PART I – BUSINESS AND GENERAL INFORMATION Filings/CF2013-203.pdf · 2. Commission Identification No. A200101631 3. ... Corporation (PhilHealth), as well as various insurance, pre-need,

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May 16, 2013

THE PHILIPPINE STOCK EXCHANGE, INC.3rd Floor, Philippine Stock Exchange PlazaAyala Triangle, Ayala AvenueMakati City, Metro Manila

Attention Ms. Janet A. EncarnacionHead, Disclosure Department

Gentlemen:

In accordance with the Securities Regulation Code, we are submitting herewith a copy ofSEC Form 17-A (Annual Report) of I-Remit, Inc. as at December 31,2012.

Thank you.

Very truly yours,

. JACILDOhief Operating Officer

I-Remit, Inc.26/F Discovery Centre, 25 ADB Avenue, Qrtigas Center, Pasig City 1605 PhilippinesTelephone: (632) 706-9999 and (632) 706-2737Facsimile: (632) 706-2767

COVER SHEET

A 2 0 0 1 0 1 6 3 1SEC Registration Number

I - R E M I T , I N C . A N D S U B S I D I A R I E S

(Company’s Full Name)

2 6 / F D i s c o v e r y C e n t r e , 2 5 A D B A v e

n u e , O r t i g a s C e n t e r , P a s i g C i t y

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

Mr. HARRIS EDSEL D. JACILDO (02) 706 – 9999 Local 100/105/109 (Contact Person) (Company Telephone Number)

1 2 3 1 1 7 - A 0 7 Month Day (Form Type) Month Day

(Fiscal Year) (Annual Meeting)

(Secondary License Type, If Applicable)

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S Remarks: Please use BLACK ink for scanning purposes.

SEC Number A200101631 PSE Code File Number

I-REMIT, INC.

AND SUBSIDIARIES

(Company’s Full Name) 26/F Discovery Centre, 25 ADB Avenue,

Ortigas Center, Pasig City, 1605 Metro Manila

(Company’s Address) (02) 706 – 9999 Local 100 / 105 / 109 (Telephone Number) December 31 (Fiscal Year Ending)

(Month and Day)

SEC FORM 17-A Form Type Amendment Designation (if applicable) December 31, 2012 Period Ended Date (Secondary License Type and File Number)

SEC FORM 17-A

f'SECURITIES AND EXCHANGE COMMISSION A

D

ANNUAL REPORT PURSUANT TO SECTION 17OF THE SECURITIES REGULATION CODE AND SECTION 141

OF THE CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended December 31,2012

2. Commission Identification No. A200101631 3. BIR Tax Identification No. 210-407-466-000

4. Exact name of registrant as specified in its charter I-REMIT, INC.

5. _M::-=-=e..:.:tr,.=o....::.M:.::,a=::n=i1:=a:z...'P::...;H:..:.:..:IL=-:Ic::-P.::..P.:.:IN,.:..:E=::S=-:-:----:-_::--_6. _,. (SEC Use Only)Province, Country or other jurisdiction of Industry Classification Codeincorporation or organization

7. 26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City, Metro ManilaAddress of principal office

1605Postal code

8. (02) 706 - 9999 Local 100/105/109Issuer's telephone number, including area code

9. Not applicableFormer name, former address, and former fiscal year, if changed since last report

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

Title Number of Shares of Common StockOutstanding and Amount of Debt Outstanding

Common Stock 597,138,800 shares (as of December 31,2012)

II. Are any or all of these securities listed on a Stock Exchange?

Yes [,(] No [ ]

If yes, state the name of such stock exchange and the classes of securities listed therein:The Philippine Stock Exchange, Inc.

12. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder orSection 11 of the RSA and RSA Rule II(a)-1 thereunder, and Sections 26 and 141 of The CorporationCode of the Philippines during the preceding twelve (12) months (or for such shorter period that theregistrant was required to file such reports)

No [ ]

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

No [ ]

13. Aggregate market value of the voting stock held by non-affiliates of the registrant:PHP 1,666,017,252 (as of December 31, 2012, PHP 2.79 per share)

DOCUMENTS INCORPORATED BY REFERENCE

Documents incorporated by reference in any part of this report: 2012 Audited Parent Company and Consolidated Financial Statements of

I-Remit, Inc. and Subsidiaries (incorporated as reference for Items 1, 6, 7 and 8 of SEC Form 17-A)

TABLE OF CONTENTS

PART I BUSINESS AND GENERAL INFORMATION Item 1 Business 1 Item 2 Properties 33 Item 3 Legal Proceedings 35 Item 4 Submission of Matters to a Vote of Security Holders 35 PART II OPERATIONAL AND FINANCIAL INFORMATION Item 5 Market for Issuer’s Common Equity and Related Stockholder Matters 36 Item 6 Management’s Discussion and Analysis or Plan of Operation 41 Item 7 Financial Statements 59 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure 59

PART III CONTROL AND COMPENSATION INFORMATION Item 9 Directors and Executive Officers of the Issuer 61 Item 10 Executive Compensation 72 Item 11 Security Ownership of Certain Beneficial Owners and Management 73 Item 12 Certain Relationships and Related Party Transactions 75 PART IV CORPORATE GOVERNANCE Item 13 Corporate Governance 78 PART V EXHIBITS AND SCHEDULES Item 14 a. Exhibit 79 b. Reports on SEC Form 17-C 79 SIGNATURES INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES INDEX TO EXHIBIT

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PART I. BUSINESS AND GENERAL INFORMATION Item 1. Business (A) Description of Business (1) Business Development I-Remit, Inc. (“I-Remit”, “Parent Company”, or “Company”) is a company in the Philippines

engaged in the business of servicing the remittance needs of overseas Filipino workers (OFWs) and other migrant workers. The Parent Company was duly registered with the Securities and Exchange Commission (SEC) on March 5, 2001 with SEC Registration No. A200101631. It started commercial operations on November 11, 2001.

The Parent Company and its subsidiaries (“Group”) are primarily engaged in the business of

fund transfer and remittance services, from abroad into the Philippines or otherwise, of any form or kind of currencies or monies, either by electronic, telegraphic, wire or any other mode of transfer; as well as in undertaking the delivery of such funds or monies, both in the domestic and international market, by providing courier or freight forwarding services; and conducting foreign exchange transactions as may be provided by law and other allied activities relative thereto; provided that the foreign exchange transactions of the Parent Company shall be limited to ordinary money changing activity or “spot” foreign currency transaction; provided further that the Parent Company shall not engage in the business of being a commodity future broker or otherwise shall engage in financial derivatives activities such as foreign currency swaps, forwards, options or other similar instruments as defined under Bangko Sentral ng Pilipinas (BSP) Circular No. 102, Series of 1995.

The Parent Company is duly registered as a Remittance Agent with the Bangko Sentral ng

Pilipinas (BSP), with Certificate No. FX-2005-000364 issued on May 10, 2005, pursuant to BSP Circular 471 Series of 2005 dated January 24, 2005. It is subject to the applicable provisions of law and BSP rules and regulations, as well as the provisions of the Anti-Money Laundering Act of 2001 (Republic Act No. 9160 as amended by Republic Acts 9194, 10167, and 10365) and its revised implementing rules and regulations, and Republic Act 10168 or the Terrorism Financing Prevention and Suppression Act of 2012 and its implementing rules and regulations.

The Parent Company’s list of services also includes auxiliary services such as liaising and

coordinating with, and accepting and distributing membership contributions, loan amortization payments, and premium payments to various government and non-government entities such as the Social Security System (SSS), the Home Development Mutual Fund (HDMF or Pag-IBIG), the Philippine Retirement Authority (PRA) and the Philippine Health Insurance Corporation (PhilHealth), as well as various insurance, pre-need, and real estate companies.

The Parent Company is to exist for fifty (50) years from and after the date of incorporation. The registered office and principal place of business of the Parent Company is 26/F Discovery

Centre, ADB Avenue, Ortigas Center, Pasig City, 1605 Metro Manila, Philippines. The Company also operates in various countries through subsidiaries, associates, or affiliates,

and via tie-ups and strategic partnerships. Tie-up and partnership arrangements are utilized when the potential volume of remittances do not justify the investment of equity.

I-Remit currently operates in 25 countries and territories worldwide. Lucky Star Management Limited, the first international office of I-Remit, opened in Hong Kong

in May 2001. In the same year, I-Remit started its aggressive global expansion by forging alliances in other countries with high concentrations of overseas Filipino workers (OFWs) and Filipino migrants. In July 2001, I-Remit forged a tie-up with its Canadian partner International Remittance (Canada) Limited (IRCL), and established operations in three (3) major provinces of Canada: British Columbia, Alberta, and Ontario. In 2005, I-Remit acquired 65% ownership in the said company, and which was subsequently increased to 95% in 2006, and further consolidated to 100% by the end of June 2007. Also, in July 2001, I-Remit entered into its first European partnership in the United Kingdom (UK), and eventually started the operation of its subsidiary, IRemit Global Remittance Limited, in January 2003. It was sold by the Company in 2004 and was repurchased in June 2007. iRemit’s expansion in Europe is in pursuit of the authorization obtained from the Financial Services Authority of the United Kingdom by its wholly-owned subsidiary, IRemit Global Remittance Limited to operate as a payment institution in the European Economic Area (EEA). Under the European Payment Services Directive,

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IRemit Global Remittance Limited may avail of its “passporting” rights and carry on its business activities in other EEA states by establishing branches, engaging agents, or providing cross-border services. I-Remit started its second Asian operation in Singapore through IRemit Singapore Pte Ltd, which commenced its commercial operations in October 2001. I-Remit acquired 49% ownership in the said company in June 2007. I-Remit further expanded in Asia through a tie-up in Taiwan, Hwa Kung Hong & Co., Ltd., which became operational in 2001. I-Remit acquired 49% ownership in the said tie-up in July 2009. I-Remit forged a tie-up in Australia that began its operations in September 2002. I-Remit Australia Pty Ltd (“IAPL”) was incorporated in December 2002 and in June 2007 ownership has been consolidated to 100%. Worldwide Exchange Pty Ltd (“WEPL”) in Australia started commercial operations in September 2003. The Company acquired 20% ownership of WEPL in June 2007 and additional 15% ownership in September 2007. On March 31, 2011, I-Remit acquired the 35% interest of minority shareholders in WEPL. With its 30% indirect voting interest through IAPL, I-Remit effectively owns 100.00% of WEPL. On July 25, 2007, the Financial Monetary Authority of Austria granted the remittance license of IREMIT EUROPE Remittance Consulting AG in which the Company has 74.9% equity interest. It started commercial operations on September 16, 2007. In November 2009, IREMIT EUROPE Remittance Consulting AG was registered by Banca D’Italia Eurosistema in the general list of financial intermediaries as a provider of money transfer services under Article 106 of the legislative decree 385/1993 of Italy’s Banking Law. On May 5, 2011, the Parent Company acquired the 25.10% ownership interest in IREMIT EUROPE Remittance Consulting AG from the noncontrolling stockholder. The acquisition increased the Parent Company’s ownership interest in IREMIT EUROPE Remittance Consulting AG to 100.0% from 74.9%. Consequently, on October 11, 2011, IREMIT EUROPE Remittance Consulting AG changed its legal name to IREMIT Remittance Consulting GmbH and changed its legal status from a stock company to a limited liability company. It also amended its Articles of Incorporation to include management consultancy in its business activities. I-Remit New Zealand Limited, a wholly-owned subsidiary was incorporated and its registration was approved by the New Zealand Ministry of Economic Development on September 11, 2007. It started commercial operations on February 13, 2008. On November 28, 2008, I-Remit’s Board of Directors (“Board”) ratified the acquisition of the 100.00% ownership interest in Power Star Asia Group Limited, a company based in Hong Kong which is engaged in foreign currency trading. On January 9, 2009, the Board of I-Remit authorized the acquisition of up to 49% of the outstanding capital stock of Hwa Kung Hong & Co., Ltd., a company engaged in the remittance business in Taiwan with offices in Taipei and Kaohsiung. The acquisition of the shares was completed on July 1, 2009. On June 10, 2011, K.K. I-Remit Japan was incorporated as a joint stock corporation in Tokyo, Japan with the primary purpose of providing money transfer and remittance services. On November 22, 2011, the company completed its registration with the Financial Services Agency (FSA) of Japan pursuant to the Payment Services Act of 2010. The company has offices in Tokyo and Nagoya.

The Company’s presence in various countries hosting overseas Filipino workers (OFWs) and

Filipino migrants and several strategic partnerships and tie-ups with various local and international banks, pawnshops, couriers, and telecommunications companies makes it the largest independent local remittance company.

The Company was also the first remittance company registered with the Board of Investments

(BOI) as a New Information Technology (IT) Service Firm in the Field of Information Technology Services (Remittance Infrastructure System) on a Non-Pioneer Status under the Omnibus Investments Code of 1987 which entitled the Company to Income Tax Holiday (ITH) Incentive for four (4) years and which was later extended to two (2) years and which expired on November 11, 2007.

I-Remit’s vision is to become the ultimate choice remittance service provider globally and to

capture a significant share of the huge annual inward remittances of OFWs around the world. It will achieve these by using the latest in information technology and communication technology through the Internet platform in delivering its products and services to its target customers.

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The Company was initially incorporated with a capital stock of two hundred million pesos (PHP

200,000,000) divided into two million shares with a par value of one hundred pesos (PHP 100) per share.

The subscribers at incorporation are the following:

Name Nationality No. of Shares Subscribed

Amount of Capital Stock Subscribed

(PHP)

Amount Paid on Subscription (PHP)

iVantage Corporation Filipino 999,993 99,999,300.00 49,999,300.00 Ben C. Tiu Filipino 1 100.00 100.00 Wilson L. Sy Filipino 1 100.00 100.00 Willy N. Ocier Filipino 1 100.00 100.00 William L. Chua Filipino 1 100.00 100.00 Juan G. Chua Filipino 1 100.00 100.00 David R. de Leon Filipino 1 100.00 100.00 Randolph C. de Leon Filipino 1 100.00 100.00 TOTAL 1,000,000 100,000,000.00 50,000,000.00

On August 15, 2001, iVantage Corporation sold all its titles, rights, interests and obligations in

and to all its subscribed shares in the Company to the following:



(PHP)


JTKC Equities, Inc. Filipino 650,000 65,000,000.00 32,500,000.00 Surewell Equities, Inc. Filipino 300,000 30,000,000.00 15,000,000.00 JPSA Global Services Co. Filipino 50,000 5,000,000.00 2,500,000.00 TOTAL 1,000,000 100,000,000.00 50,000,000.00

The new shareholders assumed pro rata the subscription payable to I-Remit, Inc. of iVantage

Corporation amounting to fifty million pesos (PHP 50,000,000). On February 8, 2005, JTKC Equities, Inc. assigned all of its rights, interests and obligations in

and to its entire subscription consisting of 650,000 shares in the Company unto Deighton Limited, a corporation organized and existing under the laws of Hong Kong.

On June 27, 2007, JTKC Equities, Inc. bought back the 650,000 shares in the Company from

Deighton Limited. On June 29, 2007, the Board and the stockholders of the Company approved the following

amendments to the Articles of Incorporation and By-Laws: On the Articles of Incorporation 1. Reduction of par value per share from PHP 100.00 to PHP 1.00 per share;

2. Increase in authorized capital stock from PHP 200 million to PHP 1.0 billion; 3. Denial of pre-emptive rights; 4. Authority of the Board of Directors to grant stock options, issue warrants or enter into

stock purchase or similar agreements; On the By-Laws 1. Period for closing of stock and transfer book or fixing of record date;

2. Period for notice of stockholders’ meeting; 3. Deadline for the submission / revocation of proxies; 4. Number, term of office, qualifications, and disqualifications; 5. Additional requirements for independent directors; 6. Election of directors; 7. Place of meeting of the Board of Directors; 8. Vacancies; 9. Constitution of a Nomination Committee; and

10. The addition of one or more Vice Chairmen to the list of officers of the Company.

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On July 20, 2007, the Board approved a Special Stock Purchase Program (“SSPP”) for its

directors, the officers and employees of the Company who have been in service for at least one (1) calendar year as of June 30, 2007, and the Company’s resource persons and consultants. A total of fifteen million (15,000,000) shares of the Company, at a par value of one peso (PHP 1.00) per share, was allocated under the SSPP. The shares were allocated to those eligible to avail of the shares based on a formula developed by the Company’s SSPP Committee and approved by the Board of Directors.

The Board of Directors of the Company also declared stock dividends worth PHP

43,000,000.00 to its shareholders on July 20, 2007, which declaration was subsequently ratified and confirmed by the Company’s shareholders during their annual meeting held on the same day, immediately after the Board meeting. The Record Date was set on August 19, 2007, thirty (30) days from the date of approval of the Company’s shareholders.

On August 22, 2007, the Securities and Exchange Commission (“SEC”) approved the

Amended Articles of Incorporation and By-Laws of the Company. The shares subscribed and paid-up subsequent to the increase in capital stock were as

follows:



(PHP)


Star Equities Inc. Filipino 158,418,225 158,418,225.00 158,418,225.00 Surewell Equities, Inc. Filipino 119,100,000 119,100,000.00 119,100,000.00 JTKC Equities, Inc. Filipino 99,631,775 99,631,775.00 99,631,775.00 JPSA Global Services Co. Filipino 19,850,000 19,850,000.00 19,850,000.00 TOTAL 397,000,000 397,000,000.00 397,000,000.00

On September 13, 2007, the SEC granted to the Company an exemption from registration of

the SSPP shares under Section 10.2 of the SRC. On September 20, 2007, the Company issued to the directors, officers and employees eligible to avail of the SSPP their respective shares under the program. Notwithstanding the aforesaid confirmation of the exempt status of the SSPP shares, the SEC nonetheless required the Corporation to include the SSPP shares among the shares of iRemit which were registered with the Commission prior to the conduct of its Initial Public Offering (IPO) in October 2007. The registration of the I-Remit shares, together with the SSPP shares, was rendered effective on October 5, 2007.

All 15,000,000 shares were subscribed. The shares subject of the SSPP were sold at par value or PHP 1.00 per share payable in full and in cash and subject to a lock-up period of two (2) years from date of issue which ended on September 19, 2009. The sale is further subject to the condition that should an officer or an employee resign from the Company prior to the expiration of the lock-up period, the shares purchased by such resigning employee or officer shall be purchased at cost by the Company’s Retirement Fund (“Retirement Fund”) for the benefit of retiring employees or officers. Total share purchases amounting to PHP11.74 million were paid in full while the difference amounting to PHP3.26 million were paid by way of salary loan. The shares acquired through the SSPP were subject to a lock-up period of two (2) years from the date of issue which ended on September 19, 2009.

On May 18, 2007, the Board of Directors of the Company approved the listing of its shares with

the Philippine Stock Exchange (“PSE”) in an initial public offering (IPO). The Board of Directors of the PSE, in its regular meeting on September 27, 2007, approved

the Company’s application to list its common shares with the PSE. On October 5, 2007, the Securities and Exchange Commission declared the Company’s Registration Statement in respect of the IPO effective and issued the Certificate of Permit to Offer Securities for Sale in respect of the offer shares.

The Company offered for subscription a total of 140,604,000 common shares each with par

value of PHP 1.00 per share consisting of (i) 107,417,000 new common shares issued and offered by the Company by way of a primary offer and (ii) a total of 33,187,000 existing shares offered by selling shareholders, JTKC Equities, Inc. (21,571,550 common shares issued), Surewell Equities (9,956,100 common shares offered), and JPSA Global Services Co. (1,659,350 common shares offered) pursuant to a secondary offer.

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On October 17, 2007, the Company completed its IPO of 140,604,000 common shares,

representing slightly above 25% of the total outstanding capital stock of 562,367,000 (net of 50,000 treasury shares) at an offer price of PHP 4.68 per share for total gross proceeds of PHP 658,026,720.00.

The net proceeds from the primary offer of PHP 466,198,457.05, determined by deducting

from the gross proceeds of the primary offer the Company’s pro-rated share in the professional fees, underwriting and selling fees, listing and filing fees, taxes and other related fees and expenses, is intended to be used by the Company to finance, in part, its expansion in other countries and to partially retire some of the Company’s short term interest-bearing loans.

On August 16, 2008, the Board of the Company authorized the buy-back from the market of up

to 10 million shares, representing approximately 1.78% of I-Remit’s outstanding common shares. The program was adopted with the objective of preserving the value of the Company’s shares, which was grossly undervalued at that time. The program also sought to boost investor confidence in the Company. A total of 10,000,000 shares have been purchased and lodged as treasury shares. On September 16, 2011, the Board of the Company authorized the buy-back from the market of up to 10 million shares, representing approximately 1.64% of I-Remit’s outstanding common shares. The program was adopted with the objective of preserving the value of the Company’s shares, which was grossly undervalued at that time. The program also sought to boost investor confidence in the Company. A total of 10,000,000 shares have been purchased and lodged as treasury shares. On September 21, 2012, the Board of the Company authorized the buy-back from the market of up to 10 million shares, representing approximately 1.67% of I-Remit’s outstanding common shares. The program was adopted with the objective of preserving the value of the Company’s shares, which was grossly undervalued at that time. The program also sought to boost investor confidence in the Company. A total of 587,000 shares have been purchased and lodged as treasury shares.

As of March 31, 2013, the Company’s capital structure is as follows:

Name Nationality No. of Shares

Subscribed


(PHP)

% to Total Number of

Shares Star Equities Inc. Filipino 174,260,047 174,260,047.00 29.3342 Surewell Equities, Inc. Filipino 139,450,290 139,450,290.00 23.4745 JTKC Equities, Inc. Filipino 127,153,247 127,153,247.00 21.4044 JPSA Global Services Co. Filipino 19,510,000 19,510,000.00 3.2842 Public Various 133,677,216 133,677,216.00 22.5027 Total, March 31, 2013 594,050,800 594,050,800.00 100.0000

The Company’s general expansion plans in 2013 include the opening of new and/or additional

offices or the engagement of new tie-ups and partners in Ireland, Macau, Germany, the Netherlands, Saudi Arabia, Oman, Qatar and Kuwait.

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(2) Business of Issuer (a) Description of Registrant The Parent Company and its subsidiaries are primarily engaged in the business of fund

transfer and remittance services of any form or kind of currencies or monies, either by electronic, telegraphic, wire or any other mode of transfer and undertakes the delivery of such funds or monies, both in the domestic and international market, by providing either courier or freight forwarding services; and conducts foreign exchange transactions as may be allowed by law and other allied activities relative thereto.

The Company’s subsidiaries are as follows: International Remittance (Canada) Ltd., a wholly-owned subsidiary, was incorporated

on July 16, 2001 pursuant to the Canada Business Corporations Act. It is registered with Industry Canada with registration number 392271-5. It is also registered as an extraprovincial company with the Registrar of Companies of the Province of British Columbia with certificate of registration number A-60718 dated December 3, 2003. Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, International Remittance (Canada) Ltd. is registered as a money service business (MSB) with the Financial Transactions and Reports Analysis Centre of Canada with registration number M081607706 valid until June 28, 2014 and subject to renewal every two (2) years. It started initially as a tie-up and partner of I-Remit, Inc, establishing its operations in three (3) major provinces in Canada, namely: British Columbia, Alberta, and Ontario. In 2005, I-Remit, Inc. acquired 65% ownership in the company that subsequently was increased to 95% in 2006 and eventually consolidated to 100% on June 29, 2007. It currently operates in nine (9) locations in Canada: Banff, Alberta; Bathurst Street, Toronto, Ontario; Pacific Mall, Calgary, Alberta; 7th Avenue, Calgary, Alberta; Edmonton, Alberta; Jamestown, Toronto, Ontario; Mississauga, Ontario; Richmond, British Columbia; and Winnipeg, Manitoba. The Filipino community is the third largest minority group in Canada. The Commission on Filipinos Overseas estimated that there were about 842,651 Filipinos in Canada as of December 2011.

I-Remit Australia Pty Ltd, a wholly-owned subsidiary, is a company incorporated on

December 10, 2002 in Victoria, Australia under the Australian Corporations Act 2001 and registered with the Australian Securities and Investments Commission with Australian Company Number (ACN) 103 107 982 and Australian Business Number (ABN) 22 103 107 982. As of June 29, 2007, the ownership of I-Remit, Inc. has been consolidated to 100%. Pursuant to subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 of Australia, I-Remit Australia Pty Ltd is registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) as an affiliate of I-Remit, Inc. with remittance affiliate number AFF100314117-001 with effect from October 22, 2012 and valid for three (3) years thereafter. It has no regular employees and has not, since incorporation, engaged in any material activities other than those related to the maintenance of a bank account. Presently, it has a bank account with Westpac Banking Corporation where I-Remit’s agents deposit the remittances they receive for the purpose of eventually transferring the accumulated balances to I-Remit’s bank accounts in the Philippines.

