Document 6524302

Transcription

Document 6524302

COVER SHEET
9
9
9
0
5
S.E.C. Registration Number
P
H
I
L
I
P
P
I
N
E
R
C
O
R
P
O
R
A
T
I
O
N
A
N
D
R
E
A
N
O
R
T
D
R
I
V
E
O
R
Q
U
E
Z
O
C
I
E
A
L
T
Y
A
N
X
D
H
O
L
D
I
B
A
L
E
T
E
E
W
M
A
N
N
G
S
I
L
A
(Company's Full Name)
C
N
H
N
T
D
C
O
M
P
L
E
O
M
I
N
G
O
N
Y
(Business Address : No. Street Company / Town / Province)
MS. JOSEFA BERNADETTE DIZON
636-1170
Contact Person
1
2
3
Month
Company Telephone Number
SEC 17-A
1
Day
FORM TYPE
Month
Day
Annual Meeting
N/A
Secondary License Type, If Applicable
N.A
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
2,507
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
Document I.D.
STAMPS
Remarks = pls. use black ink for scanning purposes
LCU
Cashier
Foreign
SECURITIES AND EXCHANGE COMMISSION
Form 17- A
PHILIPPINE REALTY AND HOLDINGS CORPORATION
Annual Report Pursuant to Section 17
of the Securities Regulation Code and Section 141
of the Corporation Code of the Philippines
1.
For the fiscal year ended:
31st December 2013
2.
SEC Identification No. :
4.
Registrant
5.
Country of Incorporation: Philippines 6.Industry Classification Code: Real Estate Developer
99905
3. BIR Tax Identification No.: 116-000-188-233
: Philippine Realty and Holdings Corporation
7. Address of principal office:
Satellite Office
Andrea North Complex, Balete Drive corner N. Domingo St.,
New Manila, Quezon City
: 5/F, PSE Centre East Tower, Exchange Road, Ortigas Center
Pasig City
8.
Registrant's telephone no.:
636-1170
9.
The Registrant has not changed its corporate name and fiscal year.
10. Securities registered pursuant to Sections 4 and 8 of the RSA
Title of Class
Common
No. of shares of common stock outstanding
Debt Outstanding
4,922,324,908 shares
P 0.00
11. The Registrant's common shares are listed on the Philippine Stock Exchange
12. The Registrant has filed all reports required to be filed by Section 17 of the Securities Regulation
Code and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporate Code during
the preceding 12 months.
The Registrant has been subject to such filing requirements for the past 90 days.
13. The aggregate market value of voting stocks held by non-affiliates representing 3,138,045,892 of
outstanding common shares is P 1,380,740,192 computed on the basis of P0.44 per common
share as of close of December 19, 2013.
14. The Registrant has filed all documents and reports required to be filed by Section 17 of the
Code.
PART I
BUSINESS AND GENERAL INFORMATION
Item 1. Business
Philippine Realty and Holdings Corporation was incorporated on July 13, 1981 with an initial
capitalization of P2 million. In 1986, the Company’s capitalization was increased to P100 million
to accommodate the entry of new stockholders. In September 1987, Philrealty became a public
corporation. Its present authorized capital stock is P 8 billion, divided into 8 billion shares, of
which 4.92 billion shares are outstanding and subscribed.
Philrealty’s main real estate activity since it started operations has been the development and sale
of residential/office condominium projects and to a limited extent, the lease of commercial and
office spaces.
It has developed unique and trend setting projects: The Alexandra, the first to offer consumers
the combination of high-rise condominium and subdivision living; Philippine Stock Exchange
Centre, the official headquarters of the Philippine Stock Exchange, Inc. and home of the
country's corporate and financial stalwarts; The Alexis, a low-rise condominium within an
upscale subdivision; the exclusive La Isla; and Casa Miguel, a 4-storey walk-up residential
condominium in San Juan, Metro Manila.
After the completion of the Philippine Stock Exchange Centre in January 1996, Philrealty
launched its Andrea North project in the 2.8-hectare former Pepsi Cola property in New Manila,
Quezon City. This project is an Alexandra-type upscale and high-rise condominium complex,
which consists of five residential towers.
On November 16, 2012 the Company held the ceremonial concrete pouring for its second
tower in the Andrea North Complex named the Skyvillas Tower. The Company also completed
the construction of its Showroom which showcases the model units of The Skyvillas Tower and
an area dedicated for retail shops. Construction of the joint venture project, Icon Plaza at the
Bonifacio Global City with Xcell Property Ventures, Inc. commenced in mid 2010 and is
74.28% completed as of year-end.
In 2002, the Company filed with the court a petition for corporate rehabilitation with prayer for
suspension of payments. The Company settled its loan obligations with all the five creditor
banks through dacion-en-pago, cash payments from the sale of assets and loan restructuring.
The Company has completed another major component of the rehabilitation plan which is the
completion of construction of the Andrea North Skyline Tower. In February 2011, the
Company filed a Motion to terminate rehabilitation proceeding on account of the successful
implementation of the Rehabilitation Plan. However, in November 2012 the court denied the
Company’s motion on the basis that it has still substantial obligations to pay, principally to a
contractor who then just won its court case against the Company.
As of December 20, 2013, the Company’s liabilities to the contractor, Andrea North Skyline
buyers and unsecured creditors were already paid, such that, the Company has filed a motion to
terminate the rehabilitation proceedings, which was recently granted on March 31, 2014. The
funds were sourced from the balance of the Company's receivables from its joint venture with
Xcell Property Ventures, Inc. over two (2) parcels of land in BGC, which is projected to
continue to be amortized over the same 14-month period and to be fully collected by December
2014.
Significant Subsidiaries
In line with Management thrust to venture into non-real estate activities, Philrealty has
organized/invested in the following subsidiaries and affiliates:
PRHC Property Managers, Inc. (100% owned)
PRHC Property Managers, Inc. (PPMI) was incorporated in May 1991 to oversee the
administration, operation and monitoring of Philrealty’s growing number of real estate
properties. In order to be at par with other property managers such as Century
Properties, Inc., FPD Saville Davis and Cuervo Far East, PPMI has expanded its
property management services to include non-Philrealty projects. The clientele includes:
Philippine Stock Exchange Centre, Icon Residences, LTA Condominium, Greenhills
Properties’ El Pueblo Real de Manila, Nobel Plaza Condominium, Andrea North Skyline
Tower, The Pinnacle Condominium, Greenrich Mansion Condominium, Genato
Investment, MDB Condominium and Philippine Stock Exchange, Inc.. PPMI ensures
that said properties be operated and managed according to the established requirements
and standards in the industry. PPMI is also engaged in the sale and leasing of managed
buildings as well as other real estate.
Tektite Insurance Brokers, Inc. (100% owned)
Tektite Insurance Brokers, Inc. was incorporated in January 1989 as Philrealty Insurance
Agency. Due to increasing demand, it was reorganized into an insurance brokerage firm
in 1994. Major clients includes: A. Brown & Co., Inc., Philrealty Group, Bostik Phils.,
RG Meditron and Phil. Stock Exchange Centre Condominium Corporation.
Universal Travel Corporation (81.53% owned)
Universal Travel Corporation was incorporated in October 1993 and is engaged in the
business of travel services by providing, arranging, marketing, engaging or rendering
advisory and consultancy services relating to tours and tour packages. UTC caters to
Philippine Stock Exchange Centre’s tenants.
Alexandra (USA), Inc. (45% owned)
Jointly owned with Greenhills Properties, Inc. (45%) and Warrenton Enterprises Corp.
(10%) of William Cu-Unjieng, this company is involved in property development in
Florida, USA. Amidst the real estate slump in the United States, the affiliate, incurred
successive losses. Settlement of loan obligations could no longer be met which led to
dacion en pago of the remaining lots in Orlando. In late 2011, AUI started the process of
liquidation. Philrealty, on its part, provided for the impairment of advances and
investment to AUI of about P 101.64 million.
The principal products or services of Philrealty, which are derived from domestic sales and
their relative contribution to revenue, are as follows:
Sale of Land and Condominium Units
Equity in Net Earnings of Joint Venture
Net Underwriting Income
Management Fees
Commission
Rental
Interest and Other Income
2013
49.52%
0.00%
0.00%
6.86%
1.55%
7.41%
34.66%
100.00%
2012
80.20%
0.00%
0.00%
4.93%
1.48%
4.97%
8.42%
100.00%
2011
72.26%
0.00%
0.00%
3.99%
1.14%
4.45%
18.16%
100.00%
Related Party Transactions
The Company’s related transactions were made on an arm’s length basis. There was no
special pricing policy between related parties. Further disclosures were made to Item No. 12
and to the Notes to Financial Statements No 26. The Parent Company engages the services
of its subsidiary, PRHC Property Managers, Inc. (PPMI) in managing company-owned
properties. PPMI, on the other hand, purchased a condominium unit back in 1996 from the
Parent Company, which is still not fully paid as of to date. The Parent Company also secures
insurance through subsidiary, Tektite Insurance Brokers, Inc. The Parent Company is given
90-day period within which to settle the premiums, the same period granted to any assured.
Also, the Parent Company extends interest-bearing financial assistance to its subsidiary,
PPMI for working capital purposes.
Major Risk/s of the Parent Company and Subsidiaries
The major factors affecting the company’s business are:
Philippine Economic Conditions
Since the breakout of the Asian financial crisis in mid-1997 the company has been
adversely affected by a general economic slowdown in the Philippines which has shattered
business and consumer confidence and reduced incomes. The slowdown in GDP
growth from an annual compound rate of 4.5% during the period from 1993 to 1997 to
3.2% from 1998 through 2002 has depressed demand for housing and office space.
Beginning 2004, the economy has staged a modest recovery, interrupted only temporarily
by the great recession in 2009. The creditable growth can be attributed to the reining in
of the government’s budget deficit which has stabilized the value of the peso, with the
help of the sustained growth of OFW remittances and the strong performance of the
business process outsourcing sector. This positive economic environment has given a
boost for the real estate industry.
Level of Interest Rates
The cost of housing is made up of the cost of land, construction and financing. Mortgage
rates in the Philippines have generally been higher compared to other countries due to
higher inflation and the financial system’s low liquidity and inefficiencies. Since 2002,
annual inflation has been subdued at about 4%, leading to single-digit Treasury Bill rates
and currently, even mortgage rates. The lower financing cost has made housing more
affordable to a larger segment of the population.
Remittances of Overseas Filipino Workers
The lack of employment opportunities locally and the opening up of foreign labor
markets has driven more and more Filipinos to work abroad. Combined with the higher
skills requirement for the new job opportunities, the labor migration has resulted in better
paying jobs and thus, increased remittances to the Philippines. This phenomenon has
been one of the driving factors for the housing industry in recent years, making up for the
lackluster local incomes.
Government Programs
In 2002, the Pag-ibig Fund (Home Development Mutual Fund) came out with increased
loanable amounts and lower interest rates for members. The loan features were further
improved in 2004. Of interest to the company is the program which allows a member to
borrow up to P3 million for a term of thirty (30) years, at an interest rate of 11.5% per
annum, and with a down payment for the unit of only 20% payable while the unit is under
construction or development. Similarly, the HDMF has instituted a Medium/High Rise
Condominium Building financing program for developers. With the trend towards smaller
condominium units, these two programs have given the sector a reliable source of
funding.
The following procedures are being undertaken to manage risks involved in the
Company and Subsidiaries:
Instead of undertaking its own property development while under court-assisted rehabilitation,
the Company has entered into joint ventures with a more financially capable corporation for its
properties in the Bonifacio Global City. With regard to its loans, the Company has fully paid its
debt through dacion-en-pago and sale of assets.
Financial and Capital Risk Management are further discussed in Notes 6 and 7 of the attached
Audited Financial Statements.
Distribution Method
Condominium sales are being handled by property consultants supervised by an out-sourced
marketing firm. A new marketing firm is hired to sell the Company’s upcoming tower in its
Andrea North Complex in New Manila.
Competition
Generally, the major players in the high-end residential and office condominium sector are
Megaworld Corporation, Ayala Land, Inc., Federal Land, Inc., Century Properties, Inc.,
Robinsons Land Corporation and Rockwell Land Corporation. The Parent Company’s
completed projects have been concentrated at the Ortigas Center, but it has extended its
operations to New Manila, Quezon City where it is developing a residential condominium
complex and to the Bonifacio Global City where it has acquired land and which the Company
contributed to its joint ventures with Xcell Property Ventures, Inc. The Company resumed the
construction of its Skyline Tower located at Balete Dr., New Manila, Quezon City in February
2009 and completed it in September 2011 for a total development completion cost of P1.1B. The
construction of the second tower of Andrea North Complex is ongoing.
Metro Manila Residential Supply
In the Makati CBD, three new condominium projects were completed in 4Q 2012
totalling 792 units. These were Raffles Residences, Greenbelt Madison, and the
Grand Midori Tower 1. In 2013, the level of new supply to be introduced in the
CBC will hit a record high at 2,825 units, most of which are Grade A residential
condominiums.
In all sub-markets, total residential stock stood at over 53,000 units as of end-2012.
Over the next four years, some 23,600 new units or an annual average of 5,900
units will be introduced. The Bonifacio Global City will have the strongest supply
pipeline and subsequently the highest level of stock by 2015.
Quezon City/New Manila Market
The Quezon City market remains to be a very attractive market since most
developers have opted to position in the main CBDs of Makati, Ortigas, Bonifacio
and Rockwell. There are still few players developing but this has rapidly increased
in the last few years due to high land values in the CBDs. Evident are the
emerging new areas of Ayala technohub and Eton Centris. Still, Quezon City has
the largest population and therefore, packs a lot of potential.
Financial Strategy
The project will be financed mostly coming from internally generated funds and
less aggressive pre-selling activities with a projected sell out within 1-2 years from
launch. Prospective buyers will be offered discounts for cash purchases. Basic
payment terms will require at least 10 to 60 percent downpayment payable over at
24 months with balance payable upon turnover of the unit.
Marketing Strategy
Philrealty has constructed a showroom with model units within the Andrea North
property. The project will offer highly-efficient unit layouts that are larger in size
compared to those currently available in the market. The units and common areas
will be highly illuminated and ventilated making them energy-efficient and
environment-friendly. Potential buyers of other developments offering smaller
unit cuts will find great value in this development. Apart from this, the almostcenter location of the project will be a product differentiator in itself.
Sales Strategy
Having the model units and marketing office on site will make the product
accessible to the buyers. This will be complemented by outdoor ads in strategic
locations leading to the site. A new marketing firm is engaged to sell the second
tower of Andrea North Complex.
Direct Competition
Currently, the competition within the area would still be the Magnolia Residences
by Robinsons Land Corp, and Pinecrest by Crown Asia. Robinsons is offering
units from 1 Br to 3 Br constructed on 4 towers of about 35 floors each. Total
inventory is about 1,227 units all in all. Pinecrest has smaller units constructed on
3 mid-rise towers averaging 10 floors each for a total of about 340 units.
Other newer developments in the area may also be competing within the market
niche; however, the location has a big advantage over the other development in
the vicinity, being the preferred site for new investments.
Also the new Robinsons Magnolia within the same block opened in mid 2012
which increased the project’s marketability and boosted land values in the
surrounding New Manila area.
Sources and Availability of Materials
The company does not maintain its own design team or construction outfit. Architectural
and engineering design consultants are commissioned on a per project basis depending on the
nature and magnitude of the task. Construction is bidded out on a competitive basis to a prequalified group of contractors. The company maintains its own project management team, but
also relies on independent outfits from time to time.
Customers
The Company sells its condominium units to individual personal and corporate buyers. No
single client accounts for a recurring significant percentage of sales.
Government Regulations
Condominium development is governed primarily by P.D. 957 as amended (Regulating the
Sales of Subdivision Lots and Condominiums), R.A. No. 4726 (Condominium Act) and R.A. No.
7160 (Local Government Code). Projects are subject to zoning laws of the city or municipality
where they are located. Developers are also required to obtain a development permit from the
Housing and Land Use Regulatory Board which is also in charge of issuing License to Sell and
Certificate of Registration. An Environmental Clearance Certificate must also be secured from
the Department of Environment and Natural Resources. The Company has complied with all
governmental requirements and there is no pending application with any government agency that
requires approval.
Patents and Trademarks
The company has registered with the Intellectual Property Office (IPO) the logo of one of its
finest projects La Isla, a residential condominium located at Ortigas Center. It was registered last
May 8, 2001 with Registration No. 4-1994-96927. The registration will be effective for twenty
(20) years. It also registered the logo and name of Philippine Realty and Holdings Corporation, a
developer of trend setting projects like the Philippine Stock Exchange Centre, The Alexandra, La
Isla and Casa Miguel as well as the logo and the name Andrea North Tower and Skyline Tower
for its project located at New Manila, Quezon. The names of the four (4) towers to be
constructed in the complex were also registered namely: Skyview, Skylight, Skyvillas and Skyscape
Towers.
Employees
Philrealty has a total workforce of 26 employees as of December 31, 2013, categorized as
follows:
Clerical
Administrative
Operations
Managerial
Executive
Total
5
9
2
2
8
26
The Company expects to more or less maintain its number of employees in the next 12
months. There is no existing Collective Bargaining Agreement (CBA) between the Company and
its employees. The employees are not on strike, have not been on strike for the past three years
and are not threatening to strike. The Company has the following supplemental benefits for its
employees: (a) Health Care; (b) Group Life Insurance; (c) Retirement Fund and (d) Profit sharing
per Company’s By-Laws.
Item 2. Properties
All properties of the Company are free from lien or encumbrance. The Company has no
intention to acquire properties in the next twelve months and will instead tap the land bank of its
major shareholder, Greenhills Properties, Inc., under joint venture arrangements.
(A)
Landbanking
Location
Area in sqm.
Title No.
New Manila., Quezon City
14,716.21
N-157138/157139/157137
Iruhin West, Tagaytay City, (85% owned)
39,975.00
T-34469/34412
Ili Norte, San Juan, La Union
32,107.00
T-40152/40153
Carlatan, San Fernando City, La Union
33,122.00
T-40701/40702
Land Estate Held for Development
and/or Capital Appreciation
Land invested in Joint Venture
Fort Bonifacio, Taguig
7,205.00
N-1186P/29717/27147
(B)
Properties and Equipment
The properties and equipment of Philrealty and its subsidiaries are located at its principal
place of business.
(C)
Leased Properties
Philrealty has also leased some of its office unit, storage units and parking slots located at
Philippine Stock Exchange Centre to individuals or corporations at prevailing rates. The
contracts of lease are renewable for periods ranging from one to five years.
Item 3. Legal Proceedings
*
Petition for Corporate Rehabilitation with Prayer for Suspension of Payments filed with the Regional Trial
Court Quezon City
Philrealty filed on December 12, 2002 a Petition for Corporate Rehabilitation with Prayer for
Suspension of Payments to stop the creditors of petitioner from foreclosing on the
mortgages over the real properties of petitioner to the prejudice of the other stakeholders of
petitioner. The court gave due course to Philrealty’s petition on February 26, 2003 and
appointed Mr. Ricardo Ysmael, as Rehabilitation Receiver. On June 20, 2003, Philrealty filed
with the RTC its amended proposed rehabilitation plan. On June 11 2004, the Court
approved the Receiver’s Recommendation on the Amended Rehabilitation Plan.
The Company filed a Motion to Terminate Proceedings on account of the successful
implementation of the Rehabilitation Plan with the Regional Trial Court of Quezon City on
February 2, 2011. In November 2012 the Rehabilitation Court, upon the recommendation
of the Rehabilitation Receiver denied the motion on the basis that the Company has still
substantial obligation to pay, mainly to Ley Construction (see below).
As of December 20, 2013, the Company’s liabilities to the contractor, Andrea North Skyline
buyers and unsecured creditors were already paid, such that, the Company has filed a motion
to terminate the rehabilitation proceedings. This was granted on March 31, 2014.
*
Ley Construction and Development Corporation vs. Philippine Realty and Holdings Corporation, Dennis
A. Abcede and Joselito L. Santos, Civil Case No. 96-160, Regional Trial Court Makati City Branch
135; CA-GR No. CV 71293, Court of Appeals.
This is a complaint filed on 29 January 1996 by Ley Construction and Development
Corporation (“Ley Construction”), as contractor, for sum of money and damages arising
from various construction projects, against Philrealty as the project owner. On February 16,
2001, Philrealty received the copy of the Decision of the Regional Trial Court issued on 31
January 2001, ordering Philrealty to pay Ley Construction a sum of money. On February 20,
2001, Philrealty filed with the Regional Trial Court a Notice of Appeal of the abovementioned decision. On October 7, 2004, the Court of Appeals Ninth Division reversed and
set aside the decision made on January 31, 2001 and the May 7, 2001 amended decision and
ordered Ley Construction to pay the defendant-appellant Philrealty the net amount due of
Three Million Seven Hundred Forty Seven Thousand Seven Hundred Ninety Three &
50/100 Pesos with legal interest from date of filing of complaint. On November 22, 2004,
Philrealty filed a Petition for Review. Ley Construction filed a Petition for Review on
Certiorari with Supreme Court which is docketed as SC-G.R. No. 167879 while Philrealty
filed its Comment to Petition for Review on Certiorari on December 12, 2005. On June 30,
2011 the Supreme Court ruled in favor of Ley Construction. Our lawyers filed a Motion for
Reconsideration which the SC denied with finality on October 25, 2011 and directing the
Company to pay P57 million plus legal interest from the time of filing of the case. The
Company has booked the prospective settlement expenses in the amount of P112.75 million
in its 2011 financial statements. On July 16, 2012, the Company received a Notice of
Garnishment and Notice to Comply/Pay in connection with the claim of “Ley
Construction” which was lifted December 26, 2012 on account of the Company’s Corporate
Rehabilitation. In November 2013, the Company settled its obligation to Ley Construction
under a compromise agreement.
*
Philippine Realty and Holdings Corp. vs. DMCI Project Developers, Inc., Universal Rightfield Property
Holdings, Inc., and Universal Leisure Corporation, Civil Case No. 67092, and pending before Branch
161, Regional Trial Court, Pasig City.
Universal Leisure Corporation(ULC) bought several condominium units from Phil. Realty
and Holdings Corp. under two(2) contracts to sell. After paying the down payment ULC
refused to pay the balance due on the principal sums of P32,534,202.66 and P32,383,972.00.
ULC claims that it is an assignee of receivable from DMCI Project Developers, Inc.(DMCI)
and Universal Rightfield Property Holdings, Inc. (URPHI) for a sum of money allegedly
owed by Philrealty to DMCI and URPHI as a result of cancellation of joint venture
agreement entered into by Philrealty, URPHI and DMCI. The trial Court ruled against
Philrealty; thus, it ordered Philrealty to pay a sum of money to ULC, DMCI and URPHI and
deliver titles of fourteen condominium units and two storage units situated at 34th Floor
West Tower as well as the seventy four parking slots situated at the West Podium 3 Parking
Level of the PSE Centre. Philrealty appealed the case with the Court of Appeals (CA) which
affirmed the trial court’s decision. In December 2012, Philrealty filed a Motion for
Reconsideration and the same was denied. Thereafter, the Parent Company filed a Petition
for Review with the Supreme Court where the matter is still pending as of report date.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of the
calendar year covered by this report.
Part II
OPERATIONAL INFORMATION
Item 5. Market for Registrant's Common Shares and Related Stockholder Matters
Market Information
Principal market for the Registrant's
Common shares
: Philippine Stock Exchange
High and Low Sales Prices for each quarter for years 2012-2013 and 1st quarter 2014
based on Philippine Stock Exchange’s Daily Quotation Report
2 0 12
1st quarter
2 0 13
2 0 14
High
Low
High
Low
High
Low
0.62
0.50
0.68
0.45
0.68
0.43
2nd quarter
0.57
0.45
0.63
0.41
3rd quarter
0.52
0.43
0.61
0.42
4th quarter
0.54
0.40
0.49
0.40
The trading of PRHC’s shares was suspended in 2003 due to the filing of the Petition for
Corporate Rehabilitation with Prayer for Suspension of Payments. It was reinstated on
October 21, 2004.
Holders
As of December 31, 2013 the Company had 2,499 stockholders. The list of the top
twenty stockholders of the Company as of December 31, 2013 is as follows:
Name of Stockholder
Citizenship
PCD Nominee Corporation
Greenhills Properties, Inc.
A Brown Company, Inc.
Campos, Lanuza & Co., Inc.
Philex Mining Corporation
Belson Securities, Inc.
Socorro C. Ramos
Universal Travel Corp.
Brisot Economic Dev. Corp
Vulcan Industrial & Mining Corp.
National Bookstore, Inc.
Ricardo Leong
Ramon de Leon
Calixto Laureano
Consuelo Madrigal
Wealth Securities, Inc.
Oscar S. Cu ITF Anthony Cu
Meridian Securities
Guoco Sec (Phils) Inc.
Citisecurities, Inc.
Guild Securities
E. Chua Chiaco Securities, Inc.
Total
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
No. of Shares
2,063,957,193
1,755,779,066
278,505,248
275,418,451
68,865,002
30,580,956
21,291,750
15,807,000
15,280,621
15,159,434
13,258,728
11,810,854
11,810,854
11,810,854
11,500,000
9,339,953
7,390,000
6,269,888
5,961,532
5,628,678
5,597,412
5,539,016
4,634,843,682
Percentage (%)
41.93%
35.67%
5.66%
5.60%
1.40%
.62%
.43%
.32%
.31%
.31%
.27%
.24%
.24%
.24%
.23%
.19%
.15%
.13%
.12%
.11%
.11%
.11%
94.39%
Dividends
No dividend was declared by the Company since its last declaration on October 24, 1995.
There are no unappropriated retained earnings to be distributed to stockholders since
1997. In 1996, the Board of Directors approved the appropriation of P250 million of
the Company’s retained earnings for the purchase of its own capital stock.
Recent sales of unregistered securities
There were no sales of unregistered securities.
Part III
FINANCIAL INFORMATION
Item 6. Management's Discussion and Analysis or Plan of Operation
Refer to 1-B hereof. There are no material off-balance sheet transactions during the
reporting period.
Item 7. 2013 Consolidated Financial Statements of Philippine Realty and Holdings
Corporation and its Subsidiaries
Refer to Exhibit 2 hereof
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
The auditing and accounting firm of Maceda Valencia & Co. is the Company’s Independent
Public Accountants appointed in the 2013 Annual Stockholders Meeting. There was no event
where Maceda Valencia & Co. and the Company had any disagreement with regard to any
matter relating to accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
Audit and Audit Related Fees
The professional fees of independent auditors Maceda Valencia & Co., for 2012 and 2013
amounts to P862,500 and P920,000, exclusive of VAT, respectively. Out of pocket expense
is pegged at 15% for 2012 and 2013.
Tax Fees
We did not engage the services of our auditor, Maceda Valencia & Co. with regard to tax
services.
PART IV
MANAGEMENT AND CERTAIN SECURITY HOLDERS
Item 9. Directors and Executive Officers of the Registrant
Gerardo Lanuza, Jr./ 67 – Other Alien/Spanish
Mr. Lanuza, has served as Director of PRHC since 1981 and has been its Chairman for the past
fifteen years. He also holds the following significant positions: Chairman of Universal Travel
Corporation, Greenhills Properties, Inc.; Director, Meridian Assurance Corp., Xcell Property
Ventures, Inc.. He is also a Member of the Philippine Stock Exchange, Inc.
Antonio O. Olbes/ 67 - Filipino
Mr. Olbes, has served as Director of PRHC since 1986 and as a Vice-Chairman of Philippine
Realty for nineteen years. His concurrent positions are: Chairman of File Managers, Inc.;
Director of Greenhills Properties, Inc., Universal Travel Corporation and Xcell Property
Ventures, Inc.
Juan Antonio Lanuza/ 76 – Other Alien
Mr. Lanuza has served as Director of PRHC since 1987 and has been a Vice-Chairman for fifteen
years. He is also a Director of Greenhills Properties, Inc., Campos Lanuza & Co., Inc. and
PRHC Property Managers, Inc.
Ramon C-F. Cuervo, III / 60 (Independent Director) - Filipino
Mr. Cuervo has served as Independent Director for nine years. He has also held the following
significant positions: Chairman of Property Partnership, Inc. and Cuervo Far East, Inc. Director
of R. F. Cuervo, Inc. and Member of Manila Board of Realtors, Inc., Philippine Association of
Real Estate, International Real Estate Institute, Institute of Philippine Real Estate Appraisers,
Philippine Association of Real Estate Consultants, and Financial Executive.
Manuel O. Orros/66 (Independent Director) - Filipino
Mr. Orros has served as Independent Director of PRHC for nine years. He is a
Director/Treasurer of Australian International Export-Import, Inc. and the President of O’ Mai
Khan, Inc. in Baguio City.
Amador C. Bacani/66 - Filipino
Mr. Bacani, has served as Director of PRHC since 1998 and is currently the President of PRHC
after serving as its Executive Vice President for seven years. His concurrent positions are:
President and Director, Xcell Property Ventures, Inc., Chairman of PRHC Property Managers,
Inc.; Director, Universal Travel Corporation and Meridian Assurance Corporation.
Atty. Mariano C. Ereso, Jr./81-Filipino
Atty. Ereso has been the Principal/Head-Tax Consulting of various auditing/law firms of which
include Laya Mananghaya & Co., CPAs/KPMG, from October 1995 to September 30, 1999 and
Ongkiko Kalaw Manhit Acorda Law Offices since October 1999. His expertise in the field of
taxation has led him to be the Team Leader of the Presidential Fact Finding Committee for the
Improvement of the operations of the Bureau of Internal Revenue and Chairman of the
Committee for Review and Codification of Income Tax Regulations.
Gerardo Domenico Antonio V. Lanuza/31 – Filipino
Mr. Lanuza was elected as Director on January 15, 2009. He is currently the Executive Vice
President of PRHC, Vice President of Campos, Lanuza & Co., Inc., Director of A Brown Co.,
Inc. and CEO of Meridian Assurance Corporation.
Gregory G. Yang/57 – Filipino
Mr. Yang is currently the Senior Vice President of McDonalds Philippines. He had been a
Branch Manager of International Corporate Bank prior to his stint at McDonalds. He was
elected as Director last August 20, 2009.
Andrew C Ng/31 – Filipino
Mr. Ng is currently the Vice-President of Alpha Alleanza Manufacturing, Inc. He was formerly
Operations Manager of Pinnacle Foods, Inc. He was elected as Director last August 20, 2009.
Andrew D. Alcid/55 – Filipino/American
Mr. Alcid was elected as Director on November 8, 2012 to fill the vacancy in the Board arising
from the death of Mr. Eduardo Gaspar in March 2012. Mr. Alcid was the President and CEO of
Coastal Road Corporation and Knowledge City Holdings & Development Corporation before
joining Greenhills Properties, Inc. as President. He was also President of AXA Philippines from
2006 to 2008.
Significant Employees
Any director or officer who may be elected is expected to make significant contributions to the
operations and business of the Corporation. Likewise, each employee is expected to do his share in
achieving the Company’s set goals.
Family Relationships
Mr. Gerardo Lanuza, Jr., Chairman of the Board, is the younger brother of Mr. Juan Antonio Lanuza,
Vice Chairman of the Board; first cousin of Mr. Antonio O. Olbes, and father of Director, Mr.
Gerardo Domenico Antonio V. Lanuza. Mr. Gregory Yang is the father-in-law of Mr. Gerardo
Domenico Antonio V. Lanuza.
Involvement in Certain Legal Proceedings
There are no legal proceedings against the directors and officers of Philippine Realty and Holdings
Corporation within the categories described in Annex C Part IV (A) of Rule 12 for the last five years.
Item 10. Executive Compensation
Year
CEO & five most highly
compensated executive officers-
2013
2012
Salary
Bonus
Per Diem
Other Annual
Compensation
Total
15,024,744.81
10,289,103.10
None
None
99,000.00
111,000.00
None
None
15,123,744.81
10,400,103.10
Gerardo Lanuza (Chairman of the
Board), Amador C. Bacani (President),
Jose F. Santos (Senior Vice-President
and COO),Gerardo Domenico
Antonio Lanuza (VP for Special
Projects) , Robirose M. Abbot (Vice
President Finance and Admin.), Jose
Ramon Olives ( Vice President for
Marketing starting September 01,
2013)
2011
8,790,436.82
None
84,000.00
None
8,874,436.82
All officers & directors as a group –
Other officers include: Juan Antonio
Lanuza (Vice-Chairman), Antonio
Olbes (Vice Chairman), Dennis
Aranaz (Construction Manager),
Josefa Ma. Bernadette Dizon
(Accounting Manager until September
13, 2013) and Rachelle Gatpandan
(Acting Accounting Manager starting
September 16, 2013)
2013
2012
2011
17,684,360.43
None
159,000.00
None
17,843,360.43
12,457,595.73
11,435,086.08
None
None
162,000.00
414,000.00
None
None
12,619,595.73
11,849,086.08
The Executive Officers are elected annually by the Board of Directors, at its first meeting following
the annual stockholders’ meeting. Every officer, including the President, is subject to removal at any
time by the Board of Directors. All officers hold office for one year and until their successors are
duly elected and qualified; provided that any officer elected to fill any vacancy shall hold office only
for the unexpired term of the office filled.
The compensation of the Company’s executive officers is fixed by the Board of Directors. They are
covered by contract of employment and as such they are entitled to all the benefits accruing to
salaried employees of the Company.
Compensation of Directors
Directors are entitled to a per diem of P3,000.00 for board meetings attended except for independent
directors who received P10,000.00. In addition, the board is entitled to a portion of the 5% of net
income before tax profit-sharing incentive for directors, officers and staff.
The directors of the registrant received per diem in the amount of P506,000, P488,000 and P484,000
for 2013, 2012 and 2011, respectively.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following persons are known to the Company to be directly or indirectly the record or
beneficial owner of more than 5% of the Company’s voting security as at December 31,
2013.
Title
Name and Address of
Record/Beneficial Owner
Record/
Beneficial Ownership
Number of
Shares Owned
Citizenship
% Owned
Common
PCD Nominee Corp.
MSE Bldg., Ayala Avenue,
Makati
“R”
Filipino/
Non-Filipino
2,063,957,193 shares
41.93%
Common
E-2003B, PSE Centre
Exchange Road, Pasig City
“B”
Filipino
1,755,779,066 shares
35.67%
Common
A.Brown Company, Inc.
Xavier Estates
Uptown Airport Road
Cagayan de Oro City
”B”
Filipino
278,505,248 shares
5.66%
Common
Campos, Lanuza & Co., Inc
E-2003B, PSE Centre
Exchange Road, Pasig City
“R”/”B”
Fil./American
Spanish/Other
Alien
275,418,451 shares
5.60%
Note: Greenhills Properties, Inc. is represented by its Chairman, Gerardo Lanuza, Jr. and
Treasurer, Antonio O. Olbes.
Campos, Lanuza & Co., Inc. is represented by its President, Corazon Lanuza and
Vice President, Antonio Reyes-Cuerva while A Brown Co., Inc. is represented by its
Chairman, Walter W. Brown and Treasurer, Annabelle P. Brown.
PCD Nominee holds 41.93% interest. PCD Nominee is the registered owner of
shares beneficially owned by participants in the PCD. Campos, Lanuza & Co., is a
participant of PCD owning 29.728 % of the company’s voting securities.
Shares held by Directors and Executive Officers as reported by transfer agent as of 31st
December 2013:
Title
Common
Common
Common
Names
Antonio O. Olbes
Amador C. Bacani
Gerardo Lanuza, Jr.
Common
Common
Common
Gregory Yang
Juan Antonio Lanuza
Gerardo Domenico Antonio
V. Lanuza
Andrew D. Alcid
Andrew Ng
Mariano C. Ereso, Jr
Manuel O. Orros
Ramon F. Cuervo, III
Directors and Officers As a
Group
Common
Common
Common
Common
Common
Common
No. of Shares
Owned
506,388
229,980
174,024
Record/Beneficial
Ownership
“B”-Direct
“B”-Direct
“B”-Direct
100,000
78,035
“B”-Direct
“B”-Direct
7,202,000
50,000
10,000
10,000
1
1
8,360,429
“B”-Direct
“B” Direct
“B”-Direct
“B”-Direct
“B”-Direct
“B”-Direct
“B”-Direct
%age Owned
Citizenship
Filipino
Filipino
Other Alien
Spanish
Filipino
Other Alien
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
0.010%
0.005%
0.004%
0.002%
0.002%
0.146%
0.001%
0.000%
0.000%
0.000%
0.000%
0.170%
Voting Trust Holders of 5% or more
Phil. Realty knows of no persons holding more than 5% of common shares under a voting
trust or similar arrangement.
Change in Control
As of the present, there is no change in control nor is the Company aware of any
arrangement that may result in a change in control of the Company since the beginning of
the last fiscal year.
Item 12. Certain Relationships and Related Transaction
These are transactions with our subsidiaries, Universal Travel Corporation and Alexandra,
USA wherein the Company extended non-interest bearing loan as additional working capital.
In 2008, we provided for allowance for doubtful accounts on our receivable from Alexandra,
USA. Also, in the same year we extended interest bearing loan to PRHC Property Managers,
Inc. as additional working capital. Advances made by our subsidiary, Tektite Insurance
Brokers, Inc. represent advance payment of insurance premium on behalf of the Company.
The Company has not entered into any material transaction nor is it a party to any
transaction in which any director, executive officer or significant shareholder of the
Company or any member of the immediate family of any of the persons mentioned in the
foregoing had or is to have a direct or indirect material interest.
Compliance with Corporate Governance (deleted pursuant to SEC Memorandum Circular
No. 5 Series of 2013)
PART V
EXHIBITS AND SCHEDULES
Item 13. Exhibits and Reports on SEC Form 11- C
Exhibits
1. Management’s Discussion and Analysis or Plan of Operation
2.
2013 Consolidated Financial Statements of Philippine Realty and Holdings
Corporation and its Subsidiaries
3. Subsidiaries of the Registrant
Reports on SEC Form 17-C
(1)
March 22, 2013
(2)
July 01, 2013
(3)
(4)
July 12, 2013
August 22, 2013
(5)
August 23,2013
(6)
September 18, 2013
(7)
September 18, 2013
(8)
October 30, 2013
Disclosure of the new website of the Company
Additional investments made in Meridian Assurance
Corporation (MAC)
Company’s reply on late filing of SEC 17-A for 2012
Appointment of Mr. Jose F. Santos, Jr. as Senior Vice
President and Chief Operating Officer for Business
Development and Construction Management
Disclosure of the Company’s record date for the Annual
Stockholders Meeting
Appointment of Mr. Jose Ramon Olives as Vice
President for Marketing
Resignation of Ms. Josefa Ma. Bernadette Dizon as
Accounting Manager
Results of the 2013 Annual Stockholders Meeting
(9)
(10)
(11)
(12)
October 30, 2013
November 11, 2013
November 19, 2013
December 03, 2013
(13)
December 13, 2013
(14)
December 27, 2013
Election of Directors for 2013-2014
Settlement of obligations to Ley Construction
New sets of directors and officers for 2013
Amended disclosures on the officers and Board
Committees
Receipt of proceeds from the sale of investment property
at Leon Guinto
Disposal of 70% shareholdings in Meridian Assurance
Corporation (MAC)
SIGNATI'RES
Pursuant to Sectron 17 of the SRC and Section L47 of the Colporation Code dre
Registrant has duly caused this report to .trg signed in behalf of the undersigped thereunto
duly authorized in Pasig City on Apnl I
.2O14.
Regisrant
Pursuant to the requirernents of the SRC, this amual has been signed by the
following persons in the capacities indicated.
*^L*
-a^br'
AMADOR C. BACANI
Vice President-Finance
President
(Chief Executive Of6cer)
_)
.
IrPR
l5
REX P. BONIFACIO
tnr4
day of Apnl
SUBSCRIBED AND SS/ORN to before me this
follows:
Tax
as
Certificates,
exhibitiag to me thei Community
,n14,
af6ants
CommunityTax
Names
Amador C. Bacani
Robirose M. Abbot
Rachelle R.
Ga@andan
Rex P" Bonifacio
t.
)oc" Nc.
Date of Issue
Place oflssue
1/n/M
Murrtinlwa Citv
01373769
r/24/14
36.4v897
2/18/1.4
Manila
Manila
n94176
u08/14
Pasic Citv
Certi6cate No.
x7ffi297
kgx'ffi&"$
NOTARY PUBTIC
fintii Oecemner 31, ?'014
i,t l,l tt^trtn
I
lj? 0"1-2014-'2!15
;i;;,i,'; ,. ' '\:-' i:07-14Q,c.
il'C'
''
lBPlr ill rrl, ,
.
Rolt No. :
,.
TtNii 4l0,l,l3ti6
Add. 92 LePirsPi
'l
-
,i}i
13-61
!t'
MCLE EXEIvIPTED fl
PtrN' 4
&C
{-x}i;[$
EXHIBIT 1
MANAGEMENT’S DISCUSSION AND ANALYSIS
Sales of Skyline Tower slowed down as fewer units became available to buyers while new sales
were booked on sale of Icon Plaza units which is 74.28% completed as of year-end. Rental
income inched up due to escalation in rental rate. Gross Profit from the sale of condominium
units in 2013 amounted to about P8.5 million lower by P43.39 million from 2012. Non-recurring
expenses increased from P0.950 million in 2012 to P7.84 million in 2013 due to reversal of
various payables and accruals.
The table below shows the material change from period to period in the Statement of
Comprehensive Income. Material shall refer to changes or items amounting to five percent (5%)
of the relevant accounts:
Sale of real estate
Other income
Other expense
Cost of real estate
General and administrative expense
2013
49.52%
26.83%
2.15%
47.18%
38.20%
VERTICAL
2012
80.20%
2.41%
.20%
69.28%
29.36%
2011
72.26%
14.07%
22.61%
68.92%
48.12%
HORIZONTAL
2013
2012
(52.67%)
1.00%
399%
(87.14%)
752.58%
(99.20%)
(47.79%)
(8.52%)
(0.26%)
(44.48%)
The Group posted a net income of P39.35 million in 2013, P4.22 million in 2012 and net loss of
(P212.60) in 2011. The loss in 2011 was due to impairments recognized for investments and
advances. The sale of real estate pertains to units sold at Skyline Tower located at New Manila,
Quezon City and Icon Plaza located at Bonifacio Global City. Other income consists of gain on
sale of investment property, gain on sale of AFS investments and gain on sales cancellation in
2013 and an adjustment in the interest computation in settlement expenses of Ley Construction
in 2012 and the reversal of the allowance for decline in value of a Bonifacio Global City lot and
Leon Guinto property of P53.50 million in 2011.
Our property management subsidiary, PRHC Property Managers, Inc. (PPMI), registered a net
income of P3.02 million, which increased by 34% from last year’s net income of P2.25 million
due to decrease in direct cost. Currently, PPMI manages a total of 11 buildings located in various
cities in Metro Manila.
Tektite Insurance Brokers, Inc. (TIBI) the Group’s insurance brokerage firm posted a net loss of P
.495 million from last year’s net income of P.459 million, due to increase in depreciation of its
condominium unit.
Consolidated general and administrative expenses dropped to P139.15 million in 2013 and P
139.52 million in 2012 from P251.27 million in 2011 since no impairment occurred during these
years compared to 2011 when the Company set-up impairment loss on receivables and
investments from subsidiary, Universal Travel Corporation and affiliate Alexandra USA. Other
expenses also dropped due to non-accrual of interest on the judicial settlement on the Parent
Company’s case with contractor Ley Construction awaiting decision of the Rehab Court on this
case.
The Company is aware of the causes of the continuous losses it incurred for the years 2009-2011.
However, it could not avoid the high costs of labor and materials at the time it resumed the
construction of Skyline Tower which it could not pass on to the old buyers.
The table below shows the material change from period to period in the Statement of Financial
Position. Material shall refer to changes or items amounting to five percent (5%) of the relevant
accounts.
Cash and cash equivalents
Trading Investments
Available for-sale investments (AFS)
Held to maturity investments (HTM)
Trade and other receivables
Real estate inventories
Real estate held for sale and
development
Investment in and advances to
associates
Property and equipment
Investment properties
Goodwill
Deferred Tax Assets
Trade and other payables
Unearned Income
Unearned premiums
Retirement Benefit Obligation
Funds held for reinsurer
Reserves
2013
9.43%
0.29%
2.88%
0.00%
17.41%
26.06%
24.75%
VERTICAL
2012
13.61%
0.49%
7.76%
1.205
17.69%
20.50%
21.51%
2011
11.18%
0.29%
7.24%
1.08%
10.56%
14.61%
35.70%
HORIZONTAL
2013
2012
(4.18%)
2.43%
(48.29%)
76.75%
67.76%
13.04%
(100.00%)
17.67%
(14.45%)
76.56%
10.49%
47.97%
0.00%
(36.47%)
1.26%
0.01%
0.01%
20405.40%
(1.81%)
2.60%
7.59%
0.00%
0.48%
3.21%
2.05%
0.00%
1.88%
0.00%
4.40%
1.52%
9.25%
0.13%
0.22%
8.54%
3.43%
1.19%
1.28%
0.09%
9.13%%
1.67%
10.10%
0.14%
0.28%
8.24%
0.00%
1.50%
1.26%
0.12%
8.94%
49.12%
(28.63%)
(100.00%)
87.06%
(67.34%)
(48.06%)
(100.00%)
27.28%
(100.00%)
(58.12%)
(4.36%)
(3.43%)
0.00%
(16.62%)
(9.37%)
0.00%
(16.57%)
7.39%
(21.76%)
7.69%
The Company’s total assets stood at P3.63 billion as of year-end 2013, lower by P546.44 million
from the end-2012 level. The Company’s real estate assets comprise 50.81%; 42.02% and 50.31%
of the total assets of the Company for 2013, 2012 and 2011, respectively. Real estate inventories
increase due to take up of Icon Plaza units corresponding to the cost of the FBDC Lot 9-4
contributed to the joint venture with Xcell Property Ventures, Inc. In 2011, the drop in real estate
inventories was due to the reclassification of Tektite I and II properties and provincial lots to
investment properties.
As at year-end, cash and cash equivalents reached P342.86 million, which is about 9.43% of the
total assets. Cash flow from operations, generated mainly from collections of receivable accounts,
commission, lease rentals, management and consultancy fees, were utilized to settle current
payables.
Decrease in trading investments, held to maturity investments, trade and other receivables,
goodwill, trade and other payables, unearned premiums and funds held for reinsurers were due to
deconsolidated operations of Meridian Assurance Corporation in 2013.
Increase in property and equipment was due to reclassification of Andrea North Skyline
Showroom previously booked to real estate inventories.
Increase in investment in and advances to subsidiaries was due to reclassification of investment to
Meridian Assurance Corporation (MAC) from subsidiary to associate in 2013.
Decrease in investment property was due to the sale of property at Ivy League, Manila in
December 2013.
Unearned income decreased due to the recognition of percentage completion on sale of Icon Plaza
Units as of year-end 2013.
Total cash received from JV partner, Xcell Property Ventures, amounted to P653.09 million as of
end 2013. Part of these funds was used to settle full loan obligation with Landbank of the
Philippines.
As a result of the foregoing and the lower reserves arising from the decline in value of available
for sale investments, the Company’s stockholders’ equity went down to P2.73 billion from the
prior year’s P2.90 billion.
Top Five Performance Indicators
Gross Revenue
Current Assets
Current Ratio = Current Liabilities
Liabilities
Debt-to-Equity Ratio= Equity
Book value per share=SHE + Subs. Rec.
# of shares outstanding
Earnings Before Interest, Tax, Depreciation and
Amortization
2012
2013
P 237,999,444
2,241,604,478
749,401,463 = 2.99
0.00
P 435,149,949
2,756,711,916
1,108,498,780 = 2.49
0.00
3,236,683,422
4,877,907,002 = .66
3,406,678,684
4,877,907,002= .70
P29,807,622
( P 12,340,771)
Gross revenue includes sale of real estate, rent, commission and management fees. The increase
in occupancy of leased areas, rental rates and number of customers will contribute significantly to
the cash inflows of the company.
EXHIBIT 3
SUBSIDIARIES OF THE REGISTRANT
(as of December 31, 2013)
Name
Tektite Insurance Brokers, Inc.
Universal Travel Corporation
Alexandra (U.S.A), Inc.
% of Ownership
100.00%
100.00%
81.53%
45.00%
Total Revenues/
Ave. Total Assets
Asset Turnover:
Shows efficiency of asset used in
operations
Interest Rate Coverage Ratio:
Determine how easily a company
can pay interest on outstanding debt
EBIT/
Interest Expense
Liabilites (Loans Payable)
Total Equity
Net Income/
Total Revenues
Net Profit Margin:
Shows how much profit is made for
every peso of revenue
Leverage Ratio (D/E Ratio):
Measure of how much of a company's
assets are funded through borrowing
and how much through equity
Current Assets/
Current Liabilities
Current Ratio:
Indicates ability to cover short term
obligations
FINANCIAL SOUNDNESS INDICATORS
29,807,622
-
0
2,726,957,653
364,275,240
3,908,112,953
39,138,234
364,275,240
2,241,604,478
749,401,463
0
0
0.09
10.74%
2.99
2013
12,340,771
-
0
2,896,896,571
475,225,208
4,073,454,016
2,183,428
475,225,208
2,756,711,916
1,108,498,780
0
0
0.12
0.46%
2.49
2012
Philippine Realty & Holdin$s Gorpolation
STATEMBNT
OX'
MANAGEMENT'S RESPONSIBILITY
The management of Pbilippine Realty and }loldings Corporation and Subsidiaries (the "Group") is responsible for
all inforrnation and fair presentation of the financial staterents for &e years ended December 31, 20f3. 2012 and
2011, including the additional components atfached thererq in accordance with the prescribed furancial reporting
framework indicated therein. This rcponsibility includes designing ad implementing internal ccntrols relwant to
the preparation and fair presentation of fimncial statemefis that are free from rnaterial misstatement whether due to
fraud or error, selecting and
accounting policies, and making accounting estimates that are
reasonable in the circumstances.
applying
The Board of Directorveviews and approves the financial statements and submits the same to the stockholders.
MacedaValencia& Co., the independent arditors appointed by the stockholders for the period December 31" 2013"
2Al2 and 201l, has examined tfte financial sfatements of tfte Company in accordance with Philippine Standards on
Auditing, and in its report to the stockholders,
its opinion on the faimess of presentation upon
completion of such examination.
has
Signature
Chairman of the Board- Mr, Gerardo Lanuza Jr
/1 n
241*-#<
.._..
Srgnafure
n
^A
l"-y-.-.
/r
Chief Executive OfficerlPresident-Mr. Arnador C, Bacani
Sigru*
Chief Financial Officer/Treasurer-Ms. Robirose M. Abbot
Signed tlns*vfiday ot
o44.tr-
*r/
5/F, Rm. 512-513 East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City, 1605
Fax: (632) 634-1504
Tel. Nos.: 631-3179 to 80. 631-8579 to
80
I
q
APR 0
SUBSCRIBED AND SWORN to before me
Cornrnunity Tax C*rtificates, as follows:
Narnes
*tir
C.T. Cert.
I 20rl
d"y
Date of
of
Issue
. affiants exhibiting to me dreir
Place of Issue
No.
Lantnalt.
027959107
01.09.14
PasigCrty
Arnador C.Bagafli
281X297
ox20.t4
Muntidupa Gty
Robirose M. Abbot
fr1373769
QI.24.X4
Manila
Gerardo
uoc. No.
P,t.ci i,n:1i] ,
l'l:3i;.:;
.
cft
,1,2C14-2015
I"s+""*
H
p
: , il7-14
I:l
.c.
IB P.
Rol'
iti,.i
i
Ari:i.
., ,
h4Ct L
txirvl,i,l to # 0dd6il3
.,,:.;i it. Prc,i.4 Q.C
OC"
h4ACH[fA VALTNCIA & ilO.
{-ertifi ed
PLrbl
ic Accountanls anc{ Managerrreirt Consulta
rrts
i
$i f
*
R
l.i
i\1.IiJ
lri
Ai'
BOA/PRC Regisiration No" 4748
BO,A Cabgorv No. Ab
SEC Accr.editation No. 0 I 96-FR- I
ll5P AccreciiLed
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Board of Directors
Philippine Realty and Holdings Corporation
Andrea North Complex
Balete Drive corner N. Domingo Street
New Manila, Quezon City
Report on the Consolidated Financia/ Statements
statements of Philippine Realty and
Holdings Corporation and Subsidiaries (the "Croup"), which comprise the consolidated statements of
financial position as at December 31 ,2013 and 2012 and January 1,2012, and the consolidated
statements of income, the consolidated statements of total comprehensive income, the consolidated
statements of changes in equity, and the consolidated statements of cash flows for the years ended
December 31 ,2013, 2012 and 201 1, and a summary of significant accounting policies and other
We have audited the accompanying consolidated financial
explanatory information.
Management's Responsibility for the Consolidated
Fina ncia
/ Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
A
uditors' Respo n s ib i /ity
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditors' judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. ln making those risk assessments, the auditors consider internal control
relevant to the entity's preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
{inancial staLements.
{"
SLrile i'0:i h4icJl;:nti &larrsior:s
8.1!i A. Arnaiz Avenue,
h4al<ati Citr, 112ti l"hilippines
& Cu. i! nn inr:ir,rpenrjenl irr+:rri-rr iirrri ol Nerri; lnl!:rnJliril;rl. J v.,atrid't:de itlv,'tnl( !1
independerri iir:ounting aild consulting iirrr:. Nexin interil:{ion:il dosr .ct .x (:ept ilni' reslonsibiliti, ior
thi: commiJlirrn ol iin\' .rci. of Dirigiioil lo .cl bl, cr the llnbilit;ej oi, an)' oi ilj merlibtis. NiembL:rshill of
l.lcxi:r lnlerrrarional, or assof,i.lled rrnbrella organizalion:., rioes ni:i..:.rn51ilulc ir-.y parlnerrship bc,lu,een
nrembrn, lnd nrlrrrlurr: do nalt Jrcept any r:sponsibilitT lor lhe contirissbi oi lny ;rit, rlr .lfnisiioil lo
rct I'v,.{ the liabilifies oi clher meftirer:;,
ir.lactc{a \ralerrci.r
Tolei:hr;nr +{r3 (2i 40:i
Fax +6:i
i2.2tJ
la I't)
{l) 403 73il6
nrr r-u(9t\1\,'Co.ct,,rn, ul t
x $u,.i\lVCi,.tr
)rn.t)11 I
Ull]!=oex!L!!f
)
MACIDA VALHNCIA & CO.
Certifiecl Publ ic Account..r nts ancl
A,1a
na
gemcnt Consu ltants
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
ln our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Philippine Realty and Holdings Corporation and Subsidiaries as at December 31,
2013 and 2012 and January 1,2012, and their financial performance and their cash flows for the
years ended December 31,2013,2012 and2O11 in accordance with Philippine Financial Reporting
Standards.
Emphasis of Mafter
Without qualifying our opinion, we draw attention to Note 1 to the consolidated financial statements,
which describe the status of Philippine Realty and Holdings Corporation's (the "Parent Company")
operations. The Parent Company has suffered significant losses from operations which resulted to a
substantial amount of deficit. These conditions, along with other matters described in Note 1 to the
consolidated financial statements, indicate the existence of a material uncertainty which may cast
doubt about the Parent Company's ability to continue as a going concern. Management is aware of
these conditions and has accordingly instituted its plan and actions concerning these matters,
including undergoing a corporate rehabilitation program filed with the Regional Trial Court of Quezon
City. The objectives of the rehabilitation program are to pay all its creditors in a fair and just manner,
to complete and deliver an unfinished condominium project to its existing buyers, and protect the
investments of the shareholders, particularly the small public investors, by keeping the business viable
and profitable. As of December 31,2010, the Parent Company's bank debts have been fully paid and
the Andrea North Skyline Tower (Andrea Tower) was completed in October 201 1. The Parent
Company will continue the development of the Andrea North Tower Project, starting with the second
tower, Skyvillas whose construction is ongoing and the marketing of which will be launched shortly.
Other projects are on the pipeline and the Parent Company is currently studying options to ultimately
address this uncertainty. Accordingly, the accompanying consolidated financial statements have been
prepared assuming that the Parent Company will continue as a going concern, which contemplates
the realization of assets and settlement of liabilities in the normal course of business. lt does not
include any adjustments that may result from the outcome of this uncertainty.
Report on Other Legal and Regu/atory Matters
Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The supplementary information shown in the Schedule showing financial
soundness indicators (Part 1,4D), Map of relationships of the companies within the Croup (Part 1,4H)
and Schedule of Philippine Financial Reporting Standards effective as of December 31 ,2013 (Part 1,
4J); Schedule of Financial Assets (Parl 2, Annex 6B-E, Schedule A); Schedule of receivables/payables
with related parties eliminated during consolidation (Part 2, Annex 6B-E, Schedule C), Schedule of
Capital Stocks (Part2, Annex 6B-E, Schedule H) and Form 17-A as additional component required by
Rule 6B of the Securities Regulation Code, as Amended, are presented for purposes of filing with the
Securities and Exchange Commission and are not a required part of the basic consolidated financial
statements. The reconciliation of retained earnings available for dividend declaration (Part 1,4C and
Annex 6B-C) is not presented because the Croup is in a deficit position. Such supplementary
information is the responsibility of management and has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements. ln our opinion, the supplementary
information has been prepared in accordance with Rule 68 of the Securities Regulation Code.,
MACHDA VALHNCIA & CO.
Certified Pubiic Accounlants and Management Consultants
MACEDA VALENCIA & CO.
/ Ur*-&, l,
.
ANTONTO O. MACEDA fR.
Partner
CPA License No. 20014
PTR No. 4285929
lssued on February 13, 2014 at Makati City
Accreditation No. (individual) 1169-A, Category A;
Effective until December 14,2014
SEC Accreditation No. (firm) 0196-FR-1;
Effective until April 2,2017
SEC
TtN 102-090-963
BIR Accreditation No. 08-005063-0-201 2
lssued on January 24, 2012; effective until January 24, 2015
BOA/PRC Reg. No. 4748, effective until December 31,2015
April
4,2014
Makati City
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012 and January 1, 2012
PHILIPPINE REALTY AND HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2013 AND 2012 AND JANUARY 1, 2012
ASSETS
Financial assets at fair value through profit or
loss
Available-for-sale (AFS) financial assets
Held-to-maturity (HTM) financial assets
Trade and other receivables - net
Prepayments and other assets - net
Real estate held for development - net
Investments in and advances to associates
Investment in joint venture
Property and equipment - net
Investment properties - net
Goodwill
Deferred tax assets - net
Note
December 31,
2013
December 31,
2012
(As Restated,
Note 40)
January 1, 2012
(As Restated,
Note 40)
9
P342,855,616
P569,014,062
P443,320,122
10
11
12
13
14
15
16
17
18
19
20
10,601,312
104,575,381
632,659,174
203,597,038
947,315,957
899,518,696
45,658,755
60,212,943
94,492,163
275,937,639
17,469,392
20,502,751
324,389,699
50,308,581
739,491,593
195,665,329
857,339,901
899,518,696
222,667
60,142,943
63,367,088
386,654,919
5,374,610
9,339,000
11,599,800
286,968,249
42,755,695
418,832,411
223,373,623
579,385,350
1,415,820,583
226,761
60,092,943
66,252,921
400,371,995
5,374,610
11,201,129
P3,634,894,066
P4,181,331,839
P3,965,576,192
P116,659,776
74,475,021
653,087,170
68,360,848
-
P357,189,181
143,387,726
653,087,170
49,655,207
53,710,411
3,674,080
P326,599,406
639,203,605
59,518,198
50,012,475
4,696,026
912,582,815
1,260,703,775
1,080,029,710
4,493,969,989
159,860,056
(1,763,488,497)
4,493,913,645
381,728,902
(1,815,362,081)
4,493,913,645
354,478,960
(1,819,212,485)
2,890,341,548
(163,383,895)
3,060,280,466
(163,383,895)
3,029,180,120
(163,383,895)
2,726,957,653
(4,646,402)
2,896,896,571
23,731,493
2,865,796,225
19,750,257
2,722,311,251
2,920,628,064
2,885,546,482
P3,634,894,066
P4,181,331,839
P3,965,576,192
38
LIABILITIES AND EQUITY
Liabilities
Unearned income
Funds held in trust
Unearned premiums
Retirement benefit obligation
Funds held for reinsurer
Equity
Capital stock
Reserves
Deficit
21
22
23
24
25
28
29
Treasury stock
Equity attributable to equity holders of the
parent
Minority interest
See Notes to the Consolidated Financial Statements.
30
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
Note
Income
Sales of real estate
Rent
Management fees
Interest income
Commission
Gain on sale of investment property
Gain on sale of AFS investments
Gain on sales cancellation
Gain on sale of property and equipment
Other income
Costs and Expenses
Cost of real estate sold
General and administrative expenses
Loss on partial disposal of a subsidiary
Equity in net loss of joint venture
Equity in net loss of an associate
Other expenses
Income (Loss) Before Income Tax
Income Tax Expense
33
31
34
32
20
35
36
41
17
37
38
Net Income (Loss) from Continuing
Operations
Net Income from Deconsolidated
Operations
5
Net Income (Loss)
Attributable to:
Equity holders of the parent
Minority interest
Basic Income (Loss) Per Share
30
39
2013
2012
(As Restated,
Note 40)
2011
(As Restated,
Note 40)
P180,388,164
26,990,136
24,978,228
28,534,665
5,642,916
53,667,628
580,597
3,145,213
75,078
40,272,615
P381,108,362
23,618,772
23,406,432
28,624,696
7,016,383
3,335,323
44,500
8,070,740
P377,343,084
23,253,376
20,826,909
21,374,564
5,931,704
10,735,161
62,738,121
364,275,240
475,225,208
522,202,919
171,874,899
139,154,484
6,698,861
21,912
7,843,122
329,218,189
139,515,000
13,057,642
4,094
950,018
359,897,212
251,270,335
7,254,435
11,201
118,073,744
325,593,278
482,744,943
736,506,927
38,681,962
4,156,268
(7,519,735)
4,305,693
(214,304,008)
2,790,305
34,525,694
(11,825,428)
(217,094,313)
4,820,822
16,044,572
4,493,282
P39,346,516
P4,219,144
(P212,601,031)
P39,138,234
208,282
P2,183,428
2,035,716
(P213,367,282)
766,251
P39,346,516
P4,219,144
(P212,601,031)
P0.01
P0.00
(P0.04)
CONSOLIDATED STATEMENTS OF TOTAL COMPREHENSIVE INCOME
Net Income (Loss)
Other Comprehensive Income (Loss),
net of tax
Items that may be subsequently
reclassified to profit or loss
Unrealized holding gain (loss) on
available-for-sale investments
Items that will not be reclassified to
profit or loss
Remeasurement of defined benefit
obligation
Total Comprehensive Income (Loss)
2013
2012
(As Restated,
Note 40)
2011
(As Restated,
Note 40)
P39,346,516
P4,219,144
(P212,601,031)
(198,553,905)
34,428,707
7,556,948
(11,215,288)
(3,566,269)
(205,189)
(P170,422,677)
P35,081,582
(P205,249,272)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
4,493,137,408
P4,493,137,408
-
Capital Stock
4,177,310
350,301,650
P350,543,683
(242,033)
Reserves
(212,603,743)
(213,367,282)
763,539
(1,606,608,742)
(P1,608,921,984)
2,313,242
Deficit
-
-
(163,383,895)
(P163,383,895)
-
Treasury Stock
(208,426,433)
(213,367,282)
4,940,849
3,073,446,421
P3,071,375,212
2,071,209
Total
3,177,161
766,251
2,410,910
16,573,096
P16,137,634
435,462
Noncontrolling
interest
(205,249,272)
(212,601,031)
7,351,759
3,090,019,517
P3,087,512,846
2,506,671
Total Equity
Attributable to owners of the Parent
-
4,177,310
Balance at January 1, 2011 as previously
reported
Effects of changes in accounting policies
Comprehensive income (loss)
Loss for the year
Other comprehensive income (loss) for the year
-
-
-
-
-
-
-
776,237
776,237
-
-
776,237
776,237
Balance at January 1, 2011 as restated
Total comprehensive loss for the year
776,237
2,885,546,482
776,237
19,750,257
4,219,144
30,862,438
Transaction with owners
Collections of subscriptions receivable
2,865,796,225
35,081,582
Total transaction with owners
(1,819,212,485)
3,981,236
2,035,716
1,945,520
(163,383,895)
354,478,960
2,183,428
28,916,918
4,493,913,645
31,100,346
Balance at December 31, 2011 as restated
-
2,920,628,064
-
39,346,516
(209,769,193)
2,183,428
1,666,976
23,731,493
(170,422,677)
3,850,404
2,896,896,571
(31,865)
208,282
(240,147)
27,249,942
39,138,234
(209,529,046)
27,249,942
(170,390,812)
-
-
-
(1,815,362,081)
-
(163,383,895)
381,728,902
39,138,234
2,142,755
Profit for the year
4,493,913,645
41,280,989
Total comprehensive income for the year
(211,671,801)
-
(211,671,801)
-
4,665,800
(32,616,280)
56,344
Profit for the year
4,665,800
(33,011,830)
-
-
395,550
56,344
(10,197,045)
-
-
56,344
10,592,595
-
Transactions with owners
Share in increase of capital
Effect of deconsolidation
(27,894,136)
10,592,595
(28,346,030)
(10,197,045)
451,894
56,344
-
Total transactions with owners
(P163,383,895)
P2,722,311,251
(P1,763,488,497)
(P4,646,402)
P159,860,056
P2,726,957,653
P4,493,969,989
CONSOLIDATED STATEMENTS OF CASH FLOWS
Note
CASH FLOWS FROM OPERATING
ACTIVITIES
Income (Loss) before income tax from
continuing operations
Adjustments for:
Impairment loss on receivables
Depreciation and amortization
Provision for retirement benefits
Impairment on investment in and advances
to associates
Holding loss (gain) on trading investments
Equity in net loss of an associate
Gain on reversal of allowance for decline in
value of real estate
Unrealized foreign exchange loss (gain) –
net
Gain on sales cancellation
Gain on sale of property and equipment
Reversal of various liabilities
Interest income
Dividend income
2013
2012
(As Restated,
Note 40)
2011
(As Restated,
Note 40)
P38,681,962
(P7,519,735)
36
36
19,660,325
8,714,915
19,860,506
6,986,706
15,507,800
8,408,427
6,642,577
36
35
17
713,206
21,912
285,282
4,094
101,774,677
(427,923)
11,201
41
6,698,861
35,37
-
(P214,304,008)
(53,499,445)
-
(735,089)
(3,145,213)
(53,667,627)
(39,840,584)
(28,534,665)
(36,632)
666,870
(7,409,073)
(28,624,696)
(179,954)
(136,233)
(1,869,616)
(10,735,161)
(259)
Operating loss before working capital changes
Decrease (increase) in:
Prepayments and other assets
Real estate held for development
Increase (decrease) in:
Unearned income
(51,468,629)
11,094,960
(35,162,721)
(152,175,453)
(15,930,000)
(148,627,963)
(293,899,463)
26,468,165
13,057,642
225,289,694
(67,143,876)
(311,668)
7,254,935
185,508,268
(103,633,362)
(68,912,705)
(13,498,817)
143,387,726
95,124,407
(42,455,067)
Cash provided by (used in) operations
Contributions to retirement fund
Retirement benefits paid
Interest received
Dividends received
Income taxes paid
(400,257,910)
(2,886,000)
(2,614,441)
28,692,702
36,632
(8,312,536)
84,874,947
(2,184,231)
(6,269,000)
28,971,572
179,954
(3,807,270)
29,349,036
(641,669)
(4,758,331)
20,219,468
259
(2,983,148)
Net cash provided by (used in) operating
activities
Forward
20
35
34
35
(P385,341,553)
P101,765,972
P41,185,615
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM INVESTING ACTIVITIES
Additional investments in joint venture
Available-for-sale investments
Held-to-maturity investments
Additions to property and equipment
Cash of subsidiary disposed, net of proceeds
from sale
Proceeds from disposal of held for trading
investments
Proceeds from disposal of property and
equipment
Note
2013
2012
(As Restated,
Note 40)
18
(P70,000)
(P50,000)
(P740,000)
779,588
(4,103,795)
(22,109,800)
26,905,205
(1,479,449)
(1,714,037)
98,491
(2,348,035)
41
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in funds held in trust
Collection of subscriptions receivable
Finance costs paid
Net cash provided by financing activities
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
FROM CONTINUING OPERATIONS
28
2011
(As Restated,
Note 40)
13,833,110
-
-
120,291,174
-
-
231,841
264,737
701,087
130,961,918
3,530,693
(4,002,494)
56,344
-
13,883,565
-
22,203,605
776,237
-
56,344
13,883,565
22,979,842
(254,323,291)
119,180,230
60,162,963
CASH FLOWS PROVIDED BY (USED IN)
DECONSOLIDATED OPERATIONS:
Operating activities
Investing activities
Financing activities
Effects of exchange rate changes
(15,401,137)
8,253,841
35,000,000
312,141
37,074,379
(47,636,429)
17,032,900
42,860
NET INCREASE IN
FROM DECONSOLIDATED OPERATIONS
28,164,845
6,513,710
79,223,011
13,782,398
40,473,213
24,967,400
-
(226,158,446)
125,693,940
139,385,974
AT BEGINNING OF YEAR
569,014,062
443,320,122
303,934,148
AT END OF YEAR
P342,855,616
P569,014,062
P443,320,122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting Entity
Philippine Realty and Holdings Corporation (the “Parent Company”) was incorporated and registered
with the Philippine Securities and Exchange Commission (SEC) on July 13, 1981. The principal
activities of the Parent Company include the acquisition, development, sale and lease of all kinds of
real estate and personal properties, and as an investment and holding company. The Parent Company
was listed with the Philippine Stock Exchange (PSE) on September 7, 1987.
The Parent Company is 35.67% owned by Greenhills Properties, Inc. (GPI), a corporation incorporated
under the laws of the Philippines. The remaining shares are owned by various individuals and
institutional stockholders.
The financial position and results of operations of the Parent Company and its subsidiaries
(collectively referred to as the “Group”) are consolidated in these financial statements.
The Parent Company’s registered office is at Andrea North Complex, Balete Drive corner
N. Domingo Street, New Manila, Quezon City.
The Subsidiaries referred to herein and in the accompanying consolidated financial statements and the
registered business activities and other information about the subsidiaries are discussed in Note 8.
Status of the Parent Company’s Operations
The Parent Company is operating under a court-approved rehabilitation plan. Its operations were
severely affected by the slump in the local real estate industry which resulted from the regional
economic crisis that hit the country in mid-1997. Due to the slump in sales caused by soaring interest
rates and the restricted availability of bank credit, the Parent Company was unable to service its debt
obligations. It resorted to dacion en pago (debt for asset swap) to reduce debts, suspended all its real
estate projects and cut its workforce to conserve cash but all these measures proved inadequate.
On December 12, 2002, the Parent Company filed a petition for corporate rehabilitation in the
Regional Trial Court of Quezon City (the “Court”). A Stay Order was granted on December 16, 2002
after the petition was deemed sufficient both in form and in substance. Among the salient features of
the Stay Order are as follows:
a.
A stay in the enforcement of all claims, whether for money or otherwise and whether such
enforcement is by court action or otherwise, against the Parent Company, its guarantors and
sureties not solidarily liable with the Parent Company;
b. Prohibiting the Parent Company from selling, encumbering, transferring or disposing in any manner
any of its properties, except in the ordinary course of business;
c.
Prohibiting the Parent Company from making any payment of its liabilities outstanding as of the
filing of instant petition;
d. Prohibiting the Parent Company’s suppliers of goods and services from withholding supply of
goods and services in the ordinary course of business for as long as it makes payments for the
goods and services supplied after the issuance of this Stay Order; and,
e.
Directing the payment in full of all administrative expenses incurred after the issuance of the Stay
Order.
Subsequent to the issuance of the Stay Order, the Court conducted a series of hearings for the purpose
of receiving various inputs from the Parent Company, the creditors, and the rehabilitation receiver as
well. Further discussions resulted in the filing of an amended rehabilitation plan.
In the course of the proceedings, the Court noted that all the creditor banks were in agreement that the
Parent Company is susceptible to rehabilitation as it is solvent and its business is viable. The singular
stumbling block to the remaining creditor banks’ agreeing to the amended plan was the matter of the
valuation of the assets of the Parent Company which were sought to be the subject of the dacion.
The Court’s study of the rehabilitation receiver’s recommendation and evaluation report revealed that
the concerns of the reluctant creditor banks have been duly addressed by the modifications suggested
to be made part of the amended rehabilitation plan. The Court noted with approval the determinations
of the rehabilitation receiver, with respect to the matter of reasonable valuation of the concerned
properties. The recommended combination of a debt restructuring and a dacion en pago as integral
components of petitioner’s amended rehabilitation plan was found to be fair and viable. The amended
rehabilitation plan was approved by the Court on June 11, 2004. The court-approved rehabilitation
plan is discussed below.
Rehabilitation Plan
The objectives of the rehabilitation plan are to pay all its creditors in a fair and just manner; to
complete and deliver the Andrea North Skyline Tower condominium units, a high-rise condominium in
Balete Drive corner N. Domingo Street, New Manila, Quezon City, Philippines, to its existing buyers;
and to protect the investments of the shareholders, particularly the small public investors, by keeping
the business viable and profitable.
The court-approved rehabilitation plan of the Parent Company includes the following:
a.
Creditor Banks
The court-approved rehabilitation plan proposes a partial dacion en pago for P1,311 million of
bank debts and the balance of P891 million shall be restructured into a P180 million Term Loan
Facility and a P711 million Coupon Bond Facility
b. Buyers of Andrea North Skyline Tower Project
Under the approved rehabilitation plan, the Parent Company will complete the Andrea North
Skyline Tower Project by entering into joint ventures for the development of properties, principally
three (3) Bonifacio Global City (BGC) lots, it shall retain after the dacion en pago settlement with
creditor banks and channeling its share of the joint venture proceeds to the Project.
c.
Other Financial Obligations
The liabilities to other third parties such as the government and its agencies, utility companies,
suppliers and contractors shall be paid from free cash generated after providing for the completion
of the Skyline Tower and the payment of the restructured bank debt.
As of December 31, 2010, the Parent Company has fully paid its debt of P2.2 billion at the time of the
Parent Company’s filing for rehabilitation in 2002 through the sale of assets principally the sale of its
share in International Exchange Bank and a BGC lot, dacion en pago and full payment of restructured
loans.
As of December 31, 2013, 2012 and January 31, 2012, the Parent Company’s debt-to-equity ratio
stood at 0.00:1 due to the continued pay out of its long-term obligations. Since the Parent Company’s
bank debts have been fully paid and the completion of the Andrea North Skyline Tower was funded by
proceeds from joint venture of BGC lots, and the partial collection of receivables from subscriptions to
the Parent Company’s shares of stock; the additional proceeds from the joint venture of BGC lots,
collection of remaining receivables from subscriptions to the Parent Company’s shares of stock, and
new sales of Skyline Tower units which are collectively estimated at over P1.6 billion represent free
cash which can be utilized to fund future development projects. Pre-selling proceeds will merely
augment this free cash, instead of funding the bulk of a project’s development cost.
-2-
On January 31, 2011, the Parent Company filed a motion to terminate rehabilitation proceedings on
account of the successful implementation of the rehabilitation plan. The Parent Company’s bases for
the motion are as follows:
a.
The substantial completion of the Andrea North Skyline Project as of December 31, 2010.
The Parent Company has applied for the necessary building occupancy permit from the local
government of Quezon City and has already commenced the turn-over of several condominium
units to their respective buyers.
b. Full settlement of outstanding obligations to all banks/secured creditors.
c.
Settlement of P22.9 million out of the total P27.2 million unsecured obligations. The balance of
P4.3 million is sufficiently covered by new and future sales of the condominium units of the
Andrea Project.
d. Settlement of P65.3 million out of the total P78.9 claims of buyers of condominium units of the
Andrea Project that filed cases for rescission of their respective contracts to sell with the Housing
and Land Use Regulatory Board (HLURB). The balance of P13.6 million is sufficiently covered by
new and future sales of the condominium units of the Andrea Project.
On November 21, 2012, the Rehabilitation Court, upon the recommendation of the Rehabilitation
Receiver, denied the above-mentioned motion to terminate of the Parent Company as it still has
substantial obligations to pay, principally to a contractor who won the case against the Parent
Company (See Note 37). Subsequently, the Court ordered the Rehabilitation Receiver to comment on
the Motion for Clarification filed by the remaining creditors. On March 6, 2013, the Rehabilitation
Receiver submitted to the Court a payment schedule for the settlement of the Parent Company's
remaining obligations.
As of December 20, 2013, the Parent Company’s liabilities to the contractor, Andrea North Skyline
buyers, and unsecured creditors were already paid, such that, the Parent Company has filed a motion
to terminate the rehabilitation proceedings on the account of the successful implementation of the
rehabilitation plan. The funds were sourced from the balance of the Parent Company's receivables
from its joint venture with Xcell Property Ventures, Inc. over two (2) parcels of land in BGC, which is
projected to continue to be amortized over the same 14-month period and to be fully collected by
December 2014.
The Group has been incurring losses and has a deficit as at December 31, 2013. This condition
indicates the existence of a material uncertainty which may cast significant doubt on the Group’s
ability to continue as a going concern. The consolidated financial statements do not include
adjustments that might result from the outcome of this uncertainty. The Parent Company is currently
studying its options to go into a financial quasi-reorganization by reducing the par value of its shares
and securing additional investors to address such uncertainty. The Parent Company will continue the
development of the Andrea North Tower Project, starting with the second tower, Skyvillas whose
construction is now on the 20th floor and the marketing of which will be launched shortly. Skyvillas,
with projected revenue of over P3 billion, will be followed by the other residential towers with a two
level retail podium under a new master plan prepared by CPG Consultants Pte. Ltd. Singapore (CPG).
The full development will take place over ten years. Additionally, the Parent Company will tap the
landbank of its major shareholder, Greenhills Properties, Inc. under joint venture agreement. The
properties include a 6,400 square meter block along 5th Avenue at Bonifacio Global City for which a
mixed use development featuring two office towers and a residential building on a retail and parking
podium has been masterplanned also by CPG. Project launch is planned for 2015. Another site is a
5,900 square meter property at the corner of ADB and Julia Vargas Avenue which is currently the site
of a restaurant complex, El Pueblo Real Del Monte. A mixed-use development with a retail anchor is
planned on this prime location in Ortigas Center. And in Tagaytay City, which will become even more
accessible with the scheduled construction of the Cavite - Laguna expressway, which will connect
Kawit at the end of the Cavite Expressway to Mamplasan at the South Luzon tollways.
-3-
2. Basis of Preparation
Statement of Compliance
The consolidated financial statements of the Group have been prepared in accordance with Philippine
Financial Reporting Standards (PFRS). PFRS includes all applicable PFRS, Philippine Accounting
Standards (PAS), and interpretations of the Philippine Interpretations Committee (PIC), Standing
Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee
(IFRIC), as approved by the Financial Reporting Standards Council (FRSC) and adopted by the SEC.
The consolidated financial statements as at and for the year ended December 31, 2013 were approved
and authorized for issuance by the Board of Directors (BOD) on April 4, 2014.
Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except for certain
properties carried at revalued amounts and certain financial instruments carried either at fair value or at
amortized cost.
Functional and Presentation Currency
The consolidated financial statements are presented in Philippine Peso, which is the presentation and
functional currency of the Group. All financial information presented have been rounded to the nearest
peso, unless otherwise stated.
Use of Estimates and Judgments
The preparation of the consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of estimation uncertainty and critical judgments in
applying accounting policies that have the most significant effect on the amounts recognized in the
consolidated financial statements are described in Note 4.
3. Significant Accounting Policies
Adoption of New and Revised Standards, Amendments to Standards and Interpretations
The Financial Reporting Standards Council approved the adoption of new and revised standards,
amendments to standards, and interpretations issued by the IFRIC and PIC as part of PFRS.
New and Revised Standards and Amendments to Standards Adopted in 2013
Effective January 1, 2013, the Group adopted the following new and revised standards and
amendments to standards:

PAS 1, Financial Statement Presentation - Presentation of Items of Other Comprehensive Income
(Amendment). The amendments to PAS 1 change the grouping of items presented in OCI. Items
that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, upon
derecognition or settlement) would be presented separately from items that will never be
reclassified.
-4-

PAS 19, Employee Benefits (Revised). These amendments eliminate the corridor approach and
calculate finance costs on a net funding basis. They would also require recognition of all actuarial
gains and losses in other comprehensive income as they occur and of all past service costs in profit
or loss. The amendments replace interest cost and expected return on plan assets with a net interest
amount that is calculated by applying the discount rate to the net defined benefit liability (asset).
See Note 40 for the impact of the adoption on the consolidated financial statements.

PFRS 10, Consolidated Financial Statements (effective January 1, 2013). The objective of PFRS 10
is to establish principles for the presentation and preparation of consolidated financial statements
when an entity controls one or more other entity (an entity that controls one or more other entities)
to present consolidated financial statements. It defines the principle of control, and establishes
control as the basis for consolidation. It sets out how to apply the principle of control to identify
whether an investor controls an investee and therefore must consolidate the investee. It also sets
out the accounting requirements for the preparation of consolidated financial statements.

PAS 27 (Revised), Separate Financial Statements (effective January 1, 2013). PAS 27 (Revised)
includes the provisions on separate financial statements that are left after the control provisions of
PAS 27 have been included in the new PFRS 10.

PAS 28 (Revised), Investments in Associates and Joint Ventures (effective January 1, 2013). PAS 28
(Revised) includes the requirements for joint ventures, as well as associates, to be equity accounted
following the issue of PFRS 11.

PFRS 11, Joint Arrangements (effective January 1, 2013). This new standard focuses on the rights
and obligations of the parties to the arrangement rather than its legal form. There are two types of
joint arrangements: joint operations and joint ventures. Joint operations arise where the investors
have rights to the assets and obligations for the liabilities of an arrangement. A joint operator
accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the
investors have rights to the net assets of the arrangement; joint ventures are accounted for under
the equity method. Proportional consolidation of joint arrangements is no longer permitted.

PFRS 12, Disclosures of Interests in Other Entities (effective January 1, 2013). This new standard
includes the disclosure requirements for all forms of interests in other entities, including joint
arrangements, associates, structured entities and other off balance sheet vehicles.

