1. business and industrial

COVER SHEET
9
9
9
0
5
S.E.C. Registration Number
P
H
I
L
I
P
P
I
N
E
C
O
R
P
O
R
A
T
I
O
R
E
A
L
T
Y
A
N
X
D
H
O
L
D
I
A
L
E
T
E
M
A
N
N
G
S
I
L
A
N
(Company's Full Name)
A
N
D
R
E
D
R
I
V
E
Q
U
E
Z
O
A
C
N
N
O
O
R
C
I
R
T
H
N
T
D
C
O
M
P
L
E
O
M
I
N
G
O
B
N
E W
Y
(Business Address : No. Street Company / Town / Province)
MS. JOSEFA BERNADETTE DIZON
636-1170
Contact Person
1
2
3
Month
Company Telephone Number
1
1
Day
7
A
FORM TYPE
Month
Day
Annual Meeting
N/A
Secondary License Type, If Applicable
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
Document I.D.
STAMPS
Remarks = pls. use black ink for scanning purposes
LCU
Cashier
Foreign
SECURITIES AND EXCHANGE COMMISSION
Form 17- A
PHILIPPINE REALTY AND HOLDINGS CORPORATION
Annual Report Pursuant to Section 17
of the Securities Regulation Code and Section 141
of the Corporation Code of the Philippines
1.
For the fiscal year ended:
31st December 2012
2.
SEC Identification No. :
4.
Registrant
5.
Country of Incorporation: Philippines 6.Industry Classification Code: Real Estate Developer
99905
3. BIR Tax Identification No.: 116-000-188-233
: Philippine Realty and Holdings Corporation
7. Address of principal office: Andrea North Complex, Balete Drive corner N. Domingo St.,
New Manila, Quezon City
Satellite Office
: 5/F, PSE Centre East Tower, Exchange Road, Ortigas Center
Pasig City
8.
Registrant's telephone no.:
636-1170
9.
The Registrant has not changed its corporate name and fiscal year.
10. Securities registered pursuant to Sections 4 and 8 of the RSA
Title of Class
Common
No. of shares of common stock outstanding
Debt Outstanding
4,922,324,908 shares
P 0.00
11. The Registrant's common shares are listed on the Philippine Stock Exchange
12. The Registrant has filed all reports required to be filed by Section 17 of the Securities Regulation
Code and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporate Code during
the preceding 12 months.
The Registrant has been subject to such filing requirements for the past 90 days.
13. The aggregate market value of voting stocks held by non-affiliates representing 3,145,188,892 of
outstanding common shares is P 1,383,883,112 computed on the basis of P0.44 per common
share as of close of December 28, 2012.
14. The Registrant has filed all documents and reports required to be filed by Section 17 of the
Code.
PART I
BUSINESS AND GENERAL INFORMATION
Item 1. Business
Philippine Realty and Holdings Corporation was incorporated on July 13, 1981 with an initial
capitalization of P2 million. In 1986, the Company’s capitalization was increased to P100 million
to accommodate the entry of new stockholders. In September 1987, Philrealty became a public
corporation. Its present authorized capital stock is P 8 billion, divided into 8 billion shares, of
which 4.92 billion shares are outstanding and subscribed.
Philrealty’s main real estate activity since it started operations has been the development and sale
of residential/office condominium projects and to a limited extent, the lease of commercial and
office spaces.
It has developed unique and trend setting projects: The Alexandra, the first to offer consumers
the combination of high-rise condominium and subdivision living; Philippine Stock Exchange
Centre, the official headquarters of the Philippine Stock Exchange, Inc. and home of the
country's corporate and financial stalwarts; The Alexis, a low-rise condominium within an
upscale subdivision; the exclusive La Isla; and Casa Miguel, a 4-storey walk-up residential
condominium in San Juan, Metro Manila.
After the completion of the Philippine Stock Exchange Centre in January 1996, Philrealty
launched its Andrea North project in the 2.8-hectare former Pepsi Cola property in New Manila,
Quezon City. This project is an Alexandra-type upscale and high-rise condominium complex,
which consists of five residential towers.
On November 16,, 2012 the Company held the Ceremonial Concrete Pouring for its second
tower in the Andrea North Complex named the Skybreeze Tower. The Company also
completed the construction of its Showroom which showcases the model units of The
Skybreeze Tower and an area dedicated for retail shops. Construction of the joint venture
project, Icon Plaza at the Bonifacio Global City with Xcell Property Ventures, Inc. commenced
in mid 2010 and is 47% completed as of year-end.
In 2002, the Company filed with the court a petition for corporate rehabilitation with prayer for
suspension of payments. The Company settled its loan obligations with all the five creditor
banks through dacion-en-pago, cash payments from the sale of assets and loan restructuring.
The Company has completed another major component of the rehabilitation plan which is the
completion of construction of the Andrea North Skyline Tower. In February 2011, the
Company filed a Motion to terminate rehabilitation proceeding on the account of successful
implementation of the Rehabilitation Plan. However, in November 2012 the court denied the
Company’s motion on the basis that it has still substantial obligations to pay in accordance with
the court-approved rehabilitation plan.
Significant Subsidiaries
In line with Management thrust to venture into non-real estate activities, Philrealty has
organized/invested in the following subsidiaries and affiliates:
PRHC Property Managers, Inc. (100% owned)
PRHC Property Managers, Inc. (PPMI) was incorporated in May 1991 to oversee the
administration, operation and monitoring of Philrealty’s growing number of real estate
properties. In order to be at par with other property managers such as Century
Properties, Inc., FPD Saville Davis and Cuervo Far East, PPMI has expanded its
property management services to include non-Philrealty projects. The clientele includes:
Philippine Stock Exchange Centre, Icon Residences, LTA Condominium, Greenhills
Properties’ El Pueblo Real de Manila, Nobel Plaza Condominium, Andrea North Skyline
Tower, The Pinnacle Condominium, Greenrich Mansion Condominium, Genato
Investment, MDB Condominium and Philippine Stock Exchange, Inc.. PPMI ensures
that said properties be operated and managed according to the established requirements
and standards in the industry. PPMI is also engaged in the sale and leasing of managed
buildings as well as other real estate.
Tektite Insurance Brokers, Inc. (100% owned)
Tektite Insurance Brokers, Inc. was incorporated in January 1989 as Philrealty Insurance
Agency. Due to increasing demand, it was reorganized into an insurance brokerage firm
in 1994. Major clients includes: A. Brown & Co., Inc., Philrealty Group, Bostik Phils.,
RG Meditron and Phil. Stock Exchange Centre Condominium Corporation.
Universal Travel Corporation (81.53% owned)
Universal Travel Corporation was incorporated in October 1993 and is engaged in the
business of travel services by providing, arranging, marketing, engaging or rendering
advisory and consultancy services relating to tours and tour packages. UTC caters to
Philippine Stock Exchange Centre’s tenants.
Meridian Assurance Corporation (86.66% owned)
Meridian Assurance Corporation was taken over by Philrealty in August 1994 from the
Lozano - Ramirez group. It is a medium-sized non-life insurance company, underwriting
fire, marine, and casualty and surety undertakings including miscellaneous lines of
insurance. Aside from its head office in Metro Manila (Pasig), it maintains offices in the
key cities of Cebu and Davao. A non-life insurance company like Malayan Insurance
Corp., Prudential Guarantee & Assurance Co., Pioneer Assurance Corp., Phil. American
Gen. Insurance Corporation, FGU and GSIS, Meridian has been accorded with
numerous accreditations from both government and private business sectors in
recognition of its business reputation.
Alexandra (USA), Inc. (45% owned)
Jointly owned with Greenhills Properties, Inc. (45%) and Warrenton Enterprises Corp.
(10%) of William Cu-Unjieng, this company is involved in property development in
Florida, USA. Amidst the real estate slump in the United States, the affiliate, incurred
successive losses. Settlement of loan obligations could no longer be met which led to
dacion en pago of the remaining lots in Orlando. In late 2011, AUI started the process of
liquidation. Philrealty, on its part, provided for the impairment of advances and
investment to AUI of about P 101.64 million.
The principal products or services of Philrealty, which are derived from domestic sales and
their relative contribution to revenue, are as follows:
Sale of Land and Condominium Units
Equity in Net Earnings of Joint Venture
Net Underwriting Income
Management Fees
Commission
Rental
Interest and Other Income
2012
72.66%
0.00%
4.95%
4.46%
3.22%
4.50%
10.21%
100.00%
2011
67.81%
0.00%
3.05%
3.74%
2.85%
4.18%
18.37%
100.00%
2010
71.49%
2.83%
2.44%
2.44%
2.14%
3.32%
15.34%
100.00%
Related Party Transactions
The Company’s related transactions were made in an arm’s length basis. There was no
special pricing policy between related parties. Further disclosures were made to Item No. 12
and to the Notes to Financial Statements No 27. The Parent Company engages the services
of its subsidiary, PRHC Property Managers, Inc. (PPMI) in managing company-owned
properties. PPMI, on the other hand, purchased a condominium unit back in 1996 from the
Parent Company, which is still not fully paid as of to date. The Parent Company also secures
insurance from subsidiary, Meridian Assurance Corporation (MAC) through subsidiary,
Tektite Insurance Brokers, Inc. The Parent Company is given 90-day period within which to
settle the premiums, the same period granted to any assured. Also, the Parent Company
extends interest-bearing financial assistance to its subsidiary, PPMI for working capital
purposes.
Major Risk/s of the Parent Company and Subsidiaries
The major factors affecting the company’s business are:
Philippine Economic Conditions
Since the breakout of the Asian financial crisis in mid-1997 the company has been
adversely affected by a general economic slowdown in the Philippines which has shattered
business and consumer confidence and reduced incomes. The slowdown in GDP
growth from an annual compound rate of 4.5% during the period from 1993 to 1997 to
3.2% from 1998 through 2002 has depressed demand for housing and office space.
Beginning 2004, the economy has staged a modest recovery, interrupted only temporarily
by the great recession in 2009. The creditable growth can be attributed to the reining in
of the government’s budget deficit which has stabilized the value of the peso, with the
help of the sustained growth of OFW remittances and the strong performance of the
business process outsourcing sector. This positive economic environment has given a
boost for the real estate industry.
Level of Interest Rates
The cost of housing is made up of the cost of land, construction and financing. Mortgage
rates in the Philippines have generally been higher compared to other countries due to
higher inflation and the financial system’s low liquidity and inefficiencies. Since 2002,
annual inflation has been subdued at about 4%, leading to single-digit Treasury Bill rates
and sometimes even mortgage rates. The lower financing cost has made housing more
affordable to a larger segment of the population.
Remittances of Overseas Filipino Workers
The lack of employment opportunities locally and the opening up of foreign labor
markets has driven more and more Filipinos to work abroad. Combined with the higher
skills requirement for the new job opportunities, the labor migration has resulted in better
paying jobs and thus, increased remittances to the Philippines. This phenomenon has
been one of the driving factors for the housing industry in recent years, making up for the
lackluster local incomes.
Government Programs
In 2002, the Pag-ibig Fund (Home Development Mutual Fund) came out with increased
loanable amounts and lower interest rates for members. The loan features were further
improved in 2004. Of interest to the company is the program which allows a member to
borrow up to P3 million for a term of thirty (30) years, at an interest rate of 11.5% per
annum, and with a down payment for the unit of only 20% payable while the unit is under
construction or development. Similarly, the HDMF has instituted a Medium/High Rise
Condominium Building financing program for developers. With the trend towards smaller
condominium units, these two programs have given the sector a reliable source of
funding.
The following procedures are being undertaken to manage risks involved in the
Company and Subsidiaries:
Instead of undertaking its own property development, the Company has entered into joint
ventures with a more financially capable corporation for its properties in the Bonifacio Global
City. With regard to its loans, the Company has fully paid its debt through dacion-en-pago and
sale of assets.
Financial and Capital Risk Management are further discussed in Notes 5 and 6 of the attached
Audited Financial Statements.
Distribution Method
Condominium sales are being handled by property consultants supervised by an out-sourced
marketing firm, The Property Forum, Inc.
Competition
Generally, the major players in the high-end residential and office condominium sector are
Megaworld Corporation, Ayala Land, Inc., Federal Land, Inc., Century Properties, Inc.,
Robinsons Land Corporation and Rockwell Land Corporation. The Parent Company’s
completed projects have been concentrated at the Ortigas Center, but it has extended its
operations to New Manila, Quezon City where it is developing a residential condominium
complex and to the Bonifacio Global City where it has acquired land and which the Company
contributed to its joint ventures with Xcell Property Ventures, Inc. The Company resumed the
construction of its Skyline Tower located at Balete Dr., New Manila, Quezon City in February
2009 and completed it in September 2011 for a total development completion cost of P1.1B.
Metro Manila Residential Supply
In the Makati CBD, three new condominium projects were completed in 4Q 2012
totalling 792 units. These were Raffles Residences, Greenbelt Madison, and the
Grand Midori Tower 1. In 2013, the level of new supply to be introduced in the
CBC will hit a record high at 2,825 units, most of which are Grade A residential
condominiums.
In all sub-markets, total residential stock stood at over 53,000 units as of end-2012.
Over the next four years, some 23,600 new units or an annual average of 5,900
units will be introduced. The Bonifacio Global City will have the strongest supply
pipeline and subsequently the highest level of stock by 2015.
Quezon City/New Manila Market
The Quezon City market remains to be a very attractive market since most
developers have opted to position in the main CBDs of Makati, Ortigas, Eastwood
and Rockwell. There are still few players developing but this has rapidly increased
in the last few years due to high land values in the CBDs. Evident are the
emerging new areas of Ayala technohub and Eton Centris. Still, Quezon City has
the largest population and therefore, packs a lot of potential.
Financial Strategy
The project will be financed mostly coming from internally generated funds and
less aggressive pre-selling activities with a projected sell out within 1 year from
launch. Prospective buyers will be offered discounts for cash purchases. Basic
payment terms will require at least 10 to 50 percent downpayment payable over at
least 36 months with balance payable upon availability or turnover of the unit.
Marketing Strategy
Philrealty has constructed a sales pavillion with mock-up/model units inside the
property. The project will offer highly-efficient unit layouts that are larger in size
compared to those currently available in the market. The units and common areas
will be highly illuminated and ventilated making them energy-efficient and
environment-friendly. Potential buyers of other developments offering smaller
unit cuts will find great value in this development. Apart from this, the almostcenter location of the project will be a product differentiator in itself.
Sales Strategy
Having the model units and marketing office on site will make the product
accessible to the buyers. An in-house sales team will be set up to focus on the
project, as well as a network of brokers.
Direct Competition
Currently, the competition within the area would still be the Magnolia Residences
by Robinsons Land Corp, and Pinecrest by Crown Asia. Robinsons is offering
units from 1 Br to 3 Br constructed on 4 towers of about 35 floors each. Total
inventory is about 800 units all in all. Pinecrest has smaller units constructed on 3
mid-rise towers averaging 10 floors each for a total of about 600 units.
Other newer developments in the area may also be competing within the project
niche; however, the location has a big advantage over the other development in
the vicinity, being the preferred site for new investments.
Also the new Robinsons Magnolia Mall New Manila opened in mid 2012 which
increased the marketability and land values in the surrounding New Manila area.
Sources and Availability of Materials
The company does not maintain its own design team or construction outfit. Architectural
and engineering design consultants are commissioned on a per project basis depending on the
nature and magnitude of the task. Construction is bidded out on a competitive basis to a prequalified group of contractors. The company maintains its own project management team, but
also relies on independent outfits from time to time.
Customers
The Company sells its condominium units to individual personal and corporate buyers. No
single client accounts for a recurring significant percentage of sales.
Government Regulations
Condominium development is governed primarily by P.D. 957 as amended (Regulating the
Sales of Subdivision Lots and Condominiums), R.A. No. 4726 (Condominium Act) and R.A. No.
7160 (Local Government Code). Projects are subject to zoning laws of the city or municipality
where they are located. Developers are also required to obtain a development permit from the
Housing and Land Use Regulatory Board which is also in charge of issuing License to sell and
Certificate of Registration. An Environmental Clearance Certificate must also be secured from
the Department of Environment and Natural Resources. The Company has complied with all
governmental requirements and there is no pending application with any government agency that
requires approval.
Patents and Trademarks
The company has registered with the Intellectual Property Office (IPO) the logo of one of its
finest projects La Isla, a residential condominium located at Ortigas Center. It was registered last
May 8, 2001 with Registration No. 4-1994-96927. The registration will be effective for twenty
(20) years. It also registered the logo and name of Philippine Realty and Holdings Corporation, a
developer of trend setting projects like the Philippine Stock Exchange Centre, The Alexandra, La
Isla and Casa Miguel as well as the logo and the name Andrea North Tower and Skyline Tower
for its project located at New Manila, Quezon. The names of the four (4) towers to be
constructed in the complex were also registered namely: Skyview, Skylight, Skybreeze and
Skyscape Towers.
Employees
Philrealty has a total workforce of 24 employees as of December 31, 2012, categorized as
follows:
Clerical
Administrative
Operations
Managerial
Executive
Total
5
9
1
2
7
24
The Company expects to more or less maintain its number of employees in the next 12
months. There is no existing Collective Bargaining Agreement (CBA) between the Company and
its employees. The employees are not on strike, have not been on strike for the past three years
and are not threatening to strike. The Company has the following supplemental benefits for its
employees: (a) Health Care; (b) Group Life Insurance; (c) Retirement Fund and (d) Profit sharing
per Company’s By-Laws.
Item 2. Properties
All properties of the Company are free from lien or encumbrance. The Company has no
intention to acquire properties in the next twelve months.
(A)
Landbanking
Location
Area in sqm.
Title No.
14,716.21
N-157138/157139/157137
1,850.24
T-230031/227268
Iruhin West, Tagaytay City, (85% owned)
39,975.00
T-34469/34412
Ili Norte, San Juan, La Union
32,107.00
T-40152/40153
Carlatan, San Fernando City, La Union
33,122.00
T-40701/40702
Land Estate Held for Development
and/or Capital Appreciation
New Manila., Quezon City
Leon Guinto, Manila
Land invested in Joint Venture
Fort Bonifacio, Taguig
(B)
7,205.00
N-1186P/29717/27147
Properties and Equipment
The properties and equipment of Philrealty and its subsidiaries are located at its principal
place of business.
(C)
Leased Properties
Philrealty has also leased some of its office unit, storage units and parking slots located at
Philippine Stock Exchange Centre to individuals or corporations at prevailing rates. The
contracts of lease are renewable for periods ranging from one to five years.
Item 3. Legal Proceedings
*
Petition for Corporate Rehabilitation with Prayer for Suspension of Payments filed with the Regional Trial
Court Quezon City
Philrealty filed on December 12, 2002 a Petition for Corporate Rehabilitation with Prayer for
Suspension of Payments to stop the creditors of petitioner from foreclosing on the
mortgages over the real properties of petitioner to the prejudice of the other stakeholders of
petitioner. The court gave due course to Philrealty’s petition on February 26, 2003 and
appointed Mr. Ricardo Ysmael, as Rehabilitation Receiver to plan. On June 20, 2003,
Philrealty filed with the RTC its amended proposed rehabilitation plan. On June 11 2004, the
Court approved the Receiver’s Recommendation on the Amended Rehabilitation Plan.
The Company has filed a Motion to Terminate Proceedings on account of the successful
implementation of the Rehabilitation Plan with the Regional Trial Court of Quezon City on
February 2, 2011. In November 2012 the Rehabilitation Court, upon the recommendation
of the Rehabilitation Receiver denied the motion on the basis that the Company has still
substantial obligation to pay in accordance with the court-approved rehabilitation plan.
*
Ley Construction and Development Corporation vs. Philippine Realty and Holdings Corporation, Dennis
A. Abcede and Joselito L. Santos, Civil Case No. 96-160, Regional Trial Court Makati City Branch
135; CA-GR No. CV 71293, Court of Appeals.
This is a complaint filed on 29 January 1996 by Ley Construction and Development
Corporation (“Ley Construction”), as contractor, for sum of money and damages arising
from various construction projects, against Philrealty as the project owner. On February 16,
2001, Philrealty received the copy of the Decision of the Regional Trial Court issued on 31
January 2001, ordering Philrealty to pay Ley Construction a sum of money. On February 20,
2001, Philrealty filed with the Regional Trial Court a Notice of Appeal of the abovementioned decision. On October 7, 2004, the Court of Appeals Ninth Division reversed and
set aside the decision made on January 31, 2001 and the May 7, 2001 amended decision and
ordered Ley Construction to pay the defendant-appellant Philrealty the net amount due of
Three Million Seven Hundred Forty Seven Thousand Seven Hundred Ninety Three &
50/100 Pesos with legal interest from date of filing of complaint. On November 22, 2004,
Philrealty filed a Petition for Review. Ley Construction filed a Petition for Review on
Certiorari with Supreme Court which is docketed as SC-G.R. No. 167879 while Philrealty
filed its Comment to Petition for Review on Certiorari on December 12, 2005. On June 30,
2011 the Supreme Court ruled in favor of Ley Construction. Our lawyers filed a Motion for
Reconsideration which the SC denied with finality on October 25, 2011 and directing the
Company to pay P57 million plus legal interest from the time of filing of the case. The
Company has booked the prospective settlement expenses in the amount of P112.75 million
in its 2011 financial statements. On July 16, 2012, the Company has received a Notice of
Garnishment and Notice to Comply/Pay in connection with the claim of “Ley
Construction” which was lifted December 26, 2012 on account of the Company’s Corporate
Rehabilitation.
*
Philippine Realty and Holdings Corp. vs. DMCI Project Developers, Inc., Universal Rightfield Property
Holdings, Inc., and Universal Leisure Corporation, Civil Case No. 67092, and pending before Branch
161, Regional Trial Court, Pasig City.
Universal Leisure Corporation(ULC) bought several condominium units from Phil. Realty
and Holdings Corp. under two(2) contracts to sell. After paying the down payment ULC
refused to pay the balance due on the principal sums of P32,534,202.66 and P32,383,972.00.
ULC claims that it is an assignee of receivable from DMCI Project Developers, Inc.(DMCI)
and Universal Rightfield Property Holdings, Inc. (URPHI) for a sum of money allegedly
owed by Philrealty to DMCI and URPHI as a result of cancellation of joint venture
agreement entered into by Philrealty, URPHI and DMCI. The trial Court ruled against
Philrealty; thus, it ordered Philrealty to pay a sum of money to ULC, DMCI and URPHI and
deliver titles of fourteen condominium units and two storage units situated at 34th Floor
West Tower as well as the seventy four parking slots situated at the West Podium 3 Parking
Level of the PSE Centre. Philrealty appealed the case with the Court of Appeals (CA) which
affirmed the trial court’s decision. In December 2012, Philrealty filed a Motion for
Reconsideration and the same was denied. Thereafter, the Parent Company filed a Petition
for Review with the Supreme Court where the matter is still pending as of report date.
*
The Alexandra Condominium Corporation vs. Philippine Realty and Holdings Corporation, HLRB Case
No. REM-080999-10589 Housing and Land Use Regulatory Board
This is a complaint filed by The Alexandra Condominium Corporation (TACC), the
association of condominium buyers of Alexandra Condominium Project (ACP) against
Philrealty as the developer of ACP for failure to install a Sewerage Treatment Plant (STP) in
ACP. Thus, TACC itself had to install STP in ACP for a sum of money and paid the
administrative fines imposed against TACC by Laguna Lake Development Authority. A
Decision was rendered in favor of Philrealty by the Arbiter and the HLURB en banc, but
complainant appealed the decision with the Office of the President (OP). The appeal was
dismissed by the OP in November 2008. The Complainant brought the case to the Court of
Appeals which denied the petition. TACC appealed the case with the Supreme Court (SC)
which dismissed the Petition for Review and eventually denied the Motion for
Reconsideration. The case is now terminated.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of the
calendar year covered by this report.
Part II
OPERATIONAL INFORMATION
Item 5. Market for Registrant's Common Shares and Related Stockholder Matters
Market Information
Principal market for the Registrant's
Common shares
: Philippine Stock Exchange
High and Low Sales Prices for each quarter for years 2011-2012 and 1st quarter 2013
based on Philippine Stock Exchange’s Daily Quotation Report
2 0 11
2 0 12
2 0 13
High
Low
High
Low
High
Low
1st quarter
0.75
0.63
0.62
0.50
0.68
0.45
2nd quarter
0.67
0.60
0.57
0.45
3rd quarter
0.71
0.41
0.52
0.43
4th quarter
0.61
0.45
0.54
0.40
The trading of PRHC’s shares was suspended in 2003 due to the filing of the Petition for
Corporate Rehabilitation with Prayer for Suspension of Payments. It was reinstated on
October 21, 2004.
Holders
As of December 31, 2012 the Company had 2,527 stockholders. The list of the top
twenty stockholders of the Company as of December 31, 2012 is as follows:
Name of Stockholder
Citizenship
PCD Nominee Corporation
Greenhills Properties, Inc.
A Brown Company, Inc.
Campos, Lanuza & Co., Inc.
Philex Mining Corporation
Belson Securities, Inc.
Socorro C. Ramos
Ramon de Leon
Universal Travel Corp.
Brisot Economic Dev. Corp
Vulcan Industrial & Mining Corp.
National Bookstore, Inc.
Ricardo Leong
Calixto Laureano
Consuelo Madrigal
Wealth Securities, Inc.
Oscar S. Cu ITF Anthony Cu
Meridian Securities
Guoco Sec (Phils) Inc.
Citisecurities, Inc.
Guild Securities
Total
Filipino
Other
Alien
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
No. of Shares
Percentage (%)
2,021,438,853
27,775,679
41.07%
.56%
1,755,779,066
278,505,248
275,418,451
68,865,002
30,580,956
21,291,750
20,373,723
15,807,000
15,280,621
15,159,434
13,258,728
11,810,854
11,810,854
11,500,000
9,339,953
7,390,000
6,269,888
5,961,532
5,628,678
5,597,412
4,634,843,682
35.67%
5.66%
5.60%
1.40%
.62%
.43%
.41%
.32%
.31%
.31%
.27%
.24%
