1!1e:ljllr - iremitglobal.com filings/cf2014-234.pdf · 2. commission identification no. a200101631...
TRANSCRIPT
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•1!1E:lJllr www.myiremit.com
April 15, 2014
THE PHILIPPINE STOCK EXCHANGE, INC.3rd Floor, Philippine Stock Exchange PlazaAyala Triangle, Ayala AvenueMakati City, Metro Manila
Attention Ms. Janet A. EncarnacionHead, Disclosure Department
Gentlemen:
In accordance with the Securities Regulation Code, we are submitting herewith a copy ofSEC Form 17-A (Annual Report) of I-Remit, Inc. as at December 31,2013.
Thank you.
I-Remit, Inc.26/F Discovery Centre, 25 ADS Avenue, Ortigas Center, Pasig City 1605 PhilippinesTelephone: (632) 706-9999 and (632) 706-2737Facsimile: (632) 706-2767
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COVER SHEET
A 2 0 0 1 0 1 6 3 1SEC Registration Number
I - R E M I T , I N C . A N D S U B S I D I A R I E S
(Company’s Full Name)
2 6 / F D i s c o v e r y C e n t r e , 2 5 A D B A v e
n u e , O r t i g a s C e n t e r , P a s i g C i t y
(Business Address: No. Street City/Town/Province)
Mr. HARRIS EDSEL D. JACILDO (02) 706 – 9999 Local 100/105/109 (Contact Person) (Company Telephone Number)
1 2 3 1 1 7 - A 0 7 Month Day (Form Type) Month Day
(Fiscal Year) (Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document ID Cashier
S T A M P S Remarks: Please use BLACK ink for scanning purposes.
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SEC Number A200101631 PSE Code File Number
I-REMIT, INC.
AND SUBSIDIARIES
(Company’s Full Name) 26/F Discovery Centre, 25 ADB Avenue,
Ortigas Center, Pasig City, 1605 Metro Manila
(Company’s Address) (02) 706 – 9999 Local 100 / 105 / 109 (Telephone Number) December 31 (Fiscal Year Ending)
(Month and Day)
SEC FORM 17-A Form Type Amendment Designation (if applicable) December 31, 2013 Period Ended Date (Secondary License Type and File Number)
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SEC FORM 17-A
SECURITIES AND EXCHANGE COMMISSI
ANNUAL REPORT PURSUANT TO SECTION 17OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
I. For the fiscal year ended December 31, 2013
2. Commission Identification No. A200101631 3. BIR Tax Identification No. 210-407-466-000
4. Exact name of registrant as specified in its charter I-REMIT, INC.
5. _M_e-,tr,.-o_M_a....,.n_il_a!.....,P_H_I_L_I-:-P_PI...,.N_E:..,.:S'-----:-----::---6. ••••• (SEC Use Only)Province, Country or other jurisdiction of Industry Classification Codeincorporation or organization
7. 26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City, Metro ManilaAddress of principal office
1605Postal code
8. (02)706 - 9999 Local 100 / 105 / 109Issuer's telephone number, including area code
9. Not applicableFormer name, former address, and former fiscal year, if changed since last report
10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA
Title Number of Shares of Common StockOutstanding and Amount of Debt Outstanding
Common Stock 613,436,122 shares (as of December 31,2013)
11. Are any or all of these securities listed on a Stock Exchange?
Yes [./] No [ ]
If yes, state the name of such stock exchange and the classes of securities listed therein:The Philippine Stock Exchange, Inc.
12. Check whether the issuer:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder orSection II of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The CorporationCode of the Philippines during the preceding twelve (12) months (or for such shorter period that theregistrant was required to file such reports)
Yes [./] No [ ]
(b) has been subject to such filing requirements for the past 90 days
Yes [./] No [ ]
13. Aggregate market value of the voting stock held by non-affiliates of the registrant:PHP 1,754,427,308.92 (as of December 31, 2013, PHP 2.86 per share)
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DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference in any part of this report: 2013 Audited Parent Company and Consolidated Financial Statements of
I-Remit, Inc. and Subsidiaries (incorporated as reference for Items 1, 6, 7 and 8 of SEC Form 17-A)
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TABLE OF CONTENTS
PART I BUSINESS AND GENERAL INFORMATION Item 1 Business 1 Item 2 Properties 34 Item 3 Legal Proceedings 36 Item 4 Submission of Matters to a Vote of Security Holders 36 PART II OPERATIONAL AND FINANCIAL INFORMATION Item 5 Market for Issuer’s Common Equity and Related Stockholder Matters 37 Item 6 Management’s Discussion and Analysis or Plan of Operation 43 Item 7 Financial Statements 63 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 63
PART III CONTROL AND COMPENSATION INFORMATION Item 9 Directors and Executive Officers of the Issuer 66 Item 10 Executive Compensation 77 Item 11 Security Ownership of Certain Beneficial Owners and Management 78 Item 12 Certain Relationships and Related Party Transactions 80 PART IV CORPORATE GOVERNANCE Item 13 Corporate Governance 83 PART V EXHIBITS AND SCHEDULES Item 14 a. Exhibit 84 b. Reports on SEC Form 17-C 84 SIGNATURES INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES INDEX TO EXHIBIT
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PART I. BUSINESS AND GENERAL INFORMATION Item 1. Business (A) Description of Business (1) Business Development I-Remit, Inc. (“I-Remit”, “Parent Company”, or “Company”) is a company in the Philippines
engaged in the business of servicing the remittance needs of overseas Filipino workers (OFWs) and other migrant workers. The Parent Company was duly registered with the Securities and Exchange Commission (SEC) on March 5, 2001 with SEC Registration No. A200101631. It started commercial operations on November 11, 2001.
The Parent Company and its subsidiaries (“Group”) are primarily engaged in the business of
fund transfer and remittance services, from abroad into the Philippines or otherwise, of any form or kind of currencies or monies, either by electronic, telegraphic, wire or any other mode of transfer; as well as in undertaking the delivery of such funds or monies, both in the domestic and international market, by providing courier or freight forwarding services; and conducting foreign exchange transactions as may be provided by law and other allied activities relative thereto; provided that the foreign exchange transactions of the Parent Company shall be limited to ordinary money changing activity or “spot” foreign currency transaction; provided further that the Parent Company shall not engage in the business of being a commodity future broker or otherwise shall engage in financial derivatives activities such as foreign currency swaps, forwards, options or other similar instruments as defined under Bangko Sentral ng Pilipinas (BSP) Circular No. 102, Series of 1995.
The Parent Company is duly registered as a Remittance Agent with the Bangko Sentral ng
Pilipinas (BSP), with Certificate No. FX-2005-000364 issued on May 10, 2005, pursuant to BSP Circular 471 Series of 2005 dated January 24, 2005. It is subject to the applicable provisions of law and BSP rules and regulations, as well as the provisions of the Anti-Money Laundering Act of 2001 (Republic Act No. 9160 as amended by Republic Acts 9194, 10167, and 10365) and its revised implementing rules and regulations, and Republic Act 10168 or the Terrorism Financing Prevention and Suppression Act of 2012 and its implementing rules and regulations.
The Parent Company’s list of services also includes auxiliary services such as liaising and
coordinating with, and accepting and distributing membership contributions, loan amortization payments, and premium payments to various government and non-government entities such as the Social Security System (SSS), the Home Development Mutual Fund (HDMF or Pag-IBIG), the Philippine Retirement Authority (PRA) and the Philippine Health Insurance Corporation (PhilHealth), as well as various insurance, pre-need, and real estate companies.
The Parent Company is to exist for fifty (50) years from and after the date of incorporation. The registered office and principal place of business of the Parent Company is 26/F Discovery
Centre, ADB Avenue, Ortigas Center, Pasig City, 1605 Metro Manila, Philippines. The Company also operates in various countries through subsidiaries, associates, or affiliates,
and via tie-ups and strategic partnerships. Tie-up and partnership arrangements are utilized when the potential volume of remittances do not justify the investment of equity.
I-Remit currently operates in 23 countries and territories worldwide. Lucky Star Management Limited, the first international office of I-Remit, opened in Hong Kong
in May 2001. In the same year, I-Remit started its aggressive global expansion by forging alliances in other countries with high concentrations of overseas Filipino workers (OFWs) and Filipino migrants. In July 2001, I-Remit forged a tie-up with its Canadian partner International Remittance (Canada) Limited (IRCL), and established operations in three (3) major provinces of Canada: British Columbia, Alberta, and Ontario. In 2005, I-Remit acquired 65% ownership in the said company, and which was subsequently increased to 95% in 2006, and further consolidated to 100% by the end of June 2007. Also, in July 2001, I-Remit entered into its first European partnership in the United Kingdom (UK), and eventually started the operation of its subsidiary, IRemit Global Remittance Limited, in January 2003. It was sold by the Company in 2004 and was repurchased in June 2007.
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I-Remit’s expansion in Europe is in pursuit of the authorization obtained from the Financial Services Authority of the United Kingdom by its wholly-owned subsidiary, IRemit Global Remittance Limited to operate as a payment institution in the European Economic Area (EEA). Under the European Payment Services Directive, IRemit Global Remittance Limited may avail of its “passporting” rights and carry on its business activities in other EEA states by establishing branches, engaging agents, or providing cross-border services. I-Remit started its second Asian operation in Singapore through IRemit Singapore Pte Ltd, which commenced its commercial operations in October 2001. IRemit Singapore Pte Ltd is an affiliate of I-Remit through common shareholders. I-Remit further expanded in Asia through a tie-up in Taiwan, Hwa Kung Hong & Co., Ltd., which became operational in 2001. I-Remit acquired 49% ownership in the said tie-up in July 2009. I-Remit forged a tie-up in Australia that began its operations in September 2002. I-Remit Australia Pty Ltd (“IAPL”) was incorporated in December 2002 and in June 2007 ownership has been consolidated to 100%. Worldwide Exchange Pty Ltd (“WEPL”) in Australia started commercial operations in September 2003. The Company acquired 20% ownership of WEPL in June 2007 and additional 15% ownership in September 2007. On March 31, 2011, I-Remit acquired the 35% interest of minority shareholders in WEPL. With its 30% indirect voting interest through IAPL, I-Remit effectively owns 100.00% of WEPL. On July 25, 2007, the Financial Monetary Authority of Austria granted the remittance license of IREMIT EUROPE Remittance Consulting AG in which the Company has 74.9% equity interest. It started commercial operations on September 16, 2007. In November 2009, IREMIT EUROPE Remittance Consulting AG was registered by Banca D’Italia Eurosistema in the general list of financial intermediaries as a provider of money transfer services under Article 106 of the legislative decree 385/1993 of Italy’s Banking Law. On May 5, 2011, the Parent Company acquired the 25.10% ownership interest in IREMIT EUROPE Remittance Consulting AG from the noncontrolling stockholder. The acquisition increased the Parent Company’s ownership interest in IREMIT EUROPE Remittance Consulting AG to 100.0% from 74.9%. Consequently, on October 11, 2011, IREMIT EUROPE Remittance Consulting AG changed its legal name to IREMIT Remittance Consulting GmbH and changed its legal status from a stock company to a limited liability company. It also amended its Articles of Incorporation to include management consultancy in its business activities. I-Remit New Zealand Limited, a wholly-owned subsidiary, was incorporated and its registration was approved by the New Zealand Ministry of Economic Development on September 11, 2007. It started commercial operations on February 13, 2008. On November 28, 2008, I-Remit’s Board of Directors (“Board”) ratified the acquisition of the 100.00% ownership interest in Power Star Asia Group Limited, a company based in Hong Kong which is engaged in foreign currency trading. On January 9, 2009, the Board of I-Remit authorized the acquisition of up to 49% of the outstanding capital stock of Hwa Kung Hong & Co., Ltd., a company engaged in the remittance business in Taiwan with offices in Taipei and Kaohsiung. The acquisition of the shares was completed on July 1, 2009. On June 10, 2011, K.K. I-Remit Japan was incorporated as a joint stock corporation in Tokyo, Japan with the primary purpose of providing money transfer and remittance services. On November 22, 2011, the company completed its registration with the Financial Services Agency (FSA) of Japan pursuant to the Payment Services Act of 2010. The company has offices in Tokyo and Nagoya. I-Remittance Singapore Pte. Ltd., a wholly-owned subsidiary, was incorporated as a private company limited by shares under the Companies Act (Cap 50) on February 14, 2014. It is currently applying for a remittance license from the Monetary Authority of Singapore.
The Company’s presence in various countries hosting overseas Filipino workers (OFWs) and
Filipino migrants and several strategic partnerships and tie-ups with various local and international banks, pawnshops, couriers, and telecommunications companies makes it the largest independent local remittance company.
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The Company was also the first remittance company registered with the Board of Investments
(BOI) as a New Information Technology (IT) Service Firm in the Field of Information Technology Services (Remittance Infrastructure System) on a Non-Pioneer Status under the Omnibus Investments Code of 1987 which entitled the Company to Income Tax Holiday (ITH) Incentive for four (4) years and which was later extended to two (2) years and which expired on November 11, 2007.
I-Remit’s vision is to become the ultimate choice remittance service provider globally and to
capture a significant share of the huge annual inward remittances of OFWs around the world. It will achieve these by using the latest in information technology and communication technology through the Internet platform in delivering its products and services to its target customers.
The Company was initially incorporated with a capital stock of two hundred million pesos (PHP
200,000,000) divided into two million shares with a par value of one hundred pesos (PHP 100) per share.
The subscribers at incorporation are the following:
Name Nationality No. of Shares Subscribed
Amount of Capital Stock Subscribed
(PHP)
Amount Paid on Subscription (PHP)
iVantage Corporation Filipino 999,993 99,999,300.00 49,999,300.00 Ben C. Tiu Filipino 1 100.00 100.00 Wilson L. Sy Filipino 1 100.00 100.00 Willy N. Ocier Filipino 1 100.00 100.00 William L. Chua Filipino 1 100.00 100.00 Juan G. Chua Filipino 1 100.00 100.00 David R. de Leon Filipino 1 100.00 100.00 Randolph C. de Leon Filipino 1 100.00 100.00 TOTAL 1,000,000 100,000,000.00 50,000,000.00
On August 15, 2001, iVantage Corporation sold all its titles, rights, interests and obligations in
and to all its subscribed shares in the Company to the following:
Name Nationality No. of Shares Subscribed
Amount of Capital Stock Subscribed
(PHP)
Amount Paid on Subscription (PHP)
JTKC Equities, Inc. Filipino 650,000 65,000,000.00 32,500,000.00 Surewell Equities, Inc. Filipino 300,000 30,000,000.00 15,000,000.00 JPSA Global Services Co. Filipino 50,000 5,000,000.00 2,500,000.00 TOTAL 1,000,000 100,000,000.00 50,000,000.00
The new shareholders assumed pro rata the subscription payable to I-Remit, Inc. of iVantage
Corporation amounting to fifty million pesos (PHP 50,000,000). On February 8, 2005, JTKC Equities, Inc. assigned all of its rights, interests and obligations in
and to its entire subscription consisting of 650,000 shares in the Company unto Deighton Limited, a corporation organized and existing under the laws of Hong Kong.
On June 27, 2007, JTKC Equities, Inc. bought back the 650,000 shares in the Company from
Deighton Limited. On June 29, 2007, the Board and the stockholders of the Company approved the following
amendments to the Articles of Incorporation and By-Laws: On the Articles of Incorporation 1. Reduction of par value per share from PHP 100.00 to PHP 1.00 per share;
2. Increase in authorized capital stock from PHP 200 million to PHP 1.0 billion; 3. Denial of pre-emptive rights; 4. Authority of the Board of Directors to grant stock options, issue warrants or enter into
stock purchase or similar agreements;
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On the By-Laws 1. Period for closing of stock and transfer book or fixing of record date;
2. Period for notice of stockholders’ meeting; 3. Deadline for the submission / revocation of proxies; 4. Number, term of office, qualifications, and disqualifications; 5. Additional requirements for independent directors; 6. Election of directors; 7. Place of meeting of the Board of Directors; 8. Vacancies; 9. Constitution of a Nomination Committee; and
10. The addition of one or more Vice Chairmen to the list of officers of the Company. On July 20, 2007, the Board approved a Special Stock Purchase Program (“SSPP”) for its
directors, the officers and employees of the Company who have been in service for at least one (1) calendar year as of June 30, 2007, and the Company’s resource persons and consultants. A total of fifteen million (15,000,000) shares of the Company, at a par value of one peso (PHP 1.00) per share, was allocated under the SSPP. The shares were allocated to those eligible to avail of the shares based on a formula developed by the Company’s SSPP Committee and approved by the Board of Directors.
The Board of Directors of the Company also declared stock dividends worth PHP
43,000,000.00 to its shareholders on July 20, 2007, which declaration was subsequently ratified and confirmed by the Company’s shareholders during their annual meeting held on the same day, immediately after the Board meeting. The Record Date was set on August 19, 2007, thirty (30) days from the date of approval of the Company’s shareholders.
On August 22, 2007, the Securities and Exchange Commission (“SEC”) approved the
Amended Articles of Incorporation and By-Laws of the Company. The shares subscribed and paid-up subsequent to the increase in capital stock were as
follows:
Name Nationality No. of Shares Subscribed
Amount of Capital Stock Subscribed
(PHP)
Amount Paid on Subscription (PHP)
Star Equities Inc. Filipino 158,418,225 158,418,225.00 158,418,225.00 Surewell Equities, Inc. Filipino 119,100,000 119,100,000.00 119,100,000.00 JTKC Equities, Inc. Filipino 99,631,775 99,631,775.00 99,631,775.00 JPSA Global Services Co. Filipino 19,850,000 19,850,000.00 19,850,000.00 TOTAL 397,000,000 397,000,000.00 397,000,000.00
On September 13, 2007, the SEC granted to the Company an exemption from registration of
the SSPP shares under Section 10.2 of the SRC. On September 20, 2007, the Company issued to the directors, officers and employees eligible to avail of the SSPP their respective shares under the program. Notwithstanding the aforesaid confirmation of the exempt status of the SSPP shares, the SEC nonetheless required the Corporation to include the SSPP shares among the shares of iRemit which were registered with the Commission prior to the conduct of its Initial Public Offering (IPO) in October 2007. The registration of the I-Remit shares, together with the SSPP shares, was rendered effective on October 5, 2007.
All 15,000,000 shares were subscribed. The shares subject of the SSPP were sold at par value or PHP 1.00 per share payable in full and in cash and subject to a lock-up period of two (2) years from date of issue which ended on September 19, 2009. The sale is further subject to the condition that should an officer or an employee resign from the Company prior to the expiration of the lock-up period, the shares purchased by such resigning employee or officer shall be purchased at cost by the Company’s Retirement Fund (“Retirement Fund”) for the benefit of retiring employees or officers. Total share purchases amounting to PHP11.74 million were paid in full while the difference amounting to PHP3.26 million were paid by way of salary loan. The shares acquired through the SSPP were subject to a lock-up period of two (2) years from the date of issue which ended on September 19, 2009.
On May 18, 2007, the Board of Directors of the Company approved the listing of its shares with
the Philippine Stock Exchange (“PSE”) in an initial public offering (IPO).
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The Board of Directors of the PSE, in its regular meeting on September 27, 2007, approved
the Company’s application to list its common shares with the PSE. On October 5, 2007, the Securities and Exchange Commission declared the Company’s Registration Statement in respect of the IPO effective and issued the Certificate of Permit to Offer Securities for Sale in respect of the offer shares.
The Company offered for subscription a total of 140,604,000 common shares each with par
value of PHP 1.00 per share consisting of (i) 107,417,000 new common shares issued and offered by the Company by way of a primary offer and (ii) a total of 33,187,000 existing shares offered by selling shareholders, JTKC Equities, Inc. (21,571,550 common shares issued), Surewell Equities, Inc. (9,956,100 common shares offered), and JPSA Global Services Co. (1,659,350 common shares offered) pursuant to a secondary offer.
On October 17, 2007, the Company completed its IPO of 140,604,000 common shares,
representing slightly above 25% of the total outstanding capital stock of 562,367,000 (net of 50,000 treasury shares) at an offer price of PHP 4.68 per share for total gross proceeds of PHP 658,026,720.00.
The net proceeds from the primary offer of PHP 466,198,457.05, determined by deducting
from the gross proceeds of the primary offer the Company’s pro-rated share in the professional fees, underwriting and selling fees, listing and filing fees, taxes and other related fees and expenses, is intended to be used by the Company to finance, in part, its expansion in other countries and to partially retire some of the Company’s short term interest-bearing loans.
On August 16, 2008, the Board of the Company authorized the buy-back from the market of up
to 10 million shares, representing approximately 1.78% of I-Remit’s outstanding common shares. The program was adopted with the objective of preserving the value of the Company’s shares, which was grossly undervalued at that time. The program also sought to boost investor confidence in the Company. A total of 10,000,000 shares have been purchased and lodged as treasury shares. On September 16, 2011, the Board of the Company authorized the buy-back from the market of up to 10 million shares, representing approximately 1.64% of I-Remit’s outstanding common shares. The program was adopted with the objective of preserving the value of the Company’s shares, which was grossly undervalued at that time. The program also sought to boost investor confidence in the Company. A total of 10,000,000 shares have been purchased and lodged as treasury shares. On September 21, 2012, the Board of the Company authorized the buy-back from the market of up to 10 million shares, representing approximately 1.67% of I-Remit’s outstanding common shares. The program was adopted with the objective of preserving the value of the Company’s shares, which was grossly undervalued at that time. The program also sought to boost investor confidence in the Company. A total of 4,562,000 shares and 4,862,000 shares have been purchased and lodged as treasury shares as of December 31, 2013 and March 31, 2014, respectively.
On June 11, 2013, the Board of the Company approved the amendment of the Corporation’s primary purpose wherein the Corporation will no longer be limited to engaging in ”spot” foreign currency transactions and will be able to engage in financial derivatives activities such as foreign currency swaps, forwards, options or other similar instruments. The amendment of the primary purpose will enable the Corporation to, among others, hedge against foreign exchange fluctuations and the resulting risk therefrom. The amendment, however, does not include activities that require new licenses and/or permits from the Bangko Sentral ng Pilipinas. The amendment will likewise not change the core business of the Corporation, which is to engage in fund transfer and remittance services from abroad and into the Philippines, or otherwise. During the annual stockholders’ meeting on July 19, 2013, the shareholders likewise approved said amendment.
On March 21, 2014, the Board of the Company approved the amendment of the Corporation's
principal office address pursuant to SEC Memorandum Circular No. 6, Series of 2014, from “Metropolitan Manila, Philippines” to “26th Floor Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City, Metro Manila, Philippines.” The amendment shall be submitted for approval of the stockholders during the Corporation's annual stockholders' meeting sometime in July 2014.
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As of March 31, 2014, the Company’s capital structure is as follows:
Name Nationality No. of Shares
Subscribed
Amount of Capital Stock Subscribed
(PHP)
% to Total Number of
Shares Star Equities Inc. Filipino 180,308,109 180,308,109.00 29.40752 Surewell Equities, Inc. Filipino 144,290,205 144,290,205.00 23.53314 JTKC Equities, Inc. Filipino 131,566,368 131,566,368.00 21.45794 JPSA Global Services Co. Filipino 20,187,135 20,187,135.00 3.29244 Public Various 136,784,305 136,784,305.00 22.30896 Total, March 31, 2014 613,136,122 613,136,122.00 100.00000
The Company’s general expansion plans in 2014 include the opening of new and/or additional
offices or the engagement of new tie-ups and partners in Austria, Kuwait, and Oman. (2) Business of Issuer (a) Description of Registrant The Parent Company and its subsidiaries are primarily engaged in the business of fund
transfer and remittance services of any form or kind of currencies or monies, either by electronic, telegraphic, wire or any other mode of transfer and undertakes the delivery of such funds or monies, both in the domestic and international market, by providing either courier or freight forwarding services; and conducts foreign exchange transactions as may be allowed by law and other allied activities relative thereto.
The Company’s subsidiaries are as follows: International Remittance (Canada) Ltd., a wholly-owned subsidiary, was incorporated
on July 16, 2001 pursuant to the Canada Business Corporations Act. It is registered with Industry Canada with registration number 392271-5. It is also registered as an extraprovincial company with the Registrar of Companies of the Province of British Columbia with certificate of registration number A-60718 dated December 3, 2003. Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, International Remittance (Canada) Ltd. is registered as a money service business (MSB) with the Financial Transactions and Reports Analysis Centre of Canada with registration number M081607706 valid until June 28, 2014 and subject to renewal every two (2) years. It started initially as a tie-up and partner of I-Remit, Inc. establishing its operations in three (3) major provinces in Canada, namely: British Columbia, Alberta, and Ontario. In 2005, I-Remit, Inc. acquired 65% ownership in the company that subsequently was increased to 95% in 2006 and eventually consolidated to 100% on June 29, 2007. It currently operates in nine (9) locations in Canada: Banff, Alberta; Pacific Mall, Calgary, Alberta; 6th Avenue Southwest, Calgary, Alberta; Edmonton Mall, Alberta; Jamestown, Toronto, Ontario; Bathurst Street, Toronto, Ontario; Vancouver, British Columbia; Richmond, British Columbia; and, Winnipeg, Manitoba. The Filipino community is the third largest minority group in Canada. The Commission on Filipinos Overseas estimated that there were about 852,401 Filipinos in Canada as of December 2012.
I-Remit Australia Pty Ltd, a wholly-owned subsidiary, is a company incorporated on
December 10, 2002 in Victoria, Australia under the Australian Corporations Act 2001 and registered with the Australian Securities and Investments Commission with Australian Company Number (ACN) 103 107 982 and Australian Business Number (ABN) 22 103 107 982. As of June 29, 2007, the ownership of I-Remit, Inc. has been consolidated to 100%. It has no regular employees and has not, since incorporation, engaged in any material activities other than those related to the maintenance of a bank account. Presently, it has a bank account with Westpac Banking Corporation where I-Remit’s agents deposit the remittances they receive for the purpose of eventually transferring the accumulated balances to I-Remit’s bank accounts in the Philippines.
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IREMIT Remittance Consulting GmbH (formerly IREMIT EUROPE Remittance
Consulting AG) (100% owned) was incorporated on July 20, 2005 in Vienna, Austria. It started commercial operations on September 16, 2007. In November 2009, IREMIT EUROPE Remittance Consulting AG was registered by Banca D’Italia Eurosistema in the general list of financial intermediaries as a provider of money transfer services under Article 106 of legislative decree 385/1993, Italy’s banking law. It opened branches in Milan and Rome in Italy on April 18, 2010 and August 1, 2010, respectively. On April 28, 2011, it stopped its money remittance operations in accordance with Article 75 of the Transitional and Final Provisions of the Austrian Payment Services Act (Zahlungsdienstegesetz) which stipulated that credit institutions that have held authorizations pursuant to Article 1 paragraph 1 no. 23 of the Austrian Banking Act (Bankwesengesetz, BWG), as amended by the Federal Act, federal Law Gazette No. 35/2003, prior to December 25, 2009, had only until April 30, 2011 to carry out their money remittance operations. On May 5, 2011, the parent company, I-Remit, Inc., acquired the 25.1% ownership interest from a non-controlling stockholder of the company. The acquisition enabled I-Remit, Inc. to have 100% ownership of IREMIT EUROPE Remittance Consulting AG. Consequently, on October 11, 2011, it changed its legal name to IREMIT Remittance Consulting GmbH and changed its legal status from a stock company to a limited liability company. It also amended its articles of incorporation to include management consultancy in its business activities. IREMIT Remittance Consulting GmbH was subsequently registered as an agent of IRemit Global Remittance Limited (United Kingdom) after the latter’s acquisition of passporting rights for establishment and offering of cross-border services in Austria. Pursuant to Article 12 para. 6 of the Austrian Payment Services Act (Zahlungsdienstegesetz), the Austrian law on the European Payment Services Directive (Directive 2007/64/EC), IREMIT Remittance Consulting GmbH provides money remittance services in Austria. It is registered in the Register of Payment Institutions of the Financial Services Authority of the United Kingdom with firm reference number 574797. The Commission on Filipinos Overseas estimated that there were 17,426 Filipinos in Austria as of December 31, 2012 who were mostly employed in the nursing field and other skilled and semi-skilled occupational groups. The Company is in the process of winding down the operation of IREMIT Remittance Consulting GmbH and will instead engage the services of an agent in Austria.
IRemit Global Remittance Limited, a wholly-owned subsidiary, is a private limited
company in the United Kingdom and Wales that was incorporated on June 22, 2001. It is registered with the Companies House of the United Kingdom with company number 04239974 pursuant to the Companies Act 2006. It started commercial operations in July 2001. Initially, I-Remit, Inc. had a 96% equity interest in IRemit Global Remittance Limited until it was sold on January 18, 2004. I-Remit, Inc. reacquired the company on June 29, 2007 with 100% ownership interest. On April 15, 2011, it acquired authorization from the Financial Services Authority to carry on payment services activities, particularly, money remittance, pursuant to the Payment Services Regulations 2009 of the United Kingdom, the British law implementing the European Payment Services Directive (Directive 2007/64/EC). It was issued its FSA reference number 537568. On April 1, 2013, it was placed under the regulatory authority of the Financial Conduct Authority that replaced the Financial Services Authority, and the Prudential Regulatory Authority. The company is registered with Her Majesty’s Customs and Excise with money laundering registration number 1213085 with certificate of registration issued on June 27, 2013 and expiring on June 1, 2014 subject to renewal. IRemit Global Remittance Limited has offices in London and Manchester in the United Kingdom, and in Milan and Rome in Italy. It has agents in the United Kingdom, Germany, and Austria. The Commission on Filipinos Overseas estimated that there were about 218,777 Filipinos in the United Kingdom as of December 31, 2012. They work mostly as nurses and caregivers in public and private nursing homes, medical professionals, and chambermaids.
I-Remit New Zealand Limited, a wholly-owned subsidiary, was incorporated on September 11, 2007. It is registered with the Registrar of Companies of the Ministry of Economic Development with certificate number 1984331. The company is registered in the Financial Service Providers (FSP) Register of the Companies House of New Zealand with FSP number 45263. It is also a participant in Financial Services Complaints Limited, a dispute resolution organization. It has an office in High Street corner Vulcan Lane, Auckland CBD. The company started operating commercially on February 13, 2008. The Commission on Filipinos Overseas estimated that there were 37,116 Filipinos in New Zealand as of December 2012.
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Lucky Star Management Limited, a wholly-owned subsidiary, was incorporated on
March 16, 2001 as a limited liability under the Companies Ordinance (Cap 32) of Hong Kong. It is registered in the Companies Registry with company number 750525. It is licensed as a money service operator pursuant to Section 30 of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) with license no. 12-07-00326 from July 9, 2012 to August 8, 2014. It has offices in World Wide Plaza, Central; United Center, Admiralty; and Lik Sang Plaza, Tsuen Wan, New Territories. The Commission on Filipinos Overseas estimated that there were 195,128 Filipinos in Hong Kong as of December 2012.
Power Star Asia Group Limited, a wholly-owned subsidiary, was incorporated on April
28, 2008 under the Companies Ordinance (Cap 32) of Hong Kong. It is registered with the Companies Registry with company number 1232132. It was acquired by I-Remit, Inc. on November 12, 2008. Power Star Asia Group Limited is engaged in foreign exchange trading activities.
Worldwide Exchange Pty Ltd, a wholly-owned subsidiary (through a direct equity
interest of 70% and indirect equity interest through I-Remit Australia Pty Ltd of 30%), is a company that was incorporated on September 29, 2003 in Queensland, Australia under the Australian Corporations Act 2001 and registered with the Australian Securities and Investments Commission with Australian Company Number (ACN) 106 493 047 and Australian Business Number (ABN) 35 106 493 047. Pursuant to subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 of Australia, Worldwide Exchange Pty Ltd is registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) as an affiliate of I-Remit, Inc. with remittance affiliate number AFF100309950-001 with effect from September 28, 2012 and valid for three (3) years thereafter. It has offices in Blacktown, New South Wales and in Perth, Western Australia. It started commercial operations in September 2002. The Commission on Filipinos Overseas estimated that there were 391,705 Filipinos in Australia as of December 2012.
K.K. I-Remit Japan is a joint stock corporation (“Kabushiki Kaisha”) that was
incorporated and registered on June 10, 2011 in Tokyo, Japan with the primary purpose of providing money transfer and remittance services. Its company number is 0100-01-140611. On October 14, 2011, it became a member of the Japan Payment Service Association (JPSA), the designated dispute resolving organization for payment service providers, including money transfer companies. On November 22, 2011, the company completed its registration with the Financial Services Agency (FSA) of Japan pursuant to the Payment Services Act of 2010 with Registration No. KLFB00019. The company has offices in Tokyo and Nagoya. It started commercial operations in Tokyo on May 14, 2012 and in Nagoya on September 1, 2012. The Commission on Filipinos Overseas estimated that there were 243,136 Filipinos in Japan as of December 31, 2012.
I-Remittance Singapore Pte. Ltd., a wholly-owned subsidiary, was incorporated as a
private company limited by shares under the Companies Act (Cap 50) on February 14, 2014. It is registered with the Registrar of Companies and Businesses of the Accounting and Corporate Regulatory Authority with company number 201404379N. It is currently applying for a remittance license from the Monetary Authority of Singapore.
Hwa Kung Hong & Co. Ltd. (49% owned), an associate, is registered with the Council of
Labor Affairs, Executive Yuan with a License of Branch Office of Private Employment Service Agency with license number 1278 valid from January 24, 2013 up to January 23, 2015 subject to renewal. It has offices in Taipei and Kaohsiung. The Commission on Filipinos Overseas estimated that there were 84,953 Filipinos in Taiwan as of December 2012.
IRemit Singapore Pte Ltd, an affiliate, is a private limited company that was
incorporated on May 11, 2001 and is registered with the Registrar of Companies and Businesses of the Accounting and Corporate Regulatory Authority with company number 200103087H. It is licensed by the Monetary Authority of Singapore to carry on the remittance business pursuant to Section 8(3) of the Money-changing and Remittance Businesses Act (Cap 187) with RA No. 01203 valid until December 31, 2014 and renewable every year. It started commercial operations in October 2001. Investment in IRemit Singapore Pte Ltd was derecognized by the Parent Company effective December 31, 2013. The Commission on Filipinos Overseas estimated that there were 184,498 Filipinos in Singapore as of December 2012.
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Principal Products and Services Through the years, I-Remit has developed products and services that cater specifically
to the various remittance needs of OFWs and other migrant workers as follows: Bank-to-Bank A facility for “same-day” online crediting to bank
account in the Philippines. A remittance transaction received before 12:00 noon Manila time may be withdrawn by the designated beneficiary from the bank branch or any BancNet, MegaLink, or ExpressNet automated teller machine (ATM) on the same day of the remittance transaction. As of December 31, 2013, there were 9,935 bank branches and 14,530 ATMs in the Philippines.
Door-to-Door Delivery of cash remittances to designated
beneficiaries through third-party couriers. I-Remit has the capability to deliver remittances in cash, literally, at the doorstep of the beneficiaries of OFWs through in-house and third-party couriers. The Company has the widest coverage nationwide and can deliver remittances within the day in Metro Manila, Rizal and nearby provinces, and in two days or more in other areas depending on the specific location of the beneficiaries. I-Remit's door-to-door delivery is by far the most efficient in the remittance industry. Through its in-house messengers and couriers, I-Remit guarantees remittance delivery on the same day for areas in Metro Manila. Its provincial courier network is unequalled in terms of efficiency and timely delivery of remittance. Furthermore, I-Remit boasts of the widest coverage nationwide, reaching more beneficiaries in the Philippines than other remittance companies.
Notify-to-Pay Allows a beneficiary in the Philippines to pick-up a
remittance in any of I-Remit’s 9,941 pay-out stations within 24 hours. These designated pay-out stations number 2,903 in Metro Manila; 3,341 in the rest of Luzon; 2,212 in the Visayas; and 1,485 in Mindanao. I-Remit has tied-up with the following commercial banks, thrift banks, rural banks, pawnshops and remittance agents which branches serve as pay-out stations for cash pick-up: Allied Banking Corporation; Bank of the Philippine Islands; BDO Unibank; BDO Remit Branches & SM Business Service Center; Cebuana Lhuillier Pera Padala; China Banking Corporation; CIS Bayad Center, Inc.; Development Bank of the Philippines; Eight Under Par, Inc. (Palawan Pawnshops); Enterprise Bank, Inc.; ExpressPay, Inc.; First Consolidated Bank; Global Pinoy Remittance and Services; HJP Pawnshop; Maybank Philippines, Inc.; ML Kwarta Padala; One Network Bank, Inc.; Philippine National Bank; Philippine Savings Bank; Philippine Veterans Bank; Orient Asia Lending, Inc. (Prime Asia Pawnshop); Rural Bank of Malinao, Inc./Microsavers; Security Bank Corporation; Security Bank Savings (formerly Premiere Development Bank); Sterling Bank of Asia (A Savings Bank); Tambunting Pawnshop Philippines; Union Bank of the Philippines; UCPB Savings Bank; United Coconut Planters Bank.
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Visa Card I-Remit Visa Card is a “debit and ATM card in one” through which remitters can send money to their beneficiaries almost instantaneously. Cardholders may withdraw cash from more than 14,000 BancNet, MegaLink, or ExpressNet ATMs in the Philippines and any Visa ATM worldwide. As a debit card, cardholders may use the I-Remit Visa Card to pay for their purchases from any of the 12 million Visa-affiliated merchant establishments in over 170 countries worldwide. The I-Remit Visa Card is issued in partnership with Chinatrust (Philippines) Commercial Bank Corporation while the Visa Electron Card is issued in partnership with the Standard Chartered Bank Philippines. In 2008, I-Remit also introduced the I-Remit Shop ‘N’ Pay Card in partnership with Sterling Bank of Asia (A Savings Bank). The I-Remit Shop ‘N’ Pay Card utilizes the EMV (Europay, MasterCard, Visa) technology, the standard for the interoperation of IC cards (“chip cards”) and IC capable POS terminals and ATMs, for authenticating credit and debit card payments.
Auxiliary Services I-Remit is authorized to accept payments,
contributions, premiums, or donations from Filipinos abroad for the following government agencies, private companies, and organizations: Social Security System (SSS); Overseas Workers Welfare Administration (OWWA); Home Development Mutual Fund (HDMF or Pag-IBIG); Philippine Health Insurance Corporation (PhilHealth); AMA Communities Inc.; AMA Land Development Corporation; CDC Holdings, Inc.; Century Properties Group, Inc.; CHMI Land, Inc.; C&P Prime Properties International, Inc.; Citi Global Reality and Developement Inc.; Citihomes Builders and Development, Inc.; COL Financial Group, Inc.; Confed Properties, Inc.; DMCI Homes, Inc.; Duraville Realty and Development Corporation; Durawood Lumber and Construction Supply; Dynamic Realty and Resources Corporation; Earth and Style Corporation; Earth Aspire Corporation; Earth Prosper Corporation; Extraordinary Development Corporation; Eton Properties Philippines, Inc.; Fiesta Communities, Inc.; Hausland Development Corporation; Homeowners Development Corporation; Imperial Homes Corporation; Ledesco Development Corporation; LLSP Development Corporation; Major Homes, Inc.; Major Properties, Inc.; Malate Construction and Development Corporation; Megaworld Corporation; New Pacific Resources Management Inc.; Northpine Land, Inc.; Phinma Property Holdings Corporation; PICAR Development, Inc.; Pueblo de Oro Development Corporation; RJ Lhinet Development Corporation; Robinson’s Homes, Inc.; SM Development Corporation; SM Synergy Property Holdings, Inc.; Suntrust Home Developers, Inc.; Surewell Equities, Inc.; Twenty Two Forty One Properties Inc.; Vistaland International Marketing; CBN Asia (The 700 Club Asia); Loyola Plans Consolidated Inc.: The Insular Life Assurance Company, Ltd.; Pioneer Life, Inc.; Philippine Retirement Authority; Jollibee Foods Corporation; Nestle Philippines; Savers Appliance Depot (Sentine Development Corporation); Zalora Philippines (BF Jade E-Services Phils., Inc.).
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SMS (Short Message Service) via Globe G-Cash and Smart Padala
Beneficiaries may encash remittances in more than 5,000 Globe G-Cash and Smart Padala encashment centers and ATMs nationwide once received on their mobile phones. Beneficiaries may also use the facility for “cashless shopping” in G-Cash and Smart affiliated business establishments.
iRemit Direct Online
Remittance System (iDOL)
iDOL is I-Remit’s Internet-based remittance service that offers convenient and secure remittance services online. It is currently available to Filipinos in Canada and the United Kingdom. It will also be made available in Australia, Hong Kong, Italy, Japan, New Zealand, and Taiwan.
I-Remit derives its income from remittance transactions in the form of: (i) service fees,
and (ii) on the spread on the applicable foreign exchange rate for each conversion of any remittance to the Philippines. Service fees cover all logistical and operational expenses of the Company and its partner or tie-up company for each remittance transaction. These fees vary per country of operation depending on competition and the current foreign exchange situation. The timing of a remittance is also a consideration in applying a foreign exchange factor.
Percentage of Sales or Revenues Contributed by Foreign Sales I-Remit operates in various countries through its subsidiaries and associates or through
tie-ups. The former allows the Company to own up to 100% equity while the latter is through agent-partner agreements. Partnership arrangements are utilized when the volume of remittances do not justify incorporating new companies.
Due to the nature of its business, a substantial portion of the Company’s sales or
revenues are from foreign sales. The percentage shares of the Company’s major markets in terms of total value of
inward remittances (in US dollar amounts) is as follows: Share in Value (in USD) of Remittances Region 2013 2012 2011 Asia-Pacific 37% 32% 32% Europe 10% 11% 11% Middle East 21% 17% 18% North America 14% 12% 14% Others 18% 28% 25% Total 100% 100% 100% The percentage shares of the Company’s major markets in terms of the volume
(number of transactions) of inward remittance transactions is as follows: Share in Volume (in No. of Transactions) of Remittances Region 2013 2012 2011 Asia-Pacific 42% 42% 43% Europe 11% 12% 11% Middle East 31% 30% 29% North America 13% 13% 14% Others 3% 3% 3% Total 100% 100% 100%
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Distribution Methods of the Products or Services I-Remit operates globally through a combined network of branches and tie-ups
worldwide offering its products and services to overseas Filipino workers (OFWs). Currently, I-Remit is present in the following 23 countries and territories:
Asia Pacific Europe Middle East North America Australia Austria Bahrain Canada Brunei Germany Israel Hong Kong Greece Jordan Indonesia Italy Lebanon Japan Spain Qatar Malaysia United Kingdom United Arab Emirates New Zealand People’s Republic of China Singapore Taiwan The Company’s general expansion plans in 2014 include the opening of new and/or
additional offices or the engagement of new tie-ups and partners in Austria, Kuwait, and Oman.
The distribution methods in the Philippines of the Company’s products or services are
as described under “Principal Products and Services.” Remittances may be credited to any bank account in the Philippines and the funds may
be withdrawn from the branch of account or from automated teller machines (ATMs). As of December 31, 2013, there were 9,935 bank branches and 14,530 ATMs in the Philippines.
I-Remit has the capability to deliver remittances in cash literally at the doorstep of the
beneficiaries of OFWs through in-house and third-party couriers. The Company has the widest coverage nationwide and can deliver remittances within the day in Metro Manila, Rizal and nearby provinces, and in two days or more in other areas depending on the specific location of the beneficiaries. I-Remit's door-to-door delivery is by far the most efficient in the remittance industry. Through our in-house messengers and couriers, I-Remit guarantees remittance delivery on the same day for areas in Metro Manila. Our provincial courier network is unequalled in terms of efficiency and timely delivery of remittance. Furthermore, I-Remit boasts the widest coverage nationwide, reaching more beneficiaries in the Philippines than other remittance companies.
Under the Company’s “Notify-to-Pay” services, remittances may be picked up by
beneficiaries in any of I-Remit’s 9,941 designated pay-out stations nationwide. Beneficiaries may also encash remittances in more than 5,000 Smart Padala and Globe
G-Cash encashment centers nationwide once notified by “text” on their mobile phones.
New Products or Services iDOL, the Company’s Internet-based remittance service that offers convenient and
secure remittance services online was made available to Filipinos in Canada and the United Kingdom in 2012. It will also be made available in Australia, Hong Kong, Italy, Japan, New Zealand, and Taiwan.
There are other services planned for launching in 2014. These products and services
are intended to improve product delivery and enhance I-Remit’s competitiveness in the OFW remittance market. Among these are various payment and collection services. The Company also intends to offer its remittance services to other nationalities through partnerships with banks or remittance companies of countries that have large populations of overseas workers. There are no publicly-announced new products or services which completion of development would require a material amount of the resources of I-Remit. New products or services will be developed using internal resources.
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Competition Players In its publication “Migration and Development Brief 21” (April 19, 2013), the World Bank
estimated that officially recorded remittances to developing countries reached USD 414 billion in 2013 growing by 6.3 percent compared with 2012 and may reach USD700 billion by 2016. The money transfer or remittance industry has numerous players that are classified into two (2) major categories: the formal and informal channels.
Formal Channels Formal funds transfer or remittance channels may be defined as composed of
institutions that transfer value or funds from one geographic location to another and are operating within the regulated financial sector. These institutions are regulated and supervised by government agencies and by laws and regulations that determine their establishment and scope of operations. Based on the standards set by the Financial Action Task Force 40 Recommendations and the Basel Committee on Banking Supervision, aside from licensing and registration, formal remittance institutions must have in place mechanisms for customer due diligence and monitoring of transactions. The formal channels may include banks, money transfer operators, credit unions, and postal services.
Banks. The Philippine remittance industry is dominated today by the country’s five
largest universal banks that lay claim to 85 percent of the total remittances flowing through the formal channels. There are over 20 commercial and thrift banks that are active players in the Philippine overseas remittance industry. Many remittance centers operating abroad are either subsidiaries or affiliates of domestic banks and are incorporated under the laws of their host countries. Some local banks have also established tie-up arrangements with banks and money transfer operators abroad. The major commercial banks in the Philippines involved in the remittance industry such as Banco de Oro Unibank, Philippine National Bank, Metropolitan Bank and Trust Company, Bank of the Philippine Islands, and the Rizal Commercial Banking Corporation. These banks also subscribe to the SWIFT system for bank-to-bank transfers and have a combined international network of correspondent banks, overseas branches, and international remittance centers.
International Money Transfer Operators. International money transfer operators consist
of companies whose subsidiaries or affiliates are licensed or registered with regulatory agencies. These operate under laws and regulations that are specific to money transfer operators or payment service providers. Among these companies are Western Union, MoneyGram, Trans-Fast, Xpress Money, and Ria Money Transfer.
Domestic Money Transfer Companies. The major domestic players include I-Remit,
LBC Express, Lucky Money, 2GO, M. Lhuillier, and Cebuana Lhuillier. Most of the companies classified under this category are local logistics service providers, courier companies, or pawnshops that have branched out into the remittance business.
Telecommunications Companies. The continuing advances in information and
telecommunications technologies allowed companies such as Smart Communications, Inc. and Globe Telecom, Inc. to offer innovative modes of sending and receiving remittances such as through short messaging system (SMS) or “text” or through e-money. Smart introduced Smart Padala in August 2004 while Globe introduced GCash in October 2004. International money transfer companies are also starting to utilize mobile phones for their money transfer businesses. In 2006, Internet payments innovator started its mobile SMS-based transfer system called PayPal Mobile. It has also developed applications for popular smart phones Blackberry, iPhone, and Android. In 2009, Twitter launched TwitPay, which interfaces with PayPal’s platform and uses the sender’s mobile-enabled Twitter account as a platform to send money to other Twitter users. The company TextPayMe was acquired in 2010 by Amazon.com which also offers Internet-based transfers through its Amazon Payments service. Through Amazon.com’s TextPayMe, users with an Amazon Payments account can send money to another person by sending an SMS text message with their mobile phone, or using their mobile phone’s Internet browser or one of several special applications designed for smartphone users. MasterCard also launched its MoneySend service in the United States which allows senders to make payments via SMS text message of their phone’s Internet browser.
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Technology-Based Companies. The emerging new players in the industry are
composed mostly of technology-based companies that utilize the Internet in offering remittance services. Their services may be availed of through traditional browers or via Web-enabled mobile phones. The online money transfer companies tapping the Philippine market are composed of Remit2Home, Xoom, and PayPal. Many remittance companies are also expanding their operations through the Internet. Western Union and MoneyGram currently offer customers the option of sending money online, as do banks such as Wells Fargo and Citibank.
Informal Channels Informal channels refer to institutions that engage in the remittance business outside of
the regulated financial sector. Cash may be sent through the recruitment agency or through the local office of the employer, through friends, relatives, or fellow workers traveling back to the Philippines. Alternatively, OFWs can bring the cash themselves upon their return to the Philippines.
“Padala” System. The literal meaning of the local word “padala” is to send something
through the courtesy of another person. In this practice, it is assumed that the person asked to bring the money to the Philippines is reliable and trustworthy, and the practice repeats as trust and confidence builds between the parties with each completed delivery.
“Kaliwaan” System. The system, despite its lack of popularity, operates through a well-
tested network of currency exchanges. It involves the use of agents in the source and destination countries who operate outside of regulatory restrictions as they arrange currency transfers. The method has been the subject of congressional inquiries because of its use in laundering monetary proceeds from illegal activities such as “jueteng.”
Hand-carry System. This method refers to the practice of overseas Filipinos in bringing
home cash themselves when they return to the Philippines for vacation or after the expiration of their work contracts.
OFW remittances continue to fuel the Philippine economy. The continuing upward
trends in inward remittance flows are expected to be sustained by the increased deployment of OFWs. Likewise, there is an observed overall shift from the utilization of unregulated, informal channels to the more formal structured channels for remittances that emphasizes the growing need for reliability, efficiency and convenience.
As competition among industry players intensifies, banks, money transfer agents, and
other similar service providers are expected to become more aggressive in their marketing and promotional activities to lure potential clients and capture larger shares of the market.
Advances in information and communications technology have allowed new players to
roll-out a growing variety of products and services catering to the evolving needs and requirements of OFWs. Such innovative approaches are expected to fuel further industry growth, help reduce transaction costs, and improve service delivery. Due to rising competition from non-traditional players, banks and money transfer agents need to upgrade their technology, expand network coverage, and enhance their distribution structures.
Industry players, particularly banks and remittance agents, will always be on the look-
out and competing for new tie-up arrangements with overseas partners, particularly in untapped geographic markets. Banks and other financial institutions will continue to seek partnership opportunities with correspondent banks, money transfer agents, and other types of partners overseas to expand their coverage while also planning to establish their own offshore units in key overseas markets like the Middle East, Canada, and the United States, that have a growing concentration of OFWs and Filipino immigrants. While the industry remains highly-competitive, industry players often link-up and have overlapping or complementary offerings with other service providers under revenue-sharing schemes.
I-Remit expects to encounter direct and indirect competition from domestic and foreign
companies offering money remittance services locally and internationally.
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The Company competes mainly in terms of pricing and service efficiency against the
domestic commercial banks, Philippine-based money transfer agencies, international money transfer agencies, and telecommunications firms.
I-Remit is able to compete effectively against the major players in the industry because
of its network of branches and tie-ups abroad, its local tie-ups with local and foreign banks, its flexibility to expand in other markets, its relatively faster decision-making process, and its marketing strategies that are customized for the Filipino populations in each country that it operates in.
The Company believes that its customer-centric model, complemented by its flexible
and dynamic structure, will allow it to compete actively in the local and international markets by capitalizing on its strengths in its core business while offering value-added services to OFWs around the world. The Company similarly believes that with its relentless drive for innovation, its streamlined organization, and efficient cost structure in its local and foreign operations, it will be able to compete effectively in the global marketplace through the continuous establishment of foreign offices in strategic locations characterized by high-densities of OFW populations that will allow it to tap a broader market, and consequently, deliver potentially high-yield profits.
Sources and Availability of Raw Materials and Names of Principal Suppliers The Company has a broad base of suppliers, both local and foreign. The Company is
not dependent on one or a few suppliers in conducting its business.
Dependence Upon a Single Customer or a Few Customers The Company serves a wide spectrum of overseas Filipino workers (OFWs) and
Filipino immigrants of different occupational groups in 23 countries and territories around the world. It is not dependent on a single customer or a few customers. Neither is there a single customer that accounts for, or will account for 20% or more of the Company’s sales. Preliminary data from the Philippine Overseas Employment Administration (POEA) also reported an increase in the number of workers deployed which in 2013 reached 1.8 million. Moreover, the POEA reported that approved job orders totaled 793,415 for 2013, of which about two-fifths (40.9%) were processed job orders mainly for service, production, and technical, and related workers. These job orders were intended for the manpower requirements of Saudi Arabia, the United Arab Emirates, Kuwait, Taiwan, Hong Kong, and Qatar. In its publication “Migration and Development Brief 21” (April 19, 2013), the World Bank estimated that officially recorded remittances to developing countries reached USD 414 billion in 2013 growing by 6.3 percent compared with 2012 and may reach USD700 billion by 2016. The top recipients of officially recorded remittances for 2013 are India (USD71 billion), China (USD60 billion), the Philippines (USD26 billion), Mexico (USD22 billion), Nigeria (USD21 billion), and Egypt (USD20 billion). Other large recipients include Pakistan, Bangladesh, Vietnam, and Ukraine. As a percentage of GDP, however, the top recipients of remittances, in 2012, were Tajikistan (48%) Kyrgyz Republic (31%), Lesotho and Nepal (25% each), and Moldova (24%). The Bangko Sentral ng Pilipinas (BSP) reported that the 2013 full-year personal remittances of overseas Filipinos to the Philippines reached USD 25.1 billion, higher by 7.6% compared to the inflows recorded in 2012. The growth in remittances was driven by higher personal transfers from land-based overseas Filipino workers with work contracts of one year or more (by 6.1%), as well as sea-based workers and land-based workers with short-term contracts (by 7.8%). Cash remittances from overseas Filipinos coursed through banks posted a 6.4% increase to reach USD22.8 billion, exceeding the BSP’s projection of five percent growth for the year. Cash transfers from both land-based and sea-based workers grew by 6 percent and 7.9 percent respectively. Moreover, cash remittances from land-based workers accounted for more than three-fourths (77.1 percent) of total cash transfers.
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It is estimated that in 2013, remittances for 8.4% of Gross Domestic Product (GDP). Remittances continue to draw strength from the increasing demand for a wider range of skilled Filipino workers abroad, mostly in the Middle East.
Transactions and/or Dependence on Related Parties The Company has transactions with its subsidiaries and associates abroad, i.e., the
remittance centers that accept transactions from its customers, mostly OFWs, in Australia, Austria, Canada, Hong Kong, New Zealand, Singapore, the United Kingdom, and Japan. These transactions primarily consist of delivery services for a fee.
Pursuant to the Company’s usual course of business, it also advances funds to its
subsidiaries, associates and affiliates. These are accounts receivable from subsidiaries, associates and affiliates pertaining to remittance transactions. It also consists of advances made to subsidiaries, associates, and affiliates for working capital to maintain cash balances in bank accounts and other financial and operating requirements. The account receivables are usually settled on the next banking day. On the other hand, advances for financial and operating requirements are due on demand.
The Company leases office space from Oakridge Properties, Inc., a related party. The Company has office sharing arrangement with Surewell Equities Pte. Ltd. in
Singapore, a related party. The Company maintains peso deposit accounts with Sterling Bank of Asia, Inc. (A
Savings Bank), a related party. The Company’s retirement benefit fund is maintained with Sterling Bank of Asia, Inc. (A Savings Bank), an affiliate due to common stockholders, as trustee. The said bank’s majority shareholders are: JTKC Equities, Inc., Surewell Equities, Inc. and Star Equities Inc. which are also the shareholders of the Company. Please see also Item 12. Certain Relationships and Related Party Transactions.
Significant Agreements and/or Commitments The Company conducts its remittance and collection business internationally by
organizing wholly-owned corporations, entering into joint ventures, and signing Memoranda of Agreements (MOAs) with remittance or money transfer operators that are authorized or licensed in their respective countries and territories including Australia, Austria, Bahrain, Brunei, Canada, China, Germany, Greece, Hong Kong SAR, Indonesia, Israel, Italy, Japan, Jordan, Lebanon, Malaysia, New Zealand, Qatar, Singapore, Spain, Taiwan, United Kingdom, and the United Arab Emirates.
The Memoranda of Agreement entered into with individuals and corporations in various
countries and territories follow a general format with minor variations. Generally, the MOAs entered into on or after 2004 provide that I-Remit retain exclusive proprietary rights over its I-Remit Foreign Remittance System which the foreign parties will use to implement the remittance arrangement. MOAs entered into on or before 2003 do not contain this provision. All MOAs, however, are aimed at limiting I-Remit’s exposure by specifying that: (i) the foreign parties are not agents but independent contractors; (ii) the foreign parties shall be shall be responsible for compliance with all applicable laws in their respective countries and territories; and (iii) funds must first be deposited to an I-Remit bank account before the Company shall release the same to the intended beneficiaries in the Philippines. Contracts executed on or after 2004 also stipulate amicable settlement or arbitration as the mode of settlement of disputes and provides for the exclusive jurisdiction of the Philippine courts. New contracts with tie-ups require bond or advanced payment cover in order to fulfill the delivery of any transaction. The bond or “advanced payment cover” is deposited to an I-Remit-designated bank account that serves as collateral.
The bulk of the MOAs executed in the Philippines cover the arrangement between the
Company and various companies and institutions, such as commercial banks, thrift banks, and pawnshops for the appointment of the latter to provide pay-out stations through their branches for the Company’s notify-to-pay services.
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Certain MOAs also involve the appointment of the Company as a collection agent for
the remittance of amortization payments, loan payments, premiums, and contributions for government financial institutions and agencies consisting of the Social Security System (SSS), Overseas Workers Welfare Administration (OWWA), Home Development Mutual Fund (HDMF or Pag-IBIG Fund), Philippine Retirement Authority (PRA) and the Philippine Health Insurance Corporation (PhilHealth), and various pre-need and real estate development companies.
Principal Terms and Expiration Dates of All Patents, Trademarks, Copyrights, Licenses, Concessions, and Royalty Agreements Held
I-Remit, Inc. is duly registered as a Remittance Agent with the Bangko Sentral ng
Pilipinas (BSP), with Certificate No. FX-2005-000364 issued on May 10, 2005, pursuant to BSP Circular 471, Series of 2005, dated January 24, 2005. It is subject to the applicable provisions of laws and BSP rules and regulations, as well as the provisions of the Anti-Money Laundering Act of 2001 (Republic Act No. 9160 as amended by Republic Acts 9194, 10167, and 10365) and its revised implementing rules and regulations, and Republic Act No. 10168 or the Terrorism Financing Prevention and Suppression Act of 2012 and its implementing rules and regulations.
I-Remit, Inc. is duly registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) as a Remittance Network Provider, with registered remittance network provider number RNP100035640-001, pursuant to subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) of Australia with effect from April 13, 2012 and valid for three (3) years thereafter. The Company’s subsidiaries and affiliates, and their branches are registered with or licensed by the relevant government regulatory bodies in their host countries in Australia, Austria, Canada, Hong Kong SAR, Italy, Japan, New Zealand, Singapore, Taiwan, and the United Kingdom. The said licenses and registrations have been granted subject to compliance with the applicable laws governing the operation of remittance companies or money transfer businesses and anti-money laundering and counter-terrorism financing. I-Remit Australia Pty Ltd is registered with the Australian Securities and Investments Commission (ASIC) as an Australian proprietary company, limited by shares with ACN 103 107 982 and ABN 22 103 107 982 with registration date December 10, 2002 and next review date December 10, 2014. Worldwide Exchange Pty Ltd is registered with the Australian Securities and Investments Commission (ASIC) as an Australian proprietary company, limited by shares with ACN 106 493 047 and ABN 35 106 493 047 with registration date September 29, 2003 and next review date September 29, 2013. Pursuant to subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) of Australia, Worldwide Exchange Pty Ltd is registered with AUSTRAC as an affiliate of I-Remit, Inc., with remittance affiliate number AFF100309950-001, with effect from September 28, 2012 and valid for three (3) years thereafter. International Remittance (Canada) Ltd. is registered with Industry Canada, with registration number 392271-5, pursuant to the Canada Business Corporations Act with date of incorporation July 16, 2001. International Remittance (Canada) Ltd. is registered as an extraprovincial company with the Registrar of Companies of the Province of British Columbia with certificate of registration number A-60718 dated December 3, 2003. Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, International Remittance (Canada) Ltd. is registered as a money services business (MSB) with the Financial Transactions and Reports Analysis Centre of Canada with registration number M081607706 valid until June 28, 2014. Lucky Star Management Limited (trading as “IRemit Hong Kong”) is registered as a limited liability company in the Companies Registry of Hong Kong pursuant to the Companies Ordinance (Cap 32). Lucky Star Management Limited (trading as “IRemit Hong Kong”) is a licensed money service operator pursuant to Section 30 of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) with License No. 12-07-00326 from July 9, 2012 to August 8, 2014.
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K.K. I-Remit Japan is registered as a “Kabushiki Kaisha” (joint stock corporation) with the Legal Affairs Bureau of the Ministry of Justice of Japan with company number 0100-01-140611. Pursuant to the Payment Services Act of 2010, K.K. I-Remit Japan is registered with the Kanto Local Finance Bureau with Registration No. KLFB00019. K.K. I-Remit Japan is a member of the Japan Payment Services Association, a dispute resolution body, with membership number 00390. I-Remit New Zealand Limited is registered with the Registrar of Companies of the Ministry of Economic Development with certificate number 1984331 effective September 11, 2007. I-Remit New Zealand Limited is registered in the Financial Service Providers Register of the Companies House of New Zealand with FSP number 45263. I-Remit New Zealand Limited is a participant to the Financial Services Complaints Limited, a dispute resolution organization. IRemit Singapore Pte Ltd, an affiliate, is registered with the Registrar of Companies and Businesses of the Accounting and Corporate Regulatory Authority with company registration number 200103087H. IRemit Singapore Pte Ltd is licensed by the Monetary Authority of Singapore to carry on the remittance business pursuant to Section 8(3) of the Money-changing and Remittance Businesses Act (Cap 187) with RA No. 01203 valid until December 31, 2014 and renewable every year. IRemit Global Remittance Limited is registered with the Companies House of the United Kingdom with company number 04239974 pursuant to the Companies Act 2006. IRemit Global Remittance Limited has been granted authorization by the Financial Conduct Authority (FCA) to carry on payment services (money remittance) with Firm Reference Number 537568 effective April 15, 2011 pursuant to the Payment Services Regulations 2009. IRemit Global Remittance Limited is registered with Her Majesty’s Customs and Excise with money laundering registration number 1213085 with certificate of registration issued on June 27, 2013 and expiring on June 1, 2014 subject to renewal. The branches of IRemit Global Remittance Limited in Rome and Milan, Italy are registered in Albo of art. 114 septies TUB (Albo degli Istituti di Pagamento) under supervision of Banca D’Italia with identification code 36023.0. pursuant to Art. 1 Paragraph 1(b) of Legislative Decree 11/2010 of Italy with effect from July 7, 2011. IREMIT Remittance Consulting GmbH is registered as an agent of IRemit Global Remittance Limited pursuant to Article 12 para. 6 of the Austrian Payment Services Act (Zahlungsdienstegesetz). IREMIT Remittance Consulting GmbH is registered in the Register of Payment Institutions of the Financial Conduct Authority of the United Kingdom with firm reference number 574797. Hwa Kung Hong & Co. Ltd. is registered with the Council of Labor Affairs, Executive Yuan with a License of Branch Office of Private Employment Service Agency with license number 1278 valid from January 24, 2013 up to January 23, 2015 subject to renewal.
I-Remit, Inc. and its subsidiaries, associates, and affiliates offer their products and services through the “I-Remit” trademark, salesmark, and/or trade name.
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I-Remit has registered the following patents, trademarks and/or trade names: Name/Trademark Date Filed Date Registered I-Remit Name and Logo January 20, 2004
Application No. 4-2004-0000529
December 11, 2006 Registration No. 4-2004-000529 Registered for a term of 10 years from date of registration
I-Load June 16, 2004 Application No. 4-2004-0005251
January 21, 2006 Registration No. 4-2004-0005251 Registered for a term of 10 years from date of registration
I-Travel June 16, 2004 Application No. 4-2004-0005252
October 1, 2005 Registration No. 4-2004-0005252 Registered for a term of 10 years from date of registration
I-Pay June 16, 2004 Application No. 4-2004-0005253
October 1, 2005 Registration No. 4-2004-0005253 Registered for a term of 10 years from date of registration
iDol July 8, 2004 Application No. 4-2004-0006066
July 30, 2006 Registration No. 4-2004-006066 Registered for a term of 10 years from date of registration
I-Serve February 14, 2008 Application No. 4-2008-001818
December 15, 2008 Registration No. 4-2008-001818 Registered for a term of 10 years from date of registration
I-Value February 14, 2008 Application No. 4-2008-001819
September 8, 2008 Registration No. 4-2008-001819 Registered for a term of 10 years from date of registration
I-Reward February 14, 2008 Application No. 4-2008-001816
December 1, 2008 Registration No. 4-2008-001819 Registered for a term of 10 years from date of registration
I-Care February 14, 2008 Application No. 4-2008-001817
September 8, 2008 Registration No. 4-2008-001819 Registered for a term of 10 years from date of registration
I-Remit Trademark
June 23, 2006 e-Filing No. 125586
June 23, 2006 Trademark No. T06/12356G Registry of Trademarks, Property Office of Singapore
I-Remit Trademark
November 1, 2007 New Zealand Trademark Registration No. 778760 Registered for a term of 10 years from date of registration
I-Remit Trademark
September 18, 2009 Application No. 145s2333
Registration pending; for publication in Trademarks Journal (Canada)
I-Remit Global Remittance Trademark
December 14, 2007 Australia Trademark Registration No. 1215720
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I-Remit has licenses to the following information technology software and systems used
in its operations: Software / System,
Version Purpose Acquisition and
Effectivity License / Renewal of Maintenance Service
Enterprise Resource Information and Control (ERIC) Financial Suite (General Ledger & Accounts Payable) Version 5.2, Jupiter Systems, Inc.
The General Ledger module serves as the central financial data repository that allows for convenient and accurate preparation of the Company’s financial statements. The Accounts Payable module manages supplier payables and disbursements.
Version 3.2 acquired in 2002; upgraded to version 5.2 in 2006; perpetual license
Support agreement is renewed every year
Enterprise Resource Information and Control (ERIC) Payroll, Human Resource Management, Timecard, Version 5.2, Jupiter Systems, Inc.
The Payroll module is used for employees’ pay computation, payroll processing, and statutory reporting. The Human Resource Management module is used for capturing 201-file information and record-keeping. The Timecard module is used in recording and processing employee working hours.
Acquired in 2007; perpetual license
Support agreement is renewed every year
Microsoft SQL Server 2000 (Standard Edition)
A relational data base management system used for the “back-end” data base of I-Remit’s remittance system
Version 2000, acquired on October 31, 2005; Version 2008, acquired on February 27, 2009; perpetual license
Software assurance ended on February 28, 2011
Microsoft SQL Server – Enterprise Edition
A relational data base management system used for the “back-end” data base of I-Remit’s remittance system
Version 2008, acquired on February 27, 2009; perpetual license
Software assurance ended on February 28, 2011
Microsoft Exchange Server, 2003 – Enterprise Edition
Microsoft Exchange Server 2007 CALS
Microsoft Exchange Server 2010 CALS
A messaging and collaborative software used for the electronic mail system of I-Remit, Inc.
Version 2003, acquired on August 11, 2006; additional licenses acquired on September 27, 2007; perpetual license
Microsoft Project, Visio Standard/Professional
Software tool used for project management , process flow, layout
Version 2003
Microsoft Visual Studio Professional Edition
Software tool used for development
Version 2010
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Software / System,
Version Purpose Acquisition and
Effectivity License / Renewal of Maintenance Service
Microsoft Office – Standard, Small Business
Software used in creating documents, files and reports
Version 2003, acquired on October 31, 2005; version 2007, acquired on November 20, 2008; perpetual license
Microsoft Windows Server – Enterprise and Standard Edition
Operating system used in servers
Version 2003, acquired on October 31, 2005; additional licenses acquired on August 31, 2006, September 30 & October 31, 2007, March 31 & October 31, 2008; Version2008, acquired on February 27, 2009
Power Builder Software development tool Version 11.1, acquired on November 18, 2008
Kaspersky Anti-Virus Anti-virus system Open space security, acquired in May 2009
Support agreement is renewed every year
Adobe Acrobat Reader File management Version 8 and 9 Hitachi Data Protection
Suite (Commvault) Backup and replication software
Version 7, 8 and 9, acquired in 2009
Support agreement is renewed every year
GlobalSign SSL Certificate
Organization Wildcard SSL for *.iremit-inc.com
Acquired in 2012 Support agreement is renewed every year
GlobalSign SSL Certificate
Organization Wildcard SSL for *.myiremit-idol.com
Acquired in 2013 Support agreement is renewed every year
VMware vCenter Server 5 Standard for vSphere 5
Provides a centralized and extensible platform for managing Virtual Infrastructure
Acquired in 2011 Support agreement is renewed every year
VMware vSphere 5 Standard
Virtualization platform for building cloud infrastructures
Acquired in 2011 Support agreement is renewed every year
ApexSQL Software SQL Database management and development tools
Acquired in 2012 Support agreement is renewed every year
Xmind – Professional Mind Map Software
Professional and Powerful Mind Mapping Tool
Acquired in 2013
Need for Any Government Approval of Principal Products or Services There are no new products or services that require government approval.
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Effect of Existing Probable Governmental Regulations on the Business The normal operation of the Company is not adversely affected by any existing
governmental regulation nor is it expected that any probable governmental regulation would have an adverse effect on the operations of the Company.
Other than the reportorial requirements of the Securities and Exchange Commission (SEC), the Bangko Sentral ng Pilipinas (BSP), the Anti-Money Laundering Council (AMLC), the Bureau of Internal Revenue (BIR), and the local permits that are required by the City Government of Pasig, there is no other governmental permit required of the Company for its operation in the Philippines. The Company is in full compliance with the requirements of the SEC, BSP, AMLC, BIR and of the local government.
The Company’s subsidiaries, affiliates, and associates are registered or have acquired
licenses or authorization to operate the remittance or money transfer business in their respective host countries or territories. The said registrations, licenses, or authorizations are either valid until revoked or subject to periodic renewal subject to compliance with all applicable laws, rules, and regulations.
The deployment of overseas Filipino workers (OFWs) is subject to the strict monitoring or the limitation on the entry of foreign workers entering specific countries by their respective governments. Governments of some concerned nations have implemented strict monitoring measures on the number and types of foreign workers entering their respective countries because some of their citizens have incessantly blamed their inability to obtain jobs on the increasing competition from foreign migrant workers.
In 2011, the Philippine Overseas Employment Administration (POEA) banned the
deployment of Filipino workers to 41 countries that have failed to ensure the protection of migrant workers. These countries are deemed as not having laws for the protection of migrant workers. The deployment ban is in pursuit of the provisions of Section 3 of Republic Act 10022, otherwise known as “The Migrant Workers and Overseas Filipinos Act of 1995” as amended, which states, thus: “The State shall likewise allow the deployment of overseas Filipino workers to companies and contractors with international operations: Provided, that they are compliant with standards, conditions and requirements, as embodied in the employment contracts prescribed by the POEA and in accordance with internationally-accepted standards.” In March 2013, the POEA lifted the ban on the deployment of Filipino workers to Iraq, Yemen, and Eritrea.
By nature, the Philippine remittance industry relies heavily on the number of OFWs residing or working abroad, and sending money to the Philippines. Any decline in the growth of OFW deployment as a result of regulations or restrictions imposed by host countries or the ban of deployment to certain countries may hamper the overall growth of the remittance industry.
Amount Spent on Research and Development Activities There is no material amount spent for research and development. Costs and Effects of Compliance with Environmental Laws The Company has not been subject to any penalties or legal or regulatory action and
has not incurred any costs for non-compliance with environmental laws or regulations of the Philippines.
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Employees The Company has 375 employees including those directly employed by subsidiaries as
of December 31, 2013. These consist of 71 officers and 304 non-officers as follows: No. of Employees (December 31, 2013)
Officers Non-Officers Total
Parent Company 43 153 196 Subsidiaries 28 151 179 Total 71 304 375
The Company projects no new additional personnel in 2014.
No. of Employees (December 31, 2013) Type Parent Company Subsidiaries Total Administrative 31 9 40 Finance 58 3 61 Information Technology 20 - 20 Sales and Marketing 13 21 34 Service and Operations 74 146 220 Total 196 179 375 None of the Company, its subsidiaries, affiliates and associate companies is subject to
any collective bargaining agreement (CBA). There has been no strike, nor any attempt to protest against the Company, its subsidiaries and associates during their entire histories.
The supplemental benefits that the Company grants to its employees include medical,
dental and hospitalization benefits, per diem and travel allowances, group insurance, birthday bonuses, meal and overtime allowances, and bereavement assistance. Employees are also entitled to vacation, sick, maternity, paternity, and emergency leaves. The Company provides the health and medical insurance benefits to its employees through an independent health maintenance organization (HMO).
Retirement Benefits
The Group has a funded, noncontributory defined benefit retirement plan, administered by a trustee, covering substantially all of its regular employees. Under this retirement plan, all qualified employees are entitled to cash benefits after satisfying age and service requirements. Under Republic Act No. 7641, also known as Retirement Pay Law, its applicability is effective on the fifth year of an employee’s tenure, provided that the employee is 60 years old but not more than 65 years old. The cost of providing benefits is determined using the projected unit credit method which reflects services rendered by employees to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Post-employment expenses include current service cost, past service cost, and net interest on defined benefit asset/liability. Re-measurements which include cumulative actuarial gains and losses, return on plan assets, and changes in the effects of asset ceiling are recognized directly in other comprehensive income and is also presented under equity in the consolidated statements of financial position. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognized immediately in profit or loss. The determination of the retirement obligation and cost and other retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include among others, discount rates, mortality of plan members and rates of compensation increase. In accordance with PFRS, actual results that differ from the assumptions and the effects of changes in actuarial assumptions are recognized directly as re-measurements in other comprehensive income. While the Parent
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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 pension and other retirement obligations. Based on the actuarial report as of December 31, 2013 and 2012, the Group has recognized retirement asset amounting to PHP 11.18 million and PHP 2.21 million, respectively. Retirement expense recognized for the years ended December 31, 2013, 2012 and 2011 amounted to PHP 4.53 million, PHP 3.99 million and P4.92 million, respectively. Re-measurements recognized as of December 31, 2013 and 2012 amounted to PHP 7.21 million gain and PHP 0.79 million loss, respectively. The Group has a single retirement plan under the regulatory framework of the Philippines. Under R.A. 7641, the Group is legally obliged to provide a minimum retirement pay for qualified employees upon retirement. The framework, however, does not have a minimum funding requirement. The Group’s benefit plan is aligned with this framework. The Group’s funded defined benefit plans for qualifying employees are entitled to retirement benefits equal to one hundred percent (100%) of Plan Salary for every year of credited service of a retirement age of sixty (60) and are not adjusted for inflationary increases once in payment, or provide adjustment for inflationary increases. The payments for the funded benefits are from trustee-administered funds. Plan assets held by trustee are governed by a trust agreement between the latter and the Group. Responsibility for governance of the plan assets including investment decision lies with the Board of Trustees while plan governance and contribution schedule lies with the Group. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at January 30, 2014 by E.M. Zalamea. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method. In accordance with the provisions of the Bureau of Internal Revenue Regulations No. 1-68, it is required that a formal Retirement Plan be Trusteed; that there must be no discrimination in benefits; that forfeitures shall be retained in the Retirement Fund and be used as soon as possible to reduce future contributions; and that no part of the corpus or income of the Retirement Fund shall be used for, or diverted to, any purpose other than for the exclusive benefit of the Plan members. The Retirement Plan Trustee, as appointed by the Group in the Trust Agreement executed between the Group and the duly appointed Retirement Plan Trustee, is responsible for the general administration of the Retirement Plan and the Management of the Retirement Fund. The Retirement Plan Trustee may seek the advice of counsel and appoint an investment manager or managers to manage the Retirement Fund, an independent accountant to audit the Fund and an actuary to value the Retirement Fund. There was no plan amendment, curtailments, or settlement recognized in the financial years ended December 31, 2013 and 2012. The principal assumptions used for the purposes of the actuarial valuations were as follows:
2013 2012
Discount rate 6.05% 5.86% Expected rate of salary increase 8.00% 8.00%
Assumptions regarding future mortality are set based on actuarial advice in accordance
with published statistics and experience. These assumptions translate into an average life expectancy in years for a pensioner retiring at age sixty (60).
