1. travel
2. tourist facilities
3. hotel

COVER SHEET
5 1 0 4 8
SEC Registration Number
F I L I N V E S T
A N D
D E V E L O PME N T
COR P OR A T I O N
S U B S I D I A R I E S
(Company’s Full Name)
6 / F ,
T h e
B e a u f o r t ,
c o r n e r
2 3 r d
G l o b a l
C i t y ,
5 t h
S t r e e t ,
T a g u i g
A v e n u e
B o n i f a c i o
C i t y
(Business Address: No. Street City/Town/Province)
Atty. Sharon P. Refuerzo
918-8188
(Contact Person)
(Company Telephone Number)
0 3
3 1
2 0 1 4
Month
Day
Year
SEC form 17Q
(1st Quarter of 2014)
(Form Type)
Month
(Fiscal Year)
Day
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
Document ID
LCU
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
1
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER
1.
For the quarterly period ended March 31, 2014.
2.
Commission identification Number 51048.
4.
Exact name of registrant as specified in its charter: FILINVEST DEVELOPMENT CORPORATION
5.
3.
BIR Tax Identification No. 000-053-167-000.
6.
Philippines
(SEC Use Only)
Industry Classification Code:
Province, Country or other jurisdiction of incorporation of organization
7.
6/F, The Beaufort, 5th Avenue Corner 23rd Street, Bonifacio Global City,
Taguig City
Address of principal office
8.
798-3959
Registrant’s telephone number, including area code
9.
Not applicable
Former name, former address, and former fiscal year, if changed since last report
10. Securities registered pursuant to Sections 4 and 8 of the RSA
Number of Shares of Common Stock Outstanding and
Amount of Debt Outstanding
Title of Each Class
Common Stock, P1.00 par value
9,317,473,987
P67B Total consolidated debt
(short-term and long-term debt)
11. Are any or all of these securities listed in the Philippines Stock Exchange?
Yes [ X ]
No [
]
If yes, state the name of such Stock Exchange and the class/es of securities listed therein:
Philippine Stock Exchange
Common Stock
12. Indicate by check mark whether the registrant:
(a) has filed all reports required to be filed by Section 17 of the Revised Securities Act (RSA) and SRC Rule 17 thereunder and Sections 11 of the RSA
and RSA 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports):
Yes [ X ]
No [
]
Yes [ X ]
No [
]
(b) has been subject to such filing requirements for the past 90 days.
2
TABLE OF CONTENTS
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements

Consolidated Statements of Financial Position
Annex
A

Consolidated Statements of Income
B

Consolidated Statements of Comprehensive Income
C

Consolidated Statements of Changes in Equity
D

Consolidated Statements of Cash Flows
E

Financial Information on Operations of Business Segments
F

Aging of Loans and Receivables
G
Page
Notes to Consolidated Financial Statements
1. Percentage of ownership
2. Transition to new and amended PFRS effective January 1, 2014
3. Performance Indicators
4. Fair Value Measurement
5. Financial Risk Management Objectives and Policies
Item 2. Management Discussion and Analysis of Financial Condition
and Result of Operations
4
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Part II – OTHER INFORMATION
3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Please refer to the attached financial statements consisting of Consolidated Statements of Financial
Position, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income,
Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows.
The consolidated financial statements include the accounts of the Parent Company and the
following subsidiaries and joint venture, with the corresponding percentages of ownership as at:
March 31, 2014
Subsidiaries:
FDC Forex Corporation
Filinvest Alabang, Inc. (FAI)
Subsidiaries:
Festival Supermall, Inc.
Northgate Convergence Corporation
Proplus, Inc.
Pro Excel Property Managers, Inc.
Entrata Hotel Services, Inc.
FSM Cinemas, Inc.
East West Banking Corporation (EW)
Subsidiaries:
Green Bank, Inc. (GBI)
East West Rural Bank, Inc. (EWRB)
Filinvest Land, Inc. (FLI)
Subsidiaries:
Cyberzone Properties, Inc.
Filinvest AII Philippines, inc.
Property Maximizer Professional Corp.
Homepro Realty Marketing Corporation
Property Specialist Resources, Inc. (Prosper)
Leisurepro, Inc.
Countrywide Water Services, Inc.
Filinvest Cyberparks, Inc. (FCI)
Filinvest Asia Corporation
Pacific Sugar Holdings Corporation (PSHC)
Subsidiaries:
Davao Sugar Central Corporation
Cotabato Sugar Central Corporation
High Yield Sugar Farms Corporation
Corporate Technologies, Inc.
Seascapes Resort, Inc. (SRI)
FDC Hotels Corporation
Subsidiaries:
Quest Restaurants, Inc. (QRI)
Boracay Seascapes Resort, Inc. (BSRI)
Chinatown Cityscapes Hotel, Inc.
Duawon Seascapes Resort, Inc.
FDC Utilities, Inc. (FDCUI)
Subsidiaries:
FDC Casecnan Hydro Power Corporation
FDC Retail Electricity Sales Corporation
FDC Danao Power Corporation
FDC Camarines Power Corporation
FDC Misamis Power Corporation (FDC Misamis)
FDC Negros Power Corporation
FDC Davao Del Norte Power Corporation
Filinvest Development Cayman Islands (FDCI)
Joint Venture:
Filarchipelago Hospitality Inc. (FHI)
December 31, 2013
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4
Transition to new and amended Philippine Financial Reporting Standards (PFRS) effective January
01, 2014
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments)
The amendments clarify the meaning of “currently has a legally enforceable right to set-off”
and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as
central clearing house systems) which apply gross settlement mechanisms that are not
simultaneous. The amendments affect presentation only and have no impact on the Group‟s
financial position or performance.
PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets
(Amendments)
These amendments remove the unintended consequences of PFRS 13 on the disclosures
required under PAS 36. In addition, these amendments require disclosure of the recoverable
amounts for the assets or cash-generating units (CGUs) for which impairment loss has been
recognized or reversed during the period. These amendments are to be applied retrospectively
with earlier application permitted, provided PFRS 13 is also applied.
PAS 39, Financial Instruments: Recognition and Measurement -Novation of Derivatives and
Continuation of Hedge Accounting (Amendments)
These amendments provide relief from discontinuing hedge accounting when novation of a
derivative designated as a hedging instrument meets certain criteria. The Group has not
novated its derivatives during the current period. However, these amendments would be
considered for future novations.
Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27)
They provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity under PFRS 10. The exception to consolidation requires
investment entities to account for subsidiaries at fair value through profit or loss. It is not
expected that this amendment would be relevant to the Group since none of the entities in the
Group would qualify to be an investment entity under PFRS 10.
Philippine Interpretation IFRIC 21, Levies (IFRIC 21)
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers
payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon
reaching a minimum threshold, the interpretation clarifies that no liability should be
anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for
annual periods beginning on or after January 1, 2014.
PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)
The amendments apply to contributions from employees or third parties to defined benefit
plans. Contributions that are set out in the formal terms of the plan shall be accounted for as
reductions to current service costs if they are linked to service or as part of the
remeasurements of the net defined benefit asset or liability if they are not linked to service.
Contributions that are discretionary shall be accounted for as reductions of current service cost
upon payment of these contributions to the plans. This amendment is not applicable to the Group
for there are no contributions from employees or third parties.
5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Real Estate Operations
On February 4, 2014, FCI, a wholly owned subsidiary of FLI was incorporated, whose primary purpose
is to acquire by purchase, lease, donation and/or to own, use, improve, develop, subdivide, sell,
mortgage, exchange, hold for investment and deal with real estate of all kinds. FCI has not yet
started its commercial operations as of March 31, 2014.