IREMIT Remittance Consulting GmbH (formerly IREMIT EUROPE Remittance

Consulting AG) (100% owned) was incorporated on July 20, 2005 in Vienna, Austria. It started commercial operations on September 16, 2007. In November 2009, IREMIT EUROPE Remittance Consulting AG was registered by Banca D’Italia Eurosistema in the general list of financial intermediaries as a provider of money transfer services under Article 106 of legislative decree 385/1993, Italy’s banking law. It opened branches in Milan and Rome in Italy on April 18, 2010 and August 1, 2010, respectively. On April 28, 2011, it stopped its money remittance operations in accordance with Article 75 of the Transitional and Final Provisions of the Austrian Payment Services Act (Zahlungsdienstegesetz) which stipulated that credit institutions that have held authorizations pursuant to Article 1 paragraph 1 no. 23 of the Austrian Banking Act (Bankwesengesetz, BWG), as amended by the Federal Act, federal Law Gazette No. 35/2003, prior to December 25, 2009, had only until April 30, 2011 to carry out their money remittance operations. On May 5, 2011, the parent company, I-Remit, Inc., acquired the 25.1% ownership interest from a non-controlling stockholder of the company. The acquisition enabled I-Remit, Inc. to have 100% ownership of IREMIT EUROPE Remittance Consulting AG. Consequently, on October 11, 2011, it changed its legal name to IREMIT Remittance Consulting GmbH and changed its legal status

7

from a stock company to a limited liability company. It also amended its articles of incorporation to include management consultancy in its business activities. IREMIT Remittance Consulting GmbH was subsequently registered as an agent of IRemit Global Remittance Limited (United Kingdom) after the latter’s acquisition of passporting rights for establishment and offering of cross-border services in Austria. Pursuant to Article 12 para. 6 of the Austrian Payment Services Act (Zahlungsdienstegesetz), the Austrian law on the European Payment Services Directive (Directive 2007/64/EC), IREMIT Remittance Consulting GmbH provides money remittance services in Austria. It is registered in the Register of Payment Institutions of the Financial Services Authority of the United Kingdom with firm reference number 574797. The Commission on Filipinos Overseas estimated that there were 25,112 Filipinos in Austria as of December 31, 2011 who were mostly employed in the nursing field and other skilled and semi-skilled occupational groups.

IRemit Global Remittance Limited, a wholly-owned subsidiary, is a private limited

company in the United Kingdom and Wales that was incorporated on June 22, 2001. It is registered with the Companies House of the United Kingdom with company number 04239974 pursuant to the Companies Act 2006. It started commercial operations in July 2001. Initially, I-Remit, Inc. had a 96% equity interest in IRemit Global Remittance Limited until it was sold on January 18, 2004. I-Remit, Inc. reacquired the company on June 29, 2007 with 100% ownership interest. On April 15, 2011, it acquired authorization from the Financial Services Authority to carry on payment services activities, particularly, money remittance, pursuant to the Payment Services Regulations 2009 of the United Kingdom, the British law implementing the European Payment Services Directive (Directive 2007/64/EC). It was issued its FSA reference number 537568. On April 1, 2013, it was placed under the regulatory authority of the Financial Conduct Authority that replaced the Financial Services Authority. The company is registered with Her Majesty’s Customs and Excise with money laundering registration number 1213085 with certificate of registration issued on May 22, 2012 and expiring on June 1, 2013 subject to renewal. IRemit Global Remittance Limited has offices in London and Manchester in the United Kingdom, and in Milan and Rome in Italy. It has agents in the United Kingdom, Germany, and Austria. The Commission on Filipinos Overseas estimated that there were about 220,000 Filipinos in the United Kingdom who work mostly as nurses and caregivers in public and private nursing homes, medical professionals, and chambermaids.

I-Remit New Zealand Limited, a wholly-owned subsidiary, was incorporated on

September 11, 2007. It is registered with the Registrar of Companies of the Ministry of Economic Development with certificate number 1984331. The company is registered in the Financial Service Providers (FSP) Register of the Companies House of New Zealand with FSP number 45263. It is also a participant in Financial Services Complaints Limited, a dispute resolution organization. It has an office in North Park, Manukau. The company started operating commercially on February 13, 2008. The Commission on Filipinos Overseas estimated that there were 35,175 Filipinos in New Zealand as of December 2011.

Lucky Star Management Limited, a wholly-owned subsidiary, was incorporated on

March 16, 2001 as a limited liability under the Companies Ordinance (Cap 32) of Hong Kong. It is registered in the Companies Registry with company number 750525. It is licensed as a money service operator pursuant to Section 30 of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) with license no. 12-07-00326 from July 9, 2012 to August 8, 2014. It has offices in World Wide Plaza, Central; United Center, Admiralty; and Lik Sang Plaza, Tsuen Wan. The Commission on Filipinos Overseas estimated that there were 174,851 Filipinos in Hong Kong as of December 2011.

Power Star Asia Group Limited, a wholly-owned subsidiary, was incorporated on April

28, 2008 under the Companies Ordinance (Cap 32) of Hong Kong. It is registered with the Companies Registry with company number 1232132. It was acquired by I-Remit, Inc. on November 12, 2008. Power Star Asia Group Limited is engaged in foreign exchange trading activities.

Worldwide Exchange Pty Ltd, a wholly-owned subsidiary (through a direct equity

interest of 70% and indirect equity interest through I-Remit Australia Pty Ltd of 30%), is a company that was incorporated on September 29, 2003 in Queensland, Australia under the Australian Corporations Act 2001 and registered with the Australian Securities and Investments Commission with Australian Company Number (ACN) 106 493 047 and Australian Business Number (ABN) 35 106 493 047. Pursuant to

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subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 of Australia, Worldwide Exchange Pty Ltd is registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) as an affiliate of I-Remit, Inc. with remittance affiliate number AFF100309950-001 with effect from September 28, 2012 and valid for three (3) years thereafter. It has offices in Blacktown, New South Wales and in Perth, Western Australia. It started commercial operations in September 2002. The Commission on Filipinos Overseas estimated that there were 384,637 Filipinos in Australia as of December 2011.

K.K. I-Remit Japan is a joint stock corporation (“Kabushiki Kaisha”) that was

incorporated and registered on June 10, 2011 in Tokyo, Japan with the primary purpose of providing money transfer and remittance services. Its company number is 0100-01-140611. On October 14, 2011, it became a member of the Japan Payment Service Association (JPSA), the designated dispute resolving organization for payment service providers, including money transfer companies. On November 22, 2011, the company completed its registration with the Financial Services Agency (FSA) of Japan pursuant to the Payment Services Act of 2010 with Registration No. KLFB00019. The company has offices in Tokyo and Nagoya. It started commercial operations in Tokyo on May 14, 2012 and in Nagoya on September 1, 2012. The Commission on Filipinos Overseas estimated that there were 220,882 Filipinos in Japan as of December 31, 2011.

The Company’s associates are as follows: IRemit Singapore Pte Ltd (49% owned) is a private limited company that was

incorporated on May 11, 2001 and is registered in the Registry of Companies and Businesses of the Accounting and Corporate Regulatory Authority with company number 200103087H. It is licensed by the Monetary Authority of Singapore to carry on the remittance business pursuant to Section 8(3) of the Money-changing and Remittance Businesses Act (Cap 187) with RA No. 01038 valid until December 31, 2013 and renewable every year. It started commercial operations in October 2001. The Commission on Filipinos Overseas estimated that there were 180,000 Filipinos in Singapore as of December 2011.

Hwa Kung Hong & Co. Ltd. (49% owned) is registered with the Department of Foreign

Exchange, the Central Bank of China with Issued Document No. Taipei Central No. 0980000061. It has offices in Taipei and Kaohsiung. The Commission on Filipinos Overseas estimated that there were 93,896 Filipinos in Taiwan as of December 2011.

Principal Products and Services Through the years, I-Remit has developed products and services that cater specifically

to the various remittance needs of OFWs and other migrant workers as follows: Bank-to-Bank A facility for “same-day” online crediting to bank

account in the Philippines. A remittance transaction received before 12:00 noon Manila time may be withdrawn by the designated beneficiary from the bank branch or any BancNet, MegaLink, or ExpressNet automated teller machine (ATM) on the same day of the remittance transaction. As of December 31, 2012, there were 9,472 bank branches and 12,285 ATMs in the Philippines.

Door-to-Door Delivery of cash remittances to designated

beneficiaries through third party couriers. I-Remit has the widest delivery reach nationwide, capable of delivering cash remittances within the day for beneficiaries in Metro Manila and the province of Rizal. Next-day deliveries may be made in the following cities and provinces: Batangas, Bulacan, Cavite, Cebu, Davao, Laguna, La Union, Pampanga, Pangasinan, Tacloban, and Tarlac. Deliveries in other remote areas may be made in two (2) to three (3) days or more depending on the actual location of the beneficiary. I-Remit can deliver in 17 regions, 79 provinces, and 136 cities and municipalities in the country.

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Notify-to-Pay Allows a beneficiary in the Philippines to pick-up a

remittance in any of I-Remit’s 9,559 pay-out stations within 24 hours. These designated pay-out stations number 2,843 in Metro Manila; 2,952 in the rest of Luzon; 2,319 in the Visayas; and 1,445 in Mindanao. I-Remit has tied-up with the following commercial banks, thrift banks, rural banks, pawnshops and remittance agents which branches serve as pay-out stations for cash pick-up: Allied Banking Corporation; Bank of the Philippine Islands; BDO Unibank; Cebuana Lhuillier Pera Padala; China Banking Corporation; CIS Bayad Centers; Development Bank of the Philippines; Eight Under Par, Inc. (Palawan Pawnshops); Enterprise Bank, Inc.; ExpressPay, Inc.; First Consolidated Bank; Global Pinoy Remittance and Services; HJP Pawnshop; KwartaGram Corporation; Maybank Philippines, Inc.; ML Kwarta Padala; One Network Bank, Inc.; Philippine National Bank; Philippine Savings Bank; Philippine Veterans Bank; Prime Asia Pawn and Jewelry Shop, Inc.; Rural Bank of Malinao, Inc.; Security Bank Corporation; Security Bank Savings (formerly Premiere Development Bank); Sterling Bank of Asia (A Savings Bank); Tambunting Pawnshop Philippines; Union Bank of the Philippines; UCPB Savings Bank; United Coconut Planters Bank.

Visa Card I-Remit Visa Card is a “debit and ATM card in one”

through which remitters can send money to their beneficiaries almost instantaneously. Cardholders may withdraw cash from more than 10,000 BancNet, MegaLink, or ExpressNet ATMs in the Philippines and any Visa ATM worldwide. As a debit card, cardholders may use the I-Remit Visa Card to pay for their purchases from any of the 12 million Visa-affiliated merchant establishments in over 170 countries worldwide. The I-Remit Visa Card is issued in partnership with Chinatrust (Philippines) Commercial Bank Corporation while the Visa Electron Card is issued in partnership with the Standard Chartered Bank Philippines. In 2008, I-Remit also introduced the I-Remit Shop ‘N’ Pay Card in partnership with Sterling Bank of Asia (A Savings Bank). The I-Remit Shop ‘N’ Pay Card utilizes the EMV (Europay, MasterCard, Visa) technology, the standard for the interoperation of IC cards (“chip cards”) and IC capable POS terminals and ATMs, for authenticating credit and debit card payments.

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Auxiliary Services I-Remit is authorized to accept payments,

contributions, premiums, or donations from Filipinos abroad for the following government agencies, private companies, and organizations: Social Security System (SSS); Overseas Workers Welfare Administration (OWWA); Home Development Mutual Fund (HDMF or Pag-IBIG); Philippine Health Insurance Corporation (PhilHealth); AMA Communities, Inc.; AMA Land, Inc.; CDC Holdings, Inc.; Century Properties Group, Inc.; CHMI Land, Inc.; C&P Properties International, Inc.; Citihomes Builders and Development, Inc.; Confed Properties, Inc.; DMCI Homes, Inc.; Duraville Realty and Development Corporation; Durawood Lumber and Construction Supply; Dynamic Realty and Resources Corporation; Earth and Style Corporation; Earth Aspire Corporation; Earth Prosper Corporation; Extraordinary Development Corporation; Eton Properties Phils., Inc.; Fiesta Communities, Inc.; Hausland Development Corporation; Homeowners Development Corporation; Ledesco Development Corporation; LLSP Development Corporation; Major Homes, Inc.; Major Properties, Inc.; Malate Construction and Development Corporation; Megaworld Corporation; Northpine Land, Inc.; Phinma Property Holdings Corporation; PICAR Development, Inc.; Pioneer Life, Inc.; Pueblo de Oro Development Corporation; RJ Lhinet Development Corporation; Robinson’s Homes, Inc.; SM Development Corporation; SM Synergy Property Holdings, Inc.; Surewell Equities, Inc.; Vistaland International Marketing; CBN Asia, Inc.; Insular Life Assurance Co., Ltd.; Jollibee Foods Corporation; Nestle Philippines; Savers Appliance Depot (Sentine Development Corporation); Suntrust Home Developers, Inc.; Zalora Philippines (BF Jade E-Services Phils., Inc.).

SMS (Short Message

Service) via Globe G-Cash and Smart Padala

Beneficiaries may encash remittances in more than 5,000 Globe G-Cash and Smart Padala encashment centers and ATMs nationwide once received on their mobile phones. Beneficiaries may also use the facility for “cashless shopping” in G-Cash and Smart affiliated business establishments.

iRemit Direct Online

Remittance System (iDOL)

iDOL is I-Remit’s Internet-based remittance service that offers convenient and secure remittance services online. It is currently available to Filipinos in Canada and the United Kingdom. It will also be made available in Australia, Hong Kong, Italy, Japan, New Zealand, and Taiwan.

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I-Remit derives its income from remittance transactions in the form of: (i) service fees,

and (ii) on the spread on the applicable foreign exchange rate for each conversion of any remittance to the Philippines. Service fees cover all logistical and operational expenses of the Company and its partner or tie-up company for each remittance transaction. These fees vary per country of operation depending on competition and the current foreign exchange situation. The timing of a remittance is also a consideration in applying a foreign exchange factor.

Percentage of Sales or Revenues Contributed by Foreign Sales I-Remit operates in various countries through its subsidiaries and associates or through

tie-ups. The former allows the Company to own up to 100% equity while the latter is through agent-partner agreements. Partnership arrangements are utilized when the volume of remittances do not justify incorporating new companies.

Due to the nature of its business, a substantial portion of the Company’s sales or

revenues are from foreign sales. The percentage shares of the Company’s major markets in terms of total value of

inward remittances (in US dollar amounts) is as follows: Share in Value (in USD) of Remittances Region 2012 2011 2010 Asia-Pacific 32% 32% 34% Europe 11% 11% 11% Middle East 17% 18% 19% North America 12% 14% 15% Others 28% 25% 21% Total 100% 100% 100% The percentage shares of the Company’s major markets in terms of the volume

(number of transactions) of inward remittance transactions is as follows: Share in Volume (in No. of Transactions) of Remittances Region 2012 2011 2010 Asia-Pacific 42% 43% 43% Europe 12% 11% 10% Middle East 30% 29% 29% North America 13% 14% 15% Others 3% 3% 3% Total 100% 100% 100%

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Distribution Methods of the Products or Services I-Remit operates globally through a combined network of branches and tie-ups

worldwide offering its products and services to overseas Filipino workers (OFWs). Currently, I-Remit is present in the following 25 countries and territories:

Asia Pacific Europe Middle East North America Australia Austria Bahrain Canada Brunei Germany Israel Hong Kong Greece Jordan Indonesia Ireland Lebanon Japan Italy Qatar Malaysia Spain United Arab Emirates New Zealand The Netherlands People’s Republic of China United Kingdom Singapore Taiwan The Company’s general expansion plans in 2013 include the opening of new and/or

additional offices or the engagement of new tie-ups and partners in Ireland, Macau, Germany, the Netherlands, Saudi Arabia, Oman, Qatar and Kuwait.

The distribution methods in the Philippines of the Company’s products or services are

as described under “Principal Products and Services.” Remittances may be credited to any bank account in the Philippines and the funds may

be withdrawn from the branch of account or from automated teller machines (ATMs). As of December 31, 2012, there were 9,472 bank branches and 12,285 ATMs in the Philippines.

I-Remit has the widest coverage in door-to-door delivery nationwide and is capable of

delivering cash remittances within the day for beneficiaries in Metro Manila and the province of Rizal. Next-day deliveries may be made in the following cities and provinces: Batangas, Bulacan, Cavite, Cebu, Davao, Laguna, La Union, Pampanga, Pangasinan, Tacloban, and Tarlac. Deliveries in other remote areas may be made in two (2) to three (3) days or 10 – 12 days depending on the specific location of the beneficiary. I-Remit can deliver in 17 regions, 81 provinces, and 136 cities and municipalities in the country.

Under the Company’s “Notify-to-Pay” services, remittances may be picked up by

beneficiaries in any of I-Remit’s 9,559 designated pay-out stations nationwide. Beneficiaries may also encash remittances in more than 5,000 Smart Padala and Globe

G-Cash encashment centers nationwide once notified by “text” on their mobile phones.

New Products or Services iDOL, the Company’s Internet-based remittance service that offers convenient and

secure remittance services online was made available to Filipinos in Canada and the United Kingdom in 2012. It will also be made available in Australia, Hong Kong, Italy, Japan, New Zealand, and Taiwan.

There are other services planned for launching in 2013. These products and services

are intended to improve product delivery and enhance I-Remit’s competitiveness in the OFW remittance market. Among these are various payment and collection services. The Company also intends to offer its remittance services to other nationalities through partnerships with banks or remittance companies of countries that have large populations of overseas workers. There are no publicly-announced new products or services which completion of development would require a material amount of the resources of I-Remit. New products or services will be developed using internal resources.

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Competition Players In its publication “Migration and Development Brief 20” (April 19, 2013), the World Bank

estimated that officially recorded remittances to developing countries reached USD 401 billion in 2012 growing by 5.3 percent compared with 2011. The money transfer or remittance industry has numerous players that are classified into two (2) major categories: the formal and informal channels.

Formal Channels Formal funds transfer or remittance channels may be defined as composed of

institutions that transfer value or funds from one geographic location to another and are operating within the regulated financial sector. These institutions are regulated and supervised by government agencies and by laws and regulations that determine their establishment and scope of operations. Based on the standards set by the Financial Action Task Force (IX Special Recommendations) and the Basel Committee on Banking Supervision, aside from licensing and registration, formal remittance institutions must have in place mechanisms for customer due diligence and monitoring of transactions. The formal channels may include banks, money transfer operators, credit unions, and postal services.

Banks. The Philippine remittance industry is dominated today by the country’s five

largest universal banks that lay claim to 85 percent of the total remittances flowing through the formal channels. There are over 20 commercial and thrift banks that are active players in the Philippine overseas remittance industry. Many remittance centers operating abroad are either subsidiaries or affiliates of domestic banks and are incorporated under the laws of their host countries. Some local banks have also established tie-up arrangements with banks and money transfer operators abroad. The major commercial banks in the Philippines involved in the remittance industry such as Banco de Oro Unibank, Philippine National Bank, Metropolitan Bank and Trust Company, Bank of the Philippine Islands, and the Rizal Commercial Banking Corporation. These banks also subscribe to the SWIFT system for bank-to-bank transfers and have a combined international network of correspondent banks, overseas branches, and international remittance centers.

International Money Transfer Operators. International money transfer operators consist

of companies whose subsidiaries or affiliates are licensed or registered with regulatory agencies. These operate under laws and regulations that are specific to money transfer operators or payment service providers. Among these companies are Western Union, MoneyGram, Trans-Fast, Xpress Money, and Ria Money Transfer.

Domestic Money Transfer Companies. The major domestic players include I-Remit,

LBC Express, Lucky Money, 2GO, M. Lhuillier, and Cebuana Lhuillier. Most of the companies classified under this category are local logistics service providers, courier companies, or pawnshops that have branched out into the remittance business.

Telecommunications Companies. The continuing advances in information and

telecommunications technologies allowed companies such as Smart Communications, Inc. and Globe Telecom, Inc. to offer innovative modes of sending and receiving remittances such as through short messaging system (SMS) or “text” or through e-money. Smart introduced Smart Padala in August 2004 while Globe introduced GCash in October 2004. International money transfer companies are also starting to utilize mobile phones for their money transfer businesses. In 2006, Internet payments innovator started its mobile SMS-based transfer system called PayPal Mobile. It has also developed applications for popular smart phones Blackberry, iPhone, and Android. In 2009, Twitter launched TwitPay, which interfaces with PayPal’s platform and uses the sender’s mobile-enabled Twitter account as a platform to send money to other Twitter users. The company TextPayMe was acquired in 2010 by Amazon.com which also offers Internet-based transfers through its Amazon Payments service. Through Amazon.com’s TextPayMe, users with an Amazon Payments account can send money to another person by sending an SMS text message with their mobile phone, or using their mobile phone’s Internet browser or one of several special applications designed for smartphone users. MasterCard also launched its MoneySend service in the United States which allows senders to make payments via SMS text message of their phone’s Internet browser.

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Technology-Based Companies. The emerging new players in the industry are

composed mostly of technology-based companies that utilize the Internet in offering remittance services. Their services may be availed of through traditional browers or via Web-enabled mobile phones. The online money transfer companies tapping the Philippine market are composed of Remit2Home, Xoom, and PayPal. Many remittance companies are also expanding their operations through the Internet. Western Union and MoneyGram currently offer customers the option of sending money online, as do banks such as Wells Fargo and Citibank.

Informal Channels Informal channels refer to institutions that engage in the remittance business outside of

the regulated financial sector. Cash may be sent through the recruitment agency or through the local office of the employer, through friends, relatives, or fellow workers traveling back to the Philippines. Alternatively, OFWs can bring the cash themselves upon their return to the Philippines.

“Padala” System. The literal meaning of the local word “padala” is to send something

through the courtesy of another person. In this practice, it is assumed that the person asked to bring the money to the Philippines is reliable and trustworthy, and the practice repeats as trust and confidence builds between the parties with each completed delivery.

“Kaliwaan” System. The system, despite its lack of popularity, operates through a well-

tested network of currency exchanges. It involves the use of agents in the source and destination countries who operate outside of regulatory restrictions as they arrange currency transfers. The method has been the subject of congressional inquiries because of its use in laundering monetary proceeds from illegal activities such as “jueteng.”

Hand-carry System. This method refers to the practice of overseas Filipinos in bringing

home cash themselves when they return to the Philippines for vacation or after the expiration of their work contracts.

OFW remittances continue to fuel the Philippine economy. The continuing upward

trends in inward remittance flows are expected to be sustained by the increased deployment of OFWs. Likewise, there is an observed overall shift from the utilization of unregulated, informal channels to the more formal structured channels for remittances that emphasizes the growing need for reliability, efficiency and convenience.

As competition among industry players intensifies, banks, money transfer agents, and

other similar service providers are expected to become more aggressive in their marketing and promotional activities to lure potential clients and capture larger shares of the market.

Advances in information and communications technology have allowed new players to

roll-out a growing variety of products and services catering to the evolving needs and requirements of OFWs. Such innovative approaches are expected to fuel further industry growth, help reduce transaction costs, and improve service delivery. Due to rising competition from non-traditional players, banks and money transfer agents need to upgrade their technology, expand network coverage, and enhance their distribution structures.

Industry players, particularly banks and remittance agents, will always be on the look-

out and competing for new tie-up arrangements with overseas partners, particularly in untapped geographic markets. Banks and other financial institutions will continue to seek partnership opportunities with correspondent banks, money transfer agents, and other types of partners overseas to expand their coverage while also planning to establish their own offshore units in key overseas markets like the Middle East, Canada, and the United States, that have a growing concentration of OFWs and Filipino immigrants. While the industry remains highly-competitive, industry players often link-up and have overlapping or complementary offerings with other service providers under revenue-sharing schemes.

I-Remit expects to encounter direct and indirect competition from domestic and foreign

companies offering money remittance services locally and internationally.

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The Company competes mainly in terms of pricing and service efficiency against the

domestic commercial banks, Philippine-based money transfer agencies, international money transfer agencies, and telecommunications firms.

I-Remit is able to compete effectively against the major players in the industry because

of its network of branches and tie-ups abroad, its local tie-ups with local and foreign banks, its flexibility to expand in other markets, its relatively faster decision-making process, and its marketing strategies that are customized for the Filipino populations in each country that it operates in.

The Company believes that its customer-centric model, complemented by its flexible

and dynamic structure, will allow it to compete actively in the local and international markets by capitalizing on its strengths in its core business while offering value-added services to OFWs around the world. The Company similarly believes that with its relentless drive for innovation, its streamlined organization, and efficient cost structure in its local and foreign operations, it will be able to compete effectively in the global marketplace through the continuous establishment of foreign offices in strategic locations characterized by high-densities of OFW populations that will allow it to tap a broader market, and consequently, deliver potentially high-yield profits.

Sources and Availability of Raw Materials and Names of Principal Suppliers The Company has a broad base of suppliers, both local and foreign. The Company is

not dependent on one or a few suppliers in conducting its business.

Dependence Upon a Single Customer or a Few Customers The Company serves a wide spectrum of overseas Filipino workers (OFWs) and

Filipino immigrants of different occupational groups in 25 countries and territories around the world. It is not dependent on a single customer or a few customers. Neither is there a single customer that accounts for, or will account for 20% or more of the Company’s sales. The International Organization for Migration (IOM)'s report on ''Health in the Post-2015 Development Agenda'' cited that there are approximately 215 million international migrants as of 2011. About 5% of this number or 10.46 million are overseas Filipinos in about 217 countries and territories. In 2011, the permanent migrants (47% or 4.86 million) comprise the largest category of overseas Filipinos, followed closely by temporary migrants (43% or 4.51 million). The irregular migrants (10% or 1.07 million) constitute the smallest category. Compared with 2010 data, the number of permanent, temporary, and irregular migrants increased by 10%, 4.36% and 52%, respectively. Irregular migrants could be found mainly in the United States, Malaysia, and Singapore. The large increase of irregular migrants in 2011 can mainly be traced to Malaysia’s 124% increase of irregular migrants from 200,000 in 2010 to 447,590 in 2011; and United States’ 67% increase from 156,000 in 2010 to 260,000 in 2011. The Philippine Overseas Employment Administration (POEA) also reported an increase in the number of workers deployed which in 2012 grew by 6.7 percent at 1,800,465 against the 1,687,831 in 2011. In its Migration and Development Brief 20 dated April 19, 2013, the World Bank estimated that officially recorded remittances to developing countries are expected to have reached USD 401 billion in 2012, up by 6.5% from USD 381 billion in 2011. The top recipients of remittances in 2012 are: India (USD 70 billion); China (USD 66 billion); the Philippines (USD 24 billion); Mexico (USD 24 billion); and Nigeria (USD 21 billion). The Bangko Sentral ng Pilipinas (BSP) reported that the 2012 full-year personal remittances of overseas Filipinos to the Philippines reached USD 23.8 billion, higher by 6.4% compared to the inflows recorded in 2011. The growth in remittances was driven by higher personal transfers from land-based overseas Filipino workers with work contracts of one year or more (by 13.3%), as well as sea-based workers and land-based workers with short-term contracts (by 11.6%).

