Annual Report for the year ended 31 December 2012 - I

Transcription

1!I~!Jtlr
www.myiremit.com
May 16, 2013
THE PHILIPPINE STOCK EXCHANGE, INC.
3rd Floor, Philippine Stock Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Metro Manila
Attention
Ms. Janet A. Encarnacion
Head, Disclosure Department
Gentlemen:
In accordance with the Securities Regulation Code, we are submitting herewith a copy of
SEC Form 17-A (Annual Report) of I-Remit, Inc. as at December 31,2012.
Thank you.
Very truly yours,
. JACILDO
hief Operating Officer
I-Remit, Inc.
26/F Discovery Centre, 25 ADB Avenue, Qrtigas Center, Pasig City 1605 Philippines
Telephone: (632) 706-9999 and (632) 706-2737
Facsimile: (632) 706-2767
COVER SHEET
A 2 0 0 1 0 1 6 3 1
SEC 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
n u e ,
O r t i g a s
C e n t r e ,
C e n t e r ,
2 5
P a s i g
A D B
A v e
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
Month
Day
(Fiscal Year)
1 7 - A
0 7
(Form Type)
Month
Day
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
Foreign
SEC Number
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, 2012
Period Ended Date
(Secondary License Type and File Number)
A200101631
f'
SECURITIES
AND EXCHANGE
A
COMMISSION
D
SEC FORM
17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES
REGULATION
CODE AND SECTION
OF THE CORPORATION
CODE OF THE PHILIPPINES
1.
For the fiscal year ended
2.
Commission
4.
Exact name of registrant as specified in its charter
5.
December
Identification
No.
31,2012
A200101631
3.
BIR Tax Identification
I-REMIT,
No.
_M::-=-=e..:.:tr,.=o....::.M:.::,a=::n=i1:=a:z...'
P::...;H:..:.:..:IL=-:Ic::-P.::..P.:.:IN,.:..:E=::S=-:-:----:-_::--_
6. _,.
(SEC Use Only)
Province, Country or other jurisdiction of
Industry Classification Code
incorporation or organization
26/F Discovery Centre, 25 ADB Avenue, Ortigas
Address of principal office
8.
(02) 706 - 9999 Local 100/105/109
Issuer's telephone number, including area code
9.
Not applicable
Former name, former address, and former fiscal year, if changed since last report
Center, Pasig City, Metro Manila
1605
Postal code
Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA
Title
Common
II.
210-407-466-000
INC.
7.
10.
141
Number of Shares of Common Stock
Outstanding and Amount of Debt Outstanding
Stock
597,138,800
shares (as of December
31,2012)
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
Section 11 of the RSA
Code of the Philippines
registrant was required
required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or
and RSA Rule II(a)-1 thereunder, and Sections 26 and 141 of The Corporation
during the preceding twelve (12) months (or for such shorter period that the
to file such reports)
No [ ]
(b) has been subject to such filing requirements
for the past 90 days
No [ ]
13.
Aggregate market value of the voting stock held by non-affiliates of the registrant:
PHP 1,666,017,252 (as of December 31, 2012, PHP 2.79 per share)
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference in any part of this report:
2012 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)
TABLE OF CONTENTS
PART I
BUSINESS AND GENERAL INFORMATION
Item 1
Item 2
Item 3
Item 4
Business
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
PART II
OPERATIONAL AND FINANCIAL INFORMATION
Item 5
Item 6
Item 7
Item 8
Market for Issuer’s Common Equity and Related Stockholder Matters
Management’s Discussion and Analysis or Plan of Operation
Financial Statements
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
PART III
CONTROL AND COMPENSATION INFORMATION
Item 9
Item 10
Item 11
Item 12
Directors and Executive Officers of the Issuer
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Party Transactions
61
72
73
75
PART IV
Item 13
CORPORATE GOVERNANCE
Corporate Governance
78
PART V
EXHIBITS AND SCHEDULES
Item 14
a.
b.
Exhibit
Reports on SEC Form 17-C
SIGNATURES
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
INDEX TO EXHIBIT
1
33
35
35
36
41
59
59
79
79
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 PagIBIG), 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 25 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. iRemit’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,
1
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 crossborder services. I-Remit started its second Asian operation in Singapore through IRemit
Singapore Pte Ltd, which commenced its commercial operations in October 2001. I-Remit
acquired 49% ownership in the said company in June 2007. I-Remit further expanded in Asia
through a tie-up in Taiwan, Hwa Kung Hong & Co., Ltd., which became operational in 2001. IRemit 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, IRemit 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.
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.
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.
2
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
iVantage Corporation
Ben C. Tiu
Wilson L. Sy
Willy N. Ocier
William L. Chua
Juan G. Chua
David R. de Leon
Randolph C. de Leon
TOTAL
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
No. of Shares
Subscribed
999,993
1
1
1
1
1
1
1
1,000,000
Amount of Capital
Stock Subscribed
(PHP)
99,999,300.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100,000,000.00
Amount Paid on
Subscription (PHP)
49,999,300.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
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
JTKC Equities, Inc.
Surewell Equities, Inc.
JPSA Global Services Co.
TOTAL
Filipino
Filipino
Filipino
No. of Shares
Subscribed
650,000
300,000
50,000
1,000,000
Amount of Capital
Stock Subscribed
(PHP)
65,000,000.00
30,000,000.00
5,000,000.00
100,000,000.00
Amount Paid on
Subscription (PHP)
32,500,000.00
15,000,000.00
2,500,000.00
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.
2.
3.
4.
Reduction of par value per share from PHP 100.00 to PHP 1.00 per share;
Increase in authorized capital stock from PHP 200 million to PHP 1.0 billion;
Denial of pre-emptive rights;
Authority of the Board of Directors to grant stock options, issue warrants or enter into
stock purchase or similar agreements;
On the By-Laws
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Period for closing of stock and transfer book or fixing of record date;
Period for notice of stockholders’ meeting;
Deadline for the submission / revocation of proxies;
Number, term of office, qualifications, and disqualifications;
Additional requirements for independent directors;
Election of directors;
Place of meeting of the Board of Directors;
Vacancies;
Constitution of a Nomination Committee; and
The addition of one or more Vice Chairmen to the list of officers of the Company.
3
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
Star Equities Inc.
JTKC Equities, Inc.
TOTAL
Nationality
No. of Shares
Subscribed
Filipino
Filipino
Filipino
Filipino
158,418,225
119,100,000
99,631,775
19,850,000
397,000,000
Amount of Capital
Stock Subscribed
(PHP)
158,418,225.00
119,100,000.00
99,631,775.00
19,850,000.00
397,000,000.00
Amount Paid on
Subscription (PHP)
158,418,225.00
119,100,000.00
99,631,775.00
19,850,000.00
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).
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 (9,956,100 common shares offered), and JPSA Global Services Co.
(1,659,350 common shares offered) pursuant to a secondary offer.
4
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
investor confidence in the Company. A total of 10,000,000 shares have been purchased and
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
investor confidence in the Company. A total of 587,000 shares have been purchased and
As of March 31, 2013, the Company’s capital structure is as follows:
Name
Star Equities Inc.
JTKC Equities, Inc.
Public
Total, March 31, 2013
Nationality
Filipino
Filipino
Filipino
Filipino
Various
No. of Shares
Subscribed
174,260,047
139,450,290
127,153,247
19,510,000
133,677,216
594,050,800
Amount of Capital
Stock Subscribed
(PHP)
174,260,047.00
139,450,290.00
127,153,247.00
19,510,000.00
133,677,216.00
594,050,800.00
% to Total
Number of
Shares
29.3342
23.4745
21.4044
3.2842
22.5027
100.0000
The Company’s general expansion plans in 2013 include the opening of new and/or additional
offices or the engagement of new tie-ups and partners in Ireland, Macau, Germany, the
Netherlands, Saudi Arabia, Oman, Qatar and Kuwait.
5
(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; Bathurst Street, Toronto, Ontario; Pacific Mall, Calgary, Alberta; 7th Avenue,
Calgary, Alberta; Edmonton, Alberta; Jamestown, Toronto, Ontario; Mississauga,
Ontario; 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 842,651 Filipinos in Canada as of December 2011.
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%. Pursuant to subsection 75C(2) of the Anti-Money Laundering
and Counter-Terrorism Financing Act 2006 of Australia, I-Remit Australia Pty Ltd is
registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) as
an affiliate of I-Remit, Inc. with remittance affiliate number AFF100314117-001 with
effect from October 22, 2012 and valid for three (3) years thereafter. 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.
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
6
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 25,112 Filipinos in Austria as of
December 31, 2011 who were mostly employed in the nursing field and other skilled
and semi-skilled occupational groups.
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. The
company is registered with Her Majesty’s Customs and Excise with money laundering
registration number 1213085 with certificate of registration issued on May 22, 2012 and
expiring on June 1, 2013 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 220,000 Filipinos in the United
Kingdom who 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 North Park,
Manukau. The company started operating commercially on February 13, 2008. The
Commission on Filipinos Overseas estimated that there were 35,175 Filipinos in New
Zealand as of December 2011.
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.
The Commission on Filipinos Overseas estimated that there were 174,851 Filipinos in
Hong Kong as of December 2011.
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
7
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 384,637
Filipinos in Australia as of December 2011.
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 220,882 Filipinos in Japan as of December 31,
2011.
The Company’s associates are as follows:
IRemit Singapore Pte Ltd (49% owned) is a private limited company that was
incorporated on May 11, 2001 and is registered in the Registry 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. 01038 valid until December 31,
2013 and renewable every year. It started commercial operations in October 2001.
The Commission on Filipinos Overseas estimated that there were 180,000 Filipinos in
Singapore as of December 2011.
Hwa Kung Hong & Co. Ltd. (49% owned) is registered with the Department of Foreign
Exchange, the Central Bank of China with Issued Document No. Taipei Central No.
0980000061. It has offices in Taipei and Kaohsiung. The Commission on Filipinos
Overseas estimated that there were 93,896 Filipinos in Taiwan as of December 2011.
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, 2012,
there were 9,472 bank branches and 12,285 ATMs in
the Philippines.
Door-to-Door
Delivery of cash remittances to designated
beneficiaries through third party couriers. I-Remit has
the widest delivery reach nationwide, capable of
delivering cash remittances within the day for
beneficiaries in Metro Manila and the province of Rizal.
Next-day deliveries may be made in the following cities
and provinces: Batangas, Bulacan, Cavite, Cebu,
Davao, Laguna, La Union, Pampanga, Pangasinan,
Tacloban, and Tarlac. Deliveries in other remote areas
may be made in two (2) to three (3) days or more
depending on the actual location of the beneficiary. IRemit can deliver in 17 regions, 79 provinces, and 136
cities and municipalities in the country.
8
Notify-to-Pay
Allows a beneficiary in the Philippines to pick-up a
remittance in any of I-Remit’s 9,559 pay-out stations
within 24 hours. These designated pay-out stations
number 2,843 in Metro Manila; 2,952 in the rest of
Luzon; 2,319 in the Visayas; and 1,445 in Mindanao. IRemit 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; Cebuana Lhuillier
Pera Padala; China Banking Corporation; CIS Bayad
Centers; 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; KwartaGram Corporation; Maybank
Philippines, Inc.; ML Kwarta Padala; One Network
Bank, Inc.; Philippine National Bank; Philippine
Savings Bank; Philippine Veterans Bank; Prime Asia
Pawn and Jewelry Shop, Inc.; Rural Bank of Malinao,
Inc.; 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.
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 10,000 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.
9
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, Inc.;
CDC Holdings, Inc.; Century Properties Group, Inc.;
CHMI Land, Inc.; C&P Properties International, Inc.;
Citihomes Builders and Development, 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 Phils., Inc.;
Fiesta Communities, Inc.; Hausland Development
Corporation; Homeowners Development Corporation;
Ledesco Development Corporation; LLSP
Development Corporation; Major Homes, Inc.; Major
Properties, Inc.; Malate Construction and Development
Corporation; Megaworld Corporation; Northpine Land,
Inc.; Phinma Property Holdings Corporation; PICAR
Development, Inc.; Pioneer Life, Inc.; Pueblo de Oro
Development Corporation; RJ Lhinet Development
Corporation; Robinson’s Homes, Inc.; SM
Development Corporation; SM Synergy Property
Holdings, Inc.; Surewell Equities, Inc.; Vistaland
International Marketing; CBN Asia, Inc.; Insular Life
Assurance Co., Ltd.; Jollibee Foods Corporation;
Nestle Philippines; Savers Appliance Depot (Sentine
Development Corporation); Suntrust Home
Developers, Inc.; Zalora Philippines (BF Jade EServices Phils., Inc.).
SMS (Short Message
Service) via Globe GCash 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.
10
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
2012
2011
2010
32%
32%
34%
11%
11%
11%
17%
18%
19%
12%
14%
15%
28%
25%
21%
100%
100%
100%
Region
Asia-Pacific
Europe
Middle East
North America
Others
Total
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
2012
2011
2010
42%
43%
43%
12%
11%
10%
30%
29%
29%
13%
14%
15%
3%
3%
3%
100%
100%
100%
Region
Asia-Pacific
Europe
Middle East
North America
Others
Total
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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 25 countries and territories:
Asia Pacific
Australia
Brunei
Hong Kong
Indonesia
Japan
Malaysia
New Zealand
People’s Republic of China
Singapore
Taiwan
Europe
Austria
Germany
Greece
Ireland
Italy
Spain
The Netherlands
United Kingdom
Middle East
Bahrain
Israel
Jordan
Lebanon
Qatar
United Arab Emirates
North America
Canada
The Company’s general expansion plans in 2013 include the opening of new and/or
additional offices or the engagement of new tie-ups and partners in Ireland, Macau,
Germany, the Netherlands, Saudi Arabia, Oman, Qatar and Kuwait.
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, 2012, there were 9,472 bank branches and 12,285 ATMs in the
Philippines.
I-Remit has the widest coverage in door-to-door delivery nationwide and is capable of
delivering cash remittances within the day for beneficiaries in Metro Manila and the
province of Rizal. Next-day deliveries may be made in the following cities and
provinces: Batangas, Bulacan, Cavite, Cebu, Davao, Laguna, La Union, Pampanga,
Pangasinan, Tacloban, and Tarlac. Deliveries in other remote areas may be made in
two (2) to three (3) days or 10 – 12 days depending on the specific location of the
beneficiary. I-Remit can deliver in 17 regions, 81 provinces, and 136 cities and
municipalities in the country.
Under the Company’s “Notify-to-Pay” services, remittances may be picked up by
beneficiaries in any of I-Remit’s 9,559 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 2013. 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.
12
Competition
Players
In its publication “Migration and Development Brief 20” (April 19, 2013), the World Bank
estimated that officially recorded remittances to developing countries reached USD 401
billion in 2012 growing by 5.3 percent compared with 2011. 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 (IX Special 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 emoney. 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.
13
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 welltested 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 lookout 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.
14
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 25 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.
The International Organization for Migration (IOM)'s report on ''Health in the Post-2015
Development Agenda'' cited that there are approximately 215 million international
migrants as of 2011. About 5% of this number or 10.46 million are overseas Filipinos in
about 217 countries and territories.
In 2011, the permanent migrants (47% or 4.86 million) comprise the largest category of
overseas Filipinos, followed closely by temporary migrants (43% or 4.51 million). The
irregular migrants (10% or 1.07 million) constitute the smallest category. Compared
with 2010 data, the number of permanent, temporary, and irregular migrants increased
by 10%, 4.36% and 52%, respectively.
Irregular migrants could be found mainly in the United States, Malaysia, and Singapore.
The large increase of irregular migrants in 2011 can mainly be traced to Malaysia’s
124% increase of irregular migrants from 200,000 in 2010 to 447,590 in 2011; and
United States’ 67% increase from 156,000 in 2010 to 260,000 in 2011.
The Philippine Overseas Employment Administration (POEA) also reported an increase
in the number of workers deployed which in 2012 grew by 6.7 percent at 1,800,465
against the 1,687,831 in 2011.
In its Migration and Development Brief 20 dated April 19, 2013, the World Bank
estimated that officially recorded remittances to developing countries are expected to
have reached USD 401 billion in 2012, up by 6.5% from USD 381 billion in 2011. The
top recipients of remittances in 2012 are: India (USD 70 billion); China (USD 66 billion);
the Philippines (USD 24 billion); Mexico (USD 24 billion); and Nigeria (USD 21 billion).
The Bangko Sentral ng Pilipinas (BSP) reported that the 2012 full-year personal
remittances of overseas Filipinos to the Philippines reached USD 23.8 billion, higher by
6.4% compared to the inflows recorded in 2011. 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 13.3%), as well as sea-based workers and landbased workers with short-term contracts (by 11.6%).
15
Cash remittances from overseas Filipinos coursed through banks reached USD21.4
billion for the full year 2012, posting an annual growth of 6.3% and exceeding the
BSP’s full-year growth projection of 5%. In particular, remittances from both sea-based
(USD4.8 billion) and land-based workers (USD16.6 billion) grew by 11.4% and 4.9%
respectively.
The resilience of overseas Filipino remittances continues to support the country’s
economic growth and development. In 2012, cash remittances from overseas Filipinos
coursed through banks represent about 6.5% of the country’s Gross National Income
(GNI) and 8.5% 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. In particular, preliminary reports by the POEA
indicated that a total of 29,533 approved job orders for January and February 2013
were mostly for service, production, professional, technical and related workers to meet
the manpower requirements in Saudi Arabia, the United Arab Emirates, Kuwait, Qatar,
and Taiwan.
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, 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, Ireland, Israel, Italy, Japan, Jordan, Lebanon, Malaysia, the
Netherlands, New Zealand, Qatar, 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
16
their respective countries and territories; and (iii) funds must first be deposited to an IRemit 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.
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 preneed 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, 2013. Pursuant to subsection 75C(2) of the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) of Australia, IRemit Australia Pty Ltd is registered with AUSTRAC as an affiliate of I-Remit, Inc., with
remittance affiliate number AFF100314117-001, with effect from October 22, 2012 and
valid for three (3) years thereafter.
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.
17
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 AntiMoney Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance
(Cap 615) with License No. 12-07-00326 from July 9, 2012 to August 8, 2014.
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 010001-140611. 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 is registered in the Registry 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 Moneychanging and Remittance Businesses Act (Cap 187) with RA No. 01132 valid until
December 31, 2013 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 May 22, 2012 and expiring on June 1, 2013 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 Department of Foreign Exchange, the
Central Bank of China with Issued Document No. Taipei Central No. 0980000061.
I-Remit, Inc. and its subsidiaries, associates, and affiliates offer their products and
services through the “I-Remit” trademark, salesmark, and/or trade name.
18
I-Remit has registered the following patents, trademarks and/or trade names:
Name/Trademark
I-Remit Name and Logo
Date Filed
January 20, 2004
Application No. 4-20040000529
I-Load
June 16, 2004
I-Travel
June 16, 2004
I-Pay
June 16, 2004
iDol
July 8, 2004
I-Serve
February 14, 2008
Application No. 4-2008-001818
I-Value
February 14, 2008
I-Reward
February 14, 2008
I-Care
February 14, 2008
I-Remit Trademark
June 23, 2006
e-Filing No. 125586
I-Remit Trademark
I-Remit Trademark
September 18, 2009
Application No. 145s2333
19
Date Registered
December 11, 2006
Registration No. 4-2004-000529
Registered for a term of 10 years
from date of registration
January 21, 2006
October 1, 2005
October 1, 2005
July 30, 2006
December 15, 2008
September 8, 2008
December 1, 2008
September 8, 2008
June 23, 2006
Trademark No. T06/12356G
Registry of Trademarks, Property
Office of Singapore
November 1, 2007
New Zealand Trademark Registration
No. 778760
Registration pending; for publication
in Trademarks Journal (Canada)
I-Remit has licenses to the following information technology software and systems used
in its operations:
Software / System,
Version
Enterprise Resource
Information and Control
(ERIC) Financial Suite
(General Ledger &
Accounts Payable)
Version 5.2, Jupiter
Systems, Inc.
Enterprise Resource
Information and Control
(ERIC) Payroll, Human
Resource Management,
Timecard, Version 5.2,
Jupiter Systems, Inc.
Microsoft SQL Server
2000 (Standard Edition),
Microsoft Corporation
Purpose
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.
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 recordkeeping. The Timecard
module is used in
recording and processing
employee working hours.
A relational data base
management system used
for the “back-end” data
base of I-Remit’s
remittance system
Microsoft SQL Server –
Enterprise Edition
A relational data base
management system used
for the “back-end” data
base of I-Remit’s
remittance system
Microsoft Exchange
Server, 2003 and 2007 –
Enterprise Edition
A messaging and
collaborative software
used for the electronic mail
system of I-Remit, Inc.
Internet Service
Accelerator 2004
Microsoft Office – Small
Business
Used as an internal firewall
Software used in creating
documents, files and
reports
20
Acquisition and
Effectivity
Version 3.2 acquired
in 2002; upgraded to
version 5.2 in 2006;
perpetual license
License / Renewal of
Maintenance Service
Support agreement is
renewed every year
Acquired in 2007;
perpetual license
renewed every year
Version 2000,
acquired on October
31, 2005; Version
2008, acquired on
February 27, 2009;
perpetual license
Version 2008,
acquired on February
27, 2009; perpetual
license
Software assurance
ended on February
28, 2011
Version 2003,
acquired on August
11, 2006; additional
licenses acquired on
September 27, 2007;
perpetual license
Acquired on August
11, 2006
Version 2003,
acquired on October
31, 2005; version
2007, acquired on
November 20, 2008;
perpetual license
Software assurance
ended on February
28, 2011
Software / System,
Version
Microsoft Windows
Server – Enterprise and
Standard Edition
Purpose
Operating system used in
servers
Power Builder
Software development tool
Kaspersky Anti-Virus
Anti-virus system
Adobe Acrobat Reader
Hitachi Data Protection
Suite (Commvault)
VeriSign SSL Certificate
File management
Backup and replication
software
SSL certificates for data
encryption
Organization Wildcard SSL
for *.iremit-inc.com
Provides a centralized and
extensible platform for
managing Virtual
Infrastructure
Virtualization platform for
building cloud
infrastructures
SQL Database
management and
development tools
GlobalSign SSL
Certificate
VMware vCenter Server
5 Standard for vSphere 5
VMware vSphere 5
Standard
ApexSQL Software
Acquisition and
Effectivity
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
Version 11.1,
acquired on
November 18, 2008
Open space security,
acquired in May 2009
Version 8 and 9
Version 7, 8 and 9,
acquired in 2009
Acquired in 2009
Acquired in 2012
Acquired in 2011
License / Renewal of
Maintenance Service
renewed every year
renewed every year
renewed every year
renewed every year
renewed every year
Acquired in 2011
renewed every year
Acquired in 2012
renewed every year
Need for Any Government Approval of Principal Products or Services
There are no new products or services that require government approval.
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.
21
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.
The POEA reported an increase in the number of workers deployed which in 2012 grew
by 6.7 percent at 1,800,465 against the 1,687,831 in 2011. Preliminary reports by the
POEA in 2013 indicated that a total of 29,533 approved job orders for January and
February were mostly for service, production, and professional, technical and related
workers to meet the manpower requirements in Saudi Arabia, the United Arab
Emirates, Kuwait, Qatar, and Taiwan.
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.
22
Employees
The Company has 347 employees including those directly employed by subsidiaries as
of December 31, 2012. These consist of 69 officers and 278 non-officers as follows:
Officers
46
23
69
Parent Company
Subsidiaries
Total
No. of Employees (December 31, 2012)
Non-Officers
151
127
278
Total
197
150
347
The Company projects no new additional personnel in 2013.
No. of Employees (December 31, 2012)
Parent Company
Subsidiaries
Total
26
8
34
56
4
60
17
17
24
17
41
74
121
195
197
150
347
Type
Administrative
Finance
Information Technology
Sales and Marketing
Service and Operations
Total
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 Parent Company has a 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 retirement cost of the Parent Company 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 plus amortization of past service cost, experience
adjustments and changes in actuarial assumptions over the expected average
remaining working lives of the covered employees. Cumulative actuarial gains and
losses in excess of the 10% of the greater between present value of the defined benefit
obligation and fair value of any plan assets were amortized over the expected average
remaining working lifetime of the employees and recognized as part of retirement
expense.
Past service cost is recognized immediately to the extent that the benefits are already
vested, and otherwise is amortized on a straight-line basis over the average period until
the benefits become vested.
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, expected
returns on plan assets and rates of compensation increase. In accordance with the
generally accepted accounting principles, actual results that differ from the assumptions
are accumulated and amortized over future periods and therefore, generally affect the
recognized expense and recorded obligation in such future periods. While the Group
23
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, 2012 and 2011, the Group has
recognized retirement asset amounting to PHP 2.2 million and PHP0.4 Million,
respectively. Retirement expense recognized in 2012, 2011 and 2010 amounted to
PHP 4.3 million, PHP 5.7 million and PHP 2.4 million, respectively.
The Group accrues benefit pursuant to the provision of the Retirement Pay Law under
non-contributory and of the defined benefit type which provides a retirement benefit
equal to one hundred percent (100%) of Plan Salary for every year of Credited Service.
The most recent actuarial valuations of plan assets and the present value of the defined
benefit obligation were carried out at December 31, 2012 by E.M. Zalamea Actuarial
Services, Inc. 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.
The principal assumptions used for the purposes of the actuarial valuations were as
follows:
2012
5.86%
8.00%
7.50%
33.10
Discount rate
Future salary increases
Expected return on plan assets
Average remaining working life (in years)
2011
9.69%
8.00%
6.00%
32.10
Amounts recognized in profit or loss in respect of these defined benefit plans are as
follows:
Current service cost
Interest cost
Changes in effect of asset ceiling loss
Actuarial (gain) loss recognized
2012
PHP 4,149,490
1,509,154
(1,493,733)
129,793
PHP 4,294,740
2011
PHP 4,618,548
2,117,009
(1,118,673
131,694
PHP 5,748,578
2010
PHP 4,618,548
2,117,009
(738,073)
(163,104)
PHP 2,376,127
The amount included in the consolidated statement of financial position arising from the
entity’s prepaid retirement in respect of its defined benefit plans is as follows:
Present value of defined benefit obligation
Fair value of plan assets
Deficit (Surplus)
Unrecognized actuarial gains (losses)
Effect of the Asset Ceiling
2012
PHP 27,959,017
30,303,714
(2,344,697)
(17,231)
129,793
PHP (2,232,135)
2011
PHP 22,524,680
21,816,324
708,356
(1,076,750)
PHP (368,394)
Movements in the present value of the defined benefit obligation in the current period
were as follows:
2012
PHP 22,524,680
4,149,490
1,509,154
(224,307)
PHP 27,959,017
Balance, January 1
Interest cost
Actuarial gains
Balance, December 31
24
2011
PHP 21,847,360
4,618,548
2,117,009
(6,058,237)
PHP 22,524,680
Movements in the fair value of the plan assets in the current period were as follows:
2012
PHP 21,816,324
6,158,445
1,493,733
835,212
PHP 30,303,714
Balance, January 1
Contributions
Actuarial gains (losses)
2011
PHP 15,196,930
6,895,233
1,118,673
(1,394,512)
PHP 21,816,324
The major categories of plan assets, and the expected rate of return at the end of the
reporting period for each category, are as follows:
2012
PHP 11,755,471
11,818,150
6,402,242
354,778
(26,927)
PHP 30,303,714
Private equity securities
Government debt securities
Deposits in banks
Interest receivable
Trust fee payable
2011
PHP 9,245,139
4,763,467
7,613,374
215,615
(21,271)
PHP 21,816,324
The overall expected rate of return is a weighted average of the expected returns of the
various categories of plan assets held.
The actual return on plan assets amounted to a gain of PHP2.3 million and a loss of
PHP0.3 million during 2012 and 2011, respectively.
The history of experience adjustments is as follows:
Present value of
obligation
Fair value of plan
assets
Deficit (surplus)
Changes in actuarial
assumptions
Experience
adjustments
on plan liabilities
Experience
adjustments
on plan assets
2012
2011
2010
2009
2008
PHP27,959,017
PHP22,524,680
PHP21,847,360
PHP10,080,516
PHP6,574,511
30,303,714
(2,344,697)
21,816,324
708,356
15,196,930
6,650,430
12,421,022
(2,340,506)
3,168,050
3,406,461
2,361,420
(498,493)
9,932,542
1,070,082
(3,766,312)
(2,585,727)
(5,559,744)
(894,376)
(382,676)
(206,448)
PHP835,212
PHP(1,394,512)
PHP(2,643,029)
PHP4,452,972
PHP-
The Group expects to make a contribution of PHP 4.3 million to its retirement fund in
the next financial year.
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
amount and fair value of the fund amounted to PHP 30.3 million as of December 31,
2012.
The funds were invested in private equity securities, deposits in banks and government
debt securities. In 2012 and 2011, the Group made contributions to the fund amounting
to PHP 6.2 million and PHP 6.9 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 SSS program.
25
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.
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.
26
I-Remit provides money transfer and remittance services in 25 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 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.
27
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.
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 selfassessment; 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.
28
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.
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 antimoney laundering rules and regulations. The revised anti-money laundering rules and
regulations were adopted by the Company in its Anti-Money Laundering and CounterTerrorism 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.
29
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.
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); and (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.
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.
30
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 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.
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.
31
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 multilayered 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.
32
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. In
addition, certain departments of the Company held offices at the 25th floor of the Discovery Centre
