MBC Definitive Information Statement 2013

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SEC Number: 1674

File Number

MANILA BROADCASTING COMPANY

(Company's Full Name)

MBC BLDG., V. SOTTO ST., CCP COMPLEX

PASAY CITY 1307 PHILIPPINES

(Company's Address)

832-6142; 832-6186

(Telephone Number)

DECEMBER 31

(Fiscal Year Ending)

FORM 20 IS

(Form Type)

DEFINITIVE INFORMATION STATEMENT

(Amendment Designation)

(Period Ended Date)

04 SEPTEMBER 2013

(Date Prepared)

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 20-IS

INFORMATION STATEMENT PURSUANT TO SECTION 20

OF THE SECURITIES REGULATION CODE

1. Check the appropriate box:

Preliminary Information Statement

X Definitive Information Statement

2. Name of Registrant as specified in its charter –


3. METRO MANILA

Province, country or other jurisdiction of incorporation or organization

4. SEC Identification Number – 1674

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

6. MBC Bldg., Vo. Sotto St., CCP Complex, Pasay City

Address of principal office Postal Code – 1307

7. Registrant’s telephone number, including area code - (632) 832-6142/86

8. Date, time and place of the meeting of security holders

Date - 26 September 2013

Time - 3:00 p.m.

Place - Star Theater, Star City, V. Sotto St.,

CCP Complex,Pasay City 1307 Philippines

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

to security holders – 05 September 2013

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

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

only to corporate registrants):

Title of Each Class Number of Shares of Common

Stock Outstanding or Amount of

Debt Outstanding

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

Debt P303,828,770

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

Yes X No

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

therein: Philippine Stock Exchange – Common Shares

INFORMATION REQUIRED IN INFORMATION STATEMENT

A. GENERAL INFORMATION

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

(a) Date, time and place of the meeting of security holders:

Date - 26 September 2013

Time - 3:00 p.m.

Place - Star Theater, Star City, V. Sotto St.,

CCP Complex, Pasay City 1307 Philippines

Complete mailing address of the principal office of the registrant:


MBC Bldg, V. Sotto St., CCP Complex,

Pasay City 1307 Philippines

(b) Approximate date on which the Information Statement is first to be sent or

given to security holders – 05 September 2013

Item 2. Dissenters' Right of Appraisal

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

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

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

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

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

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

consolidation.

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

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

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

date on which the vote was taken.

However, no action to be taken during the 26 September 2013 Annual Meeting of

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

provided by the Corporation Code of the Philippines.

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

The Corporation has no information respecting any opposition that its directors

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

matters to be acted upon during the Annual Stockholders’ Meeting on 26

September 2013.

The Corporation also has no information regarding any substantial interest, direct

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

B. CONTROL AND COMPENSATION INFORMATION

Item 4. Voting Securities and Principal Holders Thereof

(a) Each of the 402,682,990 outstanding shares of the Company as of August 30,

2013 is entitled to one (1) vote. The Company does not allow foreign

ownership of the Company’s shares.

(b) A stockholder entitled to vote at the meeting shall have the right to vote in

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

stock books of the Company as of 30 August 2013 and said stockholder may

vote such number of shares for as many persons as there are directors to be

elected or he may cumulate said shares and give one candidate as many

votes as the number of directors to be elected multiplied by the number of

his shares shall equal or he

(c) may distribute them on the same principle among many candidates as he

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

disclosure with PSE on 14 June 2013.

Item 5. Directors and Executive Officers

Directors and Executive Officers of the Registrant

(a) Security Ownership of Certain Record and Beneficial Owners

As of August 30, 2013, the Company knows no one who beneficially owns in

excess of 5% of the Company’s common stock except as set forth in the

following table:

Title of

Class

Name and Address

of Record Owner

and Relationship

with Issuer

Name and

Address of

Beneficial Owner

and Relationship

Citizenship No. of Shares

Held Percent

with Record

Owner

Common Elizalde Holdings

Corporation, MBC

Bldg., V. Sotto St.,

CCP Complex,

Pasay City 1307

Philippines

(stockholder)

Eduardo G.

Cordova

MBC Bldg., V.

Sotto St., CCP

Complex, Pasay

City 1307

Philippines

Senior Vice-

President

Filipino 139,558,774

34.66%

Elizalde Land Inc.,

2nd Floor, MBC


CCP Complex,

Pasay City 1307

Philippines

(stockholder)

Eduardo G.

Cordova, MBC

Bldg., V. Sotto

St., CCP

Complex, Pasay

City 1307

Philippines

Senior Vice-

President

Filipino 87,000,000 21.61%

Romulo Mabanta

Buenaventura

Sayoc & delos

Angeles Law

Offices*,

30th Floor,

Citibank Tower,

8741 Paseo de

Roxas, Makati City,

M.M. (Trust Fund

for the Elizalde

Children)

Atty. Reynaldo G.

Geronimo

30th Floor,

Citibank Tower,

8741 Paseo de

Roxas, Makati

City, M.M.

Trustee/Partner

Filipino 69,910,993.25

17.36%

Cebu Broadcasting

Company*, MBC


CCP Complex,

Pasay City 1307

Philippines

(Affiliate

Broadcast

Company)

Robert A. Pua

MBC Bldg., V.

Sotto St., CCP

Complex, Pasay

City 1307

Philippines Vice

President

Filipino

50,000,000 12.42%

AQG Corporation,

2291Chino Roces

Avenue, Makati

City (Stockholder)

Julio D. Sy, Jr.,

2291 Chino

Roces Avenue,

Makati City

President &

Chairman

Filipino 33,000,000

8.20%

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

(b) Security Ownership of Management as of 30 August 2013.

% to

total

Number of

Shares

I/O

Shares A B Total

Directors (All Filipino)

FRED J. ELIZALDE

Direct 0.0000% 94

RUPERTO S. NICDAO, JR.

Direct 0.0321% 129,201

JULIO MANUEL P. MACUJA

Direct 0.0000% 36

EDUARDO G. CORDOVA

Direct 0.0032% 12,779

JUAN M. ELIZALDE

Direct 0.0002% 1,000

JOSE M. TARUC, JR.

Direct 0.0002% 1,000

GARY C. HUANG

Direct 0.0000% 36

GEORGE T. GODUCO

Direct 0.0002% 1,000

RUDOLPH STEVE E. JULARBAL

Direct 0.0027% 10,807

Sub-total 0.0387% 155,953

Officers (All Filipino)

ROBERT A. PUA

Direct 0.0031% 12,293

JONATHAN E. DECENA

Direct 0.0002% 1,000

IRVING A. LISONDRA

Direct 0.0002% 1,000

CARLEA MIRANDA

Direct 0.0002% 1,000

JOSE MA. T. PARROCO

Direct 0.0031% 12,294

ELPIDIO M. MACALMA

Direct 0.0002% 1,000

Sub-total 0.0071% 28,587

Total 0.0458% 184,540

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

the registrant.

Voting Trust Holders of 5% or More

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

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

powers as provided in the Corporation Code. Elizalde Holdings Corporation is

owned by various trust funds that have executed voting trusts in favor of the

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

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

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

Company are 100% owned subsidiaries of Elizalde Holdings Corporation. Mr.

Eduardo G. Cordova and Mr. Robert A. Pua are the persons designated to exercise

voting power over the shares of ELI and CBC respectively in the registrant and

holds office at the principal office of the Corporation also.

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

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

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

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

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

Citibank Tower, 8741 Paseo de Roxas, Makati City.

A. Executive Officers (All Filipino Citizens)

B. Directors (All Filipino Citizens)

Name Position

Fred J. Elizalde - Chairman of the Board

Ruperto S. Nicdao, Jr. - President

Julio P. Macuja II - EVP – Treasurer

Eduardo G. Cordova - SVP – CFO

Juan Manuel Elizalde - VP – Operations

Jose M. Taruc - VP – DZRH

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

Robert A. Pua - VP – Controller and Compliance Officer

Irving A. Lisondra - VP – Creative Service

Ellen C. Fullido - VP – HRAS

Carlea C. Miranda - VP – Treasury

Elpidio Macalma - AVP – DZRH

Wilfredo Espinosa - AVP – FM Programming

Jose Ma. T. Parroco - AVP – Sales

*Independent Directors

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

successors have been duly elected.

The following are the criteria for Independent Directors:

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

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

independent director of any of the foregoing);

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

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

For this purpose, relative included spouse, parent, child, brother, sister and the

spouse of such child, brother or sister;

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

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

shareholders;

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

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

(2) years;

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

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

either personally or through his firm;

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

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

whether by himself or with other persons or through firm of which he is a

partner or a company of which he is a director or substantial shareholder,

other than transactions which are conducted at arms length and are

immaterial or insignificant.

The Company will submit to the Commission its Certification of Independent

Directors after the election of the members of the Board of Directors or within the

prescribed period of 30 days after the Annual Stockholders Meeting as required

Name Age Term

Fred J. Elizalde 72 1985 up to present

Ruperto S. Nicdao, Jr. 57 1988 up to present

Eduardo G. Cordova 63 1988 up to present

Julio P. Macuja II 49 1999 up to present

Jose M. Taruc 65 2001 up to present

Rudolph Steve E. Jularbal 58 2011 up to present

George T. Goduco* 47 2003 up to present

Gary C. Huang* 61 2012 up to present

by the Notice issued by the Commission dated October 20, 2006. The company

has also complied with all of the requirements of SRC Rule 38 as amended and

SEC Memorandum Circular No. 9, Series of 2011, regarding the procedure for

nomination and election of Independent Directors.

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

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

members. As part of the pre-screening, the qualifications of the nominees, as

submitted by the shareholders of record, were considered by the Nominating

Committee. With due regard to the qualifications and disqualifications set forth

in the Company’s manual for Corporate Governance, the Securities Regulation

Code and its Implementing Rules and the criteria prescribed in SEC Memorandum

Circular No. 13, Series of 2004, the Nomination Committee has determined:

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

the list of nominees; and

b. Of the incumbent directors, Mr. Gary C. Huang and Mr. George T. Goduco, the

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

Board of the Company as independent directors. The nominees for

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

is no relationship between them.

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

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

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

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

Holdings Corporation and Northern Capiz Agro-Industrial Development

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

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

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

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

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

Bachelor of Arts Major in Social Relations.

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

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

of Philippine International Corporation, Star Parks Corporation, Elizalde

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

Chairman of KBP and a member of the Financial Executives Institute of the

Philippines, Philippine Chamber of Commerce and Industry and the Makati

Business Club. He obtained his Master’s in Business Administration from

Asian Institute of Management and his AB-Honors (Major in Math), Magna

Cum Laude, from De La Salle College.

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

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

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

He is a member of the Philippine Institute of Certified Public Accountants

(PICPA). He is a Certified Public Accountant and obtained his Master’s in

Business Administration, with honors, from University of St. La Salle and his

bachelor’s degree in business administration from University of the East.

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

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

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

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

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

Center for Social Policy and Public Affairs and part time faculty member of the

Economics Department, Ateneo de Manila University, where he finished his

Bachelor of Arts Degree in Economics (Honors) in 1985. He completed his

post-graduate studies as a scholar of the British Council at the Victoria

University of Manchester in 1989, obtaining a degree of Master of Arts in

Economic and Social Studies (Major in Development Studies).

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

with the Company since 1994 in various capacities. He is also President of our

affiliate Cebu Broadcasting Company. He holds an AB Mass Communication

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

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

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

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

graduate of Jose Rizal College and was conferred with emeritus on doctoral

degree by the same school.

- Gary C. Huang is an independent director. He is currently the Dean of the

School of Business Administration, Accountancy and Customs Administration

of Emilio Aguinaldo College. Concurrently he is also the President of

Filresource, Inc. He obtained his Master’s in Business Management from the

Asian Institute of Management and his Bachelor of Science in Industrial

Engineering from the University of the Philippines, His past positions include,

President of Geonobel Philippines, Inc., Country Manager of Herbalife

International, Philippines and General Manager of Great Amusement, Inc.

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

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

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

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

1997-2000 and its Director for Corporate Planning in 1995 – 1997. He also

served as Account Officer in Solidbank and Boston Bank from 1988-1991. He

holds an MBA from the University of Bridgeport, Connecticut and a Bachelor

of Science in Economics from the University of the Philippines.

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

VP of the Legal and Regulatory Compliance Group and concurrently the

Station Manager of the company’s AM flagship station, DZRH-Manila. Atty.

Jularbal first joined the company in 1986. He resigned in 1999, did a short

stint as VP-Legal of Nextel Communications, Phil. from 1999 to 2001 before he

went into private practice and was a retained external counsel of the company

up to 2011. He was re-engaged on a full time basis in 2011. Atty. Jularbal

obtained his Bachelor’s Degree in Law from the University of the Philippines,

Diliman, QC in 1979 and was admitted to the Bar the following year. He also

holds degrees in Management and Marketing obtained from Saint Louis

University in Baguio City.

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

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

capacities. He is President of our affiliate Pacific Broadcasting System, Inc and

a Director of Cebu Broadcasting Company and Philippine Broadcasting

Company. He is a Certified Public Accountant and a member of the Philippine

Institute of Certified Public Accountants. He obtained his Bachelor’s Degree in

Business Administration, Major in Accounting, from the University of the East,

Manila and Master’s Degree in Business Administration from the De la Salle

University, Manila.

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

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

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

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

member of the Philippine Institute of Certified Public Accountants. She

obtained her degree in Bachelor of Science in Commerce major in Accounting

from the University of San Carlos, Cebu City, Magna Cum Laude.

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

various capacities in the Company since 1984 as Area Manager for FM

Stations then became the Assistant Vice-President for Advertising and

Promotions before his current Position. He took up BSC-Management from

the Divine Word College in Laoag City.

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

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

candidate for Master’s Degree in Human Resource Management from the

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

Mapua Institute of Technology. She is a member of the Personnel

Management Association of the Philippines.

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

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

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

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

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

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

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

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

network – DZRH, Love Radio, Yes-FM, Radyo Natin, Easy Rock, Aksyon Radyo

and Hot FM. He joined the Company in 1992. Previously, he was the Assistant

Vice-President for Finance of Philippine International/Star Parks Corporation,

affiliated companies of the Company, operating the amusement/theme park

Star City. He has a Masters in Management Degree from the Asian Institute of

Management and Bachelor of Arts in Economics from the University of the

Philippines. He is also an undergraduate of Bachelor of Science in Electrical

Engineering from the University of the Philippines.

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

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

2000.

Significant Employees

There are no significant employees that the registrant expects will contribute to

the business of the registrant.

Family Relationships

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

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

Treasurer, is brother-in-law. Other than the foregoing relationships disclosed,

there are no other family relationships known to the registrant.

Involvement of Directors and Officers in Certain Legal Proceedings

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

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

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

competent jurisdiction, permanently or temporarily enjoining, barring,

suspending or otherwise limiting their involvement in any type of business nor

found in action by any court or administrative bodies to have violated any law.

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

Certain Relationships and Related Transactions

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

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

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

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

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

involved. Please refer to Note 12 of the 2012 audited financial statements for the

disclosure on related party transactions.

Item 6. Compensation of Directors and Executive Officers

Executive Compensation

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

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

committee participation or special assignments nor were any bonuses or other

compensation given.

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

follows:

The aggregate compensation of the executives and directors of the

issuer/Registrant is P12,055,920 (estimate) in 2013, P11,792,411 in 2012,

P7,430,208 in 2011, P6,500,000 in 2010, P6,500,00.00 in 2009, P6,349,548 in 2008,

and P5,929,641 in 2007. There were no additional amounts paid for committee

participation or special assignments.

The key management compensation is as follows:

Name Year Salary Bonus Others

Fred J. Elizalde – 2007 5,538,708 - 390,933

Chairman / CEO 2008 6,000,262 - 349,286

2009 6,500,000 - -

2010 6,500,000 - -

2011 6,500,000 - 22,222 (Director’s Fee)

2012 6,500,000 - 22,222 (Director’s Fee)

2013 (Est.) 6,500,000 - 22,222 (Director’s Fee)

Jose M. Taruc, Jr. 2007 - - -

VP - DZRH 2008 - - -

2009 - - -

2010 - - -

2011 441,170* - 22,222 (Director’s Fee)

2012 1,474,255 - 285,386 (Talent Fee)

2013 (Est.) 1,474,255 - 373,368 (Talent Fee)

Elpidio Macalma

AVP - DZRH 2007 - - -

2008 - - -

2009 - - -

2010 - - -

2011 422,372* - 22,222 (Director’s Fee)

2012 694,270 - 2,816,278 (Talent Fee)

2013 (Est.) 694,270 - 2,991,805 (Talent Fee)

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

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

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

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

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

to Financial Statements no. 1 – Corporate Information - in the attached 2012

Audited Financial Statements.

