mbc definitive information statement 2013
TRANSCRIPT
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SEC Number: 1674
File Number
MANILA BROADCASTING COMPANY
(Company's Full Name)
MBC BLDG., V. SOTTO ST., CCP COMPLEX
PASAY CITY 1307 PHILIPPINES
(Company's Address)
832-6142; 832-6186
(Telephone Number)
DECEMBER 31
(Fiscal Year Ending)
FORM 20 IS
(Form Type)
DEFINITIVE INFORMATION STATEMENT
(Amendment Designation)
(Period Ended Date)
04 SEPTEMBER 2013
(Date Prepared)
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 – 000-479-027-000
6. MBC Bldg., Vo. Sotto St., CCP Complex, Pasay City
Address of principal office Postal Code – 1307
7. Registrant’s telephone number, including area code - (632) 832-6142/86
8. Date, time and place of the meeting of security holders
Date - 26 September 2013
Time - 3:00 p.m.
Place - Star Theater, Star City, V. Sotto St.,
CCP Complex,Pasay City 1307 Philippines
9. Approximate date on which the Information Statement is first to be sent or given
to security holders – 05 September 2013
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 P303,828,770
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
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:
Date - 26 September 2013
Time - 3:00 p.m.
Place - Star Theater, Star City, V. Sotto St.,
CCP Complex, Pasay City 1307 Philippines
Complete mailing address of the principal office of the registrant:
MANILA BROADCASTING COMPANY
MBC Bldg, V. Sotto St., CCP Complex,
Pasay City 1307 Philippines
(b) Approximate date on which the Information Statement is first to be sent or
given to security holders – 05 September 2013
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 26 September 2013 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 26
September 2013.
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
(a) Each of the 402,682,990 outstanding shares of the Company as of August 30,
2013 is entitled to one (1) vote. The Company does not allow foreign
ownership of the Company’s shares.
(b) 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 August 2013 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
(c) 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 14 June 2013.
Item 5. Directors and Executive Officers
Directors and Executive Officers of the Registrant
(a) Security Ownership of Certain Record and Beneficial Owners
As of August 30, 2013, the Company knows no one who beneficially owns in
excess of 5% of the Company’s common stock except as set forth in the
following table:
Title of
Class
Name and Address
of Record Owner
and Relationship
with Issuer
Name and
Address of
Beneficial Owner
and Relationship
Citizenship No. of Shares
Held Percent
with Record
Owner
Common Elizalde Holdings
Corporation, MBC
Bldg., V. Sotto St.,
CCP Complex,
Pasay City 1307
Philippines
(stockholder)
Eduardo G.
Cordova
MBC Bldg., V.
Sotto St., CCP
Complex, Pasay
City 1307
Philippines
Senior Vice-
President
Filipino 139,558,774
34.66%
Elizalde Land Inc.,
2nd Floor, MBC
Bldg., V. Sotto St.,
CCP Complex,
Pasay City 1307
Philippines
(stockholder)
Eduardo G.
Cordova, MBC
Bldg., V. Sotto
St., CCP
Complex, Pasay
City 1307
Philippines
Senior Vice-
President
Filipino 87,000,000 21.61%
Romulo Mabanta
Buenaventura
Sayoc & delos
Angeles Law
Offices*,
30th Floor,
Citibank Tower,
8741 Paseo de
Roxas, Makati City,
M.M. (Trust Fund
for the Elizalde
Children)
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*, MBC
Bldg., V. Sotto St.,
CCP Complex,
Pasay City 1307
Philippines
(Affiliate
Broadcast
Company)
Robert A. Pua
MBC Bldg., V.
Sotto St., CCP
Complex, Pasay
City 1307
Philippines Vice
President
Filipino
50,000,000 12.42%
AQG Corporation,
2291Chino Roces
Avenue, Makati
City (Stockholder)
Julio D. Sy, Jr.,
2291 Chino
Roces Avenue,
Makati City
President &
Chairman
Filipino 33,000,000
8.20%
The same person authorized to vote on the shares of Corporate Shareholder.
(b) Security Ownership of Management as of 30 August 2013.
% 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
JUAN M. ELIZALDE
Direct 0.0002% 1,000
JOSE M. TARUC, JR.
Direct 0.0002% 1,000
GARY C. HUANG
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
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)
B. Directors (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 – HRAS
Carlea C. Miranda - VP – Treasury
Elpidio Macalma - AVP – DZRH
Wilfredo Espinosa - AVP – FM Programming
Jose Ma. T. Parroco - AVP – Sales
*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;
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 Company will submit to the Commission its Certification of Independent
Directors after the election of the members of the Board of Directors or within the
prescribed period of 30 days after the Annual Stockholders Meeting as required
Name Age Term
Fred J. Elizalde 72 1985 up to present
Ruperto S. Nicdao, Jr. 57 1988 up to present
Eduardo G. Cordova 63 1988 up to present
Julio P. Macuja II 49 1999 up to present
Jose M. Taruc 65 2001 up to present
Rudolph Steve E. Jularbal 58 2011 up to present
George T. Goduco* 47 2003 up to present
Gary C. Huang* 61 2012 up to present
by the Notice issued by the Commission dated October 20, 2006. The company
has also complied with all of the requirements of SRC Rule 38 as amended and
SEC Memorandum Circular No. 9, Series of 2011, regarding the procedure for
nomination and election of Independent Directors.
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. Gary C. Huang 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.
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.
- 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 is also President of our
affiliate Cebu Broadcasting Company. 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 conferred with emeritus on doctoral
degree by the same school.
- Gary C. Huang is an independent director. He is currently the Dean of the
School of Business Administration, Accountancy and Customs Administration
of Emilio Aguinaldo College. Concurrently he is also the President of
Filresource, Inc. He obtained his Master’s in Business Management from the
Asian Institute of Management and his Bachelor of Science in Industrial
Engineering from the University of the Philippines, His past positions include,
President of Geonobel Philippines, Inc., Country Manager of Herbalife
International, Philippines and General Manager of Great Amusement, Inc.
- 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
Station Manager 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 before 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 President of our affiliate Pacific Broadcasting System, Inc and
a Director of Cebu Broadcasting Company and Philippine Broadcasting
Company. 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 Divine 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 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 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.
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, is
involved. Please refer to Note 12 of the 2012 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 P12,055,920 (estimate) in 2013, P11,792,411 in 2012,
P7,430,208 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 – 2007 5,538,708 - 390,933
Chairman / CEO 2008 6,000,262 - 349,286
2009 6,500,000 - -
2010 6,500,000 - -
2011 6,500,000 - 22,222 (Director’s Fee)
2012 6,500,000 - 22,222 (Director’s Fee)
2013 (Est.) 6,500,000 - 22,222 (Director’s Fee)
Jose M. Taruc, Jr. 2007 - - -
VP - DZRH 2008 - - -
2009 - - -
2010 - - -
2011 441,170* - 22,222 (Director’s Fee)
2012 1,474,255 - 285,386 (Talent Fee)
2013 (Est.) 1,474,255 - 373,368 (Talent Fee)
Elpidio Macalma
AVP - DZRH 2007 - - -
2008 - - -
2009 - - -
2010 - - -
2011 422,372* - 22,222 (Director’s Fee)
2012 694,270 - 2,816,278 (Talent Fee)
2013 (Est.) 694,270 - 2,991,805 (Talent Fee)
*Covering the period Oct. 1 to Dec. 31, 2011. The previous employer of Mr. Taruc
an 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 2012
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 26 September 2013. 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. George T. Goduco as Chairman and Mr.
Eduardo G. Cordova and Mr. Julio Manuel P. Macuja as members.
EXTERNAL AUDIT FEES
A. Audit and Audit-Related Fees
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 2012 2011 2010
Regular Audit 620,000 580,000 550,000
Review of Proposed Increase in ACS - - -
Long Form Audit - - -
Review of Forecast - - -
All Other Fees - 68,250 -
Total Audit and Audit-Related Fees 620,000 648,250 550,000
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
a. Action with respect to Reports
The Company will submit to the stockholders for approval the following:
1. 2012 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 26
September 2013.
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
Item 10. Modification or Exchange of Securities
No action is to be taken with respect to the modification of any class of securities,
or the issuance or authorization for issuance of the Company in exchange for
outstanding securities of another class.
Item 11. Financial and Other Information
The Company’s Audited Financial Statements and the 2nd quarter interim financial
statements are attached as Annex B and C respectively. The Management’s
Discussion & Analysis is incorporated in the Management Report attached as
Annex A.
Representatives of the Company’s external auditor, SGV & Co., are expected to be
present at the annual meeting, and they will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond
appropriate questions from the shareholders. The Company has had no material
disagreement with SGV & Co. on any matter of accounting principle or practices
or disclosures in the Company’s financial statements.
Item 12. Mergers, Consolidations, Acquisitions and Similar Matters
No action will be presented for shareholders’ approval at this year’s annual
meeting in respect of (1) merger or consolidation of the Company into or with
any other person, or of any other person into or with the Company, (2) acquisition
by the Company or any of its shareholders of securities of another person, (3)
acquisition by the Company of any other going business or of the assets thereof,
(4) the sale or transfer of all or any substantial part of the assets of the Company,
or (5) liquidation or dissolution of the Company.