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Cash remittances from overseas Filipinos coursed through banks reached USD21.4 billion for the full year 2012, posting an annual growth of 6.3% and exceeding the BSP’s full-year growth projection of 5%. In particular, remittances from both sea-based (USD4.8 billion) and land-based workers (USD16.6 billion) grew by 11.4% and 4.9% respectively. The resilience of overseas Filipino remittances continues to support the country’s economic growth and development. In 2012, cash remittances from overseas Filipinos coursed through banks represent about 6.5% of the country’s Gross National Income (GNI) and 8.5% of Gross Domestic Product (GDP). Remittances continue to draw strength from the increasing demand for a wider range of skilled Filipino workers abroad, mostly in the Middle East. In particular, preliminary reports by the POEA indicated that a total of 29,533 approved job orders for January and February 2013 were mostly for service, production, professional, technical and related workers to meet the manpower requirements in Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, and Taiwan.

Transactions and/or Dependence on Related Parties The Company has transactions with its subsidiaries and associates abroad, i.e., the

remittance centers that accept transactions from its customers, mostly OFWs, in Australia, Austria, Canada, Hong Kong, New Zealand, Singapore, the United Kingdom, and Japan. These transactions primarily consist of delivery services for a fee.

Pursuant to the Company’s usual course of business, it also advances funds to its

subsidiaries, associates and affiliates. These are accounts receivable from subsidiaries, associates and affiliates pertaining to remittance transactions. It also consists of advances made to subsidiaries, associates, and affiliates for working capital to maintain cash balances in bank accounts and other financial and operating requirements. The account receivables are usually settled on the next banking day. On the other hand, advances for financial and operating requirements are due on demand.

The Company leases office space from Oakridge Properties, a related party. The Company has office sharing arrangement with Surewell Equities Pte. Ltd. in

Singapore, a related party. The Company maintains peso deposit accounts with Sterling Bank of Asia, Inc. (A

Savings Bank), a related party. The Company’s retirement benefit fund is maintained with Sterling Bank of Asia, Inc. (A Savings Bank), an affiliate due to common stockholders, as trustee. The said bank’s majority shareholders are: JTKC Equities, Inc., Surewell Equities, Inc. and Star Equities Inc. which are also the shareholders of the Company. Please see also Item 12. Certain Relationships and Related Party Transactions.

Significant Agreements and/or Commitments The Company conducts its remittance and collection business internationally by

organizing wholly-owned corporations, entering into joint ventures, and signing Memoranda of Agreements (MOAs) with remittance or money transfer operators that are authorized or licensed in their respective countries and territories including Australia, Austria, Bahrain, Brunei, Canada, China, Germany, Greece, Hong Kong SAR, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Lebanon, Malaysia, the Netherlands, New Zealand, Qatar, Spain, Taiwan, United Kingdom, and the United Arab Emirates.

The Memoranda of Agreement entered into with individuals and corporations in various

countries and territories follow a general format with minor variations. Generally, the MOAs entered into on or after 2004 provide that I-Remit retain exclusive proprietary rights over its I-Remit Foreign Remittance System which the foreign parties will use to implement the remittance arrangement. MOAs entered into on or before 2003 do not contain this provision. All MOAs, however, are aimed at limiting I-Remit’s exposure by specifying that: (i) the foreign parties are not agents but independent contractors; (ii) the foreign parties shall be shall be responsible for compliance with all applicable laws in

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their respective countries and territories; and (iii) funds must first be deposited to an I-Remit bank account before the Company shall release the same to the intended beneficiaries in the Philippines. Contracts executed on or after 2004 also stipulate amicable settlement or arbitration as the mode of settlement of disputes and provides for the exclusive jurisdiction of the Philippine courts. New contracts with tie-ups require bond or advanced payment cover in order to fulfill the delivery of any transaction. The bond or “advanced payment cover” is deposited to an I-Remit-designated bank account that serves as collateral.

The bulk of the MOAs executed in the Philippines cover the arrangement between the

Company and various companies and institutions, such as commercial banks, thrift banks, and pawnshops for the appointment of the latter to provide pay-out stations through their branches for the Company’s notify-to-pay services.

Certain MOAs also involve the appointment of the Company as a collection agent for

the remittance of amortization payments, loan payments, premiums, and contributions for government financial institutions and agencies consisting of the Social Security System (SSS), Overseas Workers Welfare Administration (OWWA), Home Development Mutual Fund (HDMF or Pag-IBIG Fund), Philippine Retirement Authority (PRA) and the Philippine Health Insurance Corporation (PhilHealth), and various pre-need and real estate development companies.

Principal Terms and Expiration Dates of All Patents, Trademarks, Copyrights, Licenses, Concessions, and Royalty Agreements Held

I-Remit, Inc. is duly registered as a Remittance Agent with the Bangko Sentral ng

Pilipinas (BSP), with Certificate No. FX-2005-000364 issued on May 10, 2005, pursuant to BSP Circular 471, Series of 2005, dated January 24, 2005. It is subject to the applicable provisions of laws and BSP rules and regulations, as well as the provisions of the Anti-Money Laundering Act of 2001 (Republic Act No. 9160 as amended by Republic Acts 9194, 10167, and 10365) and its revised implementing rules and regulations, and Republic Act No. 10168 or the Terrorism Financing Prevention and Suppression Act of 2012 and its implementing rules and regulations.

I-Remit, Inc. is duly registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) as a Remittance Network Provider, with registered remittance network provider number RNP100035640-001, pursuant to subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) of Australia with effect from April 13, 2012 and valid for three (3) years thereafter. The Company’s subsidiaries and affiliates, and their branches are registered with or licensed by the relevant government regulatory bodies in their host countries in Australia, Austria, Canada, Hong Kong SAR, Italy, Japan, New Zealand, Singapore, Taiwan, and the United Kingdom. The said licenses and registrations have been granted subject to compliance with the applicable laws governing the operation of remittance companies or money transfer businesses and anti-money laundering and counter-terrorism financing. I-Remit Australia Pty Ltd is registered with the Australian Securities and Investments Commission (ASIC) as an Australian proprietary company, limited by shares with ACN 103 107 982 and ABN 22 103 107 982 with registration date December 10, 2002 and next review date December 10, 2013. Pursuant to subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) of Australia, I-Remit Australia Pty Ltd is registered with AUSTRAC as an affiliate of I-Remit, Inc., with remittance affiliate number AFF100314117-001, with effect from October 22, 2012 and valid for three (3) years thereafter. Worldwide Exchange Pty Ltd is registered with the Australian Securities and Investments Commission (ASIC) as an Australian proprietary company, limited by shares with ACN 106 493 047 and ABN 35 106 493 047 with registration date September 29, 2003 and next review date September 29, 2013. Pursuant to subsection 75C(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) of Australia, Worldwide Exchange Pty Ltd is registered with AUSTRAC as an affiliate of I-Remit, Inc., with remittance affiliate number AFF100309950-001, with effect from September 28, 2012 and valid for three (3) years thereafter.

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International Remittance (Canada) Ltd. is registered with Industry Canada, with registration number 392271-5, pursuant to the Canada Business Corporations Act with date of incorporation July 16, 2001. International Remittance (Canada) Ltd. is registered as an extraprovincial company with the Registrar of Companies of the Province of British Columbia with certificate of registration number A-60718 dated December 3, 2003. Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, International Remittance (Canada) Ltd. is registered as a money services business (MSB) with the Financial Transactions and Reports Analysis Centre of Canada with registration number M081607706 valid until June 28, 2014. Lucky Star Management Limited (trading as “IRemit Hong Kong”) is registered as a limited liability company in the Companies Registry of Hong Kong pursuant to the Companies Ordinance (Cap 32). Lucky Star Management Limited (trading as “IRemit Hong Kong”) is a licensed money service operator pursuant to Section 30 of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) with License No. 12-07-00326 from July 9, 2012 to August 8, 2014. K.K. I-Remit Japan is registered as a “Kabushiki Kaisha” (joint stock corporation) with the Legal Affairs Bureau of the Ministry of Justice of Japan with company number 0100-01-140611. Pursuant to the Payment Services Act of 2010, K.K. I-Remit Japan is registered with the Kanto Local Finance Bureau with Registration No. KLFB00019. K.K. I-Remit Japan is a member of the Japan Payment Services Association, a dispute resolution body, with membership number 00390. I-Remit New Zealand Limited is registered with the Registrar of Companies of the Ministry of Economic Development with certificate number 1984331 effective September 11, 2007. I-Remit New Zealand Limited is registered in the Financial Service Providers Register of the Companies House of New Zealand with FSP number 45263. I-Remit New Zealand Limited is a participant to the Financial Services Complaints Limited, a dispute resolution organization. IRemit Singapore Pte Ltd is registered in the Registry of Companies and Businesses of the Accounting and Corporate Regulatory Authority with company registration number 200103087H. IRemit Singapore Pte Ltd is licensed by the Monetary Authority of Singapore to carry on the remittance business pursuant to Section 8(3) of the Money-changing and Remittance Businesses Act (Cap 187) with RA No. 01132 valid until December 31, 2013 and renewable every year. IRemit Global Remittance Limited is registered with the Companies House of the United Kingdom with company number 04239974 pursuant to the Companies Act 2006. IRemit Global Remittance Limited has been granted authorization by the Financial Conduct Authority (FCA) to carry on payment services (money remittance) with Firm Reference Number 537568 effective April 15, 2011 pursuant to the Payment Services Regulations 2009. IRemit Global Remittance Limited is registered with Her Majesty’s Customs and Excise with money laundering registration number 1213085 with certificate of registration issued on May 22, 2012 and expiring on June 1, 2013 subject to renewal. The branches of IRemit Global Remittance Limited in Rome and Milan, Italy are registered in Albo of art. 114 septies TUB (Albo degli Istituti di Pagamento) under supervision of Banca D’Italia with identification code 36023.0. pursuant to Art. 1 Paragraph 1(b) of Legislative Decree 11/2010 of Italy with effect from July 7, 2011. IREMIT Remittance Consulting GmbH is registered as an agent of IRemit Global Remittance Limited pursuant to Article 12 para. 6 of the Austrian Payment Services Act (Zahlungsdienstegesetz). IREMIT Remittance Consulting GmbH is registered in the Register of Payment Institutions of the Financial Conduct Authority of the United Kingdom with firm reference number 574797. Hwa Kung Hong & Co. Ltd. is registered with the Department of Foreign Exchange, the Central Bank of China with Issued Document No. Taipei Central No. 0980000061.

I-Remit, Inc. and its subsidiaries, associates, and affiliates offer their products and services through the “I-Remit” trademark, salesmark, and/or trade name.

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I-Remit has registered the following patents, trademarks and/or trade names: Name/Trademark Date Filed Date Registered I-Remit Name and Logo January 20, 2004

Application No. 4-2004-0000529

December 11, 2006 Registration No. 4-2004-000529 Registered for a term of 10 years from date of registration

I-Load June 16, 2004 Application No. 4-2004-0005251

January 21, 2006 Registration No. 4-2004-0005251 Registered for a term of 10 years from date of registration

I-Travel June 16, 2004 Application No. 4-2004-0005252

October 1, 2005 Registration No. 4-2004-0005252 Registered for a term of 10 years from date of registration

I-Pay June 16, 2004 Application No. 4-2004-0005253

October 1, 2005 Registration No. 4-2004-0005253 Registered for a term of 10 years from date of registration

iDol July 8, 2004 Application No. 4-2004-0006066

July 30, 2006 Registration No. 4-2004-006066 Registered for a term of 10 years from date of registration

I-Serve February 14, 2008 Application No. 4-2008-001818


I-Value February 14, 2008 Application No. 4-2008-001819

September 8, 2008 Registration No. 4-2008-001819 Registered for a term of 10 years from date of registration

I-Reward February 14, 2008 Application No. 4-2008-001816


I-Care February 14, 2008 Application No. 4-2008-001817

September 8, 2008 Registration No. 4-2008-001819 Registered for a term of 10 years from date of registration

I-Remit Trademark

June 23, 2006 e-Filing No. 125586

June 23, 2006 Trademark No. T06/12356G Registry of Trademarks, Property Office of Singapore

I-Remit Trademark

November 1, 2007 New Zealand Trademark Registration No. 778760 Registered for a term of 10 years from date of registration

I-Remit Trademark

September 18, 2009 Application No. 145s2333

Registration pending; for publication in Trademarks Journal (Canada)

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I-Remit has licenses to the following information technology software and systems used

in its operations: Software / System,

Version Purpose Acquisition and

Effectivity License / Renewal of Maintenance Service

Enterprise Resource Information and Control (ERIC) Financial Suite (General Ledger & Accounts Payable) Version 5.2, Jupiter Systems, Inc.

The General Ledger module serves as the central financial data repository that allows for convenient and accurate preparation of the Company’s financial statements. The Accounts Payable module manages supplier payables and disbursements.

Version 3.2 acquired in 2002; upgraded to version 5.2 in 2006; perpetual license

Support agreement is renewed every year

Enterprise Resource Information and Control (ERIC) Payroll, Human Resource Management, Timecard, Version 5.2, Jupiter Systems, Inc.

The Payroll module is used for employees’ pay computation, payroll processing, and statutory reporting. The Human Resource Management module is used for capturing 201-file information and record-keeping. The Timecard module is used in recording and processing employee working hours.

Acquired in 2007; perpetual license


Microsoft SQL Server 2000 (Standard Edition), Microsoft Corporation

A relational data base management system used for the “back-end” data base of I-Remit’s remittance system

Version 2000, acquired on October 31, 2005; Version 2008, acquired on February 27, 2009; perpetual license

Software assurance ended on February 28, 2011

Microsoft SQL Server – Enterprise Edition

A relational data base management system used for the “back-end” data base of I-Remit’s remittance system

Version 2008, acquired on February 27, 2009; perpetual license

Software assurance ended on February 28, 2011

Microsoft Exchange Server, 2003 and 2007 – Enterprise Edition

A messaging and collaborative software used for the electronic mail system of I-Remit, Inc.

Version 2003, acquired on August 11, 2006; additional licenses acquired on September 27, 2007; perpetual license

Internet Service Accelerator 2004

Used as an internal firewall Acquired on August 11, 2006

Microsoft Office – Small Business

Software used in creating documents, files and reports

Version 2003, acquired on October 31, 2005; version 2007, acquired on November 20, 2008; perpetual license

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Software / System,

Version Purpose Acquisition and

Effectivity License / Renewal of Maintenance Service

Microsoft Windows Server – Enterprise and Standard Edition

Operating system used in servers

Version 2003, acquired on October 31, 2005; additional licenses acquired on August 31, 2006, September 30 & October 31, 2007, March 31 & October 31, 2008; Version2008, acquired on February 27, 2009

Power Builder Software development tool Version 11.1, acquired on November 18, 2008

Kaspersky Anti-Virus Anti-virus system Open space security, acquired in May 2009


Adobe Acrobat Reader File management Version 8 and 9 Hitachi Data Protection

Suite (Commvault) Backup and replication software

Version 7, 8 and 9, acquired in 2009


VeriSign SSL Certificate SSL certificates for data encryption

Acquired in 2009 Support agreement is renewed every year

GlobalSign SSL Certificate

Organization Wildcard SSL for *.iremit-inc.com


VMware vCenter Server 5 Standard for vSphere 5

Provides a centralized and extensible platform for managing Virtual Infrastructure


VMware vSphere 5 Standard

Virtualization platform for building cloud infrastructures


ApexSQL Software SQL Database management and development tools


Need for Any Government Approval of Principal Products or Services There are no new products or services that require government approval. Effect of Existing Probable Governmental Regulations on the Business The normal operation of the Company is not adversely affected by any existing

governmental regulation nor is it expected that any probable governmental regulation would have an adverse effect on the operations of the Company.

Other than the reportorial requirements of the Securities and Exchange Commission

(SEC), the Bangko Sentral ng Pilipinas (BSP), the Anti-Money Laundering Council (AMLC), the Bureau of Internal Revenue (BIR), and the local permits that are required by the City Government of Pasig, there is no other governmental permit required of the Company for its operation in the Philippines. The Company is in full compliance with the requirements of the SEC, BSP, AMLC, BIR and of the local government.

The Company’s subsidiaries, affiliates, and associates are registered or have acquired

licenses or authorization to operate the remittance or money transfer business in their respective host countries or territories. The said registrations, licenses, or authorizations are either valid until revoked or subject to periodic renewal subject to compliance with all applicable laws, rules, and regulations.

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The deployment of overseas Filipino workers (OFWs) is subject to the strict monitoring

or the limitation on the entry of foreign workers entering specific countries by their respective governments. Governments of some concerned nations have implemented strict monitoring measures on the number and types of foreign workers entering their respective countries because some of their citizens have incessantly blamed their inability to obtain jobs on the increasing competition from foreign migrant workers.

In 2011, the Philippine Overseas Employment Administration (POEA) banned the

deployment of Filipino workers to 41 countries that have failed to ensure the protection of migrant workers. These countries are deemed as not having laws for the protection of migrant workers. The deployment ban is in pursuit of the provisions of Section 3 of Republic Act 10022, otherwise known as “The Migrant Workers and Overseas Filipinos Act of 1995” as amended, which states, thus: “The State shall likewise allow the deployment of overseas Filipino workers to companies and contractors with international operations: Provided, that they are compliant with standards, conditions and requirements, as embodied in the employment contracts prescribed by the POEA and in accordance with internationally-accepted standards.” In March 2013, the POEA lifted the ban on the deployment of Filipino workers to Iraq, Yemen, and Eritrea.

By nature, the Philippine remittance industry relies heavily on the number of OFWs residing or working abroad, and sending money to the Philippines. Any decline in the growth of OFW deployment as a result of regulations or restrictions imposed by host countries or the ban of deployment to certain countries may hamper the overall growth of the remittance industry.

The POEA reported an increase in the number of workers deployed which in 2012 grew by 6.7 percent at 1,800,465 against the 1,687,831 in 2011. Preliminary reports by the POEA in 2013 indicated that a total of 29,533 approved job orders for January and February were mostly for service, production, and professional, technical and related workers to meet the manpower requirements in Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, and Taiwan.

Amount Spent on Research and Development Activities There is no material amount spent for research and development. Costs and Effects of Compliance with Environmental Laws The Company has not been subject to any penalties or legal or regulatory action and

has not incurred any costs for non-compliance with environmental laws or regulations of the Philippines.

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Employees The Company has 347 employees including those directly employed by subsidiaries as

of December 31, 2012. These consist of 69 officers and 278 non-officers as follows: No. of Employees (December 31, 2012)

Officers Non-Officers Total

Parent Company 46 151 197 Subsidiaries 23 127 150 Total 69 278 347

The Company projects no new additional personnel in 2013.

No. of Employees (December 31, 2012) Type Parent Company Subsidiaries Total Administrative 26 8 34 Finance 56 4 60 Information Technology 17 - 17 Sales and Marketing 24 17 41 Service and Operations 74 121 195 Total 197 150 347 None of the Company, its subsidiaries, affiliates and associate companies is subject to

any collective bargaining agreement (CBA). There has been no strike, nor any attempt to protest against the Company, its subsidiaries and associates during their entire histories.

The supplemental benefits that the Company grants to its employees include medical,

dental and hospitalization benefits, per diem and travel allowances, group insurance, birthday bonuses, meal and overtime allowances, and bereavement assistance. Employees are also entitled to vacation, sick, maternity, paternity, and emergency leaves. The Company provides the health and medical insurance benefits to its employees through an independent health maintenance organization (HMO).

Retirement Benefits

The Parent Company has a noncontributory defined benefit retirement plan, administered by a trustee, covering substantially all of its regular employees. Under this retirement plan, all qualified employees are entitled to cash benefits after satisfying age and service requirements. Under Republic Act No. 7641, also known as Retirement Pay Law, its applicability is effective on the fifth year of an employee’s tenure, provided that the employee is 60 years old but not more than 65 years old. The retirement cost of the Parent Company is determined using the projected unit credit method which reflects services rendered by employees to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Post-employment expenses include current service cost plus amortization of past service cost, experience adjustments and changes in actuarial assumptions over the expected average remaining working lives of the covered employees. Cumulative actuarial gains and losses in excess of the 10% of the greater between present value of the defined benefit obligation and fair value of any plan assets were amortized over the expected average remaining working lifetime of the employees and recognized as part of retirement expense. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The determination of the retirement obligation and cost and other retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include among others, discount rates, expected returns on plan assets and rates of compensation increase. In accordance with the generally accepted accounting principles, actual results that differ from the assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. While the Group

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believes that the assumptions are reasonable and appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the pension and other retirement obligations. Based on the actuarial report as of December 31, 2012 and 2011, the Group has recognized retirement asset amounting to PHP 2.2 million and PHP0.4 Million, respectively. Retirement expense recognized in 2012, 2011 and 2010 amounted to PHP 4.3 million, PHP 5.7 million and PHP 2.4 million, respectively. The Group accrues benefit pursuant to the provision of the Retirement Pay Law under non-contributory and of the defined benefit type which provides a retirement benefit equal to one hundred percent (100%) of Plan Salary for every year of Credited Service. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at December 31, 2012 by E.M. Zalamea Actuarial Services, Inc. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method. The principal assumptions used for the purposes of the actuarial valuations were as follows:

2012 2011

Discount rate 5.86% 9.69% Future salary increases 8.00% 8.00% Expected return on plan assets 7.50% 6.00% Average remaining working life (in years) 33.10 32.10

Amounts recognized in profit or loss in respect of these defined benefit plans are as

follows: 2012 2011 2010

Current service cost PHP 4,149,490 PHP 4,618,548 PHP 4,618,548 Interest cost 1,509,154 2,117,009 2,117,009 Expected return on plan assets (1,493,733) (1,118,673 (738,073) Changes in effect of asset ceiling loss 129,793 - - Actuarial (gain) loss recognized - 131,694 (163,104) PHP 4,294,740 PHP 5,748,578 PHP 2,376,127

The amount included in the consolidated statement of financial position arising from the entity’s prepaid retirement in respect of its defined benefit plans is as follows:

2012 2011

Present value of defined benefit obligation PHP 27,959,017 PHP 22,524,680 Fair value of plan assets 30,303,714 21,816,324 Deficit (Surplus) (2,344,697) 708,356 Unrecognized actuarial gains (losses) (17,231) (1,076,750) Effect of the Asset Ceiling 129,793 - PHP (2,232,135) PHP (368,394)

Movements in the present value of the defined benefit obligation in the current period were as follows:

2012 2011

Balance, January 1 PHP 22,524,680 PHP 21,847,360 Current service cost 4,149,490 4,618,548 Interest cost 1,509,154 2,117,009 Actuarial gains (224,307) (6,058,237) Balance, December 31 PHP 27,959,017 PHP 22,524,680

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Movements in the fair value of the plan assets in the current period were as follows: 2012 2011

Balance, January 1 PHP 21,816,324 PHP 15,196,930 Contributions 6,158,445 6,895,233 Expected return on plan assets 1,493,733 1,118,673 Actuarial gains (losses) 835,212 (1,394,512)

PHP 30,303,714 PHP 21,816,324 The major categories of plan assets, and the expected rate of return at the end of the

reporting period for each category, are as follows: 2012 2011

Private equity securities PHP 11,755,471 PHP 9,245,139 Government debt securities 11,818,150 4,763,467 Deposits in banks 6,402,242 7,613,374 Interest receivable 354,778 215,615 Trust fee payable (26,927) (21,271)

Balance, December 31 PHP 30,303,714 PHP 21,816,324

The overall expected rate of return is a weighted average of the expected returns of the various categories of plan assets held. The actual return on plan assets amounted to a gain of PHP2.3 million and a loss of PHP0.3 million during 2012 and 2011, respectively.

The history of experience adjustments is as follows:

2012 2011 2010 2009 2008 Present value of obligation PHP27,959,017 PHP22,524,680 PHP21,847,360 PHP10,080,516 PHP6,574,511 Fair value of plan assets 30,303,714 21,816,324 15,196,930 12,421,022 3,168,050 Deficit (surplus) (2,344,697) 708,356 6,650,430 (2,340,506) 3,406,461 Changes in actuarial assumptions 2,361,420 (498,493) 9,932,542 1,070,082 (3,766,312) Experience adjustments on plan liabilities (2,585,727) (5,559,744) (894,376) (382,676) (206,448) Experience adjustments on plan assets PHP835,212 PHP(1,394,512) PHP(2,643,029) PHP4,452,972 PHP-

The Group expects to make a contribution of PHP 4.3 million to its retirement fund in the next financial year. The subsidiaries are not required to establish and accrue retirement obligation.

The Company continues to invest in its employees through various training programs

strategically focused on the Company’s core values, team development, selling skills, customer service and product knowledge.

Transaction with Retirement Fund The Group’s retirement benefit fund is maintained with Sterling Bank of Asia, Inc. (A

Savings Bank), an affiliate due to common stockholders, as trustee. The carrying amount and fair value of the fund amounted to PHP 30.3 million as of December 31, 2012. The funds were invested in private equity securities, deposits in banks and government debt securities. In 2012 and 2011, the Group made contributions to the fund amounting to PHP 6.2 million and PHP 6.9 million, respectively. Private equity securities includes PHP 808,100 of the Group’s own equity securities bought back from resigned employees who held such securities, under the special stock purchase program. Such transaction was authorized by the Board of Directors of I-Remit Inc. through its SSS program.