PFRS 13, Fair Value Measurement. The new standard establishes a single source of guidance for
fair value measurements and disclosures about fair value measurements. It defines fair value,
establishes a framework for measuring fair value, and requires disclosures about fair value
measurements. The scope of PFRS 13 is broad; it applies to both financial instrument items and
non-financial instrument items for which other PFRSs require or permit fair value measurements
and disclosures about fair value measurements, except in specified circumstances. In general, the
disclosure requirements in PFRS 13 are more extensive than those required in the current
standards. For example, quantitative and qualitative disclosures based on the three-level fair value
hierarchy are currently required for financial instruments only under PFRS 7 Financial Instruments:
Disclosures will be extended by PFRS 13 to cover all assets and liabilities within its scope.

Amendments to PFRS 7, Disclosures – Offsetting Financial Assets and Financial Liabilities. The
amendments change the required disclosures to include information that will enable users of an
entity’s financial statements to evaluate the effect or potential effect of netting arrangements,
including rights of set-off associated with the entity’s recognized financial assets and recognized
financial liabilities, on the entity’s financial position. The entity shall provide the disclosures as
required by these amendments retrospectively.
-5-

2011 Annual Improvements:
o
Amendments to PAS 1 – Presentation of Financial Statements and Consequential
amendment to PFRS 1. The amendment clarifies the disclosure requirements for
comparative information when an entity provides a third balance sheet either: (i) as
required by PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors; or
(ii) voluntarily.
o
PAS 16 (Amendment), Property, Plant and Equipment. The amendment clarifies that spare
parts and servicing equipment are classified as property, plant and equipment rather than
inventory when they meet the definition of property, plant and equipment.
o
Amendments to PAS 32 – Financial Instruments. The amendment clarifies the treatment of
income tax relating to distribution and transaction costs.
o
PAS 34 (Amendment), Interim Financial Reporting. The amendment clarifies the disclosure
requirements for segment assets and liabilities in interim financial statements.
Except for the adoption of the revised PAS 19, which resulted to retrospective restatement, as disclosed in
Note 40, the adoption of the above new and revised standards and amendments to standards in 2013 did
not have any material effect on the Group’s consolidated financial statements.
New and Revised Standards, Amendments to Standards and Interpretations Not Yet Adopted
The following are the new standards and amendments to standards which are not yet effective for the
year ended December 31, 2013, and have not been applied in preparing the consolidated financial
statements:
Effective January 1, 2014:

PAS 32, Financial Instruments: Presentation - Asset and Liability Offsetting (Amendment). These
amendments are to the application guidance in PAS 32, Financial Instruments: Presentation, and
clarify some of the requirements for offsetting financial assets and financial liabilities on the
statements of financial position.

Amendment to PAS 36, Impairment of Assets – Recoverable Amount Disclosures for Non-financial
Assets. This amendment removed certain disclosures of the recoverable amount of cashgenerating units (CGUs) which had been included in PAS 36 by the issue of PFRS 13.

Amendments to PFRS 10, 12 and PAS 27 - Consolidation for Investment Entities. These
amendments mean that many funds and similar entities will be exempt from consolidating most of
their subsidiaries. Instead, they will measure them at fair value through profit or loss. The
amendments give an exception to entities that meet an ‘investment entity’ definition and which
display particular characteristics. Changes have also been made to PFRS 12 to introduce
disclosures that an investment entity needs to make.
-6-

PFRS 9, Financial Instruments issued in November 2009 and effective for periods beginning
January 1, 2015. This new standard addresses the classification, measurement and recognition of
financial assets and financial liabilities. It replaces the parts of PAS 39 that relate to the
classification and measurement of financial instruments. PFRS 9 requires financial assets to be
classified into two measurement categories: those measured at fair value and those measured at
amortized cost. The determination is made at initial recognition. The classification depends on the
entity’s business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument. For financial liabilities, the standard retains most of the PAS 39
requirements. The main change is that, in cases where the fair value option is taken for financial
liabilities, part of the fair value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than profit or loss, unless this creates an accounting mismatch. The
Group has yet to assess the full impact of PFRS 9 and intends to adopt PFRS 9 beginning January 1,
2015. The Group will also consider the impact of the remaining phases of PFRS 9 when issued.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate. This
interpretation covers accounting for revenue and associated expenses by entities that undertake the
construction of real estate directly or through subcontractors. The interpretation requires that
revenue on construction of real estate be recognized only upon completion, except when such
contract qualifies as construction contract to be accounted for under PAS 11, Construction
Contracts, or involves rendering of services in which case revenue is recognized based on stage of
completion. Contracts involving provision of services with the construction materials and where
the risks and reward of ownership are transferred to the buyer on a continuous basis will also be
accounted for based on stage of completion. The SEC and the FRSC have deferred the effectivity of
this interpretation until the final Revenue standard is issued by the International Accounting
Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against
the practices of the Philippine real estate industry is completed.
The adoption of this Philippine Interpretation may significantly affect the determination of the
revenue from real estate sales and the corresponding costs, and the related trade receivables,
deferred tax liabilities and deficit accounts.
The Group will assess the impact of the above new, revised and amended accounting standards and
interpretations effective subsequent to December 31, 2013 on the consolidated financial statements in
the period of initial application. Additional disclosures required by these new and amended
accounting standards will be included in the consolidated financial statements when these are
adopted.
The accounting policies set out below have been applied consistently to all periods presented in the
consolidated financial statements.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Parent Company and
entities controlled by the Parent Company, the subsidiaries, up to December 31 each year. Details of
the subsidiaries are shown in Note 8.
The consolidated financial statements were prepared using uniform accounting policies for like
transactions and other events in similar circumstances. Inter-company balances and transactions,
including inter-company profits and unrealized profits and losses, are eliminated. When necessary,
adjustments are made to the financial statements of subsidiaries to bring the accounting policies used
in line with those used by the Parent Company. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
-7-
Subsidiaries
Subsidiaries are all entities over which the group has control. The Parent Company controls an entity
when the Parent Company is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Parent Company. They are
deconsolidated from the date that control ceases.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their
fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognized as goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets acquired i.e. discount on acquisition is credited to
profit and loss in the period of acquisition. The interest of minority shareholders is stated at the
minority’s proportion of the fair values of the assets and liabilities recognized. Subsequently, any losses
applicable to the minority interest in excess of the minority interest are allocated against the interests of
the Parent Company.
Acquisition-related costs are expensed as incurred.
Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as
equity transactions - that is, as transactions with the owners in their capacity as owners. For purchases
from non-controlling interests, the difference between any consideration paid and the relevant share
acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interests are also recorded in equity.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair
value at the date when control is lost, with the change in carrying amount recognized in profit or loss.
The fair value is the initial carrying amount for purposes of subsequently accounting for the retained
interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognized in other comprehensive income in respect of that entity are accounted for as if the Group
had directly disposed of the related assets or liabilities. This may mean that amounts previously
recognized in other comprehensive income are reclassified to profit or loss.
Associates
An associate is an entity over which the Parent Company is in a position to exercise significant
influence, but not control or joint control, through participation in the financial and operating policy
decisions of the investee.
An investment is accounted for using the equity method from the day it becomes an associate. The
investment is initially recognized at cost. On acquisition of investment, the excess of the cost of
investment over the investor’s share in the net fair value of the investee’s identifiable assets, liabilities
and contingent liabilities is accounted for as goodwill and included in the carrying amount of the
investment and not amortized. Any excess of the investor’s share of the net fair value of the associate’s
identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from
the carrying amount of the investment, and is instead included as income in the determination of the
share in the earnings of the investees.
-8-
Under the equity method, the investments in the investee companies are carried in the consolidated
statements of financial position at cost plus post-acquisition changes in the Parent Company’s share in
the net assets of the investee companies, less any impairment losses. The consolidated statements of
income reflect the share of the results of the operations of the investee companies. The Parent
Company’s share of post-acquisition movements in the investee’s equity reserves is recognized directly
in equity. Profits and losses resulting from transactions between the Parent Company and the investee
companies are eliminated to the extent of the interest in the investee companies and for unrealized
losses to the extent that there is no evidence of impairment of the asset transferred. Dividends received
are treated as a reduction of the carrying value of the investment.
The Group discontinues applying the equity method when their investments in investee companies are
reduced to zero. Accordingly, additional losses are not recognized unless the Group has guaranteed
certain obligations of the investee companies. When the investee companies subsequently report net
income, the Group will resume applying the equity method but only after its share of that net income
equals the share of net losses not recognized during the period the equity method was suspended.
The reporting dates of the investee companies and the Group are identical and the investee companies’
accounting policies conform to those used by the Group for like transactions and events in similar
circumstances. Upon loss of significant influence over the associate, the Group measures and
recognizes any retaining investment at its fair value. Any difference between the carrying amount of
the associate upon loss of significant influence and the fair value of the retaining investment and
proceeds from disposal is recognized in profit or loss.
Joint arrangements
The Group has applied PFRS 11 to all joint arrangements as of January 1, 2012. Under PFRS 11
investments in joint arrangements are classified as either joint operations or joint ventures depending
on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint
arrangements and determined them to be joint ventures. Joint ventures are accounted for using the
equity method.
Under the equity method of accounting, interests in joint ventures are initially recognized at cost and
adjusted thereafter to recognize the Group’s share of the post-acquisition profits or losses and
movements in other comprehensive income. When the Group’s share of losses in a joint venture
equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in
substance, form part of the Group’s net investment in the joint ventures), the Group does not recognize
further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent
of the Group’s interest in the joint ventures. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint
ventures have been changed where necessary to ensure consistency with the policies adopted by the
Group. The change in accounting policy has been applied as from January 1, 2012.
Business Combination
Business combinations are accounted for using the acquisition method which involves the
identification of an acquirer, measurement of the cost of the business combination, and allocation, at
the acquisition date, of the cost of the business combination to the assets acquired and liabilities and
contingent liabilities assumed.
Segment Information
Operating segments are components of an enterprise about which separate financial information is
available that is evaluated regularly by Management in deciding how to allocate resources and in
assessing performance. Generally, financial information is required to be reported on the basis that it is
used internally for evaluating segment performance and deciding how to allocate resources to
segments.
-9-
For management purposes, the Group is currently organized into five business segments. These
divisions are the basis on which the Group reports its primary segment formation.
The Group’s principal business segments are as follows:
a.
b.
c.
d.
e.
Sale of real estate and Leasing
Property Management
Insurance Brokerage
Underwriting
Travel Services
Financial information on business segments are presented in Note 8. The Group’s resources producing
revenues are all located in the Philippines. Therefore, geographical segment information is not
presented.
Cash and Cash Equivalents
Cash includes cash on hand and in banks and is stated at its face value. Cash in banks earns interest at
the prevailing interest rates. Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash with maturities of three (3) months or less from the date of
acquisition and that are subject to an insignificant risk of change in value.
Financial Instruments
Financial Assets
Financial assets are recognized in the Group's consolidated financial statements when the Group
becomes a party to the contractual provisions of the instrument. Financial assets are recognized
initially at fair value. Transaction costs are included in the initial measurement of the Group's financial
assets, except for investments classified as at fair value through profit or loss. Subsequently, financial
assets are recognized at either fair value or amortized cost.
The Group presents its assets and liabilities in order of liquidity to provide information that is reliable
and more relevant to the business model of the Group.
The Group classifies non-derivative financial assets into the following categories: financial assets at fair
value through profit or loss (FVPL), loans and receivables, held-to-maturity (HTM) investments and
available-for-sale (AFS) financial assets. The classification depends on the nature and purpose of the
financial asset and is determined at the time of initial recognition. As of the reporting date, the Group
has the following categories of financial assets:
Financial assets at FVPL
Financial assets are classified as investments at FVPL when these are acquired for trading or are
designated upon initial recognition. Unless designated and considered as effective hedging
instruments, derivatives are classified as at fair value through profit or loss. Financial assets under this
category are initially recorded and are subsequently measured at fair value with gains and losses
arising from changes in fair value being included in profit or loss for the year. Transaction costs on
purchases and sale of financial assets under this category are recognized as expense in profit or loss.
A financial asset is classified as FVPL if:
a. it has been acquired principally for the purpose of selling in the near future; or
b. it is a part of an identified portfolio of financial instruments that the Group manages together and
has a recent actual pattern of short-term profit-taking; or
c. it is a derivative that is not designated and effective as a hedging instrument.
- 10 -
Loans and receivables
Cash and cash equivalents, trade and other receivables and advances to associates that have fixed or
determinable payments that are not quoted in an active market are classified as loans and receivables.
Loans and receivables are initially recognized at fair value and subsequently measured at amortized
cost using the effective interest method, less any impairment. Interest income is recognized by applying
the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial.
Short-term receivables are stated at their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts. Provision is made when there is objective evidence that the Group
will not be able to collect the debts. Bad debts are written off when identified.
Available-for-sale financial assets are those non-derivative financial assets that are designated as
available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or
(c) financial assets at fair value through profit or loss. Available-for-sale financial assets are initially
measured at fair value plus incremental direct transaction costs and subsequently are carried at fair
value. Unrealized gains and losses arising from changes in fair value are recognized directly in other
comprehensive income, with the exception of impairment losses, interest calculated using the effective
interest method and foreign exchange gains and losses on monetary assets, which are recognized
directly in profit or loss. When the available-for-sale financial asset is disposed of or is determined to
be impaired, the cumulative unrealized gain or loss previously recognized in equity is included in
profit or loss as a reclassification adjustment even if the financial asset (AFS) has not been
derecognized.
The Group’s available-for-sale financial assets are classified under this category.
HTM investments
HTM investments are non-derivative financial assets with fixed or determinable payments that the
Group intends and is able to hold to maturity, and that do not meet the definition of loans and
receivables and are not designated on initial recognition as assets at fair value through profit or loss or
as available-for-sale. HTM investments are initially measured at fair value and subsequently measured
at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial asset and of
allocating interest income over the relevant period. The effective interest rate is the rate that discounts
estimated future cash receipts through the expected life of the financial asset or, when appropriate, a
shorter period.
Impairment of Financial Assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of
impairment at each reporting date. Financial assets are impaired when there is objective evidence that,
as a result of one (1) or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been affected.
Available-for-sale financial assets
In the case of equity investments classified as available-for-sale, a significant or prolonged decline in
the fair value of the security below its cost is also evidence that the assets are impaired. Generally, the
Group treats ‘significant’ as 20% or more and ‘prolonged’ as greater than twelve months. If any such
evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognized in profit or loss - is removed from equity and recognized in profit or loss.
Impairment losses for an investment in an equity instrument classified as Available-for-sale financial
assets shall not be reversed through profit or loss but in other comprehensive income.
- 11 -
If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale financial
assets increases and the increase can be objectively related to an event occurring after the impairment
loss was recognized in profit and loss for the year, the impairment loss shall be reversed, with the
amount of the reversal recognized in profit or loss for the year.
Financial assets carried at amortized cost
For loans and receivables and held-to-maturity investment category, the Group first assesses whether
there is objective evidence of impairment exists individually for receivables that are individually
significant, and collectively for receivables that are not individually significant. If the Group determines
that no objective evidence of impairment exists for an individually assessed receivable, whether
significant of not, it includes the asset in a group of financial assets with similar credit risk
characteristics and collectively assesses those for impairment. Receivables that are individually
assessed for impairment and for which an impairment loss is or continues to be recognized are not
included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on loans and receivables carried or HTM
financial assets at amortized cost has been incurred, the amount of the loss is measured as the
difference between the asset's carrying amount and the present value of estimated future cash flows,
excluding future credit losses that have not been incurred, discounted at the financial asset's original
effective interest rate, i.e., the effective interest rate computed at initial recognition. The carrying
amount of the financial assets carried at amortized cost is reduced directly by the impairment loss, with
the exception of trade receivables wherein the carrying amount is reduced through the use of an
allowance account. If a loan or held-to-maturity investment or HTM financial assets has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. As a practical expedient, the Group may measure impairment on the
basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss shall be reversed. The reversal shall not result in a carrying amount of the
financial asset that exceeds what the amortized cost would have been had the impairment not been
recognized at the date the impairment is reversed. The amount of the reversal shall be recognized in
the profit and loss for the year.
Other financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity
instrument that is not carried at fair value because its fair value cannot be reliably measured or on a
derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument,
the amount of the impairment loss is measured as the difference between the carrying amount of the
financial asset and the present value of estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Impairment losses on financial assets carried at cost are not
reversed.
Derecognition of financial asset
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial
assets) is derecognized when:

The right to receive cash flows from the asset has expired;

The Group retains the right to receive cash flows from the asset, but has assumed an obligation to
pay them in full without material delay to a third party under a “pass-through” arrangement; or

The Group has transferred its right to receive cash flows from the asset and either has:
(a) transferred substantially all the risks and rewards of the asset; or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
- 12 -
Financial Liabilities
Financial liabilities are recognized in the Group’s consolidated financial statements when the Group
becomes a party to the contractual provisions of the instrument. Financial liabilities are initially
recognized at fair value. Transaction costs are included in the initial measurement of the Group’s
financial liabilities, which do not include any debt instruments classified as at fair value through profit
or loss.
The Group classifies its financial liabilities in the following categories; financial liabilities at fair value
through profit or loss and financial liabilities at amortized cost.
A financial liability is classified as held for trading if it is acquired or incurred principally for the
purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial
instruments that are managed together and for which there is evidence of a recent actual pattern of
short-term profit-taking. Financial liabilities held for trading also include obligations to deliver financial
assets borrowed by a short seller.
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and
are measured at amortized cost. Financial liabilities measured at amortized cost are subsequently
measured using the effective interest method. The effective interest method is a method of calculating
the amortized cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that discounts estimated future cash payments through the expected
life of the financial liability or, when appropriate, a shorter period.
The Group has no financial liability at fair value through profit or loss. Other financial liabilities
include due to insurance companies and accrued expenses and other current liabilities.
Trade and other payables are liabilities to pay for goods or services that have been received or supplied
and have been invoiced or formally agreed with the supplier. Trade and other payables are not interest
bearing and are stated at their original invoice amount, the carrying amounts approximate fair value
primarily due to the relatively short-term maturity of these financial instruments and the effect of
discounting is deemed immaterial.
Accruals are liabilities to pay goods and services that have been received or supplied but have not
been paid, invoiced or formally agreed with the supplier, including amounts due to employees. It is
necessary to estimate the amount or timing of accruals. However, the uncertainty is generally much
less than for provisions.
Derecognition of Financial Liabilities
Financial liabilities are derecognized only when they are extinguished, when the obligation specified
in the contract is discharged, cancelled or has expired. Any difference between the carrying amount of
the financial liability extinguished or transferred to another party and the consideration paid, including
any non-cash assets transferred or liabilities assumed, are recognized in profit or loss.
Offsetting
Financial assets and liabilities are offset and the net amount reported in the consolidated statements of
financial position when there is a legally enforceable right to offset the recognized amounts and there
is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
- 13 -
Prepayments
Prepayments represent expenses not yet incurred but already paid in cash. Prepayments are initially
recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to
income as these are consumed in operations or expire with the passage of time.
Prepayments are classified in the consolidated statements of financial position as current asset when
the cost of goods or services related to the prepayment are expected to be incurred within one (1) year
or the Group’s normal operating cycle, whichever is longer. Otherwise, prepayments are classified as
noncurrent assets.
Premiums Receivable
Premiums receivable are recognized on policy inception dates and measured on initial recognition at
the fair value of the consideration receivable for the period of coverage. Subsequent to initial
recognition, premiums receivable are measured at amortized cost. The carrying value of premiums
receivable is reviewed for impairment whenever events or circumstances indicate that the carrying
amount may not be recoverable, with the impairment loss recorded in profit or loss.
Derecognition
The Group derecognizes premiums receivable when the contractual rights to the cash flows from
the asset have expire; or when it transfers the reinsurance recoverable on claims and substantially all
the risks and rewards of ownership of the asset to another entity.
Due from Reinsurers and Ceding Companies
Due from reinsurers and ceding companies are recognized on the date of reinsurance and measured
on initial recognition at the fair value of the consideration receivable for the period of coverage.
Subsequent to initial recognition, due from reinsurers and ceding companies are measured at
amortized cost. The carrying value of due from reinsurers and ceding companies is reviewed for
impairment whenever events or circumstances indicate that the carrying amount may not be
recoverable, with the impairment loss recorded in profit or loss.
Derecognition
The Group derecognizes due from reinsurers and ceding companies when the contractual rights to
the cash flows from the asset have expire; or when it transfers the reinsurance recoverable on claims
and substantially all the risks and rewards of ownership of the asset to another entity.
Reinsurance Recoverable on Claims
The Group cedes insurance risk in the normal course of business. Reinsurance recoverable on claims
represents balances due from reinsurers and ceding companies for its share on the unpaid losses
incurred by the Group. Recoverable amounts are estimated in a manner consistent with the
outstanding claims provision and are in accordance with the reinsurance contract.
Reinsurance recoverable on claims is reviewed for impairment at each end of the reporting period or
more frequently when an indication of impairment arises during the reporting year. Impairment occurs
when objective evidence exists that the Group may not recover outstanding amounts under the terms
of the contract and when the impact on the amounts that the Group will receive from the reinsurer can
be measured reliably. The impairment loss is recorded in the profit or loss.
Derecognition
The Group derecognizes reinsurance recoverable on claims when the contractual rights to the cash
flows from the asset have expire; or when it transfers the reinsurance recoverable on claims and
substantially all the risks and rewards of ownership of the asset to another entity.
- 14 -
Funds Held by Ceding Companies
When the Group enters into a proportional treaty reinsurance agreement for reinsuring business, the
Group initially recognizes a receivable at transaction price. Subsequent to initial recognition, the
portion of the amount initially recognized as an asset which is presented as part of trade and other
receivables in the asset section of the consolidated statements of financial position will be withheld
and recognized as Funds held by ceding companies in the asset section of the consolidated statements
of financial position. The amount withheld is generally released after a year. Funds held for reinsurer is
accounted for in the same manner.
Deferred Reinsurance Premiums
The related reinsurance premiums ceded that pertains to the unexpired periods at end of the reporting
period are accounted for as deferred reinsurance premiums and presented in the statements of financial
position. The net changes between unearned premiums and deferred reinsurance premiums on each
end of reporting periods are recognized in profit or loss as net change in reserve for unexpired risks.
Deferred Acquisition Cost (DAC)
Commissions and other acquisition costs incurred during the financial period that vary with and are
related to securing new insurance contracts and or renewing existing insurance contracts, but which
relates to subsequent financial periods, are deferred to the extent that they are recoverable out of future
revenue margins. Acquisition costs include referral fee which is classified under other underwriting
expense. All other acquisition costs are recognized as expense when incurred.
Real Estate Inventories
Property acquired or being developed for sale in the ordinary course of business, rather than to be held
for rental or capital appreciation, is held as inventory and is measured at the lower of cost and net
realizable value.
Cost includes amounts paid to contractors for construction, borrowing costs, planning and design costs,
costs of site preparation, professional fees, property transfer taxes, construction overheads and other
related costs.
Net realizable value is the estimated selling price in the ordinary course of the business, based on
market prices at the reporting date, less costs to completion and the estimated costs of sale.
The cost of inventory recognized in profit or loss on disposal is determined with reference to the
specific costs incurred on the property sold and an allocation of any non-specific costs based on the
relative size of the property sold.
Real Estate Held for Development
Land held for development are measured at the lower of cost and fair value less costs to sell.
Expenditures for development and improvements of land are capitalized as part of the cost of the land.
Directly identifiable interest costs are capitalized while the development and construction is in
progress.
Property and Equipment
Property and equipment are initially measured at cost which consists of its purchase price and costs
directly attributable to bringing the asset to its working condition for its intended use and are
subsequently measured at cost less any accumulated depreciation, amortization and impairment
losses, if any.
Subsequent expenditures relating to an item of property and equipment that have already been
recognized are added to the carrying amount of the asset when it is probable that future economic
benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to
the Group. All other subsequent expenditures are recognized as expenses in the period in which those
are incurred.
- 15 -
After recognition as an asset, condominium units whose fair value can be measured reliably shall be
carried at revalued amount, being its fair value at the date of the revaluation less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. All other property, plant
and equipment are stated at historical cost less depreciation.
Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ
materially from that which would be determined using fair value at the end of the period. There is no
change to the valuation technique during the year. The fair value of the condominium units was
determined using inputs that are directly or indirectly observable from market data.
When an item of property and equipment is revalued, any accumulated depreciation at the date of the
revaluation is restated proportionally with the change in the gross carrying amount of the asset so that
the carrying amount of the asset after revaluation equals its revalued amount.
Any revaluation increase arising on the revaluation of such revalued assets is credited to the properties
revaluation surplus, except to the extent that it reverses a revaluation decrease for the same asset
previously recognized as an expense, in which case the increase is credited to profit or loss to the
extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of
such revaluated assets is charged as an expense to the extent that it exceeds the balance, if any, held in
the properties revaluation surplus relating to a previous revaluation of that asset.
Depreciation is computed on the straight-line method based on the estimated useful lives of the assets
as follows:
Number of years
Condominium units and building improvements
Office furniture, fixtures and equipment
Machinery and equipment
Transportation and other equipment
20 to 25
3 to 10
3 to 10
3 to 5
Leasehold and office improvements are amortized over the improvements’ useful life of five (5) years or
when shorter, the term of the relevant lease.
Properties in the course of construction for production, rental or administrative purposes, or for
purposes not yet determined, are carried at cost, less any recognized impairment loss. Cost includes
professional fees and for qualifying assets, borrowing costs capitalized in accordance with the Group’s
accounting policy.
Depreciation of these assets, on the same basis as other property assets, commences at the time the
assets are ready for their intended use.
The assets’ residual values, estimated useful lives and depreciation and amortization method are
reviewed periodically to ensure that the amounts, periods and method of depreciation and
amortization are consistent with the expected pattern of economic benefits from items of property and
equipment.
Derecognition
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal at which time the cost, appraisal increase and their
related accumulated depreciation are removed from the accounts. Gain or loss arising on the disposal
or retirement of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognized in profit or loss. The related revaluation reserve upon disposal of
revalued asset is transferred directly to retained earnings.
- 16 -
Intangible Assets
Intangible assets acquired such as computer software are initially measured at cost and subsequently
measured at cost less accumulated amortization and accumulated impairment losses.
The Group classifies its computer software as an intangible asset with definite useful life. The
intangible asset is measured initially at purchase cost and costs directly attributable into bringing the
asset into its intended use and is amortized on a straight -line basis over its estimated useful life
of five (5) years.
Amortization is charged on a straight-line basis over their estimated useful lives. The estimated
useful life and amortization method are reviewed at the end of each annual reporting period, with
the effect of any changes in estimate being accounted for on a prospective basis .
Derecognition
An intangible asset is derecognized on disposal, or when no future economic benefits are expected
from use or disposal. Gains or losses arising from derecognition of an intangible asset are measured
as the difference between the net disposal proceeds and the carrying amount of the asset and are
recognized in profit or loss when the asset is derecognized.
Investment Properties
Investment properties comprise completed property and property under development or
redevelopment that are held to earn rentals or capital appreciation or both and that are not occupied
by the Group. Investment properties are measured initially at cost, including transaction costs.
Investment properties, except for land, are carried at cost less accumulated depreciation and any
impairment in residual value. Land is carried at cost less any impairment in value.
Expenditures incurred after the investment property has been put in operation, such as repairs and
maintenance costs, are normally charged against income in the period in which the costs are incurred.
Construction in progress are carried at cost and transferred to the related investment property account
when the construction and related activities to prepare the property for its intended use are complete,
and the property is ready for occupation.
Depreciation of investment properties are computed using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives and the depreciation method are reviewed
periodically to ensure that the period and method of depreciation are consistent with the expected
pattern of economic benefits from items of investment properties. The Parent Company revised the
estimated useful values of condominium units from 35 years to 40 years with effect from January 1,
2012. The revisions were accounted for prospectively as a change in accounting estimates and as a
result, the depreciation of investment properties of the Parent Company for the year ended December
31, 2012 decreased by P3,644,555.
The estimated useful lives of depreciable investment properties follow:
Number of years
Condominium units
Land improvements
40
40
A transfer is made to investment property when there is a change in use, evidenced by ending of
owner-occupation, commencement of an operating lease to another party or ending of construction or
development. A transfer is made from investment property when and only when there is a change in
use, evidenced by commencement of owner occupation or commencement of development with a
view to sale. A transfer between investment property, owner-occupied property and inventory does not
change the carrying amount of the property transferred nor does it change the cost of that property for
measurement or disclosure purposes.
- 17 -
Derecognition
Investment properties are derecognized when either they have been disposed of, or when the
investment property is permanently withdrawn from use and no future economic benefit is expected
from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognized
in profit or loss in the year of retirement or disposal.
Goodwill
Goodwill arising from consolidation represents the excess of the cost of acquisition over the Group’s
interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly
controlled entity at the date of acquisition.
As an intangible asset assessed to have an indefinite life, the Group believes that there is no foreseeable
limit to the period over which the goodwill is expected to generate net cash inflows for the entity.
Goodwill is recognized as an asset and reviewed for impairment at least annually. Any impairment is
recognized immediately in profit or loss and is not subsequently reversed.
At acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to
benefit from the combination’s synergies. Impairment is determined by assessing the recoverable
amount of the cash-generating unit, to which the goodwill relates. Where the recoverable amount of
the cash-generating unit is less than the carrying amount, an impairment loss is recognized. Where
goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of,
the goodwill associated with the operation disposed of is included in the carrying amount of the
operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in such
circumstance is measured on the basis of the relative values of the operation disposed of and the
portion of the cash-generating unit retained.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to PFRS has been retained at the previous
generally accepted accounting principles in the Philippines. The amounts were subjected to test for
impairment at that date.
Impairment of Non-Financial Assets
At each reporting date, the Group assesses whether there is any indication that any of its non-financial
assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss.
The recoverable amount of the non-financial asset is the higher of fair value less costs to sell and
value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount. An impairment loss is recognized as an
expense.
When an impairment loss reverses subsequently, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognized in prior
years. A reversal of an impairment loss is recognized in profit or loss.
- 18 -
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary
transaction between participants at measurement date.
The fair value of a non-financial asset is measured based on its highest and best use. The asset’s current
use is presumed to be its highest and best use.
The fair value of financial and non-financial liabilities takes into account non-performance risk, which
is the risk that the entity will not fulfill an obligation.
The Group measures fair values using the following fair value hierarchy that reflects the significance of
the inputs used in making the measurements:

Level 1: Quoted price (unadjusted) in an active market for an identical asset or liability.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes assets or liabilities valued using quoted
prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets
or liabilities in markets that are considered less than active; or other valuation techniques for which
all significant inputs are directly or indirectly observable from market data.

