Our COMMITMENT:
We are a sovereign guarantor extending primarily guarantee, export insurance and related services to business entities in order to develop the Nation’s export industry and facilitate investment in strategic sectors of the economy. Our ASPIRATION:
By 2018, PhilEXIM shall be the preferred credit guarantee institution facilitating international trade and insvestments responsive to the developmental needs of the country.
CORE VALUES:
• Integrity • Professionalism • Good Governance • Innovation • Teamwork
OUR COVER To reach milestone moments in doing business, the Philippine Export-Import Credit Agency (PhilEXIM) goes into the decades of continuous support and development for their stakeholders, clients and the business community. Guided by a strong direction on investing for the rapid evolving economy, PhilEXIM continues to adopt with the changing times in providing for the needs of the export and priority industries.
Following the theme “Evolving in a Period of Opportunities” for its 2017 Annual Report it emphasizes the evolving rate of PhilEXIM towards mandate filfillment. It has assisted in providing assistance to economic requirements and expansions of trade and investments. The cover’s background shows a vast horizon, a reflection of its diverse business industries that brings not only opportunities, but hope for a better tomorrow. Financial INDICATORS
2,167 1,407 761 1,759 1,358 401
1,768 1,129 639
2015 2016 2017 2015 2016 2017 2015 2016 2017
TOTAL ASSETS (In Million Pesos) TOTAL LIABILITIES (In Million Pesos) NET WORTH (In Million Pesos)
152 342 (141) 173 548 (261)
293 311 (29)
2015 2016 2017 2015 2016 2017 2015 2016 2017
TOTAL REVENUES (In Million Pesos) TOTAL EXPENSES (In Million Pesos) COMPREHENSIVE INCOME (In Million Pesos)
TABLE of CONTENTS
1 Financial Indicators 2 Corporate Objectives and Developmental Role of PhilEXIM 4 Message from the President of the Philippines 5 Message from the Chairman of the Board of Directors 6 Message from the OIC/President and CEO 7 Review of Operations (Financial and Non-Financial Performance Qualitative Milestones) 10 Policy Direction pursuant to the Strategic Framework 12 Governing Board 14 Affiliations 16 PhilEXIM @ 40: Through the Years 18 Good Governance 21 ADFIAP 22 Senior Management & Department Heads 24 2017 Financial Statements IBC Worldwide Alliances & Partnership Corporate Objectives and Developmental Role of PhilEXIM
Corporate Objectives and Functions GUARANTEES • Guarantee Program for SMEs 1. To promote and facilitate the entry of foreign loans into the Guarantee on short term loans to persons or entities licensed country for development purposes having special regard to the to engage in export-oriented activities, as well as activities needs of export-oriented industries, industries registered with which, in the determination of TIDCORP, promote and develop the Board of Investments, public utilities, and industries the the capital goods and import-substitution industries. promotion of which is encouraged by government policy; • Guarantee Program for Large Accounts 2. To guarantee loans granted by Philippine banking and −Guarantee on loans to direct and indirect exporters, financial institutions to qualified exporters, producers of firms involved in priority projects of the National export products, and contractors with approved service Government and import substitution industries. contracts abroad; −Promote and facilitate the entry of foreign loans into 3. To facilitate and assist in the implementation of approved the country for development purposes having special service contracts abroad entered into by Philippine entities, regard to the needs of export-oriented industries, industries enterprises, or corporations with foreign exchange earning registered with the Board of Investments, public utilities, potentials, by providing counter-guarantee to Philippine banks and industries the promotion of which is encouraged by and financial institutions issuing stand-by Letters of Credit or government policy. of Letters of Guarantee for the performance of said service contracts; −Guarantee on investments (Equity and Debt)
4. To meet requests from domestic entities, enterprises, and • Portfolio Guarantee Program for SMEs corporations to assist them in the coordination of their Expand the business the business capability of any financial development and expansion plans with a view to achieving institution’s B-BBB rated SME portfolio by means of utilizing better utilization of their resources; the sovereign rating, zero-risk weight feature and capital leveraging advantage of PhilEXIM. 5. To provide insurance cover, credit and appropriate services to facilitate the export of Philippine goods or services by DIRECT LENDING any entity, enterprise or corporation organized or licensed to • Short-Term Direct Lending Program for SMEs engage in business in the Philippines; Short-term loan to persons or entities licensed to engage in export-oriented activities, as well as in activities which, in the 6. To provide direct credits and loans to exporters of Philippine determination of TIDCORP, promote and develop the capital goods and services; goods and import-substitution industries.
7. To provide technical assistance in the preparation, financing, • Medium to Long-Term Direct Lending Program for SMEs execution of development or expansion programs, including Medium and long term loan to persons or entities licensed the formulation of specific project proposals; and to engage in export-oriented activities, as well as in activities which, in the determination of TIDCORP, promote and develop 8. To undertake such actions that are consistent with the the capital goods and import-substitution industries. primary purposes of the corporation. • Wholesale Direct Lending Program for SMEs Capitalization Short term loan and capability building assistance to SME Export Sector. PhilEXIM has an authorized capital stock of P10 Billion, to be fully subscribed by the Government of the Republic of the Philippines. • Access of Small Enterprises to Sound Lending The statutory limit on its aggregate outstanding guarantee Opportunities (ASENSO) Lending program by government obligations is fifteen times (15x) its subscribed capital stock plus financial institutions (GFIs) designed to give small and medium surplus. All obligations of PhilEXIM carry the full faith and credit of enterprises (SMEs) greater access to short and long-term the Republic of the Philippines. funds.
Programs for Small, Medium and Large Exports CREDIT INSURANCE It is an insurance policy offered to business entities wishing to PhilEXIM plays a vital role in helping Philippine exporters gain protect their accounts receivable from loss due to credit risks. access to international markets and become globally competitive. To assist small, medium and large exporters, as well as priority • Export Credit Insurance (ECI) sectors, PhilEXIM has various financing products which address Insurance coverage to exporters against the risk of non- credit-related problems such as limited resources, lack of collateral payment by foreign buyers of export shipments on credit and limited access to facilities and other forms of trade financing. arising from political or commercial risks.
2 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
• Domestic Credit Insurance Agri-Modernization Projects Insurance coverage on receivables of a multinational’s • Type of Project: Integrated mechanized farm production and subsidiary company against non-payment of buyers bulk handling facility, Oleo chemical facility, grains production, in the subsidiary’s country. and postharvest system.
PROGRAMS FOR PRIORITY SECTORS OF THE GOVERNMENT • Nature of Requirements Civil works to include: Consistent with government’s existing priorities, PhilEXIM provides - Vertical/ horizontal development various guarantee facilities to attract investments particularly - Installation of electro-mechanical system, in areas where the foreign country has distinct advantages, and capital equipment where foreign exchange may be generated and/or saved. Electro-mechanical works to include: The 2014-2017 Investment Priorities Plan (IPP) focuses on - Installation of electro-mechanical system, competitiveness, skills development, technology upgrading, capital equipment infrastructure modernization, and improvements in overall - Farm machinery & equipment business environment. Together with the governance reforms and good macroeconomic performance of the Philippines in Infrastructure and Energy Projects more recent years, this bodes well for attracting investments and • Type of Project: Tollways, ports, airports, bulk water supply, achieving economic transformation. water systems, railway systems, power generation, transmission and distribution, solid waste management, Tourism-Related Projects water, and wastewater treatment. • Type of Project: Hotel, resort, eco-tourism, retirement havens, medical tourism, wellness facilities, sports, and • Nature Requirements leisure complex in priority areas under the Department of Civil works to include: Tourism’s Development Plan. - Vertical developments (buildings, structures) - Horizontal developments (rail and road stations, • Nature of Requirements water and telecom infrastructure) Civil works to include: - Other support facilities equipment (electro-mechanical - Vertical developments system and installation, metallurgical equipment, (i.e. buildings & other recreational structures) tolling stock, conveyor equipment) - Horizontal developments (i.e. roads, water sewage, electrical system, telecoms Mining Projects infrastructure) • Type of Project: Mineral ore production and processing. - Other support facilities • Nature of Requirements Civil works to include: Information and Communications Technology (ICT) Projects - Vertical/ horizontal development • Type of Project: This is a Services project which can also - Other support facilities cover integrated circuit (IC) design, ship repair, testing - Procurement of equipment facilities, and charging stations for e-vehicles. Compared to stand-alone projects, where corporations typically Development of: resort to commercial borrowings to finance their capital asset - ICT zones (i.e. cyber park or IT park dedicated acquisition and/ or civil works, and where the borrowing costs are to IT locators) normally market rates with tenors such as five (5) years or less, - IT-based industries (i.e. software development) the guarantee facilities offered by PhilEXIM for projects in the - IT-related projects (i.e. call/data centers. Backroom above-mentioned priority sectors provide financing with risk-based processing operations, data recovery and operation) pricing and the resultant economic returns.
• Nature of Requirements This translates to more concessional project terms and conditions Civil works to include: as well as better cash flows. In the end, the project becomes - Vertical and horizontal developments realistically affordable to the end-user and viable in the long-run. - Capital Expenditure (e.g. network computer The promotion of the industry sectors generate more high value servers and special equipment) jobs, equitable distribution of economic benefits and a better - Acquisition of software packages quality of life for a greater number of Filipinos.
ANNUAL REPORT 2017 3 Message from the President of the Philippines
My warmest greetings to the Philippine Export-Import Credit Agency (PhilEXIM) as it publishes its 2017 Annual Report and celebrates its 40th Anniversary.
Over the years, PhilEXIM has contributed to our country’s robust economic growth by providing credit, guarantee and technical assistance to business entities. By promoting the vibrant export and import of goods and services, you have truly empowered our local enterprises to grow and flourish.
As the publication of your 2017 Annual Report coincides with the organization’s 40th Anniversary, I trust that you will be more inspired to remain relevant and efficient amidst the challenges posed by an ever-changing world market.
We welcome the coming year confident that PhilEXIM will continue to fulfill its import role of finding ways to improve the financial accessibility of exporters and other industries. Together, let us pave wider paths of sustainability and development for our country.
Congratulations and I wish you a successful event.
RODRIGO ROA DUTERTE
MANILA December 2018
4 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Message from the Chairman of the Board of Directors
The Philippine Export-Import Credit Agency (PhilEXIM) was a brilliant idea at its inception. The agency performed the role of sovereign guarantor for critical programs and projects that would catalyze many more economic opportunities for the nation. This proved invaluable to the balanced, inclusive and investments-driven economic development we now see.
Over the past four decades, PhilEXIM stood as a reliable pillar for financing development. Over the years, this contantly innivated and reinvented itself to fulfill its mission effectively as circumstances change. PhilEXIM eventually broadened its scope of work to cover strategic industries and fledging businesses.
As we ride the crest of improved business confidence and rapid economic expansion, I am confident PhilEXIM will ably respond to the growing needs of the local government units, the export sector and the micro, small and medium enterprises (MSMEs) that bring about broad-based growth.
I congratulate the officers and staff of PhilEXIM for the great work you have done over the years. I look forward to working with you more intensively in the coming period as we consolidate our growth momentum.
CARLOS G. DOMINGUEZ Secretary of Finance
ANNUAL REPORT 2017 5 Message the OIC / President & CEO
It is nearly my third year as OIC of the Office of the President and CEO of PhilEXIM, and it has always been a challenging yet inspiring one at that.
We continued to promote our mandate with the end in view of supporting government priorities in exports and other inclusive sectors. This is notwithstanding the fact that PhilEXIM continues to seek support for its capital programming efforts, for the reason that its business needs a stable capital base.
Throughout the year 2017, PhilEXIM sought ways and means to improve in its processes, particularly for its turnaround time in operations. Which is why this year we started reviewing our manuals and policies. At the same time, our compliance processes were being strengthened as part of our ongoing governance thrusts. It is through our initiatives under corporate governance for the year where PhilEXIM merited the ADFIAP Award for Corporate Governance. Also, as part of our continued improvement of performance standards, officers and supervisors underwent a Strategic Performance Management System training with the Civil Service Commission.
This year serves as the 40th anniversary of the Corporation, and it is with pride and honor that I have been part of its organization in the last 14 years. This will be my last year in PhilEXIM after serving the government for nearly 40 years. During my years of working with PhilEXIM, it has been my commitment to be able to contribute to the fulfillment of its mandate and the realization of its development goals – create jobs, more industries supported, better lives gained through the financing programs of PhilEXIM .
Thank you to all the men and women of PhilEXIM, and especially to the Board of Directors for the support it has extended to me while I led the Corporation in the interim. Together with this valedictory is also my good wish that PhilEXIM will carry on and will become better in the years to come. God speed!
FLORENCIO P. GABRIEL, JR. OIC/ President and CEO
6 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Review of Operations (Financial and Non-Financial Performance Qualitative Milestones)
Objectives of the 2017 Business Plan PhilEXIM’s Credit Portfolio
Market Objective: Program allocation Pursue development role and participation as the country’s sovereign guarantor for strategic/economic sectors 6%
Internal Objectives: 94%
1. Strengthen the Balance Sheet a) Embark on capital infusion efforts a) Build on P500-Million equity in 2017 b) Program 2018 infusion of P4.0 B and P500 M every year until 2021
b) Pursue Asset Recovery Program • Secure deals to reduce non-earning (remedial) portfolio Guarantees Direct Lending 2. Improve Organizational Capability a) Reorganize to create advantage in line with market objective Sector Amount % Share • Re-balance to achieve clarity and interoperability of roles Guarantees 8,937.95 93.56 • Resolve gridlocks to institute better service Direct Lending 615.70 6.44 delivery and processes Total 9,553.65 100% • Improve on compliance, risk management The credit portfolio comprised the Guarantee Program which b) Acquire and retain talent and skill thru: amounted to Php 8.9 Billion or almost 94% of the total portfolio. • Revised QS and Competency Framework On the other hand, the Direct Lending Program registered • Competitive compensation and rewards Php615.7 Million in volume which is equivalent to 6% of total (CPCS) portfolio. • Re-tooling and upskilling opportunities (Professional Development) Industry Sector • Re-Balanced performance management system (SPMS) 0.82%
3. Review of PhilEXIM business model as part of 0.95% institutional strengthening 98% 4. Re-brand the Organization a) Strengthen role as Economic Enabler for industries
Results of Operations:
PhilEXIM’s operations for CY 2017 registered a net loss of P132.9 million, which is however P45.1 million or 25% lower than the annual budgeted loss of P178.0 million. Total revenues of P151.9 million were 17% below the target of P183.0 million. The shortfall in revenue was partially offset by P100.2 million or 25% savings in operating expenses (personal services and maintenance and other operating expenses) and P12.8 million or 22% from interest Industry Services Agriculture expenses.
Sector Amount % Share Industry 9,384.55 98.23 Services 78.14 0.82 Agriculture 90.96 0.95 Total 9,553.65 100%
ANNUAL REPORT 2017 7 • A bulk of the Agency’s credit portfolio went to the subscription receivable of P4.0 billion Department of Budget Industry sector and Management (DBM) all requirements including Corporate • Agriculture and Services sector represented projects Operating Budget (COB). Per DBM, the proposal subscription involving Information, Manpower and Tourism follow receivable of P4.0 billion was included in the “Unprogrammed with a share of 0.95% and 0.82%, respectively Funds” for CY 2018. The equity infusion will form part of the Guarantee Reserve Fund of the consolidated guarantee entity. Regional Access to Financing On the other hand, the proposal for the increase in the TIDCORP’s authorized capital stock from P10B to P50B is 0.34% under evaluation. 64% 0.75% Potential/Actual Sale of Assets/Properties by the Remedial and Asset Department The sale of the foreclosed assets was finalized in 2017, from 35% which PhilEXIM realized gains of P58.35 million from the gross selling price of P83.66 million.
In CY 2017, the Revised Guidelines on the Disposal of Acquired Assets was approved by the Board of Directors. In efforts to expedite evaluation of settlement/restructuring proposals, the Agency also executed restructuring agreements with two defaulted accounts. Likewise, on-going negotiations on loan repayment plans already started with nine (9) defaulted debtors.
Luzon Visayas Mindanao NCR Development of a Pricing Matrix for the Guarantee Program of PhilEXIM Options and alternatives were issued by the Senior Management Committee which included exploration of a scoring model for a particular industry being used by banks Sector Amount % Share as well as a joint project with the Philippine Institute of NCR 72.06 0.75 Development Studies. Luzon 6,122.13 64.08 Visayas 3,326.65 34.82 2. Improve Organizational Capability Mindanao 32.81 0.34 Total 9,553.65 100% Implementation of the Strategic Performance Management System (SPMS) • A total of 64% of the whole credit portfolio rests in the Emphasizes the linkage between individual employees’ Luzon area performance to the organizational performance through • Visayas is at 34.82%, NCR and Mindanao with less than properly crafted SMART objectives. Initially, SPMS training 1%, respectively. for middle managers and other employees was conducted last April 17, 2017. The same training was held for officers on August 6, 2017. As of end December, the SPMS was re- • Economic Contributions (as of 31 December 2017) calibrated for implementation.
In terms of support that will redound towards performing a Continuous implementation of ISO-Aligned Quality catalytic role, PhilEXIM-assisted firms under its Guarantee Management System and Direct Lending Programs generated the following a. In February 2017 PhilEXIM obtained compliant status developmental impact: with the ISO-aligned QMS requirement for FY 2016 PBB grant per re-validation conducted by the validating Particulars Actual agency (Systems and Productivity Improvement Manpower Generation* 143,380 Bureau, DBM) of the documents covered by PhilEXIM Transparency Seal webpage. Export Revenues (In Million US$) $16.13 b. Formation of a Committee on Manual of Procedures Number Firms Serviced* 229 (MOPs) in February 2017 was created to review MOPs of all departments. *Inclusive of beneficiary firms which are SMEs and/or c. The first batch of MOPs that were reviewed and approved cooperatives that were extended financing by PhilEXIM by the Officer-in-Charge in December, 2017 include the Credit Monitoring Department, Business Revenue Groups Results Pursuant to the 2017 Business Plan: and Treasury Operations Department.
1. Strengthen the Balance Sheet Loans Management System (LMS) The Phase 1 of LMS was implemented in 2015 and continues For CY 2017, the P500 million additional equity infusion from to undergo enhancement towards a Phase 2 implementation the National Government (NG) was included in 2017 General in 2017. Phase 2 involves loans disbursement and payment Appropriations Act (GAA) under Programmed Funds and is process but was deferred due to directives relative to the due to be released upon completion of the review of the COB Roadmap. by the Department of Budget and Management (DBM). To date, PhilEXIM had already submitted to the Department of Brand Strategy/Roadmap Budget and Management (DBM) all requirements including Management has implemented an initial branding program Corporate Operating Budget (COB). Per DBM, the proposal beginning 2014 with the launch of a new corporate logo, and
8 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Office (ICTO) in collaboration with the Presidential Communications Development and Strategic Planning Office (PCDSPO).
V. Gender and Development (GAD) Initiatives and Social Responsibility In support to GAD and as part of the Agency’s effort to integrate gender concepts and GAD perspective to its business operations, the following compliances and initiatives were pursued:
a. Submission of GAD Reports: • FY 2017 GAD Plan and Budget (reviewed and endorsed by PCW) • FY 2016 GAD Accomplishment Report (reviewed and endorsed by PCW) • FY 2015 GAD Accomplishment Report (reviewed and endorsed by PCW)
b. Events and Activities • Finalization of Writeshop on DOF-GAD National that beginning 2014 up to present, the logo has been in use in Framework Strategy and GAD Planning/Workshop all promotional paraphernalia and business presentations of • Secured copy of the All-Women Cast Lupang the Corporation. Hinirang Music Video in support of PhilEXIM to PCW Memorandum Circular No. 2016-01 to As part of the Branding initiative, PhilEXIM conducted an recognize and raise awareness on the important in-house, on-line customer feedback survey to its existing contributions and roles of women in all aspects of clients in December 2017 of which half of the respondents the Philippine society. gave a 100% favorable response rate on the programs and • Awareness on the Importance of Physical Activity services of PhilEXIM. in the workplace- Physical Therapy Students from UP College of Allied Medical Professions Other Initiatives/Compliances: and a UP Instructor conducted said activity • DOF-GFPS, “Women Inspiring Women Forum” I. Designation of a Compliance Officer to oversee all participation compliance activities and programs undertaken by • Film Screening of MA’ROSA an indie film by departments as well as enhance corporate governance Director Brillante MA Mendoza pursuits. • “Arts Appreciation talk of Women Artist” – A DOF-GFPS Activity pursuant to Presidential II. Data Privacy Act of 2012 Proclamation Nos. 224 and 227,s. 1988 and R.A. a. Data Privacy Officer (DPO) was appointed and s.1990 on the 2017 National Women’s Month submitted name of DPO and discussed role its role Celebration (NWMC) activity with National Privacy Commission (NPC). • Seminar/Workshop on Gender Mainstreaming b. Briefing to Philexim officers and staff regarding and GAD Analysis for Employees salient features of RA 10173 on June 6, 2017 was • Seminar/Activity on Nutrition & Household conducted. Solution Opportunity for employees c. NPC conducted a Privacy Impact Assessment • Attended the Gender and Development Budget workshop on June 30, 2017 and created the PIA Fora 2017- conducted by PCW Technical Services Team where PIA teams submitted data inventory and Regional Coordination Division, (TSRCD) • Screenplay of “Ang Kababaihan ng Malolos” III. Freedom of Information in coordination with the “Woman of Malolos The following compliances were accomplished in Foundation” support of Executive Order No. 02, s. 2016 or the • DOF-GAD Focal Point System Meeting of TWGs at Freedom of Information (FOI) Issuance: DOF • Donation of various Fixtures and Furnitures a. PhilEXIM submitted its FOI Manual in August, 2017 located in PhilEXIM Warehouse to Sto. Rosario b. Freedom of Information and On-Boarding Workshop Elem. School- Pampanga conducted by the Presidential Communications Operation Office VI. Orientation and Drug Testing pursuant to the c. The Freedom of Information (FOI) Manual posted on “Comprehensive Dangerous Drugs Act of 2002” and CSC Website Memorandum Circular No. 13, s. 2017 d. Attended 4th CIO Forum/Conference – Roadmap to Data Privacy Compliance a. Sixty-eight (68) employees attended the In-House Orientation Seminar for a Drug-Free Workplace (2 IV. Website compliance to DICT standards batches) with the Head of the Legal Affairs of PDEA PhilEXIM successfully harmonized its new “look and and representatives from the Dangerous Drugs feel” with the Government Website Template in October, Board as Speakers, held last October 11, 2017. 2017, an initiative of the Integrated Government Philippines (iGovPhil) project led by agencies under the b. Mandatory Drug Testing was conducted for all 77 Department of Science and Technology (DOST) – ASTI Officers and employees present last October 19, and Information and Communications Technology 2017, by Chemists from the National Bureau of Investigation.
