1. business and industrial
2. energy
3. oil
4. oil and gas prices

COVER SHEET
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( Business address: No. Street City / Town / Province )
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ORTRUD T. YAO
373-3038
Contact Person
Company Telephone Number
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A 2010
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FORM TYPE
6
Month
Secondary License Type, If Applicable
Amended Articles Number/Section
Dept. Requiring this Doc.
Total amount of borrowings
Domestic
Total No. of Stockholders
omplished by SEC Personnel concerned
File Number
LCU
Document I.D.
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STAMPS
Foreign
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SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1. For the calendar year ended December 31, 2010
2. SEC Identification Number
134800
3. BIR Tax Identification No. 000-590-608-000
4. Exact name of issuer as specified in its charter
JOLLIVILLE HOLDINGS CORPORATION
5.
(SEC Use Only)
Industry Classification Code:
PHILIPPINES
6.
Province, Country or other jurisdiction of
incorporation or organization
7. 4/F 20 Lansbergh Place
170 Tomas Morato Ave., corner Scout Castor St.
Quezon City
Address of principal office
8.
1103
Postal Code
(632) 373-3038
Issuer's telephone number, including area code
9.
Former name, former address, and former fiscal year, if changed since last report.
10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA
Title of Each Class
Common Stock, P1 par value
Number of Shares of Common Stock
Outstanding and Amount of Debt Outstanding
281,500,000 shares
11. Are any or all of these securities listed on a Stock Exchange.
Yes [ X ]
No [ ]
If yes, state the name of such stock exchange and the classes of securities listed therein:
PHILIPPINE STOCK EXCHANGE
COMMON STOCK
12. Check whether the issuer:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder
or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The
Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period
that the registrant was required to file such reports);
Yes [ X ]
No [ ]
SECForm17-A_2010JOH
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [ ]
No [ X ]
13. Aggregate market value of the voting stock held by non-affiliates is: P
= 397,394,968 as of December
31, 2010 and P
= 419,704,861 as of March 30, 2011.
PART I - BUSINESS AND GENERAL INFORMATION
Item 1. Business
(1) Business Development
Originally incorporated as a realty company in September 1986 by the Ting family, the
Company underwent a transformation to that of a holding company on April 15, 1999 after
securing Securities and Exchange Commission (SEC) approval for the change in its primary
purpose. Subsequently, on May 4, 1999, the SEC approved the increase in capitalization of
Jolliville Holdings Corporation (“JOH” or “the Company”). The authorized capital stock of the
Company was increased from 30,000 shares with a par value of P
= 100 per share to 1 billion
shares with a new par value of P
= 1 per share. To date, 281.5 million common shares are issued
and fully paid.
After this transformation into a holding company, JOH acquired the entire capital stock of its
affiliates namely, Jolliville Group Management, Inc. (“JGMI”), Jollideal Marketing Corporation
(“JMC”), Ormina Realty and Development Corporation (“ORDC”), Jolliville Leisure and Resort
Corporation (“JLRC”), and Ormin Holdings Corporation (“OHC”). It acquired the foregoing
companies through the assignment of shares of stock, which was paid for in cash to members
of the Ting Family who held ownership in the former prior to JOH’s acquisition.
JGMI was incorporated on March 9, 1994 and at present, has an authorized capital stock of
P
= 10 million divided into 100,000 common shares, with a par value of P
= 100 per share. To date,
50,000 common shares are issued and fully paid.
UCMC was incorporated on October 1, 1999, and at present, has an authorized capital stock of
P
= 8 million divided into 8 million common shares, with a par value of P
= 1 per share. This
company is a wholly owned subsidiary of JOH who is also the incorporator. To date, 2 million
common shares are issued and fully paid.
ORDC was incorporated on April 22, 1997 with an authorized capital stock of P
= 200 million
divided into 200 million common shares, with a par value of P
= 1 per share. To date, 50 million
common shares of the corporation are subscribed and P
= 23,331,830 has been received as
payment on subscription.
JLRC was incorporated on March 20, 1995, and at present, has an authorized capital stock of
P
= 20 million divided into 200,000 common shares, with a par value of P
= 100 per share. To date,
50,000 common shares are issued and fully paid.
JMC was incorporated on April 10, 1989 with an authorized capital stock of P
= 2 million divided
into 20,000 common shares, with a par value of P
= 100 per share. To date, 10,000 common
shares are issued and fully paid.
2
OHC was incorporated on March 1, 1994 with an authorized capital stock of P
= 10 million divided
into 100,000 common shares, with a par value of P
= 100 per share. To date, 25,000 common
shares are issued and fully paid.
Granville Ventures, Inc. (“GVI”) was incorporated on March 19, 2001 with an initial authorized
capital stock of P1 million divided into 1 million common shares, with a par value of P
= 1 per
share. To date, 250,000 common shares are subscribed and P
= 62,500 has been received as
payment on subscription.
Calapan Waterworks Corporation (“CWWC” or “Calapan Water”) was incorporated on
May 23, 1991, and at present, has an authorized capital stock of P
= 200 million divided into
200 million common shares, with a par of P
= 1 per share. Currently 86,742,125 common shares
of the corporation are subscribed and fully paid.
The Company through its subsidiary, ORDC, acquired a 92% controlling equity interest in
Calapan Water in December 1999. On March 24, 2003, the Securities and Exchange
Commission (SEC) approved the decrease in its par value from P
= 100 to P
= 1 and increase in
number of shares from five hundred thousand to fifty million. Subsequently on August 6, 2003,
the SEC approved Calapan Water’s application for quasi-reorganization. The application was
for a reduction of its authorized capital stock from fifty million (50,000,000) shares with a par
value of P
= 1.00 per share to seven million five hundred thousand (7,500,000) shares with the
same par value per share. The decrease resulted in a reduction in paid-up capital from
P
= 29,120,000.00 to P
= 4,368,000.00, and created a surplus of P
= 24,752,000.00 which was used to
wipe out the deficit as of 31 December 2002 amounting to P
= 16,872,555.00. Finally on
October 24, 2003, the SEC approved the company’s increase in its authorized capital stock
from 7.5 million shares to 200 million shares. Relative to the increase, 48,125,000 shares were
subscribed and P
= 12,031,250 were received as payment on subscriptions. As a result of the
increase and additional subscriptions, JOH at the time owned, directly and indirectly, 99.35% of
CWWC.
Calapan Water became the CVI’s wholly-owned subsidiary on 31 March 2009 following the
settlement of subscription payable with JOH wherein, in exchange for the assignment of eighty
six million four hundred thousand seven hundred seventy (86,400,770), Calapan Water shares
of JOH, (i) the unpaid subscription in the Company of JOH as of 30 January 2009 was fully
paid; and (ii) JOH subscribed to an additional seventy million (70,000,000) shares out of the
unissued share capital of the Company.
CVI was incorporated on 30 January 2009 under its original name “Calapan Equity Ventures,
Inc.” primarily as an investment holding company. On 23 December 2009, the SEC approved
the amendment of the Articles of Incorporation and By-Laws of CVI changing (i) its name from
“Calapan Equity Ventures, Inc.” to “Calapan Ventures, Inc.” and (ii) its primary purpose from a
holding company to one that is engaged in the business of trading, processing, assembling,
manufacturing and/or fabricating and exporting and importing, and dealing in goods, materials,
merchandise, commodities, minerals, metals and real and personal properties of every kind,
class and description. It still performs the function as a holding company as a secondary
purpose.
Upon its incorporation on 30 January 2009, CVI had an authorized capital stock of
P200,000,000 divided into 200,000,000 Common Shares with a par value of One Peso (P1.00)
per share. As of 31 December 2010, the issued and outstanding capital stock of CVI consisted
of 120,000,000 common shares.
3
Servwell BPO International Inc. (Servwell) was incorporated on May 19, 2009 as a whollyowned subsidiary of JOH primarily to design, implement, and operate certain business
processes; to assist companies in running their accounting units; to provide receivables and
payables processing, billings and collections, treasury, escrow and other related services; to
provide provident fund accounting; and to provide human-resource related processes. It has an
authorized capital stock of P5 million divided into 5 million common shares with a par value of P
=
1 a share. As of December 31, 2010, the subscribed and issued capital stock consisted of
1,250,000 shares with paid-in capital of P
= 312,500. On January 31, 2011, the SEC approved the
Articles of Merger between Servwell and UCMC. Servwell will be the surviving entity and
UCMC is to be absorbed.
Ormin Power Inc. (OPI) was incorporated on April 27, 2009 to provide power generation and
electricity supply services to distribution utilities, including but not limited to, electric
cooperatives; to install, build, own, lease, maintain or operate power generation facilities, using
fossil fuel, natural gas, or renewable energy; and to engage in any and all acts which maybe
necessary, or convenient, in the furtherance of such power generation services. JOH effectively
became owner of 60% of OPI’s outstanding capital stock in November 2010. As of December
31, 2010, OPI’s authorized capital stood at P
= 120 million consisting of 120 million shares with a
par value of P
= 1 per share. Subscribed shares amounted to 42 million shares and paid-up
capital is P
= 30 million.
(2) Business of Issuer
The Group (refers to Jolliville Holdings Corporation and its subsidiaries) has principal business
interests in leasing, management services, property development and land banking, and a local
waterworks system. Most recently, the Group engaged in trading, business process
outsourcing, and power generation through CVI, Servwell and OPI, respectively.
JOH and ORDC leases and rents out certain assets including land, buildings & improvements,
furnishings and fixtures, equipment, and machineries to a number of independent business
entities involved in the operation and management of KTV entertainment/recreation centers in
the Metro Manila area.
A group subsidiary, JGMI provides general management services and assistance to companies
within and affiliated to the Group, notably ORDC and Calapan Water. Another consolidated
subsidiary, UCMC, on the other hand, provides specialized management consultancy services
to third parties engaged in the KTV entertainment and leisure/recreation business, particularly in
the areas of facilities remodeling and interior design, organizational consulting, records
management and bookkeeping assistance. Management services are provided based on a preagreed monthly contract retainer that is reviewed yearly.
The Group owns and holds title to a number of properties in Metro Manila, Calapan City and
Puerto Galera in Oriental Mindoro. These property investments, which include parcels of urban
land, provincial and beachfront properties, as well as condominium units, are held for future
operations and/or development. At this time when demand for property is soft, the Company is
in no real rush to start development of its land-banked properties and there is no pressure on it
to do so. It will only start its own development program for its properties once there is already a
clear signal of a real turn around in the property situation.
Through JLRC, the Company has ventured with other investors (Aviso Holdings, Inc., Sta. Lucia
Realty and Dev’t., Inc., Alson’s Land Corp. and Blue River Holdings, Inc.) to invest in a
businessman’s hotel at the Eagle Ridge Golf and Country Club in General Trias, Cavite. Known
4
as the Eagle Ridge Microtel, it is the first value-for-money businessman’s hotel in the area
designed to cater not only to the accommodation needs of transient businessmen and tourists,
but also to golf players and enthusiasts of the golf course and facilities of Eagle Ridge. JLRC
has a 37.6% stake in Eagle Ridge Hotel Corporation.
Calapan Water owns, operates and manages the waterworks system of Calapan City, Oriental
Mindoro. It is one of the few privately owned water systems in the country today. Within its
franchise area, it has no competitor and there is no known oppositor to its franchise.
As of December 31, 2010, the water supply system serves seventeen (17) urban barangays
and fifteen (15) adjoining rural barangays with the number of household connections at 8,388.
Groundwater is the source of water supply in Calapan City. A total of five (5) wells were
operational at any point in time and these have a total capacity of 136.77 liters per second (lps).
Potential locations of additional wells are already identified based on the results of the
geo-resistivity survey.
All wells are equipped with production meters and Non Revenue Water (NRW) for the year
2010 averaged 33.10% as against 35.60% in 2009 and 31.60% in 2008. Prior to 2003, NRW
was in the range of 50%-52%.
The latest bacteriological and chemical/physical examination conducted by the Batangas Water
District Laboratory indicates that all of CWWC’s water sources conform to the Philippine
National Standards for Drinking Water.
In December 2006, the NWRB approved Calapan Water’s petition for an increase in water
tariffs. The chart below summarizes the approved water rates that were implemented since
February 2007 until August 18, 2010.
Consumption Bracket
A. Residential
0 to 10 cu.m.
11 to 20 cu.m.
21 to 30 cu.m.
31 to 40 cu.m.
41 to 50 cu.m.
Over 50 cu.m.
B. Commercial
0 to 25 cu.m.
26 to 1,000 cu.m.
Over 1,000 cu.m.
Water Rates
Php 156.00 minimum
16.60 per cu.m.
17.60 per cu.m.
19.60 per cu.m.
22.60 per cu.m.
26.60 per cu.m.
780.00 minimum
39.20 per cu.m.
53.20 per cu.m.
5
In 26 May 2010, the NWRB approved Calapan Water’s petition for increase of water rates for
the operation and maintenance of water supply system within Calapan City, Oriental Mindoro.
The approved CPC is valid for five (5) years with authority to charge the following rates:
Consumption Bracket
A. Residential
0 to 10 cu.m.
11 to 20 cu.m.
21 to 30 cu.m.
31 to 40 cu.m.
41 to 50 cu.m.
Over 50 cu.m.
B. Commercial
0 to 25 cu.m.
26 to 1,000 cu.m.
Over 1,000 cu.m.
Water Rates
st
nd
1 Stage Implementation
2 Stage Implementation
(first three years)
(succeeding two years)
80% increase of the existing
Full implementation of the
rate (12% ROI)
modified rates
Php 280.80 minimum
29.88 per cu.m.
31.68 per cu.m.
35.28 per cu.m.
40.68 per cu.m.
47.88 per cu.m.
Php 321.00 minimum
47.90 per cu.m.
59.00 per cu.m.
62.60 per cu.m.
66.80 per cu.m.
72.30 per cu.m.
Php 1,404.00 minimum
70.56 per cu.m.
95.76 per cu.m.
Php 1,605.00 minimum
118.00 per cu.m.
133.60 per cu.m.
The above rates are being implemented beginning 19 August 2010 until present.
Calapan Water has an ongoing rehabilitation, expansion and improvement plan for its
waterworks system in Calapan City, Oriental Mindoro. The purpose of the plan is to bolster
water pressure, improve water quality, and to increase production so as to accommodate more
subscribers. The scope, timing and extent of the works done vary depending on management’s
discretion as to the economic viability of each component of the overall plan at a definite point in
time.
Originally estimated to cost approximately One Hundred Eighty Seven Million Pesos
(PhP187,000,000.00), as of 31 December 2010, the plan is projected to cost Two Hundred
Eighteen Million Five Hundred Thousand Pesos (PhP218,500,000.00) (overall plan and all
phases combined) to complete due to increases in the cost of materials. Of the projected
amount, Eighty One Million Five Hundred Thousand Pesos (PhP81,500,000.00) will be funded
through internally generated funds and the balance of the amount will be financed through the
loan facility from DBP.
On 4 December 2007, Calapan Water received Thirty Million Seven Hundred Ninety One
Thousand Two Hundred Ten and 88/100 Pesos (PhP30,791,210.88) representing its initial
drawdown on its One Hundred Thirty Seven Million Pesos (PhP137,000,000.00) available loan
facility for the above-mentioned plan. As of 31 December 2010, One Hundred Three Million
Eight Hundred Eight Two Thousand Six Hundred Seventy Five and 24/100 Pesos
(PhP103,882,675.24) has been drawn.
Calapan Water entered into a contract with Menakor Corporation (as contractor) for the
remaining works involving the rehabilitation, expansion and improvement plan of the Calapan
waterworks system for the amount of One Hundred Sixty Eight Million Four Hundred Sixty
Seven Thousand Two Hundred Eighty Four and 31/100 Pesos (PhP168,467,284.31). Below is
the original contracted scope of work and status as of December 2010:
6
Item/Description
Contract Amount
% to
Total
Project
Transmission Line
Distribution Line
Pipe Crossing
Structures
Electrical Works
Reservoir
Pumping Equipment
Generator Sets
Chlorinator
Php
32,810,593.03
93,731,587.99
4,302,814.82
5,237,612.82
13,121,104.18
4,380,000.00
10,536,240.42
4,000,000.00
520,933.35
19.46%
55.58%
2.55%
3.11%
7.78%
2.60%
6.25%
2.37%
0.31%
TOTAL
Php 168,640,886.61
100.00%
Item
Accomplishment
94.95%
99.68%
100.00%
68.51%
47.08%
0.00%
45.10%
40.00%
0.00%
Amount
Spent
Weighted
Accomplishmen
t
Php 31,155,262.94
93,433,397.03
4,302,814.82
3,588,489.79
6,177,154.49
4,752,284.82
1,600,000.00
-
18.47%
55.40%
2.55%
2.13%
3.66%
0.00%
2.82%
0.95%
0.00%
Php 145,009,403.89
85.99%
As of 31 December 2010, around eighty six percent (86%) of the total contracted work had been
accomplished. The remaining works have been subject to a change order and now include the
construction of two (2) new wells.
The construction of two (2) new wells was prioritized in order to immediately augment water
supply. The two (2) new wells each have a capacity of thirty two (32) liters per second and
would boost production by at least fifty percent (50%). Once the new pipe network is fully
operational and the old and worn-out pipes are de-commissioned, NRW is expected to go down
to around twenty five percent (25%) from the present range of low to mid-thirties (30s).
rd
Calapan Water expects to finish its ongoing plans before the third (3 ) quarter of 2011.
Last October 1, 2006, Calapan Water formally took over the operation of the water system of
the Municipality of Tabuk, the capital of Kalinga province. Our role is to operate and maintain
the water system for a period of 15 years. The system remains the property of the local
government. The subscriber base stood at 2,788 as of December 31, 2010. The system can
accommodate up to around 9,000 subscribers.
The Tabuk water supply system would utilize well/pumping stations located in Bulanao public
market, barangays Bulanao Norte, Dagupan Centro and Appas. The annual lease fee varies
from year to year ranging from P
= 1.757 million to P
= 8.832 million. In a resolution passed by the
legislative council of Tabuk City on 2 February 2010, this lease agreement was extended for
another 10 years (from year 2021) or up to 30 September 2031.
Groundwater is the source of water supply in Tabuk City. Four (4) wells with a total capacity of
110 lps are operational.
The NRW for the years 2010 and 2009 averaged 26.90% and 24.14%, respectively.
The water rates used by Tabuk Urban Water Utility, which operated the water system prior to
the appointment of Calapan Water, are still being implemented. The current rates are as
follows:
Consumption Bracket
Residential
0 to 10 cu.m.
11 to 20 cu.m.
21 to 30 cu.m.
Water Rates
Php 210.00 minimum
23.15 per cu.m.
25.30 per cu.m.
7
Consumption Bracket
Over 31cu.m.
Commercial A
0 to 10 cu.m.
11 to 20 cu.m.
21 to 30 cu.m.
Over 31 cu.m.
Commercial B
0 to 10 cu.m.
11 to 20 cu.m.
21 to 30 cu.m.
Over 31 cu.m.
Water Rates
27.45 per cu.m.
Php 315.00 minimum
34.70 per cu.m.
37.95 per cu.m.
41.15 per cu.m.
Php 367.00 minimum
40.50 per cu.m.
44.25 per cu.m.
48.00 per cu.m.
The standard rates are adjusted monthly in accordance with the process and formula described
in the lease agreement between Calapan Water and then municipality of Tabuk dated 6 July
2006 (which was extended for another 10 years or up to 30 September 2031), which takes into
consideration the movements in the consumer price index of the Cordillera Autonomous Region
with respect to power, labor and other related costs.
The Company carries out most of its business activities (except the waterworks business where it
has no direct competition in its service area) in a competitive environment and competes in terms of
market reach, diversity and quality of products, customer relations, and pricing, among others.
Heightened competition could negatively affect the Company’s operational results.
In the leasing business, it competes with a number of financial services institutions, both domestic
and international. Among these, the more notable ones would be the likes of Equitable PCI Leasing
and Finance, Inc., ORIX Metro Leasing and Finance Corp., IFC Leasing and Finance Corp., and BPI
Leasing. While these companies offer their leasing lines to the general public, none of them have
concentrated and specialized on servicing the particular market niche of the Company, the KTV
operators. The long-established relationship of the Company with its KTV clients in the renting out
of facilities, furnishings and equipment puts it at some advantage vis-à-vis its competitors. This
competitive advantage is further strengthened by the management services and consultancy
contracts of the Company with its KTV clients.
The Company’s primary competitors in the management services and business process
outsourcing industries are Accenture, the management services and business process
outsourcing units of the other major independent accountancy firms, and a sprinkling of
independent management consultancy firms. However, the Company considers as its
competitive advantage, its long-time relationship with its clients as well as the fact that it has
multi-faceted business relationship with them (it also rents out to the same clients furnishing,
fixtures, furniture and equipment for their KTV operations). The management services and
business process outsourcing lines are highly dependent on the continuing renewals of its
contracts with its clients. The Company is confident though that, for as long as the KTV
operations of its clients are viable and profitable, it will continue to service the specialized
management consultancy and business process outsourcing needs of these clients.
Land banking and property development is a highly competitive industry. The major industry
and sector leaders of this industry include the SM Group and Robinsons Land that are more
focused on retail mall development, Ayala Land that is involved in residential, commercial, high
rise, and industrial development, Sta. Lucia Realty which is into residential, commercial and
leisure/resort development, Filinvest Land which is into central business district development,
Megaworld and Empire East Land which are into both horizontal (subdivision & townhouses)
and vertical (condominium) residential and commercial development.
8
In the leisure and resort development businesses, JOH, realizing that it is a newcomer in these
fields, adopts a strategy of “product and market niching”. It enters into strategic alliances with more
seasoned partners as in the case of the Eagle Ridge Microtel hotel project.
The Group does not plan nor propose going into other types of businesses or offer any new
service.
The Company is very much dependent on its being able to have continuing business with its
existing clients and customers. The Company has had a long-time relationship with these
clients and does not foresee losing any of them.
There has been no new significant customer and the Company does not spend material
amounts for business development activities or to research new products or services.
Since the Company and its subsidiaries are largely involved in the service industries, its product
lines and services are non-pollutive and need no special government approvals. Its only
products/service lines needing special government approval are its waterworks business
through Calapan Water and its power generation business through OPI.
Calapan Water owns and operates exclusively the local waterworks system of Calapan City by
virtue of its legislative franchise under Republic Act No. 9185 which expires on Feb. 9, 2028 and
a Certificate of Public Convenience issued by the National Water Resources Board (“NWRB”)
which expires on Jan. 17, 2013.
The franchise shall be deemed by the fact itself revoked in the event Calapan Water fails to
implement fully its medium-term development plan submitted to Congress in support of its
application for the franchise. Said plan is discussed in depth in JOH’s prospectus relating to its
initial public offering of June 2002.
Tariff rates are subject to regulation by the NWRB. All tariff increases should be approved by
the NWRB before implementation. A Water Permit should also be secured from the NWRB
prior to the operation of new sources of water (wells).
The Group at present employs 213 full-time employees. Forty four (44) are executive officers
and managers, while one hundred sixty nine (169) are non-supervisory employees. No major
addition or reduction from the present manpower is anticipated for the ensuing twelve months.
There are no collective bargaining agreements in the Group.
Item 2. Properties
The Company’s real properties, owned directly and indirectly, through its consolidated
subsidiaries, are summarized in the following table. These properties are covered with the titles
(TCTs and CCTs) in the name of the Company itself or its subsidiaries, except for the one (1)
unit of 2-BR residential condo at the Nobel Plaza that is still under a Sale Contract.
9
Type/Location
LAND IN METRO MANILA:
Quezon Ave. Q.C.
Quezon Ave. Q.C.
Diliman, Q.C.
Malate, Manila
West Ave., Q.C.
McArthur Highway, Caloocan City
PROVINCIAL LAND:
Brgy Bayanan, Calapan City
“
“
“
“
Brgy Calero, Calapan City
“
“
Pulong Gitna, Calapan City
Pulong Malaki, Calapan City
“
“
“
“
“
“
“
“
“
“
Puerto Galera, Oriental Mindoro
“
“
“
“
“
“
“
“
“
“
Brgy Tawiran, Calapan City
“
“
Brgy Sta Maria,
“
Brgy Pachoca,
“
Brgy Lalud,
“
Brgy Pachoca
“
Brgy Ilaya
“
“
“
Brgy Sta. Isabel
“
“
“
“
“
“
“
“
“
Pola, Oriental Mindoro
“
“
BUILDING:
Heartbeat Bldg, Quezon Ave.
Loveboat Bldg., McArthur Highway,
Caloocan City
Prince Plaza, West Ave.
Area (sq.m.)
Nature of Property
757.65
757.65
473.30
281.60
1,250.00
1,400.00
Commercial (on lease out)
”
Residential
Commercial
“
“
3,203.00
20,000.00
50,000.00
574.00
812.00
60,496.00
6,666.00
6,874.00
6,874.00
33,865.00
7,481.00
39,273.00
16,393.00
7,122.00
66,096.00
6,185.00
47,911.00
176,511.00
301.00
500.00
377.00
210.00
200.00
182.00
205.00
286.00
2,090.00
1,237.00
200.00
200.00
353.00
40,000.00
60,000.00
Industrial
”
”
Institutional/Commercial
”
Nature reserve island/agric.
”
“
“
”
“
“
Agri./Commercial
“
“
Commercial
Agri./Commercial
Agricultural (exempt)
Well site
“
“
“
Well site/residential
Well site
“
“
Commercial
“
Residential
“
“
Agricultural
“
1,921.70
Commercial structure
2,984.52
2,406.00
“
“
10
Type/Location
CONDOMINIUM UNITS:
Goldland Tower, Greenhills
3-BR Unit
Parking Slot
Chateau de Baie, Roxas, Pñque
2-BR Unit
Parking Slot
3-BR Unit
Parking Slot
Maple Tower, Binondo, Mla
3-BR Unit
Parking Slot
Nobel Plaza, Valero St., Makati
2-BR Unit
Lansbergh Place, T. Morato, Q.C.
th
4 Floor Commercial Space
15 Parking Slots
EGI Rufino Plaza, Pasay City
th
11 Floor Commercial Space
Area (sq.m.)
Nature of Property
160.45
12.50
Residential Condo
Owner’s parking slot
157.02
12.50
185.57
12.50
Residential Condo
Owner’s parking slot
Residential Condo
Owner’s parking slot
96.00
12.50
Residential Condo
Owner’s parking slot
110.00
Residential Condo
922.04
187.50
Commercial (office use)
Parking slots
1,653.49
Commercial
There are no significant property acquisitions intended for the ensuing year.
Item 3. Legal Proceedings
1. JGMI and Show Syndicate Corp. vs. Felicito a.k.a. Chito D. Garcia, doing business under
the name and style Foxchit Software Solution; Civil Case No. 01101977
On 02 October 2001, Jolliville Group Management Inc. (“JGMI”) and Show Syndicate Corp.
(“SSC”) filed a complaint for breach of contract and damages resulting from the delay in the
completion of the software POS Project and violation of the Exclusivity Clause against
defendant. This stemmed from plaintiffs’ engagement of defendant for the development of
software to aid in its operations. The complaint specifically prayed that defendant be made to
pay One Hundred Thousand Pesos (PhP100,000.00) as reimbursement for the service fees
paid initially; Five Hundred Thousand Pesos (PhP500,000.00) as business losses; Five
Hundred Thousand Pesos (PhP500,000.00) representing the service fees paid to the new
programmer to complete the installation and customization of the software; Five Hundred
Thousand Pesos (PhP500,000.00) as moral damages; Five Hundred Thousand Pesos
(PhP500,000.00) as exemplary damages; One Hundred Thousand Pesos (PhP100,000.00)
attorney's fees plus Two Thousand Five Hundred Pesos (PhP2,500.00) for every court
appearance; and costs of suit.
In his defense, defendant claims that it was JGMI that breached the contract and claims
damages in the amount of P
= 10,240,800.00, the supposed price for the installation on the six
other sites and branches, as actual damages, in addition to the moral damages, exemplary
damages and attorney’s fees.
The main issue in the case is whether or not defendant committed breach of contract. On
January 7, 2011, the Court issued its Decision finding that defendant breached the contract by
failing to fix reported problems in the system and for violating the exclusivity clause in the
contract. The Court then required defendant to refund plaintiffs the sum of One Hundred
11
Thousand Pesos (PhP100,000.00) representing service fees initially paid by plaintiff and to
reimburse plaintiffs the sum of Five Hundred Thousand Pesos (PhP500,000.00) representing
service fees paid to the new programmer hired to complete the computerization. The
counterclaim and all other claims were dismissed. As of this writing, the Decision has not yet
attained finality and may be subject to appeal.
2. Jolliville Holdings Corporation vs. Philippine British Assurance Co., Inc.; Civil Case No. 041051, Regional Trial Court, National Capital Judicial Region, Branch 143, Makati City
On 10 September 2004, Jolliville Holdings Corporation (“Corporation”) filed a Complaint [With
Application For The Issuance Of A Writ of Preliminary Attachment] dated 08 September 2004
(the “Complaint”) with the Regional Trial Court (“RTC”) of Makati City seeking to recover
insurance claims against defendant Philippine British Assurance Co., Inc. (“PBAC”) amounting
to at least Thirty Four Million Eight Hundred Sixty Thousand Seven Hundred Forty One and
41/100 Pesos (P
= 34,860,741.41), exclusive of interest. In addition, the Corporation prayed for
the payment of Two Million Pesos (P
= 2,000,000.00) by way of exemplary damages and One
Million Pesos (P
= 1,000,000.00) as attorney’s fees and litigation expenses.
The Corporation is claiming fraud based on defendant’s act of soliciting premium payments but
failing to honor its obligation under the insurance policies. Defendant raised the defense that
the Corporation was late in paying the insurance premium, hence, no insurance contract was in
force when the damage occurred.
On 20 April 2005, the Corporation received a copy of the Order dated 06 April 2005 denying the
Corporation’s application for the issuance of a Writ of Preliminary Attachment.
When the case proceeded to pre-trial and mediation, the parties failed to arrive at a
compromise agreement. Trial thereafter commenced and as of 11 November 2010, the
Corporation has presented five (5) witnesses, namely: (1) Mr. Roger T. Ong; (2) Mr. Robert D.
Sia; (3) Mr. Vinson Sherman A. Ko; (4) Atty. Malou F. Santiago; and (5) Mr. Alejandro TanGatue. The next hearing for the continuation of the cross-examination of Mr. Tan-Gatue was
initially scheduled on 07 April 2011. However, in light of the appointment of the Presiding
Judge, the Hon. Zenaida T. Galapate-Laguilles, to the Court of Appeals, the hearings for the
case have been postponed pending the designation by the Supreme Court of an Acting Judge
for Branch 143 of the Regional Trial Court of Makati City.
3. Ormina Realty & Development Corp. vs. 24K Property Ventures Inc.; Case No. 05-1575
(Fiscal Torralba) and Case No. 05-1576 (Fiscal Tobia)
This is a consolidated complaint for estafa and violation of P.D. 957 otherwise known as the
Subdivision and Condominium Buyers’ Protective Decree stemming from 24K Property
Ventures’ alleged failure to deliver three parking lots to ORDC as well as for reimbursement of
real property taxes from 2001 to 2004 amounting to One Million Four Hundred Twenty Four
Thousand One Hundred Sixty Two and 63/100 (PhP1,424,162.63).
The dismissal of the estafa charge was appealed before the Secretary of Justice.
On 04 November 4, 2010, the parties reached a compromise agreement on the civil aspect of
the case involving the violation of P.D. 957. In consideration of the compromise, private
complainant executed an Affidavit of Desistance. On the manifestation of the prosecution that
they could not prosecute the criminal aspect of the case without the cooperation of the private
complainant, the Judge ordered the dismissal of the case.
12
The Affidavit of Desistance resulting from the compromise did not include the case for estafa
and the appeal of the dismissal of the estafa charge where the appeal remains pending before
the Office of the Secretary of Justice.
Item 4. Submission of Matters to a Vote of Security Holders
NOT APPLICABLE
Item 5. Business Risk
Business risk is defined as threats to the organization's capability to achieve its objectives and
execute its business strategies successfully. The organization's value creation objectives define
the context for management's determination of risk management goals and objectives which, in
turn, drive and focus the process of managing business risk.
The major risks facing the Group’s businesses are briefly described below. Since the Group
caters to a niche market (KTV operators) for it’s leasing and management services businesses,
our risk sourcing is ultimately tied-in to the risks facing our clients.
Economic Circumstances
Economic circumstances are the characteristics and condition of the general business within
which commerce is conducted. Due to the difficult business climate and reduced business
activity, companies have become prudent spenders and are continuously trying to identify
expenditures it could reduce or completely do without. One of the areas most affected are its
budgets for leisure and recreation.
Human Caused Disasters
Human caused disasters pertain to major events that cause significant damage, destruction,
and/or human casualties arising from human caused events such as acts of terrorism. Peace
and order remains a concern and densely populated establishments such as malls,
entertainment centers, cinemas and the like are the most likely targets. As a result, people tend
to avoid these places.
Government Activities
Government activities are the functions undertaken to operate a political unit, including adopting
and enforcing laws and regulations, supplying goods and services, and contracting for goods
and services from private businesses. Calapan Water is moderately regulated and the actions
of government agencies such as the NWRB hold with respect to rate increases and the
operation of new water sources.
Human Behavior
Human behavior is defined as a broad range of positive and negative human activity that may
affect a business’ ability to reach its goals. The habits of consumers with regard to water usage
and spending for leisure and entertainment may adversely affect the Group’s businesses.
Through an integrated business risk management process, senior management determines
how much risk they are willing to accept when balancing risks and rewards, and allocating
13
resources. They communicate to operating managers, risk managers and process/activity
owners the level of acceptable risk.
Our business risk management is a continuous process of:

Establishing risk management objectives, tolerances and limits for all of the Group's
significant risks

Assessing risks within the context of established tolerances

Developing cost-effective risk management strategies and processes consistent with the
overall goals and objectives

Implementing risk management processes

Monitoring and reporting upon the performance of risk management processes

Improving risk management processes continuously

Ensuring adequate communication and information for decision making
*******************************************************************
14
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 6. Market for Issuer's Common Equity and Related Stockholder Matters
(1) Market Information
JOH only has unclassified common shares that is traded at the Philippine Stock Exchange
(“PSE”).
The high and low sales prices for each quarter are presented below:
Quarter
st
1 quarter 2011
th
4 quarter 2010
rd
3 quarter 2010
nd
2 quarter 2010
st
1 quarter 2010
High
3.05
3.14
2.31
2.55
3.25
Low
2.75
2.20
1.98
1.80
1.52
Last transaction date was on April 8, 2011 and the closing price was at P
= 3.02 per share.
The market capitalization of JOH as of March 31, 2011 based on the closing price on March 30,
2011 of P
= 3.01 per share is P
= 847,315,000.
As of December 31, 2010, JOH’s market capitalization stood at P
= 802,275,000 based on the
closing price of P
= 2.85 on December 30, 2010.
(2) Holders
The following table sets forth the Company’s top twenty shareholders and their corresponding
number of shares held as of December 31, 2010:
Shareholder
Elgeete Holdings, Inc.
Lucky Securities, Inc.
IGC Securities Inc.
Febra Resources Corporation
A-Net Resources Corporation
Kenly Resources Corporation
Oltru Holdings Corporation
Belson Securities, Inc.
See, Rodolfo Lim
Gan Chua, Wilfredo K.
Genmaco Corp.
Myron Ventures Corporation
Tower Securities, Inc.
Unicapital Securities Inc.
G. D. Tan & Co.
Ting, Catalina O.
Phyvita Enterprises Corporation
Ting, Ortrud
Value Quest Securities Corporation
Ting, Jolly
Shares Held
125,783,791
44,670,000
19,729,000
12,503,925
12,503,925
12,503,925
12,503,925
8,346,000
5,994,000
3,170,000
2,709,500
2,500,000
2,195,000
1,739,000
1,140,000
1,076,000
1,047,200
1,000,001
1,000,000
959,999
Percentage
44.68
15.87
7.01
4.44
4.44
4.44
4.44
2.96
2.13
1.13
0.96
0.89
0.78
0.62
0.40
0.38
0.37
0.36
0.36
0.34
*Ultimate beneficial owners under securities brokers not included.
15
(3) Dividends
On 9 July 2009, the Board of Directors of JOH declared 32% property dividends corresponding
to 90,080,000 common shares in CVI to be distributed to its stockholders of record as of 15
December 2009.
JOH’s board lot is at 1,000 shares, which means that, for each board lot, a stockholder would
receive 320 shares in CVI as dividends.
JOH’s stockholders approved this declaration of property dividends during their annual
stockholders’ meeting on 18 August 2009.
On 28 January 2010, the SEC approved the notice of property dividend declaration of JOH
consisting of 90,080,000 shares of stock of the Company amounting to P
= 90,080,000 payable to
JOH’s stockholders of record as of 15 December 2009.
On 12 April 2010, the BIR granted the requisite Certificate Authorizing Registration (CAR). Said
CAR is required before the shares can be assigned to the recipients of the dividends.
(4) Recent Sales of Unregistered or Exempt Securities, including recent issuance of Securities
constituting an exempt transaction
NONE
Item 7. Management’s Discussion and Analysis
The information herein should be read in conjunction with, and is qualified in its entirety by
reference to, the consolidated financial statements and related notes thereto contained in this
Report.
Results of Operations
In the case of management fees, we were able to negotiate a 10% increase for the year 2009
and again for the year 2010. As was the case in 2008, the client paying on the basis of its gross
revenues significantly influences the fluctuation of management fees. For 2009, this item
decreased by 9.53% from P
= 18.35 million in 2008 to P
= 16.60 million as the client reported lower
gross revenues. For the year 2010, management fees increased by 79.52% as the client with a
variable rate basis (based on revenues) reported much improved gross billings.
In the case of rentals we were able to negotiate increases from our clients for the year 2009.
Rentals increased by about 10% to around P
= 55 million. Rental further increased by 10% for the
year 2010 for most of our clients. Rentals increased by about 9% to reach around P
= 60 million
gross revenues.
Both management and leasing activities have consistently shown good results for the past
several years.
Water service revenue has been steadily improving. Each passing year is registering a new
all-time high.
2009 revenues were at P
= 75,572,905 as against the preceding year’s
P
= 53,961,429, an increase of 40.05%. Another 19.84% increase was experienced in 2010 as
revenues have now gone up to P
= 90,568,624.
16
For both 2010 versus 2009 and 2009 versus 2008, growth can be attributed to additional billed
volume from the continuing increase in the number of subscribers, for both the Calapan City
and Tabuk City operations combined. The subscriber base at the end of each year went from
8,892 in 2008, 10,058 in 2009, to 11,176 in 2010.
Another major contributor for the increase in water revenue in 2009 is the commissioning of a
new well, i. e. Well No. 12 located in Barangay Bayanan, Calapan City, in November 2008. By
way of historical data, this well was operational for only two (2) months in 2008 producing only
86,802 cubic meters, but, in 2009, it produced 633,704 cubic meters for the entire year.
For 2010, the other contributor to the increase in revenues is the 80% rate increase for our
Calapan operation implemented last August 2010.
The minimum charge for residential customers are now at P
= 280.80 from P
= 156.00 (10 cubic
meters) while that for commercial customers are at P
= 1404.00 from P
= 780 (25 cubic meters. The
rates before the above increase had been in effect since February 2007.
The current rates in effect for the Tabuk City operation have not changed since Calapan Water
started managing the water system in October 2006.
A Power Cost Adjustment (PCA) for the Calapan operation and a Standard Rate Adjustment
(SRA) for the Tabuk operation, charged to customers starting February 2008 and May 2008,
respectively, augmented water revenues for 2008 and onwards. The PCA was granted by the
National Water Resources Board to cushion the impact brought about by higher energy
operating costs while the SRA is a provision existing in the lease agreement for the Tabuk City
operation and is based on the movement of the consumer price index on a month-to-month
basis.
The sale of plumbing and scrap materials comes from Calapan Water’s new service
connections. This account decreased by 94% from P
= 539,607 in 2008 to only P
= 33,180 in 2009.
This can be attributed to outsourcing new installations to a contractor leaving repair works for
subscribers as the major source of sales. However, this rebounded in 2010 as we experienced
an increase of 296%. The account balance stands at P
= 131,394. The increase could be
attributed to new connections with special arrangements thus entailing charges beyond the
standard or normal fees.
Sale of goods pertains to the trading activity of subsidiary CVI. Since the trading activity started
only last December 2009, revenues reported was only P
= 2,831,259 while this year revenues
from trading activities reached P
= 27,338,217.
For 2009, cost of sales and services increased by P
= 12.66 million (24%) to P
= 65.70 million.
Lease fee payments for the Tabuk water system once again increased from P
= 4.3 million to P
= 7.5
million. Another major cost contributor was power costs, which increased from P
= 7.4 million to P
=
9.1 million. Power rates are ever increasing and a new well, Well No. 12, began operation in
November 2008 and its full year effects on costs were felt in 2009. The usual salaries (mainly
units rendering management services), depreciation, and repairs and maintenance slightly went
up as well, contributing to the increase in costs.
Cost of sales and services increased by 46.32% (P
= 30,431,734) in 2010. Much of the increase
could be attributed to the trading activity of CVI; Cost of sales for the trading activity this year
alone was P
= 24,895,495 as against P
= 2,573,872 last year. Also contributing are higher salaries,
depreciation (from new capital investments made last year) and power costs (due to higher
17
rates and slight increase in consumption related to well operation) of CWWC. Salaries for the
units rendering management services slightly increased as well.
Operating expenses increased by P
= 4,539,998(14.78%) to P
= 35,257,846 in 2009. As a result of
increased revenues, franchise tax payments on the Calapan operation have risen. The
Calapan operation is VAT-exempt so it is paying a 2% franchise/percentage tax on its gross
revenues. Further, an impairment loss was recognized on long-outstanding receivables
amounting to P
= 515,249 and accounts written-off amounted to P
= 23,471 whereas none were
recognized in 2008.
In 2010, Operating expenses increased by 47.53% (P
= 16,756,743). Much of the increase could
be attributed to real estate taxes and association dues on the new EGI Rufino condominium
units. Also contributing to the increase are taxes and fees related to the 32% property dividend
of JOH as well as professional services for financial advisors, audit and legal fees related to the
planned listing of CVI which are nondeductible against the IPO proceeds.
Net other income (charges) comprises mainly the gain on investment property valuation from its
adjustment to fair value. In 2008, 2009 and 2010, an adjustment of P
= 15,733,325, P
= 11,103,425
and P
= 42,079,000, respectively, were recognized based on the latest appraisal made by Crown
Property Appraisal Corporation in 2008 and by Royal Asia Appraisal Corporation in 2009 and
2010.
The current provision for income tax in 2009 decreased by P
= 2,165,542 (16.48%) though results
of operations had improved as against the previous year due to the reduction in the statutory tax
rate from 35% to 30%. Meanwhile, the increased profit for operations caused the current
provision for 2010 to increase by 47.33% to P
= 16,167,119.
The increase in the deferred provision for income tax in 2009 by 223.63% (P
= 9,436,375) was a
result of additional borrowing costs capitalized and recognition of the deferred tax liability on fair
value appraisal adjustments in investment property and property and equipment (in 2008, the
deferred tax on the change in fair value of land under investment property was not recognized).
The deferred provision in 2010 of P
= 1,727,381 represents the movements in the deferred tax
assets and liabilities in 2010.
Noncontrolling interest represents noncontrolling stockholders’ share in the net income or loss
of CVI. The fluctuation in this account is tied-in to the operating results of CWWC and to the
Company’s overall ownership in the former. In 2007, the Company owned 72.22% of CWWC.
This increased to 99.61% in 2008 following the assignment of the Ting spouses’ shares in
CWWC to ORDC. In 2009, as a result of the 32% property dividends declared, ownership in
CWWC was diluted to 58.95%. In 2010, following the purchase of CVI shares from JOH’s major
stockholders, ownership increased to 70%.
Financial Position
Total assets increased by 21.45% or P
= 205.7 million from P
= 959 million as of December 31, 2009
to P
= 1.16 billion as of December 31, 2010. The increase represents mainly additions from
CWWC’s development plan discussed later in this report, cash from operations from increased
business including the new trading activity, appraisal increment on investment property owned
by CWWC and acquisition of a property in Caloocan City by ORDC.
Receivables increased by 6.94% from P
= 41.8 million from the last year-end to P
= 44.7 million as of
December 31, 2010. This represents mainly timing differences on collections from several
18
customers and the application of CWWC’s advances to its contractors against its unpaid
balances.
Other current assets increased by 120.69% from P
= 3,044,620 as of December 31, 2009 to
P
= 6,719,058 at year-end. The increase represents unutilized creditable withholding taxes of
certain subsidiaries where the taxable income is a smaller amount. The other major contributor
to the increase is advance payments for deposits for expenses of CVI with professional firms for
its planned listing.
The available-for-sale investment amount includes a couple of P
= 1 million single payment
managed trust fund deposit in an insurance company made in 2009. This fund invests in fixed
income securities, money market instruments, and shares listed in the Philippine Stock
Exchange. Although the amount can be withdrawn anytime, management intends to hold it
long-term for a specific purpose. The increase in this account of P
= 327,743 for 2010 represents
the fair value gain on these deposits.
The investment property account increased by P
= 91.6 million from P
= 516,063,099 as of
December 31, 2009 to P
= 607,634,095 at December 31, 2010 basically from the adjustment to
fair value of P
= 42,079,000 based on the latest appraisal done by Royal Asia Appraisal
Corporation and the acquisition by ORDC of real estate located in Caloocan City worth
P
= 47.5 million.
Additions of around P
= 98.5 million, majority of which pertains to the water utilities and distribution
system related to the rehabilitation, expansion and improvement of the water system in Calapan
City, net of periodic depreciation, caused property and equipment to increase from
P
= 269,811,243 as of December 31, 2009 to P
= 330,505,657, an increase of P
= 60,694,414 or
22.5%.
Calapan Water has an ongoing rehabilitation, expansion and improvement plan of its
waterworks system in Calapan City, Oriental Mindoro. The purpose of the plan is to bolster
water pressure, improve water quality, and to increase production so as to accommodate more
subscribers.
The scope, timing and extent of the works done varies depending on
management’s discretion as to the economic viability of each component of the overall plan at a
definite point in time.
A contractor was awarded the project for the total contract price of about P
= 168 million. The
percentage of completion as of December 31, 2010 is at 85.99%. The P
= 137 million-loan
facilities from DBP are earmarked for the contract and the differential between the total contract
price and the loan facility will be sourced from internally generated sources.
The deferred tax asset account increased by 18.03% mainly from the tax effects of additional
accruals for retirement expenses and impairment losses of receivables, net of NOLCO
deducted from regular income tax. The balance of this account now stands at P
= 5,197,826.
Other noncurrent assets increased by P
= 2.74 million or 15.36%.
The balance as of
December 31, 2010 stands at P
= 20.55 million as against P
= 17.81 million as of December 31,
2009. This account includes P
= 3,311,850 pertaining to three months security deposit on a new
leased property with an area of around 5,500 square meters located at the reclaimed area along
Macapagal Avenue, Paranaque City and the reserve fund of Calapan Water. It also includes
the reserve fund which is part of the conditions of CWWC’s DBP loan wherein 5% of its monthly
billings should be deposited in said fund, with holdout of two monthly interest amortizations
during the grace period, and two monthly principal and interest amortizations after the grace
19
period and onwards. The increase in this account though came mainly from development costs
of P
= 4,426,345 on subsidiary OPI’s Inabasan hydro power plant project.
As the Group currently has a strong cash position, obligations to creditors were settled.
Accounts payable and accrued expenses decreased by P
= 1.81 million (2.02%) from
P
= 89.6 million as of December 31, 2009 to P
= 87.8 million as of December 31, 2010. A significant
portion of this account is tied-in to the property and equipment account specifically to CWWC’s
development plan. It is not funded entirely by DBP and our share as owner was recognized as
a liability. The contractor extends reasonable credit to CWWC which explains the significant
balance at year-end.
The grace period on principal payments on the DBP loan expired in 2009. The balance of
current portion of loan payable as of December 31, 2010 of P
= 10,146,422 is the amount due in
2010 for both the DBP loan, the loan from Bank of Commerce to acquire the condominium units
in Pasay City and JGMI’s loan to acquire transportation equipment.
Accounts and transactions with related parties are discussed in Note 15 to the consolidated
financial statements. The increases and decreases in the receivable and payable accounts for
the periods and the ending balances as of the end of each period thereon is dependent upon
the liquidity and financial status of the concerned parties at any given point in time. None of the
parties involved is in financial distress and there is no reason to believe that any accounts may
be impaired in the immediate or near future. Also, these accounts have no definite call dates
and do not bear interest.
Loans payable increased by 3.88% to P
= 141,229,657 as of December 31, 2010. The increase of
P
= 7,494,956 represents drawdown on the loan facility with DBP intended for the development of
the Calapan City water system, net of principal amortizations that began January 2010, the
mortgage on the newly-acquired condominium units in Pasay City, and the JGMI loan to acquire
transportation equipment. This is also tied-in to the increase in the property and equipment and
investment in real estate accounts.
The retirement benefit obligation in 2010 increased from P
= 11,754,914 in 2009 to P
= 14,041,339 in
2010 (P
= 2,286,425 or 19%) as a result of changes in the assumptions for the discount rate and
salary increases used in the new actuarial valuation made as of April 6, 2010.
The increase in the deferred tax liability account by 11.81% or P
= 2,521,246 is tied-in to the
discussion on the related provision shown under the statement of comprehensive income
discussed earlier. The increases pertain mainly to the effects of capitalized interest and
incremental fair value adjustments in investment property and property and equipment.
The decrease of P
= 3,404,623 (100%) in the payable to property owners’ account is merely the
periodic payments for the year. The account has been fully paid at year-end.
The customers’ deposits account increased by 16.82% from P
= 8,894,773 as of end-2009 to
P
= 10,391,230 at end-2010 from the increase in the subscriber base of Calapan Water. The
subscriber base stood at 11,176 at end-2010.
Noncontrolling interest pertains to CVI. This represents the share of its noncontrolling
shareholders in the net assets of said subsidiary. The change in this account is tied-in to the
discussion on the related item shown in the statement of comprehensive income discussed
earlier.
20
Financial Risk
Please refer to Notes 3, 4, 23 and 24 to the Consolidated Financial Statements for the
description, classification and measurements applied for financial instruments and the financial
risk management objectives and policies of the Group.
Key Performance Indicators
2010
2009
Profitability
Return on total assets (ROA)
=
- measures how well assets
{ni + [interest exp x (1 - tax rate)]}
average total assets
85,268,848
0.0803
1,061,847,187
55,345,750
0.0643
860,486,864
have been employed by
management
Return on equity (ROE)
=
- when compared to the ROA,
net income
83,493,396
average stockholders' equity
666,027,179
water revenues
90,568,624
0.1254
54,044,931
0.0912
592,436,663
measures the extent to which
financial leverage is working
for or against shareholders
Water revenue per subscriber
=
- measures how well service
average no. of water subscribers
8,305
10,905
75,572,905
8,038
9,402
and facilities improvements
have influenced consumer's
usage
Financial leverage
Debt ratio
=
- measures the share of
total liabilities
total assets
460,343,509
0.3952
1,164,696,617
326,325,236
0.3403
958,997,757
company's liabilities to total
assets
Liabilities to equity
=
- measures the amount of
total liabilities
460,343,509
stockholders' equity
704,353,108
0.6536
326,325,236
0.5714
571,126,366
assets being provided by
creditors for each peso of
assets being provided by
the stockholders
Market valuation
Market to book ratio
- relates the Company's stock
=
market value per share
2.85
book value per share
2.50
1.14
1.86
2.03
price to its book value per
share
21
0.92
The reason for the dramatic increase in the Group’s profitability is discussed in the results of