Level 3: Valuation techniques using significant unobservable inputs. This category includes all
assets or liabilities for which the valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the asset or liability’s valuation. This
category includes assets or liabilities that are valued based on quoted prices for similar assets or
liabilities for which significant unobservable adjustments or assumptions are required to reflect
differences between the assets or liabilities.
The methods and assumptions used by the Group in estimating the fair value of the financial
instruments are as follows:
Cash and cash equivalents and trade and other receivables – carrying amounts approximate fair values
due to the relatively short-term maturities of these items.
Held-for-trading and AFS financial assets – these are investments in equity securities, fair value for
quoted equity securities is based on quoted prices published in markets as of reporting dates, unquoted
equity securities are carried at cost less allowance for impairment losses because fair value cannot be
measured reliably due to lack of reliable estimates of future cash flows and discount rates necessary to
calculate the fair value.
Liabilities – the carrying value of claims payable, accrued expenses and other liabilities and due to
reinsurers and ceding companies approximate its fair value because of the short-term nature of these
financial liabilities.
Property and Equipment at revalued cost - the fair value of property and equipment at revalued amount
is computed based on observable inputs from market data as computed by an independent appraiser.
- 19 -
Insurance Contract Liabilities
Claims outstanding
Claims outstanding are based on the estimated ultimate cost of all claims incurred but not settled at the
end of the reporting period together with related claims handling costs and reduction for the expected
value of salvage and other recoveries. Delays can be experienced in the notification and settlement of
certain types of claims, therefore the ultimate cost of which cannot be known with certainty at the end
of the reporting period. The liability is not discounted for the time value of money and includes
provision for IBNR losses. The liability is derecognized when the contract is discharged, cancelled or
has expired.
Unearned Premiums
The proportion of written premiums, gross of commissions payable to intermediaries, attributable to
subsequent periods or to risks that have not yet expired is deferred as unearned premiums. Premiums
from short-duration insurance contracts are recognized as revenue over the period of the contracts
using the 24th method except for the marine cargo where premiums for the last two months are
considered earned the following year. The portion of the premiums written that relate to the unexpired
periods of the policies at the end of the reporting period are accounted for as unearned premiums in
the liabilities section of the consolidated statements of financial position. The change in the unearned
premiums is taken to profit or loss in order that revenue is recognized over the period of risk. Further
provisions are made to cover claims under unexpired insurance contracts which may exceed the
unearned premiums and the premiums due in respect of these contracts.
Liability Adequacy Test
At each end of the reporting period, liability adequacy tests are performed, to ensure the adequacy of
insurance contract liabilities, net of related deferred acquisition cost (DAC) assets. In performing the
test, current best estimates of future cash flows, claims handling and policy administration expenses are
used. Changes in expected claims that have occurred, but which have not been settled, are reflected
by adjusting the liability for claims and future benefits. Any inadequacy is immediately charged to the
profit or loss by establishing an unexpired risk provision for losses arising from the liability adequacy
tests. The provision for unearned premiums is increased to the extent that the future claims and
expenses in respect of current insurance contracts exceed future premiums plus the current provision
for unearned premiums.
Due to Reinsurers and Ceding Companies
When the Group enters into a reinsurance agreement for ceding out its insurance business, the Group
initially recognizes a due to reinsurers and ceding companies at transaction price.
Due to reinsurers and ceding companies are derecognized when the obligation under the liability is
settled, cancelled or expired.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities. Distribution to the Group’s shareholders is recognized as a liability in the
consolidated financial statements in the period in which the dividends are approved by the Board of
Directors.
Common shares
Common shares are classified as equity when there is no obligation to the transfer of cash or other
assets. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction from the proceeds, net of tax. If payment is deferred and the time value of money is
material, the initial measurement is on a present value basis.
Deficit
Deficit include all the accumulated losses of the Group, dividends declared and share issuance costs.
- 20 -
Treasury Stock
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted
from equity. No gain or loss is recognized in the consolidated statements of comprehensive income on
the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is recognized in additional paid-in
capital. Voting rights related to treasury shares are nullified for the Group and no dividends are
allocated to them respectively. When the shares are retired, the capital stock account is reduced by its
par value and the excess of cost over par value upon retirement is debited to additional paid-in capital
when the shares were issued and to retained earnings for the remaining balance.
Employee Benefits
Short-term benefits
The Group recognizes a liability net of amounts already paid and an expense for services rendered by
employees during the accounting period. Short-term benefits given by the Group to its employees
include salaries and wages, social security contributions, short-term compensated absences, bonuses
and non-monetary benefits.
Post-employment benefits
The Group has a funded and unfunded, non-contributory defined benefit retirement plan. The postemployment expense is determined using the Projected Unit Credit Method which reflects services
rendered by employees to the date of valuation and incorporates assumptions concerning employees’
projected salaries.
Typically defined benefit plans define an amount of retirement benefit that an employee will receive
on retirement, usually dependent on one or more factors such as age, years of service and
compensation.
The liability recognized in the consolidated statements of financial position in respect of defined
benefit retirement plans is the present value of the defined benefit obligation at the end of the
reporting period less the fair value of plan assets. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest rates of government
securities that are denominated in the currency in which the benefits will be paid, and that have terms
to maturity approximating to the terms of the related retirement obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to equity through other comprehensive income in the period in which they
arise.
Past-service costs are recognized immediately in profit or loss.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. Revenue is measured at the fair value of
consideration received or receivable, net of discounts, rebates and value added tax (VAT) and
represents amounts receivable for goods and services in the normal course of business.
A property is regarded as sold when the significant risks and returns have been transferred to the buyer,
which is normally on unconditional exchange of contracts. For conditional exchanges, sales are
recognized only when all the significant conditions are satisfied.
- 21 -
Revenue from sales of completed real estate projects is accounted for using the full accrual method. In
accordance with Philippine Interpretations Committee (PIC) Q&A No. 2006-01, the percentage-ofcompletion method is used to recognize income from sales of projects where the Group has material
obligations under the sales contract to complete the project after the property is sold, the equitable
interest has been transferred to the buyer, construction is beyond preliminary stage, and the costs
incurred or to be incurred can be measured reliably. Under this method, revenue is recognized as the
related obligations are fulfilled, measured principally on the basis of the estimated completion of a
physical proportion of the contract work.
If any of the criteria under the full accrual or percentage-of-completion method is not met, the deposit
method is applied until all the conditions for recording a sale are met. Pending recognition of sale,
cash received from buyers are presented under the Trade and other payables account in the
consolidated statements of financial position.
Gross premiums written
Gross insurance premiums written comprise the total premiums receivable for the whole period of
cover provided by contracts entered into during the accounting period and are recognized on the date
on which the policy incepts. Premiums include any adjustments arising in the accounting period for
premiums receivable in respect of business written in prior periods.
Premiums from short-duration insurance contracts are recognized as revenue over the period of the
contracts using the 24th method except for the marine cargo where premiums for the last two months
are considered earned the following year. The 24th method is based on the general assumption that the
insurance policies are issued uniformly over the month and risk is spread evenly over the year. The
portion of the premiums written that relate to the unexpired periods of the policies at end of the
reporting period are accounted for as unearned premiums and presented in the liabilities section of the
The Group also assumes reinsurance risk in the normal course of business for insurance contracts.
Premiums on assumed reinsurance are recognized in profit or loss as income and expenses in the same
manner as they would be if the reinsurance were considered direct business, taking into account the
product classification of the reinsured business.
Management fee and commission income
Management fee and commission income are recognized when the related services have been
performed in accordance with the terms and conditions of the management agreement, commission
scheme and applicable policies.
Interest income
Interest income is accrued on a time proportion basis by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate that discounts estimated future cash receipts
through the expected life of the financial asset to that asset’s net carrying amount.
Rental income
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant
operating lease. Benefits received and receivable as an incentive to enter into an operating lease are
also spread on a straight-line basis over the lease term.
Commission income
Revenue from commissions is recognized at the time it is earned, generally as of the effective date of
the applicable policies.
Dividend income
Dividend income from investments is recognized when the shareholders’ rights to receive payment
have been established.
- 22 -
Unearned Income
Unearned income represents collections from customers which are as of the reporting period not yet
earned. Unearned income are initially recorded as liability and recognized at the amount actually
received. Subsequently, these are earned through profit or loss based on the percentage of completion
of the property sold.
Funds Held in Trust
Funds held represents amounts received which are held in trust for the other party. Funds held in trust
are initially recognized at amount actually received and are subsequently measured at amortized cost.
Cost and Expense Recognition
Costs and expenses are recognized in profit or loss when there is a decrease in future economic
benefits related to a decrease in an asset or an increase in a liability has arisen that can be measured
reliably. Cost and expenses are recognized in profit or loss on the basis of (i) a direct association
between the costs incurred and the earning of specific items of income; (ii) and rational allocation
procedures when economic benefits are expected to arise over several accounting periods and the
association with income can only be broadly or indirectly determined; or, (iii) immediately when an
expenditure produces no future economic benefits or when, and to the extent that, future economic
benefits do not qualify or cease to qualify, for recognition in the consolidated statements of financial
position as an asset.
Contract costs include all direct materials and labor cost and those indirect costs related to contract
performance. Expected losses on contracts are recognized immediately when it is probable that the
total contract costs will exceed total contract revenue. Changes in contract performance, contract
conditions and estimated profitability, including those arising from contract penalty provisions, and
final contract settlements which may result in revisions to estimated costs and gross margins are
recognized in the year in which the changes are determined.
Cost of the real estate sold before the completion of the contemplated development is determined
based on actual development cost and project estimates as determined by the contractors and the
Group’s technical staff.
Cost and expenses in the consolidated statements of income are presented using the function of
expense method. Operating expenses are costs attributable to general, administrative and other
business activities of the Group. Direct costs are expenses incurred that are associated with the services
rendered.
Claim cost recognition
Liabilities for unpaid claim costs and claim adjustment expenses relating to insurance contracts are
accrued when insured events occur. Claim adjustment expenses include any legal and all related
adjusters’ fee and the cost of paying claims and expenses.
The liabilities for unpaid claims are based on the estimated ultimate cost of settling the claims. The
method of determining such estimates and establishing reserves are continually reviewed and updated.
Changes in estimates of claim costs resulting from the continuous review process and differences
between estimates and payments for claims are recognized as income or expense in the period in
which the estimates are changed or payments are made.
As allowed by PFRS 4, Insurance Contracts, the Group continued to measure its insurance obligation
on an undiscounted basis.
Estimated recoveries on settled and unsettled claims are evaluated in terms of the estimated realizable
values of the salvage recoverable and deducted from the liability for unpaid claims.
- 23 -
Commission Expense
Commissions are recognized as expense over the period of the contracts using the 24th method. The
portion of the commissions that relates to the unexpired periods of the policies at the end of the
reporting period is accounted for as “Deferred acquisition cost” in the assets section of the
Borrowing Costs
Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes
a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of
the respective assets. All other borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds.
Borrowing costs are capitalized from the commencement of the development work until the date of
practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods
when development activity is interrupted. If the carrying amount of the asset exceeds its recoverable
amount, an impairment loss is recorded.
Leases
Group as Lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Fixed lease payments are recognized as an expense in the consolidated
statements of income on straight-line basis while the variable rent is recognized as an expense based
on terms of the lease contract.
Group as Lessor
Leases where the Group does not transfer substantially all the risk and benefits of ownership of the
assets are classified as operating leases. Lease payments received are recognized as an income in the
consolidated statements of income on a straight-line basis over the lease term. Initial direct costs
incurred in negotiating operating leases are added to the carrying amount of the leased asset and
recognized over the lease term on the same basis as the rental income. Contingent rents are recognized
as revenue in the period in which they are earned.
Foreign Currency Transactions and Translation
Transactions in currencies other than Philippine Peso are recorded at the rates of exchange prevailing
on the dates of the transactions. At each reporting date, monetary assets and liabilities that are
denominated in foreign currencies are restated at the rates prevailing at the reporting date. Exchange
gains and losses arising on restatements are included in profit or loss for the year. Non-monetary assets
and liabilities that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange gains or losses arising from foreign exchange transactions are credited to or charged against
operations for the year.
Income Tax
Income tax expense for the period comprises current and deferred tax. Income tax is recognized in
profit or loss, except to the extent that it relates to items recognized in other comprehensive income or
directly in equity. In this case the tax is also recognized in other comprehensive income or directly in
equity, respectively.
The current income tax expense is calculated on the basis of the tax laws enacted at the reporting
date. Management periodically evaluates positions in income tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
- 24 -
Deferred income tax is recognized on temporary difference arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted at the reporting date and are expected to apply when
related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of
unused tax losses (net operating loss carryover or NOLCO) and unused tax credits (excess minimum
corporate income tax or MCIT) to the extent that it is probable that future taxable profit will be
available against which the temporary differences, unused tax losses and unused tax credits can be
utilized. The Group reassesses at each reporting date the need to recognize a previously unrecognized
deferred income tax asset.
Deferred income tax assets and liabilities are offset when there is legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities
relate to income taxes levied by the same taxation authority on either the taxable entity or different
taxable entities when there is an intention to settle the balances on net basis.
Provisions and Contingencies
Provisions are recognized when the Group has a present obligation, either legal or constructive, as a
result of a past event; when it is probable that the Group will be required to settle the obligation
through an outflow of resources embodying economic benefits, and; when the amount of the
obligation can be estimated reliably. When the Group expects reimbursement of some or all of the
expenditure required to settle a provision, the entity recognizes a separate asset for the reimbursement
only when it is virtually certain that reimbursement will be received when the obligation is settled.
The amount of the provision recognized is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the risks and uncertainties surrounding the
obligation. A provision is measured using the cash flows estimated to settle the present obligation; its
carrying amount is the present value of those cash flows.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Contingent liabilities are not recognized because their existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events wholly within the control of the
Group. Contingent liabilities are disclosed, unless the possibility of an outflow of resources embodying
economic benefits is remote.
Contingent assets are not recognized in the consolidated financial statements but are disclosed when
an inflow of economic benefits is probable.
Related Party Relationships and Transactions
Related party relationship exists when one party has the ability to control, directly, or indirectly
through one or more intermediaries, the other party or exercise significant influence over the other
party in making financial and operating decisions. Such relationship also exists between and/or among
entities which are under common control with the reporting enterprise, or between, and/or among the
reporting enterprise and its key management personnel, directors, or its shareholders. In considering
each possible related party relationship, attention is directed to the substance of the relationship, and
not merely the legal form.
- 25 -
Earnings (Loss) per Share
Basic earnings (loss) per share
The Group computes its basic earnings (loss) per share by dividing net profit or loss attributable to
common equity holders of the Group by the weighted average number of common shares issued and
outstanding during the period.
Diluted earnings (loss) per share
Diluted earnings per share is calculated by adjusting the weighted average number of common shares
outstanding to assume conversion of all dilutive potential common shares.
Dividend Distribution
Dividend distribution to the Group’s shareholders is recognized as a liability in the consolidated
financial statements in the period in which the dividends are approved by the Board of Directors.
Events After the Reporting Date
The Group identifies events after the reporting date as events that occurred after the reporting date but
before the date the consolidated financial statements were authorized for issue. Any event after the
reporting date that provides additional information about the Group’s financial position at the reporting
date is reflected in the consolidated financial statements. Non-adjusting events after the reporting date
are disclosed in the notes to the consolidated financial statements when material.
4. Critical Accounting Judgments and Key Sources of Estimation Uncertainty
In the application of the Group’s accounting policies, Management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on the historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future
periods.
The following are the key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cashgenerating units to which goodwill has been allocated. The value in use calculation requires the entity
to estimate the future cash flows expected to arise from the cash-generating unit and a suitable
discount rate in order to calculate present value. The Group considers that it is impracticable to
disclose with sufficient reliability the possible effects of sensitivities surrounding the impairment of the
goodwill.
Claims liability arising from insurance contracts
For non-life insurance contracts, estimates have to be made both for the expected ultimate cost of
claims reported at the reporting date and for the expected cost of the claims incurred but not yet
reported (IBNR) as of the reporting date. It can take a significant period of time before the ultimate
claim costs can be established with certainty and for some type of policies, IBNR claims form the
majority of the claims provision in the consolidated statements of financial position.
- 26 -
The primary technique adopted by management in estimating the cost of notified claims is that of
using past claims settlement trends to predict future claims settlement trends. At each reporting date,
prior year claims estimates are assessed for adequacy and changes made are charged to provision.
Non-life insurance claims provisions are not discounted for the time value of money. The main
assumption underlying the estimation of the claims provision is that a company’s past claims
development experience can be used to project future claims development and hence ultimate claims
costs. As such, these methods extrapolate the development of paid and incurred losses, average costs
per claim and claim numbers based on the observed development of earlier years and expected loss
ratios.
Historical claims development is mainly analyzed by accident years, but can also be further analyzed
by geographical area, as well as by significant business lines and claim types. Large claims are usually
separately addressed, either by being reserved at the face value of loss adjuster estimates or separately
projected in order to reflect their future development. In most cases, no explicit assumptions are made
regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit
in the historic claims development data on which the projections are based. Additional qualitative
judgment is used to assess the extent to which past trends may not apply in the future, (for example to
reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming,
economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal
factors such as portfolio mix, policy conditions and claims handling procedures) in order to arrive at
the estimated ultimate cost of claims that present the likely outcome from the range of possible
outcomes, taking account of all the uncertainties involved. A margin for adverse deviation may also be
included in the liability valuation.
At December 31, 2013, the impact of 10% increase/decrease in the ultimate cost of claims, with all
other variables held constant, would have been an increase/decrease of nil, P3,489,515 and
P3,024,140 in the Group's profit or loss for the year ended December 31, 2013, 2012 and 2011,
respectively.
Estimating useful lives of assets
The useful lives of assets are estimated based on the period over which the assets are expected to be
available for use. The estimated useful lives of assets are reviewed periodically and are updated if
expectations differ from previous estimates due to physical wear and tear, technical or commercial
obsolescence and legal or other limits on the use of the Group’s assets. In addition, the estimation of
the useful lives is based on the Group’s collective assessment of industry practice, internal technical
evaluation and experience with similar assets. It is possible, however, that future results of operations
could be materially affected by changes in estimates brought about by changes in factors mentioned
above. The amounts and timing of recorded expenses for any period would be affected by changes in
these factors and circumstances. A reduction in the estimated useful lives of assets would increase the
recognized operating expenses and decrease non-current assets.
If the actual useful lives of the property and equipment differ by 10% from management’s estimates,
the depreciation and amortization expense for 2013 and 2012 would be an estimated higher (lower) by
the following amounts:
10% lower in average useful lives
10% higher in average useful lives
- 27 -
2013
2012
(P789,815)
965,329
(P1,214,287)
1,484,129
Estimating allowances for impairment loss on receivables
The Group estimates the allowance for impairment loss on receivables based on assessment of specific
accounts when the Group has information that certain customers are unable to meet their financial
obligations. In these cases, judgment used was based on the best available facts and circumstances
including, but not limited to, the length of relationship with the customer and the customer’s current
credit status based on third party credit reports and known market factors. The Group used judgment to
record specific reserves for customers against amounts due to reduce the expected collectible amounts.
These specific reserves are re-evaluated and adjusted as additional information received impacts the
amounts estimated.
The amounts and timing of recorded expenses for any period would differ if different judgments were
made or different estimates were utilized. An increase in the allowance for impairment loss would
increase the recognized operating expenses and decrease current assets. The Group considers that it is
impracticable to disclose with sufficient reliability the possible effects of sensitivities surrounding the
impairment of receivables.
Evaluation of net realizable value of real estate inventories and real estate held for sale and
development
The Group adjusts the cost of its real estate inventories and real estate held for sale and development to
net realizable value based on its assessment of the recoverability of the assets. In determining the
recoverability of the assets, management considers whether those assets are damaged or if their selling
prices have declined. Likewise, management also considers whether the estimated costs of completion
or the estimated costs to be incurred to make the sale have increased. The amount and timing of
recorded expenses for any period would differ if different judgments were made or different estimates
were utilized.
Results of management’s assessment disclosed that there is no need for provision for impairment of
inventories as at December 31, 2013, 2012 and January 1, 2012. The provision account, if any, is
reviewed on a monthly basis to reflect the accurate valuation of the Group’s inventories. Inventory
items identified to be obsolete and unusable is written-off and charged as expense for the period. The
Group considers that it is impracticable to disclose with sufficient reliability the possible effects of
sensitivities surrounding the impairment of inventories.
Revenue recognition
When a contract for the sale of a property upon completion of construction is judged to be a
construction contract, revenue is recognized using the percentage-of-completion method as
construction progresses. The Group considers the terms and conditions of the contract, including how
the contract was negotiated and the structural elements that the customer specifies when identifying
individual projects as construction contracts. The percentage of completion is estimated by reference
to the stage of the projects and contracts determined based on the proportion of contract costs incurred
to date and the estimated costs to complete
Post-employment and other employee benefits
The present value of the retirement obligations depends on a number of factors that are determined on
an actuarial basis using a number of assumptions. The assumptions used in determining the net cost
(income) for pensions include the discount rate. Any changes in these assumptions will impact the
carrying amount of retirement obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate
that should be used to determine the present value of estimated future cash outflows expected to be
required to settle the retirement obligations. In determining the appropriate discount rate, the Group
considers the interest rates of government bonds that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating the terms of the related retirement
obligation.
- 28 -
Other key assumptions for retirement obligations are based in part on current market conditions.
Additional information is disclosed in Note 25.
Contingencies
The Group is currently involved in various legal proceedings and tax assessments. Estimates of
probable costs for the resolution of these claims has been developed in consultation with outside
counsel handling the defense in these matters and is based upon an analysis of potential results. The
Group currently does not believe these proceedings will have a material adverse effect on the financial
position. It is possible, however, that future results of operations could be materially affected by
changes in the estimates or in the effectiveness of the Group’s strategies relating to these proceedings.
Income taxes
The Group recognizes tax liabilities depending on the sources of the revenue generated. The liabilities
are based on whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the income tax
and deferred tax provisions in the period in which such determination is made.
The Group reviews the carrying amounts at each reporting date and reduces deferred tax assets to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred tax assets to be utilized. However, there is no assurance that the Group will generate
sufficient taxable profit to allow all or part of its deferred tax assets to be utilized. The Group considers
that it is impracticable to disclose with sufficient reliability the possible effects of sensitivities
surrounding the utilization of deferred tax assets.
Valuation of property
The fair value of investment property is determined by real estate valuation experts using recognized
valuation techniques and the principles of PFRS 13. Investment property under construction is
measured based on estimates prepared by independent real estate valuation experts, except where
such values cannot be reliably determined. In one case, the fair value of the investment property under
construction could not be reliably determined because it was in an area in which the surrounding
properties were under development and reliable estimates could not be made. This property is
recorded at cost.
Critical Accounting Judgments
Asset impairment
The Group performs an impairment review when certain impairment indicators are present.
Determining the fair value of property and equipment, which require the determination of future cash
flows expected to be generated from the continued use and ultimate disposition of such assets, requires
the Group to make estimates and assumptions that can materially affect the consolidated financial
statements. Future events could cause the Group to conclude that property and equipment are
impaired. Any resulting impairment loss could have a material adverse impact on the financial position
and results of operations.
The preparation of the estimated future cash flows involves significant judgment and estimations.
While the Group believes that its assumptions are appropriate and reasonable, significant changes in
the assumptions may materially affect the assessment of recoverable values and may lead to future
additional impairment charges under PFRS.
Operating Lease
The Group has entered into commercial property leases on its investment property portfolio. The
Group has determined, based on an evaluation of the terms and conditions of the arrangements,
particularly the duration of the lease terms and minimum lease payments, that it retains all the
significant risks and rewards of ownership of these properties and so accounts for the leases as
operating lease.
- 29 -
Distinction between investment properties and owner-occupied properties
The Group determines whether a property qualifies as investment property. In making this judgment,
the Group considers whether the property generates cash flows largely independent of the other assets
held by an entity. Owner-occupied properties generate cash flows that are attributable not only to
property but also to the other assets used in the production or supply process.
Some properties comprise a portion that is held to earn rentals or for capital appreciation and another
portion that is held for use in the production or supply of goods or services or for administrative
purposes. If these portions cannot be sold separately at the reporting date, the property is accounted
for as investment property only if an insignificant portion is held for use in the production or supply of
goods or services or for administrative purposes. Judgment is applied in determining whether ancillary
services are so significant that a property does not qualify as investment property. The Group considers
each property separately in making its judgment.
Distinction between real estate inventories and real estate held for sale and development
The Group determines whether a property will be classified as Real estate inventories or Real estate
held for sale and development. In making this judgment, the Group considers whether the property will
be sold in the normal operating cycle (real estate inventories) or whether it will be treated as part of the
Group’s strategic land banking activities for development or sale in the medium or long-term (land and
improvements).
Investment in Meridian Assurance Corporation
Management has assessed the level of influence that the Group has on Meridian Assurance
Corporation and determined that it has significant influence even though the share holding is below
20% because of the board representation and contractual terms. Consequently, this investment has
been classified as an associate.
5. Deconsolidation
On December 27, 2013, the Parent Company disposed its 1,750,000 shares, representing 70% interest
out of the 86.67% interest, in Meridian Assurance Corporation (MAC) at a consideration of
P191,000,000. The remaining 416,735 shares, representing 16.67% interest, was reclassified to
investment in associates at fair value amounting to P45,480,000.
The results of operations attributable to MAC in 2013, 2012 and 2011 are as follows:
Revenue
Expenses
2013
2012
2011
P32,970,219
27,890,384
P50,120,119
32,143,486
P37,351,509
31,580,146
5,079,835
259,013
17,976,633
1,932,061
5,771,363
1,278,081
P4,820,822
P16,044,572
P4,493,282
Income from deconsolidated
operations
Provision for income tax
Net income from deconsolidated
operations
- 30 -
The following table summarizes the carrying value of MAC’s assets and liabilities on December 27,
2013.
Note
Assets
Held-to-maturity investments
Trade and other receivables – net
Prepayments and other current assets – net
Property and equipment – net
10
11
12
19
Total Assets
P177,166,890
14,491,634
23,480,825
65,536,370
55,145,991
27,296,328
27,318,648
P390,436,686
Liabilities
Unearned premiums
Funds held for reinsurers
Deferred tax liabilities
25
Total Liabilities
P66,925,107
45,005,863
4,586,335
1,542,664
1,978,189
P120,038,158
The basic earnings per share of income from deconsolidated operations attributable to equity holders
of the Parent amounted to P0.0002, P0.003 and P0.001 in 2013, 2012 and 2011, respectively.
6. Financial Risk Management
Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks: legal and regulatory risk, operational risk,
market risk, credit risk and liquidity risk. The Group’s overall risk management program seeks to
minimize potential adverse effects on the financial performance of the Group. The policies for
managing specific risks are summarized below:
The management has overall responsibility for the establishment and oversight of the Group’s risk
management framework. It monitors compliance with the risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the risks faced by the
Group. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions.
The Group’s risk management policies are established to identify and analyze the risks faced by the
Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions and
the Group’s activities. The Group, through its training and management standards and procedures,
aims to develop a disciplined and constructive control environment in which all employees understand
their roles and obligations.
Operational Risk
This is the uncertainty arising from internal events caused by failures of people, process and
technology, as well as external events.
The Group has established business specific guidelines. Comprehensive insurance program, including
appropriate levels of self-insurance, is maintained to provide protection against potential losses.
- 31 -
Market Risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to
exchange rate fluctuations arise with respect to transactions denominated in US Dollars. Foreign
exchange risk arises when future commercial transactions and recognized assets and liabilities are
denominated in a currency that is not the Group’s functional currency. Significant fluctuation in the
exchange rates could significantly affect the Group’s financial position.
Foreign exchange risk exposure of the Group is limited to its cash and cash equivalents. Currently, the
Group has a policy not to incur liabilities in foreign currency. Construction and supply contracts,
which may have import components, are normally denominated in Philippine Peso.
The amounts of the Group’s foreign currency denominated monetary assets at the reporting date are as
follows:
2013
2012
P11,242,173
P10,652,601
The following table details the Group’s sensitivity to a 10% increase and decrease in the Philippine
Peso against the US Dollar. The sensitivity rate used in reporting foreign currency risk internally to key
management personnel is 10% and it represents Management’s assessment of the reasonably possible
change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a 10% change in foreign currency rates. A positive
number below indicates an increase in net income or decrease in net loss when the Philippine Peso
weakens 10% against the US Dollar. For a 10% strengthening of the Philippine Peso against the US
Dollar, there would be an equal and opposite impact on net income.
2013
2012
P1,124,217
P1,065,260
As of December 31, 2013, 2012 and 2011, the Group does not have monetary liabilities denominated
in foreign currency.
Interest rate risk
The primary source of the Group’s interest rate risk relates to cash and cash equivalents. The interest
rates on these assets and liabilities are disclosed in Notes 9.
Cash and cash equivalents are short-term in nature and with the current interest rate level, any
variation in the interest will not have a material impact on the profit or loss of the Group.
Based on the sensitivity analysis performed, the impact on profit or loss of a 10% change in interest
rates would have been a maximum increase/decrease of P561,148, P1,155,545 and 786,569 for
2013, 2012 and 2011, respectively.
Price risk
Price risk is the risk that the fair value of the financial instrument particularly equity instruments will
fluctuate as a result of changes in market prices (other than those arising from interest rate risk or
foreign currency risk), whether caused by factors specific to an individual investment, its issuer or
factors affecting all instruments traded in the market.
- 32 -
At December 31, 2013, the impact of 10% increase/decrease in the price of listed equity securities,
with all other variables held constant, would have been an increase/decrease of P11,517,669,
P34,489,245 and P29,856,805 for 2013, 2012 and 2011, respectively in the Group's total
comprehensive income and equity for the year. The Group’ sensitivity analysis takes into account the
historical performance of the stock market.
Credit risk
The Group’s credit risk is primarily attributable to its cash and cash equivalents, trade and other
receivables, premiums receivables, due from ceding companies and reinsurers, reinsurance
recoverable on claim and held-to-maturity investments as disclosed in Notes 9, 12 and 13. The Group
has adopted stringent procedure, in extending credit terms to customers and in monitoring its credit
risk.
The Group has no significant concentration of credit risk. It has policies in place to ensure that sales
are made to customers with an appropriate credit history. The Group’s exposure to credit risk arises
from a default customer, with a maximum exposure equal to carrying amount of the related
receivables, particularly those relating to its leasing operations.
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk as at December 31 are as follows:
Available-for sale financial assets
Held-to-maturity financial assets
2013
2012
P342,855,616
P569,014,062
739,491,593
6,019,391
50,308,581
632,659,174
P975,514,790
P1,364,833,627
The credit quality of financial assets which are neither past due nor impaired is discussed below:
(a) Cash in banks and cash equivalents
The Group deposits its cash balance in commercial and universal banks to minimize credit risk
exposure. Amount deposited in these banks are as follows:
2013
Universal banks
Commercial banks
2012
P136,362,698
206,492,918
P312,596,842
256,417,220
P342,855,616
P569,014,062
(b) Trade and other receivables
The credit quality of trade and other receivables and held-to-maturity financial assets that are neither
past due nor impaired can be assessed by reference to internal credit ratings or to historical information
about counterparty default rates:
2013
Premiums receivable
Group A
Group B
Group C
Total
P19,904,961
418,478
P139,334,730
1,046,196
P39,809,923
627,717
P199,049,614
2,092,391
P20,323,439
P140,380,926
P40,437,640
P201,142,005
- 33 -
2012
Premiums receivable
Due from ceding companies
and reinsurers
Reinsurance recoverable on
claims
Group A
Group B
Group C
Total
P32,036,496
4,855,524
P157,379,703
7,523,904
P148,864,733
3,372,799
P338,280,932
15,752,227
458,551
347,364
46,484
852,399
6,943,125
P44,293,696