ANNUAL REPORT 2017 9 Policy Direction pursuant to the Strategic Framework
PhilEXIM shifted its strategic priorities and revised its business plan following the direction of the National Government, where it emphasized its thrusts – support industries such as SMEs tourism, infrastructure, agriculture and manufacturing. Strategic industries under large accounts shall be Aligned towards the pursuit of government on social-economic confined initially to the development, PhilEXIM redefined its business direction guided by following sectors: a Strategic Framework under the new leadership which came in during the later part of 2014, namely: a) Tourism b) Agri-oriented exports and import substitution c) Infrastructure, including key supply-side support sector d) Export- and import substitution oriented manufacturing STABILIZE CREATE ACHIEVE the business a responsive Socio- Strategic SMEs include: with sufficient and sustainable economic organization; a) Export- and import capacity; relevance substitution-oriented manufacturing b) Tourism c) Agri-exports and import substitution The overall focus of PhilEXIM is to continue being a relevant, self-sufficient, profitable, socially-responsive and professionally- run Agency, strongly supportive of key economic development priorities of the Government. Hence, to enable the Agency to implement the aforesaid Framework, major strategic initiatives shall form the core of both revenue and support units. These are the following:
Remain relevant as a self- sufficient and profitable agency strongly supportive of key economic development priorities of the government.
Continuous but focused development of internal capabilities through: a) Well-balanced and responsive Activities shall be confined to: organization a) Providing sovereign b) Continuous personnel training and guarantees to carefully development selected large enterprises in c) Competitive remuneration structure strategic industries, as well d) Good corporate governance as direct lending on purely e) Creation of a Board-level Finance and meritorious cases; Business Development Committee b) Providing direct lending and, on a case-to-case basis, guarantees to strategic SMEs
10 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
For large guaranteed Proactive evaluation, accounts in selected monitoring and strategic industries: management of guarantee a) Proactive evaluation, portfolio, comparable to, if monitoring and not better than, management of accounts those performed by direct to ensure that the business lenders continuously remains viable and the accounts remain in good standing. b) Favorably consider a) Ensure sustainable long-term viability and profitability of arranging with lenders accounts by paying particular attention to the following, among and/or directly granting short-term credit facility, on purely others: meritorious cases, to prevent/cure temporary setbacks/ • Major economic developments which may significantly defaults or ensure sustainable viability of the business of impact on the clients’ business guaranteed accounts. • Major changes in the ownership and/or management c) Encourage and support equity financing over debt financing structure of the Corporation from foreign funders by way of guarantees on foreign equity • Major technological developments which may affect component, especially for expanding/enhancing existing the clients’ products or services. viable businesses in strategic or NG’s priority industries, • Major changes in the competitive environment thereby further improving viability and profitability due to such as the entry of a new big player or major reduced interest burden, and also helping promote much expansion of an existing competitor needed foreign direct investments into the country. • Major changes in the demand and/or supply side of the clients business b) Ensure accounts remain in good standing and potential problems are detected and cured on time
For non-performing assets: Comprehensive approach Proactive role, apart from undertaking legal initiatives, to the development and via close networking and coordination with co- growth of SMEs: creditors, prospective financial or strategic investors and borrowers/debtors, among others, to ensure that non-performing assets are recovered, liquidized and/or a) Capability-building in such areas as financial management, converted to performing assets the soonest possible. financial reporting/recording, business development and management. b) Give more weight to sustainable viability of projects over adequacy of collateral cover. c) Close evaluation, monitoring and management of accounts to facilitate development and fastertransition into bankable/ profitable entities. d) Strong support for high-impact account prospects that will generate more jobs, export and import substitutes particularly those that can be easily replicated thru regions outside NCR. This may involve assistance in the determination of the appropriate legal and operating structures of the client
ANNUAL REPORT 2017 11 Governing Board
from left to right CARLOS G. DOMINGUEZ III NESTOR A. ESPENILLA, JR. Secretary, Department of Finance Governor, Bangko Sentral ng Pilipinas Effective July 1, 2016 up to present Effective July 3, 2017 up to present (not in photo) RAMON M. LOPEZ Secretary, Department of Trade and Industry ERNESTO M. PERNIA Effective July 1, 2016 up to present Director-General, National Economic and Development Authority AMANDO M. TETANGCO, JR. Effective July 1, 2016 up to present Governor, Bangko Sentral ng Pilipinas Effective July 1, 2005 up to July 2, 2017 ISIDRO A. CONSUNJI Chairman, Philippine Overseas Construction Board Effective December 7, 2011 up to present
12 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
MICHAEL ROBERTO P. REYES ERMILANDO D. NAPA Board Member, Appointive Director Philippine Overseas Construction Board Effective August 1, 2015 up to present Effective September 23, 2016 up to present WILFRIDO A. ATIENZA JAY Y. YUVALLOS Appointive Director Appointive Director Effective June 16, 2015 up to present Effective November 28, 2012 up to present
TOMASA H. LIPANA Appointive Director Effective June 16, 2015 up to present
Alternate Members from left to right ROSALIA V. DE LEON MARIA ALMASARA CYD N. Treasurer of the Philippines TUAÑO-AMADOR Effective February 3, 2017 up to present Deputy Governor, Bangko Sentral ng Pilipinas ROBERTO B. TAN Effective January 26, 2017 up to Treasurer, Bureau of Treasury present Effective August 10, 2016 up to (not in photo) February 2, 2017 ROSEMARIE G. EDILLON Deputy Director General, National NORA K. TERRADO Economic Undersecretary, Department and Development Authority of Trade and Industry Effective March 21, 2016 up to Effective January 21, 2016 up to present present (not in photo) WILLIAM A. BELUSO, JR. Director III, Bureau of Treasury Effective February 3, 2017 up to present
ANNUAL REPORT 2017 13 Affliations Governing Board
CARLOS G. DOMINGUEZ III AMANDO M. TETANGCO, JR. Past/Present Directorships: DOF Secretary BSP Governor • Board of Directors, First Philec • BA in Economics, Ateneo de Manila • AB Economics, Ateneo de Manila Solar Corporation (Lopez Group of University University Companies) • Master in Business Administration, • Board of Directors, Philippine-Russian Ateneo de Manila Graduate School of Past/Present Directorships: Business Assembly Business • BSP Monetary Board the Anti-Money • Board of Directors, Philippine- Laundering Council American Academy of Science and Past/Present Directorships: • Philippine International Convention Engineering • President of C.G. Dominguez and Center • Board of Trustees, University of San Associates Inc., Huntly Corporation • Agriculture Credit Policy Council Carlos, 2005-; Chair of the Board • Chairman of Lafayette Philippines, Inc. • Capital Market Development Council • Board of Trustees, Kalayaan College • Chief Executive Officer and President • Export Development Council • Board of Directors, Procurement of Lafayette Philippines Inc. • PhilExport Board of Trustees Watch, Inc. • President of BPI Agricultural • Board of Trustees, Philippine Center for Development Bank NESTOR A. ESPENILLA, JR. Population and Development • Secretary of Agriculture and Secretary BSP Governor of Environment and Natural Resources • Bachelor of Science in Business ISIDRO A. CONSUNJI • President of Philippine Associated Economics, University of the POCB Chairperson Smelting and Refining Corporation Philippines • BS Civil Engineering University of the • Chairman of the Board of RCBC Capital • Masters in Business Administration, Philippines Corporation University of the Philippines • MBA - Asian Institute of Management • Chairman of Philippine Airlines • Master of Science in Policy Science, • Chairman of Philippine Associated Graduate Institute of Policy Science Past/Present Directorships: Smelting and Refining Corporation (GRIPS), Tokyo, Japan • DMCI Holdings Inc. • DACON Corporation RAMON M. LOPEZ Past/Present Directorships: • Philippine Realty Holdings, Inc. DTI Secretary • International Monetary FundGovernor • DMC-Urban Property Developers, Inc. • AB in Economics, University of the • The World Bank Alternate Governor • DMCI Project Developers, Inc. (PDI) Philippines School of Economics • Asian Development Bank Alternate • Universal Rightfield Property Holdings • Master’s in Development Economics, Governor Inc. Williams College in Massachusetts • Membership in Board of Directors/ • SEM-Calaca Power Corp. Trustees and Inter-Agency Bodies • Association of Builders Consultants Past/Present Directorships: • Chairman, Anti-Money Laundering and Designers, Inc. • CEO, RFM Corporation Council (AMLC), Financial Stability • Philippine Constructors Association • Executive Director, Go Negosyo Coordination Council (FSCC), Financial • Philippine Chamber of Coal Mines, Inc. • Chairman, Board of Investments Sector Forum (FSF), and Philippine • Chairman, Philippine Economic Zone International Convention Center (PICC) JAY Y. YUVALLOS Authority • Member, Philippine Deposit Insurance Appointive Director • Chairman, Micro SME Development Corporation (PDIC), Philippine Export- • BS Commerce Accounting University Council Import Credit Agency (PHILEXIM), of San Jose Recoletos • Chairman, Export Development Council Export Development Council (EDC) • Chairman, Industry Development Past/Present Directorships: Council ERNESTO D. PERNIA • Interior Basics Export Corporation NEDA Director-General • Infinite Horizons Incorporated • A.B. (Economics), University of San • ASEAN Business Advisory Council Carlos • A.B. (Philosophy), San Carlos Major Seminary (Cebu) • M.A. (Economics), University of Bridgeport, Connecticut • Ph.D. (Economic Demography), University of California, Berkeley
14 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Affliations Alternate Members
ERMILANDO D. NAPA ROBERTO B. TAN MARIA ALMASARA CYD N. TUAÑO- Appointive Director Treasurer of the Philippines AMADOR • Master in Management Asian Institute • BA in Economics, Ateneo de Manila Deputy Governor of Management University Bangko Sentral ng Pilipinas • Bachelor of Science in Business • Master in Business Administration, • BS in Business Economics, University Administration – Aquinas University Ateneo de Manila University of the Philippines • PhD in Economics, Australian National Past/Present Directorships: Past/Present Directorships: University • National Reinsurance Corporation of • Treasurer of the Philippines • MA in Policy Science, Saitama the Philippines • Alternate Member, Monetary Board of University, Japan • Manila Consulting & Management the Bangko Sentral ng Pilipinas • MA in Economics, University of the Company, Inc. • Undersecretary, International Finance Philippines • Century Woods, Inc. Group, Department of Finance • Catanauan Resources & Development • Board Member, National Housing Past/Present Directorships: Corp. Finance Agencies • ASEAN+3 Macroeconomic Regional • CIIF-Oil Mills Group • Board Trustee, Foundation for Office (AMRO), Member, Panel Philippine Environment Advisory WILFRIDO A. ATIENZA • Bangko Sentral ng Pilipinas, Assistant Appointive Director ROSALIA V. DE LEON Governor • BS Business Economics University of Treasurer of the Philippines the Philippines • Master Arts in Development ROSEMARIE G. EDILLON • MBA Finance Columbia University Economics, Williams College, NEDA Deputy Director-General of New York, Graduate School of Massachusets • MA in Economics, UP School of Business • BA Economic, University of the Economics Philippines • MS degree in Statistics, UP School of Past/Present Directorships: Statistics • Wealth Development Bank Past/Present Directorships: • PhD in Economics, La Trobe University • Ayala Corporation • Department of Finance in Australia • Guild Financial Consulting, Inc. • ADB Headquarters in Manila • Inter-Asia Development Bank • The World Bank Group Past/Present Directorships: • Executive Director, Asia-Pacific Policy TOMASA H. LIPANA WILLIAM A. BELUSO, JR. Center Appointive Director Director III, Bureau of Treasury • BS Business Administration, University • Bachelor of Laws, Adamson University CARLOS BERNARDO O. ABAD SANTOS of the East • Bachelor of Science in Commerce, NEDA Asst Director-General • Certified Public Accountant, 18th Place Colegio De la Purisima Concepcion • BA in Economics, University of St. La Salle, Bacolod City Past/Present Directorships: Past/Present Directorships: • MA in Economics, University of the • SM Investments Corporation • Bureau of Treasury Philippines School of Economics • Flexo Manufacturing Corporation • Court of Appeals • Goldilocks Bakeshop, Inc. Past/Present Directorships: • QBE Insurance NORA K. TERRADO • Executive Director, Asia-Pacific Policy • Inter-Asia Development Bank Undersecretary, DTI Center (APPC) • BS Commerce and Associate Studies in Liberal Arts, University of St. La MICHAEL ROBERTO P. REYES Salle, Bacolod Board Member of POCB • Executive Graduates Program in • BS in Civil Engineering, University of Strategic Economics at the University the Philippines of Asia and the Pacific • Certified Public Accountant Past/Present Directorships: • President & Chief Operating Officer, Past/Present Directorships: DCCD Engineering Corporation • Headstrong Philippines (a GENPACT • Chairman, Board of Directors, DCCD Company) Engineering Corporation • APAC Region of Headstrong, Inc. • Southeast Asia operations of Circle Freight International/Harper Group
ANNUAL REPORT 2017 15 PhilEXIM @ 40: Through the Years
1977 1979 1980 1984 1985 1987
The Philippine Export PHILGUARANTEE shifted its Presidential Decree 1962 Executive Order and Foreign Loan focus and resources from increased the authorized No. 127 issued to empower Guarantee Corporation the issuance of guarantees capital stock of PHILGUARANTEE to extend or PHILGUARANTEE was for overseas construction PHILGUARANTEE to direct loans and export PHILGUARANTEE was granted established through PHILGUARANTEE launched a contracts to the issuance P10 billion. credit insurance. The EO the additional power to offer Presidential Decree 1080 on P3 million facility to provide of guarantees for export- abolished the Export Credit export credit insurance with the January 31. It mandated the guarantee coverage to oriented enterprises in view Corporation that was transfer of the functions of the Corporation to guarantee not loans of up to P1 million for of the mounting defaults created under P.D. 1785, and defunct Philippine Export Credit only approved foreign loans for small companies, and up by guaranteed contractors transferred its functions to Insurance and Guarantee developmental purposes to P3 million for medium- engaged in Middle East PHILGUARANTEE. Corporation (PECIGCOR) to the but also loans granted by sized enterprises, under a construction projects. Corporation. domestic and foreign financial memorandum of agreement Presidential Decree 1930 was institutions to exporters and that was also signed by 27 issued, requiring that all loan manufacturers of export participating commercial guarantees to be extended products as well as contractors banks. by government-owned and with approved service controlled corporations should contracts abroad. have prior approval of the President of the Philippines.
1995 1996 1997 1998 1999 2000
Full corporate rehabilitation Term Loan Guarantee PHILGUARANTEE marked Republic Act No. 8494 was Website launched, giving Strengthened global program, started in 1988, Program (TLGP) launched to its 20th anniversary with the signed by President Fidel clients and the public easy presence by broadening completed with the provide guarantee coverage formal launching of Export V. Ramos, reorganizing and access to information about strategic alliances through conversion into equity of to medium and long-term Credit Insurance Program and renaming PHILGUARANTEE the Corporation’s programs participation in various PHILGUARANTEE’s P436 loans extended by PFIs to the signing of Partnership into the Trade and Investment and services through conferences such as the million liabilities owed to medium and large exporter Agreement with France’s Development Corporation of www.tidcorp.org.ph. Berne Union (International the National Government. accounts under existing COFACE. Organized and hosted the Philippines (TIDCORP). Union of Credit and Automatic Guarantee Line PERF and PERG Programs. the APEC-funded Trade and Investment Insurers) held in (AGL) Facility launched to The TLGP is intended to help Investment Insurance Training Tashkent, Uzbekistan; the accelerate utilization of exporters increase production Program aimed at developing Asian Regional Conference PERF and PERG Programs by by providing access to term trade and investment of Credit Alliance in providing guarantee coverage financing for the upgrade of insurance activities in APEC Bangkok, Thailand; the to loans of PFIs without prior plant facilities. Third regional member economies. Fourth 6th Annual Meeting of PHILGUARANTEE approval. field unit opened in Bacolod regional field office established AsianExport Credit Agencies Second regional field unit City. in Legazpi City to provide in Phuket, Thailand; and the opened in Davao City to service service to exporters in the Bicol joint meeting of the Berne clients in the Mindanao area. region and nearby Southern Union and Eximbanks and Luzon provinces. ECAs of Eastern European countries held in Vienna, Austria.
2007 2008 2009 2010 2011 2012 2013
PhilEXIM, as a top adherer PhilEXIM included in PhilEXIM awarded Operationalization of Automation of the Over the last Following the theme, of corporate governance, the Corporate a plaque of merit on the Trade Finance and general ledger system five years, (2008-2012) “Ensuring the Country’s formulated and implemented Governance Circle the agency’s Wholesale Loans System (TFLS). and framing of an PhilEXIM reached Economic Momentum”, a risk-based Audit Plan that for GOCCs and GFIs. Lending Program PhilEXIM netted Information Security total revenues of PhilEXIM contributes focused on the agency’s core during the 2nd ADFIAP Php332 Million in Policies Manual. P3 billion, brought to the fnancial upturn business functions, treasury, Annual Meeting. profit, the first on its about by innovations of the country through information technology and history of financial in operations and its role as the sovereign human resources. performance. financial management. credit facility with a multi-sectoral Signed Memoranda of development focus. Understanding with Korea Export-Import Bank, the P.T. Bank Ekspor Indonesia and the Export-Import Bank of Malaysia, primarily to enhance cooperation and exchange of business insights. 16 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
1987 1988 1989 1990 1991 1993 1994
Executive Order No. 64 PHILGUARANTEE was The PHILGUARANTEE Board authorized PHILGUARANTEE authorized to issue guarantees of Directors approved a to transfer to the National under the General Facility general policy framework for Government non-performing Program for medium- and the corporate revitalization accounts that were incurred large-scale exporters even and financial rehabilitation of The Pre-shipment Export The Corporation issued a The Post-shipment Export Risk by government financial without prior approval of the the Corporation to facilitate Finance Guarantee (PEFG) historic guarantee commitment Guarantee (PERG) Program institutions that included President of the Philippines. its transformation into Program was launched in for the US$138 million loan was introduced to provide DBP and PNB, among others. the national Export Credit line with the Corporation’s of Manila Electric Company guarantee coverage for export The Deed of Transfer was Agency (ECA). A US-based revitalization and new (Meralco) from the Asian bill purchases by participating executed in 1989. consultancy firm, First corporate thrust. PEFG allowed Development Bank for financial institutions arising Washington Associate (FWA), small and medium exporters Meralco’s distribution project. from export transactions was tapped to study and to gain access to financing guaranteed under the PEFG implement PHILGUARANTEE’s without need to put up hard Program. The new facility was institutional strengthening and collateral. designed to provide liquidity reorganization program. to exporters during the vital interval between shipment date and actual receipt of payment from the buyer. First field unit opened in Cebu to service exporters and clients in the Visayas region. 2000 2001 2002 2003 2004 2005 2006
TIDCORP launched the TIDCORP celebrates its 25 PhilEXIM was given an “AAA” PhilEXIM Omnibus Line and PhilEXIM signed a PhilEXIM launched the Medium and Long-Term years with the distinction rating by the Philippine Expanded Omnibus Line Memorandum of Wholesale Lending Program Direct Lending Program of being designated as the Rating Services Corporation Programs were consolidated Understanding with the Korea aimed to address the need (MLT-DLP) for Small, Philippine Export-Import Credit (Philratings), a first for a into a single program to be Export Insurance Corporation for immediate credit and Medium and Large Agency per EO 85 by President government institution. For the known as the Omnibus Line (KEIC) for various trade and development assistance to exporters. New offices at Gloria Macapagal-Arroyo. It second time, it was recognized under the General Facility investment opportunities. export organizations and sub- Citibank Center inaugurated. won the first Gawad Florendo with the Gawad Florendo Program. contractors. It won the ADFIAP Award for Public Information. Award for Public Information. Development Award for Best Annual Report.