and at the 8th floor of the Wynsum Corporate Plaza, a condominium office building located at 22 F.
Ortigas Jr. Road (formerly Emerald Avenue), Ortigas Center, Pasig City.
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
President of JTKC Equities, Inc. (1993 to date). Director John Y. Tiu, Jr. is Director and Treasurer of
JTKC Equities, Inc. (2002 to date), The Discovery Leisure Company, Inc. (2001 to date) and a
Director of Oakridge Properties, Inc. (2003 to date). Director Ruben C. Tiu is President of Oakridge
Properties, Inc. (1996 to date), The Discovery Leisure Company, Inc. (2000 to date) and an Executive
Vice-President of JTKC Equities, Inc. (1993 to date).
th
The lease on the unit at the 25 floor of the Discovery Centre (Unit 2503), consisting of an area of
199.70 square meters, was covered by an operating lease agreement, which was extended for a term
of six (6) months, commencing on February 1, 2012 and ending on August 31, 2012. The lease
extension agreement was executed due to the pending lease and renovation of units 2704 and 2705
of the Discovery Centre. At the start of the lease, for the use and occupancy of the premises, the
Company paid Oakridge Properties, Inc. the amount of PHP 658.85 per square meter every month or
its equivalent monthly rental of PHP131,572.35.
th
The lease on the unit at the 26 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, with a 10 percent escalation
on the aggregate current monthly rental on the 13thmonth 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, pays Oakridge Properties, Inc. every month the
amount of PHP798.60 per square meter or its equivalent monthly rental of PHP159,480.42.
th
The lease on the units at the 26 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, with a 10 percent escalation on the aggregate current monthly rental
on the 13thmonth 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 PHP827.21 per
square meter or its equivalent monthly rental of PHP456,454.48.
th
The lease on the unit at the 27 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 an escalation
rate of 10 percent 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.
At the start of the 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.
th
The lease on the units at the 27 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 percent 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.
33
th
The lease on the unit at the 8 floor of the Wynsum Corporate Plaza with an aggregate useable floor
area of 287.00 square meters and five (5) parking spaces, were covered by an operating lease
agreement with a term of two (2) years, commencing on September 1, 2010 and expiring on August
31, 2012. I-Remit, as lessee, paid Wynsum Realty Developer, Inc. the rent on the condominium unit
in the amount of PHP550.00 per square meter or its equivalent of PHP 157,850.00 every month and
on the five (5) parking spaces in the amount of PHP17,500.00 every month, both not subject to
escalation. After the lease expiration date, I-Remit utilized its security deposit, which is equivalent to
two (2) months rental, until October 31, 2012 when it has completed the transfer of its departments
th
from the 8 floor of the Wynsum Corporate Plaza to its headquarters in the Discovery Centre.
The above monthly rentals with respect to the lease contract with Wynsum Realty Developer, Inc.
exclude charges for air-conditioning, electricity, gas, telephone and other charges such as association
dues, which are borne by I-Remit.
Unit & Location
Unit 2503, 25/F
Discovery Centre
Unit 2603, 26/F
Discovery Centre
Unit 2604 & 2605,
26/F Discovery
Centre
Unit 2703, 27/F
Discovery Centre
Unit 2704 & 2705,
27/F Discovery
Centre
8/F Wynsum
Corporate Plaza
Five (5) parking
spaces, Wynsum
Corporate Plaza
Area
(sq m)
Current Rent
per Month
exclusive of
VAT (PHP)
Term
(years)
199.70
131,572.35
6 months
extension
199.70
159,480.42
2
25 ADB Avenue, Ortigas
Center, Pasig City
551.80
456,454.48
Center, Pasig City
199.70
Center, Pasig City
Address
Center, Pasig City
Center, Pasig City
22 F. Ortigas Jr. Road,
Ortigas Center, Pasig
City
22 F. Ortigas Jr. Road,
Ortigas Center, Pasig
City
Contract Period
Start
End
Feb. 1,
2012
Dec. 1,
2011
Aug. 31,
2012
Nov. 30,
2013
2
Dec. 1,
2011
Nov. 30,
2013
133,998.70
2
Feb. 1,
2011
Jan. 31,
2013
551.80
363,553.43
3
Oct. 15,
2012
Oct. 14,
2015
287.00
157,850.00
2
Sep. 1,
2010
Aug. 31,
2012
---
17,500.00
2
Sep. 1,
2010
Aug. 31,
2012
Rent expense pertaining to the above leased office spaces by the Parent Company, from Oakridge
Properties and Wynsum Realty amounted to PHP12.06 million in 2011, PHP11.01 million in 2010, and
PHP10.55 million in 2009.
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 59.29, PHP 53.50, and
PHP 46.36 million in 2012, 2011, and 2010, respectively. PHP 3.91 and PHP 4.02 million of the total
rent expense pertains to rent expense of the discontinued operations of Italy in 2011 and 2010,
respectively.
The Group does not expect any purchase of significant properties in the next twelve (12) months.
34
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.
35
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 2010, 2011, 2012 and first quarter 2013 are as follows:
Quarter Ending Date
Mar. 31, 2010
Jun. 30, 2010
Sep. 30, 2010
Dec. 31, 2010
Mar. 31, 2011
Jun. 30, 2011
Sep. 30, 2011
Dec. 31, 2011
Mar. 31, 2012
Jun. 30, 2012
Sep. 30, 2012
Dec. 31, 2012
Mar. 31, 2013
High
PHP 6.20
PHP 5.00
PHP 4.85
PHP 4.08
PHP 3.67
PHP 3.26
PHP 3.26
PHP 2.50
PHP 2.89
PHP 2.79
PHP 3.25
PHP 3.07
PHP 3.00
Low
PHP 4.70
PHP 4.25
PHP 3.44
PHP 3.20
PHP 3.00
PHP 2.80
PHP 1.91
PHP 2.00
PHP 2.00
PHP 2.16
PHP 2.04
PHP 2.60
PHP 2.68
Close
PHP 4.85
PHP 4.40
PHP 4.00
PHP 3.34
PHP 3.10
PHP 3.00
PHP 2.25
PHP 2.45
PHP 2.60
PHP 2.77
PHP 2.92
PHP 2.79
PHP 2.90
The stock prices of the Company’s common shares as of the latest practicable trading date,
i.e., May 15, 2013, were: PHP 2.97 (High); PHP 2.95 (Low); PHP 2.97 (Close).
36
(2)
Holders
There were nineteen (19) common shareholders of record as of December 31, 2012.
Common shares amounted to 617,725,800* as of December 31, 2012.
* Inclusive of 20,587,000 common shares purchased by the Company under its stock buy-back
program.
The top twenty (20) common shareholders as of December 31, 2012, the number of shares
held and the percentage of total shares held by each are as follows:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Name
PCD Nominee Corporation - Filipino
Star Equities Inc.
JTKC Equities, Inc.
PCD Nominee Corporation – Non-Filipino
Alba, Willy S.
Lim, Ernesto B.
Lim, Nieves Q. &/or Charis Honeylet Q. Lim
GTS Insurance Brokers Inc.
Cruz, Napoleon D. Sr. and/or Luisa I. Cruz
Ona, Edgardo V.
Soriano, Victor Martin J.
Olayres, Norberto F. and/or Olayres, Felisa J.
Hapi Iloilo Corporation
M. J. Soriano Trading, Inc.
Dela Cruz, Yolanda M. or Dela Cruz, Emilio M.
Au, Owen Nathaniel S. ITF: Li Marcus Au
Gaw, Gilbert C.
Total
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Foreign
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Total Shares
* 241,054,768
174,260,047
134,248,290
47,771,295
18,700,000
1,505,790
88,000
70,900
10,000
5,000
3,000
2,200
2,000
1,000
1,000
1,000
1,000
400
110
** 617,725,800
Percentage
(%)
39.0229
28.2099
21.7327
7.7334
3.0272
0.2438
0.0142
0.0115
0.0016
0.0008
0.0005
0.0004
0.0003
0.0002
0.0002
0.0002
0.0002
0.0001
0.0000
100.0000
* Inclusive of 79,381,952 lodged common shares held by JTKC Equities, Inc., thus, its total
shareholdings is 127,153,247 representing 20.5841% ownership, and 5,202,000 lodged common
shares held by Surewell Equities, Inc., thus, its total shareholdings is 139,450,290 representing
22.5748% ownership.
** Inclusive of 20,587,000 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
22.9034% as of December 31, 2012.
37
There were nineteen (19) common shareholders of record as of March 31, 2013. Common
shares amounted to 617,725,800* as of March 31, 2013.
* Inclusive of 23,675,000 common shares purchased by the Company under its stock buy-back
program.
The top twenty (20) common shareholders as of March 31, 2013, the number of shares held
and the percentage of total shares held by each are as follows:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Name
PCD Nominee Corporation - Filipino
Star Equities Inc.
JTKC Equities, Inc.
PCD Nominee Corporation – Non-Filipino
Alba, Willy S.
Lim, Ernesto B.
Lim, Nieves Q. &/or Charis Honeylet Q. Lim
GTS Insurance Brokers Inc.
Cruz, Napoleon D. Sr. and/or Luisa I. Cruz
Ona, Edgardo V.
Soriano, Victor Martin J.
Hapi Iloilo Corporation
M. J. Soriano Trading, Inc.
Dela Cruz, Yolanda M. or Dela Cruz, Emilio M.
Navarro, Rodel Sy
Au, Owen Nathaniel S. ITF: Li Marcus Au
Gaw, Gilbert C.
Total
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Foreign
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Total Shares
* 240,801,268
174,260,047
134,248,290
47,771,295
18,700,000
1,759,290
88,000
70,900
10,000
5,000
3,000
2,200
2,000
1,000
1,000
1,000
1,000
400
110
** 617,725,800
Percentage
(%)
38.9819
28.2099
21.7327
7.7334
3.0272
0.2848
0.0142
0.0115
0.0016
0.0008
0.0005
0.0004
0.0003
0.0002
0.0002
0.0002
0.0002
0.0001
0.0000
100.0000
* Inclusive of 79,381,952 lodged common shares held by JTKC Equities, Inc., thus, its total
shareholdings is 127,153,247 representing 20.5841% ownership, and 5,202,000 lodged common
shares held by Surewell Equities, Inc., thus, its total shareholdings is 139,450,290 representing
22.5748% ownership.
** Inclusive of 23,675,000 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
22.5026% as of March 31, 2013.
(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.
38
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 submitted for stockholders’ approval 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 12 July 2012. It was paid and distributed to the
shareholders on 07 August 2012.
Other than statutory limitations, there are no restrictions that prevent the Parent Company from
paying dividends on common equity.
39
(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 twothirds (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”).
40
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 IRemit 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. IRemit’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 IRemit’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 dynamicallyscaled 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 antivirus 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.
41
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. IRemit’s advantages over the competition are its superior service delivery systems and postsale 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 12 million in 232
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 Europewide 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. IRemit 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 BSPsupervised 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, 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 highvolume 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.
42
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 nongovernmental 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.
43
(2)
Management’s Discussion and Analysis
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.
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
44
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.
The results of IRCGmbH’s operation in Italy follow:
2011
PHP5,289,202
1,006,867
6,296,069
596,703
5,699,366
615,909
(45,024,921)
(PHP38,709,646)
65,139,395
PHP26,429,749
Delivery fees
Realized foreign exchange gains - net
Cost of services
Gross income
Other income - net
Operating expenses
Loss from operations
Gain on sale of assets
Income (Loss) from discontinued operations
45
2010
PHP7,486,658
673,204
8,159,862
3,749,195
4,410,667
38,935
(34,754,501)
(PHP30,304,899)
−
(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
th
th
from the 25 to the 27 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 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
46
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
Return on Equity
(ROE)
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Current ratio
Solvency ratio
Solvency ratio
Solvency ratio
Debt-to equity ratio
Asset-to-equity ratio
Interest rate
coverage ratio
Definition
Net income* over average
stockholders’ equity during the
period
Net income* over average total
assets during the period
Net income* over average number
of outstanding shares
Total transaction value in USD in
present year over previous year
Revenue less total cost of
services (PHP millions)
Total current assets over total
current liabilities
Net income plus depreciation over
total liabilities
Total assets over total liabilities
Total stockholders' equity over
total liabilities
Total liabilities over total
stockholders’ equity
Total assets over total
stockholders’ equity
Earnings before interest and taxes
over interest expense
Dec. 31, 2012
Dec. 31, 2011
2%
10%
1%
5%
PHP 0.05
PHP 0.22
22%
11%
561.7
588.4
1.72
2.28
0.03
0.16
1.85
2.49
0.85
1.49
1.17
0.67
2.17
1.67
2.17
5.49
* 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.
47
Below are the comparative key performance indicators of the Company’s
subsidiaries:
International Remittance (Canada) Ltd.
Performance
Definition
Indicator
Net income over average
Return on Equity
(ROE)
period
Return on Assets
Net income over average total
(ROA)
Earnings per Share
Net income over average number
(EPS)
Sales Growth
Gross Income
Lucky Star Management Limited
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
IRemit Global Remittance Limited
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
I-Remit Australia Pty Ltd
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
48
Dec. 31, 2012
Dec. 31, 2011
-2%
56%
-1%
22%
-2.30
43.64
6%
2%
96.8
92.6
Dec. 31, 2012
Dec. 31, 2011
-103%
-3%
-27%
-1%
-31.22
-1.33
-5%
-25%
9.9
17.1
Dec. 31, 2012
Dec. 31, 2011
968%
-767%
-13%
-33%
-50.71
-108,090.79
43%
28%
72.8
50.7
Dec. 31, 2012
Dec. 31, 2011
0.4%
0.4%
0.2%
0.2%
8,210.03
7,306.00
-
-
0.2
0.6
Worldwide Exchange Pty Ltd
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
I-Remit New Zealand Limited
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
IREMIT Remittance Consulting GmbH
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Power Star Asia Group Limited
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
49
Dec. 31, 2012
Dec. 31, 2011
12%
6%
1%
1%
6.01
3.02
22%
11%
38.0
34.6
Dec. 31, 2012
Dec. 31, 2011
26%
40%
-22%
-24%
-2,690.78
-3,046.62
30%
23%
3.8
5.3
Dec. 31, 2012
Dec. 31, 2011
-1,831%
194%
-47%
14%
-304.77
141.86
-78%
-20%
1.3
0.5
Dec. 31, 2012
Dec. 31, 2011
25%
30%
25%
29%
72.72
66.53
-
-
52.6
70.4
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
50
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.
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
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.
2011
PHP5,289,202
1,006,867
6,296,069
596,703
5,699,366
615,909
(45,024,921)
(PHP38,709,646)
65,139,395
PHP26,429,749
Delivery fees
Realized foreign exchange gains - net
Cost of services
Gross income
Other income - net
Operating expenses
Income (Loss) from discontinued operations
2010
PHP7,486,658
673,204
8,159,862
3,749,195
4,410,667
38,935
(34,754,501)
(PHP30,304,899)
−
(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
51
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 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.
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.
52
Below are the comparative key performance indicators of the Company (Parent Company and subsidiaries):
Performance
Indicator
Return on Equity
(ROE)
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Definition
Net income* over average
period
Net income* over average total
Net income* over average number
Dec. 31, 2011
Dec. 31, 2010
10%
5%
5%
3%
PHP 0.22
PHP 0.11
17%
10%
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.
Below are the comparative key performance indicators of the Company’s
subsidiaries:
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
53
Dec. 31, 2011
Dec. 31, 2010
56%
3%
22%
1%
43.64
1.80
2%
3%
92.6
97.5
Dec. 31, 2011
Dec. 31, 2010
-3%
89%
-1%
26%
-1.33
30.53
-25%
8%
17.0
25.6
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
54
Dec. 31, 2011
Dec. 31, 2010
-767%
39%
-33%
6%
-108,090.79
10,191.13
28%
1%
50.7
43.8
Dec. 31, 2011
Dec. 31, 2010
0.4%
1%
0.2%
0.2%
7,306.00
14,435.50
-
-
0.6
0.3
Dec. 31, 2011
Dec. 31, 2010
6%
5%
1%
1%
3.02
2.00
11%
20%
34.6
29.2
Dec. 31, 2011
Dec. 31, 2010
40%
20%
-24%
-9%
-3,046.61
-1,129.10
23%
38%
5.3
8.8
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Performance
Definition
Indicator
Return on Equity
(ROE)
period
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Dec. 31, 2011
Dec. 31, 2010
194%
-193%
14%
-74%
141.86
-666.31
-19%
94%
0.5
11.7
Dec. 31, 2011
Dec. 31, 2010
30%
38%
29%
36%
66.53
63.27
-
-
70.4
62.4
I-Remit realized a consolidated net income of PHP 65.9 million in 2010, a decrease of PHP
67.2 million or 50.5% over the consolidated net income of PHP 133.1 million in 2009.
Revenues decreased by 1.1% or PHP 8.7 million from PHP 778.7 million in 2009 to PHP
769.9 million in 2010 mainly due to the decline in realized foreign exchange gains. Foreign
exchange gains dropped by 8.6% or PHP24.9 million from PHP287.7 million in 2009 to
PHP262.8 million in 2010. The value of transactions grew by 9.9% or USD109.5 million from
USD1.103 billion in 2009 to USD1.213 billion in 2010. The Company’s revenue from delivery
fees grew by only 3.2% or PHP15.9 million from PHP490.4 million in 2009 to PHP506.2 million
in 2010 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 PHP47.63 in 2009 against PHP45.08 in 2010, a gain of 5.3% or PHP2.55 per dollar. In
December 2010, the average peso-dollar exchange rate was PHP43.95 per dollar. The
number of transactions processed by the Company grew by only 2% from 2.683 million in
2009 to 2.737 million in 2010.
Total operating expenses was higher by PHP58.3 million (14.1%) from PHP412.4 million in
2009 to PHP470.7 million in 2010 mainly on account of higher rental, marketing, and
professional fee expenses. Rental expenses increased by 28.1% from PHP39.3 million in
2009 to PHP50.4 million in 2010. Marketing expenses increased by 32.0% from PHP33.0
million in 2009 to PHP43.5 million in 2010. Professional fees increased by 46.9% from
PHP29.7 million in 2009 to PHP43.6 in 2010. The increase in these expense items are
related mainly to the Company’s expansion as it opened new offices in Canada and Italy.
Other income decreased by 62.8% or PHP54.3 million from PHP86.4 million in 2009 to
PHP32.1 million in 2010 mainly due to the decline in net trading gains on debt securities
(listed overseas) held for trading and lower other income consisting of interest income,
rebates, and unrealized foreign exchange gain. Net trading gains declined by PHP30.3 million
or 92.4% from PHP32.8 million in 2009 to PHP2.5 million in 2010.
The total assets of the Company decreased by PHP131.9 million or 5.3% to PHP2.356 billion
as of December 31, 2010 against PHP2.488 billion as of December 31, 2009. Cash and cash
equivalents decreased by PHP79.0 million or 8.2% from PHP962.8 million in 2009 to
55
PHP883.8 million in 2010. Financial assets at fair value through profit or loss amounted to
PHP102.9 million at end-2010 against PHP65.8 million at end-2009, increasing by PHP37.1
million or 56.4%. These assets consist of investments in debt securities (listed overseas) held
for trading. Receivables declined by PHP80.2 million or 7.0% from PHP1.139 billion in 2009 to
PHP1.059 billion in 2010. The Company’s non-current assets declined by PHP300,928 or
0.2% from PHP190,039,196 at end-2009 to PHP190,340,124 at end-2010.
Total liabilities declined by PHP151.4 million or 12.2% from PHP1.235 billion at end-2009 to
PHP1.084 billion in 2010 mainly due to a lower level of current liabilities. Current liabilities
decreased by PHP148.6 million or 12.1% from PHP1.232 billion in 2009 to PHP 1.083 billion
in 2010.
higher by PHP19.5 million or 1.6% against the end-2009 level of PHP 1.252 billion.
Below are the comparative key performance indicators of the Company (Parent Company and
subsidiaries):
Performance Indicator
Return on Equity (ROE)
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Definition
Net income* over average stockholders’
equity during the period
Net income* over average total assets
during the period
Net income* over average number of
outstanding shares
Total transaction value in USD in present
year over previous year
Revenue less total cost of services (PHP
millions)
Dec. 31, 2010
Dec. 31, 2009
5%
11%
3%
6%
PHP 0.12
PHP 0.24
10%
2%
562.0
547.7
* 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, 2010 and
for the year ended December 31, 2009 are P 0.14 and P 0.25, respectively.
Below are the comparative key performance indicators of the Company’s subsidiaries:
Definition
Net income over average stockholders’
Return on Assets
Net income over average total assets
(ROA)
during the period
Earnings per Share
Net income over average number of
(EPS)
outstanding shares
Sales Growth
Gross Income
millions)
Definition
Return on Assets
(ROA)
during the period
Earnings per Share
(EPS)
outstanding shares
Sales Growth
Gross Income
millions)
56
Dec. 31, 2010
Dec. 31, 2009
3%
33%
1%
10%
1.80
18.18
3%
11%
97.5
99.7
Dec. 31, 2010
Dec. 31, 2009
89%
47%
26%
14%
30.53
11.18
8%
20%
25.6
21.4
Definition
Return on Assets
(ROA)
during the period
Earnings per Share
(EPS)
outstanding shares
Sales Growth
Gross Income
millions)
Return on Assets
(ROA)
Earnings per Share
(EPS)
Sales Growth
Gross Income
Definition
during the period
outstanding shares
millions)
Definition
Return on Assets
(ROA)
during the period
Earnings per Share
(EPS)
outstanding shares
Sales Growth
Gross Income
millions)
Definition
Return on Assets
(ROA)
during the period
Earnings per Share
(EPS)
outstanding shares
Sales Growth
Gross Income
millions)
IREMIT EUROPE Remittance Consulting AG
Definition
Return on Assets
(ROA)
during the period
Earnings per Share
(EPS)
outstanding shares
Sales Growth
Gross Income
millions)
57
Dec. 31, 2010
Dec. 31, 2009
39%
60%
6%
4%
10,191.13
10,021.79
1%
-17%
43.8
46.9
Dec. 31, 2010
Dec. 31, 2009
1%
176%
0.2%
24%
14,435.50
1,859,480.93
-
-
0.3
0.2
Dec. 31, 2010
Dec. 31, 2009
5%
41%
1%
11%
2.00
29.75
20%
-5%
29.2
32.6
Dec. 31, 2010
Dec. 31, 2009
20%
81%
-9%
-25%
-1,129.10
-2,654.42
38%
595%
8.8
7.6
Dec. 31, 2010
Dec. 31, 2009
-193%
-189%
-74%
-31%
-666.31
-243.17
94%
43%
11.7
9.1
Definition
Return on Assets
(ROA)
during the period
Earnings per Share
(EPS)
outstanding shares
Sales Growth
Gross Income
millions)
Dec. 31, 2010
Dec. 31, 2009
38%
89%
36%
78%
63.27
86.35
-
-
62.4
55.5
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.
58
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
On April 24, 2013, the Company‘s Board of Directors approved the cancellation of the engagement of SyCip
Gorres Velayo & Co. (“SGV”) as the Company’s external auditor. The cancellation resulted from divergent
opinions on the scope of work of the audit process, particularly the extent of the reports to be submitted by
the Company’s foreign offices. Considering the different regulatory environments in the countries where the
Company has foreign offices, the completion of the reports required by SGV posed a significant challenge to
the timely submission of the Company’s audited financial statements. Since the delayed submission of the
Company’s audited financial statements opens the Company to reprimand or penalties from regulatory
bodies that may also reflect poorly on its corporate governance practices, the Company was constrained to
cancel the engagement of SGV and engage a different auditing firm. Further, the Company‘s Board of
Directors approved the engagement of the firm of R.S. Bernaldo & Associates to prepare the Company’s
audited financial statements for the period ending 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, 2012 and 2011, and the
statements of income, changes in equity, and cash flows for each of the three (3) years in the period ended
December 31, 2012.
SGV & Co. has served as the Company’s external auditors since 2002 and until 2013. Josephine Adrienne
A. Abarca (CPA Certificate No. 92126; SEC Accreditation No. 0466-A) is the current audit partner for the
Company. Aris C. Malantic (CPA Certificate No. 90190; SEC Accreditation No. 0326-AR-1) is the former
audit partner for the Company and he has served as such from 2005 to 2008.
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.
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 for
2012, and by SGV & Co. amounted to PHP 577,500, and PHP 550,000 for 2011, and 2010, respectively.
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.
59
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 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.
As a result of early adoption, the Group opted not to present related notes to accompany the opening
statement of financial position.
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 (Revised), Financial Instruments: Disclosures - Transfers of Financial Assets
The amendments to PFRS 7 increase the disclosure requirements for transactions involving transfers of
financial assets. These amendments are intended to provide greater transparency around risk exposures
when a financial asset is transferred but the transferor retains some level of continuing exposure in the
asset. The amendments also require disclosures where transfers of financial assets are not evenly
distributed throughout the period.
The effective date of the amendment is July 1, 2011, with earlier application permitted.
PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets
PAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the
entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and
subjective to assess whether recovery will be through use or through sale when the asset is measured
using the fair value model in PAS 40, Investment Property. The amendment provides a practical solution
to the problem by introducing a presumption that recovery of the carrying amount will, normally be
through sale.
As a result of the amendments, SIC-21, Income Taxes – Recovery of Revalued Non-Depreciable Assets
would no longer apply to investment properties carried at fair value. The amendments also incorporate
into PAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn.
The amendments are effective from January 1, 2012. Earlier application is permitted.
60
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, 58, Filipino
Director, Chairman and Chief Executive Officer
Director’s Term of Office
July 31, 2012 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), 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.
61
Armin V. Demetillo, 44, Filipino
Director, Chairman of the Executive Committee
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)
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, 51, Filipino
Director, President & Chief Operating Officer
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, 63, Filipino
Director
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.
62
A. Bayani K. Tan, 57, Filipino
Director
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); and, Destiny Financial Plans, Inc. (2003 to date as
Director and 2009 to date as Corporate Secretary).
Atty. Tan has also been the 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); and, City Cane Corporation (1993 to date). He is also a Director for the following private
companies: Highlands Gourmet Specialist Corp. (2006 to date); and, Destiny LendFund, Inc.
(2005 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); HSAI-Raintree, Inc.; 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); Monte Oro Grid Resources Corporation (2006 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); Touch Solutions, Inc.; Karen
Marie L. Ty Foundation, Inc. (2005 to date); and, Metro Manila Turf Club, Inc. (1995 to date).
He is a Trustee and the Corporate Secretary of Wellington Dee Ty Foundation, Inc. (2004 to
date). He is also a Trustee (2004 to date) and currently is the Executive Vice President of UP
Law ’80 Foundation, Inc. (2004 to date).
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); Legal
Counsel, Xavier School, Inc. (2005 to date); and, Lecturer in the Center for Global Best
Practices (2009 to date).
In the previous years, he has held the following positions: Director, Monte Oro Resources and
Energy, Inc. (2005 to 2008); Monte de Oro Grid Resources Corporation (2006 to 2009);
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), Eastern
Telecommunications Phils., Inc. (1995 to 2002), Telecommunications Technology Phils., Inc.
(1995 to 2002), Universal Rightfield Property Holding, Inc. (1993 to 2002), Universal Leisure
Corp. (1996 to 2002), and Universal Leisure Club, Inc. (1996 to 2001); Legal Counsel and
Assistant Secretary, Philippine Stock Exchange, Inc. (1997 to 2000); and, Assistant Corporate
Secretary, A. Brown Company, Inc. (1994 to 1998).
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.
63
Ben C. Tiu, 60, Filipino
Director
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 also the
Chairman of the Boards of Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date). 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., 36, Filipino
Director
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 the 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); JTKC Land, Inc. (2003 to date); The Discovery Leisure Company,
Inc. (2001 to date); Cay Islands Corporation (2008 to date); Palawan Cove Corporation (2008
to date); Sonoran Corporation (2008 to date); Tofino Corporation (2007 to date); and,
Discovery Country Suites, Inc. (2004 to date). He is a Director of Oakridge Properties, Inc.
(2003 to date), Enderun Colleges, Inc. (2005 to date), JT Perle Corporation (2007 to date),
One Cerrada Corporation (2007 to date), Sagesoft Solutions, Inc. (2003 to date), and Tokyo
Holdings, Inc. (2007 to date). He is a Director (2003 to date) and President of Southern
Visayas Property Holdings, Inc. (2009 to date), Director and First Vice President of JTKC
Realty Corporation (2006 to date), and the President of Fidelity Securities, Inc. (2000 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, 56, Filipino
Director
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, Sterling Bank
of Asia, Inc. (A Savings Bank) (2007 to date), Star Equities Inc. (2006 to date), Tera
Investments, Inc. (2001 to date), Southern Visayas Property Holdings, Inc. (2010 to date),
Palawan Cove Corporation (2008 to date), Cay Islands Corporation (2008 to date), and
Sonoran Corporation (2008 to date); President, JTKC Realty Corporation (1988 to date), PanAsean 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),
Hotel Systems Asia, Inc. (1996 to date), JTKC Land, Inc. (2003 to date), Tofino Corporation
(2009 to date), and Discovery Country Suites Inc. (2004 to date); 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).
Mr. Ruben Tiu obtained his bachelor of science in business administration degree from the De
La Salle University in 1976.
64
Calixto V. Chikiamco, 62, Filipino
Director
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 Sea 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 31, 2012:
Jose Joel Y. Pusta, 60, Filipino
Independent Director
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.
65
Gregorio T. Yu, 54, Filipino
Director
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), Chairman of CATS Motors, Inc. (2004 to date),
Chairman of CATS Asian Cars, Inc. (Mazda Greenhills) (2004 to date), Director, Prople BPO,
Inc. (formerly Summersault, Inc.) (2006 to date), Director of CMB Partners, Inc. (2003 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
Corporation (1994 to date). He is also concurrently a Director of the following companies:
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.; Philequity Dollar Income
Fund, Inc.; Philequity PSE Index Fund, Inc.; Philequity Strategic Growth Fund, Inc.; Philequity
Foreign Currency Fixed Income Fund, Inc.; Philequity Balanced Fund; and. Philequity
Resources Fund, Inc.; 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); 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 (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 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.
66
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:
Maria Cecilia V. Soria, 36, Filipino
Corporate Secretary
Term of Office
Atty. Soria is the incumbent Corporate Secretary of I-Remit, Inc. and Philequity Management,
Inc. She is also the Assistant Corporate Secretary of the following companies: Coal Asia
Holdings, Incorporated; Sterling Bank of Asia, Inc. (A Savings Bank); E-Business Services Inc.;
FHE Properties Inc.; Highlands Gourmet; iRipple, Inc.; Touch Solutions, Inc.; and JTKC
Equities, Inc.
Atty. Soria obtained her bachelor of arts degree in political science and bachelor of laws
degree from the University of the Philippines in 1998 and 2006, respectively. She is currently
a senior associate of Tan Venturanza Valdez (2012 to date). She was formerly connected with
Reyes-Fajardo & Associates (2009 to 2010), SGV & Co. (a member practice of Ernst & Young)
(2008 to 2009), and Medialdea Ata Bello & Guevarra law office (2007 to 2008). She was
admitted to the Philippine bar in May 2007.
Darlene R. Vivas, 30, Filipino
Assistant Corporate Secretary
Term of Office
Atty. Vivas is the incumbent Assistant Corporate Secretary of I-Remit, Inc. She is also the
Assistant Corporate Secretary of the following companies: First Abacus Financial Holdings
Corp.; Jolliville Holdings Corporation; The Country Club at Tagaytay Highlands, Inc.; and
Tagaytay Midlands Golf Club Inc.
Atty. Vivas obtained her bachelor of arts degree in political science from the University of the
Philippines and bachelor of laws degree from San Beda College of Law in 2003 and 2009,
respectively. She is currently an associate of Tan Venturanza Valdez (2011 to date). She was
formerly connected with Pizarras & Associates (2009 to 2010) and Santos Parungao Aquino
Abejo & Santos law office (2010). She was admitted into the Philippine bar in May 2010.