P165,250,971
P152,284,016
6,943,125
P361,828,683
Group A - new customers/related parties (less than 3 months).
Group B - existing customers/related parties (less than 3 months) with no defaults in the past.
Group C - existing customers/related parties (less than 3 months) with some defaults in the past. All
defaults were fully recovered.
As at December 31, 2013, trade and other receivables, premiums receivables, due from ceding
companies and reinsurers and reinsurance recoverable on claims of P394,492,832 (2012 –
P338,362,194) were past due but not impaired. These relate to a number of independent customers for
whom there is no recent history of default. The aging analysis of these receivables is as follows:
2013
Premiums receivable
Due from ceding companies and reinsurers
Reinsurance recoverable on claims
2012
Premiums receivable
More than
90 days
More than
one year
Total
P138,054,614
3,670,470
-
P248,548,361
4,219,387
-
P386,602,975
7,889,857
-
P141,725,084
P252,767,748
P394,492,832
P106,413,431
3,117,035
311,265
13,869,293
P191,582,760
3,583,186
438,422
19,046,802
P297,996,191
6,700,221
749,687
32,916,095
P123,711,024
P214,651,170
P338,362,194
As at December 31, 2013, trade and other receivables, premiums receivables, due from ceding
companies and reinsurers and reinsurance recoverable on claims of P37,179,184 (2012 - P37,179,184)
were impaired and provided for. No provision for impairment loss in 2013 and 2012. It was assessed
that a portion of the receivables is expected to be recovered. The aging of these receivables is as
follows:
More than
90 days
2013
Premiums receivable
- 34 -
More than
one year
Total
P -
P37,179,184
240,073
-
P37,179,184
240,073
-
P -
P37,419,257
P37,419,257
More than
90 days
2012
Premiums receivable
More than
one year
Total
P -
P37,179,184
240,073
1,881,459
P37,179,184
240,073
1,881,459
P -
P39,300,716
P39,300,716
The other classes within trade and other receivables do not contain impaired assets. The maximum
exposure to credit risk at the reporting date is the carrying amount of each class of receivable
mentioned above. The condominium certificates of the title remain in the possession of the Parent
Company until full payment has been made by the customers.
(c) Held-to-maturity (HTM) and Available-for-sale (AFS) debt financial assets
The HTM and AFS financial assets as of December 31, 2013 and 2012 by reference to their credit
rating are as follows:
Rating
HTM financial assets
AFS financial assets
BB+
BB+
2013
P -
2012
P50,308,581
6,019,391
Credit risks associated with fixed income investments are managed using:
a.
b.
c.
d.
e.
Detailed credit and underwriting policies
Specific diversification requirements
Comprehensive due diligence and ongoing credit analysis
Aggregate counterparty exposure limits
Monitoring against pre-established limits
Liquidity risk
The Group maintains adequate highly liquid assets in to assure necessary liquidity. Free cash flows are
restricted primarily for the settlement of the Parent Company’s debt obligations, in accordance with the
rehabilitation plan.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the
maturity profiles of financial assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay. The table includes both interest
and principal cash flows.
- 35 -
Note
Less than
One Year
One to Five More than
Years Five Years
(In Thousand Pesos)
21
P37,265
P31,002
P29,124
P97,391
21
21
P119,080
27,762
P98,551
12,038
P93,445
-
P311,076
39,800
21
25
5,840
3,674
473
-
P156,356
P111,062
Total
2013
2012
Claims outstanding
Due to ceding companies and
reinsurers
-
6,313
3,674
P93,445
P360,863
Fair value information
The following table set forth the carrying values which approximate the fair values of the Group’s
financial assets and liabilities recognized as of December 31, 2013 and 2012:
Carrying amount
2013
2012
Financial Assets
Financial assets at fair value
through profit or loss
AFS investments
Fair value
2013
2012
P342,855,616
P569,014,062
P342,855,616
P569,014,062
10,601,312
104,575,381
632,659,174
20,502,751
324,389,699
739,491,593
10,601,312
104,575,381
632,659,174
20,502,751
324,389,699
739,491,593
116,659,776
357,189,181
116,659,776
357,189,181
The table below analyzes financial and non-financial assets measured at fair value at the end of the
reporting period by the level in the fair value hierarchy into which the fair value measurement is
categorized:
December 31, 2013
Level 1
Equity investments
Equity investments
Property and equipment:
Condominium units
Level 2
Level 3
P10,601,312
P -
P -
10,601,312
99,375,381
-
-
99,375,381
-
6,383,000
-
- 36 -
6,383,000
Total
December 31, 2012
Level 1
Equity investments
Equity investments
Debt securities
Property and equipment:
Condominium units
Level 2
Level 3
P20,502,751
P -
P -
P20,502,751
318,370,308
6,019,391
-
-
318,370,308
6,019,391
-
34,710,035
-
34,710,035
Total
7. Capital Risk Management
The Group manages its capital to ensure that the Group is able to continue as a going concern while
maximizing the return to shareholders through the optimization of the debt and equity balance.
The capital structure of the Group consists of equity, which comprises of issued capital, reserves and
deficit
Management reviews the capital structure on a quarterly basis. As part of this review, Management
considers the cost of capital and the risks associated with it. The Parent Company’s loans-to-equity
ratio must not exceed 1:1, as a requisite in exiting the rehabilitation plan. The Group is able to meet
this requirement, computed as follows:
Loans payable
Equity
Debt to equity ratio
2013
2012
P 2,722,311,251
P2,920,628,064
0.00:1
0.00:1
As part of the reforms of the Philippine Stock Exchange (PSE) to expand capital market and improve
transparency among listed firms, PSE requires listed entities to maintain a minimum of ten percent
(10%) of their issued and outstanding shares, exclusive of any treasury shares, held by the public. The
Group has fully complied with this requirement.
Tektite Insurance Brokers, Inc. (TIBI)
The operations of TIBI are subject to the regulatory requirements of the Insurance Commission (IC).
Such regulations not only prescribe approval and monitoring of activities but also impose certain
capital requirement.
In 2006, the IC issued Memorandum Circular No. 1-2006 which provides for the minimum
capitalization requirements of all insurance brokers and reinsurance brokers. Under this circular,
existing insurance brokers and reinsurance brokers must have a net worth in accordance with the
amounts and schedule stipulated in the circular.
As of December 31, 2013 and 2012, the required statutory net worth for TIBI, being an existing
insurance broker is P10 million.
TIBI has fully complied with the capitalization requirements of Memorandum Circular No. 1-2006 as
of reporting date.
- 37 -
8. Segment Information
Details of the Parent Company’s subsidiaries as of December 31, 2013, 2012 and 2011 are as follows:
Principal
Activities
PRHC Property Managers, Inc. (PPMI)
Meridian Assurance Corporation
(MAC)
Universal Travel Corporation (UTC)
Property Management
Insurance Brokerage
Non-life Insurance
Travel and Tours Agency
Interest Ownership
2013
2012
2011
100%
100%
100%
100%
100%
100%
16.66%
81.53%
86.66%
81.53%
86.66%
81.53%
In December 2013, 70% of the total outstanding shares of MAC held by the Parent Company was sold.
The fair value of the remaining investment in MAC amounting to P45,458,000 at the date when the
Parent Company lost its control, was reclassified to investment in associates with a gain of
P15,431,319 for the remeasurement and subsequently measured using equity method in 2013.
Minority interests as of 2013, 2012 and 2011 represent the equity interests in Meridian Assurance
Corporation and Universal Travel Corporation not held by the Group.
The segment assets and liabilities as of December 31, 2013, 2012 and 2011 results of operations of the
reportable segments for the years ended December 31, 2013, 2012 and 2011 are as follows:
- 38 -
Parent
Eliminations
P379,644
Consolidated
2013
Other Income
(P66,077)
68,835
(32,189)
(1,768)
Subsidiaries
P187,963
(260,407)
-
Travel services
P634
187,963
-
Underwriting
P19,244
(920)
(172)
-
Insurance
Brokerage
P 6,486
8,088
(3,654)
(1,731)
Sale of Real Estate
and Leasing
P25,332
(410)
(80)
-
P107,37
107,317
-
2,754
P31,409
3,015
P34,424
P3,017
3,017
-
1,379
-
P22,854
(1,020)
P21,834
(P494)
(494)
-
(4)
-
P P -
P2,962
2,962
-
259
-
P28,077
P28,077
(P1,011)
(1,011)
-
81
-
P -
P -
P P -
P187,963
187,963
-
-
-
(P54,816)
(P54,816)
(P25,543)
(40,191)
(P65,734)
(P260,615)
(260,407)
208
-
-
P912,583
P912,583
P3,571,766
45,659
17,469
P3,634,894
P39,139
39,347
208
4,469
-
(In Thousand Pesos)
P206,062
1,640
(2)
-
P3,514,969
85,850
15,474
P3,616,293
P53,543
P4,104
P53,543
P -
19,660
P -
P -
-
8,715
P -
P -
-
-
P8,336
P -
164
-
P8,336
P8
-
-
P17,191
P2,393
1,713
-
P17,191
P1,703
1,084
594
P 888,329
16,698
1,362
P 888,329
6,758
-
132,881
(28,281)
(37)
Property
Management
Revenue
Segment Result
Interest income
Dividend income
Equity in net loss of
associates
Income taxes
Loss (income) before
minority interest
Minority interest
Net Income (Loss)
Other Information
Segment assets
Investments at equity method
Unallocated corporate assets
Consolidated Total Assets
Segment liabilities
Consolidated Total Liabilities
Capital expenditure
Depreciation and
amortization
Non-cash expenses
other than depreciation
- 39 -
Parent
P645
645
-
12,919
(28,217)
(180)
13,058
3,065
P403,390
P26,331
2,454
P28,785
P1,987
1,987
-
1,146
(7)
849
P23,801
P8,772
P23,527
(1,326)
P22,201
P487
487
-
247
(138)
378
P6,579
P154,622
P154,622
P391,960
(3,145)
P388,815
P16,915
16,915
-
20,130
(4,795)
(353)
1,932
P26,860
P4
P56,157
P56,157
P31,734
P31,734
P1,425
1,425
-
1,673
(263)
14
P499
Travel services
-
P -
P -
P -
P P -
P151,416
151,416
-
151,416
-
P151,416
Other Income
-
-
P -
(P77,673)
(P77,673)
(P57,660)
(165,954)
(P223,614)
(P170,691)
(168,655)
2,036
(168,655)
-
(P17,498)
Eliminations
6,987
19,861
P1,479
P1,260,704
P1,260,704
P4,171,770
223
9,339
P4,181,332
P2,183
4,219
2,036
18,876
(33,419)
(533)
13,058
6,238
P595,047
Consolidated
2012
P3,755,878
166,177
11,356
P3,933,411
P13,993
P8,772
P -
166
-
Subsidiaries
P1,104,832
P13,993
P -
-
-
Underwriting
P1,104,832
P504
1,032
-
Insurance
Brokerage
P971
890
563
Sale of Real Estate
and Leasing
17,773
925
(In Thousand Pesos)
5,499
Property
Management
Revenue
Segment Result
Interest income
Dividend income
Equity in net loss of associates
Income taxes
minority interest
Minority interest
Net Income (Loss)
Other Information
Segment assets
Investments at equity method
Segment liabilities
Capital expenditure
Depreciation and
amortization
Non-cash expenses other than
depreciation
- 40 -
2011
Consolidated
Subsidiaries
Parent
Eliminations
Travel services
Other Income
Underwriting
P549,225
Insurance
Brokerage
(P5,522)
Property
Management
P109,767
Sale of Real Estate
and Leasing
P693
(227,689)
(31)
25,851
766
P33,056
P -
P -
-
P -
(P88,940)
(P88,940)
(P193,995)
(151,715)
(P42,280)
P2,348
P1,080,030
P1,080,030
11,201
P3,965,576
227
P3,954,148
4
(2,059)
P327,641
P53,386
P -
P -
8,408
(In Thousand Pesos)
P17,773
(75,077)
-
(7,254)
P5,610
109,767
-
-
(4,244)
P21,653
(1,517)
280
-
-
-
(212,601)
P399,252
3,604
4,477
766
-
-
(75,077)
766
(P213,367)
Revenue
-
(81)
109,767
766
(P75,843)
3,386
-
-
(1,278)
(1,318)
P109,767
260
134
-
(240)
7,568
(P1,318)
P16,961
P128,998
P53,386
P -
-
155,483
minority interest
Minority interest
Net Income (Loss)
-
(1,122)
154
P7,568
P33,056
(268,111)
(31)
20,957
-
(1,523)
2,267
P154
P327,847
-
(255,963)
P2,267
P16,961
(7,254)
(P255,963)
P24,528
Segment Result
Interest expense
Interest income
Dividend income
Equity in net loss of
associates
Income taxes
P3,592,183
2,000
P26,527
P6,816
P128,998
P -
-
-
-
11,261
P3,755,386
P26,527
P6,816
P -
169
-
-
P953,241
P26,527
P366
-
-
-
P953,241
P346
660
-
-
Other Information
Segment assets
Investments at equity
method
P1,637
242
585
151,942
Segment liabilities
6,676
514
Capital expenditure
Depreciation and
amortization
Non-cash expenses
other than depreciation
154,384
- 41 -
Aggregated amounts relating to subsidiaries follow:
2013
2012
P34,424,408
17,189,957
P28,784,923
13,992,862
17,234,451
14,792,061
28,167,537
(25,150,555)
26,705,660
(24,718,497)
P3,016,982
P1,987,163
P19,041,264
5,542,959
P19,250,037
5,821,964
Net assets
13,498,305
13,428,073
Income
Cost and expenses
6,653,739
(7,148,553)
6,803,391
(6,316,432)
Net profit (loss)
(P494,814)
P486,959
P390,436,686
120,038,158
P382,815,201
148,622,680
Net assets
270,398,528
234,192,521
Income
Cost and expenses
79,370,835
(76,410,426)
100,765,250
(83,850,629)
P2,960,409
P16,914,621
Total assets
Total liabilities
P28,076,506
53,543,399
P31,773,986
56,147,315
Net assets
(25,466,893)
(24,373,329)
1,529,117
(2,539,602)
975,988
(2,170,866)
(P1,010,485)
(P1,194,878)
Total assets
Total liabilities
Net assets
Income
Cost and expenses
Net profit
Total assets
Total liabilities
Meridian Assurance Corporation (MAC)
Total assets
Total liabilities
Net profit
Income
Cost and expenses
Net loss
The following are the principal activities of the Parent Company’s subsidiaries:
PPMI was incorporated and registered with the SEC on May 24, 1991 to engage in the business of
managing, operating, developing, buying, leasing and selling real and personal property either for itself
and/or for others.
The registered office of PPMI is at the 5/F East Tower, PSE Centre, Exchange Road, Ortigas Center,
Pasig City.
TIBI was incorporated and registered with the SEC on January 2, 1989 to engage in the business of
insurance brokerage.
- 42 -
The registered office of TIBI is at the 20/F East Tower, PSE Centre, Exchange Road, Ortigas Center,
Pasig City.
On November 30, 2004, TIBI’s Board of Directors approved and authorized the increase in its
authorized capital stock from P3.4 million, divided into 3.4 million common shares with par value of
P1 per share to P17 million, divided into 17 million common shares with par value of P1 per share.
In a special meeting of the BOD on July 20, 2005, pursuant to the order of the Insurance Commission
(IC), TIBI’s BOD resolved that the advances to the Parent Company amounting to P3.1 million be offset
against the deposit for future capital stock subscriptions. Accordingly, in 2013, TIBI revised its
application with the SEC for the subscription from P16 million divided into 16 million common shares
with par value of P1 per share to P12.9 million divided into 12.9 million shares with par value of P1
per share, through the conversion of its deposit for future capital stock subscription amounting to P16
million less P3.1 million advances. As of reporting date, the conversion is pending approval of the SEC.
MAC was incorporated and registered with the SEC on March 16, 1960, renewed on November 13,
2007, primarily to engage in the business of insurance and guarantee of any kind and in all branches
except life insurance, for consideration, to indemnify any person, firm or corporation against loss,
damage or liability arising from any unknown or contingent event, and to guarantee liabilities and
obligations of any person, firm or corporation and to do all such acts and exercise all such powers as
may be reasonably necessary to accomplish the above purposes which may be incidental.
The registered office of MAC is at the 7/F, West Tower, PSE Centre, Exchange Road, Ortigas Center,
Pasig City. Aside from its head office in Metro Manila, it maintains offices in the cities of Cebu, Iloilo,
Davao and Cagayan de Oro.
UTC was incorporated and registered with the SEC on November 9, 1993 to engage in the business of
travel services by providing, arranging, marketing, engaging or rendering advisory and consultancy
services relating to tours and tour packages. The registered office of UTC is at the Ground Floor, West
Tower, PSE Centre, Exchange Road, Ortigas Center, Pasig City.
UTC holds 41,673,000 shares of the Parent Company which was acquired at P50.97 million.
9. Cash and Cash Equivalents
This account consists of:
Cash on hand and in banks
Cash equivalents
2013
2012
P41,997,759
300,857,857
P242,972,596
326,041,466
P342,855,616
P569,014,062
Cash in banks earn average annual interest ranging from 0.32% to 2.10% in 2013 and 0.32% to 1.75%
in 2012. Cash equivalents represent short-term money market placements, with annual interest ranging
from 1.25% to 2.3% and 1.00% to 4.25% in 2013 and 2012, respectively. Interest income earned
amounted to P5.6 million, P11.56 million, P7.87 million in 2013, 2012 and 2011, respectively.
- 43 -
10. Financial Assets at Fair Value Through Profit or Loss
This account is composed of various listed equity securities. The fair value of these securities is based
on quoted market prices which is level one (1) in the fair value hierarchy.
The movement of held-for-trading investments is summarized as follows:
Balance, January 1
Additions
Sale/disposal
Fair value adjustments
Note
2013
2012
5
P20,502,751
24,711,619
(17,992,566)
(2,128,858)
(14,491,634)
P11,599,800
32,053,003
(23,089,395)
(60,657)
-
P10,601,312
P20,502,751
2013
2012
P6,750,000
3,851,312
-
P7,635,003
5,614,518
1,786,308
1,402,240
1,262,506
945,480
844,200
1,012,496
P10,601,312
P20,502,751
Balance, December 31
This account is composed of the following securities at fair value:
Property company
Holding firms
Banks
Food, beverage and tobacco
Electricity, energy, power and water
Mining
Construction, infrastructure and allied services
Others
11. Available-for-sale financial assets
The movements in the AFS financial assets are summarized as follows:
Note
January 1
Additions
Disposals
Amortization of AFS – debt securities
Transfer to consolidated statements of
comprehensive income on sale of AFS
investments
5
December 31
- 44 -
2013
2012
P324,389,699
11,198,682
(11,978,270)
P286,968,249
25,986,130
(17,928,781)
323,610,111
-
295,025,598
(1,032)
39,999
(195,593,904)
(23,480,825)
(3,734,824)
33,099,957
-
P104,575,381
P324,389,699
The account is composed of the following securities:
Cost:
Listed shares of stocks
Trust funds
Golf and country club shares
Accumulated unrealized holding gain (loss)
2013
2012
P175,259,578
5,200,000
3,350,000
P201,268,834
3,350,000
183,809,578
(79,234,197)
204,618,834
119,770,865
P104,575,381
P324,389,699
AFS financial assets are investments in shares of stock of various listed equity securities and golf and
country club shares that present the Group with opportunity for return through dividend income and
trading gains. The fair value of these investments is based on quoted market prices which is a level one
in the fair value hierarchy. Unrealized holding gains or losses from market value fluctuations are
recognized as part of the Group’s reserves.
The Group received dividend income from these investments amounting to P36 thousand and P179
thousand and P259 in 2013, 2012 and 2011, respectively.
12. Held-to-Maturity (HTM) financial assets
The movements in the HTM financial assets are summarized as follows:
Balance, beginning of year
Additions
Maturities
Amortization of discount/premium
Note
2013
2012
5
P50,308,581
15,000,000
227,789
(65,536,370)
P42,755,695
45,800,000
(40,454,488)
2,207,374
-
P -
Balance, end of year
P50,308,581
The following presents the breakdown of HTM investments by contractual maturity dates at
December 31:
2013
Due within one year
Due beyond one year but not beyond five years
2012
P -
P 50,308,581
P -
P50,308,581
The account is composed of the following securities:
2013
Cost:
Treasury notes
Unamortized premium
2012
P -
P47,800,000
2,508,581
P -
P50,308,581
HTM investments consist of Philippine treasury bills which bear annual average interest of 3.7% and
3.6% in 2013 and 2012, respectively, with maturities ranging from one to five years.
- 45 -
In accordance with the provisions of the Insurance Code, the certificates covering the government
securities were deposited with the Bureau of Treasury and Insurance Commission as security for the
benefit of policyholders and creditors of MAC.
Government securities are stated at amortized cost using effective interest method. Amortization of
bond premium or discount is charged to profit or loss as part of interest income.
Management believes that the carrying amount of the Group’s HTM financial assets approximate fair
values.
13. Trade and Other Receivables
This account is composed of:
Trade
Premiums receivable
Funds held by ceding companies
Due from reinsurers and ceding companies
Other receivables
Less allowance for impairment loss
2013
2012
P384,987,963
6,974,638
278,115,830
P577,107,665
22,692,521
39,859,220
4,221,797
3,483,545
131,427,561
670,078,431
(37,419,257)
778,792,309
(39,300,716)
P632,659,174
P739,491,593
Trade receivables include amounts due from buyers of the Parent Company’s condominium projects,
generally over a period of three (3) or four (4) years. The condominium certificates of title remain in the
possession of the Parent Company until full payment has been made by the customers.
Trade receivables due after one year amount to P133.56 million in 2013 and P193.6 million in 2012.
Also, included in trade receivables are amounts due from certain buyers of Andrea North Skyline
Tower condominium project amounting to P160.37 million in 2013 and P291.9 million in 2012, for
which few of the buyers have filed cases against the Parent Company for the rescission of contracts to
sell and refund of total installment payments made amounting to P8.2 million in 2013 and 2012. With
the completion of the Skyline Tower, most of the buyers concerned have opted to retain their units
under various compromise agreements with the Parent Company. These trade receivables are now
being collected because units of Andrea North Skyline Tower have been turned over to the buyers.
Reinsurance recoverable on claims pertains to MAC’s receivable on claims from the assuming
company of its share in losses to the assured for incidents that resulted to the loss or damages to the
insured properties.
Other receivables mainly consists of receivables from the sale of shares of MAC amounting to P191
million in 2013 and advances to contractors of Andrea North Skyline and Skyvillas Projects amounting
to P39 million in 2013 and P81 million in 2012. The rest of the balances are receivables from lessees
and concessionaires.
- 46 -
Movements in the allowance for impairment loss on receivables are as follows:
2013
2012
Balance, beginning
P39,300,716
(1,881,459)
P39,300,716
-
Balance, end
P37,419,257
P39,300,716
In determining the recoverability of trade receivables, the Group considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date.
The concentration of credit risk is limited due to the client base being large and unrelated.
Accordingly, Management believes that there is no further credit provision required in excess of the
allowance for impairment loss on receivables.
Management further believes that the carrying amounts of the trade and other receivables approximate
fair values.
14. Prepayments and Other Assets
Prepaid taxes
Input value added tax (VAT) – net
Deferred reinsurance premiums
Deferred acquisition costs
Others
2013
2012
P152,334,473
31,919,062
19,343,503
P123,804,836
26,810,136
12,629,931
10,440,431
21,979,995
P203,597,038
P195,665,329
Prepaid taxes are unutilized creditable withholding taxes, a portion of which was filed for refund with
the Bureau of Internal Revenue.
Input VAT amounting to P31.9 million and P26.8 million in 2013 and 2012, respectively, is net of
output VAT.
Deferred reinsurance premiums pertains to MAC’s unexpired portion of the related premiums ceded
out, which is recognized as an asset, until the lapse of the reinsurance agreement.
Deferred acquisition cost pertains to the commission expense that were paid to intermediaries
(agents/brokers), reduced by the commission earned by MAC in reinsurance by assuming business from
other insurance companies.
Others includes prepaid insurance, security deposits, accrued interest, loans due from employees,
other accounts receivables and initial investment made by the Parent Company to the Global City
project amounted to P2.95 million in 2013 for payment of the master plan design.
- 47 -
15. Real Estate Inventories
Real estate inventories at December 31 consist of the following:
Note
In progress:
The Icon Plaza
Andrea North Skyvillas Tower
Andrea North Showroom
Andrea North Estate
Others
16
19
Completed units:
Andrea North Skyline Tower
Andrea North Skyline Model Units
Casa Miguel
2013
2012
P323,898,559
307,995,360
30,079,689
6,065,098
P394,329,292
57,855,965
35,121,677
29,303,832
2,410,626
668,038,706
519,021,392
246,245,623
26,136,314
6,895,314
305,654,382
25,768,813
6,895,314
279,277,251
338,318,509
P947,315,957
P857,339,901
In February 2009, the Group resumed construction of Skyline Tower. Adjustments in cost estimate and
accounting for construction contracts were applied. Concurrent with the adoption of the percentage of
completion revenue recognition method, the change in cost estimate for sold units was taken up in the
books. Percentage of completion prior to resumption of construction in February 2009 was 34.74%.
The percentage of completion was already 100% as of December 31, 2011.
As disclosed in Note 16, the Group’s share on the saleable area of “The Icon Plaza” under joint venture
agreement with Xcell Property Ventures, Inc. is recorded as real estate inventories. A number of units of
The Icon Plaza were already sold during 2012. The percentage of completion of The Icon Plaza is
74.28% as of December 31, 2013.
Others includes initial cost of the Parent Company in the new project in La Union, which started in
2012 but was deferred in 2013, when the Parent Company decided to prioritize its ongoing Andrea
North project in New Manila.
16. Real Estate Held for Development
Details of real estate held for development as of December 31 are as follows:
At cost:
Land invested in joint venture
Land held for development
2013
2012
P710,864,983
188,653,713
P710,864,983
188,653,713
P899,518,696
P899,518,696
In February 2005, the Parent Company entered into a joint venture agreement with Next Properties,
Inc., renamed Xcell Property Ventures, Inc. (Xcell), for the development of twin-tower residential
condominium on two (2) of PRHC’s Fort Bonifacio lots to be called “The Icon Residences.” The Parent
Company contributed two (2) lots to the joint venture, namely lots 14-2A and 14-1, and in return will
receive twenty-percent (20%) of net sales or P804 million whichever is higher, plus 35% of the joint
venture’s pre-tax profits from the project.
- 48 -
Further, it was provided under the joint venture agreement that while construction of the project is ongoing, Xcell shall remit to the Parent Company the amount of not less than (i) P280,000,000 for lot 141 and (ii) P304,600,000 for lot 14-2A. Provided, however, that total remittance to the Parent Company
shall not be less than P20,000,000 per quarter starting in December 2005 for lot 14-2, and in June
2007 for lot 14-1.
In 2008, the Parent Company and Xcell entered into an amended joint venture agreement. The
agreement provides that all amounts remitted by Xcell shall be held in trust by the Parent Company,
which shall open a special trust account with the trust department of a commercial bank acceptable to
Xcell. The funds held in trust, as mandated by the rehabilitation plan, shall be utilized exclusively for
the completion of the Parent Company’s Andrea North Skyline Tower, construction of which resumed
in February 2009.
In July 2011, the Parent Company entered into another joint venture agreement with Xcell, for the
development of a residential/commercial condominium on the Parent Company’s Fort Bonifacio lot to
be called “The Icon Plaza.” The Parent Company contributed lot 9-4 to the joint venture and in return,
will receive twenty percent (20%) of the aggregate area of all the completed and saleable units of the
project, plus 35% of the joint venture’s pre-tax profits from the project. The Parent Company’s share on
the saleable area of “The Icon Plaza” is recorded as part of Real Estate Inventories with carrying
amount equal to the cost of the land as disclosed in Note 15.
In 2012, the Parent Company and Xcell made a clarification to the Joint Venture Agreement. It was
agreed that the Parent Company’s 35% share on the profit shall be taken entirely from the dividends
from Xcell.
Xcell shall be solely responsible for the construction of the two (2) condominiums over a period of five
(5) to six (6) years. The admission value of the property based on the joint venture proposal is more
than its cost.
Details of land invested in joint venture as of December 31 are as follows:
2013
The Icon Residences
Lot 14-2A
Lot 14-1
The Icon Plaza
Lot 9-4
P309,699,540
401,165,443
P710,864,983
Accumulated equity in net earnings (losses)
of joint venture
Balance at beginning of year
Equity during the year
-
Balance at end of year
P710,864,983
2012
P309,699,540
401,165,443
P710,864,983
13,057,642
(13,057,642)
P710,864,983
Land held for development at December 31, 2013 and 2012 pertains to the property located in New
Manila, Quezon City amounting to P188,653,713.
- 49 -
17. Investments in and Advances to Associates
Details of the ownership interest in associates are as follows:
Ownership Interest
2013
Le Cheval Holdings, Inc. (LCHI)
Alexandra (USA), Inc. (AUI)
Associate (2013); Subsidiary (2012)
2012
45%
45%
45%
45%
16.66%
86.66%
2013
2012
Details of investment in and advances to associates are as follows:
Meridian Assurance Corporation, 16.66% owned
Investment – Fair value at loss of control
P45,458,000
P -
Le Cheval Holdings, Inc., 45% owned
Investment - Acquisition cost
P11,250
P11,250
Accumulated equity in net income:
Equity in net loss for the year
211,417
(21,912)
189,505
215,511
(4,094)
211,417
P200,755
P222,667
P14,184,150
(14,184,150)
-
P14,184,150
(14,184,150)
-
132,417,765
(132,417,765)
132,417,765
(132,417,765)
Alexandra (USA), Inc., 45% owned
Investment - Acquisition cost
Allowance for impairment loss
Advances to AUI
Allowance for unrecoverable advances
P45,658,755
P222,667
In late 2011, AUI started the process of liquidation. The Group provided for an allowance for
impairment loss amounting to P87,587,528 in 2011 in addition to the P44,830,237 recognized in
2008 for advances to this affiliate that can no longer be recovered.
In December 2013, 70% of the total outstanding shares of the MAC held by the Parent Company were
sold. Loss on partial disposal of a subsidiary was recognized upon loss of control on MAC amounted to
P6,698,861. The remaining cost of the investment in MAC amounting to P45,458,000 was reclassified
to investment in associates in 2013.
Other than as indicated above, the Group believes that there is no indication of impairment on its
investments in and advances to associates.
- 50 -
Aggregated amounts relating to associates are as follows:
2013
2012
P390,436,686
120,038,158
P382,815,201
148,622,680
270,398,528
234,192,521
Income
Cost and expenses
79,370,835
(76,410,426)
100,765,250
(83,850,629)
Net profit
P2,960,409
P16,914,621
P93,822
47,697
P106,019
11,200
Net assets
46,125
94,819
Income
Cost and expenses
519
(49,213)
3,423
(12,520)
(P48,694)
(P9,097)
Total assets
Total liabilities
Net assets
Total assets
Total liabilities
Net loss
Total assets
Total liabilities
P -
P -
Net assets
-
-
Income
Cost and expenses
-
-
P -
P -
Net loss
The following are the principal activities of the Group’s Associates:
Pasig City. Aside from its head office in Metro Manila, it maintains offices in the cities of Cebu and
Davao.
- 51 -
Le Cheval Holdings, Inc.
LCHI was incorporated and registered with the SEC on August 30, 1994 as a holding company and
commenced operations as such by acquiring the majority outstanding shares of stock of Philippine
Racing Club, Inc. (PRCI). In 1996, LCHI sold its shares of stock with PRCI. Thereafter, LCHI became
inactive.
Alexandra (USA), Inc.
AUI was incorporated in the United States of America (USA). AUI is involved in property development
in Florida, USA. AUI is jointly owned with GPI (45%) and Warrenton Enterprises Corporation (10%) of
William Cu-Unjieng. AUI is in the process of liquidation after the completion of the projects in Naples
and Orlando.
18. Investment in Joint Venture
Tagaytay Joint Venture
The Parent Company owns 85% of Tagaytay Joint Venture as of December 31, 2013 and 2012.
The project is a joint arrangement wherein the Parent Company and another joint venturer
unanimously decide on the relevant activities of the project. A parcel of land with an area of 39,975
square meters located in Iruhin West, Tagaytay City was purchased at a cost of P60.4 million
exclusively for the development in relation to the arrangement. A residential subdivision will be
developed on the said parcel of land. In 1997, the said project was on its planning stage and recorded
construction-in-progress consists primarily of payments for architectural designs. In 1998, the project
was put on hold.
Additional investment made by the Parent Company to the joint venture amounted to P70,000 in 2013
and P50,000 in 2012 for the upkeep of the property. The Parent Company’s investment in the project
amounted to P60.21 million and P60.14 million in 2013 and 2012, respectively, as shown in the
The Parent Company believes that there is no indication of impairment on its investment in joint
venture.
- 52 -
19. Property and Equipment
A reconciliation of the carrying amounts of property and equipment, the gross carrying amounts, and accumulated depreciation and amortization of property
and equipment are shown below:
Cost
January 1, 2012
Additions
Disposals/Adjustments
Revaluation increase
121,447,897
P116,405,439
283,034
4,759,424
Condominium
Units and
Building
Improvements
21,639,188
P21,547,672
257,918
(166,402)
-
Office Furniture,
Fixtures and
Equipment
8,551,960
P8,432,790
119,170
-
Machinery and
Equipment
19,538,030
P17,883,424
2,011,749
(357,143)
-
Transportation
and Other
Equipment
6,948,752
P6,498,886
449,866
-
Leasehold and
Office
Improvements
4,706,780
65,344,610
(689,638)
(73,728,267)
178,125,827
P170,768,211
3,121,737
(523,545)
4,759,424
Total
For the Years Ended December 31, 2013 and 2012
December 31, 2012
(4,722,479)
173,759,312
2,929,894
(4,818,056)
2,226,273
104,515,290
536,684
(9,088,644)
17,649,868
5,750,258
8,191,344
2,355,413
(303,308)
222,853
(332,495)
(3,809,465)
10,588,128
100,536
-
114,758,739
1,017,349
65,344,610
(357,143)
(51,289,623)
8,215,211
2,633,111
(136,906)
5,850,794
Additions
Reclassification
Disposals/Adjustments
Effects of deconsolidation
20,381,958
91,735
-
13,084,333
-
59,579,735
376,917
(166,402)
8,306,946
17,720,081
4,989,045
2,355,413
-
20,592,473
136,163,090
66,924,193
December 31, 2013
Accumulated Depreciation and
Amortization
January 1, 2012
Provision
Cost
Revaluation
Disposals
December 31, 2012
Forward
- 53 -
48,738,866
P4,759,533
3,375,289
(26,320,149)
Condominium
Units and
Building
Improvements
P1,046,715
17,129,469
P404,315
(316,242)
(3,551,077)
Office Furniture,
Fixtures and
Equipment
Carrying Amounts
P107,271
(8,414,217)
Machinery and
Equipment
P6,453,697
12,097,519
P2,675,842
(216,633)
(3,446,023)
Transportation
and Other
Equipment
P924,978
P1,097,958
1,301,295
P128,654
(4,678,153)
Leasehold and
Office
Improvements
P94,492,163
P63,367,088
79,267,149
P8,075,615
3,375,289
(532,875)
(46,409,619)
Total
P -
P245,014
-
P5,552,349
For the Years Ended December 31, 2013 and 2012
P54,523,704
P590,612
Provision
Cost
Revaluation
Disposals
Effects of deconsolidation
At December 31, 2012
P87,424,224
December 31, 2013
At December 31, 2013
Properties were reclassified to property and equipment from real estate inventories because of the Group’s change in use of these properties, which is to use
them for the Group’s operations (See Note 15).
Fully depreciated property and equipment still in use and included in the foregoing balances amounting to P43,249,868 and P41,869,084 as of December
31, 2013 and 2012, respectively.
The Group believes that there is no indication of impairment on its property and equipment.
- 54 -
20. Investment Properties
Land
San Fernando, La Union
San Juan, La Union
Ivy League (Malate, Manila)
Condominium units
PSE Tower I
PSE Tower II
PPMI condo unit
Land Improvements
2013
2012
P33,859,578
15,110,392
-
P33,859,578
15,110,392
51,719,941
P48,969,970
100,689,911
194,761,973
49,239,137
13,238,946
194,761,973
49,239,137
13,238,946
257,240,056
257,240,056
-
50,238,244
Accumulated Depreciation
257,240,056
(30,272,387)
307,478,300
(21,513,292)
Carrying amount, December 31
226,967,669
285,965,008
P275,937,639
P386,654,919
Land improvements pertain to the cost of excavation and pile driving works which was discontinued
when the land was restored to be able to use the property temporarily as parking lot.
The movements of investment properties are summarized as follows:
Note
2013
P386,654,919
(98,118,086)
(12,599,194)
2012
P400,371,995
(147,152)
(13,569,924)
P275,937,639
P386,654,919
2013
2012
Balance, beginning
Provision
Disposal
P21,513,292
12,599,194
3,840,099
P7,943,368
13,569,924
-
Balance, end
P30,272,387
P21,513,292
Balance, beginning
Sale of investment property
Depreciation
36
Balance, end
The movements of accumulated depreciation are as follows:
In 2013, the Parent Company sold Ivy League and improvements thereon for a consideration of
P151.79 million. Gain on sale of Ivy League amounted to P53.67 million.
- 55 -
The aggregate fair values of the investment properties as of December 31 are as follows:
Land
San Juan, La Union
Condominium units
PSE Tower I
PSE Tower II
PPMI condominium unit
2013
2012
P121,856,000
80,268,000
202,124,000
P121,856,000
80,268,000
92,512,000
294,636,000
291,970,675
85,249,000
12,420,000
389,639,675
291,970,675
85,249,000
12,420,000
389,639,675
Land improvements
P591,763,675
78,795,000
P763,070,675
The Group used the cost method in accounting for its investment properties.
Total revenue from the investment properties amounted to P27.0 million, P23.5 million and P23.2
million in 2013, 2012 and 2011, respectively, and are included as part of rent income in the
consolidated statements of income. Real property taxes attributable to investment properties amounted
to P6,422,595, P6,887,470 and P8,796,224 for 2013, 2012 and 2011, respectively and are included as
part of the general and administrative expenses. Total depreciation expense charged to profit and loss
amounted to P8,759,095, P13,569,924 and P1,317,936 in 2013, 2012 and 2011, respectively.
The Group believes that there is no indication of impairment on its investment properties as of
December 31, 2013 and 2012.
21. Trade and Other Payables
Note
Retention fee payable
Accounts payable - others
Customers’ deposits
Accrued expenses
Refundable deposits
Due to insurance companies
Accounts payable - trade
SSS and other contributions
Refunds payable
Income tax payable
Withholding and other taxes
Commission
Unearned rent income
Claims payable
Due to reinsurers and ceding companies
33
2013
2012
P43,585,684
19,124,984
16,789,205
16,253,532
7,600,003
3,813,126
3,324,799
3,231,352
1,181,917
1,030,628
480,256
221,190
23,100
-
P52,126,497
48,209,749
34,483,703
142,401,105
6,879,494
2,950,931
16,717,315
5,119,650
787,254
160,922
3,105,930
3,038,012
34,895,150
6,313,469
P116,659,776
P357,189,181
Retention fee payable is composed of retention fee from the contractors of Andrea North Skyline
Project.
- 56 -
Customers’ deposits consist of downpayments representing less than 25% of the contract price of the
condominium unit sold received from customers which are deductible from the total contract price.
Accrued expenses consist of unpaid liabilities on outside services, insurance, supplies and other
miscellaneous expenses.
The Group believes that the carrying amounts of the trade and other payables approximate fair values.
22. Unearned Income
In 2012, the Group started selling units of The Icon Plaza which is the project under joint venture
agreement with Xcell Ventures Property, Inc., as disclosed in Note 16. The percentage of completion of
The Icon Plaza as of December 31, 2013 is 74.28%.
The Group has an on-going project called the Andrea North Skyvillas Tower (“Skyvillas”). Skyvillas
started construction in 2011 and is 18.31% and 12.16% complete as of December 31, 2013 and 2012,
respectively.
Details of unearned income are as follows:
The Icon Plaza
Total sales value of completed units
Percentage uncompleted
Total Unearned Revenue
2013
2012
P289,560,735
25.72%
P270,542,879
53.00%
P74,475,021
P143,387,726
23. Funds Held in Trust
As disclosed in Note 16, the joint venture between the Parent Company and Xcell provided an
agreement that all amounts remitted by Xcell shall be held in trust by the Parent Company and shall be
utilized exclusively for the completion of the Parent Company’s Andrea North Skyline Tower, as
mandated by the rehabilitation plan. Funds held in trust amounted to P653 million in 2013 and 2012.
24. Unearned Premiums
The details of this account are as follows:
2013
Fire
Motor car
Bonds
Marine
Others
2012
P -
P16,445,167
16,057,797
7,658,454
117,816
9,375,973
P -
P49,655,207
This account pertains to premiums received which relate to subsequent accounting periods.
- 57 -
25. Retirement Benefit Plans
The Group, except for PPMI which has an unfunded, non-contributory defined benefit retirement plan,
operates a funded, non-contributory defined benefit retirement plans covering substantially all of their
regular employees. The plans are administered by local banks as trustee and provide for a lump-sum
benefit payment upon retirement. The benefits are based on the employees’ monthly salary at retirement
date multiplied by years of credited service. No other post-retirement benefits are provided.
Through its defined benefit retirement plans, the Group is exposed to a number of risks, the most
significant of which are detailed below:

Asset volatility - The plan liabilities are calculated using a discount rate set with reference to
corporate bond yields; if plan assets underperform this yield, this will create a deficit.

