revenues in 2010. Also, salaries and employee benefits increased to 23.49 million from P15.00 million in 2009. The growing number of the Corporation's employees and key management personnel caused this increase. Taxes and licenses increased by 35 1.82% to P9.1 million. This is because of the real property taxes on the Crown Center and FortMed buildings and the transfer taxes of properties. Depreciation and amortization jumped to P8.75 million increasing by 156.58%. The increase came as a result of property and equipment added by the Corporation when it built its buildings in Makati and Sta. Rosa cities. Impairment losses on receivables and advances also increased by 713.95% to P9.37 million. This was largely from the impairment of the Corporation's receivable from South Luzon Tollway Corporation.

In 2009, cost of real estate sales decreased by 34.52% from P45.82 million. This was due to the lower sales of real estate property during the year. Despite the sharp decrease of the cost of real estate sales, this was still the biggest cost of the Corporation at P30.00 million. Salaries and employee benefits increased by 259.76% to P15.00 million. This was because of the Corporation's consolidation of FortMed's fmancial performance to its financial statements. The cost of services of P22.35 million that first appeared in 2009 was also due to this consolidation.

Costs and expenses in 2008 consisted mainly of cost of real estate sales, commissions related to sale of real estate, and impairment losses. As real estate sales increased by 141%' cost of real estate sales increased likewise by 71% from P26.74 million in 2007 to P45.82 million in 2008. Commission also followed with a 473.45% or P7.12 million increase. In addition, the Corporation provided for possible uncollectible advances to a subsidiary amounting to P6.00 million.

(3) Key Performance Indicators

The Corporation measures its performance based on the utilization of assets and the return on its investments. Most of the Corporation's investments are in ventures that are still at pre-operating stages. Only Crown Central Properties Corporation, CEI Development Corporation, Ceres Property Venture, Inc., and FortMed Clinics are currently in operation.

In 20 10, the investments ratio decreased to 0 . 4 5 ~ because the Corporation divested a portion of its shares in Asian Alliance Holdings and Development Corporation. It also reclassified an investment property into fixed asset when the FortMed building in Sta. Rosa City was finally completed.

In 2009, the ratio went down from 0 . 5 5 ~ in 2008 to 0 .50~. This was due to the conversion of the land previously held as investment property into saleable units carried as inventories. Similarly, the ratio in 2008 declined from 0 . 6 4 ~ in 2007 to 0 .55~ because of the reclassification of some investment properties into inventories.

The current ratio in 2010 improved to 2 .54~ because of the collections the Corporation was able to make from its real estate operations. A higher level of sales in the year and the sale of some of the stake in Asian Alliance also increased the receivables of the Corporation. The current liabilities of the Corporation also increased but only by 9.21%. This is lower compared to the 10.33% increase in current assets. Given the movement of the current assets and liabilities, the Corporation's current ratio improved.

Indicator

Investments Ratio

Current Ratio

Debt Ratio

Return on Assets

Earnings Per Share

In 2009, the current ratio increased from 2 . 4 5 ~ in 2008 to 2.51~. This is due to the payments made by the Corporation to lessen its accounts payable and other current liabilities and due to a related party. Even though current assets decreased by 11.26% from P6 14.72 million to P545.5 1 million, current liabilities decreased by a bigger amount of 13.56% or from P251.33 million to P217.25 million. This led to the increase in the current ratio.

The 2008 current ratio of 2 . 4 5 ~ was a decrease from its 2007 level of 2.87~. This is mostly due to property acquisitions on credit. Even though current assets increased by 5.16%, it was not enough to catch up with the 23.41% increase of current liabilities during the year.

Formula

Total Investment and Advances Total Assets

Curr- Current Liabilities

Total I W ~ e s . . . .

Total Assets

FRlT Total Assets

e Total Shares Subscribed

As Dec 201 0

0 .45~

2.54~

0.128~

Twelve-Month Dec 201 0

1.52%

0.0009

of Dec 2009

0 . 5 0 ~

2 . 5 1 ~

0.119~

Period Dec 2009

0.44%

0.0002

The debt ratio of the Corporation increased in 2010 because its total liabilities increased by 9.85% or P21.78 million while its total assets increased by 1.83% or P34.16 million only. The increase in total liabilities mostly came from the Corporation's current liabilities. Current liabilities increased because most of it was operating in nature. There were more buyers of real estate properties during the year which resulted to a higher amount of deposits.

The payments of liabilities, particularly the accounts payable arising from the purchase of land properties, resulted to a lower debt ratio of 0.1 19x in 2009 compared to 0 . 1 3 4 ~ in 2008. On the other hand, total liabilities in 2008 increased by 24% to P254.28 1 million which was eight times higher than the reported increase in total assets. This resulted to a slight increase in the debt ratio from 0.11 Ox in 2007 to 0.134 in 2008.

The Corporation's ROA significantly increased to 1.52% in 2010 from 0.44% in 2009 because of the 403.99% increase in the Corporation's net income. This significantly higher ROA was paired with a significantly higher profit margin of 5.59%. However, the profit margin in 2009 was only 2.3 1%. The lower ROA and profit margin in 2009 was mostly caused by the disrupted clinic operations of FortMed Clinics.

The increase in the 2010 EPS was due to the higher net income of the Corporation for the year. The EPS of the Corporation just follows the trend of its net income because the number of subscribed shares has been fixed in the past 3 years.

(4) Past and Future Financial Condition with Particular Emphasis on the Prospects for the Future

In 2010, the Corporation continued to generate revenues from its real estate projects particularly Palma Real Residential Estates and the Cypress Towers. The combined revenues from real estate sales amounted to P149.36 million. In addition, the revenue from its healthcare business reached P57.17 million.

Cypress Towers remains to be a significant contributor to total revenues. The Corporation's real estate sales mostly come from this project. The first building was completed in 2008 and started generating revenues in the same year. The condominium project which is composed of three condominium buildings was completed early 20 10 with Altiva Tower being ready for occupancy a the end of the first quarter in 2010. The revenue stream from this project is expected to continue over the next few years.

The Palma Real Residential Estates is also expected to continue generating revenues. The project continues to market house and lot packages intended to promote build-up of a community in the project. Future sales are expected to improve as Palma Real is now accessible both from the Sta. Rosa-Tagaytay road and from the Mamplasan exit of the South Luzon Expressway.

The healthcare business is also showing signs of growth and improvement. A new marketing team was formed in 2010 which is expected to improve the revenues of the business. In fact, the business has already started expanding its operations by purchasing equipment and investing more in marketing to gain more clients.

The promising growth of the Corporation's businesses increased its demand for more talent. The Corporation has hired a significant number of employees in 2010 to support the needs of its growing businesses. Accountants, analysts, sales specialists, and marketing specialists, have been recruited and more talent is expected to be hired as the businesses grow even further.

The Corporation is not in default of any loans or lease or financing arrangement and there are no significant amounts of trade payables which have not been paid within the stated trade terms. The Corporation foresees a satisfactory business outcome in the succeeding year and does not anticipate having within the next twelve months any cash flow or liquidity problems.

The Corporation and its subsidiaries have neither issued nor invested in any financial instruments or complex foreign securities that will make them susceptible to the effects of the global financial condition. They have neither foreign currency denominated nor local peso denominated loans. The Corporation's financial risk exposure is limited to its investments in the local equities market reported as "Financial Assets at Fair Value Through Profit and Loss" in its Balance Sheet. But this exposure is insignificant being less than one percent of the Corporation's total asset base. Moreover, these investments in the local stock market are always marked to market thus reflecting the most verifiable values available. The Corporation's risk management policies are religiously observed and fair values of investments are reviewed by the Executive Committee on a weekly basis.

Item 7. Financial Statements

The audited financial statements of the Corporation are included in this report as Annex A.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During the stockholders' meeting held on May 25,2010, the fm of Manabat Sanagustin & Co. was appointed as external auditor for the fiscal year 2010. The auditing fm is also being considered to handle the independent audit of the Corporation for fiscal year 201 1. There were no disagreements with the previous independent auditor on accounting and financial disclosures. The decision to appoint a new independent auditor was made based purely on commercial reasons.

For the audit of the Corporation's financial statements, the aggregate fees billed by the independent auditors were Six Hundred Fifty Thousand Pesos (e650,000.00) and Seven Hundred Thousand (e700,000.00) for years 2009 and 2010, respectively. There were no other professional fees billed by the independent auditors during the year. The Audit Committee reviews all proposals for services to be rendered by the independent auditor.

PART 111 - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Corporation

a. Directors and Executive Officers

Mr. George L. Go, 69 years old, Filipino, is presently the Chairman of the Board of Directors of the Corporation. He is a Director of the Company since 1995. Mr. Go is also the Chairman of the following companies: Healthcare Systems of Asia Philippines, Inc., Asian Alliance Holdings and Development Corp., and GLG Crown Holdings, Corp. Mr. Go is a Director of both Shang Properties, Inc. (formerly Kuok Philippine Properties Inc.) and Asian Alliance Investment Corporation. He has held the foregoing positions within the last five years. Mr. Go earned his bachelor's degree in Economics fiom Youngstown University, U.S.A. and completed an Advanced Management Program Harvard Business School, U.S.A.

Mr. Wilfrido V. Vergara, 66 years old, Filipino, has been the Vice-Chairman of the Board of Directors of the Corporation since May 2002. He has also been the Chairman of the Nomination Committee and of the Compensation and Remuneration Committee since 2003. He was President and Chief Executive Officer and Director of Equitable PC1 Bank and most of its

subsidiaries from May 01, 1995 until his retirement in April 17, 2001. Mr. Vergara obtained his bachelor's degree in Economics from the Ateneo de Manila University.

Mr. Ramon A. Recto, 78 years old, Filipino, has been an independent director of the Corporation since May 2002. He has been the Chairman of the Audit Committee and a member of the Nomination Committee since May 2003. Mr. Recto is currently the ChairmanPresident of CME Technologies, Inc. and the President of Supply Oilfield Services, Inc. and S.O.S. Transport and Brokerage, Inc. He was the President of Lepanto Consolidated Mining Corporation. Mr. Recto obtained both of his bachelor's degrees in Electrical Engineering and in Mechanical Engineering from the University of the Philippines. He also earned his master's degree in Industrial Management from the same university.

Mr. Victor C. Macalincag, 75 years old, Filipino, has been an Independent Director of the Corporation since May 27,2003. He currently holds directorship in Semirara Mining Corporation, Republic Glass Holdings Corp, SEM Calaca Power Corporation and Finman Rural Bank. Mr. Macalincag was the President of Trade & Investment Development Corporation of the Philippines presently known as PHIL EXIM (formerly PhilGuarantee) from 1991 until his resignation in 200 1. He was Deputy Minister of Finance from 198 1 to 1986 and Undersecretary of Finance from 1986 to 1991. He concurrently held the position of National Treasurer from 1981 to 1988. Other positions he held until year 2001 were as follows: Director of Home Guaranty Corporation and Philippine Overseas Construction Board; Executive Committee Member of the Export Industry Modernization of the Technology and Livelihood Resource Center, Review Committee Member of Industrial Guarantee and Loan Fund; and Executive Committee Member of the Industry Development Council. He was also a director of Philippine Long Distance Telephone Co. (PLDT) from 1988 to 1995 and National Power Corporation from 1978 to 1986. Mr. Macalincag is a Certified Public Accountant. He has a Bachelor of Science in Business Administration from the University of the East. He also earned a Master ,of Arts in Economics from the same universiw. He finished a fellowship program conducted by the Economic Development Institute of the World Bank, Washington D.C. in 1971.

Mr. Antonio B. Alvarez, 67 years old, Filipino, has been a member of the Board of Directors since 1995 and the Treasurer of the Corporation since 1997, He is also a member of the Nomination Committee and of the Compensation and Remuneration Committee since May 2003. Mr. Alvarez is the President of Guild Securities, Inc. He is also a member of the Board of Directors of Healthcare Systems of Asia Phils., Inc. Mr. Alvarez was the Executive Vice President of Securities Specialists, Inc. He obtained his Bachelor of Science in Commerce major in Accounting from the Far Eastern University.

Mr. Andres N. Borja, 67 years old, Filipino, has been a member of the Board of Directors of the Corporation since May 27, 2003. He is a member of Compensation and Remuneration Committee and also the Audit Committee. Mr. Borja is currently the President and Director of the following companies: Crown Central Properties Corp., CEI Development Corporation, Ceres Property Venture, Inc. He was formerly the President and director of Arbor Realty and Development Corp., Almaciga Realty and Development Corp., Mark Securities, Inc. and Cedar Realty and Development Corporation. Mr. Boria earned his Bachelor of Science in Political Historv from the Ateneo de Manila University and has an Institute of Banking Diploma from the City of London College.

Mr. Conrado G. Marty, 65 years old, Filipino, is a member of the Board of Directors of Corporation. He is the President of Universal LMS Finance and Leasing Corp. and Luxor Properties and Development Corporation. He is likewise the Vice Chairman of Hyundai Asia Resources, Inc. Mr. Marty holds a Bachelor of Science in Business Administration, Major in Accounting from the Universiw of the East. He earned his Master's Degree in Business Administration from Wharton School, University of Pennsylvania.

Mr. Edilberto V. Javier, 64 years old, Filipino, has been a member of the Board of Directors of the Corporation since October 2001. He has been a member of the Nomination Committee and the Compensation and Remuneration Committee since May 2003. He is the Chairman of EVJ Holdings, Inc. and a member of the Board of Directors of the following companies: Healthcare Systems of Asia Philippines, Inc., Philippine Hoteliers, Inc. (Dusit Hotel), DTV Realty Development, Inc., and Sedgewick Holdings, Inc, He was the Senior Executive Vice President and Chief Operating Officer of Equitable PC1 Bank and a Director of most of its subsidiaries from 1995 until his resignation in 2001. Mr. Javier earned Bachelor of Arts in Economics from the Ateneo de Manila University.

Mr. Isidro A. Consunji, 62 years old, Filipino, is a member of the Board of Directors of D.M. Consunji Inc. (DMCI), Semirara Mining Corporation, and Crown Equities, Inc. He is the Chairman of the Board of DMCI Project Developers Inc., and President of DMCI Holdings Inc., Dacon Corporation, Beta Electric Electric Corp.. Mr. Consunji was born in Manila on January 15, 1949 with three children. He graduated from the University of the Philippines where he earned a Bachelor of Science in Engineering. He also took up Master of Business Economics fiom the Center for Research & Communication and Master of Business Management fiom the Asian Institute of Management. He became the President of Philippine Constructors Association from 1999 - 2000 & Philippine Chamber of Coal Mines, Inc. (May 1999 - January 2002). Mr. Sid Consunji is an active member of the U.P. Beta Epsilon Fraternity, Asian Institute of Management Alumni Association, U.P. Alumni Engineers, and U.P. Aces Alumni Association.

Mr. Patrick D. Go, 43 years old, Filipino, has been a Director of the Corporation since 1995 and the Compliance Officer since 2008. Mr. Go is also the Manaain~ Director of Healthcare Svstems of Asia Phils.. Inc. He has held the position since August 2009. He holds the foregoing positions since August 2009. He was a Vice President at Banco de Oro Unibank, Inc. from 2001 to 2009. He graduated with a Bachelor of Science in Finance and Real Estate from the San Francisco State Universiw, U.S.A. in 1992. He is the son of Mr. George L. Go.

Mr. Eugene B. Macalalag, 43 years old, Fil-ipino, has been a member of the Board of Directors of the Corporation since May 2003. He is the Vice President for Finance of the Corporation. Mr. Macalalag is also a member of the Board of Directors of Fortmed Medical Clinics Makati, Inc., Fort Bonifacio Medical Center, Inc., and CEI Properties, Inc. He ioined Crown Equities in April 1996 and has since served in various capacities. Prior to joining Crown Equities, Mr. Macalalag was an officer of the Far East Bank and Trust Company's investment banking group. Mr. Macalalag earned his master's degree in Business Administration fiom the De La Salle University, Manila.

