sec17q 1206 amended · 1 | page sec number 1674 file number manila broadcasting company...
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SEC Registration Number
M A N I L A B R O A D C A S T I N G C O M P A N Y
(Company’s Full Name)
M B C B u i L d i n g , S t a r C i t y ,
C C P C o m P l e x , R o x a s B o u l e v a r d ,
P a s a y C I t y
(Business Address: No. Street City/Town/Province)
Mr. Eduardo Cordova 832-6149
(Contact Person) (Company Telephone Number)
1 2 3 1 1 1 2 0 I S
Month Day Year (Form Type) Month Day
(Calendar Year) (Annual Meeting)
Not Applicable
(Secondary License Type, If Applicable)
Not Applicable
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document ID Cashier
S T A M P S
Remarks: Please use BLACK ink for scanning purposes.
COVER SHEET
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SEC Number 1674
File Number
MANILA BROADCASTING COMPANY
(Company's Full Name)
MBC BUILDING, STAR CITY, CCP COMPLEX
ROXAS BOULEVARD, PASAY CITY, METRO MANILA
(Company's Address)
832-6149; 8326150
(Telephone Number)
December 31
(Fiscal Year Ending)
FORM 20 IS
(Form Type)
DEFINITIVE INFORMATION STATEMENT
(Amendment Designation)
(Period Ended Date)
September 12, 2012
(Date Prepared)
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SECURITIES AND EXCHANGE COMMISSION
SEC FORM 20-IS
INFORMATION STATEMENT PURSUANT TO SECTION 20
OF THE SECURITIES REGULATION CODE
1. Check the appropriate box:
[ ] Preliminary Information Statement
[ X ] Definitive Information Statement
2. Name of Registrant as specified in its charter – MANILA BROADCASTING COMPANY
3. METRO MANILA
Province, country or other jurisdiction of incorporation or organization
4. SEC Identification Number - 1674
5. BIR Tax Identification Code – 000-479-027
6. MBC Bldg., Star City, CCP Complex, Roxas Boulevard, Pasay City, M.M.
Address of principal office Postal Code 1300
7. Registrant’s telephone number, including area code - (632) 832-6249/50
8. 24 October 2012, 3:00 p.m. at Star City Theatre, Star City, CCP Complex, Roxas
Boulevard, Pasay City, M.M.
Date, time and place of the meeting of security holders
9. Approximate date on which the Information Statement is first to be sent or given to
security holders – 21 September 2012
10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of
the RSA (information on number of shares and amount of debt is applicable only to
corporate registrants):
Title of Each Class Number of Shares of Common Stock Outstanding
or Amount of Debt Outstanding
Common P1.00 par value 402,682,990 shares
Debt P293,816,130
11. Are any or all of registrant's securities listed on a Stock Exchange?
Yes - x No _______
If yes, disclose the name of such Stock Exchange and the class of securities listed
therein: Philippine Stock Exchange – Common Shares
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INFORMATION REQUIRED IN INFORMATION STATEMENT
A. GENERAL INFORMATION
Item 1. Date, time and place of meeting of security holders.
(a) Date, time and place of the meeting of security holders: 24 October 2012, 3:00
p.m. at Star City Theatre, Star City, CCP Complex, Roxas Boulevard, Pasay City,
M.M.
Complete mailing address of the principal office of the registrant – 2nd
Floor, MBC
Building, Star City, CCP Complex, Roxas Boulevard, Pasay City, M.M.
Approximate date on which the Information Statement is first to be sent or given to
security holders – 21 September 2012
Item 2. Dissenters' Right of Appraisal
A stockholder has the right to dissent and demand payment of the fair value
of his share (1) in case of any amendment to the articles of incorporation has the
effect of changing or restricting the rights of any stockholders or of authorizing
preference over the outstanding shares or of extending or shortening the term of
corporate existence (2) in case of sale, lease, mortgage or disposition of all
substantially all the corporate property or assets and (3) in case of any merger or
consolidation.
The appraisal right may be exercised by a stockholder who voted against the
proposed corporate action by making a written demand on the corporation for the
payment of the fair market value of his shares within thirty (30) days after the date
on which the vote was taken.
However, no action to be taken during the 24 October 2012 Annual Meeting
of Stockholders will entitle any shareholder to exercise the right of appraisal as
provided by the Corporation Code of the Philippines.
Item 3. Interest of Certain Persons in Matters to be Acted Upon
The Corporation has no information respecting any opposition that its
directors or officers or nominees for election or their associates may have against
the matters to be acted upon during the Annual Stockholders’ Meeting on 24
October 2012.
The Corporation also has no information regarding any substantial interest,
direct or indirect, by any stockholder or otherwise, in any matter to be acted upon.
B. CONTROL AND COMPENSATION INFORMATION
Item 4. Voting Securities and Principal Holders Thereof
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• Each of the 402,682,990 outstanding shares of the Company as of 30 September
2012 is entitled to one (1) vote.
• A stockholder entitled to vote at the meeting shall have the right to vote in person
or by proxy by the number of shares of stock held in his name on the stock books of
the Company as of 30 September 2012 and said stockholder may vote such number
of shares for as many persons as there are directors to be elected or he may
cumulate said shares and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal or he
• may distribute them on the same principle among many candidates as he shall
see fit. The setting of the record date has been complied with upon due
disclosure with PSE on 12 September 2012.
Item 5. Directors and Executive Officers
Directors and Executive Officers of the Registrant
(a) Security Ownership of Certain Record and Beneficial Owners
Owners of at least 5% of the Company’s securities as of 31 August 2012 are as
follows:
Title of
Class
Name and
Address of
Record Owner
and
Relationship
with Issuer
Name and
Address of
Beneficial
Owner and
Relationship
with Record
Owner
Citizenship No. of Shares Held Percent
Common Elizalde
Holdings
Corporation, 2nd
Floor, MBC
Bldg., CCP
Complex, Roxas
Boulevard,
Pasay City, M.M.
(stockholder)
Eduardo G.
Cordova*
2nd
Floor, MBC
Bldg., CCP
Complex, Roxas
Boulevard,
Pasay City, M.M.
Senior Vice-
President
Filipino 139,558,774
34.66%
Elizalde Land
Inc., 2nd
Floor,
MBC Bldg., CCP
Complex, Roxas
Boulevard,
Pasay City, M.M.
(stockholder)
Eduardo G.
Cordova*, 2nd
Floor, MBC
Bldg., CCP
Complex, Roxas
Boulevard,
Pasay City, M.M.
Senior Vice-
President
Filipino
87,000,000
21.61%
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Romulo
Mabanta
Buenaventura
Sayoc & delos
Angeles Law
Offices*,
30th Floor,
Citibank Tower,
8741 Paseo de
Roxas, Makati
City, M.M.
(stockholder)
Atty. Reynaldo
G. Geronimo*
30th Floor,
Citibank Tower,
8741 Paseo de
Roxas, Makati
City, M.M.
Trustee/Partner
Filipino
69,910,993.25
17.36%
Cebu
Broadcasting
Company*, 2nd
Floor, MBC
Bldg., CCP
Complex, Roxas
Boulevard,
Pasay City, M.M.
(Affiliate
Broadcast
Company)
AQG
Corporation,
2291Chino
Roces Avenue,
Makati City
(Stockholder)
Robert A. Pua*
2nd Floor, MBC
Bldg., CCP
Complex, Roxas
Boulevard,
Pasay City, M.M.
Vice President
Julio D. Sy, Jr.*,
2291 Chino
Roces Avenue,
Makati City
President &
Chairman
Filipino
Filipino
50,000,000
33,000,000
12.42%
8.20%
• The same person authorized to vote on the shares of Corporate Shareholder.
(b) Security Ownership of Management as of 31 August 2012.
% to
total
Number
of
Shares
I/O
Shares A B Total
Directors (All Filipino)
FRED J. ELIZALDE
Direct
0.0000%
94
RUPERTO S. NICDAO, JR.
Direct
0.0321%
129,201
JULIO MANUEL P. MACUJA
Direct
0.0000%
36
EDUARDO G. CORDOVA
Direct
0.0032%
12,779
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JUAN M. ELIZALDE
Direct
0.0002%
1,000
JOSE M. TARUC, JR.
Direct
0.0002%
1,000
SANTIAGO Z. URETA
Direct
0.0000%
36
GEORGE T. GODUCO
Direct
0.0002%
1,000
RUDOLPH STEVE E. JULARBAL
Direct
0.0027%
10,807
Sub-total
0.0387% 155,953
Officers (All Filipino)
ROBERT A. PUA
Direct
0.0031%
12,293
JONATHAN E. DECENA
Direct
0.0002%
1,000
IRVING A. LISONDRA
Direct
0.0002%
1,000
CARLEA MIRANDA
Direct
0.0002%
1,000
JOSE MA. T. PARROCO
Direct
0.0031%
12,294
ELPIDIO M. MACALMA
Direct
0.0002%
1,000
Sub-total
0.0071% 28,587
Total
0.0458% 184,540
There is no arrangement existing that may result in a change of control of the
registrant.
Voting Trust Holders of 5% or More
The Chairman, Fred J. Elizalde, holds voting trust or similar agreements to more than
5% of the common stock of the corporation and has voting rights and such powers
as provided in the Corporation Code. Elizalde Holdings Corporation is owned by
various trust funds that have executed voting trusts in favor of the Chairman, Fred J.
Elizalde. These agreements shall last during the lifetime of Fred J. Elizalde as
provided for in the agreements. Mr. Fred J. Elizalde holds office at the principal
office of the Corporation. Elizalde Land, Inc. and Cebu Broadcasting Company are
100% owned subsidiaries of Elizalde Holdings Corporation. Mr. Eduardo G. Cordova
and Mr. Robert A. Pua are the persons designated to exercise voting power over the
shares of ELI and CBC respectively in the registrant and holds office at the principal
office of the Corporation also.
Atty. Reynaldo G. Geronimo is the designated Trustee of the Romulo Mabanta
Buenaventura Sayoc & Delos Angeles Trust Fund that holds voting trust or similar
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agreements to more than 5% of the common stock and has voting rights and such
powers as provided in the Corporation Code. The designation as trustee shall
continue in accordance with the agreements. He holds office at 30th
Floor, Citibank
Tower, 8741 Paseo de Roxas, Makati City.
A. Executive Officers (All Filipino Citizens)
Name Position
Fred J. Elizalde -Chairman of the Board
Ruperto S. Nicdao, Jr. -President
Julio P. Macuja II -EVP-Treasurer
Eduardo G. Cordova -SVP-CFO
Juan Manuel Elizalde -VP-Operations
Jose M. Taruc -VP-DZRH
Rudolph Steve E. Jularbal -VP-Legal and Corporate Secretary
Robert A. Pua -VP-Controller and Compliance Officer
Irving A. Lisondra -VP-Creative Service
Ellen C. Fullido -VP-HRD/Technical Services
Carlea C. Miranda -VP-Treasury
Elpidio Macalma -AVP- DZRH
Wilfredo Espinosa -AVP- FM Programming
Jose Ma. T. Parocco -AVP – Sales
B. Directors (All Filipino Citizens)
Name Age Term
Fred J. Elizalde 71 1985 up to the present
Ruperto S. Nicdao, Jr. 56 1988 up to the present
Eduardo G. Cordova 62 1988 up to the present
Julio Manuel P. Macuja 48 1999 up to the present
Jose M. Taruc 64 2001 up to the present
George T. Goduco* 46 2003 up to the present
Santiago Z. Ureta* 77 2006 up to the present
Rudolph Steve E. Jularbal 57 2011 up to the present
*Independent Directors
The term of office of the duly elected directors shall be one (1) year or until their
successors have been duly elected.
The following are the criteria for Independent Directors:
a. Not a director or officer or substantial stockholder of the corporation or of its
related companies or any of its substantial shareholders (other than as an
independent director of any of the foregoing);
b. Not a relative of any director, officer or substantial shareholder of the corporation,
any of its related companies or any its substantial shareholders. For this purpose,
relative included spouse, parent, child, brother, sister and the spouse of such child,
brother or sister;
c. Not acting as a nominee or representative of a substantial shareholder of the
corporation, any of its related companies or any of its substantial shareholders;
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d. Not been employed in any executive capacity by that public company, any of its
related companies or any of its substantial shareholders within the last two (2)
years;
e. Not retained as professional adviser by that public company, any of its related
companies or any of its substantial shareholders within the last two (2) years, either
personally or through his firm;
f. Not engaged and does not engage in any transaction with the corporation, or with
any of its related companies or with any of its substantial shareholders, whether by
himself or with other persons or through firm of which he is a partner or a company
of which he is a director or substantial shareholder, other than transactions which
are conducted at arms length and are immaterial or insignificant.
The Nomination Committee of the Board of Directors is composed of: Mr. George T.
Goduco, Chairman; and Mr. Fred J. Elizalde and Mr. Ruperto S. Nicdao, Jr., members.
As part of the pre-screening, the qualifications of the nominees, as submitted by the
shareholders of record, were considered by the Nominating Committee. With due
regard to the qualifications and disqualifications set forth in the Company’s manual
for Corporate Governance, the Securities Regulation Code and its Implementing
Rules and the criteria prescribed in SEC memorandum Circular No. 13, Series of
2004, the Nomination Committee has determined:
a. All incumbent directors were nominated to re-election and shall form part of the
list of nominees; and
b. Of the incumbent directors, Mr. Santiago Z. Ureta and Mr. George T. Goduco,
the only nominees nominated as independent directors, are qualified to sit in
the Board of the Company as independent directors. The nominees for
independent directors were nominated by Mr. Ruperto S. Nicdao, Jr. and there is
no relationship between them.
The company has complied with all of the requirements of SRC Rule 38 as amended
regarding the procedure for nomination and election of Independent Directors.
The Certification on Qualification and Disqualification of Independent Directors will
be filed with the Commission within one month after the annual stockholders’
meeting.
Business Experience for the last Five (5) years of Directors/Officers
Fred J. Elizalde has been serving as Director/Chairman of the Company since
1985. He is also currently serving as Chairman/President of Philippine
International Corporation (Philcite), Star Parks Corporation (Star City), Elizalde
Holdings Corporation and Northern Capiz Agro-Industrial Development
Corporation (Norcaic). He has also served as past Chairman/President of Asean
Section, Asean-U.S. Business Council, Philippine Chamber of Commerce &
Industry, Confederation of Asian Chambers of Commerce & Industry, etc. In
2005, he was appointed as member of the Boracay Eminent Persons Group. He
graduated Magna Cum Laude from Harvard University with a degree of Bachelor
of Arts Major in Social Relations.
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Ruperto S. Nicdao, Jr. is the current President of the Company. He has been
serving as Director of the Company since 1988. He is also serving as Director of
Philippine International Corporation, Star Parks Corporation, Elizalde Holdings
Corporation and Cultural Center of the Philippines. He is the Vice-Chairman of
KBP and a member of the Financial Executives Institute of the Philippines,
Philippine Chamber of Commerce and Industry and the Makati Business Club.
He obtained his Master’s in Business Administration from Asian Institute of
Management and his AB-Honors (Major in Math), Magna Cum Laude, from De La
Salle College.
Eduardo G. Cordova has been a Director of the company since 1988 and is
currently the SVP-CFO of the Company and Elizalde Holdings Corporation. He is
also Chairman/President of our affiliate Philippine Broadcasting Corporation. He
is a member of the Philippine Institute of Certified Public Accountants (PICPA).
He is a Certified Public Accountant and obtained his Master’s in Business
Administration, with honors, from University of St. La Salle and his bachelor’s
degree in business administration from University of the East.
Julio Manuel P. Macuja is EVP-Treasurer of the Company which he joined in
1999. He is the Chief Information Officer registered with the Philippine Stock
Exchange. He is also a Director of Elizalde Holdings Corporation and Star Parks
Corporation. He was formerly part of the Treasury Group of the Bank of the
Philippine Islands. Prior to this he was Acting Director of the Ateneo Center for
Social Policy and Public Affairs and part time faculty member of the Economics
Department, Ateneo de Manila University, where he finished his Bachelor of
Arts Degree in Economics (Honors) in 1985. He completed his post-graduate
studies as a scholar of the British Council at the Victoria University of
Manchester in 1989, obtaining a degree of Master of Arts in Economic and
Social Studies (Major in Development Studies).
Juan Manuel Elizalde is currently the VP-Operations and has been connected
with the Company since 1994 in various capacities. He holds an AB Mass
Communication degree from Menlo College, Menlo Park, California, U.S.A.