.24%
.23%
.19%
.15%
.13%
.12%
.11%
.11%
94.15%
Dividends
No dividend was declared by the Company since its last declaration on October 24,
1995. There are no unappropriated retained earnings to be distributed to stockholders
since 1997. In 1996, the Board of Directors approved the appropriation of P250 million
of the Company’s retained earnings for the purchase of its own capital stock.
Recent sales of unregistered securities
There were no sales of unregistered securities.
Part III
FINANCIAL INFORMATION
Item 6. Management's Discussion and Analysis or Plan of Operation
Refer to 1-B hereof. There are no material off-balance sheet transactions during the
reporting period.
Item 7. 2012 Consolidated Financial Statements of Philippine Realty and Holdings
Corporation and its Subsidiaries
Refer to Exhibit 2 hereof
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
The auditing and accounting firm of Maceda Valencia & Co. is the Company’s Independent
Public Accountants appointed in the 2012 Annual Stockholders Meeting. There was no event
where Maceda Valencia & Co. and the Company had any disagreement with regard to any
matter relating to accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
Audit and Audit Related Fees
The professional fees of independent auditors Maceda Valencia & Co., for 2011 and 2012
amounts to P822,250 and P862,500, exclusive of VAT, respectively. Out of pocket expense
is pegged at 15% for 2011 and 2012.
Tax Fees
We did not engage the services of our auditor, Maceda Valencia & Co. with regard to tax
services.
PART IV
MANAGEMENT AND CERTAIN SECURITY HOLDERS
Item 9. Directors and Executive Officers of the Registrant
Gerardo Lanuza, Jr./ 66 – Other Alien/Spanish
Mr. Lanuza, has served as Director of PRHC since 1981 and has been its Chairman for the past
fifteen years. He also holds the following significant positions: Chairman of Universal Travel
Corporation, Greenhills Properties, Inc.; Director, Meridian Assurance Corp., Xcell Property
Ventures, Inc.. He is also a Member of the Philippine Stock Exchange, Inc.
Antonio O. Olbes/ 66 - Filipino
Mr. Olbes, has served as Director of PRHC since 1986 and as a Vice-Chairman of Philippine
Realty for nineteen years. His concurrent positions are: Chairman of File Managers, Inc.;
Director of Greenhills Properties, Inc., Universal Travel Corporation and Xcell Property
Ventures, Inc.
Juan Antonio Lanuza/ 75 – Other Alien
Mr. Lanuza has served as Director of PRHC since 1987 and has been a Vice-Chairman for
fourteen years. He is also a Director of Greenhills Properties, Inc. and Campos Lanuza & Co.,
Inc.
Ramon C-F. Cuervo, III / 59 (Independent Director) - Filipino
Mr. Cuervo has served as Independent Director for nine years. He has also held the following
significant positions: Chairman of Property Partnership, Inc. and Cuervo Far East, Inc. Director
of R. F. Cuervo, Inc. and Member of Manila Board of Realtors, Inc., Philippine Association of
Real Estate, International Real Estate Institute, Institute of Philippine Real Estate Appraisers,
Philippine Association of Real Estate Consultants, and Financial Executive.
Manuel O. Orros/66 (Independent Director) - Filipino
Mr. Orros has served as Independent Director of PRHC for nine years. He is a
Director/Treasurer of Australian International Export-Import, Inc. and the President of O’ Mai
Khan, Inc. in Baguio City.
Amador C. Bacani/65 - Filipino
Mr. Bacani, has served as Director of PRHC since 1998 and is currently the President of PRHC
after serving as its Executive Vice President for seven years. His concurrent positions are:
President and Director, Xcell Property Ventures, Inc., Chairman of Tektite Insurance Brokers,
Inc. and PRHC Property Managers, Inc.; Director, Universal Travel Corporation and Meridian
Assurance Corporation.
Atty. Mariano C. Ereso, Jr./80-Filipino
Atty. Ereso has been the Principal/Head-Tax Consulting of various auditing/law firms of which
include Laya Mananghaya & Co., CPAs/KPMG, from October 1995 to September 30, 1999 and
Ongkiko Kalaw Manhit Acorda Law Offices since October 1999. His expertise in the field of
taxation has led him to be the Team Leader of the Presidential Fact Finding Committee for the
Improvement of the operations of the Bureau of Internal Revenue and Chairman of the
Committee for Review and Codification of Income Tax Regulations.
Gerardo Domenico Antonio V. Lanuza/30 – Filipino
Mr. Lanuza was elected as Director on January 15, 2009. He is currently Vice President-Special
Projects of PRHC, Vice President of Campos, Lanuza & Co., Inc. and Director of A Brown Co.,
Inc.
Gregory G. Yang/56 – Filipino
Mr. Yang is currently the Senior Vice President of McDonalds Philippines. He had been a
Branch Manager of International Corporate Bank prior to his stint at McDonalds. He was
elected as Director last August 20, 2009.
Andrew C Ng/30 – Filipino
Mr. Ng is currently the Vice-President of Alpha Alleanza Manufacturing, Inc. He was formerly
Operations Manager of Pinnacle Foods, Inc. He was elected as Director last August 20, 2009.
Andrew D. Alcid/54 – Filipino/American
Mr. Alcid was elected as Director on November 8, 2012 to fill the vacancy in the Board arising
from the death of Mr. Eduardo Gaspar in March 2012. Mr. Alcid is the President and CEO of
Coastal Road Corporation and Knowledge City Holdings & Development Corporation. He
occupied the same position in AXA Philippines from 2006 to 2008.
Significant Employees
Any director or officer who may be elected is expected to make significant contributions to the
operations and business of the Corporation. Likewise, each employee is expected to do his share in
achieving the Company’s set goals.
Family Relationships
Mr. Gerardo Lanuza, Jr., Chairman of the Board, is the younger brother of Mr. Juan Antonio Lanuza,
Vice Chairman of the Board; first cousin of Mr. Antonio O. Olbes, and father of Director, Mr.
Gerardo Domenico Antonio V. Lanuza. Mr. Gregory Yang is the father-in-law of Mr. Gerardo
Domenico Antonio V. Lanuza.
Involvement in Certain Legal Proceedings
There are no legal proceedings against the directors and officers of Philippine Realty and Holdings
Corporation within the categories described in Annex C Part IV (A) of Rule 12 for the last five years.
Item 10. Executive Compensation
CEO & four most highly
compensated executive officersGerardo Lanuza (Chairman of the
Board), Amador C. Bacani (President),
Jose Ma. Francisco (Vice PresidentFinance and Admin.until August
2011), Jose F. Santos (Vice President
– Mktg and Bus. Dev.),Gerardo
Domenico Antonio Lanuza, Robirose
M. Abbot (Vice President Finance and
Admin. since September 1, 2011)
All officers & directors as a group –
Other officers include: Juan Antonio
Lanuza (Vice-Chairman), Antonio
Olbes (Vice Chairman), Dennis
Aranaz (Construction Manager) and
Josefa Ma. Bernadette Dizon
(Accounting Manager)
Per Diem
Other Annual
Compensation
Total
None
None
None
117,000.00
111,000.00
84,000.00
None
None
None
11,126,340.32
10,400,103.10
8,874,436.82
13,329,627.43
None
195,000.00
None
13,524,627.43
12,457,595.73
11,435,086.08
None
None
162,000.00
414,000.00
None
None
12,619,595.73
11,849,086.08
Year
Salary
2013(est.only)
2012
2011
11,009,340.32
10,289,103.10
8,790,436.82
2013(est.
only)
2012
2011
Bonus
The Executive Officers are elected annually by the Board of Directors, at its first meeting following
the annual stockholders’ meeting. Every officer, including the President, is subject to removal at any
time by the Board of Directors. All officers hold office for one year and until their successors are
duly elected and qualified; provided that any officer elected to fill any vacancy shall hold office only
for the unexpired term of the office filled.
The compensation of the Company’s executive officers is fixed by the Board of Directors. They are
covered by contract of employment and as such they are entitled to all the benefits accruing to
salaried employees of the Company.
Compensation of Directors
Directors are entitled to a per diem of P3,000.00 for board meetings attended except for independent
directors who received P10,000.00. In addition, the board is entitled to a portion of the 5% of net
income before tax profit-sharing incentive for directors, officers and staff.
The directors of the registrant received per diem in the amount of P488,000, P414,000 and P458,000
for 2012, 2011 and 2010, respectively.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following persons are known to the Company to be directly or indirectly the record or
beneficial owner of more than 5% of the Company’s voting security as at December 31,
2012.
Title
Name and Address of
Record/Beneficial Owner
Record/
Beneficial Ownership
Number of
Shares Owned
Citizenship
% Owned
Common
PCD Nominee Corp.
MSE Bldg., Ayala Avenue,
Makati
“R”
Filipino/
Non-Filipino
2,049,214,532 shares
41.63%
Common
Greenhills Properties, Inc.
E-2003B, PSE Centre
Exchange Road, Pasig City
“B”
Filipino
1,755,779,066 shares
35.67%
Common
A.Brown Company, Inc.
Xavier Estates
Uptown Airport Road
Cagayan de Oro City
”B”
Filipino
278,505,248 shares
5.66%
Common
Campos, Lanuza & Co., Inc
E-2003B, PSE Centre
Exchange Road, Pasig City
“R”/”B”
Fil./American
Spanish/Other
Alien
275,418,451 shares
5.60%
Note: Greenhills Properties, Inc. is represented by its President, Gerardo Lanuza, Jr. and
Treasurer, Antonio O. Olbes.
Campos, Lanuza & Co., Inc. is represented by its President, Corazon Lanuza and
Vice President, Antonio Reyes-Cuerva while A Brown Co., Inc. is represented by its
Chairman, Walter W. Brown and Treasurer, Annabelle P. Brown.
PCD Nominee holds 41.63% interest. PCD Nominee is the registered owner of
shares beneficially owned by participants in the PCD. Campos, Lanuza & Co., is a
participant of PCD owning 29.363 % of the company’s voting securities.
Shares held by Directors and Executive Officers as reported by transfer agent as of 31st
December 2012:
Title
Common
Common
Common
Names
Antonio O. Olbes
Amador C. Bacani
Gerardo Lanuza, Jr.
Common
Common
Common
Gregory Yang
Juan Antonio Lanuza
Gerardo Domenico
Antonio V. Lanuza
Andrew D. Alcid
Andrew Ng
Mariano C. Ereso, Jr
Manuel O. Orros
Ramon F. Cuervo, III
Directors and Officers As a
Group
Common
Common
Common
Common
Common
Common
No. of Shares
Owned
506,388
229,980
174,024
Voting Trust Holders of 5% or more
Record/Beneficial
Ownership
“B”-Direct
“B”-Direct
“B”-Direct
100,000
78,035
“B”-Direct
“B”-Direct
59,000
50,000
10,000
10,000
1
1
1,217,429
“B”-Direct
“B” Direct
“B”-Direct
“B”-Direct
“B”-Direct
“B”-Direct
“B”-Direct
%age Owned
Citizenship
Filipino
Filipino
Other Alien
Spanish
Filipino
Other Alien
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
0.010%
0.005%
0.004%
0.002%
0.002%
0.001%
0.001%
0.000%
0.000%
0.000%
0.000%
0.025%
Phil. Realty knows of no persons holding more than 5% of common shares under a voting
trust or similar arrangement.
Change in Control
As of the present, there is no change in control nor is the Company aware of any
arrangement that may result in a change in control of the Company since the beginning of
the last fiscal year.
Item 12. Certain Relationships and Related Transaction
These are transactions with our subsidiaries, Universal Travel Corporation and Alexandra,
USA wherein the Company extended non-interest bearing loan as additional working capital.
In 2008, we provided for allowance for doubtful accounts on our receivable from Alexandra,
USA. Also, in the same year we extended interest bearing loan to PRHC Property Managers,
Inc. as additional working capital. Advances made by our subsidiary, Tektite Insurance
Brokers, Inc. represent advance payment of insurance premium on behalf of the Company.
The Company has not entered into any material transaction nor is it a party to any
transaction in which any director, executive officer or significant shareholder of the
Company or any member of the immediate family of any of the persons mentioned in the
foregoing had or is to have a direct or indirect material interest.
Compliance with Corporate Governance
The Company, its directors, officers and employees, complied with the leading practices and
principles on good corporate governance as embodied in the Company’s manual. The
Company submitted the Amended Manual on Corporation Governance in compliance with
SEC Memorandum Circular No. 6 Series of 2009. In 2010, the Company substantially
adopted the PSE Corporate Governance Guidelines for Publicly Listed Companies
(Guidelines). In 2011, the Company accomplished the Philippine Stock Exchange, Inc.
(PSEI) Corporate Governance Guidelines: Disclosure Survey. In 2012, the Company
approved and adopted the Audit Committee Charter per SEC MC No. 4 Series of 2012; in
conjunction with the Charter is the creation of the Internal Audit Unit.
PART V
EXHIBITS AND SCHEDULES
Item 13. Exhibits and Reports on SEC Form 11- C
Exhibits
1. Management’s Discussion and Analysis or Plan of Operation
2.
2012 Consolidated Financial Statements of Philippine Realty and Holdings
Corporation and its Subsidiaries
3. Subsidiaries of the Registrant
Reports on SEC Form 11-C
(1)
March 13, 2012
(2)
March 21, 2012
(3)
July 18, 2012
Death of Mr. Eduardo Gaspar
Appointment of Mr. Andrew Ng as member of the
Compensation and Remuneration Committee to replace
Mr. Eduardo Gaspar
Advise on the Notice to Comply/Pay from the SheriffRTC Makati Branch 135 ordering our company to
comply with the Writ of Execution issued by the court
(4)
July 30, 2012
(5)
(6)
August 16, 2012
August 29, 2012
(7)
September 6, 2012
(8)
September 26, 2012
(9)
(10)
October 1, 2012
November 8, 2012
(11)
November 21, 2012
(12)
November 28, 2012
(13)
November 28, 2012
(14)
(15)
November 28, 2012
December 27, 2012
on July 9, 2012 on the SC judgment in favor of the claim
filed by Ley Construction and Development Corporation
Adverse resolution of the Court of Appeals on the
Motion of Reconsideration on the case PRHC vs.
Universal Leisure Corporation (ULC), DMCI Project
Developers, Inc. and Universal Rightfield Property
Holdings, Inc. (URPHI)
Postponement of Annual Stockholders Meeting
Approval and Adoption of the Audit Committee Charter
of the Company per SEC MC No. 4, series of 2012
Submission of the original signed copy of the Audit
Committee Charter of the Company
Annual Stockholders’ Meeting for 2012 set on November
20, 2012
Creation of the Internal Audit unit
Election of Mr. Andrew Alcid as Director to fill the
vacancy arising from the death of Mr. Eduardo Gaspar
Newly elected directors during the Annual Stockholders’
Meeting
Approval of Memorandum of Agreement with major
shareholder Greenhills Properties, Inc
Denial by Regional Trial Court of QC, Branch 93 to
terminate rehabilitation proceedings
Newly elected officers
Lifting of the Notice of Garnishment and Notice to
Comply/Pay issued on July 16, 2012 in connection with
the claim of Ley Construction and Development
Corporation (LCDC)
SIGN]$URES
Pulsuart to Secdon 17 of ihe SRC afld Section 141 of rte Co+oration Code thc
Itegistralt has duly caused this repor to be si$ed io bchalf of rhe ufldersigned, rlereunto
duly authodzed in Pasig City oD April _,2013.
PFIILPPINE REAI-TYAND HOLDINGS CORTORATION
Re!.isrraflt
Pursuant to the xcqu;emenrs of rhe SttC, dns ,nnunl hasbeenskned br dle
following pctsons in the capacitiesindicated.
. a444t
AMA.DORC. BACANI
?rcsident
(tlhicfIxecutiveOfliccr)
ROBIROSEM. ANBOT
Vicc President-linancc
((:hieFFinanceOfficer)
w^h,w,,M
YAccourr.ing
M"n+tc!
[
REX P. BONIFACIO
(lorpomtcSectctnry
suBscRll.it:D
,lND SvoRNror,"fore,nc
diirf Apl Tnl,tur^n,,,,
a,,,r.
c\hjbidng ro me LhcirCommuniryTar Ccnir:care., L.U"-.,
"rou.o
""
Community Tax
Ccrti6c,rc.No.
Date oflssuc
Robiro\eM. Abbot
loscfaMa. B. Dizon
07872230
06146139
01373762
1/25/ 13
Nfuntnlupa Cir!-
1 / 1 7/ 1 3
Rex Ir. Bonifacio
22UhJ23.a
1/11/13
Mmila
X.Ianil,r
l\fakati Citv
/Yt4t4
,rt:r:nlr,
-k?,.,
'. . ,i}.-4.?*
'-w-
'))i a Et ^^I?
1/3r /\3
4
I\_/ ),".:'-'
i .l :
I
EXHIBIT 1
MANAGEMENT’S DISCUSSION AND ANALYSIS
Sales of Skyline Tower slowed down as fewer units became available to buyers while new sales
were booked on sale of Icon Plaza units which is 47% completed as of year-end. Rental income
inched up due to escalation in rental rate. Gross Profit from the sale of condominium units in
2012 amounted to about P51.89 million higher by 34.44 million from 2011. Non-recurring
expenses dropped from P138.56 million in 2011 to P0.950 million in 2012 as no impairment
occurred in 2012.
The table below shows the material change from period to period in the Statement of
Comprehensive Income. Material shall refer to changes or items amounting to five percent (5%)
of the relevant accounts:
Sale of real estate
Other income
Cost of real estate
General and administrative expense
Other expense
2012
72.66%
1.68%
62.77%
32.51%
.18%
VERTICAL
2011
67.81%
11.79%
64.67%
50.33%
21.22%
2010
71.49%
12.22%
83.02%
17.43%
6.84%
HORIZONTAL
2012
2011
1.00%
(29.87%)
(86.60%)
(28.63%)
(8.57%)
(42.41%)
(39.10%)
113.49%
(99.19%)
129.44%
The Group posted a net income of P4.69 million in 2012; net loss of P213.02 million and P55.25
in 2011 and 2010, respectively. The loss in 2010 was due to the higher construction cost upon
resumption without adjustment on the selling price of old units sold, while loss in 2011 was due to
impairments recognized for investments and advances. The sale of real estate pertains to units
sold at Skyline Tower located at New Manila, Quezon City and Icon Plaza located at Bonifacio
Global City. Other income consists of an adjustment in the interest computation in settlement
expenses of LCDC in 2012 and the reversal of the allowance for decline in value of a Bonifacio
Global City lot and Leon Guinto property of P53.50 million in 2011 and 55.64 million in 2010,
respectively. Dividend income received from A Brown Co. contributed to income in 2010 of
about P19.10 million.
Our insurance subsidiary, Meridian Assurance Corporation (MAC), posted a net income of
P17.05 million, a turnaround from last year’s P7.56 million due to a sale of property located at
Quezon City with a gain in the amount of P6.74 million; and also an increase in interest income
from money market placements from P2.99 million in 2011 to P3.41million in 2012. Other
income on the other hand decreased from P2.12 million in 2011 to P.133 million in 2012.
Our property management subsidiary, PRHC Property Managers, Inc. (PPMI), registered a net
income of P2.25 million, which dropped by 1.58% from last year’s net income of P2.27 million
due to increase in direct cost. Currently, PPMI manages a total of 11 buildings located in various
cities in Metro Manila.
Tektite Insurance Brokers, Inc. (TIBI) the Group’s insurance brokerage firm posted an income of
P.459 million from last year’s income of P.099 million, due to increase in production.
Consolidated general and administrative expenses dropped to P170.51 million from P280.06
million in 2011 since no impairment occurred during the year compared to 2011 whereby the
Company set-up impairment loss on receivables and investments from subsidiary, Universal
Travel Corporation and affiliate Alexandra USA. Other expenses also dropped due to non-accrual
of interest on the judicial settlement on the Parent Company’s case with contractor LCDC
awaiting decision of the Rehab Court on this case.
The Company is aware of the causes of the continuous losses it incurred for the last three years.
However, we could not avoid the high costs of labor and materials at the time we resumed the
construction of Skyline Tower which we could not pass on to our old buyers.
The table below shows the material change from period to period in the Statement of Financial
Position. Material shall refer to changes or items amounting to five percent (5%) of the relevant
accounts.
Cash and cash equivalents
Available for sale investments
Trade and other receivables-net
Prepayments and other assets
Real estate inventories
Real estate held for dev and sale
Investment properties
Trade and other payables
Funds held in trust
Reserves
2012
13.57%
7.74%
17.64%
4.67%
20.45%
21.46%
9.22%
8.52%
15.58%
9.20%
VERTICAL
2011
11.14%
7.21%
10.53%
5.61%
14.56%
35.59%
10.06%
8.21%
16.07%
8.92%
2010
7.48%
7.53%
10.00%
5.42%
24.46%
34.93%
3.06%
4.75%
15.19%
8.63%
HORIZONTAL
2011
2010
28.35%
45.86%
13.04%
(6.21%)
76.56%
3.15%
(12.40%)
1.48%
47.97%
(41.67%)
(36.47%)
(0.19%)
(3.43%)
221.99%
9.37%
69.44%
2.17%
3.60%
8.69%
1.19%
The Company’s total assets stood at P4.19 billion as of year-end 2012, higher by P214.00 million
from the end-2011 level. The Company’s real estate assets comprise 41.91%; 50.15% and 59.39%
of the total assets of the Company for 2012; 2011 and 2010, respectively. Real estate inventories
increase due to take up of Icon Plaza units corresponding to the cost of the FBDC Lot 9-4
contributed to the joint venture with Xcell Property Ventures, Inc. In 2011, the dropped in real
estate inventories was due to the reclassification of Tektite I and II properties and provincial lots
to investment properties.
As at year-end, cash and cash equivalents reached P569.02 million, which is about 13.57% of the
total assets. Cash flow from operations, generated mainly from collections of receivable accounts,
underwriting, lease rentals, management and consultancy fees, were utilized to settle current
payables.
Trade and other receivables increased by 76.56% from P418.83 million in 2011 to P739.49
million in 2012 due to the recognition of receivable from the sale of units of Skyline and Icon
Plaza units. The receivables comprise about 17.64% of the total assets of the Company.
Available-for-sale investments rose in 2012 due to additional acquisition of investment by our
subsidiary, MAC. Also, in 2012 the Parent Company disposed 2.51 million of A Brown shares
from which we realized a gain of P3.33 million. In 2011, AFS investments declined due to
disposal of investments made by MAC. In 2010, lower share price of A Brown Company, Inc.
(ABCI) shares brought AFS down by 12.50%. Also in 2010, ABCI declared a cash dividend of
P0.20 per share which the Company recognized as income amounting to P19.10 million in 2010.
Further, ABCI declared a 16:1 property dividend, thus increasing shares held by 5,970,000 shares.
Trade and other payables increased from P326.60 million to P357.19 million due to increase in
Claims outstanding by subsidiary Meridian Assurance Corporation from P29.62 million in 2011
to P39.80 million in 2012. Unearned income rose due to the recognition of percentage
uncompleted on sale of Icon Plaza Units as of year-end 2012.
Total cash received from JV partner, Xcell Property Venture, amounted to P653.09 million as of
end 2012. Part of these funds was used to settle full obligation with Landbank of the Philippines.
As a result of the foregoing, the Company’s stockholders’ equity went up to P2.90 billion from
the prior year’s P2.86 billion.
Top Five Performance Indicators
Gross Revenue
Current Assets
Current Ratio = Current Liabilities
Liabilities
Debt-to-Equity Ratio= Equity
Book value per share=SHE + Subs. Rec.
# of shares outstanding
Earnings Before Interest, Tax, Depreciation and
Amortization
2011
2012
P 470,993,400
2,464,867,748
992,334,482 = 2.48
0.00
P 454,268,436
1,812,086,837
814,463,710 = 2.22
0.00
3,408,216,555
4,877,907,002 = .69
3,373,090,090
4,877,907,002= .69
P1,438,282
( P 222,448,982)
Gross revenue includes sale of real estate, rent, commission, management fees and underwriting
income. The increase in occupancy of leased areas, rental rates and number of customers will
contribute significantly to the cash inflows of the company.
The Company has filed with the court a petition for corporate rehabilitation with prayer for
suspension of payments in 2002. Settlement has been reached with all the five creditor banks
through dacion-en-pago, cash payments from the sale of assets and loan restructuring. The
Company has completed another major component of the rehabilitation plan which is the
completion of construction of the Andrea North Skyline Tower. This led to the Company’s filing
of the Motion to terminate rehabilitation proceeding on the account of successful implementation
of the Rehabilitation Plan last February 2011. The Rehabilitation Court denied our petition on the
account that the Company has still substantial obligation to settle per Rehabilitation Plan.
The Company’s obligation that will have effect on cash is the settlement of its obligation to
contractor, Ley Construction Development Corporation (LCDC) which amounts to about P57
million plus legal interest from 1996 to present. The expense was booked in 2011. There is no
other event that will trigger direct or contingent financial obligation that is material to the
Company. Moreover, there are no material off-balance sheet transactions, arrangements,
obligations and other relationships of the Company with unconsolidated entities or other persons
created during this period.
Planning and design of the next tower at Andrea North Towers to be called “Skybreeze”, is in its
final stages and construction is ongoing. Construction of the joint venture project, Icon Plaza in
the Bonifacio Global City with Xcell Property Ventures commenced mid 2010 is ongoing.
EXHIBIT 3
SUBSIDIARIES OF THE REGISTRANT
(as of December 31, 2012)
Name
Tektite Insurance Brokers, Inc.
PRHC Property Managers, Inc.
Meridian Assurance Corporation
Universal Travel Corporation
Le Cheval Holdings, Inc.
Alexandra (U.S.A), Inc.
% of Ownership
100.00%
100.00%
86.66%
81.53%
45.00%
45.00%
PHILIPPINE REALTY AND HOLDINGS CORPORATION
FINANCIAL SOUNDNESS INDICATORS
2012
Current Ratio:
Indicates ability to cover short term
obligations
Current Assets/
Current Liabilities
Net Profit Margin:
Shows how much profit is made for
every peso of revenue
Net Income/
Total Revenues
Asset Turnover:
Shows efficiency of asset used in
operations
Leverage Ratio (D/E Ratio):
Measure of how much of a company's
assets are funded through borrowing
and how much through equity
Interest Rate Coverage Ratio:
Determine how easily a company
can pay interest on outstanding debt
2,464,867,748
992,334,482
4,687,519
524,475,278
2.48
0.89%
2011
1,812,086,837
814,463,710
(213,015,261)
556,479,261
2.22
-38.28%
Total Revenues/
Ave. Total Assets
524,475,278
4,085,292,636
0.13
556,479,261
4,019,630,221
0.14
Liabilites (Loans Payable)
Total Equity
0
2,898,434,442
0
0
2,863,307,977
0
EBIT/
Interest Expense
(22,678,399)
-
0
(234,701,380)
-
0
Gorporation
Realty& Holdinds
Philippine
STATEMf,NT OX MANACIMf,NT'S RtrSPONSIBILITY
Tlrc nanagcmcnl of Philippinc Realtr and Hordings corpomtion and subsidiaries( rc .,cloup') is responsible
for
the prepantion and fiir prcsentationoflhe fi'ancial st.tenenrs for thc vea$ endcdDecembcr3t. 2012. 20
and
2010, including the additiolal conrponenlsartachedthercir\ in accorclancewilh the
Fcscribed financial rE)orting
liamc\uork ildicated lhcrein. This rcsponsibility inchdcs dcsigningard inptementrnginte,nal conlrols
rcrcvantro
urcpreparalioll
ard fair prcscnlatiolof fioanciirlslalcnentsthalarefrcc horrr alcrialmisslatcme.rrhctherdcto
fraud or e'or. selecling md apprvi4 appfoprirte accountiru poricies.and nukirg accounlirg estirnarcs
tlur arc
rcnsomblein thecircunstanccs.
Thc BoardofDircclorsrcvicwsandapprovcs
tl€ financiarstatemcnts
andsubnis rhcsamero drcstockhoralers.
Maccdavalcncfu& co.. drc i,depend€nl
auditofappoirtedbv the slockholar€rs
for lhe periodDecernbcr
ll, 2012.
2011 artd2010.hase\rm inedthc financialslatcrnensof t hc cofipa in accorcrtcc $,itr philippine
slnrdards
l
on
Audiling' and in its ropoi ro ihe slockhorders.
rrascxpresscd
ils opi.ion or rhc fnimcssoi pfescntationuDon
conrpicrron
of (ltchc\,tu ui ton
Sisnrturc
Chrirn{n ofthcBolrdt Ccr{rdo Lnnuzn,Jr.
stg,.,t\ttrc :X*
/1
^ Pz
A
ll
' -:-l-J'
Chicf ExccutivcOtlicer/prcsident:Amt{lor C. Blrcnni
Sisnatfic-A/'di.&e'fr"
A4.t *
Chicf FinAnciatOItcer/Trrasur{r: Robirose}l Abbqt
Sisned
dns llPdr\ of t/gr !0r,
54. Rm.512-5l3 E.sr To\rcr. PhilippnreStoc( LxchangeC.nrrc. Ex chanecRoad,Onig. s Cenlcr, l)asigC itv l605
| a \ : ( 6 3 2 )6 l 'r - 1 5 0 '1
Tel.Nos . : 631- 3179t o 80. 631- 8579loljo
1
Coruoration
Philippine
Realty&Holdintls
tt\
l-l
AND swoRN o before.$$ $ft(
ESCRIBED
iliiij
day of Apdl 2013,afEenrssdibiting 10me rhei
Cornmudtv Trx Cedi6cates. as followE:
Names
C.T. Celt.
No.
D4te of Issu€
Placeoflssue
Gcmldo Ln$r,aJ!.
07735695
07.25.13
PasigCity
Amrdol C. B.cani
01812230
01.25.13
Munxir upeCity
RobirorcM. Abbot
061M139
01.17.'13
Marlila
rtltAua!"
ra6Etts.4iaoK rlD'/r!.
\rnEeg1t)t
Until lra- lll ' iii
M A1'1lii"lr l.ll
'"1r.:rir'!
A.DM.
Pfltf i619.1ir .rli
.,;,
t r1'::I 'i.
IBPtl3.l:liS0.0
Rol)#16tl"J-0:i :'.i'!.)i
'
TIN# {10.r:l!.lill,
MCLf,# 00 8t$
d ,? [^Brd St" Prsj. d, (Ii,.
5/F, Rm. 5 12-513 E.st Tow€r, Phililpine Slock Exchange Centre Exchdge Roa4 Ortiga Cent€., P6ig Citv, 1605