Banking and Financial Services Operations
On August 19, 2011, EW acquired 84.8% of the voting shares of GBI for Php158.6 million. GBI is
engaged in the business of extending credit to small farmers and tenants and to deserving rural
industries or enterprises and to transact all businesses which may be legally done by rural banks. In
2012, EW acquired additional shares from the non-controlling shareholder amounting to Php8.8
million and from GBI‟s unissued capital stock amounting to Php19.7 million, thereby increasing its
ownership to 96.5% as of December 31, 2012.
In 2013, EW‟s deposit for future stock subscription to GBI amounting to Php700.0 million was applied to
the 441,000,000 common shares issued by GBI to EW. In addition, EW contributed additional capital
amounting to Php1.28 million and acquired non-controlling interest amounting to 0.20 million, thereby
increasing its ownership to 99.8% as of December 31, 2013. EW‟s investment in GBI amounted to
Php888.5 million and remained at 99.8% of the total outstanding voting shares of GBI as of March 31,
2014.
On July 11, 2012, EW acquired 83.2% voting shares of FinMan Rural Bank, Inc. (FRBI) for Php34.1 million.
FRBI‟s primary purpose is to accumulate deposit and grant loans to various individuals and smallscale corporate entities as well as government and private employees. In 2012, EW acquired
additional shares of FRBI from its unissued capital stock amounting to Php20.0 million, thereby
increasing its ownership to 91.6% as of December 31, 2012. On May 21, 2013, FRBI changed its name
to East West Rural Bank, Inc. (EWRB). In 2013, EW‟s deposit for future stock subscription to EWRB
amounting to Php120.0 million was applied to the 46,000,000 common shares issued by EWRB to EW.
In addition, EW contributed additional capital amounting to Php340.0 million and acquired the
remaining non-controlling interest amounting to Php6.9 million, thereby increasing its ownership to
100.00% as of December 31, 2013. EW‟s investment in EWRB amounted to Php521.0 million as of
March 31, 2014 and December 31, 2013.
In May 2013, GBI and EWRB entered into an asset purchase agreement with assumption of liabilities
(the Purchase and Assumption Agreement) for the transfer of certain assets and liabilities of GBI to
EWRB. The transfer of the assets and liabilities took effect on October 31, 2013 after the receipt of the
required approvals from the regulators. The transfer of the assets and liabilities of GBI to EWRB was
part of EW‟s plan to combine the rural banking business of its two subsidiaries into a single entity.
After the transfer, EWRB will continue the rural banking business of GBI and the remaining assets and
liabilities of GBI will be merged with EW, with the latter as the surviving entity. The Plan of Merger
Agreement (the Plan) between EW and GBI was finalized on June 21, 2013.
On November 8, 2013, the Philippine Deposit Insurance Corporation approved the proposed merger
between EW and GBI. Subsequently, on March 28, 2014, BSP approved the Plan subject to the
former‟s conditions.
Hotel Operations
To take advantage of the growth in Philippine tourism, FDC ventured into investing in and managing
hotel properties. FDC's maiden hotel investment is the 290 key deluxe property Crimson Resort & Spa
(incorporated as SRI) in Mactan, Cebu. The hotel formally launched its operations in October 2010.
To manage its hotel investments, FDC created FHI, a 60%/40% joint venture hotel management
company with Singapore-registered Archipelago International Pte. Ltd which is an affiliate of Aston
International. In 2012, the hotel business segment started to contribute to the consolidated revenues
of FDC. In February 2012, the 427 room affordable condotel project, Quest Hotel & Conference
6
Center in Cebu City, Cebu started its operations. Another hotel property, Crimson Hotel Filinvest City
Manila in Alabang, Muntinlupa City with 345 rooms, formally launched its opening on March 21,
2013. Ground breaking of Crimson Resort and Spa Boracay occurred in the 1st Quarter of 2014. Site
development works are on-going.
Power Generation Business
Incorporated in December 2009, FDCUI serves as the holding company for all power generation and
water distribution projects of the Filinvest Group.
Presently, FDCUI is pursuing power projects across the country. Its landmark project in Mindanao will
use the circulating fluidized bed technology for its 405-megawatt thermal power plant within the
PHIVIDEC Industrial Estate in Villanueva, Misamis Oriental. With target commercial operations by 2016,
the project aims to help provide a long-term solution to Mindanao‟s energy problems.
The year 2013 was capped with the groundbreaking of the Misamis power plant on November 20 at
its project site. FDC President and CEO Josephine Gotianun Yap, FDC Chairman Jonathan T.
Gotianun, together with FDCUI President Jesus N. Alcordo led the time capsule laying ceremony and
tree-planting activity together with stakeholder partners.
A ceremonial signing of the land lease agreement between the PHIVIDEC Industrial Authority (PIA)
and FDC Misamis Power, a subsidiary of FDCUI, was held in Malacañan Palace on April 17, 2013. His
Excellency President Benigno S. Aquino III witnessed this milestone event signaling national
government support for the project.
FDC Misamis has signed power supply contracts for the project and is now working on securing
additional contracts with various distribution utilities and large industrial customers in Mindanao.
Bilateral loan agreements were signed with four banks to part-finance the construction of the power
plant.
FDCUI was awarded by the Power Sector Assets and Liabilities Management Corporation on
January 29, 2014 as one of the winning bidders for the selection and appointment of IPP
Administrators for the strips of energy, equivalent to 40 MW (40 strips of energy), of the Unified Leyte
Geothermal power plants in Tongonan, Leyte. Upon turnover, FDCUI will have the opportunity to
contract with distribution utilities and directly-connected industrial customers for the allocated