Mr. David 0. Chua, 43 years old, Filipino, has been a member of the Board of Director of the Corporation since 2007. He is the President of Cathay Pacific Steel Corporation and Asia Pacific Capital Equities and Securities Corporation. He is currently a Director of Philippine Stock Exchange, Hardware Foundation of the Phils.. and Galleria Corporate Center Condominium Corp. He is also an Advisorv Board Member of Metropolitan Bank and Trust Company and a Vice President of the Federation of the Filipino Chinese Chambers of Commerce and Industrv Inc. I-Ie is a Trustee of University of the East and University of the East Ramon Magsaysay Memorial Medical Center. He hasheld the foregoing positions for the last five years. Mr. Chua is also the President of the Philippine Steelmakers Association, 2011 Philippine Business Conference Chairman of the Philippine Chamber of Commerce and Industry and was the president of the Kellogg/Northwestern University Alumni Association of the Philippines. He was formerly Directors of the Philippine Savings Bank (PSB), First Metro Investments Corp., Chairman of Philippine Institute of Quezon City (PIQC) and Chairman 2008 National Employer's Conference Employers Confederation of the Philippines (ECPO) Mr. Chua has a Bachelor of Science in Financial Services Management, Honors degree fiom St. Mary's College in California, USA and a Masters in Business Administration (MBA) from the Kellogg School of Business of Northwestern

University, Evanston, Illinois, USA and the Graduate School of Business of the Hong Kong University of Science and Technology.

Mr. Romuald U. Dy Tang, 59 years old, Filipino, has been a member of the Board of Director of the Corporation since 2008 and was elected President of the Coruoration inMay 2010. Mr. Dy Tang is also a Director of various subsidiaries of the Corporation namely, Healthcare Systems of Asia Philippines, Fortmed Medical Clinics Makati, Inc., Fort Bonifacio Medical Center, Inc., CEI Development Corporation, CEI Properties, Inc., Ceres Holdings, Inc., Ceres Property Venture, lnc. and Parkfield Landholdings, Inc. He is also a Director and Officer of other organizations and/or Corporations namely Kok Tay Trading Corporation, Sedgewick Holdings, Inc. and DTV Realty and Development, Inc.. He was the Executive Vice President and Treasurer of Equitable PC1 Bank and a Director of the various subsidiaries of the bank. Mr. Dy Tang earned his Bachelor of Science in Business Administration from De La Salle University. Manila.

Mr. Emmanuel B. Isnit, 50 years old, Filipino, has been a member of the Board of Directors of the Corporation since May 2010. He is the Finance Head of Fortmed Medical Clinics. He joined Fortmed as consultants in July 2007. He is also the Assistant Treasurer of First Orient Securities, Inc. He also served as _a consultant of Crown Central Properties Corporation from August 2005 to June 2007 and Sedgewick Holdings from July 2001 to July 2005. He held several positions in Far East Bank and Equitable PC1 Bank. He graduated with Bachelor of Science degree in Business Administration major in Accounting from Pamantasan ng Lungsod ng Maynila in 198 1.

Mr. Noel Z. Bundalian, 52 years old, Filipino, has been a member of the Board of Directors of the Corporation in May 2010. He is the Head of operations of Fortmed Medical Clinics. graduated with Bachelor of Science in Business Administration major in Accounting from University of the East. He is a Certified Public Accountant.

b. Significant Employees

The Corporation has no employee who is not an executive officer but is expected to make a significant contribution to the business.

c. Family Relationships

Except for Mr. Patrick D. Go who is the son of Mr. George L. Go, no other directors or executive officers are presently related to each other either by consanguinity or affinity.

The Corporation has no controlling or parent company.

d. Involvement in Certain Legal Proceedings

The Corporation has no knowledge of the involvement of the current directors and executive officers, in any legal proceedings as defined in the Securities Regulation Code for the last five (5) years up to the date of this report.

Item 10. Executive Compensation

In 201 0, the Corporation's Executive Officers consisted of the following key personnel: the President, the Treasurer, the Vice-President for Finance, and the Vice-President for SubsidiariesIOperations.

The aggregate compensation paid or incurred during the last two (2) fiscal years and estimated to be paid in the ensuing fiscal year to the Executive Officers and Directors of the Corporation are as follows:

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS Name and Principal Position I Year I SalaryIFees / Others [ Total

I I I I

< ,

Eugene B. Macalalag, Vice President for Finance Andres N. Borja, Vice President for SubsidiariesIOperation.

Compensation of Executive Officers Romuald U. Dy Tang, President** Eugene B. Macalalag, Vice President for Finance Andres N. Boria. Vice President for SubsidiariesIO~erations

1 All Other Directors and Officers as a Group

201 1

2010 < , ~

* Estimate ** Compensated sfarfinp June 2010 onlv

6 million*

3.6 million

Eugene B. Macalalag, Vice President for Finance Andres N. Borja, Vice President for SubsidiariesIOperations

All Other Directors and Officers as a Group 201 1 2010

Compensation o f Directors

The members of the Board of Directors who are not executive officers are elected for a term of one year.

-

-

2009

201 1 2010 3009

3.7 million* 3.4 million

As provided in the Corporation's by-laws, directors shall receive a reasonable per diem allowance for their attendance at each meeting. Further, as compensation, the Board shall receive and allocate an amount of not more than ten percent (10%) of the net income before income tax of the Corporation during the preceding year. Such compensation shall be determined and apportioned among the Directors in such manner as the Board may deem proper, subject to the approval of shareholders representing at least a majority of the outstanding capital stock at a regular or special meeting of the stockholders.

6 million*

3.6 million

Except for a P5,000.00 per diem per meeting for each director which started in August 2007, no other payment for directors' per diem, allowance or payment for their compensation had been made during the last two fiscal years.

1.8 million

3.7 million* 3.4 million 3 5 million

- -

Other Arrangements

1.8 million

3.7 million* - 3.4 million

On May 3 1, 2002, the stockholders approved a stock option plan for directors and executive officers of the Corporation as may be designated by the Board. Pursuant to the terms and conditions of the stock option plan, the Corporation will issue a total of Three Hundred Million (300,000,000) common shares over a five-year period. On March 27, 2007, the Board of Directors approved the extension of the vesting period for another five (5) years, or until May 3 1,2012.

- - - -

1.8 million

3.7 million* - 3.4 million 3 ~ 5 million

Title of securities underlying the stock option Amount of securities underlying the stock option Participants

Grant of Stock Options

Shares of Common Stock 3~,000,000,000 shares Directors and executive officers of the Corporation as may be designated by the Board Stock Options shall be awarded to participants based on satisfaction of performance requirements and other restrictions and conditions as may be imposed by the Board and subject, in all cases, to the full discretion of

Exercise Price Entitlement Date VestingIExpiration

the Board. Par value or book value whichever is higher May 3 1,2002 (the "Entitlement Date") The option shares shall be subject to vesting according to such schedule as shall be approved by the Board; provided, that the vesting shall lapse after five (5) years from Entitlement Date; provided further, that with respect to executive officers, options shall expire upon their resignation.

be correspondingly adjusted in the event of any stock dividend declaration, stock split, merger, consolidation or other similar or analogous change in the corporation structure or capitalization of the

Adjustment in Number of Option Shares and Exercise Price

I corporation. Amendment at the Board of Directors' Discretion ' Terms and conditions of the stock option plan may be

amended by resolution of the Board, except for any ~

The number of underlying common shares in respect of outstanding options andlor the exercise price shall

increase in the maximum number of shares o r for any decrease in the exercise price which shall require the ~ approval of stockholders representing at least two- thirds (213) of the outstanding capital stock. No consideration will be received by the Corporation for

I the grant or extension of the option. I Market value of the common shares as of March I P0.078 Der share.

Item 11. Security Ownership of Certain Record and Beneficial Owners and Management

31,2011 Total number of participants awarded as of December 3 1,2010.

(1) Security Ownership of Certain Record and Beneficial Owners

None.

As of December 3 1, 2010, the following stockholders own more than 5% of the Corporation's outstanding capital stocks:

1 Amount of shares I

Total no. of participants designated by the Board as of December 31.201 0.

None.

PCD Nominee Corp. (PCD), a wholly-owned subsidiary of Philippine Central Depository, Inc., is the registered owner of certain shares in the books of the Corporation's transfer agents in the Philippines. The beneficial owners of such shares are PCD's participants, who hold shares on their behalf or in behalf of their clients. PCD is a private Corporation organized by the major institutions actively participating in the Philippine capital markets to implement an automated book-entry system of handling securities transactions in the Philippines. The beneficial owners of PCD shares that owns 5% and above are indicated as follows:

Title of Class

Common shares

Guild Securities, Inc. (Filipino) 3,343,844,264 24.59% Unit 12 15 Tower One and Exchange Plaza Ayala Avenue, Makati City

BDO Securities Corp. (Filipino) 1,2 12,524,976 8.92% 27/F Tower One and Exchange Plaza Ayala Avenue Makati City

Name and Address of Stockholders

PCD Nominee ~ o r p . ' 37lF Tower 1 Enterprise Center

Marian Securities, Inc. (Filipino) 2232 Pasong Tarno Ext. Makati City

The following have the right to vote or direct the voting or disposition of the CEI shares beneficially held by the Corporations they respectively represent: Antonio B. Alvarez for Guild Securities, Inc. and Conrado G. Marty for Marian Securities, Inc.

pecord (r)lBeneficial (b) Ownership]

8,054,394,936 (r)

% Ownership

59.22%

To the best knowledge of the Corporation, no security holder has created a voting trust for the purpose of conferring upon a trustee the right to vote pertaining to shares of stock of the Corporation.

Common shares

Common shares

(2) Security Ownership of Directors and Management

Security ownership of Management and Directors as of December 3 1,2010 is as follows:

Amount and nature of Percent of Title o f Class Name of Beneficial Beneficial Ownership Citizenship Ownersliip

Owner

2 1.59%

5.20%

Ayala Ave. cor. Paseo de Roxas, Makati City

Guild Securities, Inc. (Filipino) Unit 121 5 Tower One and Exchange Plaza, Ayala Avenue, Makati City

First Orient Securities, Inc. (Filipino) Unit 120 1 Tower One and Exchange Plaza, Ayala Avenue, Makati City

Common Shares Common Shares Common Shares Common Shares Common Shares Common Shares Common Shares Common Shares Common Shares Common Shares Common Shares

2,935,984,888 (r)

706,727,592 (r)

A. Directors Patrick D. Go Andres N. Borja George L. Go Ramon A. Recto David 0. Chua Conrad0 G. Marty Isidro Consunji Edilberto V. Javier Noel Z. Bundalian Emmanuel B. Isnit Victor C. Macalincag

Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino

1.327% 0.294% 1.007% 0.417% 0.003% 0.001%

nil 0.029%

nil nil nil

B. Executive Officers Common Shares Wilfrido V. Vergara 19,296,000 Filipino 0.142% Common Shares Antonio B. Alvarez 177,600 Filipino 0.001% Common Shares Romuald Dy Tang 76,720,000 db5 Filipino 0.564% Common Shares Eugene B. Macalalag 6,800,080 db6 Filipino 0.05%

C. Directors and Officers as a Group 54 1,640,728 3.835%

(3) Voting Trust Holders of 5% or More

No persons known to the Corporation hold more than 5% of the common shares under a voting trust or similar agreement.

- these are directly owned by the aforementioned director or officer db' - 44,412,000 of these are registered in one of the PCD member companies but beneficially owned by the director db2- 132,950,000 of these are registered in one of the PCD member companies but beneficially owned by the director db3 - 55,920,000 of these are registered in one of the PCD member companies but beneficially owned by the director d" - 4,000,000 of these are registered in one of the PCD member companies but beneficially owned by the director db5 - 76,700,000 of these are registered in one of the PCD member companies but benflcially owned by the director db6- 6,800,000 of these are registered in one of the PCD member companies but beneficially owned by the director

(4) Changes in Control

There is no arrangement which may result in a change in control of the Corporation.

Item 12. Certain Relationships and Related Transactions

During the last two years, there were no transactions or series of similar transactions with or involving the Corporation or any of its subsidiaries in which a director, executive officer, nominee for election as a director or stockholder owning ten percent (10%) or more of total outstanding shares and members of their immediate family, had or is to have a direct or indirect material interest.

PART IV - CORPORATE GOVERNANCE

Item 13. Corporate Governance

(1) Evaluation System

Since its implementation of its Manual on Corporate Governance in 2003, compliance with it has been satisfactory and no sanction has been imposed on any member of the organization for deviating from the Manual.

The Corporation adopted and implemented its Manual on Corporate Governance in 2003 to institutionalize the principles of good corporate governance in the entire organization and to supplement its By-Laws. The Corporation maintains two (2) independent directors in its Board and has designated a Compliance Officer to oversee the implementation of the Manual. Pursuant to the Manual, the Corporation created a Nomination Committee to pre-screen and shortlist all candidates nominated to become a member of the Board. A Compensation and Remuneration Committee was also formed to develop policies on executive remuneration; and an Audit Committee to check all financial reports and to provide oversight on financial management functions.

In addition to the foregoing committees, the Corporation has a five-member Executive Committee that regularly meets to discuss the Corporation's day-to-day operation.

(2) Measures on leading practices of good-corporate governance

The Board of Directors shall review the Manual from time to time and recommend the amendment thereof with the goal of achieving better transparency and accountability. The .Compliance Officer continues to evaluate the compliance of the Corporation, its directors, officers and employees with its existing Manual. which may be amended from time to time.

(3) Any Deviation from the Manual

As certified by the Compliance Officer, there was no material deviation in compliance with the Manual for the year 20 10

(4) Improvement

In early 201 1, the Corporation amended its Manual to comply with the Revised Code of Corporate Governance.

The Corporation has adopted the policy of reviewing its Manual on an annual basis at the Board level with the aim of constantly improving its corporate governance.

PART V - EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C

(1) Exhibits

Audited Financial Statements Annex A

(2) Reports on SEC Form 17-C from January 01 to Dec 31,2010

January 8,2010

March 30,2010

May 25,20 10

Submission of the Corporate Secretary's certification on the attendance of the directors in board meetings for the year 2009. Holding of the Annual Shareholders' Meeting on May 25, 2010 and setting April 30, 2010 as the Record Date for stockholders entitled to vote and participate in said meeti,ng. Submission of results of the annual shareholders' meeting and organizational meeting of the Board of Directors.

SIGNATURES

Pursuant to the requirements of Section 17 of the Code and Section 14 1 of the Corporation Code, this report is signed on behalf of the issuer by the undersigned, thereunto duly authorized, in the City of Makati.

By:

President - -LMER B. SERRANO

Corporate Secretary

SUBSCRIBED AND SWORN to before me this APR 0 8 2011 affiant exhibiting to me their Tax Identification Number, as follows:

NAMES Romuald U. Dy Tang Eugene B. Macalalag Elmer B. Serrano

Doc. No. Pl4 Page No. IW BookNo. I Series of: all

TIN 115-321-304 1 17-667-674 153-406-995

Appointment No. 5 (2011-2012) Notary Public for Pasig City

Until Dectmber31, 2012 Attorneys Roll No. 57936

Suite 2401 The Orient Square, F. Ortigas it. Road, Ortigas Center Pasig City

PTR No. 6616180;01.04.11; Pasig City IBP No. 843182: 01.04.1lj RSM

,!!mi!! Mansbat Sanagustin & Co.. CPAs The KPMG Center, 9/F 6787 Aya la Avenue Makati City 1226, Metro Manila, Philippines

Telephone +63 (2) 885 7000 Fax +63 (2) 894 1985 Internet www.kpmg.com.ph E-Mail rnanilaOkprng.com,ph

Branches. Subic . Cebu . Bacolod . Iloilo PRC-BOA Registration No. 0003 SEC Accreditation No. 0004-FR-2 BSP Accredited

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders Crown Equities, Inc. 4' Floor, Crown Center 158 Jupiter comer N. Garcia Streets, Makati City

We have audited in accordance with Philippine Standards on Auditing, the consolidated financial statements of Crown Equities, Inc. and Subsidiaries ("Group") included in this Form 17-A and have issued our report thereon dated March 29,201 1. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedules listed in the Index to Financial Statements and Supplementary Schedules are the responsibility of the Group's management. These schedules are presented for purposes of complying with the Securities Regulation Code 68 and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in at1 material respects the financial statements data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.

