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Total No. of Stockholders
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PHINMA
Life can be bettet
March 062013
NOTICE OF ANNUAL SHAREHOLDERS MEETING
TO ALL SHAREHOLDERS:
Annual Shareholders Meeting of pHINMA CORPORATION
will be held on 17 Aptil2013, at 3:00 p.m. at the 3.d Level Ballroom I of the Mandarin Oriental
Hotel Manila, Makati City. The Agenda of the Meeting is as follows:
Please be advised that the
1..
Call to Order
2.
Proof of Notice and Determination of euorum
J.
Minutes of the Previous Meeting
4.
Annual Report of Management and Ratification of all acts of the Board of Directors and
Management since the last Arurual Shareholders Meeting.
5.
Election of Directors
6.
Management Contract
7.
Appointment of External Auditor
8.
Other Matters
The record date for the determination of the shareholders entitled to notice of said
meeting and to vote thereat is 2'1, March 2013
Enclosed is a proxy form solely for your convenience.
AN I.DTAZ
We are not soliciting your proxy. However, if you would be unable to attend the meeting but would
like to be
r-epT:_ented thereat, you may accomPlish the herein proxy form and submit the same
on or-before 10 April 2013 to
the Office of the Corporate Secretary at 11ttr Floor, PHINMA Plaza,39 Plaza Drive, Rockwell
Center, uakah City.
0
PHINMA Corporation 1 2'h Floor Phinma Plaza, 39 Plaza Drive, Rockwell Center, Makati City 1 21
| Tel: 870-0100
PHINMA Corporation 12'n Floor PHINMA Plaza, 39 Plaza Drive, Rockwell center, Makati city .1210 Tet: g70-0100
|
|
Fax: 870-0456
|
Fax: g70-0456
PROXY
The undersigned, being a stockholder of PHINMA CORPORATION, (the “Company”), hereby appoints
__________________________________________ or in his absence, the Chairman of the meeting, as attorney and
proxy, with power of substitution, to present and vote all shares registered in his/her/its name as proxy of the
undersigned stockholder, at the Annual Meeting of Stockholders of the Company on April 17, 2013 and at any of
the adjournments thereof for the purpose of acting on the following matters:
1.
Approval of minutes of previous meeting.
Yes
No
Abstain
2.
Approval of annual report
Yes
No
Abstain
Yes
No
Abstain
3. Ratification of all acts of the Board of
Directors and Management since the last
annual shareholders meeting
4.
Election of Directors
Vote for all nominees listed below:
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Magdaleno B. Albarracin, Jr.
Roberto M. Laviña
Victor del Rosario
Jose L. Cuisia, Jr.
Filomeno G. Francisco
Felipe B. Alfonso (independent)
Guilllermo D. Luchangco (independent)
Roberto F. de Ocampo (independent)
Omar T. Cruz
5.
Appointment of Sycip Gorres Velayo & Co.
as external auditor for CY 2013.
6.
Renewal of Management Contract with
Phinma, Inc. for one (1) year.
7.
At their discretion, the proxies named above are
authorized to vote upon such other matters as
may properly come before the meeting.
Withhold authority for all nominees
listed on the left side
Withhold authority to vote for the
nominees listed below :
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
Yes
No
Abstain
Yes
No
Abstain
Yes
No
_____________________________________________
Printed Name of Stockholder
____________________________________________
Signature of Stockholder / Authorized Signatory
______________________
Date
This PROXY should be received by the Corporate Secretary ON OR BEFORE April 10, 2013. Proxies need not
be notarized. Please attach a photocopy of any government issued identification with photo and signature such as
passport, driver’s license or SSS ID for identification purposes.
A stockholder giving a proxy has the power to revoke it at any time before the right granted is exercised. A proxy is
also considered revoked if the stockholder attends the meeting in person and expressed his intention to vote in
person.
This proxy, when properly executed, will be voted in the manner as directed herein by the stockholder(s). If no
direction is made, this proxy will be voted for the election of all nominees and for the approval of the matters stated
above and for such other matters as may properly come before the meeting in the manner described in the
Information Statement and/or as recommended by Management or the Board of Directors.
SEC Number 12397
File Number _____
PHINMA CORPORATION
12th Floor, Phinma Plaza, 39 Plaza Drive,Rockwell Center, Makati City
Telephone No.: 870-0100
Company’s Calendar Year Ending: December 31
DEFINITIVE INFORMATION STATEMENT
(SEC FORM 20 - IS)
________________________________________
Amendment Designation (If Applicable)
December 31, 2012
Period-Ended Date
_____________________________________
Secondary License Type and File No.
1
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 20 – IS
Information Statement Pursuant to Section 20
Of The Securities Regulation Code
1. Check the appropriate box:
Preliminary Information Statement
x Definitive Information Statement
2. Name of Registrant as specified in its charter:
PHINMA CORPORATION
3. Province, country or other jurisdiction of incorporation or organization:
Manila, Philippines
4. SEC Identification Number: 12397
5. BIR Tax Identification Code: 321-000-107-026
6. Address of principal office:
12/F Phinma Plaza, 39 Plaza Drive, Rockwell Center, Makati City 1210
7. Registrant’s telephone number, including area code: (632) 8700-100
8. Date, time and place of the meeting of security holders:
April 17, 2013 at 3:00 p.m., Ballroom 1, 3RD Floor Mandarin Oriental Manila, Makati
Avenue, Makati City
9. Approximate date on which the Information Statement is first to be sent or given to
security holders:
March
22, 2013
10. Securities registered pursuant to Sections 4 and 8 of the RSA (information on number of
shares and amount of debt is applicable only to corporate registrants):
Title of Each Class
Common shares
No. of shares of Common Stock
Outstanding or Amount of Debt
Outstanding
258,907,058 shares
2
11. Are any or all registrant’s securities listed on the Philippine Stock Exchange?
Yes x
No _
If yes, disclose the name of such Stock Exchange and the class of securities listed
therein :
Philippine Stock Exchange - common shares
3
PHINMA CORPORATION
Information Statement
This Information Statement is dated as of February 28, 2013 and is being furnished to
stockholders of record of PHINMA CORPORATION, (the “Company” or “PHN”) as of March 21,
2013 in connection with its Annual Stockholders Meeting.
WE ARE NOT SOLICITING YOUR PROXY.
A.
GENERAL INFORMATION
1. Date, Time and Place of Meeting of Security Holders
Date
:
April 17, 2013
Time
:
3:00 p.m.
Place
:
Ballroom 1, 3rd Floor Mandarin Oriental Manila
Makati Avenue, Makati City 1210
Principal
Office
:
12th Floor, Phinma Plaza,
39 Plaza Drive, Rockwell Center
Makati City, Philippines 1210
This Information Statement will be first sent or given to security holders on March 22, 2013.
2. Dissenters’ Right of Appraisal
The stockholders of the Company may not exercise the right of appraisal with respect to the
actions to be taken up at the meeting pursuant to Title X on the Section governing the exercise of
the Appraisal Right under the Corporation Code of the Philippines which states that:
Any stockholder of a corporation shall have the right to dissent and demand payment of the fair
value of his shares in the following instances:
1. In case of any amendment to the articles of incorporation that has the effect of
changing or restricting the rights of any stockholders or class of shares or of
authorizing preferences in any respect superior to those of outstanding shares of any
class or of extending or shortening the terms of corporate existence.
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate property and assets as provided in the Code ; and
3. In case of merger or consolidation.
An appraisal right is also available to dissenting shareholders in case the corporation decides
to invest its funds in another corporation or business as provided for in Section 42 of the
Corporation Code.
There is no matter to be taken up in the meeting that may give rise to the exercise of the right of
appraisal.
4
3. Interest of Certain Persons in Matters to be Acted Upon
There is no substantial interest, direct or indirect, by security holdings or otherwise, of any director
or officer of the Company, any nominee or associate thereof, in any matter to be acted upon, other
than election to office.
The Board of Directors of the Company is not aware of any party who has indicated an intention to
oppose the motions set forth in the Agenda.
B.
CONTROL AND COMPENSATION INFORMATION
4. Voting Securities and Principal Holders Thereof
As of February 28, 2013 there are 258,907,058 shares of the Company’s common stock that are
outstanding and entitled to vote at the Annual Meeting. Only holders of the Company’s stock of
record at the close of business on March 21, 2013 acting in person or by proxy on the day of the
meeting are entitled to the notice of and to vote in the Annual Meeting to be held on April 17,
2013.
Cumulative voting is allowed for election of the members of the Board of Directors. Each
stockholder may vote the number of shares of stock standing in his own name as of the record
date of the meeting for as many persons as there are directors to be elected or he may
accumulate the said shares and give one candidate as many votes as the number of directors to
be elected multiplied by the number of his shares shall equal, or he may distribute them on the
same principle among as many candidates as he shall see fit; provided that the total number of
votes cast by him shall not exceed the number of shares owned by him as shown in the books of
the corporation multiplied by the whole number of directors to be elected and provided, however,
that no delinquent stock shall be used to vote.
a) Security Ownership of Certain Record and Beneficial Owners
The table below shows persons or groups known to PHN as of February 28, 2013 to be directly
or indirectly the record or beneficial owners of more than 5% of the company’s voting securities:
Table 1 - Owners of Voting Securities
Title of
Class
Common
Name & Address of Record
Owner and Relationship with
Issuer
Philippine Depository and Trust
2
Corporation
MSE Bldg.Ayala Avenue
Makati City
Stockholder
. 1
Common
Phil. Investment Mgmt.(PHINMA), Inc
Level 12, Phinma Plaza,
No. 39 Plaza Drive Rockwell Center
Makati City
Stockholder
Name of Beneficial Owner
And Relationship with
with Record Owner
Citizenship
Foreign –
36.42%
Filipino –
13.67%
Various
Phil. Investment Mgmt. (PHINMA), Inc. which is also the
record owner. Mr. Oscar J. Hilado, Chairman of the
Board, is the person appointed to exercise voting
Power.
Filipino
1
# of
Shares
Held
%
129,679,462
50.09%
92,486,823
35.72%
Phinma Inc.’s principal stockholders are : 1) EMAR Corporation (44.28%), a Filipino company
principally owned by the immediate family of the late Amb. Ramon V. del Rosario, Sr.
2) Mariposa
Properties, Inc., (28.62%), which is owned by Mr. Oscar J. Hilado and the members of his
immediate family and 3) Dr. Magdaleno B. Albarracin, Jr. who owns 13.61% of Phinma Inc.’s
5
outstanding shares. The Del Rosario and Hilado Families are expected to direct the voting of the
shares held by EMAR Corp. and Mariposa Properties, Inc.
2
Philippine Depository and Trust Corporation (“PDTC”) is a wholly-owned subsidiary of Philippine
Central Depository, Inc., (“PCD”) which acts as trustee-nominee for all shares lodged in the PCD system. It
was formerly known as PCD Nominee Corporation. The beneficial owners of such shares are PCD
participants who hold the shares on their behalf or in behalf of their clients.
Citibank N.A. – CITIFAOPHILAM is the only PCD Nominee who holds more than 5% of the
Company’s securities. The beneficial owner of these shares is Philamlife and General Insurance Company
for 25,671,164 shares. Mr. Omar T. Cruz, President & Chief Executive Officer of BPI-Philam Life
Assurance Corporation is the person appointed to exercise voting power.
b. Security Ownership of Management
The table below shows the securities beneficially owned by all directors, nominees and executive
officers of PHN as of February 28, 2013 :
Table 2 - Security Ownership of Management
Title of Class
Common
Name of Beneficial Owner
Oscar J. Hilado
Common
Common
Common
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Ramon R. del Rosario, Jr.
Amount
1,000,000
2,479,450
82,462,580
5,690,100
2,981,680
43,999,000
3,270,000
99,340
10
10
10
10
10
2,049,780
3,173,990
9,330
2,860
147,398,160
Common
Roberto M. Laviña
Common
Jose L. Cuisia, Jr.
Common
Felipe B. Alfonso
Common
Guillermo D. Luchangco
Common
Roberto F. de Ocampo
Common
Omar T. Cruz
Common
Filomeno G. Francisco
Common
Pythagoras L. Brion
Common
Regina B. Alvarez
Common
Cecille B. Arenillo
Common
Rizalina P. Andrada
Common
Rolando Soliven
Common
Juan J. Diaz
Directors and Officers as a Group
Nature of
Beneficial
Ownership
Direct
Indirect
Direct
Direct
Direct
Indirect
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
% of
Ownership
.039%
.096%
3.192%
.220%
.115%
1.699%
.126%
.004%
.000%
.000%
.000%
.000%
.000%
.079%
.123%
.000%
.000%
.000%
.000%
5.693%
c. Voting Trust Holders of 5% or more
None of the Directors and Officers own 5% or more of the outstanding capital stock of the
Company. Also, the Company is not aware of any person holding more than 5% of the
Company’s outstanding shares.
6
d. Changes in Control
There are no arrangements that may result in a change in control of the registrant, nor has there
been any change in control since the beginning of the last calendar year.
5.
Directors and Executive Officers
a)
Board of Directors
The Company’s Board of Directors is responsible for the overall management and
direction of the Company. The Board meets quarterly or as often as required, to review
and monitor the Company’s financial position and operations.
The directors of the Company are elected at the Annual Stockholders Meeting to hold office for
one year and until their respective successors have been elected and qualified.
The officers are likewise elected annually by the Board of Directors and serve for one year and
until their respective successors have been elected and qualified.
Except for Dr. Magdaleno B. Albarracin, Jr., a member of the Board of Directors and an Officer of
the Company who directly owns 3.19% of PHN shares, none of the members of the Board of
Directors and Officers directly own more than 2% of PHN shares.
Listed are the incumbent directors of the Company with their qualifications which include their
ages, citizenship, current and past positions held and business experience for the past five years.
Table 3 - Board of Directors
Directors
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Roberto M.Laviña
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Jose L. Cuisia, Jr.
Omar T. Cruz
Filomeno G. Francisco
Felipe B. Alfonso
Guillermo D. Luchangco
Roberto F. de Ocampo
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Age
75
68
62
76
64
68
58
61
75
73
67
Position
Director and Chairman of the Board
Director , Vice Chairman and President
Director, Sr. Exec. Vice President & COO
Director and Sr. Exec. Vice President
Director, Exec. Vice Pres. and CFO
Director
Director
Director
Independent Director
Independent Director
Independent Director
Oscar J. Hilado has been Chairman of the Board of the Company since 2003. He is also
Chairman of the Board of Phinma, Inc. Holcim Philippines, Inc., Trans Asia Oil and Energy
Development Corporation, Phinma Property Holdings Corporation, and Union Galvasteel
Corporation. Mr. Hilado is also a director of A. Soriano Corporation, First Philippine Holdings
Corporation, Philex Mining Corporation, Manila Cordage Corporation, Beacon Property Ventures,
Inc., Pueblo de Oro Development Corporation, United Pulp and Paper Co., Inc. and Seven Seas
Resorts and Leisure, Inc. He has been a Director of the Company since 1969 and is also the
Chairman of the Executive Committee and Nomination Committee of the Company. Mr.
Hilado is a Certified Public Accountant with a Bachelor of Science degree in Commerce from
the De La Salle College in Bacolod and a Master’s degree in Business Administration
from Harvard Business School.
7
Ramon R. del Rosario, Jr, is President and Chief Executive Officer, and Vice Chairman of the
Board of the Company. He is also the President and Chief Executive Officer of PHINMA, Inc.,
Chairman of Araullo University, Cagayan de Oro College, University of Iloilo, and University of
Pangasinan, educational institutions under the Phinma Education Network. He is also Chairman
of Trans-Asia Power Generation Corp., Trans-Asia Renewable Energy Corp., Microtel Inns and
Suites (Pilipinas), Inc., Microtel Development Corp., United Pulp and Paper., Inc., Fuld & Co., Inc.
and Fuld & Co. (Philippines), Inc. and a member of the Board of Directors of other PHINMA
managed companies. He is Vice Chairman and Executive Committee Chairman of Trans-Asia Oil
and Energy Development Corp. He is also a member of the Board of Directors of Ayala Corp. and
Holcim Philippines, Inc. Mr. del Rosario is Chairman of the Makati Business Club and Philippine
Business for Education. He served as Philippine Secretary of Finance in 1992-1993. He is the
brother of Victor J. del Rosario. He has been a Director of the Company since 1979 and became
President and Vice-Chairman of the Board on December 12, 2003. Mr. del Rosario is a graduate
of De La Salle University and Harvard Business School.
Magdaleno B. Albarracin, Jr. has been Senior Executive Vice President of the Company since
1988 and is Vice-Chairman of Phinma, Inc. He is also a director of Holcim Philippines, Inc. and
holds directorates in various Phinma companies. Dr. Albarracin served as Dean of the University
of the Philippines College of Business Administration, as member of the Board of Regents of UP,
as member of the Board of Trustees of the University of San Carlos, Cebu City and as President
of the Asean Federation of Cement Manufacturers. Dr. Albarracin has a Bachelor of Science
degree in Electrical Engineering from the University of the Philippines and a Master of
Science degree in Electrical Engineering from the University of Michigan. He obtained his
Master in Business Administration degree from the University of the Philippines and his Doctorate
in Business Administration from Harvard University. He has been a Director of the Company
since 1980.
Roberto M. Laviña was appointed as Senior Executive Vice President and Chief Operating
Officer last July 27, 2012. Mr. Laviña is also the Senior Executive Vice President and Chief
Operating Officer/ Phinma Group Chief Financial Officer of PHINMA, Inc. and Senior Executive
Vice President / Treasurer of Trans-Asia Oil and Energy Development Corporation. He also
occupies various executive posts in PHINMA-managed companies. He holds a Bachelor of
Science degree in Economics from Ateneo de Manila University and obtained his Masters degree
in Business Management from the Asian Institute of Management. He became a Director of the
Company on May 20, 2004.
Victor J. del Rosario has been the Executive Vice President / Chief Financial Officer of the
company since 1995. He is also the Vice-Chairman and Chief Executive Officer of Union
Galvasteel Corporation and the Chief Strategy Officer of PHINMA, Inc. He is also a member of
the Board of Directors of PHINMA, Inc. and various PHINMA-managed companies. Mr. del
Rosario is an Economics and Accounting graduate of the De La Salle University and holds
a Master of Business Administration degree from Columbia University. He is the brother
of Mr. Ramon R. del Rosario, Jr. He has been a Director of the Company since 1987.
Jose L. Cuisia, Jr. is the Ambassador Extraordinary and Plenipotentiary to the United States of
America and is the Vice-Chairman of The Philippine American Life and General Insurance
Company. He is also the Chairman of the Board for The Covenant Car Company, Inc. (TCI) and
the Vice-Chairman of the Board of SM Prime Holdings (SMPHI). He holds directorates in BPIPhilam Life Assurance Co. (BPLAC), PHINMA Corporation, Holcim Philippines, Inc., Manila
Water Company, Inc., Integra Business Processing Solutions, Inc. (Integra BPSI), ICCP Holdings
and Beacon Property Ventures (all of which are publicly listed companies). Ambassador Cuisia
previously served the Philippine Government as Governor of the Philippine Central Bank and
Chairman of its Monetary Board from 1990-1993. He was also appointed Commissioner,
representative of the Employer’s Group, for the Social Security System (SSS) last SeptemberDecember 2010. The Ambassador was also Governor for the Philippines to the International
8
Monetary Fund (IMF) and Alternate Governor to the World Bank. Prior to service in the Central
Bank, he was also Administrator and CEO of the Philippine Social Security System from 19861990. He received his Bachelor Science degree in Commerce from De La Salle University
and holds a Master’s degree in Business Administration from the Wharton School of Business.
Ambassador Cuisia has been a Director of the Company since 1994.
Felipe B. Alfonso is the Vice-Chairman of the Board of Trustees of the Asian Institute of
Management (AIM) Scientific Research Foundation, Inc. He was previously President of the
Asian Institute of Management, Chairman and subsequently Vice Chairman of Manila Electric
Company and was Chairman of H&Q Philippine Holdings, Inc. Currently, he is the Chairman of
the Board of e-Meralco Ventures, Inc. (EMVI), Radius Inc., and STI Inc. and I-Academy Inc. He is
a member of the board of directors of AIG Global Fund, Inc., Lopez Holdings Corporation,
Jollibee Foods Corporation, PHILAM Bond Fund, Inc., PHILAM Dollar Bond Fund, Inc., PHILAM
Fund, Inc., PHILAM Managed Income Fund, Inc., PHILAM Strategic Growth Fund, Inc., and
Philippine Investment Management, Inc. (Phinma) and served in Andorra Ventures Corporation
and First Private Power Corporation. He is a Trustee of the Coca-Cola Foundation of the
Philippines, First Philippine Conservation, Inc. (FPCI), Knowledge Channel Foundation, Inc., and
STI Foundation. He is also the Vice Chairman of the Lopez Group Foundation, Inc. Mr. Alfonso
holds a Bachelor of Laws degree from the Ateneo de Manila University and obtained his Master’s
degree in Business Administration from New York University. He became an Independent
Director of the Company on April 19, 2001.
Guillermo D. Luchangco is the Chairman and CEO of various companies under the ICCP
Group and is Chairman and President of Beacon Property Ventures, Inc. He is a director of
various companies including PHINMA Property Holdings Corp., Fuld Philippines, Inc., Globe
Telecom, Inc., Roxas & Company, Inc., Ionics Inc., Ionic Circuits, Ltd. He was formerly the ViceChairman and President of Republic Glass Corporation in 1987 and the Managing Director of
SGV & Co. in 1980. Mr. Luchangco received his Bachelor of Science degree in Chemical
Engineering (Magna cum Laude), from De La Salle University and holds a Master’s degree in
Business Administration from the Harvard Business School. He became an Independent Director
of the Company on April 11, 2005.
Roberto F. de Ocampo previously served as Secretary of Finance and was the former Chairman
and Chief Executive Officer of the Development Bank of the Philippines. He is currently
President of Philam Fund, Inc., Philam Bond Fund, Inc., Philam Strategic Growth Fund, Inc. and
director of Alaska Milk Corp., Rizal Commercial Banking Corporation, Robinson’s Land
Corporation and EEI Corporation. He has a Bachelor of Arts degree (major in Economics) from
the Ateneo de Manila University, a Master’s degree in Business Administration from the
University of Michigan, and a post-graduate diploma from the London School of Economics. He
has been conferred Doctorates (Honoris Causa) by San Beda College, De La Salle University,
Philippine Women’s University and University of Angeles City. He became an Independent
Director of the Company on April 2, 2009.
Omar T. Cruz is the President and Chief Executive Officer of BPI-Philippine-American Life
Assurance Corporation. He was the National Treasurer of the Republic of the Philippines from
March 1, 2005 to May 31, 2007.
He was previously Vice President in Treasury, Risk
Management, Financial Institution Group and Private Banking Group at Citibank N.A., President
at Citicorp Securities International, Inc, Director of ABN AMRO Bank and Governor at the
Philippine Stock Exchange. He has a Bachelor of Science degree in Industrial Management
Engineering from De La Salle College and a Master of Science degree in Industrial Economics
from the University of Asia and the Pacific.
Filomeno G. Francisco was formerly President and Chief Operating Officer of AB Capital and
Investment Corporation (ABCIC). He is currently President of Brown Cross Investments
Corporation and Chairman of Ginory Holdings Corporation. Mr. Francisco served on the Boards
of trade organizations, Investment House Association of the Philippines, Philippine Stock
9
Exchange, PSE Foundation and Manila Stock Exchange. Mr. Francisco also held directorates in
ABCIC, Cebu Holdings, Inc, Philippines Long-Term Equity Fund, Hi Cement Corporation, and
United Pulp and Paper Co., Inc. He has a Bachelor of Science degree in Management
Engineering from the Ateneo de Manila University.
b)
Executive Officer
Table 4 – Executive Officers
Name
Ramon R. del Rosario, Jr
Roberto M. Laviña
Victor J. del Rosario
Magdaleno B. Albarracin, Jr.
Pythagoras L. Brion
Regina B. Alvarez
Cecille B. Arenillo
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Age
68
62
64
76
60
46
55
Rizalina P. Andrada
Rolando Soliven
Juan J. Diaz
Filipino
Filipino
Filipino
53
38
82
Position
President & CEO
Senior Exec. Vice President & COO
Executive Vice President and CFO
Senior Exec. Vice President
Senior Vice President and Treasurer
Senior Vice President – Finance
Vice President - Treasury and Compliance
Officer
Vice President – Finance
Assistant Vice Pres. – Internal Audit
Corporate Secretary
Ramon R. del Rosario, Jr, is President and Chief Executive Officer, and Vice Chairman of the
Board of the Company. He is also the President and Chief Executive Officer of PHINMA, Inc.,
Chairman of Araullo University, Cagayan de Oro College, University of Iloilo, and University of
Pangasinan, educational institutions under the Phinma Education Network. He is also Chairman
of Trans-Asia Power Generation Corp., Trans-Asia Renewable Energy Corp., Microtel Inns and
Suites (Pilipinas), Inc., Microtel Development Corp., United Pulp and Paper., Inc., Fuld & Co., Inc.
and Fuld & Co. (Philippines), Inc. and a member of the Board of Directors of other PHINMA
managed companies. He is Vice Chairman and Executive Committee Chairman of Trans-Asia Oil
and Energy Development Corp. He is also a member of the Board of Directors of Ayala Corp. and
Holcim Philippines, Inc. Mr. del Rosario is Chairman of the Makati Business Club and Philippine
Business for Education. He served as Philippine Secretary of Finance in 1992-1993. He is the
brother of Victor J. del Rosario. He has been a Director of the Company since 1979 and became
President and Vice-Chairman of the Board on December 12, 2003. Mr. del Rosario is a graduate
of De La Salle University and Harvard Business School.
Magdaleno B. Albarracin, Jr. has been Senior Executive Vice President of the Company since
1988 and is Vice-Chairman of Phinma, Inc. He is also a director of Holcim Philippines, Inc. and
holds directorates in various Phinma companies. Dr. Albarracin served as Dean of the University
of the Philippines College of Business Administration, as member of the Board of Regents of UP,
as member of the Board of Trustees of the University of San Carlos, Cebu City and as President
of the Asean Federation of Cement Manufacturers. Dr. Albarracin has a Bachelor of Science
degree in Electrical Engineering from the University of the Philippines and a Master of
Science degree in Electrical Engineering from the University of Michigan. He obtained his
Master in Business Administration degree from the University of the Philippines and his Doctorate
in Business Administration from Harvard University. He has been a Director of the Company
since 1980.
10
Victor J. del Rosario has been the Executive Vice President / Chief Financial Officer of the
company since 1995. He is also the Vice-Chairman and Chief Executive Officer of Union
Galvasteel Corporation and the Chief Strategy Officer of PHINMA, Inc. He is also a member of
the Board of Directors of PHINMA and various PHINMA-managed companies. Mr. del
Rosario is an Economics and Accounting graduate of the De La Salle University and holds
a Master of Business Administration degree from Columbia University. He is the brother
of Mr. Ramon R. del Rosario, Jr. He has been a Director of the Company since 1987.
Roberto M. Laviña was appointed as Senior Executive Vice President and Chief Operating
Officer on July 27, 2012. Mr. Laviña is also the Senior Executive Vice President and Chief
Operating Officer/ Phinma Group Chief Financial Officer of PHINMA, Inc. and Senior Executive
Vice President / Treasurer of Trans-Asia Oil and Energy Development Corporation. He also
occupies various executive posts in PHINMA-managed companies. He holds a Bachelor of
Science degree in Economics from Ateneo de Manila University and obtained his Masters degree
in Business Management from the Asian Institute of Management. He became a Director of the
Company on May 20, 2004.
Pythagoras L. Brion, Jr. was appointed as Senior Vice President and Treasurer of the
Company on July 27, 2012. He is Executive Vice President/ Chief Finance Officer of Phinma
Property Holdings, Corporation and Senior Vice President/Treasurer of Phinma, Inc. He was
elected Senior Vice president and Chief Financial Officer of Trans-Asia Oil & Energy
Development Corporation on March 20, 2012. He received his Bachelor of Science in
Management Engineering degree from Ateneo de Manila University and holds a Master in
Business Administration degree from the University of the Philippines.
Regina B. Alvarez has been the Senior Vice President-Finance since April 2005. She holds a
Bachelor of Science degree in Business Administration and Accountancy from the University of
the Philippines and a Master’s degree in Business Administration from the Wharton School of
Business. Ms. Alvarez is also a Certified Public Accountant and is also a Senior Vice President
of PHINMA, Inc.
Cecille B. Arenillo was appointed Vice President - Treasury in May 2007. She holds a
Bachelor of Science in Commerce degree major in Accounting from the University of
Santo Tomas and is a Certified Public Accountant. She was elected as the Company’s
Compliance Officer effective August 1, 2009.
Rizalina P. Andrada was appointed Vice President- Finance in March 2012. She is a Certified
Public Accountant with a Bachelor of Science in Commerce degree major in Accounting from the
Polytechnic University of the Philippines.
Rolando Soliven was elected Assistant Vice President – Internal Audit in March 2012. He holds
a Bachelor of Science degree in Accountancy from San Beda College. He is a Certified Public
Accountant (CPA), Certified Internal Auditor (CIA) and Certified Fraud Examiner (CFE).
Juan J. Diaz is a member of the Philippine Bar and has a Master of Laws degree from Harvard
Law School. He is also the Corporate Secretary of Philippine Investment-Management Inc.,
(PHINMA), Trans-Asia Oil and Energy Development Corporation, Phinma Property Holdings
Corporation and other Phinma managed companies. He has been the Corporate Secretary of the
Company since 1993.
11
c)
Family Relationship
Ramon R. del Rosario, Jr. is the brother of Victor J. del Rosario. There is no other member of the
Board of Directors nor any Executive Officer of the Company related by affinity or consanguinity
other than the ones disclosed.
d)
Independent Directors
The following are the Company’s independent directors. They are neither officers nor substantial
shareholders of Phinma Corporation:
1. Mr. Felipe B. Alfonso
2. Mr. Guillermo D. Luchangco
3. Mr. Roberto F. de Ocampo
e)
Significant Employees
Other than the afore-named Directors and Executive Officers identified in the item on Directors
and Executive Officers in this Information Statement, there are no other employees of the
Company who may have significant influence in the Company’s major and/or strategic planning
and decision-making.
f)
Involvement in Certain Legal Proceedings
To the knowledge and/or information of the Company, the nominees for election as Directors of
the Company, the present members of the Board of Directors or the Executive Officers of the
Company and its subsidiaries, are not presently or during the last five (5) years up to February
28, 2013, involved or have been involved in criminal, bankruptcy or insolvency investigations or
proceedings affecting / involving themselves and/or their property. To the knowledge and/or
information of the Company, the said persons have not been convicted by final judgment of any
offense punishable by the laws of the Republic of the Philippines or of the laws of any other
nation/country or being subjected to any order, judgment or decree or violation of a Securities
Commodities Law.
g)
Warrants and Options Outstanding
There are no warrants or options granted by the Company to any of its Directors or Executive
Officers.
h)
Relationships and Related Transactions
During the last two years, the Company was not a party in any transaction in which a Director or
Executive Officer of the Company, any nominee for election as a director, any security holder
owning more than 10% of the Company’s issued and outstanding shares and/or any member of
his immediate family had a material interest thereon, except as disclosed below.
The Company has a management contract with Philippine Investment-Management (PHINMA),
Inc. up to June 30, 2013, renewable thereafter upon mutual agreement. Under this contract,
PHINMA has a general management authority with the corresponding responsibility over all
operations and personnel of the Company including planning, direction, and supervision of
finance and other business activities of the Company. PHINMA owns 92,486, 823 shares, which
represent 35.72% of total outstanding shares of stock of the Company.
12
i)
Election of Directors
The Directors of the Company are elected at the Annual Stockholders Meeting to hold office for
one year and until their respective successors have been elected and qualified. The Board of
Directors has no reason to believe that any of the aforesaid nominees will be unwilling or
unable to serve if elected as a director.
The incumbent directors of the Company are the nominees to the Board of Directors, as
submitted to and pre-screened by the Nominations Committee of the Company.
The members of the Nomination Committee are the following:
Mr. Oscar J. Hilado
Mr. Ramon R. del Rosario, Jr.
Guillermo D. Luchangco.
j)
-
Chairman
Member
Member
Independent Directors
On June 30, 2004, the SEC approved the Amended By-Laws with regard to incorporation of the
guidelines on the nomination and election of independent directors in compliance with SRC Rule
38.
The following are the nominees for independent directors, as submitted to and pre-screened by
the Nomination Committee of the Company using the aforementioned guidelines, pertinent
provisions of the Company’s Manual on Good Corporate Governance and its Amended By-Laws.
They are neither officers nor substantial shareholders of PHN. Mr. Ramon R. Del Rosario, Jr.
nominated the candidates for independent directors. Mr. del Rosario, Jr. is not related to the
independent director-nominees by consanguinity or affinity.
a. Mr. Felipe B. Alfonso
b. Mr. Guillermo D. Luchangco
c. Dr. Roberto de Ocampo
All the independent directors possess the qualifications and none of the disqualifications under
Securities Regulation Code or the Company’s Manual of Corporate Governance.
6.
Compensation of Directors and Executive Officers
The Directors are paid a bonus based on the net income of the Company for each calendar year.
The compensation received by the officers who are not included in the Board of Directors of the
Company represents salaries and bonuses.
For the calendar years ended December 2011 and 2012, the total salaries, allowances and
bonuses paid by the Company to the directors and executive officers as well as estimated
compensation of directors and executive officers for CY 2013 are as follows :
TABLE 5 - COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Name and Principal Position
Chairman and Top 4
Oscar J. Hilado
Chairman
Ramon R. del Rosario, Jr.
President
Year
Salary
13
Bonus
Others
Magdaleno B. Albarracin, Jr.
Sr. Exec. Vice President
Victor J. del Rosario
Exec. Vice President & CFO
Roberto M. Laviña
Sr. Vice President –Treasurer
TOTAL
2013*
2012
2011
All other Directors and Officers as a
group unnamed
10,615,726
10,408,350
9,313,500
2012*
2012
2011
10,457,571
10,485,293
8,163,246
11,647,935
15,875,680
16,667,924
910,000
910,000
1,070,000
3,302,325
6,167,893
11,588,182
1,110,000
1,000,000
1,020,000
*Estimated compensation of directors and executive officers for the year .
a)
Compensation of Directors
The Directors receive allowances, per diem and bonus based on a percentage of the net income
of the Company for each calendar year.
There are no other existing arrangements/agreements to which said directors are to be
compensated during the last completed calendar year and the ensuing year.
b)
Employment Contracts and Termination of Employment and Change-in Control
Arrangements
There is no existing contract between the Company, the executive officers or any significant
employee.
Under Article VI, Section 1 of the Company’s By-Laws, the officers of the Corporation shall hold
office for one year and until their successors are chosen and qualified in their stead. Any officer
elected or appointed by the majority of the Board of Directors maybe removed by the affirmative
vote of the Board of Directors.
c)
Compensatory Plan or Arrangement
The compensation received by officers who are not members of the Board of Directors of the
Company represents salaries, bonuses and other benefits.
d)
Compensation Committee
The members of the Compensation Committee as of February 28, 2013 are as follows :
Amb. Jose L. Cuisia, Jr.
Mr. Oscar J. Hilado
Mr. Ramon R. del Rosario, Jr.
Mr. Felipe B. Alfonso
7.
-
Chairman
Member
Member
Member
Appointment of External Auditors
As of December 31, 2012, Sycip, Gorres, Velayo and Company (SGV) has been the Company’s
Independent Public Accountant for the last five (5) years. The same auditing firm has been
endorsed by the Audit Committee to the Board. The Board, in turn, approved the endorsement
and will nominate the appointment of the said auditing firm for the stockholders’ approval at the
14
scheduled Annual Meeting of Stockholders. The said auditing firm has accepted the Company’s
invitation to stand for re-election this year.
Audit services of SGV for the calendar year ended December 31, 2012 included the
examination of the parent and consolidated financial statements of the Company, preparation of
final income tax returns and other services related to filing of reports made with the Securities and
Exchange Commission.
For the last five (5) years, there have been no disagreements with the independent
accountants on any matter pertaining to accounting principles or practices, financial
statement disclosures or auditing scope or procedure.
The Company is in compliance with SRC Rule 68, paragraph 3(b) (iv) requiring the rotation of
external auditors or engagement partners who have been engaged by the Company for a period
of five (5) consecutive years and the mandatory two-year cooling-off period for the reengagement of the same signing partner or individual auditor. The engagement partner who
conducted the audit for Calendar Year 2012 is Ms. Catherine E. Lopez, an SEC accredited
auditing partner of SGV. This is the first year of Ms. Lopez as audit partner of the company.
The members of the Audit Committee are the following :
1.
2.
3.
4.
5.
Mr. Felipe B. Alfonso
Dr. Magdaleno B. Albarracin, Jr.
Mr. Victor J. del Rosario
Mr. Roberto F. de Ocampo
Mr. Filomeno G. Francisco
-
Chairman
Member
Member
Member
Member
The external auditors for the current year and for the most recently completed calendar year are
expected to be present at the shareholders’ meeting, will have the opportunity to make a
statement if they desire to do so, and are expected to be available to respond to appropriate
questions.
The Audit Committee recommended SGV as the Independent Public Accountant for Calendar
Year 2013.
8.
External Audit Fees and Related Services
Audit and Audit-Related Fees
The Company paid or accrued the following fees for professional services rendered by SGV and
Co. for the past two years:
Year
2012
2011
Audit Fees
4,000,000.00
4,000,000.00
Tax Fees
-
Other Fees
-
The above audit fees are for the audit of the Company’s annual financial statements or services
normally provided in connection with statutory and regulatory filings or engagements for CY 2012
and 2011. There were no fees for other services.
The Audit Committee makes recommendations to the Board of Directors concerning the external
auditors and pre-approves audit plans, scope and frequency before the conduct of the external
15
audit. The reappointment of SGV and Co. as the Company’s external auditor was approved by
the stockholders in the Annual Stockholders Meeting held last May 14, 2012.
9.
Financial and Other Information
The Company’s financial statements for the year ended December 31, 2012 and
Management’s Discussion and Analysis or Plan of Operation are attached hereto as Annexes
“B” and “C” respectively.
UPON THE WRITTEN REQUEST OF A STOCKHOLDER, THE COMPANY UNDERTAKES TO
FURNISH SAID STOCKHOLDER A COPY OF THE ANNUAL REPORT ON SEC FORM 17-A,
FREE OF CHARGE. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO THE
CORPORATE SECRETARY, 11/F, PHINMA PLAZA, 39 PLAZA DRIVE, ROCKWELL CENTER,
MAKATI CITY 1210.
10.
Actions with Respect to Minutes of Previous Meeting
At the last Annual Stockholders Meeting held on May 14, 2012, the President and CEO reported
to the stockholders the Company and its subsidiaries operational performance in 2011 while the
CFO reported the Company’s financial performance with a net income of P57.5 million. The
following matters were presented and approved by the stockholders at such meeting:
a)
b)
c)
d)
e)
Minutes of the 2011 Annual Stockholders Meeting;
Ratification of all resolutions of the Board of Directors and acts of Management in
2011 done in the ordinary course of the Company’s business;
2011 Audited Financial Statements;
Election of eleven (11) Directors, including four (4) independent Directors for
2011;
Appointment of SGV as independent external auditors.
For the Annual Stockholders Meeting scheduled on April 17, 2013, the President will report on the
operational performance of the Company and its subsidiaries in 2012 while the CFO will report on
the financial performance. The following matters will also be presented for consideration by the
stockholders at such meeting:
a)
b)
c)
d)
e)
f)
Minutes of the 2012 Annual Stockholders Meeting (Annex D) ;
Ratification of all resolutions of the Board of Directors and acts of Management in
2012 done in the ordinary course of the Company’s business (Annex E);
2012 Audited Financial Statements (Annex B);
Election of eleven (11) Directors, including three (3) independent Directors for
2013;
Appointment of independent external auditor ; and
Renewal of Management Contract with Phinma, Inc. for one (1) year
The approval of the Minutes, Report for the year ended December 31, 2012, and ratification of all
acts, proceedings and resolutions of the Board of Directors and the acts of the officers and
management from the date of the last annual meeting require the affirmative vote of a majority of
the votes cast at the Annual Stockholders Meeting by the stockholders entitled to vote thereon.
16
11.
Compliance with the Company’s Manual on Good Corporate Governance
A discussion of the Company’s compliance with its Manual on Good Corporate Governance is
contained in the latter portion of Management’s Discussion and Analysis or Plan of Operations
attached hereto as “Annex A”.
12.
Other Proposed Actions
The Company and Philippine Investment Management (PHINMA), Inc. entered into a
Management Contract effective for a period of five (5) years which commenced July 1, 2008. The
Management Contract, among others granted PHINMA general management and authority with
the corresponding responsibility over all operations and personnel of the Company including
planning, direction and supervision of finance and other business activities of the Company. The
Board of Directors of the Company desires to continue availing of management services being
rendered by PHINMA, and therefore recommends the renewal of the existing Management
Contract for a period of one (1) year from July 1, 2013 to June 30, 2014 under the same terms
and conditions.
13.
Voting Procedures
The aforementioned motions will require the affirmative vote of a majority of the shares of the
Company’s common stock present, represented and entitled to vote at the Annual Meeting.
Because abstentions with respect to any matter are treated as shares present and represented
and entitled to vote for the purposes of determining whether that matter has been approved by
the stockholders, abstentions have the same effect as negative votes. Broker non-votes and
shares as to which proxy authority has been withheld with respect to any matter are not
deemed to be present or represented for purposes of determining whether stockholder approval
of that matter has been obtained.
Items requiring the vote of stockholders will be presented for approval of the stockholders at the
meeting. If stockholders or proxies of stockholders owning majority of the outstanding capital
stock are present and identified in the meeting, voting shall be by raising of hands or viva voce;
otherwise, voting shall be done in writing by secret ballot and counted thereafter in the presence
of SGV to be able to validate the counting.
14.
Other Matters
At the date hereof, there are no other matters which the Board of Directors intends to present
or has reason to believe others will present at the meeting.
17
S'GflATURE
After reasonable inquiry and to the best of my knowledge and belief, I certiff that the
cortect. This report is signed in ifre City of
inforffiation set forth in this report is true, complete and
Makati on March 22, 2013.
PHINTIA CORPORATION
Issuer
#
aiueu
J. DrAz
Corporate
r***
%
March 22,2013
t8
PHJNMA
Life can be better
June 7,2012
SECURITIES AND EXCHANGE COMMISSION
Attention: Dir. Justina F. Callangan
Corporation and Finance Department
SEC Building
EDSA, Mandaluyong City
PHILIPPINE STOCK EXCHANGE, INC.
Attention: Ms. Janet A. Encarnacion
Head, Disclosure Department
3F Philippine Stock Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City
Gentlemen:
In compliance with the Commission's requirements for independent
certification, under oath, that they possess the qualifications
disqualifications as provided for in the Securities Regulation Code,
the certifications of the following independent directors of Phinma
year 2011:
directors to submit a
and none of the
we submit herewith
Corporation for the
1. Felipe B. Alfonso
2. Guillermo D. Luchangco
3. Roberto F. de Ocampo
We trust the above submission is in full compliance with the SEC requirement.
Thank you.
Very truly yours,
W\\.
W
CECILLE B. ARENILLO
Compliance Officer
PHINMA Corporation 12'h Floor Phinma Plaza, 39 Plaza Drive, Rockwell Center, Makati City 1210
I
Tel: 870-01 00
I
Fax: 870-0456
CERTIFICATION
OF INDEPENDENT
DIRECTORS
I, FELIPE B. ALFONSO, Filipino, of legal age and a resident of #318 Pansipit St. New
Alabang Village, Muntinlupa City, after having duly sworn to in accordance with law do
hereby declare that:
1.
2.
I am an Independent Director of Phinma Corporation.
I am affiliated with the following companies or organizations:
Company / Organization
AIM-SRF,Inc.
Asian Institute of
Management- Ramon V.
del Rosario Center for
Corporate Social
Responsibility
Director
PHINMA, Corp.
Coca-Cola Foundation of
the Philippines
Radius Telecom, Ine.
First Philippine
Conservation, Inc. (FPCI)
First Philippine Realty
Corporation
First Private Power
Corporation
Jollibee Foods Corporation
Knowledge Channel
Foundation, Inc.
Lopez Group Foundation,
Ine.
Lopez Holdings Corporation
PHILAM Bond Fund, Ine.
PHILAM Dollar Bond
Fund,Ine.
PHILAM Fund, Inc.
PHILAM Managed Income
Fund, Ine.
PHILAM Strategic Growth
Position/ Relationship
Vice-Chairman, Board
of Trustees
Period of Service
AFCSR Executive
Adviser
YR 2000-present
AIG Global Fund, Inc
Director
April 2001- present
Trustee
Chairman/ Director
YR 1994-present
May 2000-present
Trustee
June 2008-present
Director
November 2003
Director
November 1997
Director
June 2000-present
Trustee
January 2002-present
Vice Chairman
Director
Director
February 2004-present
April 1997- present
Director
Director
Director
Director
Fund,Ine.
Philippine- Malaysia
Business Council
Philippine Foundation for
Global Concerns, Ine.
PHINMA, Ine.
RP-Thailand Business
Council
STI Foundation
STI,Ine.
STI - Information and
Communications
Technology Academy
(i-Academy)
Integrated Bar of the
Philippines
Makati Business Club
Management Association of
the Philippines
Alabang Country Club
Baguio Country Club
Manila Polo Club
Tagaytay Highlands
International Golf Club,
Inc.
Co-Vice Chair,
Executive Committee
November 1996-present
Trustee
Director
June 1998-present
July 2000-present
Member
Trustee
Chairman
July 2004-present
July 2002-present
Founding Governor
and Chairman
March 2002-present
Member
Member
Member
Member
Member
Member
Member
3.
I possess all the qualifications and none of the disqualifications to serve as an
Independent Director of Phinma Corporation, as provided for in Section 38 of the
Securities Regulation Code and its Implementing Rules and Regulations.
4.
I shall faithfully and diligently comply with my duties and responsibilities as
Independent Director under the Securities Regulation Code.
5.
I shall inform the Corporate Secretary of Phinma Corporation of any changes in
the abovementioned information within five days from its occurrence.
"
Done, this ~
day of
1\.UlJ.;
3.AJ \[
,at
~fv\)
Affiant
!J~ O~ 2012 ,
SUBSCRIBED AND SWORN to before me this
2012 at
MAKA'T. CITY ' affiant personally appeared before me and exhibited to me his/her
Community Tax Certificate No. 0V2403t'&
issued at MkKA 11 Clry
on
1-/0,1&11.
Doc. No.2{..r';
Page No. -((2.. ;
BookNo.~;
Series of 2012.
/
MIGUEL ROMUALDO T. SANIDAD
NOTARY PUBliC
UnW Decembor 31,2013
APPcintrr,c;··t No. M-42 (2012-2013)
I~ No. 883C~~}/_i_~:O-20!21 Makat; Cha ter
,R No. 318/7;)liI1-'IO-2012/
Makati
Rolf No. 33861
6:;'
CERTIFICATION
OF INDEPENDENT DIRECTORS
I, GUILLERMO D. LUCHANGCO,
Filipino,of legal age and a resident of 1148Tamarind
Road, Dasmarinas Village, Makati City after having duly sworn to in accordance
with law do hereby declare that:
1.
I am an Independent Director of PHINMACorporation
2.
I am affiliated with the following companies or organizations:
Company/Organization
Investment & Capital Corp of the Philippines
ICCP Holdings Corp.
ICCP Managers, Inc.
Regatta Properties, Inc.
Pueblo de Oro Development Corp.
RFM-Science Park of the Philippines, Inc
Science Park of the Philippines, Inc.
Cebu Light Industrial Park, Inc.
ICCP Land Management,
Inc
ICCP Venture Partners, Inc
ICCP Venture Partners, Inc.- U.S.
Tech Venture Partners Ltd.
Tech Venture Partners III Ltd
Pacific Synergies Partners IV Ltd.
Beacon Property Ventures, Inc
Manila Exposition Complex, Inc
ICCP Group Foundation, Inc.
Ventrix Holdings Corporation
Pueblo de Oro Golf & Country Club, Inc.