Inflation risk - Some of the Group retirement obligations are linked to inflation, and higher inflation
will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are
in place to protect the plan against extreme inflation). The majority of the plans’ assets are either
unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an
increase in inflation will also increase the deficit.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation
were performed as of December 31, 2013 by independent actuaries. The present values of the defined
benefit obligations, the related current service costs and past service costs were measured using the
projected unit credit method.
Key assumptions used for the Parent Company:
Valuation at
2013
5.10%
8.00%
Discount rate
Future salary increase
2012
5.80%
7.80%
Key assumptions used for PPMI:
Valuation at
2013
5.32%
6.00%
Discount rate
2012
6.00%
6.00%
Key assumptions used for TIBI:
Valuation at
2013
3.55%
4.00%
Discount rate
2012
4.97%
4.00%
Assumptions regarding future mortality and disability are set based on actuarial advice in accordance
with published statistics and experience.
- 58 -
The reconciliation of the present value of the defined benefit obligation (PVO) and the fair value of the
plan assets to the recognized liability presented as accrued retirement liability in the consolidated
statements of financial position is as follows:
2013
2012
Present value of defined benefit obligation
Fair value of plan assets
P77,473,940
9,113,092
P67,211,273
13,500,862
Recognized liability
P68,360,848
P53,710,411
The movements in the present value of defined benefit obligation are shown below:
2013
2012
Liability at beginning of year
Current service cost
Interest cost
Benefits paid
Remeasurement losses
Changes based on experience
Changes in financial assumptions
Changes in demographic assumptions
P67,211,273
6,406,947
3,816,110
(2,935,391)
P60,087,530
3,106,768
5,231,206
(6,461,000)
12,022,341
5,097,467
(14,144,807)
3,827,429
2,865,492
(1,446,152)
-
Liability at end of year
P77,473,940
P67,211,273
The movements in the plan assets are shown below:
Fair value of plan assets at beginning of year
Interest income
Contributions of the employers to the plans
Benefits paid/ payable
Remeasurement gain
Return on plan assets, excluding amounts included in
interest income
Fair value of plan assets at end of year
2013
2012
P13,500,862
742,698
6,190,441
(2,614,441)
P10,075,056
597,625
8,951,231
(6,269,000)
852,004
(9,558,472)
145,950
-
P9,113,092
P13,500,862
The major category of plan assets as a percentage of the fair value of total plan assets as of
December 31, 2013 and 2012 are as follows:
2013
2012
78%
22%
100%
-
100%
100%
2013
2012
2011
P5,698,054
3,016,861
P2,587,816
4,398,890
P2,608,477
4,034,100
P8,714,915
P6,986,706
P6,642,577
Equity instruments
The retirement expense recognized in profit or loss consists of:
Net interest on defined benefit liability
- 59 -
The retirement expense is recognized as part of employees’ benefits under operating expenses in the
consolidated statements of income.
The sensitivity analysis of the defined benefit obligation is:
Increase (decrease) in basis points
Effect on defined benefit obligation
+100
-100
+100
-100
P869,338
(665,345)
3,416,697
(P3,264,319)
Discount rate
The above sensitivity analyses are based on changes in principal assumption while holding all other
assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions
may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method (present value of the defined benefit obligation calculated
with the projected unit credit method at the end of the reporting period) has been applied as when
calculating the retirement liability recognized in the consolidated statements of financial position.
26. Related Party Transactions
The details of related party transactions and balances are as follows:
As at and for the year ended
December 31, 2013:
Outstanding
balance
Transactions
Trade receivables
Sale of real estate inventories
GPI
P -
P160,996,500
Sale of services
GPI
P1,926,591
P -
Advances
Alexandra (USA), Inc.,
Associate
P -
P132,417,765
Less: Allowance for
impairment loss
-
(132,417,765)
Balance, net
-
Terms and conditions
Sales of condominium units are
based on the price list in force
and terms that would be available
to third parties. The receivables
are secured, and are payable in
two (2) years.
Sales of services are negotiated
with related parties on a cost-plus
basis.
Advances are unsecured and
non-interest bearing advances
with no fixed term.
-
Key management personnel
Key
management
includes
directors (executive and nonexecutive).
Short-term benefits
Salaries and other shortterm employee benefits
P22,497,328
Termination benefits
Provision for retirement
benefits/PVO
5,998,012
46,828,213
Advances from an officer
1,500,000
1,500,000
- 60 -
P -
Advances from an officer is a
non- interest bearing, unsecured
and payable within one year from
demand.
December 31, 2012:
Outstanding
balance
Transactions
Trade receivables
P191,662,500
P160,996,500
Sale of services
P -
P1,474,862
Advances
Associate
P -
P132,417,765
Less: Allowance for
impairment loss
-
(132,417,765)
Balance, net
-
Sales of services are negotiated
basis.
Advances are unsecured and
non-interest bearing advances
with no fixed term.
Key
management
includes
directors (executive and nonexecutive).
Short-term benefits
Provision for Retirement
benefits/PVO
Sales of condominium units are
based on the price list in force
and terms that would be available
to third parties. The receivables
are secured, and are payable in
two (2) years.
-
P18,779,797
4,185,805
P -
39,716,121
Management Services
The Group provides general management services and financial management and supervision over the
janitorial and security services for the efficient administration of the properties of GPI, the ultimate
parent company, and third parties, collectively referred herein as property owners. In consideration for
said services, the Group charges the property owners a fixed monthly amount, with a 10% escalation
rate annually. These management contracts are renewable for a period of two (2) to three (3) years
upon mutual agreement of both the Group and the property owners.
The Parent Company also sold 2 floors of Icon Plaza to Greenhills Properties, Inc., a principal
shareholder, amounting to P191,662,500.
Advances to (from) related parties
The Parent Company’s substantial receivables from AUI, an associate, which is intended to fund the
latter’s working capital requirement, represents non-interest bearing advances with no fixed term with
the option to convert to equity in case of increase in capital. Advances contributed by AUI’s
stockholders were in accordance with the percentage of ownership of the stockholders in AUI.
Outstanding receivables amounted to P132.42 million in 2013 and 2012, and is included as part of
advances to associates as disclosed in Note 17. The Parent Company has provided an allowance for
unrecoverable advances totaling to P132,417,765 as of December 31, 2013 and 2012.
- 61 -
27. Contingencies
Parent Company
The Parent Company has a lawsuit pending decision by the Supreme Court, as follows:
In 1998, the Parent Company sued Universal Leisure Corporation (ULC) for failing to pay the
remaining sales price of condominium units. ULC bought several condominium units under two
Contracts to Sell. After paying the down payment, ULC refused to pay the balance due in the principal
sums of P32.5 million and P32.4 million. In February 2004, a decision was rendered in favor of the
defendant on the account that ULC is an assignee of receivables from DMCI Project Developers, Inc.
(DMCI), Universal Rightfield Property Holdings, Inc. (URPHI). These receivables are allegedly owed by
the Parent Company to DMCI and URPHI as a result of cancellation of a joint venture agreement in
1996 entered into by the Parent Company, DMCI and URPHI. The Parent Company was ordered to
deliver to ULC the titles of the condominium units and return to ULC, as assignee of defendants DMCI
and URPHI, the amount of P24.7 million and pay attorney’s fees of P600,000. The Parent Company
appealed the decision to the Court of Appeals which affirmed the trial court’s decision. During 2011,
the Parent Company provided an allowance of P15,507,800 for accounts receivable that are deemed
not recoverable from ULC. In December 2012, the Parent Company filed a motion for Reconsideration
and the same was denied. Thereafter, the Parent Company filed a Petition for Review with the Supreme
Court where the matter is still pending as of reporting date.
In addition, the Parent Company is involved in certain claims and pending lawsuits arising in the
ordinary course of business which is either pending decision by the courts or under negotiation.
Subsidiaries
Certain subsidiaries are defendants or parties in various lawsuits and claims involving civil and labor
cases. In the opinion of the subsidiaries’ management, these lawsuits and claims, if decided adversely,
will not involve sums having material effect on the subsidiaries’ financial position or results of
operations.
Management believes that the final settlement, if any, of the foregoing lawsuits or claims would not
adversely affect the Group’s financial position or results of operations.
Accordingly, no provision has been made in the accounts for these lawsuits and claims.
28. Capital Stock
2013
2012
2011
Authorized:
8,000,000,000 common shares - P1 par
value
P8,000,000,000
P8,000,000,000
P8,000,000,000
Issued and outstanding:
3,688,735,980, 3,688,679,636 and
3,687,721,960 shares in 2013, 2012 and
2011;
3,688,735,980
3,688,679,636
3,687,721,960
Forward
- 62 -
2013
Subscribed:
1,314,845,027, 1,314,901,371 and
1,315,859,047 shares in 2013, 2012
and 2011
Subscriptions receivable
P1,314,845,027
(509,725,769)
805,119,258
2012
2011
P1,314,901,371 P1,315,859,047
(509,782,113)
(509,782,113)
805,119,258
806,076,934
114,751
114,751
114,751
P4,493,969,989
P4,493,913,645
P4,493,913,645
Additional paid-in capital
The Parent Company has one class of common shares which carry no right to fixed income.
29. Reserves
2013
2012
2011
P250,000,000
P250,000,000
P250,000,000
660,989
(660,989)
-
660,989
660,989
597,556
63,433
660,989
119,770,865
(198,605,518)
(374,982)
(79,209,635)
90,609,632
29,161,233
119,770,865
91,387,656
(778,024)
90,609,632
Remeasurement Loss on Accrued
Retirement Liability
Movements during the year - gross
Movements during the year - tax
(3,818,108)
(15,605,040)
4,681,512
1,431,524
(13,310,112)
(242,033)
(5,108,678)
1,532,603
(3,818,108)
8,558,471
6,988,430
(2,096,529)
13,450,372
Property revaluation
Movements during the year - gross
Movements during the year - tax
15,115,156
(3,061,079)
918,324
(10,592,598)
2,379,803
13,450,372
2,378,264
(713,480)
15,115,156
4,566,878
(6,869,873)
2,060,962
P159,860,056
P381,728,902
P354,478,960
Appropriated retained earnings for:
Treasury stock acquisition
Catastrophe loss
Movements during the year
Unrealized holding gain on valuation of
AFS investments
(242,033)
The Group’s appropriated retained earnings amounting to P250,000,000 was allocated for the Parent
Company’s treasury stock acquisitions. The appropriation for catastrophe loss reserve of MAC was in
compliance with the Insurance Commission regulation. MAC is required to secure 100% of their
premiums retained for insurance policies of earthquake, typhoon and flood. The basis of the current
year reserve is the previous year premiums retained.
- 63 -
Details of reserves for unrealized holding gain on valuation of AFS investments follows:
Unrealized holding gain on AFS
Minority interest
2013
2012
2011
(P79,234,197)
-
P119,770,865
-
P90,405,732
203,900
(P79,234,197)
P119,770,865
P90,609,632
2013
2012
2011
P25,889,281
4,665,800
394,919
P21,142,481
2,270,606
2,256,410
16,670,566
3,335,000
1,009,631
219,948
(31,169,948)
219,784
-
127,284
-
25,889,281
21,142,481
(203,900)
203,900
-
(92,713)
(111,187)
-
30. Minority Interest
MAC
January 1
Share in increase of capital
Share in net income
Share in the realization of revaluation
of property and equipment
-
December 31
Share in reserves
Unrealized holding gain (loss) on valuation of AFS investments
January 1
57,723
Unrealized holding gain
(57,723)
-
December 31
Property revaluation
January 1
1,850,601
(219,948)
(1,630,653)
1,317,335
753,050
-
1,850,601
2,070,385
435,462
9,804
-
435,462
-
-
445,266
435,462
-
28,185,148
23,444,428
Remeasurement gain (loss) on accrued retirement liability
445,266
January 1
(291,760)
(153,506)
December 31
(203,900)
2,070,385
(219,784)
-
-
December 31
-
UTC
January 1
Share in net loss
1,508,496
(186,637)
1,729,190
(220,694)
1,972,570
(243,380)
December 31
1,321,859
1,508,496
1,729,190
Share in reserves
Unrealized holding gain (loss) on valuation of AFS investments
(5,962,151)
January 1
(6,110)
Unrealized holding loss
(5,423,361)
(538,790)
(3,730,124)
(1,693,237)
(5,968,261)
(5,962,151)
(5,423,361)
(4,646,402)
(4,453,655)
(3,694,171)
(P4,646,402)
P23,731,493
P19,750,257
December 31
- 64 -
31. Management fees
The Group provides general management services and financial management and supervision over the
janitorial and security services thru PPMI. In consideration for the said services, the Group charges the
property owners a fixed monthly amount with a 10% escalation rate annually. These management
contracts are renewable for a period of two (2) to three (3) years upon mutual agreement of both PPMI
and the property owners. The Group is entitled to fixed reimbursement of actual cost of the on-site
staff. The total income from management fees amounted to P25.0 million, P23.4 million and P20.8
million in 2013, 2012 and 2011, respectively.
32. Commission
The Group’s commission income was derived from the following activities:
Insurance brokerage
Property management
Others
2013
2012
2011
P3,687,171
1,322,062
633,683
P5,005,968
1,511,700
498,715
P4,042,507
1,196,437
692,760
P5,642,916
P7,016,383
P5,931,704
33. Leases
The Group as lessor
The Group leases various condominium units to various lessees. The minimum guaranteed rentals
under such leases for the next five (5) years are as follows:
Not later than one year
Later than one year but not later than five years
2013
2012
P8,304,919
5,500
P16,266,135
6,779,364
P8,310,419
P23,045,499
The rental income earned by the Group during 2013, 2012 and 2011 amounted to P26.99 million, to
P23.62 million and P23.25 million, respectively. Refundable deposits on these lease agreements
amounted to P7,600,003 and P6,879,494 in 2013 and 2012, respectively, and is included as part of
trade and other payables as disclosed in Note 21.
The Group as lessee
The Group leases various office space and storage facilities from affiliated companies and third parties.
Total rent expense charged to operations amounted to P879,930, P892,068 and nil in 2013, 2012 and
2011, respectively.
34. Interest Income
The Group’s interest income was derived from the following:
Trade receivables
Others
Note
9
2013
2012
2011
P5,611,475
17,998,867
4,924,323
P11,555,450
13,942,996
3,126,250
P7,865,690
580,690
12,928,184
P28,534,665
P28,624,696
P21,374,564
- 65 -
35. Other Income
The account consists of:
Note
Reversal of various payables and
accruals
Dividend income
Unrealized foreign exchange gain
Holding gain (loss) on trading
investments
Refunds from electric company
Reversal of allowance for decline
in value of land held for
development
Miscellaneous
11
2013
2012
2011
P39,840,584
36,632
735,089
P7,409,073
179,954
250,484
P1,869,616
259
5,468,292
(713,206)
-
(285,282)
164,371
427,923
1,085,288
373,516
352,140
53,499,445
387,298
P40,272,615
P8,070,740
P62,738,121
10
Included in reversal of various payables in 2013 and 2012 is an adjustment on interest computation on
accrued settlement expense amounting to P39.65 million and P5.19 million, respectively.
36. General and Administrative Expenses
Note
Salaries, wages, and benefits
Investment property
Taxes and licenses
Professional fees
Condominium dues
Transportation and travel
SSS, pag-ibig, medicare and other
benefits
Utilities
Selling expense
Insurance and bond premiums
Outside services
Rent expense
Commission Expense
Supplies and materials
Postage and communication
Repairs and maintenance
Corporate social responsibility
expenses
Membership dues
Representation and entertainment
2013
2012
2011
P40,680,121
P33,981,091
P32,359,876
12,599,194
7,061,131
18,988,864
12,723,215
8,825,203
8,714,915
8,580,196
13,569,924
6,290,582
17,340,954
9,590,550
13,336,588
6,986,706
6,234,325
8,408,427
26,781,432
14,430,401
7,167,176
6,642,577
6,018,236
4,569,062
2,609,412
2,483,673
2,355,347
2,216,945
879,930
730,352
777,848
678,083
618,169
4,205,321
3,369,204
8,718,571
2,004,377
2,108,240
892,068
644,816
532,753
833,805
1,220,634
1,356,249
3,812,202
10,847,569
3,156,088
2,347,266
466,631
811,023
579,342
518,201
317,158
251,312
205,270
208,824
184,812
229,807
416,499
217,129
25
33
Forward
- 66 -
Note
Fringe benefit tax
Advertising and promotions
Provision for impairment loss on
receivables
Impairment loss on investments
in and advances to associates
Miscellaneous
2013
2012
2011
P9,541
-
P7,156
-
P7,156
7,400
-
17
-
15,507,800
2,279,543
7,023,892
101,774,677
7,636,978
P139,154,484
P139,515,000
P251,270,335
Miscellaneous expenses include PSE fees, trainings and seminars, donations and contributions, and
various petty expenses.
37. Other Expenses
Settlement expenses
Foreign exchange loss
Others
2013
2012
2011
P7,751,825
91,297
P 917,354
32,664
P112,752,457
5,289,951
31,336
P7,843,122
P950,018
P118,073,744
In 1996, a certain contractor for one of the projects undertaken filed a complaint against the Parent
Company for alleged escalation costs, unpaid costs of construction and exemplary damages. The
Parent Company filed an answer with counterclaim representing liquidated damages for delay in
construction, overpayment and exemplary damages. On January 31, 2001, the Regional Trial Court
(RTC) issued an order to the Parent Company to pay the said contractor. The Parent Company
appealed the decision to the Court of Appeals which reversed the RTC decision. On June 13, 2011, the
Supreme Court promulgated a decision directing the Parent Company to pay P112,752,457, inclusive
of interest. This case was settled in 2013.
In 2013, the Parent Company was ordered by the Housing and Land Use Regulatory Board (HLURB) to
pay the damages amounting P 7.75 million to the buyers of condominium units of Andrea Project who
filed cases for rescission of their respective contracts to sell. The Parent Company already paid the
amount during 2013.
38. Income Taxes
The components of income tax expense (benefit) are as follows:
Current
Deferred
2013
2012
2011
P5,026,475
(870,207)
P3,932,364
373,329
P3,103,870
(313,565)
P4,156,268
P4,305,693
P2,790,305
- 67 -
A reconciliation between tax expense (benefit) and the product of accounting income (loss) multiplied
by 30% in 2013, 2012 and 2011 follow:
Income (Loss) before income tax
Income tax expense (benefit)
Additions to (reductions in) income tax
resulting from the tax effects of:
Equity in net loss (income) of joint
venture and associates
Other non-deductible expenses
Unrecognized deferred tax assets
Recovery of unrecognized deferred tax
assets
Unrealized gain on trading investments
Expiration of MCIT
Dividend income
Gain on sale of listed shares of stocks
Interest income subjected to final tax
Impairment loss on investments in
associates
Non-taxable sales
Non-deductible cost of sales
2013
2012
P38,681,962
(P7,519,735)
(P214,304,008)
11,604,589
(2,255,921)
(64,291,202)
446,045
-
3,917,293
1,232,291
9,608,219
2,176,331
920,585
59,263,239
(8,455,045)
213,962
27,148
(10,990)
2,009,658
(1,679,099)
85,585
23,680
(160,004)
(1,323,313)
(2,021,204)
(4,800,933)
P4,156,268
P4,305,693
2011
(128,377)
21,810
(229,881)
(6,064)
(3,530,887)
5,972,084
(12,088,423)
14,711,090
P2,790,305
Under Republic Act No. 8424, the Group is subject to either the 30% regular income tax or 2%
minimum corporate income tax (MCIT), whichever is higher. The excess MCIT over the regular income
tax shall be carried forward and applied against the regular income tax due for the next three
consecutive taxable years.
The details of the Group’s MCIT are as follows:
Year Incurred
Expiry
date
Amount
Applied/Expired
Effect of
deconsolidation
Balance
2013
2012
2011
2010
2016
2015
2014
2013
P3,026,439
2,720,727
1,842,312
474,088
P (474,088)
P (415,092)
(314,421)
-
P3,026,439
2,305,635
1,527,891
-
P8,063,566
(P474,088)
(P729,513)
P6,859,965
The details of the Group’s NOLCO are as follows:
Year
Incurred
Expiry
date
Amount
Applied/Expired
Effect of
deconsolidation
Balance
2013
2012
2011
2010
2016
2015
2014
2013
P2,933,513
7,871,583
157,542,043
173,817,437
P (173,817,437)
P (3,060,073)
-
P2,933,513
4,811,510
157,542,043
-
P342,164,576
(P173,817,437)
(P3,060,073)
P165,287,066
- 68 -
The components of the net deferred income tax assets and liabilities recognized by the Group are as
follows:
2013
Deferred tax assets:
benefits
Unearned premiums
Impairment loss on
receivables
Accrued other long-term
employee benefits
Unearned rental income
Unrealized foreign
exchange loss
NOLCO
MCIT
Deferred tax liabilities:
Deferred acquisition
costs
Deferred rent income
Unrealized foreign
exchange gain
Revaluation surplus
2012
Tax Base
Deferred Tax
Tax Base
Deferred Tax
P64,022,607
-
P19,206,782
-
P49,326,350
8,693,617
P14,797,905
2,608,085
-
-
1,881,460
564,438
-
-
3,077,687
-
923,306
-
-
-
93,963
918,023
3,947,730
28,189
275,407
1,184,319
64,022,607
19,206,782
67,938,830
20,381,649
1,656,623
496,987
10,440,431
1,656,623
3,132,128
496,987
735,090
3,399,587
220,527
1,019,876
475,113
24,236,663
142,535
7,270,999
5,791,300
1,737,390
36,808,830
11,042,649
P58,231,307
P17,469,392
P31,130,000
P9,339,000
The recognized deferred tax assets were from the Parent Company, MAC and PPMI.
The Managements of the Parent Company, MAC and PPMI have evaluated the available evidence
about future taxable income and other possible sources of realization of the recognized deferred tax
assets, and consequently believe that the deferred tax assets are fully realizable in the future.
The components of the deferred income tax assets not recognized by the Group are as follows:
2013
Allowance for doubtful
accounts
Allowance for impairment
loss on investment in and
advances to associates
Accrued retirement benefit
expense
Unrealized foreign
exchange loss
MCIT
NOLCO
2012
Tax Base
Deferred Tax
Tax Base
Deferred Tax
P37,419,257
P11,225,777
P37,419,257
P11,225,777
163,486,933
49,046,080
163,486,933
49,046,080
4,361,340
1,308,402
4,384,873
1,315,462
152,485,420
6,802,560
45,745,626
917,353
322,118,810
275,206
3,803,268
96,635,643
P357,752,950
P114,128,445
P528,327,226
P162,301,436
- 69 -
The deferred tax assets not recognized were from the Parent Company, TIBI and UTC, this was due to
their limited capacity to take full advantage of the tax benefit.
39. Income (Loss) Per Share
2013
2012
2011
P39,138,234
P2,183,428
(P213,367,282)
4,877,907,002
4,877,907,002
4,877,907,002
P0.01
P0.00
(P0.04)
2013
2012
2012
Issued and outstanding shares
Subscribed shares
Treasury shares
3,688,735,980
1,314,845,027
(125,674,005)
3,688,679,636
1,314,901,371
(125,674,005)
3,688,679,636
1,314,901,371
(125,674,005)
Average number of shares
4,877,907,002
4,877,907,002
4,877,907,002
Net income (loss) attributable to equity
holders of Parent Company
Weighted average no. of common shares
issued and outstanding
Income (Loss) per share
The weighted average number of common shares was computed as follows:
The Group has no potential dilutive shares.
40. Restatement
During the year, the Group adopted the revision to PAS 19 which is effective beginning January 1,
2013. As discussed in Note 3, the revision eliminate the corridor approach and require the recognition
of all of the Group’s unrecognized actuarial losses and past service cost immediately.
In effecting the restatement, the Group adjusted the amounts reported previously in the consolidated
financial statements as at the beginning of the earliest period presented.
The effects of such restatement on remeasurement losses on accrued retirement liability,
unappropriated retained earnings, net income (loss) and total equity are summarized in the tables
below:
2012
Remeasurement
loss on accrued
retirement liability
As previously reported
Effect of restatement
Adoption of amendments to
PAS 19
Deferred tax effect
As restated
Deficit
Net income
Total equity
(P1,817,642,318)
P4,687,519
P2,921,741,809
(5,454,440)
1,636,332
3,257,481
(977,244)
(669,107)
200,732
(1,591,064)
477,319
(P3,818,108)
(P1,815,362,081)
P4,219,144
P2,920,628,064
P -
- 70 -
2011
Remeasurement
loss on accrued
P -
PAS 19
Deferred tax effect
As restated
Deficit
Net loss
Total equity
(P1,821,942,766)
(P213,015,261)
P2,882,625,581
(345,761)
103,728
3,900,401
(1,170,120)
591,757
(177,527)
4,172,715
(1,251,814)
(P242,033)
(P1,819,212,485)
(P212,601,031)
P2,885,546,482
The effects of this restatement on total assets and total liabilities are summarized in the table below:
2012
2011
Total assets
Total liabilities
Total assets
Total liabilities
Early adoption of
amendments to PAS 19
Deferred tax effect
P4,181,251,383
P1,259,509,574
P3,966,845,841
P1,084,220,260
80,456
1,194,201
-
(1,269,649)
(4,190,550)
-
As restated
P4,181,331,839
P1,260,703,775
P3,965,576,192
P1,080,029,710
41. Note to Consolidated Cash Flows
2013
Net proceeds from sale of subsidiary
P13,833,110
The following are the details of the net proceeds from sale of subsidiary:
Aggregate net assets disposed/ derecognized at date of disposal
( excluding cash and cash equivalents):
Held-for-maturity investments
Trade and other receivables - net
Prepayments and other current assets - net
Property and equipment - net
Goodwill
Unearned premiums
Deferred tax liabilities
Minority interest
Reserves
Retained earnings
Less: Investments retained subsequent to disposal or derecognition
P14,491,634
23,480,825
65,536,370
55,145,991
27,296,328
27,318,648
5,374,610
(66,925,107)
(45,005,863)
(4,586,335)
(1,542,664)
(1,978,189)
(33,011,830)
(10,197,045)
10,592,598
65,989,971
(6,698,861)
59,291,110
(45,458,000)
P13,833,110
- 71 -
Satisfied by:
Cash and cash equivalents received as consideration
Less: Cash and cash equivalents sold
Total net cash consideration
P191,000,000
(177,166,890)
P13,833,110
42. Events after the Reporting Date
On March 18, 2014, as recommended by the Rehabilitation Receiver, the Parent Company’s Motion to
Terminate Rehabilitation Proceeding on the Account of the Successful Implementation of the
Rehabilitation Plan was granted. Accordingly, the Stay Order issued in this case was lifted. As a result,
the Parent Company can now freely use its properties to obtain funds for their development without
requesting for the approval of the Receiver (See Note 1 for the details of the Rehabilitation Plan).
- 72 -
SEPARATE FINANCIAL STATEMENTS
December 31, 2013 and 2012 and January 1, 2012
SEPARATE STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2013 AND 2012 AND JANUARY 1, 2012
Note
December 31,
2013
December 31,
2012
(As Restated,
Note 35 )
January 1,
2012
(As Restated,
Note 35 )
5,7
P336,162,652
P411,919,783
P294,381,952
5,8
5,9
5,10
11
12
10,601,312
99,351,157
625,231,669
179,218,836
949,582,969
11,314,518
298,304,688
683,703,660
144,676,826
859,606,913
11,599,800
274,507,655
358,094,693
174,408,823
581,652,362
2,200,148,595
2,409,526,388
1,694,645,285
19,100,000
45,469,250
21,280,381
899,518,696
60,212,943
271,965,955
83,122,755
15,474,123
144,885,375
11,250
21,280,381
899,518,696
60,142,943
365,142,112
20,976,143
11,356,015
130,123,081
11,250
21,285,565
1,415,820,583
60,092,943
394,929,265
25,090,936
11,260,746
1,416,144,103
1,523,312,915
2,058,614,369
P3,616,292,698
P3,932,839,303
P3,753,259,654
P11,974,619
74,475,021
653,087,170
P19,916,803
143,387,726
653,087,170
P61,342,749
639,203,605
739,536,810
816,391,699
700,546,354
94,820,504
53,972,123
248,107,424
39,760,492
210,984,802
39,583,726
148,792,627
287,867,916
250,568,528
888,329,437
1,104,259,615
951,114,882
4,493,969,989
154,925,001
(1,811,219,290)
4,493,913,645
362,916,039
(1,918,537,557)
4,493,913,645
337,125,853
(1,919,182,287)
2,837,675,700
(109,712,439)
2,938,292,127
(109,712,439)
2,911,857,211
(109,712,439)
2,727,963,261
2,828,579,688
2,802,144,772
P3,616,292,698
P3,932,839,303
P3,753,259,654
ASSETS
Current Assets
Financial assets at fair value through profit
or loss
Trade and other receivables – net
Prepayments and other current assets – net
Total Current Assets
Non-current Assets
Investments in subsidiaries
Investments in associates
Advances to subsidiaries and associates
Investment in joint venture
Property and equipment – net
Deferred tax assets – net
13
14
15
16
17
18
19
31
Total Non-current Assets
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables - current portion
Unearned income
Funds held in trust
5,20
21
22
Total Current Liabilities
Non-current Liabilities
Trade and other payables - net of current
portion
5,20
24
Total Non-current Liabilities
Equity
Capital stock
Reserves
Deficit
32
33
Treasury stock
32
Total Equity
See Notes to the Separate Financial Statements.
SEPARATE STATEMENTS OF INCOME
Income
Interest
Rent
Gain on sale of investments in a
subsidiary
Gain on sale of investment properties
Remeasurement of investment in
associate
Gain on sale of available-for-sale
investments
Gain (loss) on sales cancellation
Other income
Costs and Expenses
Cost of real estate sold
General and administrative expenses
Other expenses
Income (Loss) Before Income Tax
Income Tax Expense
Note
2013
2012
(As Restated,
Note 35)
27
26,18
P180,388,164
28,280,958
25,673,761
P381,108,362
28,216,872
22,281,682
13
23,18
64,907,106
53,667,628
14,615,355
13
15,431,319
9
(11,470,142)
39,912,089
3,335,323
(13,057,642)
7,810,941
(7,254,435)
10,735,161
62,456,393
396,790,883
444,310,893
486,145,155
171,874,899
107,043,413
7,799,904
329,218,189
110,432,940
950,018
359,897,212
262,613,747
118,073,744
286,718,216
440,601,147
740,584,703
110,072,667
2,754,400
3,709,746
3,065,016
(254,439,548)
1,522,998
P107,318,267
P644,730
(P255,962,546)
P0.02
P0.00
(P0.05)
28
29
30
31
Net Income (Loss)
Basic Income (Loss) Per Share
34
-
2011
(As Restated,
Note 35)
P377,343,084
20,956,513
21,908,439
-
SEPARATE STATEMENTS OF TOTAL COMEPREHENSIVE INCOME
2013
2012
(As Restated,
Note 35)
P107,318,267
P644,730
(P255,962,546)
(198,953,531)
31,552,474
(55,706)
Note
Net Income (Loss)
Other Comprehensive Income (Loss),
net of tax
Items that may be subsequently
reclassified to profit or loss
Unrealized holding gain (loss) on
Transfers of gain on sale of AFS
financial assets to statements of
total comprehensive income
Items that will not be reclassified to
profit or loss
Remeasurement loss on retirement
benefit obligation
Total Comprehensive Income (Loss)
9,33
9,33
-
2011
(As Restated,
Note 35)
(3,734,824)
-
(9,037,507)
(2,027,464)
-
(207,991,038)
25,790,186
(55,706)
(P100,672,771)
P26,434,916
(P256,018,252)
33
2
Note
35
33
33
33
-
4,493,137,408
P4,493,137,408
-
Capital Stock
(55,706)
(55,706)
337,181,559
P341,990,470
(4,808,911)
Reserves
(255,962,546)
(255,962,546)
-
(1,663,219,741)
(P1,663,219,741)
Deficit
-
-
(109,712,439)
(P109,712,439)
-
Treasury Stock
(256,018,252)
(255,962,546)
(55,706)
3,057,386,787
P3,062,195,698
(4,808,911)
Total Equity
776,237
644,730
25,790,186
-
26,434,916
-
(1,919,182,287)
-
107,318,267
(207,991,038)
337,125,853
644,730
-
-
(100,672,771)
2,802,144,772
25,790,186
644,730
-
(109,712,439)
-
25,790,186
(1,918,537,557)
-
4,493,913,645
-
107,318,267
-
P2,727,963,261
56,344
(P109,712,439)
-
2,828,579,688
362,916,039
107,318,267
(P1,811,219,290)
(109,712,439)
(207,991,038)
4,493,913,645
(207,991,038)
P154,925,001
-
-
56,344
P4,493,969,989
-
-
776,237
-
SEPARATE STATEMENTS OF CHANGES IN EQUITY
Balance at January 1, 2011 as previously reported
Effects of changes in accounting policies
Balance at January 1, 2011, as restated
Comprehensive loss
Loss for the year
Other comprehensive loss for the year
Balance as at December 31, 2011, as restated
Comprehensive income
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Balance as at December 31, 2012, as restated
Profit for the year
Other comprehensive loss for the year
Collections of subscription receivables
Balance, December 31, 2013
See Notes to Separate Financial Statements.
SEPARATE STATEMENTS OF CASH FLOWS
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Income (Loss) before income tax
Adjustments for:
18,19
Loss (Gain) on sales cancellation
24
Holding loss (gain) on trading
investments
8
Gain on sale of AFS investments - net
9
Gain on sale of investments in a
subsidiary
13
Interest income
27
Gain on sale of investment properties
18
Remeasurement of investment in
associate
13
Unrealized foreign exchange (gain) loss
28,30
Impairment loss on trade receivables
10
Impairment loss on advances in
subsidiaries and associates
15
13,14
Dividend income
28
2013
2012
(As Restated,
Note 35)
2011
(As Restated,
Note 35)
P110,072,667
P3,709,746
(P254,439,548)
16,698,182
11,470,142
6,758,348
17,773,101
5,499,390
6,675,552
(10,735,161)
5,597,804
713,206
-
285,282
(3,335,323)
(427,923)
-
(64,907,106)
(28,280,958)
(53,667,628)
(28,216,872)
(14,615,355)
(20,956,513)
-
(15,431,319)
(735,089)
-
666,870
-
140,986
15,507,800
-
-
118,656,695
(36,632)
13,057,642
(179,954)
19,906,946
7,254,435
(259)
Operating income (loss) before working capital
changes
Prepayments and other current assets
Increase (decrease) in:
Unearned income
(17,346,187)
(5,355,473)
(112,819,186)
35,498,722
(36,737,531)
(152,175,453)
-
(325,608,967)
27,440,626
225,289,694
13,057,642
(21,394,166)
(519,047)
167,618,162
(54,021,793)
(170,554,104)
(68,912,705)
(4,303,324)
143,387,726
113,790,595
(41,314,580)
Net cash generated from (used in) operations
Interest received
Contributions to retirement fund
Dividends received
(410,227,258)
28,280,958
(5,457,441)
36,632
60,850,280
28,216,872
(8,219,000)
179,954
51,339,985
20,956,513
(5,400,000)
259
(P387,367,109)
P81,028,106
P66,896,757
Net cash provided by (used in) operating
activities
Forward
SEPARATE STATEMENTS OF CASH FLOWS
Note
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in investments in and advances
13,14
to subsidiaries and associates
15
Additional investments in joint venture
17
Additions to property and equipment
19
Proceeds from sale of investment
properties
18
Proceeds from sale of property and
equipment
19
Proceeds from sale of AFS investments
9
Proceeds from sale of investments in a
subsidiary
13
Net cash provided by (used in) investing activities
2013
2012
(As Restated,
Note 35)
2011
(As Restated,
Note 35)
(P30,334,200)
(70,000)
(1,703,437)
(P14,757,110)
(50,000)
(970,568)
(P20,747,955)
(740,000)
(1,637,213)
151,785,672
31,494,531
140,510
-
220,237
7,355,940
191,000,000
-
310,818,545
23,293,030
(22,424,081)
13,883,565
22,203,605
701,087
-
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase in funds held in trust
Proceeds from collections of subscriptions
receivable
-
32
56,344
-
776,237
56,344
13,883,565
22,979,842
735,089
(666,870)
(140,986)
(75,757,131)
117,537,831
67,311,532
AT BEGINNING OF YEAR
411,919,783
294,381,952
227,070,420
AT END OF YEAR
P336,162,652
P411,919,783
P294,381,952
Net cash provided by financing activities
Effects of exchange rate changes
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
1. Reporting Entity
Philippine Realty and Holdings Corporation (the “Company”) was incorporated and registered with the
Philippine Securities and Exchange Commission (SEC) on July 13, 1981. The principal activities of the
Company include the acquisition, development, sale and lease of all kinds of real estate and personal
properties, and as an investment and holding company.
The Company was listed with the Philippine Stock Exchange (PSE) on September 7, 1987.
The Company is 35.67% owned by Greenhills Properties, Inc. (GPI), a corporation incorporated under
the laws of the Philippines. The remaining shares are owned by various individuals and institutional
stockholders.
The Company’s registered address is at Andrea North Complex, Balete Drive cor. N. Domingo Street,
New Manila, Quezon City, Philippines.
Status of the Company’s Operations
The Company is operating under a court-approved rehabilitation plan. Its operations were severely
affected by the slump in the local real estate industry which resulted from the regional economic crisis
that hit the country in mid-1997. Due to the slump in sales caused by soaring interest rates and the
restricted availability of bank credit, the Company was unable to service its debt obligations. It resorted
to dacion en pago (debt for asset swap) to reduce debts, suspended all its real estate projects and cut its
workforce to conserve cash but all these measures proved inadequate.
On December 12, 2002, the Company filed a petition for corporate rehabilitation in the Regional Trial
Court of Quezon City (the “Court”). A Stay Order was granted on December 16, 2002 after the petition
was deemed sufficient both in form and in substance. Among the salient features of the Stay Order are
as follows:
a.
A stay in the enforcement of all claims, whether for money or otherwise and whether such
enforcement is by court action or otherwise, against the Company, its guarantors and sureties not
solidarily liable with the Company;
b. Prohibiting the Company from selling, encumbering, transferring or disposing in any manner any
of its properties, except in the ordinary course of business;
c.
Prohibiting the Company from making any payment of its liabilities outstanding as of the filing of
instant petition;
d. Prohibiting the Company’s suppliers of goods and services from withholding supply of goods and
services in the ordinary course of business for as long as it makes payments for the goods and
services supplied after the issuance of this Stay Order; and,
e.
Directing the payment in full of all administrative expenses incurred after the issuance of the Stay
Order.
Subsequent to the issuance of the Stay Order, the Court conducted a series of hearings for the purpose
of receiving various inputs from the Company, the creditors, and the rehabilitation receiver as well.
Further discussions resulted in the filing of an amended rehabilitation plan.
In the course of the proceedings, the Court noted that all the creditor banks were in agreement that the
Company is susceptible to rehabilitation as it is solvent and its business is viable. The singular
stumbling block to the remaining creditor banks’ agreeing to the amended plan was the matter of the
valuation of the assets of the Company which were sought to be the subject of the dacion.
The Court’s study of the rehabilitation receiver’s recommendation and evaluation report revealed that
the concerns of the reluctant creditor banks have been duly addressed by the modifications suggested
to be made part of the amended rehabilitation plan. The Court noted with approval the determinations
of the rehabilitation receiver, with respect to the matter of reasonable valuation of the concerned
properties. The recommended combination of a debt restructuring and a dacion en pago as integral
components of petitioner’s amended rehabilitation plan was found to be fair and viable. The amended
rehabilitation plan was approved by the Court on June 11, 2004. The court-approved rehabilitation
plan is discussed below.
Rehabilitation Plan
The objectives of the rehabilitation plan are to pay all its creditors in a fair and just manner; to
complete and deliver the Andrea North Skyline Tower condominium units, a high-rise condominium
in Balete Drive corner N. Domingo Street, New Manila, Quezon City, Philippines, to its existing
buyers; and to protect the investments of the shareholders, particularly the small public investors, by
keeping the business viable and profitable.
The court-approved rehabilitation plan of the Company includes the following:
a.
Creditor Banks
The court-approved rehabilitation plan proposes a partial dacion en pago for P1,311 million of
bank debts and the balance of P891 million shall be restructured into a P180 million Term Loan
Facility and a P711 million Coupon Bond Facility
b. Buyers of Andrea North Skyline Tower Project
Under the approved rehabilitation plan, the Company will complete the Andrea North Skyline
Tower Project by entering into joint ventures for the development of properties, principally three
(3) Bonifacio Global City (BGC) lots, it shall retain after the dacion en pago settlement with creditor
banks and channeling its share of the joint venture proceeds to the Project.
c.
Other Financial Obligations
The liabilities to other third parties such as the government and its agencies, utility companies,
suppliers and contractors shall be paid from free cash generated after providing for the completion
of the Skyline Tower and the payment of the restructured bank debt.
As of December 31, 2010, the Company has fully paid its debt of P2.2 billion at the time of the
Company’s filing for rehabilitation in 2002 through the sale of assets principally the sale of its share in
International Exchange Bank and a BGC lot, dacion en pago and full payment of restructured loans.
As of December 31, 2013 and 2012 and January 1, 2012, the Company’s debt-to-equity ratio stood at
0.00:1 due to the pay out of its long-term obligations. Since the Company’s bank debts have been fully
paid and the completion of the Andrea North Skyline Tower was funded by proceeds from the joint
venture of BGC lots, and the partial collection of receivables from subscriptions to the Company’s
shares of stock; the additional proceeds from the joint venture of BGC lots, collection of remaining
receivables from subscriptions to the Company’s shares of stock, and new sales of Skyline Tower units
which are collectively estimated at over P1.6 billion represent free cash which can be utilized to fund
future development projects. Pre-selling proceeds will merely augment this free cash, instead of
funding the bulk of a project’s development cost.
-2-
On January 31, 2011, the Company filed a motion to terminate rehabilitation proceedings on account
of the successful implementation of the rehabilitation plan. The Company’s bases for the motion are as
follows:
a.
The substantial completion of the Andrea North Skyline Project as of December 31, 2010. The
Company has applied for the necessary building occupancy permit from the local government of
Quezon City and has already commenced the turn-over of several condominium units to their
respective buyers.
b. Full settlement of outstanding obligations to all banks/secured creditors.
c.
Settlement of P22.9 million out of the total P27.2 million unsecured obligations. The balance of
P4.3 million is sufficiently covered by new and future sales of the condominium units of the
Andrea Project.
d. Settlement of P65.3 million out of the total P78.9 claims of buyers of condominium units of the
Andrea Project that filed cases for rescission of their respective contracts to sell with the Housing
and Land Use Regulatory Board (HLURB). The balance of P13.6 million is sufficiently covered by
new and future sales of the condominium units of the Andrea Project.
On November 21, 2012, the Rehabilitation Court, upon the recommendation of the Rehabilitation
Receiver, denied the above-mentioned motion to terminate of the Company as it still has substantial
obligations to pay, principally to a contractor who won the case against the Company (See Note 30).
Subsequently, the Court ordered the Rehabilitation Receiver to comment on the Motion for
Clarification filed by the remaining creditors. On March 6, 2013, the Rehabilitation Receiver
submitted to the Court a payment schedule for the settlement of the Company's remaining obligations.
As of December 20, 2013, the Company’s liabilities to the contractor, Andrea North Skyline buyers
and unsecured creditors were already paid, such that, the Company has filed a motion to terminate the
rehabilitation proceedings on the account of the successful implementation of the rehabilitation plan.
The funds were sourced from the balance of the Company's receivables from its joint venture with
Xcell Property Ventures, Inc. over two (2) parcels of land in BGC, which is projected to continue to be
amortized over the same 14-month period and to be fully collected by December 2014.
The Company has been incurring losses and has a deficit as at December 31, 2013. This condition
indicates the existence of a material uncertainty which may cast significant doubt on the Company’s
ability to continue as a going concern. The separate financial statements do not include adjustments
that might result from the outcome of this uncertainty. The Company is currently studying their options
to go into a financial quasi-reorganization by reducing the par value of its shares and securing
additional investors to address such uncertainty. The Company will continue the development of the
Andrea North Tower Project, starting with the second tower, Skyvillas whose construction is now on
the 20th floor and the marketing of which will be launched shortly. Skyvillas, with projected revenue of
over P3 billion, will be followed by the other residential towers with a two level retail podium under a
new master plan prepared by CPG Consultants Pte. Ltd. Singapore (CPG). The full development will
take place over ten years. Additionally, the Company will tap the landbank of its major shareholder,
Greenhills Properties, Inc. under joint venture agreement. The properties include a 6,400 square meter
block along 5th Avenue at Bonifacio Global City for which a mixed use development featuring two
office towers and a residential building on a retail and parking podium has been masterplanned also by
CPG. Project launch is planned for 2015. Another site is a 5,900 square meter property at the corner of
ADB and Julia Vargas Avenue which is currently the site of a restaurant complex, El Pueblo Real Del
Monte. A mixed-use development with a retail anchor is planned on this prime location in Ortigas
Center. And in Tagaytay City, which will become even more accessible with the scheduled
construction of the Cavite - Laguna expressway, which will connect Kawit at the end of the Cavite
Expressway to Mamplasan at the South Luzon tollways.
-3-
2. Basis of Preparation
Statement of Compliance
The financial statements of the Company have been prepared in accordance with Philippine Financial
Reporting Standards (PFRS). PFRS includes all applicable PFRS, Philippine Accounting Standards (PAS),
and interpretations of the Philippine Interpretations Committee (PIC), Standing Interpretations
Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC), as approved
by the Financial Reporting Standards Council (FRSC) and adopted by the SEC.
These financial statements are the Company’s separate financial statements. Separate financial
statements are those presented by a parent, an investor in an associate or a venturer in a jointly
controlled entity, in which the investments are accounted for on the basis of the direct equity interest
rather than on the basis of the reported results and net assets of the investees.
The Company also prepares and issues consolidated financial statements for the same period in which
it consolidates all its investments in subsidiaries. Such consolidated financial statements provide
information about the economic activities of the group of which the Company is the parent.
The separate financial statements as at and for the year ended December 31, 2013 were approved and
authorized for issuance by the Board of Directors (BOD) on April 4, 2014.
Basis of Measurement
The Company’s separate financial statements have been prepared on a historical cost basis, except for
certain financial instruments which are either measured at fair value or at amortized cost.
Functional and Presentation Currency
The financial statements are presented in Philippine Peso, which is the presentation and functional
currency of the Company. All financial information presented have been rounded to the nearest peso,
unless otherwise stated.
Use of Estimates and Judgments
The preparation of the separate financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of estimation uncertainty and critical judgments in
applying accounting policies that have the most significant effect on the amounts recognized in the
separate financial statements are described in Note 4.
3. Significant Accounting Policies
Adoption of New and Revised Standards, Amendments to Standards and Interpretations
The Financial Reporting Standards Council approved the adoption of new and revised standards,
amendments to standards, and interpretations issued by the IFRIC and PIC as part of PFRS.
New and Revised Standards and Amendments to Standards Adopted in 2013
Effective January 1, 2013, the Company adopted the following new and revised standards and
amendments to standards:
-4-

PAS 1, Financial Statement Presentation - Presentation of Items of Other Comprehensive Income
(Amendment). The amendments to PAS 1 change the grouping of items presented in OCI. Items
that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, upon
derecognition or settlement) would be presented separately from items that will never be
reclassified.

PAS 19, Employee Benefits (Revised). These amendments eliminate the corridor approach and
calculate finance costs on a net funding basis. They would also require recognition of all actuarial
gains and losses in other comprehensive income as they occur and of all past service costs in profit
or loss. The amendments replace interest cost and expected return on plan assets with a net interest
amount that is calculated by applying the discount rate to the net defined benefit liability (asset).
See Note 35 for the impact of the adoption on the financial statements.

PFRS 10, Consolidated Financial Statements (effective January 1, 2013). The objective of PFRS 10
is to establish principles for the presentation and preparation of consolidated financial statements
when an entity controls one or more other entity (an entity that controls one or more other entities)
to present consolidated financial statements. It defines the principle of control, and establishes
control as the basis for consolidation. It sets out how to apply the principle of control to identify
whether an investor controls an investee and therefore must consolidate the investee. It also sets
out the accounting requirements for the preparation of consolidated financial statements.

PAS 27 (Revised), Separate Financial Statements (effective January 1, 2013). PAS 27 (Revised)
includes the provisions on separate financial statements that are left after the control provisions of
PAS 27 have been included in the new PFRS 10.

PAS 28 (Revised), Investments in Associates and Joint Ventures (effective January 1, 2013). PAS 28
(Revised) includes the requirements for joint ventures, as well as associates, to be equity accounted
following the issue of PFRS 11.

PFRS 11, Joint Arrangements (effective January 1, 2013). This new standard focuses on the rights
and obligations of the parties to the arrangement rather than its legal form. There are two types of
joint arrangements: joint operations and joint ventures. Joint operations arise where the investors
have rights to the assets and obligations for the liabilities of an arrangement. A joint operator
accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the
investors have rights to the net assets of the arrangement; joint ventures are accounted for under
the equity method. Proportional consolidation of joint arrangements is no longer permitted.

PFRS 12, Disclosures of Interests in Other Entities (effective January 1, 2013). This new standard
includes the disclosure requirements for all forms of interests in other entities, including joint
arrangements, associates, structured entities and other off balance sheet vehicles.

PFRS 13, Fair Value Measurement. The new standard establishes a single source of guidance for
fair value measurements and disclosures about fair value measurements. It defines fair value,
establishes a framework for measuring fair value, and requires disclosures about fair value
measurements. The scope of PFRS 13 is broad; it applies to both financial instrument items and
non-financial instrument items for which other PFRSs require or permit fair value measurements
and disclosures about fair value measurements, except in specified circumstances. In general, the
disclosure requirements in PFRS 13 are more extensive than those required in the current
standards. For example, quantitative and qualitative disclosures based on the three-level fair value
hierarchy are currently required for financial instruments only under PFRS 7 Financial Instruments:
Disclosures will be extended by PFRS 13 to cover all assets and liabilities within its scope.

Amendments to PFRS 7, Disclosures – Offsetting Financial Assets and Financial Liabilities. The
amendments change the required disclosures to include information that will enable users of an
entity’s financial statements to evaluate the effect or potential effect of netting arrangements,
-5-
including rights of set-off associated with the entity’s recognized financial assets and recognized
financial liabilities, on the entity’s financial position. The entity shall provide the disclosures as
required by these amendments retrospectively.

2011 Annual Improvements:
o
Amendments to PAS 1 – Presentation of Financial Statements and Consequential
amendment to PFRS 1. The amendment clarifies the disclosure requirements for
comparative information when an entity provides a third balance sheet either: (i) as
required by PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors; or
(ii) voluntarily.
o
PAS 16 (Amendment), Property, Plant and Equipment. The amendment clarifies that spare
parts and servicing equipment are classified as property, plant and equipment rather than
inventory when they meet the definition of property, plant and equipment.
o
Amendments to PAS 32 – Financial Instruments. The amendment clarifies the treatment of
income tax relating to distribution and transaction costs.
o
PAS 34 (Amendment), Interim Financial Reporting. The amendment clarifies the disclosure
requirements for segment assets and liabilities in interim financial statements.
Except for the adoption of the revised PAS 19, which resulted to retrospective restatement, as disclosed in
Note 35, the adoption of the above new and revised standards and amendments to standards in 2013 did
not have any material effect on the Company’s separate financial statements.
New and Revised Standards, Amendments to Standards and Interpretations Not Yet Adopted
The following are the new standards and amendments to standards which are not yet effective for the
year ended December 31, 2013, and have not been applied in preparing the separate financial
statements:

PAS 32, Financial Instruments: Presentation - Asset and Liability Offsetting (Amendment). These
amendments are to the application guidance in PAS 32, Financial Instruments: Presentation, and
clarify some of the requirements for offsetting financial assets and financial liabilities on the
statement of financial position.

Amendment to PAS 36, Impairment of Assets – Recoverable Amount Disclosures for Non-financial
Assets. This amendment removed certain disclosures of the recoverable amount of cash-generating
units (CGUs) which had been included in PAS 36 by the issue of PFRS 13.

Amendments to PFRS 10, 12 and PAS 27 - Consolidation for Investment Entities (effective January
1, 2014). These amendments mean that many funds and similar entities will be exempt from
consolidating most of their subsidiaries. Instead, they will measure them at fair value through profit
or loss. The amendments give an exception to entities that meet an ‘investment entity’ definition
and which display particular characteristics. Changes have also been made to PFRS 12 to
introduce disclosures that an investment entity needs to make.
-6-

PFRS 9, Financial Instruments issued in November 2009 and effective for periods beginning
January 1, 2015. This new standard addresses the classification, measurement and recognition of
financial assets and financial liabilities. It replaces the parts of PAS 39 that relate to the
classification and measurement of financial instruments. PFRS 9 requires financial assets to be
classified into two measurement categories: those measured at fair value and those measured at
amortized cost. The determination is made at initial recognition. The classification depends on the
entity’s business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument. For financial liabilities, the standard retains most of the PAS 39
requirements. The main change is that, in cases where the fair value option is taken for financial
liabilities, part of the fair value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than profit or loss, unless this creates an accounting mismatch. The
Company has yet to assess the full impact of PFRS 9 and intends to adopt PFRS 9 beginning
January 1, 2015. The Company will also consider the impact of the remaining phases of PFRS 9
when issued.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate . This
interpretation covers accounting for revenue and associated expenses by entities that undertake the
construction of real estate directly or through subcontractors. The interpretation requires that
revenue on construction of real estate be recognized only upon completion, except when such
contract qualifies as construction contract to be accounted for under PAS 11, Construction
Contracts, or involves rendering of services in which case revenue is recognized based on stage of
completion. Contracts involving provision of services with the construction materials and where
the risks and reward of ownership are transferred to the buyer on a continuous basis will also be
accounted for based on stage of completion. The SEC and the FRSC have deferred the effectivity of
this interpretation until the final Revenue standard is issued by the International Accounting
Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against
the practices of the Philippine real estate industry is completed.
The adoption of this Philippine Interpretation may significantly affect the determination of the
revenue from real estate sales and the corresponding costs, and the related trade receivables,
deferred tax liabilities and deficit accounts.
The Company will assess the impact of the above new and amended accounting standards and
interpretation effective subsequent to December 31, 2013 on the Company’s separate financial
statements in the period of initial application. Additional disclosures required by these new and
amended accounting standards will be included in the separate financial statements when these are
adopted.
The accounting policies set out below have been applied consistently to all periods presented in the
separate financial statements.
Cash and Cash Equivalents
Cash includes cash on hand and in banks and is stated at its face value. Cash in banks earns interest at
the prevailing interest rates. Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash with maturities of three (3) months or less from the date of
acquisition and that are subject to an insignificant risk of change in value.
-7-
Financial Instruments
Financial Assets
Financial assets are recognized in the Company's separate financial statements when the Company
becomes a party to the contractual provisions of the instrument. Financial assets are recognized
initially at fair value. Transaction costs are included in the initial measurement of the Company's
financial assets, except for investments classified as at fair value through profit or loss. Subsequently,
financial assets are recognized at either fair value or amortized cost.
Current financial assets include financial assets that are consumed or realized as part of the normal
operating cycle even when they are not expected to be realized within twelve months after the
reporting period, otherwise, they are classified as non-current assets.
The Company classifies non-derivative financial assets into the following categories: financial assets at
fair value through profit or loss (FVPL), loans and receivables, held-to-maturity (HTM) investments and
available-for-sale (AFS) financial assets. The classification depends on the nature and purpose of the
financial asset and is determined at the time of initial recognition. As of the reporting date, the
Company has the following categories of financial assets:
Financial assets at fair value through profit or loss
Financial assets are classified as investments at fair value through profit or loss when these are acquired
for trading or are designated upon initial recognition. Unless designated and considered as effective
hedging instruments, derivatives are classified as at fair value through profit or loss. Financial assets
under this category are initially recorded and are subsequently measured at fair value with gains and
losses arising from changes in fair value being included in profit or loss for the year. Transaction costs
on purchases and sale of financial assets under this category are recognized as expense in profit or loss.
A financial asset is classified as held-for-trading if:
a. it has been acquired principally for the purpose of selling in the near future; or
b. it is a part of an identified portfolio of financial instruments that the Company manages together
and has a recent actual pattern of short-term profit-taking; or
c. it is a derivative that is not designated and effective as a hedging instrument.
Cash and cash equivalents, trade and other receivables and advances to subsidiaries and associates
that have fixed or determinable payments that are not quoted in an active market are classified as loans
and receivables. Loans and receivables are initially recognized at fair value and subsequently
measured at amortized cost using the effective interest method, less any impairment. Interest income is
recognized by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
Short-term receivables are stated at their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts. Provision is made when there is objective evidence that the
Company will not be able to collect the debts. Bad debts are written off when identified.
Available-for-sale financial assets are those non-derivative financial assets that are designated as
available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or
(c) financial assets at fair value through profit or loss. Available-for-sale financial assets are initially
measured at fair value plus incremental direct transaction costs and subsequently are carried at fair
value. Unrealized gains and losses arising from changes in fair value are recognized directly in other
comprehensive income, with the exception of impairment losses, interest calculated using the effective
interest method and foreign exchange gains and losses on monetary assets, which are recognized
directly in profit or loss. When the available-for-sale financial asset is disposed of or is determined to
be impaired, the cumulative unrealized gain or loss previously recognized in equity is included in
-8-
profit or loss as a reclassification adjustment even if the financial asset (AFS) has not been
derecognized.
The Company’s available-for-sale financial assets are classified under this category.
Impairment of Financial Assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of
impairment at each reporting date. Financial assets are impaired when there is objective evidence that,
as a result of one or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been affected.
In the case of equity investments classified as available-for-sale, a significant or prolonged decline in
the fair value of the security below its cost is also evidence that the assets are impaired. Generally, the
Company treats ‘significant’ as 20% or more and ‘prolonged’ as greater than twelve months. If any
such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognized in profit or loss - is removed from equity and recognized in profit
or loss. Impairment losses for an investment in an equity instrument classified as Available-for-sale
financial assets shall not be reversed through profit or loss but in other comprehensive income.
If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale financial
assets increases and the increase can be objectively related to an event occurring after the impairment
loss was recognized in profit and loss for the year, the impairment loss shall be reversed, with the
amount of the reversal recognized in profit or loss for the year.
For loans and receivables category, the Company first assesses whether there is objective evidence of
impairment exists individually for receivables that are individually significant, and collectively for
receivables that are not individually significant. If the Company determines that no objective evidence
of impairment exists for an individually assessed receivable, whether significant of not, it includes the
asset in a group of financial assets with similar credit risk characteristics and collectively assesses those
for impairment. Receivables that are individually assessed for impairment and for which an impairment
loss is or continues to be recognized are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset's
carrying amount and the present value of estimated future cash flows, excluding future credit losses
that have not been incurred, discounted at the financial asset's original effective interest rate, i.e., the
effective interest rate computed at initial recognition. The carrying amount of the financial assets
carried at amortized cost is reduced directly by the impairment loss, with the exception of trade
receivables wherein the carrying amount is reduced through the use of an allowance account. If a loan
has a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract. As a practical expedient, the Company may measure
impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss shall be reversed. The reversal shall not result in a carrying amount of the
financial asset that exceeds what the amortized cost would have been had the impairment not been
recognized at the date the impairment is reversed. The amount of the reversal shall be recognized in
the profit or loss for the year.
-9-
Other financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity
instrument that is not carried at fair value because its fair value cannot be reliably measured or on a
derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument,
the amount of the impairment loss is measured as the difference between the carrying amount of the
financial asset and the present value of estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Impairment losses on financial assets carried at cost are not
reversed.
Derecognition of financial asset
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial
assets) is derecognized when:

The right to receive cash flows from the asset has expired;

The Company retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a “pass-through” arrangement; or