MANABAT SANAGUSTIN & CO., CPAs

Partner CPA License No. 092632 SEC Accreditation No. 1 101 -A Tax Identification No.109-916-107 BIR Ameditation No. 08-001987-23-201 1 Issued February 4,201 1; Valid until February 3,2014

PTR No. 2639624MB Issued January 3,20 1 1 at Makati City

March 29,201 1 Makati City, Metm Manila

Manabat Sanagustin 81 Co., C P h , a Philippine partnership and a member firm of the KPMG rwltwnrlr nf inciananrlnnt marnhnr firme sffiliatnrl with KPMC. Intnrnslinnal Pnnnratihm

e CROWN EQUITIES I N C O R P O R A T E D

STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Crown Equities, Inc. is responsible for all information and representations contained in the financial statements as of and for the years ended December 31,2010 and 2009. The financial statements have been prepared in conformity with Philippine Financial Reporting Standards and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration to materiality.

In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized.

The Board of Directors reviews the financial statements before such statements are approved and submitted to the stockholders of the Company.

KPMG Manabat Sanagustin & Co., the independent auditors and appointed by the stockholders, has examined the financial statements of the company in accordance with Philippine Standards on .Auditing and has expressed its opinion on the fairness of presentation upon completion of such examination, in its report to stockholders.

Romuald U. Dy Tang President

Subscribed and sworn to before me this APR 0 6 2011 affiant exhibiting' to me their Tax Identification Number, as follows:

NAMES TIN Wilfiido V. Vergara 1 1 5-32 1-274 Romuald U. Dy Tang 1 15-321-304 Antonio B. Alvarez 107-049-888

Page No.

Series of :

CHRISTINA EDEN M. RONDARIO Appointment No. 5 (2011-2012) Notary Public for h s i g City

Until Decemher31, 2012 Attorneys Roll ,No. 57936

Suite 2401 The Orient Square, F. Ortiga~ Jr. Road, Ortigas Cenicr Pasig City

PTR No. 6616180;01.04.11; Pasig City IBP No. 843182; 01.04.11; RSM

CROWN CENTER 158 JUPITER COR N. GARCIA STS.. BEL-AIR MAKATI cm 1209 TEL. NOS.: (632) 899-0081/899-0455 FAX (632) 556-2402

REPUBLIC OF THE PHILIPPNES) PASIG CITY, METRO MANILA ) S.S.

SECRETARY'S CERTIFICATE

I, ELMER B. SERRANO, Filipino, of legal age and with office address at Suite 2401 The Orient Square, F. Ortigas, Jr. Road, Ortigas Center, Pasig City, do hereby certify under oath, that:

1. I am the duly elected and incumbent Corporate Secretary of CROWN EQUITIES, INC. (the "Corporation"), a corporation duly organized and existing under and by virtue of Philippine Laws, with office address at the 4th Floor, Crown Center, 158 Jupiter cor. N. Garcia Streets, Bel-Air, Makati City;

2. At the regular meeting of the Board of Directors of the Corporation held on March 29,2011, during which a quorum was present and acting throughout, the majority of the Board approved the following resolution:

"RESOLVED, AS IT IS HEREBY RESOLVED, that CROWN EQUITIES, INC. (the "Corporation") hereby appoints and authorizes its Vice- Chairman, Mr. Wilfrido V. Vergara, as one of its authorized signatories, in lieu of the Chairman, Mr. George L. Go, in various filing requirements of the Corporation with the Bureau of Internal Revenue (BIR), Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE), including but not limited to, the Audited Financial Statements, Annual Report on SEC Form 17-A and Preliminary and Definitive Morrnation Statements of the Corporation and any and all documents filed therewith;

RESOLVED, FURTHER, that Atbty. Elmer B. Serrano, the Corporate Secretary of the Corporation, is hereby empowered and authorized to inform the BIR, SEC and PSE of the foregoing resolution and provide them with copies thereof should any of them require so and to rely on such resolution until they have been notified of the issuance of a resolution revoking said authority."

3. The foregoing resolutions have not been amended nor rescinded and is still in force and effect in accordance with the records of the Corporation.

11 2ili\ IN WITNESS WHEREOF, I have hereunto set my hand this at Pas' City.

/g

Secretary

SUBSCRIBED AND SWORN TO before me this 69R 1 1 28818 at Pasig City, affiant

exhibiting to me his Tax Identification No. 153-406-995.

Doc. F?? ; PageNo. % BookNo. , Series of 2811.

CHRISTINA EDEN M. RONDARIO Appointment No. 5 (2011-2012\ Notary Public for c i ty '

Until Decembedl, 2012 Attorneys Roll No. 57936

Suite 2401 The Orlent Square, F. Ortigas jr. Road, Ortigas Center Pasig City

PTR No. 6616180;01.04.11; Pasig City . IBP No. 843182: 01.04.11) RSM

CROWN EQUITIES, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS December 3 1,201 0 and 2009

(With Comparative Figures for 2008)

Mansbat Sanagustln & Co., CPAs Telephone +63 121 885 7000 The KPMG Center, 9/F Fax +63 (21 894 1985 6787 Ayala Avenue Internet www.kpmg.com.ph Mekati City 1226. Metro Menila, Philippines E-Mall manile@kpmg.com.ph

Branches . Subic . Cebu . Bacolod . iloilo PRC-BOA Registration No. 0003 SEC Accreditation No. 0004-FR-2 BSP Accredited

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders Crown Equities, Inc. 4' Floor, Crown Center 158 Jupiter comer N. Garcia Streets, Makati City

We have audited the accompanying consolidated financial statements of Crown Equities, Inc. and Subsidiaries, which c.omprise the consolidated statements of financial position as at December 3 I , 2010 and 2009, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatoIy information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free fiom material misstatement, whether due to fiaud or error.

Auditors ' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are fiee fiom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' 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 auditors consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but.not for the purpose of expressing an opinion on the effectiveness ofthe entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used'and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements;

w e believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Msnabat Sanagustin & Co., CPAa. a Philippine p m e n h p and a mambsr firm of the KPMG nelwork 01 indemndent marrber tifmr aHlllmed wlth KPMG Intarnallonal

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Crown Equities, Inc. and Subsidiaries as at December 3 1,201 0 and 2009, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Philippine Financial Reporting Standards.

Other Matter

The consolidated financial statements of Crown Equities, Inc. and Subsidiaries as at and for the year ended December 3 1,2008, were audited by another auditor whose report thereon dated March 3 1,2009, expressed an unqualified opinion on those statements.

MANABAT SANAGUSTIN & CO., CPAs

JOHNMOLmA . Partner CPA License No. 092632 SEC Accreditation No. I 1 01 -A Tax Identifieation No. 1099 16- 107 BIR Accreditation No. 08-001 987-23-201 1 Issued February 4,201 1; Valid until February 3,2014

PTR No. 2639624 Issued J a n u q 3,201 1 at Makati City

March 29,20 1 1 Makati City, Metro Manila

Manabat Smagustln & Co.. CPAs Telephone +63 (21 885 7000 The KPMG Center, 9/F Fax +63 121 894 1986 6787 Ayala Avenue Internet www.kpmg.corn.ph Makati City 1226. Metro Manila, Philippines E-Mail manilaOkpmg.com.ph

Branches . Subic . Cebu . Bacolod . lloilo PRC-BOA Registration No. 0003 SEC Accreditation No. 0004-FR-2 BSP Accredited

REPORT OF INDEPENDENT AUDITORS TO ACCOMPANY FINANCIAL STATEMENTS FOR FILING WITH THE

SECURITIES AND EXCHANGE COMMISSION

The Board of Directorsand Stockholders Crown Equities, Inc. 4' Floor, Crown Center 158 Jupiter comer N. Garcia Streets, Makati City

We have audited the accompanying financial statemenl of Crown Equities, Inc. and Subsidiaries as of and for the year ended December 3 1,201 0, on which we have rendered our report dated March 29,201 1.

In compliance with SRC Rule 68, we are stating that the said Company has 536 stockholders owning 100 or more shares each.

MANABAT SANAGUSTIN & CO., CPAs

JOHN MOLINA Partner .- .

CPA License'm. 092632 SEC Accreditawn No; 1.Wl -A Tax Identification ~o.l0%16-107 BIR ~ccidi tat ion Nm.'OS-00 1987-23-20 1 1

Issued Febpary 4,201 1; Valid until February 3,201 4 PTR No; 2639624 . Issued January 3,201 1 at Makati City

March 29,20 1 1 Makati City, Metro Manila

Msnaber Ssnspudn B Co., CPAo, 8 Pniliwino psrmeohip and 8 mnmbsr firm of ma KPMG nalviurl: of indamndent rnmDal firma aflilfotad with KPMG Intarnatanal

CROWN EQUITIES, INC. AND SUBSIDIA CONSOLIDATED STATEMENTS OF FINANCIAL ?

\ ;<wkt"&., s !.fi,,,.<., ,<,,; \,,b '$i,.U &%I,<;,,,,,, .. q"'

- .

Deeem ber 31 \, / I

2009 (As Restated -

Note 2010 Note 32)

ASSETS Current Assets Cash and cash equivalents Installment contracts receivable Receivables and advances - net Inventories Financial assets at fair value through

profit or loss Available-for-sale financial asset Other current assets

Total Curkent Assets - - - - -

Noncurrent Assets Installment contracts receivable 4, 5, 10 75,431,965 54,55 1,459 Jnvestment properties - net 16 624,022,813 608,489,2 12 Investments in and advances to associates - net 6, 13 234,438,556 326,934,749 Property and equipment - net 6, IS 307,534,024 298,171,143 Goodwill 13 , 21,740,604 2 1,740,604 Other noncurrent assets 17 32,793,766 8,282,994

Total Noncurrent Assets 1,295,961,728 1,3 18,170,161

LIABILITIES AND EQUITY Current Liabilities Accounts payable and other current liabilities 4, 5, 18 P134,359,622 P99,125,03 1 Due to a related party 4, 5, 27 54,964,650 72,153,570 Income tax payable 5,770,413 3,809,167 ; 42,158,700 42,158 700

Total Current Liabilities 237,253,385 2 17,246,468

Noncurrent Liability Retirement benefits obligation 30 5,714,932 3,94 1,003

Total Liabilities 242,968317 221.187.471

Equity 20 Attributable to equity holders of the parent company 1,508,811,487 1,498,659,245 Non-controlling interests 146,059,445 143,833,667

Total Equity 1,654,870,932 1,642,492,9 12

. .

See Notes to the Cancolidated Financial Statements.

CROWN EQUITIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31,2010 AND 2009 (With Comparative Figures for 2008)

2009 (As Restated -

Note 2010 Note 32) 2008

RIEVEWS Real estate sales 21 P149,358,245 P54,943,931' P78,860,497 Rendering of services 6c 56,222,689 42,890,570 Rent 29 7,147,469 1,133,661 Interest on installment contracts

receivable 10,28 7,901,330 6,489,154 2,391,526 Sale of goods 6c 948,482 1,008,143

221,578,215 106,465,459 81,252,023

OPERATING EXPENSES 22 (195,305,088) (105,643,875) (81,867,432)

SHARE IN NET LOSS OF ASSOCIATES 13 - (3,524,831) (5,833,770)

OTHER INCOME - Net 0 10,s 16,291 2 1,942,706 (192,670,104) (98,352,415) (65,758,496)

INCOME BEFORE INCOME TAX 26 28,908,111 8,113,044 15,493,527

INCOME TAX EXPENSE 26 16,530,091 5,657,018 5,859,566 NET INCOME I TOTAL

COMPREHENSIVE INCOME P12,378,020 P2,456,026 P9,633,961

Attributable to: Equity holders of the parent

company P10,152,242 P89 1,654 P4,988,979 A 1 564,372 4,644,982

P12378,020 P2,456,026 P9,633,961

BASICENLUTED EARNINGS PER SHARE ATTRTBmABLE TO EQUITY EIOLDERS OF THE PARENT COMPANY 31 P0.00075 P0.00007 P0.00037

See Nores ro rhe Consolidared F i ~ n c i a l Statements.

CROWN EQUITIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31,2010 AND-2009 (With Comparative Figures for 2008)

Equity Attributable to Equity Holders of the Parent Company Additional Non-controlling

Note Capital Stock Paid-in Capital Retained Earnings Total Interests Total Equity

As of January I, 2010 PI ,330,146,816 PI 18,570,274 P49,942,155 P1,498,659,245 P143,833,667 P1,642,492,912 Totml comprehensive income for the year

Net income for the year 10,152,242 10,152,242 2,225,778 12,378,020

As of December 31,2010 20 P1,330,146,816 P118,570,274 P60494297 P1,508,811,487 P146,059,445 P1,654,870$32

As of January 1,2009 P1,330,146,816 P118,570,274 P49,050,501 P1,497,767.591 P142,269,295 P1,640,036,886 Total comprehensive inwme for the year

Net income for the year 891,654 891,654 1,564,372 2,456,026

As of December 31,2009 (As Restated-Note 32) 20 P1,330,146,816 P118,570,274 P49,942,155 PI ,498,659,245 P143,833,667 P1,642,492,912 ---- - - - -

As of January 1,2008 P1,330,146,816 PI 18,570,274 P44,061,522 P1,492,778,612 P136,806,226 P1,629,584,838 Total comprehensive income for the year

Net income for the year 4,988,979 4,988,979 4,644,982 9,633,961 Transactions with owners, directly recorded Non-controlling interest of acquired subsidiary

during the year (4,181,913) (4,181,913) Noncontrolling interest's additional capital stock 5,000,000 5,000,000

818,087 818,087 - - - -

As of December 3 1,2008 20 P1,330,146,816 PI 18,570,274 P49,050,501 P1,497,767,591 P142,269,295 P1,640,036,886

See Notes to the Consoli&ted Financial Statements

CROWN EQUITIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,2010 AND 2009 (With Comparative Figures for 2008)

Years Ended December 31

Note 2010 2009 2008

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P28,908,111 P8,I 1 3,044 P15,493,527 Adjustments for:

Depreciation and amortization I5 11,666,960 5,517,160 2,441,923 Impairment losses on

receivables and advances 22 9,372,755 1,072,489 lmpairment losses on installment

contracts receivable 22 4,734,342 Impairment losses on available-

for-sale financial asset 2,708,350 - Retirement expense 24.30 2,197,485 992,743 276,093 Loss on disposal of investment 25 2,123,542 Unrealized foreign exchange

loss (gain) 25 168,537 107,2 1 1 (719,211) lmpairment losses on advances

to an associate 13 115,701 6,282,869 Interest income 25, 28 (11,267,094) (1 1,173,627) (13,53 1,983) Unrealimd (gain) loss in the

change in value of financial assets at FVPL 25 (2,224,872) (5,468,385) 8,450,967

Gain on sale of property and equipment 25 (1,000) (21 4,286)

Equity in net loss of an associate 13 - 3,524,83 1 5,833,770 Reversal of allowance for decline

in value of investment property 25 - (7,270,500)

Operating income before working capital changes 48,502,817 2,685,466 17,043,169

Decrease (increase) in: Installment contracts receivable (27,896,600) (8,762,400) (1 8,148,755) Receivables and advances (5,376,652) (30,437,917) (6,656,106) Inventories 68,834,564 29,983,047 35,909,210 Other currat assets (8,864,127) 3,006,690 (4,690,623)

Increase (decrease) in accounts payable and other current liabilities 35,234,591 (8,629,320) 45,3 14,817

Cash generated from (absorbed by) operations 110,434,593 (12,154,434) 68,771,712

Interest received - net of tax 9,451,733 1 1,173,627 13,53 1,983 Benefits paid 30 (423,556) Cash paid for income taxes (7,109,820) (4,468,812) (2,2 14,937)

Net cash from (used in) operating activities 112,352,950 (5,449,619) 80,088,758

Years Ended December 31 Note 2010 2009 2008

CASH FLOWS FROM JNVESTING ACTNFTIES

Additions to: Property and equipment 15 (P21,029,841) (P99,070,300) (P59,174,273) Investment property 16 (15,533,601) ( I 0,136,148) (67,846,564)

Decrease (increase) in: Financial assets at fair value

through profit or loss 8 (209,372) (6,040,538) (5,444,658) Advances to associates 13 203,038 3,399,075 (55,500) Other noncurrent assets 17 449,019 (1 0,227,653) (7,638,668)

Proceeds from sale of property and equipment 1,000 -

Net cash used in investing activities (36,119,757) (122,075,564) (140,159,663)

CASH F'LOWS FROM FINANCING ACTMTIES

Decrease in due to a related party 27 (17,188,920) (7,668,040) (1 1,000,000) Proceeds from issuance of capital

stock to minority interest - 5,000,000 Net cash used in financing activities (17,188,920) (7,668,040) (6,000,000)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUNALENTS (168,537) (1 07,2 1 1) 719,211

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 58,875,736 (1 35,300,434) (65,35 1,694)

CASE AND CASE EQUIVALENTS

CASH AND CASE? EQUIVALENTS AT END OF YEXR 7 P135,023,838 P76,148,102 P21 I ,448,536

See Notes lo the Consolidated Financlal statements.

