COVER SHEET

Transcription

COVER SHEET

COVER SHEET
P W 9 9 8
S.E.C. Registration Number
M A Y B A N K
A T R
K I M
E N G
F I N A N C I
A L
C O R P O R A T I O N
(Company's Full Name)
U N I T
8 1 1
P L A Z A
T O W E R
A Y A L A
A V E N U E
O N E
&
T R I A N G L E
M A K A T I
E X C H A N G E
A Y A L A
C I T Y
(Business Address: No. Street/City/Province)
893-1150/810-0106
Renato L. Leveriza, Jr.
Contact Person
1 2
3 1
Company Telephone Number
Any day in May
each year
SEC Form 20-IS (Preliminary)
April 12, 2012
Month
Day
FORM/TYPE
Month
Day
Annual Meeting
Fiscal Year
N A
Secondary License Type, If Applicable
SEC General Accountant &
C F D
N A
Amended Articles Number/Section
Dept. Requiring this Doc.
Total Amount of Borrowings)
4 1 1
Total No. of Stockholders
Domestic
Foreign
-------------------------------------------------------------------------------------------------------------------------------------To be accomplished by SEC Personnel concerned.
File Number
LCU
Document I.D.
Cashier
STAMPS
Remarks = pls. Use black ink for scanning
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 20-IS
INFORMATION STATEMENT PURSUANT TO SECTION 20
OF THE SECURITIES REGULATION CODE
1.
[ X ] Preliminary Information Statement
[
] Definitive Information Statement
2.
Name of Registrant as specified in its charter: Maybank ATR Kim Eng Financial Corporation
(formerly ATR KimEng Financial Corporation)
3.
SEC, Mandaluyong City, Metro Manila
Province, country or other jurisdiction of incorporation or organization
4.
SEC Identification Number: PW 998
5.
BIR Tax Identification Code : 000-410-269
6.
Unit 811, Tower One & Exchange Plaza, Ayala Triangle, Ayala Ave., Makati City
Address of principal office
7.
Registrant’s telephone number, including area code: (632) 893-1150, 810-0106, 810-0276
1226
Postal Code
11 May 2012 at 10:00 AM. Ballroom –1, Mandarion Oriental hotel
Date, time and place of the meeting of security holders
9.
Approximate date on which the Information Statement is first to be sent or given to security holders
26 April 2012
WE ARE NOT SOLICITING FOR PROXIES AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
10.
Name of Person Filing the Statement/Solicitor: NOT APPLICABLE
Address and Telephone No.:
11.
NOT APPLICABLE
Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA:
Title of Each Class
Unclassified Common Shares:
Preferred Shares:
12.
Number of Shares of Common Stock
Outstanding or Amount of Debt Outstanding
Authorized:
1,300,000,000
Issued:
1,068,393,223
Authorized:
200,000
Issued:
None
Are any or all of registrant's securities listed in a Stock Exchange?
Yes X
No _______
If yes, disclose the name of such Stock Exchange and the class of securities listed therein:
All 1,068,393,223 issued & outstanding unclassified common shares are listed at the Philippine Stock
Exchange.
SEC Form 20-IS Maybank ATR KE Financial 2011
2
WE ARE NOT SOLICITING PROXIES
& YOU ARE REQUESTED NOT TO SEND US A PROXY
PART I.
A. GENERAL INFORMATION
Item 1. Date, time and place of meeting of security holders.
Date
Time
Place
Address of Principal Office
Approximate Date on which Information
Statement is to be first sent to Shareholders
11 May 2012
10:00 AM
Ballroom –1, Mandarin Oriental Manila, Makati
Avenue cor. Paseo de Roxas, Makati City
Unit 811, Tower One & Exchange Plaza, Ayala
Triangle, Ayala Avenue, Makati City
26 April 2012
(No proxy forms will be distributed as the Company
is not soliciting proxies)
Item 2. Dissenters' Right to Appraisal
There are no matters to be taken up at the meeting, which may give rise to a dissenter’s exercise
of the Right to Appraisal. However, a brief discussion of the Right to Appraisal follows below:
The provisions of Sections 81 to 86 of Title X on Appraisal Right of the Corporation Code of the
Philippines shall govern the exercise by any stockholder of the Corporation of his/her/its right to
dissent and demand payment of the fair value of his/her/its shares. The dissenting stockholder
must have voted against the proposed corporate action in the instances provided for by law in
order to avail himself/herself/itself of the appraisal right. The instances provided by law are:
a. In case any amendment to the Articles of Incorporation has the effect of changing or
restricting the rights of any stockholder, or class of shares, or of authorizing preferences in any
respect superior to those outstanding shares of any class, or of extending or shortening the
corporate existence;
b. In case of sale, lease, exchange, transfer, mortgage, pledge, or other disposition of all or
substantially all of the corporate property and assets as provided in the Corporation Code of
the Philippines; and
c. In case of merger or consolidation.
Within 30 days after the vote, i.e. after the annual stockholders’ meeting on 11 May 2012, the
dissenting shareholder must submit a written demand for the Company to pay the fair value of
his/her/its shares. Failure to do so shall be deemed a waiver of the right to appraisal. If within 60
days from the annual meeting on 11 May 2012 the Company and the dissenting shareholder cannot
agree on the fair value of the shares, it shall be determined by three disinterested parties named
one each by the Company, the dissenter, and the two thus named. The findings of the majority of
the three shall be final and the amount they decide upon shall be paid, subject to certain
provisions of the Corporation Code, by the Company within 30 days from when the award is made.
3
Item 3. Interest of Certain Persons in or Opposition to Matters to be Acted Upon
(a) None of the persons enumerated below has any substantial interest, direct or indirect, by
security holdings or otherwise, in any matter to be acted upon other than election to office, which
impacts all shareholders, pari passu.
(1) Each person who has been a director or officer of the registrant at any time since the
beginning of the last fiscal year;
(2) Each nominee for election as a director of the registrant;
(3) Each associate of any of the foregoing persons.
(b) No director has informed the Company in writing that he/she intends to oppose any action to be
taken at the Annual Stockholders’ Meeting.
B. CONTROL AND COMPENSATION INFORMATION
Item 4. Voting Securities and Principal Holders Thereof
a) As of 30 March 2012, the Company has 1,068,393,223 issued and outstanding unclassified
common shares. All shareholders of all of the Company’s issued & outstanding unclassified common
shares are entitled to vote. One share is entitled to one vote.
There is no Voting Trust Agreement and there are no Voting Trust Holders of 5% or more
shareholding.
b) Record date with respect to shareholders entitled to notice and vote is 30 March 2012.
c) All shareholders as of Record Date are entitled to vote their shares cumulatively.
As provided in the Corporation Code of the Philippines, every stockholder of a stock corporation
who is entitled to vote, “shall have the right to vote, in person or by proxy, the number of shares
of stock standing at the time fixed in the by-laws, in his own name on the stock books of the
corporation, or where the by-laws are silent, at the time of election; and said stockholder may vote
such number of shares for as many persons as there are directors to be elected, or he may
cumulate said shares and give one candidate as many votes as the number of directors to be
elected multiplied by the number of his shares shall equal, or he may distribute them on the same
principle among as many candidates as he shall see fit.”
Security ownership of certain record and beneficial owners of more than 5% of the Company’s
securities as of 30 March 2012:
Title of
Class
Name & Address of Record
Owner and Relationship with
Issuer
Maybank Kim Eng Holdings
Limited (f.k.a. Kim Eng Holdings
Limited)
Common
Shares
50 North Canal Road # 03-01
Singapore, 059304
Record owner is the principal
shareholder of the Issuer.
*Excludes three (3) director’s nominee shares.
Name of Beneficial Owner
and
Relationship with Record
Owner
Mayban IB Holdings Sdn. Bhd.
14 Floor Menara Maybank,
100 Jalan Tun Perak
50050 Kuala Lumpur, Malaysia
Beneficial owner owns 100% of
Record Owner and, therefore,
owns the Issuer indirectly
Citizenship
Kim Eng
Holdings is a
Singapore
Corporation
Mayban IB
Holdings is a
Malaysian
Corporation
No. of Shares
Held
%
1,058,923,463*
99.11%
4
In a 17-C Report dated 17 August 2011, the Company reported the completion of the Sale and
Purchase Agreement between ATR Holdings, Inc. and Maybank Kim Eng Holdings Limited (“Maybank
Kim Eng”) wherein the latter bought 344,427,134 ATRK shares held by the former equivalent to
32.24% ownership at a price of P4.38 per share. The transaction resulted in Maybank Kim Eng
becoming the controlling shareholder of the Issuer with 74.64% ownership. Subsequently, Maybank
Kim Eng conducted a mandatory tender offer to shareholders for the remaining 25.36% it did not
already own. The tender offer resulted in Maybank Kim Eng owning 1,058,923,423 or 99.11% of
total issued and outstanding shares as disclosed in a 17-C Report dated 9 December 2011.
With the Company’s shares listed and traded on the Philippine Stock Exchange (“PSE”) under the
trading symbol MAKE (for Maybank ATR Kim Eng), Maybank ATR KE Financial is now studying various
alternatives as to how it will meet the PSE’s minimum public ownership (“MPO”) requirement of
10% and it has until 31 December 2012 to comply.
Maybank Kim Eng is a Singapore-based company engaged in securities broking, research, online
trading, equity underwriting, corporate finance and investment advisory, share financing, and
custodianship services. Mayban IB Holdings Sdn Bhd, a company with principal office in Kuala
Lumpur, Malaysia owns approximately 100% of the outstanding shares of Maybank Kim Eng
(excluding treasury shares). Messrs. Ramon B. Arnaiz, and/or Manuel N. Tordeillas, and/or Tan Pei
San is/are expected to vote all 1,058,923,463 shares held by Maybank Kim Eng.
Security ownership of certain members of the Company’s Board of Directors and Management as of
30 March 2012:
Title of
Class
Common
Name of Beneficial Owner
Ramon B. Arnaiz
Amount & Nature of
Beneficial Ownership
1 - R*
Citizenship
Filipino
% of Class
0.0000%
Common
Manuel N. Tordesillas
1 - R*
Filipino
0.0000%
Common
Lorenzo T. Roxas
1 - R*
Filipino
0.0000%
Common
Ong Seet Joon**
1 – R*
Singapore
0.0000%
Common
Tan Pei-San
1 – R*
Singapore
0.0000%
Common
Udanshaikar Raman***
1 – R*
Singapore
0.0000%
Common
Renato L. Leveriza, Jr.
1,000 - R*
Filipino
0.0001%
Common
Nilaida S. Enriquez
1 - R*
Filipino
0.0000%
Common
Eulogio A. Mendoza
1,080 – B/R
Filipino
0.0001%
Common
Ernest L. Cu
1R*
Filipino
0.0000%
Common
Ma. Victoria C. Viñas
1 - R*
Filipino
0.0000%
Common
Gemma M. Santos
0
Filipino
0.0000%
Common
All Directors & Officers as a group
2,090
0.0002%
* Nominal director’s share
** Replaced Mr. Ronald Anthony Ooi Thean Yat on 6 February 2012
*** Replaced Mr. Judd C. Kinne on 6 February 2012
Item 5. Directors and Executive Officers
The Company’s Board of Directors consists of nine (9) Directors and two (2) Independent Directors.
They are elected by and from the Company’s shareholders during the annual stockholders’ meeting.
The Board is responsible for the overall management and direction of the Company. Board meetings
are held quarterly, or as often as required. All the directors hold a term of office of one (1) year or
until the succeeding election at the next annual stockholders’ meeting.
Officers are appointed or elected annually by the Board of Directors at its first organizational
meeting following the annual meeting of stockholders, each to hold office until the corresponding
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meeting of the Board of Directors in the succeeding year or until a successor shall have been
elected, appointed, or shall have qualified.
On 8 December 2005, shareholders approved the amendment to the Company’s By-Laws adopting
Rule 38 of the Implementing Rules and Regulations of the Securities Regulation Code that forms the
guidelines for the nomination and election of independent Directors. On 8 February 2006, the
Securities and Exchange Commission approved said amendment to the By-Laws.
Nominations are conducted before the annual meeting. Any shareholder of the Company can
nominate a qualified individual for Independent Director. However, the Nominations Committee
only accepts recommendations for the positions of Independent Director signed by the shareholder
making the recommendation, with the nominees indicating their conforme. The Committee prescreens the qualifications of the nominees and prepares a short-list of qualified nominees.
Screening policies and parameters for the review of qualifications are based primarily on provisions
in the Manual of Corporate Governance and the Code of Corporate Governance. A final list of
nominees is prepared and included in the Definitive Information Statement. The names of those
recommending Independent Directors are also included in the list. Only nominees included in the
final list as contained in the Definitive Information Statement are eligible for election as Directors
and Independent Directors. Nominations are not allowed during the actual annual stockholders’
meeting.
The Company has a Nominations Committee composed of 5 members one of whom is an
Independent Director. A sixth member serves as alternate. The Nominations Committee is
composed of the following:
Mr. Ramon B. Arnaiz, Chairman
Mr. Manuel N. Tordesillas, Member
Udaishankar Raman, Member
Mr. Ernest L. Cu, Member (Independent Director)
Mr. Renato L. Leveriza, Jr., Non-Voting member
The Final List of Nominees for Directors, all incumbents, is as follows.
Mr. Ramon B. Arnaiz
Mr. Manuel N. Tordesillas
Mr. Lorenzo A.T. Roxas
Mr. Ong Seet Joon
Mr. Udaishankar Raman
Mr. Tan Pei-San
Mr. Renato L. Leveriza, Jr
Ms. Nilaida S. Enriquez
Mr. Eulogio A. Mendoza
The Final List of Nominees for Independent Directors, both incumbents is as follows:
Name of Nominee
Mr. Ernest L. Cu
Ms. Ma. Victoria C. Viñas
Person Who Recommended Nominee
Relationship
None
None
6
The following table gives a brief profile of the Company’s incumbent Directors, Independent
Directors, who are all running for re-election, and Officers.
Name & position
Ramon B. Arnaiz, Chairman
Citizenship
Filipino
Ramon B. Arnaiz, 66 years old, Filipino, has been a director of Maybank ATR KE Financial since 12
November 2001 and Chairman of the Board since 2003. Mr. Arnaiz is also the Chairman of the Board
of Maybank ATR KE Capital, ALGA, ALFA, ATR KimEng AMG Holdings, Inc. ATRKE Asset Management,
Maybank ATR KE Fixed Income, and ATR Holdings. He is Vice Chairman of Tullett Prebon and is a
director of ATRKE Land. He also serves as director and/or Chairman in other unlisted companies. He
has over 30 years of experience in securities brokerage in the Philippines and abroad, having worked
in the Madrid and London offices of Merrill Lynch, Pierce Fenner and Smith International and was a
past Governor of the Makati Stock Exchange. Mr. Arnaiz is a graduate of De La Salle University and
earned his MBA from the University of Santa Clara in California. He also completed the Harvard
Business School’s Owner/President Management Program.
Name & position
Manuel N. Tordesillas, Director & President
Citizenship
Filipino
Manuel N. Tordesillas, 59 years old, Filipino, has been a director of the Company since 12
November 2001 and President since 2003, when he was also elected Chairman of ATRKE Land. He is
also Vice Chairman of the Executive Committee of Maybank Kim Eng Holdings Limited. He has
nearly 35 years of international and local investment banking experience, spending 11 years in Hong
Kong where he worked for Citicorp International Limited and Peregrine Capital Limited just prior to
returning to the country in 1995. He is also the President and CEO of Maybank ATR KE Capital,
ATRKE AMG Holdings, Inc., ATR Holdings, and ALFA, where he also sits in their respective Boards as
a director. He also serves as director and Vice Chairman of ALGA. Mr. Tordesillas is likewise a
director of Maybank ATR KE Fixed income, and Tullett Prebon Philippines. He is currently the
President of MET Holdings, Inc., President of the Investment Houses Association of the Philippines,
member of the Capital Markets Development Council, and member of the Board of Advisors of De La
Salle University College of Business and Economics. Previously, he served as Chairman of Rockwell
Residential Towers Condominium Corporation, President of the Harvard Business School Association
of the Philippines and member of Committee on Trustees of International School of Manila. He
obtained his MBA from Harvard University and his BS in Industrial Management Engineering from De
La Salle University.
Name & position
Lorenzo Andres T. Roxas, Director
Citizenship
Filipino
Lorenzo T. Roxas, 48 years old, Filipino, has been a director of Maybank ATR KE Financial since
2003. He is Chairman of the Board & President of Maybank ATR KE Securities, having over 20 years
of experience in the stock brokerage industry. He is a director of Maybank ATR KE Capital, ATR
Holdings, Tullett Prebon, and the Philippine Association of Securities Brokers and Dealers, Inc. and
president of an unlisted company. Mr. Roxas graduated from Ateneo de Manila University with a
Bachelor of Arts degree major in Interdisciplinary Studies and earned his MBA from Northwestern
University Kellogg School of Management - Hong Kong University of Science and Technology. He also
completed the executive program at Stanford University.
Name & position
Ong Seet Joon, Director
Citizenship
Singaporean
Ong Seet Joon, 45, Singaporean, replaced Ronald Anthony Ooi Thean Yat as director of the
Company and of Maybank ATR KE Capital and became director of ATR KimEng Land, Inc. on 6
February 2012. On 1 April 2012, he became Head, Client Coverage for global wholesale banking of
Maybank Singapore. He was previously President and CEO of Maybank Philippines for five and a half
years and, before that, was Country Head of Maybank Hong Kong for six and a half years until 2006.
Mr Ong did his Master’s degree at Macquarie University in Sydney, Australia and graduated with First
Class Honours at the City Guildhall University, London.
7
Name & position
Udaishankar Raman, Director
Citizenship
Singaporean
Udaishankar Raman, 37, Malaysian, replaced Judd C. Kinne as director of the Company and
Maybank ATR KE Capital on 6 February 2012. Mr Raman is currently a Director of Maybank
Investment Bank Berhad in Kuala Lumpur Malaysia. Prior to joining Maybank, he was an Associate at
Goldman Sachs (Singapore) from 2007 to 2008, Associate Director in BinaFikir Sdn. Bhd. from 2004
to 2007, Manager at Hektar Klasik from 2002 to 2004, and Assistant General Manager at Renong
Group from 1996 to 2002. A Chartered Financial Analyst and a Chartered Management Accountant,
he holds a Bachelor of Science degree in Accounting and Financial Analysis from University of
Warwick.
Name & position
Tan Pei-San, Director
Citizenship
Singaporean
Tan Pei-San, 40, Singaporean, was elected Director in 2009 and also sits on the board of Maybank
ATR KE Capital. He is a director of Maybank Kim Eng Securities (Thailand) Public Company Limited,
KE Capital Partners Pte Ltd, Rezan Pte Ltd. and other unlisted companies.
Prior to joining
Maybank Kim Eng, Mr. Tan was Vice-President and Assistant General Counsel at JPMorgan in
Singapore where he covered capital markets transactions in South and South East Asia. Before that,
he spent three years in New York and one year in Singapore as an associate in the corporate practice
of the New York based law firm, Simpson Thacher & Bartlett, where he worked on mergers &
acquisitions, credit and capital markets transactions. Mr. Tan received his legal training at Trinity
Hall, Cambridge where he took a Double First in the Cambridge University Law Tripos. He has a
Master of Laws from Harvard Law School for which he received the inaugural Grace Ballas
Scholarship from the Singapore Academy of Law. He was a Justices’ Law Clerk at the Supreme
Court of Singapore from 1997 to 1998.
Name & position
Renato L. Leveriza, Jr., Director & Executive Vice President
Citizenship
Filipino
Renato L. Leveriza, Jr., 61 years old, Filipino, has been a director since 1995 and is currently the
Company's Executive Vice President. He joined the Company in 1990, when it was still known as
Philtread, as Vice President & Chief Financial Officer. He also serves as Director and President of
ATRKE Land. He sits as a director of ATRKE Asset Management and of Maybank ATR KE Capital,
where he is also the Chairman of the Trust Committee. Mr. Leveriza was the former Chairman of
the Business Education Committee, Junior Finex Committee, and Programs and Meetings Committee
of FINEX. He is likewise a member of the Management Association of the Philippines, the Makati
Business Club, and the Program Board of Advisers of the Financial Management Department of De La
Salle University. Mr. Leveriza is a graduate of De La Salle University with a BS degree in Chemical
Engineering and earned his Master’s diploma in Business Management from the Asian Institute of
Management.
Name & position
Nilaida S. Enriquez, Director and Treasurer
Citizenship
Filipino
Nilaida S. Enriquez, 55 years old, Filipino, has been Director and Treasurer of Maybank ATR KE
Financial since 2003. She is also Director & Treasurer of Maybank ATR KE Capital, ATRKE Land,
ATRKE Fixed Income, and ATR Holdings and Director & CFO of ATRKE AMG Holdings, Inc. She is
Executive Vice President for Operations of Maybank ATR KE Securities and Treasurer of ATRKE Asset
Management. She sits as an Excom member of both ALGA and ALFA. Ms. Enriquez joined the group in
1989. Prior to that, she was Controller at General Credit Corporation and served as Controller for
the Resource and Finance Group of Companies. A CPA, Ms. Enriquez graduated from the University
of the East and attended MBA studies at the Ateneo Graduate School of Business.
8
Name & position
Eulogio A. Mendoza
Citizenship
Filipino
Eulogio A. Mendoza, 63 years old, was a Director of Maybank ATR KE Financial from July 2002 to
May 2007 and again from May 2010 to present. He is concurrently the President and CEO of AsianLife
& General Assurance Corporation (ALGA) and Vice Chairman of AsianLife Financial Assurance
Corporation (ALFA). He is Chairman and President of ATRKE Equity Opportunity Fund Inc., ATRKE
Alpha Opportunity Fund Inc., ATR KimEng Asia Plus Recovery Fund Inc., and ATR KimEng Total
Return Bond Fund Inc. He is also a member of the Board of Directors of ALGA, ALFA, and ATRKE
Asset Management. He was formerly a member of the board of directors of PhilamCare Health
Systems, Inc, Philam Plans, Inc., The Pan Philippine Life Insurance Corporation (now Philippine AXA
Life) and a former President and Director of Philippine Life Insurance Association, Inc. (PLIA). His
prior work experience in the insurance industry includes having been Vice-President of the
Philippine American Life Insurance Company, Inc. (an AIG company), President and CEO of The Pan
Philippine Life Insurance Company, and President and CEO of GE Life Insurance Company. He
earned the title Fellow, Life Management Institute (FLMI) from the Life Office Management
Administration (LOMA). He obtained his Master in Business Administration from the Ateneo
Graduate School of Business and both his Master of Arts in Philosophy cum laude and Bachelor of
Science in Philosophy cum laude from the University of Santo Tomas.
Name & position
Ernest L. Cu, Independent Director
Citizenship
Filipino
Ernest L Cu, 51, Filipino, is an independent director of the Company and its subsidiaries Maybank
ATR KE Capital, ATRKE Asset Management, ALGA, and ALFA. He is the President & CEO of Globe
Telecom, Inc., where he is also a member of its Board of Directors. He likewise sits as a Director of
Systems Technology Institute, Inc. and other unlisted companies and is a Trustee of Ayala
Foundation, Inc and De La Salle College of St Benilde. Mr. Cu is also a member of the American
Chamber of Commerce and the Makati Business Club. Mr Cu was a former President and CEO of SPI
Technologies and was awarded the Ernst & Young ICT Entrepreneur of the Year in 2003. In 2010, he
was adjudged Best CEO by Finance Asia. Mr Cu earned his graduate degree from Northwestern
University’s J. L. Kellogg Graduate School of Management and his Bachelor’s degree from De La
Salle University.
Name & position
Ma. Victoria C. Viñas, Independent Director
Citizenship
Filipino
Ma. Victoria C. Viñas, 58, Filipino is an independent director of the Company as well as its
subsidiaries Maybank ATR KE Capital and ATRKE Asset Management. An independent fund manager,
she manages and advises various trust funds of high net worth individuals, institutions, foundations,
non-government organizations, religious orders, congregations, dioceses, and corporations. She is
currently Director & President of Anita Realty & Dev. Corp.; Director & Corporate Secretary of
Quorum Int’l., Inc. (Toby’s Sports); Director of Sports Resources, Inc.; Trustee & Treasurer of
Kaisahang Buhay Foundation, Trustee of La Salle Greenhills, Trustee of University of Regina Carmeli;
and a Member of the Finance & Investments Committee of De La Salle Brothers, Inc. She was
formerly from San Miguel Corporation where she was Senior Vice President for Corporate
Finance/Retirement Funds. Ms. Viñas earned her Bachelor of Arts degree in Economics, cum laude,
from Maryknoll College. She attended Investment Management and Pension Funds & Money
Management programs at the University of Pennsylvania Wharton Business School and Stock Market
Dynamics at University of California - Berkley.
Name & position
Gemma M. Santos, Corporate Secretary
Citizenship
Filipino
Gemma M. Santos, 50 years old, Filipino has been the Corporate Secretary of the Company since 12
November 2001. She is also the Corporate Secretary of the Company’s subsidiaries and several other
corporations, including two publicly-listed companies. A practicing corporate lawyer, Ms. Santos is a
Senior Partner at the law firm of Picazo Buyco Tan Fider & Santos. Ms. Santos completed both her
Bachelor of Arts and Bachelor of Laws degrees from the University of the Philippines.
9
No director has resigned or declined to stand for reelection since 16 January 2012, the date of the
last annual meeting, because of a disagreement with the Company relating to its operations,
policies, or practices. No director has furnished the Company a letter describing such
disagreement.
Significant employees:
The Company has no significant employee who is not an executive officer.
Family Relationships:
There are no family relationships among the directors and officers of the Company listed above.
Involvement in Certain Legal Proceedings:
The Company is not aware of the occurrence of any of the following during the past 5 years and up
to the date of signing of this Information Statement:
a) Any bankruptcy petition filed by or against any business of which any of its
incumbent directors or executive officers was a general partner or an executive
officer either at the time of the bankruptcy or within five years prior to that time.
b) Any conviction by final judgment in a criminal proceeding, foreign or domestic,
pending against any of the incumbent directors or executive officers.
c) Any order, 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 incumbent directors and executive officers in any type of business,
securities, commodities, or banking activities.
d) Any finding by a domestic or foreign court of competent jurisdiction (in civil
action), the SEC, or any comparable foreign body, or a domestic or foreign
exchange or electronic marketplace, or self regulatory organization, that any of the
incumbent directors and executive officers has violated a securities or commodities
law, and the judgment has not been reversed, suspended or vacated.
Certain Relationships and Related Transactions
The law firm of Picazo Buyco Tan Fider & Santos is the corporate legal counsel of Maybank ATR KE
Financial. The Company pays billings of the law firm based on work done on referrals made. Atty.
Gemma M. Santos, Corporate Secretary of the Company, is Senior Partner in the said law firm.
On various dates, the Company’s subsidiaries have granted loans to directors, officers, and
employees. All were done at arm’s length in terms of pricing or on terms similar to those offered to
non-related entities in an economically comparable market. These loans relate mainly to car
financing or real estate mortgage. Loans to directors are discussed in the notes to the audited
financial statements attached herewith.
Certain directors, officers, and employees of Maybank ATR Kim Eng Group companies purchased
condominium units at TRIbeca Private Residences, a joint venture development of subsidiary ATRKE
Land, Inc. (“ATRKE Land”) and Landco Pacific Corporation, under a purchase plan for employees.
Under the plan, 20% down payment is payable in 30 monthly installments with balance of the total
purchase cost due upon delivery.
Other than the aforementioned transactions, neither the Company nor its subsidiaries, has had any
transaction in which any director, executive officer, or stockholder or a member of the immediate
family of the foregoing persons had a direct or indirect interest during the last two years.
10
Item 6. Compensation of Directors and Executive Officers
Standard arrangements Under the amended By-laws of the Company, approved by the Securities
and Exchange Commission on 27 October 2008, all the directors are “entitled to receive such per
diem allowance as may be determined by resolution of the Board of Directors on the basis of
recommendation of the Compensation and Remuneration Committee, in accordance with law,
provided, that in no case shall the total yearly compensation of directors exceed ten percent (10%)
of the income before taxes of the Corporation during the preceding fiscal year”. In the year 2011,
directors were paid a total amount of P16,236,113 equal to 4% of 2010 income before taxes.
Full time employee of the Company, receive fixed monthly salaries plus benefits such as 13th
month pay, health/medical coverage, vacation leave, sick leave, and retirement. In addition, from
time to time, subject to certain factors and approvals, the Company and its subsidiaries may
declare bonuses for their officers and employees.
B) Other arrangements. The Company has no other arrangements pursuant to which a director was
paid or will be paid other than the standard arrangement above. The following table summarizes
the actual aggregate compensation of directors and officers of the Company in 2010 and 2011, and
an estimate for 2012:
Name and Principal Position
Year
Salary
(P)
Executive Officers
Bonus
(P)
Other annual
compensation
Total
2010 (actual)
Ramon B. Arnaiz, Chairman of the Board
2010
Manuel N. Tordesillas, Director and President
2010
Renato L. Leveriza, Jr., Director and Exec. Vice President
2010
2010
Raul Joseph T. Kabigting, Manager
2010
All Officers and Directors as a group unnamed
2010
6,109,344
Executive officers
2,711,934
2,200,000
11,021,278
2011 (actual)
2011
2011
Renato L. Leveriza, Jr., Director and Exec. Vice President
2011
2011
2011
Quincy S. Carreon, Finance and Accounting Manager
2011
2011
6,534,106
Executive Officers
3,277,592
16,236,113
25,997,811
2012 (estimate)
2012
2012
Renato L. Leveriza, Jr. Director and Exec. Vice President
2012
2012
2012
Quincy S. Carreon, Finance and Accounting Manager
2012
2012
10,543,55
6
3,514,519
2,200,000
16,258,075
The Company has no outstanding Warrants or Options and there are no outstanding Warrants or
Options held by Directors or Officers.
Employment Contracts and Termination of Employment and Change in Control Arrangements
11
a) Employment contracts with executive officers are standard in that they cover
salaries and benefits such as 13th month pay and medical/health coverage, vacation
leaves, and sick leaves and retirement benefits.
b.) Other than retirement benefits, the Company has no compensatory plan or
arrangement with its executive officers.
Item 7. Independent Public Accountants
Action will be taken to appoint Sycip Gorres Velayo and Company, a member practice of Ernst and
Young, as Independent Auditors for the current fiscal year (2012), replacing KPMG Manabat
Sanagustin & Co. CPAs (“MS&C”). MS&C audited the Company’s financial statements for the years
2011, 2010, and 2009. The change will align the Company’s auditors with that of the Maybank
Group.
The Company is in compliance with SRC Rule 68, paragraph 3(b)(iv) on the requirement to
rotate independent auditors every five years.
Representatives of MS&C, as the auditors of the 2011 FS are expected to be at the meeting and
will be given the opportunity to make a statement, if they desire to do so, and they will be
available to respond to appropriate questions.
There was no disagreement with KPMG and the auditing firm completed the audit of the Company’s
2011 and 2010 Financial Statements. No auditor resigned or was dismissed or ceased to perform
audit services due to a disagreement with the Company.
The Company’s Audit Committee, chaired by an Independent Director, is composed of the
following:
Ma. Victoria C. Viñas, Chairman (Independent Director)
Lorenzo Andres T. Roxas, Member
Udaishankar Raman, Member
Ernest L. Cu, Member (Independent Director)
The Audit Committee recommended for Board approval the Audited Financial Statements as of 31
December 2011. The Board approved the same on 6 February 2011.
D. OTHER MATTERS
Item 15. Action with Respect to Reports
Action will be taken to approve the minutes of the previous Annual Stockholders’ Meeting at the
coming Annual Stockholders’ Meeting on 11 May 2012. Below is a summary of the minutes of the
previous annual meeting on 16 January May 2010.
The Chairman called the meeting to order and thereafter presided, while the Corporate
Secretary took the minutes. The Corporate Secretary certified that notices were sent to
stockholders of record and further certified that there was a quorum to transact
business. Upon motion made, duly seconded, and unanimously carried, reading of the
minutes of the previous annual meeting was dispensed with and said minutes were
approved and ratified. The President noted that the report to shareholders was available
in annual report together with the financial statements and the stockholders, on motion
duly made and seconded, approved the Company’s annual report and audited annual
financial statements for the fiscal year 2010. Stockholders then ratified the acts and
proceedings of the Board of Directors and Officers of the Company during fiscal year
12
2010. Thereafter, on motion made and duly seconded, shareholders approved
amendments to the pertinent portion of the Articles of Incorporation and By-Laws to
reflect the change in name of the Company to Maybank ATR Kim Eng Financial
Corporation. On Motion made and duly seconded, stockholders appointed KPMG Manabat
Sanagustin & Co., CPAs as independent external auditors for 2011. The Law firm Picazo
Buyco Tan Fider and Santos was, on motion made, duly seconded, and approved by
shareholders, was appointed as election inspectors for the ensuing year, to serve until
the close of the succeeding annual stockholders’ meeting. Election of Directors
followed, and, there being no other matters the stockholders wished to take up, the
meeting was adjourned on motion duly made and seconded.
Action will also be taken to approve the Audited Financial Statements as of and for the year ending
31 December 2011. The audited Annual Financial Statements as of 31 December 2011 are attached.
Finally, action will be taken to ratify/approve all acts of Directors and Officers during the previous
fiscal year ending 31 December 2011.
Summary of all acts and proceedings of the Board of Directors and Officers:
Acts and proceedings of the Board of Directors and Management in 2011 include approvals
and executions of corporate legal and other actions, the exercise of any right or obligation
under existing contracts and agreements, and other acts related to the pursuit of the
Company’s business.
Item 16. Matters Not Required to be Submitted:
None
Item 17. Amendment of Charter, Bylaws or Other Documents:
None
Item 19. Voting Procedures
The following matters to be taken up for approval of shareholders require the indicated
vote:
Subject Matter
Election of Directors
Approval of Minutes of the Previous Annual
Stockholders’ Meeting
Ratification / Approval of all acts and proceedings of
Board of Directors and Management in the preceding
year
Approval of 2011 Audited Financial Statements
Appointment of Independent Auditors
Action to appoint Election Inspectors
Required Vote
Majority Vote
Majority Vote
Majority Vote
Majority Vote
Majority Vote
Majority Vote
Majority is defined as fifty percent (50%) of votes plus one (1) vote. Votes will be counted
viva voce. The Corporate Secretary is authorized to count the votes.
PART II.
Part II IS NOT APPLICABLE. COMPANY IS NOT SOLICITING PROXIES.
PART III.
13
Maybank ATR KIM ENG FINANCIAL CORPORATION
Management Report
I. AUDITED FINANCIAL STATEMENTS
The Audited Financial Statements as of 31 December 2011 and Notes thereto are attached.
II. INFORMATION ON INDEPENDENT AUDITOR & OTHER RELATED MATTERS
(formerly Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure)
1. Audit Fees: On a consolidated basis, approximately P5 million was paid to Manabat
Sanagustin & Co., CPAs, a member of the KPMG network, (“MS&Co”) in 2010 for the audit of
the parent company and its subsidiaries’ 2009 financial statements. In 2011, fees paid to
auditors amounted to approximately P7 million for the audit of the 2010 financial statements.
Tax Fees: P364 thousand was paid to MS&Co in 2011 for tax clearance purposes.
Other Fees: Approximately P5 million was paid to MS&Co in 2011 for interim reviews done
that year. In 2010, approximately P417 thousand was paid to MS&Co for a long form report
related to the increase in authorized capital stock of the Company and a then subsidiary.
These fees are negotiated by senior management with auditors and thereafter, recommended
to the audit committee, which approves the payment.
2. MS&Co. are the independent auditors of the 2011, 2010 and 2009 audited financial
statements. They were appointed as such by the Board of Directors on 26 November 2009, after
shareholders approved at the annual stockholders meeting on 18 June 2009 to delegate
authority to do so to the Board of Directors. They were reappointed by shareholders to audit
the 2010 and 2011 financial statements in subsequent annual meetings for 2010 and 2011.
There are no disagreements with auditors and no auditor has resigned over a disagreement with
the Company.
III. MANAGEMENT’S DISCUSSION & ANALYSIS
On a consolidated basis, the Company reported a Net Income Attributable to Shareholders
amounting to P324 million, up 6% or P19 million from the previous year’s P305 million. The
increase in net income attributable to shareholders came on the back of an 8% or P202 million
increase in total income to P2.856 billion. The improved performance was across the various
businesses of the Company in Capital Markets, Insurance, and Real Estate. Meanwhile total
assets amounted to P6.845 billion, a 19% increase over P5.775 billion in 2010, while total
liabilities was at P3.551 billion, up 25% from P2.842 billion. Equity attributable to Shareholders
ended the year at P3.149 billion, up 12% from P2.810 billion due primarily to the increase in
retained earnings coming from the improved net income.
Financial Condition:
Audited Consolidated Statement of Financial Position as of December 31 of the Years 2011,
2010, and 2009
Maybank ATR KE Financial Mgt. Report 2012
1
Cash and cash equivalents amounted to P2.065 billion at the close of 2011, up P281 million or
16% from P1.784 billion at the close of 2010 due to the higher net income for the period as well