Presidents and OICs ROSENDO D. BONDOC (1977-1985)
CESAR P. MACUJA (1985-1986) EVP - Officer-in-Charge
VICTOR C. MACALINCAG (1986-1991* and 1991-2001) *Concurrent Officer-in-Charge while Undersecretary of Finance (1986-1991) and Treasurer of the Philippines (1983-1988)
2014 2015 2016 2017 JOEL C. VALDES (2001-2004)
EDUARDO SERGIO G. EDEZA (2004)
Expanding Horizons VIRGILIO R. ANGELO Annual Report 2016
Seven-time Awardee for Development E orts (2002, 2004, 2005, 2007, 2009, 2011 and 2015) (2004-2007)
Launched its Portfolio PhilEXIM was given PhilEXIM organized PhilEXIM was given FRANCISCO S. MAGSAJO, JR. Guarantee Program the ADFIAP and hosted its the ADFIAP Awards (2008 - 2014) aimed at SME Development Business Forum for for Corporate develop by means Award for Strategy Intitutional Parties, Governance, of supporting such Management Client’s and FIs. and Infrasture BENIGNO L. ZIALCITA enterprises thru FI Development. (July 2014) portfolios. Officer-in-Charge
New institutional logo ERMILANDO D. NAPA launched to signal (2014 - 2015) change in branding. FLORENCIO P. GABRIEL, JR. (August 2014; July 2015 - present) SEVP - Officer-in-Charge
ANNUAL REPORT 2017 17 Good Governance
Aligned to the plans and programs envisioned for 2017, corporate 9. As part of its regular function, CGO prepared four (4) Governance governance efforts and initiatives during the year focused on activities such Circulars and emailed to all PhilEXIM employees and they are the as compliance with the requirements under the strategy and development following: sector of the Governance Commission on GOCCs (GCG), Gender and Development, Data Privacy Act of 2012 and Freedom of Information Act. a. 02 June 2017 - Governance Circular No. 2017-001 Agency Data Protection Officer (DPO) (designation of DPO) Since its approval in 2014-2015 by the Board of Directors and the b. 02 June 2017 - Governance Circular No. 2017-002 Philippine Governance Commission for the GOCCs (GCG), PhilEXIM’s Code of Standard Time (PhST) Republic Act No. 10535 (reiteration of Corporate Governance has been observed and complied with as part of compliance to PhST Act of 2013) actively promoting and pursuing governance reforms and follow principles c. 13 June 2017 - Governance Circular No. 2017-003 SMC and BCP of financials, accountability and transparency. Membership of the Data Protection Officer (membership of the DPO to SMC and BCP) A. Corporate Governance Activities d. 14 June 2017 - Governance Circular No. 2017-004 Unit Compliance Coordinators (designation of UCC representatives 1. Designation of a Compliance Officer of the Corporation. from each departments) in compliance with PhilEXIM’s Cor
2. As part of its regular function, the Corporate Governance Office (CGO) 10. Conduct of Compliance Briefing to concerned personnel by the coordinated with concerned departments and ensure compliance Compliance Officer. with submission/posting and updating of the Agency’s transparency seal in compliance with PBB documentary requirements and AO25 B. Compliance to Data Privacy Act of 2012 Inter-Agency Task Force (IATF) Good Governance Conditions from January 1-31, 2017. 1. In compliance with First Pillar of Data Privacy Act of 2012, Ms. Estrellita N. Tesoro and Atty. Angela A. Aquino were designated as 3. The CGO sought Board approval on the request for amendment Data Protection Officer (DPO) and Deputy DPO, respectively on 02 to PhilEXIM’s authorized signatories and representatives re: May 2017. Enforcement of Credit Information System Act (R.A. 9510). A copy of the duly notarized amendment was sent to Credit Information 2. CGO spearheaded the conduct of the Briefing Orientation on the Corporation (CIC). Salient & Compliant Features on R.A. 10173 (Data Privacy Act of 2012) conducted by the National Privacy Commission (NPC) on 06 4. CGO attended Corporate Governance Orientation Program for January 2017. GOCCs and Distinguished Corporate Governance Speaker Series on 26 April 2017 and 10 May 2017, respectively, conducted by 3. On 07 June 2017, the Data Protection Officer (DPO) of PhilEXIM and Institute of Corporate Directors (ICD) in compliance with Corporate Deputy DPO met with the Compliance and Monitoring Division of the Compliance Program under Training and Education. National Privacy Commission re: Role of the DPO and conduct of Privacy Impact Assessment (PIA) Workshop 5. CGO prepared a consolidated Registry of Applicable Regulatory Requirements (external) and List of Internal Requirements to 4. On 30 June 2017, the CGO coordinated the conduct of Privacy strengthen the Agency’s monitoring and reporting system and Impact Assessment Workshop by the National Privacy Commission ensure timely submission of all reports. The registry was distributed (NPC) led by Dr. Lansigan and Mr. Cleo Martinez. to all departments for information and compliance. 5. Through Office Order dated 18 July 2018, CGO coordinated the 6. Pursuant to Corporate Compliance Program, CGO prepared and creation of Privacy Impact Assessment Team composed of reported to the Corporate Governance Committee (CGC) the representatives from each department/ unit of PhilEXIM. following Quarterly Compliance/ Governance Report: 6. On 11 December 2017, the FSVP of Strategy and Development Sector a. 20 February 2017 - 4th Quarter 2016 Compliance/ Governance and VP of CGO attended 4th CIO Forum/Conference – Roadmap to Report Data Privacy Compliance sponsored by Chief Information Officers b. 08 may 2017 – 1st Quarter 2017 Compliance/ Governance Forum or CIOF. Report c. 10 October 2017 – 2nd Quarter 2017 Compliance/ Governance 7. On 01 December 2017, CGO submitted to PhilEXIM’s management Report the Data Privacy Impact Assessment Report as consolidated from d. 08 December 2017 – 3rd Quarter 2017 Compliance/ Governance the inputs of Privacy Impact Assessment Teams. Report e. 12 February 2018 – 4th Quarter 2017 Compliance/ Governance C. Compliance to Freedom of Information Act of 2000 Report 1. In compliance with the requirements of IATF on the Harmonization 7. In compliance also with the corporate compliance program, CGO of National Government Performance Monitoring, Information and coordinated the designation of unit compliance coordinators in Reporting Systems (AO 25 Task Force) through its Memorandum each department/ unit and conducted a briefing/meeting with all Circular No. 2017-104 August 2017, Section 5, CGO submitted the departments regarding Compliance Report Preparation on 25 May Freedom of Information Manual to Presidential Communications 2017. Operation Office or PCOO
8. On 04 August 2017, the FSVP of Strategy and Development Sector 2. On 08 September 2017, CGO coordinated the Freedom of and VP of CGO attended the Philippine Quality Award & Philippine Information and on-Boarding Workshop conducted by Presidential Quality Challenge Learning Sessions for Public Sector conducted Communications Operation Office at PhilEXIM. This was attended by DTI Competitiveness Bureau to see if PhilEXIM can use this for by PhilEXIM officers and staff. the implementation of Quality Management Standards as required by Inter-Agency Task Force on the Harmonization of National 3. On 10 October 2017, the Freedom of Information Manual was posted Government Performance Monitoring, Information and Reporting to PhilEXIM website Systems (AO 25 Task Force) through its Memorandum Circular No. 2017-1. 4. On 12 April 2018, CGO prepared and submitted to PCOO the Agency Inventory, FOI Quarterly Registry and Summary
18 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
D. Gender and Development Activities 8. Attendance of key officers to the ASEAN Women’s Business Conference conducted by DTI and PCW in August. As part of GAD activities, PhilEXIM took part in and undertook the following activities: E. Data Protection
1. Finalization Writeshop on DOF GAD National Framework Strategy TIDCORP ensures the protection of personal data and other information organized by DOF-GAD Focal Point System at DOF Baguio Cottage, provided by its business clients. Baguio City in January. Any information, data, records or documents relating to the condition or 2. Submission of the updated FY 2015 GAD Accomplishment Report business of the Corporation or of any insured person, firm, association based on the review/comments by PCW, and updated FY 2017 GPB or corporation are considered confidential in nature. Any member of to PCW thru GMMS in February. the Board, officer or employee of the Corporation who shall, directly or indirectly, reveal such confidential information to any third party, except 3. Support towards the first National Women’s Month Celebration in to an export credit agency or upon order of competent court, shall March by way of tarpaulin display. The celebration focused on these be liable for any financial loss suffered by the Corporation as a result key foundations: partnership for change and full implementation of thereof, without prejudice to any criminal liability. the Magna Carta of Women (Republic Act 9710), captured through the theme: “WE Make Change Work for Women.” Any of the foregoing persons who may be found guilty of gross negligence in the performance of his duties resulting in a financial loss 4. Conduct of activity that aims to promote awareness on the to the Corporation or the insured, shall be liable for such loss. Importance of physical activity in the workplace in March. This was conducted by Physical Therapy students from the University of the F. No Gift Policy Philippines (UP). TIDCORP hereby adopts the “NO GIFT POLICY” to reinforce its 5. Film showing of Ma’ Rosa in March, which tackles social issues commitment of adhering to highest ethical standards and best practices confronting the marginalized and vulnerable sector. The film of professional conduct in terms of soliciting or accepting of gifts under showing was attended by all PhilEXIM employees. its own Code of Ethics and Business Conduct. All TIDCORP officials and employees are directed to strictly observe this NO GIFT POLICY. 6. Participation of select employees in the “Women Inspiring Women Forum” per directive from DOF in March. The event gathered women 1. Basis leaders of said Agency, as well as its Bureaus and Attached Agencies to celebrate women’s journey and share inspiring stories of change a. Section 27, Article II of the constitution states that – “The and women empowerment state shall maintain honesty and integrity in the public service and take positive and effective measures against graft and 7. Participation in the “Arts Appreciation Talk by Women Artists” corruption.” organized by DOF-GFPS, held at the CCP, Pasay City in March.
TRAININGS ATTENDED, CY 2017 (BOARD OF DIRECTORS and CORSEC) TRAININGS PARTICIPANTS DATE CONDUCTED BY 1. Mandatory Continuing Legal Education (MCLE) Atty Dynah G. Nepomuceno-Bayot November 28-29, 2017 Asian Center for Legal Lecture Series 51 December 06-07, 2017 Excellence, Inc. (ACLEX) 2. In-House Seminar on R.A. 9184 (Procurment Law) Atty Dynah G. Nepomuceno-Bayot October 25-26, 2017 and its 2016 Revised Implementing Rules and Regulations 3. Orientation Seminar for a Drug-Free Work Place Atty. Florencio P. Gabriel, Jr. October 11, 2017 Program Atty Dynah G. Nepomuceno-Bayot 4. Gender Mainstreaming and GAD Analysis Atty. Florencio P. Gabriel, Jr. September 20, 2017 Atty Dynah G. Nepomuceno-Bayot 5. Freedom of Information (FOI) and ON-boarding Atty Dynah G. Nepomuceno-Bayot August 31, 2017 Presidential Communications Workshop Operations Office (PCOO) 6. Comprehensive Training on Strategic Performance Atty. Florencio P. Gabriel, Jr. August 07-08, 2017 Civil Service Institute Management System (SPMS) Atty Dynah G. Nepomuceno-Bayot 7. Republic Act 10173 (Data Privacy Act of 2012) Atty Dynah G. Nepomuceno-Bayot June 06, 2017 National Privacy Commission 8. Economic Forum Director Tomasa H. Lipana May 19, 2017 Business World Director Wilfrido A. Atienza Director Nora K. Terrado Director Emiliando D. Napa Director William A. Beluso Atty Dynah G. Nepomuceno-Bayot 9. Seminar on Best Practices in Corporate Atty Dynah G. Nepomuceno-Bayot May 11-12, 2017 Housekeeping 10. Prosperity for All Summit 2017 Director Tomasa H. Lipana April 28, 2017 ASEAN Business Advisory Atty Dynah G. Nepomuceno-Bayot Council 11. Corporate Governance Orientation Program for Director William A. Beluso April 26, 2017 Government-Owned and Controlled Corporations (CGOP-GOCC) 12. Distinguished Corporate Governance Speaker Series Atty Dynah G. Nepomuceno-Bayot March 14, 2017
ANNUAL REPORT 2017 19 b. Section I, Article XI of the constitution provides that – “Public d. Acceptance and retention of certificates, plaques, cards, Office is a public trust, Public officers and employees must thank you notes, or other written form of souvenirs or mark of at all times be accountable to the people, serve them with courtesy. utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives.” e. Acceptance of seminar bags and contents (writing/memo pad, pen, key chain, etc.), and partaking of moderately priced meals c. Section I of the Anti-Graft and Corrupt Practices Act (Republic and beverages that officials and employees obtain at events, Act No. 3019), states that – “It is the policy of the Philippine such as conferences and seminars, and which are offered Government, in line with the principle that a public office is a equally to all members of the public attending the event. public trust, to repress certain acts of public officers and private person alike which constitute graft and corrupt practices or f. Acceptance of books, pamphlets, publications, and data and which may lead thereto.” other information or reading materials that are directly useful to the TIDCORP in the performance of its mandates, objectives d. Section 7 (d) of Code of Conduct and Ethical Standards for and which books and other materials are given by individuals or Public Official and employees (Republic Act No. 6713), provides organization that have no pending business with TIDCORP as to that – “It is the policy of the state to promote a high standard create an actual or potential conflict of interest. of ethics in public service, Public official and employees shall at all times be accountable to the people and shall discharge their g. A gift from a member of his family or relative on the occasion of duties with utmost responsibility, integrity, competence, and a family celebration, and without any expectation of pecuniary loyalty, act with patriotism and justice, lead modest lives, and gain or benefits. uphold public interest over personal interest.” “Family of public officials and employees means their spouses e. Section 6.4 of the TIDCORP Code of Ethics and Business Conduct and unmarried children under eighteen (18) years of age. which prohibits solicitation or acceptance of gifts, among Relative refers to any person related to the official or employee others, by TIDCORP officials and employees in the course of within the fourth civil degree of consanguinity or affinity, their official duties or in connection with any transaction which including “bilas, inso or balae.” may be affected by the functions of their office. h. Acceptance by TIDCORP officials and employees of scholarship f. Section 29 of the Code of Corporate Governance for GOCCs or fellowship grant, travel grants, or expense for travel taking mandates all Governing Boards of Government-Owned and place within or outside of the Philippines (such as allowances, Controlled Corporations (GOCCs) to adopt a “No Gift Policy” and transportation, food and lodging) of more than nominal value, ensure its full advertisement and strict implementation within if such acceptance is appropriate and consistent with the the organization. interest of the Government, and permitted by the President and CEO (by virtue of his authority delegated by the Chairperson) of 2. Coverage TIDCORP.
This policy shall apply to the Board of Directors, officers and i. Acceptance or availment by TIDCORP of grants from local or employees including contractual employees and consultants of foreign institutions in the pursuit of the mandates, projects and TIDCORP. activities, such as those coming from ADB, World Bank, UN, USAID, etc., provided that the availment thereof shall be strictly All TIDCORP officials and employees shall not solicit, demand or in compliance with the applicable procurement laws, rules and accept, directly or indirectly, any gift, gratuity, favor, entertainment, regulations. loan, or anything of monetary value from any person, whether natural or juridical, at any time, on or off the work premises, in the j. Donations or grants coming from government entities or private course of their official duties or in connection with any operation organizations, whether local or foreign, which are considered being regulated by, or any transaction which may be affected by the and accepted as humanitarian and altruistic in purpose and functions of their office, including, but not limited to those gifts given mission. to influence the decisions or actions of officials or employees, or create the semblance or appearance of a conflict of interest or serve 5. Requirement to Inform as a motivation or part of an agreement to favor or do anything in return. The TIDCORP officials and employees are required to formally inform any individual or organization with any actual or potential 3. Exceptions business with TIDCORP of this “NO GIFT POLICY”, the reasons the TIDCORP has adopted this Policy, and request that such individual The following are exempted from the prohibition under this Policy: or organization respect such Policy. All contracts entered into by TIDCORP shall incorporate a provision adopting this Policy. a. Unsolicited gift of nominal or insignificant value not given in anticipation of, or in exchange for, a favor from an official or 6. Return and Acknowledgement of Gift employee or given after the transaction is completed or service is rendered. As to what is a gift of nominal value will depend on a. If a TIDCORP official or employee receives a gift covered by this the circumstances of each case taking into account the salary Policy: of the official or employee, the frequency or the infrequency of the giving, the expectation of benefits, and other similar factors. i. If possible, the gift shall be immediately and politely declined. The official or employee shall formally report b. Honoraria given as speaker or resource person in seminars to the Office of the President and CEO within two (2) days when such honoraria are authorized under existing laws or rules from the incident the fact of the gift-giving attempt and/or and regulations and subject to compliance with the prescribed the gift immediately and politely declined. requirements. ii. if not possible, or it is inappropriate or impractical, to return c. Official, business or working breakfast, lunch or dinner the gift, e.g. aperishable item, the gift shall be forwarded with clients or other stakeholders of TIDCORP, if such are to the Office of the President and CEO,listed in the gift unavoidable in the course of official duties and transactions. registry maintained by the Office of the President and CEO, and donated to an appropriate charitable institution
20 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
or social welfare institution in whichcase, the latter’s The complaint need not follow a specific format. However, it helps to acknowledgement or delivery receipt is considered speed up the process if the following details are provided: sufficient proof. An acknowledgement letter shall be sent to the donor informing them of the “NO GIFT POLICY” and • Name, address, telephone number, fax number, and e-mail that gift has been returned or donated to an appropriate address of the complainant: charitable institution or social welfare institution (with • Background information on the complaint, including the names of attached acknowledgement or delivery receipt from the any party that the complaint has dealt with in an attempt to resolve recipient institution or beneficiary). the issue or raise the concerns; • A clear statement outlining the complainant’s opinion of the G. Complaints & Redress Mechanism (Whistle Blowing Policy) possible effects of the problem; • The complainant’s opinion on the desired result or outcome of an TIDCORP embraces complaints as opportunities to improve efficiency investigation; and and quality of services delivery. TIDCORP also views complaints as • What has been done to solve the problem, if any, including any opportunities to increase goodwill and respect from citizens it serves. previous contact with TIDCORP.
Any individual, employee, group, entity, or other party affected or likely Anonymous Reporting to be affected by TIDCORP’s policies and initiatives can file a complaint. If a complaint is made on behalf of another party, that group should be The Agency shall accept reports made anonymously. The complainant/ identified and evidence of authority to represent that group should be whistleblower who files a report anonymously may choose to provide provided. a manner by which he/she can be contacted without jeopardizing his anonymity. Acceptable means shall include, but it is not limited to Reporting Channels using the e-mail, a landline call or pre-paid mobile number, and the like.
Complaints can be filed through the following dedicated reporting Anonymous reporting is limited to the identity of the complainant/ channels: whistleblower. The full names, positions and the alleged violations, actions and/or omission must be clearly identified, together with the 1. Web-site - http://www.TIDCORP.gov.ph/, law, rule and regulations being violated. 2. E-mail - “Contact us” portion of the TIDCORP home page 3. Mail - Office of the President and CEO 17/F Citibank Tower, The Agency will acknowledge receipt of the complaint within three (3) Valero St., Makati City, 1226 business days and determine whether such complaint falls within the 4. Telephone - (632) 848-1925 mandate. Complaints accepted are registered in a database and given 5. Fax - (632) 848 1925 an identification number to help ensure that it is dealt with in a timely manner.
PhilEXIM receives twin awards from ADFIAP on development financing and governance
on Infrastructure Development, for the development institution’s role in financing Steel Asia Manufacturing Corporation (SAMC), primarily its modern steel milling facility in Davao City. The Association also gave its Development Award for Corporate Governance category to the institution for its Strategic Framework initiative. PhilEXIM OIC-President and CEO Florencio P. Gabriel, Jr. and other officers of the Corporation, as well as representatives from SAMC were on hand to receive the award.
“The twin recognition from ADFIAP is a continued demonstration of PhilEXIM’s mandate even in today’s business realities,” said FSVP Ian A. Briones, Head of Strategy and Development of the institution, who received the award for the corporate governance category.
Key initiatives of PhilEXIM, Briones explained, include institutional efforts to further strengthen the positioning of the Corporation as the preferred credit guarantee institution, in keeping with its role as the official export- import credit agency of the country. In the next few years, he said that the presence of PhilEXIM will be further bolstered to enable stronger support for infrastructure, agriculture, SME and export segments, aligned with the economic agenda of the government.
PhilEXIM receives its Association of Development Financing Institutions in Asia and the Pacific For its part, Peralta reiterated the support of the Association for the (ADFIAP) Development Awards for infrastructure development and corporate governance during the programs of PhilEXIM and while it also thanked the Agency for keeping awarding ceremonies held at the ADFIAP office in Makati City on May 25. ADFIAP Secretary General Octavio B. Peralta (3rd from right) presents the award to FSVP Ian A. Briones, Head of Strategy and faith with its development mandate, it challenged the institution to Development Sector. Also gracing the occasion are: PhilEXIM OIC-President and CEO Atty. Florencio further take on a more meaningful role in addressing financing gaps P. Gabriel, Jr. (2nd from right); FSVP Emmanuel R. Torres (extreme left) and VP Rovi M. Peralta in the unbanked and underserved sectors. PhilEXIM is also the Trade (extreme right) of the Business Revenue Group I. and Investment Development Corporation of the Philippines, where its mandate includes promoting and encouraging domestic and international State-owned Philippine Export-Import Credit Agency (PhilEXIM) was trade and investments recently awarded by the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) with two of its annual Development Awards PhilEXIM has been consistently cited by ADFIAP mainly for its contributions for its contributions to development financing and strengthening corporate to development financing, where it won the award for a record eight years governance initiatives. in various categories such as in SME, trade financing, local economic development and human resource management. In 2015 it won a Merit In awarding ceremonies held in Makati City, ADFIAP Secretary General Award for the corporate governance and in 2011 for the human resource Octavio B. Peralta handed over to PhilEXIM officials the ADFIAP Merit Award management categories.