C R O W EQUITIES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Reporting Entity

Crown Equities, Inc. ("CEI" or the "Parent Company") was incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on October 24, 1969 primarily to engage in, among others, the exploration, development and mining of mineral claims,'under the original name of Leyte Base Metal Company, Inc. On May 22, 1995, the stockholders and the Board and Directors (BOD) approved the strategic shifi in

. the Parent Company's primary business activity from oil exploration to investment holding. In 1996, the corporate name was changed to Crown Equities, Inc. The Parent

. Company's registered office address is located at the 4th Floor, Crown Center, 158 Jupiter comer N. Garcia Streets, Makati City.

The consolidated financial statements as at and for the year ended December 31, 2010 comprise the financial statements of the Parent Company and its Subsidiaries (collectively referred to as the "Group"). The Parent Company's shares of stock are listed and traded at the Philippine Stock Exchange.

The Group operates within the Philippines and is mainly involved in real estate business, healthcare services and investment holding. As of December 31, 2010, the Parent Company holds interests in the following subsidiaries and associates, all incorporated in the Philippines:

Percentage of

Subsidiaries: Real Estate

Ceres Property Venture, lnc. (CPVI) f"l 100% 100% Crown Central Properties, Corp. CCPC) (b.c) 48% 48%

CEI Development Corp. (CEIDC)($ 100% 100% CEI Properties, Inc. (CEIPI) 100% 100% Parkfield Land Holdings, Inc. (PLH1) 75% 75%

Healthcare Fort Bonifacio Medical Center, Inc. (FBMCI) 100% 100% Healthwe Systems of Asia Phils., Inc. (HSAPI) 74% 74%

Fortmed Medical Clinics Makati, Inc. (FMCMI) (b' 74% 74% Fortmed Medical Clinics Sta. Rosa, Inc. ( F M C S R I ) ~ ~ 74% HCS Medical Care Center Cavite, Inc. (HMCCCI)" - 74%

Investment Holding Ceres Holdings, Inc. (CHI) 100% 100%

Associates: Sky Leisure Prapcrties, Inc. (SLPI)'g' 50% 50% e*Hermes, Inc. (e*Hermes) ''I 40% 40% Asian Alliance Holdings and Development Corporation (AAHDC)'~ h' 23%

Shared ownership by CEI, FBMCI, CEIPI and CHI of 60.83%. 29.15%. 10% and 0.02% respectively (Note 19). Represents indirect ownership. Management has determined that the Parent Company has control over thefinancial and operating policies of CCPC through representation on the Board of Directors (Note 2). Incorporated on July 10, 1996 and started commercial operations in October 2010. Has not yet started commercial operations. Merged to FMCMI effective September 24,2010. The financial statements of these associates were audited by other auditors. Parent Company sold its 10% holdings in AAHDC on December 17, 2010; accordingly, redassfied the remaining ownership interest to available-jor-sale financlal asset.

CEIDC, PLHI and SLPI hold substantial investment properties and have incurred substantial amount of pre-operating expenses which resulted in significant deficit. The recoverability of these investment properties is dependent upon the ability of the respective entities to successfully execute and implement their projects and, ultimately, to attain profitable operations. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of the assets or the amounts and classification of the liabilities that may result from the outcome of this uncertainty.

The accompanying consolidated financial statements were authorized for issue by the Parent Company's Board of Directors (BOD) on March 29,201 1.

2. Basis of Preparation

Statement of Com~liance The consolidated financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRSs). PFRSs include statements named PFRS and Philippine Accounting Standards (PASS) and Philippine Interpretations from International Financial Reporting Interpretations Committee (IFRIC), issued by the Financial Reporting Standards Council (FRSC).

B-i The consolidated financial statements of the Group have been prepared on the historical cost basis except for financial assets at fair value through profit or loss (FVPL).

Functional and Presentation Currency The consolidated financial statements are presented in Philippine peso, which is also the Parent Company's functional currency. All financial information presented in Philippine Peso has been rounded to the nearest peso, except when otherwise stated.

Basis of Consolidation The Group obtains and exercises control through voting rights. The Group's consolidated financial statements comprise the accounts of the Parent Company, and its subsidiaries as enumerated in Note 1, after the elimination of intercompany balances and transactions with subsidiaries, including income, expenses and dividends. Unrealized profits and losses from intercompany transactions are also eliminated in full.

The consolidated financial statements are prepared for the same reporting period as the Parent Company, using uniform accounting policies for like transactions and other events in similar circumstances.

Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented in the consolidated statements of financial position, separately from equity attributable to equity holders of the Parent Compan'y.

Non-controlling interests consist of the interests not held by the Group in PLHI, HSAPI and CCPC in 2010 and 2009.

Use of Estimates and Judgments The Group's consolidated financial statements prepared in accordance with PFRSs requires management to make judgments, estimates and assumptions that affect amounts reported in the consolidated financial statements and related notes, at the reporting date. However, uncertainty about these estimates and assumptions could result in outcome that could require a material adjustment to the carrying amount of the affected asset or liability in the hture.

Judments In the process of applying the Group's accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognized in the consolidated financial statements:

Distinction between Investment Properties and Owner-occupied Properties. The Group determines whether a property qualifies as investment property. In making its judgment, the Group considers whether the property generates cash flows largely independent from the other assets held by an entity. Owner-occupied properties generate cash flows that are attributable not only to property but also to other assets used in the production or supply process.

Some properties comprise a portion that is held to earn rental or for capital appreciation and another portion that is held for use in the supply of services or for administrative purposes. If these portions can be sold separately (or lease out separately under finance lease), the Group accounts for the portions separately. If the portion cannot be sold separately, the property is accounted for as investment property only if an insignificant portion is held for use in the production or supply of goods or service for administrative purposes. Judgment is applied in determining whether ancillary services are so significant that a property does not qualify as investment property. The Group considers each property separately in making its judgment.

Operating Lease Commitments - Group as Lessor/Lessee. The Group has entered into various lease agreements either as a lessor or a lessee. The Group had determined that it retains all the significant risks and rewards of ownership of the properties leased out on operating leases while the significant risks and rewards for properties leased from third parties are retained by the lessors.

Rent expense included as part of cost of services amounted to P146,321, P6,083,523 and nil in 2010,2009 and 2008, respectively (Note 23) while charged to operations amounted to P63,947, P4,338,965 and P1,648,599 in 2010,2009 and 2008, respectively (Note 22).

Rent income recognized in 2010, 2009 and 2008 amounted to P7,147,469, P1,133,661 and nil, respectively (Note 29).

Functional Currency. Based on the economic substance of the underlying circumstances relevant to the Group, the functional currency of the Group has been determined to be the Philippine peso. It is the currency of the primary economic environment in which the Group operates and the currency that mainly influences its revenue and expenses.

Evaluation of Control over CCPC. The Group has 48% equity interest in CCPC. Management has determined that the Group has control over the financial and operating policies of CCPC through representation on the BOD.

Estimates The key estimates and assumptions used in the consolidated financial statements are based on management's evaluation of relevant facts and circumstances as of the date of the Group's consolidated financial statements. Actual results could differ from such estimates.

Estimating Net Realizable Value of Inventories. The Group provides allowance to reduce inventories to net realizable value whenever net realizable value becomes lower than cost due to changes in price levels or other causes.

Estimates of net realizable value are based on the most reliable evidence available at the time the estimates are made of the amount the inventories are expected to be realized. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after reporting date to the extent that s ~ h events confirm conditions existing at the end of reporting date. The allowance account is reviewed periodically to reflect the accurate valuation in the financial records.

Management believes that there are no indications that the net realizable value of inventories is lower than its cost. The cost of inventories amounted to P248,O 18,697 and P3 16,853,261, respectively (Note 12).

Estimating Allowance for Impairment Losses on Receivables. Allowance is made for specific and groups of accounts, where objective evidence of .impairment exists. The Group evaluates these accounts based on available facts and circumstances, including, but not limited to, the length of the Group's relationship with the debtors, the current credit status based on third party credit reports, if any, and known market forces, average age of accounts, collection experience and historical loss experience.

Total impairment losses on installment contracts receivables, receivables and advances, advances to associates and available-for-sale financial asset amounted to P16,931,148, P1,072,489 'and P6,282,869 in 2010, 2009 and 2008, respectively (Note 22). Receivables written off amounted to P7,429,374 and nil in 2010 and 2009, respectively.

As of December 31, 2010 and 2009, the carrying value of installment contract receivables amounted to P97,996,395 and P74,834,137, respectively (Note 10); carrying value of receivables and advances amounted to P78,800,827 and P68,525,262, respectively (Note 11) while the carrying value of advances to associates amounted to P1,436,026 and P1,754,765, respectively (Note 13).

Estimating Usejitl Lives of Properry and Equipment. The Group estimates the useful 1ives.of property and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the assets.

In addition, estimation of the useful lives of property and equipment is based on collective assessment of industry practice, internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of property and equipment would increase recorded cost of services and operating expenses and decrease noncurrent assets.

Accumulated depreciation of property and equipment amounted to P151,533,330 and P142,954,230 as of December 31,2010 and 2009, respectively. Property and equipment, net of accumulated depreciation, amounted to P307,534,024 and P298,171,143 as of December 3 1,201 0 and 2009, respectively (Note 15).

Fair Value of Investment Properties. The fair value of investment property presented for disclosure purposes is based on market values, being the estimated amount for which the property can be exchanged between a willing buyer and seller in an arm's length transaction, or based on a most recent sale transaction of a similar property within the same vicinity where the investment'property is located.

In the absence of current prices in an active market, the valuations are prepared by considering the aggregate ,estimated future cash flows expected to be received from leasing out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation.

Estimated fair values of investment properties amounted to P826,657,016 and P690,763,112 as of December 3 1,2010 and 2009, respectively (Note 16).

Realizability of Dejerred Tax Assets. The Group reviews its deferred tax assets at each reporting date and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. The Group's assessment on the recognition of deferred tax assets on deductible temporary difference and carryforward benefits of MCIT and NOLCO is based on the projected taxable income within the prescription period.

The Group did not recognize the deferred tax assets as of December 3 1,2010 and 2009 since management did not expect that the deferred tax assets can be utilized in the foreseeable future.

Impairment of Nun-Jinancial Assets. PFRS require that an impairment review be performed on property and equipment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Determining the net recoverable value of assets requires the estimation of cash flows expected to be generated from the continued use and ultimate disposition of such assets. While it is believed that the assumptions used in the estimation of fair values reflected in the consolidated financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse impact on the results of operations and cash flows.

There were no impairment loss recognized in 201 0,2009 and 2008, respectively.

The aggregate carrying amount of property and equipment and investment properties amounted to P931,556,837 and P906,660,355 as of December 31, 2010 and 2009, respectively (Notes 15 and 16).

Present Value of Defied Benefit Obligation. The present value of the retirement obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. These assumptions are described in Note 30 to the consolidated financial statements and include discount rate, expected return on plan assets and salary increase rate. Actual results that differ from the assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such b r e periods.

The Group determines the appropriate discount rate at the end of each year. It is the interest rate that should be used to determine the present value of estimated hture cash outflows expected to be required to settle the retirement obligations. In determining the appropriate discount rate, the Group considers the interest rates on government bonds that are denominated in the currency in which the benefits will be paid. The terms to maturity of these bonds should approximate the terms of the related retirement liability.

Other key assumptions for retirement obligations are based in part on current market conditions.

While it is believed that the Group's assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the Group's retirement and other retirement obligations.

The Group has retirement benefits obligation of P5,714,932 and P3,941,003 as of December 3 1,201 0 and 2009, respectively (Note 30).

3. Summary of Significant Accounting Policies

The accounting policies set out below have been applied consistently by the Group to all periods presented in the consolidated financial statements, except for the changes as explained below.

Adoption of New or Revised Standards, Amendments to Standards and Internretations The FRSC approved the adoption of new or revised standards, amendments to standards, and interpretations as part of PFRSs. Accordingly, the Group changed its accounting policies in the following areas:

Adopted EfJective January 1, 201 0

.Revised PAS 27, Consolidated and Separate Financial Statements (2008), effective for annual periods beginning on or after July 1, 2009, requires accounting. for changes in ownership interests by the company in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the Company loses control of a subsidiq, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in profit or loss.

Philippine Interpretation IFRIC - 17, Distributions of Non-cash Assets to Owners, provides guidance on the accounting for non-reciprocal distributions of non-cash assets to owners acting in their capacity as owners. It also applies to distributions in which the owners may elect to receive either the non-cash asset or a cash alternative. The liability for the dividend payable is measured at fair value of the assets to be distributed. The interpretation is effective for annual periods beginning on or after July 1,2009.

Zmprovements to PFRSs 2009, include 15 amendments to 12 standards. Some of the these amendments may have significant implications for current practice, in particular the amendments to PAS 17, Leases, may affect the classification of leases of land and buildings, particularly in jurisdictions in which such leases often are for a long period of time. The improvements are generally effective for annual periods beginning on or after January I , 2010.

The adoption of these foregoing revised standards and amendments to standards did not have a material effect on the Group's consolidated financial statements.

New or Revised Standard, Amendments to Standards and Interpretations Not Yet Adopted

The Group will adopt the following new or revised standards, amendments to standards and interpretations in the respective effective dates:

To be Adopted on January 1, 201 1

Philippine Interpretation IFRIC - 19 Extinguishing Financial Liabilities with Equiry Instruments, addresses issues in respect of the accounting by the debtor in a debt for equity swap transaction. It clarifies that equity instruments issued to a creditor to extinguish all or part of a financial liability in a debt for equity swap are consideration paid in accordance with PAS 39 paragraph 41. The interpretation is effective for annual periods beginning on or after July 1,2010.

Revised PAS 24, Related Party Disclosures (2009), amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities. The revised standard is effective for annual periods beginning on or after January 1,20 1 1.

Improvements to PFRSs 2010 contain 11 amendments to 6 standards and 1 interpretation. The amendments are generally effective for annual periods beginning on or after J a n u q 1, 2011. The following are the said improvements or amendments to PFRSs which the Group did not early adopt. None of these is expected to have a significant effect on the consolidated financial statements of the Group.

To be Adopted on January 1,2012

Disclosures - Transfers of Financial Assets (Amendments to PFXS 7), require additional disclosures about transfers of financial assets. The amendments require disclosure of information that enables users of financial statements to understand the relationship between transferred financial assets that are not derecognized in their entirety and the associated liabilities; and to evaluate the nature of, and risks associated with, the entity's continuing involvement in derecognized financial assets. Entities are required to apply the amendments for annual periods beginning on or after July 1, 201 1. Earlier application is permitted. Entities are not required to provide the disclosures for any period that begins prior to July 1,201 1.

