SEC17Q 1206 amended · 1 | Page SEC Number 1674 File Number MANILA BROADCASTING COMPANY (Company's Full Name) MBC BUILDING, STAR CITY, CCP COMPLEX ROXAS BOULEVARD, PASAY CITY, METRO

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1 6 7 4

SEC Registration Number

M A N I L A B R O A D C A S T I N G C O M P A N Y

(Company’s Full Name)

M B C B u i L d i n g , S t a r C i t y ,

C C P C o m P l e x , R o x a s B o u l e v a r d ,

P a s a y C I t y

(Business Address: No. Street City/Town/Province)

Mr. Eduardo Cordova 832-6149

(Contact Person) (Company Telephone Number)

1 2 3 1 1 1 2 0 I S

Month Day Year (Form Type) Month Day

(Calendar Year) (Annual Meeting)

Not Applicable

(Secondary License Type, If Applicable)

Not Applicable

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

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SEC Number 1674

File Number

MANILA BROADCASTING COMPANY

(Company's Full Name)

MBC BUILDING, STAR CITY, CCP COMPLEX

ROXAS BOULEVARD, PASAY CITY, METRO MANILA

(Company's Address)

832-6149; 8326150

(Telephone Number)

December 31

(Fiscal Year Ending)

FORM 20 IS

(Form Type)

DEFINITIVE INFORMATION STATEMENT

(Amendment Designation)

(Period Ended Date)

September 12, 2012

(Date Prepared)

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SECURITIES AND EXCHANGE COMMISSION

SEC FORM 20-IS

INFORMATION STATEMENT PURSUANT TO SECTION 20

OF THE SECURITIES REGULATION CODE

1. Check the appropriate box:

[ ] Preliminary Information Statement

[ X ] Definitive Information Statement

2. Name of Registrant as specified in its charter – MANILA BROADCASTING COMPANY

3. METRO MANILA

Province, country or other jurisdiction of incorporation or organization

4. SEC Identification Number - 1674

5. BIR Tax Identification Code – 000-479-027

6. MBC Bldg., Star City, CCP Complex, Roxas Boulevard, Pasay City, M.M.

Address of principal office Postal Code 1300

7. Registrant’s telephone number, including area code - (632) 832-6249/50

8. 24 October 2012, 3:00 p.m. at Star City Theatre, Star City, CCP Complex, Roxas

Boulevard, Pasay City, M.M.

Date, time and place of the meeting of security holders

9. Approximate date on which the Information Statement is first to be sent or given to

security holders – 21 September 2012

10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of

the RSA (information on number of shares and amount of debt is applicable only to

corporate registrants):

Title of Each Class Number of Shares of Common Stock Outstanding

or Amount of Debt Outstanding

Common P1.00 par value 402,682,990 shares

Debt P293,816,130

11. Are any or all of registrant's securities listed on a Stock Exchange?

Yes - x No _______

If yes, disclose the name of such Stock Exchange and the class of securities listed

therein: Philippine Stock Exchange – Common Shares

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INFORMATION REQUIRED IN INFORMATION STATEMENT

A. GENERAL INFORMATION

Item 1. Date, time and place of meeting of security holders.

(a) Date, time and place of the meeting of security holders: 24 October 2012, 3:00

p.m. at Star City Theatre, Star City, CCP Complex, Roxas Boulevard, Pasay City,

M.M.

Complete mailing address of the principal office of the registrant – 2nd

Floor, MBC

Building, Star City, CCP Complex, Roxas Boulevard, Pasay City, M.M.

Approximate date on which the Information Statement is first to be sent or given to

security holders – 21 September 2012

Item 2. Dissenters' Right of Appraisal

A stockholder has the right to dissent and demand payment of the fair value

of his share (1) in case of any amendment to the articles of incorporation has the

effect of changing or restricting the rights of any stockholders or of authorizing

preference over the outstanding shares or of extending or shortening the term of

corporate existence (2) in case of sale, lease, mortgage or disposition of all

substantially all the corporate property or assets and (3) in case of any merger or

consolidation.

The appraisal right may be exercised by a stockholder who voted against the

proposed corporate action by making a written demand on the corporation for the

payment of the fair market value of his shares within thirty (30) days after the date

on which the vote was taken.

However, no action to be taken during the 24 October 2012 Annual Meeting

of Stockholders will entitle any shareholder to exercise the right of appraisal as

provided by the Corporation Code of the Philippines.

Item 3. Interest of Certain Persons in Matters to be Acted Upon

The Corporation has no information respecting any opposition that its

directors or officers or nominees for election or their associates may have against

the matters to be acted upon during the Annual Stockholders’ Meeting on 24

October 2012.

The Corporation also has no information regarding any substantial interest,

direct or indirect, by any stockholder or otherwise, in any matter to be acted upon.

B. CONTROL AND COMPENSATION INFORMATION

Item 4. Voting Securities and Principal Holders Thereof

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• Each of the 402,682,990 outstanding shares of the Company as of 30 September

2012 is entitled to one (1) vote.

• A stockholder entitled to vote at the meeting shall have the right to vote in person

or by proxy by the number of shares of stock held in his name on the stock books of

the Company as of 30 September 2012 and said stockholder may vote such number

of shares for as many persons as there are directors to be elected or he may

cumulate said shares and give one candidate as many votes as the number of

directors to be elected multiplied by the number of his shares shall equal or he

• may distribute them on the same principle among many candidates as he shall

see fit. The setting of the record date has been complied with upon due

disclosure with PSE on 12 September 2012.

Item 5. Directors and Executive Officers

Directors and Executive Officers of the Registrant

(a) Security Ownership of Certain Record and Beneficial Owners

Owners of at least 5% of the Company’s securities as of 31 August 2012 are as

follows:

Title of

Class

Name and

Address of

Record Owner

and

Relationship

with Issuer

Name and

Address of

Beneficial

Owner and

Relationship

with Record

Owner

Citizenship No. of Shares Held Percent

Common Elizalde

Holdings

Corporation, 2nd

Floor, MBC

Bldg., CCP

Complex, Roxas

Boulevard,

Pasay City, M.M.

(stockholder)

Eduardo G.

Cordova*

2nd

Floor, MBC

Bldg., CCP

Complex, Roxas

Boulevard,

Pasay City, M.M.

Senior Vice-

President

Filipino 139,558,774

34.66%

Elizalde Land

Inc., 2nd

Floor,

MBC Bldg., CCP

Complex, Roxas

Boulevard,

Pasay City, M.M.

(stockholder)

Eduardo G.

Cordova*, 2nd

Floor, MBC

Bldg., CCP

Complex, Roxas

Boulevard,

Pasay City, M.M.

Senior Vice-

President

Filipino

87,000,000

21.61%

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Romulo

Mabanta

Buenaventura

Sayoc & delos

Angeles Law

Offices*,

30th Floor,

Citibank Tower,

8741 Paseo de

Roxas, Makati

City, M.M.

(stockholder)

Atty. Reynaldo

G. Geronimo*

30th Floor,

Citibank Tower,

8741 Paseo de

Roxas, Makati

City, M.M.

Trustee/Partner

Filipino

69,910,993.25

17.36%

Cebu

Broadcasting

Company*, 2nd

Floor, MBC

Bldg., CCP

Complex, Roxas

Boulevard,

Pasay City, M.M.

(Affiliate

Broadcast

Company)

AQG

Corporation,

2291Chino

Roces Avenue,

Makati City

(Stockholder)

Robert A. Pua*

2nd Floor, MBC

Bldg., CCP

Complex, Roxas

Boulevard,

Pasay City, M.M.

Vice President

Julio D. Sy, Jr.*,

2291 Chino

Roces Avenue,

Makati City

President &

Chairman

Filipino

Filipino

50,000,000

33,000,000

12.42%

8.20%

• The same person authorized to vote on the shares of Corporate Shareholder.

(b) Security Ownership of Management as of 31 August 2012.

% to

total

Number

of

Shares

I/O

Shares A B Total

Directors (All Filipino)

FRED J. ELIZALDE

Direct

0.0000%

94

RUPERTO S. NICDAO, JR.

Direct

0.0321%

129,201

JULIO MANUEL P. MACUJA

Direct

0.0000%

36

EDUARDO G. CORDOVA

Direct

0.0032%

12,779

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JUAN M. ELIZALDE

Direct

0.0002%

1,000

JOSE M. TARUC, JR.

Direct

0.0002%

1,000

SANTIAGO Z. URETA

Direct

0.0000%

36

GEORGE T. GODUCO

Direct

0.0002%

1,000

RUDOLPH STEVE E. JULARBAL

Direct

0.0027%

10,807

Sub-total

0.0387% 155,953

Officers (All Filipino)

ROBERT A. PUA

Direct

0.0031%

12,293

JONATHAN E. DECENA

Direct

0.0002%

1,000

IRVING A. LISONDRA

Direct

0.0002%

1,000

CARLEA MIRANDA

Direct

0.0002%

1,000

JOSE MA. T. PARROCO

Direct

0.0031%

12,294

ELPIDIO M. MACALMA

Direct

0.0002%

1,000

Sub-total

0.0071% 28,587

Total

0.0458% 184,540

There is no arrangement existing that may result in a change of control of the

registrant.

Voting Trust Holders of 5% or More

The Chairman, Fred J. Elizalde, holds voting trust or similar agreements to more than

5% of the common stock of the corporation and has voting rights and such powers

as provided in the Corporation Code. Elizalde Holdings Corporation is owned by

various trust funds that have executed voting trusts in favor of the Chairman, Fred J.

Elizalde. These agreements shall last during the lifetime of Fred J. Elizalde as

provided for in the agreements. Mr. Fred J. Elizalde holds office at the principal

office of the Corporation. Elizalde Land, Inc. and Cebu Broadcasting Company are

100% owned subsidiaries of Elizalde Holdings Corporation. Mr. Eduardo G. Cordova

and Mr. Robert A. Pua are the persons designated to exercise voting power over the

shares of ELI and CBC respectively in the registrant and holds office at the principal

office of the Corporation also.

Atty. Reynaldo G. Geronimo is the designated Trustee of the Romulo Mabanta

Buenaventura Sayoc & Delos Angeles Trust Fund that holds voting trust or similar

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agreements to more than 5% of the common stock and has voting rights and such

powers as provided in the Corporation Code. The designation as trustee shall

continue in accordance with the agreements. He holds office at 30th

Floor, Citibank

Tower, 8741 Paseo de Roxas, Makati City.

A. Executive Officers (All Filipino Citizens)

Name Position

Fred J. Elizalde -Chairman of the Board

Ruperto S. Nicdao, Jr. -President

Julio P. Macuja II -EVP-Treasurer

Eduardo G. Cordova -SVP-CFO

Juan Manuel Elizalde -VP-Operations

Jose M. Taruc -VP-DZRH

Rudolph Steve E. Jularbal -VP-Legal and Corporate Secretary

Robert A. Pua -VP-Controller and Compliance Officer

Irving A. Lisondra -VP-Creative Service

Ellen C. Fullido -VP-HRD/Technical Services

Carlea C. Miranda -VP-Treasury

Elpidio Macalma -AVP- DZRH

Wilfredo Espinosa -AVP- FM Programming

Jose Ma. T. Parocco -AVP – Sales

B. Directors (All Filipino Citizens)

Name Age Term

Fred J. Elizalde 71 1985 up to the present

Ruperto S. Nicdao, Jr. 56 1988 up to the present

Eduardo G. Cordova 62 1988 up to the present

Julio Manuel P. Macuja 48 1999 up to the present

Jose M. Taruc 64 2001 up to the present

George T. Goduco* 46 2003 up to the present

Santiago Z. Ureta* 77 2006 up to the present

Rudolph Steve E. Jularbal 57 2011 up to the present

*Independent Directors

The term of office of the duly elected directors shall be one (1) year or until their

successors have been duly elected.

The following are the criteria for Independent Directors:

a. Not a director or officer or substantial stockholder of the corporation or of its

related companies or any of its substantial shareholders (other than as an

independent director of any of the foregoing);

b. Not a relative of any director, officer or substantial shareholder of the corporation,

any of its related companies or any its substantial shareholders. For this purpose,

relative included spouse, parent, child, brother, sister and the spouse of such child,

brother or sister;

c. Not acting as a nominee or representative of a substantial shareholder of the

corporation, any of its related companies or any of its substantial shareholders;

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d. Not been employed in any executive capacity by that public company, any of its

related companies or any of its substantial shareholders within the last two (2)

years;

e. Not retained as professional adviser by that public company, any of its related

companies or any of its substantial shareholders within the last two (2) years, either

personally or through his firm;

f. Not engaged and does not engage in any transaction with the corporation, or with

any of its related companies or with any of its substantial shareholders, whether by

himself or with other persons or through firm of which he is a partner or a company

of which he is a director or substantial shareholder, other than transactions which

are conducted at arms length and are immaterial or insignificant.

The Nomination Committee of the Board of Directors is composed of: Mr. George T.

Goduco, Chairman; and Mr. Fred J. Elizalde and Mr. Ruperto S. Nicdao, Jr., members.

As part of the pre-screening, the qualifications of the nominees, as submitted by the

shareholders of record, were considered by the Nominating Committee. With due

regard to the qualifications and disqualifications set forth in the Company’s manual

for Corporate Governance, the Securities Regulation Code and its Implementing

Rules and the criteria prescribed in SEC memorandum Circular No. 13, Series of

2004, the Nomination Committee has determined:

a. All incumbent directors were nominated to re-election and shall form part of the

list of nominees; and

b. Of the incumbent directors, Mr. Santiago Z. Ureta and Mr. George T. Goduco,

the only nominees nominated as independent directors, are qualified to sit in

the Board of the Company as independent directors. The nominees for

independent directors were nominated by Mr. Ruperto S. Nicdao, Jr. and there is

no relationship between them.

The company has complied with all of the requirements of SRC Rule 38 as amended

regarding the procedure for nomination and election of Independent Directors.

The Certification on Qualification and Disqualification of Independent Directors will

be filed with the Commission within one month after the annual stockholders’

meeting.

Business Experience for the last Five (5) years of Directors/Officers

Fred J. Elizalde has been serving as Director/Chairman of the Company since

1985. He is also currently serving as Chairman/President of Philippine

International Corporation (Philcite), Star Parks Corporation (Star City), Elizalde

Holdings Corporation and Northern Capiz Agro-Industrial Development

Corporation (Norcaic). He has also served as past Chairman/President of Asean

Section, Asean-U.S. Business Council, Philippine Chamber of Commerce &

Industry, Confederation of Asian Chambers of Commerce & Industry, etc. In

2005, he was appointed as member of the Boracay Eminent Persons Group. He

graduated Magna Cum Laude from Harvard University with a degree of Bachelor

of Arts Major in Social Relations.

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Ruperto S. Nicdao, Jr. is the current President of the Company. He has been

serving as Director of the Company since 1988. He is also serving as Director of

Philippine International Corporation, Star Parks Corporation, Elizalde Holdings

Corporation and Cultural Center of the Philippines. He is the Vice-Chairman of

KBP and a member of the Financial Executives Institute of the Philippines,

Philippine Chamber of Commerce and Industry and the Makati Business Club.

He obtained his Master’s in Business Administration from Asian Institute of

Management and his AB-Honors (Major in Math), Magna Cum Laude, from De La

Salle College.

Eduardo G. Cordova has been a Director of the company since 1988 and is

currently the SVP-CFO of the Company and Elizalde Holdings Corporation. He is

also Chairman/President of our affiliate Philippine Broadcasting Corporation. He

is a member of the Philippine Institute of Certified Public Accountants (PICPA).

He is a Certified Public Accountant and obtained his Master’s in Business

Administration, with honors, from University of St. La Salle and his bachelor’s

degree in business administration from University of the East.

Julio Manuel P. Macuja is EVP-Treasurer of the Company which he joined in

1999. He is the Chief Information Officer registered with the Philippine Stock

Exchange. He is also a Director of Elizalde Holdings Corporation and Star Parks

Corporation. He was formerly part of the Treasury Group of the Bank of the

Philippine Islands. Prior to this he was Acting Director of the Ateneo Center for

Social Policy and Public Affairs and part time faculty member of the Economics

Department, Ateneo de Manila University, where he finished his Bachelor of

Arts Degree in Economics (Honors) in 1985. He completed his post-graduate

studies as a scholar of the British Council at the Victoria University of

Manchester in 1989, obtaining a degree of Master of Arts in Economic and

Social Studies (Major in Development Studies).