as the sale of the Company’s shares held by the Company’s subsidiaries which were tendered to
Maybank Kim Eng. The P1.784 billion at the end of 2010 was an increase of 116% or P958 million
from P826 million at the end of 2009. At the end of 2009, the account was at P826 million, up
11% or P81 million from the previous year due to the improved bottom line as well as receipts
from the settlement agreement with the LBC parties. Cash and cash equivalents accounted for
30%, 31%, and 14% of total assets in 2011, 2010, and 2009 respectively.
Financial assets at fair value through profit or loss, increased 16% or nearly P4 million to P29
million at the end of 2011 from P25 million the year before. The movements in the account
can be traced to uptrends and downtrends in equity prices at the local bourse as well as the
net effect of Maybank ATR KE Securities’s trading activities on its own portfolio. The account
decreased 46% to P25 million in at the end of 2010 from P46 million previously at the end of
2009, which in turn was an increase of 46% or P14 million at the end of 2008.
Available-for-sale financial securities increased 42% or P183 million to P619 million at the close
of 2011 compared to P436 million at the close of 2010 primarily due to increased investments
in government securities by an insurance subsidiary. The account decreased 26% or P157 million
to P436 million at the end of 2010 from P593 million at the end of 2009, due to the disposals of
the Company’s MNB Holdings shares and investments by subsidiaries. The account increased
121% or P324 million to P593 million at the end of 2009 from P268 million the year before
largely due to the receipt of the MNB Holdings shares as part of the Settlement Agreement with
the LBC parties in 2009.
Receivables, increased 30% or P578 million to P2.519 billion as of end December 2011,
compared to P1.940 billion as of the end of December 2010 due to the increase in the
brokerage house’s trade receivables to P1.225 billion from P679 million, an increase of 80% or
P546 million. The account declined 30% or P578 million to P1.940 billion at the end of 2010
from P2.628 billion at the end of 2009, again due largely to trade receivables of the brokerage
house, which decreased 50% or P691 million to P679 million in 2010. In 2009, Receivables
increased 113% or P1.391 billion to P2.628 billion from P1.236 billion at the end of the prior
year due largely, again, to an increase in trade receivables of ATRKE Securities as well as the
receipt of notes receivables coming from the Settlement Agreement with the LBC parties.
Receivables made up 37%, 34%, and 46% of total assets in 2011, 2010, and 2009 respectively.
Insurance receivables increased 17% or P5 million to P36 million as of 31 December 2011
compared to P31 million as of 31 December 2010 with the increase in premium incomes of both
ALGA and ALFA. The account decreased 13% or P5 million to P31 million as of 31 December
2010, from P35 million in 2009, following improved collections over 2009 when said receivables
increased almost P13 million or 55% from P23 million. Insurance receivables refer to premium
payments due from policy holders.
Due from related companies decreased 68% or P19 million to P9 million in 2011 from P28
million in 2010 attributable to the payment of a subordinated debt by an affiliate. The account
also decreased in 2010, at P28 million, down 28% or P11 million from P39 million in 2009
following payments made by a subsidiary of a shareholder for trade-related obligations. Due
from related parties increased 67% to P39 million in 2009, up from P23 million in 2008 due to a
subordinated loan granted to an affiliate to comply with its risked-based capital adequacy
requirements.
Real estate inventories, comprised of units at TRIbeca Private Residences as well as the unsold
or unceded portion of the land where the development is located, decreased immaterially by
4% to P 712 million as of end December 2011 compared to P742 million at the end of 2010. In
turn, the P742 million as of end December 2010 was also an immaterial decrease of 4% from
2
P776 million as of end of 2009. Real estate inventories are reduced over the years when the
sale is recognized when the required percentage of collection of the total contract price is met
and the corresponding gross profit is recognized upon reaching required percentage of
completion.
Investment properties decreased immaterially, by 3%, in 2011 to P261 million. In 2010, it
decreased 5% or P13 million at P253 million, compared to P266 million in 2009. The decrease
was due to the net effects of a disposal of a condominium unit by ALGA and fair value increases
on other units. In 2009, the account decreased immaterially, again, by 3%.
Investment in associates and a jointly controlled entity increased 16% or P 17 million in 2011 to
P126 million compared to P109 million in 2010, due to the share in net incomes of
unconsolidated affiliates Tullett Prebon and Maybank ATR KE Fixed Income and the additional
investment in an insurance broker as well as the accumulated equity in these investees less
dividends received. The account increased 41% to P109 million at the close of 2010 from P77
million at the close of 2009 coming in part from the share in the increased net incomes of
Tullett Prebon and ATRKE Fixed Income as well as increased investment in the latter due to a
hike in capitalization. In 2009, the account increased 59% or P29 million to P77 million from
P48 million in 2008 due largely to a capital call from associate Tullett Prebon and the
investment by a subsidiary in Seagate ATR KimEng Advisors Cayman Ltd.
Property and equipment decreased 10% or P13 million to P117 million in 2011 compared to
P130 million in 2010, reflecting additions, disposals, and related depreciation of various
properties, furnishing, and equipment. The decrease in 2011 came mostly from net disposals of
transportation equipment and the related depreciation costs. In 2010, the account increased
23% to P130 million, net of disposals and depreciation, following the acquisition of
transportation and office equipment, furniture and fixtures, as well as additional software.
The account decreased 7% to P106 million in 2009 as additions to property and equipment then
were more than off-set by depreciation costs.
Deferred tax assets increased 43% or nearly P50 million to P165 million in 2011 from P115
million in 2010. The account increased P38 million or 49% to P115 million in 2010 from P77
million in 2009 and 40% or P22 million to P77 million in 2009 from P55 million in 2008. This
account represents temporary differences in tax assets and any future taxable income to which
these can be applied. Tax assets in 2009 include the tax effects of the carry forward benefit of
unused NOLCO.
Other assets decreased immaterially in 2011 and 11% or P23 million to P182 million in 2010
from P205 million primarily due to decreased deferred software costs, lower creditable
withholding taxes and decreased lease and other deposits. The account increased P45 million
or 28% to P205 million in 2009 from P160 million in 2008 due primarily to creditable withholding
taxes and prepaid expenses.
Total Assets amounted to P6.845 billion at the close of 2011, up 19% or P1.071 billion P5.775
billion at the close of 2010 following the increases in receivables, cash and cash equivalents,
and Available-for-Sale securities. In 2010, there was an immaterial 1% increase to P5.775 billion
from P5.708 the previous year, a difference of just P67 million. In 2009, total assets increased
29% to P5.708 billion. Changes in total assets through the years can be traced to movements in
the various asset accounts discussed above.
Accounts payable, accrued expenses, and other liabilities increased 58% or P742 million to
P2.011 billion as of 31 December 2011 from P1.269 billion as of 31 December 2010 as total
trade payables of the brokerage house for settlement in the next three days after balance
sheet date increased 111% or P745 million to P1.418 billion . In 2010, the account decreased
29% or P519 million to P1.269 billion from P1.787 billion in 2009 when trade payables of the
3
brokerage house decreased 47% or about P600 million to P673 million from P1.273 billion.
2009’s P1.787 billion was an increase of 153% or P1.082 billion to P1.87 billion over the prior
year due to the trade payables of the brokerage house as well as cash dividends declared by
the Company that were payable in January 2010. Accounts payable, accrued expenses, and
other liabilities made up 57%, 45%, and 55% of total liabilities in 2011, 2010, and 2009,
respectively.
Loans payable decreased 16% or P72 million to P383 million at the end of 2011 compared to
P455 million at the end of 2010 primarily due to principal payments made during the year by
the Company and Maybank ATR KE Capital for their respective loans. The account increased
38% or P125 million to P455 million from P331 million at the end of 2009, as new loans were
made to fund the expansion of the salary loan business. Previously, Loans payable increased
immaterially at the end of 2009 to P331 million compared to P317 million at the end of 2008.
Loans payable made up 11%, 16%, and 10% of total liabilities in 2011, 2010, and 2009,
respectively.
Insurance contract liabilities increased 7% or P61 million to P974 million from P913 million in
2010, following a 5% or P37 million increase in legal policy reserves and a 16% or P27 million
increase in claims payable. In 2010, the increase in insurance contract liabilities was at 13% or
P106 million to P913 million from P806 million in 2009, and, before that, from P717 million in
2008 to P806 million in 2009. The increases in the two prior years come mostly from the
increase in legal policy reserves, resulting from the expanding premium incomes. The account
made up 27%, 32%, and 25% of total liabilities over the past three years.
Due to related companies decreased from P154 million in 2009 to P22 million in 2010 and to
P135 thousand in 2011. The 99% or P22 million decrease in 2011 came primarily from payments
made for trade related obligations to subsidiaries of a shareholder. In 2010, the decrease was
86% or P132 million to P22 million from P154 million due to payments made to Harmonia
Investments Pte Ltd (“Harmonia”; a Singapore based company that sold its shares of the
Company to Maybank ATR KE Capital in November 2009). In 2009, the account increased 429%
to P154 million at the end of 2009 from P29 million at the end of 2008 attributable to the
amount due Harmonia.
Deferred tax liabilities changed immaterially over the last three years.
Total Liabilities amounted to P3.551 billion, up 25% or P709 million from P2.842 billion in 2010
due primarily to increased trade payables of the brokerage house, which increased account
payables, and the increase in insurance contract liabilities. In 2010, total liabilities decreased
P423 million or 13% fromP3.265 billion in 2009 due largely to decreases in accounts payable,
brought about by lower trade payables of the brokerage house, as well as a lower amount of
due to related parties. In 2009, total liabilities increased P1.306 billion or 67% to P3.265 billion
due to the increase then in accounts payable, also primarily from trade payable of the
brokerage house, and due to related parties.
Total equity attributable to shareholders of the Company increased 12% or P339 million to
P3.149 billion from P2.810 billion. The increase came from the higher retained earnings of
P954 million, an increase of P324 million or 51% given the higher net income for the year. The
account stood at P2.810 billion in 2010, up 21% or P479 million, due to the increase in retained
earnings, net of stock dividends declared, coming from a higher net income for the year.
Maybank ATR KE Capital’s sale of the bulk of its shareholding in the Company to third parties
lowered charges to equity, adding to the increase in total equity attributable to shareholders
then. At the close of 2009, there was a slight 2% decrease in the account to P2.332 billion due
to acquisition of the Company’s shares by a subsidiary that was charged to equity.
4
Non-controlling interest, increased 19% or P23 million to P146 million due to the minority’s
share in the net incomes of these subsidiaries and to the issuance of preferred shares by
Maybank ATR KE Capital and ALGA. In 2010, the account increased 11% or nearly P12 million to
P123 million from P111 million in 2009. The 11% increase in 2010 was lower than the 32%
increase in 2009, when ALFA’s net income increased at a higher rate.
Total equity increased 12% or P362 million to P3.295 billion in 2011 versus 20% or P490 million
to P2.933 billion in 2010. It decreased immaterially to P2.443 billion in 2009.
Results of Operations:
Consolidated Statements of Income for the years 2011, 2010, and 2009
Insurance premiums increased 10% in 2011 to P1.495 billion, up P132 million or 10% from
P1.363 billion in 2010. The growth came from an increase in both new accounts and renewed
accounts, particularly in group health policies of ALGA which saw an increase of 11% or P120
million to P1.252 million. In 2010, insurance premiums were at P1.363 billion, up 13% or P161
million, from the prior year’s P1.203 billion, coming, again, from increases in new accounts and
renewals. The account breached the P1 billion mark for the first time in 2009, when premiums
reached P1.203 billion compared to P912 in 2008, for an increase of 32% or P290 million, due to
an increase in group health premiums. Insurance premiums continue to be the largest source
of consolidated income at 52%, 51%, and 56% of total in 2011, 2010, and 2009 respectively.
Commissions decreased insignificantly by 3% or P17 million to P598 million in 2011. In 2010, the
increase was 40% or P176 million to P615 million. The increase in 2010 came despite a lower
value turnover that year as lower transaction volumes allowed the brokerage house to charge
higher rates. In 2009, commissions increased 26% or P91 million over that in the prior year as
value turnover increased 175%. Commissions accounted for 21% 23%, and 21%, of total income
in 2011, 2010, and 2009 respectively.
Interest increased 11% or P23 million to P237 million due to the higher DepEd salary loans
portfolio plus the increased cash balances and investment in government securities. The 11%
growth rate in interest income in 2011, however, was smaller than in 2010, as rates on salary
loans were reduced in the later part of the year. In 2010, interest grew 34% or P54 million to
P214 million from P160 million, given the larger salary loan portfolio and loan roll out for that
year, prior to the reduction in rates charged. The account increased 59% or P59 million to P160
million in 2009 from P101 million in 2008, again due to increases in the salary loan portfolio.
Income from sale of real estate inventories increased 5% or about P5 million to P105 million in
2011 due to the completion of additional two towers in TRIbeca Private Residences, allowing
for revenue recognition of the sale of units from the 4 towers. In 2010, the account grew
significantly, up P79 million or 364% to P101 million from P22 million in 2009, as percentages of
completion (POCs) for Towers 2, 3, and 4 allowed for higher revenue recognition. The account
decreased significantly in 2009 to P22 million, down 82% or nearly P100 million because of the
delays encountered in the construction of TRIbeca’s Tower 2, which prevented recognition of
revenues at that time from the said tower as the required POCs were not yet met.
Service fees decreased 22% or P18 million to P65 million in 2011 from P83 million in 2010 as
these fees are now charged up-front. As the remaining loans that were charged service fees
over their lives decrease, so does the total service fees earned. The account increased 35% to
P83 million in 2010 from P62 million at the end of 2009. The P62 million in 2009 was a
significant increase from P7 million in 2008, given the 56% increase in loan roll out between the
two years. Service fees are non-finance charges that were.
5
Gain on sale of loans receivable decreased immaterially in 2011 to P57.9 million. It increased
to P59 million in 2010, up 28% or P13 million from P46 million in the prior year coming from the
sale by ALFA of a larger portfolio of salary loans receivables to an affiliate and to Maybank
Philippines, Inc. that year compared to 2009. The P46 million gain in 2009 was an increase of
P13 million or 40% over the P33 million in 2008. Sale of salary loans, depending on ALFA’s MOS,
are done to increase funding for the salary loans.
Gain on Sale of Available-for-Sale Securities was at P14 million, down 63% or P24 million from
P38 million in 2010. The Difference between the two years can be traced to the sale of MNB
Holdings shares in 2010. The account amounted to P38 million in 2010, up P15 million or 62%
from 2009’s P23 million, again due to the MNB Holdings shares. The changes over the years are
due to sales by subsidiaries of investments in equity securities.
A Gain on Disposal of a Subsidiary of P7 million was recognized when ATR KimEng Insurance
Brokers Brokers, Inc. was merged with A.V. Ocampo Insurance Brokers.
Advisory and underwriting fees increased 28% or P19 million to P88 million in 2011 from 2010’s
P69 million as more follow on and rights offers were handled by a subsidiary in the prior year.
In 2009, the increase was even larger at 387% or P55 million when such fees totaled P69 million
following two milestone IPOs during the year, that of Cebu Air, Inc. (Cebu Pacific) the
country’s largest IPO ever in dollar terms, and Nickel Asia Corporation. The account decreased
significantly in 2009, when there were fewer IPOs.
Network fees increased 20% or P6 million to about P37 million in 2011 from P30 million in 2010.
In 2010, the increase was 5% or about P2 million increase to P30 million from nearly P29 million
in 2009. Network fees increase with the renewals and new accounts of ALGA as clients are
charged the fee annually.
Management, administration, and distribution fees increased 25% or about P6 million to P29
million from P23 million in 2010. In turn, the 2010 figure was an increase of 41% or about P7
million from P17 million in 2009. These increases came mostly from the increased assets under
management (AUM) of ATRKE Asset Management, although they accounted for an immaterial
amount of total revenues in the past three years.
Equity in net earnings of associates increased 13% or about P3 million to P23 million in 2011
from P20 million in 2010. In 2010, the increase was about P12 million or 148% to P20 million.
The changes reflect the increase or decrease in the net incomes of Tullett Prebon and Maybank
ATR KE Fixed Income, the two largest contributors to the account.
Reversal of allowance for impairment losses was nil in both 2011 and 2010, compared to P34
million in 2009. The P34 million reversal at that time resulted from the collection in the first
quarter of 2009 of the full amount provided for at the end of 2008.
Fair value gain on financial assets at fair value through profit or loss (FVPL) amounted to P13
million in 2011 versus nil in 2010. In 2009, the account was at P22 million in 2009 another
increase over nil in 2008. The amounts reflect net gains in fair values of financial assets held
for trading by a subsidiary, including gains from tendering the Company’s shares to Maybank
Kim Eng in the fourth quarter of 2011.
Other income increased significantly to P86 million in 2011, up 128% or P49 million, as trust
fees,hospital discounts (for prompt payment), and fees for third party administration increased
during the year. Other income decreased significantly to P38 million in 2010 from P58 million in
2009 due to the one-time recognition of gains from the Settlement Agreement in the latter.
The same recognition of gain resulted in an increase in other income in 2009 over 2008.
6
Total Income amounted to P2.856 billion, up 8% or P202 million from P2.654 billion in 2010.
The 2010 figure, in turn, was an increase of 24% or P517 million compared to 2009’s P2.137
billion. The P2.137 billion in 2009 was the first time that consolidated revenues breached the
P2 billion mark was an increase of 16% or P292 million from P1.845 billion over the previous
year.
Total Expenses increased 7% to P2.395 billion in 2011 from P2.240 billion in 2010, coming
largely from a 10% increase in operating expenses, the only expense line item on the face of
the consolidated statements of income to increase in 2011. In 2010, total expenses increased
18% to P2.240 billion from P1.891 billion in 2009 as a foreign exchange loss, loss on disposal of
investment in a subsidiary and a jointly controlled entity, and fair value losses, contributed to
already higher operating expenses and impairment losses on receivables. There was a lower
rate of increase of 6% or P111 million in total expenses, to P1.891 billion in 2009 from P1.780
billion previously brought about in part by lower interest expenses and lower impairment
losses.
Operating expenses increased 10% or P214 million to P2.278 billion in 2011; 13% or P241 million
to P2.064 billion in 2010; and 18% or P278 million to P1.823 billion in 2009. The increases were
mainly accounted for by Insurance benefits and claims, at P916 million, which increased by 9%
or P77 million from 2010; Compensation and employee benefits at P427 million, up 28% or P95
million due to a higher headcount, salary adjustments, and performance bonuses and accruals;
and Commissions (insurance-related) at P258 million, up 21% or P45 million. These three items
accounted for 70% of total operating expenses.
Cost of real estate inventories decreased immaterially to P64 million in 2011. In 2010, the
account increased quite significantly or P54 million to P65 million, while in 2009 it decreased
84% or P59 million to P11 million in 2009. The changes through the years are directly related to
the increase or decrease in the total area of units sold in TRIbeca.
Impairment loss on receivables decreased 10% or P4 million to P37 million in 2011 from P42
million in 2010 as lower provisions were made by an insurance subsidiary during the year. In
2010, it increased 19% to P42 million from P35 million previously, due to higher provisioning
given the expanded salary loans portfolio. The account increased immaterially between 2009
and 2008.
Interest Expense was at P15 million in 2011, down 13% or P2 million from P17 million in 2010.
At P17 million in 2010, it was down 11% or P2 million from P19 million in 2009, which in turn
was down 68% from the previous year. The downtrend is due primarily to the lower prevailing
rates, which allowed the Group to rationalize its borrowings. The breakdown of interest
expense on loans and other interest-bearing liabilities for 2011 is as follows:
Interest expense:
Bank Loans:
Other interest-bearing liabilities:
Total:
P8,965,062
6,226,747
P15,191,809
There was a Foreign exchange loss of P841 thousand in 2011, a 94% or P12 million decrease
from the P13 million in 2010 as a dollar denominated note receivable matured earlier in the
year, reducing full-year exposure and loss. The P13 million loss in 2010, was primarily due to
the same dollar-denominated note receivable and as the peso strengthened against the dollar,
losses were incurred. In 2009, the foreign exchange loss was insignificant at P477 thousand.
Fair value losses on financial assets at FVPL was nil in 2011 and amounted to P29 million in
2010, and nil again in 2009. The account reflects losses on the sale of shares as well as lower
values of shares held in the trading portfolio.
7
Income before tax was at P461 million in 2011, up 11% or P47 million from that in 2010. In
2010, the account was at P413 million, a 68% increase over that in 2009. The P246 million in
2009 increased 281% or P181 million from P65 million the previous year.
Income tax expense amounted to P123 million in 2011, up 23% or P23 million from just under
P100 million in 2010 due to the higher net income for the year. At P100 million in 2010, income
tax expense was up 58% from P63 million in 2009, again due to the higher taxable net income
that year compared to 2009. The expense was at P63 million in 2009 an immaterial increase
over the previous year due to the effects of NOLCO carried over from the previous year.
Net income totaled P337 million in 2011, P313 million in 2010, and P183 million in 2009.
After subtracting the minority’s share in net income amounting to P14 million in 2011, P8
million in 2010, and P11 million in 2009, Net income attributable to the Company’s
shareholders was at P323 million in 2011, P305 million in 2010 and P133 million in 2009.
Key Performance Indicators for 2011,2010, & 2009
Performance Indicator
2011
2010
2009
Asset Growth
19%
1%
29%
Liabilities (Total) Growth
25%
-13%
67%
Loans Payable ( Borrowings) Only
-16%
38%
4%
Equity Growth (Attributable to ATRKEFC shareholders)
12%
21%
-2%
Revenue Growth
8%
24%
16%
Net Income Growth (Attributable to ATRKEFC Shareholders)
6%
77%
1484%
Return on Equity Attributable to ATRKEFC Shareholders
11%
12%
7%
Debt (borrowings only) to Equity
(Attributable to ATRKEFC
0.13:1
0.18:1
0.14:1
Shareholders)
Note:
Growth:
Item this year less item last year divided by item last year
Net Income Growth:
Uses net income attributable to ATRKEFC shareholders
Return on Equity:
Net income current year over average of beginning & ending equity
attributable to ATRKEFC shareholders
Debt to Equity:
Debt (loans only) as of year end over Average Equity Attributable to ATRKEFC
shareholders
Subsidiaries and their key performance indicators:
In 2011, Maybank ATR KE Capital’s (parent level) advisory and underwriting fees increased
34% or P22 million to P88 million from P65 million in 2010. Despite the increase in advisory and
underwriting fees, total income decreased 44% or P142 million due to lower dividend earnings
and commissions. Meanwhile, total expenses increased 19% or P41 million to P263 million,
which resulted in a net loss of P59 million, net of a P21 million tax benefit. Total assets
decreased 13% or P188 million to P1.288 billion from P1.476 billion in 2010. The decrease can
be attributed to the use of cash for operations as well as payments of loans, thus reducing cash
and cash equivalents to P104 million, down 45% or P84 million from P187 million previously.
Available for sale securities also contributed to the dip in total assets, as the account
decreased 28% or P44 million to P116 million from P160 million as the company tendered its
MAKE shares to Maybank Kim Eng. Total liabilities decreased 17% or P102 million to P483 million
from P584 million as payments were made on loan principals and on amounts due to related
parties. At P805 million, down 10% or P86 million from P892 million, total equity in
2011decreased due to unrealized losses on available for sale securities charged to the account
as well as the net loss for the year of P59 million. In 2010, Total assets increased 14% to
8
P1.476 billion at the close of the year from P1.297 billion at the close of the previous year due
to the purchase of salary loan receivables, which in turn increased liabilities 56% to P584
million. Total equity decreased immaterially to P892 million due to lower unrealized gains on
AFS securities and unrealized forex losses on dollar denominated AFS securities. Total income
increased 48% in 2010 to P326 million from P221 million in 2009 following significant
improvements in advisory and underwriting fees, which increased 486% from P11 million to P65
million, coming from the IPOs of Cebu Air, Inc. (Cebu Pacific) and Nickel Asia Corporation as
well as dividend income from Maybank ATR KE Securities. Total expenses increased 49%, at
P221 million versus P148 million previously, brought about by significant increases in interest,
professional fees, and impairment losses. Net income was at P98 million, up 21% or from P81
million in 2009.
Maybank ATR KE Securities topped its 2010 performance in 2011 by ranking number one
among trading participants of the Philippine Stock Exchange, garnering a market share of
9.32%. In the previous year, it was ranked number two with a market share of 11.63%. Value
turnover in 2011 was at P265 billion, down 6% from P281 billion in 2010. The lower market
share and value turnover in 2011 reflects the increased competition among trading
participants, especially among the top 10, none of whom managed to record market share in
the double digits, compared to three in 2010. Commission income increased 8% to P587 million
from P544 million as tender offers handled by the brokerage house added to commissions
earned from day-to-day transactions. Total income was at P633 million, up 9% from P579
million. Meanwhile, total expenses decreased 1% to P373 million fro P378 million resulting in
income before tax increasing 30% or P60 million to P260 million from P200 million. After taxes,
net income was at about P183 million, up 30% or P42 million from P140 million. In 2010,
commission income increased by 39% or P152 million to P544 million from P392 million, coming
from a value turnover of P281 billion. Total income amounted to P579 million, up 30% from
P445 million for 2009. Net income was at P140 million, a decrease of 6% from P149 million, as
expenses increased to P379 million versus P244 million. In 2009, total value turnover of P379
billion was up 175% from the previous year’s P137.8 billion, increasing total income to P445
million. Total expenses decreased significantly to P244 million, down 19% or P57 million, due
largely to the absence of marked-to-market losses on financial assets at FVPL as the market
recovered from 2008’s lows. Net income was at P149 million, significant increase from P30
million in 2008.
ALGA saw net written premiums increase 11% or P120 million to P1.252 million in 2011 from
P1.132 billion in 2010, accounting for the bulk of its total income which increased 10% or P122
million to P1.381 billion in 2011 from P1.259 billion in 2010. The increase in NWP came largely
from a 21% or P203 million increase in group health premiums as group life and ordinary life
premiums, even prior to reinsurance charges, declined from 2010 levels. Net income was at
P133 million, up 21% or P23 million as expenses increased to P1.2 billion from P1.106 billion in
2010 The company had total assets of P1.415 billion at the end of 2011, up 15% or P181 million
from P1.234 billion in 2010. Total liabilities amounted to P635 million, an insignificant increase
from P622 million in the previous year. Total equity stood at P780 million, up 27% or P168
million from P612 million. In turn, the P1.234 billion in total assets at the end of 2010 was an
increase of 23% or P229 million from P1.006 billion at the end of 2009. Total liabilities also
increased by 20% to P622 million while total equity stood at P612 million, an increase of 25%.
Total income in 2010 amounted to P1.259 billion, an increase of 15%, with NWP increasing 14%
to P1.132 billion. Total expenses increased at a slower rate of 12%, to P1.106 billion with
higher hospitalization claims and surrender benefits off-set by reductions in premium tax and
DST. With growth in income outpacing that of expenses, the company recorded a net income
of P109 million in 2010, up 45% from P75 million in 2009.
ALFA’s total income in 2011 decreased 4% or P21 million to P471 million from P492 million
despite a 5% or P12 million increase in NWP to P243 million from P231 million. The decrease in
total income came in part from lower gains on sale of loans receivable as ALFA kept a larger
9
loan portfolio in its books for the year. Net income was at P52 million compared to P43 million
in 2010, an increase of 21% or P9 million, given that total expenses, at about P400 million
versus P434 million previously decreased even more than total income. Total income
increased 20% to P492 million in 2010, coming from a 12% increase in NWP to P231 million and
a 26% increase in Investment and Other Income to P250 million. The increase in NWP came
from both higher ordinary life and group life premiums Total expenses, at P434 million,
increased 23% from P352 million the year before. Net of taxes, income was at P43 million, a
slight increase from P42 million in 2009. Total assets stood at P1.211 billion, up 5% from
P1.157 billion Total liabilities increased 1% to P852 million from P840 million. Total equity
increased 13% to P359 million.
ATR KimEng Asset Management, Inc.’s total assets under management (AUM) was at P1.570
billion, up 6% or P88 million from P1.482 billion in 2010 due to higher asset values and
increased investments into the funds. Total income increased 27% or about P7 million to P32
million from P25 million in 2010. The increase came primarily from a 30% or nearly P5 million
increase in management fees to P20 million from P16 million as well. Total expenses amounted
to nearly P45 million resulting in a loss before income tax of nearly P13 million, down 49% from
P25 million in 2010. After tax of P357 thousand, net loss for the year was at just over P13
million, compared to about P24 million in 2010. In 2010, total income amounted to P25 milion,
up 44% or P8 million from P18 million in 2009. Total expenses then increased 82% to P50 million
that resulted to a loss before taxes of P24 million, compared to a loss of P10 million in 2009.
ATRKE Land recorded a net income of nearly P11 million, up 6% or just over P600 thousand
from about P10 million coming on the heels of a 5% or about P5 million increase in gross sales
of P105 million from about P101 million in 2010. The higher figures came from the completion
of Towers 3 and 4 of TRIbeca Private Residences in 2011, allowing for increased revenue
recognition. Gross profit was at P41 million in 2011, up P6 million from P35 million. The net
income in 2010 reversed a net loss of nearly P17 million in 2009, when gross sales hit P101
million from just P22 million in 2009. Gross profit was at P35 million compared to just P6
million in 2009. Total expenses increased slightly to P11.9 million from P10.33 million in 2009.
Total assets increased 2% to P1.166 billion while total liabilities increased 3% to P455 million.
Total equity stood at P711 million, a 1% increase over P701 million previously.
The Company:
(i.)
Does not know of any other trends, demands, commitments, events or
uncertainties that will result in or reasonably likely to result in its liquidity
increasing or decreasing in any material way.
i.a.) Does not have and does not expect to have any cash flow or liquidity problems
within the next 12 months.
i.b.) Is not in default or breach of any note, loan, lease or other indebtedness or
financing arrangement requiring it to make payments.
i.c.) Does not have any unpaid trade payables within any stated trade terms.
(ii.)
Is not aware of any event that will trigger direct or contingent financial obligation
that is material to it including any default or acceleration of an obligation.
Has no material off-balance sheet transactions, arrangements, obligations
(including contingent obligations) and other relationships with unconsolidated
entities or other persons created during the period.
Has no material commitments for capital expenditures, the purposes for such, and
the source of funds to be used.
Is not aware of any known trends, events, or uncertainties that have had or are
reasonably expected to have a material favorable or unfavorable impact on net
(iii.)
(iv.)
(v.)
10
(vi.)
(vii.)
(viii.)
sales, or revenues, or income from continuing operations. It does not know of any
event that may materially change the relationship between costs and revenues.
Has discussed significant elements of income or loss that did not arise from
continuing operations in the MD & A above.
Has discussed, vertically and horizontally, causes of material changes in items and
between periods (2011, 2010, and 2009) in the MD & A section of this report
pertaining to the Consolidated Statement of Financial Position and Consolidated
Statement of Income.
Is not aware of any seasonal aspects that had a material effect on financial
condition or results of operations.
IV. NATURE & SCOPE OF THE BUSINESS (COMPANY & SUBSIDIARIES)
1. Business Development
2011 saw significant changes in the Company (or “Maybank ATR KE Financial”). First, a
principal shareholder with 42.40% ownership, Maybank Kim Eng Holdings Limited (“Maybank
Kim Eng”, formerly known as Kim Eng Holdings Limited) was acquired by Mayban IB Holdings
Sdn Bhd, a wholly owned subsidiary of Malayan Banking Berhad (“Maybank”), the largest
financial institution by market capitalization listed on Bursa Malaysia. This was followed, in
August of the same year, by the acquisition by Maybank Kim Eng of the Company’s shares
owned by ATR Holdings, Inc. (“ATR Holdings”), a Filipino corporation which was then a
principal shareholder with 32.24% ownership. This resulted in Maybank Kim Eng owning 74.64%
of the Company. The said share purchase triggered a mandatory tender offer for other
Maybank ATR KE Financial shares (“MAKE”) that Maybank Kim Eng did not already own, the
completion of which resulted in Maybank Kim Eng owning 99.11% of the Company. In line with
these developments, the Company’s Board of Directors approved the amendments to the
Company’s Articles of Incorporation and By-Laws to change the Company’s name to Maybank
ATR Kim Eng Financial Corporation. Said amendments were approved by the shareholders on 16
January 2012 and by the Securities and Exchange Commission on 16 February 2012.
To ensure continuity and smooth transition, the principals of ATR Holdings, namely Ramon B.
Arnaiz, Manuel N. Tordesillas, and Lorenzo T. Roxas, who are all current directors and principal
officers of the Company and/or its subsidiaries, have agreed to remain in their posts for, at
least, the next three (3) years. To further cement the relationship, and as disclosed in a 17-C
report dated 16 August 2011, ATR Holdings subscribed to all of the voting preferred shares of
Maybank ATR Kim Eng Capital Partners, Inc. (“Maybank ATR KE Capital”) and AsianLife and
General Assurance Corporation (“ALGA”).
Meanwhile, the Company continued to reach new heights in 2011 with net income attributable
to shareholders at P324 million, up 6% or P19 million from 2010’s P305 million. Total income
reached P2.856 billion, up 8% or P202 million from P2.654 billion in 2010. Insurance premiums
at P1.495 billion, up 10% or P132 million, contributed most to total income. Commissions came
in second at P598 million, slightly lower than last year’s P615 million. Though Commissions
decreased for the year, the brokerage house Maybank ATR Kim Eng Securities, Inc. (“Maybank
ATR Kim Eng Securities”) was the top-ranked trading participant in the Philippine Stock
Exchange (“PSE”) with market share of 9.32%. Interest income was third at P237 million, up
11% or P23 million. Other significant increases came from advisory and underwriting fees, up
28% or P19 million to P88 million; management, administration and distribution fees, up 25% or
P6 million to P29 million; and sale of real estate, up 5% or P5 million to P105 million. Total
assets amounted to P6.845 billion, up 19% or P1.070 billion from P5.775 billion in 2010, largely
due to higher trade receivables settled three days after balance sheet date, as well as
increased investments in Available – for - Sale Securities. Total liabilities also increased, at
P3.551 billion up 25% or P709 million due to increased trade payables and insurance related
11
liabilities. Total equity attributable to shareholders increased 12 % or P339 million to P3.149
billion due largely to the increase in retained earnings brought about by the higher net income
for the year.
In 2010, the Company’s investment house Maybank ATR Kim Eng Capital Partners, Inc.
(“Maybank ATR KE Capital”) acted as Domestic Lead Underwriter in the US$620 million Cebu