There is no standard arrangement or employment contract between the

registrant and the above-named executive officer.

Item 7. Independent Public Accountants

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

Independent public accountant. The same firm is being recommended for

appointment by the stockholders on 26 September 2013. There has not been any

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

matter relating to accounting principles or practices, financial statement

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

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

entertain clarifications from the stockholders relating to the Financial Statements

of the corporation.

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

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

partner-in-charge since 2004. Formerly, it was Ms. Cynthia Manlapig of the same

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

requirements of SRC Rule 68, Paragraph 3 (b) (iv) requiring rotation of external

auditors. A two-year cooling off period shall be observed in the re-engagement

of the same signing partner or individual auditor.

The appointment of the Independent Public Accountants was recommended by

the Audit Committee composed of Mr. George T. Goduco as Chairman and Mr.

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

EXTERNAL AUDIT FEES

A. Audit and Audit-Related Fees

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

calendar years for professional services rendered by Sycip, Gorres, Velayo

& Co., CPA’s:

Audit and Audit-Related Fees 2012 2011 2010

Regular Audit 620,000 580,000 550,000

Review of Proposed Increase in ACS - - -

Long Form Audit - - -

Review of Forecast - - -

All Other Fees - 68,250 -

Total Audit and Audit-Related Fees 620,000 648,250 550,000

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

external auditor that are reasonably related to the performance of the

audit or review of the registrant’s financial statements.

B. Tax Fees

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

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

planning and any other form of tax services.

C. All Other Fees

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

than the services reported under Item A1 above.

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

Item 8. Compensation Plans

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

cash compensation may be paid or distributed.

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

warrants, options or any special or standard arrangement to said employees,

officers and directors whereby the registrant is liable.

C. ISSUANCE AND EXCHANGE OF SECURITIES

Item 9. Financial and Other Information

a. Action with respect to Reports

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

1. 2012 Annual Report with Audited Financial Statements; and

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

Company from the date of the last annual stockholders’ meeting up to 26

September 2013.

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

the stockholders.

1. Result of Operations

2. Balance Sheet Discussion

3. Capex

4. Targets

Item 10. Modification or Exchange of Securities

No action is to be taken with respect to the modification of any class of securities,

or the issuance or authorization for issuance of the Company in exchange for

outstanding securities of another class.

Item 11. Financial and Other Information

The Company’s Audited Financial Statements and the 2nd quarter interim financial

statements are attached as Annex B and C respectively. The Management’s

Discussion & Analysis is incorporated in the Management Report attached as

Annex A.

Representatives of the Company’s external auditor, SGV & Co., are expected to be

present at the annual meeting, and they will have the opportunity to make a

statement if they desire to do so and are expected to be available to respond

appropriate questions from the shareholders. The Company has had no material

disagreement with SGV & Co. on any matter of accounting principle or practices

or disclosures in the Company’s financial statements.

Item 12. Mergers, Consolidations, Acquisitions and Similar Matters

No action will be presented for shareholders’ approval at this year’s annual

meeting in respect of (1) merger or consolidation of the Company into or with

any other person, or of any other person into or with the Company, (2) acquisition

by the Company or any of its shareholders of securities of another person, (3)

acquisition by the Company of any other going business or of the assets thereof,

(4) the sale or transfer of all or any substantial part of the assets of the Company,

or (5) liquidation or dissolution of the Company.

Item 13. Acquisition or Disposition of Property

No action will be presented for shareholders’ approval in respect of any

acquisition or disposition of property of the Company.

Item 14. Restatement of Accounts

No action will be presented for shareholders’ approval which involves the

restatement of any the Company’s assets, capital or surplus account.

D. OTHER MATTERS

Item 15. Action with Respect to Reports

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

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

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

corporation (like opening/closing of bank accounts, authorized signatories, some

day-to-day contracts/agreements, renewal of loans, etc.) by the Board of

Directors and Officers of the registrant shall be the subjects for ratification by the

stockholders. No act of the Board of Directors and Officers that require a special

disclosure or requirements shall be ratified under this general ratification act

during the meeting.

Item 16. Matters Not Required to be Submitted

No action is to be taken with respect to any matter which is not required to be

submitted to a vote of security holders.

Item 17. Amendment of Charter, Bylaws or Other Documents

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

charter, by-laws or other documents.

Item 19. Voting Procedures

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

in the Company present or represented and entitled to vote at the Annual

Meeting. Likewise, directors shall be elected upon the majority vote of the shares

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

Unless required by law or demanded by the stockholder present in person or

represented and entitled to vote thereat, the vote on any question need not be

by ballot.

Votes will be counted based on the number of shares represented during the

meeting by each stockholder present and as voted by the stockholder. Should

there be no objections to any issue, the votes may be cast and counted as

directed by the Chairman of the meeting. The Corporate Secretary is the

designated person authorized to count the votes.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO

SEND US A PROXY.

MANAGEMENT REPORT

Management’s Discussion and Analysis or Plan of Operation

2012 vs. 2011

1. Results Of Operations

The Company’s total revenue amounted to P788.8 million that is 4.26% higher

than the revenue posted last year. On the other hand, cost and operating

expenses was reduced by P19.6 million or 3.92% lower as compared to last

year. This was mainly due to the decrease in this year’s service fees and

depreciation and amortization expenses.

Operating expenses increased from P178.8 million to P195.7 million while

other income increased by P5.1 million or 1,630.9%. The increase in the

Company’s other income was brought about by the increase in the company’s

miscellaneous income during the year. The increase in miscellaneous income

account was mainly due to the income generated by the Company from its

sponsorships in several shows/concerts during the year. Interest income

decreased by 7.02% compared to last year’s amount mainly due to reduced

investment balance on money market placement during the year.

As a result, the Company registered a net income of P87.5 million in 2012, an

increase of P26.6 million or 43.75% from P60.9 million in 2011.

2. Financial Condition and Changes In Financial Condition

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

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

note, loan, lease or other indebtedness or financing arrangement requiring it

to make payments; nor a significant amount of the registrant’s trade payables

have not been paid within the stated trade terms.

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

a. Cash and cash equivalents increased by P68.3 million or 93.45% from

P73.1 million in 2011 to P141.5 million in 2012 mainly due to increased

net cash flows generated from operations. Please see statement of cash

flows of the 2012 audited financial statements.

b. Due from affiliates represents interest-free advances to Elizalde

Holdings Corporation (EHC), an affiliate under common control with the

Company. No balance was reported for 2012. It is because the advances

made by EHC exceed the advances made by the Company to them.

Please see note 12 of the 2012 audited financial statements.

c. Materials and supplies increased by P3.1 million or 33.4% mainly due to

the increase in the Company’s Ex-deal inventory.

d. Prepaid expenses and other current assets decreased by P0.3 million or

5.67% mainly due to the amortization of prepayments and input tax on

capital goods accounts.

e. Property and equipment at cost increased by P40.0 million or 64.5%

while Property and equipment at revalued amount increased by almost

P31.3 million or 25.6%. The increase mainly due to the Company’s

acquisition of additional transmitting and transportation equipment and

to the increase in the value of its construction in progress account.

f. Investment properties amounting to P65.1 million as of December 31,

2012 represent the net balance on the acquisition of land and

construction of building in 2005 intended for future use of the

Company. The said property is currently being leased out in a yearly

basis to generate revenue in order to sustain its maintenance costs. The

decrease of P8.1 million or 11.02% represents depreciation charges

during the year.

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

became effective on October 4, 2008. The decrease of P11.8 million or

10.26% represents amortization costs during the year.

h. Accounts payable & accrued expenses decreased from P197.3 million to

P169.5 million or 14.1%. It is due to the accelerated payments made by

the Company to its suppliers and other creditors.

i. Due to affiliates represents the advances made to the Company by EHC,

an affiliate under common control with the Company. The balance as of

December 31, 2012 amounted to P6.5 million.

j. Dividends payable increased by P8.7 million or 525.3%. The large

increase is mainly due to the payment date nearing the holidays which

is due on December 21, 2012. During this time, most of the stockholders

were unable to claim their respective dividends and were claimed only

the following year.

k. Talent fees and commissions payable increased by P5.2 million or

17.01% mainly due to increased placement of client-initiated promos

during the year.

l. Income tax payable increased by P4.1 million or 32.46% mainly due to

higher income before income tax registered during the year.

m. Accrued retirement benefits increased by P5.4 million or 11.24% mainly

due to higher accrual of service costs of employees based on actuarial

valuation versus actual contribution to the retirement benefit fund.

Please see Note 17 of 2012 audited financial statement.

n. Deferred income tax liabilities-net increased by P8.2 million or 239.26%

mainly due to increase in the accrued retirement and unamortized

contribution to past service cost as well as increase in the fair value of

land carried at revalued amount. Please see note 18b of 2012 audited

FS.

o. Revaluation increment on land represents the increase the appraised

value of land. It increased from P81.1 million in 2011 to P103.0 million in

2012.

p. Retained earnings increased by P15.0 million or 10.86% mainly due to

the net effect of income and the declaration of cash dividends during

the year. Please see statements of changes in equity of 2012 audited FS.

4. Plan Of Operation

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

pipeline of revenue streams that will complement the existing airtime

revenues. Aside from the successful movie premier showing and on-air and

field promotions, MBC has once again set a lineup of events that will surely

provide maximum value for advertisers and the listening public.

• First is the Manila Bay Seasports Festival which was held last March 16-17,

2013 where an elite roster of participants was invited to join the event.

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

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

featured mixed team championships for the Dragon Boat Race, stock and

formula races in the motorized banca competition. Converging along

Roxas Boulevard’s Baywalk, water enthusiasts and hobbyists cheered on

the participants in these popular spectator sports.

• The most successful event of the company, the Aliwan Fiesta, held on April

11-13, 2013 brought the best, biggest, loudest and the most colorful

fiestas from all over the Philippines to Manila. Now on its 11th year, the

festival once again showcased the dance competition, where the

contingents present fabulously choreographed routines in full costumed

glory. The three other categories of the event were the Float completion,

Reyna ng Aliwan and the Photo Competition.

• Manila Bay Clean-up Run 3 was held last July 14, 2013 at CCP Ground,

Pasay City. The aim of this event is to raise funds for the drive to clean up

the Manila Bay of trash and pollutants as well as to raise awareness among

Filipinos to take care of our environment and preserve our city’s natural

beauty, starting with the picturesque ecology of the Manila Bay. The

Manila Bay Clean-up Run now on its 3rd year is a fund drive organized and

managed by the Company.

• MBC National Choral Competition which will take place in December 2013

also promises to bring highly acclaimed contestants not only from Metro

Manila but all over the country

• The Company also plans to tie up with movie and recording outfits for

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

several promos in the pipeline, like the yearly Bagong Taon, Bagong

Milyon and other client initiated promos that promise to a big hit among

radio listeners.

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

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

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

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

audio and video streaming over the internet, and improvement of existing

stations’ equipment and facilities nationwide. This will be funded by cash

flows from operating activities.

5. Key Financial Indicators

2012 2011

1. Return on Sales (ROS)

Net Income 87,489,385 60,863,848

Divide by: Sales 788,823,015 756,600,651

ROS 11.09% 8.04%

2. Earnings Per Share (EPS)

Net Income 87,489,385 60,863,848

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

EPS 0.217 0.151

3. Current Ratio

Current Assets 468,790,875 473,144,589

Divide by: Current Liabilities 238,720,479 242,313,089

Current Ratio 1.964 1.953

4. Debt-Equity Ratio

Total Liabilities 303,828,770 293,816,130

Divide by: Stockholders’ Equity 659,103,759 622,203,902

Debt-Equity Ratio 0.461 0.472

5. Book Value Per Share

Total Stockholders’ Equity 659.103.759 622.203.902


Book Value Per Share 1.637 1.545

Discussion on Key Performance Indicators (2012 & 2011)

a. ROS increased from 8.04% to 11.09% mainly due to higher net income

earned during the year.

b. The EPS increased by P0.066 per share due to the increase in net income

with the total number of outstanding shares remaining constant.

c. Current ratio increased from 1.953 to 1.964 mainly due to higher cash

balance as a result of higher net income during the year.

d. The debt-equity ratio decreased to 0.461:1 mainly due to revaluation

increment in land value in 2012.

e. The book value per share increased from P1.545 to P1.637 mainly due to

the revaluation increment in land value and net income during the year

with the number of outstanding shares remaining constant.

6. Other Disclosure Matters

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

condition or results of operations.

b. There are no unusual items affecting assets, liabilities, equity, net income,

or cash flows.

c. There are no changes in estimates of amounts reported in prior interim

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

prior financial years.

d. There are no material events subsequent to the end of the accounting

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

period.

e. There are no changes in the composition of the issuer during the

accounting period, including business combinations, acquisition or

disposal of subsidiaries and long-term investments, restructurings, and

discontinuing operations.

f. There are no changes in contingent liabilities or contingent assets since

the last annual balance sheet date.

g. There are no material contingencies and any events or transactions that

are material to the understanding of the current interim period.

h. There are no known trends, demands, commitments, events or

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

i. There are no known trends, events or uncertainties that had or that are

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

revenues or income from continuing operations.

j. There are no significant elements of income or loss that did not arise from

the company’s continuing operations;

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


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

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

acceleration of an obligation.

m. There are no material off-balance sheet transactions, arrangements,

obligations (including contingent obligations), and other relationships of

the Company with unconsolidated entities or other persons created during

the reporting period.

n. There are no businesses or geographical segments for which information

is not reported to the Board of Directors (BOD) and chief executive officer.

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

transaction.

p. There were no changes in accounting policies adopted for segment

reporting that have a material effect on segment information.

7. Other Disclosure Requirements Per Annex 68.1 M paragraph 7e of Rule

68.1

a. Marketable Securities

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

less than 10% of the total assets as of December 31, 2012.

b. The amounts receivable of more than P100,000.00 or one percent of total

assets from Directors, Officers, Employees, Related Parties, and Principal

Stockholders. (Jose M. Taruc, Jr. – P3,896,765.97)

c. The available-for-sale financial assets of P25,634,635 in the related balance

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

changes in the information required to be filed from that last previously

reported.

d. There were no amounts due from affiliates in the related balance sheet

that emceed five percent of total assets.

e. Intangible Assets - Other Assets – Please refer to note 10 of the audited

FS.

f. Long-term Debt – No balances as of December 31, 2012.

g. Indebtedness to related Parties amounted to P6,471,524

h. Guarantees of Securities of Other Issuers – Not applicable

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

balance sheet filed.

Title of Issue Common Shares

Number of shares authorized 1,000,000,000 shares

Number of shares issued and outstanding 402,682,990 shares

Number of shares reserved for options, NIL

warrants conversion and other rights

Number of shares held by related parties 361,469,767 shares

Number of shares held by directors, officers

and employees 184,540 shares

Others 41,028,499 shares

2011 vs 2010

1. Results Of Operations

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

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

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

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

to last year.

Interest expense decreased by P3.8 million as the Notes payable was

completely paid out as of December 31, 2010. The rental income which

slightly increased by P0.6 million from P8.5 million in 2010 to P9.1 million in

2011 represents revenue derived from the investment properties being leased

to employees and third parties. Interest income decreased by P0.3 million or

20.64% from P1.3 million in 2010 to P1.0 million in 2011 mainly due to

reduced investment balance on money market during the year.

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

2011, a decrease of P56.7 million or 48.21% from P117.5 million in 2010.

2. Financial Condition and Changes In Financial Condition

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

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

note, loan, lease or other indebtedness or financing arrangement requiring it

to make payments; nor a significant amount of the registrant’s trade payables

have not been paid within the stated trade terms.

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

a. Cash and cash equivalents decreased by P24.9 million or 25.42% from

P98.1 million in 2010 to P73.1 million in 2011 mainly due to payment of

cash dividends amounting to P120.9 million.