Jose M. Taruc has been with the Company since 1986. He is a multi-awarded
broadcast professional and is currently the Station Manager with rank of Vice
President of the Company’s flagship station DZRH-AM. He is an accounting
graduate of Jose Rizal College and was involved with other broadcast networks
as reporter prior to joining the Company.
Santiago Z. Ureta is an independent director. He is a double degree holder of
Bachelor of Science in Mechanical Engineering, Magna Cum Laude, 1955 and
Bachelor of Science in Electrical Engineering, 1956, from National University. He
is presently Consultant, CADP Consultancy Services, Inc., President, Philippine
Association of Sugar Refiners, Inc., Treasurer, Philippine Sugar Research Institute
and Trustee, Sugar Master Plan Foundation. He was formerly President, Central
Azucarera de la Carlota (a listed company), President, Philippine Sugar Millers
Association, Inc. 1993 – 1995, Chairman, Philippine Sugar Technologists
Association, Inc., President, Philippine Sugar Technologists Association, Inc.,
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National Vice President, Philippine Society of Mechanical Engineers, 1976 and
President, Negros Occ. Chapter, Philippine Society of Mechanical Engineers,
1974.
George T. Goduco is an independent director. At present, he is the President of
Healthlab Inc., a full service diagnostics laboratory and medical examination
facility. He was EVP/COO of Star Parks Corporation in 2000-2002. He also served
as Vice-President and Treasurer of the FJE Group of Companies in 1997-2000
and its Director for Corporate Planning in 1995 – 1997. He also served as
Account Officer in Solidbank and Boston Bank from 1988-1991. He holds an
MBA from the University of Bridgeport, Connecticut and a Bachelor of Science in
Economics from the University of the Philippines.
Rudolph Steve E. Jularbal is currently the Corporate Secretary. He is also the VP
of the Legal and Regulatory Compliance Group and concurrently the Officer-in-
Charge of the company’s AM flagship station, DZRH-Manila. Atty. Jularbal first
joined the company in 1986. He resigned in 1999, did a short stint as VP-Legal of
Nextel Communications, Phil. from 1999 to 2001 when he went into private
practice and was a retained external counsel of the company up to 2011. He was
re-engaged on a full time basis in 2011. Atty. Jularbal obtained his Bachelor’s
Degree in Law from the University of the Philippines, Diliman, QC in 1979 and
was admitted to the Bar the following year. He also holds degrees in
Management and Marketing obtained from Saint Louis University in Baguio City.
Robert A. Pua is currently the VP-Comptroller as well as the Compliance Officer.
He has been connected with the company since 1990 in various capacities. He is
also a Director of Cebu Broadcasting Company, Philippine Broadcasting
Company and Pacific Broadcasting Systems, Inc. He is a Certified Public
Accountant and a member of the Philippine Institute of Certified Public
Accountants. He obtained his Bachelor’s Degree in Business Administration,
Major in Accounting, from the University of the East, Manila and Master’s
Degree in Business Administration from the De la Salle University, Manila.
Carlea C. Miranda is currently the Vice-President for Treasury and has been
working with the FJE Group of Companies since 1987 in various capacities. She
is also a regular Director of our affiliates Cebu Broadcasting Company and Pacific
Broadcasting Systems, Inc. She is a Certified Public Accountant and a member of
the Philippine Institute of Certified Public Accountants. She obtained her degree
in Bachelor of Science in Commerce major in Accounting from the University of
San Carlos, Cebu City, Magna Cum Laude.
Irving A. Lisondra is the Vice-President for Creative Service. He served in various
capacities in the Company since 1984 as Area Manager for FM Stations then
became the Assistant Vice-President for Advertising and Promotions before his
current Position. He took up BSC-Management from the Diving Word College in
Laoag City.
Ellen C. Fullido is the Vice-President for Human Resources and Technical
Services of the Company. She joined the Company in 2001. She is a candidate
for Master’s Degree in Human Resource Management from the University of
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Santo Tomas and Bachelor of Science Degree in M.I.E. from Mapua Institute of
Technology. She is a member of the Personnel Management Association of the
Philippines.
Elpidio Macalma is the Assistant Station Manager of flagship AM station DZRH
with the rank of Assistant Vice-President. He is best known for the morning
segment “Espesyal na Balita” – an expose on current activities of certain
personalities. He is the Kapisanan ng mga Brodkaster sa Pilipinas (KBP) VP for
Radio and a member of the National Press Club. He holds a degree of Bachelor
of Laws from the University of the East and is a B.S. Journalism graduate from
Lyceum of the Philippines. He joined the Company in 1982.
Jose Ma. T. Parroco is Assistant Vice-President for Sales for the entire network –
DZRH, Love Radio, Yes-FM, Radyo Natin, Easy Rock, Aksyon Radyo and Hot FM.
He joined the Company in 1992. Previously, he was the Assistant Vice-President
for Finance of Philippine International/Star Parks Corporation, affiliated
companies of the Company, operating the amusement/theme park Star City. He
has a Masters in Management Degree from the Asian Institute of Management
and Bachelor of Arts in Economics from the University of the Philippines. He is
also an undergraduate of Bachelor of Science in Electrical Engineering from the
University of the Philippines.
Wilfredo Espinosa is the Assistant Vice-President for FM Programming for the
networks – Love Radio, Yes-Fm and Easy Rock. He joined the Company in 2000.
Significant Employees
There are no significant employees that the registrant expects will
contribute to the business of the registrant.
Family Relationships
Mr. Juan Manuel Elizalde, VP-Operation and Director, is the son of the
Chairman/Director, Fred J. Elizalde while Mr. Julio Manuel P. Macuja, EVP-Treasurer,
is his brother-in-law. Other than the foregoing relationships disclosed, there are no
other family relationships known to the registrant.
Involvement of Directors and Officers in Certain Legal Proceedings
None of the directors and officers was involved during the past five (5) years in any
bankruptcy proceeding. Neither have they been convicted by final judgment in any
criminal proceeding, or been subject to any order, judgment or decree of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise
limiting their involvement in any type of business nor found in action by any court or
administrative bodies to have violated any law.
The Company has no pending material legal proceedings for and against it.
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Certain Relationships and Related Transactions
There had been no material transactions during the last two years, nor is any
material transaction presently proposed, to which the Company was or is to be a
party in which any director or executive officer of the Company or owner of more
than 10% of the Company’s voting securities, any relative or spouse of any such
director or officer who shares the home of such director or executive officer who or
owner of more than 10% of the Company’s voting securities, is involved. Please
refer to Note 12 of the 2011 audited financial statements for the disclosure on
related party transactions.
Item 6. Compensation of Directors and Executive Officers
Executive Compensation
The Board Directors are paid P22,222.00 each representing Per Diem on every Board
Meeting they attended. There were no additional amounts paid for committee
participation or special assignments nor were any bonuses or other compensation
given.
The aggregate compensation of the executives of the issuer/Registrant is as
follows:
The aggregate compensation of the executives and directors of the issuer/Registrant
is P8,044,444.00 (Estimate) in 2012, P6,985,614.16 in 2011, P6,500,000 in 2010,
P6,500,00.00 in 2009, P6,349,548 in 2008, and P5,929,641 in 2007. There were no
additional amounts paid for committee participation or special assignments.
The key management compensation is as follows:
Name Year Salary Bonus Others
Fred J. Elizalde
Chairman/CEO
2007 5,538,708 0 390,933
2008 6,000,262 0 349,286
2009 6,500,000 0 0
2010 6,500,000 0 0
2011 6,500,000 0 22,222
2012 (Est.) 6,500,000 0 22,222
Jose M. Taruc, Jr.
VP-DZRH 2007 0 0 0
2008 0 0 0
2009 0 0 0
2010 0 0 0
2011 476,102.16* 0 22,222
2012 (Est.) 1,500,000.00 0 22,222
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Elpidio Macalma
AVP-DZRH 2007 0 0 0
2008 0 0 0
2009 0 0 0
2010 0 0 0
2011 422,371.98* 0 22,222
2012 (Est.) 1,400,000.00 0 0
* Covering the period Oct. 1 to Dec. 31, 2011. The previous employer of Mr. Taruc and
Mr. Macalma prior to Oct. 1, 2011 was RH Broadcasting, Inc..
With the implementation of the “Hating Kapatid” system, the only key executives
left in the payroll of the Corporation are Mr. Fred J. Elizalde, Mr. Jose M. Taruc, Jr.
and Mr. Elpidio Macalma. The mechanics of this system is explained in the Notes to
Financial Statements no. 1 – Corporate Information - in the attached 2011 Audited
Financial Statements.
There is no standard arrangement or employment contract between the registrant
and the above-named executive officer.
Item 7. Independent Public Accountants
The accounting firm of Sycip Gorres Velayo & Company is the company’s
Independent public accountant. The same firm is being recommended for
appointment by the stockholders on 17 October 2012. There has not been any
disagreement between the company and said accounting firm with regard to any
matter relating to accounting principles or practices, financial statement disclosure
or auditing scope of procedure. Representatives from SGV & Co. are expected to
attend the scheduled stockholders’ meeting and shall be available to entertain
clarifications from the stockholders relating to the Financial Statements of the
corporation.
In compliance with SEC Memo Circular No. 8, Series of 2003, Catherine Lopez is the
partner-in-charge commencing 2009. Ms. Aileen Saringan has been the partner-in-
charge since 2004. Formerly, it was Ms. Cynthia Manlapig of the same accounting
firm. This rotation of partner-in-charge is in compliance with the requirements of
SRC Rule 68, Paragraph 3 (b) (iv) requiring rotation of external auditors. A two-year
cooling off period shall be observed in the re-engagement of the same signing
partner or individual auditor.
The appointment of the Independent Public Accountants was recommended by the
Audit Committee composed of Mr. Santiago Z. Ureta as Chairman and Mr. Eduardo
G. Cordova and Mr. Julio Manuel P. Macuja as members.
EXTERNAL AUDIT FEES
A. Audit and Audit-Related Fees
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1. The following table sets out the aggregate fees billed for each of the last
calendar years for professional services rendered by Sycip, Gorres,
Velayo & Co., CPA’s:
Audit and Audit-Related Fees 2011 2010 2009
Regular Audit
580,000
550,000
520,000
Review of Proposed Increase in ACS - - -
Long Form Audit - - -
Review of Forecast - - -
All Other Fees
68,250 - -
Total Audit and Audit-Related Fees
648,250
550,000
520,000
2. There were no other assurance and related services performed by the
external auditor that are reasonably related to the performance of the
audit or review of the registrant’s financial statements.
B. Tax Fees
• There were no professional services rendered by the external auditor in the last
two (2) calendar years in relation to tax accounting, compliance, advice,
planning and any other form of tax services.
C. All Other Fees
There were no products or services provided by the external auditor, other than the
services reported under Item A1 above.
D. There are no set policies for approval and procedures for the above services.
Item 8. Compensation Plans
No action is to be taken with respect to any plan pursuant to which cash or non-cash
compensation may be paid or distributed.
There are no existing plans for employees, officers and directors for stock warrants,
options or any special or standard arrangement to said employees, officers and
directors whereby the registrant is liable.
C. ISSUANCE AND EXCHANGE OF SECURITIES
Item 9. Financial and Other Information
16 | P a g e
MBC shares are traded in the Philippine Stock Exchange. The shares are not actively
traded in the market. The last known transaction of MBC shares was last March 28,
2012 at P2.50 per share involving 3,000 shares.
There have been no known recent sales of unregistered securities of the Company.
The Company will submit to the stockholders for approval the following:
1. 2011 Annual Report with Audited Financial Statements; and
2. Ratification of the acts of the Board of Directors and Officers of the
Company from the date of the last annual stockholders’ meeting up
to 19 September 2012.
On the President’s Report – No matters will require approval or disapproval of the
stockholders.
1. Result of Operations
2. Balance Sheet Discussion
3. Capex
4. Targets
D. OTHER MATTERS
Item 15. Action with Respect to Reports
No action is to be taken with respect to any report of the registrant or of its
directors, officers or committees or minutes of any meeting of its security holders.
Only those matters undertaken in the normal course of business of the corporation
(like opening/closing of bank accounts, authorized signatories, some day-to-day
contracts/agreements, renewal of loans, etc.) by the Board of Directors and Officers
of the registrant shall be the subjects for ratification by the stockholders. No act of
the Board of Directors and Officers that require a special disclosure or requirements
shall be ratified under this general ratification act during the meeting.
Item 17. Amendment of Charter, Bylaws or Other Documents
No action is to be taken with respect to any amendment of the registrant's charter,
by-laws or other documents.
Item 19. Voting Procedures
The foregoing matters will require the affirmative vote of a majority of the shares in
the Company present or represented and entitled to vote at the Annual Meeting.
Likewise, directors shall be elected upon the majority vote of the shares present or
represented and entitled to vote at the Annual Meeting.
18 | P a g e
MANAGEMENT REPORT
Management’s Discussion and Analysis or Plan of Operation
2011 vs 2010
(1) Results Of Operations
The Company posted revenue of P756.6 million, 9.2% lower than its revenue last
year mainly due to advertisement spending by political candidates in line with
their election campaign in the previous year. On the other hand, Cost and
operating expenses increased only by 1.2% or P7.9 million as compared to last
year.
Interest expense decreased by P3.8 Million as the Notes Payable was completely
paid out as of December 31, 2010. The rental income which slightly increased by
P0.6 million from P8.5 million in 2010 to P9.1 million in 2011 represents revenue
derived from the investment properties being leased to employees and third
parties. Interest income decreased by P.3 million or 20.64% from P1.3 million in
2010 to P1.0 million in 2011 mainly due to reduced investment balance on money
market placement during the year.
As overall result, the Company registered a net income of P60.9 million in 2011, a
decrease of P56.7 million or 48.21% from P117.5 million in 2010.
(2) Financial Condition and Changes In Financial Condition
MBC is not having or does not anticipate having, within the next 12 months, any
cash flow or liquidity problems; neither is it in default or in breach of any note,
loan, lease or other indebtedness or financing arrangement requiring it to make
payments; nor a significant amount of the registrant’s trade payables have not
been paid within the stated trade terms.
(3) Causes for Material Changes from Period to Period (5%)
1. Cash and cash equivalents decreased by P=24.9 million or 25.42% from P98.1
million in 2010 to P73.1 million in 2011 mainly due to payment of cash dividends
amounting to P120.9 million.
2. Receivables-net decreased by P17.0 million or 5.44% mainly due to lower
balance of AR-trade in 2011 as a result of lower 4th
quarter sales during the year
when compared to the previous year. The credit term given to regular clients is
90 days. Please see note 6 of the 2011 audited FS.
3. Due from affiliates represents interest-free advances to Elizalde Holdings
Corporation, an affiliate under common control with the Company. There was a
net increase on this account in the amount of P47.7 million. Please see note 12
of the 2011 audited financial statements.
4. Materials and supplies decreased by P1.5M or 13.76% mainly due to conscious
effort of the Company to eliminate excessive stock of materials and supplies to
avoid extra cost of carrying the inventory.
19 | P a g e
5. Prepaid expenses and other current assets decreased by P1.5 million or 21.30%
mainly due to cancellation of Certificates of Tax Withheld which expired in 2011.
6. Property and equipment at cost decreased by P17.6 million or 22.07% mainly
due to depreciation while Property and equipment at revalued amount
remained constant.
7. Investment properties amounting to P73.2 Million as of December 31, 2011,
represents the net balance on the acquisition of land and construction of
building in 2005 intended for future use of the Company. The said property is
currently being leased out on a yearly basis to generate revenue in order to
sustain its maintenance costs. The decrease of P8.1 Million or 9.93% represents
depreciation charges during the year.
8. Intangible assets arise from the Company’s acquisition of DWRK which became
effective on October 4, 2008. The decrease of P13.3 million or 10.33%
represents amortization costs during the year.
9. Other noncurrent assets decreased by P7.3 million or 53.02% mainly due to
refund of escrow deposits amounting to P2.3 million and amortization of input
vat on capital goods claimed during the year.
10. Dividend payable decreased by P.1 million or 5.91% as a result of payments
made to stockholders.
11. Talent fees and commissions payable increased by P2.7 million or 9.54% mainly
due to increased placement of client-initiated promos during the year.
12. Income tax payable decreased by P10.4 million or 45.04% mainly due to lower
income before income tax registered during the year.