Air, Inc. (Cebu Pacific) IPO – the Philippines largest ever IPO in dollar terms. It was also the
Joint Lead Domestic Underwriter in Nickel Asia Corporation’s IPO. These two were the only two
major IPOs in 2010 and are testament to Maybank ATR KE Capital’s unrivalled expertise in
corporate finance and equity capital raising. For its part, though ranking only second among
133 trading participants in the PSE in 2010, Maybank ATR KE Securities ended 2010 with
commissions increasing by 39%.
The Company consolidated its direct ownership in ALGA in 2010. ALGA, in turn, owns 70% of
AsianLife Financial Assurance Corporation (“ALFA”). Both insurance companies showed healthy
top and bottom lines in 2010 of Php1.259 billion and PHp109 million, as well as PHP492 million
and Php43 million, respectively, for ALGA and ALFA.
The real estate business continued to grow in 2010.
Construction of TRIbeca Private
Residences’ Towers 3 and 4 was on-going while Towers 1 and 2 have been completed and
turned over to the buyers. The first residents moved-in in 2009 and the fledgling community
grew as more buildings were completed.
The Company increased its authorized capital in 2010, from P1.3 billion, divided into P1.1
billion in common shares and P200 million in preferred shares to P1.5 billion divided into P1.3
billion in common shares and P200 million preferred shares. The common shares have a par
value of P1.00 each while the preferred shares have a par value of P1,000.00 each, both
unchanged. A stock dividend declared and paid out during the year brought total issued and
outstanding shares to 1,068,393,223 shares. No preferred shares have been issued.
In 2009, the Company undertook steps to take advantage of unrealized opportunities in its
asset management business, rationalizing the same under ATR KimEng Asset Management, Inc.
It also signed a Settlement Agreement with the LBC parties, collecting the equivalent of more
than US$12 million in the process, and put to rest the disputes between LBC and the ATR
KimEng Group. Also in that year, the first among 15 residential towers in TRIbeca Private
Residences (“TRIbeca”) was completed.
a.) Form and year of organization
The following table summarizes the form and years of organization of Maybank ATR KE
Financial and its various subsidiaries.
Company
Form
Country of
Incorporation
Maybank
ATR
Kim
Eng
Financial
Corporation
Maybank ATR Kim Eng Capital Partners,
Inc.
Date of
Organization/Incorporation
Corporation
Philippines
16 October 1930
Corporation
Philippines
4 September 1990
Maybank ATR Kim Eng Securities, Inc.
Corporation
Philippines
21 August 1978
ATR KimEng AMG Holdings, Inc.
Corporation
Philippines
8 October 1993
ATR KimEng Asset Management, Inc.
Corporation
Philippines
7 July 1995
12
Company
Form
Country of
Incorporation
Maybank ATR Kim Eng Fixed Income, Inc.
Corporation
Philippines
AsianLife & General Assurance Corporation
Corporation
Philippines
AsianLife Financial Assurance Corporation
Corporation
Philippines
ATR KimEng Land, Inc.
Corporation
Philippines
Date of
Organization/Incorporation
20 September 1999
22 August 1958
Reincorporated on
4 October 2010
23 January 1960
Reincorporated on
4 October 2010
22 December 1994
b.) Neither the Company nor any of its subsidiaries went through any bankruptcy,
receivership, or similar proceedings in 2011.
c.) There was no material reclassification, merger, consolidation, purchase or sale of a
significant amount of assets not in the ordinary course of business on the part of the
Company.
2.
Business of Issuer
a.) Description of registrant
Maybank ATR KE Financial is a holding company with investments in companies
operating in the following business segments:
I. Capital Markets
Maybank ATR KE Capital is one of the leading investment houses in the
Philippines. Its primary business is corporate finance, focusing on capital
raising, debt restructuring, financial advisory, mergers and acquisitions, and
direct equity investments. It pioneered listings by introduction in the country
when the Philippine Stock Exchange, Inc. (“PSE”) listed its own shares in the
local bourse. The company has a trust license from the Bangko Sentral ng
Pilipinas (“BSP”) allowing it to perform trust and investment management
services. As of 31 December 2011, AUM of the Trust Department totaled P9.311
billion. The company was involved in notable transactions such as the Cebu Air,
Inc. (Cebu Pacific) IPO, the Nickel Asia Corporation IPO, financial advisory
services to the winning bidder in the largest privatization in the country to
date, that of National Transmission Company (Transco), a transaction
completed in 2009 and the San Miguel Brewery Inc. offering. Maybank ATR KE
Capital was awarded Best Equity House by The Asset Triple A Awards in 2011
and was given a Special Recognition for Source of Information for Monetary
Policy (Private Sector) by the BSP also in 2011.
Maybank ATR KE Securities, a wholly owned subsidiary of Maybank ATR KE
Capital, is the securities brokerage unit of the Maybank ATR Kim Eng Group. It
ranked number one in 2011 with a market share of 9.32%. The brokerage house
has been consistently among the top 2 trading participants in the PSE over the
past three years, ranking number one in 2011 and 2009. Maybank ATR KE
Securities’ clients consist of both institutional and retail, foreign and domestic.
In 2011, it was again awarded Best Stock Brokerage in the Philippines by
FinanceAsia, a regional business publication, for the fourth straight year.
13
ATR KimEng Asset Management, Inc., an indirect subsidiary of Maybank ATR KE
Capital through ATR KimEng AMG Holdings, Inc., handles the Maybank ATR Kim
Eng Group’s asset management business.
The company manages the
Kabuhayan Fund, ATRKE Philippine Balance Fund, the ATRKE Equity
Opportunity Fund, the ATRKE Alpha Opportunity Fund, the MFMCP-Aizawa Trust
Philippine Fund (“Aizawa Fund”), ATR KimEng AsiaPlus Recovery Fund, and ATR
KimEng Total Return Bond Fund. Management of the last two funds was
acquired from Deutsche Bank Manila Branch after ATRKE Capital invested into
them. In January 2012, two other funds were added to the roster of funds
managed by the company, the PrudentialLife Fixed Income Fund and the
Optima Balance Fund. Total assets under management, including the Aizawa
Fund, as of 31 December 2011 reached P1.570 billion.
Tullett Prebon (Philippines), Inc., (“Tullett Prebon”), 49% owned by Maybank
ATR KE Capital, is part of a global network of inter-dealer brokers enhancing
liquidity and efficiency in financial markets. The company acts as an
intermediary for a wide range of foreign exchange, fixed-income, and offbalance sheet products, providing various bid and offer prices to its clients,
without taking any proprietary positions in the transactions. Its clients are
financial institutions designated as primary dealers in the Philippine foreign
exchange market. Tullett Prebon is a 51%-owned subsidiary of Prebon Holdings
B.V. a Netherlands-registered corporation. Its ultimate parent is Tullett Prebon
plc, an entity incorporated under the laws of the United Kingdom of Great
Britain and Northern Ireland.
II. Insurance
ALGA is one of only four (4) composite insurers offering both life and non-life
insurance licensed by the Insurance Commission for 2011-2012. It is a leader in
the group benefits market and was first to launch industry-specific products
such as those intended for OFWs, call center employees, and hotel employees.
ALFA provides life insurance for individuals. It is also one of a limited number
of entities accredited by the Department of Education (“DepEd”) to provide
salary loans bundled with insurance to public school teachers under a salary
deduction plan. ALFA has over 20 branches nationwide.
Together, ALGA and ALFA ranked no. 11 among life insurers in the Philippines
for the year 2010 (based on latest available industry statistics from the
Insurance Commission) with P1.369 billion in premium income equal to 1.94% of
industry total.
III. Real Estate
ATRKE Land owns a parcel of land, originally with an area of 9.7 hectares,
which is being developed, in joint venture with Landco Pacific Corporation
(“Landco”), into TRIbeca Private Residences, an enclave of mid-rise
condominium clusters surrounding a 3-hectare Central Park of amenities and
verdant space. 65% of the development’s total land area is devoted to open
spaces and amenities, ensuring a low-density development for the entire
community.. Turnover of units in Tower 1 of Chelsea Place, the first cluster of
buildings developed, began in 2009 and the first residents moved-in that year.
Turnover of units in Chelsea Place Tower 2 followed in 2010 while construction
of Towers 3 and 4 were completed in 2011. Tower 5 has been opened for preselling.The development of 50% of the 3 hectare Central Park was completed in
14
December 2011 and opened in early 2012. TRIbeca also has a clubhouse and an
aqua park for residents which are also used as venues for special events and
parties.
V. DIRECTORS & OFFICERS
Please refer to Item 5 of the Information Statement
VI. MARKET PRICE OF & DIVIDENDS ON COMPANY”S COMMON SHARES
1. Market Information
a) As of 31 March 2012, the Company had 1,068,393,223 common shares listed and traded
in the Philippine Stock Exchange. Effective 5 March 2012, the stock trading symbol was
changed to “MAKE” following the approval by the SEC of the Company’s change of
name to Maybank ATR Kim Eng Financial Corporation in the previous month. Market
capitalization as of the last trade date for the stock in the first quarter of 2012, 30
March, was P26.6 billion based on closing price that day of P24.90. As of 11 April 2012,
the latest practicable date before submission of this report, market capitalization was
at P24.7 billion based on closing price of P23.10. Historical performance of the
Company’s share price from 2010 up to the first quarter of 2012 and as of the latest
practicable date is presented in the following table:
03-30-2012
(Latest
Practicable
Date)
Prices of Common Stock (in Pesos)
High
Low
26.05
Close
24.90
24.90
3.60
23.10
2012
1Q
28.85
4Q
3Q
2Q
1Q
4.80
4.40
4.15
4.50
2011
3.90
3.65
3.45
3.30
4.20
4.10
4.15
3.85
3.00
2.87
2.96
2.96
3.30
3.30
3.06
2.96
2010
4Q
3Q
2Q
1Q
3.50
3.60
3.06
3.52
2. Information on Holders of the Company’s Common Stock.
The following table lists owners of 5% or more of the Company’s securities as of 31 March 2012.
15
Name of Owner / Address
Maybank Kim Eng Holdings Limited
(f.k.a. Kim Eng Holdings Limited until 1-312012)
Singapore 059304
No. of shares
1,058,923,463
(B/R)
%
B
99.11%
As of 31 March 2012, the Company had 411 shareholders. Based on information available to the
Company as of the same date, the top twenty (20) shareholders are as follows:
Number of
Sh
1,058,923,463
99.11%
6,411,862
00.60%
%
2
Stockholders
Maybank Kim Eng Holdings Limited (f.k.a. Kim Eng Holdings
Limited until 1-31-2012)
PCD Nominee Corporation – Filipino
3
Gonzalo Puyat & Sons, Inc.
942,095
00.09%
4
Hanson G. So and/or Larcy Marichi Y. So
216,000
00.02%
5
PCD Nominee Corporation – Non- Filipino
144,907
00.01%
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Jose Ma. Olbes
Knights of Columbus – New Haven Conn.
Josefa M. Benitez Trinidad
Luciano Tan
Sagitro Incorporated
Edward Steven Lim
Wellington S. Lim
Rafael Ortigas, Jr.
Susana Lee Chung
Ramon Nisce
Nelly V. Katigbak
Sim Chi Tat &/or Conching Tan Sim
Teofilo Villongco
Vicente Villongco
Pierce Interlink Securities, Inc.
71,116
62,916
62,427
57,879
52,018
47,156
47,072
43,165
42,994
42,814
39,560
38,097
32,967
32,963
32,400
00.01%
00.01%
00.01%
00.01%
00.00%
00.00%
00.00%
00.00%
00.00%
00.00%
00.00%
00.00%
00.00%
00.00%
00.00%
1
The following table lists the security ownership of certain record and beneficial owners of more
than 5% of the Company’s securities as of 31 March 2012.
Name of Owner / Address
Maybank Kim Eng Holdings Limited
(f.k.a. Kim Eng Holdings Limited until 1-312012)
Singapore 059304
No. of shares
1,058,923,463
(B/R)
%
B
99.11%
Maybank Kim Eng Holdings Limited, formerly Kim Eng Holdings Limited, is a leading regional
securities broking group. Its businesses include securities broking, research, online trading,
equity underwriting, corporate finance and investment advisory, share financing, and
16
custodianship services. It is owned by Malayan Banking Berhad, the largest financial institution
by market capitalization listed in Bursa Malaysia, through Mayban IB Holdings Sdn. Bhd.
Maybank Kim Eng has offices in Malaysia, Singapore, Hong Kong, Indonesia, Thailand, India,
Vietnam, London, and New York and is present in the Philippines through the Company and its
subsidiaries.
As of 31 March 2012, the following represent the security ownerships of certain members of the
Company’s Board of Directors and Management:
Directors and Officers
Ramon B. Arnaiz, Chairman
Manuel N. Tordesillas, Director & President
Lorenzo T. Roxas, Director
Ong Seet Joon, Director
Udaishankar Raman, Director
Tan-Pei-San, Director
Renato L. Leveriza, Jr., Director & Exec. Vice
President
Nilaida S. Enriquez, Director & Treasurer
Eulogio A. Mendoza, Director
Ernest L. Cu, Independent Director
Ma. Victoria C. Viñas, Independent Director
Gemma M. Santos, Corporate Secretary
All Directors & Officers as a Group.
No of Shares
1
1
1
1
1
1
Nature of
Ownership
B/R
B/R
B/R
R
R
R
% of Total
0.0000%
0.0000%
0.0000%
0.0000%
0.0000%
0.0000%
1,001
B/R
0.0001%
1
1,080
1
1
None
2,090
B/R
B/R
B/R
B/R
N.A.
0.0000%
0.0001%
0.0000%
0.0000%
0.0000%
0.0002%
3. Dividends
a.) In April 2010, the Company’ Board of Directors declared 8% stock dividends on common
shares as part of the increase in authorized common capital from P1.1 billion to P1.3
billion at par value of P1.00. Shareholders approved the same at the annual stockholders’
meeting on 27 May 2010. The dividends were paid on 24 September 2010 to shareholders
of record as of 31 August 2010.
In November 2009, the Company declared a cash dividend of P0.08 per common share to
be taken out of the retained earnings as of 31 December 2008, payable on 25 January 2010
to shareholders of record as of 23 December 2009.
In June 2008, the Company declared a cash dividend of P0.05 per common share to
shareholders of record as of 15 July 2008, payable on 31 July 2008.
b.) There are no restrictions on the Company’s ability to declare dividends other than
sufficient retained earnings.
4. Recent Sales of Unregistered Securities
There was no sale of unregistered securities within the past three years.
VI. COMPLIANCE WITH LEADING PRACTICES ON CORPORATE GOVERNANCE
17
a) Evaluation system to determine level of Compliance with Manual of Corporate Governance:
The Compliance Officer monitors and determines level of compliance with Revised Manual of
Corporate Governance (Revised Manual). The Compliance Officer certified that there is such
level of compliance as stated in the certification submitted to the Commission on 03 January
2012. The Compliance Officer refers to the Manual itself, the Corporate Governance Scorecard,
and previous certifications to compare what had been done in the past and any improvements
thereon, if any, done within the year.
b) Measures being undertaken by Company to fully comply with adopted leading practices on
good corporate governance:
The Company revised it Manual on Corporate Governance in November 2009 (submitted in
January 2010) following the revision by the SEC of the Code of Corporate Governance. The
Company considers its Revised Manual of Corporate Governance to be in line with leading
practices on good corporate governance. In 2011, upon review and discussion with the SEC, the
Company’s revised Manual was deemed to have complied with all the mandatory provisions of
the Revised Code. Additionally, the Company is moving towards adopting a comprehensive
Board Manual, which among others consolidates the governance manual, risk management
manual, and other manuals, into one and includes such best practices as they have in Maybank.
The Company also continuously compares its governance practices with those of other
corporations. Where applicable, it has adopted some of these practices by their inclusion, in
full, partially, or with amendments, in the Revised Manual on Corporate Governance. The
Company set aside two out of 11 Board seats for independent directors and also put in place
the Audit, Nominations, and Compensation & Remuneration Committees. A study is being
undertaken to determine whether or not to have the Group Risk Management Committee report
straight to the Board, instead of being a sub Committee of the Audit Committee, has been
initiated in early 2012. The Corporate Secretary monitors individual attendance at board
meetings and annually submits the required certification on such. The Company’s Board of
Directors, officers, and senior managers attended the two-day seminar on Good Corporate
Governance. In 2005, the Company amended its By-Laws to adopt SRC Rule 30.1 on the
Nomination & Election of Independent Directors. The Company participates in the Corporate
Governance Survey by way of the Corporate Governance Scorecard. The scorecard is also a
means to create awareness of best practices in Corporate Governance. The Company also
makes an evaluation of its CG practices using the PSE’s own Corporate Governance Guidelines
Disclosure Template.
c) Any deviation from Manual of Good Corporate Governance:
The Company complied with all the provisions of its Revised Manual on Corporate Governance.
d) Plan to improve corporate governance of the Company:
The Company intends to adopt further corporate governance practices of the Maybank Group
where these are not in conflict with any Philippine law or regulation.
VII. UNDERTAKING TO PROVIDE ANNUAL REPORT (SEC FORM 17-A)
The Company undertakes to provide each stockholder, without charge, a copy of its Annual
Report on SEC Form 17-A for the year ended 31 December 2011 upon written request. At
the discretion of management, a charge may be made for reasonable expenses incurred to
furnish exhibits to the annual report. Written requests should be sent to:
18
Atty. Gemma M. Santos
Corporate Secretary
Maybank ATR Kim Eng Financial Corporation
Unit 811, Tower One & Exchange Plaza,
Ayala Triangle, Ayala Avenue,
Makati City 1226
Tel Nos. 893-1150, 810-0106, 810-0276
Fax # 893 1145
The Stock Transfer Agent of the Company is:
Stock Transfer Services, Inc.
Unit 34-D Rufino Pacific Tower
6784 Ayala Avenue
Makati City
Tel. # 403-2410 / 403-2412
Fax # 403-2414
19
ATR KIMENG FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
ATR KIMENG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
Note
2011
2010
6, 9
P2,065,231,164
P1,784,179,832
6
28,927,627
24,952,819
Available-for-Sale Securities
4, 6, 10, 16
618,946,808
436,305,176
Receivables - net
4, 6, 11, 16
2,518,575,189
1,940,113,824
4, 6
35,711,132
30,637,424
4, 6, 34
8,948,915
28,097,133
4, 12, 19
712,360,228
741,870,057
Investment Properties
4, 13
261,017,966
252,772,078
Investments in Associates - net
4, 14
125,775,282
108,740,274
Property and Equipment - net
4, 15
116,645,340
129,764,793
Deferred Tax Assets
4, 32
164,760,809
114,844,032
4, 6, 17, 28, 29
188,550,350
P6,845,450,810
182,369,363
P5,774,646,805
4, 6, 18, 28
P2,010,643,410
P1,268,677,736
6, 19
383,087,671
455,347,540
4, 6, 20
974,016,252
912,579,886
6, 34
134,637
21,849,553
32
182,637,097
3,550,519,067
183,198,961
2,841,653,676
ASSETS
Cash and Cash Equivalents
Financial Assets at Fair Value through
Profit or Loss
Insurance Receivables
Due from Related Companies
Real Estate Inventories
Other Assets - net
LIABILITIES AND EQUITY
Liabilities
Accounts Payable, Accrued Expenses
and Other Liabilities
Loans Payable
Insurance Contract Liabilities
Due to Related Companies
Deferred Tax Liabilities
Total Liabilities
Forward
Note
2011
2010
21
P1,068,393,223
P1,068,393,223
1,153,568,289
1,153,568,289
Equity
Capital Stock
Additional Paid-in Capital
Unrealized Gain (Loss) on Available-for-Sale Securities
(27,154,791)
Shares of Parent Company Held by Subsidiaries
22
Retained Earnings
21
-
1,304,611
(43,437,473)
954,256,349
630,381,035
Total Equity Attributable to Equity Holders of
Parent Company
3,149,063,070
2,810,209,685
Non-Controlling Interest
Total Equity
145,868,673
3,294,931,743
122,783,444
2,932,993,129
P6,845,450,810
P5,774,646,805
See Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31
INCOME
Insurance premiums - net
Commissions
Interest
Income from sale of real estate
inventories
Service fees
Gain on sale of:
Loans receivable
Available-for-sale securities
Disposal of a subsidiary
Advisory and underwriting fees
Network fees
Management, administration and
distribution fees
Equity in net earnings of associates
Reversal of allowance for
impairment losses
Fair value gain on financial assets at
fair value through profit or loss
Others
Note
2011
2010
2009
24
P1,495,200,178
598,303,004
236,528,875
P1,363,232,384
615,430,186
213,698,012
P1,202,584,207
439,059,452
159,848,021
105,194,156
65,019,133
100,545,350
83,436,690
21,667,014
62,028,997
57,931,979
14,098,571
7,136,010
87,795,834
36,620,483
58,885,748
38,047,475
68,683,777
30,450,447
46,162,440
23,463,438
14,089,496
28,871,421
29,220,745
22,665,775
23,451,652
20,042,446
16,624,663
8,082,502
25
11
5
14
26
COST AND EXPENSES
Operating expenses
23
Cost of real estate inventories sold
Impairment losses on:
Receivables
11
Available-for-sale securities
10
Interest expense
19, 30
Foreign exchange losses - net
Fair value losses on financial assets
at fair value through profit or loss
Loss on disposal of investment in a
subsidiary and a jointly-controlled
entity
INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE
NET INCOME
Forward
32
-
34,133,242
13,429,048
86,403,007
2,855,546,798
37,878,060
2,653,782,227
22,456,799
57,964,907
2,137,036,599
2,277,836,433
63,797,256
2,063,996,691
65,182,720
1,823,253,904
10,870,154
37,346,930
15,191,809
841,480
41,505,966
165,900
17,428,919
13,274,507
34,800,337
2,195,137
19,535,401
477,324
-
29,242,705
-
2,395,013,908
9,671,213
2,240,468,621
1,891,132,257
460,532,890
413,313,606
245,904,342
123,109,097
P337,423,793
99,946,320
P313,367,286
63,108,436
P182,795,906
Note
2011
2010
2009
P323,875,314
P305,089,004
P172,292,619
13,548,479
P337,423,793
8,278,282
P313,367,286
10,503,287
P182,795,906
P0.3073
P0.3074
P0.1780
Net Income Attributable to:
Equity Holders of Parent Company
Non-Controlling Interest
Net Income
Earnings per Share Attributable
to Equity Holders of Parent
Company
Basic and Diluted Earnings Per
Share
33
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NET INCOME
OTHER COMPREHENSIVE
INCOME (LOSS)
Net change in fair value of
available-for-sale securities
Net change in fair value of
available-for-sale securities
transferred to profit or loss
OTHER COMPREHENSIVE
INCOME (LOSS), NET OF
TAX
TOTAL COMPREHENSIVE
INCOME
Total comprehensive income
attributable to:
Equity holders of Parent Company
Non-controlling interest
TOTAL COMPREHENSIVE
INCOME
2011
2010
2009
P337,423,793
P313,367,286
P182,795,906
(24,728,702)
5,210,226
33,196,975
(3,710,610)
3,586,914
21,268,301
(28,439,312)
8,797,140
54,465,276
P308,984,481
P322,164,426
P237,261,182
P295,415,912
13,568,569
P312,192,597
9,971,829
P217,231,260
20,029,922
P308,984,481
P322,164,426
P237,261,182
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
Note
Balances at January 1, 2011
Attributable to Equity Holders of Parent Company
Unrealized Gain
Shares of Parent
(Loss) on AFS Company Held by
Capital Stock
Additional
Securities
Subsidiaries
(Note 21) Paid-in Capital
(Note 10)
(Note 22)
P1,068,393,223
Total comprehensive income for
the year
Net income for the year
Net change in fair value of availablefor-sale securities
Net change in fair value of availablefor-sale securities transferred to
profit or loss
P1,153,568,289
-
-
-
-
P1,304,611
-
(P43,437,473)
-
Retained Non-Controlling
Earnings
Interest
(Note 21)
(Note 5)
Total
P630,381,035
P122,783,444
P2,932,993,129
323,875,314
13,548,479
337,423,793
(24,748,792)
-
-
20,090
(24,728,702)
-
-
(3,710,610)
-
-
-
(3,710,610)
Total other comprehensive loss
-
-
(28,459,402)
-
-
20,090
(28,439,312)
for the year
-
-
(28,459,402)
-
-
-
-
43,437,473
-
-
-
-
43,437,473
Transactions with owners, recorded
directly in equity
Decrease in the Parent Company‟s
shares of stock held by subsidiaries
Increase in non-controlling interest
Total transactions with owners
Balances at December 31, 2011
Forward
1, 22
P1,068,393,223
P1,153,568,289
(P27,154,791)
P -
323,875,314
13,568,569
308,984,481
-
9,516,660
43,437,473
9,516,660
-
9,516,660
52,954,133
P145,868,673
P3,294,931,743
P954,256,349
Note
the year
profit or loss
Capital Stock
(Note 21)
Attributable to Equity Holders of Parent Company
Unrealized Gain
Shares of Parent
(Loss) on AFS
Company Held by
Additional
Securities
Subsidiaries
Paid-in Capital
(Note 10)
(Note 22)
P989,253,179
P1,153,568,289
(P5,798,982)
-
(P209,763,323)
-
Retained
Earnings
(Note 21)
P110,811,615
P2,442,503,063
305,089,004
8,278,282
313,367,286
1,693,547
5,210,226
-
-
-
-
3,516,679
-
-
-
-
3,586,914
-
-
-
-
7,103,593
-
-
for the year
-
-
7,103,593
-
305,089,004
-
(79,140,254)
-
21
21
1, 22
79,140,044
-
-
-
-
-
166,325,850
Total
P404,432,285
Total other comprehensive income
directly in equity
Declaration of stock dividends
Issuance of shares
Decrease in the Parent Company‟s
Non-Controlling
Interest
(Note 5)
-
-
3,586,914
1,693,547
8,797,140
9,971,829
322,164,426
-
(79,140,254)
79,140,044
-
166,325,850
Total contributions by and
distributions to owners
79,140,044
-
-
-
166,325,850
-
(79,140,254)
2,000,000
166,325,640
2,000,000
79,140,044
-
-
166,325,850
(79,140,254)
2,000,000
168,325,640
P122,783,444
P2,932,993,129
Forward
P1,068,393,223
P1,153,568,289
P1,304,611
(P43,437,473)
P630,381,035
Note
the year
profit or loss
Capital Stock
(Note 21)
Attributable to Equity Holders of Parent
Unrealized Gain
Shares of Parent
(Loss) on AFS
Company Held by
Additional
Securities
Subsidiaries
Paid-in Capital
(Note 10)
(Note 22)
P989,253,179
P1,153,568,289
(P50,737,623)
-
(P34,147,717)
-
Retained
Earnings
(Note 21)
Non-Controlling
Interest
(Note 5)
Total
P311,279,920
P83,781,693
P2,452,997,741
172,292,619
10,503,287
182,795,906
9,526,635
33,196,975
-
-
-
-
23,670,340
-
-
-
-
21,268,301
-
-
Total other comprehensive income
-
-
44,938,641
-
-
for the year
-
-
44,938,641
-
21
-
-
-
1, 22
-
-
-
(175,615,606)
Total contributions by and
distributions to owners
-
-
-
(175,615,606)
-
(79,140,254)
-
7,000,000
(254,755,860)
7,000,000
-
-
-
(175,615,606)
(79,140,254)
7,000,000
(247,755,860)
directly in equity
Declaration of cash dividends
Net increase in the Parent Company‟s
P989,253,179
P1,153,568,289
(P5,798,982)
172,292,619
-
(P209,763,323)
(79,140,254)
-
P404,432,285
-
21,268,301
9,526,635
54,465,276
20,029,922
237,261,182
-
(79,140,254)
-
(175,615,606)
P110,811,615
P2,442,503,063
CONSOLIDATED STATEMENTS OF CASH FLOWS
Note
CASH FLOWS FROM
OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Interest income
25
Retirement expense
Impairment losses on availablefor-sale securities
10
Impairment losses on receivables
11
Loss (gain) on disposal of
investment in a subsidiary and
a joint venture
14
Reversal of allowance for
impairment losses
Interest expense
30
Unrealized foreign exchange loss
Unrealized loss (gain) on
financial assets at FVPL
Depreciation and amortization
15
14
Dividend income
Decrease (increase) in:
Fair value of investment properties 13
Legal policy reserves
20
Gain on:
Sale of property and equipment
15
Settlement of claims
16
Sale of AFS securities
10
Sale of loans receivable
11
Operating income (loss) before
working capital changes
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets at FVPL
Receivables
11
Real estate inventories
Other assets
Claims from court judgment award 16
Increase (decrease) in:
Accounts payable, accrued
expenses and other liabilities
Insurance contract liabilities
20
Cash generated from operations
Interest received
Interest paid
Dividends received
14
Income tax paid
Net cash provided by operating activities
Forward
2011
2010
2009
P460,532,890
P413,313,606
P245,904,342
(236,528,875)
49,548,202
(213,698,012)
(159,848,021)
37,346,930
165,900
41,505,966
(7,136,010)
9,671,213
15,191,810
-
17,428,919
-
(34,133,242)
19,535,401
4,721,970
(122,488)
31,906,360
(22,665,775)
(3,361,768)
29,242,705
27,982,195
(20,042,446)
(7,174,369)
(22,456,799)
26,980,227
(8,082,502)
(6,902,305)
(8,245,888)
37,348,535
(6,885,422)
101,317,970
(1,841,419)
48,293,968
(123,500)
(14,098,571)
(57,931,979)
(221,009)
(38,047,475)
(58,885,748)
(25,572,313)
(23,463,438)
(46,162,440)
281,659,873
295,673,993
53,968,903
(16,319,074)
(566,700,299)
29,509,829
(11,067,292)
691,159,027
24,087,830
432,329,894
240,055,328
(15,191,810)
19,531,768
(168,229,659)
508,495,521
2,195,137
34,800,337
-
(8,059,572)
8,010,502
708,540,602 (1,183,107,810)
34,583,385
7,219,894
(65,058,537)
9,669,620
118,013,528
(526,019,126)
2,800,505
442,461,250
214,668,205
(17,428,919)
7,174,369
(31,739,727)
615,135,178
1,028,333,077
40,743,722
82,851,436
91,436,768
(15,118,286)
6,902,305
(53,443,468)
112,628,755
Note
CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to:
Investments in associates
Property and equipment
AFS securities
Proceeds from:
Sale of AFS securities
Sale of property and equipment
Sale of investment property
Sale of investment in a joint
venture
Decrease (increase) in due from
related companies
Net cash provided by (used in)
investing activities
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from sale of (payments to
acquire) shares of Parent
Company held by subsidiaries
Increase (decrease) in noncontrolling interest
Proceeds from availment
(payments) of:
Due to related companies
Loans payable
Proceeds from issuance of common
shares
Net cash provided by (used in)
financing activities
NET INCREASE IN CASH
AND CASH EQUIVALENTS
EFFECT IN CASH DUE TO
LOSS OF CONTROL OF A
SUBSIDIARY
CASH AND CASH
EQUIVALENTS
AT BEGINNING OF YEAR
CASH AND CASH
EQUIVALENTS
AT END OF YEAR
14
10
10
15
13
14
34
22
2011
(P3,039,233)
(23,090,500)
(1,032,862,101)
826,454,004
4,719,521
-
21
5, 14
9
(P20,000,000)
(54,772,037)
(854,109,507)
1,057,310,142
3,064,057
20,000,000
1,886,828
2009
(P20,659,623)
(19,151,995)
(2,195,137)
30,583,851
8,341,419
-
19,445,482
40,770,174
(15,759,696)
(208,372,827)
194,149,657
(18,841,181)
68,276,101
166,325,850
(33,240,467)
9,516,660
34
19
2010
(24,328,928)
(72,259,870)
-
(2,000,000)
(132,275,341)
116,844,841
-
16,526,635
(17,392,343)
14,621,010
6,641,381
(18,796,037)
148,895,350
(12,843,784)
281,326,657
958,180,185
80,943,790
(275,325)
-
-
1,784,179,832
825,999,647
745,055,857
P2,065,231,164
P1,784,179,832
P825,999,647
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General Information
ATR KimEng Financial Corporation (the “Parent Company” or “ATRKE Financial”) is a
company incorporated in the Philippines and registered with the Philippine Securities and
Exchange Commission (SEC) on October 16, 1930. Under its amended Articles of
Incorporation, the corporate life of ATRKE Financial was extended for another 50 years up
to October 16, 2030. The shares of stock of ATRKE Financial are listed and traded as
“ATRK” on the Philippine Stock Exchange (PSE) since 1992. ATRKE Financial operates
as the holding company of the following subsidiaries:
Percentage of Ownership (h)
2010
2011
Direct Indirect
Direct Indirect
Maybank ATR Kim Eng Capital Partners, Inc.
(Maybank ATR KE Capital, formerly ATR
KimEng Capital Partners, Inc.) (a)
AsianLife and General Assurance Corporation
(ALGA) (a) (g)
Maybank ATR Kim Eng Securities, Inc.
(Maybank ATR KE Securities, formerly ATR
KimEng Securities, Inc.) (b)
ATR KimEng AMG Holdings, Inc. (ATRKE
AMG) (b)
ATR KimEng Asset Management, Inc. (ATRKE
AMI) (c)
AsianLife Financial Assurance Corporation
(ALFA) (d) (g)
All Asia Asset Management, Inc. (AAMI) (e)
ATR KimEng Land, Inc. (ATRKE Land) (a)
ATR KimEng Insurance Brokers, Inc.
(ATRKE Insurance Brokers) (f)
(a)
60.00
-
100.00
-
40.00
-
100.00
-
-
60.00
-
100.00
-
49.61
-
82.69
-
47.67
-
78.49
20.44
33.80
33.80
13.63
20.44
70.00
70.00
13.63
-
-
-
100.00
Shares not held by ATRKE Financial represents preferred shares issued to ATR Holdings, Inc. in 2011
Owned through Maybank ATR KE Capital
(c)
Owned through ATRKE AMG. Formerly The Mutual Fund Management Company of the Philippines, Inc.,
change of corporate name was approved by the SEC on December 17, 2009.
(d)
Owned through ALGA
(e)
Owned through ALFA
(f)
Owned through Maybank ATR KE Securities in 2010. ATRKE Insurance Brokers was merged with A.V.
Ocampo Insurance Brokers, Inc. (A.V. Ocampo) in 2011, with the latter as the surviving entity.
(g)
ALGA and ALFA (with SEC Nos. CS201015592 and CS20101015593, respectively), were incorporated on
October 4, 2010 as successors-in-interest of corporate entities which bear the same names as ALFA and
ALGA [collectively referred to as the “Old Insurance Group” (with SEC Nos. 14341 and 16386,
respectively)], whose corporate terms expired on August 22, 2008 and January 22, 2010, respectively.
With the approval and endorsement of the Insurance Commission (IC) of the Philippines and the SEC,
ALGA and ALFA were incorporated for the purpose of continuing the business and assume all the assets
and liabilities, including the existing in-force policies, of the Old Insurance Group. The Certificates of
Authority issued by the IC to the Old Insurance Group were also transferred to ALGA and ALFA. The
winding up of the Old Insurance Group and the incorporation of ALGA and ALFA have no impact on the
consolidated financial statements of the Group.
(h)
Based on the Parent Company’s interest in the issued and outstanding shares of the subsidiaries.
(b)
ATRKE Financial and its subsidiaries are collectively referred to in the notes to the
consolidated financial statements as the “Group”.
All of the foregoing subsidiaries were incorporated in the Philippines and are registered
with the SEC.
The principal activities of ATRKE Financial‟s subsidiaries are as follows:
Name of Subsidiaries
Maybank ATR KE Capital
ALGA
Maybank ATR KE
Securities
ATRKE AMG
ATRKE AMI
ALFA
ATRKE Insurance Brokers
AAMI
ATRKE Land
Principal Activities
Investment banking, financial advisory, corporate
finance, fixed income investment and trust services
Comprehensive insurance provider of a wide range of
group and individual life products, primarily through a
multi-channel distribution system
Research, sales and execution capabilities to a broad
range of institutional and retail clients whether foreign or
domestic
Holding company with real and personal properties,
including shares of stock, bonds, debentures, notes and
other securities, among others
Management and technical advice and services provider
for mutual funds corporations, natural persons and others
Life assurance packages provider
Insurance brokerage. ATRKE Insurance Brokers was
merged with A.V. Ocampo in March 2011 and became
an associate on the same date
AAMI has been inactive since February 2003 following
the termination of the management and distribution
agreements with related companies
Real property development
As of December 31, 2010, ATRKE Financial is 32.24% owned by ATR Holdings, Inc.
(ATR Holdings, a Filipino corporation) and 42.40%-owned by Maybank Kim Eng
Holdings Limited (Kim Eng, a Singaporean conglomerate whose shares are listed on the
Singapore Stock Exchange). The remaining outstanding shares of the Parent Company
are held by the public and others.
On June 29, 2011, Kim Eng and ATR Holdings (the “contracting parties”) signed a Sale
and Purchase Agreement (the “Agreement”), wherein Kim Eng will purchase all of the
issued common shares held by ATR Holdings in ATRKE Financial, representing a
32.24% stake in ATRKE Financial (the “Sale Shares”), for the purchase price of P4.15
per share (the “Purchase Price”) (with the purchase transaction referred to as the
“Acquisition”). Total consideration for the Acquisition is approximately P1.43 billion.
The Agreement was subject to the fulfillment of certain conditions precedents, including
the receipt of appropriate regulatory approvals. On August 4, 2011, the contracting
parties reached an agreement to adjust the Purchase Price from P4.15 per share to P4.38
per share. The transaction was executed in the PSE on August 17, 2011.
Pursuant to the provisions of the Implementing Rules and Regulations of the Securities
Regulation Code (SRC) and other issuance of the SEC, the execution of the Agreement
triggered an obligation by Kim Eng to undertake a mandatory tender offer for the issued
common shares of ATRKE Financial other than those already owned, controlled or
agreed to be acquired by Kim Eng (the “Offer Shares”) (the “Mandatory Tender Offer”,
and together with the Acquisition, the “Transaction”). The offer price for each Offer
-2-
Share will be the Purchase Price. On October 24, 2011, Kim Eng announced that it will
conduct a tender offer for all the common shares of the capital stock of ATRKE Financial
commencing on October 27, 2011. As a result of the Tender Offer, the Parent Company
became 99.11% owned by Kim Eng as of December 31, 2011. The remaining
outstanding shares of the Parent Company are held by the public. The ultimate parent
company of ATRKE Financial is Malayan Banking Berhad.
On January 2, 2012, Kim Eng Holdings Limited officially changed its corporate name to
Maybank Kim Eng Holdings Limited.
On January 16, 2012, the shareholders of ATRKE Financial approved the change in its
corporate name from ATR KimEng Financial Corporation to Maybank ATR Kim Eng
Financial Corporation.
On February 6, 2012, the Board of Directors (BOD) approved the change of the trading
symbol of the Parent Company‟s shares in the PSE from “ATRK” to MAKE”. The
change will become effective after submission of the necessary documents which
includes the SEC approval of the Parent Company‟s change in corporate name.
The registered office address and principal place of business of the Parent Company is at
Unit 811, 8th Floor, Tower One and Exchange Plaza, Ayala Triangle, Ayala Avenue,
Makati City.
These consolidated financial statements have been reviewed by the Audit Committee and
recommended for approval by the BOD on February 6, 2012. On the same date, these
consolidated financial statements were approved and authorized for issue by the BOD.
2. Basis of Preparation and Statement of Compliance
Statement of Compliance
The consolidated financial statements of the Group have been prepared in compliance
with Philippine Financial Reporting Standards (PFRS).
Basis of Measurement
The accompanying consolidated financial statements have been prepared using the
historical cost basis, except for financial assets at fair value through profit or loss
(FVPL), available-for-sale (AFS) securities and investment properties, which are all
carried at fair value.
Functional and Presentation Currency
The consolidated financial statements are presented in Philippine peso, which is the
functional and presentation currency of the Parent Company. The Philippine peso is also
the functional currency of its subsidiaries. All values are rounded to the nearest peso,
unless otherwise indicated.
Use of Estimates and Judgment
The preparation of the accompanying consolidated financial statements in conformity
with PFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the Group‟s accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements are
disclosed in Note 4 to the consolidated financial statements.
-3-
3. Summary of Significant Accounting Policies
Adoption of New or Revised Standards, Amendments to Standards and Interpretations
The Financial Reporting Standards Council approved the adoption of a number of new or
revised standards, amendments to standards, and interpretations [based on International
Financial Reporting Interpretations Committee (IFRIC) Interpretations] as part of PFRS.
The Group adopted the following PFRSs starting January 1, 2011 and accordingly,
changed its accounting policies in the following areas. None of these have a significant
effect on the consolidated financial statements of the Group.