ANNUAL REPORT 2017 21 Senior Management
(from left to right): ATTY. ISABELO G. GUMARU ATTY. DYNAH G. NEPOMUCENO-BAYOT First Senior Vice President Senior Vice President and Corporate Secretary and Chief Legal Counsel Office of the Corporate Secretary Legal and Asset Management Sector ATTY. EMMANUEL R. TORRES MARILOU A. MEDINA First Senior Vice President First Senior Vice President Business Revenue Group I (BRG I) Finance and Information Management Sector CELSO R. GUTIERREZ IAN A. BRIONES First Senior Vice President First Senior Vice President Business Revenue Group II (BRG II) Strategy and Development Sector
FLORENCIO P. GABRIEL, JR. Senior Executive Vice President and Officer-in-Charge
22 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Department Heads
Top photo (from left to right): Bottom photo (from left to right): ROVI M. PERALTA ARSENIO C. DE GUZMAN ARMAND D. EUGENIO MILAGROS M. BAET Vice President Vice President, Treasury and Loan Vice President Vice President Revenue Center 2 - Operations Department Risk Management Department Corporate Governance Office Business Revenue Group I and Concurrent Head, Technology and Services Department JULITA LEAH M. GARCIA ATTY. SANDRA S. SALVADOR EDUARDO S. ANGELES Vice President Vice President Vice President LIEZEL E. PANGAN Revenue Center 6 - Legal and Assets Department Revenue Center 5 - Vice President Business Revenue Group II Business Revenue Group I Internal Audit Office ZANDRO CARLOS P. SISON ESTRELLITA N. TESORO Vice President MILDRED S. VIRAY MILDRED B. FLORES Vice President Corporate Planning and Vice President Vice President Credit and Monitoring Department II Communications Department Credit and Monitoring Department I Finance Services Department EVANGELINE MAURA Q. GOTANGCO Vice President Revenue Center 3 - Business Revenue Group I ANNUAL REPORT 2017 23 Statement of Management Responsibility for Financial Statements
The Management of the TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES (TIDCORP) also known as the PHILIPPINE EXPORT-IMPORT CREDIT AGENCY (PhilEXIM) is responsible for all information and representations contained in the statements of financial position, statements of comprehensive income, statements of changes in equity and statements of cash flows as of and for the period ended December 31, 2017 and 2016. These financial statements have been prepared in conformity with Philippine Financial Reporting Standards and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration to materiality.
In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized.
The Board of Directors review the financial statements before such statements are approved and submitted to the stakeholders of the corporation.
The Commission on Audit (COA) has audited the financial statements of the corporation in accordance with auditing standards generally accepted in the Philippines and has expressed their opinion on the fairness of the presentation upon completion of such audit in their report to the stakeholders and Board of Directors.
ATTY. ISABELO G. GUMARU MARILOU A. MEDINA Officer-in-Charge First Senior Vice President/OIC Office of the President and CEO Corporate Resources Group
Date: 16 May 2018
24 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Independent Auditor’s Report
THE BOARD OF DIRECTORS Trade and Investment Development Corporation of the Philippines Philippine Export-Import Credit Agency 17/F Citibank Tower, Citibank Plaza Valero St., Makati City
Report on the Audit of the Financial Statements Those charged with governance are responsible for overseeing TIDCORP’s financial reporting process. Adverse Opinion We have audited the financial statements of the Trade and Investment Development Auditor’s Responsibilities for the Audit of the Financial Statements Corporation of the Philippines (TIDCORP), also known as the Philippine Export-Import Our objectives are to obtain reasonable assurance about whether the financial Credit Agency, which comprise the statements of financial position as at December 31, statements as a whole are free from material misstatement, whether due to fraud 2017 and 2016, and the statements of comprehensive income, statements of changes or error, and to issue an auditor’s report that includes our opinion. Reasonable in equity and statements of cash flows for the years then ended, and notes to the assurance is a high level of assurance, but is not a guarantee that an audit conducted financial statements, including a summary of significant accounting policies. in accordance with ISSAIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually In our opinion, because of the significance of the matter discussed in the Basis for or in the aggregate, they could reasonably be expected to influence the economic Adverse Opinion section of our report, the accompanying financial statements do not decisions of users taken on the basis of these financial statements. present fairly the financial position of TIDCORP as at December 31, 2017 and 2016, and its financial performance and its cash flows for the years then ended in accordance As part of an audit in accordance with ISSAIs, we exercise professional judgment and with Philippine Financial Reporting Standards (PFRSs). maintain professional skepticism throughout the audit. We also:
Basis for Adverse Opinion • Identify and assess the risks of material misstatement of the financial statements, TIDCORP did not comply with Bangko Sentral ng Pilipinas (BSP) regulations on loan whether due to fraud or error, design and perform audit procedures responsive classification and provisioning requirements by staggering the booking of the required to those risks, and obtain audit evidence that is sufficient and appropriate to provisioning for a defaulted guarantee account over a period of ten years without the provide a basis for our opinion. The risk of not detecting a material misstatement approval of the BSP Monetary Board. Accordingly, TIDCORP’s recorded loss for CY resulting from fraud is higher than for one resulting from error, as fraud may 2017 and the Pari-passu payable and Accumulated deficit as at December 31, 2017 involve collusion, forgery, intentional omissions, misrepresentations, or the are understated by P486.880 million, P1.816 billion and P1.989 billion, respectively. override of internal control. Moreover, the Loans receivable, net of allowance for bad debts, as at December 31, 2017 is overstated by P173.280 million. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for We conducted our audits in accordance with International Standards of Supreme the purpose of expressing an opinion on the effectiveness of TIDCORP’s internal Audit Institutions (ISSAIs). Our responsibilities under those standards are further control. described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of TIDCORP in accordance with the Code • Evaluate the appropriateness of accounting policies used and the reasonableness of Ethics for Government Auditors in the Philippines (Code of Ethics) together with the of accounting estimates and related disclosures made by Management. ethical requirements that are relevant to our audits of the financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with • Conclude on the appropriateness of Management’s use of the going concern these requirements and the Code of Ethics. We believe that the audit evidence we have basis of accounting and, based on the audit evidence obtained, whether a material obtained is sufficient and appropriate to provide a basis for our adverse opinion. uncertainty exists related to events or conditions that may cast significant doubt on TIDCORP’s ability to continue as a going concern. If we conclude that Material Uncertainty Related to Going Concern a material uncertainty exists, we are required to draw attention in our auditor’s We draw attention to Note 2.1(d) to the financial statements, which states that report to the related disclosures in the financial statements or, if such disclosures TIDCORP’s financial position and operational performance have declined as continued are inadequate, to modify our opinion. Our conclusions are based on the audit losses totalling to P407.246 million were incurred by TIDCORP for the past three years. evidence obtained up to the date of our auditor’s report. However, future events In addition, as at December 31, 2017, the Corporation’s accumulated deficit was or conditions may cause TIDCORP to cease to continue as a going concern. at P5.154 billion and the non-performing loans ratio stood at 83.45 per cent of the gross loans receivable of P615.703 million. We also draw attention to Note 21.1 to the • Evaluate the overall presentation, structure and content of the financial financial statements which describes TIDCORP’s pending request to the BSP Monetary statements, including the disclosures, and whether the financial statements Board for the staggered booking of the required provisioning for a defaulted guarantee represent the underlying transactions and events in a manner that achieves fair account over a period of seven years starting CY 2018 which if denied will increase presentation. TIDCORP’s accumulated deficit to P7.143 billion and will result in negative capital of P1.228 billion. We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, As stated in Note 2.1(d), these events or conditions, along with other matters set forth including any significant deficiencies in internal control that we identify during our audit. therein and in Note 28 on the Planned Consolidation of the Guarantee Programs of the National Government and Note 29.1(e) on the Deficiency Tax Assessment and Tax Report on Other Legal and Regulatory Requirements Cases, indicate that uncertainty remains that may affect the Corporation’s ability to continue as a going concern. However, despite these adverse conditions, the payment Our audits were conducted for the purpose of forming an opinion on the basic of obligations incurred by TIDCORP is fully guaranteed by the Government of the financial statements taken as a whole. The supplementary information required under Republic of the Philippines pursuant to Section 9 of Presidential Decree No. 1080, as Revenue Regulation Nos. 15-2010 and 19-2011 in Note 29 to the financial statements amended. is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such supplementary information is Responsibilities of Management and Those Charged with Governance for the the responsibility of the Management of TIDCORP. Because of the significance of the Financial Statements matter described in the Basis for Adverse Opinion section, it is inappropriate to and we Management is responsible for the preparation and fair presentation of the financial do not express an opinion on the supplementary information referred to above. statements in accordance with PFRSs, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free COMMISSION ON AUDIT from material misstatement, whether due to fraud or error.
In preparing the financial statements, Management is responsible for assessing TIDCORP’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless TERESITA B. TITULAR Management either intends to liquidate TIDCORP or to cease operations, or has no OIC Supervising Auditor realistic alternative but to do so. May 17, 2018
ANNUAL REPORT 2017 25 Statements of Financial Position As at December 31, 2017 and 2016 (In Philippine Peso)
2016 Note 2017 (As restated)
ASSETS
CURRENT ASSETS Cash and cash equivalents 5 170,518,540 463,295,211 Short-term held-to-maturity investments 6 224,248,922 - Available-for-sale (AFS) financial assets 7 465,844,614 476,953,000 Loans and receivables, net 8.1 28,375,784 45,159,483 Other current assets 13.1 525,851,546 18,097,285 1,414,839,406 1,003,504,979
NON-CURRENT ASSETS Loans and receivables, net 8.2 322,760,862 349,874,793 Investment property, net 9 40,762,029 64,818,402 Property and equipment, net 10 64,268,450 69,839,808 Intangible assets, net 11 733,417 900,296 Deferred tax asset 12 288,564,775 221,742,026 Other non-current assets 13.2 35,417,567 48,811,181 752,507,100 755,986,506
TOTAL ASSETS 2,167,346,506 1,759,491,485
LIABILITIES
CURRENT LIABILITIES Accounts payable 14 500,077,859 374,554,193 Accrued expenses 15 12,605,982 5,388,695 Loans payable 16 812,250,000 855,000,000 Interest payable 17 4,613,781 4,133,767 Unearned income 18.1 23,263,724 28,647,188 Other payables 19 50,000,770 86,014,140 1,402,812,116 1,353,737,983
NON-CURRENT LIABILITIES Unearned income 18.2 3,312,176 3,637,855 Deferred tax liability 12 535,088 521,178 3,847,264 4,159,033
TOTAL LIABILITIES 1,406,659,380 1,357,897,016
EQUITY Capital stock 20.1 5,961,899,438 5,461,899,438 Deficit 20.2 (5,153,879,598) (5,020,748,126) Net unrealized gain (loss) on AFS financial assets 20.3 (47,332,714) (39,556,843)
TOTAL EQUITY 760,687,126 401,594,469
TOTAL EQUITY and LIABILITIES 2,167,346,506 1,759,491,485
The Notes on pages 29 to 40 form part of these financial statements.
26 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Statements of Comprehensive Income For the Years Ended December 31, 2017 and 2016 (In Philippine Peso)
2016 Note 2017 (As restated)
REVENUE
Operating income 22 151,701,137 172,555,101 Other income 22 228 89,675 151,701,365 172,644,776
EXPENSES
Operating expenses: Bad debts expense 145,810,361 354,743,434 Personal services 23 98,397,740 91,276,504 Licenses and taxes 8,547,179 2,425,279 Other services 8,264,495 8,670,292 Depreciation expense 7,810,926 11,336,940 Light and water 5,360,688 5,533,280 Audit fees and services 5,350,227 3,361,946 Communication expense 3,346,476 3,502,701 Repairs and maintenance 3,062,856 3,534,353 Insurance 1,965,422 2,081,447 Staff training and development 1,915,725 1,298,749 Business development expense 1,245,819 2,224,486 Travelling expense 952,695 1,067,206 Rent expense 855,224 1,039,049 Fuel, oil and lubricants 701,028 595,924 Administration expense 674,191 3,285,362 Supplies and materials 528,385 770,251 Representation expense 486,442 776,850 Miscellaneous expense 418,413 172,707 Dues and subscription 271,785 285,540 Amortization expense 166,879 120,880 Legal fees and other services 1,463 112,419 Consultancy expense - 144,828 Donation and contribution - 99,974
Other expenses: Interest and financial charges 24 45,795,160 49,810,725 341,929,579 548,271,126
INCOME BEFORE INCOME TAX (190,228,214) (375,626,350)
INCOME TAX EXPENSE (BENEFIT) Current tax 12, 25 6,379,581 6,338,624 Deferred tax 12 (63,476,323) (119,895,171)
(57,096,742) (113,556,547)
NET INCOME (LOSS) (133,131,472) (262,069,803)
OTHER COMPREHENSIVE INCOME (LOSS) Item that will be reclassified subsequently to profit or loss: Unrealized gain (loss) on AFS financial assets (11,108,386) (4,283,615) Reclassification adjustments - 5,349,001 Unrealized gain (loss) on AFS financial assets, net (11,108,386) 1,065,386 Tax expense 3,332,515 (319,616)
NET OTHER COMPREHENSIVE INCOME (LOSS) (7,775,871) - 745,770
TOTAL COMPREHENSIVE INCOME (LOSS) (140,907,343) (261,324,033)
The Notes on pages 29 to 40 form part of these financial statements.
ANNUAL REPORT 2017 27 Statements of Changes in Equity For the Years Ended December 31, 2017 and 2016 (In Philippine Peso)
Net unrealized gains (losses) on AFS Capital stock Deficit financial assets Note 20.1 20.2 20.3 Total Balance, January 1, 2016 as reported 5,461,899,438 (4,770,695,455) (40,302,613) 650,901,370 Add (Deduct): Prior period errors 26 - 12,042,570 - 12,042,570 Balance, January 1, 2016, as restated 5,461,899,438 (4,758,652,885) (40,302,613) 662,943,940 Reversal of forex gains (losses) - (25,438) - (25,438) Decrease in fair value adjustment - - 745,770 745,770 Net income (loss) for the year - (262,069,803) - (262,069,803) Balance, December 31, 2016 5,461,899,438 (5,020,748,126) (39,556,843) 401,594,469
Capital infusion 13.1 500,000,000 - - 500,000,000 Increase in fair value adjustment - - (7,775,871) (7,775,871) Net income (loss) for the year - (133,131,472) - (133,131,472) Balance, December 31, 2017 5,961,899,438 (5,153,879,598) (47,332,714) 760,687,126
The Notes on pages 29 to 40 form part of these financial statements. Statements of Cash Flows For the Years Ended December 31, 2017 and 2016 (In Philippine Peso)
2016 2017 (As Restated) CASH FLOWS FROM OPERATING ACTIVITIES Guarantee, interest and premium receipts 44,500,526 103,671,672 Miscellaneous receipts 93,883,228 54,007,154 Cash payments to employees and suppliers (131,162,686) (130,639,721) Collection of loans receivables 55,922,100 69,987,495 Loan releases (37,213,823) (69,007,101) Collection of receivables from subrogated claims on default guaranteed accounts - 88,169,374 Deposits from customers and contractors 8,143,393 48,170,041 Payment to clients/government agencies (11,715,996) (9,153,627) Miscellaneous payments (1,715,346) (522,512)
Net cash provided by operating activities 20,641,396 154,682,775
CASH FLOWS FROM INVESTING ACTIVITIES Net placements/proceeds of matured securities (224,248,901) 94,553,020 Purchase of property, plant and equipment (2,123,442) (5,969,679)
Net cash provided by (used in) investing activities (226,372,343) 88,583,341
CASH FLOWS FROM FINANCING ACTIVITIES Payment of corporate borrowings (42,750,000) (45,000,000) Payment of guarantee fee due to the National Government (3,800,000) (4,950,000) Payment to lenders for interest and financial charges (40,497,590) (42,793,335)
Net cash used in financing activities (87,047,590) (92,743,335)
Effect of exchange rate changes on cash on hand and in banks 1,866 72,831
NET INCREASE (DECREASE) IN CASH ON HAND AND IN BANKS (292,776,671) 150,595,612 Cash and cash equivalents at beginning of period 463,295,211 312,699,599
CASH AND CASH EQUIVALENTS AT END OF PERIOD 170,518,540 463,295,211
The Notes on pages 29 to 40 form part of these financial statements.
28 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Notes to Financial Statements December 31, 2017 and 2016 (All amounts in Philippine Peso unless otherwise stated)
(d) Going concern basis of accounting 1. GENERAL/CORPORATE INFORMATION The financial statements were prepared on a going concern basis which assumes that The Trade and Investment Development Corporation of the Philippines (TIDCORP), formerly the Corporation will continue in operation for the foreseeable future and will be able to known as the Philippine Export and Foreign Loan Guarantee Corporation (PHILGUARANTEE), is realize its assets and discharge its liabilities and commitments in the normal course of a wholly-owned government financial institution attached to the Department of Finance (DOF). business. Established on January 31, 1977 by virtue of Presidential Decree (PD) No. 1080, PHILGUARANTEE was renamed TIDCORP and granted expanded functions by Republic Act (RA) No. 8494 on For the past five years, TIDCORP’s financial position and operational performance February 12, 1998. To strengthen its role in the development and expansion of international trade, have declined as: (i) assets substantially dropped by P1.004 billion from P3.171 billion as well as to effectively respond to the economic requirements of the country, TIDCORP was in CY 2012 to P2.167 billion in CY 2017; (ii) continued losses totalling to P407.246 designated as the Philippine Export-Import Credit Agency by virtue of Executive Order (EO) No. 85 million were incurred for the past three years; (iii) accumulated deficit was at P5.154 on March 18, 2002. billion as at December 31, 2017; and (iv) non-performing loans ratio stood at 83.45 per cent of the gross loans receivable of P615.703 million as at December 31, 2017; and TIDCORP’s corporate objective is to contribute to the country’s economic development as the (v) non-earning guarantee portfolio totalled P2.892 billion as at December 31, 2017. Philippine Export-Import Credit Agency providing guarantees, credits, insurance and technical assistance services. Its mission is to stimulate, increase and develop the export of goods and Nevertheless, Management believes that TIDCORP will have sufficient capital to services by assuring speedy and unobstructed access to trade finance for viable exporters, operate over the next 12 months. An additional capital infusion from the National especially the small and medium enterprises and to help generate employment in the export Government was released by the DBM in November 2017 and credited to the BTr sector. Moreover, its programs and services also aim to support projects in priority areas of the for the account of the Corporation (See Notes 13.1 and 20.1). The remaining P4.038 National Government where the country has distinct advantage and where foreign exchange may billion unpaid subscription of the National Government was also included under the be generated and/or saved. proposed Corporate Operating Budget submitted to the DBM. Moreover, the National Government, through the DOF, is planning to consolidate the various guarantee Pursuant to PD No. 1080, as amended by RA No. 8494, TIDCORP’s expanded functions are the programs of the government by 2018 with TIDCORP as the surviving institution which following: will result in increasing the Corporation’s paid-in capital stock to an estimated P26.640 billion (See Note 28). a. To promote and facilitate the entry of foreign loans into the country for development purposes having special regard to the needs of export-oriented industries, industries Management acknowledges that uncertainties remain as to the occurrence of the registered with the Board of Investments, public utilities, and industries the promotion of above events that may affect the Corporation’s ability to continue as a going concern. which is encouraged by government policy; Despite this however, the payment of obligations incurred by TIDCORP is fully guaranteed by the Government of the Republic of the Philippines pursuant to Section 9 b. To guarantee loans granted by Philippine banking and financial institutions to qualified of PD No. 1080, as amended. exporters, producers of export products, and contractors with approved service contracts abroad; 2.2. Adoption of new and amended PFRS
c. To facilitate and assist in the implementation of approved service contracts abroad entered (a) Effective in 2017 that are relevant to the Corporation into by Philippine entities, enterprises, or corporations with foreign exchange earning potentials, by providing counter-guarantees to Philippine banks and financial institutions The Corporation adopted for the first time the following amendments to PFRS, which issuing stand-by Letters of Credit or of Letters of Guarantee for the performance of said are mandatorily effective for annual periods beginning on or after January 1, 2017: service contracts; (i) Amendments to PAS 7, Cash Flow Statements – Disclosure Initiative. These d. To meet requests from domestic entities, enterprises, and corporations to assist them in amendments introduce an additional disclosure that will enable users of financial the coordination of their development and expansion plans with a view to achieving better statements to evaluate changes in liabilities arising from financing activities. utilization of their resources; Management has adopted these amendments by presenting reconciliation e. To provide technical assistance in the preparation, financing and execution of development between the opening and ending balances of liabilities arising from financing or expansion of programs, including the formulation of specific project proposals; and activities which includes both cash and non-cash changes as presented in Note 27. f. To undertake such actions that is consistent with the primary purposes of the Corporation. (ii) Amendments to PAS 12, Income Taxes – Recognition of Deferred Tax Assets for The payment of obligations incurred by TIDCORP under the provisions of PD No. 1080, as Unrealized Losses. These amendments clarify the requirements for recognizing amended, is fully guaranteed by the Government of the Republic of the Philippines pursuant to deferred tax assets on unrealized losses. The amendments clarify accounting Section 9 thereof. for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. They also clarify certain other aspects of accounting The registered office address of the Corporation is at 17th Floor Citibank Tower, Citibank Plaza, for deferred tax assets. These amendments have no significant impact to the Valero St., Makati City. Corporation.
