President's Message

President's Report 2009
2009 Regular Annual Stockholders’ Meeting

Mr. Chairman, honorable members of the Board, fellow stockholders, my colleagues in Cebu Holdings, ladies and gentlemen: a pleasant good morning to you all.

2008 has been a year of challenges and achievements. As we read and hear in the media, global economic troubles are shaking various markets and forced everyone to be extremely cautious about their investments.

Economic Viability / Securing Financial Growth Highlights
Despite the onset of a challenging market, I am proud to report that your Company capped last year with its highiest-ever consolidated revenues at P1.5 billion. Net income was also at an all-time high of P399.5 million, 59 percent higher versus that of the previous year's. This was a fitting close as CHI celebrated 20 years of transforming the real estate landscape of Cebu.

Total revenue was a good mix of real estate development income and recurring leasing revenues. Real estate revenues from commercial and residential lot sales account 49 percent of total consolidated revenues, while leasing revenues account for 44 percent. The remaining revenues represent equity earnings in associates, interest and other income.

Commercial lot sales at Cebu Business Park boosted revenue for the real estate development business at the early part of the year. A major commercial lot sale was booked at CBP, and build-up continued to be bullish in the city's premier commercial and business district.

Demand from outsourcing and off shoring business has caused the highest spike in construction at the Cebu Business Park since 1998. Around 55,500 square meters will be added to the total office space once construction is completed. New developments within the business park include three Lexmark buildings, Chinabank, Creativo Building and Ayala Center Cebu's The Terraces.

The immediate impact of this buildup is the increase in people and vehicular traffic. This in turn benefits the businesses and service providers in the area.
Unlike other urban areas though, CBP is managed to ensure that facilities are in place to match community build-up.

Also contributing to revenue is lot sales at subsidiary Cebu Property Ventures and Development Corporation. The six remaining lots at CPVDC's Asiatown I.T. Park were sold in the early part of the year. Build-up also increased with the completion of 4 new buildings at the I.T. Park. Today, over 60 local and multi-national companies have located at Asiatown, generating over 12,500 IT and IT-related jobs.

Premium seaside subdivision, Amara, launched its newest phase, Amara North, in October of last year. Like its preceding phases, Amara North was a success when it was offered to the market. Despite market conditions and an increase in lot value, a total of 45 lots were sold with three reservations. With this, Amara has maintained its market leadership with 54 percent of relative market share.

In Amara, we assure our buyers worry-free ownership and appreciation of the property over time. We maintain the integrity of the project's brand coupled with the delivery of a unique lifestyle for residents to enjoy.
In December of last year, the Company celebrated its 20th anniversary, together with the grand opening of The Terraces and the relaunch of Cebu City Marriott Hotel.

As it marked its 10th anniversary, the Cebu City Marriott Hotel, of affiliate Cebu Insular Hotel Company, launched its refreshed look. This premier business and leisure hotel now boasts of newly renovated guest rooms and its common areas for business travelers to perform at their best.

In the Retail Business front, 2008 was marked with a milestone with the grand opening of The Terraces. Now the newest dining and entertainment destination in the city, The Terraces increased Ayala Center Cebu's leasing portfolio by 8,500 square meters of additional leasable space. It offers many firsts in Cebu such as popular restaurants, coffee shops and a wellness zone in a refreshing setting. The continuing enhancement of the mall reinforces the distinct brand of Ayala Center Cebu, further defining its differentiation against local competition.

The opening of The Terraces and the Asiatown I.T. Park's The Walk, provided additional gross leasable area for the mall. This, coupled with rental rate increases from operations, registered P593 million in revenues for the mall in 2008, 10 percent higher compared to 2007 results.

Given the overall market trend on declining stock prices, the Company's share price registered at P1.56 per share. This rate declined by 57 percent from its price as of the end of 2007. The decline, however, is lower compared to the Phisix decline of 333 percent or property index decline of 461 percent.

We maintained financial prudence and ended the year with a solid balance sheet and very strong liquidity. This was manifested by an increase in total assets to P5.7 billion, increasing by six percent from the previous year's level. Despite higher investments due to retail expansion, total liabilities as of end 2008 were maintained at around P1.4 billion. Bank debt is at P330 million.

Total stockholders' equity, which registered at P 4.3 billion, was managed through higher cash dividends declared and paid during the year. CHI declared cash dividends amounting P134 million at P0.07 per share in November of 2008.

Current ratio registered at 1.51:1 and bank debt to equity ratio at .08:1, as of end 2008. Return on equity registered at 10 percent, increasing from the previous year's seven percent, its strongest level since the Asian financial crisis in 1997.

With all these, your Company registered its best performance yet in its 20-year history with an exceptional increase in revenue for its business lines while advancing institutional strength, thus keeping at par with world-class organizations.

Social Performance: Our Human Resources
We believe that human resources management is an integral part of our business strategy and a key element in our sustainability agenda.

In 2008, we implemented the competency program we established for employees, both on the technical and behavioral aspects. An extensive range of training and development opportunities are in place to support all employees to maximize their potentials.

The health and safety of our employees is also of primary concern. CHI formed a committee to champion all matters relating to the health and safety of its employees. The Company also continues to support CHI PLUS, a program which promotes health and wellness and underscores the value of camaraderie among colleagues.