Philippine Interpretation ERIC 15, Agreementsfor the Construction of Real Estate, applies to the accounting for revenue and associated expenses by entities that undeftake the construction of real estate directly or through subcontractors. It provides guidance on the recognition of revenue among real estate developers for sales of units, such as apartments or houses, 'off plan'; i.e., before construction is completed. It also provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of PAS 1 1, Construction Contracts,

, or PAS 18, Revenue, and the timing of revenue recognition. The interpretation is effective for annual periods beginning on or after January 1,2012.

To be Adopted on January 1,2013

PFRS 9, Financial Instruments(2009) was issued as the first phase of the PAS 39 replacement project. The chapters of the standard released in 2009 only related to the classification and measurement of financial assets. PFRS 9 (2009) retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entity's business model and contractual cash flow characteristics of the financial asset. In October 2010, a new version of PFRS 9 Financial Instruments (2010) was issued which now includes all the requirements of PFRS 9 (2009) without amendment. The new version of PFRS 9 also incorporates requirements with respect to the classification and measurement of financial liabilities and the derecognition of financial assets and financial liabilities. The guidance in PAS 39 on impairment of financial assets and hedge accounting continues to apply. The new standard is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. PFRS 9 (2010) supersedes PFRS (2009). However, for annual periods beginning before January 1, 2013, any entity may elect to apply PFRS 9 (2009) rather than PFRS (2010).

The Group will assess the impact of the new or revised standards, amendments to standards and interpretations on the consolidated financial statements upon adoption.

Investments in Associates The Parent Company's investments in associates are accounted for under the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in an associate is carried in the consolidated statements of financial position at cost plus post-acquisition changes in the Group's share in net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortized. After application of the equity method, the Group determines whether it is necessary to recognize any additional impairment loss with respect to the Group's net investment in the associate. The consolidated statements of comprehensive income reflect the share in profit or loss of the associate. Where there has been a change which was recognized directly in the equity of the associate, the Group recognizes its share in any changes and discloses this, when applicable, in the consolidated statements of changes in equity. Profits and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

Financial Assets and Liabilities The Group's fmancial assets and liabilities consist of cash and cash equivalents, installment contracts receivable, receivable and advances, advances to associates, refundable deposits, financial assets at FVPL, AFS financial assets, accounts payable and other current liabilities and due to a related party.

Date of Recognition. The Group recognizes a financial asset or a financial liability in the consolidated statements of financial position when it becomes a party to the contractual provisions of the instrument. In the case of a regular way purchase or sale of financial assets, recognition is done using settlement date accounting.

Initial Recognition of Financial Insirurnents. Financial instruments are recognized initially at fair value of the consideration given (in case of an asset) or received (in case of a liability), The initial measurement of financial instruments, except for those designated at FVPL, includes transaction costs.

The Group classifies its financial assets in the following categories: held-to-maturity (HTM) investments, AFS financial assets, FVPL financial assets and loans and receivables. The Group classifies its financial liabilities as either FVPL financial liabilities or other financial liabilities. The classification depends on the purpose for which the investments are acquired and whether they are quoted in an active market. Management determines the classification of its financial assets and financial liabilities at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date.

Determination ojFair Value. The fair value for financial instruments traded in active markets at the reporting date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs:When current bid and asking prices are not available, the price of the most recent transaction provides evidence of the current fair value as long ai there has not been a significant change in economic circumstances since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash flow method, comparison to similar instfuments for which market observable prices exist, options pricing models and other relevant valuation models.

Financial Assets Financial Assets at FVPL. Financial assets at FVPL include financial assets held for trading and financial assets designated upon initial recognition at FVPL and those classified under this category through the fair value option. Derivative instrument (including embedded derivatives), except those covered by hedge accounting relationships, are classified under this category.

Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near t e n .

Financial assets may be designated by management at initial recognition at FVPL or reclassified under this category through fair value option, when any of the following criteria is met:

the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or recognizing gains or losses on a different basis; or

the assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance are evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or

the financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recognized.

The Group carries financial assets at FVPL using the fair values. Fair value changes and realized gains and losses are recognized as part of "Other income" in profit or loss. Any interest or dividend income is recognized as part of "Other income" in profit or loss when the right of payment has been established.

The Group's marketable securities are classified under this category.

The combined carrying amounts of financial assets under this category amounted to Pi7,184,880 and P14,750,636 as of December 3 1, 201 0 and 2009, respectively (Notes 4 and 8).

Loans and Receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments and maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS financial asset or financial asset at FVPL.

Subsequent to initial measurement, loans and receivables are carried at amortized cost using the effective interest rate method, less any impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are integral part of the effective interest rate. Gains or losses are recognized in profit or loss when loans and receivables are derecognized or impaired, as well as through the amortization process.

The Group's cash and cash equivalents, installment contracts receivable, receivables and advances, advances to associates, receivable from Spring Action Trading Limited and refundable deposits and construction bond are included in this category.

Cash includes cash on hand and in banks which are stated at face value. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less and are subject to an insignificant risk of change in value.

The combined carrying amounts of financial assets under this category amounted to P343,364,439 and P225,234,780 as of December 31, 2010 and 2009, respectively (Note 4).

HTM Investments. HTM investments are quoted non-derivative financial assets with fixed or determinable payments and fixed maturities for which the Group's management has the positive intention and ability to hold to maturity. Where the Group sells other than an insignificant amount of HTM investments, the entire category would be tainted and classified as AFS financial assets. After initial measurement, these investments are measured at amortized cost using the effective interest rate method, less impairment in value. -4ny interest earned on the HTM investments shall be recognized as part of "Other income (expenses)" in profit or loss on an accrual basis. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are integral part of the effective interest rate. The periodic amortization is also included as part of "Other income (expenses)" in profit or loss. Gains or losses are recognized in profit or loss when the HTM investments are derecognized or impaired, as well as through the amortization process.

The Group has no investments accounted for under this category as of December 31, 201 0 and 2009.

AFS Financial Assets. AFS financial assets are non-derivative financial assets that are either designated in this category or not classified under any of the other financial asset categories. Subsequent to initial recognition, AFS financial assets are carried at fair value in the consolidated statement of financial position. The effective yield component of AFS debt securities is reported in profit or loss. Any interest earned on AFS debt securities shall be recognized in profit or loss on an accrual basis. Dividends earned on holding AFS equity securities are recognized as "Dividend income" when the right of collection has been established. Any unrealized gains or losses for the period arising from the fair valuation of AFS .financial assets are reported as part of other comprehensive income, while the accumulated unrealized gains or losses are reported as a separate component of the Group's equity. When individual AFS financial assets are either derecognized or impaired, the related accumulated unrealized gains or losses previously reported in equity are transferred to and recognized in profit or loss.

AFS. financial assets include unquoted equity instruments with fair values which cannot be reliably determined. These instruments are carried at cost less impairment in value, if any.

The carrying amount of financial asset under this category amounted to P44,845,562 and nil as of December 31,201 0 and 2009, respectively (Note 9).

Financial Liabilities Financial Liabilities at FVPL. Financial liabilities at FVPL are classified under this category through the fair value option. Derivative instruments (including embedded derivatives) with negative fair values, except those covered by hedge accounting relationships, are also classified under this category.

The Group carries financial liabilities at FVPL using their fair values and recognize fair value changes in profit or loss. Fair value changes from derivatives accounted for as part of an effective accounting hedge are recognized in profit or loss. Any interest expense incurred shall be recognized as part of "Other income (expenses)" in profit or loss. This category includes the Group's derivative liabilities, if any.

The Group has no liability accounted for under this category as of December 31, 2010 and 2009.

Other Financial Liabilities. This category pertains to non-derivative financial liabilities that are not designated or classified as at FVPL. After initial measurement, other financial liabilities are carried at amortized cost using the effective interest 'rate method. Amortized cost is calculated by taking into account any premium or discount and any transaction costs that are considered an integral part of the effective interest rate of the liability.

The Group's accounts payable and other current liabilities, due to a related party and subscription payable are included in this category.

The combined carrying amounts of financial liabilities under this category amounted to P198,689,344 and PI 92,998,788 as of December 31, 2010 and 2009, respectively (Note 4).

Jointly Controlled Operations A jointly controlled opemtion is a joint venture carried on by each venturer using its own assets in pursuit of joint operations. The financial statements include the assets that the Group controls, the liabilities it incurs in the course of pursuing the joint operation and the expenses that the Group incurs and its share of the income that it earns from the joint operation.

Inventories Saleable Lots This pertains to the remaining balance of the land and improvements which CCPC, a subsidiary, contributed to a joint venture with a third party. The joint venture is engaged in developing and marketing a real estate project. Saleable lots is measured at the lower of cost and net realizable value (NRV). Cost of saleable lots includes acquisition cost of the land plus other development costs allocated using gross floor area (GFA) ratio.

Saleable Condominium Units and Parking Slots This pertains to the share in the joint venture allocated by DM Consunji, Inc, (DMCI) to the Parent Company in respect of the joint venture agreement (Note 28). The Parent Company used the cost of land contributed to the joint venture as cost of the inventory divided by the total square meters of the units and parking slots allocated.

Saleable House Cost of saleable house includes cost of construction and other direct costs of bringing the asset to its intended purpose.

Medical Supplies This pertains to the medical, laboratory and pharmacy supplies of FMCMI. Costs represents purchase price determined using first-in, first-out method.

Net realizable value is the'eqtimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Propem and Eauipment . Property and equipment are stated at cost net of accumulated depreciation and any

impairment losses. The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to working condition for its intended use. Expenditures for additions, major improvements and renewals are capitalized; expendituies for repairs and maintenance are charged to expense as incurred. When assets are sold, retired or otherwise disposed of, their cost and related accumulated depreciation and impainnent losses are removed from the accounts and any resulting gain or loss is recognized in profit or loss.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:

Number of Years

Building and improvements 5 -25 Leasehold improvements 10 Medical equipment 5 - 7 Office equipment, furniture and fixtures 3 - 5 Transportation equipment 3 - 5

Leasehold improvements are amortized over the estimated useful lives of the improvements of ten years or the term of the lease, whichever is lower.

Construction in progress represents properties under construction and is stated at cost. This includes cost of construction and other direct costs. The account is not depreciated until such time that the assets are completed and available for use.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's canying amount is greater that its estimated recoverable amount.

The residual values and estimated useful lives of property and equipment are reviewed, and adjusted if appropriate, at each reporting date.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the year the item is derecognized.

Investment Prouertv Investment property is a property held either to earn rental or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production and supply of goods and services or for administrative purposes. lnvestment property is accounted for at cost, less impairment loss, if any.

When the use of a property changes such that it is reclassified as property and equipment, its canying value at the date of reclassification become its cost for subsequent accounting.

Capital Stock Common stock are classified as equity. Incremental costs directly attributable to the issue of common stocks are recognised as a deduction from equity, net of any tax effects.

Operatinn Segments The Group's operating segments are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products/services and serves different markets. Financial information on operating segments is presented in Note 6 to the .consolidated financial statements.

The measurement policies the Group uses for segment reporting under PFRS 8 are the same as those used in its consolidated financial statements. There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.

The Group's CEO (the chief operating decision maker) reviews management reports on a regular basis.

Provisions Provisions are recognized only when the Group has: (a) a present obligation (legal or constructive) as a result of past event; (b) it is probable (i.e., more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of 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 recognized as interest expense. Where the Group expects a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the receipt of the reimbursement is virtually certain.

Revenue and Cost Recognition Revenue is recognized to the extent that it is probable that the economic benefits will

. flow to the Group, the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.

Real Estate Sale - Revenue from the sale of real estate, where collectibility of the contract price is reasonably assured and the Group has no further obligations, is accounted for using the full accrual method. Under this method, sale is recognized upon collection of 25% of the total contract price, as based from the Group's experience, the significant risk and rewards of ownership of the condominium units and parking slots have deemed passed to the buyer.

If the criterion under the fill accrual method is not met, the deposit method is applied. Under this method, cash received from buyers are shown as Customers' Deposits in the consolidated statement of financial position.

For tax reporting purposes, the Group uses the installment method wherein the gross profit on the installment payments actually received during the taxable year is subjected . to income tax except for accounts whose collections have reached 25% of the total selling price in the year of sale, in which case, these would be taxable in full.

Services. Revenue is recognized when the performance of contractually agreed tasks have been substantially rendered. Revenues from clinic services are shared proportionately as agreed upon by the Group and the doctors and physicians.

Sale of Gooh. Revenue is recognized when the title to inventories passes to the buyer.

Interest - Income is recognized using the effective interest method.

Gain on Sale ofAssets - Gain on sale of assets is recognized when the risk and rewards of ownership of the goods have passed to the buyer. It is measured as the excess of the fair value of consideration received or receivable over the canying value of the asset sold.

Dividend - Revenue is recognized when the Group's right to receive the payment is established.

Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding value-added tax (VAT) and discounts.

Cost and expenses are recognized in profit or loss upon utilization of the service or at the date these are incurred.

Lease Payments Operating lease payments are recognized as expense in profit or loss on a straight-line basis over the lease term. Lease incentive received, if any, is considered an integral part of minimum lease payment over the term of the lease.

Business Combination Business combinations are accounted for using the acquisition method of accounting which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost a business combination over the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the canying value may be impaired.

Negative goodwill which is the excess of the Group's interest in the net fair value of acquired identifiable assets, liabilities and contingent liabilities over cost is charged directly to income.

Transfers of assets between commonly controlled entities are accounted for under historical cost accounting.

Foreim Currencv Transactions and Translations The Group's consolidated financial statements are presented in Philippine peso, which is also the Parent Company and subsidiaries' functional currency. Transactions in foreign currencies are initially recorded using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are restated at the functional currency rate of exchange at reporting date. All differences are taken to profit or loss. Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Foreign currency gains and losses are recognized on a net basis in profit or loss.

Im~airment of Non-financial Assets The carrying values of non-financial assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists, and if the carrying value exceeds the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amounts. The recoverable amount of the asset is the greater of fair value less costs to sell or value in use. The fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's-length transaction between knowledgeable, willing parties, less costs of disposal. In assessing value in use, the estimated future caih flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses of continuing operations are recognized in profit or loss in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since thc last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the canying amount that would have been determined, net of depreciation and amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss. After such a reversal, the depreciation and amortization charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual vatue, on a systematic basis over its remaining useful life.

Retirement Costs The Group has an unhnded retirement liability based on the provisions of Republic Act (R.A.) No. 7641, The Philippine Retirement Law, covering substantially all of its employees. The Group's net obligation in respect of its retirement obligation is calculated by estimating 'the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted. The discount rate is the yield at the reporting date of long-term government bonds that have maturity dates approximating the terms of the Group's plan. The calculation is performed by a qualified actuary using the projected unit credit method. Actuarial gains and losses to the extent that any cumulative unrecognized actuarial gain or loss exceeds ten percent of the present value of the defined benefit obligation, that portion is recognized in profit or loss over the expected average working lives of the employees. Otherwise, the actuarial gain or loss is not recognized.

Income Taxes Income tax expense comprises of current and deferred tax. Current and deferred tax are recognized in profit or loss except to the extent that it relates to items recognized directly to equity or in other comprehensive income.

Current Tax. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates used to compute the amount are those that are enacted or substantively enacted at reporting date.

Deferred Tax. Deferred tax is recognized in respect of temporary differences between the canying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax assets are recognized for all deductible temporary differences, carryforward benefits of unused tax credits - Minimum Corporate Income Tax (MCIT) and unused tax losses - Net 0.perating Loss Carry Over (NOLCO), to the extent that it is probable that taxable profit will be available 'against which the deductible temporary differences, and the carryforward benefits of MCIT and NOLCO can be utilized.

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

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

Defei-red tax assets and deferred tax liabilities are offset, if there is a legally enforceable right to offset current tax assets against current tax Liabilities and they relate to income taxes levied by the same tax authority.

Related Parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Contingencies Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed in the notes to the financial statements when an inflow of economic benefits is probable.