Fuld & Company
Globe Telecommunications
Inc.
lonics, Inc.
lonics, Circuits, Ltd
lonics EMS, Inc.
lonics EMS, Ltd.
lonics Properties, Inc.
lomni Precision, Inc.
Maxima Trading
Phinma Property Holdings Corp.
Remec Broadband Wireless, Holdings Inc.
Roxas & Company, Inc.
Synertronix, Inc.
Inactive Companies:
Palawan Agro-Development
Corp.
Palawan Integrated Development Corp.
Optima Agri-Industrial Corp.
San Isidro Mining Corp.
As of May 15,2012
Position/Relationship
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
&
&
&
&
&
&
&
&
&
&
&
&
&
&
&
CEO
CEO
President
CEO
CEO
CEO
CEO
CEO
CEO
CEO
CEO
CEO
CEO
CEO
President
& President
Period of Service
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
since
March 1987
April 2007
October 1987
October 1993
February 1995
August 1997
June 1989
December 1994
November 1988
September 1989
December 2004
November 2004
October 2004
March 2008
November 2004
March 1995
April 1997
1991
April 1999
May 2011
September 2001
1991
2000
1999
2004
1997
2000
1992
November 2006
January 2007
November 2009
1995
3.
I possessall the qualifications and none of the disqualifications to serve as an
Independent Director of PHINMA Corporation, as provided for in Section 38 of the
Securities Regulation Code and its Implementing Rulesand Regulations.
4.
I shall faithfully and diligently comply with my duties and responsibilities as
Independent Director under the Securities Regulation Code.
5.
I shall inform the Corporate Secretary of PHINMA Corporation, of any
changes in the abovementioned information within five days from its occurrence.
Done, this 16th day of May, 2012 at Makati City, Philippines.
GUILLERMO
CHANGCO
ffiant
[JUN 06 2012
SUBSCRIBEDAND SWORN to before me this __
day of
at
MAKATI
,affiant personally appeared before me and exhibited to me his
Community Tax Certificate No. 07011187 issued at Makati City, Philippines on
February 2, 2012
can
(
Doc. No. U4;
PageNo.~;
Book No. .si:
Seriesof 2012
MIGUELROMa&:
T. SAN lOAD
NOTARY PUBUC
Until December
31,2013
ApPo~f~r~':?~'.t!\Jo.
M-42 (2012-2013)
IBP No. 880L {z;./ '1-10-20121 Makati Chapter
PTH No. 3187750/1-10-2012/ Makati City
Roll No. 33861
.~
-
CERTIFICATION
OF INDEPENDENT DIRECTOR
I, Roberto F. de Ocampo,
Filipino, of legal age and a resident of 121 Victoria St.,
Magallanes Village, Makati City, after having duly sworn to in accordance with law do
hereby declare that:
1.
I am an Independent
Director of PHINMA CORPORATION;
2.
I am affiliated with the following companies or organizations:
NAME OF OFFICE
RFO Center for Public Finance and Regional
Economic Cooperation
EastBay Resorts, Inc
MoneyTree Publishing Inc.
Stradcom Corporation
Tollways Association of the Philippines
Public Finance Institute of the Philippines
British Alumni Association
Seaboard Eastern Insurance Co.
Tranzen Group
Montalban Methane Power Corporation
Agus 3 Hydro Power Corporation
La Costa Development
Makati Business Club
Center for Philippine Futuristics Studies
and Management Inc.
AIM - Gov. Jose B. Fernandez Jr. Center
for Banking and Finance
Philam Fund Inc., Philam Bond Fund Inc.,
Philam Strategic Growth Fund Inc., Philam
Managed Income Fund Inc., PAMI Global
Bond Fund, Inc., Philam Dollar Bond Fund
Inc.
Centennial Group (Washington), D.C.
Emerging Markets Forum
Pacific Gaming Investments Pte. Ltd.
AB Capital & Investment Corporation
Philippine Phosphate Fertilizer Corporation
Thunderbird Resorts, Inc.
Alaska Milk Corp.
Bankard, Inc.
EEl Corporation
POSITION
Chairman of the
Board of Advisors
Chairman
Chairman
DATE ASSUMED
2006
2004
2007
2003
2003
2007
Chairman
Chairman
Chairman
Chairman
Vice-Chairman
Vice-Chairman
Vice-Chairman
Vice-Chairman
Vice-Chairman
Vice-Chairman
Vice - President
2000
2008
2007
2007
2007
2006
2010
Executive Director
2004
Director and President
2005
Founding Director
Founding Director
Director
Director
Director
Director
Director
Director
Director
1999
2005
2010
2000
2007
2007
1999
2006
2005
House of Investments
Beneficial Life Insurance Co., Inc.
Robinsons Land Corporation
Salcon Power Corporation
RCBC
United Overseas Bank Philippines
DFNNInc.
PHINMA Corporation
Manila Polo Club
A Life for Others Foundation
Health Justice Philippines
Director
Director
Director
Director
Director
Director
Director
Director
Director
Founding Trustee
Member, Advisory
Council
The Conference Board (New York)
Member, Global
Advisory Board
Argosy Fund, Inc.
Member, Board of
Advisers
Corporate Governance Institute of the Member, Board of
Philippines
Advisers
Foundation for Economic Freedom
Member, Board of
Advisers
AES Corporation (Philippines)
Member, Board of
Advisers
Navis Investment Partners
Member, Board of
Advisers
Member, Board of
Sa Aklat Sikat Foundation
Advisers
Member, Board of
Philippine Cancer Society
Advisers
Asian Institute of Management
Member, Board of
Trustees
Member, Board of
Angeles University Foundation
Trustees
Development Member, Board of
Ramos
Peace
and
Foundation
Trustees
Member, Board of
SGV Foundation
Trustees
Member, Asia
Trilateral Commission
Pacific Group
Representing
ASEAN
Renewable Energy Asia Fund (Berkeley Strategic Advisor
Energy, UK)
Investment & Capital Corporation of the Director
Philippines (lCCP)
Productivity Member, Board of
Quality
&
Philippine
2000
2008
2003
2002
2006
1999
2009
2010
2010
2010
2004
1998
2004
1999
2008
1999
2001
1998
1998
2003
1999
1999
2000
2008
2011
2012
,-
Movement, Inc.
Foundation for Economic Freedom
Advisers
Chairman
2012
3.
I possess all the qualifications and none of the disqualifications to serve as an
Independent Director of PHINMA CORPORATION, as provided for in Section
38 of the Securities Regulation Code and its Implementing Rules and
Regulations.
4.
I shall faithfully and diligently comply with my duties and responsibilities as
Independent Director under the Securities Regulation Code.
5.
I shall inform the Corporate Secretary of PHINMA CORPORATION, of any
changes in the abovementioned information within five days from its occurrence.
Done, this 4th day of June 2012,at
fJUN 06 2012
SUBSCRIBEDAND SWORN to before me this __
day of
at
MAKAT' err; , affiant personally appeared before me and exhibited to me his/her
Community Tax Certificate No. 07071520 issued at Makati City on 06 March 2012.
Doc. No ..
Page No.
Book No.
U,7 ;
<r~;
81 ;
Series of 2012.
h
MIGUEL
~
ROM6ALDO T. SAN/DAD
NOTARY PUBUC
Until December 31, 2013
AppDini.'nent No, t:1-42 (;':0'12-2013)
18P No. 8830?G! "!-"W-2.0't21 Makati Chapter
PTR No. 3'i87750i 1-10-20121 Makati City
Roll No. 33861
Annex A
COMPLIANCE PROGRAM
Compliance Policy
In accordance with the State’s policy to actively promote corporate governance reforms
aimed to raise investor confidence, develop capital market and help achieve high sustained
growth for the corporate sector and the economy, the Board of Directors, Management, and
Employees of Phinma Corporation (the “Corporation”) commit to the principles and best
practices contained in the Manual on Good Corporate Governance approved in August 2002
and as amended in March 2004, February 2008 and March 2011.
To ensure adherence of the Corporation to corporate principles and best practices contained
in the Manual, a Compliance Evaluation System was developed by the Corporation’s
Compliance Officer and approved by the Board of Directors on July 29, 2003.
Compliance Evaluation System
A. Develop a Corporate Governance Evaluation Form indicating compliance risk,
reference to Code of Corporate Governance and/or Manual, compliance risk owners,
compliance frequency, compliance status, compliance plan and timetable.
B. Identify Compliance Risk Owners.
C. Conduct an annual compliance survey by accomplishing the Corporate Governance
Evaluation Form.
D. Compliance Monitoring
1. Include compliance requirements on organizational and procedural control in
internal audit plan and activities.
2. Obtain external and internal audit findings on the effectiveness of implementation
and oversight of Corporation’s accounting and financial processes.
3. Obtain Agenda and Minutes of meetings of the Board, Audit Committee,
Nomination Committee and Executive Compensation Committee.
4. Attend Board meetings periodically.
5. Conduct compliance checks thru direct interface with compliance risk owners
and/or internal audit and/or legal department.
E. Identify and monitor compliance violations.
1. Advise responsible Compliance Risk Owners of compliance violations.
2. Require plan of compliance to include a definitive timetable from the Compliance
Risk Owners.
3. Review plan of compliance and monitor implementation.
4. Identify unresolved compliance issues and agree on a revised plan and deadline
for regularization.
5. Compile unresolved compliance violations not regularized by the agreed revised
deadline and determine possible penalties.
1
F. Accomplish the Corporate Governance Evaluation Form at the end of the
Corporation’s calendar year.
G. Report to the Chairman of the Board the extent of compliance to the Manual
including recommendation of non-compliance penalties for review and approval of
the Board.
H. Submit to the Securities and Exchange Commission (SEC) and Philippine Stock
Exchange (PSE) a certification on the extent of the Corporation’s compliance with the
Manual for the completed year.
I.
Subject Manual to periodic review and recommend appropriate changes to the
Chairman for endorsement and approval of the Board.
Compliance Certification
As of December 31, 2012, the Corporation substantially complied with the principles and best
practices contained in the Manual on Good Corporate Governance and as required by the SEC,
the Vice President-Compliance Officer, on January 23, 2013 submitted the Corporate
Governance Compliance Certification (SEC Form MCG-2002) to the SEC and PSE. Since there
were no major deviations from the Manual, the Corporation has not imposed any sanctions on
any director, officer or employee.
Corporate Governance Compliance Report
As required by the Philippine Stock Exchange, the Corporation submitted last March 26, 2012, a
Compliance Report on Corporate Governance for Year 2011. For the said year under review, the
Corporation is compliant with all guidelines except for those under Sections 2.8, 4.3 and 4.4.
For the year 2012, the Company has yet to submit its Compliance Report on Corporate
Governance which is due March 31, 2013.
Compliance Monitoring and Improving Corporate Governance
The Compliance Officer and the Internal Auditor monitor the Corporation’s compliance with the
Manual and the timely submission of reports and disclosures to both SEC and PSE. In addition,
the SEC and PSE websites are constantly monitored for relevant circulars or memorandums
affecting, improving, and updating the corporate governance of the Corporation and amending
the Manual, if necessary.
As a result of the Compliance Program, there is effective management of the relationships
between shareholders, stakeholders, directors, creditors, government, and employees.
Furthermore, the internal workings of the Corporation are directed and controlled leading to
corporate integrity, transparency, and enhanced corporate performance, a dominant theme of
Good Corporate Governance.
NMA
PHINMA
Life can be better
STATEMENT OF MANAGEMENT RESPONSIBILITY FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The management of PHINMA CORPORATION AND SUBSIDIARIES is responsible
for the preparation and fair presentation of the consolidated financial statements for the
years ended December 31,20t2 and 2011, including the additional components attached
therein, in accordance with Philippine Financial Reporting Standards. This
responsibility includes designing and implementing intemal controls relevant to the
preparation and fair presentation of the consolidated financial statements that are free
from material misstatement, whether due to fraud or error, selecting and applying
appropriate accounting policies, and making accounting estimates that are reasonable in
the circumstances.
The Board of Directors reviews and approves the consolidated financial statements and
submits the same to the stockholders.
Sycip Gorres Velayo & Co., the independent auditors, appointed by the stockholders has
examined the consolidated financial statements of the company in accordance with
Philippine Standards on Auditing and in its report to the stockholders, has expressed its
opinion on the fairness of presentation upon completion of such examination.
Signed this 6th day of March 2013.
OSCAR J. HILADO
Chairman of the Board
RAMON R. DEL ROSARIO, JR.
President and Chief Executive Officer
VI
J. DEL ROSARIO
Executive Vice President and Chief Financial Officer
PHINMACorporationl2sFloorPhinmaPlaza,39PlazaDrive,Rockwell
Center,Makati
City1210 lTel:870-0100 lFax:870-0456
\-\.
--\-\
/r_--
--/
/ ----=--:-
Life can be better
PHN Statement of Management Responsibility
For Consolidated Financial Statements
March 6, 2013
Page....2
.MAR
1 5 2013
SUBSCRIBED AND SWORN to before me
day of
2013 in Makati City, affiants exhibiting to me their Passport and Community Tax
Certificates, as follows :
this
Name
Oscar J. Hilado
Ramon R. del Rosario. JrVictor J. del Rosario
Passport No. /
Community Tax
Cert. No.
xx4476833
l 0675885
I
07 I 5863
Date of Issue
September 17,2009
January 25,2013
February 27,2013
Place of
Issue
Manila
Makat Citv
Makat Citv
rraregnrnm&/m/rcsahuDAD
NOTARYPIjBLIC'
A c{ I
--W
Page No.
Book No. q b
Series of ndf
Doc.
No.
PHINMA Corporation
1
UntilDeoember 3f,2013
Appointment No. M42 (20 12-?41 3\.
IEF No. 926662; 01-18-13; Makati Chapter
PTR No. 36!{440; 01-18-13; Makati Cig
RollNo.33861
2'h Floor Phinma Plaza, 39 Plaza Drive, Rockwell Center, Makati City '121
0 | Tel: 870-0100 |
Fax: 870-045!
PHINMA Corporation and Subsidiaries
Consolidated Financial Statements
December 31, 2012 and 2011
and Years Ended December 31, 2012, 2011 and 2010
and
Independent Auditors’ Report
SyCip Gorres Velayo & Co.
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax:
(632) 819 0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
PHINMA Corporation
We have audited the accompanying consolidated financial statements of PHINMA Corporation and
Subsidiaries, which comprise the consolidated statements of financial position as at December 31,
2012 and 2011, and the consolidated statements of income, statements of comprehensive income,
statements of changes in equity and statements of cash flows for each of the three years in the period
ended December 31, 2012, and a summary of significant accounting policies and other explanatory
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 from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on 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 about whether the consolidated financial statements are free from 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 auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal 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 of the 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
*SGVMG600202*
A member firm of Ernst & Young Global Limited
-2Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of PHINMA Corporation and Subsidiaries as at December 31, 2012 and 2011, and
their financial performance and their cash flows for each of the three years in the period ended
December 31, 2012 in accordance with Philippine Financial Reporting Standards.
SYCIP GORRES VELAYO & CO.
Catherine E. Lopez
Partner
CPA Certificate No. 86447
SEC Accreditation No. 0468-AR-2 (Group A),
February 14, 2013, valid until February 13, 2016
Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 3669691, January 2, 2013, Makati City
March 6, 2013
*SGVMG600202*
PHINMA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
2011
(As restated Note 6)
2012
(In Thousands)
ASSETS
Current Assets
Cash and cash equivalents (Notes 7, 31 and 32)
Investments held for trading (Notes 8, 31 and 32)
Trade and other receivables (Notes 9, 28, 31 and 32)
Inventories (Note 10)
Input value-added taxes
Derivative asset and other current assets (Notes 31 and 32)
Total Current Assets
P
=465,179
800,415
871,881
956,472
5,425
81,363
3,180,735
=916,157
P
771,517
857,649
977,919
40,697
85,371
3,649,310
Noncurrent Assets
Investments in associates - at equity (Note 11)
Available-for-sale (AFS) investments (Notes 12, 31 and 32)
Property, plant and equipment (Notes 13 and 19)
Investment properties (Notes 14 and 19)
Intangibles (Notes 6 and 15)
Deferred tax assets - net (Note 29)
Other noncurrent assets (Note 16)
Total Noncurrent Assets
2,344,065
232,406
2,258,625
421,707
1,091,033
85,231
31,515
6,464,582
1,835,145
140,990
2,260,744
410,890
1,307,946
49,245
26,640
6,031,600
P
=9,645,317
=9,680,910
P
P
=373,676
536,683
=455,193
P
402,495
197,051
554,797
41,796
17,655
–
23,645
64,654
1,809,957
204,567
103,735
44,889
24,496
2,281
22,095
141,063
1,400,814
LIABILITIES AND EQUITY
Current Liabilities
Notes payable (Notes 17, 31 and 32)
Trade and other payables (Notes 18, 31 and 32)
Unearned revenues - inclusive of current portion of deferred rent
revenue of P
=1.2 million in 2012 and 2011 (Notes 4 and 28)
Trust receipts payable (Notes 10, 31 and 32)
Income and other taxes payable
Due to related parties (Notes 28, 31 and 32)
Derivative liability (Notes 31 and 32)
Current portion of long-term loan payable (Notes 6, 31 and 32)
Current portion of long-term debt (Notes 19, 28, 31 and 32)
Total Current Liabilities
(Forward)
*SGVMG600202*
-2December 31
2011
(As restated Note 6)
2012
(In Thousands)
Noncurrent Liabilities
Long-term debt (Notes 19, 28, 31 and 32)
Long-term loan payable (Notes 6, 31 and 32)
Deferred tax liabilities - net (Note 29)
Pension and other post-employment benefits (Note 30)
Deferred rent revenue - net of current portion (Note 28)
Other noncurrent liabilities (Note 28)
Total Noncurrent Liabilities
Total Liabilities
P
=347,532
47,290
313,736
88,179
46,062
6,727
849,526
2,659,483
=599,659
P
78,912
310,995
58,249
47,228
7,477
1,102,520
2,503,334
Equity Attributable to Equity Holders of the Parent
Capital stock (Note 20)
Additional paid-in capital
Other components of equity (Note 20)
Retained earnings (Note 20)
Equity attributable to equity holders of the parent
2,588,946
256,495
36,032
3,510,855
6,392,328
2,577,249
255,785
33,914
3,649,960
6,516,908
Equity Attributable to Non-controlling Interest (Note 6)
Total Equity
593,506
6,985,834
660,668
7,177,576
P
=9,645,317
=9,680,910
P
See accompanying Notes to Consolidated Financial Statements.
*SGVMG600202*
PHINMA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31
2011
2012
(In Thousands, Except Per Share Data)
REVENUE
Sale of goods
Tuition and school fees
Consultancy services
Investment income (Notes 8 and 21)
Animation services
Rental income (Note 14)
COSTS AND EXPENSES
Cost of sales (Notes 22, 25 and 26)
Cost of educational, animation and consultancy services
(Notes 22, 25 and 26)
General and administrative expenses (Notes 9, 16, 23,
25, 26 and 28)
Selling expenses (Notes 9, 24, 25 and 26)
OTHER INCOME (CHARGES)
Impairment loss on goodwill (Notes 4 and 15)
Equity in net earnings of associates (Note 11)
Interest expense and other financial charges (Note 27)
Foreign exchange losses - net (Note 31)
Gain on sale of investment properties (Notes 9 and 14)
Net gains on derivatives (Note 32)
Income from reversal of unrecoverable input
value-added tax
Others – net (Note 11)
INCOME (LOSS) BEFORE INCOME TAX
PROVISION FOR (BENEFIT FROM)
INCOME TAX (Note 29)
Current
Deferred
2010
P
=3,082,380
726,872
471,262
133,068
80,396
42,655
4,536,633
=2,695,638
P
823,964
258,065
102,335
26,631
46,872
3,953,505
=2,795,576
P
754,323
–
84,067
60,127
79,639
3,773,732
(2,403,519)
(2,117,967)
(2,038,152)
(666,489)
(690,310)
(573,259)
(914,608)
(442,086)
(4,426,702)
(641,444)
(329,018)
(3,778,739)
(561,983)
(228,987)
(3,402,381)
(212,300)
118,944
(101,303)
(22,874)
16,277
12,270
(166,369)
137,656
(108,381)
(6,298)
1,611
7,121
–
59,391
(113,421)
(32,402)
386,073
50,061
1,542
30,399
(157,045)
–
63,424
(71,236)
52,349
33,428
435,479
(47,114)
103,530
806,830
69,535
(26,592)
42,943
128,294
(82,273)
46,021
135,619
31,208
166,827
NET INCOME (LOSS)
(P
=90,057)
=57,509
P
=640,003
P
Attributable to
Equity holders of the Parent
Non-controlling interest
Net income (loss)
(P
=36,010)
(54,047)
(P
=90,057)
P81,018
=
(23,509)
=57,509
P
=475,846
P
164,157
=640,003
P
Basic/Diluted Earnings (Loss) Per Common Share Attributable to Equity Holders of the Parent
(Note 34)
(P
=0.14)
=0.31
P
=1.85
P
See accompanying Notes to Consolidated Financial Statements.
*SGVMG600202*
PHINMA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
2012
Years Ended December 31
2011
2010
(In Thousands)
NET INCOME (LOSS)
OTHER COMPREHENSIVE INCOME (LOSS)
Cumulative translation adjustments
Unrealized gain (loss) on change in fair value of AFS
investments (Note 12)
Share in unrealized gain (loss) on change in fair value of
AFS investments of associates (Note 11)
(P
=90,057)
=57,509
P
=640,003
P
(5,803)
790
6,184
(635)
(367)
1,060
4,713
(1,725)
(175)
248
7,731
14,975
TOTAL COMPREHENSIVE INCOME (LOSS)
(P
=91,782)
=57,757
P
=654,978
P
Attributable to
Equity holders of the Parent
Non-controlling interest
Total Comprehensive Income (Loss)
(P
=37,735)
(54,047)
(P
=91,782)
P81,266
=
(23,509)
=57,757
P
=489,576
P
165,402
=654,978
P
See accompanying Notes to Consolidated Financial Statements.
*SGVMG600202*
PHINMA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital
Stock
(Note 20)
Additional
Paid-in
Capital
Share in
Equity
Component of
Convertible
Notes
(Note 20)
Equity Attributable to Equity Holders of the Parent Company
Share in
Unrealized
Unrealized
Gain (Loss) on Gain (Loss) on
Change in Fair
Change in
Value of AFS
Fair Value
Investments of
of AFS
Cumulative
Associates
Investments
Translation
Other
Retained Earnings
(Notes 11
(Notes 12
Adjustments
Reserves Appropriated
and 20)
and 20)
(Note 20)
(Note 20)
(Note 20) Unappropriated
Subtotal
Noncontrolling
Interest
Total
Equity
(In Thousands)
Balance, January 1, 2012
Total comprehensive income (loss)
Cash dividends - =
P0.40 a share (Note 20)
Issuance of stocks from stock purchase
plan (Note 20)
Stock purchase plan (Note 20)
Dividends received
Acquisition of subsidiaries (Note 6)
Acquisition of non-controlling interest
(Note 6)
Subscriptions
Balance, December 31, 2012
P
= 2,577,249
P
= 255,785
P
=–
–
–
–
P
= 19,051
4,713
–
11,697
–
–
–
710
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
P
= 2,588,946
–
–
P
= 256,495
–
–
P
=–
–
–
P
= 23,764
–
–
P
= 350
Balance, January 1, 2011
Total comprehensive income
Cash dividends - =
P0.40 a share (Note 20)
Dividends received
Acquisition of subsidiaries (Note 6)
Subscriptions
Balance, December 31, 2011
=2,577,249
P
–
–
–
–
–
=2,577,249
P
=255,785
P
–
–
–
–
–
=255,785
P
=–
P
–
–
–
–
–
=–
P
=19,226
P
(175)
–
–
–
–
=19,051
P
=1,352
P
(367)
–
–
–
–
=985
P
Balance, January 1, 2010
Total comprehensive income
Cash dividends - =
P0.40 a share (Note 20)
Dividends received
Subscriptions
Reclassification of share in equity
component of convertible notes
(Note 20)
Change in ownership interest without loss
of control (Note 1)
Balance, December 31, 2010
=2,577,249
P
–
–
–
–
=255,785
P
–
–
–
–
=13,443
P
–
–
–
–
=11,495
P
7,731
–
–
–
=300
P
1,052
–
–
–
–
–
–
–
–
=2,577,249
P
–
=255,785
P
–
=19,226
P
–
=1,352
P
(13,443)
–
=–
P
P
= 985
(635)
–
P
= 4,935
(5,803)
–
P
= 8,943
P
= 1,000,000
–
–
P
= 2,649,960
(36,010)
(103,095)
P
= 6,516,908
(37,735)
(103,095)
P
= 7,177,576
(91,782)
(103,095)
–
–
(21,585)
9,971
–
24,315
(21,585)
9,971
(12,407)
24,315
–
–
–
–
–
–
–
–
–
–
(8,065)
–
P
= 12,786
–
–
P
= 1,000,000
–
–
P
= 2,510,855
(8,065)
–
P
= 6,392,328
(2,016)
515
P
= 593,506
(10,081)
515
P
= 6,985,834
=8,943
P
–
–
–
–
–
=8,943
P
=1,000,000
P
–
–
–
–
–
=1,000,000
P
=2,672,037
P
81,018
(103,095)
–
–
–
=2,649,960
P
=6,538,737
P
81,266
(103,095)
–
–
–
=6,516,908
P
=761,953
P
(23,509)
–
(98,914)
11,902
9,236
=660,668
P
=7,300,690
P
57,757
(103,095)
(98,914)
11,902
9,236
=7,177,576
P
=–
P
–
–
–
–
=1,000,000
P
–
–
–
–
=2,282,587
P
475,846
(103,095)
–
–
=6,140,057
P
489,576
(103,095)
–
–
=626,309
P
165,402
–
(25,218)
4,403
=6,766,366
P
654,978
(103,095)
(25,218)
4,403
–
–
–
16,699
3,256
–
=4,145
P
8,943
=8,943
P
–
=1,000,000
P
–
=2,672,037
P
8,943
=6,538,737
P
–
–
–
–
–
–
(P
= 868)
=4,145
P
790
–
–
–
–
=4,935
P
(P
=802)
4,947
–
–
–
–
24,315
–
–
P
= 660,668
(54,047)
–
–
(8,943)
=761,953
P
3,256
–
=7,300,690
P
See accompanying Notes to Consolidated Financial Statements.
*SGVMG600202*
PHINMA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2012
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before income tax
Noncash adjustment to reconcile income before income tax to net
cash flows:
Depreciation and amortization (Note 26)
Impairment loss on goodwill (Note 15)
Equity in net earnings of associates (Note 11)
Interest expense and other financial charges (Note 27)
Retirement cost (Note 30)
Interest income (Note 21)
Provision for unrecoverable input value-added tax
(Note 23)
Dividend income (Note 21)
Stock purchase plan expense (Note 20)
Gain on sale of investment property
Net gains on derivatives - net (Note 32)
Unrealized foreign exchange loss - net
Loss (gain) on sale of property and equipment
Income from reversal of unrecoverable input value-added tax
Gain on sale of AFS investments
Operating income before working capital changes
Decrease (increase) in:
Short-term investments
Investments held for trading
Trade and other receivables
Inventories
Other current assets
Increase (decrease) in:
Trade and other payables
Trust receipts payable
Other taxes payable
Unearned revenues
Cash generated from operations
Interest paid
Income tax paid
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to:
Investments in associates
Property, plant and equipment and investment properties (Notes
13, 14 and 37)
Proceeds from sale/settlement of:
AFS investments
Forward currency contracts
Investment properties
Property, plant and equipment
Purchase price adjustment (Note 15)
Receipt of deposits for investment
Acquisition of subsidiaries - net of cash acquired (Note 6)
Interest received
Decrease (increase) in other noncurrent assets
Dividends received
Acquisition of non-controlling interest (Note 6)
Net cash provided by (used in) investing activities
Years Ended December 31
2011
2010
(In Thousands)
(P
=47,114)
=103,530
P
=806,830
P
233,048
212,300
(118,944)
101,303
63,721
(58,303)
218,079
166,369
(137,656)
108,381
38,478
(61,287)
238,380
–
(59,391)
113,421
38,168
(60,252)
45,471
(23,896)
19,821
(16,276)
(12,270)
3,107
(1,992)
–
–
399,976
7,372
(2,454)
–
(1,611)
(7,121)
4,672
(56)
–
(4)
436,692
4,063
(4,469)
–
(386,073)
(50,061)
17,442
72
(52,349)
(16)
605,765
–
(27,206)
(16,665)
21,447
37,336
47,316
67,707
309,983
(147,009)
(6,586)
(47,316)
(291,404)
308,999
(229,669)
(11,066)
5,497
451,061
(6,424)
(7,515)
857,507
(103,835)
(63,734)
689,938
(83,689)
(18,589)
(63,614)
9,683
551,894
(109,266)
(102,452)
340,176
(219,211)
(9,484)
(5,694)
6,419
107,339
(127,981)
(87,618)
(108,260)
(533,153)
(350,364)
(250,638)
(315,790)
(222,202)
9,502
9,460
24,538
26,196
7,063
96,120
–
59,424
(66,829)
54,201
(10,081)
(574,197)
257,940
13,844
9,986
766
–
–
(235,141)
58,381
19,640
17,986
–
(522,752)
258
52,484
135,300
47,141
–
–
–
60,372
9,333
43,570
–
126,256
–
*SGVMG600202*
-2-
2012
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from availment of:
Notes payable
Long-term debt
Payments of:
Notes payable
Long-term debt
Cash dividends
Long-term loan payable
Increase (decrease) in:
Non-controlling interest
Due to related parties
Net cash provided by (used in) financing activities
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
Years Ended December 31
2011
2010
(In Thousands)
380,792
–
447,133
37,841
212,991
400,000
(462,309)
(330,359)
(102,014)
(34,894)
(241,737)
(142,474)
(101,874)
(4,160)
(67,634)
(256,440)
(103,095)
–
(11,099)
(6,841)
(566,724)
(89,677)
(8,433)
(103,381)
(16,314)
(27,341)
142,167
(56)
(10,210)
5
(450,978)
(286,013)
149,953
916,157
1,202,170
1,052,217
P
=465,179
=916,157
P
=1,202,170
P
See accompanying Notes to Consolidated Financial Statements.
*SGVMG600202*
PHINMA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
PHINMA Corporation (PHN or the Parent Company) was incorporated in the Philippines and
registered with the Philippine Securities and Exchange Commission (SEC) on March 12, 1957.
On August 2, 2006, the Philippine SEC approved the extension of the Parent Company’s corporate
life for another 50 years. Also, on May 27, 2010, the Philippine SEC approved the change in the
Parent Company’s corporate name from Bacnotan Consolidated Industries, Inc. to PHINMA
Corporation. Its principal activity is investment holdings of shares in various subsidiaries,
associates and affiliates and other financial instruments.
Following are the subsidiaries of the Parent Company and the nature of their principal business
activities:
Name of Subsidiaries
Union Galvasteel Corporation (UGC) (a)
One Animate Limited (OAL) and Subsidiary (b)
Calendar/Fiscal
Nature of Business
Yearend
Manufacture and distribution
of steel products
December 31
Business Process Outsourcing
-Animation services
December 31
Pamantasan ng Araullo (Araullo University),
Inc.(AU) (c)
Educational institution
Cagayan de Oro College, Inc. (COC) (c)
Educational institution
(c)
University of Iloilo (UI)
Educational institution
University of Pangasinan (UPANG) and Subsidiary(c) Educational institution
P & S Holdings Corporation (PSHC)
Investment and real estate
holdings
Asian Plaza, Inc. (API)
Lease of real property
Fuld & Company, Inc. (Fuld U.S.) and Subsidiary (d) Business Research
Fuld & Company (Philippines), Inc.
(Fuld Philippines) (e)
Business Research
(a)
(b)
(c)
(d)
(e)
Percentage of Ownership
2011
2012
98.08
98.08
80.00
80.00
March 31
March 31
March 31
March 31
78.64
74.21
69.79
69.75
78.64
74.21
69.79
69.75
December 31
December 31
December 31
60.00
57.62
85.00
60.00
57.62
85.00
December 31
85.00
85.00
On December 22, 2010, the SEC approved the merger of UGC and Atlas Holdings Corporation (AHC) with UGC as the surviving
entity. The execution of the merger involved a share swap between UGC and the holder of the non-controlling interest in AHC.
This resulted in a decrease of the Parent Company’s ownership in UGC from 98.36% .
OAL owns 100% interest in Toon City Animation, Inc. (Toon City) in 2012 and 95% in 2011.
Balances of these subsidiaries as of and for the year ended December 31 were used for consolidation purposes, which is the same
reporting period of PHN.
Acquired by PHN on June 10, 2011.
Acquired by PHN on July 25, 2011.
The Parent Company and its subsidiaries (collectively referred to as “the Company”) are all
incorporated in the Philippines except for OAL and Fuld U.S. OAL is incorporated in Hong Kong
while Fuld U.S. is incorporated in the United States of America (USA). The Company’s ultimate
parent company is Philippine Investment-Management (PHINMA), Inc., which is also
incorporated in the Philippines.
The information on the segments of the Company is presented in Note 35.
The registered office address of the Parent Company is 12th Floor, Phinma Plaza, 39 Plaza Drive,
Rockwell Center, Makati City.
The accompanying consolidated financial statements were approved and authorized for issuance
by the Board of Directors (BOD) on March 6, 2013.
*SGVMG600202*
-2-
2. Basis of Preparation and Statement of Compliance
The accompanying consolidated financial statements of the Company have been prepared using
the historical cost basis, except for investments held for trading, available-for-sale (AFS)
investments and derivative financial instruments that have been measured at fair value. The
consolidated financial statements are presented in Philippine peso, the Parent Company’s
functional currency. All values are rounded to the nearest thousand peso unless otherwise stated.
The accompanying consolidated financial statements have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS). PFRS includes statements named PFRS,
Philippine Accounting Standards (PAS) and Philippine Interpretations from the International
Financial Reporting and Interpretations Committee (IFRIC) issued by the Financial Reporting
Standards Council (FRSC).
3. Changes in Accounting Policies and Disclosures
Current Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year except for
the following amended PFRS which were adopted on January 1, 2012.
§
PFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets (Amendments)
The amendments require additional disclosures about financial assets that have been
transferred but not derecognized to enhance the understanding of the relationship between
those assets that have not been derecognized and their associated liabilities. In addition, the
amendments require disclosures about continuing involvement in derecognized assets to
enable users of financial statements to evaluate the nature of, and risks associated with, the
entity’s continuing involvement in those derecognized assets. The amendments affect
disclosures only and have no impact on the Company’s financial position or performance.
§
PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets (Amendments)
This amendment to PAS 12 clarifies the determination of deferred tax on investment property
measured at fair value. The amendment introduces a rebuttable presumption that the carrying
amount of investment property measured using the fair value model in PAS 40, Investment
Property, will be recovered through sale and, accordingly, requires that any related deferred
tax should be measured on a ‘sale’ basis. The presumption is rebutted if the investment
property is depreciable and it is held within a business model whose objective is to consume
substantially all of the economic benefits in the investment property over time (‘use’ basis),
rather than through sale. Furthermore, the amendment introduces the requirement that
deferred tax on non-depreciable assets measured using the revaluation model in PAS 16,
Property, Plant and Equipment, always be measured on a sale basis of the asset. The
amendments have no impact on the Company’s financial statements since the Company has
no investment properties and property and equipment carried at revalued amounts.
Standards and Interpretations Issued but not yet Effective
Standards and interpretations issued effective subsequent to December 31, 2012 are listed below.
The Company intends to adopt these standards and interpretations when they become effective.
§
PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial
Liabilities (Amendments), These amendments require an entity to disclose information about
rights of set-off and related arrangements (such as collateral agreements). The new
*SGVMG600202*
-3disclosures are required for all recognized financial instruments that are set-off in accordance
with PAS 32, Financial Instruments: Presentation. These disclosures also apply to recognized
financial instruments that are subject to an enforceable master netting arrangement or ‘similar
agreement’, irrespective of whether they are set-off in accordance with PAS 32. The
amendments require entities to disclose, in a tabular format unless another format is more
appropriate, the following minimum quantitative information. This is presented separately for
financial assets and financial liabilities recognized at the end of the reporting period:
(a) The gross amounts of those recognized financial assets and recognized financial liabilities;
(b) The amounts that are set-off in accordance with the criteria in PAS 32 when determining
the net amounts presented in the statement of financial position;
(c) The net amounts presented in the statement of financial position;
(d) The amounts subject to an enforceable master netting arrangement or similar agreement
that are not otherwise included in (b) above, including:
i. Amounts related to recognized financial instruments that do not meet some or all of
the offsetting criteria in PAS 32; and
ii. Amounts related to financial collateral (including cash collateral); and
(e) The net amount after deducting the amounts in (d) from the amounts in (c) above.
The amendments to PFRS 7 are to be retrospectively applied and are effective for annual
periods beginning on or after January 1, 2013. The amendments affect disclosures only and
have no impact on the Company’s financial position or performance.
§
PFRS 10, Consolidated Financial Statements, PFRS 10 replaces the portion of PAS 27,
Consolidated and Separate Financial Statements, that addresses the accounting for
consolidated financial statements. It also includes the issues raised in Standing Interpretation
Committee (SIC) 12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single
control model that applies to all entities including special purpose entities. The changes
introduced by PFRS 10 will require management to exercise significant judgment to determine
which entities are controlled, and therefore, are required to be consolidated by a parent,
compared with the requirements that were in PAS 27. The standard becomes effective for
annual periods beginning on or after January 1, 2013.
A reassessment of control was performed by the Parent Company on all its subsidiaries in
accordance with the provisions of PFRS 10. Following the reassessment, the Parent Company
determined that it still controls all of its subsidiaries.
§
PFRS 11, Joint Arrangements, PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC
13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers. PFRS 11 removes
the option to account for jointly controlled entities using proportionate consolidation. Instead,
jointly controlled entities that meet the definition of a joint venture must be accounted for
using the equity method. The standard becomes effective for annual periods beginning on or
after January 1, 2013. The Company does not expect this Standard to have any impact on its
financial statements.
§
PFRS 12, Disclosure of Interests in Other Entities, PFRS 12 includes all of the disclosures
related to consolidated financial statements that were previously in PAS 27, as well as all the
disclosures that were previously included in PAS 31 and PAS 28, Investments in Associates.
These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates
and structured entities. A number of new disclosures are also required. The standard becomes
effective for annual periods beginning on or after January 1, 2013.
*SGVMG600202*
-4The adoption of PFRS 12 will affect disclosures only and have no impact on the Company’s
financial position or performance.
§
PFRS 13, Fair Value Measurement, PFRS 13 establishes a single source of guidance under
PFRSs for all fair value measurements. PFRS 13 does not change when an entity is required
to use fair value, but rather provides guidance on how to measure fair value under PFRS when
fair value is required or permitted. This standard should be applied prospectively as of the
beginning of the annual period in which it is initially applied. Its disclosure requirements need
not be applied in comparative information provided for periods before initial application of
PFRS 13. The standard becomes effective for annual periods beginning on or after January 1,
2013.
The Company does not anticipate that the adoption of this standard will have a significant
impact on its financial position and performance.
§
PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive
Income (OCI) (Amendments), The amendments to PAS 1 change the grouping of items
presented in OCI. Items that can be reclassified (or “recycled”) to profit or loss at a future
point in time (for example, upon derecognition or settlement) will be presented separately
from items that will never be recycled. The amendments affect presentation only and have no
impact on the Company’s financial position or performance. The amendments are not
expected to have any impact on the Company’s financial position or performance. The
amendments become effective for annual periods beginning on or after July 1, 2012.
§
PAS 19, Employee Benefits (Revised), Amendments to PAS 19 range from fundamental
changes such as removing the corridor mechanism and the concept of expected returns on plan
assets to simple clarifications and rewording. The revised standard also requires new
disclosures such as, among others, a sensitivity analysis for each significant actuarial
assumption, information on asset-liability matching strategies, duration of the defined benefit
obligation, and disaggregation of plan assets by nature and risk. The amendments become
effective for annual periods beginning on or after January 1, 2013. Once effective, the
Company has to apply the amendments retroactively to the earliest period presented.
The Company reviewed its existing employee benefits and determined that the amended
standard has significant impact on its accounting for retirement benefits. The Company
obtained the services of an external actuary to compute the impact to the financial statements
upon adoption of the standard. The effects are detailed below:
Increase (decrease) in:
Consolidated balance sheet
Net defined benefit asset/liability
Deferred tax asset/liability
Other comprehensive income
Retained earnings
As at
December 31,
2012
=’000
P
As at
January 1,
2012
=’000
P
104,787
26,031
21,106
(99,862)
85,997
14,187
(5,340)
(66,471)
*SGVMG600202*
-52012
=’000
P
Consolidated income statement
Net benefit cost
Income tax expense
Profit for the year
45,235
(11,844)
33,391
§
PAS 27, Separate Financial Statements (as revised in 2011), As a consequence of the
issuance of the new PFRS 10, Consolidated Financial Statements, and PFRS 12, Disclosure of
Interests in Other Entities, what remains of PAS 27 is limited to accounting for subsidiaries,
jointly controlled entities, and associates in the separate financial statements. The adoption of
the amended PAS 27 will not have a significant impact on the separate financial statements of
the entities in the Company. The amendment becomes effective for annual periods beginning
on or after January 1, 2013.
§
PAS 28, Investments in Associates and Joint Ventures (as revised in 2011), As a consequence
of the issuance of the new PFRS 11, Joint Arrangements, and PFRS 12, Disclosure of
Interests in Other Entities, PAS 28 has been renamed PAS 28, Investments in Associates and
Joint Ventures, and describes the application of the equity method to investments in joint
ventures in addition to associates. The amendment becomes effective for annual periods
beginning on or after January 1, 2013.
§
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface
Mine, This interpretation applies to waste removal costs (“stripping costs”) that are incurred
in surface mining activity during the production phase of the mine (“production stripping
costs”). If the benefit from the stripping activity will be realized in the current period, an
entity is required to account for the stripping activity costs as part of the cost of inventory.
When the benefit is the improved access to ore, the entity should recognize these costs as a
non-current asset, only if certain criteria are met (“stripping activity asset”). The stripping
activity asset is accounted for as an addition to, or as an enhancement of, an existing asset.
After initial recognition, the stripping activity asset is carried at its cost or revalued amount
less depreciation or amortization and less impairment losses, in the same way as the existing
asset of which it is a part. The interpretation is effective for annual periods beginning on or
after January 1, 2013. This new interpretation is not relevant to the Company.
§
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments). The amendments clarify the meaning of “currently has a legally
enforceable right to set-off” and also clarify the application of the PAS 32 offsetting criteria to
settlement systems (such as central clearing house systems) which apply gross settlement
mechanisms that are not simultaneous. The amendments affect presentation only and have no
impact on the Company’s financial position or performance. The amendments to PAS 32 are
to be retrospectively applied for annual periods beginning on or after January 1, 2014.
§
PFRS 9, Financial Instruments, PFRS 9, as issued, reflects the first phase on the replacement
of PAS 39 and applies to the classification and measurement of financial assets and liabilities
as defined in PAS 39, Financial Instruments: Recognition and Measurement. Work on
impairment of financial instruments and hedge accounting is still ongoing, with a view to
replacing PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair
value at initial recognition. A debt financial asset may, if the fair value option (FVO) is not
*SGVMG600202*
-6invoked, be subsequently measured at amortized cost if it is held within a business model that
has the objective to hold the assets to collect the contractual cash flows and its contractual
terms give rise, on specified dates, to cash flows that are solely payments of principal and
interest on the principal outstanding. All other debt instruments are subsequently measured at
fair value through profit or loss. All equity financial assets are measured at fair value either
through other comprehensive income (OCI) or profit or loss. Equity financial assets held for
trading must be measured at fair value through profit or loss. For FVO liabilities, the amount
of change in the fair value of a liability that is attributable to changes in credit risk must be
presented in OCI. The remainder of the change in fair value is presented in profit or loss,
unless presentation of the fair value change in respect of the liability’s credit risk in OCI
would create or enlarge an accounting mismatch in profit or loss. All other PAS 39
classification and measurement requirements for financial liabilities have been carried forward
into PFRS 9, including the embedded derivative separation rules and the criteria for using the
FVO. The adoption of the first phase of PFRS 9 will have an effect on the classification and
measurement of the Company’s financial assets, but will potentially have no impact on the
classification and measurement of financial liabilities.
PFRS 9 will become effective for annual periods beginning on or after January 1, 2015.
Annual Improvements to PFRSs (2009-2011 cycle)
The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessary
amendments to PFRSs. The amendments are effective for annual periods beginning on or after
January 1, 2013 and are applied retrospectively. Earlier application is permitted.
§
PFRS 1, First-time Adoption of PFRS - Borrowing Costs
The amendment clarifies that, upon adoption of PFRS, an entity that capitalized borrowing
costs in accordance with its previous generally accepted accounting principles, may carry
forward, without any adjustment, the amount previously capitalized in its opening statement of
financial position at the date of transition. Subsequent to the adoption of PFRS, borrowing
costs are recognized in accordance with PAS 23, Borrowing Costs. The amendment does not
apply to the Company as it is not a first-time adopter of PFRS.
§
PAS 1, Presentation of Financial Statements - Clarification of the requirements for
comparative information
The amendments clarify the requirements for comparative information that are disclosed
voluntarily and those that are mandatory due to retrospective application of an accounting
policy, or retrospective restatement or reclassification of items in the financial statements. An
entity must include comparative information in the related notes to the financial statements
when it voluntarily provides comparative information beyond the minimum required
comparative period. The additional comparative period does not need to contain a complete
set of financial statements. On the other hand, supporting notes for the third balance sheet
(mandatory when there is a retrospective application of an accounting policy, or retrospective
restatement or reclassification of items in the financial statements) are not required. The
amendments are not expected to have an impact on the Company’s financial position or
performance.
*SGVMG600202*
-7§
PAS 16, Property, Plant and Equipment - Classification of servicing equipment
The amendment clarifies that spare parts, stand-by equipment and servicing equipment should
be recognized as property, plant and equipment when they meet the definition of property,
plant and equipment and should be recognized as inventory, if otherwise. The amendment
will not have any significant impact on the Company’s financial position or performance.
§
PAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equity
instruments
The amendment clarifies that income taxes relating to distributions to equity holders and to
transaction costs of an equity transaction are accounted for in accordance with PAS 12. The
Company expects that this amendment will not have any impact on its financial position or
performance.
§
PAS 34, Interim Financial Reporting - Interim financial reporting and segment information
for total assets and liabilities
The amendment clarifies that the total assets and liabilities for a particular reportable segment
need to be disclosed only when the amounts are regularly provided to the chief operating
decision maker and there has been a material change from the amount disclosed in the entity’s
previous annual financial statements for that reportable segment. The amendment affects
disclosures only and has no impact on the Company’s financial position or performance.
4. Summary of Significant Accounting and Financial Reporting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Parent Company and all the
subsidiaries mentioned in Note 1. The financial statements of the subsidiaries are prepared for the
same reporting year as the Parent Company, using consistent accounting policies.
All intercompany balances, transactions, income and expenses and profits and losses resulting
from intercompany transactions are eliminated in full.
Subsidiaries are fully consolidated from the date control is transferred to the Company and cease
to be consolidated from the date control is transferred out of the Company.
Non-controlling interest represents the portion of profit or loss and net assets in the subsidiaries
not held by the Company and is presented in the consolidated statements of income, consolidated
statements of comprehensive income and within equity in the consolidated statements of financial
position, separately from equity attributable to equity holders of the parent. A change in the
ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction and is shown as “Other reserves” under “Other Components of Equity” in the
consolidated statements of changes in equity. If the Company loses control over a subsidiary, it:
§
§
§
§
§
derecognizes the assets (including goodwill) and liabilities of the subsidiary;
derecognizes the carrying amount of any non-controlling interest;
derecognizes the cumulative translation differences, recorded in equity;
recognizes the fair value of the consideration received;
recognizes the fair value of any investment retained;
*SGVMG600202*
-8§
§
recognizes any surplus or deficit in profit or loss;
reclassifies the parent’s share of components previously recognized in other comprehensive
income to profit or loss or retained earnings, as appropriate.