Juan Manuel Elizalde is currently the VP-Operations and has been connected

with the Company since 1994 in various capacities. He holds an AB Mass

Communication degree from Menlo College, Menlo Park, California, U.S.A.

Jose M. Taruc has been with the Company since 1986. He is a multi-awarded

broadcast professional and is currently the Station Manager with rank of Vice

President of the Company’s flagship station DZRH-AM. He is an accounting

graduate of Jose Rizal College and was involved with other broadcast networks

as reporter prior to joining the Company.

Santiago Z. Ureta is an independent director. He is a double degree holder of

Bachelor of Science in Mechanical Engineering, Magna Cum Laude, 1955 and

Bachelor of Science in Electrical Engineering, 1956, from National University. He

is presently Consultant, CADP Consultancy Services, Inc., President, Philippine

Association of Sugar Refiners, Inc., Treasurer, Philippine Sugar Research Institute

and Trustee, Sugar Master Plan Foundation. He was formerly President, Central

Azucarera de la Carlota (a listed company), President, Philippine Sugar Millers

Association, Inc. 1993 – 1995, Chairman, Philippine Sugar Technologists

Association, Inc., President, Philippine Sugar Technologists Association, Inc.,

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National Vice President, Philippine Society of Mechanical Engineers, 1976 and

President, Negros Occ. Chapter, Philippine Society of Mechanical Engineers,

1974.

George T. Goduco is an independent director. At present, he is the President of

Healthlab Inc., a full service diagnostics laboratory and medical examination

facility. He was EVP/COO of Star Parks Corporation in 2000-2002. He also served

as Vice-President and Treasurer of the FJE Group of Companies in 1997-2000

and its Director for Corporate Planning in 1995 – 1997. He also served as

Account Officer in Solidbank and Boston Bank from 1988-1991. He holds an

MBA from the University of Bridgeport, Connecticut and a Bachelor of Science in

Economics from the University of the Philippines.

Rudolph Steve E. Jularbal is currently the Corporate Secretary. He is also the VP

of the Legal and Regulatory Compliance Group and concurrently the Officer-in-

Charge of the company’s AM flagship station, DZRH-Manila. Atty. Jularbal first

joined the company in 1986. He resigned in 1999, did a short stint as VP-Legal of

Nextel Communications, Phil. from 1999 to 2001 when he went into private

practice and was a retained external counsel of the company up to 2011. He was

re-engaged on a full time basis in 2011. Atty. Jularbal obtained his Bachelor’s

Degree in Law from the University of the Philippines, Diliman, QC in 1979 and

was admitted to the Bar the following year. He also holds degrees in

Management and Marketing obtained from Saint Louis University in Baguio City.

Robert A. Pua is currently the VP-Comptroller as well as the Compliance Officer.

He has been connected with the company since 1990 in various capacities. He is

also a Director of Cebu Broadcasting Company, Philippine Broadcasting

Company and Pacific Broadcasting Systems, Inc. He is a Certified Public

Accountant and a member of the Philippine Institute of Certified Public

Accountants. He obtained his Bachelor’s Degree in Business Administration,

Major in Accounting, from the University of the East, Manila and Master’s

Degree in Business Administration from the De la Salle University, Manila.

Carlea C. Miranda is currently the Vice-President for Treasury and has been

working with the FJE Group of Companies since 1987 in various capacities. She

is also a regular Director of our affiliates Cebu Broadcasting Company and Pacific

Broadcasting Systems, Inc. She is a Certified Public Accountant and a member of

the Philippine Institute of Certified Public Accountants. She obtained her degree

in Bachelor of Science in Commerce major in Accounting from the University of

San Carlos, Cebu City, Magna Cum Laude.

Irving A. Lisondra is the Vice-President for Creative Service. He served in various

capacities in the Company since 1984 as Area Manager for FM Stations then

became the Assistant Vice-President for Advertising and Promotions before his

current Position. He took up BSC-Management from the Diving Word College in

Laoag City.

Ellen C. Fullido is the Vice-President for Human Resources and Technical

Services of the Company. She joined the Company in 2001. She is a candidate

for Master’s Degree in Human Resource Management from the University of

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Santo Tomas and Bachelor of Science Degree in M.I.E. from Mapua Institute of

Technology. She is a member of the Personnel Management Association of the

Philippines.

Elpidio Macalma is the Assistant Station Manager of flagship AM station DZRH

with the rank of Assistant Vice-President. He is best known for the morning

segment “Espesyal na Balita” – an expose on current activities of certain

personalities. He is the Kapisanan ng mga Brodkaster sa Pilipinas (KBP) VP for

Radio and a member of the National Press Club. He holds a degree of Bachelor

of Laws from the University of the East and is a B.S. Journalism graduate from

Lyceum of the Philippines. He joined the Company in 1982.

Jose Ma. T. Parroco is Assistant Vice-President for Sales for the entire network –

DZRH, Love Radio, Yes-FM, Radyo Natin, Easy Rock, Aksyon Radyo and Hot FM.

He joined the Company in 1992. Previously, he was the Assistant Vice-President

for Finance of Philippine International/Star Parks Corporation, affiliated

companies of the Company, operating the amusement/theme park Star City. He

has a Masters in Management Degree from the Asian Institute of Management

and Bachelor of Arts in Economics from the University of the Philippines. He is

also an undergraduate of Bachelor of Science in Electrical Engineering from the

University of the Philippines.

Wilfredo Espinosa is the Assistant Vice-President for FM Programming for the

networks – Love Radio, Yes-Fm and Easy Rock. He joined the Company in 2000.

Significant Employees

There are no significant employees that the registrant expects will

contribute to the business of the registrant.

Family Relationships

Mr. Juan Manuel Elizalde, VP-Operation and Director, is the son of the

Chairman/Director, Fred J. Elizalde while Mr. Julio Manuel P. Macuja, EVP-Treasurer,

is his brother-in-law. Other than the foregoing relationships disclosed, there are no

other family relationships known to the registrant.

Involvement of Directors and Officers in Certain Legal Proceedings

None of the directors and officers was involved during the past five (5) years in any

bankruptcy proceeding. Neither have they been convicted by final judgment in any

criminal proceeding, or been subject to any order, judgment or decree of competent

jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise

limiting their involvement in any type of business nor found in action by any court or

administrative bodies to have violated any law.

The Company has no pending material legal proceedings for and against it.

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Certain Relationships and Related Transactions

There had been no material transactions during the last two years, nor is any

material transaction presently proposed, to which the Company was or is to be a

party in which any director or executive officer of the Company or owner of more

than 10% of the Company’s voting securities, any relative or spouse of any such

director or officer who shares the home of such director or executive officer who or

owner of more than 10% of the Company’s voting securities, is involved. Please

refer to Note 12 of the 2011 audited financial statements for the disclosure on

related party transactions.

Item 6. Compensation of Directors and Executive Officers

Executive Compensation

The Board Directors are paid P22,222.00 each representing Per Diem on every Board

Meeting they attended. There were no additional amounts paid for committee

participation or special assignments nor were any bonuses or other compensation

given.

The aggregate compensation of the executives of the issuer/Registrant is as

follows:

The aggregate compensation of the executives and directors of the issuer/Registrant

is P8,044,444.00 (Estimate) in 2012, P6,985,614.16 in 2011, P6,500,000 in 2010,

P6,500,00.00 in 2009, P6,349,548 in 2008, and P5,929,641 in 2007. There were no

additional amounts paid for committee participation or special assignments.

The key management compensation is as follows:

Name Year Salary Bonus Others

Fred J. Elizalde

Chairman/CEO

2007 5,538,708 0 390,933

2008 6,000,262 0 349,286

2009 6,500,000 0 0

2010 6,500,000 0 0

2011 6,500,000 0 22,222

2012 (Est.) 6,500,000 0 22,222

Jose M. Taruc, Jr.

VP-DZRH 2007 0 0 0

2008 0 0 0

2009 0 0 0

2010 0 0 0

2011 476,102.16* 0 22,222

2012 (Est.) 1,500,000.00 0 22,222

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Elpidio Macalma

AVP-DZRH 2007 0 0 0

2008 0 0 0

2009 0 0 0

2010 0 0 0

2011 422,371.98* 0 22,222

2012 (Est.) 1,400,000.00 0 0

* Covering the period Oct. 1 to Dec. 31, 2011. The previous employer of Mr. Taruc and

Mr. Macalma prior to Oct. 1, 2011 was RH Broadcasting, Inc..

With the implementation of the “Hating Kapatid” system, the only key executives

left in the payroll of the Corporation are Mr. Fred J. Elizalde, Mr. Jose M. Taruc, Jr.

and Mr. Elpidio Macalma. The mechanics of this system is explained in the Notes to

Financial Statements no. 1 – Corporate Information - in the attached 2011 Audited

Financial Statements.

There is no standard arrangement or employment contract between the registrant

and the above-named executive officer.

Item 7. Independent Public Accountants

The accounting firm of Sycip Gorres Velayo & Company is the company’s

Independent public accountant. The same firm is being recommended for

appointment by the stockholders on 17 October 2012. There has not been any

disagreement between the company and said accounting firm with regard to any

matter relating to accounting principles or practices, financial statement disclosure

or auditing scope of procedure. Representatives from SGV & Co. are expected to

attend the scheduled stockholders’ meeting and shall be available to entertain

clarifications from the stockholders relating to the Financial Statements of the

corporation.

In compliance with SEC Memo Circular No. 8, Series of 2003, Catherine Lopez is the

partner-in-charge commencing 2009. Ms. Aileen Saringan has been the partner-in-

charge since 2004. Formerly, it was Ms. Cynthia Manlapig of the same accounting

firm. This rotation of partner-in-charge is in compliance with the requirements of

SRC Rule 68, Paragraph 3 (b) (iv) requiring rotation of external auditors. A two-year

cooling off period shall be observed in the re-engagement of the same signing

partner or individual auditor.

The appointment of the Independent Public Accountants was recommended by the

Audit Committee composed of Mr. Santiago Z. Ureta as Chairman and Mr. Eduardo

G. Cordova and Mr. Julio Manuel P. Macuja as members.

EXTERNAL AUDIT FEES

A. Audit and Audit-Related Fees

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1. The following table sets out the aggregate fees billed for each of the last

calendar years for professional services rendered by Sycip, Gorres,

Velayo & Co., CPA’s:

Audit and Audit-Related Fees 2011 2010 2009

Regular Audit

580,000

550,000

520,000

Review of Proposed Increase in ACS - - -

Long Form Audit - - -

Review of Forecast - - -

All Other Fees

68,250 - -

Total Audit and Audit-Related Fees

648,250

550,000

520,000

2. There were no other assurance and related services performed by the

external auditor that are reasonably related to the performance of the

audit or review of the registrant’s financial statements.

B. Tax Fees

• There were no professional services rendered by the external auditor in the last

two (2) calendar years in relation to tax accounting, compliance, advice,

planning and any other form of tax services.

C. All Other Fees

There were no products or services provided by the external auditor, other than the

services reported under Item A1 above.

D. There are no set policies for approval and procedures for the above services.

Item 8. Compensation Plans

No action is to be taken with respect to any plan pursuant to which cash or non-cash

compensation may be paid or distributed.

There are no existing plans for employees, officers and directors for stock warrants,

options or any special or standard arrangement to said employees, officers and

directors whereby the registrant is liable.

C. ISSUANCE AND EXCHANGE OF SECURITIES

Item 9. Financial and Other Information

16 | P a g e

MBC shares are traded in the Philippine Stock Exchange. The shares are not actively

traded in the market. The last known transaction of MBC shares was last March 28,

2012 at P2.50 per share involving 3,000 shares.

There have been no known recent sales of unregistered securities of the Company.

The Company will submit to the stockholders for approval the following:

1. 2011 Annual Report with Audited Financial Statements; and

2. Ratification of the acts of the Board of Directors and Officers of the

Company from the date of the last annual stockholders’ meeting up

to 19 September 2012.

On the President’s Report – No matters will require approval or disapproval of the

stockholders.

1. Result of Operations

2. Balance Sheet Discussion

3. Capex

4. Targets

D. OTHER MATTERS

Item 15. Action with Respect to Reports

No action is to be taken with respect to any report of the registrant or of its

directors, officers or committees or minutes of any meeting of its security holders.

Only those matters undertaken in the normal course of business of the corporation

(like opening/closing of bank accounts, authorized signatories, some day-to-day

contracts/agreements, renewal of loans, etc.) by the Board of Directors and Officers

of the registrant shall be the subjects for ratification by the stockholders. No act of

the Board of Directors and Officers that require a special disclosure or requirements

shall be ratified under this general ratification act during the meeting.

Item 17. Amendment of Charter, Bylaws or Other Documents

No action is to be taken with respect to any amendment of the registrant's charter,

by-laws or other documents.

Item 19. Voting Procedures

The foregoing matters will require the affirmative vote of a majority of the shares in

the Company present or represented and entitled to vote at the Annual Meeting.

Likewise, directors shall be elected upon the majority vote of the shares present or

represented and entitled to vote at the Annual Meeting.

18 | P a g e

MANAGEMENT REPORT

Management’s Discussion and Analysis or Plan of Operation

2011 vs 2010

(1) Results Of Operations

The Company posted revenue of P756.6 million, 9.2% lower than its revenue last

year mainly due to advertisement spending by political candidates in line with

their election campaign in the previous year. On the other hand, Cost and

operating expenses increased only by 1.2% or P7.9 million as compared to last

year.

Interest expense decreased by P3.8 Million as the Notes Payable was completely

paid out as of December 31, 2010. The rental income which slightly increased by

P0.6 million from P8.5 million in 2010 to P9.1 million in 2011 represents revenue

derived from the investment properties being leased to employees and third

parties. Interest income decreased by P.3 million or 20.64% from P1.3 million in

2010 to P1.0 million in 2011 mainly due to reduced investment balance on money

market placement during the year.

As overall result, the Company registered a net income of P60.9 million in 2011, a

decrease of P56.7 million or 48.21% from P117.5 million in 2010.

(2) Financial Condition and Changes In Financial Condition

MBC is not having or does not anticipate having, within the next 12 months, any

cash flow or liquidity problems; neither is it in default or in breach of any note,

loan, lease or other indebtedness or financing arrangement requiring it to make

payments; nor a significant amount of the registrant’s trade payables have not

been paid within the stated trade terms.

(3) Causes for Material Changes from Period to Period (5%)

1. Cash and cash equivalents decreased by P=24.9 million or 25.42% from P98.1

million in 2010 to P73.1 million in 2011 mainly due to payment of cash dividends

amounting to P120.9 million.

2. Receivables-net decreased by P17.0 million or 5.44% mainly due to lower

balance of AR-trade in 2011 as a result of lower 4th

quarter sales during the year

when compared to the previous year. The credit term given to regular clients is

90 days. Please see note 6 of the 2011 audited FS.

3. Due from affiliates represents interest-free advances to Elizalde Holdings

Corporation, an affiliate under common control with the Company. There was a

net increase on this account in the amount of P47.7 million. Please see note 12

of the 2011 audited financial statements.

4. Materials and supplies decreased by P1.5M or 13.76% mainly due to conscious

effort of the Company to eliminate excessive stock of materials and supplies to

avoid extra cost of carrying the inventory.

19 | P a g e

5. Prepaid expenses and other current assets decreased by P1.5 million or 21.30%

mainly due to cancellation of Certificates of Tax Withheld which expired in 2011.

6. Property and equipment at cost decreased by P17.6 million or 22.07% mainly

due to depreciation while Property and equipment at revalued amount

remained constant.

7. Investment properties amounting to P73.2 Million as of December 31, 2011,

represents the net balance on the acquisition of land and construction of

building in 2005 intended for future use of the Company. The said property is

currently being leased out on a yearly basis to generate revenue in order to

sustain its maintenance costs. The decrease of P8.1 Million or 9.93% represents

depreciation charges during the year.

8. Intangible assets arise from the Company’s acquisition of DWRK which became

effective on October 4, 2008. The decrease of P13.3 million or 10.33%

represents amortization costs during the year.

9. Other noncurrent assets decreased by P7.3 million or 53.02% mainly due to

refund of escrow deposits amounting to P2.3 million and amortization of input

vat on capital goods claimed during the year.

10. Dividend payable decreased by P.1 million or 5.91% as a result of payments

made to stockholders.

11. Talent fees and commissions payable increased by P2.7 million or 9.54% mainly

due to increased placement of client-initiated promos during the year.