The financial statements of the Corporation as of and for the year ended December 31, 2017 (b) Effective in 2017 that are not relevant to the Corporation (including the comparative financial statements as of and for the year ended December 31, 2016) were authorized for issue by the Corporation’s Board of Directors (BOD) on March 23, 2018. The annual improvement to PFRS 12, Disclosure of Interests in Other Entities is mandatorily effective for annual periods beginning on or after January 1, 2017 but is not relevant to the Corporation’s financial statements: 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (i) Annual Improvements to PFRS (2014 – 2016 Cycle) – PFRS 12, Disclosure of The significant accounting policies adopted in the preparation of these financial statements are Interest in Other Entities. The amendments states that an entity need not present summarized below. These policies have been consistently applied to all the years presented, a summary of financial information for interests in subsidiaries, associates, or unless otherwise stated. joint ventures that are classified as held for sale. These amendments have no significant impact to the financial statements of the Corporation. 2.1 Basis of preparation of financial statements (c) Effective subsequent to 2017 but not adopted early (a) Statement of compliance with Philippine Financial Reporting Standards The following pronouncements were issued before the year ending December 31, 2017 The financial statements of TIDCORP for the years ended December 31, 2017 and 2016 and are mandatorily effective for annual periods beginning on or after January 1, 2018. have been prepared in accordance with the Philippine Financial Reporting Standards Unless otherwise indicated, the TIDCORP does not expect that future adoption of these (PFRSs) and applicable rules and regulations of the Bangko Sentral ng Pilipinas (BSP). pronouncements will have a significant impact on its financial statements. PFRSs are issued by the Financial Reporting Standards Council and approved by the Philippine Board of Accountancy based on International Financial Reporting Standards Effective for reporting periods beginning on or after January 1, 2018: issued by the International Accounting Standards Board. (i) PFRS 9 (2014), Financial Instruments. This standard will replace PAS 39, Financial The financial statements have been prepared using the measurement bases specified Instruments – Recognition and Measurement, and PFRS 9 (2009, 2010 and 2013) by PFRS for each type of asset, liability, income and expense. The measurement bases versions. This new standard contains, among others, the following: are more fully described in the accounting policies that follow. • Three principal classification categories for financial assets based on the (b) Presentation of financial statements business model on how an entity is managing its financial instruments;
The financial statements are presented in accordance with Philippine Accounting • An expected loss model in determining impairment of all financial assets that Standard (PAS) 1, Presentation of Financial Statements. TIDCORP presents all items are not measured at fair value through profit or loss (FVTPL), which generally of income and expenses and other comprehensive income (OCI) in a single statement. depends on whether there has been a significant increase in credit risk since initial recognition of a financial asset; and
(c) Functional and presentation currency • A new model on hedge accounting that provides significant improvements principally by aligning hedge accounting more closely with the risk management These financial statements are presented in Philippine pesos, TIDCORP’s functional activities undertaken by entities when hedging their financial and non-financial and presentation currency, and all values represent absolute amounts except when risk exposures. otherwise indicated. Items included in the financial statements of TIDCORP are measured using its functional currency. Functional currency is the currency of the In accordance with the financial asset classification principle of PFRS 9 (2014), a primary economic environment in which the Corporation operates. financial asset is classified and measured at amortized cost if the asset is held within a business model whose objective is to hold financial assets in order to collect the
ANNUAL REPORT 2017 29 contractual cash flows that represent solely payments of principal and interest (SPPI) (xii) Annual improvements to PFRS (2015 – 2017 Cycle). The following improvements are on the principal outstanding. Moreover, a financial asset is classified and subsequently relevant to TIDCORP but will have no material impact on its financial statements as measured at fair value through OCI if it meets the SPPI criterion and is held in a these merely clarify existing requirements: business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets. All other financial assets are measured at FVTPL. • Amendments to PFRS 3, Business Combinations and PFRS 11, Joint Arrangements – Re-measurement of Previously Held Interests in a Joint In addition, PFRS 9 (2014) allows entities to make an irrevocable election to present Operation. The amendments to PFRS 3 clarify that when an entity obtains control subsequent changes in the fair value of an equity instrument that is not held for trading of a business that is a joint operation, it re-measures previously held interests in in OCI. that business. The amendments to PFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not re-measure The accounting for embedded derivatives in host contracts that are financial assets previously held interests in that business. is simplified by removing the requirement to consider whether or not they are closely related, and, in most arrangements, does not require separation from the host contract. • Amendments to PAS 12, Income Taxes – Tax Consequences of Dividends. The amendments clarify that the requirements in the former paragraph 52B (to For liabilities, the standard retains most of the PAS 39 requirements which include recognise the income tax consequences of dividends where the transactions or amortized cost accounting for most financial liabilities, with bifurcation of embedded events that generated distributable profits are recognised) apply to all income tax derivatives. The amendment also requires changes in the fair value of an entity’s own consequences of dividends by moving the paragraph away from paragraph 52A debt instruments caused by changes in its own credit quality to be recognized in OCI that only deals with situations where there are different tax rates for distributed rather than in profit or loss. and undistributed profits.
Management is currently assessing the impact of PFRS 9 (2014) on the financial • Amendment to PAS 23, Borrowing Costs – Eligibility for Capitalization. The statements of the Corporation. A comprehensive study of the potential impact of this amendments clarify that if any specific borrowing remains outstanding after the standard will be conducted prior to its mandatory adoption date to assess the impact related asset is ready for its intended use or sale, that borrowing becomes part of all changes. of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings. (ii) PFRS 15, Revenue from Contract Customers. The amendments address three topics: identifying performance obligations, principal versus agent considerations and Effectivity Deferred Indefinitely: licensing. PFRS 15 requires an entity to identify performance obligations on the basis of distinct promised goods or services. When another party is involved in providing (i) Amendments to PFRS 10, Consolidated Financial Statements, and to PAS 28, goods or services to a customer, it requires an entity to determine whether it is the Investment in Associates and Joint Ventures – Sales or Contribution of Assets principal in the transaction or the agent on the basis of whether it controls the goods between an Investor and its Associates or Joint Venture. The amendments to PFRS or services before they are transferred to the customer. When an entity grants a license 10 require full recognition in the investor’s financial statements of gains or losses to a customer that is distinct from other promised goods or services, the entity has to arising on the sale or contribution of assets that constitute a business as defined in determine whether the license is transferred at a point in time or over time on the basis PFRS 3, between an investor and its associate or joint venture. Accordingly, the partial of whether the contract requires the entity to undertake activities that significantly recognition of gains or losses (i.e., to the extent of the unrelated investor’s interests in affect the intellectual property to which the customer has rights. an associate or joint venture) only applies to those sale of contribution of assets that do not constitute a business. Corresponding amendments have been made to PAS 28 (iii) Amendments to PFRS 4, Insurance Contracts, regarding the implementation of PFRS to reflect these changes. In addition, PAS 28 has been amended to clarify that when 9, Financial Instruments. These amendments provide two options for entities that determining whether assets that are sold or contributed constitute a business, an issue insurance contracts. An option for companies that issue insurance contracts to entity shall consider whether the sale or contribution of those assets is part of multiple recognize in OCI, rather than profit or loss, the volatility that could arise when PFRS 9 arrangements that should be accounted for as a single transaction. is applied before the new insurance contracts standard is issued; this is the so-called overlay approach and an optional temporary exemption from applying PFRS 9 for 2.3. Financial assets entities whose predominant activity is issuing contracts within the scope of PFRS 4; this is the so-called deferral approach. 2.3.1. Classification and measurement
(iv) Amendment to PAS 40, Transfer of Investment Property. These amendments provide Financial assets, which are recognized when TIDCORP becomes a party to that an entity shall transfer a property to, or from, investment property when, and only contractual terms of the financial instrument, are classified into the following when, there is evidence of a change in use. A change of use occurs if property meets, categories: (a) financial assets at FVTPL; (b) loans and receivables; (c) available- or ceases to meet, the definition of investment property. for-sale (AFS) financial assets; and (d) held-to-maturity (HTM) investments. Management determines the classification upon initial recognition based on the (v) IFRIC 22, Foreign Currency Transactions and Advance Consideration. This IFRIC purpose for which the financial instruments were acquired and their characteristics. addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation Purchases and sales of financial assets are recognized on their settlement date. provides guidance for when a single payment/receipt is made as well as for situations All financial assets that are not classified as at FVTPL are initially recognized at where multiple payments/receipts are made. The guidance aims to reduce diversity in fair value plus any directly attributable transaction costs. Financial assets carried practice. at FVTPL are initially recorded at fair value and the related transaction costs are recognized in profit or loss. (vi) Annual Improvements to PFRS (2014 – 2016 Cycle). The following improvements are relevant to TIDCORP but will have no material impact on its financial statements as Currently, TIDCORP’s financial assets are categorized as loans and receivables, these merely clarify existing requirements: AFS financial assets and HTM investments. A more detailed description of the three financial asset categories follows. • Amendments to PFRS 1, First-time Adoption of PFRS. The amendments deleted short-term exemptions for first-time adopters regarding PFRS 7, Financial (a) Loans and receivables Instruments – Disclosures, PAS 19, Employee Benefits and PFRS 10. Loans and receivables are non-derivative financial assets with fixed or • Amendments to PAS 28, Investments in Associates and Joint Ventures. The determinable payments and fixed maturities that are not quoted in an active amendments clarify that the election to measure at FVTPL an investment in market. These arise when TIDCORP provides money, goods or services an associate or a joint venture that is held by an entity that is a venture capital directly to the debtor with no intention of trading the receivables. organization, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial Loans and receivables include loans to customer and all receivables from recognition. customers and banks. Those with maturities of less than one year are included in the current assets, and those with maturities greater than twelve Effective for reporting periods beginning on or after January 1, 2019: months after the statement of financial position (SFP) date are classified as non-current assets. (vii) PFRS 16, Leases. The new accounting model under PFRS 16 requires a lessee to recognize a ‘right-of-use asset’ and a lease liability. The right of use asset is treated Loans and receivables are subsequently measured at amortized cost using similarly to other non-financial assets and depreciated accordingly and the liability the effective interest method, less impairment losses, if any. Any change accrues interest. The new standard brings most leases on-balance sheet for lessees in value of loans and receivables is recognized in profit and loss, except for under a single model, eliminating distinction between operating and finance leases. reclassified financial assets under PAS 39 and PFRS 7. Lessor accounting however remains unchanged and the distinction between operating and finance lease is retained. (b) AFS financial assets
(viii) Amendments to PFRS 9, Financial Instruments – Prepayment Features with Negative AFS financial assets are non-derivative financial assets that are either Compensation. These amendments confirm that when a financial liability measured designated as available for sale that the Corporation’s management at amortized cost is modified without this resulting in de-recognition, a gain or loss purchased and held indefinitely and will be available to be sold when the need should be recognized immediately in profit or loss. The gain or loss is calculated as the for liquid funds arises during operating cycle or those that do not qualify for difference between the original contractual cash flows and the modified cash flows inclusion in any of the other categories of financial assets. discounted at the original effective interest rates. All financial assets within this category are subsequently measured atfair (ix) Amendments to PAS 28, Investment in Associates – Long-term Interests in Associates value, unless otherwise disclosed, with changes in value recognized in OCI, net and Joint Ventures. These amendments clarify that an entity applies PFRS 9, Financial of any effects arising from income taxes. When the financial asset is disposed Instruments to long-term interests in an associate or joint venture that form part of the of or is determined to be impaired, the cumulative fair value gains or losses net investment in the associate or joint venture but to which the equity method is not recognized in OCI is reclassified from equity to profit and loss. applied. (c) HTM investments (x) IFRIC 23, Uncertainty Over Income Tax Treatments. This IFRIC clarifies how the recognition and measurement requirements of PAS 12, Income Taxes, are applied HTM investments are non-derivative financial assets with fixed or determinable where there is uncertainty over income tax treatments. IFRIC 23 explains how to payments and fixed maturities that the Corporation’s management has the recognize and measure deferred and current income tax assets and liabilities where positive intention and ability to hold to maturity. These investments are carried there is uncertainty over a tax treatment. at amortized cost using the effective interest rate method, less impairment in value. Gains and losses are recognized in the statement of comprehensive Effective for reporting periods beginning on or after January 1, 2021: income (SCI) when the HTM are derecognized and impaired, as well as through the amortization process. (xi) PFRS 17, Insurance Contracts. This standard replaces PFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. PFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features.
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2.3.2 Impairment of financial assets loss – is reclassified to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. TIDCORP assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial Reversal of impairment losses is recognized in OCI, except for financial asset or a group of financial assets is impaired and impairment losses are incurred assets that are debt securities which are recognized in profit or loss only if the if, there is objective evidence that carrying amount exceeds the amount to be reversal can be objectively related to an event occurring after the impairment recovered through use or sale of the asset. If such evidence exists and the loss can loss was recognized. be reliably estimated, any impairment loss is recognized in the SCI. 2.3.3. Items of income and expense related to financial assets TIDCORP recognizes impairment loss based on the category of financial assets as shown below. Gains and losses arising from changes in the fair value of AFS financial assets are recognized in OCI until the financial asset is derecognized or impaired, at which (a) Carried at amortized cost – loans and receivables time the cumulative gain or loss previously recognized in OCI shall be reclassified to profit or loss. TIDCORP assesses whether objective evidence of impairment exists individually for financial assets in accordance with existing BSP regulations. If Non-compounding interest, dividend income and other cash flows resulting from there is objective evidence that an impairment loss on loans and receivables holding impaired financial assets are recognized in profit or loss when received, carried at amortized cost has been incurred, the amount of the loss is regardless of how the related carrying amount of financial assets is measured. measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses 2.3.4. Derecognition of financial assets that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through The financial assets are derecognized when the contractual rights to receive cash the use of an allowance account and the amount of the loss is recognized in flows from the financial instruments expire, or when the financial assets and all profit or loss. substantial risks and rewards of ownership have been transferred to another party. If TIDCORP neither transfers nor retains substantially all the risks and rewards If a loan and receivable has a variable interest rate, the discount rate of ownership and continues to control the transferred asset, the Corporation for measuring any impairment loss is the current effective interest rate recognizes its retained interest in the asset and an associated liability for amounts determined under the contract. When practicable, TIDCORP may measure it may have to pay. impairment on the basis of an instrument’s fair value using an observable market price. The calculation of the present value of the estimated future If TIDCORP retains substantially all the risks and rewards of ownership of a cash flows of a collateralized financial asset reflects the cash flows that may transferred financial asset, TIDCORP continues to recognize the financial asset and result from foreclosures less costs for obtaining and selling the collateral, also recognizes a collateralized borrowing for the proceeds received. whether or not the foreclosure is probable. 2.4 Fair value measurement For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics, i.e., on the basis Fair value is the price that would be received to sell an asset or paid to transfer a liability in of TIDCORP’s or BSP’s grading process that considers asset type, industry, an orderly transaction between market participants at the measurement date. The fair value collateral type, status and other relevant factors. Those characteristics are measurement is based on the presumption that the transaction to sell the asset or transfer relevant to the estimation of future cash flows for groups of such assets by the liability takes place either (a) in the principal market for the asset or liability, or (b) in the being indicative of the debtors’ ability to pay all amounts due according to the absence of a principal market, in the most advantageous market for the asset or liability. contractual terms of the assets being evaluated. The fair value of an asset or a liability is measured using the assumptions that market Future cash flows in a group of financial assets that are collectively evaluated participants would use when pricing the asset or liability, assuming that the market for impairment are estimated on the basis of the contractual cash flows of the participants act in their best economic interest. assets and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the Assets and liabilities for which fair value is measured or disclosed in the financial statements basis of current observable data to reflect the effects of current conditions are categorized within the fair value hierarchy, described as follows, based on the lowest that did not affect the period on which the historical loss experience is based level input that is significant to the fair value measurement as a whole: and to remove the effects of conditions in the historical period that do not exist currently. a. Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities; Estimates of changes in future cash flows for groups of assets should reflect and be consistent with changes in related observable data from period to b. Level 2 – valuation techniques for which the lowest level input that is significant to period. The methodologies and assumptions used for estimating future cash the fair value measurement is directly or indirectly observable; and, flows are reviewed regularly by TIDCORP to reduce any differences between loss estimates and actual loss experience. c. Level 3 – valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. Per the BSP Manual of Regulations for Non-Bank Financial Institutions (MORNBFI), non-performing loans shall, as a general rule, refer to loan For assets and liabilities that are recognized in the financial statements on a recurring accounts whose principal and/or interest is unpaid for 30 days or more after basis, the Corporation determines whether transfers have occurred between Levels in the due date or after they have become past due in accordance with existing rules hierarchy by re-assessing categorization (based on the lowest level input that is significant and regulations. This shall apply to loans payable in lump sum and loans to the fair value measurement as a whole) at the end of each reporting period. payable in quarterly, semi-annual or annual installments, in which case, the total outstanding balance thereof shall be considered non-performing. The carrying values of the Corporation’s financial assets and liabilities, particularly the AFS securities, as reflected in the SFP and related notes approximate their respective Level 1 In the case of loans payable in monthly installments, the total outstanding fair values of P465.845 million and P476.953 million as of December 31, 2017 and 2016, balance thereof shall be considered nonperforming when three or more respectively. installments are in arrears. In the case of loans payable in daily, weekly or semi- monthly installments, the entire outstanding balance of the loan/receivable 2.5. Property and equipment shall be considered as past due when the total amount of arrearages reaches 10 per cent of the total loan/receivable balance. Restructured loans shall be Property and equipment (PE) include office condominium, transportation and equipment considered non-performing except when as of restructuring date, it has an which are carried at cost less accumulated depreciation and any impairment in value. The updated principal and interest payments and it is fully secured by real estate cost of an asset comprises its purchase price and directly attributable costs of bringing with loan value of up to 60 per cent of the appraised value of real estate the asset to working condition for its intended use. Expenditures for additions, major security and the insured improvements and such other first class collaterals. improvements and renewals are capitalized while expenditures for repairs and maintenance are charged to expense as incurred. When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are written off after all the necessary procedures, Depreciation on asset is calculated using the straight-line method to allocate the cost of including approval from the management and the BOD, have been completed the asset net of residual value of 10 per cent of cost over its estimated useful life. The and the amount of the loss has been determined. Subsequent recoveries of Corporation estimates the expected useful life of PE, within the following life spans, as amounts previously written off are recognized as an income in the SCI. If, in prescribed by COA Circular No. 2015-007: 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 (such as an improvement in the debtor’s credit rating), the Type of PE Estimated Useful Life previously recognized impairment loss is reversed by adjusting the allowance Buildings 30 to 50 years account. The amount of the reversal is recognized in profit or loss. Transportation equipment (i.e. motor vehicles) 5 to 15 years Whenever possible, TIDCORP seeks to restructure loans rather than to Office equipment 5 to 15 years take possession of collateral. This may involve extending the payment Furniture, fixtures and books 2 to15 years arrangements and the agreement of new loan conditions. Management Leased assets and improvements Whichever is shorter between the useful continuously reviews restructured loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to life of the leased asset or improvement an individual or collective impairment assessment, calculated using the loans’ and the lease term original effective interest rate. The difference between the carrying value of the Other property, plant and equipment 2 to 15 years original loan and the present value of the restructured cash flows, discounted at the original effective interest rate, is recognized in profit or loss as part of Depreciation shall be for one month if the PE is available for use on or before the 15th day Impairment Losses account. of the month. Otherwise, depreciation shall be for the succeeding month. Major repairs/ renovations are depreciated over the remaining useful life of the related asset. The assets’ TIDCORP’s provisioning of valuation reserves on bad debts is pursuant to BSP useful lives are reviewed, and adjusted if appropriate, at each SFP date. Circular No. 855 issued October 29, 2014. At each SFP date, the Corporation reviews the carrying amount of its tangible assets to (b) Carried at fair value – AFS financial assets determine whether there are any indicators of impairment. If indicators of impairment exist then the recoverable amount of an asset is estimated. If the recoverable amount of an asset When a decline in the fair value of an AFS financial asset has been recognized is less than its carrying amount, the difference is recognized in the SCI as an impairment in OCI and there is objective evidence that the asset is impaired, the loss. cumulative loss – measured as the difference between the acquisition cost (net of any principal repayment and amortization) and current fair value, less An item of PE, including the related accumulated depreciation and impairment losses, if any, any impairment loss on that financial asset previously recognized in profit or is derecognized upon disposal or when no future economic benefits or service potential is expected from its use or disposal. The gain or loss arising from derecognition of the asset
ANNUAL REPORT 2017 31 (calculated as the difference between the net disposal proceeds and the carrying amount of 2.9 Impairment of non-financial assets the asset) is included in the SCI when the item is derecognized. The Corporation assesses at each reporting date whether there is an indication that PE may 2.6. Semi-expendable property be impaired. If any such indication exists or when annual impairment testing for a non- financial asset is required, the Corporation makes an estimate of the non-financial asset’s Pursuant to COA Circular Nos. 2015-007 and 2016-006 dated October 22, 2015 and recoverable amount. Recoverable amount is the higher of a non-financial asset’s fair value December 29, 2016, respectively, a capitalization threshold of P15,000 is applied as the less costs to sell and its value in use and is determined for an individual asset, unless the minimum cost of an individual asset to be recognized as PE. non-financial asset does not generate cash inflows that are largely independent of those from other or groups of non-financial assets. Semi-expendable property or those tangible items with cost below the capitalization threshold are initially recorded at cost. These items are recognized as expense in full upon When the carrying amount of a non-financial asset exceeds its recoverable amount, the issuance to end users but recorded under the Report on the Physical Count of Inventories non-financial asset is considered impaired and is written down to its recoverable amount. for monitoring purposes. An impairment loss is charged against operations in the year in which it arises.
2.7 Investment properties An impairment assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have Investment properties (IPs) are properties held either to earn rental income or for capital decreased. If such indication exists, the recoverable amount is estimated. A previously appreciation or for both, but not for sale in the ordinary course of business, use in the recognized impairment loss is reversed only if there has been a change in estimates used to production or supply of goods or services or for administrative purposes. determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That IPs are initially recorded at cost, which includes directly attributable costs incurred. It increased amount cannot exceed the carrying amount that would have been determined, is subsequently measured at cost less accumulated depreciation and accumulated net of depreciation, had no impairment loss been recognized for the asset in prior years. impairment losses, if any. Depreciation on asset is calculated using the straight-line Such reversal is recognized in the SCI. For PE, after such reversal, the depreciation expense method to allocate the cost of the assets net of residual value of 10 per cent of cost over is adjusted in future years to allocate the asset’s revised carrying amount, less any residual its estimated useful life. value, on a systematic basis over its remaining life.