13. Accrued retirement benefits increased by P37.5 million or 353.13% mainly due
to past service costs of employees transferred from an affiliate. Please see note
17 of 2011 audited FS.
14. Deferred income tax liabilities-net decreased by P8.3 million or 70.70% mainly
due increase in the accrued retirement benefits and unamortized contribution
to past service cost as well as increase in the allowances for doubtful accounts
and inventory obsolescence. Please see note 18b of 2011 audited FS.
15. Retained earnings decreased by P59.9 million or 30.25% mainly due to the
declaration of cash dividends in 2011. Please see note 14 of 2011 audited FS.
(4) Plan Of Operation
This year, MBC will bring a host of promising event performances, creating a pipeline of
revenue streams that will complement the existing airtime revenues. Aside from the
successful movie premier showing and on-air and field promotions, MBC has once again set
a lineup of events that will surely provide maximum value for advertisers and the listening
public.
- First is the Manila Bay Seasports Festival which was held last March 31 &
April 1, 2012 where an elite roster of participants was invited to join the
event. Organized by Manila Broadcasting Company and the City of
Pasay, in cooperation with the Philippine Coast Guard, this year’s
seasports festival featured mixed team championships for the Dragon
Boat Race, stock and formula races in the motorized banca competition.
Converging along Roxas Boulevard’s Baywalk, water enthusiasts and
hobbyists cheered on the participants in these popular spectator sports.
20 | P a g e
- The most successful event of the company, the Aliwan Fiesta, scheduled
on April 12-14, 2012 is set to unfold once again and bring the best,
biggest, loudest and the most colorful fiestas from all over the
Philippines to Manila. Now on its 10th
year, the festival will again
showcase the dance competition, where the contingents present
fabulously choreographed routines in full costumed glory. The three
other categories of the event were the Float completion, Reyna ng
Aliwan and the Photo Competition.
- MBC National Choral Competition which will take place in December
2012 also promises to bring highly acclaimed contestants not only from
Metro Manila but all over the country
- There will also be a live telecast at Aliw Theater of the much awaited
boxing fight between our very own Manny Pacquiao and Tim Bradley
which will be held in June 2012. The Company also plans to tie up with
movie and recording outfits for promo tours, live performances, and
fans’ days in malls. There are also several promos in the pipeline, like
the yearly Bagong Taon Bagong Milyon and other client initiated promos
that promise to be a big hit among radio listeners.
The Company also plans to earmark P75.0 million capital expenditure for its
various projects, namely; Relocation of transmitters and antennae towers of
manila stations to BSA Towers in Ortigas Center, RHTV broadcast expansion over
various cable and TV channels, leasehold improvement at Head Office, audio and
video streaming over the internet, and improvement of existing stations’
equipment and facilities nationwide. This will be funded by cash flows from
operating activities.
(5) Other Disclosure Matters
• There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
• There are no unusual items affecting assets, liabilities, equity, net income, or
cash flows.
• There are no changes in estimates of amounts reported in prior interim periods
of the current financial year or in estimates of amounts reported in prior
financial years.
• There are no material events subsequent to the end of the accounting period
that have not been reflected in the financial statements for the period.
• There are no changes in the composition of the issuer during the accounting
period, including business combinations, acquisition or disposal of subsidiaries
and long-term investments, restructurings, and discontinuing operations.
• There are no changes in contingent liabilities or contingent assets since the last
annual balance sheet date.
• There are no material contingencies and any events or transactions that are
material to the understanding of the current interim period.
• There are no known trends, demands, commitments, events or uncertainties
that will have a material impact on the Company’s liquidity.
• There are no known trends, events or uncertainties that had or that are
reasonably expected to have a material impact on the net sales or revenues or
income from continuing operations.
21 | P a g e
• There are no significant elements of income or loss that did not arise from the
company’s continuing operations;
• There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
• There are no known events that will trigger direct or contingent financial
obligation that is material to the Company, including any default or acceleration
of an obligation.
• There are no material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the Company with
unconsolidated entities or other persons created during the reporting period.
• There are no businesses or geographical segments for which information is not
reported to the Board of Directors (BOD) and chief executive officer.
• The pricing of inter-segment transfers was based on cost at the time of
transaction.
• There were no changes in accounting policies adopted for segment reporting
that have a material effect on segment information.
2010 vs 2009
(6) Results Of Operations
The Company posted revenue of P833.4 million, 25.95% higher than its revenue
last year as a result of the strong ratings of both the AM and FM stations and also
due to advertisement spending by political candidates in line with their election
campaign. On the other hand, Cost and operating expenses increased only by
15.12% or P88.3 million as compared to last year.
Interest expense decreased by P5.0 Million or 57.09%mainly due to payment of
loan during the year. The rental income which slightly decreased by P0.2 million
from P8.7 million in 2009 to P8.5 million in 2010 represents revenue derived from
the investment properties being leased to employees and third parties. Interest
income increased by P.9 million or 226.64% from P.4 million in 2009 to P1.3
million in 2010 mainly due to additional investment placement on money market
during the year.
As an overall result, the Company registered a net income of P117.5 million in
2010, an increase of P63.2 million or 116.27% from P54.3 million in 2009.
(7) Financial Condition and Changes In Financial Condition
MBC is not having or does not anticipate having, within the next 12 months, any
cash flow or liquidity problems; neither is it in default or in breach of any note,
loan, lease or other indebtedness or financing arrangement requiring it to make
payments; nor a significant amount of the registrant’s trade payables have not
been paid within the stated trade terms.
(8) Causes for Material Changes from Period to Period (5%)
22 | P a g e
16. Cash and cash equivalents increased by P=48.0 million or 95.77% from P50.1
million in 2009 to P98.1 million in 2010 mainly due to improved cash flows from
operating activities.
17. Due from affiliates represents interest-free advances to Elizalde Holdings
Corporation, an affiliate under common control with the Company. There was a
net increase on this account in the amount of P22.5 million. Please see note 13
of the 2010 audited financial statements.
18. Prepaid expenses and other current assets increased by P6.4 million or 1,238.2%
mainly due to input tax on capital goods.
19. Property and Equipment at cost decreased by P22.4 million mainly due to
depreciation while Property and Equipment at revalued amount remained
constant.
20. Investment properties amounting to P81.3 Million as of December 31, 2010,
represents the net balance on the acquisition of land and construction of
building in 2005 intended for future use of the Company. The said property is
currently being leased out on a yearly basis to generate revenue in order to
sustain its maintenance costs. The decrease of P8.1 Million or 9.0% represents
depreciation charges during the year.
21. Intangible assets arise from the Company’s acquisition of DWRK which became
effective on October 4, 2008. This is composed of frequency and intellectual
property rights with net book values of P127.0 million and P1.5 million,
respectively, as of December 31, 2010. Please see Note 10 of the 2010 audited
financial statements. The decrease of P13.8 million or 10% represents
amortization costs during the year.
22. The Notes payable of P105 million was fully paid during the year.
23. There was a net increase of P21.6 million or 11.9% in Accounts payable and
accrued expenses mainly due to advance payments made by various advertisers
for their 2011 advertisements.
24. Dividend payable increased by P0.4 million or 26.3% mainly due to unclaimed
dividends declared during the year.
25. Talent fees and commissions payable increased by P11.7 million or 72.1% mainly
due to increased placement ofclient-initiated promos during the year.
26. Income tax payable increased by P10.8 million or 87.0% mainly due to higher
income before income tax.
27. Accrued retirement benefits decreased by P1.2 million or 10.3% mainly due to
the additional cash contribution to the Retirement Fund during the year.
Key Financial Indicators
2010 2009
1. Return on Sales (ROS)
Net Income 117,528,855 54,343,557
Divide by: Sales 833,380,988 661,673,035
ROS 14.10% 8.21%
2. Earnings Per Share (EPS)
Net Income 117,528,855 54,343,557
Divide by: No. of Shares Outstanding 402,682,990 402,682,990
EPS 0.292 0.135
23 | P a g e
3. Current Ratio
Current Assets 470,379,960 390,975,308
Divide by: Current Liabilities 255,482,571 316,024,132
Current Ratio 1.84 1.24
4. Debt-Equity Ratio
Total Liabilities 277,790,552 339,191,121
Total Stockholders’ Equity 682,124,951 589,793,967
Debt-Equity Ratio 0.407 0.575
5. Book Value Per Share
Total Stockholders’ Equity 682,124,951 589,793,967
Divide by: No.of Shares Outstanding 402,682,990 402,682,990
Book Value Per Share 1.694 1.465
(4) Discussion on Key Performance Indicators
1. ROS increased from 8.21% to 14.10%. This is an indication of a favorable trend
because the net income has increased both peso and percentage-wise in
relation to sales.
2. The EPS increased by P0.157 per share because of the increase in net income
with the total number of outstanding shares remaining constant.
3. Current ratio increased from 1.24 to 1.84 mainly due to higher cash and cash
equivalents which was augmented by the revenue during the year.
4. The debt-equity ratio was down 0.407: 1 from 0.575: 1 mainly due to the bank
loans paid and higher net income during the year.
5. The book value per share increased from P1.465 to P1.694 mainly due to net
income incurred during the year.
(5) Plan Of Operation
Responding to the challenge of staying on top, MBC has once again set a lineup of events
that will surely provide maximum value for advertisers and the listening public.
- First is the Manila Bay Seasports Festival which was held last March 12-
13 where an elite roster of participants was invited to join the event.
Organized by Manila Broadcasting Company and the City of Pasay, in
cooperation with the Philippine Coast Guard, this year’s seasports
festival featured mixed team championships for the Dragon Boat Race,
stock and formula races in the motorized banca competition.
Converging along Roxas Boulevard’s Baywalk, water enthusiasts and
hobbyists cheered on the participants in these popular spectator sports.
- The most successful event of the company, the Aliwan Fiesta, scheduled
on April 14-16, 2011 is set to unfold once again and bring the best,
biggest, loudest and the most colorful fiestas from all over the
Philippines to Manila. Now on its 9th
year, the festival will again
showcase the dance competition, where the contingents present
fabulously choreographed routines in full costumed glory. The three
24 | P a g e
other categories of the event were the Float completion, Reyna ng
Aliwan and the Photo Competition.
- On July 17, 2011, MBC will hold the first-ever Manila Bay Clean-Up Fun
Run to put in focus a sustainable approach to cleaning and protecting
marine and costal resources in the area.
- MBC National Choral Competition which will take place in December
2011 also promises to bring highly acclaimed contestants not only from
Metro Manila but all over the country
Aside from these grand events, MBC will also produce and sponsor shows and
events and mount movie premiers while giving away tickets to loyal listeners.
There will also be a live telecast at Aliw Theater of the much awaited boxing fight
between our very own Manny Pacquiao and Shane Mosley which will be held on
May 7, 2011. The Company also plans to tie up with movie and recording outfits
for promo tours, live performances, and fans’ days in malls. There are also several
promos in the pipeline, like the yearly Bagong Taon Bagong Milyon and other
client initiated promos that promise to be a big hit among radio listeners.
The Company also plans to earmark P50.0 million capital expenditure for its
various projects, namely; RHTV broadcast expansion over various cable and TV
channels, upgrading of transmitters of Love Radio Manila and Yes-FM Manila
stations, leasehold improvement at Head Office, audio and video streaming over
the internet, improvement of existing stations’ equipment and facilities
nationwide and upgrading of Radyo Natin stations to at least 500 watt-power.
This will be funded by cash flows from operating activities.
(6) Other Disclosure Matters
• There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
• There are no unusual items affecting assets, liabilities, equity, net income, or
cash flows.
• There are no changes in estimates of amounts reported in prior interim periods
of the current financial year or in estimates of amounts reported in prior
financial years.
• There are no material events subsequent to the end of the accounting period
that have not been reflected in the financial statements for the period.
• There are no changes in the composition of the issuer during the accounting
period, including business combinations, acquisition or disposal of subsidiaries
and long-term investments, restructurings, and discontinuing operations.
• There are no changes in contingent liabilities or contingent assets since the last
annual balance sheet date.
• There are no material contingencies and any events or transactions that are
material to the understanding of the current interim period.
• There are no known trends, demands, commitments, events or uncertainties
that will have a material impact on the Company’s liquidity.
• There are no known trends, events or uncertainties that had or that are
reasonably expected to have a material impact on the net sales or revenues or
income from continuing operations.
25 | P a g e
• There are no significant elements of income or loss that did not arise from the
company’s continuing operations;
• There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
• There are no known events that will trigger direct or contingent financial
obligation that is material to the Company, including any default or acceleration
of an obligation.
• There are no material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the Company with
unconsolidated entities or other persons created during the reporting period.
• There are no businesses or geographical segments for which information is not
reported to the Board of Directors (BOD) and chief executive officer.
• The pricing of inter-segment transfers was based on cost at the time of
transaction.
• There were no changes in accounting policies adopted for segment reporting
that have a material effect on segment information.
• There were no changes in and disagreements with Accountants and financial
disclosures.
(7) Other Disclosure Requirements Per Annex 68.1 M Paragraph 7e of Rule 68.1
(a) Marketable Securities
The aggregate cost or market value of short-term investments constitutes less
than 10% of total assets as of December 31, 2010.
(b) There were no amounts receivable of more than P100,000.00 or one percent of
total assets from Directors, Officers, employees, Related Parties, and Principal
Stockholders.
(c) The available-for-sale financial assets of P26,099,910 in the related balance
sheet does not exceed five percent of total assets and have no material changes
in the information required to be filed from that last previously reported.
(d) The due from affiliates of P41.3 million in the related balance sheet does not
exceed five percent of total assets and have no material changes in the
information required to be filed from that last previously reported.
(e) Intangible Assets-Other Assets – Please refer to note 10, pages 19-20 of the
audited FS.
(f) Long-term Debt – No balances as of December 31, 2010.
(g) Indebtedness to Related Parties –No balances as of December 31, 2010.
(h) Guarantees of Securities of Other Issuers – Not applicable.
(i) Capital Stock – there were no significant changes since the date of the last
balance sheet filed.
26 | P a g e
Title of Issue Common Shares
Number of Shares Authorized - 1,000,000,000 shares
Number of Shares Issued and Outstanding - 402,682,990 shares
Number of Shares Reserved for Options,
Warrants, Conversion and Other Rights
- NIL
Number of Shares Held by Related Parties - 394,469,767 shares
Directors, Officers and Employees - 219,844 shares
Others - 7,993,195 shares
Market Price and Dividends required by Part V of Annex C as amended
1. Market Information
MBC shares are traded in the Philippine Stock Exchange. The shares are not actively
traded in the market. The last known transaction of MBC shares was last 29 November
2011 at P1.20 per share involving 33,000,000 shares.
2. Holders
a. There are 619 Stockholders as of 31 August 2012.
b. The top 20 Stockholders as of 31 August 2012 are as follows:
NO. OF
SHARES %AGE
1
ELIZALDE HOLDINGS CORPORATION
139,558,774.00 34.66%
2
ELIZALDE LAND, INC.
87,000,000.00 21.61%
3
ROMULO, MABANTA, BUENAVENTURA, SAYOC & DELOS ANGELES
69,910,993.25 17.36%
4
CEBU BROADCASTING COMPANY
50,000,000.00 12.42%
5
AQG CORPORATION
33,000,000.00 8.20%
6
SUNSHINE INNS, INC.
10,000,000.00 2.48%
7
PHILIPPINE BROADCASTING COMPANY
5,000,000.00 1.24%
8
PCD NOMINEE CORPORATION
1,202,188.00 0.30%
9
TANSENGCO UY & CO., INC.
659,892.00 0.16%
10
ESTATE OF ALLEN CHAM
632,549.00 0.16%
11
MYRON C. PAPA, SA OF ESTATE OF ANGELA BUTTE
627,254.00
0.16%
12
LUIS M. ALBERTO &/OR MANUEL C. ALBERTO 0.14%
27 | P a g e
553,368.00
13
L.V.N. PICTURES, INC.
447,961.00 0.11%
14
A. &/OR J.O. DEL ROSARIO
363,592.00 0.09%
15
RUPERTO S. NICDAO, JR.