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

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

the year when compared to the previous year. The credit term given to

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

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

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

was a net increase on this account in the amount of P47.7 million. Please

see note 12 of the 2011 audited financial statements.

d. Materials and supplies decreased by P1.5 million or 13.76% mainly due to

conscious effort of the Company to eliminate excessive stock of materials

and supplies to avoid extra cost of carrying the inventory.

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

21.30% mainly due to cancellation of Certificates of Tax Withheld which

expired in 2011.

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

mainly due to depreciation while Property and equipment at revalued

amount remained constant.

g. Investment properties amounting to P73.2 million as of December 31,

2011, represents the net balance on the acquisition of land and

construction of building in 2005 intended for future use of the Company.

The said property is currently being leased out on a yearly basis to

generate revenue in order to sustain its maintenance costs. The decrease

of P8.1 million or 9.93% represents depreciation charges during the year.

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

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

10.33% represents amortization costs during the year.

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

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

of input vat on capital goods claimed during the year.

j. Dividend payable decreased by P0.1 million or 5.9% as a result of

payments made to stockholders.

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

mainly due to increased placement of client-initiated promos during the

year.

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

lower income before income tax registered during the year.

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

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

see note 17 of 2011 audited FS.

n. Deferred income tax liabilities-net decreased by P8.3 million or 70.7%

mainly due to increase in the accrued retirement benefits and unamortized

contribution to past service cost as well as increase in the allowances for

doubtful accounts and inventory obsolesce. Please see note 18b of 2011

audited FS.

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

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

FS.

4. Plan of Operation

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

pipeline of revenue streams that will complement the existing airtime

revenues. Aside from the successful movie premier showing and on-air and

field promotions, MBC has once again set a lineup of events that will surely

provide maximum value for advertisers and the listening public.

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

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

event. Organized by Manila Broadcasting Company and the City of Pasay,

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

festival featured mixed team championships for the Dragon Boat Race,

stock and formula races in the motorized banca competition. Converging

along Roxas Boulevard’s Baywalk, water enthusiasts and hobbyists cheered

on the participants in these popular spectator sports.

• The most successful event of the company, the Aliwan Fiesta, held on April

12-14, 2012 brought the best, biggest, loudest and the most colorful

fiestas from all over the Philippines to Manila. Now on its 10th year, the

festival once again showcased the dance competition, where the

contingents present fabulously choreographed routines in full costumed

glory. The three other categories of the event were the Float completion,

Reyna ng Aliwan and the Photo Competition.

• MBC National Choral Competition which will take place in December 2012

also promises to bring highly acclaimed contestants not only from Metro

Manila but all over the country

• There will be a live telecast at Aliw Theater of the much awited boxing fight

between our very own Manny Pacquiao and Tim Bradley which will be held

in June 2012. The Company also plans to tie up with movie and recording

outfits for promo tours, live performances, and fans’ days in malls. There

are also several promos in the pipeline, like the yearly Bagong Taon,

Bagong Milyon and other client initiated promos that promise to a big hit

among radio listeners.

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

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

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

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

audio and video streaming over the internet, and improvement of existing

stations’ equipment and facilities nationwide. This will be funded by cash

flows from operating activities.

5. Key Financial Indicators

2011 2010

1. Return on Sales (ROS)

Net Income 60,863,848 117,528,855

Divide by: Sales 756,600,651 833,380,988

ROS 8.04% 14.10%

2. Earnings Per Share (EPS)

Net Income 60,863,848 117,528,855


EPS 0.151 0.292

3. Current Ratio

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

Divide by: Current Liabilities 242,313,089 255,482,571

Current Ratio 1.953 1.841

4. Debt-Equity Ratio


Divide by: Stockholders’ Equity 622,203,902 682,124,951

Debt-Equity Ratio 0.472 0.407

5. Book Value Per Share

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


Book Value Per Share 1.545 1.694

Discussion on Key Performance Indicators (2011 & 2010)

a. ROS decreased from 14.10% to 8.04% mainly due to lower net income

during the year.

b. The EPS decreased by P0.14 per share because of the decrease in net

income with the total number of outstanding shares remaining constant.

c. Current ratio increased from 1.841 to 1.953 mainly due to lower income

tax payable as a result of lower net income during the year.

d. The debt-equity ratio increased to 0.472:1 from 0.407:1 mainly due to the

cash dividends declared in 2011.

e. The book value per share decreased from P1.694 to P1.545 mainly due to

the cash dividends declared in 2011.

6. Other Disclosure Matters

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


b. There are no unusual items affecting assets, liabilities, equity, net income,

or cash flows.

c. There are no changes in estimates of amounts reported in prior interim

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

prior financial years.

d. There are no material events subsequent to the end of the accounting

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

period.

e. There are no changes in the composition of the issuer during the

accounting period, including business combinations, acquisition or

disposal of subsidiaries and long-term investments, restructurings, and

discontinuing operations.

f. There are no changes in contingent liabilities or contingent assets since

the last annual balance sheet date.

g. There are no material contingencies and any events or transactions that

are material to the understanding of the current interim period.

h. There are no known trends, demands, commitments, events or

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

i. There are no known trends, events or uncertainties that had or that are

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

revenues or income from continuing operations.

j. There are no significant elements of income or loss that did not arise from

the company’s continuing operations;

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


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

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

acceleration of an obligation.

m. There are no material off-balance sheet transactions, arrangements,

obligations (including contingent obligations), and other relationships of

the Company with unconsolidated entities or other persons created during

the reporting period.

n. There are no businesses or geographical segments for which information

is not reported to the Board of Directors (BOD) and chief executive officer.

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

transaction.

There were no changes in accounting policies adopted for segment reporting

that have a material effect on segment information.

7. Other Disclosure Requirements Per Annex 68.1 M paragraph 7e Rule of

68.1

a. Marketable Securities

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

less than 10% of the total assets as of December 31, 2011.

b. The amounts receivable of more than P100,000.00 or one percent of total

assets from Directors, Officers, Employees, Related Parties, and Principal

Stockholders. (Jose M. Taruc, Jr. – P3,742,950.02)

c. The available-for-sale financial assets of P25,634,635 in the related balance

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

changes in the information required to be filed from that last previously

reported.

d. The due from affiliates of P89 million in the related balance sheet does not

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

information required to be filed from that last previously reported.

e. Intangible Assets - Other Assets – Please refer to note 10 of the audited

FS.

f. Long-term Debt – No balances as of December 31, 2011.

g. Indebtedness to related Parties – No balances as of December 31, 2011

h. Guarantees of Securities of Other Issuers – Not applicable

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

balance sheet filed.

Title of Issue Common Shares

Number of shares authorized 1,000,000,000 shares

Number of shares issued and outstanding 402,682,990 shares

Number of shares reserved for options,

warrants conversion and other rights NIL

Number of shares held by related parties 361,469,767 shares

Number of shares held by directors, officers

and employees 219,844 shares

Others 7,993,195 shares

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

1. Market Information

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

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

last 03 October 2012 at P3.30 per share involving 3,000 shares. There was no

transaction of MBC shares after the said date.

Stock Prices

2013 2012 2011

High Low High Low High Low

1st Qtr NT NT 2.52 2.50 NT NT

2nd Qtr NT NT 3.10 3.10 NT NT

3rd Qtr NA NA 3.30 3.30 1.11 1.11

4th Qtr NA NA 3.30 3.30 3.04 3.04

*NT – No Transaction

*NA – Not Applicable

2. Holders

a. There are 616 Stockholders as of 30 August 2013.

b. The top 20 Stockholders as of 30 August 2013 are as follows:

No. of Shares % Age

1 Elizalde Holdings Corporation 139,558,774 34.65%

2 Elizalde Land, Inc. 87,000,000 21.60%

3 Romulo, Mabanta, Buenaventura,

Sayoc & Delos Angeles

69,910,993 17.36%

4 Cebu Broadcasting Company 50,000,000 12.41%

5 AQG Corporation 33,000,000 8.19%

6 Sunshine Inns, Inc. 10,000,000 2.48%

7 Philippine Broadcasting Corporation 5,000,000 1.24%

8 A & A Securities, Inc. 1,123,234 0.28%

9 Tansengco Uy & Co., Inc. 659,892 0.16%

10 Estate of Allen Cham 632,549 0.16%

11 Myron C. Papa, SA of Estate of

Angela Butte

627,254

0.16%

12 Luis M. Alberto &/or Manuel C.

Alberto

553,368 0.14%

13 L.V.N. Pictures, Inc. 447,961 0.11%

14 A. &/or J.O. Del Rosario 363,592 0.09%

15 Ruperto S. Nicdao, Jr. 129,201 0.03%

16 Ernestina U. De Garcia 122,338 0.03%

17 Consuelo Fajardo 121,149 0.03%

18 Luis G. Ablaza 121,149 0.03%

19 Joaquina Tirona 114,719 0.03%

20 Agapito D. Balagtas 105,370 0.03%

3. Dividends

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

Cash Dividends (per share)

Amount in

Pesos

Declaration

Date Record Date Payment Date

0.1800 Nov. 21, 2012 Dec. 10, 2012 Dec. 21, 2012

0.3000 Sept. 30, 2011 Oct. 05, 2011 Oct. 31, 2011

0.0625 Nov. 19, 2010 Dec. 09, 2010 Dec. 23, 2010

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

common shares.

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

of Securities Constituting an Exempt Transaction

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

of the company.

Item 13. Discussion on Compliance with Leading Practices in Corporate

Governance

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

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

Corporate Governance semi-annually. The members of the Audit, Nominating

and Compensation Committees have been appointed and will be recommended

for re-appointment once the new Board is constituted. The Company continues

to strive to integrate the mandate of good corporate governance in its daily life.

No deviation from the Company’s manual of Corporate Governance was noted

during the year.

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

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

shareholders, employees, customers, vendors and community. Two (2)

independent members of the Board of Directors were elected to help clarify the

direction and values of the organization, oversee performance of the company

and protect stakeholder interests. Audit, Nominating and Compensation

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

good corporate governance practices. The company advocates continuous

improvement in governance processes by monitoring the progress of the

following attributes:

Attributes Challenge

Legal and Regulatory Maintaining an understanding of the

compliance requirements in the dynamic

regulatory environment

Business Practices and Ethics Establishing ethical business practices that

keep up with the expectations of

stakeholders

Disclosure and Transparency Ensuring that stakeholders receive the

information they need in a understandable

way

Risk and Performance

Management

Dealing with both Risk Management and

Performance Enhancement as two sides of

the same coin to increase shareholder value.

Communication Finding ways to improve the interactions

between the stakeholders within various

components of the Corporate Governance

Framework.

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

provided without any charge to any stockholder who makes a written request for

such copy or to any person solicited. At the discretion of management, a charge

may be made for exhibits limited to reasonable expenses incurred by the

registrant in furnishing such exhibits. Any written request shall be addressed as

follows:


MBC Bldg., V. Sotto St.,, CCP Complex,

Pasay City 1307 Philippines

Attention: Atty. Rudolph Steve E. Jularbal

Audited Financial Statements and Interim Financial Statements

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

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

Audited Financial Statements and Supplementary Schedules and June 30, 2013

17-Q filed as part of this Form 20-IS.

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-Q

QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES

REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER

1. For the quarterly period ended: June 30, 2013

2. Commission identification number: SEC No. 1674

3. BIR Tax Identification No: 000-479-027

4. Exact name of issuer as specified in its charter: MANILA BROADCASTING COMPANY

5. Province, country or other jurisdiction of incorporation or organization: Metro Manila

6. Industry Classification Code: (SEC Use Only)

7. Address of issuer's principal office / Postal Code

MBC Bldg., Star City, CCP Complex, Roxas Boulevard, Pasay City, Metro Manila 1300

8. Issuer's telephone number, including area code: (02) 832-61-49 to 50

9. Former name, former address and former fiscal year, if changed since last report: N/A

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

Title of each Class Number of shares of common

stock outstanding and amount

of debt outstanding

Common Shares 402,682,990 shares

Total Liabilities P237,616,641

11. Are any or all of the securities listed on a Stock Exchange?

Yes [��] No [ ]

12. Indicate by check mark whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder

or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the

Corporation Code of the Philippines, during the preceding twelve (12) months (or for such

shorter period the registrant was required to file such reports)

Yes [��] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [��] No [ ]

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Please see attached Financial Statements for June 30, 2013.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Please see attached management Discussion and Analysis of Financial Condition and Results

of Operations.

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*SGVMG300302*

1 6 7 4

SEC Registration Number

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

(Company�s Full Name)

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

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

P a s a y C i t y

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

Mr. Eduardo Cordova 832-6149 (Contact Person) (Company Telephone Number)

1 2 3 1 A A F S

Month Day (Form Type) Month Day (Calendar Year) (Annual Meeting)

Not Applicable

(Secondary License Type, If Applicable)

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

615

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

*SGVMG300302*

INDEPENDENT AUDITORS� REPORT

The Stockholders and the Board of Directors

Manila Broadcasting Company

MBC Building, Star City CCP Complex, Roxas Boulevard

Pasay City

Report on the Financial Statements

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

comprise the statements of financial position as at December 31, 2012 and 2011, and the statements of

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

three years in the period ended December 31, 2012, and a summary of significant accounting policies and other explanatory information.

Management�s Responsibility for the Financial Statements

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

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

management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors� Responsibility

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

conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor�s judgment, including the

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

error. In making those risk assessments, the auditor considers internal control relevant to the entity�s preparation and fair presentation of the financial statements in order to design audit procedures that are

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

of the entity�s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as

evaluating the overall presentation of the financial statements.

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

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

Phone: (632) 891 0307 Fax: (632) 819 0872 www.sgv.com.ph BOA/PRC Reg. No. 0001,

December 28, 2012, valid until December 31, 2015 SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited

*SGVMG300302*

- 2 -

Opinion

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

Manila Broadcasting Company as at December 31, 2012 and 2011, and its financial performance and

its cash flows for each of the three years in the period ended December 31, 2012 in accordance with Philippine Financial Reporting Standards.

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

and 19-2011

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

taken as a whole. The supplementary information required under Revenue Regulations 15-2010 and 19-2011 in Notes 24 and 25 to the financial statements, respectively, are presented for purposes of

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

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

information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material respects, in relation to the

basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Catherine E. Lopez Partner

CPA Certificate No. 86447

SEC Accreditation No. 0468-AR-2 (Group A), February 14, 2013, valid until February 13, 2016

Tax Identification No. 102-085-895

BIR Accreditation No. 08-001998-65-2012,

April 11, 2012, valid until April 10, 2015 PTR No. 3669691, January 2, 2013, Makati City

April 5, 2013

*SGVMG300302*


STATEMENTS OF FINANCIAL POSITION

See accompanying Notes to Financial Statements.