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The government debt securities consist of peso denominated and USD denominated securities. The Peso-denominated Government Securities of the I-Remit Retirement Fund were purchased from accredited counterparties of SBA-Trust Group. These counterparties are Banks and Investment Houses allowed to trade government securities. Existing Peso GS accounts are all Tax exempt and are currently lodged under the Tax Exempt RoSS Account of SBA-Trust Group with the Bureau of the Treasury (BTr). The USD denominated debt securities are currently lodged with the Philippine Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s accredited counterparties that are allowed to trade government securities. Please see also Item 12. Certain Relationships and Related Party Transactions

Risk Management

The Company’s goal in risk management is to ensure that it understands, measures,

and monitors the various risks that arise from its business activities, implements the appropriate risk mitigation measures, and that it adheres strictly to its established risk management policies. Periodic strategic planning sessions and meetings by top management, and the various management and Board committees are being held to identify, assess, and formulate contingency plans to manage or minimize the adverse impact of risks to the Company. The Board of Directors performs an oversight role for the Company’s risk management activities and approves I-Remit’s risk management policies and any revisions thereto. The Chief Executive Officer, as the overall risk executive, oversees the risk management activities of the Company and ensures that the responsibilities for managing risk are clear, the levels of risk taken on by the Company are acceptable, and that an effective control environment is in place. Risk management is an integral part of the day-to-day business management of the Company and each operating unit has a responsibility to measure, manage, and control the risks associated with the functions they perform. The Company’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, fair value interest rate risk, and price risk), credit risk, liquidity risk, and operational risk. The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the auditors on a continuing basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Market Risk Management Market risks (consisting of foreign currency risk, fair value interest rate risk, and price risk), are the risks that the value of a currency position or financial instrument will fluctuate due to changes in foreign exchange rates and interest rates. The Company also has various financial assets and liabilities such as accounts receivable from agents abroad and accounts payable to beneficiaries in the Philippines, which arise directly from its remittance operations.

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I-Remit provides money transfer and remittance services in 25 countries and territories. The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Foreign exchange risk is managed through the structure of the business and an active risk management process. In the substantial majority of its transactions, I-Remit settles with its foreign offices, associates, and agents in their respective local currencies, and requires the foreign offices, associates, and agents to obtain settlement currency to provide to recipients. The Company’s policy prohibits speculating in foreign currencies. It is the Company’s policy that all foreign currencies that arise as a result of remittance transactions be traded daily with bank partners and only at prevailing foreign exchange rates in the market. The daily closing foreign exchange rates are used as the guiding rates in providing wholesale rates to subsidiaries, associates, affiliates, tie-ups, and agents. The trading proceeds are used to pay out bank loans and other obligations of the Company. The foreign currency exposure that exists is limited by the fact that the majority of transactions are settled within a day or two (2) days after these are initiated. In addition, in money transfer transactions involving different currencies received and paid in Philippine pesos, I-Remit generates revenue by receiving a foreign currency spread based on the difference between buying currencies at wholesale exchange rates and providing the currencies to its customers at retail exchange rates. This spread provides some protection against currency fluctuations. The Company’s exposure to interest rate risk arises from its cash deposits in banks which are subject to variable interest rates. The interest rate risk arising from deposits with banks is managed by means of effective investment planning and analysis, and maximizing investment opportunities in various local banks and financial institutions. The Company’s exposure to interest rate risk is minimal. The Company is also exposed to equity price risks arising from equity investments. The Company’s exposure to equity price risk is minimal. Credit Risk Management Credit risks are risks that arise when a counter-party in a transaction may potentially default and cause a possible loss to the Company. The nature of its business exposes the Company to potential risk from difficulties in recovering transaction money from its foreign partners, including tie-ups and agents. Accounts receivable from foreign offices and agents arise as a result of its remittance operations in various countries. The Company has adopted a policy of dealing only with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Company uses other publicly-available financial information and its own trading records to rate its major counter-parties. The Company’s exposure and the credit ratings of its counter-parties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counter-parties. Credit exposure is also controlled by counter-party limits. In addition, the Company is applying the following credit policies to its tie-ups and agents: (i) enforcing a contract that incorporates a bond and requiring that the full amount of the transactions be credited to the Company bank account prior to the delivery of funds to the beneficiaries and in certain cases, requiring advance funding equivalent to the average daily remittance transactions to fulfill or deliver their remittance transactions; (ii) requiring settlement on the next banking day, otherwise, the fulfillment or delivery of remittance transactions will be placed on hold; (iii) evaluation of individual potential partners and agents’ credit worthiness, as well as a close looking into the other pertinent aspects of their businesses which assures the Company of the financial soundness of its partner firms; (iv) active monitoring of receivable balances. The Company’s receivables from agents and tie-ups have a high probability of collection which have turnovers ranging from one (1) to five (5) days. The other receivables which include advances to related parties have high probabilities of collection and are due in less than one (1) year.

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Liquidity Risk Management Liquidity risk is the risk that a firm will not be able to meet its current and future cash flow and cash needs, both expected and unexpected, without materially affecting its daily operations or overall financial condition. Liquidity risk management rests with the Board of Directors which has established an appropriate risk management framework for the management of the Company’s short-, medium-, and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecasts and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Operational Risk Management Operational risks are risks of losses resulting from inadequate or failed internal processes, people and systems or from external events, such as those resulting from fraud or defalcations from internal or external sources, or actual financial losses arising from failed processes, systems and procedures. The Company’s main goal in managing operational risk is to create and maintain an operating environment that ensures and protects the integrity of its financial resources, assets, transactions, records, and information resources. The Company attempts to mitigate operational risks by maintaining a comprehensive system of internal controls, establishing standard systems and procedures, implementing a system to monitor transactions, maintaining key back-up procedures, and undertaking regular contingency planning. The Company’s internal control system is intended to provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws, rules, and regulations. The internal control system is composed of policies, processes, systems, and activities to achieve these objectives. The internal control system consists of two major activities: (i) preventive control activities; and (ii) monitoring activities. Preventive control activities seek to prevent or deter undesirable acts from occurring. These are proactive controls, designed to prevent losses, errors, or omissions. These activities include segregation of duties and tasks, proper authorizations, rotation of duties, adequate documentation, or physical security measures over cash and other assets. Monitoring activities aim to detect undesirable acts that have already occurred. These provide evidence “after the fact” that a loss or error has occurred but do not actually prevent these from occurring. These activities consist of regular supervisory reviews of account activities, reports, and reconciliations; routine spot-checking of transactions, records, and reconciliations; variance analysis, including comparisons with budget and historical data; physical inventories; control self-assessment; and internal audit review of controls. Standard systems and procedures pertain to the prescribed manner of processing transactions, handling cash and other assets, maintaining records, and preparing reports. The Company has operating manuals detailing the procedures for the processing of its remittance transactions, the implementation of its various business processes, and the use of its information technology resources. These operating manuals undergo periodic reviews and revisions, if needed. Amendments to these manuals are implemented through circulars sent to all divisions and offices of the Company. Management endeavors to implement a control-conscious environment that also supports ethical values and sound business practices. Management is responsible for “setting the tone” and encouraging the highest levels of integrity and ethical behavior, as well as exhibiting leadership behavior that promotes responsibility and accountability. Independent reviews are regularly conducted by the Internal Audit Department to ensure that risk controls are in place and functioning effectively. The Internal Audit Department undertakes a comprehensive audit of all divisions and departments in accordance with a risk-based audit plan. It conceptualizes and recommends the implementation of an improved system of internal controls to minimize operational risks. The Audit Plan for each fiscal year is approved by the Audit Committee of the Board of Directors. These audits also include the area of information security that covers application systems, databases, networks, and operating systems. The results of internal audit activities are discussed with the Audit Committee and subsequently, submitted to the Board of Directors.

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Recognizing the importance of customer service in its operations, the Company has a Customer Support Team composed of a dedicated and highly-trained team of frontline support officers who assist the Company’s subsidiaries, associates, affiliates, tie-ups and agents, and the Company’s customers and their beneficiaries. The Company provides 24 x 7 customer service support and minimizes operational risks by ensuring accuracy and effectiveness in operations and in the delivery of services. The Company also has a Business Continuity Plan (BCP) that outlines the activities and the procedures to be undertaken in the event of abnormal or emergency conditions, or a disaster, to ensure that disruption to operations will be kept at a manageable level, financial losses will be minimized, the safety and security of employees, customers, and Company records will be maintained, and normal operations will be restored in the shortest time possible. I-Remit maintains a disaster recovery (DRP) site with Globe Telecom/Innove Communications in Makati City. The other risks identified that the Company is exposed to include regulatory risk, legal risk, and technology risk. Regulatory risk refers to the potential for the Company to suffer financial losses due to changes in the laws or monetary, tax or other governmental regulations of the Philippines or of another country where it has business operations. Losses may be in the form of regulatory sanctions for non-compliance, and in extreme cases, may involve not just mere loss in terms of reputation or financial penalties, but a revocation of the license, registration, or authorization to carry on its business activities. The Company’s Compliance Program, the implementation of which is overseen and coordinated by the Compliance Officer, is the primary control process for regulatory risk issues. The Compliance Officer is responsible for communicating and disseminating new rules and regulations to all concerned units, analyzing and addressing compliance issues, and reporting compliance findings to the Management Committee, Executive Committee or the Board of Directors. I-Remit’s subsidiaries, associates, affiliates, tie-ups and agents have and maintain all registrations or licenses and permits necessary to provide remittance and money transfer services in their host countries. Compliance officers are appointed in each of the Company’s foreign offices whose primary responsibility is to ensure compliance with all local laws, rules, regulations, and ordinances; and licensing, registration, and reporting requirements. The Company is considered a “covered institution” pursuant to the Anti-Money Laundering Act (AMLA) of 2001 (Republic Act 9160 as amended by Republic Acts 9194, 10167, and 10365). I-Remit, Inc. is registered as a remittance agent with the Bangko Sentral ng Pilipinas pursuant to BSP Circular No. 471, Series of 2005 issued on January 24, 2005, that prescribes the registration and standards for the operation of foreign exchange dealers, money changers, and remittance agents. On January 5, 2011, the BSP issued BSP Circular 706 Series of 2011 that prescribes updated anti-money laundering rules and regulations. The revised anti-money laundering rules and regulations were adopted by the Company in its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Compliance Manual that was approved by the Board of Directors on June 17, 2011. The manual includes policies and guidelines that cover areas such as the customer due diligence process (“Know Your Customer” rule), large cash transactions, record-keeping, suspicious transaction reporting, and training of employees. These policies and guidelines are also based on the revised Financial Action Task Force (FATF) 40 Recommendations . I-Remit requires its subsidiaries, associates, affiliates, and agents to validate the true identity of a customer based on official or other reliable identity documents or records before accepting a transaction. The Company exercises due diligence when dealing with customers, persons appointed to act on a customer’s behalf, and beneficial owners. A “beneficial owner, in relation to a customer of I-Remit, refers to the natural person who ultimately owns or controls a customer or the person on whose behalf a transaction is being conducted and includes the person who exercises ultimate effective control over a legal person.

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The Company and its subsidiaries, associates, and affiliates are also required to implement a risk-based approach in customer due diligence in which pre-determined criteria are used to assess potential money laundering and terrorism financing risks that will determine the proportionate measures and controls that will be applied to mitigate such risks. I-Remit applies enhanced due diligence measures when customers are assessed to be “high risk.” These measures include: (i) requiring additional documentary evidence of identity; (ii) verifying the identity and background of a customer by referring to publicly-available information or verifying information provided with the relevant government bodies; (iii) establishing, by appropriate and reasonable means, the source of income or wealth, and the source of funds of the customer or the beneficial owner; (iv) determining the banks where an individual customer has maintained or is maintaining accounts and obtaining proof thereof such as bank statements or passbooks; (v) obtaining the approval of top management for a transaction where the customer or a beneficial owner is a politically-exposed person or subsequently becomes a politically-exposed person. The Company, on an ongoing basis, also monitors and continually assesses the transaction patterns of its customers and adjusts or makes changes to the risk classification or the level of due diligence applied on its customers when the situation warrants the same to manage money laundering or terrorism financing risks. I-Remit checks each remittance transaction with the lists of specially-designated nationals or blocked persons, and lists of terrorists, terrorist organizations, or persons associated with terrorists or terrorist organizations. These lists are: (i) Office of Foreign Assets Control (OFAC) of the US Department of the Treasury (Specially Designated Nationals and Blocked Persons List); (ii) Office of the Superintendent of Financial Institutions (OSFI) of Canada (Consolidated List of Names Subject to the Regulations Establishing a List of Entities Made Under Subsection 83.05[1] of the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism or the United Nations Al-Qaida and Taliban Regulations); (iii) European Union (EU) (Consolidated List of Persons, Groups and Entities Subject to EU Financial Sanctions); and (iv) United Nations Security Council Consolidated List Established and Maintained by the 1267 Committee with respect to Al Qaida, and the Taliban, and other individuals, groups, undertakings and entities associated with them. The Company is required to submit reports on “covered” transactions and “suspicious” transactions to the Anti-Money Laundering Council. Covered transactions involve single or multiple transactions in cash or other monetary instruments in excess of PHP 500,000 within one (1) banking day. Suspicious transactions are transactions that may involve money laundering or terrorism financing or attempts to circumvent or avoid any reporting requirement. The BSP requires all registered remittance agents to maintain accurate and meaningful originator information on funds transferred or remitted by requiring the sender or remitter to fill-out and sign an application form, which shall contain minimum data and information, such as the complete name and of the remitter, permanent address, nationality, amount and currency to be remitted and source of funds for individuals. All records of transactions are required to be maintained and stored for five (5) years from the date of a transaction unless a longer period is required by the relevant regulator in a host country or a transaction or group of transactions becomes the subject of an investigation for money laundering or terrorism financing. I-Remit’s foreign subsidiaries, associates, and agents are required to comply with the anti-money laundering regulations of their host countries to ensure that funds being sent are of lawful and verifiable origin. Among others, remitters are required to present documents such as proofs of identification, residency, and financial origin as required by local regulations of the host countries. Remitted amounts are also subject to the prescribed transmission limits of the monetary authorities or the financial intelligence units of each host country. Cash or non-cash transactions that amount to or exceed certain threshold amounts are also reported.

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I-Remit and its subsidiaries, associates, affiliates, and agents are licensed or registered with the various financial and central monetary authorities and/or the financial intelligence units of their host countries. These include the Australian Transaction Reports and Analysis Centre (AUSTRAC); Financial Transactions and Reports Analysis Centre (FINTRAC) of Canada; the Commissioner of Customs and Excise (Hong Kong); the Financial Conduct Authority and Her Majesty’s Customs and Excise (United Kingdom); the Financial Services Agency (Japan); the Companies Office (New Zealand); the Monetary Authority of Singapore; and the Central Bank of China (Taiwan). Regulatory risk also includes the strict monitoring or the limitation on the entry of foreign workers entering specific countries by their respective governments. Governments of some concerned nations have implemented strict monitoring measures on the number and types of foreign workers entering their respective countries because some of their citizens have incessantly blamed their inability to obtain jobs on the increasing competition from foreign migrant workers. By nature, the Philippine remittance industry relies heavily on the number of OFWs residing or working abroad, and sending money to the Philippines. Any decline in the growth of OFW deployment as a result of regulations or restrictions imposed by host countries may hamper the overall growth of the remittance industry. Legal risk pertains to the potential for loss arising from the uncertainty of the outcome of legal proceedings or potential legal proceedings. It also refers to the uncertainty of the enforceability of the obligations of the Company’s business partners, agents, tie-ups, and suppliers. Changes in law and regulations could adversely affect the Company. Legal risk is higher in new areas of business where the law is often untested by the courts. The Company seeks to minimize its legal risks by using stringent legal documentation, employing procedures designed to ensure that transactions are properly authorized and documented, and by constantly consulting its external legal counsels locally and in the countries it operates in. Technology risk refers to the risk that customers may suffer service disruptions, or that customers or the Company may incur losses arising from system defects such as failures, faults, or incompleteness in computer operations, or illegal or unauthorized use of computer systems. The delivery of financial services is characterized by rapid technological change, changing customer preferences, the introduction of new products and services, and the emergence of new standards. The Company realizes the potential losses arising from the breakdown or malfunction of computer systems as well as from the misuse of its infrastructure and networks. The Company gives importance to computer security and has a comprehensive information technology security policy. The Company identifies and evaluates technology risks by setting specific standards that need to be complied with and implementing measures based on the evaluation to manage these risks. The Company ensures the implementation of an ongoing project management and control system in development and quality control. The Company defines and maintains information security policies that follow industry standards, such as the use of firewalls, secure socket layer (SSL) encryption, anti-virus measures, and user-defined access controls. The Company’s major application systems have multiple security features to protect the integrity of applications and data. Access to I-Remit’s Foreign Remittance System via the Internet has several security restrictions including firewalls, secure socket layers using 128-bit encryption, digital certificates and password identification. All remittance transactions are encrypted with hash totals / test keys to ensure authenticity of transaction details. Most of the information technology assets including critical servers are located in a centralized data center at the Company’s headquarters, which are subject to appropriate physical and logical access controls. Likewise, the systems are designed to be redundant to ensure continuity of business operations in the event of unforeseen events or disasters. The system also has parallel servers concurrently operating and connected to different ISP providers to ensure non-disruption of its operations.

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Supporting the Company’s business processes is a dynamically-scaled network of virtualized servers and storage farms. The network is secured from malicious attacks, virus intrusions, and security threats internally and externally through the use of a multi-layered network set-up consisting of VLANs, virtual private networks, security appliances, firewalls, anti-spam software, WAN router, Internet link load balancer, and anti-virus systems. The company has a state-of-the-art backup and replication protocol that runs every night while a more concentrated database replication process transpires between the company’s headquarters and the disaster recovery site in real time. A part of the Company’s strategy is to continuously upgrade its technology infrastructure to ensure that it is able to manage the risks associated with technology or any unforeseen natural or man-made risks that may hamper the continuity of its operations.

Other Information No bankruptcy, receivership or similar proceedings have been instituted against the

Company and its subsidiaries, affiliates or associates. Furthermore, no material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business has taken place.

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Item 2. Properties (B) Description of Property I-Remit and its subsidiaries do not own any real estate properties. I-Remit is leasing its headquarters

located at the 26th and 27th floors of the Discovery Centre, a condominium office and residential building, located at 25 ADB Avenue, Ortigas Center, Pasig City from Oakridge Properties, Inc. In addition, certain departments of the Company held offices at the 25th floor of the Discovery Centre and at the 8th floor of the Wynsum Corporate Plaza, a condominium office building located at 22 F. Ortigas Jr. Road (formerly Emerald Avenue), Ortigas Center, Pasig City.

I-Remit and Oakridge Properties, Inc. are related to each other by virtue of JTKC Equities, Inc.’s

ownership of The Discovery Leisure Company, Inc. which in turn owns Oakridge Properties, Inc. JTKC Equities, Inc. is one of the Company’s major shareholders. Directors Ben C. Tiu (2001 to date), John Y. Tiu, Jr. (2002 to date) and Ruben C. Tiu (2007 to date) are brothers. Director Ben C. Tiu is President of JTKC Equities, Inc. (1993 to date). Director John Y. Tiu, Jr. is Director and Treasurer of JTKC Equities, Inc. (2002 to date), The Discovery Leisure Company, Inc. (2001 to date) and a Director of Oakridge Properties, Inc. (2003 to date). Director Ruben C. Tiu is President of Oakridge Properties, Inc. (1996 to date), The Discovery Leisure Company, Inc. (2000 to date) and an Executive Vice-President of JTKC Equities, Inc. (1993 to date).

The lease on the unit at the 25th floor of the Discovery Centre (Unit 2503), consisting of an area of

199.70 square meters, was covered by an operating lease agreement, which was extended for a term of six (6) months, commencing on February 1, 2012 and ending on August 31, 2012. The lease extension agreement was executed due to the pending lease and renovation of units 2704 and 2705 of the Discovery Centre. At the start of the lease, for the use and occupancy of the premises, the Company paid Oakridge Properties, Inc. the amount of PHP 658.85 per square meter every month or its equivalent monthly rental of PHP131,572.35.

The lease on the unit at the 26th floor of the Discovery Centre (Unit 2603), consisting of an area of

199.70 square meters, is covered by an operating lease agreement with a term of two (2) years, commencing on December 1, 2011 and ending on November 30, 2013, with a 10 percent escalation on the aggregate current monthly rental on the 13thmonth of the lease term. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. I-Remit, as lessee, pays Oakridge Properties, Inc. every month the amount of PHP798.60 per square meter or its equivalent monthly rental of PHP159,480.42.

The lease on the units at the 26th floor of the Discovery Centre (Units 2604 and 2605) with an

aggregate useable floor area of 278.00 square meters and 273.80 square meters, is covered by an operating lease agreement with a term of two (2) years, commencing on December 1, 2011 and expiring on November 30, 2013, with a 10 percent escalation on the aggregate current monthly rental on the 13thmonth of the lease term. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. At the start of the lease, I-Remit, as lessee, paid Oakridge Properties, Inc. every month the amount of PHP827.21 per square meter or its equivalent monthly rental of PHP456,454.48.

The lease on the unit at the 27th floor of the Discovery Centre (Unit 2703) with an aggregate useable

floor area of 199.70 square meters, is covered by an operating lease agreement with a term of two (2) years, which commenced on February 1, 2011 and expires on January 31, 2013, with an escalation rate of 10 percent on the 13th month of the lease term. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. At the start of the lease, I-Remit, as lessee, paid Oakridge Properties, Inc. every month the amount of PHP671.00 per square meter or its equivalent monthly rental of PHP133,998.70.

The lease on the units at the 27th floor of the Discovery Centre (Units 2704 and 2705) with an

aggregate useable floor area of 278.00 square meters and 273.80 square meters, is covered by an operating lease agreement with a term of three (3) years, commencing on October 15, 2012 and expiring on October 14, 2015, with a 10 percent escalation on the aggregate current monthly rental on the 13th month and 25th month of the lease term. The lease may be renewed under terms and conditions mutually agreed upon by the parties 90 days prior to the expiration of the contract of lease. At the start of the lease, I-Remit, as lessee, paid Oakridge Properties, Inc. every month the amount of PHP658.85 per square meter or its equivalent monthly rental of PHP363,553.43.

The above monthly rentals with respect to the lease contracts with Oakridge Properties, Inc. exclude

charges for air-conditioning and electricity or generator set during brown-out, water, and other charges such as association dues, parking fees, overtime pay of janitors and technicians which are borne by I-Remit.

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The lease on the unit at the 8th floor of the Wynsum Corporate Plaza with an aggregate useable floor

area of 287.00 square meters and five (5) parking spaces, were covered by an operating lease agreement with a term of two (2) years, commencing on September 1, 2010 and expiring on August 31, 2012. I-Remit, as lessee, paid Wynsum Realty Developer, Inc. the rent on the condominium unit in the amount of PHP550.00 per square meter or its equivalent of PHP 157,850.00 every month and on the five (5) parking spaces in the amount of PHP17,500.00 every month, both not subject to escalation. After the lease expiration date, I-Remit utilized its security deposit, which is equivalent to two (2) months rental, until October 31, 2012 when it has completed the transfer of its departments from the 8th floor of the Wynsum Corporate Plaza to its headquarters in the Discovery Centre.

The above monthly rentals with respect to the lease contract with Wynsum Realty Developer, Inc.

exclude charges for air-conditioning, electricity, gas, telephone and other charges such as association dues, which are borne by I-Remit.

Contract Period

Unit & Location Address Area (sq m)

Current Rent per Month

exclusive of VAT (PHP)

Term (years) Start End

Unit 2503, 25/F Discovery Centre

25 ADB Avenue, Ortigas Center, Pasig City 199.70 131,572.35 6 months

extension Feb. 1, 2012

Aug. 31, 2012


25 ADB Avenue, Ortigas Center, Pasig City 199.70 159,480.42 2 Dec. 1,

2011 Nov. 30,

2013 Unit 2604 & 2605,

26/F Discovery Centre

25 ADB Avenue, Ortigas Center, Pasig City 551.80 456,454.48 2 Dec. 1,

2011 Nov. 30,

2013


25 ADB Avenue, Ortigas Center, Pasig City 199.70 133,998.70 2 Feb. 1,

2011 Jan. 31,

2013 Unit 2704 & 2705,

27/F Discovery Centre

25 ADB Avenue, Ortigas Center, Pasig City 551.80 363,553.43 3 Oct. 15,

2012 Oct. 14,

2015

8/F Wynsum Corporate Plaza

22 F. Ortigas Jr. Road, Ortigas Center, Pasig City

287.00 157,850.00 2 Sep. 1, 2010

Aug. 31, 2012

Five (5) parking spaces, Wynsum Corporate Plaza

22 F. Ortigas Jr. Road, Ortigas Center, Pasig City

--- 17,500.00 2 Sep. 1, 2010

Aug. 31, 2012

Rent expense pertaining to the above leased office spaces by the Parent Company, from Oakridge

Properties and Wynsum Realty amounted to PHP12.06 million in 2011, PHP11.01 million in 2010, and PHP10.55 million in 2009.

I-Remit has office sharing arrangement with Surewell Equities Pte. Ltd. in Singapore, a subsidiary of

Surewell Equities, Inc., a stockholder of I-Remit, for the use of an office space in Singapore under a sub lease agreement. Mr. Bansan C. Choa, Chairman and Chief Executive Officer of I-Remit, is Chairman of Surewell Equities, Inc.

I-Remit’s subsidiaries have their respective operating lease agreements for their office spaces. The

lease contracts are for periods ranging from 1 to 10 years and may be renewed under the terms and conditions mutually agreed upon by the subsidiaries and the lessors.