12. Income tax payable decreased by P10.4 million or 45.04% mainly due to lower

income before income tax registered during the year.

13. Accrued retirement benefits increased by P37.5 million or 353.13% mainly due

to past service costs of employees transferred from an affiliate. Please see note

17 of 2011 audited FS.

14. Deferred income tax liabilities-net decreased by P8.3 million or 70.70% mainly

due increase in the accrued retirement benefits and unamortized contribution

to past service cost as well as increase in the allowances for doubtful accounts

and inventory obsolescence. Please see note 18b of 2011 audited FS.

15. Retained earnings decreased by P59.9 million or 30.25% mainly due to the

declaration of cash dividends in 2011. Please see note 14 of 2011 audited FS.

(4) Plan Of Operation

This year, MBC will bring a host of promising event performances, creating a pipeline of

revenue streams that will complement the existing airtime revenues. Aside from the

successful movie premier showing and on-air and field promotions, MBC has once again set

a lineup of events that will surely provide maximum value for advertisers and the listening

public.

- First is the Manila Bay Seasports Festival which was held last March 31 &

April 1, 2012 where an elite roster of participants was invited to join the

event. Organized by Manila Broadcasting Company and the City of

Pasay, in cooperation with the Philippine Coast Guard, this year’s

seasports festival featured mixed team championships for the Dragon

Boat Race, stock and formula races in the motorized banca competition.

Converging along Roxas Boulevard’s Baywalk, water enthusiasts and

hobbyists cheered on the participants in these popular spectator sports.

20 | P a g e

- The most successful event of the company, the Aliwan Fiesta, scheduled

on April 12-14, 2012 is set to unfold once again and bring the best,

biggest, loudest and the most colorful fiestas from all over the

Philippines to Manila. Now on its 10th

year, the festival will again

showcase the dance competition, where the contingents present

fabulously choreographed routines in full costumed glory. The three

other categories of the event were the Float completion, Reyna ng

Aliwan and the Photo Competition.

- MBC National Choral Competition which will take place in December

2012 also promises to bring highly acclaimed contestants not only from

Metro Manila but all over the country

- There will also be a live telecast at Aliw Theater of the much awaited

boxing fight between our very own Manny Pacquiao and Tim Bradley

which will be held in June 2012. The Company also plans to tie up with

movie and recording outfits for promo tours, live performances, and

fans’ days in malls. There are also several promos in the pipeline, like

the yearly Bagong Taon Bagong Milyon and other client initiated promos

that promise to be a big hit among radio listeners.

The Company also plans to earmark P75.0 million capital expenditure for its

various projects, namely; Relocation of transmitters and antennae towers of

manila stations to BSA Towers in Ortigas Center, RHTV broadcast expansion over

various cable and TV channels, leasehold improvement at Head Office, audio and

video streaming over the internet, and improvement of existing stations’

equipment and facilities nationwide. This will be funded by cash flows from

operating activities.

(5) Other Disclosure Matters

• There are no seasonal aspects that had a material effect on the financial

condition or results of operations.

• There are no unusual items affecting assets, liabilities, equity, net income, or

cash flows.

• There are no changes in estimates of amounts reported in prior interim periods

of the current financial year or in estimates of amounts reported in prior

financial years.

• There are no material events subsequent to the end of the accounting period

that have not been reflected in the financial statements for the period.

• There are no changes in the composition of the issuer during the accounting

period, including business combinations, acquisition or disposal of subsidiaries

and long-term investments, restructurings, and discontinuing operations.

• There are no changes in contingent liabilities or contingent assets since the last

annual balance sheet date.

• There are no material contingencies and any events or transactions that are

material to the understanding of the current interim period.

• There are no known trends, demands, commitments, events or uncertainties

that will have a material impact on the Company’s liquidity.

• There are no known trends, events or uncertainties that had or that are

reasonably expected to have a material impact on the net sales or revenues or

income from continuing operations.

21 | P a g e

• There are no significant elements of income or loss that did not arise from the

company’s continuing operations;



• There are no known events that will trigger direct or contingent financial

obligation that is material to the Company, including any default or acceleration

of an obligation.

• There are no material off-balance sheet transactions, arrangements, obligations

(including contingent obligations), and other relationships of the Company with

unconsolidated entities or other persons created during the reporting period.

• There are no businesses or geographical segments for which information is not

reported to the Board of Directors (BOD) and chief executive officer.

• The pricing of inter-segment transfers was based on cost at the time of

transaction.

• There were no changes in accounting policies adopted for segment reporting

that have a material effect on segment information.

2010 vs 2009

(6) Results Of Operations

The Company posted revenue of P833.4 million, 25.95% higher than its revenue

last year as a result of the strong ratings of both the AM and FM stations and also

due to advertisement spending by political candidates in line with their election

campaign. On the other hand, Cost and operating expenses increased only by

15.12% or P88.3 million as compared to last year.

Interest expense decreased by P5.0 Million or 57.09%mainly due to payment of

loan during the year. The rental income which slightly decreased by P0.2 million

from P8.7 million in 2009 to P8.5 million in 2010 represents revenue derived from

the investment properties being leased to employees and third parties. Interest

income increased by P.9 million or 226.64% from P.4 million in 2009 to P1.3

million in 2010 mainly due to additional investment placement on money market

during the year.

As an overall result, the Company registered a net income of P117.5 million in

2010, an increase of P63.2 million or 116.27% from P54.3 million in 2009.

(7) Financial Condition and Changes In Financial Condition

MBC is not having or does not anticipate having, within the next 12 months, any

cash flow or liquidity problems; neither is it in default or in breach of any note,

loan, lease or other indebtedness or financing arrangement requiring it to make

payments; nor a significant amount of the registrant’s trade payables have not

been paid within the stated trade terms.

(8) Causes for Material Changes from Period to Period (5%)

22 | P a g e

16. Cash and cash equivalents increased by P=48.0 million or 95.77% from P50.1

million in 2009 to P98.1 million in 2010 mainly due to improved cash flows from

operating activities.

17. Due from affiliates represents interest-free advances to Elizalde Holdings

Corporation, an affiliate under common control with the Company. There was a

net increase on this account in the amount of P22.5 million. Please see note 13

of the 2010 audited financial statements.

18. Prepaid expenses and other current assets increased by P6.4 million or 1,238.2%

mainly due to input tax on capital goods.

19. Property and Equipment at cost decreased by P22.4 million mainly due to

depreciation while Property and Equipment at revalued amount remained

constant.

20. Investment properties amounting to P81.3 Million as of December 31, 2010,

represents the net balance on the acquisition of land and construction of

building in 2005 intended for future use of the Company. The said property is

currently being leased out on a yearly basis to generate revenue in order to

sustain its maintenance costs. The decrease of P8.1 Million or 9.0% represents

depreciation charges during the year.

21. Intangible assets arise from the Company’s acquisition of DWRK which became

effective on October 4, 2008. This is composed of frequency and intellectual

property rights with net book values of P127.0 million and P1.5 million,

respectively, as of December 31, 2010. Please see Note 10 of the 2010 audited

financial statements. The decrease of P13.8 million or 10% represents

amortization costs during the year.

22. The Notes payable of P105 million was fully paid during the year.

23. There was a net increase of P21.6 million or 11.9% in Accounts payable and

accrued expenses mainly due to advance payments made by various advertisers

for their 2011 advertisements.

24. Dividend payable increased by P0.4 million or 26.3% mainly due to unclaimed

dividends declared during the year.

25. Talent fees and commissions payable increased by P11.7 million or 72.1% mainly

due to increased placement ofclient-initiated promos during the year.

26. Income tax payable increased by P10.8 million or 87.0% mainly due to higher

income before income tax.

27. Accrued retirement benefits decreased by P1.2 million or 10.3% mainly due to

the additional cash contribution to the Retirement Fund during the year.

Key Financial Indicators

2010 2009

1. Return on Sales (ROS)

Net Income 117,528,855 54,343,557

Divide by: Sales 833,380,988 661,673,035

ROS 14.10% 8.21%

2. Earnings Per Share (EPS)

Net Income 117,528,855 54,343,557

Divide by: No. of Shares Outstanding 402,682,990 402,682,990

EPS 0.292 0.135

23 | P a g e

3. Current Ratio

Current Assets 470,379,960 390,975,308

Divide by: Current Liabilities 255,482,571 316,024,132

Current Ratio 1.84 1.24

4. Debt-Equity Ratio

Total Liabilities 277,790,552 339,191,121

Total Stockholders’ Equity 682,124,951 589,793,967

Debt-Equity Ratio 0.407 0.575

5. Book Value Per Share

Total Stockholders’ Equity 682,124,951 589,793,967

Divide by: No.of Shares Outstanding 402,682,990 402,682,990

Book Value Per Share 1.694 1.465

(4) Discussion on Key Performance Indicators

1. ROS increased from 8.21% to 14.10%. This is an indication of a favorable trend

because the net income has increased both peso and percentage-wise in

relation to sales.

2. The EPS increased by P0.157 per share because of the increase in net income

with the total number of outstanding shares remaining constant.

3. Current ratio increased from 1.24 to 1.84 mainly due to higher cash and cash

equivalents which was augmented by the revenue during the year.

4. The debt-equity ratio was down 0.407: 1 from 0.575: 1 mainly due to the bank

loans paid and higher net income during the year.

5. The book value per share increased from P1.465 to P1.694 mainly due to net

income incurred during the year.

(5) Plan Of Operation

Responding to the challenge of staying on top, MBC has once again set a lineup of events

that will surely provide maximum value for advertisers and the listening public.

- First is the Manila Bay Seasports Festival which was held last March 12-

13 where an elite roster of participants was invited to join the event.

Organized by Manila Broadcasting Company and the City of Pasay, in

cooperation with the Philippine Coast Guard, this year’s seasports

festival featured mixed team championships for the Dragon Boat Race,

stock and formula races in the motorized banca competition.

Converging along Roxas Boulevard’s Baywalk, water enthusiasts and

hobbyists cheered on the participants in these popular spectator sports.

- The most successful event of the company, the Aliwan Fiesta, scheduled

on April 14-16, 2011 is set to unfold once again and bring the best,

biggest, loudest and the most colorful fiestas from all over the

Philippines to Manila. Now on its 9th

year, the festival will again

showcase the dance competition, where the contingents present

fabulously choreographed routines in full costumed glory. The three

24 | P a g e

other categories of the event were the Float completion, Reyna ng

Aliwan and the Photo Competition.

- On July 17, 2011, MBC will hold the first-ever Manila Bay Clean-Up Fun

Run to put in focus a sustainable approach to cleaning and protecting

marine and costal resources in the area.

- MBC National Choral Competition which will take place in December

2011 also promises to bring highly acclaimed contestants not only from

Metro Manila but all over the country

Aside from these grand events, MBC will also produce and sponsor shows and

events and mount movie premiers while giving away tickets to loyal listeners.

There will also be a live telecast at Aliw Theater of the much awaited boxing fight

between our very own Manny Pacquiao and Shane Mosley which will be held on

May 7, 2011. The Company also plans to tie up with movie and recording outfits

for promo tours, live performances, and fans’ days in malls. There are also several

promos in the pipeline, like the yearly Bagong Taon Bagong Milyon and other

client initiated promos that promise to be a big hit among radio listeners.

The Company also plans to earmark P50.0 million capital expenditure for its

various projects, namely; RHTV broadcast expansion over various cable and TV

channels, upgrading of transmitters of Love Radio Manila and Yes-FM Manila

stations, leasehold improvement at Head Office, audio and video streaming over

the internet, improvement of existing stations’ equipment and facilities

nationwide and upgrading of Radyo Natin stations to at least 500 watt-power.

This will be funded by cash flows from operating activities.

(6) Other Disclosure Matters



• There are no unusual items affecting assets, liabilities, equity, net income, or

cash flows.

• There are no changes in estimates of amounts reported in prior interim periods

of the current financial year or in estimates of amounts reported in prior

financial years.

• There are no material events subsequent to the end of the accounting period

that have not been reflected in the financial statements for the period.

• There are no changes in the composition of the issuer during the accounting

period, including business combinations, acquisition or disposal of subsidiaries

and long-term investments, restructurings, and discontinuing operations.

• There are no changes in contingent liabilities or contingent assets since the last

annual balance sheet date.

• There are no material contingencies and any events or transactions that are

material to the understanding of the current interim period.

• There are no known trends, demands, commitments, events or uncertainties

that will have a material impact on the Company’s liquidity.

• There are no known trends, events or uncertainties that had or that are

reasonably expected to have a material impact on the net sales or revenues or

income from continuing operations.

25 | P a g e

• There are no significant elements of income or loss that did not arise from the

company’s continuing operations;



• There are no known events that will trigger direct or contingent financial

obligation that is material to the Company, including any default or acceleration

of an obligation.

• There are no material off-balance sheet transactions, arrangements, obligations

(including contingent obligations), and other relationships of the Company with

unconsolidated entities or other persons created during the reporting period.

• There are no businesses or geographical segments for which information is not

reported to the Board of Directors (BOD) and chief executive officer.

• The pricing of inter-segment transfers was based on cost at the time of

transaction.

• There were no changes in accounting policies adopted for segment reporting

that have a material effect on segment information.

• There were no changes in and disagreements with Accountants and financial

disclosures.

(7) Other Disclosure Requirements Per Annex 68.1 M Paragraph 7e of Rule 68.1

(a) Marketable Securities

The aggregate cost or market value of short-term investments constitutes less

than 10% of total assets as of December 31, 2010.

(b) There were no amounts receivable of more than P100,000.00 or one percent of

total assets from Directors, Officers, employees, Related Parties, and Principal

Stockholders.

(c) The available-for-sale financial assets of P26,099,910 in the related balance

sheet does not exceed five percent of total assets and have no material changes

in the information required to be filed from that last previously reported.

(d) The due from affiliates of P41.3 million in the related balance sheet does not

exceed five percent of total assets and have no material changes in the

information required to be filed from that last previously reported.

(e) Intangible Assets-Other Assets – Please refer to note 10, pages 19-20 of the

audited FS.

(f) Long-term Debt – No balances as of December 31, 2010.

(g) Indebtedness to Related Parties –No balances as of December 31, 2010.

(h) Guarantees of Securities of Other Issuers – Not applicable.

(i) Capital Stock – there were no significant changes since the date of the last

balance sheet filed.

26 | P a g e

Title of Issue Common Shares

Number of Shares Authorized - 1,000,000,000 shares

Number of Shares Issued and Outstanding - 402,682,990 shares

Number of Shares Reserved for Options,

Warrants, Conversion and Other Rights

- NIL

Number of Shares Held by Related Parties - 394,469,767 shares

Directors, Officers and Employees - 219,844 shares

Others - 7,993,195 shares

Market Price and Dividends required by Part V of Annex C as amended

1. Market Information

MBC shares are traded in the Philippine Stock Exchange. The shares are not actively

traded in the market. The last known transaction of MBC shares was last 29 November

2011 at P1.20 per share involving 33,000,000 shares.

2. Holders

a. There are 619 Stockholders as of 31 August 2012.

b. The top 20 Stockholders as of 31 August 2012 are as follows:

NO. OF

SHARES %AGE

1

ELIZALDE HOLDINGS CORPORATION

139,558,774.00 34.66%

2

ELIZALDE LAND, INC.

87,000,000.00 21.61%

3

ROMULO, MABANTA, BUENAVENTURA, SAYOC & DELOS ANGELES

69,910,993.25 17.36%

4

CEBU BROADCASTING COMPANY

50,000,000.00 12.42%

5

AQG CORPORATION

33,000,000.00 8.20%

6

SUNSHINE INNS, INC.

10,000,000.00 2.48%

7

PHILIPPINE BROADCASTING COMPANY

5,000,000.00 1.24%

8

PCD NOMINEE CORPORATION

1,202,188.00 0.30%

9

TANSENGCO UY & CO., INC.

659,892.00 0.16%

10

ESTATE OF ALLEN CHAM

632,549.00 0.16%

11

MYRON C. PAPA, SA OF ESTATE OF ANGELA BUTTE

627,254.00

0.16%

12

LUIS M. ALBERTO &/OR MANUEL C. ALBERTO 0.14%

27 | P a g e

553,368.00

13

L.V.N. PICTURES, INC.

447,961.00 0.11%

14

A. &/OR J.O. DEL ROSARIO

363,592.00 0.09%

15

RUPERTO S. NICDAO, JR.