December 31

2012 2011

ASSETS

Current Assets Cash and cash equivalents (Note 5) P=141,487,141 P=73,140,156

Receivables (Note 6) 309,784,034 296,318,715

Due from affiliates (Note 12) � 88,966,242

Materials and supplies (net of allowance for inventory

obsolescence of P=1,482,019 in 2012 and P=1,508,663

in 2011) 12,415,815 9,308,734

Prepaid expenses and other current assets 5,103,885 5,410,742

Total Current Assets 468,790,875 473,144,589

Noncurrent Assets

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

Property and equipment (Note 8) At cost 102,198,219 62,139,150

At revalued amount 153,477,900 122,201,600

Investment properties (Note 9) 65,155,461 73,224,113

Intangible assets (Note 10) 103,381,196 115,196,192 Goodwill (Note 10) 38,016,206 38,016,206

Other noncurrent assets 6,278,037 6,463,547

Total Noncurrent Assets 494,141,654 442,875,443

TOTAL ASSETS P=962,932,529 P=916,020,032

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable and accrued expenses (Notes 11, 12 and 17) P=169,545,658 P=197,321,811 Due to affiliates (Note 12) 6,471,524 �

Dividends payable 10,391,998 1,661,994

Talent fees and commissions payable 35,826,629 30,618,538

Income tax payable 16,484,670 12,710,746

Total Current Liabilities 238,720,479 242,313,089

Noncurrent Liabilities Accrued retirement benefits (Note 17) 53,480,410 48,075,663

Deferred income tax liabilities - net (Note 18) 11,627,881 3,427,378

Total Noncurrent Liabilities 65,108,291 51,503,041


Equity Capital stock (Note 13) 402,803,777 402,803,777

Additional paid-in capital 79,354 79,354

Revaluation increment on land (Note 8) 103,048,264 81,154,854 Reserve for fluctuation in available-for-sale

financial assets (Note 7)

60,000

60,000

Retained earnings (Note 14) 153,233,151 138,226,704

Treasury stock (at cost) - 120,787 shares (120,787) (120,787)

Total Equity 659,103,759 622,203,902

TOTAL LIABILITIES AND EQUITY P=962,932,529 P=916,020,032

*SGVMG300302*


STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2012 2011 2010

REVENUE (Note 12) P=788,823,015 P=756,600,651 P=833,380,988

COST OF SERVICES (Notes 12 and 15) (481,554,327) (501,218,740) (519,137,632)

GROSS PROFIT 307,268,688 255,381,911 314,243,356

Operating expenses (Notes 12 and 15) (195,705,465) (178,756,054) (152,922,996)

Rental income (Note 9) 8,878,244 9,079,316 8,503,695

Interest income 934,917 1,005,500 1,267,010

Interest expense � � (3,777,035)

Other income - net (Note 7) 5,364,344 309,914 561,484

INCOME BEFORE INCOME TAX 126,740,728 87,020,587 167,875,514

PROVISION FOR INCOME TAX (Note 18) 39,251,343 26,156,739 50,346,659

NET INCOME 87,489,385 60,863,848 117,528,855

OTHER COMPREHENSIVE INCOME (LOSS) Net changes in fair value of available-for-sale

financial assets (Note 7) � 20,000 (30,000)

Increase in revaluation increment due to

appraisal, net of deferred income tax (Note 8) 21,893,410 � �

TOTAL OTHER COMPREHENSIVE

INCOME (LOSS) 21,893,410 20,000 (30,000)

TOTAL COMPREHENSIVE INCOME P=109,382,795 P=60,883,848 P=117,498,855

Weighted Average Number of

Shares Outstanding 402,682,990 402,682,990 402,682,990

Basic/Diluted Earnings Per Share (Note 22) P=0.22 P=0.15 P=0.29


*SGVMG300302*

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.

*SGVMG300302*


STATEMENTS OF CASH FLOWS

Years Ended December 31

2012 2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P=126,740,728 P=87,020,587 P=167,875,514

Adjustments for:

Depreciation and amortization (Note 15) 42,131,741 46,071,971 50,425,931

Movement in accrued retirement benefits (Note 17) 5,404,747 24,803,620 (1,217,480)

Interest income (934,917) (1,005,500) (1,267,010)

Interest expense � � 3,777,035

Impairment loss of available-for-sale financial

assets (Note 7) � 455,275 �

Operating income before working capital changes 173,342,299 157,345,953 219,593,990

Decrease (increase) in:

Receivables (13,465,319) 17,042,530 (1,990,863)

Due from affiliates 88,966,242 (47,683,060) (22,472,724) Materials and supplies (3,107,081) 1,485,055 (605,941)

Prepaid expenses and other current assets 306,857 1,464,064 (6,361,058)

Increase (decrease) in:

Accounts payable and accrued expenses (27,776,153) 7,345,592 21,744,525

Talent fees and commissions payable 5,208,091 2,667,676 11,711,837

Due to affiliates 6,471,524 � �

Net cash flows generated from operations 229,946,460 139,667,810 221,619,766

Income taxes paid, including final and creditable

withholding tax

(36,659,806)

(44,843,740)

(39,227,067)

Interest received 934,917 1,005,500 1,267,010

Net cash flows from operating activities 194,221,571 95,829,570 183,659,709

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property and equipment (Note 8) (62,307,162) (7,140,978) (6,220,404)

Decrease in other noncurrent assets 185,510 7,293,832 4,238,710

Net cash flows from (used in) investing activities (62,121,652) 152,854 (1,981,694)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (63,752,934) (120,909,206) (24,799,822)

Payments of notes payable � � (105,000,000)

Interest paid � � (3,904,127)

Cash flows used in financing activities (63,752,934) (120,909,206) (133,703,949)

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 68,346,985 (24,926,782) 47,974,066

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 73,140,156 98,066,938 50,092,872

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=141,487,141 P=73,140,156 P=98,066,938


*SGVMG300302*


NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

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

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

The registered office address of the Company is MBC Building, Star City, CCP Complex, Roxas Boulevard, Pasay City. On May 20, 1971, the Securities and Exchange Commission (SEC)

approved the amendment of the Company�s Articles of Incorporation to extend its corporate term

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

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

April 5, 2013.

2. Summary of Significant Accounting and Financial Reporting Policies

Basis of Preparation

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

except for available-for-sale (AFS) financial assets, which have been measured at fair value, and land, which is carried at revalued amount.

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

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

Statement of Compliance

The financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Changes in Accounting Policies and Disclosures

The accounting policies adopted are consistent with those of the previous financial year except for the following amendments to standards which became effective on January 1, 2012. These

amendments, however, did not have any significant impact on the financial position or

performance of the Company.

· PFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure

Requirements, require additional disclosures about financial assets that have been transferred

but not derecognized to enhance the understanding of the relationship between those assets that have not been derecognized and their associated liabilities. In addition, the amendments

require disclosures about continuing involvement in derecognized assets to enable users of

financial statements to evaluate the nature of, and risks associated with, the entity�s continuing

involvement in those derecognized assets.

· Philippine Accounting Standard (PAS) 12, Income Taxes - Recovery of Underlying Assets,

clarifies the determination of deferred tax on investment property measured at fair value. The

amendment introduces a rebuttable presumption that the carrying amount of investment property measured using the fair value model in PAS 40, Investment Property, will be

recovered through sale and, accordingly, requires that any related deferred tax should be

- 2 -

*SGVMG300302*

measured on a �sale� basis. The presumption is rebutted if the investment property is

depreciable and it is held within a business model whose objective is to consume substantially

all of the economic benefits in the investment property over time (�use� basis), rather than through sale. Furthermore, the amendment introduces the requirement that deferred tax on

nondepreciable assets measured using the revaluation model in PAS 16, Property, Plant and

Equipment, always be measured on a sale basis of the asset.

New Accounting Standards, Interpretations, and Amendments to

Existing Standards Effective Subsequent to December 31, 2012 The Company reasonably expects the following standards, amendments and interpretations, which

have been issued but are not yet effective as at December 31, 2012 to be applicable at a future

date. Except as otherwise indicated, the Company does not expect the adoption of the applicable

new and amended PFRS to have a significant impact on its financial position or performance. The relevant disclosures will be included in the notes to the financial statements when these become

effective.

Effective in 2013

· Amendments to PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and

Financial Liabilities, require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all

recognized financial instruments that are set off in accordance with PAS 32, Financial

Instruments: Presentation. These disclosures also apply to recognized financial instruments

that are subject to an enforceable master netting arrangement or �similar agreement�, irrespective of whether they are set-off in accordance with PAS 32. The amendments require

entities to disclose, in a tabular format unless another format is more appropriate, the

following minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period:

a. the gross amounts of those recognized financial assets and recognized financial liabilities;

b. the amounts that are set off in accordance with the criteria in PAS 32 when determining

the net amounts presented in the statement of financial position; c. the net amounts presented in the statement of financial position;

d. the amounts subject to an enforceable master netting arrangement or similar agreement

that are not otherwise included in (b) above, including: i. amounts related to recognized financial instruments that do not meet some or all of the

offsetting criteria in PAS 32; and

ii. amounts related to financial collateral (including cash collateral); and e. the net amount after deducting the amounts in (d) from the amounts in (c) above.

The amendment affects disclosures only and has no impact on the Company�s financial

position or performance.

· PFRS 10, Consolidated Financial Statements, replaces the portion of PAS 27, Consolidated

and Separate Financial Statements that addresses the accounting for consolidated financial

statements. It also includes the issues raised in SIC 12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single control model that applies to all entities including

special purpose entities and will require management to exercise significant judgment to

determine which entities are controlled, and therefore, are required to be consolidated by a parent compared with the requirements that were in PAS 27.

- 3 -

*SGVMG300302*

· PFRS 11, Joint Arrangements, replaces PAS 31, Interests in Joint Ventures and SIC 13,

Jointly Controlled Entities - Non-monetary Contributions by Venturers. PFRS 11 removes the

option to account for jointly controlled entities using proportionate consolidation. Instead,

jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method.

· PFRS 12, Disclosure of Interests in Other Entities, includes all of the disclosures that were

previously in PAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in PAS 31 and PAS 28. These disclosures relate to

an entity�s interests in subsidiaries, joint arrangements, associates and structured entities. A

number of new disclosures are also required.

· PAS 27, Separate Financial Statements (as revised in 2011), has been limited to accounting

for subsidiaries, jointly controlled entities, and associates in the separate financial statements

as a consequence of the new PFRS 10 and PFRS 12.

· PAS 28, Investments in Associates and Joint Ventures (as revised in 2011), has been renamed,

as a consequence of the new PFRS 11 and PFRS 12 and describes the application of the equity

method to investments in joint ventures in addition to associates.

· PFRS 13, Fair Value Measurement, establishes a single source of guidance for fair value

measurement and eliminates inconsistencies dispersed in various existing PFRS. It does not change when an entity is required to use fair value, but rather provides guidance on how to

measure fair value under PFRS when fair value is required or permitted. This standard should

be applied prospectively as of the beginning of the annual period in which it is initially applied. Its disclosure requirements need not be applied in comparative information provided

for periods before initial application of PFRS 13. The Company has assessed the impact of

adopting this standard and does not anticipate that the adoption of this standard will have a significant impact on its financial position and performance.

· Amendments to PAS 1, Presentation of Financial Statements - Presentation of Items of Other

Comprehensive Income, change the grouping of items presented in other comprehensive

income. Items that could be reclassified (or recycled) to profit or loss at a future point in time

would be presented separately from items that will never be reclassified. The amendments affect presentation only and have no impact on the Company�s financial position or

performance.

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

corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The revised standard also requires new disclosures such as, among others, a

sensitivity analysis for each significant actuarial assumption, information on asset-liability

matching strategies, duration of the defined benefit obligation, and disaggregation of plan

assets by nature and risk. The amendments become effective for annual periods beginning on or after January 1, 2013. Once effective, the Company has to apply the amendments

retroactively to the earliest period presented.

- 4 -

*SGVMG300302*

The Company reviewed its existing employee benefits and determined that the amended

standard has significant impact on its accounting for retirement benefits. The Company

obtained the services of an external actuary to compute the impact to the financial statements upon adoption of the standard. The effects are detailed below:

As at

December 31, 2012

As at

January 1, 2012

Balance sheet

Increase (decrease) in:

Accrued retirement benefits (P=8,464,518) (P=6,726,529) Deferred income tax asset (2,539,355) (2,017,959)

Retained earnings * 4,646,470 4,708,570

Other comprehensive income 1,278,693 � * Other comprehensive income will be closed to retained earnings at transition date. Subsequent to January 1, 2013, other comprehensive income shall be separately presented.

2012 2011

Statement of comprehensive income Increase (decrease):

Net retirement benefits cost P=88,715 (P=248,354)

Income tax expense (26,615) 74,506

Profit for the year (62,100) 173,848 Other comprehensive income, net of

deferred income tax 1,278,693 �

· Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface

Mine, applies to waste removal (stripping) costs incurred in surface mining activity, during the

production phase of the mine. The interpretation addresses the accounting for the benefit from

the stripping activity. This new interpretation is not relevant to the Company as it is not involved in any mining activities.

· Annual Improvements to PFRS (2009 to 2011 cycle)

The Annual Improvements to PFRS (2009 to 2011 cycle) contain non-urgent but necessary

amendments to PFRS. These amendments are effective for annual periods beginning January 1, 2013 and are applied retrospectively. Earlier application is permitted.

· PFRS 1, First-time Adoption of PFRS - Borrowing Costs, clarifies that, upon adoption of

PFRS, an entity that capitalized borrowing costs in accordance with its previous generally accepted accounting principles, may carry forward, without any adjustment, the amount

previously capitalized in its opening statement of financial position at the date of

transition. Subsequent to the adoption of PFRS, borrowing costs are recognized in accordance with PAS 23, Borrowing Costs. The amendment does not apply to the

Company as it is not a first-time adopter of PFRS.

· PAS 1, Presentation of Financial Statements - Clarification of the Requirements for

Comparative Information, clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an

accounting policy, or retrospective restatement or reclassification of items in the financial

statements. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the

minimum required comparative period. The additional comparative period does not need

- 5 -

*SGVMG300302*

to contain a complete set of financial statements. On the other hand, supporting notes for

the third balance sheet (which are mandatory when there is a retrospective application of

an accounting policy, or retrospective restatement or reclassification of items in the financial statements) are not required. The amendments will affect disclosures only and

will have no impact on the Company�s financial position or performance.

· PAS 16, Property, Plant and Equipment - Classification of Servicing Equipment, clarifies

that spare parts, stand-by equipment and servicing equipment should be recognized as

property, plant and equipment when they meet the definition of property, plant and

equipment and should be recognized as inventory, if otherwise. The amendment will not have any significant impact on the Company�s financial position or performance.

· PAS 32, Financial Instruments: Presentation - Tax Effect of Distribution to Holders of

Equity Instruments, clarifies that income taxes relating to distributions to equity holders

and to transaction costs of an equity transaction are accounted for in accordance with PAS 12. The Company expects that this amendment will not have any impact on its

financial position or performance.

· PAS 34, Interim Financial Reporting - Interim Financial Reporting and Segment

Information for Total Assets and Liabilities, clarifies that the total assets and liabilities for

a particular reportable segment need to be disclosed only when the amounts are regularly

provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity�s previous annual financial statements for that

reportable segment. The amendment will affect disclosures only and will not have any

impact on the Company�s financial position or performance.

Effective in 2014

· PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial

Liabilities, clarify the meaning of �currently has a legally enforceable right to set-off� and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central

clearing house systems) which apply gross settlement mechanisms that are not simultaneous.

The amendments affect presentation only and have no impact on the Company�s financial position or performance.

Effective in 2015

· PFRS 9, Financial Instruments: Classification and Measurement, as issued in 2010, reflects

the first phase of the work on the replacement of PAS 39 and applies to classification and

measurement of financial assets and financial liabilities as defined in PAS 39. In subsequent

phases, hedge accounting, impairment and derecognition of financial assets will be addressed. The adoption of the first phase of PFRS 9 will have an effect on the classification and

measurement of financial assets.

The Company decided not to early adopt PFRS 9 for its 2012 reporting ahead of its effectivity

date on January 1, 2015 and therefore the financial statements as at and for the year ended

December 31, 2012 do not reflect the impact of the said standard. The Company shall conduct

another impact evaluation in early 2013 using the financial statements for the year ended December 31, 2012. The Company will determine the effect of this standard in conjunction

with the other phases, when issued, to present a comprehensive picture.

- 6 -

*SGVMG300302*

Effectivity date to be determined

· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate, covers

accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. This Interpretation requires that revenue on

construction of real estate be recognized only upon completion, except when such contract

qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of

completion. The SEC and the Financial Reporting Standards Council have deferred the

effectivity of this interpretation until the final Revenue standard is issued by the International Accounting Standards Board and an evaluation of the requirements of the final Revenue

standard against the practices of the Philippine real estate industry is completed. Adoption of

the interpretation when it becomes effective will not have any impact on the financial

statements of the Company.

Cash and Cash Equivalents

Cash includes cash on hand and cash in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of up to

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

Financial Assets and Financial Liabilities

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

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

liabilities, except for any financial instrument measured at fair value through profit or loss (FVPL). The Company recognizes a financial asset or financial liability in the statement of

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

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

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

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

holders of financial instruments classified as equity are charged directly to equity, net of any related income tax benefits.

Financial instruments are classified as either financial assets or financial liabilities at FVPL, loans and receivables, held-to-maturity (HTM) investments, AFS financial assets, or other financial

liabilities, as appropriate.

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

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

year-end.

As of December 31, 2012 and 2011, the Company�s financial instruments include loans and

receivables, AFS financial assets and other financial liabilities.