2013 2012
Retiring at the end of the reporting period % Male 9 - Female 8 - Retiring 20 years after the reporting period Male 64 76 Female 94 95
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The sensitivity analysis of the defined benefit obligation of changes in the weighted
principal assumption is as follows:
Impact on Defined Benefit Obligation Change in
Assumption Increase in
Assumption Decrease in Assumption
Discount rate 100 bps Increase by 8.5% Decrease by 9.4% Salary increase rate 100 bps Increase by 8.2% Decrease by 7.6%
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the consolidated statements of financial position. Assumed life expectancy is not applicable because under the Group’s Retirement Plan, benefits are paid in full in a lump sum upon retirement or separation of an employee.
Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:
2013 2012 2011
Current service cost PHP 4,696,837 PHP 4,149,490 PHP 4,618,548 Net interest on the retirement assets (liabilities) (160,576) (158,848) 310,352 PHP 4,536,261 PHP 3,990,642 PHP 4,928,900
Amounts included in the consolidated statement of financial position arising from the entity’s obligation with respect to its defined benefit plans are as follows:
2013 2012 Present value of defined benefit obligation PHP 20,389,143 PHP 27,959,017 Fair value of plan assets 33,470,764 30,303,714 Surplus (13,081,621) (2,344,697) Effect of the asset ceiling 1,893,404 129,793 PHP (11,188,217) PHP (2,214,904)
Movements in the present value of the defined benefit obligation in both years were as follows:
2013 2012 Balance, January 1 PHP 27,959,017 PHP 22,524,680 Current service cost 4,696,837 4,149,490 Interest cost 1,638,398 1,509,154 Benefits paid from plans (1,011,975) - Actuarial (gains) / loss: Changes in financial assumptions (349,015) 2,361,420 Changes in demographic assumptions (9,585,110) - Experience (2,959,009) (2,585,727) Balance, December 31 PHP 20,389,143 PHP 27,959,017
Movements in the fair value of the plan assets in both years were as follows:
2013 2012 Balance, January 1 PHP 30,303,714 PHP 21,816,324 Interest income 1,806,580 1,668,002 Employer’s contributions 2,062,569 6,158,445 Re-measurements 309,876 660,943 Benefits paid from plan assets (1,011,975) -
Balance, December 31 PHP 33,470,764 PHP 30,303,714
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Plan assets as of December 31, 2013 are comprised as follows:
Quoted Unquoted Total Percentage Equity securities: Preferred shares PHP 5,994,395 PHP - PHP 5,994,395 18% Available-for-sale 5,791,706 - 5,791,706 17% Government securities Available-for-sale 1,872,969 - 1,872,969 6% Unquoted debt securities classified as loans - 1,017,732 1,017,732 3% Held to maturity - 999,286 999,286 3% Other securities and Debt instrument: Available-for-sale 12,846,878 - 12,846,878 38% Unquoted debt securities classified as loans - 1,998,132 1,998,132 6% Held to maturity - 1,852,880 1,852,880 6% Bank deposits - 736,162 736,162 2% Other assets - 360,624 360,624 1% PHP 26,505,948 PHP 6,964,816 PHP 33,470,764 100%
Plan assets as of December 31, 2012 are comprised as follows:
Quoted Unquoted Total Percentage Equity securities: Preferred shares PHP 4,995,561 PHP - PHP 4,995,561 17% Available-for-sale 2,669,798 - 2,669,798 9% Government securities Available-for-sale 999,112 - 999,112 3% Unquoted debt securities classified as loans - 1,021,592 1,021,592 3% Held to maturity - 1,001,566 1,001,566 3% Other securities and Debt instrument: Available-for-sale 8,785,388 - 8,785,388 29% Held to maturity - 4,079,676 4,079,676 14% Bank deposits - 6,396,558 6,396,558 21% Other assets - 354,463 354,463 1% PHP 17,449,859 PHP 12,853,855 PHP 30,303,714 100%
Expected maturity analysis of undiscounted benefit obligation is as follows::
Less than one year
More than two years but within
five years More than five years Total
Undiscounted amount - - PHP 18,235,479 PHP 18,235,479
The Group ensures that the investment positions are managed within an Asset-Liability Matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the benefit schemes. Within this framework, the Group’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The Group actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. The group has not changed the processes used to manage its risks from previous periods. The Group does not use derivatives to manage its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large portion of assets in the current year consists of equities and bonds, although the Group also invests in property, bonds, cash and investment (hedge) funds. The Group believes that equities offer the best returns over the long term with an acceptable level of risk. The majority of equities are in a locally diversified portfolio of blue chip entities.
The Group is exposed to a number of risks through its defined benefit plan. The most
significant risks are detailed below: Volatility Risk The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit. The plan hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. As the plan mature, the Group intends to reduce the level of investment risk by investing more in assets that better match the liabilities. The assets are composed of government securities, equity securities, other securities and debt instruments, bank deposits and other assets. The government bonds represent investments in Philippine government securities only. However, the Group believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of continuing equity investment is an appropriate element of the group’s long term strategy to manage the plans efficiently.
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Investment Risk Investment risk is the risk that investments on plan assets will result to a lower return than originally expected. This risk emanates on the premise that funded defined benefit plans should arranged on the basis of Asset-Liabilities Matching principle. Thus, plan assets and future contributions are invested in such a way that it will generate return to cover-up future payments of defined benefit obligations and interest costs. These plan activities exposes the Group to sensitivity in investment risks that would result to lower plan assets and higher defined benefit obligations should the performance of the investment portfolio falls below the inflation rate, interest rates and other economic conditions. Investment risk is mitigated through proper investment planning and concentration of investments. As of December 31, 2013 and 2012, plan assets are concentrated on government securities, equity securities and other securities, respectively, which account ranges from 74% and 79% in 2013 and 2012, respectively, of the total plan assets. Inflation Risk Inflation risk is the risk that the equivalent purchasing power of the plan assets will not be able to match the recorded liabilities. Payments for the defined benefit plan of the Group are not link to inflation, thus, the exposure to this risk is immaterial. To cope-up with inflation, the plan has designed a versatile policy of having an appropriate mix of debt and equity securities in the portfolio of investments during high inflation rates. Life Expectancy Risk The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities. This risk is closely associated with inflation risk wherein inflationary increases result in higher sensitivity to changes in life expectancy. The plan posses a minimal exposure to this risk since inflationary risk, which is directly associated to the plan’s sensitivity to life expectancy risk, is immaterial.
The Group does not expect to make a contribution to its retirement fund in the next
financial year as it has accumulated plan assets with a fair value of PHP 33.5 million for future application. The subsidiaries are not required to establish and accrue retirement obligation.
The Company continues to invest in its employees through various training programs
strategically focused on the Company’s core values, team development, selling skills, customer service and product knowledge.
Transaction with Retirement Fund The Group’s retirement benefit fund is maintained with Sterling Bank of Asia, Inc. (A
Savings Bank), an affiliate due to common stockholders, as trustee. The carrying amounts and fair values of the fund amounted to PHP 33.47 million and PHP 30.30 million as of December 31, 2013 and 2012, respectively. The funds were invested in private equity securities, deposits in banks and government debt securities. In 2013 and 2012, the Group made contributions to the fund amounting to PHP 2.06 million and PHP 6.15 million, respectively Private equity securities includes PHP 808,100 of the Group’s own equity securities bought back from resigned employees who held such securities, under the special stock purchase program. Such transaction was authorized by the Board of Directors of I-Remit Inc. through its SSP program. The government debt securities consist of peso denominated and USD denominated securities. The Peso-denominated Government Securities of the I-Remit Retirement Fund were purchased from accredited counterparties of SBA-Trust Group. These counterparties are Banks and Investment Houses allowed to trade government securities. Existing Peso GS accounts are all Tax exempt and are currently lodged under the Tax Exempt RoSS Account of SBA-Trust Group with the Bureau of the Treasury (BTr).
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The USD denominated debt securities are currently lodged with the Philippine Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s accredited counterparties that are allowed to trade government securities. Please see also Item 12. Certain Relationships and Related Party Transactions
Risk Management
The Company’s goal in risk management is to ensure that it understands, measures, and
monitors the various risks that arise from its business activities, implements the appropriate risk mitigation measures, and that it adheres strictly to its established risk management policies. Periodic strategic planning sessions and meetings by top management, and the various management and Board committees are being held to identify, assess, and formulate contingency plans to manage or minimize the adverse impact of risks to the Company. The Board of Directors performs an oversight role for the Company’s risk management activities and approves I-Remit’s risk management policies and any revisions thereto. The Chief Executive Officer, as the overall risk executive, oversees the risk management activities of the Company and ensures that the responsibilities for managing risk are clear, the levels of risk taken on by the Company are acceptable, and that an effective control environment is in place. Risk management is an integral part of the day-to-day business management of the Company and each operating unit has a responsibility to measure, manage, and control the risks associated with the functions they perform. The Company’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, fair value interest rate risk, and price risk), credit risk, liquidity risk, and operational risk. The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the auditors on a continuing basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Market Risk Management Market risks (consisting of foreign currency risk, fair value interest rate risk, and price risk), are the risks that the value of a currency position or financial instrument will fluctuate due to changes in foreign exchange rates and interest rates. The Company also has various financial assets and liabilities such as accounts receivable from agents abroad and accounts payable to beneficiaries in the Philippines, which arise directly from its remittance operations. I-Remit provides money transfer and remittance services in 23 countries and territories. The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Foreign exchange risk is managed through the structure of the business and an active risk management process. In the substantial majority of its transactions, I-Remit settles with its foreign offices, associates, and agents in their respective local currencies, and requires the foreign offices, associates, and agents to obtain settlement currency to provide to recipients. The Company’s policy prohibits speculating in foreign currencies. It is the Company’s policy that all foreign currencies that arise as a result of remittance transactions be traded daily with bank partners and only at prevailing foreign exchange rates in the market. The daily closing foreign exchange rates are used as the guiding rates in providing wholesale rates to subsidiaries, associates, affiliates, tie-ups, and agents. The trading proceeds are used to pay out bank loans and other obligations of the Company. The foreign currency exposure that exists is limited by
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the fact that the majority of transactions are settled within a day or two (2) days after these are initiated. In addition, in money transfer transactions involving different currencies received and paid in Philippine pesos, I-Remit generates revenue by receiving a foreign currency spread based on the difference between buying currencies at wholesale exchange rates and providing the currencies to its customers at retail exchange rates. This spread provides some protection against currency fluctuations. The Company’s exposure to interest rate risk arises from its cash deposits in banks which are subject to variable interest rates. The interest rate risk arising from deposits with banks is managed by means of effective investment planning and analysis, and maximizing investment opportunities in various local banks and financial institutions. The Company’s exposure to interest rate risk is minimal. The Company is also exposed to equity price risks arising from equity investments. The Company’s exposure to equity price risk is minimal. Credit Risk Management Credit risks are risks that arise when a counter-party in a transaction may potentially default and cause a possible loss to the Company. The nature of its business exposes the Company to potential risk from difficulties in recovering transaction money from its foreign partners, including tie-ups and agents. Accounts receivable from foreign offices and agents arise as a result of its remittance operations in various countries. The Company has adopted a policy of dealing only with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Company uses other publicly-available financial information and its own trading records to rate its major counter-parties. The Company’s exposure and the credit ratings of its counter-parties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counter-parties. Credit exposure is also controlled by counter-party limits. In addition, the Company is applying the following credit policies to its tie-ups and agents: (i) enforcing a contract that incorporates a bond and requiring that the full amount of the transactions be credited to the Company bank account prior to the delivery of funds to the beneficiaries and in certain cases, requiring advance funding equivalent to the average daily remittance transactions to fulfill or deliver their remittance transactions; (ii) requiring settlement on the next banking day, otherwise, the fulfillment or delivery of remittance transactions will be placed on hold; (iii) evaluation of individual potential partners and agents’ credit worthiness, as well as a close looking into the other pertinent aspects of their businesses which assures the Company of the financial soundness of its partner firms; (iv) active monitoring of receivable balances. The Company’s receivables from agents and tie-ups have a high probability of collection which have turnovers ranging from one (1) to five (5) days. The other receivables which include advances to related parties have high probabilities of collection and are due in less than one (1) year. Liquidity Risk Management Liquidity risk is the risk that a firm will not be able to meet its current and future cash flow and cash needs, both expected and unexpected, without materially affecting its daily operations or overall financial condition. Liquidity risk management rests with the Board of Directors which has established an appropriate risk management framework for the management of the Company’s short-, medium-, and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecasts and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Operational Risk Management Operational risks are risks of losses resulting from inadequate or failed internal processes, people and systems or from external events, such as those resulting from fraud or defalcations from internal or external sources, or actual financial losses arising from failed processes, systems and procedures.
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The Company’s main goal in managing operational risk is to create and maintain an operating environment that ensures and protects the integrity of its financial resources, assets, transactions, records, and information resources. The Company attempts to mitigate operational risks by maintaining a comprehensive system of internal controls, establishing standard systems and procedures, implementing a system to monitor transactions, maintaining key back-up procedures, and undertaking regular contingency planning. The Company’s internal control system is intended to provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws, rules, and regulations. The internal control system is composed of policies, processes, systems, and activities to achieve these objectives. The internal control system consists of two major activities: (i) preventive control activities; and (ii) monitoring activities. Preventive control activities seek to prevent or deter undesirable acts from occurring. These are proactive controls, designed to prevent losses, errors, or omissions. These activities include segregation of duties and tasks, proper authorizations, rotation of duties, adequate documentation, or physical security measures over cash and other assets. Monitoring activities aim to detect undesirable acts that have already occurred. These provide evidence “after the fact” that a loss or error has occurred but do not actually prevent these from occurring. These activities consist of regular supervisory reviews of account activities, reports, and reconciliations; routine spot-checking of transactions, records, and reconciliations; variance analysis, including comparisons with budget and historical data; physical inventories; control self-assessment; and internal audit review of controls. Standard systems and procedures pertain to the prescribed manner of processing transactions, handling cash and other assets, maintaining records, and preparing reports. The Company has operating manuals detailing the procedures for the processing of its remittance transactions, the implementation of its various business processes, and the use of its information technology resources. These operating manuals undergo periodic reviews and revisions, if needed. Amendments to these manuals are implemented through circulars sent to all divisions and offices of the Company. Management endeavors to implement a control-conscious environment that also supports ethical values and sound business practices. Management is responsible for “setting the tone” and encouraging the highest levels of integrity and ethical behavior, as well as exhibiting leadership behavior that promotes responsibility and accountability. Independent reviews are regularly conducted by the Internal Audit Department to ensure that risk controls are in place and functioning effectively. The Internal Audit Department undertakes a comprehensive audit of all divisions and departments in accordance with a risk-based audit plan. It conceptualizes and recommends the implementation of an improved system of internal controls to minimize operational risks. The Audit Plan for each fiscal year is approved by the Audit Committee of the Board of Directors. These audits also include the area of information security that covers application systems, databases, networks, and operating systems. The results of internal audit activities are discussed with the Audit Committee and subsequently, submitted to the Board of Directors. Recognizing the importance of customer service in its operations, the Company has a Customer Support Team composed of a dedicated and highly-trained team of frontline support officers who assist the Company’s subsidiaries, associates, affiliates, tie-ups and agents, and the Company’s customers and their beneficiaries. The Company provides 24 x 7 customer service support and minimizes operational risks by ensuring accuracy and effectiveness in operations and in the delivery of services. The Company also has a Business Continuity Plan (BCP) that outlines the activities and the procedures to be undertaken in the event of abnormal or emergency conditions, or a disaster, to ensure that disruption to operations will be kept at a manageable level, financial losses will be minimized, the safety and security of employees, customers, and Company records will be maintained, and normal operations will be restored in the shortest time possible. I-Remit maintains a disaster recovery (DRP) site with Globe Telecom/Innove Communications in Makati City. The other risks identified that the Company is exposed to include regulatory risk, legal risk, and technology risk.
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Regulatory risk refers to the potential for the Company to suffer financial losses due to changes in the laws or monetary, tax or other governmental regulations of the Philippines or of another country where it has business operations. Losses may be in the form of regulatory sanctions for non-compliance, and in extreme cases, may involve not just mere loss in terms of reputation or financial penalties, but a revocation of the license, registration, or authorization to carry on its business activities. The Company’s Compliance Program, the implementation of which is overseen and coordinated by the Compliance Officer, is the primary control process for regulatory risk issues. The Compliance Officer is responsible for communicating and disseminating new rules and regulations to all concerned units, analyzing and addressing compliance issues, and reporting compliance findings to the Management Committee, Executive Committee or the Board of Directors. I-Remit’s subsidiaries, associates, affiliates, tie-ups and agents have and maintain all registrations or licenses and permits necessary to provide remittance and money transfer services in their host countries. Compliance officers are appointed in each of the Company’s foreign offices whose primary responsibility is to ensure compliance with all local laws, rules, regulations, and ordinances; and licensing, registration, and reporting requirements. The Company is considered a “covered institution” pursuant to the Anti-Money Laundering Act (AMLA) of 2001 (Republic Act 9160 as amended by Republic Acts 9194, 10167, and 10365). I-Remit, Inc. is registered as a remittance agent with the Bangko Sentral ng Pilipinas pursuant to BSP Circular No. 471, Series of 2005 issued on January 24, 2005, that prescribes the registration and standards for the operation of foreign exchange dealers, money changers, and remittance agents. On January 5, 2011, the BSP issued BSP Circular 706 Series of 2011 that prescribes updated anti-money laundering rules and regulations. The revised anti-money laundering rules and regulations were adopted by the Company in its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Compliance Manual that was approved by the Board of Directors on June 17, 2011. The manual includes policies and guidelines that cover areas such as the customer due diligence process (“Know Your Customer” rule), large cash transactions, record-keeping, suspicious transaction reporting, and training of employees. These policies and guidelines are also based on the revised Financial Action Task Force (FATF) 40 Recommendations. I-Remit requires its subsidiaries, associates, affiliates, and agents to validate the true identity of a customer based on official or other reliable identity documents or records before accepting a transaction. The Company exercises due diligence when dealing with customers, persons appointed to act on a customer’s behalf, and beneficial owners. A “beneficial owner, in relation to a customer of I-Remit, refers to the natural person who ultimately owns or controls a customer or the person on whose behalf a transaction is being conducted and includes the person who exercises ultimate effective control over a legal person. The Company and its subsidiaries, associates, and affiliates are also required to implement a risk-based approach in customer due diligence in which pre-determined criteria are used to assess potential money laundering and terrorism financing risks that will determine the proportionate measures and controls that will be applied to mitigate such risks. I-Remit applies enhanced due diligence measures when customers are assessed to be “high risk.” These measures include: (i) requiring additional documentary evidence of identity; (ii) verifying the identity and background of a customer by referring to publicly-available information or verifying information provided with the relevant government bodies; (iii) establishing, by appropriate and reasonable means, the source of income or wealth, and the source of funds of the customer or the beneficial owner; (iv) determining the banks where an individual customer has maintained or is maintaining accounts and obtaining proof thereof such as bank statements or passbooks; (v) obtaining the approval of top management for a transaction where the customer or a beneficial owner is a politically-exposed person or subsequently becomes a politically-exposed person. The Company, on an ongoing basis, also monitors and continually assesses the transaction patterns of its customers and adjusts or makes changes to the risk classification or the level of due diligence applied on its customers when the situation warrants the same to manage money laundering or terrorism financing risks.
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I-Remit checks each remittance transaction with the lists of specially-designated nationals or blocked persons, and lists of terrorists, terrorist organizations, or persons associated with terrorists or terrorist organizations. These lists are: (i) Office of Foreign Assets Control (OFAC) of the US Department of the Treasury (Specially Designated Nationals and Blocked Persons List); (ii) Office of the Superintendent of Financial Institutions (OSFI) of Canada (Consolidated List of Names Subject to the Regulations Establishing a List of Entities Made Under Subsection 83.05[1] of the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism or the United Nations Al-Qaida and Taliban Regulations); (iii) European Union (EU) (Consolidated List of Persons, Groups and Entities Subject to EU Financial Sanctions); (iv) United Nations Security Council Consolidated List Established and Maintained by the 1267 Committee with respect to Al Qaida, and the Taliban, and other individuals, groups, undertakings and entities associated with them; (v) Israel Ministry of Defense Declaration of Terrorist Organizations, Unlawful Associations and Confiscation Orders; and, (vi) Australia Department of Foreign Affairs and Trade (DFAT) Consolidated List. The Company is required to submit reports on “covered” transactions and “suspicious” transactions to the Anti-Money Laundering Council. Covered transactions involve single or multiple transactions in cash or other monetary instruments in excess of PHP 500,000 within one (1) banking day. Suspicious transactions are transactions that may involve money laundering or terrorism financing or attempts to circumvent or avoid any reporting requirement. The BSP requires all registered remittance agents to maintain accurate and meaningful originator information on funds transferred or remitted by requiring the sender or remitter to fill-out and sign an application form, which shall contain minimum data and information, such as the complete name and of the remitter, permanent address, nationality, amount and currency to be remitted and source of funds for individuals. All records of transactions are required to be maintained and stored for five (5) years from the date of a transaction unless a longer period is required by the relevant regulator in a host country or a transaction or group of transactions becomes the subject of an investigation for money laundering or terrorism financing. I-Remit’s foreign subsidiaries, associates, and agents are required to comply with the anti-money laundering regulations of their host countries to ensure that funds being sent are of lawful and verifiable origin. Among others, remitters are required to present documents such as proofs of identification, residency, and financial origin as required by local regulations of the host countries. Remitted amounts are also subject to the prescribed transmission limits of the monetary authorities or the financial intelligence units of each host country. Cash or non-cash transactions that amount to or exceed certain threshold amounts are also reported. I-Remit and its subsidiaries, associates, affiliates, and agents are licensed or registered with the various financial and central monetary authorities and/or the financial intelligence units of their host countries. These include the Australian Transaction Reports and Analysis Centre (AUSTRAC); Financial Transactions and Reports Analysis Centre (FINTRAC) of Canada; the Commissioner of Customs and Excise (Hong Kong); the Financial Conduct Authority, Prudential Regulatory Authority and Her Majesty’s Customs and Excise (United Kingdom); the Financial Services Agency (Japan); the Companies Office (New Zealand); the Monetary Authority of Singapore; and the Central Bank of China (Taiwan). Regulatory risk also includes the strict monitoring or the limitation on the entry of foreign workers entering specific countries by their respective governments. Governments of some concerned nations have implemented strict monitoring measures on the number and types of foreign workers entering their respective countries because some of their citizens have incessantly blamed their inability to obtain jobs on the increasing competition from foreign migrant workers. By nature, the Philippine remittance industry relies heavily on the number of OFWs residing or working abroad, and sending money to the Philippines. Any decline in the growth of OFW deployment as a result of regulations or restrictions imposed by host countries may hamper the overall growth of the remittance industry.
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Legal risk pertains to the potential for loss arising from the uncertainty of the outcome of legal proceedings or potential legal proceedings. It also refers to the uncertainty of the enforceability of the obligations of the Company’s business partners, agents, tie-ups, and suppliers. Changes in law and regulations could adversely affect the Company. Legal risk is higher in new areas of business where the law is often untested by the courts. The Company seeks to minimize its legal risks by using stringent legal documentation, employing procedures designed to ensure that transactions are properly authorized and documented, and by constantly consulting its external legal counsels locally and in the countries it operates in. Technology risk refers to the risk that customers may suffer service disruptions, or that customers or the Company may incur losses arising from system defects such as failures, faults, or incompleteness in computer operations, or illegal or unauthorized use of computer systems. The delivery of financial services is characterized by rapid technological change, changing customer preferences, the introduction of new products and services, and the emergence of new standards. The Company realizes the potential losses arising from the breakdown or malfunction of computer systems as well as from the misuse of its infrastructure and networks. The Company gives importance to computer security and has a comprehensive information technology security policy. The Company identifies and evaluates technology risks by setting specific standards that need to be complied with and implementing measures based on the evaluation to manage these risks. The Company ensures the implementation of an ongoing project management and control system in development and quality control. The Company defines and maintains information security policies that follow industry standards, such as the use of firewalls, secure socket layer (SSL) encryption, anti-virus measures, and user-defined access controls. The Company’s major application systems have multiple security features to protect the integrity of applications and data. Access to I-Remit’s Foreign Remittance System via the Internet has several security restrictions including firewalls, secure socket layers using 128-bit encryption, digital certificates and password identification. All remittance transactions are encrypted with hash totals / test keys to ensure authenticity of transaction details. Most of the information technology assets including critical servers are located in a centralized data center at the Company’s headquarters, which are subject to appropriate physical and logical access controls. Likewise, the systems are designed to be redundant to ensure continuity of business operations in the event of unforeseen events or disasters. The system also has parallel servers concurrently operating and connected to different ISP providers to ensure non-disruption of its operations. Supporting the Company’s business processes is a dynamically-scaled network of virtualized servers and storage farms. The network is secured from malicious attacks, virus intrusions, and security threats internally and externally through the use of a multi-layered network set-up consisting of VLANs, virtual private networks, security appliances, firewalls, anti-spam software, WAN router, Internet link load balancer, and anti-virus systems. The company has a state-of-the-art backup and replication protocol that runs every night while a more concentrated database replication process transpires between the company’s headquarters and the disaster recovery site in real time. A part of the Company’s strategy is to continuously upgrade its technology infrastructure to ensure that it is able to manage the risks associated with technology or any unforeseen natural or man-made risks that may hamper the continuity of its operations.
Other Information
No bankruptcy, receivership or similar proceedings have been instituted against the
Company and its subsidiaries, affiliates or associates. Furthermore, no material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business has taken place.
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Item 2. Properties (B) Description of Property I-Remit and its subsidiaries do not own any real estate properties. I-Remit is leasing its headquarters
located at the 26th and 27th floors of the Discovery Centre, a condominium office and residential building, located at 25 ADB Avenue, Ortigas Center, Pasig City from Oakridge Properties, Inc.
I-Remit and Oakridge Properties, Inc. are related to each other by virtue of JTKC Equities, Inc.’s
ownership of The Discovery Leisure Company, Inc. which in turn owns Oakridge Properties, Inc. JTKC Equities, Inc. is one of the Company’s major shareholders. Directors Ben C. Tiu (2001 to date), John Y. Tiu, Jr. (2002 to date) and Ruben C. Tiu (2007 to date) are brothers. Director Ben C. Tiu is Chairman and President of JTKC Equities, Inc. (1993 to date). Director John Y. Tiu, Jr. is a Director and Treasurer of JTKC Equities, Inc. (2002 to date), a Director and President of The Discovery Leisure Company, Inc. (2012 to date) and a Director of Oakridge Properties, Inc. (2003 to date). Director Ruben C. Tiu is a Director and President of Oakridge Properties, Inc. (1996 to date), The Discovery Leisure Company, Inc. (2000 to date) and a Director and Executive Vice-President of JTKC Equities, Inc. (1993 to date).
The lease on the unit at the 26th floor of the Discovery Centre (Unit 2603), consisting of an area of
199.70 square meters, is covered by an operating lease agreement with a term of two (2) years, commencing on December 1, 2011 and ending on November 30, 2013. The lease has been renewed for another two (2) years, commencing on December 1, 2013 and ending on November 30, 2015. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. I-Remit, as lessee, pays Oakridge Properties, Inc. every month the amount of PHP798.60 per square meter or its equivalent monthly rental of PHP159,480.42.
The lease on the units at the 26th floor of the Discovery Centre (Units 2604 and 2605) with an
aggregate useable floor area of 278.00 square meters and 273.80 square meters, is covered by an operating lease agreement with a term of two (2) years, commencing on December 1, 2011 and expiring on November 30, 2013. The lease has been renewed for another two (2) years, commencing on December 1, 2013 and expiring on November 30, 2015. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. I-Remit, as lessee, paid Oakridge Properties, Inc. every month the amount of PHP827.21 per square meter or its equivalent monthly rental of PHP456,454.48.
The lease on the unit at the 27th floor of the Discovery Centre (Unit 2703) with an aggregate useable
floor area of 199.70 square meters, is covered by an operating lease agreement with a term of two (2) years, which commenced on February 1, 2011 and expires on January 31, 2013, with a 10 percent escalation on the aggregate current monthly rental on the 13th month of the lease term. The lease has been renewed for a term of thirty-two (32) months, which commenced on February 1, 2013 and expires on October 31, 2015, with a 10 percent escalation on the aggregate current monthly rental on the 13th month of the lease term. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. I-Remit, as lessee, paid Oakridge Properties, Inc. every month the amount of PHP671.00 per square meter or its equivalent monthly rental of PHP133,998.70.
The lease on the units at the 27th floor of the Discovery Centre (Units 2704 and 2705) with an
aggregate useable floor area of 278.00 square meters and 273.80 square meters, is covered by an operating lease agreement with a term of three (3) years, commencing on October 15, 2012 and expiring on October 14, 2015, with a 10% escalation on the aggregate current monthly rental on the 13th month and 25th month of the lease term. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. At the start of the lease, I-Remit, as lessee, paid Oakridge Properties, Inc. every month the amount of PHP658.85 per square meter or its equivalent monthly rental of PHP363,553.43.
The above monthly rentals with respect to the lease contracts with Oakridge Properties, Inc. exclude
charges for air-conditioning and electricity or generator set during brown-out, water, and other charges such as association dues, parking fees, overtime pay of janitors and technicians which are borne by I-Remit.
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Contract Period
Unit & Location Address Area (sq m)
Current Rent per Month
exclusive of VAT (PHP)
Term (years) Start End
Unit 2603, 26/F Discovery Centre
25 ADB Avenue, Ortigas Center, Pasig City 199.70 159,480.42 2 Dec. 1,
2011 Nov. 30,
2013 Unit 2603, 26/F
Discovery Centre 25 ADB Avenue, Ortigas Center, Pasig City 199.70 159,480.42 2 Dec. 1,
2013 Nov. 30,
2015 Units 2604 & 2605,
26/F Discovery Centre
25 ADB Avenue, Ortigas Center, Pasig City 551.80 456,454.48 2 Dec. 1,
2011 Nov. 30,
2013
Units 2604 & 2605, 26/F Discovery Centre
25 ADB Avenue, Ortigas Center, Pasig City 551.80 456,454.48 2 Dec. 1,
2013 Nov. 30,
2015
Unit 2703, 27/F Discovery Centre
25 ADB Avenue, Ortigas Center, Pasig City 199.70 133,998.70 2 Feb. 1,
2011 Jan. 31,
2013 Unit 2703, 27/F
Discovery Centre 25 ADB Avenue, Ortigas Center, Pasig City 199.70 133,998.70 32 months Feb. 1,
2013 Oct. 31,
2015 Units 2704 & 2705,
27/F Discovery Centre
25 ADB Avenue, Ortigas Center, Pasig City 551.80 363,553.43 3 Oct. 15,
2012 Oct. 14,
2015
Rent expense pertaining to the above leased office spaces by the Parent Company, from Oakridge
Properties, Inc. amounted to PHP 13.88 million in 2013, PHP 11.42 million in 2012, and PHP 9.24 million in 2011.
I-Remit has office sharing arrangement with Surewell Equities Pte. Ltd. in Singapore, a subsidiary of
Surewell Equities, Inc., a stockholder of I-Remit, for the use of an office space in Singapore under a sub lease agreement. Mr. Bansan C. Choa, Chairman and Chief Executive Officer of I-Remit, is Chairman of Surewell Equities, Inc.
I-Remit’s subsidiaries have their respective operating lease agreements for their office spaces. The
lease contracts are for periods ranging from 1 to 10 years and may be renewed under the terms and conditions mutually agreed upon by the subsidiaries and the lessors.
The Group’s rent expense includes operating lease agreements entered into by the subsidiaries for
the use of its office spaces. Rent expense of the Group amounted to PHP 63.35 million, PHP 59.29 million, and PHP 53.50 million in 2013, 2012, and 2011, respectively. PHP 3.91 million of the total rent expense in 2011 pertains to rent expense of the discontinued operations of Italy. The Group does not expect any purchase of significant properties in the next twelve (12) months.
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Item 3. Legal Proceedings (C) Legal Proceedings The Parent Company is not involved in nor are any of its properties subject to, any material legal
proceeding that could potentially affect its operations and financial capabilities.
Item 4. Submission of Matters to a Vote of Security Holders Except for matters taken up during the annual meeting of stockholders, there were no matters
submitted to a vote of security holders during the period covered by this report.
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PART II. OPERATIONAL AND FINANCIAL INFORMATION Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters (A) Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters (1) Market Information The common shares of the Parent Company are traded in the Philippine Stock Exchange
(PSE). Quarter-end stock price ranges for 2011, 2012, 2013 and first quarter 2014 are as follows:
Quarter Ending Date High Low Close Mar. 31, 2011 PHP 3.67 PHP 3.00 PHP 3.10 Jun. 30, 2011 PHP 3.26 PHP 2.80 PHP 3.00 Sep. 30, 2011 PHP 3.26 PHP 1.91 PHP 2.25 Dec. 31, 2011 PHP 2.50 PHP 2.00 PHP 2.45 Mar. 31, 2012 PHP 2.89 PHP 2.00 PHP 2.60 Jun. 30, 2012 PHP 2.79 PHP 2.16 PHP 2.77 Sep. 30, 2012 PHP 3.25 PHP 2.04 PHP 2.92 Dec. 31, 2012 PHP 3.07 PHP 2.60 PHP 2.79 Mar. 31, 2013 PHP 3.00 PHP 2.68 PHP 2.90 Jun. 30, 2013 PHP 2.98 PHP 2.50 PHP 2.88 Sep. 30, 2013 PHP 2.98 PHP 2.60 PHP 2.71 Dec. 31, 2013 PHP 2.98 PHP 2.50 PHP 2.86 Mar. 31, 2014 PHP 2.85 PHP 2.50 PHP 2.69
The stock prices of the Company’s common shares as of the latest practicable trading date,
i.e., April 14, 2014, were: PHP 2.68 (High); PHP 2.68 (Low); PHP 2.68 (Close).
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(2) Holders There were twenty-one (21) common shareholders of record as of December 31, 2013.
Common shares amounted to 617,725,800* as of December 31, 2013. * Inclusive of 4,289,678 common shares purchased by the Company under its stock buy-back
program.
The top twenty-one (21) common shareholders as of December 31, 2013, the number of shares held and the percentage of total shares held by each are as follows:
Name Citizenship Total Shares Percentage 1 PCD Nominee Corporation - Filipino Filipino * 228,347,410 36.96582 2 Star Equities Inc. Filipino 180,308,109 29.18902 3 Surewell Equities, Inc. Filipino 138,907,659 22.48694 4 JTKC Equities, Inc. Filipino 49,429,298 8.00182 5 JPSA Global Services Co. Filipino 19,349,022 3.13230 6 PCD Nominee Corporation – Non-Filipino Foreign 1,108,390 0.17943 7 Alba, Willy S. Filipino 90,749 0.01469 8 Quality Investments & Securities Corp. Filipino 83,454 0.01351 8 Lim, Ernesto B. Filipino 73,114 0.01184 9 Lim, Nieves Q. &/or Charis Honeylet Q. Lim Filipino 10,312 0.00167 10 GTS Insurance Brokers Inc. Filipino 5,173 0.00084 11 Cruz, Napoleon D. Sr. and/or Luisa I. Cruz Filipino 3,094 0.00050 12 Ona, Edgardo V. Filipino 2,268 0.00037 13 Soriano, Victor Martin J. Filipino 2,062 0.00033 14 Hapi Iloilo Corporation Filipino 1,034 0.00017 16 M. J. Soriano Trading, Inc. Filipino 1,034 0.00017 17 Dela Cruz, Yolanda M. or Dela Cruz, Emilio M. Filipino 1,031 0.00017 18 Navarro, Rodel Sy Filipino 1,031 0.00017 19 Sanvictores, Julius Victor Emmanuel D. Filipino 1,031 0.00017 20 Au, Owen Nathaniel S. ITF: Li Marcus Au Filipino 412 0.00007 21 Gaw, Gilbert C. Filipino 113 0.00002 Total ** 617,725,800 100.00000 * Inclusive of 82,137,070 lodged common shares held by JTKC Equities, Inc., thus, its total
shareholdings is 131,566,368 representing 21.29851% ownership, and 5,382,546 lodged common shares held by Surewell Equities, Inc., thus, its total shareholdings is 144,290,205 representing 23.35829% ownership. ** Inclusive of 4,289,678 common shares purchased by the Company under its stock buy-back program.
As required by the Amended Rule on Minimum Public Ownership of The Philippine Stock Exchange, Inc., Article XVIII, Section 3. (e), the level of the Company’s public float is 22.34694%% as of December 31, 2013.
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There were twenty-one (21) common shareholders of record as of March 31, 2014. Common
shares amounted to 617,725,800* as of March 31, 2014. * Inclusive of 4,589,678 common shares purchased by the Company under its stock buy-back
program.
The top twenty-one (21) common shareholders as of March 31, 2014, the number of shares held and the percentage of total shares held by each are as follows:
Name Citizenship Total Shares Percentage 1 PCD Nominee Corporation - Filipino Filipino * 228,347,410 36.96582 2 Star Equities Inc. Filipino 180,308,109 29.18902 3 Surewell Equities, Inc. Filipino 138,907,659 22.48694 4 JTKC Equities, Inc. Filipino 49,429,298 8.00182 5 JPSA Global Services Co. Filipino 19,349,022 3.13230 6 PCD Nominee Corporation – Non-Filipino Foreign 1,108,390 0.17943 7 Alba, Willy S. Filipino 90,749 0.01469 8 Quality Investments & Securities Corp. Filipino 83,454 0.01351 8 Lim, Ernesto B. Filipino 73,114 0.01184 9 Lim, Nieves Q. &/or Charis Honeylet Q. Lim Filipino 10,312 0.00167 10 GTS Insurance Brokers Inc. Filipino 5,173 0.00084 11 Cruz, Napoleon D. Sr. and/or Luisa I. Cruz Filipino 3,094 0.00050 12 Ona, Edgardo V. Filipino 2,268 0.00037 13 Soriano, Victor Martin J. Filipino 2,062 0.00033 14 Hapi Iloilo Corporation Filipino 1,034 0.00017 16 M. J. Soriano Trading, Inc. Filipino 1,034 0.00017 17 Dela Cruz, Yolanda M. or Dela Cruz, Emilio M. Filipino 1,031 0.00017 18 Navarro, Rodel Sy Filipino 1,031 0.00017 19 Sanvictores, Julius Victor Emmanuel D. Filipino 1,031 0.00017 20 Au, Owen Nathaniel S. ITF: Li Marcus Au Filipino 412 0.00007 21 Gaw, Gilbert C. Filipino 113 0.00002 Total ** 617,725,800 100.00000 * Inclusive of 82,137,070 lodged common shares held by JTKC Equities, Inc., thus, its total
shareholdings is 131,566,368 representing 21.29851% ownership, and 5,382,546 lodged common shares held by Surewell Equities, Inc., thus, its total shareholdings is 144,290,205 representing 23.35829% ownership. ** Inclusive of 4,589,678 common shares purchased by the Company under its stock buy-back program.
As required by the Amended Rule on Minimum Public Ownership of The Philippine Stock Exchange, Inc., Article XVIII, Section 3. (e), the level of the Company’s public float is 22.30894%% as of March 31, 2014.
(3) Dividends The Company’s Board of Directors is authorized to declare dividends. Pursuant to Sections 43
and 143 of the Corporation Code of the Philippines, Section 5 of the Securities Regulation Code, and SEC Memorandum Circular No. 11, Series of 2008 (Guidelines on the Determination of Retained Earnings Available for Dividend Declaration), dividends may be declared and paid out of the unrestricted retained earnings which shall be payable in cash, property, or stock to all stockholders on the basis of outstanding stock held by them, as often and at such time as the Board of Directors may determine and in accordance with law and applicable rules and regulations. Cash and property dividend declarations do not require any further approval from the Company’s shareholders. Any stock dividend declaration requires the approval of shareholders holding at least two-thirds of the Company’s total outstanding capital stock.
Pursuant to existing Philippine regulations, cash dividends declared by the Company must
have a record date of not less than ten (10) days or more than thirty (30) days from the date the cash dividends are declared.
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With respect to stock dividends, the record date is to be not less than ten (10) days or more
than thirty (30) days from the shareholders’ approval, provided however, that the set record date is not to be less than ten (10) training days from receipt of the Philippine Stock Exchange of the notice of declaration of stock dividend. If no record date is set, under the Securities and Exchange Commission rules, the record date will be deemed fixed at fifteen (15) days from the date of stock dividend declaration. In the event that a stock dividend is declared in connection with an increase in authorized capital stock, the corresponding record date is to be fixed by the Securities and Exchange Commission.
The Board of Directors of the Company declared stock dividends worth PHP 43,000,000.00 to
its shareholders on July 20, 2007, which declaration was subsequently ratified and confirmed by the Company’s shareholders during their annual meeting held on the same day, immediately after the Board meeting. The Record Date was set on August 19, 2007, thirty (30) days from the date of approval of the Company’s shareholders.
With the listing of the Company’s shares in the Philippine Stock Exchange, the Company
intends to maintain an annual dividend payment ratio for its shares of up to 20 percent of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations and the absence of circumstances which may restrict the payment of dividends. Circumstances which may restrict the payment of dividends include, but are not limited to, situations when the Company undertakes major projects and developments requiring substantial cash expenditures or when it is restricted from paying dividends by its loan covenants. The Company’s Board, may, at any time, modify such dividend payout ratio depending upon the results of operations and future projects and plans of the Company.
On April 25, 2008, the Board of Directors of the Parent Company declared cash dividend
amounting to PHP 21,990,504 or PHP 0.0391 per share, payable to shareholders-of-record as of May 15, 2008, which declaration was subsequently ratified and confirmed by the Parent Company’ shareholders during their annual meeting held on July 31, 2008. It was paid and distributed to the shareholders on June 10, 2008.
On March 23, 2009, the Board of Directors of the Parent Company declared cash dividend
amounting to PHP 26,012,383, representing 20 percent of the Company’s consolidated net income for the period ended December 31, 2008 or PHP 0.0471 per share, payable to shareholders-of-record as of April 7, 2009. It was paid and distributed to the shareholders on May 6, 2009.
On March 19, 2010, the Board of Directors of the Parent Company declared cash dividend
amounting to PHP 26,603,533, representing 20 percent of the Company’s consolidated net income for the period ended December 31, 2009 or PHP 0.0481 per share, payable to shareholders-of-record as of April 8, 2010. It was paid and distributed to the shareholders on May 5, 2010. On June 17, 2011, the Company’s Board of Directors authorized the declaration of Fifty-Five Million, Three Hundred Eight Thousand, Eight Hundred (55,308,800) common shares stock dividend, with a par value of one peso (PHP 1.00) per share, out of the unrestricted retained earnings of the Company as of December 31, 2010. The stock dividend, which is equivalent to 10% of the issued and outstanding shares of the Company, was taken from its unissued capital stock. Pursuant to the provisions of the Corporation Code, the aforementioned stock dividend declaration was approved by the stockholders during their annual meeting on July 29, 2011. On September 6, 2011, the PSE approved the listing of additional 55,308,800 common shares to cover said stock dividend declaration. On September 08, 2011, the stock dividend was paid to all of the Company’s stockholders of record as of August 15, 2011. On June 22, 2012, the Board of Directors of the Parent Company authorized the declaration of cash dividend of PHP0.1995 per share or PHP 119,980,856, payable to all of the Parent Company’s shareholders-of-record as of July 12, 2012. It was paid and distributed to the shareholders on August 7, 2012. On July 19, 2013, the Company‘s Board of Directors approved the declaration of the following dividends with record date of August 16, 2013:
• Cash Dividend of PHP 0.0422 per share or PHP 25,031,512.35, payable to all of the Parent Company’s shareholders-of-record as of August 16, 2013. It was paid and distributed to the shareholders on September 11, 2013.
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• Property dividend in the form of 20,586,985 shares of stock of the Company (net of fractional shares) lodged as Treasury Shares (from the buyback programs) as of December 31, 2012, payable to all of the Parent Company’s shareholders-of-record as of August 16, 2013. The Property Dividend Ratio is 0.034707107885, which was computed as 20,587,000 shares divided by 593,163,800 outstanding common shares. The shareholders, during the July 19, 2013 annual stockholders’ meeting, likewise approved the declaration of the said property dividend. It was paid and distributed to the shareholders on October 14, 2013, after the issuance of the Certificate of Filing the Notice of Property Dividend Declaration on October 7, 2013 by the Securities and Exchange Commission, net of the applicable withholding tax of certain individual shareholders which the Company paid to the BIR in their behalf in the form of 314,663 common shares or PHP 925,119.35. Accordingly, the said 314,663 shares are still included in the Company’s treasury shares.
Other than statutory limitations, there are no restrictions that prevent the Parent Company from
paying dividends on common equity.
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(4) Recent Sales of Unregistered or Exempt Securities, Including Recent Issuances of Securities
Constituting an Exempt Transaction On August 21, 2007, the Company distributed stock dividends worth PHP 43,000,000.00 to the
stockholders of record as of August 19, 2007. The stock dividend declaration was approved by the Company’s Board of Directors on July 20,
2007 and was subsequently approved and ratified by the stockholders owning at least two-thirds (2/3) of the total outstanding capital stock of the Company on the same date of July 20, 2007 during the annual stockholders’ meeting. The issuance of the shares as stock dividend was exempt from the Securities Regulation Code (SRC) registration requirements pursuant to Section 10.1 (d). The shares were issued at the original par value of one hundred pesos (PHP 100.00) per share.
Thereafter, with the approval of the Securities and Exchange Commission (“SEC”) on August
22, 2007 of the Company’s application to increase its authorized capital stock to one billion pesos (PHP 1,000,000,000.00) and to reduce its par value per share to one peso (P1.00), the Company, on August 23, 2007, issued a total of two hundred ninety seven million (297,000,000) common shares at the reduced par value of one peso (PHP 1.00) out of the increase in the Company’s authorized capital stock to the following: (1) JPSA Global Services Company; (2) JTKC Equities, Inc.; (3) Star Equities Inc.; (4) Surewell Equities, Inc.
Since no expense was incurred, or no commission, compensation or remuneration was paid or
given in connection with the issuance of the shares, the same was exempt from the SRC registration requirements pursuant to Section 10.1 (i).
Subsequent to the increase in authorized capital stock, the Company issued a total of
15,000,000 shares out of its unissued and authorized capital stock on September 20, 2007 to its Directors, key Officers, Employees, Consultants and Resource Persons under the Special Stock Purchase Plan (“SSPP”).
The foregoing issuance of the 15,000,000 new shares under the SSPP was the subject of an
application for exemption from registration of the shares under Section 10.2 of the SRC, which application was granted by the SEC on September 13, 2007. Notwithstanding the aforesaid confirmation by the Commission of the exempt status of the SSPP shares, the Commission nonetheless required the Corporation to include the SSPP shares among the shares of I-Remit which were registered with the Commission prior to the conduct of its Initial Public Offering in October 2007. The registration of the I-Remit shares, together with the SSPP shares, was rendered effective on 5 October 2007. All 15,000,000 shares were subscribed and purchased. The shares subject of the SSPP were sold at par value or PHP1.00 per share. Total share purchases amounting to PHP11.74 million were paid in full, while the difference totaling PHP3.26 million were paid by way of salary loan. Shares acquired through the SSPP are subject to a lock-up period of two (2) years from the date of issue which ended on September 19, 2009. No underwriter was engaged in connection with the foregoing share issuance.
The sale is further subject to the condition that should the officer or employee resign from the
Parent Company prior to the expiration of the lock-up period, the share purchased by such resigning employee or officer shall be purchased at cost by the Parent Company’s Retirement Fund for the benefit of the Parent Company’s retiring employees or officers. As of December 31, 2009, twenty-two (22) employees had resigned (seven in 2009, thirteen in 2008 and two in 2007) and their shares totaling to 808,100 (130,900 in 2009; 548,500 in 2008; and, 128,700 in 2007) were bought back by the Parent Company on behalf of the Retirement Fund. The total cost of the shares acquired amounting to PHP808,100 was recognized as treasury stock.
With the establishment of the I-Remit, Inc. Retirement Fund and after the expiration of the lock
up period on September 19, 2009, the Company transferred to the Retirement Fund on September 24, 2009 the 808,100 shares it has bought back from its resigned employees and officers upon reimbursement of the advances made by the Company in acquiring such shares on behalf of the Retirement Fund. With this transfer, the Company’s outstanding capital stock stood at 553,088,000 shares from 552,279,900 shares.
Except for the above issuances, the Company has not issued or sold new shares within the
past three (3) years which were not registered pursuant to the requirements of the Securities Regulation Code (“SRC”).
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Item 6. Management’s Discussion and Analysis or Plan of Operation (A) Management’s Discussion and Analysis (MD&A) or Plan of Operation (1) Plan of Operation The Company’s strategy is focused on making I-Remit a global brand and the preferred
provider of remittance or money transfer services. The key elements of the Company’s strategy are as follows: Utilizing technological advances in creating value for money for its customers;
Aggressive marketing of products and services to overseas Filipinos and other nationalities;
Implementing strategic alliances with financial institutions and money transfer operators in the Philippines and around the world;
Implementing technology solutions to streamline its business processes and minimize its operating costs.
The use of technology is interwoven in the company’s business strategy and operations. It
was the first remittance company to be registered with the Board of Investments as an information technology service firm in the field of IT services. I-Remit was also named as the Business Mirror Most Innovative Company in the Asia CEO Awards – Philippines 2011. At the heart of its operation is a robust Web-enabled proprietary front-office system known as the I-Remit Foreign Remittance System (IFS) which enables its offices, partners, tie-ups, and agents to conduct business with the Philippine office 24x7. The system was designed to handle various remittance choices: credit to bank account; door-to-door delivery; cash-pick up; or debit card reloading. The system also allows I-Remit to accept contributions and payments to SSS, Pag-IBIG, PhilHealth, real estate developers, insurance companies, etc. The IFS is also enabled to accept host-to-host transactions for virtually instantaneous crediting of beneficiary bank accounts maintained in selected banks in the Philippines. I-Remit’s IFS is linked with another proprietary system, the iRemit Local Remittance System (ILS) that allows transaction data to flow seamlessly from outlets abroad until final fulfillment of services. It allows transaction tracking for customers and immediate settlement reporting with the company’s counter-parties. I-Remit uses an aggregating engine that stores information in a data warehouse ready for data mining and analysis to allow it to serve its customers better. The emerging new players in the industry are composed mostly of technology-based companies that utilize the Internet in offering remittance services. Their services may be availed of through traditional browers or via Web-enabled mobile phones. To strengthen its online presence, I-Remit launched iDOL (I-Remit Direct Online) that targets the more computer-savvy netizen market who are more comfortable transacting through the web. I-Remit’s customers may access the facility through any Internet-enabled device providing them with the capability to remit money from anywhere, anytime. iDOL is currently available to I-Remit’s customers in Canada, the United Kingdom, and Japan. The Company intends to make iDOL available in other countries such as Australia, Hong Kong, Italy, New Zealand, and Taiwan. Supporting I-Remit’s highly-interconnected and seamless business solution is a dynamically-scaled network of virtualized servers and storage farms. The network is secured from malicious attacks, virus intrusions, and security threats internally and externally through the use of a multi-layered network set-up consisting of VLANs, virtual private networks, security appliances, firewalls, anti-spam software, WAN router, Internet link load balancer, and anti-virus systems. The company has a state-of-the-art backup and replication protocol that runs every night while a more concentrated database replication process transpires between the company’s headquarters and the disaster recovery site in real time. A part of the Company’s strategy is to continuously upgrade its technology infrastructure to ensure that it is able to manage the risks associated with technology or any unforeseen natural or man-made risks that may hamper the continuity of its operations.
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I-Remit implements aggressive marketing strategies in the countries it operates in. The Company is being positioned as having the widest range of remittance or money transfer services that fulfill the specific money transmission needs of its customers. I-Remit is also being positioned as the only Filipino service provider that can address the need of Filipino overseas workers for continuity of access to Philippine social service programs such as those of the SSS, Pag-IBIG, and PhilHealth. I-Remit’s pricing of its remittance services are always at par or even better than competition but with better levels of service and performance. I-Remit’s advantages over the competition are its superior service delivery systems and post-sale service capabilities. I-Remit’s products and services are promoted through several methods including participation in special events involving Filipino communities and sponsorship activities, print and broadcast advertisements, direct mail campaigns, and e-mail and social network promotional campaigns. I-Remit also continuously implements global and local marketing campaigns that are intended to promote customer loyalty. In pursuit of its vision, I-Remit is positioning itself to be a global player in the money transfer business by opening new remittance corridors and establishing partnerships with financial institutions all over the world. I-Remit has established partnerships with the Industrial and Commercial Bank of China for remittances bound to mainland China and with Bank Internasional Indonesia for remittances to Indonesia. The Company intends to expand its target market and offer its remittance services to other foreign workers in all the countries that it operates in. Recent official government estimates place the number of OFWs at around 10.489 million in 218 countries, territories, and jurisdictions around the world including those that are undocumented and the direct hires. I-Remit strives to establish partnerships or tie-ups in countries that have considerable number of Filipino workers particularly in countries where the market size does not economically justify establishing its own subsidiary or branch. The Company establishes partnerships with local money transfer firms that are authorized by regulatory bodies to conduct the remittance business in various countries. I-Remit’s subsidiary in London, IRemit Global Remittance Ltd. has acquired the status of an “authorized payment institution” from the Financial Conduct Authority of the United Kingdom under the European Payment Services Directive (PSD, 2007/64/EC) that provides the legal foundation for the creation of a Europe-wide single market for payment services, including money remittance. I-Remit’s subsidiary company has acquired the right to establish its presence and offer its services in any of the European Union and European Economic Area member states after proper notification of the regulatory authorities. In obtaining its authorization, I-Remit had passed a stringent examination process to ensure that it has sufficient capital resources, robust liquidity, sound governance practices, and adequate organizational, control, and IT security mechanisms. I-Remit has invoked its rights as a payment institution in the European Economic Area and established its presence in Vienna, Austria; Rome and Milan; and Frankfurt, Germany. Soon to follow are the countries of Ireland and The Netherlands. In addition, I-Remit also continuously engages the services of agents to augment the presence of its offices particularly in countries with large Filipino populations. I-Remit also continuously seeks to expand the breadth and depth of its fulfillment capabilities in the Philippines through its ever-growing network of partners consisting of universal banks, commercial banks, thrift banks, rural banks, pawnshops, remittance agents, and other BSP-supervised and regulated institutions. For many OFW households, remittances provide a considerable increase in income which in turn drives consumption and investment. The increase in disposable income of these households translates into improved standards of living as remittances find their way into investments in real estate and education, and in higher levels of consumption for food, clothing, and even luxury items. The spending patterns of OFWs and their families give rise to more opportunities for other remittance transactions. I-Remit has partnered with other companies such as Jollibee Foods Corporation, COL Financial Group, Inc., real estate developers, insurance companies, pre-need companies, and appliance distributors to expand the range of services it offers to OFWs. I-Remit’s plans include the expansion of its partnership portfolio to include schools and utility companies. I-Remit’s strategy includes the use of technology to streamline its business processes, improve its delivery capabilities, and minimize its operating costs. The Company’s continuously reviews its processes and identifies activities that may be automated. These include high-volume and highly-repetitive tasks that present opportunities for the Company to leverage on its technology capabilities and reduce costs. The Company is also in the process of identifying non-core business activities that may be outsourced.
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In conducting its business, I-Remit is fully aware that it must also contribute to the betterment of Filipino society. Its corporate social responsibility program is focused primarily on youth education. It is a constant contributor in sponsoring scholars of the Tuloy Aral project of the Overseas Workers’ Welfare Administration. It has also partnered with non-governmental organizations such as Synergeia and CBN Asia’s Operation Blessing. In cooperation with Synergeia, I-Remit provided assistance to grade one pupils of the P. Guevarra Elementary School in Tondo, Manila. The company’s employees also participated actively in tutoring sessions and other educational activities in the school. Likewise, in cooperation with CBN Asia and the 700 Club, I-Remit has provided assistance to the children of the Dumagat tribe in Rodriguez, Rizal by way of food, clothing, and school materials. The Company works closely with the Kabalikat ng Migranteng Pilipino, Inc. or KAMPI, and Kabalikat ng OFW, Inc., two non-governmental organization that extend financial, livelihood, and education assistance to families of OFWs. I-Remit also supports the Philippine embassies and consulates, the Philippine overseas labor offices, and Filipino communities and associations in its host countries to promote the welfare of overseas Filipinos, and if needed, to provide assistance to distressed OFWs.
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(2) Management’s Discussion and Analysis
2013 compared to 2012 I-Remit realized a consolidated net income of PHP 54.0 million in 2013, an increase of PHP 23.5 million or 77.1% over the consolidated net income of PHP 30.5 million in 2012. The consolidated net income in 2013 and 2012 were 6.7% and 4.0% of the 2013 and 2012 revenue, respectively. Revenues increased by PHP 31.2 million or 4.0% from PHP 771.6 million in 2012 to PHP 802.8 million in 2013 mainly due to the increase in delivery fees by PHP 21.4 million or 3.9% and increase in realized foreign exchange gains-net by PHP 5.4 million or 4.1% in 2013. The value of transactions declined by USD 17.3 million or -1.1% from USD 1.642 billion in 2012 to USD 1.625 billion in 2013 while the Philippine peso continued to depreciate against the U.S. dollar from an average peso-dollar exchange rate of PHP 42.23 in 2012 to PHP 42.45 in 2013. In December 2013, the average peso-dollar exchange rate was PHP 44.10 per dollar. The increase in delivery fees by PHP 21.4 million or 3.9% from PHP 554.6 million in 2012 to PHP 576.0 million in 2013 was mainly due to the increase in the number of transactions processed by the Company which grew by 5.8% from 3.085 million in 2012 to 3.262 million in 2013. Other fees increased by PHP 0.03 million or 4.0% from PHP 0.79 million in 2012 to PHP 0.82 million in 2013 due to increased number of amendments and retrievals recorded in 2013. Costs of services increased by PHP 5.1 million or 2.4% from PHP 209.9 million in 2012 to PHP 215.0 million in 2013. Total costs of services in 2013 and 2012 were 26.8% and 27.2% of the 2013 and 2012 revenue, respectively. This increase was mainly due to the increase in bank charges by PHP 7.94 million or 4.0% from PHP 196.75 million in 2012 to PHP 204.69 million in 2013 brought about by the continuous increase in Notify-to-pay transactions in 2013. This was partly offset by the decrease in delivery charges by PHP 2.87 million or -21.8% from PHP 13.17 million in 2012 to PHP 10.30 million in 2013 brought about by the reduction in the volume of door-to-door delivery transactions. Few more contracts for courier services were terminated in 2013. Net trading gains (losses) decreased by PHP 25.7 million or -146.1% from PHP 17.6 million in 2012 to PHP -8.1 million in 2013 due to losses realized by PSAGL on the sale of fixed income and equity securities in 2013 and unrealized losses recorded for the year-end valuation of unsold securities. Marked to market price of unsold income and equity securities declined significantly in 2013 by USD 0.04 from USD 0.99 to USD 0.95 per nominal value, thus resulting to net loss recognized in 2013 compared with the gain recognized in 2012. Other Income increased by PHP 13.94 million or 87.4% from PHP 15.95 million in 2012 to PHP29.89 million in 2013. Other income in 2013 and 2012 was 3.7% and 2.1% of the 2013 and 2012 revenue, respectively. No GST refund was recorded in 2013 as compared with 2012 wherein International Remittance (Canada) Limited (IRCL) and Worldwide Exchange Pty Ltd (WEPL) recognized a total of PHP 21.7 million refund of GST previously paid to the government of Canada and Australia, respectively. Both IRCL and WEPL are entities exempt from GST. Other income was contributed significantly by the unrealized FX gain booked by foreign offices and finance income earned by PSAGL on additional securities bought in 2013. Total operating expenses was higher by PHP 2.2 million or 0.4% from PHP 496.5 million in 2012 to PHP 498.7 million in 2013. Total other operating expenses in 2013 and 2012 were 62.1% and 64.3% of the 2013 and 2012 revenue, respectively. These were mainly on account of higher professional fees, transportation and travel, and rental expenses. Professional fees increased by PHP 13.9 million or 40.5% from PHP 34.4 million in 2012 to PHP 48.3 million in 2013 on account of higher cost recorded on outsourced client call handling services, accounting services and audit fees. Transportation and travel expenses increased by PHP 4.9 million or 45.2% from PHP 10.9 million in 2012 to PHP 15.8 million in 2013 is due to various business trips paid for by the Parent Company for the further development of global accounts. Rental expense increased by PHP 4.1 million or 6.8% from PHP 59.3 million in 2012 to PHP 63.4 million in 2013 due to the yearly escalation applied by lessors on rented office premises, increase on lease of storage areas, office equipment and two (2) new branch offices opened in Canada by International Remittance (Canada) Ltd. These increases were offset by the lower loss on write-off of assets, decrease in employee short-term benefits, business development, donations and contributions, communication, light and water. Loss on write-off of assets decreased by PHP 7.5 million or -74.5% from PHP 10.0 million in 2012 to PHP 2.6 million in 2013. Short-term employee benefits expenses decreased by PHP 7.3 million or -2.9% from PHP 253.3 million in 2012 to PHP 245.9 million in 2013. Unlike in 2012, no salary increase was budgeted to employees in 2013. Business development expenses decreased by PHP 5.0 million or -98.4% from PHP 5.1 million in 2012 to PHP 0.08 million in 2013. Donations and contributions
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decreased by PHP 2.6 million or -98.5% from PHP 2.6 million in 2012 to PHP 0.04 million in 2013 due to stricter policy implemented in paying solicitations from private and public entities. Communication, light and water decreased by PHP 2.1 million or -7.5% from PHP 28.1 million in 2012 to PHP 26.0 million in 2013 due to stricter policy implemented on utility bills. Interest expense decreased by PHP 13.5 million or -29.2% from PHP 46.1 million in 2012 to PHP 32.6 million 2013. Interest expense in 2013 and 2012 are -4.06% and -5.97% of the 2013 and 2012 revenue, respectively. Decrease in financial cost was the result of lower utilization level of bank credit lines. The annual interest rates on the Parent Company’s unsecured, short-term interest-bearing peso-denominated bank loans ranged from 5.00% to 7.125% in 2013 and 2012. The total assets of the Company increased by PHP 389.0 million or 14.6% to PHP 3.059 billion as of December 31, 2013 against PHP 2.670 billion as of December 31, 2012. Cash and cash equivalents decreased by PHP 118.8 million or -11.2% from PHP 1.062 billion in 2012 to PHP 0.943 billion in 2013. Trade and other receivables increased by PHP 456.9 million or 38.3% from PHP 1.192 billion in 2012 to PHP 1.649 billion in 2013 as remittance volume grew by 5.8% from 3.085 million transactions in 2012 to 3.262 million transactions in 2013. Trade and other receivables in 2013 and 2012 are 53.9% and 44.6% of the total assets in 2013 and 2012, respectively. Financial assets at fair value through profit or loss amounted to PHP 247.3 million at end-2013 against PHP 210.2 million at end-2012, increasing by PHP 37.1 million or 17.7%. Financial assets at fair value through profit or loss in 2013 and 2012 are 8.1% and 7.9% of the total assets in 2013 and 2012, respectively. These assets consist mainly of investments in debt securities (listed overseas) held for trading. Power Star Asia Group Limited (PSAGL) started investing on stocks in 2012. Prepayments and other current assets declined by PHP 1.6 million or -6.7% from PHP 23.9 million in 2012 to PHP 22.3 million in 2013 mainly due to prepaid capital expense booked in 2012 for the licensing requirement of K.K. I-Remit Japan (KKIJ) that was fully amortized in 2013. Prepayments and other current assets in 2013 and 2012 are 0.7% and 0.9% of the total assets in 2013 and 2012, respectively, The Company’s non-current assets increased by PHP 15.4 million or 8.5% from PHP 182.2 million at end-2012 to PHP 197.6 million at end-2013. Total non-current assets in 2013 and 2012 are 6.5% and 6.8% of the total assets in 2013 and 2012, respectively. The increase was contributed largely by the increase in retirement asset by PHP 8.97 million or 405.1% from PHP 2.2 million in end-2012 to PHP 11.2 million in end-2013 as a result of the latest actuarial valuation of the Parent Company's retirement fund based on the revised provisions of PAS 19. Retirement asset in 2013 and 2012 is 0.37% and 0.08% of the total non-current assets in 2013 and 2012, respectively. Additional acquisition of office furniture and equipment for newly opened branches of IRCL and KKIJ increased this year's capital expenditure by PHP 3.6 million or 15.2% from PHP 23.5 million in 2012 to PHP 27.1 million in 2013. Also, investments in associates increased by PHP 1.3 million or 25.6% from PHP 4.9 million in 2012 to PHP 6.2 million in 2013 which represents share on equity income from Hwa Kung Hong & Co., Ltd. Investment in IRemit Singapore Pte Ltd was derecognized by the Parent Company effective December 31, 2013. Investment in associate in 2013 and 2012 is 0.20% and 0.18% of the total non-current assets in 2013 and 2012, respectively. Property and equipment-net increased by PHP 3.6 million or 15.2% from PHP 23.5 million in end-2012 to PHP 27.1 million in end-2013. Property and equipment-net in 2013 and 2012 is 0.88% of the total non-current assets in 2013 and 2012. Deferred tax asset increased by PHP 3.8 million of 52.0% from PHP 7.2 million in end-2012 to PHP 11.0 million in end-2013 on account of higher accrual of expenses towards the end of December 31, 2013. Deferred tax asset in 2013 and 2012 is 0.36% and 0.27% of the total non-current assets in 2013 and 2012, respectively. These increases were partly offset by the decreases in intangibles assets-net and other non-current assets. Intangible assets-net decreased by PHP 0.8 million or -0.71% to PHP 112.1 million in 2013 from PHP 112.9 million in 2012 due to the amortization of software licenses. Decrease in other non-current assets by PHP 1.3 million or -4.2% to PHP 30.1 million from PHP 31.4 million in 2012 is mainly due to collection of other accounts receivable. Intangible assets – net are 3.67% and 4.23% while other non-current assets are 0.98% and 1.18% of the total non-current assets in 2013 and 2012, respectively. Total liabilities increased by PHP 336.7 million or 23.1% from PHP 1.455 billion at end-2012 to PHP 1.792 billion at end-2013. Total liabilities in 2013 and 2012 are 58.6% and 54.5% of the total liabilities and equity in 2013 and 2012, respectively. Current liabilities increased by PHP 334.6 million or 23.0% from PHP 1.453 billion in 2012 to PHP 1.788 billion in 2013. Total current liabilities in 2013 and 2012 are 58.4% and 54.4% of the total liabilities and equity in 2013 and 2012, respectively. Beneficiaries and other payables increased by PHP 264.5 million or 50.9% from PHP 519.8 million in 2012 to PHP 784.3 million in 2013. Beneficiaries and other payables in 2013 and 2012 are 25.6% and 19.5% of the total liabilities and equity in 2013 and 2012, respectively. These are mainly due to additional channels opened in 2013 for the delivery of remittances to beneficiaries. Interest-bearing loans increased by PHP 63.0 million or 6.8% from PHP 925.0 million in end-2012 to PHP 988.0 million in end-2013. Interest-bearing loans in end-2013 and end-2012 are 32.3% and 34.6% of the total liabilities and equity in end-2013 and end-2012, respectively. These are mainly due to additional bank
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loans toward end-2013 secured by the Parent Company to facilitate the fulfillment of remittances on holidays in December 2013. Income tax payable increased by PHP 7.15 million or 397.0% from PHP 1.80 million in end-2012 to PHP 8.95 million in end-2013. Income tax payable in end-2013 and end-2012 are 0.29% and 0.07% of the total liabilities and equity in end-2013 and end-2012, respectively. The increase in income tax payable is the result of higher revenue posted in 2013. Non-current liabilities increased by PHP 2.0 million or 150.2% from PHP 1.4 million in 2012 to PHP 3.4 million in 2013, which in end-2013 and end-2012 are to 0.11% and 0.05% total liabilities and equity in end-2013 and end-2012, respectively. The increase in non-current liabilities is attributable to the increase in deferred tax liabilities. The Company’s stockholders’ equity as of December 31, 2013 stood at PHP 1.267 billion, higher by PHP 52.3 million or 4.3% against the end-2012 level of PHP 1.215 billion. Total equity in 2013 and 2012 are 41.4% and 45.5% of the total liabilities and equity in 2013 and 2012, respectively. Retained Earnings decreased by PHP 40.2 million or -12.8%, from PHP 313.6 million in end-2012 to PHP 273.4 million in end-2013 and are 8.9% and 11.7% of the total liabilities and equity as of December 31, 2013 and December 31, 2012, respectively. Cumulative translation adjustment’s negative balance decreased by PHP 27.7 million or -74.7% from -PHP 37.1 million in 2012 to -PHP 9.4 million in 2013. Treasury stock decreased by PHP 56.8 million or -82.1% from -PHP 69.2 million in 2012 to -PHP 12.4 million in 2013. The decrease in Treasury stock in 2013 represents property dividend distributed, net of withholding tax in the form of shares, of 20,272,322 shares out of the treasury shares available as at December 31, 2012, partly offset by the buy-back of 3,975,000 shares. Treasury stock in 2013 and 2012 are -0.41% and -2.59% of the total liabilities and equity in 2013 and 2012, respectively. Below are the comparative key performance indicators of the Company (Parent Company and subsidiaries):
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income* over average stockholders’ equity during the period
4% 2%
Return on Assets (ROA)
Net income* over average total assets during the period 2% 1%
Earnings per Share (EPS)
Net income* over average number of outstanding shares PHP 0.09 PHP 0.05
Sales Growth Total transaction value in USD in present year over previous year -1% 22%
Gross Income Revenue less total cost of services (PHP millions) 587.9 561.7
Current ratio Total current assets over total current liabilities 1.60 1.71
Solvency ratio Net income plus depreciation over total liabilities 0.04 0.03
Solvency ratio Total assets over total liabilities 1.71 1.84
Solvency ratio Total stockholders' equity over total liabilities 0.71 0.84
Debt-to equity ratio Total liabilities over total stockholders’ equity 1.41 1.20
Asset-to-equity ratio Total assets over total stockholders’ equity 2.41 2.20
Interest rate coverage ratio
Earnings before interest and taxes over interest expense 3.44 2.16
* Net Income attributable to equity holders of the Parent Company and Minority Interest. EPS computed using Net Income attributable to equity holders of the Parent Company for the year ended December 31, 2013 and for the year ended December 31, 2012 are P 0.09 and P 0.05, respectively.
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Below are the comparative key performance indicators of the Company’s subsidiaries:
International Remittance (Canada) Ltd.
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-6% -2%
Return on Assets (ROA)
Net income over average total assets during the period -2% -1%
Earnings per Share (EPS)
Net income over average number of outstanding shares -5.02 -2.30
Sales Growth Total transaction value in USD in present year over previous year 12% 6%
Gross Income Revenue less total cost of services (PHP millions) 103.2 96.8
Lucky Star Management Limited
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-162% -103%
Return on Assets (ROA)
Net income over average total assets during the period -15% -27%
Earnings per Share (EPS)
Net income over average number of outstanding shares -12.37 -31.22
Sales Growth Total transaction value in USD in present year over previous year 12% -5%
Gross Income Revenue less total cost of services (PHP millions) 11.3 9.9
IRemit Global Remittance Limited
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-3574% 968%
Return on Assets (ROA)
Net income over average total assets during the period -2% -13%
Earnings per Share (EPS)
Net income over average number of outstanding shares -16.13 -50.71
Sales Growth Total transaction value in USD in present year over previous year -5% 43%
Gross Income Revenue less total cost of services (PHP millions) 87.0 72.8
I-Remit Australia Pty Ltd
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
3.1% 0.4%
Return on Assets (ROA)
Net income over average total assets during the period 1.4% 0.2%
Earnings per Share (EPS)
Net income over average number of outstanding shares 60,330.36 8,210.03
Sales Growth Total transaction value in USD in present year over previous year - -
Gross Income Revenue less total cost of services (PHP millions) 0.5 0.2
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Worldwide Exchange Pty Ltd
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-36% 12%
Return on Assets (ROA)
Net income over average total assets during the period -4% 1%
Earnings per Share (EPS)
Net income over average number of outstanding shares -15.76 6.01
Sales Growth Total transaction value in USD in present year over previous year -9% 22%
Gross Income Revenue less total cost of services (PHP millions) 35.5 38.0
I-Remit New Zealand Limited
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
10% 26%
Return on Assets (ROA)
Net income over average total assets during the period -10% -22%
Earnings per Share (EPS)
Net income over average number of outstanding shares -1,306.69 -2,690.78
Sales Growth Total transaction value in USD in present year over previous year 23% 30%
Gross Income Revenue less total cost of services (PHP millions) 7.0 3.8
IREMIT Remittance Consulting GmbH
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
27% -1,831%
Return on Assets (ROA)
Net income over average total assets during the period -24% -47%
Earnings per Share (EPS)
Net income over average number of outstanding shares -47.37 -304.77
Sales Growth Total transaction value in USD in present year over previous year -79% -78%
Gross Income Revenue less total cost of services (PHP millions) 0.3 1.3
Power Star Asia Group Limited
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
14% 25%
Return on Assets (ROA)
Net income over average total assets during the period 14% 25%
Earnings per Share (EPS)
Net income over average number of outstanding shares 49.85 72.72
Sales Growth Total transaction value in USD in present year over previous year - -
Gross Income Revenue less total cost of services (PHP millions) 54.5 52.6
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K.K. I-Remit Japan
Performance Indicator Definition Dec. 31, 2013 Dec. 31, 2012
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
71% 342%
Return on Assets (ROA)
Net income over average total assets during the period -57% -141%
Earnings per Share (EPS)
Net income over average number of outstanding shares -121,072.44 -153,538.62
Sales Growth Total transaction value in USD in present year over previous year 552% -
Gross Income Revenue less total cost of services (PHP millions) 5.1 1.5
2012 compared to 2011 I-Remit realized a consolidated net income of PHP 30.5 million in 2012, a decrease of PHP 105.5 million or -77.6% over the consolidated net income of PHP 136.1 million in 2011. The consolidated net income in 2012 and 2011 were 4.0% and 17.3% of the 2012 and 2011 revenue, respectively. Revenues decreased by PHP 16.2 million or -2.1% from PHP 787.9 million in 2011 to PHP 771.6 million in 2012 mainly due to the decrease in realized foreign exchange gains. The value of transactions grew by USD 300.1 million or 23.0% from USD 1.342 billion in 2011 to USD 1.642 billion in 2012. Adversely, however, generated income from the trading of foreign currencies went down by PHP 58.0 million or -21.1% from PHP 274.2 million in 2011 to PHP 216.2 million in 2012 as the Philippine peso continued to appreciate against the U.S. dollar. The average peso-dollar exchange rate was PHP 43.31 in 2011 against PHP 42.23 in 2012, a gain of 2.5% or PHP 1.08 per dollar. In December 2012, the average peso-dollar exchange rate was PHP 41.01 per dollar. The Company’s revenue from delivery fees increased by PHP 41.3 million or 8.0% from PHP 513.3 million in 2011 to PHP 554.6 million in 2012 mainly due to the increase in the number of transactions processed by the Company which grew by 10.4% from 2.795 million in 2011 to 3.085 million in 2012. Other fees increased by PHP 0.43 million or 123.6% from PHP 0.35 million in 2011 to PHP 0.78 million in 2012 due to increased number of amendments and retrievals recorded in 2012. Costs of services increased by PHP 10.5 million or 5.3% from PHP 199.4 million in 2011 to PHP 209.9 million in 2012. Total costs of services in 2012 and 2011 were 27.2% and 25.3% of the 2012 and 2011 revenue, respectively. These were mainly due to the increase in bank charges by PHP 12.4 million or 6.7% from PHP 184.4 million in 2011 to PHP 196.7 million in 2012 brought about by the huge increase in Notify-to-pay transactions in 2012. These were partly offset by the decrease in delivery charges by PHP 1.9 million or -12.5% from PHP 15.0 million in 2011 to PHP 13.1 million in 2012 brought about by the reduction in the volume of door-to-door delivery transactions. Net trading gains (losses) increased by PHP 20.6 million or 673.9% from –PHP 3.1 million in 2011 to PHP 17.6 million in 2012 due to the significant increase in the market value of debts and stock securities by Power Star Asia Group Limited (PSAGL) in 2012. PSAGL concluded the year with a realized gain of PHP 7.07 million from PHP 2.41 million in 2011 on the sale of its debts and stock securities and unrealized capital gains of PHP 10.52 million from an unrealized loss of PHP 5.47 million in 2011. Net trading gains (losses) in 2012 and 2011 were 2.3% and -0.4% of the 2012 and 2011 revenue, respectively. Other Income decreased by PHP 27.7 million or -63.5% from PHP 43.7 million in 2011 to PHP15.9 million in 2012. Other income in 2012 and 2011 was 2.1% and 5.5% of the 2012 and 2011 revenue, respectively. No GST refund was recorded in 2012 as compared with 2011 wherein International Remittance (Canada) Limited (IRCL) and Worldwide Exchange Pty Ltd (WEPL) recognized a total of PHP 21.7 million refund of GST previously paid to the government of Canada and Australia, respectively; both entities are exempt from paying GST. Unrealized foreign exchange gain (loss)-net was a net loss in 2012 because of the appreciation of the Philippine peso against the U.S. dollar. Additionally, towards the last quarter of 2012, the Parent Company outsourced the maintenance of call center agents servicing the requirements of its foreign subsidiary offices in Canada, the United Kingdom, Australia and New Zealand to Pacific Hub, Inc.