operations. From the point of view of its water business, which the Group considers to be its
major growth driver, water revenues has shown steady improvement, more so in 2011 as
increased water rates took effect during the last quarter of 2010, and is expected to improve
even further in the succeeding years as the Company already has in line the addition of new
wells and expansion of its coverage area.
The major acquisition in 2003 of the Prince Plaza property has caused the Company’s financial
leverage ratios in the past to increase as this was financed through borrowings. The obligation
from said acquisition was fully paid in 2006 from the collection of dues from and new borrowings
from stockholders. As a result, the related ratios had decreased in 2006. In 2007, however, the
ratios again increased as CWWC drew on its loan facility with DBP to finance its development
projects for its water system in Calapan City. At present, as the Group continues to grow its
business interests, the ratios continue to increase as these are partly financed through
borrowing. Nonetheless, it may be noteworthy to mention that the growth in assets and equity
outpaces the increase in our liabilities.
Following the positive developments in the local stock market, activity in the Company’s stock
has picked up recently and the prices have been indicative of its true value.
Liquidity and Solvency
The Company’s cash balance increased from end-2009 of P
= 83.49 million to P
= 126.49 million at
December 31, 2010. For the year, the Group’s borrowings and portion of cash for operations
were sufficient to finance its investment and development activities. Thus, the remaining cash
from operations remained in the Company’s coffers. In prior years, cash from operations was
used for the payment of the Group’s outstanding loans. Meanwhile, liability to equity ratios went
up to 0.5714x from 0.6536x as of end-2009 from new borrowings specifically that of Calapan
Water and from related parties.
Item 8. Financial Statements
Please refer to the attached consolidated financial statements audited by Constantino
Guadalquiver & Co. (CGCo).
Item 9. Information on Independent Accountant and Other Related Matters
CGCo, independent certified public accountants, audited the Company’s consolidated financial
statements without qualification as of and for the years ended December 31, 2010, 2009, and
2008, included in this report.
Rogelio M. Guadalquiver is the current audit partner for the Company and its subsidiaries.
Pursuant to SEC Memorandum Circular No. 8, Series of 2003, the Company will either change
its External Auditor or rotate the engagement partner every five (5) years.
There have been no disagreements between the Company and CGCo over the length of their
relationship with regard to any matter involving accounting principles or practices, financial
statement disclosures, and auditing scope and procedures.
CGCo has neither shareholdings in the Company nor any right, whether legally enforceable or
not, to nominate persons or to subscribe for the securities in the Company. CGCo will not
22
receive any direct or indirect interest in the Company or in any securities thereof (including
options, warrants, or rights thereto). The foregoing is in accordance with the Code of Ethics for
Professional Accountants in the Philippines set by the Board of Accountancy and approved by
the Professional Regulation Commission.
In connection with the audit of the Company’s financial statements, the Audit Committee had,
among other activities, (a) evaluated significant issues reported by the external auditor in
relation to the adequacy, efficiency and effectiveness of policies, controls, processes and
activities of the Company; (b) ensured that no other work is provided by the external auditor that
would impair its independence and conflict with its function as independent accountants; and (c)
ensured the compliance of the Company with acceptable auditing and accounting standards
and regulations.
The aggregate fees paid to CGCo for services rendered are P
= 670,000 in 2010 and P
= 645,000 in
2009. The services are those normally provided by the external auditor in connection with
statutory and regulatory filings or engagements. There had been no consulting or tax
engagements with CGCo.
*******************************************************************
PART III - CONTROL AND COMPENSATION INFORMATION
Item 10. Directors and Executive Officers of the Issuer
Presently, the Directors and Senior Officers of the Company are:
Name
JOLLY L. TING
65, Filipino
Bachelor of Science in Business
Administration, University of the
East
Positions Held
Present:
o
Founder, Chairman, Chief
Executive Officer (since April
3, 1999)
o
Chairman (since April 26,
2002)
o
Chairman (since April 26,
2002)
o
Chairman (since April 26,
2002)
o
Chairman (since May 30,
2001)
o
Chairman (since July 19,
1992)
o
Chairman (since 1997)
o
Company/Organization
Jolliville Holdings Corporation
Jolliville Group Management, Inc.
Ormina Realty and Development Corp.
Uptrend Concepts Management Corp.
Jolliville Leisure and Resort Corporation
Calapan Waterworks Corporation
Mirage Resources & Holdings Corp.
(manages the renowned Gloria Maris
Sharksfin Restaurant and Dimsum chains)
Rotary Club, University District, Manila
Member (since 1978)
Previous:
o
President (1991-1992)
o
Director, Treasurer (19941997)
Rotary Club, University District, Manila
Mirage Resources & Holdings Corp.
23
Name
Positions Held
NANETTE T. ONGCARRANCEJA
Present:
o
President (since September
15, 2004)
o
Director (since April 19, 1999)
o
President, Director (since
October 26, 2000)
o
Vice President (since April 5,
2008)
o
Director (since November 6,
2000)
o
Director (since August 17,
1999)
o
Vice President, Director (since
October 9, 2002)
o
Director, Treasurer (since
November 15, 2002)
o
Director, Secretary, Treasurer
(since January 6, 2005)
37, Filipino
Fine Arts Advertising Studies,
College of the Holy Spirit
Advanced Courses, Columbia
College, Vancouver Community
College, Kwantlen University
Previous:
o
Vice President (July 2001 to
September 2004)
o
Secretary/Treasurer (April
1999 to July 2001)
o
Assistant Secretary (MarchApril 1999)
o
Treasurer (November 6, 2000
to April 4, 2008)
ORTRUD T. YAO
33, Filipino
Honors, Bachelor of Commerce,
major in Finance, University of
British Columbia
Present:
o
Secretary/Treasurer, Chief
Finance Officer (since July 20,
2001)
o
Chief Compliance Officer
(since June 17, 2002)
o
o
o
o
o
o
o
o
o
President, Director (since
September 28, 2005)
President, Director (since
August 15, 2005)
Secretary, Director (since
January 12, 2004)
President, Director (since
March 30, 1999)
Vice President, Director (since
March 26, 1999)
Treasurer, Director (since
March 19, 2001)
Secretary/Treasurer, Director
(since October 9, 2002)
President, Director (since
November 15, 2002)
President, Director (since
January 6, 2005)
Company/Organization
Jolliville Holdings Corporation
- do Jolliville Group Management, Inc.
Jollideal Marketing Corporation
- do Ormin Holdings Corporation
Monako Wear Corporation (owner of Velvet
Rose Lingerie Stores)
Dollarstore Philippines, Inc. (owner of
MyDollarStore Chain of Merchandise
Outlets)
Vitanutrition Incorporated
Jolliville Holdings Corporation
- do - do Jollideal Marketing Corporation
Jolliville Holdings Corporation
- do -
Calapan Waterworks Corporation
Ormin Holdings Corporation
Kenly Resources, Inc.
Oltru Holdings Corp.
A-Net Resources Corp.
Granville Ventures, Inc.
Monako Wear Corporation
Dollarstore Philippines, Inc.
Vitanutrition Incorporated
24
Name
LOURDES G. TING
61, Filipino
Bachelor of Science in Business
Administration, Far Eastern
University
Positions Held
Present:
o
Director (since September 3,
1986)
o
President, Director (since
March 30, 1999)
o
Vice President, Director (since
March 26, 1999)
o
Vice President, Director (since
March 30, 1999)
o
Vice President, Director (since
March 26, 1999)
o
Secretary, Director (since
March 26, 1999)
Previous:
o
President (April 1999 to July
2001)
o
Treasurer (1986 to 1999)
RODOLFO L. SEE
69, Filipino
Bachelor of Science in Business
Administration, Far Eastern
University
DEXTER E. QUINTANA
59, Filipino
Masters in Business
Administration, Graduate School of
Business, University of the
Philippines
Present:
o
Director (since August 18,
2004)
o
Chairman, President (since
1980)
o
Chairman, President (since
1974)
o
Owner (since 1982)
Present:
o
Independent Director (since
July 20, 2001)
o
President (since 1984)
o
President (since 1987)
o
Managing Director (since
2008)
Company/Organization
Jolliville Holdings Corporation
Elgeete Holdings, Inc.
Febra Resources Corp.
Oltru Holdings Corp.
Kenly Resources, Inc.
A-Net Resources Corp.
Jolliville Holdings Corporation
Jolliville Realty and Development Co., Inc.
(former name of Jolliville Holdings Corp.)
Jolliville Holdings Corporation
Gold Prize Food Manufacturing Corp.
Gold Medal Food Manufacturing Corp.
International Food Snack Corp. (exporter of
locally produced dried fruit products)
Jolliville Holdings Corporation
First Property Ventures, Inc. (realty
development and commercial property
leasing firm)
Quintas Management Insurance Brokers,
Inc. (life and non-life underwriting firm)
Strategic Partners Alliance Inc.
(management consultancy & financial
intermediation firm)
25
Name
ERNESTO S. ISLA
60, Filipino
Bachelor of Science in
Architecture, University of Sto.
Tomas
Positions Held
Present:
o
Independent Director (since
July 16, 2008)
o
President & CEO (since 1996)
o
o
o
President & CEO (since 1973)
Director (since 2006)
Member (since 1980)
Previous:
o
President (September 1999 to
March 2001)
o
President & CEO (1994 to
1997)
o
Director (May 2003 to March
2007)
Company/Organization
Jolliville Holdings Corporation
Bitech Systems (Phils.) Inc.
Business Information Technology Systems
(BITS)
E.I. Construction Co. Inc.
Quezon City Red Cross
Rotary International District 3780
Rotary Club of Kamuning
APO Production Unit, Inc.
Troikapital Management, Inc.
Timpla Corporation (a new style of Filipino
restaurant)
The Company’s success and growth depends in no small measure to the continued service of its
Founder, Chairman and Chief Executive Officer, Mr. Jolly Lim Ting. His vision and strategic plans
have allowed the Company and the Group to grow to where it is now. While Mr. Ting continues to
provide the strategic direction to the Group, he has put to work in the business his children as well
as some professional managers to add depth to his management team. Mr. Ting is the closest there
is to a significant employee in the Group. There are no other such persons.
Mr. Jolly L. Ting and Ms. Lourdes G. Ting are spouses. Ms. Ortrud T. Yao and Ms. Nanette T.
Ongcarranceja are siblings and they are both children of Mr. and Mrs. Jolly L. Ting.
None of the members of the Board is involved in any legal proceeding, pending or otherwise, for
the past 5 years and up to the date of this report.
26
Item 11. Executive Compensation
S U M M A R Y C O M P E N S A T IO N T A B LE
A n n u a l C o m p e n sa tio n
______________________________________________________________________________________
(a )
(b )
N a m e a n d P rin c ip a l p o s it io n
Year
(c )
S a la ry (P )
(d )
(e )
B o n u s (P )
O t h e rs
______________________________________________________________________________________
A
J o lly L . T in g , C h a irm a n & C h ie f
E x e c u t iv e O ffic e r
B
N a n e tte
P re s id e n t
C
D
T.
O n g c a rra n c e ja ,
O rt ru d T . Y a o , T re a s u re r
C h ie f Fin a n c e O ffic e r
L o u rd e s G . T in g , D ire c t o r
TO TA L
F
&
A ll o t h e r o ffic e rs a n d
d ire c t o rs a s a
g ro u p u n n a m e d
2011*
2010
2009
2008
2011*
2010
2009
2008
5 ,2 9 4 ,6 2 5
5 ,0 4 2 ,5 0 0
5 ,0 4 0 ,0 0 0
3 ,8 6 7 ,8 0 7
5 ,0 0 2 ,3 0 5
4 ,7 6 4 ,1 0 0
3 ,8 1 5 ,1 6 9
3 ,3 3 5 ,5 3 6
4 4 1 ,2 1 9
4 2 0 ,2 0 8
4 1 0 ,0 0 0
3 2 2 ,3 1 7
4 2 8 ,0 1 6
4 0 7 ,6 3 4
3 1 7 ,9 3 1
2 7 6 ,0 2 6
-
* e s tim a te d a m o u n ts
There are no existing arrangements/agreements in which said directors and officers are to be
compensated during the last and ensuing year. Neither are there any employment contracts
and termination of employment and change-in-control arrangements.
Item 12. Security Ownership of Certain Record and Beneficial Owners
The following table presents the record/beneficial owners who in person or as group own more
than five percent (5%) of the issued and outstanding capital stock of the Company.
Title of
Class
Common
Common
Common
Common
Name and Address of Record
and relationship with Issuer
Elgeete Holdings, Inc.
(4/F 20 Lansbergh Place, 170
Tomas Morato Ave., cor. Sct.
Castor St., Quezon City)
A-Net Resources Corp.
( -ditto-)
Febra Resources Corp.
(4/F 20 Lansbergh Place, 170
Tomas Morato Ave., cor. Sct.
Castor St., Quezon City)
Kenly Resources, Inc.
( -ditto-)
Beneficial Owner
and relationship
with record owner
Citizenship
Number of Shares
Percent of
Record
Owner
Filipino
125,783,791
44.68
- ditto -
Filipino
12,503,925
4.44
- ditto -
Filipino
12,503,925
4.44
- ditto -
Filipino
12,503,925
4.44
Ting Family
27
Title of
Class
Common
Common
Common
Common
Common
Common
Common
Common
Common
Name and Address of Record
and relationship with Issuer
Oltru Holdings Corp.
(-ditto-)
Jolly L. Ting
(-ditto-)
Lourdes G. Ting
(-ditto-)
Melody T. Lancaster
(-ditto-)
Nanette T. Ongcarranceja
(-ditto-)
Kenrick G. Ting
(-ditto-)
Ortrud T. Yao
(-ditto-)
Lucky Securities, Inc.
(1402-B West Tower, PSE Centre,
Exchange Road, Ortigas Center,
Pasig City)
IGC Securities Inc.
(Suite 1006, Tower I & Exchange
Plaza, Ayala Triangle,
Ayala Avenue, Makati City)
Beneficial Owner
and relationship
with record owner
Citizenship
Number of Shares
Percent of
Record
Owner
- ditto -
Filipino
12,503,925
4.44
- ditto -
Filipino
959,999
0.34
- ditto -
Filipino
480,000
0.17
- ditto -
Filipino
1
-
- ditto -
Filipino
500,001
0.18
- ditto -
Filipino
500,001
0.18
- ditto -
Filipino
1,000,001
179,239,494
0.36
63.67
Filipino
44,670,000
15.87
Filipino
19,729,000
7.01
The major shareholders of the Company, namely: Elgeete Holdings, Inc., Febra Resources
Corp., A-Net Resources Corp., Kenly Resources, Inc., and Oltru Holdings Corp., are all private
holding companies, substantially owned and controlled by members of the Ting Family,
Filipinos. Mr. Jolly L. Ting holds 60% each of the shares held by these private holding
companies. Mr. Jolly L. Ting exercises the voting power over the shares of Elgeete Holdings,
while Mrs. Nanette T. Ongcarranceja exercises the voting power over the shares owned by
Febra Resources, A-Net Resources, and Kenly Resources. For Oltru Holdings, Ms. Ortrud T.
Yao exercises the voting power of its shares.
Lucky Securities, Inc. and IGC Securities Inc. are participants in the Philippine Central
Depository, Inc., a private company organized to implement an automated book entry system of
handling securities transactions in the Philippines. None of their clients own more than five
percent of the Company’s total outstanding common shares of stock.
28
Item 13. Security Ownership of Management
The shares owned of record or beneficially by the directors and each of the named executive
officers previously named are as follows:
Title of Class
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
Name of Beneficial Owner
Jolly L. Ting
Jolly L. Ting
Rodolfo L. See
Lourdes G. Ting
Lourdes G. Ting
Nanette T. Ongcarranceja
Nanette T. Ongcarranceja
Ortrud T. Yao
Ortrud T. Yao
Dexter E. Quintana
Ernesto S. Isla
Amount and Nature of
Beneficial Ownership
959,999 (direct)
65,386,111 (indirect)
5,994,000 (direct)
480,000 (direct)
21,726,172 (indirect)
500,001 (direct)
11,165,720 (indirect)
1,000,001 (direct)
11,165,720 (indirect)
854,001 (direct)
2 (direct)
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Percent of
Class
0.34
23.23
2.13
0.17
7.72
0.18
3.97
0.36
3.97
0.30
-
Directors and officers as a group hold a total of 119,231,727 shares equivalent to 42.36% of
Jolliville Holdings Corporation’s issued and outstanding capital stock.
Item 14. Certain Relationships and Related Transactions
The financial statements of the Company show that it has advances from its shareholders with
an outstanding balance as of end-December 2010 of P
= 160,378,829. This pertains mainly to the
acquisition of CVI shares owned by Elgeete Holdings, Inc. (“Elgeete”), a major stockholder, by
subsidiaries of Ormin Holdings Corporation, a wholly-owned subsidiary. Elgeete became a
stockholder of CVI through the 32% property dividend mentioned earlier.
*******************************************************************
PART IV - CORPORATE GOVERNANCE
(a) The Company has adopted the SEC’s Corporate Governance Self-Rating Form as the basis for
measuring the level of compliance with its Manual on Corporate Governance.
The 2010 Corporate Governance Scorecard for Publicly-Listed Companies undertaken by the
Institute of Corporate Directors in collaboration with the SEC & PSE was accomplished. This tool
was used to find out where the Company is in its corporate governance practices relative to the
practices of others in the economy, in the region, as well as “globally-regarded” good practices.
Based on the results of its assessment, the Company will gradually improve its corporate
governance practices initially focusing on the areas where it scored a poor rating.
(b) The Company has undertaken the measures below, among others, to fully comply with the adopted
leading practices on good corporate governance:
(b1)
Appointment of Compliance Officer to monitor compliance with the Manual on Corporate
Governance
(b2)
Adoption of Code of Conduct and Decorum for all directors, officers and employees
29
(b3)
Sworn Statement on compliance with policies on selective disclosure of material non-public
information required annually from each director and officer
(b4)
Sworn Statement on attendance of each director in Board Meetings for the year
(b5)
Sworn Statement that the Company substantially adopted all the provisions of its Manual on
Corporate Governance
(b6)
Attendance in seminars on Corporate Governance –All directors along with key officers and
management personnel attended a half-day seminar on Corporate Good Governance
conducted by Philippine Institute of Certified Public Accountants covering the topics: (1)
Corporate Governance Overview; (2) The Practice of Directorship; and (3) Corporate
Governance Scorecards
(b7)
Recorded minutes of the meetings of the Board of Directors and committees, i.e.
Nomination, Audit, and Compensation and Remuneration
(c) The Company submitted its Revised Manual on Corporate Governance to adopt the mandatory
provisions of SEC Memorandum Circular 06-09, the “Revised Code of Corporate Governance”.
(d) There are no known material deviations to the Company’s Corporate Governance Manual.
(e) The Company plans to continue adopting the SEC and other reputable organization’s
recommendations for improved corporate governance.
*******************************************************************
30
PART V - EXHIBITS AND SCHEDULES
Item 15. Exhibits and Reports on SEC Form 17-C
(a) Exhibits
The only exhibit applicable is the “Subsidiaries of the Registrant”. The required information has
already been discussed in Part I, Item I of this Report.
(b) Reports on SEC Form 17-C
Date
January 25, 2010
February 8, 2010
April 14, 2010
May 19, 2010
June 17, 2010
July 28, 2010
August 3, 2010
November 10, 2010
December 2, 2010
December 6, 2010
December 14, 2010
Excerpts
Certification on compliance with SEC Memorandum Circular No. 2 dated April
5, 2002 (Corporate Governance).
Appointment of Atty. Jason C. Nalupta as additional corporate information
officer and Certification on attendance of Board of Directors’ in 2009
meetings.
Notice of receipt of CAR from BIR on JOH’s property dividends.
Notice of Annual stockholders’ Meeting to be held on June 30, 2010.
Postponement of Annual Stockholders’ Meeting to July 28, 2010.
Results of Annual Stockholders’ Meeting and election of Directors to serve
under the Audit, Nomination and Compensation Committees.
Acquisition of 46.8% ownership in Ormin Power Inc.
Increase in effective ownership in Ormin Power Inc. to 60%.
Additional investment in CVI through purchase of shares from major JOH
stockholders.
Filing by CVI of Registration Statement with SEC in connection with its
planned Initial Public Offering.
Notice of non-issuance of stock certificates for CVI shares received as
property dividends from JOH.
31
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
FORM 17-A, Item 7
December 31, 2010
For the Year Ended December 31, 2010
Page No.
Consolidated Financial Statements
Consolidated Statement of Management’s Responsibility for Financial Statements
Independent Auditor's Report
Consolidated Statements of Financial Position as of December 31, 2010 and 2009