129,201.00 0.03%

16

ERNESTINA U. DE GARCIA

122,338.00 0.03%

17

CONSUELO FAJARDO

121,149.00 0.03%

18

LUIS G. ABLAZA

121,149.00 0.03%

19

JOAQUINA TIRONA

114,719.00 0.03%

20

AGAPITO D. BALAGTAS

105,370.00 0.03%

3. Dividends

The following are the dividend declarations for the last three years:

Cash Dividends (per share)

Amount in

Pesos

Declaration Date Record Date Payment Date

P0.0625 Sep. 21, 2011 Oct. 05, 2011 Oct. 12, 2011

P0.0625 Nov. 19, 2010 Dec. 09, 2010 Dec. 23, 2010

P=0.0625 Nov. 19, 2009 Dec. 15, 2009 Dec. 29, 2009

There are no existing restrictions that limit the payment of dividends on common shares.

4. Recent Sales of Unregistered or Exempt Securities including Recent Issuance of

Securities Constituting an Exempt Transaction

There have been no known recent sales of unregistered or exempt securities of the

company.

Item 13. Discussion on Compliance with Leading Practices in Corporate Governance

The Company, thru its Compliance Officer, evaluates the level of compliance of the

Board of the Directors and top-level management with the Manual of Corporate Governance

semi-annually. The members of the Audit, Nominating and Compensation Committees have

been appointed and will be recommended for re-appointment once the new Board is

constituted. The Company continues to strive to integrate the mandate of good corporate

governance in its daily life. No deviation from the Company’s manual of Corporate

Governance was noted during the year.

28 | P a g e

The company has taken steps to establish systems and processes to protect the

interests of and add value to its diverse stakeholder groups such as its shareholders,

employees, customers, vendors and community. Two (2) independent members of the

Board of Directors were elected to help clarify the direction and values of the organization,

oversee performance of the company and protect stakeholder interests. Audit, Nominating

and Compensation Committees have also been formed as part of the company’s plan to

improve good corporate governance practices. The company advocates continuous

improvement in governance processes by monitoring the progress of the following

attributes:

Attributes Challenge

Legal and Regulatory Maintaining an understanding of the compliance

requirements in the dynamic regulatory environment.

Business Practices and

Ethics Establishing ethical business practices that keep up with the

expectations of stakeholders.

Disclosure and

Transparency Ensuring that stakeholders receive the information they

need in an understandable way.

Risk and Performance

Management Dealing with both Risk Management and Performance

Enhancement as two sides of the same coin to increase

shareholder value.

Communication Finding ways to improve the interactions between the

stakeholders within various components of the Corporate

Governance Framework.

The Company undertakes that a copy of its Annual Report on Form 17-A shall be provided

without any charge to any stockholder who makes a written request for such copy or to any

person solicited. At the discretion of management, a charge may be made for exhibits

limited to reasonable expenses incurred by the registrant in furnishing such exhibits. Any

written request should be addressed to – Atty. Rudolph Steve E. Jularbal, Corporate

Secretary, 2nd

Floor, MBC Building, Star City, CCP Complex, Roxas Boulevard, Pasay City,

Metro Manila.

Audited Financial Statements and Interim Financial Statements

Enclosed is a copy of the Statement of Management’s Responsibility for Financial

Statements, Map of the Relationships of the Companies within the Group, Audited Financial

Statements and Supplementary Schedules, and June 30, 2012 17Q filed as part of this Form

20-IS.

SEC FORM 17-A 2011

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C

*SGVMC312793*

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of Directors

Manila Broadcasting Company

MBC Building, Star City

CCP Complex, Roxas Boulevard

Pasay City

Report on the Financial Statements

We have audited the accompanying financial statements of Manila Broadcasting Company, which

comprise the statements of financial position as at December 31, 2011 and 2010, and the statements of

comprehensive income, statements of changes in equity and statements of cash flows for each of the

three years in the period ended December 31, 2011, and a summary of significant accounting policies

and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with Philippine Financial Reporting Standards, and for such internal control as

management determines is necessary to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We

conducted our audits in accordance with Philippine Standards on Auditing. Those standards require

that we comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.

SyCip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Philippines

Phone: (632) 891 0307 Fax: (632) 819 0872 www.sgv.com.ph BOA/PRC Reg. No. 0001, January 25, 2010, valid until December 31, 2012 SEC Accreditation No. 0012-FR-2 (Group A), February 4, 2010, valid until February 3, 2013

A member firm of Ernst & Young Global Limited

*SGVMC312793*

- 2 -

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of

Manila Broadcasting Company as at December 31, 2011 and 2010, and its financial performance and

its cash flows for each of the three years in the period ended December 31, 2011 in accordance with

Philippine Financial Reporting Standards.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

and 19-2011

Our audits were conducted for the purpose of forming an opinion on the basic financial statements

taken as a whole. The supplementary information required under Revenue Regulations 15-2010 and

19-2011 in Notes 23 and 24 to the financial statements, respectively, are presented for purposes of

filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements.

Such information is the responsibility of the management of Manila Broadcasting Company. The

information has been subjected to the auditing procedures applied in our audit of the basic financial

statements. In our opinion, the information is fairly stated in all material respects in relation to the

basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Catherine E. Lopez

Partner

CPA Certificate No. 86447

SEC Accreditation No. 0468-AR-1 (Group A),

March 18, 2010, valid until March 17, 2013

Tax Identification No. 102-085-895

BIR Accreditation No. 08-001998-65-2009,

June 1, 2009, valid until May 31, 2012

PTR No. 3174803, January 2, 2012, Makati City

April 2, 2012

*SGVMC312793*


STATEMENTS OF FINANCIAL POSITION

See accompanying Notes to Financial Statements.

December 31

2011 2010

ASSETS

Current Assets Cash and cash equivalents (Note 5) P=73,140,156 P=98,066,938

Receivables (Note 6) 296,318,715 313,361,245 Due from affiliates (Note 12) 88,966,242 41,283,182

Materials and supplies (net of allowance for inventory obsolescence of P=1,508,663 in 2011 and P=1,387,209

in 2010) 9,308,734 10,793,789

Prepaid expenses and other current assets 5,410,742 6,874,806

Total Current Assets 473,144,589 470,379,960

Noncurrent Assets

Available-for-sale financial assets (Note 7) 25,634,635 26,069,910

Property and equipment (Note 8) At cost 62,139,150 79,732,301

At revalued amount 122,201,600 122,201,600

Investment properties (Note 9) 73,224,113 81,294,243 Intangible assets (Note 10) 115,196,192 128,463,904

Goodwill (Note 10) 38,016,206 38,016,206 Other noncurrent assets 6,463,547 13,757,379

Total Noncurrent Assets 442,875,443 489,535,543

TOTAL ASSETS P=916,020,032 P=959,915,503

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable and accrued expenses (Notes 11, 12 and 17)

P=197,321,811

P=202,638,303

Dividends payable 1,661,994 1,766,303 Talent fees and commissions payable 30,618,538 27,950,862

Income tax payable 12,710,746 23,127,103

Total Current Liabilities 242,313,089 255,482,571

Noncurrent Liabilities

Accrued retirement benefits (Note 17) 48,075,663 10,609,959

Deferred income tax liabilities - net (Note 18) 3,427,378 11,698,022

Total Noncurrent Liabilities 51,503,041 22,307,981

Total Liabilities 293,816,130 277,790,552

Equity

Capital stock (Note 13) 402,803,777 402,803,777 Additional paid-in capital 79,354 79,354

Revaluation increment on land (Note 8) 81,154,854 81,154,854 Reserve for fluctuation in available-for-sale

financial assets (Note 7)

60,000

40,000

Retained earnings (Note 14) 138,226,704 198,167,753 Treasury stock (at cost) - 120,787 shares (120,787) (120,787)

Total Equity 622,203,902 682,124,951

TOTAL LIABILITIES AND EQUITY P=916,020,032 P=959,915,503

*SGVMC312793*


STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2011 2010 2009

REVENUE (Note 12) P=756,600,651 P=833,380,988 P=661,673,035

COST OF SERVICES (Notes 9, 12 and 15) (501,218,740) (519,137,632) (412,117,764)

GROSS PROFIT 255,381,911 314,243,356 249,555,271

Operating expenses (Notes 9, 12 and 15) (178,756,054) (152,922,996) (171,661,885)

Rental income (Note 9) 9,079,316 8,503,695 8,701,439

Interest income 1,005,500 1,267,010 387,897

Interest expense – (3,777,035) (8,802,931)

Other income - net (Note 7) 309,914 561,484 208,101

INCOME BEFORE INCOME TAX 87,020,587 167,875,514 78,387,892

PROVISION FOR INCOME TAX (Note 18) 26,156,739 50,346,659 24,044,335

NET INCOME 60,863,848 117,528,855 54,343,557

OTHER COMPREHENSIVE INCOME

(LOSS)

Net changes in fair value of available-for-sale

financial assets (Note 7)

20,000

(30,000) 10,000

Increase in revaluation increment due to

appraisal, net of deferred income tax (Note 8) – – 37,662,487

TOTAL OTHER COMPREHENSIVE

INCOME (LOSS) 20,000 (30,000) 37,672,487

TOTAL COMPREHENSIVE INCOME P=60,883,848 P=117,498,855 P=92,016,044

Weighted Average Number of

Shares Outstanding

402,682,990

402,682,990

402,682,990

Basic/Diluted Earnings Per Share P=0.15 P=0.29 P=0.13


*SGVMC312793*

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*SGVMC312793*


STATEMENTS OF CASH FLOWS

Years Ended December 31

2011 2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P=87,020,587 P=167,875,514 P=78,387,892

Adjustments for:

Depreciation and amortization (Note 15) 46,071,971 50,425,931 53,134,425 Interest expense – 3,777,035 8,802,931

Movement in accrued retirement benefits 24,803,620 (1,217,480) 3,657,548 Impairment loss of AFS financial assets (Note 7) 455,275 – –

Interest income (1,005,500) (1,267,010) (387,897)

Operating income before working capital changes 157,345,953 219,593,990 143,594,899 Decrease (increase) in:

Receivables 17,042,530 (1,990,863) (82,756,822)

Due from affiliates (47,683,060) (22,472,724) (7,102,967) Materials and supplies 1,485,055 (605,941) 449,132

Prepaid expenses and other current assets 1,464,064 (6,361,058) 797,946

Increase (decrease) in: Accounts payable and accrued expenses 7,345,592 21,744,525 (9,741,000)

Talent fees and commissions payable 2,667,676 11,711,837 6,916,012

Net cash flows generated from operations 139,667,810 221,619,766 52,157,200 Income taxes paid, including final and creditable

withholding tax

(44,843,740)

(39,227,067)

(14,984,139) Interest received 1,005,500 1,267,010 410,647

Net cash flows from operating activities 95,829,570 183,659,709 37,583,708

CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (Note 8) (7,140,978) (6,220,404) (2,310,298)

Decrease in other noncurrent assets 7,293,832 4,238,710 3,735,153

Net cash flows from (used in) investing activities 152,854 (1,981,694) 1,424,855

CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (120,909,206) (24,799,822) (5,436,848)

Payments of notes payable – (105,000,000) (42,000,000)

Interest paid – (3,904,127) (8,930,023)

Cash flows used in financing activities (120,909,206) (133,703,949) (56,366,871)

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS (24,926,782) 47,974,066 (17,358,308)

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 98,066,938 50,092,872 67,451,180

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=73,140,156 P=98,066,938 P=50,092,872


*SGVMC312793*


NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

Manila Broadcasting Company (the Company) was incorporated in the Philippines on

September 30, 1947. The Company is primarily engaged in the business of radio broadcasting.

The registered office address of the Company is MBC Building, Star City, CCP Complex, Roxas

Boulevard, Pasay City. On May 20, 1971, the Securities and Exchange Commission approved the

amendment of the Company’s Articles of Incorporation to extend its corporate term for another

period of 50 years from and after June 11, 1971.

The financial statements were authorized for issuance by the Board of Directors (BOD) on

April 2, 2012.

2. Summary of Significant Accounting and Financial Reporting Policies

Basis of Preparation

The financial statements of the Company have been prepared using the historical cost convention,

except for available-for-sale (AFS) financial assets, which have been measured at fair value and

land, which is carried at revalued amount.

The financial statements are presented in Philippine peso (Peso), which is the Company’s

functional and presentation currency. Amounts are rounded to the nearest Peso unless otherwise

indicated.

Statement of Compliance

The financial statements have been prepared in compliance with Philippine Financial Reporting

Standards (PFRS).

Changes in Accounting Policies and Disclosures

The accounting policies adopted are consistent with those of the previous financial year except for

the amendment to Philippine Accounting Standards (PAS) 24, Related Party Transactions, which

was adopted as of January 1, 2011. PAS 24 clarifies the definitions of a related party. The new

definitions emphasize a symmetrical view of related party relationships and clarify the

circumstances in which persons and key management personnel affect related party relationships

of an entity. In addition, the amendment introduces an exemption from the general related party

disclosure requirements for transactions with government and entities that are controlled, jointly

controlled or significantly influenced by the same government as the reporting entity. The

adoption of the amendment did not have any impact on the financial position or performance of

the Company.

Improvements to PFRSs (issued 2010)

Improvements to PFRSs, an omnibus of amendments to standards, deal primarily with a view to

removing inconsistencies and clarifying wordings. There are separate transitional provisions for

each standard. The adoption of the following amendments resulted in changes to accounting

policies but did not have any impact on the financial position or performance of the Company.

• PFRS 7, Financial Instruments - Disclosures

• PAS 1, Presentation of Financial Statements

- 2 -

*SGVMC312793*

Standards Issued but not yet Effective

Standards issued but not yet effective up to the date of issuance of the Company’s financial

statements are listed below. This listing of standards and interpretations issued are those that the

Company reasonably expects to have an impact on disclosures, financial position or performance

when applied at a future date. The Company intends to adopt these standards when they become

effective.

Effective in 2012

• PFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure

Requirements, requires additional disclosure about financial assets that have been transferred

but not derecognized to enable the user of the Company’s financial statements to understand

the relationship with those assets that have not been derecognized and their associated

liabilities. In addition, the amendment requires disclosures about continuing involvement in

derecognized assets to enable the user to evaluate the nature of, and risks associated with, the

entity’s continuing involvement in those derecognized assets. The amendment affects

disclosures only and has no impact on the Company’s financial position or performance.

• PAS 12, Income Taxes - Recovery of Underlying Assets, clarifies the determination of deferred

tax on investment property measured at fair value. The amendment introduces a rebuttable

presumption that deferred tax on investment property measured using the fair value model in

PAS 40 should be determined on the basis that its carrying amount will be recovered through

sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets

that are measured using the revaluation model in PAS 16 always be measured on a sale basis

of the asset.

Effective in 2013

• PFRS 13, Fair Value Measurement, establishes a single source of guidance under PFRS for all

fair value measurements. PFRS 13 does not change when an entity is required to use fair

value, but rather provides guidance on how to measure fair value under PFRS when fair value

is required or permitted.

• PAS 1, Presentation of Items of Other Comprehensive Income, considers the change in

grouping of items presented in other comprehensive income. Items that could be reclassified

(or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or

settlement) would be presented separately from items that will never be reclassified. The

amendment affects presentation only and has therefore no impact on the Company’s financial

position or performance.

• PAS 19, Employee Benefits (Revised), clarifies the fundamental changes such as removing the

corridor mechanism and the concept of expected returns on plan assets to simple clarifications

and re-wording.

Effective in 2015

• PFRS 9, Financial Instruments: Classification and Measurement, reflects the first phase on

the replacement of PAS 39 and applies to classification and measurement of financial assets

and financial liabilities as defined in PAS 39. In subsequent phases, hedge accounting and

impairment of financial assets will be addressed with the completion of this project expected

on the first half of 2012.

- 3 -

*SGVMC312793*

Cash and Cash Equivalents

Cash includes cash on hand and cash in banks. Cash equivalents are short-term, highly liquid

investments that are readily convertible to known amounts of cash with original maturities of up to

three months and that are subject to an insignificant risk of change in value.

Financial Assets and Financial Liabilities

Financial assets and financial liabilities are recognized initially at fair value. Directly attributable

transaction costs, if any, are included in the initial measurement of financial assets and financial

liabilities, except for any financial instrument measured at fair value through profit or loss

(FVPL). The Company recognizes a financial asset or financial liability in the statement of

financial position when it becomes a party to the contractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the

contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or

a component that is a financial liability, are reported as expense or income. Distributions to

holders of financial instruments classified as equity are charged directly to equity, net of any

related income tax benefits.