Cash and Cash Equivalents
Cash includes cash on hand and in banks. 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 from the date of acquisition and are subject to an insignificant risk of change in
value.
Financial Instruments - Initial Recognition and Subsequent Measurement
Date of Recognition. The Company recognizes a financial instrument in the consolidated
statements of financial position when it becomes a party to the contractual provisions of the
instrument. All regular way purchases and sales of financial assets are recognized on the trade
date, i.e., the date that the Company commits to purchase the assets. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the period
generally established by regulation or convention in the marketplace. Derivatives are recognized
on a trade date basis.
Initial Recognition of Financial Instruments. Financial instruments are recognized initially at fair
value. Transaction costs are included in the initial measurement of all financial instruments,
except for financial instruments measured at fair value through profit or loss (FVPL).
The Company classifies its financial instruments into the following categories: financial assets and
liabilities at FVPL, loans and receivables, held-to-maturity (HTM) investments, AFS investments
and other financial liabilities. The classification depends on the purpose for which the instruments
are acquired and whether they are quoted in an active market. Management determines the
classification at initial recognition and, where allowed and appropriate, re-evaluates this
classification at every financial reporting date.
Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or
a component that is a financial liability, are reported as expense or income. Distributions to
holders of financial instruments classified as equity are charged directly to equity, net of any
related income tax benefits.
Determination of Fair Value. The fair value of financial instruments traded in active markets at
the end of the reporting period 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 ask prices are not available, the price of the most recent transaction
provides evidence of the current fair value as long as 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 net present value
techniques, comparison to similar instruments for which market observable prices exist, options
pricing models, and other relevant valuation models.
*SGVMG600202*
-9Day 1 Difference. Where the transaction price in a non-active market is different from the fair
value based on other observable current market transactions in the same instrument or based on a
valuation technique whose variables include only data from observable market, the Company
recognizes the difference between the transaction price and fair value (a ‘Day 1’ difference) in the
consolidated statements of income unless it qualifies for recognition as some other type of asset.
In cases where unobservable data is used, the difference between the transaction price and model
value is only recognized in the consolidated statements of income when the inputs become
observable or when the instrument is derecognized. For each transaction, the Company
determines the appropriate method of recognizing the ‘Day 1’ difference amount.
Financial Assets and Liabilities at FVPL. This category includes financial assets and liabilities
held for trading and financial assets and liabilities designated upon initial recognition as at FVPL.
Financial assets and liabilities are classified as held for trading if they are acquired for the purpose
of selling in the near term. Derivatives, including any separated derivatives, are also classified
under financial assets or liabilities at FVPL, unless these are designated as hedging instruments in
an effective hedge or financial guarantee contracts. Instruments under this category are classified
as current assets/liabilities if these are hold primarily for the purpose of trading or expected to be
realized/settled within 12 months from reporting date. Otherwise, these are classified as
noncurrent assets/liabilities.
Financial assets or financial liabilities may be designated by management on initial recognition as
at FVPL when the following criteria are met:
§
the designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them
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 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 recorded.
Financial assets and financial liabilities designated at FVPL are recorded in the consolidated
statements of financial position at fair value. Subsequent changes in fair value on financial assets
and liabilities designated at FVPL are recorded in the consolidated statements of income as “Net
gains from fair value change of investments held for trading” under “Investment income” account.
Interest earned or incurred is recorded in “Investment income” account or “Interest expense and
other financial charges” account, respectively. Dividend income is recorded according to the
terms of the contract, when the right to receive payment has been established.
The Company’s investments held for trading and derivative asset are classified under this
category. The aggregate carrying values of financial assets under this category amounted to
=800.9 million and P
P
=771.5 million as of December 31, 2012 and 2011, respectively (see Note 32).
Included under financial liability at FVPL is the Company’s derivative liability. The carrying
values of financial liability at FVPL amounted to P
=2.3 million as of December 31, 2011
(see Note 32).
*SGVMG600202*
- 10 Derivative Financial Instruments
The Company enters into short-term forward currency contracts to hedge its currency exposure
(see Note 32). Such derivative financial instruments are initially recorded at fair value on the date
on which the derivative contract is entered into and are subsequently remeasured at fair value.
Derivatives are carried as assets when the fair value is positive and liabilities when the fair value is
negative. Consequently, gains and losses from changes in fair value of these derivatives are
recognized immediately in the consolidated statements of income. The Company has opted not to
designate its derivative transactions under hedge accounting. The fair values of freestanding
forward currency transactions are calculated by reference to current forward exchange rates for
contracts with similar maturity profiles.
Embedded Derivative. An embedded derivative is a component of a hybrid (combined)
instrument that also includes a nonderivative host contract with the effect that some of the cash
flows of the hybrid instrument vary in a way similar to a stand-alone derivative. An embedded
derivative is separated from the host contract and accounted for as a derivative if all of the
following conditions are met:
(a) the economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristics and risks of the host contract;
(b) a separate instrument with the same terms as the embedded derivative would meet the
definition of a derivative; and
(c) the hybrid or combined instrument is not recognized at FVPL.
The Company assesses whether embedded derivatives are required to be separated from the host
contracts when the Company becomes a party to the contract. Subsequent reassessment is
prohibited unless there is a change in the terms of the contract that significantly modifies the cash
flows that otherwise would be required under the contract, in which case reassessment is required.
The Company determines whether a modification to cash flows is significant by considering the
extent to which the expected future cash flows associated with the embedded derivative, the host
contract or both have changed and whether the change is significant relative to the previously
expected cash flow on the contract.
Embedded derivatives are measured at fair value and are carried as assets when the fair value is
positive and as liabilities when the fair value is negative. Gains and losses from changes in fair
value of these derivatives are recognized immediately in the consolidated statements of income.
The Company has no embedded derivatives in 2012 and 2011.
Loans and Receivables. Loans and receivables are nonderivative financial assets with fixed or
determinable payments 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 investments or
financial assets at FVPL. Loans and receivables are included in current assets if maturity is within
12 months from the financial reporting date. Otherwise, these are classified as noncurrent assets.
*SGVMG600202*
- 11 After initial measurement, loans and receivables are carried at amortized cost using the effective
interest method less any allowance for impairment. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees that are an integral part of the effective
interest method. Gains and losses are recognized in the consolidated statements of income when
the loans and receivables are derecognized or impaired, as well as through the amortization
process.
The Company’s cash and cash equivalents, trade and other receivables and installment contract
receivables are classified under this category. The aggregate carrying values of financial assets
under this category amounted to P
=1,337.0 million and P
=1,773.8 million as of December 31, 2012
and 2011, respectively (see Note 32).
HTM Investments. HTM investments are quoted nonderivative financial assets with fixed or
determinable payments and fixed maturities for which the Company’s management has the
positive intention and ability to hold to maturity. Where the company sells other than an
insignificant amount of HTM investments, the entire category would be tainted and reclassified as
AFS investments. After initial measurement, such assets are carried at amortized cost using the
effective interest method less any impairment in value. Gains and losses are recognized in the
consolidated statements of income when the HTM investments are derecognized or impaired, as
well as through the amortization process. HTM Investments are classified as current if maturity is
within 12 months from the reporting date. Otherwise, these are classified as noncurrent assets.
The Company has no financial assets classified as HTM as of December 31, 2012 and 2011.
AFS Investments. AFS investments are nonderivative financial assets that are designated in this
category or are not classified in any of the three preceding categories. They are purchased and
held indefinitely, and may be sold in response to liquidity requirements or changes in market
conditions. After initial recognition, AFS investments are carried at fair value in the consolidated
statements of financial position. Changes in the fair value of such assets are reported as unrealized
gain or loss on change in fair value of AFS investments recognized as other comprehensive
income in the consolidated statements of comprehensive income until the investment is
derecognized or the investment is determined to be impaired. On derecognition or impairment,
the cumulative gain or loss previously reported in consolidated statements of comprehensive
income is transferred to the consolidated statements of income. AFS investments are classified as
current if they are expected to be realized within 12 months from the end of the reporting period.
Otherwise, these are classified as noncurrent assets.
The Company’s investments in quoted and unquoted equity securities and other investments are
classified under this category. The carrying values of financial assets under this category
amounted to P
=232.4 million and P
=141.0 million as of December 31, 2012 and 2011, respectively
(see Note 32).
Other Financial Liabilities. This category pertains to financial liabilities that are not held for
trading or not designated as at FVPL upon the inception of the liability. This includes liabilities
arising from operations or loans and borrowings.
Other financial liabilities are recognized initially at fair value and are subsequently carried at
amortized cost taking into account the impact of applying the effective interest method of
amortization (or accretion) for any related premium, discount and any directly attributable
transaction costs. Gains and losses are recognized in the consolidated statements of income when
the liabilities are derecognized, as well as through the amortization process. Other financial
liabilities are classified as current liabilities if settlement is within 12 months from the end of the
reporting period. Otherwise, these are classified as noncurrent liabilities.
*SGVMG600202*
- 12 The Company’s notes payable, trade and other payables, trust receipts payable, due to related
parties, long-term loan payable and long-term debt are classified under this category. The
aggregate carrying values of financial liabilities under this category amounted to P
=1,965.9 million
and P
=1,827.6 million as of December 31, 2012 and 2011, respectively (see Note 32).
Convertible Notes
Convertible notes which contain both a liability and an equity element, are separated into two
components on initial issuance based on the present value of the expected cash flows of the notes,
and each is accounted for separately. Upon issuance of the convertible notes, the fair value of the
liability component is determined using a market rate for an equivalent non-convertible note and
this amount is carried as a long-term liability at amortized cost until extinguished on conversion or
repayment. Amortization of discount is based on the effective interest rate method. The
remainder of the proceeds is allocated to the conversion option. The Parent Company’s share is
recognized and included in equity as “Share in equity component of convertible notes.”
Classification of Financial Instruments Between Debt and Equity
A financial instrument is classified as debt if it provides for a contractual obligation to:
§
§
§
deliver cash or another financial asset to another entity;
exchange financial assets or financial liabilities with another entity under conditions that are
potentially unfavorable to the Company; or
satisfy the obligation other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of own equity shares.
If the Company does not have an unconditional right to avoid delivering cash or another financial
asset to settle its contractual obligation, the obligation meets the definition of a financial liability.
The components of issued financial instruments that contain both liability and equity elements are
accounted for separately, with the equity component being assigned the residual amount after
deducting from the instrument as a whole the amount separately determined as the fair value of the
liability component on the date of issue.
Impairment of Financial Assets
The Company assesses at each reporting date whether a financial asset or group of financial assets
is impaired.
Assets Carried at Amortized Cost. If there is objective evidence (such as the probability of
insolvency or significant financial difficulties of the debtor) that an impairment loss on loans and
receivables carried at amortized cost has been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated future cash
flows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate (i.e., the effective interest rate computed at initial
recognition). The carrying amount of the asset is reduced through the use of an allowance account
and the amount of the loss is recognized in the consolidated statements of income. Interest income
continues to be accrued on the reduced carrying amount based on the original effective interest
rate of the asset. Loans and receivables together with the associated allowance are written off
when there is no realistic prospect of future recovery and all collateral, if any, has been realized or
has been transferred to the Company. If in a subsequent year, the amount of the estimated
impairment loss increases or decreases because of an event occurring after the impairment was
recognized, the previously recognized impairment loss is increased or reduced by adjusting the
*SGVMG600202*
- 13 allowance account. If a write-off is later recovered, the recovery is recognized in the consolidated
statements of income. Any subsequent reversal of an impairment loss is recognized in the
consolidated statements of income, to the extent that the carrying value of the asset does not
exceed its amortized cost at the reversal date.
The Company first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the asset
is included in a group of financial assets with similar credit risk characteristics and that group of
financial assets is collectively assessed for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not included in
a collective assessment of impairment. For the purpose of specific evaluation of impairment, the
Company assesses whether financial assets are impaired through assessment of collectability of
financial assets considering the debtor’s capacity to pay, history of payment, and the availability
of other financial support. For the purpose of a collective evaluation of impairment, if necessary,
financial assets are grouped on the basis of such credit risk characteristics such as debtor type,
payment history, past-due status and terms.
Assets Carried at Cost. If there is objective evidence (such as continuing losses or significant
financial difficulties of the investee company) that an impairment loss has been incurred on an
unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably
measured, the amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the current market rate
of return for a similar financial asset.
AFS Investments. In the case of equity instruments classified as AFS investments, evidence of
impairment would include a significant or prolonged decline in the fair value of the investments
below its cost. Where there is evidence of impairment, the cumulative loss is measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognized in the consolidated statements of income, is removed from
the consolidated statements of comprehensive income and recognized in the consolidated
statements of income. Impairment losses on equity investments are not reversed through the
consolidated statements of income. Increases in the fair value after impairment are recognized
directly in consolidated statements of comprehensive income.
In the case of debt instruments classified as AFS investments, impairment is assessed based on the
same criteria as financial assets carried at amortized cost. Future interest income is based on the
reduced carrying amount of the asset and is accrued based on the rate of the interest used to
discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded
as part of interest income in the consolidated statements of income. If, in the subsequent year, the
fair value of a debt instrument can be objectively related to an asset occurring after the impairment
loss was recognized in the consolidated statements of income, the impairment loss is reversed
through the consolidated statements of income.
Derecognition of Financial Assets and Liabilities
Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of a
group of similar financial assets) is derecognized when:
§
the rights to receive cash flows from the asset have expired; or
*SGVMG600202*
- 14 §
the Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a “pass-through”
arrangement; or
§
the Company has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.
Where the Company has transferred its rights to receive cash flows from an asset or has entered
into a “pass-through” arrangement, and has neither transferred nor retained substantially all the
risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the
extent of the Company’s continuing involvement in the asset. Continuing involvement that takes
the form of a guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Company could be
required to repay.
Financial Liabilities. A financial liability is derecognized when the obligation under the liability
is discharged or cancelled or expired.
Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts, of a financial liability (or part of a
financial liability) extinguished or transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities assumed, is recognized in the consolidated
statements of income.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated
statements of financial position if and only if there is a currently legal right to offset the
recognized amounts and the Company intends to either settle on a net basis, or to realize the asset
and settle the liability simultaneously. This is not generally the case with master netting
agreements, and the related assets and liabilities are presented at gross amounts in the consolidated
statements of financial position.
Inventories
Inventories are valued at the lower of cost or net realizable value. Costs incurred in bringing each
inventory to its present location and conditions are accounted for as follows:
Finished goods
–
determined using the moving average method;
cost includes direct materials and labor and a
proportion of manufacturing overhead costs
based on normal operating capacity but
excludes borrowing costs;
Raw materials, spare parts and others
–
determined using the moving average method.
The net realizable value of inventories, except spare parts, is the selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to
make the sale. The net realizable value of spare parts is the current replacement cost.
*SGVMG600202*
- 15 Investments in Associates
Investments in associates are accounted for under the equity method. These are entities in which
the Company has significant influence and which are neither subsidiaries nor joint ventures of the
Company. The investments in associates are carried in the consolidated statements of financial
position at cost plus post-acquisition changes in the Company’s share in net assets of the
associates, less any impairment in value. The consolidated statements of income reflect the
Company’s share in the results of operations of the associates. Unrealized gains arising from
transactions with its associates are eliminated to the extent of the Company’s interest in the
associates against the related investments. Unrealized losses are eliminated similarly but only to
the extent that there is no evidence of impairment of the asset transferred.
The Company shall discontinue the use of the equity method from the date when it ceases to have
significant influence over an associate and shall account for the investment in accordance to PAS
39 from that date, provided that the associate does not become a subsidiary or joint venture. On
the loss of significant influence, the Company shall measure at fair value any investment the
Company retains in the former associate. The Company shall recognize in profit or loss the
difference between:
a. the fair value of any retained investment and any proceeds from disposing of the part interest
in the associate; and
b. the carrying amount of the investment at the date when significant influence is lost.
When the Company’s accumulated share in net losses of an associate equals or exceeds the
carrying amount of the investment, including advances for future conversion to equity, the
Company discontinues the recognition of its share in additional losses and the investment is
reported at nil value. If the associate subsequently reports net income, the Company will resume
applying the equity method only after its share in that net income equals the share in net losses not
recognized during the period the equity method was suspended.
Property, Plant and Equipment
Property, plant and equipment, except land, are carried at cost less accumulated depreciation and
any impairment loss. Land is carried at cost less any impairment loss. The cost of property, plant
and equipment comprises its purchase price, including any applicable import duties and
capitalized borrowing costs (for property, plant and equipment other than land) and other costs
directly attributable in bringing the asset to its working condition and location for its intended use.
Expenditures incurred after the property, plant and equipment have been put into operation, such
as repairs and maintenance, are normally charged to current operations in the year the costs are
incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in
an increase in the future economic benefits expected to be obtained from the use of an item of
property and equipment beyond its originally assessed standard of performance, the expenditures
are capitalized as additional costs of property and equipment.
Depreciation is computed using the straight-line method over the following estimated useful lives
of the assets:
Plant site improvements
Buildings and improvements
Machinery and equipment
Transportation and other equipment
10–20 years
10–20 years
5–20 years
2–10 years
*SGVMG600202*
- 16 The useful lives and depreciation method are reviewed periodically to ensure that the periods and
depreciation method are consistent with the expected pattern of economic benefits from items of
property, plant and equipment.
When each major inspection is performed, its cost is recognized in the carrying amount of the
property, plant and equipment as a replacement if the recognition criteria are met.
An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net disposal proceeds and carrying amount of
the asset) is credited or charged to consolidated statements of income.
Construction in-progress represents properties and structures under construction/development and
is stated at cost. This includes cost of construction, plant and equipment, any borrowing costs
directly attributable to such asset during the construction period and other direct costs.
Construction in-progress is not depreciated until such time when the relevant assets are completed
and ready for operational use.
Investment Properties
Investment properties are measured initially at cost, including direct transaction costs. The
carrying amount includes the cost of replacing part of an existing investment property at the time
the cost is incurred, if the recognition criteria are met, and excludes the costs of day-to-day
servicing of an investment property. Subsequent to initial recognition, investment properties
(except land) are stated at cost less accumulated depreciation and impairment loss. Land is carried
at cost less any impairment in value.
Depreciation of buildings for lease is calculated on a straight-line basis over the estimated useful
lives of 15 to 20 years.
Investment property is derecognized when either it has been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its
disposal. Any gains or losses on the retirement or disposal of an investment property are
recognized in the consolidated statements of income in the year of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use,
evidenced by ending of owner-occupation or commencement of an operating lease to another
party. Transfers are made from investment property when, and only when, there is a change in
use, evidenced by commencement of owner-occupation or commencement of development with a
view to sell.
Business Combinations, Goodwill and Goodwill Impairment
Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured as the aggregate of the consideration transferred, measured at acquisition date fair
value and the amount of any non-controlling interest in the acquiree. For each business
combination, the acquirer measures the non-controlling interest in the acquiree either at fair value
or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred
are expensed and included in administrative expenses.
*SGVMG600202*
- 17 When the Company acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree. If the business combination is achieved in
stages, the acquisition date fair value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at
the acquisition date. Subsequent changes to the fair value of the contingent consideration which is
deemed to be an asset or liability will be recognized in accordance with PAS 39 either in profit or
loss or as a change to other comprehensive income. If the contingent consideration is classified as
equity, it should not be remeasured until it is finally settled within equity.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration
transferred and the amount recognized for non-controlling interest over the net identifiable assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets
of the subsidiary acquired, the difference is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the cash-generating units that are expected to benefit from
the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to
those units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this circumstance is measured based on the relative values of the operation disposed
of and the portion of the cash-generating unit retained.
Intangible Assets
The cost of intangible assets acquired separately is measured on initial recognition at cost. The
cost of intangible assets (student lists and customer contracts) acquired in a business combination
is measured at the fair value as of date of acquisition. Following initial recognition, intangible
assets are carried at cost less accumulated amortization and any accumulated impairment losses.
Student lists are amortized over three years and assessed for impairment whenever there is an
indication that the student lists acquired may be impaired. Customer contracts are amortized over
the estimated economic life of one year.
The useful lives of intangible assets are assessed to be either finite or indefinite. The amortization
periods and method are reviewed at least at each financial year-end. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the
asset is accounted for by changing the amortization period or method, as appropriate, and treated
as changes in accounting estimates. The amortization expense on intangible assets with finite
lives is recognized in the consolidated statements of income in the expense category consistent
with the function of the intangible asset. Intangible assets with indefinite lives (trademarks) are
not amortized, but are tested for impairment annually, either individually or at the cash-generating
unit level.
*SGVMG600202*
- 18 Impairment of Nonfinancial Assets
The Company assesses at each reporting date whether there is an indication that a nonfinancial
asset may be impaired when events or changes in circumstances indicate that the carrying value of
a nonfinancial asset may not be recoverable. If any such indication exists, or when annual
impairment testing for an asset is required, the Company makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating
unit’s fair value less costs to sell and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other
assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessment of the time value of money and the risks
specific to the asset. Impairment losses are recognized in the consolidated statements of income in
those expense categories consistent with the function of the impaired asset.
For nonfinancial assets excluding goodwill, 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 the last impairment loss was recognized.
If that is the case, the carrying amount of the asset is increased to its recoverable amount.
However, that increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognized for the asset in prior
years. Such reversal is recognized in consolidated statements of income. After such a reversal,
the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis over its remaining useful life.
After application of the equity method, the Company determines whether it is necessary to
recognize any additional impairment loss with respect to the Company’s investments in associates.
The Company determines at each reporting date whether there is any objective evidence that the
investment in associate is impaired. If this is the case, the Company calculates the amount of
impairment being the difference between the fair value and the carrying value of the investee
company and recognizes the difference in the consolidated statements of income.
The following assets have specific characteristics for impairment testing:
Goodwill. Goodwill is tested for impairment annually and when circumstances indicate that the
carrying value may be impaired. Impairment is determined for goodwill by assessing the
recoverable amount of each cash generating unit (or group of cash generating units) to which the
goodwill relates. When the recoverable amount of the cash generating unit is less than its carrying
amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be
reversed in future periods.
Intangible assets. Intangible assets with indefinite useful lives are tested for impairment annually
as either individually or at the cash generating unit level, as appropriate, and when circumstances
indicate that the carrying value may be impaired.
Capital Stock
Capital stock is measured at par value for all shares issued. When the Company issues more than
one class of stock, a separate account is maintained for each class of stock and the number of
shares issued.
*SGVMG600202*
- 19 When the shares are sold at premium, the difference between the proceeds and the par value is
credited to the “Additional paid-in capital” account in the consolidated statement of financial
position. When shares are issued for a consideration other than cash, the proceeds are measured
by the fair value of the consideration received.
Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees,
printing costs and taxes are chargeable to the “Additional paid-in capital” account in the
consolidated statements of financial position.
Retained Earnings
Retained earnings represent accumulated net profits, net of dividend distributions and other capital
adjustments.
Revenue Recognition
Revenue is recognized when it is probable that the economic benefits associated with the
transaction will flow to the Company and the amount of revenue can be measured reliably.
Revenue is measured at the fair value of the consideration received or receivable, excluding
discounts, rebates, sales taxes or duty. The following specific recognition criteria must also be
met before revenue is recognized:
Sale of Goods. Revenue from sale of roofing and other steel products, books and incidentals is
recognized when the significant risks and rewards of ownership of the goods have passed to the
buyer, usually on delivery of the goods.
Tuition and School Fees. Revenue is recognized as income over the corresponding school term to
which they pertain. Tuition and school fees received pertaining to the summer semester and the
next school year are recorded as part of “Unearned revenues” account in the consolidated
statements of financial position.
Consultancy Services. Revenue is recognized when services are rendered.
Animation Services. Income from animation services is recognized by reference to the stage of
completion. Stage of completion is measured by reference to labor hours incurred to date as a
percentage of total estimated labor hours for each contract. Where the contract outcome cannot be
measured reliably, revenue is recognized only to the extent that the expenses incurred are eligible
to be recovered.
Rental Income. Revenue is recognized on a straight-line basis over the lease term.
Investment Income. Investment income includes net gains and losses on investments held for
trading (see accounting policy on Financial Assets) and interest income. Interest income is
recognized as the interest accrues, taking into account the effective yield on the asset.
Cost of Sales, Educational, Animation and Consultancy Services
Cost of sales includes direct materials used, personnel costs, as well as repair and power and fuel
used to run production of steel products. Cost of educational services constitutes costs incurred to
administer academic instruction. Costs of animation services include all direct materials, labor
costs and indirect costs related to contract performance. Cost of consultancy services includes
labor cost and other direct costs related to the performance of consultancy services. These
expenses are expensed as incurred.
*SGVMG600202*
- 20 General and Administrative Expenses
General and administrative expenses constitute costs of administering the businesses and are
expensed as incurred.
Selling Expenses
Selling expenses include costs of distribution of steel products, books, incidentals, personnel costs,
freight expenses, commission and advertising. Selling expenses are expensed as incurred.
Retirement Costs
PHN, UGC, Toon City, UPANG and AU have distinct funded, noncontributory defined benefit
retirement plans while UI and COC have a defined, unfunded, noncontributory retirement plans
covering all permanent employees, each administered by their respective Retirement Committees.
Retirement costs are actuarially determined using the projected unit credit method. Actuarial
gains and losses are recognized as income or expense when the net cumulative unrecognized
actuarial gains and losses for each plan at the end of the previous financial reporting year exceed
10% of the higher of the defined benefit obligation and the fair value of plan assets at that date.
These gains or losses are recognized over the expected average remaining working lives of the
employees participating in the plans.
The past service cost, if any, is recognized as an expense on a straight-line basis over the average
period until the benefits become vested. If the benefits are already vested immediately following
the introduction of, or changes to, a pension plan, past service cost is recognized immediately.
The defined benefit liability is the aggregate of the present value of the defined benefit obligation
and actuarial gains and losses not recognized, reduced by past service cost not yet recognized and
the fair value of plan assets out of which the obligations are to be settled directly. If such
aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of
cumulative unrecognized net actuarial losses and past service cost and the present value of any
economic benefits available in the form of refunds from the plan or reductions in the future
contributions to the plan.
If the asset is measured at the aggregate of cumulative unrecognized net actuarial losses and past
service cost and the present value of any economic benefits available in the form of refunds from
the plan or reductions in the future contributions to the plan, net actuarial losses of the current
period and past service cost of the current period are recognized immediately to the extent that
they exceed any reduction in the present value of those economic benefits. If there is no change or
an increase in the present value of the economic benefits, the entire net actuarial losses of the
current period and past service cost of the current period are recognized immediately. Similarly,
net actuarial gains of the current period after the deduction of past service cost of the current
period exceeding any increase in the present value of the economic benefits stated above are
recognized immediately if the asset is measured at the aggregate of cumulative unrecognized net
actuarial losses and past service cost and the present value of any economic benefits available in
the form of refunds from the plan or reductions in the future contributions to the plan. If there is
no change or a decrease in the present value of the economic benefits, the entire net actuarial gains
of the current period after the deduction of past service cost of the current period are recognized
immediately.
Stock Purchase Plan
The Company has a stock purchase plan offered to senior officers which gives the right to
purchase shares of the Company set aside by the plan.
*SGVMG600202*
- 21 The cost of equity-settled transactions with employees is measured by reference to their fair value
at the date they are granted, determined using the acceptable valuation techniques. The amount is
fixed at grant date.
The cost of equity-settled transactions, together with a corresponding increase in equity, is
recognized over the period in which the performance and/or service conditions are fulfilled ending
on the date on which the employees become fully entitled to the award (“vesting date”). The
cumulative expense recognized for equity-settled transactions at each reporting date up to and until
the vesting date reflects the extent to which the vesting period has expired, as well as the
Company’s best estimate of the number of equity instruments that will ultimately vest. The
consolidated statements of income charge or credit for the period represents the movement in
cumulative expense recognized at the beginning and end of that period. No expense is recognized
for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market condition, which awards are treated as vesting irrespective of whether or not the market
condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum, an expense is recognized
as if the terms had not been modified. An additional expense is likewise recognized for any
modification which increases the total fair value of the share-based payment arrangement or which
is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of
cancellation, and any expense not yet recognized for the award is recognized immediately. If a
new award, however, is substituted for the cancelled awards and designated as a replacement
award, the cancelled and new awards are treated as if they were a modification of the original
award, as described in the previous paragraph.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement and requires an assessment of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset. A reassessment is made after inception of the lease only if one of the following applies:
a. There is a change in contractual terms, other than a renewal or extension of the arrangement;
b. A renewal option is exercised or extension granted, unless that term of the renewal or
extension was initially included in the lease term;
c. There is a change in the determination of whether fulfillment is dependent on a specified
asset; or
d. There is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios a, c or d above, and at the date
of renewal or extension period for scenario b.
Company as Lessee. Leases where the lessor retains substantially all the risks and benefits of
ownership of the leased asset are classified as operating leases. Operating lease payments are
recognized as an expense in the consolidated statement of income on a straight-line basis over the
lease term.
*SGVMG600202*
- 22 Company as Lessor. Leases where the Company does not transfer substantially all the risks and
benefits of ownership of the assets are classified as operating leases. Lease payments received are
recognized as an income in the consolidated statement of income on a straight-line basis over the
lease term.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and 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 due to the passage of time is recognized as interest expense in the
consolidated statements of income.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are
capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in
the period they occur. Borrowing cost consists of interest and other costs that an entity incurs in
connection with the borrowing of funds.
Foreign Currency-denominated Transactions and Translation
The consolidated financial statements are presented in Philippine peso, which is the Parent
Company’s functional and presentation currency. The subsidiaries determine their own functional
currency and items included in the financial statements of each subsidiary are measured using that
functional currency. The Company has elected to recycle the gain or loss that arises from direct
method of consolidation, the method the Company uses to complete its consolidation.
Transactions in foreign currencies are recorded using their functional currency exchange rate at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the functional currency closing rate of exchange at the end of the reporting period.
Exchange gains or losses arising from foreign currency translations are credited or charged to
current operations. Nonmonetary items that are measured at historical cost in a foreign currency
are translated using the exchange rate at the date 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 is determined.
Other than OAL and Fuld U.S., the functional and presentation currency of the subsidiaries within
the Company is Philippine peso. The functional currency of OAL and Fuld U.S. is U.S. dollar.
The assets and liabilities of foreign operations are translated into Philippine peso at the rate of
exchange prevailing at the reporting date and their income statements are translated at exchange
rates prevailing at the date of the transactions. The exchange differences arising on the translation
are recognized in other comprehensive income. On disposal of a foreign operation, the component
of other comprehensive income relating to that particular foreign operation is recognized in the
consolidated statements of income.
Taxes
Current Tax. Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the tax authority. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively enacted at the end of the
reporting period.
*SGVMG600202*
- 23 Deferred Tax. Deferred tax is provided, using the liability method, on all temporary differences at
the end of the reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable
temporary differences, except:
§
where the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
§
in respect of taxable temporary differences associated with investments in subsidiaries and
associates, where the timing of the reversal of the temporary differences can be controlled and
it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward benefits
of unused tax credits from excess minimum corporate income tax (MCIT) over the regular
corporate income tax (RCIT) and unused net operating loss carryover (NOLCO), to the extent that
it is probable that taxable profit will be available against which the deductible temporary
differences, and the carryforward of unused excess MCIT and unused NOLCO can be utilized
except:
§
where the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
§
in respect of deductible temporary differences associated with investments in subsidiaries and
associates. Deferred tax assets are recognized only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences 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 assets 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 assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the end of the reporting period.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax items are recognized in correlation to the underlying transaction either in other
comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to
offset current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same tax authority.
*SGVMG600202*
- 24 Value-Added Tax (VAT). Revenue, expenses and assets are recognized net of the amount of VAT,
except:
§
Where the VAT incurred on a purchase of assets or services are not recoverable from the
taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the
asset or as part of the expense item as applicable; and
§
Receivables and payables that are stated with the amount of VAT included. The net amount
of VAT recoverable from, or payable to, the tax authority is included as part of “Input valueadded taxes” or “Income and other taxes payable” accounts in the consolidated statements of
financial position.
Earnings Per Common Share (EPS) Attributable to the Equity Holders of the Parent
Basic EPS is computed by dividing net income (after deducting dividends on preferred shares)
attributable to equity holders of the parent by the weighted average number of issued and
outstanding common shares during the year after giving retroactive effect to any stock dividend
declared during the year.
Diluted Earnings Per Share
Diluted earnings per share amounts are calculated by dividing the net income attributable to equity
holders of the Parent Company by the weighted average number of ordinary shares outstanding
during the year plus the weighted average number of ordinary shares that would be issued on the
conversion of all dilutive potential ordinary shares into ordinary shares.
Segment Reporting
The Company is organized into five major business segments. Such business segments are the
bases upon which the Company reports its primary segment information. Financial information
on business segments is presented in Note 35 to the consolidated financial statements.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. They are
disclosed in the notes to the consolidated financial statements unless the possibility of an outflow
of resources embodying economic benefits is remote. Contingent assets are not recognized in the
consolidated financial statements but are disclosed in the notes to the consolidated financial
statements when an inflow of economic benefits is probable.
Events After the Reporting Period
Post year-end events that provide additional information about the Company’s financial position at
the end of the reporting period (adjusting events) are reflected in the consolidated financial
statements. Post year-end events that are not adjusting events are disclosed in the notes to the
consolidated financial statements when material.
5. Significant Accounting Judgments, Estimates and Assumptions
The accompanying consolidated financial statements prepared in conformity with PFRS require
management to make judgments, estimates and assumptions that affect the amounts reported in the
consolidated financial statements and related notes. In preparing the Company’s consolidated
financial statements, management has made its best judgments, estimates and assumptions of
certain amounts, giving due consideration to materiality. The judgments, estimates and
assumptions used in the accompanying consolidated financial statements are based upon
management’s evaluation of relevant facts and circumstances as of the date of the consolidated
financial statements. Actual results could differ from such estimates.
*SGVMG600202*
- 25 The Company believes the following represents a summary of these significant judgments,
estimates and assumptions and related impact and associated risks in its consolidated financial
statements.
Judgments
In the process of applying the Company’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 Company’s consolidated financial statements:
Operating Lease - Company as Lessor. The Company has entered into commercial property
leases on its investment property portfolio. The Company has determined, based on an evaluation
of the terms and conditions of the arrangements, that it retains all the significant risks and rewards
of ownership of these properties which are leased out on operating leases.
Rental income amounted to P
=42.7 million, P
=46.9 million and P
=79.6 million in 2012, 2011 and
2010, respectively.
Revenue Recognition. Selecting an appropriate revenue recognition method for a particular sale
transaction requires certain judgments based on sufficiency of cumulative payments by the buyer
and completion of development. The Company assesses its revenue arrangements against specific
criteria to determine if it is acting as principal or agent. The Company has concluded that it is
acting as a principal in all its revenue arrangements.
Functional Currency. The Parent Company has determined that its functional currency is the
Philippine peso. It is the currency of the primary economic environment in which the Parent
Company operates. The subsidiaries determine their own functional currencies depending on the
primary economic environment in which they operate.
Derecognition of Financial Assets. Pursuant to an agreement between PHN and Vicsal Investment
Inc. (Vicsal), PHN agreed to sell its shares in AB Capital subject to certain conditions, including
the following:
(a) Approval of the Bangko Sentral ng Pilipinas (BSP)
(b) Removal of assets other than those identified and agreed to be retained by Vicsal in
AB Capital, by transfer to a New Company in exchange for shares in New Company
and/or by sale or assignment of assets to the New Company
(c) Return of capital to PHN pertaining to shares in New Company
(d) Selling Shareholders shall secure all Government Authorizations, including approvals
and clearances, required for the return of capital of AB Capital to PHN and other sellers
(e) On Closing Date, PHN shall transmit to the Buyer the Deed of Absolute Sale
Management assessed that the transaction is not yet completed since certain conditions are not yet
complied with.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
end of the reporting period that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of Goodwill and Trademarks. The Company performs impairment testing of goodwill
and trademarks on an annual basis or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. This requires an estimation of the value in use
*SGVMG600202*
- 26 of the cash-generating unit to which the goodwill is allocated. Value in use is determined by
making an estimate of the expected future cash flows from the cash-generating unit and applies a
discount rate to calculate the present value of these cash flows. Goodwill acquired through
business combination has been allocated to one cash-generating unit which is also the operating
entity acquired through business combination and to which the goodwill relates. The recoverable
amount of the goodwill and trademarks has been determined based on value in use calculation
using cash flow projections covering a five-year period. The calculation of value in use for the
Company’s goodwill and trademark is sensitive to revenue growth rates and discount rates.
Revenue growth rates estimates are based on values achieved in previous years and also takes into
account anticipated increase from various market initiatives. The pre-tax discount rates applied to
cash flow projections ranges from 9% to 12% in 2012 and 2011. Discount rate reflects the current
market assessment of the risk specific to each cash-generating unit. The discount rate is based on
the average percentage of the weighted average cost of capital for the industry. This rate is further
adjusted to reflect the market assessment of any risk specific to the cash-generating unit for which
future estimates of cash flows have not been adjusted. Management believes that no reasonably
possible change in these key assumptions would cause the carrying values to materially exceed its
recoverable amount. The Company performs its annual testing of goodwill and trademarks at
December 31.
Impairment loss on goodwill amounting to P
=212.3 million and P
=166.4 million was recognized in
2012 and 2011 respectively. No impairment loss on trademarks was recognized in 2012 and 2011.
The carrying amount of goodwill and trademarks amounted to P
=1,091.0 million and P
=1,304.4
million as of December 31, 2012 and 2011, respectively, and is presented as part of the
“Intangibles” account in the consolidated statements of financial position (see Note 15).
Impairment of Nonfinancial Assets, other than Goodwill. The Company assesses whether there
are any indicators of impairment for all nonfinancial assets, other than goodwill, at each reporting
date. These nonfinancial assets (investment in associates, property, plant and equipment,
investment properties and intangibles) are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be recoverable. This requires
an estimation of the value in use of the cash-generating units. Estimating the value in use requires
the Company to make an estimate of the expected future cash flows from the cash-generating unit
and also to choose a suitable discount rate in order to calculate the present value of those cash
flows. In cases where the value in use cannot be reliably estimated, the recoverable amount is
based on the fair value less costs to sell. The recoverable amount of investments in associates is
based on fair value less cost to sell. Fair value less costs to sell is determined to be the amount
obtainable from the sale of the underlying net assets of the associate.
There are no impairment of nonfinancial assets in 2012 and 2011. The carrying amounts of
investments in associates amounted to P
=2,334.1 million and P
=1,835.1 million as at December 31,
2012 and 2011, respectively (see Note 11). The carrying amounts of property, plant and
equipment amounted to P
=2,258.6 million and P
=2,260.7 million as of December 31, 2012 and 2011,
respectively (see Note 13). The carrying amounts of investment properties amounted to
=421.7 million and P
P
=410.9 million as of December 31, 2012 and 2011, respectively (see Note 14).
The carrying amounts of intangibles, other than goodwill and trademarks, amounted to nil and
=3.6 million as of December 31, 2012 and 2011, respectively (see Note 15).
P
*SGVMG600202*
- 27 Impairment of AFS Investments. The Company treats AFS equity investments as impaired when
there has been a significant or prolonged decline in the fair value below its cost or where other
objective evidence of impairment exists. The determination of what is “significant” or
“prolonged” requires judgment. The Company treats “significant” generally as 20% or more of
the original cost of investment, and “prolonged” as period longer than six months. In addition, the
Company evaluates other factors, including normal volatility in share price for quoted equities and
the future cash flows and the discount factors for unquoted equities.
Based on management’s assessment, the Company’s AFS investments are not impaired. The
carrying values of AFS investments amounted to P
=232.4 million and P
=141.0 million as of
December 31, 2012 and 2011, respectively (see Note 12).
Impairment of Trade Receivables. The Company maintains allowance for doubtful accounts based
on the result of the individual and collective assessments under PAS 39. Under the individual
assessment, which considers the significant financial difficulties of the debtor, the Company is
required to obtain the present value of estimated cash flows using the receivable’s original
effective interest rate. Impairment loss is determined as the difference between the receivables’
carrying balance and the computed present value. The collective assessment would require the
Company to group its receivables based on the credit risk characteristics (debtor type, past-due
status and terms) of the debtors. Impairment loss is then determined based on historical loss
experience of the receivables grouped per credit risk profile. Historical loss experience is adjusted
on the basis of current observable data to reflect the effects of current conditions that did not affect
the period on which the historical loss experience is based and to remove the effects of conditions
in the historical period that do not exist currently. The methodology and assumptions used for the
individual and collective assessments are based on management’s judgment and estimate.
Therefore, the amount and timing of recorded expense for any year would differ depending on the
judgments and estimates made for the year.
The carrying amounts of trade and other receivables amounted to P
=871.9 million and
P857.6 million as of December 31, 2012 and 2011, respectively (see Note 9). The allowance
=
for impairment of receivables amounted to P
=197.8 million and P
=164.8 million as of
December 31, 2012 and 2011, respectively (see Note 9).
Realizability of Deferred Tax Assets. 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 assets to be utilized. This is based on the
Company’s projection of the future results of operations.
Deferred tax assets amounted to P
=103.1 million and P
=78.9 million as of December 31, 2012 and 2011,
respectively (see Note 29).
Deductible temporary differences, unused NOLCO and MCIT for which no deferred tax assets
were recognized in the consolidated statements of financial position amounted to P
=464.7 million
and P
=374.7 million as of December 31, 2012 and 2011, respectively (see Note 29).
Recoverability of Input VAT. The carrying amounts of input taxes were reduced to the extent that it is
no longer probable that sufficient revenue subject to VAT will be available to allow all or part of the
input VAT to be utilized.
*SGVMG600202*
- 28 Allowance for unrecoverable input VAT amounted to P
=118.6 million and =
P89.2 million as of
December 31, 2012 and 2011, respectively (see Note 16). The carrying amount of input VAT
classified as current assets amounted to =
P5.4 million and P
=40.7 million as of December 31, 2012 and
2011, respectively. Input VAT classified as other noncurrent assets amounted to =
P0.6 million and nil
as of December 31, 2012 and 2011, respectively (see Note 16).
Estimating Useful Lives of Property, Plant and Equipment, Investment Properties and Intangibles.
The Company estimates the useful lives of depreciable property, plant and equipment, depreciable
investment properties and intangibles with finite useful lives based on the period over which the
property, plant and equipment, investment properties and intangibles with finite useful lives are
expected to be available for use and on the collective assessment of industry practice, internal
technical evaluation and experience with similar assets and in the case of intangibles, useful lives
are also based on the contracts covering such intangibles. The estimated useful lives of property,
plant and equipment and investment properties are reviewed periodically and updated if
expectations differ materially from previous estimates due to physical wear and tear, technical or
commercial obsolescence and legal or other limits on the use of the property, plant and equipment
and investment properties. However, it is possible that future results of operations could be
materially affected by changes in the estimates brought about by changes in factors mentioned
above. The amounts and timing of recording of expenses for any period would be affected by
changes in these factors and circumstances.
The carrying amounts of depreciable property, plant and equipment amounted to P
=1,066.6 million
and P
=1,059.6 million as of December 31, 2012 and 2011, respectively (see Note 13). The carrying
amounts of depreciable investment properties amounted to P
=74.4 million and P
=80.6 million as of
December 31, 2012 and 2011, respectively (see Note 14). The carrying amounts of intangibles
with finite useful lives amounted to nil and P
=3.6 million as of December 31, 2012 and 2011,
respectively (see Note 15).
Estimating Net Realizable Value of Inventories. The Company carries inventories at net realizable
value when this becomes lower than cost due to damage, physical deterioration, obsolescence,
changes in price levels or other causes.
The carrying amounts of inventories amounted to P
=956.5 million and P
=977.9 million as of
December 31, 2012 and 2011, respectively (see Note 10).
Estimating the Fair Values of Acquiree’s Identifiable Assets and Liabilities. Where the fair values
of the acquiree’s identifiable assets and liabilities cannot be derived from active markets, the
Company determined the fair values using internal valuation techniques and generally accepted
valuation approaches. The inputs to these valuation approaches are taken from historical
experience and observable markets where possible, but where this is not feasible, estimates are
used in establishing fair values. The estimates may include discount rates and assumptions used in
cash flow projections.
The fair values of the identifiable net assets acquired (liabilities assumed) from Fuld U.S. and Fuld
Philippines amounted to P
=83.8 million and (P
=4.5 million), respectively, in 2011 (see Note 6).
Pension Benefits. The determination of the Company’s obligation and cost of pension benefits is
dependent on the selection of certain assumptions made by management and used by actuaries in
calculating such amounts. The assumptions presented in Note 30 include among others, discount
rates, expected rates of return on plan assets and rates of future salary increase. In accordance
*SGVMG600202*
- 29 with PFRS, 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 future periods.
Net pension liability, included under “Pension and other post-employment benefits” account in the
consolidated statements of financial position, amounted to P
=51.8 million and P
=31.8 million as of
December 31, 2012 and 2011, respectively. Net pension expense amounted to P
=53.8 million,
=31.7 million and P
P
=34.3 million in 2012, 2011 and 2010, respectively (see Note 30).
Fair Value of Financial Assets and Liabilities. The Company carries certain financial assets and
liabilities at fair value in the consolidated statements of financial position. Determining the fair
value of financial assets and liabilities requires extensive use of accounting estimates and
judgment. The significant components of fair value measurement were determined using
verifiable objective evidence (i.e., foreign exchange rates, interest rates, volatility rates).
However, the amount of changes in fair value would differ if the Company utilized different
valuation methodologies and assumptions. Any changes in the fair value of these financial assets
and liabilities would affect profit and loss and other comprehensive income.
The methods and assumptions used to estimate the fair value of financial assets and liabilities are
discussed in Note 32.
6. Business Combinations and Acquisition of Non-controlling Interests
Acquisition of Fuld U.S.
On June 10, 2011, PHN purchased 85% voting shares of stock of Fuld U.S. Fuld U.S. is a
business research and consulting firm focusing on business and competitive intelligence. Fuld
U.S. is incorporated in the USA with offices in the USA, United Kingdom and China.
Founded in 1979, Fuld U.S. delivers customized proprietary research analysis and consulting
designed to help clients understand the competition and anticipate competitive challenges.
The Company acquired Fuld U.S. to increase its BPO portfolio which will provide
opportunities in the high value-added services sector.
The fair values of the identifiable assets acquired and liabilities assumed as of the date of
acquisition are as follows:
Previous
Carrying
Fair Value
Recognized on
Value in the
Acquisition
Subsidiary
(In Thousands)
Cash on hand and in banks
Receivables
Prepaid expenses and other assets
Property and equipment
Intangibles (Note 15)
P8,969
=
69,340
20,453
8,491
47,156
154,409
P8,969
=
69,340
20,453
8,491
–
107,253
(Forward)
*SGVMG600202*
- 30 Previous
Carrying
Fair Value
Recognized on
Value in the
Acquisition
Subsidiary
(In Thousands)
Accounts payable and accrued liabilities
Deferred tax liabilities
Total identifiable net assets
Non-controlling interest at fair value
Goodwill arising from acquisition (Note 15)
Total consideration transferred
(P
=56,429)
(14,147)
(70,576)
83,833
(12,575)
284,252
=355,510
P
(P
=56,429)
(56,429)
=50,824
P
The Company measured the non-controlling interest in the acquiree by its proportionate share
of the acquiree’s net identifiable assets.
The cost of acquiring Fuld U.S. amounted to U.S.$8.2 million (P
=355.5 million) consisting of
cash payment of U.S.$5.8 million and the remaining balance of U.S.$2.4 million payable in
four years at four equal installments with an interest rate of 4.5% per annum. As of December
31, 2012, current and noncurrent portions of long-term loan payable related to the acquisition
of Fuld U.S. amounted to P
=23.6 million ($0.6 million) and P
=47.23 million ($1.1 million),
respectively.
As of December 31, 2011, current and noncurrent portions of long-term loan payable related
to the acquisition of Fuld U.S. amounted to P
=22.1 million ($0.5 million) and P
=78.9 million
($1.8 million), respectively, (non-cash investing transaction).
The cash outflow related to the acquisition is as follows (amounts in thousands):
Cash paid on acquisition date (included in cash flows from investing
activities)
Transaction cost (included as part of administrative expenses and cash
flows from operating activities)
Less cash of acquired subsidiary
Net cash outflow
(P
=242,215)
(10,610)
8,969
(P
=243,856)
The fair value of receivables amounted to P
=69.3 million. These receivables are not impaired
and are expected to be collected in full.