Item 13. Acquisition or Disposition of Property
No action will be presented for shareholders’ approval in respect of any
acquisition or disposition of property of the Company.
Item 14. Restatement of Accounts
No action will be presented for shareholders’ approval which involves the
restatement of any the Company’s assets, capital or surplus account.
D. OTHER MATTERS
Item 15. Action with Respect to Reports
No action is to be taken with respect to any report of the Company 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 16. Matters Not Required to be Submitted
No action is to be taken with respect to any matter which is not required to be
submitted to a vote of security holders.
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.
Unless required by law or demanded by the stockholder present in person or
represented and entitled to vote thereat, the vote on any question need not be
by ballot.
Votes will be counted based on the number of shares represented during the
meeting by each stockholder present and as voted by the stockholder. Should
there be no objections to any issue, the votes may be cast and counted as
directed by the Chairman of the meeting. The Corporate Secretary is the
designated person authorized to count the votes.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
MANAGEMENT REPORT
Management’s Discussion and Analysis or Plan of Operation
2012 vs. 2011
1. Results Of Operations
The Company’s total revenue amounted to P788.8 million that is 4.26% higher
than the revenue posted last year. On the other hand, cost and operating
expenses was reduced by P19.6 million or 3.92% lower as compared to last
year. This was mainly due to the decrease in this year’s service fees and
depreciation and amortization expenses.
Operating expenses increased from P178.8 million to P195.7 million while
other income increased by P5.1 million or 1,630.9%. The increase in the
Company’s other income was brought about by the increase in the company’s
miscellaneous income during the year. The increase in miscellaneous income
account was mainly due to the income generated by the Company from its
sponsorships in several shows/concerts during the year. Interest income
decreased by 7.02% compared to last year’s amount mainly due to reduced
investment balance on money market placement during the year.
As a result, the Company registered a net income of P87.5 million in 2012, an
increase of P26.6 million or 43.75% from P60.9 million in 2011.
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%)
a. Cash and cash equivalents increased by P68.3 million or 93.45% from
P73.1 million in 2011 to P141.5 million in 2012 mainly due to increased
net cash flows generated from operations. Please see statement of cash
flows of the 2012 audited financial statements.
b. Due from affiliates represents interest-free advances to Elizalde
Holdings Corporation (EHC), an affiliate under common control with the
Company. No balance was reported for 2012. It is because the advances
made by EHC exceed the advances made by the Company to them.
Please see note 12 of the 2012 audited financial statements.
c. Materials and supplies increased by P3.1 million or 33.4% mainly due to
the increase in the Company’s Ex-deal inventory.
d. Prepaid expenses and other current assets decreased by P0.3 million or
5.67% mainly due to the amortization of prepayments and input tax on
capital goods accounts.
e. Property and equipment at cost increased by P40.0 million or 64.5%
while Property and equipment at revalued amount increased by almost
P31.3 million or 25.6%. The increase mainly due to the Company’s
acquisition of additional transmitting and transportation equipment and
to the increase in the value of its construction in progress account.
f. Investment properties amounting to P65.1 million as of December 31,
2012 represent 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 in a yearly
basis to generate revenue in order to sustain its maintenance costs. The
decrease of P8.1 million or 11.02% represents depreciation charges
during the year.
g. Intangible assets arise from the Company’s acquisition of DWRK which
became effective on October 4, 2008. The decrease of P11.8 million or
10.26% represents amortization costs during the year.
h. Accounts payable & accrued expenses decreased from P197.3 million to
P169.5 million or 14.1%. It is due to the accelerated payments made by
the Company to its suppliers and other creditors.
i. Due to affiliates represents the advances made to the Company by EHC,
an affiliate under common control with the Company. The balance as of
December 31, 2012 amounted to P6.5 million.
j. Dividends payable increased by P8.7 million or 525.3%. The large
increase is mainly due to the payment date nearing the holidays which
is due on December 21, 2012. During this time, most of the stockholders
were unable to claim their respective dividends and were claimed only
the following year.
k. Talent fees and commissions payable increased by P5.2 million or
17.01% mainly due to increased placement of client-initiated promos
during the year.
l. Income tax payable increased by P4.1 million or 32.46% mainly due to
higher income before income tax registered during the year.
m. Accrued retirement benefits increased by P5.4 million or 11.24% mainly
due to higher accrual of service costs of employees based on actuarial
valuation versus actual contribution to the retirement benefit fund.
Please see Note 17 of 2012 audited financial statement.
n. Deferred income tax liabilities-net increased by P8.2 million or 239.26%
mainly due to increase in the accrued retirement and unamortized
contribution to past service cost as well as increase in the fair value of
land carried at revalued amount. Please see note 18b of 2012 audited
FS.
o. Revaluation increment on land represents the increase the appraised
value of land. It increased from P81.1 million in 2011 to P103.0 million in
2012.
p. Retained earnings increased by P15.0 million or 10.86% mainly due to
the net effect of income and the declaration of cash dividends during
the year. Please see statements of changes in equity of 2012 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 16-17,
2013 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, held on April
11-13, 2013 brought the best, biggest, loudest and the most colorful
fiestas from all over the Philippines to Manila. Now on its 11th year, the
festival once again showcased 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.
• Manila Bay Clean-up Run 3 was held last July 14, 2013 at CCP Ground,
Pasay City. The aim of this event is to raise funds for the drive to clean up
the Manila Bay of trash and pollutants as well as to raise awareness among
Filipinos to take care of our environment and preserve our city’s natural
beauty, starting with the picturesque ecology of the Manila Bay. The
Manila Bay Clean-up Run now on its 3rd year is a fund drive organized and
managed by the Company.
• MBC National Choral Competition which will take place in December 2013
also promises to bring highly acclaimed contestants not only from Metro
Manila but all over the country
• 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 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. Key Financial Indicators
2012 2011
1. Return on Sales (ROS)
Net Income 87,489,385 60,863,848
Divide by: Sales 788,823,015 756,600,651
ROS 11.09% 8.04%
2. Earnings Per Share (EPS)
Net Income 87,489,385 60,863,848
Divide by: No. of Shares Outstanding 402,682,990 402,682,990
EPS 0.217 0.151
3. Current Ratio
Current Assets 468,790,875 473,144,589
Divide by: Current Liabilities 238,720,479 242,313,089
Current Ratio 1.964 1.953
4. Debt-Equity Ratio
Total Liabilities 303,828,770 293,816,130
Divide by: Stockholders’ Equity 659,103,759 622,203,902
Debt-Equity Ratio 0.461 0.472
5. Book Value Per Share
Total Stockholders’ Equity 659.103.759 622.203.902
Divide by: No. of Shares Outstanding 402,682,990 402,682,990
Book Value Per Share 1.637 1.545
Discussion on Key Performance Indicators (2012 & 2011)
a. ROS increased from 8.04% to 11.09% mainly due to higher net income
earned during the year.
b. The EPS increased by P0.066 per share due to the increase in net income
with the total number of outstanding shares remaining constant.
c. Current ratio increased from 1.953 to 1.964 mainly due to higher cash
balance as a result of higher net income during the year.
d. The debt-equity ratio decreased to 0.461:1 mainly due to revaluation
increment in land value in 2012.
e. The book value per share increased from P1.545 to P1.637 mainly due to
the revaluation increment in land value and net income during the year
with the number of outstanding shares remaining constant.
6. Other Disclosure Matters
a. There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
b. There are no unusual items affecting assets, liabilities, equity, net income,
or cash flows.
c. 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.
d. 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.
e. 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.
f. There are no changes in contingent liabilities or contingent assets since
the last annual balance sheet date.
g. There are no material contingencies and any events or transactions that
are material to the understanding of the current interim period.
h. There are no known trends, demands, commitments, events or
uncertainties that will have a material impact on the Company’s liquidity.
i. 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.
j. There are no significant elements of income or loss that did not arise from
the company’s continuing operations;
k. There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
l. 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.
m. 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.
n. There are no businesses or geographical segments for which information
is not reported to the Board of Directors (BOD) and chief executive officer.
o. The pricing of inter-segment transfers was based on cost at the time of
transaction.
p. There were no changes in accounting policies adopted for segment
reporting that have a material effect on segment information.
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 the total assets as of December 31, 2012.
b. The amounts receivable of more than P100,000.00 or one percent of total
assets from Directors, Officers, Employees, Related Parties, and Principal
Stockholders. (Jose M. Taruc, Jr. – P3,896,765.97)
c. The available-for-sale financial assets of P25,634,635 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. There were no amounts due from affiliates in the related balance sheet
that emceed five percent of total assets.
e. Intangible Assets - Other Assets – Please refer to note 10 of the audited
FS.
f. Long-term Debt – No balances as of December 31, 2012.
g. Indebtedness to related Parties amounted to P6,471,524
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.
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, NIL
warrants conversion and other rights
Number of shares held by related parties 361,469,767 shares
Number of shares held by directors, officers
and employees 184,540 shares
Others 41,028,499 shares
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 P0.3 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 during the year.