The Group’s rent expense includes operating lease agreements entered into by the subsidiaries for

the use of its office spaces. Rent expense of the Group amounted to PHP 59.29, PHP 53.50, and PHP 46.36 million in 2012, 2011, and 2010, respectively. PHP 3.91 and PHP 4.02 million of the total rent expense pertains to rent expense of the discontinued operations of Italy in 2011 and 2010, respectively. The Group does not expect any purchase of significant properties in the next twelve (12) months.

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Item 3. Legal Proceedings (C) Legal Proceedings The Parent Company is not involved in nor are any of its properties subject to, any material legal

proceeding that could potentially affect its operations and financial capabilities.

Item 4. Submission of Matters to a Vote of Security Holders Except for matters taken up during the annual meeting of stockholders, there were no matters

submitted to a vote of security holders during the period covered by this report.

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PART II. OPERATIONAL AND FINANCIAL INFORMATION Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters (A) Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters (1) Market Information The common shares of the Parent Company are traded in the Philippine Stock Exchange

(PSE). Quarter-end stock price ranges for 2010, 2011, 2012 and first quarter 2013 are as follows:

Quarter Ending Date High Low Close Mar. 31, 2010 PHP 6.20 PHP 4.70 PHP 4.85 Jun. 30, 2010 PHP 5.00 PHP 4.25 PHP 4.40 Sep. 30, 2010 PHP 4.85 PHP 3.44 PHP 4.00 Dec. 31, 2010 PHP 4.08 PHP 3.20 PHP 3.34 Mar. 31, 2011 PHP 3.67 PHP 3.00 PHP 3.10 Jun. 30, 2011 PHP 3.26 PHP 2.80 PHP 3.00 Sep. 30, 2011 PHP 3.26 PHP 1.91 PHP 2.25 Dec. 31, 2011 PHP 2.50 PHP 2.00 PHP 2.45 Mar. 31, 2012 PHP 2.89 PHP 2.00 PHP 2.60 Jun. 30, 2012 PHP 2.79 PHP 2.16 PHP 2.77 Sep. 30, 2012 PHP 3.25 PHP 2.04 PHP 2.92 Dec. 31, 2012 PHP 3.07 PHP 2.60 PHP 2.79 Mar. 31, 2013 PHP 3.00 PHP 2.68 PHP 2.90

The stock prices of the Company’s common shares as of the latest practicable trading date,

i.e., May 15, 2013, were: PHP 2.97 (High); PHP 2.95 (Low); PHP 2.97 (Close).

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(2) Holders There were nineteen (19) common shareholders of record as of December 31, 2012.

Common shares amounted to 617,725,800* as of December 31, 2012. * Inclusive of 20,587,000 common shares purchased by the Company under its stock buy-back

program.

The top twenty (20) common shareholders as of December 31, 2012, the number of shares held and the percentage of total shares held by each are as follows:

Name Citizenship Total Shares Percentage

(%) 1 PCD Nominee Corporation - Filipino Filipino * 241,054,768 39.0229 2 Star Equities Inc. Filipino 174,260,047 28.2099 3 Surewell Equities, Inc. Filipino 134,248,290 21.7327 4 JTKC Equities, Inc. Filipino 47,771,295 7.7334 5 JPSA Global Services Co. Filipino 18,700,000 3.0272 6 PCD Nominee Corporation – Non-Filipino Foreign 1,505,790 0.2438 7 Alba, Willy S. Filipino 88,000 0.0142 8 Lim, Ernesto B. Filipino 70,900 0.0115 9 Lim, Nieves Q. &/or Charis Honeylet Q. Lim Filipino 10,000 0.0016 10 GTS Insurance Brokers Inc. Filipino 5,000 0.0008 11 Cruz, Napoleon D. Sr. and/or Luisa I. Cruz Filipino 3,000 0.0005 12 Ona, Edgardo V. Filipino 2,200 0.0004 13 Soriano, Victor Martin J. Filipino 2,000 0.0003 14 Olayres, Norberto F. and/or Olayres, Felisa J. Filipino 1,000 0.0002 15 Hapi Iloilo Corporation Filipino 1,000 0.0002 16 M. J. Soriano Trading, Inc. Filipino 1,000 0.0002 17 Dela Cruz, Yolanda M. or Dela Cruz, Emilio M. Filipino 1,000 0.0002 18 Au, Owen Nathaniel S. ITF: Li Marcus Au Filipino 400 0.0001 19 Gaw, Gilbert C. Filipino 110 0.0000 Total ** 617,725,800 100.0000 * Inclusive of 79,381,952 lodged common shares held by JTKC Equities, Inc., thus, its total

shareholdings is 127,153,247 representing 20.5841% ownership, and 5,202,000 lodged common shares held by Surewell Equities, Inc., thus, its total shareholdings is 139,450,290 representing 22.5748% ownership. ** Inclusive of 20,587,000 common shares purchased by the Company under its stock buy-back program.

As required by the Amended Rule on Minimum Public Ownership of The Philippine Stock Exchange, Inc., Article XVIII, Section 3. (e), the level of the Company’s public float is 22.9034% as of December 31, 2012.

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There were nineteen (19) common shareholders of record as of March 31, 2013. Common

shares amounted to 617,725,800* as of March 31, 2013. * Inclusive of 23,675,000 common shares purchased by the Company under its stock buy-back

program.

The top twenty (20) common shareholders as of March 31, 2013, the number of shares held and the percentage of total shares held by each are as follows:

Name Citizenship Total Shares Percentage

(%) 1 PCD Nominee Corporation - Filipino Filipino * 240,801,268 38.9819 2 Star Equities Inc. Filipino 174,260,047 28.2099 3 Surewell Equities, Inc. Filipino 134,248,290 21.7327 4 JTKC Equities, Inc. Filipino 47,771,295 7.7334 5 JPSA Global Services Co. Filipino 18,700,000 3.0272 6 PCD Nominee Corporation – Non-Filipino Foreign 1,759,290 0.2848 7 Alba, Willy S. Filipino 88,000 0.0142 8 Lim, Ernesto B. Filipino 70,900 0.0115 9 Lim, Nieves Q. &/or Charis Honeylet Q. Lim Filipino 10,000 0.0016 10 GTS Insurance Brokers Inc. Filipino 5,000 0.0008 11 Cruz, Napoleon D. Sr. and/or Luisa I. Cruz Filipino 3,000 0.0005 12 Ona, Edgardo V. Filipino 2,200 0.0004 13 Soriano, Victor Martin J. Filipino 2,000 0.0003 14 Hapi Iloilo Corporation Filipino 1,000 0.0002 15 M. J. Soriano Trading, Inc. Filipino 1,000 0.0002 16 Dela Cruz, Yolanda M. or Dela Cruz, Emilio M. Filipino 1,000 0.0002 17 Navarro, Rodel Sy Filipino 1,000 0.0002 18 Au, Owen Nathaniel S. ITF: Li Marcus Au Filipino 400 0.0001 19 Gaw, Gilbert C. Filipino 110 0.0000 Total ** 617,725,800 100.0000 * Inclusive of 79,381,952 lodged common shares held by JTKC Equities, Inc., thus, its total

shareholdings is 127,153,247 representing 20.5841% ownership, and 5,202,000 lodged common shares held by Surewell Equities, Inc., thus, its total shareholdings is 139,450,290 representing 22.5748% ownership. ** Inclusive of 23,675,000 common shares purchased by the Company under its stock buy-back program.

As required by the Amended Rule on Minimum Public Ownership of The Philippine Stock Exchange, Inc., Article XVIII, Section 3. (e), the level of the Company’s public float is 22.5026% as of March 31, 2013.

(3) Dividends The Company’s Board of Directors is authorized to declare dividends. Pursuant to Sections 43

and 143 of the Corporation Code of the Philippines, Section 5 of the Securities Regulation Code, and SEC Memorandum Circular No. 11, Series of 2008 (Guidelines on the Determination of Retained Earnings Available for Dividend Declaration), dividends may be declared and paid out of the unrestricted retained earnings which shall be payable in cash, property, or stock to all stockholders on the basis of outstanding stock held by them, as often and at such time as the Board of Directors may determine and in accordance with law and applicable rules and regulations. Cash and property dividend declarations do not require any further approval from the Company’s shareholders. Any stock dividend declaration requires the approval of shareholders holding at least two-thirds of the Company’s total outstanding capital stock.

Pursuant to existing Philippine regulations, cash dividends declared by the Company must

have a record date of not less than ten (10) days or more than thirty (30) days from the date the cash dividends are declared.

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With respect to stock dividends, the record date is to be not less than ten (10) days or more

than thirty (30) days from the shareholders’ approval, provided however, that the set record date is not to be less than ten (10) training days from receipt of the Philippine Stock Exchange of the notice of declaration of stock dividend. If no record date is set, under the Securities and Exchange Commission rules, the record date will be deemed fixed at fifteen (15) days from the date of stock dividend declaration. In the event that a stock dividend is declared in connection with an increase in authorized capital stock, the corresponding record date is to be fixed by the Securities and Exchange Commission.

The Board of Directors of the Company declared stock dividends worth PHP 43,000,000.00 to

its shareholders on July 20, 2007, which declaration was subsequently ratified and confirmed by the Company’s shareholders during their annual meeting held on the same day, immediately after the Board meeting. The Record Date was set on August 19, 2007, thirty (30) days from the date of approval of the Company’s shareholders.

With the listing of the Company’s shares in the Philippine Stock Exchange, the Company

intends to maintain an annual dividend payment ratio for its shares of up to 20 percent of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations and the absence of circumstances which may restrict the payment of dividends. Circumstances which may restrict the payment of dividends include, but are not limited to, situations when the Company undertakes major projects and developments requiring substantial cash expenditures or when it is restricted from paying dividends by its loan covenants. The Company’s Board, may, at any time, modify such dividend payout ratio depending upon the results of operations and future projects and plans of the Company.

On April 25, 2008, the Board of Directors of the Parent Company declared cash dividend

amounting to PHP 21,990,504 or PHP 0.0391 per share, payable to shareholders-of-record as of May 15, 2008, which declaration was subsequently ratified and confirmed by the Parent Company’ shareholders during their annual meeting held on July 31, 2008. It was paid and distributed to the shareholders on June 10, 2008.

On March 23, 2009, the Board of Directors of the Parent Company declared cash dividend

amounting to PHP 26,012,383, representing 20 percent of the Company’s consolidated net income for the period ended December 31, 2008 or PHP 0.0471 per share, payable to shareholders-of-record as of April 7, 2009. It was paid and distributed to the shareholders on May 6, 2009.

On March 19, 2010, the Board of Directors of the Parent Company declared cash dividend

amounting to PHP 26,603,533, representing 20 percent of the Company’s consolidated net income for the period ended December 31, 2009 or PHP 0.0481 per share, payable to shareholders-of-record as of April 8, 2010. It was paid and distributed to the shareholders on May 5, 2010. On June 17, 2011, the Company’s Board of Directors authorized the declaration of Fifty-Five Million, Three Hundred Eight Thousand, Eight Hundred (55,308,800) common shares stock dividend, with a par value of one peso (PHP 1.00) per share, out of the unrestricted retained earnings of the Company as of December 31, 2010. The stock dividend, which is equivalent to 10% of the issued and outstanding shares of the Company, was taken from its unissued capital stock. Pursuant to the provisions of the Corporation Code, the aforementioned stock dividend declaration was submitted for stockholders’ approval during their annual meeting on July 29, 2011. On September 6, 2011, the PSE approved the listing of additional 55,308,800 common shares to cover said stock dividend declaration. On September 08, 2011, the stock dividend was paid to all of the Company’s stockholders of record as of August 15, 2011. On June 22, 2012, the Board of Directors of the Parent Company authorized the declaration of cash dividend of PHP0.1995 per share or PHP 119,980,856, payable to all of the Parent Company’s shareholders-of-record as of 12 July 2012. It was paid and distributed to the shareholders on 07 August 2012.

Other than statutory limitations, there are no restrictions that prevent the Parent Company from

paying dividends on common equity.

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(4) Recent Sales of Unregistered or Exempt Securities, Including Recent Issuances of Securities

Constituting an Exempt Transaction On August 21, 2007, the Company distributed stock dividends worth PHP 43,000,000.00 to the

stockholders of record as of August 19, 2007. The stock dividend declaration was approved by the Company’s Board of Directors on July 20,

2007 and was subsequently approved and ratified by the stockholders owning at least two-thirds (2/3) of the total outstanding capital stock of the Company on the same date of July 20, 2007 during the annual stockholders’ meeting. The issuance of the shares as stock dividend was exempt from the Securities Regulation Code (SRC) registration requirements pursuant to Section 10.1 (d). The shares were issued at the original par value of one hundred pesos (PHP 100.00) per share.

Thereafter, with the approval of the Securities and Exchange Commission (“SEC”) on August

22, 2007 of the Company’s application to increase its authorized capital stock to one billion pesos (PHP 1,000,000,000.00) and to reduce its par value per share to one peso (P1.00), the Company, on August 23, 2007, issued a total of two hundred ninety seven million (297,000,000) common shares at the reduced par value of one peso (PHP 1.00) out of the increase in the Company’s authorized capital stock to the following: (1) JPSA Global Services Company; (2) JTKC Equities, Inc.; (3) Star Equities Inc.; (4) Surewell Equities, Inc.

Since no expense was incurred, or no commission, compensation or remuneration was paid or

given in connection with the issuance of the shares, the same was exempt from the SRC registration requirements pursuant to Section 10.1 (i).

Subsequent to the increase in authorized capital stock, the Company issued a total of

15,000,000 shares out of its unissued and authorized capital stock on September 20, 2007 to its Directors, key Officers, Employees, Consultants and Resource Persons under the Special Stock Purchase Plan (“SSPP”).

The foregoing issuance of the 15,000,000 new shares under the SSPP was the subject of an

application for exemption from registration of the shares under Section 10.2 of the SRC, which application was granted by the SEC on September 13, 2007. Notwithstanding the aforesaid confirmation by the Commission of the exempt status of the SSPP shares, the Commission nonetheless required the Corporation to include the SSPP shares among the shares of I-Remit which were registered with the Commission prior to the conduct of its Initial Public Offering in October 2007. The registration of the I-Remit shares, together with the SSPP shares, was rendered effective on 5 October 2007. All 15,000,000 shares were subscribed and purchased. The shares subject of the SSPP were sold at par value or PHP1.00 per share. Total share purchases amounting to PHP11.74 million were paid in full, while the difference totaling PHP3.26 million were paid by way of salary loan. Shares acquired through the SSPP are subject to a lock-up period of two (2) years from the date of issue which ended on September 19, 2009. No underwriter was engaged in connection with the foregoing share issuance.

The sale is further subject to the condition that should the officer or employee resign from the

Parent Company prior to the expiration of the lock-up period, the share purchased by such resigning employee or officer shall be purchased at cost by the Parent Company’s Retirement Fund for the benefit of the Parent Company’s retiring employees or officers. As of December 31, 2009, twenty-two (22) employees had resigned (seven in 2009, thirteen in 2008 and two in 2007) and their shares totaling to 808,100 (130,900 in 2009; 548,500 in 2008; and, 128,700 in 2007) were bought back by the Parent Company on behalf of the Retirement Fund. The total cost of the shares acquired amounting to PHP808,100 was recognized as treasury stock.

With the establishment of the I-Remit, Inc. Retirement Fund and after the expiration of the lock

up period on September 19, 2009, the Company transferred to the Retirement Fund on September 24, 2009 the 808,100 shares it has bought back from its resigned employees and officers upon reimbursement of the advances made by the Company in acquiring such shares on behalf of the Retirement Fund. With this transfer, the Company’s outstanding capital stock stood at 553,088,000 shares from 552,279,900 shares.

Except for the above issuances, the Company has not issued or sold new shares within the

past three (3) years which were not registered pursuant to the requirements of the Securities Regulation Code (“SRC”).

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Item 6. Management’s Discussion and Analysis or Plan of Operation (A) Management’s Discussion and Analysis (MD&A) or Plan of Operation (1) Plan of Operation The Company’s strategy is focused on making I-Remit a global brand and the preferred

provider of remittance or money transfer services. The key elements of the Company’s strategy are as follows: Utilizing technological advances in creating value for money for its customers;

Aggressive marketing of products and services to overseas Filipinos and other nationalities;

Implementing strategic alliances with financial institutions and money transfer operators in the Philippines and around the world;

Implementing technology solutions to streamline its business processes and minimize its operating costs.

The use of technology is interwoven in the company’s business strategy and operations. It

was the first remittance company to be registered with the Board of Investments as an information technology service firm in the field of IT services. I-Remit was also named as the Business Mirror Most Innovative Company in the Asia CEO Awards – Philippines 2011. At the heart of its operation is a robust Web-enabled proprietary front-office system known as the I-Remit Foreign Remittance System (IFS) which enables its offices, partners, tie-ups, and agents to conduct business with the Philippine office 24x7. The system was designed to handle various remittance choices: credit to bank account; door-to-door delivery; cash-pick up; or debit card reloading. The system also allows I-Remit to accept contributions and payments to SSS, Pag-IBIG, PhilHealth, real estate developers, insurance companies, etc. The IFS is also enabled to accept host-to-host transactions for virtually instantaneous crediting of beneficiary bank accounts maintained in selected banks in the Philippines. I-Remit’s IFS is linked with another proprietary system, the iRemit Local Remittance System (ILS) that allows transaction data to flow seamlessly from outlets abroad until final fulfillment of services. It allows transaction tracking for customers and immediate settlement reporting with the company’s counter-parties. I-Remit uses an aggregating engine that stores information in a data warehouse ready for data mining and analysis to allow it to serve its customers better. The emerging new players in the industry are composed mostly of technology-based companies that utilize the Internet in offering remittance services. Their services may be availed of through traditional browers or via Web-enabled mobile phones. To strengthen its online presence, I-Remit launched iDOL (I-Remit Direct Online) that targets the more computer-savvy netizen market who are more comfortable transacting through the web. I-Remit’s customers may access the facility through any Internet-enabled device providing them with the capability to remit money from anywhere, anytime. iDOL is currently available to I-Remit’s customers in Canada, the United Kingdom, and Japan. The Company intends to make iDOL available in other countries such as Australia, Hong Kong, Italy, New Zealand, and Taiwan. Supporting I-Remit’s highly-interconnected and seamless business solution is a dynamically-scaled network of virtualized servers and storage farms. The network is secured from malicious attacks, virus intrusions, and security threats internally and externally through the use of a multi-layered network set-up consisting of VLANs, virtual private networks, security appliances, firewalls, anti-spam software, WAN router, Internet link load balancer, and anti-virus systems. The company has a state-of-the-art backup and replication protocol that runs every night while a more concentrated database replication process transpires between the company’s headquarters and the disaster recovery site in real time. A part of the Company’s strategy is to continuously upgrade its technology infrastructure to ensure that it is able to manage the risks associated with technology or any unforeseen natural or man-made risks that may hamper the continuity of its operations.

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I-Remit implements aggressive marketing strategies in the countries it operates in. The Company is being positioned as having the widest range of remittance or money transfer services that fulfill the specific money transmission needs of its customers. I-Remit is also being positioned as the only Filipino service provider that can address the need of Filipino overseas workers for continuity of access to Philippine social service programs such as those of the SSS, Pag-IBIG, and PhilHealth. I-Remit’s pricing of its remittance services are always at par or even better than competition but with better levels of service and performance. I-Remit’s advantages over the competition are its superior service delivery systems and post-sale service capabilities. I-Remit’s products and services are promoted through several methods including participation in special events involving Filipino communities and sponsorship activities, print and broadcast advertisements, direct mail campaigns, and e-mail and social network promotional campaigns. I-Remit also continuously implements global and local marketing campaigns that are intended to promote customer loyalty. In pursuit of its vision, I-Remit is positioning itself to be a global player in the money transfer business by opening new remittance corridors and establishing partnerships with financial institutions all over the world. I-Remit has established partnerships with the Industrial and Commercial Bank of China for remittances bound to mainland China and with Bank Internasional Indonesia for remittances to Indonesia. The Company intends to expand its target market and offer its remittance services to other foreign workers in all the countries that it operates in. Recent official government estimates place the number of OFWs at around 12 million in 232 countries, territories, and jurisdictions around the world including those that are undocumented and the direct hires. I-Remit strives to establish partnerships or tie-ups in countries that have considerable number of Filipino workers particularly in countries where the market size does not economically justify establishing its own subsidiary or branch. The Company establishes partnerships with local money transfer firms that are authorized by regulatory bodies to conduct the remittance business in various countries. I-Remit’s subsidiary in London, IRemit Global Remittance Ltd. has acquired the status of an “authorized payment institution” from the Financial Conduct Authority of the United Kingdom under the European Payment Services Directive (PSD, 2007/64/EC) that provides the legal foundation for the creation of a Europe-wide single market for payment services, including money remittance. I-Remit’s subsidiary company has acquired the right to establish its presence and offer its services in any of the European Union and European Economic Area member states after proper notification of the regulatory authorities. In obtaining its authorization, I-Remit had passed a stringent examination process to ensure that it has sufficient capital resources, robust liquidity, sound governance practices, and adequate organizational, control, and IT security mechanisms. I-Remit has invoked its rights as a payment institution in the European Economic Area and established its presence in Vienna, Austria; Rome and Milan; and Frankfurt, Germany. Soon to follow are the countries of Ireland and The Netherlands. In addition, I-Remit also continuously engages the services of agents to augment the presence of its offices particularly in countries with large Filipino populations. I-Remit also continuously seeks to expand the breadth and depth of its fulfillment capabilities in the Philippines through its ever-growing network of partners consisting of universal banks, commercial banks, thrift banks, rural banks, pawnshops, remittance agents, and other BSP-supervised and regulated institutions. For many OFW households, remittances provide a considerable increase in income which in turn drives consumption and investment. The increase in disposable income of these households translates into improved standards of living as remittances find their way into investments in real estate and education, and in higher levels of consumption for food, clothing, and even luxury items. The spending patterns of OFWs and their families give rise to more opportunities for other remittance transactions. I-Remit has partnered with other companies such as Jollibee Foods Corporation, real estate developers, insurance companies, pre-need companies, and appliance distributors to expand the range of services it offers to OFWs. I-Remit’s plans include the expansion of its partnership portfolio to include schools and utility companies. I-Remit’s strategy includes the use of technology to streamline its business processes, improve its delivery capabilities, and minimize its operating costs. The Company’s continuously reviews its processes and identifies activities that may be automated. These include high-volume and highly-repetitive tasks that present opportunities for the Company to leverage on its technology capabilities and reduce costs. The Company is also in the process of identifying non-core business activities that may be outsourced.

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In conducting its business, I-Remit is fully aware that it must also contribute to the betterment of Filipino society. Its corporate social responsibility program is focused primarily on youth education. It is a constant contributor in sponsoring scholars of the Tuloy Aral project of the Overseas Workers’ Welfare Administration. It has also partnered with non-governmental organizations such as Synergeia and CBN Asia’s Operation Blessing. In cooperation with Synergeia, I-Remit provided assistance to grade one pupils of the P. Guevarra Elementary School in Tondo, Manila. The company’s employees also participated actively in tutoring sessions and other educational activities in the school. Likewise, in cooperation with CBN Asia and the 700 Club, I-Remit has provided assistance to the children of the Dumagat tribe in Rodriguez, Rizal by way of food, clothing, and school materials. The Company works closely with the Kabalikat ng Migranteng Pilipino, Inc. or KAMPI, and Kabalikat ng OFW, Inc., two non-governmental organization that extend financial, livelihood, and education assistance to families of OFWs. I-Remit also supports the Philippine embassies and consulates, the Philippine overseas labor offices, and Filipino communities and associations in its host countries to promote the welfare of overseas Filipinos, and if needed, to provide assistance to distressed OFWs.