Financial instruments are classified as either financial assets or financial liabilities at FVPL, loans

and receivables, held-to-maturity (HTM) investments, AFS financial assets, or other financial

liabilities, as appropriate.

The Company determines the classification of its financial assets and financial liabilities at initial

recognition and, where allowed and appropriate, reevaluates this designation at each financial

year-end.

As of December 31, 2011 and 2010, the Company’s financial instruments include loans and

receivables, AFS financial assets and other financial liabilities.

Loans and receivables

Loans and receivables are nonderivative financial assets with fixed or determinable payments that

are not quoted in an active market. Such assets are carried at amortized cost in the statement of

financial position. Amortization is determined using the effective interest rate method. Loans and

receivables are classified as current assets if maturity is within twelve months from the statement

of financial position date. Otherwise, these are classified as noncurrent assets.

Included under this category are the Company’s cash in banks, short-term investments, receivables

and due from affiliates as of December 31, 2011 and 2010.

AFS financial assets

AFS financial assets are those nonderivative financial assets that are designated as such or are not

classified in any of the three preceding categories. Financial assets may be designated at initial

recognition as AFS if they are purchased and held indefinitely, and may be sold in response to

liquidity requirements or changes in market conditions. After initial recognition, quoted AFS

financial assets are measured at fair value with gains or losses being recognized as a separate

component of equity and as other comprehensive income until the investment is derecognized or

until the investment is determined to be impaired. Unquoted AFS financial assets, on the other

hand, are carried at cost, net of any impairment, until the investment is derecognized.

Included under this category are the Company’s quoted and unquoted equity investments as of

December 31, 2011 and 2010.

- 4 -

*SGVMC312793*

Other financial liabilities

This category pertains to financial liabilities that are neither held for trading nor designated as at

FVPL upon the inception of the liability. These include liabilities arising from operations or

borrowings.

The financial liabilities are recognized initially at fair value and are subsequently carried at

amortized cost, taking into account the impact of applying the effective interest rate method of

amortization (or accretion) for any related premium, discount and any directly attributable

transaction costs.

Included under this category are the Company’s accounts payable and accrued expenses,

dividends payable, talent fees and commissions payable as of December 31, 2011 and 2010.

Determination of Fair Value of Financial Instruments

The fair value of financial instruments traded in active markets at the end of reporting period is

based on their quoted market price or dealer price quotations (bid price for long positions and ask

price for short positions), without any deduction for transaction costs. When current bid and

asking prices are not available, the price of the most recent transaction provides evidence of the

current fair value as long as there has not been a significant change in economic circumstances

since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by

using appropriate valuation techniques. Valuation techniques include net present value

techniques, comparison to similar instruments for which market observable prices exist, options

pricing models, and other relevant valuation models.

The Company determines and discloses the fair value of its financial instruments on the basis of

the following hierarchy:

Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities. Included

in this level are the Company’s quoted AFS financial assets.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair

value are observable, either directly or indirectly. The Company has no financial

instruments included under this level.

Level 3: techniques which use inputs that are not based on observable market data which have a

significant effect on the recorded fair value. The Company has no financial instruments

included under this level.

“Day 1” Difference

When the transaction price in a non-active market is different from the fair value of other

observable current market transactions in the same instrument or based on a valuation technique

whose variables include only data from observable market, the Company recognizes the difference

between the transaction price and fair value (a “Day 1” difference) in profit or loss unless it

qualifies for recognition as some other type of asset. In cases where use is made of data which is

not observable, the difference between the transaction price and model value is only recognized in

profit or loss when the inputs become observable or when the instrument is derecognized. For

each transaction, the Company determines the appropriate method of recognizing the “Day 1”

difference amount.

Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement

of financial position if, and only if, there is a currently enforceable legal right to offset the

- 5 -

*SGVMC312793*

recognized amounts and there is an intention to settle on a net basis, or to realize the asset and

settle the liability simultaneously.

This is not generally the case with master netting agreements, and the related assets and liabilities

are presented gross in the statement of financial position.

Derecognition of Financial Assets and Financial Liabilities

Financial assets A financial asset (or, where applicable a part of a financial asset or part of similar financial assets)

is derecognized when:

• the right to receive cash flows from the asset has expired;

• the Company retains the right to receive cash flows from the financial asset, but has assumed

an obligation to pay them in full without material delay to a third party under a “pass-through”

arrangement; or

• the Company has transferred its right to receive cash from the financial asset and either (a) has

transferred substantially all the risks and rewards of the financial asset, or (b) has neither

transferred nor retained substantially all the risks and rewards of the financial asset, but has

transferred control of the financial asset. When the Company has transferred its right to receive cash from a financial asset and has neither

transferred nor retained substantially all the risks and rewards of the financial asset nor transferred

control of the financial asset, the financial asset is recognized to the extent of the Company’s

continuing involvement in the financial asset. Continuing involvement that takes the form of a

guarantee over the transferred financial asset is measured at the lower of the original carrying

amount of the financial asset and the maximum amount of consideration that the Company could

be required to repay. Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or

cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially

different terms, or the terms of an existing liability are substantially modified, such an exchange or

modification is treated as a derecognition of the original financial liability and the recognition of a

new financial liability, and the difference in the respective carrying amounts is recognized in profit

or loss.

Impairment of Financial Assets

The Company assesses at each reporting period whether there is objective evidence that a financial

asset or group of financial assets is impaired.

Financial assets carried at amortized cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortized

cost has been incurred, the amount of the loss is measured as the difference between the asset’s

carrying amount and the present value of estimated future cash flows (excluding future credit

losses that have not been incurred) discounted at the financial asset’s original effective interest rate

(i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset

shall be reduced either directly or through use of an allowance account. The amount of the loss

shall be recognized in profit or loss.

The Company first assesses whether objective evidence of impairment exists individually for

financial assets that are individually significant, and individually or collectively for financial assets

that are not individually significant. Objective evidence of impairment, includes, but is not limited

- 6 -

*SGVMC312793*

to, bankruptcy or insolvency on the part of the customer and adverse changes in economy. If it is

determined that no objective evidence of impairment exists for an individually assessed financial

asset, whether significant or not, the asset is included in a group of financial assets with similar

credit risk characteristics and that group of financial assets is collectively assessed for impairment.

Financial assets that are individually assessed for impairment and for which an impairment loss is

or continues to be recognized are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be

related objectively to an event occurring after the impairment was recognized, the previously

recognized impairment loss is reversed by adjusting the allowance account. The amount of the

reversal is recognized in profit or loss. Interest income continues to be accrued on the reduced

carrying amount based on the original effective interest rate of the asset. Loans, together with the

associated allowance, are written off when there is no realistic prospect of future recovery and all

collateral, if any, has been realized or has been transferred to the Company. If in a subsequent

year, the amount of the estimated impairment loss increases or decreases because of an event

occurring after the impairment was recognized, the previously recognized impairment loss is

increased or reduced by adjusting the allowance for impairment losses account. If a future write-

off is later recovered, the recovery is recognized in profit or loss. Any subsequent reversal of an

impairment loss is recognized in profit or loss to the extent that the carrying value of the asset

does not exceed its amortized cost at reversal date.

In relation to receivables, a provision for impairment is made when there is objective evidence

(such as the probability of insolvency or significant financial difficulties of the debtor) that the

Company will not be able to collect all of the amounts due under the original terms of the invoice.

The carrying amount of the receivables is reduced through the use of an allowance account.

Receivables together with the related allowance are written off when there is no realistic prospect

of future recovery.

AFS financial assets For AFS financial assets, the Company assesses at each reporting period whether there is objective

evidence that a financial asset or group of financial assets is impaired.

In the case of equity investments classified as AFS financial assets, this would include a

significant or prolonged decline in the fair value of the investments below its cost. Where there is

evidence of impairment, the cumulative loss - measured as the difference between the acquisition

cost and the current fair value, less any impairment loss on that financial asset previously

recognized in profit or loss - is removed from equity and recognized in profit or loss. Impairment

losses on equity investments are not reversed through profit or loss. Increases in fair value after

impairment are recognized as other comprehensive income.

Materials and Supplies

Materials and supplies are stated at the lower of cost (determined using the first-in, first-out

method) and net realizable value. Cost includes the invoice price and related charges such as

freight, insurance, and taxes, among others. Net realizable value is the current replacement cost.

Property and Equipment

Property and equipment, except for land, are stated at cost less accumulated depreciation and

amortization and any impairment in value.

The initial cost of property and equipment comprises its purchase price, including import duties,

taxes, and any directly attributable costs of bringing the asset to its working condition and location

for its intended use. Expenditures incurred after the property and equipment have been put into

operation, such as repairs and maintenance costs, are normally charged to profit or loss in the

- 7 -

*SGVMC312793*

period in which the costs are incurred. In situations where it can be clearly demonstrated that the

expenditures have resulted in an increase in the future economic benefits expected to be obtained

from the use of an item of property and equipment beyond its originally assessed standard of

performance, the expenditures are capitalized as additional cost of property and equipment. When

assets are sold or retired, their cost, accumulated depreciation and amortization and any

impairment in value are eliminated from the accounts. Any gain or loss resulting from the

disposal is included in profit or loss.

Land is stated at revalued amount based on the fair market value of the property determined by an

independent firm of appraisers as of December 31, 2009. The increase in the valuation of land, net

of deferred income tax liability, is credited to “Revaluation increment on land” in the statement of

financial position and other comprehensive income. Upon disposal, the relevant portion of the

revaluation increment realized in respect of the previous valuation will be released from the

revaluation increment directly to retained earnings in other comprehensive income. Decreases that

offset previous increases in respect of the same property are charged against the revaluation

increment. All other decreases are charged against current operations.

Depreciation commences when an asset is in its location and condition and capable of being

operated in the manner intended by management. It is computed using the straight-line method,

based on the estimated useful lives of the assets as follows:

Years

Broadcasting and transmission equipment 8-11

Furniture and equipment 5

Transportation equipment 4

Building and leasehold improvements are amortized over the term of the lease or life of the

building and improvements ranging from seven to seventeen years, whichever is shorter.

Construction in progress represents properties under construction and is stated at cost, including

cost of construction and other direct costs. Construction in progress is not depreciated until such

time that the relevant assets are completed and ready for operational use.

The estimated useful lives and depreciation and amortization method are reviewed periodically to

ensure that these are consistent with the expected pattern of economic benefits from the items of

property and equipment.

Investment Properties

Investment properties, except land, are measured at cost, including transaction costs, less

accumulated depreciation and any impairment in value. The carrying amount includes the cost of

replacing part of an existing investment property at the time that cost is incurred, if the recognition

criteria are met, and excludes the costs of day-to-day servicing of an investment property.

Investment properties are derecognized when either they have been disposed of or when the

investment property is permanently withdrawn from use and no future economic benefit is

expected from its disposal. Any gains or losses on the retirement or disposal of an investment

property are recognized in profit or loss in the year of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change in use,

evidenced by ending of owner-occupation, commencement of an operating lease to another party

or ending of construction or development. Transfers are made from investment property when,

and only when, there is a change in use, evidenced by commencement of owner-occupation or

commencement of development with a view to sale.

- 8 -

*SGVMC312793*

Investment properties is composed of land, building and other property and is depreciated, except

land, on a straight-line basis over their estimated useful lives of ten years and eight years,

respectively.

Intangible Assets

The cost of intangible assets acquired in a business combination is the fair value as at the date of

acquisition. Following initial recognition, intangible assets are carried at cost less any

accumulated amortization and any accumulated impairment losses.

The intangible assets are assessed as finite and are amortized over the useful economic life and

assessed for impairment whenever there is an indication that the intangible asset may be impaired.

The amortization period and the amortization method for an intangible asset with a finite useful

life is reviewed at least at each reporting period. Changes in the expected useful life or the

expected pattern of consumption of future economic benefits embodied in the asset is accounted

for by changing the amortization period or method, as appropriate, and are treated as changes in

accounting estimates. The amortization of intangible assets with finite lives is recognized in profit

or loss.

Amortization commences when the intangible asset is acquired and is capable of being owned and

operated in the manner intended by management. It is computed using the straight-line method,

based on the estimated useful lives of the assets as follows:

Years

Frequency 13

Intellectual property rights 3

Goodwill is initially measured at cost being the excess of the cost of the business combination

over the net fair value of the acquiree’s identifiable assets. Goodwill is reviewed for impairment

annually or more frequently if events or changes in circumstances indicate that the carrying value

may not be recoverable.

Impairment of Nonfinancial Assets

The carrying values of property and equipment and investment properties are reviewed for

impairment when events or changes in circumstances indicate the carrying values may not be

recoverable. If any such indication exists, or when annual impairment testing is required, and

where the carrying values exceed the estimated recoverable amounts, the assets or the cash

generating units are written down to their recoverable amounts. The recoverable amount of the

assets is the greater of the fair value less costs to sell and value-in-use. In assessing value-in-use,

the estimated future cash flows are discounted to their present value using a pretax discount rate

that reflects current market assessments of the time value of money and the risks specific to the

asset. For an asset that does not generate largely independent cash inflows, the recoverable

amount is determined for the cash-generating unit to which the asset belongs. Any impairment

loss is recognized in profit or loss.

Capital Stock

Capital stock is the portion of the paid in capital representing the total par value of the shares

issued.

Retained Earnings

Retained earnings represent the cumulative balance of net income or loss, net of any dividend

declaration and other capital adjustments.

- 9 -

*SGVMC312793*

Additional Paid-in Capital

Additional paid-in capital represents the amount paid in excess of the par value of the shares

issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in

equity as a deduction from proceeds, net of tax.

Treasury Stock

Treasury stocks are shares of the Company which are reacquired and are measured at cost and

deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or

cancellation of the Company’s own equity instrument.

Revenue

Revenue is recognized when the significant risks and rewards of ownership have been transferred

or the services have been rendered to the customer, the amount of revenue can be measured

reliably and it is probable that the economic benefits will flow to the Company. Revenue is

measured at the fair value of the consideration received, excluding discounts and rebates. The

following specific criteria must also be met before revenue is recognized:

Broadcasting fees

Broadcasting fees are recognized as income when the program is broadcasted or the advertisement

is aired.

Rental income

Rental income is recognized on a straight-line basis over the lease term.

Interest

Interest is recognized as the interest accrues.

Cost of Services and Operating Expenses

Cost of services and operating expenses are recognized when incurred.

Retirement Benefits

Retirement benefits cost is actuarially determined using the projected unit credit method. This

method reflects services rendered by employees up to the date of valuation and incorporates

assumptions concerning employees’ projected salaries. Actuarial valuation is conducted with

sufficient regularity, with option to accelerate when significant changes to underlying assumptions

occur. Retirement benefits cost includes current service cost, interest cost, expected return on plan

assets, amortization of actuarial gains and losses, past service cost and effect of any curtailment or

settlement.

The net retirement benefits liability recognized by the Company is the aggregate of the present

value of the defined benefit obligation and actuarial gains and losses not recognized reduced by

past service cost not yet recognized and the fair value of plan assets out of which the obligation is

to be settled directly. The present value of the defined benefit obligation is determined by

discounting the estimated future cash outflows using risk-free interest rates that have terms of

maturity approximating the terms of the related accrued retirement benefits.

Actuarial gains and losses is recognized as income or expense if the cumulative unrecognized

actuarial gains and losses at the end of the previous reporting period exceeded 10% of the greater

of the present value of defined benefit obligation or the fair value of the plan assets. These gains

and losses are recognized over the expected average remaining working life of the employees

participating in the plan.

- 10 -

*SGVMC312793*

Borrowing Costs

Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of

a qualifying asset. All other borrowing costs are expensed as incurred. Capitalization of

borrowing costs commences when the activities to prepare the asset are in progress and

expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the

assets are substantially ready for their intended use. If the carrying amount of the asset exceeds its

recoverable amount, an impairment loss is recorded.

Income Taxes

Current income tax

Current income tax assets and current income tax liabilities for the current and prior periods are

measured at the amount expected to be recovered or paid to the taxation authorities. The tax rates

and tax laws used to compute the amount are those that have been enacted or substantively enacted

at the end of reporting period.

Deferred income tax

Deferred income tax is provided, using the balance sheet liability method, on all temporary

differences at the reporting period between the tax bases of assets and liabilities and their carrying

amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred

income tax assets are recognized for all deductible temporary differences, to the extent that it is

probable that sufficient future taxable profits will be available against which the deductible

temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting period and

reduced to the extent that it is no longer probable that sufficient future taxable profits will be

available to allow all or part of the deferred income tax assets to be utilized.

Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are

expected to apply to the period when the asset is realized or the liability is settled, based on tax

rates and tax laws that have been enacted or substantively enacted at the end of the reporting

period.

Deferred income tax relating to items recognized outside profit or loss is recognized under other

comprehensive income and outside profit or loss.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable

right exists to set off current income tax assets against current income tax liabilities and the

deferred income taxes relate to the same taxable entity and the same taxation authority.

Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of

the arrangement and requires an assessment of whether the fulfillment of the arrangement is

dependent on the use of a specific asset or assets and the arrangement conveys a right to use the

asset. A reassessment is made after inception of the lease only if one of the following applies:

a. there is a change in contractual terms, other than a renewal or extension of the arrangement;

b. a renewal option is exercised or extension granted, unless that term of the renewal or

extension was initially included in the lease term;

c. there is a change in the determination of whether fulfillment is dependent on a specified

asset; or,

d. there is a substantial change to the asset.

- 11 -

*SGVMC312793*

When a reassessment is made, lease accounting shall commence or cease from the date when the

change in circumstances gave rise to the reassessment for scenarios a, c or d above, and at the date

of renewal or extension period for scenario b.

Company as lessor

Leases where the Company retains substantially all the risks and rewards of ownership of the asset

are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are

added to the carrying amount of the leased asset and recognized over the lease term on the same

basis as rental income. Contingent rents are recognized as revenue in the period in which they are

earned.

Company as lessee Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are

classified as operating leases. Operating lease expense is recognized in profit or loss on a straight-

line basis over the lease term.

Earnings Per Share

Basic earnings per share is computed by dividing the net income by the weighted average number

of shares outstanding during the year.

Diluted earnings per share is calculated by dividing the net income by the weighted average

number of shares outstanding during the year and adjusted for the effects of all dilutive potential

common shares, if any.

In determining both the basic and the diluted earnings per share, the effect of stock dividends, if

any, is accounted for retroactively.

Foreign Currency-denominated Transactions

Transactions in foreign currencies (i.e., currencies other than the Peso) are initially recorded using

the functional currency exchange rate at the date of the transaction. Outstanding monetary assets

and liabilities denominated in foreign currencies are restated using the functional currency closing

exchange rate at the end of reporting period. All differences are taken to profit or loss.

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a

result of a past event, it is probable that an outflow of resources embodying economic benefits will

be required to settle the obligation, and a reliable estimate can be made of the amount of the

obligation.

Contingencies

Contingent liabilities are not recognized in the financial statements. They are disclosed in the

notes to financial statements unless the possibility of an outflow of resources embodying

economic benefits is remote. Contingent assets are not recognized in the financial statements but

are disclosed in the notes to financial statements when an inflow of economic benefits is probable.

Contingent assets are assessed continually to ensure that developments are appropriately reflected

in the financial statements. If it has become virtually certain that an inflow of economic benefits

will arise, the asset and the related income are recognized in the financial statements.

Events After the End of the Reporting Period

Post year-end events that provide additional information about the Company’s position at the end

of reporting period (adjusting events) are reflected in the financial statements. Post year-end

events that are not adjusting events are disclosed in the notes to financial statements when

material.

- 12 -

*SGVMC312793*

3. Significant Accounting Judgments and Estimates

The preparation of the financial statements in compliance with PFRS requires management to

make judgments, estimates and assumptions that affect the amounts reported in the financial

statements and notes. The judgments, estimates and assumptions used in the financial statements

and notes are based upon management’s evaluation of relevant facts and circumstances that are

believed to be reasonable as of the date of the financial statements. Actual results could differ

from such estimates.

The judgments, estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognized in the period in which the estimate is revised if

the revision affects only that period, or in the period of the revision and future periods if the

revision affects both current and future periods.

Judgment

In the process of applying the Company’s accounting policies, management has made the

following judgment, apart from those involving estimations, which have the most significant

effect on the amounts recognized in the financial statements:

Determination of the Company’s functional currency

Based on the economic substance of the underlying circumstances relevant to the Company, the

functional currency has been determined to be the Philippine peso. It is the currency that mainly

influences the sale of service and the costs of providing the service.

Assessment of impairment of noncurrent nonfinancial assets The Company assesses the impairment of assets whenever events or changes in circumstances

indicate that the carrying amount of an asset may not be recoverable. The factors that the

Company considers important which could trigger an impairment review include the following:

a. significant adverse changes in the technological, market, or economic environment in which

the Company operates;

b. significant decrease in the market value of an asset;

c. significant increase in the discount rate used for the value-in-use calculations;

d. evidence of obsolescence and physical damage;

e. significant changes in the manner in which an asset is used or expected to be used;

f. plans to restructure or discontinue an operation; and

g. evidence is available from internal reporting that the economic performance of an asset is, or

will be, worse than expected.

Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is

recognized. The recoverable amount is the higher of an asset’s net selling price and value-in-use.

The net selling price is the amount obtainable from the sale of an asset in an arm’s length

transaction while value-in-use is the present value of estimated future cash flows expected to arise

from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable

amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to

which the asset belongs.

Recoverable amount represents the value-in-use, determined as the present value of estimated

future cash flows expected to be generated from the continued use of the assets. The estimated

cash flows are projected using growth rates based on historical experience and business plans and

are discounted using pretax discount rates that reflect the current assessment of the time value of

money and the risks specific to the asset.

- 13 -

*SGVMC312793*

For goodwill, the Company determines whether it is impaired at least on an annual basis. This

requires an estimation of the value-in-use of the cash-generating unit to which the goodwill is

allocated. Estimating a value-in-use amount requires management to make an estimate of the

expected future cash flows from the cash-generating unit and also to choose a suitable discount

rate in order to calculate the present value of those cash flows.

Based on management’s evaluation, no impairment loss needs to be recognized on the Company’s

property and equipment, investment properties, intangible assets and goodwill in 2011, 2010 and

2009. As of December 31, 2011 and 2010, the carrying values of the Company’s nonfinancial

assets amounted to P=410.8 million and P=449.7 million, respectively.

Operating lease commitments - Company as lessee

The Company has a lease agreement with a third party covering its satellite communications

services. The Company has determined that the risks and rewards of ownership of the underlying

property is retained by the lessor since the lease does not transfer ownership of the assets to the

Company, the lease term is not for the major part of the economic life of the assets and the

Company has no option to purchase the assets at the end of the lease agreements. Accordingly,

the lease was accounted for as an operating lease and was determined that this lease shall be

recognized on a straight-line basis over the lease term.

Operating lease commitments - Company as lessor

The Company has arrangements with various lessees covering the building units it offers for lease,

the ownership over which was determined to have been retained by the Company. Accordingly,

these leases were accounted for as operating leases.

Classification of financial instruments

The Company classifies a financial instrument, or its component parts, on initial recognition, as a

financial asset, a financial liability or an equity instrument in accordance with the substance of the

contractual arrangement and the definitions of a financial asset, a financial liability or an equity

instrument. The substance of a financial instrument, rather than its legal form, governs its

classification in the statement of financial position. As of December 31, 2011 and 2010, the

Company’s total financial assets amounted to P=484.1 million and P=478.8 million, respectively,

while its total financial liabilities amounted to P=197.3 million and P=189.4 million, respectively

(see Note 20).

Estimations

The key assumptions concerning the future and other key sources of estimation at the end of

reporting period that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year are discussed below:

Estimation of allowance for doubtful accounts The Company maintains allowance for doubtful accounts at a level considered adequate to provide

for potential uncollectible receivables. The level of this allowance is evaluated by management on

the basis of factors that affect the collectibility of accounts. These factors include, but are not

limited to, the length of the Company’s relationship with the client, the client’s payment behavior

and known market factors.

In addition to specific allowance against individually significant receivables, the Company also

makes a collective impairment testing which takes into consideration the customers’ ability to pay,

age of receivables, past collection experiences and other factors that may affect collectibility.

As of December 31, 2011 and 2010, allowance for doubtful accounts amounted to P=58.4 million

and P=55.4 million, respectively. Receivables, net of related allowance, amounted to

P=296.3 million and P=313.4 million as of December 31, 2011 and 2010, respectively (see Note 6).

- 14 -

*SGVMC312793*

Estimation of allowance for inventory obsolescence

Provisions are made for items of inventory which are specifically identified to be obsolete. The

amount of estimate is based on a number of factors which include, among others, the age and

status of inventories and the Company’s experience.

Allowance for inventory obsolescence amounted to P=1.5 million and P=1.4 million as of

December 31, 2011 and 2010, respectively. Materials and supplies, net of related provision for

inventory obsolescence, amounted to P=9.3 million and P=10.8 million as of December 31, 2011 and

2010, respectively.

Estimation of useful lives of property and equipment,

investment properties and intangible assets The Company estimated the useful lives of its property and equipment, depreciable investment

properties, and intangible assets based on the period over which the assets are expected to be

available for use. The Company annually reviews the estimated useful lives of property and

equipment, depreciable investment properties, and intangible assets based on factors that include

asset utilization, internal technical evaluation, technological changes, environmental changes and

anticipated use of the assets. It is possible that future results of operations could be materially be

affected by changes in these estimates brought about by changes in the factors mentioned.

As of December 31, 2011 and 2010, carrying value of depreciable property and equipment

amounted to P=62.1 million and P=79.7 million, respectively. The net carrying value of depreciable

investment properties amounted to P=30.1 million and P=38.1 million as of December 31, 2011 and

2010, respectively. Net intangible assets amounted to P=115.2 million and P=128.5 million as of

December 31, 2011 and 2010, respectively. Total depreciation and amortization relating to

property and equipment and investment properties, and intangible assets charged to operations

amounted to P=46.1 million, P=50.4 million and P=53.1 million in 2011, 2010 and 2009, respectively

(see Notes 8, 9, 10 and 15).

Recognition of deferred income tax assets The Company reviews the carrying amounts of deferred income tax assets at each reporting period

and reduces deferred income tax assets to the extent that it is no longer probable that sufficient

future taxable profits will be available to allow all or part of the deferred income tax assets to be

utilized.

Based on management’s evaluation, there will be sufficient future taxable profits against which

the deferred income tax assets can be applied. As of December 31, 2011 and 2010, recognized

deferred income tax assets amounted to P=31.4 million and P=23.1 million, respectively

(see Note 18).

Assessment of impairment of AFS financial assets The Company performs its impairment analysis of AFS financial assets with quoted market prices

by considering whether the investment incurs significant or prolonged decline in fair value. The

determination of what is “significant” or “prolonged” requires judgment. The Company performs

its impairment analysis of AFS financial assets with no quoted bid prices by considering changes

in the issuer’s industry and sector performance, legal and regulatory framework, changes in

technology, and other factors that affect the recoverability of the Company’s investments. Based

on management’s assessment, impairment loss needs to be recognized on unquoted AFS financial

assets amounting to P=0.5 million in 2011. Management has determined that no impairment loss

needs to be recognized on the Company’s quoted AFS financial assets in 2011 and on its quoted

and unquoted AFS financial assets in 2010 and 2009.

- 15 -

*SGVMC312793*

The carrying value of AFS financial assets amounted to P=25.6 million and P=26.1 million as of

December 31, 2011 and 2010, respectively (see Note 7).

Estimation of retirement benefits cost and liability

The determination of the obligation and retirement benefits cost is dependent on assumptions used

by actuaries in calculating such amounts. Those assumptions are described in Note 17 and include

among others, discount rates which are determined by using risk-free interest rate of government

bonds consistent with the estimated term of the obligation, expected returns on plan assets, and

salary increase rates. In accordance with PFRS, actual results that differ from the Company’s

assumptions are accumulated and amortized over future periods and therefore, generally affect the

recognized expense and recorded obligation in such future periods. While the Company believes

that the assumptions are reasonable and appropriate, significant differences in the actual

experience or significant changes in the assumptions may materially affect the retirement benefits

obligation.

The Company has unrecognized actuarial gain amounting to P=6.7 million and P=8.6 million

as of December 31, 2011 and 2010, respectively. Accrued retirement benefits amounted to

P=48.1 million and P=10.6 million as of December 31, 2011 and 2010, respectively (see Note 17). Provisions The Company provides for present obligations (legal or constructive) where it is probable that

there will be an outflow of resources embodying economic benefits that will be required to settle

said obligations. An estimate of the provision is based on known information at the end of the

reporting period, net of any estimated amount that may be reimbursed to the Company. If the

effect of the time value of money is material, provisions are discounted using a pretax rate that

reflects the risks specific to the liability. The amount of provision is being reassessed at least on

an annual basis to consider new relevant information. There were no provisions recognized as of


4. Segment Information

The Company is organized into only one operating division, radio broadcasting, which is its

primary activity. The Company has six programming formats, namely DZRH and “Aksyon

Radyo” stations, Love Radio, Yes-FM, Hot-FM, Radyo Natin, and Easyrock. For management

purposes, the Company considers the entire business as one segment. Management monitors the

operating results of the business for the purpose of making decisions about resource allocation and

performance assessment.

Broadcasting fee, net income, total assets and total liabilities for the years ended

December 31, 2011, 2010 and 2009 are the same as reported elsewhere in the accompanying

financial statements.

2011 2010 2009

Broadcasting fee P=756,600,651 P=833,380,988 P=661,673,035

Net income 60,863,848 117,528,855 54,343,557

Total assets 916,020,032 959,915,503 928,985,088

Total liabilities 293,816,130 277,790,552 339,191,121

The Company has no revenue from transactions with a single external customer accounting for

more than 10% or more of the broadcasting fee. All noncurrent assets of the Company are located

in the Philippines.

- 16 -

*SGVMC312793*

5. Cash and Cash Equivalents

2011 2010

Cash on hand and in banks P=30,971,762 P=54,795,199

Short-term investments 42,168,394 43,271,739

P=73,140,156 P=98,066,938

Cash in banks earn interest at the respective bank deposit rates. Short-term investments are made

for varying periods of up to three months depending on the immediate cash requirements of the

Company and earn interest at the respective short-term deposit rates.

6. Receivables

2011 2010

Trade P=327,096,340 P=350,056,492

Advances to stations 18,195,060 8,503,358

Others 9,378,556 10,243,881

354,669,956 368,803,731

Less allowance for doubtful accounts 58,351,241 55,442,486

P=296,318,715 P=313,361,245

Trade receivables and advances to stations are noninterest-bearing and have credit terms of

approximately 90 days.

A reconciliation of the allowance for doubtful accounts by class is as follows:

Trade

Advances to

stations Others

Total

December 31, 2009 P=48,559,685 P=3,576,926 P=3,922,959 P=56,059,570

Provisions (reversal)

(Note 15) 9,485,104 (3,325,805) 131,039

6,290,338

Write off (6,907,422) – – (6,907,422)

December 31, 2010 51,137,367 251,121 4,053,998 55,442,486

Provisions (reversal)

(Note 15) 3,274,958 128,785 (494,988)

2,908,755

December 31, 2011 P=54,412,325 P=379,906 P=3,559,010 P=58,351,241

2011

Trade

Advances to

stations Others

Total

Individual impairment P=– P=101,514 P=1,325,257 P=1,426,771

Collective impairment 54,412,325 278,392 2,233,753 56,924,470

P=54,412,325 P=379,906 P=3,559,010 P=58,351,241

2010

Trade

Advances to

stations Others

Total

Individual impairment P=– P=101,514 P=1,325,257 P=1,426,771

Collective impairment 51,137,367 149,607 2,728,741 54,015,715

P=51,137,367 P=251,121 P=4,053,998 P=55,442,486

- 17 -

*SGVMC312793*

7. Available-for-sale Financial Assets

2011 2010

Unquoted P=25,999,910 P=25,999,910

Less allowance for impairment losses 455,275 –

25,544,635 25,999,910

Quoted 90,000 70,000

P=25,634,635 P=26,069,910

The fair value of the quoted shares of stock is determined based on quoted market price. As of

December 31, 2011, the Company has no intention to dispose the unquoted shares of stock

primarily composed of investment in Star Parks Corporation, a related party. These unquoted

shares of stock are carried and presented at cost less impairment losses, if any.