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Total operating expenses was higher by PHP 49.5 or 11.1% million from PHP 447.3 million in 2011 to PHP 496.8 million in 2012. Total other operating expenses in 2012 and 2011 were 64.4% and 56.8% of the 2012 and 2011 revenue, respectively. These were mainly on account of higher employee benefits, loss on write-off of assets, rental, communication, light and water, donations and contributions, business development, marketing, depreciation and amortization, insurance, and taxes and licenses. The increase in these expense items were related mainly to the Company’s expansion as it opened new offices in Japan, Canada and Italy. Employee benefits expenses increased by 20.6% from PHP 213.5 million in 2011 to PHP 257.6 million in 2012. Loss on write-off of assets increased by 378.7% from PHP 2.1 million in 2011 to PHP 10.0 million in 2012 mainly due to the write off of disallowed Input VAT claim at PHP 6.7 million, CASA account with Banco Filipino for bank deposits held after its closure on March 15, 2011, and discontinued investments at P1.8 million. Rental expenses increased by 10.8% from PHP 53.5 million in 2011 to PHP 59.3 million in 2012 due to the yearly escalation applied by lessors on rented office premises and additional three (3) branch offices opened by International Remittance (Canada) Ltd. and one (1) branch office by K.K. I-Remit Japan. Communication, light and water increased by PHP 4.5 million or 19.2% from PHP 23.5 million in 2011 to PHP 28.1 million in 2012 due to increase in number of remittance transactions in 2012 which required more communication between the company and its customers; along with this, electricity bills also increased as more transactions required extended processing time. Donations and contributions stood at PHP 2.6 million in 2012 as against none in 2011. Business development expenses increased by 71.5% from PHP 3.0 million in 2011 to PHP 5.1 million in 2012. Marketing expenses increased by PHP 1.6 million or 4.3% from PHP 36.3 million in 2011 to PHP 37.9 million in 2012 due to the various marketing promotions done during the year and payments for various marketing collaterals, sponsorships and advertisements. Depreciation and amortization increased by PHP 1.2 million or 10.0% from PHP 11.5 million in 2011 to PHP 12.7 million in 2012 due to the purchases of additional office and communication equipment, transportation equipment, furniture and fixtures, and additional leasehold improvements for the renovation of a new office space at Discovery Centre building in 2012. Insurance expense increased by 54.7% from PHP 2.0 million in 2011 to PHP 3.1 million in 2012. Taxes and licenses increased by 11.4% from PHP 9.0 million in 2011 to PHP 10.0 million in 2012. These increases were offset by the decrease in transportation and travel, photocopying and supplies, penalties and surcharges, entertainment, amusement and recreation, and professional fees. Transportation and travel decreased by PHP 12.9 million or -54.3% from PHP 23.8 million in 2011 to PHP 10.9 million in 2012, photocopying and supplies decreased by PHP 4.3 million or -29.5% from PHP 14.6 million in 2011 to PHP 10.3 million in 2012 while entertainment, amusement and recreation decreased by PHP 2.8 million or -47.0% from PHP 6.0 million in 2011 to PHP 3.2 million in 2012 due to continuous cost cutting measures implemented by the Parent Company in all its foreign subsidiaries. Professional fees decreased by PHP 1.8 million or -5.0% from PHP 36.2 million in 2011 to PHP 34.4 million in 2012. Interest income decreased by PHP 0.91 million or -6.6% from PHP 13.86 million in 2011 to PHP 12.95 million in 2012. Interest income in 2012 and 2011 are 1.7% and 1.8% of the 2012 and 2011 revenue, respectively. Interest expense increased by PHP 7.7 million or 20.2% from PHP 38.3 million in 2011 to PHP 46.1 million 2012. Interest expense in 2012 and 2011 are -5.97% and -4.86% of the 2012 and 2011 revenue, respectively. These are mainly due to higher amount of loans availed from bank partners during 2012 and higher annual interest rates on the Parent Company’s unsecured, short-term interest-bearing peso-denominated bank loans ranging from 5.00% to 7.125% in 2012 and 5.00% to 7.00% in 2011. In February 2010, IREMIT Remittance Consulting GmbH (formerly IREMIT EUROPE Remittance Consulting AG) started its remittance business in Italy. On April 28, 2011, IREMIT Remittance Consulting GmbH (IRCGmbH) stopped its money remittance operations in Rome and Milan in Italy in accordance with Article 75 of the Transitional and Final Provisions of Austrian Payment Services Act, which stipulated that credit institutions that have held authorizations pursuant to Article 1 paragraph 1 no 23 BWG, as amended by the Federal Act Federal Law Gazette No. 35/2003, prior to December 25, 2009, have only until April 30, 2011 to carry out their money remittance operations. In December 2011, IRCGmbH sold assets relating to its operations in Italy to a third party. These assets, with an aggregate carrying amount of PHP 7.29 million, were sold for a consideration of PHP 72.43 million thereby resulting to a gain on sale of PHP 65.14 million.
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The results of IRCGmbH’s operation in Italy follow:
2011 2010 Delivery fees PHP5,289,202 PHP7,486,658 Realized foreign exchange gains - net 1,006,867 673,204 6,296,069 8,159,862 Cost of services 596,703 3,749,195 Gross income 5,699,366 4,410,667 Other income - net 615,909 38,935 Operating expenses (45,024,921) (34,754,501) Loss from operations (PHP38,709,646) (PHP30,304,899) Gain on sale of assets 65,139,395 − Income (Loss) from discontinued operations PHP26,429,749 (PHP30,304,899)
The total assets of the Company increased by PHP 408.9 million or 18.0% to PHP 2.685 billion as of December 31, 2012 against PHP 2.276 billion as of December 31, 2011. Cash and cash equivalents increased by PHP 170.9 million or 19.2% from PHP 891.2 million in 2011 to PHP 1.062 billion in 2012. Financial assets at fair value through profit or loss amounted to PHP 210.2 million at end-2012 against PHP 125.2 million at end-2011, increasing by PHP 85.0 million or 67.8%. Financial assets at fair value through profit or loss in 2012 and 2011 are 7.8% and 5.5% of the total assets in 2012 and 2011, respectively. These assets consist mainly of investments in debt securities (listed overseas) held for trading. Power Star Asia Group Limited started investing on stocks in 2011. Increase in debt securities from PHP112.6 million in 2011 to PHP 189.9 million in 2012 was due to marked to market closing as of December 31, 2012 for the securities being held by Power Star Asia Group Limited. As of December 31, 2012 and 2011, the carrying amount includes net unrealized gain of PHP 8.4 million and loss of PHP 2.1 million, respectively. Increase in equity securities from PHP 12.6 million in 2011 to PHP 20.3 million in 2012 was due to the purchase of securities as a result of improving market. As of December 31, 2012 and 2011, the carrying amount includes net unrealized loss of PHP 2.1 million and gain of PHP 3.4 million, respectively. Trade and other receivables increased by PHP 161.1 million or 15.6% from PHP 1.031 billion in 2011 to PHP 1.192 billion in 2012 as remittance volume grew by 6% from PHP 142.93 million in December 2011 to PHP 148.06 million in December 2012 and receivables from IREMIT Remittance Consulting GmbH and Worldwide Exchange Pty Ltd were collected in 2012. Trade and other receivables in 2012 and 2011 are 44.4% and 45.3% of the total assets in 2012 and 2011, respectively. Prepayments and other current assets declined by PHP 5.0 million or -17.4% from PHP 28.9 million in 2011 to PHP 23.9 million in 2012 mainly due to prepaid capital expense from the licensing requirement of K.K. I-Remit Japan which was fully amortized in 2012. Prepayments and other current assets in 2012 and 2011 are 0.9% and 1.3% of the total assets in 2012 and 2011, respectively, The Company’s non-current assets declined by PHP 3.0 million or -1.5% from PHP 199.4 million at end-2011 to PHP 196.4 million at end-2012. Total non-current assets in 2012 and 2011 are 7.3% and 8.8% of the total assets in 2012 and 2011, respectively. The decrease in non-current assets is mainly due to Input VAT credits paid in 2008 which were collected in 2012 in the form of tax credit certificates amounting to PHP 2.97 million while disallowed claims amounting to PHP 4.49 million were written off in 2012. Also, investments in associates decreased by PHP 3.6 million of -15.5% from PHP 23.1 million in 2011 to PHP 19.5 million in 2012 which include equity income on IRemit Singapore Pte Ltd at PHP 0.5 million and Hwa Kung Hong & Co., Ltd. at PHP 0.8 million reduced by share on dividends declared by IRemit Singapore Pte Ltd in 2012 at PHP 4.9 million. These decreases were partly offset by the increases in property and equipment - net, deferred tax asset, and retirement asset. Property and equipment – net increased by PHP 4.3 million or 22.3% from PHP 19.2 million in end-2011 to PHP 23.5 million in end-2012 mainly due to renovation cost capitalized to leasehold improvements in 2012 when the Parent Company transferred its occupied office from the 25th to the 27th floor in Discovery Centre building in October 2012. Deferred tax asset increased to PHP 1.9 million of 38.4% from PHP 5.0 million in end-2011 to PHP 6.9 million in end-2012 on account of deferred tax assets on temporary differences recognized by the Parent Company and losses sustained by I-Remit New Zealand Limited in 2012. Retirement assets increased by PHP 1.9 million or 505.9% from PHP 0.4 million in end-2011 to PHP 2.2 million in end-2012 on account of excess contribution paid to the Retirement Fund of the Parent Company based on actuarial valuation conducted by E.M. Zalamea Actuarial Services, Inc. on January 28, 2013. Total liabilities increased by PHP 535.2 million or 58.6% from PHP 912.7 million at end-2011 to PHP 1.45 billion at end-2012. Total liabilities in 2012 and 2011 are 53.9% and 40.1% of the total liabilities and equity in 2012 and 2011, respectively. Current liabilities increased by PHP 534.0 million or 58.5% from PHP 912.6 million in 2011 to PHP 1.45 billion in 2012. Total current liabilities in 2012 and 2011 are 53.9% and 40.1% of the total liabilities and equity in 2012 and 2011, respectively. Beneficiaries and other payables increased by PHP 279.8 million or 116.5% from PHP 240.1 million in 2011 to PHP
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519.8 million in 2012. Beneficiaries and other payables in 2012 and 2011 are 19.4% and 10.5% of the total liabilities and equity in 2012 and 2011, respectively. These are mainly due to additional channels opened in 2012 for the delivery of remittances to beneficiaries. Interest-bearing loans increased by PHP 259.0 million or 38.9% from PHP 666.0 million in end-2011 to PHP 925.0 million in end-2012. Interest-bearing loans in end-2012 and end-2011 are 34.5% and 29.3% of the total liabilities and equity in end-2012 and end-2011, respectively. These are mainly due to additional bank loans towards end-2012 secured by the Parent Company to facilitate the fulfillment of remittances on holidays in December 2012. Income tax payable decreased by PHP 4.8 million or -72.6% from PHP 6.6 million in end-2011 to PHP 1.8 million in end-2012. Income tax payable in end-2012 and end-2011 are 0.1% and 0.3% of the total liabilities and equity in end-2012 and end-2011, respectively. The decrease in income tax payable was significantly influenced by the huge decrease on income sourced from the trading of foreign currencies. The Company’s stockholders’ equity as of December 31, 2012 stood at PHP 1.237 billion, lower by PHP 126.3 million or -9.3% against the end-2011 level of PHP 1.363 billion. Total equity in 2012 and 2011 are 46.1% and 59.9% of the total liabilities and equity in 2012 and 2011, respectively. Retained Earnings decreased by PHP 89.5 million or -21.1%, from PHP 424.0 million in end-2011 to PHP 334.5 million in end-2012. Cumulative translation adjustment decreased by PHP20.6 million or 124.8% from -PHP 16.5 million in 2011 to -PHP 37.1 million in 2012. Treasury stock increased by PHP 16.2 million or 30.6% from -PHP 53.0 million in 2011 to -PHP 69.2 million in 2012. Treasury stock in 2012 and 2011 are -2.6% and -2.3% of the total liabilities and equity in 2012 and 2011, respectively. The increase in Treasury stock in 2012 represents buy-back of 5,714,000 shares. Below are the comparative key performance indicators of the Company (Parent Company and subsidiaries):
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income* over average stockholders’ equity during the period
2% 10%
Return on Assets (ROA)
Net income* over average total assets during the period 1% 5%
Earnings per Share (EPS)
Net income* over average number of outstanding shares PHP 0.05 PHP 0.22
Sales Growth Total transaction value in USD in present year over previous year 22% 11%
Gross Income Revenue less total cost of services (PHP millions) 561.7 588.4
Current ratio Total current assets over total current liabilities 1.71 2.27
Solvency ratio Net income plus depreciation over total liabilities 0.03 0.16
Solvency ratio Total assets over total liabilities 1.84 2.46
Solvency ratio Total stockholders' equity over total liabilities 0.84 1.46
Debt-to equity ratio Total liabilities over total stockholders’ equity 1.20 0.68
Asset-to-equity ratio Total assets over total stockholders’ equity 2.20 1.68
Interest rate coverage ratio
Earnings before interest and taxes over interest expense 2.16 5.47
* Net Income attributable to equity holders of the Parent Company and Minority Interest. EPS computed using Net Income attributable to equity holders of the Parent Company for the year ended December 31, 2012 and for the year ended December 31, 2011 are P 0.05 and P 0.23, respectively.
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Below are the comparative key performance indicators of the Company’s subsidiaries:
International Remittance (Canada) Ltd.
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-2% 56%
Return on Assets (ROA)
Net income over average total assets during the period -1% 22%
Earnings per Share (EPS)
Net income over average number of outstanding shares -2.30 43.64
Sales Growth Total transaction value in USD in present year over previous year 6% 2%
Gross Income Revenue less total cost of services (PHP millions) 96.8 92.6
Lucky Star Management Limited
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-103% -3%
Return on Assets (ROA)
Net income over average total assets during the period -27% -1%
Earnings per Share (EPS)
Net income over average number of outstanding shares -31.22 -1.33
Sales Growth Total transaction value in USD in present year over previous year -5% -25%
Gross Income Revenue less total cost of services (PHP millions) 9.9 17.1
IRemit Global Remittance Limited
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
968% -767%
Return on Assets (ROA)
Net income over average total assets during the period -13% -33%
Earnings per Share (EPS)
Net income over average number of outstanding shares -50.71 -108,090.79
Sales Growth Total transaction value in USD in present year over previous year 43% 28%
Gross Income Revenue less total cost of services (PHP millions) 72.8 50.7
I-Remit Australia Pty Ltd
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
0.4% 0.4%
Return on Assets (ROA)
Net income over average total assets during the period 0.2% 0.2%
Earnings per Share (EPS)
Net income over average number of outstanding shares 8,210.03 7,306.00
Sales Growth Total transaction value in USD in present year over previous year - -
Gross Income Revenue less total cost of services (PHP millions) 0.2 0.6
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Worldwide Exchange Pty Ltd
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
12% 6%
Return on Assets (ROA)
Net income over average total assets during the period 1% 1%
Earnings per Share (EPS)
Net income over average number of outstanding shares 6.01 3.02
Sales Growth Total transaction value in USD in present year over previous year 22% 11%
Gross Income Revenue less total cost of services (PHP millions) 38.0 34.6
I-Remit New Zealand Limited
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
26% 40%
Return on Assets (ROA)
Net income over average total assets during the period -22% -24%
Earnings per Share (EPS)
Net income over average number of outstanding shares -2,690.78 -3,046.62
Sales Growth Total transaction value in USD in present year over previous year 30% 23%
Gross Income Revenue less total cost of services (PHP millions) 3.8 5.3
IREMIT Remittance Consulting GmbH
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-1,831% 194%
Return on Assets (ROA)
Net income over average total assets during the period -47% 14%
Earnings per Share (EPS)
Net income over average number of outstanding shares -304.77 141.86
Sales Growth Total transaction value in USD in present year over previous year -78% -20%
Gross Income Revenue less total cost of services (PHP millions) 1.3 0.5
Power Star Asia Group Limited
Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
25% 30%
Return on Assets (ROA)
Net income over average total assets during the period 25% 29%
Earnings per Share (EPS)
Net income over average number of outstanding shares 72.72 66.53
Sales Growth Total transaction value in USD in present year over previous year - -
Gross Income Revenue less total cost of services (PHP millions) 52.6 70.4
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2011 compared to 2010 I-Remit realized a consolidated net income of PHP 136.1 million in 2011, an increase of PHP 70.1 million or 106.4% over the consolidated net income of PHP 65.9 million in 2010. The consolidated net income in 2011 and 2010 are 17.3% and 8.7% of the 2011 and 2010 revenue, respectively. Revenues increased by 3.4% or PHP 26.1 million from PHP 761.8 million in 2010 to PHP 787.9 million in 2011 mainly due to the increase in realized foreign exchange gains. Foreign exchange gains increased by 4.6% or PHP 12.1 million from PHP 262.1 million in 2010 to PHP 274.2 million in 2011. The Company’s revenue from delivery fees grew by 2.9% or PHP 14.5 million from PHP 498.7 million in 2010 to PHP 513.3 million in 2011 largely because of the appreciation of the Philippine peso against the U.S. dollar. The Company’s fees are largely settled in U.S. dollars. The average peso-dollar exchange rate was PHP 45.11 in 2010 against PHP 43.31 in 2011, a gain of 4.0% or PHP 1.80 per dollar. In December 2011, the average peso-dollar exchange rate was PHP 43.65 per dollar. The value of transactions grew by 16.7% or USD 202.3 million from USD 1.213 billion in 2010 to USD 1.415 billion in 2011. The number of transactions processed by the Company grew by only 2% from 2.737 million in 2010 to 2.794 million in 2011. Other fees decreased by 60.69% or PHP 0.5 million from PHP 0.9 million in 2010 to PHP 0.4 million in 2011 due to lesser number of amendments and retrievals recorded in 2011. Costs of services decreased by 2.3% or PHP 4.7 million from PHP 204.1 million in 2010 to PHP 199.4 million in 2011. Total costs of services in 2011 and 2010 are 25.3% and 26.8% of the 2011 and 2010 revenue, respectively. These are mainly due to the decrease in delivery charges by 49.8% or PHP 14.9 million from PHP 29.9 million in 2010 to PHP 15.0 million in 2011 brought about by the huge reduction in door-to-door transactions in 2011. These are partly offset by the increase in the cost of fulfilling delivery of remittances to beneficiaries mostly in the form of bank charges by 5.8% or PHP 10.2 million from PHP 174.2 million in 2010 to PHP 184.4 million in 2011. Other operating income (loss)-net increased by 56.9% or PHP 9.7 million from PHP 17.0 million in 2010 to PHP 26.8 million in 2011. Total other operating income (loss)-net in 2011 and 2010 are 3.40% and 2.24% of the 2011 and 2010 revenue, respectively. These are mainly due to the PHP 21.7 million refund of GST previously paid by International Remittance (Canada) Limited (IRCL) and Worldwide Exchange Pty Ltd (WEPL) to the government of Canada and Australia, respectively. Both entities are exempt from paying GST. These are partly offset by the decline in net trading gains by PHP 5.5 million or 223.8% from PHP 2.5 million in 2010 to –PHP 3.1 million in 2011 due to unrealized capital loss accrued from investment on stocks by Power Star Asia Group Limited (PSAGL). PSAGL invested on stocks at an average cost of 126.90 marked at 126.30 as of the close of December 31, 2011. Total operating expenses was higher by PHP 11.4 million (2.6%) from PHP 435.9 million in 2010 to PHP 447.3 million in 2011. Total other operating expenses in 2011 and 2010 are 56.8% and 57.2% of the 2011 and 2010 revenue, respectively. These are mainly on account of higher rental, salaries, wages and employee benefits, photocopying and supplies, entertainment, amusement and recreation, communication, light and water and other operating expenses. The increase in these expense items are related mainly to the Company’s expansion as it opened new offices in Canada, Italy and Japan. Rental expenses increased by 15.4% from PHP 46.4 million in 2010 to PHP 53.5 million in 2011 due to the yearly escalation applied by lessors on rented office premises. Salaries, wages and employee benefits expenses increased by 2.4% from PHP 208.5 million in 2010 to PHP 213.5 million in 2011. Photocopying and supplies expenses increased by 24.7% from PHP11.7 million in 2010 to PHP 14.6 in 2011 due to higher production of visa cards and kits in 2011. Entertainment, amusement and recreation expenses increased by 56.6% from PHP 3.8 million in 2010 to PHP 6.0 million in 2011 mainly due to the development of offices/tie-ups in Japan, Kuwait, Saudi Arabia and Oman. Communication, light and water increased by 6.4% from PHP 22.1 million in 2010 to PHP 23.5 million in 2011 due to increase in number of remittance transactions in 2011 which required more communication between the company and its customers. Along with this, electricity bills also increased as more transactions required extended processing time. Other operating expenses increased by 34.0% from PHP 21.0 million in 2010 to PHP 28.2 million in 2011 mainly due to disallowed Input VAT for years 2005 and 2006 (PHP 2.1 million), license fee paid for the start in operation of K.K. I-Remit Japan (PHP 3.9 million), cost of payroll outsourced to Prople BPO, Inc. and increase in association dues charges by lessors of the Parent Company (PHP 1.1 milllion). These are partly offset by lower marketing, professional fees, transportation and travel, depreciation and amortization expenses. Marketing expenses decreased by 14.7% from PHP 42.6 million in 2010 to PHP 36.3 million in 2011 while transportation and travel expenses decreased by 10.7% from PHP 26.7 million in 2010 to PHP 23.8 million in 2011 due to cost cutting measures implemented by the Parent Company in all its foreign subsidiaries. Professional fees decreased by 8.8% from PHP 39.7 million in 2010 to PHP 36.2 million in 2011 due to termination of three (3) retainer contracts of the Parent Company and cessation of operation in Austria. Depreciation and amortization decreased by 13.3% from PHP 13.3 million in 2010 to PHP 11.5 million in 2011 due to higher number of office equipment fully depreciated in 2011.
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Interest income increased by 10.8% or PHP 1.3 million from PHP 12.5 million in 2010 to PHP 13.9 million in 2011. Interest income in 2011 and 2010 are 1.8% and 1.6% of the 2011 and 2010 revenue, respectively. These are mainly due to higher deposits resulting from higher volume of transactions in 2011. Interest expense increased by 31.2% or PHP 9.1 million from PHP 29.2 million in 2010 to PHP 38.3 million 2011. Interest expense in 2011 and 2010 are -4.9% and -3.8% of the 2011 and 2010 revenue, respectively. These are mainly due to higher availment of loans from bank partners during 2011 and higher annual interest rates on the Parent Company’s unsecured, short-term interest-bearing peso-denominated bank loans ranging from 5.00% to 7.00% in 2011 and 5.50% to 6.00% in 2010. In February 2010, IREMIT Remittance Consulting GmbH (formerly IREMIT EUROPE Remittance Consulting AG) started its remittance business in Italy. On April 28, 2011, IREMIT Remittance Consulting GmbH (IRCGmbH) stopped its money remittance operations in Rome and Milan in Italy in accordance with Article 75 of the Transitional and Final Provisions of Austrian Payment Services Act, which stipulated that credit institutions that have held authorizations pursuant to Article 1 paragraph 1 no 23 BWG, as amended by the Federal Act Federal Law Gazette No. 35/2003, prior to December 25, 2009, have only until April 30, 2011 to carry out their money remittance operations. In December 2011, IRCGmbH sold assets relating to its operations in Italy to a third party. These assets, with an aggregate carrying amount of PHP 7.29 million, were sold for a consideration of PHP 72.43 million thereby resulting to a gain on sale of PHP 65.14 million. The results of IRCGmbH’s operation in Italy follow:
2011 2010 Delivery fees PHP5,289,202 PHP7,486,658 Realized foreign exchange gains - net 1,006,867 673,204 6,296,069 8,159,862 Cost of services 596,703 3,749,195 Gross income 5,699,366 4,410,667 Other income - net 615,909 38,935 Operating expenses (45,024,921) (34,754,501) Loss from operations (PHP38,709,646) (PHP30,304,899) Gain on sale of assets 65,139,395 − Income (Loss) from discontinued operations PHP26,429,749 (PHP30,304,899)
The total assets of the Company decreased by PHP 82.1 million or 3.5% to PHP 2.273 billion as of December 31, 2011 against PHP 2.356 billion as of December 31, 2010. Cash and cash equivalents increased by PHP 7.4 million or 0.8% from PHP 883.8 million in 2010 to PHP 891.2 million in 2011. Financial assets at fair value through profit or loss amounted to PHP 125.2 million at end-2011 against PHP 102.9 million at end-2010, increasing by PHP 22.3 million or 21.6%. Financial assets at fair value through profit or loss in 2011 and 2010 are 5.5% and 4.4% of the total assets in 2011 and 2010, respectively. These assets consist mainly of investments in debt securities (listed overseas) held for trading. Power Star Asia Group Limited started investing on stocks in 2011. Accounts receivable declined by PHP 125.8 million or 11.9% from PHP 1,059.3 million in 2010 to PHP 933.5 million in 2011. Accounts receivable in 2011 and 2010 are 41.0% and 45.0% of the total assets in 2011 and 2010, respectively. These are mainly due to improved collection of advances to agents and foreign subsidiaries in 2011. Other receivables increased by PHP 31.0 million or 37.1% from PHP 83.4 million in 2010 to PHP 114.4 million in 2011. Other receivables in 2011 and 2010 are 5.0% and 3.5% of the total assets in 2011 and 2010, respectively. These are mainly due to nontrade receivable from the sale of various assets of IREMIT Remittance Consulting GmbH related to the discontinued operations in Italy which was subsequently collected in March 2012 and partly offset by the application of receivables from non-controlling shareholders of IREMIT Remittance Consulting GmbH and Worldwide Exchange Pty Ltd amounting to PHP 12.3 million and PHP 25.01 million, respectively, against the acquisition costs. Other current assets declined by PHP 7.4 million or 20.4% from PHP 36.3 million in 2010 to PHP 28.9 million in 2011. Other current assets in 2011 and 2010 are 1.3% and 1.5% of the total assets in 2011 and 2010, respectively. These are mainly due to lower balances of prepaid expenses and visa cards inventory. The Company’s non-current assets declined by PHP 9.7 million or 5.1% from PHP 190.3 million at end-2010 to PHP 180.6 million at end-2011. Total noncurrent assets in 2011 and 2010 are 7.9% and 8.0% of the total assets in 2011 and 2010, respectively. These are mainly due to the equity in net earnings of IRemit Singapore Pte Ltd of PHP 1.5 million and Hwa Kung Hong & Co., Ltd. of PHP 0.6 million in 2011, lesser investment on fixed assets in 2011, deferred tax asset on additional net loss of I-Remit
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New Zealand Limited in 2011 and issuance of tax credit certificates by the BIR for Input VAT for the years 2005 and 2006 amounting to PHP 1.71 million and PHP 3.82 million, respectively. Total liabilities declined by PHP 171.6 million or 15.8% from PHP 1.084 billion at end-2010 to PHP 912.7 million at end-2011 mainly due to lower level of current liabilities. Total liabilities in 2011 and 2010 are 40.1% and 46.0% of the total liabilities and equity in 2011 and 2010, respectively. Current liabilities decreased by PHP 170.8 million or 15.7% from PHP 1.083 billion in 2010 to PHP 912.6 million in 2011. Total current liabilities in 2011 and 2010 are 40.1% and 46.0% of the total liabilities and equity in 2011 and 2010, respectively. Beneficiaries and other payables increased by PHP 40.6 million or 20.3% from PHP 199.5 million in 2010 to PHP 240.1 million in 2011. Beneficiaries and other payables in 2011 and 2010 are 10.6% and 8.5% of the total liabilities and equity in 2011 and 2010, respectively. These are mainly due to additional channels opened in 2011 for the delivery of remittances to beneficiaries. Interest-bearing loans decreased by PHP 211 million or 24.1% from PHP 877 million in end-2010 to PHP 666 million in end-2011. Interest-bearing loans in end-2011 and end-2010 are 29.3% and 37.2% of the total liabilities and equity in end-2011 and end-2010, respectively. These are mainly due to lesser loan exposure at end-2011 mainly brought about by improved collection of accounts receivable. The Company’s stockholders’ equity as of December 31, 2011 stood at PHP 1.361 billion, higher by PHP 89.4 million or 7.0% against the end-2010 level of PHP 1.271 billion. Total equity in 2011 and 2010 are 59.9% and 54.0% of the total liabilities and equity in 2011 and 2010, respectively. Capital stock increased by PHP 55.3 million or 9.8% from PHP 562.4 million in 2010 to PHP 617.7 million in 2011. Capital stock in 2011 and 2010 are 27.2% and 23.9% of the total liabilities and equity in 2011 and 2010, respectively. These are mainly due to the distribution of stock dividend to stockholders on September 8, 2011. Capital paid-in excess of par value decreased by PHP 38.3 million or 8.9% from PHP 429.5 million in 2010 to PHP 391.2 million in 2011. Capital paid-in excess of par value in 2011 and 2010 are 17.2% and 18.2% of the total liabilities and equity in 2011 and 2010, respectively. The decrease in capital paid-in excess of par value in 2011 represents excess of acquisition cost over the carrying value of the non-controlling interests acquired in 2011 (IREMIT Remittance Consulting GmbH and Worldwide Exchange Pty Ltd). Treasury stock increased by PHP 12.9 million or 32.1% from -PHP 40.1 million in 2010 to -PHP 53.0 million in 2011. Treasury stock in 2011 and 2010 are -2.3% and -1.7% of the total liabilities and equity in 2011 and 2010, respectively. The increase in Treasury stock in 2011 represents buy-back of 5,544,000 shares. Below are the comparative key performance indicators of the Company (Parent Company and subsidiaries):
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income* over average stockholders’ equity during the period
10% 5%
Return on Assets (ROA)
Net income* over average total assets during the period 5% 3%
Earnings per Share (EPS)
Net income* over average number of outstanding shares PHP 0.22 PHP 0.11
Sales Growth Total transaction value in USD in present year over previous year 11% 10%
Gross Income Revenue less total cost of services (PHP millions) 588.4 557.6
* Net Income attributable to equity holders of the Parent Company and Minority Interest. EPS computed using Net Income attributable to equity holders of the Parent Company for the year ended December 31, 2011 and for the year ended December 31, 2010 are P 0.23 and P 0.13, respectively.
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Below are the comparative key performance indicators of the Company’s subsidiaries:
International Remittance (Canada) Ltd.
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
56% 3%
Return on Assets (ROA)
Net income over average total assets during the period 22% 1%
Earnings per Share (EPS)
Net income over average number of outstanding shares 43.64 1.80
Sales Growth Total transaction value in USD in present year over previous year 2% 3%
Gross Income Revenue less total cost of services (PHP millions) 92.6 97.5
Lucky Star Management Limited
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-3% 89%
Return on Assets (ROA)
Net income over average total assets during the period -1% 26%
Earnings per Share (EPS)
Net income over average number of outstanding shares -1.33 30.53
Sales Growth Total transaction value in USD in present year over previous year -25% 8%
Gross Income Revenue less total cost of services (PHP millions) 17.0 25.6
IRemit Global Remittance Limited
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
-767% 39%
Return on Assets (ROA)
Net income over average total assets during the period -33% 6%
Earnings per Share (EPS)
Net income over average number of outstanding shares -108,090.79 10,191.13
Sales Growth Total transaction value in USD in present year over previous year 28% 1%
Gross Income Revenue less total cost of services (PHP millions) 50.7 43.8
I-Remit Australia Pty Ltd
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
0.4% 1%
Return on Assets (ROA)
Net income over average total assets during the period 0.2% 0.2%
Earnings per Share (EPS)
Net income over average number of outstanding shares 7,306.00 14,435.50
Sales Growth Total transaction value in USD in present year over previous year - -
Gross Income Revenue less total cost of services (PHP millions) 0.6 0.3
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Worldwide Exchange Pty Ltd
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
6% 5%
Return on Assets (ROA)
Net income over average total assets during the period 1% 1%
Earnings per Share (EPS)
Net income over average number of outstanding shares 3.02 2.00
Sales Growth Total transaction value in USD in present year over previous year 11% 20%
Gross Income Revenue less total cost of services (PHP millions) 34.6 29.2
I-Remit New Zealand Limited
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
40% 20%
Return on Assets (ROA)
Net income over average total assets during the period -24% -9%
Earnings per Share (EPS)
Net income over average number of outstanding shares -3,046.61 -1,129.10
Sales Growth Total transaction value in USD in present year over previous year 23% 38%
Gross Income Revenue less total cost of services (PHP millions) 5.3 8.8
IREMIT Remittance Consulting GmbH
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
194% -193%
Return on Assets (ROA)
Net income over average total assets during the period 14% -74%
Earnings per Share (EPS)
Net income over average number of outstanding shares 141.86 -666.31
Sales Growth Total transaction value in USD in present year over previous year -19% 94%
Gross Income Revenue less total cost of services (PHP millions) 0.5 11.7
Power Star Asia Group Limited
Performance Indicator Definition Dec. 31, 2011 Dec. 31, 2010
Return on Equity (ROE)
Net income over average stockholders’ equity during the period
30% 38%
Return on Assets (ROA)
Net income over average total assets during the period 29% 36%
Earnings per Share (EPS)
Net income over average number of outstanding shares 66.53 63.27
Sales Growth Total transaction value in USD in present year over previous year - -
Gross Income Revenue less total cost of services (PHP millions) 70.4 62.4
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The Company is not aware of any known trends, commitments, events or uncertainties that will have a
material impact on the Company’s liquidity. The Company has not defaulted in paying its currently maturing obligations. In addition, obligations of the Company are guaranteed up to a certain extent by the Company’s majority stockholders.
The Company is not aware of any events that will trigger a direct or contingent financial obligation that
is material to the Company, including any default or acceleration of an obligation. There are no material off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Company with unconsolidated entities or other persons created during the reporting period.
The Company has no material commitments for capital expenditures. Except as discussed above, the Company is not aware of any trends, events or uncertainties that have
had or that are reasonably expected to have a material favorable or unfavorable impact on sales, revenues or income from continuing operations.
Except as discussed above, there are no other significant elements of income or loss that did not arise
from the Company’s continuing operations. There are no seasonal aspects that had a material effect on the financial condition or results of
operations.
The Company does not expect any purchase of significant equipment in the next twelve (12) months. The Company does not expect any significant changes in the number of employees in the next twelve
(12) months.
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Item 7. Financial Statements The consolidated financial statements and schedules listed in the accompanying Index to Financial
Statements and Supplementary Schedules are filed as part of this Form 17-A.
Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure I-Remit and its subsidiaries had no disagreement with the auditors on any matter of accounting principles or
practices, financial statements disclosure, or auditing scope or procedure as of December 31, 2013 and December 31, 2012.
Appointment of and Review of the Performance of the External Auditor The Board of Directors and the stockholders approve the Audit Committee’s recommendation for the
appointment and the review of the performance of the external auditors. In appointing its external auditors, the Company considers the technical competence, training, experience and professional reputation of the audit firm’s partners and staff, its capacity to perform the requirements of the audit engagement, its correspondent and other professional relationships with reputable firms in other jurisdictions, and the general reputation of the firm for integrity and efficiency.
Pursuant to the General Requirements of SRC Rule 68, Par. 3 (Qualifications and Reports of Independent
Auditors), I-Remit engaged the services of R.S. Bernaldo & Associates (RSBA) (BOA/PRC Reg. No. 0300; SEC Group A Accreditation No. 0153-FR-1) for the audit of the Group’s and Parent Company’s financial statements which comprise the statements of condition as of December 31, 2013 and 2012, and the statements of income, changes in equity, and cash flows for each of the three (3) years in the period ended December 31, 2013.
R.S. Bernaldo & Associates (a correspondent firm of Panell Kerr Forster International) has served as the
Company’s external auditors since 2013. Rosario S. Bernaldo (CPA Certificate No. 25927; SEC Group A Accreditation No. 1192-A), managing partner, is the current audit partner for the Company.
SGV & Co. has served as the Company’s external auditors from 2002 and until 2013. Josephine Adrienne A. Abarca (CPA Certificate No. 92126; SEC Accreditation No. 0466-A) was the former audit partner for the Company and she has served as such from 2009 to 2013. Aris C. Malantic (CPA Certificate No. 90190; SEC Accreditation No. 0326-AR-1) was the former audit partner for the Company and he has served as such from 2005 to 2008.
External Audit Fees and Services For the audit of the Group’s and Parent Company’s annual financial statements and services provided in
connection with statutory and regulatory filings or engagements, the aggregate amounts to be billed/billed, exclusive of value-added tax (VAT) and out-of-pocket expenses, by RSBA amounts to PHP 600,000, and PHP 600,000 for 2013, and 2012, respectively, and by SGV & Co. amounted to PHP 577,500 for 2011.
RSBA and SGV & Co. did not render professional services for tax accounting, compliance, advice, planning
and any other form of tax services. RSBA and SGV & Co. did not provide products and services other than the services reported above. The Company’s Board of Directors approves the audit fees as recommended by the Audit Committee and the Management Committee.
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Changes in Accounting Policies The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of new and revised
Philippine Financial Reporting Standards (PFRS). The term “PFRS” in general includes all applicable PFRS, Philippine Accounting Standards (PAS), and Interpretations issued by the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the FRSC and adopted by SEC. These new and revised PFRS prescribe new accounting recognition, measurement and disclosure requirements applicable to the Group. When applicable, the adoption of the new standards was made in accordance with their transitional provisions, otherwise the adoption is accounted for as change in accounting policy under PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
The accounting policies adopted are consistent with those of the previous financial year except for the
adoption of the following new and revised PFRS. The following new and revised PFRS has been applied in the current period and had materially affected the amounts reported in the financial statements: PAS 19 (Revised), Employee Benefits Significant changes to this standard include removal of corridor approach; immediate recognition of past service costs; presentation of re-measurements on defined benefit plans in other comprehensive income; new recognition criteria on termination benefits; and improved disclosure requirements. The amended standard comes into effect for accounting periods beginning on or after January 1, 2013. Earlier application is permitted. The revised PAS 19 ranges from 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 Group reviewed its existing employee benefits and determined that the amended standard has significant impact on its accounting for retirement benefits. The Group has applied PAS 19 (Revised) retrospectively in the current year in accordance with the transition provisions set out in the revised standard. The opening statement of financial position as of January 1, 2012 and the comparative figures have been accordingly restated. The effects of adoption on the consolidated financial statements are as follows: Consolidated Statements of Financial Position
As at December As at January 31, 2012 1, 2012 (As re-stated) (As re-stated) Increase (decrease) in: Retirement assets PHP 2,923,260 PHP - Deferred tax assets (226,637) 568,928 Deferred tax liabilities 656,368 356,422 Retirement liability - 708,356 Other comprehensive income (loss) 528,820 2,783,019 Retained earnings 502,211 463,256
Consolidated Statements of Comprehensive Income
2012 As reported Previously Adjustments As re-stated Retirement expense PHP 4,294,704 PHP (304,062) PHP 3,990,642 Provision for deferred income tax 854,517
(198,149)
656,368
Profit for the year 30,526,247 (10,917) 30,515,330 Re-measurements - (528,820) (528,8200
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The following new and revised PFRSs have also been adopted in the financial statements, the application of which have not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements: PFRS 7 (Amended), Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities The amendment requires disclosing information that will enable users to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. The amendments are effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. An entity shall provide the disclosures required by those amendments retrospectively. PFRS 10, Consolidated Financial Statements The Standard establishes the principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The Standard defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. This PFRS will supersede PAS 27, Consolidated Financial Statements and Separate Financial Statements and SIC 12, Consolidation – Special Purpose Entities. PFRS 10 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. PFRS 12, Disclosure of Interests in Other Entities The Standard applies to entities that have interests in a subsidiary, a joint arrangement, and an associate or an unconsolidated structured entity. It benefits the users by identifying the profit or loss and the cash flows available to the reporting entity and by determining the value of current or future investment in the reporting entity. PFRS 12 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. PFRS 13, Fair Value Measurement The Standard explains how to measure fair value for financial reporting. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It emphasizes that fair value is market-based not an entity-specific measurement; hence an entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not relevant when measuring fair value. It was developed to eliminate inconsistencies of fair value measurements dispersed in various existing PFRSs. It clarifies the definition of fair value, provides a single framework for measuring fair value and enhances fair value disclosures. PFRS 13 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. PAS 1, Presentation of Items of Other Comprehensive Income (OCI) To improve the presentation of items of OCI, amended PAS 1 requires entities to group items presented in the OCI on the basis whether they would be reclassified to (recycled to) profit or loss subsequently. The amendments did not address which items should be presented in the OCI and did not change the option to present OCI items either before or net of tax. Those amendments are effective for annual periods beginning on or after July 1, 2012. Earlier application is permitted. PIC Q&A No. 2013-03 PAS 19 – Accounting for Employee Benefits under a Defined Contribution Plan subject to Requirements of Republic Act (RA) 7641, The Philippine Retirement Law This Interpretation provides guidance in accounting for post-employment benefits for an entity which has opted to provide a defined contribution plan as its only post-employment benefit plan despite the minimum retirements benefits required to be provided to employees under RA 7641. This Interpretation is effective for annual financial statements with period beginning January 1, 2013 and should be applied retrospectively.
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PART III. CONTROL AND COMPENSATION INFORMATION Item 9. Directors and Executive Officers of the Issuer
(A) Directors, Executive Officers, Promoters and Control Persons (1) Directors, Including Independent Directors and Control Persons Bansan C. Choa, 59, Filipino Director, Chairman and Chief Executive Officer Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date
Mr. Choa has served as Chairman and Chief Executive Officer of I-Remit, Inc. since 2005 and
has been a Director since 2002. He is involved in various businesses in the manufacturing, and construction and property development sectors. He currently holds the following positions: Chairman, Confed Properties, Inc. (1991 to date); Chairman, Surewell Equities, Inc. (2001 to date); Director and Chairman of Loan Committee, Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date); President, Philippine Retirement, Inc. (2009 to date); Treasurer, Six Alps Corporation (1997 to date); Treasurer, Banwood Construction Center, Inc. (1976 to date); Chairman, Flexi Woodworks, Inc. (1993 to date); Chairman, Sure Fortune Properties, Inc. (2001 to date); and, Chairman, OLGC Psychological Services (2001 to date). Mr. Choa was a Board Member, Professional Regulation Commission on Real Estate Service (2010 to 2012).
Mr. Choa is a licensed real estate broker (Professional Regulation Commission License No.
00002), appraiser (Professional Regulation Commission License No. 00002), and real estate consultant (Professional Regulation Commission License No. 00002). He is a certified public accountant (Professional Regulation Commission License No. 030924). He is active in the real property development and property management field and has served and continues to hold board and officer positions in housing and real property development organizations including the Organization of Socialized Housing Developers of the Philippines as President (2008 to 2009), Board Adviser (2009 to date), and Board Member (2000 to 2008); Subdivision and Housing Developers Association as Board Governor (2000 to 2001), Treasurer (2001 to 2002 and 2003 to 2004), Auditor (2002 to 2003), First Vice President (2007 to 2008), Chairman (2004 to 2005 and 2006 to 2007), Board Adviser (2005 to 2006), President (2009 to 2010), and Board Advisor (2011 to date); Grandeur Realty Specialists, Inc. as Chairman (1995 to 2001); Multi Dealers Inc. as President (1987 to 1990); and, Gold Palm Properties, Inc. as Vice President (1989 to 1996). He is also the Chairman of the Board of Trustees of Kassel Condominium Corporation (2001 to date). Mr. Choa is a member of the National Real Estate Association since 1998.
He was one of the finalists of the 2006 Entrepreneur of the Year award of the Ernst & Young
global accounting firm. He was a nominee for Global Filipino Executive of the Year in the 2011 Asia CEO Awards Philippines. He is also the Chairman of the Board of Trustees since 2002 of the Kabalikat ng Migranteng Pilipino, Inc. (KAMPI), a non-stock non-profit organization serving overseas Filipino workers.
Mr. Choa obtained his master in business administration degree from the Ateneo de Manila
University Graduate School of Business in 1985 and his bachelor’s degree in commerce from the De La Salle University in 1974. He is a member of the Philippine Institute of Certified Public Accountants (PICPA) since 1976. He was connected with the accounting firm of SyCip Gorres Velayo & Co. from 1974 to 1976.
Armin V. Demetillo, 45, Filipino Director, Chairman of the Executive Committee Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such July 17, 2009 to date
Mr. Demetillo has served as Director and Chairman of the Executive Committee of I-Remit,
Inc. since July 17, 2009. He is a Director of I-Remit Australia Pty Ltd, Worldwide Exchange Pty Ltd (Australia) and I-Remit New Zealand Limited since 2010. He is the Managing Director of Goldleaf Guard Services, Inc. (2002 to date); Executive Vice President, Rapid Security (2002 to date); and, Vice President, St. Thomas Security Corporation (2002 to date). Mr. Demetillo is the Chairman of Virlanie Foundation, Inc. (2005 to 2007), a street children foundation supported by Princess Caroline of Monaco, which received an award in Europe for its effort in protecting children’s rights. He became the Faculty Member/Academic Counselor in College of Business and Economics, De La Salle University (1992 to 2002).
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Mr. Demetillo obtained his bachelor of arts degree, major in philosophy cum laude from the
Saint Joseph Seminary College in 1990.
Harris Edsel D. Jacildo, 52, Filipino Director, President & Chief Operating Officer Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such August 8, 2002 to date
Mr. Jacildo joined I-Remit, Inc. as Executive Vice President and Chief Operating Officer in
February 2002. He has been a Director and the President and Chief Operating Officer of the Company since April 2002. He also currently holds the following positions: Director, Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date), Lucky Star Management Ltd. (Hong Kong) (2003 to date), and IRemit Global Remittance Limited (United Kingdom) (2003 to date).
He is also a Trustee of the Kabalikat ng Migranteng Pilipino, Inc. (KAMPI) (2003 to date), a
non-stock non-profit organization serving overseas Filipino workers. Prior to joining I-Remit, he spent 20 years in the banking industry where he was initially
working in the field of information technology while employed by the Pacific Banking Corporation (1982 to 1985). In 1985, he joined the remittance division of the Rizal Commercial Banking Corporation (RCBC) where he was a Systems Analyst until 1991 and was the head of its TeleMoney Asia-Pacific operations until 2002.
Mr. Jacildo obtained his bachelor of science in applied economics degree from the De La Salle
University in 1982. He also completed the basic management program of the Asian Institute of Management in 1991 and completed two years in the school of law in the Ateneo de Manila University (1982 to 1984).
Gilbert C. Gaw, 64, Filipino Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date
Mr. Gaw has been a Director of I-Remit, Inc. since 2002. He has a business engaged in steel
manufacturing. He is currently a partner of JPSA Global Services (2003 to date), and a Director of Treasure Steelworks Corporation (2004 to date) and Zhangzhou Stronghold Steel Works Co., Ltd. (China) (2003 to date). His past work experiences include: President and General Manager of Philshine Industrial Corp. (1982 to 2001); Plant Manager of Seton Industrial Corp. (1980 to 1982); Partner in Harden Pipe Trading Co. (1975 to 1978); Sales in Union Hardware (1969 to 1975); and, Trainee – Purchasing in D. P. Marketing Co. (1967 to 1969).
He obtained his bachelor of science in electronics and communications engineering degree
from the University of the East in 1973. He also took a vocational course in Samson Technical School in 1962. Mr. Gaw obtained his bachelor of theology degree in the Biblical Seminary of the Philippines (1978 to 1980) and MSC at UPISSI at the University of the Philippines in 1982.
A. Bayani K. Tan, 58, Filipino Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such May 18, 2007 to date
Atty. Tan was the Corporate Secretary of I-Remit, Inc. from 2001 until 2004 and has been a
Director since May 2007. He is currently a Director and Corporate Secretary of the following reporting companies: First Abacus Financial Holdings Corporation (1994 to date); Sinophil Corporation (1993 to date); TKC Steel Corporation (2007 to date); Tagaytay Highlands International Golf Club, Inc. (1993 to date); Destiny Financial Plans, Inc. (2003 to date); and, Discovery World (2013 to date as Director and 2003 to date as Corporate Secretary).
Atty. Tan has also been a Corporate Secretary and a Director of Sterling Bank of Asia, Inc. (A
Savings Bank) (2009 to date); FHE Properties, Inc. (1995 to date); Club Asia, Inc. (1999 to date); City Cane Corporation (1993 to date); Belle Bay Plaza Corporation (1996 to date); Campanilla Mineral Resources, Inc. (2011 to date); Foundation Capital Resources, Inc. (2011 to date); Mandalore Manila Bay Dev’t Corp. (2012 to date); Philequity Dividend Yield Fund, Inc.
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(2013 to date); Raemulan Lands, Inc. (2012 to date); SCT Electro Component Corp. (1988 to date); SCT Furnishing Corporation (1977 to date); Loto Pacific Leisure Corporation (2010 to date as a Director and 2007 to date as a Corporate Secretary); S.C. Tan Export Corporation (1985 to date as a Director and 1977 to date as a Corporate Secretary); Sinophil Leisure & Resorts Corp. (2010 to date as a Director and 2008 to date as a Corporate Secretary); and, Yoshita Corporation (1995 to date as a Director and 1994 to date as a Corporate Secretary). He is also a Director for the following private companies: Destiny LendFund, Inc. (2005 to date) ); Coal Asia Holdings, Inc. (2012 to date); Core Lifestyle Clothing, Inc. (2005 to date); Highlands Garden Corporation (2001 to date); Metropolitan Leisure & Tourism Corp. (1996 to date); Palm Conception Power Corporation (2013 to date); Parallax Resources, Inc. (2001 to date); SLW Development Corporation (2001 to date); Yehey! Money, Inc. (2001 to date); and, Yek Holdings, Inc. (1995 to date). Atty. Tan is also an Independent Director of Pharex Health Corporation (2012 to date). Atty. Tan is the Chairman and President of the following companies: Mercury Ventures, Inc. (1999 to date); T&V Realty Holdings, Inc. (1997 to date as Chairman and 2011 to date as President); and Trifels, Inc. (1989 to date). He is the Corporate Secretary of the following companies: Belle Corporation (1994 to date); Pacific Online Systems Corporation (2007 to date); Vantage Equities, Inc. (1993 to date); Yehey! Corporation (2004 to date); Philequity Fund, Inc. (1997 to date); Philequity Peso Bond Fund, Inc. (2000 to date); Philequity Dollar Income Fund, Inc. (1999 to date); Philequity PSE Index Fund, Inc. (1999 to date); Tagaytay Midlands Golf Club, Inc. (1997 to date); The Country Club at Tagaytay Highlands, Inc. (1995 to date); The Spa and Lodge at Tagaytay Highlands, Inc. (1999 to date); Monte Oro Resources and Energy, Inc. (2005 to date); E-Business Services, Inc. (2001 to date); Hella-Phil., Inc. (1992 to date); JTKC Equities, Inc. (1998 to date); Goodyear Steel Pipe Corporation (1999 to date); Star Equities Inc. (2006 to date); Tera Investments, Inc. (2001 to date); The Discovery Leisure Company, Inc. (2001 to date); Karen Marie L. Ty Foundation, Inc. (2005 to date); Aldex Realty Corporation (1998 to date); British Wire Industries Corporation (1998 to date); Cay Islands Corporation (2008 to date); Dakota Residences Condominium Corporation (2011 to date); Demikk Holdings, Inc. (1998 to date); Demikk Realty, Inc. (1998 to date); Dining Systems Inc. (1998 to date); Discovery Country Suites, Inc. (2004 to date); Discovery Fleet Corporation (2012 to date); Donau Deli, Inc. (2001 to date); Donau Gourmet, Inc. (2007 to date); Goodway Marketing Corp. (1999 to date); Hotel Systems Asia, Inc. (1998 to date); International Interiors, Inc. (1998 to date); JT Perle Corporation (2007 to date); JTKC Land, Inc. (2003 to date); JTKC Realty Corporation (1998 to date); Lucky Circle Corporation (2008 to date); More Coal Corporation (2008 to date); More Minerals Corporation (2008 to date); More Oil & Gas Corporation (2008 to date); More Reedbank Corporation (2008 to date); Oakridge Properties, Inc. (1998 to date); One Cerrada Corporation (2007 to date); One Urdaneta Corporation (2010 to date); Palawan Cove (2008 to date); Pan Asean Multi-Resources Corporation (1998 to date); Philequity Foreign Currency Fixes Income Fund, Inc. (2010 to date); Philequity Strategic Growth Fund, Inc. (2008 to date); Philequity Resources Fund, Inc. (2010 to date); Philippine Calcium Industries Co., Inc. (1999 to date); Philippine Creative Licensing Group, Inc. (1998 to date); Sonoran Corporation (2008 to date); Treasure Steel Works Corporation (2010 to date); Union Pacific Ace Industries, Inc. (1998 to date); Winsteel Manufacturing Corp. (1998 to date); Winstone Industrial Corporation (1999 to date); and, Philippine Jesuit Aid Association, Inc. (2011 to date). He also holds the following positions: a Trustee and Corporate Secretary of Wellington Dee Ty Foundation, Inc. (2004 to date); a Trustee (2013 to date) and Treasurer (2013 to date) of Rebisco Foundation, Inc.; a Trustee (2011 to date) and Corporate Secretary (2011 to date) of St. Scholastica’s Hospital, Inc.; a Trustee (2013 to date) of Wills International Foundation, Inc.; a Trustee and Executive Vice President of UP Law ’80 Foundation, Inc. (2004 to date); and, President (2012 to date) of Catarman Chamber Elementary School Foundation, Inc. Atty. Tan is also the Managing Partner of the law firm of Tan Venturanza Valdez since 1988. He also concurrently holds the following positions: Managing Director, Shamrock Development Corporation (1988 to date); Managing Trustee, SC Tan Foundation, Inc. (1986 to date); and, Legal Counsel, Xavier School, Inc. (2005 to date).
In the previous years, he has held the following positions: Director, Monte Oro Resources and
Energy, Inc. (2005 to 2008); Corporate Secretary, Monte de Oro Grid Resources Corporation (2006 to 2009); Director, National Grid Corporation (2008 to 2009); Director and Corporate Secretary, Metro Manila Turf Club, Inc. (1995 to 2006), APC Group, Inc. (1996 to 2006), and Clearwater Country Club, Inc. (2001 to 2004); Corporate Secretary, International Exchange Bank (1995 to 2006) and Touch Solutions, Inc. (2007 to 2013).
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Atty. Tan holds a Master of Laws degree from New York University, USA (class of 1988). He obtained his Bachelor of Laws degree from the University of the Philippines in 1980 where he was a member of the Order of the Purple Feather (the UP College of Law Honor Society) having ranked ninth in his class. Atty. Tan was admitted to the Philippine Bar in 1981 after placing sixth in the examinations. He also has a bachelor of arts degree (majored in political science) from San Beda College (class of 1976) from where he graduated class valedictorian and was awarded the medal for academic excellence.
Ben C. Tiu, 61, Filipino Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such May 18, 2001 to date
Mr. Ben Tiu has been a Director of I-Remit, Inc. since 2001 and has also served as the
Chairman and Chief Executive Officer of I-Remit, Inc. from 2001 to 2004. He is the Corporate Nominee in the Philippine Stock Exchange of Fidelity Securities, Inc. (1998 to date). He also concurrently holds the following positions: Chairman, Tera Investments, Inc. (2001 to date); President, JTKC Equities, Inc. (1993 to date); and, President, Philippine Calcium Industries Company, Inc. (1988 to date). Mr. Tiu was also formerly the Vice Chairman of the Board and Chairman of the Executive Committee of the International Exchange Bank (1995 to 2006).
He obtained his master in business administration degree from the Ateneo de Manila
University Graduate School of Business in 1977 and his bachelor’s degree in mechanical engineering from the Loyola Marymount University, USA, in 1975.
John Y. Tiu, Jr., 37, Filipino Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date
Mr. John Tiu has served as Director of I-Remit, Inc. since 2002. He is also presently Chairman
and President of Tera Investments, Inc. (2003 to date); and a Director of Sterling Bank of Asia, Inc. (A Savings Bank) (2006 to date). He is also a Director and Treasurer of the following companies: Star Equities Inc. (2006 to date); Touch Solutions, Inc. (2001 to date); JTKC Equities, Inc. (2002 to date); and, JTKC Land, Inc. (2003 to date). He is a Director of Oakridge Properties, Inc. (2003 to date), Enderun Colleges, Inc. (2005 to date), and Sagesoft Solutions, Inc. (2003 to date). He is a Director and First Vice President of JTKC Realty Corporation (2006 to date), and the President of Fidelity Securities, Inc. (2000 to date). He is also a Director and President of The Discovery Leisure Company Inc. (2012 to date), Discovery Country Suites Inc. (2004 to date), and Discovery World Corporation (2006 to date as a Director and 2009 to date as President). He is the Chairman and President of the following companies: Cay Islands (2012 to date), Palawan Cove Corporation (2012 to date), Sonoran Corporation (2012 to date), JT Perle Corporation (2007 to date), and One Cerrada Corporation (2007 to date). Mr. Tiu is a stockholder in Tokyo Holdings Inc. (2007 to date).
Mr. John Tiu obtained his bachelor of science in electrical engineering degree (minor in
mathematics) from the University of Washington, USA, in 1998.
Ruben C. Tiu, 57, Filipino Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such May 18, 2007 to date
Mr. Ruben Tiu has served as Director of I-Remit, Inc. from 2002 to 2004 and was reappointed
as such on May 18, 2007. He currently holds the following positions: Director (2007 to date) and Chairman of the Board (2013 to date), Sterling Bank of Asia, Inc. (A Savings Bank); Director, Tera Investments, Inc. (2001 to date), Palawan Cove Corporation (2008 to date), Cay Islands Corporation (2008 to date), Discovery World Corporation (2010 to date), and Sonoran Corporation (2008 to date); President, JTKC Realty Corporation (1988 to date), Pan-Asean Multi Resources Corporation (1988 to date), Aldex Realty Corporation (1988 to date), Oakridge Properties, Inc. (1996 to date), The Discovery Leisure Company, Inc. (2000 to date), Discovery Country Suites Inc. (2004 to date), Hotel Systems Asia, Inc. (1996 to date), and JTKC Land, Inc. (2003 to date); President and Chairman, Star Equities Inc. (2006 to date); and, Executive Vice President, JTKC Equities, Inc. (1993 to date), and Union Pacific Ace Industries, Inc. (1988 to date). He was also the Director of International Exchange Bank (1995 to 2006).
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Mr. Ruben Tiu obtained his bachelor of science in business administration degree from the De
La Salle University in 1976.
Calixto V. Chikiamco, 63, Filipino Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date
Mr. Chikiamco has been a Director of I-Remit, Inc. since 2002. He is a former columnist of the
Manila Standard and the Manila Times. He has authored two (2) books: “Reforming the System” (Orange Publications and Kalikasan Press, 1992) and “Why We Are Who We Are” (Foundation for Economic Freedom, 1998). In 2001, he was awarded by the Archdiocese of Manila for the Best Business Column (“Agriculture, Not IT”, Manila Standard) in the Catholic Mass Media Awards. He is the founder and President of Mobilemoco, Inc. (2010 to date) and MRM Studios, Inc., a company involved in mobile entertainment, digital musical services, and e-commerce (2001 to date). He also concurrently holds the following positions: Director, UPCC Securities (1999 to date); Vice Chairman, CBY, Inc. (1999 to date); Director, Golden Sunrise (1984 to date); Director, APMC (1985 to date); President, Foundation for Economic Freedom (2010 to date); and, President, Four Seas Trading Inc. (2008 to date). He is also presently a columnist of Business World and a property rights consultant to The Asia Foundation. He is a member of the Philippine Internet Commerce Society and the Syracuse University Alumni Association.
Mr. Chikiamco holds a Master’s degree in Professional Studies in Media Administration from
the Syracuse University (New York, USA). He obtained his bachelor’s degree in economics summa cum laude from the De La Salle University.
In accordance with the requirements of Section 38 of the Securities Regulation Code, the Revised SRC Rules, and the Company’s Manual on Corporate Governance, the following Directors were nominated and elected as Independent Directors of the Company during the Annual Stockholders’ Meeting held on July 19, 2013:
Jose Joel Y. Pusta, 61, Filipino Independent Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date
Mr. Pusta has been a Director of I-Remit since 2002. He was a Director and Vice President of
Confed Properties, Inc. (1997 to 2009). He was also the Corporate Secretary and a Trustee of the Kabalikat ng Migranteng Pilipino, Inc. (KAMPI) (2003 to 2009), the President and a Trustee of the Kassel Condominium Corporation (2002 to 2009), and the Vice President and Financial Controller of Green Bank, Inc. (A Rural Bank) (2010 to 2011). Mr. Pusta previously held the following positions: Senior Administrative and Logistics Manager of Digital Telecommunications Philippines, Inc. (1994 to 1997); Senior Internal Audit Manager of Metromedia Times Corporation (1992 to 1994), and Universal Robina Corporation (1985 to 1992); Internal Audit Manager of Manila Midtown Hotel, Inc. (1984 to 1985), Robinsons, Inc, (1983 to 1984), and Litton Mills, Inc. (1979 to 1983); Internal Audit Supervisor of CFC Corporation (1978 to 1979); Semi-Senior Staff Auditor of SyCip Gorres Velayo & Co. (1975 to 1978); and, Foreign Remittance Clerk in Philippine Banking Corporation (1975).
Mr. Pusta obtained his bachelor of science in commerce degree (majored in accounting) from
the University of San Carlos in Cebu City in 1974. He has also earned units leading to the master in business administration degree at the Ateneo de Manila University Graduate School of Business from 1981 to 1983. He is a certified public accountant (CPA) and a member of the Philippine Institute of Certified Public Accountants (PICPA) and the Institute of Internal Auditors, Philippines.
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Gregorio T. Yu, 55, Filipino Director Director’s Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such May 18, 2007 to date Mr. Yu was a Director of I-Remit, Inc. from 2001 to 2004 and was re-elected as an
Independent Director of the Company on May 18, 2007. He is currently the Chairman of CATS Automobile Corporation (2004 to date), CATS Motors, Inc. (2004 to date), American Motorcycles, Inc. (2012 to date), Auto Nation Group (2012 to date), and President of the Domestic Satellite Corporation of the Philippines (2001 to date). He is also a Director and the Vice Chairman of the Board of Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date) and Chairman and President of Lucky Star Network Communications Inc. (1994 to date). He is also concurrently a Director of the following companies: CATS Asian Cars, Inc. (Mazda Greenhills) (2004 to date); Prople BPO, Inc. (formerly Summersault, Inc.) (2006 to date); CMB Partners, Inc. (2003 to date); Philippine National Reinsurance Corporation (2011 to date); iRipple, Inc. (2010 to date); Jupiter Systems, Inc. (2001 to date); Wordtext Systems, Inc. (2001 to date); Yehey, Inc. (2001 to date); Philequity Fund, Inc. (1994 to date); Philequity Peso Bond Fund, Inc. (1994 to date); Philequity Dollar Income Fund, Inc. (1994 to date); Philequity PSE Index Fund, Inc. (1994 to date); Philequity Strategic Growth Fund, Inc. (1994 to date); Philequity Foreign Currency Fixed Income Fund, Inc. (1994 to date); Philequity Balanced Fund (1994 to date); Philequity Resources Fund, Inc. (1994 to date); Philippine Airlines, Inc. (2011 to date); Glyph Studios, Inc. (2011 to date); Philippine Bank of Communications (2011 to date); Unistar Credit and Finance Corporation (2012 to date), and Nexus Technologies Inc. (2012 to date). Mr. Yu is also a Trustee of the Government Service Insurance System (2010 to date). He is also a Board Member of Ballet Philippines (2009 to date) and Manila Symphony Orchestra (2009 to date), and a Trustee of the Xavier School, Inc. (1998 to date) and a Trustee (1997 to date) and the Chairman, Ways and Means Committee (1998 to date) of the Xavier School Educational and Trust Fund, Inc.
Mr. Yu was formerly the President and Chief Executive Officer of Belle Corporation (1989 to
2001). He was also a Director and a Member of the Executive Committee of The International Exchange Bank (1995 to 2006). He was also a Director of the following companies: Nexus Technologies, Inc. (2001 to 2011); R.S. Lim & Co., Inc. (1997 to 2008); and, Ivantage Corporation (1993 to 2006). He was also the President of the following organizations: Tagaytay Highlands International Golf Club (1991 to 2001); Tagaytay Midlands Golf Club (1997 to 2001); and, The Country Club and Tagaytay Highlands (1995 to 2001). He was also the President and Chief Executive Officer of Sinophil Corporation (1993 to 2001) and Pacific Online Systems Corporation (1994 to 2001). He was also the Vice Chairman of Philippine Global Communications, Inc. (1996 to 2001), and the APC Group, Inc. (1994 to 2001). He was also the Director of Cebu Holdings Inc. (1994 to 1996), and Filcredit Finance (2004 to 2008). He was also connected with the Chase Manhattan Asia Limited Hong Kong as Director of Corporate Finance (1988 to 1999), and with The Chase Manhattan Bank, NA Asia Pacific Regional Headquarters Hong Kong as Vice President – Area Credit (1986 to 1988). He was also a Second Vice President of the Chase Manhattan Bank, N.A. Manila Offshore Banking Unit (1983 to 1986). He was also a Chairman of the CATS Asian Cars, Inc. (2004 to 2011). He was also the Assistant Vice President of R.S. Lim and Company, Inc. (1978 to 1981). Mr. Yu was a Lecturer in Economics in the De La Salle University from 1978 to 1980.
Mr. Yu obtained his Master of Business Administration degree from The Wharton School,
Graduate of the University of Pennsylvania in 1983. He obtained his bachelor of arts degree in economics summa cum laude from the De La Salle University in 1978.
The above directors shall hold office from their date of election until the next annual
shareholders meeting or their resignation unless sooner terminated or removed in accordance with law.
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The names, ages, citizenship, present positions, previous positions, terms of office, and period
served by the Corporate Secretary and the Assistant Corporate Secretary are as follows:
Anna Francesca C. Respicio, 28, Filipino Corporate Secretary Term of Office August 16, 2013 until the next annual stockholders’ meeting Period Served as Such August 16, 2013 to date
Atty. Respicio is the incumbent Corporate Secretary of I-Remit, Inc., Luckyfortune Business
Ventures, Inc. (2012 to date), and Raemulan Lands, Inc. She is also the Assistant Corporate Secretary of the following companies: A Brown Company, Inc. (2012 to date); Discovery World Corporation (2013 to date); First Abacus Financial Holdings Corporation (September 2013 to date); Sterling Bank of Asia, Inc. (A Savings Bank) (August 2013 to date); Tagaytay Highlands International Golf Club, Inc. (June 2013 to date); The Spa and Lodge at Tagaytay Highlands, Inc. (June 2013 to date); Fidelity Securities, Inc.; Red Dragon Culinary Concepts, Inc. (July 2013 to date); Attenborough Holdings Corporation; St. Patrick Mining Development Corporation; Parallax Resources, Inc.; and, SLW Development Corporation. Atty. Respicio obtained her bachelor of arts degree (majored in philosophy) in 2007 and her Juris Doctor degree in 2011 from the Ateneo de Manila University. She is currently an Associate at Tan Venturanza Valdez. She was admitted to the Philippine bar in April 2012.
Adrian Francis S. Bustos, 26, Filipino Assistant Corporate Secretary Term of Office August 16, 2013 until the next annual stockholders’ meeting Period Served as Such August 16, 2013 to date
Atty. Bustos is the incumbent Assistant Corporate Secretary of I-Remit, Inc. He is an
incumbent Director and Corporate Secretary of Angat Hydropower Corporation and KWPP Holdings Corporation, and the Corporate Secretary of Emerald Holdings Corporation and Emerald Headway Distributors, Inc. He is also the Assistant Corporate Secretary of the following companies: Vantage Equities, Inc.; Yehey! Corporation; Philequity funds (9 corporations); Palm Concepcion Power Corporation; JTKC Land, Inc.; The Country Club at Tagaytay Highlands, Inc.; Tagaytay Midlands Golf Club Inc.; and FHE Properties Inc. Atty. Bustos obtained his bachelor of science degree in business administration and bachelor of laws degree from the University of the Philippines in 2008 and 2012, respectively. He is currently an associate at Tan Venturanza Valdez (2013 to date). He was formerly connected with Vicsal Investment, Inc. (2013) as a financial analyst and he is a Chartered Financial Analyst (CFA) level 1 passer. He was admitted to the Philippine bar in April 2013.
The names, ages, citizenship, present positions, previous positions, terms of office, and period served of all Executive Officers are as follows:
Bansan C. Choa, 59, Filipino Director, Chairman and Chief Executive Officer Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such 2005 to date
(see above for business experience and positions held under “Directors”)
Harris Edsel D. Jacildo, 52, Filipino Director, President and Chief Operating Officer Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such February 4, 2002 to date
(see above for business experience and positions held under “Directors”)
Ronald A. Benito, 43, Filipino Senior Vice President & Head, International Treasury Period Served as Such November 15, 2010 to date
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Mr. Benito joined I-Remit, Inc. in 2010 and currently heads the Company’s international treasury unit in charge of trading its foreign currencies. He was previously connected with ICAP AP (Singapore) as director of new business initiatives (2007-2010) and vice president and deputy treasurer of Banco Santander Central Hispano (2001-2004).
He obtained his bachelor of arts degree in economics cum laude from the University of Santo
Tomas in 1991. He obtained his master of arts degree in international relations (school of politics) in 2005 from the University of Durham, United Kingdom and his master of science degree in economics and international business in 2007 from City University London.
Ma. Elizabeth G. Yao, 44, Filipino Senior Vice President & Head, Service and Operations Division Period Served as Such August 12, 2002 to date
Ms. Yao joined I-Remit in 2002 and has since been in charge of its Service and Operations
Division. She was previously an equities sales officer of Belson Securities, Inc. (1997 – 2002). She was previously connected with the institutional sales group of Belson PrimeEast Capital (1996 – 1997) and was also a money market trader of the Security Bank Corporation (1995 – 1996).
She obtained her bachelor’s degree in business administration from the University of the
Philippines in 1994. She also attended the business administration program of the University of New Mexico (USA) from 1988 to 1990.
Bernadette Cindy C. Tiu, 35, Filipino First Vice President & Chief Financial Officer; Head, Finance Division Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such April 1, 2005 to date
Ms. Tiu has been the Chief Financial Officer of I-Remit since 2006. She was previously the
Finance Manager of IRemit Global Remittance Limited in the United Kingdom (2003) and International Remittance (Canada) Ltd. (2004), both wholly-owned subsidiaries of the Company. She joined I-Remit, Inc. in Manila in 2005 as Treasurer and Corporate Governance Head.
She obtained her bachelor’s degree in business administration (majored in accounting and
finance) from the Boston University School of Management in 2001. Fitzgerald S. Duba, 49, Filipino First Vice President & Compliance Officer; Head, Corporate Affairs and Information Division Term of Office July 19, 2013 until the next annual stockholders’ meeting Period Served as Such November 16, 2007 to date
Mr. Duba was a Vice President and the head of the Corporate Strategy Division of the Rizal
Commercial Banking Corporation (RCBC) from 2002 to 2005, where he was employed for 12 years. He was also a management consultant in the Management Services Division of SyCip Gorres Velayo & Co (SGV) and later, the Manila office of Andersen Consulting.
He obtained his bachelor’s degree in industrial engineering from the University of the
Philippines in 1987 and completed the basic banking course of the Asian Institute of Management in 1996. He also completed the corporate governance seminar of the Bangko Sentral ng Pilipinas (BSP) in 2000, and the corporate governance and anti-money laundering act seminar of the Philippine Securities Consultancy Corporation in 2012. He is a member of the Philippine Institute of Industrial Engineers.
Glenn L. Igual, 52, Filipino Vice President; Head, Information and Technology Services Division Period Served as Such September 6, 2010 to date
Mr. Igual joined I-Remit, Inc. in 2010 and currently heads the Company’s Information and
Technology Services Division in charge of Software solutioning and IT Infrastructure setup and management. He was previously connected with Ayala Systems Technology Inc. as General Manager for Trusted Hub Ltd’s Philippine business unit (2009 – 2010), and was the Corporate Secretary and a Director of Saffron Hill Phils., Inc. (2005 – 2010). He was formerly the Vice
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President of Information Technology Services of United Coconut Planters Life Assurance Corp. (2004 – 2008). He is also a Founder/Director of Cabana Fresh Moves Inc. (2008 to date).
He obtained his bachelor of arts degree in computer management from the Polytechnic
University of the Philippines in 1983. He completed his Strategic Business Economics Program in the University of Asia and the Pacific in 2004. He obtained his Fellow, Life Management Institute (FLMI) designation in 2003 from the Life Office Management Association (LOMA) in Atlanta, Georgia, a USA-based continuing education program and his IT Infrastructure Library (ITIL) certification in 2009.
Regina L. Shimamoto, 52, Filipino Vice President; Head, Human Capital Management Division Period Served as Such October 15, 2012 to date
Ms. Shimamoto joined I-Remit, Inc. in 2012 and currently heads the Company’s Human
Capital Management Division in charge of HR planning & acquisition, performance management, employee compensation & benefits, employee engagement, training, and organizational development. She was formerly the Training Manager; then the Recruitment & Training Manager; and eventually, the HR Director of Amanpulo resort by the Amanresorts (the luxury hotels group) in Pamalican Island, Cuyo, Palawan from 2008 to 2012. Her affiliation with the Philippine’s most premier resort started when she conducted weekend courses under the English for Specific Purposes programs (English for Hotels & Restaurants Professionals) for all frontliners of the resort from February 2006 to May 2007. Before then, Professor Shimamoto has also served as Faculty member in the Department of English and Applied Linguistics of the De La Salle University’s College of Education from 1998 to 2008, as Faculty member in the Languages Department of the University of Santo Tomas’ College of Arts & Letters from 2007 to 2008, as Lay Formator/Faculty member in the English Department of the Rogationist Seminary’s Father Hannibal Formation Center from 2001 to 2006, and as Faculty member in the Languages Department of the Philippine Christian University’s College of Arts, Sciences, & Social Work from 1993 to 1998.
She obtained her bachelor of arts degree in English from the Philippine Christian University,
Manila. Also, she has completed a Certification for Professional Education from 1991 to 1993 and the Master of Education in Language Teaching (TESL) from the University of the Philippines from 1993 to 1997, respectively. She has acquired some academic units under the Doctor of Philosophy in Applied Linguistics program from 2005 to 2007 in De La Salle University, Manila. Ms. Shimamoto has attended and completed several programs, seminars, and workshops on Human Resource & Labor Relations, change management, situational leadership, corporate training, organizational development, learning & development, and performance management from 2008 to present.
Alejandro B. Pepino, Jr., 45, Filipino Vice President; Head, Global Sales and Marketing Division Period Served as Such December 2, 2013 to date
Mr. Pepino joined I-Remit, Inc. in 2013 and currently heads the Company’s Global Sales and
Marketing Division. He was previously employed with Procter & Gamble (P&G) and its distributor companies in the Philippines, Brunei, Malaysia, Singapore and Vietnam in various capacities in marketing and operations from 2003 to 2013. Prior to P&G, he had stints with Wella Philippines, Edward Keller (now Diethelm Philippines), the Tosoh Polyvin Company (TPC), and First Pacific Davies Philippines, among others, all in sales and marketing operations functions.
He obtained his bachelor of science in management degree (majored in legal management) from the Ateneo de Manila University in 1989. He finished top of the class in his Marketing Diploma at the Ateneo de Manila Graduate School of Business in 2008 as part of completing his Regis-Executive MBA curricula from 2007-2009.
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(2) Significant Employees There is no person other than the entire human resources as a whole, and the executive
officers who are expected to make a significant contribution to the Company.
(3) Family Relationships Directors Ben C. Tiu, John Y. Tiu, Jr. and Ruben C. Tiu are brothers. Bernadette Cindy C. Tiu,
First Vice President and Chief Financial Officer of the Company, is a daughter of Director Ben C. Tiu.
There are no other family relationships among the directors or the officers listed.