As an 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%)
a. Cash and cash equivalents decreased by P24.9 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.
b. 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.
c. 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.
d. Materials and supplies decreased by P1.5 million 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.
e. 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.
f. 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.
g. 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.
h. 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.
i. 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.
j. Dividend payable decreased by P0.1 million or 5.9% as a result of
payments made to stockholders.
k. 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.
l. Income tax payable decreased by P10.4 million or 45.04% mainly due to
lower income before income tax registered during the year.
m. 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.
n. Deferred income tax liabilities-net decreased by P8.3 million or 70.7%
mainly due to 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 obsolesce. Please see note 18b of 2011
audited FS.
o. 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.
• The most successful event of the company, the Aliwan Fiesta, held on April
12-14, 2012 brought the best, biggest, loudest and the most colorful
fiestas from all over the Philippines to Manila. Now on its 10th year, the
festival once again showcased 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 be a live telecast at Aliw Theater of the much awited 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 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. Key Financial Indicators
2011 2010
1. Return on Sales (ROS)
Net Income 60,863,848 117,528,855
Divide by: Sales 756,600,651 833,380,988
ROS 8.04% 14.10%
2. Earnings Per Share (EPS)
Net Income 60,863,848 117,528,855
Divide by: No. of Shares Outstanding 402,682,990 402,682,990
EPS 0.151 0.292
3. Current Ratio
Current Assets 473,144,589 470,379,960
Divide by: Current Liabilities 242,313,089 255,482,571
Current Ratio 1.953 1.841
4. Debt-Equity Ratio
Total Liabilities 293,816,130 277,790,552
Divide by: Stockholders’ Equity 622,203,902 682,124,951
Debt-Equity Ratio 0.472 0.407
5. Book Value Per Share
Total Stockholders’ Equity 622,203,902 682,124,951
Divide by: No. of Shares Outstanding 402,682,990 402,682,990
Book Value Per Share 1.545 1.694
Discussion on Key Performance Indicators (2011 & 2010)
a. ROS decreased from 14.10% to 8.04% mainly due to lower net income
during the year.
b. The EPS decreased by P0.14 per share because of the decrease in net
income with the total number of outstanding shares remaining constant.
c. Current ratio increased from 1.841 to 1.953 mainly due to lower income
tax payable as a result of lower net income during the year.
d. The debt-equity ratio increased to 0.472:1 from 0.407:1 mainly due to the
cash dividends declared in 2011.
e. The book value per share decreased from P1.694 to P1.545 mainly due to
the cash dividends declared in 2011.
6. Other Disclosure Matters
a. There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
b. There are no unusual items affecting assets, liabilities, equity, net income,
or cash flows.
c. 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.
d. 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.
e. 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.
f. There are no changes in contingent liabilities or contingent assets since
the last annual balance sheet date.
g. There are no material contingencies and any events or transactions that
are material to the understanding of the current interim period.
h. There are no known trends, demands, commitments, events or
uncertainties that will have a material impact on the Company’s liquidity.
i. 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.
j. There are no significant elements of income or loss that did not arise from
the company’s continuing operations;
k. There are no seasonal aspects that had a material effect on the financial
condition or results of operations.
l. 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.
m. 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.
n. There are no businesses or geographical segments for which information
is not reported to the Board of Directors (BOD) and chief executive officer.
o. 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.
7. Other Disclosure Requirements Per Annex 68.1 M paragraph 7e Rule of
68.1
a. Marketable Securities
The aggregate cost or market value of short-term investments constitutes
less than 10% of the total assets as of December 31, 2011.
b. The amounts receivable of more than P100,000.00 or one percent of total
assets from Directors, Officers, Employees, Related Parties, and Principal
Stockholders. (Jose M. Taruc, Jr. – P3,742,950.02)
c. The available-for-sale financial assets of P25,634,635 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 P89 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 of the audited
FS.
f. Long-term Debt – No balances as of December 31, 2011.
g. Indebtedness to related Parties – No balances as of December 31, 2011
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.
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 361,469,767 shares
Number of shares held by 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 03 October 2012 at P3.30 per share involving 3,000 shares. There was no
transaction of MBC shares after the said date.
Stock Prices
2013 2012 2011
High Low High Low High Low
1st Qtr NT NT 2.52 2.50 NT NT
2nd Qtr NT NT 3.10 3.10 NT NT
3rd Qtr NA NA 3.30 3.30 1.11 1.11
4th Qtr NA NA 3.30 3.30 3.04 3.04
*NT – No Transaction
*NA – Not Applicable
2. Holders
a. There are 616 Stockholders as of 30 August 2013.
b. The top 20 Stockholders as of 30 August 2013 are as follows:
No. of Shares % Age
1 Elizalde Holdings Corporation 139,558,774 34.65%
2 Elizalde Land, Inc. 87,000,000 21.60%
3 Romulo, Mabanta, Buenaventura,
Sayoc & Delos Angeles
69,910,993 17.36%
4 Cebu Broadcasting Company 50,000,000 12.41%
5 AQG Corporation 33,000,000 8.19%
6 Sunshine Inns, Inc. 10,000,000 2.48%
7 Philippine Broadcasting Corporation 5,000,000 1.24%
8 A & A Securities, Inc. 1,123,234 0.28%
9 Tansengco Uy & Co., Inc. 659,892 0.16%
10 Estate of Allen Cham 632,549 0.16%
11 Myron C. Papa, SA of Estate of
Angela Butte
627,254
0.16%
12 Luis M. Alberto &/or Manuel C.
Alberto
553,368 0.14%
13 L.V.N. Pictures, Inc. 447,961 0.11%
14 A. &/or J.O. Del Rosario 363,592 0.09%
15 Ruperto S. Nicdao, Jr. 129,201 0.03%
16 Ernestina U. De Garcia 122,338 0.03%
17 Consuelo Fajardo 121,149 0.03%
18 Luis G. Ablaza 121,149 0.03%
19 Joaquina Tirona 114,719 0.03%
20 Agapito D. Balagtas 105,370 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
0.1800 Nov. 21, 2012 Dec. 10, 2012 Dec. 21, 2012
0.3000 Sept. 30, 2011 Oct. 05, 2011 Oct. 31, 2011
0.0625 Nov. 19, 2010 Dec. 09, 2010 Dec. 23, 2010
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.
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 a 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 shall be addressed as
follows:
MANILA BROADCASTING COMPANY
MBC Bldg., V. Sotto St.,, CCP Complex,
Pasay City 1307 Philippines
Attention: Atty. Rudolph Steve E. Jularbal
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, 2013
17-Q filed as part of this Form 20-IS.
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES
REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER
1. For the quarterly period ended: June 30, 2013
2. Commission identification number: SEC No. 1674
3. BIR Tax Identification No: 000-479-027
4. Exact name of issuer as specified in its charter: MANILA BROADCASTING COMPANY
5. Province, country or other jurisdiction of incorporation or organization: Metro Manila
6. Industry Classification Code: (SEC Use Only)
7. Address of issuer's principal office / Postal Code
MBC Bldg., Star City, CCP Complex, Roxas Boulevard, Pasay City, Metro Manila 1300
8. Issuer's telephone number, including area code: (02) 832-61-49 to 50
9. Former name, former address and former fiscal year, if changed since last report: N/A
10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the RSA
Title of each Class Number of shares of common
stock outstanding and amount
of debt outstanding
Common Shares 402,682,990 shares
Total Liabilities P237,616,641
11. Are any or all of the securities listed on a Stock Exchange?
Yes [����] No [ ]
12. Indicate by check mark whether the registrant:
(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder
or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the
Corporation Code of the Philippines, during the preceding twelve (12) months (or for such
shorter period the registrant was required to file such reports)
Yes [����] No [ ]
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [����] No [ ]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Please see attached Financial Statements for June 30, 2013.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Please see attached management Discussion and Analysis of Financial Condition and Results
of Operations.
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*SGVMG300302*
1 6 7 4
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 A A F S
Month Day (Form Type) Month Day (Calendar Year) (Annual Meeting)
Not Applicable
(Secondary License Type, If Applicable)
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
615
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
*SGVMG300302*
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, 2012 and 2011, 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, 2012, 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,
December 28, 2012, valid until December 31, 2015 SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015
A member firm of Ernst & Young Global Limited
*SGVMG300302*
- 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, 2012 and 2011, and its financial performance and
its cash flows for each of the three years in the period ended December 31, 2012 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 24 and 25 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-2 (Group A), February 14, 2013, valid until February 13, 2016
Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2012,
April 11, 2012, valid until April 10, 2015 PTR No. 3669691, January 2, 2013, Makati City
April 5, 2013
*SGVMG300302*
MANILA BROADCASTING COMPANY
STATEMENTS OF FINANCIAL POSITION
See accompanying Notes to Financial Statements.
