The Group (refers to Jolliville Holdings Corporation and its subsidiaries) has principal business interests in leasing, management services, property development, land banking, local waterworks system, business process outsourcing, and power generation.

The Group owns and holds title to a number of properties in Metro Manila, Calapan City, Agoo La Union and Puerto Galera in Oriental Mindoro. These property investments, which include parcels of urban land, provincial and beachfront properties, as well as condominium units, are held for future operations and/or development.

JOH and ORDC leases and rents out certain assets including land, buildings & improvements, furnishings and fixtures, equipment, and machineries to a number of independent business entities involved in the operation and management of KTV entertainment/recreation centers in the Metro Manila area.

A group subsidiary, JGMI provides general management services and assistance to companies within and affiliated to the Group, notably ORDC and Calapan Water. Another consolidated subsidiary, SBI, on the other hand, provides business process outsourcing services to third parties engaged in the KTV entertainment and leisure/recreation business, and construction. The services are provided based on a
pre-agreed monthly retainer that is reviewed annually.

Through JLRC, the Company has ventured with other investors (Aviso Holdings, Inc., Sta. Lucia Realty and Dev't., Inc., Alson's Land Corp. and Blue River Holdings, Inc.) to invest in a businessman's hotel at the Eagle Ridge Golf and Country Club in General Trias, Cavite. Known as the Eagle Ridge Microtel, it is the first value-for-money businessman's hotel in the area designed to cater not only to the accommodation needs of transient businessmen and tourists, but also to golf players and enthusiasts
of the golf course and facilities of Eagle Ridge. JLRC has a 37.6% stake in Eagle Ridge Hotel Corporation.

Calapan Water owns, operates and manages the waterworks system of Calapan City, Oriental Mindoro by virtue of its legislative franchise under Republic Act No. 9185 which will expire on February 9, 2028 and a CPC issued by the National Water Resources Board ("NWRB") that expired on January 17, 2018. CWWC filed an application for renewal of its CPC before the NWRB on July 13, 2017 that is still under evaluation as of this report. Calapan Water is one of the few privately owned water systems in the
country today. It has no competitor nor known oppositor to its franchise within its franchise area.

Groundwater is the source of water supply in Calapan City. CWWC draws water from the ground and distributes the water through its transmission and distribution lines leading to the household. A total of seven (7) wells are operational and are equipped with production meters. CWWC also operates ten (10) booster units to ensure adequate water supply to higher elevations and extreme areas within the service barangays.

As of December 31, 2017, the water supply system serves twenty-seven (27) urban barangays and eight (8) adjoining rural barangays. The total number of water service connections is now at 14,450 from the previous year's 13,384. It currently serves 13,647 residential and 803 commercial clients. It is not dependent on one or few major customers nor does its depend on a limited number of suppliers.

CWWC completed the pipelaying and energization of new transmission line from the newly commissioned water source at Barangay Biga to the existing transmission line at Barangay Sapul. This will partially improve the water supply condition at the existing service barangays.

CWWC's average Non-Revenue Water (NRW) went up slightly to 25.51% for 2017 as against 23.47 for 2016. The increase was due to the flushing and disinfection of new transmission and distribution lines prior to energization.

Regular bacteriological and chemical/physical test results released by the Batangas Water District Laboratory indicate that all of CWWC's water sources conform to the Philippine National Standards for Drinking Water (PNSDW).

In May 26, 2010, the NWRB approved Calapan Water's petition for increase of water rates for the operation and maintenance of water supply system within Calapan City, Oriental Mindoro. The approved CPC is valid for five (5) years with authority to charge the following rates:

The above chart shows the residential and commercial rates approved by the NWRB that are currently being implemented in Calapan.

Calapan Water formally took over the operation of the water system of the Municipality of Tabuk, the capital of Kalinga province, in October 2006. Under the contract with the Local Government of Tabuk, Calapan Water will operate and maintain the water system in Tabuk City for a period of 15 years. This lease agreement was extended for another 10 years (from year 2021) or up to September 30, 2031 through a resolution passed by the legislative council of Tabuk City on February 2, 2010. The system remains the property of the local government.