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(4) Involvement in Certain Legal Proceedings As a result of the delay in the delivery of the facilities of the Universal Leisure Club, Inc. (ULC),
some of its members initiated legal actions against ULC, the Universal Rightfield Property Holdings, Inc. (URPHI) and the Universal Leisure Corp. (ULCorp), as well as their respective officers and directors, including their former Corporate Secretary, A. Bayani K. Tan, an incumbent Director of I-Remit, Inc. The cases filed include:
i. a Complaint for Syndicated Estafa (docketed as I.S. No. 02-50443-F), which was
dismissed on 18 June 2003 by the City Prosecutor of Mandaluyong City for lack of probable cause and which dismissal was affirmed on 26 May 2004 by the Department of Justice on a Petition for Review filed by the complainants;
ii. a criminal case for Estafa and Large-Scale Swindling (docketed as Criminal Case No. Q02-114052) before the Regional Trial Court (RTC) of Quezon City, which was dismissed by the RTC in its Omnibus Order dated 29 November 2005 and which dismissal was affirmed with finality on 22 February 2007 by the RTC due to complainant’s failure to file a proper notice of appeal within the prescribed period;
iii. another Complaint for Estafa (I.S. No. 08K-89713), which was submitted for resolution in
2009 was only acted upon and dismissed by the Office of the City Prosecutor of Manila on March 18, 2013;
iv. Civil actions for breach of contract and/or annulment of contract, specific performance,
quieting of title and reimbursement, damages with request for receivership and preliminary attachment (Civil Case Nos. MC03-075, MC03-77 and MC04-082) before the RTC of Mandaluyong City, which cases have been settled and the RTC Mandaluyong has on March 6, 2006, promulgated a Joint Decision approving the settlement agreement. However, while the main cases have been settled, a group of ULC members who were not included in the settlement and were not in favor of its terms initiated suit to nullify the same. RTC Mandaluyong rejected moves to assail the settlement, prompting this group to elevate their complaint to the Court of Appeals. The Court of Appeals partially granted the group’s prayer and revived the writs of attachment and garnishment but only to such extent as to cover the remaining claims (P10,423,724.00), which ruling was affirmed by the Supreme Court in its Resolution dated 16 November 2009.
On October 11, 2012, the same group of people who were not included in the settlement filed
a Motion for Re-Issuance of Writs of Attachment and Garnishment in SEC Case No. MC-03-075, which the RTC-Mandaluyong, Branch 211 granted in an Order dated 28 November 2013. This Order is still the subject of a Motion for Reconsideration that has yet to be resolved by the Court. Atty. Tan moved for the dismissal of the case on plaintiff’s failure to prosecute the same, but the RTC Mandaluyong denied his motion, Atty. Tan then filed a Petition for Certiorari with the Court of Appeals.
Except as provided above, the Company is not aware of any of the following events wherein any of its directors, executive officers, nominees for election as director, executive officers, underwriter or control persons were involved during the past five (5) years up to the latest date.
(1) Any bankruptcy petition filed by or against any business of which any of the above
persons was a general partner or executive officer either at the time of bankruptcy or within two years prior to that time;
(2) Any order or judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any of the above persons in any type of business, securities, commodities, or banking activities; and
(3) Any findings by a domestic or foreign court of competent jurisdiction (in civil action), the
SEC or comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self-regulatory organization, that any of the above persons has violated a securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
The Company and its major subsidiaries and associates are not involved in, nor are any of
their properties subject to, any material legal proceedings that could potentially affect their operations and financial capabilities.
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Item 10. Executive Compensation
(B) Executive Compensation (1) Summary Compensation Table The following table summarizes the aggregate compensation paid or accrued during the last
two (2) calendar years and to be paid in the ensuing calendar year to the Company’s Chief Executive Officer and four (4) other most highly compensated officers:
Year Name Principal Position Aggregate
Compensation Bansan C. Choa Chairman & CEO Harris E. D. Jacildo President & COO Ma. Elizabeth G. Yao SVP Ronald A. Benito SVP Bernadette Cindy C. Tiu FVP & CFO
16,402,379.89
2014 (Estimate)
All other officers and directors as a group unnamed 13,717,261.21 Bansan C. Choa Chairman & CEO Harris E. D. Jacildo President & COO Ma. Elizabeth G. Yao SVP Ronald A. Benito SVP Bernadette Cindy C. Tiu FVP & CFO
15,157,209.06
2013 (Actual)
All other officers and directors as a group unnamed 12,848,634.27 Bansan C. Choa Chairman & CEO Harris E. D. Jacildo President & COO Ma. Elizabeth G. Yao SVP Ronald A. Benito SVP Bernadette Cindy C. Tiu FVP & CFO
10,818,309.75
2012 (Actual)
All other officers and directors as a group unnamed 12,565,764.12
(2) Compensation of Directors The directors receive per diems for attendance in meetings of the Board but do not receive
compensation from the Company for services rendered. There are no other standard arrangements, including consultancy contracts, pursuant to which any Director of the Company was compensated, or is to be compensated, directly or indirectly, for any services provided as a Director, including any additional amounts payable for committee participation, or special assignments, during the Company’s last completed fiscal year, and the ensuing year.
(3) Employment Contracts and Termination of Employment and Change-in-Control Arrangements There was no compensatory plan or arrangement with respect to named Executive Officers
that resulted or will result from the resignation, retirement or termination of such executive officer from a change-in-control of the Company.
(4) Warrants and Options Outstanding: Repricing No warrants or options on the Company’s shares of stock have been issued to the Directors or
Executive Officers as a form of compensation for services rendered.
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Item 11. Security Ownership of Certain Beneficial Owners and Management
(1) Security Ownership of Certain Record and Owners The following are known to the registrant to be directly or indirectly the record or beneficial owner of
more than five per cent (5%) of registrant’s voting securities (registrant has only one class of voting security, i.e., common shares) as of December 31, 2013:
Class
Name and Address of Record Owner and Relationship with
Issuer
Name and Address of Beneficial Owner and
Relationship with Record Owner Citizenship
Number of Shares
Per cent Held
Common PCD Nominee Corporation G/F Makati Stock Exchange
Building, 6767 Ayala Avenue, Makati City
(stockholder)
(Please see note below) Filipino 228,347,410¹ 36.96582
Common Star Equities Inc. 2/F JTKC Center
2155 Pasong Tamo Makati City
Same as record owner Filipino 180,308,109 29.18902
Common Surewell Equities, Inc. 690-A Quirino Ave.
Tambo, Paranaque City
Same as record owner Filipino 138,907,659 22.48694
Common JTKC Equities, Inc. 2/F JTKC Center
2155 Pasong Tamo Makati City
Same as record owner Filipino 49,429,298 8.00182
NOTE: PCD Nominee Corporation (“PCDNC”) is a wholly-owned subsidiary of the Philippine Central Depository, Inc. The
beneficial owners of such shares of the Company registered under the name of PCDNC are PCD’s participants who hold the shares in there own behalf or in behalf of their clients. No PCD participant currently owns more than five per cent (5%) of the Corporation’s shares forming part of the PCNDC account except Fidelity Securities, Inc., viz:
Class Name and Address of Owner and Relationship with Issuer Citizenship Number of Shares Per cent Held
Common
Fidelity Securities, Inc.* 2/F JTKC Centre
2155 Pasong Tamo, Makati City
Filipino
150,117,080²
24.30157
* Fidelity Securities, Inc. (“Fidelity”) is a registered broker and dealer in securities and holds the shares of the Company in favor of beneficial
owners who hold the shares in their own behalf or on behalf of their respective clients. Includes 4,562,000, 10,000,000 and 10,000,000 Treasury shares purchased from the stock market under the Buy-back Program that were
approved by the Board on September 21, 2012, September 16, 2011 and August 15, 2008, respectively, and excludes 20,272,322 shares, net of withholding tax in the form of shares, distributed as property dividend on October 14, 2013. 2 Includes 82,137,070 shares in favor of beneficial owner JTKC Equities, Inc. which owns a total of 131,566,368 shares or per cent held of 21.29851% and 5,382,546 shares in favor of beneficial owner Surewell Equities, Inc. which owns a total of 144,290,205 shares or per cent held of 23.35829%.
As required by the Amended Rule on Minimum Public Ownership of The Philippine Stock Exchange, Inc., Article XVIII, Section 3. (e), the level of the Company’s public float is 22.34694% as of December 31, 2013.
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(2) Security Ownership of Management (Individual Directors and Executive Officers)
Title of Class Name of Beneficial Owner Number of Shares
Nature of Legal & Beneficial Ownership Citizenship
Per cent of Class
883,563 Direct 0.14303 Common Bansan C. Choa 41,964,094 Indirect Filipino 6.79332 Common Armin V. Demetillo 56,831 Direct Filipino 0.00920 Common Harris Edsel D. Jacildo 18,490 Direct Filipino 0.00299 Common Calixto V. Chikiamco 113 Direct Filipino 0.00002 939,470 Direct 0.15209 Common Gilbert C. Gaw 10,093,568 Indirect Filipino 1.63399 Common Jose Joel Y. Pusta 113 Direct Filipino 0.00002 Common A. Bayani K. Tan 586,779 Direct Filipino 0.09499 1,232,037 Direct 0.19945 Common Ben C. Tiu 15,983,881 Indirect Filipino 2.58754 429,877 Direct 0.06959 Common Ruben C. Tiu 15,983,881 Indirect Filipino 2.58754 79,190 Direct 0.01282 Common John Y. Tiu, Jr. 15,983,881 Indirect Filipino 2.58754 Common Gregorio T. Yu 113 Direct Filipino 0.00002 159,831 Direct 0.02587 Common Bernadette Cindy C. Tiu 481,535 Indirect Filipino 0.07795
The aggregate number of shares owned of-record by all Directors and Executive Officers as a group
named herein as of December 31, 2013 is 104,877,247 common shares or approximately 16.97796% of the Company’s common shares. This includes the indirect ownership of 100,490,840 shares representing 16.26787% of the Company’s common shares.
(3) Voting Trust of 5% or More The Company is not aware of any voting trust agreement executed granting any person the right to
exercise the voting rights of a holder of 5% or more of the securities.
(4) Changes In Control There are no arrangements, existing or otherwise, which may result in a change in control of the
Company.
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Item 12. Certain Relationships and Related Party Transactions
A related party is a person or entity that is related to the Group that is preparing its financial statements. A
person or a close member of that person’s family is related to Group if that person has control or joint control over the Group, has significant influence over the Group, or is a member of the key management personnel of the Group or of a parent of the Group. An entity is related to the Group if any of the following conditions applies: • The entity and the Group are members of the same group (which means that each parent, subsidiary
and fellow subsidiary is related to the others). • One entity is an associate or joint venture of the other entity (or an associate or joint venture of a
member of a group of which the other entity is a member). • Both entities are joint ventures of the same third party. • One entity is a joint venture of a third entity and the other entity is an associate of the third entity. • The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity
related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.
• The entity is controlled or jointly controlled by a person identified above. • A person identified above has significant influence over the entity or is a member of the key
management personnel of the entity (or of the entity).
Close members of the family of a person are those family members, who may be expected to influence, or be influenced by, that person in their dealings with the Group and include that person’s children and spouse or domestic partner; children of that person’s spouse or domestic partner; and dependents of that person or that person’s spouse or domestic partner. A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Nature of relationship of the Group and its related parties are disclosed below:
Related Parties Nature of Relationship Hwa Kung Hong & Co., Ltd.(HKHCL) Associate Sterling Bank of Asia, Inc. (A Savings Bank) Under common controlling party Oakridge Properties, Inc. Under common controlling party Surewell Equities, Inc. Investor with significant influence Stockholders Key Management Personnel
Due from Related Parties Balance of due from related parties as shown in the consolidated statement of financial position are summarized per category as follows:
Associate December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding Volume Balances Volume Balances HKHCL Remittance PHP 5,340,222,739 PHP 52,254,154 PHP 5,155,165,031 PHP 60,187,956 Due from 2,894,979 5,049,427 5,223,594 8,192,341 Delivery fees 46,232,429 561,058 47,715,373 2,130,587
The following are the nature, terms and conditions of the following accounts:
• Remittance pertains to the principal amount of transaction accepted by a foreign associate office from a
remitter, delivery of which is fulfilled by the Group to intended beneficiary in the Philippines. Account is collectible within five (5) days from date of transaction.
• Delivery fees are the share in service fees collected by the foreign subsidiary office along with the principal amount of transaction. Account collected within five (5) days from date of transaction.
• Due from account refers to operating funds and marketing materials advanced to foreign associate offices. Account is collectible within thirty (30) days from date of funding.
The amounts outstanding are non-interest bearing, unsecured, collectible on demand and will be settled in cash. No guarantee was required. No provision made for doubtful accounts as these accounts are all collectible.
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Key Management Personnel December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding Category Volume Balances Volume Balances Advances PHP 6,242 PHP 7,533,281 PHP 3,779,592 PHP 7,045,214
Advances pertain to sum of money advanced to key management personnel subject to liquidation within the
Company’s prescribed period of liquidation. The amount outstanding is non-interest bearing, unsecured, collectible on demand and will be settled in cash. There is no guaranty required and no provision was made for doubtful account as the account is deemed collectible.
Investor with Significant Influence December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding Category Volume Balances Volume Balances Rental PHP 889,134 PHP - PHP 898,920 PHP 254,182
Pertains to the cost of rental paid to Surewell Equities Pte. Ltd. (SEPL) for the sharing of its office in
Singapore with the Group under a sublease agreement. SEPL is a foreign subsidiary office of Surewell Equities, Inc., one of the principal stockholders of the Group. There is no security deposit paid and without provision for escalation. Rent is paid monthly.
Due to Related Parties
Balance of due to related parties as shown in the consolidated statement of financial position are
summarized per category as follows: Key Management Personnel December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding Category Volume Balances Volume Balances Key management personnel PHP - PHP - PHP 218,417 PHP 218,417 Stockholders - 7,289,480 4,896,570 7,289,480 PHP - PHP 7,278,480 PHP 5,114,987 PHP 7,507,897
Advances from stockholders pertain to net amount of advances resulted from reclassification of investment in
associate and accumulated dividend income amounting to PHP 12.6 million and PHP19.88 million, respectively. The amounts outstanding are unsecured, non-interest bearing, payable on demand and will be settled in cash. No guarantees have been given in respect of the amounts owed to related party.
Other Related Parties
Balance of other related parties as shown in the consolidated statement of financial position are summarized
per category as follows: Under Common Controlling Parties December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding Category Volume Balances Volume Balances Sterling Bank of Asia, Inc. PHP 280,083 PHP - PHP 384,536 PHP - Oakridge Properties, Inc. 13,885,207 - 11,421,505 -
Sterling Bank of Asia pertains to income earned from depositary accounts in Peso and USD (FCDU)
maintained at Sterling Bank of Asia (SBA), an affiliate of the Group through common controlling stockholders. Principal stockholders of SBA and the Group are JTKC Equities, Inc., Star Equities, Inc., and Surewell Equities, Inc. The Group deposits the amounts to PHP 113.04 million, PHP 126.86 million, and PHP 193.04 million with Sterling Bank of Asia, Inc. (A Savings Bank) as of December 31, 2013, 2012 and 2011, respectively. These deposits earned interest income amounting to PHP 0.28 million, PHP 0.38 million, and PHP 0.42 million in 2013, 2012 and 2011, respectively.
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Oakridge Properties, Inc. pertains to the cost of rental paid to Oakridge Properties, Inc. (OPI) by the Group for the use of office spaces at Discovery Centre, a building owned by OPI, an affiliate of the Group. OPI is owned by The Discovery Leisure Company Inc, (TDLCI), an entity owned by JTKC Equities, Inc, and JTKC Realty Corporation. Lease contract with OPI includes security deposit of two months and one month advance rental. Rent is paid monthly with provision for yearly escalation. Rent expense amounted to PHP 13.88 million, PHP 11.42 million, and PHP 9.2 million for 2013, 2012 and 2011, respectively.
Remuneration of Key Management Personnel The remuneration of the directors and other members of key management personnel of the Group is set out
below in aggregate for each of the categories specified in PAS 24, Related Party Disclosures: 2013 2012 2011
Short-term employee benefits PHP 36,117,237 PHP 31,659,537 PHP 27,036,984 Retirement benefits 1,877,723 1,260,378 1,571,444 37,994,960 32,919,915 28,608,428
Transaction with Retirement Fund The Group’s retirement benefit fund is maintained with Sterling Bank of Asia, Inc. (A Savings Bank), an
affiliate due to common stockholders, as trustee. The carrying amounts and fair values of the fund amounted to PHP 33.47 million and PHP 30.30 million as of December 31, 2013 and 2012, respectively. The funds were invested in private equity securities, deposits in banks and government debt securities. In 2013 and 2012, the Group made contributions to the fund amounting to PHP 2.06 million and PHP 6.15 million, respectively Private equity securities includes PHP 808,100 of the Group’s own equity securities bought back from resigned employees who held such securities, under the special stock purchase program. Such transaction was authorized by the Board of Directors of I-Remit Inc. through its SSP program. The government debt securities consist of peso denominated and USD denominated securities. The Peso-denominated Government Securities of the I-Remit Retirement Fund were purchased from accredited counterparties of SBA-Trust Group. These counterparties are Banks and Investment Houses allowed to trade government securities. Existing Peso GS accounts are all Tax exempt and are currently lodged under the Tax Exempt RoSS Account of SBA-Trust Group with the Bureau of the Treasury (BTr). The USD denominated debt securities are currently lodged with the Philippine Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s accredited counterparties that are allowed to trade government securities.
The law firm of Tan Venturanza Valdez is among the firms engaged by the Company to render legal services. Atty. A. Bayani K. Tan, a Director of the Company, is a managing partner of this firm while Atty. Anna Francesca C. Respicio, the Corporate Secretary, and Atty. Adrian Francis S. Bustos, Assistant Corporate Secretary, are associates. During the year, the Company paid Tan Venturanza Valdez certain legal fees that the Company believes to be reasonable for the services rendered.
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PART IV. CORPORATE GOVERNANCE
Pursuant to Item V. of SEC Memorandum Circular No. 5, Series of 2013: Annual Corporate Governance Report, dated March 20, 2013, the Corporate Governance section in this Annual Report (SEC Form 17-A) has been deleted.
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PART V. EXHIBITS AND SCHEDULES The other exhibits, as indicated in the Index to Exhibits, are either not applicable to the Company or require no answer. (a) Exhibit A – Aging of Consolidated Receivables, Unaudited, December 31, 2013 (b) Reports on SEC Form 17-C Reports under SEC Form 17-C (Current Report) that were filed during the last six (6) months covered
by this report and first quarter 2014:
Date Report July 19, 2013 Election of directors in the 2013 Annual Stockholders’ Meeting and the appointment of officers
and committee members in the subsequent organizational meeting of the Board of Directors Elected members of the Board of Directors “Please be advised that during the annual stockholders’ meeting of I-Remit, Inc. (the “Corporation”) held today, the following were elected as members of the Board of Directors of the Corporation for the year 2013-2014, to hold office as such until their successors shall have been duly elected and qualified:
Jose Joel Y. Pusta - Independent Director Gregorio T. Yu - Independent Director Calixto V. Chikiamco - Director Bansan C. Choa - Director Armin V. Demetillo - Director Gilbert C. Gaw - Director Harris E. D. Jacildo - Director A. Bayani K. Tan - Director Ben C. Tiu - Director John Y. Tiu, Jr. - Director Ruben C. Tiu - Director
During the same meeting, the shareholders approved the audited financial statements of the
Corporation as of year-end 2012, as well as the re-appointment of R.S. Bernaldo & Associates as the Corporation’s external auditor for the year 2013. Further, the shareholders approved the amendment of the Corporation’s primary purpose wherein the Corporation will no longer be limited to engaging in ”spot” foreign currency transactions and will be able to engage in financial derivatives activities such as foreign currency swaps, forwards, options or other similar instruments. The amendment of the primary purpose will enable the Corporation to, among others, hedge against foreign exchange fluctuations and the resulting risk therefrom. The amendment, however, does not include activities that require new licenses and/or permits from the Bangko Sentral ng Pilipinas. The amendment will likewise not change the core business of the Corporation, which is to engage in fund transfer and remittance services from abroad and into the Philippines, or otherwise. Finally, the shareholders approved the declaration of property dividends of 20,587,000 shares of the Corporation lodged as Treasury Shares, with any fractional shares accruing to a shareholder to be paid in cash based on the market value of the stock of the Corporation on the date of declaration. The record date for the property dividend is on 16 August 2013, with the payment thereof to be made not later than thirty (30) days after record date and subject to the approval of the Securities and Exchange Commission.
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In the organizational meeting of the Board of Directors held after the shareholders’ meeting, the following persons were elected officers of the Corporation for the year 2013-2014, to serve as such until their successors shall have been duly elected and qualified:
Bansan Choa - Chairman and Chief Executive Officer Harris E. D. Jacildo - President and Chief Operating Officer Maria Cecilia V. Soria - Corporate Secretary Emma Theresa M. Cabochan - Assistant Corporate Secretary Bernadette Cindy C. Tiu - First Vice-President and Chief Financial Officer Fitzgerald S. Duba - Compliance Officer
Also, during the aforesaid organizational meeting of the Board, the following directors were
elected as members of the various Committees for the year 2013-2014, to serve as such until their successors shall have been duly elected and qualified:
Executive Committee 1. Armin V. Demetillo (Chairman)
2. Bansan C. Choa 3. Gilbert C. Gaw 4. Harris E. D. Jacildo 5. Ben C. Tiu
Audit and Risk Committee 1. Gregorio T. Yu (Chairman)
2. Bansan C. Choa 3. John Y. Tiu, Jr. 4. Harris E. D. Jacildo
Nomination Committee 1. Bansan C. Choa
2. Armin V. Demetillo 3. Gregorio T. Yu
Compensation & Remuneration Committee 1. Bansan C. Choa
2. Armin V. Demetillo 3. Gregorio T. Yu”
August 16, 2013 Resignation and Appointment of Corporate Secretary and Assistant Corporate Secretary “On August 16, 2013, the Company‘s Board of Directors accepted the resignation of Atty. Maria Cecilia V. Soria as Corporate Secretary effective immediately in view of her resignation from the Tan Venturanza Valdez Law Offices. In the same meeting, the Board appointed Atty. Anna Francesca C. Respicio as the Corporate Secretary of the Company effective August 16, 2013 to serve as such until her successor shall have been duly elected and qualified. Atty. Adrian Francis S. Bustos was appointed as Assistance Corporate Secretary of the Company vice Atty. Emma Theresa M. Cabochan, who likewise resigned as Assistant Corporate Secretary.”
December 2, 2013 I-Remit signed MOA with COL Financial Group, Inc. February 13, 2014 Certificates of Attendance to Corporate Governance Seminar pursuant to SEC Memorandum
Circular No. 20, Series of 2013 “Certificates of attendance to corporate governance training with SEC-accredited training provider issued by The Institute of Corporate Directors to Mr. John Y. Tiu, Jr., Director, and Ms. Bernadette Cindy C. Tiu, Chief Financial Officer, of IRemit, Inc. in relation to the Distinguished Corporate Governance Speaker Seminar Series held on 05 February 2014 in Makati City.”
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86
February 20, 2014 Incorporation of I-REMITTANCE SINGAPORE PTE. LTD. February 24, 2014 Supplement to Previous Disclosure Re: Incorporation of I-REMITTANCE SINGAPORE PTE. LTD.
as a remittance company “Further to our disclosure dated 20 February 2014, kindly be advised that the operation of I-REMITTANCE SINGAPORE PTE. LTD. as a remittance company is subject to the approval of and granting of a license by the Monetary Authority of Singapore pursuant to the Money-Changing and Remittance Businesses Act (Cap. 187) of Singapore.”
March 21, 2014 Board Approval of Amendment of Principal Office Address
“At today's meeting of the Board of Directors of the Corporation, the Board approved the
amendment of the Corporation's principal office address pursuant to SEC Memorandum Circular No. 6, Series of 2014 as follows:
Article No. From To
THIRD
The principal office of the Corporation shall be established or located in Metropolitan Manila, Philippines.
The principal office of the Corporation shall be established or located at 26th Floor Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City, Metro Manila, Philippines.
The amendment shall be submitted for approval of the stockholders during the Corporation's annual stockholders' meeting sometime in July 2014.”
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Exhibit A
Total Current 2-30 Days 31-60 Days Over 60 DaysAgents 887,106,502 873,354,678 - - 13,751,824 Couriers 122,931,916 - 122,931,916 - - Related Parties 7,077,655 - 7,077,655 - - Others 632,149,553 570,045,046 62,104,507 - -
1,649,265,626 1,443,399,724 192,114,078 - 13,751,824
I-REMIT, INC. AND SUBSIDIARIESAging of Consolidated Receivables
UnauditedDecember 31, 2013
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SIGNATURES
Pursuant to the requirements of Section 17 of the Code and Section 14 of the Corporation COd~~ r~ort is si9nedon behalf of the Issuer by the undersigned, thereunto duly authorized, in the City of Pasig on I'( 1 5 20J.014.
By:
ANNA FRANCE CA C. RESPICIOCorporate Secretary
SUBSCRIBED AND SWORN to before me this ~R 1 5 201~ , affiants exhibiting to me theirCommunity Tax Certificates (CTG) and Competent Evidences of Identity (CEI) as follows:
Name CTC No.; Date and Place of Issue CEIBANSANC. CHOA 25030291; January6,2014; ParafiaqueCity TIN 159-305-537HARRIS E. D. JACILDO 27971406; January 16,2014; PasigCity TIN 126-967-441BERNADETTECINDYC. TIU 27971412; January 16,2014; PasiqCity TIN 203-338-548ANNA FRANCESCAC. RESPICIO 34260627; January 13, 2014; City of Manila TIN 419-191-112ANALIE M. ANGELES 27968496; January 16,2014; PasiqCity TIN 102-789-384
Document No.Page No.Bool< No.Series of 2014.
MARIO Itar 'blic or
Pasig City, an Juan. gui9 & PaterosAppointment No. 296 (2013-2014)
Commission Expires on December 31. 20142704 East Tower, PSE Centre Exchange Road
Ortrqas Center 1605 Pasiq CItyPTR No. 9443772 I 01.02.2014 I Quezon CityIBP No 945761 112.272013 Quezon C,ty
Roll No. 62170
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STATEMENT OF MANAGEMENT'S RESPONSIBILITYFOR CONSOLIDATED FINANCIAL STATEMENTS
www.myiremit.com'fI~!JllrThe Management of I-REMIT INC. AND SUBSIDIARIES is responsible for the preparation and fairpresentation of the financial statements for the years ended December 31, 2013 and 2012,including the additional components attached therein, in accordance with the Philippine FinancialReporting Standards. This responsibility includes designing and implementing internal controlsrelevant to the preparation and fair presentation of financial statements that are free from materialmisstatement, whether due to fraud or error, selecting and applying appropriate accountingpolicies, and making accounting estimates that are reasonable in the circumstances.
The Board of Directors reviews and approves the financial statements and submit the same to thestockholders.
R.S. Bernaldo & Associates, the independent auditors, appointed by the stockholders, hasexamined the financial statements of the Company in accordance with Philippine Standards onAuditing, and in its report to the stockholders has expressed its opinion on the fairness ofpresentation upon completion of such examination.
NSAN C. CHOAChairma and Chief Executive Offic
)
"
I-Remit, Inc.26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City 1605 PhilippinesTelephone: (632) 706-9999 and (632) 706-2737Facsimile: (632) 706-2767
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SUBSCRIBED AND SWORN to before me this MAR 2 7 2J:b\i., affiants exhibitingto me their Community Tax Certificates (CTC) and Competent Evidences of Identity (CEI) asfollows:
Name CTC No., Date and Placeof Issue CEIBANSAN C. CHOA 25030291; January 6, 2014; Parariaque TIN 159-305-537
CityHARRISE. D. JACILDO 27971406; January 16, 2014; PasigCity TIN 126-967-441BERNADETTECINDY C. TIU 27971412; January 16, 2014; PasigCity TIN 203-338-548
Document No.Page No.Book No.Series of2014.
I
;iel S. BUSTOSNotary Public for
Pasl City, Sa" Juan, Tagu'\J s PaterosApPOintment No. 294 (2013-2014)
Comr.llss,,·,., E~pi:es on O,=<cembei 31 20142704 East Tewf'''' PS'" C '
I ••••. ~ e; entre EXGhange RoadOrt,g<1s Center 1605 Pa''Ig Ct' ,PTR •• - Ji 'f
,'0.9443170 101.02 ..2014 I Pasig CityIBPNo 945762/12.27.2013 Pampan.a
Roll No. 62610 9
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A 2 0 0 1 0 1 6 3 1
I - R E M I T I N C . A N D S U B S I D I A R I E S
2 6 ⁄ F D I S C O V E R Y C E N T R E
2 5 A D B A V E N U E , O R T I G A S C E N T R E
P A S I G C I T Y
1 2 3 1 A F S 0 7 3 1
Dept. Requiring this Doc.
Total No. of Stockholders
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Remarks = pls. Use black ink for scanning purposes
Month Day
Fiscal Year
Day
COVER SHEET
Total Amount of Borrowings
Amended Articles Number/Section
FORM TYPE
(Company's Full Name)
S.E.C. Registration Number
(Business Address: No. Street City/Town/Province)
Contact Person
Annual Meeting
Company Telephone Number
Mr. Bansan C. Choa 706-9999
Secondary License Type, If Applicable
STAMPS
Domestic
To be accomplished by SEC Personnel concerned
LCUFile Number
Month
CashierDocument I.D.
Foreign
18
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RSBA R.S. BERNALDO & ASSOCIATES worldwide
INDEPENDENT AUDITORS' REPORT
The Board of Directors and StockholdersI-REMIT INC. AND SUBSIDIARIES26/F Discovery Centre, 25 ADB AvenueOrtigas Centre, Pasig City
We have audited the accompanying consolidated financial statements ofI-REMIT INC. AND SUBSIDIARIES, which comprise the consolidated statements of financialposition as of December 31, 2013 and 2012, and the consolidated statements ofcomprehensive income, statements of changes in equity and statements of cash flows forthe years then ended and a summary of significant accounting policies and other explanatoryinformation.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with Philippine Financial Reporting Standards, and forsuch internal control as Management determines is necessary to enable the preparation ofconsolidated financial statements that are free from material misstatement, whether due tofraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements basedon our audit. We conducted our audit in accordance with Philippine Standards on Auditing.Those standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the consolidated financial statementsare free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and,disclosures in the consolidated financial statements. The procedures selected depend on theauditors' judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity's preparation andfair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the entity's internal control. An audit also includes evaluating theappropriateness of accounting policies used and the.reasonableness of accouritinq estimatesmade by management, as well as evaluating the ote:ran~,preseniati6.h"of 'tl)8 consolidated~ . -.. .' . , , '.financial statements. ~LAi~u;~';.:.~; .
i ~ '.'~ !. .)~. ..,'! ,J •. ~'
:~a~~~i~~~ ~~;:~:~t ~~1~~0~~idencewe have Obtairf\Jd'i~t~i~:n:" ~ &J:~~~oprial~ 10 provide
'-""-"'4" 'I !./\.,'>1 .-J~ __ ~_""t:~:><r ••fr..-~"""'''· .••• ,,;~
RSBA20YEARS
A: 18/F Cityland Condominium 10 Tower 1156 HV dela Costa Street, Ayala North,
Makati City, Philippines 1226
T: +632812-1718 to 24
F: +632 813-6539
E: rsbassoceorsbernaldo.corn
W: www.rsbernaldo.corn
BOA/PRe No. 0300SEe Group A AccreditedSSP Group B AccreditedCDA CEA Accreditedrc Accredited
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Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of I-REMIT INC. AND SUBSIDIARIES as of December 31, 2013 and2012, and its financial performance and cash flows for the years then ended in accordancewith Philippine Financial Reporting Standards.
Emphasis of Matter
We draw attention to Notes 34 and 35 to the consolidated financial statements whichdescribe the correction of prior period error and impact of transition to revised PAS 19Employee Benefits on the date of transition to retained earnings and prior year's profit,respectively. Our opinion is not qualified in respect of this matter.
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Other Matter
The consolidated financial statements of the Group as of December 31, 2011(not presented herein), were audited by another auditor whose report dated March 23,2012, expressed an unqualified opinion on those statements. As part of our audit of the2013 financial statements, we also audited the adjustments described in Notes 34, 35 and36 that were applied to the Consolidated Statement of Financial Position as at December 31,2011 to come up with the Consolidated Statement of Financial Position as at January 1,2012 (presented herein as corresponding figures). In our opinion, such adjustments areappropriate and have been properly applied. We were not engaged to audit, review, or applyany procedures to the 2011 consolidated financial statements of the Group other than withrespect to the adjustments and, accordingly, we do not express an opinion or any other formof assurance on the 2011 consolidated financial statements taken as a whole.
R.S. BERNALDO & ASSOCIATESBOA/PRC No. 0300Valid until December 31, 2015SEC Group A AccreditedAccreditation No. 01 53-FR-1Valid until September 13, 2014BSP Group B AccreditedValid until February 14, 2014CDA CEA No. 0013-AFValid until November 17, 2016IC Accreditation No. F-2013/002-0Valid until March 26, 2016
Roms~oManaging PartnerCPA Certificate No. 25927SEC Group A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSP Group B AccreditedValid until February 14, 2014BIR Accreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No. 109-227-722PTR No. 4232656Issued on January 6, 2014 at Makati City or'
, '{ t _ '1
.__ 1March 21,2014
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I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITIONDecember 31, 2013, 2012 and 2011(In Philippine Peso)
APR /1 !2014V /
£ay·
~.Ctl~ifL$OeJtCl10 ~EVIEWOFFn, •••••.•D CONTF~TS
NOTES 2013
2012(As re-stated)
2011(As re-stated)
ASSETS
Current AssetsCash and cash equivalentsTrade and other receivablesFinancial assets at fair value through profit or lossPrepayments and other current assets
7 943,316,542 1,062,120,047 891,235,6238 1,649,265,626 1,192,359,836 1,031,284,1469 247,300,331 210,180,347 125,226,26410 22,296,614 23,901,932 28,928,836
2,862,179,113 2,488,562,162 2,076,674,869
Non-current AssetsInvestment in an associateProperty and equipment - netIntangible assets - netRetirement assetDeferred tax assetsOther non-current assets
11 6,185,346 4,923,587 4,111.88512 27,057,295 23,495,462 19,207,45813 112,091,619 112,893,853 112,892,13523 11,188,217 2,214,90430 10,998,664 7,236,232 5,549,27614 30,082,214 31,413,351 38,904,367
197,603,355 182,177 ,389 180,665,121
3,059,782,468 2,670,739,551 2,257,339,990TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current LiabilitiesBeneficiaries and other pay abiesAdvances from stockholdersIncome tax payableLoans payable
TOTAL STOCKHOLDERS' EQUITY
15 784,325,185 519,839,277 240,081,15226 7,289,480 7,289,480 2,392,910
8,951,967 1,801,235 6,563,87716 988,000,000 925,000,000 666,000,000
1,788,566,632 1,453,929,992 915,037,939
30 3,441,341 1,375,408 388,391708,356
3,441,341 1,375,408 1,096,747
1,792,007,973 1,455,305,400 916,134,686
17 617,725,800 617,725,800 617,725,800
17 391,232,478 391,232,478 391,232,4 78
261,003,338 244,404,181 350,092,189
17 12,400,309 69,209,688 52,987,208. (37:'t!t' ~17 r (9,401,345) (16,517,663)
Ii j. f' ~
23 Lll,~vr.i24 .. (7 ,680) (1,327,500)
17 (12,400,309) (69, 9,688) (52,987,208)J' ., •••• It
1,26"'7:'1'74,495 "1,215,434, 51 1,341,205,304
2,67-9,739,59-1 2,257,339,990
Non-current LiabilitiesDeferred tax liabilitiesRetirement benefit obligation
TOTAL LIABILITIES
S T 0 C K H 0 L D E R S' E QUI T Y
Capital Stock
Additional Paid-in Capital
Unappropriated Retained Earnings
Appropriated Retained Earnings
Cumulative Translation Adjustment
Remeasurements
Treasury Stock
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(See Notes to Consolidated Financial Statements)
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I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the Years Ended December 31,2013,2012 and 2011[ln Philippine Peso)
2012 2011NOTES 2013 (As re-stated) (As re-stated)
REVENUES 18 802,870,625 771,640,852 787,859,505
COST OF SERVICES 19 214,985,968 209,915,076 199,427,305
GROSS PROFIT 587,884,657 561,725,776 588,432,200
NET TRADING GAINS (LOSSES) 9 (8,106,121 ) 17,583,669 (3,064,068)
OTHER INCOME 20 29,894,265 15,948,890 43,678,138
609,672,801 595,258,335 629,046,270
OPERATING EXPENSES 21 498,741,941 496,506,736 446,504,808
FINANCE COSTS 16 32,593,239 46,068,423 38,322,540
EQUITY IN NET EARNINGS 11 1,261,759 811,702 599,420
PROFIT BEFORE TAX FROM
CONTINUING OPERATION 79,599,380 53,494,878 144,818,342
INCOME TAXES 29 25,568,402 22,979,548 36,254,074
PROFIT FROM:
CONTINUING OPERATION 54,030,978 30,515,330 108,564,268
DISCONTINUED OPERATION 28 26,429,749
PROFIT 54,030,978 30,515,330 134,994,017
OTHER COMPREHENSIVE INCOME THAT
WILL BE RECLASSIFIED SUBSEQUENTLY
TO PROFIT OR LOSSTranslation adjustment 17 27,728,283 (20,611,965) 3,983,494
OTHER COMPREHENSIVE INCOME THAT
WILL NOT BE RECLASSIFIED SUBSEQUENTLY
TO PROFIT OR LOSSRemeasurements 23 8,012,904 528,820 2,783,019
TOTAL COMPREHENSIVE INCOME 89,772,165 10,432,185 141,760,530
ATTRIBUTABLE TO:Equity holders of the parent 89,772,165 10,432,185 143,868,447Non-controlling interest (2,107,917)
89,772,165 10,432,185 141,760,530
EARNINGS PER SHARE
Basic Earnings per Share fromContinuing and DiscontinuedOperations 27 0.09 0.05 0.22
Basic Earnings per Share fromContinuing Operations 27 0.09 ...- 0.05 0.18
, ~(See Notes to Consolidated Financial Statementsi
"a~4 t~1
1I.. I •.... ~'-
I
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I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFor the Years Ended December 31. 2013. 2012 and 2011(In Philippine Peso)
EquityCumulative Attributable to
Additional Paid-in Unappropriated Appropriated Translation Equity Holders of Non·controllingNotes Capital Stock Capital Retained Earnings Retained Earnings Adjustment Treasury Stock Remeasurements the Parent Interest Total
Balance. January 1. 2011. as previously stated 562.417.000 429.513.501 301.085.527 40.115.150 (20.602.890) (40.115.150) 1.272.413.138 1.145.456 1.273.558.594Correction of prior period error 34 (19.812.681) (19.812.681) (19.812.681)Effects of change in accounting policy 23 (4.110.519) (4.110.519) (4.110.519)
Balance. January 1. 2011 as restated 17 562.417.000 429.513.501 281.272.846 40.115.150 (20.602.890) (40.115.150) (4.110.519) 1.248.489.938 1.145.456 1.249.635.394Profit. as restated 137.000.201 137.000.201 (2.006.184) 134.994.017Other comprehensive income 17.23 4.085.227 2.783.019 6.868.246 (101.733) 6.766.513Stock dividends 17 55.308.800 (55.308.800)Purchase of non-controlling interest 17 (38.281.023) (38.281.023) 962,461 (37.318.562)Purchase of own stock 17 (12.872.058) (12.872.058) (12.872.058)Appropriation of retained earnings 17 (12.872.058) 12.872.058
Balance. December 31, 201 1 as restated 17 617,725,800 391.232.478 350.092,189 52.987,208 (16,517,663) (52.987.208) (1.327.500) 1,341.205,304 1.341,205.304Profit. as restated 34 30.515.330 30.515.330 30.515.330Cash dividends 17 (119.980.858) (119.980.858) (119.980.858)Purchaseof own stock 17 (16.222,480) (16.222.480) (16.222.480)Appropriation of retained earnings 17 (16.222.480) 16.222.480Other comprehensive income 17,23 (20.611.965) 528.820 (20.083.145) (20,083,145)
Balance. December 31, 2012 as restated 17 617.725.800 391.232.478 244.404.181 69,209,688 (37.129.628) (69.209.688) (798.680) 1.215.434.151 1,215.434.151Profit 54.030.978 54.030.97B 54,030.978Cash dividends 17 (25.031.512) (25.031.512) (25.031.512)Property dividends 17 (69.209.688) (69.209.688) (69.209,688)Purchase of own stock 17 (11.475.190) (11,475.190) (11.475,190)Buy back of treasury shares 17 68.284.569 (68.284.569) 68,284,569 68.284.569 68,284.569Appropriations of retained earnings 17 (11,475.190) 11.475.190Other comprehensive income 17.23 27.728.283 8.012.904 35.741,187 35.741.187
Balance. December 31.2013 17 617,725,800 391,232,478 261.003.338 12.400.309 (9.401,345) (12.400,309) 7.214.224 1.267.774.495 1.267.774.495
(See Notes to Consolidated Financial Statements!
t.
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I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH flOWSFor the Years Ended December 31, 2013, 2012 and 2011(In Philippine Peso)
2012 2011
NOTES 2013 (As re-stated) (As re-stated)
CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax from continuing operation 79,599,380 53,494,878 144,818,342
Profit before tax from discontinued operation 28 26,429,749
Profit before tax 79,599,380 53,494,878 171,248,091
Adjustments for:Finance cost 16 32,593,239 46,068,423 38,322,540
Depreciation 12,21 11,926,058 11,717,731 11,261,295
Unrealized market valuation (gain) loss
on financial assets at fair valuethorugh profit or loss (FVPL) 9 8,106,121 (17,583,669) 3,064,068
Retirement benefits 21,23 4,536,261 3,990,642 4,928,900Amortization 13,21 820,628 941,167 2,006,374
Loss on write-off of assets 21 2,559,109 10,040,886 2,058,616
Loss (Gain) on sale of property and equipment 12 322,096 124,567 (3,9541
Dividende income 9,20 (294,391) (234,434) (56,5771
Equity in net earnings of associates 11 (1,261,759) (811,702) (599,4201
Unrealized foreign exchange (gain) loss - net 20 (5,133,202) 3,113,114 (1,205,505)
Finance income 20 (15,648,620) (12,947,4191 113,862,222)
Gain from sale of assets of discontinued operations 28 (65,139,395)
Operating cash flows before changesin working capital 118,124,920 97,914,184 152,022,811
Decrease (Increase) in operating assets:Trade and other receivables (451,370,568) (164,277,676) (1,315,200)
Prepayments and other current assets (5,058,513) (5,013,982) 5,024,824Other non-current assets . , =.f.""' .•.•"""-..,.:r.----- .....,.,,~ 1,331,137 7,491,016 3,700,816
Increase in beneficiaries and other payablel--:- - ("') '\ 264,459,139 279,846,425 40,663,944
'/j ~Cash generated from (used in) operations :0 (72,513,885) 215,959,967 200,097,195
Income taxes paid ,', (21,851,772) (28,668,766) (37,021,550)
Net cash from (used in) operating activities (94,365,657) 187,291,201 163,075,645
CASH FLOWS FROM INVESTING ACTIVITIES ."TFinance income received c :.,) 15,246,601 13,036,291 13,749,663
Dividend income received ; (if 294,391 234,434 56,577
Proceeds from disposals of property and equipment- 204,828 361,743 456,143
Additions to software -: 3 (13,083) (945,187) (2,034,070)
Contributions to retirement fund '~~ ,
(2,062,569) (6,158,445) (6,895,233)
Additions to property and equipment (15,656,139) (16,772,225) (7,110,179)
Additions to financial assets at FVPL -.; 9 (45,226,105) (67,370,4141 141,966,860
Acquisition of non-controlling interest in subsidiaries~ 1- (37,318,562)
Advances from stockholders~~~'.""._""""
4,896,570
Net cash from (used in] investing activities (47,212,077) (72,717,233) 102,871,199
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 16 988,000,000 925,000,000 666,000,000
Payment of own stock 17 (11.475,190) (16,222,480) (12,872,058)
Finance cost paid 16 (31,083,365) (46,156,723) (38,402,247)
Payment of cash dividends 17 (25,031,512) (119,980,858)
Payments of loans 16 (925,000,000) (666,000,000) (877,000,000)
Net cash from (used in) financing activities (4,590,067) 76,639,939 (262,274,305)
EFFECTS OF FOREIGN EXCHANGE RATE CHANGESON CASH AND CASH EQUIVALENTS 27,364,296 (20,329,483) 3,745,137
NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (118,803,505) 170,884,424 7,417,676
CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 1,062,120,047 891,235,623 883,817,947
CASH AND CASH EQUIVALENTS AT END OF YEAR 943,316,542 1,062,120,047 891,235,623
(See Notes to Consolidated Financial Statements)
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I-REMIT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012
1. CORPORATE INFORMATION
I-Remit Inc. (the “Parent Company”) was incorporated in the Philippines and was
registered with the Securities and Exchange Commission (SEC) on March 5, 2001 and
started commercial operations on November 11, 2001. The Parent Company and its
subsidiaries (collectively referred to as “the Group”), except Power Star Asia Group
Limited (PSAGL), are engaged in the business of fund transfer and remittance services
of any form or kind of currencies or monies, either by electronic, telegraphic, wire or
any other mode of transfer; delivery of such funds or monies, both in domestic and
international market, by providing either courier or freight forwarding services; and
conduct of foreign exchange transactions as may be allowed by law and other allied
activities relative thereto. PSAGL, on the other hand provides financial advisory and
other services.
The Parent Company’s common shares were listed with the Philippine Stock Exchange
on October 17, 2007.
The Parent Company is 29.39% owned by STAR Equities, Inc., 21.45% owned by
JTKC Equities, Inc., 23.52% owned by Surewell Equities, Inc., 3.29% owned by JPSA
Global Services Co., and the rest by the public.
The Parent Company, which is domiciled in the Philippines, has its registered office and
principal place of business at the 26/F Discovery Centre, 25 ADB Avenue, Ortigas
Center, Pasig City.
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The Parent Company’s subsidiaries and associate are as follows:
Subsidiaries
Country of
Incorporation Functional Currency
Effective Percentage of Ownership
Principal Activity 2013 2012 2011
International Remittance
(Canada) Ltd. (IRCL)
Fund transfer and
remittance services Canada Canadian Dollar (CAD) 100% 100% 100%
Lucky Star Management
Limited (LSML)
Fund transfer and
remittance services Hong Kong Hong Kong Dollar (HKD) 100% 100% 100%
IRemit Global
Remittance Limited
(IGRL)
Fund transfer and
remittance services
United
Kingdom Great Britain Pound (GBP) 100% 100% 100%
I-Remit Australia Pty Ltd
(IAPL)
Fund transfer and
remittance services Australia Australian Dollar (AUD) 100% 100% 100%
Worldwide Exchange
Pty Ltd (WEPL)
Fund transfer and
remittance services Australia Australian Dollar (AUD) 100% 100% 100%
IREMIT Remittance
Consulting GmbH
(IRCGmbH)
Fund transfer and
remittance services Austria Euro (EUR) 100% 100% 100%
I-Remit New Zealand
Limited (INZL)
Fund transfer and
remittance services New Zealand New Zealand Dollar (NZD) 100% 100% 100%
Power Star Asia Group
Limited (PSAGL)
Foreign currencies
trading services Hong Kong Hong Kong Dollar (HKD) 100% 100% 100%
K.K. Iremit Japan (KKIJ)
Fund transfer and
remittance services Japan Japanese Yen (JPY) 100% 100% 100%
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Associate
Country of
Incorporation
Functional
Currency
Effective Percentage of
Ownership
2013 2012 2011
Hwa Kung Hong & Co., Ltd.
(HKHCL)
Taiwan New Taiwan
Dollar (NTD)
49% 49% 49%
The summarized financial information of the subsidiaries are as follows:
2013 2012
IRCL
Total assets P 68,351,402 P 97,630,710
Total liabilities 35,727,724 63,480,786
Net assets 32,623,678 34,149,924
Revenue 113,843,057 107,274,588
Loss (1,859,049) (850,446)
LSML
Total assets 13,920,294 19,638,493
Total liabilities 13,617,963 16,888,672
Net assets 302,331 2,749,821
Revenue 11,321,549 9,926,615
Loss (2,473,102) (6,244,406)
IGRL
Total assets 281,435,928 75,056,907
Total liabilities 279,772,065 76,480,710
Net assets 1,663,863 (1,423,803)
Revenue 93,299,473 82,091,620
Loss (4,290,353) (7,859,357)
IAPL
Total assets 10,877,526 6,772,278
Total liabilities 6,978,255 2,798,254
Net assets 3,899,272 3,974,024
Revenue 524,961 342,095
Profit 120,661 16,420
WEPL
Total assets 24,661,092 50,392,104
Total liabilities 21,207,859 45,090,309
Net assets 3,453,233 5,301,795
Revenue 37,925,719 40,107,691
Profit (Loss) (1,576,236) 601,276
IRCGmbH
Total assets 12,701,302 14,800,826
Total liabilities 27,650,205 24,640,548
Net liabilities (14,948,903) (9,839,722)
Revenue 420,680 1,715,341
Loss (3,315,563) (21,333,703)
(forwarded)
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2013 2012
INZL
Total assets P 16,372,502 P 10,945,522
Total liabilities 30,507,109 22,700,932
Net liabilities (14,134,607) (11,755,410)
Revenue 8,916,530 4,835,680
Loss (1,306,694) (2,690,784)
PSAGL
Total assets 394,019,282 314,218,132
Total liabilities 2,612,757 415,558
Net assets 391,406,525 313,802,574
Revenue 54,773,157 52,881,032
Profit 49,850,688 72,720,246
KKIJ
Total assets 53,005,841 32,334,233
Total liabilities 97,412,944 55,899,785
Net liabilities (44,407,103) (23,565,552)
Revenue 5,854,270 (1,747,387)
Loss (24,214,488) (30,707,725)
The Parent Company has indirect control over I-Remit Italy. I-Remit Italy is a
wholly-owned subsidiary of IGRL.
The Parent Company’s ownership to WEPL consists of direct voting interest of 70%
and indirect voting interest through IAPL of 30%.
On March 25, 2011, the Parent Company acquired 35% ownership interest in WEPL
from the non-controlling stockholders for a consideration of P12,303,818.
The carrying value of the non-controlling interest at acquisition was P1,090,315.
The difference of P11,213,503 between the consideration paid and the carrying value
of the non-controlling interest was recognized as equity adjustment and deducted from
additional paid-in capital. The acquisition increased the Parent Company’s effective
ownership in WEPL to 100% from 65%.
IRCGmbH is formerly known as IREMIT EUROPE Remittance Consulting AG (IERCAG).
On May 5, 2011, the Parent Company acquired the 25.10% ownership interest in
IERCAG from the non-controlling stockholder for a consideration of P25,014,743.
The carrying value of the non-controlling interest at acquisition was P2,052,777
deficit. The difference of P27,067,520 between the consideration paid and the
carrying value of the non-controlling interest was recognized as equity adjustment and
deducted from additional paid-in capital. The acquisition increased the Parent
Company’s ownership interest in IERCAG to 100% from 74.90%.
Consequently, on October 11, 2011, IERCAG changed its legal name to IREMIT
Remittance Consulting GmbH (IRCGmbH) and changed its legal status from a stock
company to a limited liability company. It also amended its Articles of Incorporation to
include management consultancy in its business activities.
On June 10, 2011, the Parent Company incorporated KKIJ in Japan to provide
remittance services. KKIJ has started its commercial operations last May 23, 2012.
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2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
The Philippine Financial Reporting Standards Council (PFRSC) approved the issuance of
new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in
general includes all applicable PFRS, Philippine Accounting Standards (PAS), and
Interpretations issued by the Philippine Interpretations Committee (PIC), Standing
Interpretations Committee (SIC) and International Financial Reporting Interpretations
Committee (IFRIC) approved by the PFRSC and adopted by SEC.
These new and revised PFRS prescribe new accounting recognition, measurement and
disclosure requirements applicable to the Group. When applicable, the adoption of the
new standards was made in accordance with their transitional provisions, otherwise
the adoption is accounted for as change in accounting policy under PAS 8, Accounting
Policies, Changes in Accounting Estimates and Errors.
2.01 New and Revised PFRSs with Material Effect on Amounts Reported in the Current
Year (and/or Prior Years)
The following new and revised PFRSs have been applied in the current period and had
materially affected the amounts reported in these consolidated financial statements.
Details of other new and revised PFRSs applied in these consolidated financial
statements that have had no material effect on the consolidated financial statements
are set out in section 2.02.
PAS 19 (Revised), Employee Benefits
Significant changes to this standard include removal of corridor approach;
immediate recognition of past service costs; presentation of re-measurements on
defined benefit plans in other comprehensive income; new recognition criteria on
termination benefits; and improved disclosure requirements.
The amended standard comes into effect for accounting periods beginning on or
after January 1, 2013. Earlier application is permitted.
The revised PAS 19 ranges from 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 Group reviewed its existing employee benefits and determined that the
amended standard has significant impact on its accounting for retirement benefits.
The Group has applied PAS 19 (Revised) retrospectively in the current year in
accordance with the transition provisions set out in the revised standard.
The opening statement of financial position as of January 1, 2012 and the
comparative figures have been accordingly restated.
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The effects of adoption on the consolidated financial statements are as follows:
Consolidated Statements of Financial Position
As at December
31, 2012
(As re-stated)
As at January 1,
2012
(As re-stated)
Increase (decrease) in:
Retirement asset P 2,923,260 P -
Deferred tax assets (226,637) 568,928
Deferred tax liabilities 656,368 356,422
Retirement liability - 708,356
Other comprehensive income (loss) 528,820 2,783,019
Retained earnings 502,211 463,256
Consolidated Statements of Comprehensive Income
2012
As reported
previously
Adjustments
As re-stated
Retirement expense P 4,294,704 P (304,062) P 3,990,642
Provision for deferred
income tax
854,517 (198,149) 656,368
Profit for the year 30,526,247 (10,917) 30,515,330
Re-measurements - - (528,820) (528,820)
2.02 New and Revised PFRSs Applied with No Material Effect on the Consolidated
Financial Statements
The following new and revised PFRSs have also been adopted in these consolidated
financial statements. The application of these new and revised PFRSs has not had any
material impact on the amounts reported for the current and prior years but may affect
the accounting for future transactions or arrangements.
PFRS 7 (Amended), Financial Instruments: Disclosures – Offsetting Financial Assets
and Financial Liabilities
The amendment requires disclosing information that will enable users to evaluate
the effect or potential effect of netting arrangements on an entity’s financial
position. The amendments are effective for annual periods beginning on or after
January 1, 2013 and interim periods within those annual periods. An entity shall
provide the disclosures required by those amendments retrospectively.
PFRS 10, Consolidated Financial Statements
The Standard establishes the principles for the presentation and preparation of
consolidated financial statements when an entity controls one or more other
entities.
The Standard defines the principle of control and establishes control as the basis
for determining which entities are consolidated in the consolidated financial
statements. This PFRS will supersede PAS 27, Consolidated Financial Statements
and Separate Financial Statements and SIC 12, Consolidation – Special Purpose
Entities.
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PFRS 10 is effective for annual periods beginning on or after January 1, 2013, with
earlier application permitted.
PFRS 12, Disclosure of Interests in Other Entities
The Standard applies to entities that have interests in a subsidiary, a joint
arrangement, and an associate or an unconsolidated structured entity. It benefits
the users by identifying the profit or loss and the cash flows available to the
reporting entity and by determining the value of current or future investment in the
reporting entity.
PFRS 12 is effective for annual periods beginning on or after January 1, 2013, with
earlier application permitted.
PFRS 13, Fair Value Measurement
The Standard explains how to measure fair value for financial reporting. It defines
fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. It emphasizes that fair value is market-based not an entity-specific
measurement; hence an entity’s intention to hold an asset or to settle or otherwise
fulfil a liability is not relevant when measuring fair value. It was developed to
eliminate inconsistencies of fair value measurements dispersed in various existing
PFRSs. It clarifies the definition of fair value, provides a single framework for
measuring fair value and enhances fair value disclosures.
PFRS 13 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted.
PAS 1, Presentation of Items of Other Comprehensive Income (OCI)
To improve the presentation of items of OCI, amended PAS 1 requires entities to
group items presented in the OCI on the basis whether they would be reclassified
to (recycled to) profit or loss subsequently.
The amendments did not address which items should be presented in the OCI and
did not change the option to present OCI items either before or net of tax.
Those amendments are effective for annual periods beginning on or after
July 1, 2012. Earlier application is permitted.
PIC Q&A No. 2013-03 PAS 19 – Accounting for Employee Benefits under a
Defined Contribution Plan subject to Requirements of Republic Act (RA) 7641,
The Philippine Retirement Law
This Interpretation provides guidance in accounting for post-employment benefits
for an entity which has opted to provide a defined contribution plan as its only
post-employment benefit plan despite the minimum retirements benefits required to
be provided to employees under RA 7641.
This Interpretation is effective for annual financial statements with period beginning
January 1, 2013 and should be applied retrospectively.
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PAS 27, Separate Financial Statements
The amendments to PAS 27 are result of the completion and issuance of a new
standard on consolidation, the PFRS 10, Consolidated Financial Statements. As a
result, PAS 27 will now be titled as Separate Financial Statements containing
requirements relating only to separate financial statements.
The amended standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
PAS 28, Investment in Associates and Joint Ventures
The amendments to PAS 28 are the result of the completion and issuance of a new
standard on joint arrangements, the PFRS 11, Joint Arrangements. As a result,
PAS 28 will now be entitled as Investment in Associates and Joint Ventures
incorporating requirements for joint ventures.
The amended standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
Improvements to PFRS (2011) – Effective for annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
PAS 1, Presentation of Financial Statements – The improvements in this PFRS
clarifies that when an entity changes an accounting policy, or makes a
retrospective restatement or reclassifications it shall present:
a) the opening statement of financial position should be presented as at the
beginning of the required comparative period; and
b) related notes are not required to accompany this opening statement of financial
position.
The objective of financial reporting was also updated to reflect the conceptual
framework.
PAS 16, Property, Plant and Equipment – It clarifies that servicing equipment
should be classified as property, plant and equipment when it is used during more
than one period and as inventory otherwise.
PAS 32, Financial instruments: Presentation – It clarifies that income tax relating to
distributions to holders of an equity instrument and income tax relating to
transaction costs of an equity transaction should be accounted for in accordance
with PAS 12, Income Taxes.
PAS 34, Interim Financial Reporting – It clarifies that the requirements in PAS 34
relating to segment information for total assets for each reportable segment in
order to enhance consistency with the requirements in PFRS 8, Operating
Segments. The amendment clarifies that total assets 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 in the total
assets for that segment from the amount disclosed in the last annual financial
statements.
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2.03 New and Revised PFRSs in Issue but Not Yet Effective
The Group will adopt the following standards and interpretations enumerated below
when they become effective. Except as otherwise indicated, the Group does not
expect the adoption of these new and amended PFRS to have significant impact on the
consolidated financial statements.
PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, Financial Instruments, issued in November 2009 and amended in
October 2010 introduces new requirements for the classification and measurement
of financial assets and financial liabilities and for de-recognition.
PFRS 9 requires all recognised financial assets that are within the scope of PAS 39,
Financial Instruments: Recognition and Measurement, to be subsequently measured
at amortized cost or fair value. Specifically, debt investments that are held within a
business model whose objective is to collect the contractual cash flows, and that
have contractual cash flows that are solely payments of principal and interest on
the principal outstanding are generally measured at amortized cost at the end of
subsequent accounting periods. All other debt investments and equity investments
are measured at their fair values at the end of subsequent accounting periods.
The most significant effect of PFRS 9 regarding the classification and measurement
of financial liabilities relates to the accounting for changes in fair value of a
financial liability (designated as at fair value through profit or loss) attributable to
changes in the credit risk of that liability. Specifically, under PFRS 9, for financial
liabilities that are designated as at fair value through profit or loss, the amount of
change in the fair value of the financial liability that is attributable to changes in the
credit risk of that liability is recognized in other comprehensive income, unless the
recognition of the effects of changes in the liability's credit risk in other
comprehensive income would create or enlarge an accounting mismatch in profit or
loss. Changes in fair value attributable to a financial liability's credit risk are not
subsequently reclassified to profit or loss. Previously, under PAS 39, the entire
amount of the change in the fair value of the financial liability designated as at fair
value through profit or loss was recognized in profit or loss.
PFRS 9 is effective for annual periods beginning on or after January 1, 2015, with
earlier application permitted.
PFRS 10 (Amended), Consolidated Financial Statements, PFRS 12 (Amended),
Disclosure of Interest in Other Entities, PAS 27 (Amended), Separate Financial
Statements
The amendment requires a parent company that is an investment entity to measure
its investments in particular subsidiaries at fair value through profit or loss instead
of consolidating them. The new disclosure requirements pertaining to investment
entities were added to PFRS 12 and PAS 27.
The amendments are effective for annual periods beginning on or after
January 1, 2014. Earlier application is permitted.
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PAS 32 (Amended), Financial Instruments: Presentation – Offsetting of Financial
Assets and Liabilities
The amendment provided additional application guidance for offsetting in
accordance with PAS 32. The amendments clarified the meaning of “currently has
a legally enforceable right of set-off” and that some gross settlement systems may
be considered equivalent to net settlement. These amendments are effective for
annual periods beginning on or after January 1, 2014 and should be applied
retrospectively. Earlier application is permitted.
PAS 36 (Amended), Impairment of Assets
The amendment requires the disclosure of recoverable amount on impaired assets.
It clarifies that the scope of disclosures is limited to the recoverable amount of
impaired assets that is based on fair value less costs of disposal.
The amendment is to be applied retrospectively for annual periods beginning on or
after January 1, 2014. Earlier application is permitted for periods when the entity
has already applied IFRS 13.
IFRIC 21, Levies
This interpretation provides guidance on how to account levies that are within the
scope of PAS 37, Provisions, Contingent Liabilities and Contingent Assets.
It clarifies that the obligating event that gives rise to a liability to pay a levy is the
activity that triggers payment of the levy, as identified by the legislation.
This interpretation is effective for annual periods beginning on or after
January 1, 2014 and it shall be applied retrospectively. Earlier application is
permitted.
3. BASIS FOR THE PREPARATION AND PRESENTATION OF CONSOLIDATED FINANCIAL
STATEMENTS
3.01 Statement of Compliance
The consolidated financial statements have been prepared in conformity with PFRS and
are under the historical cost convention except for certain financial assets carried at
fair value and amortized cost.
3.02 Functional and Presentation Currency
Items included in the consolidated financial statements of the Group are measured
using Philippine Peso (P), the currency of the primary economic environment in which
the Parent Company operates (the “functional currency”).
The Group chose to present its consolidated financial statements using the Parent
Company’s functional currency.
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3.03 Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent
Company and its subsidiaries.
The consolidated financial statements incorporate the financial statements of the
Parent Company and the entities controlled by the Parent Company (its subsidiaries) up
to December 31 each year. Control is achieved when the Parent Company has
exposure or rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over an investee. In assessing
control, potential voting rights that are presently exercisable or convertible are taken
into account.
Subsidiaries are consolidated from the date when control is transferred to the Parent
Company and ceases to be consolidated from the date when control is transferred out
of the Parent Company.
On acquisition, the assets and liabilities and the contingent liabilities of a subsidiary are
measured at their fair values at the date of acquisition. Any excess of the cost of
acquisition over the fair values of the assets acquired is recognized as a goodwill.
Any deficiency of the cost of acquisition below the fair values of the identifiable net
assets acquired (i.e. discount on acquisition) is credited to the profit and loss in the
period of acquisition.
Goodwill is initially measured at cost, being the excess of the aggregate of fair value of
the consideration transferred and the amount recognized for non-controlling interest
over the net identifiable assets acquired and liabilities assumed. If this consideration is
lower than the fair value of the net assets of the subsidiary acquired, the difference is
recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business
combination is, from the acquisition date, allocated to each of the Group’s
cash-generating units (CGU) that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquire are assigned to those
units.
The consolidated financial statements are prepared using uniform accounting policies
for like transactions and other events in similar circumstances. Inter-group balances
and transactions, including inter-group profits and unrealized profits and losses,
are eliminated. When necessary, adjustments are made to the financial statements of
the subsidiary to bring the accounting policies used in line with those used by the
Group. All inter-group transactions, balances, income and expenses are eliminated
during consolidation.
Non-controlling interests represent the portion of profit or loss and net assets not held
by the Parent Company and are presented in the consolidated statements of
comprehensive income and within equity in the consolidated statements of financial
position, separately from the Group’s equity attributable to equity holders of the Parent
Company.
Upon the loss of control, the Group derecognizes the assets and liabilities of the
subsidiary, any non-controlling interests and other components of equity related to the
subsidiary. Any surplus or deficit arising on the loss of controls is recognized in profit
or loss. If the Group retains any interest in the previous subsidiary, then such interest
is measured at fair value at the date the control is lost. Subsequently, it is accounted
for as entity-accounted investee or as an available-for-sale financial asset depending on
the level of influence retained.
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4. SIGNIFICANT ACCOUNTING POLICIES
Principal accounting and financial reporting policies applied by the Group in the
preparation of its consolidated financial statements are enumerated below and are
consistently applied to all the years presented, unless otherwise stated.
4.01 Segment Information
An operating segment is a component of the Group: (a) that engages in business
activities from which it may earn revenues and incur expenses, including revenues and
expenses relating to transactions with other components of the Group; (b) whose
operating results are regularly reviewed by the Group’s chief operating decision maker
to make decisions about resources to be allocated to the segment and assess its
performance; and (c) for which discrete financial information is available.
The Group reports separately, information about an operating segment that meets any
of the following quantitative thresholds: (a) its reported revenue, including both sales
to external customers and inter-segment sales or transfers, is 10% or more of the
combined revenue, internal and external, of all operating segments, provided that;
(b) the absolute amount of its reported profit or loss is 10% or more of the greater, in
absolute amount, of the combined reported profit of all operating segments that did not
report a loss and the combined reported loss of all operating segments that reported a
loss; and (c) its assets are 10% or more of the combined assets of all operating
segments.
Operating segments that do not meet any of the quantitative thresholds may be
considered reportable, and separately disclosed, if Management believes that
information about the segment would be useful to users of the financial statements.
For management purposes, the Group is currently organized into remittance business in
four (4) regions namely as : Philippines, Asia Pacific, Europe and North America.
These regions are the basis on which the Group reports its primary segment
information.
4.02 Financial Assets
Financial assets are initially measured at fair value, plus transaction costs, except for
those financial assets classified as at fair value through profit or loss, which are initially
measured at fair value.
Financial assets that are subsequently measured at amortized cost, and where the
purchase or sale are under a contract whose terms require delivery of such within the
timeframe established by the market concerned are initially recognized on the trade
date.
Financial assets are classified into the following specified categories: financial assets
‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-
for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends
on the nature and purpose of the financial assets and is determined at the time of initial
recognition.
The Group’s financial assets include cash and cash equivalents, financial assets at fair
value through profit or loss, trade and other receivables and refundable deposits under
other non-current assets.
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4.02.01 Effective Interest Method
The effective interest method is a method of calculating the amortised cost of a debt
instrument and of allocating finance income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts including
all fees on points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts, through the expected life of
the debt instrument, or, where appropriate, a shorter period to the net carrying amount
on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than
those financial assets carried at fair value through profit or loss.
4.02.02 Amortized Cost
Amortized cost is computed using the effective interest rate method less any
allowance for impairment and principal repayment or reduction. The calculation takes
into account any premium or discount on acquisition and includes transaction costs
and fees that are an integral part of effective interest rate.
4.02.03 Financial Assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for
trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that
the Group manages together and has a recent actual pattern of short-term profit-
taking; or
it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognized in profit or loss subsequently. The net gain or loss
recognized in profit or loss incorporates any dividend or interest earned on the financial
asset and is included in the consolidated statements of comprehensive income.
Fair value is determined in the manner described in Note 33.
4.02.04 Trade and other Receivables
Trade receivables, loans, and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as ‘loans and
receivables’. Loans and receivables are measured at amortized cost using the effective
interest method, less any impairment. Finance income is recognized by applying the
effective interest rate, except for short-term receivables when the recognition of
interest would be immaterial.
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4.02.05 Impairment of Financial Assets
Financial assets, other than financial assets at FVTPL, are assessed for indicators of
impairment at the end of each reporting period. Financial assets are impaired where
there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the
investment have been affected.
Objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial
re-organization.
the lender, for economic or legal reasons relating to the borrower’s financial
difficulty, grants the borrower a concession that the lender would not otherwise
consider
the disappearance of an active market for that financial asset because of financial
difficulties
observable data indicating that there is a measurable decrease in the estimated
future cash flows from a group of financial assets since the initial recognition of
those assets, although the decrease cannot yet be identified with the individual
financial assets in the group, including (i) adverse changes in the payment status of
borrowers in the group (e.g. an increased number of delayed payments or an
increased number of credit card borrowers who have reached their credit limit and
are paying the minimum monthly amount); or (ii) national or local economic
conditions that correlate with defaults on the assets in the group (e.g. an increase
in the unemployment rate in the geographical area of the borrowers, a decrease in
property prices for mortgages in the relevant area, a decrease in oil prices for loan
assets to oil producers, or adverse changes in industry conditions that affect the
borrowers in the group).
Other factors may also be evidence of impairment, including significant changes with
an adverse effect that have taken place in the technological, market, economic or legal
environment in which the issuer operates.
For certain categories of financial asset, such as trade receivables, assets that are
assessed not to be impaired individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio of receivables could
include the Group’s past experience of collecting payments, an increase in the number
of delayed payments in the portfolio past the average credit period of thirty (30) days,
as well as observable changes in national or local economic conditions that correlate
with default on receivables.
The amount of the impairment is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly
for all financial assets with the exception of trade receivables, where the carrying
amount is reduced through the use of an allowance account. When a trade receivable
is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognized in
profit or loss.
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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 through profit or loss
to the extent that the carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortized cost would have been had the
impairment not been recognized.
4.02.06 De-recognition of Financial Assets
The Group derecognizes a financial asset only when the contractual rights to the cash
flows from the asset expire, or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Group recognizes its
retained interest in the asset and an associated liability for amounts it may have to
pay. If the Group retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Group continues to recognize the financial asset and
also recognizes a collateralized borrowing for the proceeds received.
4.03 Investment in an Associate
An associate is an entity over which the Group has significant influence and that is
neither a subsidiary nor an interest in a joint venture. Significant influence is the power
to participate in the financial and operating policy decisions of the investee but is not
control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial
statements using the equity method of accounting, except when the investment is
classified as held for sale, in which case it is accounted for in accordance with PFRS 5,
Non-current Assets Held for Sale and Discontinued Operations. Under the equity
method, an investment in an associate is initially recognized in the consolidated
statements of financial position at cost and adjusted thereafter to recognize Group’s
share of the profit or loss and other comprehensive income of the associate. When the
Group’s share of losses of an associate exceeds Group’s interest in that associate
(which includes any long-term interests that, in substance, form part of the Group’s
net investment in the associate), the Group discontinues recognizing its share of
further losses. Additional losses are recognized only to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of
the identifiable assets, liabilities and contingent liabilities of the associate recognized at
the date of acquisition is recognized as goodwill. The goodwill is included within the
carrying amount of the investment and is assessed for impairment as part of that
investment. Any excess of the Group’s share of the net fair value of the identifiable
assets, liabilities and contingent liabilities over the cost of acquisition, after
reassessment, is recognized immediately in profit or loss.
The requirements of PAS 39 are applied to determine whether it is necessary to
recognize any impairment loss with respect to the Group’s investment in an associate.
When necessary, the entire carrying amount of the investment (including goodwill) is
tested for impairment in accordance with PAS 36, Impairment of Assets as a single
asset by comparing its recoverable amount (higher of value in use and fair value less
costs to sell) with its carrying amount. Any impairment loss recognized forms part of
the carrying amount of the investment. Any reversal of that impairment loss is
recognized in accordance with PAS 36 to the extent that the recoverable amount of
the investment subsequently increases.
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An entity loses significant influence over an investee when it loses the power to
participate in the financial and operating policy decisions of that investee. The loss of
significant influence can occur with or without a change in absolute or relative
ownership levels.
The Group measures and recognizes any remaining investments at fair value.
Any difference between the carrying amount, the associate upon loss of significant
influence and the fair value of investment retained and proceeds from disposal is
recognized in profit or loss.
4.04 Property and Equipment
Property and equipment are initially measured at cost. The cost of an asset consists of
its purchase price and costs directly attributable to bringing the asset to its working
condition for its intended use. Subsequent to initial recognition, property and
equipment are carried at cost less accumulated depreciation and accumulated
impairment losses.
Subsequent expenditures relating to an item of property and equipment that have
already been recognized are added to the carrying amount of the asset when it is
probable that future economic benefits, in excess of the originally assessed standard of
performance of the existing asset, will flow to the Group. All other subsequent
expenditures are recognized as expenses in the period in which those are incurred.
Depreciation is computed using straight-line method based on the estimated useful
lives of the assets as follows:
Office and communication equipment 3 years
Transportation and delivery equipment 3 to 5 years
Furniture and fixtures 3 to 5 years
Leasehold improvements are depreciated over the shorter between the improvements’
useful life of five (5) years or the lease term.
An item of property and equipment is derecognized on disposal, or when no future
economic benefits are expected from use or disposal. Gains or losses arising from
de-recognition of a property and equipment are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognized in
profit or loss when the asset is derecognized.
4.05 Intangible Assets
4.05.01 Intangible Assets Acquired Separately
Intangible assets acquired separately are initially carried at cost. Subsequently,
intangible assets with definite useful lives are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized on a
straight-line basis over their estimated useful lives.
The estimated useful life and amortization method are reviewed at the end of each
annual reporting period, with the effect of any changes in estimate being accounted for
on a prospective basis.
Amortization of software is computed using straight-line method based on the
estimated useful life of three (3) years.
Goodwill is not amortized but impaired at least on an annual basis.
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Intangible assets with indefinite life are not amortized. However, such assets are
reviewed annually to ensure the carrying amount does not exceed the recoverable
amount regardless of whether an indicator of impairment is present. The Group
considers its goodwill as having an indefinite useful life and reviewed for impairment
annually or frequently if events or changes in circumstances indicate that the carrying
value may be impaired.
4.05.02 De-recognition of Intangible Assets
An intangible asset is derecognized on disposal or when no future economic benefits
are expected from use or disposal. Gains or losses arising from de-recognition of an
intangible asset are measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognized in profit or loss.
4.06 Impairment of Assets
At each reporting date, the Group assesses whether there is any indication that any
assets other than deferred tax assets, assets arising from employee benefits and
financial assets that are within the scope of PAS 39, Financial Instruments:
Recognition and Measurement, may have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss, if any. Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. When a
reasonable and consistent basis of allocation can be identified, assets are also allocated
to individual cash-generating units, or otherwise they are allocated to the smallest
group of cash-generating units for which a reasonable and consistent allocation basis
can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for
use are tested for impairment annually, and whenever there is an indication that the
asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less
than its carrying amount, the carrying amount of the asset or cash-generating unit is
reduced to its recoverable amount. An impairment loss is recognized as an expense.
The amount of impairment is applied first to the goodwill attributable to the cash
generating unit then to the identifiable net assets.
For assets other than goodwill, when an impairment loss subsequently reverses, the
carrying amount of the asset or cash-generating unit is increased to the revised
estimate of its recoverable amount, but the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognized for the asset or cash-generating unit in prior years. A reversal of an
impairment loss is recognized as an income.
With respect to goodwill, amounts recognized as impairment shall not be reversed in a
subsequent period.
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4.07 Borrowing Costs
Borrowing costs are recognized in profit or loss in the period in which they are
incurred.
4.08 Financial Liabilities and Equity Instruments
4.08.01 Classification as Debt or Equity
Debt and equity instruments are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangement.
4.08.02 Financial Liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other
financial liabilities’.
The Group’s financial liabilities consist of beneficiaries and other payables (except
payable to government agencies), advances from stockholders and loans payable.
4.08.03 Other Financial Liabilities
Other financial liabilities, including borrowings, are initially measured at fair value
inclusive of directly attributable transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the
effective interest method, with finance cost recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a
financial liability and of allocating finance cost over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash payments through
the expected life of the financial liability, or, where appropriate, a shorter period to the
net carrying amount on initial recognition.
4.08.04 De-recognition of Financial Liabilities
The Group derecognizes financial liabilities when, and only when, the Group’s
obligations are discharged, cancelled or expired. When an existing 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 de-recognition of the original liability and the recognition of a new liability.
The difference between the carrying amount of the financial liability derecognized and
the consideration paid and payable is recognized in profit or loss.