Amendment to PAS 32, Financial Instruments: Presentation - Classification of
Rights Issues, permits rights, options or warrants to acquire a fixed number of the
entity‟s own equity instruments for a fixed amount of any currency to be classified as
equity instruments provided the entity offers the rights, options or warrants pro rata
to all of its existing owners of the same class of its own non-derivative equity
instruments.

Revised PAS 24, Related Party Disclosures (2009) amends the definition of a related
party.

Improvements to PFRS 2010 contain 11 amendments to six standards and to one
interpretation. Following are the amendments to standards relevant to the Group:

PFRS 3, Business Combinations. The amendments: (i) clarify that contingent
consideration arising in a business combination previously accounted for in
accordance with PFRS 3 (2004) that remains outstanding at the adoption date of
PFRS 3 (2008) continues to be accounted for in accordance with PFRS 3 (2004);
and (ii) limit the accounting policy choice to measure non-controlling interests
upon initial recognition at fair value or at the non-controlling interest‟s
proportionate share of the acquiree‟s identifiable net assets to instruments that
give rise to a present ownership interest and that currently entitle the holder to a
share of net assets in the event of liquidation, among others.

PAS 27, Consolidated and Separate Financial Statements. The amendments
clarify that the consequential amendments to PAS 21, The Effects of Changes in
Foreign Exchange Rates, PAS 28, Investments in Associates and PAS 31,
Interests in Joint Ventures resulting from PAS 27 (2008) should be applied
prospectively, with the exception of amendments resulting from renumbering.

PFRS 7, Financial Instruments: Disclosures. The amendments add an explicit
statement that qualitative disclosure should be made in the context of the
quantitative disclosures to better enable users to evaluate an entity‟s exposure to
risks arising from financial instruments. In addition, the International Accounting
Standards Board (IASB) amended and removed existing disclosure requirements.

PAS 1, Presentation of Financial Statements. The amendments clarify that
disaggregation of changes in each component of equity arising from transactions
recognized in other comprehensive income is also required to be presented, but
may be presented either in the statement of changes in equity or in the notes.
The principal accounting policies applied in the preparation of the consolidated financial
statements are set out below. These policies have been consistently applied to all the
years presented, unless otherwise stated.
-4-
Principles of Consolidation
The consolidated financial statements include the financial statements of the Parent
Company and the subsidiaries enumerated in Note 1 to the consolidated financial
statements. The financial statements of the subsidiaries are prepared using the same
reporting date and reporting period as those of the Parent Company, using consistent
accounting policies.
Subsidiaries are entities controlled by the Group. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing
whether the Group controls an entity. Subsidiaries are fully consolidated from the date
control is transferred to the Group and cease to be consolidated from the date control is
transferred out of the Group.
As discussed in Note 5 to the consolidated financial statements, ATR Holdings holds
preferred shares of ALGA as of December 31, 2011 and those of ATRKE Land as
December 31, 2011 and 2010. These preferred shares are voting, and cumulative and
earns dividend at a fixed percentage per annum. By virtue of these subscriptions, ATR
Holdings holds 57.97% and nil voting interest in ALGA as of December 31, 2011 and 2010
and 66% voting interest in ATRKE Land as of December 31, 2011 and 2010, respectively.
On August 18, 2011, ATR Holdings executed a Joint Voting Agreement, whereby ATR
Holdings agreed to, at anytime (as permitted by local statutes), vote together and in
accordance with the manner by which the BOD of ATRKE Financial shall vote on
matters requiring resolution with respect to its interest in ALGA and ATRKE Land.
A similar joint voting agreement was executed between ATR Holdings and ATRKE
Financial in 2008 relating to the interest of ATR Holdings in the preferred shares of
ATRKE Land as of December 31, 2010.
Due to economic interest and control of ATRKE Financial in ALGA and ATRKE Land
on the basis of the joint voting agreements executed, ATRKE Financial considers these
entities as subsidiaries.
The share in net income of the minority interest of ATR Holdings includes only the
cumulative dividend income earned from the date they became the minority shareholders
of ALGA and ATRKE Land.
Intercompany transactions, balances, income and expenses and unrealized gains and
losses on transactions between entities in the Group are eliminated in full. Noncontrolling interests represent the interests of shareholders outside the Group in the
operating results and net assets of Maybank ATR KE Capital, ALGA, ATRKE AMG,
ATRKE AMI and ALFA.
Changes in Ownership Interest
When the Group loses control over a subsidiary, it derecognizes the assets and liabilities
and related equity components of the former subsidiary. Any gain or loss is recognized in
profit or loss. Any investment retained in the former subsidiary is measured at its fair
value at the date when control is lost.
Changes in ownership interest of a subsidiary that do not result in loss of control are
accounted for as equity transactions and will have no impact on goodwill and do not give
rise to an amount recognized in profit or loss.
-5-
Business Combination and Goodwill
The Group applies the acquisition method to account for business combinations.
Goodwill is measured as the fair value of the consideration transferred including the
recognized amount of any non-controlling interest in the acquiree, less the net recognized
amount (generally fair value) of the identifiable assets acquired and liabilities assumed,
all measured as of the acquisition date. Consideration transferred includes the fair values
of the assets transferred, liabilities incurred by the Group to the previous owners of the
acquiree, and equity interests issued by the Group. Consideration transferred also
includes the fair value of any contingent consideration. The Group measures any noncontrolling interest at its proportionate interest in the identifiable net assets of the
acquiree. Transaction costs that the Group incurs in connection with a business
combination, such as finder‟s fees, legal fees, due diligence fees and other professional
and consulting fees are expensed as incurred.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is reviewed for impairment, annually or more frequently if events or
changes in circumstances indicate that the carrying amount may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group‟s cash-generating units (CGU),
or groups of CGU that are expected to benefit from the combination‟s synergies.
Impairment is determined by assessing the recoverable amount of the CGU (group of
CGU), to which the goodwill relates. Where the recoverable amount of the CGU is less
than the carrying amount, an impairment loss is recognized. Where goodwill forms part
of a CGU and part of the operation within that unit is disposed of, the goodwill is
associated with the operation disposed of and is included in the carrying amount of the
operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this circumstance is measured on the basis of the relative values of the
operation disposed of and the portion of the CGU retained.
The Group considers its reportable segment as its CGU for the impairment analysis of the
Group‟s goodwill, if any.
Financial Instruments
Date of Recognition. Financial instruments are recognized in the consolidated statements
of financial position when the Group becomes a party to the contractual provisions of the
instrument. Purchases or sales of financial assets that require delivery of the assets
within the time frame established by regulation or convention in the marketplace are
recognized on the trade date.
Initial Recognition of Financial Instruments. Financial instruments are recognized
initially at fair value of the consideration given (in case of an asset) or received (in case
of a liability). Except for financial instruments at FVPL, the initial measurement of
financial instruments includes transaction costs. The Group classifies its financial assets
into the following categories: financial assets at FVPL, held-to-maturity (HTM)
investments, AFS securities, and loans and receivables. The Group classifies its financial
liabilities either as financial liabilities at FVPL or other financial liabilities. The
classification depends on the purpose for which the instruments were acquired or
incurred and whether these are quoted in an active market. Management determines the
classification of its financial instruments at initial recognition and, where allowed and
appropriate, re-evaluates such designation at every reporting date.
-6-
Financial instruments issued by the Group are classified as liability or equity in
accordance with the substance of the contractual arrangement. Any interest, dividends,
foreign exchange gains and losses from financial instruments or component considered as
a financial liability are recognized in profit or loss for the period. On the other hand,
distributions to the holders of financial instruments classified as equity are treated as
owner-related and presented in the consolidated statement of changes in equity.
“Day 1” Profit or Loss. Where the transaction price in a non-active market is different
from the fair value from other observable current market transactions in the same
instrument or based on a valuation technique whose variables include only data from
observable market, the Group recognizes the difference between the transaction price and
fair value (a “Day 1” profit or loss) in profit or loss, unless it qualifies for recognition as
some other type of asset. In cases where data used as inputs in a valuation model are not
observable, the difference between the transaction price and model value is only
recognized in profit or loss when the inputs become observable or when the instrument is
derecognized. For each transaction, the Group determines the appropriate method of
recognizing the “Day 1” profit or loss.
Financial Assets or Financial Liabilities at FVPL. This category consists of financial
assets that are held for trading or financial instruments designated by management as at
FVPL on initial recognition. Derivative instruments, if any, except those covered by
hedge accounting relationships, are classified under this category.
Financial assets and financial liabilities at FVPL are recorded in the consolidated
statement of financial position at fair value, with changes in the fair value recognized in
profit or loss. Interest earned from and interest incurred on these financial instruments
are recognized on an accrual basis using the effective interest method, while dividend
income is recorded when the right of payment has been established.
Financial assets or financial liabilities that are not held for trading but are classified under
the FVPL category are designated by management as such at initial recognition only
when the following criteria are met:

The designation eliminates or significantly reduces the inconsistent treatment that
would otherwise arise from measuring the assets or liabilities or recognizing gains or
losses on them on a different basis; or

The assets and liabilities are part of a group of financial assets, financial liabilities or
both which are managed and their performance evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy; or

The financial instrument contains an embedded derivative, unless the embedded
derivative does not significantly modify the cash flows or it is clear, with little or no
analysis, that it would not be separately recorded.
As of December 31, 2011 and 2010, the Group‟s financial assets at FVPL pertain to
Maybank ATR KE Securities‟ quoted equity securities which are held for trading.
HTM Investments. HTM investments are quoted non-derivative financial assets with
fixed or determinable payments and fixed maturities for which management has the
positive intention and ability to hold to maturity. Where the Group sells or reclassifies
other than an insignificant amount of HTM investments, the entire category would be
tainted and reclassified at fair value as AFS securities. After initial measurement, these
assets are subsequently measured at amortized cost using the effective interest method,
-7-
less allowance for impairment, if any. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees that are an integral part of the
effective interest rate. The amortization is included as part of interest income in profit or
loss. Any impairment losses are recognized in profit or loss. The effects of revaluing
foreign currency-denominated HTM investments are also recognized in profit or loss.
As of December 31, 2011 and 2010, the Group does not have any HTM investments.
Loans and Receivables. Loans and receivables are non-derivative financial assets with
fixed or determinable payments and fixed maturities that are not quoted in an active
market. They are not entered into with the intention of immediate or short-term resale.
After initial measurement, the loans and receivables are subsequently measured at
amortized cost using the effective interest method, less allowance for impairment, if any.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees that are an integral part of the effective interest rate. The
amortization is included as part of interest income for the period. The losses arising from
the impairment, if any, of certain loans and receivables are recognized in profit or loss.
As of December 31, 2011 and 2010, the Group‟s loans and receivables include cash and
cash equivalents, receivables, insurance receivables, due from related companies and
lease and other deposits.
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with an original
maturity of three months or less from the date of placement and that are subject to an
insignificant risk of change in value.
AFS Securities. AFS securities are financial assets which are designated as such, or do
not qualify to be classified or have not been classified under any other financial category.
They are purchased and may be held indefinitely or sold in response to liquidity
requirements or changes in market conditions. These include debt and equity securities.
After initial measurement, AFS securities are subsequently measured at fair value.
Changes in fair value, other than impairment losses and foreign currency differences on
AFS debt securities, are recognized in other comprehensive income and lodged in “Net
unrealized gain (loss) on AFS securities” account within equity in the consolidated
statement of financial position. The losses arising from the impairment of AFS, if any,
are recognized in profit or loss. When the security is disposed of, the cumulative gain or
loss previously recognized in other comprehensive income is transferred to profit or loss.
The effective yield component of AFS debt securities, as well as the impact of
restatement on foreign currency-denominated AFS debt securities, is recognized also in
profit or loss.
When the fair value of AFS securities cannot be measured reliably because of lack of
reliable estimates of unobservable inputs, such as in the case of unquoted equity
instruments, such AFS securities are allowed to be carried at cost less impairment, if any.
This category includes investments in equity securities not held for control or significant
influence over the investee and debt securities.
As of December 31, 2011 and 2010, the Group‟s AFS securities include investments in
shares of stock, proprietary shares, mutual funds and government securities.
-8-
Other Financial Liabilities. Issued financial instruments or their components, which are
not classified as at FVPL, are classified as other financial liabilities at amortized cost,
where the substance of the contractual arrangement results in the Group having an
obligation either to deliver cash or another financial asset to the holder or lender, or to
satisfy the obligation other than by the exchange of a fixed amount of cash or another
financial asset or a fixed number of the Group‟s own equity instruments.
After initial measurement, these financial liabilities are subsequently measured at
amortized cost using the effective interest method. Amortized cost is calculated by
taking into account any discount or premium on the issue and fees that are an integral
part of the effective interest rate. The amortization is included as part of interest expense
for the period.
This category includes to the Group‟s accounts payable, accrued expenses and other
liabilities (other than liabilities covered by other accounting standards, such as retirement
liability and income tax payable), loans payable, and amounts due to related companies,
and insurance contract liabilities (except legal policy reserves).
Offsetting of Financial Instruments
Financial assets and financial 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 asset and settle the liability simultaneously. This is not
generally the case with master netting agreements. Thus, the related assets and liabilities
are presented on a gross basis in the consolidated statement of financial position.
Impairment of Financial Assets
The Group assesses at each reporting date whether a financial asset or a group of
financial assets is impaired.
A financial asset or a group of financial assets is deemed to be impaired if, and only if,
there is objective evidence of impairment as a result of one or more events that has
occurred after the initial recognition of the asset (an incurred loss event) and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset or the
group of financial assets that can be reliably estimated. Evidence of impairment may
include indications that the borrower or a group of borrowers is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability
that they will enter bankruptcy or other financial reorganization and where observable data
indicate that there is measurable decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate with defaults.
Loans and Receivables. For loans and receivables, the Group first assesses whether
objective evidence of impairment exists individually for financial assets that are
individually significant, or collectively for financial assets that are not individually
significant. If the Group determines that no objective evidence of impairment exists for
individually assessed accounts, whether significant or not, it includes the asset in a group
of financial assets with similar credit risk characteristics and collectively assesses for
impairment. Assets that are individually assessed for impairment and for which an
impairment loss is, or continues to be, recognized are not included in the collective
assessment for impairment. For the purpose of a collective evaluation of impairment,
loans and receivables are grouped on the basis of such credit risk characteristics as type
of borrower, collateral type, credit and payment status, and term.
-9-
If there is objective evidence that an impairment loss has been incurred, the amount of
the loss is measured as the excess of loan‟s carrying amount over its net realizable value,
normally based on the present value of the estimated future cash flows from the asset.
The present value of the estimated future cash flows is discounted at the loan‟s original
effective interest rate. Time value is generally not considered when the effect of
discounting is not material. If a loan has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate. Any impairment loss
determined is recognized in profit or loss.
The carrying amount of an impaired loan is reduced to its net realizable value through the
use of an allowance account. For an impaired loan, interest income continues to be
recognized using the rate of interest used to discount the future cash flows for the
purpose of measuring the impairment loss. If, in a subsequent period, the amount of the
allowance for impairment decreases because of an event occurring after the impairment
loss was recognized, the previously recognized impairment loss is reversed to profit or
loss, to the extent that the resulting carrying amount of the asset does not exceed its
carrying amount had no impairment loss been recognized.
Where loans and receivables have been ascertained to be worthless, the related amount is
written off against the corresponding allowance for impairment loss.
AFS Securities Carried at Fair Value. In the case of equity securities classified as AFS
securities, impairment indicators would include a significant or prolonged decline in the
fair value of the securities below cost. Where there is objective evidence of impairment,
the cumulative loss in equity, measured as the difference between the acquisition cost and
the current fair value, less any impairment loss previously recognized, is transferred to
profit or loss. Subsequent recovery in the fair value of an impaired AFS equity security is
recognized in other comprehensive income.
In the case of AFS debt securities, impairment is assessed based on the same criteria as
financial assets carried at amortized cost. Interest continues to be accrued at the effective
interest rate on the reduced carrying amount of the asset and is recorded as part of interest
income for the period. If, in a subsequent year, the fair value of a debt instrument
increase and the increase can be objectively related to an event occurring after the
impairment loss was recognized in profit or loss, the impairment loss is reversed through
profit or loss to the extent that the resulting carrying amount of the asset does not exceed
its carrying amount had no impairment loss been recognized.
AFS Financial Assets Carried at Cost. If there is an objective evidence of an impairment
loss on an unquoted equity instrument that is not carried at fair value because its fair
value cannot be reliably measured, the amount of the loss is measured as the difference
between the asset‟s carrying amount and the present amount of estimated future cash
flows discounted at the current market rate of return for a similar financial asset.
Derecognition of Financial Assets and Liabilities
Financial Asset. A financial asset (or, where applicable a part of a financial asset or part
of a group of similar financial assets) is derecognized when:

The right to receive cash flows from the asset has expired; or

The Group retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a “passthrough” arrangement; or
- 10 -

The Group has transferred its right to receive cash flows from the asset and either
has: (a) transferred substantially all the risks and rewards of the asset; or (b) has
neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
Where the Group has transferred its right to receive cash flows from an asset and has
neither transferred nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognized to the extent of the Group‟s
continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could be
required to pay.
Financial Liability. A financial liability is derecognized when the obligation under the
liability is discharged or cancelled or has expired.
Securities Lending and Borrowing. Securities lending and borrowing transactions are
usually collateralized by securities or cash. The transfer of the securities to counterparties
is only reflected in the consolidated statement of financial position if the risks and
rewards of ownership are also transferred. Accordingly, securities borrowed are not
derecognized unless they are sold to third parties, in which case the obligation to return
the securities is recorded as a trading liability and measured at fair value with any gains
or losses included in profit or loss. Cash advanced or received as collateral is recorded as
an asset or liability, respectively.
Real Estate Inventories
Real estate inventories are carried at the lower of cost and net realizable value (NRV).
NRV is the estimated selling price in the ordinary course of business, less estimated costs
of completion and estimated costs necessary to make the sale. Cost includes those costs
incurred for development and improvement of the properties.
The Group‟s real estate inventories are stated at deemed cost up to January 1, 2006
following a change in use of the properties. The deemed cost is the fair value of the
properties based on the latest appraisal report at the date of change in use (see Note 12).
Investment Properties
Properties held for long-term rental yields and for capital appreciation are classified as
investment properties.
Investment properties are measured initially at cost, including transaction costs. The
carrying amount includes the cost of replacing part of an existing investment property at
the time that cost is incurred only when it is probable that the future economic benefits
associated with the item will flow to the Group and the cost of the item can be reliably
measured; and excludes the cost of day-to-day servicing. All other repairs and
maintenance are recognized in profit or loss during the period in which they are incurred.
Subsequent to initial recognition, investment properties are stated at fair value which
reflects market conditions at the reporting date. Gains and losses arising from changes in
the fair value of investment property are included in profit or loss in the year in which
they arise.
An investment property is derecognized when it has either been disposed of or the
investment property is permanently withdrawn from use and no future benefit is expected
from its disposal. Any gains or losses from derecognition of an investment property are
recognized in profit or loss in the year of disposal or retirement.
- 11 -
Transfers are made to investment property when, and only when, there is a change in use,
evidenced by the end of owner-occupation or commencement of an operating lease to
another party.
Transfers are made from investment property when, and only when, there is a change in
use, evidenced by commencement of owner-occupation or commencement of
development with a view to sell.
Property that is being constructed for future use as investment property is accounted for at
fair value.
Investments in Associates
The Group‟s investments in associates are accounted for using the equity method.
Associates are entities over which the Group has significant influence and which are
neither subsidiaries nor joint ventures of the Group. The investments in associates are
carried in the consolidated statement of financial position at cost plus post-acquisition
changes in the Group‟s share in net assets of the associates, less any impairment. The
Group‟s share in the results of operations of the associates is recognized in profit or loss.
Unrealized gains arising from transactions with its associates are eliminated to the extent of
the Group‟s interest in the associates against the related investments. Unrealized losses are
eliminated similarly but only to the extent that there is no evidence of impairment of the
asset transferred.
When the Group‟s accumulated share in net losses of an associate equals or exceeds the
carrying amount of the investment, including advances for future conversion to equity,
the Group discontinues the recognition of its share in additional losses and the investment
is reported at nil value. If the associate subsequently reports net income, the Group will
resume applying the equity method only after its share in that net income equals the share
in net losses not recognized during the period the equity method was suspended.
The financial statements of the associates are prepared using the same reporting date and
reporting period as those of the Group.
Property and Equipment
Property and equipment include owner-occupied real properties and equipment used in
the operations of the Group. Property and equipment are stated at cost less accumulated
depreciation and amortization and allowance for impairment, if any.
The initial cost of an item of property and equipment comprises its purchase price,
including any directly attributable costs of bringing the asset to its working condition and
location for its intended use. Subsequent costs are included in the asset‟s carrying amount
or recognized as a separate asset, as appropriate, only when it is probable that the future
economic benefits associated with the item will flow to the Group and the cost of the
item can be reliably measured. All other repairs and maintenance are recognized in profit
or loss during the period in which they are incurred.
- 12 -
Depreciation and amortization are computed on a straight-line basis over the estimated
useful lives of the property and equipment, as follows:
Condominium units
Condominium improvements
Transportation equipment
Furniture, fixtures and office equipment
Computer hardware, software and
peripherals
Leasehold improvements
Number of Years
40
10
5
2-5
2-3
2 - 10 or lease term,
whichever is shorter
The residual values, useful lives and depreciation and amortization method are reviewed
periodically to ensure that these are consistent with the expected pattern of economic
benefits from items of property and equipment.
Construction in progress is stated at cost. This includes the costs of construction and
other direct costs. Construction in progress is not depreciated until such time that the
relevant assets are substantially complete and available for use.
An item of property and equipment is derecognized upon disposal or when no further
future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in profit or loss in the period
when the asset is derecognized.
Exchange Trading Right
Exchange trading right was acquired as a result of the PSE conversion plan to preserve
the access of stock brokerage to the trading facilities and continue to transact business in
the PSE. The exchange trading right is an intangible asset that is regarded as having an
indefinite useful life as there is no foreseeable limit to the period over which this asset is
expected to generate net cash inflows for Maybank ATR KE Securities.
Exchange trading right is carried at the amount allocated from the original cost of the
exchange membership seat less any allowance for impairment. Maybank ATR KE
Securities does not intend to sell the exchange trading right in the near foreseeable future.
Impairment of Non-financial Assets
At each reporting date, the Group assesses whether there is any indication that its
nonfinancial assets (which include investment properties, property and equipment and
investment in associates and a jointly-controlled entity, and exchange trading right) may
be impaired. When an indicator of impairment exists or when an annual impairment
testing for an asset (such as goodwill and exchange trading right) is required, the Group
makes a formal estimate of the recoverable amount. The recoverable amount is the
higher of an asset‟s or CGU‟s fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets, in which case the
recoverable amount is assessed as part of the CGU to which it belongs. Where the
carrying amount of an asset (or CGU) exceeds its recoverable amount, the asset (or
CGU) is considered impaired and is written down to its recoverable amount. 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 (or CGU).
- 13 -
An impairment loss is recognized in the period when it arises.
For non-financial assets, an assessment is made at each reporting date as to whether there
is any indication that previously recognized impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is estimated. A
previously recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the asset‟s recoverable amount since the last impairment loss
was recognized. If that is the case, the carrying amount of the asset is increased to its
recoverable amount. The reversal can be made only to the extent that the resulting
carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation and amortization, had no impairment loss been recognized. Such
reversal is recognized in profit or loss. After such a reversal, the depreciation is adjusted
in future years to allocate the asset‟s revised carrying amount, less any residual value, on
a systematic basis over its remaining life.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation. If the effect of the time value of money is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessment of the time value of money and where
appropriate, the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognized as an interest expense.
Retirement Cost
Retirement cost is actuarially determined using the projected unit credit method. This
method reflects services rendered by employees up to the date of valuation and
incorporates assumptions concerning employees‟ projected salaries. Actuarial valuations
are conducted with sufficient regularity, with option to accelerate when significant
changes to underlying assumptions occur. Retirement cost includes current service cost,
interest cost, adjusted for the expected return on any plan assets, actuarial gains and
losses, the effect of any past service cost and curtailment or settlement.
Retirement asset recognized by a subsidiary in the Group, in respect of the defined
benefit retirement plan, is the lower of: (a) the fair value of the plan assets at the
reporting date less the present value of the defined benefit obligation, together with
adjustments for unrecognized actuarial gains or losses and past service costs that shall be
recognized in later periods; or, (b) the total of any cumulative unrecognized net actuarial
losses and past service costs and the present value of any economic benefits available in
the form of refunds from the plan or reductions in future contributions to the plan.
Net retirement liability is the aggregate of the present value of the defined benefit
obligation and any actuarial gains not recognized reduced by past service cost and
actuarial losses not yet recognized and the fair value of plan assets out of which the
obligations are to be settled directly.
The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using risk-free interest rate of government bonds that have
terms to maturity approximating to the terms of the related retirement liability. Actuarial
gains and losses arising from experience adjustments and changes in actuarial
assumptions are recognized in profit or loss when the net cumulative unrecognized
actuarial gains and losses at the end of the previous period exceeded 10% of the higher of
the present value of the defined benefit obligation and the fair value of plan assets at that
date. These gains or losses are recognized over the expected average remaining working
lives of the employees participating in the plan.
- 14 -
Past service costs, if any, are recognized immediately in profit or loss, unless the changes
to the retirement plan are conditional on the employees remaining in service for a
specified period of time (the vesting period). In this case, the past service costs are
amortized on a straight-line basis over the vesting period.
Bonus Plans. This is short-term employee benefit obligation which is measured on an
undiscounted basis and is expensed as the relative service is provided. A liability is
recognized for the amount expected to be paid under the short-term cash bonus or profit
sharing plans if the Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee, and the obligation can be
estimated reliably.
Shares of Parent Company Held by Subsidiaries
Where any subsidiary of the Group purchases the Parent Company‟s capital stock
(treasury shares), the consideration paid, including any directly attributable incremental
cost (net of income tax) is deducted from equity attributable to the Parent Company‟s
equity holders until the shares are cancelled, reissued, or disposed of. Where such shares
are subsequently sold or reissued, any consideration received, net of any directly
attributable incremental transaction cost and the related income tax effects, is included in
equity attributable to the Parent Company‟s equity holders.
Income Recognition
Income is measured at the fair value of the consideration received or receivable, net of
discounts. Income is recognized to the extent that it is probable that economic benefits
will flow to the Group and the income can be reliably measured. The following specific
recognition criteria must also be met before income is recognized:
Insurance Premiums. Premiums arising from insurance contracts are recognized as
income when received and on the issue date which coincides with the effective date of
the insurance policies for the first year premiums. For the renewal business, premiums
are recognized as income when still in force and in the process of collection based on
actuarial methods and assumptions. Premiums are shown before deduction of
commissions and reinsurers‟ share on gross premiums.
Commission Income. Commission income is recognized when the related services are
rendered. Maybank ATR KE Securities records commissions and related clearing
expenses on a trade date basis upon occurrence of securities transactions. Income
relating to insurance brokering is taken into account at the later of the policy inception
date or when the policy placement has been completed and confirmed.
Advisory and Underwriting Fees. Advisory and underwriting fees are recognized upon
billing to clients based on the stage of completion of the service.
Income from Sale of Real Estate Inventories. Income is recognized using the percentage of
completion method. Under this method, income is recognized as the related obligation is
fulfilled, measured principally on the basis of the estimated completion of a physical
proportion of the contract work.
Any excess of collections over the recognized income is included as customers‟ deposits
under the “Accounts payable, accrued expenses and other liabilities” account in the
consolidated statements of financial position.
- 15 -
If none of the income recognition criteria is met, the deposit method is applied until all the
conditions for recording a sale are met. Pending recognition of sale, cash received from the
buyers is presented as part of “Customers‟ deposits” included under “Accounts payable,
accrued expenses and other liabilities” account in the consolidated statements of financial
position.
Network and Other Services Fees. Network, management, administration, distribution,
trust and redemption fees are recognized when services are rendered.
Interest Income. For all interest-bearing financial assets, interest income is recorded at the
effective interest rate, which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial instrument or a shorter period, where appropriate,
to the net carrying amount of the financial asset.
Once the recorded value of a financial asset or group of similar financial assets has been
reduced due to an impairment loss, future interest income is based on the reduced
carrying amount and is accrued using the rate of interest used to discount future cash
flows for the purpose of measuring impairment loss.
Dividend Income. Dividend income is recognized when the shareholders‟ right to receive
payment is established.
Expense Recognition
Expenses are recognized 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.
Expenses are recognized when they are incurred.
Expenses connected to investment properties are treated as ordinary operating expenses
and are recognized when incurred.
Leases
As Lessee
Leases where the lessor does not transfer substantially all the risks and benefits of
ownership of the assets are classified as operating leases. Lease expense is recognized on
a straight-line basis over the lease term.
As Lessor
Leases where the Group does not transfer substantially all the risks and benefits of
ownership of the assets to the lessee are classified as operating leases. Lease income is
recognized on a straight-line basis over the lease term.
Foreign Currency-Denominated Transactions and Balances
Transactions in foreign currencies are initially recorded in the foreign currency exchange
rate prevailing at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated to the functional currency at the
closing rate prevailing at reporting date. The foreign currency gain or loss on monetary
items is the difference between amortized cost in the functional currency at the beginning
of the period, adjusted for effective interest and payments during the period, and the
amortized cost in foreign currency translated at the closing rate prevailing at the end of
the reporting period. Foreign currency differences arising on translation are recognized in
profit or loss, except for differences arising on the translation of AFS equity securities,
which are recognized as other comprehensive income.
- 16 -
Income Tax
Current Tax. Current tax assets and liabilities for the current period are measured at the
amount expected to be recovered from or paid to the taxation authority. The tax rates and
the tax laws used to compute the amount are those that are enacted or substantively
enacted as at the reporting date.
Deferred Tax. Deferred tax is provided on all temporary differences at the reporting date
between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax
assets are recognized for all deductible temporary differences, carryforward benefits of
unused tax credits from the excess of minimum corporate income tax (MCIT) over the
regular corporate income tax (RCIT), and unused net operating loss carryover (NOLCO),
to the extent that it is probable that sufficient taxable income will be available against
which the deductible temporary differences and carryforward benefits of unused tax
credits from excess of MCIT over RCIT and unused NOLCO can be utilized. Deferred
tax, however, is not recognized on temporary differences that arise 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, affects neither the accounting income nor taxable income or
loss.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient taxable income will be available
to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax
assets are reassessed at each reporting date and are recognized to the extent that it has
become probable that future taxable profit will allow the deferred tax assets to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are applicable to the
period when the asset is realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted as at the reporting date.
Current tax and deferred tax are recognized in profit or loss except to the extent that it
relates to a business combination or items recognized directly in equity or in other
comprehensive income.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right
exists to set off current tax assets against current tax liabilities and deferred taxes relate to
the same taxable entity and the same taxation authority.
Insurance Contracts
Product Classification
ALGA and ALFA issue contracts that transfer insurance risk or financial risk or both.
Insurance contracts are those contracts that transfer significant insurance risk. Such risk
includes the probability of having to pay benefits on the occurrence of an insured event
such as death, accident or disability. ALGA and ALFA may also transfer insurance
contracts through its reinsurance arrangements to hedge a greater possibility of claims
occurring than expected. Such contracts may also transfer financial risk. As a general
guideline, ALFA and ALGA define significant insurance risk as the possibility of having
to pay benefits on the occurrence of an insured event that are at least 10% more than the
benefits payable if the insured event did not occur. Investment contracts are those
contracts that transfer financial risk with no significant insurance risk.
- 17 -
Insurance contracts may contain a premium and capital fund rider that entitles the
policyholder to receive additional benefits based on investment performance of ALFA
and ALGA. These contracts are recorded as financial liabilities under premium deposit
fund. Local statutory regulation sets out the bases and limits for the amounts on which
the additional benefits are based and the accumulation of fund deposits and contributions.
Recognition and Measurement
Premiums arising from insurance contracts are recognized as income when received and
on the issue date which coincides with the effective date of the insurance policies for the
first year premiums. For the renewal business, premiums are recognized as income when
still in force and in the process of collection based on actuarial methods and assumptions.
Premiums are shown before deduction of commissions.
Insurance benefits and claims are recorded when incurred. These are recorded when
notices of claims have been received and dividends have been incurred or when policies
reach maturity. For unpaid benefits, a provision is made for the estimated cost of all
claims received but not settled as of reporting date less reinsurance recoveries. Provision
is also made for the cost of claims incurred but not reported (IBNR) until after the
reporting date based on ALGA and ALFA‟s experience and historical data. Differences
between the provision for outstanding claims at the reporting date and subsequent
revisions and settlements are included in the consolidated statement of income in the year
the revisions and settlements are made. Unpaid benefits to life policies form part of
policy and contract claims payable included under “Insurance contract liabilities” account
in the consolidated statement of financial position (see Note 20).
Aggregate reserve for life insurance policies represents the accumulated total liability for
policies in force at the reporting date. Such reserves are established at amounts adequate
to meet the estimated future obligations of all life insurance policies in force. The
reserves are calculated using actuarial methods and assumptions as approved by the IC,
subject to the liability adequacy test.
A number of life insurance contracts contain discretionary participating feature. This
feature entitles policyholders to policy dividends whose amounts and timing of payments
are contractually under the discretion of ALGA and ALFA. The policy dividends of
ALGA and ALFA are declared annually, the amounts are computed using actuarial
methods and assumptions, and are included under “Insurance benefits and claims”
included under the “Operating expenses” account in the consolidated statement of
income, while policyholders‟ dividends are included under the “Insurance contract
liabilities” account in the consolidated statement of financial position (see Note 20).
Commissions and other expenses for the acquisition of insurance contracts are expensed
as incurred.
Liability Adequacy Test
At each reporting date, a liability adequacy test is performed for the insurance contract
liabilities. In performing this test, current best estimates of future cash flows and claims
handling and administration expenses, as well as investment income from the asset
backing such liabilities, are used. Any deficiency is immediately recognized in profit or
loss.
Long-term insurance contracts are measured based on assumptions set out at the
inception of the contract. When the liability adequacy test requires the adoption of new
best estimate assumptions, such assumptions (without margins for adverse deviation) are
used for the subsequent measurement of these liabilities.
- 18 -
Reinsurance Contracts Held
Contracts entered into by ALGA and ALFA with reinsurers, which compensate ALGA
and ALFA for losses on one or more contracts insured by ALGA and ALFA and that
meet the classification requirements for insurance contracts are classified as reinsurance
contracts held. Insurance contracts entered into by ALGA and ALFA under which the
contract holder is another insurer (inward reinsurance) are classified as insurance
contracts. Contracts that do not meet these classification requirements are classified as
financial assets.
The benefits to which ALGA and ALFA are entitled under its reinsurance contracts held
are recognized as reinsurance assets. These assets consist of amounts due from reinsurers
classified within loans and receivables. Premiums payable for reinsurance contracts are
recognized as an expense upon recognition of related premiums. Amounts recoverable
from or due to reinsurers are measured consistently with the amounts associated with the
reinsured contracts and in accordance with terms of each reinsurance contract.
ALGA and ALFA assess its reinsurance assets for impairment at least annually. If there
is objective evidence that the reinsurance asset is impaired, ALGA and ALFA reduce the
carrying amount of the reinsurance assets to its recoverable amount and recognize that
impairment loss in the consolidated statement of income. ALGA and ALFA gather
objective evidence that a reinsurance asset is impaired using the same process for
financial assets held at amortized cost. The impairment loss is also calculated following
the same method used for financial assets.
Receivables and Payables Related to Insurance Contracts
Receivables and payables are recognized when due. Premiums due and uncollected are
recognized when due and measured on initial recognition at the fair value of the
consideration. The carrying amount of premiums due and uncollected is reviewed for
impairment whenever events or circumstances indicate the carrying amount may not be
recoverable, with the impairment loss recorded in profit or loss. Premiums due and
uncollected are derecognized following the derecognition criteria for financial
instruments.
Benefits and Claims. Benefits and claims consist of benefits and claims paid to
policyholders as well as changes in the valuation of insurance contract liabilities and
reserve for policyholders‟ dividends. Death claims and surrenders are recorded on the
basis of notifications received. Maturities and annuity payments are recorded when due.
Direct Costs and Expenses. Commissions and other expenses for the acquisition of
insurance contracts are expensed as incurred.
Interest Expense. Interest expense on accumulated policyholder‟s dividends and premium
deposit fund is recognized in the consolidated statement of income as it accrues and is
calculated using the effective interest method. Accrued interest is credited to the liability
account every policy anniversary date.
Fiduciary Activities
A subsidiary in the Group acts as a trustee and assumes other fiduciary capacities that
result in the holding or placing of assets on behalf of trusts, retirement benefit plans and
other institutions. The assets and income arising thereon are excluded from the
consolidated financial statements as they are not assets and income of the Group (see
Note 35). Trust fees are recognized as income when services are rendered.
- 19 -
Segment Reporting
An operating segment is a component of the Group that engages in business activities
from which it may earn revenues and incur expenses, including revenues and expenses
that relate to transactions with any of the Group‟s other components. All operating
segments‟ operating results are reviewed regularly by the Group‟s BOD to make
decisions about resources to be allocated to the segment and assess its performance, and
for which discrete financial information is available.
Segment results that are reported to the BOD include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire
property and equipment, and intangible assets other than goodwill.
Earnings Per Share (EPS)
Basic EPS is calculated by dividing income applicable to common shares by the
weighted average number of common shares outstanding during the year with retroactive
adjustments for stock dividends. Diluted EPS is computed in the same manner as basic
EPS, however, net income attributable to common shares and the weighted average
number of shares outstanding are adjusted for the effects of all dilutive potential common
shares.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. They are
disclosed in the notes to the consolidated financial statements unless the possibility of an
outflow of resources embodying economic benefits is remote. Contingent assets are not
recognized in the consolidated financial statements but disclosed in the notes to
consolidated financial statements when an inflow of economic benefits is probable.
Events After the Reporting Date
Any post year-end event that provides additional information about the Group‟s financial
position at the reporting date (adjusting event) is reflected in the consolidated financial
statements. Any post year-end events that are not adjusting events, if any, are disclosed
in the notes to the consolidated financial statements when material.
New or Revised Standards, Amendments to Standards and Interpretations Not Yet
Adopted
A number of new standards, amendments to standards and interpretations are effective
for annual periods beginning after January 1, 2011, and have not been applied in
preparing these consolidated financial statements.
The Group will adopt the following new or revised standards, amendments to standards
and interpretations on the respective effective dates:
To be Adopted on January 1, 2012

Disclosures - Transfers of Financial Assets (Amendments to PFRS 7), require
additional disclosures about transfers of financial assets. The amendments require
disclosure of information that enables users of financial statements to understand the
relationship between transferred financial assets that are not derecognized in their
entirety and the associated liabilities; and to evaluate the nature of, and risks
associated with, the entity‟s continuing involvement in derecognized financial assets.
Entities are required to apply the amendments for annual periods beginning on or
after July 1, 2011. Entities are not required to provide the disclosures for any period
that begins prior to July 1, 2011.
- 20 -

Presentation of Items of Other Comprehensive Income (Amendments to PAS 1). The
amendments:



require that an entity present separately the items of other comprehensive income
that would be reclassified to profit or loss in the future if certain conditions are
met from those that would never be reclassified to profit or loss;
do not change the existing option to present profit or loss and other
comprehensive income in two statements; and
change the title of the statement of comprehensive income to the statement of
profit or loss and other comprehensive income. However, an entity is still
allowed to use other titles.
The amendments do not address which items are presented in other comprehensive
income or which items need to be reclassified. The requirements of other PFRS
continue to apply in this regard.