129,201.00 0.03%
16
ERNESTINA U. DE GARCIA
122,338.00 0.03%
17
CONSUELO FAJARDO
121,149.00 0.03%
18
LUIS G. ABLAZA
121,149.00 0.03%
19
JOAQUINA TIRONA
114,719.00 0.03%
20
AGAPITO D. BALAGTAS
105,370.00 0.03%
3. Dividends
The following are the dividend declarations for the last three years:
Cash Dividends (per share)
Amount in
Pesos
Declaration Date Record Date Payment Date
P0.0625 Sep. 21, 2011 Oct. 05, 2011 Oct. 12, 2011
P0.0625 Nov. 19, 2010 Dec. 09, 2010 Dec. 23, 2010
P=0.0625 Nov. 19, 2009 Dec. 15, 2009 Dec. 29, 2009
There are no existing restrictions that limit the payment of dividends on common shares.
4. Recent Sales of Unregistered or Exempt Securities including Recent Issuance of
Securities Constituting an Exempt Transaction
There have been no known recent sales of unregistered or exempt securities of the
company.
Item 13. Discussion on Compliance with Leading Practices in Corporate Governance
The Company, thru its Compliance Officer, evaluates the level of compliance of the
Board of the Directors and top-level management with the Manual of Corporate Governance
semi-annually. The members of the Audit, Nominating and Compensation Committees have
been appointed and will be recommended for re-appointment once the new Board is
constituted. The Company continues to strive to integrate the mandate of good corporate
governance in its daily life. No deviation from the Company’s manual of Corporate
Governance was noted during the year.
28 | P a g e
The company has taken steps to establish systems and processes to protect the
interests of and add value to its diverse stakeholder groups such as its shareholders,
employees, customers, vendors and community. Two (2) independent members of the
Board of Directors were elected to help clarify the direction and values of the organization,
oversee performance of the company and protect stakeholder interests. Audit, Nominating
and Compensation Committees have also been formed as part of the company’s plan to
improve good corporate governance practices. The company advocates continuous
improvement in governance processes by monitoring the progress of the following
attributes:
Attributes Challenge
Legal and Regulatory Maintaining an understanding of the compliance
requirements in the dynamic regulatory environment.
Business Practices and
Ethics Establishing ethical business practices that keep up with the
expectations of stakeholders.
Disclosure and
Transparency Ensuring that stakeholders receive the information they
need in an understandable way.
Risk and Performance
Management Dealing with both Risk Management and Performance
Enhancement as two sides of the same coin to increase
shareholder value.
Communication Finding ways to improve the interactions between the
stakeholders within various components of the Corporate
Governance Framework.
The Company undertakes that a copy of its Annual Report on Form 17-A shall be provided
without any charge to any stockholder who makes a written request for such copy or to any
person solicited. At the discretion of management, a charge may be made for exhibits
limited to reasonable expenses incurred by the registrant in furnishing such exhibits. Any
written request should be addressed to – Atty. Rudolph Steve E. Jularbal, Corporate
Secretary, 2nd
Floor, MBC Building, Star City, CCP Complex, Roxas Boulevard, Pasay City,
Metro Manila.
Audited Financial Statements and Interim Financial Statements
Enclosed is a copy of the Statement of Management’s Responsibility for Financial
Statements, Map of the Relationships of the Companies within the Group, Audited Financial
Statements and Supplementary Schedules, and June 30, 2012 17Q filed as part of this Form
20-IS.
SEC FORM 17-A 2011
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PB
C
Oth
ers
/
Pu
bli
c
MB
C
PIC
SP
C
*SGVMC312793*
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
Manila Broadcasting Company
MBC Building, Star City
CCP Complex, Roxas Boulevard
Pasay City
Report on the Financial Statements
We have audited the accompanying financial statements of Manila Broadcasting Company, which
comprise the statements of financial position as at December 31, 2011 and 2010, and the statements of
comprehensive income, statements of changes in equity and statements of cash flows for each of the
three years in the period ended December 31, 2011, and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these 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 financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
SyCip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Philippines
Phone: (632) 891 0307 Fax: (632) 819 0872 www.sgv.com.ph BOA/PRC Reg. No. 0001, January 25, 2010, valid until December 31, 2012 SEC Accreditation No. 0012-FR-2 (Group A), February 4, 2010, valid until February 3, 2013
A member firm of Ernst & Young Global Limited
*SGVMC312793*
- 2 -
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Manila Broadcasting Company as at December 31, 2011 and 2010, and its financial performance and
its cash flows for each of the three years in the period ended December 31, 2011 in accordance with
Philippine Financial Reporting Standards.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
and 19-2011
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information required under Revenue Regulations 15-2010 and
19-2011 in Notes 23 and 24 to the financial statements, respectively, are presented for purposes of
filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements.
Such information is the responsibility of the management of Manila Broadcasting Company. The
information has been subjected to the auditing procedures applied in our audit of the basic financial
statements. In our opinion, the information is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Catherine E. Lopez
Partner
CPA Certificate No. 86447
SEC Accreditation No. 0468-AR-1 (Group A),
March 18, 2010, valid until March 17, 2013
Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2009,
June 1, 2009, valid until May 31, 2012
PTR No. 3174803, January 2, 2012, Makati City
April 2, 2012
*SGVMC312793*
MANILA BROADCASTING COMPANY
STATEMENTS OF FINANCIAL POSITION
See accompanying Notes to Financial Statements.
December 31
2011 2010
ASSETS
Current Assets Cash and cash equivalents (Note 5) P=73,140,156 P=98,066,938
Receivables (Note 6) 296,318,715 313,361,245 Due from affiliates (Note 12) 88,966,242 41,283,182
Materials and supplies (net of allowance for inventory obsolescence of P=1,508,663 in 2011 and P=1,387,209
in 2010) 9,308,734 10,793,789
Prepaid expenses and other current assets 5,410,742 6,874,806
Total Current Assets 473,144,589 470,379,960
Noncurrent Assets
Available-for-sale financial assets (Note 7) 25,634,635 26,069,910
Property and equipment (Note 8) At cost 62,139,150 79,732,301
At revalued amount 122,201,600 122,201,600
Investment properties (Note 9) 73,224,113 81,294,243 Intangible assets (Note 10) 115,196,192 128,463,904
Goodwill (Note 10) 38,016,206 38,016,206 Other noncurrent assets 6,463,547 13,757,379
Total Noncurrent Assets 442,875,443 489,535,543
TOTAL ASSETS P=916,020,032 P=959,915,503
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses (Notes 11, 12 and 17)
P=197,321,811
P=202,638,303
Dividends payable 1,661,994 1,766,303 Talent fees and commissions payable 30,618,538 27,950,862
Income tax payable 12,710,746 23,127,103
Total Current Liabilities 242,313,089 255,482,571
Noncurrent Liabilities
Accrued retirement benefits (Note 17) 48,075,663 10,609,959
Deferred income tax liabilities - net (Note 18) 3,427,378 11,698,022
Total Noncurrent Liabilities 51,503,041 22,307,981
Total Liabilities 293,816,130 277,790,552
Equity
Capital stock (Note 13) 402,803,777 402,803,777 Additional paid-in capital 79,354 79,354
Revaluation increment on land (Note 8) 81,154,854 81,154,854 Reserve for fluctuation in available-for-sale
financial assets (Note 7)
60,000
40,000
Retained earnings (Note 14) 138,226,704 198,167,753 Treasury stock (at cost) - 120,787 shares (120,787) (120,787)
Total Equity 622,203,902 682,124,951
TOTAL LIABILITIES AND EQUITY P=916,020,032 P=959,915,503
*SGVMC312793*
MANILA BROADCASTING COMPANY
STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31
2011 2010 2009
REVENUE (Note 12) P=756,600,651 P=833,380,988 P=661,673,035
COST OF SERVICES (Notes 9, 12 and 15) (501,218,740) (519,137,632) (412,117,764)
GROSS PROFIT 255,381,911 314,243,356 249,555,271
Operating expenses (Notes 9, 12 and 15) (178,756,054) (152,922,996) (171,661,885)
Rental income (Note 9) 9,079,316 8,503,695 8,701,439
Interest income 1,005,500 1,267,010 387,897
Interest expense – (3,777,035) (8,802,931)
Other income - net (Note 7) 309,914 561,484 208,101
INCOME BEFORE INCOME TAX 87,020,587 167,875,514 78,387,892
PROVISION FOR INCOME TAX (Note 18) 26,156,739 50,346,659 24,044,335
NET INCOME 60,863,848 117,528,855 54,343,557
OTHER COMPREHENSIVE INCOME
(LOSS)
Net changes in fair value of available-for-sale
financial assets (Note 7)
20,000
(30,000) 10,000
Increase in revaluation increment due to
appraisal, net of deferred income tax (Note 8) – – 37,662,487
TOTAL OTHER COMPREHENSIVE
INCOME (LOSS) 20,000 (30,000) 37,672,487
TOTAL COMPREHENSIVE INCOME P=60,883,848 P=117,498,855 P=92,016,044
Weighted Average Number of
Shares Outstanding
402,682,990
402,682,990
402,682,990
Basic/Diluted Earnings Per Share P=0.15 P=0.29 P=0.13
See accompanying Notes to Financial Statements.
*SGVMC312793*
MA
NIL
A B
RO
AD
CA
ST
ING
CO
MP
AN
Y
ST
AT
EM
EN
TS
OF
CH
AN
GE
S I
N E
QU
ITY
F
OR
TH
E Y
EA
RS
EN
DE
D D
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EM
BE
R 3
1,
20
11, 2
01
0 A
ND
20
09
Cap
ital
Sto
ck
(No
te 1
3)
Ad
dit
ion
al
P
aid
-in
Cap
ital
Rev
alu
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n
Incr
emen
t
on
Lan
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(No
te 8
)
Res
erv
e fo
r
Flu
ctu
atio
n i
n
A
vai
lab
le-f
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sale
Fin
anci
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Ass
ets
(N
ote
7)
Ret
ain
ed
Ear
nin
gs
(No
te 1
4)
Tre
asu
ry
Sto
ck
To
tal
BA
LA
NC
ES
AT
DE
CE
MB
ER
31
, 2
00
8
P=4
02,8
03
,777
P=7
9,3
54
P=4
3,4
92
,36
7
P=6
0,0
00
P=7
6,6
30
,88
7
(P=
120
,787
) P=
52
2,9
45
,598
To
tal
com
pre
hen
sive
inco
me
–
–
37
,662
,48
7
10
,000
54
,343
,55
7
–
92
,016
,04
4
Cas
h d
ivid
end
s, P=
0.0
6 p
er s
har
e
–
–
–
–
(25
,167
,67
5)
–
(25
,167
,67
5)
BA
LA
NC
ES
AT
DE
CE
MB
ER
31
, 2
00
9
40
2,8
03
,777
79
,354
81
,154
,85
4
70
,000
10
5,8
06
,769
(120
,78
7)
58
9,7
93
,967
To
tal
com
pre
hen
sive
inco
me
(lo
ss)
–
–
–
(30
,000
) 1
17,5
28
,855
–
11
7,4
98
,855
Cas
h d
ivid
end
s, P=
0.0
6 p
er s
har
e
–
–
–
–
(25
,167
,87
1)
–
(25
,167
,87
1)
BA
LA
NC
ES
AT
DE
CE
MB
ER
31
, 2
01
0
40
2,8
03
,777
79
,354
81
,154
,85
4
40
,000
19
8,1
67
,753
(120
,78
7)
68
2,1
24
,951
To
tal
com
pre
hen
sive
inco
me
–
–
–
20
,000
60
,863
,84
8
–
60
,883
,84
8
Cas
h d
ivid
end
s, P=
0.3
0 p
er s
har
e
–
–
–
–
(120
,80
4,8
97
) –
(1
20
,80
4,8
97
)
BA
LA
NC
ES
AT
DE
CE
MB
ER
31
, 2
01
1
P=4
02,8
03
,777
P=7
9,3
54
P=8
1,1
54
,85
4
P=6
0,0
00
P=1
38,2
26
,704
(P=1
20
,78
7)
P=6
22,2
03
,902
See
acc
om
pan
ying
Note
s to
Fin
an
cia
l S
tate
men
ts.
*SGVMC312793*
MANILA BROADCASTING COMPANY
STATEMENTS OF CASH FLOWS
Years Ended December 31
2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax P=87,020,587 P=167,875,514 P=78,387,892
Adjustments for:
Depreciation and amortization (Note 15) 46,071,971 50,425,931 53,134,425 Interest expense – 3,777,035 8,802,931
Movement in accrued retirement benefits 24,803,620 (1,217,480) 3,657,548 Impairment loss of AFS financial assets (Note 7) 455,275 – –
Interest income (1,005,500) (1,267,010) (387,897)
Operating income before working capital changes 157,345,953 219,593,990 143,594,899 Decrease (increase) in:
Receivables 17,042,530 (1,990,863) (82,756,822)
Due from affiliates (47,683,060) (22,472,724) (7,102,967) Materials and supplies 1,485,055 (605,941) 449,132
Prepaid expenses and other current assets 1,464,064 (6,361,058) 797,946
Increase (decrease) in: Accounts payable and accrued expenses 7,345,592 21,744,525 (9,741,000)
Talent fees and commissions payable 2,667,676 11,711,837 6,916,012
Net cash flows generated from operations 139,667,810 221,619,766 52,157,200 Income taxes paid, including final and creditable
withholding tax
(44,843,740)
(39,227,067)
(14,984,139) Interest received 1,005,500 1,267,010 410,647
Net cash flows from operating activities 95,829,570 183,659,709 37,583,708
CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (Note 8) (7,140,978) (6,220,404) (2,310,298)
Decrease in other noncurrent assets 7,293,832 4,238,710 3,735,153
Net cash flows from (used in) investing activities 152,854 (1,981,694) 1,424,855
CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (120,909,206) (24,799,822) (5,436,848)
Payments of notes payable – (105,000,000) (42,000,000)
Interest paid – (3,904,127) (8,930,023)
Cash flows used in financing activities (120,909,206) (133,703,949) (56,366,871)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (24,926,782) 47,974,066 (17,358,308)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 98,066,938 50,092,872 67,451,180
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=73,140,156 P=98,066,938 P=50,092,872
See accompanying Notes to Financial Statements.
*SGVMC312793*
MANILA BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS
1. Corporate Information
Manila Broadcasting Company (the Company) was incorporated in the Philippines on
September 30, 1947. The Company is primarily engaged in the business of radio broadcasting.
The registered office address of the Company is MBC Building, Star City, CCP Complex, Roxas
Boulevard, Pasay City. On May 20, 1971, the Securities and Exchange Commission approved the
amendment of the Company’s Articles of Incorporation to extend its corporate term for another
period of 50 years from and after June 11, 1971.
The financial statements were authorized for issuance by the Board of Directors (BOD) on
April 2, 2012.
2. Summary of Significant Accounting and Financial Reporting Policies
Basis of Preparation
The financial statements of the Company have been prepared using the historical cost convention,
except for available-for-sale (AFS) financial assets, which have been measured at fair value and
land, which is carried at revalued amount.
The financial statements are presented in Philippine peso (Peso), which is the Company’s
functional and presentation currency. Amounts are rounded to the nearest Peso unless otherwise
indicated.
Statement of Compliance
The financial statements have been prepared in compliance with Philippine Financial Reporting
Standards (PFRS).
Changes in Accounting Policies and Disclosures
The accounting policies adopted are consistent with those of the previous financial year except for
the amendment to Philippine Accounting Standards (PAS) 24, Related Party Transactions, which
was adopted as of January 1, 2011. PAS 24 clarifies the definitions of a related party. The new
definitions emphasize a symmetrical view of related party relationships and clarify the
circumstances in which persons and key management personnel affect related party relationships
of an entity. In addition, the amendment introduces an exemption from the general related party
disclosure requirements for transactions with government and entities that are controlled, jointly
controlled or significantly influenced by the same government as the reporting entity. The
adoption of the amendment did not have any impact on the financial position or performance of
the Company.
Improvements to PFRSs (issued 2010)
Improvements to PFRSs, an omnibus of amendments to standards, deal primarily with a view to
removing inconsistencies and clarifying wordings. There are separate transitional provisions for
each standard. The adoption of the following amendments resulted in changes to accounting
policies but did not have any impact on the financial position or performance of the Company.
• PFRS 7, Financial Instruments - Disclosures
• PAS 1, Presentation of Financial Statements
- 2 -
*SGVMC312793*
Standards Issued but not yet Effective
Standards issued but not yet effective up to the date of issuance of the Company’s financial
statements are listed below. This listing of standards and interpretations issued are those that the
Company reasonably expects to have an impact on disclosures, financial position or performance
when applied at a future date. The Company intends to adopt these standards when they become
effective.