Loans and receivables

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

are not quoted in an active market. Such assets are carried at amortized cost in the statement of financial position. Amortization is determined using the effective interest rate method. Loans and

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

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

- 7 -

*SGVMG300302*

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

and due from affiliates as of December 31, 2012 and 2011.

AFS financial assets

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

classified in any of the three preceding categories. Financial assets may be designated at initial recognition as AFS if they are purchased and held indefinitely, and may be sold in response to

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

financial assets are measured at fair value with gains or losses being recognized as a separate component of equity and as other comprehensive income until the investment is derecognized or

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

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

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

December 31, 2012 and 2011.

Other financial liabilities

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

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

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

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

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

Included under this category are the Company�s accounts payable and accrued expenses, due to

affiliates, dividends payable, talent fees and commissions payable as of December 31, 2012 and 2011.

Determination of Fair Value of Financial Instruments The fair value of financial instruments traded in active markets at the end of reporting period is

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

price for short positions), without any deduction for transaction costs. When current bid and asking prices are not available, the price of the most recent transaction provides evidence of the

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

since the time of the transaction.

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

using appropriate valuation techniques. Valuation techniques include net present value

techniques, comparison to similar instruments for which market observable prices exist, options pricing models, and other relevant valuation models.

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

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

in this level are the Company�s quoted AFS financial assets. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair

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

instruments included under this level.

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*SGVMG300302*

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

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

included under this level.

�Day 1� Difference

When the transaction price in a non-active market is different from the fair value of other observable current market transactions in the same instrument or based on a valuation technique

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

between the transaction price and fair value (a �Day 1� difference) in profit or loss unless it qualifies for recognition as some other type of asset. In cases where use is made of data which is

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

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

each transaction, the Company determines the appropriate method of recognizing the �Day 1� difference amount.

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

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

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

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

are presented gross in the statement of financial position.

Derecognition of Financial Assets and Financial Liabilities

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

is derecognized when:

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

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

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

arrangement; or

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

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

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

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

transferred nor retained substantially all the risks and rewards of the financial asset nor transferred control of the financial asset, the financial asset is recognized to the extent of the Company�s

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

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

amount of the financial asset and the maximum amount of consideration that the Company could be required to repay.

Financial liabilities

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

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

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

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

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*SGVMG300302*

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

or loss.

Impairment of Financial Assets

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

asset or group of financial assets is impaired.

Financial assets carried at amortized cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset�s

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

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

(i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss

shall be recognized in profit or loss.

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

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

that are not individually significant. Objective evidence of impairment, includes, but is not limited to, bankruptcy or insolvency on the part of the customer and adverse changes in economy. If it is

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

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

credit risk characteristics and that group of financial assets is collectively assessed for impairment. Financial assets that are individually assessed for impairment and for which an impairment loss is

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

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

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

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

reversal is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans, together with the

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

collateral, if any, has been realized or has been transferred to the Company. If in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event

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

increased or reduced by adjusting the allowance for impairment losses account. If a future write-off is later recovered, the recovery is recognized in profit or loss. Any subsequent reversal of an

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

does not exceed its amortized cost at reversal date.

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

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

Company will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivables is reduced through the use of an allowance account.

Receivables together with the related allowance are written off when there is no realistic prospect

of future recovery.


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.

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*SGVMG300302*

In the case of equity investments classified as AFS financial assets, this would include a

significant or prolonged decline in the fair value of the investments below its cost. Where there is

evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously

recognized in profit or loss - is removed from equity and recognized in profit or loss. Impairment

losses on equity investments are not reversed through profit or loss. Increases in fair value after impairment are recognized as other comprehensive income.

Materials and Supplies Materials and supplies are stated at the lower of cost (determined using the first-in, first-out

method) and net realizable value. Cost includes the invoice price and related charges such as

freight, insurance, and taxes, among others. Net realizable value is the current replacement cost.

Property and Equipment

Property and equipment, except for land, are stated at cost less accumulated depreciation and

amortization and any impairment in value.

The initial cost of property and equipment comprises its purchase price, including import duties,

taxes, and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the property and equipment have been put into

operation, such as repairs and maintenance costs, are normally charged to profit or loss in the

period in which the costs are incurred. In situations where it can be clearly demonstrated that the

expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment beyond its originally assessed standard of

performance, the expenditures are capitalized as additional cost of property and equipment. When

assets are sold or retired, their cost, accumulated depreciation and amortization and any impairment in value are eliminated from the accounts. Any gain or loss resulting from the

disposal is included in profit or loss.

Land is stated at revalued amount based on the fair market value of the property determined by an independent firm of appraisers as of December 31, 2012. The increase in the valuation of land,

net of deferred income tax liability, is credited to �Revaluation increment on land� in the

statement of financial position and other comprehensive income. Upon disposal, the relevant portion of the revaluation increment realized in respect of the previous valuation will be released

from the revaluation increment directly to retained earnings in other comprehensive income.

Decreases that offset previous increases in respect of the same property are charged against the revaluation increment. All other decreases are charged against current operations.

Depreciation commences when an asset is in its location and condition and capable of being

operated in the manner intended by management. It is computed using the straight-line method, based on the estimated useful lives of the assets as follows:

Years

Broadcasting and transmission equipment 8-11 Furniture and equipment 5

Transportation equipment 4

Building and leasehold improvements are amortized over the term of the lease or life of the

building and improvements ranging from seven to seventeen years, whichever is shorter.

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*SGVMG300302*

Construction in progress represents properties under construction and is stated at cost, including

cost of construction and other direct costs. Construction in progress is not depreciated until such

time that the relevant assets are completed and ready for operational use.

The estimated useful lives and depreciation and amortization method are reviewed periodically to

ensure that these are consistent with the expected pattern of economic benefits from the items of property and equipment.

Investment Properties Investment properties, except land, are measured at cost, including transaction costs, less

accumulated depreciation and any impairment in value. The carrying amount includes the cost of

replacing part of an existing investment property at the time that cost is incurred, if the recognition

criteria are met, and excludes the costs of day-to-day servicing of an investment property.

Investment properties are derecognized when either they have been disposed of or when the

investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment

property are recognized in profit or loss in the year of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change in use,

evidenced by ending of owner-occupation, commencement of an operating lease to another party

or ending of construction or development. Transfers are made from investment property when,

and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

Investment properties is composed of land, building and other property and is depreciated, except

land, on a straight-line basis over their estimated useful lives of ten years and eight years, respectively.

Intangible Assets

The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any

accumulated amortization and any accumulated impairment losses.

The intangible assets are assessed as finite and are amortized over the useful economic life and

assessed for impairment whenever there is an indication that the intangible asset may be impaired.

The amortization period and the amortization method for an intangible asset with a finite useful

life is reviewed at least at each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted

for by changing the amortization period or method, as appropriate, and are treated as changes in

accounting estimates. The amortization of intangible assets with finite lives is recognized in profit or loss.

Amortization commences when the intangible asset is acquired and is capable of being owned and operated in the manner intended by management. It is computed using the straight-line method,

based on the estimated useful lives of the assets as follows:

Years

Frequency 13

Intellectual property rights 3

- 12 -

*SGVMG300302*

Goodwill is initially measured at cost being the excess of the cost of the business combination

over the net fair value of the acquiree�s identifiable assets. Goodwill is reviewed for impairment

annually or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.

Impairment of Nonfinancial Assets The carrying values of property and equipment, investment properties and intangible assets are

reviewed for impairment when events or changes in circumstances indicate the carrying values

may not be recoverable. If any such indication exists, or when annual impairment testing is required, and where the carrying values exceed the estimated recoverable amounts, the assets or

the cash generating units are written down to their recoverable amounts. The recoverable amount

of the assets is the greater of the fair value less costs to sell and value-in-use. In assessing value-

in-use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks

specific to the asset. For an asset that does not generate largely independent cash inflows, the

recoverable amount is determined for the cash-generating unit to which the asset belongs. Any impairment loss is recognized in profit or loss.

Capital Stock

Capital stock is the portion of the paid in capital representing the total par value of the shares

issued.

Retained Earnings

Retained earnings represent the cumulative balance of net income or loss, net of any dividend declaration and other capital adjustments.

Other Comprehensive Income

Other comprehensive income comprises items of income and expense that are not recognized in

profit or loss in accordance with PFRS. Other comprehensive income of the Company pertains to net changes in fair values of AFS financial assets and revaluation increment on land carried at

revalued amount.

Additional Paid-in Capital

Additional paid-in capital represents the amount paid in excess of the par value of the shares

issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax.

Treasury Stock

Treasury stocks are shares of the Company which are reacquired and are measured at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or

cancellation of the Company�s own equity instrument.

Revenue

Revenue is recognized when the significant risks and rewards of ownership have been transferred

or the services have been rendered to the customer, the amount of revenue can be measured reliably and it is probable that the economic benefits will flow to the Company. Revenue is

measured at the fair value of the consideration received or receivable, excluding discounts and

rebates. The following specific criteria must also be met before revenue is recognized:

Broadcasting fees

Broadcasting fees are recognized as income when the program is broadcasted or the advertisement

is aired.

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*SGVMG300302*

Rental income

Rental income is recognized on a straight-line basis over the lease term.

Interest

Interest is recognized as the interest accrues.

Cost of Services and Operating Expenses

Cost of services and operating expenses are recognized when incurred. They are measured at the fair value of the consideration paid or payable.

Value-Added Tax (VAT)

Revenue, expenses and assets are recognized net of the amount of VAT except:

· where VAT incurred on a purchase of assets or services is not recoverable from the taxation

authority, in which case VAT is recognized as part of the cost of acquisition of the asset or as

part of the expense item, as applicable; and

· receivables and payables that are stated with the amount of VAT included.

Retirement Benefits

Retirement benefits cost is actuarially determined using the projected unit credit method. This method reflects services rendered by employees up to the date of valuation and incorporates

assumptions concerning employees� projected salaries. Actuarial valuation is conducted with

sufficient regularity, with option to accelerate when significant changes to underlying assumptions

occur. Retirement benefits cost includes current service cost, interest cost, expected return on plan assets, amortization of actuarial gains and losses, past service cost and effect of any curtailment or

settlement.

The net retirement benefits liability recognized by the Company is the aggregate of the present

value of the defined benefit obligation and actuarial gains and losses not recognized reduced by

past service cost not yet recognized and the fair value of plan assets out of which the obligation is

to be settled directly. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using risk-free interest rates that have terms of

maturity approximating the terms of the related accrued retirement benefits.

Actuarial gains and losses is recognized as income or expense if the cumulative unrecognized

actuarial gains and losses at the end of the previous reporting period exceeded 10% of the greater

of the present value of defined benefit obligation or the fair value of the plan assets. These gains and losses are recognized over the expected average remaining working life of the employees

participating in the plan.

Borrowing Costs Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of

a qualifying asset. All other borrowing costs are expensed as incurred. Capitalization of

borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the

assets are substantially ready for their intended use. If the carrying amount of the asset exceeds its

recoverable amount, an impairment loss is recorded.

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*SGVMG300302*

Income Taxes

Current income tax

Current income tax assets and current income tax liabilities for the current and prior periods are measured at the amount expected to be recovered or paid to the taxation authorities. The tax rates

and tax laws used to compute the amount are those that have been enacted or substantively

enacted at the end of reporting period.

Deferred income tax

Deferred income tax is provided, using the liability method, on all temporary differences at the

reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred

income tax assets are recognized for all deductible temporary differences, to the extent that it is probable that sufficient future taxable profits will be available against which the deductible

temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting period and

reduced to the extent that it is no longer probable that sufficient future taxable profits will be

available to allow all or part of the deferred income tax assets to be utilized.

Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are

expected to apply to the period when the asset is realized or the liability is settled, based on tax

rates and tax laws that have been enacted or substantively enacted at the end of the reporting period.

Deferred income tax relating to items recognized outside profit or loss is recognized under other

comprehensive income and outside profit or loss.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable

right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Leases The determination of whether an arrangement is, or contains a lease is based on the substance of

the arrangement and requires an assessment of whether the fulfillment of the arrangement is

dependent on the use of a specific asset or assets and the arrangement conveys a right to use the

asset. A reassessment is made after inception of the lease only if one of the following applies:

a. there is a change in contractual terms, other than a renewal or extension of the arrangement;

b. a renewal option is exercised or extension granted, unless that term of the renewal or extension was initially included in the lease term;

c. there is a change in the determination of whether fulfillment is dependent on a specified

asset; or, d. there is a substantial change to the asset.

When a reassessment is made, lease accounting shall commence or cease from the date when the

change in circumstances gave rise to the reassessment for scenarios a, c or d above, and at the date of renewal or extension period for scenario b.

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*SGVMG300302*

Company as lessor

Leases where the Company retains substantially all the risks and rewards of ownership of the asset

are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same

basis as rental income. Contingent rents are recognized as revenue in the period in which they are

earned.

Company as lessee

Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are

classified as operating leases. Operating lease expense is recognized in profit or loss on a straight-line basis over the lease term.

Earnings Per Share

Basic earnings per share is computed by dividing the net income by the weighted average number of shares outstanding during the year.

Diluted earnings per share is calculated by dividing the net income by the weighted average

number of shares outstanding during the year and adjusted for the effects of all dilutive potential common shares, if any.

In determining both the basic and the diluted earnings per share, the effect of stock dividends, if

any, is accounted for retroactively.

Foreign Currency-denominated Transactions

Transactions in foreign currencies (i.e., currencies other than the Peso) are initially recorded using

the functional currency exchange rate at the date of the transaction. Outstanding monetary assets and liabilities denominated in foreign currencies are restated using the functional currency closing

exchange rate at the end of reporting period. All differences are taken to profit or loss.

Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a

result of a past event, it is probable that an outflow of resources embodying economic benefits will

be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Contingencies Contingent liabilities are not recognized in the financial statements. They are disclosed in the

notes to financial statements unless the possibility of an outflow of resources embodying

economic benefits is remote. Contingent assets are not recognized in the financial statements but

are disclosed in the notes to financial statements when an inflow of economic benefits is probable. Contingent assets are assessed continually to ensure that developments are appropriately reflected

in the financial statements. If it has become virtually certain that an inflow of economic benefits

will arise, the asset and the related income are recognized in the financial statements.

Events After the Reporting Period

Post year-end events that provide additional information about the Company�s position at the end

of reporting period (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to financial statements when

material.

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*SGVMG300302*

3. Significant Accounting Judgments and Estimates

The preparation of the financial statements in compliance with PFRS requires management to

make judgments, estimates and assumptions that affect the amounts reported in the financial statements. The judgments, estimates and assumptions used in the financial statements are based

upon management�s evaluation of relevant facts and circumstances that are believed to be

reasonable as of the date of the financial statements. Actual results could differ from such estimates.

The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if

the revision affects only that period, or in the period of the revision and future periods if the

revision affects both current and future periods.

Judgment

In the process of applying the Company�s accounting policies, management has made the

following judgment, apart from those involving estimations, which have the most significant effect on the amounts recognized in the financial statements:

Determination of the Company�s functional currency Based on the economic substance of the underlying circumstances relevant to the Company, the

functional currency has been determined to be the Philippine peso. It is the currency that mainly

influences the sale of service and the costs of providing the service.

Assessment of impairment of noncurrent nonfinancial assets

The Company assesses the impairment of assets whenever events or changes in circumstances

indicate that the carrying amount of an asset may not be recoverable. The factors that the Company considers important which could trigger an impairment review include the following:

a. significant adverse changes in the technological, market, or economic environment in which

the Company operates; b. significant decrease in the market value of an asset;

c. significant increase in the discount rate used for the value-in-use calculations;

d. evidence of obsolescence and physical damage; e. significant changes in the manner in which an asset is used or expected to be used;

f. plans to restructure or discontinue an operation; and,

g. evidence is available from internal reporting that the economic performance of an asset is, or will be, worse than expected.

Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is

recognized. The recoverable amount is the higher of an asset�s net selling price and value-in-use. The net selling price is the amount obtainable from the sale of an asset in an arm�s length

transaction while value-in-use is the present value of estimated future cash flows expected to arise

from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to

which the asset belongs.

Recoverable amount represents the value-in-use, determined as the present value of estimated

future cash flows expected to be generated from the continued use of the assets. The estimated

cash flows are projected using growth rates based on historical experience and business plans and

are discounted using pretax discount rates that reflect the current assessment of the time value of money and the risks specific to the asset.