Social Performance: Our Communities and External Partnerships
We are faced with issues that we share with our neighboring communities. Our involvement with them has evolved remarkably from mere corporate philanthropy to corporate social responsibility and sustainable community partnership. Today, the alliances we have established are key in improving the communities where we operate.

In 2008, the Solid Waste Management program in partnership with the alliance was the major focus of the Company's CSR initiatives. An agreement was entered into by CHI and the neighborhood alliance for the waste collection at Ayala Center Cebu, CBP and Asiatown I.T. Park. Through this program we save on costs, while providing income for 21 families from Baranagay Luz. Most importantly, we are able to do our share in helping the environment by reducing the residual waste dumped to the city's landfill daily.

Other than the Solid Waste Management program mentioned earlier, other initiatives with our neighboring barangays include programs to promote education, health and entrepreneurship.

In support of the Company's CSR initiatives, a volunteerism program for the employees was created. Last year, we launched Agbayay, our employee volunteerism program, and clocked 925 volunteer hours from participants collectively by yearend.

Because we believe that a healthy business environment will enhance Cebu's bid as an investment haven, we have also been very active with our partnerships in the industry.

As we brace for the effects of the financial meltdown, we will renew our focus on strengthening the organization and its systems. Moving forward, with our projects now in place, innovation and customer service will be key focal points as these have and will continue to differentiate Cebu Holdings from other developers.

Environmental Performance
To strengthen our commitment towards environmental sustainability, we boldly established a Climate Change Policy for CHI. We recognize our important role in mitigating climate change through our business practices and commit to be even more efficient and accountable in our operations.

Among our initiatives is to carefully monitor the energy consumption of our projects and operations in relation to our carbon emissions. Water consumption and wastewater discharge are also measured to be within set targets and regulations. With this data, we can effectively manage our environmental footprint and find ways to improve performance by introducing technical innovations to our systems.

Equally as important, we believe, is ensuring sustainable growth not only for the Company, but for the environments we operate in as well.

Ensuring Sustainable Growth
Thus, we published our first Integrated Annual and Sustainability Report in 2007. This documented our performance in the economic, social and environment aspects, measured by the Global Reporting Initiative, the most widely accepted and recognized framework globally for sustainability reporting.

I am proud to note that this inaugural report ranked fifth in the 2008 Best Annual Report Awards of the Management Association of the Philippines, and was also cited as the most improved publication.

This year, in keeping with our drive for continual improvement, we more than doubled the number of sustainability indicators, and added commentaries from our stakeholders, thus progressing to a B level report, from last year's C level.

The 2008 Integrated Annual & Sustainability Report distributed earlier summarizes the last year's progress in reaching our short-term goals as well as our long-term objectives. Here we have also outlined our set of priorities as a Company towards sustainable growth. These are the issues which we feel matter most and are within our circle of influence. This is a journey, and every achievement, a step forward.
We take cognizance of the inherent challenges of our business. Thus we formed a Sustainability Policy where we commit to integrate sustainable development practices into our strategy and business operations as we optimize value and secure financial growth for our shareholders.

Our Management Systems / Sustainability at the center of operations aligned to management systems
With our integrated management system, performance metrics are outlined. The Balanced Scorecard sets individual and company targets. Execution and output is measured against international standards with our Quality, Environment, Health and Safety Management Systems. The broader scope is to document, monitor and evaluate sustainability practices based on the triple bottom line approach.

With these systems and empowerment of our employees, your Company was successfully able to deliver record-breaking performance for 2008.

View Forward
In the coming years, we shall continue to invest in the twin-win industries of Cebu - tourism and business process outsourcing. These are industries that have helped jumpstart Cebu's economy in recent years, allowing it to register double-digit growth in GDP, higher than the country's overall average. Given strategic focus, these are the same industries that will pull us through and even allow us to prosper despite the crisis.

We anticipate an even higher demand for office space as companies cut back and look for cheaper alternatives for their operations. Thus, we will be strengthening our efforts to bring in additional leaseable space, as well as increase initiatives to encourage more locators in these areas.

For residential subdivision, Amara, we will be exploring new markets, particularly those not significantly affected by the ongoing crisis. This, coupled with on-time delivery and quality beyond competition, will assure the continued success of Amara.

In the retail front, we are working on even more enhancements and keeping our ears on the ground on ever-changing market preferences, strengthening our position as the lifestyle icon of Cebu.

We continue to emphasize that land is the best and most secure investment for your money, especially with the current financial crisis. We will continue to refine our project plans, revising them in the light of new realities. We have also re-prioritized investments, and staggered the timing of new investments for the remainder of our pipeline.

In summary, 2008 was a great year for the Company. We marked two decades with our highest recorded income and extended our leadership in our business lines. We have further strengthened our external relationships by actively engaging in our social and business communities, ultimately becoming more relevant as a responsible corporate citizen.

I would like to take this opportunity to thank our chairman, Mr. Jim Ayala, for the wisdom with which he has guided the company for the past five years.

I would also like to thank my colleagues at CHI for their dedication and commitment, our shareholders for their continued support, and our Board of Directors for their guidance all these years.

With a clear vision and our collective commitment, we face the challenges and opportunities of 2009 head on.

Thank you and good morning.