Effective in 2012
• PFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure
Requirements, requires additional disclosure about financial assets that have been transferred
but not derecognized to enable the user of the Company’s financial statements to understand
the relationship with those assets that have not been derecognized and their associated
liabilities. In addition, the amendment requires disclosures about continuing involvement in
derecognized assets to enable the user to evaluate the nature of, and risks associated with, the
entity’s continuing involvement in those derecognized assets. The amendment affects
disclosures only and has no impact on the Company’s financial position or performance.
• PAS 12, Income Taxes - Recovery of Underlying Assets, clarifies the determination of deferred
tax on investment property measured at fair value. The amendment introduces a rebuttable
presumption that deferred tax on investment property measured using the fair value model in
PAS 40 should be determined on the basis that its carrying amount will be recovered through
sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets
that are measured using the revaluation model in PAS 16 always be measured on a sale basis
of the asset.
Effective in 2013
• PFRS 13, Fair Value Measurement, establishes a single source of guidance under PFRS for all
fair value measurements. PFRS 13 does not change when an entity is required to use fair
value, but rather provides guidance on how to measure fair value under PFRS when fair value
is required or permitted.
• PAS 1, Presentation of Items of Other Comprehensive Income, considers the change in
grouping of items presented in other comprehensive income. Items that could be reclassified
(or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or
settlement) would be presented separately from items that will never be reclassified. The
amendment affects presentation only and has therefore no impact on the Company’s financial
position or performance.
• PAS 19, Employee Benefits (Revised), clarifies the fundamental changes such as removing the
corridor mechanism and the concept of expected returns on plan assets to simple clarifications
and re-wording.
Effective in 2015
• PFRS 9, Financial Instruments: Classification and Measurement, reflects the first phase on
the replacement of PAS 39 and applies to classification and measurement of financial assets
and financial liabilities as defined in PAS 39. In subsequent phases, hedge accounting and
impairment of financial assets will be addressed with the completion of this project expected
on the first half of 2012.
- 3 -
*SGVMC312793*
Cash and Cash Equivalents
Cash includes cash on hand and cash in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original maturities of up to
three months and that are subject to an insignificant risk of change in value.
Financial Assets and Financial Liabilities
Financial assets and financial liabilities are recognized initially at fair value. Directly attributable
transaction costs, if any, are included in the initial measurement of financial assets and financial
liabilities, except for any financial instrument measured at fair value through profit or loss
(FVPL). The Company recognizes a financial asset or financial liability in the statement of
financial position when it becomes a party to the contractual provisions of the instrument.
Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or
a component that is a financial liability, are reported as expense or income. Distributions to
holders of financial instruments classified as equity are charged directly to equity, net of any
related income tax benefits.
Financial instruments are classified as either financial assets or financial liabilities at FVPL, loans
and receivables, held-to-maturity (HTM) investments, AFS financial assets, or other financial
liabilities, as appropriate.
The Company determines the classification of its financial assets and financial liabilities at initial
recognition and, where allowed and appropriate, reevaluates this designation at each financial
year-end.
As of December 31, 2011 and 2010, the Company’s financial instruments include loans and
receivables, AFS financial assets and other financial liabilities.
Loans and receivables
Loans and receivables are nonderivative financial assets with fixed or determinable payments that
are not quoted in an active market. Such assets are carried at amortized cost in the statement of
financial position. Amortization is determined using the effective interest rate method. Loans and
receivables are classified as current assets if maturity is within twelve months from the statement
of financial position date. Otherwise, these are classified as noncurrent assets.
Included under this category are the Company’s cash in banks, short-term investments, receivables
and due from affiliates as of December 31, 2011 and 2010.
AFS financial assets
AFS financial assets are those nonderivative financial assets that are designated as such or are not
classified in any of the three preceding categories. Financial assets may be designated at initial
recognition as AFS if they are purchased and held indefinitely, and may be sold in response to
liquidity requirements or changes in market conditions. After initial recognition, quoted AFS
financial assets are measured at fair value with gains or losses being recognized as a separate
component of equity and as other comprehensive income until the investment is derecognized or
until the investment is determined to be impaired. Unquoted AFS financial assets, on the other
hand, are carried at cost, net of any impairment, until the investment is derecognized.
Included under this category are the Company’s quoted and unquoted equity investments as of
December 31, 2011 and 2010.
- 4 -
*SGVMC312793*
Other financial liabilities
This category pertains to financial liabilities that are neither held for trading nor designated as at
FVPL upon the inception of the liability. These include liabilities arising from operations or
borrowings.
The financial liabilities are recognized initially at fair value and are subsequently carried at
amortized cost, taking into account the impact of applying the effective interest rate method of
amortization (or accretion) for any related premium, discount and any directly attributable
transaction costs.
Included under this category are the Company’s accounts payable and accrued expenses,
dividends payable, talent fees and commissions payable as of December 31, 2011 and 2010.
Determination of Fair Value of Financial Instruments
The fair value of financial instruments traded in active markets at the end of reporting period is
based on their quoted market price or dealer price quotations (bid price for long positions and ask
price for short positions), without any deduction for transaction costs. When current bid and
asking prices are not available, the price of the most recent transaction provides evidence of the
current fair value as long as there has not been a significant change in economic circumstances
since the time of the transaction.
For all other financial instruments not listed in an active market, the fair value is determined by
using appropriate valuation techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which market observable prices exist, options
pricing models, and other relevant valuation models.
The Company determines and discloses the fair value of its financial instruments on the basis of
the following hierarchy:
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities. Included
in this level are the Company’s quoted AFS financial assets.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly. The Company has no financial
instruments included under this level.
Level 3: techniques which use inputs that are not based on observable market data which have a
significant effect on the recorded fair value. The Company has no financial instruments
included under this level.
“Day 1” Difference
When the transaction price in a non-active market is different from the fair value of other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Company recognizes the difference
between the transaction price and fair value (a “Day 1” difference) in profit or loss unless it
qualifies for recognition as some other type of asset. In cases where use is made of data which is
not observable, the difference between the transaction price and model value is only recognized in
profit or loss when the inputs become observable or when the instrument is derecognized. For
each transaction, the Company determines the appropriate method of recognizing the “Day 1”
difference amount.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement
of financial position if, and only if, there is a currently enforceable legal right to offset the
- 5 -
*SGVMC312793*
recognized amounts and there is an intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously.
This is not generally the case with master netting agreements, and the related assets and liabilities
are presented gross in the statement of financial position.
Derecognition of Financial Assets and Financial Liabilities
Financial assets A financial asset (or, where applicable a part of a financial asset or part 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 financial 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 from the financial asset and either (a) has
transferred substantially all the risks and rewards of the financial asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of the financial asset, but has
transferred control of the financial asset. When the Company has transferred its right to receive cash from a financial asset and has neither
transferred nor retained substantially all the risks and rewards of the financial asset nor transferred
control of the financial asset, the financial asset is recognized to the extent of the Company’s
continuing involvement in the financial asset. Continuing involvement that takes the form of a
guarantee over the transferred financial asset is measured at the lower of the original carrying
amount of the financial asset and the maximum amount of consideration that the Company could
be required to repay. Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original financial liability and the recognition of a
new financial liability, and the difference in the respective carrying amounts is recognized in profit
or loss.
Impairment of Financial Assets
The Company assesses at each reporting period whether there is objective evidence that a financial
asset or group of financial assets is impaired.
Financial assets carried at amortized cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset’s original effective interest rate
(i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset
shall be reduced either directly or through use of an allowance account. The amount of the loss
shall be recognized in profit or loss.
The Company first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial assets
that are not individually significant. Objective evidence of impairment, includes, but is not limited
- 6 -
*SGVMC312793*
to, bankruptcy or insolvency on the part of the customer and adverse changes in economy. If it is
determined that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, the asset is included in a group of financial assets with similar
credit risk characteristics and that group of financial assets is collectively assessed for impairment.
Financial assets that are individually assessed for impairment and for which an impairment loss is
or continues to be recognized are not included in a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed by adjusting the allowance account. The amount of the
reversal is recognized in profit or loss. Interest income continues to be accrued on the reduced
carrying amount based on the original effective interest rate of the asset. Loans, together with the
associated allowance, are written off when there is no realistic prospect of future recovery and all
collateral, if any, has been realized or has been transferred to the Company. If in a subsequent
year, the amount of the estimated impairment loss increases or decreases because of an event
occurring after the impairment was recognized, the previously recognized impairment loss is
increased or reduced by adjusting the allowance for impairment losses account. If a future write-
off is later recovered, the recovery is recognized in profit or loss. Any subsequent reversal of an
impairment loss is recognized in profit or loss to the extent that the carrying value of the asset
does not exceed its amortized cost at reversal date.
In relation to receivables, a provision for impairment is made when there is objective evidence
(such as the probability of insolvency or significant financial difficulties of the debtor) that the
Company will not be able to collect all of the amounts due under the original terms of the invoice.
The carrying amount of the receivables is reduced through the use of an allowance account.
Receivables together with the related allowance are written off when there is no realistic prospect
of future recovery.
AFS financial assets For AFS financial assets, the Company assesses at each reporting period whether there is objective
evidence that a financial asset or group of financial assets is impaired.
In the case of equity investments classified as AFS financial assets, this would include a
significant or prolonged decline in the fair value of the investments below its cost. Where there is
evidence of impairment, 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 on equity investments are not reversed through profit or loss. Increases in fair value after
impairment are recognized as other comprehensive income.
Materials and Supplies
Materials and supplies are stated at the lower of cost (determined using the first-in, first-out
method) and net realizable value. Cost includes the invoice price and related charges such as
freight, insurance, and taxes, among others. Net realizable value is the current replacement cost.
Property and Equipment
Property and equipment, except for land, are stated at cost less accumulated depreciation and
amortization and any impairment in value.
The initial cost of property and equipment comprises its purchase price, including import duties,
taxes, and any directly attributable costs of bringing the asset to its working condition and location
for its intended use. Expenditures incurred after the property and equipment have been put into
operation, such as repairs and maintenance costs, are normally charged to profit or loss in the
- 7 -
*SGVMC312793*
period in which the costs are incurred. In situations where it can be clearly demonstrated that the
expenditures have resulted in an increase in the future economic benefits expected to be obtained
from the use of an item of property and equipment beyond its originally assessed standard of
performance, the expenditures are capitalized as additional cost of property and equipment. When
assets are sold or retired, their cost, accumulated depreciation and amortization and any
impairment in value are eliminated from the accounts. Any gain or loss resulting from the
disposal is included in profit or loss.
Land is stated at revalued amount based on the fair market value of the property determined by an
independent firm of appraisers as of December 31, 2009. The increase in the valuation of land, net
of deferred income tax liability, is credited to “Revaluation increment on land” in the statement of
financial position and other comprehensive income. Upon disposal, the relevant portion of the
revaluation increment realized in respect of the previous valuation will be released from the
revaluation increment directly to retained earnings in other comprehensive income. Decreases that
offset previous increases in respect of the same property are charged against the revaluation
increment. All other decreases are charged against current operations.
Depreciation commences when an asset is in its location and condition and capable of being
operated in the manner intended by management. It is computed using the straight-line method,
based on the estimated useful lives of the assets as follows:
Years
Broadcasting and transmission equipment 8-11
Furniture and equipment 5
Transportation equipment 4
Building and leasehold improvements are amortized over the term of the lease or life of the
building and improvements ranging from seven to seventeen years, whichever is shorter.
Construction in progress represents properties under construction and is stated at cost, including
cost of construction and other direct costs. Construction in progress is not depreciated until such
time that the relevant assets are completed and ready for operational use.
The estimated useful lives and depreciation and amortization method are reviewed periodically to
ensure that these are consistent with the expected pattern of economic benefits from the items of
property and equipment.
Investment Properties
Investment properties, except land, are measured at cost, including transaction costs, less
accumulated depreciation and any impairment in value. The carrying amount includes the cost of
replacing part of an existing investment property at the time that cost is incurred, if the recognition
criteria are met, and excludes the costs of day-to-day servicing of an investment property.
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 gains or losses on the retirement or disposal of an investment
property are recognized in profit or loss in the year of retirement or disposal.
Transfers are made to investment property when, and only 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. Transfers are 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.
- 8 -
*SGVMC312793*
Investment properties is composed of land, building and other property and is depreciated, except
land, on a straight-line basis over their estimated useful lives of ten years and eight years,
respectively.
Intangible Assets
The cost of intangible assets acquired in a business combination is the fair value as at the date of
acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortization and any accumulated impairment losses.
The intangible assets are assessed as finite and are amortized over the useful economic life and
assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortization period and the amortization method for an intangible asset with a finite useful
life is reviewed at least at each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset is accounted
for by changing the amortization period or method, as appropriate, and are treated as changes in
accounting estimates. The amortization of intangible assets with finite lives is recognized in profit
or loss.
Amortization commences when the intangible asset is acquired and is capable of being owned and
operated in the manner intended by management. It is computed using the straight-line method,
based on the estimated useful lives of the assets as follows:
Years
Frequency 13
Intellectual property rights 3
Goodwill is initially measured at cost being the excess of the cost of the business combination
over the net fair value of the acquiree’s identifiable assets. Goodwill is reviewed for impairment
annually or more frequently if events or changes in circumstances indicate that the carrying value
may not be recoverable.
Impairment of Nonfinancial Assets
The carrying values of property and equipment and investment properties are reviewed for
impairment when events or changes in circumstances indicate the carrying values may not be
recoverable. If any such indication exists, or when annual impairment testing is required, and
where the carrying values exceed the estimated recoverable amounts, the assets or the cash
generating units are written down to their recoverable amounts. The recoverable amount of the
assets is the greater of the 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 pretax discount rate
that reflects current market assessments of the time value of money and the risks specific to the
asset. For an asset that does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset belongs. Any impairment
loss is recognized in profit or loss.
Capital Stock
Capital stock is the portion of the paid in capital representing the total par value of the shares
issued.
Retained Earnings
Retained earnings represent the cumulative balance of net income or loss, net of any dividend
declaration and other capital adjustments.
- 9 -
*SGVMC312793*
Additional Paid-in Capital
Additional paid-in capital represents the amount paid in excess of the par value of the shares
issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in
equity as a deduction from proceeds, net of tax.
Treasury Stock
Treasury stocks are shares of the Company which are reacquired and are measured at cost and
deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or
cancellation of the Company’s own equity instrument.
Revenue
Revenue is recognized when the significant risks and rewards of ownership have been transferred
or the services have been rendered to the customer, the amount of revenue can be measured
reliably and it is probable that the economic benefits will flow to the Company. Revenue is
measured at the fair value of the consideration received, excluding discounts and rebates. The
following specific criteria must also be met before revenue is recognized:
Broadcasting fees
Broadcasting fees are recognized as income when the program is broadcasted or the advertisement
is aired.
Rental income
Rental income is recognized on a straight-line basis over the lease term.
Interest
Interest is recognized as the interest accrues.
Cost of Services and Operating Expenses
Cost of services and operating expenses are recognized when incurred.
Retirement Benefits
Retirement benefits cost is actuarially determined using the projected unit credit method. This
method reflects services rendered by employees up to the date of valuation and incorporates
assumptions concerning employees’ projected salaries. Actuarial valuation is conducted with
sufficient regularity, with option to accelerate when significant changes to underlying assumptions
occur. Retirement benefits cost includes current service cost, interest cost, expected return on plan
assets, amortization of actuarial gains and losses, past service cost and effect of any curtailment or
settlement.
The net retirement benefits liability recognized by the Company is the aggregate of the present
value of the defined benefit obligation and actuarial gains and losses not recognized reduced by
past service cost not yet recognized and the fair value of plan assets out of which the obligation is
to be settled directly. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using risk-free interest rates that have terms of
maturity approximating the terms of the related accrued retirement benefits.
Actuarial gains and losses is recognized as income or expense if the cumulative unrecognized
actuarial gains and losses at the end of the previous reporting period exceeded 10% of the greater
of the present value of defined benefit obligation or the fair value of the plan assets. These gains
and losses are recognized over the expected average remaining working life of the employees
participating in the plan.
- 10 -
*SGVMC312793*
Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of
a qualifying asset. All other borrowing costs are expensed as incurred. Capitalization of
borrowing costs commences when the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the
assets are substantially ready for their intended use. If the carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recorded.