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*SGVMG300302*

For goodwill, the Company determines whether it is impaired at least on an annual basis. This

requires an estimation of the value-in-use of the cash-generating unit to which the goodwill is

allocated. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount

rate in order to calculate the present value of those cash flows.

Based on management�s evaluation, no impairment loss needs to be recognized on the Company�s

property and equipment, investment properties, intangible assets, goodwill, and other noncurrent

assets in 2012, 2011 and 2010. As of December 31, 2012 and 2011, the carrying values of the Company�s noncurrent nonfinancial assets amounted to P=468.5 million and P=417.2 million,

respectively.

Operating lease commitments - Company as lessee The Company has a lease agreement with a third party covering its satellite communications

services. The Company has determined that the risks and rewards of ownership of the underlying

property is retained by the lessor since the lease does not transfer ownership of the assets to the Company, the lease term is not for the major part of the economic life of the assets and the

Company has no option to purchase the assets at the end of the lease agreements. Accordingly,

the lease was accounted for as an operating lease and was determined that this lease shall be recognized on a straight-line basis over the lease term.

Operating lease commitments - Company as lessor

The Company has arrangements with various lessees covering the building units it offers for lease, the ownership over which was determined to have been retained by the Company. Accordingly,

these leases were accounted for as operating leases.

Classification of financial instruments The Company classifies a financial instrument, or its component parts, on initial recognition, as a

financial asset, a financial liability or an equity instrument in accordance with the substance of the

contractual arrangement and the definitions of a financial asset, a financial liability or an equity

instrument. The substance of a financial instrument, rather than its legal form, governs its classification in the statement of financial position. As of December 31, 2012 and 2011, the

Company�s total financial assets amounted to P=476.3 million and P=483.5 million, respectively,

while its total financial liabilities amounted to P=178.9 million and P=197.3 million, respectively (see Note 20).

Estimations The key assumptions concerning the future and other key sources of estimation at the end of

reporting period that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year are discussed below:

Estimation of allowance for doubtful accounts

The Company maintains allowance for doubtful accounts at a level considered adequate to provide

for potential uncollectible receivables. The level of this allowance is evaluated by management on the basis of factors that affect the collectibility of accounts. These factors include, but are not

limited to, the length of the Company�s relationship with the client, the client�s payment behavior

and known market factors.

In addition to specific allowance against individually significant receivables, the Company also

makes a collective impairment testing which takes into consideration the customers� ability to pay,

age of receivables, past collection experiences and other factors that may affect collectibility.

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*SGVMG300302*

As of December 31, 2012 and 2011, allowance for doubtful accounts amounted to P=60.0 million

and P=58.4 million, respectively. Receivables, net of related allowance, amounted to

P=309.8 million and P=296.3 million of December 31, 2012 and 2011, respectively (see Note 6).

Estimation of allowance for inventory obsolescence

Provisions are made for items of inventory which are specifically identified to be obsolete. The amount of estimate is based on a number of factors which include, among others, the age and

status of inventories and the Company�s experience.

Allowance for inventory obsolescence amounted to P=1.5 million as of December 31, 2012 and

2011. Materials and supplies, net of related provision for inventory obsolescence, amounted to

P=12.4 million and P=9.3 million as of December 31, 2012 and 2011, respectively.

Estimation of useful lives of property and equipment, investment properties and intangible assets The Company estimated the useful lives of its property and equipment, depreciable investment

properties, and intangible assets based on the period over which the assets are expected to be available for use. The Company annually reviews the estimated useful lives of property and

equipment, depreciable investment properties, and intangible assets based on factors that include

asset utilization, internal technical evaluation, technological changes, environmental changes and anticipated use of the assets. It is possible that future results of operations could be materially

affected by changes in these estimates brought about by changes in the factors mentioned.

As of December 31, 2012 and 2011, the carrying value of depreciable property and equipment amounted to P=102.2 million and P=62.1 million, respectively. The net carrying value of

depreciable investment properties amounted to P=22.0 million and P=30.1 million as of

December 31, 2012 and 2011, respectively. Net intangible assets amounted to P=103.4 million and P=115.2 million as of December 31, 2012 and 2011, respectively. Total depreciation and

amortization relating to property and equipment and investment properties, and intangible assets

charged to operations amounted to P=42.1 million, P=46.1 million and P=50.4 million in 2012, 2011

and 2010, respectively (see Notes 8, 9, 10 and 15).

Recognition of deferred income tax assets

The Company reviews the carrying amounts of deferred income tax assets at each reporting period and reduces deferred income tax assets to the extent that it is no longer probable that sufficient

future taxable profits will be available to allow all or part of the deferred income tax assets to be

utilized.

Based on management�s evaluation, there will be sufficient future taxable profits against which

the deferred income tax assets can be applied. As of December 31, 2012 and 2011, recognized

deferred income tax assets amounted to P=32.5 million and P=31.4 million, respectively (see Note 18).

Assessment of impairment of AFS financial assets

The Company performs its impairment analysis of AFS financial assets with quoted market prices by considering whether the investment incurs significant or prolonged decline in fair value. The

determination of what is �significant� or �prolonged� requires judgment. The Company performs

its impairment analysis of AFS financial assets with no quoted bid prices by considering changes in the issuer�s industry and sector performance, legal and regulatory framework, changes in

technology, and other factors that affect the recoverability of the Company�s investments. Based

on management�s assessment, impairment loss needs to be recognized on unquoted AFS financial

assets amounting to P=0.5 million in 2011. Management has determined that no impairment loss needs to be recognized on the Company�s quoted AFS financial assets in 2012, 2011 and 2010.

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*SGVMG300302*

The carrying value of AFS financial assets amounted to P=25.6 million as of December 31, 2012

and 2011 (see Note 7).

Estimation of retirement benefits cost and liability

The determination of the obligation and retirement benefits cost is dependent on assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 17 and include

among others, discount rates which are determined by using risk-free interest rate of government

bonds consistent with the estimated term of the obligation, expected returns on plan assets, and salary increase rates. In accordance with PFRS, actual results that differ from the Company�s

assumptions are accumulated and amortized over future periods and therefore, generally affect the

recognized expense and recorded obligation in such future periods. While the Company believes

that the assumptions are reasonable and appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the retirement benefits

obligation.

The Company has unrecognized actuarial gain amounting to P=8.5 million and P=6.7 million as of

December 31, 2012 and 2011, respectively. Accrued retirement benefits amounted to

P=53.5 million and P=48.1 million as of December 31, 2012 and 2011, respectively (see Note 17).

Provisions

The Company provides for present obligations (legal or constructive) where it is probable that

there will be an outflow of resources embodying economic benefits that will be required to settle said obligations. An estimate of the provision is based on known information at the end of the

reporting period, net of any estimated amount that may be reimbursed to the Company. If the

effect of the time value of money is material, provisions are discounted using a pretax rate that reflects the risks specific to the liability. The amount of provision is being reassessed at least on

an annual basis to consider new relevant information. There were no provisions recognized as of

December 31, 2012 and 2011 (see Note 23).

4. Segment Information

The Company is organized into only one operating division, radio broadcasting, which is its

primary activity. The Company has six programming formats, namely DZRH and �Aksyon Radyo� stations, Love Radio, Yes-FM, Hot-FM, Radyo Natin, and Easyrock. For management

purposes, the Company considers the entire business as one segment. Management monitors the

operating results of the business for the purpose of making decisions about resource allocation and

performance assessment.

Broadcasting fee, net income, total assets and total liabilities for the years ended

December 31, 2012, 2011 and 2010 are the same as reported elsewhere in the accompanying

financial statements.

2012 2011 2010

Broadcasting fee P=788,823,015 P=756,600,651 P=833,380,988

Net income 87,489,385 60,863,848 117,528,855 Total assets 962,932,529 916,020,032 959,915,503

Total liabilities 303,828,770 293,816,130 277,790,552

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*SGVMG300302*

The Company has no revenue from transactions with a single external customer accounting for

more than 10% or more of the broadcasting fee. All noncurrent assets of the Company are located

in the Philippines.

5. Cash and Cash Equivalents

2012 2011

Cash on hand and in banks P=115,857,975 P=30,971,762

Short-term investments 25,629,166 42,168,394

P=141,487,141 P=73,140,156

Cash in banks earn interest at the respective bank deposit rates. Short-term investments are made

for varying periods of up to three months depending on the immediate cash requirements of the

Company and earn interest at the respective short-term deposit rates.

6. Receivables

2012 2011

Trade P=335,021,540 P=327,096,340 Advances to stations 22,632,278 18,195,060

Others 10,612,172 9,378,556

368,265,990 354,669,956 Less allowance for doubtful accounts 58,481,956 58,351,241

P=309,784,034 P=296,318,715

Trade receivables and advances to stations are noninterest-bearing and have credit terms of

approximately 90 days.

A reconciliation of the allowance for doubtful accounts by class is as follows:

Trade Advances to

stations Others

Total

December 31, 2010 P=51,137,367 P=251,121 P=4,053,998 P=55,442,486 Provisions (reversal) (Note 15) 3,274,958 128,785 (494,988) 2,908,755

December 31, 2011 54,412,325 379,906 3,559,010 58,351,241 Provisions (reversal) (Note 15) 1,646,321 � (1,515,606) 130,715

December 31, 2012 P=56,058,646 P=379,906 P=2,043,404 P=58,481,956

2012

Trade

Advances to

stations Others Total

Individual impairment P=� P=101,514 P=1,371,997 P=1,473,511 Collective impairment 56,058,646 278,392 671,407 57,008,445

P=56,058,646 P=379,906 P=2,043,404 P=58,481,956

2011

Trade Advances to

stations Others Total

Individual impairment P=� P=101,514 P=1,325,257 P=1,426,771 Collective impairment 54,412,325 278,392 2,233,753 56,924,470

P=54,412,325 P=379,906 P=3,559,010 P=58,351,241

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*SGVMG300302*

7. Available-for-sale Financial Assets

The carrying value of AFS financial assets as of December 31, 2012 and 2011 follows:

Unquoted P=25,999,910

Less allowance for impairment losses 455,275

25,544,635 Quoted 90,000

P=25,634,635

The fair value of the quoted shares of stock is determined based on quoted market price. As of

December 31, 2012, the Company has no intention to dispose the unquoted shares of stock primarily composed of investment in Star Parks Corporation, a related party. These unquoted

shares of stock are carried and presented at cost less impairment losses, if any.

Rollforward analysis of AFS financial assets follows:

2012 2011

Balance at beginning of year P=25,634,635 P=26,069,910

Impairment loss directly charged to profit or loss � (455,275) Gain recognized in other comprehensive income � 20,000

Balance at end of year P=25,634,635 P=25,634,635

The movement of reserve for fluctuation in AFS financial assets follows:

2012 2011

Beginning balance P=60,000 P=40,000

Valuation gain taken to other comprehensive income � 20,000

Ending balance P=60,000 P=60,000

8. Property and Equipment

a. Property and equipment carried at cost consist of:

2012

Building and

Broadcasting

and Furniture

Leasehold

Improvements

Transmission

Equipment

and

Equipment

Transportation

Equipment

Construction

In Progress

Total

Cost

Beginning balances P=131,377,892 P=354,634,894 P=94,684,131 P=34,932,832 P=6,404,030 P=622,033,779

Additions � 7,095,201 94,595 5,532,596 49,584,770 62,307,162

Ending balances 131,377,892 361,730,095 94,778,726 40,465,428 55,988,800 684,340,941

Accumulated Depreciation

and Amortization

Beginning balances 108,488,417 326,412,499 92,610,039 32,383,674 � 559,894,629

Depreciation and

amortization (Note 15)

8,724,562

10,960,792

919,617

1,643,122

�

22,248,093

Ending balances 117,212,979 337,373,291 93,529,656 34,026,796 � 582,142,722

Net Book Values P=14,164,913 P=24,356,804 P=1,249,070 P=6,438,632 P=55,988,800 P=102,198,219

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*SGVMG300302*

2011

Building and

Broadcasting

and

Furniture

Leasehold

Improvements

Transmission

Equipment

and

Equipment

Transportation

Equipment

Construction

In Progress

Total

Cost

Beginning balances P=131,040,536 P=354,312,377 P=94,607,056 P=34,932,832 P=� P=614,892,801

Additions 337,356 322,517 77,075 � 6,404,030 7,140,978

Ending balances 131,377,892 354,634,894 94,684,131 34,932,832 6,404,030 622,033,779

Accumulated Depreciation

and Amortization

Beginning balances 99,492,822 312,645,836 91,647,657 31,374,185 � 535,160,500

Depreciation and

amortization (Note 15)

8,995,595

13,766,663

962,382

1,009,489

�

24,734,129

Ending balances 108,488,417 326,412,499 92,610,039 32,383,674 � 559,894,629

Net Book Values P=22,889,475 P=28,222,395 P=2,074,092 P=2,549,158 P=6,404,030 P=62,139,150

As of December 31, 2012 and 2011, fully depreciated property and equipment with a cost

totaling P=410.7 million and P=342.9 million, respectively, are still used in operations.

b. Land at revalued amount as of December 31, 2012 and 2011 consists of:

2012 2011

Cost P=6,266,094 P=6,266,094

Appraisal increase 147,211,806 115,935,506

P=153,477,900 P=122,201,600

The revalued amount of P=153.5 million in 2012 and P=122.2 million in 2011 is based on the

valuation conducted by an independent appraisal company as of December 31, 2012 and 2009,

respectively. The appraisal company used the market data or sales comparison approach where

the fair market values are determined by referring to the extent, character and utility of the properties and sales and holding prices of similar land. The revaluation increment, net of

deferred income tax liability of P=103.0 million and P=81.2 million as of December 31, 2012 and

2011, respectively, is included in the equity section of the statements of financial position (see Note 18).

9. Investment Properties

2012

Land

Building and

Other Property

Total

Cost P=43,162,500 P=80,381,524 P=123,544,024

Accumulated Depreciation Beginning balances � 50,319,911 50,319,911 Depreciation (Note 15) � 8,068,652 8,068,652

Ending balances � 58,388,563 58,388,563

Net Book Values P=43,162,500 P=21,992,961 P=65,155,461

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*SGVMG300302*

2011

Land

Building and

Other Property

Total

Cost P=43,162,500 P=80,381,524 P=123,544,024

Accumulated Depreciation Beginning balances � 42,249,781 42,249,781 Depreciation (Note 15) � 8,070,130 8,070,130

Ending balances � 50,319,911 50,319,911

Net Book Values P=43,162,500 P=30,061,613 P=73,224,113

Investment properties are leased to employees and third parties. Total fair value of investment properties amounted to P=157.6 million as of December 31, 2012 and P=168.6 million as of

December 31, 2011, as determined by an independent appraiser as of December 31, 2012 and

2009, respectively. The appraiser used the market data or sales comparison approach in determining the fair value of investment properties. The valuation was made on the basis of the

market value determined by referring to the extent, character and utility of the properties and sales

and holding prices of similar property.

Rental income generated from these investment properties amounted to P=8.9 million in 2012,

P=9.1 million in 2011 and P=8.5 million in 2010. Related direct operating expenses amounted to

P=11.3 million, P=9.0 million and P=12.8 million in 2012, 2011 and 2010, respectively.

10. Intangible Assets

On September 30, 2008, the Company acquired a radio station from a private company. The total

cost of acquisition amounted to P=229.6 million, inclusive of value-added tax and net of

withholding tax.

In 2009, the Company obtained valuation services from an independent appraisal company to

determine the fair values of the identifiable assets and the value of goodwill as of the acquisition

date. The excess of acquisition cost over the adjusted fair values of the identifiable assets amounting to P=38.0 million was recognized as goodwill.