IPs include real and other properties acquired (ROPA) in settlement of loans and receivables 2.10 Financial liabilities under the Direct Lending and Guarantee Programs, through foreclosure or dacion in payment. These properties are initially booked at the carrying amount of the loan (i.e., Financial liabilities which include bank loans, trade and other payables (except government- outstanding loan balance less allowance for credit losses computed based on PAS 39 related obligations) are recognized when TIDCORP becomes a party to the contractual provisioning requirement which take into account the fair market value of the collateral) terms of the instrument. All interest-related charges incurred on a financial liability, except plus booked accrued interest less allowance for credit losses, plus transaction costs those that are capitalized, are recognized as an expense in profit or loss as an expense in incurred upon acquisition (e.g., non-refundable capital gains tax and documentary stamp the SCI under the caption “Interest and financial charges”. tax paid in connection with the foreclosure/purchase of the acquired real estate property). Maintenance and other carrying costs subsequent to the foreclosure or acquisition of such Financial liabilities are classified as current liabilities if payment is due to be settled within property are taken up as expenses. Realized gain on sale thereof is credited to income. one year or less after the end of the reporting period (or in the normal operating cycle of the business, if longer) or the Corporation does not have an unconditional right to defer Pursuant to the BSP Circular No. 520 dated March 20, 2006, TIDCORP adopted the following settlement of the liability for at least 12 months after the end of the reporting period. policies in accounting for ROPA: Otherwise, these are presented as non-current liabilities.
a. Land and buildings are accounted for using the cost model under PAS 40, Investment Financial liabilities are derecognized from the statement of financial position only when Property; the obligations are extinguished either through discharge, cancellation or expiration. The difference between the carrying amount of the financial liability derecognized and the b. Other non-financial assets shall be accounted for using the cost model under PAS 16, consideration paid or payable is recognized in profit or loss. Property Plant and Equipment; 2.11 Provident Fund c. Buildings and other non-financial assets are depreciated over the remaining useful life of the assets, which shall not exceed ten years and three years from the date of TIDCORP has a Provident Fund for the benefit of its employees. The contributions made acquisition, respectively; and to the Fund consist of the employees’ share at 5 per cent of basic salary which is withheld from the monthly payroll and the employer’s share at 25 per cent of basic salary which is d. Land, buildings and other non-financial assets shall be subject to the impairment charged to Provident Fund Contributions. provisions of PAS 36, Impairment of Assets. 2.12 Equity The appraisal of all ROPA is made at least every other year to determine whether impairment exists. Immediate re-appraisal is conducted on ROPA which materially declined in value. Capital stock represents the value of capital paid by the National Government. Retained If the recoverable amount/appraised value of ROPA is less than its carrying amount, the earnings (Deficit) represent all current and prior period results of operations as disclosed in difference is recognized in the SCI as Impairment loss. profit and loss, reduced by the amount of dividends declared.
An IP is derecognized upon disposal or when it is permanently withdrawn from use and Net unrealized fair value gains (losses) on AFS securities arise from cumulative mark-to- no future economic benefits are expected from its disposal. Any gains or losses on the market valuation of outstanding AFS securities. retirement or disposal of an IP are recognized in profit or loss in the period of the retirement or disposal. 2.13 Revenue and expense recognition
Transfers are made to or from IP only when there is a change in use. For a transfer from IP Revenue is recognized when it is probable that the economic benefits will flow to the to owner’s occupied property, the deemed cost for subsequent accounting is the fair value Corporation and the revenues can be reliably measured. In addition, the specific recognition at the date of change in use. If owner’s occupied property becomes an IP, the Corporation criteria that follow must also be met before revenue is recognized: accounts for such property in accordance with the policy stated under PE up to the date of change in use. (a) Income from guarantee operations
2.8 Intangible assets Guarantee fees are collected in advance upon issuance of the guarantee and periodically thereafter, based on outstanding guaranteed loan. The accounting treatment for Intangible assets include acquired licenses and internally developed software which are guarantee fee income follows the accrual basis. Guarantee fees collected in advance recognized if, and only if it is probable that the expected future economic benefits or service are charged to unearned income and is distributed/amortized over the period covered potential that are attributable to the asset will flow to the Corporation and the cost or fair by the guarantee fee. value of the asset can be measured reliably. Commitment fees are collected in advance upon issuance of the guarantee based on Acquired computer software licenses are capitalized on the basis of the costs incurred to the undrawn balances of guaranteed loan. The accounting treatment for commitment acquire and install the specific software. Capitalized costs are amortized on a straight- fees is the same as that of the guarantee fee income. Processing fees are recognized line basis over the expected useful life of five years. Costs associated with maintaining upon collection. computer software and those costs associated with research activities are recognized as expense in profit or loss as incurred. Interest and penalties due to delay in the payment of guarantee fees and advances are recognized as income upon collection. Costs that are directly attributable to the development phase of new customized software for information technology and telecommunications systems are recognized as intangible (b) Income from direct lending operations assets if, and only if, the Corporation can demonstrate all of the following recognition requirements: Interest and similar income derived from financial instruments measured at amortized cost and interest-bearing financial instruments is recorded at the effective interest a. The technical feasibility of completing the intangible asset so that it will be available for rate, which is the rate that exactly discounts estimated future cash payments or use or sale; receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. b. The intention to complete the intangible asset and use or sell it; Interest income, processing fees and penalties due on delayed payment are recognized c. The ability to use or sell the intangible asset; upon collection.
d. The intangible asset will generate probable future economic benefits or service Cost and expenses are recognized in profit or loss upon utilization of goods or services or potential; at the date they are incurred. Finance costs are reported in profit or loss on accrual basis.
e. The availability of adequate technical, financial and other resources necessary to 2.14 Leases complete the development and to use or sell the intangible asset; and The Corporation determines whether an arrangement is, or contains, a lease based on the f. Ability to measure reliably the expenditure attributable to the intangible asset during substance of the arrangement. It makes an assessment of whether the fulfillment of the development. arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Leases are accounted for as follows: Development costs not meeting these criteria for capitalization are expensed as incurred.
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(a) TIDCORP as lessee required. Guided by the MORNBFI and the related amendments thereto, such estimates are based on assumptions about a number of factors and actual results may differ, Leases which do not transfer to the Corporation substantially all the risks and benefits resulting in future changes to the allowance. of ownership of the asset are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are recognized as expense in profit or (b) Recognition of provisions and contingencies loss on a straight-line basis over the lease term. Associated costs, such as repairs and maintenance and insurance, are expensed as incurred. Judgment is exercised by management to distinguish between provisions and contingencies. Policies on recognition and disclosure of provisions and contingencies (b) TIDCORP as lessor are discussed in Note 2.15 and relevant disclosures are presented in Note 21.
Leases wherein the Company substantially transfers to the lessee all risks and benefits 3.2. Use of estimates incidental to ownership of the leased item are classified as finance leases and are presented as receivable at an amount equal to the Company’s net investment in the The following are the key assumptions concerning the future, and other key sources of lease. Finance income is recognized based on the pattern reflecting a constant periodic estimation uncertainty at the end of the reporting period, that have a significant risk of rate of return on the Company’s net investment outstanding in respect of the finance causing a material adjustment to the carrying amounts of resources and liabilities within lease. the next reporting period:
Leases which do not transfer to the lessee substantially all the risks and benefits of a) Estimating impairment of financial assets ownership of the asset are classified as operating leases. Lease income from operating leases is recognized in profit or loss on a straight-line basis over the lease term. TIDCORP reviews its AFS securities and loans and other receivables portfolios to assess impairment at least on a quarterly basis. In determining whether an impairment 2.15 Provisions and contingencies loss should be recorded in profit or loss, TIDCORP makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the Provisions are recognized when the Corporation has a present obligation (legal or estimated future cash flows from the financial asset or a portfolio of similar financial constructive) as a result of a past event, and it is probable that an outflow of resources assets. This evidence may include observable data indicating that there has been an embodying economic benefits will be required to settle the obligation and a reliable estimate adverse change in the payment status of borrowers or issuers in a group, or national or can be made of the amount of the obligation. local economic conditions that correlate with defaults on assets in the group.
Contingent liabilities are not recognized but are disclosed in the financial statements b) Estimating useful lives of PE and IP unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized but are disclosed in the financial statements when an TIDCORP estimates the useful lives of premises, furniture, fixtures and equipment, inflow of economic benefits is probable. IPs and other properties based on the period over which the assets are expected to be available for use. The estimated useful lives of premises, furniture, fixtures and 2.16 Income taxes equipment, investment properties and other properties are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and Tax expense recognized in the profit or loss comprises the sum of deferred tax and current tear, technical or commercial obsolescence and legal or other limits on the use of the tax not recognized in OCI or directly in equity, if any. assets.
2.16.1. Current tax The carrying amounts of IPs are analyzed in Note 9 while those of PE are analyzed in Note 10. Current tax assets or liabilities comprise those claims from, or obligations to, fiscal authorities relating to the current or prior reporting period, that are uncollected or c) Determining realizable amount of deferred tax assets unpaid at the end of the reporting period. They are calculated using the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable TIDCORP reviews its deferred tax assets at the end of each reporting period and profit for the year. All changes to current tax assets or liabilities are recognized as a reduces the carrying amount to the extent that it is no longer probable that sufficient component of tax expense in profit or loss. taxable profit will be available to allow all or part of the deferred tax assets to be utilized.
2.16.2. Deferred tax The carrying value of deferred tax assets, which management assessed to be utilized within the next two to three years, as of December 31, 2017 and 2016 is disclosed in Deferred tax is accounted for using the liability method on temporary differences Note 12. at the end of the reporting period between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Under the liability 3.3. Foreign currency-denominated monetary assets method, with certain exceptions, deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible The Corporation’s accounting for foreign currency-denominated monetary assets is guided temporary differences and the carryforward of unused tax losses and unused tax by PAS 21, The Effects of Changes in Foreign Exchange Rates. Actual foreign currency credits to the extent that it is probable that taxable profit will be available against transactions are recorded initially based on prevailing rate/spot rate as of transaction date. which the deferred tax asset can be utilized. Unrecognized deferred tax assets are These accounts are translated/converted into Philippine peso using the Philippine Dealing reassessed at the end of each reporting period and are recognized to the extent System Weighted Average Rate (PDSWAR) closing rate as of SFP date. Foreign exchange that it has become probable that future taxable profit will be available to allow such differences arising from the settlement of monetary items or on translation of monetary deferred tax assets to be recovered. items are recognized in the SCI in the period in which they arise.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled provided such 4. RISK MANAGEMENT tax rates and tax laws have been enacted or substantively enacted at the end of each reporting period. Risk is inherent in the TIDCORP’s activities but it is managed through a process of on-going identification, assessment/measurement, control and monitoring subject to the risk limits The carrying amount of deferred tax assets is reviewed at the end of each reporting and management action trigger mechanism. The Corporation recognizes the importance period and reduced to the extent that it is probable that sufficient taxable profit will of risk management to ensure its long term viability. Management shall see to it that the risk be available to allow all or part of the deferred tax asset to be utilized. management functions are implemented in all business units of the organization. This process of risk management is critical to the entity’s continuing overall viability and each individual within The measurement of deferred tax liabilities and assets reflects the tax consequences the Corporation is accountable for the risk exposures relating to his or her responsibilities. that would follow from the manner in which TIDCORP expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. The Corporation is exposed to credit risk, liquidity risk, market risk, operational risk and regulatory risk. The Corporation’s overall risk management program focuses on these risk areas and should Most changes in deferred tax assets or liabilities are recognized as a component of regularly formulate risk management strategies and policies to mitigate/minimize potential tax expense in profit or loss, except to the extent that it relates to items recognized adverse effects on its financial and operational performances. in OCI or directly in equity. In this case, the tax is also recognized in OCI or directly in equity, respectively. In line with the thrust of Management to improve the overall viability of the Corporation, the BOD approved the creation of the Finance and Business Development Committee (FBDC) which is 2.16 Events after the end of the reporting period mandated to assist the BOD perform efficiently and effectively its oversight role with respect to TIDCORP’s financial management and business development consistent with its mandate under Any post-year-end event that provides additional information about TIDCORP’s financial its Charter and relevant government policies. position at the end of reporting period (adjusting event) is reflected in the financial statements. Post-year-end events that are not adjusting events, if any, are disclosed when The FBDC’s major tasks are to review the Corporation’s business plans and business strategies material to the financial statements. and its annual budget; evaluate financial condition and operating performance, provide guidance to Management, particularly to the Business Revenue Group, through the Board, in formulating specific marketing and business development activities consistent with its approved business 3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES plan.
TIDCORP’s financial statements prepared in accordance with PFRS require management to make The FBDC is also mandated to provide necessary guidance to the Management, through the judgments and estimates that affect the amounts reported in the financial statements and related BOD, in formulating strategies and/or specific action plans to (a) improve/strengthen TIDCORP’s notes. Judgments and estimates are continually evaluated and are based on historical experience capital structure and overall financial condition, specifically on its borrowing, investing and related and other factors, including expectations of future events that are believed to be reasonable under financing activities; (b) recover exposures/liquefy acquired assets and/or properly dispose the circumstances. Actual results may ultimately differ from these estimates and the differences non-performing assets of the Corporation; and (c) regularly check the status and availability could be significant. of program funds to ensure adequate and appropriate allocation of resources to back up the funding requirements of credit and guarantee proposals in the pipeline and recommend to the 3.1 Critical management judgments in applying accounting policies BOD alternative sources of funds to support the operations and programs of TIDCORP.
In the process of applying the Corporation’s accounting policies, Management has used 4.1. Risk management structure its judgment and made estimates in determining the amounts recognized in the financial statements. The most significant use of judgments and estimates are as follows: a) Board level
(a) Impairment losses on loans, advances and contingent liabilities (i) Board of Directors. The BOD is responsible for the overall risk management approach and for approving the risk principles and strategies. The Corporation reviews its problem loans, advances and contingent liabilities at each reporting date to assess whether an allowance for impairment should be recorded in (ii) Risk Oversight Committee (ROC). This Committee shall be responsible for the the profit or loss. In particular, judgment by Management is required in the estimation following: of amount and timing of future cash flows when determining the level of allowance
ANNUAL REPORT 2017 33 • Performing oversight risk management functions specifically in the areas of (iv) Internal Audit Office (IAO). Risk management processes throughout the managing credit, market, liquidity, operational, legal, reputational and other Corporation are audited by the IAO that examines both the adequacy of the risks of the Corporation, and crisis management, which shall include receiving procedures and compliance with procedures. IAO discusses the results of the from Senior Management periodic information on risk exposures and risk assessments with management and reports its findings and recommendations to management activities; the Audit Committee and the BOD. The IAO shall be responsible for the following:
• Developing the Risk Management policy of the Corporation, ensuring • Examine and evaluate the adequacy and effectiveness of the internal control compliance with the same and ensure that the risk management process and systems at various operations and activities of the Corporation; compliance are embedded throughout the operations of TIDCORP, especially at the Board and Management levels; and • Review compliance with legal and regulatory requirements and approved Corporation’s policies and procedures; • Providing quarterly reporting and updating the Board on key risk management issues as well as ad hoc reporting and evaluation on investment proposals. • Examine the quality of credit portfolio and periodically updates Management on the status thereof; (iii) Credit Committee (CreCom). This Committee shall be responsible for the following: • Appraise performance and economical and efficient use of corporate • Ensure that the credit policies set by the Board are implemented; resources;
• Review, assess, and recommend changes or amendments to the adequacy • Recommend measures to safeguard the assets of the Corporation; of TIDCORP’s existing credit policies and its overall credit administration/ implementation, such as but not limited to the general compliance with • Review the accuracy and reliability of the Corporation’s accounting records existing guidelines and procedures; and financial reports, including that of other entities where the Corporation has financial interest or where it may have review and monitoring authority • Review the quality of TIDCORP’s guarantees and direct lending portfolios through contractual agreements or covenants; and assuring adherence to policies and guidelines and monitoring progress toward achieving corporate objectives without prejudice to the review to be • Suggest/Recommend to Management measures to address the inherent conducted by an independent body/regulator; flaws/defects in the systems and operations of the different organizational units of the Corporation. • Review and approve or deny all applications for direct lending and/or guarantee involving amounts that fall within the amount limitations set by the 4.2. Risk mitigation Board for the Committee; (a) Credit risk • Review and recommend/endorse to the Board all applications for direct lending and guarantee involving amounts that exceeds the amount limitations Credit risk is the risk that a guaranteed obligor or direct lending client of the TIDCORP set by the Board for the Committee; will fail to meet its obligations in accordance with the agreed terms. The goal of credit risk management is to create shareholder value by ensuring the credit risk exposures • Advise on any matter of significance relating to credit including generate returns in excess of the cost of the underlying capital while at the same recommendations to the Board of changes in guarantee and direct lending time supporting government economic development priorities and thrusts in sectors policies or directions; covered by its mandate.
• Review and assess the Committee’s Charter periodically and recommend Credit risk arises from the Corporation’s guarantees and direct lending business, any proposed changes to the Board for approval and shall conduct annual comprising of off-SFP commitments and on-SFP portfolio. assessment of its own performance; and Credit risk is addressed at the operational level by specific processes and procedures • Perform such other functions that the Board may delegate from time to time as contained in TIDCORP’s Risk Asset Management Manual (RAMM) and through the or as may be required by law. Credit Policy Memoranda (CPMs) issued from time to time. The Corporation’s credit assessment process includes the determination of a credit risk rating or score for the (iv) Audit Committee. This Committee shall be responsible for the following: borrower. For this purpose, it implements its own Internal Credit Risk Rating System (ICRRS). The Corporation manages and controls credit risk by setting limits on the • Overseeing, monitoring and evaluating the adequacy and effectiveness amount of risk it is willing to accept. Counterparty limits are established by the use of a of TIDCORP’s internal control system, engage and provide oversight of credit classification system which assigns each counterparty a risk rating. The credit the Corporation’s internal and external auditors, and coordinate with the quality review process allows the Corporation to assess the potential loss as a result of Commission on Audit (COA); the risks it is exposed to and take immediate corrective actions on the same.
• Reviewing and approving audit scope and frequency, the annual internal (b) Liquidity risk audit plan, quarterly, semi-annual and annual financial statements before submission to the Board, focusing on changes in accounting policies and Liquidity risk is the risk that the Corporation will be unable to meet its payment practices, major judgmental areas, significant adjustments resulting from the obligations when they fall due under normal and stress circumstances. To mitigate audit, going concern assumptions, compliance with accounting standards, risk, management has arranged diversified funding sources in addition to its core and compliance with tax, legal, regulatory and COA requirements; revenue base, manages assets with liquidity in mind, and monitors future cash flows and liquidity on a daily basis. This incorporates an assessment of expected cash flows • Receiving and reviewing reports of internal and external auditors and and the availability of high grade collateral which could be used to secure additional regulatory agencies, and ensuring that Management is taking appropriate funding, if required. corrective actions, in a timely manner in addressing control and compliance functions with regulatory agencies; To address this risk, Management incorporated in its Business Plan the Contingency Funding Plan (CFP) which was approved by the Board in February 2008, with the • Ensuring that internal auditors have free and full access to all the Corporation’s following objectives: records, properties and personnel relevant to and required by its function and that the internal audit activity shall be free from interference in determining its • To define the level of crisis that the BOD intends for the Corporation to survive scope, performing its work and communicating its results; and without external assistance and that the same crisis level does not escalate to a point that it cannot survive. • Developing a transparent financial management system that will ensure the integrity of internal control activities throughout the organization through a • To articulate in advance what to do, when, how and by whom to manage a crisis procedures and policies handbook that will be used by the entire organization. or liquidity situation to avert any escalation of the same with the minimum of financial impact. b) Management level The concept is to manage a crisis fast enough but to mitigate also the risks of (i) The Senior Management Committee (SMC). The SMC is a standing advisory escalation and prevent the exacerbation of the crisis by slow and wrong decision. The body responsible for providing sound and strategic guidance, advice, policies and CPF covers the following areas: (a) Survivable Liquidity Stress Level; (b) Activation guidelines on key matters or issues affecting the operations of TIDCORP, and and Crisis Management Process; (c) Senior Management Crisis Committee; (d) periodically evaluates and monitors the implementation of strategies or action Contingency Funding Strategy; (e) Communications; (f) Management Information plans that the BOD or Management has approved. System Requirements; and (g) Other Specific Crisis Management Preparation Requirements. (ii) Risk Management Office (RMO). The role of the RMO is to assist and support management in attaining and maintaining a high quality risk asset process as well As a result of the shift by the Corporation from HTM to AFS securities, TIDCORP as healthy and sound portfolio quality that would result to the attainment of the maintains a portfolio of highly marketable securities that can be easily liquidated in Corporation’s objectives as to profitability, service efficiency and product delivery. the event of unforeseen interruption of cash flow. Likewise, due to the dynamic nature of the underlying businesses, the Fund Management Department of the Corporation (iii) Office of the Chief Risk Officer. The Chief Risk Officer shall be responsible for the maintains flexibility in funding by keeping committed credit lines available. following: (c) Market risk • Integrate risk management into the business activities of the Corporation; Market risk is essentially the risk of loss on the Corporation’s statement of financial • Ensure that the Corporation manages adequately credit, market, liquidity, position positions and asset/liability structure due to price or interest rate changes; legal, operational and other risks: that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange and equity prices. a) Review compliance with existing risk asset management policies, regulations, plans and procedures, and In general, market risk is identified when a product is approved for introduction into the Corporation’s portfolios, as well as when the actual risk-taking transaction is b) Provide feedback to Management and/or marketing units on potential consummated. In the product approval process, the aim is to perform a thorough losses or gains in risk asset management operations based on periodic analysis, evaluation and documentation of the market risk exposure arising from the financial analysis to gauge the credit health of the Corporation and product, if any, and to ensure such is within the strategic parameters and risk tolerance identify sound credit alternatives. guidelines of the Corporation.