Consolidated Statements of Comprehensive Income for the years
ended December 31, 2010, 2009 and 2008
Consolidated Statement of Changes in Equity for the years
ended December 31, 2010, 2009 and 2008
Consolidated Statements of Cash Flows for the years
ended December 31, 2009, 2008 and 2007
Notes to Consolidated Financial Statements
1
2
3
4
5
6
7
Supplementary Schedules
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
Marketable Securities - (Current Marketable Equity Securities and Other Shortterm Cash Investments)
Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Affiliates)
Non-current Marketable Equity Securities, Other Long-term Investments, and
Other Investments
Indebtedness of Unconsolidated Subsidiaries and Affiliates
Property, Plant and Equipment
Accumulated Depreciation
Intangible Assets - Other Assets
Long-term Debt
Indebtedness to Affiliates and Related Parties (Long-term Loans from Related
Companies)
Guarantees of Securities of Other Issuers
Capital Stock
* These schedules, which are required by SRC Rule 68, have been omitted because they are either not
required, not applicable or the information required to be presented is included in the Company's
consolidated financial statements or the notes to consolidated financial statements.
*
*
*
*
*
*
*
*
*
*
*
Constantino Guadalquiver & Co.
Certified Public Accountants
15th Floor Citibank Tower
8741 Paseo de Roxas Street
Salcedo Village, Makati City, Philippines
Telephone (+632) 848-1051
Fax (+632) 728-1014
E-mail address:[email protected]
INDEPENDENT AUDITORS’ REPORT
The Stockholders and Board of Directors
Jolliville Holdings Corporation
20 Lansbergh Place
170 Tomas Morato corner Scout Castor Street
Quezon City
We have audited the accompanying consolidated financial statements of Jolliville Holdings
Corporation and Subsidiaries, which comprise the consolidated statements of financial position as of
December 31, 2010 and 2009, and the consolidated statements of comprehensive income,
consolidated statements of changes in equity and consolidated statements of cash flows for each of
the three years in the period ended December 31, 2010, and a summary of significant accounting
policies and other explanatory notes.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
JOLLIVILLE HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2010 AND 2009
(Amounts in Philippine Pesos)
Note
2010
2009
=
P 126,493,930
44,726,668
6,719,058
=83,494,483
P
41,825,140
3,044,620
177,939,656
128,364,243
13,792,149
9,077,743
607,634,095
330,505,657
5,197,826
20,549,490
13,792,149
8,750,000
516,063,099
269,811,243
4,403,961
17,813,062
986,756,960
830,633,514
=
P 1,164,696,616
=958,997,757
P
=
P 10,146,422
–
87,788,849
172,942,123
10,075,643
=7,543,834
P
3,404,623
89,603,164
57,806,292
4,744,618
280,953,037
163,102,531
131,083,235
14,041,339
23,874,668
10,391,230
126,190,867
11,754,914
21,353,422
8,894,773
179,390,472
168,193,976
ASSETS
Current Assets
Cash and cash equivalents
Current portion of receivables – net
Other current assets
6
7
8
Total Current Assets
Noncurrent Assets
Noncurrent portion of receivables
Available-for-sale investments – net
Investment property
Property and equipment – net
Deferred tax assets – net
Other noncurrent assets
7
9
10
11
20
12
Total Noncurrent Assets
LIABILITIES AND EQUITY
Current Liabilities
Current portion of loans payable
Payable to property owners
Accounts payable and accrued expenses
Due to related parties
Income tax payable
13
14
15
Total Current Liabilities
Noncurrent Liabilities
Noncurrent portion of loans payable
Retirement benefit obligation
Deferred tax liabilities
Customers' deposits
Total Noncurrent Liabilities
(Forward)
13
16
20
-2-
(Carryforward)
Note
Equity
Attributable to Equity Holders of Parent Company
Capital stock
Additional paid-in capital
Revaluation surplus in property and equipment
– net of deferred taxes
Net unrealized loss on available-for-sale investments
Retained earnings
Non-controlling interests
See accompanying Notes to Consolidated Financial Statements.
9
2010
2009
=
P 281,500,000
812,108
=281,500,000
P
1,509,533
204,774,621
(1,222,135)
152,622,572
638,487,166
203,727,605
(1,500,000)
80,917,957
566,155,095
65,865,941
704,353,107
61,546,155
627,701,250
=
P 1,164,696,616
=958,997,757
P
JOLLIVILLE HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Amounts in Philippine Pesos)
Note
REVENUES
Water services
Rental
Management services
Sale of goods
Sale of plumbing and scrap materials
COSTS OF SALES AND SERVICES
21
21
17
GROSS PROFIT
OPERATING EXPENSES
18
PROFIT FROM OPERATIONS
OTHER INCOME – Net
19
PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (BENEFIT)
– Net
Current
Deferred
TOTAL COMPREHENSIVE INCOME
2009
2008
=
P 90,568,624
59,963,428
29,808,602
27,338,217
131,394
=75,572,905
P
55,035,428
16,604,910
2,831,259
33,180
=53,961,429
P
50,040,851
18,354,279
–
539,607
207,810,265
150,077,682
122,896,166
96,131,608
65,699,874
53,038,607
111,678,657
84,377,808
69,857,559
52,014,589
35,257,846
30,717,848
59,664,068
49,119,962
39,139,711
41,723,828
21,115,356
20,850,262
101,387,896
70,235,318
59,989,973
16,167,119
1,727,381
17,894,500
10,973,566
5,216,821
16,190,387
13,139,108
(4,219,554)
8,919,554
83,493,396
54,044,931
51,070,419
327,743
–
–
20
NET PROFIT
OTHER COMPREHENSIVE INCOME
(LOSS)
Unrealized gain on available-for-sale
investments
Revaluation surplus in investment
property and property and
equipment
Impairment loss on investment property
Income tax
Effect of change in tax rate
2010
9
–
–
–
–
13,483,210
(2,524,459)
(4,044,963)
–
43,750,184
–
(3,578,605)
896,485
327,743
7,250,526
41,068,064
=
P 83,821,139
=61,295,457
P
=92,138,483
P
-2-
Note
2010
2009
2008
=
P 74,641,565
8,851,831
=45,802,580
P
8,242,351
=51,029,408
P
41,011
=
P 83,493,396
=54,044,931
P
=51,070,419
P
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Equity holders of the parent
=
P 74,919,432
Non-controlling interests
8,901,707
=49,200,749
P
12,094,708
=92,096,985
P
41,498
=
P 83,821,139
=61,295,457
P
=92,138,483
P
=
P 0.2652
=0.1627
P
=0.1813
P
NET PROFIT ATTRIBUTABLE TO:
Equity holders of the parent
Non-controlling interests
EARNINGS PER SHARE
22
See accompanying Notes to Consolidated Financial Statements.
JOLLIVILLE HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Amounts in Philippine Pesos)
Note
2010
2009
2008
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF
PARENT COMPANY
CAPITAL STOCK - P1 par value
Authorized - 1,000,000,000 shares
Subscribed and fully paid – 281,500,000 shares
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year
Acquisition of non-controlling interests
REVALUATION SURPLUS IN INVESTMENT
PROPERTY AND PROPERTY AND EQUIPMENT
Balance at beginning of year
Acquisition of non-controlling interests
Other comprehensive income - net
Revaluation surplus in a disposed subsidiary
Balance at end of year
=
P 281,500,000
1,509,533
(697,425)
=
P 281,500,000 =
P 281,500,000
1,509,533
1,509,533
–
–
812,108
1,509,533
1,509,533
203,727,605
1,047,016
202,070,778
–
160,880,122
123,079
–
–
204,774,621
3,398,169
(1,741,342)
203,727,605
41,067,577
–
202,070,778
NET UNREALIZED LOSS ON AVAILABLE-FORSALE-INVESTMENT
Balance at beginning of year
Other comprehensive income
(1,500,000)
277,865
(1,500,000)
–
(1,500,000)
–
Balance at end of year
(1,222,135)
(1,500,000)
(1,500,000)
RETAINED EARNINGS
Balance at beginning of year
Net profit during the year
Acquisition of non-controlling interests
80,917,957
74,641,565
(2,936,950)
Dividends declared
Balance at end of year
–
125,195,377
45,802,580
–
(90,080,000)
–
152,622,572
80,917,957
125,195,377
638,487,166
566,155,095
608,775,688
NON-CONTROLLING INTERESTS
Balance at beginning of year
Total comprehensive income
Increase (decrease) in non-controlling interests
61,546,155
8,901,707
(4,581,921)
504,921
12,094,708
48,946,526
Balance at end of year
65,865,941
61,546,155
=
P 704,353,107
See accompanying Notes to Consolidated Financial Statements.
74,165,969
51,029,408
–
27,710,080
41,498
(27,246,657)
504,921
=
P 627,701,250 =
P 609,280,609
JOLLIVILLE HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Amounts in Philippine Pesos)
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax
Adjustments for:
Change in fair value of investment property
Depreciation and amortization
Finance charges
Provision for:
Retirement benefit
Impairment loss
Interest income
Interest - financial liability at amortized cost
Unrealized foreign exchange gain
Reversal of allowance for impairment loss on
receivables
Excess of fair value net assets of subsidiaries
over cost of investment
Reversal of impairment loss on available-forsale financial assets
Operating profit before working capital changes
Increase in:
Receivables
Other current assets
Increase (decrease) in:
Accounts payable and accrued expenses
Customers' deposits
Cash generated from operations
Interest paid
Income tax paid
Interest received
Retirement benefits paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to:
Property and equipment
Investment property
Available-for-sale investments
Decrease (increase) in other noncurrent assets
Payments to property owners
Cash from acquired subsidiaries
Net cash used in investing activities
(Forward)
2010
2009
2008
=
P 101,387,896
=70,235,318
P
=59,989,973
P
19
11
(42,079,000)
22,435,534
3,630,959
(11,103,425)
20,160,151
1,868,171
(15,733,325)
20,828,205
58,146
16
7
2,741,903
319,941
(1,750,903)
2,434,798
515,249
(2,729,633)
1,137,619
–
(2,062,497)
(1,078,306)
(17,507)
153,783
–
426,784
–
–
(647,146)
–
–
(9,016,514)
–
–
–
85,590,517
71,870,752
(3,502,842)
(3,221,469)
(3,674,438)
(6,980,561)
–
(15,355,214)
(44,363)
(1,102,973)
1,496,457
79,088,094
(12,746,455)
(10,836,094)
1,750,903
(455,478)
50,493,364
(458,430)
114,925,125
(7,556,081)
(6,981,664)
2,729,633
–
26,715,628
621,598
73,079,712
(3,964,467)
(6,293,194)
2,062,497
–
56,800,970
103,117,013
64,884,548
61,142,063
(73,678,778) (104,701,862)
(49,491,996) (53,438,214)
–
(2,000,000)
(2,736,428)
3,615,047
(2,326,317)
(3,900,000)
–
2,243,217
(39,102,135)
(18,037,738)
–
(4,149,046)
(3,900,000)
–
(128,233,519) (158,181,812)
(65,188,919)
-2-
Note
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in:
Due to related parties
Non-controlling interest
Proceeds from loan availment
2010
=
P 102,649,625
4,269,908
7,494,956
2009
2008
(=5,536,889)
P
(32,752)
91,565,979
(=2,294,300)
P
–
11,377,511
114,414,489
85,996,338
9,083,211
17,507
–
–
NET INCREASE IN CASH AND CASH
EQUIVALENTS
42,999,447
30,931,539
8,778,840
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
83,494,483
52,562,944
43,784,104
=
P 126,493,930
=83,494,483
P
=52,562,944
P
Net cash provided by financing activities
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
END OF YEAR
See accompanying Notes to Consolidated Financial Statements.
6
JOLLIVILLE HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Philippine Pesos)
1. Corporate Information
Jolliville Holdings Corporation (“the Parent Company”) and subsidiaries, collectively referred to
as “the Group” were incorporated and organized under the laws of the Philippines and
registered with the Securities and Exchange Commission on various dates.
The consolidated financial statements include the accounts of the Parent Company and the
following subsidiaries:
Subsidiaries
Ormina Realty and Development Corporation (ORDC)
Uptrend Concepts Management Corporation (UCMC)
Jolliville Group Management, Inc. (JGMI)
Servwell BPO International (Servwell)*
Granville Ventures Inc. (GVI)*
Jollideal Marketing Corporation (JMC)*
Jolliville Leisure and Resort Corporation (JLRC)*
Ormin Holdings Corporation (OHC)* and Subsidiaries:
OTY Development Corp. (OTY)*
Melan Properties Corp. (MPC)*
KGT Ventures, Inc. (KGT)*
Ibayo Island Resort Corp. (IIRC)*
NGTO Resources Corp. (NGTO)*
Ormin Power, Inc. (OPI)*
Calapan Ventures, Inc. (CVI) and Subsidiaries
Direct ownership of the Parent Company
Parent Company’s ownership through OHC Subsidiaries
Kristal Water Source Corp. (Kristal Water)*
Tabuk Water Corp. (Tabuk Water)*
Calapan Waterworks Corporation (CWC)
*preoperating stage
Percentage of Ownership
36.94
33.33
2010
2009
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
60.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
70.27
70.27
70.27
70.00
25.85
33.33
59.18
59.18
59.18
58.95
The Parent Company was incorporated primarily to acquire, invest in, hold, sell, exchange and
generally deal in with securities of every kind and description (without in any way acting as
investment house, or securities dealer or broker), and to purchase, lease or otherwise acquire
lands or interest in lands, and to build, construct or erect thereon buildings, factories, or other
structures.
-2-
Currently, the Parent Company’s principal activity is holdings in subsidiaries and associates and
leasing of investment property and movable property.
The principal activities of the
subsidiaries are as follows:
Name of subsidiary
Principal activity
CVI
Engages in, operates, conducts and maintains the business of trading,
processing, assembling, manufacturing, and/or fabricating and
exporting, importing, buying, acquiring, holding, or otherwise
disposing of and dealing in goods, wares, supplies, materials, articles,
merchandise, commodities, equipment, hardware, appliances,
minerals, metals, timber, lumber and real and personal properties of
every kind, class and description, whether natural or artificial which
may become articles of commerce.
CWC
Operates, manages and maintains the general business of
development and utilization of water resources to harness, produce
and supply water for domestic, municipal, agricultural, industrial,
commercial or recreational purposes.
Tabuk Water*
Will engage in the operation, management and maintenance of
development and utilization of water resources. Also, will acquire,
own, lease, construct, install, equip, operate, manage and maintain
plants.
Kristal Water*
Will engage in the operation, management and maintenance of
development and utilization of water resources. Also, will acquire,
own, lease, construct, install, equip, operate, manage and maintain
plants as well as operation of an ice plant and distribution and sale of
ice.
OPI*
Will provide power generation and electricity supply services to
distribution utilities, including but not limited to, electric cooperatives;
to install, build, own, lease maintain or operate power generation
facilities, using fossil fuel, natural gas, or renewable energy; and to
engage in any and all acts which maybe necessary, or convenient, in
the furtherance of such power generation services.
JGMI
UCMC
Provide management, investment and technical advices and services
except the management of funds, securities, portfolio or similar assets
of the managed entities or corporations.
Servwell
Design, implement, and operate certain business processes; assist
companies in running their accounting units; provide receivables and
payables processing, billings and collections, treasury, escrow and
other related services; provide provident fund accounting; and provide
human resource-related processes.
ORDC
Engages in real estate business including property development, sale
or lease. Develops, sells and/or leases movable property.
(Forward)
-3-
(Carryforward)
Name of subsidiary
Principal activity
JLRC/MPC
KGT/OTY
IIRC/NGTO*
Will engage in the lease and purchase of marine, aquatic and
environmental resources located in the Philippines and develop and
conserve places with tourism value.
JMC*
Will engage in the purchase and sale of construction and other related
materials.
GVI
OHC*
Will engage in real estate business including property acquisition,
development, sale or lease.
Also, will engage in the purchase,
investment and sale of securities of any kind, without, in any way,
acting as investment house or security dealer or broker.
*preoperating stage
The Parent Company’s registered office and principal place of business is No. 20 Lansbergh
Place, 170 Tomas Morato corner Scout Castor Street, Quezon City.
The accompanying consolidated financial statements were authorized for issue by the Board of
Directors on April 6, 2011.
2. Basis of Preparation
The consolidated financial statements of the Group have been prepared on the historical cost
basis except for investment properties and certain property and equipment which are stated at
appraised values. These consolidated financial statements are presented in Philippine pesos,
which is the Group’s functional and presentation currency under PFRS. All values are rounded
to the nearest peso, except when otherwise indicated.
Statement of Compliance
The accompanying consolidated financial statements of the Group have been prepared in
compliance with Philippine Financial Reporting Standards (PFRS). PFRS includes statements
named PFRS, Philippine Accounting Standards (PAS) and International Financial Reporting
Interpretations Committee (IFRIC) interpretations issued by the Financial Reporting Standards
Council.
Basis of Consolidation
The consolidated financial statements include the accounts of the Parent Company and the
aforementioned subsidiaries (see Note 1) held directly or indirectly through wholly and
majority-owned subsidiaries. Subsidiaries are consolidated from the date on which control is
transferred to the Parent Company and cease to be consolidated from the date on which
control is transferred out of the Parent Company. The results of subsidiaries acquired or
disposed of during the year are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the effective date of disposal, as
appropriate. All significant intercompany accounts, transactions, and income and expenses and
losses are eliminated upon consolidation.
Where necessary, adjustments are made to the consolidated financial statements of
subsidiaries to bring their accounting policies in line with those used by other members of the
Group.
-4-
Non-controlling interests share in the net assets of consolidated subsidiaries are identified
separately from the Group’s equity therein. Non-controlling interests consist of the amount of
those interests at the date of the original business combination and the non-controlling
interest’s share of changes in equity since the date of the combination. Losses applicable to
the non-controlling interests in excess of the non-controlling interests share in the subsidiary’s
equity are allocated against the interest of the Group except to the extent that the noncontrolling interests has a binding obligation and is able to make an additional investment to
cover losses.
Disposals of equity investments to non-controlling interests result in gains and losses for the
Group are recorded in the consolidated statement of comprehensive income. Purchase of
equity shares from non-controlling interests are accounted for as equity transaction
(i.e., transactions with owners in their capacity as owners). In such circumstances, the
carrying amounts of the controlling and non-controlling interests shall be adjusted to reflect the
changes in their relative interests in the subsidiary. Any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the consideration paid
shall be recognized directly in equity.
On February 27, 2008, certain stockholders of ORDC and CWC assigned their shares of stock in
CWC in favor of ORDC. Subsequently, in December 10, 2008, ORDC assigned all of its shares
of stock in CWC, including those assigned by its stockholders, in favor of the Parent Company.
The effects of these assignments resulted to a reduction of goodwill and noncontrolling
interests and an increase in the revaluation surplus in investment property.
In 2009, the Company invested in the newly created CVI and Servwell with 100% ownership.
Part of the payment for the subscription to CVI was the assignment of the Company’s
ownership in CWC, equivalent to 99.61%.
Stockholders of JOH approved the declaration of property dividends in 2009 (see Note 26).
Subsequently on December 22, 2009, a stockholder of JOH executed a deed of assignment of
shares of stocks of the Parent Company equivalent to 40 million shares in favor of certain
subsidiaries of JOH. In 2010, certain affiliates of the Parent Company assigned part of its
investment in CVI to the Parent Company. This assignment resulted to an increase in
investment in CVI by =19.2
P
million and increasing its percentage of ownership from 25.85% to
36.95%.
In 2010, the Parent Company invested in OPI, a newly organized corporation, by acquiring
60% of OPI’s outstanding capital stock from its stockholders.
On January 31, 2011, the SEC approves the merger of UCMC and Servwell as Servwell as the
surviving entity.
3. Summary of Significant Accounting and Financial Reporting Policies
The accounting policies adopted are consistent with those of the previous financial years except
for the adoption of the amendment to PAS and PFRS and interpretations issued by FRSC, which
became effective on or before January 1, 2010 as follows:

Amendment to PFRS 2, Share-based Payment: Group Cash-settled Share-based Payment
Transactions, clarifies the scope and the accounting for group cash-settled share-based
payment transactions.
-5-
The amendment had no effect in the consolidated financial statements as this is not relevant
to the Group.

Revised PFRS 3, Business Combinations and PAS 27, Consolidated and Separate Financial
Statements, introduces significant changes in the accounting for business combinations
occurring after this date. Changes affect the valuation of noncontrolling interests, the
accounting for transaction costs, the initial recognition and subsequent measurement of a
contingent consideration and business combinations achieved in stages. These changes will
impact the amount of goodwill recognized, the reported results in the period that an
acquisition occurs and future reported results. PAS 27 (Amended) requires that a change in
the ownership interest of a subsidiary (without loss of control) is accounted for as a
transaction with owners in their capacity as owners. Therefore, such transactions will no
longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended
standard changes the accounting for losses incurred by the subsidiary as well as the loss of
control of a subsidiary. PFRS 3 (Revised) will be applied prospectively while PAS 27
(Amended) will be applied retrospectively with a few exceptions.
The revision had no effect in the consolidated financial statements as there was no
transaction during the year that would apply such revised standard.

Amendment to PAS 39, Financial Instruments: Recognition and Measurement – Eligible
Hedged Items, clarifies that an entity is permitted to designate a portion of the fair value
changes or cash flow variability of a financial instrument as a hedged item. This also covers
the designation of inflation as a hedged risk or portion in particular situations.
This is currently not applicable to the Group.

Philippine Interpretation IFRIC 17, Distributions of Non-Cash Assets to Owners, provides
guidance on how to account for noncash distributions to owners. The interpretation clarifies
when to recognize a liability, how to measure it and the associated assets, and when to
derecognize the asset and liability.
The above interpretation is not relevant to the Group as there was no such arrangement
made during the year.

Philippine Interpretation IFRIC 18, Transfers of Assets from Customers, covers accounting
for transfers of items of property, plant and equipment by entities that receive such
transfers from their customers. Agreements within the scope of this interpretation are
agreements in which an entity receives from a customer an item of property, plant and
equipment that the entity must then use either to connect the customer to a network or
to provide the customer with ongoing access to a supply of goods or services, or to do
both. This interpretation also applies to agreements in which an entity receives cash
from a customer when that amount of cash must be used only to construct or acquire an
item of property, plant and equipment and the entity must then use the item of property,
plant and equipment either to connect the customer to a network or to provide the
customer with ongoing access to a supply of goods or services, or to do both.
The above interpretation is not relevant to the Group as there was no such arrangement
made during the year.
-6-
Improvements to Existing Standards
In April 2009, International Accounting Standards Board (IASB) issued amendments to certain
standards, primarily with a view to removing inconsistencies and clarifying wordings. There are
separate transitional provisions for each standard.

PFRS 2, Share-based Payment, clarifies that the contribution of a business on formation of
a joint venture and combinations under common control are not within the scope of PFRS 2
even though they are out of scope of PFRS 3, Business Combinations (Revised).

PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations, clarifies that the
disclosures required in respect of non-current assets and disposal groups classified as held
for sale or discontinued operations are only those set out in PFRS 5. The disclosure
requirements of other PFRSs only apply if specifically required for such non-current assets
or discontinued operations.

PFRS 8, Operating Segments, clarifies that segment assets and liabilities need only be
reported when those assets and liabilities are included in measures that are used by the
chief operating decision maker.

Amendment to PAS 1, Presentation of Financial Statements, clarifies that the terms of a
liability that could result at anytime in its settlement by the issuance of equity instruments
at the option of the counterparty do not affect its classification.

Amendment to PAS 7, Statement of Cash Flows, clarifies that only an expenditure that
results in a recognized asset can be classified as a cash flow from investing activities.

Amendment to PAS 17, Leases, removes the specific guidance on the classification of leases
of land. Prior to the amendment, leases of land were classified as operating leases. The
amendment now requires that leases of land are classified as either “finance” or “operating”
in accordance with the general principles of PAS 17. It also clarifies that when a lease
includes both land and building elements, an entity assesses the classification of each
element as finance or an operating lease separately in accordance with the general
guidance on lease classification set out in PAS 17. The amendments will be applied
retrospectively.

Amendment to PAS 18, Revenue, provides guidance on determining whether an entity is
acting as a principal or as an agent. The features to consider are whether the Group:
a) has primary responsibility for providing the goods or services; b) has inventory risk; c)
has discretion in establishing prices; and d) bears the credit risk.

Amendment to PAS 36, Impairment of Assets, clarifies that the largest unit permitted for
the purpose of allocating goodwill to cash-generating units for goodwill impairment is the
operating segment level defined in PFRS 8 before aggregation.

PAS 38, Intangible Assets, clarifies that if an intangible asset acquired in a business
combination is identifiable only with another intangible asset, the acquirer may recognize
the group of intangible assets as a single asset provided the individual assets have similar
useful lives. It also clarifies that the valuation techniques presented for determining the
fair value of intangible assets acquired in a business combination that are not traded in
active markets are only examples and are not restrictive on the methods that can be used.
-7-

PAS 39, Financial Instruments: Recognition and Measurement, clarifies the following:
(a) that a prepayment option is considered closely related to the host contract when the
exercise price of a prepayment option reimburses the lender up to the approximate present
value of lost interest for the remaining term of the host contract; (b) that the scope
exemption for contracts between an acquirer and a vendor in a business combination to
buy or sell an acquiree at a future date applies only to binding forward contracts, and not
derivative contracts where further actions by either party are still to be taken; and (c) that
gains or losses on cash flow hedges of a forecast transaction that subsequently results in
the recognition of a financial instrument or on cash flow hedges of recognized financial
instruments should be reclassified in the period that the hedged forecast cash flows affect
profit or loss.

Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives, clarifies that it
does not apply to possible reassessment at the date of acquisition, to embedded derivatives
in contracts acquired in a business combination between entities or businesses under
common control or the formation of joint venture.

Philippine Interpretation IFRIC 16, Hedges of a Net Investment in a Foreign Operation,
states that, in a hedge of a net investment in a foreign operation, qualifying hedging
instruments may be held by any entity or entities within the group, including the foreign
operation itself, as long as the designation, documentation and effectiveness requirements
of PAS 39 that relate to a net investment hedge are satisfied.
The above improvements to existing standards did not have significant impact on the Group’s
consolidated financial statements.
Future Changes in Accounting Policies
The Group did not early adopt the following standards and Philippine Interpretations that have
been approved but are not yet effective:
Effective in 2011




PAS 24 (Revised), Related Party Disclosures
Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity
Amendment to PAS 32, Classification of Rights to Issue
Amendment to Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement
Improvements to Existing Standards

PFRS 1, First-time Adoption of PFRS

PFRS 3, Business Combinations

PFRS 7, Financial Instruments: Disclosures

PAS 1, Presentation of Financial Statements

PAS 27, Consolidated and Separate Financial Statements

PAS 34, Interim Financial Reporting

IFRIC 13, Customer Loyalty Programmes
Effective in 2012

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate
-8-
Effective in 2013

PFRS 9, Financial Instruments
The Group is currently assessing the relevance and impact of the above standards, amendment
to standards and interpretations.
The revised disclosures on the consolidated financial
statements required by the above standard and interpretation will be included in the Group’s
consolidated financial statements when these are adopted.
Financial Assets and Liabilities
Recognition
The Group recognizes a financial asset or liability in the consolidated statement of financial
position when it becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are recognized initially at fair value of consideration given or
received less directly attributable transaction costs. Transaction costs are included in the initial
measurement of all financial assets and liabilities, except for financial instruments measured at
fair value through profit and loss.
Determination of Fair Value
Fair value is determined by preference to the transaction price or other market prices. If such
market prices are not reliably determinable, the fair value is determined by using appropriate
valuation techniques. Valuation techniques include net present value model where the fair
value of the consideration is estimated as the sum of all future cash payments or receipts,
discounted using the prevailing market rates of interest for a similar instruments with similar
maturities. Other valuation techniques include comparing to similar instruments for which
market observable prices exist; recent arm’s length market transaction; option pricing model
and other relevant valuation models.
Subsequent to initial recognition, the Group classifies its financial assets and liabilities in the
following categories: financial assets and liabilities at fair value through profit or loss (FVPL),
loans and receivables, held-to-maturity investments, and available-for-sale financial assets as
appropriate. The classification depends on the purpose for which the investments are acquired
and whether they are quoted in an active market. The Group determines the classification at
initial recognition and, where allowance is appropriate, re-evaluates this designation at every
reporting date. As of December 31, 2010 and 2009, the Group has financial assets under loans
and receivables and available-for-sale financial assets and financial liabilities under other
financial liabilities.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
and are not quoted in an active market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the receivables. Such assets are
carried at cost or amortized cost in the consolidated statement of financial position.
Amortization is determined using the effective interest method. Loans and receivables are
included in current assets if maturity is within 12 months from the end of financial reporting
period. Otherwise, these are classified as noncurrent assets.
Classified under this category are the Group’s cash and cash equivalents, receivables and
deposits.
-9-
Available-for-Sale Financial Assets
Available-for-sale financial assets are those non-derivative financial assets that are designated
as available-for-sale or are not classified in any of the three preceding categories. After initial
recognition, available-for-sale financial assets are measured at fair value with gains or losses
being recognized as separate component of equity until the investment is derecognized or until
the investment is determined to be impaired at which time the cumulative gain or loss
previously reported in equity is included in the consolidated statement of comprehensive
income.
The fair value of investments that are actively traded in organized financial market is
determined by reference to quoted market bid prices at the close of business on the end of
financial reporting period. For investments where there is no active market, fair value is
determined using valuation techniques. Such techniques include recent arm’s length market
transaction; reference to the current market value of another instrument which is substantially
the same; discounted cash flows analysis and option pricing models.
Classified under this category are the Group’s investments in shares of stocks and mutual fund
managed by an insurance company.
Financial Liabilities
Other Financial Liabilities
This category pertains to financial liabilities that are not held for trading or not designated as at
FVPL upon inception of the liability. These include liabilities arising from operations and
borrowings.
The financial liabilities are recognized initially at fair value and are subsequently carried at
amortized cost, taking into account the impact of applying the effective interest method of
amortization (or accretion) for any related premium, discount and any directly attributable
transaction costs.
This category includes loans payable, payable to property owners, accounts payable and
accrued expenses, due to related parties and customers’ deposits.
Impairment of Financial Assets
The Group assesses at end of each financial reporting period whether a financial asset or group
of financial assets is impaired.
Assets carried at amortized cost
If there is objective evidence that an impairment loss on loans and receivables carried at
amortized cost has been incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate (i.e., the effective interest rate computed at initial recognition).
The carrying amount of the asset shall be reduced either directly or through use of an
allowance account. The amount of the loss shall be recognized in the Group’s consolidated
statement of comprehensive income.
- 10 -
The Group first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the
asset is included in a group of financial assets with similar credit risk characteristics and that
group of financial asset is collectively assessed for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is or continues to be recognized are
not included in a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decrease can be related
objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the consolidated statement of comprehensive income to the extent that the
carrying value of the asset does not exceed its amortized cost at the reversal date.
Assets carried at cost
If there is objective evidence that an impairment loss has been incurred in 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 loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows discounted at the current
market rate of return for a similar financial asset.
Available-For-Sale Financial Assets
If an available-for-sale asset is impaired, an amount comprising the difference between its cost
(net of any principal payment and amortization) and its current fair value, less any impairment
loss previously recognized in profit or loss, is transferred from equity to the consolidated
statement of comprehensive income. Reversals in respect of equity instruments classified as
available-for-sale are not recognized in profit or loss. Reversals of impairment losses on debt
instruments are reversed through profit or loss if the increase in fair value of the instrument
can be objectively related to an event occurring after the impairment loss was recognized in
profit or loss.
Derecognition of Financial Assets and Liabilities
Financial assets
A financial asset is derecognized when (1) the rights to receive cash flows from the financial
instruments expire, (2) the Group retains the right to receive cash flows from the asset, but
has assumed an obligation to pay them in full without material delay to a third party under a
“pass-through” arrangement, or (3) the Group has transferred its rights to receive cash flows
from the asset and either has transferred substantially all the risks and rewards of the asset, or
has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement and has neither transferred nor retained substantially all the
risks and rewards of an asset nor transferred control of the assets, the asset is recognized to
the extent of the Group’s continuing involvement in the asset. Continuing involvement that
takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the
Group could be required to repay.
- 11 -
Financial Liabilities
A financial liability is derecognized when the obligation under the liability is discharged,
cancelled or expired. Where the existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is
recognized in consolidated statement of comprehensive income.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated statement of financial position if, and only if, there is a currently enforceable legal
right to offset the recognized amounts and there is an intention to settle on a net basis, or to
realize the asset and settle the liability simultaneously. This is not generally the case with
master netting agreements, and the related assets and liabilities are presented gross in the
consolidated statement of financial position.
Revenue and Cost Recognition
Revenue is recognized when it is probable that the economic benefit associated with the
transactions will flow to the Group and the amount can be reliably measured. The following
specific recognition criteria must also be met before revenue is recognized:






Water revenues are recognized when the related water services are rendered.
Rental income is recognized on a straight-line basis in accordance with the substance of the
lease agreement.
Management fee comprises the value of all services provided and is recognized when
rendered.
Sales are recognized upon delivery of goods sold, and the transfer of risks and rewards to
the customer has been completed.
Interest income is recognized on a time proportion basis that reflects the effective yield on
the asset.
Other income is recorded when the related income/service is earned.
Cost and expenses are recognized upon utilization of the service or at the date they are
incurred. Except for borrowing costs attributable to qualifying assets, all finance costs are
recognized in the consolidated statement of comprehensive income.
Merchandise Inventory
Merchandise inventory is valued at lower of cost and net realizable value. Cost is determined
by the first-in, first-out (FIFO) method. Net realizable value is the selling price in the ordinary
course of business, less costs of marketing and distribution.
Prepayments and Other Current Assets
Prepayments are expenses paid in advance and recorded as asset before they are utilized. This
account comprises the following:

Input Tax. Input tax is recognized when an entity in the Group purchases goods or
services from a Value Added Tax (VAT)-registered supplier. This account is offset, on a per
entity basis, against any output tax previously recognized.