Fd: (632) 634-l s04
Tel. Nos.: 63 l-3 | 79 lo 80. 631-8579lo 80
MACEI]AVALINCIA& CO.
(rtr.:i rl nl ts
C i :ri r !d []l ti r ,1(ri ,rl .tnfs and Man.S ernl rrr
BOA/I'RC
Re8slirtio N,) 'rru
BOAadtego\' 1.. ia
S E (:
A ..r.d tat.n N .. I l'r a r
F5l ' A .. r ! f r ld
AUDITORS
REPORT
OF INDEPENDENT
TheStockholders
and Boardof Directors
PhilippineRealtyand HoldingsCorporation
AndreaNonh Complex
Baete DrivecornerN. DominSoStreel
New Manila,QuezonCity
Repon on the Consolidated Financia/ Statements
finnncialslalements
of PhilippineReaty and
We have auditedthe accompanying
consolidated
(the"croup"),which comprisethe consolidaled
stat€ments
of
Ho din8scorporationand subsidiaries
financialpositionasofDecember:ll,20l2,20lland20l0,andlheconsolidatedslatemenlsofiot:l|
of changesin equily, and lhe consolidated
comprehensive
income,th€ consolidated
slatements
accounlingpo icies
of cashflowsfor the yearsthenended/:Lnda summaryof significanl
slalements
andotherexplanatory
informalion.
Managetnent's R6pansibi/ity l'or the Latralidated FhtrnciaI Slalemenls
financial
and fair presenlalion
ot theseconsolidated
Managemenlis fesponsible
for the preparalion
and for suchinLelnal
control
slalemenls
in accordanc€
with PhilippineFinancialReponingStandards,
preparation
lhal
are
free
managemenl
is
necessary
to
enable
the
of
financial
statemonls
as
determines
due
lo
fraud
or
error,
frommaLerial
misslAtement,
whether
A udi tors' Responsibi Ii ty
financialslalemenls
basedon o!r
our rcsponsibilily
is lo expressan opinionon iheseconsolidaied
on AuditinS. Those
audiis. We conductedour auditsin accord)ncewith PhilippineSlandards
and plan and performthe auditto obt,rin
standards
fequirelhal we complywiih eihica reqLriremenls
reasonableassLrrance
whelher lhe consolidatedfinancial statemenlsare free from maierial
procedures
to obiainaLrditevidenceaboutthe amounlsand disclosures
An auditinvolvesperforminB
selected
in the consolidated
financialstaiernents.
The pfocedures
dependon the auditors'judBmenl,
of the consolidated
finrncialstatements,
includinBthe assessment
of lhe risksof materialmisstatemenl
the auditorsconsiderinternacontrol
whetherdue ro fraudor error. In makingthoseriskassessments,
of the consolidaled
linancialshtementsir
relevrntlo the en(ily'spreparation
and fair presenlation
in the circumstances,
bul nol for lhe purposeof
orderto designauditprocedures
that areappropriate
of the entity'sinternalcontrol. An audit also inc udes
expressing
an opinionon the effectiveness
enessof accounting
of accolrntingpoicies Lrsedand the reasonab
evrluitin8 the appropriaieness
the overallpresentaiion
of the consolidaled
estimates
made by management,
as well as evaluating
financialstatements.
srir) :1) , :lil ..i thfsions
l l . r r . . l ra i i ; l : l t I'r i i p p i n cs
l . i . t r . . r i f 6 : r (2 ) 4 0 r 7 2 2 6 l o :j i ,
.:r'.w.Mvco..jrr.ltb
I ![!!!.:.:r].i..rl
MAa::DAV,{lllClA & CO.
l:l..il1:irrll)rl,l . A,jconntaIi ,i:ra ,r1,.,i1..ri,:r1l o|EUhanrs
We believetha he auditevidencewe haveobtainedis sufficient
and appropriate
to providea basis
for our auditopinion.
Opinion
financialslatements
presentfairly, in all maierialrespects,
the
In our opinion,the consolidated
financialpositionof PhilippineRealtyand floldin8sCorporation
and Subsidiaries
as of December3l,
performance
and their(ashflowslor the yearsthenended
2012,2011and2010,andtheirfinancirLl
Repo(ingStandards.
in accordanc€
with PhilippineFinancial
Etnphasb ofMatter
to Not€ 1 lo the consoid.rtedfinancialstatements,
Withoutqualifyingour opinion,we draw altention
(the"ParenlCompany")
which describe
the sratus
of rh€ PhilippineReaty and uoldingsCorporation's
operations.
The ParenrCompanyhassufferedsignificant
Losses
from operations
which resuhedlo a
substanlial
amountof deficit. Thesercndilions,alongwilh othermallersdescribedin Note I to the
which may cast
consolidated
financialslatements,
indicatethe erislenceof a rnaterialunceftainty
doubtaboul the ParentComp:ny'sahilityto continueas a goin8concern.Management
is awareof
these conditionsand has accordinglyinstiluledits plan and actionscon(erninSthese matters,
programfiledwith the Regional
includingunderBoinS
a (:orporate
rehibilitation
TrialCou( ol Quezon
progfam
pay
farrind jun manner,
The
objecrives
of
lhe
rehabilit.ltion
are
to
all
its
creditors
rn
a
Cily.
proj€d
condominilrm
lo
ils
€xislinB
buyers,
and protectlhe
to completeand deliveran Lrnfinished
p.lrticularly
I
public
viable
inveslmenls
of lhe shareholders,
the sma
investorc,
by keepingthe blrsiness
profitab
and
c. AsofDe(emberiJ1,2010/theParentCompany'sbankdeblshavebeen[rllypaidand
from
the AndreaNorth SkylineTower(AndreaTower)was completedin Oclober2011. Proceeds
(ash
which can be utilizedLoflrndfLrlure
developmenl
new saes of AndreaTowerwill represent
free
projecls. Accoftlingly,lhe accompanying
finan(ialstirlemenls
consolidaLed
have been prepared
the
assumingthat lhe Plrent Companywill (onlinue as a going concern,which conLemplales
of llabllities
in the normalcourseof business.ll doesnol include
rei|lizalion
of assels
and settlemenl
anyadjuslmenls
thatmay resLrll
fromthe outcomeof thisuncertainly.
Repott on Otller LeBaland Re9ulatory MatLers
Our auditwas conducledL,r ihe purposeof forminBan opinionon the basicconsoid|led financial
inlormalionshown in the Scheduleof Philippine
statements
takenas a whole. lhe sLrpplcmeniary
of
FinanciaRepo(in8Slandards
effectiveas of December31,2012 (Part1,41),Map of relalionships
(Parl
parties
l,4H);Schedule
of
receivables/payab
with
related
the companies
within the Group
es
(Pad 2, Annex 68-E)and Forrn 174 as additionalcomponent
eiminated during consolidalion
of
Regulation
Code,as Amended,are presented
for purposes
requiredby Rule68 of the Securities
filinS with the Securiliesand ExchangeCommissionand are not a requiredpart of the basic
The reconciliation
of reiainedearningsavailablefor dividend
consoiidated
financialstatements.
(Parl1, 4C and Annex68-C)are nol presenled
declar.rtion
because
the Cro{rpis in a defict posilion.
of mana8ement
to the
Suchsupplementary
informaiionis the responsibility
and hasbeen subjected
financirlstatements.
In our opinion,
auditingprocedures
appliedin lhe audiiofthe basicconsolidated
the supplementary
informationhns been preparedn accordancewith Rule 6{:}of the Securities
RegulationCode.
MACEDAVALFNCIA& CO.
CertlfiedPublic Acco{r'rtantsand ManagementConsultants
MACEDAVALENCIA
& CO.
I
tt
/1 |
f .Ul4r,Llc h .
ANTONIOO. MACEDA
JR,
CPALicense
No.20014
PTRNo.3837288
lssued
28,2013atMakatiCity
on February
Ai
SECAccreditation
No. 1169-4,Category
Effective
untilDecember
14,2014
SECAccreditation
No 0196-F;
Effective
untilApril27,2014
TtN 102-090-953
BIRAccreditation
No. 08'005063-0-2
012
24,2015
lssued
on January
24,2012;effective
untillanuary
BOA,/PRC
Reg.No.4748,effective
untilDecember
31,2015
Ap r il18,2013
MakatiCily
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011 and 2010
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2012, 2011 AND 2010
ASSETS
Cash and cash equivalents
Held-for-trading investments
Available-for-sale investments (AFS)
Held-to-maturity investments (HTM)
Trade and other receivables – net
Prepayments and other assets – net
Real estate inventories
Real estate held for development and sale – net
Investments in and advances to associates
Investment in joint venture
Property and equipment – net
Investment properties – net
Goodwill
Deferred tax assets
Note
2012
2011
2010
8
9
10
11
12
13
14
15
16
17
18
19
P569,014,062
20,502,751
324,389,699
50,308,581
739,491,593
195,665,329
857,339,901
899,518,696
222,667
60,142,943
63,367,088
386,654,919
5,374,610
20,301,194
P443,320,122
11,599,800
286,968,249
42,755,695
418,832,411
223,373,623
579,385,350
1,415,820,583
226,761
60,092,943
66,252,921
400,371,995
5,374,610
23,916,175
P303,934,148
11,171,877
305,979,914
36,725,106
406,023,206
220,106,714
993,271,634
1,418,545,543
88,803,995
59,352,943
64,176,387
124,342,445
5,374,610
23,160,681
P4,192,294,033
P3,978,291,238
P4,060,969,203
P357,189,181
143,387,726 653,087,170
49,655,207
52,516,210
3,674,080
11,042,650
P326,599,406
639,203,605
59,518,198
54,203,025
4,696,026
11,445,397
P192,827,156
41,314,580
617,000,000
59,171,428
52,446,341
3,555,539
7,141,313
1,270,552,224
1,095,665,657
973,456,357
4,493,913,645
385,547,010
(1,817,642,318)
4,493,913,645
354,720,993
(1,821,942,766)
4,493,137,408
350,543,683
(1,608,921,984)
40
LIABILITIES AND EQUITY
Liabilities
Trade and other payables
Unearned income
Funds held in trust
Unearned premiums
Retirement benefit obligation
Funds held for reinsurer
Deferred tax liabilities
20
21
22
23
24
25
40
Equity
Capital stock
Reserves
Deficit
29
30
Treasury stock
29
3,061,818,337
(163,383,895)
3,026,691,872
(163,383,895)
3,234,759,107
(163,383,895)
Equity attributable to equity holders of the
parent
Minority interest
31
2,898,434,442
23,307,367
2,863,307,977
19,317,604
3,071,375,212
16,137,634
2,921,741,809
2,882,625,581
3,087,512,846
P4,192,294,033
P3,978,291,238
P4,060,969,203
See Notes to the Consolidated Financial Statements.
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF TOTAL COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
Income
Sales of real estate
Rent
Management fees
Interest income
Net underwriting income
Commission
Gain on sale of investment property
Gain on sale of AFS investments
Gain on sale of held-for-trading
investments
Gain on sale of HTM investments
Gain on sale of property and equipment
Equity in net income of joint venture
Gain on sales cancellation
Other income
Costs and Expenses
Cost of real estate sold
General and administrative expenses
Equity in net loss of joint venture
Equity in net loss of associates
Other expenses
Note
2012
2011
2010
35
33
36
32
34
19
P381,108,362
23,618,772
23,406,432
33,419,230
25,944,698
16,915,136
6,737,348
2,941,782
P377,343,084
23,253,376
20,826,909
25,851,469
16,964,902
15,880,165
-
P538,098,609
25,022,477
18,383,578
23,549,719
18,294,250
16,141,180
-
1,469,261
45,476
44,500
8,824,281
10,735,161
65,624,195
21,268,026
91,944,074
524,475,278
556,479,261
752,701,913
329,218,189
170,504,504
13,057,642
4,094
950,018
359,897,212
280,055,226
7,254,435
11,201
118,111,098
624,897,920
131,178,810
93,463
51,464,985
513,734,447
765,329,172
807,635,178
15
37
38
15
16
39
Finance Costs
Income (Loss) Before Income Tax
Income Tax Expense (Benefit)
-
40
Net Income (Loss)
Attributable to:
Equity holders of the parent
Minority interest
Other Comprehensive Income (Loss)
Unrealized holding gain (loss) on
available-for-sale investments
Partial realization of revaluation surplus
31
10
30
Total Comprehensive Income (Loss)
Basic Income (Loss) Per Share
See Notes to the Consolidated Financial Statements.
41
-
492,526
10,740,831
6,053,312
(208,849,911)
4,165,350
(55,425,791)
(174,500)
P4,687,519
(P213,015,261)
(P55,251,291)
P2,633,472
2,054,047
(P213,784,321)
769,060
(P55,280,462)
29,171
P4,687,519
(P213,015,261)
(P55,251,291)
29,365,133
1,666,976
(889,211)
826,972
(57,588,034)
826,972
P35,719,628
(P213,077,500)
(P112,012,353)
P0.00
(P0.04)
(P0.01)
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
Note
2012
2011
2010
P3,688,679,636
P3,687,721,960
P3,687,461,960
1,314,901,371
(509,782,113)
114,751
1,315,859,047
(509,782,113)
114,751
1,316,119,047
(510,558,350)
114,751
29
4,493,913,645
4,493,913,645
4,493,137,408
30
385,547,010
354,720,993
350,543,683
(1,821,942,766)
2,633,472
(1,608,921,984)
(213,784,321)
(1,555,109,313)
(55,280,462)
1,666,976
826,972
826,972
(63,433)
640,819
(1,817,642,318)
(1,821,942,766)
(1,608,921,984)
(163,383,895)
(163,383,895)
(163,383,895)
23,307,367
19,317,604
16,137,634
P2,921,741,809
P2,882,625,581
P3,087,512,846
CAPITAL STOCK - P1 par value
Authorized - 8,000,000,000 shares
Issued and outstanding
3,688,679,636 shares in 2012;
3,687,721,960 shares in 2011; and
3,687,461,960 shares in 2010
Subscribed
1,314,901,371 shares in 2012;
1,315,859,047 shares in 2011; and
1,316,119,047 shares in 2010
Subscriptions receivable
Additional paid-in capital
RESERVES
DEFICIT
Balance at beginning of year
Income (Loss) for the year
Partial realization of revaluation
surplus
Application of catastrophe reserve
fund
30
30
Balance at end of year
TREASURY STOCK
125,674,005 shares
MINORITY INTEREST
See Notes to the Consolidated Financial Statements.
29
31
-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
Note
CASH FLOWS FROM OPERATING
ACTIVITIES
Income (Loss) before income tax
Adjustments for:
Impairment loss on receivables
Depreciation and amortization
Provision for retirement benefits
Impairment on investment in and
advances to associates
Unrealized holding loss (gain) on
trading investments
Equity in net loss of associates
Gain on reversal of allowance for
decline in value of real estate
Direct write-off of receivable
Unrealized foreign exchange loss (gain)
– net
Gain on sale of held-for-trading
investments
Gain on sale of property and equipment
Gain on sale of investment properties
Reversal of various liabilities
Amortization of premium on HTM
investments
Finance costs
Interest income
Dividend income
38
18,19
24,38
38
37
16
15
38
2012
2011
P10,740,831
(P208,849,911)
(P55,425,791)
24,116,681
7,456,416
15,507,800
12,221,062
7,798,353
1,665,757
10,920,041
7,585,291
60,657
4,094
-
101,774,677
2010
-
(427,923)
11,201
(998,488)
93,463
(53,499,445)
-
(55,640,000)
1,210,191
37,39
624,010
(103,633)
37
(1,469,261)
(44,500)
(6,737,348)
(7,409,073)
(1,869,616)
(2,207,374)
(33,419,230)
(533,350)
(5,843,089)
(25,851,469)
(766,269)
754,850
42,146,469
(10,400,942)
(20,251,688)
(8,817,447)
(159,898,262)
(68,686,979)
(321,283,028)
27,246,658
13,057,642
225,289,694
(41,422,016)
(3,728,545)
7,254,935
185,508,268
(37,195,590)
(72,702,561)
(41,390,993)
-
40,269,454
143,387,726
(1,021,946)
(9,862,991)
138,744,052
(41,314,580)
1,140,487
346,770
(22,880,536)
(199,752,127)
185,723
5,391,205
Cash provided by (used in) operations
Contributions to retirement benefit plan
Retirement benefits paid
Interest received
Dividends received
Income taxes paid
108,265,762
(9,143,231)
33,419,230
533,350
(3,807,270)
86,631,109
(641,669)
(5,400,000)
25,851,469
766,269
(2,983,148)
(437,031,858)
(779,442)
10,400,942
20,251,688
(1,829,347)
Net cash provided by (used in)
operating activities
129,267,841
104,224,030
(408,988,017)
Operating loss before working capital changes
Decrease (increase) in:
Trade and other receivables
Prepayments and other assets
Real estate held for development and sale
Real estate inventories
Increase (decrease) in:
Trade and other payables
Unearned income
Funds held for reinsurers
Unearned premiums
Forward
11
36
37
9,653,868
-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
CASH FLOWS FROM INVESTING
ACTIVITIES
Additional investments in joint venture
Reduction in investments and advances to
associates
Decrease (increase) in:
Held-for-trading investments
Available-for-sale investments
Held-to-maturity investments
Additions to property and equipment
Proceeds from disposal of investment
properties
Proceeds from disposal of property and
equipment
Note
2012
2011
17
(50,000)
(740,000)
16
10
11
18
(7,494,347)
(8,595,107)
(5,345,512)
(3,121,737)
6,884,500
18
16,429,217
(187,500)
(4,020,702)
-
2010
(220,000)
(8,921,363)
17,981,740
(1,243,900)
(6,965,234)
-
264,737
701,087
(17,457,466)
12,182,102
13,883,565
-
22,203,605
776,237
-
(227,486,420)
77,000,000
446,479,257
(42,146,469)
13,883,565
22,979,842
253,846,368
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
125,693,940
139,385,974
(154,510,406)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
443,320,122
303,934,148
458,444,554
CASH AND CASH EQUIVALENTS
AT END OF YEAR
P569,014,062
P443,320,122
P303,934,148
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Payments of loans payable
Increase in funds held in trust
Collection of subscriptions receivable
Finance costs paid
Net cash provided by financing activities
See Notes to the Consolidated Financial Statements.
26
22
29
631,243
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting Entity
Philippine Realty and Holdings Corporation (the “Parent Company”) was incorporated and registered
with the Philippine Securities and Exchange Commission (SEC) on July 13, 1981. The principal
activities of the Parent Company include the acquisition, development, sale and lease of all kinds of
real estate and personal properties, and as an investment and holding company. The Parent Company
was listed with the Philippine Stock Exchange (PSE) on September 7, 1987.
The Parent Company is 35.67% owned by Greenhills Properties, Inc. (GPI), a corporation incorporated
under the laws of the Philippines. The remaining shares are owned by various individuals and
institutional stockholders. GPI is PRHC’s ultimate parent company.
The financial position and results of operations of the Parent Company and its subsidiaries
(the “Group”) are consolidated in these financial statements.
The Parent Company’s registered office is at Andrea North Complex, Balete Drive corner
N. Domingo Street, New Manila, Quezon City.
The Subsidiaries referred to herein and in the accompanying consolidated financial statements and the
registered business activities and other information about the subsidiaries are discussed in Note 7.
Status of the Parent Company’s Operations
The Parent Company is operating under a court-approved rehabilitation plan. Its operations were
severely affected by the slump in the local real estate industry which resulted from the regional
economic crisis that hit the country in mid-1997. Due to the slump in sales caused by soaring interest
rates and the restricted availability of bank credit, the Parent Company was unable to service its debt
obligations. It resorted to dacion en pago (debt for asset swap) to reduce debts, suspended all its real
estate projects and cut its workforce to conserve cash but all these measures proved inadequate.
On December 12, 2002, the Parent Company filed a petition for corporate rehabilitation in the
Regional Trial Court of Quezon City (the “Court”). A Stay Order was granted on December 16, 2002
after the petition was deemed sufficient both in form and in substance. Among the salient features of
the Stay Order are as follows:
a.
A stay in the enforcement of all claims, whether for money or otherwise and whether such
enforcement is by court action or otherwise, against the Parent Company, its guarantors and
sureties not solidarily liable with the Parent Company;
b. Prohibiting the Parent Company from selling, encumbering, transferring or disposing in any manner
any of its properties, except in the ordinary course of business;
c.
Prohibiting the Parent Company from making any payment of its liabilities outstanding as of the
filing of instant petition;
d. Prohibiting the Parent Company’s suppliers of goods and services from withholding supply of
goods and services in the ordinary course of business for as long as it makes payments for the
goods and services supplied after the issuance of this Stay Order; and,
e.
Directing the payment in full of all administrative expenses incurred after the issuance of the Stay
Order.
Following the Parent Company’s filing for corporate rehabilitation, the PSE issued an indefinite trading
suspension of the Parent Company’s stocks. The trading suspension was subsequently lifted on October
21, 2004.
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Subsequent to the issuance of the Stay Order, the Court conducted a series of hearings for the purpose
of receiving various inputs from the Parent Company, the creditors, and the rehabilitation receiver as
well. Further discussions resulted in the filing of an amended rehabilitation plan.
In the course of the proceedings, the Court noted that all the creditor banks were in agreement that the
Parent Company is susceptible to rehabilitation as it is solvent and its business is viable. The singular
stumbling block to the remaining creditor banks’ agreeing to the amended plan was the matter of the
valuation of the assets of the Parent Company which were sought to be the subject of the dacion.
The Court’s study of the rehabilitation receiver’s recommendation and evaluation report revealed that
the concerns of the reluctant creditor banks have been duly addressed by the modifications suggested
to be made part of the amended rehabilitation plan. The Court noted with approval the determinations
of the rehabilitation receiver, with respect to the matter of reasonable valuation of the concerned
properties. The recommended combination of a debt restructuring and a dacion en pago as integral
components of petitioner’s amended rehabilitation plan was found to be fair and viable. The amended
rehabilitation plan was approved by the Court on June 11, 2004. The court-approved rehabilitation
plan is discussed below.
Rehabilitation Plan
The objectives of the rehabilitation plan are to pay all its creditors in a fair and just manner; to
complete and deliver the Andrea North Skyline Tower condominium units, a high-rise condominium in
Balete Drive corner N. Domingo Street, New Manila, Quezon City, Philippines, to its existing buyers;
and to protect the investments of the shareholders, particularly the small public investors, by keeping
the business viable and profitable.
The court-approved rehabilitation plan of the Parent Company includes the following:
a.
Creditor Banks
The court-approved rehabilitation plan proposes a partial dacion en pago and a partial
restructuring as the mode of settlement.
Under this plan, P1,311 million of bank debts, shall be settled via dacion en pago.
i. The dacion shall be at appraised value of the properties as determined by independent
appraisers appointed by the Court or as agreed upon by the Parent Company and the respective
creditor bank.
ii. The dacion shall be executed under the Special Purpose Vehicle Act of 2002 and its
implementing rules and regulations.
The balance of P891 million shall be restructured and divided into two (2) tranches:
Tranche A Term Loan Facility
Amount:
P180 million
Tenor:
Ten (10) years
Interest:
Five Percent (5%) per Annum (Simple)
Tranche B Zero Coupon Bond Facility
Amount:
P711 million
Tenor:
Up to fifteen (15) years
Interest:
Five Percent (5%) per Annum (Simple)
The restructured debt shall be secured by properties in the total amount of P1,475 million.
-2-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b. Buyers of Andrea North Skyline Tower Project
Under the approved rehabilitation plan, the Parent Company will complete the Andrea North
Skyline Tower Project by entering into joint ventures for the development of properties, principally
three (3) Bonifacio Global City lots, it shall retain after the dacion en pago settlement with creditor
banks and channeling its share of the joint venture proceeds to the Project.
c.
Other Financial Obligations
The liabilities to other third parties such as the government and its agencies, utility companies,
suppliers and contractors shall be paid from free cash generated after providing for the completion
of the Skyline Tower and the payment of the restructured bank debt.
As of December 31, 2010, the Parent Company has fully paid its debt of P2.2 billion at the time of the
Parent Company’s filing for rehabilitation in 2002.
As of December 31, 2012, 2011 and 2010, the Parent Company’s debt-to-equity ratio stood at 0.00:1
due to the continued pay out of its long-term obligations. The total finance costs recognized on interest
bearing obligations amounted to nil in 2012 and 2011 and P0.49 million in 2010. Since the Parent
Company’s bank debts have been fully paid and the completion of the Andrea North Skyline Tower
was funded by proceeds from joint venture of Bonifacio Global City lots, and the partial collection of
receivables from subscription to the Company’s shares of stock; the additional proceeds from the joint
venture of Bonifacio Global City lots, collection of remaining receivables from subscription to the
Parent Company’s shares of stock, and new sales of Skyline Tower units which are collectively
estimated at over P1.6 billion represent free cash which can be utilized to fund future development
projects. Pre-selling proceeds will merely augment this free cash, instead of funding the bulk of a
project’s development cost.
On January 31, 2011, the Parent Company filed a motion to terminate rehabilitation proceeding on
account of the successful implementation of the rehabilitation plan. The Parent Company’s bases for
the motion are as follows:
a.
The substantial completion of the Andrea North Skyline Project as of December 31, 2010.
The Parent Company has applied for the necessary building occupancy permit from the local
government of Quezon City and has already commenced the turn-over of several condominium
units to their respective buyers.
b. Full settlement of outstanding obligations to all banks/secured creditors.
c.
Settlement of P22.9 million out of the total P27.2 million unsecured obligations. The balance of
P4.3 million is sufficiently covered by new and future sales of the condominium units of the
Andrea Project.
d. Settlement of P65.3 million out of the total P78.9 claims of buyers of condominium units of the
Andrea Project that filed cases for rescission of their respective contracts to sell with the Housing
and Land Use Regulatory Board (HLURB). The balance of P13.6 million is sufficiently covered by
new and future sales of the condominium units of the Andrea Project.
On November 21, 2012, the Rehabilitation Court, upon the recommendation of the Rehabilitation
Receiver, denied the above-mentioned motion to terminate of the Parent Company as it still has
substantial obligations to pay in accordance with the court-approved rehabilitation plan.
Subsequently, the Court ordered the Rehabilitation Receiver to comment on the Motion for
Clarification filed by the remaining creditors. On March 6, 2013, the Rehabilitation Receiver submitted
to the Court a payment schedule for the settlement of the Parent Company's remaining obligations.
-3-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The payment schedule involves the settlement of the Parent Company's liabilities over a 14-month
period, starting in April 2013 until May 2014. Andrea North Skyline buyers and unsecured creditors,
owed a total of P11.12 million, shall all be fully paid by May 2013, while Ley Construction and
Development Corporation shall be paid P5 million per month over a period of twelve (12) months
commencing in June 2013 until P57.17 million is fully paid. The proposed payment plan is net of
interests in accordance with the Parent Company's court-approved rehabilitation plan. The funds shall
be sourced from the balance of the Parent Company's receivables from its joint venture with Xcell
Property Ventures, Inc. over two (2) parcels of land in Bonifacio Global City, which is projected to
continue to be amortized over the same 14-month period and to be fully collected by December 2014.
2. Basis of Preparation
Statement of Compliance
The consolidated financial statements have been prepared in accordance with Full Philippine Financial
Reporting Standards (PFRS). Full PFRS includes all applicable PFRS, Philippine Accounting Standards
(PAS) and interpretations issued by the International Financial Reporting Interpretations Committee
(IFRIC) as approved by the Philippine Financial Reporting Standards Council (FRSC) and adopted by
the SEC.
The consolidated financial statements as of and for the year ended December 31, 2012 were approved
and authorized for issuance by the Board of Directors (BOD) on April 18, 2013.
Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except for certain
properties carried at revalued amounts, certain financial instruments carried either at fair value or at
amortized cost and investments under the equity method.
Functional and Presentation Currency
The consolidated financial statements are presented in Philippine Peso, which is the presentation and
functional currency of the Group.
Use of Estimates and Judgments
The preparation of the consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of estimation uncertainty and critical judgments in
applying accounting policies that have the most significant effect on the amounts recognized in the
consolidated financial statements are described in Note 4.
-4-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. Significant Accounting Policies
Adoption of New and Revised Standards, Amendments to Standards and Interpretations
The Financial Reporting Standards Council approved the adoption of new standards, amendments to
standards, and interpretations issued by the IFRIC as part of PFRS.
Amendments to Standards Adopted in 2012.
Effective January 1, 2012, the Group adopted the following amendments to standards:

Amendments to PFRS 7, Disclosures – Transfer of Financial Assets issued in October 2010 and
effective for annual periods beginning on or after July 1, 2011. The amendments to increase the
disclosure requirements for transactions involving transfers of financial assets. These amendments
are intended to provide greater transparency around risk exposures when a financial asset is
transferred but the transferor retains some level of continuing exposure in the asset. The
amendments also require disclosures where transfers of financial assets are not evenly distributed
throughout the period.

Amendments to PAS 12, Income Taxes - Recovery of Underlying Assets. The amendment clarified
the determination of deferred tax on investment property measured at fair value. The amendment
introduces a rebuttable presumption that deferred tax on investment property measured using the
fair value model in PAS 40 should be determined on the basis that its carrying amount will be
recovered through sale. Furthermore, it introduces the requirement that deferred tax on nondepreciable assets that are measured using the revaluation model in PAS 16 always be measured
on a sale basis of the asset.
The adoption of the above amendments to standards in 2012 did not have any material effect on the
consolidated financial statements.
New and Revised Standards, Amendments to Standards and Interpretations Not Yet Adopted.
The following are the new and revised standards and amendments to standards which are not yet
effective for the year ended December 31, 2012, and have not been applied in preparing the
consolidated financial statements:
Effective January 1, 2013:

Amendments to PAS 1, Financial Statement Presentation - Presentation of Items of Other
Comprehensive Income. The amendments to PAS 1 change the grouping of items presented in
OCI. Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for
example, upon derecognition or settlement) would be presented separately from items that will
never be reclassified. The amendment becomes effective for annual periods beginning on or after
July 1, 2012.

Amendments to PAS 19, Employee Benefits. These amendments eliminate the corridor approach
and calculate finance costs on a net funding basis. They would also require recognition of all
actuarial gains and losses in other comprehensive income as they occur and of all past service
costs in profit or loss. The amendments replace interest cost and expected return on plan assets
with a net interest amount that is calculated by applying the discount rate to the net defined benefit
liability (asset).

PAS 27, Separate Financial Statements (Revised). As a consequence 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 separate financial statements.
-5-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

PAS 28, Investments in Associates and Joint Ventures (Revised). As a consequence of the new
PFRS 11, Joint Arrangements, and PFRS 12, Investment in Associate and Joint Venture, PAS 28 has
been renamed and describes the application of the equity method to investments in joint ventures
in addition to associates.

PFRS 11, Joint Arrangements. This new standard is a more realistic reflection of joint arrangements
by focusing on the rights and obligations of the arrangement rather than its legal form. There are
two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a
joint operator has rights to the assets and obligations relating to the arrangement and hence
accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the
joint operator has rights to the net assets of the arrangement and hence equity accounts for its
interest. Proportional consolidation of joint ventures is no longer allowed.

PFRS 12, Disclosures of Interests in Other Entities. PFRS 12 includes all of the disclosures that were
previously in PAS 27 related to consolidated financial statements, as well as all of the disclosures
that were previously included in PAS 31and PAS 28. These disclosures relate to an entity’s interests
in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures
are also required.

PFRS 13, Fair Value Measurement, issued in May 2011 and effective for annual periods beginning
January 1, 2013. The new standard establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. It defines fair value, establishes a
framework for measuring fair value, and requires disclosures about fair value measurements. The
scope of PFRS 13 is broad; it applies to both financial instrument items and non-financial
instrument items for which other PFRSs require or permit fair value measurements and disclosures
about fair value measurements, except in specified circumstances. In general, the disclosure
requirements in PFRS 13 are more extensive than those required in the current standards. For
example, quantitative and qualitative disclosures based on the three-level fair value hierarchy are
currently required for financial instruments only under PFRS 7 Financial Instruments: Disclosures
will be extended by PFRS 13 to cover all assets and liabilities within its scope.

Amendments to PFRS 7, Disclosures – Offsetting Financial Assets and Financial Liabilities issued in
December 2011 and effective for annual periods beginning January 1, 2013. The amendments
change the required disclosures to include information that will enable users of an entity’s financial
statements to evaluate the effect or potential effect of netting arrangements, including rights of setoff associated with the entity’s recognized financial assets and recognized financial liabilities, on
the entity’s financial position. The entity shall provide the disclosures as required by these
amendments retrospectively.

Amendments to PFRS 10, 11 and 12 – Transition Guidance. These amendments provide additional
transition relief to PFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative
information to only the preceding comparative period. For disclosures related to unconsolidated
structured entities, the amendments will remove the requirement to present comparative
information for periods before PFRS 12 is first applied.
Effective January 1, 2014:
 Amendments to PAS 32, Financial Instruments: Presentation – Asset and Liability Offsetting. These
amendments are to the application guidance in PAS 32, Financial Instruments: Presentation, and
clarify some of the requirements for offsetting financial assets and financial liabilities on the
statements of financial position.
-6-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Effective January 1, 2015:

PFRS 9, Financial Instruments issued in November 2009 and effective for periods beginning
January 1, 2015. This new standard addresses the classification, measurement and recognition of
financial assets and financial liabilities. It replaces the parts of PAS 39 that relate to the
classification and measurement of financial instruments. PFRS 9 requires financial assets to be
classified into two measurement categories: those measured at fair value and those measured at
amortized cost. The determination is made at initial recognition. The classification depends on the
entity’s business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument. For financial liabilities, the standard retains most of the PAS 39
requirements. The main change is that, in cases where the fair value option is taken for financial
liabilities, part of the fair value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than profit or loss, unless this creates an accounting mismatch. The
Group has yet to assess the full impact of PFRS 9 and intends to adopt PFRS 9 beginning January 1,
2015. The Group will also consider the impact of the remaining phases of PFRS 9 when issued.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate . This
interpretation covers accounting for revenue and associated expenses by entities that undertake the
construction of real estate directly or through subcontractors. The interpretation requires that
revenue on construction of real estate be recognized only upon completion, except when such
contract qualifies as construction contract to be accounted for under PAS 11, Construction
Contracts, or involves rendering of services in which case revenue is recognized based on stage of
completion. Contracts involving provision of services with the construction materials and where
the risks and reward of ownership are transferred to the buyer on a continuous basis will also be
accounted for based on stage of completion. The SEC and the FRSC have deferred the effectivity of
this interpretation until the final Revenue standard is issued by the International Accounting
Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against
the practices of the Philippine real estate industry is completed.
The adoption of Philippine Interpretation of IFRIC 15 may significantly affect the determination of
the revenue from real estate sales and the corresponding costs, and the related trade receivables,
deferred tax liabilities and retained earnings accounts.
The Group will assess the impact of the above new, revised and amended accounting standards and
interpretations effective subsequent to December 31, 2012 on the consolidated financial statements in
the period of initial application. Additional disclosures required by these new and amended
accounting standards will be included in the consolidated financial statements when these are
adopted.
The accounting policies set out below have been applied consistently to all periods presented in the
consolidated financial statements.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Parent Company and
entities controlled by the Parent Company, the subsidiaries, up to December 31 each year. Control is
achieved where the Parent Company has the power to govern the financial and operating policies of
an investee entity so as to obtain benefits from its activities.
Subsidiaries are consolidated from the date when control is transferred to the Parent Company and
cease to be consolidated from the date when control is transferred out of the Parent Company.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their
fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognized as goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets acquired i.e. discount on acquisition is credited to
-7-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
profit and loss in the period of acquisition. The interest of minority shareholders is stated at the
minority’s proportion of the fair values of the assets and liabilities recognized. Subsequently, any losses
applicable to the minority interest in excess of the minority interest are allocated against the interests of
the Parent Company.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
profit or loss from the effective date of acquisition or up to the effective date of disposal, as appropriate.
The consolidated financial statements were prepared using uniform accounting policies for like
transactions and other events in similar circumstances. Inter-company balances and transactions,
including inter-company profits and unrealized profits and losses, are eliminated. When necessary,
adjustments are made to the financial statements of subsidiaries to bring the accounting policies used
in line with those used by the Parent Company. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
Business Combination
Business combinations are accounted for using the purchase method which involves the identification
of an acquirer, measurement of the cost of the business combination, and allocation, at the acquisition
date, of the cost of the business combination to the assets acquired and liabilities and contingent
liabilities assumed.
Segment Information
Operating segments are components of an enterprise about which separate financial information is
available that is evaluated regularly by Management in deciding how to allocate resources and in
assessing performance. Generally, financial information is required to be reported on the basis that it is
used internally for evaluating segment performance and deciding how to allocate resources to
segments.
For management purposes, the Group is currently organized into five business segments. These
divisions are the basis on which the Group reports its primary segment formation.
The Group’s principal business segments are as follows:
a.
b.
c.
d.
e.
Sale of real estate and Leasing
Property Management
Insurance Brokerage
Underwriting
Travel Services
Financial information on business segments are presented in Note 7. The Group’s resources producing
revenues are all located in the Philippines. Therefore, geographical segment information is not
presented.
Cash and Cash Equivalents
Cash includes cash on hand and in banks and is stated at its face value. Cash equivalents are shortterm, highly liquid investments that are readily convertible to known amounts of cash with maturities
of three (3) months or less from the date of acquisition and that are subject to an insignificant risk of
change in value.
-8-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments
Financial Assets
Financial assets are recognized in the Group’s consolidated financial statements when the Group
becomes a party to the contractual provisions of the instrument. Financial assets are recognized
initially at fair value. Transaction costs are included in the initial measurement of the Group’s financial
assets, except for investments classified as at fair value through profit or loss.
The Group classifies non-derivative financial assets into the following categories:
Investments at fair value through profit or loss
Financial assets are classified as investments at fair value through profit or loss when these are acquired
for trading or are designated upon initial recognition. Unless designated and considered as effective
hedging instruments, derivatives are classified as at fair value through profit or loss. Financial assets
under this category are initially recorded and are subsequently measured at fair value with gains and
losses arising from changes in fair value being included in profit or loss for the year. Transaction costs
on purchases and sale of financial assets under this category are recognized as expense in profit or loss.
A financial asset is classified as held-for-trading if:
a. it has been acquired principally for the purpose of selling in the near future; or
b. it is a part of an identified portfolio of financial instruments that the Group manages together and
has a recent actual pattern of short-term profit-taking; or
c. it is a derivative that is not designated and effective as a hedging instrument.
Loans and receivables
Loans and receivables are non-derivative financial assets that have fixed or determinable payments that
are not quoted in an active market and that the Group does not intend to sell immediately or in the
near future. Loans and receivables are measured at amortized cost using the effective interest method,
less any impairment. Interest income is recognized by applying the effective interest rate, except for
short-term receivables when the recognition of interest would be immaterial.
Short-term receivables are measured at net realizable values and any allowances for impairment as
non-collectability shall be deducted from the initial amount recognized. Provision is made when there
is objective evidence that the Group will not be able to collect the debts. Bad debts are written off
when identified.
Available-for-sale investments
Available-for-sale investments (AFS) are those non-derivative financial assets that are designated as AFS
or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets
at fair value through profit or loss. AFS investments are carried at fair value. Gains and losses arising
from changes in fair value are recognized in other comprehensive income, with the exception of
impairment losses and foreign exchange gains and losses. Interest calculated using the effective interest
method and foreign exchange gains and losses on monetary assets are recognized directly in profit or
loss. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss
previously recognized in the investments revaluation reserve is included in profit or loss.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
that the Group intends and is able to hold to maturity and that do not meet the definition of loans and
receivables and are not designated on initial recognition as assets at fair value through profit or loss or
as available-for-sale. Held-to-maturity investments are measured at amortized cost using the effective
interest method and reduced by impairment losses, if any.
-9-
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The effective interest method is a method of calculating the amortized cost of a financial asset and of
allocating interest income over the relevant period. The effective interest rate is the rate that discounts
estimated future cash receipts through the expected life of the financial asset or, when appropriate, a
shorter period.
Impairment of Financial Assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of
impairment at each reporting date. Financial assets are impaired when there is objective evidence that,
as a result of one or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been affected.
The Group assesses at each reporting date whether there is any objective evidence that a financial
asset or group of financial assets, other than financial instruments classified as at fair value through
profit and loss, is impaired.
Financial assets carried at cost
If there is objective evidence 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 or on a
derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument,
the amount of the impairment loss is measured as the difference between the carrying amount of the
financial asset and the present value of estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Impairment losses on financial assets carried at cost are not
reversed.
AFS investments
When a decline in the fair value of AFS investments has been recognized directly in equity and there is
objective evidence that the asset is impaired, the cumulative loss that had been recognized directly in
equity shall be removed from equity and recognized in profit or loss, even though the financial asset
has not been derecognized.
If, in a subsequent period, the fair value of an investment classified as AFS increases and the increase
can be objectively related to an event occurring after the impairment loss was recognized in profit or
loss, the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss.
Impairment losses for an investment in an equity instrument classified as AFS shall not be reversed
through profit or loss, but shall be recognized in equity.
Financial assets carried at amortized cost
For loans and receivables category, the Group first assesses whether there is objective evidence of
impairment exists individually for receivables that are individually significant, and collectively for
receivables that are not individually significant. If the Group determines that no objective evidence of
impairment exists for an individually assessed receivable, whether significant of not, it includes the
asset in a group of financial assets with similar credit risk characteristics and collectively assesses those
for impairment. Receivables 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.
If there is objective evidence that an impairment loss on financial assets 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 financial assets carried at
amortized cost is reduced directly by the impairment loss, with the exception of trade receivables
wherein the carrying amount is reduced through the use of an allowance account. When trade
receivables are considered uncollectible, these are written off against the allowance account.
Subsequent recoveries shall not result in a carrying amount of the financial asset that exceeds what the
amortized cost would have been had the impairment not been recognized at the date the impairment
- 10 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
is reversed. The amount of the reversal shall be recognized in profit or loss. Changes in the carrying
amount of the allowance account are recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss shall be reversed. The reversal shall not result in a carrying amount of the
financial asset that exceeds what the amortized cost would have been had the impairment not been
recognized at the date the impairment is reversed. The amount of the reversal shall be recognized in
profit or loss.
Derecognition of Financial Asset
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the
asset expire or when the Group transfers the financial asset and substantially all the risks and rewards
of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognize the financial asset and also recognizes a collateralized borrowing for the
proceeds received.
Financial Liabilities
Financial liabilities are recognized in the consolidated financial statements when the Group becomes a
party to the contractual provisions of the instrument. Financial liabilities are initially recognized at fair
value. Transaction costs are included in the initial measurement of the Group’s financial liabilities,
which do not include any debt instrument classified as at fair value through profit or loss.
Since the Group does not have financial liabilities classified as at fair value through profit or loss, all
financial liabilities are subsequently measured at amortized cost using the effective interest method,
with interest expense recognized on an effective yield basis.
Trade payables are liabilities to pay for goods or services that have been received or supplied and have
been invoiced or formally agreed with the supplier. Trade payables are non-interest bearing and are
stated at their original invoice amount since the effect of discounting is immaterial.
Accruals are liabilities to pay for goods or services that have been received or supplied but have not
been paid, invoiced or formally agreed with the supplier, including amounts due to employees. It is
necessary to estimate the amount or timing of accruals; however, the uncertainty is generally much less
than for provisions.
Interest-bearing loans are recorded at the proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are accounted for on
an accrual basis to the profit or loss account using effective interest method and are added to the
carrying amount of the instrument to the extent that these are not settled in the period in which these
arise.
Financial liabilities are derecognized by the Group when the obligation under the liability is
discharged, cancelled or expired. Any difference between the carrying amount of the financial liability
derecognized and the consideration paid or payable is recognized in profit or loss.
- 11 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Offsetting
Financial assets and liabilities are offset and the net amount reported in the consolidated statements of
financial position when there is a legally enforceable right to offset the recognized amounts and there
is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Prepayments
Prepayments represent expenses not yet incurred but already paid in cash. Prepayments are initially
recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to
income as these are consumed in operations or expire with the passage of time.
Prepayments are classified in the consolidated statements of financial position as current asset when
the cost of goods or services related to the prepayment are expected to be incurred within one (1) year
or the Group’s normal operating cycle, whichever is longer. Otherwise, prepayments are classified as
noncurrent assets.
Investments in Associates
An associate is an entity over which the Parent Company is in a position to exercise significant
influence, but not control or joint control, through participation in the financial and operating policy
decisions of the investee.
An investment is accounted for using the equity method from the day it becomes an associate. On
acquisition of investment, the excess of the cost of investment over the investor’s share in the net fair
value of the investee’s identifiable assets, liabilities and contingent liabilities is accounted for as
goodwill and included in the carrying amount of the investment and not amortized. Any excess of the
investor’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent
liabilities over the cost of the investment is excluded from the carrying amount of the investment, and
is instead included as income in the determination of the share in the earnings of the investees.
Under the equity method, the investments in the investee companies are carried in the consolidated
statements of financial position at cost plus post-acquisition changes in the Parent Company’s share in
the net assets of the investee companies, less any impairment losses. The consolidated statements of
total comprehensive income reflect the share of the results of the operations of the investee companies.
The Parent Company’s share of post-acquisition movements in the investee’s equity reserves is
recognized directly in equity. Profits and losses resulting from transactions between the Parent
Company and the investee companies are eliminated to the extent of the interest in the investee
companies and for unrealized losses to the extent that there is no evidence of impairment of the asset
transferred. Dividends received are treated as a reduction of the carrying value of the investment.
The Group discontinues applying the equity method when their investments in investee companies are
reduced to zero. Accordingly, additional losses are not recognized unless the Group has guaranteed
certain obligations of the investee companies. When the investee companies subsequently report net
income, the Group will resume applying the equity method but only after its share of that net income
equals the share of net losses not recognized during the period the equity method was suspended.
The reporting dates of the investee companies and the Group are identical and the investee companies’
accounting policies conform to those used by the Group for like transactions and events in similar
circumstances. Upon loss of significant influence over the associate, the Group measures and
recognizes any retaining investment at its fair value. Any difference between the carrying amount of
the associate upon loss of significant influence and the fair value of the retaining investment and
proceeds from disposal is recognized in profit or loss.
Investment in Joint Venture
The Parent Company has an interest in a joint venture, whereby the venturers have a contractual
arrangement to undertake an economic activity that establishes joint control. The Parent Company
recognizes its interest in the joint venture using the equity method.
- 12 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Parent Company, as a venturer, recognizes the assets that it controls, the liabilities that it incurs,
the expenses that it incurs, and its share of the income from the sale of goods or services by the joint
venture. Interests in joint ventures are initially recorded at cost and adjusted thereafter for the Parent
Company’s share of the income/loss of the joint venture, less any impairment in value.
Real Estate Inventories
Property acquired or being developed for sale in the ordinary course of business, rather than to be held
for rental or capital appreciation, is held as inventory and is measured at the lower of cost and net
realizable value.
Cost includes amounts paid to contractors for construction, borrowing costs, planning and design costs,
costs of site preparation, professional fees, property transfer taxes, construction overheads and other
related costs.
Net realizable value is the estimated selling price in the ordinary course of the business, based on
market prices at the reporting date, less costs to completion and the estimated costs of sale.
The cost of inventory recognized in profit or loss on disposal is determined with reference to the
specific costs incurred on the property sold and an allocation of any non-specific costs based on the
relative size of the property sold.
Real Estate Held for Development and Sale
Land held for development and sale are measured at the lower of carrying amount and fair value less
costs to sell. Expenditures for development and improvements of land are capitalized as part of the cost
of the land. Directly identifiable interest costs are capitalized while the development and construction
is in progress.
Property and Equipment
Property and equipment are initially measured at cost which consists of its purchase price and costs
directly attributable to bringing the asset to its working condition for its intended use and are
subsequently measured at cost less any accumulated depreciation, amortization and impairment
losses, if any.
Subsequent expenditures relating to an item of property and equipment that have already been
recognized are added to the carrying amount of the asset when it is probable that future economic
benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to
the Group. All other subsequent expenditures are recognized as expenses in the period in which those
are incurred.
Any revaluation increase arising on the revaluation of such revalued assets is credited to the properties
revaluation surplus, except to the extent that it reverses a revaluation decrease for the same asset
previously recognized as an expense, in which case the increase is credited to profit or loss to the
extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of
such revaluated assets is charged as an expense to the extent that it exceeds the balance, if any, held in
the properties revaluation surplus relating to a previous revaluation of that asset.
Depreciation is computed on the straight-line method based on the estimated useful lives of the assets
as follows:
Number of years
Condominium units and building improvements
Office furniture, fixtures and equipment
Machinery and equipment
Transportation and other equipment
- 13 -
20 to 25
3 to 10
3 to 10
5
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Leasehold and office improvements are amortized over the improvements’ useful life of five (5) years or
when shorter, the term of the relevant lease.
Properties in the course of construction for production, rental or administrative purposes, or for
purposes not yet determined, are carried at cost, less any recognized impairment loss. Cost includes
professional fees and for qualifying assets, borrowing costs capitalized in accordance with the Group’s
accounting policy.
Depreciation of these assets, on the same basis as other property assets, commences at the time the
assets are ready for their intended use.
The assets’ residual values, estimated useful lives and depreciation and amortization method are
reviewed periodically to ensure that the amounts, periods and method of depreciation and
amortization are consistent with the expected pattern of economic benefits from items of property and
equipment.
When an asset is retired or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts.
Depreciation on revalued assets is charged to profit or loss. On the subsequent sale or retirement of a
revalued property, the attributable revaluation surplus remaining in the properties’ revaluation reserve
is transferred directly to retained earnings.
Property and equipment is derecognized upon disposal or when no future economic benefits are
expected from its use. Gain or loss arising on the disposal or retirement of an asset is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognized in the
profit or loss.
Investment Properties
Investment properties comprise completed property and property under development or
redevelopment that are held to earn rentals or capital appreciation or both and that are not occupied
by the Group. Investment properties, except for land, are carried at cost less accumulated depreciation
and any impairment in residual value. Land is carried at cost less any impairment in value.
Expenditures incurred after the investment property has been put in operation, such as repairs and
maintenance costs, are normally charged against income in the period in which the costs are incurred.
Construction in progress are carried at cost and transferred to the related investment property account
when the construction and related activities to prepare the property for its intended use are complete,
and the property is ready for occupation.
Depreciation of investment properties are computed using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives and the depreciation method are reviewed
periodically to ensure that the period and method of depreciation are consistent with the expected
pattern of economic benefits from items of investment properties. The Parent Company revised the
estimated useful values of condominium units from 35 years to 40 years with effect from January 1,
2012. The revisions were accounted for prospectively as a change in accounting estimates and as a
result, the depreciation of investment properties of the Parent Company for the year ended December
31, 2012 decreased by P3,644,555.
The estimated useful lives of depreciable investment properties follow:
Number of years
Condominium units
40
- 14 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Investment properties are derecognized when either they have been disposed of, or when the
investment property is permanently withdrawn from use and no future economic benefit is expected
from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognized
in the consolidated statement of total comprehensive income in the year of retirement or disposal.
A transfer is made to investment property when there is a change in use, evidenced by ending of
owner-occupation, commencement of an operating lease to another party or ending of construction or
development. A transfer is 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 sale. A transfer between investment property, owner-occupied property and inventory does not
change the carrying amount of the property transferred nor does it change the cost of that property for
measurement or disclosure purposes.
Goodwill
Goodwill arising from consolidation represents the excess of the cost of acquisition over the Group’s
interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly
controlled entity at the date of acquisition.
As an intangible asset assessed to have an indefinite life, the Group believes that there is no foreseeable
limit to the period over which the goodwill is expected to generate net cash inflows for the entity.
Goodwill is recognized as an asset and reviewed for impairment at least annually. Any impairment is
recognized immediately in profit or loss and is not subsequently reversed.
At acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to
benefit from the combination’s synergies. Impairment is determined by assessing the recoverable
amount of the cash-generating unit, to which the goodwill relates. Where the recoverable amount of
the cash-generating unit is less than the carrying amount, an impairment loss is recognized. 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 such
circumstance is measured on the basis of the relative values of the operation disposed of and the
portion of the cash-generating unit retained.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to PFRS has been retained at the previous
generally accepted accounting principles in the Philippines. The amounts were subjected to test for
impairment at that date.
Impairment of Non-Financial Assets
At each reporting date, the Group assesses whether there is any indication that any of its non-financial
assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of
allocation can be identified, assets are also allocated to individual cash-generating units. Otherwise,
these are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-inuse, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
- 15 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
that reflects current market assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.
An impairment loss is recognized as an expense, unless the relevant asset is carried at revalued
amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss reverses subsequently, the carrying amount of the asset or cash-generating
unit is increased to the revised estimate of its recoverable amount, so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment
loss is recognized as income, unless the relevant asset is carried at revalued amount in which case the
reversal of the impairment loss is treated as a revaluation increase.
Provisions and Contingencies
Provisions are recognized when the Group has a present obligation, either legal or constructive, as a
result of a past event; when it is probable that the Group will be required to settle the obligation
through an outflow of resources embodying economic benefits, and; when the amount of the
obligation can be estimated reliably. When the Group expects reimbursement of some or all of the
expenditure required to settle a provision, the entity recognizes a separate asset for the reimbursement
only when it is virtually certain that reimbursement will be received when the obligation is settled.
The amount of the provision recognized is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the risks and uncertainties surrounding the
obligation. A provision is measured using the cash flows estimated to settle the present obligation; its
carrying amount is the present value of those cash flows.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Contingent liabilities are not recognized because their existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
the Group. Contingent liabilities are disclosed, 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 when
an inflow of economic benefits is probable.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Common shares are classified as equity when there is no obligation to transfer cash or other assets.
Equity instruments are measured at the fair value of the cash or other resources received or receivable.
If payment is deferred and the time value of money is material, the initial measurement is on a present
value basis.
Treasury Stock
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted
from equity. No gain or loss is recognized in the consolidated statements of comprehensive income on
the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is recognized in additional paid-in
capital. Voting rights related to treasury shares are nullified for the Group and no dividends are
allocated to them respectively. When the shares are retired, the capital stock account is reduced by its
- 16 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
par value and the excess of cost over par value upon retirement is debited to additional paid-in capital
when the shares were issued and to retained earnings for the remaining balance.
Employee Benefits
Short-term benefits
The Group recognizes a liability net of amounts already paid and an expense for services rendered by
employees during the accounting period. Short-term benefits given by the Group to its employees
include salaries and wages, social security contributions, short-term compensated absences and nonmonetary benefits.
Post-employment benefits
The Group has funded and unfunded, non-contributory retirement plans. The post-employment
expense is determined using the Projected Unit Credit Method which reflects services rendered by
employees to the date of valuation and incorporates assumptions concerning employees’ projected
salaries. Post-employment expenses include current service cost plus amortization of past service cost,
experience adjustments and changes in actuarial assumptions over the expected average remaining
working lives of the covered employees. Cumulative actuarial gains and losses in excess of the 10% of
the greater between present value of the defined benefit obligation and fair value of any plan assets
were amortized over the expected average remaining working lifetime of the employees and
recognized as part of retirement expense.
Past service cost is recognized immediately to the extent that the benefits are already vested.
Otherwise, it is amortized on a straight-line basis over the average period until the benefits become
vested.
The retirement benefit obligation recognized in the consolidated statements of financial position
represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial
gains and losses reduced by the fair value of plan assets out of which the obligation are to be settled
directly. Any asset resulting from this calculation is limited to unrecognized actuarial gains and losses.
The funding policy is to contribute an amount based on the actuarial valuation report which is carried
out at each reporting date.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date or
whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group
recognizes termination benefits at the time when it is demonstrably committed to either terminating the
employment of current employees according to a detailed formal plan without possibility of
withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after the reporting date are discounted to
present value.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be measured reliably. Revenue is measured at the fair value of the
consideration received or receivable and represents amounts receivable for goods and services
provided in the normal course of business.
Income from sale of real estate
For real estate sales, the Group assesses whether it is probable that the economic benefits will flow to
the Group when the sales prices are collectible. Collectibility of the sales price is demonstrated by the
buyer’s commitment to pay, which in turn is supported by substantial initial and continuing
investments that give the buyer a stake in the property sufficient that the risk of loss through default
- 17 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
motivates the buyer to honor its obligation to the seller. Collectibility is also assessed by considering
factors such as the credit standing of the buyer, age and location of the property.
Revenue from sales of real estate and cost from completed projects is accounted for using the full
accrual method. The percentage-of-completion method is used to recognize income from sales of
projects where the Group has material obligations under the sales contract to complete the project after
the property is sold. Under this method, revenues is recognized as the related obligations are fulfilled,
measured principally on the basis of the estimated completion of a physical proportion of the contract
work.
Any excess of collection over the recognized receivables are included in the “Accounts payableothers” account in the liabilities section of the consolidated statements of financial position.
Premiums
Premiums from short duration insurance contracts are recognized as revenue over the period of the
contracts using the 24th method. The 24th method assumes that the average date of issue of all policies
written during any one month is the middle of that month. The portion of the premiums written that
relate to the unexpired periods of the policies at reporting date are accounted for as “Unearned
Premiums” and presented in the liability section of the consolidated statements of financial position.
The related reinsurance premiums ceded that pertain to the unexpired periods at reporting date are
accounted for as “Deferred Reinsurance Premiums” shown as part of prepayments and other assets in
the consolidated statements of financial position. The net changes in these accounts between reporting
dates are charged or credited to “Net Change in Reserve for Unexpired Risks” shown as part of net
underwriting income in the consolidated profit or loss. This method is also used to recognize the
related commission income derived from premiums ceded.
Management fee and commission income
Management fee and commission income are recognized when the related services have been
performed in accordance with the terms and conditions of the management agreement, commission
scheme and applicable policies.
Interest income
Interest income is accrued on a time proportion basis by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate that discounts estimated future cash receipts
through the expected life of the financial asset to that asset’s net carrying amount.
Rental income
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant
operating lease. Benefits received and receivable as an incentive to enter into an operating lease are
also spread on a straight-line basis over the lease term.
Dividend income
Dividend income from investments is recognized when the shareholders’ rights to receive payment
have been established.
Cost and Expense Recognition
Costs and expenses are recognized in the consolidated statements of comprehensive income when
there is a decrease in future economic benefits related to a decrease in an asset or an increase in a
liability has arisen that can be measured reliably. Cost and expenses are recognized in the
consolidated profit or loss on the basis of (i) a direct association between the costs incurred and the
earning of specific items of income; (ii) and rational allocation procedures when economic benefits are
expected to arise over several accounting periods and the association with income can only be broadly
or indirectly determined; or, (iii) immediately when an expenditure produces no future economic
benefits or when, and to the extent that, future economic benefits do not qualify or cease to qualify, for
recognition in the consolidated statements of financial position as an asset.
- 18 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Contract costs include all direct materials and labor cost and those indirect costs related to contract
performance. Expected losses on contracts are recognized immediately when it is probable that the
total contract costs will exceed total contract revenue. Changes in contract performance, contract
conditions and estimated profitability, including those arising from contract penalty provisions, and
final contract settlements which may result in revisions to estimated costs and gross margins are
recognized in the year in which the changes are determined.
Cost of the real estate sold before the completion of the contemplated development is determined
based on actual development cost and project estimates as determined by the contractors and the
Group’s technical staff.
Cost and expenses in the consolidated statements of total comprehensive income are presented using
the nature of expense method. Operating expenses are costs attributable to general, administrative and
other business activities of the Group. Direct costs are expenses incurred that are associated with the
services rendered.
Borrowing Costs
Borrowing costs directly attributable to the acquisition or construction 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 in which they occur.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds.
Borrowing costs are capitalized from the commencement of the development work until the date of
practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods
when development activity is interrupted. If the carrying amount of the asset exceeds its recoverable
amount, an impairment loss is recorded.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the
arrangement at inception date whether the fulfillment of the arrangement is dependent on the use of a
specific asset or assets or 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 the 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 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) and at the date of
renewal or extension period for scenario (b).
Group as Lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Fixed lease payments are recognized as an expense in the consolidated
statement of total comprehensive income on straight-line basis while the variable rent is recognized as
an expense based on terms of the lease contract.
Group as Lessor
Leases where the Group does not transfer substantially all the risk and benefits of ownership of the
assets are classified as operating leases. Lease payments received are recognized as an income in the
consolidated statements of total comprehensive income on a straight-line basis over the lease term.
Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the
- 19 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
leased asset and recognized over the lease term on the same basis as the rental income. Contingent
rents are recognized as revenue in the period in which they are earned.
Foreign Currency Transactions and Translation
Transactions in currencies other than Philippine Peso are recorded at the rates of exchange prevailing
on the dates of the transactions. At each reporting date, monetary assets and liabilities that are
denominated in foreign currencies are restated at the rates prevailing at the reporting date. Exchange
gains and losses arising on restatements are included in profit or loss for the year. Non-monetary assets
and liabilities that are measured in terms of historical cost in a foreign currency are not retranslated.
Income Tax
Income tax expense (benefit) represents the sum of the current tax expense and deferred tax expense
(benefit).
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the consolidated statement of total comprehensive income because it excludes items of
income or expense that are taxable or deductible in other years, and it further excludes items that are
never taxable or deductible. The Group’s liability for current tax is calculated using the normal
corporate tax of 30% for 2012, 2011, and 2010 or 2% minimum corporate income tax (MCIT),
whichever is higher.
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable
profit, and are accounted for using the liability method. Deferred tax liabilities are generally recognized
for all taxable temporary differences, while deferred tax assets are generally recognized for all
deductible temporary differences to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences arising on investments in
subsidiaries and associates and interests in joint ventures, except when the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future.
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 profits will be available to allow all or part of the
asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period the liability is settled
or the asset is realized. Deferred tax is charged or credited in profit or loss, except when it relates to
items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Related Party Relationships and Transactions
Related party relationship exists when one party has the ability to control, directly, or indirectly
through one or more intermediaries, the other party or exercise significant influence over the other
party in making financial and operating decisions. Such relationship also exists between and/or among
entities which are under common control with the reporting enterprise, or between, and/or among the
reporting enterprise and its key management personnel, directors, or its shareholders. In considering
each possible related party relationship, attention is directed to the substance of the relationship, and
not merely the legal form.
- 20 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Insurance Contracts
Provision for unearned premiums
The proportion of written premiums, gross of commissions payable to intermediaries, attributable to
subsequent periods or to risks that have not yet expired is deferred as provision for unearned
premiums. Premiums from short-duration insurance contracts are recognized as revenue over the
period of the contracts using the 24th method except for the marine cargo where premiums for the last
two months are considered earned the following year. The portion of the premiums written that relate
to the unexpired periods of the policies at end of reporting period are accounted for as provision for
unearned premiums as part of claims outstanding and presented in the liabilities section of the
consolidated statements of financial position. The change in the provision for unearned premiums is
taken to the consolidated statement of total comprehensive income in the order that revenue is
recognized over the period of risk. Further provisions are made to cover claims under unexpired
insurance contracts which may exceed the unearned premiums and the premiums due in respect of
these contracts.
Liability adequacy test
At each end of the reporting date, liability adequacy tests are performed, to ensure the adequacy of
insurance contract liabilities, net of related deferred acquisition costs. In performing the test, current
best estimates of future cash flows, claims handling and policy administration expenses are used.
Changes in expected claims that have occurred, but which have not been settled, are reflected by
adjusting the liability for claims and future benefits. Any inadequacy is immediately charged to the
consolidated statements of total comprehensive income by establishing an unexpired risk provision for
losses arising from the liability adequacy tests. The reserve for unexpired risk is increased to the extent
that the future claims and expenses in respect of current insurance contracts exceed future premiums
plus the current provision for unearned premiums.
Reinsurance
The Group cedes insurance risk in the normal course of business for all of its businesses. Reinsurance
assets include balances due from reinsurance companies. Amounts recoverable from reinsurers are
estimated in a manner consistent with the outstanding claims provision or settled claims associated
with the reinsurer’s policies and are in accordance with the related reinsurance contract. Reinsurance
assets are reviewed for impairment at each reporting date or more frequently when an indication of
impairment arises during the reporting year. Impairment occurs when there is objective evidence as a
result of an event that occurred after initial recognition of the reinsurance asset that the Group may not
receive all outstanding amounts due under the terms of the contract and the event has a reliably
measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss
is recorded in the consolidated statement of total comprehensive income.
Gains or losses on buying reinsurance are recognized in the consolidated statement of total
comprehensive income immediately at the date of purchase and are not amortized. Ceded reinsurance
arrangements do not relieve the Group from its obligations to policyholders.
The Group also assumes reinsurance risk in the normal course of business. Premiums and claims on
assumed reinsurance are recognized as income and expense in the same manner as they would be if
the reinsurance were considered direct business, taking into account the product classification of the
reinsured business. Amounts payable are estimated in a manner consistent with the associated
reinsurance contract.
Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.
Reinsurance assets or liabilities are derecognized when the contractual rights expire or extinguish or
when the contract is transferred to another party.
- 21 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred acquisition costs
Costs that vary with and are primarily related to the acquisition of new and renewal of short-duration
insurance contracts such as commissions, certain underwriting and policy issue costs and inspection
fees, are deferred and charged to expense in proportion to premium revenue recognized. Unamortized
acquisition costs are shown in the consolidated statements of financial position as deferred acquisition
costs.
Claim cost recognition
Liabilities for unpaid claim costs and claim adjustment expenses relating to insurance contracts are
accrued when insured events occur. Claim adjustment expenses include any legal and all related
adjusters’ fee and the cost of paying claims and expenses.
The liabilities for unpaid claims are based on the estimated ultimate cost of settling the claims. The
method of determining such estimates and establishing reserves are continually reviewed and updated.
Changes in estimates of claim costs resulting from the continuous review process and differences
between estimates and payments for claims are recognized as income or expense in the period in
which the estimates are changed or payments are made.
As allowed by PFRS 4, Insurance Contracts, the Group continued to measure its insurance obligation
on an undiscounted basis.
Estimated recoveries on settled and unsettled claims are evaluated in terms of the estimated realizable
values of the salvage recoverable and deducted from the liability for unpaid claims.
Earnings (Loss) per Share
The Group computes its basic earnings (loss) per share by dividing net income or loss attributable to
common equity holders of the parent entity by the weighted average number of common shares issued
and outstanding during the year.
Events After the Reporting Date
The Group identifies events after the reporting date as events that occurred after the reporting date but
before the date the consolidated financial statements were authorized for issue. Any event after the
reporting date that provides additional information about the Group’s financial position at the reporting
date is reflected in the consolidated financial statements. Non-adjusting events after the reporting date
are disclosed in the notes to the consolidated financial statements when material.
4. Critical Accounting Judgments and Key Sources of Estimation Uncertainty
In the application of the Group’s accounting policies, Management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on the historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future
periods.
The following are the key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
- 22 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Claims liability arising from insurance contracts
For non-life insurance contracts, estimates have to be made both for the expected ultimate cost of
claims reported at the reporting date and for the expected ultimate cost of the claims incurred but not
yet reported (IBNR) as of reporting date. It can take a significant period of time before the ultimate
claim costs can be established with certainty and for some type of policies, IBNR claims form the
majority of the claims provision in the consolidated statements of financial position.
The primary technique adopted by management in estimating the cost of notified and IBNR claims is
that of using past claims settlement trends to predict future claims settlement trends. At each reporting
date, prior year claims estimates are assessed for adequacy and changes made are charged to
provision. Non-life insurance claims provisions are not discounted for the time value of money. The
main assumption underlying the estimation of the claims provision is that a company’s past claims
development experience can be used to project future claims development and hence ultimate claims
costs. As such, these methods extrapolate the development of paid and incurred losses, average costs
per claim and claim numbers based on the observed development of earlier years and expected loss
ratios.
Historical claims development is mainly analyzed by accident years, but can also be further analyzed
by geographical area, as well as by significant business lines and claim types. Large claims are usually
separately addressed, either by being reserved at the face value of loss adjuster estimates or separately
projected in order to reflect their future development. In most cases, no explicit assumptions are made
regarding future rates of claims inflation or loss ratios.
Instead, the assumptions used are those implicit in the historic claims development data on which the
projections are based. Additional qualitative judgment is used to assess the extent to which past trends
may not apply in the future. For example to reflect one-off occurrences, changes in external or market
factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial
decisions and legislation, as well as internal factors such as portfolio mix, policy conditions and claims
handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely
outcome from the range of possible outcomes, taking account of all the uncertainties involved.
A margin for adverse deviation may also be included in the liability valuation.
Estimating useful lives of assets
The useful lives of Group’s assets with definite life are estimated based on the period over which the
assets are expected to be available for use. The estimated useful lives are reviewed periodically and are
updated if expectations differ from previous estimates due to physical wear and tear, technical or
commercial obsolescence and legal or other limits on the use of the Group’s assets. In addition, the
estimation of the useful lives is based on Group’s collective assessment of industry practice, internal
technical evaluation and experience with similar assets. It is possible, however, that future results of
operations could be materially affected by changes in estimates brought about by changes in factors
mentioned above. The amounts and timing of recorded expenses for any period would be affected by
changes in these factors and circumstances. A reduction in the estimated useful lives of assets would
increase the recognized operating expenses and decrease noncurrent assets.
Asset impairment
The Group performs an impairment review when certain impairment indicators are present.
Determining the fair value of property and equipment, investment properties and intangible assets,
which require the determination of future cash flows expected to be generated from the continued use
and ultimate disposition of such assets, requires the Group to make estimates and assumptions that can
materially affect the consolidated financial statements. Future events could cause the Group to
conclude that property and equipment, investment properties and intangible assets associated with an
acquired business is impaired. Any resulting impairment loss could have a material adverse impact on
the financial position and results of operations.
- 23 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The preparation of the estimated future cash flows involves significant judgment and estimations.
While the Group believes that its assumptions are appropriate and reasonable, significant changes in
the assumptions may materially affect the assessment of recoverable values and may lead to future
additional impairment charges under PFRS.
Deferred tax assets
The Group reviews the carrying amounts at each reporting date and reduces deferred tax assets 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. However, there is no assurance that the Group will generate
sufficient taxable profit to allow all or part of its deferred tax assets to be utilized.
Financial assets through profit or loss
The Group carries some of its financial assets at fair value, which requires extensive use of accounting
estimates and judgment. While significant components of fair value measurement were determined
using verifiable objective evidence, foreign exchange rates, interest rates, volatility rates, the amount of
changes in fair value would differ if the Group utilized different valuation methodology. Any changes
in fair value of these financial assets would affect directly the profit or loss and equity.
Impairment of AFS equity investments
The Group 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 Group treats ‘significant’
generally as 20% or more and ‘prolonged’ as greater than 6 months for quoted equity securities. In
addition, the Group evaluates other factors, including normal volatility in share price for quoted
equities and the future cash flows and the discount factors for unquoted equities.
Estimating allowances for impairment loss on receivables
The Group estimates the allowance for impairment losses related to trade and other receivables based
on assessment of specific accounts where the Group has information that certain customers are unable
to meet their financial obligations. In these cases judgment used was based on the best available facts
and circumstances including, but not limited to, the length of relationship with the customer and the
customer’s current credit status based on third party credit reports and known market factors. The
Group used judgment to record specific reserves for customers against amounts due to reduce the
expected collectible amounts. These specific reserves are re-evaluated and adjusted as additional
information received impacts the amounts estimated.
The amounts and timing of recorded expenses for any period would differ if different judgments were
made or different estimates were utilized. An increase in the allowance for doubtful accounts would
increase the recognized operating expenses and decrease current assets.
Distinction between investment properties and owner-occupied properties
The Group determines whether a property qualifies as investment property. In making this judgment,
the Group considers whether the property generates cash flows largely independent of the other assets
held by an entity. Owner-occupied properties generate cash flows that are attributable not only to
property but also to the other assets used in the production or supply process.
Some properties comprise a portion that is held to earn rentals or for capital appreciation and another
portion that is held for use in the production or supply of goods or services or for administrative
purposes. If these portions cannot be sold separately at the reporting date, the property is accounted for
as investment property only if an insignificant portion is held for use in the production or supply of
goods or services or for administrative purposes. Judgment is applied in determining whether ancillary
services are so significant that a property does not qualify as investment property. The Group considers
each property separately in making its judgment.
- 24 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Distinction between real estate inventories and real estate held for development and sale
The Group determines whether a property will be classified as real estate inventories or real estate held
for development and sale. In making this judgment, the Group considers whether the property will be
sold in the normal operating cycle (real estate inventories) or whether it will be treated as part of the
Group’s strategic land banking activities for development or sale in the medium or long-term (real
estate held for development and sale).
Evaluation of net realizable value of real estate inventories and real estate held for sale and
development
The Group adjusts the cost of its real estate inventories and real estate held for sale and development to
net realizable value based on its assessment of the recoverability of the assets. In determining the
recoverability of the assets, management considers whether those assets are damaged or if their selling
prices have declined. Likewise, management also considers whether the estimated costs of completion
or the estimated costs to be incurred to make the sale have increased. The amount and timing of
recorded expenses for any period would differ if different judgments were made or different estimates
were utilized.
Revenue recognition
The Group’s revenue recognition policies require the use of estimates and assumptions that may affect
the reported amounts of revenues and receivables. Differences between the amounts initially
recognized and actual settlements are taken up in the accounts upon reconciliation. However, there is
no assurance that such use of estimates may not result in material adjustments in future periods.
Post-employment benefits
The determination of the retirement obligation cost is dependent on the selection of certain
assumptions used by actuaries in calculating such amounts. Those assumptions include among others,
discount rates, expected returns on plan assets and rates of compensation increase. In accordance with
PFRS, actual results that differ from the assumptions are accumulated and amortized over future
periods and generally affect the recognized expense and recorded obligation in such future periods.
While the Group believes that the assumptions are reasonable and appropriate, significant differences
in the actual experience or significant changes in the assumptions may materially affect the pension
and other retirement obligations.
Contingencies
The Group is currently involved in various legal proceedings and tax assessments. Estimates of
probable costs for the resolution of these claims has been developed in consultation with outside
counsel handling the defense in these matters and is based upon an analysis of potential results.
The Group currently does not believe these proceedings will have a material adverse effect on the
consolidated financial position. It is possible, however, that future results of operations could be
materially affected by changes in the estimates or in the effectiveness of the Group’s strategies relating
to these proceedings.
Valuation of financial instruments
The Group measures fair values using the following fair value hierarchy that reflects the significance of
the inputs used in making the measurements:

Level 1: Quoted price (unadjusted) in an active market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes instruments valued using quoted prices
in active markets for similar instruments; quoted prices for identical or similar instruments in
markets that are considered less than active; or other valuation techniques for which all significant
inputs are directly or indirectly observable from market data.
- 25 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Level 3: Valuation techniques using significant unobservable inputs. This category includes all
instruments for which the valuation technique includes inputs not based on observable data and
the unobservable inputs have a significant effect on the instrument’s valuation. This category
includes instruments that are valued based on quoted prices for similar instruments for which
significant unobservable adjustments or assumptions are required to reflect differences between the
instruments.
The methods and assumptions used by the Group in estimating the fair value of the financial
instruments are as follows:
Cash and cash equivalents and trade and other receivables – carrying amounts approximate fair values
due to the relatively short-term maturities of these items.
Held-for-trading and AFS investments – these are investments in equity securities, fair value for quoted
equity securities is based on quoted prices published in markets as of reporting dates, unquoted equity
securities are carried at cost less allowance for impairment losses because fair value cannot be
measured reliably due to lack of reliable estimates of future cash flows and discount rates necessary to
calculate the fair value.
Liabilities – the carrying value of trade and other payables approximate its fair value because of the
short-term nature of these financial liabilities.
The table below analyzes financial instruments measured at fair value at the end of the reporting
period by the level in the fair value hierarchy into which the fair value measurement is categorized:
December 31, 2012
Level 1
Held-for-trading investments
Equity investments
AFS financial assets
Equity investments
Debt securities
Level 2
Level 3
Total
P20,502,751
P -
P -
P20,502,751
318,370,308
6,019,391
-
-
318,370,308
6,019,391
December 31, 2011
Level 1
Held-for-trading investments
Equity investments
AFS financial assets
Equity investments
Level 2
Level 3
Total
P11,599,800
P -
P -
P11,599,800
286,968,249
-
-
286,968,249
December 31, 2010
Level 1
Held-for-trading investments
Equity investments
AFS financial assets
Equity investments
Level 2
Level 3
Total
P11,171,877
P -
P -
P11,171,877
305,979,914
-
-
305,979,914
- 26 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Financial Risk Management
Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks: legal and regulatory risk, operational risk,
market risk, credit risk and liquidity risk. The Group’s overall risk management program seeks to
minimize potential adverse effects on the financial performance of the Group. The policies for
managing specific risks are summarized below:
Legal and Regulatory Risk Management
This is the risk associated with failure to comply with laws or to conduct business consistent with
changing regulatory or public expectations.
Regulators are interested in protecting the rights of the policyholders and maintain close vigil to ensure
that the Group is satisfactorily managing affairs for their benefit. At the same time, the regulators are
also interested in ensuring that the Group maintains appropriate solvency position to meet liabilities
arising from claims and that the risk levels are at acceptable levels. The operations of the Group are
also subject to the regulatory requirements of the Insurance Commission (IC). Such regulations not only
prescribe approval and monitoring of activities but also impose certain restrictive provisions (e.g.,
capital adequacy to minimize the risk of default and insolvency on the part of the insurance
companies) to meet the unforeseen liabilities as these arise.
The Group promotes a strong compliance culture by setting the appropriate tone at the top, with
respect to compliance with laws and regulations, and established compliance policies and framework.
Compliance and legal obligations are monitored and reported to the Board of Directors.
Operational Risk
This is the uncertainty arising from internal events caused by failures of people, process and
technology, as well as external events.
The Group has established business specific guidelines. Comprehensive insurance program, including
appropriate levels of self-insurance, is maintained to provide protection against potential losses.
Market Risk
Foreign exchange risk
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to
exchange rate fluctuations arise with respect to transactions denominated in US Dollars. Foreign
exchange risk arises when future commercial transactions and recognized assets and liabilities are
denominated in a currency that is not the Group’s functional currency. Significant fluctuation in the
exchange rates could significantly affect the Group’s financial position.
Foreign exchange risk exposure of the Group is limited to its advances to Alexandra (USA), Inc. and
cash and cash equivalents. Currently, the Group has a policy not to incur liabilities in foreign currency.
Construction and supply contracts, which may have import components, are normally denominated in
Philippine Peso.
The amounts of the Group’s foreign currency denominated monetary assets, gross of allowances at the
reporting date are as follows:
Cash and cash equivalents
Advances to Alexandra (USA), Inc.
2012
2011
2010
P10,652,601
-
P12,119,089
-
P14,888,873
132,288,144
- 27 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table details the Group’s sensitivity to a 10% increase and decrease in the Philippine
Peso against the US Dollar. The sensitivity rate used in reporting foreign currency risk internally to key
management personnel is 10% and it represents Management’s assessment of the reasonably possible
change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a 10% change in foreign currency rates. A positive
number below indicates an increase in net income or decrease in net loss when the Philippine Peso
weakens 10% against the US Dollar. For a 10% strengthening of the Philippine Peso against the US
Dollar, there would be an equal and opposite impact on net income.
Cash and cash equivalents
Advances to Alexandra (USA), Inc.
2012
2011
2010
P1,065,260
-
P1,211,909
-
P1,488,887
13,228,814
P1,065,260
P1,211,909
P14,717,701
As of December 31, 2012, 2011 and 2010, the Group does not have monetary liabilities denominated
in foreign currency.
Interest rate risk
The primary source of the Group’s interest rate risk relates to its cash and cash equivalents, held-tomaturity investments and loans payable. The interest rates on these assets and liabilities are disclosed
in Notes 8, 11, and 26.
Interests on loans payable were arranged at fixed interest rates as stated in the court-approved
rehabilitation plan, eliminating the possible exposure of the Group to interest rate risk fluctuations.
Cash and cash equivalents are short-term in nature and with the current interest rate level, any
variation in the interest will not have a material impact on the net loss of the Group.
Insurance Risk
The principal risk Meridian Assurance Corporation (MAC) faces under insurance contracts is that the
actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by
the frequency of claims, severity of claims, actual benefits paid and subsequent development of claims.
Therefore, the objective of MAC is to ensure that sufficient reserves are available to cover these
liabilities.
The above risk exposure is mitigated by diversification across a large portfolio of insurance contracts.
The variability of risks is also improved by careful selection and implementation of underwriting
strategy guidelines, as well as the use of reinsurance arrangements.
MAC purchases reinsurance as part of its risks mitigation program. Reinsurance ceded is placed on
both a proportional and non-proportional basis with retention limits varying by product line. The
majority of proportional reinsurance is quota-share reinsurance which is taken out to reduce the overall
exposure of MAC to certain classes of business. Non-proportional reinsurance is primarily excess-ofloss reinsurance designed to mitigate MAC’s net exposure to catastrophe losses. Retention limits for the
excess-of-loss reinsurance vary by product line.
Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims
provision and are in accordance with the reinsurance contracts. Although MAC has reinsurance
arrangements, it is not relieved of its direct obligations to its policyholders and thus a credit exposure
exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations
assumed under such reinsurance agreements.
- 28 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAC’s placement of reinsurance is diversified such that it is neither dependent on a single reinsurer
nor are the operations of MAC substantially dependent upon any single reinsurance contract.
MAC principally issues the following types of general insurance contracts: fire, motor car, bonds,
marine cargo, and others. The most significant risks arise from climate changes and natural disasters.
These risks do not vary significantly in relation to the location of the risk insured by MAC, type of risk
insured and by industry.
To further reduce the risk exposure, MAC requires strict claim review policies to assess all new and
ongoing claims, regular detailed review of claims handling procedures and frequent investigation of
possible fraudulent claims.
MAC further enforces a policy of actively managing and prompt pursuing of claims, in order to reduce
its exposure to unpredictable future developments that can negatively impact MAC.
MAC also has limited its exposure level by imposing maximum claim amounts on certain contracts as
well as the use of reinsurance arrangements in order to limit exposure to catastrophic events. The
purpose of these underwriting and reinsurance strategies is to limit exposure to catastrophes to a
predetermined maximum amount based on MAC’s risk appetite as decided by management.
The table below set out details of claims outstanding by type of contract:
2012
Fire
Motor car
Marine cargo
Others
2011
Fire
Motor car
Bonds
Marine cargo
Others
2010
Fire
Motor car
Bonds
Marine cargo
Others
Direct Business
Assumed Business
Total
P13,863,343
3,645,818
31,535
1,186,237
P21,017,884
23,906
31,453
P34,881,227
3,645,818
55,441
1,217,690
P18,726,933
P21,073,243
P39,800,176
Direct Business
Assumed Business
Total
P11,739,381
2,932,017
10,000
1,589,407
P12,332,262
1,000,000
23,906
453
P24,071,643
2,932,017
1,000,000
33,906
1,589,860
P16,270,805
P13,356,621
P29,627,426
Direct Business
Assumed Business
Total
P9,184,559
3,594,911
5,314
1,987,797
P2,857,740
1,000,000
2,513
453
P12,042,299
3,594,911
1,000,000
7,827
1,988,250
P14,772,581
P3,860,706
P18,633,287
- 29 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Credit risk
The Group’s credit risk is primarily attributable to its trade and other receivables, premiums
receivables, due from ceding companies and reinsurers, reinsurance recoverable on claim and held-tomaturity investments as disclosed in Notes 11 and 12. The Group has adopted stringent procedure, in
extending credit terms to customers and in monitoring its credit risk.
The Group has no significant concentration of credit risk. It has policies in place to ensure that sales
are made to customers with an appropriate credit history. The Group’s exposure to credit risk arises
from a default customer, with a maximum exposure equal to carrying amount of the related
receivables, particularly those relating to its leasing operations.
The credit quality of trade and other receivables, premiums receivables, due from ceding companies
and reinsurers, reinsurance recoverable on claim and held-to-maturity investments that are neither past
due nor impaired can be assessed by reference to internal credit ratings or to historical information
about counterparty default rates:
2012
Trade and other receivables
Premiums receivable
Due from ceding companies
and reinsurers
Reinsurance recoverable on
claims
Held-to-maturity investments
2011
Trade and other receivables
Premiums receivable
Due from ceding companies
and reinsurers
Reinsurance recoverable on
claims
Held-to-maturity investments
2010
Trade and other receivables
Premiums receivable
Due from ceding companies
and reinsurers
Reinsurance recoverable on
claims
Held-to-maturity investments
Group A
Group B
Group C
Total
P32,036,496
4,855,524
P157,379,703
7,523,904
P148,864,733
3,372,799
P338,280,932
15,752,227
458,551
347,364
46,484
852,399
6,943,125
50,308,581
-
6,943,125
50,308,581
P94,602,277
P165,250,971
P152,284,016
P412,137,264
P5,402,906
4,212,273
P26,390,402
7,397,140
P55,400,164
5,788,850
P87,193,472
17,398,263
494,718
241,085
116,596
852,399
14,390,896
42,755,695
-
-
14,390,896
42,755,695
P67,256,488
P34,028,627
P61,305,610
P162,590,725
P36,909,689
4,981,679
P24,626,177
7,082,530
P34,403,092
6,846,230
P95,938,958
18,910,439
536,523
1,229,300
126,450
1,892,273
9,983,956
36,725,106
P89,136,953