The Company has transferred its right to receive cash flows from the asset and either has:
(a) transferred substantially all the risks and rewards of the asset; or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Financial liabilities are recognized in the Company’s separate financial statements when the Company
becomes a party to the contractual provisions of the instrument. Financial liabilities are initially
recognized at fair value. Transaction costs are included in the initial measurement of the Company’s
financial liabilities, which do not include any debt instruments classified as at fair value through profit
or loss.
The Company classifies its financial liabilities in the following categories; financial liabilities at fair
value through profit or loss and financial liabilities at amortized cost.
A financial liability is classified as held for trading if it is acquired or incurred principally for the
purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial
instruments that are managed together and for which there is evidence of a recent actual pattern of
short-term profit-taking. Financial liabilities held for trading also include obligations to deliver financial
assets borrowed by a short seller.
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and
are measured at amortized cost. Financial liabilities measured at amortized cost are subsequently
measured using the effective interest method. The effective interest method is a method of calculating
the amortized cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that discounts estimated future cash payments through the expected
life of the financial liability or, when appropriate, a shorter period.
The Company has no financial liability at fair value through profit or loss. Other financial liabilities
include accrued expenses and other current liabilities.
Trade and other payables are liabilities to pay for goods or services that have been received or supplied
and have been invoiced or formally agreed with the supplier. Trade and other payables are not interest
bearing and are stated at their original invoice amount, the carrying amounts approximate fair value
primarily due to the relatively short-term maturity of these financial instruments and the effect of
discounting is deemed immaterial.
- 10 -
Accruals are liabilities to pay goods and services that have been received or supplied but have not
been paid, invoiced or formally agreed with the supplier, including amounts due to employees. It is
necessary to estimate the amount or timing of accruals. However, the uncertainty is generally much
less than for provisions.
Derecognition of Financial Liabilities
Financial liabilities are derecognized only when they are extinguished, when the obligation specified
in the contract is discharged, cancelled or has expired. Any difference between the carrying amount of
the financial liability extinguished or transferred to another party and the consideration paid, including
any non-cash assets transferred or liabilities assumed, are recognized in profit or loss.
Offsetting
Financial assets and liabilities are offset and the net amount reported in the separate statements of
financial position when there is a legally enforceable right to offset the recognized amounts and there
is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Prepayments
Prepayments represent expenses not yet incurred but already paid in cash. Prepayments are initially
recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to
income as they are consumed in operations or expire with the passage of time.
Prepayments are classified in the separate statements of financial position as current asset when the
cost of goods or services related to the prepayment are expected to be incurred within one (1) year or
the Company’s normal operating cycle, whichever is longer. Otherwise, prepayments are classified as
non-current assets.
Investments in Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Company has control. The
Company has control as an entity when the Company is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Company. They are deconsolidated from the date that control ceases.
Investment in shares of stock of subsidiaries is accounted for using the cost method. Under this
method, investments are recognized at cost and income from investment is recognized in profit or loss
only to the extent that the investor receives distribution from accumulated profits of the investee arising
after the acquisition date. Distributions received in excess of such profits are regarded as a recovery of
investment and are recognized as a reduction of the cost of the investment.
Investments in Associates
An associate is an entity over which the Company is in a position to exercise significant influence, but
not control or joint control, through participation in the financial and operating policy decisions of the
investee.
An investment is accounted for using the equity method from the day it becomes an associate. The
investment is initially recognized at cost. On acquisition of investment, the excess of the cost of
investment over the investor’s share in the net fair value of the investee’s identifiable assets, liabilities
and contingent liabilities is accounted for as goodwill and included in the carrying amount of the
investment and not amortized. Any excess of the investor’s share of the net fair value of the associate’s
identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from
the carrying amount of the investment, and is instead included as income in the determination of the
share in the earnings of the investees.
- 11 -
Under the equity method, the investments in the investee companies are carried in the separate
statements of financial position at cost plus post-acquisition changes in the Company’s share in the net
assets of the investee companies, less any impairment losses. The separate statements of income reflect
the share of the results of the operations of the investee companies. The Company’s share of postacquisition movements in the investee’s equity reserves is recognized directly in equity. Profits and
losses resulting from transactions between the Company and the investee companies are eliminated to
the extent of the interest in the investee companies and for unrealized losses to the extent that there is
no evidence of impairment of the asset transferred. Dividends received are treated as a reduction of the
carrying value of the investment.
The Company discontinues applying the equity method when its investments in investee companies
are reduced to zero. Accordingly, additional losses are not recognized unless the Company has
guaranteed certain obligations of the investee companies. When the investee companies subsequently
report net income, the Company will resume applying the equity method but only after its share of that
net income equals the share of net losses not recognized during the period the equity method was
suspended.
The reporting dates of the investee companies and the Company are identical and the investee
companies’ accounting policies conform to those used by the Company for like transactions and events
in similar circumstances. Upon loss of significant influence over the associate, the Company measures
and recognizes any retaining investment at its fair value. Any difference between the carrying amount
of the associate upon loss of significant influence and the fair value of the retaining investment and
proceeds from disposal is recognized in profit or loss.
Investments in Joint Venture
The Company has applied PFRS 11 to all joint arrangements as of January 1, 2012. Under PFRS 11
investments in joint arrangements are classified as either joint operations or joint ventures depending
on the contractual rights and obligations of each investor. The Company has assessed the nature of its
joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using
the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognized at cost and
adjusted thereafter to recognize the Company’s share of the post-acquisition profits or losses and
movements in other comprehensive income. When the Company’s share of losses in a joint venture
equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in
substance, form part of the Company’s net investment in the joint ventures), the Company does not
recognize further losses, unless it has incurred obligations or made payments on behalf of the joint
ventures.
Unrealized gains on transactions between the Company and its joint ventures are eliminated to the
extent of the Company’s interest in the joint ventures. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint
ventures have been changed where necessary to ensure consistency with the policies adopted by the
Company. The change in accounting policy has been applied as from January 1, 2012.
Real Estate Inventories
Property acquired or being developed for sale in the ordinary course of business, rather than to be held
for rental or capital appreciation, is held as inventory and is measured at the lower of cost and net
realizable value.
Cost includes amounts paid to contractors for construction, borrowing costs, planning and design costs,
costs of site preparation, professional fees, property transfer taxes, construction overheads and other
related costs.
- 12 -
Net realizable value is the estimated selling price in the ordinary course of the business, based on
market prices at the reporting date, less costs to completion and the estimated costs of sale.
The cost of inventory recognized in profit or loss on disposal is determined with reference to the
specific costs incurred on the property sold and an allocation of any non-specific costs based on the
relative size of the property sold.
Real Estate Held for Development
Land held for development are measured at the lower of cost and net realizable value. Expenditures for
development and improvements of land are capitalized as part of the cost of the land. Directly
identifiable borrowing costs are capitalized while the development and construction is in progress.
Property and Equipment
Property and equipment are initially measured at cost which consists of its purchase price and costs
directly attributable to bringing the asset to its working condition for its intended use and are
subsequently measured at cost less any accumulated depreciation, amortization and impairment
losses, if any.
Subsequent expenditures relating to an item of property and equipment that have already been
recognized are added to the carrying amount of the asset when it is probable that future economic
benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to
the Company. All other subsequent expenditures are recognized as expenses in the period in which
those are incurred.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as
follows:
Number of years
20 to 25
5 to 10
3 to 10
5
Condominium units
Building improvements
Office furniture, fixtures and equipment
Transportation and other equipment
Leasehold improvements are amortized over the improvements’ useful life of five (5) years or, when
shorter, the term of the relevant lease.
The assets’ residual values, estimated useful lives and depreciation and amortization method are
reviewed periodically to ensure that the amounts, periods and method of depreciation and
amortization are consistent with the expected pattern of economic benefits from items of property and
equipment.
Derecognition
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal at which time the cost, and their related accumulated
depreciation are removed from the accounts. Gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds and the carrying amount of the asset
and is recognized in profit or loss.
Investment Properties
Investment properties comprise completed property and property under development or redevelopment that are held to earn rentals or capital appreciation or both and that are not occupied by
the Company. Investment properties, except for land, are carried at cost less accumulated depreciation
and any impairment in residual value. Land is carried at cost less any impairment in value.
Expenditures incurred after the investment property has been put in operation, such as repairs and
maintenance costs, are normally charged against income in the period in which the costs are incurred.
- 13 -
Construction in progress are carried at cost and transferred to the related investment property account
when the construction and related activities to prepare the property for its intended use are complete,
and the property is ready for occupation.
Depreciation of investment properties are computed using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives and the depreciation method are reviewed
periodically to ensure that the period and method of depreciation are consistent with the expected
pattern of economic benefits from items of investment properties. The Company revised the estimated
useful values of condominium units from 35 years to 40 years with effect from January 1, 2012. The
revisions were accounted for prospectively as a change in accounting estimates and as a result, the
depreciation of investment properties of the Company for the year ended December 31, 2012 have
been decreased by P3,644,555.
The estimated useful lives of depreciable investment properties follow:
Number of years
Condominium units
Land improvements
40
40
A transfer is made to investment property when there is a change in use, evidenced by ending of
owner-occupation, commencement of an operating lease to another party or ending of construction or
development. A transfer is made from investment property when and only when there is a change in
use, evidenced by commencement of owner-occupation or commencement of development with a
view to sale. A transfer between investment property, owner-occupied property and inventory does not
change the carrying amount of the property transferred nor does it change the cost of that property for
measurement or disclosure purposes.
Derecognition
Investment properties are derecognized when either they have been disposed of, or when the
investment property is permanently withdrawn from use and no future economic benefit is expected
from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognized
in profit or loss in the year of retirement or disposal.
Impairment of Non-financial Assets
At each reporting date, the Company assesses whether there is any indication that any of its
non-financial assets may have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
The recoverable amount of the non-financial asset is the higher of fair value less costs to sell and
value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount. An impairment loss is recognized as an
expense.
When an impairment loss reverses subsequently, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognized in prior
years. A reversal of an impairment loss is recognized in profit or loss.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary
transaction between participants at measurement date.
- 14 -
The fair value of a non-financial asset is measured based on its highest and best use. The asset’s current
use is presumed to be its highest and best use.
The fair value of financial and non-financial liabilities takes into account non-performance risk, which
is the risk that the entity will not fulfill an obligation.
The Company measures fair values using the following fair value hierarchy that reflects the significance
of the inputs used in making the measurements:

Level 1: Quoted price (unadjusted) in an active market for an identical asset or liability.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes assets or liabilities valued using quoted
prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets
or liabilities in markets that are considered less than active; or other valuation techniques for which
all significant inputs are directly or indirectly observable from market data.

Level 3: Valuation techniques using significant unobservable inputs. This category includes all
assets or liabilities for which the valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the asset or liability’s valuation. This
category includes assets or liabilities that are valued based on quoted prices for similar assets or
liabilities for which significant unobservable adjustments or assumptions are required to reflect
differences between the assets or liabilities.
The methods and assumptions used by the Company in estimating the fair value of the financial
instruments are as follows:
Cash and cash equivalents and trade and other receivables – carrying amounts approximate fair values
due to the relatively short-term maturities of these items.
Financial assets and FVPL and AFS financial assets – these are investments in equity securities, fair
value for quoted equity securities is based on quoted prices published in markets as of reporting dates,
unquoted equity securities are carried at cost less allowance for impairment losses because fair value
cannot be measured reliably due to lack of reliable estimates of future cash flows and discount rates
necessary to calculate the fair value.
Liabilities – the carrying value of trade and other payables approximate its fair value because of the
short-term nature of these financial liabilities.
Equity
An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. Distribution to the Company’s shareholders is recognized as a
liability in the Company’s separate financial statements in the period in which the dividends are
approved by the Company’s Board of Directors.
Common shares
Common shares are classified as equity when there is no obligation to the transfer of cash or other
assets. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction from the proceeds, net of tax.
Deficit
Deficit include all the accumulated losses of the Company, dividends declared and share issuance
costs.
- 15 -
Treasury Stock
The Company’s equity instruments which are reacquired (treasury shares) are recognized at cost and
deducted from equity. No gain or loss is recognized in the profit or loss on the purchase, sale, issue or
cancellation of the Company’s own equity instruments. Any difference between the carrying amount
and the consideration, if reissued, is recognized in additional paid-in capital. Voting rights related to
treasury shares are nullified for the Company and no dividends are allocated to them respectively.
When the shares are retired, the capital stock account is reduced by its par value and the excess of cost
over par value upon retirement is debited to additional paid-in capital when the shares were issued
and to retained earnings for the remaining balance.
Employee Benefits
Short-term benefits
The Company recognizes a liability net of amounts already paid and an expense for services rendered
by employees during the accounting period. Short-term benefits given by the Company to its
employees include salaries and wages, social security contributions, short-term compensated absences,
bonuses and non-monetary benefits.
Post-employment benefits
The Company has a funded, non-contributory defined benefit retirement plan. The post-employment
expense is determined using the Projected Unit Credit Method which reflects services rendered by
employees to the date of valuation and incorporates assumptions concerning employees’ projected
salaries.
Typically defined benefit plans define an amount of retirement benefit that an employee will receive
on retirement, usually dependent on one or more factors such as age, years of service and
compensation.
The liability recognized in the separate statements of financial position in respect of defined benefit
retirement plans is the present value of the defined benefit obligation at the end of the reporting
period less the fair value of plan assets. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest rates of government
securities that are denominated in the currency in which the benefits will be paid, and that have terms
to maturity approximating to the terms of the related retirement obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to equity through other comprehensive income in the period in which they
arise.
Past-service costs are recognized immediately in profit or loss.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured. Revenue is measured at the fair value of
consideration received or receivable, net of discounts, rebates and value added tax (VAT) and
represents amounts receivable for goods and services in the normal course of business.
A property is regarded as sold when the significant risks and returns have been transferred to the buyer,
which is normally on unconditional exchange of contracts. For conditional exchanges, sales are
recognized only when all the significant conditions are satisfied.
- 16 -
Revenue from sales of completed real estate projects is accounted for using the full accrual method. In
accordance with Philippine Interpretations Committee (PIC) Q&A No. 2006-01, the percentage-ofcompletion method is used to recognize income from sales of projects where the Company has
material obligations under the sales contract to complete the project after the property is sold, the
equitable interest has been transferred to the buyer, construction is beyond preliminary stage, and the
costs incurred or to be incurred can be measured reliably. Under this method, revenue is recognized as
the related obligations are fulfilled, measured principally on the basis of the estimated completion of a
physical proportion of the contract work.
If any of the criteria under the full accrual or percentage-of-completion method is not met, the deposit
method is applied until all the conditions for recording a sale are met. Pending recognition of sale,
cash received from buyers are presented under the Trade and other payables account in the separate
statements of financial position.
Rental income
Rental income from operating leases is recognized as income on a straight-line basis over the term of
the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are
also spread on a straight-line basis over the lease term.
Interest income
Interest income is accrued on a time proportion basis by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate that discounts estimated future cash receipts
through the expected life of the financial asset to that asset’s net carrying amount.
Dividend income
Dividend income from investments is recognized when the shareholders’ rights to receive payment
have been established.
Unearned Income
Unearned income represents collections from customers which are as of the reporting period not yet
earned. Unearned income are initially recorded as liability and recognized at the amount actually
received. Subsequently, these are earned through profit or loss based on the percentage of completion
of the property sold.
Funds Held in Trust
Funds held represents amounts received which are held in trust for the other party. Funds held in trust
are initially recognized at amount actually received and are subsequently measured at amortized cost.
Cost and Expense Recognition
Costs and expenses are recognized in profit or loss when a decrease in future economic benefits
related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably.
Costs and expenses are recognized in profit or loss on the basis of: (i) a direct association between the
costs incurred and the earning of specific items of income; (ii) systematic and rational allocation
procedures when economic benefits are expected to arise over several accounting periods and the
association with income can only be broadly or indirectly determined; or (iii) immediately when an
expenditure produces no future economic benefits or when, and to the extent that, future economic
benefits do not qualify or cease to qualify for recognition in the statements of separate financial
position as an asset.
Contract costs include all direct materials and labor cost and those indirect costs related to contract
performance. Expected losses on contracts are recognized immediately when it is probable that the
total contract costs will exceed total contract revenue. Changes in contract performance, contract
conditions and estimated profitability, including those arising from contract penalty provisions, and
final contract settlements which may result in revisions to estimated costs and gross margins are
recognized in the year in which the changes are determined.
- 17 -
Cost of the real estate sold before the completion of the contemplated development is determined
based on actual development cost and project estimates as determined by the contractors and the
Company’s technical staff.
Cost and expenses in the separate statements of income are presented using the function of expense
method. Operating expenses are costs attributable to general, administrative and other business
activities of the Company. Direct costs are expenses incurred that are associated with the services
rendered.
Borrowing Costs
Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes
a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of
the respective assets. All other borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds.
Borrowing costs are capitalized from the commencement of the development work until the date of
practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods
when development activity is interrupted. If the carrying amount of the asset exceeds its recoverable
amount, an impairment loss is recorded.
Leases
Company as Lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Fixed lease payments are recognized as an expense in the separate
statement of income on a straight-line basis while the variable rent is recognized as an expense based
on terms of the lease contract.
Company as Lessor
Leases where the Company does not transfer substantially all the risk and benefits of ownership of the
assets are classified as operating leases. Lease payments received are recognized as an income in the
separate statements of income on a straight-line basis over the lease term. Initial direct costs incurred in
negotiating operating leases are added to the carrying amount of the leased asset and recognized over
the lease term on the same basis as the rental income. Contingent rents are recognized as revenue in
the period in which they are earned.
Foreign Currency Transactions and Translation
Transactions in currencies other than Philippine Peso are recorded at the rates of exchange prevailing
on the dates of the transactions. At each reporting date, monetary assets and liabilities that are
denominated in foreign currencies are restated at the rates prevailing on the reporting date. Nonmonetary assets and liabilities that are measured in terms of historical cost in a foreign currency are not
retranslated. Exchange gains or losses arising from foreign exchange transactions are credited to or
charged against operations for the year.
Income Tax
Income tax expense for the period comprises current and deferred tax. Income tax is recognized in
profit or loss, except to the extent that it relates to items recognized in other comprehensive income or
directly in equity. In this case the tax is also recognized in other comprehensive income or directly in
equity, respectively.
The current income tax expense is calculated on the basis of the tax laws enacted at the reporting date.
Management periodically evaluates positions in income tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
- 18 -
Deferred income tax is recognized on temporary difference arising between the tax bases of assets and
liabilities and their carrying amounts in the separate financial statements. However, deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantively enacted at the reporting date and are expected to apply when related deferred income tax
asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of
unused tax losses (net operating loss carryover or NOLCO) and unused tax credits (excess minimum
corporate income tax or MCIT) to the extent that it is probable that future taxable profit will be
available against which the temporary differences, unused tax losses and unused tax credits can be
utilized. The Company reassesses at each reporting date the need to recognize a previously
unrecognized deferred income tax asset.
Deferred income tax assets and liabilities are offset when there is legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority on either the taxable entity or different
taxable entities when there is an intention to settle the balances on net basis.
Provisions and Contingencies
Provisions are recognized when the Company has a present obligation, either legal or constructive, as
a result of a past event; when it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, and; when the amount of the obligation can be estimated
reliably. When the Company expects reimbursement of some or all of the expenditure required to settle
a provision, the entity recognizes a separate asset for the reimbursement only when it is virtually
certain that reimbursement will be received when the obligation is settled.
The amount of the provision recognized is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the risks and uncertainties surrounding the
obligation. A provision is measured using the cash flows estimated to settle the present obligation; its
carrying amount is the present value of those cash flows.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Contingent liabilities are not recognized because their existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
the entity. Contingent liabilities are disclosed, unless the possibility of an outflow of resources
embodying economic benefits is remote.
Contingent assets are not recognized in the separate financial statements but are disclosed when an
inflow of economic benefits is probable.
Related Party Relationships and Transactions
Related party relationship exists when one party has the ability to control, directly, or indirectly
through one or more intermediaries, the other party or exercise significant influence over the other
party in making financial and operating decisions. Such relationship also exists between and/or among
entities which are under common control with the reporting enterprise, or between, and/or among the
reporting enterprise and its key management personnel, directors, or its shareholders. In considering
each possible related party relationship, attention is directed to the substance of the relationship, and
not merely the legal form.
- 19 -
Earnings (Loss) per Share
Basic earnings (loss) per share
The Company computes its basic earnings (loss) per share by dividing net profit or loss attributable to
common equity holders of the Company by the weighted average number of common shares issued
and outstanding during the period.
Diluted earnings (loss) per share
Diluted earnings per share is calculated by adjusting the weighted average number of common shares
outstanding to assume conversion of all dilutive potential common shares.
Dividend Distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Company’s
separate financial statements in the period in which the dividends are approved by the Company’s
Board of Directors.
Events After the Reporting Date
The Company identifies events after the reporting date as events that occurred after the reporting date
but before the date the separate financial statements were authorized for issue. Any subsequent event
that provides additional information about the Company’s financial position at the reporting date is
reflected in the separate financial statements. Non-adjusting subsequent events are disclosed in the
notes to the separate financial statements when material.
4. Critical Accounting Judgments and Key Sources of Estimation Uncertainty
In the application of the Company’s accounting policies, Management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on the historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future
periods.
The following are the key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year:
Critical Accounting Estimates and Assumptions
Estimating useful lives of assets
The useful lives of assets are estimated based on the period over which the assets are expected to be
available for use. The estimated useful lives of assets 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 Company’s assets. In addition, the estimation
of the useful lives is based on the Company’s collective assessment of industry practice, internal
technical evaluation and experience with similar assets. It is possible, however, that future results of
operations could be materially affected by changes in estimates brought about by changes in factors
mentioned above. The amounts and timing of recorded expenses for any period would be affected by
changes in these factors and circumstances. A reduction in the estimated useful lives of assets would
increase the recognized operating expenses and decrease non-current assets.
- 20 -
If the actual useful lives of the property and equipment differ by 10% from management’s estimates,
the depreciation and amortization expense for 2013 and 2012 would be an estimated higher (lower) by
the following amounts:
10% lower in average useful lives
10% higher in average useful lives
2013
2012
P772,570
(632,103)
P825,308
(547,065)
Estimating allowances for impairment loss on receivables
The Company estimates the allowance for impairment loss on receivables based on assessment of
specific accounts when the Company has information that certain customers are unable to meet their
financial obligations. In these cases, judgment used was based on the best available facts and
circumstances including, but not limited to, the length of relationship with the customer and the
customer’s current credit status based on third party credit reports and known market factors. The
Company used judgment to record specific reserves for customers against amounts due to reduce the
expected collectible amounts. These specific reserves are re-evaluated and adjusted as additional
information received impacts the amounts estimated.
The amounts and timing of recorded expenses for any period would differ if different judgments were
made or different estimates were utilized. An increase in the allowance for impairment loss would
increase the recognized operating expenses and decrease current assets. The Company considers that it
is impracticable to disclose with sufficient reliability the possible effects of sensitivities surrounding the
impairment of receivables.
Evaluation of net realizable value of real estate inventories and real estate held for sale and
development
The Company adjusts the cost of its real estate inventories and real estate held for sale and
development to net realizable value based on its assessment of the recoverability of the assets. In
determining the recoverability of the assets, management considers whether those assets are damaged
or if their selling prices have declined. Likewise, management also considers whether the estimated
costs of completion or the estimated costs to be incurred to make the sale have increased. The amount
and timing of recorded expenses for any period would differ if different judgments were made or
different estimates were utilized.
Results of management’s assessment disclosed that there is no need for provision for impairment of
inventories as at December 31, 2013 and 2012. The provision account, if any, is reviewed on a
monthly basis to reflect the accurate valuation of the Company’s inventories. Inventory items identified
to be obsolete and unusable is written-off and charged as expense for the period. The Company
considers that it is impracticable to disclose with sufficient reliability the possible effects of sensitivities
surrounding the impairment of inventories.
Revenue recognition
When a contract for the sale of a property upon completion of construction is judged to be a
construction contract, revenue is recognized using the percentage-of-completion method as
construction progresses. The Company considers the terms and conditions of the contract, including
how the contract was negotiated and the structural elements that the customer specifies when
identifying individual projects as construction contracts. The percentage of completion is estimated by
reference to the stage of the projects and contracts determined based on the proportion of contract
costs incurred to date and the estimated costs to complete.
Post-employment and other employee benefits
The present value of the retirement obligations depends on a number of factors that are determined on
an actuarial basis using a number of assumptions. The assumptions used in determining the net cost
(income) for pensions include the discount rate. Any changes in these assumptions will impact the
carrying amount of retirement obligations.
- 21 -
The Company determines the appropriate discount rate at the end of each year. This is the interest rate
that should be used to determine the present value of estimated future cash outflows expected to be
required to settle the retirement obligations. In determining the appropriate discount rate, the Company
considers the interest rates of government bonds that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating the terms of the related retirement
obligation.
Other key assumptions for retirement obligations are based in part on current market conditions.
Additional information is disclosed in Note 24.
Contingencies
The Company is currently involved in various legal proceedings and tax assessments. Estimates of
probable costs for the resolution of these claims has been developed in consultation with outside
counsel handling the defense in these matters and is based upon an analysis of potential results. The
Company currently does not believe these proceedings will have a material adverse effect on the
financial position. It is possible, however, that future results of operations could be materially affected
by changes in the estimates or in the effectiveness of the Company’s strategies relating to these
proceedings.
Income taxes
The Company recognizes tax liabilities depending on the sources of the revenue generated. The
liabilities are based on whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which such determination is made.
The Company reviews the carrying amounts at each reporting date and reduces deferred tax assets to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred tax assets to be utilized. However, there is no assurance that the Company will generate
sufficient taxable profit to allow all or part of its deferred tax assets to be utilized. The Company
considers that it is impracticable to disclose with sufficient reliability the possible effects of sensitivities
surrounding the utilization of deferred tax asset.
Valuation of investment property
The fair value of investment property is determined by real estate valuation experts using recognized
valuation techniques and the principles of PFRS 13. Investment property is measured based on
estimates prepared by independent real estate valuation experts, except where such values cannot be
reliably determined. In one case, the fair value of the investment property under construction could not
be reliably determined because it was in an area in which the surrounding properties were under
development and reliable estimates could not be made. This property is recorded at cost.
- 22 -
Critical Accounting Judgments
Asset impairment
The Company performs an impairment review when certain impairment indicators are present.
Determining the fair value of property and equipment, which require the determination of future cash
flows expected to be generated from the continued use and ultimate disposition of such assets, requires
the Company to make estimates and assumptions that can materially affect the separate financial
statements. Future events could cause the Company to conclude that property and equipment are
impaired. Any resulting impairment loss could have a material adverse impact on the financial position
and results of operations.
The preparation of the estimated future cash flows involves significant judgment and estimations.
While the Company believes that its assumptions are appropriate and reasonable, significant changes
in the assumptions may materially affect the assessment of recoverable values and may lead to future
additional impairment charges under PFRS.
Operating Lease
The Company has entered into commercial property leases on its investment property portfolio. The
Company has determined, based on an evaluation of the terms and conditions of the arrangements,
particularly the duration of the lease terms and minimum lease payments, that it retains all the
significant risks and rewards of ownership of these properties and so accounts for the leases as
operating lease.
Distinction between investment properties and owner-occupied properties
The Company determines whether a property qualifies as investment property. In making this
judgment, the Company considers whether the property generates cash flows largely independent of
the other assets held by an entity. Owner-occupied properties generate cash flows that are attributable
not only to property but also to the other assets used in the production or supply process.
Some properties comprise a portion that is held to earn rentals or for capital appreciation and another
portion that is held for use in the production or supply of goods or services or for administrative
purposes. If these portions cannot be sold separately at the reporting date, the property is accounted
for as investment property only if an insignificant portion is held for use in the production or supply of
goods or services or for administrative purposes. Judgment is applied in determining whether ancillary
services are so significant that a property does not qualify as investment property. The Company
considers each property separately in making its judgment.
Distinction between real estate inventories and real estate held for sale and development
The Company determines whether a property will be classified as Real estate inventories or Real estate
held for sale and development. In making this judgment, the Company considers whether the property
will be sold in the normal operating cycle (real estate inventories) or whether it will be treated as part
of the Company’s strategic land banking activities for development or sale in the medium or long-term
(land and improvements).
5. Financial Risk Management
Financial risk management objectives and policies
The Company’s activities expose it to a variety of financial risks: market risk, credit risk, and liquidity
risk. The Company’s overall risk management program seeks to minimize potential adverse effects on
the financial performance of the Company. The policies for managing specific risks are summarized
below.
- 23 -
The management has overall responsibility for the establishment and oversight of the Company’s risk
management framework. It monitors compliance with the risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the risks faced by the
Company. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions.
The Company’s risk management policies are established to identify and analyze the risks faced by the
Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions and
the Company’s activities. The Company, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
Operational Risk
This is the uncertainty arising from internal events caused by failures of people, process and
technology, as well as external events.
The Company has established business specific guidelines. Comprehensive insurance program,
including appropriate levels of self-insurance, is maintained to provide protection against potential
losses.
Market risk
Foreign exchange risk
The Company undertakes certain transactions denominated in foreign currencies. Hence, exposures to
exchange rate fluctuations arise with respect to transactions denominated in US Dollar. Foreign
exchange risk arises when future commercial transactions and recognized assets and liabilities are
denominated in a currency that is not the Company’s functional currency. Significant fluctuation in the
exchange rates could significantly affect the Company’s financial position.
Foreign exchange risk exposure of the Company is limited to its cash and cash equivalents. Currently,
the Company has a policy not to incur liabilities in foreign currency. Construction and supply
contracts, which may have import components, are normally denominated in Philippine Peso.
The amounts of the Company’s foreign currency denominated monetary assets, at the reporting date
are as follows:
2013
2012
P11,242,173
P10,309,074
The following table details the Company’s sensitivity to a 10% increase or decrease in the Philippine
Peso against the US Dollar. The sensitivity rate used in reporting foreign currency risk internally to key
management personnel is 10% and it represents Management’s assessment of the reasonably possible
change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a 10% change in foreign currency rates. A positive
number below indicates a decrease in net income or increase in net loss when the Philippine Peso
weakens at 10% against the US Dollar. For a 10% strengthening of the Philippine Peso against the US
Dollar, there would be an equal and opposite impact on the net income.`
- 24 -
2013
2012
P1,124,217
P1,030,907
As of December 31, 2013, 2012 and 2011, the Company does not have monetary liabilities
denominated in foreign currency.
Interest rate risk
The primary source of the Company’s interest rate risk relates to its cash and cash equivalents. The
interest rates on these assets are disclosed in Notes 7.
Cash and cash equivalents are short-term in nature and with the current interest rate level, any
variation in the interest will not have a material impact on the profit or loss of the Company.
Based on the sensitivity performed the impact on profit or loss of a 10% increase/decrease on interest
rate would be a maximum increase/decrease of P535,777, P1,115,963 and P744,764 for 2013, 2012
and 2011, respectively.
Price risk
Price risk is the risk that the fair value of the financial instrument particularly equity instruments will
fluctuate as a result of changes in market prices (other than those arising from interest rate risk or
foreign currency risk), whether caused by factors specific to an individual investment, its issuer or
factors affecting all instruments traded in the market.
At December 31, 2013, the impact of 10% increase/decrease in the price of listed equity securities,
with all other variables held constant, would have been an increase/decrease of P9,931,516 in the
Company's total comprehensive income and equity for the year (2012 - P29,830,469). The Company’s
sensitivity analysis takes into account the historical performance of the stock market.
Credit risk
The Company’s credit risk is primarily attributable to its trade and other receivables and advances to
subsidiaries and associates as disclosed in Notes 10 and 15, respectively. The Company has adopted
stringent procedure, in extending credit terms to customers and in monitoring its credit risk.
The Company has no significant concentration of credit risk. It has policies in place to ensure that sales
are made to customers with an appropriate credit history. The Company’s exposure to credit risk arises
from a default customer, with a maximum exposure equal to carrying amount of the related
receivables, particularly those relating to its leasing operations.
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk as at December 31 are as follows:
- 25 -
2013
2012
P336,162,652
625,231,669
21,280,381
P411,919,783
683,703,660
21,280,381
P982,674,702
P1,116,903,824
The credit quality of financial assets which are neither past due nor impaired is discussed below:
(a) Cash in banks and cash equivalents
The Company deposits its cash balance in commercial and universal banks to minimize credit risk
exposure. Amount deposited in these banks are as follows:
Universal banks
Commercial banks
2013
2012
P130,224,878
205,937,774
P211,577,681
200,342,102
P336,162,652
P411,919,783
(b) Trade and other receivables and Advances to subsidiaries and associates
The credit quality of trade and other receivables and advances to subsidiaries and associates that are
neither past due nor impaired can be assessed by reference to internal credit ratings or to historical
information about counterparty default rates:
2013
Group A
Group B
Group C
Group A
Group B
Group C
P9,028,252
49,787,113
43,331,337
P102,146,702