capacity or trade the available capacity at the Wholesale Electricity Spot Market (WESM).
Towards further expanding its portfolio, FDCUI continues to explore water distribution investments, the
possibility of buying into existing generation assets and contracts, as well as coal trading
opportunities.
Other Operations
On January 24, 2014, FDC issued and listed Php8,800.0 million unsecured fixed-rate peso retail bonds
due 2024 with annual coupon rate of 6.1458%. Interest is payable quarterly in arrears starting April 24,
2014. The proceeds from the bond issuance will be used to finance capital requirements for 2014
and refinance debt obligations.
Part of the proceeds from the local bonds amounting to Php2,258.7 million was used during the first
quarter of 2014 for the following (In Thousands):
Refinancing of debt obligations
Capital expenditures for:
Hotel projects
Power project
Total
Php762,420
4,000
1,492,284
Php2,258,704
7
Results of Operations
Three-Month Period Ended March 31, 2014 Compared with Three-Month Period Ended
March 31, 2013
I. Consolidated Operations
FDC registered total consolidated revenues and other income of Php9,055.0 million in the first quarter
of 2014, slightly higher than the same quarter last year of Php9,017.3 million. Excluding the financial
and banking services, consolidated revenues and other income grew by Php433.0 million or 8.6%
over the same quarter last year.
Net of eliminating entries, the Real Estate Operations contributed Php4,216.6 million or 46.6% of
consolidated revenues and other income. Finance and Banking Services contributed Php3,598.5
million or 39.7% of total revenues while the Sugar Operations and Hotel Operations contributed
Php977.3 million or 10.8% and Php262.7 million or 2.9%, respectively, of consolidated revenues and
other income.
II. Segment Operations
Real Estate Operations
For the first quarter of 2014, total revenues and other income from real estate operations jumped by
10.6% to Php4,216.6 million from Php3,810.8 million over the same period last year. The growth
resulted from the continued increase in real estate sales and steady growth in mall and rental
revenues. Real estate sales amounted to Php3,217.2 million, up by 10.2% or Php297.1 million from
Php2,920.1 in the first quarter of last year, owing to FLI‟s higher sales of middle-income projects
consisting of medium-rise buildings (MRBs) and high-rise buildings (HRBs), other middle income
projects and industrial estate. Mall and rental revenues, likewise posted a considerable growth of
10.7% to Php621.7 million on account of rental fee escalation and CPI's additional tenants.
Costs of real estate sales increased by 16.7%, due to increased share of sales of MRBs and HRBs with
relatively lower margin. On the other hand, real estate operating expenses including interest and
depreciation, increased by just 2.1%, as a result of effective management of operating costs.
FLI
Before eliminating entries, FLI‟s net income from its business segments registered a year-on-year
growth of 14.6% or an increase of Php137.8 million from Php945.4 million in 2013 to Php1,083.1 million
in 2014.
Total consolidated revenues went up by 22.5% to Php3,594.2 million during the first three months of
2014 from Php2,934.6 million for the same period last year. The increase resulted from the continued
robust real estate sales that reached Php3,054.7 million (up by Php613.8 million or by 25.2%) and
rental revenue of Php493.7 million (higher by Php45.8 million or 9.3%). Real estate sales booked during
the current period broken down by product type are as follows: Middle Income 78% (inclusive of
MRBs and HRBs); Affordable 11%; High-End 2%; Farm Estate 2%; Socialized and others 7%. Major
contributors to the good sales performance during the period included the launching of new MRB‟s
and House and Lot projects in diverse new locations, intensive marketing activities and attractive
pricing. The increase in rental revenues from the mall and office spaces was brought about mainly by
higher rental revenues generated by CPI from Northgate Cyberzone buildings resulting from higher
take up rate of “Filinvest One” in 2013. Other sources of revenue from rental services include the
ready-built-factories in Filinvest Technology Park in Calamba, Laguna, commercial lots in Tagaytay
City, and commercial and office spaces in Alabang, Muntinlupa City and Makati City.
Interest income for the three months ended March 31, 2014 increased by 7.9% to Php167.9 million
from P155.6 million during the same period in 2013. The increase was due to higher interest generated
8
from installment contracts receivable and bank deposits. Other income increased by 24.2% to
Php117.1 million from Php94.3 million or by Php22.8 million due to higher income from amusement
centers, parking and other lease-related activities, and processing fees.
Cost of real estate sales increased from Php1,419.2 million in 2013 to Php1,781.7 million in 2014
mainly due to higher amount of sales booked during the current period as well as the increased
share of sales of MRBs and HRBs which historically had carried relatively lower profit margins.
Revenues from MRBs and HRBs significantly grew by Php219.0 million or by 12.8% from Php1,708.5
during the first three months ended March 31, 2013 to Php1,927.5 million for the same period of 2014.
General and administrative expenses increased by Php35.1 million during the first three months of
2014 or by 13.4%, from Php262.6 million in 2013 to Php297.7 million in 2014. The increase was due to
higher salary and wages, professional fees, rental, and subdivision and property repairs, recorded
during the current period. Likewise, selling and marketing expenses went up by Php21.28 million due
to additional cost of new advertising and promotional materials brought about by the launch of new
marketing campaign featuring our celebrity endorser, higher incentives, commissions and service
fees paid to brokers and other sellers as a consequence of higher sales.
Provision for income tax increased by 88.0% to P210.8 million for the first three months of 2014 from
P112.1 million for the same period in 2013.