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(2) Management’s Discussion and Analysis

2012 compared to 2011 I-Remit realized a consolidated net income of PHP 30.5 million in 2012, a decrease of PHP 105.5 million or -77.6% over the consolidated net income of PHP 136.1 million in 2011. The consolidated net income in 2012 and 2011 were 4.0% and 17.3% of the 2012 and 2011 revenue, respectively. Revenues decreased by PHP 16.2 million or -2.1% from PHP 787.9 million in 2011 to PHP 771.6 million in 2012 mainly due to the decrease in realized foreign exchange gains. The value of transactions grew by USD 300.1 million or 23.0% from USD 1.342 billion in 2011 to USD 1.642 billion in 2012. Adversely, however, generated income from the trading of foreign currencies went down by PHP 58.0 million or -21.1% from PHP 274.2 million in 2011 to PHP 216.2 million in 2012 as the Philippine peso continued to appreciate against the U.S. dollar. The average peso-dollar exchange rate was PHP 43.31 in 2011 against PHP 42.23 in 2012, a gain of 2.5% or PHP 1.08 per dollar. In December 2012, the average peso-dollar exchange rate was PHP 41.01 per dollar. The Company’s revenue from delivery fees increased by PHP 41.3 million or 8.0% from PHP 513.3 million in 2011 to PHP 554.6 million in 2012 mainly due to the increase in the number of transactions processed by the Company which grew by 10.4% from 2.795 million in 2011 to 3.085 million in 2012. Other fees increased by PHP 0.43 million or 123.6% from PHP 0.35 million in 2011 to PHP 0.78 million in 2012 due to increased number of amendments and retrievals recorded in 2012. Costs of services increased by PHP 10.5 million or 5.3% from PHP 199.4 million in 2011 to PHP 209.9 million in 2012. Total costs of services in 2012 and 2011 were 27.2% and 25.3% of the 2012 and 2011 revenue, respectively. These were mainly due to the increase in bank charges by PHP 12.4 million or 6.7% from PHP 184.4 million in 2011 to PHP 196.7 million in 2012 brought about by the huge increase in Notify-to-pay transactions in 2012. These were partly offset by the decrease in delivery charges by PHP 1.9 million or -12.5% from PHP 15.0 million in 2011 to PHP 13.1 million in 2012 brought about by the reduction in the volume of door-to-door delivery transactions. Net trading gains (losses) increased by PHP 20.6 million or 673.9% from –PHP 3.1 million in 2011 to PHP 17.6 million in 2012 due to the significant increase in the market value of debts and stock securities by Power Star Asia Group Limited (PSAGL) in 2012. PSAGL concluded the year with a realized gain of PHP 7.07 million from PHP 2.41 million in 2011 on the sale of its debts and stock securities and unrealized capital gains of PHP 10.52 million from an unrealized loss of PHP 5.47 million in 2011. Net trading gains (losses) in 2012 and 2011 were 2.3% and -0.4% of the 2012 and 2011 revenue, respectively. Other Income decreased by PHP 27.7 million or -63.5% from PHP 43.7 million in 2011 to PHP15.9 million in 2012. Other income in 2012 and 2011 was 2.1% and 5.5% of the 2012 and 2011 revenue, respectively. No GST refund was recorded in 2012 as compared with 2011 wherein International Remittance (Canada) Limited (IRCL) and Worldwide Exchange Pty Ltd (WEPL) recognized a total of PHP 21.7 million refund of GST previously paid to the government of Canada and Australia, respectively; both entities are exempt from paying GST. Unrealized foreign exchange gain (loss)-net was a net loss in 2012 because of the appreciation of the Philippine peso against the U.S. dollar. Additionally, towards the last quarter of 2012, the Parent Company outsourced the maintenance of call center agents servicing the requirements of its foreign subsidiary offices in Canada, the United Kingdom, Australia and New Zealand to Pacific Hub, Inc. Total operating expenses was higher by PHP 49.5 or 11.1% million from PHP 447.3 million in 2011 to PHP 496.8 million in 2012. Total other operating expenses in 2012 and 2011 were 64.4% and 56.8% of the 2012 and 2011 revenue, respectively. These were mainly on account of higher employee benefits, loss on write-off of assets, rental, communication, light and water, donations and contributions, business development, marketing, depreciation and amortization, insurance, and taxes and licenses. The increase in these expense items were related mainly to the Company’s expansion as it opened new offices in Japan, Canada and Italy. Employee benefits expenses increased by 20.6% from PHP 213.5 million in 2011 to PHP 257.6 million in 2012. Loss on write-off of assets increased by 378.7% from PHP 2.1 million in 2011 to PHP 10.0 million in 2012 mainly due to the write off of disallowed Input VAT claim at PHP 6.7 million, CASA account with Banco Filipino for bank deposits held after its closure on March 15, 2011, and discontinued investments at P1.8 million. Rental expenses increased by 10.8% from PHP 53.5 million in 2011 to PHP 59.3 million in 2012 due to the yearly escalation applied by lessors on rented office premises and additional three (3) branch offices opened by

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International Remittance (Canada) Ltd. and one (1) branch office by K.K. I-Remit Japan. Communication, light and water increased by PHP 4.5 million or 19.2% from PHP 23.5 million in 2011 to PHP 28.1 million in 2012 due to increase in number of remittance transactions in 2012 which required more communication between the company and its customers; along with this, electricity bills also increased as more transactions required extended processing time. Donations and contributions stood at PHP 2.6 million in 2012 as against none in 2011. Business development expenses increased by 71.5% from PHP 3.0 million in 2011 to PHP 5.1 million in 2012. Marketing expenses increased by PHP 1.6 million or 4.3% from PHP 36.3 million in 2011 to PHP 37.9 million in 2012 due to the various marketing promotions done during the year and payments for various marketing collaterals, sponsorships and advertisements. Depreciation and amortization increased by PHP 1.2 million or 10.0% from PHP 11.5 million in 2011 to PHP 12.7 million in 2012 due to the purchases of additional office and communication equipment, transportation equipment, furniture and fixtures, and additional leasehold improvements for the renovation of a new office space at Discovery Centre building in 2012. Insurance expense increased by 54.7% from PHP 2.0 million in 2011 to PHP 3.1 million in 2012. Taxes and licenses increased by 11.4% from PHP 9.0 million in 2011 to PHP 10.0 million in 2012. These increases were offset by the decrease in transportation and travel, photocopying and supplies, penalties and surcharges, entertainment, amusement and recreation, and professional fees. Transportation and travel decreased by PHP 12.9 million or -54.3% from PHP 23.8 million in 2011 to PHP 10.9 million in 2012, photocopying and supplies decreased by PHP 4.3 million or -29.5% from PHP 14.6 million in 2011 to PHP 10.3 million in 2012 while entertainment, amusement and recreation decreased by PHP 2.8 million or -47.0% from PHP 6.0 million in 2011 to PHP 3.2 million in 2012 due to continuous cost cutting measures implemented by the Parent Company in all its foreign subsidiaries. Professional fees decreased by PHP 1.8 million or -5.0% from PHP 36.2 million in 2011 to PHP 34.4 million in 2012. Interest income decreased by PHP 0.91 million or -6.6% from PHP 13.86 million in 2011 to PHP 12.95 million in 2012. Interest income in 2012 and 2011 are 1.7% and 1.8% of the 2012 and 2011 revenue, respectively. Interest expense increased by PHP 7.7 million or 20.2% from PHP 38.3 million in 2011 to PHP 46.1 million 2012. Interest expense in 2012 and 2011 are -5.97% and -4.86% of the 2012 and 2011 revenue, respectively. These are mainly due to higher amount of loans availed from bank partners during 2012 and higher annual interest rates on the Parent Company’s unsecured, short-term interest-bearing peso-denominated bank loans ranging from 5.00% to 7.125% in 2012 and 5.00% to 7.00% in 2011.

In February 2010, IREMIT Remittance Consulting GmbH (formerly IREMIT EUROPE Remittance Consulting AG) started its remittance business in Italy. On April 28, 2011, IREMIT Remittance Consulting GmbH (IRCGmbH) stopped its money remittance operations in Rome and Milan in Italy in accordance with Article 75 of the Transitional and Final Provisions of Austrian Payment Services Act, which stipulated that credit institutions that have held authorizations pursuant to Article 1 paragraph 1 no 23 BWG, as amended by the Federal Act Federal Law Gazette No. 35/2003, prior to December 25, 2009, have only until April 30, 2011 to carry out their money remittance operations. In December 2011, IRCGmbH sold assets relating to its operations in Italy to a third party. These assets, with an aggregate carrying amount of PHP 7.29 million, were sold for a consideration of PHP 72.43 million thereby resulting to a gain on sale of PHP 65.14 million. The results of IRCGmbH’s operation in Italy follow:

2011 2010 Delivery fees PHP5,289,202 PHP7,486,658 Realized foreign exchange gains - net 1,006,867 673,204 6,296,069 8,159,862 Cost of services 596,703 3,749,195 Gross income 5,699,366 4,410,667 Other income - net 615,909 38,935 Operating expenses (45,024,921) (34,754,501) Loss from operations (PHP38,709,646) (PHP30,304,899) Gain on sale of assets 65,139,395 − Income (Loss) from discontinued operations PHP26,429,749 (PHP30,304,899)

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The total assets of the Company increased by PHP 408.9 million or 18.0% to PHP 2.685 billion as of December 31, 2012 against PHP 2.276 billion as of December 31, 2011. Cash and cash equivalents increased by PHP 170.9 million or 19.2% from PHP 891.2 million in 2011 to PHP 1.062 billion in 2012. Financial assets at fair value through profit or loss amounted to PHP 210.2 million at end-2012 against PHP 125.2 million at end-2011, increasing by PHP 85.0 million or 67.8%. Financial assets at fair value through profit or loss in 2012 and 2011 are 7.8% and 5.5% of the total assets in 2012 and 2011, respectively. These assets consist mainly of investments in debt securities (listed overseas) held for trading. Power Star Asia Group Limited started investing on stocks in 2011. Increase in debt securities from PHP112.6 million in 2011 to PHP 189.9 million in 2012 was due to marked to market closing as of December 31, 2012 for the securities being held by Power Star Asia Group Limited. As of December 31, 2012 and 2011, the carrying amount includes net unrealized gain of PHP 8.4 million and loss of PHP 2.1 million, respectively. Increase in equity securities from PHP 12.6 million in 2011 to PHP 20.3 million in 2012 was due to the purchase of securities as a result of improving market. As of December 31, 2012 and 2011, the carrying amount includes net unrealized loss of PHP 2.1 million and gain of PHP 3.4 million, respectively. Trade and other receivables increased by PHP 161.1 million or 15.6% from PHP 1.031 billion in 2011 to PHP 1.192 billion in 2012 as remittance volume grew by 6% from PHP 142.93 million in December 2011 to PHP 148.06 million in December 2012 and receivables from IREMIT Remittance Consulting GmbH and Worldwide Exchange Pty Ltd were collected in 2012. Trade and other receivables in 2012 and 2011 are 44.4% and 45.3% of the total assets in 2012 and 2011, respectively. Prepayments and other current assets declined by PHP 5.0 million or -17.4% from PHP 28.9 million in 2011 to PHP 23.9 million in 2012 mainly due to prepaid capital expense from the licensing requirement of K.K. I-Remit Japan which was fully amortized in 2012. Prepayments and other current assets in 2012 and 2011 are 0.9% and 1.3% of the total assets in 2012 and 2011, respectively, The Company’s non-current assets declined by PHP 3.0 million or -1.5% from PHP 199.4 million at end-2011 to PHP 196.4 million at end-2012. Total non-current assets in 2012 and 2011 are 7.3% and 8.8% of the total assets in 2012 and 2011, respectively. The decrease in non-current assets is mainly due to Input VAT credits paid in 2008 which were collected in 2012 in the form of tax credit certificates amounting to PHP 2.97 million while disallowed claims amounting to PHP 4.49 million were written off in 2012. Also, investments in associates decreased by PHP 3.6 million of -15.5% from PHP 23.1 million in 2011 to PHP 19.5 million in 2012 which include equity income on IRemit Singapore Pte Ltd at PHP 0.5 million and Hwa Kung Hong & Co., Ltd. at PHP 0.8 million reduced by share on dividends declared by IRemit Singapore Pte Ltd in 2012 at PHP 4.9 million. These decreases were partly offset by the increases in property and equipment - net, deferred tax asset, and retirement asset. Property and equipment – net increased by PHP 4.3 million or 22.3% from PHP 19.2 million in end-2011 to PHP 23.5 million in end-2012 mainly due to renovation cost capitalized to leasehold improvements in 2012 when the Parent Company transferred its occupied office from the 25th to the 27th floor in Discovery Centre building in October 2012. Deferred tax asset increased to PHP 1.9 million of 38.4% from PHP 5.0 million in end-2011 to PHP 6.9 million in end-2012 on account of deferred tax assets on temporary differences recognized by the Parent Company and losses sustained by I-Remit New Zealand Limited in 2012. Retirement assets increased by PHP 1.9 million or 505.9% from PHP 0.4 million in end-2011 to PHP 2.2 million in end-2012 on account of excess contribution paid to the Retirement Fund of the Parent Company based on actuarial valuation conducted by E.M. Zalamea Actuarial Services, Inc. on January 28, 2013. Total liabilities increased by PHP 535.2 million or 58.6% from PHP 912.7 million at end-2011 to PHP 1.45 billion at end-2012. Total liabilities in 2012 and 2011 are 53.9% and 40.1% of the total liabilities and equity in 2012 and 2011, respectively. Current liabilities increased by PHP 534.0 million or 58.5% from PHP 912.6 million in 2011 to PHP 1.45 billion in 2012. Total current liabilities in 2012 and 2011 are 53.9% and 40.1% of the total liabilities and equity in 2012 and 2011, respectively. Beneficiaries and other payables increased by PHP 279.8 million or 116.5% from PHP 240.1 million in 2011 to PHP 519.8 million in 2012. Beneficiaries and other payables in 2012 and 2011 are 19.4% and 10.5% of the total liabilities and equity in 2012 and 2011, respectively. These are mainly due to additional channels opened in 2012 for the delivery of remittances to beneficiaries. Interest-bearing loans increased by PHP 259.0 million or 38.9% from PHP 666.0 million in end-2011 to PHP 925.0 million in end-2012. Interest-bearing loans in end-2012 and end-2011 are 34.5% and 29.3% of the total liabilities and equity in end-2012 and end-2011, respectively. These are mainly due to additional bank loans towards end-2012 secured by the Parent Company to facilitate the fulfillment of remittances on holidays in December 2012. Income tax payable decreased by PHP 4.8 million or -72.6% from PHP 6.6 million in end-2011 to PHP 1.8 million in end-2012. Income tax payable in end-2012 and end-2011 are 0.1% and 0.3% of the total liabilities and equity in end-2012 and end-2011, respectively. The decrease in income tax payable was significantly

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influenced by the huge decrease on income sourced from the trading of foreign currencies. The Company’s stockholders’ equity as of December 31, 2012 stood at PHP 1.237 billion, lower by PHP 126.3 million or -9.3% against the end-2011 level of PHP 1.363 billion. Total equity in 2012 and 2011 are 46.1% and 59.9% of the total liabilities and equity in 2012 and 2011, respectively. Retained Earnings decreased by PHP 89.5 million or -21.1%, from PHP 424.0 million in end-2011 to PHP 334.5 million in end-2012. Cumulative translation adjustment decreased by PHP20.6 million or 124.8% from -PHP 16.5 million in 2011 to -PHP 37.1 million in 2012. Treasury stock increased by PHP 16.2 million or 30.6% from -PHP 53.0 million in 2011 to -PHP 69.2 million in 2012. Treasury stock in 2012 and 2011 are -2.6% and -2.3% of the total liabilities and equity in 2012 and 2011, respectively. The increase in Treasury stock in 2012 represents buy-back of 5,714,000 shares. Below are the comparative key performance indicators of the Company (Parent Company and subsidiaries):

Performance Indicator Definition Dec. 31, 2012 Dec. 31, 2011

Return on Equity (ROE)

Net income* over average stockholders’ equity during the period

2% 10%

Return on Assets (ROA)

Net income* over average total assets during the period 1% 5%

Earnings per Share (EPS)

Net income* over average number of outstanding shares PHP 0.05 PHP 0.22

Sales Growth Total transaction value in USD in present year over previous year 22% 11%

Gross Income Revenue less total cost of services (PHP millions) 561.7 588.4

Current ratio Total current assets over total current liabilities 1.72 2.28

Solvency ratio Net income plus depreciation over total liabilities 0.03 0.16

Solvency ratio Total assets over total liabilities 1.85 2.49

Solvency ratio Total stockholders' equity over total liabilities 0.85 1.49

Debt-to equity ratio Total liabilities over total stockholders’ equity 1.17 0.67

Asset-to-equity ratio Total assets over total stockholders’ equity 2.17 1.67

Interest rate coverage ratio

Earnings before interest and taxes over interest expense 2.17 5.49

* Net Income attributable to equity holders of the Parent Company and Minority Interest. EPS computed using Net Income attributable to equity holders of the Parent Company for the year ended December 31, 2012 and for the year ended December 31, 2011 are P 0.05 and P 0.23, respectively.

48

Below are the comparative key performance indicators of the Company’s subsidiaries:

International Remittance (Canada) Ltd.



Net income over average stockholders’ equity during the period

-2% 56%


Net income over average total assets during the period -1% 22%


Net income over average number of outstanding shares -2.30 43.64



Lucky Star Management Limited




-103% -3%


Net income over average total assets during the period -27% -1%


Net income over average number of outstanding shares -31.22 -1.33

Sales Growth Total transaction value in USD in present year over previous year -5% -25%


IRemit Global Remittance Limited




968% -767%




Net income over average number of outstanding shares -50.71 -108,090.79



I-Remit Australia Pty Ltd




0.4% 0.4%


Net income over average total assets during the period 0.2% 0.2%


Net income over average number of outstanding shares 8,210.03 7,306.00

Sales Growth Total transaction value in USD in present year over previous year - -


49

Worldwide Exchange Pty Ltd




12% 6%


Net income over average total assets during the period 1% 1%


Net income over average number of outstanding shares 6.01 3.02



I-Remit New Zealand Limited




26% 40%




Net income over average number of outstanding shares -2,690.78 -3,046.62



IREMIT Remittance Consulting GmbH




-1,831% 194%





Sales Growth Total transaction value in USD in present year over previous year -78% -20%


Power Star Asia Group Limited




25% 30%







50

2011 compared to 2010 I-Remit realized a consolidated net income of PHP 136.1 million in 2011, an increase of PHP 70.1 million or 106.4% over the consolidated net income of PHP 65.9 million in 2010. The consolidated net income in 2011 and 2010 are 17.3% and 8.7% of the 2011 and 2010 revenue, respectively. Revenues increased by 3.4% or PHP 26.1 million from PHP 761.8 million in 2010 to PHP 787.9 million in 2011 mainly due to the increase in realized foreign exchange gains. Foreign exchange gains increased by 4.6% or PHP 12.1 million from PHP 262.1 million in 2010 to PHP 274.2 million in 2011. The Company’s revenue from delivery fees grew by 2.9% or PHP 14.5 million from PHP 498.7 million in 2010 to PHP 513.3 million in 2011 largely because of the appreciation of the Philippine peso against the U.S. dollar. The Company’s fees are largely settled in U.S. dollars. The average peso-dollar exchange rate was PHP 45.11 in 2010 against PHP 43.31 in 2011, a gain of 4.0% or PHP 1.80 per dollar. In December 2011, the average peso-dollar exchange rate was PHP 43.65 per dollar. The value of transactions grew by 16.7% or USD 202.3 million from USD 1.213 billion in 2010 to USD 1.415 billion in 2011. The number of transactions processed by the Company grew by only 2% from 2.737 million in 2010 to 2.794 million in 2011. Other fees decreased by 60.69% or PHP 0.5 million from PHP 0.9 million in 2010 to PHP 0.4 million in 2011 due to lesser number of amendments and retrievals recorded in 2011. Costs of services decreased by 2.3% or PHP 4.7 million from PHP 204.1 million in 2010 to PHP 199.4 million in 2011. Total costs of services in 2011 and 2010 are 25.3% and 26.8% of the 2011 and 2010 revenue, respectively. These are mainly due to the decrease in delivery charges by 49.8% or PHP 14.9 million from PHP 29.9 million in 2010 to PHP 15.0 million in 2011 brought about by the huge reduction in door-to-door transactions in 2011. These are partly offset by the increase in the cost of fulfilling delivery of remittances to beneficiaries mostly in the form of bank charges by 5.8% or PHP 10.2 million from PHP 174.2 million in 2010 to PHP 184.4 million in 2011. Other operating income (loss)-net increased by 56.9% or PHP 9.7 million from PHP 17.0 million in 2010 to PHP 26.8 million in 2011. Total other operating income (loss)-net in 2011 and 2010 are 3.40% and 2.24% of the 2011 and 2010 revenue, respectively. These are mainly due to the PHP 21.7 million refund of GST previously paid by International Remittance (Canada) Limited (IRCL) and Worldwide Exchange Pty Ltd (WEPL) to the government of Canada and Australia, respectively. Both entities are exempt from paying GST. These are partly offset by the decline in net trading gains by PHP 5.5 million or 223.8% from PHP 2.5 million in 2010 to –PHP 3.1 million in 2011 due to unrealized capital loss accrued from investment on stocks by Power Star Asia Group Limited (PSAGL). PSAGL invested on stocks at an average cost of 126.90 marked at 126.30 as of the close of December 31, 2011. Total operating expenses was higher by PHP 11.4 million (2.6%) from PHP 435.9 million in 2010 to PHP 447.3 million in 2011. Total other operating expenses in 2011 and 2010 are 56.8% and 57.2% of the 2011 and 2010 revenue, respectively. These are mainly on account of higher rental, salaries, wages and employee benefits, photocopying and supplies, entertainment, amusement and recreation, communication, light and water and other operating expenses. The increase in these expense items are related mainly to the Company’s expansion as it opened new offices in Canada, Italy and Japan. Rental expenses increased by 15.4% from PHP 46.4 million in 2010 to PHP 53.5 million in 2011 due to the yearly escalation applied by lessors on rented office premises. Salaries, wages and employee benefits expenses increased by 2.4% from PHP 208.5 million in 2010 to PHP 213.5 million in 2011. Photocopying and supplies expenses increased by 24.7% from PHP11.7 million in 2010 to PHP 14.6 in 2011 due to higher production of visa cards and kits in 2011. Entertainment, amusement and recreation expenses increased by 56.6% from PHP 3.8 million in 2010 to PHP 6.0 million in 2011 mainly due to the development of offices/tie-ups in Japan, Kuwait, Saudi Arabia and Oman. Communication, light and water increased by 6.4% from PHP 22.1 million in 2010 to PHP 23.5 million in 2011 due to increase in number of remittance transactions in 2011 which required more communication between the company and its customers. Along with this, electricity bills also increased as more transactions required extended processing time. Other operating expenses increased by 34.0% from PHP 21.0 million in 2010 to PHP 28.2 million in 2011 mainly due to disallowed Input VAT for years 2005 and 2006 (PHP 2.1 million), license fee paid for the start in operation of K.K. I-Remit Japan (PHP 3.9 million), cost of payroll outsourced to Prople BPO, Inc. and increase in association dues charges by lessors of the Parent Company (PHP 1.1 milllion). These are partly offset by lower marketing, professional fees, transportation and travel, depreciation and amortization expenses. Marketing expenses decreased by 14.7% from PHP 42.6 million in 2010 to PHP 36.3 million in 2011 while transportation and travel expenses decreased by 10.7% from PHP

51

26.7 million in 2010 to PHP 23.8 million in 2011 due to cost cutting measures implemented by the Parent Company in all its foreign subsidiaries. Professional fees decreased by 8.8% from PHP 39.7 million in 2010 to PHP 36.2 million in 2011 due to termination of three (3) retainer contracts of the Parent Company and cessation of operation in Austria. Depreciation and amortization decreased by 13.3% from PHP 13.3 million in 2010 to PHP 11.5 million in 2011 due to higher number of office equipment fully depreciated in 2011. Interest income increased by 10.8% or PHP 1.3 million from PHP 12.5 million in 2010 to PHP 13.9 million in 2011. Interest income in 2011 and 2010 are 1.8% and 1.6% of the 2011 and 2010 revenue, respectively. These are mainly due to higher deposits resulting from higher volume of transactions in 2011. Interest expense increased by 31.2% or PHP 9.1 million from PHP 29.2 million in 2010 to PHP 38.3 million 2011. Interest expense in 2011 and 2010 are -4.9% and -3.8% of the 2011 and 2010 revenue, respectively. These are mainly due to higher availment of loans from bank partners during 2011 and higher annual interest rates on the Parent Company’s unsecured, short-term interest-bearing peso-denominated bank loans ranging from 5.00% to 7.00% in 2011 and 5.50% to 6.00% in 2010. In February 2010, IREMIT Remittance Consulting GmbH (formerly IREMIT EUROPE Remittance Consulting AG) started its remittance business in Italy. On April 28, 2011, IREMIT Remittance Consulting GmbH (IRCGmbH) stopped its money remittance operations in Rome and Milan in Italy in accordance with Article 75 of the Transitional and Final Provisions of Austrian Payment Services Act, which stipulated that credit institutions that have held authorizations pursuant to Article 1 paragraph 1 no 23 BWG, as amended by the Federal Act Federal Law Gazette No. 35/2003, prior to December 25, 2009, have only until April 30, 2011 to carry out their money remittance operations. In December 2011, IRCGmbH sold assets relating to its operations in Italy to a third party. These assets, with an aggregate carrying amount of PHP 7.29 million, were sold for a consideration of PHP 72.43 million thereby resulting to a gain on sale of PHP 65.14 million. The results of IRCGmbH’s operation in Italy follow:

2011 2010 Delivery fees PHP5,289,202 PHP7,486,658 Realized foreign exchange gains - net 1,006,867 673,204 6,296,069 8,159,862 Cost of services 596,703 3,749,195 Gross income 5,699,366 4,410,667 Other income - net 615,909 38,935 Operating expenses (45,024,921) (34,754,501) Loss from operations (PHP38,709,646) (PHP30,304,899) Gain on sale of assets 65,139,395 − Income (Loss) from discontinued operations PHP26,429,749 (PHP30,304,899)

The total assets of the Company decreased by PHP 82.1 million or 3.5% to PHP 2.273 billion as of December 31, 2011 against PHP 2.356 billion as of December 31, 2010. Cash and cash equivalents increased by PHP 7.4 million or 0.8% from PHP 883.8 million in 2010 to PHP 891.2 million in 2011. Financial assets at fair value through profit or loss amounted to PHP 125.2 million at end-2011 against PHP 102.9 million at end-2010, increasing by PHP 22.3 million or 21.6%. Financial assets at fair value through profit or loss in 2011 and 2010 are 5.5% and 4.4% of the total assets in 2011 and 2010, respectively. These assets consist mainly of investments in debt securities (listed overseas) held for trading. Power Star Asia Group Limited started investing on stocks in 2011. Accounts receivable declined by PHP 125.8 million or 11.9% from PHP 1,059.3 million in 2010 to PHP 933.5 million in 2011. Accounts receivable in 2011 and 2010 are 41.0% and 45.0% of the total assets in 2011 and 2010, respectively. These are mainly due to improved collection of advances to agents and foreign subsidiaries in 2011. Other receivables increased by PHP 31.0 million or 37.1% from PHP 83.4 million in 2010 to PHP 114.4 million in 2011. Other receivables in 2011 and 2010 are 5.0% and 3.5% of the total assets in 2011 and 2010, respectively. These are mainly due to nontrade receivable from the sale of various assets of IREMIT Remittance Consulting GmbH related to the discontinued operations in Italy which was subsequently collected in March 2012 and partly offset by the application of receivables from non-controlling shareholders of IREMIT Remittance Consulting GmbH and Worldwide Exchange Pty Ltd amounting to PHP 12.3 million and PHP 25.01 million, respectively, against the acquisition