Earnings Per Share Earnings per share is computed by dividing net income or loss for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of common shares outstanding during the year, after retroactive adjustment for stock dividend declared in the current year, if any.

The Group has no dilutive potential common shares outstanding that would require disclosure of diluted earnings per share in the consolidated statements of comprehensive income.

Events After the Reporting Date Post-year end events that provide additional information about the Company's position at reporting date (adjusting events) arc reflected in the financial statements. Post-year end events that are not adjusting events are disclosed in the notes to the financial statements when material.

4. Determinat ion of Fair Values

The table below presents a comparison by category of carrying amounts and estimated fair values of the Group's financial instruments as of December 3 1,2010 and 2009.

2010 2009 Carrying Fair Canying Fair

Note Value Value Value Value Financlal Assets

Cash and cash equivalents 7 P135,023,838 P135,023,838 P76,148,102 P76,148,102 Installment contracts receivable 10 97,996,395 97,996,395 74,834,137 74,834,137 Receivables and.advances - net 11 78,800,827 78,800,827 68,525.262 68,525,262 Advances to associates 13 1,436,026 1,436,026 1,754,765 1,754,765 Receivable from Spring Action

Limited - noncurrent 17 27,083,333 27,083 f 33 Refundable deposits and

construction bond 17 3,024,020 3,024,020 3,972,5 14 3,972,514

Loans and receivables 343,364,439 343,364,439 225,234,780 225,234,780

AFS financial asset 9 44,845,562 44,845,562

Financial assets at FVPL 8 17,184,880 17,184,880 14,750,636 14,750,636

P405J94,881 P405,394,881 P239,985,416 P239,985,416

Financial Liabilities Accounts payable and other

current liabilities (excluding specific taxes and other taxes payable and accrued taxes) 18 P101,565,994 P101,565,994 P78,686,5 18 P78,686,5 18

Due to a related party 27 54,964,650 54,964,650 72,153,570 72,153,570 Subscri tions a able

P198,689,344 P198,689,344 P192,998,788 P192,998,788

Financial Instruments Whose Carrying Amounts Approximate Fair Values The Group has determined that carrying amounts of cash and cash equivalents, installment contracts receivable, receivables and advances, advances to associates, long- term receivable, refundable deposits, construction bond, accounts payable and other current liabilities, due to a related and subscription payable party reasonably approximate their fair values because these are mostly short term in nature.

Financial Assets at FVPL and AFS Financial Assets The fair values of publicly traded instruments and similar investments are based on quoted market prices in an active market. Unquoted equity securities are carried at cost less impairment.

5. Financial Risk Management Objectives and Policies

Obiectives and Policies The Group has exposure to the following financial risks:

Credit risk Liquidity risk Market risk

This note presents information about the Group's exposure to each of the foregoing risks, the Group's objectives, policies and processes for measuring and managing these risks, and the Group's management of capital. The Group's .risk management is coordinated with the BOD, and focuses on actively securing the Group's short-to-medium-term cash flows by minimizing the exposure to financial markets. Long-term financial investments are managed to generate lasting returns..

The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. Also, the Group has low exposure to interest rate risk since the Group's existing financial assets have fixed interest. Risks to which the Group is exposed to are described below.

Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables. Generally, the maximum credit risk exposure of financial assets is the canying amount of the financial assets as shown on the face of the consolidated statements of financial position (or in the detailed analysis provided in the notes to the consolidated financial statements), as summarized below:

Note 2010 2009

Cash in banks and cash equivalents 7 P134,971,338 P76,085,602 Installment contracts receivable 10 97,996,395 74,834,137 Receivables and advances I 1 78,800,827 68,525,262 Noncurrent portion of receivable' from

Spring Action Trading Limited* 17 27,083,333 - Refindable deposits and construction bond* 17 3,024,020 3,972,5 14

- -

Included under "Other Noncurrent Assets 'kccount in the consolidated sratemenIs ojjinancial poslrlon.

The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls. Where available at a reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group's policy is to deal only with creditworthy counterparties. The Group's installment contracts receivables, which are secured by land titles, are also actively monitored to avoid significant concentration of credit risk. Except for the installment contracts receivable secured by land titles, none of the other financial assets are secured by collateral or other credit enhancements.

The table below shows the credit quality by class of financial assets as of December 3 1, 2010.

Neither Past Due nor Sp~cifieally Impaired PastDue or Hlgh Standard Substandard Indlvidu~lly

Grade Grade Grade Impaired Total Cash in bnnk and cash

equivalents P134,971,338 P - P - P - P134,971,338 installment contracts receivable 97,996,395 4,734,342 102,730,737 ReceivabIes and advances 76,704,759 2,096,068 11,111,867 89,912,694 Noncunent portion of

receivable from Spring Action Trading Limited* 27,083,333 27,083,333

Refundable deposits and performance bond* 3,024,020 3,024,020

P232$67,733 P106,812,112 P2,096,068 P15,846,209 P357,722,122 - - - - - - - - - - -

* Included under "Other Noncurrent Assets "account in the consolidated slalements ~Jjnancialposition,

The table below shows the credit quality by class of financial assets as of December 3 1, 2009.

Neither Past Due nor,Specifically Impaired Past Due or High Standard Substandard Individually

Grade Grade Grade Impaired Total

Cash in bank and cash equivalents P76,085,602 P - P - P - P76,085,602

installment contracts receivable 74,834,137 74,834,137 Receivables and advances 63,331,425 5,193,837 9,175,486 77,700,748 Refundable deposits and

performance bond* 3,972,514 3,972,5 14 P150.919.739 P67.303.939 P5.193,837 F9,175,486 P232,593,001

Included under "Other Noncurrent AsseLs" account in the consolidated ed!atemenls ~Jjinancialposition,

Liauiditv Risk Liquidity risk pertains to the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or '

another financial asset. The Group maintains cash to meets its liquidity requirements for up to 60-day periods. Excess cash are invested in short-term placements or equity securities. As at December 31, the Group's financial liabilities have maturities which are presented below:

. Due on Within 6 - 12 2010 Demand 6 Months Months Total

Accounts payable and other current liabilities (excluding specific taxes and other taxes payable and accrued taxes) P - P35,198,324 P66,367,670 P101,565,994

Due to a related party 54,964,650 54,964,650 Subscriptions payable 42,158,700 42,158,700

P42,158,700 P35,198,324 P121,332,320 P198,689,344

Due on Within 6 - 12 2009 Demand 6 Months Months Total

Accounts payable and other current liabilities (excluding specific taxes and other taxes payable and accrued taxes) P - P20,441,336 P58,245,182 P78.686,518

Due to a nlated party ' 72,153,570 72,153,570 Subscriptiohs payable 42,158,700 42,158,700

P42,158,700 P20.44 1,336 PI 30,398,752 P192,998,788

The above contractual maturities reflect the gross cash flows, which may differ from the carrying values of the liabilities at the reporting dates.

Market Price Risk Market risk is the risk that changes in market prices, such as interest rates and other market prices will affect the Group's income or the values of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing return.

The Group's market risk is limited to its investments carried at fair value through profit or loss. The Group manages its risk arising from changes in market price by monitoring the changes in the market price of the investments.

Fair Value Hierarchy The table below analyses financial instruments carried at fair value, by valuation method.

The different levels have been defined as follows:

a Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived fiom prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total Financial Assets at FVPL

2010 P17,184,880 P - P - P17,184,880 2009 14,750,636 14,750,636

During the year, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Cauital Management The Group sets the amount of capital in proportion to its overall financing structure, i.e., equity and liabilities. The Group manages the capital structure and makes adjustments thereon in the light of .changes in economic condition and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group applied for capital restructuring to SEC, which had been approved on January 10,2008, to reduce its deficit by the Group's capital stock and additional paid in capital (APIC). There were no changes in the Group's approach to capital management during the year.

The Group monitors capital on the basis of the carrying amount of equity as presented on the face of the consolidated statements of financial position. The Group is not subject to externally-imposed capital requirements.

Capital for the reporting periods under review is summarized as follows:

2010 2009

Total liabilities P242,968,3 17 P221,187,471 1

Debt-to-equity ratio 0.15:l 0.13:l

6. Operating Segments

Business Segments For management purposes, the Group is organized into three major business segments, namely real estate, investment holdings and healthcare services. These are also the basis of the Group in reporting its primary segment information.

(a) The real estate segment involves acquisition of land, planning and developing residential communities such as development and sale of condominium units and parking slots, residential lots and housing units. This segment includes the Group's transactions with joint ventures.

(b) The investment holding creates project investments and later disposes these investments after creating value. This also includes acquisition and sale of equity securities. This is the main operation of the Group. Included in this segment are the Group's transactions on investments in associates and trading of financial assets at fair value through profit and loss.

(c) Healthcare setvices involves in delivering outpatient health care service through ambulatory care centers. This is the operation of the acquired subsidiaries of the Group in 2008.

Segment Assets and Liabilities Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories and property and equipment, net of allowances and provision. Segment liabilities include all operating liabilities and consist principally of accounts, wages, taxes currently payable and accrued liabilities.

The following tables present revenue and profit information regarding business segments of the Group for the years ended December 31, 2010 and 2009 and certain assets and liability information regarding industry segments at December 31, 2010 and 2009 (in thousands).

Investment Healthcare Real Estate Holdings Services Ellmlnation Total

Year Ended December 31,2010 REVENUES P 170,936 P - P57,268 (P6,626) P221,578 - RESULTS

Segment results P8-6) P27.767

Interest income P3.366 3,366 Change in fair value of financial assets

at FVPL (2,225) (2225) Income tax expense (16,530)

Net income P12.378 - -

ASSETS AND LIABILITTES Segment assets P3,054,383 P229,856 P228,175 (P1.6363 16) P1,876,098 Intangible assets 21,741 21,741

Total assets P3.054383 P25 1,597 P228.175 (PI ,636,3 16) P1,897,839

Segment liabilities P719,083 P286,169 P256,920 (P1,019,204) P242,968

OTHER SEGMENT INFORMATION Depreciation P5.675 P2 P5,990 P - PI 1,667 Capital expenditure in property and

equipment 1 1,229 9,80 1 2 1,030 Capital expenditure in investment

PfWerty 15,534 15,534 Investment and advances in associates

-net 1,375,938 196.406 152,595 (1,490.500) . 234,439

Year Ended December 31,2009 REVENUES P62,566 P - P43,899 P - P106.465

RESULTS Segment mults P14,852 (P2,460) (P6,439) P2,945 P8.898

Interest income 4,683 4,683 Change in fair value of financial assets

at FVPL (5.468) (5,468) Income tax expense (5,6571

Net inoome P2.456

ASSETS AND LIABILITIES . Segment assets P2,637,466 P2 19,408 P127,97 1 (P1.142.906) P1,841,939 Intangible assets 21,741 21,741

Total msets P2.637.466 P241,149 P127,971 (P1.142,906) P1.863,680 - - - - - - -- - - -- - - - --

Segment liabilities P817,763 P272;233 P240,862 (P1,109.671) P221.187

OTHER SEGMENT INFORMATION Depreciation P1,936 P6 P3.575 P - P5.5 17 Capital expenditure in property and

equipment 99.070 99,070 Capital expenditun in investment

. ProPe@' 10,136 10,136 lnvabnent and advances in associates - net 1,304,037 185,185 - (1,162,287) 326,935 Equity share in net losses (3,525) (3,525)

7. Cash and Cash Equivalents

This account at December 3 1 consists of:

Note 2010 2009 Cash on hand P52,500 P62,500 Cash in banks 5 14,061,393 14,82 1,423 Short-term investments 5 120,909,945 61,264,179

4 P135.023.838 P76.148.102

Cash accounts with the banks generally earn interest at rates based on daily bank deposit rates. Short-term investments are made for varying periods of between 30 to 35 days and earn effective interest ranging from 4% to 4.06% per annum in 2010 and 1% to 4.5% per annum -in 2009. Total interest earned on cash in bank and short-term investments in 2010,2009 and 2008 amounted to P3,365,764, P4,684,473 and P11,347,433, respectively (Note 25).

8. Financial Assets at Fair Value through Profit or Loss

This account consists of marketable equity securities which are listed and traded in the PSE. The fair values have been determined based on closing bid prices at reporting date.

The Group recognized an increase (a decrease) in fair values of these financial assets of P2,224,872, P5,468,385 and (P8,450,967) million in 2010, 2009 and 2008, respectively. Actual gains (losses) realized from the sale of these securities amounted to P1,487,484, (P325,863) and (P239,468) in 2010,2009 and 2008, respectively (Note 25).

9. Available-for-Sale Financial Asset

On December 17, 2010, the Parent Company sold 10% of its 23% ownership interest in AAHDC for P42.5 million. Actual loss realized from the sale amounted to P2,123,542 (Note 25). Accordingly, the investment in AAHDC was reclassified to available-of-sale financial asset and measured at cost less impairment. Impairment loss of P2,708,350 was assessed by management to be a permanent decline and was charged to profit or loss.

The movements in this account are as follows:

Note

Balance at beginning of year P - Transfer from investment in and advances to associates 47,553,912 Impairment losses 25 (2,708,350) Balance at end of vear P44,845,562

10. Installment Contracts Receivable

The breakdown of installment contracts receivable by contractual maturity dates as of December 3 1 follows:

Note . 2010 2009 Due in one year or less P23,267,107 P20,282,678 Less allowance for impairment 702,677

22.564.430 20.282.678

Due afier one year 79,463,630 5435 1,459 Less allowance for impairment 4,031,665

75,43 1,965 5435 1,459

Installment contracts receivable are collectible in various installment periods between 1 to 12 years and earn interest at rates ranging from 14% to 18% per annum. Interest income earned in 2010, 2009 and 2008 amounted to P7,901,330, P6,489,154 and P2,391,526, respectively.

- 11. Receivables and Advances

This account at December 3 1 consists of:

Note 2010 2009 Due from project developers 28 P27$96,357 P27,615,562 Receivable from patients 19,699,329 15,810,468 Receivable from Spring Action Trading

Limited 15,416,667 - Advances to Guild Securities 12,380,356 11,191,211 Interest receivable 10 11,618,530 12,763,529 Rent receivable 29 963,819 2,229 Advances to MTD Manila Expressway,

Inc. (MTDME) - 7,429,374 Others 1,837,636 2,888,375

89,912,694 77,700,748 ; 9,175 486

P78,800,827 P68,525,262

Due fiom project developers relate to collections fiom installment contracts receivable which are not yet remitted by project developers, DMCI and Sta. Lucia Realty and Development, Inc. to the Group. Collections are made by the developers, and thereafter, deposit the same to their respective joint bank accounts (Note 28).

Receivable from Spring Action Trading Limited arises from the sale of the Parent Company's holdings in AAHDC. This receivable earns annual interest at Treasury Bill rate plus 3% on the outstanding balance. The noncurrent portion of P27,083,333 is presented under "Other noncurrent assets" in the consolidated statements of financial position (Note 17).

The advances to Guild Securities, Inc., a stock brokerage firm and also a stockholder of the Parent Company, relate to non-interest bearing advances for purchases of trading securities, net of proceeds from related sales.

Receivables from patients are normally due within 30 to 60 days and do not bear any interest.

Interest receivable pertains to interest earned from installment contracts receivable (Note 10).

The advances to MTDME is unsecured, noninterest-bearing and with no definite repayment date. In 2010, these advances were written-off.

A reconciliation of the allowance for impairment at the beginning and end of 2010 and 2009 is shown below:

Note 2010 2009 2008 Balance at beginning of year:

Allowance for impairment on receivable from patients P8,803,360 P8,048,0 13 P -

Allowance for impairment on other receivables 372,126 372,126 372,126

9,175,486 8,420,139 372,126 Allowance for impairment on

receivable from patients of newly acquired subsidiary (HSAPI) - 8,048,O 13

Impairment loss on advances to MTDME during the year 22 7,429,374

Impairment loss on receivable &om patients during the year 22 1,300,174 1,072,489

Impairment loss on interest receivable 22 643,207

Recovery of impairment loss 25 (7,000) (3 17,142) Receivables written-off (7,429,374) Balance at end of year P11,I 11,867 P9,175,486 P8,420,139

12. Inventories

This account consists of:

Note 2010 2009

At Cost 28 Real Estate

Saleable lots P173,843,071 P197,959,048 Saleable condominium unit and

parking lots 70,865,373 1 14,956,890 Saleable house 1,746,910 1,982,556

Healthcare .