Prepaid Rent and Other Expenses. Prepaid rent and other expenses are apportioned over
the period covered by the payment and charged to the appropriate account in the
consolidated statement of comprehensive income when incurred.
- 12 -

Creditable Withholding Tax. Creditable withholding tax is deducted from income tax
payable in the same year the revenue was recognized.
Prepayments and other assets that are expected to be realized for no more than 12 months
after the reporting period are classified as current asset. Otherwise, these are classified as
other noncurrent asset.
Investment Property
Investment property, which is property held to earn rentals and/or for capital appreciation, is
carried at fair value at end of each financial reporting period. These are initially recorded at
cost, including transaction cost. Gains or losses arising from changes in the fair value of
investment property are included in the statement of comprehensive income for the period in
which they arise.
Investment property is derecognized on disposal, or when the investment property is
permanently withdrawn from use and no future economic benefit is expected from its disposal.
Any gains or losses on the retirement or disposal of an investment property are recognized in
the consolidated statement of comprehensive income in the year of retirement or disposal.
A company-occupied property classified under property and equipment account becomes an
investment property when it ends company-occupation. Decrease in the carrying amount is
recognized in consolidated statements of comprehensive income. However, to the extent that
an amount is included in its revaluation surplus, the decrease is charged against the
revaluation surplus. Increase in carrying amount is recognized in consolidated statements of
comprehensive income to the extent that the increase reverses a previous impairment loss for
such property. The amount recognized in consolidated statements of comprehensive income
does not exceed the amount needed to restore the carrying amount that would have been
determined (net of depreciation) had no impairment loss been recognized. Any remaining part
of the increase is recognized in other comprehensive income and increases the revaluation
surplus within equity. On subsequent disposal of the investment property, the revaluation
surplus included in equity may be transferred to retained earnings. The transfer from
revaluation surplus to retained earnings is not made through profit or loss.
Where there is clear evidence that the fair value of an investment property is not reliably
determinable on a continuing basis, the cost model under PAS 16 “Property, Plant and
Equipment”, shall be used.
Property and Equipment
Land is carried at appraised values as determined by an independent firm of appraisers on
December 22, 2009. The appraisal increment resulting from the revaluation was credited to
“Revaluation Surplus in Property and Equipment” shown under “Equity” section in the
consolidated statement of financial position. Other property and equipment are carried at cost
less accumulated depreciation, amortization and any allowance for impairment in value.
Initial cost of property and equipment comprises its construction cost or purchase price and
any directly attributable cost of bringing the assets to its working condition and location for its
intended use. Expenses incurred and paid after the property and equipment have been put
into operation, such as repairs and maintenance and overhaul costs, are normally charged to
income when the costs are incurred. In situation where it can be clearly demonstrated that the
expenditures have resulted in an increase in the future economic benefits expected to be
obtained from the use of an item of property and equipment beyond its originally assessed
standard of performance, the expenditures are capitalized as an additional cost of property and
equipment.
- 13 -
Depreciation is computed using the straight-line method over the following estimated useful
lives:
Years
Land improvements
Buildings, condominium units and improvements
Water utilities and distribution system
Furniture, furnishings and equipment for lease
Transportation equipment
Office furniture, fixtures and equipment
20
10 - 25
10 - 50
10
8
5
The useful life and depreciation method are reviewed periodically to ensure that the method
and period of depreciation and amortization are consistent with the expected pattern of
economic benefits from items of property and equipment.
Construction in progress and equipment for installation, included in the property and
equipment, is stated at cost. This includes cost of construction, equipments and other direct
costs. Construction in progress and equipment for installation is not depreciated until such
time as the relevant assets are completed or installed and put into operational use.
When assets are retired or otherwise disposed of, the cost and related accumulated
depreciation are eliminated from the accounts, and any gain or loss resulting from their
disposal is credited or charged to current operations.
Goodwill
Goodwill arising from the acquisition of a subsidiary or a jointly controlled entity represents the
excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity
recognized at the date of acquisition. Goodwill is initially recognized as an asset at cost and is
subsequently measured at cost less any accumulated impairment losses. Goodwill is reviewed
for impairment annually or more frequently, if events of changes in circumstances indicate that
the carrying value may be impaired. An impairment loss recognized for goodwill is not
reversed in a subsequent period. Negative goodwill, which is the excess of net fair value of
subsidiaries’ identifiable assets, liabilities and contingent liabilities over the cost of business
combination, is immediately recognized as income.
On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
- 14 -
Impairment of Non-financial Assets
The carrying values of long-lived assets are reviewed for impairment when events or changes
in circumstances indicate that the carrying values may not be recoverable. If any such
indication exists and where the carrying values exceed the estimated recoverable amounts, the
assets or cash-generating units are written down to their recoverable amounts.
The
recoverable amount of the asset is the greater of net selling price and value in use. The net
selling price is the amount obtainable from the sale of an asset in an arm’s length transaction
less cost to sell. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessment of the
time value of money and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the smallest cashgenerating unit to which the asset belongs.
Impairment losses are recognized in the
consolidated statement of comprehensive income in the period in which it arises unless the
asset is carried at a revalued amount in which case the impairment is charged to the
revaluation increment of the said asset.
A previously recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the recoverable amount of an asset, however, not to an amount
higher than the carrying amount that would have been determined (net of any depreciation and
amortization) had no impairment loss been recognized for the asset in prior years.
A reversal of an impairment loss is credited to current operations.
Bank Loans and Long-term Payables
Interest-bearing bank loans are initially measured at fair value, and are subsequently
measured at amortized cost, using the effective interest rate method. Any difference between
the proceeds, net of transaction costs, and the settlement amount is recognized over the term
of the loan in accordance with the Group’s accounting policy for borrowing costs.
Long-tem payables are initially measured at fair value and are subsequently measured at
amortized cost, using effective interest rate method.
Gains and losses are recognized in profit or loss when the liabilities are derecognized or
impaired, as well as through the amortization process.
Retirement Benefits Costs
The Group’s retirement cost is actuarially determined using the Projected Unit Credit Method.
This method reflects service rendered by employees up to the date of valuation and
incorporates assumptions concerning employees’ projected salaries. Actuarial valuations are
conducted with sufficient regularity with option to accelerate when significant changes to
underlying assumptions occur. Retirement expense includes current service cost, interest cost
and amortization of unrecognized past service cost and recognition of actuarial gains or losses.
The current service cost is a level annual amount or a fixed percentage of salary which, when
invested at the rate of interest assumed in the actuarial valuation, is sufficient to provide the
required retirement benefit at the employee’s retirement.
Past service cost is the present value of the excess of the projected retirement benefits over
the amount expected to be provided by future contributions based on the service cost. Past
service cost is recognized immediately to the extent that the benefits are already vested, and
otherwise is amortized on a straight-line basis over the average period until the benefits
become vested.
- 15 -
Actuarial gains and losses that exceed 10% of the greater of the present value of the Group’s
defined benefit obligation and the fair value of plan assets are amortized over the expected
average remaining working lives of the participating employees.
The retirement benefit obligation recognized in the consolidated statement of financial position
represents the present value of the defined benefit obligation as adjusted for unrecognized
actuarial gains and losses and unrecognized past service cost, and as reduced by the fair value
of plan assets, if any. Any assets resulting from this calculation is limited to unrecognized
actuarial losses and past service costs, plus the present value of available refunds and
reductions in future contributions to the plan.
Related Party Transactions
Transactions between related parties are based on terms similar to those offered to non-related
parties. Parties are considered to be related if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making
financial and operating decisions and the parties are subject to common control or common
significant influence. Related parties may be individuals or corporate entities.
Borrowing Costs
Borrowing costs are generally expensed as incurred. Borrowing costs incurred during the
construction period on loans and advances used to finance construction and property
development are capitalized as part of construction and development costs included under
“Property and Equipment” account in the consolidated statement of financial position.
Capitalization of borrowing costs commences when the activities to prepare the asset are in
progress and expenditures and borrowing costs are being incurred. Capitalization of borrowing
costs ceases when substantially all the activities necessary to prepare the asset for its intended
use are complete. If the carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recorded. Capitalized borrowing cost is based on applicable weighted
average borrowing rate.
All other borrowing costs are charged to operation in the period in which they are incurred.
Foreign Currency Transactions and Translations
Transactions denominated in foreign currencies are recorded in Philippine pesos using the
exchange rate at the date of the transactions. Outstanding monetary assets and liabilities
denominated in foreign currencies are stated using the closing exchange rate at the end of
financial reporting period. Gains or losses arising from foreign currency transactions are
credited or charged directly to current operations.
Equity
Capital stock is determined using the nominal value of shares that have been issued.
Additional paid-in capital includes any premiums received on the initial issuance of capital
stock. Any transaction costs associated with the issuance of shares are deducted from
additional paid-in capital, net of any related income tax benefits.
Net unrealized gain (loss) on available-for-sale investment accounts are the excess of the fair
market value over the carrying amounts of these investments. When fluctuation is deemed
permanent, the gain or loss resulting from such fluctuation will be reversed and charged to
consolidated statement of comprehensive income in the year that the permanent fluctuation is
determined.
- 16 -
Retained earnings include all current and prior period net profit as disclosed in the consolidated
statement of comprehensive income.
Leases
Leases are classified as finance leases whenever the term of the lease transfer substantially all
the risks and rewards of ownership to the lessee. All other leases are classified as operating
leases.
The Group as lessor
Amounts due from lessees under finance leases are recorded as receivables at the amount of
the Group’s net investment in the leases. Finance lease income is allocated to accounting
period so as to reflect a constant periodic rate of return on the Group’s net investment in
respect of the leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are
added to the carrying amount of the lease asset and recognized on a straight-line basis over
the term of the lease.
The Group as lessee
Assets held under finance lease are initially recognized as assets of the Group at their fair value
at the inception of the lease or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the consolidated statement of financial
position as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are charged directly to profit or loss, unless they are directly attributable to qualifying
assets, in which case they are capitalized in accordance with the Group’s general policy on
borrowing costs. Contingent rental are recognized as expense in the periods in which they are
incurred.
Rental expense under operating leases are charged to profit or loss on a straight-line basis over
the term of the lease.
The Group determines whether an arrangement is, or contains a lease based on the substance
of the arrangement. It makes an assessment of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use
the asset.
Income Taxes
Income taxes represent the sum of current year tax and deferred tax.
The current year tax is based on taxable income for the year. Taxable income differs from
income as reported in the consolidated statement of comprehensive income because it
excludes items of income or expenses 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
income tax is calculated using tax rates that have been enacted or substantively enacted at the
end of financial reporting period.
- 17 -
Deferred tax is provided, using the balance sheet liability method, on all temporary differences
at the end of financial reporting period between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes and carryforward benefits of net operating
loss carryover (NOLCO) and minimum corporate income tax (MCIT). Deferred tax assets are
recognized for all deductible temporary differences to the extent that it is probable that taxable
profit will be available against which the deductible temporary difference can be utilized.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax
assets and liabilities are measured using the tax rate that is expected to apply to the period
when the asset is realized or the liability is settled.
The carrying amount of deferred tax assets is reviewed at end of each financial reporting period
and reduced to the extent that it is not probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax assets to be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities.
Income tax relating to items recognized directly in equity is recognized in equity and other
comprehensive income.
Earnings per Share (EPS)
EPS is determined by dividing net profit for the year by the weighted average number of shares
outstanding during the year including fully paid but unissued shares as of the end of the year,
adjusted for any subsequent stock dividends declared. Diluted earnings per share is computed
by dividing net income for the year by the weighted average number of common shares issued
and outstanding during the year after giving effect to assumed conversion of potential common
shares. The Group has no existing dilutive shares.
Provisions
Provisions are recognized only when the following conditions are met: a) there exists a present
obligation (legal or constructive) as a result of past event; b) it is probable (i.e. more likely
than not) that an outflow of resources embodying economic benefits will be required to settle
the obligation; and, c) reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at end of each financial reporting period and adjusted to reflect the
current best estimate.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. They are
disclosed unless the possibility of an outflow of resources embodying economic benefits is
remote. A contingent asset is not recognized in the consolidated financial statements but
disclosed when an inflow of economic benefit is probable.
Events after the End of Financial Reporting Period
Post year-end events that provide additional information about the Group’s position at the end
of financial reporting period (adjusting events) are reflected in the Group’s consolidated
financial statements. Post year-end events that are non-adjusting events are disclosed in the
notes to consolidated financial statements when material.
- 18 -
4. Management’s Use of Judgments and Estimates
The preparation of the Group’s consolidated financial statements in accordance with PFRS
requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes.
The estimates and
assumptions used in the accompanying consolidated financial statements are based upon
management’s evaluation of relevant facts and circumstances as of the date of the consolidated
financial statements. Actual results could differ from such estimates. The effect of any
changes in estimates will be recorded in the Group’s consolidated financial statements when
determinable.
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under
the circumstances.
Judgments
In the process of applying the Group’s accounting policies, management has made the
following judgments, apart from those involving estimations which have the most significant
effect on the amounts recognized in the consolidated financial statements:

Operating Lease Commitments – Group as Lessor
The Group has entered into property leases on its investment property portfolio. The
Group has determined that it retains all significant risk and rewards of ownership of these
properties which are leased out on operating leases.

Provision for Contingencies
The Group is currently involved in legal and administrative proceedings. The Group’s
estimate of the probable costs for the resolution of these claims has been developed in
consultation with outside counsel handling 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 effect on its financial position and results of operations. It is possible,
however, that future results of operation could be materially affected by changes or in the
effectiveness of strategies relating to these proceedings.

Impairment of Available-for-Sale Financial Assets
The Group follows the guidance of PAS 39 in determining when an investment is
other-than-temporarily impaired. This determination requires significant judgment. In
making this judgment, the Group evaluates, among other factors, the duration and extent
to which the fair value of an investment is less than its cost and the financial health of the
near-term business outlook for the investee, including factors such as industry and sector
performance, changes in technology and operational and financing cash flows.
The Group’s allowance for decline and impairment in value of available-for-sale
investments as of December 31, 2010 and 2009 amounted to =1
P .5 million. However,
management expects full recoverability as soon as the investees resume/start their
operations.

Distinction between Investment Property and Owner-Occupied Property
The Group determines whether a property qualifies as an investment property. In making
its judgments, 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 the property but also other assets used in the
supply process.
- 19 -
Some properties are held to earn rentals or for capital appreciation and other properties
are held for use in rendering of services or for administrative purposes. If the portion
cannot be sold separately, the property is accounted for as an investment property only if
an insignificant portion is held for use in the production or supply of goods and 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.
Estimates
The key assumptions concerning the future and other sources of estimation uncertainty at the
end of financial reporting period that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are discussed below:

Useful Lives of Property and Equipment
Useful lives of property and equipment are estimated based on the period over which these
assets are expected to be available for use. Such estimation is based on a collective
assessment of industry practice, internal technical evaluation and experience with similar
assets. The estimated useful life of each asset is reviewed periodically and 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 asset. It is possible,
however, that future results of operations could be materially affected by changes in the
amounts and timing of recorded expenses brought about by changes in the factors
mentioned above. Any reduction in the estimated useful lives of property and equipment
would increase the Group’s recorded operating expenses and decrease on the related asset
accounts.
There were no significant changes in the estimated useful lives of property and equipment.

Impairment of Receivables
The Group maintains allowances for impairment losses on receivables at a level considered
adequate to provide for potential uncollectible receivables. The level of this allowance is
evaluated by the management on the basis of factors that affect the collectibility of the
accounts.
The factors include, but are not limited to, the length of relationship with the customer, the
customer’s payment behavior and known market factors. The Group reviews the age and
status of receivables, and identifies accounts that are to be provided with allowances on a
continuous basis.
The Group provides full allowance for receivables that it deems
uncollectible. The amount and timing of recorded expenses for any period would differ if
the Group made different judgments or utilized different estimates. An increase in the
allowance for impairment losses on receivables would increase recorded operating expenses
and decrease current assets.
The Group’s allowance for impairment losses amounted to =1.4
P
million and =1.1
P
million as
of December 31, 2010 and 2009, respectively.
The carrying value of the Group’s
receivables amounted to =43.1
P
million and =55.6
P
million as of December 31, 2010 and
2009, respectively (see Note 7).

Retirement and Other Benefits
The determination of the Group’s obligation and cost for pension and other retirement
benefits is dependent on management’s selection of certain assumptions used by actuaries
in calculating such amounts.
- 20 -
The assumptions for pension costs and other retirement benefits are described in Note 16,
and include among others, discount and salary increase rates. Actual results that differ
from the assumptions are accumulated and amortized over future periods and therefore,
generally affect the Group’s recognized expense and recorded obligation in such future
periods. While management believes that the assumptions are reasonable and appropriate,
significant differences in actual experience or significant changes in management
assumptions may materially affect the Group’s pension and other retirement obligations.
The Group also estimates other employee benefits obligation and expense, including the
cost of paid leaves based on historical leave availments of employees, subject to the
Group’s policy. These estimates may vary depending on the future changes in salaries and
actual experiences during the year.
Retirement expense amounted to =2.7
P
million in 2010, =2.4
P
million in 2009 and
=1.1
P
million in 2008. The Group’s retirement benefit obligation amounted to =14.0
P
million
and =11.8
P
million as of December 31, 2010 and 2009, respectively (see Note 16).

Impairment of Non-Financial Assets
Impairment review is performed when certain impairment indicators are present. Such
indicators would include significant changes in asset usage, significant decline in market
value and obsolescence or physical damage on an asset. If such indicators are present and
where the carrying amount of the asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. Determining the net
recoverable value of assets requires the estimation of cash flows expected to be generated
from the continued use and ultimate disposition of such assets. While it is believed that the
assumptions used in the estimation of fair values reflected in the consolidated financial
statements are appropriate and reasonable, significant changes in these assumptions may
materially affect the assessment of recoverable values and any resulting impairment loss
could have a material adverse impact on the results of operations.
Determining whether goodwill is impaired requires an estimation of the value in use of the
cash-generating units to which goodwill has been allocated. The value in use calculation
requires the management to estimate the future cash flows expected to arise from the
cash-generating unit and a suitable discount rate in order to calculate present value.
The carrying amounts of investment property, property and equipment and other
noncurrent assets are disclosed in Notes 10, 11 and 12.