Income Taxes
Current income tax
Current income tax assets and current income tax liabilities for the current and prior periods are
measured at the amount expected to be recovered or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those that have been enacted or substantively enacted
at the end of reporting period.
Deferred income tax
Deferred income tax is provided, using the balance sheet liability method, on all temporary
differences at the reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred
income tax assets are recognized for all deductible temporary differences, to the extent that it is
probable that sufficient future taxable profits will be available against which the deductible
temporary differences can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting period and
reduced to the extent that it is no longer probable that sufficient future taxable profits will be
available to allow all or part of the deferred income tax assets to be utilized.
Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realized or the liability is settled, based on tax
rates and tax laws that have been enacted or substantively enacted at the end of the reporting
period.
Deferred income tax relating to items recognized outside profit or loss is recognized under other
comprehensive income and outside profit or loss.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable
right exists to set off current income tax assets against current income tax liabilities and the
deferred income taxes relate to the same taxable entity and the same taxation authority.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of
the arrangement and requires an assessment of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset. A reassessment is made after inception of the lease only if one of the following applies:
a. there is a change in contractual terms, other than a renewal or extension of the arrangement;
b. a renewal option is exercised or extension granted, unless that term of the renewal or
extension was initially included in the lease term;
c. there is a change in the determination of whether fulfillment is dependent on a specified
asset; or,
d. there is a substantial change to the asset.
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*SGVMC312793*
When a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios a, c or d above, and at the date
of renewal or extension period for scenario b.
Company as lessor
Leases where the Company retains substantially all the risks and rewards of ownership of the asset
are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are
added to the carrying amount of the leased asset and recognized over the lease term on the same
basis as rental income. Contingent rents are recognized as revenue in the period in which they are
earned.
Company as lessee Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are
classified as operating leases. Operating lease expense is recognized in profit or loss on a straight-
line basis over the lease term.
Earnings Per Share
Basic earnings per share is computed by dividing the net income by the weighted average number
of shares outstanding during the year.
Diluted earnings per share is calculated by dividing the net income by the weighted average
number of shares outstanding during the year and adjusted for the effects of all dilutive potential
common shares, if any.
In determining both the basic and the diluted earnings per share, the effect of stock dividends, if
any, is accounted for retroactively.
Foreign Currency-denominated Transactions
Transactions in foreign currencies (i.e., currencies other than the Peso) are initially recorded using
the functional currency exchange rate at the date of the transaction. Outstanding monetary assets
and liabilities denominated in foreign currencies are restated using the functional currency closing
exchange rate at the end of reporting period. All differences are taken to profit or loss.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
Contingencies
Contingent liabilities are not recognized in the financial statements. They are disclosed in the
notes to financial statements unless the possibility of an outflow of resources embodying
economic benefits is remote. Contingent assets are not recognized in the financial statements but
are disclosed in the notes to financial statements when an inflow of economic benefits is probable.
Contingent assets are assessed continually to ensure that developments are appropriately reflected
in the financial statements. If it has become virtually certain that an inflow of economic benefits
will arise, the asset and the related income are recognized in the financial statements.
Events After the End of the Reporting Period
Post year-end events that provide additional information about the Company’s position at the end
of reporting period (adjusting events) are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to financial statements when
material.
- 12 -
*SGVMC312793*
3. Significant Accounting Judgments and Estimates
The preparation of the financial statements in compliance with PFRS requires management to
make judgments, estimates and assumptions that affect the amounts reported in the financial
statements and notes. The judgments, estimates and assumptions used in the financial statements
and notes are based upon management’s evaluation of relevant facts and circumstances that are
believed to be reasonable as of the date of the financial statements. Actual results could differ
from such estimates.
The judgments, 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.
Judgment
In the process of applying the Company’s accounting policies, management has made the
following judgment, apart from those involving estimations, which have the most significant
effect on the amounts recognized in the financial statements:
Determination of the Company’s functional currency
Based on the economic substance of the underlying circumstances relevant to the Company, the
functional currency has been determined to be the Philippine peso. It is the currency that mainly
influences the sale of service and the costs of providing the service.
Assessment of impairment of noncurrent nonfinancial assets The Company assesses the impairment of assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The factors that the
Company considers important which could trigger an impairment review include the following:
a. significant adverse changes in the technological, market, or economic environment in which
the Company operates;
b. significant decrease in the market value of an asset;
c. significant increase in the discount rate used for the value-in-use calculations;
d. evidence of obsolescence and physical damage;
e. significant changes in the manner in which an asset is used or expected to be used;
f. plans to restructure or discontinue an operation; and
g. evidence is available from internal reporting that the economic performance of an asset is, or
will be, worse than expected.
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is
recognized. The recoverable amount is the higher of an asset’s net selling price and value-in-use.
The net selling price is the amount obtainable from the sale of an asset in an arm’s length
transaction while value-in-use is the present value of estimated future cash flows expected to arise
from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable
amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to
which the asset belongs.
Recoverable amount represents the value-in-use, determined as the present value of estimated
future cash flows expected to be generated from the continued use of the assets. The estimated
cash flows are projected using growth rates based on historical experience and business plans and
are discounted using pretax discount rates that reflect the current assessment of the time value of
money and the risks specific to the asset.
- 13 -
*SGVMC312793*
For goodwill, the Company determines whether it is impaired at least on an annual basis. This
requires an estimation of the value-in-use of the cash-generating unit to which the goodwill is
allocated. Estimating a value-in-use amount requires management to make an estimate of the
expected future cash flows from the cash-generating unit and also to choose a suitable discount
rate in order to calculate the present value of those cash flows.
Based on management’s evaluation, no impairment loss needs to be recognized on the Company’s
property and equipment, investment properties, intangible assets and goodwill in 2011, 2010 and
2009. As of December 31, 2011 and 2010, the carrying values of the Company’s nonfinancial
assets amounted to P=410.8 million and P=449.7 million, respectively.
Operating lease commitments - Company as lessee
The Company has a lease agreement with a third party covering its satellite communications
services. The Company has determined that the risks and rewards of ownership of the underlying
property is retained by the lessor since the lease does not transfer ownership of the assets to the
Company, the lease term is not for the major part of the economic life of the assets and the
Company has no option to purchase the assets at the end of the lease agreements. Accordingly,
the lease was accounted for as an operating lease and was determined that this lease shall be
recognized on a straight-line basis over the lease term.
Operating lease commitments - Company as lessor
The Company has arrangements with various lessees covering the building units it offers for lease,
the ownership over which was determined to have been retained by the Company. Accordingly,
these leases were accounted for as operating leases.
Classification of financial instruments
The Company classifies a financial instrument, or its component parts, on initial recognition, as a
financial asset, a financial liability or an equity instrument in accordance with the substance of the
contractual arrangement and the definitions of a financial asset, a financial liability or an equity
instrument. The substance of a financial instrument, rather than its legal form, governs its
classification in the statement of financial position. As of December 31, 2011 and 2010, the
Company’s total financial assets amounted to P=484.1 million and P=478.8 million, respectively,
while its total financial liabilities amounted to P=197.3 million and P=189.4 million, respectively
(see Note 20).
Estimations
The key assumptions concerning the future and other key sources of estimation at the end of
reporting period that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below:
Estimation of allowance for doubtful accounts The Company maintains allowance for doubtful accounts at a level considered adequate to provide
for potential uncollectible receivables. The level of this allowance is evaluated by management on
the basis of factors that affect the collectibility of accounts. These factors include, but are not
limited to, the length of the Company’s relationship with the client, the client’s payment behavior
and known market factors.
In addition to specific allowance against individually significant receivables, the Company also
makes a collective impairment testing which takes into consideration the customers’ ability to pay,
age of receivables, past collection experiences and other factors that may affect collectibility.
As of December 31, 2011 and 2010, allowance for doubtful accounts amounted to P=58.4 million
and P=55.4 million, respectively. Receivables, net of related allowance, amounted to
P=296.3 million and P=313.4 million as of December 31, 2011 and 2010, respectively (see Note 6).
- 14 -
*SGVMC312793*
Estimation of allowance for inventory obsolescence
Provisions are made for items of inventory which are specifically identified to be obsolete. The
amount of estimate is based on a number of factors which include, among others, the age and
status of inventories and the Company’s experience.
Allowance for inventory obsolescence amounted to P=1.5 million and P=1.4 million as of
December 31, 2011 and 2010, respectively. Materials and supplies, net of related provision for
inventory obsolescence, amounted to P=9.3 million and P=10.8 million as of December 31, 2011 and
2010, respectively.
Estimation of useful lives of property and equipment,
investment properties and intangible assets The Company estimated the useful lives of its property and equipment, depreciable investment
properties, and intangible assets based on the period over which the assets are expected to be
available for use. The Company annually reviews the estimated useful lives of property and
equipment, depreciable investment properties, and intangible assets based on factors that include
asset utilization, internal technical evaluation, technological changes, environmental changes and
anticipated use of the assets. It is possible that future results of operations could be materially be
affected by changes in these estimates brought about by changes in the factors mentioned.
As of December 31, 2011 and 2010, carrying value of depreciable property and equipment
amounted to P=62.1 million and P=79.7 million, respectively. The net carrying value of depreciable
investment properties amounted to P=30.1 million and P=38.1 million as of December 31, 2011 and
2010, respectively. Net intangible assets amounted to P=115.2 million and P=128.5 million as of
December 31, 2011 and 2010, respectively. Total depreciation and amortization relating to
property and equipment and investment properties, and intangible assets charged to operations
amounted to P=46.1 million, P=50.4 million and P=53.1 million in 2011, 2010 and 2009, respectively
(see Notes 8, 9, 10 and 15).
Recognition of deferred income tax assets The Company reviews the carrying amounts of deferred income tax assets at each reporting period
and reduces deferred income tax assets to the extent that it is no longer probable that sufficient
future taxable profits will be available to allow all or part of the deferred income tax assets to be
utilized.
Based on management’s evaluation, there will be sufficient future taxable profits against which
the deferred income tax assets can be applied. As of December 31, 2011 and 2010, recognized
deferred income tax assets amounted to P=31.4 million and P=23.1 million, respectively
(see Note 18).
Assessment of impairment of AFS financial assets The Company performs its impairment analysis of AFS financial assets with quoted market prices
by considering whether the investment incurs significant or prolonged decline in fair value. The
determination of what is “significant” or “prolonged” requires judgment. The Company performs
its impairment analysis of AFS financial assets with no quoted bid prices by considering changes
in the issuer’s industry and sector performance, legal and regulatory framework, changes in
technology, and other factors that affect the recoverability of the Company’s investments. Based
on management’s assessment, impairment loss needs to be recognized on unquoted AFS financial
assets amounting to P=0.5 million in 2011. Management has determined that no impairment loss
needs to be recognized on the Company’s quoted AFS financial assets in 2011 and on its quoted
and unquoted AFS financial assets in 2010 and 2009.
- 15 -
*SGVMC312793*
The carrying value of AFS financial assets amounted to P=25.6 million and P=26.1 million as of
December 31, 2011 and 2010, respectively (see Note 7).
Estimation of retirement benefits cost and liability
The determination of the obligation and retirement benefits cost is dependent on assumptions used
by actuaries in calculating such amounts. Those assumptions are described in Note 17 and include
among others, discount rates which are determined by using risk-free interest rate of government
bonds consistent with the estimated term of the obligation, expected returns on plan assets, and
salary increase rates. In accordance with PFRS, actual results that differ from the Company’s
assumptions are accumulated and amortized over future periods and therefore, generally affect the
recognized expense and recorded obligation in such future periods. While the Company believes
that the assumptions are reasonable and appropriate, significant differences in the actual
experience or significant changes in the assumptions may materially affect the retirement benefits
obligation.
The Company has unrecognized actuarial gain amounting to P=6.7 million and P=8.6 million
as of December 31, 2011 and 2010, respectively. Accrued retirement benefits amounted to
P=48.1 million and P=10.6 million as of December 31, 2011 and 2010, respectively (see Note 17). Provisions The Company provides for present obligations (legal or constructive) where it is probable that
there will be an outflow of resources embodying economic benefits that will be required to settle
said obligations. An estimate of the provision is based on known information at the end of the
reporting period, net of any estimated amount that may be reimbursed to the Company. If the
effect of the time value of money is material, provisions are discounted using a pretax rate that
reflects the risks specific to the liability. The amount of provision is being reassessed at least on
an annual basis to consider new relevant information. There were no provisions recognized as of
December 31, 2011 and 2010.
4. Segment Information
The Company is organized into only one operating division, radio broadcasting, which is its
primary activity. The Company has six programming formats, namely DZRH and “Aksyon
Radyo” stations, Love Radio, Yes-FM, Hot-FM, Radyo Natin, and Easyrock. For management
purposes, the Company considers the entire business as one segment. Management monitors the
operating results of the business for the purpose of making decisions about resource allocation and
performance assessment.
Broadcasting fee, net income, total assets and total liabilities for the years ended
December 31, 2011, 2010 and 2009 are the same as reported elsewhere in the accompanying
financial statements.
2011 2010 2009
Broadcasting fee P=756,600,651 P=833,380,988 P=661,673,035
Net income 60,863,848 117,528,855 54,343,557
Total assets 916,020,032 959,915,503 928,985,088
Total liabilities 293,816,130 277,790,552 339,191,121
The Company has no revenue from transactions with a single external customer accounting for
more than 10% or more of the broadcasting fee. All noncurrent assets of the Company are located
in the Philippines.
- 16 -
*SGVMC312793*
5. Cash and Cash Equivalents
2011 2010
Cash on hand and in banks P=30,971,762 P=54,795,199
Short-term investments 42,168,394 43,271,739
P=73,140,156 P=98,066,938
Cash in banks earn interest at the respective bank deposit rates. Short-term investments are made
for varying periods of up to three months depending on the immediate cash requirements of the
Company and earn interest at the respective short-term deposit rates.
6. Receivables
2011 2010
Trade P=327,096,340 P=350,056,492
Advances to stations 18,195,060 8,503,358
Others 9,378,556 10,243,881
354,669,956 368,803,731
Less allowance for doubtful accounts 58,351,241 55,442,486
P=296,318,715 P=313,361,245
Trade receivables and advances to stations are noninterest-bearing and have credit terms of
approximately 90 days.
A reconciliation of the allowance for doubtful accounts by class is as follows:
Trade
Advances to
stations Others
Total
December 31, 2009 P=48,559,685 P=3,576,926 P=3,922,959 P=56,059,570
Provisions (reversal)
(Note 15) 9,485,104 (3,325,805) 131,039
6,290,338
Write off (6,907,422) – – (6,907,422)
December 31, 2010 51,137,367 251,121 4,053,998 55,442,486
Provisions (reversal)
(Note 15) 3,274,958 128,785 (494,988)
2,908,755
December 31, 2011 P=54,412,325 P=379,906 P=3,559,010 P=58,351,241
2011
Trade
Advances to
stations Others
Total
Individual impairment P=– P=101,514 P=1,325,257 P=1,426,771
Collective impairment 54,412,325 278,392 2,233,753 56,924,470
P=54,412,325 P=379,906 P=3,559,010 P=58,351,241
2010
Trade
Advances to
stations Others
Total
Individual impairment P=– P=101,514 P=1,325,257 P=1,426,771
Collective impairment 51,137,367 149,607 2,728,741 54,015,715
P=51,137,367 P=251,121 P=4,053,998 P=55,442,486
- 17 -
*SGVMC312793*
7. Available-for-sale Financial Assets
2011 2010
Unquoted P=25,999,910 P=25,999,910
Less allowance for impairment losses 455,275 –
25,544,635 25,999,910
Quoted 90,000 70,000
P=25,634,635 P=26,069,910
The fair value of the quoted shares of stock is determined based on quoted market price. As of
December 31, 2011, the Company has no intention to dispose the unquoted shares of stock
primarily composed of investment in Star Parks Corporation, a related party. These unquoted
shares of stock are carried and presented at cost less impairment losses, if any.
