1. automotive and vehicles
2. cars
3. diesel

COVER SHEET
9 4 0 0 7 1 6 0
SEC Registration Number
A R T H A L A N D
E I B
R e a
l
t
C O R P O R A T I O N
y
D e v e
l
o p e r
s
(
,
f
o r m e r
I n c
.
l
y
)
(Company’s Full Name)
P I C A D I L L Y
4 T H
A V E N U E
B O N I F A C I O
T A G U I G
S T A R
B U I L D I
C O R N E R
G L O B A L
C I T Y ,
N G ,
2 7 T H
S T R E E T
C I T Y ,
M E T R O
M A N I L A
(Business Address: No. Street City/Town/Province)
Atty. Riva Khristine V. Maala
(+632) 878-0390
(Contact Person)
(Company Telephone Number)
DEFINITIVE
1 2
3 1
Month
Day
2 0
-
I S
(Form Type)
(Fiscal Year)
0 6
2 5
Month
Day
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
2,181
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
ALCO DEFINITIVE Information Statement 1
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 20-IS
INFORMATION STATEMENT PURSUANT TO SECTION 20
OF THE SECURITIES REGULATION CODE
1. DEFINITIVE Information Statement
2. Name of Registrant as specified in its charter:
ArthaLand Corporation (ALCO)
3. Metro Manila, Philippines
Province, country or other jurisdiction of incorporation or organization
4.
SEC Identification Number: ASO-94-007160
5.
BIR Tax Identification Number: 116-004-450-721
6. 8/F Picadilly Star Building, 4th Avenue corner 27th Street, Bonifacio Global City, Taguig City
Address of Principal Office
1634
Postal Code
7. (+632) 403-6910/403-6915
Registrant's telephone number, including area code
8. EIB REALTY DEVELOPERS, INC., Exportbank Plaza, Chino Roces corner Gil Puyat Avenues,
Makati City
Former name, former address and former fiscal year, if changed since last report
9.
25 June 2010, 8:30 A.M., ArthaLand Sales Pavillon, McKinley Parkway corner 7th Avenue,
Bonifacio Global City, Taguig City
Date, time and place of the meeting of security holders
10. 03 June 2010
Approximate date on which the Information Statement is first to be sent or given to security holders
11. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA:
Title of Each
Class
Common Shares
Number of Shares of Common Stock
Outstanding
Amount of Debt Outstanding
5,118,095,199 (P0.18 par value)
None
12. Are any or all of these securities listed on a Stock Exchange?
Yes [x]
No [ ]
If yes, disclose the name of such stock exchange and the class of securities listed therein:
Philippine Stock Exchange
Common Shares (2,096,865,199 ONLY)
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
ALCO DEFINITIVE Information Statement 2
A. GENERAL INFORMATION
ITEM 1. Date, Time and Place of ANNUAL STOCKHOLDERS’ MEETING of Security Holders
a.
Date: 25 June 2010 (Friday)
Time: 8:30 A.M.
Place: ArthaLand Sales Pavillon
McKinley Parkway corner 7th Avenue
Bonifacio Global City, Taguig City
b.
Principal Address of Issuer:
c.
The approximate date on which the Information Statement is first sent or given to security
holders is 03 June 2010.
8/F Picadilly Star Building
4th Avenue corner 27th Street
Bonifacio Global City, Taguig City
ITEM 2. Dissenters’ Right of Appraisal
The stockholders’ right of appraisal is given under the instances provided by Section Title X,
Appraisal Right, Corporation Code of the Philippines.
In the forthcoming Annual Stockholders’ Meeting, approval of the stockholders will be sought for the
amendment of the latest By-laws of ArthaLand Corporation (ALCO) for purposes of incorporating
therein the procedures for the nomination and election of independent directors and revising such
other provisions thereof which are inconsistent with the Securities Regulation Code. Under the
Corporation Code, this would entitle dissenting stockholders to exercise their appraisal right.
For the valid exercise of the appraisal right, ALCO adopts the procedure laid down in the Corporation
Code, as follows:
1.
The dissenting stockholder must have voted against the proposed corporate action. In
this case, the proposed amendment to ALCO’s By-Laws shall involve incorporating
therein the procedures for the nomination and election of independent directors and
revising such other provisions thereof which are inconsistent with the Securities
Regulation Code.
2.
The dissenting stockholder must make a written demand within thirty (30) days from
the date the vote was taken. Failure to make the demand within the prescribed period
shall be deemed a waiver of the appraisal right.
From the time of demand, all rights accruing to the shares, including voting and
dividend rights shall be suspended in accordance with the provisions of the
Corporation Code, except the right of the stockholder to receive payment of the fair
value of the shares. The dividend, voting and rights of the dissenting stockholder
shall be restored if ALCO fails to pay the fair value within thirty (30) days after the
award.
3.
The price of the shares will be determined based on the fair value of the shares as of
the day prior to the date on which the vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.
ALCO DEFINITIVE Information Statement 3
4.
The withdrawing stockholder must submit (through the Office of the Corporate
Secretary1) the stock certificate/s representing his ALCO shares for notation of being
a dissenting stockholder, within ten (10) days from written demand. Failure to do so
shall, at ALCO’s option, terminate the stockholder’s appraisal right.
5.
ALCO shall pay the withdrawing stockholder for his shares, provided that, ALCO has
unrestricted retained earnings in its books to cover such payment.
The right of payment shall cease under the following instances:
a. If the dissenting stockholder withdraws his demand for payment, subject to
ALCO’s consent;
b. If ALCO abandons the proposed action;
c. If the Securities and Exchange Commission (SEC) disapproves the proposed
action; and,
d. Where the SEC determines that such stockholder is not entitled to the appraisal
right.
Upon payment by ALCO, the stockholder’s shares must then be transferred to ALCO.
ITEM 3. Interest of Certain Persons in or Opposition to Matters to be acted upon
While certain persons may have interest in the matters to be acted upon in the meeting, as of the date
of this Information Statement, ALCO has not received any written information from any director,
nominee or stockholder on any intention to oppose any action to be taken up at the meeting.
B. CONTROL AND COMPENSATION INFORMATION
ITEM 4. Voting Securities and Principal Holders Thereof
a.
Class entitled to vote
Class of Shares
No. of Shares
(As of 30 April 2010)
Voting Rights
5,118,095,199
With voting rights
Common
b.
Record Date: 03 June 2010 (Thursday)
c.
Cumulative Voting Rights
Section 4, Article II of ALCO’s By-laws provides that at “all stockholders’ meetings, every
stockholder shall be entitled to one (1) vote for each share of voting stock standing in his
name on the proper books of the Corporation at the time of closing thereof for the purpose of
the meeting.”
For the election of directors, ALCO adopts the manner and method of election provided under
Section 24 of the Corporation Code which entitles the stockholders to cumulative voting.
1
8/F Picadilly Star Building, 4th Avenue corner 27th Street, Bonifacio Global City, Taguig City 1634.
ALCO DEFINITIVE Information Statement 4
In cumulating votes, a stockholder may either (1) cumulate his shares and give one candidate
as many votes as the number of directors to be elected multiplied by the number of his shares
shall equal, or (2) cumulate his shares by multiplying the number of his shares by the number
of directors to be elected and distribute the same among as many candidates as he shall see fit.
The total number of votes to be cast by the stockholder must not exceed the number of shares
owned by him as shown in the books of ALCO multiplied by the whole number of directors
to be elected.
d.
Security Ownership of Certain Record and Beneficial Owners and Management2
(1)
Security Ownership of Certain Record and Beneficial Owners of more than 5%
of the Voting Shares (as of 30 April 2010)
Title
of Class
------------Common
Name and Address of Record
Owners, Nature of Ownership
& Name of Beneficial Owner
---------------------------------
Citizenship
--------------
No. of Shares
------------------
Percentage
Held
---------------
Filipino
2,983,730,000*
58.30%
Filipino
981,699,817**
19.18%
AO Capital Holdings I, Inc.
Record and Direct Beneficial Owner
25/F Philamlife Tower
8767 Paseo de Roxas, Makati
City
Common
Export and Industry Bank, Inc.
Record and Direct Beneficial Owner
Exportbank Plaza, Exportbank
Drive corner Chino Roces
Avenue, Makati City
* The shares will be voted by Mr. Jaime C. Gonzalez, Chairman of AO Capital Holdings 1,
Inc., with business address at the 25/F Philamlife Tower, 8767 Paseo de Roxas, Makati City.
** The shares will be voted by Mr. Juan Victor S. Tanjuatco, President of Export and Industry
Bank, Inc., with business address at the 37/F Exportbank Plaza, Exportbank Drive corner
Chino Roces Avenue, Makati City.
There are no other participants who own more than 5% of ALCO’s voting securities.
(2)
Security Ownership of Management (as of 30 April 2010)
There are no shares held or acquired beneficially by any one of the directors and executive
officers of ALCO, other than the nominal shares held by said directors and executive officers.
(This portion was intentionally left blank.)
2
Figures are based on the total common voting shares of ALCO as of 30 April 2010.
ALCO DEFINITIVE Information Statement 5
Title
of Class
-------------
Name, Address and Position of
Record Owners
---------------------------------
Common
Dionisio E. Carpio, Jr.
Director/Compliance Officer
40 Columbia Street, Loyola Grand
Villas, Quezon City
Common
Common
Common
Common
Common
Common
None
None
Jaime C. Gonzalez
Director/Chairman
50 McKinley Road, Forbes Park,
Makati City
Angela de Villa-Lacson
Director/President
Unit 3503 The Regency at Salcedo
Tordesillas corner Sanchez Streets
Salcedo Village, Makati City
Omar T. Salvo
Director
15 Peace Street, Multinational
Village, Paranaque City
Pauline C. Tan
Director/Treasurer
42 Russel Street, Pasay City
Ernest K. Cuyegkeng
Independent Director
1839 Santan Street, Dasmarinas
Village, Makati City
Rene R. Fuentes
Independent Director
11 Yuchengco Drive, Pacific
Malayan Village Cupang,
Muntinlupa City
Daisy P. Arce
Corporate Secretary
200 Recoletos Street, Urdaneta
Village, Makati City
Riva Khristine V. Maala
Assistant Corporate
Secretary/Corporate Information
Officer
21 J. Paredes St., BF Homes,
Diliman Quezon City
Citizenship
--------------
Amount &
Nature of
Ownership
-----------------
% of Class
---------------
1
Filipino
Record and Direct
Beneficial Owner
Filipino
Record and Direct
Beneficial Owner
Filipino
Record and Direct
Beneficial Owner
Filipino
Record and Direct
Beneficial Owner
Filipino
Record and Direct
Beneficial Owner
Filipino
Record and Direct
Beneficial Owner
Filipino
Record and Direct
Beneficial Owner
0.00 %
Filipino
0
N.A.
Filipino
0
N.A.
TOTAL
----------------7 shares
0.00 %
1
0.00 %
1
0.00 %
1
0.00 %
1
0.00 %
1
0.00 %
1
ALCO DEFINITIVE Information Statement 6
(3)
Voting Trust Holders of 5% or More
There are no voting trust holders registered in the books of ALCO.
(4)
Changes in Control
During ALCO’s Annual Stockholders’ Meeting held on 16 October 2009, the stockholders
unanimously elected the following as the members of its Board of Directors for the year
2009-2010, to hold office as such and until their respective successors are duly nominated,
elected and qualified:
Regular Directors
1.
2.
3.
4.
5.
Mr. Dionisio E. Carpio, Jr.
Mr. Jaime C. Gonzalez
Ms. Angela de Villa-Lacson
Ms. Pauline C. Tan
Mr. Omar T. Salvo
Independent Directors
6.
7.
Mr. Ernest K. Cuyegkeng, and
Mr. Rene R. Fuentes
ITEM 5. Directors, including Independent Directors, and Executive Officers
a.
Incumbent Directors and Positions Held/Business Experience for the Past Five (5) Years
The following are ALCO’s incumbent Directors who were elected in accordance with the Bylaws of ALCO.
Name
Position
Age
Jaime C. Gonzalez
Angela de Villa Lacson
Pauline C. Tan
Dionisio E. Carpio, Jr.
Omar T. Salvo
Ernest K. Cuyegkeng
Rene R. Fuentes
Chairman
President
Director/Treasurer
Director/Compliance Officer
Director
Director (Independent)
Director (Independent)
64
64
40
64
48
64
63
Jaime C. Gonzalez, Filipino, is the Chairman of AO Capital Holdings 1, Inc. and Elite
Holdings, Inc. concurrently. He also holds the chairmanship of Export and Industry Bank,
Inc. (“Exportbank”) and its group of companies. He is the co-founder and presently
Chairman and CEO of AO Capital Partners, a boutique investment bank with operations in
the Asian region. He serves on the boards of a number of other publicly listed companies
including IPVG Corp. (which is involved in information technology and communications in
the Philippines and selected countries in Asia) and Euromoney Institutional Investor plc
(which is a UK company involved in publishing, conferences and data services). He is a
graduate of the Harvard Business School.
Angela de Villa-Lacson, Filipino, comes from a successful stint with Ayala Land, Inc. (ALI)
where she was involved in growing the Residential Business of the company from a very
ALCO DEFINITIVE Information Statement 7
small share in 1999 during the depressed real estate market, to its current position of
accounting for more than half of the revenues of the company. While in ALI, she led various
high-end residential developments, notably One Roxas Triangle, Serendra, The Residences at
Greenbelt and One Legazpi Park, and some low-rise developments, Montgomery Place and
Ferndale. She was also involved in the development of the new communities in the South:
Ayala Greenfields and Ayala Westgrove. Concurrent to her position in ALI as head of Ayala
Land Premier, she started and grew its subsidiary, Community Innovations, Inc. (CII), the
company that addressed the needs of the middle market. Some of CII's projects that she led
were The Columns in Ayala Avenue and Legazpi, and Verdana. She also headed the
Innovation and Design Group of ALI. This group leads the design, masterplanning and
development of various communities of ALI in residential high-rise, gated villages,
commercial buildings, BPO campuses and retail. She headed the Ayala Museum too, leading
the design development and installation of its newest primary exhibition, 'Crossroads of
Civilization'. Prior to joining ALI, she was marketing director of San Miguel Corporation
(Beer and Foods) and headed various marketing groups of Unilever, both here and in Europe.
Pauline C. Tan, Filipino, is the President and General Manager of EIB Securities, Inc., a
wholly owned subsidiary of Exportbank, of which she was a director until 25 May 2006. She
is also presently a Vice President/Director and Compliance Officer of Medco Holdings, Inc.
She was connected with the Hong Kong Chinese Bank in 1994. From 1995 to 1999, she was
a director of Lippo Securities, Inc.; from 1995 to 1998, of Medco Asia Investment Corp.,
formerly Lippo Asia Investment Corporation; and, from 1995 to 2000, of Manila Exposition
Complex, Inc. She was also the Managing Director of Sung Hung Kai Securities Philippines,
Inc. from 1999 to June 2000.
Dionisio E. Carpio, Jr., Filipino, is presently a Director of Exportbank and its group of
companies which include EIB Savings Bank, Inc. and EIB Securities, Inc. He is also a
Director and executive officer of both Medco Asia Investment Corp. and Medco Holdings,
Inc. He has over twenty-five (25) years experience in investment advisory and trust fund
management services as well as in investment banking and securities brokerage. Mr. Carpio
holds a Masters degree in Business Management from the Asian Institute of Management.
Omar T. Salvo, Filipino, is Managing Director of American Orient Capital Partners, Inc. and
concurrently President of Beacon Hill Resources Management, Inc. He was previously
connected with the Land Bank of the Philippines, where he held senior management positions
in various units covering corporate banking, investment banking and asset recovery. He holds
an AB Economics degree from the Ateneo de Manila University and a Master in Business
Management degree from the Asian Institute of Management.
Ernest K. Cuyegkeng, Filipino, is presently the Executive Vice President/Chief Financial
Officer of A. Soriano Corporation. His other concurrent positions include being the President
of Phelps Dodge Philippines, Inc. and Anscor Land, Inc., and a Director of Seven Seas
Resorts & Leisure, Inc., A. Soriano Air Corporation, and AB Capital & Investment
Corporation. He holds a Bachelor of Arts degree in Economics and a Bachelor of Science
degree in Business Administration, both from the De La Salle University. He also obtained a
Masters degree in Business Administration from the Columbia Graduate School of Business
in New York.
Rene R. Fuentes, Filipino, is presently the Director/Advisor of the Liberal Arts Program of
Sycip Gorres Velayo & Co. (SGV), the President of the De La Salle University Science
Foundation, Inc. and the General Manager of 1911 Insurance Agency Corporation. He has
been affiliated with SGV since 1973. He holds a Bachelor of Arts degree, Major in History
and Political Science, and a Bachelor of Science degree in Business Administration, both
from the De La Salle University. He also obtained a Masters degree in Business
ALCO DEFINITIVE Information Statement 8
Administration from the University of Sta. Clara, U.S.A., and finished the Management
Development Program of the Asian Institute of Management.
Term of Office:
The Board of Directors is composed of seven (7) members who are generally elected at an
annual stockholders’ meeting and their term of office shall be one (1) year and until their
successors shall have been elected at the next annual stockholders’ meeting and have
qualified in accordance with the By-laws of ALCO.
b.
Procedure for the Nomination & Election of Independent Directors
For the nomination and election of Independent Directors, ALCO adopts the rules prescribed
by SRC Rule 38 of the Implementing Rules and Regulations of the Securities and Regulation
Code, as amended, pending amendment of its By-Laws to incorporate therein the said
provision, among others.
Nomination of Independent Director/s
1. Nomination of independent director/s shall be conducted by the Nomination Committee3
(the ‘Committee’) prior to a stockholders’ meeting. All recommendations shall be signed
by the nominating stockholders together with the acceptance and conformity by the
would-be nominees.
2
The Committee shall pre-screen the qualifications and prepare a final list of all candidates
and put in place screening policies and parameters to enable it to effectively review the
qualifications of the nominees for independent director/s.
3. After the nomination, the Committee shall prepare a Final List of Candidates which shall
contain all the information about all the nominees for independent directors, as required
under Part IV (A) and (C) of Annex ‘C’ of SRC Rule 12, which list, shall be made
available to the Commission and to all stockholders through the filing and distribution of
the Information Statement, in accordance with SRC Rule 20, or in such other reports the
company is required to submit to the Commission. The name of the person or group of
persons recommending the nomination of the independent director shall be identified in
such report including any relationship with the nominee.
4. Only nominees whose names appear on the Final List of Candidates shall be eligible for
election as Independent Director/s. No other nominations shall be entertained after the
Final List of Candidates shall have been prepared. No further nominations shall be
entertained or allowed on the floor during the actual annual stockholders’/memberships’
meeting.
Election of Independent Director/s
1. Except as those required under the SRC and subject to pertinent existing laws, rules and
regulations of the Commission, the conduct of the election of independent director/s shall
be made in accordance with the standard election procedures under ALCO’s By-laws.
2. The Chairman of the Meeting shall be responsible for informing all stockholders in
attendance of the mandatory requirement of electing independent director/s. He shall
ensure that an independent director/s is elected during the stockholders’ meeting.
3
Composed of Messrs. Jaime C. Gonzalez (Chairman), Dionisio E. Carpio, Jr. and Rene R. Fuentes.
ALCO DEFINITIVE Information Statement 9
3. Specific slot/s for independent directors shall not be filled up by unqualified nominees.
4. In case of failure of election for independent director/s, the Chairman of the Meeting shall
call a separate election during the same meeting to fill up the vacancy.
For the Annual Stockholders’ Meeting on 25 June 2010, the following were nominated as
directors and independent directors of ALCO for the ensuing year, namely:
A.
Nominees for Regular Directors
1.
2.
3.
4.
5.
B.
Mr. Dionisio E. Carpio, Jr.
Mr. Jaime C. Gonzalez
Ms. Angela de Villa-Lacson
Mr. Omar T. Salvo
Ms. Pauline C. Tan
Nominees for Independent Directors
6.
7.
Mr. Ernest K. Cuyegkeng
Mr. Rene R. Fuentes
Messrs. Cuyegkeng and Fuentes were nominated by Mr. Gonzalez. They are not in anyway
related to Mr. Gonzalez or to any one of ALCO’s shareholders owning more than 5% of its
voting shares. Both of them possess all the qualifications and none of the disqualifications of
an independent director. Further, they are not officers or employees of ALCO or any of its
subsidiaries and are free from any business or other relationships with ALCO or any of its
subsidiaries which could, or could reasonably be perceived to, materially interfere with the
exercise of their independent judgment in carrying out their responsibilities as independent
directors.
c.
Corporate and Executive Officers and Positions Held/Business Experience for the Past
Five (5) Years
The following are ALCO’s principal corporate officers:
Chairman of the Board
President
Treasurer
Corporate Secretary
Assistant Corporate Secretary/
Corporate Information Officer
Compliance Officer
Jaime C. Gonzalez
Angela de Villa Lacson
Pauline C. Tan
Atty. Daisy P. Arce
Atty. Riva Khristine V. Maala
Dionisio E. Carpio, Jr.
Daisy P. Arce – Atty Arce, Filipino, is the Corporate Secretary of Exportbank and its group
of companies. She was also recently elected a Director of EIB Securities, Inc. She holds a
Bachelor of Laws degree from the Ateneo de Manila University. She was a partner at Quasha
Ancheta Peña & Nolasco Law Offices and now has her own practice.
Riva Khristine V. Maala – Atty. Maala, Filipino, is the Assistant Corporate Secretary of
Exportbank and its group of companies. She holds a Bachelor of Arts degree in Philosophy
(cum laude) and a Bachelor of Laws degree, both from the University of the Philippines.
Prior to joining Exportbank in October 2001, she was an Associate Attorney of Fortun
Narvasa and Salazar Law Offices.
ALCO DEFINITIVE Information Statement 10
Term of Office:
The corporate officers of ALCO are appointed/elected by the Board of Directors at the
organizational meeting following the stockholders’ meeting for a term of one (1) year and
until their successors are appointed/elected and have qualified in accordance with the By-laws
of ALCO.
d.
Significant Employees
Other than the above-named directors and corporate officers, the following are significant or
key personnel of ALCO who are expected to make a significant contribution to the business
of ALCO:
Catherine A. Ilagan, Filipino, is the Head of Project Business Development. She comes
with an extensive fifteen (15) years experience in Real Estate in Ayala Land, Inc. (ALI). She
spent seven (7) years in Corporate Planning, where she played a key role in the determination
of the growth projects of the company. This was followed by about six and a half (6½) years
of Vertical Residential Project Developments. Her last one and half (1½) years there saw her
do Estate Management where she played a key role of maximizing the value of the ALI land
developed by the various business units of ALI. She was part of the team that conceptualized
and successfully launched Nuvali, the 1,600 hectare landholdings of ALI in Canlubang. She
was also responsible for the management of ALI’s landholdings in Makati.
Jose V. Asuncion, Jr., Filipino, is the Vice President for Technical Services. He replaced
Nestor Omar T. Arce-Ignacio in December 2009. Mr. Asuncion has over 30 years of
experience as an architect in various property development firms, playing an integral part
during its success years. While he is a licensed architect, his previous posts have allowed him
to be involved in construction management as well. His recent projects prior to joining ALCO
include the Fairways Tower in Bonifacio Global City and St. Francis Towers in
Mandaluyong. He was also involved in Makati CBD high-rise developments like BSA
Mansion, BSA Plaza, Prince Plaza and the Asian Mansion Condos. Previous to this, he
headed the Architectural Group of the HLURB from 1982-1991.
Froilan Q Tejada, Filipino, is the Chief Finance Officer. He joined ALCO with fourteen
(14) years of Finance experience and was involved with the acquisition, turn-around and
expansion of groups such as KFC, Philippines (7 years) and Bitexco, a real estate property
development company in Vietnam (3 years). He was involved for four (4) years in the Fort
Bonifacio Development Corporation, heading the treasury and planning functions. For
Bitexco, he was involved in raising funds of about US$200.0MM for their various property
projects. He set up and implemented the SAP Enterprise Resource Planning system in
Bitexco and mapped out its corporate restructuring and medium term financial plan. He had
also negotiated and closed a management agreement with Marriott in Vietnam.
e.
Family Relationship
The above-mentioned incumbent directors and executive officers of ALCO are not related to
each other, either by consanguinity or affinity.
f.
Involvement in Certain Legal Proceedings
The above-named directors and corporate/executive officers of ALCO have not been involved
during the past five (5) years up to the date of this Information Statement in any bankruptcy
proceeding or any proceeding involving a violation of securities or commodities laws or
regulations, nor have they been convicted by final judgment in a criminal proceeding. Neither
ALCO DEFINITIVE Information Statement 11
has there been any order or judgment enjoining, barring, suspending or limiting their
involvement in any type of business, securities, commodities or banking activities.
As of the date of this Information Statement, there is no official notice filed with ALCO
involving any of its directors and executive officers in their personal capacities in any legal
proceeding.
g.
Certain Relationships and Related Transactions
In the ordinary course of business, ALCO has normal banking transactions with one of its
shareholders, Exportbank.
Except for the above, there are no other transactions (or series of similar transactions) with or
involving Exportbank or any of its subsidiaries in which a director or an executive officer or a
stockholder who owns ten percent (10%) or more of ALCO’s total outstanding shares or
member/s of their immediate family, had or is to have a direct or indirect material interest.
ITEM 6. Compensation of Directors and Executive Officers
a.
Compensation of Directors and Executive Officers
Section 10, Article III of ALCO’s By-laws provides that the “Board of Directors is
empowered and authorized to fix and determine the compensation of its members, including
profit sharing and other incentives, subject to the limitations imposed by law.” Pursuant to
this provision, to compensate the members of the Board, a per diem of P7,500.00 is given to
each director for each board of director’s meeting (special or regular) attended. Each director
is also paid a per diem of P2,500.00 for each committee meeting he has attended, of which he
is a member. These committees are the Audit Committee, the Stock Option and
Compensation Committee and the Nomination Committee.
Section 7, Article IV in turn provides that the “Chairman, or such other officer(s) as the Board
of Directors may authorize, shall determine the compensation of all the officers and
employees of the Corporation.”