The subscriber base stood at 3,700 as of December 31, 2017, 3,475 as of December 31, 2016, and 3,636 as of December 31, 2015. The system is capable of accommodating up to around 9,000 subscribers. CWWC in Tabuk draws water from the ground and distributes the water through the LGU owned system leading each household.

Groundwater is the source of water supply in Tabuk City. Three (3) out of four (4) wells with a total capacity of 80 lps are operational. Aside from the existing three (3) wells, an elevated water steel storage and a ground level concrete reservoir with a total capacity of 350 cu.m. and 640 cu.m., respectively, have been built to ensure consistent water supply.

As part of its campaign to reduce the non-revenue water, the company implemented the use of leak detection equipment last 2013. By using this device, the distribution system water losses have been minimized and water is being conserved.

The current rates for Tabuk City are as follows:

The standard rates are adjusted taking into consideration the movements in the consumer price index of the Cordillera Autonomous Region with respect to power, labor and other related costs.

The Company has no direct competition for the waterworks business in its service area.

The Company is very much dependent on its being able to have continuing business with its existing customers. Calapan and Tabuk water subscribers are dependent on Calapan Water for their daily water needs. As such, the Company does not foresee losing clients as long as Calapan Water continues to deliver quality potable water service.

On December 10, 2012, MAWI entered into Memorandum of Agreements (MOA) with the Municipality of Agoo and with the Municipality of Tubao, Province of La Union. The MOA with Agoo covers the joint and mutual cooperation of MAWI and Agoo LGU in the successful construction, installation, operation and maintenance of a water supply system for the supply and distribution of water in Agoo for domestic, industrial and/or commercial use for a period of twenty-five (25) years, renewable for another 25 years.
On the other hand, the MOA with Tubao covers the sourcing of water by MAWI within the former's territorial jurisdiction to supply and distribute water to its constituents and the adjacent Municipality of Agoo, including the right of way to install, lay, construct and maintain water mains, pipes, conduits and all other necessary apparatus and appurtenances for a period of 25 years also, renewable for another 25 years.

The construction of well sites and laying of pipes in Agoo were accomplished last December 2015. MAWI has laid 53.4 kilometers of distribution pipelines and 6.7 kilometers of transmission pipelines. It has built two (2) pumping stations and two (2) boosters. It has two (2) deep well sources covered by Conditional Water Permit Nos. 10-16-13-038 and 12-11-3-008, with a total discharge of 60.536 lps. (or 5,230.31 cum) per day.

The NWRB in its Decision dated October 21, 2015, granted MAWI a CPC and approved the following water rates:

19, 2014, Development Bank of the Philippines (DBP) extended MAWI, a Two Hundred
Eighty Million Pesos (₱280,000,000) term loan to finance the construction of water distribution system in Agoo. As of 31 December 2017, ₱217.75 million has been drawn from the term loan facility.

MAWI started its formal business operations last February 2, 2016.

MAWI draws water from the ground and distributes the water through the transmission and distribution lines leading each household. It serves fourteen (14) urban barangays and twenty-six (26) adjoining rural barangays in Agoo and five (5) barangays in Aringay. The total number of household connections is 2,032 broken down into 1,961 residential and 71 commercial clients. MAWI is not dependent on one or few major customers nor does it depend as well on a limited number of suppliers. MAWI has no
competitor in the town of Agoo.

OPI began its commercial operations last November 11, 2011. It operates a 9.6 MW diesel fired power plant in Calapan City to supply the Oriental Mindoro Electric Cooperative. It is also currently constructing a 10 MW mini hydro power facility in the Municipality of San Teodoro in Oriental Mindoro.

On June 21, 2016, the Energy Regulatory Commission (ERC) issued a Decision for the approval of the PSA between ORMECO and OPI. The ERC only granted the generation rates of ₱2.0931/kWh (premaximization) and ₱1.9686/kWh (post-maximization) from OPI's proposed rate of ₱2.95/kWh under the PSA. The difference in rate is primarily due among others, to ERC's exclusion of pre-operating expenses, contingency, permits/licenses and other development costs in the computation of the total project cost as a component of the capacity fee and the use of the contracted energy of 3,800,000 kWh/month and 4,939,200 kWh/month in fixing the billing determinants.