December 31
2012 2011
ASSETS
Current Assets Cash and cash equivalents (Note 5) P=141,487,141 P=73,140,156
Receivables (Note 6) 309,784,034 296,318,715
Due from affiliates (Note 12) � 88,966,242
Materials and supplies (net of allowance for inventory
obsolescence of P=1,482,019 in 2012 and P=1,508,663
in 2011) 12,415,815 9,308,734
Prepaid expenses and other current assets 5,103,885 5,410,742
Total Current Assets 468,790,875 473,144,589
Noncurrent Assets
Available-for-sale financial assets (Note 7) 25,634,635 25,634,635
Property and equipment (Note 8) At cost 102,198,219 62,139,150
At revalued amount 153,477,900 122,201,600
Investment properties (Note 9) 65,155,461 73,224,113
Intangible assets (Note 10) 103,381,196 115,196,192 Goodwill (Note 10) 38,016,206 38,016,206
Other noncurrent assets 6,278,037 6,463,547
Total Noncurrent Assets 494,141,654 442,875,443
TOTAL ASSETS P=962,932,529 P=916,020,032
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses (Notes 11, 12 and 17) P=169,545,658 P=197,321,811 Due to affiliates (Note 12) 6,471,524 �
Dividends payable 10,391,998 1,661,994
Talent fees and commissions payable 35,826,629 30,618,538
Income tax payable 16,484,670 12,710,746
Total Current Liabilities 238,720,479 242,313,089
Noncurrent Liabilities Accrued retirement benefits (Note 17) 53,480,410 48,075,663
Deferred income tax liabilities - net (Note 18) 11,627,881 3,427,378
Total Noncurrent Liabilities 65,108,291 51,503,041
Total Liabilities 303,828,770 293,816,130
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) 103,048,264 81,154,854 Reserve for fluctuation in available-for-sale
financial assets (Note 7)
60,000
60,000
Retained earnings (Note 14) 153,233,151 138,226,704
Treasury stock (at cost) - 120,787 shares (120,787) (120,787)
Total Equity 659,103,759 622,203,902
TOTAL LIABILITIES AND EQUITY P=962,932,529 P=916,020,032
*SGVMG300302*
MANILA BROADCASTING COMPANY
STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31
2012 2011 2010
REVENUE (Note 12) P=788,823,015 P=756,600,651 P=833,380,988
COST OF SERVICES (Notes 12 and 15) (481,554,327) (501,218,740) (519,137,632)
GROSS PROFIT 307,268,688 255,381,911 314,243,356
Operating expenses (Notes 12 and 15) (195,705,465) (178,756,054) (152,922,996)
Rental income (Note 9) 8,878,244 9,079,316 8,503,695
Interest income 934,917 1,005,500 1,267,010
Interest expense � � (3,777,035)
Other income - net (Note 7) 5,364,344 309,914 561,484
INCOME BEFORE INCOME TAX 126,740,728 87,020,587 167,875,514
PROVISION FOR INCOME TAX (Note 18) 39,251,343 26,156,739 50,346,659
NET INCOME 87,489,385 60,863,848 117,528,855
OTHER COMPREHENSIVE INCOME (LOSS) Net changes in fair value of available-for-sale
financial assets (Note 7) � 20,000 (30,000)
Increase in revaluation increment due to
appraisal, net of deferred income tax (Note 8) 21,893,410 � �
TOTAL OTHER COMPREHENSIVE
INCOME (LOSS) 21,893,410 20,000 (30,000)
TOTAL COMPREHENSIVE INCOME P=109,382,795 P=60,883,848 P=117,498,855
Weighted Average Number of
Shares Outstanding 402,682,990 402,682,990 402,682,990
Basic/Diluted Earnings Per Share (Note 22) P=0.22 P=0.15 P=0.29
See accompanying Notes to Financial Statements.
*SGVMG300302*
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See
acc
om
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ote
s to
Fin
an
cia
l Sta
tem
ents
.
*SGVMG300302*
MANILA BROADCASTING COMPANY
STATEMENTS OF CASH FLOWS
Years Ended December 31
2012 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax P=126,740,728 P=87,020,587 P=167,875,514
Adjustments for:
Depreciation and amortization (Note 15) 42,131,741 46,071,971 50,425,931
Movement in accrued retirement benefits (Note 17) 5,404,747 24,803,620 (1,217,480)
Interest income (934,917) (1,005,500) (1,267,010)
Interest expense � � 3,777,035
Impairment loss of available-for-sale financial
assets (Note 7) � 455,275 �
Operating income before working capital changes 173,342,299 157,345,953 219,593,990
Decrease (increase) in:
Receivables (13,465,319) 17,042,530 (1,990,863)
Due from affiliates 88,966,242 (47,683,060) (22,472,724) Materials and supplies (3,107,081) 1,485,055 (605,941)
Prepaid expenses and other current assets 306,857 1,464,064 (6,361,058)
Increase (decrease) in:
Accounts payable and accrued expenses (27,776,153) 7,345,592 21,744,525
Talent fees and commissions payable 5,208,091 2,667,676 11,711,837
Due to affiliates 6,471,524 � �
Net cash flows generated from operations 229,946,460 139,667,810 221,619,766
Income taxes paid, including final and creditable
withholding tax
(36,659,806)
(44,843,740)
(39,227,067)
Interest received 934,917 1,005,500 1,267,010
Net cash flows from operating activities 194,221,571 95,829,570 183,659,709
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (Note 8) (62,307,162) (7,140,978) (6,220,404)
Decrease in other noncurrent assets 185,510 7,293,832 4,238,710
Net cash flows from (used in) investing activities (62,121,652) 152,854 (1,981,694)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (63,752,934) (120,909,206) (24,799,822)
Payments of notes payable � � (105,000,000)
Interest paid � � (3,904,127)
Cash flows used in financing activities (63,752,934) (120,909,206) (133,703,949)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 68,346,985 (24,926,782) 47,974,066
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 73,140,156 98,066,938 50,092,872
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=141,487,141 P=73,140,156 P=98,066,938
See accompanying Notes to Financial Statements.
*SGVMG300302*
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 (SEC)
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 5, 2013.
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 following amendments to standards which became effective on January 1, 2012. These
amendments, however, did not have any significant impact on the financial position or
performance of the Company.
· PFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure
Requirements, require additional disclosures about financial assets that have been transferred
but not derecognized to enhance the understanding of the relationship between those assets that have not been derecognized and their associated liabilities. In addition, the amendments
require disclosures about continuing involvement in derecognized assets to enable users of
financial statements to evaluate the nature of, and risks associated with, the entity�s continuing
involvement in those derecognized assets.
· Philippine Accounting Standard (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 the carrying amount of investment property measured using the fair value model in PAS 40, Investment Property, will be
recovered through sale and, accordingly, requires that any related deferred tax should be
- 2 -
*SGVMG300302*
measured on a �sale� basis. The presumption is rebutted if the investment property is
depreciable and it is held within a business model whose objective is to consume substantially
all of the economic benefits in the investment property over time (�use� basis), rather than through sale. Furthermore, the amendment introduces the requirement that deferred tax on
nondepreciable assets measured using the revaluation model in PAS 16, Property, Plant and
Equipment, always be measured on a sale basis of the asset.
New Accounting Standards, Interpretations, and Amendments to
Existing Standards Effective Subsequent to December 31, 2012 The Company reasonably expects the following standards, amendments and interpretations, which
have been issued but are not yet effective as at December 31, 2012 to be applicable at a future
date. Except as otherwise indicated, the Company does not expect the adoption of the applicable
new and amended PFRS to have a significant impact on its financial position or performance. The relevant disclosures will be included in the notes to the financial statements when these become
effective.
Effective in 2013
· Amendments to PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and
Financial Liabilities, require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all
recognized financial instruments that are set off in accordance with PAS 32, Financial
Instruments: Presentation. These disclosures also apply to recognized financial instruments
that are subject to an enforceable master netting arrangement or �similar agreement�, irrespective of whether they are set-off in accordance with PAS 32. The amendments require
entities to disclose, in a tabular format unless another format is more appropriate, the
following minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period:
a. the gross amounts of those recognized financial assets and recognized financial liabilities;
b. the amounts that are set off in accordance with the criteria in PAS 32 when determining
the net amounts presented in the statement of financial position; c. the net amounts presented in the statement of financial position;
d. the amounts subject to an enforceable master netting arrangement or similar agreement
that are not otherwise included in (b) above, including: i. amounts related to recognized financial instruments that do not meet some or all of the
offsetting criteria in PAS 32; and
ii. amounts related to financial collateral (including cash collateral); and e. the net amount after deducting the amounts in (d) from the amounts in (c) above.
The amendment affects disclosures only and has no impact on the Company�s financial
position or performance.
· PFRS 10, Consolidated Financial Statements, replaces the portion of PAS 27, Consolidated
and Separate Financial Statements that addresses the accounting for consolidated financial
statements. It also includes the issues raised in SIC 12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single control model that applies to all entities including
special purpose entities and will require management to exercise significant judgment to
determine which entities are controlled, and therefore, are required to be consolidated by a parent compared with the requirements that were in PAS 27.
- 3 -
*SGVMG300302*
· PFRS 11, Joint Arrangements, replaces PAS 31, Interests in Joint Ventures and SIC 13,
Jointly Controlled Entities - Non-monetary Contributions by Venturers. PFRS 11 removes the
option to account for jointly controlled entities using proportionate consolidation. Instead,
jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method.
· PFRS 12, Disclosure of Interests in Other Entities, includes all of the disclosures that were
previously in PAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in PAS 31 and PAS 28. These disclosures relate to
an entity�s interests in subsidiaries, joint arrangements, associates and structured entities. A
number of new disclosures are also required.