The names, ages, citizenship, present positions, previous positions, terms of office, and period
served of all Executive Officers are as follows:
Bansan C. Choa, 58, Filipino
Director, Chairman and Chief Executive Officer
Term of Office
2005 to date
(see above for business experience and positions held under “Directors”)
Harris Edsel D. Jacildo, 51, Filipino
Director, President and Chief Operating Officer
Term of Office
February 4, 2002 to date
(see above for business experience and positions held under “Directors”)
Ronald A. Benito, 42, Filipino
Senior Vice President & Head, International Treasury
November 15, 2010 to date
Mr. Benito joined I-Remit, Inc. in 2010 and currently heads the Company’s international
67
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, 43, Filipino
Senior Vice President & Head, Service and Operations Division
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, 34, Filipino
First Vice President & Chief Financial Officer; Head, Finance Division
Term of Office
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, 48, Filipino
First Vice President & Compliance Officer; Head, Corporate Affairs and Information Division
Term of Office
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, 51, Filipino
Vice President; Head, Information and Technology Services Division
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
President of Information Technology Services of United Coconut Planters Life Assurance
68
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, 51, Filipino
Vice President; Head, Human Capital Management Division
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.
69
(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.
70
(4)
Involvement in Certain Legal Proceedings
As a result of the delay in the delivery of the facilities of the Universal Leisure Club, Inc.
(ULCI), some of its members have initiated legal actions against ULCI, the Universal Rightfield
Property Holdings, Inc. (URPHI) and the Universal Leisure Corp. (ULCorp), as well as their
respective incumbent and former officers and directors, including their former Corporate
Secretary, A. Bayani K. Tan. The cases filed include:
i. Civil actions for breach of contract and/or of contract, specific performance, quieting of
title and reimbursement, damages with request for receivership and preliminary
attachment (Civil Case Nos. MC03-075, MC03-077, and MC04-082) before the RTC of
Mandaluyong City, which cases have been settled and the RTC Mandaluyong has, on 08
February 2006, promulgated a Joint Decision approving the Settlement Agreement,
Supplemental Agreement, and Second Supplemental Agreement re: Civil Case Nos.
MC03-077 and MC04-082. RTC Mandaluyong, noting the settlement of Civil Case Nos.
MC03-077 and MC04-082, likewise issued an Order dated 18 May 2006 re: Civil Case
No. MC-075 holding that the aforementioned settlement agreement likewise puts an end
to Civil Case No. MC03-075, as it involves substantially similar factual antecedents, and
holding further that the complaint and counterclaims of the parties are withdrawn with
prejudice. While the main cases have been settled, a group of ULCI members who were
not included in the settlement and are not in favor of its terms have initiated suit to nullify
the same. RTC Mandaluyong has rejected such moves to assail the settlement,
prompting said 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. Respondents filed
a timely petition with the Supreme Court, where it is currently pending.
ii. A Complaint for Estafa (docketed as I.S. No. 08-K-19713) filed before the City Prosecutor
of Manila. A Counter-Affidavit has already been filed before the City Prosecutor seeking
to dismiss the Complaint for lack of cause of action.
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.
71
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
2013
(Estimate)
2012
(Actual)
2011
(Actual)
(2)
Name
Principal Position
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
All other officers and directors as a group unnamed
Bansan C. Choa
Chairman & CEO
President & COO
SVP
Ronald A. Benito
SVP
FVP & CFO
Bansan C. Choa
Chairman & CEO
President & COO
SVP
Ronald A. Benito
SVP
FVP & CFO
Aggregate
Compensation
11,201,030.81
13,443,246.75
10,690,532.00
12,693,541.87
9,346,922.42
11,541,657.95
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.
72
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, 2012:
Class
Common
Common
Common
Common
Name and Address of Record
Owner and Relationship with
Issuer
PCD Nominee Corporation
G/F Makati Stock Exchange
Building, 6767 Ayala Avenue,
Makati City
(stockholder)
Star Equities Inc.
2/F JTKC Center
2155 Pasong Tamo
Makati City
690-A Quirino Ave.
Tambo, Paranaque City
JTKC Equities, Inc.
2/F JTKC Center
2155 Pasong Tamo
Makati City
Name and Address of
Beneficial Owner and
Relationship with
Record Owner
(Please see note below)
Citizenship
Filipino
Number of
Shares
241,054,768¹
Per cent
Held
39.0229%
Same as record owner
Filipino
174,260,047
28.2099%
Filipino
134,248,290
21.7327%
Filipino
47,771,295
7.7334%
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
Common
Name and Address of Owner
and Relationship with Issuer
Fidelity Securities, Inc.*
2/F JTKC Centre
2155 Pasong Tamo, Makati City
Citizenship
Filipino
Number of Shares
152,412,684²
Per cent Held
24.6732%
* 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 587,000, 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.
2 Includes 79,381,952 shares in favor of beneficial owner JTKC Equities, Inc. which owns a total of 127,153,247 shares or per cent held of
20.5841% and 5,202,000 shares in favor of beneficial owner Surewell Equities, Inc. which owns a total of 139,450,290 shares or per cent
held of 22.5748%.
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 22.9034% as of December
31, 2012.
73
(2)
Security Ownership of Management (Individual Directors and Executive Officers)
Title of
Class
Common
Name of Beneficial Owner
Bansan C. Choa
Common
Common
Common
Common
Armin V. Demetillo
Harris Edsel D. Jacildo
Calixto V. Chikiamco
Gilbert C. Gaw
Common
Common
Common
Jose Joel Y. Pusta
A. Bayani K. Tan
Ben C. Tiu
Common
Ruben C. Tiu
Common
John Y. Tiu, Jr.
Common
Common
Gregorio T. Yu
Number of Shares
855,800
40,557,334
55,110
17,930
110
902,764
9,755,000
110
573,044
1,199,033
15,447,735
416,856
15,447,735
78,419
15,447,735
110
154,990
466,950
Nature of Legal &
Beneficial Ownership
Direct
Indirect
Direct
Direct
Direct
Direct
Indirect
Direct
Direct
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Direct
Indirect
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Per cent of
Class
0.13854%
6.56559%
0.00892%
0.00290%
0.00002%
0.14614%
1.57918%
0.00002%
0.09277%
0.19410%
2.50074%
0.06748%
2.50074%
0.01269%
2.50074%
0.00002%
0.02509%
0.07559%
The aggregate number of shares owned of record by all Directors and Executive Officers as a group
named herein as of December 31, 2012 is 101,376,765 common shares or approximately 16.41% of
the Company’s common shares. This includes the indirect ownership of 97,122,489 shares
representing 15.72% 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.
74
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 a parent 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
IRemit Singapore Pte Ltd (ISPL)
Hwa Kung Hong & Co., Ltd.(HKHCL)
Stockholders/ Directors
Nature of Relationship
Associate
Associate
Key Management Personnel
Advances to Related Parties
Balance of advances to related parties as shown in the consolidated statement of financial position are
summarized per category as follows:
Associates
December 31, 2012
Amount/
Volume
HKHCL
Remittance
Due from
Delivery fees
ISPL
Remittance
Due from
Delivery fees
PHP
5,155,165,031
5,223,594
47,715,373
7,203,835,917
457,714
25,161,186
December 31, 2011
Outstanding
Balances
PHP
60,187,956
8,192,341
2,130,587
105,072,529
10,332,965
2,782,994
Amount/
Volume
PHP
5,148,060,359
6,382,656
46,127,251
7,211,603,671
996,076
24,463,777
Outstanding
Balances
PHP
29,136,840
8,715,507
326,674
64,141,580
16,034,603
2,180,325
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 Parent Company to intended beneficiary in the Philippines.
Delivery fee is the share in service fee collected by the foreign subsidiary office along with the principal
amount of transaction. Account collected in 1-5 days from date of transaction.
Due from account refers to operating funds and marketing materials advanced to foreign associate
offices. It has a term of settlement within 1-30 days from date of funding.
The amounts outstanding are non-interest bearing, unsecured and will be settled in cash. No guarantee was
required. No provision made for doubtful accounts as these accounts are all collectible.
75
Affiliates
December 31, 2012
•
PHP
Amount/
Volume
-
PHP
December 31, 2011
Outstanding
Balances
254,182
PHP
Amount/
Volume
-
PHP
Outstanding
Balances
270,616
Surewell Equities, Inc. – This pertains to the cost of rental paid to Surewell Equities Pte. Ltd. (SEPL) for
the sharing of its office in Singapore under a sublease agreement with the Parent Company . SEPL is a
foreign subsidiary office of Surewell Equities, Inc., one of the principal stockholders of the Parent
Company. No security deposit paid and without provision for escalation. Rent is paid monthly.
The amounts outstanding are non-interest bearing, unsecured 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.
December 31, 2012
Advances
PHP
Amount/
Volume
3,779,592
PHP
Outstanding
Balances
7,045,214
December 31, 2011
PHP
Amount/
Volume
-
PHP
Outstanding
Balances
-
The following are the nature, terms and conditions:
•
Advances – This pertains to receivable from a key management personnel of the Parent Company
subject to liquidation within company prescribed period of liquidation.
The amount outstanding is non-interest bearing, unsecured and will be settled in cash. No guaranty required.
No provision was made for doubtful account as the account is deemed collectible.
Advances from Related Parties
Balance of advances from related parties as shown in the consolidated statement of financial position are
summarized per category as follows:
December 31, 2012
Advances
PHP
Amount/
Volume
218,417
PHP
Outstanding
Balances
218,417
December 31, 2011
PHP
Amount/
Volume
-
PHP
Outstanding
Balances
-
•
Advances – This pertains to payable to director of the Parent Company subject to liquidation within
company prescribed period of liquidation.
The amount outstanding is non-interest bearing, unsecured and will be settled in cash. No guaranty required.
Lease Contracts
The Group leases office spaces from Oakridge Properties. Rent expense amounted to PHP 11.4 million and
PHP 9.2 million in 2012 and 2011, respectively.
The Group entered into a sublease agreement with Surewell Equities Pte Ltd., one of the stockholders of the
Parent Company. The Group also has deposits amounting to PHP 126.9 million and PHP 193.0 million with
Sterling Bank of Asia, Inc. (A Savings Bank) as of December 31, 2012 and 2011, respectively. These
deposits earned PHP 0.38 million, PHP 0.42 million, and PHP 1.12 million interest income in 2012, 2011 and
2010, respectively.
Investment in Associate
The Group recognized dividend income amounting to PHP 4.9 million and PHP 0.59 million from dividends
declared by ISPL in 2012 and 2010, respectively. The Group has forty nine percent (49%) ownership interest
on its associate and a carrying amount of investment amounted to PHP 19.5 million in 2012.
76
Remuneration of Key Management Personnel
The remuneration of the directors and other members of key management personnel of the Group are set out
below in aggregate for each of the categories specified in PAS 24, Related Party Disclosures:
Short-term employee benefits
Post-employment benefits
PHP
2012
31,659,537
1,260,378
32,919,915
PHP
2011
27,036,984
1,571,444
28,608,428
PHP
2010
21,059,431
549,541
21,608,972
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 amount and fair value of the fund amounted to
PHP 30.3 million as of December 31, 2012.
The funds were invested in private equity securities, deposits in banks and government debt securities. In
2012 and 2011, the Group made contributions to the fund amounting to PHP 6.2 million and PHP 6.9 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 SSS program.
The government debt securities consist of peso denominated and USD denominated securities. The Pesodenominated 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. Maria Cecilia
V. Soria, the Corporate Secretary, and Atty. Darlene R. Vivas, 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.
77
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.
78
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, 2012
(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 2013:
Date
Report
July 5, 2012
Purchase of Shares by Principal Shareholders at PHP 2.71 per share from the market:
Shares
Total Shares
Principal Shareholder
Purchased
After the Purchase
JTKC Equities, Inc.
10,542,000
127,153,247
5,202,000
139,450,290
810,000
19,510,000
July 31, 2012
Election of directors in the 2012 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 2012-2013, to hold office as such until their successors shall have
been duly elected and qualified:
Jose Joel Y. Pusta
Gregorio T. Yu
Calixto V. Chikiamco
Bansan C. Choa
Armin V. Demetillo
Gilbert C. Gaw
A. Bayani K. Tan
Ben C. Tiu
John Y. Tiu, Jr.
Ruben C. Tiu
-
Director
Director
Director
Director
Director
Director
Director
Director
Director
During the same meeting, the shareholders approved the audited financial statements of the
Corporation as of year-end 2011, as well as the re-appointment of SyCip Gorres Velayo & Co. as
the Corporation’s external auditor for the year 2012.
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 2012-2013, to serve as
such until their successors shall have been duly elected and qualified:
Bansan Choa
Maria Cecilia V. Soria
Darlene R. Vivas
Fitzgerald S. Duba
79
-
Chairman and Chief Executive Officer
President and Chief Operating Officer
Corporate Secretary
Assistant Corporate Secretary
First Vice-President and Chief Financial Officer
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 2012-2013, 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.
2.
3.
Bansan C. Choa
Armin V. Demetillo
Gregorio T. Yu”
September 21, 2012
Board Approval of Buy-back Program of up to 10 million shares
September 27, 2012
I-Remit signed MOA with Small World Financial Services Group Ltd
October 1, 2012
Addendum to Disclosure dated 27 September 2012 regarding I-Remit having signed a MOA with
Small World Financial Services Group Ltd
October 5, 2012
Status of Audit Committee Charter in Compliance with SEC Memorandum Circular No. 4, Series
of 2012
January 28, 2013
I-Remit signed MOA with Megaworld Corporation
January 29, 2013
I-Remit signed MOA with Palawan Pawnshop
February 21, 2013
I-Remit signed MOA with Century Properties Group, Inc.
80
Exhibit A
I-REMIT, INC. AND SUBSIDIARIES
Aging of Consolidated Receivables
Unaudited
December 31, 2012
Agents
Couriers
Related Parties
Others
Total
1,067,065,055
94,426,347
25,824,702
5,043,732
1,192,359,836
Current
1,067,065,055
1,067,065,055
2-30 Days
94,426,347
94,426,347
31-60 Days
-
Over 60 Days
25,824,702
5,043,732
30,868,434
SIGNATURES
Pursuant to the requirements of Section 17 of the Code and Section 14 of the Corporation Code, this report is s~ned
on behalf of the Issuer by the undersigned, thereunto duly authorized, in~(
n
eti9f
By:
AS7
~
ANALJ,!:'_M.ANGELES
Preskien: & Controlter
MARIAC~RIA
Corporate Secretary
:L,
SUBSCRIBED AND SWORN to before me thi~/~(
~ ~ (~.
affiants exhibiting to me their
Community Tax Certificates (CTC) and Competent Evidences ofl en Ity (CEI) as follows:
Name
BANSAN C. CHOA
HARRIS E. D. JACILDO
BERNADETTE CINDY C. TIU
MARIA CECILIA V. SORIA
ANALIE M. ANGELES
CTC No.; Date and Place of Issue
26981086; January 5, 2013; Paranacue City
01710103;January8,2013;
PasigCity
01710107;January8,2013;PasiQCity
01368775; January 16, 2013; City of Manila
01707697;Januarv8,2013;PasigCi~
TIN
TIN
TIN
TIN
TIN
CEI
159-305-537
126-967-441
203-338-548
908-911-456
102-789-384
ANNA FRA CESC C. RESPICIO
./:..,.-
'.
_.
Docum~ No.
Page No.
Book No:"""-.
Series of 20~.
r-
Notary Public fm end in Makati City
Appoi~\ >7 ~·.·i ~! ~., /.: (2") i2-2013)
Comnii"c.:C:J ::;-, -.,~ _ ,,- ':-;iTlCei 31,2013
2/F J1"C .:: )1.'-:', . - . '::;"";;no Roces Street
~"~:::'1_:" .: .y, i i:.i.;') t'\.~31"iia
t\!:t-:-' .. ~.~:.~ ~~o':j'Jo. SOSS7
PTR No. 8"ti 17421 O~.03.20131 Pas!9 City
ISP No. 913428 ( 12.213.121 Quezon City
3
'/I~l1tlr
www.myiremit.com
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The Management of I-REMIT INC. AND SUBSIDIARIES is responsible for the preparation and fair
presentation of the consolidated financial statements for the years ended December 31, 2012 and
2011, including the additional components attached therein, in accordance with the Philippine
Financial Reporting Standards. This responsibility includes designing and implementing internal
controls relevant to the preparation and fair presentation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error, selecting and applying
appropriate accounting policies, and making accounting estimates that are reasonable in the
circumstances.
The Board of Directors reviews and approves the consolidated financial statements and submit the
same to the stockholders.
R.S. Bernaldo & Associates
and SyCip Gorres Velayo & Co., the independent auditors,
appointed by the stockholders for the period December 31, 2012 and 2011, respectively, have
examined the consolidated financial statements of the Group in accordance with Philippine
Standards on Auditing, and in their reports to the stockholders, have expressed their opinion on
the fairness of presentation upon completion of such examination.
ANSAN C. CHOA
an and Chief Executive Officer
TTJ!~""'DY
C. TIU
ncial Officer
I-Remit, Inc.
26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City 1605 Philippines
Telephone: (632) 706-9999 and (632) 706-2737
Facsimile: (632) 706-2767
;:
MAY 1 5 2013
SUBSCRIBED AND SWORN to before me this
2013, affiants
exhibiting to me their Community Tax Certificates (CTC) and Competent Evidences of Identity
(CEI) as follows:
Name
BANSAN C. CHOA
CTC No., Date and Place of Issue
26981086; Januarv 5, 2013; Paranaoue City
01710103; January 8, 2013; Pasiq City
01710107; Januarv8,2013; PasiQCity
CEI
TIN 159-305-537
TI N 126-967-441
TI N 203-338-548
Notary Public
Document No.
Page No.
Book No.
Series of 2013.
COVER SHEET
S.E.C. Registration Number
(Company's Full Name)
(Business Address: No. Street CityITown/Province)
Mr. Bansan C. Choa
706-9999
Contact Person
Company Telephone Number
G1J GLJ
Month
Day
[ill GLJ
lliI£Iill
FORM TYPE
Month
Day
Annual Meeting
Fiscal Year
Secondary License Type, If Applicable
OIIJIIJJ
__
18
Domestic
To be accomplished
by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
Remarks = pis. Use black ink for scanning purposes
11_Foreign
R.S. BERNALDO
BOA/PRC No. 0300
BSP Accredited
SEC Accreditation No. 0153-FR-1
CDA CEA No. 013-AF
& ASSOCIATES
A correspondent firm of Panell Kerr Forster International
worldwide
INDEPENDENT AUDITORS' REPORT
'.' -.,' ~ e
The Board of Directors and Stockholders
I-REMIT INC. AND SUBSIDIARIES
26/F Discovery Centre, 25 ADB Avenue
Ortigas Centre, Pasig City
We
have
audited
the
accompanying
consolid ted
financial
statements
of
comprise the consolidated statement of financial
position as of December 31, 2012, and the consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended and a summary of significant accounting policies and other explanatory
information.
I-REMIT INC. AND SUBSIDIARIES, which
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with Philippine Financial Reporting Standards, and for such
internal control as Management
determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement,
whether due to
fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
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 the
audit to obtain reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements.
The procedures selected depend on the
auditors' judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements,
whether due to fraud or error.
In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness
of the entity's
internal control.
An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient
basis for our audit opinion.
and appropriate to provide a
18/F Cityland Condominium 10 Tower 1,6815 Ayala Avenue cor. H.v. Dela Costa St., Makati City, Philippines 1200
TEL +63 2 812-1718 to 24 FAX +632 813-6539 E-MAil rsbassoc@rsbernaldo.com
WEBSITE www.rsbernaldo.com
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, 2012, and its
financial performance and cash flows for the years then ended in accordance with Philippine
Financial Reporting Standards.
Emphasis of Matter
We draw attention to Note 2.01, which describe the early adoption of amendments to PAS 1
which clarifies the requirements
for providing comparative
information
when an entity
provides financial statements beyond the minimum comparative information requirements.
As a result of the early adoption, the Group opted not to present related notes to accompany
the opening consolidated statement of financial position.
Our opinion is not qualified with
regards to this matter.
Without further qualifying our oprruon, we draw attention to Note 35 which states that no
appropriation was made for the treasury stocks for the years 2011 and 2010; the goodwill is
not carried at its historical cost and the movement is due to translation adjustment, which
resulted to adjustments in cumulative translation account; and in the 2008 consolidated
financial statements, the beginning retained earnings of IRCGmbH, which is 74.90% owned
subsidiary of the Parent Company in 2008, is taken up as an adjustment to trade receivables.
Other Matter
The consolidated financial statements of the Group as of December 31, 2011, were audited
by another auditor whose report dated March 23, 2012, expressed an unqualified opinion on
those statements.
As part of our audit of the 2012 consolidated financial statements,
we also audited the
adjustments described in Note 35 that were applied to amend the 2011 consolidated financial
statements.
In our opinion, such adjustments are appropriate and have been properly applied.
We were not engaged to audit, review, or apply any procedures to the 2011 consolidated
financial statements
of the Group other than with respect to the adjustments
and,
accordingly, we do not express an opinion or any other form of assurance on the 2011
consolidated financial statements taken as a whole.
R.S. BERNALDO & ASSOCIATES
BOA/PRC No. 0300
Valid until December 31, 2015
SEC Group A Accredited
Accreditation No. 0153-FR-1
Valid until September 13, 2014
BSP Group B Accredited
Valid until February 14, 2014
CDA CEA No. 013-AF
Valid until October 25, 2013
Ro!n~o
Managing Partner
CPA Certificate No. 25927
Accreditation No. 1192-A
Valid until March 1, 2015
BIR Accreditation No. 08-002793-1-2012
Valid from October 23, 2012 until October 22, 2015
Tax Identification No. 109-227-722
PTR No. 3676450
Issued on January 9, 2013 at Makati City
May 15, 2013
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
December 31, 2012
(With Comparative Figures for 2011 and 2010)
(In Philippine Peso)
NOTES
2012
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
7
8
9
1,062,120,047
1.192,359.836
210,180,347
891,235,623
1,031,284,146
125,226,264
883,817,947
1,126,047,045
102,905,294
Prepayments and other current assets
10
23,901,932
28,928,836
36,346,603
ASSETS
Current Assets
2,488.562.162
Non-current Assets
Investments in associates
Other non-current
23,064,091
19,207,458
112.893.853
2,232,135
6,893,941
31,413,351
112,892,135
196,421.093
199,416,793
208,689,197
2,684,983,255
2,276,091,662
2,357,806,086
15
519,839,277
240.081,152
199,496,915
16
1,801,235
925,000,000
6.563,877
666,000,000
6,942,551
877 ,000,000
12
13
23
net
30
14
assets
2,149,116,889
19,492,351
23,495,462
11
Property and equipment Intangible assets - net
Retirement asset
Deferred tax asset
2,076,674,869
TOTAL ASSETS
368,394
4,980,348
38,904,367
20,932,236
27,013,308
113,522,937
4,232,920
42,987,796
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Beneficiaries and other payables
Income tax payable
Loans payable
1,446,640,512
912,645,029
1,083,439,466
Non-current Liabilities
Deferred tax liabilities
30
1,217,135
31,969
29,765
778,261
1.217,135
31,969
808,026
Retirement benefit obligation
TOTAL LIABILITIES
S T 0 C K H 0 L D E R S'
E QUI
1,447,857,647
912.676,998
1,084,247,492
T Y
Capital Stock
17
617.725.800
617,725,800
562,417,000
Additional
17
391,232,478
391,232,478
429,513,501
Paid-In Capital
Unappropriated
Appropriated
Cumulative Translation
Adjustment
Treasury Stock
Total Equity Attributable
Non-controlling
265,296,958
370,974,049
301,085,527
17
69,209,688
52,987,208
40,115,150
17
(37,129,628)
(16,517,663)
(20,602,890)
17
(69,209,688)
(52,987,208)
Retained Earnings
Retained Earnings
to Equity Holders of the Parent
1,237,125,608
1,363,414,664
(40,115,150)
1,272,413,138
1,145,456
interest
TOTAL STOCKHOLDERS' EQUITY
1.237.125,608
1,363,414,664
1,273,558,594
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
2,684,983,255
2,276,091,662
2,357,806,086
(See Notes to Consolidated Financial Statements)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INfCOM
For the Year Ended December 31, 2012
(In Philippine
Peso)
NOTES
2012
REVENUES
18
771,640,852
761,750,514
COST OF SERVICES
19
209,915,076
204,177,261
588,432,200
561,725,776
GROSS PROFIT
NET TRADING GAINS (LOSSES)
OTHER INCOME
(3,064,068)
557,573,253
2,475,649
9
17,583,669
20
15,948,890
43,678,138
27,093,944
595,258,335
629,046,270
587,142,846
OPERATING EXPENSES
21
496,810,798
447,324,486
435,915,471
FINANCE COSTS
16
46,068,423
38,322,540
29,213,843
EQUITY IN NET EARNINGS
11
1,324,830
2,131,855
2,504,455
53,703,944
145,531,099
124,517,987
23,177,697
35,897,652
28,298,852
30,526,247
109,633,447
96,219,135
PROFIT BEFORETAX FROM
CONTINUING OPERATION
29
INCOME TAXES
PROFIT (LOSS) FROM:
CONTINUING OPERATION
DISCONTINUED OPERATION
28
30,526,247
PROFIT
26,429,749
(30,304,899)
136,063,196
65,914,236
OTHER COMPREHENSIVEINCOME
Translation adjustment
(20,611,965)
3,983,494
TOTAL COMPREHENSIVEINCOME
9,914,282
140,046,690
50,569,126
ATTRIBUTABLE TO:
Equity holders of the parent
Non-controlling interest
9,914,282
142,154,607
(2,107,917)
63,488,250
(12,919,124)
140,046,690
50,569,126
9,914,282
.
(15,345,110)
EARNINGS PERSHARE
Basic Earnings per Share from
Continuing and Discontinued
Operations
27
0.05
0.23
0.13
Basic Earnings per Share from
Continuing Operations
27
0.05
0.18
0.16
(See Notes to Consolidated
Financial
Statements)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Year Ended December
31, 2012
IIn Philippine
Peso)
Equity
Additional
Balance at January
Correction
1, 2010,
as previously
of prior period errors
Balance at January
1, 2010,
stated
Paid-
Notes
Capital Stock
in Capital
17
562,4 i 7,000
429,513,501
17,35
429,513,501
Profit
income
Retained
Retained
Translation
Treasury
Equity Holders of
controlling
Earnings
Earnings
Adjustment
Stock
the Parent
Interest
(20,398,998)
(40,115,150)
1,238,362,438
14,064,580
1,252,427,018
1,235,528,421
14,064,580
1,249,593,001
77,551,227
(11,636,991)
306,946,085
250,137,833
40,115,150
13,859,085
40,115,150
(6,539,913)
Attributable
(40,115,150)
Balance at December 31,2010,
as restated
17
(14,062,977)
(26,603,533)
17
562,417,000
429,513,501
Profit
301,085,527
income
40,115,150
17
17
Stock dividends
Purchase of non-controlling
interest
(20,602,890)
(40,115,150)
4,085,227
55,308,800
1
of retained earnings
Balance at December 31, 2011,
as restated
(12,872,058)
617,725,800
391,232,478
Profit
370,974,049
income
17
Cash dividends
17
Purchase of own stock
17
of retained earnings
Balance at December 31, 2012
(16,517,663)
(52,987,208)
(20,611,965)
(119,980,858)
(16,222,480)
(16,222,480)
17
17
617,725,800
(1,282,133)
65,914,236
(15,345,110)
(26,603,533)
1,145,456
138,069,380
(2,006,184)
4,085,227
(101,733)
1,273,558,594
136,063,196
3,983,494
391,232,478
265,296,958
(12,872,058)
962,461
(37,318,562)
(12,872,058)
12,872,058
52,987,208
30,526,247
Other comprehensive
(2,834,017)
1,272,413,138
(38,281,023)
(12,872,058)
17,35
17
Total
(55,308,800)
(38,281,023)
17
Non-
(26,603,533)
138,069,380
Other comprehensive
to
(2,834,017)
(14,062,977)
17
Cash dividends
Appropriation
Cumulative
77,551,227
Other comprehensive
Appropriation
Appropriated
(56,808,252)
562,417,000
as restated
Unappropriated
1,363,414,664
1,363,414,664
30,526,247
30,526,247
(20,611,965)
(20,611,965)
(119,980,858)
(119,980,858)
(16,222,480)
(16,222,480)
16,222,480
69,209,688
(37,129,628)
(69,209,688)
Financial Statements)
"I
j
•
.1
("
Ir-',
'
1,237,125,608
1,237,125,608
<' ,
CONSOLIDATED STATEMENT OF CASH flOWS
For the Year Ended December 31,2012
(In Philippine
CJ
C .: I V L
11
Cl-lli'T'SE O. DEL r:OSAR10
Peso)
NOTES
CASH FLOWS FROM OPERATINGACTIVITIES
Profit before tax from continuing operation
Profit (Loss) before tax from discontinued operation
Profit before tax
Adjustments for:
Finance costs
Depreciation
Loss on write-off of assets
Unrealized foreign exchange (gain) loss - net
Amortization
Loss (Gain) on sale of property and equipment
Equity in net earnings of associates
Finance income
Unrealized market valuation (gain) loss
on financial assets at fair value
thorugh profit or loss (FVPL)
Gain from sale of assets of discontinued operations
Net cash from (used in) financing activities
53,703,944
171,960,848
38,322,540
11,261,295
2,058,616
5,748,578
(1,205,505)
2,006,374
(3,954)
(2,131,855)
(13,862,222)
9
28
(17,583,669)
(3,064,068)
(65,139,395)
23
20
11
12
13
12
1
Net cash from (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans
Payment for buy-back of shares
Finance cost paid
Payment of cash dividends
Payments of loans
145,531,099
26,429,749
46,068,423
11,717,731
10,040,886
4,294,704
3,113,114
941,167
124,567
(1,324,830)
(12,947,419)
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income received
Dividends received from associate
Proceeds from disposals of property and equipment
Additions to software
Additions to property and equipment
Acquisition of non-controlling interest in subsidiaries
53,703,944
16
12
21
21,23
20
13
12
11
20
Operating cash flows before changes
in working capital
Decrease (Increase) in operating assets:
Financial assets at FVPL
Other non-current assets
Increase (Decrease) in beneficiaries and other payables
Cash generated from operations
Contributions to retirement fund
Income taxes paid
2010
(As restated)
2012
16
17
16
17
16
124,517,987
(30,304,899)
94,213,088
29,213,843
12,544,844
2,376,127
(1,769,202)
1,525,720
(2,504,455)
(12,514,490)
2,475,649
98,148,618
145,951,252
125,561,124
(164,277,676)
(67,370,414)
(5,013,982)
7,491,016
279,846,425
(1,315,200)
148,094,996
5,024,824
3,700,816
40,663,944
(57,544,136)
111,406,287
148,823,987
(6,158,445)
(28,668,766)
342,120,632
(6,895,233)
(37,021,550)
105,843,838
(5,229,490)
113,996,776
298,203,849
44,935,494
13,749,663
12,514,490
13,036,291
4,896,570
361,743
(945,187)
(16,772,225)
456,143
(2,034,070)
(7,110,179)
(37,318,562)
577,192
(32,257,005)
925,000,000
(16,222,480)
(46,156,723)
(119,980,858)
(666,000,000)
666,000,000
(12,872,058)
(38,402,247)
76,639,939
(1,246,688)
(3,361,378)
(68,971,371 )
(55,678,854)
596,381
1,610,572
(852,274)
(14,039,160)
(169,991)
877,000,000
(29,396,496)
(877,000,000)
(26,603,533)
(930,000,000)
(262,274,305)
(109,000,029)
EFFECTSOF FOREIGNEXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
(20,329,483)
3,745,137
(14,761,174)
NET INCREASE(DECREASE)IN CASH
AND CASH EQUIVALENTS
170,884,424
7,417,676
(78,995,700)
CASH AND CASH EQUIVALENTS
AT BEGINNINGOF YEAR
891,235,623
883,817,947
962,813,647
1,062,120,047
891,235,623
883,817,947
CASH AND CASH EQUIVALENTS AT END OF YEAR
Financial
Statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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 principal activities of 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 is 29.18% owned by STAR Equities, Inc., 21.29% owned by
JTKC Equities, Inc. 23.35% owned by Surewell Equities, Inc., 3.27% owned by JPSA
Global Services Co., and the rest by the public. The Parent Company is the ultimate
parent Company of the Group.
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. The Parent Company’s common shares were listed with the
Philippine Stock Exchange on October 17, 2007.
The Parent Company’s subsidiaries and associates follows:
Subsidiaries
Country of
Incorporation
Functional
Currency
Effective Percentage of
Ownership
2012
2011
2010
International Remittance
(Canada) Ltd. (IRCL)
Canadian
Dollar (CAD)
100%
100%
100%
Canada
(LSML)
Hong Kong
Dollar (HKD)
100%
100%
100%
Hong Kong
(IGRL)
United
Kingdom
Great Britain
Pound (GBP)
100%
100%
100%
100%
100%
Australia
Australian
Dollar (AUD)
100%
I-Remit Australia Pty Ltd (IAPL)
(WEPL)
Australian
Dollar (AUD)
100%
100%
65%
Australia
IREMIT Remittance Consulting
GmbH (IRCGmbH)
100%
100%
74.9%
Austria
Euro (EUR)
(INZL)
New Zealand
Dollar (NZD)
100%
100%
100%
New Zealand
100%
100%
Hong Kong
Hong Kong
Dollar (HKD)
100%
(PSAGL)
100%
-
Japan
Japanese
Yen (JPY)
100%
K.K. Iremit Japan (KKIJ)
Effective Percentage of
Ownership
Associates
Country of
Incorporation
IRemit Singapore Pte. Ltd. (ISPL)
Singapore
Hwa Kung Hong & Co., Ltd.
(HKHCL)
Taiwan
Functional
Currency
Singapore
Dollar (SGD)
New Taiwan
Dollar (NTD)
2012
2011
2010
49%
49%
49%
49%
49%
49%
The Parent Company’s ownership to WEPL is consists of direct voting interest of 70%
and indirect voting interest through IAPL of 30%
IRCGmbH is formerly known as IREMIT EUROPE Remittance Consulting AG (IERCAG).
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
‘Capital paid-in excess of par value’. The acquisition increased the Parent Company’s
effective ownership in WEPL to 100% from 65%.
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.
2.
ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
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.
2
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 financial statements. Details of other
new and revised PFRSs applied in these financial statements that have had no material
effect on the financial statements are set out in section 2.02.