The total consideration in the 2011 consolidated financial statements was based on a
provisional assessment of fair values. The total consideration and the purchase price
allocation were finalized in 2012. The 2011 comparative information was restated to reflect
the adjustment to the provisional amounts. Total liabilities increased by P
=9.3 million with a
corresponding increase in goodwill of the same amount. This resulted in P
=284.2 million of
goodwill arising on the acquisition. The goodwill includes the value of expected synergies
arising between Fuld U.S. and the Company’s knowledge process outsourcing portfolio.
From the date of acquisition, Fuld U.S. has contributed P
=248.3 million of revenue and
P12.5 million loss to the consolidated income before income tax of the Company in 2011. If
=
the combination had taken place at the beginning of 2011, consolidated revenue from
continuing operation would have been P
=4,174.4 million and consolidated net income would
have been P
=72.4 million in 2011.
*SGVMG600202*
- 31 Acquisition of Fuld Philippines (formerly Business Back Office, Inc.)
On July 25, 2011, PHN purchased 85% voting shares of stock of Fuld Philippines. Fuld
Philippines is a knowledge process outsourcing provider based in Manila. It is a multiindustry, multi-market, and multi-company research capability with over 350 projects
conducted since 2002. The Company acquired Fuld Philippines to increase its BPO portfolio
which will provide opportunities in the high value-added services sector.
The fair values of the identifiable assets acquired and liabilities assumed as of the date of
acquisition are as follows:
Previous
Carrying
Value in the
Subsidiary
Fair Value
Recognized on
Acquisition
(In Thousands)
Cash on hand and in banks
Receivables
Advances to employees
Property and equipment
Accrued payable and accrued expenses
Loans payable
Retirement payable
Taxes payable
Total identifiable net liabilities
Non-controlling interest at fair value
Goodwill arising from acquisition (see Note 15)
Total consideration transferred
=1,012
P
1,756
163
636
3,567
(5,157)
(961)
(78)
(1,857)
(8,053)
(4,486)
673
14,120
=10,307
P
=1,012
P
1,756
163
636
3,567
(5,157)
(961)
(78)
(1,857)
(8,053)
(P
=4,486)
The Company measured the non-controlling interest in the acquiree by its proportionate share
of the acquiree’s net liabilities.
The cost of acquiring Fuld Philippines amounted to P
=10.3 million, of which P
=4.0 million (noncash investing transaction) was retained by the Company. As of December 31, 2012 and
2011, retained portion amounted to P
=3.0 million and P
=4.0 million, respectively, included as
part of “Trade and other payables” account in the statements of financial position.
The cash outflow related to the acquisition is as follows (amounts in thousands):
Cash paid on acquisition date (included in cash flows from investing
activities)
Transaction costs (included as part of administrative expenses and cash
flows from operating activities)
Less cash of acquired subsidiary
Net cash outflow
(P
=2,907)
(6)
1,012
(P
=1,901)
The fair value of receivables amounted to P
=1.8 million. These receivables are not impaired
and are expected to be collected in full.
*SGVMG600202*
- 32 The total consideration in the 2011 consolidated financial statements was based on a
provisional assessment of fair values. The total consideration and the purchase price
allocation were finalized in 2012. The 2011 comparative information was restated to reflect
the adjustment to the provisional amounts. Total liabilities increased by P
=3.4 million. There
was also a corresponding increase in goodwill amounting to P
=3.4 million resulting in
=14.1 million of goodwill arising on the acquisition. The goodwill includes the value of
P
expected synergies arising between Fuld Philippines and the Company’s knowledge process
outsourcing portfolio.
From the date of acquisition, Fuld Philippines has contributed P
=9.7 million of revenue and
=0.2 million loss to the consolidated income before income tax of the Company in 2011. If
P
the combination had taken place at the beginning of the year, consolidated revenue from
continuing operations would have been P
=4,174.4 million and consolidated net income would
have been P
=72.4 million.
Acquisition of non-controlling interest in Toon City
On February 29, 2012, OAL acquired the remaining 5% non-controlling interest in Toon City
for P
=10.1 million. The difference between the acquisition cost and the book value of the
interest acquired amounting to P
=8.1 million was recognized as “Other reserves” in the equity
section of the consolidated statement of financial position.
Acquisition in Fuld US
In August 2012, FULD US acquired Outward Insights, LLC by issuing FULD US common
stock. Goodwill arising from acquisition amounted to P
=6.1 million. The carrying value of the
net assets acquired approximates its fair values. The net assets of Outward Insights, LLC
recognized in the Company’s December 31, 2012 financial statements were based on
provisional assessment of fair values as the audit and fair valuation of the identifiable net
assets acquired were not yet completed.
7. Cash and Cash Equivalents
This account consists of:
2011
2012
(In Thousands)
Cash on hand and in banks
Short-term deposits
P
=150,264
314,915
P
=465,179
P83,853
=
832,304
=916,157
P
Cash in banks earn interest at the prevailing bank deposit rates. Short-term deposits are made for
varying periods of up to three months depending on the immediate cash requirements of the
Company and earn interest at the respective short-term deposit rates.
Interest income from cash and cash equivalents amounted to P
=22.1 million, P
=32.3 million and
=29.6 million in 2012, 2011 and 2010, respectively (see Note 21).
P
*SGVMG600202*
- 33 -
8. Investments Held for Trading
This account consists of investments in:
2011
2012
(In Thousands)
Bonds
Unit Investment Trust Funds (UITFs)
Marketable equity securities
P
=491,127
302,687
6,601
P
=800,415
=414,525
P
353,065
3,927
=771,517
P
Net gains from fair value change of investments held for trading amounted to P
=50.9 million,
=38.6 million and P
P
=19.3 million in 2012, 2011 and 2010, respectively (see Note 21). The
unrealized gains from fair value change of investments held for trading amounted to
=42.1 million, P
P
=27.9 million and P
=13.0 million in 2012, 2011 and 2010, respectively. Cumulative
unrealized gains from fair value change of investment held for trading amounted to P
=14.3 million
and P
=18.6 million as at December 31, 2012 and 2011, respectively.
Investments held for trading have yields ranging from 1.06% to 6.55% in 2012, 3.66% to 7.98% in
2011 and 3.27% to 10.46% in 2010. Interest income from investments held for trading amounted
to P
=23.7 million, P
=15.0 million and P
=20.3 million in 2012, 2011 and 2010, respectively
(see Note 21).
9. Trade and Other Receivables
This account consists of:
2011
2012
(In Thousands)
Trade
Installment contract receivables (see Note 14)
Advances to suppliers and contractors
Accrued interest
Receivable from PHN Retirement/Gratuity Plan
(PHN Retirement)
Advances to officers and employees
Due from related parties (see Note 28)
Others
Less allowance for doubtful accounts
P
=889,284
68,884
56,002
10,696
=780,742
P
72,617
13,449
11,817
8,939
8,875
2,913
24,062
1,069,655
197,774
P
=871,881
8,939
6,094
75,653
53,144
1,022,455
164,806
=857,649
P
Trade receivables include receivables from sale of roofing and other steel products to customers
like developers and contractors, which are normally on a 30-60 days term. Trade receivables also
include tuition and other school fees receivables which are normally collected within the current
school semester. Other trade receivables are noninterest-bearing and normally collected
throughout the financial year.
*SGVMG600202*
- 34 Installment contract receivables mainly represent the balance of receivable from a third party for
the sale of API’s property (see Note 14). The receivables are noninterest-bearing and are shortterm in nature.
The terms and conditions of the amounts due from related parties are discussed in Note 28.
Other receivables are noninterest-bearing and normally collected throughout the financial year.
Movements in the allowance for doubtful accounts are as follows:
Trade
2012
Others
Total
(In Thousands)
Balance at January 1, 2012
Provisions (Notes 23 and 24)
Reversals/write-offs
Balance at December 31, 2012
P
=156,561
36,374
(730)
P
=192,205
P
=8,245
–
(2,676)
P
=5,569
P
=164,806
36,374
(3,406)
P
=197,774
Individual impairment
Collective impairment
P
=33,910
158,295
P
=192,205
P
=1,364
4,205
P
=5,569
P
=35,274
162,500
P
=197,774
Trade
2011
Others
Total
(In Thousands)
Balance at January 1, 2011
Provisions (Notes 23 and 24)
Reversals/write-offs
Balance at December 31, 2011
=138,052
P
36,192
(17,683)
=156,561
P
=8,245
P
–
–
=8,245
P
=146,297
P
36,192
(17,683)
=164,806
P
Individual impairment
Collective impairment
P38,536
=
118,025
=156,561
P
=6,640
P
1,605
=8,245
P
P45,176
=
119,630
=164,806
P
10. Inventories
This account consists of:
2011
2012
(In Thousands)
At cost:
Finished goods
Raw materials
Other inventories
At net realizable value Spare parts and others
P
=875,576
19,796
27,350
=886,342
P
36,303
20,633
33,750
P
=956,472
34,641
=977,919
P
*SGVMG600202*
- 35 Under the terms of the agreements covering liabilities under trust receipts, certain inventories
amounting to P
=554.8 million and P
=103.7 million as of December 31, 2012 and 2011, respectively,
have been released to UGC in trust for the banks. UGC is accountable to the banks for the
inventories under trust or its sales proceeds.
Finished goods mainly represent roofing and other steel products of UGC.
The cost of spare parts and other inventories carried at net realizable value amounted to
=35.1 million and P
P
=36.0 million as of December 31, 2012 and 2011, respectively.
Cost of inventories sold, presented as “Inventories used” under “Cost of Sales”, amounted to
=2,083.9 million, P
P
=1,844.9 million and P
=1,740.5 million in 2012, 2011 and 2010, respectively
(see Note 22).
11. Investments in Associates
This account consists of investments in the following entities:
PHINMA Property Holdings Corporation (PPHC)
Trans-Asia Oil and Energy Development
Corporation (TA Oil)
AB Capital and Investment Corporation
(AB Capital) (a)
Luzon Bag Corporation(b)
Asia Coal Corporation (Asia Coal) (c)
(a)
Percentage of Ownership
2011
2012
35.35
35.35
26.21
28.26
26.51
21.05
12.08
26.51
21.05
12.08
In 2012, represents the shares to be received by PHN from AB Capital upon return of capital.
Liquidated in 2012.
(c)
Ceased commercial operations and considered as an associate although percentage of ownership is below
20% since the Company has significant influence as evidenced in its representation in the BOD of Asia
Coal.
(b)
The movements and details of investments in associates are as follows:
2011
2012
(In Thousands)
Acquisition costs:
Balance at beginning of year
Additions
Reclassified to AFS investment
Balance at end of year
Accumulated equity in net income (losses):
Balance at beginning of year
Equity in net earnings for the year
Dividends received
Reclassified to AFS investment
Balance at end of year
P
=1,888,248
533,153
(116,222)
2,305,179
(72,154)
118,944
(54,201)
22,533
15,122
=1,537,282
P
350,966
–
1,888,248
(191,824)
137,656
(17,986)
–
(72,154)
(Forward)
*SGVMG600202*
- 36 2011
2012
(In Thousands)
Share in net unrealized gain on change in fair value
of AFS investments of associates:
Balance at beginning of year
Change in fair value during the year
Balance at end of year
=19,226
P
(175)
19,051
=1,835,145
P
P
=19,051
4,713
23,764
P
=2,344,065
The detailed carrying values of investments in associates which are accounted for under the equity
method are as follows:
2011
2012
(In Thousands)
*
TA Oil
PPHC
AB Capital
Academy of Competitive Intelligence**
Asia Coal
=1,267,692
P
373,630
191,397
2,158
268
=1,835,145
P
P
=1,828,597
413,034
100,227
1,939
268
P
=2,344,065
*The fair value based on quoted share price amounted to =
P 1,476.9 million and =
P 896.0 million as of
December 31,,2012 and 2011, respectively.
**Associate of Fuld U.S.
The following table summarizes the financial information of the Company’s investments in
associates:
2011
2012
(In Thousands)
Share in the associates’ net assets:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net assets attributable to common stockholders
Share in the associates’ revenue and net income:
Revenue
Net income
Carrying amount of the investments
P
=2,168,209
963,642
(410,191)
(389,124)
P
=2,332,536
=1,683,679
P
945,154
(410,481)
(388,283)
=1,830,069
P
P
=732,538
118,705
=694,215
P
146,875
P
=2,344,065
=1,835,145
P
Following are the status of operations and significant transactions of certain associates:
a. TA Oil
TA Oil is involved in power generation and oil and mineral exploration activities.
On February 16, 2012, the BOD of TA Oil declared cash dividend amounting to P
=66.5 million
equivalent to P
=0.04 a share to all common stockholders of record as of March 1, 2012. This
was paid on March 27, 2012.
*SGVMG600202*
- 37 On March 20, 2012, the stockholders of TA Oil approved the increase in the authorized capital
stock subject to the approval of the SEC from P
=4.2 billion divided into 4.2 billion shares with
a par value of P
=1 per share to P
=8.4 billion divided in to 8.4 billion shares with a par value of
=1 per share. The said increase in authorized capital stock shall be funded by a stock rights
P
offering, the terms and conditions of which, including the final issue size, rights entitlement,
offer price and record date shall be determined by the board of directors. The application for
the increase in authorized capital stock was approved by the SEC in November 2012.
On October 3, 2012, the SEC approved the stock rights offering of 1.415 billion shares of TA
Oil at the rate of one share for every two shares held as of record date of November 14, 2012,
at a price of P
=1.00 per share. The offer period commenced on November 14, 2012 and ended
on November 20, 2012. TA Oil also offered an additional 212.25 million shares to meet
additional demand from eligible stockholders (“Overallotment Option”). Total proceeds will
be used to finance its equity investments in a 54MW wind energy project in San Lorenzo,
Guimaras and the second 135MW clean coal-fired power plant in Calaca, Batangas, and other
power project opportunities.
On June 6, 2011, the SEC approved the increase in the TA Oil’s authorized capital stock` from
=2 billion divided into 2 billion shares, to P
P
=4.2 billion divided into 4.2 billion shares.
On March 30, 2011, the SEC approved the stock rights offering of 1,165.24 million shares of
TA Oil at the rate of seven shares for every ten shares held as of record date of May 18, 2011,
at a price of P
=1.00 per share. The offer period commenced on May 30, 2011 and ended on
June 3, 2011. Total proceeds raised from the stock rights offering, net of direct costs incurred,
amounted to P
=1,154.53 million. The proceeds will be used as equity investment in new 135
MW clean coal power project and in Maibarara Geothermal, Inc. Additional investments
made to TA Oil as a result of stock rights offering and issuance of new shares amounted to
=350.4 million in 2011.
P
On March 21, 2011, the BOD of TA Oil declared a cash dividend amounting to P
=66.5 million
equivalent to P
=0.04 a share to all common stockholders of record as of April 11, 2011. This
was paid on May 4, 2011.
On March 24, 2010, the BOD of TA Oil declared a cash dividend amounting to P
=66.5 million
equivalent to P
=0.04 a share to all common stockholders of record as of May 3, 2010. This was
paid on May 28, 2010.
Dividend income recognized by the Parent Company from TA Oil amounted to P
=18.0 million
each in 2012, 2011 and 2010.
TA Oil has 100% equity interest in CIP II Power Corporation (CIPP) which operates a 21MW
Bunker C-fired power plant in CIP II Special Economic Zone in Calamba, Laguna. In April,
2009, the terms of the sale of the distribution assets to Manila Electric Company was finalized
resulting in the cessation of CIPP’s operations starting April 2009. Also, the separation of
substantially all of CIPP’s employees effective January 2010 was announced. On February
22, 2010 and March 24, 2010, the BOD and stockholders of TA Oil and CIPP approved the
proposed merger of TA Oil and CIPP, respectively, subject to the approval by the SEC. As of
December 31, 2012, CIPP has not filed its application for merger with SEC and has deferred
its plan for merger.
*SGVMG600202*
- 38 b. PPHC
PPHC is engaged in real estate development, particularly in the development of affordable
medium and high-rise condominium units.
On November 27, 2012, the BOD approved the stock rights offering at the rate of one share
for every five shares held as of record date of November 28, 2012, at a price of P
=0.10 per
share. The existing shareholders of PPHC subscribed to and fully paid for 1,801,470,025
shares valued at P
=180.1 million.
On March 13, 2012, the BOD of PPHC declared a cash dividend amounting to P
=63.5 million
or 7% of outstanding capital stock to all shareholders of record as of March 23, 2012. This
was paid in 2012.
On March 1, 2010, the BOD of PPHC declared a cash dividend amounting to P
=59.7 million,
equivalent to P
=0.01 per share to all common stockholders of record as of March 15, 2010.
This was paid in 2010.
Dividend income recognized by the Parent Company from PPHC amounted to P
=22.5 million
and P
=21.1 million each in 2012, 2011 and 2010, respectively.
c. AB Capital
AB Capital is an investment house that engages in corporate finance, fixed-income securities
dealership, stock brokerage and fund management.
Pursuant to an agreement between PHN and Vicsal Investment Inc. (Vicsal), PHN agreed to
sell its shares in AB Capital subject to certain conditions, including the following:
(a) Approval of the Bangko Sentral ng Pilipinas (BSP)
(b) Removal of assets other than those identified and agreed to be retained by Vicsal in
AB Capital, by transfer to a New Company in exchange for shares in New Company
and/or by sale or assignment of assets to the New Company
(c) Return of capital to PHN pertaining to shares in New Company
(d) Selling Shareholders shall secure all Government Authorizations, including approvals
and clearances, required for the return of capital of AB Capital to PHN and other
sellers
(e) On Closing Date, PHN shall transmit to the Buyer the Deed of Absolute Sale
On June 29, 2012, in accordance with PAS 28, PHN discontinued the use of the equity method
on the AB Capital shares to be sold to Vicsal due to the change in relationship of PHN with
AB Capital. The investment in AB Capital to be sold to Vicsal is accounted for in accordance
with PAS 39 from that date.
The AB Capital shares to be sold to Vicsal are presented at its fair value as an available-forsale financial asset in accordance with PAS 39 amounted to P
=101.8 million. The difference
between the fair value and carrying amount of the AB Capital shares to be sold to Vicsal
amounting to P
=6.7 million is recorded as “Unrealized fair value adjustment on AFS
investment previously held as associate” and included under “Others-net” in the consolidated
statements of comprehensive income.
Investment in AB Capital presented as part of Investments in Associates in the statements of
consolidated financial position represents the New Company shares to be received by PHN
from AB Capital upon return of capital.
*SGVMG600202*
- 39 d. Asia Coal
Asia Coal is engaged in the trading of coal. On March 19, 2009, the BOD and stockholders of
Asia Coal approved the shortening of the term of Asia Coal’s corporate existence until
October 31, 2009, thereby causing the dissolution of Asia Coal as of such date, subject to the
approval of the SEC. As of December 31, 2012, Asia Coal is in the process of securing a tax
clearance with the Bureau of Internal Revenue (BIR) in connection with the filing with the
SEC of its application for dissolution.
12. AFS Investments
This account consists of investments in quoted and unquoted equity securities:
2011
2012
(In Thousands)
Quoted
Unquoted (Note 11)
P
=10,101
267,822
277,923
45,517
P
=232,406
Less accumulated impairment losses
P20,620
=
165,887
186,507
45,517
=140,990
P
AFS investments consist of investment in shares, and therefore have no fixed maturity date or
coupon rate.
The unquoted AFS investments are carried at cost less accumulated impairment losses since their
fair value cannot be reliably measured. The quoted AFS securities which are listed in the
Philippine Stock Exchange (PSE) are carried at fair value. Unrealized gain (loss) on change in fair
value on such quoted AFS amounting to (P
=0.6 million), (P
=0.4 million) and P
=1.1 million were
recognized in 2012, 2011 and 2010, respectively.
Full provision for impairment loss has been made on unquoted AFS investments in Unicon
Phinma Concrete Corporation and United Industrial Bag Corporation, which discontinued their
operations on March 21, 2000 and in October 2000, respectively.
13. Property, Plant and Equipment
This account consists of:
Cost
Land
Plant site improvements
Buildings and improvements
Machinery and equipment
Transportation and other equipment
January 1,
2012
Additions
P
=1,085,875
22,834
1,252,026
723,353
469,532
3,553,620
P
=36,190
528
52,233
50,514
65,519
204,984
Disposals Reclassification
(In Thousands)
(P
=23,760)
(119)
(4,522)
(115,222)
(20,682)
(164,305)
P
=–
5,413
2,802
71,682
(40,454)
39,443
December 31,
2012
P
=1,098,305
28,656
1,302,539
730,327
473,915
3,633,742
(Forward)
*SGVMG600202*
- 40 January 1,
2012
Less Accumulated Depreciation
Plant site improvements
Buildings and improvements
Machinery and equipment
Transportation and other equipment
Construction in progress
Net Book Value
Cost
Land
Plant site improvements
Buildings and improvements
Machinery and equipment
Transportation and other equipment
Less Accumulated Depreciation
Plant site improvements
Buildings and improvements
Machinery and equipment
Transportation and other equipment
Construction in progress
Net Book Value
P
=17,809
482,495
568,813
339,065
1,408,182
2,145,438
115,306
P
=2,260,744
Additions
P
=2,555
55,268
100,794
64,679
223,296
(18,312)
45,654
P
=27,342
Disposals Reclassification
(In Thousands)
(P
=119)
(2,328)
(114,754)
(17,643)
(134,844)
(29,461)
–
(P
=29,461)
P
=3,539
(847)
12,252
(42,724)
(27,780)
67,223
(67,223)
P
=–
December 31,
2012
P
=23,784
534,588
567,105
343,377
1,468,854
2,164,888
93,737
P
=2,258,625
December 31,
2011
January 1,
2011
Additions
=1,044,497
P
23,469
1,202,671
694,524
398,435
3,363,596
=67,436
P
–
54,955
31,459
76,060
229,910
=–
P
(635)
–
(3,008)
(3,075)
(6,718)
(P
=26,058)
–
(5,600)
378
(1,888)
(33,168)
=1,085,875
P
22,834
1,252,026
723,353
469,532
3,553,620
15,978
429,305
494,608
280,996
1,220,887
2,142,709
33,818
=2,176,527
P
2,466
53,190
76,970
64,410
197,036
32,874
98,406
=131,280
P
(635)
–
(2,765)
(2,608)
(6,008)
(710)
–
(P
=710)
–
–
–
(3,733)
(3,733)
(29,435)
(16,918)
(P
=46,353)
17,809
482,495
568,813
339,065
1,408,182
2,145,438
115,306
=2,260,744
P
Disposals
(In Thousands)
Reclassification
Undepreciated capitalized borrowing costs amounted to P
=1.4 million and P
=1.7 million as at
December 31, 2012 and 2011, respectively. There were no borrowing costs capitalized in 2012,
2011 and 2010.
Certain property, plant and equipment of UGC, AU and UPANG totaling P
=0.92 billion and
=1.1 billion as of December 31, 2012 and 2011, respectively, were used as security for their
P
respective long-term debt as disclosed in Note 19 to the consolidated financial statements.
14. Investment Properties
This account consists of:
January 1,
2012
Additions
Disposals
(In Thousands)
December 31,
2012
Cost
Land
Buildings for lease
Less accumulated depreciation
Buildings for lease
P
=330,314
93,316
423,630
P
=25,226
–
25,226
(P
=8,261)
–
(8,261)
P
=347,279
93,316
440,595
12,740
P
=410,890
6,148
P
=19,078
–
(P
=8,261)
18,888
P
=421,707
*SGVMG600202*
- 41 January 1,
2011
Additions/
Disposals
Reclassifications
(see Note 9)
(In Thousands)
December 31,
2011
Cost
Land
Buildings for lease
Less accumulated depreciation
Buildings for lease
=321,085
P
106,175
427,260
P9,229
=
10,000
19,229
=–
P
(22,859)
(22,859)
=330,314
P
93,316
423,630
20,971
=406,289
P
6,253
=12,976
P
(14,484)
(P
=8,375)
12,740
=410,890
P
The fair value of investment properties based on the latest valuation performed by independent
firms of appraisers on various dates in 2012 and 2011 amounted to P
=894.7 million and
=810.6 million as of December 31, 2012 and 2011, respectively. The valuation of investment
P
properties was based on market values using sales comparison approach, which considers the sales
of similar or substitute properties and related market data and establishes value estimate by
processes involving comparison.
On December 9, 2011, API acquired a condominium unit amounting to P
=10.0 million from AB
Capital, an affiliate, for cash.
On December 28, 2010, API signed a Memorandum of Agreement with Shang Property
Developers, Inc. (SPDI) for the sale of API’s property for P
=615.0 million. Outstanding receivable
from SPDI amounted to =
P68.9 million and P
=72.6 million, presented in “Installment contract
receivables” account under “Trade and other receivables”, as at December 31, 2012 and 2011,
respectively (see Note 9).
Land include PSHC’s land amounting to P
=220.0 million which was used as security for its longterm debt as disclosed in Note 19 to the consolidated financial statements.
Rental income amounted to P
=42.7 million, P
=46.9 million and P
=79.6 million in 2012, 2011 and
2010, respectively, and presented in the consolidated statements of income. While direct costs and
expenses incurred amounted to P
=6.2 million, P
=6.3 million and P
=26.7 million in 2012, 2011 and
2010, respectively, and included as part of “General and administrative expenses” account in the
consolidated statements of income (see Note 23).
15. Intangibles
Following are the details and movements in this account:
January 1,
2012
Additions
Adjustment
Impairment
December 31,
2012
(In Thousands)
Cost
Goodwill (Note 6)
Student lists
Trademarks (Note 6)
Customer contracts
Accumulated amortization
Student lists
Customer contracts
P
=1,257,186
131,120
47,156
22,080
1,457,542
P
=6,054
–
–
–
6,054
(P
=7,063)
–
–
–
(7,063)
(P
=212,300)
–
–
–
(212,300)
P
=1,043,877
131,120
47,156
22,080
1,244,233
127,516
22,080
149,596
P
=1,307,946
3,604
–
3,604
P
=2,450
–
–
–
(P
=7,063)
–
–
–
(P
=212,300)
131,120
22,080
153,200
P
=1,091,033
*SGVMG600202*
- 42 -
January 1,
2011
December 31,
2011 (As
restated Impairment
Note 6)
Additions Adjustment
(In Thousands)
Cost
Goodwill (Note 6)
Student lists
Trademarks (Note 6)
Customer contracts
Accumulated amortization
Student lists
Customer contracts
=1,125,183
P
131,120
–
22,080
1,278,383
=298,372
P
–
47,156
–
345,528
=–
P
–
–
–
–
(P
=166,369)
–
–
–
(166,369)
=1,257,186
P
131,120
47,156
22,080
1,457,542
92,268
22,080
114,348
=1,164,035
P
35,248
–
35,248
=310,280
P
–
–
–
=–
P
–
–
–
(P
=166,369)
127,516
22,080
149,596
=1,307,946
P
The Company recognized impairment loss on goodwill amounting to P
=212.3 million in 2012 and
=166.4 million in 2011.
P
In 2012, the Company received P
=7.1 million from its escrow fund which pertains to excess
payment from the acquisition of UPANG on February 2, 2009. The excess consideration was
adjusted to the cost of the business combination in 2012.
16. Other Noncurrent Assets
This account consists of:
2011
2012
(In Thousands)
Input VAT - net of allowance for unrecoverable
amount of P
=118.6 million and P
=89.2 million
in 2012 and 2011, respectively (Note 23)
Refundable deposits
Others - net of allowance for doubtful advances of
=51.5 million in 2012 and P
P
=51.1 million in 2011
P
=605
8,349
=–
P
1,794
22,561
P
=31,515
24,846
=26,640
P
17. Notes Payable
This account consists of notes payable of the following subsidiaries:
2011
2012
(In Thousands)
UGC
AU
COC
UI
P
=274,821
50,751
35,604
12,500
P
=373,676
=423,543
P
–
11,500
20,150
=455,193
P
*SGVMG600202*
- 43 This account consists of unsecured short-term peso-denominated loans obtained from financial
institutions with annual interest rates ranging from 4.50% to 5.75% in 2012 and 4.63% to 5.25%
in 2011.
18. Trade and Other Payables
This account consists of:
2012
2011
(As restated Note 6)
(In Thousands)
Trade
Payable to third parties
Accruals for:
Personnel costs (see Notes 25 and 28)
Professional fees and others (see Note 28)
Interest (see Note 27)
Freight, hauling and handling
Customers’ deposits
Dividends
Others
P
=127,079
124,583
=108,901
P
44,449
65,400
38,194
8,291
6,549
91,977
30,274
44,336
P
=536,683
52,773
65,912
10,823
883
44,756
31,916
42,082
=402,495
P
Trade payables are noninterest-bearing and normally settled on 30 to 90-day terms.
Accrued expenses, customers deposits, dividends, payable to third parties and others are normally
settled throughout the financial year.
Other liabilities pertains to other accrued and unpaid general and administrative expenses which
are normally settled throughout the financial year.
19. Long-term Debt
This account consists of long-term liabilities of the following subsidiaries:
2011
2012
(In Thousands)
UPANG
AU
UGC
Less debt issuance cost
PSHC
Fuld U.S.
Less current portion - net of debt issuance cost
P
=228,500
30,000
–
258,500
2,267
256,233
152,873
3,080
412,186
64,654
P
=347,532
=259,148
P
45,653
280,000
584,801
827
583,974
151,050
5,698
740,722
141,063
=599,659
P
*SGVMG600202*
- 44 UPANG
This represents loan obtained from China Banking Corporation (China Bank) on July 21, 2009
used for the acquisition and/or refinancing of its capital expenditures. The terms of the loan are as
follows:
Tenure
Seven (7) - year term loan with one year grace period for repayment.
Repayment
The first principal payment will commence at the end of the 5th
quarter from the date of drawdown; amortization will be graduated, at
=12.5 million from the fifth to the 16th quarters; P
P
=15.0 million from
the 17th to the 24th quarters and the P
=7.5 million for the last four
quarters until full settlement.
Funding/Interest rate
Interest will be based on the Wholesale Lending Program (third party
funder) with a fixed rate of 8% for the first five years. Rates for the
remaining two year period of the term shall be based on the prevailing
two-year PDST-F rate plus a minimum spread of 2%.
Security
The facility will be secured by Real Estate Mortgage amounting to
=300.0 million on the school assets covering land and land
P
improvements (see Note 13).
The foregoing loan agreements include, among others, certain restrictions and requirements with
respect to the following:
§
Maintenance of the following ratios based on the audited year-end financial statements: (1)
current ratio of not less than 1:1; (2) debt to equity ratio of not more than 3:1. Waived for the
first year of the loan but is required for the remaining term of the loan.
UPANG’s current ratio is below the required current ratio of 1:1. Based on the loan
agreement, an event of default includes the failure to comply with any of the loan covenants
and such noncompliance is either not remediable or if remediable, continues to be unremedied
for a period of 30 days from written notice by the bank. The University has not received any
notice from the Bank. In March 2013, the University requested from the bank for the waiver
of the required current ratio. As of March 6, 2013, the University is awaiting the bank’s
response to this request.
§
Restrictions on declaration and payment of dividends, entering into merger or consolidation
which would result in a material change in control, sale, lease, mortgage or otherwise dispose
of all or substantially all of its assets and amendment of Articles of Incorporation and By-laws
that would cause a material adverse change in the financial ability or capacity of the Company
to perform.
On December 21, 2012, a Term Loan Agreement was signed by the UPANG and China Bank for a
7-year term loan for a maximum principal amount of P
=275 million. The proceeds will be used to
refinance existing obligations and to fund the capital expenditures for the school year 2012-2013.
The loan was drawn on February 1, 2013 and February 15, 2013 totalling to P
=250 million with
interest based on 7-year PDSTF plus spread. Under the new term loan, the Company is not
allowed to pay dividends for the first 3 years of the loan. Dividends may be paid starting on the
4th year, provided the current ratio shall not be less than 1.25:1.00 and debt-service cover shall at
least be 1.50:1.00.
*SGVMG600202*
- 45 UGC
As at December 31, 2011, long-term debt includes loans obtained from Banco de Oro Unibank,
Inc. (BDO) and Rizal Commercial Banking Corporation (RCBC).
On June 29, 2010, the outstanding long-term debt from BDO and RCBC (the lenders) were preterminated by obtaining three-year term loans aggregating to P
=400.0 million from the same
lenders for which P
=2.8 million debt issue cost was paid. The newly obtained loans are to be paid
in 11 quarterly installments of P
=20.0 million to commence on September 25, 2010 and a lump sum
payment in June 2013 amounting to P
=180.0 million. The interest is at a fixed rate of 7.624%
computed based on 3-year PDST-F plus a spread of 1.75% and applicable taxes at the time of the
drawdown.
As of December 31, 2011, the loans from the lenders are collateralized by mortgage agreement on
UGC’s land, plantsite improvements, buildings and installations and machinery and equipment of
Calamba and Davao plants amounting to P
=461.3 million, respectively (see Note 13).
The foregoing loan agreements include, among others, certain restrictions and requirements with
respect to the following:
§
Maintenance of the following ratios for the duration of the loan agreements: (1) current ratio
of not less than 1:1; (2) debt to equity ratio of not more than 1.5:1
§
Restrictions on declaration and payment of dividends, incurrence of new long-term debt,
entering into management agreement other than with PHINMA, entering into merger (except
where it is the surviving entity) or consolidation or any change of ownership, sale, lease or
otherwise transfer of a substantial portion of its assets except in the ordinary course of
business, making any loans, advances or investments, making capital expenditures,
prepayment of any other long-term debt and amendment of Articles of Incorporation and Bylaws.
Under the loan agreement, failure to comply with the obligation or covenant in the agreement
should be remedied within thirty (30) calendar days after notice by the lenders.
As of December 31, 2011, UGC is in compliance with the terms of the loan agreement.
Amortization of debt issue costs, included under “Interest expense and other financial charges”
account in the consolidated statements of income, amounted to P
=0.8 million, P
=0.7 million and
=1.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. Interest
P
expense amounted to P
=15.1 million, P
=25.6 million and P
=25.4 million for the years ended
December 31, 2012, 2011 and 2010, respectively (see Note 27).
On September 19, 2012, the outstanding long-term debt of P
=240 million from BDO and RCBC
were pre-terminated.
PSHC
This represents interest-bearing loan obtained from United Pulp and Paper Co., Inc. (UPPC)
amounting to P
=154.0 million arising from the acquisition of land from UPPC. UPPC was a former
associate of the Company.
*SGVMG600202*
- 46 This loan is presented at amortized cost as of the end of the reporting period. The present value of
the loan at initial recognition in 2006 was calculated using an effective interest rate of 11.0%. The
effective interest rate used in computing for the present value of the loan payable was derived
based on the rate inherent to the loan after considering the carrying value and the future value of
the loan payable at the coupon rate of 9.1%.
Initially, the said loan is payable in two installments amounting to P
=44.0 million on July 15, 2008
and P
=110.0 million on July 15, 2013. On July 8, 2008, a Memorandum of Agreement was
executed by UPPC and PSHC amending the maturity date of P
=44.0 million from July 15, 2008 to
July 15, 2013. A recomputation of the effective interest rate of 10.52% was made in 2008 to
reflect the change in the payment terms of the liability in 2013. On December 20, 2012, a
Memorandum of Agreement was executed by UPPC and the Company amending the payment
terms of the P
=154.0 million from July 15, 2013 to July 15, 2018. A recomputation of the effective
interest rate of 9.28% was made to reflect the change in the payment terms in the liability.
Additional interest expense resulting from the accretion of loan payable amounted to P
=1.82
million, =
P1.70 million and P
=1.5 million in 2012, 2011 and 2010, respectively (see Note 27). The
details of the loan are as follows:
2011
2012
(In Thousands)
Loan payable to UPPC
Less unamortized discount
P
=154,000
1,127
P
=152,873
=154,000
P
2,950
=151,050
P
To secure the payment of the loan, PSHC constituted a mortgage over its land amounting to
=220.0 million in favor of certain creditors of UPPC (see Note 14).
P
The payable of PSHC to UPPC incurs an annual interest at a rate subject to mutual agreement by
UPPC and PSHC on each anniversary date. Interest expense on the amount payable to UPPC,
computed at 9.1% of the outstanding principal balance, amounted to P
=14.0 million in 2012, 2011
and 2010 (see Note 27).
AU
AU’s long-term debt consists of:
2011
2012
(In Thousands)
Loan payable to China Bank
Less current portion
P
=30,000
12,251
P
=17,749
=45,653
P
9,573
=36,080
P
Loan payable to China Bank represents the balance of a 10-year loan from China Bank which was
used to preterminate the restructured long-term debt from another local bank, partially finance
Araullo University’s building renovation and purchase various school equipment. The debt is
payable on fixed monthly amortization of P
=750,000 starting April 17, 2006. Interest shall be
payable monthly in arrears based on variable pass-on rate plus spread. In 2010, the outstanding
loan payable to China Bank of P
=53.25 million was restructured with the same lender at a fixed rate
interest based on the 5-year prevailing PDST-F rate plus a spread of 1.5% payable quarterly in
*SGVMG600202*
- 47 arrears including the applicable taxes for the account of the borrower. The new debt is to be paid
in 19 quarterly installments until February 5, 2015 under a graduated amortization schedule based
on the agreement. Transaction costs paid and included in the carrying amount of the new debt
amounted to P
=2.4 million. Actual average interest rate was 10.3% in 2012 and 2011.
AU’s land, including existing and future improvements thereon, is used as collateral for its loan
payable to China Bank. The net book value of the said land and improvements amounted to
=160.0 million and P
P
=163.0 million as of December 31, 2012 and 2011, respectively (see Note 13).
20. Equity
a. Capital Stock
The composition of the Parent Company’s capital stock as of December 31, 2012, 2011 and
2010 is as follows:
2012
Preferred - cumulative,
nonparticipating, =
P10 par value
Class AA
Authorized
Number of Shares
2011
2010
50,000,000
50,000,000
50,000,000
Class BB
Authorized
50,000,000
50,000,000
50,000,000
Common - P
=10 par value
Authorized
420,000,000
420,000,000
420,000,000
258,867,064
39,994
257,697,313
39,994
257,697,313
39,994
258,907,058
257,737,307
257,737,307
Common shares:
Issued
Subscribed
Issued and subscribed
(see Note 35)
The issued and outstanding shares as of December 31, 2012, 2011 and 2010 are held by
1,278, 1,292 and 1,306 equity holders, respectively.
Capital stock presented in the statements of financial position is net of subscription
receivables amounting to P
=124 thousand as at December 31, 2012 and 2011.
The following summarizes the information on the Company’s track record of registration of
securities under the Securities Regulation Code:
Date of SEC Approval
March 12, 1957
June 30, 1959
June 30, 1967*
June 30, 1968*
January 21, 1980*
Authorized
Shares
1,200,000
–
800,000
1,000,000
2,000,000
No. of
Shares Issued
172,298
47,868
–
–
–
Issue/Offer
Price
=10
P
10
–
–
–
(Forward)
*SGVMG600202*
- 48 -
Date of SEC Approval
November 3, 1988*
July 21, 1992*
January 15, 1995*
March 16, 1999*
Authorized
Shares
10,000,000
25,000,000
60,000,000
320,000,000
No. of
Shares Issued
–
–
–
–
Issue/Offer
Price
=–
P
–
–
–
*Increase in authorized capital stock.
b. Retained Earnings
On March 22, 2012, the BOD of PHN declared a cash dividend of P
=0.40 a share to all
common shareholders of record as of April 11, 2012.
On March 3, 2011, the BOD of PHN declared a cash dividend of P
=0.40 a share to all common
shareholders of record as of March 29, 2011.
On March 3, 2010, the BOD of PHN declared a cash dividend of P
=0.40 a share to all common
shareholders of record as of March 29, 2010.
On October 5, 2005, the BOD of PHN appropriated P
=1.0 billion of retained earnings for future
investments. As approved by the BOD of PHN last March 6, 2013, the said appropriation
shall remain in effect and shall be used for the following, subject to specific terms and
conditions as the Board shall fix:
i.
ii.
iii.
Investments in PPHC of up to P
=300 million by year 2014;
Investments in Microtel Development Corporation of up to P
=200 million by year 2015;
and
Investments in Trans-Asia Oil and Energy Development Corporation of up to
=500 million by year 2016.
P
The BOD of PHN declared the following stock dividends:
Date
April 14, 2008
March 30, 2007
May 31, 2006
Dividend Rate
10%
15%
20%
Shareholders’ Record Date
June 13, 2008
June 15, 2007
August 11, 2006
The retained earnings account is restricted for the payment of dividends to the extent of
=599.1 million and P
P
=594.1 million as of December 31, 2012 and 2011, respectively,
representing the accumulated equity in net earnings of the subsidiaries and associates. The
accumulated equity in net earnings of the subsidiaries and associates is not available for
dividend distribution until such time that the Parent Company receives the dividends from the
subsidiaries and associates.
*SGVMG600202*
- 49 c. Other Components of Equity
This account consists of:
2011
2012
(In Thousands)
Share in unrealized gain on change in fair value of AFS
investments of associates (Note 11)
Cumulative translation adjustments
Unrealized gain on change in fair value of AFS
investments (Note 12)
Other reserves:
Reserve for Stock Purchase Plan
Other reserves resulting from change in ownership
interest in subsidiaries without loss of control
(Notes 1 and 6)
P
=23,764
(868)
=19,051
P
4,935
350
985
11,908
–
878
P
=36,032
8,943
=33,914
P
In 2010, the convertible debt has been extinguished thus the Company reclassified the
remaining balance of share in equity component of convertible notes to retained earnings.
d. Stock Purchase Plan
Following are the salient features of the Company’s Stock Purchase Plan:
Purpose
Prices of share
Tranches
Holding period
To motivate the Senior Officers to achieve the
Company’s goals, to help make the personal goals and
corporate goals congruent and to reward the officers for
the resulting increase in the value of PHN shares.
The officers shall purchase shares of stock of PHN from
those set aside under the Stock Purchase Plan at the
average closing price of PHN shares in the stock market
for 20 trading days, in no case shall the price be lower
than par value.
1/3 of the maximum shares can be purchased upon date
of first notice and 1/3 each every year thereafter
provided that work performance is deemed acceptable.
One-third of the shares shall not be sold or transferred to
a 3rd party for at least one year from the date of each
purchase or until retirement whichever comes first.
Another one-third of the shares shall not be sold or
transferred to a 3rd party for at least two years from the
date of each purchase or until retirement whichever
comes first.
The last one-third of the shares shall not be sold or
transferred to a 3rd party for at least three years from the
date of each purchase or until retirement whichever
comes first.
Any such sale or transfer shall be considered null and
void.
*SGVMG600202*
- 50 On April 2, 2009 and April 20, 2010, the BOD and shareholders of PHN respectively,
approved the setting aside of 8.4 million shares from the unsubscribed portion of the
Corporation’s 420 million authorized common shares for stock purchase by the Senior
Officers of this Corporation. On January 26, 2012, the Philippine SEC approved the
Company’s Stock Purchase Plan while the Philippine Stock Exchange approved for listing the
8.4 million shares last May 23, 2012.
Under its Stock Purchase Plan, officers of the Company can purchase P
=30.5 million worth of
shares over three years, subject to certain conditions. The shares can be purchased at the
average closing price of PHN shares in the market 20 days prior to each notice, but in no case
shall the price be less than par value.
As of December 31, 2012, total shares acquired under the stock purchase plan amount to
1,169,751 or P
=12.4 million.
Total cumulative expense recognized in relation to the stock purchase plan amounted to
=24.3 million as of December 31, 2012. There were no unexercised vested shares as of
P
December 31, 2012.
21. Investment Income
This account consists of:
2011
2012
2010
(In Thousands)
Interest income:
Cash and cash equivalents
(Note 7)
Investments held for trading
(Note 8)
Due from related parties
(Note 28)
Net gains from fair value change of
investments held for trading
(Note 8)
Dividend income
P
=22,131
=32,265
P
=29,624
P
23,704
14,998
20,258
12,468
58,303
14,024
61,287
10,370
60,252
50,869
23,896
P
=133,068
38,594
2,454
=102,335
P
19,346
4,469
=84,067
P
22. Cost of Sales, Educational, Animation and Consultancy Services
This account consists of:
2012
2011
2010
(In Thousands)
Cost of sales
Cost of educational services
Cost of animation services
Cost of consultancy services
P
=2,403,519
510,392
106,944
49,153
P
=3,070,008
=2,117,967
P
518,249
87,176
84,885
=2,808,277
P
=2,038,152
P
481,946
91,313
–
=2,611,411
P
*SGVMG600202*
- 51 The details of cost of sales, educational, animation and consultancy services are as follows:
2012
2011
2010
(In Thousands)
Inventories used (Note 10)
Personnel costs (Note 25)
Depreciation (Note 26)
Laboratory and school supplies
Equipment running
Repairs and maintenance
Educational tour expenses
School affiliations and other
expenses
Sports development and school
activities
Accreditation expenses
Others
P
=2,083,862
443,194
158,371
100,062
56,836
34,081
20,217
=1,844,916
P
534,982
133,475
60,176
55,253
39,249
23,449
=1,740,462
P
454,703
127,399
51,836
18,342
52,265
9,044
15,827
12,750
16,557
9,268
4,606
143,684
P
=3,070,008
9,508
75
94,444
=2,808,277
P
16,089
19,260
105,454
=2,611,411
P
2011
2010
23. General and Administrative Expenses
This account consists of:
2012
(In Thousands)
Personnel costs (Notes 25, 28 and
30)
Professional fees and outside
services (Note 28)
Depreciation and amortization
(Notes 14 and 26)
Provision for unrecoverable input
value-added tax (Note 16)
Rent, light and water
Taxes and licenses
Transportation and travel
Provision for doubtful accounts
(Note 9)
Advertising and promotions
Insurance
Communications
Office supplies
Donation
Others
P
=463,803
=257,206
P
=145,711
P
130,048
120,294
169,323
66,714
73,067
101,949
45,471
43,534
29,821
24,109
7,372
18,706
20,929
10,395
4,063
5,935
21,937
5,563
24,072
18,588
6,189
7,663
4,820
3,735
46,041
P
=914,608
23,505
22,921
4,821
2,643
5,097
19,393
55,095
=641,444
P
30,189
15,987
4,662
4,199
5,475
20,605
26,385
=561,983
P
*SGVMG600202*
- 52 -
24. Selling Expenses
This account consists of:
2012
2011
2010
(In Thousands)
Personnel costs (Note 25)
Freight, handling and hauling
Transportation and travel
Commission
Provision for doubtful accounts
(Note 9)
Advertising
Taxes and licenses
Supplies
Repairs and maintenance
Depreciation (Note 26)
Postage, telephone and telegraph
Entertainment, amusement and
recreation
Insurance
Outside services
Rental and utilities
Others
P
=227,003
71,186
35,666
23,578
=135,984
P
53,147
30,832
23,541
=64,791
P
49,416
17,990
21,779
12,302
12,154
10,464
9,151
8,272
7,963
7,339
12,687
14,858
9,378
8,822
8,215
11,537
8,436
12,085
9,957
8,046
9,243
8,002
9,032
7,671
2,830
2,386
1,919
1,325
8,548
P
=442,086
3,167
2,596
1,272
1,120
3,426
=329,018
P
3,050
2,182
1,418
1,008
3,317
=228,987
P
2011
2010
25. Personnel Costs
This account consists of:
2012
(In Thousands)
Salaries, employee benefits
and bonuses (Note 28)
Retirement and other postemployment benefits (Note 30)
Training
Others
P
=1,017,737
=875,775
P
=605,285
P
63,721
10,098
42,444
P
=1,134,000
38,478
8,381
5,538
=928,172
P
38,168
6,902
14,850
=665,205
P
*SGVMG600202*
- 53 -
26. Depreciation and Amortization
Depreciation and amortization relate to the following assets:
2012
2011
2010
(In Thousands)
Property, plant and equipment and
investment properties:
Cost of sales, educational and
animation services
(Note 22)
General and administrative
expenses (Note 23)
Selling expenses (Note 24)
Intangibles General and administrative
expenses (Note 23)
P
=158,371
=133,475
P
=127,399
P
63,110
7,963
37,819
11,537
66,704
9,032
3,604
P
=233,048
35,248
=218,079
P
35,245
=238,380
P
2011
2010
27. Interest Expense and Other Financial Charges
This account consists of:
2012
(In Thousands)
Interest expense on loans
and borrowings (Notes 17 and
19)
Other financial charges
P
=101,141
162
P
=101,303
=107,903
P
478
=108,381
P
=104,375
P
9,046
=113,421
P
28. Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the
other party in making financial and operating decisions and the parties are subject to common
control. Related parties may be individual or corporate entities.