52

costs. Other current assets declined by PHP 7.4 million or 20.4% from PHP 36.3 million in 2010 to PHP 28.9 million in 2011. Other current assets in 2011 and 2010 are 1.3% and 1.5% of the total assets in 2011 and 2010, respectively. These are mainly due to lower balances of prepaid expenses and visa cards inventory. The Company’s non-current assets declined by PHP 9.7 million or 5.1% from PHP 190.3 million at end-2010 to PHP 180.6 million at end-2011. Total noncurrent assets in 2011 and 2010 are 7.9% and 8.0% of the total assets in 2011 and 2010, respectively. These are mainly due to the equity in net earnings of IRemit Singapore Pte Ltd of PHP 1.5 million and Hwa Kung Hong & Co., Ltd. of PHP 0.6 million in 2011, lesser investment on fixed assets in 2011, deferred tax asset on additional net loss of I-Remit New Zealand Limited in 2011 and issuance of tax credit certificates by the BIR for Input VAT for the years 2005 and 2006 amounting to PHP 1.71 million and PHP 3.82 million, respectively. Total liabilities declined by PHP 171.6 million or 15.8% from PHP 1.084 billion at end-2010 to PHP 912.7 million at end-2011 mainly due to lower level of current liabilities. Total liabilities in 2011 and 2010 are 40.1% and 46.0% of the total liabilities and equity in 2011 and 2010, respectively. Current liabilities decreased by PHP 170.8 million or 15.7% from PHP 1.083 billion in 2010 to PHP 912.6 million in 2011. Total current liabilities in 2011 and 2010 are 40.1% and 46.0% of the total liabilities and equity in 2011 and 2010, respectively. Beneficiaries and other payables increased by PHP 40.6 million or 20.3% from PHP 199.5 million in 2010 to PHP 240.1 million in 2011. Beneficiaries and other payables in 2011 and 2010 are 10.6% and 8.5% of the total liabilities and equity in 2011 and 2010, respectively. These are mainly due to additional channels opened in 2011 for the delivery of remittances to beneficiaries. Interest-bearing loans decreased by PHP 211 million or 24.1% from PHP 877 million in end-2010 to PHP 666 million in end-2011. Interest-bearing loans in end-2011 and end-2010 are 29.3% and 37.2% of the total liabilities and equity in end-2011 and end-2010, respectively. These are mainly due to lesser loan exposure at end-2011 mainly brought about by improved collection of accounts receivable. The Company’s stockholders’ equity as of December 31, 2011 stood at PHP 1.361 billion, higher by PHP 89.4 million or 7.0% against the end-2010 level of PHP 1.271 billion. Total equity in 2011 and 2010 are 59.9% and 54.0% of the total liabilities and equity in 2011 and 2010, respectively. Capital stock increased by PHP 55.3 million or 9.8% from PHP 562.4 million in 2010 to PHP 617.7 million in 2011. Capital stock in 2011 and 2010 are 27.2% and 23.9% of the total liabilities and equity in 2011 and 2010, respectively. These are mainly due to the distribution of stock dividend to stockholders on September 8, 2011. Capital paid-in excess of par value decreased by PHP 38.3 million or 8.9% from PHP 429.5 million in 2010 to PHP 391.2 million in 2011. Capital paid-in excess of par value in 2011 and 2010 are 17.2% and 18.2% of the total liabilities and equity in 2011 and 2010, respectively. The decrease in capital paid-in excess of par value in 2011 represents excess of acquisition cost over the carrying value of the non-controlling interests acquired in 2011 (IREMIT Remittance Consulting GmbH and Worldwide Exchange Pty Ltd). Treasury stock increased by PHP 12.9 million or 32.1% from -PHP 40.1 million in 2010 to -PHP 53.0 million in 2011. Treasury stock in 2011 and 2010 are -2.3% and -1.7% of the total liabilities and equity in 2011 and 2010, respectively. The increase in Treasury stock in 2011 represents buy-back of 5,544,000 shares.

53

Below are the comparative key performance indicators of the Company (Parent Company and subsidiaries):



Net income* over average stockholders’ equity during the period

10% 5%








Below are the comparative key performance indicators of the Company’s subsidiaries:





56% 3%











-3% 89%





Sales Growth Total transaction value in USD in present year over previous year -25% 8%


54





-767% 39%




Net income over average number of outstanding shares -108,090.79 10,191.13







0.4% 1%


Net income over average total assets during the period 0.2% 0.2%









6% 5%











40% 20%







55





194% -193%


Net income over average total assets during the period 14% -74%


Net income over average number of outstanding shares 141.86 -666.31

Sales Growth Total transaction value in USD in present year over previous year -19% 94%






30% 38%







2010 compared to 2009 I-Remit realized a consolidated net income of PHP 65.9 million in 2010, a decrease of PHP

67.2 million or 50.5% over the consolidated net income of PHP 133.1 million in 2009. Revenues decreased by 1.1% or PHP 8.7 million from PHP 778.7 million in 2009 to PHP 769.9 million in 2010 mainly due to the decline in realized foreign exchange gains. Foreign exchange gains dropped by 8.6% or PHP24.9 million from PHP287.7 million in 2009 to PHP262.8 million in 2010. The value of transactions grew by 9.9% or USD109.5 million from USD1.103 billion in 2009 to USD1.213 billion in 2010. The Company’s revenue from delivery fees grew by only 3.2% or PHP15.9 million from PHP490.4 million in 2009 to PHP506.2 million in 2010 largely because of the appreciation of the Philippine peso against the U.S. dollar. The Company’s fees are largely settled in U.S. dollars. The average peso-dollar exchange rate was PHP47.63 in 2009 against PHP45.08 in 2010, a gain of 5.3% or PHP2.55 per dollar. In December 2010, the average peso-dollar exchange rate was PHP43.95 per dollar. The number of transactions processed by the Company grew by only 2% from 2.683 million in 2009 to 2.737 million in 2010. Total operating expenses was higher by PHP58.3 million (14.1%) from PHP412.4 million in 2009 to PHP470.7 million in 2010 mainly on account of higher rental, marketing, and professional fee expenses. Rental expenses increased by 28.1% from PHP39.3 million in 2009 to PHP50.4 million in 2010. Marketing expenses increased by 32.0% from PHP33.0 million in 2009 to PHP43.5 million in 2010. Professional fees increased by 46.9% from PHP29.7 million in 2009 to PHP43.6 in 2010. The increase in these expense items are related mainly to the Company’s expansion as it opened new offices in Canada and Italy. Other income decreased by 62.8% or PHP54.3 million from PHP86.4 million in 2009 to PHP32.1 million in 2010 mainly due to the decline in net trading gains on debt securities (listed overseas) held for trading and lower other income consisting of interest income, rebates, and unrealized foreign exchange gain. Net trading gains declined by PHP30.3 million or 92.4% from PHP32.8 million in 2009 to PHP2.5 million in 2010. The total assets of the Company decreased by PHP131.9 million or 5.3% to PHP2.356 billion as of December 31, 2010 against PHP2.488 billion as of December 31, 2009. Cash and cash equivalents decreased by PHP79.0 million or 8.2% from PHP962.8 million in 2009 to

56

PHP883.8 million in 2010. Financial assets at fair value through profit or loss amounted to PHP102.9 million at end-2010 against PHP65.8 million at end-2009, increasing by PHP37.1 million or 56.4%. These assets consist of investments in debt securities (listed overseas) held for trading. Receivables declined by PHP80.2 million or 7.0% from PHP1.139 billion in 2009 to PHP1.059 billion in 2010. The Company’s non-current assets declined by PHP300,928 or 0.2% from PHP190,039,196 at end-2009 to PHP190,340,124 at end-2010. Total liabilities declined by PHP151.4 million or 12.2% from PHP1.235 billion at end-2009 to PHP1.084 billion in 2010 mainly due to a lower level of current liabilities. Current liabilities decreased by PHP148.6 million or 12.1% from PHP1.232 billion in 2009 to PHP 1.083 billion in 2010. The Company’s stockholders’ equity as of December 31, 2010 stood at PHP 1.271 billion, higher by PHP19.5 million or 1.6% against the end-2009 level of PHP 1.252 billion. Below are the comparative key performance indicators of the Company (Parent Company and subsidiaries):


Return on Equity (ROE) Net income* over average stockholders’ equity during the period 5% 11%








Below are the comparative key performance indicators of the Company’s subsidiaries: International Remittance (Canada) Ltd.


Return on Equity (ROE) Net income over average stockholders’ equity during the period 3% 33%
















57

IRemit Global Remittance Limited Performance Indicator Definition Dec. 31, 2010 Dec. 31, 2009






Sales Growth Total transaction value in USD in present year over previous year 1% -17%






Net income over average total assets during the period 0.2% 24%


Net income over average number of outstanding shares 14,435.50 1,859,480.93










Sales Growth Total transaction value in USD in present year over previous year 20% -5%











IREMIT EUROPE Remittance Consulting AG


Return on Equity (ROE) Net income over average stockholders’ equity during the period -193% -189%




Net income over average number of outstanding shares -666.31 -243.17



58

Power Star Asia Group Limited Performance Indicator Definition Dec. 31, 2010 Dec. 31, 2009








The Company is not aware of any known trends, commitments, events or uncertainties that will have a material impact on the Company’s liquidity. The Company has not defaulted in paying its currently maturing obligations. In addition, obligations of the Company are guaranteed up to a certain extent by the Company’s majority stockholders.

The Company is not aware of any events that will trigger a direct or contingent financial obligation that

is material to the Company, including any default or acceleration of an obligation. There are no material off-balance sheet transactions, arrangements, obligations (including contingent

obligations), and other relationships of the Company with unconsolidated entities or other persons created during the reporting period.

The Company has no material commitments for capital expenditures. Except as discussed above, the Company is not aware of any trends, events or uncertainties that have

had or that are reasonably expected to have a material favorable or unfavorable impact on sales, revenues or income from continuing operations.

Except as discussed above, there are no other significant elements of income or loss that did not arise

from the Company’s continuing operations. There are no seasonal aspects that had a material effect on the financial condition or results of

operations.

The Company does not expect any purchase of significant equipment in the next twelve (12) months. The Company does not expect any significant changes in the number of employees in the next twelve

(12) months.

59

Item 7. Financial Statements The consolidated financial statements and schedules listed in the accompanying Index to Financial

Statements and Supplementary Schedules are filed as part of this Form 17-A.

Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure On April 24, 2013, the Company‘s Board of Directors approved the cancellation of the engagement of SyCip

Gorres Velayo & Co. (“SGV”) as the Company’s external auditor. The cancellation resulted from divergent opinions on the scope of work of the audit process, particularly the extent of the reports to be submitted by the Company’s foreign offices. Considering the different regulatory environments in the countries where the Company has foreign offices, the completion of the reports required by SGV posed a significant challenge to the timely submission of the Company’s audited financial statements. Since the delayed submission of the Company’s audited financial statements opens the Company to reprimand or penalties from regulatory bodies that may also reflect poorly on its corporate governance practices, the Company was constrained to cancel the engagement of SGV and engage a different auditing firm. Further, the Company‘s Board of Directors approved the engagement of the firm of R.S. Bernaldo & Associates to prepare the Company’s audited financial statements for the period ending December 31, 2012.

Appointment of and Review of the Performance of the External Auditor The Board of Directors and the stockholders approve the Audit Committee’s recommendation for the

appointment and the review of the performance of the external auditors. In appointing its external auditors, the Company considers the technical competence, training, experience and professional reputation of the audit firm’s partners and staff, its capacity to perform the requirements of the audit engagement, its correspondent and other professional relationships with reputable firms in other jurisdictions, and the general reputation of the firm for integrity and efficiency.

Pursuant to the General Requirements of SRC Rule 68, Par. 3 (Qualifications and Reports of Independent

Auditors), I-Remit engaged the services of R.S. Bernaldo & Associates (RSBA) (BOA/PRC Reg. No. 0300; SEC Group A Accreditation No. 0153-FR-1) for the audit of the Group’s and Parent Company’s financial statements which comprise the statements of condition as of December 31, 2012 and 2011, and the statements of income, changes in equity, and cash flows for each of the three (3) years in the period ended December 31, 2012.

SGV & Co. has served as the Company’s external auditors since 2002 and until 2013. Josephine Adrienne

A. Abarca (CPA Certificate No. 92126; SEC Accreditation No. 0466-A) is the current audit partner for the Company. Aris C. Malantic (CPA Certificate No. 90190; SEC Accreditation No. 0326-AR-1) is the former audit partner for the Company and he has served as such from 2005 to 2008.

R.S. Bernaldo & Associates (a correspondent firm of Panell Kerr Forster International) has served as the

Company’s external auditors since 2013. Rosario S. Bernaldo (CPA Certificate No. 25927; SEC Group A Accreditation No. 1192-A), managing partner, is the current audit partner for the Company.

External Audit Fees and Services For the audit of the Group’s and Parent Company’s annual financial statements and services provided in

connection with statutory and regulatory filings or engagements, the aggregate amounts to be billed/billed, exclusive of value-added tax (VAT) and out-of-pocket expenses, by RSBA amounts to PHP 600,000 for 2012, and by SGV & Co. amounted to PHP 577,500, and PHP 550,000 for 2011, and 2010, respectively.

RSBA and SGV & Co. did not render professional services for tax accounting, compliance, advice, planning

and any other form of tax services. RSBA and SGV & Co. did not provide products and services other than the services reported above. The Company’s Board of Directors approves the audit fees as recommended by the Audit Committee and the Management Committee.

60

Changes in Accounting Policies The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of new and revised

Philippine Financial Reporting Standards (PFRS). The term “PFRS” in general includes all applicable PFRS, Philippine Accounting Standards (PAS), and Interpretations issued by the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the FRSC and adopted by SEC. These new and revised PFRS prescribe new accounting recognition, measurement and disclosure requirements applicable to the Group. When applicable, the adoption of the new standards was made in accordance with their transitional provisions, otherwise the adoption is accounted for as change in accounting policy under PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

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

adoption of the following new and revised PFRS. The following new and revised PFRS has been applied in the current period and had materially affected the amounts reported in the financial statements: PAS 1, Presentation of Financial Statements The improvements in this PFRS clarifies that when an entity changes an accounting policy, or makes a retrospective restatement or reclassifications it shall present: a) the opening statement of financial position should be presented as at the beginning of the required

comparative period; and, b) related notes are not required to accompany this opening statement of financial position. As a result of early adoption, the Group opted not to present related notes to accompany the opening statement of financial position. The following new and revised PFRSs have also been adopted in the financial statements, the application of which have not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements: PFRS 7 (Revised), Financial Instruments: Disclosures - Transfers of Financial Assets The amendments to PFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. The effective date of the amendment is July 1, 2011, with earlier application permitted. PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets PAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in PAS 40, Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be through sale. As a result of the amendments, SIC-21, Income Taxes – Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into PAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn. The amendments are effective from January 1, 2012. Earlier application is permitted.

61

PART III. CONTROL AND COMPENSATION INFORMATION Item 9. Directors and Executive Officers of the Issuer

(A) Directors, Executive Officers, Promoters and Control Persons (1) Directors, Including Independent Directors and Control Persons Bansan C. Choa, 58, Filipino Director, Chairman and Chief Executive Officer Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date

Mr. Choa has served as Chairman and Chief Executive Officer of I-Remit, Inc. since 2005 and

has been a Director since 2002. He is involved in various businesses in the manufacturing, and construction and property development sectors. He currently holds the following positions: Chairman, Confed Properties, Inc. (1991 to date); Chairman, Surewell Equities, Inc. (2001 to date); Director and Chairman of Loan Committee, Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date); President, Philippine Retirement, Inc. (2009 to date); Treasurer, Six Alps Corporation (1997 to date); Treasurer, Banwood Construction Center, Inc. (1976 to date); Chairman, Flexi Woodworks, Inc. (1993 to date); Chairman, Sure Fortune Properties, Inc. (2001 to date); and, Chairman, OLGC Psychological Services (2001 to date). Mr. Choa was a Board Member, Professional Regulation Commission on Real Estate Service (2010 to 2012).

Mr. Choa is a licensed real estate broker (Professional Regulation Commission License No.

00002), appraiser (Professional Regulation Commission License No. 00002), and real estate consultant (Professional Regulation Commission License No. 00002). He is a certified public accountant (Professional Regulation Commission License No. 030924). He is active in the real property development and property management field and has served and continues to hold board and officer positions in housing and real property development organizations including the Organization of Socialized Housing Developers of the Philippines as President (2008 to 2009), Board Adviser (2009), and Board Member (2000 to 2008); Subdivision and Housing Developers Association as Board Governor (2000 to 2001), Treasurer (2001 to 2002 and 2003 to 2004), Auditor (2002 to 2003), First Vice President (2007 to 2008), Chairman (2004 to 2005 and 2006 to 2007), Board Adviser (2005 to 2006), President (2009 to 2010), and Board Advisor (2011 to date); Grandeur Realty Specialists, Inc. as Chairman (1995 to 2001); Multi Dealers Inc. as President (1987 to 1990); and, Gold Palm Properties, Inc. as Vice President (1989 to 1996). He is also the Chairman of the Board of Trustees of Kassel Condominium Corporation (2001 to date). Mr. Choa is a member of the National Real Estate Association since 1998.

He was one of the finalists of the 2006 Entrepreneur of the Year award of the Ernst & Young

global accounting firm. He was a nominee for Global Filipino Executive of the Year in the 2011 Asia CEO Awards Philippines. He is also the Chairman of the Board of Trustees since 2002 of the Kabalikat ng Migranteng Pilipino, Inc. (KAMPI), a non-stock non-profit organization serving overseas Filipino workers.

Mr. Choa obtained his master in business administration degree from the Ateneo de Manila

University Graduate School of Business in 1985 and his bachelor’s degree in commerce from the De La Salle University in 1974. He is a member of the Philippine Institute of Certified Public Accountants (PICPA) since 1976. He was connected with the accounting firm of SyCip Gorres Velayo & Co. from 1974 to 1976.

62

Armin V. Demetillo, 44, Filipino Director, Chairman of the Executive Committee Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such July 17, 2009 to date

Mr. Demetillo has served as Director and Chairman of the Executive Committee of I-Remit,

Inc. since July 17, 2009. He is a Director of I-Remit Australia Pty Ltd, Worldwide Exchange Pty Ltd (Australia) and I-Remit New Zealand Limited since 2010. He is the Managing Director of Goldleaf Guard Services, Inc. (2002 to date); Executive Vice President, Rapid Security (2002 to date); and, Vice President, St. Thomas Security Corporation (2002 to date). Mr. Demetillo is the Chairman of Virlanie Foundation, Inc. (2005 to 2007), a street children foundation supported by Princess Caroline of Monaco, which received an award in Europe for its effort in protecting children’s rights. He became the Faculty Member/Academic Counselor in College of Business and Economics, De La Salle University (1992 to 2002)

Mr. Demetillo obtained his bachelor of arts degree, major in philosophy cum laude from the

Saint Joseph Seminary College in 1990.

Harris Edsel D. Jacildo, 51, Filipino Director, President & Chief Operating Officer Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such August 8, 2002 to date

Mr. Jacildo joined I-Remit, Inc. as Executive Vice President and Chief Operating Officer in

February 2002. He has been a Director and the President and Chief Operating Officer of the Company since April 2002. He also currently holds the following positions: Director, Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date), Lucky Star Management Ltd. (Hong Kong) (2003 to date), and IRemit Global Remittance Limited (United Kingdom) (2003 to date).

He is also a Trustee of the Kabalikat ng Migranteng Pilipino, Inc. (KAMPI) (2003 to date), a

non-stock non-profit organization serving overseas Filipino workers. Prior to joining I-Remit, he spent 20 years in the banking industry where he was initially

working in the field of information technology while employed by the Pacific Banking Corporation (1982 to 1985). In 1985, he joined the remittance division of the Rizal Commercial Banking Corporation (RCBC) where he was a Systems Analyst until 1991 and was the head of its TeleMoney Asia-Pacific operations until 2002.

Mr. Jacildo obtained his bachelor of science in applied economics degree from the De La Salle

University in 1982. He also completed the basic management program of the Asian Institute of Management in 1991 and completed two years in the school of law in the Ateneo de Manila University (1982 to 1984).

Gilbert C. Gaw, 63, Filipino Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date

Mr. Gaw has been a Director of I-Remit, Inc. since 2002. He has a business engaged in steel

manufacturing. He is currently a partner of JPSA Global Services (2003 to date), and a Director of Treasure Steelworks Corporation (2004 to date) and Zhangzhou Stronghold Steel Works Co., Ltd. (China) (2003 to date). His past work experiences include: President and General Manager of Philshine Industrial Corp. (1982 to 2001); Plant Manager of Seton Industrial Corp. (1980 to 1982); Partner in Harden Pipe Trading Co. (1975 to 1978); Sales in Union Hardware (1969 to 1975); and, Trainee – Purchasing in D. P. Marketing Co. (1967 to 1969).

He obtained his bachelor of science in electronics and communications engineering degree

from the University of the East in 1973. He also took a vocational course in Samson Technical School in 1962. Mr. Gaw obtained his bachelor of theology degree in the Biblical Seminary of the Philippines (1978 to 1980) and MSC at UPISSI at the University of the Philippines in 1982.

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A. Bayani K. Tan, 57, Filipino Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such May 18, 2007 to date

Atty. Tan was the Corporate Secretary of I-Remit, Inc. from 2001 until 2004 and has been a

Director since May 2007. He is currently a Director and Corporate Secretary of the following reporting companies: First Abacus Financial Holdings Corporation (1994 to date); Sinophil Corporation (1993 to date); TKC Steel Corporation (2007 to date); Tagaytay Highlands International Golf Club, Inc. (1993 to date); and, Destiny Financial Plans, Inc. (2003 to date as Director and 2009 to date as Corporate Secretary).

Atty. Tan has also been the Corporate Secretary and a Director of Sterling Bank of Asia, Inc.

(A Savings Bank) (2009 to date); FHE Properties, Inc. (1995 to date); Club Asia, Inc. (1999 to date); and, City Cane Corporation (1993 to date). He is also a Director for the following private companies: Highlands Gourmet Specialist Corp. (2006 to date); and, Destiny LendFund, Inc. (2005 to date). He is the Corporate Secretary of the following companies: Belle Corporation (1994 to date); Pacific Online Systems Corporation (2007 to date); Vantage Equities, Inc. (1993 to date); Yehey! Corporation (2004 to date); Philequity Fund, Inc. (1997 to date); Philequity Peso Bond Fund, Inc. (2000 to date); Philequity Dollar Income Fund, Inc. (1999 to date); Philequity PSE Index Fund, Inc. (1999 to date); HSAI-Raintree, Inc.; Tagaytay Midlands Golf Club, Inc. (1997 to date); The Country Club at Tagaytay Highlands, Inc. (1995 to date); The Spa and Lodge at Tagaytay Highlands, Inc. (1999 to date); Monte Oro Resources and Energy, Inc. (2005 to date); Monte Oro Grid Resources Corporation (2006 to date); E-Business Services, Inc. (2001 to date); Hella-Phil., Inc. (1992 to date); JTKC Equities, Inc. (1998 to date); Goodyear Steel Pipe Corporation (1999 to date); Star Equities Inc. (2006 to date); Tera Investments, Inc. (2001 to date); The Discovery Leisure Company, Inc. (2001 to date); Touch Solutions, Inc.; Karen Marie L. Ty Foundation, Inc. (2005 to date); and, Metro Manila Turf Club, Inc. (1995 to date). He is a Trustee and the Corporate Secretary of Wellington Dee Ty Foundation, Inc. (2004 to date). He is also a Trustee (2004 to date) and currently is the Executive Vice President of UP Law ’80 Foundation, Inc. (2004 to date). Atty. Tan is also the Managing Partner of the law firm of Tan Venturanza Valdez since 1988. He also concurrently holds the following positions: Managing Director, Shamrock Development Corporation (1988 to date); Managing Trustee, SC Tan Foundation, Inc. (1986 to date); Legal Counsel, Xavier School, Inc. (2005 to date); and, Lecturer in the Center for Global Best Practices (2009 to date).

In the previous years, he has held the following positions: Director, Monte Oro Resources and

Energy, Inc. (2005 to 2008); Monte de Oro Grid Resources Corporation (2006 to 2009); National Grid Corporation (2008 to 2009); Director and Corporate Secretary, Metro Manila Turf Club, Inc. (1995 to 2006), APC Group, Inc. (1996 to 2006), and Clearwater Country Club, Inc. (2001 to 2004); Corporate Secretary, International Exchange Bank (1995 to 2006), Eastern Telecommunications Phils., Inc. (1995 to 2002), Telecommunications Technology Phils., Inc. (1995 to 2002), Universal Rightfield Property Holding, Inc. (1993 to 2002), Universal Leisure Corp. (1996 to 2002), and Universal Leisure Club, Inc. (1996 to 2001); Legal Counsel and Assistant Secretary, Philippine Stock Exchange, Inc. (1997 to 2000); and, Assistant Corporate Secretary, A. Brown Company, Inc. (1994 to 1998).

Atty. Tan holds a Master of Laws degree from New York University, USA (class of 1988). He

obtained his Bachelor of Laws degree from the University of the Philippines in 1980 where he was a member of the Order of the Purple Feather (the UP College of Law Honor Society) having ranked ninth in his class. Atty. Tan was admitted to the Philippine Bar in 1981 after placing sixth in the examinations. He also has a bachelor of arts degree (majored in political science) from San Beda College (class of 1976) from where he graduated class valedictorian and was awarded the medal for academic excellence.