PAS 1, Presentation of Financial Statements – The improvements in this PFRS
clarifies that when an entity changes an accounting policy, or makes a
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.
As a result of early adoption, the Group opted not to present related notes to
accompany the opening consolidated statement of financial position.
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 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 (Revised), Financial Instruments: Disclosures – Transfers of Financial
Assets
The amendments to PFRS 7 increase the disclosure requirements for transactions
involving transfers of financial assets. These amendments are intended to provide
greater transparency around risk exposures when a financial asset is transferred but
the transferor retains some level of continuing exposure in the asset.
The amendments also require disclosures where transfers of financial assets are not
evenly distributed throughout the period.
The effective date of the amendment is July 1, 2011, with earlier application
permitted.

PAS 12, Income Taxes – Deferred Tax: Recovery of Underlying Assets
PAS 12 requires an entity to measure the deferred tax relating to an asset
depending on whether the entity expects to recover the carrying amount of the
asset through use or sale. It can be difficult and subjective to assess whether
recovery will be through use or through sale when the asset is measured using the
fair value model in PAS 40, Investment Property. The amendment provides a
practical solution to the problem by introducing a presumption that recovery of the
carrying amount will, normally be through sale.
As a result of the amendments, SIC-21, Income Taxes – Recovery of Revalued
Non-Depreciable Assets would no longer apply to investment properties carried at
fair value. The amendments also incorporate into PAS 12 the remaining guidance
previously contained in SIC-21, which is accordingly withdrawn.
The amendments are effective from January 1, 2012.
permitted.
Earlier application is
3
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
financial statements.

Assets
the transferor retains some level of continuing exposure in the asset. The
amendments also require disclosures where transfers of financial assets are not
permitted.

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 derecognition.
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.
4

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 11, Joint Arrangements
The Standard requires a party to a joint arrangement to determine whether the type
of joint arrangement is joint operation or joint venture, by assessing its rights and
obligations arising from the arrangement.
A joint venturer is required to recognise an investment and to account for that
investment using the equity method in accordance with PAS 28, Investments in
Associates and Joint Ventures, unless the entity is exempted from applying the
equity method as specified in the standard. Joint operators are required to
recognise and measure the assets and liabilities (and recognise the related revenues
and expenses) in relation to its interest in the arrangement in accordance with
relevant PFRSs applicable to the particular assets, liabilities, revenues and
expenses.

PFRS 12, Disclosure of Interests in Other Entities
The Standard applies to entities that have an interest 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 cash flows available to the reporting
entity and determining the value of current or future investment in the reporting
entity.

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
5

PAS 1, Presentation of Items of Other Comprehensive Income
To improve the presentation of items of Other Comprehensive Income (OCI), the
IASB amended IAS 1 to require 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.

PAS 19 (Amended), Employee Benefits
Significant changes to this standard include removal of corridor approach;
immediate recognition of past service costs; presentation of remeasurements 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.
Revised PAS 19, Employee Benefits
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 obtained the services of an external actuary to compute the impact to
the financial statements upon adoption of the standard. The effects are detailed
below:
As of
As of
December 31, 2012 December 31, 2011
Increase (decrease) in:
Consolidated statement of financial position
Net defined benefit
asset/liability
P
17,231
Deferred tax asset/liability
5,169
Other comprehensive income
(755,457)
Retained earnings
777,857
P
1,076,750
323,025
(3,975,741)
5,375,516
As of
January 1, 2011
P
2012
Consolidared statement of comprehensive income
Net benefit cost
Income tax expense
Profit for the year
Attributable to the owners of the Parent Company
Attributable to non-controlling interests
P
(304,062)
317,856
(13,794)
(13,794)
-
5,872,169
1,761,651
7,633,820
2011
P
(819,678)
1,438,626
(618,948)
(618,948)
-
6

PAS 27 (Revised), 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 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.

Improvements to PFRS (2011) – Effective for annual periods beginning on or after
b) related notes are not required to Group 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,
Interim Financial Reporting 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.
7
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 Group operates (the “functional currency”).
The Group chose to present its consolidated financial statements using its functional
currency.
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 the
power to govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
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.
Subsidiaries are entities controlled by the Group. Control exists when the Group has
the power, directly or indirectly, to govern the financial and operating policies of an
entity so as to obtain benefit from its activities. In assessing control, potential voting
rights that are presently exercisable or convertible are taken into account.
The financial statements of the subsidiaries are included in the consolidated financial
statements from the date when the Group obtains control, and continue to be
consolidated until the date when such control ceases.
On acquisition, the assets and liabilities and the contingent liabilities of a subsidiaries
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.
8
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 cashgenerating 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 intra-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 Group and are presented in the consolidated statements of income, 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
subsidiaries, any non-controlling interests and other components of equity related to
the subsidiaries. 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.
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.
9
For management purposes, the Group is currently organized into three business
segments: Third Party Transactions, Retail Solutions and Special Projects.
These divisions 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, ‘availablefor-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.
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.
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 consolidated statement of comprehensive income. Fair value is
determined in the manner described in Note 31.
10
4.02.04 Loans and 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.
4.02.05 Impairment of Financial Assets
Financial assets, other than financial assets at FVPL, 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.
11
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.
4.02.06 Derecognition 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 Investments in Associates
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
statement 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.
12
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. 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.
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 on a straight-line method based on the estimated useful lives
of the assets as follows:
Office and communication equipment
Transportation and delivery equipment
Furniture and fixtures
3 years
3 to 5 years
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
derecognition 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.
13
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 lives of three (3) years of the assets.
Goodwill is not amortized but impaired at least on an annual basis.
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 for the reason that it is not
subject to amortization but is reviewed for impairment annually or frequently if events
or changes in circumstances indicate that the carrying value may be impaired.
4.05.02 Derecognition 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 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.
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.
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.
14
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
4.07 Borrowing Costs
All other 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 trade and other payables (except payable to
government agencies and accrued expenses) 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 Derecognition of Financial Liabilities
The Group derecognizes financial liabilities when, and only when, the Group’s
obligations are discharged, cancelled or expired. 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.
15
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.
4.09 Offsetting of Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the
consolidated statement of financial position if, and only if, there is a currently
enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the 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, incentives and bonuses, and
non-monetary benefits.
4.10.02 Post-employment Benefits
The Group has a funded and non-contributory retirement plan. The cost of providing
benefits is determined using the Projected Unit Credit Method (PUCM) 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 plus amortization of past service cost, experience adjustments and
changes in actuarial assumptions over the expected average remaining working lives of
the covered employees. Cumulative actuarial gains and losses in excess of the 10% of
the greater between present value of the defined benefit obligation and fair value of
any plan assets were amortized over the expected average remaining working lifetime
of the employees and recognized as part of retirement expense. Actuarial gains and
losses arising during the year are recognized in profit or loss.
Any asset resulting from this calculation is limited to unrecognized actuarial losses and
past service cost, plus the present value of available funds and reductions in future
contributions to the plan.
The funding policy is to contribute an amount based on the actuarial valuation report
which is carried out at regular intervals.
4.11 Provisions and Contingencies
Provisions are recognized when the Company has a present obligation, whether legal or
constructive, as a result of a past event, it is probable that the Company will be
required to settle the obligation, and a reliable estimate can be made of the amount of
the obligation.
16
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 statement of comprehensive
income.
Contingencies are not recognized in the Group’s consolidated financial statements
unless the possibility of inflow/outflow of resources embodying economic benefits is
probable.
4.12 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 rebates and other similar allowances.
4.12.01 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;

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
Revenue from rendering pertains to delivery fees and other fees.
4.12.02 Finance Income
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.
17
4.13 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 statement 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.
4.14 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.
4.14.01 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.
4.15 Foreign Currency Transactions and Translation
In preparing the consolidated financial statements of the Group, transactions in
currencies other than the Group’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 translated using the exchange rates
as at the dates of the initial transactions.
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.
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 statement
presenting profit or loss and other comprehensive income are translated at the average
exchange rate for the period.
4.16 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.
18
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).


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.