Realizability of Deferred Tax Assets
The carrying amount of deferred tax assets is reviewed at end of each financial reporting
period and reduced to the extent that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred tax assets to be utilized. Management
expects future operations will generate sufficient taxable profit that will allow all or part of
the deferred tax assets to be utilized.
The Group’s deferred tax assets amounted to =5.2
P
million and =4.4
P
million as of
December 31, 2010 and 2009, respectively (see Note 20).
- 21 -

Determination of Fair Value of Financial Assets and Liabilities
PFRS requires that certain financial assets and liabilities be carried at fair value, which
requires the use of extensive accounting estimates and judgments. While significant
components of fair value measurement are determined using verifiable objective evidence
(i.e. interest rates, volatility rates), the timing and amount of changes in fair value would
differ with the valuation methodology used. Any change in the fair value of these financial
assets and liabilities would directly affect income and equity (see Note 24).
5. Business Segments
The Group’s operating businesses are organized and managed separately according to the
nature of services provided, with each segment representing a strategic business unit that
serves different market. The Parent Company and ORDC are engaged in providing furnishings
and non-heavy equipment for lease. Also, the Parent Company leases some of its investment
properties. The Utilities segment (CWC) is engaged in the operation, maintenance and
distribution of water supplies in the City of Calapan, province of Oriental Mindoro and town of
Tabuk, province of Apayao.
Corporate and Others segment includes management and
marketing services, trading and real estate. Marketing service, other water service and real
estate business are still in their preoperating stages. Segment accounting policies are the
same as the policies described in Note 2.
Segment assets include all operating assets used by a segment and consist principally of
operating cash, receivables, investment property, property and equipment net of allowances
and provisions. Segment liabilities include all operating liabilities and consist principally of
accounts, wages, taxes currently payable and accrued liabilities. Segment assets and liabilities
do not include deferred income taxes.
The Group generally accounts for inter-segment sales and transfers as in arm’s-length
transactions at current market prices.
Such sales and purchases are eliminated in
consolidation.
The following are revenue and profit information regarding industry segments for the years
ended December 31, 2010, 2009 and 2008 and certain assets and liability information
regarding industry segments as of December 31, 2010, 2009 and 2008:
Rental
Segment revenues
Segment cost and
expenses
Earnings before
depreciation
and income tax
Depreciation
Income tax
expense
(benefit)
Net income
Segment assets
Utilities
2010
Management
Trading
services
Unallocated
Consolidated
=
P 59,963,428
=
P 90,568,624
=
P 27,469,611
=
P 29,808,602
=
P 44,276,481
=
P 252,086,746
19,188,701
60,896,121
26,984,494
18,641,347
2,552,653
128,263,316
40,774,727
29,672,503
485,117
11,167,255
41,723,828
123,823,430
15,396,046
6,202,630
–
836,858
–
22,435,534
6,815,414
6,836,342
4,264,087
–
17,894,500
=
P 18,563,267
=
P 16,633,531
=
P 506,460
=
P 6,066,310
=
P 41,723,828
=
P 83,493,396
=
P 552,512,991 =
P 332,869,916
=
P 2,654,776
=
P 16,898,339
(21,343)
=
P 259,760,594 =
P 1,164,696,616
Segment liabilities
=
P 25,087,847
=
P 77,992,603
=
P 90,431
=
P 6,401,885
=
P 350,770,743
=
P 460,343,509
Capital expenditure
=
P 82,603,546
=
P 254,877,313
=
P 2,564,345
=
P 10,496,454
=
P 353,811,449
=
P 704,353,107
- 22 -
2009
Rental
Utilities
Management
services
Trading
Unallocated
Consolidated
Segment revenues
Segment cost and
expenses
Earnings before
depreciation and
income tax
=55,035,428
P
=75,572,905
P
=2,864,439
P
=16,604,910
P
=21,259,997
P
=171,337,679
P
18,052,859
55,453,554
3,948,361
3,989,939
2,021,954
83,466,667
36,982,569
20,119,351
(1,083,922)
12,614,971
19,238,043
87,871,012
Depreciation
Income tax expense
(benefit)
13,992,365
5,536,412
631,374
–
20,160,151
9,589,599
4,242,726
(334,846)
2,692,910
–
16,190,389
=13,400,605
P
=10,340,213
P
(P
=749,076)
=9,290,687
P
=19,238,043
P
=51,520,472
P
=437,335,830
P
=236,563,041
P
=13,127,998
P
=17,936,346
P
=254,034,542
P
=958,997,757
P
=79,341,903
P
=173,917,227
P
=31,091
P
=10,279,917
P
=67,726,369
P
=331,296,507
P
=357,993,927
P
=62,645,814
P
=13,096,907
P
=7,656,429
P
=186,308,173
P
=627,701,250
P
Net income
Segment assets
Segment liabilities
Capital expenditure
–
2008
Rental
Segment revenues
Utilities
Management
services
Unallocated
Consolidated
=50,040,851
P
=54,501,036
P
=18,354,279
P
=65,085,376
P
=187,981,542
P
Segment cost and expenses
18,061,057
43,314,203
1,552,989
484,931
63,413,180
Earnings before depreciation
and income tax
31,979,794
11,186,833
16,801,290
64,600,445
124,568,362
15,645,669
4,841,956
340,580
–
20,828,205
2,643,731
1,531,008
4,744,815
–
8,919,554
=13,690,394
P
=4,813,869
P
=11,715,895
P
=64,600,445
P
=94,820,603
P
=382,026,368
P
=93,568,689
P
=23,308,925
P
=263,071,988
P
=761,975,970
P
=36,284,603
P
=73,687,314
P
=7,252,614
P
=30,499,559
P
=147,724,090
P
=345,741,765
P
=19,881,375
P
=16,056,311
P
=232,572,429
P
=614,251,880
P
Depreciation
Income tax expense
(benefit)
Net income
Segment assets
Segment liabilities
Capital expenditure
6. Cash and Cash Equivalents
This account consists of:
Short-term time deposits
Cash in banks
Cash on hand
2010
=
P 100,590,632
25,642,798
260,500
=
P 126,493,930
2009
=51,194,706
P
32,084,277
215,500
=83,494,483
P
Cash in banks earn interest at the respective bank deposit rates. Time deposits are made for
varying periods up to three months depending on the immediate cash requirements of the
Group, and earn interest at 4.0% to 6.75% gross. Interest income earned amounted to
=1.8
P
million in 2010, =2.7
P
million in 2009 and =2.1
P
million in 2008 (see Note 19).
- 23 -
As of December 31, 2010, the Group’s foreign currency denominated monetary asset under
cash in bank amounted to US$30,214 with peso equivalent of =1,325,973.
P
This balance was
restated using the closing rate of =43.885
P
to US$1 as of December 31, 2010. The Group’s
unrealized foreign exchange gain reported in the consolidated statements of comprehensive
income amounted to =17,507
P
in 2010.
7. Receivables
This account consists of:
Trade
Advances to supplier (Note 21)
Claims from insurance company
Advances to officers and employees
Interest receivable
Advances to contractors
Receivable from sale of investment
Others
Less noncurrent portion
Current portion
Less allowance for impairment losses
2010
=
P 21,791,869
15,404,410
13,792,149
584,577
146,000
–
–
8,163,963
59,882,968
13,792,149
46,090,819
1,364,151
=
P 44,726,668
2009
=26,461,797
P
–
13,792,149
36,399
–
6,799,395
2,971,605
6,631,445
56,692,790
13,792,149
42,900,641
1,075,501
=41,825,140
P
The noncurrent portion of the receivables pertains to the insurance claims on indemnification of
fire loss incurred in November 2001. Lawsuits filed against the insurance company are
currently on-going. The amount that is expected to be recovered is significantly higher than
the recorded claim as this is the recorded value of the properties at the time of loss.
Management believes that these claims are recoverable in full. Accordingly, no adjustment has
been made in the accompanying consolidated financial statements relating to the recoverability
of such claim.
The rollforward of allowance for impairment losses follows:
Balance at beginning of year
Provision for impairment losses (Note 18)
Reversal due to write-off of receivables
Balance at end of year
2010
=
P 1,075,501
319,941
(31,291)
=
P 1,364,151
2009
=1,207,398
P
515,249
(647,146)
=1,075,501
P
2010
=
P 4,053,889
2,606,154
59,015
=
P 6,719,058
2009
=2,980,342
P
–
64,278
=3,044,620
P
8. Other Current Assets
This account consists of:
Creditable withholding taxes
Deposits
Others
- 24 -
9. Available-for-Sale Investments
This account consists of:
Cost of investment in:
Shares of stocks
Mutual fund
Fair value gain (loss) on available-for sale investments
Balance at beginning of year
Additions
Balance at end of year
2010
2009
=
P 8,250,000
2,000,000
10,250,000
=8,250,000
P
2,000,000
10,250,000
(1,500,000)
327,743
(1,172,257)
=
P 9,077,743
(1,500,000)
–
(1,500,000)
=8,750,000
P
Investment in mutual fund pertains to a fund managed by an insurance company. This fund
seeks to achieve an optimal level of income in the medium term together with long term capital
growth through investments in fixed income securities and money market instruments and
shares listed in the Philippine Stock Exchange.
Although the amount can be withdrawn anytime, the management intended to hold the fund on
a long term basis.
The fund’s fair market value as of December 31, 2010 and 2009 is not materially different from
that of the value from the time of acquisition.
10. Investment Property
This account consists of:
2010
Cost:
Land
Buildings and condominium units
Additions:
Land
Buildings and condominium units
Adjustment to fair value:
Beginning
Additions (Note 19)
Impairment (Note 19)
Ending
2009
=
P 165,293,356
95,841,346
261,134,702
=164,102,924
P
43,563,564
207,666,488
1,193,125
48,268,871
310,596,698
1,190,432
52,247,782
261,104,702
254,958,397
42,079,000
–
297,037,397
=
P 607,634,095
246,379,431
11,103,425
(2,524,459)
254,958,397
=516,063,099
P
The fair values of investment properties were determined by an independent appraiser as of
December 31, 2010. The valuation of investment properties was based on market values. The
fair value represents the amount at which the assets can be exchanged between a
knowledgeable, willing seller and a knowledgeable, willing buyer in an arm’s length transaction
at the date of valuation, in accordance with International Valuation Standards.
- 25 -
Appraisal increase recognized in the consolidated statements of comprehensive income which
amounted to =42.1
P
million in 2010, =11.1
P
million in 2009 and =59.5
P
million in 2008. Also,
impairment loss in 2009 amounting to =2.5
P
million was recognized in the consolidated
statements of comprehensive income (see Note 19).
The Group leases out some of its investment properties generally for a period of one (1) year,
renewable annually. Rental income earned by the Group from its investment property under
operating leases amounted to =17.3
P
million in 2010, =18.3
P
million in 2009 and =14.8
P
million in
2008.
11. Property and Equipment
The rollforward analysis of this account follows:
2010
Buildings,
Furniture, Water utilities
Office
Construction in
condominium
furnishings and
and
furniture,
Land and
units and
equipment
distribution
progress and
improvements
improvements
for lease
system
equipment
equipment
installation
Total
=
P 1,347,598
=
P 52,902,727
=
P 228,654,466
=
P 92,666,177
=
P 16,972,776
=
P 15,263,256
=
P 120,696,769
=
P 528,503,769
fixtures and Transportation
equipment for
Cost:
At January 1
Acquisitions
At December 31
–
–
11,070,482
2,258,088
1,489,548
2,138,245
66,173,585
83,129,948
1,347,598
52,902,727
239,724,948
94,924,265
18,462,324
17,401,501
186,870,354
611,633,717
322,575
10,246,194
222,781,116
15,159,400
13,646,382
12,570,929
–
274,726,596
Accumulated depreciation:
At January 1
Depreciation
At December 31
6,082
1,949,837
12,248,319
5,325,594
836,444
2,069,258
–
22,435,534
328,657
12,196,031
235,029,435
20,484,994
14,482,826
14,640,187
–
297,162,130
=
P 40,706,696
=
P 4,695,513 =
P 74,439,271
=
P 3,979,498
=
P 2,761,314
=
P 186,870,354
=
P 330,505,657
Buildings,
Furniture, Water utilities
Revaluation increment in land
At January 1 and at
December 31
Net carrying value
16,034,070
=
P 17,053,011
16,034,070
2009
Office
Construction in
condominium
furnishings and
and
furniture,
Land and
units and
equipment
distribution
progress and
improvements
improvements
for lease
system
equipment
equipment
installation
=
P 1,347,598
=
P 52,902,727
=
P 228,474,619
=
P 82,996,321
=
P 15,810,205
=
P 13,876,096
=
P 34,397,966
98,698,237
fixtures and Transportation
equipment for
Total
Cost:
At January 1
=
P 429,805,532
–
–
179,847
9,669,856
1,162,571
1,387,160
86,298,803
1,347,598
52,902,727
228,654,466
92,666,177
16,972,776
15,263,256
120,696,769
528,503,769
At January 1
306,413
8,144,068
211,688,797
10,485,343
12,599,897
11,341,927
–
254,566,445
Depreciation
16,162
2,102,126
11,092,319
4,674,057
1,046,485
1,229,002
–
20,160,151
322,575
10,246,194
222,781,116
15,159,400
13,646,382
12,570,929
–
274,726,596
Acquisitions
At December 31
Accumulated depreciation:
At December 31
(Forward)
- 26 -
(Carryforward)
2009
Buildings,
Furniture, Water utilities
Office
Construction in
condominium
furnishings and
and
furniture,
Land and
units and
equipment
distribution
fixtures and
Transportation
equipment for
progress and
improvements
improvements
for lease
system
equipment
equipment
installation
Total
Revaluation increment
in land
2,498,070
2,498,070
Addition
13,536,000
13,536,000
At December 31
16,034,070
16,034,070
At January 1
Net carrying value
=
P 17,059,093
=
P 42,656,533
=
P 5,873,350
=
P 77,506,777
=
P 3,326,394
=
P 2,692,327
=
P 120,696,769
=
P 269,811,243
Land was revalued on December 22, 2009 by an independent appraiser. The valuation of the
land is based on the fair market values using the Market Data Approach by identification of the
sales and listings of comparable properties registered in the vicinity. Appraisal increase was
credited to equity and other comprehensive income amounting to =9.5
P
million net of deferred
tax liability of =4.0
P
million (see Note 20).
Equipment for installation amounting to =9.6
P
million came from one of the acquired
subsidiaries in 2009.
The Group’s capitalized borrowing cost amounted to =8.4
P
million in 2010 and =5.7
P
million in
2009. Total borrowing cost capitalized under construction in progress as of December 31, 2010
and 2009 amounted to =18.0
P
million and =9.6
P
million, respectively (see Note 13).
Certain property and equipment under “land and improvements” and “water utilities and
distribution system” with a total carrying value of =101.7
P
million and =105.5
P
million in 2010
and 2009, respectively, were mortgaged in favor of a creditor bank in connection with the
Group’s loan availment (see Note 13).
The Group’s management had reviewed the carrying values of the property and equipment as
of December 31, 2010 and 2009 for any impairment. Based on the evaluation, there are no
indications that the property and equipment might be impaired.
Depreciation expense was charged under the following accounts in the consolidated statements
of comprehensive income:
Costs of sales and services (Note 17)
Operating expenses (Note 18)
2010
=
P 18,076,859
4,358,675
=
P 22,435,534
2009
=16,580,573
P
3,579,578
=20,160,151
P
2008
=17,111,055
P
3,717,150
=20,828,205
P
Furniture, furnishings and equipment for lease are generally for a period of one (1) year,
renewable annually. Rental income generated on lease of furniture, furnishings and equipment
amounted to =42.7
P
million in 2010, =45.7
P
million in 2009 and =35.2
P
million in 2008.
- 27 -
12. Other Noncurrent Assets
This account consists of:
Special bank deposit (Notes 21 and 24)
Development cost (Note 21)
Reserve fund (Note 13)
Utilities and other deposits (Note 24)
Deferred input VAT
2010
=
P 9,000,000
4,426,345
3,538,797
3,584,348
–
=
P 20,549,490
2009
=9,000,000
P
–
4,609,196
3,839,075
364,791
=17,813,062
P
13. Loans Payable
This account pertains to long-term loans availed from local banks as follow:
a.
Loan from a local bank was availed for the rehabilitation, expansion and improvements of
waterworks system of CWC for =137
P
million payable in fifteen (15) years on a monthly
basis. Interest is fixed at 10.5% per annum, reviewable and subject to adjustment
annually thereafter but not to exceed 15% per annum. CWC was able to negotiate the
interest rate at 7.75% in 2010 and 9% in 2009 and 2008.
CWC has drawn for its expansion project the amount of =17.2
P
million in 2010 and
=44.5
P
million in 2009.
Interest expense capitalized amounted to =8.4
P
million in 2010 and =5.7
P
million in 2009
(see Note 11).
Debt Covenant
CWC executed a deed of assignment relative to the loan, in favor of the bank of (a) a
portion of CWC’s Reserve Fund (via Savings or Other Investment Account) equivalent to
two monthly interest amortization during the grace period, to increase to two monthly
principal and interest amortization after the grace period onwards. The Reserve Fund shall
be maintained for CWC’s expenses for maintenance, operation and emergency fund; and
(b) billed water/receivables until the amount of the loan is fully paid. The reserve fund
amounted to =3.5
P
million and =4.6
P
million as of December 31, 2010 and 2009,
respectively (see Note 12).
Also, CWC, JOH and its major stockholders mortgaged their real estate and other
equipment situated in Calapan, Oriental Mindoro in favor of the bank. The aggregate
carrying value of the Group’s property and equipment mortgaged as of December 31, 2010
and 2009 amounted to =101.7
P
million and =105.5
P
million, respectively. The titles of the
mortgaged property have already been delivered to the bank.
As of December 31, 2010 and 2009, the Group is in compliant with the said covenants.
b.
In July 2009, ORDC entered into a loan agreement with a local bank for the acquisition of
EGI Rufino Building located in Pasay City for =46.8
P
million payable in fifteen (15) years.
Interest of 8.0% per annum is fixed for the first ten (10) years and 10.0% fixed for the
next five years.
- 28 -
Interest charged to operations amounted to =2.5
P
million in 2010 and =1.9
P
million in 2009
(see Note 19). No interest was charged to operations in 2008.
c.
In August 2009, the JGMI entered into a loan agreement with a local bank for the
acquisition of transportation equipment for =1.2
P
million in 60 months. The first due date is
on August 7, 2009 and on every 7th of the month thereafter.
In relation to this loan agreement, the above property was mortgaged as security for the
payment of the loan. Upon full payment of last monthly installment, the collateral
documents will be released.
The maturity profile of the above loans payable follows:
Due within 1 year
Due beyond 1 year, not later than 5 years
Due beyond 5 years
2010
=
P 10,146,422
51,393,098
79,690,137
=
P 141,229,657
2009
=7,543,834
P
45,379,439
80,811,428
=133,734,701
P
2010
=
P 73,241,116
8,868,555
5,679,178
=
P 87,788,849
2009
=77,745,303
P
7,198,984
4,658,877
=89,603,164
P
14. Accounts Payable and Accrued Expenses
This account consists of:
Trade
Accrued expenses
Others
Carrying values of this account approximate the fair values at end of financial reporting period
due to the short term nature of the transactions.
Accrued expenses include interest, payables to electrical and water utility providers.
Others significantly include government payables.
15. Related Party Transactions
Details of due to related parties follow:
Stockholders
Affiliate
2010
=
P 160,378,829
12,563,294
=
P 172,942,123
2009
=57,721,257
P
85,035
=57,806,292
P
Affiliates are entities that are owned and controlled by JOH and neither a subsidiary nor
associate of the Group. These affiliates are effectively sister companies of the Group by virtue
of ownership of JOH.
- 29 -
The Group has the following transactions with related parties:
a.
Unsecured and noninterest bearing cash advances made by stockholders to the Group to
settle in full its loan balance in 2006 and for working capital purposes which are payable on
demand and usually settled in cash.
b.
Unsecured and noninterest bearing cash advances from affiliates for working capital
purposes which are payable on demand and usually settled in cash.
c.
The remuneration of directors and other members of key management personnel during
the year are as follows:
Salaries
Bonuses
2010
=
P 9,806,600
827,843
=
P 10,634,443
2009
=8,855,169
P
727,931
=9,583,100
P
2008
=7,203,343
P
598,343
=7,801,686
P
16. Retirement Benefit Costs
The Group operates a noncontributory retirement plan covering all qualifying employees.
Under the current plan, the employees are entitled to retirement benefits of 60 percent of one
month’s pay per year on attainment of at least five years of their services with the Group.
The most recent actuarial valuations of present value of the defined benefit obligation were
carried out at April 6, 2010 by independent actuaries. The present value of the defined benefit
obligation and the related current service cost and past service cost, were measured using the
Projected Unit Credit Method.
As of December 31, 2010, the plan has not been funded.
The principal assumptions used for the purposes of the actuarial valuation follow:
Discount rate
Expected rate of salary increase
2010
10.0%
5.0%
2009
10.0%
5.0%
2008
7.0%
5.5%
Retirement expenses recognized in the statements of comprehensive income included under
Salaries and employee benefits were determined as follows:
Current service cost
Interest cost
Net actuarial loss recognized
2010
=
P 1,654,288
1,087,615
–
=
P 2,741,903
2009
=696,908
P
1,169,470
568,420
=2,434,798
P
2008
=572,774
P
564,845
–
=1,137,619
P
The rollforward of retirement benefit obligation follows:
Balance at beginning of year
Retirement expense
Benefits paid
Balance at end of year
2010
2009
=
P 11,754,914
=9,320,116
P
2,741,903
2,434,798
(455,478)
=
P 14,041,339 =11,754,914
P
- 30 -
17. Cost of Sales and Services
This account consists of:
Cost of services
Salaries and employee benefits (Note 15)
Depreciation and amortization (Note 11)
Utilities
Rental (Note 21)
Repairs and maintenance
Transportation and travel
Supervision and regulatory fees (Note 21)
Office supplies
Communication
Materials
Insurance
Others
Cost of sales
Purchases
2010
2009
2008
=
P 24,570,301
18,076,859
10,656,690
7,851,467
6,679,050
903,656
692,139
583,943
478,251
440,444
193,329
109,984
=
P 71,236,113
=23,672,285
P
16,580,573
9,144,062
7,526,448
3,681,127
503,683
592,706
507,901
286,244
383,881
128,722
118,370
63,126,002
=18,899,242
P
17,111,055
7,382,058
4,312,655
2,429,863
968,366
553,509
520,288
155,735
430,826
170,974
104,036
=53,038,607
P
24,895,495
=
P 96,131,608
2,573,872
=65,699,874
P
–
=53,038,607
P
The Group does not maintain merchandise inventory as of December 31, 2010 and 2009.
18. Operating Expenses
This account consists of:
Professional services
Salaries and employee benefits
(Notes 15 and 16)
Taxes and licenses
Depreciation (Note 11)
Utilities
Association dues
Representation
Security services
Rental (Note 21)
Transportation and travel
Office supplies
Communication
Repairs and maintenance
Provision for impairment loss (Note 7)
Insurance
Donation
Accounts written-off
Others
2010
=
P 16,748,886
2009
=3,486,345
P
2008
=3,368,827
P
11,035,396
7,607,795
4,358,675
2,276,490
1,166,143
1,083,210
1,082,838
1,027,602
1,004,907
962,164
896,079
661,134
319,941
158,006
63,779
–
1,561,544
=
P 52,014,589
9,787,417
5,282,807
3,579,578
1,646,178
802,417
707,379
950,945
651,597
3,053,281
643,599
762,155
286,767
515,249
88,321
103,950
23,471
2,886,390
=35,257,846
P
7,238,511
3,658,834
3,717,150
1,749,125
608,664
715,189
1,083,996
342,840
3,312,304
465,572
588,702
232,305
–
84,272
307,648
–
3,243,909
=30,717,848
P
- 31 -
19. Other Income (Charges)
This account consists of:
2010
Change in fair value of investment property
through profit or loss (Note 10)
Finance charges (Note 13)
Interest income (Note 6)
Bank charges
Excess of fair values of net assets of
subsidiaries over cost (Note 2)
Amortization of deferred interest
(Note 24)
Reversal of impairment loss in
available-for-sale investments
Others
=
P 42,079,000
(2,536,360)
1,750,903
(16,293)
–
–
–
446,578
=
P 41,723,828
2009
=11,103,425
P
(1,858,355)
2,729,633
(9,816)
9,016,514
(153,783)
2008
=15,733,325
P
(58,146)
2,062,497
–
–
(426,784)
–
287,738
=21,115,356
P
3,502,842
36,528
=20,850,262
P
2010
2009
=
P 4,212,400
=3,526,474
P
580,513
48,722
356,191
5,197,826
493,918
48,722
334,847
4,403,961
20. Income Taxes
a.
The Group’s deferred tax assets consist of the following:
Tax effect of:
Accrued retirement expense
Allowances for:
Impairment losses of receivables
Parts obsolescence
NOLCO
The Group did not recognize the deferred tax asset on NOLCO amounting to =126,347
P
since management believes this could not be realized prior to its expiration.
The Group’s deferred tax liabilities consist of the following:
Tax effect of:
Fair value adjustments and appraisal increase in
investment property and property and equipment
Capitalized borrowing costs
2010
2009
=
P 19,064,447
4,810,221
=
P 23,874,668
=18,475,153
P
2,878,269
=21,353,422
P
Deferred tax liability on fair value adjustments and appraisal increase in property and
equipment is based on effective tax rate of 30% of the appraisal increase for ordinary
assets.
- 32 -
NOLCO totaling =1.8
P
million as of December 31, 2010, can be carried forward and claimed
as deduction against regular taxable income as follows:
Date incurred
Amount
Expired
Balance
Expiry Date
December 31, 2010
=291,189
P
=–
P
=291,189
P
December 31, 2013
December 31, 2009
1,390,836
–
1,390,836
December 31, 2012
December 31, 2008
127,812
–
127,812
December 31, 2011
December 31, 2007
209,021
(209,021)
–
December 31, 2010
=2,018,858
P
(P
=209,021)
=1,809,837
P
MCIT incurred in 2008 amounting to =227,237
P
was applied against regular income tax due
in 2009.
b.
Reconciliation between the statutory and the effective income tax rates follows:
Statutory income tax rate
Additions to (reductions in) income tax
resulting from:
Effect of change in fair value of
investment property
Change in deferred tax assets not
recognized
Interest income taxed at lower rate
Other unallowable expenses
Applied NOLCO
Effect of change in income tax rate
Others – net
Effective income tax rate
c.
2010
30.00%
2009
30.00%
2008
35.00%
(12.34)
(2.79)
(16.91)
0.68
(0.51)
0.30
(0.30)
0.64
(1.40)
0.33
–
–
–
26.78%
(1.97)
(1.20)
0.96
–
(0.54)
(0.47)
14.87%
(0.19)
17.64%
RA No. 9504 that was enacted in 2008 amended various provisions in the existing 1997
National Internal Revenue Code. Among the reforms introduced by the said RA was the
option granted to Corporations to avail the optional standard deduction at 40% of gross
income in lieu of the itemized deduction scheme.
The Parent Company and the subsidiaries opted for the itemized deduction scheme for its
income tax reporting in 2010 and 2009.
21. Significant Contracts and Commitments
a.
Lease of Water Facilities
In 2006, CWC entered into a lease agreement with the local government of Tabuk, in the
province of Kalinga (local government).
Items under lease are the water facilities
developed and owned by the local government. Under the agreement, CWC will manage,
operate and maintain this water system within a defined service area for 15 years from the
day the facilities are turned-over by the local government. CWC shall pay lease to the local
government based on agreed amounts. Also, CWC shall pay supervision fee of =5
P per
connection on a monthly basis subject to adjustment according to the change in general
consumer price index of the region where the local government belongs.
- 33 -
The Group maintains a performance security in the form of a bank guarantee. If provided
in the form of a bank guarantee or an irrevocable letter of credit, security shall be valid for
an initial period of twelve (12) months and the Group shall ensure that the security shall be
renewed annually, each renewal to take effect immediately on the expiration of the
previous security. The amount of performance security is =9.0
P
million per annum from
year one (1) to year ten (10) and =4.5
P
million per annum from year eleven (11) to year
fifteen (15) of the lease (see Note 12).
The lease became effective in October 2006.
extended for another ten (10) years.
On March 25, 2010, the lease term was
The future aggregate minimum lease payments under lease are as follows:
Within one year
Over 1 year but not more than 5 years
More than five years
2010
2009
2008
=
P 8,832,000
=7,851,467
P
=7,526,448
P
35,328,000
35,328,000
34,347,467
50,784,000
59,616,000
68,448,000
=
P 94,944,000 =102,795,467
P
=110,321,915
P
Lease and supervision fees paid amounted to =7.9
P
million and =0.6
P
million in 2010,
respectively, =7.5
P
million and =0.6
P
million for 2009, respectively, and =4.3
P
million and
=0.6
P
million in 2008, respectively.
The Group’s water revenue from operating the water utilities amounted to =18.1
P
million in
2010, =17.0
P
million in 2009 and =12.8
P
million in 2008.
b.
Power Supply Agreement (PSA)
On February 9, 2010, OPI entered into a PSA with Oriental Mindoro Electric Cooperative,
Inc. (ORMECO) wherein OPI agreed to supply the power needs of ORMECO and to
construct, operate and maintain the needed power generation plant on a Build-OwnOperate (BOO) basis.
The period of the agreement shall take effect upon the declaration of the Power Plant’s
commercial operation and shall be effective for a period of fifteen (15) years, subject to
renewal and for another fifteen (15) years by mutual agreement of the parties.
c.
Fuel Supply and Management Agreement (FSMA)
Pursuant to the Power Supply Agreement, OPI also entered into a FSMA with ORMECO.
OPI shall own the storage tanks and dispensing pumps that will be installed at the power
plant and all the structures, fixtures and equipment used in connection with the supply of
fuel and lube oil. This agreement shall have the same duration as that of the PSA unless
otherwise agreed by both parties.
d.
Hydropower Service Contract
On March 25, 2010, OPI entered into a Hydropower Service Contract with the Department
of Energy (DOE) pursuant to Section 2, Article XII of the 1987 Constitution and Republic
Act No. 9513, otherwise known as the Renewable Energy Act of 2008. OPI is hereby
appointed and constituted by DOE as the exclusive party to explore, develop and utilize the
hydropower resources within Inabasan River in the Municipality of San Teodoro, Oriental
Mindoro. Technical and financial risk under the contract shall be assumed by OPI in case
no hydropower resource in quantities of electricity is determined during the predevelopment stage.
- 34 -
The pre-development stage of the hydropower contract shall be two (2) years from
March 25, 2010 and renewable for another year if OPI has not been in default in its
exploration, financial and other work commitments and obligations and has provided a
work program for the extension period acceptable to DOE, after which this hydropower
contract shall automatically terminate unless a declaration of commerciality has been
submitted by OPI before the end of the third contract year and thereafter duly confirmed
by DOE. Within this stage, OPI shall undertake exploration, assessment, harnessing,
piloting and other studies of hydropower resources in the area.
The initial amount of the bond or any other guarantee shall not be less than the budgetary
estimate for the first year based on the Work Program. This performance bond shall be
secured from a DOE-accredited insurance or surety company. In any case that OPI fails to
observe or perform its work obligations under the said Work Program, the Government
may proceed against the bond or other guarantee. As of December 31, 2010, cost incurred
for the performance bond included under the Development cost account in the statement of
financial position amounted to =51,028
P
(see Note 12).
e.
Agreements for Power Plant
Supply Contract for 6.4MW Packaged Power Station
On December 21, 2009, OPI entered into a contract with a supplier to purchase four units
of 1.6MW HiMSEN 9H21/32 diesel engines equipped with matching generators and ancillary
equipment including supervision during site erection and commissioning for 6.4 MW Diesel
Power Plant (HFO) in Calapan City, Oriental Mindoro, Philippines.
As of December 31, 2010, advance payment made amounted to =15.4
P
million
(see Note 7).
6-8MW Modular Bunker Power Plant
An agreement for the construction of 6-8MW Modular Bunker Power Plant at Ormeco
Compound, Sta. Isabel, Calapan City, Oriental Mindoro was entered by OPI on
May 13, 2010 with Sixteen Enterprises with contract duration of 180 calendar days.
As of December 31, 2010, total cost incurred included in the construction in progress
account under Property and equipment and input VAT paid in relation to the power plant
amounted to =4.1
P
million and =0.5
P
million, respectively.
f.
Memorandum of Agreements (MOA)
OPI entered into a MOA with the DOE for the granting of financial benefits to the host
communities of the energy-generation company and/or energy resources for its 8 MW
Modular Bunker Diesel Power Plant and 10 MW Inabasan Hydroelectric Power Plant. Based
on the agreements, OPI shall provide financial benefits equivalent to one centavo per
kilowatt-hour (=0.01/kWh)
P
of the total electricity sales of the generation facility to the
region, province, city or municipality and barangay that host the generation facility.
g.
Management Services Contracts
The Group has management services contracts for a period of one year renewable upon
such terms and conditions as may be mutually agreed upon by the parties. Total revenue
from management services amounted to in =29.8
P
million in 2010, =16.6
P
million in 2009
and =18.4
P
million in 2008.
- 35 -
h.
Lease Agreement
Group as a Lessor
The Group leased its various properties and certain furniture, furnishings and equipment
under operating lease with various lessees. The lease shall be for a period of one year and
renewable upon mutual agreement of the parties. Rental income recognized in the
statements of comprehensive income amounted to =60.0
P
million in 2010, =55.0
P
million in
2009 and =50.0
P
million in 2008.
Group as a Lessee
The Group leases several office spaces for a period of one year, renewable upon mutual
agreement of the parties. Rental expense charged to operations and reported in the
statements of comprehensive income amounted to =1.0
P
million in 2010, =0.7
P
million in
2009 and =0.3
P
million in 2008.
The Group also leased a parcel of land owned by ORMECO for the Calapan Bunker C Diesel
Plant’s site. The term of the lease is for 15 years with an annual rental of =10,000
P
and
may be renewed for another fifteen (15) years, under terms and conditions mutually
agreed upon by the parties.
The future aggregate minimum
December 31, 2010 follow:
lease
payments
under
operating
Within one year
Over 1 year but not more than 5 years
More than five years
lease
as
of
=10,000
P
40,000
100,000
=150,000
P
22. Earnings Per Share (EPS)
Computation of EPS attributable to the equity holders of the parent company is as follows:
Net profit
Divided by weighted average number
of common shares
2010
=
P 74,641,566
2009
=45,802,580
P
2008
=51,029408
P
281,500,000
=
P 0.2652
281,500,000
=0.1627
P
281,500,000
=0.1813
P
There were no potential dilutive shares in 2010, 2009 and 2008.
23. Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise of cash, receivables, short-term bank
deposits, available-for-sale investments, bank loans, trade payables, due to related parties and
property owners. The main purpose of the Group’s financial instruments is to fund the Group’s
operations and to acquire and improve property and equipment. The main risks arising from
the use of financial instruments are liquidity risk, interest rate risk and credit risk.
- 36 -
The main objectives of the Group’s financial risk management are as follows:



To identify and monitor such risks on an ongoing basis;
To minimize and mitigate such risks; and
To provide a degree of certainty about costs.
The Group’s Board of Directors reviews and agrees with policies for managing each of these
risks. These are summarized below:
Liquidity risk
The Group seeks to manage its liquid funds through cash planning on a regular basis. The
Group uses historical figures and experiences and forecasts from its collections and
disbursements. The Group’s objective is to maintain a balance between continuity of funding
and flexibility through valuation of projected and actual cash flow information.
Table below summarizes the maturity profile of the Group’s financial liabilities:
2010
Within 1 year Over 1 to 5 years
Over 5 years
Loans payable
Accounts payable and
accrued expenses
=19,580
P
=10,126,842
P
=51,393,098
P
=79,690,137
P
=141,229,657
P
87,788,849
–
–
–
87,788,849
Due to related parties
172,942,123
–
–
–
172,942,123
=260,750,552
P
=10,126,842
P
=51,393,098
P
On demand
Total
=79,690,137
P
=401,960,629
P
2009
On demand Within 1 year Over 1 to 5 years
Over 5 years
Total
Loans payable
Accounts payable and
accrued expenses
=19,580
P
=7,524,254
P
=45,379,439
P
89,603,164
–
–
–
89,603,164
Due to related parties
57,806,292
–
–
–
57,806,292
–
3,404,623
Payable to property owners
3,404,623
–
–
=150,833,659
P
=7,524,254
P
=45,379,439
P
=80,811,428
P
=133,734,701
P
=80,811,428
P
=284,548,780
P
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the
Group’s long-term borrowings. The Group’s policy is to minimize interest rate cash flow risk
exposures. Long-term borrowings are therefore usually at agreed interest rates.
In 2010 and 2009, the Group was able to negotiate the interest rate at 9% which is below the
agreed minimum annual fixed rate of 15% in the loan agreement. The following table set forth
the impact of the range of reasonably possible changes in the interest rates on the Group’s
income before income tax and equity on December 31, 2010 and 2009:
Reasonably possible
changes in interest rates
Effect on income
before tax
Effect on equity
2010
+6%
-6%
=5,769,907
P
(5,769,907)
=4,038,935
P
(4,038,935)
2009
+6%
-6%
5,200,975
(5,200,975)
3,640,683
(3,640,683)
- 37 -
Credit risk
Credit risk refers to the risk that a customer/debtor will default on its contractual obligations
resulting in financial loss to the Group.
The Group controls this risk through regular
coordination with the customers. In addition, receivable balances are monitored on an ongoing
basis with the result that the Group’s exposure to bad debts is not significant. The Group also
controls this risk by cutting its services and refusal to reconnect until the customer’s account is
cleared or paid.
The table below shows the gross maximum exposure to credit risk of the Group as of
December 31, 2010 and 2009, without considering the effects of credit risk mitigation
techniques.
2010
=
P 126,493,930
58,518,817
9,077,743
9,000,000
=
P 203,090,490
Cash and cash equivalents
Receivables
AFS investment
Special bank deposit
2009
=83,494,483
P
55,617,289
8,750,000
9,000,000
=156,861,772
P
The Group’s credit risk is primarily attributable to its trade receivables. An allowance for
impairment is made where there is an identified loss event which, based on previous
experience, is evidence of a reduction in the recoverability of the cash flows.
Given the Group’s diverse base of customers, it is not exposed to large concentration of credit
risk.
Below is the credit quality of financial assets:
2010
Neither past due nor impaired
High grade
Standard
grade
Past due but
not impaired
Impaired
Total
Cash and cash equivalents
Receivables
AFS investments
Special bank deposits
=126,493,930
P
29,472,213
9,077,743
9,000,000
=–
P
10,067,536
–
–
=–
P
18,979,068
–
–
=–
P
1,364,151
–
–
=126,493,930
P
59,882,968
9,077,743
9,000,000
Total
=174,043,886
P
=10,067,536
P
=18,979,068
P
=1,364,151
P
=204,454,641
P
2009
Cash and cash equivalents
Receivables
AFS investments
Special bank deposits
Total
Neither past due nor
impaired
High grade
Past due but
not impaired
Impaired
Total
=83,494,483
P
11,356,913
8,750,000
9,000,000
=–
P
44,260,376
–
–
=–
P
1,075,501
–
–
=83,494,483
P
56,692,790
8,750,000
9,000,000
=112,601,396
P
=44,260,376
P
=1,075,501
P
=157,937,273
P
- 38 -
High grade cash and cash equivalents are short-term placements and working cash fund;
and special bank deposit are placed, invested, or deposited in local banks belonging to the top
ten (10) banks in the Philippines in terms of resources and profitability. The counterparties
have a very remote likelihood of default and have consistently exhibited good paying habits. AFS
investments are assessed based on financial status of the counterparty and its current share
price performance in the market.
Foreign Exchange Risk
Foreign exchange risk occurs due to currency differences in the Group’s cash and cash
equivalents in United States Dollar.
The Group does not have any foreign currency hedging arrangements.
The Group closely monitors the movements of the exchange rate and makes a regular
assessment of future foreign exchange movements. The Group then manages the balance
of its foreign currency denominated monetary assets and liabilities based on this
assessment.
The following table demonstrates the impact on the income before tax and on equity, of
reasonable possible change in the US Dollar to Peso exchange rate, as a result of changes
in fair value of monetary assets and liabilities, in December 31, 2010:
USD Appreciate (Depreciate)
Effect on equity
Effect on income before tax
+2%
-2%
=26,519
P
(26,519)
=18,564
P
(18,564)
24. Financial Instruments
Set out below is a comparison by category of carrying values and estimated fair values of
Group’s financial instruments as of December 31:
2010
2009
Carrying value
Fair value
Carrying value
Fair value
=
P 126,493,930
=
P 126,493,930
=
P 83,494,483
=
P 83,494,483
58,518,817
58,518,817
55,617,289
55,617,289
9,077,743
9,077,743
8,750,000
8,750,000
12,538,797
12,538,797
13,609,196
13,609,196
=
P 206,629,287
=
P 206,629,287
=
P 161,470,968
=
P 161,470,968
Carrying value
Fair value
Carrying value
Fair value
=
P 141,229,657
=
P 141,229,657
=
P 133,734,701
=
P 133,734,701
Financial assets:
Cash and cash equivalents
Receivables
Available-for-sale investments
Other noncurrent assets
2010
2009
Financial liabilities:
Loans payable
Accounts payable and accrued
expenses
Due to related parties
Payable to property owners
Customers’ deposits
87,788,849
87,788,849
89,603,164
89,603,164
172,942,123
172,942,123
57,806,292
57,806,292
–
–
3,404,623
3,404,623
10,391,230
10,391,230
8,894,773
8,894,773
=
P 412,351,859
=
P 412,351,859
=
P 293,443,553
=
P 293,443,553
- 39 -
Fair value is defined as the amount at which the financial instrument could be exchanged in a
current transaction between knowledgeable willing parties in an arm’s length transaction, other
than in a forced liquidation or sale. Fair values are obtained from quoted market prices,
discounted cash flow models and option pricing models, as appropriate.
The carrying value of cash, receivables, accounts payable and accrued expenses, due to related
parties and loans payable balances approximate their fair values due to the short-term nature
of the transactions and are considered due and demandable.
Other noncurrent assets approximate their fair values as this is subject to insignificant risk of
change in value. This was only classified under noncurrent due to the restriction attached to it
by a third party.
The estimated fair values of payable to property owners are based on the discounting values of
future cash flows using prevailing discount rates that are specific to the tenor of the
instruments’ cash flows as of end of financial reporting period. Discount rate was at 8.3%.
The amortized interest on liabilities to property owners amounted to =153,783
P
in 2009 and
=426,784
P
in 2008.
The fair value of utilities and other deposits could not be determined since the time of their
refunds or applications could not be reasonably estimated.
The fair value of customer’s deposits could not be practically determined since they are
attached to the underlying service and that the cessation of services and the possibility of
refund are not determinable.
Moreover, the individual balances of this account are
insignificant.
25. Capital Management
The Group’s objective in managing capital is to ensure that entities in the Group will be able to
continue as a going concern while maximizing the return to stakeholders through the
optimization of the debt and equity balance and to sustain future development of the business.
In order to maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares.
The Group considers the following accounts as its capital:
Capital stock
Additional paid-in capital
Retained earnings
2010
2009
=
P 281,500,000
=281,500,000
P
812,108
1,509,533
152,622,572
80,917,957
=
P 434,934,680
=363,927,490
P
The Group manages capital on the basis of the debt-to-equity ratio which is calculated as total
debt divided by total equity. Total debt is equivalent to all components of liability.
- 40 -
The debt-to-equity ratios as at December 31, 2010 and 2009 follow:
Total debt
Total equity
Debt-to-equity ratio
2010
=
P 436,468,841
704,353,107
0.62:1.00
2009
=309,943,085
P
627,701,250
0.49:1.00
26. Dividends
JOH’s stockholders approved the declaration of 32% property dividends corresponding to
90,080,000 shares of Calapan Ventues, Inc. during the annual stockholders’ meeting on
August 18, 2009. On January 28, 2010, the SEC approved the notice of property dividend
declaration of JOH amounting to =90,080,000
P
payable to JOH’s stockholders of record as of
December 15, 2009.
27. Supplemental Disclosure on Non-Cash Financing Activity
Non-cash financing activity pertains to the declaration of property dividends to JOH’s
stockholders in 2009 amounting to =90,080,000
P
(see Note 26).
28. Contingencies
The Group is a party to certain lawsuits or claims arising from the ordinary course of business.
The Group’s management and legal counsels believe that the eventual liabilities under these
lawsuits or claims, if any, will not have a material effect on the Group’s consolidated financial
statements, and thus, no provision has been made for these contingent liabilities.
JOLLIVILLE HOLDINGS CORPORATION
SCHEDULE OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION
DECEMBER 31, 2010
Beginning Unappropriated Retained Earnings,
as adjusted
P
Add net profit during the year
TOTAL RETAINED EARNINGS, END
AVAILABLE FOR DIVIDEND DECLARATION
5,808,397
31,832,692
P
37,641,089