On October 17, 2016, the Company filed an Omnibus Motion for Partial Reconsideration and for the Issuance of a Status Quo Order to the ERC. On January 11, 2017, OPI filed a Supplemental Motion for Partial Reconsideration to submit supporting documents based on OPI's incurred actual expenses.

On June 6, 2017, ERC issued the Status Quo Ante Order deferring the implementation of the Decision for a period of no more than six (6) months or until the issues raised in OPI's Motions have been resolved.

On December 5, 2017, ERC issued an Order extending the Status Quo Order prayed by OPI in its Omnibus Motion. The implementation of the Decision dated June 21, 2016 was stayed for another six (6) months or until the resolution of the Omnibus Motion, which comes earlier.

Management strongly believes that the ERC should favorably consider OPI's Motion on the matter of the excluded costs, sufficiently supported by evidence of actual amounts incurred.

The Company considers the Oriental Mindoro Electric Cooperative (ORMECO) as a significant customer being the primary off-taker of the power produced by Ormin Power Inc. The Group does not spend material amounts for business development activities as most plans are developed internally.

Except for the waterworks business where it has no direct competition, the Company carries out most of its business activities in a competitive environment and competes in terms of market reach, diversity, customer relations, and pricing, among others. Heightened competition could negatively affect the Company's operational results.

In the leasing business, it competes with a number of financial institutions and real estate companies, both domestic and international. While its competitors offer their leasing lines to the general public, none of them have concentrated and specialized on servicing the particular market niche of the Company, the KTV operators. The long-established relationship of the Company with its KTV clients in the renting out of facilities, furnishings and equipment puts it at some advantage vis-à-vis its competitors. This competitive advantage is further strengthened by the management services and consultancy contracts of the Company with its KTV clients.

The Company's primary competitors in the management services and business process outsourcing industries are Accenture, the management services and the business process outsourcing units of the other major independent accountancy firms, and international BPO companies. However, the Company considers as its competitive advantage, its long-time relationship with its clients as well as the fact that it has multi-faceted business relationship with them (it also rents out to the same clients furnishing, fixtures, furniture and equipment for their KTV operations). The management services and business process outsourcing lines are highly dependent on the continuing renewals of its contracts with its clients. The Company is confident though that, for as long as the KTV operations of its clients are viable and profitable, it will continue to service the specialized business process outsourcing needs of these clients.

Land banking and property development is a highly competitive industry. The major industry and sector leaders of this industry include the SM Group and Robinsons Land that are more focused on retail mall development, Ayala Land that is involved in residential, commercial, high rise, and industrial development, Sta. Lucia Realty which is into residential, commercial and leisure/resort development, Filinvest Land which is into central business district development, Megaworld and Empire East Land which are into both horizontal (subdivision & townhouses) and vertical (condominium) residential and commercial development.

In the leisure and resort development businesses, JOH adopts a strategy of "product and market niching". It enters into strategic alliances with more seasoned partners as in the case of the Eagle Ridge Microtel hotel project.

The Group does not plan nor propose going into other types of businesses or offer any new service.

The Company is very much dependent on its being able to have continuing business with its existing clients and customers. The Company has had a long-time relationship with these clients and does not foresee losing any of them.

The Company's subsidiaries involved in the service industries need no special government approvals. However, its waterworks business through Calapan Water and its power generation business through OPI require several special government approvals such as Environment Compliance Certificate from the Department of Environment and Natural Resources (DENR) and water permits from the National Water Resources Board. Tariff rates are subject to regulation by the NWRB, while power rates are approved by the Department of Energy. The complexities of tariff regulation require consideration of many factors including the proponent's return of investment.
CWWC and MAWI incurred minimal amounts for research and development activities as well as compliance to environmental laws which do not contribute to a significant percentage of revenues for the calendar years 2017, 2016, and 2015.