• Advise the BOD in areas of risk exposures and risk management activities of In order to address this, the Treasury Operations Department is tasked to closely the Corporation. monitors the behavior of the market in terms of prevailing interest rates and mark-to- market valuation of TIDCORP’s AFS government securities
34 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
(d) Operational risk Accounts receivable represents trade receivables from clients under the different program offerings, namely: guarantee, direct lending, and credit insurance programs, including Operational risk is the risk of loss resulting from inadequate or failed internal processes, default accounts to be collected within one year. people and systems or from external events – whether deliberate, accidental or natural. Guarantee fees receivable represents guarantee fees due on the interest portion of the TIDCORP undertakes the identification/assessment of operational risk through (a) guaranteed obligations of the Corporation from one account. products, systems and process development; (b) business continuity planning; and (c) audits. Interest receivable on loans represents accrued interest receivable from loans receivable with current status as at SFP date. Section 4 of BSP Circular No. 202, series of 1999 Control and mitigation of operational risks are undertaken through (a) control provides that no accrual of interest income is allowed if a loan has become non-performing. mitigation activities, such as segregation of duties, clear documentation of procedures, Interest on non-performing loans shall be taken up as income only when actual collections physical assets and information access control and verification and reconciliation; and thereon are received. (b) continuity planning. Interest receivable on investments represents accrued interest receivable from investments Operational risk is addressed through approved documentations of processes in in government-issued debt instruments, government bank products and other investments, back office/support functions. Emphasis is placed on controls to guide day-to-day broken down as follows: processes. 2017 2016 5. CASH AND CASH EQUIVALENTS Treasury bonds 4,951,764 6,107,597 This account consists of the following: Retail Treasury bonds 1,155,833 - Philippine interest reduction bonds 1,725,571 1,725,571 2016 Special savings deposit 1,184 504,342 2017 (As restated) Foreign currency denominated time deposit 1,577 1,577 Cash on hand - 19,774 7,835,929 8,339,087
Revolving/petty cash fund 152,313 129,101 8.2. Non-current Cash in bank Foreign currency deposits 1,063,036 980,237 This account consists of the following: Savings deposit 232,481 741,099 Treasury bills 162,220,710 - 2017 2016 Special savings deposit 6,850,000 461,425,000 Loans receivable – non-current, net 322,760,862 348,840,807 170,518,540 463,295,211 Accounts receivable – clients, net - 1,033,986 Receivable from subrogated claims, net - - This account includes placements in Treasury bills with maturity of less than 90 days from date of acquisition and with interest rates ranging at 2.05 to 2.45 per cent per annum. 322,760,862 349,874,793 Loans receivable – non-current, net represents the long-term portion of the outstanding 6. SHORT-TERM HELD-TO-MATURITY INVESTMENTS balance of the loans receivable originated by the Corporation under the RDL and WLP. In 2017, total loan releases amounted to P37.214 million, loan collections/recoveries This account consists of short-term HTM investments in Treasury bills totalling to P224,248,922 amounted to P45.614 million and the amortization of loans receivable discounts amounted as of December 31, 2017, and which have terms ranging from 104 to 133 days and effective to P0.66 million. Details follow: interest rates of 2.20 to 2.47 per cent per annum.
2017 2016 7. AVAILABLE-FOR-SALE FINANCIAL ASSETS Loans receivable 597,644,753 606,378,310 This account is composed of the following: Allowance for doubtful accounts (274,883,891) (257,537,503) 322,760,862 348,840,807 Retail Treasury Receivables from subrogated claims represents advances made by TIDCORP to creditor- Treasury Bonds Bonds Total banks on assumption of the guaranteed portion of the loan and interest as well as other Balance, January 1, 2016 358,248,758 217,638,855 575,887,613 charges related thereto and the restructured accounts of defaulting clients under the Acquisitions/Additions - - - Guarantee Program. As a result of the call on the guarantees issued in favor of the creditor- banks, TIDCORP settled advances on these default accounts aggregating to P2.766 billion Sales/Reductions - (100,000,000) (100,000,000) for the principal and interest amortizations covering the period from December 2006 to Fair value gains (losses) (2,594,893) 3,660,280 1,065,387 December 2015 for large and SME accounts. The guarantee accommodations for these accounts were issued during the period 1979 to 2007 while the claim payments cover the Balance, December 31, 2016 355,653,865 121,299,135 476,953,000 period from 1980 to 2016. The balance of the accounts totalling to P2,506,987,910 as of Acquisitions/Additions - - - both December 31, 2017 and 2016 have been fully provided for with allowance. Sales/Reductions - - - 8.2 Allowance for doubtful accounts Fair value gains (losses) (4,625,676) (6,482,710) (11,108,386) Balance, December 31, 2017 351,028,189 114,816,425 465,844,614 Movements in the allowance for doubtful accounts for loans and receivables are as follows:
The Corporation’s AFS investments are stated at their fair values. As at December 31, 2017 and 2016, the accumulated net unrealized loss on AFS investments, which is reflected as fair Recoveries/ value adjustments in the statement of changes in equity, amounted to P47.333 million and Balance, Additional Write-offs/ Balance, P39.557 million, respectively, net of deferred tax assets of P20.285 million and P16.953 million, 1/1/2017 Provision Adjustments 12/31/2017 respectively. These investments are classified as current assets with the intention to dispose Loans receivable – anytime within 12 months from the SFP date. short-term 294,894 - (114,973) 179,921 Loans receivable – long-term 257,537,503 25,920,000 (8,573,612) 274,883,891 8. LOANS AND RECEIVABLES Accounts receivable 8.1 Current – clients 8,898,909 - 3,039,150 11,938,059 Receivable from This account consists of the following: subrogated claims 2,506,987,910 - - 2,506,987,910 2,773,719,216 25,920,000 (5,649,435) 2,793,989,781 2017 2016 Loans receivable – current 18,057,984 30,224,865 Recoveries/ Interest receivable on investments 7,835,929 8,339,087 Balance, Additional Write-offs/ Balance, Accounts receivable – current 280,298 5,779,087 1/1/2016 Provision Adjustments 12/31/2016 Loans receivable – Interest receivable – loans 2,447,397 1,846,914 short-term 507,443 500,000 (712,549) 294,894 28,621,608 46,189,953 Loans receivable – Allowance for doubtful accounts 179,921 294,894 long-term 176,742,145 31,000,000 49,795,358 257,537,503 Loans receivable – discount 65,903 735,576 Accounts receivable – clients 8,898,909 - - 8,898,909 245,824 1,030,470 Receivable from 28,375,784 45,159,483 subrogated claims 2,506,987,910 - - 2,506,987,910 Loans receivable – current represents the outstanding balance of loan releases to clients 2,693,136,407 31,500,000 49,082,809 2,773,719,216 under the Retail Direct Lending (RDL) and the Wholesale Lending Programs (WLP).
ANNUAL REPORT 2017 35 9. INVESTMENT PROPERTY Oracle Purchasing and Oracle Financials. The FIS was developed in 2012 to automate the processing and consolidation of all financial transactions of the Corporation. This account represents the cost of acquired assets or ROPA by the Corporation through dacion in payment or foreclosure in settlement of loans under the Direct Lending and Guarantee 11.2 Central Liability System (CLS) programs, as follows: CLS is the automated system covering the loan management processes on credit application, evaluation, investigation and approval. 2016 2017 (As restated) Cost 12. CURRENT AND DEFERRED TAXES Balance, January 1 112,257,244 101,082,823 The components of tax expense relating to profit or loss and OCI follow: Additions 13,127,400 12,084,421 Disposal/Retirement (55,909,738) (910,000) 2017 2016 Balance, December 31 69,474,906 112,257,244 Reported in profit or loss Accumulated depreciation Current tax expense: Balance, January 1 26,686,220 23,163,558 Regular corporate income tax at 30% - - Depreciation 781,479 3,850,262 Final tax at 20% and 7.50% 6,379,581 6,338,624 Disposal/Retirement (19,507,444) (327,600) 6,379,581 6,338,624 Balance, December 31 7,960,255 26,686,220 Deferred tax expense (income) relating to origination Accumulated impairment and reversal of temporary differences (63,476,323) (119,895,171) Balance, January 1 20,752,622 20,752,622 (57,096,742) (113,556,547) Impairment - - Disposal/Retirement - - 2017 2016 Balance, December 31 20,752,622 20,752,622 Reported in OCI Deferred tax expense (income) relating to origination 40,762,029 64,818,402 and reversal of temporary differences 20,285,449 16,952,933 The appraised value of the above assets totalled P154.440 million and P229.363 million as of A reconciliation of tax on pre-tax profit computed at the applicable statutory rates to tax expense December 31, 2017 and 2016, respectively based on appraisals conducted in 2010 to 2016. reported in the statements of profit or loss follows:
10. PROPERTY AND EQUIPMENT 2017 2016 This account consists of the following: Tax on pre-tax profit at 30% (57,068,465) (113,524,696) Adjustment for income subjected to lower tax rates (9,563,968) (9,508,172) Transportation Office IT Tax effects of non-deductible interest expense 3,156,110 3,137,697 Building Equipment Equipment Equipment Total (63,476,323) (119,895,171) Cost January 1, 2017, as reported 87,456,709 14,905,268 14,178,042 35,250,709 151,790,728 The net deferred tax assets relate to the following as of December 31: Adjustments - - (120,850) 804,560 683,710 January 1, 2017, as restated 87,456,709 14,905,268 14,057,192 36,055,269 152,474,438 Statement of Additions - - 1,128,780 334,780 1,463,560 Financial Position Profit or Loss Disposal/Retirement - - (9,220) (9,982) (19,202) 2017 2016 2017 2016 December 31, 2017 87,456,709 14,905,268 15,176,752 36,380,067 153,918,796 Deferred tax assets Accumulated depreciation January 1, 2017, as reported 35,006,666 10,920,056 12,863,193 20,545,299 79,335,214 Unearned income 6,643,827 6,818,866 (175,039) (4,065,620) Adjustments - - (120,880) - (120,880) Bad debts 206,375,733 162,632,624 43,743,109 106,423,030 January 1, 2017, as restated 35,006,666 10,920,056 12,742,313 20,545,299 79,214,334 Impairment losses 1,192,581 1,192,581 - - Depreciation 2,738,407 421,628 295,206 3,574,206 7,029,447 Accrued expenses 4,748,154 2,660,713 2,087,441 898,816 Disposal/Retirement - - (7,293) (6,438) (13,731) December 31, 2017 37,745,073 11,341,684 13,030,226 24,113,067 86,230,050 Minimum corporate income tax 48,652 48,652 - - Accumulated impairment Net operating loss carry-over 49,266,893 31,435,657 17,831,236 16,467,628 January 1, 2017 - 942,785 723,533 1,753,978 3,420,296 Unrealized foreign currency gains Impairment - - - - - (losses) 3,486 - 3,486 - Disposal/Retirement - - - - - Unrealized gains (losses) – OCI 20,285,449 16,952,933 - - December 31, 2017 - 942,785 723,533 1,753,978 3,420,296 288,564,775 221,742,026 63,490,233 119,723,854 Net book value, December 31, 2017 49,711,636 2,620,799 1,422,993 10,513,022 64,268,450 Deferred tax liability Net book value, Unrealized foreign currency gains December 31, 2016 52,450,043 3,042,427 591,346 13,755,992 69,839,808 (losses) - (16,419) 16,419 (16,419) Prepaid expenses (535,088) (504,759) (30,329) 187,736 Based on appraisals conducted in November 2017 and October 2016, the total PE has appraised (535,088) (521,178) (13,910) 171,317 value of P182.896 million and P145.041 million, respectively. Details follow: Net deferred tax assets 288,029,687 221,220,848 Deferred tax income (expense) 63,476,323 119,895,171 2017 2016 Building 170,200,000 119,590,000 Land transportation 5,667,300 8,940,000 13. OTHER ASSETS Equipment, furniture and fixtures 7,028,330 16,510,707 13.1. Current 182,895,630 145,040,707 This account covers non-trade receivables and other assets as follows: 11. INTANGIBLE ASSETS 2016 This account represents the automated systems developed and launched by the Corporation 2017 (As restated) from 2008 to 2017 covering backroom operations in line with the corporate initiative to improve turn-around time and benchmark with real-time processing through the automation of major Subscriptions receivable 500,000,000 - processes, as follows: Receivables from the Bureau of Internal Revenue (BIR) 18,263,028 12,795,453 Prepaid expenses 4,362,967 2,741,860 2017 2016 Lease payments receivable 2,488,759 1,837,752 Balance, January 1, as reported 900,296 1,386,296 Accounts receivable – officers and employees 662,813 552,365 Adjustment/Reclassification - (441,320) Prepaid documentary stamp tax 288,190 424,429 Balance, January 1, as adjusted 900,296 944,976 Advances to officers and employees - 10,000 Additions - 76,200 Office supplies and other inventory (214,211) (264,574) Disposal - - 525,851,546 18,097,285 Amortization (166,879) (120,880) Balance, December 31 733,417 900,296 Subscriptions receivable represents the additional capital infusion per NCA- BMB-C-17-0018380 dated November 9, 2017 released by the Department of Budget and The automated systems primarily comprised of the following: Management (DBM) per SARO-BMB-C-17-0019166, of even date, and credited to the Bureau of Treasury (BTr) for the account of TIDCORP. 11.1. Financial Information System (FIS) Receivables from the BIR represents tax credits (payments either through cash or FIS is the General Ledger system that will consolidate all financial transactions of the creditable withholding tax in excess of tax due) for corporate income tax elected to be Corporation and consequently provide Management with accurate, timely and complete carried forward to the next taxable period. financial reports. It is composed of the different modules, namely, Oracle Inventory,
36 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
13.2. Non-current Refund of processing fees represents processing fees for refund to prospective clients who have cancelled their application in TIDCORP’s various program offerings. This account consists of the following: COFACE represents the share of Compagnie Francaise D’ Assurance Pour Le Commerce Exterieur (COFACE), TIDCORP’s reinsurer under the Credit Insurance Program, in the buyers’ 2016 credit limit application fees covering the cost of credit information verification conducted on the 2017 (As restated) foreign buyers of the clients under the Credit Insurance Program of the Corporation. Foreign currency – In Trust for the BTr 18,128,555 17,919,956 Lease payments receivable – car plan 10,815,357 10,356,918 Inventory clearing is a holding account that represent supplies inventory that has been received but not yet invoiced, or invoiced and not yet received. Miscellaneous assets 6,159,294 6,139,946 Premium reserve fund 286,499 286,499 15. ACCRUED EXPENSES Due from Provident Fund 27,862 27,862 Sales contract receivable - 14,080,000 This account represents expenditures already incurred but remained unpaid as of SFP date. As of Accounts receivable – National Government, net - - December 31, 2017, accrued expenses totalled P12.606 million, of which, P1.392 million was set- up for prior years and P11.213 million was set-up for the current year. As of December 31, 2016, 35,417,567 48,811,181 accrued expenses totalled P5.389 million, of which, P1.404 million was set-up for prior years and P3.985 million was set-up for the current year. Foreign currency – In Trust for the BTr represents a foreign currency deposit unit (FCDU) time deposit with Land Bank of the Philippines (LBP) held in trust under the name of TIDCORP for the account of the BTr, which has an outstanding balance of US$363,130 2016 as at 2017 converted at the of rate P49.923 per US$1.00 and US$359,746 as at end 2016 2017 (As restated) converted at P49.813 per US$1.00. This arose from court cases in the United States of Personal services 4,732,443 1,567,289 America filed against TIDCORP related to a default account under the Guarantee Program Maintenance and other operating expenses of the Corporation which was turned over to the National Government in 1989 pursuant to Audit fees and other services 4,880,623 1,464,264 Administrative Order (AO) No. 64 dated March 24, 1988 and Deed of Transfer dated March 31, 1989. Janitorial services 1,290,000 958,441 Staff, training and development 720,000 - The DOF and BTr released US$5.000 million on April 26, 2002 per DOF letter-instruction to Printing services 322,784 398,000 BTr of even date. However, the final settlement agreement between TIDCORP and Fidelity Electricity 89,840 76,137 Partners, Inc. amounted to only US$4.800 million, thus, a balance of US$0.200 million. Promotional and marketing expenses 77,000 327,990 Over the years, TIDCORP administered the fund by maintaining the same in time deposit Administration expense - 77,500 accounts yielding net interest income of US$163,130 from April 26, 2002 to December 31, Legal fees and other services - 31,618 2017 and US$159,745 up to December 31, 2016. Others 493,292 487,456 Lease payments receivable covers outstanding receivables from TIDCORP officers who 12,605,982 5,388,695 availed of car plan under lease-purchase agreement with TIDCORP, pursuant to the guidelines issued by the Office of the President of the Philippines (OP), to wit: 16. LOANS PAYABLE
2017 2016 This account represents the short-term loan/line with the LBP with outstanding balance of Lease payments receivable 11,634,107 11,175,668 P812.250 million as of December 31, 2017 from P855.000 million as of December 31, 2016. Allowance for bad debts (818,750) (818,750) The credit facility with LBP, initially granted on July 17, 2008 for P200.000 million and gradually increased to P2.200 billion in August 2014, is availed and renewed through promissory notes with 10,815,357 10,356,918 terms not to exceed 180 days. Miscellaneous assets consist of the following assets of the Corporation: As security for the payment of the loan/line, including interests, penalties, fees and other charges, as well as the exact and faithful performance and observance of the terms and conditions of the 2017 2016 promissory notes, P361.000 million worth of TIDCORP’s rights, titles and interest on and over Paintings and other assets 3,114,463 3,114,463 deposits, money market placements and/or government securities have been assigned to LBP. Deposit to various contractors 1,490,287 1,487,321 Due from National Government Agencies 918,544 902,162 As endorsed by the DOF, the OP approved the renewal of TIDCORP’s Special Authority to borrow Tower club corporate membership 636,000 636,000 under its existing short-term borrowing facilities of up to P2.200 billion for a tenor of one year from Government Financial Institutions with ROP guarantee, in accordance with Section 14, 6,159,294 6,139,946 General Provisions of RA No. 10633 or the FY 2014 General Appropriations Act, and Section (a) of Premium reserve fund represents TIDCORP’s 40 per cent pro-rata share in its 20 per cent RA No. 8494, subject to pertinent laws, rules and regulations. retention of the gross insurance premiums collected under the Credit Insurance Program which is set aside as reserves to cover future claims. 17. INTEREST PAYABLE Accounts receivable – National Government represents various advances made covering legal fees for the account of the National Government pursuant to Board Resolution No. This account represents the interest obligation of the Corporation in connection with the short- 1094 dated March 29, 1996, net of required valuation reserves. The balance of the account term loan line with LBP as follows: of P6,765,588 as of both December 31, 2017 and 2016 had been fully provided for with allowance. 2017 2016 Principal Interest Principal Interest 13.3. Allowance for doubtful accounts amount obligation amount obligation Three-month PDST-F plus spread, subject to Movements in the allowance for doubtful accounts for other asset accounts are as follows: monthly re-pricing 361,000,000 2,489,296 380,000,000 2,349,245 ROP guarantee 451,250,000 2,124,485 475,000,000 1,784,522 812,250,000 4,613,781 855,000,000 4,133,767 Recoveries/ Balance, Additional Write-offs/ Balance, 1/1/2017 Provision Adjustments 12/31/2017 18. UNEARNED INCOME Accounts Receivable – Nat’l Gov’t 6,765,588 - - 6,765,588 Lease payments receivable 818,750 - - 818,750 This account represents guarantee fees and interest income collected in advance from various 7,584,338 - - 7,584,338 accounts under the Direct Lending and Guarantee Programs, installment sales, capitalized interest on restructured accounts as well the interest, penalties and other charges on which proceeds from the foreclosure/dacion of assets were applied. Details of the account follow: Recoveries/ Balance, Additional Write-offs/ Balance, 18.1. Current 1/1/2016 Provision Adjustments 12/31/2016 Accounts Receivable – Nat’l Gov’t 6,765,588 - - 6,765,588 Lease payments receivable - 818,750 - 818,750 2017 2016 6,765,588 818,750 - 7,584,338 Guarantee fees 22,146,090 22,604,554 Receivable from compromise agreements 1,030,125 5,830,125 Interest income – lending - 125,000 14. ACCOUNTS PAYABLE Deferred interest, penalties and other charges on which acquired assets on default accounts were This account represents trade payables of the Corporation, broken down as follows: applied 87,509 87,509 23,263,724 28,647,188 2016 2017 (As restated) 18.2 Non-current Pari-passu payable – banks 500,240,763 374,700,967 Accounts payable – clients 78,111 89,659 2016 Accounts payable – banks 8,213 7,125 2017 (As restated) Refund of processing fees - 14,850 Receivable from compromise agreements - COFACE/COGERI 862 862 Deferred interest, penalties and other charges on Inventory clearing (250,090) (259,270) which acquired assets on default accounts were 500,077,859 374,554,193 applied 3,312,176 3,637,855 3,312,176 3,637,855 Pari-passu payable – banks represents the provision for default guarantees pursuant to PAS 37 covering one account as well as the pro-rata share of banks from TIDCORP’s collections/ recoveries and proceeds from the sale of acquired assets from default accounts under the Guarantee Program.
ANNUAL REPORT 2017 37 19. OTHER PAYABLES As of December 31, 2017 and 2016, the guaranteed principal obligations under the contingent liability account is inclusive of the P191.700 million interest covered by This account consists of the following: TIDCORP’s guarantee corresponding to the guaranteed principal obligations of one account, as provided in the Guarantee Agreement with the lenders and borrowers.