PFRS 12, Disclosure of Interests in Other Entities, which contains the disclosure
requirements for entities that have interests in subsidiaries, joint arrangements (i.e.,
joint operations or joint ventures), associates and/or unconsolidated structured
entities, aiming to provide information to enable users to evaluate: (1) the nature of,
and risks associated with, an entity‟s interests in other entities; and (2) the effects of
those interests on the entity‟s financial position, financial performance and cash
flows.

PAS 19, Employee Benefits (amended 2011)
The amended PAS 19 includes the following requirements:


actuarial gains and losses are recognized immediately in other comprehensive
income; this change will remove the corridor method and eliminate the ability for
entities to recognize all changes in the defined benefit obligation and in plan
assets in profit or loss, which is currently allowed under PAS 19; and
expected return on plan assets recognized in profit or loss is calculated based on
the rate used to discount the defined benefit obligation.

PFRS 13, Fair Value Measurement, which replaces the fair value measurement
guidance contained in individual PFRS with a single source of fair value
measurement guidance. It defines fair value, establishes a framework for measuring
fair value and sets out disclosure requirements for fair value measurements. It
explains how to measure fair value when it is required or permitted by other PFRS. It
does not introduce new requirements to measure assets or liabilities at fair value, nor
does it eliminate the practicability exceptions to fair value measurements that
currently exist in certain standards.

PAS 28, Investments in Associates and Joint Ventures (2011)
PAS 28 (2011) supersedes PAS 28 (2008). PAS 28 (2011) makes the following
amendments:

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations, applies
to an investment, or a portion of an investment, in an associate or a joint venture
that meets the criteria to be classified as held for sale; and
- 21 -

on cessation of significant influence or joint control, even if an investment in an
associate becomes an investment in a joint venture or vice versa, the entity does
not remeasure the retained interest.

PFRS 9, Financial Instruments
PFRS 9 (2009) is the first standard issued as part of a wider project to replace
PAS 39. PFRS 9 (2009) retains but simplifies the mixed measurement model and
establishes two primary measurement categories for financial assets: amortized cost
and fair value. The basis of classification depends on the entity‟s business model and
the contractual cash flow characteristics of the financial asset. The guidance in
PAS 39 on impairment of financial assets and hedge accounting continues to apply.
PFRS 9 (2010) adds the requirements related to the classification and measurement
of financial liabilities, and derecognition of financial assets and liabilities to the
version issued in November 2009. It also includes those paragraphs of PAS 39
dealing with the measurement of fair value and accounting for derivatives embedded
in a contract that contains a host that is not a financial asset, as well as the
requirements of Philippine Interpretation IFRIC 9, Reassessment of Embedded
Derivatives.
None of the foregoing is expected to have a significant effect on the consolidated
financial statements of the Group, except for PFRS 9, Financial Instruments, which
becomes mandatory for the Group‟s 2015 consolidated financial statements and could
change the classification and measurement of financial assets.
Deferral of the local implementation of Philippine Interpretation IFRIC 15, Agreements
for the Construction of Real Estate
Philippine Interpretation IFRIC 15 applies to the accounting for revenue and associated
expenses by entities that undertake the construction of real estate directly or through
subcontractors. It provides guidance on the recognition of revenue among real estate
developers for sales of units, such as apartments or houses „off plan‟ i.e., before
construction is completed. It also provides guidance on how to determine whether an
agreement for the construction of real estate is within the scope of PAS 11, Construction
Contracts, or PAS 18, Revenue, and the timing of revenue recognition.
The Group is in the process of evaluating the impact of the adoption of this interpretation.
Accordingly, the impact of this interpretation is not yet known or reasonably estimable as
of reporting date.
4. Critical Judgments and Estimates
The Group makes judgments and estimates that affect the reported amounts of assets,
liabilities, income, expenses, and disclosures of contingent assets and liabilities within
the next accounting period. These judgments and estimates are continually evaluated and
are adjusted based on historical experience and other relevant factors, including
expectations of future events that are believed to be reasonable under the circumstances.
- 22 -
Judgment
Operating Lease Commitments - The Group as Lessee
The Group has entered into commercial leases on certain offices. The Group has
determined, based on an evaluation of the terms and conditions of the arrangement, that it
has not acquired any significant risks and rewards of ownership of these properties because
the lease agreements do not transfer to the Group the ownership over the assets at the end
of the lease term and do not provide the Group with a bargain purchase option over the
leased assets and so accounts for these arrangements as operating leases.
Estimates
a. Legal Policy Reserves
Ultimate liability arising from claims made under insurance contracts
The estimation of the ultimate liability arising from claims made under insurance
contracts is the Group‟s most critical accounting estimate. There are several sources of
uncertainty that need to be considered in the estimation of the liability that the Group
will ultimately pay for such claims. The major sources of uncertainties are the
frequency of claims due to contingencies covered and the timing of benefit payments.
Note 20 to the consolidated financial statements discusses the assumptions that have
the greatest impact on the consolidated financial statements.
Estimate of future benefit payments and premiums arising from long-term insurance
contracts
Estimates of future benefit payments depend on the expectations of future benefit
payments for contingencies covered, the major ones being death and endowment
benefits. The Group bases these estimates on mortality and other contingency tables
approved by the IC as well as future investment earnings rate of the assets backing up
these liabilities, subject to the maximum rate provided under the Insurance Code of the
Philippines (Insurance Code).
Legal Policy Reserves
(i) Process used to decide on assumptions
The Group determines its legal policy reserves in accordance with the requirements
of the Insurance Code. At inception of the contract, the Group determines
assumptions in relation to mortality, persistency, investment returns, and
administration expenses. Assumptions are also set in relation to inflation rates, tax,
dividend scale and sales commission plus other incentives. Certain profit targets
are also set at this stage. These assumptions are used in calculating liabilities
during the life of the contracts. A margin for risk and uncertainty is added to these
assumptions. In order to minimize risk, the Group ensures that the assumptions
used are best estimates, taking into account current experience at each reporting
date to determine whether liabilities are adequate in the light of the latest current
estimates and taking into consideration the provision of PFRS 4, Insurance
Contracts.
Group Health Polices
Legal policy reserves for group health policies are equivalent to unearned premium
as of reporting date.
- 23 -
Individual and Group Life Policies
The assumptions used for life insurance contracts are as follows:
(a) Mortality
An appropriate base table of recognized standard mortality table is chosen
depending on the type of contract and subject to the approval of the IC.
(b) Lapsation
In accordance with requirements of the Insurance Code, a 100% persistency
rate has been assumed for all policies which are in-force and under no
forfeiture option as of valuation date.
(c) Investment Yield
The interest rate ranges from 5% to 5.5% and 5.5% to 6% for ALGA and
ALFA, respectively, per annum and does not exceed the 6% maximum
specified by the Insurance Code.
The following presents the comparison between assumptions made by the Group
in accordance with regulatory requirements and the actual rates that would have
been used in accordance with PFRS as of reporting date:
(a) Mortality - This is based on 100% of the 1971 Philippine Intercompany
Mortality Table and the 1958/1980 Commissioner Standard Ordinary
Mortality Table. The following summarizes the actual experience in 2011
and 2010:
2011
65.89%
57.59%
20.74%
Individual insurance - ALGA
Individual insurance - ALFA
Group insurance
2010
69.62%
32.38%
35.78%
(b) Lapsation - There is no lapsation assumption in statutory valuation. The
Group‟s experience (based on figures as of December 31) is as follows:
ALGA
First year persistency
66.67%
Second year persistency 79.31%
Third year persistency
83.95%
2011
ALFA
79.59%
87.81%
86.43%
ALGA
76.52%
80.95%
85.92%
2010
ALFA
78.46%
91.16%
98.24%
(c) Investment Yield - This would range from 5% to 6% per annum, which is
within the statutory maximum of 6%. ALGA‟s and ALFA‟s actual
experience is approximately 9% and 21%, respectively, in 2011 and 8% and
28%, respectively, in 2010 for peso-denominated assets.
Despite the foregoing differences between assumptions made by the Group in
accordance with the regulatory requirements and the actual rates that would have
been used in accordance with PFRS, the legal policy reserves recognized by the
Group as of December 31, 2011 and 2010 are deemed adequate.
- 24 -
(ii) Liability adequacy test, changes in assumptions and sensitivity analysis
Legal policy reserves are conservatively calculated in accordance with the
requirements of the Insurance Code. The liability adequacy test was performed
using the current best estimates on interest, mortality, lapse and expenses. The net
present value of future cash flows as of December 31, 2011 and 2010 computed
under the requirements of PFRS 4, amounted to P635.5 million and
P607.8 million, respectively. As such, the recorded statutory reserves as of the said
dates of P728.0 million and P690.7 million, respectively, are adequate using best
estimate assumptions. Testing under different interest rate scenarios and their
impact on gross and net liabilities, equity and profit before tax are disclosed in
Note 20 to the consolidated financial statements.
(iii) Source of uncertainty in the estimation of future claim payment
Although the Group has taken necessary steps to mitigate the uncertainty in the
estimation of future benefit payments and premium receipts, it is still subject to the
unpredictability of changes in mortality levels. The Group adopts the standard
mortality table in assessing future benefit payments and premium receipts as
approved by the IC.
The liability under the insurance contracts includes provisions for incurred but not
reported (IBNR) claims and provisions for claims in course of settlement as of
reporting date. The IBNR provision is based on historical experience and is subject
to a degree of uncertainty.
Reinsurance - Assumptions and Methods
The Group limits its exposure to loss within insurance operations through
participation in reinsurance arrangements. Amounts receivable from reinsurers
are estimated in a manner consistent with the assumptions used for ascertaining
the underlying policy benefits. Even though the Group may have reinsurance
arrangements, it is not relieved of its direct obligations to its policyholders and,
thus a credit exposure exists with respect to reinsurance ceded, to the extent that
a reinsurer is unable to meet its obligations assumed under such reinsurance
agreements. The Group is neither dependent on a single reinsurer nor are the
operations of the Group substantially dependent on any reinsurance contract.
b. Impairment of Receivables, Insurance Receivables and Due from Related Companies
The Group reviews its receivables to assess impairment at specific and collective levels
on a periodic basis. In assessing for impairment, the Group determines whether there
is any objective evidence indicating that there is a measurable decrease in the estimated
future cash flows of its receivables. This evidence may include observable data
indicating that there has been an adverse change in the payment status of borrowers, or
industry-wide or local economic conditions that correlate with defaults on receivables.
In addition to specific impairment testing, the Group also makes an assessment for
collective impairment against credit exposures which are not individually significant
and those which, although not specifically identified as requiring a specific allowance
for impairment, have a greater risk of default than when originally granted.
The amount and timing of recognizing impairment losses for any period would differ if
the Group made different assumptions or utilized different estimates. An increase in
allowance for impairment would decrease net income and decrease total assets.
- 25 -
The Group provided allowance for impairment on receivables totaling P325.0 million
and P288.7 million as of December 31, 2011 and 2010, respectively (see Note 11).
As of December 31, 2011 and 2010, the carrying amounts of receivables amounted to
P2,519.0 million and P 1,940.1 million, respectively (see Note 11).
As of December 31, 2011 and 2010, the carrying amount of insurance receivables
amounted to P35.7 million and P30.6 million, respectively, and due from related
companies amounted to P8.9 million and P28.1 million, respectively (see Note 34).
c. Impairment of AFS Securities
The Group determines that AFS equity securities are impaired when there has been a
significant or prolonged decline in the fair value below its cost. This determination of
what is significant or prolonged requires judgment. The Group treats “significant”
generally as 20% or more of the original cost of investment, and “prolonged,” greater
than six months. In making this judgment, the Group evaluates among other factors,
the normal volatility in share prices for similar securities.
The recognition of an impairment loss may also be appropriate when there is evidence
of deterioration in the financial health of the issuer, dismal industry and sector
performance, adverse changes in technology, and operational and financing cash flows
affecting the issuer.
In 2010, the Group sold and disposed unquoted equity securities with cost and carrying
value amounting to P588.6 million and P282.2 million, respectively. The remaining
cost of unquoted AFS securities amounted to P75.3 million and P83.4 million as of
December 31, 2011 and 2010, respectively. Of the total unquoted AFS securities,
P41.2 million is fully provided with allowance for impairment as of December 31,
2011 and 2010.
As of December 31, 2011 and 2010, the carrying amounts of AFS securities amounted
to P618.9 million and P436.3 million, respectively (see Note 10).
d. Realizability of Deferred Tax Assets
Management reviews at each reporting date the carrying amount of the Group‟s
deferred tax assets. The carrying amount of deferred tax assets is reduced to the
extent that it is no longer probable that sufficient taxable profit will be available
against which the related tax assets can be utilized. Management believes that
sufficient taxable profit will be generated in the near foreseeable future to allow, at
least, the recognized deferred tax assets to be utilized. The Group‟s unrecognized
deferred tax assets relate to the carryforward benefits of unused NOLCO amounting
to P32.2 million and P35.4 million as of December 31, 2011 and 2010, respectively,
and excess MCIT amounting to P7.0 million and P8.6 million as of December 31,
2011 and 2010, respectively. Recognized deferred tax assets as of December 31,
2011 and 2010 amount to P174.0 million and P127.3 million, respectively (see
Note 32).
- 26 -
e. Estimating the Net Realizable Value of Real Estate Inventories
The Group reviews real estate inventories for probable decline in value. The review
considers certain indications such as significant change in the asset usage and/or
plans relating to the real estate projects. Where the carrying amount of real estate
inventories exceeds its net realizable value, the real estate inventory is considered
impaired and is written down to its net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business, less estimated cost of
completion and estimated cost necessary to make the sale.
As of December 31, 2011 and 2010, the Group assessed that the net realizable value of
its real estate inventories exceeds the carrying cost. A decrease in the estimate of the
net realizable value of the real estate inventories below the carrying cost will decrease
net income and total assets.
The carrying amounts of real estate inventories amounted to P712.4 million and
P741.9 million as of December 31, 2011 and 2010, respectively (see Note 12).
f.
Estimating Fair Value of Investment Properties
The Group uses the fair value model under which any gain or loss arising from change
in fair value of investment properties shall be recognized in profit or loss for the period
in which it arises. The fair value represents the amount at which the assets could be
exchanged between a knowledgeable, willing buyer and seller in an arm‟s-length
transaction at the date of valuation. Fair value of investment in memorial lots is based
on the published selling prices of similar properties within the same vicinity adjusted
for estimated bulk discount. Fair value of other investment properties is determined by
independent professional appraisers. An increase in the fair value of investment
properties will increase assets and net income.
Investment properties amounted to P261.0 million and P252.8 million as of
December 31, 2011 and 2010, respectively (see Note 13). The increase in fair value of
investment properties amounted to P8.2 million in 2011 and P6.9 million in 2010 and
decrease in fair value of investment properties of P5.3 million in 2009 (see Note 26).
g. Impairment of Non-financial Assets
The Group assesses impairment of non-financial assets whenever events or changes in
circumstances indicate that the carrying amount of its investments in associates,
property and equipment and exchange trading right may not be recoverable. The
factors that the Group considers important which could trigger an impairment review
include, but are not limited to, the following:

significant underperformance relative to expected historical or projected future
operating results;

significant changes in the manner of use of the acquired assets or the strategy for
overall business; and