Outstanding balances at year-end are unsecured and settlement occurs in cash throughout the
financial year. There have been no guarantees provided or received for any related party
receivables or payables. For the years ended December 31, 2012, 2011 and 2010, the Company
has not recorded any impairment of receivables from related parties. This assessment is
undertaken each financial year through examining the financial position of the related party and
the market in which the related party operates.
*SGVMG600202*
- 54 The significant related party transactions entered into by the Company with its associates and
entities under common control and the amounts included in the consolidated financial statements
with respect to such transactions follow:
2012
Company
Amount/
Volume
Amount
Due to
Related
Parties
Amount
Due from
Related
Parties
(see Note 9)
(In Thousands)
Share in expenses,
management fees
P
=28,231
P
=12,608
P
=299
Grant of interest
bearing advances
1,500
–
1,500
Share in expenses
1,563
–
821
Non-interest
bearing
Unsecured, no
impairment
Share in expenses
5,687
5,047
293
Non-interest
bearing
Unsecured, no
impairment
P
=17,655
P
=2,913
Amount
Due from
Related
Parties
(see Note 9)
(In Thousands)
Terms
Conditions
Non-interest
bearing
Unsecured, no
impairment
Nature
Terms
Conditions
Non-interest
bearing
Unsecured, no
impairment
Ultimate Parent
Associates
4.87%-5.07%
30-60 days
Unsecured, no
impairment
Other Related
Parties
2011
Company
Nature
Amount/
Volume
Amount
Due to
Related
Parties
Share in expenses,
management fees
=85,310
P
=20,200
P
=58,258
P
Grant of interest
bearing advances
131,307
–
643
Share in expenses
1,589
–
3,010
Non-interest
bearing
Unsecured, no
impairment
Share in expenses
22,542
4,296
13,742
Non-interest
bearing
Unsecured, no
impairment
=24,496
P
=75,653
P
Ultimate Parent
.
Associates
4.87%-5.07% Unsecured, no
impairment
30-60 days
Other Related
Parties
*SGVMG600202*
- 55 2010
Company
Amount of
Due from
Related
Parties
(see Note 9)
(In Thousands)
Nature
Amount/
Volume
Amount of
Due to
Related
Parties
Share in expenses,
management fees
=63,207
P
=29,690
P
=239
P
Grant of interest
bearing advances
25,272
–
–
Share in expenses
2,684
–
740
Grant of interest
bearing advances
37,53
–
–
37,811
3,239
8,336
=32,929
P
=9,315
P
Terms
Conditions
Non-interest
bearing
Unsecured, no
impairment
3.16%, 32 days
Unsecured, no
impairment
Non-interest
bearing
Unsecured, no
impairment
3.16%, 32 days
Unsecured, no
impairment
Non-interest
bearing
Unsecured, no
impairment
Ultimate Parent
.
Associates
Other Related
Parties
Share in expenses
PHINMA, Inc. The Company has a management contract with PHINMA, Inc. up to June 30,
2013, renewable thereafter mutual agreement. Under this contract, PHINMA, Inc. has a general
management authority with corresponding responsibility over all operations and personnel of the
Company including planning, direction, and supervision of all the operations, sales, marketing,
distribution, finance and other business activities of the Company. Under the existing
management agreement, the Parent Company pays PHINMA, Inc. a fixed monthly management
fee plus an annual incentive based on a certain percentage of the Parent Company’s net income.
TA Oil and TA Power. TA Oil and TA Power are likewise controlled by PHINMA, Inc. through a
management agreement. Phinma Corporation bills TA Oil and TA Power for their share in
expenses.
PPHC. The Company grants interest bearing advances to PPHC for a period of 30-60 days. The
Company also bills PPHC their share in expenses.
PSHC. PSHC has outstanding long-term debt to UPPC arising from the acquisition of land from
UPPC, then an associate of the Company (see Note 19). PSHC leases the land to UPPC for a
period of 50 years, renewable for another 25 years upon the approval of the Philippine Department
of Trade and Industry. Annual lease income during the entire lease term is initially fixed at
=14.6 million. In connection with the lease, UPPC was required to make a lease deposit with
P
PSHC of =
P55.5 million in July 2003 and an additional P
=2.9 million in April 2005, aggregated and
reflected as part of “Other noncurrent liabilities” at amortized cost at the end of the reporting
period, and refundable to UPPC upon the expiration of the lease. The lease deposit’s present
value was calculated using an effective interest rate of 12.0% per annum. On August 2, 2006,
PSHC and UPPC amended the lease agreement increasing the annual rent revenue from
=14.6 million to P
P
=19.2 million effective January 1, 2006.
*SGVMG600202*
- 56 The difference between the face value of the lease deposit and its corresponding present value at
inception was aggregated and reflected as unearned revenue that is being amortized as rent
revenue simultaneous with the accretion of the lease deposit.
The consolidated statements of financial position include the following outstanding balances as of
December 31 resulting from the aforementioned transactions:
2011
2012
(In Thousands)
Trade and other receivables
Unearned revenues
Trade and other payables
Long-term debt
Other noncurrent liabilities
P
=–
47,228
–
152,873
595
P1,712
=
48,394
1,144
151,050
531
Retirement Fund. The Parent Company has established a retirement fund that is managed by a
trustee. The carrying value and fair value of the retirement fund of the Parent Company amounts
to P
=46.0 million and P
= 37.3 million as of December 31, 2012 and 2011, respectively.
Management and Directors’ Compensation
PHN, UGC, COC, AU, UPANG and UI are under common management by PHINMA, Inc. and
pay PHINMA, Inc. a fixed annual management fee plus an annual bonus based on a certain
percentage of the respective companies’ adjusted net income, as defined in the management
contract between PHINMA, Inc. and the respective companies, pursuant to the provisions of the
same contract.
Management fees and bonuses, included in “Professional fees and outside services” account under
“General and administrative expenses”, amounted to P
=35.5 million, P
=42.0 million and
=110.2 million in 2012, 2011 and 2010, respectively. The related unpaid amount, included in
P
“Accruals for professional fees and others” account under “Trade and other payables” in the
consolidated statements of financial position, amounted to P
=13.7 million and P
=16.5 million as of
December 31, 2012 and 2011, respectively.
PHN, UGC, AHC, UI and AU recognized bonus to directors computed based on net income with
pre-agreed adjustments. Directors’ bonus, included in “Personnel costs” account under “General
and administrative expenses”, amounted to P
=12.5 million, P
=20.9 million and P
=43.2 million in
2012, 2011 and 2010, respectively. The related unpaid amount, included in “Accruals for
personnel costs” account under “Trade and other payables” in the consolidated statements of
financial position, amounted to P
=6.7 million and P
=7.2 million as of December 31, 2012 and 2011,
respectively.
Compensation of key management personnel of the Company are as follows:
2012
2011
2010
(In Thousands)
Short-term employee benefits
Post-employment benefits
(Note 30):
Retirement benefits
Vacation and sick leave
P
=73,340
=69,168
P
=70,227
P
6,686
1,989
P
=82,015
5,107
1,213
=75,488
P
4,582
2,064
=76,873
P
*SGVMG600202*
- 57 -
29. Income Tax
The components of the Company’s deferred tax assets and liabilities are as follows:
2011
2012
(In Thousands)
Deferred tax assets:
NOLCO
Allowance for doubtful accounts
Pension liability
Unearned tuition fee revenue
Accrued expenses
Stock purchase plan
Unrealized foreign exchange losses
Excess of straight-line recognition of management
fee over contract payment terms
Unamortized past service costs
Allowance for inventory writedown
Unrealized loss on change in fair value
Accrued interest expense
Allowance for impairment losses
MCIT
Unamortized accrued rent expense
Deferred tax liabilities:
Fair value adjustments on property and equipment
of subsidiaries
Accelerated depreciation
Accrued revenue
Unrealized gain on change in fair value
Deferred installment sales
Unamortized capitalized borrowing cost
Derivative assets
Pension asset
Unrealized foreign exchange gains
Unamortized debt issuance costs
Others
P
=28,769
25,676
17,334
12,881
6,468
4,482
2,750
=13,753
P
23,676
8,113
4,148
13,118
–
8,524
2,709
1,137
409
314
156
–
–
–
103,085
2,709
1,556
409
–
1,091
1,255
339
185
78,876
(286,403)
(33,508)
(89)
(3,700)
(7,282)
(525)
(390)
(6,104)
(2,377)
(248)
–
(340,626)
(P
=261,750)
(244,892)
(40,800)
(25,878)
(10,149)
(7,282)
(420)
(158)
–
–
–
(2,011)
(331,590)
(P
=228,505)
The deferred tax assets and liabilities are presented in the consolidated statements of financial
position as follows:
2011
2012
(In Thousands)
Deferred tax assets - net
Deferred tax liabilities - net
P
=85,231
(313,736)
(P
=228,505)
=49,245
P
(310,995)
(P
=261,750)
*SGVMG600202*
- 58 The Company’s deductible temporary differences, unused NOLCO and MCIT for which no
deferred tax assets are recognized in the consolidated statements of financial position, are as
follows:
2011
2012
(In Thousands)
NOLCO
Allowance for unrecoverable input VAT
Accrued personnel costs and employee benefits
Unrealized foreign exchange losses
Unamortized past service costs
MCIT
Unrealized loss on derivatives
P
=279,203
118,573
22,596
21,633
14,970
7,758
–
P
=464,733
=212,722
P
89,214
31,675
16,980
13,443
8,377
2,281
=374,692
P
Deferred tax assets amounting to P
=139.4 million and P
=112.4 in 2012 and 2011, respectively, were
not recognized since management believes that it is not probable that sufficient future taxable
profit will be available to allow said deferred tax assets to be utilized.
AU, UPANG, UI and COC, as private educational institutions, are taxed based on the provisions
of Republic Act (R.A.) No. 8424, which was passed into law effective January 1, 1998.
Section 27(B) of R.A. No. 8424 defines and provides that: “A Proprietary Educational Institution
is any private school maintained and administered by private individuals or groups with an issued
permit to operate from the Department of Education, Culture and Sports, or Commission on
Higher Education, or Technical Education and Skills Development Authority, as the case may be,
in accordance with the existing laws and regulations - shall pay a tax of ten percent (10%) on their
taxable income.”
MCIT totaling =
P7.8 million can be deducted against RCIT due while NOLCO totaling
=364.3 million can be claimed as deduction against taxable income, as follows:
P
Date Paid/Incurred
Expiry Date
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
Amount
MCIT
NOLCO
(In Thousands)
=4,788
P
1,137
1,833
=7,758
P
=6,507
P
223,104
134,705
=364,316
P
MCIT amounting to P
=2.5 million and P
=2.8 million expired in 2012 and 2011, respectively. No
MCIT and NOLCO were claimed as deduction against regular taxable income in 2012 and 2011.
*SGVMG600202*
- 59 A reconciliation between the statutory tax rates and the Company’s effective tax rates on income
before income tax and non-controlling interest is as follows:
Applicable statutory tax rate
Income tax effects of:
Tax rate differential of
schools
Interest income subjected to
lower final tax rate
Dividend income exempt
from tax
Change in unrecognized
deferred tax assets and
others
Effective tax rates
2012
30%
2011
30.0%
2010
30.0%
52.1
(27.4)
(3.6)
19.9
(17.8)
(2.2)
1.2
(0.7)
(0.2)
(208.4)
(105.2%)
60.4
44.5%
(3.3)
20.7%
30. Pension and Other Post-employment Benefits
Pension and other post-employment benefits consist of:
2011
2012
(In Thousands)
Net pension liability
Vacation and sick leave
P
=51,788
36,391
P
=88,179
=31,778
P
26,471
=58,249
P
Pension and other employee benefits expenses under “Cost of sales”, “General and administrative
expenses” and “Selling expenses”, consist of:
2012
2011
2010
(In Thousands)
Net pension expense
Vacation and sick leave
P
=53,756
9,965
P
=63,721
=31,747
P
6,731
=38,478
P
=34,317
P
3,851
=38,168
P
Annual contribution to the retirement plans consists of a payment to cover the current service costs
for the year plus a payment toward funding the actuarial accrued liability.
The following tables summarize the components of net pension expense recognized in the
consolidated statements of income and the funded status and amounts recognized in the
consolidated statements of financial position for the respective plans.
*SGVMG600202*
- 60 Net pension expense consists of:
2012
2011
2010
(In Thousands)
Current service cost
Interest cost on defined benefit
obligation
Expected return on plan assets
Past service cost
Net actuarial loss recognized
Net pension expense
P
=20,822
=13,764
P
=22,764
P
14,645
(8,435)
22,846
3,878
P
=53,756
13,911
(7,956)
10,105
1,923
=31,747
P
13,169
(7,776)
4,141
2,019
=34,317
P
Details of net pension liability are as follows:
2011
2012
(In Thousands)
Present value of defined benefit obligation
Fair value of plan assets
Unfunded obligation
Benefits paid
Unrecognized net actuarial losses
Pension liability
P
=300,184
(142,080)
158,104
(6,454)
(99,862)
P
=51,788
P219,656
=
(120,150)
99,506
(4,182)
(63,546)
=31,778
P
Changes in the present value of the defined benefit obligation are as follows:
2011
2012
(In Thousands)
Balance at beginning of year
Current service cost
Interest cost on defined benefit obligation
Actuarial losses
Benefits paid
Increase in past service cost
Balance at end of year
P
=219,656
20,822
14,645
29,606
(7,974)
23,429
P
=300,184
=165,644
P
13,764
13,911
36,236
(15,421)
5,522
=219,656
P
Change in the fair value of plan assets are as follows:
2011
2012
(In Thousands)
Balance at beginning of year
Contributions by employer
Benefits paid
Expected return on plan assets
Actuarial gains (losses)
Balance at end of year
Actual return on plan assets
P
=120,150
25,310
(7,974)
8,435
(3,841)
P
=142,080
P
=4,594
=113,945
P
11,423
(15,421)
7,956
2,247
=120,150
P
=10,203
P
The Company expects to contribute P
=34.3 million to its defined benefit pension plans in 2013.
*SGVMG600202*
- 61 The principal assumptions used in determining pension benefits are as follows:
Discount rates
Expected rates of return
on plan assets
Rates of salary increase
2012
5-8%
2011
7–12%
2010
7–12%
5-10%
3-8%
5–8%
5–9%
5–8%
5–9%
The major categories of plan assets as a percentage of the fair value of the plan assets are as
follows:
2011
66%
32%
2%
100%
2012
84%
14%
2%
100%
Fixed income securities and others
Equities
Property
The expected return on plan assets is based on the Company’s expectation that assets will yield at
least equal to the risk-free rate for the applicable period over which the obligation is to be settled.
The Company has established a retirement fund that is managed by a trustee. The carrying value
and fair value of the retirement fund of the Company amounts to P
=46.0 million and =
P37.3 million
as of December 31, 2012 and 2011, respectively. The major categories of plan assets as a
percentage of the fair value of total plan assets are as follows:
2011
83%
12
5
100%
2012
83%
12
5
100%
Cash and short-term investments
Property
Marketable equity securities
Cash and short-term investments include liquid investments in Special Deposit Accounts (SDAs),
government securities and mutual funds and UITFs. Marketable equity securities can be sold
through the Philippine Stock Exchange. These include shares of stock of the Parent Company
with a fair value of P
=2.2 million and P
=2.4 million as of December 31, 2012 and 2011, respectively.
Cumulative unrealized fair value gains on the shares amount to P
=0.5 million. The plan assets also
include an investment in a unit in Island Palm Garden Condominium located in Quezon City.
The voting rights over the shares are exercised through the trustee by the retirement committee,
the members of which are directors or officers of the Parent Company.
Amounts for the current and previous four periods are as follows:
2012
Present value of defined benefit
obligation
Fair value of plan assets
Unfunded (surplus) obligation
Experience adjustments on plan
liabilities
Experience adjustments on plan assets
2011
2010
(In Thousands)
2009
P
= 300,184
(142,080)
158,104
P219,656
=
(120,150)
99,506
P165,644
=
(113,945)
51,699
=156,033
P
(81,870)
74,163
(35)
43
(27)
7
(5,469)
2,026
(1,284)
–
2008
P47,564
=
(73,022)
(25,458)
1,900
36
*SGVMG600202*
- 62 -
31. Financial Risk Management Objectives and Policies
The Company’s principal financial instruments comprise of cash and cash equivalents, short-term
investments, corporate promissory notes and bonds, government bonds, quoted and unquoted
shares of stocks, currency forwards, investments in UITFs and loans and borrowings in Philippine
Peso and U.S. dollar currencies. The main purpose of these financial instruments is to finance the
Company’s investments. The Company also has financial assets and liabilities, such as trade and
other receivables and trade and other payables that arise directly from operations.
The main risks arising from the Company’s treasury transactions are credit risk, liquidity risk,
market risk, foreign currency risk, interest rate risk and equity price risk. Careful study, skill,
prudence and due diligence are exercised at all times in the handling of the funds of the Company.
An Investment Committee reviews and approves policies and directions for investments and risks
management. The basic parameters approved by the Investment Committee are:
Investment Objective
Safety of Principal
Tenor
Three year maximum for any security, with average duration
between one and two years
Exposure Limits
a. For banks and fund managers: maximum of 20% of total funds
of the Company per bank or fund
b. For peso investments: minimal corporate exposure except for
registered bonds
c. For foreign currencies: maximum 50% of total portfolio. Limits
on third currencies outside USD are set regularly and reviewed
at least once a year by the Investment Committee
d. For investments in equities whether directly managed or
managed by professional managers: limits are set as approved by
the Investment Committee and based on current market outlook
at the time of review
e. For derivative transactions - limits are set up to 100% of asset
subject to derivative transaction with the objective of neutrality
of gain/loss
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the
other party by failing to discharge an obligation. Due to the Company’s investing and operating
activities, the Company is exposed to the potential credit-related losses that may occur as a result
of an individual, counterparty or issuer being unable or unwilling to honor its contractual
obligations.
In managing credit risk on these financial instruments, the Company transacts only with the
Company’s duly accredited domestic and foreign banks. Investments per financial institution are
subject to a maximum of 20% of the Company’s investible funds. It is the Company’s policy that
investments cannot exceed 10% of the trust or mutual fund’s total assets.
*SGVMG600202*
- 63 A comprehensive credit and business review in coordination with dealers or underwriters is
performed whenever the Company invests in non-rated securities. Furthermore, the Company
monitors the credit quality of corporate and sovereign bonds with reference to credit rating studies
and updates from the major rating agencies. The Company’s exposure to credit risk on its cash
and cash equivalents, investments held for trading, AFS investments, trade and other receivables
and derivative instruments arises from default of the counterparties with maximum exposures
equal to the carrying amounts of the instruments.
2011
2012
(In Thousands)
Loans and receivables:
Cash and cash equivalents
Trade and other receivables
Investments held for trading:
Investments in bonds
Investments in marketable equity securities
Derivative assets
AFS investments:
Quoted
Unquoted - net of accumulated impairment
losses
P
=465,179
871,881
=916,157
P
857,649
491,127
6,601
528
414,525
3,927
–
10,101
20,620
222,305
P
=2,067,722
120,370
=2,333,248
P
There are no significant concentrations of credit risk within the Company.
Credit Quality of Financial Assets, Other than Trade and Other Receivables
The Company uses the following criteria to rate credit quality of its financial assets, other than
trade and other receivables:
Class
Description
High Grade
Investments in instruments that have a recognized foreign
or local third party rating or instruments which carry
guaranty/collateral.
Standard Grade
Investments in instruments of companies that have the
apparent ability to satisfy its obligations in full.
Substandard Grade
Investments in instruments of companies that have an
imminent possibility of foreclosure; those whose
securities have declined materially in value, or those
whose audited financial statements show
impaired/negative net worth.
Cash and cash equivalents and derivative instruments are classified as high grade since these are
deposited in/or transacted with reputable financial institutions which have low probability of
insolvency.
*SGVMG600202*
- 64 The credit quality of investments held for trading and AFS investments as of December 31
follows:
2012
Neither Past Due nor Impaired
High
Standard
Substandard
Grade
Grade
Grade
(In Thousands)
Investments held for trading:
Investments in bonds
Investments in marketable equity
securities
Derivative assets
AFS investments:
Quoted
Unquoted
Total
P
=480,029
P
=11,098
P
=–
P
=–
P
=491,127
–
528
6,601
–
–
–
–
–
6,601
528
–
–
P
=480,557
10,101
222,305
P
=454,693
–
–
P
=–
–
45,517
P
=45,517
10,101
267,822
P
=776,179
Impaired
Total
2011
Neither Past Due nor Impaired
High
Standard
Substandard
Grade
Grade
Grade
(In Thousands)
Investments held for trading:
Investments in bonds
Investments in marketable equity
securities
AFS investments:
Quoted
Unquoted
Impaired
=387,264
P
=27,262
P
=–
P
=–
P
=414,526
P
–
3,927
–
–
3,927
–
–
=387,264
P
20,620
120,370
=172,179
P
–
–
=–
P
–
45,517
=45,517
P
20,620
165,887
=604,960
P
Credit Quality of Trade and Other Receivables
Trade and other receivables are classified as (a) high grade when the receivables are secured or
covered with collaterals; (b) standard grade when the receivables are unsecured but debtors have
good paying habits; or (c) substandard grade when the receivables are unsecured and debtors have
poor paying habits.
The credit quality of trade and other receivables (including installment contract receivables) as of
December 31 are as follows:
2012
Neither Past Due nor Impaired
High Grade Standard Grade
Past Due
or Impaired
Total
(In Thousands)
Trade
Due from related parties
Installment contract receivables
Advances to suppliers and contractors
Accrued interest
Receivable from PHN Retirement
Advances to officers and employees
Others
P
=–
–
–
–
10,696
–
–
–
P
=10,696
P
=697,079
2,913
68,884
56,002
–
8,939
7,343
20,025
P
=861,185
P
=192,205
–
–
–
–
–
1,532
4,037
P
=197,774
P
=889,284
2,913
68,884
56,002
10,696
8,939
8,875
24,062
P
=1,069,655
*SGVMG600202*
- 65 2011
Neither Past Due nor Impaired
High Grade
Standard Grade
Past Due
or Impaired
Total
(In Thousands)
Trade
Due from related parties
Installment contract receivables
Advances to suppliers and contractors
Accrued interest
Receivable from PHN Retirement
Advances to officers and employees
Others
=–
P
–
–
–
11,817
–
–
–
=11,817
P
=624,181
P
72,779
72,617
10,623
–
8,939
6,094
50,599
=845,832
P
=156,561
P
2,874
–
2,826
–
–
–
2,545
=164,806
P
=780,742
P
75,653
72,617
13,449
11,817
8,939
6,094
53,144
=1,022,455
P
As of December 31, 2012 and 2011, the aging analysis of trade and other receivables (including
installment contract receivables) are as follows:
2012
Neither
Past Due nor
Total
Impaired
<30 Days
Past Due but not Impaired
30–60 Days 60–90 Days 90–120 Days
>130 Days
Past
Due and
Impaired
(In Thousands)
Trade
Due from related parties
Installment contract receivables
Advances to suppliers
and contractors
Accrued interest
Receivable from PHN
Retirement
Advances to officers
and employees
Others
P
= 889,284
2,913
68,884
P
= 429,005
2,913
68,884
P
= 105,587
–
–
P
= 35,363
–
–
P
= 35,023
–
–
P
= 26,405
–
–
P
= 65,696
–
–
P
= 192,205
–
–
56,002
10,696
37,077
10,696
2,580
–
2,152
–
1,782
–
2,504
–
9,907
–
–
–
8,939
8,939
–
–
–
–
–
–
8,875
24,062
P
= 1,069,655
4,189
17,936
P
= 579,639
486
103
P
= 108,756
548
10
P
= 38,073
314
51
P
= 37,170
77
21
P
= 29,007
1,729
1,904
P
= 79,236
1,532
4,037
P
= 197,774
>130 Days
Past
Due and
Impaired
2011
Neither
Past Due
Total nor Impaired
<30 Days
Past Due but not Impaired
30–60 Days 60–90 Days 90–120 Days
(In Thousands)
Trade
Due from related parties
Installment contract receivables
Advances to suppliers
and contractors
Accrued interest
Receivable from PHN
Retirement
Advances to officers
and employees
Others
=780,742
P
75,653
72,617
=414,014
P
72,779
72,617
=88,274
P
–
–
=35,125
P
–
–
=15,242
P
–
–
=22,485
P
–
–
=49,041
P
–
–
=156,561
P
2,874
–
13,449
11,817
7,797
11,817
445
–
874
–
457
–
638
–
412
–
2,826
–
8,939
8,939
–
–
–
–
–
–
6,094
53,144
=1,022,455
P
6,094
46,964
=641,021
P
–
345
=89,064
P
–
345
=36,344
P
–
345
=16,044
P
–
–
=23,123
P
–
2,600
=52,053
P
–
2,545
=164,806
P
Impaired financial instruments comprise of trade receivables from customers, related parties and
other receivables. The past due but not impaired trade and receivables are expected to be collected
the following year.
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to settle or meet its obligations on time
or at a reasonable price. The Company manages liquidity risks by restricting investments and
continuously monitoring weekly and monthly cash flows as well as updates of annual plans.
*SGVMG600202*
- 66 The maturities of the financial liabilities are determined based on the Company’s projected
payments and contractual maturities. The average duration adheres to guidelines provided by the
Investment Committee. It is the Company’s policy to restrict investment principally to publicly
traded securities with a history of marketability and by dealing with only large reputable domestic
and international institutions.
The tables below show the maturity profile of the Company’s financial assets used for liquidity
purposes based on contractual undiscounted cash flows as of December 31:
2012
Within
1 Year
Financial Assets
Loans and receivables Cash and cash equivalents
Financial assets at FVPL:
Investments in bonds
Investments in marketable
equity securities
Derivative assets
AFS investments Quoted
1–2 Years
2–3 Years
3–5 Years
(In Thousands)
More than
5 Years
Total
P
=465,179
P
=–
P
=–
P
=–
P
=–
P
=465,179
7,581
27,632
–
21,893
434,021
491,127
6,601
528
–
–
–
–
–
–
–
–
6,601
528
10,101
P
=489,990
–
P
=27,632
–
P
=–
–
P
=21,893
–
P
=434,021
10,101
P
=973,536
More than
5 Years
Total
2011
Within
1 Year
Financial Assets
Loans and receivables Cash and cash equivalents
Financial assets at FVPL:
Investments in bonds
Investments in marketable
equity securities
AFS investments Quoted
1–2 Years
2–3 Years
3–5 Years
(In Thousands)
=916,157
P
=–
P
=–
P
=–
P
=–
P
=916,157
P
24,066
7,845
30,743
29,329
322,542
414,525
3,927
–
–
–
–
3,927
20,620
=964,770
P
–
=7,845
P
–
=30,743
P
–
=29,329
P
–
=322,542
P
20,620
=1,355,229
P
The table below summarizes the maturity profile of the Company’s financial liabilities based on
contractual undiscounted payments as of December 31:
2012
Within
1 Year
1–2 Years
2–3 Years
3–5 Years
More than
5 Years
Total
P
=–
–
–
–
–
161,591
P
=161,591
P
=373,676
536,683
560,649
17,655
77,334
545,016
P
=2,111,013
(In Thousands)
Financial Liabilities
Other financial liabilities:
Notes payable
Trade and other payables
Trust receipts payable
Due to related parties
Long-term loan payable*
Long-term debt*
P
=373,676
536,683
560,649
17,655
26,852
98,705
P
=1,614,220
P
=–
–
–
–
25,773
92,192
P
=117,965
P
=–
–
–
–
24,709
79,374
P
=104,083
P
=–
–
–
–
–
113,154
P
=113,154
* Including current and noncurrent portions.
*SGVMG600202*
- 67 2011 (As restated - Note 6)
Within
1 Year
1–2 Years
2–3 Years
3–5 Years
More than
5 Years
Total
=–
P
–
–
–
–
23,347
=23,347
P
=459,115
P
402,495
104,240
24,496
103,625
823,338
=1,917,309
P
(In Thousands)
Financial Liabilities
Other financial liabilities:
Notes payable
Trade and other payables
Trust receipts payable
Due to related parties
Long-term loan payable*
Long-term debt*
=459,115
P
402,495
104,240
24,496
24,713
197,122
=1,212,181
P
=–
P
–
–
–
26,304
477,447
=503,751
P
=–
P
–
–
–
26,304
68,985
=95,289
P
=–
P
–
–
–
26,304
56,437
=82,741
P
* Including current and noncurrent portions.
Market Risk
Market risks are managed by constant review of global and domestic economic and financial
environments as well as regular discussions with banks’ economists/strategy officers to get
multiple perspectives on interest rate trends/forecasts. Regular comparison of the portfolio’s
marked-to-market values and yields with defined benchmarks are also made.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates. The Company’s financial assets that
are exposed to foreign currency risk are foreign currency denominated cash and cash equivalents,
investment in bonds and investments in UITFs.
Foreign exchange risks on the U.S. dollar and other foreign currencies are managed through
constant monitoring of the political and economic environment. Returns are also calibrated on a
per currency basis to account for the perceived risks with higher returns expected from weaker
currencies. The Company also enters into currency forward contracts to manage its foreign
currency risk.
The following table shows the U.S. foreign currency-denominated financial assets and financial
liabilities and their peso equivalents as of December 31:
2012
Peso
Foreign
Currency
Equivalent
2011
Foreign
Peso
Currency
Equivalent
(In Thousands)
Financial assets:
Cash and cash equivalents
Receivables
Investments in bonds
Financial liabilities:
Trust receipts payable
Long-term loan payable
US$514
339
1,664
US$2,517
P
=21,100
13,916
68,307
P
=103,323
US$3,720
151
2,284
US$6,155
=163,085
P
6,620
100,131
=269,836
P
US$935
1,728
US$2,663
P
=38,382
70,934
P
=109,316
US$2,366
2,304
US$4,670
=103,725
P
101,007
=204,732
P
In translating foreign currency-denominated financial assets into peso amounts, the exchange rate
used was P
=41.05 to US$1.00 and P
=43.84 to US$1.00 as of December 31, 2012 and 2011,
respectively.
*SGVMG600202*
- 68 The following table demonstrates the sensitivity to a reasonably possible change in the exchange
rate, with all other variables held constant, of the Company’s profit before tax (due to the changes
in the fair value of monetary assets) as of December 31, 2012 and 2011. There is no impact on the
Company's equity other than those already affecting the profit or loss. The effect on profit before
tax already includes the impact of derivatives outstanding as of December 31, 2012 and 2011.
2012
Increase (Decrease)
in Peso-Dollar Exchange Rate
Effect on
Profit Before Tax
(In Millions)
PHN
P
=1.00
(1.00)
P
=0.017
(0.017)
UGC
1.00
(1.00)
0.927
(0.927)
Fuld Philippines
1.00
(1.00)
0.397
(0.397)
2011
Increase (Decrease)
in Peso-Dollar Exchange Rate
Effect on
Profit Before Tax
(In Millions)
PHN
P1.00
=
(1.00)
P1.5
=
(1.5)
UGC
1.00
(1.00)
2.4
(2.4)
Fuld Philippines
1.00
(1.00)
0.1
(0.1)
Interest Rate Risk
a. Cash Flow Interest Rate Risk
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
The Company is exposed to cash flow interest rate risk due to AU’s variable rate loan from
China Bank as at December 31, 2010 (see Note 19). On August 5, 2011, the interest on AU’s
loan is fixed based on the 5-year prevailing PDST-F plus a spread of 1.50% payable quarterly.
The following table demonstrates the effect of changes in market interest rates, on the Company’s
profit before income tax, based on the Company’s expectation, with all other variables held
constant as of December 31, 2010. There is no other significant impact on the Company’s
equity other than those already affecting the profit or loss.
2010
Increase/Decrease
in Basis Points
Effect on Profit
Before Tax
(In Thousands)
Loan payable to China Bank
50
(50)
(P
=274)
274
*SGVMG600202*
- 69 b. Price Interest Rate Risk
Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate
due to changes in market interest rates. The Company accounts for its debt investments at fair
value. Thus, changes in benchmark interest rate will cause changes in the fair value of quoted
debt instruments.
The following tables set out the carrying amounts, by maturity, of the Company’s financial
instruments that are exposed to interest rate risk as of December 31:
2012
Fixed Rate
Placements (PHP)
Placements (AUD)
Investments in bonds (PHP)
Investments in bonds (US$)
Interest
Rates
Within 1
Year
1.75%–4.69%
2.22%
5.875%-11.75%
5.0%–10.375%
272,546
30,141
7,582
–
Interest
Rates
Within 1
Year
3.60%–3.90%
0.69%–6.47%
6.37%–13.00%
6.25%–10.37%
3.00%–6.62%
742,320
162,459
24,066
–
168,238
3–5 Years
More than
5 Years
Total
–
–
–
–
–
–
–
21,893
–
–
415,258
18,762
272,546
30,141
422,840
68,287
1–2 Years 2–3 Years
(In Thousands)
3–5 Years
More than
5 Years
Total
–
–
–
29,329
–
–
–
282,469
40,073
–
742,320
162,459
314,380
100,145
168,238
1–2 Years 2–3 Years
(In Thousands)
–
–
–
27,632
2011
Fixed Rate
Placements (PHP)
Placements (US$)
Investments in bonds (PHP)
Investments in bonds (US$)
Advances
–
–
7,845
–
–
–
–
–
30,743
–
Interest on financial instruments classified as fixed rate was fixed until the maturity of the
instrument.
Other financial assets at FVPL are noninterest-bearing investments and are therefore not subject to
interest rate volatility.
The table below set forth the estimated change in the Company’s income before tax due to a
reasonably possible change in the market prices of quoted bonds and interest rates for peso
placements and trust receipts classified under financial assets at FVPL and short term deposits
classified under loans and receivables, brought about by movement in the interest rate as of
December 31, 2012 and 2011. There is no impact on the Company’s equity other than those
already affecting the profit or loss.
2012
Increase/(Decrease)
in Basis Points
PHN – peso placement
– dollar placement
– peso bonds
– dollar bonds
50
(50)
25
(25)
50
(50)
20
(20)
Effect on
Profit Before Tax
(In Thousands)
P
=219
(219)
35
(35)
(8,192)
8,192
114
(114)
(Forward)
*SGVMG600202*
- 70 2012
Increase/(Decrease)
in Basis Points
API, PSHC, PEN – peso
placement
UGC – trust receipts
Effect on
Profit Before Tax
(In Thousands)
50
(50)
50
(50)
P
=1,285
(1,285)
115
(115)
2011
Increase/(Decrease)
in Basis Points
PHN – peso placement
– dollar placement
– peso bonds
– dollar bonds
UGC – trust receipts
175
(175)
50
(50)
50
(50)
100
(100)
Effect on
Profit Before Tax
(In Thousands)
=1,015
P
(1,015)
1,506
(1,506)
(7,758)
7,758
851
(851)
25
(25)
(37)
37
Peso placements are subject to cash flow interest rate risk while peso and dollar bonds are subject
to fair value interest rate risk.
Equity Price Risk
Equity price risk is the risk that the fair values of equities decrease as a result of changes in the
levels of the equity indices and the values of individual stocks. The Company’s exposure to
equity price risk relates primarily to its equity investments listed in the PSE classified under
investments held for trading.
The Company’s policy is to maintain the risk to an acceptable level. Movement of share price is
monitored regularly to determine impact on the Company’s financial position.
The following tables demonstrate the effect on the Company’s profit before income tax (as a
result of a change in the fair value of equity instruments held as investment held for trading) due
to a reasonably possible change in equity indices, based on the Company’s expectation, with all
other variables held constant as of December 31, 2012 and 2011. There is no other significant
impact on the Company’s equity other than those already affecting the profit or loss.
2012
Increase/Decrease
in Stock Exchange Index
Effect on
Profit Before Tax
(In Thousands)
PHN
+15%
-15%
P
=422
(422)
*SGVMG600202*
- 71 2012
Increase/Decrease
in Stock Exchange Index
Effect on
Profit Before Tax
(In Thousands)
UGC
+15%
-15%
P
=167
(167)
API
+15%
-15%
293
(293)
2011
Increase/Decrease
in Stock Exchange Index
Effect on
Profit Before Tax
(In Thousands)
PHN
+16.2%
-16.2%
P439
=
(439)
UGC
+20.2%
-20.2%
218
(218)
Capital Management
The primary objective of the Company’s capital management is to ensure that the Company
maintains a healthy capital structure to maintain strong credit rating and maximize shareholder
value.
The Company closely monitors and manages its debt-to-equity ratio, which it defines as total
liabilities divided by total equity. Capital includes all the accounts appearing in the “Equity
attributable to equity holders of the parent” and “Equity attributable to noncontrolling interest” in
the consolidated statements of financial position.
To ensure that there are sufficient funds to settle its liabilities, the Company’s policy is to keep
debt-to-equity ratio below 1:1. The Company’s consolidated debt-to-equity ratio as of
December 31, 2012 and 2011 are as follows:
2011
2012
(In Thousands)
Total liabilities
Total equity
Debt-to-equity ratio
P
=2,659,483
6,985,834
0.38:1
=2,503,334
P
7,177,576
0.35:1
*SGVMG600202*
- 72 -
32. Financial Instruments
Fair Value
Set out below is a comparison by category of carrying amounts and fair values of all of the
Company’s financial instruments that are carried in the consolidated statements of financial
position as at December 31:
Carrying Amount
2011
2012
Fair Value
2012
2011
(In Thousands)
Financial Assets
Loans and receivables:
Cash and cash equivalents
Trade and other receivables
Financial assets at FVPL:
Investments held for trading:
Investments in bonds
Investments in marketable
equity securities
Derivative asset
AFS investments:
Quoted
Unquoted
P
=465,179
871,881
1,337,060
=916,157
P
857,649
1,773,806
P
=465,179
871,881
1,337,060
=916,157
P
857,649
1,773,806
491,127
414,525
491,127
414,525
6,601
528
498,256
3,927
–
418,452
6,601
528
498,256
3,927
–
418,452
10,101
222,305
232,406
P
=2,067,722
20,620
120,370
140,990
=2,333,248
P
10,101
222,305
232,406
P
=2,067,722
20,620
120,370
140,990
=2,333,248
P
Carrying Amount
2011 (As restated Note 6)
2012
Fair Value
2011 (As restated Note 6)
2012
(In Thousands)
Financial Liabilities
Financial liability at FVPL Derivative liability
Other financial liabilities:
Notes payable
Trade and other payables
Trust receipts payable
Due to related parties
Long-term loan payable*
Long-term debt*
P
=–
=2,281
P
P
=–
=2,281
P
373,676
536,685
554,797
17,655
70,935
412,186
1,965,934
P
=1,965,934
455,193
402,495
103,735
24,496
101,007
740,722
1,827,648
=1,829,929
P
373,676
536,685
554,797
17,655
78,330
364,005
1,925,148
P
=1,925,148
455,193
402,495
103,735
24,496
110,460
774,019
1,870,398
=1,872,679
P
*Including current and noncurrent portion.
The following methods and assumptions are used to estimate the fair value of each class of
financial instruments:
Cash and Cash Equivalents, Short-term Investments, Trade and Other Receivables, Notes
Payable, Trade and Other Payables, Trust Receipts Payable and Due to Related Parties. The
carrying amounts approximate fair values due to the relatively short-term maturities of the
financial instruments.
*SGVMG600202*
- 73 Investments Held for Trading and AFS Investments. Quoted market prices have been used to
determine the fair value of financial assets at FVPL and listed AFS investments. Unquoted AFS
investments are measured at cost less accumulated impairment loss since the fair value is not
readily determinable due to the unpredictable nature of future cash flows and the lack of suitable
methods of arriving at a reliable fair value. The Company does not intend to dispose the unquoted
AFS in the near future.
Long-term Loan Payable and Long-term Debt. The fair value of interest-bearing fixed-rate loans
is based on the discounted value of expected future cash flows using the applicable rates for
similar types of loans. Discount rates used range from 3% to 5% in 2012 and 2.7% to 6.0% in
2011.
Derivative Instruments. The fair value of freestanding currency forward contracts is calculated by
reference to current forward exchange rates for contracts with similar maturity profiles.
Derivative Instruments
Freestanding Derivatives. The Company’s derivative financial instruments are accounted for as
financial instruments at FVPL.
The Company enters into sell US$-buy PHP
= non-deliverable foreign currency forward contracts to
manage the foreign currency risk arising from its US$ denominated assets. These derivatives are
transactions not accounted for as accounting hedges.
The Company has outstanding currency forward contracts with an aggregate notional amount of
US$4.3 million and US$6.3 million as of December 31, 2012 and 2011, respectively. The
weighted average contracted forward rate is P
=41.12 to US$1.00 and P
=43.49 to US$1.00 as of
December 31, 2012 and 2011, respectively. The currency forward contracts outstanding as of
December 31, 2012 will mature up to April 2013. The net changes in fair values of these
outstanding currency forward contracts amounted to P
=0.5 million and negative P
=2.3 million as of
December 31, 2012 and 2011, respectively.
The net changes in fair value of these derivative assets (liabilities) are as follows:
2011
2012
(In Thousands)
Balance at beginning of year
Net change in fair value during the year
Fair value of settled contracts
Balance at end of year
(P
=2,281)
12,270
(9,461)
P
=528
=4,442
P
7,121
(13,844)
(P
=2,281)
Embedded Derivatives. In 2009, embedded foreign currency derivatives were bifurcated from
certain of the Company’s purchase contracts, which are denominated in a currency that is neither
the functional currency of a party to the contract nor the routine currency for the transaction.
The Company’s embedded derivatives have an aggregate notional amount of US$7.2 million as of
December 31, 2009. The weighted average contracted forward rate is P
=42.72 to US$1.00 as of
December 31, 2009. The net fair values of the embedded derivatives amounted to P
=2.8 million
gain as of December 31, 2009. These embedded derivatives matured in 2010. There are no
embedded derivatives as of December 31, 2012 and 2011.
*SGVMG600202*
- 74 The net changes in fair values of derivatives are presented as “Net gains on derivatives” in the
consolidated statements of income.
Fair Value Hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that
are not based on observable market data
Financial assets measured at fair value are as follows:
2012
Financial assets at FVPL:
Investments held for trading:
Investments in bonds
Investments in marketable equity securities
AFS investments Quoted
Level 3
P
=491,127
6,601
P
=491,127
6,601
P
=–
–
P
=–
–
10,101
P
=507,829
10,101
P
=507,829
–
P
=–
–
P
=–
Level 1
Level 2
(In Thousands)
Level 3
2011
Financial assets at FVPL:
Investments held for trading:
Investments in bonds
Investments in marketable equity securities
AFS investments Quoted
Level 1
Level 2
(In Thousands)
=414,525
P
3,927
=414,525
P
3,927
=–
P
–
=–
P
–
20,620
=439,072
P
20,620
=439,072
P
–
=–
P
–
=–
P
Derivative assets and liabilities are classified under Level 1 fair value hierarchy.
During the years ended December 31, 2012 and 2011, 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.
*SGVMG600202*
- 75 -
33. Commitments and Contingencies
a. Unused Credit Lines
PHN has an unused credit line amounting to P
=500.0 million as at December 31, 2012.
UGC has the following unused approved credit lines with local banks and financial
institutions as of December 31, 2012:
Nature
Amount
(In Thousands)
Letters of credit/trust receipts
Bills purchase line
Invoice financing
Settlement risk
Forward contract
=332,935
P
158,995
100,000
350,000
65,000
b. Commitments Under Operating Lease Agreements
Lessee
UGC entered into lease agreements covering its warehouse premises which have terms
ranging from one to two years, renewable at the option of UGC under certain terms and
conditions.
Future minimum rental payable as of December 31, 2012 are as follows:
Amount
(In Thousands)
2013
2014
=17,498
P
16,124
c. Property Agreement
On March 2, 2006, API entered into an agreement with Paramount Property Management
Company for services to manage, administer, operate and maintain the building for a monthly
rate of P
=0.07 million exclusive of VAT. In consideration, API shall pay a pre-agreed
management fee. Such fee is subject to an annual escalation of 10%. The agreement shall be
for a period of five years up to March 2, 2011 and was not renewed as a result of disposal of
the property in 2010.
d. Others
There are contingent liabilities arising from lawsuits primarily involving collection cases filed
by third parties and for tax assessments occurring in the ordinary course of business. On the
basis of information furnished by the Company’s legal counsel, management believes that
none of these contingencies will materially affect the Company’s financial position and results
of operations.
*SGVMG600202*
- 76 -
34. EPS Computation
Basic EPS is computed as follows:
2012
2011
2010
(In Thousands)
(a) Net income (loss) attributable to equity
holders of the parent
(P
=36,010)
=81,018
P
=475,846
P
(b) Weighted average number of common
shares outstanding
258,322
257,737
257,737
Basic EPS attributable to equity holders of the
parent (a/b)
(P
=0.14)
=0.31
P
=1.85
P
2011
2010
Diluted EPS is computed as follows:
2012
(In Thousands)
(a) Net income (loss) attributable to equity
holders of the parent
(P
=36,010)
=81,018
P
=475,846
P
(b) Weighted average number of common
shares outstanding adjusted for the
effect of exercise of shares from
Stock Purchase Plan
259,095
257,737
257,737
Diluted EPS attributable to equity holders
of the parent (a/b)
(P
=0.14)
=0.31
P
=1.85
P
2011
2010
2012
(In Thousands)
Weighted average number of common shares
for basic earnings per share
Effect of exercise of shares from Stock
Purchase Plan
Weighted average number of common shares
outstanding adjusted for the effect of
exercise of shares from Stock Purchase
Plan
258,322
257,737
257,737
773
–
–
259,095
257,737
257,737
The assumed exercise of shares from the Stock Purchase Plan would result in additional 1,545,894
common shares in 2012 and nil in 2011 and 2010. The estimated number of shares to be issued is
based on the closing price of the Company’s share as of December 31, 2012.
35. Segment Information
For management purposes, the Company’s operating businesses are organized and managed
separately according to business activities and has five reportable operating segments as follows:
§
§
Investment holdings – The Parent Company and PSHC are engaged in investment holding
activities of shares of stocks and other financial instruments.
Property development – API leases its real and personal properties.
*SGVMG600202*
- 77 §
§
§
Steel – UGC manufactures and trades iron and steel products.
Educational services – AU, COC, UPANG and UI offer graduate, tertiary, secondary and
elementary education services.
BPO – OAL and Toon City are engaged in film, video, television and animation services.
Fuld U.S. and Fuld Philippines are engaged in intelligence research.
The Company has no geographical segment for segment reporting format as the Company’s risks
and rates of return are substantially in the same economic and political environment, with the
companies incorporated and operated in the Philippines.
Management monitors the operating results of its business units separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is
evaluated based on operating profit or loss and is measured consistently with operating profit or
loss in the consolidated financial statements. However, Company financing (including finance
costs and finance income) and income taxes are managed on a group basis and are not allocated to
operating segments.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to
transaction with third parties.