The net book values of the intangible assets as of December 31 are as follows:

2012

Frequency

Intellectual

Property

Rights

Total

Cost P=153,594,927 P=5,810,867 P=159,405,794

Accumulated Amortization

Beginning balances 38,398,735 5,810,867 44,209,602

Amortization (Note 15) 11,814,996 � 11,814,996

Ending balances 50,213,731 5,810,867 56,024,598

Net Book Values P=103,381,196 P=� P=103,381,196

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*SGVMG300302*

2011

Frequency

Intellectual

Property

Rights

Total

Cost P=153,594,927 P=5,810,867 P=159,405,794

Accumulated Amortization

Beginning balances 26,583,739 4,358,151 30,941,890

Amortization (Note 15) 11,814,996 1,452,716 13,267,712

Ending balances 38,398,735 5,810,867 44,209,602

Net Book Values P=115,196,192 P=� P=115,196,192

Impairment Testing of Goodwill The Company performs its annual impairment test every December of each year. The

recoverable amount of the cash-generating unit determined based on value in use, is compared to

its carrying amount. An impairment loss is recognized if the carrying amount of the cash-

generating unit exceeds its recoverable amount.

The cash flow projections are based on a five-year financial planning period and are discounted

using the weighted average cost of capital. As a result of this analysis, management has

determined that there was no impairment loss in 2012, 2011 and 2010 since the value in use

exceeds the carrying value of the identifiable assets.

Key Assumptions

The following are the key assumptions used in management�s analysis:

2012 2011 2010

Discount rate 12.35% 11.88% 16.63% Expected growth rate 3.46% 1.80% 2.00%

Sensitivity to Changes in Assumptions

Management assesses that a change in the discount rate of 1% point would not cause the carrying

value of identifiable assets to exceed its recoverable amount.

11. Accounts Payable and Accrued Expenses

2012 2011

Trade P=27,767,884 P=56,421,127

Accrued expenses (Notes 12 and 17) 71,954,630 77,711,724

Output tax and others 69,823,144 63,188,960

P=169,545,658 P=197,321,811

Trade payables and accrued expenses consist of amounts due to suppliers and service providers

and are usually payable within 30 days.

12. Related Party Transactions

Related party relationship exists when one party has the ability to control, directly or indirectly, through one or more intermediaries, or exercise significant influence over the other party in

making financial and operating decisions. Such relationships also exist between and/or among

entities which are under common control with the reporting entity and its key management

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*SGVMG300302*

personnel, directors or stockholders. In considering each possible related party relationship,

attention is directed to the substance of the relationship and not merely the legal form.

Transactions between related parties are accounted for at arm�s length prices or on terms similar to

those offered to on-related entities in an economically comparable market.

In the normal course of business, the Company has transactions with the following related parties:

· Elizalde Holding Corporation (EHC), an entity under common control;

· Cebu Broadcasting Company (CBC), an entity under common control;

· Pacific Broadcasting System, Inc. (PBSI), an entity under common control;

· Philippine Broadcasting Corporation (PBC), an entity under common control, and,

· Affiliated service companies.

The summary of transactions and outstanding balances with related parties are presented below:

Year Nature

Amounts /

Volume

Receivable

(Payable) Terms and conditions

Entities under common

control:

EHC 2012 Advances P=� (P=6,471,524)

Unsecured, interest-

free with no definite

call dates and no

impairment

2011 -do- � 88,966,242 -do-

CBC 2012 Program costs 138,979,511 � -do-

2011 -do- 117,805,553 � do-

PBC 2012 -do- 30,192,361 � -do-

2011 -do- 32,382,498 � do-

PBSI 2012 -do- 50,081,245 � -do-

2011 -do- 53,525,218 � do-

Affiliated service

companies 2012 Service fees 123,119,125 � -do-

2011 -do- 171,270,963 � do-

Others:

Officers 2012 Advances 827,900 5,591,824 -do-

2011 -do- � 4,763,923 do-

Key management

personnel 2012

Short-term employee

benefits and retirement

benefits � �

2011 -do- � �

The Company�s significant related party transactions are as follows:

a. The Company and several affiliated broadcasting companies, which are owned and managed

by certain stockholders and/or members of the BOD of the Company, entered into marketing

agreements, whereby the affiliated broadcasting companies designated the Company as their

sole marketing outfit for the sales, promotion, and marketing of the radio commercial airtime of all radio broadcast stations of these affiliated broadcasting companies. Under the marketing

agreements, the Company shall remit to the affiliated broadcasting companies a certain fixed

amount per year and/or a certain percentage of the annual net income from the sale of the commercial time of the radio broadcast stations after agency commission. The original

marketing agreement, which was effective for a period of five years from January 1, 1998, has

been renewed annually, thereafter. Total fees included under �Program costs� presented as part of �Costs of services� in the statements of comprehensive income amounted to

P=219.2 million in 2012, P=203.7 million in 2011 and P=204.1 million in 2010. The Company

also bills the affiliated broadcasting companies for their share in the expenses for operating the

radio broadcast stations (see Note 15).

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*SGVMG300302*

b. In 2002, the �Hating Kapatid� system (the System) was devised to change the way the

Company was handling the operations of the radio stations as well as its marketing,

engineering, administrative, and financial functions (support functions). Under the System, the operations of each radio station and support services functions were outsourced to service

companies managed and operated by former station managers and officers of the Company

(affiliated service companies). As such, substantially all employees of the Company were separated. As approved by the BOD, the Company shall provide financial support to certain

radio stations through advances as well as payment of certain operating expenses of the said

radio stations until these radio stations can financially sustain their operations.

As a result of the System, the Company entered into service agreements with affiliated service companies, which are owned and managed by certain stockholders and/or members of the

BOD of the Company. These affiliated service companies provide production and creative

services, promotions, accounting, personnel, collection, procurement, engineering, and other related services. The Company pays a certain percentage of collection as service fee. Total

service fees amounted to P=123.1 million in 2012, P=171.3 million in 2011 and P=214.3 million

in 2010 which is shown as part of �Cost of services� in the statements of comprehensive income. The outstanding payables related to these transactions amounted to P=22.9 million and

P=21.6 million as of December 31, 2012 and 2011, respectively, and are shown as part of the

�Accounts payable and accrued expenses� account in the statements of financial position.

In October 2011, the service agreement between the Company and DZRH was cancelled.

This resulted in the transfer of DZRH employees to the Company. The Company assumed the

retirement benefits liabilities to these transferred employees totaling P=38.1 million. This amount includes P=12.6 million representing the separation costs previously accrued under

�Accrued expenses� account prior to the start of the implementation of the System

(see Note 17).

c. The Company grants and obtains short-term interest-free advances to and from its affiliates,

which are owned and managed by certain stockholders and/or members of the BOD of the

Company. The outstanding amount due from affiliates as of December 31, 2012 and due to an affiliate as of December 31, 2011 pertains to EHC.

d. The short-term employee benefits and retirement benefits cost of key management personnel amounted to P=9.1 million in 2012 and P=7.0 million in 2011.

13. Capital Stock

Capital stock consists of 1,000,000,000 authorized common shares with par value of P=1.00 per

share, of which 402,803,777 shares have been issued. Total number of equity shareholders as of

December 31, 2012 and 2011 is 615 and 619, respectively.

On October 19, 1976, the stockholders approved the increase in the authorized capital stock of the

Company from P=1.5 million, divided into 1.5 million shares with par value of P=1.00 each to

P=5.0 million, divided into 5.0 million shares with par value of P=1.00 each. On the same date, the stockholders approved the declaration of 50% stock dividends payable to stockholders of record as

of October 30, 1976.

In 1978, the stockholders reduced the proposed increase to P=4.0 million, divided into 4.0 million shares with par value of P=1.00 each, and approved the payment of the 50% stock dividend to

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*SGVMG300302*

stockholders of record as of October 30, 1976. The increase in authorized capital stock was

approved by the SEC on April 28, 1978.

The BOD and stockholders approved on January 29, 1997 and February 26, 1997, respectively, the

increase in the Company�s authorized capital stock from P=4.0 million, divided into 4.0 million

shares with par value of P=1.00 each to P=1.0 billion, divided into 1.0 billion shares with the same par value.

14. Retained Earnings

On November 19, 2012, the BOD declared cash dividends amounting to P=72.5 million or P=0.18

per share to stockholders on record as of December 20, 2012 payable on December 29, 2012.

On September 30, 2011, the BOD declared cash dividends amounting to P=120.8 million or P=0.30

per share to stockholders on record as of October 5, 2011 payable on October 31, 2011.

On November 19, 2010, the BOD declared cash dividends amounting to P=25.2 million or P=0.06

per share to stockholders on record as of December 9, 2010 payable on December 23, 2010.

The Company�s retained earnings are not available for declaration as dividends to the extent of the

cost of treasury stock and unrealized gains.

15. Cost of Services and Operating Expenses

Cost of services:

2012 2011 2010

Program costs (Notes 12 and 19) P=308,395,890 P=290,644,665 P=273,926,827

Service fees (Note 12) 123,119,125 171,270,963 214,305,150

Personnel expenses (Notes 12 and 16) 33,039,032 20,624,510 8,636,643 Depreciation and amortization

(Notes 8, 9 and 10) 10,960,792 14,215,499 17,785,685

Replacement parts 6,039,488 4,463,103 4,483,327

P=481,554,327 P=501,218,740 P=519,137,632

Operating expenses:

2012 2011 2010

Personnel expenses (Notes 12 and 16) P=57,132,250 P=61,758,629 P=29,311,669

Depreciation and amortization (Notes 8, 9 and 10) 31,170,949 31,856,472 32,640,246

Communication, light and water 21,893,293 16,966,432 22,874,310

Agency commission and discounts 18,608,703 18,268,100 19,261,756

Travel and transportation 11,324,491 7,672,647 6,606,257 Repairs 10,104,029 5,783,025 8,254,792

Rent (Note 19) 8,021,358 2,710,584 2,912,865

Advertising and promotions 5,175,363 13,417,846 8,372,563

(Forward)

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*SGVMG300302*

2012 2011 2010

Replacement parts P=5,166,398 P=1,314,988 P=438,296

Taxes and licenses 4,761,664 3,724,312 3,622,320 Entertainment, amusement and recreation 2,590,359 2,250,484 1,929,020

Professional fees 1,530,263 1,353,510 1,465,617

Dues and membership fees 986,789 986,476 1,072,323 Insurance and bonds 645,136 465,513 595,998

Provision for doubtful accounts (Note 6) 130,715 2,908,755 6,290,338

Others 16,463,705 7,318,281 7,274,626

P=195,705,465 P=178,756,054 P=152,922,996

16. Personnel Expenses

2012 2011 2010

Salaries, wages and bonuses P=70,936,319 P=46,323,399 P=28,096,734

Retirement benefits cost (Note 17) 7,278,536 27,748,145 2,530,097

Other short-term employee benefits 11,956,427 8,311,595 7,321,481

P=90,171,282 P=82,383,139 P=37,948,312

17. Retirement Benefits and Separation Costs

Separation Costs under the Hating Kapatid System Substantially all employees of the Company were separated in 2002 upon implementation of the

System. However, most of the said personnel were employed by the affiliated service companies.

The separated employees expressly agreed in writing to receive their separation pay from the

Company only after their final/actual separation/resignation from the affiliated service companies. Separation costs of P=37.1 million have been recognized in 2002 in addition to the amount

previously accrued.

As discussed in Note 12, the agreement with DZRH under the System was cancelled in 2011 and

the employees of DZRH were transferred to the Company. As a result, separation costs relating to

the employees transferred from DZRH amounting to P=12.7 million were reclassified as retirement

benefits and included under �Accrued retirement benefits� in the statement of financial position as of December 31, 2011.

The remaining unpaid balance of the separation cost of P=28.1 million and P=41.9 million as of December 31, 2012 and 2011, respectively, are included in the �Accounts payable and accrued

expenses� account in the statements of financial position.

Retirement Benefits

The Company has a funded, noncontributory defined benefit retirement plan covering all of its

remaining employees. The latest actuarial valuation report is as of December 31, 2012.

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*SGVMG300302*

The components of retirement benefits cost charged to profit and loss are as follows:

2012 2011 2010

Current service cost P=4,935,922 P=1,497,413 P=961,786

Interest cost 4,294,352 2,070,545 2,735,822

Expected return on plan assets (1,951,738) (1,097,400) (993,273) Net actuarial gains � (240,534) (174,238)

Past service costs of employees

transferred from an

affiliate (Note 12) � 25,518,121 �

Total retirement benefits cost P=7,278,536 P=27,748,145 P=2,530,097

The funded status and amounts recognized in the statements of financial position for the

retirement plan as of December 31, 2012 and 2011 are as follows:

2012 2011

Present value of benefit obligation P=80,940,273 P=73,033,198

Fair value of plan assets 35,924,381 31,684,064

45,015,892 41,349,134 Unrecognized actuarial gains 8,464,518 6,726,529

Accrued retirement benefits P=53,480,410 P=48,075,663

Movements in the accrued retirement benefits follow:

2012 2011

Balances, January 1 P=48,075,663 P=10,609,959

Retirement benefits cost 7,278,536 27,748,145

Contributions (1,873,789) (2,944,525) Reclassification (Note 12) � 12,662,084

Balances, December 31 P=53,480,410 P=48,075,663

The changes in present value of the retirement obligation are as follows:

2012 2011

Present value of obligation at beginning of year P=73,033,198 P=28,094,233

Current service cost 4,935,922 1,497,413

Interest cost 4,294,352 2,070,545 Actuarial loss (gain) on obligation (1,323,199) 3,190,802

Past service costs of employees transferred from

an affiliate (Note 12) � 25,518,121 Reclassification (Note 12) � 12,662,084

Present value of obligation at end of year P=80,940,273 P=73,033,198

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*SGVMG300302*

The changes in fair value of plan assets are as follows:

2012 2011

Fair value of plan assets at beginning of year P=31,684,064 P=26,066,501

Expected return on plan assets 1,951,738 1,097,400

Contributions 1,873,789 2,944,525 Actuarial gain on plan assets 414,790 1,575,638

Fair value of plan assets at end of year P=35,924,381 P=31,684,064

Actual return on plan assets amounted to P=2.4 million in 2012 and P=2.7 million in 2011. The

expected rates of return on plan assets were based on a reputable fund trustee�s indicative yield rate for a risk portfolio similar to that of the fund with consideration to the fund�s past

performance.

The assumptions used to determine retirement benefits of the Company as of January 1 are as follows:

2012 2011

Discount rate 5.88% 7.37% Salary increase rate 10.00% 10.00%

Expected rate of return on plan assets 6.16% 4.21%

As of December 31, 2012, the discount rate, salary increase rate and expected rate of return on

plan assets are 5.31%, 10.00% and 4.00%, respectively.

The major categories of plan assets as a percentage of the fair value of total plan assets are as

follows:

2012 2011

Investments in government securities 91.25% 94.55%

Cash and cash equivalents 6.62% 3.08%

Receivables 2.13% 2.37%

100.00% 100.00%

Amounts for the current and previous four annual periods are as follows:

2012 2011 2010 2009 2008

Benefit obligation P=80,940,273 P=73,033,198 P=28,094,233 P=25,168,553 P=23,224,078 Plan assets (35,924,381) (31,684,064) (26,066,501) (19,865,454) (15,138,770)Deficit 45,015,892 41,349,134 2,027,732 5,303,099 8,085,308 Experience adjustments on

plan liabilities (5,507,244) (4,171,492) (2,612,571) � � Experience adjustments on plan assets 414,790 1,575,638 1,460,197 871,077 (1,550,632)

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*SGVMG300302*

18. Income Taxes

a. The provision for income tax consists of:

2012 2011 2010

Regular corporate income tax P=40,246,814 P=34,211,753 P=49,749,512

Final tax 186,916 215,630 238,675 Deferred (1,182,387) (8,270,644) 358,472

P=39,251,343 P=26,156,739 P=50,346,659

b. The components of the Company�s net deferred income tax liabilities consist of the tax effects

of the following:

2012 2011

Deferred income tax assets on:

Allowances for: Doubtful accounts P=17,544,587 P=17,505,372

Inventory obsolescence 444,606 452,599

Accrued retirement benefits and unamortized

contribution to past service cost 14,546,468 13,384,453 Accrued rent expense � 10,850

32,535,661 31,353,274

Deferred income tax liabilities on

revaluation increment on land (Note 8) 44,163,542 34,780,652

Deferred income tax liabilities - net P=11,627,881 P=3,427,378

c. The reconciliation of income tax computed at the statutory tax rate to provision for income tax

as shown in profit or loss follows:

2012 2011 2010

Statutory income tax P=38,022,218 P=26,106,176 P=50,362,654

Additions to (reductions in)

income tax resulting from: Interest income subjected to

final tax at a lower rate (93,559) (86,020) (141,428)

Impairment losses on AFS financial assets � 136,583 �

Nondeductible expenses 1,322,684 � 125,433

Provision for income tax P=39,251,343 P=26,156,739 P=50,346,659

19. Lease Commitments

The Company leases satellite communications capacity for the performance of its broadcasting

services called the Transponder Lease, which considers certain space segment capacity and transponder power. The lease agreement is for a period of five years from November 1, 2007 and

was renewed for another five years commencing on November 1, 2012. Rent expense on this

lease agreement amounted to P=4.8 million, P=4.7 million and P=4.8 million in 2012, 2011 and 2010,

respectively, included under �Program costs� presented as part of �Costs and operating expenses� in the statements of comprehensive income.