4.08.05 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of
an entity after deducting all of its liabilities. Equity instruments issued by the Group
are recognized at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. Incremental costs directly attributable to the
issue of new shares or options are shown in equity as a deduction from the proceeds,
net of tax. The cost of acquiring the Group‘s own shares are shown as a deduction
from equity until the shares are cancelled or reissued. When such shares are
subsequently sold or reissued, any consideration received, net of directly attributable
incremental transaction costs and the related income tax effects, is included in equity.
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4.09 Offsetting of Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the
consolidated statements 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 assets and settle the liabilities simultaneously.
4.10 Employee Benefits
4.10.01 Short-term Benefits
The Group recognizes a liability net of amounts already paid and an expense for
services rendered by employees during the accounting period. Short-term benefits
given by the Group to its employees include salaries and wages, social security
contributions, short-term compensated absences, profit-sharing and bonuses,
and non-monetary benefits.
4.10.02 Post-employment Benefits
Contributions to defined contribution retirement benefit plans are recognized as an
expense when employees have rendered service entitling them to the contributions.
Payments made to state-managed retirement benefit plans are dealt with as payments
to defined contribution plans where the Group’s obligations under the plans are
equivalent to those arising in a defined contribution retirement benefit plan.
The Group has a funded, non-contributory defined benefit retirement plan. This benefit
defines an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and
compensation.
The cost of providing benefits is determined using the Projected Unit Credit Method
which reflects services rendered by employees to the date of valuation and
incorporates assumptions concerning employees’ projected salaries. Post-employment
expenses include current service cost, past service cost, and net interest on defined
benefit asset/liability. Re-measurements which include cumulative actuarial gains and
losses, return on plan assets, and changes in the effects of asset ceiling are recognized
directly in other comprehensive income and is also presented under equity in the
consolidated statements of financial position.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to equity in other comprehensive income in the
period in which they arise.
Past-service costs are recognized immediately in profit or loss.
The retirement assets recognized in the consolidated statements of financial position in
respect of defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets.
The defined benefit obligation is calculated annually by an independent actuary using
the projected unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using market rates on
government bond that are denominated in the currency in which the benefits will be
paid, and that have terms to maturity approximating to the terms of the related pension
obligation.
The asset that resulted from this calculation is a result of over funding or when an
actuarial gain arises. It is recognized since it is a resource which the Group controls
and is available in the form of reduction in future contributions.
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The funding policy is to contribute an amount based on the actuarial valuation report
which is carried out at regular intervals
4.11 Provisions
Provisions are recognized when the Group has a present obligation, whether legal or
constructive, as a result of a past event, it is probable that the Group will be required
to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
The amount recognized as a provision is the best estimate of the consideration required
to settle the present obligation at the end of the reporting period, taking into account
the risks and uncertainties surrounding the obligation. Where a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is
the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected
to be recovered from a third party, a receivable is recognized as an asset if it is
virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
Provisions are reviewed at each reporting date and adjusted to reflect the current best
estimate and presented in the Group’s consolidated statements of comprehensive
income.
4.12 Share-based Payments
4.12.01 Equity-settled Share-based Payments
Equity-settled share-based payments to employees and others providing similar services
are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments
is expensed on a straight-line basis over the vesting period, based on the Parent
Company’s estimate of equity instruments that will eventually vest. At the end of
each reporting period, the Parent Company revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates,
if any, is recognized in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to the equity-settled employee
benefits reserve.
4.13 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the Group and the revenue can be measured reliably. Revenue is measured at
the fair value of the consideration received or receivable and represents amounts
receivable for services provided in the normal course of business. Revenue is reduced
for estimated customer returns, rebates and other similar allowances.
4.13.01 Rendering of Services
Revenue from a contract to provide services is recognized by reference to the stage of
completion of the contract. Revenue from rendering of services is recognized when all
the following conditions are satisfied:
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow
to the Group;
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the stage of completion of the transaction can be measured reliably; and
the costs incurred for the transaction and the costs to complete the transaction
can be measured reliably.
Revenues from rendering services pertain to delivery fees and other fees.
4.13.02 Dividend and Finance Income
Dividend income from investments is recognized when the shareholder’s right to
receive payment has been established, provided that it is probable that the economic
benefits will flow to the Group and the amount of revenue can be measured reliably.
Finance income is recognized when it is probable that the economic benefits will flow
to the Group and the amount of revenue can be measured reliably. Finance income is
accrued on a time proportion basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset’s net
carrying amount on initial recognition.
4.14 Expense Recognition
Expense encompasses losses as well as those expenses that arise in the course of the
ordinary activities of the Group.
The Group recognizes expenses in the consolidated statements of comprehensive
income when a decrease in future economic benefits related to a decrease in an asset
or an increase of a liability has arisen that can be measured reliably.
4.15 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other leases are
classified as operating leases.
4.15.01 The Group as a Lessee
Operating lease payments are recognized as an expense on a straight-line basis over
the lease term, except where another systematic basis is more representative of the
time pattern in which economic benefits from the leased asset are consumed.
In the event that lease incentives are received to enter into operating leases, such
incentives are recognized as a liability. The aggregate benefit of incentives is
recognized as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed.
4.16 Foreign Currency Transactions and Translation
In preparing the consolidated financial statements of the Group, transactions in
currencies other than the Parent’s functional currency, i.e. foreign currencies, are
recognized at the rates of exchange prevailing at the dates of the transactions. At the
end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognized in profit or loss in the period in which they arise
except for exchange differences arising on non-monetary assets and liabilities where
the gains and losses of such non-monetary items are recognized directly in equity.
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Assets and liabilities from foreign operation are translated at exchange rates at the end
of the reporting period. Exchange differences are recognized initially in other
comprehensive income and reclassified from equity to profit or loss on disposal of the
net investment. On the other hand, income and expenses for each consolidated
statement presenting profit or loss and other comprehensive income are translated at
the average exchange rate for the period.
4.17 Related Parties and Related Party Transactions
A related party is a person or entity that is related to the Group that is preparing its
financial statements. A person or a close member of that person’s family is related to
Group if that person has control or joint control over the Group, has significant
influence over the Group, or is a member of the key management personnel of the
Group or of a parent of the Group.
An entity is related to the Group if any of the following conditions applies:
The entity and the Group are members of the same group (which means that each
parent, subsidiary and fellow subsidiary is related to the others).
One entity is an associate or joint venture of the other entity (or an associate or
joint venture of a member of a group of which the other entity is a member).
Both entities are joint ventures of the same third party.
One entity is a joint venture of a third entity and the other entity is an associate of
the third entity.
The entity is a post-employment benefit plan for the benefit of employees of either
the Group or an entity related to the Group. If the Group is itself such a plan, the
sponsoring employers are also related to the Group.
The entity is controlled or jointly controlled by a person identified above.
A person identified above has significant influence over the entity or is a member of
the key management personnel of the entity (or of an entity).
Close members of the family of a person are those family members, who may be
expected to influence, or be influenced by, that person in their dealings with the Group
and include that person’s children and spouse or domestic partner; children of that
person’s spouse or domestic partner; and dependents of that person or that person’s
spouse or domestic partner.
A related party transaction is a transfer of resources, services or obligations between
related parties, regardless of whether a price is charged.
4.18 Taxation
Income tax expense represents the net of the tax currently payable and deferred tax.
4.18.01 Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the consolidated statements of comprehensive income
because of items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end
of the reporting period.
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4.18.02 Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of
assets and liabilities in the consolidated financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognized for all taxable temporary differences. Deferred tax assets are generally
recognized for all deductible temporary differences, carry forward of unused tax credits
from excess Minimum Corporate Income Tax (MCIT) over Regular Corporate Income
Tax (RCIT) and unused Net Operating Loss Carryover (NOLCO), to the extent that it is
probable that taxable profits will be available against which those deductible temporary
differences and carry forward of unused MCIT and unused NOLCO can be utilized.
Deferred income tax, however, is not recognized when it arises from the initial
recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction that affects neither the accounting profit nor taxable
profit or loss.
Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax
assets arising from deductible temporary differences are only recognized to the extent
that it is probable that there will be sufficient taxable profits against which to utilize
the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the period in which the liability is settled or the asset realized, based on tax
rates and tax laws that have been enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at the
end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
4.18.03 Current and Deferred Tax for the Period
Current and deferred tax are recognized as an expense or income in profit or loss,
except when they relate to items that are recognized outside profit or loss, whether in
other comprehensive income or directly in equity, in which case the tax is also
recognized outside profit or loss.
4.19 Earnings per Share
The Group computes its basic earnings per share by dividing net income or loss
attributable to ordinary equity holders of the Group by the weighted average number of
ordinary shares outstanding during the period.
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4.20 Events after the Reporting Period
The Group identifies subsequent events as events that occurred after the reporting
date but before the date when the consolidated financial statements were authorized
for issue. Any subsequent events that provide additional information about the
Group’s position at the reporting period, adjusting events, are reflected in the
consolidated financial statements, while subsequent events that do not require
adjustments, non-adjusting events, are disclosed in the notes to consolidated financial
statements when material.
4.21 Prior Period Errors
The Group corrects material prior period errors retrospectively in the first set of
consolidated financial statements authorized for issue after their discovery by:
(a) restating the comparative amounts for the prior period presented in which the error
occurred; or (b) if the error occurred before the earliest prior period presented, restating
the opening balances of assets, liabilities and equity for the earliest prior period
presented.
4.22 Changes in Accounting Policies
The adoption of the new and revised standards and interpretations disclosed in
Notes 2.01 and 2.02 were made in accordance with their transitional provisions,
otherwise the adoption is accounted for as change in accounting policy under PAS 8,
Accounting Policies, Changes in Accounting Estimates and Errors.
5. CRITICAL JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are disclosed in Note 4,
Management is required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily from other sources.
The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimate is
revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
5.01 Critical Judgment in Applying Accounting Policy
5.01.01 Functional Currency
PAS 21 requires Management to use its judgment to determine the entity’s functional
currency such that it most faithfully represents the economic effects of the underlying
transactions, events and conditions that are relevant to the entity. In making this
judgment, the Group considers the following:
the currency that mainly influences sales prices for financial instruments and
services (this will often be the currency in which sales prices for its financial
instruments and services are denominated and settled);
the currency in which funds from financing activities are generated; and
the currency in which receipts from operating activities are usually retained.
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The Group determined its functional currency to be Philippine peso, being the currency
that mainly influences the Parent revenues and cost and expenses. Each entity in
the Group determines its own functional currency as disclosed in Note 1.
5.01.02 Assessment of Control
The Group determines whether an entity qualifies as a subsidiary when it has control
over an entity. The Group controls an entity when it has the three elements of control
as disclosed in Note 4. In making its judgments, the Group considers all facts and
circumstances when assessing control over an investee. A reassessment of control is
conducted when there are changes to one or more of the three elements of control.
Any changes from at least one of the elements would result to lose or gain of control
over an entity.
The Group having 100% ownership and voting interest assessed that it has control
over its subsidiaries since it has power over the subsidiaries, exposure or rights to
variable returns from its involvement and ability to use its power to affect the
component of its returns.
The Group has 49% ownership and voting rights over Hwa Kung Hong & Co., Ltd.
(HKHCL). Group assessed that it does not have a control over HKHCL. The 49%
ownership and voting rights of the Group represents only significant influence over the
associate. The Group has only the power to participate in the financial and operating
policy decisions over the investee.
5.02 Key Sources of Estimation Uncertainty
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainty at the end of the 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.
5.02.01 Reviewing Residual Values, Useful Lives and Depreciation Method of Property
and Equipment
The residual values, useful lives and depreciation method of the Group’s property and
equipment are reviewed at least annually, and adjusted prospectively if appropriate,
if there is an indication of a significant change in, how an asset is used; significant
unexpected wear and tear; technological advancement; and changes in market prices
since the most recent annual reporting date. The useful lives of the Group’s assets are
estimated based on the period over which the assets are expected to be available for
use. In determining the useful life of an asset, the Group considers the expected
usage, expected physical wear and tear, technical or commercial obsolescence arising
from changes or improvements in production, or from a change in the market demand
for the product or service output and legal or other limits on the use of the Group’s
assets. In addition, the estimation of the useful lives is based on Group’s collective
assessment of industry practice, internal technical evaluation and experience with
similar assets. It is possible, however, that future results of operations could be
materially affected by changes in estimates brought about by changes in factors
mentioned above. The amounts and timing of recorded expenses for any period would
be affected by changes in these factors and circumstances. A reduction in the
estimated useful lives of property and equipment would increase the recognized
operating expenses and decrease non-current assets. The Group uses a depreciation
method that reflects the pattern in which it expects to consume the asset’s future
economic benefits. If there is an indication that there has been a significant change in
the pattern used by which the Group expects to consume an asset’s future economic
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benefits, the entity shall review its present depreciation method and, if current
expectations differ, change the depreciation method to reflect the new pattern.
In both years, Management assessed that there is no significant change from the
previous estimates. The accumulated depreciation of property and equipment
amounted to P92,131,050 and P82,306,658 as of December 31, 2013 and 2012,
respectively, as disclosed in Note 12. The carrying amounts of property and
equipment amounted to P27,057,295 and P23,495,462 as of December 31, 2013 and
2012, respectively, as disclosed in Note 12.
5.02.02 Reviewing Residual Values, Useful Lives and Amortization Method of
Intangible Assets
The residual values, useful lives and amortization method of the Group’s intangible
assets are reviewed at least annually, and adjusted prospectively if appropriate, if there
is an indication of a significant change in, how an asset is used; technological
advancement; and changes in market prices since the most recent annual reporting
date. Amortization begins when the intangible asset is available for use, i.e. when it is
in the location and condition necessary for it to be usable in the manner intended by
management. Amortization ceases when the asset is derecognized. The Group uses a
straight-line method of amortization since it cannot determine reliably the pattern in
which it expects to consume the asset’s future economic benefits.
In both years, Management assessed that there is no significant change from the
previous estimates. The accumulated amortization of software amounted to
P13,552,254 and P12,728,827 as of December 31, 2013 and 2012, respectively,
as disclosed in Note 13. The aggregate carrying amounts of intangibles amounted to
P112,091,619 and P112,893,853 as of December 31, 2013 and 2012, respectively,
as disclosed in Note 13.
5.02.03 Asset Impairment
The Group performs an impairment review when certain impairment indicators are
present. Determining the fair value of property and equipment, investment in associate
and intangible assets, which require the determination of future cash flows expected to
be generated from the continued use and ultimate disposition of such assets, requires
the Group to make estimates and assumptions that can materially affect the
consolidated financial statements. Future events could cause the Group to conclude
that property and equipment, investments in subsidiaries, investment in associate and
intangible assets are impaired. Any resulting impairment loss could have a material
adverse impact on the financial condition and results of operations.
The preparation of the estimated future cash flows involves significant judgment and
estimations. While the Group believes that its assumptions are appropriate and
reasonable, significant changes in the assumptions may materially affect the
assessment of recoverable values and may lead to future additional impairment charges
under PFRS.
Goodwill is reviewed for impairment annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
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Impairment is determined for goodwill by assessing the recoverable amount of the CGU
(or group of CGUs) to which the goodwill relates. Where the recoverable amount of
the CGU (or group of CGUs) is less than the carrying amount of the CGU (or group of
CGUs) to which goodwill has been allocated, an impairment loss is recognized
immediately in the consolidated statements of comprehensive income. Impairment
losses relating to goodwill cannot be reversed for subsequent increases in its
recoverable amount in future periods. The Group performs its annual impairment test
of goodwill at the reporting date.
The recoverable amount of the CGUs have been determined based on value-in-use
calculation using cash flow projections from financial budgets approved by senior
management covering a five-year period. The discount rates applied to cash flow
projections ranges from 7.87% to 12.00% in 2013, 7.19% to 10.81% in 2012 and
8.55% to 10.60% in 2011, and cash flows beyond the five year-period were
extrapolated using a steady growth rate of 1.00% in 2013, 1.00% in 2012 and
0.13% to 1.43% in 2011.
The calculations of the value-in-use of the CGUs are most sensitive to the following
assumptions:
• Growth rate - The forecasted growth rate is based on a very conservative steady
growth rate that does not exceed the long term average rate for the industry.
• Pre-tax discount rates - Discount rates reflect management’s estimate of the risks
specific to each CGU. This is the benchmark used by management to assess
operating performance.
Management believes that there is no impairment in the value of its property and
equipment, investment in an associate and intangible assets, thus no impairment loss is
recognized in the consolidated financial statements in both years. As of
December 31, 2013 and 2012, the aggregate carrying amounts of investment in an
associate, property and equipment, and intangible assets amounted to P145,334,260
and P141,312,902, respectively, as disclosed in Notes 11, 12 and 13.
5.02.04 Estimating Allowances for Doubtful Accounts
Allowance for doubtful accounts is maintained at a level considered adequate to
provide for potential uncollectible receivables. The Group estimates the allowance for
doubtful accounts related to its trade and other receivables based on assessment of
specific accounts where the Group has information that certain customers are unable
to meet their financial obligations. In these cases, judgment used was based on the
best available facts and circumstances including but not limited to, the length of
relationship with the customer and the customer’s current credit status based on third
party credit reports and known market factors. The Group used judgment to record
specific allowances for customers against amounts due to reduce the expected
collectible amounts. These specific allowances are re-evaluated and adjusted as
additional information received impacts the amounts estimated.
The amounts and timing of recorded expenses for any period would differ if different
judgments were made or difference estimate were utilized. An increase in the
allowance for doubtful accounts would increase the recognized operating expenses and
decrease current assets.
As of December 31, 2013 and 2012, Management believes that the recoverability of
receivables is certain; hence, no allowance for doubtful accounts was provided. As of
December 31, 2013 and 2012, the carrying values of trade and other receivables
amounted to P1,649,265,626 and P1,192,359,836, respectively, as disclosed in
Note 8.
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5.02.05 Deferred Tax Assets
The Group reviews the carrying amounts at each reporting period and reduces deferred
tax assets to the extent that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax assets to be utilized prior to
expiration.
As of December 31, 2013 and 2012, the Group’s recognized deferred tax assets from
NOLCO, accumulated depreciation, and unused tax credits amounted to P10,998,664
and P7,236,232, respectively, as disclosed in Note 30. Management believes that
future taxable profits will be available to allow all or part of deferred tax assets to be
utilized prior to expiration.
5.02.06 Post-employment Benefits
The determination of the retirement obligation and cost and other retirement benefits is
dependent on the selection of certain assumptions used by actuaries in calculating
such amounts. Those assumptions include among others, discount rates, mortality of
plan members and rates of compensation increase. In accordance with PFRS, actual
results that differ from the assumptions and the effects of changes in actuarial
assumptions are recognized directly as re-measurements in other comprehensive
income. While the Group believes that the assumptions are reasonable and
appropriate, significant differences in the actual experience or significant changes in
the assumptions may materially affect the pension and other retirement obligations.
Based on the actuarial report as of December 31, 2013 and 2012, the Group has
recognized retirement asset amounting to P11,188,217 and P2,214,904, respectively,
as disclosed in Note 23. Retirement expense recognized for the years ended
December 31, 2013, 2012 and 2011 amounted to P4,536,261, P3,990,642 and
P4,928,900, respectively, as disclosed in Notes 21 and 23. Re-measurements
recognized as of December 31, 2013 and 2012 amounted to P7,214,224 gain and
P798,680 loss, respectively, as disclosed in Note 23.
6. SEGMENT INFORMATION
6.01 Segment Revenue and Results
The following is an analysis of the Group‘s revenue and results from continuing operations by reportable segment (amounts in thousands):
2013
Segment
Revenue
Segment
Cost
Segment
Profit
Philippines P 481,682 P 192,482 P 289,200
Asia Pacific 119,308 5,371 113,937
Europe 93,720 6,448 87,272
North America 113,843 10,685 103,158
Adjustment and elimination (5,683) - (5,683)
Total P 802,870 P 214,986 P 587,884
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2012
Segment
Revenue
Segment
Cost
Segment
Profit
Philippines P 470,199 P 185,136 P 285,063
Asia Pacific 106,346 3,866 102,480
Europe 83,807 10,461 73,346
North America 107,275 10,452 96,823
Adjustment and elimination 4,014 - 4,014
Total P 771,641 P 209,915 P 561,726
2011
Segment
Revenue
Segment
Cost
Segment
Profit
Philippines P 490,087 P 175,332 P 314,755
Asia Pacific 131,329 3,440 127,889
Europe 64,288 10,384 53,904
North America 103,124 10,271 92,853
Adjustment and elimination (969) - (969)
Total P 787,859 P 199,427 P 588,432
Segments’ profit and the Group’s profit are reconciled as follow amounts (in thousands):
2013 2012 2011
Philippines P 289,200 P 285,063 P 314,755
Asia Pacific 113,937 102,480 127,889
Europe 87,272 73,346 53,904
North America 103,158 96,823 92,853
Adjustments and eliminations (5,683) 4,014 (969)
Total for continuing operations 587,884 561,726 588,432
Net trading gains (losses) (8,106) 17,583 (3,064)
Other income 29,894 15,949 43,678
Finance costs (32,593) (46,068) (38,323)
Equity in net earnings 1,262 812 600
Operating expenses (498,742) (496,507) (446,505)
Income tax (25,568) (22,980) (36,254)
Profit P 54,031 P 30,515 P 108,564
Revenue reported above represents revenue generated from external customers.
There were no inter-segment sales in 2013, 2012 and 2011.
The accounting policies of the reportable segments are the same as the Group‘s
accounting policies disclosed in Note 4. Segment profit represents the profit earned by
each segment without allocation of other income, operating expenses, foreign
exchange loss and income tax. This is the measure reported to the chief operating
decision maker for the purpose of resource allocation and assessment of segment
performance.
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6.02 Geographical Information
The Group operates in four (4) principal geographical areas. The Group‘s revenue from
continuing operations from external customers and information about its non-current
assets by geographical location are detailed below:
2013
Revenue from
External
Customers
Non-current
Assets
Philippines P 481,682,380 P 337,336,807
Asia Pacific 122,451,222 18,254,819
Europe 85,410,856 13,207,634
North America 113,843,057 9,789,775
Adjustments and eliminations (516,890) (180,985,680)
Total P 802,870,625 P 197,603,335
2012
Revenue from
External
Customers
Non-current
Assets
Philippines P 470,199,180 P 320,966,687
Asia Pacific 109,964,208 18,871,238
Europe 84,546,415 8,560,828
North America 107,274,588 8,144,099
Adjustments and eliminations (343,539) (174,365,463)
Total P 771,640,852 P 182,117,389
2011
Revenue from
External
Customers
Non-current
Assets
Philippines P 490,087,163 P 317,618,741
Asia Pacific 131,328,620 16,399,386
Europe 64,288,395 8,032,438
North America 103,124,096 6,733,478
Adjustments and eliminations (968,769) (168,475,344)
Total P 787,859,505 P 180,308,699
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6.03 Segment Assets and Liabilities
2013 2012 2011
Segment Assets
Philippines P 2,962,808 P 2,567,982 P 2,148,582
Asia Pacific 512,857 434,301 356,540
Europe 294,137 89,858 125,544
North America 68,351 97,631 87,150
Total segment assets 3,838,153 3,189,772 2,717,816
Unallocated (778,371) (519,032) (460,832)
Total assets 3,059,782 2,670,740 2,256,984
Segment Liabilities
Philippines 1,874,090 1,491,205 962,364
Asia Pacific 158,719 143,794 82,971
Europe 307,422 101,121 113,573
North America 35,728 63,481 50,795
Total segment liabilities 2,375,959 1,799,601 1,209,703
Unallocated (583,951) (344,296) (293,925)
Total liabilities P 1,792,008 P 1,455,305 P 915,778
For the purpose of monitoring segment performance and allocating resources between
segments:
All assets are allocated to reportable segments other than investment subsidiaries
and inter-segment receivables; and
All liabilities are allocated to reportable segments other than accrued expenses,
payable to government agencies, other payables, retirement benefit obligation,
deferred tax liability and income tax payable.
7. CASH AND CASH EQUIVALENTS
For the purpose of the consolidated statements of cash flows, cash and cash
equivalents include cash on hand, in banks and short-term deposits. Cash equivalents
are short-term, highly liquid investments that are readily convertible to known amounts
of cash with maturities of three months or less from the date of acquisition and that
are subject to an insignificant risk of change in value.
Cash and cash equivalents at the end of the reporting period as shown in the
consolidated statements of cash flows can be reconciled to the related items in the
consolidated statements of financial position as follows:
2013 2012
Cash on hand P 150,780,728 P 34,689,374
Cash in banks 773,533,386 975,550,943
Cash equivalents 19,002,428 51,879,730
P 943,316,542 P 1,062,120,047
Cash in banks earns interest ranging from 0.40% to 2% while cash equivalents earn
interest at rate of 1.75%.
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Finance income earned on these accounts amounted to P1,652,599, P2,106,151 and
P3,140,373 in 2013, 2012 and 2011, respectively, as disclosed in Note 20.
8. TRADE AND OTHER RECEIVABLES
The Group’s trade and other receivables consist of:
2013 2012
Agents P 887,106,502 P 1,067,065,055
Foreign currency receivable 570,045,046 -
Couriers 122,931,916 88,815,199
Advances to trading clients 27,739,897 -
Advances to related parties (Note 26) 12,127,081 15,491,737
Officers and employees 9,907,183 4,754,013
Finance income 3,937,998 3,535,978
Others 15,470,003 12,697,854
P 1,649,265,626 P 1,192,359,836
Receivables from agents pertain to advances made to fund the remittance transactions
to beneficiaries. Due from related parties included in receivable from agents account
as of December 31, 2013 and 2012 amounted to P52,815,212 and P62,318,543,
respectively, as disclosed in Note 26. These are settled within one (1) to five (5) days
from transaction date. No interest was charged on trade receivables.
Foreign currency receivable pertains to the dollar receivable of the Group in relation to
foreign currency trading transactions. This is the set-up of dollar receivable in forward
contract trading transactions. Group enters into forward contract trading particularly
for Canadian dollar (CAD), Pound (GBP), European dollar (Euro) and New Zealand dollar
(NZD).
Receivables from couriers pertain to advances made to courier providers to ease up the
door-to-door delivery of the remittances to the beneficiaries. These are settled within
one (1) to two (2) weeks from transaction date..
Advances to related parties include operating funds and marketing materials advanced
to associate offices by the Group. These advances are collectible in one (1) month
from date of funding.
Receivable from officers and employees pertain to advances given to officers and
employees. These amounted to P7,077,654 and P7,045,214 in 2013 and 2012,
respectively, as disclosed in Note 26. These are settled within one (1) to five (5) days
from transaction date. No interests were charged on these receivables.
Advances to trading clients pertain to advances made to banks in relation to the
trading activities of the Group. These receivables are due within one (1) to five (5)
days from transaction date.
During the year, the Group write off receivables from PSAGL amounting to P899,321
and WEPL amounting to P1,432,917, respectively, as disclosed in Note 21, due to
certainty of uncollections.
Others include receivables from SSS and suppliers. These outstanding receivables are
due within thirty (30) days from transaction date.
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Trade receivables disclosed above include amounts which are past due at the end of
the reporting period but against which the Group has not recognized an allowance for
doubtful receivables because there has not been a significant change in credit quality
and the amounts are still considered recoverable. The Group does not hold any
collateral or other credit enhancements over these balances nor does it have a legal
right of offset against any amounts owed by the Group to the counterparties.
Aging of accounts that are past due but not impaired is as follows:
2013 2012
31 – 60 days P 5,128,579 P 6,296,592
Over 60 days 8,623,245 5,956,439
P 13,751,824 P 12,253,031
In determining the recoverability of a trade receivable, the Company considers any
change in the credit quality of the trade receivable from the date credit was initially
granted up to the reporting period. The concentration of credit risk is limited due to
the customer base being large and unrelated. Accordingly, Management believes that
there is no credit provision required.
9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The Group’s financial assets at fair value through profit or loss are as follows:
2013 2012
Debt securities P 225,973,392 P 189,861,699
Equity securities 21,326,939 20,318,648
P 247,300,331 P 210,180,347
Movements in the financial assets at fair value through profit or loss are presented
below:
2013 2012
Balance, January 1 P 210,180,347 P 125,226,264
Acquisition of securities 45,226,105 67,370,414
Net trading gains (loss) (8,106,121) 17,583,669
Balance, December 31 P 247,300,331 P 210,180,347
Debt securities are bonds issued by various foreign private corporations and foreign
government and are listed overseas with interest rates range from 6% to 13%. As of
December 31, 2013, 2012 and 2011, the carrying amounts include net unrealized loss
of P8,939,285 and net unrealized gains of P8,447,554 and P2,100,545, respectively.
Finance income earned in 2013, 2012 and 2011 amounted to P13,996,021,
P10,841,268 and P10,721,849, respectively, as disclosed in Note 20. Dividend
income earned in 2013, 2012 and 2011 amounted to P294,391, P234,434 and
P56,577, respectively, as disclosed in the others account in Note 20.
Equity securities are common shares of various foreign corporations. As of
December 31, 2013, 2012 and 2011 the carrying amounts include net unrealized gains
of P351,924 and P2,067,747 and unrealized loss of P3,373,744, respectively.
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In 2013, the Group has loss from changes in fair value of financial assets at FVTPL
amounting to P8,106,121, while in 2012 in 2011, the Group has gain and loss from
fair value changes of financial assets at FVTPL amounting to P17,583,669 and
P3,064,068, respectively, are included in net trading gains in the consolidated
statements of comprehensive income.
The basis of fair values of these debt and equity securities are based on quoted prices
(Level 1) as disclosed in Note 31.
10. PREPAYMENTS AND OTHER CURRENT ASSETS
The details of the Group’s prepayments and other current assets are shown below:
2013 2012
Receivable from Bureau of Internal Revenue (BIR) P 13,160,534 P 13,160,534
Prepaid expenses 6,125,390 5,813,060
Visa cards inventory 1,919,544 2,829,010
Advances to suppliers and contractors 852,868 1,830,343
Offices supplies 238,278 259,624
Creditable withholding tax - 9,361
P 22,296,614 P 23,901,932
Receivable from BIR pertains to the excess payments made by the Group in 2007 for
the Initial Public Offering (IPO) percentage tax at P13,160,534. As of December 31,
2013, the case on the recoverability of tax on IPO is pending resolution with the Court
of Tax Appeals. The Group believes that it will be able to obtain the refund from the
BIR.
Prepaid expenses include prepayments for rent, insurance, internet connection and
association dues among others.
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11. INVESTMENT IN AN ASSOCIATE
In both years, the Group’s owned 49% investment in Hwa Kung Hong & Co., Ltd.
(HKHCL), a company engaged in remittance business incorporated under the laws of
Taiwan.
Movements in the investment in an associate are presented below:
2013 2012
Acquisition cost P 3,573,974 P 3,573,974
Accumulated equity in net income
Balance, January 1 4,923,587 4,111,885
Equity in profit 1,261,759 811,702
Balance, December 31 P 6,185,346 P 4,923,587
In 2013, the Group derecognized its investment in I-Remit Singapore Pte Ltd. (ISPL)
amounting to P12,600,000 after withdrawing its request from the Monetary Authority
of Singapore (MAS) to transfer ISPL shares. In its letter to I-Remit Singapore Pte. Ltd.
dated April 23, 2008, the Authority has approved the transfer of 49,000 shares or
49% of the shares in ISPL to I-Remit Inc., subject to certain requirement for documents
which were not executed, hence, no share transfer was effected as disclosed in Note
34.
The summarized financial information of the associate is as follows:
2013 2012
Total assets P 33,206,308 P 34,857,286
Total liabilities 25,787,134 30,312,680
Net assets 7,419,174 4,544,606
Revenue 13,678,703 13,023,598
Profit 2,575,020 1,656,534
Group’s share in profits of subsidiary 1,261,759 811,702
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12. PROPERTY AND EQUIPMENT — net
The carrying amounts of the Group’s property and equipment are as follows:
Office and
communication
equipment
Transportation
and delivery
equipment
Furniture and
fixtures
Leasehold
improvements
Total
January 1, 2012
Cost P 46,462,063 P 7,038,459 P 9,079,155 P 29,695,623 P 92,275,300
Accumulated depreciation (38,095,056) (4,376,224) (6,666,645) (23,929,917) (73,067,842)
Carrying amount 8,367,007 2,662,235 2,412,510 5,765,706 19,207,458
Movements during 2012
Balance, January 1, 2012 8,367,007 2,662,235 2,412,510 5,765,706 19,207,458
Additions 8,886,886 2,489,213 1,127,028 4,269,098 16,772,225
Disposal:
Cost (1,168,133) (514,960) - - (1,683,093)
Accumulated depreciation 1,018,543 178,240 - - 1,196,783
Reclassification of accounts:
Cost 359,082 - (359,082) - -
Accumulated depreciation (275,293) - 275,293 - -
Exchange adjustments:
Cost (712,370) (833) (155,388) (693,721) (1,562,312)
Accumulated depreciation 573,121 4,111 153,041 551,859 1,282,132
Depreciation (Note 21) (5,812,338) (1,835,527) (1,361,000) (2,708,866) (11,717,731)
Balance, December 31, 2012 11,236,505 2,982,479 2,092,402 7,184,076 23,495,462
December 31, 2012
Cost 53,827,528 9,011,879 9,691,713 33,271,000 105,802,120
Accumulated depreciation (42,591,023) (6,029,400) (7,599,311) (26,086,924) (82,306,658)
Carrying Amount P 11,236,505 P 2,982,479 P 2,092,402 P 7,184,076 P 23,495,462
Balance forwarded
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Balance carry-forward
Office and
communication
equipment
Transportation and
delivery equipment
Furniture and
fixtures
Leasehold
improvements
Total
Movements during 2013
Balance, January 1, 2013 P 11,236,505 P 2,982,479 P 2,092,402 P 7,184,076 P 23,495,462
Additions 5,172,977 917,976 610,905 8,954,281 15,656,139
Disposal:
Cost (333,611) (2,736,646) (567,506) (419,706) (4,057,469)
Accumulated depreciation 208,323 2,648,102 548,921 125,199 3,530,545
Exchange adjustments:
Cost 1,106,530 40,633 149,409 490,983 1,787,555
Accumulated depreciation (960,243) (27,827) (29,327) (411,482) (1,428,879)
Depreciation (Note 21) (5,867,700) (1,341,134) (739,137) (3,978,087) (11,926,058)
Balance, December 31, 2013 10,562,781 2,483,583 2,065,667 11,945,264 27,057,295
December 31, 2013
Cost 59,773,424 7,233,842 9,884,521 42,296,558 119,188,345
Accumulated depreciation (49,210,643) (4,750,259) (7,818,854) (30,351,294) (92,131,050)
Carrying amount P 10,562,781 P 2,483,583 P 2,065,667 P 11,945,264 P 27,057,295
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As of December 31, 2013 and 2012, the cost of fully depreciated property and
equipment still in use are as follows:
2013
2012
Office and communication equipment P 24,832,855 P 21,914,402
Leasehold improvements 23,721,581
19,368,462
Furniture and fixtures 3,765,097 3,334,365
Transportation and delivery equipment
1,353,642
1,665,218
P 53,673,175 P 46,282,447
In 2013, the Group disposed an equipment with a carrying amount of P526,924 for a
consideration of P204,828 which resulted to loss on disposal of P322,096, while in
2012, the Group disposed an equipment with a carrying amount of P486,310 for a
consideration of P361,743 which resulted to loss on sale of P124,567, while in 2011,
the Group disposed an equipment with a carrying amount of P460,097 for a
consideration of P456,143 which resulted to loss on sale of P3,954.
The Group’s consolidated depreciation of property and equipment amounted to
P11,926,058, P11,717,731 and P11,261,295 in 2013, 2012 and 2011, respectively,
as disclosed in Note 21.
Depreciation amounting to P1,760,917 pertains to the discontinued operations in Italy
for the year ended December 31, 2011, as disclosed in Notes 21 and 28.
In both years, the Group carried out a review of the recoverable amounts of its
property and equipment and determined that there is no indication that impairment has
occurred on its property and equipment.
13. INTANGIBLE ASSETS – net
The Group’s intangible assets are as follows:
2013 2012
Goodwill P 111,441,191 P 111,441,191
Software – net 650,428 1,452,662
P 112,091,619 P 112,893,853
13.01 Goodwill
The Group’s goodwill relate to the excess of the acquisition cost over the ownership
interest acquired by the Group in IGRL, IAPL, IRCL, LSML and WEPL, as follows:
13.01.01 IGRL and IAPL
On June 2, 2007, the Group’s BOD approved the acquisition of 100% ownership
interest in both IGRL and IAPL for a consideration of P71,200,000 and P8,552,000,
respectively. IGRL and IAPL are based in United Kingdom and Australia, respectively.
These entities, which are in the remittance business, have the same operations as the
Group. Accordingly, on June 29, 2007, the Group acquired 100% ownership interest
in IGRL and IAPL through the execution of deeds of assignment by the previous
stockholders (who are also the stockholders of the Group) of both entities. Under the
deeds of assignment, the existing advances by the Group to certain stockholders were
applied as payment for the purchase of IGRL and IAPL.
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13.01.02 WEPL
On June 2, 2007, the Group’s BOD also approved the acquisition of 20% ownership
interest in WEPL for a consideration of P5,600,000. WEPL was incorporated and is
based in Australia, and has the same operations as the Group. Accordingly, on June
29, 2007 the Group acquired 20% ownership interest in WEPL through execution of a
deed of assignment by the previous stockholders (who are also stockholders of the
Group) of the entity. Under the deed of assignment, the existing advances of the
Group to certain stockholders were applied 15% ownership interest in WEPL was
acquired by the Group for a consideration of P3,433,072.
On March 25, 2011, the Group’s BOD approved the acquisition of another 35%
ownership interest in WEPL for a consideration of AUD0.27 million (P12,303,818).
As discussed in Note 1, WEPL is effectively 100% owned by the Group through its
direct interest of 70% and indirect interest of 30% through IAPL.
13.01.03 IRCL
On October 1, 2004, the Group’s BOD approved the acquisition of 65% of IRCL for a
consideration of P10,344,000. IRCL, which was incorporated on July 16, 2001, is
based in Canada, and has the same operations as the Group. The fair value of the net
assets of IRCL at acquisition date is P8,247,612 and the fair value of the 65%
ownership interest was P5,360,948. The difference of P4,983,052 between the
consideration paid and the fair value of the interest acquired in IRCL was recognized as
goodwill. On July 26, 2006, the additional 30% ownership interest from a non-
controlling stockholder in IRCL was transferred to the Group at no additional cost.
On June 2, 2007, the Group’s BOD approved the acquisition of 5% ownership interest
from a non-controlling stockholder for a consideration of P3,100,000 taking its
ownership in IRCL to 100%. Accordingly, on June 29, 2007, IRCL’s non-controlling
stockholder executed a deed of assignment to transfer the ownership interest to the
Group. Under the deed of assignment, the existing advances from the Group to a
certain stockholder were applied as payment for the purchase of IRCL. The fair value
of the net assets of IRCL at acquisition date was P11,126,780, and the fair value of
the additional interest acquired was P556,339. The difference of P2,543,601
between the consideration paid and the non-controlling interest acquired in IRCL was
recognized as goodwill.
13.01.04 LSML
LSML was incorporated on March 16, 2001, is based in Hong Kong, and has the same
operations as the Group. On June 2, 2007, the Group’s BOD approved the acquisition
of 49% ownership interest in LSML for a consideration of P24,700,000 thereby taking
its ownership in LSML to 100%. Accordingly, on June 29, 2007, the non-controlling
stockholder of LSML (who is also a stockholder of the Group) executed a deed of
assignment to transfer its ownership interest to the Group. Under the deed of
assignment, the existing advances by the Group to the stockholder were applied as
payment for the purchase of LSML. The fair value of the net assets of LSML at
acquisition date was P8,228,257 and the fair value of the additional interest acquired
was P4,031,846. The difference of P20,668,154 between the consideration paid and
the non-controlling interest acquired in LSML was recognized as goodwill.
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Goodwill acquired through business combinations has been allocated to five (5)
individual CGUs are as follows:
2013 2012
IGRL P 69,982,505 P 69,982,505
LSML 20,668,154 20,668,154
IAPL 7,678,564 7,678,564
IRCL 7,526,653 7,526,653
WEPL 5,585,315 5,585,315
P 111,441,191 P 111,441,191
13.02 Software – net
Movements in software are as follows:
2013 2012
Balance, January 1
Cost P 14,181,489 P 13,239,304
Accumulated amortization (12,728,827) (11,788,360)
1,452,662 1,450,944
Movements during the year
Balance, January 1 1,452,662 1,450,944
Additions 13,083 945,187
Foreign exchange adjustment:
Cost 8,110 (3,002)
Accumulated amortization (2,799) 700
Amortization (820,628) (941,167)
Balance, December 31 P 650,428 P 1,452,662
The softwares have two (2) years remaining amortization period.
The Group’s consolidated amortization of intangible asset amounted to P820,628
P941,167 and P2,006,374 in 2013, 2012 and 2011, respectively, as disclosed in
Note 21.
In 2013 and 2012, the Group carried out a review of the recoverable amounts of its
intangible assets. The Group has determined that there is no indication that
impairment has occurred on its intangible assets.
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14. OTHER NON-CURRENT ASSETS
Below is the composition of the Group’s other non-current assets.
2013 2012
Refundable deposits (Note 25) P 18,877,336 P 19,905,025
Input VAT 11,160,878 11,464,326
Others 44,000 44,000
P 30,082,214 P 31,413,351
The Group has applied for tax credits on Input VAT with the BIR and is waiting for the
issuance of Tax Credit Certificates (TCCs). In 2011, the BIR issued two tax credit
certificates to the Group for its input VAT filed for years 2005 and 2006 amounting to
P1,719,885 and P3,815,946, respectively. In 2012, the BIR issued additional tax
credit certificate to the Group for its Input VAT filed in 2008 amounting to
P2,968,565. In 2013, the BIR issued another tax credit certificate to the Group for its
Input VAT filed in 2010 amounting to P445,740. Management of the Group believes
that it will able to collect the rest of the TCCs applicable to its outstanding claims.
The carrying amounts are already net of claims disallowed by the BIR amounting to
P226,871 and P6,677,857 in 2013 and 2012, respectively, as disclosed in Note 21.
15. BENEFICIARIES AND OTHER PAYABLES
The components of beneficiaries and other payables account are as follows:
2013 2012
Beneficiaries P 63,848,152 P 443,442,930
Foreign currency payable 569,593,858 -
Agents, couriers and trading clients 97,500,635 41,732,521
Accrued expenses 34,728,650 25,246,630
Payable to government agencies 4,393,206 4,258,753
Payable to suppliers 2,536,336 3,720,856
Advances from related parties (Note 26) - 218,417
Others 11,724,348 - 1,219,170
P 784,325,185 P 519,839,277
Foreign currency payable pertains to the dollar payable of the Group in relation to
foreign currency trading transactions. This is the set-up of dollar payable in forward
contract trading transactions.
Payables to beneficiaries, agents, couriers and trading clients are non-interest bearing
and are normally settled within thirty (30) days.
Accrued expenses include accruals for various operating expenses, courier charges,
training and development, professional fees, utilities and finance cost.
Others include payable to remitters through visa cards issued by the Group.
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16. LOANS PAYABLE
In 2013 and 2012, the Group issued an unsecured, short-term interest-bearing
peso-denominated bank loans with an aggregate amount of P988,000,000 and
P925,000,000, respectively. The loans payable have an interest rate ranges from 5%
to 7.125% per annum and have maturities of less than one (1) year. The related
finance cost from these loans payable amounted to P32,593,239, P46,068,423 and
P38,322,540 in 2013, 2012 and 2011, respectively.
In 2013 and 2012, the Group’s accrued finance cost amounting to P3,416,080 and
P1,827,756, respectively, as part of accrued expenses in Note 15.
The Group has unused credit facilities with various banks amounting to
P2,167,000,000 and P1,880,000,000 as of December 31, 2013 and 2012,
respectively.
Movements of loans payable are as follows:
2013 2012
Balance, January 1 P 925,000,000 P 666,000,000
Additional loans obtain 988,000,000 925,000,000
Payments for short-term loans (925,000,000) (666,000,000)
Balance, December 31 P 988,000,000 P 925,000,000
As of the reporting period, the Group is compliant with the terms and conditions of the
loans.
17. CAPITAL STOCK
The capital stock of the Group is as follows:
2013 2012
Ordinary shares P 617,725,800 P 617,725,800
Additional paid-in-capital 391,232,478 391,232,478
P 1,008,958,278 P 1,008,958,278
17.01 Ordinary Shares
The ordinary shares of the Group are described as follows:
2013 2012
Authorized:
1,000,000,000 shares at P1 par value
per share P 1,000,000,000 P 1,000,000,000
Issued and outstanding (P1 par value per
share) P 613,436,122 P 597,138,800
Treasury stock (P1 par value per share) 4,289,678 20,587,000
Total issued P 617,725,800 P 617,725,800
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The Group’s issued and outstanding ordinary shares are detailed as follows:
2013 2012
Issued and outstanding, January 1 597,138,800 617,725,800
Treasury stock – reissuance 20,272,322 -
Treasury stock – additional acquisition (3,975,000) (20,587,000)
Issued and outstanding, December 31 613,436,122 597,138,800
Ordinary shares carry one vote per share and a right to dividend.
17.01.01 Additional Paid-in Capital
The Group’s additional paid-in capital in excess of par value is composed of excess of
proceeds on issuance of the Group’s shares amounting to P391,232,478 as of
December 31, 2013 and 2012.
17.02 Treasury Stock
Details about the Group’s treasury stock are as follows:
2013 2012
Shares Amount Shares Amount
Balance, January 1 20,587,000 P 69,209,688 14,873,000 P 52,987,208
Acquisitions 3,975,000 11,475,190 5,714,000 16,222,480
Reissuance (20,272,322) (68,284,569) - -
Balance, December 31 4,289,678 P 12,400,309 20,587,000 P 69,209,688
On July 19, 2013, the BOD of the Group declared property dividend to its stockholders
out of its treasury stock consisting of Twenty Million Five Hundred Eighty Seven
Thousand (20,587,000) shares at the cost of P69,209,688.
Of the total property dividend declared, Three Hundred Fourteen Thousand Six
Hundred Sixty Three (314,663) shares or P925,119 were required in exchange for the
payment of the withholding tax of certain individual shareholders which the Group paid
to the BIR in their behalf. Accordingly, the said shares are still included in the Group’s
treasury shares.
The property dividends reissued were distributed pro-rata based on the stockholders’
respective shareholdings as of record date on August 16, 2013. In 2013, the Group
purchased a total of 3,975,000 shares or P11,475,190 equivalent from the buy-back
program of 2012.
On September 21, 2012, the Board of Directors of the Group adopted a resolution
authorizing another buy-back program of up to ten million (10,000,000) of its shares in
the market. The Group purchased the remaining balance of 5,127,000 shares
(P14,560,680) from the buy-back program of 2011 and 587,000 shares (P1,661,800)
from the latest buy-back program authorized in 2012.
On September 16, 2011, the Board of Directors of the Group adopted a resolution
authorizing the buy-back of up to ten million (10,000,000) of its shares in the market.
The Group purchased 4,873,000 shares (P11,314,130) under the buy-back program.
Also on the same year, the Group purchased 671,000 shares (P1,557,928) under the
buy-back program approved in August 15, 2008.
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In 2009 and 2008, the Group purchased 130,900 shares for P130,000 and 548,500
shares for P55,000, respectively, under the SSPP. The 808,100 shares (including
128,700 shares purchased in 2007) purchased under the SSPP, were subsequently
transferred in September 2009 to the retirement fund of the Group.
On August 15, 2008, the Group’s BOD approved the buy-back program to acquire up
to ten million (10,000,000) of its shares, representing approximately 1.87% of the
Group’s total outstanding common shares, from the market. The Group purchased
9,329,000 shares for P40,110,000 in 2008 under the buy-back program.
17.03 History of Registration of Securities
On September 13, 2007, the Group filed a registration statement with the SEC in
accordance with the Securities Regulation Code for the registration of a total of
562,417,000 common shares. A pre-effective clearance was issued by the SEC on
October 5, 2007.
The application for listing was approved by the BOD of the PSE on September 27,
2007. The Group was listed in the first board (now main board) of the PSE last
October 17, 2007.
On October 17, 2007, the Group completed its Initial Public Offering (IPO) of
107,417,000 new common shares at an offer price of P4.68 per share for a total
gross proceeds of P502,711,560. The Group intends to use the majority of its net
proceeds from the offer to finance, in part, its expansion in existing and new countries
and to cover working capital requirements as well as partially retire some of the
Group’s short-term interest-bearing loans. When such proceeds shall be used to pay
off debts, the Group shall pay off loan payables, or portions of the same, to banks with
which the Group has existing credit lines. The retirement of the Group’s debts has the
underlying intention of reducing debt service burden and consequently improving
profitability. Direct costs incurred relative to the IPO amounting to P36,513,103 were
charged against the additional paid-in capital.
As of December 31, 2013 and 2012, Group has a total number of twenty (20) and
nineteen (19) stockholders holding the above registered securities, respectively.
17.04 Appropriation of Retained Earnings
As of December 31, 2013 and 2012, appropriated retained earnings pertaining to
treasury stock amounted to P12,400,309 and P69,209,688, respectively. This is in
accordance with the legal requirement of Section 41 of the Corporation Code of the
Philippines which requires an entity to have sufficient retained earnings to support for
the treasury shares.
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17.05 Cumulative Translation Adjustment
Shown below are the movements on the Group’s cumulative translation reserve:
2012 2011
Balance, January 1 P 37,129,628 P 16,517,663
Exchange differences arising on translating the
net assets of foreign operations (27,670,131) 20,670,117
Others (58,152) (58,152)
Balance, December 31 P 9,401,345 P 37,129,628
17.06 Dividends Declared
The Group has declared the following dividends to its equity holders:
Dividend per Share Total Dividends
2013 2012 2011 2013 2012 2011
Cash
dividends P 0.0422 P 0.1993 P - P 25,031,512 P 119,980,858 P -
Property
dividends 3.3641
-
- 69,209,688 - -
Stock
dividends -
-
1.00 - -
55,308,800
P 3.4063 P 0.1993 P 1.00 P 94,241,200 P 119,980,858 P 55,308,800
During the stockholders’ meeting of the Group in July 19, 2013, the BOD of the Group
approved and authorized the declaration of property dividends of 20,587,000 shares of
the Corporation lodged as Treasury Shares, to be paid based on the market value of
the stock of the corporation on the date of declaration and cash dividend in the
aggregate amount of Twenty Five Million (P25,000,000) to its stockholders.
In October 7, 2013, the Securities and Exchange Commission (SEC) certified the notice
of property dividend consisting of treasury shares amounting to P69,209,688 payable
to the stockholders of record as of August 16, 2013. The Group issued and
distributed the property dividend net of withholding tax on October 14, 2013 and paid
the cash dividend of P25,031,512 to the stockholders on September 11, 2013 at the
rate of P0.0422 per share.
On its regular meeting held in June 22, 2012, the Board of Directors of the Company
approved and authorized the declaration of cash dividends equivalent to P119,980,858
or approximately P0.1993 per share based on the Corporation’s six hundred two
million seventy one thousand eight hundred (P602,071,800) issued and outstanding
common shares as of the end of trading day, payable to all of its stockholders-of-
record as of July 12, 2012.
On June 17, 2011, the BOD of the Group authorized the declaration of stock dividends
amounting to P55,308,800 equivalent to 10% of outstanding shares of 553,088,000
in favor of its stockholders-of-record as of August 15, 2011. The declaration was
subsequently ratified and confirmed by the Group’s stockholders during their annual
meeting held on July 29, 2011.
On March 19, 2010, the BOD of the Group declared cash dividends amounting to
P26,603,533 or P0.0481 per share, payable to shareholders-of-record as of April 8,
2010. The declaration was subsequently ratified and confirmed by the Group’
shareholders during their annual meeting held on July 23, 2010. The payment was
made on May 5, 2010.
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On March 23, 2009, the BOD of the Group declared cash dividends amounting to
P26,010,000 or P0.0471 per share, payable to shareholders-of-record as of April 7,
2009. The declaration was subsequently ratified and confirmed by the Group’
shareholders during their annual meeting held on July 17, 2009. The payment of
dividends was made on May 6, 2009.
18. REVENUES
An analysis of the Group’s revenue for the year from continuing operations is as
follows:
2013 2012 2011
Delivery fees P 576,010,830 P 554,609,474 P 513,290,111
Commission 89,311,287 84,894,485 103,738,196
Realized foreign exchange
gains – net 136,730,863 131,350,949 170,479,667
Other fees 817,645 785,944 351,531
P 802,870,625 P 771,640,852 P 787,859,505
The delivery fees earned by associates amounted to P13,678,703, P13,023,598 and
P13,150,965 in 2013, 2012 and 2011, respectively, as disclosed in Note 26 as part
of the receivables.
19. COST OF SERVICES
An analysis of the Group’s cost of services for the year from continuing operations is
as follows:
2013 2012 2011
Bank charges P 204,688,679 P 196,747,870 P 184,380,473
Delivery charges 10,297,289 13,167,206 15,046,832
P 214,985,968 P 209,915,076 P 199,427,305
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20. OTHER INCOME
An analysis of the Group’s other income for the year from continuing operations is as
follows:
2013 2012 2011
Finance income (Notes 7
and 9) P 15,648,620 P 12,947,419 P 13,862,222
GST refund - - 21,668,641
Rebates - - 2,881,469
Unrealized foreign
exchange gain (loss) –
net 5,133,202 (3,113,114) 1,205,505
Service charge 3,677,474 2,207,428 1,329,984
Refunds 3,454,816 1,368,903 148,641
Dividend income (Note 9) 294,391 234,434 56,577
Others 1,685,762 2,303,820 2,525,099
P 29,894,265 P 15,948,890 P 43,678,138
Rebates pertain to the refund of bank service charges.
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21. OPERATING EXPENSES
An analysis of the Group’s operating expenses for the year from continuing operations
is as follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Short-term benefits (Note 23) P 245,928,591 P 253,264,274 P 207,756,488
Rental (Note 25) 63,350,049 59,296,196 53,508,878
Professional fees 48,348,631 34,413,630 36,222,215
Marketing (Note 22) 36,834,472 37,914,975 36,339,592
Communication, light and
water 25,962,532 28,058,114 23,529,910
Transportation and travel 15,804,707 10,885,556 23,829,160
Depreciation and amortization
(Notes 12 and 13) 12,746,686 12,658,898 11,506,753
Photocopying and supplies 10,622,669 10,309,316 14,630,525
Taxes and licenses 10,997,243 10,046,458 9,020,616
Entertainment, amusement and
recreation 6,024,011 3,188,030 6,017,276
Repairs and maintenance 5,906,952 6,427,108 4,770,543
Retirement benefits (Note 23) 4,536,261 3,990,642 4,928,900
Association dues 3,069,631 3,223,761 3,230,078
Insurance 2,357,100 3,054,839 1,974,703
Loss on write-off of assets 2,559,109 10,040,886 2,058,616
Business development 81,732 5,100,724 2,974,651
Donations and contributions 40,000 2,621,445 -
Penalties and surcharges - - 2,992,353
Others 3,571,565 2,011,884 1,213,551
P 498,741,941 P 496,506,736 P 446,504,808
Loss on write-off of asset pertains to disallowed input VAT, deposits with Banco
Filipino and expenditures intended for certain investment in International I-Remit
Corporation – USA and receivable of PSAGL and WEPL.
2013
2012
2011
Disallowed input VAT
(Note 14) P 226,871 P 6,677,857 P 2,058,616
Deposits with Banco Filipino
-
1,584,891
Write of investment in -
I-Remit Corporation – USA
-
1,778,138
Write of receivable (Note 8)
2,332,238
-
-
P 2,559,109 P 10,040,886 P 2,058,616
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22. MARKETING EXPENSES
The account is composed of the following expenses:
2013 2012 2011
Marketing and promotions P 26,996,476 P 27,110,504 P 27,746,400
Advertising and publicity 9,837,996 10,804,471 9,617,140
P 36,834,472 P 37,914,975 P 37,363,540
Expenses amounting to P1,023,948 pertain to the marketing expenses of the
discontinued operations of Italy for the year ended December 31, 2011.
23. EMPLOYEE BENEFITS
Aggregate employee benefits expense comprised:
2013
2012
(As Re-stated)
2011
(As Re-stated)
Short-term benefits (Note 21) P 245,928,591 P 253,264,274 P 207,756,488
Retirement benefits
(Note 21) 4,536,261 3,990,642 4,928,900
P 250,464,852 P 257,254,916 P 212,685,388
23.01 Short-term Employee Benefits
Short-term benefits include salaries and wages, de-minimis fringe benefits, sick and
vacation leave pay, training and development and 13th month pay.
23.02 Retirement Benefits
The Group has a single retirement plan under the regulatory framework of the
Philippines. Under R.A. 7641, the Group is legally obliged to provide a minimum
retirement pay for qualified employees upon retirement. The framework, however,
does not have a minimum funding requirement. The Group’s benefit plan is aligned
with this framework.
The Group’s funded defined benefit plans for qualifying employees are entitled to
retirement benefits equal to one hundred percent (100%) of Plan Salary for every year
of credited service of a retirement age of sixty (60) and are not adjusted for inflationary
increases once in payment, or provide adjustment for inflationary increases.
The payments for the funded benefits are from trustee-administered funds. Plan assets
held by trustee are governed by a trust agreement between the latter and the Group.
Responsibility for governance of the plan assets including investment decision lies with
the Board of Trustees while plan governance and contribution schedule lies with the
Group.
The most recent actuarial valuations of plan assets and the present value of the
defined benefit obligation were carried out at January 30, 2014 by E.M. Zalamea.
The present value of the defined benefit obligation, and the related current service cost
and past service cost, were measured using the Projected Unit Credit Method.
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In accordance with the provisions of the Bureau of Internal Revenue Regulations
No. 1-68, it is required that a formal Retirement Plan be Trusteed; that there must be
no discrimination in benefits; that forfeitures shall be retained in the Retirement Fund
and be used as soon as possible to reduce future contributions; and that no part of the
corpus or income of the Retirement Fund shall be used for, or diverted to, any purpose
other than for the exclusive benefit of the Plan members.
The Retirement Plan Trustee, as appointed by the Group in the Trust Agreement
executed between the Group and the duly appointed Retirement Plan Trustee, is
responsible for the general administration of the Retirement Plan and the Management
of the Retirement Fund. The Retirement Plan Trustee may seek the advice of counsel
and appoint an investment manager or managers to manage the Retirement Fund, an
independent accountant to audit the Fund and an actuary to value the Retirement
Fund.
There was no plan amendment, curtailments, or settlement recognized in the financial
years ended December 31, 2013 and 2012.
The principal assumptions used for the purposes of the actuarial valuations were as
follows:
2013 2012
Discount rate 6.05% 5.86%
Expected rate of salary increase 8.00% 8.00%
Assumptions regarding future mortality are set based on actuarial advice in accordance
with published statistics and experience. These assumptions translate into an average
life expectancy in years for a pensioner retiring at age sixty (60).
2013 2012
Retiring at the end of the reporting period
Male 9 -
Female 8 -
Retiring 20 years after the reporting period
Male 64 76
Female 94 95
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The sensitivity analysis of the defined benefit obligation of changes in the weighted
principal assumption is as follows:
Impact on Defined Benefit Obligation
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
Discount rate 100 bps Increase by 8.5% Decrease by 9.4%
Salary increase rate 100 bps Increase by 8.2% Decrease by 7.6%
The above sensitivity analysis is based on a change in an assumption while holding all
other assumptions constant. In practice, this is unlikely to occur, and changes in some
of the assumptions may be correlated. When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions, the same method (present value
of the defined benefit obligation calculated with the projected unit credit method at the
end of the reporting period) has been applied as when calculating the pension liability
recognized within the consolidated statements of financial position.
Assumed life expectancy is not applicable because under the Group’s Retirement Plan,
benefits are paid in full in a lump sum upon retirement or separation of an employee.
Amounts recognized in profit or loss in respect of these defined benefit plans are as
follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Current service cost P 4,696,837 P 4,149,490 P 4,618,548
Net interest on the retirement
assets (liabilities) (160,576) (158,848) 310,352
P 4,536,261 P 3,990,642 P 4,928,900
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Reconciliation of re-measurements recognized in other comprehensive income is as follows:
Change on
demographic
assumption
Change on
financial
assumption
Experience
adjustment
Return on Plan
Assets
excluding
interest
Re-
measurements
Deferred tax
asset (liability)
Re-
measurement
gain (loss) – net
deferred tax
asset (liability)
Gain (loss) Balance at
January 1, 2011 P - P - P - P (5,872,169) P (5,872,169) P 1,761,650 P (4,110,519)
Amount recognized during
the year - 498,493 5,559,744 (2,082,496) 3,975,741 (1,192,722) 2,783,019
Gain (loss) Balance at
December 31, 2011 - 498,493 5,559,744 (7,954,665) (1,896,428) 568,928 (1,327,500)
Amount recognized during
the year - (2,361,420) 2,585,727 531,150 755,457 (226,637) 528,820
Gain (loss) Balance at
December 31, 2012 - (1,862,927) 8,145,471 (7,423,515) (1,140,971) 342,291 (798,680)
Amount recognized during
the year 9,585,110 349,015 2,959,009 (1,446,129) 11,447,005 (3,434,101) 8,012,904
Gain (loss) Balance at
December 31, 2013 P 9,585,110 P (1,513,912) P 11,104,480 P (8,869,644) P 10,306,034 P (3,091,810) P 7,214,224
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Amounts included in the consolidated statements of financial position arising from the
entity’s obligation with respect to its defined benefit plans are as follows:
2013 2012
Present value of defined benefit obligation P 20,389,143 P 27,959,017
Fair value of plan assets (33,470,764) (30,303,714)
Surplus (13,081,621) (2,344,697)
Effect of the asset ceiling 1,893,404 129,793
P (11,188,217) P (2,214,904)
Movements in the present value of the defined benefit obligation in both years were as
follows:
2013 2012
Balance, January 1 P 27,959,017 P 22,524,680
Current service cost 4,696,837 4,149,490
Interest cost 1,638,398 1,509,154
Benefits paid from plans (1,011,975) -
Actuarial (gains) / loss:
Changes in financial assumptions (349,015) 2,361,420
Changes in demographic assumptions (9,585,110) -
Experience (2,959,009) (2,585,727)
Balance, December 31 P 20,389,143 P 27,959,017
Movements in the fair value of the plan assets in both years were as follows:
2013 2012
Balance, January 1 P 30,303,714 P 21,816,324
Interest income 1,806,580 1,668,002
Employer’s contributions 2,062,569 6,158,445
Re-measurements 309,876 660,943
Benefits paid from plan assets (1,011,975) -
Balance, December 31 P 33,470,764 P 30,303,714
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Plan assets as of December 31, 2013 are comprised as follows:
Quoted Unquoted Total Percentage
Equity securities:
Preferred shares P 5,994,395 P - P 5,994,395 18%
Available-for-sale 5,791,706 - 5,791,706 17%
Government securities
Available-for-sale 1,872,969 - 1,872,969 6%
Unquoted debt securities
classified as loans - 1,017,732 1,017,732 3%
Held to maturity - 999,286 999,286 3%
Other securities and Debt
instrument:
Available-for-sale 12,846,878 - 12,846,878 38%
Unquoted debt securities
classified as loans - 1,998,132 1,998,132 6%
Held to maturity - 1,852,880 1,852,880 6%
Bank deposits - 736,162 736,162 2%
Other assets - 360,624 360,624 1%
P 26,505,948 P 6,964,816 P 33,470,764 100%
Plan assets as of December 31, 2012 are comprised as follows:
Quoted Unquoted Total Percentage
Equity securities:
Preferred shares P 4,995,561 P - P 4,995,561 17%
Available-for-sale 2,669,798 - 2,669,798 9%
Government securities
Available-for-sale 999,112 - 999,112 3%
Unquoted debt securities
classified as loans - 1,021,592 1,021,592 3%
Held to maturity - 1,001,566 1,001,566 3%
Other securities and Debt
instrument:
Available-for-sale 8,785,388 - 8,785,388 29%
Held to maturity - 4,079,676 4,079,676 14%
Bank deposits - 6,396,558 6,396,558 21%
Other assets - 354,463 354,463 1%
P 17,449,859 P 12,853,855 P 30,303,714 100%
Expected maturity analysis of undiscounted benefit obligation is as follows:
Less than
one year
More than two
years but within
five year
More than
five years Total
Undiscounted amount P - P - P 18,235,479 P 18,235,479
The Group ensures that the investment positions are managed within an Asset-Liability
Matching (ALM) framework that has been developed to achieve
long-term investments that are in line with the obligations under the benefit schemes.
Within this framework, the Group’s ALM objective is to match assets to the pension
obligations by investing in long-term fixed interest securities with maturities that match
the benefit payments as they fall due and in the appropriate currency.
The Group actively monitors how the duration and the expected yield of the
investments are matching the expected cash outflows arising from the pension
obligations. The group has not changed the processes used to manage its risks from
previous periods. The Group does not use derivatives to manage its risk. Investments
are well diversified, such that the failure of any single investment would not have a
material impact on the overall level of assets. A large portion of assets in the current
year consists of equities and bonds, although the Group also invests in property,
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bonds, cash and investment (hedge) funds. The Group believes that equities offer the
best returns over the long term with an acceptable level of risk. The majority of
equities are in a locally diversified portfolio of blue chip entities.
The Group is exposed to a number of risks through its defined benefit plan.
The most significant risks are detailed below:
Volatility Risk
The plan liabilities are calculated using a discount rate set with reference to corporate
bond yields; if plan assets underperform this yield, this will create a deficit. The plan
hold a significant proportion of equities, which are expected to outperform corporate
bonds in the long-term while providing volatility and risk in the short-term.
As the plan mature, the Group intends to reduce the level of investment risk by
investing more in assets that better match the liabilities. The assets are composed of
government securities, equity securities, other securities and debt instruments, bank
deposits and other assets. The government bonds represent investments in Philippine
government securities only.
However, the Group believes that due to the long-term nature of the plan liabilities and
the strength of the supporting group, a level of continuing equity investment is an
appropriate element of the group’s long term strategy to manage the plans efficiently.
Investment Risk
Investment risk is the risk that investments on plan assets will result to a lower return
than originally expected. This risk emanates on the premise that funded defined
benefit plans should arranged on the basis of Asset-Liabilities Matching principle.
Thus, plan assets and future contributions are invested in such a way that it will
generate return to cover-up future payments of defined benefit obligations and interest
costs. These plan activities exposes the Group to sensitivity in investment risks that
would result to lower plan assets and higher defined benefit obligations should the
performance of the investment portfolio falls below the inflation rate, interest rates and
other economic conditions.
Investment risk is mitigated through proper investment planning and concentration of
investments. As of December 31, 2013 and 2012, plan assets are concentrated on
government securities, equity securities and other securities, respectively, which
account ranges from 74% and 79% in 2013 and 2012, respectively, of the total plan
assets.
Inflation Risk
Inflation risk is the risk that the equivalent purchasing power of the plan assets will not
be able to match the recorded liabilities.
Payments for the defined benefit plan of the Group are not link to inflation, thus, the
exposure to this risk is immaterial. To cope-up with inflation, the plan has designed a
versatile policy of having an appropriate mix of debt and equity securities in the
portfolio of investments during high inflation rates.
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Life Expectancy Risk
The majority of the plans’ obligations are to provide benefits for the life of the member,
so increases in life expectancy will result in an increase in the plans’ liabilities.
This risk is closely associated with inflation risk wherein inflationary increases result in
higher sensitivity to changes in life expectancy. The plan posses a minimal exposure
to this risk since inflationary risk, which is directly associated to the plan’s sensitivity
to life expectancy risk, is immaterial.
24. SHARE BASED PAYMENTS
On July 20, 2007, the Group’s BOD approved the proposal to set up a SSPP totaling
15,000,000 shares for the employees of the Group who have been in the service for at
least one (1) calendar year as of June 30, 2007, as well as its BOD members, resource
persons and consultants (collectively referred to as “the Participants”). A Notice of
Exemption under Section 10.2 of the Securities Regulations Code had been approved
by the SEC on September 13, 2007. Notwithstanding the aforesaid confirmation by
the SEC of the exempt status of the SSPP shares, the SEC nonetheless required the
Group to include the SSPP shares among the shares of the Group which were
registered with the SEC prior to the conduct of its Initial Public Offering in October
2007. The registration of the Group shares, together with the SSPP shares, was
rendered effective on October 5, 2007.
All 15,000,000 shares were exercised. The shares subject to the SSPP were sold at
par value or P1.00 per share. Total shares amounting to P11.74 million were paid in
full, while the difference totaling P3.26 million were paid by way of salary loan.
Shares acquired through SSPP are subject to a lock-up period of two years from date
of issue, which ended on September 19, 2009.
The sale is further subject to the condition that should the officer or employee resign
from the Group prior to the expiration of the lock-up period, the shares purchased by
such resigning employee or officer shall be purchased at cost by the Group as treasury
stock. As of December 31, 2009, 24 employees resigned (9 in 2009, 13 in 2008 and
2 in 2007) and their shares totaling 808,100 (130,900 in 2009, 548,500 in 2008 and
128,700 in 2007) were bought back by the Group at par value.
As approved by the Group’s BOD, the fair value of the shares issued under the SSPP
was measured at the grant date using the price-earnings multiple model taking into
account the terms and conditions upon which the shares were granted. The fair value
at grant date was P1.33 per share. This transaction also resulted in an increase in
equity by P1.53 million, P2.16 million and P1.00 million recognized as ‘share-based
payment’ under equity in 2009, 2008 and 2007, respectively..
On September 19, 2009, which is the end of the lock up period, the 808,100 shares
bought back at cost was transferred to the Group’s retirement fund upon
reimbursement of the P808,100 million paid by the Group for those shares.
The expense arising from the share-based payment plan is recognized over the
two-year lock-up period. The expense recognized under ‘Salaries, wages and employee
benefits’ in the Group’s consolidated statements of comprehensive income amounted
to P1.53 million in 2009.
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25. OPERATING LEASE AGREEMENTS
25.01 The Group as a Lessee
Operating leases relate to leases of space for use of office space subject to lease terms
with Wynsum Realty and Oakridge Properties, Inc. Operating lease payments represent
rentals payable by the Group for office space.
On August 31, 2012, the Group entered into another lease agreement with OPI for the
use of office spaces on Units 2704 and 2705 for an initial term of three (3) years from
October 15, 2012 to October 14, 2015 with provision for 10% escalation on the
second and third year of the term of contract. The Group has an option to renew for
another three (3) years.
The subsidiaries have their respective operating lease agreements for their office
spaces. The lease contracts are for periods ranging from one (1) to ten (10) years and
may be renewed under the terms and conditions mutually agreed upon by the
subsidiaries and the lessors.
Rent expense of the Group from continuing operations amounted to P63,350,049,
P59,296,196 and P53,508,878 in 2013, 2012 and 2011, respectively, as disclosed in
Note 21. P3,914,938 of the total rent expense pertains to the discontinued operations
of Italy for the year ended December 31, 2011. The Group’s refundable deposits
amounted to P18,877,336 and P19,905,025 in 2013 and 2012, respectively, as
disclosed in Note 14.
At reporting date, the Group had outstanding commitments for future minimum lease
payments under non-cancelable operating leases, which fall due as follows:
2013 2012
Not later than one year P 52,237,720 P 48,594,222
Later than one year but not later than five
years 70,241,467 75,519,359
Later than five years - 2,045,507
P 122,479,187 P 126,159,088
26. RELATED PARTY TRANSACTIONS
Nature of relationship of the Group and its related parties are disclosed below:
Related Parties Nature of Relationship
Hwa Kung Hong & Co., Ltd.(HKHCL) Associate
Sterling Bank of Asia (SBA) Under common controlling party
Oakridge Properties, Inc. (OPI) Under common controlling party
Surewell Equities, Inc. (SEI) Investor with significant influence
Stockholders Key management personnel
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Balances and transactions between the Group and its related parties are disclosed
below:
26.01 Due from Related Parties
Balance of due from related parties presented under trade and other receivables in
Note 8 are summarized per category as follows:
2013
Receivable
from Agents
Advances to
Related Parties Total
Associate P 52,815,212 P 5,049,427 P 57,864,639
Key management personnel - 7,533,281 7,533,281
P 52,815,212 P 12,582,708 P 65,397,920
2012
Receivable
from Agents
Advances to
Related Parties Total
Associate P 62,318,543 P 8,192,341 P 71,510,884
Affiliate - 254,182 254,182
Key management personnel - 7,045,214 7,045,214
P 62,318,543 P 15,491,737 P 78,810,280
Receivable from agents includes remittances and delivery fees, while advances to
related parties include due from.
26.01.01 Associate
Transactions with an associate are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Volume Balances Volume Balances
HKHCL
Remittance P 5,340,222,739 P 52,254,154 P 5,155,165,031 P 60,187,956
Due from 2,894,979 5,049,427 5,223,594 8,192,341
Delivery fees 46,232,429 561,058 47,715,373 2,130,587
The following are the nature, terms and conditions of the following accounts:
• Remittance pertains to the principal amount of transaction accepted by a foreign
associate office from a remitter, delivery of which is fulfilled by the Group to
intended beneficiary in the Philippines. Account is collectible within five (5) days
from date of transaction.
• Delivery fees are the share in service fees collected by the foreign subsidiary office
along with the principal amount of transaction. Account collectible within five (5)
days from date of transaction.
• Due from account refer to operating funds and marketing materials advanced to
foreign associate offices. Account is collectible within thirty (30) days from date of
funding.
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The amounts outstanding are non-interest bearing, unsecured, collectible on demand
and will be settled in cash. No guarantee was required. No provision made for doubtful
accounts as these accounts are all collectible.
26.01.02 Key Management Personnel
Transactions with the key management personnel are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Category Volume Balances
Volume
Balances
Advances P 6,242 P 7,533,281 P 3,779,592 P 7,045,214
Advances pertain to sum of money advanced to key management personnel subject to
liquidation within the Company’s prescribed period of liquidation.
The amount outstanding is non-interest bearing, unsecured, collectible on demand and
will be settled in cash. There is no guaranty required and no provision was made for
doubtful account as the account is deemed collectible.
26.01.03 Investor with Significant Influence
Transactions with investor with significant influence are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Category Volume Balances
Volume
Balances
Rental P 889,134 - P 898,920 P 254,182
Pertains to the cost of rental paid to Surewell Equities Pte. Ltd. (SEPL) for the sharing of
its office in Singapore with the Group under a sublease agreement. SEPL is a foreign
subsidiary office of Surewell Equities, Inc., one of the principal stockholders of the
Group. There is no security deposit paid and without provision for escalation. Rent is
paid monthly.
26.02 Due to Related Parties
26.02.01 Key Management Personnel
Advances from stockholders and to other members of key management personnel as
shown in the consolidated statements of financial position and in beneficiaries and other
payables in Note 15, respectively, are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Category Volume Balances
Volume
Balances
Key management
personnel P - P - P 218,417 P 218,417
Stockholders - 7,289,480 4,896,570 7,289,480
P - P 7,289,480 P 5,114,987 P 7,507,897
Advances from stockholders pertain to net amount of advances resulted from
reclassification of investment in associate and accumulated dividend income amounting
to P12,600,000 and P19,889,480, respectively, as disclosed in Notes 34 and 36.
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The amounts outstanding are unsecured, non-interest bearing, payable on demand and
will be settled in cash. No guarantees have been given in respect of the amounts owed
to related party.
26.03 Other Related Parties
26.03.01 Under Common Controlling Parties
Transactions under common controlling parties are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Volume Balances
Volume
Balances
Sterling Bank of Asia P 280,083 P - P 384,536 P -
Oakridge Properties, Inc. 13,885,207 - 11,421,505 -
The following are the nature, terms and conditions of the above transactions:
• Sterling Bank of Asia pertains to income earned from depositary accounts in Peso and
USD (FCDU) maintained at Sterling Bank of Asia (SBA), an affiliate of the Group
through common controlling stockholders. Principal stockholders of SBA and the
Group are JTKC Equities, Inc., Star Equities, Inc. and Surewell Equities, Inc.
The Group deposits the amounts to P113,044,170, P126,865,934 and
P193,049,842 with SBA as of December 31, 2013, 2012 and 2011, respectively.
These deposits earned interest income amounting to P280,083, P384,536 and
P425,360 in 2013, 2012 and 2011, respectively.
• Oakridge Properties, Inc. pertains to the cost of rental paid to Oakridge Properties,
Inc. (OPI) by the Group for the use of office spaces at Discovery Centre, a building
owned by OPI, an affiliate of the Group as disclosed in Note 26. OPI is owned by
The Discovery Leisure Company Inc, (TDLCI), an entity owned by JTKC Equities, Inc,
and JTKC Realty Corporation. Lease contract with Oakridge includes security deposit
of two months and one month advance rental. Rent is paid monthly with provision
for yearly escalation. Rent expense amounted to P13,885,207, P11,421,505 and
P9,247,615 for 2013, 2012 and 2011, respectively, as disclosed in Note 21.