significant negative industry, market or economic trends.
- 27 -
As of December 31, 2011 and 2010, the Group assessed that there are no impairment
indicators relating to its property and equipment and exchange trading right. However,
the Group maintains an allowance for impairment loss on its investment in an associate
equivalent to the cost of the investment of P103.7 million (see Note 14). A recovery in
the estimated recoverable amount of such investment will increase assets and net
income.
As of December 31, 2011 and 2010, investments in associates amounted to
P125.8 million and P108.7 million, respectively (see Note 14).
As of December 31, 2011 and 2010, property and equipment amounted to
P116.6 million and P129.8 million, respectively (see Note 15).
h. Estimated Useful Lives of Property and Equipment
The Group reviews on an annual basis the estimated useful lives of property and
equipment based on expected asset utilization as anchored on business plans. It is
possible that future results of operations could be materially affected by changes in
these estimates. A reduction in the estimated useful lives of property and equipment
would increase the recorded depreciation expense and decrease the carrying amount
of the related assets.
As of December 31, 2011 and 2010, the carrying amount of property and equipment
amounted to P116.6 million and P129.8 million, respectively (see Note 15).
i.
Contingencies
The Group is currently involved in some legal proceedings. The estimate of the
probable costs for the resolution of these claims has been developed in consultation
with external and internal legal counsels and was based upon an analysis of potential
results.
Management and its legal counsels believe that the Group has substantial legal and
factual bases for its position and, is of the opinion, that losses arising from these legal
actions, if any, will not have a material adverse impact on the Group‟s consolidated
financial statements. Accordingly, no provision was recognized as of December 31,
2011 and 2010.
j.
Retirement Benefits
The determination of retirement cost and retirement obligation is dependent on the
selection of certain actuarial assumptions used in calculating such amounts. Those
actuarial assumptions include, among others, discount rate, expected return on plan
assets and salary increase rate. Due to the long-term nature of retirement benefits,
such estimates are subject to significant uncertainty.
The expected rate of return is based on the average historical earnings of the plan
assets and expected growth in the value of the equity investments over a long-term
period. It is determined by considering the expected return available on the assets
underlying the current investment policy. Expected yields on fixed income
investments are based on gross redemption yields as at reporting date. The assumed
discount rate was determined using the market yields on Philippine government
bonds with terms consistent with the expected employee benefit payout as of
reporting date. The expected salary increase rate was based on the historical
increases in salary of covered employees, adjusted for any impact of changes in
- 28 -
management plans. Please refer to Note 28 to the consolidated financial statements
for the details of actuarial assumptions used in the calculation. In accordance with
PAS 19, Employee Benefits, actual results that differ from the Group‟s assumptions
are accumulated and amortized over future periods and therefore, generally affect the
recognized expense and recorded obligation in such future periods. While the 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 retirement obligation.
As of December 31, 2011 and 2010 entities in the Group has retirement liability
amounting to P48.5 million and P40.3 million, respectively, and retirement asset
amounting to P13.3 million and P11.2 million, respectively (see Note 28).
k. Income and Cost Recognition
The Group‟s income and cost recognition policies relating to real estate contracts of
ATRKE Land require management to make use of estimates and assumptions that may
affect the reported amounts of income and costs. The Group‟s income from real estate
contracts are recognized based on the percentage of completion of each tower as
determined monthly by the technical director of the joint venture partner of ATRKE
Land after review and concurrence by ATRKE Land management. While the Group
believes that this estimate is reasonable and appropriate, significant differences in the
actual experience or significant changes in the assumptions may materially affect the
amount of revenue recognized.
Income and costs recognized related to real estate contracts amounted to
P105.2 million and P63.8 million, respectively, in 2011, P100.5 million and
P65.2 million, respectively, in 2010, and P21.7 million and P10.9 million, respectively,
in 2009.
l.
Determination of Fair Value of Investment in Unlisted Foreign Holding Company
The Group holds shares of stock of an unlisted foreign investment holding company.
The fair value of the investment is determined based on the fair value of the net
assets of the said entity. Management believes that this valuation method
approximates the fair value of the said investment because the assets of the entity
consist primarily of investments in listed securities carried at FVPL and its liabilities
are negligible. While management believes that the valuation method provides a
reliable estimate of the fair value of the investment, the fair value of the net assets of
the entity may differ from the value of the entity taken as a whole.
As of December 31, 2011 and 2010, the Group‟s investment in the said entity is
carried at P6.4 million and P20.0 million, respectively.
5. Changes in Ownership Interests in Subsidiaries
a. Shareholder Agreements with ATR Holdings, Maybank ATR KE Capital, ALGA,
and ATRKE Land
On August 15, 2011, ATR Holdings subscribed to 5,766,660 preferred shares of
Maybank ATR Capital which entitled it to a 40.00% voting interest.
- 29 -
On August 17, 2011, Maybank ATR Capital, ALGA and ATRKE Land entered into
separate Shareholders Agreements (the “Agreements”) with ATR Holdings and
ATRKE Financial. The Agreements define the respective rights and obligation of,
and governs the relationship among the shareholders of Maybank ATR Capital,
ALGA and ATRKE Land. The Agreements also provide the voting rights and BOD
representation of each of the stockholders of Maybank ATR Capital, ALGA and
ATRKE Land.
The Agreements include provisions on transfers and other dispositions of the
preferred shares of Maybank ATR Capital, ALGA and ATRKE Land held by ATR
Holdings and issuance of new shares, rights of first refusal, tag-along rights, dragalong rights, lock-up and put option.
The Agreements provide that the lock-up period is from the date of signing of the
Agreement up to its second anniversary (the “Lock-up Period”). Provided that when
the Lock-up period shall have lapsed, ATR Holdings shall have the right (but not the
obligation) to sell to ATRKE Financial or other qualified purchaser, all of the
preferred shares that are owned and held by ATR Holdings (the “Put Option”) at an
agreed consideration. The put option shall be exercisable by ATR Holdings at any
time after the lapse of the Lock-up period.
On August 18, 2011, ATR Holdings executed a Joint Voting Agreement, whereby
ATR Holdings agreed to, at anytime (as permitted by local statutes), vote together
and in accordance with the manner by which the BOD of ATRKE Financial shall
vote on matters requiring resolution with respect to its interest in ALGA and ATRKE
Land.
On August 24, 2011, the Board of ALGA ratified the issuance of 37,500,000
preferred shares to ATR Holdings, a domestic corporation which represents 60%
voting interest.
On November 30, 2011, the Board of ALGA authorized the conversion of
P100 million from Contributed Surplus to Paid up Capital. Consequently, ALGA
issued 10,000,000 shares to common stockholders as a result of the conversion.
On December 29, 2011, the BOD of ALGA approved the following:
a) Reclassification of 300,000 unissued common shares into 30,000,000 preferred
shares and the amendment of the Articles of Incorporation to reflect the change;
and
b) Subscription by ATR Holdings to additional 12,559,537 preferred shares at par.
The above transactions resulted in a 60% ownership by ATR Holdings and another
domestic company, and a 40% ownership of ATRKE Financial. As of February 2,
2012, the documents on the proposed amendments in Articles of Incorporation have
been submitted to the Insurance Commission and SEC.
b. Sale of Non-Controlling Interests in ATRKE AMG
On June 24, 2010, the Shareholder‟s Agreement executed by the shareholders of
ATRKE AMG, which includes Maybank ATR KE Capital, was amended to include
the new stockholder of ATRKE AMG who subscribed to 20,000 shares of stock
amounting to P2.0 million. This resulted to the decrease in Maybank ATR KE
Capital‟s ownership in ATRKE AMG from 86% to 82.69% in 2010.
- 30 -
c. Sale of ALGA shares owned by Sovereign Global Resources Limited (Sovereign) to
ATRKE Financial and Liquidation of Sovereign
On November 5, 2010, ATRKE Financial acquired the 22% ownership interest of
Sovereign, a subsidiary of Maybank ATR KE Capital, in ALGA, with consideration
totaling P109.5 million. The Parent Company incurred P0.2 million in taxes.
In December 2010, Maybank ATR KE Capital wrote-off the balance of its
investment in Sovereign following the sale and transfer of Sovereign‟s 22% interest
in ALGA to ATRKE Financial (see Note 17). Total loss on disposal of a subsidiary
amounted to P3.1 million recognized in the 2010 consolidated statement of income.
d. Merger of ATRKE Insurance Brokers and A.V. Ocampo
On July 21, 2010, ATRKE Insurance Brokers entered into a Plan and Agreement of
Merger with A.V. Ocampo with the latter as the surviving entity. The merger
became effective upon the approval and issuance of the certificate of merger by the
SEC on March 2, 2011. The merger resulted in Maybank ATR KE Securities owning
3.59% of the surviving corporation. As a result of the loss in control of ATRKE
Insurance Brokers, the Group derecognized the assets and liabilities of ATRKE
Insurance Brokers which were previously consolidated ito the accounts of the Group
and recognized the equity interest in the surviving entity at P10.5 million, which
approximates its fair value. The resulting gain on deconsolidation amounting to
P7.1 million is recognized in profit or loss in 2011.
6. Financial Risk Management
Financial Risk Management
The Group‟s risk management program is guided by the principles set out in the ATR
KimEng Group Risk Management Framework and implements the policies, procedures
and guidelines established by the Group Risk Management Committee and approved by
the Audit Committee of the Board of ATRKE Financial. The policies, procedures and
guidelines are meant to manage financial risks common to the different entities in the
Group and those which are specific to certain subsidiaries given the nature of their
respective operations. Discussed below are the risk management policies and
measurement tools used by the Group in monitoring and managing its significant
financial risks relevant to the Group as a whole and to each operating segment in
particular:
Market Risk
Market risk is the risk of change in fair value of financial instruments from fluctuation in
foreign exchange rates (currency risk), market prices (price risk) and market interest rates
(interest rate risk), whether such change in price is caused by factors specific to the
individual instrument or its issuer or factors affecting all instruments traded in the
market.
a. Currency Risk
The Group is exposed to currency risk arising from currency exposures with respect
to the U.S. dollar (US$). Currency risk arises from cash and cash equivalents,
receivables, AFS securities, collateral court bond, interest payable and loans payable
denominated in U.S. dollar.
- 31 -
The Finance Department of each entity in the Group is responsible for managing the
net foreign exchange position of each entity. Only a minimal amount of foreign
currency-denominated monetary assets and liabilities is maintained at any given time.
Foreign exchange rates are monitored on a daily basis and depending upon
projections, cash and cash equivalents is retained, sold, wholly or partially, or hedged
via forward or option transactions.
The table below summarizes the Group‟s exposure to currency risk as of
December 31, 2011 and 2010:
Financial assets:
Loans and receivables:
Cash and cash equivalents
Receivables
Collateral court bond*
AFS securities
Other financial liabilities:
Interest payable**
Loans payable
2011
2010
PHP
US$
$823,555
1,640,313
P36,104,637
71,911,304
$1,688,581
594,489
25,000
1,710,357
P74,027,408
26,062,398
1,096,000
74,982,051
2,463,868
108,015,941
4,018,427
176,167,857
37,881
2,500,000
1,660,703
109,600,000
63
3,069,008
2,762
134,545,311
2,537,881
111,260,703
3,069,071
134,548,073
($74,013)
(P3,244,762)
$949,356
P41,619,784
US$
PHP
* Included under “Other assets” account in the Consolidated Statements of Financial Position.
**Included under “Accounts payable, accrued expenses and other liabilities” account in the Consolidated
Statements of Financial Position.
In translating foreign currency-denominated financial assets and liabilities into
Philippine peso amounts, the exchange rate used was P43.84 to US$1.00 as of
December 31, 2011 and 2010.
The following table shows the sensitivity to a reasonably possible change in U.S.
dollar/Philippine peso exchange rate, with all other variables held constant, of the
Group‟s income before tax as of December 31, 2011 and 2010.
2011
2010
Peso Appreciation
(Depreciation) vis-àvis U.S. dollar
P1
(1)
P1
(1)
Increase (Decrease)
in Profit Before
Income Tax
(P1,714,326)
1,714,326
(P761,001)
761,001
Increase (Decrease)
in Equity
P1,640,295
(1,640,295)
P1,710,357
(1,710,357)
b. Price Risk
The Group is exposed to equity price risk in relation to its financial assets at FVPL
and AFS equity securities. Such financial assets are subject to price risk due to
possible adverse changes in market values of the instruments arising from factors
specific to individual instruments or their issuers or factors affecting all instruments
traded in the market.
- 32 -
The Group‟s trading strategies with respect to its security positions are periodically
reviewed by the Chief Financial Officer (CFO) of each entity in the Group, together
with senior management. Senior management is responsible for reviewing trading
positions, exposures, profits and losses and trading strategies. Said positions are
marked-to-market every month (or more often in a volatile market environment) in
order that the mandate of senior management as to the points at which to liquidate the
securities could be carried out.
The maximum holding period for AFS equity securities is ninety (90) days.
Exceptions to this are approved by senior management.
The following table shows the sensitivity to a reasonably possible change in the PSE
index (PSEi), with all variables held constant, of the Group‟s equity securities at
FVPL and AFS equity securities as of December 31, 2011 and 2010:
December 31, 2011
PSEi
PSEi
December 31, 2010
PSEi
PSEi
Change in
Variables
Increase (Decrease)
in Profit Before
Income Tax
Increase (Decrease)
in Equity
22.45%
-22.45%
P6,932,805
(6,932,805)
P6,545,762
(6,545,762)
12.81%
-12.81%
P4,383,907
(4,383,907)
P3,718,076
(3,718,076)
The assumed fluctuation rate is based on the average change in the yearend PSEi
from the two year period before the reporting date.
c. Interest Rate Risk
Interest rate risk is the risk that future cash flows from a financial instrument (cash
flow interest rate risk) or its fair value (fair value interest rate risk) will fluctuate
because of changes in market interest rates.
The Finance Department of each entity in the Group is responsible for managing the
interest rate exposure of each entity. It monitors market conditions and reviews loan
agreements regularly against prevailing market interest rates. Where the entity‟s
borrowing rates are higher than those prevailing in the market, the Finance
Department re-negotiates pricing on the entity‟s borrowings.
In negotiating or renegotiating the entity‟s borrowings, the respective Finance
Department coordinates with the Group CFO such that interest rates could be
benchmarked against the rates of other Group entities, and in order that any collateral
business given to lenders by the Group could be taken into consideration in obtaining
the best rates.
The investment policy of ALFA and ALGA, collectively referred to as the Insurance
Group (IG) is to maintain an adequate yield to match the interest necessary to support
future policy liabilities. Management‟s focus is to reinvest the proceeds of the
maturing securities and to invest premium receipts while continuing to maintain
satisfactory investment quality. The IG has an Investment Committee, which
approves all investment undertakings and meets on a monthly basis. The IG adopts
an investment strategy to invest primarily in high quality securities while maintaining
diversification to avoid significant exposure to issuer and/or industry concentrations.
- 33 -
The following table shows information relating to the Group‟s interest-bearing
financial instruments as of December 31, 2011 and 2010 by maturity profile:
Range of
Interest Rate
Less than
1 Year
Cash and cash equivalents 0.20% - 4.88% P2,064,835,480
AFS securities
4.40% - 8.75%
28,957,482
Receivables:
Loans receivable
10.00% - 16.00%
29,703,839
Salary loans
5.70% - 15.00%
335,308,849
Policy loans
10.00%
91,444,095
Receivables from officers
and employees
5.70% - 15.00%
1,515,622
Loans payable
Policyholders‟ dividends
Premium deposit fund
Cash flow interest rate risk:
Loans payable
AFS securities
Receivables:
Loans receivable
Salary loans
Notes receivable
Policy loans
and employees
Loans payable
Advances from developer
Cash flow interest rate risk:
Loans payable
4.25% - 11.80%
4.00 - 6.00%
4.00 - 6.00%
6.00% - 7.00%
Total
P 57,953,697
P 70,451,665
P 231,670,384
P2,064,835,480
389,033,228
6,770,501
526,819,248
-
6,838,288
38,176,082
-
7,188,561
-
50,501,189
900,304,179
91,444,095
-
-
-
1,515,622
P238,858,945
P3,497,633,793
P159,871,941
49,831,469
101,903,421
P5,618,526
-
P4,548,852
-
P4,047,257
-
P174,086,576
49,831,469
101,903,421
P311,606,831
P5,618,526
P4,548,852
P4,047,257
P325,821,466
P182,251,034
P26,750,061
P1,783,796,577
102,505,701
4.25% - 9.00%
More than
3 Years
P115,466,035
0.25% - 4.13%
4.25% - 9.13%
4.00% - 12.50%
4.00% - 6.00%
4.00% - 6.00%
9.50%
2-3 Years
P591,543,446
Less than
1 Year
10.00% - 12.00%
1-2 Years
P2,551,765,367
Range of
Interest Rate
10.00% - 16.00%
12.00% - 16.00%
6.00%
10.00%
December 31, 2011
34,688,916
143,234,239
16,177,316
129,980,479
P -
P -
1-2 Years
2-3 Years
More than
3 Years
Total
P -
P 49,570,399
P 42,190,481
P1,783,796,577
194,266,581
5,506,049
208,398,050
-
8,100,003
133,985,605
-
50,222,495
834,665,702
16,177,316
129,980,479
December 31, 2010
1,927,527
349,047,808
-
-
7,187,581
6,000,680
P2,217,570,809
P356,976,015
P263,474,498
P184,276,089
P3,022,297,411
P206,951,677
52,893,481
145,909,457
11,106,677
P14,246,272
-
P3,819,174
-
P10,825,995
-
P235,843,118
52,893,481
145,909,457
11,106,677
P416,861,292
P14,246,272
P3,819,174
P10,825,995
P445,752,733
P120,229,273
P99,275,151
P -
-
P209,001,095
P -
13,188,261
P219,504,424
The table below shows the sensitivity to a reasonably possible change in year-end
interest rates on the Group‟s profit, with all variables held constant, as of
December 31, 2011 and 2010:
Increase (Decrease) in Basis Points
+P100 basis points
- P100 basis points
Increase (Decrease) in
Profit Before Income Tax
2010
2011
P21,950,442
P20,900,109
(21,950,442)
(20,900,109)
There is no impact on equity except those already affecting profit or loss.
Credit Risk
Credit risk refers to the risk that the borrower or issuer or counterparty may fail to
perform its obligation to pay in a timely manner, or that its ability to perform such
obligation may get impaired before delivery date. Credit risk is not limited to lending
activities only but arises whenever funds are extended, committed, invested, or otherwise
exposed through actual or implied contractual agreements, whether on or off books.
- 34 -
In order to mitigate credit risk, it is the policy of the Group that each entity within the
Group: (a) deal only with reputable and creditworthy obligors and counterparties; (b)
establish prudent credit limits for each obligor and counterparty; and (c) monitor usage of
credit limits to ensure that those limits are complied with. Each entity in the Group
adheres to this policy.
With respect to credit risk arising from the financial assets of the Group, the Group‟s
exposure to risk arises from the default of the counterparty, with a maximum exposure
equal to the carrying amount of these instruments as follows:
Insurance receivables
AFS securities:
Unlisted securities
Listed equity securities
Mutual funds
Proprietary shares
Government securities
Receivables:
Salary loans - net
Due from customers and brokers
Loans receivable - net
Due from clearing house
Policy loans
Installment contracts receivable
Receivable from developer
Accounts receivable - net
Receivables from officers and employees
Interest receivable
Agents‟ account balances - net
Notes receivable
Miscellaneous receivables - net
Due from related companies
Other assets:
Collateral court bond
Performance bonds
Lease and other deposits
2010
2011
P2,064,835,480 P1,783,796,577
30,637,424
35,711,132
24,952,819
28,297,627
6,357,156
51,343,095
160,850,529
11,362,800
389,033,228
20,012,675
52,311,256
155,991,864
13,722,800
194,266,581
900,304,179
1,225,005,592
50,501,189
91,444,095
119,644,359
23,045,627
60,571,014
35,180,109
8,684,738
2,030,049
2,164,238
8,948,915
834,665,702
496,515,552
77,555,994
182,983,427
129,980,479
101,595,773
22,944,540
20,858,240
38,040,560
12,211,192
1,610,140
16,177,316
4,974,709
28,097,133
1,032,000
11,844,215
13,928,961
9,067,102
12,833,900
P5,302,078,012 P4,265,846,070
Financial Assets at FVPL and AFS Securities
In connection with investment securities, the Group secures satisfactory credit quality by
setting maximum limits of portfolio securities with a single or group of issuers, excluding
those secured on specific assets and setting the minimum ratings for the issuer. The Group
sets the maximum amounts and limits that may be advanced to/placed with individual
corporate counterparties which are set by reference to their long-term ratings.
- 35 -
Amounts Due from Customers and Brokers and Clearing House
The Group‟s trading business, carried out by Maybank ATR KE Securities, include trade
execution for its clients. These activities may expose Maybank ATR KE Securities to
risk arising from price volatility which can reduce the clients‟ ability to meet their
obligations. To the extent clients are unable to meet their commitments to the Maybank
ATR KE Securities, it may be required to purchase or sell financial instruments at
prevailing market prices in order to fulfill the client‟s obligations.
In accordance with industry practice, client trades are generally settled three (3) business
days after trade date (T+3).
Institutional and foreign clients settle their trade on a delivery versus payment scheme
such that no shares are received or delivered without corresponding payment thus
limiting credit risk within the standard T+3 settlement. Individual clients maintain their
securities position with Maybank ATR KE Securities in its scripless form and are usually
sufficient to cover debit balances.
Maybank ATR KE Securities monitors concentration of credit risks on both individual and
institutional counterparties by considering its credit worthiness, financial strength, and the
size of its positions or commitments. Where considered necessary, Maybank ATR KE
Securities requires a deposit of additional collateral or a reduction of securities position
from the counterparty.
Maybank ATR KE Securities provides margin financing facility to customers subject to
credit committee approval and is monitored regularly for compliance with the margin limit
and collateral requirement. The collateral requirement for margin accounts is 200% of the
outstanding debit balance.
Salary Loans
The Group fully complies with the guidelines issued by the Department of Education
(DepEd) in granting loans to teachers which are monitored by DepEd on a regular basis.
Any violation shall result to the revocation of the license to extend loans to public school
teachers. The Group‟s credit evaluation policies are anchored on the DepEd guidelines on
net take home pay of the teachers and authenticity of documents submitted by the
borrowers.
The Group‟s Executive Committee (Excom) created a special committee (DepEd
Committee) tasked to monitor the DepEd loans business. The DepEd Committee meets on
a monthly basis to discuss developments and status of past due accounts, action plans for
collecting unpaid accounts and other pertinent issues relative to the loans operations. The
DepEd Committee, in turn, reports to the Excom the status of the loans business on a
regular basis.
As of December 31, 2011 and 2010, the IG has significant concentration of credit risk
arising from salary loans extended to DepEd teachers.
Policy Loans
Loans to policyholders granted by the IG against the cash surrender value of insurance
policies carry minimal credit risk.
A significant credit exposure exists with respect to reinsurance ceded, to the extent that any
reinsurer may be unable to meet its obligations assumed under such reinsurance
agreements. The IG selects only domestic and foreign companies with strong financial
standing and excellent track records to participate in the IG‟s reinsurance programs.
Reinsurance is used to manage insurance risk. This does not, however, discharge the IG‟s
- 36 -
liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the IG
remains liable for the payment to the policyholder. The creditworthiness of reinsurers is
considered on an annual basis by reviewing their financial strength prior to finalization of
any contract.
The following table shows the credit quality of the Group‟s financial assets as classified
into high, medium and low grade as of December 31, 2011 and 2010:
December 31, 2011
Neither Past Due nor Impaired
Medium
High Grade
Grade
Low Grade
Total
AFS financial assets:
Unlisted securities
Mutual funds
Proprietary shares
Receivables:
Loans granted to:
Domestic third party management company
One Virtual Corporation
(OVC)
Mortgage loans
Other loans
Salary loans
Accounts receivable
Installment contract
receivables
Policy loans
Agents‟ account balances
Interest receivable
and employees
Due from customers and
brokers:
Foreign
Corporate
Margin
Individual
Brokers
Miscellaneous receivables
Other assets:
Performance bonds
P2,064,835,480
35,711,132
27,996,830
P -
6,357,156
389,033,228
160,850,529
51,343,095
11,362,800
-
-
-
-
7,129,661
43,371,528
219,955,886
42,890,040
598,686,820
17,680,974
P 300,797
P2,064,835,480
35,711,132
28,297,627
236,888,918
236,888,918
-
7,129,661
43,371,528
818,642,706
60,571,014
45,555,832
120,760,864
2,228,672
45,555,832
7,129,661
43,371,528
939,403,570
62,799,686
1,203,742
-
119,644,359
91,444,095
3,233,791
8,684,738
23,045,627
-
-
-
119,644,359
91,444,095
2,030,049
8,684,738
23,045,627
35,180,109
-
-
35,180,109
957,115,960
126,429,283
3,926,583
24,233,170
8,681,407
2,164,238
8,948,915
-
-
957,115,960
126,429,283
3,926,583
24,233,170
8,681,407
2,164,238
8,948,915
13,928,961
12,833,900
-
-
13,928,961
12,833,900
P616,367,794
- 37 -
Total
P2,064,835,480
35,711,132
28,297,627
47,542,156
389,033,228
160,850,529
51,343,095
11,362,800
119,644,359
91,444,095
2,030,049
8,684,738
23,045,627
P4,499,128,759
P 41,185,000
-
-
6,357,156
389,033,228
160,850,529
51,343,095
11,362,800
Past Due or
Impaired
P300,797
P5,115,797,350
314,622
72,868,664
31,435,903
P552,442,217
35,180,109
957,430,582
126,429,283
76,795,247
55,669,073
8,681,407
2,164,238
8,948,915
13,928,961
12,833,900
P5,668,239,567
High Grade
Unlisted securities
Mutual funds
Proprietary shares
Receivables:
Loans granted to:
Domestic third party management company
One Virtual Corporation
Mortgage loans
Other loans
Salary loans
Notes receivable
Accounts receivable
receivables
Policy loans
Interest receivable
and employees
brokers:
Foreign
Corporate
Individual
Brokers
Other assets:
Performance bonds
December 31, 2010
Neither Past Due nor Impaired
Medium
Grade
Low Grade
Total
P1,783,796,577
24,421,317
P -
20,012,675
194,266,581
155,991,864
52,311,256
13,722,800
30,637,424
-
23,884,776
26,337,719
227,247,527
16,177,316
15,187,247
101,595,773
129,980,479
1,610,140
12,211,192
22,944,540
556,621,921
-
P 531,502
P1,783,796,577
24,952,819
41,185,000
-
61,197,675
194,266,581
155,991,864
52,311,256
13,722,800
30,637,424
-
23,884,776
26,337,719
783,869,448
16,177,316
15,187,247
236,888,918
45,555,832
80,512,974
7,899,665
236,888,918
45,555,832
23,884,776
26,337,719
864,382,422
16,177,316
23,086,912
-
101,595,773
129,980,479
1,610,140
12,211,192
22,944,540
1,203,742
-
101,595,773
129,980,479
2,813,882
12,211,192
22,944,540
-
38,040,560
79,170,002
213,568,507
15,191,334
57,525,310
182,983,427
4,856,481
28,097,133
118,228
-
-
79,170,002
213,568,507
15,191,334
57,525,310
182,983,427
4,974,709
28,097,133
-
1,032,000
11,844,215
9,067,102
P3,483,176,999
P567,276,424
Total
P1,783,796,577
24,952,819
20,012,675
194,266,581
155,991,864
52,311,256
13,722,800
30,637,424
10,536,275
-
P -
-
27,504,285
1,032,000
11,844,215
9,067,102
Past Due or
Impaired
P531,502
P4,050,984,925
1,303,930
193,514
129,562,955
436,903
P544,743,433
38,040,560
80,473,932
213,762,021
144,754,289
57,525,310
182,983,427
5,411,612
28,097,133
1,032,000
11,844,215
9,067,102
P4,595,728,358
The Group utilizes an internal credit rating system based on its assessment of the quality
of its financial assets.
The Group classifies its unimpaired financial assets into the following credit grades:
High grade - This pertains to accounts with a very low probability of default as
demonstrated by the counterparty‟s long history of stability, profitability and diversity.
The counterparty has the ability to raise substantial amounts of funds through the public
markets or external financing. The counterparty has a strong debt service record and a
moderate use of leverage.
Medium grade - The counterparty has no history of default. The counterparty has
sufficient liquidity to fully service its debt over the medium term. The counterparty has
adequate capital or resources to readily absorb any potential losses from its operations
and any reasonably foreseeable contingencies. The counterparty reported profitable
operations for at least the past 3 years.
Low grade - The counterparty is expected to be able to adjust to the cyclical downturns in
its operations. Any prolonged adverse economic conditions would however ostensibly
create profitability and liquidity issues. Operating performance could be marginal or on
the decline. The counterparty may have a history of default in interest but must have
regularized its service record to date. The use of leverage is above industry standards but
has contributed to shareholder value.
- 38 -
The table below shows the analysis of age of financial assets that are past due but not
impaired and past due and impaired as of December 31, 2011 and 2010.
December 31, 2011
Past Due but not Impaired
90 to
More than
Past Due
180 Days
180 Days
and Impaired
AFS financial assets - Unlisted securities
Loans granted to:
Domestic third party -management
company
OVC
Salary loans
Accounts receivable
T+3 to T+13
Due from Customers:
Foreign
Margin
Individual
P -
P -
Total
P41,185,000
P41,185,000
45,481,068
-
36,180,405
-
236,888,918
45,555,832
39,099,391
1,203,742
2,228,672
236,888,918
45,555,832
120,760,864
1,203,742
2,228,672
P45,481,068
P36,180,405
P366,161,555
P447,823,028
2011
T+14 to
T+31 to
T+30
T+45
Over T+45
Total
P306,316
9,412,687
4,572,931
P625
216,445
5,743,039
P250
155,704
18,499,158
P7,431
63,083,828
2,620,775
P314,622
72,868,664
31,435,903
P14,291,934
P5,960,109
P18,655,112
P65,712,034
P104,619,189
December 31, 2010
90 to
More than
Past Due
180 Days
180 Days
and Impaired
AFS financial assets - Unlisted securities
Loans granted to:
Domestic third party -management
company
OVC
Salary loans
Accounts receivable
P -
P -
Total
P41,185,000
P41,185,000
23,619,679
5,670,993
-
27,333,499
27,176,575
-
236,888,918
18,222,333
29,716,720
2,228,672
1,203,742
436,903
236,888,918
45,555,832
80,512,974
7,899,665
1,203,742
436,903
P29,290,672
P54,510,074
P329,882,288
P413,683,034
2010
Due from Customers:
Foreign
Corporate
Individual
T+3 to T+13
T+14 to T+30
T+31 to T+45
Over T+45
Total
P 123,475
26,848,759
P1,223,633
850
16,297,827
P 475
3,290,419
P80,297
68,714
83,125,950
P1,303,930
193,514
129,562,955
P26,972,234
P17,522,310
P3,290,894
P83,274,961
P131,060,399
Liquidity Risk
Liquidity risk is the risk of being unable to meet payment obligations as these become
due without incurring unacceptable losses due to disruption in funding sources, and/or
inability to liquidate assets quickly due to changes in market conditions, and/or
unplanned utilization of cash resources.
Liquidity risk is closely related to market risk as any adverse developments on foreign
exchange rates, interest rates and market prices of securities could have an impact on
liquidity.
- 39 -
Management of liquidity is the responsibility of the Finance Department of each entity in
the Group. Given the nature of the Group‟s business, mitigation of liquidity risk involves
in the first instance forecasting liquidity requirements and ensuring that sufficient balance
of cash and cash equivalents is maintained to meet immediate needs.
The maturity dates of financial assets and liabilities are matched. Mismatching of
maturities is not undertaken unless this is for a demonstrable financial advantage and
specifically approved by senior management.
Insurance Group
The Group‟s insurance business is exposed to daily calls on its available cash resources
from claims arising from insurance contracts. The IG maintains a minimum proportion
of sufficient funds available to meet such calls to cover maturities, claims and surrenders
at unexpected levels of demand.
The BOD of ALFA and ALGA formed an Asset and Liability Committee (ALCO) which
meets on a quarterly basis to ensure the adequacy of reserves and liquid assets and their
compliance with the regulatory reserve and liquidity requirements. Cash forecasts are
prepared and reviewed monthly by the ALCO, DepEd Committee and Investment
Committee to ensure that the operational funding requirements are adequately met.
The table below summarizes the maturity profile of the financial assets and liabilities of
the Group as of December 31, 2011 and 2010 based on the remaining contractual
payments, except for the legal policy reserves, which are based on the estimated timing
of net cash outflows using the recognized insurance liability amounts:
<1 Year
Unlisted securities
Mutual funds
Proprietary shares
Receivables:
Loans receivable
Salary loans
Accounts receivable
receivables
Policy loans
Interest receivable
Receivables from officers and
employees
brokers:
Foreign
Corporate
Margin
Individual
Brokers
Other assets:
Performance bonds
P2,065,231,164
35,711,132
28,297,627
December 31, 2011
1 - 5 Years
Over 5 Years
P -
P -
Total
P2,065,231,164
35,711,132
28,297,627
6,357,156
35,007,388
160,850,529
51,343,095
11,362,800
128,405,362
-
225,620,478
-
6,357,156
389,033,228
160,850,529
51,343,095
11,362,800
44,838,516
335,308,849
51,015,536
3,273,043
564,995,330
9,555,478
2,389,630
-
50,501,189
900,304,179
60,571,014
119,644,359
91,444,095
2,030,049
8,684,738
23,045,627
-
-
119,644,359
91,444,095
2,030,049
8,684,738
23,045,627
35,180,109
-
-
35,180,109
957,430,582
126,429,283
76,795,247
55,669,073
8,681,407
2,164,238
8,948,915
-
-
957,430,582
126,429,283
76,795,247
55,669,073
8,681,407
2,164,238
8,948,915
13,928,961
12,833,900
-
-
13,928,961
12,833,900
P4,368,234,375
- 40 -
P706,229,213
P228,010,108
P5,302,473,696
<1 Year
Accounts payable and accrued
expenses:
Due to customers and brokers
Due to clearing house
Accrued expenses
Accounts payable
Life insurance deposit
Customers‟ deposit
Miscellaneous payables
Loans payable
Insurance contract liabilities:
Claims payable
Accounts payable and accrued
expenses:
Accrued expenses
Accounts payable
Loans payable
Claims payable
Total
P623,847,615
794,296,634
101,903,421
200,781,886
87,010,722
P 6,840,644
P -
P623,847,615
794,296,634
101,903,421
200,781,886
93,851,366
13,356,377
9,754,013
30,418,891
342,122,975
40,964,696
-
13,356,377
9,754,013
30,418,891
383,087,671
211,051,806
196,114,214
49,831,469
134,637
98,844,443
-
418,174,320
-
728,070,569
196,114,214
49,831,469
134,637
P2,660,624,660
P146,649,783
P418,174,320
P3,225,448,763
<1 Year
Unlisted securities
Mutual funds
Proprietary shares
Receivables:
Loans receivable
Salary loans
Notes receivable
Accounts receivable
receivables
Policy loans
Interest receivable
and employees
brokers:
Foreign
Corporate
Individual
Brokers
Other assets:
Performance bonds
December 31, 2011
1 - 5 Years
Over 5 Years
P1,784,179,832
30,637,424
24,952,819
December 31, 2010
1 - 5 Years
Over 5 Years
P -
P -
Total
P1,784,179,832
30,637,424
24,952,819
20,012,675
102,505,701
155,991,864
52,311,256
13,722,800
77,376,405
-
14,384,475
-
20,012,675
194,266,581
155,991,864
52,311,256
13,722,800
47,480,437
148,816,696
16,177,316
14,562,274
27,220,790
685,849,006
6,295,966
2,854,767
-
77,555,994
834,665,702
16,177,316
20,858,240
101,595,773
129,980,479
1,610,140
12,211,192
22,944,540
32,039,880
80,473,932
213,762,021
144,754,289
57,525,310
182,983,427
4,974,709
28,097,133
1,032,000
11,844,215
9,067,102
6,000,680
-
-
101,595,773
129,980,479
1,610,140
12,211,192
22,944,540
-
38,040,560
-
80,473,932
213,762,021
144,754,289
57,525,310
182,983,427
4,974,709
28,097,133
1,032,000
11,844,215
9,067,102
P3,446,247,236
P802,742,847
P673,391,936
145,909,457
117,513,329
65,424,528
11,106,677
9,416,891
4,991,542
55,087,193
327,180,950
P 5,041,820
128,166,590
195,296,554
168,964,371
52,893,481
21,849,553
40,285,911
-
455,139,569
-
690,722,034
168,964,371
52,893,481
21,849,553
P1,849,026,462
P173,494,321
P455,139,569
P2,477,660,352
- 41 -
P17,239,242
P -
P4,266,229,325
P673,391,936
145,909,457
117,513,329
70,466,348
11,106,677
9,416,891
4,991,542
55,087,193
455,347,540
Underwriting Risk
Underwriting risk is unique to the Capital Markets Group (CMG) which consists of
ATRKE Financial, Maybank ATR KE Capital, Maybank ATR KE Securities, ATRKE
AMG and ATRKE AMI. This refers to the risk that the securities underwritten by CMG
on a firm commitment basis may not be fully subscribed, resulting in CMG having to buy
the unsold portion of the issue. Underwriting risk could lead to illiquidity and financial
loss should the market price of the securities decline, and damage to reputation of the
Group.
Where CMG acts as the lead underwriter, CMG applies various risk mitigation processes
and procedures such as the conduct of fundamental analysis, valuation, pre-marketing,
book-building process, underwriting commitment, and determination of residual
underwriting risk. Before substantial work is done on a proposed underwriting
transaction, the same is presented to the Kim Eng Group Capital Markets Committee
(CMC) such that a high level view of the desirability, feasibility, and risks relating to the
proposed transaction are assessed and a decision is taken as to whether or not to proceed
with the underwriting agreement.
Where CMG is not the lead underwriter but instead, a participant or a sub-underwriter,
fundamental analysis, valuation and pre-marketing is not done by CMG. Nonetheless,
before accepting the role as a sub-underwriter, the Group performs the necessary due
diligence procedures to ensure that it will be in a position to sell the volume that it agrees
to sell. Thus, consultation with the Pre-Screening Committee and presentation to the
CMC are necessary and approval therefrom is obtained before any agreement to a subunderwriting arrangement. The Pre-Screening Committee is composed of senior officers
from Maybank ATR KE Capital‟s Corporate Finance Department and Sales Team of
Maybank ATR KE Securities.
Insurance Risk
Nature of Risk
Insurance risk is unique to the Group‟s insurance business. The principal risk the IG faces
under insurance contracts is that the actual claims and benefit payments or the timing
thereof, differ from expectations. This is influenced by the frequency of claims, severity of
claims, actual benefits paid and subsequent development of long-term claims. Therefore,
the objective of the IG is to ensure that sufficient reserves are available to cover these
liabilities.
Insurance risk includes premium/benefits risk, actuarial reserve risk and reinsurance risk.
Premium/benefits risk is the risk of having to pay, from a premium that may be fixed for a
specific term, benefits that can be affected by uncontrollable event when they become due.
Adequacy of the actuarial reserves is monitored by an in-house actuary on a regular basis in
accordance with local regulations. Reinsurance risk arises from underwriting direct
business or reinsurance business in relation to reinsurers and brokers.
Monitoring and Controlling
The IG regularly assesses the reserving methodology in accordance with local regulations.
Underwriting guidelines and limits for insurance and reinsurance contracts have been well
established to clearly regulate responsibility and accountability.
- 42 -
The main underwriting strategy of the IG in managing insurance risk is the use of
reinsurance. The IG maintains surplus-type reinsurance treaties for both individual and
group life businesses. The retention limit of the IG for its individual business is
P2.0 million for the basic life and for riders or supplementary covers for ALGA and
P1.0 million for the basic life and P0.5 million for riders or supplementary covers for
ALFA. For group business, the retention limit is P2.0 million and P0.6 million per life for
ALGA and ALFA, respectively. In addition, the IG may arrange facultative cessions for
risks beyond the scope of its automatic treaties.
Frequency and Severity of Claims
The frequency and severity of claims is dependent on the type of contracts as follows:
a. For contracts where death is the insured risk, the most significant factor would be
epidemics that result in earlier or more claims than expected.
b. For contracts with fixed and guaranteed benefits and fixed future premiums, there are
no mitigating terms and conditions that reduce the insurance risk accepted.
c. For contracts with discretionary participating feature, the participating nature of these
insurance contracts result in a portion of the insurance risk being shared with the
insured party.
d. For medical insurance contracts where illness incurred by the insured is the considered
risk, the most significant factor would be epidemics and communicable diseases, that
may result in earlier or more claims than expected.
The IG manages these risks through its underwriting strategy and reinsurance program.
However, the risk is also dependent on the policyholders‟ right to pay reduced or no future
premiums, or to terminate the contract completely.
The following represents the Group‟s concentration of insurance risk as of December 31,
2011 and 2010:
December 31, 2011
Exposures, Net of Reinsurance
Concentration
(in Thousands)
Ordinary life
Group
ALGA
P276,790
23,224,238
P23,501,028
ALFA
P6,091,008
718,560
P6,809,568
(In Percentage)
ALGA
1.18
98.82
100.00
ALFA
89.45
10.55
100.00
December 31, 2010
Exposures, Net of Reinsurance
Concentration
(in Thousands)
Ordinary life
Group
ALGA
P323,471
10,958,957
P11,282,428
ALFA
P6,271,087
641,597
P6,912,684
- 43 -
(In Percentage)
ALGA
2.87
97.13
100.00
ALFA
90.72
9.28
100.00
Summary of Claims Analysis
Mortality Ratio (%)
ALGA
ALFA
2010
2010
2011
2011
69.62
32.38
65.89
57.59
35.78
90.73
35.78
92.46
Aggregate individual
Aggregate groups
Classification by Attained Age (Based on 2011 Data of Inforce Policies)
ALGA
The table below presents the concentration of risk across the 14 age brackets. Exposure is
concentrated on age bracket 40-44 to 60-64 for individual and age bracket 25-29 to
40-44 for group.
Attained
Age
<20
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65 - 69
70 - 74
75 - 79
80 +
Total
Attained
Age
<20
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65 - 69
70 - 74
75 - 79
80 +
Total
Individual
Gross of Reinsurance
Net of Reinsurance
Exposure (‘000) Concentration (%) Exposure (‘000) Concentration (%)
P7,250
6,200
3,100
4,836
20,643
29,460
68,151
61,803
50,523
32,095
14,419
6,515
1,735
2,060
2.35
2.01
1.00
1.57
6.69
9.54
22.07
20.01
16.36
10.39
4.67
2.11
0.56
0.67
P7,250
6,200
3,100
4,836
20,643
28,960
54,651
53,803
43,523
29,095
14,419
6,515
1,735
2,060
2.62
2.24
1.12
1.75
7.46
10.46
19.74
19.44
15.72
10.51
5.21
2.35
0.64
0.74
P308,790
100.00
P276,790
100.00
Group
Net of Reinsurance
P679,585
1,216,301
4,511,334
4,732,449
4,184,437
3,340,913
2,861,055
2,359,552
1,510,512
658,458
38,641
8,861
59
132
2.60
4.66
17.28
18.13
16.03
12.80
10.96
9.04
5.79
2.52
0.15
0.04
0.00
0.00
P679,221
1,196,288
4,458,823
4,551,453
3,691,358
2,741,106
2,317,701
1,877,434
41,194,799
472,241
34,762
8,861
59
132
2.92
5.15
19.20
19.60
15.89
11.80
9.98
8.08
5.14
2.03
0.15
0.06
0.00
0.00
P26,102,289
100.00
P63,224,238
100.00
- 44 -
ALGA
The table below presents the concentration of risk across the 14 age brackets. For
individual insurance, exposure is concentrated on age brackets 40-44 to 55-59. For group
insurance, exposure is concentrated on age brackets 25-29 to 45-49.
Attained
Age
<20
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65 - 69
70 - 74
75 - 79
80 +
Total
Attained
Age
<20
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65 - 69
70 +
Total
Individual
Net of Reinsurance
Exposure („000 ) Concentration (%)
P9,361
5,700
2,858
16,920
30,220
58,149
72,724
59,692
50,907
27,155
12,770
5,614
1,496
1,905
2.63
1.60
0.80
4.76
8.50
16.36
20.46
16.79
14.32
7.64
3.59
1.58
0.42
0.55
P9,361
5,700
2,858
16,920
30,220
44,149
64,724
59,692
43,907
24,155
12,770
5,614
1,496
1,905
2.89
1.76
0.88
5.23
9.34
13.65
20.01
18.45
13.57
7.47
3.95
1.74
0.46
0.60
P355,471
100.00
P323,471
100.00
Group
Net of Reinsurance
P33,682
555,566
2,029,774
2,096,557
2,224,430
1,883,577
1,680,887
1,251,010
879,933
241,276
6,646
61
0.26
4.31
15.75
16.27
17.27
14.62
13.05
9.71
6.83
1.87
0.05
0.01
P30,857
555,566
1,994,279
1,943,605
1,842,536
1,502,661
1,278,160
980,495
668,426
155,665
6,646
61
0.28
5.07
18.20
17.74
16.81
13.71
11.66
8.95
6.10
1.42
0.06
0.00
P12,883,399
100.00
P10,958,957
100.00
- 45 -
ALFA
The table below presents the concentration of risk across the 14 age brackets. Exposure is
concentrated on age bracket 30-34 to 45-49 for individual and age bracket 25-29 to 40-44
for group.
Attained
Age
<20
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65 - 69
70 - 74
75 - 79
80 +
Total
Attained
Age
Individual
Net of Reinsurance
P63,236
44,983
512,102
1,385,376
1,253,187
1,202,293
737,719
498,215
356,118
150,536
101,035
16,320
7,602
1,680
1.00
0.71
8.09
21.88
19.80
18.99
11.65
7.87
5.63
2.38
1.60
0.26
0.12
0.02
P61,473
44,682
506,446
1,370,357
1,245,401
1,131,211
728,553
477,864
319,132
118,115
63,628
15,028
7,602
1,516
1.01
0.73
8.31
22.50
20.45
18.57
11.96
7.85
5.24
1.94
1.04
0.25
0.12
0.03
P6,330,402
100.00
P6,091,008
100.00
Group
Net of Reinsurance
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
P35,450
208,012
200,611
134,131
81,792
40,139
16,655
4,051
19
4.92
28.86
27.83
18.61
11.35
5.57
2.31
0.56
0.00
P35,450
208,012
200,611
134,131
81,792
39,756
15,121
3,668
19
4.93
28.95
27.92
18.67
11.38
5.53
2.10
0.52
0.00
Total
P720,860
100.00
P718,560
100.00
- 46 -
ALFA
The table below presents the concentration of risk across the 14 age brackets. For
individual insurance, exposure is concentrated on age brackets from 25-29 to 45-49. For
group insurance, exposure is concentrated on age brackets from 25-29
to 40-44.
Attained
Age
Individual
Net of Reinsurance
Exposure („000 ) Concentration (%) Exposure („000 ) Concentration (%)
<20
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65 - 69
70 - 74
75 - 79
80 +
P67,450
87,322
842,628
1,445,057
1,224,015
1,142,146
685,857
442,470
301,745
99,283
80,088
19,101
5,187
869
1.05
1.36
13.08
22.43
19.00
17.73
10.64
6.87
4.68
1.54
1.24
0.29
0.08
0.01
P66,113
84,596
835,973
1,443,133
1,220,722
1,108,443
665,336
424,881
261,655
88,562
48,027
17,763
5,187
696
1.05
1.35
13.33
23.01
19.47
17.68
10.61
6.78
4.17
1.41
0.77
0.28
0.08
0.01
Total
P6,443,218
100.00
P6,271,087
100.00
Attained
Age
Group
Net of Reinsurance
Exposure („000 ) Concentration (%) Exposure („000 ) Concentration (%)
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
P4,185
109,418
191,891
140,668
101,495
55,862
25,964
10,423
3,991
0.65
16.99
29.80
21.85
15.76
8.68
4.03
1.62
0.62
P4,185
109,418
191,891
140,668
101,495
55,478
24,431
10,040
3,991
0.65
17.05
29.91
21.92
15.82
8.65
3.81
1.56
0.63
Total
P643,897
100.00
P641,597
100.00
Source of Uncertainty in the Estimation of Future Claim Payments
Estimation of future payments and premium receipts is subject to unpredictability of
changes in mortality and morbidity levels. The IG adopts standard industry data in
assessing future benefit payments and premium receipts as approved by the IC.
Adjustments are made, if necessary, according to the experience of the IG.
For individual life, no adjustment is made by the IG to the standard mortality table. For
group life and accident and health business, the mortality table is adjusted to reflect the
actual and projected experience, which are given weights or credibility depending on the
amount and length of exposure under consideration. The IG currently monitors its actual
experience on individual business on a per policy basis and on an aggregate basis, and
reports the same to management.
The liability for these contracts comprises the IBNR provision, a provision for reported
claims not yet paid and a provision for unexpired risk at reporting dates. The IBNR
provision is based on historical experience and is subject to a degree of uncertainty.
- 47 -
Financial Instruments
Fair Values and Carrying Values
The following table sets forth the carrying values and estimated fair values of financial
assets and liabilities recognized as of December 31, 2011 and 2010:
2011
Carrying Value
Receivables:
Salary loans - net
Installment contracts receivables
Policy loans
Accounts receivable
Loans receivable - net
Receivables from officers and
employees
Interest receivable
Notes receivable
Miscellaneous receivables - net
Other assets
P2,065,231,164
Fair Value
2010
Carrying Value
P2,065,231,164 P1,784,179,832
Fair Value
P1,784,179,832
1,225,005,592
900,304,179
119,644,359
91,444,095
60,571,014
50,501,189
1,225,005,592
888,978,302
117,677,733
91,444,095
60,571,014
52,097,318
496,515,552
834,665,702
101,595,773
129,980,479
20,858,240
77,555,994
496,515,552
902,416,623
113,581,707
129,980,479
20,858,240
84,455,085
35,180,109
23,045,627
8,684,738
2,030,049
2,164,238
35,711,132
8,948,915
26,762,861
35,180,109
23,045,627
8,684,738
2,030,049
2,164,238
35,711,132
8,948,915
26,762,861
38,040,560
22,944,540
12,211,192
1,610,140
182,983,427
16,177,316
4,974,709
30,637,424
28,097,133
21,943,317
38,040,560
22,944,540
12,211,192
1,610,140
182,983,427
16,177,316
4,974,709
30,637,424
28,097,133
21,943,317
4,655,229,261
4,643,532,887
3,804,971,330
3,891,607,276
AFS financial securities:
Unlisted securities
Mutual funds
Proprietary shares
6,357,156
389,033,228
160,850,529
51,343,095
11,362,800
6,357,156
389,033,228
160,850,529
51,343,095
11,362,800
20,012,675
194,266,581
155,991,864
52,311,256
13,722,800
20,012,675
194,266,581
155,991,864
52,311,256
13,722,800
Total AFS securities
618,946,808
618,946,808
436,305,176
436,305,176
28,297,627
28,297,627
24,952,819
24,952,819
P5,290,777,322 P4,266,229,325
P4,352,865,271
Total loans and receivables
P5,302,473,696
2011
Carrying Value
Other financial liabilities:
Loans payable
Claims payable
Accounts payable, accrued expenses
and other liabilities:
Accounts payable
Accrued expenses
Fair Value
2010
Carrying Value
Fair Value
P383,087,671
P381,111,236
P455,347,540
P456,830,482
728,070,569
196,114,214
49,831,469
134,637
728,070,569
196,114,214
49,831,469
134,637
690,722,034
168,964,371
52,893,481
21,849,553
690,722,034
168,964,371
52,893,481
21,849,553
623,847,615
794,296,634
93,851,366
200,781,886
101,903,421
9,754,013
13,356,377
30,418,891
623,847,615
794,296,634
93,851,366
200,781,886
101,903,421
9,754,013
13,356,377
30,418,891
673,391,936
70,466,348
117,513,329
145,909,457
4,991,542
11,106,677
9,416,891
55,087,193
673,391,936
70,466,348
117,513,329
145,909,457
4,991,542
11,106,677
9,416,891
55,087,193
P3,225,448,763
P3,223,472,328
P2,477,660,352
P2,479,143,294
- 48 -
The following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which it is practicable to reliably estimate such value:

Cash and cash equivalents - the carrying values approximate fair values considering
that these instruments have original maturities of three months or less and are subject
to an insignificant risk of change in value.

Financial assets at FVPL, quoted AFS equity securities and other financial
instruments - The fair value for financial instruments traded in active markets at the
reporting date is based on their quoted market price or dealer price quotations from
an active market (bid price for financial assets and ask price for financial liabilities),
without any deduction for transaction costs. When quoted prices are not available,
the price of the most recent market transactions for similar instruments normally
provides objective evidence of fair value, provided that there has not been a
significant change in the relevant economic circumstances since the time of the
transaction.
For all other financial instruments, fair value is determined by using the appropriate
valuation techniques. Valuation techniques include the discounted cash flow
approach, price comparison to similar instruments for which market observable
prices exist, options pricing models, and other relevant valuation models.