Compensation for 2009
Name and Principal Position
-----------------------------------
Year
-----------
Directors and Executives
1. President/CEO
2. Compliance Officer
3. Chief Financial Officer
4. VP, Business Development
5. VP, Technical Services
2007
2008
2009
Salary
Bonus
--------------- ---------------P516.0K
P17.513M
P29.097M
P61.0K
None
None
Other
-----------------P255.0K
None
None
Mr. Jaime C. Gonzalez – Chairman of the Board
Ms. Angela de Villa Lacson – President
Ms. Catherine A, Ilagan – Vice President (Head of Project Business Development)
Mr. Jose V. Asuncion – Vice President (Technical Services)
Mr. Froilan Q. Tejada – Chief Finance Officer
ALCO DEFINITIVE Information Statement 12
Name and Principal Position
-----------------------------------Other Officers (as a group)
Year
-----------
Salary
Bonus
--------------- ----------------
Other
-----------------
2007
2008
2009
None
P2.412M
P2.412M
None
None
None
None
None
None
Year
----------2010
Salary
-------------P29.097M
Bonus
--------------None
Other
-----------------None
2010
P2.412M
None
None
Estimated Compensation for 2010
Name and Principal Position
----------------------------------Directors and Executives
1. President/CEO
2. Compliance Officer
3. Chief Financial Officer
4. VP, Business Development
5. VP, Technical Services
Officers (as a group)
b.
Standard Arrangement/Material Terms of Any Other Arrangement/Terms and
Conditions of Employment Contract with Above Named Corporate/Executive Officers
In ALCO’s annual meeting held on 16 October 2009, the stockholders representing more than
sixty-seven percent (67%) of all its issued and outstanding common shares which are entitled
and qualified to vote approved the 2009 ALCO Stock Option Plan for its qualified employees.
The total amount of shares which are available and may be issued for this purpose will
amount to 10% of ALCO’s total outstanding capital stock at any given time. At present, this
is equivalent to 511,809,520 shares. The Stock Option and Compensation Committee
consisting of at least three (3) directors, one (1) of whom is an independent director, will
administer the implementation of this plan.
Under the 2009 ALCO Stock Option Plan, the qualified employees eligible to participate are
(i) members of the Board; (ii) President and CEO and other corporate officers, which include
the Corporate Secretary and the Assistant Corporate Secretary; (iii) Employees and
Consultants who are exercising managerial level functions or are members of the
Management Committee; and, (iv) Executive officers assigned to ALCO’s subsidiaries or
affiliates4.
The Stock Option and Compensation Committee is empowered to determine to whom the
Options are to be granted, determine the price the Option is to be exercised (which in no case
shall be below the par value of ALCO’s common stock), decide when such Option shall be
granted and its effectivity dates, and determine the number and class of shares to be allocated
to each qualified employee. The Committee will also consider at all times the performance
evaluation of the qualified employee and/or the result of the achievement of the objectives of
ALCO each year.
The Option Period during which the qualified employee may exercise the option to purchase
such number of shares granted will be three (3) years starting with the full year vesting.
On the Exercise Date, the qualified employee should pay the full Purchase Price or in such
terms as may be decided upon by the Committee.
4
ALCO must have at least 50% equity holdings therein.
ALCO DEFINITIVE Information Statement 13
ITEM 7. Independent Public Accountant
Article V of ALCO’s By-laws provides, among others, that the External Auditor shall be appointed by
its Board of Directors and shall receive such compensation or fee as may be determined by the
Chairman or such other officer(s) as the Board of Directors may authorize.
ALCO is in compliance with SRC Rule 68 of the Implementing Rules and Regulations of the
Securities and Regulation Code, as amended, requiring the rotation of external auditors or engagement
partners after their engagement for a consecutive period of five (5) years.
Punongbayan and Araullo (P&A) was appointed as ALCO’s external auditor for 2007, 2008 and 2009
and there had been no disagreement with P&A during this time.
P&A shall send its representatives to the annual stockholders’ meeting on 25 June 2010 for purposes
of addressing accounting concerns and related questions which may be raised by the stockholders in
the said meeting.
Information on Independent Accountant
Accountant
Mailing Address
:
:
Certifying Partner
C.P.A. Reg. No.
TIN No.
PTR No.
SEC Accreditation No.
BIR Account No.
:
:
:
:
:
:
Punongbayan & Araullo
20/F Tower 1, The Enterprise Center
6766 Ayala Avenue, Makati City
Mr. Francis B. Albalate
0088499
120-319-015
208.7609, 04 January 2010, Makati City
0104-AR-1
08-002511-5-2008 (25 November 2008 to 2011)
Fees and Other Arrangements
The external auditor’s fees are based on the estimated time that would be spent on an engagement and
ALCO is charged at hourly rates vis-à-vis the experience level of the professional staff members who
will be assigned to work on the engagement. Fees are also generally based on the complexity of the
issues involved and the work to be performed, as well as the special skills required to complete the
work.
For 2007 and 2008, P&A’s fees for the services rendered to ALCO are P110,000.00 and P220,000.00,
respectively. For 2009, P&A’s fees are P 270,000.00. These fees are exclusive of VAT and out of
pocket expenses.
ITEM 8. Compensation Plans
As reflected in Item 6b above, ALCO made available to its qualified employees in 2009 a stock
option plan wherein they can enjoy the benefits of ownership of ALCO and thereby increase their
concern for its long-term progress and well-being, induce their continued service and stimulate their
efforts towards the continued success thereof.
C. ISSUANCE AND EXCHANGE OF SECURITIES
No action will be taken during the Annual Stockholders’ Meeting on 25 June 2010 with respect to the
Authorization or Issuance of Securities Other than for Exchange (Item 9); Modification or Exchange
ALCO DEFINITIVE Information Statement 14
of Securities (Item 10); Financial and Other Information (Item 11); Mergers, Consolidations,
Acquisitions and Similar Matters (Item 12); Acquisition or Disposition of Property (Item 13); or,
Restatement of Accounts (Item 14).
D. OTHER MATTERS
ITEM 15. Action With Respect to Reports
Management will present at the Annual Stockholders’ Meeting ALCO’s financial reports as of 31
December 2009.
The Minutes of the Stockholders’ Meeting held on 16 October 2009 will be submitted for approval of
the stockholders.
Ratification by the stockholders of all actions of ALCO’s Board of Directors and Management from
the last stockholders’ meeting of 16 October 2009 until the date of the forthcoming Annual
Stockholders’ Meeting will also be sought. These refer to all actions undertaken in the development
of ALCO’s pilot project, Arya Residences.
Copies of the Minutes together with a summary of all resolutions of the Board and Management will
be distributed during the annual meeting itself.
Other than the foregoing, there is no other matter with respect to Reports to be presented for which the
stockholders’ approval is sought.
ITEM 16. Matters Not Required To Be Submitted
There is no matter not required to be submitted to a vote of the stockholders present at the Annual
Stockholders’ Meeting.
ITEM 17. Amendment of Charter, By-Laws or Other Documents
The stockholders will be asked during the Annual Stockholders’ Meeting to approve the proposed
amendment of ALCO’s By-laws for purposes of incorporating therein the procedures for the
nomination and election of independent directors and revising such other provisions thereof which are
inconsistent with the Securities Regulation Code.
ITEM 18. Other Proposed Action
The election of ALCO’s External Auditor for the ensuing year will be taken up at the Annual
Stockholders’ Meeting, pursuant to ALCO’s By-Laws. Management will nominate P&A as ALCO’s
External Auditor for 2010.
ITEM 19. Voting Procedures – Voting for Corporate Actions
a.
Voting for Corporate Actions
Voting on matters submitted for stockholders’ approval during the Annual Stockholders’ Meeting
shall be done by viva voce and shall be supervised by the designated staff of P&A, ALCO’s External
Auditor, and by Professional Stock Transfer, Inc., ALCO’s Stock and Transfer Agent.
ALCO DEFINITIVE Information Statement 15
b.
Nominations and Voting for the Uection of Dircctors
O)
'all stockholdcrs' meetings.
Section,1,Article II of AI-CO'S By-laws providesthat at
eyery stocklolder shall be entitl€d to one (1) vote for each share of ]loing stock
standing ir his name on the p.oper book of dre Corpotation ar Ihe time of clostlrg
thereoffor the purposeoflhc meeting."
(2)
No nominalions ftom the floor during dre stockholders' meeting sball be allowed or
recognizcd.
(3)
For the purpose of electing dlrecto$, the system ol cumulative voting shall be
followed. Each stocklolder has a number of voies equal to the number of shareshe
owns, times the number ofdfectors to be elected. Thc stockholderunder this votmg
s,vstemhas the option to (i) castall his votesm favor of onenomineo; or (ii) distsibutc
those votes in the samcpnnciple among as mary nomineesas hc shall se€trt. Oily
caldidates drily nomiiated shall be voted by the slockholde$ entitled to vote or by
their respecti\.eProxies.
The top seven(7) nomineesreceiling the highest numberof votes sball bc considered
elccleil as dirccton ol ALCO for tle te.m 2010-2011 and until tleir successorsshaii
ba1€ been elected at the next annual stock}olden meetilg and until they have
qualified in accordancewitl the ByJaws of ALCO.
(4)
Voling for the electror of Dhectors shalI be by ballot and ihe tabulation of th€ votes
shall be supervisedby the desi$ated staff of ALCO'S Er.lemal Auditor and Stoch
and Tmnsfer Agent; prolrded. that voting may bc by vrva voce upon approval by the
majority of the stockholdeNprEsenth ihe meetitrg.
F
slclurunn plcr
Aftcr reasonableinquiry and to the b€st of my trJrowledgeand betie{ I certi4' tlar the information set
lod ir this bformation Statementis true, completeand correc! This is siercd in Tnguig ('itr or
June 2010.
ISAI-AND
CORPORATION
DAISY PIIARCE
SUBSCRIBEDAND SWORNto betdreme this A( da\ of June 20111atTuguig Ci6, Philippincs
: -a.lfi.1nt*":l!ib.ituS to ]ne fier Passforl No EB0Ij-1668rssuedon -21Ap/rl 2lll0 ai the Crfi ofMftirl8.
Pldlippines.- -^
d\A,1
i\-tradirEi'rittj Manag€mentReport
J0HllPAull/f,.lCABILAO
ofTaguig
CitY
NoitryPuqlc'
20l1
Decomber
Ap;c:nlmEnt
107.
i.lo. Unti,31
,12bFlocr,
26hst,cor.3'iAvenue
N€loneCenler,
193.i
Global
CiV,
Taguig
ii,:scenl
Boniiaclo
Pail(
\?le$!,
NO,
54363
IiCLL
O:ATTORNEYS
lr4.lvl.
Taguig
Cily,
FTRtlo.0!i,ill:3'0;0i10812010;
1/21lo8/Ceb!
City
Li;:!Tlij:i;: ilor07ti5;
ALCO DEFINI llvl
IDformation Strtenenl 16
MANAGEMENT REPORT
BUSINESS AND GENERAL INFORMATION
a.
Business Development
ARTHALAND CORPORATION (“ALCO”), formerly EIB Realty Developers, Inc., was
incorporated on 10 August 1994 for the purpose of engaging in property development of
residential, commercial, leisure and industrial projects. ALCO’s principal office has been
moved to the 8th floor Picadilly Star Building, 4th Avenue corner 27th Street, Bonifacio Global
City, Taguig City.
In its earlier years, ALCO (then known as EIB Realty) undertook the development and
completion of Exportbank Plaza and the One McKinley Place Condominium, which was a
joint venture undertaking of ALCO and the Philippine Townships, Inc. (formerly RFM
Properties and Holdings, Inc.) through One McKinley Place, Inc. as the corporate vehicle.
ALCO’s property investments include three (3) parcels of land at the Bonifacio Global City
(BGC) with a combined land area of close to one (1) hectare, a 33-hectare property in
Tagaytay City and a 500-square meter property in Davao.
In 2007, ALCO instituted several corporate actions to prepare for its medium and long term
business goals. It underwent a quasi-reorganization consisting of the following:
1.
Decrease in the par value of ALCO’s common shares from P1.00 to P0.18 per share,
with the corresponding decrease in the authorized capital stock from P2.0 Billion to
the paid-in capital stock of P246,257,136.00 only1;
2.
Increase in the authorized capital stock from P246,257,136.00 to P2,946,257,135.82,
divided into 16,368,095,199 common shares at a par value of P0.18 per share2; and
3.
Issuance of warrants to the holders of the 1,368,095,199 issued and outstanding
common shares as of 04 December 20073.
Following the reduction in the par value of its shares and decrease in authorized capital stock,
ALCO undertook a recapitalization program which led to the entry of new investors, namely
AO Capital Holdings 1, Inc., Vista Holdings Corporation, The First Resources Management
and Securities Corporation and Elite Holdings, Inc. The Board approved the P750.0 million
subscription in ALCO equivalent to 3.750 billion common shares of the new investors on 12
August 2008.
On 27 November 2008, during ALCO’s annual stockholders’ meeting, a resolution was made
to change its name to ArthaLand Corporation which was subsequently approved by the
Securities and Exchange Commission on 26 January 2009. This change in name was made to
reflect the renewed thrust of ALCO’s new Board and Management.
Ms. Angela De Villa-Lacson was elected to the Board of Directors of ALCO on 14 March
2008. The Board also appointed Ms. Lacson as ALCO’s President effective on 01 April
2008. Upon her assumption of office, Mr. Jaime Gonzalez, who was then Chairman and
1
As approved by the SEC on 04 December 2007.
As approved by the SEC on 24 December 2008.
3
These are the shareholders of record at the time when the reduction in the par value of the said shares to P0.18
per share was approved by the SEC.
2
ALCO Management Report
1
President concurrently, continued to be ALCO’s Chairman of the Board.
By end-2008, ALCO has completed its line-up of the key management team. ALCO set up
its sales team in 2009.
b.
Business/Projects
ALCO’s main business activity is property development of residential, commercial and
leisure projects. It is geared to pursuing niched and boutique developments beginning with its
land investments in the BGC as well as opportunistic joint venture developments.
ALCO is a registered member of the US Green Building Council’s Leadership in Energy and
Environmental Design (LEED) for its endeavors in sustainable developments. LEED is a US
organization which sets the world standards for green buildings and sustainable
developments.
ALCO’s various properties consist of the following:
1. ALCo’s flagship project located on Lot 4-1 in BGC: Arya Residences is a 2-tower highend residential development on a 6,357-square meter property along McKinley Parkway.
ALCO commenced planning for Arya Residences at the start of 2009, and completed the
Sales Pavilion which houses the model units in the third quarter of the same year. The
first of the two (2) towers of Arya Residences was officially launched in February 2010.
Tower 1 will have 301 units consisting of 1’s, 2’s and 3 bedrooms. Arya Residences will
offer unique retail and dining areas at the elevated ground floor and an amenity podium.
Arya Residences is a registered project with LEED with a certification goal of gold. The
groundbreaking ceremonies were held last April 2010.
2. Lot 7-1 in BGC: A 1,585-square meter property within the E-Square which is the
Philippine Economic Zone Authority (PEZA) area of the BGC. It is across the new St.
Luke’s Medical Center. The property is intended for a residential development.
3. Lot 5-5 in BGC: A 2,233-square meter property which is likewise within the E-Square.
The property is across the street from the proposed Shangri La Hotel and the Philippine
Stock Exchange. The development plan for this property may be mixed-use.
In 2007, ALCO offered to acquire from Export and Industry Bank, Inc. (EIB) its rights, title
and interests in Exportbank Plaza subject to EIB securing the appropriate regulatory approvals
for the transaction. Due to the protracted delay in obtaining the said regulatory approvals,
ALCO is no longer pushing through with the said acquisition and advised EIB accordingly in
a letter dated 17 May 2010.
While ALCO currently intends to develop its BGC properties as described above, these plans
may change subject to market conditions.
Even when these projects are completed, ALCO commits to provide property management
services to the condominium corporation of the developments. Post-completion involvement
allows ALCO to maintain a high standard of maintenance quality in its developments.
c.
Subsidiary
Urban Property Holdings, Inc. (UPHI) is a subsidiary of ALCO originally established as a 5545 joint venture company with PR Builders Developers and Managers, Inc. (PR Builders) for
the development of a housing project on a 331,760 m2 property in Calamba, Laguna, i.e. the
Tagaytay Project. In 2009, PR Builders assigned all of its rights, title and interests in UPHI.
UPHI remains non-operational to date. There is no major imminent risk involved in the
business of UPHI except for any market price volatility on the Tagaytay property.
ALCO Management Report
2
ALCO wholly owns three (3) other subsidiaries namely, Cazneau Inc., Irmo Inc. and
Technopod, Inc., which are real estate companies. These companies are non-operational to
date.
d.
Competition
ALCO faces competition from other domestic property developers. The level of competition
depends on product types, target market segments, location of developments and pricing,
among others.
ALCO views the major property players which are into the middle and high market categories
for high-rise residential in the vicinity of its investment properties as direct competition.
There are significant barriers to entry into the market such as the considerable capital needed
for the acquisition and development of land, the development expertise and reputation
required from an experienced management team, technological know-how from a technical
team, to name a few.
Competition can also be present in the procurement of raw materials particularly in a tight
supply market. ALCO will also have to contend with competition with other property
developers for high-caliber sales/leasing agents and brokers.
Since ALCO has just launched its first project Arya Residences, it has yet to test its
competitive advantages in the market. ALCO, however, believes that given the desirability of
the project locations, its strict adherence to quality, innovation and sustainability, its
competitive pricing schemes and commitment to its projects even after sales, it will be able to
compete effectively.
e.
Industry Risk
1. High-rise Residential Market
The property development sector is cyclical and is subjected to the Philippine economic,
political and business performance. The industry is dependent primarily on consumer
spending for housing. In the past years, a significant portion of housing demand, particularly
on the low-end, was being driven by purchases from the overseas workers’ market. This
exposes the industry to the economic performance of foreign countries of the overseas
workers such as the United States, Saudi Arabia and countries in Europe.
The industry, and to some extent ALCO, has to contend with risks relating to volatility in
overseas remittances, interest rates, credit availability, foreign exchange, political
developments, costs and supply of construction materials, wages, changes in national and
local laws, and regulations governing Philippine real estate and investments.
2.
Commercial Office Market
The office market has been largely driven by the Business Process Outsourcing (BPO) sector
which caters largely to US and European customers. The BPO industry, organized under the
Business Process Association of the Philippines (BPAP), comprises primarily of contact
centers, back office operations, medical transcription, among others.
The BPO industry has been experiencing phenomenal growth since the mid-2000. However,
with the onset of the global economic slowdown in the middle of 2008, BPO companies took
a wait-and-see position and re-assessed their expansion plans. This led to a glut in office
ALCO Management Report
3
space with supply at 614,000 square meter outpacing demand of 451,000 square meters. The
increased office space vacancies resulted in a downward adjustment in rental rates. Due to
these circumstances, some developers have postponed construction of new office buildings.
The BPAP continues to foresee a steady albeit at a more tempered growth in demand at a rate
of 23% yearly. Total demand is estimated to reach 3.8 million square meters by 2011 or a
total increment of 2.29 million square meters from 2008-2011. With the slow down of
construction activities in this sector, the forecasted supply of 1.75 million square meters for
the period 2008-2011 will result in a shortage in office space. Developers who will be
completing their projects by 2011 will be well-positioned for the recovery.
f.
Sources and availability of raw materials
Construction of the projects are awarded to qualified reputable construction firms subject to a
bidding process and management’s evaluation of contractors’ qualifications and satisfactory
working relationships. The construction materials, primarily cement and rebars, are normally
provided for by the contractors as part of the contract. However, ALCO may opt to procure
owner-supplied construction materials should it be more cost-effective for the projects.
g.
Advances to Related Parties
In the normal conduct of its business, ALCO and its subsidiaries enter into inter-company
transactions with each other, principally consisting of advances and reimbursements for
expenses. These transactions are made substantially on the same terms as with other
individuals and businesses of comparable risks.
h.
Patents and Trademarks
ALCO’s operations are not dependent on patents, trademarks, copyrights and the like.
i.
Government approval for principal products or services
ALCO secures various government approvals such as Environmental Compliance Certificates
(ECCs), development permits and licenses to sell as part of its normal course of business.
1.
High-rise residential projects
Real estate development and sale of residential condominiums or subdivisions are governed
by Presidential Decree No. 957. The administrative function is vested on the Housing and
Land Use Regulatory Board (HLURB). The HLURB with local government units administer
Presidential Decree No. 957 and regulate real estate business in the country.
2.
Philippine Economic Zone Authority
ALCO has properties (lots 7-1 and 5-5) at the PEZA area of the BGC, otherwise called the ESquare. PEZA is a government unit that oversees economic zones which are created by
presidential proclamations and which consist of industrial estates, export processing zones,
free trade zones, tourist areas and information technology enterprises. PEZA-registered
enterprises enjoy income tax holidays and duty-free importation of equipment, machinery and
raw materials.
j.
Cost and Effects of Compliance with Environmental Laws
ALCO has complied with all environmental regulatory requirements for both the preconstruction and operational phases of completed projects. ALCO will be obtaining
ALCO Management Report
4
government approvals for its new projects based on the projects’ timetable for development
and pre-selling.
k.
Employees
As of the date of this Report, ALCO has a total of thirty (30) employees.
are not covered by a collective bargaining agreement.
l.
These employees
Working Capital
In general, ALCO finances its projects through pre-selling activities, loans and support from
its strategic partnerships with other corporations, considering the long construction time and
the magnitude of investments necessary to complete its projects.
MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ALCO began its first full year of operations in 2009 following the entry of new investors, the
formation of new management and the building-up of the organization in 2008. In 2009, ALCO
focused on the planning of its flagship project, Arya Residences. Investments were made for the
planning of the said project and the construction of the Sales Pavilion which houses the model units of
Arya Residences. The sales team was also organized and trained. Significant groundwork to
introduce ALCO was laid-out in 2009 which led to the launch of Arya Residences in February 2010.
As a start-up company, revenue recognition will take place after pre-selling activities beginning with
Arya Residences, which will be followed by a mid-range residential development on ALCO’s second
property in the BGC. The financial results of ALCO are reflective of the start-up nature of its
operations.
The following are the financial highlights of ALCO and its subsidiaries, UPHI, Cazneau Inc., Irmo,
Inc. and Technopod, Inc. (hereinafter, collectively referred to as the “Group”) for 2009 vis-à-vis 2008
and 2007:
COMPARABLE DISCUSSION FOR FISCAL YEAR 2009
Key Performance Indicators
Earnings Per Share
Net Earnings(loss) attributable to
equity holdings of the Parent to
Weighted Average Number of
Outstanding Common Shares
Capital Adequacy Ratio
Total Equity to Total Assets
Ratio
Liquidity
Liquid To Total Assets Ratio
Profitability
Return on Average Equity
December 2009
December 2008
P -0.0837
P -0.0011
46.71%
59.36%
1.08%
0.69%
-26.44%
-0.43%
Earnings (loss) per share is computed as follows:
Group
2008
2009
Net earnings (loss)
Divided by weighted average
number of outstanding
common shares
(P
Earnings (loss) per share
(P
140,749,470 )
(P
1,682,480,199
0.0837 )
1.537.202 )
(P
Earnings (loss) per share
(P
P
1,368,095,199
(P
0.0011 )
160,522,570
1,368,095,199
P
0.1173
Parent
2008
2009
Net earnings (loss)
Divided by weighted average
number of outstanding
common shares
2007
138,365,410 )
(P
1,682,480,199
0.0822 )
572,372 )
2007
P
1,368,095,199
(P
0.0004 )
159,307,488
1,368,095,199
P
0.1164
There are no dilutive potential common shares at the end of each of the three years.
In 2009, the Group’s Capital Adequacy Ratio (CAR) stood at 46.71% or 12.65% lower compared to
previous year’s ratio of 59.36%. CAR was computed by dividing the Total Average Stockholder’s
Equity over the Total Assets:
Total Average Stockholder’s Equity (P)
Total Assets
Ratio
2009
532.395M
1,139.851M
46.71%
2008
539.645M
909.117M
59.36%
Liquidity ratio indicates the proportion of total assets which can be readily converted into cash. It
also measures the extent to which the assets can be converted into cash to meet its liquidity
requirements. Liquid assets include cash and other cash items. Below is the computation for
Liquidity Ratio:
Total Liquid Assets (P)
Total Assets
Ratio
2009
2008
12.322M
1,139.851M
1.08%
6.268M
909.117M
0.69%
Return on average equity (ROE) ratio decreased from -0.43% in 2008 to -26.44% in 2009. Return on
Average Equity Ratio was calculated as follows:
Total Income (Loss) (P)
Total Average Stockholders’ Equity
Ratio
2009
-140.749M
532.395M
-26.44%
2008
-2.319M
539.645M
-0.43%
Discussion and Analysis of Materials Events
(1)
There are no other known trends, commitments, events or uncertainties that will have a
material impact on ALCO’s liquidity within the next twelve (12) months except for those
mentioned above.
(2)
i.
The present capital expenditure commitments are the planning and development
works on Arya Residences.
ii.
There are no events that will trigger any direct or contingent financial obligation that
is material to the Group or any default or acceleration of an obligation for the period.
(3)
There is nothing to disclose regarding any material off-balance sheet transactions,
arrangements, obligations (including contingent obligations) and other relationships of ALCO
with unconsolidated entities or other persons created during the reporting period.
(4)
There are no other significant elements of income or loss that did not arise from ALCO’s
operations or borrowings for its projects.
(5)
The causes of the material changes of 5% or more from period to period of the following
accounts are as follows:
Balance Sheet Accounts
(i)
Cash and Cash Equivalent – The increase of 97% to P12.322M from
P6.268M was due to increased minimum cash balance employed by the
company to ensure funding for the requirements of the residential project.
(ii)
Receivables – The decrease in receivables related to the nullification of the
Sale and Purchase Agreement dated 28 December 2007 between ALCO and
EIB on the former’s acquisition of the latter’s rights, title and interests in
Exportbank Plaza have been effected in the Parent’s books.