Medical supplies 1,563,343 1,954,767

Saleable lots consists of residential lots located in Bifian, Laguna covering a total area of 270,053 square meters which is currently being sold and developed by SLRDI into Palma Real Residential Estates project, under a venture agreement with CCPC, a subsidiary. Development of the residential lots has been completed. The balance of the saleable lots is equivalent to the cost of the unsold portion of the land (Note 28).

The movement of the saleable lots follows:

2010 2009 Area in Area in

square meters Amount square meters Amount

Balance at beginning of year 59,925 P197,959,048 65,875 F2 17,613,056 Other cost 13,500

59,925 197,972,548 65,875 217,613,056 Cost of saleable lots sold

during the year (7,304) (24,129,477) (5,950) (1 9,654,008)

Balance at end of year 52,621 P173,843,071 59,925 P197,959,048

Saleable .condominium units and parking slots pertains to the unsold units and parking slots in the Cypress Project. The movement of the saleable condominium units and parking slots follow:

2010 2009 Area in Area in

square meters Amount square meters Amount

Balance at beginning of year 5,964 P114,956,890 6,501 P 125,306,965 Cost of saleable condominium

units and parking slots sold during the year (2,287) (44,091,517) (537) (10,350,075)

3,677 P70,865,373 5,964 PI 14,956,890

Saleable house pertains to housing units on the developed lots in Bifian, Laguna. The costs of the housing units are included in the "saleable house" account.

The movement of the saleable hbuse follows:

., 2010 2009 Area in Area in

square. meters Amount square meters Amount

Balance at beginning of year 171.5 P1,982,556 171.5 P1,257,443 Construction costs , 271, 3,129,152 725,113

442.5 5,111,708 171.5 1,982,556 Cost of saleable house sold

during the year (291) (3,364,798)

Balance at end of year 151.5 P1,746,910 171.5 P1,982,556

13. Investments in and Advances to Associates

This account at December 3 1 consists of:

2010 2009

Investment in associates P - P92,177,454 Advances to associates 1,436,026 1,754,765 @

P234,438,556 P326,934,749

The breakdown of the Group's deposit for future stock subscription and advances in associates follow:

Allowance for 2010 Amount Impairment Net Amount Deposit for future stock subscription to

SLPI P3 17,688,141 (P84,685,611) P233,002,530

Advance to associates: e*Hermes P10,441,101 (~10,441,101) P - SLPl 1,436,026 1,436,026

PI 1,877,127 (P10,441,101) P1,436,026

Allowance for 2009 Amount Impairment Net Amount Deposit for W e stock subscription to

SLPI P3 17,688,141 (P84,685,611) P233,002,530

Advance to associates: e*Hennes PI 0,388,278 (P10,325,400) P62,878 SLPI I ,436,026 1,436,026 AAHDC 255,861 255,861

P12,080,165 (P10,325,400) P1,754,765

The unabsorbed net losses of the respective associates follow:

2010 2009

SLPI P20,441,524 P37,503,618 e*Hermes 4,967,807 4,960,829

P25,409,331 P42,464,447

The breakdown of the Group's investment in associates follows:

Accumulated Equity

2010 Amount in Net Losses Net Amount Investment at equity

SLPI P100,000,000 (P100,000,000) P - e*Hermes 800,000 (800,000) -

P100,800,000 (P100,800,000) P -

Accumulated Equity

2009 Amount in Net Losses Net Amount

Investment at equity AAHDC P101,536,055 (P9,358,601) P92,177,454 SLPI 100,000,000 (1 00,000,000) e*Hermes 800,000 (800,000)

P202,336,055 (PI 10,158,601) P92,177,454

The Group recognized equity share in net loss from AAHDC amounting to nil, P3,524,83 1 and P5,833,770 million in 201 0,2009 and 2008, respectively.

A reconciliation of the allowance for impairment as of December 31, 2010, 2009 and 2008 is shown below:

Note 2010 2009 2008

Balance at beginning of year: Allowance for impairment on

deposit for future stock subscription of SLPI P84,685,611 P84,685,611 P84,685,611

Allowance for impairment on 10,325,400 25,912 171

95,011,011 95,O 11,0 1 1 1 10,597,782 Eliminated impairment loss on

advances to newly acquired subsidiary (HSAPI) (2 1,869,640)

Impairment losses on advances to associates during the year 22 115,701 6,282,869

Balance at end of year P95,126,712 P95,011,011 P95,011,011

The following summarizes the financial position and financial performance of the Group's associates as of December 3 1 :

Total Net Income Total Assets liabilities (Loss)

2010 SLPI P676,143,430 P135,069,558 P34,124,188 e*Hermes 21,585 10,441,101 (1 7,445)

2009 SLPI P623,484,744 P116,535,060 P18,259,173 AAHDC 278,360,198 6,737,272 (15,325,352)

21,207 e*Hermes 10,423 , 278 ( 57,5691

Goodwill The goodwill is attributed to the Group's acquisition of control over HSAPI in 2008. It is the management's assessment that the goodwill is not impaired since the fair values of the related net assets of HSAPI for which goodwill was attributed still exceeds its carrying amount as of December 3 1,20 10.

14. Investment in Subsidiaries

The following are the transactions relating to the Parent Company's investments in subsidiaries.

On December 19, 2008, the BOD approved the increase in CPVI's authorized capital stock from P300,000, divided into 300,000 common shares, to P700,000,000, divided into 700,000,000 common shares, both with par value of P1 per share. Payment for the subscription is through the exchange of properties owned by the subscribers, the Parent Company, CEI Properties, Inc. (CEIPI) and Fort Bonifacio Medical Center, Inc. (FBMCI), which consist of the rights and interests in a condominium joint venture project referred to as "Cypress Towers" and shares of stock of Crown Central Properties Corporation (CCPC), a related pa* under common control. CEIPI and FBMCI are also related parties under common control.

The subscribed number of shares and amount, and properties exchanged by each of the subscribers are as follows:

Subscribed ,

Subscriber No. of Shares Amount Properties Exchanged Parent Company 303,949,000 P303,949,000 Cypress Towers and

shares of stock of CCPC*

CEIPI 50,000,000 50,000,000 Parcel of land FBMCI

* Shares of stock of CCPC consists of 62,499,970 shares with a value of P72.499,965

The application for the increase in the Company's authorized capital stock was approved by the SEC on April 8, 2010. However, due to the inter-lapping of the transfer process among the parties, the titling of the Cypress Towers units of the Parent Company and FBMCI, the intervening sales and collections of proceeds, the Company, the Parent Company and FBMCI entered into a Memorandum of Agreement (the "Agreement") to fw the cut-off date for the attribution and apportionment of the proceeds, inventories, receivables and other assets, and obligations including customeis' deposits to be December 3 1,20 10.

The physical possession of the remaining Cypress Towers units and the right of administration of these Cypress Towers units were transferred to the Company at cut-off date. The Company assumed the obligation to collect from the buyers of the Cypress Towers units without any right or recourse against the Parent Company and FBMCI in case of failure of the buyers of the Cypress Towers units to pay when due. However, titles over the Cypress Towers units are transferred only to the buyers upon full and final payment.

FMCMI On May 21, 2010, the planned merger of FMCMI with FMCSRl and HMCCCI was approved by the entities' respective Board of Directors (BOD) and was ratified by at least two-thirds (213) votes of the stockholders of each entities during its special meeting on the same date called for the purpose. The SEC approved the merger on September 24, 2010.

Salient features of the merger are as follows:

FMCMI shall be the surviving entity and the corporate existence of FMCSRl and HMCCCI shall cease.

All the assets, rights, powers, privileges, immunities, franchises and businesses of FMCSRI and HMCCCI as of the effective date of the merger, shall be deemed assigned, transferred to and vested in FMCMI by operation of law as provided for under Section 80 of the Corporation Code, without need of any further act or deed.

As of the effective date of merger, the FMCMI shall assume all outstanding liabilities, obligations and undertakings of FMCSRI and HMCCCI.

All issued and outstanding capital stock of FMCSRI and HMCCCl on the effective date of the merger shall be cancelled but no new shares of stock shall be issued to the stockholders of FMCSRI and HMCCCI since the constituent entities are wholly-owned subsidiaries of HSAPI.

5. Property and Equipment

The movements in this account are as follows:

Office Equipment,

Building and Leasehold Medical Furniture l'ransportation Construction Noie Land Improveineats Improvements Equipment and Futures Equipment in Progress Total

Gross carrying amount: January 1,2009 P120,132,721 P - P42,486,562 P75,8 12,173 P20,018,545 P15,450.772 P68,504,300 F'342,405,073 Additions 27,248,974 12,52 1,382 1,225,125 874,159 57,200,660 99,070,300 Disposals (350,000) (350,000) December 3 1,2009 120,132,721 27,248,974 55,007,944 77,037,298 20,892,704 15,100,772 125,704,960 44 1,125,373 Additions 5,440,282 275,254 7,897,959 2,136,712 3,275,000 2,004,634 21,029,841 Disposals (1,033,3 15) (2,054,545) (3,087,860) Reclassification 125,832,038 1,877,556 (127,709,594)

December 31,2010 120,132,721 158,521,294 55,283,198 84,935,257 23,873,657 16,321,227 - 459,067,354

Accumulated depreciation: January 1,2009 42,377,495 66,647,404 18,366,084 10,396,087 - 137,787,070 Depreciation during the year 22.23 181,660 408,729 2,107,97 1 576,486 2,242,3 14 5,517,160 ~ i i ~ o s a l s (350,000) (350,000) December 3 1,2009 181,660 42,786,224 68,755,375 18,942,570 12,288,401 - 142,954,230 Depreciation during the year 22, 23 4,412,190 1,270,513 2,919,624 1,424.854 1,639,779 11,666,960 Disposals (1,033,3 15) (2,054,545) (3,087,860)

December 31,2010 4,593,850 44,056,737 71,674,999 19,334,109 11,873,635 - 151,533,330

Carrying amount: December 3 1,2009 P120,132,721 ' P27,067,314 P12,221,720 P8,281,923 P1,950,134 P2,812,371 P125,704,960 P298,171,143 - - - - December 31,2010 P120,132,721 P153,927,444 PI 1,226,461 P13,260,258 P4,539,548 P4,447,592 P - P307,534,0tl

-

Construction in progress pertains to the construction of building in Bel-Air Village, Makati City which was completed in January 2010. Part of the building is intended to be used as the new administrative ofice of the Parent Company and the other areas will be held for lease. Depreciation expense included as part of cost of services amounted to P2,919,623, P2,107,973 and nil in 2010, 2009 and 2008, respectively (Note 23) while charged to operations amounted to P8,747,337, P3,409,187 and P2,441,923 in 2010,2009 and 2008, respectively (Note 22).

16. Investment Properties

The Group's investment properties pertain to several parcels of land located in Taguig, Batangas and Bulacan which are held for future development. The Group uses the cost model in determining the valuation of investment properties. The cost of the property consists of the purchase price, commissions, taxes, licenses, and other directly attributable cost of bringing the asset to its intended purpose.

The movement in the carrying amount of investment property is shown below:

2010 2009 Balance at the beginning of year P672,272,785 P662,136,637 Additional capitalized expenditures . 15,533,601 10,136,148

687,806,386 672,272,785 Allowance for impairment (63,783,573) (63,783,573)

Balance at end of year P624,022,813 P608,489,2 12

The total appraised values of the Group's investment properties in 2010 and 2009 amounted to P826,657,016 and P690,763,112, respectively, as determined by independent appraisers. The appraised values were determined through the inspection of property and investigation of local market condition with consideration to the extent, character and utility of property, sales and holding prices of similar land and highest and best use of the property.

The unpaid balance on the acquisition of land of P19,5 13,78 1 as of December 3 1, 2010 and 2009, respectively, is presented under Accounts payable and other current liabilities as Payable on purchase of land ('Note 18). The liability is non-interest bearing and payable upon issuance of new titles by Register of Deeds. As of December 31, 2010, some of the land titles are still in the process of being consolidated in the name of the respective subsidiaries.

77. other Assets

This account at December 3 1 consists of:

2010 2009

Current: Input VAT P41,948,961 P3 8,497,740 Prepaid commission 8,709,440 3,902,175 Prepaid taxes 2,546,031 4,92 1,154 Construction bond 1,037,900 1,03 7,900 Others 1,196,955 591,314

P55,439,287 P48,950,283

Noncurrent: Receivable from Spring Action Trading

Limited 11 P27,083J33 P - Input VAT 3,045,732 4,295,116 Refundable deposits 1,986,120 2,934,6 14 Others 678,581 1,053,264

P32,793,766 P8,282,994

18. Accounts Payable and Other Current Liabilities

This account at December 3 I consists of:

Note 2010 2009 Customers' deposits P37,701,661 P29,583,05 1 Payable on purchase of land 16 19,513,781 19,513,781 Specific taxes and other taxes payable 17,455,227 5,130,112 Trade 14,566,361 9,569,337 Accrued taxes 15,338,401 15,308,401 Due to GCV Management 6,006,913 6,003,035 Payable to developer 5,789,880 904,855 Payable to officers and employees 2 7 3,910,208 Due to stockholders 2 7 3,145,315 3,145,315 Payable to contractors 2,304,883 Accrued physician's fees 1,642,509 1,749,908 Commission payable 1,258,174 3,55 1,273 Accrued rent 1 11,947 164,856 : 4 501,107

P134.359.622 P99.125.03 1

19. Subscription Payable

As of December 3 1,2010 and 2009, subscription payable amounting P42,158,700 refers to the unpaid subscription (with no specific payment date, bears no interest, and callable an9ime) of the Parent Company to SLPI, an associate.

20. Equity

Ca~ital Stock The authorized capital stock of the Parent Company is P2,400,000,000, divided into 24,000,000,000 shares with par value of PO. 10 per share.

Stock O~t ion Plan The Group has a stock option plan, which entitles directors and executive officers of the Group to purchase shares of stock of the Parent Company at par value or book value, whichever is higher. The underlying shares subject to the stock option plan covers 2,400,000,000 common shares representing 10% of the authorized capital stock of the Parent Company. The option shares shall be subject to vesting according to such schedule as shall be approved by the BOD, provided that vesting shall lapse after five years from entitlement date, and provided further that with respect to executive officers, vesting shall expire upon their resignation from the Group. The number of underlying common shares in respect of outstanding options and/or the exercise price shall be correspondingly adjusted in the event of any stock dividend declaration, stock split, merger, consolidation, or the similar or analogous change in the corporate structure or capitalization of the Group. The terms and conditions of the stock option plan may be amended by the resolution of the BOD, except that any increase in the maximum number of shares or any decrease in the exercise price shall require the approval of stockholders representing at least two-thirds of the outstanding capital stock.

No stock option was granted from the time the plan was approved.

21. Real Estate Sales

This account for the year ended December 3 1 consists of

Note 2010 2009 2008 Sale of condominium units

and parking lots 28 P100,884,918 P22,176,940 3 1,046,571 ,

Sale of lots 28 41,024,680 32,766,991 47,s i 3,926 Sale of house 28 7,448,647

P149,358,245 P54,943,93 1 P78,860,497 - 22. Operating Expenses

This account for the years ended December 3 1 consists of

Note Cost of real estate sales Salaries and employee benefits 24 Cost of services 23 Commission Taxes and licenses Depreciation and amortization 15 Impainnent losses on

receivables and advances 2, 11 Impainnent losses on installment

contracts receivable Professional fees Transportation and travel Outside services Repairs and maintenance Supplies Meetings and seminars Utilities Directors fees Filing fee Postage and communication Advertising Representation and entertainment Cost of goods sold Insurance Irnpainnent losses on advances to

associates 13 Rent 2 Other operating expenses

Cost of real estate sales pertain to the cost of the land (Notes 12 and 28).