A person identified above has significant influence over the entity or is a member of
the key management personnel of the entity (or of a parent 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.
4.17 Taxation
Income tax expense represents the net of the tax currently payable and deferred tax.
4.17.01 Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the consolidated statement 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
4.17.02 Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of
assets and liabilities in the 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.
19
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.
4.17.03 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.
4.18 Share-based Payments
4.18.01 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 Group’s
estimate of equity instruments that will eventually vest. At the end of each reporting
period, the Group 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.
4.19 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.
20
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 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.
5.
CRITICAL JUDGMENT 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.
The Group determined its functional currency to be Philippine Peso, being the currency
that mainly influences the Group revenues and cost and expenses.
21
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
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
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 P82,306,658 and P73,067,842 as of December 31, 2012 and 2011,
respectively, as disclosed in Note 12.
The carrying amounts of property and
equipment amounted to P23,495,462 and P19,207,458 as of December 31, 2012 and
2011, 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.
Goodwill is reviewed for impairment annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
22
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 statement 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 range from 7.19% to 10.81% in 2012, 8.55% to 10.60% in 2011 and
7.31% to 8.83% in 2010, and cash flows beyond the five year-period were
extrapolated using a steady growth rate of 1.00% in 2012, 1.00% in 2011 and
0.13% to 1.43% in 2010.
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.
previous estimates.
The accumulated amortization of software amounted to
P12,728,827 and P11,788,360 as of December 31, 2012 and 2011, respectively, as
disclosed in Note 13. The carrying amounts of software amounted to P1,452,662 and
P1,450,944 as of December 31, 2012 and 2011, 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
associates 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.
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.
Management believes that there is no impairment in the value of its property and
equipment, investments in associates and intangible assets, thus no impairment loss is
recognized in the consolidated financial statements in both years. As of December 31,
2012 and 2011, the aggregate carrying amounts of investments in associates,
property and equipment, and intangible assets amounted to P155,881,666 and
P155,163,684, respectively, as disclosed in Notes 11, 12 and 13.
23
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 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
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 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, 2012 and 2011, Management believes that the recoverability of
receivables is certain; hence, no allowance for doubtful accounts was provided. As of
December 31, 2012 and 2011, the carrying values of trade and other receivables
amounted to P1,192,359,836 and P1,031,284,146, respectively, as disclosed in
Notes 8.
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, 2012 and 2011, the Group’s recognized deferred tax assets from
NOLCO, accumulated depreciation, and unused tax credits amounted to P6,893,941
and P4,980,348, 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.
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, expected
returns on plan assets and rates of compensation increase. In accordance with the
generally accepted accounting principles, actual results that differ from the
assumptions are accumulated and amortized over future periods and therefore,
generally affect the recognized expense and recorded obligation in such future periods.
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, 2012 and 2011, the Group has
recognized retirement asset amounting to P2,232,135 and P368,394, respectively, as
disclosed in Note 23. Retirement expense recognized in 2012, 2011 and 2010
amounted to P4,294,704, P5,748,678 and P2,376,127, respectively, as disclosed in
Notes 21 and 23.
24
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):
2012
Segment
Revenue
Segment
Profit
Segment Cost
Philippines
Asia Pacific
Europe
North America
Adjustment and elimination
P
470,199
106,346
83,807
107,275
4,014
P
185,136
3,866
10,461
10,452
-
P
285,063
102,480
73,346
96,823
4,014
Total
P
771,641
P
209,915
P
561,726
2011
Segment
Revenue
Segment
Profit
Segment Cost
Philippines
Asia Pacific
Europe
North America
Adjustment and elimination
P
490,087 P
131,329
64,288
103,124
(969)
175,332
3,440
10,384
10,271
-
P
314,755
127,889
53,904
92,853
(969)
Total
P
787,859
199,427
P
588,432
P
2010
Segment
Revenue
Segment
Profit
Segment Cost
Philippines
Asia Pacific
Europe
North America
P
463,249
128,963
60,481
109,058
P
180,569
2,665
9,411
11,532
P
282,680
126,298
51,070
97,526
Total
P
761,751
P
204,177
P
557,574
25
The Segments’ profit and the Group’s profit are reconciled as follow amounts in
thousands):
2012
Philippines
Asia Pacific
Europe
North America
Adjustments and eliminations
P
Total for continuing operations
Net trading gains (losses)
Other income
Finance costs
Equity in net earnings
Operating expenses
Income tax
Profit
2011
285,063
102,480
73,346
96,823
4,014
P
561,726
17,583
15,949
(46,068)
1,325
(496,811)
(23,178)
P
30,526
2010
314,755 P
127,889
53,904
92,853
(969)
588,432
(3,064)
43,678
(38,323)
2,132
(447,324)
(35,898)
P
109,633
282,680
126,298
51,070
97,526
557,574
2,476
27,094
(29,214)
2,504
(435,916)
(28,299)
P
96,219
Revenue reported above represents revenue generated from external customers. There
were no inter-segment sales in 2012, 2011 and 2010.
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.
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:
2012
Revenue from
External
Customers
Non-current
Assets
Philippines
Asia Pacific
Europe
North America
P
470,199,180 P 331,436,866
109,964,208
19,755,933
84,546,415
8,560,828
107,274,588
8,144,099
(343,539)
(171,476,633)
Total
P
771,640,852
P 196,421,093
26
2011
Revenue from
External
Customers
Non-current
Assets
Philippines
Asia Pacific
Europe
North America
P
490,087,163 P 330,374,629
131,328,620
16,399,386
64,288,395
8,032,438
103,124,096
6,733,478
(968,769)
(162,123,138)
Total
P
787,859,505
P 199,416,793
2010
Revenue from
External
Customers
Non-current
Assets
Philippines
Asia Pacific
Europe
North America
P
463,248,573
128,963,802
60,480,623
109,057,516
-
P 289,498,725
12,461,647
14,412,255
6,384,737
(114,068,167)
Total
P
761,750,514 P
208,689,197
6.03 Segment Assets and Liabilities
2012
Segment Assets
Philippines
Asia Pacific
Europe
North America
P 2,579,264
435,122
89,858
97,631
2011
P 2,161,338
356,540
125,544
87,150
2010
P 2,298,118
256,831
85,245
62,144
Total segment assets
Unallocated
3,201,875
(516,892)
2,730,572
(454,480)
2,702,338
(344,532)
Total assets
2,684,983
2,276,092
2,357,806
Segment Liabilities
Philippines
Asia Pacific
Europe
North America
1,485,601
143,864
101,121
63,481
959,263
82,971
113,573
50,795
1,138,677
53,107
84,182
40,718
Total segment liabilities
Unallocated
1,794,067
(346,209)
Total liabilities
P 1,447,858
1,206,602
(293,925)
P
912,677
1,316,684
(232,437)
P 1,084,247
27
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.
For the purpose of the consolidated statement 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 statement of cash flows can be reconciled to the related items in the
consolidated statement of financial position as follows:
2012
Cash on hand
Cash in banks
Cash equivalent
P
2011
34,689,374
975,550,943
51,879,730
P
47,998,476
806,000,555
37,236,592
P 1,062,120,047
P
891,235,623
Cash in banks earns interest ranging from 0.40% to 2% while cash equivalents earn
interest at rate of 1.75%.
Finance income earned on these accounts amounted to P2,106,151, P3,140,373 and
P3,465,452 in 2012, 2011 and 2010, respectively, as disclosed in Note 20.
8.
TRADE AND OTHER RECEIVABLES
The Group’s trade and other receivables consist of:
2012
Agents
Couriers
Advances to related parties (Note 26)
Officers and employees
Interest
Non-trade
Others
2011
P
1,067,065,055
88,815,199
25,824,702
4,754,013
3,535,978
2,364,889
P
P
1,192,359,836
P
913,329,835
3,523,052
25,020,726
9,514,306
3,624,850
72,432,683
3,838,694
1,031,284,146
Receivables from agents pertain to advances made to fund the remittance transactions
to beneficiaries. These are settled within one (1) to five (5) days from transaction
date. No interest was charged on trade receivables.
28
Receivables from couriers pertain to advances made to courier companies to ease up
the door-to-door delivery of the remittances to the beneficiaries. These are settled
within thirty (30) days to sixty (60) days from transaction date.
Advances to related parties include operating funds and marketing materials advanced
to associate offices by the Group. These advances are collected in one month from
date of funding.
Aging of accounts that are past due but not impaired is as follows:
2012
1 – 30 days past due
Over 60 days past due
2011
P
12,253,031
P
8,773,779
P
12,253,031
P
8,773,779
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, the directors believe 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:
2012
Debt securities
Equity securities
2011
P
189,861,699
20,318,648
P 112,624,807
12,601,457
P
210,180,347
P 125,226,264
Debt securities are bonds issued by various foreign private corporations and foreign
government and are listed overseas. As of December 31, 2012 and 2011, the carrying
amounts includes net unrealized gain and loss of P8,447,554 and P2,100,545,
respectively.
Finance income earned in 2012, 2011 and 2010 amounted to
P10,841,268, P10,721,849 and P9,049,038 respectively, as disclosed in Note 20.
Equity securities are common shares of various foreign corporations.
As of
December 31, 2012, 2011 and 2010 the carrying amount includes net unrealized
(gain) loss of P2,067,747, (P3,373,744) and nil, respectively.
In 2012 and 2010, the Group has gain from changes in fair value of financial assets at
FVPL amounting to P17,583,669 and P2,475,649, respectively, while in 2011, the
Group has loss from fair value changes of financial assets at FVPL amounting to
P3,064,068, are included in net trading gains in the consolidated statement 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. There were no transfers between Level 1 and Level
2 fair value measurements.
29
10. PREPAYMENTS AND OTHER CURRENT ASSETS
The details of the Group’s prepayments and other current assets are shown below:
2012
Receivable from Bureau of Internal Revenue (BIR)
Prepaid expenses
Visa cards inventory
Advances to suppliers and contractors
Offices supplies
Creditable withholding tax
Refundable taxes
2011
P 13,160,535
5,813,060
2,829,010
1,830,343
259,623
9,361
-
P 13,160,535
9,907,410
3,371,662
1,087,500
190,328
2,979
1,208,422
P 23,901,932
P 28,928,836
In 2012 and 2011, receivable from BIR pertains to the excess payments made by the
Group in 2007 for the Initial Public Offering (IPO) percentage tax at P13,160,535. As
of December 31, 2012, 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 payments for interest, rent, association dues and insurance.
Refundable taxes pertain to the advance income taxes paid by LSML at the beginning
of the year based on the tax assessment on the projected income. In 2011, LSML
operations resulted to a loss making the advance tax payments either refundable or
applicable to other tax obligations.
11. INVESTMENTS IN ASSOCIATES
Details of the Group’s associates are as follows:
Name of
Associates
ISPL
HKHCL
Principal Activity
Remittance business
Remittance business
Place of
Incorporation
and Operation
Singapore
Taiwan
Proportion of
Ownership Interest
2012
49%
49%
2011
49%
49%
The movements in the investment in associates are presented below:
2012
Acquisition cost
Accumulated equity in net income
Balance, January 1
Equity in profit
Dividends declared
P 16,173,974
2011
P 16,173,974
6,890,117
1,324,830
(4,896,570)
4,758,262
2,131,855
-
3,318,377
6,890,117
P 19,492,351
P 23,064,091
30
The summarized financial information of the associates is as follows:
2012
2011
ISPL
Total assets
Total liabilities
Net assets
Revenue
Profit
82,988,673
68,611,378
14,377,295
1,745,567
P
1,047,199
73,253,861
49,702,899
23,550,962
55,923,737
P
3,127,419
HKHCL
Total assets
Total liabilities
Net assets
Revenue
Profit
P 34,857,286
30,312,680
4,544,606
13,023,598
1,656,534
P 26,874,705
23,905,645
2,969,060
19,339,949
1,223,305
31
12. PROPERTY AND EQUIPMENT — net
The carrying amounts of the Group’s property and equipment are as follows:
Office and
communication
equipment
January 1, 2011
Cost
Accumulated depreciation
P
Carrying amount
Movements during 2011
Balance, January 1, 2011
Additions
Disposal
Cost
Exchange adjustments
Cost
Depreciation (Note 21)
43,553,651 P
(33,075,135)
December 31, 2011
Cost
10,147,352 P
(6,497,396)
Leasehold
improvements
30,636,325 P
(21,706,870)
Total
91,339,399
(64,326,091)
3,955,381
3,649,956
8,929,455
27,013,308
10,478,516
5,425,325
3,955,381
35,315
3,649,956
473,849
8,929,455
1,175,690
27,013,308
7,110,179
(1,518,214)
776,847
(1,984,214)
628,335
(6,213,783)
2,143,857
(23,832)
16,230
(962,326)
(132,178)
228,214
(3,079,596)
39,505
375,687
(11,261,295)
-
194,442
131,317
(5,889,913)
1,073
(74)
(1,329,460)
8,367,007
2,662,235
2,412,510
5,765,706
19,207,458
7,038,459
(4,376,224)
9,079,155
(6,666,645)
29,695,623
(23,929,917)
92,275,300
(73,067,842)
46,462,063
(38,095,056)
P
7,002,071 P
(3,046,690)
Furniture and
fixtures
10,478,516
(2,711,355)
738,675
Balance, December 31, 2011
Carrying Amount
Transportation
and delivery
equipment
8,367,007
P
2,662,235 P
2,412,510 P
5,765,706 P
19,207,458
32
Office and
communication
equipment
Additions
Disposal
Cost
Reclassification of accounts
Cost
Exchange adjustments
Cost
P
8,367,007 P
8,886,886
(1,168,133)
1,018,543
December 31, 2012
Cost
P
2,662,235
2,489,213
Furniture and
fixtures
P
(514,960)
178,240
359,082
(275,293)
Carrying amount
Transportation
and delivery
equipment
-
Leasehold
improvements
Total
2,412,510 P
1,127,028
5,765,706 P
4,269,098
-
-
(359,082)
275,293
19,207,458
16,772,225
(1,683,093)
1,196,783
-
-
(712,370)
573,121
(5,812,338)
(833)
4,111
(1,835,527)
(155,388)
153,041
(1,361,000)
(693,721)
551,859
(2,708,866)
(1,562,312)
1,282,132
(11,717,731)
11,236,505
2,982,479
2,092,402
7,184,076
23,495,462
53,827,528
(42,591,023)
9,011,879
(6,029,400)
9,691,713
(7,599,311)
33,271,000
(26,086,924)
105,802,120
(82,306,658)
11,236,505
P
2,982,479
P
2,092,402
P
7,184,076
P
23,495,462
As of December 31, 2012 and 2011, the cost of fully depreciated property and equipment still in use by the Group amounted to
P65,567,540 and P61,548,191, respectively.
33
In 2012, the Company disposed an equipment with a carrying amount of P486,310 for
a consideration of P361,743 which resulted to loss on disposal of P124,567, while in
2011, the Group disposed an equipment with a carrying amount of P493,669 for a
consideration of P456,143 which resulted to loss on sale of P3,954. Gain on disposal
recognized amounted to P223,214 and included in the consolidated statement of
comprehensive income as part of other income.
The Group’s consolidated depreciation of property and equipment amounted to
P11,717,731, P11,261,295 and P12,544,844 in 2012, 2011 and 2010, respectively,
as disclosed in Note 21.
Depreciation and amortization amounting to P1,760,917 and P795,627 pertains to the
discontinued operations in Italy for the years ended December 31, 2011 and 2010,
respectively, as disclosed in Note 28.
During the year, the Group carried out a review of the recoverable amounts of its
property and equipment. The Group has 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:
2012
Goodwill
Software – net
2011
P
111,441,191
1,452,662
P 111,441,191
1,450,944
P
112,893,853
P 112,892,135
13.01 Goodwill
The Group’s goodwill relate to the excess of the acquisition cost over the ownership
interest acquired by the Parent Company in IGRL, IAPL, IRCL, LSML and WEPL, as
follows:
13.01.01 IGRL and IAPL
On June 2, 2007, the Parent Company’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 Parent Company. Accordingly, on June 29, 2007, the Parent
Company 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 Parent Company) of both entities. Under the deeds of assignment, the existing
advances by the Parent Company to certain stockholders were applied as payment for
the purchase of IGRL and IAPL.
34
13.01.02 WEPL
On June 2, 2007, the Parent Company’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 Parent
Company. Accordingly, on June 29, 2007 the Parent Company acquired 20%
ownership interest in WEPL through execution of a deed of assignment by the previous
stockholders (who are also stockholders of the Parent Company) of the entity. Under
the deed of assignment, the existing advances of the Parent Company to certain
stockholders were applied 15% ownership interest in WEPL was acquired by the
Parent Company for a consideration of P3,433,072.
On March 25, 2011, the Parent Company’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
Parent Company through its direct interest of 70% and indirect interest of 30%
through IAPL.
13.01.03 IRCL
On October 1, 2004, the Parent Company’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 Parent
Company. 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 no-controlling stockholder in IRCL was transferred to the Parent
Company at no additional cost.
On June 2, 2007, the Parent Company’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 Parent Company. Under the deed of assignment, the existing
advances from the Parent Company 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 Parent Company. On June 2, 2007, the Parent Company’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 Parent Company) executed a deed of assignment to transfer its ownership interest
to the Parent Company. Under the deed of assignment, the existing advances by the
Parent Company 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.
35
Goodwill acquired through business combinations has been allocated to five (5)
individual CGUs as follows:
2012
IGRL
LSML
IAPL
IRCL
WEPL
2011
P
69,982,505
20,668,154
7,678,564
7,526,653
5,585,315
P
69,982,505
20,668,154
7,678,564
7,526,653
5,585,315
P
111,441,191
P
111,441,191
13.02 Software – net
Movements in software are as follows:
2012
Balance, January 1
Cost
Accumulated amortization
P
Movements during the year
Balance, January 1
Additions
Disposals
Cost
Foreign exchange adjustment
Cost
Amortization
2011
13,239,304 P
(11,788,360)
1,450,944
2,081,746
1,450,944
945,187
2,081,746
2,034,070
-
(941,474)
459,811
(3,002)
700
(941,167)
P
12,384,629
(10,302,883)
1,452,662
(237,921)
61,086
(2,006,374)
P
1,450,944
The intangible asset has three (3) years remaining amortization period.
During the year, the Group carried out a review of the recoverable amounts of its
intangible asset. The Group has determined that there is no indication that impairment
has occurred on its intangible assets.
The Group’s consolidated amortization of intangible asset amounted to P941,167,
P2,006,374 in 2012 and 2011, respectively, as disclosed in Note 21.
36
14. OTHER NON-CURRENT ASSETS
Below is the composition of the Group’s other non-current assets.
2012
Refundable deposits (Note 25)
Input VAT
Deferred input VAT
Others
2011
P
19,905,025
11,464,326
44,000
P
17,291,585
21,242,725
326,057
44,000
P
31,413,351
P
38,904,367
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
P1,710,000 and P3,820,000, respectively. Management of the 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
P6,790,000, P2,060,000 and nil in 2012, 2011 and 2010, respectively.
Refundable deposits pertain to the security deposits made by the Group in relation to
rental lease agreements for the office spaces in the Philippines, Hong Kong, United
Kingdom, Canada and Italy.
15. BENEFICIARIES AND OTHER PAYABLES
The components of beneficiaries and other payables account are as follows:
2012
Beneficiaries
Agents, couriers and trading clients
Accrued expenses
Payable to government agencies
Payable to suppliers
Advances from related parties (Note 26)
Output VAT
Others
2011
P 443,442,930
41,732,521
25,246,630
4,258,753
3,720,856
218,417
1,219,170
P 155,140,304
65,550,310
14,801,171
3,179,656
1,391,836
17,875
-
P 519,839,277
P 240,081,152
Payables to beneficiaries, agents, couriers and trading clients are noninterest-bearing
and are normally settled within one (1) to thirty (30) days.
Accrued expenses include the Group’s accrual for various operating expenses such as
vacation and sick leave benefits, courier charges, training and development,
professional fees and utilities.
37
16. LOANS PAYABLE
In 2012 and 2011, the Parent Company issued an unsecured, short-term interestbearing peso-denominated bank loans with an aggregate amount of P925,000,000 and
P666,000,000, respectively. The loans payable have an interest rate ranges from 5%
and 7.125% per annum and have maturities of less than one (1) year. The related
finance costs from these loans payable amounted to P46,068,423, P38,322,540,
P29,213,843 in 2012, 2011 and 2010, respectively.
The Parent Company has unused credit facilities with various banks amounting to
P1,880,000,000 and P1,480,000,000 as of December 31, 2012 and 2011,
respectively.
Movements of loans payable are as follows:
2012
Balance, January 1
Additional loans obtain
Payments for short-term loans payable
P
P
2011
666,000,000 P
925,000,000
(666,000,000)
925,000,000
P
877,000,000
666,000,000
(877,000,000)
666,000,000
As of the reporting period, the Parent Company is compliant with the terms and
conditions of the loans.
17. ISSUED CAPITAL
17.01 Ordinary Shares
Components of ordinary shares issued and outstanding are as follows:
Ordinary shares
Additional paid-in-capital
P
2012
617,725,800
391,232,478
P
2011
617,725,800
391,232,478
P
1,008,958,278
P
1,008,958,278
Shown below are the details on the movements of ordinary shares.
2012
Authorized:
1,000,000,000 shares at P1 par
value per share
P
Subscribed, issued, and outstanding:
562,417,000 shares at P1 par value
per share
Stock dividends, 55,308,800 shares
at P1 par value per share
P
1,000,000,000
2011
P
1,000,000,000
562,417,000
562,417,000
55,308,800
55,308,800
617,725,800
P
617,725,800
Ordinary shares carry one vote per share and a right to dividends.
38
On September 13, 2007, the SEC approved the registration of 140,604,000 common
shares with offer price of P4.68 and 454,950,000 outstanding shares with par value
of P1. There are 19, 17 and 13 registered common stockholders as of December 31,
2012, 2011 and 2010. Shares lodged with the Philippine Central Depository (PCD) are
registered under the name of PCD Nominee Corporation and as such are treated as
being held by only one shareholder.
17.01.01 Additional Paid-in Capital
The Group additional paid-in-capital-in excess of par value is composed of excess of
proceeds on issuance of the Group shares amounting to P429,510,000 and excess of
acquisition costs over the carrying value of the non-controlling interests acquired in
2011 amounting to P38,280,000, as disclosed in Note 1.
17.02 Treasury Shares
Details about the Company’s treasury shares are as follows:
2012
Shares
2011
Amount
Shares
Amount
Balance, January 1
Acquisitions
14,873,000
5,714,000
P
52,987,208
16,222,480
9,329,000
5,544,000
P
40,115,150
12,872,058
20,587,000
P
69,209,688
14,873,000
P
52,987,208
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.
In 2009 and 2008, the Parent Company 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 Parent
Company.
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 from the
market. The Parent Company purchased 4,873,000 shares for P11,350,000 under
this buy-back program. Also on the same year, the Parent Company purchased
671,000 shares for P1,520,000 under the buy- back program approved in August 15,
2008.
On September 21, 2012, the Board of Directors 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 for P14,560,000 from the buy-back program of 2011 and 587,000
shares for P1,670,000 from the latest buy-back program authorized in 2012.
39
17.03 Appropriation of Retained Earnings
The movements in the appropriated retained earnings are as follows:
2012
2011
Balance, January 1
Additional appropriation
P
52,987,208
16,222,480
P
40,115,150
12,872,058
P
69,209,688
P
52,987,208
17.04 Cumulative Translation Reserve
Shown below are the movements on the Group’s cumulative translation reserve.
2012
Balance, January 1
Exchange differences arising on translating the
net assets of foreign operations
Gain reclassified to profit or loss on disposal of
foreign operations
Others
P
P
16,517,663
2011
P
20,602,890
20,670,117
(5,961,544)
(58,152)
1,934,466
(58,149)
37,129,628
P
16,517,663
17.05 Dividends Declared
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. 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.
On June 17, 2011, the BOD of the Parent Company authorized the declaration of stock
dividends 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 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-ofrecord as of July 12, 2012. The cash dividends were paid on August 17,2012.
Accumulated net earnings of the subsidiaries amounting to P349.13 million and
P200.65 million as of December 31, 2012 and 2011, respectively, are not available for
dividend declaration. This accumulated equity in net earnings becomes available for
dividend upon receipt of cash dividends from the investees by the Parent Company.
40
18. REVENUES
An analysis of the Group’s revenue for the year from continuing operations is as
follows:
2012
Delivery fees
Commission
Realized foreign exchange
gains – net
Other fees
2011
2010
P 554,609,474
84,894,485
P 513,290,111
103,738,196
P 498,740,664
109,716,962
131,350,949
785,944
170,479,667
351,531
152,398,738
894,150
P 771,640,852
P 787,859,505
P 761,750,514
The delivery fees earned of associates amounted to P72,876,559 and P70,591,028 in
2012 and 2011, respectively, as disclosed in Note 26.
19. COST OF SERVICES
An analysis of the Group’s cost of services for the year from continuing operations is
as follows:
2012
Bank charges
Delivery charges
2011
2010
P 196,747,870
13,167,206
P 184,380,473
15,046,832
P 174,201,772
29,975,489
P 209,915,076
P 199,427,305
P 204,177,261
20. OTHER INCOME
An analysis of the Group’s other income for the year from continuing operations is as
follows:
2012
Finance income (Notes 7
and 9)
GST refund
Rebates
Unrealized foreign exchange
gain (loss) – net
Others
P
12,947,419
-
2011
P
(3,113,114)
6,114,585
P
15,948,890
13,862,222
21,668,641
2,881,469
2010
P
1,205,505
4,060,301
P
43,678,138
12,514,490
6,728,713
1,769,202
6,081,539
P
27,093,944
Rebates pertain to the refund of bank service charges.
41
21. OPERATING EXPENSES
An analysis of the Group’s operating expenses for the year from continuing operations
is as follows:
2012
Short-term benefits (Note 23)
Rental (Note 25)
Marketing (Note 22)
Professional fees
Communication, light and water
Depreciation and amortization (Notes 12
and 13)
Transportation and travel
Photocopying and supplies
Taxes and licenses
Loss on write-off of assets
Repairs and maintenance
Business development
Post-employment benefits (Note 23)
Association dues
Entertainment, amusement and
recreation
Insurance
Donations and contributions
Penalties and surcharges
Others
P
P
2011
253,264,274
59,296,196
37,914,975
34,413,630
28,058,114
P
2010
207,756,488
53,508,878
36,339,592
36,222,215
23,529,910
P
206,149,704
46,360,479
42,590,016
39,709,891
22,119,419
12,658,689
10,885,556
10,309,316
10,046,458
10,040,886
6,427,108
5,100,724
4,294,704
3,223,761
11,506,753
23,829,160
14,630,525
9,020,616
2,058,616
4,770,543
2,974,651
5,748,578
3,230,078
13,274,937
26,696,985
11,731,270
7,910,719
4,902,356
2,679,500
2,376,127
1,927,949
3,188,030
3,054,839
2,621,445
2,012,093
6,017,276
1,974,703
2,992,353
1,213,551
3,842,472
1,835,663
1,155,280
652,704
496,810,798
P
447,324,486
P
435,915,471
Loss on write-off of asset pertains to disallowed input vat, deposits with Banco Filipino
and expenditures intended for certain investment.
22. MARKETING EXPENSES
The account is composed of the following expenses:
2012
Marketing and promotions
Advertising and publicity
2011
2010
P
27,110,504
10,804,471
P
27,746,400
9,617,140
P
34,637,750
8,883,266
P
37,914,975
P
37,363,540
P
43,521,016
Expenses amounting to P1,023,948 and P931,000 pertain to the marketing expenses
of the discontinued operations of Italy for the years ended December 31, 2011 and
2010, respectively.
42
23. EMPLOYEE BENEFITS
Aggregate employee benefits expense comprised:
2012
Short-term benefits
2011
2010
P
253,264,274
4,294,704
P 207,756,488
5,748,578
P 206,149,704
2,376,127
P
257,558,978
P 213,505,066
P 208,525,831
23.01 Short-term Employee Benefits
Short-term benefits include salaries and wages, de-minimis fringe benefit, sick and
vacation leave pay, training and development and 13th month pay.
23.02 Post-employment Benefits
The Group accrues benefit pursuant to the provision of the Retirement Pay Law under
non-contributory and of the defined benefit type which provides a retirement benefit
equal to one hundred percent (100%) of Plan Salary for every year of Credited Service.
The most recent actuarial valuations of plan assets and the present value of the
defined benefit obligation were carried out at December 31, 2012 by E.M. Zalamea
Actuarial Services, Inc. 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.
follows:
2012
Discount rate
Future salary increases
2011
5.86%
8.00%
7.50%
33.10
9.69%
8.00%
6.00%
32.10
follows:
2012
Interest cost
Changes in effect of asset
ceiling loss
Actuarial gain (loss) recognized
P
P
2011
2010
4,149,490 P
1,509,154
(1,493,733)
4,618,548 P
2,117,009
(1,118,673)
129,793
-
131,694
4,294,704
P
5,748,578
2,143,246
1,134,058
(738,073)
(163,104)
P
2,376,127
43
The amount included in the consolidated statement of financial position arising from
the entity’s prepaid retirement in respect of its defined benefit plans is as follows:
2012
P
Deficit (Surplus)
Unrecognized actuarial gains (losses)
Effect of the asset ceiling
27,959,017
30,303,714
2011
P
(2,344,697)
(17,231)
129,793
P
(2,232,135)
22,524,680
21,816,324
708,356
(1,076,750)
-
P
(368,394)
were as follows:
2012
2011
Balance, January 1
Interest cost
Actuarial gains
P
22,524,680
4,149,490
1,509,154
(224,307)
P
21,847,360
4,618,548
2,117,009
(6,058,237)
P
27,959,017
P
22,524,680
2012
2011
Balance, January 1
Contributions
Actuarial gains (losses)
P
21,816,324
6,158,445
1,493,733
835,212
P
15,196,930
6,895,233
1,118,673
(1,394,512)
P
30,303,714
P
21,816,324
2012
2011
Deposits in banks
Interest receivable
Trust fee payable
P
11,755,471 P
11,818,150
6,402,242
354,778
(26,927)
P
30,303,714
P
9,245,139
4,763,467
7,613,374
215,615
(21,271)
21,816,324
The overall expected rate of return is a weighted average of the expected returns of
the various categories of plan assets held.
The actual return on plan assets amounted to a gain of P2,328,945 and a loss of
P275,839 during 2012 and 2011, respectively.
44
2012
Present value of
defined benefit
obligation
Fair value of plan
assets
Deficit (Surplus)
assumptions
Experience
adjustments on
plan liabilities
Experience
adjustments on
plan assets
P
27,959,017
2011
P
30,303,714
P
21,847,360
2009
P
10,080,516
2008
P
15,196,930
(2,344,697)
708,356
6,650,430
(2,340,506)
3,406,461
2,361,420
(498,493)
9,932,542
1,070,082
(3,766,312)
835,212
(5,559,744)
P
(1,394,512) P
(894,376)
(2,643,029) P
12,421,022
6,574,511
21,816,324
(2,585,727)
P
22,524,680
2010
3,168,050
(382,676)
4,452,972
(206,448)
P
-
The Group expects to make a contribution of P4,294,704 to its retirement fund in the
next financial year.
The subsidiaries are not required to establish and accrue retirement obligation.
24. SHARE BASED PAYMENTS
On July 20, 2007, the Parent Company’s BOD approved the proposal to set up a 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 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 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 at par value.
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 in 2009, 2008 and
2007, respectively.
45
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 P0.81 million paid by the Parent Company for those shares.
The expense arising from the share-based payment plan is recognized over the twoyear lock-up period. The expense recognized under ‘Salaries, wages and employee
benefits’ in the statements of income amounted to P1.53 million in 2009.
25. OPERATING LEASE AGREEMENTS
25.01 The Group as a Lessee
Operating leases relate to leases of space for use of office space with lease terms
between Wynsum Realty and Oakridge Properties. 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
Oakridge Properties 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 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 amounted to P59,296,196, P53,508,878, and
P3,914,938 and P4,025,523 of the total rent expense pertains to rent expense of the
discontinued operations of Italy for the years ended December 31, 2011 and 2010,
respectively.
The Group’s refundable deposits amounted to P19,905,025 and
P17,291,585 in 2012 and 2011, respectively, as disclosed in Note 14.
At reporting date, the Parent Company had outstanding commitments for future
minimum lease payments under non-cancelable operating leases, which fall due as
follows:
2012
Not later than one year
Later than one year but not later than five
years
Later than five years
P
48,594,222
2011
P
75,519,359
2,045,507
P
126,159,087
43,590,836
53,212,917
-
P
96,803,753
46
26. RELATED PARTY TRANSACTIONS
Nature of relationship of the Group and its related parties are disclosed below:
Related Parties
Stockholders/ Directors
Associate
Associate
26.01 Advances to Related Parties
Balance of advances to related parties as shown in the consolidated statement of
financial position are summarized per category as follows:
26.01.01 Associates
December 31, 2012
Amount/
Volume
HKHCL
Remittance
Due from
Delivery fees
P 5,155,165,031
5,223,594
47,715,373
ISPL
Remittance
Due from
Delivery fees
7,203,835,917
457,714
25,161,186
Outstanding
Balances
P
December 31, 2011
Amount/
Volume
60,187,956
8,192,341
2,130,587
P 5,148,060,359
6,382,656
46,127,251
105,072,529
10,332,965
2,782,994
7,211,603,671
996,076
24,463,777
Outstanding
Balances
P
29,136,840
8,715,507
326,674
64,141,580
16,034,603
2,180,325
• 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.
• Delivery fee is the share in service fee collected by the foreign subsidiary office
along with the principal amount of transaction. Account collected in 1-5 days from
date of transaction.
• Due from account refers to operating funds and marketing materials advanced to
foreign associate offices. It has a term of settlement within 1-30 days from date of
funding.
The amounts outstanding are non-interest bearing, unsecured and will be settled in
cash. No guarantee was required. No provision made for doubtful accounts as these
accounts are all collectible.
47
26.01.02 Affiliates
December 31, 2012
Amount/
Volume
P
-
December 31, 2011
Outstanding
Balances
P
254,182
Amount/
Volume
P
-
Outstanding
Balances
P
270,616
• Surewell Equities, Inc. – This pertains to the cost of rental paid to Surewell Equities
Pte. Ltd. (SEPL) for the sharing of its office in Singapore under a sublease agreement
with the Parent Company . SEPL is a foreign subsidiary office of Surewell Equities,
Inc., one of the principal stockholders of the Parent Company. No security deposit
paid and without provision for escalation. Rent is paid monthly.
cash. No guarantees have been received. No provisions have been made for doubtful
debts in respect of the amounts owed by the related parties.
26.01.03 Key Management Personnel
December 31, 2012
Amount/
Volume
Advances
3,779,592
Outstanding
Balances
7,045,214
December 31, 2011
Amount/
Volume
Outstanding
Balances
-
-
• Advances – This pertains to receivable from a key management personnel of the
Parent Company subject to liquidation within company prescribed period of
liquidation.
The amount outstanding is non-interest bearing, unsecured and will be settled in cash.
No guaranty required. No provision was made for doubtful account as the account is
deemed collectible.
26.02 Advances from Related Parties
Balance of advances from related parties as shown in the consolidated statement of
26.02.01 Key Management Personnel
December 31, 2012
Amount/
Volume
Advances
218,417
Outstanding
Balances
218,417
December 31, 2011
Amount/
Volume
-
Outstanding
Balances
-
• Advances – This pertains to payable to director of the Parent Company subject to
liquidation within company prescribed period of liquidation.
No guaranty required.
48
26.03 Lease Contracts
The Group leases office spaces from Oakridge Properties as disclosed in Note 25. Rent
expense amounted to P11,421,505 and P9,247,615 in 2012 and 2011, respectively.
The Group entered into a sublease agreement with Surewell Equities Pte Ltd., one of
the stockholders of the Parent Company. The Group also has deposits amounting to
P126,865,934 and P193,049,842 with SBA as of December 31, 2012 and 2011,
respectively. These deposits earned P384,536, P425,360, and P1,124,404 interest
income in 2012, 2011 and 2010, respectively.
26.04 Investment in Associate
The Group recognized dividend income amounting to P4,896,570 and P596,381 from
dividends declared by ISPL in 2012 and 2010, respectively. The Group has forty nine
percent (49%) ownership interest on its associate and a carrying amount of investment
amounted to P19,492,351 in 2012.
26.05 Remuneration of Key Management Personnel
The remuneration of the directors and other members of key management personnel of
the Group are set out below in aggregate for each of the categories specified in
PAS 24, Related Party Disclosures:
2012
Short-term employee benefits
2011
2010
P 31,659,537
1,260,378
P 27,036,984
1,571,444
P 21,059,431
549,541
P
P 28,608,428
P 21,608,972
32,919,915
26.06 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 amount and fair value
of the fund amounted to P30,303,714 as of December 31, 2012.
debt securities. In 2012 and 2011, the Group made contributions to the fund
amounting to P6,158,445 and P6,895,233, respectively, as disclosed in Note 23.
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 Board of Directors of
I-Remit Inc. through its SSS program as disclosed in Note 24.
Fund were purchased from accredited counterparties of SBA-Trust Group.
These counterparties are Banks and Investment Houses allowed to trade government
Treasury (BTr).
accredited counterparties that are allowed to trade government securities
49
27. EARNINGS PER SHARE
The Group’s basic earnings per share is 0.05,
December 31, 2012, 2011 and 2010, respectively.
0.23
and
0.11
as
of
The earnings and weighted average number of ordinary shares used in the calculation
of basic earnings per share are as follows:
2012
a. Net income from continuing
operations
b. Income/(loss) from
discontinued operations
c. Net income (a+b)
d. Net income attributable to
ordinary equity holders of
the Parent Company for
basic earnings
e. Weighted average number
of shares for basic earnings
per share
f. Basic earnings per share
(c/e)
g. Basic earnings per share
attributable to ordinary
equity holders of the Parent
Company (d/e)
h. Basic earnings per share
from continuing operations
(a/e)
i. Basic earnings (loss) per
share attributable to equity
holders of the Parent
Company from discontinued
operations (b/e)
P
2011
30,526,247
P
109,633,447
2010
P 96,219,135
30,526,247
26,429,749
136,063,196
(30,304,899)
65,914,236
30,526,247
138,069,380
77,551,227
600,742,383
607,014,606
608,396,800
0.05
0.22
0.11
0.05
0.23
0.13
0.05
0.18
0.16
0.04
(0.05)
-
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
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.
50
Delivery fees
Foreign exchange gains – net
P
2012
-
P
2011
5,289,202
1,006,867
2010
7,486,658
673,204
P
Cost of services
-
Gross income
Other income – net
Operating expenses
-
5,699,366
615,909
(45,024,921)
4,410,667
38,935
(34,754,501)
-
(38,709,646)
65,139,395
(30,304,899)
-
Income from discontinued operations
P
-
6,296,069
596,703
P 26,429,749
8,159,862
3,749,195
P (30,304,899)
The net cash flows incurred by IRCGmbH in its Italy operations are as follows:
2012
Operating
Financing
2011
P
-
P 27,911,882
(27,911,882)
P
-
P
-
29. INCOME TAXES
29.01 Income Tax Recognized in Profit or Loss
Components of income tax expense are as follows:
2012
Current tax expense
Deferred tax benefit
Final tax
2011
2010
P 23,534,368 P 36,053,005
(728,427)
(745,224)
371,756
589,871
P 28,576,367
(921,460)
643,945
P 23,177,697
P 28,298,852
P 35,897,652
The table below shows the income tax rates provided on the assessable profit for the
year of each subsidiary:
2012
PSAGL
LSML
IAPL
WEPL
INZL
IGRL
IRCL
JPY
16.50%
16.50%
30.00%
30.00%
28.00%
20.00%
34.20%
30.00%
2011
16.50%
16.50%
30.00%
30.00%
28.00%
21.00%
34.20%
-
51
A numerical reconciliation between tax expense and the product of accounting profit
multiplied by the tax rate in 2012, 2011 and 2010 follows:
2012
Accounting profit
2011
2010
P 53,703,944
P 145,531,099
P 124,517,987
16,111,183
43,659,330
37,355,396
Tax expense at 30%
Tax effects of:
Adjustments made due to
consolidation
Application of tax credit
Non-taxable income
Non-deductible expenses
Recognition of previously
unrecognized deferred
tax assets
Non-recognition of deferred
tax assets
Difference in statutory rates
(793,603)
(72,947)
(8,803,902)
2,867,026
14,028,616
(10,237,502)
2,831,134
(840,927)
-
21,350,943
(6,640,076)
P 23,177,697
(9,519,133)
(4,386,094)
1,782,151
-
(4,566,798)
(9,817,128)
P
35,897,652
12,489,198
(9,422,666)
P
28,298,852
30. DEFERRED TAXES
The components of the Group’s deferred tax assets and their respective movements
are as follows:
At January
1, 2011
Deferred tax assets
NOLCO
Reversal of temporary
difference
Unused tax credits
Charge (credit)
to profit or loss At January 1,
for the year
2012
P 3,669,877 P
119,288
443,755
P 4,232,920 P
Unrealized foreign
exchange gain – net
Retirement asset
Capital allowance
Charge (credit)
to profit or loss
for the year
1,310,471 P
4,980,348 P
(119,288)
(443,755)
-
747,428 P
4,980,348 P
1,132,385
At December 31,
2012
P
898,714
(117,506)
1,913,593
6,112,733
898,714
(117,506)
-
P
6,893,941
P
P
29,765
P
2,204
P
31,969
296,153 P
854,517
34,496
296,153
854,517
66,465
P
29,765 P
2,204 P
31,969 P
1,185,166 P
1,217,135
52
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, 2012 and 2011 are presented below:
2012
Carrying
Amount
2011
Fair Value
Carrying
Amount
Fair Value
Financial Assets:
Financial assets at FVPL
P 210,180,347 P 210,180,347 P 125,226,264 P 125,226,264
Trade and other receivables 1,192,359,836
1,192,359,836
1,031,284,146
1,031,284,146
Refundable deposits
19,905,025
19,905,025
17,291,585
17,018,242
P 1,422,445,208 P 1,422,445,208 P 1,173,801,995 P 1,173,528,652
Financial Liabilities:
Beneficiaries and other
payables
Loans payable
P
515,580,524 P
925,000,000
515,580,524 P
925,000,000
236,883,621 P
666,000,000
236,883,621
666,000,000
P 1,440,580,524 P 1,440,580,524 P
902,883,621 P
902,883,621
Due to short-term nature or demand feature of financial assets at FVPL, trade and
other receivables, refundable deposits, trade and other payables (except payable to
government agencies and accrued expenses) and loans, Management estimates that
their carrying amounts approximate their fair values.
31.02 Fair Value Measurements Recognized in the Consolidated Statement 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).
As of December 31, 2012 and 2011, the financial instruments carried at fair value only
pertains to the Group’s financial assets at FVPL, which consist of investments in debt
and equity securities, as disclosed in Note 9. The fair values of these debt and equity
securities are based on quoted prices (Level 1). There were no transfers between
Level 1 and Level 2 fair value measurements.
53
32. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Group’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 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 Company’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 Company.
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:
Assets
2012
CAD
EUR
HKD
SGD
AUD
USD
GBP
IDR
JPY
NTD
NZD
QAR
P
P
Liabilities
2011
330,890,819
130,409,602
57,153,139
110,653,207
67,415,248
98,929,737
146,169,454
176,200
23,340,843
62,318,543
16,355,342
3,100
P
1,043,815,234
P
2012
204,120,268
82,287,633
71,278,604
69,903,060
68,926,331
66,185,751
68,975,423
29,205,344
13,381,984
3,311
P
674,267,709
P
2,723,607
6,385,997
931,782
1,622,066
6,294,717
2,002,349
702,604
20,663,122
2011
P
-
P
2,231,758
3,301,794
597,641
2,024,483
1,578,550
189,779
9,924,005
54
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 five percent (5)% increase and
decrease in the Philippine Peso against the relevant foreign currencies. The sensitivity
rate of five percent (5)% 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 five percent (5)% change in foreign currency rates. The
sensitivity analysis includes external loans as well as loans to foreign operations 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 five percent (5%) weakening of the Philippine Peso against the
relevant currency, there would be a comparable impact on the profit and other equity,
and the balances below would be negative.
2012
Canadian Dollar
United States Dollar
Euro
Hongkong Dollar
Japan Yen
United Kingdom Pound
Australia Dollar
New taiwan Dollar
Singapore Dollar
New Zealand Dollar
Indonesia Rupiah
Qatari Riyal
2011
P 11,471,339
6,161,714
5,456,473
3,351,614
3,220,833
3,211,795
2,450,281
1,222,776
464,905
53,805
18,354
198
P
7,057,169
4,122,296
3,475,017
4,213,617
1,547,563
2,491,571
573,049
293,695
45,347
211
P 37,084,087
P
23,819,535
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.
Profit for the year ended December 31, 2012 and 2011 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.
55
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 five percent (5)% higher/lower:

net profit for the year ended December 31, 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 increase of
P1,015,932 in the 2012 consolidated statement 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.
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 Company uses other publicly available financial
information and its own trading records to rate its major customers. The 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.
The Company does not have significant credit risk exposure to any single counterparty
or any group of counterparties having similar characteristics. The Company 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 Company’s maximum exposure to credit risk,
without taking into account collateral or other credit enhancements held.
2012
Cash in banks and cash equivalents
Financial assets at fair value through
profit or loss
Refundable deposits
P
1,027,430,673
1,192,359,836
2011
P
210,180,347
19,905,025
P
2,449,875,881
843,237,147
1,031,284,146
125,226,264
17,291,585
P
2,017,039,142
The Company does not hold any collateral or other credit enhancements to cover this
credit risk.
56
The table below shows the credit quality by class of financial assets of the Company:
Neither Past Due nor Impaired
Medium
Grade
High Grade
December 31, 2012
Cash in bank and
cash equivalents
Trade and other
receivables
Financial assets at
fair value through
profit or loss
Refundable deposits
P 1,027,430,673
P
-
P
-
P
1,027,430,673
-
-
1,180,106,805
210,180,347
19,905,025
-
-
210,180,347
19,905,025
P
-
P
P
Total
1,180,106,805
P 2,437,622,850
December 31, 2011
Cash in bank and
cash equivalents
Trade and other
receivables
Financial assets at
fair value through
profit or loss
Refundable deposits
Low
Grade
843,237,147
P
-
-
P
2,437,622,850
P
843,237,147
P
-
1,022,510,367
-
-
1,022,510,367
125,226,264
17,291,585
-
-
125,226,264
17,291,585
P 2,008,265,363
P
-
P
-
P
2,008,265,363
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, 2012 and 2011:
2012
Asia Pacific
Middle East
North America
Europe
2011
P
1,684,327,697
177,709,946
329,052,746
275,289,164
P
1,742,418,296
108,885,265
74,982,548
107,446,135
P
2,466,379,553
P
2,033,732,244
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.
57
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 nonderivative 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
December 31, 2012
Loans payable
December 31, 2011
Loans payable
5% to 7.125%
5% to 7%
Within 1 Year
P
515,580,524
925,000,000
P
1,440,580,524
P
236,883,621
666,000,000
P
902,883,621
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
December 31, 2012
profit or loss
0.50% to 2%
-
Within 1 Year
P
-
1,062,120,047
1,192,359,836
210,180,347
P
2,464,660,230
58
Weighted
Average Effective
Interest Rate
December 31, 2011
profit or loss
0.50% to 2%
-
Within 1 Year
P
891,235,623
1,031,284,146
-
125,226,264
P
2,047,746,033
The amounts included above for variable interest rate instruments for both nonderivative 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 Company’s financing facilities are as follows:
2012
Secured bank loan facilities with various
maturity dates through to 2012 and
which may be extended by mutual
agreement:
amount used
amount unused
P
2011
925,000,000
1,880,000,000
P
666,000,000
1,480,000,000
P 2,805,000,000
P
2,146,000,000
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.
2012
Currency
HKD
CAD
EUR
NZD
AUD
GBP
JPY
Change in nominal
foreign currency
exchange rate
+0.25
+2.00
+5.04
+3.24
+3.86
+5.60
+0.08
Change in nominal
foreign currency
Effect on equity
exchange rate
15,158,460
1,654,760
(911,967)
(1,136,805)
839,375
(120,681)
(4,136,510)
+0.09
+0.50
+2.88
-0.03
+1.26
+1.27
+0.04
Effect on
equity
P
5,099,821
418,027
(522,027)
11,655
274,139
(27,318)
(1,975,458)
59
2011
Currency
HKD
CAD
EUR
NZD
AUD
GBP
Change in nominal
foreign currency
exchange rate
+0.11 P
+2.81
+7.36
+3.50
+2.95
+4.40
Change in nominal
foreign currency
Effect on equity
exchange rate
5,233,309
2,386,352
1,578,924
(955,612)
600,471
(12,964)
-0.26
-1.60
-0.25
-2.44
-2.94
-1.06
Effect on
equity
P
(12,369,640)
(1,358,777)
(53,632)
666,198
(598,435)
3,123
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
2011 and 2010.
The capital structure of the Group consists of net debt (borrowings as disclosed in
Notes 15, 16, and 30 offset by cash and cash equivalents, as disclosed in Note 7) and
equity of the Group (comprising capital paid-in, retained earnings, cumulative
translation adjustment and treasury stock as disclosed in Notes 17.
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 Company is in compliance with the
above requirements.
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 Company has a target gearing
ratio of 1:1 determined as the proportion of net debt to equity.
The gearing ratio at end of the reporting period was as follows:
2012
Debt
Net Debt
Equity
Net debt to equity ratio
P
1,447,857,647
1,062,120,047
2011
P
912,676,998
891,235,623
385,737,600
1,237,125,608
21,441,375
1,363,414,664
0.31:1
0.02:1
Debt is defined as long- and short-term borrowings (excluding derivatives and financial
guarantee contracts), as described in Note 4.07, while equity includes all capital and
reserves of the Group that are managed as capital.
60
34. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS
Certain amounts in the comparative financial statements and note disclosures have
been reclassified to conform to the current year’s presentation. The reclassifications
include:
Account
From
Amount
To
2011
Consolidated Statement of Financial Position
Accounts receivable
Other receivables
Prepayments and other current
Other current assets
assets
Goodwill
Intangible assets – net
Software costs
Intangible assets – net
Retirement assets
Prepaid retirement
Interest-bearing loans
Loans payable
Capital paid-in excess of par
value
Additional paid-in capital
Consolidated Statement of Comprehensive Income
Interest income
Other income
Interest expense
Finance cost
2010
P 916,852,887
114,431,259
P
1,042,606,171
83,440,874
28,928,836
111,441,191
1,450,944
368,394
666,000,000
36,346,603
111,441,191
2,081,746
877,000,000
391,232,478
429,513,501
13,862,222
38,322,540
12,514,490
29,213,843
Management believes that the above reclassifications resulted to a better presentation
of accounts and did not have any impact on prior year’s profit or loss.
35. CORRECTION OF PRIOR PERIOD ERRORS
In 2012, the Company determined the following:
 No appropriation was made for the treasury stocks for the years 2011 and 2010.
 The goodwill is not carried at its historical cost and the movement is due to
translation adjustment, which resulted to adjustments in cumulative translation
account.
 In the 2008 consolidated financial statements the beginning retained earnings of
IRCGmbH, which is 74.90% owned subsidiary of the Parent Company in 2008, is
taken up as an adjustment to trade receivables.
Thus, the consolidated financial statements as of and for the year ended
December 31, 2012 was restated as follows:
Retained
Earnings as of
January 1,
2010
Appropriation of retained earnings for the
treasury stocks
Goodwill adjustment
Retained earnings take-up
P
Increase (Decrease)
As previously stated
As restated
Cumulative
Translation
Adjustment
(40,115,150) P
(16,693,102)
(56,808,252)
306,946,085
P
250,137,833
13,859,085
13,859,085
(20,398,998)
P
(6,539,913)
61
36. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved and authorized for issuance by the Board of
Directors on May 14, 2013.
62
R.S. BERNALDO
A correspondent
& ASSOCIATES
BOA/PRC No. 0300
BSP Accredited
CDA CEA No. 013-AF
firm of Pan ell Kerr Forster International
worldwide
INDEPENDENT AUDITORS' REPORT ON THE SUPPLEMENTARY SCHEDULES
We have issued our report dated May 15, 2013 on the basic consolidated financial
statements of I-REMIT INC. AND SUBSIDIARIES as of and for the period December 31,
2012.
Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements of I-REMIT INC. AND SUBSIDIARIES taken as a whole.
The information in the Schedules I to IV and A to H as of and for the period December 31,
2012 which is not a required part of the consolidated financial statements is required to be
filed with the Securities and Exchange Commission. Such information 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 the basic consolidated financial statements.
In our opinion, the information is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
BOA/PRC No. 0300
CDA CEA No. 013-AF
RO&~DO
Managing Partner
Accreditation No. 11 92-A
Tax Identification No.1 09-227-722
PTR No. 3676450
May 15, 2013
18/F Cityland Condominium 10 Tower 1,6815 Ayala Avenue cor. H.V. Dela Costa St., Makati City, Philippines 1200
TEL +63 2 812-1718 to 24 FAX +632 813-6539 E-MAIL rsbassoc@rsbernaldo.com
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
December 31, 2012
Schedule
Part 1
I
II
III
Part 2
A
B
C
D
E
F
G
H
Content
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)
Map showing relationships between and among parent,
subsidiaries, an associate, and joint venture (Part 1 4H)
Financial Assets
Amounts Receivable from Directors, Officers, Employees, Related
Parties and Principal Stockholders (Other than Affiliates)
Amounts Receivable from Related Parties which are eliminated
during the consolidation of financial statements
Intangible Assets - Other Assets
Long-Term Debt
Indebtedness to Related Parties (included in the consolidated
statement of financial position)
Guarantees of Securities of Other Issuers
Capital Stock
Page No.
2
3
8
9
10
12
14
15
16
17
18
Other Required Information
IV
Schedule of Financial Soundness Indicators (Part 1 4D)
1
Schedule I
I-REMIT INC.
SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
DECEMBER 31, 2012
Unappropriated Retained Earnings, Beginning
P
153,759,324
Net income based on the face of audited financial statements
Less:
Dividend declarations during the year
Treasury shares
Unrealized foreign exchange gains – net
Add:
Realized income categorized as unrealized in previous years
30,627,057
(119,980,858)
(16,222,480)
(987,177)
1,205,505
Net loss actual/realized
(105,357,953)
Unappropriated Retained Earnings, Ending
P
48,401,371
2
Schedule II
SCHEDULE OF EFFECTIVE STANDARDS AND INTERPRETATIONS
DECEMBER 31, 2012
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of December
31, 2012
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
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
PFRS 1
(Revised)