*SGVMG600202*
- 78 Segment Information
Financial information on the operating segments are summarized as follows:
Investment
Holdings
Property
Development
Steel
Educational
Services
(In Thousands)
BPO
P
=33,410
311,242
P
=344,652
P
=649
15,088
P
=15,737
P
=2,911,208
1,437
P
=2,912,645
P
=906,638
735
P
=907,373
P
=551,658
18
P
=551,676
P
=–
(195,450)
(P
=195,450)
(P
=320,521)
311,242
–
(19,824)
(9,170)
–
(P
=38,273)
(P
=100,129)
15,088
(2,325)
–
–
–
(P
=87,366)
P
=142,833
736
–
(23,758)
(14,743)
(1,114)
P
=103,954
(P
=393,452)
18
3,508
(10,389)
5,826
–
(P
=394,489)
P
=327,931
(195,452)
117,760
–
4,464
55,161
P
=309,864
Eliminations
Total
Operations
Year Ended December 31, 2012
Revenues
Segment revenue
Investment income
Total revenues
Results
Segment results
Investment income
Equity in net earnings of an associate
Interest expense and financing charges
Benefit from (provision for) income tax
Share of non-controlling interest
Net income attributable to equity holders of parent
P
=145,515
1,437
–
(47,332)
(29,320)
–
P
=70,300
P
=4,403,563
133,070
P
=4,536,633
(P
=197,823)
133,069
118,943
(101,303)
(42,943)
54,047
(P
=36,010)
As at December 31, 2012
Assets and Liabilities
Segment assets
Investment in associates
Deferred tax assets
Total assets
Segment liabilities
Income and other taxes payable
Deferred tax liabilities
Total liabilities
Other Segment Information
Capital expenditures
Depreciation and amortization
Provision for impairment loss on investment in a
subsidiary/goodwill
Provision for unrecoverable input value-added tax
P
=1,556,278
4,778,588
–
P
=6,334,866
P
=403,088
–
–
P
=403,088
P
=1,949,318
10,288
31,284
P
=1,990,890
P
=2,313,948
–
26,634
P
=2,340,582
P
=226,860
1,939
35,146
P
=263,945
P
=762,258
(2,442,479)
(7,833)
(P
=1,688,054)
P
=7,211,750
2,348,336
85,231
P
=9,645,317
P
=438,542
1,935
5,852
P
=446,329
P
=484
–
7,281
P
=7,765
P
=1,017,052
22,943
47,317
P
=1,087,312
P
=778,503
16,329
140,104
P
=934,936
P
=482,820
589
83
P
=483,492
(P
=413,445)
–
113,094
(P
=300,351)
P
=2,303,956
41,796
313,731
P
=2,659,483
P
=14,071
11,529
P
=–
667
P
=24,906
98,824
P
=149,375
72,410
P
=30,929
20,342
P
=–
14,881
59,779
1,542
–
–
–
–
–
–
212,300
–
(59,779)
–
P
=219,281
218,653
212,300
1,542
*SGVMG600202*
- 79 -
Investment
Holdings
Property
Development
Steel
Educational
Services
(In Thousands)
BPO
P33,585
=
508,173
=541,758
P
=10,695
P
14,867
=25,562
P
=2,640,861
P
2,571
=2,643,432
P
=881,333
P
2,435
=883,768
P
=284,696
P
39
=284,735
P
=–
P
(425,750)
(P
=425,750)
(P
=346,987)
508,173
–
(19,620)
(2,821)
–
=138,745
P
(P
=35,539)
14,867
25,071
–
(2,722)
–
=1,677
P
=168,647
P
2,435
–
(29,052)
(9,984)
(716)
=131,330
P
(P
=103,272)
39
1,556
(10,073)
(2,371)
1,947
(P
=112,174)
=90,267
P
(425,750)
111,029
–
15,671
22,278
(P
=186,505)
Eliminations
Total
Operations
Year Ended December 31, 2011
Revenues
Segment revenue
Investment income
Total revenues
Results
Segment results
Investment income
Equity in net earnings of an associate
Interest expense and financing charges
Benefit from (provision for) income tax
Share of non-controlling interest
Net income attributable to equity holders of parent
=198,804
P
2,571
–
(49,636)
(43,794)
–
=107,945
P
=3,851,170
P
102,335
=3,953,505
P
(P
=28,080)
102,335
137,656
(108,381)
(46,021)
23,509
=81,018
P
As at December 31, 2011 (As restated - Note 6)
Assets and Liabilities
Segment assets
Investment in associates
Deferred tax assets
Total assets
Segment liabilities
Income and other taxes payable
Deferred tax liabilities
Total liabilities
Other Segment Information
Capital expenditures
Depreciation and amortization
Provision for impairment loss on investment in a
subsidiary/goodwill
Provision for unrecoverable input value-added tax
=2,095,305
P
4,319,127
–
=6,414,432
P
=525,506
P
–
–
=525,506
P
=1,928,240
P
10,288
19,904
=1,958,432
P
=2,209,903
P
–
2,879
=2,212,782
P
=460,844
P
2,159
22,283
=485,286
P
=576,722
P
(2,496,429)
4,179
(P
=1,915,528)
=7,796,520
P
1,835,145
49,245
=9,680,910
P
=419,476
P
2,914
–
=422,390
P
=977
P
120
7,281
=8,378
P
=955,196
P
25,739
52,759
=1,033,694
P
=748,466
P
12,870
119,793
=881,129
P
=361,363
P
3,246
83
=364,692
P
(P
=338,028)
–
131,079
(P
=206,949)
=2,147,450
P
44,889
310,995
=2,503,334
P
=18,026
P
11,748
=10,000
P
772
=91,710
P
77,975
=181,516
P
73,088
=18,300
P
7,972
(P
=3,762)
46,524
=315,790
P
218,079
274,172
7,372
–
–
–
–
–
–
166,369
–
(274,172)
–
166,369
7,372
*SGVMG600202*
- 80 -
Investment
Holdings
Property
Development
Steel
Educational
Services
(In Thousands)
BPO
Revenues
Segment revenue
Investment income
Total revenues
P28,839
=
307,107
=335,946
P
=44,781
P
2,270
=47,051
P
=2,660,613
P
742
=2,661,355
P
=895,305
P
1,712
=897,017
P
=60,127
P
28
=60,155
P
=–
P
(227,792)
(P
=227,792)
Results
Segment results
Investment income
Equity in net earnings of an associate
Interest expense and financing charges
Benefit from (provision for) income tax
Share of non-controlling interest
Net income attributable to equity holders of parent
=234,627
P
307,107
–
(24,212)
(6,152)
–
=511,370
P
=351,846
P
2,270
47,501
(717)
(83,546)
–
=317,354
P
=174,918
P
1,712
–
(31,287)
(19,545)
(412)
=125,386
P
(P
=71,621)
28
–
(5,840)
(907)
554
(P
=77,786)
(P
=285,513)
(227,792)
11,890
–
15,886
(164,299)
(P
=649,828)
Eliminations
Total
Operations
Year Ended December 31, 2010
=372,536
P
742
–
(51,365)
(72,563)
–
=249,350
P
=3,689,665
P
84,067
=3,773,732
P
=776,793
P
84,067
59,391
(113,421)
(166,827)
(164,157)
=475,846
P
As at December 31, 2010
Assets and Liabilities
Segment assets
Investment in associates
Deferred tax assets
Total assets
Segment liabilities
Income and other taxes payable
Deferred tax liabilities
Total liabilities
Other Segment Information
Capital expenditures
Depreciation and amortization
Reversal of impairment loss on investment in a subsidiary
Provision for (reversal of) unrecoverable input value-added
tax
=2,752,849
P
3,885,950
–
=6,638,799
P
=763,198
P
–
36,407
=799,605
P
=2,027,099
P
10,288
–
=2,037,387
P
=2,093,216
P
–
1,963
=2,095,179
P
=452,936
P
–
1,672
=454,608
P
=198,271
P
(2,531,554)
4,419
(P
=2,328,864)
=8,287,569
P
1,364,684
44,461
=9,696,714
P
=443,312
P
1,366
–
=444,678
P
=11,076
P
35,794
91,352
=138,222
P
=886,565
P
37,122
49,902
=973,589
P
=688,544
P
9,081
112,481
=810,106
P
=125,744
P
462
923
=127,129
P
(P
=228,924)
(36)
131,260
(P
=97,700)
=1,926,317
P
83,789
385,918
=2,396,024
P
P1,173
=
12,456
346,282
=–
P
26,686
–
=63,725
P
72,707
–
=153,652
P
73,112
–
=3,652
P
6,896
–
=–
P
46,523
(346,282)
=222,202
P
238,380
–
3,891
–
–
–
(52,177)
–
(48,286)
*SGVMG600202*
- 81 -
36. Events after the Reporting Period
On March 6, 2013, the Parent Company’s BOD declared a cash dividend amounting to
=103.2 million equivalent to P
P
=0.40 a share to all common shareholders of record as of
March 22, 2013, which is payable on April 17, 2013.
37. Note to Consolidated Statement of Cash Flows
In 2012, the Company has a noncash investing activity pertaining to acquisition of investment
property amounting to P
=25.2 million and noncash financing activity pertaining to issuance of
shares of stock amounting to P
=12.4 million.
*SGVMG600202*
,,
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SEC Accreditation No. 0012-FR-3 (Group A),
November 15,2012, valid until November 16,2O15
INDEPEI{DENT AUDITORS' REPORT
ON SI]PPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
PHINMA Corporation
l2th Floor, PHINMA Plaza
39 Plaza Drive, Rockwell Center
Makati City
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of PHINMA Corporation and Subsidiaries as at December 31,2012 and 2011 and for each
of the three years in the period ended December 31,2012, and have issued our report thereon dated
March 6,2013. Our audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the lndex to the Consolidated Financial
Statements and Supplementary Schedules are the responsibility of the Company's management.
These schedules are presented for purposes of complying with Securities Regulation Code Rule 68, As
Amended (2011) and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state, in all material respects, the information required to be set forth therein in relation
to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
1ar/,^;"/ I lrrrCatherine E.
Partner
Lopez I D
CPA Certificate No. 86447
SEC Accreditation No. 0468-AR-2 (Group A),
February 14,2013, valid until February 13,2016
Tax Identification No. 102-085-895
BIR Accreditation No. 08-00 1 998-65 -2012,
April I1,2012, valid until April 10, 2015
PTRNo. 3669691, January 2,2013, Makati City
March 6,2013
ililililtil
Iil
ilfitil
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ililtil ilil iltlI tffi illl il ll]
A member firm ol Emst & Young Global Limitod
PHINMA CORPORATION AND SUBSIDIARIES
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
DECEMBER 31, 2012
Annex 68-E
A. Financial Assets
Attached
B. Amounts Receivable from Directors, Officers, Employees Related Parties
and Principal Stockholders (Other than Related Parties)
Not applicable
C. Amounts Receivable from Related parties which are eliminated during the
consolidation of financial statements
Attached
D. Intangible Assets - Other Assets
Attached
E. Long-term Debt
Attached
F. Indebtedness to Related Parties (Long-term Loans from Related
Companies)
Not applicable
G. Guarantees of Securities of Other Issuers
Not applicable
H. Capital Stock
Attached
Additional Components
i) Reconciliation of Retained Earnings Available for Dividend Declaration
Attached
ii) List of Philippine Financial Reporting Standards Effective as at
December 31, 2012
Attached
iii) Map of Relationships of the Companies within the Group
Attached
PHINMA CORPORATION
Schedule A. FINANCIAL ASSETS
December 31, 2012
Number of Shares
or Principal Amount of
Bonds and Notes
Name of Issuing Entity and Association of Each Issue
Investment in Fixed Treasury Notes (FXTNs)
First Metro Investment Corporation
International Bank
Rizal Commercial Banking Corporation
China Banking Corporation
BDO Unibank, Inc.
Investment in Bonds in US $
Deutsche Bank (Indon 14)
ING Bank ( Indon 14)
Metropolitan Bank & Trust Co. (Firpac 17)
P
$
Investment in Unit Investment Trust Fund and Money
Market Fund (UITF & MMF)
BDO Unibank, Inc. (Peso MMF)
Bank of the Philippine Islands (Odyssey bond fund)
Metropolitan Bank & Trust Co. (peak earner dollar bond fund)
Investment in Unit Investment Trust Fund and Money
Market Fund (UITF & MMF) -in US $
Bank of the Philippine Island (Odyssey dollar bond fund)
Marketable Equity Securities
Holcim Phil.
Universal Robina Corp.
Aboitiz Equity Ventures
First Phil. Holdings Corp.
Globe Telecom Inc.
Filinvest Land Inc.
Metro Pacific Corp.
Banco de Oro Universal Bank
First Gen Corp
BPI
DMCI
MBTC
Aboitiz Power
VLL Public Offer
Atlas Consolidated Mining & Dev't Co
Security Bank Corporation
Robinson's Land
Swift Foods, Inc.
East West Bank
D&L Industries, Inc.
Trans-Asia Oil & Energy Development Corp.
Available for sale investments
Qouted:
First Philippine Holdings Corp. - Preferred
Unqouted:
AB Capital & Investment Corp.
Asian Eye Institute, Inc.
Beacon Property Ventures, Inc.
Manila Cordage Company
Coral Way City Hotel Corp.- Preferred
Club shares
Amount
Shown in the
Balance
Sheet
80,835,811 P
3,390,575
54,086,011
230,640,944
4,000,000
372,953,341
86,619,500 P
3,516,028
62,900,863
265,737,390
4,065,600
422,839,381
853,816
495,489
150,000
1,499,305
38,583,839
22,671,617
7,031,865
68,287,322
Value based on
market quotation
at end of
reporting
period
Income
received and
accrued
Php86,619,499.68
3,516,028
62,900,863
265,737,390
4,065,600
422,839,381
43,092,000
38,583,839
22,671,617
7,031,865
68,287,322
8,153,000
in shares
74,168
645,435
6,151,605
106,232,758
155,911,293
10,401,817
272,545,868
106,232,758
155,911,293
10,401,817
272,545,868
14,207,000
29,547
29,547
30,141,169
30,141,169
30,141,169
30,141,169
4,719,000
3
2,920
3,000
4,500
190
4,000
10,600
1,873
8,000
1,854
2,000
78
17,000
16,000
8,500
1,473
14,700
219
4,000
80,000
2,643,800
41
242,360
158,700
402,525
207,480
5,960
47,170
136,261
178,400
174,276
107,900
7,948
626,450
77,600
158,950
229,788
305,025
276
116,000
351,200
3,066,808
6,601,117
41
242,360
158,700
402,525
207,480
5,960
47,170
136,261
178,400
174,276
107,900
7,948
626,450
77,600
158,950
229,788
305,025
276
116,000
351,200
3,066,808
6,601,117
1,638,159
97,500
10,101,000
10,101,000
850,502
220,758
50,000
45,000,000
18,136
6,625,000
various
101,789,832
1,837,075
46,328,440
5,612,548
66,250,000
486,500
232,405,395
101,789,832
1,837,075
46,328,440
5,612,548
66,250,000
486,500
232,405,395
385,957
1,236,459
1,032,820,252
1,032,820,252
73,045,618
Schedule B.
Amounts Receivable from Directors, Officers, Employees , Related Parties and Principal Stockholders (Other than Related Parties)
Deductions
Balance at
Beginning
of Period
Name and Designation of Debtor
Additions
P
P
Amount
Collected
P
-
P
Amount
Written-Off
P
-
P
Current
P
-
P
Non Current
P
-
P
Balance
at End
of Period
P
-
P
P
-
P
-
-
Schedule C.
Accounts Receivable from Related parties which are eliminated during the consolidation of financial statements
Deductions
Balance at
Beginning
of Period
Name and Designation of Debtor
Pamantasan ng Araullo (Araullo University), Inc.
Cagayan de Oro College Inc.
Fuld & Company, Inc.
Fuld & Company (Philippines), Inc.
One Animate Limited / Toon City
Union Galvasteel Corporation
University of Iloilo
Pangasinan Medical Center Inc.
University of Pangasinan
Amount
Collected
Additions
Amount
Written-Off
Current
Balance
at End
of Period
Non Current
P
9,937,381
18,276,162
20,837,878
2,888,000
238,418,057
180,645
22,928,272
11,870,707
P
5,903,012
4,104,247
40,200,715
11,005,997
72,074,887
2,546,148
3,078,367
1,188,295
24,975,338
P
3,878,045
14,710,233
506,197
7,058,986
24,500
2,356,837
17,034,013
28,449,702
P
-
P
11,962,348
7,670,175
60,532,396
6,835,011
310,468,444
369,956
8,972,626
1,188,295
8,396,343
P
P
325,337,102
P
165,077,005
P
74,018,512
P
-
P
416,395,595
P
-
P
11,962,348
7,670,175
60,532,396
6,835,011
310,468,444
369,956
8,972,626
1,188,295
8,396,343
P
416,395,595
-
Schedule D.
Intangible Assets - Other Assets
Beginning
Balance
Description
Cost:
Goodwill
Student lists
Trademarks
Customer contracts
P
Accumulated amortization :
Student lists
Customer contracts
1,257,186,321
131,120,130
47,155,868
22,079,939
1,457,542,258
Additions
At Cost
P
127,516,130
22,079,939
149,596,069
P
1,307,946,189
Deductions
Charged to
Charged to
Costs
Other
and Expenses
Accounts
-
P
3,604,000
3,604,000
P
(3,604,000)
(212,300,250)
(212,300,250)
P
P
(212,300,250)
-
Other ChangesAdditions
(Deductions)
P
P
-
(1,008,547)
(1,008,547)
Ending
Balance
P
P
(1,008,547)
1,043,877,524
131,120,130
47,155,868
22,079,939
1,244,233,461
131,120,130
22,079,939
153,200,069
P
1,091,033,392
Schedule E.
Long-term Debt
Title of Issue and Type of
Obligation
University of Pangasinan China Banking Corporation
P
Pamantasan ng Araullo (Araullo University), Inc. China Banking Corporation
Fuld & Company, Inc. Bank of the West
P& S Holdings Corporation United Pulp and Paper Company, Inc.
226,832,376
P
50,000,000
Amount shown under Caption
"Long-Term Debt" in related
Balance Sheet
P
176,832,376
29,400,724
12,251,074
17,149,650
3,079,960
2,402,924
677,036
152,873,074
P
(a) Net of debt issue cost of P826,695
Amount shown under
Caption "Current Portion of
Long-Term Debt" in related
Balance Sheet
Amount
Authorized by
Indenture
412,186,134
P
64,653,998
152,873,074
P
347,532,136
Schedule H.
Capital Stock
Title of Issue
Preferred Shares
Class AA
Class BB
Common Shares
Number of
Shares
Authorized
Number of
Shares Reserved
for Options,
Warrants,
Conversions, and
Other Rights
Number of
Shares Issued
and
Outstanding
Number of Shares Held By
Directors,
Officers and
Employees
Affiliates
Others
50,000,000
50,000,000
100,000,000
-
-
-
-
-
420,000,000
258,907,058
-
110,242,593
14,657,087
134,007,378
520,000,000
258,907,058
-
110,242,593
14,657,087
134,007,378
PHINMA CORPORATION
RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION
December 31, 2012
Unappropriated Retained, Earnings, beginning
Adjustments:
Unrealized fair value gains on investments held for trading
and derivative assets in 2011
Deferred tax asset
2,055,897,716
Unappropriated Retained Earnings, as adjusted beginning
2,022,504,079
Net Loss based on the face of AFS
Less: Non-actual/unrealized income net of tax
Unrealized foreign exchange gain - net
(except those attributable to cash and cash equivalents)
Unrealized fair value adjustment on investments
Unrealized fair value adjustment on AFS investment previously held as associate
Unrealized gain on derivatives
Deferred tax asset in 2011
Deferred tax asset in 2012
Unrealized fair value gains on investments held for trading
and derivative assets in 2011
Less:
(27,826,537)
(5,567,100)
(41,055,417)
(4,821,120)
(39,602,045)
(44,500,248)
(528,235)
5,567,100
(4,454,986)
27,826,537
Net income actually earned during the period
(101,568,414)
Dividend declarations during the period
(103,094,923)
Unappropriated Retained Earnings, as adjusted, ending
1,817,840,742
PHINMA CORPORATION
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2012
Framework for the Preparation and Presentations of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
First-time Adoption of Philippine Financial
Reporting Standards
Amendments to PFRS 1and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled
Entity or Associate
Amendments to PFRS 1: Additional Exemptions
for First-time Adopters
Amendments to PFRS 1: Limited Exemptions
from Comparative PFRS 7 Disclosures for Firsttime Adopters
Amendments to PFRS 1: Severe Hyperinflation
and Removal of Fixed Date for First-time
Adopters
PFRS 1
Amendments to PFRS 1: Government Loans
(Revised)
Share-based payment
Amendments to PFRS 2: Vesting Conditions and
Cancellations
Amendments to PFRS 2: Group Cash-settled
Share-based Payment Transactions
PFRS 2
PFRS 3
Business Combinations
(Revised)
PFRS 4
PFRS 5
PFRS 6
PFRS 7
Insurance Contracts
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
Non-current Assets Held for Sale and
Discontinued Operations
Exploration for and Evaluation of Mineral
Resources
Financial Instruments: Disclosures
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets – Effective
Date and Transition
Amendments to PFRS 7: Improving Disclosures
about Financial Instruments
Amendments to PFRS 7: Disclosures – Transfers
of Financial Assets
Amendments to PFRS 7: Disclosures – Offsetting
Financial Assets and Financial Liabilities
Amendments to PFRS 7: Mandatory Effective
Adopted
Not
Adopted
Not
Applicable
Adopted
Adopted
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Adopted
Adopted
Adopted
Adopted
Not
Applicable
Not
Applicable
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Not early
adopted
Not early
Date of PFRS 9
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2012
Operating Segments
PFRS 8
PFRS 9*
Financial Instruments
Amendments to PFRS 9: Mandatory Effective
Date of PFRS 9 and Transition Disclosures
PFRS 10*
Consolidated Financial Statements
PFRS 11*
Joint Arrangements
PFRS 12*
Disclosure of Interests in Other Entities
PFRS 13*
Fair Value Measurement
Philippine Accounting Standards
Presentation of Financial Statements
Amendment to PAS 1: Capital Disclosures
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on
Liquidation
Amendments to PAS 1: Presentation of Items of
PAS 1
Other Comprehensive
(Revised)
Inventories
PAS 2
Statement of Cash Flows
PAS 7
Accounting Policies , Changes in Accounting
Estimates and Errors
PAS 8
Events after the Reporting Period
PAS 10
Construction Contracts
PAS 11
Income Taxes
Amendment to PAS 12 – Deferred Tax: Recovery
of Underlying Assets
PAS 12
Property, Plant and Equipment
PAS 16
Leases
PAS 17
Revenue
PAS 18
Employee Benefits
Amendments to PAS 19: Actuarial Gains and
Losses, Group Plans and Disclosures
PAS 19
PAS 19
Employee Benefits
(Amended)*
Accounting for Government Grants and Disclosure
of Government Assistance
PAS 20
The Effects of Changes in Foreign Exchange Rates
Amendment: Net Investment in a Foreign
Operation
PAS 21
PAS 23
Borrowing Costs
(Revised)
PAS 24
Related Party Disclosures
(Revised)
Accounting and Reporting by Retirement Benefit
Plans
PAS 26
adopted
Adopted
Adopted
Not
Adopted
Not
Applicable
Not early
adopted
Not early
adopted
Not early
adopted
Not early
adopted
Not early
adopted
Not early
adopted
Adopted
Adopted
Adopted
Not early
adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Not early
adopted
Not
Applicable
Adopted
Not
Applicable
Adopted
Adopted
Not
Applicable
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2012
PAS 27
PAS 27
(Amended)*
PAS 28
PAS 28
(Amended)*
PAS 29
PAS 31
PAS 32
PAS 33
PAS 34
PAS 36
PAS 37
PAS 38
PAS 39
Consolidated and Separate Financial Statements
Separate Financial Statements
Investment in Associates
Investment in Associates and Joint Ventures
Financial Reporting in Hyperinflationary
Economies
Interest in Joint Ventures
Financial Instruments : Disclosure and
Presentation
Amendments to PAS 32 and PAS 1 : Puttable
Financial Instruments and Obligations Arising on
Liquidation
Amendment to PAS 32 : Classification of Rights
Issues
Amendment to PAS 32 : Offsetting of Financial
Assets and Financial Liabilities
Earnings per Share
Interim Financial Reporting
Impairment of Assets
Provisions, Contingent Liabilities and Contingent
Assets
Intangible Assets
Financial Instruments: Recognition and
Measurement
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial
Liabilities
Amendments to PAS 39: Cash Flow Hedge
Accounting of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
Amendments to PAS 39 and PFRS 4 : Financial
Guarantee Contracts
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets – Effective
Date and Transition
Amendments to Philippine Interpretation IFRC –
9 and PAS 39: Embedded Derivatives
PAS 40
Amendment to PAS 39: Eligible Hedged Items
Investment Property
PAS 41
Agriculture
Philippine Interpretations
Changes in Existing Decommissioning,
Restoration and Similar Liabilities
IFRIC 1
Adopted
Not
Adopted
Not
Applicable
Adopted
Not early
adopted
Adopted
Not early
adopted
Not
Applicable
Adopted
Adopted
Adopted
Adopted
Not early
adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Adopted
Not
Applicable
Not
Applicable
Not
Applicable
Adopted
Adopted
Adopted
Not
Applicable
Adopted
Not
Applicable
Not
Applicable
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2012
Members’ Share in Co-operative Entities and
Similar Instruments
IFRIC 2
Determining Whether an Arrangement Contains a
Lease
IFRIC 4
Rights to Interests Arising from Decommissioning,
Restoration and Environmental Rehabilitation
Funds
IFRIC 5
Liabilities arising from Participating in a Specific
Market – Waste Electrical and Electronic
Equipment
IFRIC 6
Applying the Restatement Approach under PAS 29
Financial Reporting in Hyperinflationery
Economies
IFRIC 7
Scope of PFRS 2
IFRIC 8
Reassessment of Embedded Derivatives
Amendments to Philippine Interpretation IFRC – 9
and PAS 39: Embedded Derivatives
IFRIC 9
Interim Financial Reporting and Impairment
IFRIC 10
IFRIC 11
PFRS 2 - Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
Amendments to Philippine Interpretations IFRC –
14, Prepayments of a Minimum Funding
Requirement
Hedges of a Net Investment in a Foreign
Operationj
Distributions of Non-cash Assets to Owners
Transfers of Assets from Customers
Extinguishing Financial Liabilities with Equity
Instruments
Stripping Costs in the Production Phase of a
Surface Mine
IFRIC 14
IFRIC 16
IFRIC 17
IFRIC 18
IFRIC 19
IFRIC 20
SIC - 7
SIC – 10
Adopted
Not
Applicable
Not
Applicable
Not
Applicable
Adopted
Adopted
Adopted
Adopted
Not
Applicable
Not
Applicable
Not
Applicable
Adopted
Adopted
Not
Applicable
Adopted
Adopted
Not
Applicable
Not early
adopted
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
Introduction of the Euro
Government Assistance – No Specific Relation to
Operating Activities
SIC – 13
SIC – 15
SIC – 25
SIC – 27
Amendment to SIC – 12: Scope of SIC 12
Jointly-Controlled Entities – Non-Monetary
Contributions by Venturers
Operating Leases – Incentives
Income Taxes – Changes in the Tax Status of an
Entity or its Shareholders
Evaluating the Substance of Transactions
Involving the Legal Form of a Lease
Not
Applicable
Not
Applicable
Adopted
Consolidation – Special Purpose Entities
SIC – 12
Not
Adopted
Adopted
Adopted
Not
Applicable
Adopted
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2012
SIC – 29
SIC – 31
Service Concession of Arrangements: Disclosures
Revenue – Barter Transactions Involving
Advertising Services
SIC – 32
Intangible Assets – Web Site Costs
Adopted
Not
Adopted
Not
Applicable
Not
Applicable
Not
Applicable
Not
Applicable
PHINMA INC.
25.01%
35.88%
26.21%
PHINMA CORP.
TA OIL
3.16%
35.4%
12.08%
PPHC
Asia Coal *
60.34%
100%
T-O Insurance
2.25%
31.56%
100%
PHINMA A & E
28.18%
100%
PHINMA F & A
51%
MISPI
100%
PVCC*
50%
TA Power
100%
TAREC
100%
TA Petroleum Corp.
69.35%
21.05%
Luzon Bag Corp.*
39.47%
30.65%
Palawan 55
100%
TA Gold
100%
CIP II Power Corp.
Unimer*
25%
Maibarara Geothermal,
Inc.
MDC
50%
SLTEC
50.91%
Union Packing Corp.
98.08%
UGC
69.75%
UPang
69.79%
UI
1.38%
88.87%
100%
60%
P & S Holding
43.07%
Diniwid
31.25%
Union Aggregates Corp.*
85%
Fuld & Company, Inc.
29.74%
First Batangas
50%
ACTA Power Corporation
85%
Fuld & Company (Phils.),
Inc.
20%
Nemo
57.14%
Coral Way
78.64%
AU
19.92%
74.21%
COC
18.38%
57.62%
Asian Plaza
36.90%
OAL
20%
49.01%
Calabar Aggregates Corp*
5.48%
80%
8.30%
Filmag*
2.31%
Filagro Dev’t*
100%
Toon City
Map of relationships of the Companies within the Group
As of December 31, 2012
* Ceased operation
Annex C
MANAGEMENT REPORT
FINANCIAL AND OTHER INFORMATION
Changes In and Disagreements
Financial Disclosures
with
Accountants
on
Accounting
and
For the last five (5) years, there have been no disagreements with the independent
accountants on any matter of accounting principles or practices, financial statement
disclosures or auditing scope or procedure.
Management’s Discussions and Analysis or Plan of Operation
CALENDAR YEAR 2012
The year 2012 was a year of broad-based growth for the Philippine economy which grew an
estimated 6.6%, buoyed by strong contribution from the services, manufacturing, and construction
sectors. Strong macroeconomic fundamentals and President Aquino’s no-nonsense “Daang
Matuwid” program sent further positive signals to the institutional investment community as the
local stock market index climbed throughout the year, closing 33% higher and posting one of the
best performances in the region.
In the face of this business environment, your Company’s consolidated revenue for 2012
amounted to P4.5 billion, an increase of 15% over the P3.9 billion posted in 2011 on stronger
demand for our steel products as well as a full year’s consolidation of revenue from the
competitive intelligence company we acquired in the middle of 2011.
Core income attributable to shareholders of the parent, before one-off provisions and other nonrecurring items, amounted to P 131.5 million for the year. This includes the favorable financial
results of Trans-Asia Oil and Energy Development Corporation and Phinma Education Network
(PEN). This was offset, however, by lower income levels of the steel and property businesses
and further losses in the BPO businesses. As a result, core income attributable to shareholders of
the parent decreased to P 131.5 million from P 174.1 million in 2011.
In view of the prospects of One Animate Limited (OAL), your Company has taken a conservative
stance and written-off the balance of goodwill in OAL amounting to P 212 million. This represents
a total write-off of the Corporation’s exposure in OAL, resulting in a consolidated net loss of P 90
million for 2012.
2012 Highlights
Union Galvasteel Corporation (UGC), our subsidiary engaged in steel roofing, posted a 10%
growth in sales revenues during the year. However, net income declined by 35%, from P 108
million in 2011 to P70 million in 2012, due to competitive pressures and due to a non-cash
impairment on machinery which will not be used in the ongoing conversion of the Continuous
Galvanizing Line to a Color Coating Line. The company maintained however its leadership in the
prepainted roofing industry and is poised for stronger growth as it implements an expansion
program which will make it the largest manufacturer of color coated steel roofing products.
In 2012, core income from the four schools under the Phinma Education Network (PEN) amounted
to P103.4 million, an increase from P96.9 million in 2011. Total enrollment at June 2012
reflected a 3% increase over total enrollment in the previous year. In 2012, Cagayan de Oro
College (COC) established a satellite campus in Barangay Puerto to serve up to 1,000 students
from nearby areas. We are also pleased to report that PEN schools continued to perform well in
terms of board examination passing rates.
Demand for animation services from US studios continued to be weak as the US economy
contracted in the fourth quarter of the year, to end 2012 with a GDP growth rate of 2.2%. During
the year, net loss from operations and from provisions on receivables amounted to
P161.5
million.
In addition, your Company has conservatively booked an impairment loss on the
remaining goodwill in OAL in the amount of P212 million.
On the other hand, Trans Asia Oil and Energy Development Corporation (TA Oil) continues to post
strong results as earnings increased 15% from P408.2 million in 2011 to P471.2 million in 2012.
The Power Group contributed P747 million to the company’s revenues through sales of 533 million
KWh to the Wholesale Electricity Spot Market (WESM) and to its bilateral customers Holcim
Philippines, Quezon Electric Cooperative II, and Sorsogon Electric Cooperative I.
During the year, TA Oil raised over P2 billion in a successful rights issue and private placement to
fund its programmed power expansion program and completed the transfer of the 21 MW CIP II
bunker power plant to Bacnotan, La Union. Also, the construction of the first 135 MW coal-fired
power plant of South Luzon Thermal Energy Corporation (SLTEC), a joint venture with the Ayala
group, is on schedule and is expected to commence operations in the second half of 2014.
Phinma Property Holdings Corporation (Phinma Properties), despite the strong markets in 2012,
was challenged by new building regulations passed early in the year as well as unfavorable
weather, which both resulted in delayed construction and recognition of revenues. Phinma
Properties posted a decrease in net income from P70.9 million in 2011 to P4.7 million in 2012. As
a result, equity in net earnings of affiliates during the year decreased by 14% from P137.7 million
in 2011 to P118.9 million in 2012.
Fuld & Company and Business Backoffice, Inc. (now rebranded as Fuld Philippines) together
completed their first calendar year under Phinma. In 2012, Fuld reorganized new teams in the US
and UK, integrated Fuld Philippines into the business, but was challenged by weak demand due to
the slow nature of the US economic recovery. The Fuld group posted a net loss of P20.7 million.
Moving forward, Fuld intends to diversify revenue sources, grow its Asian business out of a new
office in Singapore, and build a strong Philippine back office.
Phinma Corporation ended 2012 with a strong balance sheet, with total assets of P9.6 billion and
a current ratio and debt-to-equity ratio of 1.76 and 0.04 respectively. Your Company also has
funds of approximately P1.0 billion available for investment, should attractive opportunities
become available.
We are pleased to report that, based on a core net income of P131.5 million, your Board has
declared a cash dividend of P0.40 per share payable on April 17, 2013.
2013 Outlook
Despite the challenges faced by your Company in 2012 arising from weak demand in our US
markets, the Philippine business remains strong. For 2013, the Philippine economy, despite the
continuing weakness in the global economy, is expected to grow by 6% to 7% on strong
household consumption, fueled by inflows from overseas Filipinos and rising investments from the
private sector, as well as from Government infrastructure spending. The Philippine stock market,
echoing international institutional investor confidence in the country, again reached new highs in
2013, with the main index breaching the 6,800 mark in early March. Standard & Poor’s raised its
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Philippine outlook to “positive” in late 2012, citing the stability of the Aquino’s administration and
economic growth. Indications are that the country’s credit rating will again be upgraded in the first
half of 2013.
Interest rates are expected to again remain soft in the year, further encouraging
local investment.
Moving forward, your Company continues to be particularly optimistic about the energy sector and
expects to participate fully in its expected growth. Already, TA Oil has begun to implement
expansion plans that provide for an increase in its current generation portfolio by 500 megawatts
over the next five years. SLTEC, on the other hand, is in the final stage of the feasibility study for
a second 135 MW clean coal-fired unit. Estimated to cost P 10 billion, the second unit will also
utilize the Atmospheric Circulating Fluidized Bed boiler technology which will minimize the
environmental impact of emissions from the power plant.
For 2013, Phinma Properties intends to leverage on its socialized housing expertise as it delivers
600 socialized housing units to the National Housing Authority. The company is also poised for a
recovery based on a larger sales network and a healthy pipeline of over 4,400 condominium units
over the next three years.
Outside the area of reliable and renewable power and housing, your Company anticipates growth
in its other businesses and expects various expansion projects to boost profitability in the future.
UGC’s new Color Coating Line will be the largest in the industry when it becomes operational in
2014. At the same time, PEN is establishing new satellite campuses in both Cabanatuan and
Cagayan de Oro which will come onstream in June 2013.
Your Company remains committed toward its customers, employees, suppliers, business partners,
and creditors. Through its chosen areas of quality education, reliable and renewable power, and
affordable homes, the Company remains steadfast in its commitment toward nation building
through good businesses that will provide attractive returns to our shareholders and improve the
lives of Filipinos.
Phinma Corporation, through the Phinma Education Network (PEN), seeks to provide a better
future for thousands of students by offering quality education at affordable rates. The PEN
network comprises four schools namely Araullo University (AU), Cagayan de Oro College (COC),
University of Pangasinan (UPang) and University of Iloilo (UI), providing basic, secondary and
tertiary education. In addition to offering affordable tuition ranging from P14,000 to P20,000 a
semester, the schools continue to offer financial assistance and, through various programs, grants
scholarships to children of government employees and high school students graduating with
honors.
Total network enrollment grew by three percent from 26,200 students in June 2011 to 27,000 in
June 2012 due to strong increase in COC enrollment, driven by its expansion in the eastern
section of Cagayan de Oro City. The Agusan – Puerto satellite campus saw an 80 percent
growth in freshman enrollment from 2011 to 2012. In June 2012, COC formally inaugurated the
new COC-Puerto campus in Barangay Puerto which accommodates 1,000 more students.
In terms of academic results, COC and AU both achieved a 100 percent passing rate for fresh
graduates in the accountancy board exams in May and October 2012 respectively. UPang
remains the best performing nursing school in Region 1, hitting an all-time high passing rate of 83
percent for first-timers in the June 2012 nursing board exams, while COC produced a first-placer
and third-placer in the March 2012 criminology board exams. The COC results for electrical and
mechanical engineering boards were also 100 percent for first timers in the September 2012
examination. In 2012, UI produced two board topnotchers – an 8th placer in the March 2012
criminology board exams and a 4th placer in the November 2012 nursing board exams
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In 2012, core income from the four schools under the Phinma Education Network (PEN) amounted
to P103.4 million, an increase from P96.9 million in 2011. The combined calendar year assets of
the network grew by five percent from P 2.21 billion to P 2.31 billion.
In 2012, PEN standardized processes, including salaries and benefits, and introduced a new
faculty ranking system and in-house training module across its network. Standards were set for
electricity consumption as the network moved towards energy-saving cooling and lighting
methods. PEN expects reductions in utility costs for school year 2012 – 2013. The PEN schools
also made a shift toward open source software, reducing laboratory and software costs of the
students and the schools.
A new system was also introduced, adopting a single registration
process. The new system, will eventually allow online and off-site enrollment, online payments
systems, improving convenience and providing better and faster services to the students.
In 2012, PEN piloted a new learning system integrating online material with drills and guided selflearning. Initial positive results indicate the new system is potentially more effective than
traditional teaching methods. PEN will rapidly expand the use of this learning system in the next
school year. Also, UI signed a Memorandum of Agreement with Magsaysay Lines to bring the
latter’s training services to Region Six through a world class training center located on the UI
campus, while UPang partnered with DMCI and TA Power to renovate and upgrade the
engineering laboratories.
Moving forward, PEN is expanding COC’s Basic Education Department and establishing a new
AU campus. The new COC Basic Education complex, a five-storey building with 28 to 30
classrooms, broke ground in October 2012 while AU South, AU’s new campus located in the
Southern district of Cabanatuan, broke ground in November 2012. The facilities will be open for
enrollment in June 2013.
PEN schools continue to standardize processes, improve efficiencies, introduce innovation, and
expand, pursuant to the continuing mission of your Company to provide a better life for its students
and their families through affordable yet quality education.
Energy
Phinma Corporation, through its affiliate Trans-Asia Oil and Energy Development Corporation (TA
Oil), provides sustainable and reliable power to its customers.
We are pleased to report that 2012 was another strong year for TA Oil, with the company posting
a consolidated net income of P471.2 million, an increase of 15% over the net income of P408.2
million for 2011. As of December 31, 2012, total consolidated assets stood at P7.7 billion, total
liabilities at P747.4 million and total equity at P6.9 billion.
In 2012, TA Oil renewed its license as a Wholesale Aggregator (WA) from the Energy Regulatory
Commission (ERC) which will enable it to provide quality and affordable supply of power to
electric cooperatives in the country. The company also signed an Auxiliary Service Provision
Agreement (ASPA) with the National Grid Corporation of the Philippines (NGCP) as it prepares to
enter the market for reserve power.
During the year, TA Oil’s 3.4 MW bunker-fired Power Plant continued to supply power to the
Guimaras electric cooperative and to the Wholesale Electicity Spot Market (WESM) in the Visayas,
delivering a total of 4.3 GWh of power. Trans-Asia Power Generation Corporation (TA Power), a
subsidiary of TA Oil, also continued to provide power to major customer Holcim Philippines, Inc.
(Holcim). Out of the total energy sales of 253 GWh, 91% or 231 GWh were delivered to Holcim
while the remaining 9% or 22 GWh were exported to the WESM. In January 2013, TA Power
became a 100%-owned subsidiary of TA Oil upon the latter’s acquisition of Holcim’s 50% interest
in TA Power.
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In 2012, TA Oil completed the transfer of subsidiary CIP II Power Corporation’s 21 MW Bunker
power plant from Calamba, Laguna to Bacnotan, La Union. Testing, commissioning, and
interconnection of the plant to the Grid was completed in December 2012. In 2013, the power
plant will operate as a merchant plant and will support the electricity supply business of TA Oil.
TA Oil affiliate Maibarara Geothermal Inc. continued to develop the Maibarara geothermal power
plant project which is around 60% complete at yearend 2012. The project is expected to be
operational within the last quarter of 2013. This project is the first renewable energy undertaking
declared commercial by the government under the Renewable Energy Act of 2008. Upon
commercial operation, the Maibarara geothermal power plant will be the first geothermal power
station in Luzon in 16 years.
South Luzon Thermal Energy Corporation (SLTEC) is TA Oil’s venture with Ayala Corporation’s
energy arm, AC Energy Holdings Corporation. The construction of the first 135MW
environmentally friendly Circulating Fluidized Bed coal-fired plant is proceeding as scheduled and
the plant is expected to start operations in the second half of 2014.
The commitment of TA Oil towards other renewable energy sources such as wind projects remains
steadfast through its wholly-owned subsidiary, Trans-Asia Renewable Energy Corporation
(TAREC). With the approval of the Feed-In-Tariff rate for wind projects in July 2012, TAREC
advanced further its 54 MW San Lorenzo Wind Project, completing negotiations on the EPC
Contract, Loan Agreement, and Operation & Maintenance and Project Management Contracts.
To fund its continued expansion, TA Oil raised fresh capital in 2012, raising over P1.6 billion from
a rights issue and another P400 million via a private placement to institutional investors. Both
issuances were oversubscribed, and the total P2 billion in proceeds will be used primarily to
finance TA Oil’s equity investments in the 54 megawatt wind project in San Lorenzo, Guimaras
and the planned second 135 megawatt unit of SLTEC’s coal-fired power plant in Calaca,
Batangas.
On the exploration front, in December 2012 TA Oil signed agreements assigning participating
interests in various service contracts to wholly-owned subsidiaries Trans-Asia Petroleum
Corporation and Palawan 55 Exploration & Production Corporation. The spin-off of oil and gas
assets will bring focus to TA Oil’s oil and gas exploration efforts, and facilitate additional capital
raising which may be required for oil and gas activities in the future.
For 2013, TA Oil looks forward to the implementation of the open-access regime and is well
poised to capitalize on this opportunity and the expected robust growth of the Philippine economy
to generate higher revenues and income. Beyond 2013, TA Oil expansion plans provide for an
increase in the current generation portfolio by 500 megawatts over the next five years as it
supports the government’s thrust to ensure adequate and reliable supply of power for the growth
of the nation.
Steel Products
Union Galvasteel Corporation (UGC) is the market leader in the manufacture of pre-painted
galvanized roofing and other steel products, such as steel decking, frames and insulated panels
used for cold storage and other facilities. The company has the largest and most diversified
distribution network in the industry, with roll-forming plants and warehouses in key locations
throughout the country.
In 2012, the strong economy spurred a robust growth in construction activity, increasing demand
for construction materials. UGC leveraged its distribution network, distinct product quality, and
customer service, increasing sales to industrial estates, large contractors, and major housing
developers. The company also maintained its strong participation in government projects such as
5
school buildings, military housing units, and shelter relocation projects for typhoon-damaged areas
of Mindanao. UGC revenue increased 10% from P 2.6 billion in 2011 to P 2.9 billion in 2012.
As the company’s market base expanded and products were innovated during the year, UGC
institutionalized its Customer and Technical Services program to strengthen its commitment to
provide total customer satisfaction. With the pick-up of construction activity, the company
expanded its production capabilities with the commercial operation in August 2012 of its new
Polyurethane line in Calamba, Laguna, producing Polyurethane panels for Agro-Industrial facilities
and insulated roofing panels and augmenting its existing Polyurethane Line in Davao.
Under the current liaberalized tariff regime, it is now more economical for UGC to import
galvanized coils, rather doing the galvanizing in our plant. Hence, the company has decided to
convert its idle continuous galvanizing line (CGL) in Calamba into a higher-capacity color coating
line (CCL), in anticipation of further growth in the demand for steel roofing. This CCL, expected to
be operational in early 2014, will have a capacity of 60,000 metric tons/year of color coated GI
materials making it the largest in the industry and further strengthening UGC’s market leadership
in the pre-painted roofing sector. To support the growing market in the Visayas, the company is
also upgrading its rollforming plant and regional office in Cebu, which will be operational by the
second quarter of 2013.
Investing in Information Technology to support its growing business and information needs, UGC
has selected the Oracle E-Business suite to streamline business processes across its nationwide
business units. The system is undergoing parallel runs before it goes live by the second quarter of
2013.
The company ended 2012 with a Net Income of P 70 million, a 35% decrease compared to Net
Income of P108 million in 2011. Although demand for construction materials increased, there was
also increased competition from imported steel products under the liberalized tariff regime.
Moreover, the conversion of the CGL to a CCL resulted in an impairment charge of P25 million on
machinery unutilized in the conversion. Without this non-cash charge, UGC net income for 2012
would have been P95 million.
The company declared dividends to shareholders and settled the balance of its long term
obligations in anticipation of refinancing with new long-term loans at more attractive rates. Total
assets amounted to P1.98 billion, total liabilities stood at P1.08 billion and stockholders equity at
P894.6 million.
In 2013, UGC marks its 50th year of operations. Although it has been a challenging journey, we
are proud that the company has attained market leadership and financial stability while
maintaining quality and integrity. UGC looks forward to more years of contribution to the growth of
the country as it fulfills Phinma’s commitment to a better life.
Housing
Phinma Property Holdings Corporation (Phinma Properties), a 35% owned affiliate of the
Company, is a leading developer of affordable medium- and high-rise condominium units in Metro
Manila. Phinma Properties is the Philippine’s first and only triple ISO certified housing developer,
recognized for its quality, safety, and environment-friendly designs.
Phinma Properties had another challenging year in 2012. A new fire code was introduced in
January 2012 as a knee-jerk reaction to a tragic fire in Tuguegarao. This forced the building plans
of Arezzo Place Pasig and Solano Hills back to the drawing boards and pushed back the project
starts to the second quarter, into the rainy season. Although Temporary Licenses to Sell for the
projects were secured and strong sales commenced in June 2012, the unusually long rainy
season of 2012 hampered construction. Reservations for the aforementioned projects totaled 813
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units by the end of 2012. Construction, however, fell behind with Solano Hills and Arezzo Place
ending the year with only 270 and 180 units at finishing stages of construction, respectively.
In 2012, Phinma Properties also experienced delays in the delivery of its Bistekville 2 socialized
housing for the Quezon City Local Government Unit (LGU).
Only 422 row houses were
completed in 2012, compared to a target of 894 units, due to the LGU’s delay in clearing the
construction area.
The result was a lag in revenue recognition based on construction completion, resulting in net
income of P4.7million in 2012 compared to net income of P70.9 million in 2011. During the year,
paid-up capital increased to P1.088 billion due to stock rights offer proceeds of P180.1 million
earmarked for property acquisition . Total assets increased to P2.87 billion as of end 2012 from
P2.63 billion in 2011.
For 2013, Phinma Properties looks forward to Hacienda Balai, a 1,260-unit medium-rise building
(MRB) project over a 2.9-hectare land in Quezon City, scheduled for groundbreaking by the middle
of the year. Phinma Properties’ pipeline also includes projects outside Metro Manila: a total of
1,350 units in Santa Rosa, Laguna, 1,080 units in Davao City, and Phinma Properties’ first of three
15-storey condominium buildings in Pasay City. This project pipeline will add another 4,450
condominium units over the next 3 years. Phinma Properties also leveraged on socialized
housing efficiencies learned in Bistekville 2 and participated in project biddings of the National
Housing Authority (NHA). In December 2012, the company was awarded a 600-unit MRB project,
subsequently approved by the NHA board in February 2013. Phinma Properties has likewise
been awarded the contract for the construction of the 120-room Microtel Technohub.