Rollforward analysis of AFS financial assets follows:

2011 2010

Balance at beginning of year P=26,069,910 P=26,099,910

Impairment loss directly charged to profit or loss (455,275) –

Gain (loss) recognized in other

comprehensive income

20,000

(30,000)

Balance at end of year P=25,634,635 P=26,069,910

The movement of reserve for fluctuation in AFS financial assets follows:

2011 2010

Beginning balance P=40,000 P=70,000

Valuation gain (loss) taken to other

comprehensive income

20,000

(30,000)

Ending balance P=60,000 P=40,000

8. Property and Equipment

a. Property and equipment carried at cost consist of:

2011

Building and

Broadcasting

and

Furniture

Leasehold

Improvements

Transmission

Equipment

and

Equipment

Transportation

Equipment

Construction

In Progress

Total

Cost

Beginning balances P=131,040,536 P=354,312,377 P=94,607,056 P=34,932,832 P=– P=614,892,801

Additions 337,356 322,517 77,075 – 6,404,030 7,140,978

Ending balances 131,377,892 354,634,894 94,684,131 34,932,832 6,404,030 622,033,779

Accumulated Depreciation

and Amortization

Beginning balances 99,492,822 312,645,836 91,647,657 31,374,185 – 535,160,500

Depreciation and

amortization (Note 15)

8,995,595

13,766,663

962,382

1,009,489

–

24,734,129

Ending balances 108,488,417 326,412,499 92,610,039 32,383,674 – 559,894,629

Net Book Values P=22,889,475 P=28,222,395 P=2,074,092 P=2,549,158 P=6,404,030 P=62,139,150

- 18 -

*SGVMC312793*

2010

Building and

Broadcasting

and

Furniture

Leasehold

Improvements

Transmission

Equipment

and

Equipment

Transportation

Equipment

Construction

In Progress

Total

Cost

Beginning balances P=131,040,536 P=352,150,332 P=93,996,806 P=30,894,874 P=589,849 P=608,672,397

Additions – 2,162,045 610,250 4,037,958 – 6,810,253

Reclassification and

other adjustments

–

–

–

–

(589,849)

(589,849)

Ending balances 131,040,536 354,312,377 94,607,056 34,932,832 – 614,892,801

Accumulated Depreciation

and Amortization

Beginning balances 89,924,346 295,308,987 90,676,298 30,645,543 – 506,555,174

Depreciation and

amortization (Note 15)

9,568,476

17,336,849

971,359

728,642

–

28,605,326

Ending balances 99,492,822 312,645,836 91,647,657 31,374,185 – 535,160,500

Net Book Values P=31,547,714 P=41,666,541 P=2,959,399 P=3,558,647 P=– P=79,732,301

b. Land at revalued amount as of December 31, 2011 and 2010 consists of:

Cost P=6,266,094

Appraisal increase 115,935,506

P=122,201,600

The revalued amount of P=122.2 million in 2011 and 2010 is based on the valuation conducted by

an independent appraisal company as of December 31, 2009. The valuation was made on the

basis of the fair market value determined by referring to the extent, character and utility of the

properties and sales and holding prices of similar land. The revaluation increment is included in

the equity section of the statements of financial position, net of deferred income tax liability of

P=34.8 million as of December 31, 2011 and 2010 (see Note 18).

9. Investment Properties

2011

Land

Building and

Other Property

Total

Cost P=43,162,500 P=80,381,524 P=123,544,024

Accumulated Depreciation Beginning balances – 42,249,781 42,249,781 Depreciation (Note 15) – 8,070,130 8,070,130

Ending balances – 50,319,911 50,319,911

Net Book Values P=43,162,500 P=30,061,613 P=73,224,113

2010

Land

Building and

Other Property

Total

Cost P=43,162,500 P=80,381,524 P=123,544,024

Accumulated Depreciation Beginning balances – 34,181,128 34,181,128 Depreciation (Note 15) – 8,068,653 8,068,653

Ending balances – 42,249,781 42,249,781


- 19 -

*SGVMC312793*

Investment properties are leased to employees and third parties. Total fair value of investment

properties amounted to P=168.6 million, as determined by an independent appraiser as of

December 31, 2009. The valuation was made on the basis of the market value determined by

referring to the extent, character and utility of the properties and sales and holding prices of

similar property.

Rental income generated from these investment properties amounted to P=9.1 million in 2011,

P=8.5 million in 2010 and P=8.7 million in 2009. Related direct operating expenses amounted to

P=8.97 million, P=12.8 million and P=13.3 million in 2011, 2010 and 2009, respectively.

10. Intangible Assets

On September 30, 2008, the Company acquired a radio station from a private company. The total

cost of acquisition amounted to P=229.6 million, inclusive of value-added tax and net of

withholding tax.

In 2009, the Company obtained valuation services from an independent appraisal company to

determine the fair values of the identifiable assets and the value of goodwill as of the acquisition

date. The excess of acquisition cost over the adjusted fair values of the identifiable assets

amounting to P=38.0 million was recognized as goodwill.

The net book values of the intangible assets as of December 31 are as follows:

2011

Frequency

Intellectual

Property

Rights

Total

Cost P=153,594,927 P=5,810,867 P=159,405,794

Accumulated Amortization Beginning balances 26,583,739 4,358,151 30,941,890 Amortization (Note 15) 11,814,996 1,452,716 13,267,712

Ending balances 38,398,735 5,810,867 44,209,602

Net Book Values P=115,196,192 P=– P=115,196,192

2010

Frequency

Intellectual

Property

Rights

Total

Cost P=153,594,927 P=5,810,867 P=159,405,794

Accumulated Amortization Beginning balances 14,768,743 2,421,195 17,189,938 Amortization (Note 15) 11,814,996 1,936,956 13,751,952

Ending balances 26,583,739 4,358,151 30,941,890


- 20 -

*SGVMC312793*

11. Accounts Payable and Accrued Expenses

2011 2010

Trade P=56,421,127 P=30,881,314

Accrued expenses (Notes 12 and 17) 77,711,724 95,557,732

Output tax and others 63,188,960 76,199,257

P=197,321,811 P=202,638,303

Trade payables and accrued expenses consist of amounts due to suppliers and service providers

and are usually payable within 30 days.

12. Related Party Transactions

Related party relationship exists when one party has the ability to control, directly or indirectly,

through one or more intermediaries, or exercise significant influence over the other party in

making financial and operating decisions. Such relationships also exist between and/or among

entities which are under common control with the reporting entity and its key management

personnel, directors or stockholders. In considering each possible related party relationship,

attention is directed to the substance of the relationship and not merely the legal form.

Transactions between related parties are accounted for at arm’s length prices or on terms similar to

those offered to on-related entities in an economically comparable market.

The Company’s significant related party transactions are as follows:

a. The Company and several affiliated broadcasting companies, which are owned and managed

by certain stockholders and/or members of the BOD of the Company, entered into marketing

agreements, whereby the affiliated broadcasting companies designated the Company as their

sole marketing outfit for the sales, promotion, and marketing of the radio commercial airtime

of all radio broadcast stations of these affiliated broadcasting companies. Under the marketing

agreements, the Company shall remit to the affiliated broadcasting companies a certain fixed

amount per year and/or a certain percentage of the annual net income from the sale of the

commercial time of the radio broadcast stations after agency commission. The original

marketing agreement, which was effective for a period of five years from January 1, 1998, has

been renewed annually, thereafter. Total fees included under “Program costs” presented as

part of “Costs of services” in the statements of comprehensive income amounted to

P=203.7 million in 2011, P=204.1 million in 2010 and P=111.7 million in 2009. The Company

also bills the affiliated broadcasting companies for their share in the expenses for operating the

radio broadcast stations (see Note 15).

b. In 2002, the “Hating Kapatid” system (the System) was devised to change the way the

Company was handling the operations of the radio stations as well as its marketing,

engineering, administrative, and financial functions (support functions). Under the System,

the operations of each radio station and support services functions were outsourced to service

companies managed and operated by former station managers and officers of the Company

(affiliated service companies). As such, substantially all employees of the Company were

separated. As approved by the BOD, the Company shall provide financial support to certain

radio stations through advances as well as payment of certain operating expenses of the said

radio stations until these radio stations can financially sustain their operations.

As a result of the System, the Company entered into service agreements with affiliated service

companies, which are owned and managed by certain stockholders and/or members of the

- 21 -

*SGVMC312793*

BOD of the Company. These affiliated service companies provide production and creative

services, promotions, accounting, personnel, collection, procurement, engineering, and other

related services. The Company pays a certain percentage of collection as service fee. Total

service fees amounted to P=171.3 million in 2011, P=214.3 million in 2010 and P=135.5 million

in 2009 which is shown as part of “Cost of services” in the statements of comprehensive

income. The outstanding payables related to these transactions amounted to P=21.6 million and

P=23.6 million as of December 31, 2011 and 2010, respectively, and are shown as part of the

“Accounts payable and accrued expenses” account in the statements of financial position.

In October 2011, the service agreement between the Company and DZRH was cancelled.

This resulted in the transfer of DZRH employees to the Company. The Company assumed the

retirement benefits liabilities to these transferred employees totaling

P=38.1 million. This amount includes P=12.6 million representing the separation costs

previously accrued under “Accrued expenses” account prior to the start of the implementation

of the System (see Note 17).

c. The Company grants and obtains short-term interest-free advances to and from its affiliates,

which are owned and managed by certain stockholders and/or members of the BOD of the

Company. The outstanding amount due from affiliates as of December 31, 2011 and 2010

pertains to receivable from Elizalde Holding Corporation, an entity under common control

with the Company.

d. The short-term employee benefits and retirement benefits cost of key management personnel

amounted to P=7.0 million in 2011 and P=6.5 million in 2010 and 2009.

13. Capital Stock

Capital stock consists of 1,000,000,000 authorized common shares with par value of P=1.00 per

share, of which 402,803,777 shares have been issued. Total number of equity shareholders as of

December 31, 2011 and 2010 is 619.

On October 19, 1976, the stockholders approved the increase in the authorized capital stock of the

Company from P=1.5 million, divided into 1.5 million shares with par value of P=1.00 each to P=5.0

million, divided into 5.0 million shares with par value of P=1.00 each. On the same date, the

stockholders approved the declaration of 50% stock dividends payable to stockholders of record as

of October 30, 1976.

In 1978, the stockholders reduced the proposed increase to P=4.0 million, divided into 4.0 million

shares with par value of P=1.00 each, and approved the payment of the 50% stock dividend to

stockholders of record as of October 30, 1976. The increase in authorized capital stock was

approved by the SEC on April 28, 1978.

The BOD and stockholders approved on January 29, 1997 and February 26, 1997, respectively, the

increase in the Company’s authorized capital stock from P=4.0 million, divided into 4.0 million

shares with par value of P=1.00 each to P=1.0 billion, divided into 1.0 billion shares with the same

par value.

- 22 -

*SGVMC312793*

14. Retained Earnings

On September 30, 2011, the BOD declared cash dividends amounting to P=120.8 million or P=0.30

per share to stockholders on record as of October 5, 2011 payable on October 31, 2011.

On November 19, 2010, the BOD declared cash dividends amounting to P=25.2 million or P=0.06

per share to stockholders on record as of December 9, 2010 payable on December 23, 2010.

On November 19, 2009, the BOD declared cash dividends amounting to P=25.2 million or P=0.06

per share to stockholders on record as of December 15, 2009 payable on December 29, 2009.

The Company’s retained earnings are not available for declaration as dividends to the extent of the

cost of treasury stock and unrealized gains.

15. Cost of Services and Operating Expenses

Cost of services:

2011 2010 2009

Program costs (Notes 12 and 19) P=290,644,665 P=273,926,827 P=243,821,736

Service fees (Note 12) 171,270,963 214,305,150 135,467,587

Personnel expenses (Notes 12 and 16) 20,624,510 8,636,643 7,526,584

Depreciation and amortization

(Notes 8, 9 and 10) 14,215,499 17,785,685 20,260,440

Replacement parts 4,463,103 4,483,327 5,041,417

P=501,218,740 P=519,137,632 P=412,117,764

Operating expenses:

2011 2010 2009

Personnel expenses (Notes 12 and 16) 61,758,629 29,311,669 31,955,830

Depreciation and amortization

(Notes 8, 9 and 10) 31,856,472 32,640,246 32,873,985

Agency commission and discounts 18,268,100 19,261,756 14,931,987

Communication, light and water 16,966,432 22,874,310 30,546,068

Advertising and promotions 13,417,846 8,372,563 12,464,397

Travel and transportation 7,672,647 6,606,257 11,243,092

Repairs 5,783,025 8,254,792 7,431,127

Taxes and licenses 3,724,312 3,622,320 3,749,535

Provision for doubtful accounts (Note 6) 2,908,755 6,290,338 14,151,519

Rent (Note 19) 2,710,584 2,912,865 1,805,235

Entertainment, amusement and recreation 2,250,484 1,929,020 1,525,329

Replacement parts 1,314,988 438,296 840,055

Others 10,123,780 10,408,564 8,143,726

P=178,756,054 P=152,992,996 P=171,661,885

16. Personnel Expenses

2011 2010 2009

Salaries, wages and bonuses P=46,323,399 P=28,096,734 P=25,985,956

Retirement benefits cost (Note 17) 27,748,145 2,530,097 6,869,757

Other short-term employee benefits 8,311,595 7,321,481 6,626,701

P=82,383,139 P=37,948,312 P=39,482,414

- 23 -

*SGVMC312793*

17. Retirement Benefits and Separation Costs

Separation Costs under the Hating Kapatid System

Substantially all employees of the Company were separated in 2002 upon implementation of the

System. However, most of the said personnel were employed by the affiliated service companies.

The separated employees expressly agreed in writing to receive their separation pay from the

Company only after their final/actual separation/resignation from the affiliated service companies.

Separation costs of P=37.1 million have been recognized in 2002 in addition to the amount

previously accrued.

As discussed in Note 12, the agreement with DZRH under the System was cancelled in 2011 and

the employees of DZRH were transferred to the Company. As a result, separation costs relating to

the employees transferred from DZRH amounting to P=12.7 million were reclassified as retirement

benefits and included under “Accrued retirement benefits” in the statement of financial position as

of December 31, 2011.

The remaining unpaid balance of the separation cost of P=41.9 million and P=42.2 million as of

December 31, 2011 and 2010, respectively, are included in the “Accounts payable and accrued

expenses” account in the statements of financial position.

Retirement Benefits

The Company has a funded, noncontributory defined benefit retirement plan covering all of its

remaining employees. The latest actuarial valuation report is as of December 31, 2011.

The components of retirement benefits cost charged to profit and loss are as follows:

2011 2010 2009

Current service cost P=1,497,413 P=961,786 P=961,786

Interest cost 2,070,545 2,735,822 6,656,021

Expected return on plan assets (1,097,400) (993,273) (643,398)

Net actuarial gains (240,534) (174,238) (104,652)

Past service costs of employees

transferred from an

affiliate (Note 12)

25,518,121

–

–

Total retirement benefits cost P=27,748,145 P=2,530,097 P=6,869,757

The funded status and amounts recognized in the statements of financial position for the retirement

plan as of December 31, 2011 and 2010 are as follows:

2011 2010

Present value of benefit obligation P=73,033,198 P=28,094,233

Fair value of plan assets 31,684,064 26,066,501

41,349,134 2,027,732

Unrecognized actuarial gains 6,726,529 8,582,227

Accrued retirement benefits P=48,075,663 P=10,609,959

- 24 -

*SGVMC312793*

Movements in the accrued retirement benefits follow:

2011 2010

Balances, January 1 P=10,609,959 P=11,827,439

Retirement benefits cost 27,748,145 2,530,097

Contributions (2,944,525) (3,747,577)

Reclassification (Note 12) 12,662,084 –

Balances, December 31 P=48,075,663 P=10,609,959

The changes in present value of the retirement obligation are as follows:

2011 2010

Present value of obligation at beginning of year P=28,094,233 P=25,168,553

Interest cost 2,070,545 2,735,822

Current service cost 1,497,413 961,786

Actuarial gain on obligation 3,190,802 (771,928)

Past service costs of employees

transferred from an affiliate

25,518,121

–

Reclassification (Note 12) 12,662,084 –

Present value of obligation at end of year P=73,033,198 P=28,094,233

The changes in fair value of plan assets are as follows:

2011 2010

Fair value of plan assets at beginning of year P=26,066,501 P=19,865,454

Expected return on plan assets 1,097,400 993,273

Contributions 2,944,525 3,747,577

Actuarial gain on plan assets 1,575,638 1,460,197

Fair value of plan assets at end of year P=31,684,064 P=26,066,501

Actual return on plan assets amounted to P=2.7 million in 2011 and P=2.5 million in 2010. The

expected rates of return on plan assets were based on a reputable fund trustee’s indicative yield

rate for a risk portfolio similar to that of the fund with consideration to the fund’s past

performance.