· PAS 27, Separate Financial Statements (as revised in 2011), has been limited to accounting
for subsidiaries, jointly controlled entities, and associates in the separate financial statements
as a consequence of the new PFRS 10 and PFRS 12.
· PAS 28, Investments in Associates and Joint Ventures (as revised in 2011), has been renamed,
as a consequence of the new PFRS 11 and PFRS 12 and describes the application of the equity
method to investments in joint ventures in addition to associates.
· PFRS 13, Fair Value Measurement, establishes a single source of guidance for fair value
measurement and eliminates inconsistencies dispersed in various existing PFRS. It 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. This standard should
be applied prospectively as of the beginning of the annual period in which it is initially applied. Its disclosure requirements need not be applied in comparative information provided
for periods before initial application of PFRS 13. The Company has assessed the impact of
adopting this standard and does not anticipate that the adoption of this standard will have a significant impact on its financial position and performance.
· Amendments to PAS 1, Presentation of Financial Statements - Presentation of Items of Other
Comprehensive Income, change the 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
would be presented separately from items that will never be reclassified. The amendments affect presentation only and have no impact on the Company�s financial position or
performance.
· PAS 19, Employee Benefits (Revised), clarifies fundamental changes such as removing the
corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The revised standard also requires new disclosures such as, among others, a
sensitivity analysis for each significant actuarial assumption, information on asset-liability
matching strategies, duration of the defined benefit obligation, and disaggregation of plan
assets by nature and risk. The amendments become effective for annual periods beginning on or after January 1, 2013. Once effective, the Company has to apply the amendments
retroactively to the earliest period presented.
- 4 -
*SGVMG300302*
The Company reviewed its existing employee benefits and determined that the amended
standard has significant impact on its accounting for retirement benefits. The Company
obtained the services of an external actuary to compute the impact to the financial statements upon adoption of the standard. The effects are detailed below:
As at
December 31, 2012
As at
January 1, 2012
Balance sheet
Increase (decrease) in:
Accrued retirement benefits (P=8,464,518) (P=6,726,529) Deferred income tax asset (2,539,355) (2,017,959)
Retained earnings * 4,646,470 4,708,570
Other comprehensive income 1,278,693 � * Other comprehensive income will be closed to retained earnings at transition date. Subsequent to January 1, 2013, other comprehensive income shall be separately presented.
2012 2011
Statement of comprehensive income Increase (decrease):
Net retirement benefits cost P=88,715 (P=248,354)
Income tax expense (26,615) 74,506
Profit for the year (62,100) 173,848 Other comprehensive income, net of
deferred income tax 1,278,693 �
· Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface
Mine, applies to waste removal (stripping) costs incurred in surface mining activity, during the
production phase of the mine. The interpretation addresses the accounting for the benefit from
the stripping activity. This new interpretation is not relevant to the Company as it is not involved in any mining activities.
· Annual Improvements to PFRS (2009 to 2011 cycle)
The Annual Improvements to PFRS (2009 to 2011 cycle) contain non-urgent but necessary
amendments to PFRS. These amendments are effective for annual periods beginning January 1, 2013 and are applied retrospectively. Earlier application is permitted.
· PFRS 1, First-time Adoption of PFRS - Borrowing Costs, clarifies that, upon adoption of
PFRS, an entity that capitalized borrowing costs in accordance with its previous generally accepted accounting principles, may carry forward, without any adjustment, the amount
previously capitalized in its opening statement of financial position at the date of
transition. Subsequent to the adoption of PFRS, borrowing costs are recognized in accordance with PAS 23, Borrowing Costs. The amendment does not apply to the
Company as it is not a first-time adopter of PFRS.
· PAS 1, Presentation of Financial Statements - Clarification of the Requirements for
Comparative Information, clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an
accounting policy, or retrospective restatement or reclassification of items in the financial
statements. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the
minimum required comparative period. The additional comparative period does not need
- 5 -
*SGVMG300302*
to contain a complete set of financial statements. On the other hand, supporting notes for
the third balance sheet (which are mandatory when there is a retrospective application of
an accounting policy, or retrospective restatement or reclassification of items in the financial statements) are not required. The amendments will affect disclosures only and
will have no impact on the Company�s financial position or performance.
· PAS 16, Property, Plant and Equipment - Classification of Servicing Equipment, clarifies
that spare parts, stand-by equipment and servicing equipment should be recognized as
property, plant and equipment when they meet the definition of property, plant and
equipment and should be recognized as inventory, if otherwise. The amendment will not have any significant impact on the Company�s financial position or performance.
· PAS 32, Financial Instruments: Presentation - Tax Effect of Distribution to Holders of
Equity Instruments, clarifies that income taxes relating to distributions to equity holders
and to transaction costs of an equity transaction are accounted for in accordance with PAS 12. The Company expects that this amendment will not have any impact on its
financial position or performance.
· PAS 34, Interim Financial Reporting - Interim Financial Reporting and Segment
Information for Total Assets and Liabilities, clarifies that the total assets and liabilities for
a particular reportable segment need to be disclosed only when the amounts are regularly
provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity�s previous annual financial statements for that
reportable segment. The amendment will affect disclosures only and will not have any
impact on the Company�s financial position or performance.
Effective in 2014
· PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities, clarify the meaning of �currently has a legally enforceable right to set-off� and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central
clearing house systems) which apply gross settlement mechanisms that are not simultaneous.
The amendments affect presentation only and have no impact on the Company�s financial position or performance.
Effective in 2015
· PFRS 9, Financial Instruments: Classification and Measurement, as issued in 2010, reflects
the first phase of the work 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, impairment and derecognition of financial assets will be addressed. The adoption of the first phase of PFRS 9 will have an effect on the classification and
measurement of financial assets.
The Company decided not to early adopt PFRS 9 for its 2012 reporting ahead of its effectivity
date on January 1, 2015 and therefore the financial statements as at and for the year ended
December 31, 2012 do not reflect the impact of the said standard. The Company shall conduct
another impact evaluation in early 2013 using the financial statements for the year ended December 31, 2012. The Company will determine the effect of this standard in conjunction
with the other phases, when issued, to present a comprehensive picture.
- 6 -
*SGVMG300302*
Effectivity date to be determined
· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate, covers
accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. This Interpretation requires that revenue on
construction of real estate be recognized only upon completion, except when such contract
qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of
completion. The SEC and the Financial Reporting Standards Council have deferred the
effectivity of this interpretation until the final Revenue standard is issued by the International Accounting Standards Board and an evaluation of the requirements of the final Revenue
standard against the practices of the Philippine real estate industry is completed. Adoption of
the interpretation when it becomes effective will not have any impact on the financial
statements of the Company.
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, 2012 and 2011, 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.
- 7 -
*SGVMG300302*
Included under this category are the Company�s cash in banks, short-term investments, receivables
and due from affiliates as of December 31, 2012 and 2011.
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, 2012 and 2011.
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, due to
affiliates, dividends payable, talent fees and commissions payable as of December 31, 2012 and 2011.
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.
- 8 -
*SGVMG300302*
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
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
- 9 -
*SGVMG300302*
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 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.
- 10 -
*SGVMG300302*
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
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, 2012. 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.
- 11 -
*SGVMG300302*
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.
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
- 12 -
*SGVMG300302*
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, investment properties and intangible assets 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.
Other Comprehensive Income
Other comprehensive income comprises items of income and expense that are not recognized in
profit or loss in accordance with PFRS. Other comprehensive income of the Company pertains to net changes in fair values of AFS financial assets and revaluation increment on land carried at
revalued amount.
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 or receivable, 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.
- 13 -
*SGVMG300302*
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. They are measured at the fair value of the consideration paid or payable.
Value-Added Tax (VAT)
Revenue, expenses and assets are recognized net of the amount of VAT except:
· where VAT incurred on a purchase of assets or services is not recoverable from the taxation
authority, in which case VAT is recognized as part of the cost of acquisition of the asset or as
part of the expense item, as applicable; and
· receivables and payables that are stated with the amount of VAT included.
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.
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.
- 14 -
*SGVMG300302*
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 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.
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.
- 15 -
*SGVMG300302*
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 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.
- 16 -
*SGVMG300302*
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. The judgments, estimates and assumptions used in the financial statements 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.
- 17 -
*SGVMG300302*
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, goodwill, and other noncurrent
assets in 2012, 2011 and 2010. As of December 31, 2012 and 2011, the carrying values of the Company�s noncurrent nonfinancial assets amounted to P=468.5 million and P=417.2 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, 2012 and 2011, the
Company�s total financial assets amounted to P=476.3 million and P=483.5 million, respectively,
while its total financial liabilities amounted to P=178.9 million and P=197.3 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.
- 18 -
*SGVMG300302*
As of December 31, 2012 and 2011, allowance for doubtful accounts amounted to P=60.0 million
and P=58.4 million, respectively. Receivables, net of related allowance, amounted to
P=309.8 million and P=296.3 million of December 31, 2012 and 2011, respectively (see Note 6).
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 as of December 31, 2012 and
2011. Materials and supplies, net of related provision for inventory obsolescence, amounted to
P=12.4 million and P=9.3 million as of December 31, 2012 and 2011, 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
affected by changes in these estimates brought about by changes in the factors mentioned.