(iii)
Other Current Assets – Increase is mainly due to creditable withholding tax.
(iv)
Property and Equipment – This is due to the construction and completion of
ALCO’s Sales Pavilion.
(v)
Loans Payable -- This was primarily due to new and increased credit facilities
from banks (AUB and Malayan Bank) and private lenders to fund the
requirements of Arya Residences.
(vi)
Accounts Payable and Accrued Expenses – The increase in Accounts Payable
and Accrued Expenses is primarily due to rental costs built by EIB to ALCO
and other obligations arising from the nullification of the Sale and Purchase
Agreement dated 28 December 2007 between ALCO and EIB on the
former’s acquisition of the latter’s rights, title and interests in Exportbank
Plaza.
Income statement
(i)
The decrease in Gross income in 2009 is primarily due to one-time reversals
made in 2008 regarding property impairment losses as well as payables.
(ii)
The higher operating expenses in 2009 is due to reflecting full year corporate
overhead whereas for 2008, the corporate overhead was effectively for only
half a year since the personnel recruitment commenced primarily starting the
second quarter of 2008. From twenty (20) employees in end 2008, ALCO
had thirty (30) employees in 2009.
(iii)
Finance charges increased by P26.408M due to the interest on increased
borrowings.
Summary of Significant Accounting Policies
Basis of Preparation of Financial Statements
The consolidated financial statements of ALCO and its subsidiaries, UPHI, Cazneau Inc.,
Irmo Inc. and Technopod, Inc. have been prepared in accordance with PFRS. PFRS are
adopted by the Financial Reporting Standards Council (FRSC) from the pronouncements
issued by the International Accounting Standards Board.
The consolidated financial statements have been prepared using the measurement bases
specified by PFRS for each type of asset, liability, income and expense. These consolidated
financial statements have been prepared on the historical cost basis.
2009 – As of 31 December 2009, the Group’s total assets stood at P1,139.851M, while its total
liabilities and equity amounted to P670.937M and P468.915M, respectively. Total resources went up
by P230.734M compared to 31 December 2008 level of P909.118M. The increase was brought about
by ALCO’s increased interest in Bonifacio lot identified as Lot 7-1 and expenditures for the planning
and design of its first residential project Arya Residences, including the construction and completion
of ALCO’s Sales Pavilion. Total liabilities increased by P357.695M. This was primarily due to new
and increased credit facilities from banks and private lenders to fund the requirements of Arya
Residences. Total stockholders’ equity amounted to P468.915M in 2009 vis-à-vis P595.876M in 31
December 2008. The decrease is due to necessary operating expenses for the launch of the residential
project.
In terms of profitability, the Group performed lower in 2009 compared to 2008 because of higher
operating expenses and higher interest expenses. The higher operating expenses is attributable to
expenses in connection with Arya Residences as well as the full year’s corporate overhead in 2009
vis-à-vis half year’s level in 2008 since the personnel recruitment commenced primarily starting in the
second quarter of 2008. Finance charges increased by P26.408M due to the interest on increased
borrowings.
Impact of New Amendments and Interpretations to Existing Standards
(a)
Effective in 2009 that are Relevant to the Group
In 2009, the Group adopted the following new revisions and amendments to PFRS that are
relevant to the Group and effective for financial statements for the annual period beginning on
or after 01 January 2009:
PAS 1 (Revised 2007)
PAS 23 (Revised 2007)
Various Standards
:
:
:
Presentation of Financial Statements
Borrowing Costs
2008 Annual Improvements to PFRS
Discussed below are the effects on the financial statements of the new and amended
standards.
(i) PAS 1 (Revised 2007), Presentation of Financial Statements, requires an entity to
present all items of income and expense recognized in the period in a single
statement of comprehensive income or in two statements: a separate statement of
income and a statement of comprehensive income. Income and expense recognized
in profit or loss is presented in the statement of income in the same way as the
previous version of PAS 1. The statement of comprehensive income includes the
profit or loss for the period and each component of income and expense recognized
outside of profit or loss or the “non-owner changes in equity,” which are no longer
allowed to be presented in the statements of changes in equity, classified by nature
(e.g., gains or losses on available-for-sale assets or translation differences related to
foreign operations). A statement showing an entity’s financial position at the
beginning of the previous period is also required when the entity retrospectively
applies an accounting policy or makes a retrospective restatement, or when it
reclassifies items in its financial statements.
The Group’s adoption of PAS 1 (Revised 2007) did not result in any material
adjustments in its financial statements as the change in accounting policy only
affects presentation aspects. The Group has elected to present a single statement of
comprehensive income. Moreover, as a result of retrospective restatement (see
Note 22), the Group presented two comparative periods for the statement of
financial position (see Note 2.1).
(ii) PAS 23 (Revised 2007), Borrowing Costs. Under the revised PAS 23, all
borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset shall be capitalized as part of the cost of that asset.
The option of immediately expensing borrowing costs that qualify for asset
recognition has been removed.
The adoption of this new standard has a significant effect on the 2009 financial
statements, as well as for prior periods, as the Group’s existing accounting policy is
to capitalize all interest directly related to qualifying assets.
(iii) 2008 Annual Improvements to PFRS. The FRSC has adopted the Improvements to
Philippine Financial Reporting Standards 2008 which became effective for the
annual periods beginning on or after 01 January 2009.
Among those
improvements, the following are the amendments relevant to the Group:
• PAS 23 (Amendment), Borrowing Costs. The amendment clarifies the
definition of borrowing costs to include interest expense determined using the
effective interest method under PAS 39. This amendment had no significant
effect on the 2009 financial statements.
• PAS 38 (Amendment), Intangible Assets. The amendment clarifies when to
recognize a prepayment asset, including advertising or promotional
expenditures. In the case of supply of goods, the entity recognizes such
expenditure as an expense when it has a right to access the goods. Also,
prepayment may only be recognized in the event that payment has been made in
advance of obtaining right access to goods or receipt of services. The Group
determined that adoption of this amendment had no material effect on its 2009
financial statements.
• PAS 39 (Amendment), Financial Instruments: Recognition and Measurement.
The definition of financial asset or financial liability at fair value through profit
or loss as it related to items that are held for trading was changed. A financial
asset or liability that is part of a portfolio of financial instruments managed
together with evidence of an actual recent pattern of short-term profit taking is
included in such a portfolio on initial recognition. The Group determined that
adoption of this amendment had no material effect on its 2009 financial
statements.
(b)
Effective in 2009 but not Relevant to the Group
The following amendments, interpretations and improvements to published standards are
mandatory for accounting periods beginning on or after January 1, 2009 but are not relevant
to the Group’s financial statements:
PFRS 1 and PAS 27 (Amendments):
PFRS 2 (Amendment)
PFRS 7 (Amendment)
PFRS 8
Philippine Interpretations
International Financial
Reporting Interpretations
Committee (IFRIC) 13
IFRIC 16
(c)
:
:
:
:
:
PFRS 1 – First Time Adoption of PFRS
and PAS 27 – Consolidated and Separate
Financial Statements
Share-based Payment
Financial Instruments: Disclosures
Operating Segments
Customer Loyalty Programmes
Hedges of a Net Investment in a Foreign
Operation
Effective Subsequent to 2009
There are new PFRS, revisions, amendments, annual improvements and interpretations to
existing standards that are effective for periods subsequent to 2009. Among those,
management has initially determined the following, which the Group will apply in accordance
with their transitional provisions, to be relevant to its financial statements:
(i) Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement – Amendment to IFRIC 14 (effective on or before 01 January 2011).
This interpretation addresses unintended consequences that can arise from the
previous requirements when an entity prepays future contributions into a defined
benefit pension plan. It sets out guidance on when an entity recognizes an asset in
relation to a PAS 19 surplus for defined benefit plans that are subject to a minimum
funding requirement. Management does not expect that its future adoption of the
amendment will have a material effect on its financial statements because it does
not usually make substantial advance contribution to its retirement fund.
(ii) Philippine Interpretation IFRIC 18, Transfers of Assets from Customers (effective
from 01 July 2009). This interpretation provides guidance on how to account for
items of property, plant and equipment received from customers; or cash that is
received and used to acquire or construct specific assets. It is only applicable to
agreements in which an entity receives from a customer such assets that the entity
must either use to connect the customer to a network or to provide ongoing access
to a supply of goods or services or both. Management does not anticipate the
adoption of the interpretation to have material impact on its financial statements.
(iii) Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity
Instruments (effective on or after 01 July 2010). It addresses accounting by an
entity when the terms of a financial liability are renegotiated and result in the entity
issuing equity instruments to a creditor to extinguish all or part of the financial
liability. These transactions are sometimes referred to as “debt for equity”
exchanges or swaps, and have happened with increased regularity during the
financial crisis. The interpretation requires the debtor to account for a financial
liability which is extinguished by equity instruments as follows:
•
the issue of equity instruments to a creditor to extinguish all (or part of a
financial liability) is consideration paid in accordance with PAS 39;
•
the entity measures the equity instruments issued at fair value, unless this
cannot be reliably measured;
•
if the fair value of the equity instruments cannot be reliably measured, then the
fair value of the financial liability extinguished is used; and,
•
the difference between the carrying amount of the financial liability
extinguished and the consideration paid is recognized in profit or loss.
Management has determined that the adoption of the interpretation will not have a
material effect on it financial statements as it does not normally extinguish financial
liabilities through equity swap.
(iv) 2009 Annual Improvements to PFRS. The FRSC has adopted the Improvements to
Philippine Financial Reporting Standards 2009. Most of these amendments
became effective for annual periods beginning on or after 01 July 2009 or 01
January 2010. Among those improvements, only the following amendments were
identified to be relevant to the Group’s financial statements:
•
PAS 1 (Amendment), Presentation of Financial Statements (effective from
01 January 2010). The amendment clarifies the current and non-current
classification of a liability that can, at the option of the counterparty, be settled
by the issue of the entity’s equity instruments. The Group will apply the
amendment in its 2010 financial statements but expects there to be no material
impact in the Group’s financial statements.
•
PAS 7 (Amendment), Statement of Cash Flows (effective from 01 January
2010). The amendment clarifies that only an expenditure that results in a
recognized asset can be classified as a cash flow from investing activities. The
amendment will not have a material impact on the financial statements since
only recognized assets are classified by the Group as cash flow from investing
activities.
•
PAS 17 (Amendment), Leases (effective from 01 January 2010). The
amendment 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. Management has initially determined that this
will not have material impact on the financial statements since the Group does
not enter into a lease agreement that includes both land and building.
•
PAS 18 (Amendment), Revenue (effective from 01 January 2010). The
amendment provides guidance on determining whether an entity is acting as a
principal or as an agent. Management will apply this amendment prospectively
in its 2010 financial statements.
Risk Management Objectives And Policies
The Group is exposed to a variety of financial risks which result from both its operating and investing
activities. The Group’s risk management is coordinated with the Board of Directors and focuses on
actively securing the Group’s short- to medium-term cash flows by minimizing the exposure to
financial markets. Long-term financial investments are managed to generate lasting returns.
The Group does not actively engage in the trading of financial assets for speculative purposes nor
does it write options. The most significant financial risks to which the Group is exposed to is
described below.
Credit Risk Analysis
The Group and the Parent’s exposure to credit risk is limited to the carrying amount of financial assets
recognized as of 31 December 2009 as summarized below:
Notes
Cash in bank
Receivables - net
5
6
Advances to subsidiaries - net
Deposit in escrow account
8
10
Group
P
Parent
12,313,772
16,591,070
P 12,121,272
16,591,070
183,081,600
256,345,759
183,081,600
P 211,986,442
P 468,139,701
This compares to the Group and the Parent’s exposure to credit risk limited to the carrying amount of
financial assets recognized as of 31 December 2008 and 2007, respectively, as follows:
2008
Notes
Cash in bank
Receivables - net
5
6
Advances to subsidiaries - net
Deposit in escrow account
8
10
Group
P
Parent
6,260,100
80,320,343
P 6,072,600
80,320,343
183,081,600
81,389,534
183,081,600
P 269,662,043
P
350,864,077
2007
Notes
Cash in bank
Receivables – net
Advances to a subsidiary
5
6
8
Group
P
P
13,628,670
40,992
13,669,662
Parent
P 13,628,670
40,992
74,663,438
P 88,333,100
Generally, the maximum credit risk exposure of financial assets is the carrying amount of the
financial assets as shown in the statements of financial position (or in the detailed analysis provided in
the notes to the financial statements). Credit risk, therefore, is only disclosed in circumstances where
the maximum potential loss differs significantly from the financial asset’s carrying amount.
Cash in banks are insured by the Philippine Deposit Insurance Corporation up to a maximum
coverage of P500,000.00 per depositor per banking institution. For advances to subsidiaries, the
Group is not exposed to significant risk more than the carrying amount of the advances since such net
assets of the subsidiary are sufficient to cover the Group’s investments and advances.
Liquidity Risk
Liquidity risk is the risk that there are insufficient funds available to adequately meet the credit
demands of the Group’s customers and repay liabilities on maturity.
The Group closely monitors the current and prospective maturity structure of its resources and
liabilities and the market condition to guide pricing and asset/liability allocation strategies to manage
its liquidity risks.
The analysis of the maturity profile of financial assets and financial liabilities as of 31 December 2009
is presented below:
Group
Current
Within
6 Months
Financial Assets:
Cash
Receivables
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
Non-current
1 to 5
Later than
Years
5 years
6 to 12
Months
12,321,772
16,591,070
28,912,842
P
-
P
-
P
-
520,674,278
-
-
-
150,262,495
670,936,495
-
-
-
-
Total gap
(P
642,023,653) P
P
Cumulative gap
(P
642,023,653) (P 642,023,653 ) (P 642,023,653) (P 642,023,653 )
Current
Within
6 to 12
6 Months
Months
Financial Assets:
Cash
Receivables
Advances to subsidiaries
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
Subscription payable
12,134,272
16,591,070
28,725,342
P
-
-
P
-
Non-current
1 to 5
Later than
Years
5 years
P
P
256,345,759
256,345,759
-
520,674,278
-
-
-
89,991,254
562,500
611,228,032
-
-
-
-
Total gap
(P
582,502,690 ) P
Cumulative gap
(P
582,502,690) (P 582,502,690)
P 256,345,759 P
-
(P 326,156,931) (P 326,156,931)
This compares to the analysis of the concentration of financial assets and financial liabilities as of 31
December 2008 and 2007, respectively, as follows:
Current
Within
6 Months
Financial Assets:
Cash
Receivables
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
Total gap
(P
6,268,100
77,757,566
84,025,666
Non-current
1 to 5
Later than
Years
5 Years
6 to 12
Months
P
-
P
-
P
-
212,187,188
-
-
-
101,054,517
313,241,705
-
-
-
229,216,039) P
-
P
-
P
-
Cumulative gap
(P
229,216,039) (P 229,216,039 ) (P 229,216,039)(P 229,216,039 )
Current
Within
6 Months
Financial Assets:
Cash
Receivables
Advances to subsidiaries
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
Subscription payable
6,080,600
77,757,566
83,838,166
P
-
P
81,398,534
81,398,534
-
-
-
-
43,577,263
562,500
256,326,951
-
-
-
-
(P
172,488,785) P
Cumulative gap
(P
172,488,785) (P 172,488,785)
Current
Within
6 Months
P
P
212,187,188
Total gap
Financial Assets:
Cash
Receivables
Total
Non-current
1 to 5
Later than
Years
5 Years
6 to 12
Months
13,633,670
40,992
13,674,662
P
P
(P
81,398,534 P
-
91,090,251) (P 91,090,251)
Group – December 31, 2007
Non-current
6 to 12
1 to 5
Later than
Months
Years
5 Years
-
P
-
P
-
Financial Liabilities:
Accounts payable, accrued expenses
and other liabilities
37,597,638
-
Total gap
(P
23,922,976)
Cumulative gap
(P
23,922,976) (P 23,922,976)
Current
Within
6 Months
Financial Assets:
Cash
Receivables
Advances to subsidiaries
Total
P
13,633,670
40,992
13,674,662
P
P
(P
-
P
23,922,976) (P
23,922,976)
Parent – December 31, 2007
Non-current
6 to 12
1 to 5
Later than
Months
Years
5 Years
-
P
P
74,663,438
74,663,438
-
Financial Liabilities:
Accounts payable, accrued expenses
and other liabilities
29,141,161
-
Total gap
(P
15,466,499 ) P
Cumulative gap
(P
15,466,499 ) ( P 15,466,499)
P
74,663,438 P
P
59,196,939 P
59,196,939
2008 – As of 31 December 2008, the Group’s total assets stood at P909.118M, while its total
liabilities and equity amounted to P313.242M and P595.876M, respectively. Total resources went up
by P388.105M compared to 31 December 2007 level of P521.012M. The increase was brought about
by the deposit in shares in Manchesterland of P183.061M, purchase of transportation and office
equipment and FFE amounting to P12.733M, acquisition of property in Tagaytay and Batangas of
P45.020M and increase in receivables of P74.079M from ALCO. Total liabilities increased by
P275.644M. The major causes include credit facility from Asia United Bank (AUB) and borrowings
from private lenders. Total stockholders’ equity amounted to P595.876M in 2008 and P483.415M in
31 December 2007 . Increase of P112.461M is due to capital infusion of new investors. ALCO’s
increase of its authorized capital stock by P2.7 Billion was approved by the SEC on 24 December
2008.
In terms of profitability, the Group performed lower in 2008 compared to 2007. ALCO’s net income
as Parent in 2008 was P-0.572M as compared to P159.307M 2007.
Gross income of P72.829M in 2008 is mainly attributable to the recovery of its impairment of asset in
Fort Bonifacio amounting to P52.70M and recovery of P15M provision for OMP accounts. Operating
expenses in 2008 went up by approximately P31.637M from 2007 due to salaries and related accounts
brought about by the increase of manpower from one (1) employee in 2007 to fifteen (15) employees
in 2008. Finance charges increased by P7.442M due to the AUB loan and various short term notes.
2007 – As of 31 December 2007, the Group’s total assets stood at P521M Billion, while its total
liabilities and equity amounted to P37.60M and P483,415M, respectively. Total resources is
approximate the 2006 level. Realized gain on sale of properties in 2007 amounting to P191.5M
represents realization of the remaining unearned revenue recognized by the Parent in 2002 related to
the sale of certain condominium units of Exportbank Plaza held then by the Parent. The gain from the
said sale was previously deferred by the Parent, the recognition of which will be made upon disposal
of such property to a third party or through depreciation charges taken up by EIB. However, as a
result of EIB’s loss of control over the Parent in 2007, the remaining unearned revenues were fully
recognized in the same year.
On 04 December 2007, the SEC approved the decrease in the capital stock of the Parent from
P2,000,000,000.00 divided into 2,000,000,000 shares with par value of P1.00 per share to
P246,257,136 divided into 1,368,095,199 shares with the par value of P0.18 each. Also, the SEC
approved to apply against the deficit balance the reduction in par value of the capital stock of the
Parent amounting to P1,121.8M.
In terms of profitability, the Group performed better in 2007 compared to 2006. ALCO’s net income
in 2007 was P159.307M compared to 2006 net loss of P125.97M. The main reason for this is the
abovementioned realized gain on sale of property.
COMPARABLE DISCUSSION OF INTERIM PERIOD AS OF 31 MARCH 2010
Key Performance Indicators
March 2010
December 2009
38.64%
46.71%
Liquid to Total Assets Ratio
3.24%
1.08%
Profitability
Return on Average Equity
-5.17%
-26.44%
Capital Adequacy Ratio
Total Equity to Total Assets Ratio
Liquidity
The Group’s Capital Adequacy Ratio (CAR) stood at 38.64%, lower by 8.07% than last year’s level
of 46.71 %. CAR is computed by dividing the Total Average Stockholder’s Equity over the Total
Assets:
Total Average Stockholder’s Equity
Total Assets
March 2010
December 2009
P464.398 Mn
P1,201.921 Mn
P532.395 Mn__
P1,139.851 Mn
Ratio
38.64%
46.71%
Liquidity ratio indicates the proportion of total assets which can be readily converted into cash. It also
measures the extent to which the assets can be converted into cash to meet its liquidity requirements.
Liquid assets include cash and other cash items. The Group’s Liquidity ratio for the period is 3.24%
and is favorably higher by 2.16% than the ratio of 1.08% during end 2009. Below is the computation
for the Liquidity Ratio:
Total Liquid Assets
Total Assets
Ratio
March 2010
December 2009
P38.928 Mn
P1,201.921 Mn
3.24%
P12.322 Mn
P1,139.851 Mn
1.08%
The ratio of the Group’s return on average equity (ROE) increased from negative 26.44% in
December 2009 to negative 5.17 % in March 2010. The Return on Average Equity Ratio is
calculated as follows:
Total Income (Loss)
Total Average Stockholders’ Equity
Ratio
March 2010
December 2009
P(24,032.431 Mn)
P464,398 Mn
-5.17%
P(140.749Mn)
P532.395Mn
-26.44%
Discussion and Analysis of Material Events
(1)
There are no other known trends, commitments, events or uncertainties that will have a
material impact on ALCO’s liquidity within the next twelve (12) months except for those
mentioned above.
(2)
i.
The present capital expenditure commitments are the planning and development
works on Arya Residences.
ii.
There are no events that will trigger any direct or contingent financial obligation that
is material to the Group or any default or acceleration of an obligation for the period.
(3)
There is nothing to disclose regarding any material off-balance sheet transactions,
arrangements, obligations (including contingent obligations) and other relationships of ALCO
with unconsolidated entities or other persons created during the reporting period.
(4)
There are no other significant elements of income or loss that did not arise from ALCO’s
operations or borrowings for its projects.
(5)
The causes of the material changes of 5% or more from period to period of the following
accounts are as follows:
Balance Sheet Accounts – 31 March 2010 versus 31 December 2009 (Audited)
(i)
216% increase in Cash and Cash Equivalent – largely due to collection from
pre-selling activities.
(ii)
52% increase in Receivables – primarily due to advances to suppliers,
contractors and employees.
(iii)
26% increase in Other Current Assets – mainly due to creditable withholding
taxes.
(iv)
49% increase in Current Loans Payable – largely due to proceeds from short
term notes payable and bank loans.
(v)
54% decrease in Accounts Payable and Accrued Expenses – due to settlement
of various outstanding payables.
(vi)
Capital Stock – P15.000 Mn was collected from existing subscriptions.
(vii)
Retained Earnings – The Group registered net loss of P24.032 Mn for the first
quarter of 2010.
Income Statement – 1st Quarter 2010 versus 1st Quarter 2009
(i)
1,029% increase in Gross Income – primarily due to rental revenues for the
period.
(ii)
73.49% decrease in Taxes and Licenses – lower due to payment of
documentary stamp tax for additional subscribed capital last year.
(iii)
1,680% increase in Association Dues – mainly an effect of transfer of office
in Picadilly Star Building in Taguig City and the operation of the Sales
Pavilion for Arya Residences also in Taguig City.
(iv)
44% increase in Management and Professional Fees - due to engagement of
consultants related to operations.
The Group’s revenues rose ten-fold to P0.276 Mn in the first quarter of 2010 from P0.024 Mn for the
same period in 2009 on account of rental income. Operating expenses favorably decreased by 7% to
P15.271Mn from P16.342Mn for the same comparable period due to lower taxes and licenses.
Given the start-up nature of ALCO’s operations, significant upfront investments were made for its
pipeline projects consisting mainly of Arya Residences in 2009. The Group incurred borrowings in
the second half of 2009 which increased finance costs in the first quarter of 2010. The Group
registered net loss of P24.032Mn for the first quarter of 2010, 9.6% higher than the net loss of
P21.927Mn for the same period in 2009.
The Group’s aggregate resources as of 31 March 2010 are P1.202 Bn, which is higher by 11% or
P119.644 Mn, than last year’s P1.140 Bn.
Market Information
ALCO’s common shares are traded in the Philippine Stock Exchange. The volume of its shares
traded from 2003 to 2009 has been negligible due to market conditions. On 24 May 2007, ALCO
sought the voluntary suspension of trading of its shares until such time as the SEC approves its capital
reorganization and the listing of its additional shares in the Exchange. The suspension was lifted last
08 January 2009.
The following are the highlights of quarterly trading for the periods of 2007 to 2009:
Quarter
1
2
3
High
.26
.23
.25
2009
Low
.09
.14
.125
Close
.17
.14
.155
High
----
2008
Low
----
Close
----
High
.26
.31
.28
2007
Low
.16
.18
.2050
Close
.20
.28
.27
4
.29
.155
.160
--
--
--
--
--
--
The highlights of trading for the period of 04 January 2010 to 30 April 2010 are as follows:
2010
January
February
March
April
High
.30
.29
.24
.23
Low
.1350
.1850
.1950
.1950
Close
.27
.19
.1950
.20
Security Holders
The number of shareholders of record as of the date of this Report is 2,181 and common shares
outstanding are 5,118,095,199.
Article Seventh of ALCO’s Articles of Incorporation provides that ALCO’s common shares of stock
are not subject to pre-emptive rights of the stockholders and may therefore be issued in such
quantities at such times as the Board of Directors may determine. Article Tenth also provides that no
issuance or transfer of shares of stock shall be allowed if it will reduce the ownership of Filipino
citizens to less than the percentage required by law.
ALCO’s top 20 stockholders as of 31 December 2009 are as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Name of Shareholders
AO Capital Holdings I
Export and Industry Bank, Inc.
The First Resources Management and Securities Corp. (PCD)
Elite Holdings, Inc.
Vista Holdings Corporation
Kuok Khoon Loong
E.Securities, Inc., (Under PCD)
The First Resources Mgt. And Sec. Corp.
Keng, Tina
Investors Sec., Inc. (PCD)
Bartolome, Rosario
EQL Properties, Inc.