26.04 Remuneration of Key Management Personnel
The remuneration of the directors and other members of key management personnel of
the Group is set out below in aggregate for each of the categories specified in PAS 24,
Related Party Disclosures:
2013 2012
Short-term benefits P 36,117,237 P 31,659,537
Retirement benefits 1,877,723 1,260,378
P 37,994,960 P 32,919,915
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26.05 Transaction with Retirement Fund
The Group’s retirement benefit fund is maintained with Sterling Bank of Asia (SBA), an
affiliate due to common stockholders, as trustee. The carrying amounts and fair values
of the fund amounted to P33,470,764 and P30,303,714 as of December 31, 2013
and 2012, respectively.
The funds were invested in private equity securities, deposits in banks and government
debt securities. In 2013 and 2012, the Group made contributions to the fund
amounting to P2,062,569 and P6,158,445, respectively.
Private equity securities includes P808,100 of the Group’s own equity securities
bought back from resigned employees who held such securities, under the special
stock purchase program. Such transaction was authorized by the BOD of
the Group through its SSS program, as disclosed in Note 20.
The government debt securities consist of peso denominated and USD denominated
securities. The Peso-denominated Government Securities (GS) of the Group’s
Retirement Fund were purchased from accredited counterparties of SBA-Trust Group.
These counterparties are Banks and Investment Houses allowed to trade government
securities. Existing Peso GS accounts are all tax-exempt and are currently lodged
under the Tax-exempt RoSS Account of SBA-Trust Group with the Bureau of the
Treasury (BTr).
The USD denominated debt securities are currently lodged with the Philippine
Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s
accredited counterparties that are allowed to trade government securities.
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27. EARNINGS PER SHARE
The Group’s basic earnings per share is P0.09, P0.05 and P0.22 as of
December 31, 2013, 2012 and 2011, respectively.
The earnings and weighted average number of ordinary shares used in the calculation
of basic earnings per share are as follows:
2013
2012
(As re-stated)
2011
(As re-stated)
a. Net income from continuing
operations P 54,030,978 P 30,515,330 P 108,564,268
b. Income from discontinued
operations - - 26,429,749
c. Net income (a+b) 54,030,978 30,515,330 134,994,017
d. Net income attributable to
ordinary equity holders of
the Group for basic earnings 54,030,978 30,515,330 134,994,017
e. Weighted average number
of ordinary shares for the
purposes of basic earnings
per share 595,422,077 600,742,383 607,014,606
f. Basic earnings per share
(c/e) 0.09 0.05 0.22
g. Basic earnings per share
attributable to ordinary
equity holders of the Group
(d/e) 0.09 0.05 0.23
h. Basic earnings per share
from continuing operations
(a/e) 0.09 0.05 0.18
i. Basic earnings (loss) per
share attributable to equity
holders of the Group from
discontinued operations
(b/e) - - 0.04
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27.01 Impact of Correction of Prior Period Error and Change in Accounting Policy
Correction of prior period error and changes in the Group’s accounting policy during
the year is described in Notes 35 and 36, including the extent of impact the errors and
changes have resulted on Retained Earnings and earnings per share in 2012 and 2011.
The following table summarizes the impact of the correction of prior period error and
change in accounting policy on basic earnings per share:
Increase (Decrease) on profit for
the Year from Continuing
Operations
Increase (Decrease) on
Basic Earnings per Share
2012 2011 2012 2011
Retirement expense P 304,062 P 819,678 - -
Provision for deferred
income tax (61,399) (212,507) -
-
Equity in net earnings (513,128) (1,532,435) - (.0001)
P (270,465) P (925,264) - (.0001)
28. DISCONTINUED OPERATIONS
In February 2010, IRCGmbH (formerly IERCAG) started its remittance business in Italy.
On April 28, 2011, IRCGmbH stopped its money remittance operations in Rome and
Milan in Italy in accordance with Article 75 of the Transitional and Final Provisions of
Austrian Payment Services Act, which stipulated that credit institutions that have held
authorizations pursuant to Article 1 paragraph 1 no 23 BWG, as amended by the
Federal Act Federal Law Gazette No. 35/2003, prior to December 25, 2009, have only
until April 30, 2011 to carry out their money remittance operations.
In December 2011, IRCGmbH sold assets relating to its operations in Italy to a third
party. These assets, with an aggregate carrying amount of P7,293,288, were sold for
a consideration of P72,432,683 thereby resulting to a gain on sale of P65,139,395.
The results of IRCGmbH’s operation in Italy is as follow:
2013 2012 2011
Delivery fees P - P - P 5,289,202
Foreign exchange gains – net - - 1,006,867
- - 6,296,069
Cost of services - - 596,703
Gross income - - 5,699,366
Other income – net - - 615,909
Operating expenses - - (45,024,921)
Loss from operations - - (38,709,646)
Gain on sale of assets - - 65,139,395
Income from discontinued operations P - P - P 26,429,749
The net cash flows incurred by IRCGmbH in its Italy operations for operating and financing are nil in 2013 and 2012.
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29. INCOME TAXES
29.01 Income Tax Recognized in Profit or Loss
Components of income tax expense are as follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Current tax expense P 29,970,743 P 23,534,368 P 36,053,005
Deferred tax benefit (4,649,716) (926,576) (388,802)
Final tax 247,375 371,756 589,871
P 25,568,402 P 22,979,548 P 36,254,074
The table below shows the income tax rates provided on the assessable profit for the
year of each subsidiary:
2013 2012
PSAGL 16.50% 16.50%
LSML 16.50% 16.50%
IAPL 30.00% 30.00%
WEPL 30.00% 30.00%
INZL 28.00% 28.00%
IGRL 20.00% 20.00%
IRCL 34.20% 34.20%
JPY 30.00% 30.00%
A numerical reconciliation between tax expense and the product of accounting profit
multiplied by the tax rate in 2013, 2012 and 2011 follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Accounting profit P 79,599,381 P 53,494,878 P 144,818,342
Tax expense at 30% 23,879,814 16,048,463 43,445,503
Tax effects of:
Adjustments made due to
consolidation (1,198,895) (793,603) 14,028,616
Application of tax credit - (72,947) -
Non-taxable income (4,585,241) (8,803,902) (10,237,502)
Non-deductible expenses 3,278,180 2,867,026 2,831,134
Recognition of previously
unrecognized deferred tax
assets (45,727) (1,100,475) 568,929
Non-recognition of deferred
tax assets 11,576,272 21,475,062 (4,565,478)
Difference in statutory rates (7,336,001) (6,640,076) (9,817,128)
P 25,568,402 P 22,979,548 P 36,254,074
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Non-deductible expenses pertain to accounts written off during the period and offshore
transaction of PSAGL.
Non-recognition of DTA pertains to unrecognized deferred tax asset on unrealized loss
on foreign currency.
Recognition of previous unrecognized DTA pertains to unrecognized deferred tax asset
on temporary differences such as accrued finance cost, accrued courier charges and
other accruals.
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30. DEFERRED TAXES
The components of the Group’s deferred tax assets and their respective movements are as follows:
At January
1, 2012
Charge (credit)
to profit or
loss for the
year
Charge (credit)
to other
comprehensive
income
At January 1,
2013
(As re-stated)
Charge (credit)
to profit or
loss for the
year
Charge (credit) to
other
comprehensive
income
At December
31, 2013
Deferred tax assets
NOLCO P 4,980,349 P 1,132,385 P - P 6,112,733 P 1,118,325 P - P 7,231,058
Reversal of temporary
difference 568,928 898,714 (226,637) 1,241,005 2,498,746 (342,291) 3,397,460
Accumulated
depreciation - (117,506) - (117,506) - - (117,506)
Unused tax credits - - - - 79,757 - 79,757
Foreign exchange
adjustments - - - - 407,895 - 407,895
P 5,549,277 P 1,913,593 P (226,637) P 7,236,232 P 4,104,723 P (342,291) P 10,998,664
Deferred tax liabilities
Unrealized foreign
exchange gain –
net P - P 296,153 P - P 296,153 P (296,153) P - P -
Retirement asset 356,422 656,368 - 1,012,790 (736,081) 3,091,810 3,368,519
Capital allowance 31,969 34,496 - 66,465 (412) - 66,053
Foreign exchange
adjustments - - - - 6,769 - 6,769
P 388,391 P 987,017 P - P 1,375,408 P (1,025,877) P 3,091,810 P 3,441,341
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31. FAIR VALUE MEASUREMENTS
31.01 Fair Value of Financial Assets and Liabilities
The carrying amounts and estimated fair values of the Group’s financial assets and
financial liabilities as of December 31, 2013 and 2012 are presented below:
2013 2012
Carrying Amount Fair Value Carrying Amount Fair Value
Financial Assets:
Financial assets at FVTPL P 247,300,331 P 247,300,331 P 210,180,347 P 210,180,347
Trade and other receivables 1,649,265,626 1,649,265,626 1,192,359,836 1,192,359,836
Refundable deposits 18,877,336 18,877,336 19,905,025 19,905,025
P 1,915,443,293 P 1,915,443,293 P 1,422,445,208 P 1,422,445,208
Financial Liabilities:
Beneficiaries and other
payables P 779,931,979 P 779,931,979 P 515,580,524 P 515,580,524
Advances from stockholders 7,289,480 7,289,480 7,289,480 7,289,480
Loans payable 988,000,000 988,000,000 925,000,000 925,000,000
P 1,775,221,459 P 1,775,221,459 P 1,447,870,004 P 1,447,870,004
The fair values of financial assets and financial liability are determined as follows.
Due to short-term nature of trade and other receivables, refundable deposits,
beneficiaries and other payables, advances from stockholders and loans payable,
their carrying amounts approximate their fair values.
The fair value of financial asset at FVTPL is based on quoted price in an active
market.
31.02 Fair Value Measurements Recognized in the Consolidated Statements of
Financial Position
The following table provides an analysis of financial instruments that are measured
subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted)
in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that
include inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
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31.03 Fair Value Determinations of Assets and Liability
The following table provides an analysis of assets and liability that are measured at fair
value on a recurring and non-recurring basis subsequent to initial recognition at fair
value, grouped into Levels 1 to 3 based on the degree to which inputs to valuation
techniques are observable:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that can be accessed at the measurement date;
Level 2 inputs are inputs other than quoted prices included within the Level 1 that
are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
31.03.01 Fair Value Hierarchy
As of December 31, 2013 and 2012, the fair value of financial assets through profit or
loss based on the level 1 fair value measurements amounted to P247,300,331 and
P210,180,347, as disclosed in Note 9.
32. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Group’s Corporate Treasury function provides services to the business, co-
ordinates access to domestic and international financial markets, monitors and
manages the financial risks relating to the operations of the Group through internal risk
reports which analyze exposures by degree and magnitude of risks. These risks
include market risk, including currency risk, fair value interest rate risk and price risk,
credit risk and liquidity risk.
The Group seeks to minimize the effects of these risks by using derivative financial
instruments to hedge risk exposures. The use of financial derivatives is governed by
the Group’s policies approved by the board of directors, which provide written
principles on foreign exchange risk, interest rate risk, credit risk, the use of financial
derivatives and non-derivative financial instruments, and the investment of excess
liquidity. Compliance with policies and exposure limits is reviewed by the internal
auditors on a continuous basis. The Group does not enter into or trade financial
instruments, including derivative financial instruments, for speculative purposes.
The Corporate Treasury function reports quarterly to the Group’s risk management
committee, an independent body that monitors risks and policies implemented to
mitigate risk exposures.
32.01 Market Risk Management
32.01.01 Foreign Currency Risk Management
The Group undertakes transactions denominated in foreign currencies; consequently
exposures to exchange rate fluctuations arise. It is the Group’s policy that all daily
foreign currencies, which arise as a result of its remittance transactions, must be
traded daily with bank partners only at prevailing foreign exchange rates in the market.
The daily closing foreign exchange rates shall be the guiding rate in providing
wholesale rates and retail rates to foreign offices and agents, respectively. The trading
proceeds will be used to pay out bank loans and other obligations of the Group.
The carrying amounts of the Group’s foreign currency denominated monetary assets
and monetary liabilities at the end of the reporting period are as follows:
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Assets Liabilities
2013 2012 2013 2012
CAD P 261,478,539 P 331,009,884 P 3,167,555 P 2,723,588
EUR 85,414,775 136,882,373 10,120,682 10,982,893
HKD 308,943,098 277,689,905 644,402 719,181
SGD 131,948,726 110,653,207 - -
AUD 29,201,953 68,529,386 1,418,524 1,622,082
USD 345,213,084 98,929,737 - - -
GBP 71,109,754 123,079,985 1,557,774 1,697,828
IDR 382,634 176,200 - -
JPY 45,241,177 23,767,541 1,741,071 2,002,349
NTD 52,815,212 62,318,543 - -
NZD 13,319,634 16,400,807 491,346 702,602
QAR - 3,100 - -
P 1,345,068,586 P 1,249,440,668 P 19,141,354 P 20,450,523
The Group is mainly exposed to the Canadian, Euro, Singaporean dollar and United
Kingdom Pound.
The following table details the Group’s sensitivity to a (5%) and 5% increase and
decrease in the Philippine Peso against the relevant foreign currencies 2013 and 2012,
respectively. The sensitivity rate of 5% and 4% is used when reporting foreign
currency risk internally to key management personnel and represents management’s
assessment of the reasonably possible change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the period end for a 5% and 4% change
in foreign currency rates. The sensitivity analysis includes external loans within the
Group where the denomination of the loan is in a currency other than the currency of
the lender or the borrower. A positive number below indicates an increase in profit and
other equity where the Philippine Peso strengthens five percent (5%) against the
relevant currency. For a 5% and 4% weakening of the Philippine Peso against the
relevant currency change in foreign currency rates in 2013 and 2012, there would be a
comparable impact on the profit and other equity, and the balances below would be
negative.
2013 2012
Canadian Dollar P 2,839,889 P (11,952,226)
United States Dollar 28,130,030 (6,295,939)
Euro 8,934,207 (5,297,440)
Hongkong Dollar 24,863,560 (16,819,889)
Japan Yen (4,972,074) (3,295,777)
United Kingdom Pound 7,125,091 (2,958,761)
Australia Dollar (2,014,435) (2,587,781)
New taiwan Dollar 2,477,223 (1,305,533)
Singapore Dollar 5,484,849 (627,681)
New Zealand Dollar 1,014,763 (77,596)
Indonesia Rupiah 31,179 -
Qatari Riyal - (196)
P 73,914,282 P (51,218,819)
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The Group's sensitivity to foreign currency has decreased during the current period
mainly due to decrease in average currency rate used.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent
foreign exchange risk as the year end exposure does not reflect the exposure during
the year. The Group mitigates its exposure to foreign currency risk by monitoring its
foreign currency cash flows.
32.01.02 Interest Rate Risk Management
The Group’s exposure to interest rate risk arises from its cash deposits in banks which
are subject to variable interest rates.
The interest rate risk arising from deposits with banks is managed by means of
effective investment planning and analysis and maximizing investment opportunities in
various local banks and financial institutions.
The interest rate risk on financial assets at fair value through profit or loss classified as
debt securities is immaterial since it is subject to fixed rate.
Profit for the years ended December 31, 2013 and 2012 would have been unaffected
since the Group has no borrowings at variable rates and interest rate risk exposure for
its cash in bank, which is subject to variable rate, is very immaterial.
The Group’s sensitivity to interest rates has not changed significantly from the prior
year. In Management’s opinion, the sensitivity analysis is unrepresentative of the
inherent interest rate risk as the year-end exposure does not reflect the exposure
during the year.
32.01.03 Other Price Risk Management
The Group is exposed to equity price risks arising from equity investments.
The sensitivity analyses below have been determined based on the exposure to equity
price risks at the end of the reporting period.
If equity prices had been 5% higher/lower:
net profit for the years ended December 31, 2013 and 2012 would have been
unaffected as the equity investments are classified as financial assets at fair value
through profit or loss and no investments were disposed of or impaired; and
Based on the historical movement of the stock exchange index, Management’s
assessment of reasonable possible change was determined to be an decrease and
increase of P1,066,347 and P1,015,932 in the 2013 and 2012 consolidated
statements of comprehensive income.
The Group’s sensitivity to equity prices has not changed significantly from the prior
year.
32.02 Credit Risk Management
Credit risk refers to the risk that counterparty will default on its contractual obligations
resulting in financial loss to the Group. The Group has adopted a policy of only dealing
with creditworthy counterparties and obtaining sufficient collateral, where appropriate,
as a means of mitigating the risk of financial loss from defaults.
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The Group only transacts with entities that are rated the equivalent of investment
grade and above. This information is supplied by independent rating agencies where
available and, if not available, the Group uses other publicly available financial
information and its own trading records to rate its major customers. The Group’s
exposure and the credit ratings of its counterparties are continuously monitored and
the aggregate value of transactions concluded is spread amongst approved
counterparties. Credit exposure is controlled by counterparty limits that are reviewed
and approved by the risk management committee annually.
The Group does not have significant credit risk exposure to any single counterparty or
any group of counterparties having similar characteristics. The Group defines
counterparties as having similar characteristics if they are related entities.
The credit risk on liquid funds is limited because counterparties are banks with high
credit ratings.
The carrying amount of financial assets recognized in the financial statements, which is
net of impairment losses, represents the Group’s maximum exposure to credit risk,
without taking into account collateral or other credit enhancements held.
2013 2012
Cash in banks and cash equivalents P 792,535,814 P 1,027,430,673
Trade and other receivables 1,649,265,626 1,192,359,836
Financial assets at fair value through
profit or loss 247,300,331 210,180,347
Refundable deposits 18,877,336 19,905,025
P 2,707,979,107 P 2,449,875,881
The Company does not hold any collateral or other credit enhancements to cover this
credit risk.
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The table below shows the credit quality by class of financial assets of the Company:
Neither Past Due nor Impaired
High Grade
Medium
Grade
Low
Grade Total
December 31, 2013 - -
Cash in banks and
cash equivalents P 792,535,814 P - P - P 792,535,814
Trade and other
receivables 1,635,513,802 - - 1,635,513,802
Financial assets at
fair value through
profit or loss 247,300,331 - - 247,300,331
Refundable deposits 18,877,336 - - 18,877,336
P 2,694,227,283 P - P - P 2,694,227,283
December 31, 2012 - -
Cash in banks and
cash equivalents P 1,027,430,673 P - P - P 1,027,430,673
Trade and other
receivables 1,180,106,805 - - 1,180,106,805
Financial assets at
fair value through
profit or loss 210,180,347 - - 210,180,347
Refundable deposits 19,905,025 - - 19,905,025
P 2,437,622,850 P - P - P 2,437,622,850
Maximum exposure for financial instruments recorded at fair value as shown above
represent the risk exposure as of respective balance sheet dates but not the maximum
risk exposure that could arise in the future as a result of changes in value.
The table below shows the maximum credit exposure of the Group per geographical
classification as of December 31, 2013 and 2012:
2013 2012
Asia Pacific P 1,673,067,587 P 1,667,824,025
Middle East 265,520,002 177,709,946
North America 331,697,251 329,052,746
Europe 437,694,268 275,289,164
P 2,707,979,108 P 2,449,875,881
The credit quality of the financial assets was determined as follows:
Loans and receivables
High grade – These are receivables from counterparties with no default in payment.
Medium – These are receivables from counterparties with up to three defaults in
payment.
Low – These are receivables from counterparties with more than three defaults in
payment.
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Investments at FVTPL
High grade – Companies that are consistently profitable, have strong fundamentals
and pays out dividends and interest.
Medium – Companies that recently turned profitable and have the potential of
becoming a high grade company. These companies have sound fundamentals.
Low – Companies that are not yet profitable, speculative in nature but have the
potential to turn around fundamentally.
32.03 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the board of directors,
which has established an appropriate liquidity risk management framework for the
management of the Group’s short-, medium- and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities, by continuously monitoring
forecast and actual cash flows, and by matching the maturity profiles of financial
assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its non-
derivative financial liabilities with agreed repayment periods. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The tables include both
interest and principal cash flows. To the extent that interest flows are floating rate,
the undiscounted amount is derived from interest rate curves at the end of the
reporting period. The contractual maturity is based on the earliest date on which the
Group may be required to pay.
Weighted Average
Effective Interest
Rate Within 1 Year
December 31, 2013
Beneficiaries and other payables - P 779,931,979
Advances from stockholders - 7,289,480
Loans payable 5% to 7.125% 988,000,000
P 1,775,221,459
December 31, 2012
Beneficiaries and other payables - P 515,580,524
Advances from stockholders - 7,289,480
Loans payable 5% to 7.125% 925,000,000
P 1,447,870,004
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The following table details the Group’s expected maturity for its non-derivative
financial assets. The table has been drawn up based on the undiscounted contractual
maturities of the financial assets including interest that will be earned on those assets.
The inclusion of information on non-derivative financial assets is necessary in order to
understand the Group’s liquidity risk management as the liquidity is managed on a net
asset and liability basis.
Weighted
Average Effective
Interest Rate Within 1 Year
December 31, 2013
Cash and cash equivalents 0.50% to 2% P 943,316,542
Trade and other receivables - 1,635,513,802
Financial assets at fair value through
profit or loss 6% - 13% 247,300,331
Refundable deposit - 18,877,336
P 2,845,008,011
December 31, 2012
Cash and cash equivalents 0.50% to 2% P 1,062,120,047
Trade and other receivables - 1,180,106,805
Financial assets at fair value through
profit or loss 6%-13% 210,180,347
Refundable deposit 19,905,025
P 2,472,312,224
The amounts included above for variable interest rate instruments for both non-
derivative financial assets and liabilities is subject to change if changes in variable
interest rates differ to those estimates of interest rates determined at the end of the
reporting period.
The Group’s financing facilities are as follows:
2013 2012
Secured bank loan facilities with various
maturity dates through to 2013 and
which may be extended by mutual
agreement:
Amount used P 988,000,000 P 925,000,000
Amount unused 2,167,000,000 1,880,000,000
P 3,155,000,000 P 2,805,000,000
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32.04 Translation Risk
The Group’s consolidated statement of financial position is exposed to foreign
exchange fluctuations as these affect the translation of subsidiaries’ net assets and
income and expenses denominated in foreign currencies. The following tables set forth
for the year indicated the impact of reasonably possible changes in the rates of other
currencies on equity.
2013
Currency
Change in Nominal
Foreign Currency
Exchange rate
Effect on Equity
Change in Nominal
Foreign Currency
Exchange Rate
Effect on
Equity
HKD +0.04 3,051,830 -0.51 P (35,239,361)
CAD +0.90 703,276 -2.25 (1,762,000)
EUR +0.45 (418,682) -9.08 8,446,546
NZD +0.46 (178,759) -2.95 1,152,842
AUD +4.11 755,019 -0.70 (127,918)
GBP +0.49 288,334 -12.33 (7,327,787)
JPY +0.05 (5,498,077) -0.02 2,353,536
2012
Currency
Change in Nominal
Foreign Currency
Exchange Rate
Effect on equity
Change in Nominal
Foreign Currency
Exchange Rate
Effect on
equity
HKD +0.25 P 15,122,594 +0.09 P 5,087,755
CAD +2.00 1,654,760 +0.50 418,027
EUR +5.04 (3,727,842) +2.88 (2,133,889)
NZD +3.24 (1,136,805) -0.03 11,655
AUD +3.86 840,813 +1.26 274,609
GBP +5.60 (2,456,954) +1.27 556,175
33. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Group manages its capital to ensure that the Group will be able to continue as
going concerns while maximizing the return to stakeholders through the optimization of
the debt and equity balance. The Group’s overall strategy remains unchanged from
2012 and 2011.
The capital structure of the Group consists of net debt (borrowings as detailed in Note
15 offset by cash and bank balances) and equity of the Group (comprising capital paid-
in, retained earnings, cumulative translation adjustment, re-measurements and treasury
stock, as disclosed in Notes 17 and 25.
Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations
are prohibited from retaining surplus plus profits in excess of 100% of their paid-in
capital stock, except: 1) when justified by definite corporate expansion projects or
programs approved by the board of directors; or 2) when the corporation is prohibited
under any loan agreement with any financial institution or creditor, whether local or
foreign, from declaring dividends without its/his consent, and such consent has not yet
been secured; or 3) when it can be clearly shown that such retention is necessary
under special circumstances obtaining in the corporation, such as when there is a need
for special reserve for probable contingencies. The Group is in compliance with the
above requirements.
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The Group’s risk management committee reviews the capital structure of the Group on
an annual basis. As part of this review, the committee considers the cost of capital
and the risks associated with each class of capital. The Group has a target gearing
ratio of 1:1 determined as the proportion of net debt to equity.
The gearing ratios at end of the reporting periods are as follows:
2013 2012
Debt P 1,792,007,973 P 1,455,305,400
Cash and cash equivalents 943,316,542 1,062,120,047
Net Debt 848,691,431 393,185,353
Equity 1,267,774,495 1,215,434,151
Net debt to equity ratio 0.67:1 0:32:1
Debt is defined as long- and short-term borrowings, as described in Notes 15 and 16,
while equity includes all capital and reserves of the Group that are managed as capital.
34. CORRECTION OF PRIOR PERIOD ERROR
In 2013, the Group derecognized its investment in I-Remit Singapore Pte. Ltd. (ISPL)
and the related dividend income amounting to P12,600,000 and P19,889,480,
respectively, as disclosed in Note 11, for failure to execute the documents required by
the Monetary Authority in Singapore to effect the official transfer of the 49,000 shares
or 49% of the shares in ISPL to I-Remit Inc.
The effects of correction of prior period error to retained earnings and prior year’s
profit are as follows:
Retained Earnings
January 1, 2012
2012
Profit
As previously reported P 370,974,049 P 30,526,247
Effect of correction of prior period error
(19,812,681)
(513,128)
Effect of change in accounting policy
(Note 35)
(1,069,179) 502,211
As restated P 350,092,189 P 30,515,330
The Management believes that such restatement is appropriate and resulted to a better
presentation of accounts.
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35. CHANGE IN ACCOUNTING POLICY
Effective January 1, 2013, the Group applied the revised PAS 19, Employee Benefits in
accounting its retirement benefit obligation. The revised standard ranges from
fundamental changes such as removing the corridor approach in accounting
unrecognized actuarial gains and losses, immediate recognition of past service cost to
profit or loss, 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 assumptions,
information on asset-liability matching strategies duration of the defined benefit
obligation, and disaggregation of plan assets by nature and risk. The revised standard
requires retrospective application in accordance with the transitional provisions set out
as follows:
• An entity need not adjust the carrying amount of assets outside the scope of this
Standard for changes in employee benefit costs that were included in the carrying
amount before the date of initial application. The date of initial application is the
beginning of the earliest prior period presented in the first financial statements in
which the entity adopts this Standard.
• In the separate financial statements for periods beginning before January 1, 2014,
an entity need not present comparative information for the disclosures required
about the sensitivity of the defined benefit obligation.
As a result, the Group’s opening separate statement of financial position as of January
1, 2012 and the comparative figures have been restated accordingly.
Impact of the transition is as follows:
As a result of the adoption of PAS 19 (Revised), adjustments to the retained
earnings and profit of 2012 pertain to de-recognition of retirement assets,
recognition of retirement liability, adjustment in retirement liability and decrease in
retirement expense recognized.
The Group de-recognized the retirement assets under the previous accounting
standard of PAS 19 amounting to P368,394 and recognition of retirement liability
under PAS 19 (Revised) amounting to P708,356.
The Group recognized adjustment in retirement liability amounting to P1,076,750
and decrease in retirement expense amounting to P304,062 and P819,678 in 2012
and 2011, respectively, as a result of the adoption of PAS 19 (Revised).
In 2012, the Group de-recognized deferred tax assets amounting to P198,149
while in 2011, the Group recognized deferred tax assets amounting to P356,422
on retirement liability amounting to P708,356.
The Group recognized re-measurements arising from change on demographic
assumptions, change on financial assumptions and experience amounting to
P2,783,019 and P528,820 as of January 1, 2012 and December 31, 2012,
respectively.
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Summary of adjustments to retained earnings and prior year’s profit are as follows:
Retained Earnings
January 1, 2012
2012 Profit
De-recognition of retirement assets P 368,394 P -
Recognition of retirement liability 708,356 -
Adjustment in retirement liability (1,076,750) -
Retirement expense 819,678 304,062
Provision for deferred income tax (356,422) 198,149
Net Increase 463,256 502,211
Effect of correction of prior period error
(Note 34)
(19,812,681)
(513,128)
Adjustment on equity in net earnings (1,532,435) -
As previously reported 370,974,049 30,526,247
As restated P 350,092,189 P 30,515,330
36. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS
Certain amounts in the comparative consolidated financial statements and note
disclosures have been reclassified to conform to the current year’s presentation.
The reclassifications are as follows:
Previous Classification Current Classification Amount
Investment in an associate Advances from stockholders P (12,600,000)
Retained earnings Advances from stockholders 19,889,480
P 7,289,480
In Note 20, the following reclassification has been made as follows:
Previous Classification Current Classification 2012
2011
Others Service charge P 2,207,428 P 1,329,984
Refunds 1,368,903 148,641
Dividend income 234,434 56,777
P 3,810,765 P 1,535,402
Management believes that the above reclassifications resulted to a better presentation
of accounts.
37. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved and authorized for issuance by the Board of
Directors on March 21, 2014.
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R.S. BERNALDO & ASSOCIATESworldwide
REPORT ON THE INDEX AND SUPPLEMENTARY SCHEDULES
The Board of Directors and StockholdersI-REMIT INC. AND SUBSIDIARIES26/F Discovery Centre, 25 ADB AvenueOrtigas Centre, Pasig City
We have issued our report dated March 21, 2014 on the basic separate financial statementsof I-REMIT INC. AND SUBSIDIARIES as of and for the period December 31, 2013. Our auditwas conducted for the purpose of fo-rming an opinion on the basic separate financialstatements of I-REMIT INC. AND SUBSIDIARIES taken as a whole. The information in theindex to the separate financial statements and supplementary schedules as of and for theperiod December 31, 2013, which is not a required part of the separate financial statements,is required to be filed with the Securities and Exchange Commission (SEC). Suchinformation is the responsibility of the Management of I-REMIT INC. AND SUBSIDIARIES.The information has been subjected to the auditing procedures applied in our audit of thebasic separate financial statements. In our opinion, the information is fairly stated in allmaterial respects in relation to the basic separate financial statements taken as a whole.
R.S. BERNALDO & ASSOCIATESBOA/PRC No. 0300Valid until December 31, 2015SEC Group A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSP Group B AccreditedValid until February 14, 2014CDA CEA No. 0013-AFValid until November 17, 2016IC Accreditation No. F-2013/002-0
valil'l~~016R~li!u~ S. BERNALDOManaging PartnerCPA Certificate No. 25927SEC Group A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSP Group B AccreditedValid until February 14, 2014BIR Accreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No. 109-227-722PTR No. 4232656Issued on January 6, 2014 at Makati City
RSBA20YEARS
March 21, 2014
A: 18fF Cityland Condominium 10 Tower 1
156 HV dela Costa Street. Ayala North.
Makati City. Philippines 1226
T: +632812-1718 to 24
F: +632813-6539E: [email protected]
W: www.rsbernaldo.eom
BOA/PRe No. 0300SEe Group A AccreditedSSP Group B AccreditedCDA CEA AccreditedfC Accredited
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1
I-REMIT INC. AND SUBSIDIARIES
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
December 31, 2013
Schedule Content Page No.
Part 1
I Schedule of Retained Earnings Available for Dividend Declaration
(Part 1 4C, Annex 68-C) 2
II Schedule of all effective standards and interpretations under PFRS
(Part 1 4J) 3
III Map showing relationships between and among parent,
subsidiaries, an associate, and joint venture (Part 1 4H) 9
Part 2
A Financial Assets 10
B Amounts Receivable from Directors, Officers, Employees, Related
Parties and Principal Stockholders (Other than Affiliates) 11
C Amounts Receivable from Related Parties which are eliminated
during the consolidation of financial statements 15
D Intangible Assets - Other Assets 17
E Long-Term Debt 18
F Indebtedness to Related Parties (included in the consolidated
statement of financial position) 19
G Guarantees of Securities of Other Issuers 20
H Capital Stock 21
Other Required Information
IV Schedule of Financial Soundness Indicators (Part 1 4D) 22
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2
Schedule I
I-REMIT INC.
SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
DECEMBER 31, 2013
Unappropriated Retained Earnings, Beginning P 48,401,371
Net income based on the face of audited financial statements 41,360,485
Less: Dividend declarations during the year – Property 69,209,688
Dividend declarations during the year - Cash 25,031,512
Derecognition of Dividend Income from an Associate 19,889,480
Unrealized FX Gains (Loss) this last year -reversal (2007) 128,700
Appropriations of retained earnings 11,475,190
Sub-total 125,734,570
Add: Reissuance of treasury stock 68,284,569
Unrealized foreign exchange loss – net
1,186,515
Realized income categorized as unrealized in previous
years 987,177
Prior Year Adjustment on Revised PAS19 965,468
Sub-total 71,423,728
Net loss actual/realized (12,950,357)
Unappropriated Retained Earnings, Ending P 35,451,014
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3
Schedule II
I-REMIT INC. AND SUBSIDIARIES
SCHEDULE OF EFFECTIVE STANDARDS AND INTERPRETATIONS
DECEMBER 31, 2013
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of December
31, 2013
Adopted Not
Adopted
Not
Applicable
Framework for the Preparation and Presentation of
Financial Statements
Conceptual Framework Phase A: Objectives and
qualitative characteristics
PFRSs Practice Statement Management
Commentary
Philippine Financial Reporting Standards
PFRS 1
(Revised)
First-time Adoption of Philippine
Financial Reporting Standards
Amendments to PFRS 1 and PAS
27: Cost of an Investment in a
Subsidiary, Jointly Controlled
Entity or Associate
Amendments to PFRS 1: Additional
Excemptions for First-time
Adopters
Amendment to PFRS 1: Limited
Exception from Comparative PFRS
7 Disclosures for first-time
Adopters
Amendments to PFRS 1: Severe
Hyperinflation and Removal of
Fixed Date for First-time Adopters
Amendments to PFRS 1:
Government Loans
PFRS 2
Share-based Payment
Amendments to PFRS 2: Vesting
Conditions and Cancellations
Amendments to PFRS 2: Group
Cash-Settled Share-based Payment
Transactions
PFRS 3
(Revised) Business Combinations
PFRS 4 Insurance Contracts
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4
Amendments to PAS 39 and PFRS
4: Financial Guarantee Contracts
PFRS 5 Non-current Asset Held for Sale
and Discontinued Operations
PFRS 6 Exploration for and Evaluation of
Mineral Resources
PFRS 7
Financial Instruments: Disclosures
Amendments to PFRS 7: Transition
Amendments to PAS 39 and PFRS
7: Reclassification of Financial
Assets
Amendments to PAS 39 and PFRS
7: Reclassification of Financial
Assets - Effective Date and
Transition
Amendments to PFRS 7: Improving
Disclosures about Financial
Instruments
Amendments to PFRS 7:
Disclosures - Transfer of Financial
Assets
Amendments to PFRS 7:
Disclosures - Offsetting Financial
Assets and Financial Liabilities
Amendments to PFRS 7:
Mandatory Effective Date of PFRS
9 and Transition Disclosures
PFRS 8 Operating Segments
PFRS 9
Financial Instruments
Amendments to PFRS 9:
Mandatory Effective Date of PFRS
9 and Transition Disclosures
PFRS 10 Consolidated Financial Statements
PFRS 11 Joint Arrangements
PFRS 12 Disclosure of Interest in Other
Entities
PFRS 13 Fair Value Measurements
Philippine Accounting Standards
PAS 1
(Revised)
Presentation of Financial
Statements
Amendments to PAS 1: Capital
Disclosures
Amendments to PAS 32 and PAS
1: Puttable Financial Instruments
and Obligations Arising on
Liquidation
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5
Amendments to PAS 1:
Presentation of items Other than
Comprehensive Income
PAS 2 Inventories
PAS 7 Statement of Cash Flows
PAS 8 Accounting Policies, Changes in
Estimates and Errors
PAS 10 Events After the Balance Sheet
Date
PAS 11 Construction Contracts
PAS 12
Income Taxes
Amendments to PAS 12 - Deferred
Tax: Recovery of Underlying
Assets
PAS 16 Property, Plant and Equipment
PAS 17 Leases
PAS 18 Revenue
PAS 19
Employee Benefits
Amendments to PAS 19: Actuarial
Gains and Losses, Group Plans and
Disclosures
PAS 19
(Amended) Employee Benefits
PAS 20
Accounting for Government Grants
and Disclosure of Government
Assisstance
PAS 21
The Effect of Changes in Foreign
Exchange Rates
Amendment: Net Investment in a
Foreign Operation
PAS 23
(Revised) Borrowing Cost
PAS 24
(Revised) Related Party Disclosures
PAS 26 Accounting and Reporting by
Retirement Benefit Plans
PAS 27
(Amended) Separate Financial Statements
PAS 28
(Amended)
Investments in Associates and
Joint Ventures
PAS 29 Financial Reporting in
Hyperinflationary Economy
PAS 31 Interests in Joint Ventures
PAS 32
Financial Instruments: Disclosure
and Presentation
Amendments to PAS 32 and PAS
1: Puttable Financial Instruments
and Obligations Arising on
Liquidation
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6
Amendments to PAS 32:
Classification of Right Issues
Amendment to PAS 32: Offsetting
Financial Assets and Financial
Liabilities
PAS 33 Earning Per Share
PAS 34 interim Financial Reporting
PAS 36 Impairment of Assets
PAS 37 Provision, Contingent Liabilities and
Contingent Assets
PAS 38 Intangible Assets
PAS 39
Financial Instruments: Recognition
and Measurement
Amendments to PAS 39: Transition
and Initial Recognition of Financial
Assets and Financial Liabilities
Amendments to PAS 39: Cash
Flow Hedge Accounting of
Forecast Intragroup Transactions
Amendments to PAS 39: The Fair
Value Option
Amendments to PAS 39:
Reclassification of Financial Assets
Amendments to PAS 39 and PFRS
7: Reclassification of Financia
Assets - Effective Date and
Transition
Amendments to Philippine
Interpretation IFRIC-9 and PAS 39:
Embedded Derivatives
PAS 40 Investment Property
PAS 41 Agriculture
Philippine Interpretations
IFRIC 1
Changes in Existing
Decommissioning, Restoration and
Similar Liabilities
IFRIC 1 Member's Share in Co-operative
Entities and Similar Instruments
IFRIC 4 Determining Whethter an
Arrangement Contains a Lease
IFRIC 5
Rights to Interests arising from
Decommissioning, Restoration and
Environmental Rehabilitation Funds
IFRIC 6
Liabilities arising from Participating
in a Specific Market-Waste
Electrical and Electronic Equipment
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7
IFRIC 7
Applying the Restatement
Approach under PAS 29 Financial
Reporting in Hyperinflationary
Economies
IFRIC 8 Scope of PFRS 2
IFRIC 9
Reassessment of Embedded
Derivatives
Amendments to Philippine
Interpretation IFRIC-9 and PAS 39:
Embedded Derivatives
IFRIC 10 Interim Financial Reporting and
Impairment
IFRIC 11 PFRS 2- Group and Treasury Share
Transactions
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programs
IFRIC 14
The Limit on a Defined Benefit
Asset, Minimum Funding
Requirements and their Interaction
Amendments to Philippine
Interpretations IFRIC - 14,
Prepayments of a Minimum
Funding Requirement
IFRIC 16 Hedges of a Net Investment in a
Foreign Operation
IFRIC 17 Distribution of Non-Cash Assets to
Owners
IFRIC 18 Transfer of Assets from Customers
IFRIC 19 Extinguishing Financial Liabilities
with Equity Instruments
IFRIC 20 Stripping Costs in the Production
Phase of a Surface Mine
SIC - 7 Introduction of the Euro
SIC - 10
Government Assisstance - No
Specific Relation to Operating
Activities
SIC - 12
Consolidation - Special Purpose
Entities
Amendments to SIC - 12: Scope of
SIC 12
SIC - 13
Jointly Controlled Entities - Non-
Monetary Contributions by
Venturers
SIC - 15 Operating Leases - Incentives
SIC - 21 Income Taxes - Recovery of
Revalued Non-Depreciable Assets
SIC - 25
Income Taxes - Changes in the
Tax Status of an Entity or its
Shareholders
SIC - 27 Evaluating the Substance of
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8
Transactions Involving the Legal
Form of a Lease
SIC - 29 Service Concession Arrangements:
Disclosures
SIC - 31 Revenue - Barter Transaction
Involving Advertising Services
SIC - 32 Intangible Assets - Web Site Costs
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9
Schedule III
I-REMIT INC. AND SUBSIDIARIES
MAP SHOWING RELATIONSHIPS BETWEEN AND AMONG PARENT,
SUBSIDIARIES, AN ASSOCIATE, AND JOINT VENTURE
STAR Equities Inc.
29.3931352 %
JTKC Equities, Inc.
21.4474437%
Surewell Equities, Inc
23.5216349%
JPSA Global Services Co.
3.2908290%
Public
22.3469572%
I-Remit, Inc.
Ownership Structure
International Remittances (Canada) Ltd.
100%
Lucky Star Management Limited (Hong Kong)
100%
IRemit Global Remittance Limited (UK)
100%
Worldwide Exchange Pty Ltd *
100%
IREMIT Remittance Consulting GmbH (Austria)
100%
*Consisting of 70% direct ownership and 30% indirect ownership through I-Remit Australia Pty Ltd, a wholly-owned subsidiary.
** An associate
I-Remit New Zealand Limited
100%
Hwa Kung Hong & Co. Ltd. (Taiwan)**
49%
K.K. I-REMIT JAPAN
100%
Power Star Asia Group Limited
100%
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10
I-Remit Inc. and Subsidiaries
Schedule A – Financial Assets
December 31, 2013
Name of issuing entity and
association of each issue Number of shares or principal amount of bonds or notes Amount shown on the balance sheet Income accrued
Debt securities
Citic Pacific Ltd. $201,000 P=8,734,716 P=176,748
Claudius Limited Notes 208,000 9,963,659 74,739
FTP Finance Ltd. 300,650 14,130,929 333,024
Republic of Venezuela 93,500 4,366,248 100,629
Royal Capital BV 301,775 13,969,375 219,986
Bank of Ceylon 201,000 8,995,226 134,572
Sistema Intl 300,750 14,218,831 170,125
ABN Amro Bank 200,620 9,773,604 175,730
ALFA Bank 201,150 9,467,234 186,829
SBERBANK 200,725 8,501,643 85,954
Theta Capital 202,800 8,284,107 78,554
Central China Real State 201,625 8,897,291 309,778
Soho China Ltd 199,600 8,523,840 103,681
Petron Corporation 400,500 17,573,494 547,538
Bank of Ceylon 200,800 8,474,206 103,755
FPC Treasury 200,720 7,578,759 87,680
Millicom International Cellular 222,003 9,400,641 55,414
MTS International Funding Ltd.
Vedanta Resources PLC
Various Private Corporation
200,088
201,100
891,000
8,324,063
8,625,949
38,209,579
43,162
45,875
900,832
5,129,406 P=225,973,392 P=3,934,605
Equity securities (shares)
Apple Inc 595 14,819,357 P=–
Global X Silver (SIL) 1,000 497,224 –
China Unicom Hong Kong Ltd
HSBC Holdings PLC (HKD)
18,000
10,000
1,194,861
4,815,497
–
P=21,326,939 P=–
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11
I-Remit Inc. and Subsidiaries
Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Related Parties)
December 31, 2013
Name of Debtor Balance at
beginning of period Additions
Amounts
Collected
Amounts Written-
off Current Non- Current
Balance at end of
period
Al Frederick Go - 220,585.03 220,585.03 - - - -
Alfred Piajo - 28.00 - - 28.00 - 28.00
Allan Sagarbarria - 630.16 254.82 - 375.34 - 375.34
Alma Buella - 37,568.71 32,000.00 - 5,568.71 - 5,568.71
Alma Mendoza - 2,229.33 550.00 - 1,679.33 - 1,679.33
Amy Buenviaje - 67.32 67.32 - - - -
Analie Angeles - 401,675.00 9,151.84 - 392,523.16 - 392,523.16
Analiza S. Bismonte 10,764.69 37,028.46 47,793.15 - - - -
Analyn Villanueva 2,914.62 - - 2,914.62 - 2,914.62
Arlene Borbon - 1,623.77 - - 1,623.77 - 1,623.77
Arnold Ebid Francia - 856.01 - - 856.01 - 856.01
Bambang Setyawan - 200.29 143.06 57.23 - - -
Bansan Choa - 26,410.22 20,167.84 - 6,242.38 - 6,242.38
Bansan Choa 264,773.00 979.00 - 263,794.00 - 263,794.00
Bernadette Cindy Tiu 6,989,845.80 913,399.00 576,887.59 - 7,326,357.21 - 7,326,357.21
Bryan Johnson Lim - 41,620.00 - - 41,620.00 - 41,620.00
Call Center - 490.45 - - 490.45 - 490.45
Carmen Baladad 242.97 71,822.27 5,438.29 - 66,626.95 - 66,626.95
Catherine Chan 436.24 90,436.24 90,872.48 - - - -
Charlotte Jennifer D. Lapore - 1,170.00 585.00 - 585.00 - 585.00
Christopher Martin Eusebio 3,801.06 - 3,801.06 - - - -
Claire Panes 67.50 - 67.50 - - - -
Clarissa Celestino 198.34 - 198.34 - - - -
Dennis Jugo - 65,978.50 65,442.50 - 536.00 - 536.00
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Desiderio Jr. Dumalag 28,524.49 1,029.58 14,585.76 - 14,968.31 - 14,968.31
Dina Simbulan 56,123.61 - 56,123.61 - - - -
Dolores Joson 0.83 - 0.83 - - - -
Eleanor Hilario 12,653.00 - 12,653.00 - - - -
Elisa Cerdan 34.53 - 34.53 - - - -
Elsa Asuncion Lim - 303,950.37 - - 303,950.37 - 303,950.37
Eva Preciosa Ramos - 1,243.77 - - 1,243.77 - 1,243.77
Evelyn Galo - 24,477.60 5,000.00 - 19,477.60 - 19,477.60
Fatima Ramos 198.34 - 198.34 - - - -
Fitzgerald Duba - 1,332,500.00 690,833.35 - 641,666.65 - 641,666.65
Flora Mae V. Batisla-On - 10,844.95 - - 10,844.95 - 10,844.95
Florence Pamintuan - 4,378,468.99 - 218,923.27 4,159,545.72 - 4,159,545.72
Geraldine Joy A. Guisper - 366.71 - - 366.71 - 366.71
Gilbert Gaw 2,580.00 - 2,580.00 - - - -
Glen Igual 589,100.02 450,000.00 593,233.48 - 445,866.54 - 445,866.54
Griselda Marie M. Martin - 484,606.00 30,000.00 - 454,606.00 - 454,606.00
Harris Jacildo 925,925.80 400,000.00 622,222.24 - 703,703.56 - 703,703.56
Heidy Sandra De Dios - 3,650.00 3,650.00 - - - -
Ian Chryzl Gonzales 2,999.40 - 2,999.40 - - - -
Imelda Ambrosio - 2,658.79 - - 2,658.79 - 2,658.79
Jacklyn K. Genabe - 854.91 - - 854.91 - 854.91
Jed Paul Buzon - 1,030.58 - - 1,030.58 - 1,030.58
Jeddahlyn Gandalera 250.81 - 250.81 - - -
Jennifer Itable 5.00 320.92 325.92 - - - -
Jennifer Lumabi - 258.15 - - 258.15 - 258.15
Jerome V. Jayco - 390.00 - - 390.00 - 390.00
Jess Mar Bautista - 390.00 - - 390.00 - 390.00
Jesus Mel Sayo 73,772.17 155.00 73,927.17 - - - -
Joe Estrada - 315.52 315.52 - - - -
Jonathan Bunag 14,143.42 - - - 14,143.42 - 14,143.42
Jonathan Samaniego 45,468.47 - - 36,781.61 8,686.86 - 8,686.86
Jorie Perena - 1,377.37 - - 1,377.37 - 1,377.37
Jose III Maceda - 1,786,380.00 1,311,379.99 - 475,000.01 - 475,000.01
Joselyn Bagalan 2,576.64 2,576.64 - - - -
Juliet Santos 3.12 - 3.12 - - - -
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Junell Dassun 16,086.31 - - - 16,086.31 - 16,086.31
Justine Castellon 272,309.52 - 272,309.52 - - - -
Kristal Airess Angeles 290.62 290.62 581.24 - - - -
Kristie Anne Hernandez - 406,310.76 295,983.22 - 110,327.54 - 110,327.54
Lourdjenn Padlan - 21,883.33 8,114.71 - 13,768.62 - 13,768.62
Ma. Eliza Batang 198.33 0.01 198.34 - - - -
Ma. Katrina Relopez - 4,984.97 - - 4,984.97 - 4,984.97
Ma.Cristina Pardeno - 21,883.33 8,114.71 - 13,768.62 - 13,768.62
Makoto Kinoshita 414,045.00 - 198,291.35 - 215,753.65 - 215,753.65
Maria Angelica Lallana 241.32 1,731,165.30 1,427,042.65 - 304,363.96 - 304,363.96
Maria Cristina Castillejo 360,572.00 300,000.00 394,555.80 - 266,016.20 - 266,016.20
Maria Cristina R. Benter - 2,937.63 - - 2,937.63 - 2,937.63
Maria Elizabeth Yao - 61,575.95 - - 61,575.95 - 61,575.95
Maria Gracia T. Lim 88.75 11,913.47 88.75 - 11,913.47 - 11,913.47
Maria Lourdes Maglatang - 3,829.45 1,000.00 - 2,829.45 - 2,829.45
Maria There Dela Cruz - 19,593.99 6,532.10 - 13,061.89 - 13,061.89
Maricar Ryka Aguinaldo - 1,627.22 - - 1,627.22 - 1,627.22
Marie Ann Ledonio - 7,917.68 - - 7,917.68 - 7,917.68
Mariefe Oporto 79,867.95 16,808.90 - - 96,676.85 - 96,676.85
Marivic Chaw 15,093.06 33,522.00 25,873.06 - 22,742.00 - 22,742.00
Marlon Dayao - 14,837.12 3,500.00 - 11,337.12 - 11,337.12
Mary Grace Daguman - 996.36 - - 996.36 - 996.36
Mary Jean Jetomo 61.45 997.12 61.45 - 997.12 - 997.12
Maryfhel Adane - 530.98 530.98 - - - -
May Tsui 1,022.66 - 1,022.66 - (0.00) - -
May-I Yumol - 992.09 850.00 - 142.09 - 142.09
Michael Angelo C. Barcelon - 1,991.59 - - 1,991.59 - 1,991.59
Michael Chavez - 2,338.17 - - 2,338.17 - 2,338.17
Niel Malana - 166.82 - - 166.82 - 166.82
Noville D. Ungriano - 2,204.53 - - 2,204.53 - 2,204.53
Pacific Hub - 6,884.74 862.53 - 6,022.21 - 6,022.21
Philip Nicholas Laurel - 3,906.59 1,005.00 - 2,901.59 - 2,901.59
Regina Shimamoto 635,100.00 500,000.00 631,400.00 - 503,700.00 - 503,700.00
Reizle Balcita - 4,660.99 - - 4,660.99 - 4,660.99
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14
Rene Capiral - 65,658.75 - - 65,658.75 - 65,658.75
Rennced Filipina A. Razo - 1,827.96 - - 1,827.96 - 1,827.96
Rocky Flores 66,488.90 - 52,024.15 - 14,464.75 - 14,464.75
Rogelyn Calamasa - 151.39 - - 151.39 - 151.39
Rommel Rosario - 409.00 409.00 - - - -
Rona Ramos - 2,990.00 2,990.00 - - - -
Ronald Guinto 989.20 - 989.20 - - - -
Ronald Santos 222,362.45 - - - 222,362.45 - 222,362.45
Roy Dequina 187,801.00 - 187,801.00 - - - -
Ruth Martinez 6.60 - 6.60 - - - -
Salome V. Dalipe - 3,967.69 - - 3,967.69 - 3,967.69
Sarah Jane Gesta - 10,843.21 - - 10,843.21 - 10,843.21
Severino Lagan 18,749.99 676.48 9,369.76 - 10,056.71 - 10,056.71
Shermaine Salinas - 32,980.00 - - 32,980.00 - 32,980.00
Shiela Marie C. Cercado - 1,489.48 - - 1,489.48 - 1,489.48
Winona Fay Gevana 3,759.00 - 3,759.00 - - - -
TOTAL 11,319,623.36 14,409,748.27 8,033,145.32 255,762.11 17,440,464.19 - 17,440,464.19
The Group write-off receivables from directors, officers, employees, related parties and principal stockholders deemed to be uncollectible.
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15
I-Remit Inc. and Subsidiaries
Schedule C - Amounts Receivable from Related Parties which are eliminated
during the consolidation of financial statements)
December 31, 2013
Amount/ Outstanding
Balances Volume
Lucky Star Management Limited
Remittance P 1,006,973,117 P 17,896,635
Due from 3,387,829 12,286,251
Delivery fee 6,501,360 118,457
IRemit Global Remittance Limited
Remittance 6,590,684,104 297,844,190
Due from 73,983,569 51,007,070
Delivery fee 25,331,309 2,914,516
Service income 491,680 53,789
Worldwide Exchange Pty Ltd
Remittance 5,409,896,230 45,625,488
Due from 5,595,241 4,266,439
Delivery fee 25,034,377 308,174
Service income - -
International Remittance (Canada) Ltd.
Remittance 9,516,679,459 260,711,907
Due from 5,145,952 281,016
Delivery fee 57,951,323 2,235,718
Service income - -
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16
Amount/ Outstanding
Balances Volume
I-Remit New Zealand Limited
Remittance 1,194,704,130 18,811,168
Due from 3,103,915 19,175,580
Delivery fee 4,649,338 101,338
Service income - -
IREMIT Remittance Consulting GmbH
Remittance 32,049,347 -
Due from 11,222,594 24,880,481
Delivery fee 219,027 -
K.K. Iremit Japan
Remittance 1,122,988,072 33,770,470
Due from 28,137,198 61,107,201
Delivery fee 2,346,152 113,872
I-Remit Australia Pty Ltd
Remittance 5,699,018,165 5,155,573
Due from P 1,837,911 P 450,093
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17
I-Remit Inc. and Subsidiaries
Schedule D - Intangible Assets - Other Assets
December 31, 2013
Description1
Beginning
Balance
Additions at
Cost2
Charged to cost
and expenses
Charged to other
accounts
Other changes
additions
(deductions)3 Ending Balance
Goodwill 111,441,190.57 – – – – 111,441,190.57
Software 1,452,661.91 13,082.90 (820,627.50) – 5311.00 650,428.31
1 The information required shall be grouped into (a) intangibles shown under the caption intangible assets and (b) deferrals shown under the caption Other Assets in the related balance
sheet. Show by major classifications.
2 For each change representing other than an acquisition, clearly state the nature of the change and the other accounts affected. Describe cost of additions representing other than cash
expenditures.
3 If provision for amortization of intangible assets is credited in the books directly to the intangible asset account, the amounts shall be stated with explanations, including the accounts
charged. Clearly state the nature of deductions if these represent anything other than regular amortization.
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18
I-Remit Inc. and Subsidiaries
Schedule E - Long-Term Debt
December 31, 2013
Title of issue and
type of obligation (i)
Amount
authorized by
indenture
Amount shown under caption
“Current portion of long-term debt’
in related balance sheet (ii)
Amount shown under caption
“Long-Term Debt” in related
balance sheet (iii)
Interest
Rate
%
Maturity
Date
None to Report
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19
I-Remit Inc. and Subsidiaries
Schedule F - Indebtedness to Related Parties
(included in the Consolidated Statements of Financial Position)
December 31, 2013
Name of Related Parties1 Balance at beginning of period Balance at end of period2
None to Report
1 The related parties named shall be grouped as in Schedule D. The information called shall be stated for any persons whose investments shown separately in such related schedule.
2 For each affiliate named in the first column, explain in a note hereto the nature and purpose of any material increase during the period that is in excess of 10 percent of the related
balance at either the beginning or end of the period.
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20
I-Remit Inc. and Subsidiaries
Schedule G - Guarantees of Securities of Other Issuers
December 31, 2013
Name of issuing entity
of securities guaranteed
by the company for
which this statement is
filed
Title of issue of each
class of securities
guaranteed
Total amount of
guaranteed and
outstanding1
Amount owned by
person of which
statement is filed Nature of guarantee2
None to Report
1 Indicate in a note any significant changes since the date of the last balance sheet file. If this schedule is filed in support of consolidated financial statements, there shall be set forth
guarantees by any person included in the consolidation except such guarantees of securities which are included in the consolidated balance sheet. 2 There must be a brief statement of the nature of the guarantee, such as “Guarantee of principal and interest”, “Guarantee of Interest”, or “Guarantee of Dividends”. If the guarantee is
of interest, dividends, or both, state the annual aggregate amount of interest or dividends so guaranteed.
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21
I-Remit Inc. and Subsidiaries
Schedule H - Capital Stock
December 31, 2013
Title of Issue1
Number of
shares
authorized
Number of
shares issued
and outstanding
as shown under
the related
balance sheet
caption
Number of
shares reserved
for options,
warrants,
conversion and
other rights
Number of
shares held by
related parties2
Directors,
officers and
employees Others3
Common stock - P=1 par value 1,000,000,000 617,725,800 – 476,351,818 4,898,371 132,185,933
1 Include in this column each type of issue authorized
2 Related parties referred to include persons for which separate financial statements are filed and those included in the consolidated financial statements, other than the issuer of the
particular security.
3 Indicate in a note any significant changes since the date of the last balance sheet filed.
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22
I-REMIT INC. AND SUBSIDIARIES
SCHEDULE IV - FINANCIAL SOUNDNESS INDICATORS
For the Years Ended December 31, 2013, 2012 and 2011
2013 2012 2011
A. SHORT-TERM LIQUIDITY RATIO
CURRENT RATIO 1.60 1.71 2.27
Current Assets 2,862,179,113 2,488,562,162 2,076,674,869
Current Liabilities 1,788,566,632 1,453,929,992 915,037,939
WORKING CAPITAL TO ASSETS 0.35 0.39 0.51
(Current Assets - Current Liabilities) 1,073,612,481 1,034,632,170 1,161,636,930
Total Assets 3,059,782,468 2,670,739,551 2,257,339,990
B. LONG-TERM SOLVENCY
DEBT TO EQUITY 1.41 1.20 0.68
Total Liabilities 1,792,007,973 1,455,305,400 916,134,686
Shareholders' Equity 1,267,774,495 1,215,434,151 1,341,205,304
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23
LONG-TERM DEBT TO EQUITY - - -
Long-Term Debt - - -
Shareholders' Equity 1,267,774,495 1,215,434,151 1,341,205,304
FIXED ASSETS TO EQUITY 0.02 0.02 0.01
(Fixed Assets - Accumulated Depreciation) 27,057,295 23,495,462 19,207,458
Shareholders' Equity 1,267,774,495 1,215,434,151 1,341,205,304
CREDITORS EQUITY TO TOTAL ASSETS 0.59 0.54 0.41
Total Liabilities 1,792,007,973 1,455,305,400 916,134,686
Total Assets 3,059,782,468 2,670,739,551 2,257,339,990
FIXED ASSETS TO LONG-TERM DEBT - - -
(Fixed Assets - Accumulated Depreciation) 27,057,295 23,495,462 19,207,458
Long-Term Debt - - -
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24
C. RETURN ON INVESTMENTS
RATE OF RETURN ON TOTAL ASSETS 0.02 0.01 0.06
Net Income 54,030,978 30,515,330 134,994,017
Average Total Assets 2,865,261,010 2,464,039,771 2,307,573,038
RATE OF RETURN ON EQUITY 0.04 0.02
0.10
Net Income 54,030,978 30,515,330 136,063,196
Average Stockholders' Equity 1,241,604,323 1,278,319,728 1,307,381,949
D. PROFITABILITY RATIOS
GROSS PROFIT RATIO 0.73 0.73 0.75
Gross Income 587,884,657 561,725,776 588,432,200
Revenues 802,870,625 771,640,852 787,859,505
OPERATING INCOME TO REVENUES 0.14 0.13 0.23
Income from Operations 112,192,619 99,563,301 183,140,882
Revenues 802,870,625 771,640,852 787,859,505
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25
PRETAX INCOME TO REVENUES
0.10
0.07
0.18
Pretax Income 79,599,380 53,494,878 144,818,342
Revenues 802,870,625 771,640,852 787,859,505
NET INCOME TO COMMISSION INCOME 0.07 0.04 0.17
Net Income 54,030,978 30,515,330 134,994,017
Revenues 802,870,625 771,640,852 787,859,505
E. INTEREST COVERAGE RATIO
INTEREST COVERAGE RATIO 3 2 5
Earnings Before Interest and Tax 112,192,619 99,563,301 183,140,882
Interest Expense 32,593,239 46,068,423 38,322,540
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~I
www.myiremit.com·LR~!fllrSTATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The Management of I-REMIT INC. is responsible for the preparation and fair presentation of theseparate financial statements for the year ended December 31, 2013 and 2012, including theadditional components therein, in accordance with the Philippine Financial Reporting Standards.This responsibility includes designing and implementing internal controls relevant to thepreparation and fair presentation of separate financial statements that are free from materialmisstatement, whether due to fraud or error, selecting and applying appropriate accountingpolicies, and making accounting estimates that are reasonable in the circumstances.
The Board of Directors reviews and approves the separate financial statements and submits thesame to the stockholders.
R.S. Bernaldo & Associates, the independent auditors, appointed by the stockholders, hasexamined the financial statements of the Parent Company in accordance with Philippine Standardson Auditing, and in its report to the stockholders, has expressed its opinion on the fairness ofpresentation upon completion of such examination.
B SAN C. CHOAand Chief Executive Officer
.'
) ,__ , ••••.••••..••I~""-
I-Remit, Inc.26/F Discovery Centre, 25 ADS Avenue, Ortigas Center, Pasig City 1605 PhilippinesTelephone: (632) 706-9999 and (632) 706-2737Facsimile: (632) 706-2767
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SUBSCRIBED AND SWORN to before me this MAR 2 7 20 1~14, affiants exhibitingto me their Community Tax Certificates (CTC) and Competent Evidences of Identity (CEI) asfollows:
Name CTC No., Date and Placeof Issue CEIBANSAN C. CHOA 25030291; January 6, 2014; ParnHaque TIN 159-305-537
CityHARRIS E. D. JACILDO 27971406; January 16, 2014; Pasig City TIN 126-967-441BERNADETTECINDY C. TIU 27971412; January 16, 2014; Pasig City TIN 203-338-548
Document No.Page No.Book No.Series of2014.
1Notary cubi:c fer
PaSID CIty. San Juan, TJgUlq & P:~t~ros}.\~)i:·nHH '!'(:!it NQ. ,~94 {~:J 13~20 14)
Cornr:,;3.Sn.,Q .,:".~.lt:""::sqn Of c'p~-;~oer J1, 201427D4 c.~·s· f-~")~;.\..,!,e- :3C '=.~:"lt-;;."'! [vC:'0n.:;e Road
CI"t\~;'3:; I::zr;ter !6JE ;;s:,~ -;'~vPTH t,lv. o144377l) I 01.02/('1/,; PilSlg c«IBP No 945752/12.27.2013 PamjJilrigll
Roll No 02610
.~I
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A 2 0 0 1 0 1 6 3 1
I - R E M I T I N C .
2 6 ⁄ F D I S C O V E R Y C E N T R E
A D B A V E N U E , O R T I G A S C E N T R E
P A S I G C I T Y
1 2 3 1 A F S 0 7 3 1
Dept. Requiring this Doc.
Total No. of Stockholders
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Remarks = pls. Use black ink for scanning purposes
STAMPS
Domestic
To be accomplished by SEC Personnel concerned
LCUFile Number
Month
Contact Person
Annual Meeting
Company Telephone Number
Mr. Bansan C. Choa 706-9999
Secondary License Type, If Applicable
CashierDocument I.D.
Foreign
COVER SHEET
Total Amount of Borrowings
Amended Articles Number/Section
FORM TYPE
(Company's Full Name)
18
S.E.C. Registration Number
(Business Address: No. Street City/Town/Province)
Month Day
Fiscal Year
Day
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R.S. BERNALDO & ASSOCIATES worldwide
INDEPENDENT AUDITORS' REPORT
The Board of Directors and StockholdersI-REMIT INC.26/F Discovery Centre, 25 ADB AvenueOrtigas Center, Pasig City
Report on the Separate Financial Statements
We have audited the accompanying separate financial statements of I-REMIT INC., whichcomprise the separate statements of financial position as of December 31, 2013 and 2012,and the separate statements of comprehensive income, separate statements of changes inequity and separate statements of cash flows for the years then ended, and a summary ofsignificant accounting policies and other explanatory information.
Management's Responsibility for the Separate Financial Statements
Management is responsible for the preparation and fair presentation of these separatefinancial statements in accordance with Philippine Financial Reporting Standards, and forsuch internal control as Management determines is, necessary .t~onable. the preparation ofseparate financial statements that are free from "l~!~{i·?I(tnis-st~~.e en 'whether due to fraudor error. ;
.I. (, .)u n II ,,~,I. .: .. . .. ~~ ...~ r .• i\ tJ ' Lu.,Auditors' Responsibilitv
Our responsibility is to express an opinion on these sep"ar~a;~fln~ncjal ~tatem~nts based onour audits. We conducted our audits in accorda-nce with 'the"'Philippine Standards onAuditing. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the separate financialstatements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the separate financial statements. The procedures selected depend on theauditors' judgment, including the assessment of the risks of material misstatement of theseparate financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity's preparation andfair presentation of the separate financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimatesmade by the management, as well as evaluating the overall presentation of the separatefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion.
RSBA20YEARS
A: 18/F Cityland Condominium 10 Tower 1156 HV dela Costa Street. Ayala North.
Makati City. Philippines 1226
T: +632 812·1718 to 24
F: +632813·6539
W: www.rsbernaldo.eom
BOA/PRe No. 0300SEe Group A AccreditedSSP Group B AccreditedCDA CEA Accreditedrc Accredited
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Opinion
In our opinion, the separate financial statements present fairly, in all material respects, thefinancial position of I-REMIT INC. as of December 31, 2013 and 2012, and its separatefinancial performance and cash flows for the years then ended in accordance with PhilippineFinancial Reporting Standards.
Emphasis of Matter
We draw attention to Notes 32 and 33 to the separate financial statements which describethe correction of prior period error and impact of transition to revised PAS 19 EmployeeBenefits on the date of transition to retained earnings and prior year's profit, respectively.Our opinion is not qualified in respect of this matter.
Other Matter
The separate financial statements of the Parent Company as of December 31, 2011(not presented herein), were audited by another auditor whose report dated March 23,2012, expressed an unqualified opinion on those statements. As part of our audit of the2013 financial statements, we also audited the adjustments described in Notes 32, 33 and34 that were applied to the Separate Statement of Financial Position as at December 31,2011 to come up with the Separate Statement of Financial Position as at January 1, 2012(presented herein as corresponding figures). In our opinion, such adjustments areappropriate and have been properly applied. We were not engaged to audit, review, or applyany procedures to the 2011 separate financial statements of the Parent Company other thanwith respect to the adjustments and, accordingly, we do not express an opinion or any otherform of assurance on the 2011 separate financial statements taken as a whole.
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Report on Supplementary Information Required Under Revenue Regulations
Our audits were conducted for the purpose of forming an opinion on the basic separatefinancial statements taken as a whole. The supplementary information required underRevenue Regulations Nos. 15 - 2010 and 19 - 2011 in Notes 36 and 37, respectively, tothe notes to separate financial statements are presented for purposes of filing with theBureau of Internal Revenue and is not required part of the basic separate financialstatements. Such information is the responsibility of the Management of I-REMIT INC. Theinformation has been subjected to the auditing procedures applied in our audits of the basicseparate financial statements. In our opinion, the information is fairly stated in all materialrespects in relation to the basic separate financial statements taken as a whole.
R.S. BERNALDO & ASSOCIATESBOA/PRCNo. 0300Valid until December 31, 2015SECGroup A AccreditedAccreditation No. 01 53-FR-1Valid until September 13, 2014BSPGroup B AccreditedValid until February 14, 2014CDA CEA No. 0013-AFValid until November 17,2016IC Accreditation No. F-2013/002-0Valid until March 26, 2016
ROS RIOS. BERNALDOManaging PartnerCPA Certificate No. 25927SECGroup A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSPGroup B AccreditedValid until February 14, 2014BIRAccreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No.1 09-227-722PTRNo. 4232656Issued on January 6, 2014 at Makati City
March 21, 2014
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I-REMIT INC.SEPARATE STATEMENTS OF FINANCIAL POSITIONDecember 31, 2013, 2012 and 2011(In Philippine Pesol
1!:"ll.C~T·.D. S::G~~r£cRECEIVED SU8JECT TO REVIEW Of
FOR", ANn CONTENTS---';;"';;';';;';;:';:;:=~__ ~.I
NOTES2011
(As re-stated)20132012
(As re-stated)
ASSETS
Current AssetsCash and cash equivalentsTrade and other receivablesPrepayments and other current assets
678
518,106,3442,089,130,764
18,233,976
789,926,2251,437,175,689
19,903,603
667,523,4991,140,046,934
23,392,972
2,625,4 71,084 2,247,005,517 1,830,963,405
Non-current AssetsInvestments in subsidiariesInvestment in an associateProperty and equipment - netIntangible assets - netRetirement assetDeferred tax assetsOther non-current assets
9101112242713
TOTAL ASSETS
293,744,901 285,862,9243,573,974 3,573,9748,219,803 8,901,653
602,001 1,404,81611,188,217 2,214,9044,314,306 2,147,051
11·5';69~,605,::,,:::-:,,~~·c7f6'I.8g1;366:
~....
2,9(;2,807,891 2, 67,9
LIABILITIESAND STOCKHOLDERS' EQUITY
LIABILITIES
Current LiabilitiesBeneficiaries and other payablesAdvances from stockholdersIncome tax payableLoans payable
1416
15
Non-current LiabilitiesDeferred tax liabilitiesRetirement liability
2724
\
.:O~~e Pit'r( i.~,'1
I~~r~(:~lL fF' j:'~ t
~~-",.''''''''''--'''>''~'
279,160,1033,573,9747,094,4741,396,241
568,92826,181,442
317,975,162
2; 148,938,567I _
868,963,414 555,881,732 289,663,2487,289,480 7,289,480 2,392,9106,468,454 1,715,594 3,599,355
988,000,000 925,000,000 666,000,000
1.870,721,348 1,489,886,806 961,655,513
3,368,519 1,308,943 356,422708,356
3,368,519 1,308,943 1,064,778
1.874.089.867 1,491,195,749 962,720,291
617,725,800 617,725,800 617,725,800
429,513,501 429,513,501 429,513,501
34,264,499 30,335,835 140,306,475
12,400,309 69,209,688 52,987,208
7,214,224 (798,680) (1,327,500)
1,101,118,333 1,145,986,144 1,239,205,484
(12,400,309) (69,209,688) (52,987,208)
1.088,718.024 1,076,776,456 1,186,218,276
2,962,807,891 2,567,972,205 2,148,938,567
TOTAL LIABILITIES
STOCKHOLDERS' EQUITY
Capital Stock
Additional Paid-in Capital
Unappropriated Retained Earnings
Appropriated Retained Earnings
Re-measurements
17
17
17
24
Treasury Stock 17
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIESAND STOCKHOLDERS' EQUITY
(See Notes to Separate Financial Statements)
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I-REMIT INC.SEPARATE STATEMENTS OF COMPREHENSIVE INCOMEFor the Years Ended December 31, 2013, 2012 and 2011(In Philippine Peso)
2012 2011NOTES 2013 (As re-stated) (As re-stated)
REVENUE 20 481,682,380 470,199,179 490,087,163
COST OF SERVICES 21 192,482,366 185,136,308 175,332,116
GROSSPROFIT 289,200,014 285,062,871 314,755,047
OTHERINCOME 22 3,686,632 11,907,620 16,373,704
292,886,646 296,970,491 331,128,751
OPERATINGEXPENSES 23 201,179,915 209,321,618 212,716,345
FINANCECOSTS 15 32,593,239 46,068,423 38,322,540
PROFITBEFORETAX 59,113,492 41,580,450 80,089,866
INCOME TAXES 26 17,753,007 15,347,752 24,120,465
PROFIT 41,360,485 26,232,698 55,969,401
OTHERCOMPREHENSIVEINCOME
RE-MEASUREMENTS 24 8,012,904 528,820 2,783,019
TOTAL COMPREHENSIVEINCOME 49,373,389 26,761,518 58,752,420
EARNINGSPERSHAREBasic Earnings per Share 28 0.07 0.04 0.09
(See Notes to Separate Financial Statements)
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I-REMIT INC.SEPARATE STATEMENTS OF CHANGES IN EQUITYFor the Years Ended December 31, 2013, 2012 and 2011(In Philippine Peso)
Additional Paid-in Unappropriated AppropriatedNotes Capital Stock Capital RetainedEarnings RetainedEarnings Treasury Stock Re-measurements Total
Balance, January 1, 2011,as previously reported 562,417,000 429,513,501 167,510,842 40,115,150 (40,115,150) 1,159,441,343
Correction of prior period error 32 (14,992,910) (14,992,910)Effects of change in accounting policy 24 (4,110,519) (4,110,519)
Balance, January 1, 2011,as re-stated 17,18,24 562,417,000 429,513,501 152,517,932 40,115,150 (40,115,150) (4,110,519) 1,140,337,914
Profit, as re-stated 55,969,401 55,969,401Stock dividends 18 55,308,800 (55,308,800)Purchaseof own stock 17 (12,872,058) (12,872,058)Appropriations of retained earnings 17 (12,872,058) 12,872,058Other comprehensive income 24 2,783,019 2,783,019
Balance, December 31, 2011,as re-stated 17,18,24 617,725;800 429,513,501 140,306,475 52,987.208 (52.987.208) (1.327.500) 1,186.218.276
Profit, as re-stated 26,232,698 26,232.698Cash dividends 18 (119,980,858) (119,980,858)Purchaseof own stock 17 (16,222,480) (16,222,480)Appropriations of retained earnings 17 (16,222,480) 16,222,480Other comprehensive income 24 528,820 528.820
Balance. December 31. 2012.as re-stated 17,18,24 617,725,800 429,513,501 30.335,835 69,209,688 (69,209.688) (798.680) 1.076.776,456
Profit 41,360,485 41.360,485Cash dividends 18 (25,031,512) (25.031.512)Property dividends 18 (69,209,688) (69.209,688)Purchaseof own stock 17 (11,475.190) (11,475,190)Reissuanceof treasury stock 17 68,284,569 (68,28,4,569) 68,284,569 68.284.569Appropriations of retained earnings 17 (11,475,190) 11,475,190Other comprehensive income 24 8,012,904 8.012.904
Balance. December 31.2013 617.725.800 429.513.501 34.264,499 12,400.309 (12,400,309) 7,214,224 1.088.718.024
(See Notes to Separate Financial Statements)
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I-REMIT INC.SEPARATE STATEMENTS OF CASH FLOWSFor the Years Ended December 31, 201 3, 201 2 and 2011(In Philippine Peso)
2012 2011NOTES 2013 (As re-stated) (As re-stated)
CASH FLOWS FROM OPERATINGACTIVITIESProfit before tax 59,113.492 41,580,450 80,089,866Adjustments for:
Finance cost 15 32,593,239 46,068,423 38,322,540Depreciation 11,23 4,950,987 5,057,609 4,991,976Retirement benefit expense 23,24 4,536,261 3,990,642 4,928,900Unrealized foreign exchange loss (gain) - net 22,23 1,186,515 (987,177) (2,722,754)Amortization 12,23 815,898 936,613 1,543,083Gain on sale 11,22 (101.458) (3,954)Finance income 6,22 (1.475,008) (1,858,779) (2,949,353)Loss on write-off of assets ~ , 13,23 226,871 10,040,886 2,058,616
Operating cash flows before..f;:J\?nge~" :in working capital . ~ .