Receivables:
-
Salary loans, loans receivable and installment contract receivables - the fair
values are based on the discounted value of the future cash flows using the
prevailing market rates for similar types of instrument.
-
Due from customers and brokers, due from clearing house, accounts receivables,
policy loans, notes receivable, due from related companies, receivables from
officers and employees, interest receivable and other receivables - the carrying
values approximate fair values due to the short-term nature of most of these
instruments. Management believes that the effect of discounting cash flows from
these instruments using the prevailing market rates is not significant.
Other Financial Liabilities at Amortized Cost
-
Accounts payable, interest payable, due to customers and brokers, accrued
expenses, premium deposit fund, other liabilities and due to related companies the carrying amounts approximate their fair values at reporting date due to the
short-term nature of most of these instruments. Management believes that the
effect of discounting the future cash payments for these instruments using the
prevailing market rates is not significant.
-
Fixed rate interest-bearing loans - the fair values are based on the discounted
value of future cash flows using the prevailing market rates for similar types of
borrowings.
-
Variable rate interest-bearing loans - the carrying value approximates the fair
value because of recent and regular pricing based on current market rates.
- 49 -
Fair Value Hierarchy
The table below analyses financial instruments carried at fair value, by valuation method
as of December 31, 2011 and 2010.
Level 1
AFS securities
P611,416,852
28,927,627
P640,344,479
Level 1
AFS securities
P410,619,701
24,952,819
P435,572,520
December 31, 2011
Level 2
Level 3
P7,529,956
P7,529,956
P P -
Total
P618,946,808
28,927,627
P647,874,435
December 31, 2010
Level 2
Level 3
P25,685,475
P25,685,475
P P -
Total
P436,305,176
24,952,819
P461,257,995
The following table shows the movement in Level 3 of the fair value hierarchy:
Balance at January 1
Total losses recognized in:
- Profit or loss
- Comprehensive income
Balance at December 31
P25,685,475
(4,500,000)
(13,655,519)
P7,529,956
The different levels have been defined as follows:



Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: 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).
Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
There has been no transfer from Level 1 and Level 3 to other levels in 2011 and 2010.
7. Capital Management
The primary objectives of the Group‟s capital management are to support its business,
maximize shareholders‟ value in terms of returns on investment and increased stock
value and ensure that it complies with externally-imposed capital requirements.
The Group manages its capital structure and makes adjustments to it in light of changes
in economic conditions. To maintain or adjust the capital structure, the Group may adjust
or defer the dividend payment to shareholders or issue new shares. No changes were
made in the objectives, policies or processes during the years ended December 31, 2011
and 2010.
- 50 -
The Group‟s capital includes the equity attributable to equity holders of the Parent
Company adjusted for the net unrealized fair value gain (loss) on AFS securities. As of
December 31, 2011 and 2010, the Group‟s capital consists of:
2011
Capital:
Equity attributable to equity holders of the
Parent Company
Net unrealized fair value loss (gain) on AFS
securities
Total capital
2010
P3,149,063,070 P2,810,209,685
(1,304,611)
27,154,791
P3,176,217,861 P2,808,905,074
Certain companies in the Group are covered by regulations covering the respective
industries and these subsidiaries manage capital in compliance with the regulatory
requirements. If not properly monitored and adjusted, the regulatory capital levels could
fall below the required minimum amounts set by regulators, which could expose the
respective companies to various sanctions ranging from fixed monetary penalties, or
suspension or revocation of license. The subsidiaries manage the level of regulatory
capital requirements by assessing shortfalls between reported and required capital.
Adjustments to current capital levels are made in light of changes in unusual or
unforeseen market volatility and changing regulatory requirements.
The Parent Company and its subsidiaries are in compliance with the respective externally
imposed capital requirements for the years ended December 31, 2011 and 2010.
8. Operating Segments
The Group derives revenues from the following main operating business segments:
Capital Markets




Investment holding - includes acquisitions and investments in various business
ventures;
Investment banking - includes various business groups that cover corporate finance
and financial advisory services, mergers and acquisitions, direct investments, fixed
income and trust services;
Investment management - provides and renders management and technical advice,
services for mutual funds corporations, natural persons and other entities; and
Brokerage - covers the brokerage business.
Real Estate

Real estate - ATRKE Land has entered into a joint venture with Landco Pacific
Corporation (Landco), an unrelated company, for the development of its real estate
property into a themed-residential lifestyle community, the TRIbeca Private
Residences.
Insurance