Rollforward analysis of AFS financial assets follows:
2011 2010
Balance at beginning of year P=26,069,910 P=26,099,910
Impairment loss directly charged to profit or loss (455,275) –
Gain (loss) recognized in other
comprehensive income
20,000
(30,000)
Balance at end of year P=25,634,635 P=26,069,910
The movement of reserve for fluctuation in AFS financial assets follows:
2011 2010
Beginning balance P=40,000 P=70,000
Valuation gain (loss) taken to other
comprehensive income
20,000
(30,000)
Ending balance P=60,000 P=40,000
8. Property and Equipment
a. Property and equipment carried at cost consist of:
2011
Building and
Broadcasting
and
Furniture
Leasehold
Improvements
Transmission
Equipment
and
Equipment
Transportation
Equipment
Construction
In Progress
Total
Cost
Beginning balances P=131,040,536 P=354,312,377 P=94,607,056 P=34,932,832 P=– P=614,892,801
Additions 337,356 322,517 77,075 – 6,404,030 7,140,978
Ending balances 131,377,892 354,634,894 94,684,131 34,932,832 6,404,030 622,033,779
Accumulated Depreciation
and Amortization
Beginning balances 99,492,822 312,645,836 91,647,657 31,374,185 – 535,160,500
Depreciation and
amortization (Note 15)
8,995,595
13,766,663
962,382
1,009,489
–
24,734,129
Ending balances 108,488,417 326,412,499 92,610,039 32,383,674 – 559,894,629
Net Book Values P=22,889,475 P=28,222,395 P=2,074,092 P=2,549,158 P=6,404,030 P=62,139,150
- 18 -
*SGVMC312793*
2010
Building and
Broadcasting
and
Furniture
Leasehold
Improvements
Transmission
Equipment
and
Equipment
Transportation
Equipment
Construction
In Progress
Total
Cost
Beginning balances P=131,040,536 P=352,150,332 P=93,996,806 P=30,894,874 P=589,849 P=608,672,397
Additions – 2,162,045 610,250 4,037,958 – 6,810,253
Reclassification and
other adjustments
–
–
–
–
(589,849)
(589,849)
Ending balances 131,040,536 354,312,377 94,607,056 34,932,832 – 614,892,801
Accumulated Depreciation
and Amortization
Beginning balances 89,924,346 295,308,987 90,676,298 30,645,543 – 506,555,174
Depreciation and
amortization (Note 15)
9,568,476
17,336,849
971,359
728,642
–
28,605,326
Ending balances 99,492,822 312,645,836 91,647,657 31,374,185 – 535,160,500
Net Book Values P=31,547,714 P=41,666,541 P=2,959,399 P=3,558,647 P=– P=79,732,301
b. Land at revalued amount as of December 31, 2011 and 2010 consists of:
Cost P=6,266,094
Appraisal increase 115,935,506
P=122,201,600
The revalued amount of P=122.2 million in 2011 and 2010 is based on the valuation conducted by
an independent appraisal company as of December 31, 2009. The valuation was made on the
basis of the fair market value determined by referring to the extent, character and utility of the
properties and sales and holding prices of similar land. The revaluation increment is included in
the equity section of the statements of financial position, net of deferred income tax liability of
P=34.8 million as of December 31, 2011 and 2010 (see Note 18).
9. Investment Properties
2011
Land
Building and
Other Property
Total
Cost P=43,162,500 P=80,381,524 P=123,544,024
Accumulated Depreciation Beginning balances – 42,249,781 42,249,781 Depreciation (Note 15) – 8,070,130 8,070,130
Ending balances – 50,319,911 50,319,911
Net Book Values P=43,162,500 P=30,061,613 P=73,224,113
2010
Land
Building and
Other Property
Total
Cost P=43,162,500 P=80,381,524 P=123,544,024
Accumulated Depreciation Beginning balances – 34,181,128 34,181,128 Depreciation (Note 15) – 8,068,653 8,068,653
Ending balances – 42,249,781 42,249,781
Net Book Values P=43,162,500 P=38,131,743 P=81,294,243
- 19 -
*SGVMC312793*
Investment properties are leased to employees and third parties. Total fair value of investment
properties amounted to P=168.6 million, as determined by an independent appraiser as of
December 31, 2009. The valuation was made on the basis of the market value determined by
referring to the extent, character and utility of the properties and sales and holding prices of
similar property.
Rental income generated from these investment properties amounted to P=9.1 million in 2011,
P=8.5 million in 2010 and P=8.7 million in 2009. Related direct operating expenses amounted to
P=8.97 million, P=12.8 million and P=13.3 million in 2011, 2010 and 2009, respectively.
10. Intangible Assets
On September 30, 2008, the Company acquired a radio station from a private company. The total
cost of acquisition amounted to P=229.6 million, inclusive of value-added tax and net of
withholding tax.
In 2009, the Company obtained valuation services from an independent appraisal company to
determine the fair values of the identifiable assets and the value of goodwill as of the acquisition
date. The excess of acquisition cost over the adjusted fair values of the identifiable assets
amounting to P=38.0 million was recognized as goodwill.
The net book values of the intangible assets as of December 31 are as follows:
2011
Frequency
Intellectual
Property
Rights
Total
Cost P=153,594,927 P=5,810,867 P=159,405,794
Accumulated Amortization Beginning balances 26,583,739 4,358,151 30,941,890 Amortization (Note 15) 11,814,996 1,452,716 13,267,712
Ending balances 38,398,735 5,810,867 44,209,602
Net Book Values P=115,196,192 P=– P=115,196,192
2010
Frequency
Intellectual
Property
Rights
Total
Cost P=153,594,927 P=5,810,867 P=159,405,794
Accumulated Amortization Beginning balances 14,768,743 2,421,195 17,189,938 Amortization (Note 15) 11,814,996 1,936,956 13,751,952
Ending balances 26,583,739 4,358,151 30,941,890
Net Book Values P=127,011,188 P=1,452,716 P=128,463,904
- 20 -
*SGVMC312793*
11. Accounts Payable and Accrued Expenses
2011 2010
Trade P=56,421,127 P=30,881,314
Accrued expenses (Notes 12 and 17) 77,711,724 95,557,732
Output tax and others 63,188,960 76,199,257
P=197,321,811 P=202,638,303
Trade payables and accrued expenses consist of amounts due to suppliers and service providers
and are usually payable within 30 days.
12. Related Party Transactions
Related party relationship exists when one party has the ability to control, directly or indirectly,
through one or more intermediaries, or exercise significant influence over the other party in
making financial and operating decisions. Such relationships also exist between and/or among
entities which are under common control with the reporting entity and its key management
personnel, directors or stockholders. In considering each possible related party relationship,
attention is directed to the substance of the relationship and not merely the legal form.
Transactions between related parties are accounted for at arm’s length prices or on terms similar to
those offered to on-related entities in an economically comparable market.
The Company’s significant related party transactions are as follows:
a. The Company and several affiliated broadcasting companies, which are owned and managed
by certain stockholders and/or members of the BOD of the Company, entered into marketing
agreements, whereby the affiliated broadcasting companies designated the Company as their
sole marketing outfit for the sales, promotion, and marketing of the radio commercial airtime
of all radio broadcast stations of these affiliated broadcasting companies. Under the marketing
agreements, the Company shall remit to the affiliated broadcasting companies a certain fixed
amount per year and/or a certain percentage of the annual net income from the sale of the
commercial time of the radio broadcast stations after agency commission. The original
marketing agreement, which was effective for a period of five years from January 1, 1998, has
been renewed annually, thereafter. Total fees included under “Program costs” presented as
part of “Costs of services” in the statements of comprehensive income amounted to
P=203.7 million in 2011, P=204.1 million in 2010 and P=111.7 million in 2009. The Company
also bills the affiliated broadcasting companies for their share in the expenses for operating the
radio broadcast stations (see Note 15).
b. In 2002, the “Hating Kapatid” system (the System) was devised to change the way the
Company was handling the operations of the radio stations as well as its marketing,
engineering, administrative, and financial functions (support functions). Under the System,
the operations of each radio station and support services functions were outsourced to service
companies managed and operated by former station managers and officers of the Company
(affiliated service companies). As such, substantially all employees of the Company were
separated. As approved by the BOD, the Company shall provide financial support to certain
radio stations through advances as well as payment of certain operating expenses of the said
radio stations until these radio stations can financially sustain their operations.
As a result of the System, the Company entered into service agreements with affiliated service
companies, which are owned and managed by certain stockholders and/or members of the
- 21 -
*SGVMC312793*
BOD of the Company. These affiliated service companies provide production and creative
services, promotions, accounting, personnel, collection, procurement, engineering, and other
related services. The Company pays a certain percentage of collection as service fee. Total
service fees amounted to P=171.3 million in 2011, P=214.3 million in 2010 and P=135.5 million
in 2009 which is shown as part of “Cost of services” in the statements of comprehensive
income. The outstanding payables related to these transactions amounted to P=21.6 million and
P=23.6 million as of December 31, 2011 and 2010, respectively, and are shown as part of the
“Accounts payable and accrued expenses” account in the statements of financial position.
In October 2011, the service agreement between the Company and DZRH was cancelled.
This resulted in the transfer of DZRH employees to the Company. The Company assumed the
retirement benefits liabilities to these transferred employees totaling
P=38.1 million. This amount includes P=12.6 million representing the separation costs
previously accrued under “Accrued expenses” account prior to the start of the implementation
of the System (see Note 17).
c. The Company grants and obtains short-term interest-free advances to and from its affiliates,
which are owned and managed by certain stockholders and/or members of the BOD of the
Company. The outstanding amount due from affiliates as of December 31, 2011 and 2010
pertains to receivable from Elizalde Holding Corporation, an entity under common control
with the Company.
d. The short-term employee benefits and retirement benefits cost of key management personnel
amounted to P=7.0 million in 2011 and P=6.5 million in 2010 and 2009.
13. Capital Stock
Capital stock consists of 1,000,000,000 authorized common shares with par value of P=1.00 per
share, of which 402,803,777 shares have been issued. Total number of equity shareholders as of
December 31, 2011 and 2010 is 619.
On October 19, 1976, the stockholders approved the increase in the authorized capital stock of the
Company from P=1.5 million, divided into 1.5 million shares with par value of P=1.00 each to P=5.0
million, divided into 5.0 million shares with par value of P=1.00 each. On the same date, the
stockholders approved the declaration of 50% stock dividends payable to stockholders of record as
of October 30, 1976.
In 1978, the stockholders reduced the proposed increase to P=4.0 million, divided into 4.0 million
shares with par value of P=1.00 each, and approved the payment of the 50% stock dividend to
stockholders of record as of October 30, 1976. The increase in authorized capital stock was
approved by the SEC on April 28, 1978.
The BOD and stockholders approved on January 29, 1997 and February 26, 1997, respectively, the
increase in the Company’s authorized capital stock from P=4.0 million, divided into 4.0 million
shares with par value of P=1.00 each to P=1.0 billion, divided into 1.0 billion shares with the same
par value.
- 22 -
*SGVMC312793*
14. Retained Earnings
On September 30, 2011, the BOD declared cash dividends amounting to P=120.8 million or P=0.30
per share to stockholders on record as of October 5, 2011 payable on October 31, 2011.
On November 19, 2010, the BOD declared cash dividends amounting to P=25.2 million or P=0.06
per share to stockholders on record as of December 9, 2010 payable on December 23, 2010.
On November 19, 2009, the BOD declared cash dividends amounting to P=25.2 million or P=0.06
per share to stockholders on record as of December 15, 2009 payable on December 29, 2009.
The Company’s retained earnings are not available for declaration as dividends to the extent of the
cost of treasury stock and unrealized gains.
15. Cost of Services and Operating Expenses
Cost of services:
2011 2010 2009
Program costs (Notes 12 and 19) P=290,644,665 P=273,926,827 P=243,821,736
Service fees (Note 12) 171,270,963 214,305,150 135,467,587
Personnel expenses (Notes 12 and 16) 20,624,510 8,636,643 7,526,584
Depreciation and amortization
(Notes 8, 9 and 10) 14,215,499 17,785,685 20,260,440
Replacement parts 4,463,103 4,483,327 5,041,417
P=501,218,740 P=519,137,632 P=412,117,764
Operating expenses:
2011 2010 2009
Personnel expenses (Notes 12 and 16) 61,758,629 29,311,669 31,955,830
Depreciation and amortization
(Notes 8, 9 and 10) 31,856,472 32,640,246 32,873,985
Agency commission and discounts 18,268,100 19,261,756 14,931,987
Communication, light and water 16,966,432 22,874,310 30,546,068
Advertising and promotions 13,417,846 8,372,563 12,464,397
Travel and transportation 7,672,647 6,606,257 11,243,092
Repairs 5,783,025 8,254,792 7,431,127
Taxes and licenses 3,724,312 3,622,320 3,749,535
Provision for doubtful accounts (Note 6) 2,908,755 6,290,338 14,151,519
Rent (Note 19) 2,710,584 2,912,865 1,805,235
Entertainment, amusement and recreation 2,250,484 1,929,020 1,525,329
Replacement parts 1,314,988 438,296 840,055
Others 10,123,780 10,408,564 8,143,726
P=178,756,054 P=152,992,996 P=171,661,885
16. Personnel Expenses
2011 2010 2009
Salaries, wages and bonuses P=46,323,399 P=28,096,734 P=25,985,956
Retirement benefits cost (Note 17) 27,748,145 2,530,097 6,869,757
Other short-term employee benefits 8,311,595 7,321,481 6,626,701
P=82,383,139 P=37,948,312 P=39,482,414
- 23 -
*SGVMC312793*
17. Retirement Benefits and Separation Costs
Separation Costs under the Hating Kapatid System
Substantially all employees of the Company were separated in 2002 upon implementation of the
System. However, most of the said personnel were employed by the affiliated service companies.
The separated employees expressly agreed in writing to receive their separation pay from the
Company only after their final/actual separation/resignation from the affiliated service companies.
Separation costs of P=37.1 million have been recognized in 2002 in addition to the amount
previously accrued.
As discussed in Note 12, the agreement with DZRH under the System was cancelled in 2011 and
the employees of DZRH were transferred to the Company. As a result, separation costs relating to
the employees transferred from DZRH amounting to P=12.7 million were reclassified as retirement
benefits and included under “Accrued retirement benefits” in the statement of financial position as
of December 31, 2011.
The remaining unpaid balance of the separation cost of P=41.9 million and P=42.2 million as of
December 31, 2011 and 2010, respectively, are included in the “Accounts payable and accrued
expenses” account in the statements of financial position.
Retirement Benefits
The Company has a funded, noncontributory defined benefit retirement plan covering all of its
remaining employees. The latest actuarial valuation report is as of December 31, 2011.
The components of retirement benefits cost charged to profit and loss are as follows:
2011 2010 2009
Current service cost P=1,497,413 P=961,786 P=961,786
Interest cost 2,070,545 2,735,822 6,656,021
Expected return on plan assets (1,097,400) (993,273) (643,398)
Net actuarial gains (240,534) (174,238) (104,652)
Past service costs of employees
transferred from an
affiliate (Note 12)
25,518,121
–
–
Total retirement benefits cost P=27,748,145 P=2,530,097 P=6,869,757
The funded status and amounts recognized in the statements of financial position for the retirement
plan as of December 31, 2011 and 2010 are as follows:
2011 2010
Present value of benefit obligation P=73,033,198 P=28,094,233
Fair value of plan assets 31,684,064 26,066,501
41,349,134 2,027,732
Unrecognized actuarial gains 6,726,529 8,582,227
Accrued retirement benefits P=48,075,663 P=10,609,959
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*SGVMC312793*
Movements in the accrued retirement benefits follow:
2011 2010
Balances, January 1 P=10,609,959 P=11,827,439
Retirement benefits cost 27,748,145 2,530,097
Contributions (2,944,525) (3,747,577)
Reclassification (Note 12) 12,662,084 –
Balances, December 31 P=48,075,663 P=10,609,959
The changes in present value of the retirement obligation are as follows:
2011 2010
Present value of obligation at beginning of year P=28,094,233 P=25,168,553
Interest cost 2,070,545 2,735,822
Current service cost 1,497,413 961,786
Actuarial gain on obligation 3,190,802 (771,928)
Past service costs of employees
transferred from an affiliate
25,518,121
–
Reclassification (Note 12) 12,662,084 –
Present value of obligation at end of year P=73,033,198 P=28,094,233
The changes in fair value of plan assets are as follows:
2011 2010
Fair value of plan assets at beginning of year P=26,066,501 P=19,865,454
Expected return on plan assets 1,097,400 993,273
Contributions 2,944,525 3,747,577
Actuarial gain on plan assets 1,575,638 1,460,197
Fair value of plan assets at end of year P=31,684,064 P=26,066,501
Actual return on plan assets amounted to P=2.7 million in 2011 and P=2.5 million in 2010. The
expected rates of return on plan assets were based on a reputable fund trustee’s indicative yield
rate for a risk portfolio similar to that of the fund with consideration to the fund’s past
performance.