Phinma Properties’ network of brokers has grown from 342 in January 2012 to 618 in December
2012. The expansion of the network is a continuing program and PPHC expects to grow to at
least 1,000 active brokers by year end 2013. The strong sales force and robust pipeline ensure
that Phinma Properties is well poised for a recovery in 2013 as it continues to make life better for
the urban Filipino family by providing quality, affordable homes.
Business Process Outsourcing
Fuld & Company, acquired by PHINMA in June 2011, and Business Back office Inc. (BBI), have
together completed their first full year of operations as part of the PHINMA group. The joint
acquisitions were designed to showcase Filipino talent to the world by producing high-value
research services for the world’s largest corporations.
Fuld & Company is a global consulting firm that pioneered the field of competitive intelligence to
improve corporate strategy and operations. Since 1979, Fuld has served more than 300 of the
largest global firms, providing customized research and analysis on markets, competitors,
suppliers, and customers. Fuld’s well-known strategic gaming workshops help clients improve their
market positions by evaluating the implications of planning decisions and anticipating market and
competitive responses. BBI, now re-branded as Fuld Philippines (Fuld PH), was established in
2002 and has completed over 400 research projects across multiple industries and markets
worldwide, providing phone-based intelligence collection and analysis on critical business issues
for top management. Together, these operations, based in Manila, Singapore, London, and
Cambridge, Massachusetts, offer multinationals a broad array of services to address client tactical
market needs, as well as longer term assessments of future markets.
2012 was year of change for Fuld and Company. The firm hired and integrated a new
management team in the US and the UK and also made some key new additions to the
management team in Manila. In August, Fuld acquired Outward Insights, Inc., a strong brand in
the competitive intelligence world best known for strategic services such as war games, scenario
planning, and consulting. Fuld moved almost all of its secondary research from US/UK based
companies to Fuld Manila. 2012 was also a year of transition and integration for Fuld PH, with
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initiatives focused on the employment of key personnel, streamlining the communication chain,
and the review and alignment of current Fuld PH policies and standards with the rest of the Fuld
organization.
In 2012, Fuld’s business in the US continued to be challenged by the major re-organization and
the costs thereof and by weak demand in light of the slow pace of the US economic recovery. In
its first full year of operation under Phinma, the Fuld group posted revenue of P471.2 million and
net loss of P20.7 million.
Moving forward, Fuld Asia, launched in Singapore in late 2012, opens an important new market.
The current recognition of the brand is very positive and Fuld expects to grow the Asian business
significantly in the coming years. 2013 sees Fuld PH striding towards integration and
development, continuing efforts to recruit more staff with advanced industry experience. This will
be coupled with multi-skill, training, fostering extensive integration programs with its counterparts
in the US and UK, and developing strategic plans to reconcile its goals and objectives within the
Fuld framework. The overall goal for Fuld & Company – and a fundamental part of its growth
strategy - remains the building of a strong Philippine back office, which is expected to employ
hundreds of Filipinos in the years ahead.
One Animate Limited (One Animate) is an 80% owned subsidiary of Phinma Corporation and is
the parent company of Toon City Animation, Inc., a domestic BPO company specializing in
animation services for film studios.
In 2012, One Animate booked revenues of P80.4 million, an increase over revenues of P26.7
million in 2011. Projects for 2012 included one season and two TV specials of Curious George for
Universal Studios. During the year, One Animate continued to be challenged by weak demand
from US animation studios as the US economy contracted in the fourth quarter of 2012. Delayed
production on existing contracts also resulted in cost overruns as the company subcontracted
additional capacity to meet deadlines. In 2012 the company also provided for the write off of
doubtful receivables related to production on the Voltron account in 2011. All told, net loss from
operations of One Animate amounted to P161.5 million. To prevent further losses, in December
2012,Toon City retrenched most of its employees, in line with a shift to a contractual production
model. our Company has decided to take a conservative stance and book a non-cash provision
for impairment of the remaining goodwill in OAL in the amount of P212 million.
Hotels
In view of increasing tourist arrivals and the need for tourism infrastructure, Phinma Corporation
ventured into the hospitality industry. Today, part of Phinma Corporation’s mission is to provide
affordable quality hotel services in the Philippines.
Coral Way City Hotel Corp owns the 150-room Microtel by Wyndham (Microtel) Mall of Asia which
commenced full commercial operations in September 2010. The hotel is managed by Microtel
Development Corp.
Microtel is an international chain of hotels under Wyndham Hotel Group with more than 300
properties worldwide. Microtel pioneered the no-frills hotel concept in the Philippines that targets
the mid-market. Its approach is back-to-basics and focuses on providing consistently clean,
comfortable and secure accommodations at value rates.
In the Philippines, there 10 hotels located in key regional hubs and resort locations such as
Baguio, Batangas, Boracay, Cabanatuan, Cavite, Davao, General Santos, Mall of Asia, Puerto
Princesa, and Tarlac. Three more Hotels - in Acropolis, Quezon City, UP Technohub, Quezon
City, and Sta. Rosa, Laguna - will open soon.
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In 2009, Phinma Corporation invested P66.2 million in preferred shares of Coral Way City Hotel
Corporation, a subsidiary of Microtel Development Corporation. These preferred shares are
convertible to common shares and bear cumulative dividends at a rate of 10%.
Strategically situated near SMX Convention Center and SM Mall of Asia, Microtel Mall of Asia
(MOA) caters to local and international travelers, both on business and leisure trips. In 2012, the
hotel had an occupancy rate of 83%, with 68% of the bookings coming from the leisure market and
the rest from corporate bookings and attendees of conventions, meetings and events in the area.
In 2012, Microtel MOA achieved gross revenue of P175 million, gross operating profit of P71.8
million and net income of P3.6 million.
For 2013, Microtel MOA will aggressively promote through various channels such as print,
television, online, partnerships, and events. It will also continue to focus its sales and marketing
efforts to tap the corporate accounts and meetings, incentives, conventions and events market.
The hotel will likewise fully utilize web-based sales and marketing tools to achieve greater internet
visibility and availability and generate more online bookings.
Key Performance Indicators (KPI)
The top five (5) KPI’s used to measure the financial performance of PHN and its subsidiaries as of
December 31, 2012 compared to the same period last year are shown in the following table :
Financial KPI
Profitability
Return on Equity (ROE)
Gross Profit Margin
Definition
Net income (loss) attributable to
PHN equity holders
Ave. total equity attributable to PHN
equity holders
2012
2011
(0.56%)
1.24%
32.33%
28.97%
15.32%
8.60%
Gross profit
Net sales
Efficiency
Cash Flow Margin
Liquidity
Current Ratio
Debt-to Equity Ratio
Cash flow from operating Activities
Net sales
Current assets
Current liabilities
1.76 : 1.00
2.63 : 1.00
Total liabilities
Total equity
0.38 : 1.00
0.35 : 1.00
Profitability
The decline in the return on equity reflects the net loss of P 36 million for CY 2012. However,
gross profit margin increased from 28.97% in CY 2011 to 32.33% in CY 2012 mainly due to
gross profit margin contribution of Fuld US which was acquired and consolidated beginning June
2011.
Efficiency
Net cash inflow from operations was P695 million in CY 2012 compared to P340 million in CY
2011 as shown in the consolidated statements of cash flows. The net cash inflow in CY 2012 is
largely due to an increase in trust receipts payable of UGC from P104 million in CY 2011 to P555
million in CY 2012
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Liquidity
Current ratio as of December 31, 2012 decreased from 2.63:1.00 last year to 1.76:100 this year
due to an increase in current liabilities of UGC.
Debt-equity ratio of PHN and its subsidiaries as of end December 31, 2012 increased from
0.35:1.00 to 0.38:1.00 due to the increase in current liabilities.
Other Financial Ratios are as follows :
Financial Ratio
Asset to Equity
Interest rate coverage
ratio
Definition
Total Assets
Total Equity
EBITDA
Interest expense
2012
2011
1.38
1.35
4.81
5.06
Asset to Equity ratio of PHN and subsidiaries as of end December 31, 2012 increased slightly from
1.35 to 1.38.
Interest rate coverage ratio decreased from 3.97 in CY 2011 to 2.69 in CY 2012 due to lower
EBITDA.
Accounting Policies and Principles
The accompanying consolidated financial statements of Phinma Corporation have been prepared in
compliance with accounting principles generally accepted in the Philippines as set forth in Philippine
Financial Reporting Standards (PFRS). The consolidated financial statements have been prepared on
a historical cost basis, except for financial assets at fair value through profit and loss, available for sale
investments and derivative investments that have been measured at fair value.
The consolidated financial statements are prepared in Philippine pesos, the company’s functional and
presentation currency.
Below are additional disclosures on the Company’s operations :
a. Any known trends, demands, commitments, events and uncertainties that will result in or likely to
decrease its liquidity in any material way.
PHN does not anticipate having any cash flow or liquidity problems nor does it anticipate any
default or breach of any of its existing loans.
b. Any events that will trigger direct or contingent financial obligation that is material to the
company, including any default or acceleration of an obligation.
None
c. All material off-balance sheet transactions, arrangements, obligations (including contingent
obligations) and other relationships of the company with unconsolidated entities or other person
created during the reporting period.
None
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d. Any material commitments for capital expenditures, the general purpose of such commitments and
the expected sources of funds for such expenditures.
None
e. Any known trends, events or uncertainties that have had or that are reasonably expected to have
a material favorable or unfavorable impact on net sales/revenues/income from continuing
operations.
The operations of Phinma Corporation and its subsidiaries continue to be affected by the
economic performance of the Philippines and in the countries in which they operate.
f.
Any significant elements of income or loss that did not arise from the Issuer’s continuing
operations.
None.
g. The causes for any material change from period to period which shall include vertical and
horizontal analyses of any material item.
Any increase or decreases of 5% or more in the financial statement accounts is discussed below.
h. Any seasonal aspects that had a material effect on the financial condition or results of operations.
Like any other company in the construction industry, the operations of UGC is affected by
seasonal demand. During the summer months starting December to May, demand for roofing
materials are greater than during the rainy months of June to November. The demand for the
first semester of the calendar year is normally higher than that of the second semester.
The revenues of the schools under the Phinma Education network decline during summer months.
For the parent company and the other subsidiaries, there are no seasonal aspects that materially
affect operations.
Material Changes in Balance Sheet Accounts
Cash and cash equivalents
The movements in cash and cash equivalents are shown in the cash flow statement.
Investments held for Trading
The P 29 million increase in Investments Held for Trading represents additional investments in
Unit Investment Trust Funds (UITFs) by Asian Plaza, Inc.
Input tax
The decrease in the account of P35 million is due to a provision on input tax of OAL in the
amount of P29 million as well as a decrease in input tax of UGC amounting to P8 million.
Other current assets
The decrease in the account of P4 million is mainly due to a decrease in various assets of Fuld
US.
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Investments in associates – at equity
The increase in the account of P509 million is due to the Parent Company’s participation in the
stockrights offering of Trans-Asia Oil and Energy Development Corporation and Phinma
Property Holdings Corporation in the amount of P474 million and P64 million, respectively.
Available for sale investments
The P 91 million increase in the account represents reclassification of investments in AB Capital
and Investment Corporation to available for sale investments.
Intangibles
The decrease in the account of P216.9 million represents the impairment loss on goodwill in One
Animated Limited in the amount of P 212 million.
Deferred Tax Assets
The P36 million increase in the account represents increase in deferred tax assets of AU, COC
and Fuld US in the amount of P8 million, P12 million and P17 million respectively.
Other noncurrent assets
The P 5 million increase in other assets is attributable to the increase in various deferred charges
of COC, Fuld Philippines, and UI in the amount of P3 million, P 1.3 million and P1.3 million
respectively.
LIABILITIES
Notes payables
The decrease in the account of P82 million represents payments made by UGC on its short-term
borrowings.
Trade and other current liabilities
The increase in the account from P402 million to P537 million is partly due to a P 97 million
deposit payable as well as an increase in the combined trade payables of Fuld US, UGC, UI
and UPANG in the amount of P50 million.
Trust receipts payable
The P451 million increase in the account is attributable to the increase in UGC’s trust receipts
payable from P104 million in December 2011 to P555 million this year.
Income and other taxes payable
The decrease in the account of P3 million represents a decrease in income tax payable of UGC
.
Due to related parties
The decrease in the account represents payments by UGC of various liabilities to Phinma, Inc.
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Derivative liability
The decrease in the account is due to the full settlement of non-deliverable forward contracts of
PHN which were outstanding as of December 31, 2011.
Long-term loan payable
The decrease in the amount of P30 million represents partial principal payments made by PHN to
selling stockholders of Fuld US in June 2012.
Long-term debt
The decrease of P328 million represents UGC’s pre-termination of its long term debt with Banco
de Oro and Rizal Commercial Banking Corporation amounting to P240 million, and AU’s and
Upang’s loan payments during the first semester of CY 2012.
Pension and other post-employment benefits
The increase in the account of P 30 million is due to retirement plan upgrade of UGC as well
accruals for post-employment benefits of AU, COC and UI.
Other Noncurrent liabilities
The increase in the account is attributable to an increase in non-current liabilities of Fuld US.
EQUITY
Unrealized gain (loss) on change in fair value of available for sale investments
The change is due to the increase in prices of First Philippine Holdings preferred shares held by
Phinma Corporation.
Share in unrealized gains on financial assets of associates
The increase in the account is due to mark-to-market gains booked by an affiliate, Trans-Asia Oil
and Energy Development Corporation.
Cumulative translation adjustments
The decrease of P6 million in the account represents cumulative translation adjustments arising
from the consolidation of OAL and Fuld US.
Reserve for stock purchase plan
This is a reserve account for the stock purchase plan of officers of the parent company, PHN.
Acquisition of minority interest
This account represents the acquisition by OAL of the remaining 5% equity interest in Toon City.
13
Material Changes in Income Statement Accounts
Revenues
The increase in revenues in the amount of P583 million is due to increase in revenues of UGC
amounting to P269 million as a result of increase in sales volume.
Likewise, consultancy
revenues of Fuld US increased from P248 million to P 440 million for calendar year 2012. The
former reflects revenues for the seven (7) months ended December 31, 2011, since the company
was acquired and consolidated only beginning June 2011 while the latter reflects consultancy
services for twelve months.
Cost of sales
The increase in cost of sales amounting to P286 million is mainly due to an increase in UGC’s
cost of raw materials as a result of increase in sales volume.
Operating expenses
The P 363 million increase in the account is due to the consolidation of operating expenses of Fuld
US for twelve (12) months ended December 31, 2012 compared to 7 months in 2011. Fuld US
was consolidated by PHN only starting June 2011.
Interest expense and other financial charges
The decrease of P7 million in the account is due to the decrease in UPang’s long-term debt.
Equity in net earnings of associates
The decrease in the account of P19 million is largely due to a decline in equitized income in
Phinma Property Holdings Corporation (PPHC), from P25 million in CY 2011 to P2 million in CY
2012.
Net gain (loss) on derivatives
This account reflects a net gain in derivatives amounting to P12.3 million for CY 2012 compared to
P7 million of the same period last year.
As of December 31, 2012, the company has outstanding non-deliverable contracts with an
aggregate notional amount of US$4.3 million transacted at an average rate of P41.12 to $1.00. As
of the end of the year, the average forward rate was P 40.99 to $1.00, resulting in an unrealized
gain of P.5 million. Net derivative gain on settled contracts amounted to P 11.7 million.
Foreign exchange gain (loss)
PHN booked foreign exchange losses as of December 31, 2012 due to the movement in foreign
exchange rate from P43.84 as of Dec. 31, 2011 to P41.05 as of December 31, 2012.
Gain on sale of investment properties
This represents the gain on sale of land of PHN in Nasugbu, Batangas and General Santos City.
Impairment loss on goodwill
This represents the write-off of the balance of goodwill in One Animate.
14
Other income (charges)
The decrease in other income of P39.7 million represents the decrease in other income of UPANG
and UI in the amount of P14 million and P17 million respectively.
Provision for income tax
The decrease in provision for income tax from P46 million to P43 million is mainly due to UGC, the
income of which declined from P108 million in 2011 to P70 million in 2012.
Comprehensive Income
Comprehensive income decreased from P58 million in calendar year 2011 to a loss of P92
million this year due to the decrease in net income from P57.5 million last year to a net loss P90
million this year.
For other comprehensive income / (charges), kindly refer to the comments on equity accounts.
CALENDAR YEAR 2011
The year 2011 was a year of challenges in the face of a slowdown in the world economy from
continued uncertainty in the US, Europe, and the Middle East. Closer to home, a series of
typhoons and delays in implementation of our government’s infrastructure programs also impacted
the construction industry. Amidst this difficult business environment, your Company’s
consolidated revenue for 2011 amounted to P3.9 billion, only a modest 3% increase over the P3.8
billion posted in 2010. Consolidated net income decreased to P57.5 million from net income of
P254.0 million excluding one-off gains in 2010. Consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) for the year amounted to P 596 million.
2011 Highlights
Union Galvasteel Corporation (UGC), our subsidiary engaged in steel roofing, posted a decline in
net income, from income of P202 million excluding extraordinary gains in 2010 to P107.9 million in
2011. This decrease is attributed to a slowdown in the construction industry from a series of
typhoons as well as delays in government infrastructure spending. Inspite of these, the company
maintained its leadership in the prepainted roofing industry, and is poised for a recovery as the
government accelerates implementation of its Public Private Partnership (PPP) programs and as
the nation rebuilds in the face of the natural calamities of 2011.
During the year, income of the four schools under the Phinma Education Network (PEN)
amounted to P131.3 million, an increase of 5% compared to P125.4 million in 2010. Total
enrollment increased to 25,964 students, a 2% increase over the previous year. In 2011, the
schools improved facilities and continued to perform well in terms of graduate examination
passing rates.
In 2011, One Animate limited posted a net loss of P97.1 million due to delayed projects from
clients and production and cost challenges as the company took on more complex Computer
Generated Imagery (CGI) work. One Animate has since instituted measures to better manage
client relationships and improve CGI capabilities to control costs and margins. Despite these
measures, your Company has nonetheless taken a conservative stance and has elected to book
in 2011 a non-cash provision for impairment of goodwill in the amount of P166.4 million.
During the year, equity in net earnings of affiliates increased from P59.4 million in 2010 to P137.7
million in 2011 due to the strong performance of our energy business. Trans Asia Oil and Energy
15
Development Corporation (TA Oil) delivered stellar results, with consolidated net income surging
from P14.7 million in 2010 to P408.2 million in 2011. TA Oil continued its active participation in the
Wholesale Electricity Supply Market (WESM), ramping up access to generation capacity to
reduce its vulnerability to volatilities in the market. During the year, TA Oil entered into a fifty-fifty
joint venture with Ayala Corporation’s AC Energy Holdings Corporation to undertake the
construction and operation of a modern 135 MW coal-fired power plant in Calaca, Batangas.
Phinma Property Holdings Corporation (Phinma Properties), faced with industry-wide challenges
such as more conservative loan value appraisals and longer loan approval cycles from the Home
Development Mutual Fund (HDMF), posted a decrease in income from operations from P134
million in 2010 to P70.9 million in 2011. Despite this, Phinma Properties launched its ASiA
Enclaves project in Alabang and entered into a development agreement with the Quezon City local
government for a 1,000-unit urban relocation program.
While equity in net earnings of Phinma Properties decreased from P47.5 million in 2010 to P25.0
million in 2011, equity in net earnings of AB Capital and Investment Corporation increased from P
5.3 million in 2010 to P 7.5 million in 2011.
In June 2011, the Company, in search for opportunities in the high value-added services sector,
increased its Business Process Outsourcing portfolio through the acquisition of Fuld & Company,
a Cambridge, Massachusetts-based global consulting firm and a leader in the field of competitive
intelligence. The Company also acquired in 2011 Business Backoffice, Inc. (now Fuld Philippines,
Inc.), a knowledge process outsourcing (KPO) firm. The acquisition of these companies will be
accretive, with synergies expected as Fuld and Co. continues to provide competitive business
research services, with additional support and a wider geographic reach through Fuld Philippines,
Inc.
Phinma Corporation ended 2011 with a strong balance sheet, with total assets of P9.7 billion and
a current ratio and debt-to-equity ratio of 2.6 : 1 and 0.35: 1 respectively. Your Company has
funds of P 1.6 billion available for investment, should attractive opportunities become available.
Despite the modest income for 2011, given the consolidated EBITDA of P 596 million, your Board
has deemed it appropriate to maintain its cash dividends at the same level of P0.40 per share,
payable on April 26, 2012.
Improving Lives
Despite the challenges, your Company remains committed toward its customers, suppliers,
employees, and the public. Although 2011 was a year of external challenges and internal growth
pains, we maintain our conviction that doing good is good business. Through good business, we
build the nation, address the aspirations of our stakeholders, and improve the lives of Filipinos providing quality education, reliable and renewable power, and attractive homes, all at affordable
costs.
Education
Phinma Corporation, through the Phinma Education Network (PEN), seeks to provide a better
future for thousands of students by offering quality education at affordable rates. PEN comprises
four schools namely Araullo University (AU), Cagayan de Oro College (COC), University of
Pangasinan (UPang) and University of Iloilo (UI), providing basic, secondary and tertiary education
to approximately 26,000 students.
PEN has strived to make its schools among the most affordable private institutions in their
respective areas, with tuition fees ranging from P15,000 to P20,000 per semester. To keep tuition
fees low, the schools continue to manage costs and streamline operations. As a result, the ratio of
non-teaching employees to faculty today averages at an efficient level of about 1:3. To provide
education to even more students, the PEN schools introduced the PHINMA Scholarship program,
16
which offers fifty percent scholarship on tuition and fees to those in financial need. In 2011, over
4,400 students enrolled under this program.
For the school year 2011, overall PEN enrollment grew by two percent to 25,964. During the year,
income of the four schools under the Phinma Education Network (PEN) amounted to P131.3
million, an increase of 5% compared to P125.4 million in 2010
The schools continue to perform well and are continuously improving their programs and facilities.
In AU, 100% of accountancy examinees passed both board exams in 2011. In addition, the
school was the top school among private schools in Cabanatuan in both its criminology and
nursing program in terms of passing average for fresh graduates.
Upang has completed the renovation of its Arts and Sciences building. The school continues to
perform well in terms of passing rates for graduates of its nursing, medical technology, and law
programs, and has instituted retention policies and standards in its board courses to further
improve the quality of its graduates.
COC’s Criminology department has been recognized by the Commission on Higher Education as
a Center of Development for demonstrating institutional leadership and high standards in the
areas of instruction and research. In 2011, one criminology student and one mechanical
engineering student scored in the Top 10 in the nationwide board exams. In 2011, COC
continued to further improve teaching performance of faculty through intensive training, seminars
and workshops.
UI continues to improve its programs, with a March 2011 nursing graduate scoring in the Top 5 in
the nationwide licensure exam in December. In March 2012, UI’s marine engineering course
received its ISO 9001:2008 certification.
For 2012, PEN schools have targeted improvement in various areas including advanced course
offerings, faculty development, education materials, both academic and sports facilities, and
graduate placement, all in support of its mission of providing quality education accessible to all
students.
Energy
Phinma Corporation, through its affiliate Trans-Asia Oil and Energy Development Corporation (TA
Oil), continued its commitment to provide sustainable and reliable power to its customers.
We are pleased to report that the year 2011 was a good year for TA Oil, with the company posting
a consolidated net income of P408.2 million, a substantial improvement over the modest P14.7
million net income of the prior year. As of December 31 2011, total consolidated assets stood at
P5.3 billion, total liabilities at P696.6 million and total equity at P4.6 billion.
Trans-Asia Power Generation Corporation (TA Power), a subsidiary of TA Oil, continued to
provide power to major customer Holcim Philippines, Inc. (Holcim). Out of the total energy sales of
240 GWh, 90% or 217 GWh were delivered to Holcim while the remaining 10% or 23 GWh were
exported to the Wholesale Electricity Spot Market (WESM).
During the year, TA Oil’s 3.4MW bunker-fired Power Plant began supplying power to the WESM in
the Visayas, in addition to providing reliable and stable peaking power to the island of Guimaras.
A total of 3.63 GWh of power was produced, with 89.7% sold to the Guimaras cooperative and the
balance of 10.3% sold on the WESM, resulting in total revenues of P61.9 million and net income
from operations of P13.5 million.
17
In 2011, TA Oil signed a long-term contract to supply the electricity requirement of Holcim
Philippines. The ongoing transfer of the 21 MW bunker power station assets of the CIP II Power
Corporation (CIPP), a wholly-owned subsidiary of TA Oil, to Bacnotan, La Union will maximize its
operating capacity as a merchant plant and at the same time provide reliable embedded-power to
serve better the contract with Holcim.
TA Oil continued its active participation in the WESM, ramping up its access to generation
capacity, to better manage trading risks and enlarge its customer base. In 2011, TA Oil entered
into an energy purchase agreement covering the SEM Calaca Plant in Batangas. On the demand
side, in addition to the long term contract with Holcim, TA Oil also signed contracts with electric
cooperatives in Batangas, Sorsogon, and Quezon for the supply of power to their customers.
In July 2011, TA Oil joined forces with Ayala Corporation’s energy arm, AC Energy Holdings
Corporation, to form South Luzon Thermal Energy Corporation (SLTEC), the vehicle undertaking
the construction and operation of a modern 135 MW coal-fired power plant employing the
environment-friendly Atmospheric Circulating Fluidized Bed boiler technology. The Project will be
implemented on a 14-hectare parcel of land inside Phoenix Petro Terminal and Industrial Park in
Calaca, Batangas. The project officially commenced in December 2011 and the plant is expected
to start commercial operations by the third quarter of 2014.
Steel Products
Union Galvasteel Corporation (UGC) is the market leader in the manufacture of pre-painted
galvanized roofing and other steel products, such as steel decking, frames and insulated panels
used for cold storage and other facilities. The company has the largest and most diversified
distribution network in the industry, with roll-forming plants and warehouses in key locations
throughout the country.
2011 proved to be more challenging than expected as delays in the implementation of the
Government’s Public Private Partnership (PPP) programs and adverse climate conditions
dampened demand and resulted in some delays of construction activity. As demand for
construction materials improved slightly, there was also increased competition due to the
continuous importation of steel products under the liberalized tariff regime.
Inspite of these market conditions, UGC maintained its competitive advantage and leadership in
the prepainted roofing industry due to its strategic distribution network. Customers continued to
choose UGC products and services due to the company’s commitment to quality, availability, and
timely delivery.
Amidst the challenges, sales revenues grew modestly by 4% mainly due to the growing
acceptance of the Company’s polyurethane insulated roofing materials. The Company also saw
strong demand from the agro-industrial market for its insulated panels for cold storage facilities. In
2011, the Company adopted an aggressive strategy to service the requirement for heavy gauges
and steel frame building systems for the commercial and industrial sector. This broadened the
company’s product offering and, together with the ISO Certified Quality Management System,
reinforced UGC’s Customer and Technical Service Program.
UGC’s Color Coating Line (CCL) operated at optimum productivity and efficiency levels. The
Company also pursued skills development and training for its workforce to keep up with changes
in process technology, products, and demands of its consumers.
Net income for 2011 of P107.9 million was 46% lower than the P202 million income in 2010
excluding extraordinary income. UGC’s financial condition at year end 2011 remained healthy,
18
with total assets of P1.9 billion, total liabilities of P1.0 billion, and stockholders’ equity of P924.7
million.
Housing
Phinma Property Holdings Corporation (Phinma Properties), a 35% owned affiliate of the
Company, is a leading developer of affordable medium- and high-rise condominium units in Metro
Manila.
The year 2011 was a year of challenge for Phinma Properties. The tightening of policies and
procedures by the Home Development Mutual Fund (HDMF) on the heels of the Globe Asiatique
controversy resulted in conservative loan value appraisals and extended conversion cycles from
loan application to approval. The Fukushima earthquake in March 2011 and subsequent reviews
of building codes and metrics for structural integrity contributed further procedural delays, despite
the fact that all of Phinma Properties’ designs, which adhered to Zone 4 earthquake codes
exceeding compliance requirements, were approved without retrofit.
Despite these challenges, Phinma Properties launched one project in May of 2011. ASiA
Enclaves Alabang marked the entry of Phinma Properties into the upper mid-affordable market,
and a re-entry into the south after the success of Fountain Breeze in Sucat Road. Although the
project experienced a slow start due partly to the conservative stance of the HDMF, sales have
since picked up and are now on track.
Nevertheless, Phinma Properties saw the delays as an opportunity to venture into an alternative
revenue stream. Leveraging on its engineering efficiency, the company entered into urban
renewal programs to unlock previously inaccessible land values. In the last quarter of 2011, the
company entered into a development agreement with the Quezon City local government for an
urban relocation project, Bistekville II, involving the delivery of close to 1,000 low-cost housing
units, the first of its kind in Metro Manila. There is a growing opportunity for the company to
duplicate this model for similar projects with other government institutions.
In 2011, Phinma Properties posted operating income of P70.9 million, lower than the P134 million
net income posted in 2010. During the year, Phinma Properties raised P1.0 billion via the
issuance of corporate notes through partnerships with several financial institutions. This
substantially increased total assets to P2.6 billion by end 2011 from P2.0 billion in 2010. The new
funds are earmarked for land and technology acquisitions to support the company’s development
plans.
Moving forward, Phinma Properties is gearing up for expansion into high-growth areas of the
National Capital Region and into areas south of the Metro, as well as other areas of the country.
With funds in place and a more aggressive stance on property acquisition, PPHC is developing its
pipeline for the coming years.
Business Process Outsourcing
One Animate Limited (One Animate) is an 80% owned subsidiary of Phinma Corporation and is
the parent company of Toon City Animation, Inc., a domestic BPO company specializing in
animation services for film studios.
In 2011, One Animate booked revenues amounting to US$3.3 million, up from revenues of US$1.1
million in 2010. Projects for 2011 included Geronimo Stilton and Henry & Me, augmenting projects
carried over from 2010 such as Looney Tunes and Voltron Force. One Animate was posed with
several challenges in 2011. The slowdown in the world economy dampened demand from
19
international clients and delayed production of existing contracts. One Animate also incurred
additional production costs as it moved into more complex Computer Generated Imagery (CGI)
work. As a result, One Animate posted a net loss of P97.1 million in 2011. In addition to this loss,
your Company took a conservative stance and opted to book a non-cash provision for impairment
of goodwill in the amount of P166.4 million.
In 2011, reaffirming the Company’s ongoing mission of providing high value-added services that
are globally competitive, Phinma Corporation acquired Fuld & Company (Fuld) in June and
Business Backoffice Inc. (BBI).
Fuld is a global consulting firm based in Cambridge, Massachusetts that pioneered the field of
using competitive intelligence to improve strategy and operations. Since 1979, Fuld has served
more than 300 of the largest companies worldwide providing customized research and analysis on
markets, competitors, suppliers, and customers. The company enables clients to make more
informed judgments related to mergers and acquisitions, new product introductions, market entry,
tactical sales plans, distribution channels, cost reduction programs, restructuring, supply chain
management, employee recruitment and retention, and a variety of other critical business
decisions. Fuld’s well-known strategic gaming workshops help clients improve their market
positions by evaluating the implications of strategic decisions and anticipate market and
competitive responses.
BBI is a Philippine-based firm that provides business intelligence research services for consulting
firms and corporations worldwide. Established in 2002, BBI has since worked on over 400
research projects across multiple industries and markets worldwide, providing phone-based
intelligence collection and analysis on critical business issues for top management. Originally
operating under the Global Business Research Support brand, BBI was rebranded as Fuld
Philippines following the company’s integration under Fuld & Company in January 2012.
The combined US and Philippine operations will allow Fuld & Company to truly serve a global
client base with flexible and a broad array of service offerings, including ongoing competitive
monitoring. An important element of this growth strategy is the building of a strong Philippine
backoffice, which is expected to employ hundreds of Filipinos in the years ahead.
Hotels
In 2009, Phinma Corporation invested P66.2 million in preferred shares of Coral Way City Hotel
Corporation (Coral Way), a subsidiary of Microtel Development Corporation. These preferred
shares are convertible to common shares and bear cumulative dividends at a rate of 10%.
Microtel is an international chain of hotels under Wyndham Hotel Group with more than 300
properties worldwide. In the Philippines, Microtel has eleven (11) properties in key regional hubs
and resort locations such as Baguio, Batangas, Boracay, Cabanatuan, Cavite, Davao, Mall of
Asia, Puerto Princesa and Tarlac and will soon open properties in Libis, Quezon City and General
Santos City. Microtel pioneered the no-frills hotel concept in the Philippines that target the midmarket. Its approach is back-to-basics: offer consistently clean, comfortable and secure
accommodations at value rates.
Coral Way owns the 150-room Microtel Mall of Asia which commenced full commercial operations
in September 2010. Strategically situated near SMX Convention Center and SM Mall of Asia,
Microtel Mall of Asia caters to local and international travelers, on business or leisure trips. In
2011, about 68% of the hotel guests were leisure travelers while the rest were corporate bookings
and attendees of conventions, meetings and events in the area.
On its first full year of operations, Microtel Mall of Asia achieved an occupancy rate of 77% and
revenues of P155.2 million in 2011. Gross operating profit was P67.2 million and net income was
P11.2 million.
20
Consolidated Statements of Financial Position
The Company’s financial position remained strong with total assets of P 9.7 billion compared to
total liabilities of P 2.5 billion. Of total assets of P 9.7 billion, P 1.7 billion or 17% are in cash and
near-cash investments such as short-term placements, bonds and investments in UITFs.
The company has maintained healthy financial ratios, with current ratio of 2.63:1.00 and debt-toequity ratio of 35:1.00.
Key Performance Indicators (KPI)
The top five (5) KPI’s used to measure the financial performance of PHN and its subsidiaries
as of December 31, 2011 compared to the same period last year are shown in the following
table :
Financial KPI
Definition
2011
2010
Profitability
Return
(ROE)
on
Equity
Gross Profit Margin
Net income (loss)
Ave. total equity attributable
to PHN equity holders
Gross profit
Net sales
1.24%
28.97%
7.51%
30.80%
Efficiency
Cash Flow Margin
Cashflow from operating Activities
Net sales
8.60%
(2.87%)
2.63 : 1.00
3.41 : 1.00
0.35 : 1.00
0.33 : 1.00
Liquidity
Current Ratio
Debt-to Equity Ratio
Current assets
Current liabilities
Total liabilities
Total equity
Profitability
The return on equity for the calendar year 2011 of 1.24% is lower than the 7.51% return for the
same period last year. The decrease was due to the decline in net income attributable to equity
holders of the parent from P476 million in 2010 to P81 million in 2011.
Gross profit margin slightly decreased from 30.80% in CY 2010 to 28.97% in CY 2011. This was
mainly due to the decrease in gross profits of Union Galvasteel Corporation, University of Iloilo
and One Animate Limited.
Efficiency
Net cash inflow from operations was P340 million in 2011 compared to net cash outflow of P108
million in CY 2010 as shown in the consolidated statement of cash flows. The net cash inflow in
2011 is largely due to the collection of contracts receivable form the sale of Asian Plaza building in
the amount of P400 million.
21
Liquidity
Current ratio decreased to 2.63 :1.00 in CY 2011 from 3.41:1.00 in CY 2010 mainly due to a
decrease in cash and financial assets. The Company participated in the stock rights offering of
Trans-Asia Oil in the amount of P395 million and made an initial payment of P242 million for its
acquisition of an 85% ownership in Fuld. The Company likewise invested P8.5 million in Fuld &
Company (Philippines), Inc. (formerly Business Back Office, Inc.) and paid cash dividends
amounting to P104 million during the year.
The debt-equity ratio of PHN and its subsidiaries as of December 31, 2011 was slightly higher at
0.35 compared to 0.33 as of December 31, 2010 due to an increase in notes payable and traderelated accounts payable.
Other Financial Ratios are as follows :
Financial Ratio
Asset to Equity
Interest rate coverage
ratio
Definition
Total Assets
Total Equity
EBITDA
Interest expense
CY 2011
CY 2010
1.35
1.33
5.50
10.22
Phinma Corporation is not aware of the followng :
(1)
Any trends or any demands, commitments, events or uncertainties that will result
in or likely to decrease its liquidity in any material way. PHN does not anticipate
having within the next twelve (12) months any cash flow or liquidity problems nor
does it anticipate any default or breach of any its existing notes, loans, other
indebtedness or financing arrangements requiring it to make payments ;
(2)
Any events that will trigger direct or contingent material financial obligations to the
company, including any default or acceleration of its existing obligations ;
(3)
Any material off-balance sheet transactions , arrangements, obligations, (direct or
contingent) and other relationships the Company with unconsolidated entities or
other persons created during the year ;
(4)
Any material commitments for capital expenditures ;
(5)
Any known trends, events or uncertainties that have had or that are reasonably
expected to have a material favorable or unfavorable impact on net sales or
revenues or income from continuing operations; and
(6)
Any significant elements of income or loss that did not arise from the registrant’s
continuing operations.
Material Changes in Statement of Financial Position Accounts
Cash and cash equivalents
The decrease in cash and cash equivalents are shown in the cash flow statement.
22
Short-term Investments
The decrease of P47 million in the account resulted from conversion of short-term investments into
placements with maturities of less than 90 days. These placements are classified under the cash
and cash equivalent account.
Investments held for Trading
Investments held for trading were used to fund the initial payment of P242 million for the acquisition
of Fuld as well as participation in the stock rights offering of TA Oil, hence the decrease in the
account.
Trade and other receivables - net
The decrease of P213 million is mainly due to the collection of the contract receivable of API in the
amount of P 400 million. However, this was offset by the increase in trade receivables of Fuld, a
company which was acquired in June 2011 and consolidated by Phinma Corporation in 2011.
Inventories
The increase in inventories in the amount of P147 million comes largely from the increase in UGC’s
finished goods inventories as of December 31, 2011.
Input tax
The decrease in the account of P33 million represents a decrease in input tax of UGC in the
amount of P36 million.
Derivative assets
The account represents derivative assets of PHN and OAL in the amount of P 3 million and P1
million arising from its non-deliverable forward contracts.
Other current assets
The increase of P56 million is mainly due to the first-time consolidation of Fuld & Co., and Fuld &
Company (Philippines) with current assets in the amount of P40 million and P2 million
respectively. UI and COC also registered an increase in other current assets in the amount of P6
million and P5 million respectively.
Investment in associates – at equity
The significant increase in the amount of P470 million represents the participation of the
company in the stock rights offering of TA Oil in the amount of P 350 million and equitized
earnings, net of dividends.
Available-for-sale investments
The P258 million decrease in the account represents redemption of preferred shares of AB
Capital and Investment Corporation and Ayala Corporation in the amount of P250 million and P8
million respectively.
23
Intangibles
The P131 million increase in the account represents provisional goodwill arising from the
acquisition of Fuld & Company, Inc. in June 2011 and Fuld & Company (Philippines), Inc.
(formerly Business Back Office, Inc.) in July 2011.
Deferred tax assets
The P 5 million increase in the account represents the deferred tax asset on trademarks booked
in CY 2011 which was however reduced by the deferred tax assets booked by API in 2010 when it
availed of the Optional Standard Deduction on its taxable income in 2011.
Installment contract receivable-net of current portion
The P21 million decrease in this account is due to full collection of receivable on the sale of an
investment property of COC.
Other noncurrent assets
The increase in the amount of P6 million is attributable to the first-time consolidation of
other noncurrent assets.
Fuld’s
LIABILITIES
Notes payable
The increase of P206 million arises from the additional short-term borrowings of UGC.
Trust receipts payable
The decrease of P18 million is attributable to the decrease in UGC’s trust receipts payable from
P122 million as of December 31, 2010 to P104 million as of December 31, 2011.
Unearned revenues
The unearned revenues of AU, COC, UI and Upang increased from P195 million as of December
31, 2010 to P205 million as of December 31, 2011. Tuition fees collected at the beginning of the
semester in June are booked under Unearned Revenues; the account is eventually reduced as
the income is earned over the semester.
Derivative liability
The P2.3 million in the account balance represents unrealized losses on non-deliverable forward
contracts of PHN.
Income and other taxes payable
The P39 million decrease in the account is due to the payment of income taxes by API.
Due to related parties
The decrease in the account represents payment of management bonus by UGC during the year.
24
Current portion of long-term payable and long-term debt
The amount of P22 million included under the current portion of long-term payable and P78
million long-term payable represents the balance on the acquisition of Fuld, which is payable in
equal installments over four years beginning 2012.
Long-term Debt – net of current portion
The decrease in the long-term debt in the amount of P104 million is attributable to partial payment
of loans of UGC, UPANG and AU.
Deferred tax liabilities
The decrease in the account of P75 million is attributable to the difference in the gain on sale of
the API property recognized under the accounting standards and the gain recognized under tax
rules.
Pension and other post-employment benefits
The P18 million increase in the account represents accrual for post-employment benefits of PHN,
AU, COC, UPANG, UI and OAL.
Other noncurrent liabilities
The decrease in the non-current liabilities in the amount of P8 million resulted from the
reclassification to current liabilities of API’s lease deposits amounting to P 10.4 million.
EQUITY
Unrealized gain (loss) on change in fair value of available for sale investments
The decrease of P0.37 million is due to the loss recognized upon the redemption of Ayala
Corporation preferred shares.
Cumulative translation adjustments
The increase in the account of P.8 million represents cumulative translation adjustments arising
from the consolidation of OAL.
Non-controlling interest
The P101 million decrease in the non-controlling interest is due to the declaration of significant
cash dividends by API and UGC. The companies declared cash dividends in the amount of
P 159 million and P250 million respectively during the first semester of 2011.
Material Changes in Income Statement Accounts
Revenues
The increase in revenue account in the amount of P180 million represents revenue of Fuld &
Company, Inc. and Fuld & Company (Philippines), Inc. in the amount of P248 million and P10
million respectively which were consolidated for the first time in 2011.
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Cost of sales
The increase in cost of sales of P197 million represents increase in UGC’s cost of raw materials as
well as the first time consolidation of Fuld & Company, Inc. and Fuld & Company (Philippines), Inc.
Operating expenses
The increase in the operating expenses of P180 million represents operating expenses of Fuld, &
Company and Fuld & Company (Philippines) in the amount of P172 million and P6 million
respectively which were consolidated for the first time during the second quarter of 2011.
Equity in net earnings of associates
The increase in the account of P78 million is largely due to the surge in equitized earnings from
Trans-Asia Oil and Energy Development Corporation (TA Oil) amounting to P115 million as of
December 31, 2011 compared to P4 million in CY 2010.
Net gain (loss) on derivatives
This account reflects a net gain on derivatives amounting to P7 million in CY 2011 compared to
P50 million in CY 2010.
The Company has outstanding non-deliverable contracts with an aggregate notional amount of
US$6.4 million transacted at an average rate of P43.486 to $1.00. As of December 31, 2011, the
average forward rate was P43.845 to $1.00, resulting in an unrealized loss of P2.3 million. This
was offset by the net derivative gain on settled contracts amounting to P9.4 million.
Foreign exchange gain (loss)
Foreign exchange loss as of December 31, 2011 was P6.3 million compared to P32 million in
CY 2010. The peso strengthened in CY 2010 from an exchange rate of P46.20 in CY 2009 to
P43.84 in 2010 and 2011.
Provision for impairment loss on investments in a subsidiary
In view of losses sustained by OAL, management took a conservative stance and elected to book
an impairment loss on its investments in OAL in the amount of P166.4 million.
Gain from sale of investment property
This represents the gain on sale of Asian Plaza property to Shang Property Developers, Inc. in
December 2010.
Income from reversal of unrecoverable input vat
This represents a reversal of provision on input tax in the amount of P52 million which UGC
expects to fully utilize.
Other income (charges)
The increase in other income of P35 million is attributable to the payment of various receivables.
which were written-off in previous years.
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Provision for income tax
The decrease in provision for income tax from P167 million to P46 million is due to the decline in
income of UGC from P249 million last year to P108 million this year.
Comprehensive Income
Comprehensive income decreased from P654 million in December 2010 to P58 million in
December 2011 largely due to the decrease in net income from P640 million in 2010 to P58
million this year.
For other comprehensive income / (charges), kindly refer to the comments on equity accounts.
CALENDAR YEAR 2010
The year 2010 marked our Company's first year of operations under our new name, Phinma
Corporation, and was a period of robust growth for the company. Consolidated net income in
2010 amounted to P 640 million, a 27 % increase over income in 2009 of P 504.5 million. Net
income attributable to equity holders of the parent amounted to P 475.8 million, compared to P
447.4 million in 2009.
Life Can Be Better
Our mission, which has determined our business path for the past years and for the years ahead,
is to make life better for our customers and suppliers, our employees, and the various other
publics that we serve, while providing attractive returns for our shareholders. The strong financial
results of the Company's operations reinforces our conviction that our twin objectives are not
mutually exclusive, and that we can provide better returns for our shareholders, while making life
better for our fellow Filipinos by providing them with attractive and decent homes in wholesome
communities, reliable power and renewable energy sources, and high-quality education at
affordable cost.
2010 Highlights
Union Galvasteel Corporation (UGC), the Company’s steel-roofing subsidiary, again surpassed its
own record performance of the past two years. UGC posted net income of P 249.4 million
compared to P 151.9 million in 2009. These figures represent an impressive 28% return on equity,
and is the result of its exceptional supply chain management, aided by the company’s top-class
customer service and the expansion of its distribution facilities.
During the year, aggregate income contribution from our four schools under the Phinma Education
Network (PEN), amounted to P 123.4 million, compared to P 79 million in 2009. The year's
results reflects a 5% increase in enrollment over last year and the consolidation of full-year results
of operations of University of Pangasinan and University of Iloilo, both of which were consolidated
by PEN in February and March 2009, respectively.
Income contribution from our animation business, however, declined during the year. In 2010, the
Company picked up a P 62.2 million net loss from One Animate Limited (OAL), due to delays in
the implementation of various contracts, most of which have been postponed to 2011. As
evidence of the company’s brighter prospects in 2011 and future years, OAL has built up its
workforce from a low level of less than 300 in the first half of 2010 to 800 to-date, and is gearing
up to further increase it to 1,000 in the coming months.
During the year, equity in net earnings of affiliates dropped from P 117.7 million in 2009 to P 59.4
million.
Equitized earnings from Trans Asia Oil and Energy Development Corporation (TA Oil)
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decreased from P 76.5 million to P 3.9 million in 2010 due to the volatile Wholesale Electricity
Supply Market (WESM) and fuel prices. Nevertheless, TA Oil faces the future with renewed
confidence that it has reduced its vulnerability to the volatilities of WESM by entering into various
contracts to increase its capacity and hedge against price fluctuations, thus enabling it to take
fuller advantage of the opportunities in the WESM market in the future.
Phinma Property Holdings Corporation (PPHC) posted stellar performance in 2010, as it achieved
net income of P 230.5 million, the first time the company has exceeded the P 200 million mark.
During the year, however, it was determined that legal procedures required to address a delayed
extension of the company’s corporate life may result in some liabilities for PPHC, all of which are
now being addressed. Nevertheless, the company has taken a conservative stance and has
provided for the maximum cost of resolving the pending issues.
As a result, equity in net earnings of PPHC remained flat at P 47.5 million in 2010. On the other
hand, equity in net earnings of AB Capital and Investment Corporation, decreased from P 17.4
million in 2009 to P 5.3 million in 2010.
Despite the above, we are pleased to note that our Company unlocked significant asset values
that offset the earnings decline in some of the business sectors. During the year, Asian Plaza, Inc.
(API), a 57% owned subsidiary of Phinma Corporation, signed an agreement to conclude the sale
of its property at a handsome premium over market rates. The transaction yielded a gain on sale
of P 404 million for API.
Phinma Corporation continued to effectively manage its foreign exchange exposure through nondeliverable forward contracts (NDF). The company booked a gain on the NDF contracts
amounting to P 50.1 million, which has more than offset a foreign exchange loss of P 32.4 million
due to the strengthening of the Philippine peso, resulting in a net foreign exchange gain of P 17.7
million.