2016 On September 16, 2015, a guaranteed account in the amount of P2.892 billion, of which 2017 (As restated) P0.192 billion represents interest, filed a Petition for Voluntary Rehabilitation with the Trust liabilities – BTr 18,128,555 17,919,956 Ormoc City Regional Trial Court (RTC). The proceedings was later on transferred to the Client’s deposit 15,352,489 52,432,297 Tacloban RTC, a commercial court, based on the ruling of the Court of Appeals in favor of Miscellaneous deposits 2,331,535 4,110,232 a creditor who opposed that the Ormoc City RTC is not a commercial court. Trust liabilities 1,229,349 1,216,946 Reinsurance premium payable 46,360 46,360 On September 22, 2015, the Presiding Judge issued a Commencement Order declaring Other current liabilities 12,912,482 10,288,349 the account to be under rehabilitation pursuant to RA No. 10142, otherwise known as the Financial Rehabilitation and Insolvency Act of 2010. 50,000,770 86,014,140 Trust liabilities – BTr represents an FCDU time deposit account with the LBP held in trust under Per BSP Report of Examination as of December 31, 2015, Philphos’ total guaranteed the name of TIDCORP for the account of the BTr, which has an outstanding principal balance exposure of P2.892 billion was classified as Doubtful-Loss. Based on updated figures, this of US$363,130 as of December 31, 2017 converted at the rate of US$1.00 is to P49.923, and requires a total provision for bad debts P1.944 billion, net of the TIDCORP’s 52.4 per cent US$359,745 as of December 31, 2016 converted at the rate of US$1.00 is to P49.813 (See Note share or P947.338 million in the latest valuation of the Mortgage Trust Indenture. Starting 13.2). CY 2016, the deficiency in the provision was booked on staggered basis over a period of ten years. Miscellaneous deposit includes bidders’ and performance bonds collected from suppliers and contractors as well as down payment from buyers on the sale of acquired assets. As of December 31, 2017 and 2016, the recorded allowance for bad debts amounted to P497.77 million and P372.235 million, respectively, with deficiency of P1.446 billion Client’s deposit covers excess guarantee fees, advance collection of credit insurance premiums, which was proposed for booking over a period of seven years in the books of a proposed deposits on the sale of acquired assets and interest and penalties collected from clients under the TIDCORP subsidiary commencing in CY 2018. The creation of a subsidiary is in line various program offerings of the Corporation which shall be applied to future fees due. with the DOF recommendation to the Governance Commission for GOCCs (GCG) on the planned consolidation of the guarantee functions, programs and funds of the Agricultural Trust liabilities represents TIDCORP and insurer’s 40 per cent share in premium reserve fund Guarantee Fund Pool (AGFP), Industrial Guarantee and Loan Fund (IGLF), Small Business based on gross insurance premium set aside to cover future claims. Corporation (SBC) and Home Guaranty Corporation (HGC) and TIDCORP, with TIDCORP as the surviving institution (See Note 28). Reinsurance premium payable represents the share of COFACE in the gross insurance premium by virtue of the Reinsurance Agreement. The implementation of the staggered booking of the provision over a period of seven years is still subject to the approval of the BSP – MB. Other current liabilities consist of the following: 21.2. Legal cases
2017 2016 TIDCORP is a party to various legal proceedings. Based on the status of these cases as Accounts payable – trade 5,123,920 2,424,045 at December 31, 2017 and 2016, the Management believes that these have no material Bureau of Internal Revenue 3,373,783 3,644,538 impact on the financial statements of TIDCORP. Withholding tax – employees 1,573,935 1,221,878 21.3 BIR Final Assessment Notice Provident fund – contributions and loans payable 1,251,870 1,289,414 Government Service Insurance System (GSIS) 1,027,226 1,187,495 On January 13, 2015, TIDCORP received Preliminary Assessment Notice (PAN) and Accounts payable – non-trade 396,441 327,783 Final Assessment Notice (FAN) from the BIR for deficiencies on income tax, expanded Home Development Mutual Fund (HDMF) 101,319 120,346 withholding tax, withholding tax on compensation and final withholding of value-added Philippine Health Insurance Corporation (PHIC) 63,988 72,850 tax for the taxable year 2011 totaling to P113.921 million. Protest letters against these 12,912,482 10,288,349 notices were filed on February 12, 2015 and June 29, 2015, respectively. TIDCORP is still awaiting the decision of the Revenue District Office (RDO) (See Note 29.1).
20. EQUITY 22. REVENUE 20.1. Capital stock 22.1. Operating income On January 11, 1985, PD No. 1962, further amending Section 7 of PD No. 550, as amended by PD No. 1080, was issued increasing the authorized capital stock of the Corporation from P2.000 billion to P10.000 billion which is fully subscribed by the Government of the 2016 Philippines. 2017 (As restated) Guarantee, commitment and processing fees 39,400,594 105,944,784 The paid-in capital amounted to P5.962 billion and P5.462 billion as of December 31, 2017 Interest on investments and deposits 31,879,895 31,693,904 and 2016, respectively. The increase of P500 million represents the additional subscription Interest and penalties on loans 17,335,144 16,873,531 payment released by DBM to the BTr in November 2017 for the account of TIDCORP (See Gain (loss) on sale of acquired assets 58,347,478 (582,400) Note 13.1). Gain (loss) on sale of investments - 256,934 20.2. Deficit Insurance premium and commission - 135,807 Lease income 141,597 7,505,612 This account represents the net of accumulated profits and losses from prior years’ Miscellaneous income 4,596,429 10,726,929 operations and the result of the transfer of non-performing assets of P5.220 billion and 151,701,137 172,555,101 related real and contingent liabilities of P2.709 billion and P3.651 billion, respectively, to the National Government pursuant to AO No. 64 dated March 24, 1988 and Deed of Interest income on investments and deposits consists of the interests earned on the Transfer dated March 8, 1989. various deposits and investments maintained by the Corporation, as follows:
20.3. Net unrealized gains (losses) on AFS financial asset 2017 2016 AFS financial assets 23,606,250 25,728,819 This represents the net effect of unrealized gains (losses) on AFS investment portfolio of the Corporation. Accordingly, the net unrealized fair value gains (losses) on the AFS, net of HTM investments 4,658,524 - deferred tax is presented as a separate item under equity. Deposits 3,615,121 5,965,085 31,879,895 31,693,904 20.4. Capital Adequacy Ratio Interest and penalties on loans represents interest earned on current loans receivable and Under the new Capital Adequacy Ratio (CAR) framework, TIDCORP’s CAR was set at seven penalty charges collected on restructured loans, receivables from subrogated claims and per cent, five per cent of which should be Tier 1 capital by December 31, 2012. During the other receivables, as follows: transition period beginning 2011, the CAR must not be lower than three per cent and by January 1, 2012 should be at five per cent. 2016 2017 (As restated) As at December 31, 2017, CAR was at 7.13 per cent, a marked improvement from Direct lending 8,827,894 8,727,744 previous years as a result of the booking of the equity infusion of P500 million based Wholesale lending 655,651 2,549,884 on RA No. 10924 or the FY 2017 General Appropriations Act. As at December 31, 2016, CAR registered at 3.61 per cent, below the required benchmark approved by the BSP – Remedial/Restructured loans 7,851,599 5,595,903 Monetary Board (MB) of seven percent due to delays in the receipt of the projected equity 17,335,144 16,873,531 infusion from the National Government. Gain (loss) on sale of investment represents the realized trading gains on the sale of AFS investment portfolio of the Corporation. 21. CONTINGENCIES 2017 2016 21.1. Guarantees outstanding Purchase price/Maturity value - 100,000,000 Unrealized loss as of beginning of year - (5,349,001) This is an off-book contingent account representing guarantees outstanding in favor Unrealized gain for the current year - 5,605,935 of the foreign and/or domestic banks/financial institutions for loans they extended to clients/borrowers. Outstanding guarantees for general facility as of December 31, 2017 - 256,934 and 2016 amounted to P8,937,950,000 and P9,045,514,431, respectively. Miscellaneous income represents processing fees from the guarantee and lending programs, pre-termination fees from a guaranteed account, interest and penalty charges For short-term guarantee cover, guarantees are recorded upon issuance of the guarantee, collected from restructured loans and other receivables classified as default accounts. while for long-term guarantee cover, the contingent liability is equal to the drawdowns/ availments from the guarantee facility recorded within the accounting period.
38 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
As reported, Adjustments As restated, 22.2. Other income 12/31/2016 Debit Credit 12/31/2016 Operating income 2016 Interest and penalties on loans 15,420,212 - 1,453,319 16,873,531 2017 (As restated) Lease income 7,530,946 25,334 - 7,505,612 Gain (loss) on retirement of equipment (5,471) - Expenses Foreign exchange gains (losses) 1,866 72,831 Depreciation expense 9,663,926 1,673,014 - 11,336,940 Other income 3,833 16,844 Other services 8,826,903 - 156,611 8,670,292 228 89,675 Rent, light and water 6,608,636 - 6,608,636 - GSIS contribution 5,327,390 - 101,374 5,226,016 Foreign exchange gains (losses) represents the foreign exchange differential arising from Audit fees and services 3,833,977 - 472,031 3,361,946 the settlement or translation of foreign-currency denominated items. Foreign exchange Communication expense 3,509,051 - 6,350 3,502,701 gains/losses resulting from translation/revaluation of foreign currency monetary items is determined at each SFP date using the PDSWAR as of last working day of the month/ Administration expense 3,306,866 - 21,504 3,285,362 closing date. For the periods ended December 31, 2017 and 2016, the closing rates used Licenses and taxes 2,398,872 26,407 - 2,425,279 were P49.923 per US$1 and P47.813 per US$1, representing the PDSWAR as of last Business development expense 2,248,783 - 24,297 2,224,486 working day of the period. Amortization expense 1,793,894 - 1,673,014 120,880 Representation expense 778,430 - 1,580 776,850 Legal fees and other services 680,800 - 568,381 112,419 23. Personal Services Fuel, oil and lubricants 607,390 - 11,466 595,924 Miscellaneous expense 219,379 - 46,672 172,707 This account consists of the following: Consultancy expense 187,356 - 42,528 144,828 Rent expense - 1,039,049 - 1,039,049 2017 2016 Light and water - 5,533,280 - 5,533,280 Salaries and wages 43,754,187 43,550,132 ECC contribution - 101,374 - 101,374 Bonus and incentives 16,571,487 12,308,384 Deficit, 1/1/2016 (4,770,695,455) - 12,042,570 (4,758,652,885) Other benefits 15,057,762 14,682,385 (4,321,958,640) 47,835,633 47,835,633 (4,294,815,113) Provident Fund contribution 10,937,631 10,887,535 GSIS contribution 5,241,098 5,226,016 Terminal pay 4,639,101 1,857,408 The nature of material prior period adjustments and reclassifications effected for CY 2016 are as Hospitalization 1,604,602 2,128,339 follows: PHIC contribution 385,263 385,806 a) Sales contract receivable was restated due to the application of prior period collections of HDMF contribution 100,800 101,699 P14,080,000 as lease payments relative to the repurchase of an acquired asset by a client ECC contribution 100,600 101,374 who was not able to fully pay for the same as provided under the contract to repurchase. Overtime pay 5,209 47,426 98,397,740 91,276,504 b) The FCDU time deposit account with the LBP held in trust under the name of TIDCORP for the account of the BTr, with an outstanding balance of P17,919,956 as of December 31, 2016 (US$359,745 converted at the rate of US$1.00 to P49.813) was reclassified from 24. INTEREST AND FINANCIAL CHARGES “Cash and cash equivalents” to “Other non-current assets” since the same is not held for the purpose of meeting short-term cash commitments (See Note 13.2). This pertains to paid and accrued interests on loans payable to creditor-bank as well as guarantee fees due to the National Government relative to ROP guarantee on the Corporation’s borrowings c) Accrued expenses for personal services and maintenance and other operating expenses of with the LBP of P812.250 million and P855.000 million in 2017 and 2016, respectively. P4,804,110 and P1,361,321, respectively, over set-up in CY 2016 were reversed.
2017 2016 27. CASH FLOWS ARISING FROM FINANCING ACTIVITIES Loans payable 40,977,604 43,265,324 ROP guarantee 4,817,556 6,545,401 Pursuant to the requirements of PAS 7, below is the reconciliation between the opening and 45,795,160 49,810,725 ending balances of liabilities arising from financing activities which includes both cash and non- cash changes: 25. FINAL TAX Non-cash changes This account represents the final tax on interest income from investments and deposits at the 2016 Cash Flows Repayment Renewal Accrual 2017 rate of 20 per cent on peso-denominated placements and at 7.50 per cent on foreign currency deposits. Details follow: Loans payable 855,000,000 (42,750,000) (1,667,250,000) 1,667,250,000 - 812,250,000 Interest payable 4,133,767 (40,497,590) - - 40,977,604 4,613,781 2016 859,133,767 (83,247,590) (1,667,250,000) 1,667,250,000 40,977,604 816,863,781 2017 (As restated) Interest on investments and deposits 31,879,895 31,693,905 Non-cash changes Final tax (6,379,581) (6,338,624) 2015 Cash Flows Repayment Renewal Accrual 2016 25,500,314 25,355,281 Loans payable 900,000,000 (45,000,000) (1,755,000,000) 1,755,000,000 - 855,000,000 Interest payable 3,661,778 (42,793,335) - - 43,265,324 4,133,767 26. PRIOR PERIOD ADJUSTMENTS AND RECLASSIFICATIONS 903,661,778 (87,793,335) (1,755,000,000) 1,755,000,000 43,265,324 859,133,767
Several accounts in the 2016 financial statements were restated or reclassified to conform with the 2017 presentation as follows: 28. PLANNED CONSOLIDATION OF THE GUARANTEE PROGRAMS OF THE NATIONAL GOVERNMENT As reported, Adjustments As restated, 12/31/2016 Debit Credit 12/31/2016 In line with the State’s policy to rationalize the operations of government agencies and GOCCs Cash and cash equivalents in order to strengthen their financial capabilities, to improve delivery of services, to achieve Foreign currency – In trust for the BTr 17,919,956 - 17,919,956 - economic efficiency and to support the government’s development thrust, the DOF in a letter Other current assets dated August 31, 2017 recommended to the GCG the consolidation by CY 2018 of the issuance of Receivables from BIR 12,451,480 343,973 - 12,795,453 government guarantees and the guarantee programs of the AGFP, IGLF, SBC, HGC and TIDCORP Other non-current assets with TIDCORP as the surviving institution. Foreign currency – In trust for the BTr - 17,919,956 - 17,919,956 At present, the Department of Agriculture oversees the AGFP; IGLF is under the National Economic Sales contract receivable - 14,080,000 - 14,080,000 and Development Authority; HGC under the Housing and Urban Development Coordinating Property and equipment Council; SBC under the Department of Trade and Industry; and TIDCORP under the DOF. Under a IT equipment 35,250,709 804,560 - 36,055,269 centralized approach, the National Government will have a more comprehensive oversight of its Office equipment 14,178,042 - 120,850 14,057,192 guarantees to effectively identify, monitor and control risks, implement necessary measures to Accumulated dep’n – office equipment 12,863,193 120,880 - 12,742,313 manage risks and provide appropriate capital against those risks. Deferred tax asset 221,860,416 - 118,390 221,742,026 Accounts payable Integral to the planned consolidation is the restructuring of TIDCORP which would involve: (a) Accounts payable – clients 74,911 - 14,748 89,659 the creation of a TIDCORP subsidiary, through SEC registration, that will function as a Board of Accounts payable – supplies 2,375 2,375 - - Liquidators to assume, dispose and liquidate TIDCORP’s non-performing accounts/assets and Fixed assets clearing (804,590) - 804,590 - outstanding loan with the LBP; and (b) the increase of TIDCORP’s authorized capital stock from Others – refund (12,962) - 12,962 - P10.000 billion to P50.000 billion and current paid-up capital stock from P5.962 billion to P26.640 Accrued expenses billion to allow higher absorptive capacity to guarantee under its expanded mandate. Personal services 6,371,399 4,804,110 - 1,567,289 Maintenance and other operating In October 2017, the GCG approved the recommendation and, accordingly, endorsed to the OP the planned consolidation, including a draft EO, for approval by the President of the Philippines. expenses 5,129,912 1,361,321 52,815 3,821,406 Non-current unearned income Deferred interest, penalties and other charges 3,016,263 - 621,592 3,637,855 Other payables Client’s deposit 47,492,900 - 4,939,397 52,432,297
ANNUAL REPORT 2017 39 a) Taxable revenues 29. SUPPLEMENTARY INFORMATION REQUIRED BY THE BUREAU OF INTERNAL REVENUE The composition of the Corporation’s taxable revenues for the years ended 2017 Presented below is the supplementary information which is required by the BIR under its existing and 2016 are presented below. Revenue Regulations (RRs) to be disclosed as part of the notes to financial statements. This supplementary information is not a required disclosure under PFRS. 2017 2016 29.1 Requirements under RR No. 15-2010 Final Tax Regular Tax Final Tax Regular Tax Rate Rate Rate Rate On December 28, 2010, RR No. 15-2010 became effective and amended certain provisions Rendering of services 31,879,895 119,241,611 31,693,905 126,223,456 of RR No. 21-2002 prescribing the manner of compliance with any documentary and/or procedural requirements in connection with the preparation and submission of financial b) Deductible cost of services statements and income tax returns. Section 2 of RR No. 21-2002 was further amended to include in the notes to financial statements information on taxes, duties and license fees Deductible costs of services for the years ended 2017 and 2016 comprise the paid or accrued during the year. following:
a) Income, business, final investment income and fringe benefits taxes 2017 2016 For the year 2017 and 2016, the Corporation paid/accrued a total amount of Regular Tax Regular Tax P22.395 and P16.145 million, respectively for income taxes, business tax (gross Rate Rate receipts tax) and fringe benefit tax as follows: Direct charges – salaries, wages and benefits 69,704,026 67,178,005 2017 2016 Direct charges – interest and financial (In millions) (In millions) expenses 35,834,239 37,315,596 Income tax 5.468 1.103 Direct charges – depreciation 7,866,553 7,486,677 Gross receipts tax 7.788 7.995 Direct charges – material, supplies and facilities 4,526,890 4,772,336 Final investment income tax 6.380 6.339 Direct charges – rental 855,224 1,039,049 Fringe benefit tax 2.759 0.708 Direct charges – others 5,608,812 10,624,272 22.395 16.145 124,395,744 128,415,935 b) Documentary stamp taxes c) Taxable non-operating and other income Documentary stamp taxes remitted/paid in 2017 and 2016 pertaining to loan instruments executed with clients and with banks for corporate borrowings The details of non-operating and other income for the year ended December 31, amounted to P4.254 million and P4.625 million, respectively. 2017 and 2016 are as follows:
c) Taxes and licenses 2017 2016 The details of the taxes and licenses account are broken down as follows: Regular Tax Regular Tax Rate Rate Gain on sale of investment - 256,934 2017 2016 (In millions) (In millions) Actual foreign exchange gain 8,015 19,862 Gross receipts tax 4.670 1.604 8,015 276,796 Fringe benefit tax 3.781 0.740 d) Itemized deductions Municipal license and permits 0.011 0.011 The amounts of itemized deductions for the year ended December 31, 2017 and Real estate taxes 0.009 0.035 2016 are as follows: Miscellaneous 0.076 0.035 8.547 2.425 2017 2016 d) Withholding taxes Regular Tax Regular Tax Rate Rate The details of total withholding taxes for the year 2017 and 2016 are shown below: Salaries and allowances 24,007,475 23,881,767 Taxes and licenses 8,547,179 2,398,872 2017 2016 Janitorial and messenger services 5,698,444 6,330,637 (In millions) (In millions) Communication, light and water 4,352,769 4,781,709 Compensation and benefits 10.469 11.644 Insurance 1,965,422 2,080,426 Expanded withholding taxes 1.364 1.473 Miscellaneous 9,720,047 13,503,000 Government money payments 3.091 3.385 54,291,336 52,976,411 Final withholding taxes - - 14.924 16.502 e) Deficiency tax assessments and tax cases
PAN and FAN for deficiency in income tax, expanded withholding tax, withholding tax on compensation and final withholding of value added tax for taxable year 2011 totaling to P113.921 million were received in 2015. This assessment was disputed and a protest was filed with a request for reinvestigation on February 11, 2015, pursuant to RR No. 12-99 on “Implementing the Provisions of the National Internal Revenue Code of 1997 Governing the Rules on Assessment of National Internal Revenue Taxes, Civil Penalties and Interest.”
On June 29, 2015, the protest was forwarded to RDO No. 50 and the Corporation was requested to submit necessary documents. Accordingly, on July 10, 2015 TIDCORP forwarded the related documents to RDO No. 50. The Corporation is still awaiting the decision of the RDO.
29.2. Requirements under RR No. 19-2011
RR No. 19-2011 requires schedules of taxable revenues and other non-operating income, costs of sales and services, itemized deductions and other significant tax information, to be disclosed in the notes to financial statements.
The amounts of taxable revenues and income, and deductible costs and expenses presented below are based on relevant tax regulations issued by the BIR, hence, may not be the same as the amounts of revenues reflected in the 2017 and 2016 statements of profit or loss.
40 PHILEXIM PHILIPPINE EXPORT-IMPORT CREDIT AGENCY
Worldwide Alliance & Partnership
A number of Export Credit Agencies (ECAs) were created during of the AEBF is to enhance cooperation and forge stronger links the course of economic development in many Asian countries among its member institutions. consistent with their governments’ export-oriented strategy. Over the years, Exim Banks/ ECAs have evolved into widely different PhilEXIM is also a member of the Association of Development financial institutions depending upon the business environment Financing Institutions in Asia and the Pacific (ADFIAP) where in the respective countries, their foreign trade profile, country risk it attends its various fora and seminars. ADFIAP was founded considerations and the development of local financial markets. in 1976 and is an association of development banks and other Its annual meetings serve as a forum for discussing a wide range financial institutions engaged in the financing of development in of issues which focus on fostering common understanding and the Asia-Pacific region with the mission of advancing sustainable sharing information. It also endeavors to meet the challenges development by strengthening the development finance function faced as an ECA in Asia and explore possible areas for further and institutions, enhancing capacity of members and advocating regional cooperation. development finance innovations.
PhilEXIM is an active and regular member of the Asian EXIM PhilEXIM is an awardee of ADFIAP for its development pursuits for Banks Forum (AEBF) which was created upon the initiative of the the years 2002, 2004, 2005, 2007, 2009, 2011, 2015 and 2017. Export-Import Bank of India (Exim India) in 1996. The objective
ANNUAL REPORT 2017 41