Amendments to PFRS 1: Additional
Exemptions 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
Share-based Payment
PFRS 2
PFRS 3
(Revised)
Amendments to PFRS 2: Vesting
Conditions and Cancellations
Amendments to PFRS 2: Group CashSettled Share-based Payment
Transactions
Business Combinations
Insurance Contracts
PFRS 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









3
Financial Instruments: Disclosures
Amendments to PFRS 7: Transition
Reclassification of Financial Assets
Reclassification of Financial Assets Effective Date and Transition
PFRS 7
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
Financial Instruments
PFRS 9



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
Presentation of Financial Statements
Amendments to PAS 1: Capital
Disclosures
PAS 1
(Revised)
Amendments to PAS 32 and PAS 1:
Puttable Financial Instruments and
Obligations Arising on Liquidation



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






4
Income Taxes
PAS 12
Amendments to PAS 12 - Deferred Tax:
Recovery of Underlying Assets
PAS 16
Property, Plant and Equipment
PAS 17
Leases
PAS 18
Revenue
Employee Benefits
PAS 19
PAS 19
(Amended)
PAS 20
PAS 21
Amendments to PAS 19: Actuarial
Gains and Losses, Group Plans and
Disclosures







Employee Benefits

Accounting for Government Grants and
Disclosure of Government Assistance
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
Financial Instruments: Disclosure and
Presentation
PAS 32
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














5
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
PAS 39
Amendments to PAS 39: The Fair Value
Option
Amendments to PAS 39:
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 Whether 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
IFRIC 7
IFRIC 8




Applying the Restatement Approach
under PAS 29 Financial Reporting in
Hyperinflationary Economies
Scope of PFRS 2
Reassessment of Embedded Derivatives
IFRIC 9

Derivatives
IFRIC 10
Interim Financial Reporting and
Impairment
IFRIC 11
PFRS 2- Group and Treasury Share
Transactions
IFRIC 12
Service Concession Arrangements







6
IFRIC 13
IFRIC 14
Customer Loyalty Programs
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 - 10

Amendments to Philippine
Interpretations IFRIC - 14, Prepayments
of a Minimum Funding Requirement
IFRIC 16
SIC - 7

The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and
their Interaction






Introduction of the Euro

Government Assistance - No Specific
Relation to Operating Activities

Consolidation - Special Purpose Entities
SIC - 12

Amendments to SIC - 12: Scope of SIC
12
SIC - 13
Jointly Controlled Entities - NonMonetary 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
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









7
Schedule III
MAP SHOWING RELATIONSHIPS BETWEEN AND AMONG PARENT,
SUBSIDIARIES, AN ASSOCIATE, AND JOINT VENTURE
Ownership Structure
STAR Equities Inc.
29.1825028 %
JTKC Equities, Inc.
21.2937506%
Surewell Equities, Inc
23.3530780%
3.2672471%
Public
22.9034215%
I-Remit, Inc.
International Remittances (Canada) Ltd.
100%
IREMIT Remittance Consulting GmbH (Austria)
100%
Lucky Star Management Limited (Hong Kong)
100%
100%
IRemit Global Remittance Limited (UK)
100%
Hwa Kung Hong & Co. Ltd. (Taiwan)**
49%
Worldwide Exchange Pty Ltd *
100%
IRemit Singapore Pte Ltd **
49%
100%
K.K. I-REMIT JAPAN
100%
*Consisting of 70% direct ownership and 30% indirect ownership through I-Remit Australia Pty Ltd, a wholly-owned subsidiary.
** An associate
8
I-Remit Inc. and Subsidiaries
Schedule A – Financial Assets
December 31, 2012
Name of issuing entity and
association of each issue
Debt securities
Citic Pacific Ltd.
Claudius Limited Notes
FTP Finance Ltd.
Republic of Venezuela
Royal Capital BV
Bank of Ceylon
Sistema Intl
PT Berau Coal Energy
ABN Amro Bank
GAZPROM
ALFA Bank
Columbia Telecom
VTB Bank
Perusahaan Listrik Negar
SBERBANK
Eurochem M& C
Theta Capital
Various Private Corp.
Equity securities (shares)
SHS General Motors
Apple Inc
Global X Silver (SIL)
Number of shares or
principal amount of
bonds or notes
Amount shown on
the balance sheet
$402,000
208,000
300,650
93,500
301,775
201,000
300,750
193,500
200,620
203,000
201,150
202,250
201,438
203,052
200,725
201,490
202,800
604,490
=16,649,880
P
9,242,818
13,933,355
4,202,494
13,404,385
8,848,738
13,243,551
7,984,225
8,719,020
8,432,491
8,711,631
8,415,250
8,856,948
8,466,973
8,333,150
8,528,548
8,389,799
25,498,443
=1,351,442
P
702,726
863,392
364,663
1,078,008
367,304
554,754
196,871
159,475
105,487
168,546
119,533
122,020
83,570
75,582
22,795
24,375
1,388,215
=189,861,699
P
=7,748,757
P
=6,390,746
P
12,998,119
929,783
=–
P
–
–
=20,318,648.00
P
=–
P
5,400
595
1,000
Income
accrued
9
Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Related Parties)
December 31, 2012
Name of Debtor
Analiza S. Bismonte
Angelina Quito
Annie Angeles
Anthony Bryan Robles
Bansan Choa
Belinda Herrera
Bernadette Cindy Tiu
Carmen Baladad
Carol Ann Ong
Catherine Chan
Chris Eusebio
Claire Panes
Clarissa Celestino
Desiderio Dumalag, Jr.
Dina Simbulan
Dolores Joson
Eleanor Hilario
Elisa Cerdan
Fatima Ramos
Genevee Llobrera
Gilbert Gaw
Gina Herminigildo
Glenn Igual
Harris Jacildo
Ian Chryzl Gonzales
Irene Hazel Marquez
Jacqueline Songday
Jeddahlyn Gandalera
Jenifer Lumabi
Jennifer Itable
Jesus Mel Sayo
Jhoanna Raoet
Jonathan Bunag
Balance at
beginning of
period
=P
135,702.00
281,891.00
7,636,251.87
13,746.49
56,123.61
2,999.40
14,143.42
Additions
=10,764.69
P
8,013.03
8,048.92
54,587.64
3,779,591.50
160,815.94
7,763.47
436.24
3,801.06
67.50
1,928.04
28,524.49
14,072.42
12,653.00
34.53
1,928.04
12,678.13
2,580.00
19,808.80
659,816.67
1,074,073.96
27,947.65
7,763.88
8,240.74
126,372.47
5.00
100,273.54
7,763.88
-
Amounts
Collected
=P
8,013.03
135,702.00
8,048.92
17,118.00
54,587.64
4,425,997.57
160,572.97
7,763.47
13,746.49
1,729.70
14,071.59
1,729.70
12,678.13
19,808.80
70,716.65
148,148.16
27,947.65
7,763.88
7,989.93
126,372.47
26,501.37
7,763.88
-
Amounts
Written-off
=P
-
Current
=10,764.69
P
264,773.00
6,989,845.80
242.97
436.24
3,801.06
67.50
198.34
28,524.49
0.83
12,653.00
34.53
198.34
2,580.00
589,100.02
925,925.80
2,999.40
250.81
5.00
73,772.17
-
Non- Current
=P
56,123.61
14,143.42
Balance at end of
period
=10,764.69
P
264,773.00
6,989,845.80
242.97
436.24
3,801.06
67.50
198.34
28,524.49
56,123.61
0.83
12,653.00
34.53
198.34
2,580.00
589,100.02
925,925.80
2,999.40
250.81
5.00
73,772.17
14,143.42
10
Jonathan Samaniego
Jose Vernie Vasquez
Joselyn Bagalan
Joycelyn Pangilinan
Juliet Santos
Junell Dasun
Justine Castellon
Kristal Angeles
Leonida Villegas
Ma Cristina Castellejo
Ma. Antonette Wolfe
Ma. Eliza Batang
Ma. Josefina Sy
Makoto Kinoshita
Maria Ana Telbrico
Maria Angelica Lallana
Maria Grace Lim
Marie Fe Oporto
Marietta Pavao
Marivic Chaw
Mary Jean Jetomo
May Tsui
Michelle Ramos
Milagrosa Sado
Paul Erick Villaluz
Regina Shimamoto
Rocky Flores
Rodelia Barit
Rogelyn Cimafranca
Romina Dulay
Ronald Guinto
Ronald Santos
Rosita Mendoza
Rosselita Magsalin
Roy Dequina
Ruth Martinez
Severino Lagan
Simeon Sarte
Wilfredo Sinconegue
Winona Fay Gevana
2,576.64
16,086.31
272,309.52
460,328.00
1,518.29
222,362.45
-
45,468.47
14,149.97
7,764.29
3.12
290.62
7,763.88
12,817.56
9,512.86
56,424.14
4,015,269.00
7,763.05
66,041.85
88.75
79,867.95
9,253.04
15,093.06
61.45
1,022.66
899.27
34,605.59
657,000.00
14,149.97
7,764.29
7,763.88
99,756.00
12,817.56
9,314.53
56,424.14
3,601,224.00
7,763.05
65,800.53
9,253.04
899.27
34,605.59
1,518.29
21,900.00
-
45,468.47
2,576.64
3.12
290.62
198.33
414,045.00
241.32
88.75
79,867.95
15,093.06
61.45
1,022.66
635,100.00
16,086.31
272,309.52
360,572.00
-
45,468.47
2,576.64
3.12
16,086.31
272,309.52
290.62
360,572.00
198.33
414,045.00
241.32
88.75
79,867.95
15,093.06
61.45
1,022.66
635,100.00
7,763.88
8,049.34
8,049.75
73,907.61
189,202.50
8,847.00
187,801.00
6.61
19,166.66
8,757.21
14,619.41
3,759.00
7,763.88
8,049.34
8,049.75
72,918.41
189,202.50
8,847.00
416.67
8,757.21
14,619.41
-
-
989.20
187,801.00
6.61
18,749.99
3,759.00
222,362.45
-
989.20
222,362.45
187,801.00
6.61
18,749.99
3,759.00
=9,116,039.00
P
=11,811,719.30
P
=9,608,134.94
P
=P
=10,378,026.05
P
=941,597.31
P
=11,319,623.36
P
11
Schedule C - Amounts Receivable from Related Parties which are eliminated
during the consolidation of financial statements
December 31, 2012
Amount/
Volume
Remittance
Due from
Delivery fee
Remittance
Due from
Delivery fee
Service income
Remittance
Due from
Delivery fee
Service income
Remittance
Due from
Delivery fee
Service income
Remittance
Due from
Delivery fee
Service income
P
906,060,540
2,848,880
6,406,963
Outstanding
Balances
P
13,591,056
9,460,733
143,428
7,172,949,521
34,369,236
26,298,780
3,646,004
193,148,649
52,541,211
948,339
999,952
5,654,003,334
288,604
28,840,903
1,792,774
33,252,223
773,357
369,519
8,397,932,144
245,069
55,191,391
1,160,626
208,951,955
1,931,573
236,268
952,992,756
126,421
4,412,176
584,255
7,833,438
15,812,209
36,306
584,255
12
Amount/
Volume
Remittance
Due from
Delivery fee
K.K. Iremit Japan
Remittance
Due from
Delivery fee
Remittance
Due from
P
Outstanding
Balances
158,815,269
15,089,831
1,032,912
5,813,043
14,761,355
43,028
165,806,223
27,505,484
397,226
20,666,749
33,117,004
41,884
3,673,446,537
399,907
P
1,272,493
82,349
• Remittance pertains to the principal amount of remittance accepted by a foreign subsidiary office from a remitter, delivery of which is
fulfilled by the Parent Company to intended beneficiary in the Philippines.
• Delivery fee is the share in service fee collected by the foreign subsidiary office along with the principal amount of remittance from a
remitter. Account collected in 1-5 days from date of transaction.
• Due from account refers to operating funds and marketing materials advanced to foreign subsidiary offices. Settled in 1-30 days from
date of funding.
• 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 the latter offices.
Transactions with related parties are non-interest bearing, unsecured 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.
13
Schedule D - Intangible Assets - Other Assets
December 31, 2012
Description1
Goodwill
Software
Beginning
Balance
111,441,190.57
1,450,944.55
Additions at
Cost2
–
945,187.06
Charged to cost
and expenses
Charged to other
accounts
–
(941,139.52)
–
–
Other changes
additions
(deductions)3
–
(2,330.19)
Ending Balance
111,441,190.57
1,452,661.91
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.
14
Schedule E - Long-Term Debt
December 31, 2012
Title of issue and
type of
obligation1
Amount
authorized by
indenture
Amount shown under caption
“Current portion of long-term debt’
in related balance sheet2
“Long-Term Debt” in related
balance sheet3
Interest
Rate (%)
Maturity Date
None to Report
1
Include in this column each type of obligation authorized.
2
This column is to be totaled to correspond to the related balance sheet caption.
3
Include in this column details as to interest rates, amounts or number of periodic instalments, and maturity dates.
15
Schedule F - Indebtedness to Related Parties
(included in the consolidated financial statement of position)
December 31, 2012
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.
16
Schedule G - Guarantees of Securities of Other Issuers
December 31, 2012
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.
17
Schedule H - Capital Stock
December 31, 2012
1
Title of Issue1
Number of
shares
authorized
Common stock - =1
P par value
1,000,000,000
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
617,725,800
–
Number of
shares held by
related parties2
460,373,585
Directors,
officers and
employees
357
Others3
136,765,215
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.
18
SCHEDULE IV - FINANCIAL SOUNDNESS INDICATORS
For the Years Ended December 31, 2012 and 2011
2012
2011
A. SHORT-TERM LIQUIDITY RATIO
CURRENT RATIO
Current Assets
Current Liabilities
WORKING CAPITAL TO ASSETS
(Current Assets - Current Liabilities)
Total Assets
1.72
2.28
2,488,562,162
1,446,640,512
2,076,674,869
912,645,029
0.39
0.51
1,041,921,650
2,684,983,255
1,164,029,840
2,276,091,662
1.17
0.67
1,447,857,647
1,237,125,608
912,676,998
1,363,414,664
-
-
-
-
0.02
0.01
23,495,462
1,237,125,608
19,207,458
1,363,414,664
0.54
0.40
1,447,857,647
2,684,983,255
912,676,998
2,276,091,662
-
-
23,495,462
-
19,207,458
-
B. LONG-TERM SOLVENCY
DEBT TO EQUITY
Total Liabilities
Shareholders' Equity
LONG-TERM DEBT TO EQUITY
Long-Term Debt
FIXED ASSETS TO EQUITY
(Fixed Assets - Accumulated Depreciation)
CREDITORS EQUITY TO TOTAL ASSETS
Total Liabilities
Total Assets
FIXED ASSETS TO LONG-TERM DEBT
Long-Term Debt
2012
2011
C. RETURN ON INVESTMENTS
RATE OF RETURN ON TOTAL ASSETS
Net Income
Average Total Assets
RATE OF RETURN ON EQUITY
Net Income
Average Stockholders' Equity
0.01
0.06
30,526,247
2,480,537,459
136,063,196
2,316,948,874
0.02
0.10
30,526,247
1,300,270,136
136,063,196
1,318,486,629
2012
2011
D. PROFITABILITY RATIOS
GROSS PROFIT RATIO
Gross Income
Revenues
OPERATING INCOME TO REVENUES
Income from Operations
Revenues
PRETAX INCOME TO REVENUES
Pretax Income
Revenues
NET INCOME TO COMMISSION INCOME
Net Income
Revenues
0.73
0.75
561,725,776
771,640,852
588,432,200
787,859,505
0.13
0.23
99,772,367
771,640,852
183,853,639
787,859,505
0.07
0.18
53,703,944
771,640,852
145,531,099
787,859,505
0.04
0.17
30,526,247
771,640,852
136,063,196
787,859,505
99,772,367
46,068,423
210,283,388
38,322,540
E. INTEREST COVERAGE RATIO
INTEREST COVERAGE RATIO
Eanings Before Interest and Tax
Interest Expense
www.myiremit.com
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The Management of I-REMIT INC. is responsible for the preparation and fair presentation of the
separate financial statements for the years ended December 31, 2012 and 2011, including the
additional components attached therein, in accordance with the Philippine Financial Reporting
Standards. This responsibility includes designing and implementing internal controls relevant to
the preparation and fair presentation of separate financial statements that are free from material
misstatement, whether due to fraud or error, selecting and applying appropriate accounting
policies, and making accounting estimates that are reasonable in the circumstances.
The Board of Directors reviews and approves the separate financial statements and submit the
same to the stockholders.
R.S. Bernaldo & Associates
and SyCip Gorres Velayo & Co., the independent auditors,
appointed by the stockholders for the period December 31, 2012 and 2011, respectively, have
examined the separate financial statements of the Parent Company in accordance with Philippine
Standards on Auditing, and in their reports to the stockholders, have expressed their opinion on
the fairness of presentation upon completion of such examination.
B
SANC.CHOA
and Chief Executive Officer
I-Remit, Inc.
26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City 1605 Philippines
Telephone: (632) 706-9999 and (632) 706-2737
Facsimile: (632) 706-2767
MAY 1 5 2013
SUBSCRIBED AND SWORN to before me this
2013, affiants
exhibiting to me their Community Tax Certificates (CTC) and Competent Evidences of Identity
(CEI) as follows:
Name
BANSAN C. CHOA
CTC No., Date and Place of Issue
26981086; January 5, 2013; Parafiaque City
01710103; January 8, 2013; Pasig City
01710107; January 8, 2013; Pasiq City
CEI
TI N 159-305-537
TIN 126-967-441
TI N 203-338-548
Notary Public
Document No.
Page No.
Book No.
Series of 2013.
VAN SA C. RAYMUNDO
No ry Pllblic for Pasfg City
Commissionuntil 31 December 2014
2404 Discover; Cent':l, 25 ADBAve .. Ortlgas Center, Pasig eit1l
APPT No. 82 (2013·201tf) I Roll No. 50(j80 .
PTR No.8429032; 01/07/2013; P<ilsig City
IS? No. 9H115; 1mO{20~2; r;'a!tati Ci'~Y
COVER SHEET
S.E.C. Registration Number
(Company's Full Name)
(Business Address: No. Street CityITown/Province)
Mr. Bansan C. Choa
706-9999
Contact Person
Company Telephone Number
G1J GLJ
Month
Day
[ill GLJ
lliI£Iill
FORM TYPE
Month
Day
Annual Meeting
Fiscal Year
Secondary License Type, If Applicable
OIIJIIJJ
__
18
Domestic
To be accomplished
by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
Remarks = pis. Use black ink for scanning purposes
11_Foreign
aONPRC No. 0300
asp Accredited
SECAccreditation
No. 0153-FR-1
CDA CEA No. 013-AF
A correspondent
firm of Pan ell Kerr Forster International
worldwide
INDEPENDENT AUDITORS' REPORT
I-REMIT INC.
26/F Discovery Centre, ADB Avenue
Report on the Separate Financial Statements
We have audited the accompanying financial statements of I-REMIT INC., which comprise the
statement of financial position as of December 31, 2012, and the separate statement of
comprehensive income, separate statement of changes in equity and separate statement of
cash flows for the year ended December 31, 2012 and a summary of significant 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 financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal
control as Management
determines
is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an oprruon on these financial statements based on 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 the audit to
obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements.
The procedures selected depend on the auditors'
judgment, including the assessment of the risks of material misstatement
of the financial
statements, whether due to fraud or error.
In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control.
An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
basis for our audit opinion.
and appropriate to provide a
18/F Cityland Condominium 10 Tower 1, 6815 Ayala Avenue cor. H.V. Dela Costa St., Makati City, Philippines 1200
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial
position of I-REMIT INC. as of December 31, 2012, and its financial performance and cash
flows for the year then ended December 31, 2012 in accordance with Philippine Financial
Reporting Standards.
Emphasis of Matter
We draw attention to Note 2.01, which describe the early adoption of amendments to PAS 1
which clarifies the requirements
for providing comparative
information
when an entity
provides financial statements beyond the minimum comparative information requirements.
As a result of the early adoption, the Parent Company opted not to present related notes to
accompany the opening separate statement of financial position.
Our opinion is not qualified
with regards to this matter.
Without further qualifying our opmron. we draw attention to Note 33 which
appropriation was made for the treasury stocks for the years 2011 and 2010.
states that no
Other Matter
The financial statements of the Company as of December 31, 2011, were audited by another
auditor whose report dated March 23, 2012, expressed an unqualified opinion on those
statements.
As part of our audit of the December 31, 2012 separate financial statements, we also audited
the adjustments described in Note 32 that were applied to amend the December 31, 2011
and 2010 financial statements.
In our opinion, such adjustments are appropriate and have
been properly applied. We were not engaged to audit, review, or apply any procedures to the
December 31, 2011 and 2010 financial statements of the Company other than with respect
to the adjustments and, accordingly, we do not express an opinion or any other form of
assurance on the December 31, 2011 and 2010 financial statements taken as a whole.
Report on the Supplementary
Information
Required Under Revenue Regulations
Our audit was conducted for the purpose of forming an opinion on the basic financial
statement
taken as a whole.
The supplementary
information
required under Revenue
to the financial
Regulations 15-2010
and 19-2011
in Notes 35 and 36, respectively,
statements are presented for purposes of filing with the Bureau of Internal Revenue and are
not a required part of the basic financial statements.
Such information is the responsibility of
the Management
of I-REMIT INC. The information
has been subjected to the auditing
procedures applied in our audit of the basic financial statements.
In our opinion, the
information is fairly stated in all material respects in relation to the basic financial statements
taken as a whole.
BOA/PRC No. 0300
Valid until December 31,2015
CDA CEA No. 013-AF
RO~~O
Managing Partner
PTR No. 3676450
May 15, 2013
•
,l"'~"l1 ~
"j
I-REMIT INC.
SEPARATE STATEMENT OF FINANCIAL POSITION
2~jj ,:'i:3
December 31, 2012
u
(In Philippine Pesol
NOTES
J
,
-t.)
"
2010
(As restated)
2012
ASSETS
Current Assets
Non-current Assets
Investments in subsidiaries
Investments in associates
Property and equipment - net
Intangible assets - net
Retirement asset
Deferred tax assets
Other non-current asset
6
7
8
9
10
11
12
24
27
13
TOTAL ASSETS
789,926,225
1,437,175,689
19,903,603
667,523,499
1,140,046,934
23,392,972
727,665,919
1,257,593,191
23,360,255
2,247,005,517
1,830,963,405
2,008,619,365
285,862,924
16,173,974
8,901,653
1,404,816
2,232,135
1,804,760
16,861,366
279,160,103
16,173,974
7,094,474
1,396,241
368,394
228,975,278
16,173,974
9,493,115
1,868,072
26,181,442
32,988,285
333,241,628
330,374,628
289,498,724
2,580,247,146
2,161,338,033
2,298,118,089
LIABILITIESAND STOCKHOLDERS'EQUITY
LIABILITIES
Current Liabilities
Income tax payable
Loans payable
Non-current Liabilities
Retirement liability
14
15
27
555,881,732
1,715,594
925,000,000
289,663,248
3,599,355
666,000,000
257,058,653
3,839,832
877,000,000
1,482.597.326
959,262,603
1,137,898,485
1,150,670
778,261
1,150,670
1,483,747,996
TOTAL LIABILITIES
STOCKHOLDERS'
778,261
959,262,603
1,138,676,746
EQUITY
Capital Stock
17
617,725,800
617,725,800
562,417,000
Additional Paid-in Capital
17
429,513,501
429,513,501
429,513,501
49,259,848
154,836,129
167,510,842
69,209,688
52,987,208
40,115,150
1,165,708,837
1,255,062,638
1,199,556,493
Unappropriated Retained Earnings
Appropriated Retained Earnings
Treasury Stock
17
17
(69,209,688)
(52,987,208)
(40,115,150)
TOTAL STOCKHOLDERS'EQUITY
1,096,499,149
1,202,075,430
1,159,441,343
TOTAL LIABILITIESAND STOCKHOLDERS'EQUITY
2,580,247,145
2,161,338,033
2,298,118,089
(See Notes to Separate Financial Statements)
i
i
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I-REMIT INC.
SEPARATE STATEMENT
l
r"~"~. ._..
IDate i MAY 1 52!'
OF COMPREHENSIVE INCOME
'-I
2012
2011
2010
REVENUE
20
470,199,179
490,087,163
463,248,572
COST OF SERVICES
21
185,136,308
175,332,116
180,568,774
285,062,871
314,755,047
282,679,798
16,804,190
16,373,704
8,104,103
301,867,061
331,128,751
290,783,901
GROSS PROFIT
OTHER INCOME
22
OPERATING EXPENSES
23
209,625,680
213,536,023
204,594,735
FINANCE COSTS
15
46,068,423
38,322,540
29,213,843
46,172,958
79,270,188
56,975,323
15,545,901
23,764,043
16,429,892
30,627,057
55,506,145
40,545,431
PROFIT BEFORETAX
INCOME TAXES
26
PROFIT
EARNINGS PER SHARE
Basic Earnings per Share
0.05
1,
"sns i
L ,~....", , .-J
1
R E c s i V, E:O
\
•.fY·~~:fE~q;,
nrt ~.,?1.6E::!.J
NOTES
:
I
c.
8
;,'l ;',Oi~ i •.•
0.09
0.07
I-REMIT INC.
SEPARATE STATEMENT OF CHANGES IN EQUITY
Notes
Balance at January 1, 2010,
as previously stated
Correction of prior period error
Balance at January 1,2010,
Profit
Cash dividends
17
33
as restated
Capital stock
562,417,000
Additional Paidin Capital
429,513,501
Unappropriated
Retained
Earnings
Appropriated
Retained
Earnings
193,684,094
(40,115,150)
40,115,150
Treasury Stock
Total
(40,115,150)
1,145,499,445
562,417,000
429,513,501
153,568,944
40,545,431
(26,603,533)
40,115.150
(40.115,150)
1,145,499,445
40,545,431
(26,603,533)
429,513.501
167,510,842
55,506,145
(55,308,800)
40.115,150
(40,115,150)
1,159,441,343
55,506,145
18
Balance at December 31, 2010.
as restated
Profit
Stock dividends
17
562,41 7,000
18
17
55,308,800
Balance at December 31, 2011,
as previously stated
Correction of prior period error
17
33
617,725,800
429,513,501
167,708,187
(12,872,058)
40,115,150
12,872,058
(52,987,208)
1,202,075,430
617.725,800
429,513,501
154,836.129
30,627,057
(119,980,858)
52,987,208
(52,987,208)
(16,222,480)
1,202,075,430
30,627,057
(119,980,858)
(16,222,480)
(16,222,480)
16,222,480
49,259,848
69,209,688
(69,209,688)
1,096,499,149(",)
Balance at December 31, 2011.
as restated
Profit
Cash dividends
Appropriations of retained earnings
18
17
17
Balance at December 31, 2012
17
(12,872,058)
617,725,800
429.513.501
(12,872,058)
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I-REMIT INC.
SEPARATE STATEMENT OF CASH FLOWS
(In Philippine Pesol
2011
(As restated)
2010
(As resta ed)
46,172,958
79,270,188
56,975,323
15
23
11,23
12,23
23
22
46,068,423
10,040,886
5,057,609
936,613
4,294,704
(987,177)
29,213,843
6,22
10,22
(1,858,779)
(4,896,570)
38,322,540
2,058,616
4,991,976
1,543,083
5,748,578
(1,205,505)
(3,954)
(2,949,353)
NOTES
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Finance cost
Loss on write-off of asset
Depreciation
Amortization
Retirement benefit expense
Unrealized foreign exchange gain - net
Gain on sale of property and equipment
Finance income
Dividend income
Operating cash flows before changes
in working capital
Decrease (Increase) in operating assets:
Other non-current assets
Increase in beneficiaries and other payables
Cash generated from operations
Contribution to retirement fund
Income taxes paid
104,828,667
24
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received
Finance income received
Proceeds from disposal of property and equipment
Acquisition of non-controlling interest in
subsidiaries
Additions to intangible assets
Acquisition of subsidiary.
Additions to property and equipment
Net cash from (used in) financing activities
6,550,801
1,507,900
2,376,127
(1,769,202)
(3,219,724)
(596,381 )
127,776,169
91,038,687
(302,118,325)
3,489,369
(720,810)
269,945,476
117,546,258
(32,717)
4,748,227
32,684,301
35,026,766
3,480,468
(1,146,492)
43,492,092
75,424,377
(6,158,445)
(16,890,790)
282,722,238
(6,895,233)
(23,414,649)
171,891,521
(5,229,490)
(24,590,301 )
52,375,142
252,412,356
142,071,730
11
4,896,570
1,487,023
349,596
9
12
9
11
(945,188)
(6,702,821)
(7,214,384)
(37,318,560)
(1,071,252)
(12,866,265)
(2,593,345)
(5,948,825)
(8,129,204)
(51,485,976)
(1,837,381)
925,000,000
(666,000,000)
(119,980,858)
(16,222,480)
(46,156,723)
666,000,000
(877 ,000,000)
877,000,000
(930,000,000)
(26,603,533)
10,22
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans
Payments of loans
Payment for cash dividends
Payment for buy-back of shares
Finance cost paid
2012
15
15
18
17
2,359,482
3,964
596,381
2,575,779
1,610,572
(671,288)
(12,872,058)
(38,402,247)
(29,396,496)
76,639,939
(262,274,305)
(109,000,029)
1,526,209
1,205,505
1,769,202
122,4 12,086
(60,142,420)
33,003,522
EFFECTSOF FOREIGNEXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE)IN CASH
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
(See Notes to Separate Financial Statementsl
667,523,499
727,665,919
694,662,397
789,935,585
667,523,499
727,665,919
I-REMIT INC.
NOTES TO SEPARATE FINANCIAL STATEMENTS
December 31, 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.
of P1.00.
There are 19, 17 and 13 registered common stockholders as of
December 31, 2012, 2011 and 2010, respectively. Shares lodged with the Philippine
Central Depository are registered under the name of PCD Nominee Corporation and as
such are treated as being held by only one shareholder. The Parent Company’s
common shares were listed with the Philippine Stock Exchange (PSE) on October 17,
2007.
The Parent Company is 29.18% owned by STAR Equities, Inc., 21.29% owned by
JTKC Equities, Inc., 23.35% owned by Surewell Equities Inc., 3.27% 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 (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 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.
1
2.01 New and Revised PFRSs with Material Effect on Amounts Reported in the
Current Year
The following new and revised PFRSs have been applied in the current period and had
materially affected the amounts reported in these financial statements. Details of other
new and revised PFRSs applied in these financial statements that have had no material
effect on the financial statements are set out in section 2.02.