In 2010, the Securities and Exchange Commission (SEC) approved the merger of 100% owned
UGC and 90% owned Atlas Holdings Corporation (AHC), with UGC as the surviving entity. The
merger will make possible the more productive use of the financial assets of AHC and will reduce
the financing costs of UGC. The integration of the administration of the two corporations will
likewise result in economies of scale and improved efficiency of operations.
Phinma Corporation ended the year with a strong balance sheet, with total assets of P 9.7 billion
and a current ratio and debt-to-equity ratio at strong levels of 3.37 and 0.33 respectively.
In view of its financial performance in 2010, your Company declared a cash dividend of P 0.40 per
share, which will be paid out on April 26, 2011.
EDUCATION
Phinma Corporation, through the Phinma Education Network (PEN), seeks to provide a better
future for thousands of students by offering quality education at affordable rates. PEN comprises
four schools namely Araullo University (AU), Cagayan de Oro College (COC), University of
Pangasinan (UPang) and University of Iloilo (UI), providing basic, secondary and tertiary
education to approximately 25,000 students.
PEN has strived to make its schools among the most affordable private institutions in their
respective areas, with tuition fees ranging from P 14,000 to P 17,000 per semester. To keep tuition
fees low, the schools continue to manage costs and streamline operations. As a result, the ratio of
non-teaching employees to faculty today averages at an efficient level of about 1:3. To provide
education to even more students, the PEN schools introduced the PHINMA Scholarship program,
which offers fifty percent scholarship on tuition and fees to those in financial need. Today, there
are 1,963 students who are enrolled under this program.
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Despite competition from state and local government universities and colleges, overall network
enrollment grew by five percent to 25,719 students during the year. For the year 2010, Phinma
Corporation equitized earnings from PEN amounting to P 123.4 million, compared to P 79 million
in 2009. These results reflect the increase in enrollment and the consolidation of full-year results
of operations of University of Pangasinan and University of Iloilo, both of which were consolidated
by Phinma Corporation in February and March 2009, respectively.
PEN has instituted various changes in all of its schools to further improve academic quality. It has
institutionalized pre-and post-graduation review programs and has set internal targets for board
examinations. It has likewise expanded the number of PEN-wide final exams in order to
standardize learning outcomes and track teaching performance. PEN has also begun to reintroduce the College Scholastic Aptitude Test in the higher years to track the development of
general competencies of our students.
The schools have shown significant improvements in many areas. AU and COC continue to be
the leading Criminology programs in their areas. COC was the top-performing school in the nation
in terms of first takers for schools with more than 100 examinees, while AU produced a third placer
in the August 2010 board examination. In accountancy, 100% of AU’s 2010 graduates passed the
September 2010 board. COC experienced similar results in Mechanical Engineering, with 100%
of its first-time takers passing the examination.
In AU’s nursing program, although the passing rate has dropped from last year, it remained the
best performing among the private schools in Cabanatuan. Also, in other board programs, both
AU’s and COC’s first takers performed above the national passing average. Upang, on the other
hand, remained to be the best performing nursing program for 100 or more takers in Region I.
In 2010, UI established a partnership with Philippine Transmarine Carriers, Inc, a local maritime
company, to improve the employment opportunities of the graduates of its Marine Engineering
Program. UI also partnered with the Ateneo de Manila Professional Schools. The University will
now offer Ateneo’s MBA program in Iloilo and a joint Law – Master in Public Management Degree
with the Ateneo School of Government.
With the financial support of the Lopez Group Foundation, UI has likewise set up the Center for
Enterprise Development which seeks to assist, through training programs and consulting services,
the province’s micro and small enterprises. More recently CED signed a partnership agreement
with the Iloilo Central Market Vendors’ Association (ICMVA) to provide ICMVA training while the
Association will open their doors to UI’s students for research and on-the-job training
opportunities.
While we are proud to report that significant gains have been achieved in the PHINMA Education
Network, PEN continues to work toward its goal of transforming the PEN schools into truly
national class institutions, while remaining accessible to its students.
STEEL PRODUCTS
Union Galvasteel Corporation (UGC) is the market leader in the manufacture of pre-painted
galvanized roofing and other steel products, such as steel decking, frames and insulated panels
used for cold storage and other facilities. The company has the largest and most diversified
distribution network in the industry, with roll-forming plants and warehouses in key locations
throughout the country.
In 2010, the Philippine economy registered robust growth of 7%, and the construction industry
performed creditably as well. However, competition in the roofing market was keen, with the
29
onslaught of imported steel products due to the liberalized tariff regime. Against this business
backdrop, UGC nevertheless registered impressive gains in its operations and in its financial
performance.
UGC increased its sales volume by 14% during the year, boosted by sales of high value steel
products with innovative profiles. This growth was the result of the expansion of the company’s
distribution facilities in more strategic locations around the country. Consequently, UGC ended
the year with net income of P 249 million, exceeding its previous record income of P 154 million
in 2009.
These gains were matched by the operational efficiencies attained in its manufacturing facilities.
UGC’s Galvanizing and Color Coating lines located in Calamba, Laguna have been recognized by
the Laguna Lake Development Authority (LLDA) with the Lakan ng Lawa award for maintaining
effluents discharge to the Laguna Lake better than the LLDA standards and requirements. This is
the second year UGC has received this award. Also, UGC’s Davao roll-forming and polyurethane
plants have been certified under ISO 9001-2008 for its Quality Management System, the first in
Mindanao.
In 2011, competition in the roofing market will remain tough, brought about by importations of steel
products under liberalized tariffs. These are expected to put further pressure on revenues and
margins. The surging prices of oil products will likewise adversely impact UGC’s operating costs.
In response to these challenges, UGC will focus on strengthening its business model by exploring
new products, new markets and new raw material sources, implementing a stronger customer
service program and enhancing its organizational efficiencies. The company will utilize its financial
resources with prudence to enable it to withstand any economic shock in the coming months.
HOUSING
Phinma Property Holdings Corporation (Phinma Properties), a 35% owned affiliate of the
Company, is the leading developer of affordable medium- and high-rise condominium units in
Metro Manila.
The year 2010 was another stellar year for Phinma Properties, as it achieved a net income of
P 230.5-M. The year marked the first time the company breached the P 200-Million level and this
augers well for the company’s expansion plans for the next three years.
The company’s financial performance for 2010 was driven not only by income from its three
ongoing projects namely, Fountain Breeze, Sofia Bellevue and Flora Vista, but also by the sale of
part of its Cagayan de Oro property to Robinson’s Land Corporation, and by various commissions
earned.
Phinma Properties’ strong balance sheet will continue to grow and support its real estate
developments going forward. As of December 31, 2010, total assets of Phinma Properties
surpassed P 2 billion while total revenues reached P 1.8 billion during the year.
On the whole, Phinma Properties considers itself to be well positioned in the very competitive real
estate environment and is confident of growing its business, particularly due to its positioning as
being the best-value-for-money home option, with fast delivery of projects and its emphasis on
community living.
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ENERGY
Phinma Corporation, through its affiliates Trans-Asia Oil and Energy Development Corporation
(TA Oil) and Trans-Asia Power Generation Corporation (TA Power), continued its commitment to
provide sustainable and reliable supply of power to its customers.
During the year, TA Power continued to supply reliable quality power to Holcim Philippines, Inc.
(Holcim). Out of the total energy produced of 185 GWh, 65% or 121 GWh were delivered to
Holcim while the remaining 35% were exported to the Philippine Wholesale Electricity Spot Market
(WESM). In 2010, Trans-Asia Power registered a net income of P 45 Million.
TA Oil’s 3.4MW bunker-fired power plant in Guimaras continued to operate as a peaking plant and
provided reliable peaking power to the island. In 2010, the plant generated 4.3GWH of electricity
resulting in total revenues of P55.5Million and net income from operations of P9.6Million.
CIP II Power Corporation (CIPP), a wholly owned subsidiary of TA Oil, will move and operate its
21 MW bunker C-fired power plant in Bacnotan, La Union. Transfer begun in February 2011 and
the power plant is expected to be on stream by January 2012. It will operate as a merchant plant
and will support the electricity supply business of its parent company.
TA Oil also continued its active participation in the WESM by trading the electricity requirements of
its customers and the excess generation of Trans-Asia Power. In 2010, the total energy bought for
its customer, Holcim, reached 191 GWh. To ensure the sustainability and reliability of the supply
business, TA Oil has entered into a partnership with One Subic Power Generation Corporation to
manage and administer the 116 MW diesel power plant and has renewed the contract to purchase
the generated energy of NIA-Baligatan HEP.
TA Oil has chosen Calaca, Batangas as the location for its new 135MW coal-fired power plant,
which will employ the environment-friendly Atmospheric Circulating Fluidized Bed boiler
technology. An option to acquire about 13.1 hectares of land inside Phoenix Petro Terminal and
Industrial Park had been exercised in November 2010.
The project has been granted an Environmental Compliance Certificate by the Department of
Environment and Natural Resources in April 2010 and has been endorsed by the Department of
Energy for registration with the Board of Investments in October 2010. The power plant is
envisioned to begin commercial operation in 2014 and will be the first base-load plant of TA Oil,
which will further support its electricity supply business.
In February 2010, Trans-Asia Renewable Energy Corporation (TAREC), a wholly owned
subsidiary of TA Oil focusing on developing wind resource development, obtained an additional 10
service contracts from the Department of Energy (DOE), expanding TAREC’s wind farm portfolio
to 20 sites capable of supporting an aggregate energy production of 350 MW.
TAREC installed three more wind masts, a second one in San Lorenzo, Guimaras and
Ballesteros, Cagayan as well as one in Aparri, Cagayan. This brings to eight the total number of
wind measuring devises that were installed by TAREC in various sites. Continuous readings from
these sites have showed very encouraging results. To facilitate sourcing of the much needed
funds to develop the San Lorenzo Wind Project, TAREC continues to discuss with potential
partners and lenders.
During the year, TA Oil was able to generate US$1.325 million from the sale to Peak Royalties
Limited (BVI) of its royalty interest in the Cadlao Production Area, Northwest Palawan under SC
No. 6. TA Oil was also able to realize higher returns from financial assets and recoup certain
economic values from its non-operating assets in Laguna.
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We are pleased to report that, despite difficult challenges in 2010, TA Oil ended the year with a
consolidated net income of P14.7 million and a strong balance sheet. As of December 31, 2010,
total consolidated assets stood at P3.4 billion, total liabilities at P412 million and total equity at P3
billion.
ANIMATION
In 2008, Phinma Corporation invested US $6.734 million for an 80% interest in One Animate
Limited, a company that owns 95% of Toon City Animation, Inc., a domestic BPO company which
specializes in providing 2-D animation services for major film studios abroad. This investment is
part of Phinma Corporation’s mission of providing high value-services that are globally
competitive.
During the year, One Animate booked revenues amounting to US$1.3 million on various projects,
including Warner Brothers’ Looney Tunes, Kickstart/World Events Production’s Voltron Force, and
Titeuf from Antefilms. However, due to delays in the implementation of these and other contracts,
OAL posted a net loss of P77 million.
Many of OAL’s delayed contracts, however, have been postponed to 2011. Its ongoing projects
include Geronimo Stilton, Looney Tunes, Henry and Me, and Voltron. As evidence of the
company’s brighter prospects in 2011, OAL has built up its its workforce from 300 employees in
the first half of 2010 to 800 today, and is gearing up to further increase it to 1,000 in the coming
months.
Despite the operating results in 2010, we continue to believe in the viability of our animation
business. Major international studios see a continuing need for expertise in 2-D, as shown by the
revival of Disney’s 2-D “Princess Stories”, seasons 5 and 6 of Universal Studio’s Curious George,
and Atlantyca’s Geronimo Stilton. Disney, in particular, has launched Disney Junior Channel that
will feature shows in 2-D to cater to its pre-school audience.
At the same time, One Animate is enhancing its capabilities in Computer Generated Imagery
(CGI) to take it to the next level of animation services, by taking on officers, artists and supervisors
with known expertise in CGI, conducting extensive training programs, and investing in new
software and equipment to upgrade its CGI capabilities.
Phinma Corporation supports the animation services sector which harnesses and showcases
Filipino talents and skills. One Animate offers its employees work opportunities locally, in the
process keeping world-class talent home.
HOTELS
Phinma Corporation also made it its mission to provide affordable quality hotel services in the
Philippines. In 2009, Phinma Corporation invested P66.2 million in preferred shares of Coral Way
City Hotel Corporation (Coral Way), a subsidiary of Microtel Development Corporation (Microtel).
These preferred shares are convertible to common shares and bear cumulative dividends at a rate
of 10%.
Microtel is part of the international Microtel group with more than 300 properties worldwide. In the
Philippines, Microtels inns and resorts are located in key commercial and industrial areas, as well
as in choice resort locations. Its portfolio of hotels includes properties in Baguio, Batangas,
Boracay, Cabanatuan, Cavite, Davao, Palawan, Tarlac, and Manila.
Coral Way owns and operates the 150-room Microtel Mall of Asia (MOA) which was soft launched
in May 2010 and which commenced full commercial operations in September 2010. Located
close to SMX Convention Center and the Mall of Asia, the hotel caters to both local and
international business travelers and value-minded tourists as well.
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On its first months of operations, Microtel MOA achieved an occupancy rate of over 50% and
revenues of P 57.1 million. Microtel MOA posted a net loss of P 12.9 million before financing
charges due to accrual of operating expenses for the full year; however, gross operating profit
amounted to P 11.5 million. In 2011, Microtel MOA fully intends to strengthen its internet presence
and tap more corporate and convention accounts.
Although Microtel MOA still has some way to go in improving its profitability, we believe it is
extremely well-located and is a good business model. Consistent with all Microtel properties
world-wide, Microtel MOA is a no-frills hotel that meets the needs of the mid-market category of
the hotel industry. Our approach is back to basics: we make life better for guests by offering
consistently clean, comfortable, and safe accommodations at value rates.
Consolidated Statements of Financial Position
The Company’s financial position remained strong with total assets of P 9.7 billion compared to
total liabilities of P 2.4 billion. Of total assets of P 9.7 billion, P 2.1 billion or 22% are in cash and
near-cash investments such as short-term placements, bonds and investments in UITFs.
The company has maintained healthy financial ratios, with current ratio of 3.37 :1.00 and debt-toequity ratio of 33:1.00.
Key Performance Indicators (KPI)
The top five (5) KPI’s used to measure the financial performance of PHN and its subsidiaries
as of December 31, 2010 compared to the same period last year are shown in the following
table :
Financial KPI
Profitability
Return on Equity
(ROE)
Gross Profit Margin
Definition
2010
Net income (loss)
Ave. total equity attributable to
PHN equity holders
2009
7.51%
7.50%
30.80%
31.39%
(3.22%)
14.90%
Current assets
Current liabilities
3.37 : 1.00
2.43 : 1.00
Total liabilities
Total equity
0.33 : 1.00
0.33 : 1.00
Gross profit
Net sales
Efficiency
Cash Flow Margin
Liquidity
Current Ratio
Debt-to Equity Ratio
Cash flow from operating
Activities
Net sales
Profitability
Return on equity for the calendar year 2010 remained at 7.51%. Net income attributable to equity
holders of the parent increased modestly from P 447 million in 2009 to P 476 million in 2010.
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The gross profit margin slightly declined from 31.39% in CY 2009 to 30.80% in CY 2010. This was
mainly the result of the operating losses of One Animate Limited in 2010.
Efficiency
Net cash outflow from operations was P 121 million in 2009 compared to net cash inflow of P 555
million this year as shown in the consolidated statement of cash flows. The outflow was mainly
due to transfer from cash to investments held for trading, increase in inventories of Union
Galvasteel Corporation and payments of trade and other payables.
Liquidity
Current ratio improved to 3.37 :1.00 in CY 2010 from 2.43:1.00 last year mainly due to receipt of
payment from Phoenix Petroleum Philippines on long-term contract receivables arising from its
purchase of PHN’s shares in Bacnotan Industrial Park Corporation as well as the sale of the Asian
Plaza property in December 2010.
The debt-equity ratio of PHN and its subsidiaries as of December 31, 2010 remained at 0.33: 1.00
Material Changes in Balance Sheet Accounts
Cash and cash equivalents
The consolidated Statements of Cash Flows shows details of material changes in cash and cash
equivalents.
Short-term investments
The increase in the account represents transfer of placements from 30 days maturity period to
placements with maturity of three months up to one year.
Investments held for Trading
The increase in the account represents additional investments in bonds, mutual fund and UITF.
Trade and other receivables - net
As of December 31, 2010, Asian Plaza Inc. had receivables of P 461 million arising from the sale of
its property to Shang Property Developers, Inc.
Inventories
The increase in inventories comes mainly from the increase in UGC’s finished goods inventory
from P 502 million in December 2009 to P 732 million in December 2010.
Input tax
The increase in the account represents a reversal of provision on input tax in the amount of P 52
million which UGC expects to fully utilize.
Derivative assets
PHN had outstanding non-deliverable contracts with an aggregate notional amount of US$8.2
million transacted at an average rate of P 47.57 to $1.00. As of December 31, 2010, the average
forward rate was P 45.81 to US$1.00, resulting in an unrealized gain of P 3.1 million.
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Other current assets
The decrease in the account represents a decrease in the prepayments of UGC.
Investment properties
The decrease in the account represents the sale of Asian Plaza land and building in December
2010.
Installment contract receivable
The decrease in the account represents full payment received from Phoenix Petroleum
Philippines, Inc. on receivables arising from the sale of PHN’s shares in Bacnotan Industrial Park
Corporation.
Deferred tax assets
The increase in the account represents the tax benefit on the availment of OSD in CY 2011 of
Asian Plaza, Inc.
Other assets
The increase in the account represents increase in deferred charges of COC.
LIABILITIES
Notes payable
The increase in notes payable represents additional short-term borrowings of UGC.
Trade and other payables
The decrease in this account represents payment by UGC in the amount of P 126 million for the
redemption of UGC preferred shares held by Hi Precision Steel Center Inc.
Trust receipts payable
The decrease in the account is attributable to the decrease in UGC’s trust receipts payable from P
131 million in December 2009 to P 122 million in 2010.
Unearned revenues
Tuition fees received by the schools are first charged to unearned revenues and are then
recognized as revenues monthly throughout the semester. The increase in the account is due to
the increase in revenues of AU, COC, UI and UPANG during the period.
Income and other taxes payable
The increase in the account represents higher income tax payable of Asian Plaza, Inc. as a result of
a P 404 million gain on the sale of its property in December 2010.
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Due to related parties
The decrease in the account represents payment made by UPANG on advances from its
shareholders, Silverman Holdings, Inc. and JIH Prime Management and Development
Corporation.
Current portion of Long-term debt
The increase in the account represents reclassification of long-term debt of UPANG which will fall
due within the year.
Long-term debt
The increase in the account represents a loan obtained by UGC in June 2010 amounting to
P 400 million.
Deferred tax liabilities
The increase in the account from P 322.9 million to P 385.9 million represents the tax effect on the
unrealized gain of sale of building booked by Asian Plaza, Inc.
Pension and other post-employment benefits
The increase in the account represents accrual for post-employment benefits of PHN,UGC, COC
and UPang.
Other noncurrent liabilities
The increase in the account represents increase in provision for student refund of UPang
EQUITY
Share in equity component of convertible notes
In December 2010, the Securities and Exchange Commission (SEC) approved the conversion of
the above account to retained earnings.
Share in unrealized gains on financial assets of associates
The increase in the account represents mark to market gains on securities held by Trans Asia Oil
and Energy Development Corporation.
Unrealized gain (loss) on change in fair value of available for sale investments
The change is due to the improvement in prices of First Philippine Holdings preferred shares.
Cumulative translation adjustments
The increase in the account represents cumulative translation adjustments arising from the
consolidation of OAL.
Other reserves
This increase in the account represents the impact of the change in ownership interest of PHN in
UGC as a result of the merger between AHC and UGC.
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Retained earnings
The increase in the account represents increase in net income.
Material Changes in Income Statement Accounts
Revenues
The increase in revenues is attributable to an increase in revenues of Union Galvasteel
Corporation, University of Pangasinan, and University of Iloilo.
General and administrative expenses
The decrease in the account represents decrease in personnel costs of AU, COC, UPANG and UI
as well as a decrease in the amortization charges in OAL.
Selling expenses
The increase in the account represents increase in freight and handling costs of UGC from P 35
million to P 49 million as well as an increase in personnel costs.
Equity in net earnings of associates
The decrease in the account is largely due to equitized income from Trans-Asia Oil and Energy
Development Corporation from P 76 million in CY 2009 compared to P 4 million this year as a
result of substantial trading losses.
Equity in net earnings from Phinma Property Holdings
Corporation and AB Capital and Investment Corporation declined as well.
Net gain (loss) on derivatives
This account reflects a net gain on derivatives of PHN amounting to P 50 million in 2010 and
P 58.3 million in 2009.
Negative goodwill
Negative goodwill in 2009 arose from the acquisition of shared in UGC and represents the
difference between the P 36.3 million consideration paid for the 19.5% minority interest of HPSCI
in UGC and its carrying value in the amount of P 121 million in 2009.
Gain on sale of fixed assets
This represents the gain on sale of Asian Plaza property to Shang Property Developers, Inc. in
December 2010.
Income from reversal of unrecoverable input tax
This represents a reversal of provision on input tax in the amount of P 52 million which UGC
expects to fully utilize.
Foreign exchange gain (loss)
PHN and AHC booked foreign exchange losses during the year as a result of the strengthening of
the peso from P 46.20 as of December 31, 2009 to P 43.84 as of year-end 2010.
37
Other income (charges)
The increase in the account is mainly due to fees received by PHN from United Pulp and Paper
Company, Inc.
Provision for income tax
The increase in provision for income tax was brought about by the significant income generated by
UGC from P 152 million in 2009 to P 249 million this year as well as the gain on sale of fixed
assets booked by Asian Plaza, Inc. in the amount of P 404 million.
Comprehensive Income
Comprehensive income increased from P 511 million in CY 2009 to P 655 million this year due to
the increase in net income from P 504 million in 2009 to P 640 million in 2010.
For other comprehensive income and charges, please refer to the comments on equity accounts.
38
Brief Description of the General Nature and Scope of Business of the Company
Parent Company
The Company was incorporated in the Philippines on March 12, 1957. Its principal activity is
investment in shares of various subsidiaries, associates, affiliates and other marketable equity
securities. The ultimate parent company of PHN and its subsidiaries is Philippine InvestmentManagement (PHINMA), Inc.
On May 27, 2010, the Securities and Exchange Commission approved the change of name of the
Company from Bacnotan Consolidated Industries, Inc. to Phinma Corporation.
As of December 31, 2012, the Company’s principal subsidiaries and its percentage of ownership
are as follows:
Name of Subsidiaries
Union Galvasteel Corporation (UGC)
Fuld and Company, Inc.
Fuld and Company (Philippines), Inc. (formerly Business Back Office, Inc.)
One Animate Limited (OAL)
Pamantasan ng Araullo (Araullo University), Inc. (AU)
Cagayan de Oro College, Inc. (COC)
University of Iloilo (UI)
University of Pangasinan (UPANG)
P & S Holdings Corporation (PSHC)
Asian Plaza, Inc. (API)
% of
Ownership
98.08
85.00
85.00
80.00
78.64
74.13
69.79
69.75
60.00
57.62
The principal activities of the subsidiaries are as follows :
Name of Subsidiaries
Nature of Business
Manufacture of galvanized and pre-painted iron
sheets and allied products for roofing
BPO - Animation services
Investment and real estate holdings
Investment in real properties
Educational institution
Educational institution
Educational institution
Educational institution
Business research
Business research
UGC
OAL
PSHC
API
AU
COC
UPANG
UI
Fuld & Company, Inc.
Fuld & Company (Philippines), Inc.
The Company also has direct minority interest in the following companies:
Phinma Property Holdings Corporation (PPHC
Trans-Asia Oil and Energy Development Corporation
AB Capital and Investment Corporation (AB Capital)
Luzon Bag Corporation (Luzon Bag) (b)
(a)
Asia Coal Corporation
(a)
(b)
ceased commercial operations
liquidated in February 2012
39
35.40%
26.21%
26.51%
21.05%
12.08%
Market Registrant’s Common Equity and Related Stockholders’ Matters
Market Price
The shares of stock of PHN are listed and traded in the Philippine Stock Exchange, Inc.
(PSE). The high and low market prices of the shares of stock of PHN for each quarter
within the last two (2) years and for the first two (2) months of 2013 are as follows :
Period
Calendar Year 2013
January
February
Calendar Year 2012
January – March
April – June
July – September
October - December
Calendar Year 2011
January – March
April – June
July – September
October - December
High
Low
14.00
13.90
10.78
12.50
12.30
12.10
11.00
11.80
11.10
10.20
10.16
10.20
14.00
13.80
13.70
12.30
11.10
11.70
10.50
10.30
Source: Philippine Stock Exchange, Inc.
Dividends on Common Shares
Cash Dividends Payment on Common Shares
PHN is authorized to pay cash or stock dividends or combinations thereof, subject to
approval by the Board of Directors. Holders of outstanding shares on a dividend record date
for such shares are entitled to the full dividend declared without regard to any subsequent
transfer of shares.
On October 5, 2005 the Board of Directors approved appropriation of retained earnings in the
amount of P 1.0 billion for investments. There are no other limitations for the Company’s
declaration of dividends to its common stock.
On March 9, 2009 the Board of Directors declared cash dividend of P 0.40 per share to all
shareholders of record as of March 30, 2009 payable April 24, 2009.
On March 3, 2010 the Board of Directors declared cash dividend of P 0.40 per share to all
shareholders of record as of March 29, 2010 payable April 23, 2010.
On March 3, 2011 the Board of Directors declared cash dividend of P 0.40 per share to all
shareholders of record as of March 29, 2011 payable April 26, 2011.
On March 22, 2012 the Board of Directors declared cash dividend of P 0.40 per share to all
shareholders of record as of April 11, 2012 payable April 26, 2012.
On March 6, 2013 the Board of Directors declared cash dividend of P 0.40 per share to all
shareholders of record as of March 22, 2013 payable April 17, 2013.
40
Stock Dividends Payment on Common Shares
PHN paid out a 20% stock dividend on September 6, 2006 to all shareholders of record as of
August 11, 2006. On March 30, 2007, the Board of Directors declared a 15% stock dividend to all
shareholders of record as of June 5, 2007 which was paid June 30, 2007. On April 14, 2008, the
Board of Directors declared a 10% stock dividend to all shareholders of record as of June 13,
2008 which was paid July 8, 2008.
Holders
As of February 28, 2013, there are 1,276 common shareholders.
Sale of Unregistered Securities Within the Last Three (3) Years :
PHN has no unregistered securities, hence no sale of said securities within the last three (3)
years.
Stockholders
As of February 28, 2013, PHN has 258,907,058 common shares outstanding held by 1,276
stockholders. The list of the top twenty (20) stockholders of the Company as recorded by the
Stock Transfer Service, Inc., the Company’s stock transfer agent, is as follows :
Rank
1.
2.
3.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
TOTAL
Stockholders
PCD Nominee Corp. (Non-Filipino)
Philippine Investment Management, Inc. (PHINMA)
PCD Nominee Corp. (Filipino)
Magdaleno B. Albarracin, Jr.
Trans-Asia Oil & Energy Development Corporation
Trans-Asia Power Generation Corp.
Bibiano M. Gavino
Allen Cham
Philippine Remnants Company
Victor J. del Rosario
Salud D. De Castro
Kayumanggi Publishers Co.
Roberto M. Lavina
Regina B. Alvarez
Ramon R. del Rosario, Jr.
Albert Awad
Cipriano V. Amando
Phinma Jumbo Retirement Fund
Ho Doris Teresa
Virginia S. Syjuco
41
No. of
Shares
94,297,055
92,486,823
35,382,407
8,246,258
8,139,812
4,648,896
1,473,241
1,094,059
1,069,371
569,010
500,000
470,693
327,000
317,399
298,168
276,764
247,738
171,727
168,601
162,004
250,347,026
% of
ownership
36.42%
35.72%
13.67%
3.19%
3.14%
1.80%
.57%
.42%
.41%
.22%
.19%
.18%
.12%
.12%
.12%
.11%
.10%
.07%
.07%
.06%
96.70%
Directors
Name
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Magdaleno B. Albarracin, Jr.
Roberto M. Laviña
Victor J. del Rosario
Jose L. Cuisia, Jr.
Omar T. Cruz
Filomeno G. Franciso
Felipe B. Alfonso
Guillermo D. Luchangco
Roberto F. de Ocampo
Position
Director and Chairman
Director, Vice Chairman , President & CEO
Director and Senior Exec. Vice President
Director, Senior Exec. Vice President &
COO
Director, Exec. Vice President and CFO
Director
Director
Director
Independent Director
Independent Director
Independent Director
Officers
Name
Ramon R. del Rosario, Jr.
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Roberto M. Laviña
Victor J. del Rosario
Pythagoras L. Brion, Jr.
Regina B. Alvarez
Cecille B. Arenillo
Position
President & CEO
Senior Exec. Vice President
Executive Vice President & CFO
Senior Exec. Vice President & COO
Executive Vice President & CFO
Senior Vice President and Treasurer
Senior Vice President – Finance
Vice President - Treasury and Compliance
Officer
Vice President – Finance
Assistant Vice President - Internal Audit
Corporate Secretary
Rizalina P. Andrada
Rolando Soliven
Juan J. Diaz
Executive Committee
Name
Oscar J. Hilado
Magdaleno B. Albarracin, Jr.
Ramon R. del Rosario, Jr.
Jose L. Cuisia, Jr.
Guillermo D. Luchangco
Position
Chairman
Member
Member
Member
Member
Audit Committee
Name
Felipe B. Alfonso
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Roberto F. de Ocampo
Filomeno G. Francisco
Position
Chairman
Member
Member
Member
Member
42
Nomination Committee
Name
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Guillermo D. Luchangco
Position
Chairman
Member
Member
Compensation Committee
Name
Jose L. Cuisia, Jr.
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Felipe B. Alfonso
Position
Chairman
Member
Member
Member
Retirement Committee
Name
Oscar J. Hilado
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Roberto M. Laviña
Position
Chairman
Member
Member
Member
43
Annex D
PHINMA CORPORATION
MINUTES OF THE ANNUAL MEETING
OF SHAREHOLDERS
Held on 14 May 2012
at the Rockwell Club, Rockwell Center
Makati City
1.
Call to Order
The Chairman called the meeting to order at 3:00 p.m. and presided thereat. The
Corporate Secretary recorded the minutes of the proceedings.
2.
Certification of Notice and Quorum
The Corporate Secretary certified that notices of the meeting were duly sent to all
shareholders of record and that the owners of 186,961,330 shares representing 72.54% of
the entire issued and outstanding capital stock of the corporation were present in person
or by proxy.
3.
Minutes of Previous Meeting
Copies of the minutes of the previous annual meeting held on 14 April 2011
having been furnished and fully disclosed to all shareholders, the reading of said
minutes was dispensed with and approved on motion duly seconded and unanimously
carried.
4.
Annual Report of Management
Management reported the results of operations of the corporation and its
subsidiaries during the preceding year based on the 2011 Annual Report which included
the audited consolidated financial statements for the calendar year ended 31 December
2011.
Following the presentation on the highlights of the Annual Report and the
financial statements by the President, with particular emphasis on the operations of the
company’s subsidiaries and affiliates in the fields of education, housing, energy, steel
products, hotels, and business process outsourcing, it was on motion duly seconded and
unanimously carried:
“RESOLVED, that the Annual Report including the Audited Financial
Statements for the year ended 31 December 2011, be and hereby are
approved and filed as part of the minutes of this meeting, and that all acts
Annex D
of the Board of Directors and of Management since the last Annual
Meeting of Shareholders be and hereby are approved and confirmed.”
5.
Election of Directors
The Chairman then announced that the meeting was open for the nomination of
directors for the ensuing year.
The following candidates duly qualified by the Nomination Committee were
nominated:
Mr. Oscar J. Hilado, Chairman
Mr. Ramon R. del Rosario, Jr.
Dr. Magdaleno B. Albarracin, Jr.
Amb. Jose L. Cuisia, Jr.
Mr. Victor J. del Rosario
Mr. Roberto M. Laviña
Mr. Guillermo D. Luchangco (Independent)
Mr. Felipe B. Alfonso (Independent)
Mr. Roberto F. de Ocampo (Independent)
Mr. Omar T. Cruz
Mr. Filomeno G. Francisco
There being no other nominations, the nominations were closed on motion duly
seconded and unanimously carried, and the Secretary was instructed to cast the
unanimous vote of the shareholders for those nominated. Whereupon, the Chairman
declared all the above-named individuals as duly elected directors of the company for
the ensuing year and until the election and qualification of their successors.
6.
Appointment of External Auditors
Acting on the recommendation of the Audit Committee as endorsed by the
Board of Directors, it was on motion duly seconded and unanimously carried:
“RESOLVED, that the firm of SyCip, Gorres, Velayo and Company, be
and hereby is appointed external auditors of the company for the
calendar year 2012.”
Annex D
7.
Adjournment
With no other business to come before the shareholders, the meeting was
adjourned on motion duly seconded and unanimously carried.
JUAN J. DIAZ
Corporate Secretary
A T T E S T:
OSCAR J. HILADO
Chairman of the Meeting
ANNEX E
Summary of Significant Resolutions Approved by the Board of Directors since the Last
Annual Meeting of Shareholders
(March 22 to November 13, 2012)
FOR RATIFICATION BY THE STOCKHOLDERS
Regular Meeting of the Board of Directors
March 22, 2012
·
Approval of the Audited Financial Statements for the years ended December 31, 2011.
·
Declaration of a P.40 cash dividend to all shareholders of record as of April 11, 2012
payable on April 26, 2012.
·
Appointment of SGV & Co., as external auditors for the year 2012 was endorsed by the
Board.
·
Scheduling of the Annual Shareholders Meeting for May 14, 2012 at 3:00 pm at the Palm
Grove, Rockwell Club, Rockwell Center, Makati City and fixing April 16, 2012 as the
record date for the determination of the shareholders entitled to notice and to vote at the
same meeting.
·
Approval of the retirement of Mr. Onisimo L. Prado as Assistant Vice President – Internal
Audit and his replacement by Mr. Rolando D. Soliven as of March 31, 2012.
·
Approval of the promotion of Ms. Rizalina P. Andrada to Vice President – Finance.
·
Grant of authority to open and close savings, time, current and/or trust account/s, avail of
loans, credit facilities, bank guarantees and standby letter of credit; and avail of internet
banking facilities with any bank or financial institution, whether local or foreign, which the
Corporation may designate and deem necessary for its operations;
·
Grant of authority to open savings/current account; invest excess funds in any financial
instruments; avail of loans, credit facilities, bank guarantees and standby letter of credit;
enter into any contract or agreement for the purchase of sale of any currency ; and deal
in financial derivative transactions including but not limited to forward contracts, swaps,
and the like both in local and foreign currency, covering currency, interest rate and credit
risks with any bank or financial institution, whether local or foreign currency, covering
currency, interest rate and credit risks with any bank or financial institution, whether local
or foreign and designation of authorized signatories.
·
Grant of authority to renew the following credit facilities with Security Bank Corporation
and designation of authorized signatories.
a. Domestic Bills Purchase Line of P50.0 million
b. Pre-settlement Risk line of US$1.0 million ; and
c. Settlement Risk Line of $50.0 million.
·
Grant of authority to open safety deposit box/es with Rizal Commercial Banking
Corporation – Rockwell Center Branch and designation of Ms. Cecille B. Arenillo and Ms.
Nanette P. Villalobos to sign any and all documents necessary for the said purpose as
1
well as to access and operate any and all of the Corporation’s safety deposit box/es with
RCBC.
·
Designation of Ms. Rizalina P. Andrada as authorized user of the Corporation’s
Metrobank Government Electronic Services System.
·
Designation of Mr. Alex Banawan as authorized user of Electronic Filing and Payment
System (eFPS) of the Bureau of Internal Revenue (BIR) of the Corporation.
·
Grant of authority to Ms. Regina B. Alvarez, Senior Vice President and Ms. Rizalina P.
Andrada, Vice President-Finance, to sign, execute and deliver any and all documents
necessary to effect the transfer of the certificates of title over various real properties
located in La Union reflecting “PHINMA CORPORATION” as the new name of the
Corporation.
·
Grant of authority to Ms. Regina B. Alvarez to transact with Globe Telecom, Inc. for any
communication requirement as deemed necessary by the Corporation.
Organization Meeting of the Board of Directors
May 14, 2012
·
The following officers were nominated and unanimously elected to the positions set
forth after their respective names :
Name
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Roberto M. Laviña
Pythagoras L. Brion
Regina B. Alvarez
Position
Chairman of the Board
Vice-Chairman and President & CEO
Senior Exec. Vice President
Executive Vice President & CFO
Senior Vice President / Treasurer
Senior Vice President
Senior Vice President
Cecille B. Arenillo
Rizalina P. Andrada
Rolando D. Soliven
Giles R. Katigbak
Juan J. Diaz
Vice President - Treasury & Compliance Officer
Vice President for Finance
Assistant Vice President - Internal Audit
Investment Relations Officer
Corporate Secretary
·
The compositions of the various Committees for the year 2012 :
Executive Committee
Name
Oscar J. Hilado
Magdaleno B. Albarracin, Jr.
Ramon R. del Rosario, Jr.
Jose L. Cuisia, Jr.
Guillermo D. Luchangco
Position
Chairman
Member
Member
Member
Member
2
Audit Committee
Name
Felipe B. Alfonso
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Roberto F. de Ocampo
Filomeno G. Francisco
Position
Chairman
Member
Member
Member
Member
Nomination Committee
Name
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Guillermo D. Luchangco.
Position
Chairman
Member
Member
Compensation Committee
Name
Jose L. Cuisia, Jr.
Oscar J. Hilado
Ramon R. del Rosario, Jr.
Felipe B. Alfonso
Position
Chairman
Member
Member
Member
Retirement Committee
Name
Oscar J. Hilado
Magdaleno B. Albarracin, Jr.
Victor J. del Rosario
Roberto M. Lavina
Position
Chairman
Member
Member
Member
Regular Meeting of the Board of Directors
May 14, 2012
·
Grant of authority to borrow, obtain, and/or contract for loans/credit accommodations
from or through PHILIPPINE COMMERCIAL CAPITAL, INC. (PCCI), its Subsidiaries
and Affiliates and/or PHILIPPINE COMMERCIAL CAPITAL, INC. – TRUST AND
INVESTMENTS GROUP (PCCI-TIG) under such terms and conditions as maybe
mutually agreed upon by the Corporation and PCCI, its Subsidiaries and Affiliates
and/or PCCI-TIG. Designation of authorized signatories.
·
Resolution that this authority to borrow, obtain, and/or contract for loans/credit
accommodations for or through PCCI, its Subsidiaries and Affiliates and/or PCCITIG, shall be effective for a period of two (2) years from the date of passage of this
3
resolution, unless earlier terminated by the Board of Directors in a meeting called for
this purpose ;
·
Grant of authority to place funds and to make investments with PHILIPPINE
COMMERCIAL CAPITAL, INC. (PCCI), its Subsidiaries and Affiliates and/or
PHILIPPINE COMMERCIAL CAPITAL, INC.-TRUST AND INVESTMENTS GROUP
(PCCI-TIG), to invest funds, in any of the following instruments, High Yielding
Savings Deposits, Treasury Bills, Commercial Papers, Corporate Promissory Notes
and/or Debt Papers, Government Securities and Investment Management
Agreements, for the Corporation’s own account and risk. Designation of authorized
signatories
·
Resolution that this authority to place funds and to make investments with or through
Philippine Commercial Capital, Inc. (PCCI). Its Subsidiaries and Affiliates and/or
Philippine Commercial Capital, Inc. – Trust and Investments Group (PCCI-TIG), shall
be effective for a period of two(2) years from the date of the passage of this
resolution, unless earlier terminated by the Board of Directors in a meeting called for
this purpose;
·
Grant of authority to open and close savings, time, current and/or trust account/s;
invest excess funds ‘ avail of internet banking facilities ; avail of loans, credit facilities,
bank guarantees and standby letter of credit; enter into any contract or agreement for
the purchase of sale of any currency; deal in financial derivatives transactions
including but not limited to forward contracts, swaps, options, structured products and
the like both in local and foreign currency, covering currency interest rate and credit
risks; and enter into and International Swap and Derivatives Association Master
Agreement with Deutsche Bank AG and/or their subsidiaries; and designation of
authorized signatories.
·
Grant of authority to sell motor vehicles and designation of authorized signatory for
this purpose ;
·
Grant of authority (1) to facilitate processing, claim and receive documents with the
Bureau of Internal Revenue (BIR), City Assessor’s Office, City Treasurer’s Office,
Department of Agrarian Reform, Bureau of Land, Registry of Deeds (ROD) of
General Santos City, and other government agencies relative to the transfer of
ownership of property consisting of five thousand one hundred and four square
meters (5,104 sq.m.) more or less covered by Transfer Certificate of Title (TCT) No.
T-43089 ; (2) to receive and claim the new title of the subject property from the
Registry of Deeds of General Santos City ; and (3) to make, sign and execute any
and all documents and to perform all acts and whatever requisite and necessary to
carry out the above purpose. Designation of authorized signatories.
·
Ratification of various Deed of Absolute Sale
a) Deed of Absolute Sale, dated December 13, 2011 in favor of Phinma Corporation
entered in the Notarial Register of Atty. Miguel Romualdo T. Sanidad as Doc. No.
342, Page No. 71, Book No. 80, Series of 2011, of a parcel of land covered by
and more particularly described in Transfer Certificate of Title (TCT) No. RT
6502-(36402) of the Registry of Deeds for the Province of La Union ;
b) Deed of Absolute Sale, dated December 13, 2011 in favor of Phinma Corporation
entered in the Notarial Register of Atty. Miguel Romualdo T. Sanidad as Doc. No.
4
343, Page No. 71, Book No. 80, Series of 2011, of a parcel of land covered by
and more particularly described in Transfer Certificate of Title (TCT) No. T 88814
of the Registry of Deeds for the Province of Davao del Norte ;
c) Deed of Absolute Sale, dated December 13, 2011 in favor of Phinma Corporation
entered in the Notarial Register of Atty. Miguel Romualdo T. Sanidad as Doc. No.
344, Page No. 71, Book No. 80, Series of 2011, of a parcel of land covered by
and more particularly described in Transfer Certificate of Title (TCT) No. T 88813
of the Registry of Deeds for the Province of Davao del Norte ;
d) Deed of Absolute Sale, dated December 13, 2011 in favor of Phinma Corporation
entered in the Notarial Register of Atty. Miguel Romualdo T. Sanidad as Doc. No.
345, Page No. 71, Book No. 80, Series of 2011, of a parcel of land covered by
and more particularly described in Transfer Certificate of Title (TCT) No. T 88815
of the Registry of Deeds for the Province of Davao del Norte ;
e) Deed of Absolute Sale, dated December 13, 2011 in favor of Phinma Corporation
entered in the Notarial Register of Atty. Miguel Romualdo T. Sanidad as Doc. No.
346, Page No. 72, Book No. 80, Series of 2011, of a parcel of land covered by
and more particularly described in Transfer Certificate of Title (TCT) No. T
186091, T-186092 and T-186093 of the Registry of Deeds for the Province of
Iloilo;
f)
Deed of Absolute Sale, dated December 13, 2011 in favor of Phinma Corporation
entered in the Notarial Register of Atty. Miguel Romualdo T. Sanidad as Doc. No.
347, Page No. 72, Book No. 80, Series of 2011, of a parcel of land covered by
and more particularly described in Transfer Certificate of Title (TCT) No. T-43089
of the Registry of Deeds for General Santos City; and
g) Deed of Absolute Sale, dated December 13, 2011 in favor of Phinma Corporation
entered in the Notarial Register of Atty. Miguel Romualdo T. Sanidad as Doc. No.
348, Page No. 72, Book No. 80, Series of 2011, of a parcel of land covered by
and more particularly described in Transfer Certificate of Title (TCT) Nos. 89963,
89964, 89965 of the Registry of Deeds for the City of Makati .
h) Designation of authorized signatories.
Regular Meeting of the Board of Directors
July 27, 2012
·
Resolution that, in relation to the stock rights offering of Trans-Asia Oil and
Energy Development Corporation (“TA Oil”), the Corporation is hereby authorized
to commit to subscribe to and purchase not only its respective rights
entitlements but also to subscribe to and purchase together with Philippine
Investment Management Inc. (“Phinma Inc.”) any unsubscribed shares after the
stock rights offer period in proportion to the Corporation’s and Phinma Inc.’s
respective shareholdings in TA Oil ;
Grant of authority to Mr. Pythagoras L. Brion, Senior Vice President and
Treasurer to sign, execute, and deliver any and all documents necessary to
effect the said commitment, and hereby confirming that all documents and
materials signed by the above named officer in connection with the said
commitment be considered to have been approved by the Corporation’s Board of
Directors.
5
·
Election of Mr. Roberto M. Laviña as Senior Executive Vice president
and Chief Operating Officer and Mr. Pythagoras L. Brion, Jr. as Senior
Vice President and Treasurer.
·
Grant of authority to sell a parcel of land with an area of five thousand
one hundred four (5,104) square meters more or less, located in Makar,
General Santos covered by and more particularly described in Transfer
Certificate of Title No. T-43089. Resolution to name, constitute, and
appoint Mr. Roberto M. Laviña, Senior Executive Vice President and
Chief Operating Officer of the Corporation, to be the Corporation’s true
and lawful Attorney-in-Fact.
Regular Meeting of the Board of Directors
November 13, 2012
·
Resolution that, in relation to the stock rights offering of Phinma Property Holdings
Corporation (“PPHC”), the Corporation is authorized to subscribe to and purchase
not only its preemptive rights entitlements but also to subscribe to and purchase
together with Philippine Investment Management Inc. (“Phinma, Inc”) any
unsubscribed shares after the stock rights offer period in proportion to this
Corporation’s and Phinma Inc.’s respective shareholdings in PPHC. Designation of
authorized signatories.
·
Grant of authority to acquire by purchase the following parcels of land located in
Barangay Puting Lupa, Calamba City particularly by and described as follows :
TCT NO.
LOT/SURVEY NO.
T-347359
T-347360
T-347361
T-347362
T-347363
T-347364
T-347365
T-347366
T-347367
T-347368
T-347369
T-348613
T-348614
T-261069
T-261070
T-261072
T-261073
T-261074
T-261075
T-261076
4057-NEW, CAD. – 154
4042, Calamba Estate
4311-A, Psd-77232
4621-A Psd-77232
4312-A, Psd-77232
4039, Calamba Estate
4041, Calamba Estate
4052, Calamba Estate
4053, Calamba Estate
4054, Calamba Estate
B, (LRC) Psd-202107
4047, Calamba Frial Land Estate
4046, Calamba Frial Land Estate
3871-B (LRC) Psd-202107
4040, Calamba Estate
4292, Cad 154 Calamba Estate
4044, Calamba Estate
4045, Calamba Estate
4048, Calamba Estate
4073, Calamba Estate
AREA (SQ. M.)
39,457
823
3,282
24,538
4,833
2,186
19,733
4,210
3,368
4,843
36,651
1,881
6,665
30,318
27,312
4,404
2,772
13,386
4,410
38,462
Resolution that Senior Executive Vice President and Chief Operating Officer
Roberto M. Laviña be authorized to execute on behalf of this Corporation the
corresponding documentation.”
6
·
Grant of authority to sell a parcel of land with an area of five thousand one hundred four
(5,104) square meters more or less, located in Makar, General Santos covered by and
more particularly described in Transfer Certificate of Title No. T-43089. Designation of
authorized signatory.
·
Grant of authority to open and maintain an escrow account with Banco de Oro Unibank,
Inc.-Trust and Investments Group and designation of authorized signatories to represent
the Corporation in the opening of the account and to execute any and all documents,
papers necessary to accomplish the authority given to the Corporation, including, the
day-to day instruction and/or transaction and the closing or termination of the account.
·
Grant of authority to sell a motor vehicle and designation of authorized signatory for this
purpose.
·
Approval of the Audit Committee Charter of the Corporation, as revised and duly
endorsed by the Audit Committee in compliance with the requirements of SEC
Memorandum No. 4 of 2012.
7