The assumptions used to determine retirement benefits of the Company as of January 1 are as
follows:
2011 2010
Discount rate 7.37% 10.87%
Salary increase rate 10.00% 10.00%
Expected rate of return on plan assets 4.21% 5.00%
As of December 31, 2011, the discount rate, salary increase rate and expected rate of return on
plan assets are 5.88%, 10.00% and 6.16%, respectively.
The Company expects to contribute P=7.8 million in 2012.
- 25 -
*SGVMC312793*
The major categories of plan assets as a percentage of the fair value of total plan assets are as
follows:
2011 2010
Investments in government securities 94.55% 90.88%
Receivables 2.37% 2.00%
Cash and cash equivalents 3.08% 7.12%
100.00% 100.00%
Amounts for the current and previous four annual periods are as follows:
2011 2010 2009 2008 2007
Benefit obligation P=73,033,198 P=28,094,233 P=25,168,553 P=23,224,078 P=26,183,862
Plan assets (31,684,064) (26,066,501) (19,865,454) (15,138,770) (12,008,645)
Deficit 41,349,134 2,027,732 5,303,099 8,085,308 14,175,217
Experience adjustments on
plan liabilities
(4,171,492)
(2,612,571)
–
–
–
Experience adjustments on
plan assets
1,575,638
1,460,197
871,077 (1,550,632)
710,729
18. Income Taxes
a. The provision for income tax consists of:
2011 2010 2009
Regular corporate income tax P=34,211,753 P=49,749,512 P=25,281,770
Final tax 215,630 238,675 77,570
Deferred (8,270,644) 358,472 (1,315,005)
P=26,156,739 P=50,346,659 P=24,044,335
b. The components of the Company’s net deferred income tax liabilities consist of the tax effects
of the following:
2011 2010
Deferred income tax assets on:
Allowances for:
Doubtful accounts P=17,505,372 P=16,632,746
Inventory obsolescence 452,599 416,163
Accrued retirement benefits and unamortized
contribution to past service cost 13,384,453 5,968,641
Accrued rent expense 10,850 26,670
Unamortized pre-operating expenses – 50,882
31,353,274 23,095,102
Deferred income tax liabilities on:
Revaluation increment on land (Note 8) 34,780,652 34,780,652
Unrealized foreign exchange gain – 12,472
34,780,652 34,793,124
Deferred income tax liabilities - net P=3,427,378 P=11,698,022
- 26 -
*SGVMC312793*
c. The reconciliation of income tax computed at the statutory tax rate to provision for income tax
as shown in profit or loss follows:
2011 2010 2009
Statutory income tax P=26,106,176 P=50,362,654 P=23,516,368
Additions to (reductions in)
income tax resulting from:
Impairment losses on AFS
financial assets 136,583 – –
Interest income subjected to
final tax at a lower rate (86,020) (141,428) (38,799)
Nondeductible portion of
interest expense
–
125,433
38,402
Nondeductible taxes and
licenses
–
–
528,364
Provision for income tax P=26,156,739 P=50,346,659 P=24,044,335
19. Lease Commitments
The Company leases satellite communications services for the performance of its broadcasting
services called the Transponder Lease, which considers certain space segment capacity and
transponder power. The new lease agreement is for a period of five years from November 1, 2007.
Rent expense on this lease agreement amounted to P=4.7 million, P=4.8 million and P=4.9 million in
2011, 2010 and 2009, respectively, included under “Program costs” presented as part of “Costs
and operating expenses” in the statements of comprehensive income.
Future minimum lease payments as of December 31 are as follows:
2011 2010
Within one year P=3,923,680 P=4,708,416
After one year but not more than five years – 3,923,680
P=3,923,680 P=8,632,096
20. Financial Risk Management Objectives and Policies
The Company’s principal financial instruments consist of cash and cash equivalents. The main
purpose of these financial instruments is to fund the Company’s operations. The other financial
assets and financial liabilities arising directly from its operations are receivables, due from
affiliates, AFS financial assets, accounts payable and accrued expenses, talent fees and
commissions payable and dividends payable. The main risks arising from the Company’s financial instruments are credit risk, and liquidity risk.
The BOD reviews and approves policies for managing each of these risks.
Credit Risk
Credit risk, or the risk of counterparties defaulting, is controlled by the application of control and
monitoring procedures. It is the Company’s policy that all clients who wish to trade on credit
terms are subjected to credit verification procedures. Receivables and due from affiliates balances
are monitored on an ongoing basis to ensure that the Company’s exposure to bad debts is not
- 27 -
*SGVMC312793*
significant. The Company evaluates the concentration of risk with respect to its receivables as
low, as its customers are located in several industries and operate in largely independent markets.
With respect to credit risk arising from the Company’s other financial assets consisting of cash
and cash equivalents, the Company’s exposure arises from the default of the counterparty, with a
maximum exposure equal to the carrying amount of these instruments. The Company deals only
with financial institutions duly evaluated and approved by the BOD. The Company avoids
concentrations of credit risk on its liquid assets as these are spread over several financial
institutions.
The maximum exposure of the Company to credit risk as of December 31, 2011 and 2010 is equal
to the carrying values of the financial assets. The Company does not hold collaterals as security.
Credit quality of financial assets The tables below summarize the credit quality of the Company’s financial assets as of
December 31.
2011
Neither past due nor impaired
Standard Past due but Past due
High grade grade not impaired and impaired Total
Loans and receivables:
Cash in banks P=30,389,454 P=– P=– P=– P=30,389,454
Short-term investments 42,168,394 – – – 42,168,394
Receivables:
Trade 62,142,725 81,797,535 128,743,755 54,412,325 327,096,340
Advances to stations 8,452,352 202,591 9,160,211 379,906 18,195,060
Others 2,126,647 1,474,036 2,218,863 3,559,010 9,378,556
Due from affiliates 88,966,242 – – – 88,966,242
Unquoted AFS financial assets – 25,544,635 – – 25,544,635
P=234,245,814 P=109,018,797 P=140,122,829 P=58,351,241 P=541,738,681
2010
Neither past due nor impaired
Standard Past due but Past due
High grade grade not impaired and impaired Total
Loans and receivables:
Cash in banks P=54,279,157 P=– P=– P=– P=54,279,157 Short-term investments 43,271,739 – – – 43,271,739
Receivables:
Trade 15,702,249 172,832,420 110,384,456 51,137,367 350,056,492 Advances to stations 6,165,985 767,540 1,318,712 251,121 8,503,358
Others 477,531 – 5,712,352 4,053,998 10,243,881
Due from affiliates 41,283,182 – – – 41,283,182
Unquoted AFS financial assets – 25,999,910 – – 25,999,910
P=161,179,843 P=199,599,870 P=117,415,520 P=55,442,486 P=533,637,719
Financial assets classified as “high grade” are those cash in banks and short-term investments
transacted with reputable local banks and receivables and due from affiliates with no history of
default on the agreed contract terms. Financial instruments classified as “standard grade” are
those financial assets with little history of default on the agreed terms of the contract. A financial
asset is considered past due when a counterparty has failed to make a payment when contractually
due. “Past due but not impaired” financial assets are items with history of frequent default.
Nevertheless, the amounts due are still collectible. Lastly, “Past due and impaired” items are those
that are long outstanding and have been specifically identified and collectively provided with
allowance for probable losses.
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*SGVMC312793*
Financial assets that are past due but not impaired
The tables below summarize the aging analysis of past due but not impaired financial assets as of
December 31, 2011 and 2010.
2011
<30 Days
31-60
Days
61-90
Days
91-120
Days
Over 120
Days
Total
Loans and receivables:
Receivables
Trade P=32,848,191 P=13,801,353 P=10,876,406 P=28,773,176 P=42,444,629 P=128,743,755
Advances to stations 2,531,511 525,125 – 1,339,651 4,763,924 9,160,211
Others – – – – 2,218,863 2,218,863
P=35,379,702 P=14,326,478 P=10,876,406 P=30,112,827 P=49,427,416 P=140,122,829
2010
<30 Days
31-60
Days
61-90
Days
91-120
Days
Over 120
Days
Total
Loans and receivables:
Receivables
Trade P=25,858,926 P=11,505,426 P=10,007,940 P=22,381,720 P=40,630,444 P=110,384,456
Advances to stations 169,686 230,035 388,481 470,858 59,652 1,318,712
Others – – – – 5,712,352 5,712,352
P=26,028,612 P=11,735,461 P=10,396,421 P=22,852,578 P=46,402,448 P=117,415,520
Liquidity Risk
Liquidity risk arises when obligations are not met when they fall due. It is the Company’s
objective to finance capital expenditures, services, and maturing obligations as scheduled. To
cover the Company’s financing requirements and at the same time, manage its liquidity risk, the
Company uses internally generated funds and proceeds from debt. Projected and actual cash flow
information are regularly evaluated and funding sources are continuously assessed.
The tables below summarize the maturity profile of the Company’s financial liabilities as of
December 31, 2011 and 2010 based on contractual undiscounted payments, including interest due:
2011
Less than 3 to 12
On demand 3 months months Total
Other financial liabilities
Accounts payable and accrued
expenses* P=52,280,514 P=62,083,110 P=50,656,516 P=165,020,140
Dividends payable 1,661,994 – – 1,661,994
Talent fees and commissions
payable – 21,432,976
9,185,561 30,618,537
P=53,942,508 P=83,516,086 P=59,842,077 P=197,300,671
*Amounts are exclusive of nonfinancial liabilities amounting to P=32,301,671 as of December 31, 2011.
2010
Less than 3 to 12
On demand 3 months months Total
Other financial liabilities
Accounts payable and accrued
expenses*
P=62,583,487
P=54,251,709
P=42,830,297
P=159,665,493
Dividends payable 1,766,303 – – 1,766,303
Talent fees and commissions
payable
–
19,565,604
8,385,258
27,950,862
P=64,349,790 P=73,817,313 P=51,215,555 P=189,382,658
*Amounts are exclusive of nonfinancial liabilities amounting to P=42,972,810 as of December 31, 2010.
- 29 -
*SGVMC312793*
The following tables show the profile of financial assets used by the Company to manage its
liquidity risk:
2011
On Less than 3 to 12
Demand 3 Months Months Total
Cash in banks P=30,389,454 P=– P=– P=30,389,454
Short-term investments – 42,168,394 – 42,168,394
30,389,454 42,168,394 – 72,557,848
Receivables
Trade 143,940,260 57,525,950 71,217,805 272,684,015
Advances to stations 8,654,943 3,056,636 6,103,575 17,815,154
Others 3,600,683 – 2,218,863 5,819,546
156,195,886 60,582,586 79,540,243 296,318,715
Due from affiliates – – 88,966,242 88,966,242
P=186,585,340 P=102,750,980 P=168,506,485 P=457,842,805
2010
On Less than 3 to 12
Demand 3 Months Months Total
Cash in banks P=54,279,157 P=– P=– P=54,279,157
Short-term investments – 43,271,739 – 43,271,739
54,279,157 43,271,739 – 97,550,896
Receivables
Trade 108,638,674 190,280,451 – 298,919,125
Advances to stations 2,307,506 5,944,731 – 8,252,237
Others 2,667,849 3,522,035 – 6,189,884
113,614,029 199,747,217 – 313,361,246
Due from affiliates – – 41,283,182 41,283,182
P=167,893,186 P=243,018,956 P=41,283,182 P=452,195,324
Equity Price Risk
The Company’s exposure to the risk of changes in equity price relates primarily to its quoted AFS
financial asset. Management believes that the Company’s exposure to equity price risk is minimal
since the balance of quoted AFS financial asset is not material (see Note 7).
Capital Management
The primary objective of the Company’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximize shareholder
value.
The Company manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. To maintain or adjust the capital structure, the Company may adjust the
dividend payment to shareholders, return capital to shareholders or issue new shares. No changes
were made in the objectives, policies or processes during the years ended December 31, 2011 and
2010.
The Company monitors its use of capital using debt to equity ratio (total liabilities/total equity)
which is 47.22% and 40.72% as of December 31, 2011 and 2010, respectively.
- 30 -
*SGVMC312793*
The following table summarizes the Company’s capital structure as of December 31, 2011 and
2010:
2011 2010
Capital stock P=402,803,777 P=402,803,777
Additional paid-in capital 79,354 79,354
Retained earnings 138,226,704 198,167,753
Treasury stock (120,787) (120,787)
P=540,989,048 P=600,930,097
21. Financial Assets and Financial Liabilities
The carrying value and estimated fair value of all the financial instruments are equal as of
December 31, 2011 and 2010.
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value:
AFS financial assets The fair value of the quoted shares of stock as of December 31, 2011 and 2010 is based on quoted
market price (Level 1). Unquoted shares of stock amounting to P=25.5 million and P=26.0 million as
of December 31, 2011 and 2010, respectively, are carried and presented at cost since the fair
values of such investments cannot be reliably determined. There were no transfers between the
different hierarchy levels in 2011.
Other financial assets and financial liabilities Due to the short-term nature of other financial assets and financial liabilities, the fair value of cash
in banks, short-term investments, receivables, due from affiliates, accounts payable and accrued
expenses, dividends payable, and talent fees and commissions payable approximate the carrying
value as of the end of the reporting period.
22. Other Matters
The Company is and may become a defendant/respondent in various cases and assessments which
are pending in the courts or under protest. Management and its legal counsels believe that the
liability, if any, that may result from the outcome of these cases and investigation will not
materially affect its financial position and results of operations.
23. Supplementary Information Required Under Revenue Regulations 15-2010
In compliance with Bureau of Internal Revenue Revenue Regulations 15-2010 issued on
November 25, 2010, mandating all taxpayers to disclose information on taxes and license fees
paid and accrued during the taxable year, summarized below are the taxes paid and accrued by the
Company in 2011.
a. Output VAT declared by the Company amounted to P=90,987,235 based on receipts of
P=758,226,961 in 2011. Outstanding output tax payable amounted to P=7,719,839 as of
December 31, 2011.
- 31 -
*SGVMC312793*
The Company’s revenue on which output VAT is declared, is based on collections, hence,
may not be the same as the amounts accrued in the statement of comprehensive income.
b. Movements in input VAT are as follows:
Balance, January 1 P=4,136,434
Current year payments for:
Services lodged under cost of services 55,742,698
Services lodged under other accounts –
Capital goods subject to amortization 4,920,000
Capital good not subject to amortization –
Claims for tax credit and other adjustments (60,408,054)
Balance, December 31 P=4,391,078
c. Taxes and licenses paid by the Company are as follows:
Business permits P=1,732,450
Real property taxes 719,111
Documentary stamp taxes on NTC permits 105
Others 1,272,646
P=3,724,312
d. Withholding taxes paid and accrued by the Company are as follows:
Paid Accrued Total
Withholding tax on compensation
and benefits P=3,240,924 P=586,197
P=3,827,121
Expanded withholding tax 13,962,472 1,164,152 15,126,624
24. Supplementary Information Required Under Revenue Regulations 19-2011
In compliance with Bureau of Internal Revenue Regulations 19-2011 dated December 9, 2011,
presented below are the details of revenue, cost of services, other taxable income and itemized
deductions of the Company.
Sales, Revenue, Receipts and Fees
The Company’s taxable revenue from broadcasting fees amounted to P=756,600,651 for the year
ended December 31, 2011.
Cost of Services
The Company’s tax deductible cost of services in 2011 are as follows:
Program costs P=290,697,396
Service fees 171,270,963
Personnel expenses 20,624,510
Depreciation and amortization expense 14,215,499
Replacement parts 4,463,103
P=501,271,471
- 32 -
*SGVMC312793*
Itemized Deductions
The Company’s itemized deductions in 2011 are as follows:
Personnel expenses P=37,039,255
Depreciation and amortization 31,856,472
Agency commission and discounts 18,268,100
Communication, light and water 16,966,432
Advertising and promotions 13,417,846
Travel and transportation 7,672,647
Repairs 5,783,025
Taxes and licenses 3,724,312
Entertainment, amusement and recreation 2,250,484
Replacement parts 1,193,534
Others 13,003,919
P=151,176,026
Details of Other Income
Rental income P=9,079,316
Realized foreign exchange gain 41,574
Others 765,133
P=9,886,023
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