23. Cost of Services

This account for the years ended December 3 1 consists of:

Note 2010 2009 2008 Materials, supplies and facilities P9,773,441 P6,765,839 P - Salaries and employee benefits 24 8,546,586 5,432,992 Depreciation and amortization 15 2,919,623 2,107,973 Rent 2, 29 146,321 6,083,523 Others 1,516,927 1,957,703 -

P22,902,898 P22,348,03 0 P -

24. Salaiies and Employee Benefits

This account for the years ended December 3 1 consists of:

Note 2010 2009 2008 Salaries and wages P27,584,969 P17,873,605 P3,704,378 Retirement expense 30 2,197,485 992,743 276,093 Social security costs 1,557,174 1,259,193 160,643 Compensated absences 698,554 308,165 28,584

32,038,182 20,433,706 4,169,698 Amount charged to cost of

services 23 (8,546,586) (5,432,992) 22 P23,491,596 PI 5,000,714 P4,169,698

25. Otber Income

This account for the years ended December 3 1 consists of:

Note, 2010 2009 2008 Interest income Change in fair value of

financial assets at FVPL Realized gain (loss) on sale of

financial assets at FVPL Dividend income Recovery of impairment Gain on sale of property and

equipment Impairment losses on available-

for-sale financial asset Loss on disposal of investment Unrealized foreign exchange

gain (loss) Reversal of other current

liabilities Reversal of allowance for decline

in value of investment property Other income

26. Income Taxes

The components of income tax expense are as follows:

2010 2009 2008 Current tax expense:

Regular corporate income tax (RCIT) PlS,247,922 P5,653,92 1 P3,270,530 MCIT 611,806 652,337 Final tax 670,363 3,097 2,2 14,937 Benefit &om application of MCIT

against RCIT - (278,238) P16,S30,091 P5,657,018 P5,859,566

The reconciliation of the income tax expense computed at the applicable statutory tax rates to the income tax expense as shown in the consolidated statements of income is as follows:

2010 2009 2008 Income before income tax P28,908,111 P8,I 13,044 P15,493,527

Tax computed at 30% in 201 0 and 2009 and 35% in 2008 P8,672,433 P2,433,913 P5,422,735

Adjustments for income subjected to lower income tax rates (1,672,2 15)

Tax effects of: Change in unrecognized deferred tax

asset 7,846,224 6,861,027 (2,736,085) Expired NOLCO 913,231 345,272 Non-deductible expenses 461,063 117,849 5,087,130 Expired MCIT 171,189 186,515 Non-taxable income (1,194,865) (1,78 1,204) (13 1,730) Interest Income subject to Final Tax (339,184) (1,409,165) Applied MCIT (1,029,847) Benefit h m previously unrecognized

NOLCO - (67,342) (1 10,269) P16,S30,091 P5,657,018 P5,859,566

The Group did not recognize the deferred tax assets relating to temporary differences as of December 3 1, 2010 and 2009 since management did not expect that the deferred tax assets can be utilized in the foreseeable fiture.

The net deferred tax assets that have not been recognized in the consolidated statements of financial position are as follows:

Allowance for impairment on receivables and advances P133,714,793 P108,338,856

NOLCO 15,707,764 8,007,475 Allowance for impairment on investment property 9,015,740 9,015,740 Unrealized gross profit from installment sales 6,941,933 4,652,98 1 Retirement benefits obligation 1,584,161 1,09 1,239 Accrued expenses 1,102,244 Allowance for impairment on AFS 812,505 MCIT 755,075 341,530 Unrealized foreign exchange gain 50,561 32,163 Accrued rent income (264,803) (58,670)

P169,419,973 PI 3 1,42 - 1,314

In compliance with the Tax Return Act (Act) of 1997, the Company pays the MCIT or the normal income tax whichever is greater. Any excess of the MCIT over the normal income tax is carried forward annually and credited against the normal income tax for the three succeeding taxable years.. The same Act also provided for the introduction of a NOLCO privilege which can be carried over in the three succeeding taxable years.

Details of the Group's MCIT are as follows:

Balance, Applied1 Year Incurred beginning Additions Expired Balance, end Expiry Date

2007 P171.189 P - (P171,189) P - December31,2010 2008 129,487 129,487 December 3 1,201 1 2009 40.854 40,854 December 31,2012 2010 764,947 764,947 December 31,2013

P341,530 P764,947 (P171,189) P935,288

As of December 3 1, 2010, the Group has NOLCO which can be claimed as deduction from future taxable income. Details of NOLCO are as follows:

Balance, Applied1 Year Incurred beginning Additions Expired Balance, end Expiry Date

2007 P3,642,129 P - (P3,642,129) P - December31,2010 ' 2008 3,165,836 3,165,836 December31,2011

2009 27,094,945 27,094,945 December 31,2012 2010 - December 3 1,2013

P33,902,9 10 P - (P3,642,129) P30,260,781

On May 24, 2005, Republic Act No. 9337 entitled "An Act Amending the National Internal Revenue Code, as Amended, with Salient Features" (Act), was passed into a law initially effective November 1, 2005. Among others, the Act includes the following significant revisions to the rules of taxation, among others:

a. Change in the corporate income tax rate from 32% to 35% starting November 1, 2005 and changes to 30% starting January 1,2009 and onwards; and

b. Changes in unallowable interest expense from 38% to 42% of interest income subjected to final tax starting November 1,2005 and 33% beginning January 1,2009.

On October 10,2007, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 12-2007, which amended the timing of the calculation and payment of MCIT from an annual basis to a quarterly basis, i.e. excess MCIT from a previous quarter during the current taxable year, may be applied against subsequent quarterly or current annual income tax due, whether MCIT or regular corporate income tax (RCIT). However, excess MCIT from previous taxable yearls are not creditable against MCIT due for a subsequent quarter and are only creditable against quarterly and annual RCIT.

27. Related Party Transactions

Transactions with related parties are made on arms length basis in a manner similar to transactions with non-related parties. Other than those disclosed in Notes 13, 14, 18, 19 and 20, the Group's related parties included its associates, the Group's key management, and others as described below.

Due to a Related Party This account represents mainly the amount payable to Solid Share Holdings, Inc. (SSHI), a shareholder of CCPC, pertaining to cash advances amounting to P54,964,650 and P72,153,570 as of December 3 1,2010 and 2009, respectively, used by CCPC to finance the acquisition and development of the land located in BiAan, Laguna and for payments of various administrative expenses. Total payments to SSHI amounted to P 17,188,920 in 2010 and P7,668,040 in 2009. These advances are non-interest bearing, unsecured and do not have specific repayment terms.

Key Management Personnel Compensation Salaries and other benefits given to key management personnel are as follows:

2010 2009 2008

Salaries and wages P5,539,087 P925,200 P925,200 1 3 ~ month and other bonuses 600,930 37,032 37,032 Social security services and other

contributions 71,990 16,365 16,365

P6,212,007 P978,597 P978,597

28. Jointly Controlled Operation

Joint Venture with DMCI In 2005, the Parent Company entered into a Memorandum of Agreement (the Agreement) with DMCI wherein the Parent Company together with FBMCI shall contribute land where DMCI will develop and construct three condominium buildings to be called The Cypress Project. DMCI shall be responsible for completion of the project and for all expenditure and liabilities that may arise upon the course of the project.

The initial agreement had been subject to changes as transactions were negotiated. To date, the parties have thus far agree that (a) the Parent Company and FBMCI shall contribute the land; (b) DMCI shall be responsible for the development, construction and sale of condominium units; and (c) the Parent .Company and FBMCI share in the project is equivalent to 15.6% of the total saleable condominium units and parking slots.

Sales were made from the allocated units to the Parent Company and FBMCI, however, it had been mutually agreed that all proceeds of sales will be recognized by the Parent Company first before FBMCI will receive its share. The Parent Company recognized in its 2010 and 2009 financial statements its share of the assets, liabilities, revenues and expenses in the joint venture in accordance with the Agreement.

Joint Venture Agreement with SLRDI On October 23, 2003, the CCPC entered into a Memorandum of Agreement (the Agreement) with the SLRDI (the Developer) wherein the CCPC shall contribute land and the improvements thereon, while the Developer shall be responsible for completing the development of the Palma Real Residential Estates project in Bifian, Laguna (the Project) and for all expenses necessary in reo oaring the lots into its saleable unit Mote 1 11.

29. Operating Lease Commitments

Grouu as Lessor The Group leased out certain commercial spaces on its buildirig to several parties under various operating lease agreements for a period of 1 to 10 years. All leases include a clause to enable upward escalation adjustment of the annual rental rates.

Future minimum rental receivables under the non-cancellable operating lease agreements as of December 3 1 follows:

2008 Within one year P7,529,257 P3,9 16,492 P - After one year but not more than five

years 19,730,328 15,665,968 After five years 14,532,226 18,448,718

P41,791,811 P38,03 1,178 P - Rent income recognized in 2010, 2009 and 2008 amounted to P7,147,469, P1,133,661 and nil, respectively.

Grouu as Lessee Prior to the Group's move to its new location, it has a cancellable operating lease with Banco De Oro Unibank Inc. and Greenfield Development Corporation covering office space and clinic which ended in 2009.

In 2010, the Group made rentals of medical equipment used for on-site company checkups.

Rent expense included as part of cost of services amounted to P146,321, P6,083,523 and nil in 2010, 2009 and 2008, respectively (Note ,23), while charged to operations amounted to P63,947, P4,338,965 and P1,648,599 in 2010, 2009 and 2008, respectively (Note 22).

30. Retirement Plan

The reconciliation of the retirement benefits liability recognized in the consolidated statements of financial position is shown below:

2010 2009 Present value of the obligation P3,291,048 P4,003,196 Net unrecognized actuarial gains (loss) 2,423,884 (62,193) Retirement benefits obligation P5,714,932 P3,94 1,003

The movements in the present value of defined benefit obligation are shown below:

2010 2009 Balance at beginning of year P4,003,196 P3,019,197 Current service costs 575,260 660,33 1 Interest costs 327,339 323,668 Benefits paid (423,556) Actuarial gain (1,191,191)

Balance at end of year P3,291,048 P4,003,196

The retirement benefits expense recognized in the consolidated proft or loss is as follows:

2010 2009 2008 Current service costs P575,260 P660,33 1 P1 40,541 Interest costs 327,339 323,668 123,995 Net actuarial loss recognized during

the year 1,294,886 8,744 1 1,557 P2,197,485 P992,743 P276,093

The principal actuarial assumptions at reporting date are as follows:

2010 2009 2008 Discount rates 8.17% 10.54% 9.06% Expected rate of salary increases 5.00% 5.00% 5.00%

The historical information of the amounts for the current and previous period is as follows:

2010 2009 2008 Present value of defined benefit

obligation P3,291,048 P4,003,196 P3,019,197 Fair value of plan assets - Deficiency in the plan 3,291,048 4,003,196 3,019,197 Experience adjustments - -

As Previously Adjustments / Reported Reclassification As Restated

Statement of Financial Position

Liability Accounts payable and other cumnt

liabilities P114,83 1,250 (PI 5,706,219) P99,125,031 Due to a related party 80,202.61 3 (8,049,043) 72,153,570 0 3 809,167

P195,033,863 (P 19,946,095) P175,087,768

Statement of Comprehensive Income Income

Revenues PI 17,237,590 (P10,772,131) P106,465,459 Other income 10,8 16,29 1 10,8 16,291

P1 17,237,590 P44,160 P117,281,750

Expenses Operating expenses PI 10,368,278 (P4,724,403) P105,643,875 Share in net loss of associates 3,524,83 1 3,524,83 1 Income tax expense 5,280,774 376,244 5,657,O 18

P115,649,052 (P823,328) PI 14,825,724

Attributable to: Equity holders of the Parent Company P249,713 ~641.94 1 P89 1,654 Non-controlling interests 1,338,825 225,547 1,564,372

P1.588.538 P867.488 P2.456.026

The Group believes that the presentation of a third statement of financial position as of January 1, 2009, the earliest prior period presented, is not relevant as the adjustments and reclassification have no effect on the consolidated statement of financial position as at January 1,2009.

A~~ipunts ~eceivable l~iom Directors, Officers, J3mplbye&j Related ~aities, alnl Principal Stockl!ol,ders (Other than ~filiates) , ,

. . . . N/A

. . . . : . .

.Nr!ncurrerit ~ a r k e t i . 4 ~ Equity Securities, 0ther.LoigTerm Invbtments . . . .

it? $tack and Other h i ~ l s t m e r i t s . .

'2

The Agreement has the following significant provisions, among others:

a. The Developer shall be solely liable for any and all expenses to be incurred in the construction and development to be introduced by SLRDI on the Project SLRDI shall also shield the CCPC from any claim that may be raised by any government agency, sub-contractor, supplier or third party in connection with the development of the Project.

b. The CCPC shall be paid 60% of the sales proceeds while SLRDI shall be paid 40% of the sales proceeds. The CCPC and SLRDI shall shoulder the corresponding taxes on their respective share of the proceeds;

c. The proceeds from the sale of lots shall be deposited in the joint bank account of the CCPC and SLRDI; and

d. The CCPC and SLRDI shall nominate a marketing manager that will handle the sale of lots in the Project. The marketing manager shall present a marketing plan to the CCPC and SLRDI.

The development of the residential lots has been completed and the Project started selling lots in 2004. CCPC recognized in its 2010 and 2009 financial statements its share of the assets, liabilities, revenues and expenses in the joint venture in accordance with the Agreement.

The revenues recognized by the Group from the joint ventures are shown below:

Joint Venture Joint Venture 2010 with DMCI with SLRDI Total Real estate sales P100,884,918 P44,856,323 P145,741,241 Interest income 2,210,593 5,690,737 7,901,330

P103,095,511 P50,547,060 P153,642$71

Joint Venture Joint Venture 2009 with DMCI with SLRDI Total Real estate sales P22,176,940 P32,766,991 P54,943,93 1 Interest income 1,100,218 5,388,936 6,489,154

P23,277,158 P38,155,927 P61,433,085

Joint Venture Joint Venture 2008 with DMCl with SLRDI Total Real estate sales P3 1,046,571 P47,8 13,926 P78,860,497

2,120,6 16 2,184 550 P31,110,505 P49,934,542 P81,045,047

As of December 31, 2010, there were no outstanding contingent liabilities and commitments with respect to the joint venture agreement.

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~igit&'elecom, , .

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Filini'est Land I nc . 1 ',

Holcim ~ h i l i ~ ~ \ ~ ~ ~ s , Inc. . .

Marcventures F,$?ldings, Inc. . . . . . Manilawater Inc.

National ~ e ~ ~ l i $ n c e Corp , ,d oriental ~etroI$u$~ & ~ i n e G f ? 4" Oriental ~etrol(yiii,n & Mineral TP The Philodrill C$~poration ;.:

Premiere Ente~$i:hent Phils. ,

Philippine Estal/;:corPoration ' '..''' shang ~ro~jertit:;, Inc. . . Sunhust ~orn~$evelopers :.

Vulcail Indusd:i.$l , Vista Land & ijl.(kscapes Inc .:": . .

*Shown in the bi[v~lce sheet as ~itlnhcial Assets at fair value through profit or loss Values-are basedivz mat'ket quot$ion at balance sheet date

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''becertlbe? 31,2010 ' . .'.

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. . . Balance at- beginning of Bklance. at end of

. . . . . . . . . .: ,year . . . . year ..... . . . . . . . . . . . . . . . . . . . . . . . . , , . . . . . . .

I '. sky Leisure Proper ties:? .lnc. . . P 1;436,026 . ' P ' 1,436;026 Asian ~llia&e HoIclb~gs & Dev't ~ & i ' . ~ j. ' . 255,861 - e*Hermes, Inc. . . . . . 10,388,278 10,441,101

. . . , ' .12,080,165 11,877,127 ~llowance'for impairil*ent - , ( , . . . 10,325,400 ) ( , , 10,441,101 )

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