Provision for current income tax increased to Php142.0 million in 2014 from Php71.7 million in 2013 due
to higher taxable income brought about by higher revenues.
Provision for deferred income tax increased by Php28.4 million from P40.4 million in 2013 to Php68.8
million in 2014 due to higher capitalized borrowing cost.
FAI
Total revenues and other income declined by 45.1% from Php524.4 million to Php287.7 million. The
decrease was due to lower sales of FCC lots that were posted in the first quarter of 2014 compared
to same quarter last year.
Before eliminating entries, FAI reported a consolidated net income of Php57.1 million for the first
quarter of 2014, lower by Php299.3 million from the same quarter last year.
Financial and Banking Services - EW
Before eliminating entries, EW‟s net income for the current period declined by 38% to Php455.7 million
from Php734.9 million.
Net Revenues declined by only 4% in the first quarter of 2014 to Php3.4 billion from Php3.6 billion in the
same quarter last year, despite the drop in trading gains. The decline in securities trading gains were
compensated by the stable double-digit growth in core recurring income, particularly net interest
income from loans and service fees on loans and branch transactions. EW‟s net interest income and
service charges, fees and commission increased by Php622.2 million or 25% year-on-year, which
compensated for the Php756.0 million decline in trading revenues.
Net interest income stood at Php2.3 billion in the first quarter of 2014, 24% or Php445.2 million higher
than the Php1.9 billion posted in the same quarter last year. The higher net interest income was a
result of the 37% growth in customer loans coupled by the declining funding costs. Interest income
increased by 14% to Php2.7 billion, while interest expense declined by 24% to Php342.6 million,
compared to same period last year. This resulted for the Bank to post an industry leading net interest
margin of 8.0%, which is two-times higher than industry average.
Other operating income, exclusive of trading revenues, was at Php800.1 million, which is 23% higher
than the Php650.9 million posted in the same quarter last year. The increase primarily came from
9
Php748.6 million of service charges, fees, commissions and other charges booked in 1Q2014, which is
31% higher than the same quarter last year on account of increasing CASA base and consumer loan
portfolio which are rich in transactional and service fees.
Securities trading gains in the first quarter of 2014 was at Php263.7 million, or 75% lower as compared
to the Php1,047.8 million gains posted in same quarter last year, as the Bank sold its securities portfolio
and realized gains to take advantage of the favorable market conditions during the first quarter of
last year. Foreign exchange trading gains, however, increased by 96% to Php57.5 million compared
to the Php29.3 million due to Bank‟s net long position and US Dollar currency appreciation during the
period.
Total operating expenses, exclusive of provision for credit losses, increased to Php2.1 billion or 6% from
Php2.0 billion in the same period last year. Compensation and fringe benefits declined by 1% yearon-year to Php721.1 million. The decline was largely due to the accelerated compensation and
benefits booked last year on account of higher income, plus one-off booking of retirement related
benefits. Net of the accelerated expenses posted last year, manpower related expenses would
have increased by 20% year-on-year on account of the increase in headcount. Other expenses
related to business expansion posted double digit increase year-on-year, as follows: (1) Depreciation
and amortization grew by 29.1% to Php203.0 million; (2) Rent grew by 10% as a result of branch store
expansion; and (3) Miscellaneous expenses grew by 13% on account of higher consumer loan
related expenses.
Provision for loan losses declined by 18% to Php740.6 million from Php904.3 million last year.
The
higher provisions last year was due to accelerated recognition of credit costs on account of the
strong growth in credit cards portfolio in the first quarter of 2013. Net of the accelerated provisions
last year, credit cost would have increased by 16% year-on-year, as a result of the double-digit
growth in total customer loan portfolio.
Cost-to-Income ratio increased to 62% as of March 31, 2014 from 56% in the same period last year
due to lower trading gains realized at the earlier part of the year.
Sugar Operations
Sugar operations posted a consolidated net income of Php95.2 million for the first quarter of 2014,
with a Php110.6 million growth from same period last year. Significant increase in net income was
due to the 58% improvement in gross profit, as the sugar sales in the current period has higher margin
attributable to lower cost of inventories.
Hotel Operations
Hotel segment contributed total revenues and other income of Php262.7 million, a Php12.4 million
jump from last year‟s revenues of Php250.3 million due to revenues generated by newly opened
hotel, Crimson Alabang, which formally started its commercial operations in March 2013.
Other Operations
Other segment pertains to the operations of FDC Parent (as a holding company) and FDCI, which
was incorporated to facilitate the Group‟s issuance of foreign currency denominated bonds. Cost
of other operations mainly consists of interest on dollar bonds issued by FDCI in April 2013.
Operating expenses increased by 10.7% due to interest on Php8,800.0 million unsecured fixed-rate
peso retail bonds, as previously mentioned.
10
Financial Condition  As of March 31, 2014 compared with As of December 31, 2013
As of March 31, 2014, FDC‟s total consolidated assets stood at Php285,014.5 million, total equity was
at Php86,120.4 million (including noncontrolling interest of Php20,343.2 million), and total liabilities was
at Php198,894.1 million. Total consolidated assets increased by Php14,250.5 million or 5.3% from the
Php270,764.0 million as of end - 2013. The following were the significant movements in assets during
the period:

Cash and cash equivalents
 9.1% increase from Php30,796.2 million to Php33,613.4 million
The increase was primarily due to EW‟s higher deposit base and liquid funds.

Loans and receivables – Financial and banking services
 4.9% increase from Php87,498.8 million to Php91,810.8 million
The increase was primarily driven from increase in customer loans on both consumer and midmarket segments.

Loans and receivables – Real estate operations
 7.0% increase from Php19,030.5 million to Php20,386.4 million
The increase came primarily from sales recognized during the current period, mostly from middleincome projects including HRBs and MRBs, industrial estate and other middle income projects.

Financial assets at fair value through profit or loss (FVPL)
9.5% decrease from Php1,948.7 million to Php1,763.1 million
The FVPL portfolio decreased as the Bank realized a portion of its trading portfolio at the start of
the year.

Financial assets at amortized cost
10.2% increase from Php9,080.3 million to Php10,010.6 million
The increase was largely due to build-up of liquid assets as a result of favorable market yields.

Other assets  34.6% increase from Php7,983.6 million to Php10,744.1 million
The increase in other assets was attributable largely to FDCUI‟s prepayment to EP Contractor, FLI‟s
additional prepaid expenses and EWBC‟s prepaid expenses, returned checks and other cash
items and advances/downpayment to contractors and public utilities.
As of March 31, 2014, total liabilities grew by Php12,815.4 million from 2013 year-end balance of
Php186,078.7 million to Php198,894.1 million due to increase in deposit liabilities and long-term debt.
The Php5,418.3 million increase in deposit liabilities was due to EW‟s additional clients while long-term
debt went up by 11.9% due to Php8,800.0 million peso bonds issued in January 2014, as mentioned in
the preceding section. Income tax payable increased on account of FLI‟s higher taxable income
and EW‟s decline in provision for impairment losses.
The Group has no material commitments for capital expenditures, except for the project
developments of the real estate subsidiaries, the planned development of power plant projects, the
intended construction and management of various hotels, and the initial expenses necessary for the
new branches of the bank subsidiary which expenditures can be adequately covered by the
operating cash flow and availment of medium and long term loans.
11
Performance Indicators
Earning per share (EPS)
As of and For The ThreeMonth Period Ended March
31, 2014
As of December 31, 2013 and
For The Three-Month Period
Ended March 31, 2013
0.301
/share
0.415
/share
16.61
Times
13.98
Times
Net Income Attributable to Equity Holders (Annualized)
Weighted Average Number of Outstanding Shares
Price Earnings Ratio (PE)
Closing Price*
Earnings Per Share
Return on Revenues
14%
17%
Net Income
Total Revenues
Long-term Debt to Equity Ratio
Long-term Debt
Total Stockholders' Equity
0.77
:1
0.70
:1
Total Liabilities to Equity Ratio
Total liabilities**
Total Stockholders' Equity
1.12
:1
1.03
:1
Asset to Equity Ratio
3.31
:1
3.20
:1
2.34
:1
6.15
:1
1.34
:1
1.26
:1
4.08
:1
3.84
:1
Total Assets
Total Equity
EBITDA to Total Interest Paid
EBITDA
Total Interest Payment
Current Ratio
a.
Including EW
Current Assets
Current Liabilities
b. Excluding EW
Current Assets
Current Liabilities
*Closing price at March 28, 2014 and March 31, 2013
**excluding deposit liabilities and bills and acceptances
payable
EPS as of March 31, 2014 decreased on account of lower net income. PE Ratio as of March 31, 2014
was higher because of the decrease in EPS. Long-term debt-to-equity ratio (0.77:1 in 2014 vs 0.70:1 in
2013), total liabilities-to-equity (1.12:1 in 2014 vs 1.03:1 in 2013) and Asset-to-equity (3.31:1 in 2014 vs.
3.20:1 in 2013) were higher due to Php8.8 billion local bonds issued in January 2014, as mentioned in
the preceding section. EBITDA-to-total interest paid decreased due to higher interest paid still in
relation to the issuance of bonds (offshore bonds issued in April 2013 and local bonds issued in
January 2014). Current ratio as of March 31, 2014 was higher compared to 2013 year-end ratio,
largely due to higher loans and receivables of EW.
12
Fair Value Measurement
The following table sets forth the fair value hierarchy of the Group‟s assets and liabilities
measured at fair value and those for which fair values are required to be disclosed:
Carrying
Value
Assets measured at fair value
Financial assets
Financial assets at FVTPL
Financial assets at FVTOCI
Investment securities at amortized cost
Loans and receivables
Real estate operations
Financial and banking services
Non-financial assets
Investment properties
Total assets
Liabilities measured at fair value
Financial liabilities
Financial liabilities at Amortized Costs
Deposit liabilities
Accounts Payable and Accrued
Expenses
Long-term debt
=1,763,096
P
130,611
10,010,570
=1,763,096
P
130,611
10,593,487
=1,763,096
P
130,611
10,593,487
=–
P
–
–
=–
P
–
–
20,386,426
91,810,810
20,647,317
94,837,486
–
–
–
–
20,647,317
94,837,486
40,909,759
50,706,583
=165,011,272 P
P
=178,678,580
–
=12,487,194
P
100,547,074
Liabilities measured at fair value
Financial liabilities
Deposit liabilities
Accounts Payable and Accrued
Expenses
Long-term debt
100,802,712
24,434,611
23,755,787
59,093,035
66,972,285
=184,103,720 P
P
=191,530,784
Carrying
Value
Assets measured at fair value
Financial assets
Financial assets at FVTPL
Financial assets at FVTOCI
Investment securities at amortized cost
Loans and receivables
Real estate operations
Financial and banking services
Non-financial assets
Investment properties
Total assets
March 31, 2014
(Unaudited)
Fair Value
Quoted
Prices in
Significant
Significant
active
observable unobservable
market
inputs
inputs
Total
(Level 1)
(Level 2)
(Level 3)
(In Thousands)
50,706,583
–
=50,706,583 P
P
=115,484,803
–
–
–
=–
P
–
–
100,802,712
23,755,787
–
66,972,285
=– P
P
=191,530,784
December 31, 2013
(Audited)
Fair Value
Quoted
Prices in
Significant
Significant
active
observable unobservable
market
inputs
inputs
Total
(Level 1)
(Level 2)
(Level 3)
(In Thousands)
=1,948,703
P
137,161
9,080,320
=1,948,703
P
137,161
9,530,347
=1,948,703
P
97,733
9,530,347
=–
P
–
–
=–
P
39,428
–
14,178,780
86,378,402
14,414,041
91,032,695
–
–
–
–
14,414,041
91,032,695
39,055,000
150,778,366
50,119,732
167,182,679
–
11,576,783
–
–
50,119,732
155,605,896
44,600,681
48,312,619
–
–
–
–
48,312,619
15,272,813
14,849,200
59,093,035
62,290,717
=118,966,529 P
P
=125,452,536
–
=–
P
14,849,200
–
62,290,717
=– P
P
=125,452,536
The methods and assumptions used by the Group in estimating the fair value of the financial
instruments are:
FVTPL Financial Assets: Fair value is based on quoted prices as of reporting dates.
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Loans and Receivables: Fair values of loans and receivables is based on the discounted value of
future cash flows using the prevailing interest rates and current incremental lending rates for similar
types of receivables for real estate operations and financial and banking services, respectively.
Carrying amounts of cash and cash equivalents approximate fair values
considering that these consist mostly of overnight deposits and floating rate placements.
Debt securities - Fair values are generally based upon quoted market prices. If the market
prices are not readily available, fair values are estimated using either values obtained from
independent parties offering pricing services or adjusted quoted market prices of comparable
investments or using the discounted cash flow methodology.
Equity securities - Fair values of quoted equity securities are based on quoted market prices.
The costs of unquoted equity investments approximate their fair values since there is
insufficient more recent information available to determine fair values and there are no
indicators that cost might not be representative of fair value.
Due To/From Related Parties: The carrying amounts approximate fair values due to short-term
nature of transactions.
Deposit Liabilities: Fair values of liabilities approximate their carrying amounts due either to
the demand nature or the relatively short-term maturities of these liabilities except for time
deposit liabilities whose fair value are estimated using the discounted cash flow methodology
using EW‟s incremental borrowing rates for similar borrowings with maturities consistent
with those remaining for the liability being valued.
Bills and Acceptances Payable: The carrying amounts approximate fair values due to short-term
nature of transactions.
Accounts Payable and Accrued Expenses: On accounts due within one year, the fair value of
accounts payable and accrued expenses approximates the carrying amounts. On accounts due for
more than one year, estimated fair value is based on the discounted value of future cash flows using
the prevailing interest rates on loans and similar types of payables.
Long-term Debt: Estimated fair value on debts with fixed interest and not subjected to
quarterly repricing is based on the discounted value of future cash flows using the applicable
risk free rates for similar types of loans adjusted for credit risk. Long-term debt subjected to quarterly
repricing is not discounted since it approximates fair value.
Financial Risk Management Objectives and Policies
The Group‟s principal financial instruments are composed of cash and cash equivalents, FVTPL,
FVTOCI and investment securities at amortized cost, loans from financial institutions, mortgage and
contracts receivables and other receivables. The main purpose of these financial instruments is to
raise financing for the Group‟s operations.
The main objectives of the Group‟s risk management are as follows:



To identify and monitor risks on an ongoing basis;
To minimize and mitigate such risks; and
To provide a degree of certainty about costs.
14
Financial and Banking Operations
Risk Management
To ensure that corporate goals and objectives and business and risk strategies are achieved, EW
utilizes a risk management process that is applied throughout the organization in executing all
business activities. Employees‟ functions and roles fall into one of the three categories where risk
must be managed in the business units, operating units and governance units.
EW‟s activities are principally related to the use of financial instruments and are exposed to credit risk,
liquidity risk and market risk, the latter being subdivided into trading and non-trading risks. It is also
subject to operating risks. Forming part of a coherent risk management system are the risk concepts,
trading tools, analytical models, statistical methodologies, historical studies and market analysis,
which are being employed by EW. These tools support the key risk process that involves identifying,
measuring, controlling and monitoring risks.
Credit Risk
Excessive concentration of lending plays a significant role in the weakening of asset quality. EW
reduces this risk by diversifying its loan portfolio across various sectors and borrowers. EW believes
that good diversification across economic sectors and geographic areas, among others, will enable
it to ride through business cycles without causing undue harm to its asset quality.
The Risk Management Department (RMD) reviews EW‟s loan portfolio in line with EW‟s policy of not
having significant concentrations of exposure to specific industries or group of borrowers.
Management of concentration of risk is by client/counterparty and by industry sector. For risk
concentration monitoring purposes, the financial assets are broadly categorized into loans and
receivables, loans and advances to bank, and investment securities. RMD ensures compliance to
BSP‟s limit on exposure to any single person or group of connected persons. To maintain the quality
of its large exposure accounts, it is EW‟s policy to keep the expected loss (determined based on the
credit risk rating of the account) from such accounts to, at most, one percent (1%) of the aggregate
outstanding balance of accounts that qualify as large exposures. With this, accounts with better risk
grades are given priority in terms of being granted a bigger share in EW‟s loan facilities. Aligned with
the Manual Registrations for Bank‟s definition, EW considers its loan portfolio concentrated if it has
exposures more than (30%) to particular industry sector.
Liquidity Risk
The main responsibility of daily asset liability management lies with the Treasury Group, specifically the
Liquidity Desk, which is tasked to manage EW‟s statement of financial position and have a thorough
understanding of the risk elements involved in the business. EW‟s liquidity risk management is then
monitored through Asset-Liability Management Committee (ALCO). Resulting analysis of the
statement of financial position along with the recommendation is presented during the weekly ALCO
meeting where deliberations, formulation of actions and decisions are made to minimize risk and
maximize EW‟s returns. Discussions include actions taken in the previous ALCO meeting, economic
and market status and outlook, liquidity risk, pricing and interest rate structure, limit status and
utilization. To ensure that EW has sufficient liquidity at all times, the ALCO formulates a contingency
plan which sets out the amount and the sources of funds (such as unutilized credit facilities) available
to EW and the circumstances under which such funds will be used. By way of the Maximum
Cumulative Outflow (MCO) limit, EW is able to manage its short-term liquidity risks by placing a cap
on the outflow of cash on a cumulative basis. EW takes a multi-tiered approach to maintaining liquid
assets. EW‟s principal source of liquidity is comprised of cash and other cash items (COCI), due from
BSP, due from other banks and interbank loans receivable (IBLR) and securities purchased under
resale agreement (SPURA) with maturities of less than one year. In addition to regulatory reserves, EW
maintains a sufficient level of secondary reserves in the form of liquid assets such as short-term trading
and investment securities that can be realized quickly.
15
Market Risk
The Board has set limits on the level of risk that may be accepted. Price risk limits are applied at the
business unit level and approved by the BOD based on, among other things, a business unit‟s
capacity to manage price risks, the size and distribution of the aggregate exposure to price risks and
the expected return relative to price risks.
EW applies a VaR methodology to assess the market risk positions held and to estimate the potential
economic loss based upon a number of parameters and assumptions on market conditions. VaR is a
method used in measuring financial risk by estimating the potential negative change in the market
value of a portfolio at a given confidence level and over a specified time horizon.
Foreign Currency Risk
EW holds foreign currency denominated assets and liabilities, thus, fluctuations on the foreign
exchange rates can affect the financial and cash flows of EW. Managing the foreign exchange
exposure is important for banks with exposures in foreign currencies. It includes managing foreign
currency positions in order to control the impact of changes in exchange rates on the financial
position of EW. EW likewise applies the VaR methodology in estimating the potential loss of EW due
to foreign currency fluctuations. EW uses a 99% confidence level with one-day horizon in estimating
the FX VaR. The use of a 99% confidence level means that within a one-day horizon, losses
exceeding the VaR figure should occur, on average, not more than once every hundred days.
EW‟s policy is to maintain foreign currency exposure within acceptable limits and within existing
regulatory guidelines. EW believes that its profile of foreign currency exposure on its assets and
liabilities is within limits for financial institutions engaged in the type of businesses in which EW is
engaged.
As of March 31, 2014, total foreign currency assets and foreign currency liabilities of financial and
banking segment (inclusive of contingent foreign currency asset and liabilities) amounted to US$618
million and US$1,495 million, respectively.
Interest Rate Risk
A critical element of risk management program consists of measuring and monitoring the risks
associated with fluctuations in market interest rates on the EW‟s net interest income. The short-term
nature of the business of its assets and liabilities reduces the exposure of its net interest income to
such risks.
EW employs „Gap Analysis‟ to measure the interest rate sensitivity of its assets and liabilities. The
asset/liability gap analysis measures, for any given period, any mismatches between the amounts of
interest-earning assets and interest-bearing liabilities that would re-price, or mature (for contracts that
do not re-price), during that period. The re-pricing gap is calculated by first distributing the assets
and liabilities contained in EW‟s statement of financial position into tenor buckets according to the
time remaining to the next re-pricing date (or the time remaining to maturity if there is no re-pricing),
and then obtaining the difference between the total of the re-pricing (interest rate sensitive) assets
and re-pricing (interest rate sensitive) liabilities. If there is a positive gap, there is asset sensitivity which
generally means that an increase in interest rates would have a positive effect on EW‟s net interest
income. If there is a negative gap, this generally means that an increase in interest rates would have
a negative effect on net interest income.
EW also monitors its exposure to fluctuations in interest rates by using scenario analysis to estimate the
impact of interest rate movements on its interest income. This is done by modeling the impact to
EW‟s interest income and interest expenses of different parallel changes in the interest rate curve,
assuming the parallel change only occurs once and the interest rate curve after the parallel change
does not change again for the next twelve months.
16
Operational Risk
Operational risk is the loss resulting from inadequate or failed internal processes, people and systems
or from external events. It includes legal, compliance and reputational risks but excludes strategic
risk.
EW‟s Board of Directors have put in place an operational risk management framework and limit
structure tailored for each business, operating, and governance units. This framework serves as the
guide on how to manage operational risk by adopting a uniform and structured methodology of risk
identification, assessment, mitigation, monitoring and reporting. This framework is brought to life
through everyone‟s concerted efforts, from top management to the individual employees in the
different units of the Bank. These individuals are in the best position to identify and manage the
operational risks that they come face-to-face with everyday. Correspondingly, they measure
identified risks based on registered losses in the past and quantified residual risks from self-assessment
activities, and adopt control measures that would fit the Bank‟s operating environment as well as
organizational maturity. To track the overall operational risk exposure of the Bank, loss incidents,