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.
As a result of the early adoption, the Parent Company did not present related notes
to accompanying the opening separate statement of financial position.
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 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.

Assets
the transferor retains some level of continuing exposure in the asset.
The amendments also require disclosures where transfers of financial assets are not
permitted.

PAS 12, Income Taxes – Deferred Tax: Recovery of Underlying Assets
PAS 12 requires an entity to measure the deferred tax relating to an asset
depending on whether the entity expects to recover the carrying amount of the
asset through use or sale. It can be difficult and subjective to assess whether
recovery will be through use or through sale when the asset is measured using the
fair value model in PAS 40, Investment Property. The amendment provides a
practical solution to the problem by introducing a presumption that recovery of the
carrying amount will, normally be through sale.
As a result of the amendments, SIC-21, Income Taxes – Recovery of Revalued
Non-Depreciable Assets would no longer apply to investment properties carried at
fair value. The amendments also incorporate into PAS 12 the remaining guidance
previously contained in SIC-21, which is accordingly withdrawn.
2
The amendments are effective from January 1, 2012.
permitted.
Earlier application is
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 financial statements.

PFRS 7 (Amended), Financial Instruments: Disclosures – Offsetting Financial Assets
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. These 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 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 derecognition.
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 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.
3
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 12, Disclosure of Interests in Other Entities
The Standard applies to entities that have an interest 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 cash flows available to the reporting
entity and determining the value of current or future investment in the reporting
entity.

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
PFRS. It clarifies the definition of fair value, provides a single framework for
measuring fair value and enhances fair value disclosures.

PAS 1, Presentation of Items of Other Comprehensive Income
To improve the presentation of items of Other Comprehensive Income (OCI), the
IASB amended IAS 1 to require 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.

PAS 19 (Amended), Employee Benefits
Significant changes to this standard include removal of corridor approach;
immediate recognition of past service costs; presentation of remeasurements 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.
4

Revised PAS 19, Employee Benefits
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 obtained the services of an external actuary to
compute the impact to the financial statements upon adoption of the standard.
The effects are detailed below:
As of
As of
December 31, 2012 December 31, 2011
Increase (decrease) in:
Separate
Statement
of
Financial Position
Net defined benefit
asset/liability
Deferred tax asset/liability
Other comprehensive income
Retained earnings
P
17,231
5,169
(755,457)
777,857
P
1,076,750
323,025
(3,975,741)
5,375,516
As of
January 1, 2011
P
2012
Separate Statement of Comprehensive Income
Net benefit cost
Income tax expense
Profit for the year
Attributable to the owners of the Parent Company
Attributable to non-controlling interests

P
(304,062)
317,856
(13,794)
(13,794)
-
5,872,169
1,761,651
7,633,820
2011
P
(819,678)
1,438,626
(618,948)
(618,948)
-
PAS 27 (Revised), Separate Financial Statements
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.

PAS 28 (Revised), Investment in Associates and Joint Ventures
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.
5

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.
3.
BASIS FOR THE PREPARATION AND PRESENTATION OF SEPARATE FINANCIAL
STATEMENTS
3.01 Statement of Compliance
The 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 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, ‘availablefor-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends
6
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 noncurrent asset.
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.
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 Loans and 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.
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

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
7
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 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 Derecognition 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.
8
4.02 Investments in Associates
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.
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 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. 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.
4.03 Investment 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 power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
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.
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
9
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
Transportation and delivery equipment
Furniture and fixtures
3 years
3 – 5 years
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
derecognition 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.
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.
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.
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 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.
10
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 include beneficiaries and other payables
(excluding payable to government agencies and certain accruals) and interest-bearing
loans.
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 Derecognition 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 derecognition of the original liability and the recognition of
11
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
issue 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
statement of financial position if, and only if, there is a currently enforceable legal right
to offset the recognized amounts and there is an intention to settle on a net basis, or
to realize the 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.
The Parent Company has a funded, non-contributory retirement plan. 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 plus amortization of past service cost, experience adjustments and
changes in actuarial assumptions over the expected average remaining working lives of
the covered employees. Cumulative actuarial gains and losses in excess of the ten
percent (10%) of the greater between present value of the defined benefit obligation
and fair value of any plan assets were amortized over the expected average remaining
working lifetime of the employees and recognized as part of retirement expense.
Actuarial gains and losses arising during the year are recognized in profit or loss.
Any asset resulting from this calculation is limited to unrecognized actuarial losses and
past service cost, plus the present value of available funds and reductions in future
contributions to the plan.
The funding policy is to contribute an amount based on the actuarial valuation report
which is carried out at regular intervals.
12
4.11 Provisions and Contingencies
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
Provisions are reviewed at each reporting date and adjusted to reflect the current best
estimate and presented in the Parent Company’s separate statement of comprehensive
income.
Contingencies are not recognized in the Parent Company’s separate financial
statements unless the possibility of inflow/outflow of resources embodying economic
benefits is probable.
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.
13
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 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 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.
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 statement 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.
14
4.16 Foreign Currency Transactions
In preparing the 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. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using the exchange rates
as at the dates of the initial transactions.
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 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).


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 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.


A person identified above has significant influence over the entity or is a member of
the key management personnel of the entity (or of a 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 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 statement 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
15
calculated using tax rates that have been enacted or substantively enacted by the end
4.18.02 Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of
assets and liabilities in the 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 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.
16
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 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
financial statements, while subsequent events that do not require adjustments,
non-adjusting events, are disclosed in the notes to financial statements when material.
4.21 Prior Period Errors
The Parent Company corrects material prior period errors retrospectively in the first set
of 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.
5.
CRITICAL JUDGMENT 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 Judgment 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.
17
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
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.
previous estimates. The carrying values of property and equipment amounted to
P8,901,653 and P7,094,474 as of 2012 and 2011, respectively, as disclosed in
Note 11.
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.
18
Management assessed that there is no significant change from the previous estimates.
Amortization in 2012 and 2011 amounted to P936,613 and P1,543,083, respectively,
as disclosed in Note 12. The carrying amounts of intangible assets as of December
31, 2012 and 2011 amounted to P1,404,816 and P1,396,241 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 associates 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 financial statements.
Future events could cause the Parent Company to conclude that property and
equipment, investments in subsidiaries, investment in associates 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, investments in
associates and intangible assets, thus, no impairment loss was recognized in both
years. As of December 31, 2012 and 2011, the aggregate carrying amounts of
investments in subsidiaries, investments in associates, property and equipment and
intangible assets amounted to P312,343,367 and P303,824,792, respectively, as
disclosed in Notes 9, 10, 11 and 12.
5.02.04 Estimating Allowances for Doubtful Accounts
The Parent Company estimates the allowance for doubtful accounts related to its
accounts 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.
As of December 31, 2012 and 2011, Management believes that the recoverability of
receivables is certain; hence, no allowance for doubtful accounts was provided.
As of December 31, 2012 and 2011, the carrying amounts of trade and other
receivables amounted to P1,437,175,689 and P1,140,046,934, respectively, as
19
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 2012, 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, 2012, the carrying amount of deferred tax
assets amounted to P1,804,760, respectively, as disclosed in Note 27. In 2011, the
Parent Company did not recognize deferred tax assets amounting to P2,803,088,
Management believes that it is not probable that future taxable profits will be available
to allow all or part of deferred tax assets to be utilized.
The determination of the retirement obligation and cost is dependent on the selection
of certain assumptions used by actuaries in calculating such amounts. Those
assumptions include among others, discount rates, expected returns on plan assets and
rates of compensation increase. In accordance with the generally accepted accounting
principles, actual results that differ from the assumptions are accumulated and
amortized over future periods and therefore, generally affect the recognized expense
and recorded obligation in such future periods. 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, 2012 and 2011, the Parent Company has recognized retirement
asset amounting to P2,232,135 and P368,394, respectively, as disclosed in Note 24.
Retirement benefit expense recognized amounted to P4,294,704, P5,748,578 and
P2,376,127 in 2012, 2011 and 2010, respectively as disclosed in Note 24.
6.
For the purpose of the separate statement of cash flows, cash and cash equivalents
include cash on hand and in banks and cash equivalents. Cash equivalents are shortterm, 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
statement of cash flows can be reconciled to the related items in the separate
statement of financial position as follows:
2012
Cash on hand
Cash in banks
Cash equivalents
2011
P
22,455,596
747,470,629
20,000,000
P
24,772,521
642,750,978
-
P
789,926,225
P
667,523,499
Cash in banks earns interest ranging from 0.50% to 2.00% while cash equivalents
earn interest at rate of 1.75%.
20
Finance income earned on these accounts amounted to P1,858,779, P2,949,353 and
7.
TRADE AND OTHER RECEIVABLES
The Parent Company trade and other receivables consist of:
2012
Agents
Couriers
Advances to related parties (Note 16)
Officers and employees
Others
2011
P 1,196,101,092
88,815,199
146,490,161
4,011,145
1,758,092
P
993,280,050
3,523,052
137,260,244
2,526,259
3,457,329
P 1,437,175,689
P
1,140,046,934
Receivables from agents pertain to advances made to fund the remittance transactions
to beneficiaries. These are settled within one (1) to five (5) days from transaction
date. No interest were charged on trade receivables.
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 (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 collected in one month from date of funding.
Aging of accounts that are past due but not impaired is as follows:
2012
Over 60 days past due
2011
P
6,296,592
-
P
-
P
6,296,592
P
-
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, the directors believe that
there is no credit provision required.
Others include advances to contractors and trading clients for foreign exchange
transactions. These outstanding receivables are due within one (1) year.
21
8.
PREPAYMENTS AND OTHER CURRENT ASSETS
The Parent Company’s prepayment’s other current assets consist of:
2012
Receivable from Bureau of Internal Revenue (BIR)
Visa cards inventory
Advances to suppliers and contractors
Prepaid expenses
Office supplies
Creditable withholding tax
2011
P
13,160,534
2,829,010
1,830,343
1,824,093
259,623
-
P 13,160,535
3,371,662
1,087,500
5,579,968
190,328
2,979
P
19,903,603
P 23,392,972
Receivable from BIR pertains to the excess payments made by the Parent Company in
2007 for the Initial Public Offering (IPO) percentage tax at P13,160,535. As of
December 31, 2012, 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
IRCGmbH
IGRL
LSML
WEPL
IRCL
IAPL
PSAGL
KKIJ
INZL
Principal Activity
Remittance and management
consultancy
Money transfer services
Fund transfer and remittance
services
services
services
Money transfer services
Foreign currencies trading
services
Money remittance services
Money remittance services
Proportion of
Place of
Ownership Interest
Incorporation
2012
2011
and Operation
Austria
United
Kingdom
100%
100%
100%
100%
Hong Kong
100%
100%
Australia
100%
100%
Canada
Australia
100%
100%
100%
100%
Hong Kong
Japan
New Zealand
100%
100%
100%
100%
100%
100%
22
This account consists of:
2012
IRCGmbH
IGRL
LSML
WEPL
IRCL
IAPL
PSAGL
KKIJ
INZL
2011
P
103,215,084
85,355,965
42,554,665
21,336,890
13,444,000
8,552,000
5,958,800
5,413,120
32,400
P
103,215,083
78,653,145
42,554,665
21,336,890
13,444,000
8,552,000
5,958,800
5,413,120
32,400
P
285,862,924
P
279,160,103
Movements of investments in subsidiaries are as follows:
2012
2011
Balance, January 1
Acquisition of additional shares in subsidiaries
P
279,160,103
6,702,821
P
266,293,838
12,866,265
P
285,862,924
P
279,160,103
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
Parent Company to a limited liability Parent 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 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.
9.02 Acquisition of subsidiaries
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.
23
On February 10, 2012, the Parent Company increased its capital share for another GBP
100,000 or P6,702,821 as required by FSA.
10. INVESTMENTS IN ASSOCIATES
Details of the Parent Company’s investments in associates are as follows:
Name of
Associates
ISPL
HKHCL
Principal Activity
Remittance business
Remittance business
Place of
Incorporation and
Operation
Proportion of
Ownership Interest
Singapore
Taiwan
2012
2011
49%
49%
49%
49%
This account consists of:
2012
ISPL
HKHCL
2011
P
12,600,000
3,573,974
P
12,600,000
3,573,974
P
16,173,974
P
16,173,974
The Parent Company recognized dividend income amounting to P4,896,570, nil and
P596,381 from dividends declared by ISPL in 2012, 2011 and 2010, respectively, as
24
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, 2011
Cost
P
25,050,187 P
6,834,602 P
3,779,467 P
11,795,343 P
47,459,599
(21,499,889)
(2,944,869)
(2,984,108)
(10,537,618)
(37,966,484)
3,550,298
3,889,733
795,359
1,257,725
9,493,115
3,550,298
3,889,733
795,359
1,257,725
9,493,115
Additions
2,222,849
35,315
285,181
50,000
2,593,345
Carrying amount
Disposal
Cost
-
-
(10)
-
(10)
Accumulated Depreciation
-
-
-
-
-
(2,483,026)
(1,309,027)
(414,913)
(785,010)
(4,991,976)
3,290,121
2,616,021
665,617
522,715
7,094,474
December 31, 2011
Cost
27,273,036
6,869,917
4,064,638
11,845,343
50,052,934
(23,982,915)
(4,253,896)
(3,399,021)
(11,322,628)
(42,958,460)
3,290,121
2,616,021
665,617
522,715
7,094,474
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
(53,200)
(514,960)
-
-
40,323
178,241
-
-
(3,290,998)
(1,071,471)
(288,233)
(406,907)
(5,057,609)
4,851,174
1,207,831
390,737
2,451,911
8,901,653
Carrying amount
Disposal
Cost
Accumulated Depreciation
(568,160)
218,564
December 31, 2012
Cost
Carrying amount
P
32,084,764
6,354,957
4,077,991
14,181,446
56,699,158
(27,233,590)
(5,147,126)
(3,687,254)
(11,729,535)
(47,797,505)
4,851,174 P
1,207,831 P
390,737 P
2,451,911 P
8,901,653
As of December 31, 2012 and 2011, the cost of fully depreciated property and
equipment still in use amounted to P28,620,900 and P23,132,698, respectively.
In 2012 and 2011, the Parent Company disposed certain depreciated property and
equipment for total consideration of P349,596 and P3,954, respectively.
Depreciation charged to operating expenses amounted to P5,057,609, P4,991,976
and P6,550,801 in 2012, 2011 and 2010, respectively, as disclosed in Note 23.
During the year, 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 an impairment has occurred on its property and equipment.
25
12. INTANGIBLE ASSETS – net
The carrying amounts of the Parent Company’s intangible assets follow:
2012
Carrying amount
Cost
P
Movements during the year
Balance, January 1
Additions
Amortization (Note 23)
P
2011
14,113,137 P
(12,708,321)
13,167,949
(11,771,708)
1,404,816
1,396,241
1,396,241
945,188
(936,613)
1,868,072
1,071,252
(1,543,083)
1,404,816
P
1,396,241
The Parent Company’s intangible assets include software used in the business
activities of the Parent Company.
Amortization charged to operating expenses amounted to P936,613, P1,543,083 and
During the year, 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.
13. OTHER NON-CURRENT ASSETS
The components of other non-current assets account are as follows:
2012
Input VAT
Refundable deposits (Note 25)
Deferred input VAT
Others
2011
P
11,464,326
5,353,040
44,000
P
21,242,725
4,568,661
326,056
44,000
P
16,861,366
P
26,181,442
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 tax credit certificates 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 tax credit certificate to the Parent Company for its Input VAT filed in
2008 amounting to P2,968,565. 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
P6,677,857, P2,058,616 and nil in 2012, 2011 and 2010, respectively, as disclosed
in Note 23.
26
14. BENEFICIARIES AND OTHER PAYABLES
The components of beneficiaries and other payables account are as follows:
2012
Beneficiaries
Advances from related parties (Note 16)
Agents, couriers and trading clients
Accrued expenses
Payable to suppliers
Payable to government agencies
Others
2011
P
443,309,073
74,130,345
23,047,301
7,751,470
3,720,856
1,608,544
2,314,143
P
155,140,304
79,753,117
44,404,974
7,019,510
1,391,836
1,476,777
476,730
P
555,881,732
P
289,663,248
Payables to beneficiaries, agents, couriers and trading clients are noninterest-bearing
and are normally settled within 1 to 30 days.
Accrued expenses include accruals for various operating expenses, courier charges,
training and development, professional fees and utilities.
15. LOANS PAYABLE
In 2012 and 2011, the Parent Company issued an unsecured, short-term interestbearing peso-denominated bank loans with an aggregate amount of P925,000,000 and
P666,000,000, respectively. The loans payable have an interest rate ranges from 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 P46,068,423, P38,322,540,
P29,213,843 in 2012, 2011 and 2010, respectively.
The Parent Company has unused credit facilities with various banks amounting to
P1,880,000,000 and P1,480,000,000 as of December 31, 2012 and 2011,
respectively.
Movements of loans payable are as follows:
2012
Balance, January 1
Additional loans obtain
Payments for short-term loans payable
P
P
2011
666,000,000 P
925,000,000
(666,000,000)
925,000,000
P
877,000,000
666,000,000
(877,000,000)
666,000,000
As of the reporting period, the Parent Company is compliant with the terms and
conditions of the loans.
27
16. RELATED PARTY TRANSACTIONS
Nature of relationship of the Parent Company and its related parties are disclosed
below:
Related Parties
International Remittance (Canada) Ltd. (IRCL)
Lucky Star Management Limited (LSML)
IRemit Global Remittance Limited (IGRL)
I-Remit Australia Pty Ltd (IAPL)
Worldwide Exchange Pty Ltd (WEPL)
IREMIT Remittance Consulting GmbH (IRCGmbH)
I-Remit New Zealand Limited (INZL)
Power Star Asia Group Limited(PSAGL)
K.K. Iremit Japan (KKIJ)
Sterling Bank of Asia (SBA)
Oakridge Properties
Surewell Equities Pte. Ltd.
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate
Associate
Affiliates
Affiliates
Affiliates
Balances and transactions between the Parent Company and its related parties are
disclosed below:
16.01 Advances to related parties
Balance of advances to related parties as shown in the separate statement of financial
position are summarized per category as follows:
16.01.01 Subsidiaries
December 31, 2012
Amount/
Outstanding
Volume
Balances
LSML
Remittance
Due from
Delivery fee
December 31, 2011
Amount/
Outstanding
Volume
Balances
906,060,540
2,848,880
6,406,963
13,591,056
9,460,733
143,428
968,347,557
6,957,891
7,562,975
8,298,821
6,778,807
135,848
Remittance
Due from
Delivery fee
Service income
7,172,949,521
34,369,236
26,298,780
3,646,004
193,148,649
52,541,211
948,339
999,952
5,531,809,775
23,544,513
20,070,096
3,321,792
36,909,320
19,643,004
338,579
778,290
WEPL
Remittance
Due from
Delivery fee
Service income
5,654,003,334
288,604
28,840,903
1,792,774
33,252,223
773,357
369,519
4,866,615,954
916,863
26,358,605
1,464,752
23,419,787
364,387
150,004
239,788
IGRL
(Balance forwarded)
28
December 31, 2012
Amount/
Outstanding
Volume
Balances
December 31, 2011
Amount/
Outstanding
Volume
Balances
IRCL
Remittance
Due from
Delivery fee
Service income
8,397,932,144
245,069
55,191,391
1,160,626
208,951,955
1,931,573
236,268
8,658,896,960
261,982
55,556,118
915,676
167,796,179
33,716
1,459,060
116,483
INZL
Remittance
Due from
Delivery fee
Service income
952,992,756
126,421
4,412,176
584,255
7,833,438
15,812,209
36,306
584,255
768,097,797
5,982,986
4,032,091
464,934
10,376,816
15,260,990
50,530
464,934
IRCGmbH
Remittance
Due from
Delivery fee
158,815,269
15,089,831
1,032,912
5,813,043
14,761,355
43,028
K.KIJ
Remittance
Due from
Delivery fee
165,806,223
27,505,484
397,226
20,666,749
33,117,004
41,884
IERCAG
Remittance
Due from
Delivery fee
IAPL
Remittance
Due from
PSAGL
Due from
-
-
3,673,446,537
399,907
-
1,272,493
82,349
-
-
-
5,611,520
-
5,611,520
-
1,534,094,349
37,810,554
6,294,573
62,811,308
595,890
4,965,185,873
697,587
29,704,309
373,740
33,166
33,166
subsidiary office from a remitter, delivery of which is fulfilled by the Parent Company
• 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 collected in 1-5
days from date of transaction.
foreign subsidiary offices. Settled in 1-30 days from date of funding.
• 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 the latter offices.
Transactions with related parties are non-interest bearing, unsecured 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.
29
16.01.02 Associates
December 31, 2012
Amount/
Outstanding
Volume
Balances
December 31, 2011
Amount/
Outstanding
Volume
Balances
HKHCL
Remittance
Due from
Delivery fees
5,155,165,031
5,223,594
47,715,373
60,187,956
8,192,341
2,130,587
5,148,060,359
6,382,656
46,127,251
29,136,840
8,715,507
326,674
ISPL
Remittance
Due from
Delivery fees
7,203,835,917
457,714
25,161,186
105,072,529
10,332,965
2,782,994
7,211,603,671
996,076
24,463,777
64,141,580
16,034,603
2,180,325
associate office from a remitter, delivery of which is fulfilled by the Parent Company
• Delivery fee is the share in service fee collected by the foreign subsidiary office along
with the principal amount of transaction. Account collected in 1-5 days from date of
transaction.
foreign associate offices. It has a term of settlement within 1-30 days from date of
funding.
cash. No guarantee was required. No provision made for doubtful accounts as these
accounts are all collectible.
16.02 Other Related Parties
16.02.01 Affiliates
December 31, 2012
Amount/
Outstanding
December 31, 2011
Amount/
Outstanding
Category
Volume
Volume
Sterling Bank of Asia
Oakridge Properties
384,536
11,421,505
898,920
Balances
-
425,360
9,247,615
877,219
Balances
-
• Sterling Bank of Asia – This 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 are JTKC Equities, Inc. Star Equities, Inc. and Surewell Equities, Inc.
• Oakridge Properties - This 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. OPI is owned by The
Discovery Leisure Company Inc, (TDLCI), an entity owned by JKTC Equities, Inc, and
JKTC Realty Corporation. Lease contract with Oakridge includes security deposit of
30
two months and one month advance rental. Rent is paid monthly with provision for
yearly escalation.
• Surewell Equities, Inc. – This pertains to the cost of rental paid to Surewell Equities
Pte. Ltd. (SEPL) for the sharing of its office in Singapore under a sublease agreement
with the Parent Company . SEPL is a foreign subsidiary office of Surewell Equities,
Inc., one of the principal stockholders of the Parent Company. No security deposit
paid and without provision for escalation. Rent is paid monthly.
cash. No guarantees have been received. No provisions have been made for doubtful
debts in respect of the amounts owed by the related parties.
16.02.02 Key Management
December 31, 2012
Amount/
Outstanding
December 31, 2011
Amount/
Outstanding
Volume
Balances
Volume
Balances
500,000
689,385
600,000
929,385
Key Management
Advances
• Advances – This pertains to a key management personnel subject to liquidation
within company prescribed period of liquidation.
No guaranty required. No provision was made for doubtful account as the account is
deemed collectible.
16.03 Advances from Related Parties
Balance of advances from related parties as shown in the separate statement of
Category
December 31, 2012
Amount/
Outstanding
December 31, 2011
Amount/
Outstanding
Volume
Balances
Volume
53,926,985
65,440,113
77,952,025
Balances
Subsidiary
PSAGL
75,534,429
 Accounts payable to PSAGL represents charges on various treasury assistance and
advisory services rendered by PSAGL to the Parent Company.
The amounts outstanding are unsecured, non-interest bearing and will be settled in
cash. No guarantees have been given or received. No provisions have been made for
doubtful debts in respect of the amounts owed to a related party.
31
16.04 Lease Contracts
The Parent Company leases office spaces from Oakridge Properties as disclosed in
Note 25. Rent expense amounted to P11,421,505 and P9,247,615 in 2012 and
2011, respectively.
The Parent Company entered into a sublease agreement with Surewell Equities Pte
Ltd., one of the stockholders of the Parent Company. The Parent Company also has
deposits amounting to P126,865,934 and P193,049,842 with SBA as of December
31, 2012 and 2011, respectively. These deposits earned P384,536, P425,360, and
P1,124,404 interest income in 2012, 2011 and 2010, respectively.
16.05 Investment in Associate
The Parent Company recognized dividend income amounting to P4,896,570 and
P596,381 from dividends declared by ISPL in 2012 and 2010, respectively. The
Parent Company has forty nine percent (49%) ownership interest on its associate and
a carrying amount of investment amounted to P19,492,351 in 2012.
16.06 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:
2012
Short-term benefits
2011
2010
P
22,368,436
1,260,378
P
21,310,932
1,571,444
P
19,605,330
549,541
P
23,628,814
P
22,882,376
P
20,154,871
16.07 Transaction 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 amount and
fair value of the fund amounted to P30,303,714 as of December 31, 2012 as
debt securities. In 2012 and 2011, the Parent Company made contributions to the
fund amounting to P6,158,445 and P6,895,233, respectively, as disclosed in Note 24.
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
I-Remit Inc. through its SSS program as disclosed in Note 19.
Fund were purchased from accredited counterparties of SBA-Trust Group.
These counterparties are Banks and Investment Houses allowed to trade government
Treasury (BTr).
32
accredited counterparties that are allowed to trade government securities
17. ISSUED CAPITAL
The issued capital of the Parent Company is as follows:
2012
Ordinary shares
Additional paid-in capital
P
617,725,800
429,513,501
P 1,047,239,301
2011
P
617,725,800
429,513,501
P 1,047,239,301
17.01 Ordinary Shares
The ordinary shares of the Parent Company are described as follows:
2012
Authorized:
1,000,000,000 shares at P1 par value
per share
2011
P 1,000,000,000
P 1,000,000,000
Subscribed and issued:
562,417,000 shares at P1 par value per
share
Stock dividends, 55,308,800 shares at P1
par value per share
P
P
Total subscribed, issued
P
562,417,000
55,308,800
617,725,800
562,417,000
55,308,800
P
617,725,800
Ordinary shares carry one vote per share and a right to dividend.
of P1. There are 19, 17 and 13 registered common stockholders as of December 31,
2012, 2011 and 2010. Shares lodged with the Philippine Central Depository are
registered under the name of PCD Nominee Corporation and as such are treated as
being held by only one shareholder.
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
P429,510,000 and excess of acquisition costs over the carrying value of the
non-controlling interests acquired in 2011 amounting to P38,280,000, as disclosed in
Note 1.
33
17.02 Treasury Shares
Details about the Parent Company’s treasury shares are as follows:
2012
Shares
2011
Amount
Shares
Amount
Balance, January 1
Acquisitions
14,873,000 P 52,987,208
5,714,000
16,222,480
9,329,000 P 40,115,150
5,544,000
12,872,058
20,587,000 P 69,209,688
14,873,000 P 52,987,208
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.
In 2009 and 2008, the Parent Company 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 Parent
Company.
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 (P11,350,000) under
the buy-back program. Also on the same year, the Parent Company purchased
671,000 shares (P1,520,000) under the buy-back program approved in
August 15, 2008.
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 (P14,560,000) from the buy-back program of 2011 and 587,000
shares (P1,670,000) from the latest buy-back program authorized in 2012.
17.03 Appropriation of Retained Earnings
As of December 31, 2012 and 2011, appropriated retained earnings pertaining to
treasury shares amounted to P69,209,688 and P52,987,208, respectively. This is in
accordance with the legal requirement of Section 41 of the Corporation Code which
requires an entity to have sufficient retained earnings to support for the treasury
shares.
18. DIVIDENDS DECLARED
Parent Company’ shareholders during their annual meeting held on July 17, 2009.
The payment of dividends was made on May 6, 2009.
34
Parent Company’ shareholders during their annual meeting held on July 23, 2010. The
payment was made on May 5, 2010.
On June 17, 2011, the Board of Directors of the Parent Company authorized the
declaration of stock dividends 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 its regular meeting held in June 22, 2012, the Board of Directors 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 Corporation’s
Six Hundred Two Million Seventy One Thousand Eight Hundred Pesos (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.
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 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.
35
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 twoyear lock-up period. The expense recognized under ‘Salaries, wages and employee
benefits’ in the Parent Company separate statement of comprehensive income
amounted to P1.53 million in 2009.
20. REVENUE
The Parent Company’s revenue from operations amounted to P470,199,179,
P490,087,163 and P463,248,572 in 2012, 2011 and 2010, respectively.
The Parent Company’s primary operation is to engaged in fund transfer and remittance.
21. COST OF SERVICES
The following are the components of the Parent Company’s cost of services:
2012
Bank charges
Delivery charges
2011
2010
P
171,969,103
13,167,205
P
160,285,284
15,046,832
P
147,447,466
33,121,308
P
185,136,308
P
175,332,116
P
180,568,774
22. OTHER INCOME
Components of other income are as follows:
2012
Service fees
Dividends (Note 10)
Finance income (Note 6)
Foreign exchange gain –
net
Rebates
Reversal of foreign
income tax
Others
P
P
7,848,011
4,896,570
1,858,779
2011
P
6,316,114
2,949,353
2010
P
596,381
3,219,724
987,177
-
2,722,754
2,881,469
116,205
687,509
1,213,653
1,504,014
2,406,695
1,077,589
16,804,190
P
16,373,704
P
8,104,103
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 UK. Also included on this
classification 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 assets and liabilities.
Rebates pertain to the refund of bank service charges.
36
23. OPERATING EXPENSES
During 2012, 2011 and 2010, operating expenses are as follows:
2012
2011
2010
Salaries, wages and
employee benefits
(Note 24)
Marketing
Communication, light and
water
Rental (Note 25)
Professional fees
Loss on write-off of asset
Taxes and licenses
Business development
Supplies
(Note 24)
Association dues
Donations and contributions
Entertainment, amusement
and recreation
Amortization (Note 12)
Insurance
Miscellaneous
P
87,034,589
26,422,467
P
83,310,975
28,248,090
P
83,926,886
32,398,920
17,544,663
14,464,084
10,893,897
10,040,886
6,994,878
6,569,769
5,100,724
5,057,609
4,576,498
13,782,359
14,230,999
8,488,153
2,058,616
6,726,300
21,159,472
2,974,650
4,991,976
8,941,140
10,971,965
11,744,048
9,566,460
6,085,301
21,814,488
2,679,500
6,550,801
5,848,125
4,294,704
3,223,761
2,621,445
5,748,578
3,230,078
-
2,376,127
1,927,949
1,155,280
1,728,062
936,613
799,106
506,867
815,058
4,459,545
1,543,083
691,037
814,865
2,136,107
2,843,451
1,507,900
799,563
613,229
1,784,742
P 209,625,680 P 213,536,023 P 204,594,735
Loss on write-off of asset pertains to disallowed input vat, deposits with Banco Filipino
and expenditures intended for certain investment.
24. EMPLOYEE BENEFITS
Aggregate employee benefits expense comprised:
2012
Short-term benefits
2011
P 87,034,589
4,294,704
P 83,310,975
5,748,578
P 91,329,293
P 89,059,553
24.01 Short-term Employee Benefits
Short-term benefits include salaries and wages, de-minimis fringe benefit, sick and
vacation leave pay, training and development and 13th month pay.
37
24.02 Post-employment Benefits
The Parent Company accrues benefit pursuant to the provision of the Retirement Pay
Law under non-contributory and of the defined benefit type which provides a
retirement benefit equal to one hundred percent (100%) of Plan Salary for every year
of Credited Service.
The most recent actuarial valuations of Plan assets and the present value of the
defined benefit obligation were carried out at December 31, 2012 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.
follows:
2012
Discount rate
Future salary expenses
2011
5.86%
8.00%
7.50%
33.10
9.69%
8.00%
6.00%
32.10
follows:
2012
Interest on obligation
Actuarial loss recognized
Change in the effect of the asset ceiling – loss
2011
P
4,149,490 P
1,509,154
(1,493,733)
129,793
4,618,548
2,117,009
(1,118,673)
131,694
-
P
4,294,704
5,748,578
P
The amount included in the separate statement of financial position arising from the
Parent Company’s obligation in respect of its defined benefit plans is as follows:
2012
P 27,959,017
30,303,714
Deficit (surplus)
Unrecognized actuarial losses
Effect of the asset ceiling
Retirement Asset
2011
P 22,524,680
21,816,324
(2,344,697)
(17,231)
129,793
P
(2,232,135) P
708,356
(1,076,750)
(368,394)
38
were as follows:
2012
2011
Balance, January 1
Interest cost
Actuarial gain
P 22,524,680 P 21,847,360
4,149,490
4,618,548
1,509,154
2,117,009
(224,307)
(6,058,237)
P 27,959,017
P 22,524,680
2012
2011
Balance, January 1
Contributions
Actual return on plan assets
Actuarial gain (loss)
P 21,816,324
6,158,445
1,493,733
835,212
P 15,196,930
6,895,233
1,118,673
(1,394,512)
P 30,303,714
P 21,816,324
2012
2011
Deposits in banks
Interest receivable
Trust fee payable
P 11,818,150 P
11,755,471
6,402,242
354,778
(26,927)
P 30,303,714
4,763,467
9,245,139
7,613,374
215,615
(21,271)
P 21,816,324
The overall expected rate of return is a weighted average of the expected returns of
the various categories of plan assets held.
The actual return on plan assets amounted to a gain of P2,328,945 and loss of
P275,839 in 2012 and 2011, respectively.
39
2012
Present value of
defined benefit
obligation
Fair value of plan
assets
Deficit (Surplus)
assumptions
Experience
adjustments on
plan liabilities
Experience
adjustments on
plan assets
P
27,959,017
2011
P
30,303,714
(2,344,697)
(498,493)
(2,585,727)
835,212
P
21,816,324
708,356
2,361,420
P
22,524,680
2010
(5,559,744)
P
(1,394,512) P
21,847,360
2009
P
15,196,930
6,650,430
9,932,542
2008
10,080,516
P
12,421,022
(2,340,506)
3,168,050
3,406,461
1,070,082
(3,766,312)
(894,376)
(382,676)
(2,643,029) P
6,574,511
4,452,972
(206,448)
P
-
The Parent Company expects to make a contribution of P4,294,704 to its retirement
fund in the next financial year.
25. OPERATING LEASE AGREEMENTS
25.01 The Parent Company as a Lessee
Operating leases relate to leases of space for use of office space with lease terms
between Wynsum Realty and Oakridge Properties. 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
Oakridge Properties 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 rent expense of the Parent Company amounted to P14,464,084, P14,230,999
and P11,744,048 as of 2012, 2011 and 2010, respectively, as disclosed in Note 23.
As of 2012 and 2011, the Parent Company has a refundable deposits amounting to
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:
2012
Not later than one year
Later than one year but not later than five years
2011
P 11,464,590
7,998,175
P 10,458,903
7,101,949
P 19,462,765
P 17,560,852
40
26. INCOME TAXES
26.01 Income Tax Recognized in Profit or Loss
Components of income tax expense are as follows:
2012
Current tax expense
Deferred tax expense (benefit)
Final tax
2011
2010
P
15,828,235 P
(654,090)
371,756
23,174,172
589,871
P 15,785,947
643,945
P
15,545,901 P
23,764,043
P 16,429,892
A numerical reconciliation between tax expense and the product of accounting profit
multiplied by the tax rate in 2012, 2011 and 2010 follows:
2012
Accounting profit
P
Tax expense at 30%
Tax effects of:
Non-deductible finance cost
Non-deductible VAT Input
Non-deductible expenses
Non-recognition of DTA
Recognition of previous
unrecognized DTA
Others
46,172,958
2011
P
79,270,188
P 56,975,323
13,851,888
23,781,056
17,092,597
184,019
2,003,357
533,442
-
291,986
318,753
-
-
(840,927)
(185,878)
P
2010
15,545,901
P
(14,064)
(659,486)
(294,935)
(321,972)
23,764,043
P 16,429,892
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:
Accrued
courier
charges
Recognized in profit or loss
Balance, December 31,
2012
Accrued
Interest
Accrued –
others
Total
P
433,360
P
571,862
P
799,538
P
1,804,760
P
433,360
P
571,862
P
799,538
P
1,804,760
41
In 2011 and 2010, the Parent Company did not recognized deferred tax assets on the
following temporary differences:
2011
2010
Accrued interest
Accrued courier charges
Others
P
1,994,506 P
808,582
2,074,213
393,793
381,961
P
2,803,088 P
2,849,967
27.02 Deferred Tax Liabilities
Unrealized
foreign
exchange gain
Retirement Asset
Total
Recognized in profit or loss
P
P
854,517
P
296,153
1,150,670
P
854,517 P
296,153 P
1,150,670
28. EARNINGS PER SHARE
The Parent Company’s basic earnings per share is 0.05, 0.09 and 0.07 as of
December 31, 2012, 2011 and 2010, respectively.
The earnings and weighted average number of ordinary shares used in the calculation
of basic earnings per share are as follows:
2012
Earnings used in the calculation
of total basic earnings per
share
Weighted average number of
ordinary shares for the
purposes of basic
earnings per share
P
30,627,057
600,742,383
2011
P
55,506,145
607,014,606
2010
P
40,545,431
608,396,800
The Parent Company did not have any potential dilutive instruments as of
December 31, 2012, 2011 and 2010.
42
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, 2012 and 2011 are presented below:
2012
Carrying
Amount
Financial Assets:
Trade and other
receivables
Refundable deposits
2011
Fair Value
Carrying
Amount
Fair Value
P 1,437,175,689 P 1,437,175,689 P 1,140,046,934 P 1,140,046,934
5,353,040
5,353,040
4,568,661
4,568,661
P 1,442,528,729 P 1,442,528,729 P 1,144,615,595 P 1,144,615,595
Financial Liabilities:
payables
Loans payable
P
547,602,343 P
547,602,343 P
281,166,961 P
281,166,961
925,000,000
925,000,000
666,000,000
666,000,000
947,166,961 P
947,166,961
P 1,472,602,343 P 1,472,602,343 P
Due to short-term nature or demand feature of trade and other receivables, refundable
deposits, beneficiaries and other payables (except payable to government agencies and
accrued expenses) and loans payable, Management estimates that their carrying
amounts approximate their fair values.
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.
43
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 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 Parent Company.
The carrying amounts of the Parent Company’s foreign currency denominated
monetary assets at the end of the reporting period are as follows:
2012
FCDU
CAD
EUR
SGD
USD
GBP
AUD
NTD
JPY
NZD
HKD
IDR
QAR
PESO
Cash
2,192,803
285,567
166,911
1,531,460
14,862
658,878
400,031
271,178
251
42,923,183
275
Receivable
5,070,966
1,908,884
3,127,603
878,521
1,447,131
836,352
44,131,195
43,489,087
234,624
2,593,639
-
Total
7,263,769
2,194,451
3,294,514
2,409,981
1,461,993
1,495,230
44,131,195
43,889,118
505,802
2,593,890
42,923,183
275
229,638,797
119,250,810
110,653,207
98,929,737
96,629,841
63,582,679
62,318,543
20,899,120
16,965,597
13,735,815
176,200
3,100
48,445,399
103,718,002
152,163,401
832,783,446
2011
FCDU
CAD
EUR
SGD
USD
AUD
GBP
NTD
NZD
HKD
JPY
IDR
QAR
PESO
Cash
600,992
440,811
1,263,619
45,588
14,873
4,809
23,219
275
Receivable
3,899,810
702,086
1,628,629
246,093
1,215,971
796,606
20,248,641
309,338
1,496,086
-
Total
3,899,810
1,303,078
2,069,440
1,509,712
1,261,559
811,479
20,248,641
314,147
1,519,305
275
166,949,916
73,922,243
69,903,060
66,185,751
55,804,483
54,974,473
29,205,344
10,589,449
8,565,572
3,311
2,394,186
30,543,260
32,937,446
536,103,602
The Parent Company is mainly exposed to the changes in CAD and US Dollar.
44
The following table details the Parent Company’s sensitivity to a 5% increase and
decrease in the Philippine Peso against the relevant foreign currencies. The sensitivity
rate of 5% 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% change in foreign currency rates. A positive number below indicates an
increase in profit and other equity where the Philippine Peso strengthens 5% against
the relevant currency.
2012
CAD
EUR
SGD
USD
GBP
AUD
NTD
JPY
NZD
HKD
IDR
QAR
2011
P
12,415,357
6,447,262
5,982,435
5,348,609
5,224,265
3,437,580
3,369,235
1,129,905
917,240
742,623
9,526
168
P
-
P
45,024,205
P
-
The Parent Company's sensitivity to foreign currency has increased during the current
year 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 year end exposure does not reflect the exposure during
the year. The Parent Company’s sensitivity analysis increases to 5% from 0%, as
compared to prior year. The Parent Company mitigates its exposure to foreign currency
risk by monitoring its 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.
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 year ended December 31, 2012 and 2011 would have been unaffected
since the Parent Company 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 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.
45
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.
The carrying amount of financial assets recognized in the 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.
2012
Cash in banks and cash equivalents
Refundable deposit
P
2011
767,470,629
1,437,175,689
5,353,040
P 2,209,999,358
P
642,750,978
1,140,046,934
4,568,661
P 1,787,366,573
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:
2012
High Grade
Cash in banks and
cash equivalents
Trade and other
receivables
P
767,470,629 P
1,437,175,689
Refundable deposit
5,353,040
P
2,209,999,358 P
Medium
Grade
-
Low
Grade
P
-
P
-
Total
P
767,470,629
-
1,437,175,689
5,353,040
-
P 2,209,999,358
46
2011
High Grade
Cash in banks and cash
equivalents
Trade and other
receivables
Refundable deposits
P
642,750,978 P
Medium
Grade
-
1,140,046,934
4,568,661
-
P 1,787,366,573 P
-
Low
Grade
P
P
-
Total
P
642,750,978
-
1,140,046,934
4,568,661
-
P 1,787,366,573
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.
30.03 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 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.
47
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
December 31, 2012
payables
Loans payable
December 31, 2011
payables
Loans payable
1–5
years
Within 1 year
P
Total
547,602,343
925,000,000
P
-
P
P 1,472,602,343
P
-
P 1,472,602,343
P
281,166,961
666,000,000
P
-
P
281,166,961
666,000,000
P
947,166,961
P
-
P
947,166,961
5- 7.125%
5- 7.125%
547,602,343
925,000,000
The following table details the Parent Company’s expected maturity for its nonderivative 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, 2012
Floating
Cash and cash equivalents interest rates P
Refundable deposit
789,926,225 P
1,437,175,689
5,353,040
-
P
789,926,225
1,437,175,689
5,353,040
P
2,232,454,954 P
-
P
2,232,454,954
Floating
Cash and cash equivalents interest rates P
Refundable deposit
667,523,499 P
1,140,046,934
4,568,661
-
P
1,812,139,094 P
-
P 1,812,139,094
December 31, 2011
-
P
667,523,499
1,140,046,934
4,568,661
The amounts included above for variable interest rate instruments for both
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.
48
The Parent Company’s financing facilities are as follows:
2012
Secured bank loan facilities with various
maturity dates through to 2012 and
which may be extended by mutual
agreement:
amount used
amount unused
P
2011
925,000,000
1,880,000,000
P
666,000,000
1,480,000,000
P 2,805,000,000
P
2,146,000,000
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 2011 and 2010.
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 period was as follows:
2012
Debt
Cash
Net Debt
Equity
Net debt to equity ratio
P
1,483,757,357
789,926,225
693,831,132
1,095,742,712
0.63:1
2011
P
959,262,603
667,523,499
291,739,104
1,202,075,430
0.24:1
Debt is defined as long and short-term borrowings, as described in Notes 14 and 15,
while equity includes all capital and retained earnings of the Parent Company that are
managed as capital.
49
32. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS
Certain amounts in the comparative financial statements and note disclosures have
been reclassified to conform to the current year’s presentation. The reclassifications
include:
Account
From
Separate Statement
Investments in
subsidiaries and
associates
Investments in
subsidiaries and
associates
Retained earnings
Separate Statement
Income
Interest income
Interest income
Interest expense
Amount
To
2011
2010
of Financial Position
Investments in
subsidiaries
P
Investments in
associates
Appropriations of
retained earnings
279,160,103
P
228,975,278
16,173,974
16,173,974
52,987,208
40,115,150
of Comprehensive
Other income
Other income
Finance cost
P
2,949,353
38,322,540
P
3,219,724
29,213,843
Management believes that the above reclassifications resulted to a better presentation
of accounts and did not have any impact on prior year’s profit or loss.
33. CORRECTION OF PRIOR PERIOD ERROR
In 2012, the Parent Company determined that no appropriation was made for the buyback of shares in 2011 and 2010 amounting to P52,987,208 and P40,115,150,
despite of the legal requirement of the Corporation Code to have sufficient retained
earnings to cover-up the cost of the re-acquired shares. Thus, the Management
appropriated retained earnings with respect to its period specific effects. Management
believes that such restatement is appropriate and resulted to a better presentation of
accounts.
34. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved and authorized for issue by the Board of
Directors on May 14, 2013.
50
35. 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:
35.01 Taxes, Duties and Licenses Paid or Accrued
The details of the Parent Company’s taxes, duties and licenses fees paid or accrued in
2012 are as follows:
35.01.01 Output VAT
The Parent Company is a VAT-registered Parent Company with VAT output declaration
of P77,871 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.
35.01.02 Input VAT
An analysis of the Parent Company’s input VAT claimed during the year is as follows:
Balance, January 1
Current year’s domestic purchases/payments for:
Capital goods subject to amortization
Capital goods not subject to amortization
Services lodged under other accounts
P
4,082
3,413
333,405
Total available input tax
Claims for tax credit/refund and other adjustments
21,242,725
21,583,625
(10,119,299)
P
11,464,326
35.01.03 Other Taxes and Licenses
An analysis on the Parent Company’s other taxes and licenses and permit fees paid or
accrued during the year is as follows:
Documentary stamp taxes
Licenses and permits
Others
P
4,048,788
2,500,199
445,911
P
6,994,898
Documentary stamp taxes are paid for application for loans and other transactions.
51
35.01.04 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
Expanded withholding taxes
P
10,038,970
7,622,786
P
17,661,756
Expanded withholding tax pertains to rentals, professional fees and contractors.
36. 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:
36.01 Revenues
The Parent Company’s revenue for the taxable year 2012, which pertains to rendering
of services, amounted to P470,199,179.
36.02 Cost of Services
The following is an analysis of the Parent Company’s cost of services for the taxable
year:
Bank charges
Delivery charges
P
171,969,103
12,409,356
P
184,378,459
36.03 Non-Operating and Taxable Other Income
The Parent Company’s non-operating and taxable other income for the taxable year
2012 amounted to P15,777,134.
52
36.04 Itemized Deductions
The following is an analysis of the Parent Company‘s itemized deductions for the
taxable year:
Salaries, wages and employee benefits
Finance cost
Marketing
Communication, light and water
Rental
Professional fees
Taxes and licenses
Fringe benefits
Depreciation and amortization
Supplies
Association dues
Entertainment, amusement and recreation
Insurance
Other expenses
P
87,034,589
46,156,723
26,833,138
17,138,220
14,464,084
10,500,714
6,994,878
6,915,323
6,569,769
5,994,222
4,576,498
3,223,761
1,728,062
799,106
506,865
9,401,117
P
248,837,069
53
R.S. BERNALDO
A correspondent
& ASSOCIATES
BOA/PRC No. 0300
BSP Accredited
CDA CEA No. 013-AF
firm of Pane II Kerr Forster International
worldwide
SUPPLEMENTAl- INDEPENDENT AUDITORS'
REPORT
I-REMIT INC.
26/F Discovery Centre, ADB Avenue
We have examined
the financial
statements
of I-REMIT INC. for the year ended
December 31, 2012 on which we have rendered the attached report dated May 15, 2013.
In compliance with Revenue Regulation V-20, we are stating that no partner of our Firm is
related by consanguinity or affinity to the president, manager or principal stockholders of the
Company.
BOA/PRC No. 0300
CDA CEA No. 013-AF
Valid ntil Qctober 25, 2013
~
RO ~RIO S. BERNALDO
Managing Partner
PTR No. 3676450
May15,2013
18/F Cityland Condominium 10 Tower 1, 6815 Ayala Avenue cor. H.V. Dela Costa St., Makati City, Philippines 1200
R.S. BERNALDO
& ASSOCIATES
aONPRC No. 0300
asp Accredited
CDA CEA No. 013-AF
A correspondent firm of Panell Kerr Forster International
worldwide
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY SCHEDULES
I-REMIT INC.
Ortigas Centre, Pasig CityS
We have issued our report dated May 15, 2013 on the basic separate financial statements of
I-REMIT INC. as of and for the year ended December 31, 2012. Our audit was conducted for
the purpose of forming an opinion on the basic separate financial statements of I-REMIT INC.
taken as a whole.
The information in Index to the Separate Financial Statements and
Supplementary Schedules as of and for the year ended December 31, 2012 which is not a
required part of the basic separate financial statements is required to be filed with the
Securities and Exchange Commission.
Such information has been subjected to the auditing
procedures applied in pl:lr .audit of the basic separate financial statements and, in our opinion,
is fairly stated in all material respects in relation to the basic separate financial statements
taken as a whole.
BOA/PRC No. 0300
CDA CEA No. 013-AF
Valid ntil October 25, 2013
~
~RIO S. BERNALDO
Managing Partner
SEe Group A Accredited
Accreditation No. 11 92-A
PTR No. 3676450
May 15, 2013
18/F Cityland Condominium 10 Tower 1,6815 Ayala Avenue cor. HV. Dela Costa St., Makati City, Philippines 1200
I-REMIT INC.
INDEX TO THE SEPARATE FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
December 31, 2012
Schedule
Part 1
I
II
III
Part 2
A
B
C
D
E
F
G
Content
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)
Map showing relationships between and among parent,
subsidiaries, an associate, and joint venture (Part 1 4H)
Financial Assets
Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other than Affiliates)
Intangible Assets - Other Assets
Long-Term Debt
Indebtedness to Related Parties (included in the consolidated
statement of position)
Guarantees of Securities of Other Issuers
Capital Stock
Page No.
2
3
8
9
10
12
13
14
15
16
Other Required Information
IV
Schedule of Financial Soundness Indicators (Part 1 4D)
1
Schedule I
I-REMIT INC.
SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
DECEMBER 31, 2012
Unappropriated Retained Earnings, Beginning
Net income based on the face of audited financial statements
Less:
Dividend declarations during the year
Treasury shares
Unrealized foreign exchange gains - net
Add:
Realized income categorized as unrealized in previous years
P
Net loss actual/realized
Unappropriated Retained Earnings, Ending
153,759,324
30,627,057
(119,980,858)
(16,222,480)
(987,177)
1,205,505
(105,357,953)
P
48,401,371
2
Schedule II
I-REMIT INC.
SCHEDULE OF EFFECTIVE STANDARDS AND INTERPRETATIONS
DECEMBER 31, 2012
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of December 31,
2012
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)
PFRS 2
PFRS 3
(Revised)
PFRS 4
PFRS 5
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
Share-based Payment
Amendments to PFRS 2: Vesting
Conditions and Cancellations
Amendments to PFRS 2: Group CashSettled Share-based Payment
Transactions
Business Combinations
Insurance Contracts
Financial Guarantee Contracts
Non-current Asset Held for Sale and
Discontinued Operations