-
P32,938,007
P41,375,772
9,983,956
36,725,106
P163,450,732
Group A - new customers/related parties (less than 3 months).
Group B- existing customers/related parties (less than 3 months) with no defaults in the past.
Group C - existing customers/related parties (less than 3 months) with some defaults in the past. All
defaults were fully recovered.
- 30 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2012, trade and other receivables, premiums receivables, due from ceding
companies and reinsurers and reinsurance recoverable on claims of P373,441,113 (2011 –
P294,085,284; 2010 – P276,000,718) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default. The aging analysis of these
receivables is as follows:
2012
Trade and other receivables
Premiums receivable
Due from ceding companies and reinsurers
Reinsurance recoverable on claims
2011
Trade and other receivables
Premiums receivable
Due from ceding companies and reinsurers
Reinsurance recoverable on claims
2010
Trade and other receivables
Premiums receivable
Due from ceding companies and reinsurers
Reinsurance recoverable on claims
More than
90 days
More than
one year
Total
P106,413,431
3,117,035
311,265
13,869,293
P226,661,679
3,583,186
438,422
19,046,802
P333,075,110
6,700,221
749,687
32,916,095
P123,711,024
P249,730,089
P373,441,113
P94,536,022
6,658,578
565,065
7,899,608
P172,169,633
2,333,507
1,083,098
8,839,773
P266,705,655
8,992,085
1,648,163
16,739,381
P109,659,273
P184,426,011
P294,085,284
P98,344,887
7,767,638
612,814
6,011,779
P152,639,534
2,722,178
1,174,623
6,727,265
P250,984,421
10,489,816
1,787,437
12,739,044
P112,737,118
P163,263,200
P276,000,718
As at December 31, 2012, trade and other receivables, premiums receivables, due from ceding
companies and reinsurers and reinsurance recoverable on claims of P39,300,706 (2011 –
P39,300,716; 2010 – P25,931,270) were impaired and provided for. The amount of the provision was
nil in 2012 (2011 – P15,507,800; 2010 – P1,665,757). It was assessed that a portion of the receivables
is expected to be recovered. The aging of these receivables is as follows:
More than
90 days
2012
Trade and other receivables
Premiums receivable
Due from ceding companies and reinsurers
More than
one year
Total
P37,179,184
240,073
1,881,459
P37,179,184
240,073
1,881,459
P39,300,716
P39,300,716
P -
P37,179,184
240,073
1,881,459
P37,179,184
240,073
1,881,459
P -
P39,300,706
P39,300,706
P P -
2011
Trade and other receivables
Premiums receivable
Due from ceding companies and reinsurers
Forward
- 31 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
More than 90
days
2010
Trade and other receivables
Premiums receivable
Due from ceding companies and reinsurers
Reinsurance recoverable on claims
P P -
More than
one year
Total
P20,703,544
1,905,830
2,354,057
967,839
P20,703,544
1,905,830
2,354,0567
967,839
P25,931,270
P25,931,270
The other classes within trade and other receivables do not contain impaired assets. The maximum
exposure to credit risk at the reporting date is the carrying amount of each class of receivable
mentioned above. The condominium certificates of the title remain in the possession of the Parent
Company until full payment has been made by the customers.
Liquidity risk
The Group maintains adequate highly liquid assets in to assure necessary liquidity. Free cash flows are
restricted primarily for the settlement of the Parent Company’s debt obligations, in accordance with the
rehabilitation plan.
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay. The table includes both interest
and principal cash flows.
2012
Trade and other payables
Claims outstanding
Due to ceding companies and
reinsurers
Funds held for reinsurers
2011
Trade and other payables
Claims outstanding
Due to ceding companies and
reinsurers
Funds held for reinsurers
2010
Trade and other payables
Claims outstanding
Due to ceding companies and
reinsurers
Funds held for reinsurers
Notes
Less than One
Year
20
20
P119,080
27,762
P98,551
12,038
20
25
5,840
3,674
473
-
P156,356
P111,062
20
20
P284,910
24,720
P5,664
4,908
P -
P290,574
29,628
20
25
6,112
4,696
285
-
-
6,397
4,696
P320,438
P10,857
P -
P331,295
20
20
P168,139
18,633
P37
-
P21
-
P168,197
18,633
20
25
5,997
3,556
-
-
P37
P21
P196,295
- 32 -
One to Five
More than
Years
Five Years
(In Thousand Pesos)
P93,445
P93,445
Total
P311,076
39,800
6,313
3,674
P360,863
5,997
3,556
P196,383
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Capital Risk Management
The Group manages its capital to ensure that the Group is able to continue as a going concern while
maximizing the return to shareholders through the optimization of the debt and equity balance.
The capital structure of the Group consists of equity, which comprises of issued capital, reserves and
deficit as disclosed in Notes 29 and 30.
Management reviews the capital structure on a quarterly basis. As part of this review, Management
considers the cost of capital and the risks associated with it. The Parent Company’s loans-to-equity
ratio must not exceed 1:1, as a requisite in exiting the rehabilitation plan. The Group is able to meet
this requirement, computed as follows:
Loans payable
Equity
2012
2011
2010
P2,835,305,635
P2,806,748,494
P3,062,195,698
0.00:1
0.00:1
0.00:1
Debt to equity ratio
Regulatory Capital Requirement
The operations of Meridian Assurance Corporation (MAC) are subject to the regulatory requirements of
the Insurance Commission (IC). Such regulations not only prescribe approval and monitoring of
activities but also impose certain capital requirement.
Margin of Solvency
Under Sec. 194 of Presidential Decree 612 (PD 612), also known as the Insurance Code of the
Philippines, MAC shall maintain, at all times, a margin of solvency equal to P500,000 or 10% of the
total amount of its net premiums written during the preceding year, whichever is higher. The margin of
solvency is the excess of the value of MAC’s admitted assets, as defined under existing insurance
regulations, exclusive of its paid-up capital, over the amounts of its liabilities, unearned premiums and
reinsurance reserves in the Philippines.
The estimated amounts of non-admitted assets as of December 31, 2012, 2011 and 2010 as defined
under Sec. 197 of PD 612, which are included in the consolidated statements of financial position, are
as follows:
Deferred reinsurance premiums
Deferred acquisition costs
Premiums in course of collection
Property and equipment – net
Deferred tax assets
Other assets
2012
2011
2010
P12,629,931
10,440,431
6,048,058
2,557,937
7,362,264
873,003
P16,423,610
8,887,518
8,221,766
1,890,097
9,112,574
2,212,343
P15,835,968
7,882,819
3,970,027
726,429
10,012,334
1,238,104
P39,911,624
P46,747,908
P39,665,681
The final amount of the margin of solvency can be determined only after the accounts of MAC have
been examined by the Office of the IC, particularly with respect to the determination of admitted and
non-admitted assets.
Fixed capitalization requirements
MAC manages its capital to ensure that it will be able to continue as a going concern and maintain
appropriate solvency position to meet liabilities arising from claims. Further, capitalization is one of the
essential financial rating factors for insurance companies which are strictly monitored by the IC. Capital
infusion is usually made to avoid revocation of its Certificate of Authority because of non-compliance.
Pursuant to Department Order No. 27-06, any licensed wholly Filipino-owned domestic life and non-
- 33 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
life insurance company must possess a minimum paid up capital of P250 million, P175 million and
P125 million as of December 31, 2012, 2011 and 2010, respectively. Implementation of this
Department Order was, however, deferred to March 31, 2012 for P175 million and March 31, 2011 for
P125 million required minimum paid up capital. The Department Order 27-06, stating that the
minimum paid-up capital should be P250 million as of December 31, 2012 was superseded by the new
Department Order 15-2012, but the effectivity was deferred on account of a temporary restraining order
issued by a court.
On March 30, 2012 and 2011, paid-up capital were increased by P50 million and P25 million for
December 31, 2012 and 2011 to comply with the minimum paid-up capital of P175 million and
P125 million for December 31, 2012 and 2011 per Department of Finance (DOF) Department Order
No. 27-06 being implemented by the IC. The infusion of the additional paid-up capital was done in
cash and stock dividend. The additional capital was infused by the same shareholders, thus, there was
no change in the percentage of capital ownership.
7. Segment Information
Details of the Parent Company’s subsidiaries as of December 31, 2012, 2011 and 2010 are as follows:
Principal
Activities
PRHC Property Managers, Inc. (PPMI)
Tektite Insurance Brokers, Inc. (TIBI)
Meridian Assurance Corporation
(MAC)
Universal Travel Corporation (UTC)
Property Management
Insurance Brokerage
Non-life Insurance
Travel and Tours Agency
Interest Ownership
2012
2011
2010
100%
100%
100%
100%
100%
100%
86.66%
81.53%
86.66%
81.53%
86.66%
81.53%
Minority interests represent the equity interests in Meridian Assurance Corporation and Universal
Travel Corporation not held by the Group.
The segment assets and liabilities as of December 31, 2012, 2011 and 2010 and results of operations
of the reportable segments for the years ended December 31, 2012, 2011 and 2010 are as follows:
- 34 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2012
Parent
Subsidiaries
Sale of Real Estate
and Leasing
Property
Management
Insurance
Brokerage
Underwriting
Travel services
Other Income
Eliminations
Consolidated
(In Thousand Pesos)
Revenue
Segment Result
Interest expense
Interest income
Dividend income
Equity in net loss of associates
Income taxes
Loss (income) before
minority interest
Minority interest
Net Income (Loss)
Other Information
Segment assets
Investments at equity method
Unallocated corporate assets
Consolidated Total Assets
Segment liabilities
Unallocated corporate
liabilities
Consolidated Total Liabilities
Capital expenditure
Depreciation and amortization
Non-cash expenses other than
depreciation
P403,390
P25,312
P6,579
P26,860
P665
P66,110
(P4,441)
P524,475
P11,860
(33)
28,217
180
(13,057)
(2,708)
P3,206
7
(962)
P699
138
(378)
P13,896
4,794
353
(1,991)
(P1,444)
263
(14)
P66,110
-
(P82,783)
-
(P12,176)
(33)
33,419
533
(13,057)
(6,053)
739
P739
2,251
P2,251
459
P459
17,052
P17,052
(1,195)
(P1,195)
66,110
P66,110
(82,783)
2,054
(P80,729)
2,633
2,054
P4,687
P3,755,306
166,177
9,443
P3,930,926
P26,331
3,496
P29,827
P19,250
P19,250
P382,815
7,362
P390,177
P31,734
P31,734
P P -
(P43,666)
(165,954)
(P209,620)
P4,171,770
223
20,301
P4,192,294
P1,095,048
P17,467
P4,495
P150,019
P56,157
P -
(P63,677)
P1,259,509
572
P1,095,620
P17,467
1,326
P5,821
9,145
P159,164
P56,157
P -
(P63,677)
11,043
P1,270,552
P971
17,773
P505
889
P 1,032
P1,642
4,256
P4
166
P -
P -
P3,122
24,116
6,046
547
590
950
-
-
8,133
- 35 -
-
2011
Parent
Sale of Real Estate
and Leasing
Subsidiaries
Property
Management
Insurance
Brokerage
Underwriting
Travel
services
Other Income
Eliminations
Consolidated
(In Thousand Pesos)
Revenue
P399,251
P21,653
P5,610
P17,773
P693
P117,021
(P5,522)
P556,479
Segment Result
Interest expense
Interest income
Dividend income
Equity in net loss of associates
Income taxes
(P330,849)
(31)
20,957
(7,266)
(1,435)
P3,212
3
(1,122)
P205
134
(240)
(P1,519)
4,477
766
(1,287)
(P1,624)
280
(81)
P117,021
-
P15,385
-
(P228,939)
(31)
25,851
766
(7,266)
(4,165)
Income (Loss) before minority
interest
Minority interest
Net Income (Loss)
(318,624)
(P318,624)
2,093
P2,093
99
P99
2,437
P2,437
(1,425)
(P1,425)
117,021
P117,021
15,385
769
P14,616
(213,784)
769
(P213,015)
Other Information
Segment assets
Investments at equity method
Unallocated corporate assets
Consolidated Total Assets
P3,590,057
151,942
11,414
P3,753,413
P24,991
3,390
P28,381
P14,137
P14,137
P310,806
9,113
P319,919
P33,056
P33,056
P P -
(P18,900)
(151,715)
(P170,615)
P3,954,147
227
23,917
P3,978,291
Segment liabilities
Unallocated corporate
liabilities
(P944,538)
(P18,272)
(P3,951)
(P115,200)
(P53,386)
P -
P51,127
(P1,084,220)
Consolidated Total Liabilities
(P946,664)
(P18,272)
(P3,951)
(P124,519)
(P53,386)
P -
P1,637
6,676
P346
242
P366
660
P1,673
2,924
P 169
P -
P -
P4,022
10,671
154,384
514
585
3,947
-
-
-
159,430
Capital expenditure
Depreciation
Non-cash expenses other than
depreciation
(2,126)
-
-
(9,319)
- 36 -
-
-
P51,127
(11,445)
(P1,095,665)
2010
Parent
Subsidiaries
Sale of Real Estate
and Leasing
Property
Management
Insurance
Brokerage
Underwriting
Travel
services
Other Income
Eliminations
Consolidated
(In Thousand Pesos)
Revenue
P563,121
P18,761
P6,770
P21,868
P809
P143,716
(P2,343)
P752,702
Segment Result
Interest expense
Interest income
Dividend income
Equity in net loss of associates
Income taxes
(P231,472)
(493)
23,389
19,104
(93)
1,207
P391
2
(938)
P469
(774)
(P2,249)
1,148
701
( P1,410)
158
(22)
P143,716
-
(P8,114)
-
(P98,669)
(493)
23,549
20,252
(93)
174
Income (Loss) before minority
interest
Minority interest
(188,358)
-
(545)
-
(305)
-
(400)
-
(1,274)
-
143,716
-
(8,114)
29
(55,280)
29
Net Income (Loss)
(P188,358)
(P545)
(P305)
(P400)
(P1,274)
P143,716
(P8,085)
(P55,251)
Other Information
Segment assets
Investments at equity method
Unallocated corporate assets
P3,784,713
128,374
9,755
P23,503
3,329
P14,021
-
P265,808
2,960
P44,292
-
P -
(P88,782)
(127,004)
-
P4,043,555
1,370
16,044
Consolidated Total Assets
P3,922,842
P26,832
P14,021
P268,768
P44,292
P -
(P215,786)
P4,060,969
Segment liabilities
Unallocated corporate
liabilities
(P860,103)
(P18,990)
(P5,143)
(P112,178)
(P54,136)
P -
P77,638
(P972,912)
Consolidated Total Liabilities
(P860,647)
(P18,990)
(P5,143)
(P112,178)
(P54,136)
P -
P5,481
5,769
P7
836
P1,340
426
P137
3,714
P 175
P -
P -
P6,965
10,920
4,492
358
1,991
743
-
-
7,584
Capital expenditure
Depreciation
Non-cash expenses other than
depreciation
(544)
-
-
-
- 37 -
-
-
-
P77,638
(544)
(P973,456)
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Aggregated amounts relating to subsidiaries follow:
2012
2011
2010
P29,827,217
17,467,175
P28,380,176
18,271,587
P26,831,641
18,990,280
12,360,042
10,108,589
7,841,361
26,705,660
(24,454,207)
24,339,114
(22,071,886)
22,043,302
(20,651,950)
P2,251,453
P2,267,228
P1,391,352
P19,250,037
5,821,964
P14,137,197
3,950,648
P14,020,904
3,336,769
Net assets
13,428,073
10,186,549
10,684,135
Income
Cost and expenses
6,803,391
(6,344,522)
5,830,894
(5,731,201)
7,145,725
(7,073,731)
P458,869
P99,693
P71,994
P382,815,201
151,802,043
P319,918,102
124,518,887
P269,222,755
112,178,626
Net assets
231,013,158
195,399,215
157,044,129
Income
Cost and expenses
100,765,250
(83,713,217)
37,351,509
(29,762,001)
30,432,046
(28,664,010)
(P17,052,033)
P7,589,508
P1,768,036
Universal Travel Corporation (UTC)
Total assets
Total liabilities
P31,773,986
56,147,315
P33,056,483
53,386,367
P44,292,391
54,137,072
Net assets
(24,373,329)
(20,329,884)
(9,844,681)
975,988
(2,170,866)
1,079,754
(2,397,460)
1,121,888
(2,240,918)
(P1,194,878)
(P1,317,706)
(P1,119,030)
PRHC Property Managers, Inc. (PPMI)
Total assets
Total liabilities
Net assets
Income
Cost and expenses
Net profit
Tektite Insurance Brokers, Inc. (TIBI)
Total assets
Total liabilities
Net profit
Meridian Assurance Corporation (MAC)
Total assets
Total liabilities
Net profit
Income
Cost and expenses
Net loss
The following are the principal activities of the Parent Company’s subsidiaries:
PRHC Property Managers, Inc. (PPMI)
PPMI was incorporated and registered with the SEC on May 24, 1991 to engage in the business of
managing, operating, developing, buying, leasing and selling real and personal property either for itself
and/or for others.
The registered office of PPMI is at the 5/F East Tower, PSE Centre, Exchange Road, Ortigas Center,
Pasig City.
- 38 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Tektite Insurance Brokers, Inc. (TIBI)
TIBI was incorporated and registered with the SEC on January 2, 1989 to engage in the business of
insurance brokerage.
The registered office of TIBI is at the 20/F East Tower, PSE Centre, Exchange Road, Ortigas Center,
Pasig City.
On November 30, 2004, TIBI’s Board of Directors approved and authorized the increase in its
authorized capital stock from P3.4 million, divided into 3.4 million common shares with par value of
P1 per share to P17 million, divided into 17 million common shares with par value of P1 per share. As
of reporting date, the application for the increase in capital stock is still pending the SEC’s approval.
Meridian Assurance Corporation (MAC)
MAC was incorporated and registered with the SEC on March 16, 1960, renewed on November 13,
2007, primarily to engage in the business of insurance and guarantee of any kind and in all branches
except life insurance, for consideration, to indemnify any person, firm or corporation against loss,
damage or liability arising from any unknown or contingent event, and to guarantee liabilities and
obligations of any person, firm or corporation and to do all such acts and exercise all such powers as
may be reasonably necessary to accomplish the above purposes which may be incidental.
The registered office of MAC is at the 7/F, West Tower, PSE Centre, Exchange Road, Ortigas Center,
Pasig City. Aside from its head office in Metro Manila, it maintains offices in the cities of Cebu, Iloilo,
Davao and Cagayan de Oro.
Universal Travel Corporation (UTC)
UTC was incorporated and registered with the SEC on November 9, 1993 to engage in the business of
travel services by providing, arranging, marketing, engaging or rendering advisory and consultancy
services relating to tours and tour packages. The registered office of UTC is at the Ground Floor, West
Tower, PSE Centre, Exchange Road, Ortigas Center, Pasig City.
UTC holds 41,673,000 shares of the Parent Company which was acquired at P50.97 million.
8. Cash and Cash Equivalents
This account consists of:
Cash on hand and in banks
Cash equivalents
2012
2011
2010
P242,972,596
326,041,466
P54,183,552
389,136,570
P43,943,458
259,990,690
P569,014,062
P443,320,122
P303,934,148
Cash in banks earn average annual interest ranging from 0.32% to 1.75% in 2012 and 0.25% to 1.75%
during 2011 and 2010. Cash equivalents represent short-term money market placements, with annual
interest ranging from 1.00% to 4.25%, 1.25% to 4.63% and 1.20% to 4.50%, in 2012, 2011 and 2010,
respectively. Interest income earned amounted to P14.96 million, P10.86 million and P7.89 million in
2012, 2011 and 2010, respectively.
- 39 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Held-for-trading Investments
This account is composed of various equity securities. The fair value of these securities is based on
quoted market prices which is level one (1) in the fair value hierarchy.
The movement of held-for-trading investments is summarized as follows:
Note
2012
2011
2010
37
P11,599,800
32,053,003
(23,089,395)
(60,657)
P11,171,877
427,923
P10,173,389
998,488
P20,502,751
P11,599,800
P11,171,877
2012
2011
2010
P7,635,003
5,614,518
1,786,308
1,402,240
1,262,506
945,480
P6,750,000
4,849,800
-
P6,750,000
4,421,877
-
Balance, January 1
Additions
Sale/disposal
Fair value adjustments
Balance, December 31
This account is composed of the following securities at fair value:
Property company
Holding firms
Banks
Food, beverage and tobacco
Electricity, energy, power and water
Mining
Construction, infrastructure and allied
services
Others
844,200
1,012,496
P20,502,751
-
-
P11,599,800
P11,171,877
2012
2011
2010
P286,968,249
25,986,130
(17,928,781)
P305,979,914
17,703,325
(35,825,779)
P363,286,005
281,943
-
295,025,528
(1,032)
29,365,133
287,857,460
(889,211)
363,567,948
(57,588,034)
P324,389,699
P286,968,249
P305,979,914
10. Available-for-sale Investments
The movements in the AFS investments are summarized as follows:
January 1
Additions
Disposals
Amortization of AFS – debt securities
Fair value adjustments
December 31
- 40 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The account is composed of the following securities:
Cost:
Shares of stocks
Golf and country club shares
Accumulated unrealized holding gain
2012
2011
2010
P201,268,834
3,350,000
P193,212,517
3,350,000
P211,334,971
3,350,000
204,618,834
119,770,865
196,562,517
90,405,732
214,684,971
91,294,943
P324,389,699
P286,968,249
P305,979,914
AFS investments are investments in shares of stock of various listed equity securities and golf and
country club shares that present the Group with opportunity for return through dividend income and
trading gains. The fair value of these investments is based on quoted market prices which is a level one
in the fair value hierarchy. Unrealized holding gains or losses from market value fluctuations are
recognized as part of the Group’s reserves.
The Group received dividend income from these investments amounting to P0.53 million, P0.77
million and P20.25 million in 2012, 2011 and 2010, respectively, as disclosed in Note 37.
11. Held-to-Maturity (HTM) Investments
The movements in the HTM investments are summarized as follows:
2012
2011
2010
Balance, beginning of year
Additions
Maturities
Amortization of discount/premium
P42,755,695
45,800,000
(40,454,488)
2,207,374
P36,725,106
8,353,250
(8,165,750)
5,843,089
P35,481,206
10,165,750
(8,167,000)
(754,850)
Balance, end of year
P50,308,581
P42,755,695
P36,725,106
The following presents the breakdown of HTM investments by contractual maturity dates at
December 31:
2012
Due within one year
Due beyond one year but not beyond five
years
P -
2011
2010
P33,856,001
P8,329,428
50,308,581
8,899,694
28,395,678
P50,308,581
P42,755,695
P36,725,106
2012
2011
2010
P47,800,000
2,508,581
P42,499,694
256,001
P35,412,500
1,312,606
P50,308,581
P42,755,695
P36,725,106
The account is composed of the following securities:
Cost:
Treasury notes
Unamortized premium
HTM investments consist of Philippine treasury bills which bear annual average interest of 3.6%, 2.9%
and 4.4% in 2012, 2011 and 2010, respectively, with maturities ranging from one to five years.
- 41 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the provisions of the Insurance Code, the certificates covering the government
securities were deposited with the Bureau of Treasury and Insurance Commission as security for the
benefit of policyholders and creditors of MAC.
Government securities are stated at amortized cost using effective interest method. Amortization of
bond premium or discount is charged to profit or loss as part of interest income.
Management believes that the carrying amount of the Group’s HTM investments approximate fair
values.
12. Trade and Other Receivables
This account is composed of:
Trade
Premium receivables
Reinsurance recoverable on claims
Funds held by ceding companies
Due from ceding companies and
reinsurers
Other receivables
Less allowance for impairment loss
2012
2011
2010
P577,107,665
22,692,521
39,859,220
4,221,797
P332,173,009
26,630,421
31,130,277
4,912,097
P307,363,423
31,306,085
23,690,839
3,296,857
3,483,545
131,427,561
4,382,021
58,905,302
5,065,932
61,231,340
778,792,309
(39,300,716)
458,133,127
(39,300,716)
431,954,476
(25,931,270)
P739,491,593
P418,832,411
P406,023,206
Trade receivables include amounts due from buyers of the Parent Company’s condominium projects,
generally over a period of three (3) or four (4) years. The condominium certificates of title remain in the
possession of the Parent Company until full payment has been made by the customers.
Trade receivables due after one year amount to P193.6 million in 2012, P173.5 million in 2011 and
P178.7 million in 2010.
Also, included in trade receivables are amounts due from certain buyers of Andrea North Skyline
Tower condominium project amounting to P291.9 million in 2012, P265.9 million in 2011 and P246.5
million in 2010, for which few of the buyers have filed cases against the Parent Company for the
rescission of contracts to sell and refund of total installment payments made amounting to P8.2 million
in 2012, 2011 and 2010. With the completion of the Skyline Tower, most of the buyers concerned
have opted to retain their units under various compromise agreements with the Parent Company.
These trade receivables are now being collected because units of Andrea North Skyline Tower have
been handed over to the buyers.
Reinsurance recoverable on claims pertains to MAC’s receivable on claims from the assuming
company of its share in losses to the assured for incidents that resulted to the loss or damages to the
insured properties.
Other receivables mainly consists of advances to contractors of Andrea North Skyline and Skybreeze
Projects amounting to P81 million in 2012, P46 million in 2011 and P41 million in 2010. The rest of
the balances are receivables from lessees and concessionaires.
- 42 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Movements in the allowance for impairment loss on receivables are as follows:
Balance, beginning
Provision
Write off
Balance, end
Note
2012
2011
2010
28,38
P39,300,716
-
P25,931,270
15,507,800
(2,138,354)
P29,335,072
1,665,757
(5,069,559)
P39,300,716
P39,300,716
P25,931,270
In determining the recoverability of trade receivables, the Group considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date.
The concentration of credit risk is limited due to the client base being large and unrelated.
Accordingly, Management believes that there is no further credit provision required in excess of the
allowance for impairment loss on receivables.
Management further believes that the carrying amounts of the trade and other receivables approximate
fair values.
13. Prepayments and Other Assets
This account consists of:
Prepaid taxes
Input VAT – net
Deferred reinsurance premiums
Deferred acquisition costs
Others
2012
2011
2010
P123,804,836
26,810,136
12,629,931
10,440,431
21,979,995
P102,980,002
71,636,443
16,423,610
8,887,518
23,446,050
P96,214,367
85,713,144
15,835,968
7,882,819
14,460,416
P195,665,329
P223,373,623
P220,106,714
Prepaid taxes are unutilized creditable withholding taxes, a portion of which was filed for refund with
the Bureau of Internal Revenue.
Input VAT amounting to P26.8 million, P71.6 million and P85.71 million in 2012, 2011 and 2010,
respectively, is net of output VAT.
Deferred reinsurance premiums pertains to MAC’s unexpired portion of the related premiums ceded
out, which is recognized as an asset, until the lapse of the reinsurance agreement.
Deferred acquisition cost pertains to the commission expense that were paid to intermediaries
(agents/brokers), reduced by the commission earned by MAC in reinsurance by assuming business from
other insurance companies.
Others includes prepaid insurance, security deposits, accrued interest, loans due from employees and
other accounts receivables.
- 43 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. Real Estate Inventories
Real estate inventories at December 31 consist of the following:
Note
In progress:
The Icon Plaza
Andrea North Skybreeze
Tower
Andrea North Showroom
Andrea North Estate
Andrea North Skyline Tower
Andrea North Skyline Model
Units
Others
15
Completed units:
Andrea North Skyline
Tower
Andrea North Skyline Model
Units
Casa Miguel
PSE Tower I
PSE Tower II
2012
P394,329,292
2011
P-
2010
P -
57,855,965
35,121,677
29,303,832
-
35,825,425
26,610,758
-
16,259,236
16,259,236
681,137,987
2,410,626
17,911
27,643,748
17,911
519,021,392
62,454,094
741,318,118
305,654,382
485,262,269
25,768,813
6,895,314
-
24,773,673
6,895,314
-
7,952,406
194,761,973
49,239,137
338,318,509
516,931,256
251,953,516
P857,339,901
P579,385,350
P993,271,634
-
In February 2009, the Group resumed construction of Skyline Tower. Adjustments in cost estimate and
accounting for construction contracts were applied. Concurrent with the adoption of the percentage of
completion revenue recognition method, the change in cost estimate for sold units was taken up in the
books. Percentage of completion prior to resumption of construction in February 2009 is 34.74%. The
percentage of completion is 100% and 95.13% as of December 31, 2011 and 2010, respectively.
As disclosed in Note 15, the Group’s share on the saleable area of “The Icon Plaza” under joint venture
agreement with Xcell Property Ventures, Inc. is recorded as real estate inventories. A number of units of
The Icon Plaza were already sold during 2012. The percentage of completion of The Icon Plaza is 47%
as of December 31, 2012.
The movements of completed units are summarized as follows:
Note
Balance, beginning
Sale of Andrea North Skyline
units
Completion of Andrea North
Skyline Tower
Reclassification to investment
properties
Sale of Casa Miguel unit
Balance, end
2012
2011
2010
P516,931,256
P251,953,516
P251,953,516
(178,612,747)
17
-
-
510,035,942
-
-
(244,001,110)
(1,057,092)
-
P338,318,509
- 44 -
-
P516,931,256
P251,953,516
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Completed units in PSE Towers I and II were reclassified to Investment Properties as disclosed in
Note 19.
15. Real Estate Held for Development and Sale
This account consists of:
Land invested in joint venture
Land held for development and sale
Allowance for decline in value
2012
2011
2010
P710,864,983
188,653,713
P1,227,166,870
188,653,713
P731,177,060
740,867,928
899,518,696
-
1,415,820,583
-
1,472,044,988
(53,499,445)
P899,518,696
P1,415,820,583
P1,418,545,543
2011
2010
P53,499,445
(53,499,445)
P109,139,445
(55,640,000)
Movements in the allowance for decline in value are as follows:
2012
Balance, beginning
Reversal during the year
P -
Balance, end
P -
P-
P53,499,445
The Group provides an allowance for decline in value to bring down the carrying amounts of the assets
to their net realizable values which are based on the fair market values as determined by various
independent appraisers. During 2011, the allowance was reversed due to increase in the appraised
values of the properties.
Land invested in joint venture
In February 2005, the Parent Company entered into a joint venture agreement with Next Properties,
Inc., renamed Xcell Property Ventures, Inc. (Xcell), for the development of twin-tower residential
condominium on two (2) of PRHC’s Fort Bonifacio lots to be called “The Icon Residences.” The Parent
Company contributed two (2) lots to the joint venture, namely lots 14-2A and 14-1, and in return will
receive twenty-percent (20%) of net sales or P804 million whichever is higher, plus 35% of the joint
venture’s pre-tax profits from the project.
Further, it was provided under the joint venture agreement that while construction of the project is ongoing, Xcell shall remit to the Parent Company the amount of not less than (i) P280,000,000 for lot 141 and (ii) P304,600,000 for lot 14-2A. Provided, however, that total remittance to the Parent Company
shall not be less than P20,000,000 per quarter starting in December 2005 for lot 14-2, and in June
2007 for lot 14-1.
In 2008, the Parent Company and Xcell entered into an amended joint venture agreement. The
agreement provides that all amounts remitted by Xcell shall be held in trust by the Parent Company,
which shall open a special trust account with the trust department of a commercial bank acceptable to
Xcell. The funds held in trust, as mandated by the rehabilitation plan, shall be utilized exclusively for
the completion of the Parent Company’s Andrea North Skyline Tower, construction of which resumed
in February 2009.
In July 2011, the Parent Company entered into another joint venture agreement with Xcell, for the
development of a residential/commercial condominium on the Parent Company’s Fort Bonifacio lot to
be called “The Icon Plaza.” The Parent Company contributed lot 9-4 to the joint venture and in return,
will receive twenty percent (20%) of the aggregate area of all the completed and saleable units of the
project, plus 35% of the joint venture’s pre-tax profits from the project. The Parent Company’s share on
- 45 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the saleable area of “The Icon Plaza” is recorded as part of Real Estate Inventories with carrying
amount equal to the cost of the land as disclosed in Note 14.
In 2012, the Parent Company and Xcell made a clarification to the Joint Venture Agreement. It was
agreed that the Parent Company’s 35% share on the profit shall be taken entirely from the dividends
from Xcell.
Xcell shall be solely responsible for the construction of the two (2) condominiums over a period of five
(5) to six (6) years. The admission value of the property based on the joint venture proposal is more
than its cost.
Details of land invested in joint venture as of December 31 are as follows:
The Icon Residences
Lot 14-2A
Lot 14-1
The Icon Plaza
Lot 9-4
2012
2011
2010
P309,699,540
401,165,443
P309,699,540
401,165,443
P309,699,540
401,165,443
-
503,244,245
-
710,864,983
1,214,109,228
710,864,983
Accumulated equity in net earnings (losses) of joint venture
Balance at beginning of year
13,057,642
Equity during the year
(13,057,642)
20,312,077
(7,254,435)
(955,949)
21,268,026
-
13,057,642
20,312,077
P710,864,983
P1,227,166,870
P731,177,060
Balance at end of year
Land held for development and sale
Land held for development and sale at December 31 consists of properties located at the following
sites:
New Manila, Quezon City
Fort Bonifacio, Taguig
San Fernando, La Union
San Juan, La Union
Allowance for decline in value
2012
2011
2010
P188,653,713
-
P188,653,713
-
P188,653,713
503,244,245
33,859,578
15,110,392
188,653,713
-
188,653,713
-
740,867,928
(53,499,445)
P188,653,713
P188,653,713
P687,368,483
The movements of land held for development and sale are summarized as follows:
Note
Balance, beginning
Reclassification to land
invested in joint venture
Reclassification to investment
properties
Balance, end
2012
2011
2010
P188,653,713
P740,867,928
P740,867,928
19
-
(503,244,245)
-
-
(48,969,970)
-
P188,653,713
- 46 -
P188,653,713
P740,867,928
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. Investments in and Advances to Associates
Details of the ownership interest in associates are as follows:
Ownership Interest
2012
2011
2010
45%
45%
45%
45%
45%
45%
2012
2011
2010
Le Cheval Holdings, Inc., 45% owned
Investment - Acquisition cost
P11,250
P11,250
P11,250
Accumulated equity in net income:
Balance, beginning of year
Equity in net loss for the year
Balance, end of year
215,511
(4,094)
211,417
226,712
(11,201)
215,511
238,103
(11,391)
226,712
P222,667
P226,761
P237,962
P14,184,150
(14,184,150)
-
P14,184,150
(14,184,150)
-
P14,184,150
14,184,150
(13,052,024)
13,052,024
-
(12,969,952)
(82,072)
(13,052,024)
Le Cheval Holdings, Inc. (LCHI)
Alexandra (USA), Inc. (AUI)
Details of investment in and advances to associates are as follows:
Alexandra (USA), Inc., 45% owned
Investment - Acquisition cost
Allowance for impairment loss
Accumulated equity in net losses:
Balance, beginning of year
Equity in net loss for the year
Reversal of equity in net losses of AUI
Balance, end of year
-
Advances to AUI
Allowance for unrecoverable advances
132,417,765
(132,417,765)
P222,667
132,417,765
(132,417,765)
P226,761
1,132,126
132,264,144
(44,830,237)
87,433,907
P88,803,995
In late 2011, AUI started the process of liquidation. The Group provided for an allowance for
impairment loss amounting to P87,587,528 in 2011 in addition to the P44,830,237 recognized in
2008 for advances to this affiliate that can no longer be recovered.
Other than as indicated above, the Group believes that there is no indication of impairment on its
investments in and advances to associates.
- 47 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Aggregated amounts relating to associates are as follows:
2012
2011
2010
P106,019
11,200
P534,230
30,314
P538,807
10,000
Net assets
94,819
503,916
528,807
Revenues
Cost and expenses
3,423
(12,520)
7,743
(32,634)
9,754
(35,067)
Net loss
(P9,097)
(P24,891)
(P25,313)
Alexandra (USA), Inc.
Total assets
Total liabilities
P -
P -
P180,211,383
203,995,999
Net assets
-
-
(23,784,616)
Revenues
Cost and expenses
-
(105,937,389)
(182,382)
P -
(P105,937,389)
(P182,382)
Le Cheval Holdings, Inc.
Total assets
Total liabilities
Net loss
The following are the principal activities of the Group’s Associates:
Le Cheval Holdings, Inc.
LCHI was incorporated and registered with the SEC on August 30, 1994 as a holding company and
commenced operations as such by acquiring the majority outstanding shares of stock of Philippine
Racing Club, Inc. (PRCI). In 1996, LCHI sold its shares of stock with PRCI. Thereafter, LCHI became
inactive.
Alexandra (USA), Inc.
AUI was incorporated in the United States of America (USA). AUI is involved in property development
in Florida, USA. AUI is jointly owned with GPI (45%) and Warrenton Enterprises Corporation (10%) of
William Cu-Unjieng.
17. Investment in Joint Venture
Tagaytay Joint Venture
The Parent Company owns 85% of Tagaytay Joint Venture as of December 31, 2012, 2011 and 2010.
The project with Atty. Antonio C. Pastelero is known as Tagaytay Joint Venture. A parcel of land with
an area of 39,975 square meters located in Iruhin West, Tagaytay City was purchased at a cost of
P60.4 million. A residential subdivision will be developed on the said parcel of land. In 1997, the said
project was on its planning stage and recorded construction-in-progress consists primarily of payments
for architectural designs. In 1998, the project was put on hold. During 2011, a market study was
performed to reassess the plan for the Joint Venture.
Additional investment made by the Parent Company to the joint venture amounted to P50,000 in
2012, P740,000 in 2011 and P120,000 in 2010 for the upkeep of the property. The Parent Company’s
investment in the project amounted to P60.1 million, P60.1 million and P59.4 million in 2012, 2011
and 2010, respectively, as shown in the consolidated statements of financial position.
The Parent Company has no capital commitment in relation to its investment in joint venture.
The Parent Company believes that there is no indication of impairment on its investment in joint
venture.
- 48 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Property and Equipment
Note
Condominium units and
Building Improvements
For the Years Ended December 31, 2012, 2011 and 2010
Office Furniture, Fixtures and
Machinery and
Transportation and
Equipment
Equipment
Other Equipment
Leasehold and Office
Improvements
Total
Cost
January 1, 2010
Additions
Disposals
December 31, 2010
Additions
Disposals/Adjustments
Revaluation increase
December 31, 2011
Additions
Disposals/Adjustments
Revaluation increase
P106,723,478
106,723,478
254,730
9,427,231
116,405,439
283,034
4,759,424
P20,394,929
531,277
20,926,206
733,722
(112,256)
21,547,672
257,918
(166,402)
-
P8,273,074
75,419
8,348,493
84,297
8,432,790
119,170
-
P10,064,500
6,311,023
(58,638)
16,316,885
2,947,953
(1,381,414)
17,883,424
2,011,749
(357,143)
-
P6,451,371
47,515
6,498,886
6,498,886
449,866
-
P151,907,352
6,965,234
(58,638)
158,813,948
4,020,702
(1,493,670)
9,427,231
170,768,211
3,121,737
(523,545)
4,759,424
December 31, 2012