J.M. Barcelon & Co., Inc (PCD)
AB Capital Securities, Inc. (Under PCD)
Abacus Securities Corp. (PCD)
Citiseconline.Com, Inc. (PCD)
Ansaldo Godinez & Co., Inc. (Under PCD)
Angping & Associates Sec., Inc. (PCD)
I.Aclerman & Co., Inc. (PCD)
Wealth Securities, Inc. (Under PCD)
TOTAL
No. of Shares
2,983,730,000
981,699,817
363,820,237
119,810,000
100,000,000
50,000,000
43,504,426
37,500,000
25,000,000
17,797,850
15,231,750
14,671,125
12,352,374
11,042,273
10,315,169
9,829,190
9,125,087
7,969,845
7,960,274
7,464,150
4,828,823,567
%
58.30
19.18
7.11
2.34
1.95
0.98
0.85
0.73
0.49
0.35
0.30
0.29
0.24
0.22
0.20
0.19
0.18
0.16
0.16
0.15
There is no information available as of the date of this Report which relates to acquisition, business
combination or other reorganization which could affect the present holdings of ALCO’s shareholders.
Dividends
There were no dividends declared in the years 2007, 2008 and 2009.
Whether ALCO plans to declare dividends within the next twelve (12) months is uncertain but the
same shall be subject to Section 2, Article VII of ALCO’s By-laws which provides, as follows:
“Dividends shall be declared from the unrestricted retained earnings of the Corporation,
including stock dividends from paid-in surplus, at such time and in such amounts as the Board
of Directors may determine. Dividend declarations shall not in any manner reduce the paid-in
capital of the Corporation. Unless otherwise resolved by the Board of Directors, a fraction of
one-half or more of a share owing to a stockholder resulting from a declaration of stock
dividends shall be issued as one full share, while a fraction of less than one-half share shall be
disregarded.
“Declaration of stock dividends shall be submitted to a stockholders’ meeting for approval
within forty (40) business days from such declaration by the Board of Directors. The record
date for stock dividends shall not be earlier than the date of approval by the stockholders.
“Declaration of cash dividends shall have a record date which shall not be less than ten (10)
business days but not more than thirty (30) business days from the date of declaration by the
Board of Directors.”
Recent Sales of Unregistered or Exempt Securities
There were no sales within the past three (3) years of unregistered securities of ALCO which were not
registered under the Code.
CORPORATE GOVERNANCE
ALCO’s compliance with its Manual of Corporate Governance is monitored by its Compliance
Officer, who is tasked, among others, to determine and measure the compliance with the said Manual.
ALCO’s Board of Directors has not adopted any other specific measure to comply with leading
practices on good corporate governance.
Immediately after the Annual Stockholders’ Meeting on 16 October 2009, the Board of Directors
formed several committees to perform some of its functions in aid of good governance and pursuant
to the mandates of the Securities and Exchange Commission, namely the Audit Committee4, the Stock
Option and Compensation Committee5, and the Nomination Committee6.
For 2009, the Philippine Stock Exchange, Inc. imposed on ALCO monetary penalties equivalent to
P100,000.00 for its non-disclosure of the execution of subscription agreements of its private
placement investors.
(Nothing follows.)
4
Composed of Messrs. Rene R. Fuentes (Chairman), Ernest K. Cuyegkeng and Omar T. Salvo.
Composed of Messrs. Jaime C. Gonzalez (Chairman), Dionisio E. Carpio, Jr. and Ernest K. Cuyegkeng, and
Ms. Angela de Villa Lacson (Vice Chair).
6
Composed of Messrs. Jaime C. Gonzalez (Chairman), Dionisio E. Carpio, Jr. and Rene R. Fuentes.
5
SIGNATUREPACE
Pursuant
to the requirements
of Section17 of the SecuritiesRegulations
Codeand Section141ofthe
CoryorulionCode,thisMamgementRepot is signedonbehalfof rheissuerin Trguig City on this
dayofJune2010.
ARTHALANDCORPORATION
By:
JAIM
Chair
CTC
ONZALEZ
2157100/01.15.1o/Manila
/&,-*
DE VILLA LACSON
o. 01998769/01.13.1o,Manila
N Q. TEJADA
'&nance
olfcer
No.01851
828/01.08.1o/Manila
SUBSCRIBEDAND SWORNto beforeme this /lstday of JI]ne2010at Taguig City, Philippines,
affiantsexlibiting theirrespectiveCommunityTa.xCertiflcatesasaboveindicated.
./:
-d'",r'r".'
j(.{
rage No:
K
I
BookNo.
. Sedesof20l0.
uo,*f,[[,*,*o
*ffi#itffi
ALCO MaragementReporr 20
o
AnruntaNB
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
(ALCO) is responsiblefor all
The Managemenrof ARTHALAND coRPoRATIoN
informationand representations
contained;n the financialstatementsfor the years ended3l
Decemb€r2009 and 2008.The financialstaiements
havebeenpreparedin accordance
with the
financialfepoting standardsin the Philippinesand reflect amountsthat are basedon the best
estimatesand informed judgnent of Managementwith an appropriateconsiderat;onto
nateriality.
ln this regard,Managementmaintainsa systemof accountingand reportingrvhichprovidesfor
the necessaryintemalconlrolsto ensurethat transactions
are properlyauthoized and recorded,
assetsare safeguarded
againstunauthorized
use, and dispositionand liabilitiesare recognized.
The Managementl;kewisedisclosesto ALCO's Audit Com,'nittee
and/orBoardofDirectors and
to iis exremalauditor (i) all significantdeficienciesin the designor operationofinternal controls
that could adverselyaffect its ability lo record,processand repot financialdata;(ii) mateial
weaknessin the intemal controls; and, (iii) any fraud that involves Managementor other
employees
who havesign;ficanlrolesin intemalcontrol.
The BoardofDirectorsreviewsthe financialstatemenis.before
suchstatements
are aDDroved
and
submittedto the stockholders
of the company.
Punongbaynn
and Araullo,the independent
auditorappointedby ihe stockiolders,hasexamined
ALCO'5 financial statemenlsin accordancewith Philippine Standardson Auditing and has
its opinionon the faimessofpresentationuponconpletion of suchexamination,in its
expressed
reportto the BoardofDirectorsandstockholders.
Signedunderoathb) rhefollowing:
t
JAIM
GONZALEZ
ffCl
-t'l
il,,'',,-/[o,l1,7
.FgELADE\rLLA LACSON
/
:1!10Ar NtrA
M r*!r{dii-L**
Cf,C:
Q. TEJADA
Financeolrtcer
-&loAsNiIA
MrY1 B2n10
Sr BSCRIBTD
ANDswoRN ro uetore
mA'rf,ib
Xi May 2010.aifianrs
erhibirinb
,,,<,,
_li,i
respective
ConmunilyTaxCeflificales
asaboveindicated.
DoclNo. )/D
Pase
No. b\
BookNo. frl-ll
Series
of2010.
NOTASYtrUBLIC
51, ?O1O
UNTILDESEII']ER
PTR09t5lS2-r Ot-d4- 20t0
CIT}
F * P gL!S. TUI{IUhAN,|AI,IUI6
8/FPi€d ySl4Buldiq,4hAvenue6mer2TsSL
Bonracocloba
(632)403.6908
Ct Taguig
Cly 1634 I: (632)4036910/403-69i5'F
03.6909
n*rrHo*
LINDERTAKING
ARTIIALAND CORPORATION (ALCO) undefiakesto provide, without
charge,a copyof its AnnualRepoft,SECForm l7-A, to anypersonsolicitinga copy
thereofupon
writtenrequest
addressed
to theOfficeofthe CorponteSeoretary
ofALCO
with principalofficeaddress
at the 8,tr PicadillyStarBuilding,4s Avenuecomer27t
Sheet,BonifacioGlobalCit, TaguigCify.
. GONZAIEZ
of the Board
dz,,--
DE I'ILLA LACSON
Q. TEJADA
Oficer
8/FPicadilySidBudnq,4hAvenuecomer2TsSl,smihciocobalCV,TeuigCity1634
(a403,0908
T: (632)403-6910/403-6915'F
/ 403.6909
ARTHALAND CORPORATION
(Formerly, EIB Realty Developers, Inc.)
(A Subsidiary of AO Capital Holdings, Inc.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Philippine Pesos)
1.
CORPORATE INFORMATION
1.1 General
Arthaland Corporation (“ALCO” or the Parent, formerly, EIB Realty Developers,
Inc.) was incorporated in the Philippines to engage in real estate development
including building and development of residential, industrial and commercial
properties. Prior to December 28, 2007, the Parent was a majority owned subsidiary
(71.75%) of Export and Industry Bank, Inc. (EIB). On December 28, 2007, the
Parent ceased to be a subsidiary of EIB as a result of the subscription of new
shareholders of the Parent which reduced EIB’s shareholdings to less than 19.2%
(see Note 19.2). ALCO became a subsidiary of AO Capital Holdings, Inc. (AOCHI)
with 58% ownership.
The Parent’s shares of stock are listed in the Philippine Stock Exchange (PSE).
1.2 Change in Corporate Name
On May 6, 2008, the Parent’s Board of Directors (BOD) resolved that the name of
the Parent be changed to Arthaland Corporation and consequently amend its articles
of incorporation and by-laws to reflect the change in corporate name. On
November 27, 2008, the Parent’s stockholders approved the change in corporate
name.
Subsequently, on January 26, 2009, the Securities and Exchange Commission (SEC)
approved the Parent’s application for the change in its corporate name.
1.3 Subsidiaries
The Parent holds interest in the following entities as of December 31, 2009, 2008 and
2007:
Effective % of Ownership
2008
2007
Subsidiaries
Notes
2009
Cazneau, Inc. (Cazneau)
Technopod, Inc. (Technopod)
Irmo, Inc. (Irmo)
Urban Property Holdings,
Inc. (UPHI)
8.1
8.1
8.1
100.00
100.00
100.00
100.00
100.00
100.00
-
8.2
100.00
55.00
55.00
-2-
All of the Parent’s subsidiaries are established primarily to engage in real estate
business development (see Note 8).
As of April 12, 2010, the Parent and its subsidiaries’ (the Group) principal place of
business is located at 8/F, Picadilly Star Building, 4th Avenue corner 27th Street,
Bonifacio Global City, Taguig City. Prior to this date, the Group’s principal place of
business was located at Export Bank Plaza, Chino Roces corner Sen. Gil Puyat
Avenues, Makati City.
1.4 Approval of Financial Statements
The financial statements of the Group and of ALCO for the year ended
December 31, 2009 (including the comparatives for the years ended
December 31, 2008 and 2007) were authorized for issue by the BOD on
May 17, 2010.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been used in the preparation of these
financial statements are summarized below. The policies have been consistently
applied to all the years presented, unless otherwise stated.
2.1
Basis of Preparation of Financial Statements
(a)
Statement of Compliance with Philippine Financial Reporting Standards
The financial statements of the Group have been prepared in accordance with
Philippine Financial Reporting Standards (PFRS). PFRS are adopted by the
Financial Reporting Standards Council (FRSC) from the pronouncements issued
by the International Accounting Standards Board.
The financial statements have been prepared on the historical cost basis. The
measurement bases are more fully described in the accounting policies that
follow.
(b)
Presentation of Financial Statements
The financial statements are presented in accordance with Philippine
Accounting Standard (PAS) 1 (Revised 2007), Presentation of Financial Statements.
The Group presents all items of income and expenses in a single statement of
comprehensive income. Two comparative periods are presented for the
statement of financial position when the Group applies an accounting policy
retrospectively, makes a retrospective restatement of items in its financial
statements, or reclassifies items in the financial statements.
(c)
Functional and Presentation Currency
These financial statements are presented in Philippine pesos, the Group’s
functional currency, and all values represent absolute amounts except when
otherwise indicated.
-3-
Items included in the financial statements of the Group are measured using the
currency of the primary economic environment in which the entity operates
(the functional currency).
2.2 Adoption of New Interpretations, Revisions and Amendments to PFRS
(a)
Effective in 2009 that are Relevant to the Group
In 2009, the Group adopted the following new revisions and amendments to
PFRS that are relevant to the Group and effective for financial statements for
the annual period beginning on or after January 1, 2009:
PAS 1 (Revised 2007)
PAS 23 (Revised 2007)
PFRS 8
Various Standards
:
:
:
:
Presentation of Financial Statements
Borrowing Costs
Operating Segments
2008 Annual Improvements to PFRS
Discussed below are the effects on the financial statements of the revised and
amended standards.
(i) PAS 1 (Revised 2007), Presentation of Financial Statements, requires an entity to
present all items of income and expense recognized in the period in a single
statement of comprehensive income or in two statements: a separate
statement of income and a statement of comprehensive income. Income
and expense recognized in profit or loss is presented in the statement of
income in the same way as the previous version of PAS 1. The statement of
comprehensive income includes the profit or loss for the period and each
component of income and expense recognized outside of profit or loss or
the “non-owner changes in equity,” which are no longer allowed to be
presented in the statement of changes in equity, classified by nature
(e.g., gains or losses on available-for-sale assets or translation differences
related to foreign operations). A statement showing an entity’s financial
position at the beginning of the previous period is also required when the
entity retrospectively applies an accounting policy or makes a retrospective
restatement, or when it reclassifies items in its financial statements.
The Group has elected to present a single statement of comprehensive
income. Moreover, as a result of retrospective restatement (see Note 22),
the Group presented two comparative periods for the statement of financial
position (see Note 2.1).
(ii) PAS 23 (Revised 2007), Borrowing Costs. Under the revised PAS 23, all
borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset shall be capitalized as part of the cost of
that asset. The option of immediately expensing borrowing costs that
qualify for asset recognition has been removed. The adoption of this
revised standard did not have any significant effect on the 2009 financial
statements, as well as for prior periods, as the Group’s existing accounting
policy is to capitalize all interest directly related to qualifying assets.
-4-
(iii) PFRS 8, Operating Segments. Under this new standard, a reportable operating
segment is identified based on the information about the components of the
entity that management uses to make decisions about operating matters. In
addition, segment assets, liabilities and performance, as well as certain
disclosures, are to be measured and presented based on the internal reports
prepared for and reviewed by the chief decision makers. The Group
identifies operating segments and reports on segment assets, liabilities and
performance based on internal management reports therefore, adoption of
this new standard did not have a material impact on the Group’s financial
statements as the Group does not have a reportable operating segment.
(iv) 2008 Annual Improvements to PFRS. The FRSC has adopted the 2008
Improvements to PFRS which became effective for the annual periods
beginning on or after January 1, 2009. Among those improvements, the
following are the amendments relevant to the Group:
• PAS 23 (Amendment), Borrowing Costs. The amendment clarifies the
definition of borrowing costs to include interest expense determined
using the effective interest method under PAS 39. This amendment had
no significant effect on the 2009 financial statements.
• PAS 38 (Amendment), Intangible Assets. The amendment clarifies when to
recognize a prepayment asset, including advertising or promotional
expenditures. In the case of supply of goods, the entity recognizes such
expenditure as an expense when it has a right to access the goods. Also,
prepayment may only be recognized in the event that payment has been
made in advance of obtaining right access to goods or receipt of services.
The Group determined that adoption of this amendment had no material
effect on its 2009 financial statements.
• PAS 39 (Amendment), Financial Instruments: Recognition and Measurement.
The definition of financial asset or financial liability at fair value through
profit or loss as it related to items that are held for trading was changed.
A financial asset or liability that is part of a portfolio of financial
instruments managed together with evidence of an actual recent pattern
of short-term profit taking is included in such a portfolio on initial
recognition. The Group determined that adoption of this amendment
had no material effect on its 2009 financial statements.
(b)
Effective in 2009 but not Relevant to the Group
The following amendments, interpretations and improvements to published
standards are mandatory for accounting periods beginning on or after
January 1, 2009 but are not relevant to the Group’s financial statements:
PFRS 1 and PAS 27
(Amendments)
:
PFRS 2 (Amendment)
PFRS 7 (Amendment)
:
:
PFRS 1 – First Time Adoption of PFRS
and PAS 27 – Consolidated and
Separate Financial Statements
Share-based Payment
Financial Instruments: Disclosures
-5-
Philippine Interpretations
International Financial
Reporting Interpretations
Committee (IFRIC) 13
:
Philippine Interpretations
IFRIC 16
:
(c)
Customer Loyalty Programmes
Hedges of a Net Investment in a
Foreign Operation
Effective Subsequent to 2009
There are new PFRS, revisions, amendments, annual improvements and
interpretations to existing standards that are effective for periods subsequent to
2009. Among those, management has initially determined the following, which
the Group will apply in accordance with their transitional provisions, to be
relevant to its financial statements:
(i) PAS 27 (Revised), Consolidated and Separate Financial Statements (effective from
July 1, 2009). The revised standard requires the effects of all transactions
with non-controlling interests to be recorded in equity if there is no change
in control and these transactions will no longer result in goodwill or gains
and losses. The standard also specifies the accounting when control is lost.
Any remaining interest in the equity is re-measured to fair value, and a gain
or loss is recognized in profit or loss. The Group will apply this revised
standard prospectively from January 1, 2010 to all transactions with noncontrolling interests.
(ii) PFRS 3 (Revised), Business Combinations (effective from July 1, 2009).
The revised standard continues to apply the acquisition method to business
combinations, with some significant changes. For example, all payments
to purchase a business are to be recorded at fair value at the acquisition
date, with contingent payments classified as debt subsequently
re-measured through the income statement. There is a choice on an
acquisition-by-acquisition basis to measure the non-controlling interest in
the acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets. All acquisition-related costs
should be expensed. The Group will apply PFRS 3 (Revised) prospectively
to all business combinations from January 1, 2010.
(iii) Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement – Amendment to IFRIC 14 (effective from January 1, 2011). This
interpretation addresses unintended consequences that can arise from the
previous requirements when an entity prepays future contributions into a
defined benefit pension plan. It sets out guidance on when an entity
recognizes an asset in relation to a PAS 19 surplus for defined benefit plans
that are subject to a minimum funding requirement. Management does not
expect that its future adoption of the amendment will have a material effect
on its financial statements because it does not usually make substantial
advance contribution to its retirement fund.
-6-
(iv) Philippine Interpretation IFRIC 18, Transfers of Assets from Customers
(effective from July 1, 2010). This interpretation provides guidance on how
to account for items of property, plant and equipment received from
customers; or cash that is received and used to acquire or construct specific
assets. It is only applicable to agreements in which an entity receives from a
customer such assets that the entity must either use to connect the customer
to a network or to provide ongoing access to a supply of goods or services
or both. Management does not anticipate the adoption of the interpretation
to have material impact on its financial statements.
(v) Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with
Equity Instruments (effective from July 1, 2010). It addresses accounting by
an entity when the terms of a financial liability are renegotiated and result in
the entity issuing equity instruments to a creditor to extinguish all or part of
the financial liability. These transactions are sometimes referred to as “debt
for equity” exchanges or swaps, and have happened with increased regularity
during the financial crisis. The interpretation requires the debtor to account
for a financial liability which is extinguished by equity instruments as
follows:
•
the issue of equity instruments to a creditor to extinguish all (or part of a
financial liability) is consideration paid in accordance with PAS 39;
•
the entity measures the quity instruments issued at fair value, unless this
cannot be reliably measured;
•
if the fair value of the equity instruments cannot be reliably measured,
then the fair value of the financial liability extinguished is used; and,
•
the difference between the carrying amount of the financial liability
extinguished and the consideration paid is recognized in profit or loss.
Management has determined that the adoption of the interpretation will not
have a material effect on its financial statements as it does not normally
extinguish financial liabilities through equity swap.
(vi) 2009 Annual Improvements to PFRS. The FRSC has adopted the
Improvements to Philippine Financial Reporting Standards 2009. Most of these
amendments became effective for annual periods beginning on or after
July 1, 2009, or January 1, 2010. Among those improvements, only the
following amendments were identified to be relevant to the Group’s
financial statements:
•
PAS 1 (Amendment), Presentation of Financial Statements (effective from
January 1, 2010). The amendment clarifies the current and non-current
classification of a liability that can, at the option of the counterparty, be
settled by the issue of the entity’s equity instruments. The Group will
apply the amendment in its 2010 financial statements but expects it to
have no material impact in the Group’s financial statements.
-7-
•
PAS 7 (Amendment), Statement of Cash Flows (effective from
January 1, 2010). The amendment clarifies that only an expenditure that
results in a recognized asset can be classified as a cash flow from
investing activities. The amendment will not have a material impact on
the financial statements since only recognized assets are classified by the
Group as cash flow from investing activities.
•
PAS 17 (Amendment), Leases (effective from January 1, 2010). The
amendment 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. Management has initially
determined that this will not have material impact on the financial
statements since the Group does not enter into a lease agreement that
includes both land and building.
•
PAS 18 (Amendment), Revenue (effective from January 1, 2010). The
amendment provides guidance on determining whether an entity is
acting as a principal or as an agent. Management will apply this
amendment prospectively in its 2010 financial statements.
•
PFRS 8 (Amendment), Operating Segments (effective from
January 1, 2010). It clarifies that a measure of segment assets should be
disclosed only if the amount is regularly provided to the chief operating
decision maker (CODM). The Group reports total assets for each of its
reportable segments as they are regularly provided to the CODM, hence,
does not expect any significant effect on the Group’s segment reporting.
2.3 Basis of Consolidation
The Parent obtains and exercises control through voting rights. The Group’s
consolidated financial statements comprise the accounts of the Parent, and its
subsidiaries as enumerated in Note 1.3, after the elimination of material intercompany
transactions. All intercompany balances and transactions with subsidiaries, including
income, expenses and dividends, are eliminated in full. Unrealized profits and losses
from intercompany transactions that are recognized in assets are also eliminated in
full. Intercompany losses that indicate impairment are recognized in the financial
statements.
The financial statements of subsidiaries are prepared for the same reporting period as
the Parent, using consistent accounting principles.
The Parent accounts for its investments in subsidiaries, and non-controlling as
follows:
(a) Investments in Subsidiaries
Subsidiaries are all entities over which the Group has the power to control the
financial and operating policies. The Parent obtains and exercises control through
voting rights.
-8-
Subsidiaries are consolidated from the date the Parent obtains control until such
time that such control ceases.
Acquired subsidiaries are subject to the application of the purchase method for
acquisitions. This involves the revaluation at fair value of all identifiable assets
and liabilities, including contingent liabilities of the subsidiary, at the acquisition
date, regardless of whether or not they were recorded in the financial statements
of the subsidiary prior to acquisition. On initial recognition, the assets and
liabilities of the subsidiary are included in the Group’s statement of financial
position at their revalued amounts, which are also used as the bases for
subsequent measurement in accordance with the Group accounting policies.
(b) Transactions with Non-controlling Interests
The Group applies a policy of treating transactions with non-controlling interests
as transactions with parties external to the Group. Disposals of equity
investments to non-controlling interests result in gains and losses for the Group
that are recorded in profit or loss. Purchases of equity shares from
non-controlling interests result in goodwill, being the difference between any
consideration paid and the relevant share acquired in the carrying value of the net
assets of the subsidiary.
2.4 Business Combination
Business acquisitions are accounted for using the purchase method of accounting.
Goodwill acquired in a business combination is initially measured at cost being the
excess of the cost of a business combination over the Group’s interest in the net fair
value of identifiable assets, liabilities and contingent liabilities. Following initial
recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is reviewed for impairment annually, or more frequently if events or
changes in circumstances indicate that the carrying value may be impaired
(see Note 2.15).
Negative goodwill which is the excess of the Group’s interest in the net fair value of
acquired identifiable assets, liabilities and contingent liabilities over cost is charged
directly to income.
Transfers of assets between commonly controlled entities are accounted for under
historical cost accounting.
2.5 Segment Reporting
A business segment is a group of assets and operations engaged in providing products
or services that are subject to risks and returns that are different from those of other
business segments. A geographical segment is engaged in providing products or
services within a particular economic environment that is subject to risks and returns
that are different from those of segments operating in other economic environments.
As of December 31, 2009, 2008 and 2007, the Group has no reportable operating
segment.
-9-
2.6 Financial Assets
Financial assets, which are recognized when the Group becomes a party to the
contractual terms of the financial instrument, include cash and other financial
instruments. Financial assets, other than hedging instruments, are classified into the
following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments and available-for-sale financial assets.
Financial assets are assigned to the different categories by management on initial
recognition, depending on the purpose for which the investments were acquired. The
designation of financial assets is re-evaluated at every reporting period at which date a
choice of classification or accounting treatment is available, subject to compliance
with specific provisions of applicable accounting standards.
Regular purchases and sales of financial assets are recognized on their trade date. All
financial assets that are not classified as at fair value through profit or loss are initially
recognized at fair value plus any directly attributable transaction costs. Financial
assets carried at fair value through profit or loss are initially recorded at fair value and
transaction costs related to it are recognized in profit or loss.
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that 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. They are included in current assets, except for maturities greater than
12 months after the reporting period which are classified as non-current assets.
Loans and receivables are subsequently measured at amortized cost using the effective
interest method, less impairment loss, if any. Any change in their value is recognized
in profit or loss. Impairment loss is provided when there is objective evidence that
the Group will not be able to collect all amounts due to it in accordance with the
original terms of the receivables. The amount of the impairment loss is determined as
the difference between the assets’ carrying amount and the present value of estimated
cash flows.
The Group’s financial assets categorized as loans and receivables are presented as
Cash and Receivables in the statement of financial position. Cash includes cash on
hand, savings and demand deposits.
All income and expenses, relating to financial assets that are recognized in profit or
loss are presented as part of Finance Costs or Finance Income in the statement of
comprehensive income.
Non-compounding interest and other cash flows resulting from holding financial
assets are recognized in profit or loss when earned, regardless of how the related
carrying amount of financial assets is measured. All income relating to financial assets
recognized in profit or loss are presented in the statement of comprehensive income
as part of Interest and Other Income.
Derecognition of financial assets occurs when the rights to receive cash flows from
the financial instruments expire or are transferred and substantially all of the risks and
rewards of ownership have been transferred.
- 10 -
2.7 Real Estate Assets
Real estate assets consist of the acquisition cost of the land (including individual
acquisition costs), actual and estimated development and construction costs and other
necessary costs incurred in bringing the assets ready for sale.
Real estate assets are carried at the lower of cost and net realizable value. Considering
the pricing policies of the Group, cost is considerably lower than the net realizable
value.
Net realizable value is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and the estimated costs necessary to make the
sale.
2.8 Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization and any impairment in value.