actual and potential, are escalated to Management. This information provides Management with
the means to ensure continuous monitoring and proper management of operational risk exposures.
The Group (excluding EW)
Interest Rate Risk
The Group‟s exposure to the risk for changes in market interest rates relates primarily to the Group‟s
long-term debt obligations with floating interest rates.
The Group‟s interest rate exposure
management policy centers on reducing the Group‟s overall interest expense and exposure to
changes in interest rates. The Group‟s policy is to manage its interest cost using a mix of fixed and
floating interest-rate debts. The Group regularly monitors available loans in the market which is
cheaper and substitutes expensive debts of the Group. The Group‟s long-term debt with floating
interest rate usually mature after 3-5 years from the date of availment, while fixed rate term-loans
mature after 5-7 years.
The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with
all other variables held constant of the Group‟s profit before tax and equity (through the impact on
floating rate borrowings). There is no other impact on the Group‟s other comprehensive income
other than those already affecting the profit and loss.
Increase (decrease) in basis points
+ 200
- 200
Effect on income before tax
(P194 million)
P194 million
Liquidity Risk
The Group seeks to manage its liquidity profile to be able to finance capital expenditures and service
maturing debts. To cover its financing requirements, the Group intends to use internally generated
funds and draw on available long-term and short-term credit facilities.
As part of its liquidity risk management, the Group regularly evaluates its projected and actual cash
flows. It also continuously assesses conditions in the financial markets for opportunities to pursue fund
raising activities, in the event any foreseeable requirements arise. Fund raising activities may include
straight bank loans and capital market issuances. Accordingly, its loan maturity profile is regularly
reviewed to ensure availability of funding through an adequate amount of credit facilities with
financial institutions.
Overall, the Group‟s funding arrangements are designed to keep an appropriate balance between
equity and debt, to ensure financing flexibility while continuously enhancing the Group‟s businesses.
17
Credit Risk
It is the Group‟s policy that buyers who wish to avail of the in-house financing scheme are subjected
to credit verification procedures. Receivable balances are being monitored on a regular basis and
subjected to appropriate actions to manage credit risk. With respect to credit risk arising from the
other financial assets of the Group, which comprise cash and cash equivalents, other receivables
and investments, the Group‟s exposure to credit risk arises from default of the counterparty, with
maximum exposure equal to the carrying amount of these instruments.
Notes to Financial Statements
1. The attached interim consolidated financial statements are prepared in compliance with
Philippine Financial Reporting Standards (PFRS). The accounting policies and methods of
computation followed in the financial statements for the period ended March 31, 2014 are the
same as those followed in the annual financial statements of the Company for the year ended
December 31, 2013.
2. The consolidated financial statements include the financial statements of the Company and its
subsidiaries together with the Group‟s proportionate share in its joint ventures. The financial
statements of the subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies except for PSHC and its subsidiaries whose reporting period starts
from October 1 and ends on September 30.
3. Except for the sugar operations, the operating activities of the Company are carried out
uniformly over the calendar year. There are no unusual operating cycles or seasons that will
differentiate the operations for the period January to September 2013 from the operations for the
rest of the year. The milling activities of the subsidiaries engaged in sugar operations usually start
in November and end in May or June of the following year.
4. Except as disclosed in the Management Discussion and Analysis of Financial Condition and
Results of Operation, there are no unusual items affecting assets, liabilities, equity, net income or
cash flows for the interim period. There are no known trends, demands, commitments, events or
uncertainties that will have a material impact on the Company‟s liquidity.
5. There are no changes in estimates of amounts reported in the previous period that have material
effects in the current interim period.
6. Except for those discussed in the Management Discussion and Analysis of Financial Condition
and Results of Operations, there are no issuances, repurchases and repayments of debt and
equity securities.
7. There were no other dividends paid (aggregate or per share) separately for ordinary shares and
other shares during the interim period, except as discussed in the Management Discussion and
Analysis of Financial Condition and Results of Operation.
8. The Company has the following reportable segments:
Real estate which involves acquisition of land, planning and development of large-scale fully
integrated residential and commercial communities; development and sale of residential and
commercial lots and the development and leasing of retail and office space and land in these
communities; construction and sale of residential housing and condominiums and office
buildings; development of farm estates, industrial and business parks; operation of cinema and
mall; and parking and property management.
Banking and financial services which involves commercial and banking operations, including
generations of savings, current and time deposits in pesos and foreign currencies; commercial,
mortgage and agribusiness loans; payment services, provision of credit card facilities, fund
transfers, international trade settlements and remittances from overseas workers; trust and
18
investment services including portfolio management, unit funds, trust administration and estate
planning; and safety deposit facilities.
Sugar operations which involves operation of agricultural lands for planting and cultivating farm
products and operation of a complete sugar central for the purpose of milling or converting
sugar canes to centrifugal or refined sugar.
Hotel operations which involves operation of hotels, management of resorts, villas, service
apartment and other services for the pleasure, comfort and convenience of guests in said
establishments under its management.
Power generation operations which involves the establishment, construction, operation and
supply of power to offtakers. This segment is still under various stage to include pre-operating,
research, development and construction of facilities.
Other operations which involves holding company operations including issuances of bonds,
availment of bank loans, investments in corporations and acquisition of land for leasing and
development.
Financial information on the operations of these business segments as of and for the three-month
periods ended March 31, 2014 and 2013 are summarized in the attached Annex F.
9. Except as discussed in the Management Discussion and Analysis of Financial Condition and
Results of Operations, there are no material events subsequent to March 31, 2014 up to the date
of this report that have not been reflected in the financial statements for the interim period.
10. There have been no changes in the composition of the Company during the interim period, such
as business combination, acquisition or disposal of subsidiaries and long-term investments,
restructurings and discontinuing operations, except as discussed in the Developments of the
Company and Management Discussion on its Results of Operations.
11. There are no material contingencies and any other events or transactions affecting the current
interim period.
12. There are no known events that will trigger direct or contingent financial obligation that is
material to the Company, including any default or acceleration of an obligation.
13. There are no known material off-balance sheet transactions, arrangements, obligations including
contingent liabilities, and other relationships of the Company, with unconsolidated entities or
other persons created during the reporting period.
14. There are no significant elements of income or loss, except as discussed in the Management
Discussion on the Results of Operations, that did not arise from the issuer‟s continuing operations.
16. There are no known seasonal aspects that had a material effect on the financial condition or
results of operations.
17. Aside from the possible material increase in interest rates on the outstanding floating – rate term
loans, there are no known trends, events or uncertainties or any material commitments that may
result to any cash flow or liquidity problems of the Group within the next 12 months. The Group is
not in default or breach of any note, loan, lease or other indebtedness or financing
arrangements requiring it to make payments or any significant amount in its accounts payable
that have not been paid within the stated terms.
PART II -- OTHER INFORMATION
There are no other information required to be reported that have not been previously reported in SEC
Form 17-C.
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