The assumptions used to determine retirement benefits of the Company as of January 1 are as

follows:

2011 2010

Discount rate 7.37% 10.87%

Salary increase rate 10.00% 10.00%

Expected rate of return on plan assets 4.21% 5.00%

As of December 31, 2011, the discount rate, salary increase rate and expected rate of return on

plan assets are 5.88%, 10.00% and 6.16%, respectively.

The Company expects to contribute P=7.8 million in 2012.

- 25 -

*SGVMC312793*

The major categories of plan assets as a percentage of the fair value of total plan assets are as

follows:

2011 2010

Investments in government securities 94.55% 90.88%

Receivables 2.37% 2.00%

Cash and cash equivalents 3.08% 7.12%

100.00% 100.00%

Amounts for the current and previous four annual periods are as follows:

2011 2010 2009 2008 2007

Benefit obligation P=73,033,198 P=28,094,233 P=25,168,553 P=23,224,078 P=26,183,862

Plan assets (31,684,064) (26,066,501) (19,865,454) (15,138,770) (12,008,645)

Deficit 41,349,134 2,027,732 5,303,099 8,085,308 14,175,217

Experience adjustments on

plan liabilities

(4,171,492)

(2,612,571)

–

–

–

Experience adjustments on

plan assets

1,575,638

1,460,197

871,077 (1,550,632)

710,729

18. Income Taxes

a. The provision for income tax consists of:

2011 2010 2009

Regular corporate income tax P=34,211,753 P=49,749,512 P=25,281,770

Final tax 215,630 238,675 77,570

Deferred (8,270,644) 358,472 (1,315,005)

P=26,156,739 P=50,346,659 P=24,044,335

b. The components of the Company’s net deferred income tax liabilities consist of the tax effects

of the following:

2011 2010

Deferred income tax assets on:

Allowances for:

Doubtful accounts P=17,505,372 P=16,632,746

Inventory obsolescence 452,599 416,163

Accrued retirement benefits and unamortized

contribution to past service cost 13,384,453 5,968,641

Accrued rent expense 10,850 26,670

Unamortized pre-operating expenses – 50,882

31,353,274 23,095,102

Deferred income tax liabilities on:

Revaluation increment on land (Note 8) 34,780,652 34,780,652

Unrealized foreign exchange gain – 12,472

34,780,652 34,793,124

Deferred income tax liabilities - net P=3,427,378 P=11,698,022

- 26 -

*SGVMC312793*

c. The reconciliation of income tax computed at the statutory tax rate to provision for income tax

as shown in profit or loss follows:

2011 2010 2009

Statutory income tax P=26,106,176 P=50,362,654 P=23,516,368

Additions to (reductions in)

income tax resulting from:

Impairment losses on AFS

financial assets 136,583 – –

Interest income subjected to

final tax at a lower rate (86,020) (141,428) (38,799)

Nondeductible portion of

interest expense

–

125,433

38,402

Nondeductible taxes and

licenses

–

–

528,364

Provision for income tax P=26,156,739 P=50,346,659 P=24,044,335

19. Lease Commitments

The Company leases satellite communications services for the performance of its broadcasting

services called the Transponder Lease, which considers certain space segment capacity and

transponder power. The new lease agreement is for a period of five years from November 1, 2007.

Rent expense on this lease agreement amounted to P=4.7 million, P=4.8 million and P=4.9 million in

2011, 2010 and 2009, respectively, included under “Program costs” presented as part of “Costs

and operating expenses” in the statements of comprehensive income.

Future minimum lease payments as of December 31 are as follows:

2011 2010

Within one year P=3,923,680 P=4,708,416

After one year but not more than five years – 3,923,680

P=3,923,680 P=8,632,096

20. Financial Risk Management Objectives and Policies

The Company’s principal financial instruments consist of cash and cash equivalents. The main

purpose of these financial instruments is to fund the Company’s operations. The other financial

assets and financial liabilities arising directly from its operations are receivables, due from

affiliates, AFS financial assets, accounts payable and accrued expenses, talent fees and

commissions payable and dividends payable. The main risks arising from the Company’s financial instruments are credit risk, and liquidity risk.

The BOD reviews and approves policies for managing each of these risks.

Credit Risk

Credit risk, or the risk of counterparties defaulting, is controlled by the application of control and

monitoring procedures. It is the Company’s policy that all clients who wish to trade on credit

terms are subjected to credit verification procedures. Receivables and due from affiliates balances

are monitored on an ongoing basis to ensure that the Company’s exposure to bad debts is not

- 27 -

*SGVMC312793*

significant. The Company evaluates the concentration of risk with respect to its receivables as

low, as its customers are located in several industries and operate in largely independent markets.

With respect to credit risk arising from the Company’s other financial assets consisting of cash

and cash equivalents, the Company’s exposure arises from the default of the counterparty, with a

maximum exposure equal to the carrying amount of these instruments. The Company deals only

with financial institutions duly evaluated and approved by the BOD. The Company avoids

concentrations of credit risk on its liquid assets as these are spread over several financial

institutions.

The maximum exposure of the Company to credit risk as of December 31, 2011 and 2010 is equal

to the carrying values of the financial assets. The Company does not hold collaterals as security.

Credit quality of financial assets The tables below summarize the credit quality of the Company’s financial assets as of

December 31.

2011

Neither past due nor impaired

Standard Past due but Past due

High grade grade not impaired and impaired Total

Loans and receivables:

Cash in banks P=30,389,454 P=– P=– P=– P=30,389,454

Short-term investments 42,168,394 – – – 42,168,394

Receivables:

Trade 62,142,725 81,797,535 128,743,755 54,412,325 327,096,340

Advances to stations 8,452,352 202,591 9,160,211 379,906 18,195,060

Others 2,126,647 1,474,036 2,218,863 3,559,010 9,378,556

Due from affiliates 88,966,242 – – – 88,966,242

Unquoted AFS financial assets – 25,544,635 – – 25,544,635

P=234,245,814 P=109,018,797 P=140,122,829 P=58,351,241 P=541,738,681

2010

Neither past due nor impaired

Standard Past due but Past due

High grade grade not impaired and impaired Total


Cash in banks P=54,279,157 P=– P=– P=– P=54,279,157 Short-term investments 43,271,739 – – – 43,271,739

Receivables:

Trade 15,702,249 172,832,420 110,384,456 51,137,367 350,056,492 Advances to stations 6,165,985 767,540 1,318,712 251,121 8,503,358

Others 477,531 – 5,712,352 4,053,998 10,243,881

Due from affiliates 41,283,182 – – – 41,283,182

Unquoted AFS financial assets – 25,999,910 – – 25,999,910

P=161,179,843 P=199,599,870 P=117,415,520 P=55,442,486 P=533,637,719

Financial assets classified as “high grade” are those cash in banks and short-term investments

transacted with reputable local banks and receivables and due from affiliates with no history of

default on the agreed contract terms. Financial instruments classified as “standard grade” are

those financial assets with little history of default on the agreed terms of the contract. A financial

asset is considered past due when a counterparty has failed to make a payment when contractually

due. “Past due but not impaired” financial assets are items with history of frequent default.

Nevertheless, the amounts due are still collectible. Lastly, “Past due and impaired” items are those

that are long outstanding and have been specifically identified and collectively provided with

allowance for probable losses.

- 28 -

*SGVMC312793*

Financial assets that are past due but not impaired

The tables below summarize the aging analysis of past due but not impaired financial assets as of


2011

<30 Days

31-60

Days

61-90

Days

91-120

Days

Over 120

Days

Total


Receivables

Trade P=32,848,191 P=13,801,353 P=10,876,406 P=28,773,176 P=42,444,629 P=128,743,755

Advances to stations 2,531,511 525,125 – 1,339,651 4,763,924 9,160,211

Others – – – – 2,218,863 2,218,863

P=35,379,702 P=14,326,478 P=10,876,406 P=30,112,827 P=49,427,416 P=140,122,829

2010

<30 Days

31-60

Days

61-90

Days

91-120

Days

Over 120

Days

Total


Receivables

Trade P=25,858,926 P=11,505,426 P=10,007,940 P=22,381,720 P=40,630,444 P=110,384,456

Advances to stations 169,686 230,035 388,481 470,858 59,652 1,318,712

Others – – – – 5,712,352 5,712,352

P=26,028,612 P=11,735,461 P=10,396,421 P=22,852,578 P=46,402,448 P=117,415,520

Liquidity Risk

Liquidity risk arises when obligations are not met when they fall due. It is the Company’s

objective to finance capital expenditures, services, and maturing obligations as scheduled. To

cover the Company’s financing requirements and at the same time, manage its liquidity risk, the

Company uses internally generated funds and proceeds from debt. Projected and actual cash flow

information are regularly evaluated and funding sources are continuously assessed.

The tables below summarize the maturity profile of the Company’s financial liabilities as of

December 31, 2011 and 2010 based on contractual undiscounted payments, including interest due:

2011

Less than 3 to 12

On demand 3 months months Total


Accounts payable and accrued

expenses* P=52,280,514 P=62,083,110 P=50,656,516 P=165,020,140

Dividends payable 1,661,994 – – 1,661,994

Talent fees and commissions

payable – 21,432,976

9,185,561 30,618,537

P=53,942,508 P=83,516,086 P=59,842,077 P=197,300,671

*Amounts are exclusive of nonfinancial liabilities amounting to P=32,301,671 as of December 31, 2011.

2010

Less than 3 to 12

On demand 3 months months Total


Accounts payable and accrued

expenses*

P=62,583,487

P=54,251,709

P=42,830,297

P=159,665,493

Dividends payable 1,766,303 – – 1,766,303

Talent fees and commissions

payable

–

19,565,604

8,385,258

27,950,862

P=64,349,790 P=73,817,313 P=51,215,555 P=189,382,658

*Amounts are exclusive of nonfinancial liabilities amounting to P=42,972,810 as of December 31, 2010.

- 29 -

*SGVMC312793*

The following tables show the profile of financial assets used by the Company to manage its

liquidity risk:

2011

On Less than 3 to 12

Demand 3 Months Months Total

Cash in banks P=30,389,454 P=– P=– P=30,389,454

Short-term investments – 42,168,394 – 42,168,394

30,389,454 42,168,394 – 72,557,848

Receivables

Trade 143,940,260 57,525,950 71,217,805 272,684,015

Advances to stations 8,654,943 3,056,636 6,103,575 17,815,154

Others 3,600,683 – 2,218,863 5,819,546

156,195,886 60,582,586 79,540,243 296,318,715

Due from affiliates – – 88,966,242 88,966,242

P=186,585,340 P=102,750,980 P=168,506,485 P=457,842,805

2010

On Less than 3 to 12

Demand 3 Months Months Total

Cash in banks P=54,279,157 P=– P=– P=54,279,157

Short-term investments – 43,271,739 – 43,271,739

54,279,157 43,271,739 – 97,550,896

Receivables

Trade 108,638,674 190,280,451 – 298,919,125

Advances to stations 2,307,506 5,944,731 – 8,252,237

Others 2,667,849 3,522,035 – 6,189,884

113,614,029 199,747,217 – 313,361,246

Due from affiliates – – 41,283,182 41,283,182

P=167,893,186 P=243,018,956 P=41,283,182 P=452,195,324

Equity Price Risk

The Company’s exposure to the risk of changes in equity price relates primarily to its quoted AFS

financial asset. Management believes that the Company’s exposure to equity price risk is minimal

since the balance of quoted AFS financial asset is not material (see Note 7).

Capital Management

The primary objective of the Company’s capital management is to ensure that it maintains a strong

credit rating and healthy capital ratios in order to support its business and maximize shareholder

value.

The Company manages its capital structure and makes adjustments to it, in light of changes in

economic conditions. To maintain or adjust the capital structure, the Company may adjust the

dividend payment to shareholders, return capital to shareholders or issue new shares. No changes

were made in the objectives, policies or processes during the years ended December 31, 2011 and

2010.

The Company monitors its use of capital using debt to equity ratio (total liabilities/total equity)

which is 47.22% and 40.72% as of December 31, 2011 and 2010, respectively.

- 30 -

*SGVMC312793*

The following table summarizes the Company’s capital structure as of December 31, 2011 and

2010:

2011 2010

Capital stock P=402,803,777 P=402,803,777

Additional paid-in capital 79,354 79,354

Retained earnings 138,226,704 198,167,753

Treasury stock (120,787) (120,787)

P=540,989,048 P=600,930,097

21. Financial Assets and Financial Liabilities

The carrying value and estimated fair value of all the financial instruments are equal as of


The following methods and assumptions were used to estimate the fair value of each class of

financial instrument for which it is practicable to estimate such value:

AFS financial assets The fair value of the quoted shares of stock as of December 31, 2011 and 2010 is based on quoted

market price (Level 1). Unquoted shares of stock amounting to P=25.5 million and P=26.0 million as

of December 31, 2011 and 2010, respectively, are carried and presented at cost since the fair

values of such investments cannot be reliably determined. There were no transfers between the

different hierarchy levels in 2011.

Other financial assets and financial liabilities Due to the short-term nature of other financial assets and financial liabilities, the fair value of cash

in banks, short-term investments, receivables, due from affiliates, accounts payable and accrued

expenses, dividends payable, and talent fees and commissions payable approximate the carrying

value as of the end of the reporting period.

22. Other Matters

The Company is and may become a defendant/respondent in various cases and assessments which

are pending in the courts or under protest. Management and its legal counsels believe that the

liability, if any, that may result from the outcome of these cases and investigation will not

materially affect its financial position and results of operations.

23. Supplementary Information Required Under Revenue Regulations 15-2010

In compliance with Bureau of Internal Revenue Revenue Regulations 15-2010 issued on

November 25, 2010, mandating all taxpayers to disclose information on taxes and license fees

paid and accrued during the taxable year, summarized below are the taxes paid and accrued by the

Company in 2011.

a. Output VAT declared by the Company amounted to P=90,987,235 based on receipts of

P=758,226,961 in 2011. Outstanding output tax payable amounted to P=7,719,839 as of

December 31, 2011.

- 31 -

*SGVMC312793*

The Company’s revenue on which output VAT is declared, is based on collections, hence,

may not be the same as the amounts accrued in the statement of comprehensive income.

b. Movements in input VAT are as follows:

Balance, January 1 P=4,136,434

Current year payments for:

Services lodged under cost of services 55,742,698

Services lodged under other accounts –

Capital goods subject to amortization 4,920,000

Capital good not subject to amortization –

Claims for tax credit and other adjustments (60,408,054)

Balance, December 31 P=4,391,078

c. Taxes and licenses paid by the Company are as follows:

Business permits P=1,732,450

Real property taxes 719,111

Documentary stamp taxes on NTC permits 105

Others 1,272,646

P=3,724,312

d. Withholding taxes paid and accrued by the Company are as follows:

Paid Accrued Total

Withholding tax on compensation

and benefits P=3,240,924 P=586,197

P=3,827,121

Expanded withholding tax 13,962,472 1,164,152 15,126,624

24. Supplementary Information Required Under Revenue Regulations 19-2011

In compliance with Bureau of Internal Revenue Regulations 19-2011 dated December 9, 2011,

presented below are the details of revenue, cost of services, other taxable income and itemized

deductions of the Company.

Sales, Revenue, Receipts and Fees

The Company’s taxable revenue from broadcasting fees amounted to P=756,600,651 for the year

ended December 31, 2011.

Cost of Services

The Company’s tax deductible cost of services in 2011 are as follows:

Program costs P=290,697,396

Service fees 171,270,963

Personnel expenses 20,624,510

Depreciation and amortization expense 14,215,499

Replacement parts 4,463,103

P=501,271,471

- 32 -

*SGVMC312793*

Itemized Deductions

The Company’s itemized deductions in 2011 are as follows:

Personnel expenses P=37,039,255

Depreciation and amortization 31,856,472

Agency commission and discounts 18,268,100

Communication, light and water 16,966,432

Advertising and promotions 13,417,846

Travel and transportation 7,672,647

Repairs 5,783,025

Taxes and licenses 3,724,312

Entertainment, amusement and recreation 2,250,484

Replacement parts 1,193,534

Others 13,003,919

P=151,176,026

Details of Other Income

Rental income P=9,079,316

Realized foreign exchange gain 41,574

Others 765,133

P=9,886,023

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