The initial cost of property and equipment comprises its purchase price and directly
attributable costs of bringing the asset to working condition for its intended use.
Expenditures for additions, major improvements and renewals are capitalized;
expenditures for repairs and maintenance are charged to expense as incurred.
When assets are sold, retired or otherwise disposed of, their cost and related
accumulated depreciation and impairment losses, if any, are removed from the
accounts and any resulting gain or loss is reflected in profit or loss for the period.
Depreciation is computed on a straight-line basis over the estimated useful life of
property and equipment of five years.
Leasehold improvements are amortized over the estimated useful life of the
improvements or the term of the lease whichever is shorter.
An asset’s carrying amount is written down immediately to its recoverable amount if
the asset’s carrying amount is greater than its estimated recoverable amount
(see Note 2.15).
The residual values and estimated useful lives of property and equipment are reviewed
and adjusted if appropriate, at the end of each reporting period.
An item of property and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain
or loss arising on derecognition of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the item) is included in profit or
loss in the period the item is derecognized.
2.9 Financial Liabilities
Financial liabilities include Loans Payable, Accounts Payable, Accrued Expenses and
Other Liabilities, and Subscriptions Payable, which are measured at amortized cost
using the effective interest rate method.
- 11 -
Financial liabilities are recognized when the Group becomes a party to the contractual
terms of the instrument. All interest-related charges are recognized as an expense in
profit or loss under the caption Finance Costs in the statement of comprehensive
income.
Financial liabilities are initially recognized at their fair value and subsequently
measured at amortized cost.
Financial liabilities are derecognized from the statement of financial position only
when the obligations are extinguished either through discharge, cancellation or
expiration.
2.10 Provisions
Provisions are recognized when present obligations will probably lead to an outflow of
economic resources and these can be estimated reliably even if the timing or amount of
the outflow may still be uncertain. A present obligation arises from the presence of a
legal or constructive commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to settle the present
obligation, based on the most reliable evidence available at the end of the reporting
period, including the risks and uncertainties associated with the present obligation.
Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole.
When time value of money is material, long-term provisions are discounted to their
present values using a pretax rate that reflects market assessments and the risks
specific to the obligation. Provisions are reviewed at the end of each reporting period
and adjusted to reflect the current best estimate.
In those cases where the possible outflow of economic resource as a result of present
obligations is considered improbable or remote, or the amount to be provided for
cannot be measured reliably, no liability is recognized in the financial statements.
Similarly, possible inflows of economic benefits to the Group that do not yet meet the
recognition criteria of an asset are considered contingent assets, hence, are not
recognized in the financial statements. On the other hand, any reimbursement that
the Group can be virtually certain to collect from a third party with respect to the
obligation is recognized as a separate asset not exceeding the amount of the related
provision.
2.11 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amounts reported in the statement
of financial position only when there is a legally enforceable right to offset the
recognized amounts and there is an intention to settle on a net basis, or realize the
asset and settle the liability simultaneously.
- 12 -
2.12 Revenue and Cost Recognition
Revenue is recognized to the extent that the revenue can be reliably measured; it is
probable that the economic benefits will flow to the Group; and the costs incurred or
to be incurred can be measured reliably. In addition, the following specific
recognition criteria must also be met before revenue is recognized:
(a) Sale of real estate assets – Revenue is recognized when the risk and rewards of
ownership of the goods have passed to the buyer.
(b) Rental income – Revenue is recognized on a straight-line basis over the lease term.
(c) Interest – Revenue is recognized as the interest accrues taking into account the
effective yield on the asset.
Costs and expenses are recognized in profit or loss upon utilization of goods or
services or at the date they are incurred. All finance costs are reported in profit or
loss, except capitalized borrowing costs which are included as part of the cost of the
related qualifying asset (see Note 2.16), on an accrual basis.
2.13 Leases
The Group accounts for its leases as follows:
(a) Group as Lesseee
Leases, which do not transfer to the Group substantially all the risks and benefits
of ownership of the asset, are classified as operating leases. Operating lease
payments are recognized as expense in profit or loss on a straight-line basis over
the lease term. Associated costs, such as maintenance and insurance, are expensed
as incurred.
(b) Group as Lessor
Leases, which do not transfer to the lessee substantially all the risks and benefits
of ownership of the asset, are classified as operating leases. Lease income from
operating leases is recognized in profit or loss on a straight-line basis over the
lease term.
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.
2.14 Foreign Currency Transactions
The accounting records of the Group are maintained in Philippine pesos. Foreign
currency transactions during the year are translated into the functional currency at
exchange rates which approximate those prevailing on transaction dates.
- 13 -
Foreign currency gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the statement of comprehensive
income as part of income or loss from operations.
2.15 Impairment of Non-financial Assets
The Group’s property and equipment and the Parent’s investment in subsidiaries are
subject to impairment testing. All other individual assets or cash-generating units are
tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
For purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating units). As a result,
some assets are tested individually for impairment and some are tested at
cash-generating unit level.
Impairment loss is recognized for the amount by which the asset or cash-generating
unit’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of fair value, reflecting market conditions less costs to sell, and value in use,
based on an internal evaluation of discounted cash flow. Impairment loss is charged
pro rata to the other assets in the cash generating unit.
All assets are subsequently reassessed for indications that an impairment loss
previously recognized may no longer exist and the carrying amount of the asset is
adjusted to the recoverable amount resulting in the reversal of the impairment loss.
2.16 Borrowing Costs
Borrowing costs are recognized as expenses in the period in which they are incurred,
except to the extent that they are capitalized. Borrowing costs that are attributable to
the acquisition, construction or production of a qualifying asset (i.e., an asset that
takes a substantial period of time to get ready for its intended use or sale) are
capitalized as part of cost of such asset. The capitalization of borrowing costs
commences when expenditures for the asset and borrowing costs are being incurred
and activities that are necessary to prepare the asset for its intended use or sale are in
progress. Capitalization ceases when all such activities are substantially complete.
2.17 Employee Benefits
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into an independent entity. The Group has no legal or constructive
obligations to pay further contributions after payment of the fixed contribution. The
contributions recognized in respect of defined contribution plans are expensed as they
fall due. Liabilities and assets may be recognized if underpayment or prepayment,
respectively, has occurred and are included in current liabilities or current assets as
they are normally of a short-term nature.
- 14 -
2.18 Interests in a Joint Venture
With respect to the Group’s interest in jointly-controlled operations, the Group
recognizes in its financial statements:
(a) the assets that it controls and the liabilities that it incurs; and,
(b) the expenses that it incurs and its share in the income that it earns from the sale
of goods or services by the joint venture. The Group’s share in the income and
expense of the joint venture are recorded as part of the related income and
expense accounts.
2.19 Income Taxes
Tax expense recognized in profit or loss comprises the sum of deferred tax and
current tax not recognized in other comprehensive income or directly in equity, if any.
Current tax assets or liabilities comprise those claims from, or obligations to, fiscal
authorities relating to the current or prior reporting period, that are uncollected or
unpaid at the end of the reporting period. They are calculated according to the tax
rates and tax laws applicable to the fiscal periods to which they relate, based on the
taxable profit for the year. All changes to current tax assets or liabilities are
recognized as a component of tax expense in profit or loss.
Deferred tax is provided, using the liability method on temporary differences at the
end of the reporting period between the tax base of assets and liabilities and their
carrying amounts for financial reporting purposes. Under the liability method, with
certain exceptions, deferred tax liabilities are recognized for all taxable temporary
differences and deferred tax assets are recognized for all deductible temporary
differences and the carryforward of unused tax losses and unused tax credits to the
extent that it is probable that taxable profit will be available against which the deferred
tax asset can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply to the period when the asset is realized or the liability is settled provided such
tax rates have been enacted or substantively enacted at the end of the reporting
period.
Most changes in deferred tax assets or liabilities are recognized as a component of tax
expense in profit or loss. Only changes in deferred tax assets or liabilities that relate
to items recognized in other comprehensive income or directly in equity are
recognized in other comprehensive income or directly in equity.
- 15 -
2.20 Equity
Capital stock represents 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.
Advances from a stockholder with indefinite repayment term include advances with
which the stockholder has no current or foreseeable intention to collect or the
subsidiary has the sole discretion to repay the obligations.
Retained earnings (deficit) include all current and prior period results as disclosed in
profit or loss in the statement of comprehensive income.
Non-controlling interests represent the portion of the profit or loss and net assets of a
subsidiary attributable to equity interests that are not owned, directly or indirectly
through subsidiaries, by the Parent.
2.21 Earnings (Loss) Per Share
Basic earnings per share is determined by dividing the net income for the year
attributable to common shareholders by the weighted average number of common
shares outstanding during the year, after giving retroactive effect to any stock
dividends declared in the current year. Diluted earnings per share is equal to the basic
earnings per share since the Group has no potential dilutive common shares.
3.
SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
The Group’s financial statements prepared in accordance with PFRS require
management to make judgments and estimates that affect the amounts reported in the
financial statements and related notes. Judgments and estimates 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. Actual results may ultimately differ from these estimates.
3.1
Critical Management Judgments in Applying Accounting Policies
In the process of applying the Group’s accounting policies, management has made the
following judgments, apart from those involving estimation, which have the most
significant effect on the amounts recognized in the financial statements:
(a) Provisions and Contingencies
Judgment is exercised by management to distinguish between provisions and
contingencies. Policies on recognition and disclosure of provision and disclosure
of contingencies are discussed in Note 2.10 and relevant disclosures are presented
in Note 23.
- 16 -
(b) Operating and Finance Leases
The Group has entered into various lease agreements. Critical judgment was
exercised by management to distinguish each lease agreement as either an
operating or finance lease by looking at the transfer or retention of significant risk
and rewards of ownership of the properties covered by the agreements. Failure to
make the right judgment will result in either overstatement or understatement of
assets and liabilities.
3.2 Key Sources of Estimation Uncertainty
The following are the key assumptions concerning the future, and other key sources
of estimation uncertainty at the end of 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.
(a) Useful Lives of Property and Equipment
The Group estimates the useful lives of property and equipment based on the
period over which the assets are expected to be available for use. The estimated
useful lives of property and equipment are reviewed periodically and are updated
if expectations differ from previous estimates due to physical wear and tear,
technical or commercial obsolescence and legal or other limits on the use of the
assets. The carrying amounts of property and equipment are analyzed in Note 9.
Based on management’s assessment as at December 31, 2009, there is no change
in estimated useful lives of property and equipment during the year. Actual
results, however, may vary due to changes in estimates brought about by changes
in factors mentioned above.
(b) Allowance for Impairment of Receivables and Advances to Subsidiaries
Allowance is made for specific and groups of accounts, where objective evidence
of impairment exists. The Group evaluates these accounts based on available
facts and circumstances, including, but not limited to, the length of the Group’s
relationship with the customers, the customers’ current credit status based on
third party credit reports and known market forces, average age of accounts,
collection experience and historical loss experience.
The Group and the Parent’s impairment losses on receivables amounted to
P985,413 in 2007 (nil in 2009 and 2008). Allowance for impairment on
receivables in 2007 amounting to P985,413 was subsequently written-off in 2008.
No impairment loss on Advances to Subsidiaries was recognized in 2009, 2008
and 2007. Allowance for impairment in Advances to Subsidiaries amounted to
P3,261,249 as of December 31, 2009, 2008 and 2007 (see Note 8).
- 17 -
(c) Realizable Amount of Deferred Tax Assets
The Group reviews its deferred tax assets at the end of each reporting period and
reduces the carrying amount 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
asset to be utilized. The carrying value of deferred tax assets, which management
assessed not to be fully utilized within the next two to three years, as of
December 31, 2009, 2008 and 2007 is disclosed in Note 17.1.
(d) Impairment of Non-financial Assets
The Group’s policy on estimating the impairment of non-financial assets is
discussed in Note 2.15. Though management believes that the assumptions used
in the estimation of fair values reflected in the 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 effect on the results of operations.
The Group and the Parent’s recovery of impairment losses on real estate assets
amounted to P52.7 million in 2008 while impairment losses amounted to
P0.9 million in 2007 (nil in 2009) (see Note 7).
4.
RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group is exposed to a variety of financial risks which result from both its
operating and investing activities. The Group’s risk management is coordinated with
the BOD, and focuses on actively securing the Group’s short- to medium-term cash
flows by minimizing the exposure to financial markets.
The Group does not engage in the trading of financial assets for speculative purposes
nor does it write options. The most significant financial risks to which the Group is
exposed to as described below and in the succeeding pages.
4.1
Credit Risk
The Group and the Parent’s exposure to credit risk is limited to the carrying amount
of financial assets recognized as of December 31, 2009 as summarized below:
Group
Notes
Cash in bank
Receivables - net
Advances to subsidiaries - net
Deposit in escrow account
5
6
8
10
P
12,313,772
16,591,070
183,081,600
P 211,986,442
Parent
P
12,121,272
16,591,070
256,345,759
183,081,600
P 468,139,701
- 18 -
This compares to the Group and the Parent’s exposure to credit risk limited to the
carrying amount of financial assets recognized as of December 31, 2008 and 2007,
respectively, as follows:
2008
Notes
Cash in bank
Receivables - net
Advances to subsidiaries - net
Deposit in escrow account
5
6
8
10
Group
P
Parent
6,260,100
77,757,566
183,081,600
P 267,099,266
P
6,072,600
77,757,566
81,389,534
183,081,600
P 348,301,300
2007
Notes
Cash in bank
Receivables – net
Advances to a subsidiary
5
6
8
Group
Parent
P
13,628,670
40,992
-
P
13,628,670
40,992
74,663,438
P
13,669,662
P
88,333,100
Generally, the maximum credit risk exposure of financial assets is the carrying amount
of the financial assets as shown in the statements of financial position (or in the
detailed analysis provided in the notes to the financial statements). Credit risk,
therefore, is only disclosed in circumstances where the maximum potential loss differs
significantly from the financial asset’s carrying amount.
Cash in banks are insured by the Philippine Deposit Insurance Corporation up to a
maximum coverage of P500,000 per depositor per banking institution. For advances
to subsidiaries, the Group is not exposed to significant risk more than the carrying
amount of the advances since such net assets of the subsidiary are sufficient to cover
the Group’s investments and advances.
4.2 Liquidity Risk
Liquidity risk is the risk that there are insufficient funds available to adequately meet
the credit demands of the Group’s customers and repay liabilities on maturity.
The Group closely monitors the current and prospective maturity structure of its
resources and liabilities and the market condition to guide pricing and asset/liability
allocation strategies to manage its liquidity risks.
- 19 The analysis of the maturity profile of financial assets and financial liabilities as of
December 31, 2009 are presented below:
Group
Current
Within
6 Months
Financial Assets:
Cash
Receivables
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
Non-current
1 to 5
Later than
Years
5 years
6 to 12
Months
12,321,772
16,591,070
28,912,842
P
-
P
-
P
-
173,331,266
197,343,012
150,000,000
-
150,262,495
323,593,761
197,343,012
150,000,000
-
150,000,000 ) P
-
Total gap
(P
294,680,919) (P 197,343,012 ) ( P
Cumulative gap
(P
294,680,919) (P 492,023,931 ) (P 642,023,931)( P 642,023,931 )
Parent
Current
Within
6 Months
Financial Assets:
Cash
Receivables
Advances to subsidiaries
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
Subscription payable
Non-current
1 to 5
Later than
Years
5 years
6 to 12
Months
12,134,272
16,591,070
28,725,342
P
-
P
P
256,345,759
256,345,759
-
173,331,266
197,343,012
150,000,000
-
89,991,254
562,500
263,885,020
197,343,012
150,000,000
-
106,345,759 P
-
Total gap
(P
235,159,678 ) ( P 197,343,012 )
P
Cumulative gap
(P
235,159,678) (P 432,502,690)
(P
326,156,931) (P 326,156,931)
This compares to the analysis of the maturity profile of financial assets and financial
liabilities as of December 31, 2008 and 2007, respectively, as follows:
Current
Within
6 Months
Financial Assets:
Cash
Receivables
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
6,268,100
77,757,566
84,025,666
P
Group – December 31, 2008
Non-current
6 to 12
1 to 5
Later than
Months
Years
5 Years
-
P
-
P
-
212,187,188
-
-
-
101,054,517
313,241,705
-
-
-
-
Total gap
(P
229,216,039) P
P
Cumulative gap
(P
229,216,039) (P 229,216,039 ) (P
-
P
229,216,039)(P
229,216,039 )
- 20 -
Current
Within
6 Months
Financial Assets:
Cash
Receivables
Advances to subsidiaries
P
Financial Liabilities:
Loans payable
Accounts payable, accrued expenses
and other liabilities
Subscription payable
6,080,600
77,757,566
83,838,166
P
Parent – December 31, 2008
Non-current
6 to 12
1 to 5
Later than
Months
Years
5 Years
-
P
-
-
-
43,577,263
562,500
256,326,951
-
-
-
-
(P
172,488,785) P
Cumulative gap
(P
172,488,785) (P 172,488,785)
Current
Within
6 Months
P
-
212,187,188
Total gap
Financial Assets:
Cash
Receivables
Total
P
81,389,534
81,389,534
13,633,670
40,992
13,674,662
P
P
81,389,534 P
(P
91,099,251 ) (P
91,099,251)
Group – December 31, 2007
Non-current
6 to 12
1 to 5
Later than
Months
Years
5 Years
-
P
-
P
-
Financial Liabilities:
Accounts payable, accrued expenses
and other liabilities
37,597,638
-
-
Total gap
(P
23,922,976 ) P
Cumulative gap
(P
23,922,976 ) (P 23,922,976)
Current
Within
6 Months
Financial Assets:
Cash
Receivables
Advances to subsidiaries
Total
P
13,633,670
40,992
13,674,662
P
P
(P
-
-
P
23,922,976 ) (P
23,922,976)
Parent – December 31, 2007
Non-current
6 to 12
1 to 5
Later than
Months
Years
5 Years
-
P
P
74,663,438
74,663,438
-
Financial Liabilities:
Accounts payable, accrued expenses
and other liabilities
5.
29,141,161
-
Total gap
(P
15,466,499 ) P
Cumulative gap
(P
15,466,499 ) ( P
-
15,466,499)
-
P
74,663,438 P
P
59,196,939 P
59,196,939
CASH
Cash includes the following components as of December 31:
Note
Petty cash fund
Cash in bank
Group
2008
2009
2007
P
8,000
12,313,772
P
8,000
6,260,100
P
5,000
13,628,670
P
12,321,772
P
6,268,100
P
13,633,670
18.1
- 21 -
Note
Petty cash fund
Cash in bank
Parent
2008
2009
2007
P
13,000
12,121,272
P
8,000
6,072,600
P
5,000
13,628,670
P
12,134,272
P
6,080,600
P
13,633,670
18.1
Cash accounts with banks generally earn interest at rates based on daily bank deposit
rates.
6.
RECEIVABLES
The details of receivables of both the Group and Parent are shown below:
2008
2009
Advances to suppliers
Accounts receivable – others
Accounts receivable – EIB
P
Allowance for impairment
P
9,559,214
7,031,856
16,591,070
-
P
16,591,070
P
6,240,744
71,516,822
77,757,566
-
2007
P
1,026,405
1,026,405
985,413)
P
40,992
(
77,757,566
Accounts Receivable - EIB represents the Parent’s net receivables from EIB after all
adjustments related to the nullification of the Sale and Purchase Agreement (SPA)
dated December 28, 2007 covering the sale of the ExportBank Plaza have been
effected in the Parent’s books (see Notes 18.3 and 22.1). The net receivable mostly
pertains to building-related expenses which the Parent incurred for the account of
EIB.
7.
REAL ESTATE ASSETS
The details of real estate assets are shown below:
Group
2008
2009
Land and development cost:
Fort Bonifacio, Taguig City
Fort Bonifacio, Taguig City
– under Joint Development
Agreement
Laguna
Batangas City
Davao City
Tagaytay City
Valuation allowance
P
41,814,991
149,816,377
34,152,985
12,000,000
10,866,950
1,029,370,772
(
182,498,812 )
P
P
780,719,469
846,871,960
593,316,435
2007
P
149,816,377
34,152,985
12,000,000
10,866,950
800,152,747
182,498,812 ) (
(
P
617,653,935
575,127,216
149,816,377
12,000,000
736,943,593
235,198,812)
P
501,744,781
- 22 Parent
2008
2009
Land and development cost:
Fort Bonifacio, Taguig City
Fort Bonifacio, Taguig City
– under Joint Development
Agreement
Batangas City
Davao City
Tagaytay City
Valuation allowance
P
P 607,562,554
41,814,991
34,152,985
12,000,000
10,866,950
706,397,480
182,498,812 )
(
P
34,152,985
12,000,000
10,866,950
650,336,370
182,498,812 ) (
(
P
P 523,898,668
593,316,435
2007
467,837,558
575,127,216
12,000,000
587,127,216
235,198,812)
P
351,928,404
Real estate assets are accounted for using the lower of cost and net realizable value.
The cost of the properties consists of the purchase price, development cost and other
direct costs of bringing the asset to its intended purpose.
A reconciliation of the valuation allowance at the beginning and end of 2009, 2008
and 2007, for both the Group and the Parent, is shown below.
2008
2009
Balance at beginning of year
Recovery of value
Impairment loss
P
Balance at end of year
P
182,498,812
182,498,812
2007
P
235,198,812
52,700,000 )
-
P
234,298,812
900,000
P
182,498,812
P
235,198,812
(
a. Real Estate Properties of the Parent and Irmo Located at Fort Bonifacio, Taguig City
The total carrying value of these real estate properties amounted to
P640.0 million and P466.9 million as of December 31, 2009 for the Group and
Parent, respectively, and P413.8 million and P339.9 million for both the Group and
the Parent as of December 31, 2008 and 2007, respectively.
The appraised values of the Fort Bonifacio properties as determined by an
independent appraiser were estimated to be P1.05 billion in 2009. As a result, a
recovery of impairment loss amounting to P52.7 million was recognized and
presented in the 2008 statement of comprehensive income. Allowance for
impairment pertaining to this property amounted to P179.5 million as of
December 31, 2009 and 2008 and P232.2 million as of December 31, 2007.
- 23 -
b. Real Estate Project under Joint Development Agreement
On November 3, 2009, the Parent and Manchesterland Properties, Inc. (MPI)
(collectively referred to as the Co-developers) entered into a Joint Development
Agreement (JDA) whereby the Co-developers agreed to jointly undertake the
development of land located in Fort Bonifacio, Taguig City, owned by MPI, into a
residential condominium to be held primarily for sale to third parties. Under the
JDA, MPI agreed to contribute the land whereas the Parent agreed to contribute
the development costs to finance the construction of the residential condominium.
In return for their respective contributions, the Co-developers have agreed to
distribute and allocate among themselves the condominium units to their pro-rata
interest therein. The development and construction period is estimated to be
72 months from the date of the execution of the JDA. Total costs incurred by the
Parent in connection with the JDA amounted to P41,814,991 in 2009 and is
presented as part of Real Estate Assets in the statement of financial position.
c. Real Estate Project of UPHI in Laguna
This is a project between UPHI and PR Builders, Developers and Managers, Inc.
(PR) which covers the development of a housing project on two parcels of land in
Calamba, Laguna and Tagaytay with an aggregate area of about 331,769 square
meters (sq.m.).
Certain parcels of land of UPHI with an area of about 10,000 square meters are the
subject of expropriation proceedings filed by the National Power Corporation
(NAPOCOR) with the Regional Trial Court of Calamba, Laguna, covering a tower
which NAPOCOR erected to form part of the Tayabas – Dasmariñas Line Project.
The above-mentioned area comprises only 3% of the total land area of the
property of UPHI. The potential effect of this case on the Group’s financial
statements could not be determined at the moment. Management, however,
believes that the effect of such expropriation is not significant.
On August 28, 2007, UPHI received a notice of coverage under the
Comprehensive Agrarian Reform Program (CARP) from the Department of
Agrarian Reform (DAR) on its Calamba, Laguna property.
Subsequently, on December 19, 2007, UPHI received a notice of order from DAR
indicating that the property is exempted from the coverage of CARP provided the
following conditions are met: (1) disturbance compensation to affected tenants,
farmworkers, or bonafide occupants, if any, in such amount or kind as may be
mutually agreed upon and approved by DAR, shall be paid; and, (2) DAR reserves
the right to cancel or withdraw its order for misrepresentation of facts integral to
its issuance and/or for violation of the law and applicable rules and regulations on
land use exemption or exclusion.
The carrying value of the above-mentioned project amounted to P149.8 million
as of December 31, 2009, 2008 and 2007. Based on the appraisal report dated
March 8, 2010, the fair value of the land amounted to P282.0 million.
- 24 -
d. Real Estate Properties of the Parent in Batangas and Tagaytay
The Parent’s real estate properties in Laurel, Batangas and Tagaytay which have
carrying amounts of P34.1 million and P10.9 million, respectively, were acquired by
the Parent in 2008 as a result of the compromise agreement with PR and spouses
Villlarin (see Note 8.2). The appraised values of Batangas and Tagaytay properties
are estimated to be P34.1 million and P15.3 million, respectively. The appraisal
reports on the Batangas and Tagaytay properties were dated March 5, 2010 and
March 8, 2010, respectively.
e. Real Estate Properties in Davao City
Based on the appraisal report dated February 24, 2010, the value of the property in
Davao City was estimated to be P10.0 million. Impairment losses recognized in
the 2007 statement of comprehensive income amounted to P0.9 million (nil in
2009 and 2008), while the allowance for impairment related to this property
amounted to P3.0 million as of December 31, 2009, 2008 and 2007.
8.