2012
P31,016,545
171,043,540
148,864,733
3,372
P350,928,190
Group A - new customers/related parties (less than 3 months).
Group B- existing customers/related parties (less than 3 months) with no defaults in the past.
Group C - existing customers/related parties (less than 3 months) with some defaults in the past. All
defaults were fully recovered.
As at December 31, 2013, trade and other receivables and advances to subsidiaries and associates of
P507,186,164 (2012 – P316,876,667) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default. The aging analysis of these trade
receivables is as follows:
2013
More than 3 months
More than 1 year
More than 1 year
- 26 -
2012
P154,946,579
346,858,007
P106,117,163
205,381,298
21,280,381
21,277,009
P523,084,967
P332,775,470
As at December 31, 2013, trade and other receivables and advances to subsidiaries and associates of
P200,666,116 (2012 – P200,666,116) were impaired and provided for. There was no provision for
impairment loss for the years ended December 31, 2013 and 2012. It was assessed that a portion of the
receivables is expected to be recovered. The aging of these receivables is as follows:
2013
More than 3 months
More than 1 year
More than 1 year
2012
P 37,179,184
P 37,179,184
163,486,932
163,486,932
P200,666,116
P200,666,116
The other classes within trade and other receivables do not contain impaired assets. The maximum
exposure to credit risk at the reporting date is the carrying amount of each class of receivable
mentioned above. The condominium certificates of the title remain in the possession of the Company
until full payment has been made by the customers.
Liquidity risk
The Company maintains adequate highly liquid assets in the form of cash and cash equivalents to
assure necessary liquidity. Free cash flows are restricted primarily for the settlement of their debt
obligations, in conformity with the rehabilitation plan.
The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the
maturity profiles of financial assets and liabilities.
The following tables detail the Company’s remaining contractual maturity for its non-derivative
financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Company can be required to pay. The table includes
both interest and principal cash flows.
Less than
One Year
One to Five
Years
More than
Five Years
Total
2013
P11,975
(In Thousand Pesos)
P72,648
P22,172
P106,795
2012
P19,917
P115,429
P268,024
P132,678
Fair value information
The following table set forth the carrying values which approximate the fair values of the Company’s
financial assets and liabilities recognized as of December 31, 2013 and 2012:
Financial Assets
Held-for-trading investments
AFS investments
- 27 -
2013
2012
P336,162,652
10,601,312
99,351,157
625,231,669
P411,919,783
11,314,518
298,304,688
683,703,660
106,795,123
268,024,227
The table below analyzes financial instruments measured at fair value at the end of the reporting
period by the level in the fair value hierarchy into which the fair value measurement is categorized:
December 31, 2013
Level 1
Equity investments:
P10,601,312
99,351,157
Level 2
P -
Level 3
P -
Total
P10,601,312
99,351,157
December 31, 2012
Level 1
Equity investments:
P11,314,518
298,304,688
Level 2
P -
Level 3
P -
Total
P11,314,518
298,304,688
6. Capital Risk Management
The Company manages its capital to ensure that the Company is able to continue as a going concern
while maximizing the return to shareholders through the optimization of the debt and equity balance.
The capital structure of the Company consists of equity, which comprises of issued capital, reserves
and deficit.
Management reviews the capital structure on a quarterly basis. As part of this review, Management
considers the cost of capital and the risks associated with it. The Company’s loan-to-equity ratio must
not exceed 1:1 as a requisite to exit the rehabilitation plan. The Company is able to meet this
requirement, computed as follows:
Loans payable
Equity
Debt to equity ratio
2013
2012
P 2,727,963,261
P 2,828,579,688
0.00:1
0.00:1
As part of the reforms of the Philippine Stock Exchange (PSE) to expand capital market and improve
transparency among listed firms, PSE requires listed entities to maintain a minimum of ten percent
(10%) of their issued and outstanding shares, exclusive of any treasury shares, held by the public. The
Company has fully complied with this requirement.
7. Cash and Cash Equivalents
Cash on hand and in banks
Cash equivalents
- 28 -
2013
2012
P39,328,136
296,834,516
P211,963,044
199,956,739
P336,162,652
P411,919,783
Cash in banks earned an average annual interest of 1.75% during 2013 and 2012, respectively. Cash
equivalents represent money market placements or short-term investments, with annual interest ranging
from 2.0% to 3.0% and 2.25% to 3.65% in 2013 and 2012, respectively.
8. Financial Assets at Fair Value Through Profit or Loss
The movement of financial assets at FVPL is summarized as follows:
Note
2013
2012
28
P11,314,518
(713,206)
P11,599,800
(285,282)
P10,601,312
P11,314,518
The account is composed of various equity securities. The fair value of these securities is based on
quoted market prices which is level one (1) in the fair value hierarchy.
The account is composed of the following listed equity securities from:
Property company
Holding firms
2013
2012
P6,750,000
3,851,312
P6,750,000
4,564,518
P10,601,312
P11,314,518
9. Available-for-sale financial assets
This account is composed of the following securities:
Note
Cost
Listed shares of stock
Golf and country club shares
Accumulated unrealized holding gain
33
2013
2012
P175,202,274
3,350,000
P175,202,274
3,350,000
178,552,274
(79,201,117)
178,552,274
119,752,414
P99,351,157
P298,304,688
The movement in the AFS securities is summarized as follows:
Balance, beginning
Sale of investments
Realized gain transferred from equity
Note
2013
2012
33
P298,304,688
(198,953,531)
P274,507,655
(4,020,617)
(3,734,824)
31,552,474
P99,351,157
P298,304,688
Balance, end
AFS financial assets are investments in shares of stock of various listed equity securities and golf and
country club shares that present the Company with opportunity for return through dividend income
and trading gains. The fair value of these investments is based on quoted market prices which is a level
one in the fair value hierarchy. Unrealized holding gains or losses from market value fluctuations are
recognized as part of the Company’s reserves.
- 29 -
There was no movement in AFS financial assets during 2013, except for the decline in fair value and
additional shares received as a result of stock dividends declared by A. Brown Company. In 2012, A.
Brown Company, Inc. shares were disposed through a series of sales. Total cost of shares disposed
amounted to P4.02 million. Accumulated holding gain transferred to profit or loss on sale of the
investments amounted to P3.34 million in 2012.
Valuation gain (loss) taken to equity from AFS investments amounting to (P199 million) in 2013 and
P27.8 million in 2012.
10. Trade and Other Receivables
Trade
Other receivables
2013
2012
P386,432,626
275,978,227
P591,260,728
129,622,116
662,410,853
(37,179,184)
720,882,844
(37,179,184)
P625,231,669
P683,703,660
Allowance for doubtful accounts
Trade receivables include amounts due from buyers of the Company’s condominium projects,
generally over a period of three (3) or four (4) years. The condominium certificates of title remain in the
possession of the Company until full payment has been made by the customers. Trade receivables due
after one year amount to P133.56 million in 2013 and P193.6 million in 2012.
Also, included in trade receivables are amounts due from certain buyers of Andrea North Skyline
Tower condominium project amounting to P160.37 million in 2013 and P291.9 million in 2012, for
which few of the buyers have filed cases against the Company for the rescission of contracts to sell and
refund of total installment payments made amounting to P8.2 million in 2013 and 2012. With the
completion of the Skyline Tower, most of the buyers concerned have opted to retain their units under
various compromise agreements with the Company. These trade receivables are now being collected
because units of Andrea North Skyline Tower have been turned over to the buyers.
Other receivables mainly consists of receivables from the sale of shares of MAC amounting to P191
million in 2013 and advances to contractors of Andrea North Skyline and Skyvillas Projects amounting
to P39 million in 2013 and P81 million in 2012. The rest of the balances are receivables from lessees
and concessionaires.
The allowance for doubtful accounts has been determined as follows:
2013
2012
Collectively impaired
Individually impaired
P21,671,384
15,507,800
P21,671,384
15,507,800
Total
P37,179,184
P37,179,184
In determining the recoverability of trade receivables, the Company considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date. The
concentration of credit risk is limited due to the client base being large and unrelated. Accordingly,
Management believes that there is no further credit provision required in excess of the allowance for
impairment loss on receivables.
- 30 -
Management further believes that the carrying amounts of the trade and other receivables approximate
fair values.
11. Prepayments and Other Current Assets
Creditable withholding tax
Prepaid taxes
Input value added tax– net
Prepaid expenses
Security deposits
Other assets
2013
2012
P86,105,135
38,239,295
31,774,316
11,451,570
7,046,637
4,601,883
P60,145,219
39,239,295
26,603,162
10,110,534
6,921,989
1,656,627
P179,218,836
P144,676,826
Creditable withholding tax is the tax withheld by the customer from their payment to the Company and
which tax is creditable against the income tax payable of the Company.
Prepaid taxes are unutilized creditable withholding taxes which were filed for refund with the Bureau
of Internal Revenue.
Input VAT amounting to P31.77 million and P26.60 million in 2013 and 2012, respectively, is net of
output VAT.
Security deposits are payments to contractors which will be returned upon completion of their works.
Other assets includes the initial investment made by the Company to the Global City project
amounting to P2.95 million in 2013 for payment of the master plan design.
12. Real Estate Inventories
Note
In progress:
The Icon Plaza
Andrea North Skyvillas
Tower
Andrea North Estate
Andrea North Showroom
Others
16
19
Completed units at cost:
Andrea North Skyline
Tower
Andrea North Skyline Model
Units
Casa Miguel
- 31 -
2013
2012
P323,898,559
P394,329,292
307,995,360
30,079,689
6,065,097
57,855,965
29,303,832
35,121,677
2,410,626
P668,038,705
P519,021,392
P248,512,636
P307,921,394
26,136,314
6,895,314
25,768,813
6,895,314
281,544,264
340,585,521
P949,582,969
P859,606,913
In February 2009, the Company resumed construction of Skyline Tower. Adjustments in cost estimate
and accounting for construction contracts were applied. Concurrent with the adoption of the
percentage of completion revenue recognition method, the change in cost estimate for sold units was
taken up in the books. Percentage of completion prior to resumption of construction in February 2009
was 34.74%. The percentage of completion was already 100% as of December 31, 2011.
As disclosed in Note 16, the Company’s share on the saleable area of “The Icon Plaza” under joint
venture agreement with Xcell Property Ventures, Inc. is recorded as real estate inventories. A number
of units of The Icon Plaza were already sold during 2012. The percentage of completion of The Icon
Plaza is 74.28% as of December 31, 2013.
Others includes initial cost of the Company in the new project in La Union which started in 2012 but
was deferred in 2013 when the Company decided to prioritize its ongoing Andrea North project in
New Manila.
13. Investments in Subsidiaries
Details of the Company’s ownership interest in subsidiaries as of December 31 are as follows:
2013
2012
100%
100%
81.53%
-
100%
100%
81.53%
86.66%
2013
2012
Investments in Subsidiaries:
P5,722,796
5,200,000
13,900,000
-
P5,722,796
5,200,000
13,900,000
125,785,375
24,822,796
(5,722,796)
150,608,171
(5,722,796)
P19,100,000
P144,885,375
The details of the Company’s investments in subsidiaries are as follows:
In December 2013, one million seven hundred forty nine thousand nine hundred eighty four
(1,749,984) shares or 70% of the total outstanding shares of MAC held by the Company was sold at a
gain of P64,907,106, presented as gain on sale of investments in subsidiary. The fair value of the
investment in MAC amounting to P45,458,000 at the date when the Company loss its control, was
reclassified to investment in associates with a gain of P15,431,319 for the remeasurement and
subsequently using measured equity method in 2013.
Management performed an assessment for impairment on its investment in subsidiaries. The negative
net worth of Universal Travel Corporation (UTC) indicate the possible impairment in the value of
investments in this entity. In 2011, the Company provided an allowance for impairment loss amounting
to P5,722,796 for investments in UTC. Upon reassessment in 2013, the Company believes that there is
no reversal of the allowance for impairment.
- 32 -
Aggregated amounts relating to subsidiaries are as follows:
2013
2012
P34,576,845
17,322,386
P29,827,218
17,467,176
Net assets
17,254,459
12,360,042
Income
Cost and expenses
10,833,907
(7,806,917)
26,705,660
(24,454,207)
3,026,990
P2,251,453
P19,041,264
5,542,959
P19,250,037
5,821,964
Net assets
13,498,305
13,428,073
Income
Cost and expenses
6,653,739
(7,148,553)
6,803,391
(6,344,522)
(494,814)
P458,869
Total assets
Total liabilities
P28,076,506
53,543,399
P31,773,986
56,147,315
Net assets
(25,466,893)
(24,373,329)
1,529,117
(2,539,602)
975,988
(2,170,866)
(P1,010,485)
(P1,194,878)
Total assets
Total liabilities
Net profit
Total assets
Total liabilities
Net profit (loss)
Income
Cost and expenses
Net loss
The following are the principal activities of the Company’s subsidiaries:
PPMI was incorporated and registered with the SEC on May 24, 1991 to engage in the business of
managing, operating, developing, buying, leasing and selling real and personal property either for itself
and/or for others.
The registered office of PPMI is at the 5/F East Tower, Philippine Stock Exchange Centre (PSE),
Exchange Road, Ortigas Center, Pasig City.
Tektite Insurance Brokers, Inc.
TIBI was incorporated and registered with the SEC on January 2, 1989 to engage in the business of
insurance brokerage.
The registered office of TIBI is at the 20/F, East Tower, PSE Centre, Exchange Road, Ortigas Center,
Pasig City.
On November 30, 2004, the TIBI's Board of Directors (BOD) approved and authorized the increase in
its authorized capital stock from P3.4 million, divided into 3.4 million common shares with par value
of P1 per share to P17 million, divided into 17 million common shares with par value of P1 per share.
The said increase is pending the SEC's approval. Accordingly, the Company will subscribe to 16
million common shares at a total price of P16 million through conversion of its deposit for future
capital stock subscription amounting to P16 million. The SEC, however, refused to act on TIBI's
application for the increase in capital stock until the Company pays the amount of P3.1 million
representing advances made to the Company.
- 33 -
In a special meeting of the BOD on July 20, 2005, pursuant to the order of the Insurance Commission
(IC), TIBI’s BOD resolved that the advances to the Company amounting to P3.1 million be offset
against the deposit for future capital stock subscriptions. Accordingly, in 2013, TIBI revised its
application with the SEC for the subscription from P16 million divided into 16 million common shares
with par value of P1 per share to P12.9 million divided into 12.9 million shares with par value of P1
per share, through the conversion of its deposit for future capital stock subscription amounting to P16
million less P3.1 million advances. As of reporting date, the conversion is pending approval of the SEC.
Universal Travel Corporation
UTC was incorporated and registered with the SEC on November 9, 1993 to engage in the business of
travel services by providing, arranging, marketing, engaging or rendering advisory and consultancy
services relating to tours and tour packages. The registered office of UTC is at the Ground Floor, West
Tower, PSE Centre, Exchange Road, Ortigas Center, Pasig City.
14. Investments in Associates
Details of the Company’s ownership interest on associates as of December 31 are as follows:
2013
2012
16.66%
45%
45%
45%
45%
The details of the Company’s investments in subsidiaries and associates are as follows:
Investments in Associates:
2013
2012
P45,458,000
14,184,150
11,250
P 14,184,150
11,250
59,653,400
(14,184,150)
P45,469,250
14,195,400
(14,184,150)
P11,250
Management performed an assessment for impairment on its investment in associates. The imminent
liquidation of Alexandra USA, Inc. (AUI) indicates the possible impairment in the value of investments
in this entity. In 2011, the Company provided an allowance for impairment loss amounting to
P14,184,150 for investments in AUI.
Aggregated amounts relating to associate are as follows:
Total assets
Total liabilities
P387,165,503
116,693,077
P382,815,202
151,835,366
Net assets
270,472,426
230,979,836
Income
Cost and expenses
79,370,835
(76,336,528)
100,765,250
(83,746,539)
P3,034,307
P17,018,711
Net profit
Forward
- 34 -
Total assets
Total liabilities
Net assets
Income
Cost and expenses
Net loss
Total assets
Total liabilities
2013
2012
P93,822
47,697
P106,019
11,200
46,125
94,819
519
(49,213)
3,423
(12,520)
(P48,694)
(P9,097)
P -
P -
Net assets
-
-
Income
Cost and expenses
-
-
P -
P -
Net loss
The following are the principal activities of the Company’s Associate:
Pasig City. Aside from its head office in Metro Manila, it maintains offices in the cities of Cebu and
Davao.
Le Cheval Holdings, Inc.
LCHI was incorporated and registered with the SEC on August 30, 1994 as a holding company and had
commenced operations as such by acquiring the majority outstanding shares of stock of Philippine
Racing Club, Inc. (PRCI). In 1996, LCHI sold its shares of stock of PRCI. Thereafter, LCHI became
inactive.
AUI was incorporated in the United States of America (USA). AUI is involved in property development
in Florida, USA. AUI is jointly owned with GPI (45%) and Warrenton Enterprises Corporation (10%) of
William Cu-Unjeng. AUI is in the process of liquidation after the completion of the projects in Naples
and Orlando.
- 35 -
15. Advances to Subsidiaries and Associates
Details of the Company’s advances to subsidiaries and allowance for unrecoverable advances as of
Allowance for unrecoverable advances
2013
2012
P184,767,313
(163,486,932)
P184,767,313
(163,486,932)
P21,280,381
P21,280,381
2013
2012
P52,350,191
P52,350,191
(643)
132,417,765
(643)
132,417,765
184,767,313
184,767,313
(163,486,932)
(163,486,932)
P21,280,381
P21,280,381
Details of advances to subsidiaries and associate are as follows:
Relationship
Advances to:
Universal Travel Corp.
Meridian Assurance
Corporation
Subsidiary
Associate
(2013);
Subsidiary
(2012)
Associate
Allowance for unrecoverable
advances
In late 2011, AUI started the process of liquidation. The Company provided for an allowance for
impairment loss amounting to P87,587,528 in 2011 in addition to the P44,830,236 recognized for
advances to this affiliate that can no longer be recovered. Impairment loss for advances to UTC was
also provided amounting to P31,069,168 due to uncertainty of recoverability.
Management believes that the carrying amounts of the advances to subsidiaries and affiliates
approximate fair values.
16. Real Estate Held For Development
Details of real estate held for development as of December 31 are as follows:
At cost:
- 36 -
2013
2012
P710,864,983
188,653,713
P710,864,983
188,653,713
P899,518,696
P899,518,696
Land invested in Joint Venture
In February 2005, the Company entered into a joint venture arrangement with Next Properties, Inc.,
renamed Xcell Property Ventures, Inc. (Xcell), for the development of a twin/tower residential
condominium on two (2) of the Company’s Fort Bonifacio lots to be called “The Icon Residences.” The
Company contributed two (2) lots to the joint venture, namely lots 14-2A and 14-1, and in return will
receive twenty-percent (20%) of net sales or P804 million whichever is higher, plus 35% of the joint
venture’s pre-tax profits from the project.
Further, it was arranged under the Company’s Rehabilitation Court approved plan that while
construction of the Project is on-going, Xcell shall remit to the Company the amount of not less than (i)
P280,000,000 for lot 14-1 and (ii) P304,600,000 for lot 14-2A. Provided, however, that total
remittance to the Company shall not be less than P20,000,000 per quarter starting in December 2005
for lot 14-2, and in June 2007 for lot 14-1.
In 2008, the Company and Xcell entered into an amended joint venture agreement. The agreement
provides that all amounts remitted by Xcell shall be held in trust by the Company, which shall open a
special trust account with the trust department of a commercial bank acceptable to Xcell. The funds
held in trust, as mandated by the rehabilitation plan, shall be utilized exclusively for the completion of
the Company’s Andrea North Skyline Tower, construction of which resumed in February 2009.
In July 2011, the Company entered into another joint venture agreement with Xcell Property Ventures,
Inc. (Xcell), for the development of a residential/commercial condominium on the Company’s Fort
Bonifacio lot to be called “The Icon Plaza.” The Company contributed lot 9-4 to the joint venture and
in return will receive twenty percent (20%) of the aggregated area of all the completed and saleable
units of the project, plus 35% of the joint venture’s pre-tax profits from the project. The Company’s
share on the saleable area of “The Icon Plaza” is recorded as part of Real Estate Inventories with
carrying amount equal to the cost of the land as disclosed in Note 12.
In 2012, the Company and Xcell made a clarification to the joint agreement. It was agreed that the
Company’s 35% share on the profit shall be taken entirely from the dividends from Xcell.
Xcell shall be solely responsible for the construction of the two (2) condominiums over a period of five
(5) to six (6) years. The admission value of the property based on the joint venture proposal is more
than its cost.
Details of land invested in joint venture as of December 31 are as follows:
2013
The Icon Residences
Lot 14-2A
Lot 14-1
The Icon Plaza
Lot 9-4
P309,699,540
401,165,443
P710,864,983
Accumulated equity in net earnings (losses)
of joint venture
-
Equity during the year
P710,864,983
2012
P309,699,540
401,165,443
P710,864,983
13,057,642
(13,057,642)
P710,864,983
Real estate held for development as at December 31 is composed of land held for development located
in New Manila, Quezon City amounting to P188,653,713 .
- 37 -
17. Investments in Joint Venture
Tagaytay Joint Venture
The Company owns 85% of Tagaytay Joint Venture as of December 31, 2013 and 2012.
The project is a joint arrangement wherein the Company and another joint venturer unanimously
decide on the relevant activities of the project. A parcel of land with an area of 39,975 square meters
located in Iruhin West, Tagaytay City was purchased at a cost of P60.4 million exclusively for the
development in relation to the arrangement. A residential subdivision will be developed on the said
parcel of land. In 1997, the said project was on its planning stage and recorded construction-inprogress consists primarily of payments for architectural designs. In 1998, the project was put on hold.
Additional investment made by the Company to the joint venture arrangement amounted to P70,000 in
2013 and P50,000 in 2012 for the upkeep of the property. The Company’s investment in the project
amounted to P60.21 million and P60.14 million in 2013 and 2012, respectively, as shown in the
separate statements of financial position.
Management believes that no indication of impairment loss has occurred on its investments in joint
venture.
18. Investment Properties
Details of investment property are as follows:
Land
San Juan, La Union
Condominium units
PSE Tower I
PSE Tower II
Land improvements
2013
2012
P33,859,578
15,110,392
-
P33,859,578
15,110,392
51,719,941
P48,969,970
P100,689,911
194,761,973
49,239,137
177,079,027
49,239,137
244,001,110
226,318,164
-
50,238,244
292,971,080
(21,005,125)
377,246,319
(12,104,207)
P271,965,955
P365,142,112
Accumulated depreciation
Land improvements pertain to the cost of excavation and pile driving works which was discontinued
when the land was restored to be able to use the property temporarily as parking lot.
The movements of investment properties are summarized as follows:
Balance, beginning
Sale
Sale cancellation
Note
2013
2012
23
P377,246,319
(101,958,185)
17,682,946
P394,929,265
(17,682,946)
-
P292,971,080
P377,246,319
Balance, end
- 38 -
The movements of accumulated depreciation are as follows:
Note
Balance, beginning
Provision
Sale cancellation
Sale
2013
2012
P12,104,207
11,937,257
803,770
(3,840,109)
29
P 12,907,977
(803,770)
P21,005,125
Balance, end
P12,104,207
In 2013, the Company sold Ivy League and improvements thereon for a consideration of P151.79
million. Gain on sale of Ivy League amounted to P53.67 million.
The aggregate fair values of the investment properties as of December 31 are as follows:
Land
San Juan, La Union
Condominium units
PSE Tower I
PSE Tower II
Land improvements
2013
2012
P121,856,000
80,268,000
-
121,856,000
80,268,000
P92,512,000
202,124,000
294,636,000
291,970,675
85,249,000
377,219,675
291,970,675
85,249,000
377,219,675
P579,343,675
78,795,000
P750,650,675
Rental income recognized from the investment properties amounted to P25,673,761 in 2013 and
P22,281,682 in 2012. Real property taxes attributable to the investment property amounted to
P6,422,595 in 2013 and P6,887,470 in 2012, these are included as part of taxes and licenses in
general and administrative expenses. Other direct operating expenses arising from investment
properties that generate rental income represent depreciation of condominium units which amounted
to P11,937,247 in 2013 and P12,907,977 in 2012.
- 39 -
19. Property and Equipment
A reconciliation of the carrying amounts of property and equipment, the gross carrying amounts, and
accumulated depreciation and amortization of property and equipment are shown below:
For the years ended December 31, 2013 and 2012
Condominium
Office
Units and
Furniture,
Transportation
Leasehold
Fixtures and
and Other
Improvements
Equipment
Equipment
Total
January 1, 2012
Additions
Disposals
52,872,634
283,034
-
12,510,154
176,678
-
12,241,047
510,856
(357,143)
77,623,835
970,568
(357,143)
December 31, 2012
Additions
Reclassifications
Disposals
53,155,668
1,017,349
65,344,610
(357,143)
12,686,832
144,588
-
12,394,760
541,500
-
78,237,260
1,703,437
65,344,610
(357,143)
December 31, 2013
P119,160,484
P12,831,420
P12,936,260
P144,928,164
32,745,486
3,195,202
-
11,899,658
191,966
-
7,887,755
1,477,956
(136,906)
52,532,899
4,865,124
(136,906)
December 31, 2012
Provision
Disposals
P35,940,688
3,305,649
-
P12,091,624
220,916
-
P9,228,805
1,234,360
(216,633)
P57,261,117
4,760,925
(216,633)
December 31, 2013
P39,246,337
P12,312,540
P10,246,532
P61,805,409
Carrying Amount December 31, 2012
P17,214,980
P595,208
P3,165,955
P20,976,143
Carrying Amount December 31, 2013
P79,914,147
P518,880
P2,689,728
P83,122,755
Accumulated Depreciation and
Amortization
January 1, 2012
Provision
Disposals
Fully depreciated property and equipment still in use and included in the foregoing balances
amounting to P37,475,139 and P36,096,451 as of December 31, 2013 and 2012, respectively.
Properties were reclassified to property and equipment from real estate inventories because of the
Company’s change in use of these properties, which is to use them for the Company’s operations (See
Note 12).
Management believes that there is no indication that an impairment loss has occurred on its property
and equipment.
- 40 -
20. Trade and Other Payables
Note
Retention fee payable
Non-trade payables
Customers’ deposits
Accrued expenses
Refundable deposits
Payable to government agencies
Trade payables
Accrued settlement expense
26
30
2013
2012
P43,585,684
19,004,544
16,789,205
15,104,069
7,256,823
3,041,084
2,013,714
-
52,126,497
28,167,713
34,483,703
17,565,149
6,879,494
1,890,497
P3,213,442
123,697,732
P106,795,123
P268,024,227
Retention fee payable is composed of retention fee from the contractors of Andrea North Skyline
Project.
Customers’ deposits consist of downpayments representing less than 25% of the contract price of the
condominium unit sold received from customers which are deductible from the total contract price.
Accrued expenses consist of unpaid liabilities on outside services, insurance, supplies and other
miscellaneous expenses.
Management believes that the carrying amounts of the trade and other payables approximate fair
values.
21. Unearned Income
In 2012, the Company started selling units of The Icon Plaza which is the project under joint venture
agreement with Xcell Ventures Property, Inc, as disclosed in Note 16. The percentage of completion of
The Icon Plaza as of December 31, 2013 is 74.28%.
The Company has an on-going project called the Andrea North Skyvillas Tower (“Skyvillas”). Skyvillas
started construction in 2011 and is 18.31% and 12.16% complete as of December 31, 2013 and 2012,
respectively.
Details of unearned income are as follows:
The Icon Plaza
Total sales value of completed units
Percentage uncompleted
Total Unearned Revenue
2013
2012
P289,560,735
25.72%
P270,542,879
53.00%
P74,475,021
P143,387,726
22. Funds Held in Trust
As disclosed in Note 16, the joint venture agreement between the Company and Xcell provided an
agreement that all amounts remitted by Xcell shall be held in trust by the Company and shall be
utilized exclusively for the completion of the Company’s Andrea North Skyline Tower, as mandated by
the rehabilitation plan. Funds held in trust amounted to P653 million in 2013 and 2012.
- 41 -
23. Related Party Transactions
In the normal course of business, the Company enters into various significant transactions with related
parties, which are consummated at terms comparable to those charged by or billed to third party
suppliers or customers. Significant transactions with related parties follow:
December 31, 2013:
Transactions
Outstanding
balance
Trade receivables
Greenhills Properties, Inc.,
Principal Shareholder
PRHC Property Managers,
Inc.
P -
P160,996,500
-
1,645,926
Non-trade payable
Cancellation of sale of
investment properties
Meridian Assurance
Corporation, Associate
P31,494,531
P9,325,000
Purchase of services
Tektite Insurance Brokers,
Inc, Subsidiary
P931,411
Inc., Subsidiary
1,258,619
P300,687
-
Advances
Associate
-
132,417,765
Universal Travel
Corporation, Subsidiary
-
52,350,191
Meridian Assurance
Corporation, Associate
-
(643)
Less: Allowance for
impairment loss
-
(132,417,765)
Balance, net
-
52,349,548
Sales of condominium units to
related parties are based on the
price list in force and terms that
would be available to third parties.
The receivables are secured, and
are payable monthly in two (2)
years.
This represents downpayment on
the sale which was cancelled and
is payable on demand.
Purchase of services are negotiated
basis. These payables are due 30
days after the end of the month.
These receivables are unsecured in
nature and bear no interest.
Advances to subsidiaries and
associates are unsecured and noninterest bearing and payable on
demand.
Key
management
includes
directors (executive and nonexecutive) and executive officers.
Short-term benefits
P19,417,308
benefits/PVO
5,445,877
- 42 -
-
43,490,737
December 31, 2012:
Transactions
Outstanding
balance
Trade receivables
Sale of investment properties:
Meridian Assurance
P31,494,531
P23,168,638
Greenhills Properties, Inc.,
Principal Shareholder
191,662,500
160,996,500
Inc., Subsidiary
-
2,994,453
Trade receivables
Sales of real estate inventories
Tektite Insurance Brokers,
Inc, Subsidiary
P2,087,871
Inc., Subsidiary
255,795
P630,724
-
Advances
Associate
P -
P132,417,765
Universal Travel
(3,866)
52,350,191
Meridian Assurance
(1,318)
(643)
Less: Allowance for
impairment loss
-
(132,417,765)
Balance, net
-
52,349,548
The receivables are secured, and
are payable monthly in two (2)
years.
Purchase of services are negotiated
basis. These payables are due 30
days after the end of the month.
These receivables are unsecured in
nature and bear no interest.
Advances to subsidiaries and
associates are unsecured and noninterest bearing and payable on
demand.
Key
management
includes
directors (executive and nonexecutive) and executive officers.
Short-term benefits
P15,829,597
benefits/PVO
3,680,225
-
36,361,266
Sale of investment properties
In 2012, the Company sold 3 units of PSE Tower I to MAC, a subsidiary, with a total contract price of
P31.49 million payable in 2 years, at a gain of P14.62 million. On December 23, 2013, the contract to
sell the condominium units owned by the Company was cancelled resulting to a loss of P14.62
million.
The Company also sold 2 floors of Icon Plaza to Greenhills Properties, Inc., a principal shareholder,
amounting to P191,662,500. The outstanding receivable from GPI as of December 31, 2013 and 2012
amounted to P160,996,500, secured with the condominium units, payable monthly, in 2 years.
- 43 -
PPMI also purchase a condominium unit from the Company. The outstanding receivable from PPMI
amounted to P1.65 million and P2.99 million as of December 31, 2013 and 2012, respectively.
The Company has an existing agreement with PPMI, a subsidiary, for the latter to manage its real estate
properties. In consideration thereof, the Company pays PPMI a fee as stipulated in the management
agreement.
In the normal course of business, the Company purchases insurance policies through TIBI.
Advances to (from) related parties
The Company’s substantial receivables from AUI, an associate, which is intended to fund the latter’s
working capital requirement, represents non-interest bearing advances with no fixed term with the
option to convert to equity in case of increase in capital. Advances contributed by AUI’s stockholders
were in accordance with the percentage of ownership of the stockholders in AUI. Outstanding
receivables amounted to P132.42 million in 2013 and 2012, and is included as part of advances to
subsidiaries and associates as disclosed in Note 15. The Company provided an allowance for
unrecoverable advances totaling to P132,417,765 as of December 31, 2013 and 2012.
Management believes that the carrying amount of the related party transactions approximates fair
value.
24. Retirement Benefit Plan
The Company operates a funded, non-contributory defined benefit retirement plan covering
substantially all of its regular employees. The plan is administered by a local bank as trustee and
provides for a lump-sum benefit payment upon retirement. The benefits are based on the employees’
monthly salary at retirement date multiplied by years of credited service. No other post-retirement
benefits are provided.
Through its defined benefit retirement plans and post-employment medical plans, the Company is
exposed to a number of risks, the most significant of which are detailed below:

Asset volatility - The plan liabilities are calculated using a discount rate set with reference to
corporate bond yields; if plan assets underperform this yield, this will create a deficit.

Inflation risk - Some of the Company’s retirement obligations are linked to inflation, and higher
inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary
increases are in place to protect the plan against extreme inflation). The majority of the plan’s
assets are either unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation,
meaning that an increase in inflation will also increase the deficit.
The most recent actuarial valuation of plan assets and the present value of the defined benefit
obligation were carried out by an independent actuary on January 28, 2014 for the year ended
December 31, 2013. The present value of the defined benefit obligation, and the related current
service cost were measured using the Projected Unit Credit Method.
- 44 -
The reconciliation of the present value of the defined benefit obligation (PVO) and the fair value of the
plan assets to the recognized liability presented as accrued retirement liability in the separate
statements of financial position is as follows:
2013
2012
Present value of defined benefit obligation
Fair value of plan assets
P59,620,693
5,648,570
P41,710,492
1,950,000
Recognized liability
P53,972,123
P39,760,492
The movements in the present value of defined benefit obligation are shown below:
2013
2012
Liability at beginning of year
Interest cost
Benefits paid
Remeasurement losses
Experience adjustments
Changes in financial assumptions
P41,710,492
4,452,238
2,419,210
(2,614,441)
P39,583,726
1,738,936
3,760,454
(6,269,000)
10,590,680
3,062,514
1,224,914
1,671,462
Liability at end of year
P59,620,693
P41,710,492
2013
2012
Fair value of plan assets at beginning of year
Interest income
Contribution of the employer to the plan
Benefits paid/ payable
Remeasurement gain
Return on plan assets, excluding amounts
included in interest income
P1,950,000
113,100
5,457,441
(2,614,441)
P 8,219,000
(6,269,000)
Fair value of plan assets at end of year
P5,648,570
The movements in the plan assets are shown below:
742,470
P1,950,000
The major category of plan assets as a percentage of the fair value of total plan assets as of
2013
2012
99%
1%
100%
-
100%
100%
2013
2012
2011
P4,452,238
2,306,110
P1,738,936
3,760,454
P1,856,142
3,741,662
P6,758,348
P5,499,390
P5,597,804
Equity instruments
The retirement expense recognized in profit or loss consists of:
Net interest on defined benefit liability
The retirement expense is recognized as part of employees benefits under operating expenses in the
separate statements of income (see Note 29).
- 45 -
The principal assumptions used to determine retirement benefits obligation of the Company are as
follows:
2013
5.10%
8.00%
Discount rate
2012
5.80%
7.00%
The sensitivity analysis of the defined benefit obligation is:
Discount rate
Increase
(decrease) in
basis points
Effect on defined benefit
obligation
+50
-50
+50
-50
P1,077,568
(1,077,568)
1,039,790
(1,039,790)
The above sensitivity analyses are based on changes in principal assumption while holding all other
assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions
may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method (present value of the defined benefit obligation calculated
with the projected unit credit method at the end of the reporting period) has been applied as when
calculating the retirement liability recognized in the separate statements of financial position.
25. Contingencies
The Company has a lawsuit pending decision by the Supreme Court, as follows:
In 1998, the Company sued Universal Leisure Corporation (ULC) for failing to pay the remaining
sales price of condominium units. ULC bought several condominium units under two Contracts to
Sell. After paying the down payment, ULC refused to pay the balance due in the principal sums of
P32.5 million and P32.4 million. In February 2004, a decision was rendered in favor of the
defendant on the account that ULC is an assignee of receivables from DMCI Project Developers,
Inc. (DMCI), Universal Rightfield Property Holdings, Inc. (URPHI). These receivables are allegedly
owed by the Company to DMCI and URPHI as a result of cancellation of a joint venture agreement
in 1996 entered into by the Company, DMCI and URPHI. The Company was ordered to deliver to
ULC the titles of the condominium units and return to ULC, as assignee of defendants DMCI and
URPHI, the amount of P24.7 million and pay attorney’s fees of P600,000. The Company appealed
the decision to the Court of Appeals which affirmed the trial court’s decision. During 2011, the
Company provided an allowance of P15,507,800 for accounts receivable that are deemed not
recoverable from ULC. In December 2012, the Company filed a motion for Reconsideration and
the same was denied. Thereafter, the Company filed a Petition for Review with the Supreme Court
where the matter is still pending as of reporting date.
In addition, the Company is involved in certain claims and pending lawsuits arising in the ordinary
course of business which is either pending decision by the courts or under negotiation.
Management believes that the final settlement, if any, of the foregoing lawsuits or claims would not
adversely affect the Company’s financial position or results of operations.
- 46 -
26. Operating Lease Agreements
Property rental income earned during 2013, 2012 and 2011 amounted to P25.67 million, P22.28
million and P21.91 million, respectively. At the reporting date, the Company has contracts with tenants
for the following future minimum lease income:
Not later than one year
Later than one year but not later than five
years
2013
2012
P8,304,919
P14,982,605
5,500
6,779,364
P8,310,419
P21,761,969
Refundable deposits on these lease agreements amounted to P7,256,823 and P6,879,494 in 2013 and
2012, respectively, and is included as part of trade and other payables as disclosed in Note 20.
Interest income for late payments amounted to P729,790, P227,558 and P108,357 in 2013, 2012 and
2011, respectively.
27. Interest Income
This account consists of interest from:
Note
Trade receivables
Penalty for late payments
Receivable from Xcell Property
Ventures, Inc.
Others
26
2013
2012
2011
P17,998,867
5,357,768
729,790
P13,942,996
11,159,626
227,558
P580,690
7,447,639
108,357
426,698
10,637,613
4,194,533
2,459,994
2,182,214
P28,280,958
P28,216,872
P20,956,513
2013
2012
2011
P39,840,584
735,089
36,632
P7,409,073
250,484
179,954
P1,869,616
5,430,938
259
(713,206)
(285,282)
427,923
12,990
256,712
53,499,445
1,228,212
P39,912,089
P7,810,941
P62,456,393
28. Other Income
Reversal of various payables and accruals
Foreign exchange gain
Dividend income
Realized holding gain/(loss) on financial assets
at FVPL
Gain on reversal of allowance for decline in
value of land held for development and
sale
Miscellaneous
Included in reversal of various payables in 2013 and 2012 is an adjustment on interest computation on
accrued settlement expense amounting to P39.65 million and P5.19 million, respectively.
- 47 -
29. General and Administrative Expenses
Note
Salaries and wages
Taxes and licenses
Condominium dues
Professional fees
Transportation and travel
Marketing expenses
Outside services
SSS, Pag-ibig, medicare and other
short-term benefits
Insurance and bond premiums
Utilities
Postage and communication
Supplies and materials
Corporate social responsibility
expenses
Repairs and maintenance
Membership dues
Representation and entertainment
Impairment loss on advances to
Impairment loss on trade receivables
Miscellaneous
18
19
24
15
2013
2012
2011
P24,097,548
18,356,631
P17,309,424
15,789,922
P15,675,437
26,252,899
11,937,257
4,760,925
8,572,315
8,055,214
7,657,249
6,758,348
2,483,673
2,466,722
12,907,977
4,865,124
13,253,008
7,591,952
5,526,736
5,499,390
8,718,571
2,442,785
6,675,552
7,167,176
12,794,636
5,145,646
5,597,804
10,847,569
2,347,266
2,275,029
1,977,029
1,508,693
568,905
510,022
2,120,472
1,840,297
2,257,679
723,033
313,467
1,356,249
2,104,194
1,607,553
579,342
566,096
317,158
302,752
232,346
88,520
208,824
996,582
165,392
95,275
409,294
134,008
134,418
-
13,14
10
-
118,656,695
4,117,077
7,807,030
19,906,946
15,507,800
9,147,167
P107,043,413
P110,432,940
P262,613,747
2013
2012
2011
P7,751,825
48,079
-
P 32,664
917,354
P112,752,457
31,336
5,289,951
P7,799,904
P950,018
P118,073,744
30. Other Expenses
Settlement expenses
Bank charges
Foreign exchange loss
In 1996, a certain contractor for one of the projects undertaken filed a complaint against the Company
for alleged escalation costs, unpaid costs of construction and exemplary damages. The Company filed
an answer with counterclaim representing liquidated damages for delay in construction, overpayment
and exemplary damages. On January 31, 2001, the Regional Trial Court (RTC) issued an order to the
Company to pay the said contractor. The Company appealed the decision to the Court of Appeals
which reversed the RTC decision. On June 13, 2011, the Supreme Court promulgated a decision
directing the Company to pay P112,752,457, inclusive of interest. This case was settled in 2013.
- 48 -
In 2013, the Company was ordered by the Housing and Land Use Regulatory Board (HLURB) to pay
the damages amounting P 7.75 million to the buyers of condominium units of Andrea Project who filed
cases for rescission of their respective contracts to sell. The Company already paid the amount during
2013.
31. Income Taxes
Components of income tax expense (benefit) are as follows:
Current
Deferred
2013
2012
2011
P2,999,291
(244,891)
P2,369,923
695,093
P1,599,837
(76,839)
P2,754,400
P3,065,016
P1,522,998
A reconciliation between tax expense and the product of accounting income (loss) multiplied by 30%
in 2013, 2012 and 2011 follows:
2013
2012
2011
Accounting income (loss) before tax
P110,072,667
P3,709,746
(P254,439,548)
30%
33,021,800
30%
1,112,923
30%
(76,331,864)
300,000
213,962
(24,101,528)
-
1,170,000
85,585
1,181,686
780,000
(128,377)
68,666,527
(5,061,514)
(1,607,330)
(10,990)
-
(3,347,888)
(53,986)
3,917,293
(1,000,597)
-
(2,234,292)
(78)
2,176,330
14,711,090
Statutory tax rate
Tax expense (benefit)
Additions to (reductions in) income tax
resulting from the tax effects of:
Non-deductible expenses
Unrealized gain on trading investments
Gain on sale of investments in a subsidiary
Unrecognized deferred tax assets
Recovery of unrecognized deferred tax
assets
Interest income subjected to final tax
Dividend income
Equity in net losses of joint venture
Gain on sale of listed shares of stock
Non-deductible cost of sales
Non-taxable sales
P2,754,400
P3,065,016
5,972,084
(12,088,422)
P1,522,998
Under Republic Act No. 8424, the Company is subject to either the 30% regular income tax or 2%
minimum corporate income tax (MCIT), whichever is higher. The excess MCIT over the regular income
tax shall be carried forward and applied against the regular income tax due for the next three
consecutive taxable years.
- 49 -
Deferred income tax assets - net recognized by the Company consist of:
2013
2012
2011
Tax Base
Deferred Tax
Tax Base
Deferred Tax
Tax Base
Deferred Tax
P53,972,123
P16,191,637
P39,760,492
P11,928,148
P39,583,726
P11,875,118
Deferred Tax Assets
Retirement benefit
obligation
Minimum corporate
income tax (MCIT)
-
-
-
-
-
1,511,897
53,972,123
16,191,637
39,760,492
11,928,148
39,583,726
13,387,015
Deferred Tax Liabilities
Unrealized foreign
exchange gain
Deferred rent income
735,089
1,656,625
220,527
496,987
250,483
1,656,625
75,146
496,987
5,430,940
1,656,625
1,629,282
496,987
2,391,714
717,514
1,907,108
572,133
7,087,565
2,126,269
P51,580,409
P15,474,123
P37,853,384
P11,356,015
P32,496,161
P11,260,746
The Company's unrecognized deferred tax assets pertain to the following:
2013
Net operating loss
carry-over
Allowance for
impairment loss
on advances to
subsidiaries and
associates
Allowance for
impairment loss
on receivables
Unrealized foreign
exchange loss
Minimum corporate
income tax
(MCIT)
Total
2012
2011
Tax Base
Deferred Tax
Tax Base
Deferred Tax
Tax Base
Deferred Tax
P152,485,420
P45,745,626
P322,118,810
P96,635,643
P383,351,400
P115,005,420
163,486,932
49,046,080
163,486,932
49,046,080
163,486,932
49,046,080
37,179,184
11,153,755
37,179,184
11,153,755
37,179,184
11,153,755
917,353
275,206
5,289,953
1,586,986
-
-
-
6,802,560
P353,151,536
P112,748,021
P523,702,279
3,803,269
P160,913,953
-
-
P589,307,469
P176,792,241
Deferred tax assets have not been recognized in respect of the above items because it is not probable
that future taxable profit will be available against which the Company can utilize the benefits there
from.
The Company has NOLCO that can be claimed as deduction from future taxable income as follows:
Year Incurred
Expiry date
2011
2010
2014
2013
Amount
Applied/Expired
Balance
P152,485,420
169,633,390
P 169,633,390
P152,485,420
-
P322,118,810
P169,633,390
P152,485,420
- 50 -
The Company has MCIT that can be claimed as tax credits against future normal income tax liabilities
as follows:
Year Incurred
Expiry date
2013
2012
2011
2016
2015
2014
Amount
P2,999,291
2,291,372
1,511,897
P6,802,560
Applied/Expired
Balance
P P -
P2,999,291
2,291,372
1,511,897
P6,802,560
2013
2012
2011
P8,000,000,000
P8,000,000,000
P8,000,000,000
3,688,735,980
3,688,679,636
3,687,721,960
1,314,845,027
(509,725,769)
1,314,901,371
(509,782,113)
1,315,859,047
(509,782,113)
805,119,258
805,119,258
806,076,934
114,751
114,751
114,751
P4,493,969,989
P4,493,913,645
P4,493,913,645
P109,712,439
P109,712,439
P109,712,439
32. Capital Stock
Authorized
8,000,000 common shares at P1 par
value
Issued and outstanding
3,688,735,980 shares in 2013
3,688,679,636 shares in 2012
3,687,461,960 shares in 2011
Subscribed
1,314,845,027 shares in 2013
1,314,901,371 shares in 2012
1,316,119,047 shares in 2011
Subscriptions receivable
Additional paid-in capital
Treasury
81,256,100 common shares with
average cost of P1.35 per share
33. Reserves
Revaluation on Available-for-sale
Investments
9
2013
2012
(As Restated)
2011
(As Restated)
119,752,414
(198,953,531)
91,934,764
27,817,650
91,990,470
(55,706)
(P79,201,117)
P119,752,414
P91,934,764
Forward
- 51 -
Remeasurement Loss on
Retirement Benefit
Obligation
Adjustment
36
As restated
Actuarial loss during the
year - gross
Actuarial loss during the
year - tax
24
Appropriated retained
earnings
2013
2012
(As Restated)
2011
(As Restated)
P (6,836,375)
P (4,808,911)
P (4,808,911)
(6,836,375)
(4,808,911)
(4,808,911)
(12,910,724)
(2,896,377)
-
3,873,217
868,913
-
(15,873,882)
(6,836,375)
(4,808,911)
250,000,000
250,000,000
250,000,000
P154,925,001
P362,916,039
P337,125,853
The Company’s appropriated retained earnings amounting to P250,000,000 was allocated for treasury
stock acquisitions.
34. Basic Income (Loss) Per Share
Net income (loss)
Weighted average no. of common
shares - issued and outstanding
2013
2012
2011
P107,318,267
P644,730
(P255,962,546)
4,922,324,907
4,922,324,907
4,922,324,907
P0.02
P0.00
(P0.05)
Basic income (loss) per share
The weighted average number of common shares issued and outstanding was computed as follows:
2013
2012
2011
Issued and outstanding
Subscribed shares
Treasury shares
3,688,735,980
1,314,845,027
(81,256,100)
3,688,679,636
1,314,901,371
(81,256,100)
3,687,461,960
1,316,119,047
(81,256,100)
Average number of shares
4,922,324,907
4,922,324,907
4,922,324,907
The Company has no potential dilutive shares.
- 52 -
35. Restatement
During the year, the Company adopted the revision to PAS 19 and PFRS 11 which are effective
beginning January 1, 2013.
As discussed in Note 3, the revision in PAS 19 eliminate the corridor approach and require the
recognition of all of the Company’s unrecognized actuarial losses and past service cost immediately.
In effecting the restatement, the Company adjusted the amounts reported previously in the separate
financial statements as at the beginning of the earliest period presented.
The effects of such restatement on remeasurement losses on accrued retirement liability,
unappropriated retained earnings, net income (loss) and total equity are summarized in the tables
below:
The effects of this restatement on total assets and total liabilities are summarized in the table below:
2012
Remeasurement
loss on accrued
PAS 19
Deferred tax effect
As restated
Deficit
Net income
Total equity
(P1,918,926,033)
P461,442
P2,835,027,587
(9,766,250)
2,929,875
554,966
(166,490)
261,837
(78,551)
(9,211,284)
2,763,385
(P6,836,375)
(P1,918,537,557)
P644,728
P2,828,579,688
Net loss
Total equity
(P1,919,387,477)
(P256,167,736)
P2,806,748,493
(6,869,873)
2,060,962
293,129
(87,939)
293,129
(87,939)
(6,576,744)
1,973,023
(P4,808,911)
(P1,919,182,287)
(255,962,546)
2,802,144,772
P -
2011
Remeasurement
loss on accrued
PAS 19
Deferred tax effect
As restated
P -
Deficit
2012
2011
Total assets
Total liabilities
Total assets
Total liabilities
PAS 19
Deferred tax effect
P3,930,075,918
P1,095,048,331
P3,751,286,630
P944,538,137
2,763,385
9,211,284
-
1,973,024
6,576,745
-
As restated
P3,932,839,303
P1,104,259,615
P3,753,259,654
P951,114,882
- 53 -
36. Events after the Reporting Date
On March 18, 2014, as recommended by the Rehabilitation Receiver, the Company’s Motion to
Terminate Rehabilitation Proceeding on the Account of the Successful Implementation of the
Rehabilitation Plan was granted. Accordingly, the Stay Order issued in this case was lifted. As a result,
the Company can now freely use its properties to obtain funds for their development without
requesting for the approval of the Receiver. (See Note 1 for the details of the Rehabilitation Plan)
37. Supplementary Information Required by the Bureau of Internal Revenue (BIR)
The Bureau of Internal Revenue issued RR19-2011 and RR15-2010 on December 29, 2011 and
November 25, 2010, respectively, which requires certain tax information to be disclosed in the notes to
the separate financial statements. The Company presented the required supplementary tax information as
a separate schedule attached to its annual income tax return.
- 54 -

Document 6524302

Transcription

Similar documents

Teleplan Annual Report 2007 from website

Teleplan_GB_2006_Final

Eloxite Corporation

Exclusive listing broker: HomeLife/Bayview Realty

Mincom New Choice Realty Ltd. Brokerage Brochure

Pahlen Realty, Inc. proudly presents

kung fu gardens - First Property

review of financial results

Challenger 2/3 Level 0 Control

Compared to cold-tip thermometers