Insurance - covers life and general insurance services that cater to both individual and
group requirements.
Transactions between operating segments are on a normal commercial terms and
conditions. All operating business segments are in the Philippines.
- 51 -
The segment assets, liabilities and results of operations of the reportable segments of the Group as of and for the years ended December 31, 2011 and
2010 reported are as follows:
Investment
Banking
CAPITAL MARKETS
Investment
Brokerage
Management
2011
Investment
Holding
Total
REAL ESTATE
INSURANCE
Elimination
P144,907,124
22,728,872
38,728,825
P604,795,629
(63,097)
28,816,087
P31,770,694
77,806
P15,495,513
44,094,458
P796,968,960
22,665,775
111,717,176
P110,813,535
8,054,631
P1,694,678,361
151,934,462
(P6,108,708)
(35,177,394)
P2,596,352,148
22,665,775
236,528,875
Total revenue
Operating expenses, excluding depreciation,
amortization and interest expense
Depreciation and amortization expense
Interest expense
206,364,821
633,548,619
31,848,500
59,589,971
931,351,911
118,868,166
1,846,612,823
(41,286,102)
2,855,546,798
229,325,360
10,305,976
22,852,448
362,125,738
5,793,927
5,897,376
43,979,306
1,973,075
-
44,448,669
389,701
95,516
679,879,073
18,462,679
28,845,340
83,901,901
610,374
18,392,793
1,588,437,037
12,833,307
3,131,073
(4,302,272)
(35,177,397)
2,347,915,739
31,906,360
15,191,809
Income (loss) before income tax
Income tax expense (benefit)
(56,118,963)
(20,562,051)
259,731,578
77,251,073
(14,103,881)
1,123,010
14,656,085
(7,211,165)
204,164,819
50,600,867
15,963,098
6,284,058
242,211,406
66,224,172
(1,806,433)
-
460,532,890
123,109,097
(P35,556,912)
P182,480,505
(P15,226,891)
P21,867,250
P153,563,952
P9,679,040
P175,987,234
(P1,806,433)
P337,423,793
P2,669,695,727
243,628,189
778,514
P6,355,583,951
2,326,894,325
12,790,601
P1,144,002,742
421,325,462
2,475,000
P2,306,261,780
1,345,095,692
7,620,464
(P2,960,397,663)
(542,796,412)
-
P6,845,450,810
3,550,519,067
22,886,065
Revenue and other income
Interest income
Net income (loss)
Other information:
Segment assets
Segment liabilities
Capital expenditures
P1,336,452,567
482,521,312
2,951,790
P2,314,580,979
1,585,066,764
7,195,769
Investment
Banking
Brokerage
P313,952,283
20,042,446
16,180,369
P550,269,884
29,978,205
Total revenue
Interest expense
350,175,098
Interest income
Net income (loss)
Other information:
Segment assets
Segment liabilities
P34,854,678
15,678,060
1,864,528
CAPITAL MARKETS
Investment
Management
Consolidated
2010
Investment
Holding
Total
REAL ESTATE
INSURANCE
P24,710,874
641,017
P190,209,253
46,538,015
P1,079,142,294
20,042,446
93,337,606
P102,545,195
12,870,337
P1,579,910,291
172,478,966
(P341,556,011)
(64,988,897)
P2,420,041,769
20,042,446
213,698,012
580,248,089
25,351,891
236,747,268
1,192,522,346
115,415,532
1,752,389,257
(406,544,908)
2,653,782,227
179,272,801
9,487,528
28,338,226
366,178,319
4,966,888
10,279,559
47,654,730
1,866,812
-
59,965,289
158,839
2,291,170
653,071,139
16,480,067
40,908,955
76,627,523
493,652
19,588,394
1,503,583,044
11,008,476
25,526,634
(38,224,199)
(68,595,064)
2,195,057,507
27,982,195
17,428,919
133,076,543
6,669,876
198,823,323
59,716,314
(24,169,651)
(1,113,515)
174,331,970
(30,423,786)
482,062,185
34,848,889
18,705,963
6,439,081
212,271,103
58,658,350
(299,725,645)
-
413,313,606
99,946,320
P126,406,667
P139,107,009
(P23,056,136)
P204,755,756
P497,213,296
P12,266,882
P153,612,753
(P299,725,645)
P313,367,286
P1,567,513,761
584,307,413
14,056,502
P1,505,655,230
958,383,699
11,748,891
P2,730,817,913
267,451,883
800,775
P5,846,521,768
1,833,274,350
29,737,546
P1,165,754,583
452,756,342
807,602
P2,054,868,500
1,275,778,928
24,226,889
(P3,292,498,046)
(720,155,944)
-
P5,774,646,805
2,841,653,676
54,772,037
P42,534,864
23,131,355
3,131,378
- 52 -
Elimination
Consolidated
Interest income
Total revenue
Interest expense
Net income (loss)
Other information:
Segment assets
Segment liabilities
Investment
Banking
Brokerage
P206,814,172
8,082,502
7,837,728
P437,214,618
16,885,015
222,734,402
122,228,767
9,048,260
16,689,101
CAPITAL MARKETS
Investment
Management
2009
Investment
Holding
Total
P17,466,644
105,546
P168,647,946
26,450,402
P830,143,380
8,082,502
51,278,691
P8,264,632
4,194,682
P1,356,541,395
125,507,688
(P225,843,331)
(21,133,040)
P1,969,106,076
8,082,502
159,848,021
454,099,633
17,572,191
195,098,348
889,504,573
12,459,314
1,482,049,083
(246,976,371)
2,137,036,599
230,624,082
5,308,297
845,359
25,806,872
1,342,783
-
137,940,214
51,381
1,012,603
516,599,935
15,750,721
18,547,063
9,945,344
359,102
21,362,393
1,303,568,025
10,870,404
758,985
14,503,325
(21,133,040)
1,844,616,629
26,980,227
19,535,401
217,321,896
51,987,046
(9,577,465)
1,343,958
56,094,150
(26,065,451)
338,606,854
18,639,933
(19,207,525)
(2,414,345)
166,851,669
46,882,848
(240,346,656)
-
245,904,342
63,108,436
P83,393,894
P165,334,849
(P10,921,423)
P82,159,601
P319,966,921
(P16,793,180)
P119,968,821
(P240,346,656)
P182,795,906
P345,138,579
283,062,156
13,035,387
P1,912,780,826
1,446,553,345
2,089,432
P1,767,566,007
487,876,296
-
P4,071,923,521
2,224,892,158
16,815,914
P1,696,702,032
1,115,951,680
4,723,107
(P1,243,464,851)
(513,758,644)
-
P5,707,627,192
3,265,124,129
21,593,969
74,768,274
(8,625,621)
P46,438,109
7,400,361
1,691,095
REAL ESTATE
P1,182,466,490
438,038,935
54,948
INSURANCE
Elimination
For the years ended December 31, 2011, 2010 and 2009, there was no significant concentration of revenue to a single customer.
- 53 -
Consolidated
9. Cash and Cash Equivalents
This account consists of:
Cash on hand and in banks:
Cash on hand
Peso-denominated
Dollar-denominated
Cash equivalents:
Peso-denominated time deposits and special
savings
Dollar-denominated time deposits
2011
2010
P395,684
599,355,722
37,707,922
P383,255
590,557,250
29,740,788
1,427,358,941
412,895
P2,065,231,164
1,119,211,919
44,286,620
P1,784,179,832
In compliance with SRC Rule 49.2 covering customer protection and custody of
securities, Maybank ATR KE Securities maintains a peso-denominated bank account
(included under “Cash in banks”) for trade-related settlement with its customers
amounting to P203.2 million and P102.5 million as of December 31, 2011 and 2010,
respectively. Maybank ATR KE Securities‟ reserve requirement is determined and
provided monthly in compliance with SEC guidelines.
10. Available-for-Sale Securities
At fair value:
Unlisted securities
Mutual funds
Proprietary shares
At cost less impairment:
Unlisted domestic holding and manufacturing
company and a local bank
Less allowance for impairment
2011
2010
P6,357,156
51,343,095
160,850,529
11,362,800
389,033,228
618,946,808
P20,012,675
52,311,256
155,991,864
13,722,800
194,266,581
436,305,176
41,185,000
41,185,000
-
41,185,000
41,185,000
-
P618,946,808
P436,305,176
Unlisted Domestic Holding and Manufacturing Company
The unlisted domestic holding and manufacturing company ceased to operate and
accordingly, the Group provided full allowance on impairment amounting to
P40.0 million as of December 31, 2011 and 2010.
- 54 -
Unlisted Foreign Holding Company
The equity securities in an unlisted foreign holding company represent shares of stock of
an investment holding company, which invests in various equity and debt securities in
foreign markets. The Company estimated the fair value of this investment based on the
fair value of the net assets of the investments holding company. The fair value of the
investment amounts to P6.4 million as of December 31, 2011, and 20.0 million as of
December 31, 2010.
Mutual Fund: ATRKE Funds
The investments in ATRKE Funds pertain to the Group‟s investments in ATR KimEng
AsiaPlus Recovery Fund, Inc. (formerly DWS Deutsche Philippine Equity, Inc.) and
ATR KimEng Total Return Bond Fund, Inc. (formerly DWS Deutsche Fixed-Income
Funds, Inc.), collectively referred to as the (“ATRKE Funds”). On September 15, 2009,
the BOD approved the Group‟s investments in the ATRKE Funds of up to P75 million,
as part of a Transition of Management Agreement (TMA) among Maybank ATR KE
Capital, the ATRKE Funds and Deutsche Bank AG - Manila Branch (DB Manila).
At the date of the TMA, Maybank ATR KE Capital, subscribed to the shares of the
ATRKE Funds aggregating P2.0 million. The amended prospectuses were approved by
the SEC on March 8, 2010 and the additional investment of P73 million was made on
March 17, 2010. These shares are intended to be eventually redeemed and thus were
classified as part of AFS securities.
Government Securities
As of December 31, 2011 and 2010, AFS debt securities include investments in
government securities with fair value amounting to P294.5 million and P143.2 million,
respectively, that are designated as restricted investments of the IG and maintained with
the Bureau of Treasury in compliance with the provisions of the IC as security for the
benefit of the life insurance policyholders and creditors of the IG.
AFS debt securities also include fixed-term treasury notes of Maybank ATR KE Capital
amounting to P94.5 million and P51.1 million as of December 31, 2011 and 2010,
respectively, which are earmarked by Maybank ATR KE Capital as security deposit for
the faithful performance of its trust and fiduciary services (see Note 35).
The movements in AFS securities are summarized as follows:
Note
Balance at beginning of year
Additions
Sale of investment in unlisted foreign bank
Maturities of government securities and
disposals of equity securities of listed
domestic companies
Impairment of equity securities of an
unlisted domestic bank
Fair value adjustments
Balance at end of year
- 55 -
16
2011
P436,305,176
1,032,862,101
-
2010
P592,827,097
854,109,507
(282,091,088)
(829,692,619)
(733,584,666)
(20,527,850)
P618,946,808
(165,900)
5,210,226
P436,305,176
The movement of allowance for impairment are as follows:
Note
Provision for the year
Write-off
16
2011
P41,185,000
P41,185,000
2010
P341,019,100
165,900
(300,000,000)
P41,185,000
11. Receivables
2010
2011
P496,515,552
P1,225,005,592
864,382,422
939,403,570
332,667,245
332,945,939
101,595,773
119,644,359
129,980,479
91,444,095
23,086,912
62,799,686
34
38,040,560
35,180,109
22,944,540
23,045,627
12,211,192
8,684,738
2,813,882
3,233,791
16
16,177,316
182,983,427
5,411,812
2,164,238
2,843,551,744 2,228,811,112
(288,697,288)
(324,976,555)
P2,518,575,189 P1,940,113,824
Note
Salary loans
Loans receivable
Installment contract receivables
Policy loans
Accounts receivable
Receivables from officers and employees
Interest receivable
Notes receivable
Miscellaneous
Allowance for impairment
Due from Customers
This account represents amounts due from customers of Maybank ATR KE Securities for
equities purchased in the stock market. Securities purchased by customers are held as
collateral for amounts due from customers.
Due from customers consists of:
Money
Balance
Fully secured accounts:
More than 250%
Between 200% and 250%
Partially secured accounts
2011
Security Valuation
Long
Short
Money
Balance
2010
Security Valuation
Long
Short
P272,025,369
27,487,204
9,247,566
798,126,050
109,437,996
P23,779,000,913
62,833,289
16,090,000
1,120,988,483
108,665,751
P -
P290,401,453
381,631
13,799,127
73,115,267
61,292,764
P23,661,069,988
145,500
22,624,000
75,581,848
60,254,337
P -
P1,216,324,185
P25,087,578,436
P -
P438,990,242
P23,819,675,673
P -
Fully secured accounts include margin accounts amounting to P77 million and
P105.8 million as of December 31, 2011 and 2010, respectively. Interest earned on these
margin accounts amounted to P13.0 million in 2011, P14.9 million in 2010 and
P4.9 million in 2009.
- 56 -
Salary Loans
Salary loans represent loans granted by ALFA and ALGA to DepEd teachers and private
institution employees with terms ranging from 6 to 36 months, collected through salary
deduction. These loans bear annual interest rates of 7.50% to 12.00% in 2011 and 9.00%
to 16.00% in 2010, depending on the term of the loan.
Loans Receivable
The account consists of:
Loans granted to the following parties:
Domestic third party - management
company
OVC
Mortgage loans
Others
Note
2011
2010
34
34
P236,888,918
45,555,832
7,129,661
43,371,528
P332,945,939
P236,888,918
45,555,832
23,884,776
26,337,719
P332,667,245
Domestic Third Party. The loan receivable from a domestic third party is a five-year term
loan with an annual interest rate of 6.00% due in 2008. In 2008, the Parent Company and
the Borrower agreed to extend the loan for another five years, maturing on November 25,
2013. The loan receivable is secured by 6,848,948 shares of stock of a Philippine-based
Filipino corporation, 375,000 shares of stock of and advances to a Philippine holding
company amounting to P117.0 million.
In 2006, the Philippine-based Filipino corporation filed a case with the Regional Trial
Court of Makati (RTC of Makati) for corporate rehabilitation, which included the
suspension of payments to plan holders and creditors. On May 28, 2007, the RTC of
Makati approved the Modified Rehabilitation Plan (the Plan). The approval is only
effective for two years subject to review of compliance of all the terms and conditions of
the Plan. The Plan is composed mainly of restructuring of liabilities, including the related
maturities and growth projections of trust fund assets. The financial projections supporting
the Plan showed negative stockholders‟ equity and debt service up to 2040, and
accordingly the Parent Company provided full allowance on the said loan.
One Virtual Corporation (OVC). Loan receivable from OVC pertains to a P56.2 million
restructured clean loan granted by Maybank ATR KE Capital bearing an annual interest
rate of 14.99% which matured on April 30, 2003. Upon maturity of the loan, a related
company of the borrower (“New Borrower”) assumed the restructured loan and offered
122,483,536 listed shares of stock of a local entertainment company as settlement for the
loan based on the Memorandum of Understanding dated December 29, 2003. Maybank
ATR KE Capital and the New Borrower have subsequently agreed to several extension of
the maturity of the loan receivable and changes to the payment terms.
On June 30, 2005, Maybank ATR KE Capital entered into an Amended and Restated
Purchase Agreement with the New Borrower. Under the agreement, the New Borrower
shall convey, transfer and cede unto the Company a total of 56,241,768 new shares of
stock of an information technology service firm in exchange for the 122,483,536 listed
shares previously offered.
- 57 -
In accordance with the Amended and Restated Purchase Agreement dated March 24,
2008, Maybank ATR KE Capital and the New Borrower agreed that the 19% of the
shares of an information technology service company equivalent to 19% of the loan
balance will be transferred to Maybank ATR KE Capital in 2008, with the shares of the
same information technology service company to cover the remaining balance of 81% of
the loan to be transferred on or before March 31, 2009. As provided in the Amended and
Restated Purchase Agreement (third amendment), in case of any delay in the completion
of the share swap, Maybank ATR KE Capital will have the option to require the borrower
to repay the loan obligation through the transfer of equivalent common shares of Next
Mobile, Inc. (NMI), a corporation organized and existing under the Philippine laws. The
conversion price of one (1) NMI share with a par value of P100.00 per share shall be
P485.32 or equivalent to 93,868 NMI shares.
On September 30, 2008, the New Borrower delivered to Maybank ATR KE Capital the
stock certificates for 10,685,936 shares of the information technology service company
representing 19% of the loan balance equivalent to P10.7 million, duly endorsed for
transfer by the New Borrower. The value of shares was deducted from the outstanding
receivable as of September 30, 2008. The fair value of the unlisted shares as of
September 30, 2008 was determined using binding offers to buy the said shares from
interested third parties.
On March 9, 2009, another Amended and Restated Purchase Agreement was executed
between Maybank ATR KE Capital and the New Borrower to extend the date of transfer
of the shares of the information technology service firm covering the remaining loan
balance to March 31, 2010. Subsequently, several amendments were made to the
Amended and Restated Purchase Agreement to extend the date of transfer of the shares.
As of December 31, 2011, the Amended and Restated Purchase Agreement provides that
the date of transfer of the shares is extended upto March 31, 2012.
As of December 31, 2011 and 2010, the market value of the shares of the information
technology service company in the PSE was lower than the carrying amount of the loans
receivable. Accordingly, a provision for impairment loss of P27.3 million and
P13.7 million was recognized by the Group in profit or loss. Total allowance for
impairment loss relating to this receivable amounted to P45.5 million and P18.2 million
as of December 31, 2011 and 2010, respectively.
Mortgage Loans. Mortgage loans consist of real estate mortgage (housing loans) and
chattel mortgage (car loans) to directors, officers, employees and third party individuals.
Housing and car loans to officers and employees are collectible over a period of five to
15 years through salary deduction. These loans bear an annual interest ranging from 10%
to 16%.
Other Loans Receivable. This account includes loans extended to officers and employees
of the Group in 2010 for the acquisition of units in Tribeca Private Residences for five
years which bear an interest at 10% per annum.
On September 30, 2011, the ATRKE Land granted a P29.4 million bridge loan to Landco
to partially finance the construction of the Central Park Project of Tribeca Private
Residences. The loan is secured by an assignment of Landco‟s share of installment
contract receivables from Towers 1-4 of the Project with a face value not lower than
P29.4 million. The term of the loan is at a maximum of ninety days reckoned from date
of initial loan drawdown, renewable subject to mutual agreement or seven days from
drawdown date of the loan, whichever is earlier. The loan bears interest based on the four
year PDST-F-Fix, plus a spread of four percent (4% p.a.) to be reset every 30 days. As of
December 31, 2011, the outstanding loan amounted to P22.0 million.
- 58 -
Installment Contracts Receivable
Installment contracts receivable pertain to receivables from sale of real estate properties by
ATRKE Land. Installment contracts receivables are collectible in monthly installments
over a period of one to two years and are not interest-bearing. Installment contract
receivables are carried at amortized cost, net of deferred revenue amounting to nil and
P51.7 million as of December 31, 2011 and 2010, respectively. Installment contract
receivables were discounted using credit adjusted market rates ranging from 2.94% to
5.80% depending on the tenor of the particular installment contracts receivable.
As of December 31, 2011 and 2010, installment contract receivables due within one year
from the reporting date amounted to P119.6 million and P101.6 million, respectively.
Policy Loans
Policy loans pertain to loans issued to insurance policyholders. The loan is issued with the
cash surrender value of the policyholders‟ insurance policy as collateral. Interest rate on
policy loans in 2011 and 2010 is pegged at 10%. The policyholders may repay the policy
loans at any time during the effectivity of the policy and if unpaid upon surrender or
maturity, the policy loan, including any unpaid interest, will be deducted from the surrender
value or maturity benefits.
Accounts Receivable
This account primarily represents receivable from advisory, underwriting and management
services of Maybank ATR KE Capital and ATRKE AMI. This also includes receivable
from a third party administration company which represents amounts due from the
policyholders advanced by ALGA for billings made by medical providers. This is
normally due 15 days from billing date to policyholders.
Receivables from Officers and Employees
Receivables from officers and employees primarily represent advances subject to
liquidation and interest-bearing car financing loans extended to officers and employees of
the Group with interest rates ranging from 10% to 12% per annum. The loans are paid
through monthly salary deduction and have original term of five years (see Note 34).
Receivable from Developer
This account represents reimbursement of expenses as provided in the Joint Venture
Agreement (JVA) and collections from buyers which have not yet been remitted to
ATRKE Land by Landco. These receivables are due and collectible upon demand.
Based on an impairment review conducted by management in prior years, the loans
receivable from the domestic third party and the Philippine holding company and accounts
receivable from certain customers of ATRKE Financial amounting to P81.0 million and
P24.8 million, respectively, have been determined to be fully impaired. In 2010, ATRKE
Financial assessed that the said receivables can no longer be collected and accordingly
wrote off these accounts.
- 59 -
As of December 31, 2011 and 2010, receivables of P325.0 million and P288.7 million were
impaired and fully provided for as follows:
Loans
Receivable
Accounts
Receivable
P322,463,833
13,666,750
(81,019,332)
P27,037,834
(24,809,162)
Note
As at December 31,
2009
Provision
Write-offs
As at December 31,
2010
Provision
Recoveries
Disposal of a
subsidiary
Write-offs
As at December 31,
2011
255,111,251
27,333,499
5
P282,444,750
2,228,672
P2,228,672
Salary
Loans
Agents
Account
Balances
P35,959,037
27,796,258
(34,038,575)
P1,203,742
-
29,716,720
10,013,431
653,966
1,203,742
-
(1,284,726)
P39,099,391
Others
P17,129,180
42,958
(16,735,235)
P1,203,742
436,903
(436,903)
P -
Total
P403,793,626
41,505,966
(156,602,304)
288,697,288
37,346,930
653,966
(436,903)
(1,284,726)
P324,976,555
12. Real Estate Inventories
Real estate inventories are carried at cost which consists of the following:
Acquisition cost
Fair value adjustments to recognize real
estate inventories at deemed cost
Note
2011
P205,864,822
2010
P206,331,926
3
506,495,406
P712,360,228
535,538,131
P741,870,057
In 2006, the Group reclassified a real estate property from investment properties to real
estate inventories following a change in use of the properties. Prior to reclassification,
the real estate property was carried at fair value based on the latest appraisal report. In
accordance with PAS 40, Investment Property, the real property‟s deemed cost for
subsequent accounting shall be its fair value at the date of change in use. The fair value
adjustment is realized based on the percentage of completion of units sold.
Real estate inventories pertain to the property located along East Service Road, Barangay
Sucat, Muntinlupa City owned by ATRKE Land, which originally had an area of 97,504
square meters (see Note 37), consisting of undeveloped land and unsold completed units
of Tribeca Private Residences.
The property is being developed by a joint venture operations partner in phases as a
themed residential lifestyle community referred to as the “Tribeca Private Residences”
project.
The bulk of ATRKE Land‟s real estate property is covered by a Mortgage Trust
Indenture (MTI) and, Mortgage Participation Certificates (MPCs) which were used as
security for loans obtained by Maybank ATR KE Capital from a local bank. ATRKE
Land is a co-maker to the said loans (see Note 19).
- 60 -
13. Investment Properties
The movements in this account are as follows:
Memorial
Lots
Residential Condominium Condominium
Lots
Units Improvements
Other
Properties
Total
Fair value as at
January 1, 2011
P171,860,371
8,245,888
P44,898,000
-
P35,581,685
-
P297,022
-
P135,000
-
P252,772,078
8,245,888
Fair value as at
December 31, 2011
P180,106,259
P44,898,000
P35,581,685
P297,022
P135,000
P261,017,966
Fair value as at
January 1, 2010
Disposals
P171,860,371
-
P44,898,000
-
P48,696,263
(20,000,000)
6,885,422
P297,022
-
P135,000
-
P265,886,656
(20,000,000)
6,885,422
Fair value as at
December 31, 2010
P171,860,371
P44,898,000
P35,581,685
P297,022
P135,000
P252,772,078
14. Investments in Associates
The investments in associates consist of:
Percentage of
Ownership
2010
2011
2011
49.00
46.70
49.00
46.70
P18,906,300
103,749,012
P18,906,300
103,749,012
20.00
3.59
20.00
-
23,828,316
10,539,233
23,828,316
-
157,022,861
(103,749,012)
146,483,628
(103,749,012)
53,273,849
42,734,616
66,005,658
22,665,775
(16,170,000)
45,963,212
20,042,446
-
72,501,433
66,005,658
P125,775,282
P108,740,274
Note
Acquisition cost :
Tullett Prebon Philippines, Inc.
(Prebon)
Net Curricula Inc. (NCI)
Maybank ATR Kim Eng Fixed
Income, Inc. (formerly
known as ATR KimEng
Fixed Income, Inc.)
A.V. Ocampo
5
Accumulated equity in net earnings:
January 1
Equity in net earnings for the year
Dividends received
December 31
- 61 -
Amount
2010
The breakdown of investments in associates is as follows:
2011
P57,281,298
58,017,848
10,476,136
P125,775,282
Prebon
Maybank ATR KE Fixed Income
A.V. Ocampo
2010
P60,104,237
48,636,037
P108,740,274
Status of operations and principal activities of the associates are as follows:
a. Prebon
Prebon acts as an intermediary in a wide range of foreign exchange, fixed income
and off-books products to enhance liquidity and efficiency in markets.
b. NCI
NCI was engaged in providing internet services to public schools. As a result of
business reverses due to technical and infrastructure problems, poor market
conditions and financial difficulties, NCI suffered losses and ceased commercial
operations. Consequently, management has recognized a 100% allowance for
impairment on such investment.
c. Maybank ATR KE Fixed Income
Maybank ATR KE Fixed Income is engaged in financial and investment consulting
and advisory business.
On April 26, 2010, Maybank ATR KE Capital subscribed to additional 200,000
shares of Maybank ATR KE Fixed Income with a par value of P100 per share for a
total subscription price of P20 million. On the same date, the Maybank ATR KE
Capital received from Maybank ATR KE Fixed Income, a stock dividend equal to
100,129 common shares.
d. A.V. Ocampo
As discussed in Note 5 to the consolidated financial statements, A.V. Ocampo is an
insurance broker which acts as an agent between the insurer and the insured. The
Group has a significant influence in A.V. Ocampo by virtue of the Group‟s
representation in BOD and participation in policy making process of A.V. Ocampo.
Summarized financial information of the associates follow:
a. Prebon
2011*
P164,824,379
50,079,031
177,033,663
25,149,866
Total assets
Total liabilities
Revenue
Net income
*Unaudited
- 62 -
2010
P207,942,242
85,346,761
195,759,686
23,366,088
b. Maybank ATR KE Fixed Income
2010
2011
P624,279,938 P1,120,026,657
879,903,512
337,247,733
161,880,780
122,058,811
43,836,991
46,909,061
Total assets
Total liabilities
Revenue
Net income
c. A.V. Ocampo
2011*
P19,711,326
10,490,116
8,383,402
(1,757,588)
Total assets
Total liabilities
Revenue
Net income
* Unaudited
15. Property and Equipment
The movements in this account are as follows:
Cost:
Condominium units
Furniture, fixtures and office
equipment
Computer hardware, software
and peripherals
Less accumulated depreciation
and amortization:
Condominium units
equipment
and peripherals
Net book value
December 31,
2010
Additions
Disposals
P94,474,636
13,943,704
79,814,824
P 9,879,965
P (26,098,863)
105,786,156
4,854,108
21,734,043
34,245,490
Reclassifications
December 31,
2011
P -
P94,474,636
13,943,704
63,595,926
(988,582)
(575,448)
109,076,234
4,710,812
3,441,180
(759,472)
575,448
-
27,020,303
36,927,198
349,998,853
22,886,065
(27,846,917)
-
345,038,001
45,910,896
11,572,643
46,080,982
1,921,114
253,661
11,598,669
(22,291,823)
-
47,832,010
11,826,304
35,387,828
79,025,702
9,935,845
(787,735)
-
88,173,812
10,879,045
26,764,792
4,522,111
3,674,960
(668,201)
-
15,401,156
29,771,551
220,234,060
31,906,360
(23,747,759)
-
228,392,661
(P9,020,295)
(P4,099,158)
P -
P116,645,340
P129,764,793
- 63 -
Cost:
Condominium units
equipment
and peripherals
Less accumulated depreciation
and amortization:
Condominium units
equipment
and peripherals
Construction in progress
Net book value
December 31,
2009
Additions
P94,474,636
12,494,826
69,469,013
P 22,125,666
P (11,779,855)
86,038,611
20,281,748
(534,203)
-
105,786,156
13,849,979
29,784,431
7,903,564
4,461,059
(19,500)
-
-
21,734,043
34,245,490
306,111,496
54,772,037
(12,333,558)
43,989,782
11,463,870
44,549,609
1,921,114
108,773
10,468,179
(8,936,806)
-
45,910,896
11,572,643
46,080,982
70,265,617
9,294,288
(534,203)
-
79,025,702
8,071,019
23,402,477
2,827,526
3,362,315
(19,500)
-
-
10,879,045
26,764,792
201,742,374
27,982,195
(9,490,509)
-
220,234,060
1,448,878
P105,818,000
P26,789,842
Disposals
(P2,843,049)
Reclassifications
December 31,
2010
P 1,448,878
-
P94,474,636
13,943,704
79,814,824
1,448,878
(1,448,878)
P -
349,998,853
P129,764,793
As of December 31, 2011 and 2010, certain transportation equipment with a total
carrying amount of P3.8 million and P10.6 million, respectively, have been pledged to
secure certain borrowings of the Group (see Note 19).
16. Settlement Agreement
On November 12, 2001, ATRKE Financial acquired the shares of stock of PMHI
Holdings (PMHI), formerly LBC Global Corporation. PMHI is an entity incorporated
under the laws of the State of Delaware, U.S.A.
In 2006, the Group recognized an asset in its consolidated financial statements representing
claims from several court cases seeking the recovery of economic benefits foregone by the
Group relative to its investment in the shares of stock of PMHI due to the depletion of
PMHI‟s assets resulting from the breach of fiduciary duties by the directors of PMHI (the
LBC Parties). The Group subsequently provided full allowance for impairment amounting
to P300.0 million.
The asset was recognized after the court of Chancery of the State of Delaware ruled in
favor of the Group, followed by the issuance of the same court of a final court order on
January 27, 2007. The decision was later affirmed by the Delaware Supreme Court on
June 14, 2007 (Delaware Judgment). Accordingly, the Group determined that all the asset
recognition criteria had been met with respect to its claims from the court judgment award
in 2006. The initial measurement of the asset was based on the expected cash flows from
monetizing the identified assets of the LBC Parties discounted at the prevailing borrowing
rates applicable. As of December 31, 2008, the claims from court judgment award
amounted to P617.4 million.
On May 5, 2009, as a result of the Delaware Judgment award and the mediation
procedures sanctioned by the San Francisco courts, the Parent Company and the LBC
Parties signed a Settlement Agreement to fully settle all related cases and disputes
between the two parties.
- 64 -
Pursuant to the Settlement Agreement, the LBC Parties:
a. Paid the Parent Company US$2.5 million in cash;
b. Delivered to the Parent Company two promissory notes aggregating US$5.0 million
subject to a simple interest of 6% per annum. The outstanding balance of these notes
were recorded as receivables in the consolidated statements of financial position as of
December 31, 2010; and
c. Transferred the irrevocable beneficial ownership to the Parent Company of 226,072
shares of stock of MNB Holdings Corporation (MNB Holdings), the holding
company of Mission National Bank of San Francisco, California, U.S.A.,
representing 49.38% ownership in MNB Holdings.
Upon receipt of the legal and/or beneficial ownership of the foregoing financial assets in
2009, the Group recognized the assets received at fair value totaling to P643.2 million,
broken down as follows:
a. Cash, $2.5 million, equivalent to P118.2 million at the time of receipt;
b. Promissory notes amounting to $5.0 million, equivalent to P236.4 million at the time
of receipt (see Note 11); and
c. Shares of stock of MNB Holdings (226,072 shares) with an aggregate fair value of
US$6.1 million or $27 per share, equivalent to P288.6 million at the time of receipt
(see Note 10).
In the same year, the Group also derecognized the claims from court judgment award of
P617.4 million and recognized the resulting gain from the foregoing settlement
amounting to P18.1 million, net of deferred tax effects, in profit or loss.
The two promissory notes of US$2.5 million each bear a simple interest of 6.00% per
annum, with maturities on May 20, 2010 and May 20, 2011. The promissory notes were
fully secured by irrevocable and unconditional stand-by letters of credit issued by a bank
pre-approved by the Parent Company. On various dates in 2010, the Parent Company
collected from the LBC Parties a total of $4.6 million for payment of the promissory
notes, in accordance with the payment terms. The notes receivable amounted to
P16.2 million as of December 31, 2010. This was fully collected in 2011(see Note 11).
The shares of stock of MNB Holdings acquired are not publicly listed and are not
actively traded in the over-the-counter market at the time of acquisition. Accordingly, the
Parent Company resorted to valuation techniques such as the use of binding offers to buy
from various interested third parties in estimating the fair value of the shares.
Management believed that the lowest price indicated among these binding offers to buy
represented the best estimate of fair value at the time of acquisition.
On January 15, 2010, the Board of Governors of the Federal Reserve System (the “Fed”)
approved the transfer of the title of the 226,072 MNB Holdings shares to the Parent
Company. The Fed approval, however, requires the Parent Company, among others, to
dispose of the shares within two years.
On January 27, 2010, the Parent Company sold 186,072 MNB Holdings shares at
US$30.50 a share, or for a total consideration of US$5.68 million, to a third party
through a Share Sale Agreement as approved by the Fed.
- 65 -
On March 19, 2010, the Parent Company sold its remaining 40,200 MNB Holdings
shares for a total consideration of US$1.23 million. The completion of the sale of the
shares was subject to certain conditions precedent, including the satisfaction of any
requirement or condition which may be imposed by the Fed. As of December 31, 2010,
all conditions precedent have been complied with, and as a result the sale has been
finalized, with the Parent Company collecting the sales proceeds in full.
17. Other Assets
Note
Creditable withholding tax
Performance bonds
Retirement asset
Reserve funds
Input tax
Prepayments
Deferred software costs
Exchange trading right
Miscellaneous
28
2011
P91,368,785
13,928,961
13,294,100
12,833,900
9,212,895
8,946,601
8,295,881
1,763,035
1,000,000
27,906,192
P188,550,350
2010
P83,383,220
11,844,215
11,226,300
9,067,102
9,675,873
11,649,686
13,683,832
1,763,035
1,000,000
1,032,000
28,044,100
P182,369,363
Creditable Withholding Tax
This account pertains to taxes withheld by customers and can be applied against future
income tax liabilities.
Performance Bonds
Performance bonds consist of amounts posted by ALGA with hospital network providers
in compliance with certain group insurance policy contracts. These bonds will be
recovered upon termination of the policy contracts and after all claims and benefits
accruing to the contracts have been settled.
Lease and Other Deposits
This account consists of deposits made by the Group to the lessor of its office spaces and
advances to various suppliers. The lease deposits shall be refunded by the lessor at the
end of the lease term, net of any liabilities identified at such time.
Reserve Funds
Reserve funds consist of contingency funds, which are maintained to defray claims of the
insurance pools business of ALGA.
Prepayments
Prepayments include advance payments on office space rental, insurance, financial
information services, condominium fees and membership fees and dues.
- 66 -
18. Accounts Payable, Accrued Expenses and Other Liabilities
Note
Accrued expenses
Taxes, licenses and fees payable
Accounts payable
Retirement liability
Customers‟ deposits
Miscellaneous
28
2011
P794,296,634
623,847,615
200,781,886
101,903,421
93,875,209
93,851,366
48,557,998
13,356,377
9,754,013
30,418,891
P2,010,643,410
2010
P 673,391,936
117,513,329
145,909,457
140,484,179
70,466,348
40,310,184
9,416,891
4,991,542
11,106,677
55,087,193
P1,268,677,736
Due to Customers
Due to customers are all due within one year from the respective reporting date, as
follows:
Money
Balance
With money balance
Without money balance
P623,829,720
-
2011
Security Valuation
Long
Short
Money
Balance
2010
Security Valuation
Long
Short
P5,414,232,432
80,077,994,623
P188,393,898
-
P665,971,160
-
P6,263,116,944
22,818,837,683
P478,306,397
-
P623,829,720 P85,492,227,055
P188,393,898
P665,971,160
P29,081,954,627
P478,306,397
Due to customers and brokers were subsequently paid within 3 days from the reporting
date.
Accrued Expenses
The account includes accrual of interest on loans and notes payable, accrued employee
benefits, marketing expenses, rentals and professional fees.
Premium Deposit Fund
The account pertains to funds of ALFA and ALGA held for policyholders with interest
rates ranging from 4.00% to 6.00% per annum. Interest expense charged to current
operations amounted to P1.6 million in 2011, P0.2 million in 2010 and P0.4 million in
2009.
Taxes, Licenses and Fees Payables
This account primarily consists of stock transaction tax payable, withholding taxes
payable, gross receipts tax payable, income tax payable and output tax payable.
Accounts Payable
The account primarily consists of amounts due to suppliers, brokers, and medical providers
for goods purchased and services availed of.
Customers‟ Deposits
The account represents collections received from buyers of real estate, where the income
recognition criteria on sale of real estate have not been met.
- 67 -
Advances from Developer
On September 15, 2008, Landco extended advances of P35.0 million to ATRKE Land for
working capital requirements. Such advances are payable in equal installments over
36 months until 2011 and bear interest at 9.5% per annum. Total interest expense
recognized amounted to P0.4 million in 2011, P1.5 million in 2010 and P2.6 million in
2009. The said advances were fully paid as of December 31, 2011.
19. Loans Payable
This account consists of borrowings from the following:
Note
Borrowing from local banks of:
Maybank ATR KE Securities
ALGA
ALFA
ATRKE Financial
ATRKE Land
Others:
34
2011
2010
P212,847,627
42,600,004
10,025,440
6,647,899
-
P228,345,229
31,516,256
7,672,115
7,715,585
24,945,316
265,144
110,966,701
P383,087,671
154,887,895
P455,347,540
Borrowings of the Group carry effective interest rates ranging from 4.25% to 11.80% and
4.00% to 12.50% in 2011 and 2010, respectively.
Loans payable are payable in various amortization periods shown below:
Short-term (less than one year)
Medium-term (one to five years)
2011
P342,122,975
40,964,696
P383,087,671
2010
P327,180,950
128,166,590
P455,347,540
2011
2010
P173,701,130
P191,458,986
109,600,000
134,545,316
36,666,667
42,600,004
73,333,333
31,516,256
20,519,870
P383,087,671
24,493,649
P455,347,540
Following is a breakdown of secured loans payable:
Continuing suretyship agreements on salary loans
receivable
Secured by notes receivable and standby letters of
credit
MPC on the MTI covering real estate property
owned by ATRKE Land and deed of assignment
for future cash dividends
Various shares of stock
Transportation equipment of Maybank ATR KE
Capital, Maybank ATR KE Securities, ALFA
and ALGA
- 68 -
On December 21, 2007, Maybank ATR KE Capital obtained a loan from a local bank
aggregating to P314.0 million. The loan was subdivided into the following: (a) P204.0
million with a term of three years with no grace period on principal repayment. Interest is
based on the prevailing market rate and to be reset every quarter. Principal and interest
were to be paid on a quarterly basis; and (b) P110.0 million with a term of five years
inclusive of two years grace period on principal repayment. Interest is based on
prevailing market rate and to be reset every quarter. Principal and interest were to be
paid on a quarterly basis. The loan is secured by: (a) an MPC on the MTI covering part
of the real property owned by ATRKE Land situated along East Service Road of the
South Expressway, Barangay Sucat, Muntinlupa City; and (b) a Deed of Assignment
representing future cash dividends due to Maybank ATR KE Capital from an associated
company. The outstanding balance of this loan amounted to P36.7 million and
P73.3 million as of December 31, 2011 and 2010, respectively.
On March 25, 2010, Maybank ATR KE Capital obtained a P70.1 million loan from
certain individuals. The loan has a term of two years with a fixed annual interest rate of
9% and payable in equal monthly amortizations. The loan is secured by an assignment of
receivables from ALFA. The carrying amount of this loan amounted to P1.4 million and
P45.3 million as of December 31, 2011 and 2010, respectively.
On May 29, 2010 and June 28, 2010, Maybank ATR KE Capital obtained loan from a
local bank totaling P73.3 million. Maybank ATR KE Capital obtained another loan from
the same bank in June 2011 amounting to P57.7 million. The loans have a term of two
years with interest based on prevailing market rate and are payable in equal monthly
amortizations. The loans are secured by assignment of receivables. The carrying amount
of these loans amounted to P58.3 million and P52.3 million as of December 31, 2011 and
2010, respectively.
On July 23, 2010, Maybank ATR KE Capital entered into a short term loan agreement
with Kim Eng for an aggregate amount of US$5.0 million. The loan was broken down
into two (2) equal tranches of US$2.5 million each. The loan was secured by a Letter of
Guarantee from ATRKE Financial. In August 2010, Maybank ATR KE Capital obtained
the first tranche amounting to US$2.5 million. The loan had a term of one year from the
date of drawdown with interest based on six-month LIBOR on the date of first
disbursement plus spread of three percent (3%) to be reset every six (6) months or cost of
funds plus a spread of 1.5%, whichever is higher. Interest is payable semi-annually.
Actual interest rate was 4.25% per annum in 2010 and 2011. The loan is renewable on a
case-to-case basis. As of December 31, 2010, Maybank ATR KE Capital did not avail the
second tranche of the loan. The loan from the first drawdown was renewed in July 2011
with the same terms and conditions. The carrying amount of this loan as of
December 31, 2011 and 2010 is US$2.5 million (equivalent to P109.6 million
retranslated using an exchange rate of P43.84:US$1.00 for 2011 and 2010).
On December 23, 2010, Maybank ATR KE Capital obtained a P200.0 million loan
facility from another local bank and availed of P93.9 million in 2010. In March and
April 2011, Maybank ATR KE Capital availed a total of 105.7 million. The loans had a
term of two years from the date of availment with interest based on prevailing market
rate to be reset every quarter. The loans were secured by assignment of receivables.
Carrying value of this loan amounted to P114.0 million and P93.9 million as of
December 31, 2011 and 2010, respectively.
- 69 -
To secure various borrowings from local banks, various continuing surety agreements
were issued by ATRKE Financial. These continuing suretyship agreements covered
maximum amounts of P300.0 million and P375.0 million as of December 31, 2011 and
2010, respectively.
Certain loan agreements have negative covenants relating to changes in nature of
business, ownership or management, merger or consolidation and sale or lease of assets,
and events of default provisions should the loans remain unpaid. Maybank ATR KE
Capital was in full compliance with the aforementioned covenants.
On September 9, 2009, Maybank ATR KE Securities entered into a loan line agreement
with a local bank for working capital requirements amounting to P150 million with a
maximum tenor of 360 days with interest at the bank‟s lending rate, payable in arrears. As
of December 31, 2011 and 2010, outstanding availments from the loan facility amounted to
P42.6 million and P31.5 million, respectively, bearing an effective interest rate of 6.5%
per annum and 8% per annum, respectively.
ATRKE Financial
On May 4, 2010, ATRKE Financial obtained US$2.7 million loan from a local bank,
which bears an interest of 4.0% per annum and is payable until May 20, 2011. The loan
is secured by a deed of assignment of a promissory note dated May 20, 2009 issued by
the LBC Parties in favor of ATRKE Financial (see Note 16).
Interest expense on the above mentioned loans amounted to P15.2 million, P17.4 million
and P19.5 million in 2011, 2010 and 2009, respectively.
20. Insurance Contract Liabilities
2011
P728,070,569
196,114,214
49,831,469
P974,016,252
Claims payable
- 70 -
2010
P690,722,034
168,964,371
52,893,481
P912,579,886
As of December 31, 2011 and 2010, details of the Group‟s insurance contract liabilities are
as follows:
Gross
Reserves for:
Ordinary life policies
Ordinary total and permanent
disability
Ordinary accidental death
benefits
Ordinary supplementary
contracts
Group life insurance
Accident and health policiesordinary
Accident and health policiesgroup
Claims payable
2011
Reinsurance
P502,524,801
Net
Gross
(P1,691,572) P500,833,229
P475,097,429
2010
Reinsurance
Net
(P832,381) P474,265,048
1,519,824
-
1,519,824
1,352,619
-
1,352,619
5,698,900
-
5,698,900
4,607,224
-
4,607,224
12,064,162
25,702,830
9,242,358
53,080,279
-
82,188
92,167
-
182,169,436
150,616,085
728,070,569
196,114,214
49,831,469
694,088,161
168,964,371
52,893,481
(P2,837,108) P974,016,252
P915,946,013
12,064,162
26,848,366
82,188
182,169,436
730,907,677
196,114,214
49,831,469
P976,853,360
(1,145,536)
(2,837,108)
-
(2,533,746)
9,242,358
50,546,533
-
92,167
-
150,616,085
(3,366,127)
-
690,722,034
168,964,371
52,893,481
(P3,366,127) P912,579,886
The movements in legal policy reserves are as follows:
As at January 1
New business, reinstatement and
change in policy year
Released by death and other
terminations and supplementary
contracts
Others
As at December 31
Legal Policy
Reserves
2011
Reinsurer’s
Share in
Liabilities
P694,088,161
(P3,366,127)
1,022,988,740
(1,014,812,852)
28,643,628
P730,907,677
1,395,042
Net
Legal Policy
Reserves
2010
Reinsurer‟s
Share in
Liabilities
P690,722,034
P592,262,818
(P2,858,754)
P589,404,064
1,024,383,782
995,028,035
(1,555,909)
993,472,126
(892,153,909)
(1,048,783)
1,048,536
(892,153,909)
(247)
P694,088,161
(P3,366,127)
P690,722,034
(1,014,812,852)
(866,023)
27,777,605
(P2,837,108)
P728,070,569
Net
The movements in claims payable are as follows:
2011
P168,964,371
(109,194,027)
136,343,870
P196,114,214
As at January 1
Paid during the year
Provisions during the year
As at December 31
2010
P167,718,619
(660,353,168)
661,598,920
P168,964,371
The movements in policyholders‟ dividends are as follows:
2011
P52,893,481
(7,380,469)
4,318,457
P49,831,469
As at January 1
Paid during the year
Provisions during the year
As at December 31
2010
P49,184,383
(5,658,600)
9,367,698
P52,893,481
Sensitivities
The analysis below is performed for the financial impact of reasonably possible
movement in key assumptions with all other assumptions held constant, on the
consolidated statements of income and changes in equity. The correlation of assumptions
will have a significant effect in determining the ultimate claims liabilities. However, to
demonstrate the impact due to changes in assumptions, assumption changes are shown
below on an individual basis.
- 71 -
The assumptions that have the greatest effect on the consolidated financial statements are
listed below:
December 31, 2011
Increase
Increase
(Decrease)
(Decrease)
in Net
in Profit
Liabilities
Before Tax
Change in
Assumptions
10%
-10%
-1%
Mortality
Discount rate
P11,069,753
(10,932,585)
72,583,163
Discount rate
(P7,748,828)
7,652,810
(50,808,215)
December 31, 2010
Increase
Increase
(Decrease)
(Decrease)
in Net
in Profit
Liabilities
Before Tax
Change in
Assumptions
Mortality
(P11,069,753)
10,932,585
(72,583,163)
Increase
(Decrease)
in Equity
10%
-10%
-1%
P10,227,627
(10,377,394)
58,118,686
(P10,227,627)
10,377,394
(58,118,686)
Increase
(Decrease)
in Equity
(P7,159,338)
7,264,176
(40,683,080)
21. Capital Stock and Retained Earnings
The details and movements of the Parent Company‟s capital stock are as follows:
2011
Shares
2010
Common stock:
Authorized - P1 par value
Increase during the year
1,300,000,000
1,300,000,000
1,100,000,000
200,000,000
1,300,000,000
Issued and outstanding:
At beginning of year
Issuances during the year
At end of year
1,068,393,223
1,068,393,223
989,253,179
79,140,044
1,068,393,223
200,000
200,000
Preferred stock:
Authorized - P1,000 par value
Issued and outstanding
-
-
On August 4, 2010, the Philippine SEC approved the increase in authorized capital stock
of the Parent Company from P1,300.0 million divided into 1,100,000,000 common
shares with par value of P1.00 each and 200,000 preferred shares with par value of
P1,000 each into P1,500.0 million divided into 1,300,000,000 common shares and
200,000 preferred shares with the same respective par values.
The following are the salient features of the preferred stock:
a. Cumulative dividend at a rate to be determined solely by the BOD;
b. Nonparticipating in the retained earnings remaining after dividend payments have
been made on the preferred shares;
- 72 -
c. Redeemable at such price, within such period, in such manner and under such terms
and conditions as may be determined by the BOD; and
d. Non-voting.
As of December 31, 2011, the equity holdings of the shareholder groups are as follows:
Shareholder Group
Kim Eng
Public and others
Number of Shares
1,058,923,463
9,469,760
1,068,393,223
%
99.11%
0.89%
100.00%
The BOD declared cash dividends out of its unrestricted retained earnings on the
following dates:
2009
November 26, 2009
P0.08 a share or P79.1 million
December 23, 2009
January 25, 2010
Date of declaration
Cash dividends
Date of record
Date of payment
On April 14, 2010, the Parent Company‟s BOD approved the declaration of an 8% stock
dividend on all issued and outstanding shares as of August 31, 2010, equivalent to
79,140,044 shares with P1.00 par value a share. The Parent Company‟s stockholders
approved the said stock dividend declaration on May 27, 2010. Following the approval
of the Philippine SEC on the increase in the Parent Company‟s authorized capital stock
as discussed above, on September 24, 2010, the Parent Company issued all the shares to
its entitled stockholders.
Retained Earnings
As of December 31, 2011, the Parent Company‟s retained earnings amounts to
P172.7 million, which is available for distribution as dividends to shareholders.
As of December 31, 2011, the consolidated retained earnings include the fair value
adjustment on real estate inventories carried at deemed cost (net of tax effects) amounting
to P353.3 million.
22. Shares of Parent Company Held by Subsidiaries
This account pertains to the Parent Company‟s shares of stock held by the following
subsidiaries as of December 31, 2010:
No. of Shares
3,945,203
11,337,415
339,427
616
15,622,661
ATRKE AMG
ALGA
- 73 -
Cost
P9,990,348
32,764,642
682,266
217
P43,437,473
In November 2009, Maybank ATR KE Capital acquired a 6.51% interest in ATRKE
Financial for P175.6 million. In November 2010, Maybank ATR KE Capital sold these
shares including the stock dividends received with total cost amounting to P166.3 million
to third parties in a special block sale on the board of PSE. The remaining balance of
P9.3 million is presented as part of “Shares of Parent Company Held by Subsidiaries” in
the 2010 consolidated statement of changes in equity. The subsidiaries of ATRKE
Financial sold all their shares during the Tender Offer period with total cost of
P43.4 million. Accordingly, there are no shares of parent company held by subsidiaries
as of December 31, 2011.
As discussed in Note 5 to the consolidated financial statements, Kim Eng made a Tender
Offer for all ATRKE Financial shares and, the Parent Company‟s subsidiaries sold all of
their ATRKE Financial shares held through the Tender Offer.
23. Operating Expenses
Note
24
Insurance benefits and claims
Compensation and employee
benefits
27, 28
Commission
Professional fees
Research and marketing costs
Taxes and licenses
Insurance
Entertainment, amusement and
recreation
Communications and office supplies
Rent and utilities
29
Service fees
Depreciation and amortization
15
Stock exchange fees and dues
Transportation and travel
Contracted services
Financial information services
Repairs and maintenance
Others
31
2011
P915,813,848
2010
P839,054,971
2009
P719,765,393
426,880,543
258,146,018
115,546,172
75,406,301
53,260,870
64,981,760
332,279,330
212,894,988
117,281,937
96,690,455
79,978,501
63,957,384
262,796,056
127,307,504
176,236,631
40,725,307
75,716,858
65,797,335
55,968,719
55,732,298
59,227,779
36,137,590
37,545,206
42,092,362
31,123,560
29,161,073
37,287,279
30,860,821
62,660,632
31,629,791
27,982,195
26,980,227
31,906,360
23,372,350
16,977,228
34,320,730
23,351,798
27,508,780
29,027,828
22,304,472
15,974,301
25,182,878
11,345,375
13,974,739
14,265,947
7,086,300
9,246,340
12,183,685
52,325,945
59,147,996
50,676,282
P2,277,836,433 P2,063,996,691 P1,823,253,904
- 74 -
24. Net Insurance Premiums and Insurance Benefits and Claims
Net insurance premiums consist of:
Life insurance contracts
premiums revenue:
Group health insurance
Ordinary life insurance
2011
2010
2009
P1,179,230,201
259,822,711
58,484,448
1,497,537,360
P929,985,740
271,882,695
166,031,993
1,367,900,428
P842,706,492
213,421,172
154,759,179
1,210,886,843
212,153
2,125,029
2,337,182
2,336,735
2,331,309
4,668,044
3,235,144
5,067,492
8,302,636
Less reinsurers‟ share of life
insurance contracts premium
revenue:
Ordinary life insurance
P1,495,200,178 P1,363,232,384 P1,202,584,207
Insurance benefits and claims consist of:
Claims
Increase in legal policy reserves
Surrenders and maturities
Policyholders‟ dividends and
interest thereon
2011
P761,216,684
37,348,534
113,624,631
2010
P663,475,848
101,317,970
64,766,105
2009
P595,009,523
48,293,968
64,756,541
3,623,999
P915,813,848
9,495,048
P839,054,971
11,705,361
P719,765,393
2011
2010
2009
P133,477,485
46,962,869
13,026,427
4,343,177
3,999,417
1,997,999
1,373,753
15,150,757
16,196,991
P236,528,875
P110,681,174
25,489,271
14,935,390
11,391,804
7,496,186
2,775,000
1,811,190
34,912,616
4,205,381
P213,698,012
P96,050,669
20,555,044
4,196,113
3,997,434
9,287,605
3,090,446
11,717,934
381,321
10,571,455
P159,848,021
25. Interest Income
This account consists of interest income from:
Salary loans
Due from customers
Installment contract receivables
Notes receivable
Mortgage loans
Policy loans
Other loans and receivables
AFS securities
- 75 -
26. Other Income
2011
2010
2009
P16,011,781
10,533,328
9,896,973
9,602,859
P14,566,161
4,391,181
1,288,184
962,455
P4,839,327
1,216,826
3,550,399
2,590,608
8,245,888
3,361,768
631,929
28,118,481
P86,403,007
6,885,422
7,174,369
319,180
2,291,108
P37,878,060
6,902,305
159,202
25,758,785
12,947,455
P57,964,907
Note
Realized income on sale of
land
Trust fees
Hospital discount
Third party administration
Increase in fair value of
investment properties
Dividend
Redemption fees
Gain from settlement of claims
Others
13
16
27. Compensation and Employee Benefits
Note
Salaries and wages
Employee benefits
Retirement cost
Social security and
medical costs
Other
28
2011
P332,954,831
54,548,391
31,060,314
2010
P280,732,366
20,265,401
17,774,593
2009
P208,652,164
13,862,035
24,240,723
6,061,227
2,255,780
P426,880,543
5,852,597
7,654,373
P332,279,330
5,450,528
10,590,606
P262,796,056
28. Retirement Plans
Each of the companies in the Group has a non-contributory defined benefit retirement plan
covering all permanent employees. Benefits under the retirement plan are based on an
amount computed at 125% for ATRKE Financial, Maybank ATR KE Capital, and
Maybank ATRKE Securities, 100% for ALGA and ALFA, and 50% for ATRKE AMI,
of final monthly basic salary for every year of credited service.
The retirement plan of ATRKE Financial, ATRKE AMI and ALFA are still unfunded as
of December 31, 2011.
- 76 -
Following are the amounts recognized based on the recent actuarial valuations:
a. Net retirement asset and liability recognized in the consolidated statements of
financial position:
2010
2011
(P251,057,076) (P172,812,819)
237,715,605
305,912,504
64,902,786
54,855,428
(35,818,902)
(19,591,530)
P29,083,884
P35,263,898
Fair value of plan assets
Present value of defined liability obligation
Funding status
Unrecognized actuarial losses
Net retirement liability
Retirement asset and liability are presented in the consolidated statements of
financial position under the following accounts:
Other assets
Accounts payable, accrued expenses
and other liabilities
Net retirement liability
Note
17
18
2011
(P13,294,100)
2010
(P11,226,300)
48,557,998
P35,263,898
40,310,184
P29,083,884
2011
(P20,694,363)
70,813,045
2010
(P35,316,673)
(4,444,726)
Experience adjustments are as follows:
Loss on plan liabilities
Gain (loss) on plan assets
Expense recognized in profit or loss:
Current service cost
Interest cost
Expected return on plan assets
Net actuarial gain (loss)
recognized during the year
Retirement cost
Actual return on plan assets
b.
2011
P23,752,240
17,495,803
(11,154,694)
2010
P15,067,611
14,854,341
(11,206,366)
2009
P4,670,079
29,403,398
(7,615,912)
966,965
P31,060,314
(940,993)
P17,774,593
(2,216,842)
P24,240,723
P55,010,457
P6,761,640
P36,741,553
Movements in the fair value of plan assets are as follows:
2011
P172,812,819
11,154,694
43,855,763
24,880,300
(1,646,500)
P251,057,076
As at January 1
Expected return on plan assets
Actuarial gains (losses)
Employer contribution
Benefits paid
As at December 31
- 77 -
2010
P162,707,158
11,206,366
(4,444,726)
10,499,400
(7,155,379)
P172,812,819
The plan assets comprise the following:
2011
P33,427,829
164,133,376
43,343,768
6,974,336
3,177,767
P251,057,076
Cash in bank
Equity securities
Debt securities
Loans and receivables
Others
Total
2010
P339,669
112,200,052
36,429,817
4,254,669
19,588,612
P172,812,819
The equity securities include ATRKE Financial shares amounting to P95.8 million as
of December 31, 2010. All of these shares were sold during the Tender Offer.
c. The movements in the present value of defined benefit obligation are as follows:
2011
P237,715,605
23,752,240
17,495,803
(1,646,500)
28,595,356
P305,912,504
As at January 1
Current service cost
Interest cost
Benefits paid
Actuarial losses
As at December 31
2010
P168,517,952
15,067,611
14,854,341
(7,155,379)
46,431,080
P237,715,605
Relevant information on the Plan for the current and previous four reporting dates
and periods are as follows:
Defined benefit obligation
Plan assets
Deficit (surplus)
2011
2010
2009
2008
2007
P305,912,504
251,057,076
P237,715,605
172,812,819
P168,517,952
162,707,158
P81,622,500
120,403,658
P119,818,513
129,030,960
P54,855,428
P64,902,786
P5,810,794
(P38,781,158)
(P9,212,447)
The Group expects to contribute P9.5 million to the Plan for 2012.
The principal assumptions used for the Group actuarial valuation are as follows:
Discount rate
Expected rate of return on plan
assets
Salary increase rate
2011
2010
2009
6.00% - 6.98%
7.00% - 7.80%
8.50% - 9.01%
6.00% - 8.00% 6.00% - 7.80% 6.00% - 10.00%
6.00% - 10.00% 6.00% - 10.00% 6.00% - 8.00%
The expected rate of return is based on the average historical earnings of the plan
assets and expected growth in the value of the equity investments over a long-term
period. It is determined by considering the expected return available on the assets
underlying the current investment policy. Expected yields on fixed income
investments are based on gross redemption yields as at reporting date.
- 78 -
29. Lease Agreements
As Lessee
ALFA, ALGA, ATRKE Land and ATRKE AMI lease their office spaces and branch
offices, as applicable, for varying periods and rental rates. The lease agreements are
renewable subject to the agreement of the lessee and the lessors.
The annual minimum future rental payments based on the foregoing lease contracts are as
follows:
2011
P20,614,588
48,759,705
P69,374,293
Within one year
More than one year up to five years
2010
P16,648,465
33,470,111
P50,118,576
Rent expense based on the above agreements amounted to P22.9 million, P18.3 million
and P14.0 million in 2011, 2010 and 2009, respectively.
30. Interest Expense
This account consists of interest expense from the following:
Local banks
Kim Eng
Others
2011
P8,965,062
4,688,749
1,537,998
P15,191,809
2010
P13,149,094
1,922,390
2,357,435
P17,428,919
2009
P16,919,355
2,616,046
P19,535,401
2011
P10,148,248
6,682,268
6,155,947
6,421,302
1,064,869
20,203,648
P50,676,282
2010
P10,578,586
7,086,468
6,933,861
5,621,817
2,384,960
19,720,253
P52,325,945
2009
P7,476,747
4,670,534
5,011,758
12,659,627
2,069,527
27,259,803
P59,147,996
31. Other Operating Expenses
Membership fees and dues
Advertising
Seminars and conferences
Miscellaneous services
Bank charges
Others
- 79 -
32. Income Tax
The Group‟s deferred tax assets (liabilities) account at December 31 consists of:
Deferred tax assets:
Other accrued expenses
Past service costs
NOLCO
Accrued retirement liability
MCIT
Accrued gross receipts tax
Advance rental
Unrealized foreign exchange loss
Deferred tax liabilities:
Fair value increment on real estate inventories
Installment contracts receivable
Retirement assets
Unrealized gain on financial assets at FVPL
Unrealized claims from LBC parties
Unrealized foreign exchange gain
2011
2010
P96,126,292
28,515,628
16,077,124
14,586,585
14,541,143
2,146,442
1,022,044
881,753
94,334
173,991,345
P85,111,440
9,446,220
16,372,347
12,076,869
247,396
2,229,978
1,763,510
15,482
127,263,242
151,394,437
32,641,608
3,988,230
3,843,358
191,867,633
161,035,209
22,163,752
3,367,898
3,806,612
5,231,011
13,689
195,618,171
(P17,876,288)
(P68,354,929)
The Group‟s net deferred tax liabilities are presented in the following accounts in the
consolidated statement of financial position:
2011
P164,760,809
(182,637,097)
(P17,876,288)
Deferred tax assets
Deferred tax liabilities
2010
P114,844,032
(183,198,961)
(P68,354,929)
Details of NOLCO and MCIT as of December 31, 2011 are as follows:
Year Incurred
2011
2010
2009
NOLCO
P56,132,018
18,055,287
6,658,263
P80,845,568
MCIT
P2,357,844
3,805,699
3,000,118
P9,163,661
Expiration
2014
2013
2012
Deferred income tax assets are recognized for NOLCO and MCIT to the extent that it is
probable that sufficient taxable income will be available in the near foreseeable future
against which the related tax benefits can be utilized.
NOLCO amounting to P1.6 million and P7.2 million expired in 2011 and 2010,
respectively, while P13.1 million and P110.5 million was applied in 2011 and 2010,
respectively.
- 80 -
MCIT amounting to P1.7 million and P6 thousand expired in 2011 and 2010, respectively,
while P4.7 million was applied in 2011 and 2010, respectively.
The Group‟s carryforward benefits of unused NOLCO and excess MCIT for which no
deferred tax assets have been recognized in the consolidated statements of financial
position are as follows:
2011
P32,223,618
7,017,219
NOLCO
MCIT
2010
P35,429,315
8,580,450
Certain deferred tax assets of the Group were not recognized since management believes
that it is not probable that sufficient future taxable income will be available in the near
foreseeable future to allow the tax benefits to be utilized.
In compliance with the Tax Reform Act of 1997, Group shall pay the MCIT or the normal
income tax, whichever is greater. Any excess of the MCIT over the normal income tax is
carried forward annually and credited against the normal income tax for the next three
succeeding taxable years.
Details of income tax expense are as follows:
Current
Final
Deferred
2011
P156,221,820
12,453,026
(45,565,749)
P123,109,097
2010
P143,831,637
6,824,879
(50,710,196)
P99,946,320
2009
P80,631,125
5,578,393
(23,101,082)
P63,108,436
A reconciliation between the income tax computed at the statutory income tax rate and the
income tax expense recognized in profit or loss is as follows:
Statutory income tax
Adjustments for:
Non-deductible expenses
Income subjected to lower tax
rate
Non-taxable realized income
on sale of land and others
Change in unrecognized
deferred tax assets
Non-taxable dividend income
Recovery of impairment losses
Effects of using OSD against
itemized deduction
Expired NOLCO and MCIT
Income tax expense
2011
P138,159,867
2010
P123,994,082
2009
P73,771,303
9,676,135
24,700,802
16,727,162
(10,155,445)
(13,856,665)
(11,490,300)
(4,766,484)
(5,734,177)
(2,007,082)
(14,525,571)
1,503,768
-
(29,150,437)
(2,152,311)
-
320,954
(10,239,973)
2,145,026
P99,946,320
(6,787,443)
2,813,815
P63,108,436
3,216,827
P123,109,097
- 81 -
33. Earnings Per Share
Basic and diluted earnings per share are the same in 2011, 2010 and 2009, details of
which are as follows:
Net income attributable to equity
holders of the Parent
Company
Weighted average number of
common shares outstanding
Basic and diluted earnings per
share
2011
2010
2009
P323,875,314
P305,089,004
P172,292,619
1,054,071,785
992,500,006
968,154,973
P0.3073
P0.3074
P0.1780
34. Related Party Transactions
The accompanying consolidated financial statements include various transactions of the
Group with its related companies as follows:
a. In 2010, the Parent Company‟s BOD approved to guarantee the loan of a subsidiary
payable to the shareholder of the former for up to US$5.0 million. As of
December 31, 2011 and 2010, the loan payable of the said subsidiary to the
shareholder amounts to US$2.5 million (equivalent to P109.6 million), included
under “Loans payable” account in the consolidated statement of financial position
(see Notes 19 and 36).
b. A subsidiary extended a subordinated loan to Prebon, an associate, aggregating
P14.7 million on June 19, 2009, which bears an annual interest of 10.24% and is
payable on June 21, 2013. The said loan was fully paid in 2011.
c. Details of amounts due from/to related companies at December 31 are as follows:
Related Party
Associates:
Maybank ATR KE Fixed
Income
A.V. Ocampo
Prebon
Shareholders:
ATR Holdings
Kim Eng
Subsidiaries of Kim Eng:
Kim Eng Singapore
Kim Eng Hong Kong
Retirement fund:
ATR-KimEng Multi
Employe Employees
Retirement Plan
Other related parties
Due from Related Party
2010
2011
P2,680,756
2,584,034
1,966,591
398,824
P3,614,129
17,347,648
604,290
-
99,431
1,219,279
3,829,985
2,701,081
P8,948,915
P28,097,133
- 82 -
Due to Related Party
2010
2011
P -
P -
89,185
45,452
4,896,649
-
16,271,858
675,190
-
5,856
P134,637
P21,849,553
These primarily represents short-term cash advances which are generally unsecured
and collectible/payable on demand, and payments of expenses on behalf of related
companies. Transactions with related companies included assignment of loans
receivable (see Note 11).
d. Loans to and remuneration of directors are as follows:
Directors‟ remuneration
Loan to a director
Note
2011
2010
11
P2,580,000
-
P2,694,000
2,000,000
e. Details of key management personnel compensation are as follows:
Salaries and other short-term benefits
Management fee and bonus
Post-employment benefits
Fringe benefit tax
Social security cost
Other benefits
2011
2010
P170,718,166
34,825,303
17,023,349
4,938,811
539,525
16,883,310
P244,928,464
P144,157,888
7,504,002
2,064,004
545,007
P153,820,901
In 2011, the certain members of the key management personnel of the Group
received management fees as compensation and were also entitled to participate in
the consolidated profits of ATRKEFC through a guaranteed annual bonus equivalent
to a percentage of the consolidated net income after tax before bonus. The annual
bonus is based on the latest audited consolidated financial statements of ATRKEFC
for a given fiscal year. The amount of management fees and bonus is included under
“Professional fees” account in the 2011consolidated statement of income.
f.
As discussed in Note 11 to the consolidated financial statements, the Group extended
loans to officers and employees of the Group for the acquisition of units in Tribeca
Private Residences for five years which bear interest at 10% per annum. The
outstanding balance of the related receivable as of December 31, 2011 and 2010
amounted to P19.4 million and P23.9 million, respectively. The Group also extended
mortgage loans to its directors, officers and employees which are collectible over a
period of five to 15 years through salary deduction amounting to P7.1 million and
P23.9 million as of December 31, 2011 and 2011, respectively. In addition, ALGA
and ALFA grant housing and/or car loans to certain officers and directors. The loans
are collectible over a period of 5 to 15 years and bear interest ranging from 10% to
16% a year.
g. ALFA assigned to Maybank Philippines, Inc. (Maybank), a subsidiary of Malayan
Banking Berhad, and Maybank ATR KE Fixed Income, on a without recourse basis,
certain salary loans amounting to P241.7 million and P255.7 million in 2011 and
2010, respectively, for P268.4 million and P272.4 million, respectively, resulting in a
gain of P26.7 million and P16.7 million, respectively. The gain represents the
excess of the proceeds from the assignment of receivables over the present value of
the loan on date of sale.
h. As discussed in Note 19 to the consolidated financial statements, Maybank ATR KE
Capital obtained a loan from Kim Eng amounting to $2.5 million with peso
equivalent of P109.6 million as of December 31, 2011 and 2010.
- 83 -
i.
The Group has various bank accounts and short-term placements with Maybank
amounting to P15.1 million and P273.4 million, respectively, as of December 31,
2011.
35. Trust Assets
Securities and other properties held by Maybank ATR KE Capital - Trust Department in
a fiduciary or agency capacity for its client and its beneficiaries amounted to
P9,317.0 million and P6,778.0 million as of December 31, 2011 and 2010, respectively.
36. Contingent Liabilities and Commitments
a. Maybank ATR KE Capital has continuing suretyship agreements with several local
banks to guarantee the credit line facility obtained by Maybank ATR KE Fixed Income
aggregating to P1.301 billion and P1.751 billion as of December 31, 2011 and 2010,
respectively.
On June 24, 2010, a continuing guaranty agreement was executed by Kim Eng in favor
of Maybank ATR KE Capital to guarantee 80% of the amount of the continuing
suretyship agreements to ensure ATRKE Fixed Income‟s faithful compliance with the
terms and conditions of its existing loans and any and all future loans that may be
availed by ATRKE Fixed Income.
b. On July 10, 2009, Landco secured a loan from the Allied Bank amounting to P521.0
million to finance the construction of Towers 3 and 4 of the Tribecca Private
Residences project. The loan was secured by an unregistered mortgage on the real
property owned by ATRKE Land with an aggregate area of 3,629 square meters,
situated along East Service Road of the South Expressway, Barangay Sucat,
Muntinlupa City. For and in consideration of executing the mortgage, ATRKE Land
will be entitled to a one time collateral fee equivalent to a certain percentage of the
maximum amount of the letters of credit and term loan for Towers 3 and 4. As
security for the mortgage, Landco assigned to ATRKE Land its share in Towers 1
and 2 receivables in the amount of P53.2 million.
c. On February 16, 2011, Landco secured a loan from UnionBank of the Philippines
(UnionBank) amounting to P40 million to partially finance the initial phase of the
construction of the Central Park of the Tribeca Private Residences Project. The loan
was secured by a continuing surety of ATRKE Land in favor of UnionBank and a
mortgage participation certificate on the 9.7 hectare property of ATRKE Land. For
and in consideration for ATRKE Land‟s provision of the guarantee and collateral,
Landco shall pay ATRKE Land a fee of 1% p.a. of the outstanding principal of the
loan for the guarantee and a fee of 1% p.a. of the outstanding principal of the loan for
the collateral provided. To secure ATRKE Land‟s exposure, Landco shall pledge to
ATRKE Land its receivables from the sale of units in all buildings in the complex
existing at the time of taking the loan (which are not currently pledged to Allied
Bank and/or ATRKE Land in connection with the financing for the construction of
Towers 3 and 4 and/or other creditors of Landco, if any) in the amount equivalent to
the said exposure, provided that all receivables covered by the pledge which are paid
by the unit buyers shall be replaced by other receivables to ensure that the pledge
shall at all times cover ATRKE Land‟s exposure.
- 84 -
37. Agreements
ATRKE Land
On October 11, 2006, ATRKE Land (as landowner) entered into a contractual and
unincorporated JVA with Landco (as developer), whereby the latter shall develop the 9.7hectare property of ATRKE Land located in Muntinlupa City, into a master-planned and
themed residential lifestyle community referred to as the “Tribeca Private Residences”
project.
In accordance with the terms of the JVA, ATRKE Land contributed its 9.7-hectare land
in phases with a carrying value then of P1,112.1 million to the joint venture. Thereafter
and pursuant to the JVA, ATRKE Land shall have no further capital commitment. In
turn, Landco shall be solely responsible for the development of the property, providing
the necessary funds and expertise for the development. Further, all required permits,
licenses and approvals of the appropriate regulatory agencies shall be secured by Landco.
As presented in the masterplan, the property shall be developed in phases. There will be
five phases, with each phase consisting of a cluster of three mid-rise towers. As of
December 31, 2011 the percentage of completion and percentage sold per tower are as
follows:
Tower 1
Tower 2
Tower 3
Tower 4
Percentage of Completion
100.00%
100.00%
100.00%
100.00%
Percentage Sold
98.00%
94.00%
83.00%
92.00%
The JVA is accounted for as a jointly-controlled operation in accordance with PAS 31,
Interests in Joint Ventures.
- 85 -
ANNEX A
ATR KIM ENG FINANCIAL CORP. AND SUBSIDIARIES
AGING OF RECEIVABLES
As of December 31, 2011
Over
1-30 Days
Accounts Receivable
Due From Customers and Brokers
Due from Clearing House
Insurance Receivables
31-60 Days
40,937,263
4,721,505
1,140,638,159
-
84,367,434
-
18,553,519
12,269,141
61-90 Days
674,152
2,399,896
91-120 Days
628,222
1,481,252
120 Days
15,838,544
1,007,324
Past Due
Total
-
62,799,686
-
1,225,005,592
-
-
35,711,132

COVER SHEET

Transcription

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