P121,447,897
P21,639,188
P8,551,960
P19,538,030
P6,948,752
P178,125,827
Accumulated Depreciation and Amortization
January 1, 2010
Provision
38
Disposals
December 31, 2010
Provision
38
Disposals
December 31, 2011
Provision
38
Disposals
P43,865,963
7,851,121
51,717,084
7,862,651
59,579,735
7,344,458
-
P19,835,412
279,404
20,114,816
356,402
(89,260)
20,381,958
376,917
(166,402)
P7,819,384
233,719
8,053,103
162,108
8,215,211
91,735
-
P7,963,200
1,139,256
(58,638)
9,043,818
2,247,633
(703,323)
10,588,128
2,633,111
(136,906)
P5,669,768
38,972
5,708,740
41,518
5,750,258
100,536
-
P85,153,727
9,542,472
(58,638)
94,637,561
10,670,312
(792,583)
104,515,290
10,546,757
(303,308)
December 31, 2012
P66,924,193
P20,592,473
P8,306,946
P13,084,333
P5,850,794
P114,758,739
Carrying Amounts
At December 31, 2010
P55,006,394
P811,390
P295,390
P7,273,067
P790,146
P64,176,387
At December 31, 2011
P56,825,704
P1,165,714
P217,579
P7,295,296
P748,628
P66,252,921
At December 31, 2012
P54,523,704
P1,046,715
P245,014
P6,453,697
P1,097,958
P63,367,088
The Group believes that there is no indication of impairment on its property and equipment.
- 49 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. Investment Properties
This account consists of:
2012
2011
2010
P51,719,941
33,859,578
15,110,392
-
P51,719,941
33,859,578
15,110,392
147,152
P51,719,941
147,152
100,689,911
100,837,063
51,867,093
194,761,973
49,239,137
13,238,946
194,761,973
49,239,137
13,238,946
16,279,583
13,238,946
257,240,056
257,240,056
29,518,529
Land Improvements
Ivy League (Malate, Manila)
50,238,244
50,238,244
50,238,244
Accumulated Depreciation
21,513,292
7,943,368
7,281,421
285,965,008
299,534,932
72,475,352
P386,654,919
P400,371,995
P124,342,445
Land
Ivy League (Malate, Manila)
San Fernando, La Union
San Juan, La Union
Baclaran and Quezon City
Condominium units
PSE Tower I
PSE Tower II
MAC condo unit
PPMI condo unit
Carrying amount, December 31
Land improvements pertain to the cost of excavation and pile driving works which was discontinued
then the land was restored to be able to use the property temporarily as parking lot.
The movements of investment properties are summarized as follows:
Note
Balance, beginning
Sale of investment property
Depreciation
Reclassification from real
estate inventories
Reclassification from real
estate held for development
and sale
Return of condominium unit
Additional investment
Balance, end
2012
P400,371,995
(147,152)
(13,569,924)
2011
P124,342,445
(1,317,936)
2010
P125,570,015
(1,377,570)
14
-
244,001,110
15
-
48,969,970
(15,623,594)
-
150,000
P400,371,995
P124,342,445
P386,654,919
-
Properties were reclassified to investment properties from real estate inventories and held for
development and sale because of the Parent Company’s change in use of these properties, which is to
earn rentals and capital appreciation.
- 50 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The movements of accumulated depreciation are as follows:
Balance, beginning
Provision
Disposal
Balance, end
2012
2011
2010
P7,943,368
13,569,924
-
P7,281,421
1,317,936
(655,989)
P5,903,851
1,377,570
-
P21,513,292
P7,943,368
P7,281,421
The aggregate fair values of the investment properties as of December 31 are as follows:
Land
Ivy League (Malate, Manila)
San Fernando, La Union
San Juan, La Union
Baclaran and Quezon City
Condominium units
PSE Tower I
PSE Tower II
MAC condominium unit
PPMI condominium unit
Land improvements
Ivy League (Malate, Manila)
2012
2011
2010
P92,512,000
121,856,000
80,268,000
294,636,000
P74,935,000
139,164,070
97,295,126
6,884,500
318,278,696
P74,935,000
115,369,000
48,161,000
6,884,500
245,349,500
291,970,675
85,249,000
12,420,000
389,639,675
323,016,320
34,060,361
12,420,000
369,496,681
323,016,320
34,060,361
17,890,606
12,420,000
387,387,287
78,795,000
78,795,000
78,795,000
P763,070,675
P766,570,377
P711,531,787
The Group used the cost method in accounting for its investment properties.
Total revenue from the investment properties amounted to P23.5 million, P23.2 million and P1.9
million in 2012, 2011 and 2010, respectively, and are included as part of rent income in the
consolidated statements of total comprehensive income. Gain on sale of investment properties
amounted to P6,737,648 in 2012. Real property taxes attributable to investment properties amounted
to P6,887,470, P8,796,224 and P70,597 for 2012, 2011 and 2010, respectively and are included as
part of the general and administrative expenses. Total depreciation expense charged to profit and loss
amounted to P13,569,924, P1,317,936 and P1,377,570 in 2012, 2011 and 2010, respectively.
The Group believes that there is no indication of impairment on its investment properties as of
December 31, 2012, 2011 and 2010.
20. Trade and Other Payables
Accrued expenses
Deposit payable
Accounts payable - others
Claims payable
Refundable deposits
Due to ceding companies and
reinsurers
Note
39
35
2012
P142,401,105
86,921,490
47,898,459
34,895,150
6,879,494
2011
P144,077,900
84,760,340
35,801,734
29,627,426
7,269,208
2010
P45,402,893
78,900,117
22,333,697
18,633,287
7,053,453
6,313,469
6,396,956
5,997,182
Forward
- 51 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2012
2011
2010
3,038,012
3,105,930
16,717,315
5,119,650
2,950,931
787,254
160,922
4,870,091
4,003,635
3,767,579
3,500,670
1,595,037
757,431
171,399
5,227,349
127,416
4,566,095
1,938,783
1,806,550
683,681
156,653
P357,189,181
P326,599,406
P192,827,156
Commission
Withholding and other taxes
Accounts payable - trade
SSS and other contributions
Due to insurance companies
Refunds payable
Income tax payable
Accrued expenses consist of unpaid liabilities on outside services, insurance, and other miscellaneous
expenses. It also included accrued settlement expense for an unfavorable case against the Parent
Company (as disclosed in Note 39). Deposit payable is composed of customers’ deposit and retention
fee from the contractors of Andrea North Skyline, construction of which resumed in February 2009.
The Group believes that the carrying amounts of the trade and other payables approximate fair values.
21. Unearned Income
Prior to 2009, the Group applied full accrual method for sale of condominium units in which revenue
and corresponding cost of sale is recorded in full without reference to the percentage of completion of
the condominium units sold. Currently, the Group applies PAS 11, Construction Contracts, which
states that when the outcome of a construction contract can be estimated reliably, contract revenue
and contract costs associated with the construction contract shall be recognized as revenue and
expenses, respectively, by reference to the stage of completion of the contract activity at each reporting
date.
In 2012, the Group started selling units of The Icon Plaza which is the project under joint venture
agreement with Xcell Ventures Property, Inc., as disclosed in Note 15. The percentage of completion of
The Icon Plaza as of December 31, 2012 is 47%.
The Group has two on-going projects called the Andrea North Skyline Tower (“Skyline”) and Andrea
North Skybreeze Tower (“Skybreeze”). Construction of Skyline resumed only in February 2009 from its
last operation in 2002. Percentage of completion of Skyline is 100% and 95.13% as at December 31,
2011 and 2010, respectively. Skybreeze started construction in 2011 and is 12.16% complete as of
December 31, 2012.
Details of unearned income are as follows:
The Icon Plaza
Total sales value of completed units
Percentage uncompleted
Unearned revenue
Andrea North Skyline Tower
Total sales value of completed units
Percentage uncompleted
2012
2011
2010
P270,542,879
53.00%
P0.00%
P0.00%
143,387,726
1,437,130,378
0.00%
Unearned revenue
Total Unearned Revenue
P143,387,726
- 52 -
1,183,177,169
0.00%
848,348,665
4.87%
-
41,314,580
P-
P41,314,580
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. Funds Held in Trust
As disclosed in Note 15, the joint venture between the Parent Company and Xcell provided an
agreement that all amounts remitted by Xcell shall be held in trust by the Parent Company and shall be
utilized exclusively for the completion of the Parent Company’s Andrea North Skyline Tower, as
mandated by the rehabilitation plan. As of December 31, 2012, 2011 and 2010, funds held in trust
amounted to P653.1 million, P639.2 million and P617.0 million, respectively.
23. Unearned Premiums
The details of this account are as follows:
Fire
Motor car
Bonds
Marine
Others
2012
2011
2010
P16,445,167
16,057,797
7,658,454
117,816
9,375,973
P23,027,242
19,662,013
7,054,507
105,544
9,668,892
P18,444,167
18,001,956
6,706,244
105,854
15,913,207
P49,655,207
P59,518,198
P59,171,428
This account pertains to premiums received which relate to subsequent accounting periods.
24. Retirement Benefit Plans
The Group, except for PPMI, operates a funded, non-contributory defined benefit retirement plan
covering substantially all of its regular employees. The plans are administered by local banks as trustee
and provide for a lump-sum benefit payment upon retirement. The benefits are based on the employees’
monthly salary at retirement date multiplied by years of credited service. No other post-retirement
benefits are provided.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation
were performed as of December 31, 2012 by independent actuaries. The present values of the defined
benefit obligations, the related current service costs and past service costs were measured using the
projected unit credit method.
Key assumptions used for the Parent Company:
Discount rate
Expected return on plan assets
Expected rate of salary increases
2012
Valuation at
2011
2010
5.80%
7.80%
7.80%
9.50%
10.00%
9.50%
10.00%
2012
Valuation at
2011
2010
6.00%
6.00%
9.50%
6.00%
8.25%
6.00%
Key assumptions used for PPMI:
Discount rate
Expected rate of salary increases
- 53 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Key assumptions used for TIBI:
Discount rate
Expected return on plan assets
Expected rate of salary increases
2012
Valuation at
2011
2010
4.97%
4.00%
4.00%
4.97%
4.00%
4.00%
5.93%
4.00%
4.00%
2012
Valuation at
2011
2010
5.43%
4.00%
5.00%
6.03%
6.00%
3.50%
8.09%
6.00%
5.00%
Key assumptions used for MAC:
Discount rate
Expected return on plan assets
Expected rate of salary increases
The amounts recognized in consolidated statements of total comprehensive income in respect of these
defined benefit plans are as follows:
Current service cost
Interest cost
Expected return on plan assets
Net actuarial (gain) loss
2012
2011
2010
P3,276,166
5,061,808
(567,278)
(314,280)
P3,319,995
4,729,832
(23,413)
(228,061)
P3,138,007
4,051,126
(337,086)
733,244
P7,456,416
P7,798,353
P7,585,291
The amounts included in the consolidated statements of financial position arising from the Group’s
obligations in respect of these defined benefit retirement plans are as follows:
Present value of defined benefit
obligations
Fair value of plan assets
Underfunded obligation
Unrecognized actuarial loss (gain)
Actuarial loss
2012
2011
2010
P67,211,272
13,458,631
53,752,641
(4,710,744)
3,474,313
P60,087,529
10,075,262
50,012,267
4,190,758
-
P58,089,260
8,753,325
49,335,935
3,110,406
-
P52,516,210
P54,203,025
P52,446,341
Movements in the present value of defined benefit obligations were as follows:
2012
2011
2010
At January 1
Interest cost
Current service cost
Benefits paid
Actuarial (gain) loss on obligation
P60,087,529
5,061,808
3,276,166
(6,461,000)
5,246,769
P58,089,260
5,194,678
3,319,995
(5,400,000)
(1,116,404)
P44,181,101
4,030,453
3,158,680
(981,750)
7,700,776
At December 31
P67,211,272
P60,087,529
P58,089,260
- 54 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Movements in the fair value of plan assets were as follows:
2012
2011
2010
At January 1
Expected return on plan assets
Actuarial gain
Contribution
Benefits paid
P10,075,262
567,278
133,860
9,143,231
(6,461,000)
P8,753,325
463,280
216,988
641,669
-
P5,719,257
1,646,584
89,792
2,279,442
(981,750)
At December 31
P13,458,631
P10,075,262
P8,753,325
The actual return on plan assets was P0.58 million, P0.59 million and P0.43 million during 2012, 2011
and 2010, respectively.
The history of experience adjustments is as follows:
Present value of defined benefit
obligations
Fair value of plan assets
Underfunded retirement plan
Experience adjustments on plan
liabilities
Experience adjustments on plan assets
Experience adjustments on defined
benefit obligations
2012
2011
2010
2009
2008
P67,211,272
13,458,631
P60,087,529
10,075,262
P58,089,260
8,753,325
P44,181,101
5,719,257
P42,906,835
4,993,125
53,752,641
50,012,267
49,335,935
38,461,844
37,913,710
1,503,645
133,860
129,377
216,988
(10,595)
89,792
(676,772)
82,260
(41,900)
(433,455)
(78,338)
6,625,465
6,283,178
750,698
-
The composition of the plan assets at the reporting dates are as follows:
Cash
Investments
2012
P156,229
13,302,402
2011
P67,895
10,007,367
2010
P137,130
8,616,195
P13,458,631
P10,075,262
P8,753,325
The overall expected rate of return are 5.9% in 2012 and 6.0% in 2011 and 2010 which are weighted
average of the expected returns of the various categories of plan assets held. Management’s
assessment of the expected return is based on historical return trends and analyst’s predictions of the
market for the asset in the next 12 months.
25. Funds Held for Reinsurer
This account pertains to the 40% of the premiums collected by MAC, as the ceding company, from the
assured. This portion is retained by MAC for later remittance to the assuming company under treaty
agreements. Forty percent is the standard rate used by the industry. This portion will also be released
and remitted to the reinsurers during the same quarter of the following year, the reinsurance term
expires. The amount also serves as a reserve to cover future losses.
- 55 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. Loans Payable
The movements in the loans payable account are summarized as follows:
2012
2011
Balance, beginning
Payment of principal
Availment of additional loan
P -
P -
Balance, end
P -
P -
2010
P227,486,420
(227,486,420)
P -
United Coconut Planters Bank (UCPB)
In August 2009, UCPB approved a P200 million credit line under which the Parent Company drew
down P50 million in September 2009 payable within four (4) months at an interest rate of 3.5% and
P100 million in November 2009 payable on or before June 30, 2010 at an interest rate of 3.5%.
On January 6 and January 12, 2010, the Parent Company settled the P100 million and P50 million
loans, respectively.
Bank of Commerce (BOC)
On October 15, 2009, the Parent Company availed a P20 million loan from BOC. The loan was fully
paid on January 25, 2010.
Cameron Granville Assets Management Inc. (formerly from Export and Industry Bank)
In May 2003, the Parent Company requested from the Court that it be allowed to settle its outstanding
obligations with Export and Industry Bank in accordance with the terms and conditions of the
rehabilitation plan, that is, of a dacion en pago. The Court granted the exception to the stay order on
June 16, 2003. On June 2, 2005, the Parent Company settled its outstanding obligation to the extent of
P248.3 million, inclusive of P63.3 million accrued interest by way of dacion en pago, and transferred
of all of its rights, interests and obligations over a parcel of land identified as Lot No. 2B, Block No. 14,
with an area of 1,986 square meters located at Fort Bonifacio Global City, Taguig City. On the same
date, a loan restructuring agreement was executed to restructure the remaining obligation of P5 million
for a term of 10 years at a fixed interest rate of 5% per annum, payable semi-annually in accordance
with the repayment schedule, with a grace period of one year on interest and five years on principal
payments. The Parent Company’s ten million (10,000,000) A. Brown Company, Inc.’s shares of stock
are assigned as collateral for the loan. In 2007, Cameron Granville Asset Management Inc. acquired
Export and Industry Bank’s interest, rights and participation over the loan account of the Parent
Company. The Parent Company has made two (2) semiannual interest payments amounting to
P312,500 in 2008 and 2007. On April 8, 2010, the Parent Company settled the balance of the loan
and was granted a discount of P0.809 million.
Finance costs charged to profit or loss using the effective interest rate method amounted to nil both in
2012 and 2011 and P.49 million in 2010.
27. Related Party Transactions
The Parent Company’s ultimate parent is Greenhills Properties, Inc. (GPI), a corporation incorporated
under the laws of the Philippines.
In the normal course of business, the Group had entered into various transactions with related parties
which are consummated at a term comparable to those charged by or billed to third party suppliers or
customers. Significant transactions with related parties follow:
- 56 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) Significant related party transactions for the years ended December 31, 2012, 2011 and 2010
Relationship
GPI
Merdom
Ultimate
Parent
Affiliate
Sale of real estate
inventories
Management fees
Commission income
Rent income
Rent expense
2012
2011
2010
P190,492,346
987,551
516,938
86,400
(70,000)
P 987,551
522,511
86,400
(840,000)
P 987,551
311,413
86,400
-
P192,013,235
P756,462
P1,385,364
In 2012, the Group sold 2 floors of Icon Plaza to Greenhills Properties, Inc., the ultimate parent
company, amounting to P190,492,346. The outstanding receivable from GPI as of December 31,
2012 amounted to P159,826,346, payable in 2 years.
The Group provides general management services and financial management and supervision over
the janitorial and security services for the efficient administration of the properties of GPI, the
ultimate parent company, and third parties, collectively referred herein as property owners. In
consideration for said services, the Group charges the property owners a fixed monthly amount,
with a 10% escalation rate annually. These management contracts are renewable for a period of
two (2) to three (3) years upon mutual agreement of both the Group and the property owners.
The Group performs real estate brokering services to GPI, ultimate parent company. Commission
earned from GPI amounted to P516,938, P522,511 and P311,413 in 2012, 2011 and 2010,
respectively.
The Group leases a portion of its condominium unit to GPI. The lease is for two years up to
December 31, 2014, with a monthly payment of P7,200. The rental income for 2012, 2011 and
2010 amounted to P86,400.
The Group leases office premises from Merdom Corporation, an affiliated company, for a period of
two (2) years ending December 31, 2012. Rent expense charged to operations amounted to
P70,000 in 2012 and P840,000 in 2012 and 2011.
(b) Year-end balances of advances to associate
Relationship
AUI
Associate
Advances to:
Beginning balance
Forex gain (loss)
Allowance for unrecoverable
advances
2012
2011
2010
P132,417,765
-
P132,288,144
129,621
P141,092,044
(8,803,900)
132,417,765
132,417,765
132,264,144
(132,417,765)
(132,417,765)
(44,830,237)
P -
P -
P87,433,907
The Group’s receivables from AUI, an associate, which is intended to fund the latter’s working
capital requirement, represents non-interest bearing advances with no fixed term with the option to
convert to equity in case of increase in capital. Advances contributed by AUI’s stockholders were
in accordance with the percentage of ownership of the stockholders in AUI. Outstanding
receivables amounted to P132.4 million both in 2012 and 2011 and P132.3 million in 2010,
respectively, and is included as part of advances to associates as disclosed in Note 16. The Group
provided an allowance for unrecoverable advances totaling to P132,417,765 as of December 31,
2012.
- 57 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(c) Year-end balances of other receivables/payables to related party
Relationship
GPI
Ultimate parent
2012
Trade receivables
P159,826,346
2011
2010
P -
P -
(d) Remuneration for Key Management Personnel
The remuneration of the key management personnel of the Group, is set out below in aggregate as
specified in PAS 24, Related Party Disclosures.
Short-term employee benefits
Post-employment benefits
2012
2011
2010
P25,549,318
4,691,334
P22,728,644
4,042,977
P21,718,114
4,697,627
P 30,240,652
P26,771,621
P26,415,741
28. Contingencies
Parent Company
The Parent Company has a lawsuit pending decision by the Supreme Court, as follows:
In 1998, the Parent Company sued Universal Leisure Corporation (ULC) for failing to pay the
remaining sales price of condominium units. ULC bought several condominium units under two
Contracts to Sell. After paying the down payment, ULC refused to pay the balance due in the
principal sums of P32.5 million and P32.4 million. In February 2004, a decision was rendered in
favor of the defendant on the account that ULC is an assignee of receivables from DMCI Project
Developers, Inc. (DMCI), Universal Rightfield Property Holdings, Inc. (URPHI). These receivables
are allegedly owed by the Parent Company to DMCI and URPHI as a result of cancellation of a
joint venture agreement in 1996 entered into by the Parent Company, DMCI and URPHI. The
Parent Company was ordered to deliver to ULC the titles of the condominium units and return to
ULC, as assignee of defendants DMCI and URPHI, the amount of P24.7 million and pay attorney’s
fees of P600,000. The Parent Company appealed the decision to the Court of Appeals which
affirmed the trial court’s decision. During 2011, the Parent Company provided an allowance of
P15,507,800 for accounts receivable that are deemed not recoverable from ULC. In December
2012, the Parent Company filed a motion for Reconsideration and the same was denied.
Thereafter, the Parent Company filed a Petition for Review with the Supreme Court where the
matter is still pending as of reporting date.
In addition, the Parent Company is involved in certain claims and pending lawsuits arising in the
ordinary course of business which is either pending decision by the courts or under negotiation.
Management believes that the final settlement, if any, of the foregoing lawsuits or claims would not
adversely affect the Group’s financial position or results of operations.
Subsidiaries
Certain subsidiaries are defendants or parties in various lawsuits and claims involving civil and labor
cases. In the opinion of the subsidiaries’ management, these lawsuits and claims, if decided adversely,
will not involve sums having material effect on the subsidiaries’ financial position or results of
operations.
Accordingly, no provision has been made in the accounts for these lawsuits and claims.
- 58 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. Capital Stock
Authorized:
8,000,000,000 common shares - P1
par value
Issued and outstanding:
3,688,679,636 shares in 2012;
3,687,721,960 shares in 2011; and
3,687,461,960 shares in 2010
Subscribed:
1,314,901,371 shares in 2012;
1,315,859,047 shares in 2011; and
1,316,119,047 shares in 2010
Subscriptions receivable
2012
2011
2010
P8,000,000,000
P8,000,000,000
P8,000,000,000
3,688,679,636
3,687,721,960
3,687,461,960
1,314,901,371
(509,782,113)
805,119,258
1,315,859,047
(509,782,113)
806,076,934
1,316,119,047
(510,558,350)
805,560,697
114,751
114,751
114,751
P4,493,913,645
P4,493,913,645
P4,493,137,408
P163,383,895
P163,383,895
P163,383,895
Additional paid-in capital
Treasury stock:
125,674,005 shares with average
cost of P1.30/share
The Parent Company has one class of common shares which carry no right to fixed income.
30. Reserves
Appropriated retained earnings for:
Treasury stock acquisition
2012
2011
2010
P250,000,000
P250,000,000
P250,000,000
660,989
660,989
597,556
63,433
660,989
1,238,375
(640,819)
597,556
90,609,632
29,161,233
119,770,865
91,387,656
(778,024)
90,609,632
149,843,396
(58,455,740)
91,387,656
13,450,372
1,664,784
15,115,156
8,558,471
4,891,901
13,450,372
9,385,443
(826,972)
8,558,471
P385,547,010
P354,720,993
P350,543,683
Catastrophe loss
Balance at beginning of year
Movements during the year
Balance at end of year
Unrealized holding gain on valuation
of AFS investments
Balance at beginning of year
Movements during the year
Balance at end of year
Property revaluation
Balance at beginning of year
Movements during the year
Balance at end of year
- 59 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group’s appropriated retained earnings amounting to P250,000,000 was allocated for the Parent
Company’s treasury stock acquisitions. The appropriation for catastrophe loss reserve of MAC was in
compliance with the Insurance Commission regulation. MAC is required to secure 100% of their
premiums retained for insurance policies of earthquake, typhoon and flood. The basis of the current
year reserve is the previous year premiums retained.
Details of reserves of unrealized holding gain on valuation of AFS investments follows:
Note
10
2011
2011
2010
P119,770,865
-
P90,405,732
203,900
P91,294,943
92,713
P119,770,865
P90,609,632
P91,387,656
2012
2011
2010
P21,145,290
2,270,606
2,274,741
P16,670,566
3,335,000
1,012,440
P16,307,426
235,856
219,784
127,284
127,284
25,910,421
21,145,290
16,670,566
(203,900)
203,900
(92,713)
(111,187)
(960,419)
867,706
(203,900)
(92,713)
2,070,385
(219,784)
1,317,335
753,050
1,444,618
(127,283)
1,850,601
2,070,385
1,317,335
27,761,022
23,011,775
17,895,188
UTC
January 1
Share in net loss
1,729,190
(220,694)
1,972,570
(243,380)
2,179,256
(206,686)
December 31
1,508,496
1,729,190
1,972,570
(5,423,361)
(538,790)
(3,730,124)
(1,693,237)
(3,653,240)
(76,884)
(5,962,151)
(5,423,360)
(3,730,124)
(4,453,655)
(3,694,171)
(1,757,554)
P23,307,367
P19,317,604
P16,137,634
Unrealized holding gain on AFS
Minority interest
31. Minority Interest
MAC
January 1
Share in increase of capital
Share in net income
Share in the realization of revaluation
of property and equipment
December 31
Share in reserves
Unrealized holding gain (loss) on valuation of
AFS investments
January 1
Unrealized holding gain (loss)
December 31
-
Property revaluation
January 1
Movements during the year
December 31
Share in reserves
Unrealized holding gain (loss) on valuation of
available-for-sale investments
January 1
Unrealized holding gain (loss)
December 31
- 60 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. Net Underwriting Income
Gross premiums written:
Direct premiums
Premiums assumed
Premiums ceded
Net change in reserve for unexpired risks
Underwriting deductions
2012
2011
2010
P74,585,834
29,755,677
P73,467,309
32,019,779
P79,910,472
20,275,917
104,341,511
105,487,088
100,186,389
(32,905,469)
6,069,312
(51,560,656)
(36,750,703)
240,872
(52,012,355)
(35,031,873)
(175,478)
(46,684,788)
P25,944,698
P16,964,902
P18,294,250
33. Management fees
The Group provides general management services and financial management and supervision over the
janitorial and security services thru PPMI. In consideration for the said services, the Group charges the
property owners a fixed monthly amount with a 10% escalation rate annually. These management
contracts are renewable for a period of two (2) to three (3) years upon mutual agreement of both PPMI
and the property owners. The Group is entitled to fixed reimbursement of actual cost of the on-site
staff. The total income from management fees amounted to P23.4 million, P20.8 million and P18.4
million in 2012, 2011 and 2010, respectively.
34. Commission
The Group’s commission income was derived from the following activities:
Underwriting
Insurance brokerage
Property management
Others
2012
2011
2010
P9,898,753
5,005,968
1,511,700
498,715
P9,948,461
4,042,507
1,196,437
692,760
P8,563,636
5,441,320
1,326,814
809,410
P 16,915,136
P15,880,165
P16,141,180
35. Leases
The Group as lessor
The Group leases various condominium units to various lessees. The minimum guaranteed rentals
under such leases for the next five (5) years are as follows:
Not later than one year
Later than one year but not later than five
years
2012
2011
2010
P16,266,135
P15,277,850
P13,502,562
6,779,364
19,071,757
28,846,507
P23,045,499
P34,349,607
P42,349,069
- 61 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The rental income earned by the Group during 2012, 2011 and 2010 amounted to P23.62 million,
P23.25 million and P25.02 million, respectively. Refundable deposits on these lease agreements
amounted to P6,879,494, P7,269,208 and P7,053,453 in 2012, 2011 and 2010, respectively, and is
included as part of trade and other payables as disclosed in Note 20.
The Group as lessee
The Group leases various office space and storage facilities from affiliated companies and third parties.
Total rent expense charged to operations amounted to P1,362,971, P420,975 and P543,819 in 2012,
2011 and 2010, respectively.
36. Interest Income
The Group’s interest income was derived from the following:
Cash and cash equivalents
Trade receivables
Receivable from joint venture
Others
2012
2011
2010
P14,962,303
13,942,996
426,698
4,087,233
P10,856,941
580,690
10,637,613
3,776,225
P7,887,520
15,454,830
207,369
P33,419,230
P25,851,469
P23,549,719
2012
2011
2010
P7,409,073
533,350
293,344
164,371
P1,869,616
766,269
5,430,938
1,085,288
P1,210,191
20,251,688
156,474
9,341,241
53,499,445
55,640,000
(60,657)
484,800
427,923
2,544,716
998,488
4,345,992
P8,824,281
P65,624,195
P91,944,074
37. Other Income
The account consists of:
Note
Reversal of various payables and
accruals
Dividend income
Unrealized foreign exchange gain
Refunds from electric company
Reversal of allowance for decline
in value of land held for
development and sale
Unrealized holding gain (loss) on
trading investments
Miscellaneous
10
15
-
9
- 62 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38. General and Administrative Expenses
Note
Salaries, wages, and benefits
Depreciation and amortization
Taxes and licenses
Condominium dues
Professional fees
Selling expense
SSS, pag-ibig, medicare and other
benefits
Transportation and travel
Provision for retirement benefits
Utilities
Insurance and bond premiums
Outside services
Repairs and maintenance
Rent expense
Commission Expense
Supplies and materials
Representation and entertainment
Postage and communication
Corporate social responsibility
expenses
Membership dues
Advertising and promotions
Fringe benefit tax
Provision for impairment loss on
receivables
Impairment loss on investments and
advances to associates
Direct write-off of premium
receivables
Miscellaneous
18,19
24
35
2012
2011
2010
P44,875,387
24,116,681
18,910,219
14,361,961
12,726,465
8,718,571
P45,599,934
12,221,062
27,565,564
7,943,067
17,005,463
10,847,569
P41,050,433
10,920,041
9,618,177
4,756,205
13,601,186
9,850,308
7,803,465
7,679,794
7,456,416
4,260,154
2,192,356
2,108,240
1,532,202
1,362,971
1,066,026
970,931
844,485
833,805
1,905,482
7,068,989
7,798,353
4,747,276
3,315,127
2,347,266
791,613
420,975
466,631
1,376,518
657,283
579,342
2,711,511
5,709,155
7,585,291
4,936,752
2,490,943
2,232,297
791,934
543,819
396,393
1,335,291
3,288,590
504,522
208,824
184,812
182,410
7,156
416,499
253,733
7,156
176,527
253,869
2,385
1,665,757
12
-
15,507,800
16
-
101,774,677
-
8,101,173
9,437,847
6,757,424
P170,504,504
P280,055,226
P131,178,810
Miscellaneous expenses include PSE fees, trainings and seminars, donations and contributions, and
various petty expenses.
39. Other Expenses
Settlement expenses
Foreign exchange loss
Others
2012
2011
2010
P 917,354
32,664
P112,752,457
5,327,305
31,336
P41,654,643
9,810,342
-
P950,018
P118,111,098
P51,464,985
In 1996, a certain contractor for one of the projects undertaken filed a complaint against the Parent
Company for alleged escalation costs, unpaid costs of construction and exemplary damages. The
Parent Company filed an answer with counterclaim representing liquidated damages for delay in
construction, overpayment and exemplary damages. On January 31, 2001, the Regional Trial Court
(RTC) issued an order to the Parent Company to pay the said contractor. The Parent Company
- 63 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
appealed the decision to the Court of Appeals which reversed the RTC decision. On June 13, 2011, the
Supreme Court promulgated a decision directing the Parent Company to pay P112,752,457, inclusive
of interest.
40. Income Taxes
The components of income tax expense (benefit) are as follows:
Current
Deferred
2012
2011
2010
P4,268,905
1,784,407
P3,509,701
655,649
P1,840,984
(2,015,484)
P6,053,312
P4,165,350
(P174,500)
A reconciliation between tax expense (benefit) and the product of accounting income (loss) multiplied
by 30% in 2012, 2011 and 2010 follow:
Income (Loss) before income tax
Income tax expense (benefit)
Additions to (reductions in) income tax resulting
from the tax effects of:
Equity in net loss (income) of joint venture and
associates
Other non-deductible expenses
Unrecognized deferred tax assets
Unrealized gain on trading investments
Expiration of MCIT
Dividend income
Gain on sale of listed shares of stocks
Gain on sale of investment property
Interest income subjected to final tax
Impairment loss on investments in associates
Non-taxable sales
Non-deductible cost of sales
Provision for MCIT
2012
2011
2010
P10,740,831
(P208,849,911)
(P55,425,791)
3,222,249
(P62,654,974)
(P16,627,737)
3,917,293
1,232,291
5,877,668
85,585
23,680
(160,004)
(1,323,313)
(2,021,204)
(4,800,933)
-
2,176,331
920,585
59,002,056
(128,377)
21,810
(229,881)
(6,064)
(3,530,887)
5,972,084
(12,088,423)
14,711,090
-
(6,352,369)
1,212,415
36,630,182
(6,075,506)
(3,118,196)
(64,875,009)
59,010,098
21,622
P6,053,312
P4,165,350
(P174,500)
Under Republic Act No. 8424, the Group is subject to either the 30% regular income tax or 2%
minimum corporate income tax (MCIT), whichever is higher. The excess MCIT over the regular income
tax shall be carried forward and applied against the regular income tax due for the next three
consecutive taxable years.
The details of the Group’s MCIT are as follows:
Year Incurred
Expiry date
2012
2011
2010
2009
2015
2014
2013
2012
- 64 -
Amount
Applied/Expired
Balance
P2,720,727
1,842,312
474,088
115,471
P5,152,598
P (115,471)
(P115,471)
P2,720,727
1,842,312
474,088
P5,037,127
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The details of the Group’s NOLCO are as follows:
Year Incurred
Expiry date
2012
2011
2010
2009
2015
2014
2013
2012
Amount
Applied/Expired
Balance
P1,935,373
47,262,613
52,145,231
19,387,128
P (19,387,128)
P1,935,373
47,262,613
52,145,231
-
P120,730,345
(P19,387,128)
P101,343,217
The components of the net deferred income tax assets and liabilities recognized by the Group are as
follows:
Deferred tax assets:
Provision for retirement benefits
Unearned premiums
Impairment loss on receivables
Accrued other long-term employee
benefits
Unearned rental income
Unrealized foreign exchange loss
NOLCO
MCIT
2012
2011
2010
P14,717,450
2,608,085
564,438
P15,110,021
5,356,638
564,438
P14,758,619
5,287,207
1,496,296
923,306
28,189
275,407
1,184,319
593,086
10,868
2,281,124
292,033
93,247
78,729
634,972
519,578
P20,301,194
P23,916,175
P23,160,681
P3,132,129
496,987
142,535
7,270,999
P2,666,255
496,987
1,630,371
6,651,784
P2,364,846
496,987
46,942
4,232,538
P11,042,650
P11,445,397
P7,141,313
Deferred tax liabilities:
Deferred acquisition costs
Deferred rent income
Unrealized foreign exchange gain
Revaluation surplus
The recognized deferred tax assets were from the Parent Company, MAC and PPMI.
The Managements of the Parent Company, MAC and PPMI have evaluated the available evidence
about future taxable income and other possible sources of realization of the recognized deferred tax
assets, and consequently believe that the deferred tax assets are fully realizable in the future.
The components of the deferred income tax assets not recognized by the Group are as follows:
2012
2011
2010
P 11,225,777
P 11,225,777
P16,049,834
20,022,507
49,046,080
1,315,462
275,206
3,803,268
96,635,643
49,046,080
1,150,885
1,586,986
150,747
115,005,420
1,818,133
2,865,600
91,791
69,259,794
P162,301,436
P178,165,895
P110,107,659
Allowance for decline in value of real estate
held-for-sale
Allowance for doubtful accounts
Allowance for impairment loss on
investment in and advances to associates
Accrued retirement benefit expense
Unrealized foreign exchange loss
MCIT
NOLCO
The deferred tax assets not recognized were from the Parent Company, TIBI and UTC, this was due to
their limited capacity to take full advantage of the tax benefit.
- 65 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
41. Income (Loss) Per Share
Net income (loss) attributable to equity
holders of Parent Company
Weighted average no. of common shares
issued and outstanding
2012
2011
2010
P4,687,519
(P213,784,321)
(P55,280,462)
4,877,907,002
4,877,907,002
4,877,907,002
(P0.00)
(P0.04)
(P0.01)
Income (Loss) per share
The weighted average number of common shares was computed as follows:
2012
2011
2010
Issued and outstanding shares
Subscribed shares
Treasury shares
3,688,679,636
1,314,901,371
(125,674,005)
3,687,721,960
1,315,859,047
(125,674,005)
3,687,461,960
1,316,119,047
(125,674,005)
Average number of shares
4,877,907,002
4,877,907,002
4,877,907,002
The Group has no potential dilutive shares.
42. Financial Instruments
The following table shows the comparison by category of carryi ng amounts and fair values of all of
the Group’s financial instruments that are carried in the statements of financial position as of
December 31, 2012, 2011 and 2010:
2012
Carrying Amount
2011
2010
2012
Fair Value
2011
2010
(In Thousand Pesos)
Financial assets:
Cash and cash
equivalents
Held-for-trading
investments
Trade and other
receivables
Available-for-sale
investments
Total financial assets
Financial liabilities:
Trade and other
payables
Funds held for
reinsurers
Total financial
liabilities
P569,014
P443,320
P303,934
P569,014
P443,320
P303,934
20,503
11,600
11,172
20,503
11,600
11,172
739,492
418,832
406,023
739,492
418,832
406,023
324,390
286,968
305,980
324,390
286,968
305,980
P1,653,399
P1,160,720
P1,027,109
P1,653,399
P1,160,720
P1,027,109
P357,189
P326,599
P192,827
P357,189
P326,599
P192,827
3,674
4,696
3,556
3,674
4,696
3,556
P360,863
P331,295
P196,383
P360,863
P331,295
P196,383
The methods and assumptions used by the Group in estimating the fair value of the financial
instruments are as follows:
Cash and cash equivalents and trade and other receivables – carrying amounts approximate fair values
due to the relatively short-term maturities of these items.
- 66 -
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Held-for-trading investments and AFS investments – these are investments in equity securities, fair
value for quoted equity securities is based on quoted prices published in markets as of reporting dates,
unquoted equity securities are carried at cost less allowance for impairment losses because fair value
cannot be measured reliably due to lack of reliable estimates of future cash flows and discount rates
necessary to calculate the fair value.
Liabilities – the carrying value of trade and other payables and funds held for reinsurers approximate its
fair value because of the short-term nature of these financial liabilities.
- 67 -