As of December 31, 2012 and 2011, the carrying value of depreciable property and equipment amounted to P=102.2 million and P=62.1 million, respectively. The net carrying value of
depreciable investment properties amounted to P=22.0 million and P=30.1 million as of
December 31, 2012 and 2011, respectively. Net intangible assets amounted to P=103.4 million and P=115.2 million as of December 31, 2012 and 2011, respectively. Total depreciation and
amortization relating to property and equipment and investment properties, and intangible assets
charged to operations amounted to P=42.1 million, P=46.1 million and P=50.4 million in 2012, 2011
and 2010, 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, 2012 and 2011, recognized
deferred income tax assets amounted to P=32.5 million and P=31.4 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 2012, 2011 and 2010.
- 19 -
*SGVMG300302*
The carrying value of AFS financial assets amounted to P=25.6 million as of December 31, 2012
and 2011 (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=8.5 million and P=6.7 million as of
December 31, 2012 and 2011, respectively. Accrued retirement benefits amounted to
P=53.5 million and P=48.1 million as of December 31, 2012 and 2011, 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, 2012 and 2011 (see Note 23).
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, 2012, 2011 and 2010 are the same as reported elsewhere in the accompanying
financial statements.
2012 2011 2010
Broadcasting fee P=788,823,015 P=756,600,651 P=833,380,988
Net income 87,489,385 60,863,848 117,528,855 Total assets 962,932,529 916,020,032 959,915,503
Total liabilities 303,828,770 293,816,130 277,790,552
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*SGVMG300302*
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.
5. Cash and Cash Equivalents
2012 2011
Cash on hand and in banks P=115,857,975 P=30,971,762
Short-term investments 25,629,166 42,168,394
P=141,487,141 P=73,140,156
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
2012 2011
Trade P=335,021,540 P=327,096,340 Advances to stations 22,632,278 18,195,060
Others 10,612,172 9,378,556
368,265,990 354,669,956 Less allowance for doubtful accounts 58,481,956 58,351,241
P=309,784,034 P=296,318,715
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, 2010 P=51,137,367 P=251,121 P=4,053,998 P=55,442,486 Provisions (reversal) (Note 15) 3,274,958 128,785 (494,988) 2,908,755
December 31, 2011 54,412,325 379,906 3,559,010 58,351,241 Provisions (reversal) (Note 15) 1,646,321 � (1,515,606) 130,715
December 31, 2012 P=56,058,646 P=379,906 P=2,043,404 P=58,481,956
2012
Trade
Advances to
stations Others Total
Individual impairment P=� P=101,514 P=1,371,997 P=1,473,511 Collective impairment 56,058,646 278,392 671,407 57,008,445
P=56,058,646 P=379,906 P=2,043,404 P=58,481,956
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
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*SGVMG300302*
7. Available-for-sale Financial Assets
The carrying value of AFS financial assets as of December 31, 2012 and 2011 follows:
Unquoted P=25,999,910
Less allowance for impairment losses 455,275
25,544,635 Quoted 90,000
P=25,634,635
The fair value of the quoted shares of stock is determined based on quoted market price. As of
December 31, 2012, 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:
2012 2011
Balance at beginning of year P=25,634,635 P=26,069,910
Impairment loss directly charged to profit or loss � (455,275) Gain recognized in other comprehensive income � 20,000
Balance at end of year P=25,634,635 P=25,634,635
The movement of reserve for fluctuation in AFS financial assets follows:
2012 2011
Beginning balance P=60,000 P=40,000
Valuation gain taken to other comprehensive income � 20,000
Ending balance P=60,000 P=60,000
8. Property and Equipment
a. Property and equipment carried at cost consist of:
2012
Building and
Broadcasting
and Furniture
Leasehold
Improvements
Transmission
Equipment
and
Equipment
Transportation
Equipment
Construction
In Progress
Total
Cost
Beginning balances P=131,377,892 P=354,634,894 P=94,684,131 P=34,932,832 P=6,404,030 P=622,033,779
Additions � 7,095,201 94,595 5,532,596 49,584,770 62,307,162
Ending balances 131,377,892 361,730,095 94,778,726 40,465,428 55,988,800 684,340,941
Accumulated Depreciation
and Amortization
Beginning balances 108,488,417 326,412,499 92,610,039 32,383,674 � 559,894,629
Depreciation and
amortization (Note 15)
8,724,562
10,960,792
919,617
1,643,122
�
22,248,093
Ending balances 117,212,979 337,373,291 93,529,656 34,026,796 � 582,142,722
Net Book Values P=14,164,913 P=24,356,804 P=1,249,070 P=6,438,632 P=55,988,800 P=102,198,219
- 22 -
*SGVMG300302*
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
As of December 31, 2012 and 2011, fully depreciated property and equipment with a cost
totaling P=410.7 million and P=342.9 million, respectively, are still used in operations.
b. Land at revalued amount as of December 31, 2012 and 2011 consists of:
2012 2011
Cost P=6,266,094 P=6,266,094
Appraisal increase 147,211,806 115,935,506
P=153,477,900 P=122,201,600
The revalued amount of P=153.5 million in 2012 and P=122.2 million in 2011 is based on the
valuation conducted by an independent appraisal company as of December 31, 2012 and 2009,
respectively. The appraisal company used the market data or sales comparison approach where
the fair market values are determined by referring to the extent, character and utility of the properties and sales and holding prices of similar land. The revaluation increment, net of
deferred income tax liability of P=103.0 million and P=81.2 million as of December 31, 2012 and
2011, respectively, is included in the equity section of the statements of financial position (see Note 18).
9. Investment Properties
2012
Land
Building and
Other Property
Total
Cost P=43,162,500 P=80,381,524 P=123,544,024
Accumulated Depreciation Beginning balances � 50,319,911 50,319,911 Depreciation (Note 15) � 8,068,652 8,068,652
Ending balances � 58,388,563 58,388,563
Net Book Values P=43,162,500 P=21,992,961 P=65,155,461
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*SGVMG300302*
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
Investment properties are leased to employees and third parties. Total fair value of investment properties amounted to P=157.6 million as of December 31, 2012 and P=168.6 million as of
December 31, 2011, as determined by an independent appraiser as of December 31, 2012 and
2009, respectively. The appraiser used the market data or sales comparison approach in determining the fair value of investment properties. 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=8.9 million in 2012,
P=9.1 million in 2011 and P=8.5 million in 2010. Related direct operating expenses amounted to
P=11.3 million, P=9.0 million and P=12.8 million in 2012, 2011 and 2010, 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:
2012
Frequency
Intellectual
Property
Rights
Total
Cost P=153,594,927 P=5,810,867 P=159,405,794
Accumulated Amortization
Beginning balances 38,398,735 5,810,867 44,209,602
Amortization (Note 15) 11,814,996 � 11,814,996
Ending balances 50,213,731 5,810,867 56,024,598
Net Book Values P=103,381,196 P=� P=103,381,196
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*SGVMG300302*
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
Impairment Testing of Goodwill The Company performs its annual impairment test every December of each year. The
recoverable amount of the cash-generating unit determined based on value in use, is compared to
its carrying amount. An impairment loss is recognized if the carrying amount of the cash-
generating unit exceeds its recoverable amount.
The cash flow projections are based on a five-year financial planning period and are discounted
using the weighted average cost of capital. As a result of this analysis, management has
determined that there was no impairment loss in 2012, 2011 and 2010 since the value in use
exceeds the carrying value of the identifiable assets.
Key Assumptions
The following are the key assumptions used in management�s analysis:
2012 2011 2010
Discount rate 12.35% 11.88% 16.63% Expected growth rate 3.46% 1.80% 2.00%
Sensitivity to Changes in Assumptions
Management assesses that a change in the discount rate of 1% point would not cause the carrying
value of identifiable assets to exceed its recoverable amount.
11. Accounts Payable and Accrued Expenses
2012 2011
Trade P=27,767,884 P=56,421,127
Accrued expenses (Notes 12 and 17) 71,954,630 77,711,724
Output tax and others 69,823,144 63,188,960
P=169,545,658 P=197,321,811
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
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*SGVMG300302*
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.
In the normal course of business, the Company has transactions with the following related parties:
· Elizalde Holding Corporation (EHC), an entity under common control;
· Cebu Broadcasting Company (CBC), an entity under common control;
· Pacific Broadcasting System, Inc. (PBSI), an entity under common control;
· Philippine Broadcasting Corporation (PBC), an entity under common control, and,
· Affiliated service companies.
The summary of transactions and outstanding balances with related parties are presented below:
Year Nature
Amounts /
Volume
Receivable
(Payable) Terms and conditions
Entities under common
control:
EHC 2012 Advances P=� (P=6,471,524)
Unsecured, interest-
free with no definite
call dates and no
impairment
2011 -do- � 88,966,242 -do-
CBC 2012 Program costs 138,979,511 � -do-
2011 -do- 117,805,553 � do-
PBC 2012 -do- 30,192,361 � -do-
2011 -do- 32,382,498 � do-
PBSI 2012 -do- 50,081,245 � -do-
2011 -do- 53,525,218 � do-
Affiliated service
companies 2012 Service fees 123,119,125 � -do-
2011 -do- 171,270,963 � do-
Others:
Officers 2012 Advances 827,900 5,591,824 -do-
2011 -do- � 4,763,923 do-
Key management
personnel 2012
Short-term employee
benefits and retirement
benefits � �
2011 -do- � �
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=219.2 million in 2012, P=203.7 million in 2011 and P=204.1 million in 2010. The Company
also bills the affiliated broadcasting companies for their share in the expenses for operating the
radio broadcast stations (see Note 15).