INVESTMENTS IN AND ADVANCES TO SUBSIDIARIES
The composition of this account in the Parent’s financial statements as of
December 31, 2009, 2008 and 2007 is presented below:
2009
Equity investments:
UPHI
Irmo
Technopod
Cazneau
Allowance for impairment
P
(
14,667,161
250,000
250,000
250,000
15,417,161
5,232,027 )
P
(
Allowance for impairment
(
86,175,966
173,388,803
20,808
21,431
259,607,008
3,261,249 )
(
256,345,759
P 266,530,893
8.1
2007
11,000,000
P
250,000
250,000
250,000
11,750,000
5,232,027 ) (
11,000,000
11,000,000
5,232,027)
6,517,973
10,185,134
Advances to subsidiaries:
UPHI
Irmo
Technopod
Cazneau
2008
P
5,767,973
84,641,783
3,000
3,000
3,000
84,650,783
3,261,249 ) (
77,924,687
77,924,687
3,261,249)
81,389,534
74,663,438
87,907,507
P
80,431,411
Investments in Cazneau, Technopod and Irmo
On July 31, 2008, the Parent incorporated Cazneau and Technopod. On
August 13, 2008, the Parent also incorporated Irmo. All of these entities are wholly
owned by the Parent and are established primarily to engage in the realty estate
business development.
- 25 -
8.2 Investment in UPHI
UPHI was organized pursuant to the provisions of a Memorandum of Agreement
(MOA) executed by the Parent and PR on November 4, 1994. The MOA covers the
development of a housing project on two parcels of land in Calamba, Laguna and
Tagaytay City with an aggregate area of about 331,769 sq. m. (see Note 7). The
Parent and PR agreed to contribute 55% and 45%, respectively, for the UPHI’s
equity.
Prior to the execution of a compromise agreement in 2008, EIB had sold the PR
Account (including the Batangas property and the 45% equity in UPHI, among
others) to a Special Purpose Vehicle (“SPV”). The SPV offered these properties to
the Parent, and after some negotiations, the Parent agreed to assume the liability to
PR arising from the compromise agreement in exchange for these properties.
Consequently, the Parent recognized provision for liability relating to this agreement
in the amount P7.94 million in 2008 (see Note 12). Portion of the assets are recorded
as additions to real estate assets. As of December 31, 2009 and 2008, the unsettled
balance related to this agreement amounted to P13.0 million and P19.9 million,
respectively, which is presented as part of accounts payable under Accounts Payable,
Accrued Expenses and Other Liabilities in the statements of financial position.
On December 28, 2009 UPHI became a wholly owned subsidiary of ALCO by virtue
of a Deed of Assignment between the Parent and Spouses Villarin.
In 2007, the Parent recognized additional impairment loss on its equity investment in
UPHI amounting to P628,180 and is presented as part of Other Non-current Assets
in the 2009 statement of financial position.
9.
PROPERTY AND EQUIPMENT
The gross carrying amounts and accumulated depreciation and amortization of
property and equipment of both the Group and Parent at the beginning and end of
2009 and 2008 (no beginning balance for 2007) are shown below.
Office
Equipment
December 31, 2009
Cost
Accumulated depreciation
and amortization
Net carrying amount
December 31, 2008
Cost
Accumulated depreciation
and amortization
Net carrying amount
December 31, 2007
Cost
Accumulated depreciation
and amortization
Net carrying amount
Furniture and
Fixtures
Leasehold
Improvements
Transportation
Equipment
Total
P
P 30,134,252
P 13,850,521
P 52,054,522
P
5,581,511
(
1,135,193 ) (
P
4,446,318
P
1,951,185
P
2,165,133
P
744,620
(
2,488,238
537,053) (
228,426 ) (
1,943,534) (
P 28,190,718
P
2,617,069) (
P 11,233,452
P 45,821,673
918,517 P 10,098,843
P 13,927,113
117,788) (
200,857) (
647,255) (
P
1,936,707
P
626,832 P
717,660 P
P
291,726
P
73,168
744,071 P
-
P
47,199)
-
(
696,872 P
-
P
(
P
15,680 ) (
276,046
P
6,095) (
P
67,073
P
6,232,849 )
9,451,588
1,194,326 )
P 12,732,787
1,108,965
68,974 )
1,039,991
- 26 -
A reconciliation of the carrying amounts at the beginning and end of 2009, 2008 and
2007, of property and equipment is shown below.
Office
Equipment
10.
Furniture and
Fixtures
Leasehold
Improvements
Transportation
Equipment
P
P
P
Balance at January 1, 2009,
net of accumulated
depreciation
and amortization
Additions
Depreciation and
amortization charges
for the year
(
Balance at December 31, 2009,
net of accumulated
depreciation and
amortization
P
4,446,318
P
1,951,185
P
276,046
1,873,407
P
67,073
671,452
P
1,936,707
3,376,033
866,422 ) (
Balance at January 1, 2008,
net of accumulated
depreciation
and amortization
Additions
Depreciation and
amortization charges
for the year
(
Balance at December 31, 2008,
net of accumulated
depreciation and
amortization
P
1,936,707
P
291,726
Acquisitions in 2007
Depreciation and
amortization charges
for the year
(
Balance at December 31, 2007,
net of accumulated
depreciation and
amortization
P
626,832
1,651,010
326,657) (
212,746 ) (
2,992,177) (
1,969,814) (
6,155,070 )
P 45,821,673
P
P
P
696,872
174,446
P
626,832
P
717,660
P
P
73,168
P
744,071
P
6,095) (
67,073
P 12,732,787
39,243,956
P 11,233,452
153,658) (
P
9,451,588
3,751,678
P 28,190,718
111,693) (
15,680 ) (
276,046
717,660
30,465,235
Total
10,098,843
647,255) (
9,451,588
47,199)
P
696,872
P
1,039,991
12,818,148
1,125,352 )
P 12,732,787
-
P
-
(
-
P
1,108,965
68,974 )
1,039,991
OTHER ASSETS
Other assets as of December 31 consist of the following:
Group
2008
2009
Current:
Creditable withholding
tax – net
Input VAT
Prepayments
Deferred input VAT
Miscellaneous
P
Non-current:
Deposit in escrow account
Miscellaneous
18,911,245
6,288,500
2,493,238
1,912,744
4,612,524
34,218,251
P
218,244,885
P
183,081,600
183,081,600
183,081,600
945,034
184,026,634
P
9,041,528
379,395
735,111
1,467,486
11,623,520
2007
P
194,705,120
4,549,256
3,614
4,552,870
-
P
4,552,870
- 27 Parent
2008
2009
Current:
Creditable withholding
tax – net
Input VAT
Prepayments
Deferred input VAT
Miscellaneous
P
Non-current:
Deposit in escrow account
18,911,245
6,288,500
2,493,238
1,912,744
4,612,524
34,218,251
P
217,299,851
P
183,081,600
183,081,600
P
9,041,528
379,395
735,111
1,467,486
11,623,520
2007
P
194,705,120
4,549,256
3,614
4,552,870
-
P
4,552,870
Deposits in escrow account refers to the amount deposited by the Parent to a bank,
being the escrow agent, relative to the Share Purchase Agreement (Agreement)
entered into by the Parent with Goldpath Properties Development Corporation
(GPDC) on July 22, 2008 for the acquisition of MPI.
On May 15, 2009, the Parent modified the Agreement to purchase 100% of the total
outstanding capital stock or 635,705 shares of MPI from GPDC instead of the
original 49%, as contained in the original Agreement executed between the parties on
July 22, 2008.
In accordance with the modified provisions of the Agreement, the total purchase
price of P915,408,000 shall be paid as follows:
a. Downpayment of P183,081,600 to be paid on or before signing date, and
b. Installment payment on remaining balance of P732,326,400 to be paid as follows:
i. Principal payment – shall be payable in 10 quarterly amortizations
commencing on the sixth quarter from signing date, and
ii. Interest payment – the installment balance shall carry interest at 9% per
annum commencing on the sixth quarter from signing date and an additional
3% catch-up interest which shall be payable at the start of the quarter
following the full payment of the principal and interest.
In addition to the purchase price, GPDC shall also be entitled to the payment of
returns from the sale of condominium units which shall be developed and constructed
by the Parent on MPI’s property. The payment shall commence at the start of the 2nd
month of the 16th quarter from the signing date and shall be equivalent to 8% of the
gross receipts to be received by the Parent on the signing date and thereafter.
Upon full payment of the principal balance, ownership of MPI’s shares will be
transferred to the Parent.
As of December 31, 2009, control of either MPI or MPI’s underlying asset has not
been transferred, hence, the downpayment was recognized as deposit.
- 28 -
11.
LOANS PAYABLE
This account consists of amounts due to the following:
2008
2009
Current:
Asia United Bank (AUB)
Other short-term loans
P
Non-current:
Malayan Bank (MB)
197,343,012
173,331,266
370,674,278
P
P
-
150,000,000
P 520,674,278
147,467,163
64,720,025
212,187,188
2007
P
212,187,188
-
P
-
Loan payable to AUB represents an unsecured short-term borrowing obtained in
December 2008. This loan bears interest at an annual rate of 9.5% and will mature on
September 30, 2010.
Meanwhile, other short-term loans represent liabilities to private lenders with
maturities of 90 to 180 days from value date or date of inception of the loan
agreement. This type of loan bears interest at an annual rate ranging from 5.0% to
9.0%.
Loan payable to MB represents a secured short-term borrowing obtained in
December 2009. This loan bears interest at an annual rate of 10.75% with maturity
date of December 11, 2011. This loan is secured by real estate assets owned by the
Parent in Fort Bonifacio, Makati City.
The total interest incurred for these loans amounted to P30.3 million in 2009 and
P6.3 million in 2008 and is presented as part of Finance Costs account in the
statements of comprehensive income (see Note 16).
12.
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER
LIABILITIES
This account consists of:
Notes
Accounts payable – EIB
Accounts payable – Others
Accrued expenses
Other liabilities
Group
2008
2009
2007
8.2, 18.3 P
107,571,660
37,828,350
4,516,070
346,415
P
54,000,000
37,764,649
6,509,121
2,780,747
P
35,982,700
1,614,938
P
150,262,495
P
101,054,517
P
37,597,638
- 29 -
Notes
Accounts payable – EIB
Accounts payable – Others
Accrued expenses
Other liabilities
Parent
2008
2009
2007
8.2, 18.3 P
53,571,660
32,406,441
3,666,734
346,419
P
34,407,450
6,389,066
2,780,747
P
27,526,223
1,614,938
P
89,991,254
P
43,577,263
P
29,141,161
In 2008, the Parent derecognized the provision previously set-up for the funding of
One Mckinley Place, Inc. project in accordance with the agreement for EIB to
shoulder the liability; hence, the Parent recognized income of P15.0 million, which is
presented as Reversal of Provision account in the 2008 statement of comprehensive
income.
Accounts payable also includes P7.94 million provision for liability related to the
Parent’s participation in the compromise agreement between and among the Parent,
EIB, PR and Spouses Villarin on April 15, 2008 (see Note 8.2).
The fair values of accounts payable, accrued expenses and other liabilities have not
been disclosed as management considers the carrying amounts recognized in the
statements of financial position to be a reasonable approximation of their fair values,
due to their short duration.
13.
SUBSCRIPTIONS PAYABLE
As of December 31, 2009 and 2008, this account consists of subscriptions payable
relating to the investments of the Parent in the following subsidiaries (see Note 8.1):
Cazneau
Technopod
Irmo
14.
P
187,500
187,500
187,500
P
562,500
REALIZED GAIN ON SALE OF PROPERTIES
Realized gain on sale of properties in 2007 amounting to P191.5 million represents
realization of the remaining unearned revenue recognized by the Parent in 2002
related to the sale of certain condominium units of ExportBank Plaza held then by
the Parent. The gain from the said sale was previously deferred by the Parent, the
recognition of which will be made upon disposal of such properties to a third party or
through depreciation charges taken up by EIB. However, as a result of EIB’s loss of
control over the Parent in 2007, the remaining unearned revenues was fully
recognized in the same year.
- 30 -
15.
EMPLOYEE BENEFITS
Employee benefits for the Group and Parent include the following:
2008
2009
Salaries and wages
Bonuses and allowances
SSS, Pag-ibig, PHIC contributions
Other benefits
16.
2007
P
23,934,550
1,956,499
98,602
341,789
P
23,367,652
53,968
147,721
-
P
516,184
61,290
-
P
26,331,440
P
23,569,341
P
577,474
FINANCE COSTS
Finance costs relate to the following:
Note
Loans payable
Bank charges
17.
2008
2009
11
2007
P
30,269,188
3,581,008
P
6,263,750
1,178,071
P
-
P
33,850,196
P
7,441,821
P
-
TAXES
17.1
Current and Deferred Taxes
The components of tax expense of the Group and the Parent for the years ended
December 31, are as follows:
2008
2009
Final tax at 20%
Minimum corporate income tax
(MCIT) at 2%
P
P
158,900
90,670
P
93,521
13,850
P
2007
P
172,750
154,501
-
184,191
P
154,501
The reconciliation of tax on pretax income (loss) computed at the statutory income
tax rates to tax expense is as follows:
Group
2008
2009
Statutory income tax at 30% in 2009
and 35% in 2008 and 2007
Adjustment for income subjected
to lower income tax rates
Tax effects of:
Changes in unrecognized
deferred tax assets
Unrecognized MCIT
Non-deductible expense
Tax expense reported in
profit or loss
(P
(
42,173,016 )
79,450 )
29,725,316
13,850
12,686,050
P
172,750
(P
2007
747,269 )
P
56,405,042
(
68,002 )
(
115,877 )
(
2,388,872 )
93,521
3,294,813
(
56,134,664 )
-
P
184,191
P
154,501
- 31 Parent
2008
2009
Statutory income tax at 30% in 2009
and 35% in 2008 and 2007
Adjustment for income subjected
to lower income tax rates
Tax effects of:
Changes in unrecognized
deferred tax assets
Unrecognized MCIT
Non-deductible expense
(P
41,457,798 )
(
79,450 )
29,010,098
13,850
12,686,050
Tax expense reported in
profit or loss
P
172,750
(P
2007
135,863 )
P
55,811,696
(
68,002 )
(
115,877 )
(
3,000,278 )
93,521
3,294,813
(
55,541,318 )
-
P
184,191
P
154,501
The Group and Parent did not recognize the following deferred tax assets as of
December 31, 2009, 2008 and 2007 since it does not expect to have sufficient taxable
profit against which the deferred tax assets can be utilized. The components of
deferred tax assets that were not recognized are as follows:
2009
Group
Amount
Tax Effect
NOLCO
Allowance for impairment
Accrued rent
Provision for liabilities
MCIT
Amount
Parent
Tax Effect
P
335,551,983
192,263,502
8,921,127
7,944,705
107,371
P 100,665,595
57,679,051
2,676,338
2,388,412
107,371
P 330,278,903
200,756,778
8,921,127
7,944,705
107,371
P 99,083,671
60,227,033
2,676,338
2,383,412
107,371
P
544,788,688
P 163,511,767
P 548,008,884 P
164,477,825
2008
Parent
Group
Amount
NOLCO
Allowance for impairment
Provision for liabilities
Accrued rent
MCIT
Tax Effect
Amount
Tax Effect
P
213,828,979
192,263,502
7,944,705
2,697,660
115,496
P
64,148,694
57,679,051
2,383,412
809,298
115,496
P 210,165,477
200,756,778
7,944,705
2,697,660
115,496
P
63,049,643
60,227,033
2,383,412
809,298
115,496
P
416,850,342
P 125,135,951
P 421,680,116
P 126,584,882
2007
Parent
Group
Amount
Allowance for impairment
NOLCO
Provision for liabilities
MCIT
Tax Effect
Amount
Tax Effect
P
245,948,915
162,807,002
22,944,705
21,975
P
86,082,120
56,982,450
8,030,647
21,975
P 254,442,191
160,473,012
22,944,705
21,975
P
89,054,767
56,165,554
8,030,647
21,975
P
431,722,597
P 151,117,192
P 437,881,883
P 153,272,943
- 32 -
The details of NOLCO incurred by the Group, which can be claimed as deduction
against their respective future taxable income within three years from the year the loss
was incurred and those which expired, are shown below.
a. Parent
Original
Amount
Year
2009
2008
2007
2006
P
P
Expired
Balance
120,614,865
58,791,027
150,873,011
501,439
P
330,780,342
P
-
Remaining
Balance
P
120,614,865
58,791,027
150,873,011
-
P
330,278,903
501,439
501,439
Valid
Until
2012
2011
2010
2009
b. Subsidiaries
Original
Amount
Year
2009
2008
2007
2006
P
P
Expired
Balance
2,384,060
1,746,874
1,142,146
774,482
P
6,047,562
P
-
Remaining
Balance
P
2,384,060
1,746,874
1,142,146
-
P
5,273,080
774,482
774,482
Valid
Until
2012
2011
2010
2009
The breakdown of MCIT as of December 31, 2009 attributable to the Parent and
their expiration dates are presented below.
Year
2009
2008
Balance
P
13,850
93,521
P
107,371
Valid
Until
2012
2011
MCIT incurred in 2006 amounting to P21,975 expired in 2009.
17.2 Optional Standard Deduction (OSD)
Effective July 2008, Republic Act (RA) No. 9504 was approved giving corporate
taxpayers an option to claim itemized deduction or OSD equivalent to 40% of gross
sales. Once the option is made, it shall be irrevocable for the taxable year for which
the option was made.
In 2009 and 2008, the Group claimed itemized deductions.
17.3 Change in Applicable Tax Rate
Effective January 1, 2009, in accordance with RA No. 9337, RCIT rate was reduced
from 35% to 30% and nonallowable deductions for interest expense from 42% to
33% of interest income subjected to final tax.
- 33 -
18.
RELATED PARTY TRANSACTIONS
18.1 Deposit Placements
In the ordinary course of business, the Parent has normal banking transactions with
EIB. As of December 31, 2009, 2008 and 2007, the Parent’s cash in bank amounting
to P5,538,753, P5,175,897 and P13,510,091, respectively, are deposited with EIB
(see Note 5).
18.2 Advances to Related Parties
In the regular conduct of business, the Parent, its subsidiaries and EIB enter into
intercompany transactions with each other, principally consisting of advances and
reimbursements of expenses. These transactions are made substantially on the same
terms as with other individuals and businesses of comparable risks.
The breakdown of advances granted by the Parent to subsidiaries, which are shown as
part of Investments in and Advances to Subsidiaries account in the statements of
financial position (see Note 8) are as follows:
2008
2007
P
77,924,686
P
6,726,097
84,650,783
3,261,249 ) (
69,061,249
8,863,438
77,924,687
3,261,249)
P
81,389,534
74,663,438
2009
Balance at beginning of year
Additions
Balance at end of year
Allowance for impairment
P
(
84,650,783
174,956,225
259,607,008
3,261,249 )
P 256,345,759
(
P
18.3 Payable to EIB
Payable to EIB amounted to P53,571,660 in 2009 (nil in 2008 and 2007) represents
rentals and other costs billed by EIB to the Parent.
UPHI has advances from EIB amounting to P54.0 million. As a consequence of the
reduced shareholdings of EIB in the Parent (see Note 1.1), the balance was
reclassified out of Advances from a Stockholder with Indefinite Repayment Term in
2008. As of December 31, 2009 and 2008, these advances from EIB were recorded as
part of accounts payable under Accounts Payable, Accrued Expenses and Other
Liabilities account in the statements of financial position (see Note 12).
18.4 Consultancy Fees
In 2008, the Parent entered into an agreement with certain personnel employed by
related parties to perform consultancy services. Consultancy fee amounted to
P5.4 million and P6.8 million in 2009 and 2008, respectively, and are presented as part
of Management and Professional Fees in the statements of comprehensive income.
As of December 31, 2009 and 2008, the Parent has no outstanding liability related to
this contract.
- 34 -
18.5 Key Management Compensations
The compensation of key management personnel amounted to P29.1 million in 2009,
P20.7 million in 2008 and P0.6 million in 2007. The Parent has only one key
management personnel in 2007 holding the position of vice president as the Parent
has not yet resumed its operation during that year. The substantial variance in the key
management compensation from 2007 was due to the corporate re-organization in
2008 involving the hiring of new set of management team.
19.
CAPITAL STOCK
The account consists of:
Shares
2008
2009
Common shares
Authorized – 16,368,095,199 shares
in 2009 and 2008; and
1,368,095,199 shares in 2007
Issued
Subscribed
1,996,865,199
3,121,230,000
1,368,095,199
3,750,000,000
1,368,095,199
-
5,118,095,199
5,118,095,199
1,368,095,199
Amount
2008
2009
Issued:
Balance at beginning of year
Issued during the year
Decrease in par value
Balance at end of year
Subscribed:
Balance at beginning of year
Subscribed during the year
Issued during the year
Balance at end of year
Less subscriptions receivable
P
246,257,136
113,178,600
359,435,736
P
(
P
421,181,736
2007
246,257,136
P 1,368,095,199
-
246,257,136
-
(
1,121,838,063)
246,257,136
675,000,000
675,000,000
506,219,618)
168,780,382
675,000,000
113,178,600 )
561,821,400
500,075,400 ) (
61,746,000
(
2007
P
415,037,518
-
P
246,257,136
19.1 Quasi-reorganization
On May 24, 2007, the Parent’s BOD approved the following resolutions:
•
Reduction in the par value of the Parent’s common shares from P1.00 per share
to P0.18 per share and, correspondingly, decrease the Parent’s authorized capital
stock from P2.0 billion divided into 2 billion common shares, to P246,257,136
divided into 1,368,095,199 common shares.
- 35 -
•
Allow the entry of additional capital after the decrease in the Parent’s authorized
capital stock, by increasing its authorized capital stock from P246,257,136 divided
by 1,368,095,199 common shares at a par value of P0.18 per share, to
P9,000,000,000 divided into 50,000,000,000 common shares also at a par value of
P0.18 per share.
On December 4, 2007, the SEC approved the decrease in the capital stock of the
Parent from P2,000,000,000 divided into 2,000,000,000 shares with par value of
P1.00 per share to P246,257,136 divided into 1,368,095,199 shares with the par value
of P0.18 each. Also, the SEC approved to apply against the deficit balance the
reduction in par value of the capital stock of the Parent amounting to
P1,121,838,063.
19.2 Increase in Authorized Capital Stock
On December 28, 2007, the Parent entered into a subscription agreement wherein
certain investors agreed to subscribe to new shares totaling 3,750,000,000 shares with
par value of P0.18 per share (or P675,000,000) at an offer price of P0.20 per share.
Consequently, in August 2008, the Parent received deposits for stock subscription
totaling P168,780,382. Subscription receivable as of December 31, 2008 amounted to
P506,219,618 and is presented as a reduction to the capital stock.
On January 24 and 28, 2008, the Parent’s BOD and stockholders, respectively,
approved to increase the authorized capital stock from P246,257,136 divided into
1,368,095,199 shares to P2,946,257,136 divided into 16,368,095,199 shares
(or increase of 2,700,000,000 shares) both with a par value of P0.18. On
December 24, 2008, the Parent received from the SEC the certificate of increase in
authorized capital stock.
19.3 Issuance of Warrants
On November 19 and 27, 2008, the Parent’s BOD and stockholders, respectively,
approved the issuance of warrants to the shareholders of the Group’s existing
1,368,095,199 common shares at a ratio of 3 warrants to 1 share under the following
terms and conditions:
a. Exercise price at P0.26 per share;
b. Three year life;
c. Use of proceeds will be for the Group’s operations and the development of its
various projects, including the payment of its obligations from the purchase
price of ExportBank Plaza;
d. The warrants will be issued and will subsequently be applied for listing with
the PSE; and,
e. Issuance is subject to the receipt of all regulatory approvals.
As of December 31, 2009, the Group has not yet issued any warrants.
- 36 -
20.
CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND
PROCEDURES
The Group’s capital management objectives are:
•
To ensure the Group’s ability to continue as a going concern; and,
•
To build adequate capital to carry on its business.
The Group monitors capital on the basis of the carrying amount of equity as
presented on the face of the statement of financial position. Capital for the reporting
periods under review is summarized as follows:
Group
2008
2009
Total liabilities
Total equity
P 670,936,773
468,914,587
Debt-to-equity ratio
P
P
Debt-to-equity ratio
21.
611,228,032
471,048,395
P
1.00 : 1.90
1.00 : 0.70
P
1.00 : 0.77
256,326,951
590,694,187
37,597,638
483,414,666
1.00 : 12.86
Parent
2008
2009
Total liabilities
Total equity
313,241,705
595,875,803
2007
2007
P
1.00 : 2.30
29,141,161
422,486,177
1.00 : 14.50
EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per share is computed as follows:
2009
Net profit (loss)
Divided by weighted average
number of outstanding
common shares
(P
Earnings (loss) per share
(P
140,749,470 ) ( P
1,682,480,199
0.0837 ) ( P
2009
Net profit (loss)
Divided by weighted average
number of outstanding
common shares
(P
Earnings (loss) per share
(P
138,365,410 ) ( P
1,682,480,199
0.0822 ) ( P
Group
2008
1,537,202 ) P
1,368,095,199
0.0011 ) P
Parent
2008
572,372 ) P
1,368,095,199
0.0004 ) P
2007
160,522,570
1,368,095,199
0.1173
2007
159,307,488
1,368,095,199
0.1164
Dilted earnings (loss) per share equals the basic earnings (loss) per share as the Parent
does not have any dilutive potential common shares at the end of each of the three
years.
- 37 -
22.
PRIOR PERIOD ADJUSTMENTS
22.1 Annulment of SPA
On December 28, 2007, the Parent and EIB entered in a SPA whereby EIB sold
ExportBank Plaza and the EIB-owned portion of Lot 7-1 in Fort Bonifacio, Global
City to the Parent for a price of P2,779.7 million and P168.4 million, respectively.
Subsequently, on March 31, 2008, the SPA was amended to defer the EIB-owned
portion of Fort Bonifacio Lot 7-1 from the sale pending the transfer of the certificate
of title of Lot 7-1 from the name of the previous owners to EIB and to reduce selling
price from P2,779.7 million to P2,620.0 million of ExportBank Plaza.
In a subsequent letter agreement dated September 24, 2008, certain terms of the SPA
were amended to reflect the following:
a. Reduction in the selling price from P2,779.7 million to P2,620.0 based on the
recent appraisal of the same conducted by Jones Lang LaSalle.
b. Revised the payment terms a follows:
i
Downpayment of twenty percent (20%) of the purchase price, which is not
forfeitable, shall be paid in two (2) tranches:
a) P100,000,000 upon the effectivity of the amended SPA;
b) The balance of the downpayment shall be paid not later than
November 30, 2008; and,
ii
The balance of the purchase price shall be paid not later than one year from
the effectivity of the amended SPA, subject to the completion of the EIB’s
delivery of certificates of title free and clear of any and all encumbrances and
the completion of EIB’s other deliverables pursuant to the SPA, with interest
at the rate equivalent to the EIB’s investment rate,
net of tax.