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*SGVMG300302*

Future minimum lease payments as of December 31 are as follows:

2012 2011

Within one year P=4,704,330 P=3,923,680

After one year but not more than five years 18,033,265 �

P=22,737,595 P=3,923,680

20. Financial Risk Management Objectives and Policies

The Company�s principal financial instruments consist of cash and cash equivalents. The main purpose of these financial instruments is to fund the Company�s operations. The other financial

assets and financial liabilities arising directly from its operations are receivables, due to/from

affiliates, AFS financial assets, accounts payable and accrued expenses, talent fees and

commissions payable and dividends payable.

The main risks arising from the Company�s financial instruments are credit risk and liquidity risk.

The BOD reviews and approves policies for managing each of these risks.

Credit Risk Credit risk, or the risk of counterparties defaulting, is controlled by the application of control and

monitoring procedures. It is the Company�s policy that all clients who wish to trade on credit

terms are subjected to credit verification procedures. Receivables and due from affiliates balances are monitored on an ongoing basis to ensure that the Company�s exposure to bad debts is not

significant. The Company evaluates the concentration of risk with respect to its receivables as

low, as its customers are located in several industries and operate in largely independent markets.

With respect to credit risk arising from the Company�s other financial assets consisting of cash and cash equivalents, the Company�s exposure arises from the default of the counterparty, with a

maximum exposure equal to the carrying amount of these instruments. The Company deals only

with financial institutions duly evaluated and approved by the BOD. The Company avoids concentrations of credit risk on its liquid assets as these are spread over several financial

institutions.

The maximum exposure of the Company to credit risk as of December 31, 2012 and 2011 is equal

to the carrying values of the financial assets. The Company does not hold collaterals as security.

Credit quality of financial assets The tables below summarize the credit quality of the Company�s financial assets as of

December 31.

2012

Neither past due nor impaired

Standard Past due but Past due

High grade grade not impaired and impaired Total

Loans and receivables:

Cash in banks P=115,299,975 P=� P=� P=� P=115,299,975

Short-term investments 25,629,166 � � � 25,629,166

Receivables:

Trade 73,264,367 78,309,501 127,389,026 56,058,646 335,021,540

Advances to stations 11,583,265 1,125,276 9,543,831 379,906 22,632,278

Others 6,288,797 956,283 1,323,688 2,043,404 10,612,172


Quoted 90,000 � � � 90,000

Unquoted � 25,544,635 � � 25,544,635

P=232,155,570 P=105,935,695 P=138,256,545 P=58,481,956 P=534,829,766

- 33 -

*SGVMG300302*

2011

Neither past due nor impaired

Standard Past due but Past due

High grade grade not impaired and impaired Total


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


Quoted 90,000 � � � 90,000

Unquoted � 25,544,635 � � 25,544,635

P=234,335,814 P=109,018,797 P=140,122,829 P=58,351,241 P=541,828,681

Financial assets classified as �high grade� are those cash in banks and short-term investments

transacted with reputable local banks and receivables and due from affiliates with no history of default on the agreed contract terms. Financial instruments classified as �standard grade� are

those financial assets with little history of default on the agreed terms of the contract. A financial

asset is considered past due when a counterparty has failed to make a payment when contractually due. �Past due but not impaired� financial assets are items with history of frequent default.

Nevertheless, the amounts due are still collectible. Lastly, �Past due and impaired� items are

those that are long outstanding and have been specifically identified and collectively provided

with allowance for probable losses.

Financial assets that are past due but not impaired

The tables below summarize the aging analysis of past due but not impaired financial assets as of December 31, 2012 and 2011.

2012

<30 Days

31-60

Days

61-90

Days

91-120

Days

Over 120

Days

Total


Receivables Trade P=29,795,366 P=15,859,855 P=10,746,413 P=38,996,108 P=31,991,284 P=127,389,026 Advances to stations 721,618 119,409 127,639 3,092,059 5,483,106 9,543,831 Others � � � � 1,323,688 1,323,688

P=30,516,984 P=15,979,264 P=10,874,052 P=42,088,167 P=38,798,078 P=138,256,545

2011

<30 Days

31-60 Days

61-90 Days

91-120 Days

Over 120 Days

Total

Loans and receivables: Receivables Trade P=32,848,191 P=13,801,353 P=10,876,406 P=28,773,176 P=42,444,629 P=128,743,755 Advances to stations 2,531,511 525,125 � 1,339,651 4,763,924 9,160,211 Others � � � � 2,218,863 2,218,863

P=35,379,702 P=14,326,478 P=10,876,406 P=30,112,827 P=49,427,416 P=140,122,829

Liquidity Risk

Liquidity risk arises when obligations are not met when they fall due. It is the Company�s objective to finance capital expenditures, services, and maturing obligations as scheduled. To

cover the Company�s financing requirements and at the same time, manage its liquidity risk, the

Company uses internally generated funds and proceeds from debt. Projected and actual cash flow information are regularly evaluated and funding sources are continuously assessed.

- 34 -

*SGVMG300302*

The tables below summarize the maturity profile of the Company�s financial liabilities as of

December 31, 2012 and 2011 based on contractual undiscounted payments, including interest due:

2012

Less than 3 to 12 On demand 3 months months Total

Other financial liabilities Accounts payable and accrued expenses* P=51,398,290 P=45,412,041 P=35,851,611 P=132,661,942

Due to an affiliate 6,471,524 � � 6,471,524 Dividends payable 10,391,998 � � 10,391,998 Talent fees and commissions payable � 25,078,640 10,747,989 35,826,629

P=68,261,812 P=70,490,681 P=44,599,600 P=185,352,093

*Amounts are exclusive of nonfinancial liabilities amounting to P=36,903,445 as of December 31, 2012.

2011

Less than 3 to 12 On demand 3 months months Total

Other financial liabilities Accounts payable and accrued expenses* P=52,280,514 P=62,083,110 P=50,656,516 P=165,020,140 Dividends payable 1,661,994 � � 1,661,994 Talent fees and commissions payable � 21,432,976

9,185,561 30,618,537

P=53,942,508 P=83,516,086 P=59,842,077 P=197,300,671

*Amounts are exclusive of nonfinancial liabilities amounting to P=32,301,671 as of December 31, 2011.

The following tables show the profile of financial assets used by the Company to manage its liquidity risk:

2012

On Less than 3 to 12 Demand 3 Months Months Total

Cash in banks P=115,299,975 P=� P=� P=115,299,975 Short-term investments � 25,629,166 � 25,629,166

115,299,975 25,629,166 � 140,929,141

Receivables Trade 151,573,868 56,401,634 70,987,392 278,962,894

Advances to stations 12,708,541 968,666 8,575,165 22,252,372 Others 7,245,080 � 1,323,688 8,568,768

171,527,489 57,370,300 80,886,245 309,784,034

P=286,827,464 P=82,999,466 P=80,886,245 P=450,713,175

2011

On Less than 3 to 12 Demand 3 Months Months Total

Cash in banks P=30,389,454 P=� P=� P=30,389,454 Short-term investments � 42,168,394 � 42,168,394

30,389,454 42,168,394 � 72,557,848

Receivables Trade 143,940,260 57,525,950 71,217,805 272,684,015 Advances to stations 8,654,943 3,056,636 6,103,575 17,815,154 Others 3,600,683 � 2,218,863 5,819,546

156,195,886 60,582,586 79,540,243 296,318,715

Due from affiliates � � 88,966,242 88,966,242

P=186,585,340 P=102,750,980 P=168,506,485 P=457,842,805

- 35 -

*SGVMG300302*

Equity Price Risk

The Company�s exposure to the risk of changes in equity price relates primarily to its quoted AFS

financial asset. Management believes that the Company�s exposure to equity price risk is minimal since the balance of quoted AFS financial asset is not material (see Note 7).

Capital Management The primary objective of the Company�s capital management is to ensure that it maintains a strong

credit rating and healthy capital ratios in order to support its business and maximize shareholder

value.

The Company manages its capital structure and makes adjustments to it, in light of changes in

economic conditions. To maintain or adjust the capital structure, the Company may adjust the

dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended December 31, 2012 and

2011.

The Company monitors its use of capital using debt to equity ratio (total liabilities/total equity)

which is 46.10% and 47.22% as of December 31, 2012 and 2011, respectively.

The following table summarizes the Company�s capital structure as of December 31, 2012 and

2011:

2012 2011

Capital stock P=402,803,777 P=402,803,777

Additional paid-in capital 79,354 79,354

Retained earnings 153,233,151 138,226,704

Treasury stock (120,787) (120,787)

P=555,995,495 P=540,989,048

21. Financial Assets and Financial Liabilities

The carrying value and estimated fair value of all the financial instruments are equal as of December 31, 2012 and 2011.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

AFS financial assets The fair value of the quoted shares of stock as of December 31, 2012 and 2011 is based on quoted

market price (Level 1). Unquoted shares of stock amounting to P=25.5 million as of December 31,

2012 and 2011, are carried and presented at cost since the fair values of such investments cannot

be reliably determined. There were no transfers between the different hierarchy levels in 2012 and 2011.

Other financial assets and financial liabilities Due to the short-term nature of other financial assets and financial liabilities, the fair value of cash

in banks, short-term investments, receivables, due to/from affiliates, accounts payable and accrued

expenses, dividends payable, and talent fees and commissions payable approximate the carrying

value as of the end of the reporting period.

- 36 -

*SGVMG300302*

22. Earnings per Share (EPS)

Basic EPS is computed based on the weighted average number of issued and outstanding common

shares during each year. Diluted EPS is computed as if the potential common share or instrument that may entitle the holder to common share were exercised as of the beginning of the year. When

there are no potential common shares or other instruments that may entitle the holder to common

shares, diluted EPS, is the same as the basic EPS.

There are no dilutive financial instruments in 2012 and 2011, hence, diluted EPS is the same as the

basic EPS.

23. Other Matters

The Company is and may become a defendant/respondent in various cases and assessments which are pending in the courts or under protest. Management and its legal counsels believe that the

liability, if any, that may result from the outcome of these cases and investigation will not

materially affect its financial position and results of operations.

24. Supplementary Information Required Under Revenue Regulations 15-2010

In compliance with Bureau of Internal Revenue Regulations 15-2010 issued on November 25,

2010, mandating all taxpayers to disclose information on taxes and license fees paid and accrued

during the taxable year, summarized below are the taxes paid and accrued by the Company in

2012.

a. Output VAT declared by the Company amounted to P=93,425,872 based on receipts of

P=778,548,936. Outstanding net output tax payable amounted to P=24,143,770 as of December 31, 2012.

The Company�s revenue on which output VAT is declared, is based on collections, hence,

may not be the same as the amounts accrued in the statement of comprehensive income.

b. Movements in input VAT are as follows:

Balance, January 1 P=4,391,078

Current year payments for: Services lodged under cost of services 54,461,080

Capital goods subject to amortization 5,413,063

Total available input VAT during the period 64,265,221

Claims for tax credit and other adjustments (59,315,969)

Balance, December 31 P=4,949,252

c. Taxes and licenses paid by the Company are as follows:

Business permits P=2,289,218

NTC permits and fees 1,340,251

Real property taxes 819,948 Others 312,247

P=4,761,664

- 37 -

*SGVMG300302*

d. Withholding taxes paid and accrued by the Company are as follows:

Paid Accrued Total

Expanded withholding tax P=15,042,848 P=1,465,442 P=16,508,290

Withholding tax on compensation

and benefits

5,738,097

1,469,518

7,207,615 Final withholding taxes 1,372,760 1,895,154 3,267,914

25. Supplementary Information Required Under Revenue Regulations 19-2011

In compliance with Bureau of Internal Revenue Regulations 19-2011 dated December 9, 2011, presented below are the details of revenue, cost of services, other taxable income and itemized

deductions of the Company.

Sales, Revenue, Receipts and Fees The Company�s taxable revenue from broadcasting fees amounted to P=788,823,015 for the year

ended December 31, 2012.

Cost of Services

The Company�s tax deductible cost of services in 2012 are as follows:

Program costs P=308,432,058

Service fees 123,119,125

Personnel expenses 33,039,032

Depreciation and amortization expense 10,960,792 Replacement parts 6,039,489

P=481,590,496

Itemized Deductions

The Company�s itemized deductions in 2012 are as follows:

Salaries and allowances P=52,261,436

Depreciation 31,170,949

Communication, light and water 21,893,293 Commissions 20,283,535

Transportation and travel 11,324,491

Repairs and maintenance - labor 10,104,029 Rental 8,021,358

Repairs and maintenance - materials/supplies 5,193,042

Advertising and promotions 5,175,363

Taxes and licenses 4,761,664 Security services 2,945,436

Office supplies 2,621,618

Representation and entertainment 2,590,359 SSS, GSIS, Philhealth, HDMF and other contributions 1,776,621

Professional fees 1,530,263

Dues and membership fees 986,789 Insurance 645,136

Director's fees 366,667

Freight and delivery 263,531

Miscellaneous 3,403,480

P=187,319,060

- 38 -

*SGVMG300302*

Details of Other Income

Rental income P=8,878,244 Others 5,364,344

P=14,242,588

*SGVMG300302*


TO ACCOMPANY INCOME TAX RETURN


Manila Broadcasting Company MBC Building, Star City, Sotto Street

CCP Complex, Roxas Boulevard, Pasay City

We have audited the financial statements of Manila Broadcasting Company as at and for the year

ended December 31, 2012, on which we have rendered the attached report dated April 5, 2013.

In compliance with Revenue Regulations V-20, we are stating that no partner of our Firm is related by

consanguinity or affinity to the president, manager or principal stockholders of the Company.




SEC Accreditation No. 0468-AR-2 (Group A),

February 14, 2013, valid until February 13, 2016 Tax Identification No. 102-085-895



April 5, 2013





*SGVMG300302*


ON SUPPLEMENTARY SCHEDULES


Manila Broadcasting Company MBC Building, Star City

CCP Complex, Roxas Boulevard

Pasay City

We have audited in accordance with Philippine Standards on Auditing, the financial statements of

Manila Broadcasting Company as at December 31, 2012 and 2011 and for each of the three years in the period ended December 31, 2012, included in this Form 17-A and have issued our report thereon

dated April 5, 2013. Our audits were made for the purpose of forming an opinion on the basic

financial statements taken as a whole. The schedules listed in the Index to the Financial Statements and Supplementary Schedules are the responsibility of the Company's management. These schedules

are presented for purposes of complying with Securities Regulation Code Rule 68, As Amended

(2011) and are not part of the basic financial statements. These schedules have been subjected to the

auditing procedures applied in the audit of the basic financial statements and in our opinion, fairly state, in all material respects, the information required to be set forth therein in relation to the basic

financial statements taken as a whole.




SEC Accreditation No. 0468-AR-2 (Group A), February 14, 2013, valid until February 13, 2016

Tax Identification No. 102-085-895



April 5, 2013





*SGVMG300302*


SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS

AVAILABLE FOR DIVIDEND DECLARATION DECEMBER 31, 2012

Unappropriated retained earnings, beginning P=138,226,704

Adjustments:

Deferred income tax assets (31,353,274)

Cost of treasury shares (120,787)

(31,474,061)

Unappropriated retained earnings, as adjusted to available for dividend declaration, beginning 106,752,643

Add net income actually earned/realized during the year

Net income during the year closed to retained earnings 87,489,385

Less increase in deferred income tax assets (1,182,387)

86,306,998

Less dividend declaration during the year (72,482,938)

Total retained earnings available for dividend declaration, end P=120,576,703

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