Decrease (Increase) in opefa:!~g assets';,) \1 f. 2nt4 .Trade and other receivables ;';'1 1\ 'J' I ~ ~ ~ '(649,774,852)
" 'Prepayments and other urrent assets., . _ I 1,442,756Other non-current assets P .~ C ::1 ~ V f' ~;j i 1,167,761
Increase in beneficiaries ar)dot~~~\gayables' ", J. '\ "J l 308,740.482
101,846,797 104,828,667 126,258,920
(302,959,497) 117,546,2583,489,369 (32,717)
(720,810) 4,748,227268,117,920 32,684,301
72,755,649 281,204,989(16,519,034) (23,414,649)
56,236,615 257,790,340
1,858,779 2,949,353349,596 3,964
(945,188) (1,071,252)(6,158,445) (7,485,104)(7,214,384) (2,593,345)(6,702,821) (12,866,265)
(37,318,560)4,896,570
(13,915,893) (58,381,209)
Cash generated from (used in) operationsIncome taxes paid
(236,577 ,056)(16,541,927)
Net cash from (used in) operating activities (253,118,983)
CASH FLOWS FROM INVESTING ACTIVITIESFinance income receivedProceeds from disposal of property and equipmentAdditions to intangible assetsContributions to retirement fundAdditions to property and equipmentAdditions to investment in subsidiariesAcquisition of non-controlling interest in subsidiariesAdvances from stockholders
6,221112
16,24119916
1.475,008190,003(13,083)
(2,062,569)(4,357,682)(7,881,977)
Net cash used in investing activities (12,650,300)
CASH FLOWS FROM FINANCING ACTIVITIESProceeds from loansPurchase of own stockPayment of cash dividendsFinance cost paidPayments of loans
15 988,000,000 925,000,000 666,000,00017 (11.475,190) (16,222,480) (12,872,058)18 (25,031,512) (119,980,858)15 (29,177,159) (44,240,867) (38,402,247)15 (925,000,000) (666,000,000) (877,000,000)
(2,683,861 ) 78,555,795 (262,274,305)
(3,366,737) 1,526,209 2,722,754
(271,819,881) 122,402,726 (60,142,420)
789,926,225 667,523,499 727,665,919
518,106,344 789,926,225 667,523,499
Net cash from (used in) financing activities
EFFECTSOF FOREIGNEXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS
NET INCREASE(DECREASE)IN CASH
CASH AND CASH EQUIVALENTS AT
BEGINNINGOF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
(See Notes to Separate Financial Statements)
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I-REMIT INC. NOTES TO SEPARATE FINANCIAL STATEMENTS
December 31, 2013 and 2012
1. CORPORATE INFORMATION
I-Remit Inc. (the “Parent Company”) was incorporated and registered with the
Philippine Securities and Exchange Commission (SEC) on March 5, 2001 and started its
commercial operations on November 11, 2001. The Parent Company is primarily
engaged in the business of fund transfer and remittance services of any form or kind of
currencies or monies, either by electronic, telegraphic, wire or any other mode of
transfer; delivery of such funds or monies, both in the domestic and international
market, by providing either courier or freight forwarding services; and conduct of
foreign exchange transactions as may be allowed by law and other allied activities
relative thereto, respectively.
The Parent Company’s common shares were listed with the Philippine Stock Exchange
(PSE) on October 17, 2007.
The Parent Company is 29.39% owned by STAR Equities, Inc., 21.45% owned by
JTKC Equities, Inc., 23.52% owned by Surewell Equities, Inc., 3.29% owned by JPSA
Global Services Co., and the rest by the public.
The Parent Company, which is domiciled in the Philippines, has its registered office and
principal place of business at the 26/F Discovery Centre, 25 ADB Avenue, Ortigas
Center, Pasig City.
2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
The Philippine Financial Reporting Standards Council (PFRSC) approved the issuance of
new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in
general includes all applicable PFRS, Philippine Accounting Standards (PAS), and
Interpretations issued by the Philippine Interpretations Committee (PIC), Standing
Interpretations Committee (SIC) and International Financial Reporting Interpretations
Committee (IFRIC) approved by the PFRSC and adopted by SEC.
These new and revised PFRS prescribe new accounting recognition, measurement and
disclosure requirements applicable to the Parent Company. When applicable, the
adoption of the new standards was made in accordance with their transitional
provisions, otherwise the adoption is accounted for as change in accounting policy
under PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
2.01 New and Revised PFRSs with Material Effect on Amounts Reported in the Current
Year (and/or Prior Years)
The following new and revised PFRSs have been applied in the current period and had
materially affected the amounts reported in these separate financial statements.
Details of other new and revised PFRSs applied in these separate financial statements
that have had no material effect on the separate financial statements are set out in
section 2.02.
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PAS 1, Presentation of Financial Statements – The improvements in this PFRS
clarifies that when an entity changes an accounting policy, or makes a
retrospective restatement or reclassifications it shall present:
a) the opening separate statement of financial position should be presented as at
the beginning of the required comparative period; and
b) the related notes are not required to accompany this opening separate
statement of financial position.
As a result of the early adoption in 2012, the Parent Company did not present related
notes to accompany the opening separate statement of financial position.
PAS 19 (Revised), Employee Benefits
Significant changes to this standard include removal of corridor approach;
immediate recognition of past service costs; presentation of re-measurements on
defined benefit plans in other comprehensive income; new recognition criteria on
termination benefits; and improved disclosure requirements.
The amended standard comes into effect for accounting periods beginning on or
after January 1, 2013. Earlier application is permitted.
The revised PAS 19 ranges from 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 Parent Company reviewed its existing employee benefits and determined that
the amended standard has significant impact on its accounting for retirement
benefits.
The Parent Company has applied PAS 19 (Revised) retrospectively in the current
year in accordance with the transitional provisions set out in the revised standard.
The opening separate statement of financial position as of January 1, 2012 and the
comparative figures have been accordingly restated.
The effects of adoption on the separate financial statements are as follows:
Separate Statement of Financial Position
As at December
31, 2012
(As re-stated)
As at January 1,
2012
(As re-stated)
Increase (decrease) in:
Retirement asset P 2,923,260 P -
Deferred tax assets (226,637) 568,928
Deferred tax liabilities 656,368 356,422
Retirement liability - 708,356
Other comprehensive income (loss) 528,820 2,783,019
Retained earnings 502,211 463,256
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Separate Statement of Comprehensive Income
2012
As reported
previously
Adjustments
As re-stated
Retirement expense P 4,294,704 P (304,062) P 3,990,642
Provision for deferred
income tax
854,517 (198,149) 656,368
Profit for the year 30,627,057 (502,211) 30,124,846
Other comprehensive
loss
-
-
(528,820)
(528,820)
2.02 New and Revised PFRSs Applied with No Material Effect on the Financial
Statements
The following new and revised PFRSs have also been adopted in these separate
financial statements. The application of these new and revised PFRSs has not had any
material impact on the amounts reported for the current and prior years but may affect
the accounting for future transactions or arrangements.
PFRS 7 (Amended), Financial Instruments: Disclosures – Offsetting Financial Assets
and Financial Liabilities
The amendment requires disclosing information that will enable users to evaluate
the effect or potential effect of netting arrangements on an entity’s financial
position. The amendments are effective for annual periods beginning on or after
January 1, 2013 and interim periods within those annual periods. An entity shall
provide the disclosures required by those amendments retrospectively.
PFRS 10, Consolidated Financial Statements
The Standard establishes the principles for the presentation and preparation of
consolidated financial statements when an entity controls one or more other
entities.
The Standard defines the principle of control and establishes control as the basis
for determining which entities are consolidated in the consolidated financial
statements. This PFRS will supersede PAS 27, Consolidated Financial Statements
and Separate Financial Statements and SIC 12, Consolidation – Special Purpose
Entities.
PFRS 10 is effective for annual periods beginning on or after January 1, 2013, with
earlier application permitted.
PFRS 12, Disclosure of Interests in Other Entities
The Standard applies to entities that have interests in a subsidiary, a joint
arrangement, and an associate or an unconsolidated structured entity. It benefits
the users by identifying the profit or loss and the cash flows available to the
reporting entity and by determining the value of current or future investment in the
reporting entity.
PFRS 12 is effective for annual periods beginning on or after January 1, 2013, with
earlier application permitted.
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PFRS 13, Fair Value Measurement
The Standard explains how to measure fair value for financial reporting. It defines
fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. It emphasizes that fair value is market-based not an entity-specific
measurement; hence, an entity’s intention to hold an asset or to settle or otherwise
fulfil a liability is not relevant when measuring fair value. It was developed to
eliminate inconsistencies of fair value measurements dispersed in various existing
PFRSs. It clarifies the definition of fair value, provides a single framework for
measuring fair value and enhances fair value disclosures.
PFRS 13 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted.
PAS 1, Presentation of Items of Other Comprehensive Income (OCI)
To improve the presentation of items of OCI, amended PAS 1 requires entities to
group items presented in the OCI on the basis whether they would be reclassified
to (recycled to) profit or loss subsequently.
The amendments did not address which items should be presented in the OCI and
did not change the option to present OCI items either before or net of tax.
Those amendments are effective for annual periods beginning on or after
July 1, 2012. Earlier application is permitted.
PIC Q&A No. 2013-03 PAS 19 – Accounting for Employee Benefits under a
Defined Contribution Plan subject to Requirements of Republic Act (RA) 7641,
The Philippine Retirement Law
This Interpretation provides guidance in accounting for post-employment benefits
for an entity which has opted to provide a defined contribution plan as its only
post-employment benefit plan despite the minimum retirements benefits required to
be provided to employees under RA 7641.
This Interpretation is effective for annual financial statements with period beginning
January 1, 2013 and should be applied retrospectively.
PAS 27 (Revised), Consolidated and Separate Financial Statements
The amendments to PAS 27 are result of the completion and issuance of a new
standard on consolidation, the PFRS 10, Consolidated Financial Statements. As a
result, PAS 27 will now be titled as Separate Financial Statements containing
requirements relating only to separate financial statements.
The amended standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
PAS 28 (Revised), Investment in Associates
The amendments to PAS 28 are the result of the completion and issuance of a new
standard on joint arrangements, the PFRS 11, Joint Arrangements. As a result,
PAS 28 will now be titled as Investment in Associates and Joint Ventures
incorporating requirements for joint ventures.
The amended standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
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Improvements to PFRS (2011) – Effective for annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
PAS 16, Property, Plant and Equipment – It clarifies that servicing equipment
should be classified as property, plant and equipment when it is used during more
than one period and as inventory otherwise.
PAS 32, Financial instruments: Presentation – It clarifies that income tax relating to
distributions to holders of an equity instrument and income tax relating to
transaction costs of an equity transaction should be accounted for in accordance
with PAS 12, Income Taxes.
2.03 New and Revised PFRSs in Issue but Not Yet Effective
The Parent Company will adopt the following standards and interpretations enumerated
below when they become effective. Except as otherwise indicated, the Parent
Company does not expect the adoption of these new and amended PFRS to have
significant impact on the separate financial statements.
PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, Financial Instruments, issued in November 2009 and amended in
October 2010 introduces new requirements for the classification and measurement
of financial assets and financial liabilities and for de-recognition.
PFRS 9 requires all recognised financial assets that are within the scope of PAS 39,
Financial Instruments: Recognition and Measurement, to be subsequently measured
at amortized cost or fair value. Specifically, debt investments that are held within a
business model whose objective is to collect the contractual cash flows, and that
have contractual cash flows that are solely payments of principal and interest on
the principal outstanding are generally measured at amortized cost at the end of
subsequent accounting periods. All other debt investments and equity investments
are measured at their fair values at the end of subsequent accounting periods.
The most significant effect of PFRS 9 regarding the classification and measurement
of financial liabilities relates to the accounting for changes in fair value of a
financial liability (designated as at fair value through profit or loss) attributable to
changes in the credit risk of that liability. Specifically, under PFRS 9, for financial
liabilities that are designated as at fair value through profit or loss, the amount of
change in the fair value of the financial liability that is attributable to changes in the
credit risk of that liability is recognized in other comprehensive income, unless the
recognition of the effects of changes in the liability's credit risk in other
comprehensive income would create or enlarge an accounting mismatch in profit or
loss. Changes in fair value attributable to a financial liability's credit risk are not
subsequently reclassified to profit or loss. Previously, under PAS 39, the entire
amount of the change in the fair value of the financial liability designated as at fair
value through profit or loss was recognized in profit or loss.
PFRS 9 is effective for annual periods beginning on or after January 1, 2015, with
earlier application permitted.
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PFRS 10 (Amended), Consolidated Financial Statements, PFRS 12 (Amended),
Disclosure of Interest in Other Entities, PAS 27 (Amended), Separate Financial
Statements
The amendment requires a parent company that is an investment entity to measure
its investments in particular subsidiaries at fair value through profit or loss instead
of consolidating them. The new disclosure requirements pertaining to investment
entities were added to PFRS 12 and PAS 27.
The amendments are effective for annual periods beginning on or after
January 1, 2014. Earlier application is permitted.
PAS 32 (Amended), Financial Instruments: Presentation – Offsetting of Financial
Assets and Liabilities
The amendment provided additional application guidance for offsetting in
accordance with PAS 32. The amendments clarified the meaning of “currently has
a legally enforceable right of set-off” and that some gross settlement systems may
be considered equivalent to net settlement. These amendments are effective for
annual periods beginning on or after January 1, 2014 and should be applied
retrospectively. Earlier application is permitted.
PAS 36 (Amended), Impairment of Assets
The amendment requires the disclosure of recoverable amount on impaired assets.
It clarifies that the scope of disclosures is limited to the recoverable amount of
impaired assets that is based on fair value less costs of disposal.
The amendment is to be applied retrospectively for annual periods beginning on or
after January 1, 2014. Earlier application is permitted for periods when the entity
has already applied IFRS 13.
IFRIC 21, Levies
This interpretation provides guidance on how to account levies that are within the
scope of PAS 37, Provisions, Contingent Liabilities and Contingent Assets.
It clarifies that the obligating event that gives rise to a liability to pay a levy is the
activity that triggers payment of the levy, as identified by the legislation.
This interpretation is effective for annual periods beginning on or after
January 1, 2014 and it shall be applied retrospectively. Earlier application is
permitted.
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3. BASIS FOR THE PREPARATION AND PRESENTATION OF SEPARATE FINANCIAL
STATEMENTS
3.01 Statement of Compliance
The separate financial statements have been prepared in conformity with PFRS and are
under the historical cost convention, except for certain financial instruments that are
carried at amortized cost.
3.02 Functional and Presentation Currency
Items included in the separate financial statements of the Parent Company are
measured using Philippine Peso (P), the currency of the primary economic environment
in which the Parent Company operates (the “functional currency”).
The Parent Company chose to present its separate financial statements using its
functional currency.
3.03 Basis of Preparation
These separate financial statements were based from the Parent Company’s own
transactions, exclusive of transactions of the Parent Company’s subsidiaries, the latter
transactions being used in the preparation of the consolidated financial statements,
which are also available for public use.
4. SIGNIFICANT ACCOUNTING POLICIES
Principal accounting and financial reporting policies applied by the Parent Company in
the preparation of its financial statements are enumerated below and are consistently
applied to all the years presented, unless otherwise stated.
4.01 Financial Assets
Financial assets are initially measured at fair value, plus transaction costs, except for
those financial assets classified as at fair value through profit or loss, which are initially
measured at fair value.
Financial assets that are subsequently measured at amortized cost, and where the
purchase or sale are under a contract whose terms require delivery of such within the
timeframe established by the market concerned are initially recognized on the trade
date.
Financial assets are classified into the following specified categories: financial assets
‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments,
‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification
depends on the nature and purpose of the financial assets and is determined at the
time of initial recognition.
The Parent Company’s financial assets include cash and cash equivalents, trade and
other receivables and refundable deposits presented under other non-current assets.
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4.01.01 Effective Interest Method
The effective interest method is a method of calculating the amortized cost of a debt
instrument and of allocating finance income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts including
all fees on points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts, through the expected life of
the debt instrument, or, where appropriate, a shorter period to the net carrying amount
on initial recognition.
Income is recognized on an effective interest basis.
4.01.02 Amortized Cost
Amortized cost is computed using the effective interest rate method less any
allowance for impairment and principal repayment or reduction. The calculation takes
into account any premium or discount on acquisition and includes transaction costs
and fees that are an integral part of effective interest rate.
4.01.03 Trade and other Receivables
Trade and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as ‘trade and other receivables’. Trade and
other receivables are measured at amortized cost using the effective interest method,
less any impairment. Finance income is recognized by applying the effective interest
rate, except for short-term receivables when the recognition of interest would be
immaterial.
4.01.04 Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at the end of each reporting
period. Financial assets are impaired where there is objective evidence that, as a result
of one or more events that occurred after the initial recognition of the financial asset,
the estimated future cash flows of the investment have been affected.
Objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial
re-organization.
the lender, for economic or legal reasons relating to the borrower’s financial
difficulty, grants the borrower a concession that the lender would not otherwise
consider
the disappearance of an active market for that financial asset because of financial
difficulties
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observable data indicating that there is a measurable decrease in the estimated
future cash flows from a group of financial assets since the initial recognition of
those assets, although the decrease cannot yet be identified with the individual
financial assets in the group, including (i) adverse changes in the payment status of
borrowers in the group (e.g. an increased number of delayed payments or an
increased number of credit card borrowers who have reached their credit limit and
are paying the minimum monthly amount); or (ii) national or local economic
conditions that correlate with defaults on the assets in the group (e.g. an increase
in the unemployment rate in the geographical area of the borrowers, a decrease in
property prices for mortgages in the relevant area, a decrease in oil prices for loan
assets to oil producers, or adverse changes in industry conditions that affect the
borrowers in the group).
Other factors may also be evidenced of impairment, including significant changes with
an adverse effect that have taken place in the technological, market, economic or legal
environment in which the issuer operates.
For certain categories of financial asset, such as trade receivables, assets that are
assessed not to be impaired individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio of receivables could
include the Parent Company’s past experience of collecting payments, an increase in
the number of delayed payments in the portfolio past the average credit period of
five (5) days, as well as observable changes in national or local economic conditions
that correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment is the
difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly
for all financial assets with the exception of trade receivables, where the carrying
amount is reduced through the use of an allowance account. When a trade receivable
is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognized in
profit or loss.
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 through profit or loss
to the extent that the carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortized cost would have been had the
impairment not been recognized.
4.01.05 De-recognition of Financial Assets
The Parent Company derecognizes a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another entity.
If the Parent Company neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Parent
Company recognizes its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Parent Company retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Parent Company
continues to recognize the financial asset and also recognizes a collateralized
borrowing for the proceeds received.
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4.02 Investment in an Associate
An associate is an entity over which the Parent Company has significant influence and
that is neither a subsidiary nor an interest in a joint venture. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but
is not control or joint control over those policies.
Any excess of the cost of acquisition over the Parent Company’s share of the net fair
value of the identifiable assets, liabilities and contingent liabilities of the associate
recognized at the date of acquisition is recognized as goodwill. The goodwill is
included within the carrying amount of the investment and is assessed for impairment
as part of that investment. Any excess of the Parent Company’s share of the net fair
value of the identifiable assets, liabilities and contingent liabilities over the cost of
acquisition, after reassessment, is recognized immediately in profit or loss.
The Parent Company accounts the investment under the cost method. The Parent
Company recognizes as income the dividends received that are distributed from net
accumulated earnings of the investee since the date of acquisition by the investor.
Dividends received that are in excess of the earnings subsequent to the date of
acquisition are not income and therefore considered as return or reduction of
investment.
The requirements of PAS 39, Financial Instruments: Recognition and Measurement are
applied to determine whether it is necessary to recognize any impairment loss with
respect to the Parent Company’s investment in an associate. When necessary, the
entire carrying amount of the investment (including goodwill) is tested for impairment
in accordance with PAS 36, Impairment of Assets as a single asset by comparing its
recoverable amount (higher of value in use and fair value less costs to sell) with its
carrying amount. Any impairment loss recognized forms part of the carrying amount of
the investment. Any reversal of that impairment loss is recognized in accordance with
PAS 36 to the extent that the recoverable amount of the investment subsequently
increases.
The Parent Company loses significant influence over an investee when it loses the
power to participate in the financial and operating policy decisions of that investee.
The loss of significant influence can occur with or without a change in absolute or
relative ownership levels.
4.03 Investments in Subsidiaries
A subsidiary is an entity, including an unincorporated entity such as a partnership that
is controlled by another entity known as parent. Control is the exposure or rights, to
variable returns from the involvement with an investee and the ability to affect that
return through its power over an investee.
Investments in subsidiaries are accounted under the cost method. Under the cost
method, the Parent Company recognizes as income the dividends received that are
distributed from net accumulated earnings of the investee since the date of acquisition
by the investor. Dividends received that are in excess of the earnings subsequent to
the date of acquisition are not income and therefore considered as return or reduction
of investment.
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If the Parent Company loses control of a subsidiary, the Parent Company recognizes
any investment retained in the former subsidiary at its fair value at the date when
control is lost or recognizes any resulting difference as a gain or loss in profit or loss
attributable to the Parent Company. Changes in a parent’s ownership interest in a
subsidiary that do not result in a loss of control are accounted for as equity
transactions.
4.04 Property and Equipment
Property and equipment are initially measured at cost. The cost of an asset consists of
its purchase price and costs directly attributable to bringing the asset to its working
condition for its intended use. Subsequent to initial recognition, property and
equipment are carried at cost less accumulated depreciation and accumulated
impairment losses.
Subsequent expenditures relating to an item of property and equipment that have
already been recognized are added to the carrying amount of the asset when it is
probable that future economic benefits, in excess of the originally assessed standard of
performance of the existing asset, will flow to the Parent Company. All other
subsequent expenditures are recognized as expenses in the period in which those are
incurred.
Depreciation is computed on a straight-line method based on the estimated useful lives
of the assets as follows:
Office and communication equipment 3 years
Transportation and delivery equipment 3 – 5 years
Furniture and fixtures 3 – 5 years
Leasehold improvements are depreciated over the shorter between the improvements’
useful life of five (5) years or the lease term.
An item of property and equipment is derecognized on disposal, or when no future
economic benefits are expected from use or disposal. Gains or losses arising from
de-recognition of a property and equipment are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognized in
profit or loss.
4.05 Intangible Assets
Intangible assets acquired separately are initially carried at cost. Subsequently,
intangible assets with definite useful lives are carried at cost less accumulated
amortization and accumulated impairment losses.
Software costs are amortized on a straight-line basis over its estimated useful life of
three (3) years.
The estimated useful life and amortization method are reviewed at the end of each
annual reporting period, with the effect of any changes in estimate being accounted for
on a prospective basis.
An intangible asset is derecognized on disposal or when no future economic benefits
are expected from use or disposal. Gains or losses arising from derecognition of an
intangible asset are measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognized in profit or loss.
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4.06 Impairment of Assets
At each reporting date, the Parent Company assesses whether there is any indication
that any assets other than retirement asset, deferred tax assets and financial assets
that are within the scope of PAS 39, Financial Instruments: Recognition and
Measurement, may have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss, if any. Where it is not possible to estimate the recoverable amount of
an individual asset, the Parent Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs. When a reasonable and consistent
basis of allocation can be identified, assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less
than its carrying amount, the carrying amount of the asset or cash-generating unit is
reduced to its recoverable amount. An impairment loss is recognized as an expense.
When an impairment loss subsequently reverses, the carrying amount of the asset or
cash-generating unit is increased to the revised estimate of its recoverable amount, but
the increased carrying amount should not exceed the carrying amount that would have
been determined had no impairment loss been recognized for the asset or
cash-generating unit in prior years. A reversal of an impairment loss is recognized as
an income.
4.07 Borrowing Costs
Borrowing costs are recognized in profit or loss in the period in which they are
incurred.
4.08 Financial Liabilities and Equity Instruments
4.08.01 Classification as Debt or Equity
Debt and equity instruments are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements.
4.08.02 Financial Liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other
financial liabilities’.
The Parent Company’s financial liabilities includes beneficiaries and other payables
(excluding payable to government agencies and certain accruals), advances from
stockholders and loans payable.
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4.08.03 Other Financial Liabilities
Other financial liabilities, including borrowings, are initially measured at fair value
inclusive of directly attributable transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the
effective interest method, with finance cost recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a
financial liability and of allocating finance cost over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash payments through
the expected life of the financial liability, or, where appropriate, a shorter period to the
net carrying amount on initial recognition.
4.08.04 De-recognition of Financial Liabilities
The Parent Company derecognizes financial liabilities when, and only when, the Parent
Company’s obligations are discharged, cancelled or expired. When an existing 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 de-recognition of the original liability and the recognition of
a new liability. The difference between the carrying amount of the financial liability
derecognized and the consideration paid and payable is recognized in profit or loss.
4.08.05 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of
an entity after deducting all of its liabilities. Equity instruments issued by the Parent
Company are recognized at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. Incremental costs directly attributable to the
issuance of new shares or options are shown in equity as a deduction from the
proceeds, net of tax. The cost of acquiring the Parent Company‘s own shares are
shown as a deduction from equity until the shares are cancelled or reissued. When
such shares are subsequently sold or reissued, any consideration received, net of
directly attributable incremental transaction costs and the related income tax effects, is
included in equity.
4.09 Offsetting of Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the separate
statements 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 assets and settle the liabilities simultaneously.
4.10 Employee Benefits
4.10.01 Short-term Benefits
The Parent Company recognizes a liability net of amounts already paid and an expense
for services rendered by employees during the accounting period. Short-term benefits
given by the Parent Company to its employees include salaries and wages, social
security contributions, short-term compensated absences, profit sharing and bonuses,
non-monetary benefits.
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4.10.02 Post-employment Benefits
The Parent Company has a funded, non-contributory defined benefit retirement plan.
This benefit defines an amount of pension benefit that an employee will receive on
retirement, usually dependent on one or more factors such as age, years of service and
compensation.
The cost of providing benefits is determined using the Projected Unit Credit Method
which reflects services rendered by employees to the date of valuation and
incorporates assumptions concerning employees’ projected salaries. Post-employment
expenses include current service cost, past service cost, and net interest on defined
benefit asset/liability. Re-measurements which include cumulative actuarial gains and
losses, return on plan assets, and changes in the effects of asset ceiling are recognized
directly in other comprehensive income and is also presented under equity in the
separate statement of financial position.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to equity in other comprehensive income in the
period in which they arise.
Past-service costs are recognized immediately in profit or loss.
The retirement assets recognized in the separate statements of financial position in
respect of defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets.
The defined benefit obligation is calculated annually by an independent actuary using
the projected unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest rates of
government securities, equity securities and other securities that are denominated in
the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension obligation.
The asset that resulted from this calculation is a result of over funding or when an
actuarial gain arises. It is recognized since it is a resource which the Parent Company
controls and is available in the form of reduction in future contributions.
The funding policy is to contribute an amount based on the actuarial valuation report
which is carried out at regular intervals.
4.11 Provisions
Provisions are recognized when the Parent Company has a present obligation, whether
legal or constructive, as a result of a past event, it is probable that the Parent
Company will be required to settle the obligation, and a reliable estimate can be made
of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required
to settle the present obligation at the end of the reporting period, taking into account
the risks and uncertainties surrounding the obligation. Where a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is
the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected
to be recovered from a third party, a receivable is recognized as an asset if it is
virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
Provisions are reviewed at each reporting date and adjusted to reflect the current best
estimate and presented in the Parent Company’s separate statements of
comprehensive income.
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4.12 Share-based Payments
4.12.01 Equity-settled Share-based Payments
Equity-settled share-based payments to employees and others providing similar services
are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments
is expensed on a straight-line basis over the vesting period, based on the Parent
Company’s estimate of equity instruments that will eventually vest. At the end of
each reporting period, the Parent Company revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates,
if any, is recognized in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to the equity-settled employee
benefits reserve.
4.13 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the Parent Company and the revenue can be measured reliably. Revenue is
measured at the fair value of the consideration received or receivable and represents
amounts receivable for services provided in the normal course of business. Revenue is
reduced for estimated customer returns, rebates and other similar allowances.
4.13.01 Rendering of Services
Revenue from a contract to provide services is recognized by reference to the stage of
completion of the contract. Revenue from rendering of services is recognized when all
the following conditions are satisfied:
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow
to the Parent Company;
the stage of completion of the transaction can be measured reliably; and
the costs incurred for the transaction and the costs to complete the transaction can
be measured reliably.
Revenue from rendering of services encompasses delivery and other fees.
4.13.02 Dividend and Finance Income
Dividend income from investments is recognized when the shareholder’s right to
receive payment has been established, provided that it is probable that the economic
benefits will flow to the Parent Company and the amount of revenue can be measured
reliably.
Finance income is recognized when it is probable that the economic benefits will flow
to the Parent Company and the amount of revenue can be measured reliably. Finance
income is accrued on a time proportion basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that
asset’s net carrying amount on initial recognition.
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4.14 Expense Recognition
Expense encompasses losses as well as those expenses that arise in the course of the
ordinary activities of the entity.
The Parent Company recognizes expenses in the separate statements of
comprehensive income when a decrease in future economic benefits related to a
decrease in an asset or an increase of a liability has arisen that can be measured
reliably.
4.15 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other leases are
classified as operating leases.
4.15.01 The Parent Company as a Lessee
Operating lease payments are recognized as an expense on a straight-line basis over
the lease term, except where another systematic basis is more representative of the
time pattern in which economic benefits from the leased asset are consumed.
In the event that lease benefits are received to enter into operating leases, such
benefits are recognized as a liability. The aggregate benefits are recognized as a
reduction of rental expense on a straight-line basis, except where another systematic
basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed.
4.16 Foreign Currency Transactions
In preparing the separate financial statements of the Parent Company, transactions in
currencies other than the Parent Company’s functional currency, i.e. foreign currencies,
are recognized at the rates of exchange prevailing at the dates of the transactions.
At the end of each reporting period, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at that date.
Exchange differences are recognized in profit or loss in the period in which they arise.
4.17 Related Parties and Related Party Transactions
A related party is a person or entity that is related to the Parent Company that is
preparing its separate financial statements. A person or a close member of that
person’s family is related to Parent Company if that person has control or joint control
over the Parent Company, has significant influence over the Parent Company, or is a
member of the key management personnel of the Parent Company or of a of the Parent
Company.
An entity is related to the Parent Company if any of the following conditions applies:
The entity and the Parent Company are members of the same group (which means
that each parent, subsidiary and fellow subsidiary is related to the others).
One entity is an associate or joint venture of the other entity (or an associate or
joint venture of a member of a group of which the other entity is a member).
Both entities are joint ventures of the same third party.
One entity is a joint venture of a third entity and the other entity is an associate of
the third entity.
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The entity is a post-employment benefit plan for the benefit of employees of either
the Parent Company or an entity related to the Parent Company. If the Parent
Company is itself such a plan, the sponsoring employers are also related to the
Parent Company.
The entity is controlled or jointly controlled by a person identified above.
A person identified above has significant influence over the entity or is a member of
the key management personnel of the entity (or of an entity).
Close members of the family of a person are those family members, who may be
expected to influence, or be influenced by, that person in their dealings with the Parent
Company and include that person’s children and spouse or domestic partner; children
of that person’s spouse or domestic partner; and dependents of that person or that
person’s spouse or domestic partner.
A related party transaction is a transfer of resources, services or obligations between
related parties, regardless of whether a price is charged.
4.18 Taxation
Income tax expense represents the net of the tax currently payable and deferred tax.
4.18.01 Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the separate statements of comprehensive income because
of items of income or expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Parent Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end
of the reporting period.
4.18.02 Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of
assets and liabilities in the separate financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognized for all taxable temporary differences. Deferred tax assets are generally
recognized for all deductible temporary differences, carry forward of unused tax credits
from excess Minimum Corporate Income Tax (MCIT) over Regular Corporate Income
Tax (RCIT) and unused Net Operating Loss Carryover (NOLCO), to the extent that it is
probable that taxable profits will be available against which those deductible temporary
differences and carry forward of unused MCIT and unused NOLCO can be utilized.
Deferred income tax, however, is not recognized when it arises from the initial
recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction that affects neither the accounting profit nor taxable
profit or loss.
Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax
assets arising from deductible temporary differences are only recognized to the extent
that it is probable that there will be sufficient taxable profits against which to utilize
the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.
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Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the period in which the liability is settled or the asset realized, based on tax
rates and tax laws that have been enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Parent Company
expects, at the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Parent Company intends to settle
its current tax assets and liabilities on a net basis.
4.18.03 Current and Deferred Tax for the Period
Current and deferred tax are recognized as an expense or income in profit or loss,
except when they relate to items that are recognized outside profit or loss, whether in
other comprehensive income or directly in equity, in which case the tax is also
recognized outside profit or loss.
4.19 Earnings per Share
The Parent Company computes its basic earnings per share by dividing net income or
loss attributable to ordinary equity holders of the Parent Company by the weighted
average number of ordinary shares outstanding during the period.
4.20 Events after the Reporting Period
The Parent Company identifies subsequent events as events that occurred after the
reporting period but before the date when the separate financial statements were
authorized for issue. Any subsequent events that provide additional information about
the Parent Company’s position at the reporting period, adjusting events, are reflected
in the separate financial statements, while subsequent events that do not require
adjustments, non-adjusting events, are disclosed in the notes to separate financial
statements when material.
4.21 Prior Period Errors
The Parent Company corrects material prior period errors retrospectively in the first set
of separate financial statements authorized for issue after their discovery by:
(a) restating the comparative amounts for the prior period presented in which the error
occurred; or (b) if the error occurred before the earliest prior period presented, restating
the opening balances of assets, liabilities and equity for the earliest prior period
presented.
4.22 Changes in Accounting Policies
The adoption of the new and revised standards and interpretations disclosed in
Note 2.01 was made in accordance with their transitional provisions, otherwise the
adoption is accounted for as change in accounting policy under PAS 8, Accounting
Policies, Changes in Accounting Estimates and Errors.
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5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Parent Company’s accounting policies, which are disclosed in
Note 4, Management is required to make judgements, estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily from other
sources. The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimate is
revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
5.01 Critical Judgments in Applying Accounting Policy
05.01.01 Functional Currency
PAS 21 requires Management to use its judgment to determine the entity’s functional
currency such that it most faithfully represents the economic effects of the underlying
transactions, events and conditions that are relevant to the entity. In making this
judgment, the Parent Company considers the following:
the currency that mainly influences sales prices for financial instruments and
services (this will often be the currency in which sales prices for its financial
instruments and services are denominated and settled);
the currency in which funds from financing activities are generated; and
the currency in which receipts from operating activities are usually retained.
The Parent Company determined its functional currency to be Philippine Peso, being
the currency that mainly influences the Parent Company’s revenues and cost and
expenses.
5.01.02 Assessment of Control
The Parent Company determines whether an entity qualifies as a subsidiary when it
has control over an entity. The Parent Company controls an entity when it has the
three elements of control as disclosed in Note 4. In making its judgments, the Parent
Company considers all facts and circumstances when assessing control over an
investee. A reassessment of control is conducted when there are changes to one or
more of the three elements of control. Any changes from at least one of the elements
would result to lose or gain of control over an entity.
The Parent Company having 100% ownership and voting interest assessed that it has
control over its subsidiaries since it has power over the subsidiaries, exposure or rights
to variable returns from its involvement and ability to use its power to affect the
component of its returns. The carrying amounts of investment in subsidiaries
amounted to P293,744,901 and P285,862,924 as of December 31, 2013 and 2012,
respectively, as disclosed in Note 9.
The Parent Company has 49% ownership and voting rights over Hwa Kung Hong &
Co., Ltd. (HKHCL). Parent Company assessed that it does not have a control over
HKHCL. The 49% ownership and voting rights of the Parent Company represents only
significant influence over the associate. The Parent Company has only the power to
participate in the financial and operating policy decisions over the investee.
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5.02 Key Sources of Estimation Uncertainty
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainty at the end of the 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.
5.02.01 Reviewing Residual Values, Useful Lives and Depreciation Method of Property
and Equipment
The residual values, useful lives and depreciation method of the Parent Company’s
property and equipment are reviewed at least annually, and adjusted prospectively if
appropriate, if there is an indication of a significant change in, how an asset is used;
significant unexpected wear and tear; technological advancement; and changes in
market prices since the most recent annual reporting date. The useful lives of the
Parent Company’s assets are estimated based on the period over which the assets are
expected to be available for use. In determining the useful life of an asset, the Parent
Company considers the expected usage, expected physical wear and tear, technical or
commercial obsolescence arising from changes or improvements in production, or from
a change in the market demand for the product or service output and legal or other
limits on the use of the Parent Company’s assets. In addition, the estimation of the
useful lives is based on Parent Company’s collective assessment of industry practice,
internal technical evaluation and experience with similar assets. It is possible,
however, that future results of operations could be materially affected by changes in
estimates brought about by changes in factors mentioned above. The amounts and
timing of recorded expenses for any period would be affected by changes in these
factors and circumstances. A reduction in the estimated useful lives of property and
equipment would increase the recognized operating expenses and decrease non-current
assets. The Parent Company uses a depreciation method that reflects the pattern in
which it expects to consume the asset’s future economic benefits. If there is an
indication that there has been a significant change in the pattern used by which an
Parent Company expects to consume an asset’s future economic benefits, the Parent
Company shall review its present depreciation method and, if current expectations
differ, change the depreciation method to reflect the new pattern.
In both years, Management assessed that there is no indication of change from
previous estimates since the most recent annual reporting period. The estimated
useful life of the Parent Company’s property and equipment ranges from three (3) to
five (5) years. In 2013, 2012 and 2011 the depreciation expense amounted to
P4,950,987, P5,057,609 and P4,991,976, respectively, as disclosed in Notes 11 and
23. The carrying amounts of property and equipment amounted to P8,219,803, and
P8,901,653 as of December 31, 2013 and 2012, respectively, as disclosed in
Note 11.
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5.02.02 Reviewing Residual Values, Useful Lives and Amortization Method of
Intangible Assets
The residual values, useful lives and amortization method of the Parent Company’s
intangible assets are reviewed at least annually, and adjusted prospectively if
appropriate, if there is an indication of a significant change in, how an asset is used;
technological advancement; and changes in market prices since the most recent annual
reporting date. Amortization begins when the intangible asset is available for use, i.e.
when it is in the location and condition necessary for it to be usable in the manner
intended by management. Amortization ceases when the asset is derecognized.
The Parent Company uses a straight line method of amortization since it cannot
determine reliably the pattern in which it expects to consume the asset’s future
economic benefits.
In both years, Management assessed that there is no significant change from the
previous estimates. Amortization in 2013, 2012 and 2011, amounted to P815,898,
P936,613 and P1,543,083, respectively, as disclosed in Notes 12 and 23.
The carrying amounts of intangible assets as of December 31, 2013 and 2012
amounted to P602,001 and P1,404,816, respectively, as disclosed in Note 12.
5.02.03 Asset Impairment
The Parent Company performs an impairment review when certain impairment
indicators are present. Determining the fair value of property and equipment,
investments in subsidiaries, investment in an associate and intangible assets, which
require the determination of future cash flows expected to be generated from the
continued use and ultimate disposition of such assets, requires the Parent Company to
make estimates and assumptions that can materially affect the separate financial
statements. Future events could cause the Parent Company to conclude that property
and equipment, investments in subsidiaries, investment in associate and intangible
assets are impaired. Any resulting impairment loss could have a material adverse
impact on the financial condition and results of operations.
The preparation of the estimated future cash flows involves significant judgment and
estimations. While the Parent Company believes that its assumptions are appropriate
and reasonable, significant changes in the assumptions may materially affect the
assessment of recoverable values and may lead to future additional impairment charges
under PFRS.
The Parent Company determined that there is no indication that an impairment loss has
occurred on its property and equipment, investments in subsidiaries, investment in an
associate and intangible assets, thus, no impairment loss was recognized in both years.
As of December 31, 2013 and 2012, the aggregate carrying amounts of investments
in subsidiaries, investment in an associate, property and equipment and intangible
assets amounted to P306,140,679 and P299,743,367, respectively, as disclosed in
Notes 9, 10, 11 and 12.
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5.02.04 Estimating Allowances for Doubtful Accounts
The Parent Company estimates the allowance for doubtful accounts related to its trade
and other receivables based on assessment of specific accounts where the Parent
Company has information that certain customers are unable to meet their financial
obligations. In these cases, judgment used was based on the best available facts and
circumstances including but not limited to, the length of relationship with the customer
and the customer’s current credit status based on third party credit reports and known
market factors. The Parent Company used judgment to record specific reserves for
customers against amounts due to reduce the expected collectible amounts.
These specific reserves are re-evaluated and adjusted as additional information received
impacts the amounts estimated.
The amounts and timing of recorded expenses for any period would differ if different
judgments were made or different estimates were utilized. An increase in the
allowance for doubtful accounts would increase the recognized operating expenses and
decrease current assets.
In both years, Management believes that the recoverability of receivables is certain;
hence, no allowance for doubtful accounts was provided. As of December 31, 2013
and 2012, the carrying amounts of trade and other receivables amounted to
P2,089,130,764 and P1,437,175,689, respectively, as disclosed in Note 7.
5.02.05 Deferred Tax Assets
The Parent Company reviews the carrying amounts at each reporting date and reduces
deferred tax assets to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred tax assets to be utilized prior
to expiration.
In both years, Management believes that the Parent Company would be able to
generate future taxable profit that would allow all of its deferred tax assets to be fully
utilized prior to expiration. As of December 31, 2013 and 2012, the carrying amounts
of deferred tax assets amounted to P4,314,306 and P2,147,051, respectively, as
disclosed in Note 27.
5.02.06 Post-employment Benefits
The determination of the retirement obligation and cost and other retirement benefits is
dependent on the selection of certain assumptions used by actuaries in calculating
such amounts. Those assumptions include among others, discount rates, mortality of
plan members and rates of compensation increase. In accordance with PFRS, actual
results that differ from the assumptions and the effects of changes in actuarial
assumptions are recognized directly as re-measurements in other comprehensive
income. While the Parent 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 pension and other retirement obligations.
As of December 31, 2013 and 2012, the Parent Company has recognized retirement
asset amounting to P11,188,217 and P2,214,904, respectively, as disclosed in
Note 24. Retirement benefit expense recognized amounted to P4,536,261,
P3,990,642 and P4,928,900 for the years ended December 31, 2013, 2012 and
2011, respectively, as disclosed in Notes 23 and 24.
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6. CASH AND CASH EQUIVALENTS
For the purpose of the separate statements of cash flows, cash and cash equivalents
include cash on hand, in banks and cash equivalents. Cash equivalents are short-term,
highly liquid investments that are readily convertible to known amounts of cash with
maturities of three months or less from the date of acquisition and that are subject to
an insignificant risk of change in value.
Cash and cash equivalents at the end of the reporting period as shown in the separate
statements of cash flows can be reconciled to the related items in the separate
statements of financial position as follows:
2013 2012
Cash on hand P 14,336,603 P 22,455,596
Cash in banks 503,769,741 747,470,629
Cash equivalents - 20,000,000
P 518,106,344 P 789,926,225
In 2013 and 2012, cash in banks earn interest ranging from 0.10 % to 2.5% and
0.50% to 2.00%, respectively, while cash equivalents earn interest at rate of 1.75%.
Finance income earned on these accounts amounted to P1,475,008, P1,858,779 and
P2,949,353 in 2013, 2012 and 2011, respectively, as disclosed in Note 22.
7. TRADE AND OTHER RECEIVABLES
The Parent Company’s trade and other receivables consist of:
2013 2012
Agents P 1,173,830,247 P 1,196,101,092
Foreign currency receivable 570,045,046 -
Advances to related parties (Note 16) 178,627,347 136,157,196
Couriers 122,931,916 88,815,199
Advances to trading clients 24,241,862 -
Officers and employees 4,640,573 4,011,145
Others 14,813,773 12,091,057
P 2,089,130,764 P 1,437,175,689
Receivables from agents pertain to advances made to fund the remittance transactions
to beneficiaries and to related parties. The due from related parties which are included
under agents account amounted to P738,422,718 and P550,766,065 in 2013 and
2012, respectively, as disclosed in Note 16. These are settled within one (1) to five
(5) days from transaction date. No interests were charged on these receivables.
Foreign currency receivable pertains to the dollar receivable of the Parent Company in
relation to foreign currency trading transactions. This is the set-up of dollar receivable
in forward contract trading transactions. Parent Company enters into forward contract
trading particularly for Canadian dollar (CAD), Pound (GBP), European dollar (Euro) and
New Zealand dollar (NZD).
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Receivables from couriers pertain to advances made to courier providers to ease up
door-to-door delivery of remittances to beneficiaries. These are settled within one (1)
to two (2) weeks from transaction date.
Advances to related parties include operating funds and marketing materials advanced
to foreign subsidiary and associate offices by the Parent Company. These advances
are collectible in one month from the date of funding.
Receivable from officers and employees pertain to advances given to officers and
employees. These amounted to P455,627 and P689,385 in 2013 and 2012,
respectively, as disclosed in Note 16. These are settled within one (1) to five (5) days
from transaction date. No interests were charged on these receivables.
Advances to trading clients pertain to advances made to banks in relation to the
trading activities of the Parent Company. These receivables are due within one (1) to
five (5) days from transaction date.
Others include receivables from SSS and suppliers. These outstanding receivables are
due within thirty (30) days from transaction date.
Trade receivables disclosed above include amounts which are past due at the end of
the reporting period but against which the Parent Company has not recognized an
allowance for doubtful receivables because there has not been a significant change in
credit quality and the amounts are still considered recoverable. The Parent Company
does not hold any collateral or other credit enhancements over these balances nor does
it have a legal right of offset against any amounts owed by the Parent Company to the
counterparty.
Aging of accounts that are past due but not impaired is as follows:
2013 2012
1 – 30 days P - P -
31 – 60 days 5,128,579 6,296,592
Over 60 days - -
P 5,128,579 P 6,296,592
In determining the recoverability of a trade receivable, the Parent Company considers
any change in the credit quality of the trade receivable from the date credit was initially
granted up to the reporting period. The concentration of credit risk is limited due to
the customer base being large and unrelated. Accordingly, Management believes that
there is no credit provision required.
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8. PREPAYMENTS AND OTHER CURRENT ASSETS
The Parent Company’s prepayments and other current assets consist of:
2013 2012
Receivable from Bureau of Internal Revenue (BIR) P 13,160,534 P 13,160,534
Prepaid expenses 2,062,752 1,824,093
Visa cards inventory 1,919,544 2,829,010
Advances to suppliers and contractors 852,868 1,830,343
Office supplies 238,278 259,623
P 18,233,976 P 19,903,603
Receivable from BIR pertains to the excess payments made by the Parent Company in
2007 for the Initial Public Offering (IPO) percentage tax at P13,160,534. As of
December 31, 2013, the case on the recoverability of tax on IPO is pending resolution
with the Court of Tax Appeals. The Parent Company believes that it will be able to
obtain the refund from the BIR.
Prepaid expenses include prepayments for rent, insurance, internet connection and
association dues among others.
9. INVESTMENTS IN SUBSIDIARIES
Details of the Parent Company’s investments in subsidiaries accounted at cost are as
follows:
Name of
Subsidiaries Principal Activity
Place of
Incorporation
and Operation
Proportion of
Ownership Interest
2013 2012
IRCGmbH Fund transfer and remittance services Austria 100% 100%
IGRL Fund transfer and remittance services
United
Kingdom 100% 100%
LSML Fund transfer and remittance services Hong Kong 100% 100%
WEPL Fund transfer and remittance services Australia 100% 100%
IRCL Fund transfer and remittance services Canada 100% 100%
IAPL Fund transfer and remittance services Australia 100% 100%
PSAGL Foreign currencies trading services Hong Kong 100% 100%
KKIJ Fund transfer and remittance services Japan 100% 100%
INZL Fund transfer and remittance services New Zealand 100% 100%
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This account consists of:
2013 2012
IRCGmbH P 103,215,084 P 103,215,084
IGRL 93,237,942 85,355,965
LSML 42,554,665 42,554,665
WEPL 21,336,890 21,336,890
IRCL 13,444,000 13,444,000
IAPL 8,552,000 8,552,000
PSAGL 5,958,800 5,958,800
KKIJ 5,413,120 5,413,120
INZL 32,400 32,400
P 293,744,901 P 285,862,924
The Parent Company has indirect control over I-Remit Italy. I-Remit Italy is a wholly-
owned subsidiary of IGRL.
Movement of investments in subsidiaries is as follows:
2013 2012
Balance, January 1 P 285,862,924 P 279,160,103
Acquisition of additional shares in subsidiaries 7,881,977 6,702,821
Balance, December 31 P 293,744,901 P 285,862,924
9.01 Additional Acquisition of Non-controlling Interest
9.01.01 IRCGmbH
On May 5, 2011, the Parent Company acquired the remaining 25.10% ownership
interest in IRCGmbH from the non-controlling stockholder for a consideration of
P25,014,743. The acquisition increased the Parent Company’s ownership interest in
IRCGmbH to 100.00% from 74.90%. The receivable from non-controlling shareholder
was applied in full against the total consideration.
Consequently, on October 11, 2011, IERCAG changed its legal name to IREMIT
Remittance Consulting GmbH (IRCGmbH) and changed its legal status from a stock
company to a limited liability company. It also amended its Articles of Incorporation to
include management consultancy in its business activities.
9.01.02 WEPL
On March 25 2011, the Parent Company’s Board of Directors (BOD) approved the
acquisition of 35.00% ownership interest from the non-controlling stockholders of
WEPL for a consideration of AUD274,345 (P12,303,817), consequently making the
ownership of the Parent Company over WEPL at 100.00%. The Parent Company
applied its receivables from the non-controlling shareholders against the acquisition
cost.
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9.02 Additional Acquisition of Subsidiaries
On February 7, 2013, the BOD of IGRL approved the increase of IGRL’s authorized
shares to 122,000 with which the Parent Company invested GBP122,000 or
P7,881,977 for the additional capital. The increase of the said investment did not
change the ownership status of the Parent Company because IGRL is 100% owned by
the Parent Company.
On April 15, 2011, IGRL was authorized by the Financial Services Authority (FSA) of
the United Kingdom as an Authorized Payment Institution under the European Payment
Services Directive, a legislation adopted by the European Union that aims to harmonize
laws across Europe pertaining to the provision of payment services, including money
transfer services. Prior to this grant, the BOD of IGRL approved the increase of IGRL’s
authorized shares to 105,000 with which the Parent Company invested GBP104,900
or P7,453,145 for the additional capital requirement. On February 10, 2012,
the Parent Company increased its capital share for another GBP100,000 or
P6,702,821 as required by FSA.
9.03. Summarized Financial Information of Subsidiaries
The summarized financial information of the subsidiaries are as follows:
2013 2012
IRCGmbH P P
Total assets 12,701,301 14,800,826
Total liabilities 27,650,205 24,640,548
Net liabilities (14,948,904) (9,839,722)
Revenue 420,679 1,715,341
Loss (3,315,563) (21,333,703)
IGRL
Total assets 281,435,928 75,056,907
Total liabilities 279,772,065 76,480,710
Net assets (liabilities) 1,663,863 (1,423,803)
Revenue 93,299,473 82,091,620
Loss (4,290,353) (7,859,357)
LSML
Total assets 13,920,295 19,638,493
Total liabilities 13,617,963 16,888,672
Net assets (liabilities) 302,332 2,749,821
Revenue 11,321,549 9,926,615
Loss (2,473,102) (6,244,406)
WEPL
Total assets 24,661,092 50,392,104
Total liabilities 21,207,859 45,090,309
Net assets 3,453,233 5,301,795
Revenue 37,925,719 40,107,691
Profit (Loss) (1,576,236) 601,276
(forwarded)
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2013 2012
IRCL
Total assets P 68,351,402 P 97,630,710
Total liabilities 35,727,724 63,480,786
Net assets 32,623,678 34,149,924
Revenue 113,843,057 107,274,588
Loss (1,859,048) (850,446)
IAPL
Total assets 10,877,526 6,772,278
Total liabilities 6,978,255 2,798,254
Net assets 3,899,271 3,974,024
Revenue 524,961 342,095
Profit 120,661 16,420
PSAGL
Total assets 394,019,282 314,218,132
Total liabilities 2,612,757 415,558
Net assets 391,406,525 313,802,574
Revenue 54,773,157 52,881,032
Profit 49,850,688 72,720,246
KKIJ
Total assets 53,005,841 32,334,233
Total liabilities 97,412,944 55,899,785
Net liabilities (44,407,103) (23,565,552)
Revenue 5,854,270 1,747,387
Loss (24,214,489) (30,707,725)
INZL
Total assets 16,372,502 10,945,522
Total liabilities 30,507,109 22,700,932
Net liabilities (14,134,607) (11,755,410)
Revenue 8,916,530 4,835,680
Profit (Loss) (1,306,693) (2,690,784)
10. INVESTMENT IN AN ASSOCIATE
In both years, the Parent Company owned 49% investment in Hwa Kung Hong & Co.,
Ltd. (HKHCL), a company engaged in remittance business incorporated under the laws
of Taiwan.
In both years, cost of investment of the Parent Company in HKHCL amounted to
P3,573,974.
In 2013, the Parent Company derecognized its investment in I-Remit Singapore Pte.
Ltd. (ISPL) amounting to P12,600,000 after withdrawing its request from the Monetary
Authority of Singapore (MAS) to transfer ISPL shares. In its letter to I-Remit Singapore
Pte. Ltd. dated April 23, 2008, the Authority has approved the transfer of 49,000
shares or 49% of the shares in ISPL to I-Remit Inc., subject to certain requirement for
documents which were not executed, hence, no share transfer was effected as
disclosed in Note 32.
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The summarized financial information of the associate are as follows:
2013 2012
Total assets P 33,206,308 P 34,857,286
Total liabilities 25,787,134 30,312,680
Net assets 7,419,174 4,544,606
Revenue 13,678,703 13,023,598
Profit 2,575,020 1,656,534
11. PROPERTY AND EQUIPMENT — net
The carrying amounts of the Parent Company’s property and equipment are as follows:
Office and
Communication
Equipment
Transportation
and Delivery
Equipment
Furniture and
Fixtures
Leasehold
Improvements Total
January 1, 2012
Cost P 27,273,036 P 6,869,917 P 4,064,638 P 11,845,343 P 50,052,934
Accumulated depreciation (23,982,915) (4,253,896) (3,399,021) (11,322,628) (42,958,460)
Carrying amount 3,290,121 2,616,021 665,617 522,715 7,094,474
Movements during 2012
Balance, January 1, 2012 3,290,121 2,616,021 665,617 522,715 7,094,474
Additions 4,864,928 - 13,353 2,336,103 7,214,384
Disposal
Cost (53,200) (514,960) - - (568,160)
Accumulated Depreciation 40,323 178,241 - - 218,564
Depreciation (Note 23) (3,290,998) (1,071,471) (288,233) (406,907) (5,057,609)
Balance, December 31,
2012 4,851,174 1,207,831 390,737 2,451,911 8,901,653
December 31, 2012
Cost 32,084,764 6,354,957 4,077,991 14,181,446 56,699,158
Accumulated depreciation (27,233,590) (5,147,126) (3,687,254) (11,729,535) (47,797,505)
Carrying amount 4,851,174 1,207,831 390,737 2,451,911 8,901,653
Movements during 2013
Balance, January 1, 2013 4,851,174 1,207,831 390,737 2,451,911 8,901,653
Additions 2,295,989 - 73,936 1,987,757 4,357,682
Disposal
Cost - (2,736,646) - - (2,736,646)
Accumulated Depreciation - 2,648,101 - - 2,648,101
Depreciation (Note 23) (3,359,644) (535,734) (196,213) (859,396) (4,950,987)
Balance, December 31,
2013 3,787,519 583,552 268,460 3,580,272 8,219,803
December 31, 2013
Cost 34,380,753 3,618,311 4,151,927 16,169,203 58,320,194
Accumulated depreciation (30,593,234) (3,034,759) (3,883,467) (12,588,931) (50,100,391)
Carrying amount P 3,787,519 P 583,552 P 268,460 P 3,580,272 P 8,219,803
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As of December 31, 2013 and 2012, the cost of fully depreciated property and
equipment still in use are as follows:
2013 2012
Office and communication equipment P 16,450,679 P 13,894,296
Leasehold improvements 11,410,992 10,830,083
Furniture and fixtures 2,894,730 2,234,382
Transportation and delivery equipment 1,353,642 1,665,218
P 32,110,043 P 28,623,979
In 2013 and 2012, the Parent Company disposed certain depreciated property and
equipment for total consideration of P190,003 and P349,596, respectively, resulting
to a gain on sale amounting to P101,458 and nil, respectively, as disclosed in Note 22.
Depreciation charged to operating expenses amounted to P4,950,987, P5,057,609
and P4,991,976 in 2013, 2012 and 2011, respectively, as disclosed in Note 23.
In 2013, 2012 and 2011, the Parent Company carried out a review of the recoverable
amounts of its property and equipment. The Parent Company has determined that
there is no indication that impairment has occurred on its property and equipment.
12. INTANGIBLE ASSETS – net
The carrying amounts of the Parent Company’s intangible assets are as follow:
2013 2012
Carrying amount
Cost P 14,126,220 P 14,113,137
Accumulated depreciation (13,524,219) (12,708,321)
602,001 1,404,816
Movements during the year
Balance, January 1 1,404,816 1,396,241
Additions 13,083 945,188
Amortization (Note 23) (815,898) (936,613)
Balance, December 31 P 602,001 P 1,404,816
The Parent Company’s intangible assets pertain to software used in the business
activities of the Parent Company.
Amortization charged to operating expenses amounted to P815,898, P936,613 and
P1,543,083 in 2013, 2012 and 2011, respectively, as disclosed in Note 23.
The remaining amortization period is two (2) years.
In 2013 and 2012, the Parent Company carried out a review of the recoverable
amounts of its intangible assets. The Parent Company has determined that there is no
indication that impairment has occurred on its intangible assets.
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13. OTHER NON-CURRENT ASSETS
The components of other non-current assets account are as follows:
2013 2012
Input VAT P 11,160,878 P 11,464,326
Refundable deposits (Note 26) 4,488,727 5,353,040
Others 44,000 44,000
P 15,693,605 P 16,861,366
The Parent Company has applied for tax credits on input VAT with the BIR and is
waiting for the issuance of Tax Credit Certificates (TCCs). In 2011, the BIR issued
two TCCs to the Parent Company for its input VAT filed for years 2005 and 2006
amounting to P1,719,885 and P3,815,946, respectively. In 2012, the BIR issued
additional TCC to the Parent Company for its input VAT filed in 2008 amounting to
P2,968,565. In 2013, the BIR issued another TCC to the Parent Company for its input
VAT filed in 2010 amounting to P445,740. Management of the Parent Company
believes that it will able to collect the rest of the TCCs applicable to its outstanding
claims. The carrying amounts are already net of claims disallowed by the BIR
amounting to P226,871 and P6,677,857 in 2013 and 2012, respectively, as disclosed
in Note 23.
14. BENEFICIARIES AND OTHER PAYABLES
The components of beneficiaries and other payables account are as follows:
2013 2012
Foreign currency payable P 569,593,858 P -
Due to related parties (Note 16) 127,196,909 74,130,345
Agents, couriers and trading clients 72,394,831 23,047,301
Beneficiaries 63,015,049 443,309,073
Accrued expenses 18,639,860 7,751,470
Payable to suppliers 5,017,627 3,720,856
Payable to government agencies 1,380,932 1,608,544
Others 11,724,348 2,314,143
P 868,963,414 P 555,881,732
Foreign currency payable pertains to the dollar payable of the Parent Company in
relation to foreign currency trading transactions. This is the set-up of dollar payable in
forward contract trading transactions.
Payables to beneficiaries, agents, couriers and trading clients are non-interest bearing
and are normally settled within thirty (30) days.
Accrued expenses include accruals for various operating expenses, courier charges,
training and development, professional fees, utilities and finance cost.
Others include payable to remitters through visa cards issued by the Parent Company.
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15. LOANS PAYABLE
In 2013 and 2012, the Parent Company obtained an unsecured, short-term interest-
bearing peso-denominated bank loans and promissory notes with an aggregate amount
of P988,000,000 and P925,000,000, respectively. The loans payable have an interest
rate of 5% and 7.125% per annum and have maturities of less than one (1) year.
The related finance cost from these loans payable amounted to P32,593,239,
P46,068,423 and P38,322,540 in 2013, 2012 and 2011, respectively.
In 2013 and 2012, the Parent Company’s accrued finance cost amounting to
P3,416,080 and P1,827,556, respectively, as part of accrued expenses in Note 14.
The Parent Company has unused credit facilities with various banks amounting to
P2,167,000,000 and P1,880,000,000 as of December 31, 2013 and 2012,
respectively.
Movements of loans payable are as follows:
2013 2012
Balance, January 1 P 925,000,000 P 666,000,000
Additional loans obtain 988,000,000 925,000,000
Payments for short-term loans (925,000,000) (666,000,000)
Balance, December 31 P 988,000,000 P 925,000,000
As of the reporting period, the Parent Company is compliant with the terms and
conditions of the loans.
16. RELATED PARTY TRANSACTIONS
Nature of relationship of the Parent Company and its related parties are disclosed
below:
Related Parties Nature of Relationship
International Remittance (Canada) Ltd. (IRCL) Subsidiary
Lucky Star Management Limited (LSML) Subsidiary
IRemit Global Remittance Limited (IGRL) Subsidiary
I-Remit Australia Pty Ltd (IAPL) Subsidiary
Worldwide Exchange Pty Ltd (WEPL) Subsidiary
IREMIT Remittance Consulting GmbH (IRCGmbH) Subsidiary
I-Remit New Zealand Limited (INZL) Subsidiary
Power Star Asia Group Limited(PSAGL) Subsidiary
K.K. Iremit Japan (KKIJ) Subsidiary
Hwa Kung Hong & Co., Ltd.(HKHCL) Associate
Sterling Bank of Asia (SBA)
Under common controlling
party
Oakridge Properties, Inc. (OPI)
Under common controlling
party
Surewell Equities, Inc. (SEI)
Investor with significant
influence
Stockholders Key management personnel
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Balances and transactions between the Parent Company and its related parties are
disclosed below:
16.01 Due from Related Parties
Balance of due from related parties presented under trade and other receivables, as
disclosed in Note 7, are summarized per category as follows:
2013
Receivable
from Agents
Advances to
Related Parties Total
Subsidiaries P 685,607,506 P 173,577,920 P 859,185,426
Associate 52,815,212 5,049,427 57,864,639
Key management personnel - 455,627 455,627
P 738,422,718 P 179,082,974 P 917,505,692
2012
Receivable
from Agents
Advances to
Related Parties Total
Subsidiaries P 488,447,522 P 127,964,855 P 616,412,377
Associate 62,318,543 8,192,341 70,510,884
Key management personnel - 689,385 689,385
P 550,766,065 P 136,846,581 P 687,612,646
Receivable from agents includes remittances and delivery fees, while advances to
related parties include due from and service income.
16.01.01 Subsidiaries
Transactions with subsidiaries are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Volume Balances Volume Balances
LSML
Remittance P 1,006,973,117 P 17,896,635 P 906,060,540 P 13,591,056
Due from 3,387,829 12,286,251 2,848,880 9,460,733
Delivery fee 6,501,360 118,457 6,406,963 143,428
IGRL
Remittance 6,590,684,104 297,844,190 7,172,949,521 193,148,649
Due from 73,983,569 51,077,070 34,369,236 52,541,211
Delivery fee 25,331,309 2,914,516 26,298,780 948,339
Service income 491,680 53,789 3,646,004 999,952
WEPL
Remittance 5,409,896,230 45,625,488 5,654,003,334 33,252,223
Due from 5,595,241 4,266,439 288,604 -
Delivery fee 25,034,377 308,174 28,840,903 773,357
Service income - - 1,792,774 369,519
(forwarded)
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December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Volume Balances Volume Balances
IRCL
Remittance P 9,516,679,459 P 260,711,907 P 8,397,932,144 P 208,951,955
Due from 5,145,952 281,016 245,069 -
Delivery fee 57,951,323 2,235,718 55,191,391 1,931,573
Service income - - 1,160,626 236,268
INZL
Remittance 1,194,704,130 18,811,168 952,992,756 7,833,438
Due from 3,103,915 19,175,580 126,421 15,812,209
Delivery fee 4,649,338 101,338 4,412,176 36,306
Service income - - 584,255 584,255
IRCGmbH
Remittance 32,049,347 - 158,815,269 5,813,043
Due from 11,222,594 24,880,481 15,089,831 14,761,355
Delivery fee 219,027 - 1,032,912 43,028
K.KIJ
Remittance 1,122,988,072 33,770,470 165,806,223 20,666,749
Due from 28,137,198 61,107,201 27,505,484 33,117,004
Delivery fee 2,346,152 113,872 397,226 41,884
IAPL
Remittance 5,699,081,165 5,155,573 3,673,446,537 1,272,493
Due from 1,837,911 450,093 399,907 82,349
The following are the natures, terms and conditions:
• Remittance pertains to the principal amount of transaction accepted by a foreign
subsidiary office from a remitter, delivery of which is fulfilled by the Parent Company
to intended beneficiary in the Philippines. Account is collectible within five (5) days
from date of transaction.
• Due from account refers to operating funds and marketing materials advanced to
foreign subsidiary offices. Account is collectible within thirty (30) days from date of
funding.
• Delivery fee is the share in service fee collected by the foreign subsidiary office along
with the principal amount of transaction from a remitter. Account is collectible
within five (5) days from date of transaction.
• Service income refers to service fee collected by the Parent Company from selected
foreign subsidiary offices for the administration of call center agents servicing the
requirements of foreign subsidiary offices. Account is collectible within five (5) days
from date of transaction.
Transactions with subsidiaries are non-interest bearing, unsecured, collectible on
demand and will be settled in cash. No guarantees have been received. No provisions
have been made for doubtful debts in respect of the amounts owed by the related
parties.
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16.01.02 Associate
Transactions with associate are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Volume Balances Volume Balances
HKHCL
Remittance P 5,340,222,739 P 52,254,154 P 5,155,165,031 P 60,187,956
Due from 2,894,979 5,049,427 5,223,594 8,192,341
Delivery fees 46,232,429 561,058 47,715,373 2,130,587
The following are the natures, terms and conditions of the following accounts:
• Remittance pertains to the principal amount of transaction accepted by a foreign
associate office from a remitter, delivery of which is fulfilled by the Parent Company
to intended beneficiary in the Philippines. Account is collectible within five (5) days
from date of transaction.
• Delivery fee is the share in service fee collected by the foreign subsidiary office along
with the principal amount of transaction. Account is collectible within five (5) days
from date of transaction.
• Due from account refers to operating funds and marketing materials advanced to
foreign associate offices. Account is collectible within thirty (30) days from date of
funding.
The amounts outstanding are non-interest bearing, unsecured, collectible on demand
and will be settled in cash. No guarantee was required. No provision made for doubtful
accounts as these accounts are all collectible.
16.01.03 Key Management Personnel
Transactions with the key management personnel are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Category Volume Balances
Volume
Balances
Advances P 6,242 P 455,627 P 500,000 P 689,385
The following are the nature, term and conditions:
• Advances pertain to sum of money advanced to key management personnel subject
to liquidation within the Company’s prescribed period of liquidation.
The amount outstanding is non-interest bearing, unsecured, collectible on demand and
will be settled in cash. There is no guaranty required and no provision was made for
doubtful account as the account is deemed collectible.
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16.02 Due to Related Parties
Balance of due to related parties are summarized per category as follows:
16.02.01 Subsidiaries
Due to subsidiaries as shown as part of beneficiaries and other payables, as disclosed
in Note 14, are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Volume Balances
Volume
Balances
PSAGL P 56,958,632 P 113,555,500 P 53,926,985 P 60,720,798
IGRL 757,108 10,125,955 9,368,846 9,368,846
IAPL 3,642,675 3,515,454 4,040,701 4,040,701
The following are the nature, terms and conditions:
Due to PSAGL represents charges on various treasury assistance and advisory
services rendered by PSAGL to the Parent Company. Term of settlement within
thirty (30) days from date of obligation.
Due to IGRL and IAPL represents operating funds and marketing materials payable to
foreign subsidiary offices. Term of settlement within thirty (30) days from date of
obligation.
The amounts outstanding are unsecured, non-interest bearing, payable on demand and
will be settled in cash. No guarantees have been given in respect of the amount owed
to related parties.
16.02.02 Key Management Personnel
Advances from stockholders considered as key management personnel as shown in the
separate statements of financial position are detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Category Volume Balances
Volume
Balances
Stockholders P - P 7,289,480 P 4,896,570 P 7,289,480
Advances from stockholders pertain to net amount of advances that resulted from the
reclassification of investment in associate and accumulated dividend income amounting
to P12,600,000 and P19,889,480, respectively, as disclosed in Notes 32 and 34.
The amounts outstanding are unsecured, non-interest bearing, payable on demand and
will be settled in cash. No guarantees have been given in respect of the amounts owed
to related party.
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16.03 Other Related Parties
16.03.01 Under Common Controlling Party
Transactions with related parties under common controlling party are detailed as
follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Volume Balances
Volume
Balances
Sterling Bank of Asia P 280,083 P - P 384,536 P -
Oakridge Properties, Inc. 13,885,207 - 11,421,505 -
The following are the nature, terms and conditions of the above transactions:
• Sterling Bank of Asia pertains to income earned from depositary accounts in Peso and
USD (FCDU) maintained at Sterling Bank of Asia (SBA), an affiliate of the Parent
Company through common controlling stockholders. Principal stockholders of SBA
and the Parent Company are JTKC Equities, Inc., Star Equities, Inc. and Surewell
Equities, Inc.
The Parent Company deposited the amounts of P113,044,170, P126,865,934 and
P193,049,842 with SBA as of December 31, 2013, 2012 and 2011, respectively.
These deposits earned interest income amounting to P280,083, P384,536 and
P425,360 in 2013, 2012 and 2011, respectively.
• Oakridge Properties, Inc. pertains to the cost of rental paid to Oakridge Properties,
Inc. (OPI) by the Parent Company for the use of office spaces at Discovery Centre, a
building owned by OPI, an affiliate of the Parent Company as disclosed in Note 25.
OPI is owned by The Discovery Leisure Company Inc, (TDLCI), an entity owned by
JTKC Equities, Inc, and JTKC Realty Corporation. Lease contract with OPI includes
security deposit of two months and one month advance rental. Rent is paid monthly
with provision for yearly escalation. Rent expense amounted to P13,885,207,
P11,421,505 and P9,247,615 for 2013, 2012 and 2011, respectively, as disclosed
in Note 25.
16.03.02 Investor with Significant Influence
Transaction with an investor with significant influence is detailed as follows:
December 31, 2013 December 31, 2012
Amount/ Outstanding Amount/ Outstanding
Category Volume Balances
Volume
Balances
Surewell Equities, Inc. P 889,134 - P 898,920
-
• Surewell Equities, Inc. pertains to the cost of rental paid to Surewell Equities Pte.
Ltd. (SEPL) for the sharing of its office in Singapore with the Parent Company under
a sublease agreement. SEPL is a foreign subsidiary office of Surewell Equities, Inc.,
one of the principal stockholders of the Parent Company. There is no security
deposit paid and without provision for escalation. Rent is paid monthly.
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16.04 Remuneration of Key Management Personnel
The remuneration of the directors and other members of key management personnel of
the Parent Company is set out below in aggregate for each of the categories specified
in PAS 24, Related Party Disclosures:
2013 2012
Short-term benefits P 26,145,567 P 22,368,436
Post-employment benefits 1,877,723 1,260,378
P 28,023,290 P 23,628,814
16.05 Transactions with Retirement Fund
The Parent Company’s retirement benefit fund is maintained with Sterling Bank of Asia
(SBA), an affiliate due to common stockholders, as trustee. The carrying amounts and
fair values of the fund amounted to P33,470,764 and P30,303,714 as of
December 31, 2013 and 2012, respectively.
The funds were invested in private equity securities, deposits in banks and government
debt securities. In 2013 and 2012, the Parent Company made contributions to the
fund amounting to P2,062,569 and P6,158,445, respectively.
Private equity securities includes P808,100 of the Parent Company’s own equity
securities bought back from resigned employees who held such securities, under the
special stock purchase program. Such transaction was authorized by the BOD of
the Parent Company through its SSS program as disclosed in Note 19.
The government debt securities consist of Peso-denominated and USD denominated
securities. The Peso-denominated Government Securities (GS) of the Parent
Company’s Retirement Fund were purchased from accredited counterparties of
SBA-Trust Group. These counterparties are Banks and Investment Houses allowed to
trade government securities. Existing Peso GS accounts are all tax-exempt and are
currently lodged under the Tax-exempt RoSS Account of SBA-Trust Group with the
Bureau of the Treasury (BTr).
The USD denominated debt securities are currently lodged with the Philippine
Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s
accredited counterparties that are allowed to trade government securities.
17. CAPITAL STOCK
The capital stock of the Parent Company is as follows:
2013 2012
Ordinary shares P 617,725,800 P 617,725,800
Additional paid-in capital 429,513,501 429,513,501
P 1,047,239,301 P 1,047,239,301
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17.01 Ordinary Shares
The ordinary shares of the Parent Company are described as follows:
2013 2012
Authorized:
1,000,000,000 shares at P1 par value
per share P 1,000,000,000 P 1,000,000,000
Issued and outstanding (P1 par value per
share) P 613,436,122 P 597,138,800
Treasury stock (P1 par value per share) 4,289,678 20,587,000
Total issued P 617,725,800 P 617,725,800
The Parent Company’s issued and outstanding ordinary shares are detailed as follows:
2013 2012
Issued and outstanding, January 1 597,138,800 617,725,800
Treasury stock – reissuance 20,272,322
Treasury stock – additional acquisition (3,975,000) (20,587,000)
Issued and outstanding, December 31 613,436,122 597,138,800
Ordinary shares carry one vote per share and a right to dividend.
17.01.01 Additional Paid-in Capital
The Parent Company’s additional paid-in capital in excess of par value is composed of
excess of proceeds on issuance of the Parent Company’s shares amounting to
P429,513,501 as of December 31, 2013 and 2012.
17.02 Treasury Stock
Details about the Parent Company’s treasury stock are as follows:
2013 2012
Shares Amount Shares Amount
Balance, January 1 20,587,000 P 69,209,688 14,873,000 P 52,987,208
Acquisitions 3,975,000 11,475,190 5,714,000 16,222,480
Reissuance (20,272,322) (68,284,569) - -
Balance, December 31 4,289,678 P 12,400,309 20,587,000 P 69,209,688
On July 19, 2013, the BOD of the Parent Company declared property dividends to its
stockholders out of its treasury stock consisting of Twenty Million Five Hundred Eighty
Seven Thousand (20,587,000) shares at the cost of P69,209,688.
Of the total property dividend declared, Three Hundred Fourteen Thousand Six
Hundred Sixty Three (314,663) shares or P925,119 were required in exchange for the
payment of the withholding tax of certain individual shareholders which the Parent
Company paid to the BIR in their behalf. Accordingly, the said shares are still included
in the Parent Company’s treasury shares.
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The property dividends reissued were distributed pro-rata based on the stockholders’
respective shareholdings as of record date on August 16, 2013. In 2013, the Parent
Company purchased a total of 3,975,000 shares or P11,475,190 equivalent from the
buy-back program of 2012.
On September 21, 2012, the BOD of the Parent Company adopted a resolution
authorizing another buy-back program of up to ten million (10,000,000) of its shares in
the market. The Parent Company purchased the remaining balance of 5,127,000
shares (P14,560,680) from the buy-back program of 2011 and 587,000 shares
(P1,661,800) from the latest buy-back program authorized in 2012.
On September 16, 2011, the BOD of the Parent Company adopted a resolution
authorizing the buy-back of up to ten million (10,000,000) of its shares in the market.
The Parent Company purchased 4,873,000 shares (P11,314,130) under the buy-back
program. Also on the same year, the Parent Company purchased 671,000 shares
(P1,563,078) under the buy-back program approved in August 15, 2008.
In 2009 and 2008, the Parent Company purchased 130,900 shares for P130,000 and
548,500 shares for P55,000, respectively, under the Special Stock Purchase Program
(SSPP). The 808,100 shares (including 128,700 shares purchased in 2007) purchased
under the SSPP, were subsequently transferred in September 2009 to the retirement
fund of the Parent Company.
On August 15, 2008, the Parent Company’s BOD approved the buy-back program to
acquire up to ten million (10,000,000) of its shares, representing approximately 1.87%
of the Parent Company’s total outstanding common shares, from the market.
The Parent Company purchased 9,329,000 shares for P40,110,000 in 2008 under the
buy-back program.
17.03 History of Registration of Securities
On September 13, 2007, the Parent Company filed a registration statement with the
SEC in accordance with the Securities Regulation Code for the registration of a total of
562,417,000 common shares. A pre-effective clearance was issued by the SEC on
October 5, 2007.
The application for listing was approved by the BOD of the PSE on
September 27, 2007. The Parent Company was listed in the first board (now main
board) of the PSE last October 17, 2007.
On October 17, 2007, the Parent Company completed its Initial Public Offering (IPO) of
107,417,000 new common shares at an offer price of P4.68 per share for a total
gross proceeds of P502,711,560. The Parent Company intends to use the majority of
its net proceeds from the Offer to finance, in part, its expansion in existing and new
countries and to cover working capital requirements as well as partially retire some of
the Parent Company’s short-term interest-bearing loans. When such proceeds shall be
used to pay off debts, the Parent Company shall pay off loan payables, or portions of
the same, to banks with which the Parent Company has existing credit lines.