In EIB’s letter to the Parent dated October 28, 2008, EIB indicated that before any
additional payment is remitted, EIB shall furnish the Parent beforehand written
conformity of PDIC to the amended SPA as further revised above.
The Parent paid the first tranche of the downpayment amounting to P100.0 million to
EIB on September 25, 2008.
In a letter dated May 17, 2010, the Parent informed EIB that given the protracted
delay by EIB in securing PDIC’s approval of the above transaction, the Parent is no
longer pushing through with the said sale, hence, the SPA was annulled. As a result,
all transactions relating to the sale were adjusted as if no sale took place in 2007.
- 38 -
The following information presents the 2008 and 2007 condensed statement of
financial position and net profit (loss) of the Group as previously reported,
adjustments, and the adjusted balances.
2008
Adjustments
Add (Deduct)
As Previously
Reported
Statement of financial position:
Assets:
Receivables – net
Real estate assets – net
Other current assets – net
Investment properties – net
Other non-current assets – net
Total assets
Liabilities:
Loans payable
Accounts payable, accrued
expenses and other
liabilities
P
253,745,842
15,201,995
3,174,560,787
186,497,330
175,988,276 )
617,653,935
3,578,475 )
3,174,560,787 )
3,415,730 )
P
77,757,566
617,653,935
11,623,520
183,081,600
P 3,649,006,841
( P 2,739,889,333 )
P
909,117,508
P
(P
P
212,187,188
214,720,025
2,891,721,498
(P
(
(
(
(
P 3,106,441,523
Retained earnings
P
122,596,436
P
P
309,377,504
169,502,611
140,358,922
125,701
(P
(
(
Net loss
(P
609,730 )
( P 2,793,199,818 )
(P
Total assets
P
56,258,917
7,872,290
3,121,744,781
3,415,730
P 3,203,965,379
101,054,517
P
313,241,705
53,310,485
P
175,906,921
236,548,084 )
101,979,958 )
132,917,101 )
58,490
P
72,829,420
67,522,653
7,441,821
184,191
1,709,517 ) ( P
2007
Adjustments
Add (Deduct)
As Previously
Reported
Statement of financial position:
Assets:
Receivables – net
Real estate assets – net
Other current assets – net
Investment properties – net
Other non-current assets – net
2,532,837 )
2,790,666,981 )
Total liabilities
Statement of comprehensive income:
Revenues
Operating expenses
Finance cost
Tax expense
Restated
Balance
(P
2,319,245 )
Restated
Balance
56,217,925 )
501,744,781
3,319,420 )
3,121,744,781 )
3,415,730 )
P
40,992
501,744,781
4,552,870
-
( P 2,682,953,075 )
P
521,012,304
(
(
(
- 39 -
As Previously
Reported
2007
Adjustments
Add (Deduct)
Liabilities:
Accounts payable, accrued
expenses and other
liabilities
P 2,775,570,713
( P 2,737,973,075 )
P
37,597,638
Total liabilities
P 2,775,570,713
( P 2,737,973,075 )
P
37,597,638
Retained earnings
P
122,424,123
P
55,020,000
P
177,444,123
P
90,905,259
(P
55,020,000 )
P
35,885,259
Statement of comprehensive income:
Operating expenses
Restated
Balance
The following information presents the 2008 and 2007condensed statement of
financial position and net profit (loss) of the Parent as previously reported,
adjustments, and the adjusted balances.
2008
Adjustments
Add (Deduct)
As Previously
Reported
Statement of financial position:
Assets
Receivables – net
Real estate assets – net
Other current assets – net
Investment properties – net
Other non-current assets – net
Total assets
Liabilities
Loans payable
Accounts payable, accrued
expenses and other
liabilities
P
253,745,842
15,201,995
3,024,744,410
186,497,330
175,988,276 )
467,837,558
3,578,475 )
3,024,744,410 )
3,415,730 )
P
77,757,566
467,837,558
11,623,520
183,081,600
P 3,586,910,471
( P 2,739,889,333 )
P
847,021,138
P
(P
P
212,187,188
214,720,025
2,834,244,243
(P
(
(
(
(
P 3,049,526,768
Retained earnings
P
122,346,185
P
P
309,377,504
167,755,737
140,358,922
125,701
(P
(
(
P
1,137,144
(P
Net profit (loss)
2,532,837 )
2,790,666,980 )
Total liabilities
Statement of comprehensive income:
Revenues
Operating expenses
Finance cost
Tax expense
Restated
Balance
( P 2,793,199,817 )
43,577,263
P
256,326,951
53,310,484
P
175,656,669
236,548,084 )
101,979,957 )
132,917,101 )
58,490
P
72,829,420
65,775,780
7,441,821
184,191
1,709,516 ) ( P
572,372 )
- 40 2007
Adjustments
Add (Deduct)
As Previously
Reported
Statement of financial position:
Assets
Receivables – net
Real estate assets – net
Other current assets – net
Investment properties – net
Other non-current assets – net
P
56,258,917
7,872,290
2,971,928,404
3,415,730
(P
(
(
(
Restated
Balance
56,217,925 )
351,928,404
3,319,420 )
2,971,928,404 )
3,415,730 )
P
40,992
351,928,404
4,552,870
-
Total assets
P 3,134,580,413
( P 2,682,953,075 )
P
451,627,338
Liabilities:
Accounts payable, accrued
expenses and other
liabilities
P 2,767,114,236
( P 2,737,973,075 )
P
29,141,161
Retained earnings
P
121,209,041
P
55,020,000
P
176,229,041
P
90,391,293
(P
55,020,000 )
P
35,371,293
Statement of comprehensive income:
Operating expenses
22.2 Reclassification of Certain Accounts
The financial statements reflected the reclassification of land and development costs
with carrying value of P617.7 million and P467.8 million in 2008 and 2007,
respectively, previously classified under Investment Properties to Real Estate Assets
account as these assets are held for future development (see Note 7).
23.
COMMITMENTS AND CONTINGENCIES
There are commitments and contingencies existing as at the end of the reporting
period that have not been recorded in the financial statements as of
December 31, 2009. Management is of the opinion that losses, if any, from these
items will not have a material effect on the Group and Parent’s financial statements.
ARTHALAND CORPORATION
(Formerly, EIB Realty Developers, Inc.)
(A Subsidiary of AO Capital Holdings, Inc.)
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Philippine Pesos)
Group
2008
(As Restated see Note 22)
2009
Notes
2007
(As Restated see Note 22)
Parent
2008
(As Restated see Note 22)
2009
2007
(As Restated see Note 22)
A S S E T S
CURRENT ASSETS
Cash
Receivables - net
Real estate assets - net
Other current assets - net
5
6
7
10
P
Total Current Assets
NON-CURRENT ASSETS
Investments in and advances to subsidiaries - net
Property and equipment - net
Other non-current assets - net
8
9
10
Total Non-current Assets
TOTAL ASSETS
12,321,772
16,591,070
846,871,960
34,218,251
P
6,268,100
77,757,566
617,653,935
11,623,520
910,003,053
713,303,121
45,821,673
184,026,634
12,732,787
183,081,600
229,848,307
195,814,387
P
13,633,670
40,992
501,744,781
4,552,870
P
519,972,313
1,039,991
1,039,991
12,134,272
16,591,070
523,898,668
34,218,251
P
6,080,600
77,757,566
467,837,558
11,623,520
P
13,633,670
40,992
351,928,404
4,552,870
586,842,261
563,299,244
266,530,893
45,821,673
183,081,600
87,907,507
12,732,787
183,081,600
-
495,434,166
283,721,894
81,471,402
370,155,936
80,431,411
1,039,991
P
1,139,851,360
P
909,117,508
P
521,012,304
P
1,082,276,427
P
847,021,138
P
451,627,338
P
370,674,278
150,262,495
-
P
212,187,188
101,054,517
-
P
37,597,638
-
P
370,674,278
89,991,254
562,500
P
212,187,188
43,577,263
562,500
P
29,141,161
-
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Loans payable
Accounts payable, accrued expenses and other liabilities
Subscriptions payable
11
12
13
520,936,773
Total Current Liabilities
NON-CURRENT LIABILITY
Loans payable
150,000,000
11
Total Liabilities
EQUITY
Capital stock
Additional paid-in capital
Advances from a stockholder with indefinite repayment term
Retained earnings
Non-controlling interests
19
18
19
Total Equity
TOTAL LIABILITIES AND EQUITY
313,241,705
P
-
37,597,638
461,228,032
-
150,000,000
256,326,951
29,141,161
-
-
670,936,773
313,241,705
37,597,638
611,228,032
256,326,951
29,141,161
421,181,736
12,575,400
35,157,451
-
415,037,518
175,906,921
4,931,364
246,257,136
54,000,000
177,444,123
5,713,407
421,181,736
12,575,400
37,291,259
-
415,037,518
175,656,669
-
246,257,136
176,229,041
-
468,914,587
595,875,803
483,414,666
471,048,395
590,694,187
422,486,177
1,139,851,360
P
909,117,508
See Notes to Financial Statements.
P
521,012,304
P
1,082,276,427
P
847,021,138
P
451,627,338
ARTHALAND CORPORATION
(Formerly, EIB Realty Developers, Inc.)
(A Subsidiary of AO Capital Holdings, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Philippine Pesos)
2009
Notes
REVENUES
Interest
Recovery of value of real estate assets
Reversal of provision
Realized gain on sale of properties
Rental
Others
OPERATING EXPENSES
Management and professional fees
Employee benefits
Representation
Taxes and licenses
Rental
Depreciation and amortization
Advertising
Supplies
Transportation and travel
Security services
Janitorial and clerical services
Insurance
Communications
Annual dues and fees
Power, light and water
Impairment losses
Provision for liabilities
Others
P
FINANCE COSTS
18
15
9
(
(
453,348
52,700,000
15,000,000
1,486,994
72,829,420
31,135,494
26,331,440
11,770,312
8,549,881
6,223,467
6,155,070
2,921,263
2,361,798
1,977,333
1,867,641
1,860,297
1,820,455
1,268,313
1,062,749
803,440
17,476,366
23,569,341
8,004,320
5,476,348
2,697,660
1,125,352
599,231
931,185
1,379,726
1,065,120
408,359
72,829,420
194,833,282
3,617,110
577,474
316,765
2,823,240
31,638,688
26,331,440
11,770,312
7,957,808
6,223,467
6,155,070
2,921,263
2,360,448
1,977,333
17,133,473
23,569,341
8,004,233
5,476,348
2,697,660
1,125,352
599,231
931,185
1,379,726
3,572,110
577,474
316,765
2,494,641
67,522,653
35,885,259
140,749,470 )
161,157,264
161,157,264
184,191
(
(
(
2,319,245 )
161,002,763
-
105,829,458
65,775,780
35,371,293
-
7,053,640
(
138,365,410 )
159,461,989
-
388,181 )
159,461,989
184,191
(
-
-
2,743,949
270,098
531,371
393,912
61,813
2,513,593
22,944,705
1,393,901
676,612
519,548
510,763
7,441,821
138,192,660 )
-
408,359
172,750
(
68,974
51,255
22,530
158,151
-
33,850,196
154,501
-
1,860,297
1,817,961
1,268,313
779,915
803,440
1,963,703
104,342,464 )
-
2,135,054 )
-
-
108,213,518
-
OTHER COMPREHENSIVE INCOME
1,486,994
3,082,722
(
772,504
-
197,042,523
2,104,565
140,576,720 )
P
191,521,535
186,239
2,353,004
-
-
453,348
52,700,000
15,000,000
4,676,072
68,974
51,255
22,530
158,151
676,612
519,548
510,763
P
2007
(As Restated see Note 22)
692,495
270,098
531,371
393,912
61,813
1,885,413
22,944,705
2,162,448
5,306,767
794,499
-
-
-
7,441,821
P
772,504
191,521,535
186,239
4,562,245
Parent
2008
(As Restated see Note 22)
2009
-
4,676,072
172,750
(
P
-
33,850,196
17
2007
(As Restated see Note 22)
692,495
106,726,524 )
16
NET PROFIT (LOSS)
P
-
6, 7, 8
12
PROFIT (LOSS) BEFORE TAX
TAX EXPENSE
794,499
-
7
12
14
OPERATING PROFIT (LOSS)
Group
2008
(As Restated see Note 22)
154,501
572,372 )
159,307,488
-
-
TOTAL COMPREHENSIVE INCOME (LOSS)
(P
140,749,470 )
(P
2,319,245 )
P
161,002,763
(P
138,365,410 )
(P
Attributable to:
Stockholders of Parent
Non-controlling interests
(P
140,749,470 )
-
(P
(
1,537,202 )
782,043 )
P
160,522,570
480,193
(P
138,365,410 )
-
(P
(P
140,749,470 )
(P
2,319,245 )
P
161,002,763
(P
138,365,410 )
(P
572,372 )
P
159,307,488
(P
0.0837 )
(P
0.0011 )
P
0.1173
(P
0.0822 )
(P
0.0004 )
P
0.1164
EARNINGS (LOSS) PER SHARE - Basic and diluted
21
See Notes to Financial Statements.
572,372 )
P
572,372 )
P
-
159,307,488
159,307,488
-
ARTHALAND CORPORATION
(Formerly, EIB Realty Developers, Inc.)
(A Subsidiary of AO Capital Holdings, Inc.)
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Philippine Pesos)
Group
2008
(As Restated see Note 22)
2009
Notes
2007
(As Restated see Note 22)
Parent
2008
(As Restated see Note 22)
2009
2007
(As Restated see Note 22)
EQUITY ATTRIBUTABLE TO
STOCKHOLDERS OF PARENT
CAPITAL STOCK
Issued and outstanding
Subscribed capital - net of subscriprions receivable
Decrease in capital stock by capital restructuring
P
19
19
19
359,435,736
61,746,000
-
P
421,181,736
ADDITIONAL PAID-IN CAPITAL
Issuance during the year
ADVANCES FROM A STOCKHOLDER WITH
INDEFINITE REPAYMENT TERM
RETAINED EARNINGS (DEFICIT)
Balance at beginning of year
As previously reported
Prior period adjustments
As restated
Decrease in deficit by capital restructuring
Net profit (loss)
12,575,400
18
22
19
(
8
TOTAL EQUITY
-
(
(
595,875,803
P
See Notes to Financial Statements.
(
1,368,095,199
1,121,838,063 )
-
-
-
-
-
122,346,185
53,310,484
175,656,669
138,365,410 )
121,209,041
55,020,000
176,229,041
572,372 )
(
(
1,104,916,510 )
1,104,916,510 )
1,121,838,063
159,307,488
(
175,656,669
176,229,041
480,193
-
-
-
5,713,407
-
-
-
5,233,214
4,931,364
P
246,257,136
37,291,259
782,043 )
P
(
246,257,136
168,780,382
415,037,518
177,444,123
5,713,407
P
12,575,400
1,104,916,510 )
1,104,916,510 )
1,121,838,063
160,522,570
-
-
468,914,587
(
359,435,736
61,746,000
421,181,736
54,000,000
175,906,921
4,931,364
4,931,364 )
P
-
122,424,123
55,020,000
177,444,123
1,537,202 )
(
Balance at end of year
-
122,596,437
53,310,484
175,906,921
140,749,470 )
35,157,451
(
P
1,368,095,199
1,121,838,063 )
246,257,136
-
(
P
415,037,518
-
Balance at end of year
EQUITY ATTRIBUTABLE TO
NON-CONTROLLING INTERESTS
Balance at beginning of year
Increase to 100% ownership in a subsidiary
Net profit (loss)
246,257,136
168,780,382
-
483,414,666
P
471,048,395
P
590,694,187
P
422,486,177
ARTHALAND CORPORATION
(Formerly, EIB Realty Developers, Inc.)
(A Subsidiary of AO Capital Holdings, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Philippine Pesos)
2009
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Profit (loss) before tax
Adjustments for:
Finance costs
Depreciation and amortization
Interest income
Recovery of impairment loss
Reversal of provision
Impairment losses
Realized gain on sale of properties
Provision for liabilities
Operating loss before working capital changes
Decrease (increase) in receivables
Decrease (increase) in other current assets
Increase in real estate assets
Decrease (increase) in other non-current assets
Increase (decrease) in accounts payable,
accrued expenses and other liabilities
Cash used in operations
Interest paid
Interest received
Cash paid for income taxes
(P
(
(
7,441,821
1,125,352
453,348 )
52,700,000 )
15,000,000 )
(
(
(
-
P
161,157,264
68,974
772,504 )
(
1,885,413
191,521,535 )
22,944,705
6,237,683 )
299,711
4,552,870 )
7,464,804 )
4,294,692
(
(
(
(
149,059,243 )
527,146,756 )
6,263,750 )
453,348
90,670 )
(
(
(
45,626,970
252,275,491 )
30,269,188 )
794,499
158,900 )
(
882,153
154,501 )
(
281,909,080 )
(
533,047,828 )
(
39,243,956 )
(
12,818,148 )
(
(
(
(
6,053,672
CASH AT BEGINNING OF YEAR
6,268,101
P
12,321,773
7,365,569 )
(
6,268,101
(
(
(
14,726,102 )
(
103,285,694 )
(
1,108,965 )
(
(
39,243,956 )
919,075,161 )
740,451,775
217,867,342 )
(
(
(
29,468,737
6,080,600
13,633,670
P
12,134,272
2,513,593
191,521,535 )
22,944,705
7,304,778 )
299,711
4,552,870 )
(
(
-
4,294,692
672,929
6,590,316 )
(
-
526,312,733 )
(
5,862,664 )
(
(
(
12,818,148 )
196,500 )
6,726,096 )
(
8,863,438 )
(
19,740,744 )
(
9,972,403 )
(
1,108,965 )
-
369,720,025
168,780,382
-
538,500,407
(
7,553,070 )
(
15,835,067 )
13,633,670
P
6,080,600
Supplemental Information on Noncash Investing and Financing Activities
On April 15, 2008, a compromise agreement was entered into by various parties including Arthaland Corporation for the purpose of settling the issues between the parties. Under this agreement, Arthaland Corporation will acquire a property in Tagaytay City
and assume liabilities totaling P42.5 million in exchange for certain real estate assets and equity shares with total allocated cost of P37.8 million. Portion of the assets are recorded as additions to real estate assets. As of December 31, 2008, the unpaid balance
related to this agreement amounted to P19.9 million (see Note 7).
On December 4, 2007, the Securities and Exchange Commission approved the decrease in the authorized capital stock of the Parent by reducing its par value. The reduction in the capital stock amounting to P1.12 billion was applied against deficit (see Note 19.1).
See Notes to Financial Statements.
68,974
772,504 )
(
882,153
154,501 )
327,206,708
6,053,672
159,461,989
-
(
308,487,090
18,719,618
15,835,067 )
P
(
144,071,020 )
520,411,661 )
6,263,750 )
453,348
90,670 )
-
P
-
-
-
(
(
(
(
(
(
(
(
(
2007
(As Restated see Note 22)
388,181 )
7,441,821
1,125,352
453,348 )
52,700,000 )
15,000,000 )
42,832,983
73,652,105 )
30,269,188 )
794,499
158,900 )
1,108,965 )
13,633,670
P
(
(P
59,974,356 )
80,372,872 )
9,603,487 )
43,308,326 )
183,081,600 )
-
538,500,407
(
33,850,196
6,155,070
794,499 )
(
(
(
(
(
1,792,800 )
15,453,754 )
369,720,025
168,780,382
327,206,708
Cash From Financing Activities
138,192,660 )
98,981,893 )
61,166,496
22,608,581 )
56,061,110 )
12,818,148 )
308,487,090
18,719,618
19
(
(
(
39,243,956 )
(P
(
Parent
2008
(As Restated see Note 22)
2009
-
61,721,229 )
80,372,872 )
9,603,486 )
43,308,326 )
183,081,600 )
NET INCREASE (DECREASE) IN CASH
CASH AT END OF YEAR
2,135,054 )
(
(
(
(
(
(
(
9
8
18
(P
2007
(As Restated see Note 22)
101,365,953 )
61,166,496
22,608,581 )
234,149,389 )
945,034 )
(
(
(
Net Cash Used in Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Deposits for stock subscription
33,850,196
6,155,070
794,499 )
7
12
6, 7
14
12
Net Cash Used in Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment
Acquisition of investments
Increase in advances to subsidiaries
140,576,720 )
16
9
17
Group
2008
(As Restated see Note 22)
29,468,737
P
13,633,670
COVER SHEET
9 4 0 0 7 1 6 0
SEC Registration Number
A R T H A L A N D
C O R P O R A T I O N
(Company’s Full Name)
8 F
P I C A D I L L Y
4 T H
A V E N U E
B O N I F A C I O
T A G U I G
S T A R
B U I L D I N G
C O R N E R
G L O B A L
2 7 T H
S T R E E T
C I T Y
C I T Y
(Business Address: No. Street City/Town/Province)
Froilan Q. Tejada
403-6910
(Contact Person)
(Company Telephone Number)
0 3
3 1
Month
Day
1 7
- Q
(Form Type)
(Fiscal Year)
0 6
2 5
Month
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
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
Foreign
ARTHALAND CORPORATION
(Company’s Full Name)
8/F Picadilly Star Building, 4th Avenue corner 27th Street
Bonifacio Global City, Taguig City
(Company’s Address)
403-6910
(Telephone Number)
March 31
(Fiscal year ending)
(month & day)
June 25
(Annual Meeting)
SEC FORM 17 – Q QUARTERLY REPORT
(Form Type)
Amendment Designation (If applicable)
MARCH 31, 2010
(Period Ended Date)
____________________________________
(Secondary License Type & File Number)
__________________
LCU
____________________
(Cashier)
___________________
DTU
ASO-94-007160
(SEC Number)
_____________________
Central Receiving Unit
____________________
File Number
2
____________________
Document I.D.
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 11 OF THE
REVISED SECURITIES ACT AND RSA RULE 11(a)-1 (b)(2) THEREUNDER
1. For the quarterly period ended March 31, 2010
2. Commission Identification No. ASO-94-007160
3. BIR TIN 116-004-450-721
4. Exact name of registrant as specified in its character
ARTHALAND CORPORATION
5. Incorporated in Metro Manila, Philippines on August 10, 1994.
6. Industry Classification Code ___________________________.
7. Address of registrant’s principal office
Code
Postal
8/F Picadilly Star Building, 4th Avenue corner 27th Street,
Bonifacio Global City, Taguig City
1634
8. Registrant’s Telephone Number : 403-6910
9. Former name, former address and former fiscal year, if changed since last report:
EIB Realty Developers, Inc. – Exportbank Plaza, Sen. Gil Puyat Avenue corner Chino
Roces Avenue, Makati City
10. Securities registered pursuant to Sections 4 and 8 of the RSA
Title of each class
Number of shares common
stock outstanding or amount
of debt outstanding.
Common Shares
2,096,865,199 common shares
11. Are any or all of the securities listed on the Philippine Stock Exchange?
YES [ X ]
NO [ ]
3
ITEM 1.
Financial Statements Required under SRC RULE 68.1
1.
Basic and Diluted Earnings per Share (See attached Income Statement).
2.
The accompanying consolidated interim financial statements of Arthaland Corporation
(ALCO) were prepared in accordance with accounting principles generally accepted in the
Philippines as set forth in Philippine Financial Reporting Standards (PFRS) and
Philippine Accounting Standards (PAS).
3.
Notes to Financial Statements:
a. The accompanying financial statements of ALCO and its subsidiaries Urban Property
Holdings. Inc. (UPHI), Cazneau Inc., Technopod Inc., and Irmo Inc. were prepared in
accordance with PFRS. The financial statements have been prepared using the
historical cost basis and are presented in Philippine Pesos.
b. There is no significant seasonality or cycle of interim operations.
c. There are no material events subsequent to the end of the interim period.
d. There are no changes in the composition of the issuer during the interim period
including business combinations, acquisition or disposal of subsidiaries and long-term
investments, restructurings and discontinuing operations.
e. There are no material changes in the contingent liabilities or contingent assets since the
last annual balance sheet date.
f.
There are no material contingencies and any other events or transactions that are
material to an understanding of the current interim period.
5
ARTHALAND CORPORATION (Formerly, EIB Realty Developers, Inc.)
STATEMENTS OF FINANCIAL POSITION
AS OF MARCH 31, 2010 & DECEMBER 31, 2009
MARCH 31, 2010
DECEMBER 31, 2009
INCREASE
UNAUDITED
AUDITED
(DECREASE)
%
A S S E T S
CURRENT ASSETS
Cash
Receivables‐ net
Real estate asset ‐ net
Other current assets ‐ net
Total Current Assets
38,928,487
12,321,772
26,606,715
216%
25,246,517
16,591,070
8,655,447
52%
857,137,957
846,871,960
10,265,997
1%
43,098,150
34,218,251
8,879,899
26%
964,411,111
910,003,053
54,408,058
6%
-
NON‐CURRENT ASSETS
Investment properties ‐ net
Investments in and advances to subsidiaries ‐ net
Property and equipment ‐ net
Other non‐current assets ‐ net
Total Non‐current Assets
TOTAL ASSETS
-
-
-
46,706,982
45,821,673
885,309
1.93%
190,802,765
184,026,634
6,776,131
3.68%
237,509,747
229,848,307
7,661,440
3%
1,201,920,858
1,139,851,360
119,644,431
11%
353,495,990
370,674,278
(17,178,288)
-5%
188,542,713
150,262,495
38,280,218
25%
542,038,703
520,936,773
21,101,930
4%
200,000,000
150,000,000
50,000,000
33%
200,000,000
150,000,000
50,000,000
33%
742,038,703
670,936,773
71,101,930
11%
377,435,736
359,435,736
18,000,000
5%
56,746,000
61,746,000
(5,000,000)
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Loans payable Accounts payable, accrued expenses Total Current Liabilities
NON‐CURRENT LIABILITIES
Loans payable Other non‐current
Total Non‐Current Liabilities
Total Liabilities
EQUITY
Capital stock issued and outstanding
Subscribed Capital Stock
Additional paid‐in capital
Retained earnings
Net Income
-
-
14,575,400
12,575,400
2,000,000
16%
35,157,450
175,906,921
(140,749,471)
-80%
(24,032,431)
(140,749,470)
116,717,039
-83%
-
Minority Interest
Total Equity
TOTAL LIABILITIES AND EQUITY
-
459,882,155
468,914,587
(9,032,432)
-2%
1,201,920,858
1,139,851,360
62,069,498
5%
6
ARTHALAND CORPORATION (Formerly, EIB Realty Developers, Inc.)