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*SGVMG300302*
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
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=123.1 million in 2012, P=171.3 million in 2011 and P=214.3 million
in 2010 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=22.9 million and
P=21.6 million as of December 31, 2012 and 2011, 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, 2012 and due to an affiliate as of December 31, 2011 pertains to EHC.
d. The short-term employee benefits and retirement benefits cost of key management personnel amounted to P=9.1 million in 2012 and P=7.0 million in 2011.
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, 2012 and 2011 is 615 and 619, respectively.
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
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*SGVMG300302*
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.
14. Retained Earnings
On November 19, 2012, the BOD declared cash dividends amounting to P=72.5 million or P=0.18
per share to stockholders on record as of December 20, 2012 payable on December 29, 2012.
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.
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:
2012 2011 2010
Program costs (Notes 12 and 19) P=308,395,890 P=290,644,665 P=273,926,827
Service fees (Note 12) 123,119,125 171,270,963 214,305,150
Personnel expenses (Notes 12 and 16) 33,039,032 20,624,510 8,636,643 Depreciation and amortization
(Notes 8, 9 and 10) 10,960,792 14,215,499 17,785,685
Replacement parts 6,039,488 4,463,103 4,483,327
P=481,554,327 P=501,218,740 P=519,137,632
Operating expenses:
2012 2011 2010
Personnel expenses (Notes 12 and 16) P=57,132,250 P=61,758,629 P=29,311,669
Depreciation and amortization (Notes 8, 9 and 10) 31,170,949 31,856,472 32,640,246
Communication, light and water 21,893,293 16,966,432 22,874,310
Agency commission and discounts 18,608,703 18,268,100 19,261,756
Travel and transportation 11,324,491 7,672,647 6,606,257 Repairs 10,104,029 5,783,025 8,254,792
Rent (Note 19) 8,021,358 2,710,584 2,912,865
Advertising and promotions 5,175,363 13,417,846 8,372,563
(Forward)
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*SGVMG300302*
2012 2011 2010
Replacement parts P=5,166,398 P=1,314,988 P=438,296
Taxes and licenses 4,761,664 3,724,312 3,622,320 Entertainment, amusement and recreation 2,590,359 2,250,484 1,929,020
Professional fees 1,530,263 1,353,510 1,465,617
Dues and membership fees 986,789 986,476 1,072,323 Insurance and bonds 645,136 465,513 595,998
Provision for doubtful accounts (Note 6) 130,715 2,908,755 6,290,338
Others 16,463,705 7,318,281 7,274,626
P=195,705,465 P=178,756,054 P=152,922,996
16. Personnel Expenses
2012 2011 2010
Salaries, wages and bonuses P=70,936,319 P=46,323,399 P=28,096,734
Retirement benefits cost (Note 17) 7,278,536 27,748,145 2,530,097
Other short-term employee benefits 11,956,427 8,311,595 7,321,481
P=90,171,282 P=82,383,139 P=37,948,312
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=28.1 million and P=41.9 million as of December 31, 2012 and 2011, 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, 2012.
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*SGVMG300302*
The components of retirement benefits cost charged to profit and loss are as follows:
2012 2011 2010
Current service cost P=4,935,922 P=1,497,413 P=961,786
Interest cost 4,294,352 2,070,545 2,735,822
Expected return on plan assets (1,951,738) (1,097,400) (993,273) Net actuarial gains � (240,534) (174,238)
Past service costs of employees
transferred from an
affiliate (Note 12) � 25,518,121 �
Total retirement benefits cost P=7,278,536 P=27,748,145 P=2,530,097
The funded status and amounts recognized in the statements of financial position for the
retirement plan as of December 31, 2012 and 2011 are as follows:
2012 2011
Present value of benefit obligation P=80,940,273 P=73,033,198
Fair value of plan assets 35,924,381 31,684,064
45,015,892 41,349,134 Unrecognized actuarial gains 8,464,518 6,726,529
Accrued retirement benefits P=53,480,410 P=48,075,663
Movements in the accrued retirement benefits follow:
2012 2011
Balances, January 1 P=48,075,663 P=10,609,959
Retirement benefits cost 7,278,536 27,748,145
Contributions (1,873,789) (2,944,525) Reclassification (Note 12) � 12,662,084
Balances, December 31 P=53,480,410 P=48,075,663
The changes in present value of the retirement obligation are as follows:
2012 2011
Present value of obligation at beginning of year P=73,033,198 P=28,094,233
Current service cost 4,935,922 1,497,413
Interest cost 4,294,352 2,070,545 Actuarial loss (gain) on obligation (1,323,199) 3,190,802
Past service costs of employees transferred from
an affiliate (Note 12) � 25,518,121 Reclassification (Note 12) � 12,662,084
Present value of obligation at end of year P=80,940,273 P=73,033,198
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*SGVMG300302*
The changes in fair value of plan assets are as follows:
2012 2011
Fair value of plan assets at beginning of year P=31,684,064 P=26,066,501
Expected return on plan assets 1,951,738 1,097,400
Contributions 1,873,789 2,944,525 Actuarial gain on plan assets 414,790 1,575,638
Fair value of plan assets at end of year P=35,924,381 P=31,684,064
Actual return on plan assets amounted to P=2.4 million in 2012 and P=2.7 million in 2011. 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:
2012 2011
Discount rate 5.88% 7.37% Salary increase rate 10.00% 10.00%
Expected rate of return on plan assets 6.16% 4.21%
As of December 31, 2012, the discount rate, salary increase rate and expected rate of return on
plan assets are 5.31%, 10.00% and 4.00%, respectively.
The major categories of plan assets as a percentage of the fair value of total plan assets are as
follows:
2012 2011
Investments in government securities 91.25% 94.55%
Cash and cash equivalents 6.62% 3.08%
Receivables 2.13% 2.37%
100.00% 100.00%
Amounts for the current and previous four annual periods are as follows:
2012 2011 2010 2009 2008
Benefit obligation P=80,940,273 P=73,033,198 P=28,094,233 P=25,168,553 P=23,224,078 Plan assets (35,924,381) (31,684,064) (26,066,501) (19,865,454) (15,138,770)Deficit 45,015,892 41,349,134 2,027,732 5,303,099 8,085,308 Experience adjustments on
plan liabilities (5,507,244) (4,171,492) (2,612,571) � � Experience adjustments on plan assets 414,790 1,575,638 1,460,197 871,077 (1,550,632)
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*SGVMG300302*
18. Income Taxes
a. The provision for income tax consists of:
2012 2011 2010
Regular corporate income tax P=40,246,814 P=34,211,753 P=49,749,512
Final tax 186,916 215,630 238,675 Deferred (1,182,387) (8,270,644) 358,472
P=39,251,343 P=26,156,739 P=50,346,659
b. The components of the Company�s net deferred income tax liabilities consist of the tax effects
of the following:
2012 2011
Deferred income tax assets on:
Allowances for: Doubtful accounts P=17,544,587 P=17,505,372
Inventory obsolescence 444,606 452,599
Accrued retirement benefits and unamortized
contribution to past service cost 14,546,468 13,384,453 Accrued rent expense � 10,850
32,535,661 31,353,274
Deferred income tax liabilities on
revaluation increment on land (Note 8) 44,163,542 34,780,652
Deferred income tax liabilities - net P=11,627,881 P=3,427,378
c. The reconciliation of income tax computed at the statutory tax rate to provision for income tax
as shown in profit or loss follows:
2012 2011 2010
Statutory income tax P=38,022,218 P=26,106,176 P=50,362,654
Additions to (reductions in)
income tax resulting from: Interest income subjected to
final tax at a lower rate (93,559) (86,020) (141,428)
Impairment losses on AFS financial assets � 136,583 �
Nondeductible expenses 1,322,684 � 125,433
Provision for income tax P=39,251,343 P=26,156,739 P=50,346,659
19. Lease Commitments
The Company leases satellite communications capacity for the performance of its broadcasting
services called the Transponder Lease, which considers certain space segment capacity and transponder power. The lease agreement is for a period of five years from November 1, 2007 and
was renewed for another five years commencing on November 1, 2012. Rent expense on this
lease agreement amounted to P=4.8 million, P=4.7 million and P=4.8 million in 2012, 2011 and 2010,
respectively, included under �Program costs� presented as part of �Costs and operating expenses� in the statements of comprehensive income.
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*SGVMG300302*
Future minimum lease payments as of December 31 are as follows:
2012 2011
Within one year P=4,704,330 P=3,923,680
After one year but not more than five years 18,033,265 �
P=22,737,595 P=3,923,680
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 to/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
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, 2012 and 2011 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.