The retirement of the Parent Company’s debts has the underlying intention of reducing
debt service burden and consequently improving profitability. Direct costs incurred
relative to the IPO amounting to P36,513,103 were charged against the additional
paid-in capital.
As of December 31, 2013 and 2012, Parent Company has a total number of twenty
(20) and nineteen (19) stockholders holding the above registered securities,
respectively.
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17.04 Appropriation of Retained Earnings
As of December 31, 2013 and 2012, appropriated retained earnings pertaining to
treasury stock which amounted to P12,400,309 and P69,209,688, respectively.
This is in accordance with the legal requirement of Section 41 of the Corporation Code
of the Philippines which requires an entity to have sufficient retained earnings to
support for the treasury shares.
18. DIVIDENDS DECLARED
The Parent Company has declared the following dividends to its equity holders:
Dividend per Share Total Dividends
2013 2012 2011 2013 2012 2011
Cash
dividends P 0.0422 P 0.1993 P - P 25,031,512 P 119,980,858 P -
Property
dividends
3.3641 - -
69,209,688
-
-
Stock
dividends
- - 1.00
-
- 55,308,800
P 3.4063 P 0.1993 P 1.00 P 94,241,200 P 119,980,858 P 55,308,800
During the stockholders’ meeting of the Parent Company in July 19, 2013, the BOD of
the Parent Company approved and authorized the declaration of property dividends of
20,587,000 shares of the Corporation lodged as Treasury Shares, to be paid based on
the market value of the stock of the corporation on the date of declaration and cash
dividends in the aggregate amount of Twenty Five Million (P25,000,000) to its
stockholders. In October 7, 2013, the Securities and Exchange Commission (SEC)
certified the notice of property dividends consisting of treasury shares amounting to
P69,209,688 payable to the stockholders of record as of August 16, 2013.
The Parent Company issued and distributed the property dividends net of withholding
tax on October 14, 2013 and paid the cash dividend of P25,031,512 to the
stockholders on September 11, 2013 at the rate of P0.0422 per share.
On its regular meeting held in June 22, 2012, the BOD of the Parent Company
approved and authorized the declaration of cash dividends equivalent to P119,980,858
or approximately P0.1993 per share based on the Parent Company’s six hundred two
million seventy one thousand eight hundred (602,071,800) issued and outstanding
common shares as of the end of trading day, payable to all of its stockholders-of-
record as of July 12, 2012.
On June 17, 2011, the BOD of the Parent Company authorized the declaration of stock
dividends amounting to P55,308,800 equivalent to 10% of outstanding shares of
553,088,000 in favor of its stockholders-of-record as of August 15, 2011.
The declaration was subsequently ratified and confirmed by the Parent Company’s
stockholders during their annual meeting held on July 29, 2011.
On March 19, 2010, the BOD of the Parent Company declared cash dividends
amounting to P26,603,533 or P0.0481 per share, payable to shareholders-of-record as
of April 8, 2010. The declaration was subsequently ratified and confirmed by the
Parent Company’ shareholders during their annual meeting held on July 23, 2010.
The payment was made on May 5, 2010.
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On March 23, 2009, the BOD of the Parent Company declared cash dividends
amounting to P26,010,000 or P0.0471 per share, payable to shareholders-of-record as
of April 7, 2009. The declaration was subsequently ratified and confirmed by the
Parent Company’ shareholders during their annual meeting held on July 17, 2009.
The payment of dividends was made on May 6, 2009.
19. SHARE-BASED PAYMENTS
On July 20, 2007, the Parent Company’s BOD approved the proposal to set up an
Special Stock Purchase Program (SSPP) totaling 15,000,000 shares for the employees
of the Parent Company who have been in the service for at least one (1) calendar year
as of June 30, 2007, as well as its BOD members, resource persons and consultants
(collectively referred to as “the Participants”). A Notice of Exemption under
Section 10.2 of the Securities Regulations Code had been approved by the SEC on
September 13, 2007. Notwithstanding the aforesaid confirmation by the SEC of the
exempt status of the SSPP shares, the SEC nonetheless required the Parent Company
to include the SSPP shares among the shares of the Parent Company which were
registered with the SEC prior to the conduct of its Initial Public Offering in October
2007. The registration of the Parent Company shares, together with the SSPP shares,
was rendered effective on October 5, 2007.
All 15,000,000 shares were exercised. The shares subject to the SSPP were sold at
par value or P1.00 per share. Total shares amounting to P11.74 million were paid in
full, while the difference totaling P3.26 million were paid by way of salary loan.
Shares acquired through SSPP are subject to a lock-up period of two (2) years from
date of issue, which ended on September 19, 2009.
The sale is further subject to the condition that should the officer or employee resign
from the Parent Company prior to the expiration of the lock-up period, the shares
purchased by such resigning employee or officer shall be purchased at cost by the
Parent Company as Treasury stock. As of December 31, 2009, 24 employees
resigned (9 in 2009, 13 in 2008 and 2 in 2007) and their shares totaling 808,100
(130,900 in 2009, 548,500 in 2008 and 128,700 in 2007) were bought back by the
Parent Company.
As approved by the Parent Company’s BOD, the fair value of the shares issued under
the SSPP was measured at the grant date using the price-earnings multiple model
taking into account the terms and conditions upon which the shares were granted.
The fair value at grant date was P1.33 per share. This transaction also resulted in an
increase in equity by P1.53 million, P2.16 million and P1.00 million recognized as
‘Share-based payment’ under equity in 2009, 2008 and 2007, respectively.
On September 19, 2009, which is the end of the lock up period, the 808,100 shares
bought back at cost was transferred to the Parent Company’s retirement fund upon
reimbursement of the P808,100 paid by the Parent Company for those shares.
The expense arising from the share-based payment plan is recognized over the
two-year lock-up period. The expense recognized under ‘Salaries, wages and employee
benefits’ in the Parent Company separate statements of comprehensive income
amounted to P1.53 million in 2009.
20. REVENUE
The Parent Company’s revenue from operations amounted to P481,682,380,
P470,199,179 and P490,087,163 in 2013, 2012 and 2011, respectively.
The Parent Company’s primary operation is to engage in fund transfer and remittance.
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21. COST OF SERVICES
The following are the components of the Parent Company’s cost of services:
2013 2012 2011
Bank charges P 182,185,078 P 171,969,103 P 160,285,284
Delivery charges 10,297,288 13,167,205 15,046,832
P 192,482,366 P 185,136,308 P 175,332,116
22. OTHER INCOME
Components of other income are as follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Service fees P 1,045,870 P 7,848,011 P 6,316,114
Finance income (Note 6) 1,475,008 1,858,779 2,949,353
Gain on sale (Note 11) 101,458 - 3,954
Foreign exchange
gain – net - 987,177 2,722,754
Rebates - - 2,881,469
Others 1,064,296 1,213,653 1,500,060
P 3,686,632 P 11,907,620 P 16,373,704
Service fees pertain to revenue earned from services rendered by the call center agents
employed by the Parent Company to service the phone-in transactions of its foreign
subsidiary offices in Canada, New Zealand, Australia and United Kingdom.
Also included in this account is the service fee collected from the Social Security
System (SSS) for remittance accepted and transacted by the Parent Company on its
behalf amounting to P499,973.
Foreign exchange gain – net represents currency exchange income (net of losses)
arising from revaluation of foreign currency denominated monetary assets and
liabilities.
Rebates pertain to the refund of bank service charges.
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23. OPERATING EXPENSES
In 2013, 2012 and 2011, the Parent Company’s operating expenses are as follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Salaries, wages and
employee benefits
(Note 24) P 86,477,200 P 87,034,589 P 83,310,975
Marketing 27,338,913 26,422,467 28,248,090
Communication, light and
water 15,886,503 17,544,663 13,782,359
Rental (Note 25) 15,278,004 14,464,084 14,230,999
Transportation and travel 12,472,189 6,569,769 21,159,472
Professional fees 8,930,781 10,893,897 8,488,153
Taxes and licenses 7,997,034 6,994,878 6,726,300
Depreciation (Note 11) 4,950,987 5,057,609 4,991,976
Entertainment, amusement
and recreation 4,737,184 1,728,062 4,459,545
Supplies 4,707,206 4,576,498 8,941,140
Retirement benefits
(Note 24) 4,536,261 3,990,642 4,928,900
Association dues 3,069,631 3,223,761 3,230,078
Amortization (Note 12) 815,898 936,613 1,543,083
Repairs and maintenance 703,657 799,106 691,037
Insurance 479,355 506,867 814,865
Loss on write-off of assets 226,871 10,040,886 2,058,616
Business development 81,732 5,100,724 2,974,650
Donations and contributions 40,000 2,621,445 -
Other expense 1,186,515 - -
Miscellaneous 1,263,994 815,058 2,136,107
P 201,179,915 P 209,321,618 P 212,716,345
Details of loss on write-off of assets are as follows:
2013 2012 2011
Disallowed input VAT
(Note 13) P 226,871 P 6,677,857 P 2,058,616
Deposits with Banco Filipino - 1,584,891 -
Write of investment in
I-Remit Corporation – USA
(Note 26) - 1,778,138 -
P 226,871 P 10,040,886 P 2,058,616
Other expense pertains to currency exchange loss (net of gain) accruing from the
revaluation of foreign currency denominated monetary assets and liabilities.
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24. EMPLOYEE BENEFITS
Aggregate employee benefits expense comprised:
2013
2012
(As re-stated)
2011
(As re-stated)
Short-term benefits
(Note 23) P 86,477,200 P 87,034,589 P 83,310,975
Retirement benefits
(Note 23) 4,536,261 3,990,642 4,928,900
P 91,013,461 P 91,025,231 P 88,239,875
24.01 Short-term Employee Benefits
Short-term benefits include salaries and wages, de-minimis fringe benefits, sick and
vacation leave pay, training and development and 13th month pay.
24.02 Post-employment Benefits
The Parent Company has a single retirement plan under the regulatory framework of
the Philippines. Under R.A. 7641, the Parent Company is legally obliged to provide a
minimum retirement pay for qualified employees upon retirement. The framework,
however, does not have a minimum funding requirement. The Parent Company’s
benefit plan is aligned with this framework.
The Parent Company’s funded defined benefit plans for qualifying employees are
entitled to retirement benefits equal to one hundred percent (100%) of Plan Salary for
every year of credited service of a retirement age of sixty (60) and are not adjusted for
inflationary increases once in payment, or provide adjustment for inflationary increases.
The payments for the funded benefits are from trustee-administered funds. Plan assets
held by trustee are governed by a trust agreement between the latter and the Parent
Company. Responsibility for governance of the plan assets including investment
decision lies with the Board of Trustees while plan governance and contribution
schedule lies with the Parent Company.
The most recent actuarial valuations of plan assets and the present value of the
defined benefit obligation were carried out at January 30, 2014 by E.M. Zalamea.
The present value of the defined benefit obligation, and the related current service cost
and past service cost, were measured using the Projected Unit Credit Method.
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In accordance with the provisions of the Bureau of Internal Revenue Regulations
No. 1-68, it is required that a formal Retirement Plan be Trusteed; that there must be
no discrimination in benefits; that forfeitures shall be retained in the Retirement Fund
and be used as soon as possible to reduce future contributions; and that no part of the
corpus or income of the Retirement Fund shall be used for, or diverted to, any purpose
other than for the exclusive benefit of the Plan members.
The Retirement Plan Trustee, as appointed by the Parent Company in the Trust
Agreement executed between the Parent Company and the duly appointed Retirement
Plan Trustee, is responsible for the general administration of the Retirement Plan and
the Management of the Retirement Fund. The Retirement Plan Trustee may seek the
advice of counsel and appoint an investment manager or managers to manage the
Retirement Fund, an independent accountant to audit the Fund and an actuary to value
the Retirement Fund.
There was no plan amendment, curtailments, or settlement recognized in the financial
years ended December 31, 2013 and 2012.
The principal assumptions used for the purposes of the actuarial valuations were as
follows:
2013 2012
Discount rate 6.05% 5.86%
Expected rate of salary increase 8.00% 8.00%
Assumptions regarding future mortality are set based on actuarial advice in accordance
with published statistics and experience. These assumptions translate into an average
life expectancy in years for a pensioner retiring at age sixty (60).
2013 2012
Retiring at the end of the reporting period
Male 9 -
Female 8 -
Retiring 20 years after the reporting period
Male 64 76
Female 94 95
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The sensitivity analysis of the defined benefit obligation of changes in the weighted
principal assumption is as follows:
Impact on Defined Benefit Obligation
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
Discount rate 100 bps Increase by 8.5% Decrease by 9.4%
Salary increase rate 100 bps Increase by 8.2% Decrease by 7.6%
The above sensitivity analysis is based on a change in an assumption while holding all
other assumptions constant. In practice, this is unlikely to occur, and changes in some
of the assumptions may be correlated. When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions, the same method (present value
of the defined benefit obligation calculated with the projected unit credit method at the
end of the reporting period) has been applied as when calculating the pension liability
recognized within the separate statements of financial position.
Assumed life expectancy is not applicable because under the Parent Company’s
Retirement Plan, benefits are paid in full in a lump sum upon retirement or separation of
an employee.
Amounts recognized in profit or loss in respect of these defined benefit plans are as
follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Current service cost P 4,696,837 P 4,149,490 P 4,618,548
Net interest on the retirement
assets (liabilities) (160,576) (158,848) 310,352
P 4,536,261 P 3,990,642 P 4,928,900
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Reconciliation of re-measurements recognized in other comprehensive income is as follows:
Change on
demographic
assumption
Change on
financial
assumption
Experience
adjustment
Return on Plan
Assets
excluding
interest
Re-
measurements
Deferred tax
asset (liability)
Re-
measurement
gain (loss) – net
deferred tax
asset (liability)
Gain (loss) Balance at
January 1, 2011 P - P - P - P (5,872,169) P (5,872,169) P 1,761,650 P (4,110,519)
Amount recognized during
the year - 498,493 5,559,744 (2,082,496) 3,975,741 (1,192,722) 2,783,019
Gain (loss) Balance at
December 31, 2011 - 498,493 5,559,744 (7,954,665) (1,896,428) 568,928 (1,327,500)
Amount recognized during
the year - (2,361,420) 2,585,727 531,150 755,457 (226,637) 528,820
Gain (loss) Balance at
December 31, 2012 - (1,862,927) 8,145,471 (7,423,515) (1,140,971) 342,291 (798,680)
Amount recognized during
the year 9,585,110 349,015 2,959,009 (1,446,129) 11,447,005 (3,434,101) 8,012,904
Gain (loss) Balance at
December 31, 2013 P 9,585,110 P (1,513,912) P 11,104,480 P (8,869,644) P 10,306,034 P (3,091,810) P 7,214,224
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Amounts included in the separate statements of financial position arising from the
entity’s obligation with respect to its defined benefit plans are as follows:
2013 2012
Present value of defined benefit obligation P 20,389,143 P 27,959,017
Fair value of plan assets (33,470,764) (30,303,714)
Surplus (13,081,621) (2,344,697)
Effect of the asset ceiling 1,893,404 129,793
P (11,188,217) P (2,214,904)
Movements in the present value of the defined benefit obligation in both years were as
follows:
2013 2012
Balance, January 1 P 27,959,017 P 22,524,680
Current service cost 4,696,837 4,149,490
Interest cost 1,638,398 1,509,154
Benefits paid from plans (1,011,975) -
Actuarial (gains) / loss:
Changes in financial assumptions (349,015) 2,361,420
Changes in demographic assumptions (9,585,110) -
Experience (2,959,009) (2,585,727)
Balance, December 31 P 20,389,143 P 27,959,017
Movements in the fair value of the plan assets in both years were as follows:
2013 2012
Balance, January 1 P 30,303,714 P 21,816,324
Interest income 1,806,580 1,668,002
Employer’s contributions 2,062,569 6,158,445
Re-measurements 309,876 660,943
Benefits paid from plan assets (1,011,975) -
Balance, December 31 P 33,470,764 P 30,303,714
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Plan assets as of December 31, 2013 are comprised as follows:
Quoted Unquoted Total Percentage
Equity securities:
Preferred shares P 5,994,395 P - P 5,994,395 18%
Available-for-sale 5,791,706 - 5,791,706 17%
Government securities
Available-for-sale 1,872,969 - 1,872,969 6%
Unquoted debt securities
classified as loans - 1,017,732 1,017,732 3%
Held to maturity - 999,286 999,286 3%
Other securities and Debt
instrument:
Available-for-sale 12,846,878 - 12,846,878 38%
Unquoted debt securities
classified as loans - 1,998,132 1,998,132 6%
Held to maturity - 1,852,880 1,852,880 6%
Bank deposits - 736,162 736,162 2%
Other assets - 360,624 360,624 1%
P 26,505,948 P 6,964,816 P 33,470,764 100%
Plan assets as of December 31, 2012 are comprised as follows:
Quoted Unquoted Total Percentage
Equity securities:
Preferred shares P 4,995,561 P - P 4,995,561 17%
Available-for-sale 2,669,798 - 2,669,798 9%
Government securities
Available-for-sale 999,112 - 999,112 3%
Unquoted debt securities
classified as loans - 1,021,592 1,021,592 3%
Held to maturity - 1,001,566 1,001,566 3%
Other securities and Debt
instrument:
Available-for-sale 8,785,388 - 8,785,388 29%
Held to maturity - 4,079,676 4,079,676 14%
Bank deposits - 6,396,558 6,396,558 21%
Other assets - 354,463 354,463 1%
P 17,449,859 P 12,853,855 P 30,303,714 100%
Expected maturity analysis of undiscounted benefit obligation is as follows:
Less than
one year
More than two
years but within
five year
More than
five years Total
Undiscounted amount P - P - P 18,235,479 P 18,235,479
The Parent Company ensures that the investment positions are managed within an
Asset-Liability Matching (ALM) framework that has been developed to achieve
long-term investments that are in line with the obligations under the benefit schemes.
Within this framework, the Parent Company’s ALM objective is to match assets to the
pension obligations by investing in long-term fixed interest securities with maturities
that match the benefit payments as they fall due and in the appropriate currency.
The Parent Company actively monitors how the duration and the expected yield of the
investments are matching the expected cash outflows arising from the pension
obligations. The group has not changed the processes used to manage its risks from
previous periods. The Parent Company does not use derivatives to manage its risk.
Investments are well diversified, such that the failure of any single investment would
not have a material impact on the overall level of assets. A large portion of assets in
the current year consists of equities and bonds, although the Parent Company also
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invests in property, bonds, cash and investment (hedge) funds. The Parent Company
believes that equities offer the best returns over the long term with an acceptable level
of risk. The majority of equities are in a locally diversified portfolio of blue chip
entities.
The Parent Company is exposed to a number of risks through its defined benefit plan.
The most significant risks are detailed below:
Volatility Risk
The plan liabilities are calculated using a discount rate set with reference to corporate
bond yields; if plan assets underperform this yield, this will create a deficit. The plan
hold a significant proportion of equities, which are expected to outperform corporate
bonds in the long-term while providing volatility and risk in the short-term.
As the plan mature, the Parent Company intends to reduce the level of investment risk
by investing more in assets that better match the liabilities. The assets are composed
of government securities, equity securities, other securities and debt instruments, bank
deposits and other assets. The government bonds represent investments in Philippine
government securities only.
However, the Parent Company believes that due to the long-term nature of the plan
liabilities and the strength of the supporting group, a level of continuing equity
investment is an appropriate element of the group’s long term strategy to manage the
plans efficiently.
Investment Risk
Investment risk is the risk that investments on plan assets will result to a lower return
than originally expected. This risk emanates on the premise that funded defined
benefit plans should arranged on the basis of Asset-Liabilities Matching principle.
Thus, plan assets and future contributions are invested in such a way that it will
generate return to cover-up future payments of defined benefit obligations and interest
costs. These plan activities exposes the Parent Company to sensitivity in investment
risks that would result to lower plan assets and higher defined benefit obligations
should the performance of the investment portfolio falls below the inflation rate,
interest rates and other economic conditions.
Investment risk is mitigated through proper investment planning and concentration of
investments. As of December 31, 2013 and 2012, plan assets are concentrated on
government securities, equity securities and other securities, respectively, which
account ranges from 74% and 79% in 2013 and 2012, respectively, of the total plan
assets.
Inflation Risk
Inflation risk is the risk that the equivalent purchasing power of the plan assets will not
be able to match the recorded liabilities.
Payments for the defined benefit plan of the Parent Company are not link to inflation,
thus, the exposure to this risk is immaterial. To cope-up with inflation, the plan has
designed a versatile policy of having an appropriate mix of debt and equity securities in
the portfolio of investments during high inflation rates.
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Life Expectancy Risk
The majority of the plans’ obligations are to provide benefits for the life of the member,
so increases in life expectancy will result in an increase in the plans’ liabilities.
This risk is closely associated with inflation risk wherein inflationary increases result in
higher sensitivity to changes in life expectancy. The plan posses a minimal exposure
to this risk since inflationary risk, which is directly associated to the plan’s sensitivity
to life expectancy risk, is immaterial.
25. OPERATING LEASE AGREEMENTS
25.01 The Parent Company as a Lessee
Operating leases relate to leases of spaces for use of office space subject to lease
terms with Wynsum Realty and Oakridge Properties, Inc. Operating lease payments
represent rentals payable by the Parent Company for office space.
On August 31, 2012, the Parent Company entered into another lease agreement with
OPI for the use of office spaces on Units 2704 and 2705 for an initial term of three (3)
years from October 15, 2012 to October 14, 2015 with provision for 10% escalation
on the second and third year of the term of contract. The Parent Company has an
option to renew for another three (3) years.
The rent expense of the Parent Company amounted to P15,278,004, P14,464,084
and P14,230,999 as of December 31, 2013, 2012 and 2011, respectively, as
disclosed in Note 23. Part of the total rent expense applies to related party
transactions which amounted to P13,885,207, P11,421,505 and P9,247,615 for
2013, 2012 and 2011, respectively, as disclosed in Note 16. As of
December 31, 2013, 2012 and 2011, the Parent Company has refundable deposits
amounting to P4,488,727, P5,353,040 and P4,568,661, respectively, as disclosed in
Note 13.
At each reporting date, the Parent Company had outstanding commitments for future
minimum lease payments under non-cancelable operating leases, which fall due as
follows:
2013 2012
Not later than one year P 13,808,781 P 11,464,590
Later than one year but not later than five years 12,141,875 7,998,175
P 25,950,656 P 19,462,765
26. INCOME TAXES
26.01 Income Tax Recognized in Profit or Loss
Components of income tax expense are as follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Current tax expense P 21,047,412 P 15,828,235 P 23,174,172
Deferred tax expense (benefit) (3,541,780) (852,239) 356,422
Final tax 247,375 371,756 589,871
P 17,753,007 P 15,347,752 P 24,120,465
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A numerical reconciliation between tax expense and the product of accounting profit
multiplied by the tax rate in 2013, 2012 and 2011 follows:
2013
2012
(As re-stated)
2011
(As re-stated)
Accounting profit P 59,113,492 P 41,580,450 P 80,089,866
Tax expense at 30% 17,734,048 12,474,135 24,026,959
Tax effects of:
Non-deductible expenses 214,087 2,002,414 -
Non-deductible finance cost - 184,019 291,986
Non-taxable finance income (195,128) (185,878) (294,935)
Non-deductible input VAT - 2,003,357 -
Recognition of DTL from
revised PAS 19 - (289,368) 110,519
Non-recognition of DTA - - (14,064)
Recognition of previous
unrecognized DTA - (840,927) -
P 17,753,007 P 15,347,752 P 24,120,465
Non-deductible expenses include accounts written off during the period.
Recognition of DTA from revised PAS 19 pertains to the effect of PAS 19 (Revised).
Non-recognition of DTA pertains to unrecognized deferred tax asset on unrealized loss
on foreign currency.
Recognition of previous unrecognized DTA pertains to unrecognized deferred tax asset
on temporary differences such as accrued finance cost, accrued courier charges and
other accruals.
27. DEFERRED TAXES
27.01 Deferred Tax Assets
The components of the Parent Company’s deferred tax assets and their respective
movements are as follows:
Profit or loss
Re-
measurement Total
Balance, January 1, 2012 P - P 568,928 P 568,928
Recognized during the year
(Note 24) 1,804,760 (226,637) 1,578,123
Balance, December 31, 2012 1,804,760 342,291 2,147,051
Recognized during the year
(Note 24) 2,509,546 (342,291) 2,167,255
Balance, December 31, 2013 P 4,314,306 P - P 4,314,306
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27.01.01 Deferred tax assets charged to profit or loss
The components of the Parent Company’s deferred tax assets charge to profit or loss
and their respective movements are as follows:
Accrued
Courier
Charges
Accrued
Interest
Accrued –
others
Unrealized
Foreign
Exchange
Loss – net
Total
Balance, January 1,
2012 P - P - P - P - P -
Recognized in profit
or loss 433,360 571,862 799,538
-
1,804,760
Balance, December 31,
2012 433,360 571,862 799,538 -
1,804,760
Recognized in profit or
loss (141,537) 465,759 1,829,370 355,954
2,509,546
Balance, December 31,
2013 P 291,823 P 1,037,621 P 2,628,908 P 355,954 P 4,314,306
27.02 Deferred Tax Liabilities
The components of the Parent Company’s deferred tax liabilities and their respective
movements are as follows:
Profit or loss
Re-
measurement Total
Balance, January 1, 2012 P 356,422 P - P 356,422
Recognized during the year
(Note 24) 952,521 - 952,521
Balance, December 31, 2012 1,308,943 - 1,308,943
Recognized during the year
(Note 24) (1,032,234) 3,091,810 2,059,576
Balance, December 31, 2013 P 276,709 P 3,091,810 P 3,368,519
27.02.01 Deferred tax liabilities charged to profit or loss
The components of the Parent Company’s deferred tax liabilities charge to profit or loss
and their respective movements are as follows:
Retirement
Asset
(As re-stated)
Pension
amortization
Unrealized
foreign
exchange gain
Total
Balance, January 1, 2012 P 356,422 P - P - P 356,422
Recognized in profit or loss 650,341 6,027 296,153 952,521
Balance, December 31, 2012 1,006,763 6,027 P 296,153 1,308,943
Recognized in profit or loss (742,108) 6,027 (296,153) (1,032,234)
Balance, December 31, 2013 P 264,655 P 12,054 P - P 276,709
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28. EARNINGS PER SHARE
The Parent Company’s basic earnings per share is P0.07, P0.04 and P0.09 as of
December 31, 2013, 2012 and 2011, respectively.
The earnings and weighted average number of ordinary shares used in the calculation
of basic earnings per share are as follows:
2013 2012 2011
Earnings used in the
calculation of total basic
earnings per share P 41,360,486 P 26,232,698 P 55,969,401
Weighted average number of
ordinary shares for the
purposes of basic
earnings per share 595,422,077 600,742,383 607,014,606
The Parent Company did not have any potential dilutive instruments as of
December 31, 2013, 2012 and 2011.
28.01 Impact of Correction of Prior Period Error and Changes in Accounting Policy
Correction of prior period error and changes on the Parent Company’s accounting
policy during the year is described in Notes 33 and 34 respectively, including the
extent of impact the errors and changes have resulted on Retained Earnings and
earnings per share for 2012 and 2011.
The following table summarizes the impact of the correction of prior period error and
changes in accounting policy on basic earnings per share:
Increase (Decrease) on
Profit for the Year
Increase (Decrease) on
Basic Earnings per Share
2012 2011 2012 2011
Retirement expense P 304,062 P 819,678 P - P -
Provision for deferred
income tax (61,399) (212,507) - -
Dividend income
(Note 26) (4,896,570) - (0.01) -
P (4,653,907) P 607,171 P (0.01) P -
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29. FAIR VALUE MEASUREMENTS
29.01 Fair Value of Financial Assets and Liabilities
The carrying amounts and estimated fair values of the Parent Company’s financial
assets and financial liabilities as of December 31, 2013 and 2012 are presented below:
2013 2012
Carrying
Amount Fair Value
Carrying
Amount Fair Value
Financial Assets:
Trade and other
receivables P 2,089,130,764 P 2,089,130,764 P 1,437,175,689 P 1,437,175,689
Refundable deposits 4,488,727 4,488,727 5,353,040 5,353,040
P 2,093,619,491 P 2,093,619,491 P 1,442,528,729 P 1,442,528,729
Financial Liabilities:
Beneficiaries and other
payables P 848,942,622 P 848,942,622 P 547,602,343 P 547,602,343
Loans payable 988,000,000 988,000,000 925,000,000 925,000,000
Advances from
stockholders 7,289,480 7,289,480 7,289,480 7,289,480
P 1,844,232,102 P 1,844,232,102 P 1,479,891,823 P 1,479,891,823
Due to short-term nature or demand feature of trade and other receivables, refundable
deposits which is reported under other non-current assets, beneficiaries and other
payables (except payable to government agencies and accrued expenses), advances
from stockholders and loans payable, Management estimates that their carrying
amounts approximate their fair values.
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30. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Parent Company’s Corporate Treasury function provides services to the business,
co-ordinates access to domestic and international financial markets, monitors and
manages the financial risks relating to the operations of the Parent Company through
internal risk reports which analyze exposures by degree and magnitude of risks.
These risks include market risk, including currency risk and fair value interest rate risk,
credit risk and liquidity risk.
The Parent Company seeks to minimize the effects of these risks through appropriate
and dedicated investment planning aimed to reduce risk exposure. These parameters
include monitoring cash flows and investigation of counterparty’s credit quality.
Compliance with policies and exposure limits is reviewed by the Treasury on a
continuous basis.
The Treasury reports quarterly and monitors risks and policies implemented to mitigate
risk exposures.
30.01 Market Risk Management
30.01.01 Foreign Currency Risk Management
The Parent Company undertakes transactions denominated in foreign currencies;
consequently exposures to exchange rate fluctuations arise. It is the Parent
Company’s policy that all daily foreign currencies, which arise as a result of its
remittance transactions, must be traded either through spot or forward trading
transactions with bank partners only at prevailing foreign exchange rates in the market.
The daily closing foreign exchange rates shall be the guiding rate in providing
wholesale rates and retail rates to foreign offices and agents, respectively. The trading
proceeds will be used to pay out bank loans and other obligations of the Parent
Company.
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The carrying amounts of the Parent Company’s foreign currency denominated monetary assets at the end of the reporting period are as
follows:
2013
Cash Receivable
Receivable -
FCCY Total
Payable -
FCCY Net PESO
US dollar (USD) 923,996 6,361,619 6,667,349 13,952,964 6,199,569 7,753,395 345,213,084
Canadian Dollar (CAD) 19,906 6,261,455 - 6,281,361 755,000 5,526,361 231,951,441
Singaporean Dollar (SGD) 18,400 3,753,367 - 3,771,767 - 3,771,767 131,948,726
European Dollar (EURO) 177,172 4,234,521 - 4,411,693 3,045,699 1,365,994 82,823,242
Taiwan Dollar (NTD) - 35,725,699 - 35,725,699 - 35,725,699 52,815,212
Yen (JPY) 400,001 80,341,769 - 80,741,770 - 80,741,770 34,053,043
Pound (GBP) 101,303 687,010 - 788,313 371,575 416,738 30,358,970
Australian Dollar (AUD) 297,500 1,301,526 - 1,599,026 1,050,000 549,026 21,840,602
New Zealand Dollar
(NZD) 172,121 522,514 - 694,635 280,060 414,575 15,005,242
Hong Kong Dollar (HKD) 1,119 3,148,107 - 3,149,226 - 3,149,226 18,021,494
Rupiah (IDR) 86,188,478 - - 86,188,478 - 86,188,478 382,634
964,413,690
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2012
Cash Receivable Total PESO
Canadian Dollar
(CAD) 2,192,803 5,070,966 7,263,769 229,638,797
European Dollar
(EURO) 285,567 1,908,884 2,194,451 119,250,810
Singaporean
Dollar (SGD) 166,911 3,127,603 3,294,514 110,653,207
US dollar (USD) 1,531,460 878,521 2,409,981 98,929,737
Pound (GBP) 14,862 1,447,131 1,461,993 96,629,841
Australian Dollar
(AUD) 658,878 836,352 1,495,230 63,582,679
Taiwan Dollar
(NTD) - 44,131,195 44,131,195 62,318,543
Yen (JPY) 400,031 43,489,087 43,889,118 20,899,120
New Zealand
Dollar (NZD) 271,178 234,624 505,802 16,965,597
Hong Kong
Dollar (HKD) 251 2,593,639 2,593,890 13,735,815
Rupiah (IDR) 42,923,183 - 42,923,183 176,200
Qatar Dollar
(QAR) 275 - 275 3,100
832,783,446
The Parent Company is mainly exposed to the changes in Canadian and US dollar.
The following table details the Parent Company’s sensitivity to 4.08% and 5.41%
increase and decrease in the Philippine Peso against the relevant foreign currencies in
2013 and 2012, respectively. The sensitivity rate of 5.08% and 5.41% are used
when reporting foreign currency risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in foreign
exchange rates. The sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the period end for 4.08%
and 5.41% change in foreign currency rates in 2013 and 2012. A positive number
below indicates an increase in profit and other equity where the Philippine Peso
strengthens 4.08% and 5.41% against the relevant currency.
2013 2012
USD P 14,089,890 P 5,348,609
CAD 9,467,110 12,415,357
SGD 5,385,494 5,982,435
EUR 3,380,435 6,447,262
NTD 2,155,656 3,369,235
JPY 1,389,877 1,129,905
GBP 1,239,103 5,224,265
AUD 891,425 3,437,580
HKD 735,548 742,623
NZD 612,440 917,240
IDR 15,617 9,526
QAR - 168
P 39,362,594 P 45,024,205
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The Parent Company's sensitivity to foreign currency has increased during the current
period mainly due to increase in foreign currency denominated assets.
In Management’s opinion, the sensitivity analysis is unrepresentative of the inherent
foreign exchange risk as the period end exposure does not reflect the exposure during
the year. The Parent Company’s sensitivity analysis decreases from 5.41% to 4.08%,
as compared to prior year. The Parent Company mitigates its exposure to foreign
currency risk by monitoring its Canadian and US Dollar cash flows.
30.01.02 Interest Rate Risk Management
The Parent Company’s exposure to interest rate risk arises from its cash deposits in
banks which are subject to variable interest rates while its loans payable at fixed
interest rates. The risk is managed by the Parent Company by maintaining appropriate
fixed rate loans payable.
The interest rate risk arising from deposits with banks is managed by means of
effective investment planning and analysis and maximizing investment opportunities in
various local banks and financial institutions.
Profit for the years ended December 31, 2013 and 2012 would have been unaffected
since the Parent Company has no loans payable at variable rates and interest rate risk
exposure for its cash in bank, which is subject to variable rate, is very immaterial.
The Parent Company’s sensitivity to interest rates has not changed significantly from
the prior year. In Management’s opinion, the sensitivity analysis is unrepresentative of
the inherent interest rate risk as the year-end exposure does not reflect the exposure
during the year.
30.02 Credit Risk Management
Credit risk refers to the risk that counterparty will default on its contractual obligations
resulting in financial loss to the Parent Company. The Parent Company has adopted a
policy of only dealing with creditworthy counterparties and obtaining sufficient
collateral, where appropriate, as a means of mitigating the risk of financial loss from
defaults. The Parent Company only transacts with entities that are rated the
equivalent of investment grade and above. This information is supplied by independent
rating agencies where available and, if not available, the Parent Company uses other
publicly available financial information and its own trading records to rate its major
customers. The Parent Company’s exposure and the credit ratings of its counterparties
are continuously monitored and the aggregate value of transactions concluded is
spread amongst approved counterparties. Credit exposure is controlled by
counterparty limits that are reviewed and approved by the risk management committee
annually.
Trade receivables consist of a large number of customers, spread across diverse
industries and geographical areas. Ongoing credit evaluation is performed on the
financial condition of accounts receivable and, where appropriate, credit guarantee
insurance cover is purchased.
The credit risk on liquid funds is limited because the counterparties are banks with high
credit-ratings.
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The carrying amount of financial assets recognized in the separate financial
statements, which is net of impairment losses, represents the Parent Company’s
maximum exposure to credit risk, without taking into account collateral or other credit
enhancements held.
2013 2012
Cash in banks and cash equivalents P 503,769,741 P 767,470,629
Trade and other receivables 2,084,002,185 1,430,879,097
Refundable deposit 4,488,727 5,353,040
P 2,592,260,653 P 2,203,702,766
The Parent Company does not hold any collateral or other credit enhancements to
cover this credit risk.
The table below shows the credit quality by class of financial assets of the Parent
Company:
2013
Neither Past Due nor Impaired
High Grade
Medium
Grade
Low
Grade Total
Cash in banks P 503,769,741 P - P - P 503,769,741
Trade and other
receivables 2,084,002,185 - - 2,084,002,185
Refundable deposit 4,488,727 - - 4,488,727
P 2,592,260,653 P - P - P 2,592,260,653
2012
Neither Past Due nor Impaired
High Grade
Medium
Grade
Low
Grade Total
Cash in banks and cash
equivalents P 767,470,629 P - P - P 767,470,629
Trade and other
receivables 1,430,879,097 - - 1,430,879,097
Refundable deposits 5,353,040 - - 5,353,040
P 2,203,702,766 P - P - P 2,203,702,766
The credit quality of the financial assets was determined as follows:
Trade and other receivables
High grade – These are receivables from counterparties with no default in payment.
Medium – These are receivables from counterparties with up to three defaults in
payment.
Low – These are receivables from counterparties with more than three defaults in
payment.
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30.03 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the BOD, which has
established an appropriate liquidity risk management framework for the management of
the Parent Company’s short, medium and long-term funding and liquidity management
requirements. The Parent Company manages liquidity risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities, by continuously monitoring
forecast and actual cash flows, and by matching the maturity profiles of financial
assets and liabilities.
The following tables detail the Parent Company’s remaining contractual maturity for its
non-derivative financial liabilities with agreed repayment periods. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Parent Company can be required to pay. The tables include
both interest and principal cash flows. The contractual maturity is based on the
earliest date on which the Parent Company may be required to pay.
Weighted
Average
Effective
Interest
Rate Within 1 year
1 – 5
years Total
December 31, 2013
Beneficiaries and other
payables n/a P 848,942,622 P - P 848,942,622
Advances from
stockholders n/a 7,289,480 7,289,480
Loans payable
5 and
7.125% 988,000,000 - 988,000,000
P 1,844,232,102 P - P 1,844,232,102
Weighted
Average
Effective
Interest
Rate Within 1 year
1 – 5
years Total
December 31, 2012
Beneficiaries and other
payables n/a P 547,602,343 P - P 547,602,343
Advances from
stockholders n/a 7,289,480 7,289,480
Loans payable
5 and
7.125% 925,000,000 - 925,000,000
P 1,479,891,823 P - P 1,479,891,823
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The following table details the Parent Company’s expected maturity for its non-
derivative financial assets. The table has been drawn up based on the undiscounted
contractual maturities of the financial assets including interest that will be earned on
those assets. The inclusion of information on non-derivative financial assets is
necessary in order to understand the Parent Company’s liquidity risk management as
the liquidity is managed on a net asset and liability basis.
Weighted
Average
Effective
Interest Rate Within 1 Year 1 – 5 Years Total
December 31, 2013
Cash and cash
equivalent
0.10% to
2.50% P 518,106,344 P - P 518,106,344
Trade and other
receivables n/a 2,089,130,764 - 2,089,130,764
Refundable deposit n/a - 4,488,727 4,488,727
- P 2,607,237,108 P 4,488,727 P 2,611,725,835
December 31, 2012
Cash and cash
equivalents
0.50% to
2.00% P 789,926,225 P - P 789,926,225
Trade and other
receivables n/a 1,437,175,689 - 1,437,175,689
Refundable deposit n/a - 5,353,040 5,353,040
- P 2,227,101,014 P 5,353,040 P 2,232,454,954
The amounts included above for variable interest rate instruments for non-derivative
financial asset is subject to change if changes in variable interest rates differ to those
estimates of interest rates determined at the end of the reporting period.
The Parent Company’s financing facilities are as follows:
2013 2012
Secured bank loan facilities with various
maturity dates through to 2012 and
which may be extended by mutual
agreement:
Amount used P 988,000,000 P 925,000,000
Amount unused 2,167,000,000 1,880,000,000
P 3,155,000,000 P 2,805,000,000
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31. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Parent Company manages its capital to ensure that the Parent Company will be
able to continue as going concerns while maximizing the return to stakeholders through
the optimization of the debt and equity balance. The Parent Company’s overall
strategy remains unchanged from 2012 and 2011.
The capital structure of the Parent Company consists of net debt offset by cash and
bank balances and equity of the Parent Company.
Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations
are prohibited from retaining surplus plus profits in excess of 100% of their paid-up
capital stock, except: 1) when justified by definite corporate expansion projects or
programs approved by the board of directors; or 2) when the corporation is prohibited
under any loan agreement with any financial institution or creditor, whether local or
foreign, from declaring dividends without its/his consent, and such consent has not yet
been secured; or 3) when it can be clearly shown that such retention is necessary
under special circumstances obtaining in the corporation, such as when there is a need
for special reserve for probable contingencies. The Parent Company is in compliance
with the above requirements.
The BOD has overall responsibility for monitoring capital in proportion to risk. Profiles
for capital ratios are set in the light of changes in the Parent Company’s external
environment and the risks underlying the Parent Company’s business, operation and
industry. The Parent Company has a target gearing ratio of 1:1 determined as the
proportion of net debt to equity.
The gearing ratio at the end of each reporting periods was as follows:
2013 2012
Debt P 1,874,089,867 P 1,491,195,749
Cash 518,106,344 789,926,225
Net Debt 1,355,983,523 701,269,524
Equity 1,088,718,025 1,076,776,457
Net debt to equity ratio P 1.25:1 P 0.65:1
Debt is defined as short-term borrowings, as described in Notes 14, 15, 16 and 27,
while equity includes all capital and retained earnings of the Parent Company that are
managed as capital.
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32. CORRECTION OF PRIOR PERIOD ERROR
In 2013, the Parent Company derecognized its investment in I-Remit Singapore Pte.
Ltd. (ISPL) and the related dividend income amounting to P12,600,000 and
P19,889,480, respectively, as disclosed in Note 16 for failure to execute the
documents required by the Monetary Authority in Singapore to effect the official
transfer of the 49,000 shares or 49% of the shares in ISPL to I-Remit Inc. as disclosed
in Note 10.
The effects of correction of prior period error to retained earnings and prior year’s
profit are as follows:
Retained Earnings
January 1, 2012
2012
Profit
As previously reported P 154,836,129 P 30,627,057
Effect of correction of prior period error
(14,992,910)
(4,896,570)
Effect of change in accounting policy
(Note 33)
463,256 502,211
As restated P 140,306,475 P 26,232,698
The Management believes that such restatement is appropriate and resulted to a better
presentation of accounts.
33. CHANGE IN ACCOUNTING POLICY
Effective January 1, 2013, the Parent Company applied the revised PAS 19, Employee
Benefits in accounting its retirement benefit obligation. The revised standard ranges
from fundamental changes such as removing the corridor approach in accounting
unrecognized actuarial gains and losses, immediate recognition of past service cost to
profit or loss, 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 assumptions,
information on asset-liability matching strategies duration of the defined benefit
obligation, and disaggregation of plan assets by nature and risk. The revised standard
requires retrospective application in accordance with the transitional provisions set out
as follows:
• An entity need not adjust the carrying amount of assets outside the scope of this
Standard for changes in employee benefit costs that were included in the carrying
amount before the date of initial application. The date of initial application is the
beginning of the earliest prior period presented in the first financial statements in
which the entity adopts this Standard.
• In the separate financial statements for periods beginning before January 1, 2014,
an entity need not present comparative information for the disclosures required
about the sensitivity of the defined benefit obligation.
As a result, the Parent Company’s opening separate statement of financial position as
of January 1, 2012 and the comparative figures have been restated accordingly.
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66
Impact of the transition is as follows:
As a result of the adoption of PAS 19 (Revised), adjustments to the retained
earnings and profit of 2012 pertain to de-recognition of retirement assets,
recognition of retirement liability, adjustment in retirement liability and decrease in
retirement expense recognized.
The Parent Company de-recognized the retirement assets under the previous
accounting standard of PAS 19 amounting to P368,394 and recognition of
retirement liability under PAS 19 (Revised) amounting to P708,356.
The Parent Company recognized adjustment in retirement liability amounting to
P1,076,750 and decrease in retirement expense amounting to P304,062 and
P819,678 in 2012 and 2011, respectively, as a result of the adoption of PAS 19
(Revised).
In 2012, the Parent Company de-recognized deferred tax assets amounting to
P198,149 while in 2011, the Parent Company recognized deferred tax assets
amounting to P356,422 on retirement liability amounting to P708,356.
The Parent Company recognized re-measurements arising from change on
demographic assumptions, change on financial assumptions and experience
amounting to P2,783,019 and P528,820 as of January 1, 2012 and
December 31, 2012, respectively.
Summary of adjustments to retained earnings and prior year’s profit are as follows:
Retained Earnings
January 1, 2012
2012 Profit
De-recognition of retirement assets P 368,394 P -
Recognition of retirement liability 708,356 -
Adjustment in retirement liability (1,076,750) -
Retirement expense 819,678 304,062
Provision for deferred income tax (356,422) 198,149
Net Increase 463,256 502,211
Effect of correction of prior period error
(Note 32)
(14,992,910)
(4,896,570)
As previously reported 154,836,129 30,627,057
As restated P 140,306,475 P 26,232,698
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67
34. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS
Certain amounts in the comparative separate financial statements and note disclosures
have been reclassified to conform to the current year’s presentation.
The reclassifications are as follows:
Previous Classification Current Classification Amount
Investment in an associate Advances from stockholders P (12,600,000)
Retained earnings Advances from stockholders 19,889,480
Advances to related parties Receivable – others P 10,332,965
Advances to related parties Due from related parties P 917,505,692
Advances from related parties Due to related parties P 687,612,646
Management believes that the above reclassifications resulted to a better presentation
of accounts.
35. APPROVAL OF FINANCIAL STATEMENTS
These separate financial statements were approved and authorized for issue by the
Board of Directors on March 21, 2014.
36. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO. 15–2010
The Bureau of Internal Revenue (BIR) has released a new revenue regulation dated
November 25, 2010 amending Revenue Regulations No. 21-2002 setting forth
additional disclosures on Notes to Financial Statements. Below are the disclosures
required by the said Regulation:
36.01 Taxes, Duties and Licenses Paid or Accrued
The details of the Parent Company’s taxes, duties and licenses fees paid or accrued in
2013 are as follows:
36.01.01 Output VAT
The Parent Company is a VAT-registered Parent Company with VAT output declaration
of P66,353 for the year based on the amount reflected in the revenue.
Zero-rated sales of goods and services consist of export sales and those rendered to
persons or entities whose exemptions are provided under special laws or international
agreements to which the Philippines is a signatory.
The Parent Company, being engaged in the business of fund transfer and remittance
services of any form or kind of currencies or monies, is registered as a zero-rated VAT
taxpayer under Section 108 (B) (2) of NIRC. Revenue from rendering of services such
as delivery fees, realized foreign exchange gains and other fees are zero-rated.
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68
36.01.02 Input VAT
An analysis of the Parent Company’s input VAT claimed during the year is as follows:
Balance, January 1 P 11,464,326
Current year’s domestic purchases/payments for services lodged
under other accounts 408,297
Creditable VAT input 27,219
Total available input tax 11,899,842
Creditable VAT input and tax credit certificate (445,740)
Output VAT (66,353)
Write-off (226,871)
Balance, December 31, 2013 P 11,160,878
36.01.03 Taxes and Licenses
An analysis on the Parent Company’s taxes and licenses and permit fees paid or
accrued during the year is as follows:
Documentary stamp taxes P 3,276,594
Licenses and permits 3,551,435
Others 1,169,005
P 7,997,034
Documentary stamp taxes are paid for application for loans and other transactions.
36.01.04 Withholding Taxes
An analysis on the Parent Company’s withholding taxes paid or accrued during the
year is as follows:
Withholding tax on compensation and benefits P 9,412,555
Expanded withholding taxes 6,392,886
P 15,805,441
Expanded withholding tax pertains to rentals, professional fees and contractors.
37. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO. 19–2011
Pursuant to Section 244 in relation to Section 6(H) of the National Internal Revenue
Code of 1997 (Tax Code), as amended, these Regulations are prescribed to revise BIR
Form 1702 setting forth the following schedules. Below are the disclosures required
by the said Regulation:
37.01 Revenues
The Parent Company’s revenue for the taxable year 2013, which pertains to rendering
of services, amounted to P481,682,380.
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69
37.02 Cost of Services
The following is an analysis of the Parent Company’s cost of services for the taxable
year:
Bank charges P 176,594,964
Delivery charges 10,297,288
P 186,892,252
37.03 Non-Operating and Taxable Other Income
The Parent Company’s non-operating and taxable other incomes for the taxable year
are as follows:
Service fees P 1,045,870
Gain on sale 101,458
Realized foreign exchange gain in prior year 987,177
Others 1,064,296
P 3,198,801
37.04 Itemized Deductions
The following is an analysis of the Parent Company‘s itemized deductions for the
taxable year:
Salaries, wages and employee benefits P 86,477,200
Finance costs 30,517,962
Marketing 27,338,913
Communication, light and water 15,886,503
Rental 15,278,004
Transportation and travel 12,472,189
Professional fees 8,930,781
Taxes and licenses 7,997,034
Depreciation 4,950,987
Entertainment, amusement and recreation 4,737,184
Supplies 4,707,206
Association dues 3,069,631
Retirement benefits paid 2,082,659
Amortization 815,898
Repairs and maintenance 703,657
Insurance 479,355
Business development 81,732
Donations and contributions 40,000
Miscellaneous 1,263,994
P 227,830,889
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RSBA R.S. BERNALDO & ASSOCIATES worldwide
INDEPENDENT AUDITORS' REPORT TO ACCOMPANY INCOME TAX RETURN
The Board of Directors and StockholdersI-REMIT INC.26/F Discovery Centre, 25 ADB AvenueOrtigas Centre, Pasig City
We have examined the separate financial statements of I-REMIT INC. for the years endedDecember 31, 2013 and 2012 on which we have rendered the attached report datedMarch 21,2014.
In compliance with Revenue Regulation V-20, we are stating that no partner of our Firm isrelated by consanguinity or affinity to the president, manager or principal stockholders of theCompany.
R.S. BERNALDO & ASSOCIATESBOA/PRCNo. 0300Valid until December 31, 2015SEC Group A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSPGroup B AccreditedValid until February 14, 2014CDA CEA No. 0013-AFValid until November 17, 2016IC Accreditation No. F-2013/002-0Valid until March 26, 2016
R&tl~DOManaging PartnerCPA Certificate No. 25927SEC Group A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSPGroup B AccreditedValid until February 14, 2014BIRAccreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No. 109-227-722PTR No. 4232656Issued on January 6, 2014 at Makati City
March 21, 2014RSBA
20YEARS
A: 18/F Cityland Condominium 10 Tower 1156 l-lV. dela Costa Street, Ayala North,Makati City, Philippines 1226
T: +632812-1718 to 24F: +632813-6539E: [email protected]
W: www.rsbernaldo.eom
BOA/PRe No. 0300SEe Group A AccreditedBSP Group B AccreditedCDA CEA AccreditedIe Accredited
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RSS R.S. BERNALDO & ASSOCIATES worldwide
REPORT ON THE INDEX AND SUPPLEMENTARY SCHEDULES
The Board of Directors and StockholdersI-REMITINC.26/F Discovery Centre, 25 ADB AvenueOrtigas Centre, Pasig City
We have issued our report dated March 21, 2014 on the basic separate financial statementsof I-REMIT INC. as of and for the period December 31, 2013. Our audit was conducted forthe purpose of forming an opinion on the basic separate financial statements of I-REMIT INC.taken as a whole. The information in the index to the separate financial statements andsupplementary schedules as of and for the period December 31, 2013, which is not a requiredpart of the separate financial statements, is required to be filed with the Securities andExchange Commission (SEC). Such information is the responsibility of the Management ofI-REMIT INC. The information has been subjected to the auditing procedures applied in ouraudit of the basic separate financial statements. In our opinion, the information is fairly statedin all material respects in relation to the basic separate financial statements taken as a whole.
R.S. BERNALDO & ASSOCIATESBOA/PRCNo. 0300Valid until December 31, 2015SECGroup A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSPGroup B AccreditedValid until February 14, 2014CDA CEA No. 0013-AFValid until November 17, 2016IC Accreditation No. F-2013/002-0Valid until March 26, 2016
Rj(tK~Managing PartnerCPA Certificate No. 25927SECGroup A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSPGroup B AccreditedValid until February 14, 2014BIRAccreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No.1 09-227-722PTRNo. 4232656Issued on January 6, 2014 at Makati City
RSBA20YEARS
A: 18/F Cityland Condominium 10 Tower 1156 HV. dela Costa Street. Ayala North.
Makati City. Philippines 1226
T: +632812-1718 to 24
F: +632 813-6539E: [email protected]
W: www.rsbernaldo.eom
BOA/PRe No. 0300SEe Group A AccreditedBSP Group B AccreditedCDA CEA Accreditedf C Accredited
March 21,2014
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I-REMIT INC.
INDEX TO THE SEPARATE FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
DECEMBER 31, 2013
Schedule Content
Part 1
Schedule of Retained Earnings Available for Dividend
Declaration
(Part 1 4C, Annex 68-C)
Schedule of all effective standards and interpretations under
PFRS
(Part 1 4J)
IIIMap showing relationships between and among parent,
subsidiaries, an associate, and joint venture (Part 1 4H)
Part 2
A Financial Assets
B
Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other than
Affiliates)
CReceivable from Related Parties Eliminated during the
Consolidation of Financial Statements
D Intangible Assets - Other Assets
E Long-Term Debt
FIndebtedness to Related Parties (included in the consolidated
statement of position)
G Guarantees of Securities of Other Issuers
H Capital Stock
IV Schedule of Financial Soundness Indicators (Part 1 4D)
Other Required Information
19
15
16
17
18
14
Page No.
I 2
II 3
8
9
10
13
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Schedule I
I-REMIT INC.
SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
DECEMBER 31, 2013
P 48,401,371
41,360,485
Less:Dividend declarations during the year - Property 69,209,688
Dividend declarations during the year - Cash 25,031,512
Derecognition of Dividend Income from an Associate 19,889,480
Unrealized FX Gains (Loss) this last year -reversal (2007) 128,700
Appropriations of retained earnings 11,475,190
Sub-total 125,734,570
Add:Reissuance of treasury stock 68,284,569
Unrealized foreign exchange loss - net 1,186,515
Realized income categorized as unrealized in previous years 987,177
Prior Year Adjustment on Revised PAS19 965,468
Sub-total 71,423,728
(12,950,357)
P 35,451,014
Unappropriated Retained Earnings, Beginning
Net income based on the face of audited financial statements
Net loss actual/realized
Unappropriated Retained Earnings, Ending
2
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Schedule II
I-REMIT INC.
SCHEDULE OF EFFECTIVE STANDARDS AND INTERPRETATIONS
DECEMBER 31, 2013
a
a
a
a
a
a
a
a
a
a
a
PFRS 5 aNon-current Asset Held for Sale and
Discontinued Operations
a
PFRS 4
Insurance Contracts
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
PFRS 2
Share-based Payment
Amendments to PFRS 2: Vesting Conditions and
Cancellations
Amendments to PFRS 2: Group Cash-Settled
Share-based Payment Transactions
PFRS 3
(Revised)Business Combinations
Philippine Financial Reporting Standards
PFRS 1
(Revised)
First-time Adoption of Philippine Financial
Reporting Standards
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled
Entity or Associate
Amendments to PFRS 1: Additional Excemptions
for First-time Adopters
Amendment to PFRS 1: Limited Exception from
Comparative PFRS 7 Disclosures for first-time
Adopters
Amendments to PFRS 1: Severe Hyperinflation
and Removal of Fixed Date for First-time
Adopters
Amendments to PFRS 1: Government Loans
Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS Effective as of December 31, 2013Adopted
Not
Adopted
Not
Applicable
aFramework for the Preparation and Presentation of Financial
Statements
a
3
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PFRS 6 a
a
a
a
a
a
a
a
a
PFRS 8 a
a
a
PFRS 10 a
PFRS 11 a
PFRS 12 a
PFRS 13 a
a
a
a
a
PAS 2 a
PAS 7 a
PAS 8 a
PAS 10 a
PAS 11 a
Amendments to PAS 1: Presentation of items
Other than Comprehensive Income
Inventories
Statement of Cash Flows
Accounting Policies, Changes in Estimates and
Errors
Events After the Balance Sheet Date
Construction Contracts
Joint Arrangements
Disclosure of Interest in Other Entities
Fair Value Measurements
Philippine Accounting Standards
PAS 1
(Revised)
Presentation of Financial Statements
Amendments to PAS 1: Capital Disclosures
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on
Amendments to PFRS 7: Mandatory Effective
Date of PFRS 9 and Transition Disclosures
Operating Segments
PFRS 9
Financial Instruments
Amendments to PFRS 9: Mandatory Effective
Date of PFRS 9 and Transition Disclosures
Consolidated Financial Statements
Exploration for and Evaluation of Mineral
Resources
PFRS 7
Financial Instruments: Disclosures
Amendments to PFRS 7: Transition
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets - Effective
Date and Transition
Amendments to PFRS 7: Improving Disclosures
about Financial Instruments
Amendments to PFRS 7: Disclosures - Transfer
of Financial Assets
Amendments to PFRS 7: Disclosures - Offsetting
Financial Assets and Financial Liabilities
4
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a
a
PAS 16 a
PAS 17 a
PAS 18 a
a
a
PAS 19
(Amended)a
PAS 20 a
a
a
PAS 23
(Revised)a
PAS 24
(Revised)a
PAS 26 a
PAS 27
(Amended)a
PAS 28
(Amended)a
PAS 29 a
PAS 31 a
a
a
a
a
PAS 33 a
PAS 34 a
PAS 36 a
PAS 37 a
PAS 38 a
Earning Per Share
interim Financial Reporting
Impairment of Assets
Provision, Contingent Liabilities and Contingent
Assets
Intangible Assets
Interests in Joint Ventures
PAS 32
Financial Instruments: Disclosure and
Presentation
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on
Liquidation
Amendments to PAS 32: Classification of Right
Issues
Amendment to PAS 32: Offsetting Financial
Assets and Financial Liabilities
Borrowing Cost
Related Party Disclosures
Accounting and Reporting by Retirement Benefit
Plans
Separate Financial Statements
Investments in Associates and Joint Ventures
Financial Reporting in Hyperinflationary Economy
PAS 19
Employee Benefits
Amendments to PAS 19: Actuarial Gains and
Losses, Group Plans and Disclosures
Employee Benefits
Accounting for Government Grants and
Disclosure of Government Assisstance
PAS 21
The Effect of Changes in Foreign Exchange
Rates
Amendment: Net Investment in a Foreign
Operation
PAS 12
Income Taxes
Amendments to PAS 12 - Deferred Tax:
Recovery of Underlying Assets
Property, Plant and Equipment
Leases
Revenue
5
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a
a
a
a
a
a
a
PAS 40 a
PAS 41 a
a
IFRIC 1 a
IFRIC 4 a
IFRIC 5 a
IFRIC 6 a
IFRIC 7 a
IFRIC 8 a
a
a
IFRIC 10 a
IFRIC 11 a
IFRIC 12 a
IFRIC 13 a
Interim Financial Reporting and Impairment
PFRS 2- Group and Treasury Share Transactions
Service Concession Arrangements
Customer Loyalty Programs
Rights to Interests arising from
Decommissioning, Restoration and
Environmental Rehabilitation Funds
Liabilities arising from Participating in a Specific
Market-Waste Electrical and Electronic
EquipmentApplying the Restatement Approach under PAS
29 Financial Reporting in Hyperinflationary
Economies
Scope of PFRS 2
IFRIC 9
Reassessment of Embedded Derivatives
Amendments to Philippine Interpretation IFRIC-9
and PAS 39: Embedded Derivatives
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning,
Restoration and Similar Liabilities
Member's Share in Co-operative Entities and
Similar Instruments
Determining Whethter an Arrangement Contains
a Lease
Amendments to PAS 39: Reclassification of
Financial Assets
Amendments to PAS 39 and PFRS 7:
Reclassification of Financia Assets - Effective
Date and Transition
Amendments to Philippine Interpretation IFRIC-9
and PAS 39: Embedded Derivatives
Investment Property
Agriculture
PAS 39
Financial Instruments: Recognition and
Measurement
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial
Liabilities
Amendments to PAS 39: Cash Flow Hedge
Accounting of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
6
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a
a
IFRIC 16 a
IFRIC 17 a
IFRIC 18 a
IFRIC 19 a
IFRIC 20 a
SIC - 7 a
SIC - 10 a
a
a
SIC - 13 a
SIC - 15 a
SIC - 21 a
SIC - 25 a
SIC - 27 a
SIC - 29 a
SIC - 31 a
SIC - 32 a
Income Taxes - Recovery of Revalued Non-
Depreciable Assets
Income Taxes - Changes in the Tax Status of
an Entity or its Shareholders
Evaluating the Substance of Transactions
Involving the Legal Form of a Lease
Service Concession Arrangements: Disclosures
Revenue - Barter Transaction Involving
Advertising Services
Intangible Assets - Web Site Costs
Government Assisstance - No Specific Relation
to Operating Activities
SIC - 12Consolidation - Special Purpose Entities
Amendments to SIC - 12: Scope of SIC 12
Jointly Controlled Entities - Non-Monetary
Contributions by Venturers
Operating Leases - Incentives
Hedges of a Net Investment in a Foreign
Operation
Distribution of Non-Cash Assets to Owners
Transfer of Assets from Customers
Extinguishing Financial Liabilities with Equity
Instruments
Stripping Costs in the Production Phase of a
Surface Mine
Introduction of the Euro
IFRIC 14
The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
Amendments to Philippine Interpretations IFRIC -
14, Prepayments of a Minimum Funding
Requirement
7
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Schedule III
I-REMIT INC.
MAP SHOWING RELATIONSHIPS BETWEEN AND AMONG PARENT,
SUBSIDIARIES, AN ASSOCIATE, AND JOINT VENTURE
STAR Equities Inc.
29.3931352 %
JTKC Equities, Inc.
21.4474437%
Surewell Equities, Inc
23.5216349%
JPSA Global Services Co.
3.2908290%
Public
22.3469572%
I-Remit, Inc.
Ownership Structure
International Remittances (Canada) Ltd.
100%
Lucky Star Management Limited (Hong Kong)
100%
IRemit Global Remittance Limited (UK)
100%
Worldwide Exchange Pty Ltd *
100%
IREMIT Remittance Consulting GmbH (Austria)
100%
*Consisting of 70% direct ownership and 30% indirect ownership through I-Remit Australia Pty Ltd, a wholly-owned subsidiary.
** An associate
I-Remit New Zealand Limited
100%
Hwa Kung Hong & Co. Ltd. (Taiwan)**
49%
K.K. I-REMIT JAPAN
100%
Power Star Asia Group Limited
100%
8
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I-REMIT INC.
Schedule A – Financial Assets
DECEMBER 31, 2013
None to Report
Number of shares or principal
amount of bonds or notes
Amount shown on the balance
sheetIncome accrued
Name of issuing entity and
association of each issue
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I-REMIT INC.
Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Related Parties)
DECEMBER 31, 2013
Name of Debtor
Balance at
beginning of
period
Additions Amounts
Collected
Amounts
Written-off Current Non- Current
Balance at end of
period
Alma Buella P - P 37,568.71 P 32,000.00 P - P 5,568.71 P - P 5,568.71
Alma Mendoza - 2,229.33 550.00 - 1,679.33 - 1,679.33
Analie Angeles - 401,675.00 9,151.84 - 392,523.16 - 392,523.16
Analiza S. Bismonte 10,764.69 37,028.46 47,793.15 - - - -
Arnold Ebid Francia - 856.01 - - 856.01 - 856.01
Bansan Choa - 26,410.22 20,167.84 - 6,242.38 - 6,242.38
Bernadette Cindy Tiu 689,384.80 400,000.00 576,887.59 - 512,497.21 - 512,497.21
Bryan Johnson Lim - 41,620.00 - 41,620.00 - 41,620.00
Catherine Chan 436.24 90,436.24 90,872.48 - 0.00 - 0.00
Charlotte Jennifer D. Lapore- 1,170.00 585.00 - 585.00 - 585.00
Christopher Martin Eusebio 3,801.06 - 3,801.06 - (0.00) - (0.00)
Claire Panes 67.50 - 67.50 - - - -
Clarissa Celestino 198.34 - 198.34 - - - -
Dennis Jugo - 65,978.50 65,442.50 - 536.00 - 536.00
Desiderio Jr. Dumalag 28,524.49 1,029.58 14,585.76 - 14,968.31 - 14,968.31
Dina Simbulan 56,123.61 - 56,123.61 - - - -
Elisa Cerdan 34.53 - 34.53 - - - -
Eva Preciosa Ramos - 1,243.77 - - 1,243.77 - 1,243.77
Evelyn Galo - 24,477.60 5,000.00 - 19,477.60 - 19,477.60
Fatima Ramos 198.34 - 198.34 - - - -
Fitzgerald Duba - 1,332,500.00 690,833.35 - 641,666.65 - 641,666.65
Flora Mae V. Batisla-On - 10,844.95 - - 10,844.95 - 10,844.95
Geraldine Joy A. Guisper - 366.71 - - 366.71 - 366.71
Gilbert Gaw 2,580.00 - 2,580.00 - - - -
Glen Igual 589,100.02 450,000.00 593,233.48 - 445,866.54 - 445,866.54
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I-REMIT INC.
Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Related Parties)
DECEMBER 31, 2013
Name of Debtor
Balance at
beginning of
period
Additions Amounts
Collected
Amounts
Written-off Current Non- Current
Balance at end of
period
Griselda Marie M. Martin - 484,606.00 30,000.00 - 454,606.00 - 454,606.00
Harris Jacildo 925,925.80 400,000.00 622,222.24 - 703,703.56 - 703,703.56
Heidy Sandra De Dios - 3,650.00 3,650.00 - - - -
Ian Chryzl Gonzales 2,999.40 - 2,999.40 - - - -
Imelda Ambrosio - 2,658.79 - - 2,658.79 - 2,658.79
Jacklyn K. Genabe - 854.91 - - 854.91 - 854.91
Jennifer Itable 5.00 5.00 10.00 - - - -
Jerome V. Jayco - 390.00 - - 390.00 - 390.00
Jess Mar Bautista - 390.00 - - 390.00 - 390.00
Jesus Mel Sayo 73,772.17 155.00 73,927.17 - - - -
Jonathan Bunag 14,143.42 - - - 14,143.42 - 14,143.42
Jorie Perena - 1,377.37 - - 1,377.37 - 1,377.37
Jose III Maceda - 1,786,380.00 1,311,379.99 - 475,000.01 - 475,000.01
Joselyn Bagalan 2,576.64 2,576.64 - - - -
Juliet Santos 3.12 - 3.12 - - - -
Junell Dassun 16,086.31 - - - 16,086.31 - 16,086.31
Justine Castellon 272,309.52 - 272,309.52 - - - -
Kristal Airess Angeles 290.62 290.62 581.24 - - - -
Kristie Anne Hernandez - 406,310.76 295,983.22 - 110,327.54 - 110,327.54
Lourdjenn Padlan - 21,883.33 8,114.71 - 13,768.62 - 13,768.62
Ma. Eliza Batang 198.33 0.01 198.34 - - - -
Ma. Katrina Relopez - 4,984.97 - - 4,984.97 - 4,984.97
Ma.Cristina Pardeno - 21,883.33 8,114.71 - 13,768.62 - 13,768.62
Maria Cristina Castillejo 360,572.00 300,000.00 394,555.80 - 266,016.20 - 266,016.20
Maria Cristina R. Benter - 2,937.63 - - 2,937.63 - 2,937.63
Maria Elizabeth Yao - 61,575.95 - - 61,575.95 - 61,575.95
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I-REMIT INC.
Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Related Parties)
DECEMBER 31, 2013
Name of Debtor
Balance at
beginning of
period
Additions Amounts
Collected
Amounts
Written-off Current Non- Current
Balance at end of
period
Maria Gracia T. Lim 88.75 11,913.47 88.75 - 11,913.47 - 11,913.47
Maria Lourdes Maglatang - 3,829.45 1,000.00 - 2,829.45 - 2,829.45
Maricar Ryka Aguinaldo - 1,627.22 - - 1,627.22 - 1,627.22
Marie Fe Oporto 3,480.44 968.34 - - 4,448.78 - 4,448.78
Marivic Chaw 15,093.06 33,522.00 25,873.06 - 22,742.00 - 22,742.00
Marlon Dayao - 14,837.12 3,500.00 - 11,337.12 - 11,337.12
Mary Grace Daguman - 996.36 - - 996.36 - 996.36
Mary Jean Jetomo 61.45 997.12 61.45 - 997.12 - 997.12
May-I Yumol - 992.09 850.00 - 142.09 - 142.09
Michael Angelo C. Barcelon- 1,991.59 - - 1,991.59 - 1,991.59
Michael Chavez - 2,338.17 - - 2,338.17 - 2,338.17
Noville D. Ungriano - 2,204.53 - - 2,204.53 - 2,204.53
Philip Nicholas Laurel - 3,906.59 1,005.00 - 2,901.59 - 2,901.59
Regina Shimamoto 635,100.00 500,000.00 631,400.00 - 503,700.00 - 503,700.00
Rennced Filipina A. Razo - 1,827.96 - - 1,827.96 - 1,827.96
Rocky Flores 66,488.90 - 52,024.15 - 14,464.75 - 14,464.75
Rommel Rosario - 409.00 409.00 - - - -
Rona Ramos - 2,990.00 2,990.00 - - - -
Ronald Santos 222,362.45 - - - 222,362.45 - 222,362.45
Salome V. Dalipe - 3,967.69 - - 3,967.69 - 3,967.69
Severino Lagan 18,749.99 676.48 9,369.76 - 10,056.71 - 10,056.71
Shermaine Salinas - 32,980.00 - - 32,980.00 - 32,980.00
Shiela Marie C. Cercado - 1,239.25 - - 1,239.25 - 1,239.25
TOTAL P 4,011,520.99 P 7,049,983.18 P 5,965,303.64 P - P 5,096,200.53 P - P 5,096,200.53
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I-REMIT INC.
Schedule C - Amounts Receivable from Related Parties which are eliminated
during the consolidation of financial statements
DECEMBER 31, 2013
Amount/ Outstanding
Volume Balances
Lucky Star management Limited
Remittance P 1,006,973,117 P 17,896,635
Due from 3,387,829 12,286,251
Delivery fee 6,501,360 118,457
IRemit Global Remittance Limited
Remittance 6,590,684,104 297,844,190
Due from 73,983,569 51,077,070
Delivery fee 25,331,309 2,914,516
Service income 491,680 53,789
Worldwide Exchange Pty Ltd
Remittance 5,409,896,230 45,625,488
Due from 5,595,241 4,266,439
Delivery fee 25,034,377 308,174
International Remittance (Canada) Ltd.
Remittance 9,516,679,459 260,711,907
Due from 5,145,952 281,016
Delivery fee 57,951,323 2,235,718
I-Remit New Zealand Limited
Remittance 1,194,704,130 18,811,168
Due from 3,103,915 19,175,580
Delivery fee 4,649,338 101,338
IREMIT Remittance Consulting GmbH
Remittance 32,049,347 -
Due from 11,222,594 24,880,481
Delivery fee 219,027 -
K.K. Iremit Japan
Remittance 1,122,988,072 33,770,470
Due from 28,137,198 61,107,201
Delivery fee 2,346,152 113,872
I-Remit Australia Pty Ltd
Remittance 5,699,018,165 5,155,573
Due from 1,837,911 450,093
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I-REMIT INC.
Schedule D - Intangible Assets - Other Assets
DECEMBER 31, 2013
Description Beginning Balance Additions at CostCharged to cost
and expenses
Charged to other
accounts
Other changes
additions (deductions)Ending Balance
Software 1,404,816 13,083 (815,898) - - 602,001
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I-REMIT INC.
Schedule E - Long-Term Debt
DECEMBER 31, 2013
Interest Rate
%
None to Report
Title of issue and type of
obligation
Amount authorized
by indenture
Amount shown under caption
“Current portion of long-term debt’
in related balance sheet
Amount shown under caption
“Long-Term Debt” in related
balance sheet
Maturity
Date
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I-REMIT INC.
Schedule F - Indebtedness to Related Parties
(Included in the consolidated statement of financial position)
DECEMBER 31, 2013
Name of Related PartiesBalance at beginning of
periodBalance at end of period
None to Report
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I-REMIT INC.
Schedule G - Guarantees of Securities of Other Issuers
DECEMBER 31, 2013
Name of issuing entity
of securities guaranteed
by the company for
which this statement is
filed
Title of issue of each class of
securities guaranteed
Total amount of guaranteed
and outstanding
Amount owned by person of
which statement is filedNature of guarantee
None to Report
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I-REMIT INC.
Schedule H - Capital Stock
DECEMBER 31, 2013
Title of IssueNumber of shares
authorized
Number of shares issued
and outstanding as shown
under the related balance
sheet caption
Number of shares
reserved for options,
warrants, conversion
and other rights
Number of shares
held by related
parties
Directors,
officers and
employees
Others
Common stock - 1
par value 1,000,000,000 617,725,800 - 476,351,818 4,898,371 137,084,304
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I-REMIT INC.
SCHEDULE IV - FINANCIAL SOUNDNESS INDICATORS
For the Years Ended December 31, 2013, 2012 and 2011
2013 2012 2011
A. SHORT-TERM LIQUIDITY RATIO
CURRENT RATIO 1.40 3.98 1.90
Current Assets 2,625,471,084 2,247,005,517 1,830,963,405
Current Liabilities 1,870,721,348 564,886,806 961,655,513
WORKING CAPITAL TO ASSETS 0.25 0.66 0.40
(Current Assets - Current Liabilities) 754,749,736 1,682,118,711 869,307,892
Total Assets 2,962,807,891 2,567,972,205 2,148,938,567
B. LONG-TERM SOLVENCY
DEBT TO EQUITY 1.72 1.23 0.81
Total Liabilities 1,874,089,867 566,195,749 962,720,291
Shareholders' Equity 1,088,718,024 459,050,656 1,186,218,276
LONG-TERM DEBT TO EQUITY - - -
Long-Term Debt - - -
Shareholders' Equity 1,088,718,024 459,050,656 1,186,218,276
FIXED ASSETS TO EQUITY 0.01 0.02 0.01
(Fixed Assets - Accumulated Depreciation) 8,219,803 8,901,653 7,094,474
Shareholders' Equity 1,088,718,024 459,050,656 1,186,218,276
CREDITORS EQUITY TO TOTAL ASSETS 0.63 0.22 0.45
Total Liabilities 1,874,089,867 566,195,749 962,720,291
Total Assets 2,962,807,891 2,567,972,205 2,148,938,567
FIXED ASSETS TO LONG-TERM DEBT - - -
(Fixed Assets - Accumulated Depreciation) 8,219,803 8,901,653 7,094,474
Long-Term Debt - - -
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C. RETURN ON INVESTMENTS
RATE OF RETURN ON TOTAL ASSETS 0.01 0.01 0.03
Net Income 41,360,485 26,232,698 55,969,401
Average Total Assets 2,765,390,048 2,358,455,386 2,223,528,328
RATE OF RETURN ON EQUITY 0.05 0.03 0.05
Net Income 41,360,485 26,232,698 55,969,401
Average Stockholders' Equity 773,884,340 822,634,466 1,172,829,810
D. PROFITABILITY RATIOS
GROSS PROFIT RATIO 0.60 0.61 0.64
Gross Income 289,200,014 285,062,871 314,755,047
Revenues 481,682,380 470,199,179 490,087,163
OPERATING INCOME TO REVENUES 0.19 0.19 0.24
Income from Operations 91,706,731 87,648,873 118,412,406
Revenues 481,682,380 470,199,179 490,087,163
PRETAX INCOME TO REVENUES 0.12 0.09 0.16
Pretax Income 59,113,492 41,580,450 80,089,866
Revenues 481,682,380 470,199,179 490,087,163
NET INCOME TO COMMISSION INCOME 0.09 0.06 0.11
Net Income 41,360,485 26,232,698 55,969,401
Revenues 481,682,380 470,199,179 490,087,163
E. INTEREST COVERAGE RATIO
INTEREST COVERAGE RATIO 3 2 3
Eanings Before Interest and Tax 91,706,731 87,648,873 118,412,406
Interest Expense 32,593,239 46,068,423 38,322,540
20