STATEMENTS OF FINANCIAL POSITION
MARCH 31, 2010 & MARCH 31, 2009
MARCH 31, 2010
MARCH 31, 2009
INCREASE
UNAUDITED
UNAUDITED
(DECREASE)
A S S E T S
CURRENT ASSETS
Cash
Receivables‐ net
Real estate assets ‐ net
Other current assets
Total Current Assets
NON‐CURRENT ASSETS
Investment properties ‐ net
Investments in and advances to subsi
Property and equipment ‐ net
Other non‐current assets ‐ net
Total Non‐current Assets
TOTAL ASSETS
38,928,487
19,442,685
19,485,802
25,246,517
111,321,482
-86,074,965
857,137,957
612,749,509
244,388,448
43,098,150
12,626,190
30,471,960
964,411,111
756,139,866
208,271,245
0
-
0
-
0
0
46,706,982
28,893,666
17,813,316
190,802,765
183,275,400
7,527,365
237,509,747
212,169,066
25,340,681
1,201,920,858
968,308,932
233,611,926
353,495,990
252,907,068
100,588,922
188,542,713
141,008,073
47,534,640
542,038,703
393,915,141
542,038,703
200,000,000
444,755
199,555,245
200,000,000
742,038,703
444,755
394,359,896
0
199,555,245
347,678,807
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Loans payable Accounts payable, accrued expenses Total Current Liabilities
NON‐CURRENT LIABILITIES
Loans payable Other non‐current
Total Non‐Current Liabilities
Total Liabilities
EQUITY
Capital stock
Subscribed capital stock
Less: subscription receivables
Advances from a stockholder with indefinite repayment term
Additional paid‐in capital
Retained earnings
Net Income
Minority interest
Total Equity
TOTAL LIABILITIES AND EQUITY
377,435,736
246,257,136
131,178,600
56,746,000
675,000,000
-618,254,000
(506,219,618)
506,219,618
0
14,575,400
35,157,450
175,906,921
-140,749,471
-24,032,431
(21,696,078)
-2,336,353
0
4,700,675
-4,700,675
459,882,155
573,949,036
-114,066,881
1,201,920,858
968,308,932
233,611,926
7
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
1. CASH AND CASH EQUIVALENTS
Petty Cash Fund
Cash in Bank
24,000
38,904,487
38,928,487
2. RECEIVABLES
Advances to suppliers
Accounts receivable ‐ others
3. REAL ESTATE ASSETS
Davao Property
Fort Bonifacio Tagaytay Project
Batangas
Laguna
15,068,541
10,177,976
25,246,517
9,000,000
653,271,645
10,866,950
34,152,985
149,846,377
857,137,957
4. PROPERTY AND EQUIPMENT
Office Equipment
Furniture, fixture and Equipment
Leasehold Rights and Improvement
Transportation Equipment
4,724,688
3,349,137
28,980,904
9,652,253
46,706,982
5. OTHER NON‐CURRENT ASSETS
‐Other Assets‐Deferred Input Tax
Other Assets‐Deposits
Other Assets‐Deposit‐Rental
1,890,976
187,707,524
1,204,265
190,802,765
6. LOANS PAYABLE
Bank Loans
Short term Notes Payable
200,000,000
153,495,990
353,495,990
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSE ‐ CURRENT
Accounts Payable
Output tax payable
Output tax Clearing
Withholding tax payable
Other payables
58,606,124
5,706,436
3,475,335
1,164,629
119,590,189
188,542,713
8. LONG TERM PAYABLES
Bank Loans
200,000,000
8
ARTHALAND, CORPORATION
(Formerly, EIB Realty Developers, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS January to March 31, 2010 AND December 31, 2009
Jan-Mar 31, 2010
UNAUDITED
Jan-Dec 31, 2009
AUDITED
REVENUES
Rental
Recovery of impairment loss
Reversal of provision
Interest
Realized gain on sale of properties
Others
OPERATING EXPENSES
Depreciation and amortization
Taxes and licenses
Employee benefits
Management and professional fees
Representation
Equity share in net loss
Insurance
Brokerage fees
Rental
Power, light and water
Transportation and travel
Security services
Supplies
Communications
Advertising
Annual dues and fees
Janitorial and clerical services
Impairment losses
Rental
Provision for liabilities
Others
244,526
31,501
276,027
765,812
1,003,441
6,971,559
2,652,084
25,570
46,614
1,258,468
398,436
230,880
510,749
434,986
342,900
5,270
6,486
454,755
162,942
TOTAL EXPENSES
15,270,952
108,213,518
(14,994,925)
9,037,506
(24,032,431)
(24,032,431)
(106,726,524)
33,850,196
(140,576,720)
172,750
(140,749,470)
(24,032,431)
-
(140,749,470)
-
TOTAL INCOME
OPERATING INCOME (LOSS)
FINANCE COSTS
INCOME (LOSS) BEFORE TAX
TAX EXPENSE
NET INCOME (LOSS)
Equity holders of Parent
Minority interest
794,499
692,495
1,486,994
6,155,070
8,549,881
26,331,440
31,135,494
11,770,312
1,820,455
6,223,467
803,440
1,977,333
1,867,641
2,361,798
1,268,313
2,921,263
1,062,749
1,860,297
-
2,104,565
9
ARTHALAND CORPORATION (Formerly, EIB Realty Developers, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS January to March 31, 2010 AND January to March 31, 2009
Jan-Mar 31, 2010
UNAUDITED
REVENUES
Rental
Recovery of impairment loss
Reversal of provision
Interest
Realized gain on sale of properties
Others
Jan-Mar 31, 2009
UNAUDITED
-
31,501
19,082
%
276,027
24,440
Depreciation and amortization
Taxes and licenses
Salaries and Wages
Management and professional fees
Representation
Equity share in net loss
Insurance
Brokerage fees
Association dues
Power, light and water
Transportation and travel
Security services
Supplies
Communications
Advertising
Annual dues and fees
Janitorial and clerical services
Impairment losses
Rental
Provision for liabilities
Others
765,812
1,003,441
6,971,559
2,652,084
25,570
46,614
1,258,468
398,436
230,880
510,749
434,986
342,900
5,270
750,890
3,784,873
7,739,248
1,841,371
53,970
233,704
70,708
184,258
140,870
416,076
337,652
276,130
64,768
154,971
17,784
-
244,526
12,419
(5,358)
251,587
14,922
(2,781,432)
(767,689)
810,713
(28,400)
(187,090)
1,187,760
214,178
90,010
94,673
97,334
66,770
(59,498)
(154,971)
(11,298)
-
274,509
(111,567)
-40.64%
TOTAL EXPENSES
15,270,952
16,341,782
(1,070,830)
-6.55%
(14,994,925)
9,037,506
(24,032,431)
(16,317,342)
5,609,426
(21,926,768)
-8.10%
61.11%
9.60%
(24,032,431)
(21,926,768)
(24,032,431)
-
(21,696,078)
(230,690)
1,322,417
3,428,080
(2,105,663)
(2,105,663)
(2,336,353)
230,690
10.77%
-100.00%
(0.01)
(0.02)
(0.00)
0.00
TOTAL INCOME
244,526
Increase
(Decrease)
5,358
OPERATING EXPENSES
OPERATING INCOME (LOSS)
FINANCE COSTS
INCOME (LOSS) BEFORE TAX
TAX EXPENSE
NET INCOME (LOSS)
Attributable to:
Equity holders of Parent
Minority interest
EARNINGS (LOSS) PER SHARE
6,486
454,755
162,942
65.08%
-100.00%
1029.41%
1.99%
-73.49%
-9.92%
44.03%
-52.62%
-80.05%
1679.81%
116.24%
63.90%
22.75%
28.83%
24.18%
-91.86%
-100.00%
-63.53%
9.60%
10
ARTHALAND CORPORATION (Formerly, EIB Realty Developers, Inc.)
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE PERIODS January to March 31, 2010 AND January to March 31, 2009
Jan-March 2010
CASH FLOW FROM OPERATING ACTIVITIES
Income (Loss) Before Income Tax
Adjustments to reconcile income (loss) before income tax
to net cash generated from (used in) operations:
Interest Expense
Provision for Probable Losses
Equity in Net Losses (Earnings) of an Affiliate
Depreciation and Amortization
Interest Income
Benefit from Deferred Income Tax
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables
Real estate assets
Other non-current assets
Other Assets
Increase (decrease) in:
Accounts Payable and Accrued Expenses
Jan-March 2009
(24,032,431)
(21,926,768)
9,037,506
5,609,426
765,812
(31,501)
750,890
(18,365)
(8,655,447)
(10,265,997)
(6,776,131)
(8,879,899)
(33,563,916)
(11,006,505)
(193,799)
(1,002,670)
238,280,217
40,398,311
Net Cash Generated from (used in) Operations
Interest Received
Income Tax Paid
Interest Paid
189,442,129
31,501
(20,953,396)
18,365
(9,037,506)
(5,609,426)
Net Cash Provided by (used in) Operating Activities
180,436,124
(26,544,457)
CASH FLOWS FROM INVESTING ACTIVITY
Acquisition of property and equipment
(1,651,121)
(1,000,838)
Net Cash Provided by Investing Activities
(1,651,121)
(1,000,838)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(Decrease) in Loans Payable
Proceeds from issuance of capital stock
Proceeds from borrowings
15,000,000
(167,178,288)
Net Cash Provided by Financing Activities
(152,178,288)
40,719,880
26,606,715
13,174,585
12,321,772.00
6,268,100
38,928,487
19,442,685
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
40,719,880
11
ARTHALAND CORPORATION (Formerly, EIB Realty Developers, Inc.)
UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODS January to March 31, 2010 AND January to March 31, 2009
MARCH 31, 2010
UNAUDITED
EQUITY- PHP1 par value
Authorized - 16,368,095,199 shares in 2009 & 2010
Issued - 2,096,865,199 shares
Subscribed - 3,121,230,000 shares
Capital Stock - Issued
Subscribed
Less: subscribed receivables
Additional paid in Capital
Retained Earnings (Deficit)
Net Income (Loss)
Minority Interest in a Consolidated Subsidiary
TOTAL EQUITY
377,435,736
56,746,000
14,575,400
35,157,450
(24,032,431)
459,882,155
459,882,155
MARCH 31, 2009
UNAUDITED
246,257,136
675,000,000
(506,219,618)
175,906,921
(21,696,078)
569,248,361
4,700,675
573,949,036
12
ARTHALAND CORPORATION
AGING OF ACCOUNTS RECEIVABLE
AS OF March 31, 2010
Type of Accounts Receivable
a) TRADE RECEIVABLE
1. Suppliers
2. ____________________
3. ____________________
Sub Total
Less: Allow. For Doubtful Accounts
NET TRADE RECEIVABLE
b) NON TRADE RECEIVABLES
1. Others
Sub Total
Less: Allow. For Doubtful Accounts
NET NON-TRADE RECEIVABLE
NET RECEIVABLES (A+B)
Total
Within
Within
6 Mos.
6 Mos. - 1 year
15,068,540.70 15,068,540.70
15,068,540.70
15,068,540.70
0.00
15,068,540.70
15,068,540.70
0.00
10,177,975.84
10,177,975.84
0.00
10,177,975.84
10,177,975.84
‐
‐
‐
10,177,975.84
0.00
10,177,975.84
25,246,516.54
15,068,540.70
10,177,975.84
ACCOUNTS RECEIVABLE DESCRIPTION:
Type of Receivable
1. Advances to Supplier
Nature / Description
Downpayments on Contracts
Collection Period
% of Project
1.Advances to Employees
Advances and Working Fund
Payroll period
13
ARTHALAND CORPORATION
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operation
Comparable Discussion of Interim Period as of 31 March 2010
The Group’s revenues rose ten-fold to P0.276 Mn in the first quarter of 2010 from P0.024 Mn for
the same period in 2009 on account of rental income. Operating expenses favorably decreased by
7% to P15.271 Mn from P16.342 Mn for the same comparable period due to lower taxes and
licenses.
Given the start-up nature of ALCO’s operations, significant upfront investments were made for its
pipeline projects consisting mainly of Arya Residences in 2009. The Group incurred borrowings
in the second half of 2009 which increased finance costs in the first quarter of 2010. The Group
registered net loss of P24.032 Mn for the first quarter of 2010, 9.6% higher than the net loss of
P21.927 Mn for the same period in 2009.
FINANCIAL CONDITION MARCH 31, 2010 AND DEC 31, 2009
The Group’s aggregate resources as of 31 March 2010 is P1.202 Bn, which is higher by 11% or
P119.644 Mn than last year’s P1.140 Bn.
Impact of New Amendments and Interpretations to Existing Standards
(a)
Effective in 2009 that are Relevant to the Group
In 2009, the Group adopted the following new revisions and amendments to PFRS that are
relevant to the Group and effective for financial statements for the annual period
beginning on or after 01 January 2009:
PAS 1 (Revised 2007)
PAS 23 (Revised 2007)
Various Standards
:
:
:
Presentation of Financial Statements
Borrowing Costs
2008 Annual Improvements to PFRS
Discussed below are the effects on the financial statements of the new and amended
standards.
(i) PAS 1 (Revised 2007), Presentation of Financial Statements, requires an entity to
present all items of income and expense recognized in the period in a single
statement of comprehensive income or in two statements: a separate statement of
income and a statement of comprehensive income. Income and expense
recognized in profit or loss is presented in the statement of income in the same
way as the previous version of PAS 1. The statement of comprehensive income
includes the profit or loss for the period and each component of income and
expense recognized outside of profit or loss or the “non-owner changes in
14
equity,” which are no longer allowed to be presented in the statements of changes
in equity, classified by nature (e.g., gains or losses on available-for-sale assets or
translation differences related to foreign operations). A statement showing an
entity’s financial position at the beginning of the previous period is also required
when the entity retrospectively applies an accounting policy or makes a
retrospective restatement, or when it reclassifies items in its financial statements.
The Group’s adoption of PAS 1 (Revised 2007) did not result in any material
adjustments in its financial statements as the change in accounting policy only
affects presentation aspects. The Group has elected to present a single statement
of comprehensive income. Moreover, as a result of retrospective restatement (see
Note 22), the Group presented two comparative periods for the statement of
financial position (see Note 2.1).
(ii) PAS 23 (Revised 2007), Borrowing Costs. Under the revised PAS 23, all
borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset shall be capitalized as part of the cost of that
asset. The option of immediately expensing borrowing costs that qualify for asset
recognition has been removed.
The adoption of this new standard has a significant effect on the 2009 financial
statements, as well as for prior periods, as the Group’s existing accounting policy
is to capitalize all interest directly related to qualifying assets.
(iii) 2008 Annual Improvements to PFRS. The FRSC has adopted the Improvements
to Philippine Financial Reporting Standards 2008 which became effective for the
annual periods beginning on or after 01 January 2009. Among those
improvements, the following are the amendments relevant to the Group:
 PAS 23 (Amendment), Borrowing Costs. The amendment clarifies the
definition of borrowing costs to include interest expense determined using the
effective interest method under PAS 39. This amendment had no significant
effect on the 2009 financial statements.
 PAS 38 (Amendment), Intangible Assets. The amendment clarifies when to
recognize a prepayment asset, including advertising or promotional
expenditures. In the case of supply of goods, the entity recognizes such
expenditure as an expense when it has a right to access the goods. Also,
prepayment may only be recognized in the event that payment has been made
in advance of obtaining right access to goods or receipt of services. The Group
determined that adoption of this amendment had no material effect on its 2009
financial statements.
 PAS 39 (Amendment), Financial Instruments: Recognition and Measurement.
The definition of financial asset or financial liability at fair value through
profit or loss as it related to items that are held for trading was changed. A
financial asset or liability that is part of a portfolio of financial instruments
managed together with evidence of an actual recent pattern of short-term
profit taking is included in such a portfolio on initial recognition. The Group
determined that adoption of this amendment had no material effect on its 2009
financial statements.
15
b)
Effective in 2009 but not Relevant to the Group
The following amendments, interpretations and improvements to published standards are
mandatory for accounting periods beginning on or after January 1, 2009 but are not relevant to
the Group’s financial statements:
PFRS 1 and PAS 27 (Amendments):
PFRS 1 – First Time Adoption of
PFRS
PFRS 2 (Amendment)
PFRS 7 (Amendment)
PFRS 8
Philippine Interpretations
International Financial
Reporting Interpretations
Committee (IFRIC) 13
IFRIC 16
(c)
and PAS 27 – Consolidated and Separate
Financial Statements
: Share-based Payment
: Financial Instruments: Disclosures
: Operating Segments
: Customer Loyalty Programmes
: Hedges of a Net Investment in a Foreign
Operation
Effective Subsequent to 2009
There are new PFRS, revisions, amendments, annual improvements and interpretations to
existing standards that are effective for periods subsequent to 2009. Among those,
management has initially determined the following, which the Group will apply in
accordance with their transitional provisions, to be relevant to its financial statements:
(i) Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement – Amendment to IFRIC 14 (effective on or before 01 January 2011).
This interpretation addresses unintended consequences that can arise from the
previous requirements when an entity prepays future contributions into a
defined benefit pension plan. It sets out guidance on when an entity recognizes
an asset in relation to a PAS 19 surplus for defined benefit plans that are subject
to a minimum funding requirement. Management does not expect that its future
adoption of the amendment will have a material effect on its financial statements
because it does not usually make substantial advance contribution to its
retirement fund.
(ii) Philippine Interpretation IFRIC 18, Transfers of Assets from Customers (effective
from 01 July 2009). This interpretation provides guidance on how to account for
items of property, plant and equipment received from customers; or cash that is
received and used to acquire or construct specific assets. It is only applicable to
agreements in which an entity receives from a customer such assets that the
entity must either use to connect the customer to a network or to provide ongoing
access to a supply of goods or services or both. Management does not anticipate
the adoption of the interpretation to have material impact on its financial
statements.
16
(iii) Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with
Equity Instruments (effective on or after 01 July 2010). It addresses accounting by
an entity when the terms of a financial liability are renegotiated and result in the
entity issuing equity instruments to a creditor to extinguish all or part of the
financial liability. These transactions are sometimes referred to as “debt for
equity” exchanges or swaps, and have happened with increased regularity during
the financial crisis. The interpretation requires the debtor to account for a
financial liability which is extinguished by equity instruments as follows:

the issue of equity instruments to a creditor to extinguish all (or part of a
financial liability) is consideration paid in accordance with PAS 39;

the entity measures the equity instruments issued at fair value, unless this
cannot be reliably measured;

if the fair value of the equity instruments cannot be reliably measured, then
the fair value of the financial liability extinguished is used; and,

the difference between the carrying amount of the financial liability
extinguished and the consideration paid is recognized in profit or loss.
Management has determined that the adoption of the interpretation will not have
a material effect on it financial statements as it does not normally extinguish
financial liabilities through equity swap.
(iv) 2009 Annual Improvements to PFRS. The FRSC has adopted the Improvements
to Philippine Financial Reporting Standards 2009. Most of these amendments
became effective for annual periods beginning on or after 01 July 2009 or 01
January 2010. Among those improvements, only the following amendments were
identified to be relevant to the Group’s financial statements:

PAS 1 (Amendment), Presentation of Financial Statements (effective from
01 January 2010). The amendment clarifies the current and non-current
classification of a liability that can, at the option of the counterparty, be
settled by the issue of the entity’s equity instruments. The Group will apply
the amendment in its 2010 financial statements but expects there to be no
material impact in the Group’s financial statements.

PAS 7 (Amendment), Statement of Cash Flows (effective from 01 January
2010). The amendment clarifies that only an expenditure that results in a
recognized asset can be classified as a cash flow from investing activities. The
amendment will not have a material impact on the financial statements since
only recognized assets are classified by the Group as cash flow from investing
activities.

PAS 17 (Amendment), Leases (effective from 01 January 2010). The
amendment 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
17
classification set out in PAS 17. Management has initially determined that
this will not have material impact on the financial statements since the Group
does not enter into a lease agreement that includes both land and building.

PAS 18 (Amendment), Revenue (effective from 01 January 2010). The
amendment provides guidance on determining whether an entity is acting as
a principal or as an agent. Management will apply this amendment
prospectively in its 2010 financial statements.
RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group is exposed to a variety of financial risks which result from both its operating and
investing activities. The Group’s risk management is coordinated with its Parent, in close
cooperation with the Board of Directors, and focuses on actively securing the Group’s short- to
medium-term cash flows by minimizing the exposure to financial markets. Long-term financial
investments are managed to generate lasting returns.
The Group does not actively engage in the trading of financial assets for speculative purposes nor
does it write options. The most significant financial risks to which the Group is exposed to as
described below.
Credit Risk Analysis
The Group and the Parent’s exposure to credit risk is limited to the carrying amount of financial
assets recognized as of 31 March 2010.
Generally, the maximum credit risk exposure of financial assets is the carrying amount of the
financial assets as shown on the face of the balance sheet. Credit risk, therefore, is only disclosed
in circumstances where the maximum potential loss differs significantly from the financial asset’s
carrying amount.
For advances to subsidiaries and associate, the Group is not exposed to significant risk more than
the carrying amount of the advances since such net assets of the subsidiary and associate are
sufficient to cover the Group’s investments and advances.
Liquidity Risk
Liquidity risk is the risk that there are insufficient funds available to adequately meet the credit
demands of the Group’s customers and repay liabilities on maturity.
The Group closely monitors the current and prospective maturity structure of its resources and
liabilities and the market condition to guide pricing and asset/liability allocation strategies to
manage its liquidity risks.
18
Key Performance Indicators
Capital Adequacy Ratio
Total Equity to Total Assets Ratio
Liquidity
Liquid to Total Assets Ratio
Profitability
Return on Average Equity
March 2010
December 2009
38.64%
46.71%
3.24%
1.08%
-5.17%
-26.44%
The Group’s Capital Adequacy Ratio (CAR) stood at 38.64%, lower by 8.07% than last year’s
level of 46.71 %. CAR is computed by dividing the Total Average Stockholder’s Equity over the
Total Assets:
March 2010
Total Average Stockholder’s Equity
Total Assets
Ratio
P 464.398 Mn__
P 1,201.921 Mn
38.64%
December 2009
P 532.395 Mn__
P 1,139.851 Mn
46.71%
Liquidity ratio indicates the proportion of total assets which can be readily converted into cash. It
also measures the extent to which the assets can be converted into cash to meet its liquidity
requirements. Liquid assets include cash and other cash items. The Group’s Liquidity ratio for
the period is 3.24% and is favorably higher by 2.16% than ratio of 1.08% during end 2009. Below
is the computation for the Liquidity Ratio:
March 2010
Total Liquid Assets
Total Assets
Ratio
P 38.928 Mn__
P 1,201.921 Mn
3.24%
December 2009
P 12.322 Mn__
P 1,139.851 Mn
1.08%
The ratio of the Group’s return on average equity (ROE) increased from negative 26.44% in
December 2009 to negative 5.17 % in March 2010. The Return on Average Equity Ratio is
calculated as follows:
March 2010
Total Income (Loss)
Total Average Stockholders’ Equity
Ratio
P (24,032.431 Mn)
P 464,398 Mn
-5.17%
December 2009
P (140.749Mn)
P 532.395Mn
-26.44%
19
Discussion and Analysis of Material Events
(1)
There are no other known trends, commitments, events or uncertainties that will have a
material impact on ALCO’s liquidity within the next twelve (12) months except for those
mentioned above.
(2)
i.
The present capital expenditure commitments are the planning and development
works on Arya Residences.
ii.
There are no events that will trigger any direct or contingent financial obligation
that is material to the Group or any default or acceleration of an obligation for the period.
(3)
There is nothing to disclose regarding any material off-balance sheet transactions,
arrangements, obligations (including contingent obligations) and other relationships of
ALCO with unconsolidated entities or other persons created during the reporting period.
(4)
There are no other significant elements of income or loss that did not arise from ALCO’s
operations or borrowings for its projects.
(5)
The causes of the material changes of 5% or more from period to period of the following
accounts are as follows:
Balance Sheet Accounts – March 31, 2010 versus December 31, 2009 (Audited)
(i)
216% increase in Cash and Cash Equivalent – largely due to collection
from pre-selling activities.
(ii)
52% increase in Receivables – primarily due to advances to suppliers,
contractors and employees.
(iii)
26% increase in Other Current Assets – mainly due to creditable
withholding taxes.
(iv)
49% increase in Current Loans Payable – largely due to proceeds from
short term notes payable and bank loans.
(v)
54% decrease in Accounts Payable and Accrued Expenses – due to
settlement of various outstanding payables.
(vi)
Capital Stock – P15.000 Mn was collected from existing subscriptions.
(vii)
Retained Earnings – The Group registered net loss of P24.032 Mn for the
first quarter of 2010.
20
Income Statement – 1st Quarter 2010 versus 1st Quarter 2009
(i)
1,029% increase in Gross Income – primarily due to rental revenues for the
period.
(ii)
73.49% decrease in Taxes and Licenses – lower due to payment of
documentary stamp tax for additional subscribed capital last year.
(iii)
1,680% increase in Association Dues – mainly an effect of transfer of office
in Picadilly Star Building in Taguig and the operation of the Sales Pavilion
for Arya Residences also in Taguig.
(iv)
44% increase in Management and Professional Fees - due to engagement of
consultants related to operations.
- nothing follows -
21