2012
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=115,299,975 P=� P=� P=� P=115,299,975
Short-term investments 25,629,166 � � � 25,629,166
Receivables:
Trade 73,264,367 78,309,501 127,389,026 56,058,646 335,021,540
Advances to stations 11,583,265 1,125,276 9,543,831 379,906 22,632,278
Others 6,288,797 956,283 1,323,688 2,043,404 10,612,172
AFS financial assets
Quoted 90,000 � � � 90,000
Unquoted � 25,544,635 � � 25,544,635
P=232,155,570 P=105,935,695 P=138,256,545 P=58,481,956 P=534,829,766
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*SGVMG300302*
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
AFS financial assets
Quoted 90,000 � � � 90,000
Unquoted � 25,544,635 � � 25,544,635
P=234,335,814 P=109,018,797 P=140,122,829 P=58,351,241 P=541,828,681
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.
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, 2012 and 2011.
2012
<30 Days
31-60
Days
61-90
Days
91-120
Days
Over 120
Days
Total
Loans and receivables:
Receivables Trade P=29,795,366 P=15,859,855 P=10,746,413 P=38,996,108 P=31,991,284 P=127,389,026 Advances to stations 721,618 119,409 127,639 3,092,059 5,483,106 9,543,831 Others � � � � 1,323,688 1,323,688
P=30,516,984 P=15,979,264 P=10,874,052 P=42,088,167 P=38,798,078 P=138,256,545
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
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.
- 34 -
*SGVMG300302*
The tables below summarize the maturity profile of the Company�s financial liabilities as of
December 31, 2012 and 2011 based on contractual undiscounted payments, including interest due:
2012
Less than 3 to 12 On demand 3 months months Total
Other financial liabilities Accounts payable and accrued expenses* P=51,398,290 P=45,412,041 P=35,851,611 P=132,661,942
Due to an affiliate 6,471,524 � � 6,471,524 Dividends payable 10,391,998 � � 10,391,998 Talent fees and commissions payable � 25,078,640 10,747,989 35,826,629
P=68,261,812 P=70,490,681 P=44,599,600 P=185,352,093
*Amounts are exclusive of nonfinancial liabilities amounting to P=36,903,445 as of December 31, 2012.
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.
The following tables show the profile of financial assets used by the Company to manage its liquidity risk:
2012
On Less than 3 to 12 Demand 3 Months Months Total
Cash in banks P=115,299,975 P=� P=� P=115,299,975 Short-term investments � 25,629,166 � 25,629,166
115,299,975 25,629,166 � 140,929,141
Receivables Trade 151,573,868 56,401,634 70,987,392 278,962,894
Advances to stations 12,708,541 968,666 8,575,165 22,252,372 Others 7,245,080 � 1,323,688 8,568,768
171,527,489 57,370,300 80,886,245 309,784,034
P=286,827,464 P=82,999,466 P=80,886,245 P=450,713,175
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
- 35 -
*SGVMG300302*
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, 2012 and
2011.
The Company monitors its use of capital using debt to equity ratio (total liabilities/total equity)
which is 46.10% and 47.22% as of December 31, 2012 and 2011, respectively.
The following table summarizes the Company�s capital structure as of December 31, 2012 and
2011:
2012 2011
Capital stock P=402,803,777 P=402,803,777
Additional paid-in capital 79,354 79,354
Retained earnings 153,233,151 138,226,704
Treasury stock (120,787) (120,787)
P=555,995,495 P=540,989,048
21. Financial Assets and Financial Liabilities
The carrying value and estimated fair value of all the financial instruments are equal as of December 31, 2012 and 2011.
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, 2012 and 2011 is based on quoted
market price (Level 1). Unquoted shares of stock amounting to P=25.5 million as of December 31,
2012 and 2011, 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 2012 and 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 to/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.
- 36 -
*SGVMG300302*
22. Earnings per Share (EPS)
Basic EPS is computed based on the weighted average number of issued and outstanding common
shares during each year. Diluted EPS is computed as if the potential common share or instrument that may entitle the holder to common share were exercised as of the beginning of the year. When
there are no potential common shares or other instruments that may entitle the holder to common
shares, diluted EPS, is the same as the basic EPS.
There are no dilutive financial instruments in 2012 and 2011, hence, diluted EPS is the same as the
basic EPS.
23. 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.
24. Supplementary Information Required Under Revenue Regulations 15-2010
In compliance with Bureau of Internal 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
2012.
a. Output VAT declared by the Company amounted to P=93,425,872 based on receipts of
P=778,548,936. Outstanding net output tax payable amounted to P=24,143,770 as of December 31, 2012.
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=4,391,078
Current year payments for: Services lodged under cost of services 54,461,080
Capital goods subject to amortization 5,413,063
Total available input VAT during the period 64,265,221
Claims for tax credit and other adjustments (59,315,969)
Balance, December 31 P=4,949,252
c. Taxes and licenses paid by the Company are as follows:
Business permits P=2,289,218
NTC permits and fees 1,340,251
Real property taxes 819,948 Others 312,247
P=4,761,664
- 37 -
*SGVMG300302*
d. Withholding taxes paid and accrued by the Company are as follows:
Paid Accrued Total
Expanded withholding tax P=15,042,848 P=1,465,442 P=16,508,290
Withholding tax on compensation
and benefits
5,738,097
1,469,518
7,207,615 Final withholding taxes 1,372,760 1,895,154 3,267,914
25. 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=788,823,015 for the year
ended December 31, 2012.
Cost of Services
The Company�s tax deductible cost of services in 2012 are as follows:
Program costs P=308,432,058
Service fees 123,119,125
Personnel expenses 33,039,032
Depreciation and amortization expense 10,960,792 Replacement parts 6,039,489
P=481,590,496
Itemized Deductions
The Company�s itemized deductions in 2012 are as follows:
Salaries and allowances P=52,261,436
Depreciation 31,170,949
Communication, light and water 21,893,293 Commissions 20,283,535
Transportation and travel 11,324,491
Repairs and maintenance - labor 10,104,029 Rental 8,021,358
Repairs and maintenance - materials/supplies 5,193,042
Advertising and promotions 5,175,363
Taxes and licenses 4,761,664 Security services 2,945,436
Office supplies 2,621,618
Representation and entertainment 2,590,359 SSS, GSIS, Philhealth, HDMF and other contributions 1,776,621
Professional fees 1,530,263
Dues and membership fees 986,789 Insurance 645,136
Director's fees 366,667
Freight and delivery 263,531
Miscellaneous 3,403,480
P=187,319,060
- 38 -
*SGVMG300302*
Details of Other Income
Rental income P=8,878,244 Others 5,364,344
P=14,242,588
*SGVMG300302*
INDEPENDENT AUDITORS� REPORT
TO ACCOMPANY INCOME TAX RETURN
The Stockholders and the Board of Directors
Manila Broadcasting Company MBC Building, Star City, Sotto Street
CCP Complex, Roxas Boulevard, Pasay City
We have audited the financial statements of Manila Broadcasting Company as at and for the year
ended December 31, 2012, on which we have rendered the attached report dated April 5, 2013.
In compliance with Revenue Regulations V-20, we are stating that no partner of our Firm is related by
consanguinity or affinity to the president, manager or principal stockholders of the Company.
SYCIP GORRES VELAYO & CO.
Catherine E. Lopez Partner
CPA Certificate No. 86447
SEC Accreditation No. 0468-AR-2 (Group A),
February 14, 2013, valid until February 13, 2016 Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2012,
April 11, 2012, valid until April 10, 2015 PTR No. 3669691, January 2, 2013, Makati City
April 5, 2013
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,
December 28, 2012, valid until December 31, 2015 SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015
A member firm of Ernst & Young Global Limited
*SGVMG300302*
INDEPENDENT AUDITORS� REPORT
ON SUPPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
Manila Broadcasting Company MBC Building, Star City
CCP Complex, Roxas Boulevard
Pasay City
We have audited in accordance with Philippine Standards on Auditing, the financial statements of
Manila Broadcasting Company as at December 31, 2012 and 2011 and for each of the three years in the period ended December 31, 2012, included in this Form 17-A and have issued our report thereon
dated April 5, 2013. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the Index to the Financial Statements and Supplementary Schedules are the responsibility of the Company's management. These schedules
are presented for purposes of complying with Securities Regulation Code Rule 68, As Amended
(2011) and are not part of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and in our opinion, fairly state, in all material respects, the information required to be set forth therein 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-2 (Group A), February 14, 2013, valid until February 13, 2016
Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2012,
April 11, 2012, valid until April 10, 2015 PTR No. 3669691, January 2, 2013, Makati City
April 5, 2013
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,
December 28, 2012, valid until December 31, 2015 SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015
A member firm of Ernst & Young Global Limited
*SGVMG300302*
MANILA BROADCASTING COMPANY
SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION DECEMBER 31, 2012
Unappropriated retained earnings, beginning P=138,226,704
Adjustments:
Deferred income tax assets (31,353,274)
Cost of treasury shares (120,787)
(31,474,061)
Unappropriated retained earnings, as adjusted to available for dividend declaration, beginning 106,752,643
Add net income actually earned/realized during the year
Net income during the year closed to retained earnings 87,489,385
Less increase in deferred income tax assets (1,182,387)
86,306,998
Less dividend declaration during the year (72,482,938)
Total retained earnings available for dividend declaration, end P=120,576,703
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