3
PFRS 6
Exploration for and Evaluation of Mineral
Resources

Amendments to PFRS 7: Transition

PFRS 7

Financial Instruments: Disclosures
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
Effective Date of PFRS 9 and Transition
Disclosures






PFRS 8
Operating Segments

PFRS 9
Financial Instruments
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 1: Presentation of
items Other than Comprehensive Income

PAS 2
Inventories
PAS 7
Statement of Cash Flows
Accounting Policies, Changes in
Estimates and Errors

PAS 10
Events After the Balance Sheet Date
PAS 11

Construction Contracts
PAS 8



4
Income Taxes
PAS 12

Amendments to PAS 12 - Deferred Tax:
Recovery of Underlying Assets

PAS 16
Property, Plant and Equipment
PAS 17

Leases
PAS 18

Revenue

Employee Benefits

PAS 19
PAS 19
(Amended)
PAS 20
PAS 21
PAS 23
(Revised)
PAS 24
(Revised)
PAS 26
PAS 27
(Amended)
PAS 28
(Amended)
PAS 29
PAS 31
PAS 32
Amendments to PAS 19: Actuarial Gains
and Losses, Group Plans and Disclosures

Employee Benefits

Accounting for Government Grants and
Disclosure of Government Assisstance
The Effect of Changes in Foreign
Exchange Rates
Amendment: Net Investment in a
Foreign Operation



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

Interests in Joint Ventures
Financial Instruments: Disclosure and
Presentation
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
Provision, Contingent Liabilities and
Contingent Assets

Intangible Assets

PAS 37
PAS 38

5
PAS 39
Financial Instruments: Recognition and
Measurement
Amendments to PAS 39: Transition and
Initial Recognition of Financial Assets
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
Reclassification of Financia Assets Effective Date and Transition
Derivatives







PAS 40
Investment Property
PAS 41

Agriculture

Philippine Interpretations
IFRIC 1
IFRIC 1
IFRIC 4
IFRIC 5
IFRIC 6
IFRIC 7
IFRIC 8
IFRIC 9
IFRIC 10
IFRIC 11
IFRIC 12
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
Rights to Interests arising from
Decommissioning, Restoration and
Environmental Rehabilitation Funds
Liabilities arising from Participating in a
Specific Market-Waste Electrical and
Electronic Equipment
Applying the Restatement Approach
under PAS 29 Financial Reporting in
Hyperinflationary Economies
Scope of PFRS 2
Reassessment of Embedded Derivatives
Derivatives
Interim Financial Reporting and
Impairment
PFRS 2- Group and Treasury Share
Transactions
Service Concession Arrangements












6
IFRIC 13
IFRIC 14
IFRIC 16
IFRIC 17
IFRIC 18
IFRIC 19
IFRIC 20
SIC - 7
SIC - 10
SIC - 12
SIC - 13
SIC - 15
Customer Loyalty Programs
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
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

SIC - 32
Intangible Assets - Web Site Costs
SIC - 27
SIC - 29







Jointly Controlled Entities - NonMonetary Contributions by Venturers
SIC - 31
SIC - 25

Government Assisstance - No Specific
Relation to Operating Activities
Consolidation - Special Purpose Entities
Amendments to SIC - 12: Scope of SIC
12
Operating Leases - Incentives
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
SIC - 21









7
Schedule III
I-REMIT INC.
MAP SHOWING RELATIONSHIPS BETWEEN AND AMONG PARENT,
SUBSIDIARIES, AN ASSOCIATE, AND JOINT VENTURE
Ownership Structure
STAR Equities Inc.
29.1825028 %
JTKC Equities, Inc.
21.2937506%
Surewell Equities, Inc
23.3530780%
3.2672471%
Public
22.9034215%
I-Remit, Inc.
International Remittances (Canada) Ltd.
100%
IREMIT Remittance Consulting GmbH (Austria)
100%
Lucky Star Management Limited (Hong Kong)
100%
100%
IRemit Global Remittance Limited (UK)
100%
Hwa Kung Hong & Co. Ltd. (Taiwan)**
49%
Worldwide Exchange Pty Ltd *
100%
IRemit Singapore Pte Ltd **
49%
100%
K.K. I-REMIT JAPAN
100%
*Consisting of 70% direct ownership and 30% indirect ownership through I-Remit Australia Pty Ltd, a wholly-owned subsidiary.
** An associate
8
I-Remit Inc.
Schedule A – Financial Assets
December 31, 2012
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
None to Report
9
I-Remit Inc.
Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Related Parties)
December 31, 2012
Balance at
beginning of
period
Name of Debtor
Analiza S. Bismonte
Annie Angeles
Bernadette Cindy Tiu
Catherine Chan
Chris Eusebio
Claire Panes
Clarissa Celestino
Desiderio Dumalag, Jr.
Dina Simbulan
Elisa Cerdan
Fatima Ramos
Gilbert Gaw
Glenn Igual
Harris Jacildo
Ian Chryzl Gonzales
Jennifer Itable
Jesus Mel Sayo
Jonathan Bunag
Joselyn Bagalan
Juliet Santos
Junell Dasun
Justine Castellon
Kristal Angeles
Ma Cristina Castellejo
Ma. Eliza Batang
Maria Grace Lim
P
135,702.00
929,384.80
13,746.49
56,123.61
2,999.40
14,143.42
2,576.64
16,086.31
272,309.52
460,328.00
-
Amounts
Collected
Additions
P
10,764.69
500,000.00
436.24
3,801.06
67.50
1,928.04
28,524.49
34.53
1,928.04
2,580.00
659,816.67
1,074,073.96
5.00
100,273.54
3.12
290.62
9,512.86
88.75
P
135,702.00
740,000.00
13,746.49
1,729.70
1,729.70
70,716.65
148,148.16
26,501.37
99,756.00
9,314.53
-
Amounts
Written-off
P
-
Current
P
10,764.69
689,384.80
436.24
3,801.06
67.50
198.34
28,524.49
34.53
198.34
2,580.00
589,100.02
925,925.80
2,999.40
5.00
73,772.17
2,576.64
3.12
290.62
198.33
88.75
Balance at end
of period
Non- Current
P
56,123.61
14,143.42
16,086.31
272,309.52
360,572.00
-
P
10,764.69
689,384.80
436.24
3,801.06
67.50
198.34
28,524.49
56,123.61
34.53
198.34
2,580.00
589,100.02
925,925.80
2,999.40
5.00
73,772.17
14,143.42
2,576.64
3.12
16,086.31
272,309.52
290.62
360,572.00
198.33
88.75
10
Marie Fe Oporto
Marivic Chaw
Mary Jean Jetomo
Paul Erick Villaluz
Regina Shimamoto
Rocky Flores
Ronald Santos
Severino Lagan
TOTAL
1,518.29
222,362.45
P
2,127,280.93
3,480.44
15,093.06
61.45
657,000.00
19,166.66
P
3,189,204.26
1,518.29
21,900.00
416.67
P
1,304,964.20
P
-
3,480.44
15,093.06
61.45
635,100.00
18,749.99
P
3,069,923.68
222,362.45
P
941,597.31
3,480.44
15,093.06
61.45
635,100.00
222,362.45
18,749.99
P
4,011,520.99
11
Schedule C - Intangible Assets - Other Assets
December 31, 2012
Description
Software
Beginning
Balance
1,396,241.38
Additions at
Cost
945,187.06
Charged to cost
and expenses
Charged to other
accounts
(936,612.53)
–
Other changes
additions
(deductions)
–
Ending Balance
1,404,815.91
12
Schedule D - Long-Term Debt
December 31, 2012
Title of issue and
type of obligation
Amount
authorized by
indenture
“Current portion of long-term debt’ in
related balance sheet
“Long-Term Debt” in related
balance sheet
Interest
Rate
%
Maturity
Date
None to Report
13
Schedule E - Indebtedness to Related Parties
(Included in the consolidated financial statement of position)
December 31, 2012
Name of Related Parties
Balance at beginning of period
Balance at end of period
None to Report
14
Schedule F - Guarantees of Securities of Other Issuers
December 31, 2012
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
filed
Nature of guarantee
None to Report
15
Schedule G - Capital Stock
December 31, 2012
Title of Issue
Common stock - =1
P par
value
Number of
shares
authorized
1,000,000,000
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
617,725,800
–
460,373,585
Directors,
officers and
employees
207
Others
136,765,215
16
SCHEDULE IV - FINANCIAL SOUNDNESS INDICATORS
For the Years Ended December 31, 2012 and 2011
2012
2011
A. SHORT-TERM LIQUIDITY RATIO
CURRENT RATIO
Current Assets
Current Liabilities
WORKING CAPITAL TO ASSETS
(Current Assets - Current Liabilities)
Total Assets
1.52
1.91
2,247,014,878
1,482,606,687
1,830,963,405
959,262,603
0.30
0.40
764,408,191
2,580,256,506
871,700,802
2,161,338,033
1.35
0.80
1,483,757,357
1,096,499,149
959,262,603
1,202,075,430
-
-
1,096,499,149
1,202,075,430
0.01
0.01
8,901,653
1,096,499,149
7,094,474
1,202,075,430
0.58
0.44
1,483,757,357
2,580,256,506
959,262,603
2,161,338,033
8,901,653
-
7,094,474
-
B. LONG-TERM SOLVENCY
DEBT TO EQUITY
Total Liabilities
LONG-TERM DEBT TO EQUITY
Long-Term Debt
FIXED ASSETS TO EQUITY
CREDITORS EQUITY TO TOTAL ASSETS
Total Liabilities
Total Assets
FIXED ASSETS TO LONG-TERM DEBT
Long-Term Debt
11
2012
2011
C. RETURN ON INVESTMENTS
RATE OF RETURN ON TOTAL ASSETS
Net Income
Average Total Assets
RATE OF RETURN ON EQUITY
Net Income
Average Stockholders' Equity
0.01
0.02
30,627,057
2,370,797,270
55,506,145
2,229,728,061
0.01
0.05
30,627,057
2,370,797,269
55,506,145
1,180,758,387
12
2012
2011
D. PROFITABILITY RATIOS
GROSS PROFIT RATIO
0.61
0.64
285,062,871
470,199,179
314,755,047
490,087,163
0.20
0.24
92,241,381
470,199,179
117,592,728
490,087,163
0.10
0.16
46,172,958
470,199,179
79,270,188
490,087,163
0.07
0.11
30,627,057
470,199,179
55,506,145
490,087,163
INTEREST COVERAGE RATIO
2
3
Eanings Before Interest and Tax
Interest Expense
92,241,381
46,068,423
117,592,728
38,322,540
Gross Income
Revenues
OPERATING INCOME TO REVENUES
Income from Operations
Revenues
PRETAX INCOME TO REVENUES
Pretax Income
Revenues
NET INCOME TO COMMISSION INCOME
Net Income
Revenues
E. INTEREST COVERAGE RATIO
13