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Ben C. Tiu, 60, Filipino Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such May 18, 2001 to date

Mr. Ben Tiu has been a Director of I-Remit, Inc. since 2001 and has also served as the

Chairman and Chief Executive Officer of I-Remit, Inc. from 2001 to 2004. He is also the Chairman of the Boards of Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date). He is the Corporate Nominee in the Philippine Stock Exchange of Fidelity Securities, Inc. (1998 to date). He also concurrently holds the following positions: Chairman, Tera Investments, Inc. (2001 to date); President, JTKC Equities, Inc. (1993 to date); and, President, Philippine Calcium Industries Company, Inc. (1988 to date). Mr. Tiu was also formerly the Vice Chairman of the Board and Chairman of the Executive Committee of the International Exchange Bank (1995 to 2006).

He obtained his master in business administration degree from the Ateneo de Manila

University Graduate School of Business in 1977 and his bachelor’s degree in mechanical engineering from the Loyola Marymount University, USA, in 1975.

John Y. Tiu, Jr., 36, Filipino Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date

Mr. John Tiu has served as Director of I-Remit, Inc. since 2002. He is also presently Chairman

and President of Tera Investments, Inc. (2003 to date); and a Director of Sterling Bank of Asia, Inc. (A Savings Bank) (2006 to date). He is also the Director and Treasurer of the following companies: Star Equities Inc. (2006 to date); Touch Solutions, Inc. (2001 to date); JTKC Equities, Inc. (2002 to date); JTKC Land, Inc. (2003 to date); The Discovery Leisure Company, Inc. (2001 to date); Cay Islands Corporation (2008 to date); Palawan Cove Corporation (2008 to date); Sonoran Corporation (2008 to date); Tofino Corporation (2007 to date); and, Discovery Country Suites, Inc. (2004 to date). He is a Director of Oakridge Properties, Inc. (2003 to date), Enderun Colleges, Inc. (2005 to date), JT Perle Corporation (2007 to date), One Cerrada Corporation (2007 to date), Sagesoft Solutions, Inc. (2003 to date), and Tokyo Holdings, Inc. (2007 to date). He is a Director (2003 to date) and President of Southern Visayas Property Holdings, Inc. (2009 to date), Director and First Vice President of JTKC Realty Corporation (2006 to date), and the President of Fidelity Securities, Inc. (2000 to date).

Mr. John Tiu obtained his bachelor of science in electrical engineering degree (minor in

mathematics) from the University of Washington, USA, in 1998.

Ruben C. Tiu, 56, Filipino Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such May 18, 2007 to date

Mr. Ruben Tiu has served as Director of I-Remit, Inc. from 2002 to 2004 and was reappointed

as such on May 18, 2007. He currently holds the following positions: Director, Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date), Star Equities Inc. (2006 to date), Tera Investments, Inc. (2001 to date), Southern Visayas Property Holdings, Inc. (2010 to date), Palawan Cove Corporation (2008 to date), Cay Islands Corporation (2008 to date), and Sonoran Corporation (2008 to date); President, JTKC Realty Corporation (1988 to date), Pan-Asean Multi Resources Corporation (1988 to date), Aldex Realty Corporation (1988 to date), Oakridge Properties, Inc. (1996 to date), The Discovery Leisure Company, Inc. (2000 to date), Hotel Systems Asia, Inc. (1996 to date), JTKC Land, Inc. (2003 to date), Tofino Corporation (2009 to date), and Discovery Country Suites Inc. (2004 to date); Executive Vice President, JTKC Equities, Inc. (1993 to date), and Union Pacific Ace Industries, Inc. (1988 to date). He was also the Director of International Exchange Bank (1995 to 2006).

Mr. Ruben Tiu obtained his bachelor of science in business administration degree from the De

La Salle University in 1976.

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Calixto V. Chikiamco, 62, Filipino Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date

Mr. Chikiamco has been a Director of I-Remit, Inc. since 2002. He is a former columnist of the

Manila Standard and the Manila Times. He has authored two (2) books: “Reforming the System” (Orange Publications and Kalikasan Press, 1992) and “Why We Are Who We Are” (Foundation for Economic Freedom, 1998). In 2001, he was awarded by the Archdiocese of Manila for the Best Business Column (“Agriculture, Not IT”, Manila Standard) in the Catholic Mass Media Awards. He is the founder and President of Mobilemoco, Inc. (2010 to date) and MRM Studios, Inc., a company involved in mobile entertainment, digital musical services, and e-commerce (2001 to date). He also concurrently holds the following positions: Director, UPCC Securities (1999 to date); Vice Chairman, CBY, Inc. (1999 to date); Director, Golden Sunrise (1984 to date); Director, APMC (1985 to date); President, Foundation for Economic Freedom (2010 to date); and, President, Four Sea Trading Inc. (2008 to date). He is also presently a columnist of Business World and a property rights consultant to The Asia Foundation. He is a member of the Philippine Internet Commerce Society and the Syracuse University Alumni Association.

Mr. Chikiamco holds a Master’s degree in Professional Studies in Media Administration from

the Syracuse University (New York, USA). He obtained his bachelor’s degree in economics summa cum laude from the De La Salle University.

In accordance with the requirements of Section 38 of the Securities Regulation Code, the Revised SRC Rules, and the Company’s Manual on Corporate Governance, the following Directors were nominated and elected as Independent Directors of the Company during the Annual Stockholders’ Meeting held on July 31, 2012:

Jose Joel Y. Pusta, 60, Filipino Independent Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such August 16, 2002 to date

Mr. Pusta has been a Director of I-Remit since 2002. He was a Director and Vice President of

Confed Properties, Inc. (1997 to 2009). He was also the Corporate Secretary and a Trustee of the Kabalikat ng Migranteng Pilipino, Inc. (KAMPI) (2003 to 2009), the President and a Trustee of the Kassel Condominium Corporation (2002 to 2009), and the Vice President and Financial Controller of Green Bank, Inc. (A Rural Bank) (2010 to 2011). Mr. Pusta previously held the following positions: Senior Administrative and Logistics Manager of Digital Telecommunications Philippines, Inc. (1994 to 1997); Senior Internal Audit Manager of Metromedia Times Corporation (1992 to 1994), and Universal Robina Corporation (1985 to 1992); Internal Audit Manager of Manila Midtown Hotel, Inc. (1984 to 1985), Robinsons, Inc, (1983 to 1984), and Litton Mills, Inc. (1979 to 1983); Internal Audit Supervisor of CFC Corporation (1978 to 1979); Semi-Senior Staff Auditor of SyCip Gorres Velayo & Co. (1975 to 1978); and, Foreign Remittance Clerk in Philippine Banking Corporation (1975).

Mr. Pusta obtained his bachelor of science in commerce degree (majored in accounting) from

the University of San Carlos in Cebu City in 1974. He has also earned units leading to the master in business administration degree at the Ateneo de Manila University Graduate School of Business from 1981 to 1983. He is a certified public accountant (CPA) and a member of the Philippine Institute of Certified Public Accountants (PICPA) and the Institute of Internal Auditors, Philippines.

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Gregorio T. Yu, 54, Filipino Director Director’s Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such May 18, 2007 to date Mr. Yu was a Director of I-Remit, Inc. from 2001 to 2004 and was re-elected as an

Independent Director of the Company on May 18, 2007. He is currently the Chairman of CATS Automobile Corporation (2004 to date), Chairman of CATS Motors, Inc. (2004 to date), Chairman of CATS Asian Cars, Inc. (Mazda Greenhills) (2004 to date), Director, Prople BPO, Inc. (formerly Summersault, Inc.) (2006 to date), Director of CMB Partners, Inc. (2003 to date), and President of the Domestic Satellite Corporation of the Philippines (2001 to date). He is also a Director and the Vice Chairman of the Board of Sterling Bank of Asia, Inc. (A Savings Bank) (2007 to date) and Chairman and President of Lucky Star Network Communications Corporation (1994 to date). He is also concurrently a Director of the following companies: National Reinsurance Corporation (2011 to date); iRipple, Inc. (2010 to date); Jupiter Systems, Inc. (2001 to date); Wordtext Systems, Inc. (2001 to date); Yehey, Inc. (2001 to date); Philequity Fund, Inc. (1994 to date); Philequity Peso Bond Fund, Inc.; Philequity Dollar Income Fund, Inc.; Philequity PSE Index Fund, Inc.; Philequity Strategic Growth Fund, Inc.; Philequity Foreign Currency Fixed Income Fund, Inc.; Philequity Balanced Fund; and. Philequity Resources Fund, Inc.; Philippine Airlines, Inc. (2011 to date); Glyph Studios, Inc. (2011 to date); Philippine Bank of Communications (2011 to date); Unistar Credit and Finance Corporation (2012 to date), and Nexus Technologies Inc. (2012 to date). Mr. Yu is also a Trustee of the Government Service Insurance System (2010 to date). He is also a Board Member of Ballet Philippines (2009 to date) and Manila Symphony Orchestra (2009 to date), and a Trustee of the Xavier School, Inc. (1998 to date) and a Trustee (1997 to date) and the Chairman, Ways and Means Committee (1998 to date) of the Xavier School Educational and Trust Fund, Inc.

Mr. Yu was formerly the President and Chief Executive Officer of Belle Corporation (1989 to

2001). He was also a Director and a Member of the Executive Committee of The International Exchange Bank (1995 to 2006). He was also a Director of the following companies: Nexus Technologies, Inc. (2001 to 2011); R.S. Lim & Co., Inc. (1997 to 2008); and, Ivantage Corporation (1993 to 2006). He was also the President of the following organizations: Tagaytay Highlands International Golf Club (1991 to 2001); and, The Country Club and Tagaytay Highlands (1995 to 2001). He was also the President and Chief Executive Officer of Sinophil Corporation (1993 to 2001) and Pacific Online Systems Corporation (1994 to 2001). He was also the Vice Chairman of Philippine Global Communications (1996 to 2001) and the APC Group, Inc. (1994 to 2001). He was also the Director of Cebu Holdings Inc. (1994 to 1996), and Filcredit Finance (2004 to 2008). He was also connected with the Chase Manhattan Asia Limited Hong Kong as Director of Corporate Finance (1988 to 1999), and with The Chase Manhattan Bank, NA Asia Pacific Regional Headquarters Hong Kong as Vice President – Area Credit (1986 to 1988). He was also a Second Vice President of the Chase Manhattan Bank, N.A. Manila Offshore Banking Unit (1983 to 1986). He was also the Assistant Vice President of R.S. Lim and Company, Inc. (1978 to 1981). Mr. Yu was a Lecturer in Economics in the De La Salle University from 1978 to 1980.

Mr. Yu obtained his Master of Business Administration degree from The Wharton School,

Graduate of the University of Pennsylvania in 1983. He obtained his bachelor of arts degree in economics summa cum laude from the De La Salle University in 1978.

The above directors shall hold office from their date of election until the next annual

shareholders meeting or their resignation unless sooner terminated or removed in accordance with law.

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The names, ages, citizenship, present positions, previous positions, terms of office, and period

served by the Corporate Secretary and the Assistant Corporate Secretary are as follows:

Maria Cecilia V. Soria, 36, Filipino Corporate Secretary Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such July 29, 2011 to date

Atty. Soria is the incumbent Corporate Secretary of I-Remit, Inc. and Philequity Management,

Inc. She is also the Assistant Corporate Secretary of the following companies: Coal Asia Holdings, Incorporated; Sterling Bank of Asia, Inc. (A Savings Bank); E-Business Services Inc.; FHE Properties Inc.; Highlands Gourmet; iRipple, Inc.; Touch Solutions, Inc.; and JTKC Equities, Inc. Atty. Soria obtained her bachelor of arts degree in political science and bachelor of laws degree from the University of the Philippines in 1998 and 2006, respectively. She is currently a senior associate of Tan Venturanza Valdez (2012 to date). She was formerly connected with Reyes-Fajardo & Associates (2009 to 2010), SGV & Co. (a member practice of Ernst & Young) (2008 to 2009), and Medialdea Ata Bello & Guevarra law office (2007 to 2008). She was admitted to the Philippine bar in May 2007.

Darlene R. Vivas, 30, Filipino Assistant Corporate Secretary Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such July 29, 2011 to date

Atty. Vivas is the incumbent Assistant Corporate Secretary of I-Remit, Inc. She is also the

Assistant Corporate Secretary of the following companies: First Abacus Financial Holdings Corp.; Jolliville Holdings Corporation; The Country Club at Tagaytay Highlands, Inc.; and Tagaytay Midlands Golf Club Inc. Atty. Vivas obtained her bachelor of arts degree in political science from the University of the Philippines and bachelor of laws degree from San Beda College of Law in 2003 and 2009, respectively. She is currently an associate of Tan Venturanza Valdez (2011 to date). She was formerly connected with Pizarras & Associates (2009 to 2010) and Santos Parungao Aquino Abejo & Santos law office (2010). She was admitted into the Philippine bar in May 2010.

The names, ages, citizenship, present positions, previous positions, terms of office, and period served of all Executive Officers are as follows:

Bansan C. Choa, 58, Filipino Director, Chairman and Chief Executive Officer Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such 2005 to date

(see above for business experience and positions held under “Directors”)

Harris Edsel D. Jacildo, 51, Filipino Director, President and Chief Operating Officer Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such February 4, 2002 to date

(see above for business experience and positions held under “Directors”)

Ronald A. Benito, 42, Filipino Senior Vice President & Head, International Treasury Period Served as Such November 15, 2010 to date

Mr. Benito joined I-Remit, Inc. in 2010 and currently heads the Company’s international

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treasury unit in charge of trading its foreign currencies. He was previously connected with ICAP AP (Singapore) as director of new business initiatives(2007-2010) and vice president and deputy treasurer of Banco Santander Central Hispano (2001-2004).

He obtained his bachelor of arts degree in economics cum laude from the University of Santo

Tomas in 1991. He obtained his master of arts degree in international relations (school of politics) in 2005 from the University of Durham, United Kingdom and his master of science degree in economics and international business in 2007 from City University London.

Ma. Elizabeth G. Yao, 43, Filipino Senior Vice President & Head, Service and Operations Division Period Served as Such August 12, 2002 to date

Ms. Yao joined I-Remit in 2002 and has since been in charge of its Service and Operations

Division. She was previously an equities sales officer of Belson Securities, Inc. (1997 – 2002). She was previously connected with the institutional sales group of Belson PrimeEast Capital (1996 – 1997) and was also a money market trader of the Security Bank Corporation (1995 – 1996).

She obtained her bachelor’s degree in business administration from the University of the

Philippines in 1994. She also attended the business administration program of the University of New Mexico (USA) from 1988 to 1990.

Bernadette Cindy C. Tiu, 34, Filipino First Vice President & Chief Financial Officer; Head, Finance Division Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such April 1, 2005 to date

Ms. Tiu has been the Chief Financial Officer of I-Remit since 2006. She was previously the

Finance Manager of IRemit Global Remittance Limited in the United Kingdom (2003) and International Remittance (Canada) Ltd. (2004), both wholly-owned subsidiaries of the Company. She joined I-Remit, Inc. in Manila in 2005 as Treasurer and Corporate Governance Head.

She obtained her bachelor’s degree in business administration (majored in accounting and

finance) from the Boston University School of Management in 2001. Fitzgerald S. Duba, 48, Filipino First Vice President & Compliance Officer; Head, Corporate Affairs and Information Division Term of Office July 31, 2012 until the next annual stockholders’ meeting Period Served as Such November 16, 2007 to date

Mr. Duba was a Vice President and the head of the Corporate Strategy Division of the Rizal

Commercial Banking Corporation (RCBC) from 2002 to 2005, where he was employed for 12 years. He was also a management consultant in the Management Services Division of SyCip Gorres Velayo & Co (SGV) and later, the Manila office of Andersen Consulting.

He obtained his bachelor’s degree in industrial engineering from the University of the

Philippines in 1987 and completed the basic banking course of the Asian Institute of Management in 1996. He also completed the corporate governance seminar of the Bangko Sentral ng Pilipinas (BSP) in 2000, and the corporate governance and anti-money laundering act seminar of the Philippine Securities Consultancy Corporation in 2012. He is a member of the Philippine Institute of Industrial Engineers.

Glenn L. Igual, 51, Filipino Vice President; Head, Information and Technology Services Division Period Served as Such September 6, 2010 to date

Mr. Igual joined I-Remit, Inc. in 2010 and currently heads the Company’s Information and

Technology Services Division in charge of Software solutioning and IT Infrastructure setup and management. He was previously connected with Ayala Systems Technology Inc. as General Manager for Trusted Hub Ltd’s Philippine business unit (2009 – 2010), and was the Corporate Secretary and a Director of Saffron Hill Phils., Inc. (2005 – 2010). He was formerly the Vice President of Information Technology Services of United Coconut Planters Life Assurance

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Corp. (2004 – 2008). He is also a Founder/Director of Cabana Fresh Moves Inc. (2008 to date).

He obtained his bachelor of arts degree in computer management from the Polytechnic

University of the Philippines in 1983. He completed his Strategic Business Economics Program in the University of Asia and the Pacific in 2004. He obtained his Fellow, Life Management Institute (FLMI) designation in 2003 from the Life Office Management Association (LOMA) in Atlanta, Georgia, a USA-based continuing education program and his IT Infrastructure Library (ITIL) certification in 2009.

Regina L. Shimamoto, 51, Filipino Vice President; Head, Human Capital Management Division Period Served as Such October 15, 2012 to date

Ms. Shimamoto joined I-Remit, Inc. in 2012 and currently heads the Company’s Human

Capital Management Division in charge of HR planning & acquisition, performance management, employee compensation & benefits, employee engagement, training, and organizational development. She was formerly the Training Manager; then the Recruitment & Training Manager; and eventually, the HR Director of Amanpulo resort by the Amanresorts (the luxury hotels group) in Pamalican Island, Cuyo, Palawan from 2008 to 2012. Her affiliation with the Philippine’s most premier resort started when she conducted weekend courses under the English for Specific Purposes programs (English for Hotels & Restaurants Professionals) for all frontliners of the resort from February 2006 to May 2007. Before then, Professor Shimamoto has also served as Faculty member in the Department of English and Applied Linguistics of the De La Salle University’s College of Education from 1998 to 2008, as Faculty member in the Languages Department of the University of Santo Tomas’ College of Arts & Letters from 2007 to 2008, as Lay Formator/Faculty member in the English Department of the Rogationist Seminary’s Father Hannibal Formation Center from 2001 to 2006, and as Faculty member in the Languages Department of the Philippine Christian University’s College of Arts, Sciences, & Social Work from 1993 to 1998.

She obtained her bachelor of arts degree in English from the Philippine Christian University,

Manila. Also, she has completed a Certification for Professional Education from 1991 to 1993 and the Master of Education in Language Teaching (TESL) from the University of the Philippines from 1993 to 1997, respectively. She has acquired some academic units under the Doctor of Philosophy in Applied Linguistics program from 2005 to 2007 in De La Salle University, Manila. Ms. Shimamoto has attended and completed several programs, seminars, and workshops on Human Resource & Labor Relations, change management, situational leadership, corporate training, organizational development, learning & development, and performance management from 2008 to present.

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(2) Significant Employees There is no person other than the entire human resources as a whole, and the executive

officers who are expected to make a significant contribution to the Company.

(3) Family Relationships Directors Ben C. Tiu, John Y. Tiu, Jr. and Ruben C. Tiu are brothers. Bernadette Cindy C. Tiu,

First Vice President and Chief Financial Officer of the Company, is a daughter of Director Ben C. Tiu.

There are no other family relationships among the directors or the officers listed.

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(4) Involvement in Certain Legal Proceedings As a result of the delay in the delivery of the facilities of the Universal Leisure Club, Inc.

(ULCI), some of its members have initiated legal actions against ULCI, the Universal Rightfield Property Holdings, Inc. (URPHI) and the Universal Leisure Corp. (ULCorp), as well as their respective incumbent and former officers and directors, including their former Corporate Secretary, A. Bayani K. Tan. The cases filed include:

i. Civil actions for breach of contract and/or of contract, specific performance, quieting of

title and reimbursement, damages with request for receivership and preliminary attachment (Civil Case Nos. MC03-075, MC03-077, and MC04-082) before the RTC of Mandaluyong City, which cases have been settled and the RTC Mandaluyong has, on 08 February 2006, promulgated a Joint Decision approving the Settlement Agreement, Supplemental Agreement, and Second Supplemental Agreement re: Civil Case Nos. MC03-077 and MC04-082. RTC Mandaluyong, noting the settlement of Civil Case Nos. MC03-077 and MC04-082, likewise issued an Order dated 18 May 2006 re: Civil Case No. MC-075 holding that the aforementioned settlement agreement likewise puts an end to Civil Case No. MC03-075, as it involves substantially similar factual antecedents, and holding further that the complaint and counterclaims of the parties are withdrawn with prejudice. While the main cases have been settled, a group of ULCI members who were not included in the settlement and are not in favor of its terms have initiated suit to nullify the same. RTC Mandaluyong has rejected such moves to assail the settlement, prompting said group to elevate their complaint to the Court of Appeals. The Court of Appeals partially granted the group’s prayer and revived the writs of attachment and garnishment but only to such extent as to cover the remaining claims. Respondents filed a timely petition with the Supreme Court, where it is currently pending.

ii. A Complaint for Estafa (docketed as I.S. No. 08-K-19713) filed before the City Prosecutor of Manila. A Counter-Affidavit has already been filed before the City Prosecutor seeking to dismiss the Complaint for lack of cause of action.

Except as provided above, the Company is not aware of any of the following events wherein any of its directors, executive officers, nominees for election as director, executive officers, underwriter or control persons were involved during the past five (5) years up to the latest date.

(1) Any bankruptcy petition filed by or against any business of which any of the above

persons was a general partner or executive officer either at the time of bankruptcy or within two years prior to that time;

(2) Any order or judgment, or decree, not subsequently reversed, suspended or vacated,

of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any of the above persons in any type of business, securities, commodities, or banking activities; and

(3) Any findings by a domestic or foreign court of competent jurisdiction (in civil action), the

SEC or comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self-regulatory organization, that any of the above persons has violated a securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

The Company and its major subsidiaries and associates are not involved in, nor are any of

their properties subject to, any material legal proceedings that could potentially affect their operations and financial capabilities.

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Item 10. Executive Compensation

(B) Executive Compensation (1) Summary Compensation Table The following table summarizes the aggregate compensation paid or accrued during the last

two (2) calendar years and to be paid in the ensuing calendar year to the Company’s Chief Executive Officer and four (4) other most highly compensated officers:

Year Name Principal Position Aggregate

Compensation Bansan C. Choa Chairman & CEO Harris E. D. Jacildo President & COO Ma. Elizabeth G. Yao SVP Ronald A. Benito SVP Bernadette Cindy C. Tiu FVP & CFO

11,201,030.81

2013 (Estimate)

All other officers and directors as a group unnamed 13,443,246.75 Bansan C. Choa Chairman & CEO Harris E. D. Jacildo President & COO Ma. Elizabeth G. Yao SVP Ronald A. Benito SVP Bernadette Cindy C. Tiu FVP & CFO

10,690,532.00

2012 (Actual)

All other officers and directors as a group unnamed 12,693,541.87 Bansan C. Choa Chairman & CEO Harris E. D. Jacildo President & COO Ma. Elizabeth G. Yao SVP Ronald A. Benito SVP Bernadette Cindy C. Tiu FVP & CFO

9,346,922.42

2011 (Actual)

All other officers and directors as a group unnamed 11,541,657.95

(2) Compensation of Directors The directors receive per diems for attendance in meetings of the Board but do not receive

compensation from the Company for services rendered. There are no other standard arrangements, including consultancy contracts, pursuant to which any Director of the Company was compensated, or is to be compensated, directly or indirectly, for any services provided as a Director, including any additional amounts payable for committee participation, or special assignments, during the Company’s last completed fiscal year, and the ensuing year.

(3) Employment Contracts and Termination of Employment and Change-in-Control Arrangements There was no compensatory plan or arrangement with respect to named Executive Officers

that resulted or will result from the resignation, retirement or termination of such executive officer from a change-in-control of the Company.

(4) Warrants and Options Outstanding: Repricing No warrants or options on the Company’s shares of stock have been issued to the Directors or

Executive Officers as a form of compensation for services rendered.

73

Item 11. Security Ownership of Certain Beneficial Owners and Management

(1) Security Ownership of Certain Record and Owners The following are known to the registrant to be directly or indirectly the record or beneficial owner of

more than five per cent (5%) of registrant’s voting securities (registrant has only one class of voting security, i.e., common shares) as of December 31, 2012:

Class

Name and Address of Record Owner and Relationship with

Issuer

Name and Address of Beneficial Owner and

Relationship with Record Owner Citizenship

Number of Shares

Per cent Held

Common PCD Nominee Corporation G/F Makati Stock Exchange

Building, 6767 Ayala Avenue, Makati City

(stockholder)

(Please see note below) Filipino 241,054,768¹ 39.0229%

Common Star Equities Inc. 2/F JTKC Center

2155 Pasong Tamo Makati City

Same as record owner Filipino 174,260,047 28.2099%

Common Surewell Equities, Inc. 690-A Quirino Ave.

Tambo, Paranaque City


Common JTKC Equities, Inc. 2/F JTKC Center

2155 Pasong Tamo Makati City


NOTE: PCD Nominee Corporation (“PCDNC”) is a wholly-owned subsidiary of the Philippine Central Depository, Inc. The

beneficial owners of such shares of the Company registered under the name of PCDNC are PCD’s participants who hold the shares in there own behalf or in behalf of their clients. No PCD participant currently owns more than five per cent (5%) of the Corporation’s shares forming part of the PCNDC account except Fidelity Securities, Inc., viz:

Class Name and Address of Owner and Relationship with Issuer Citizenship Number of Shares Per cent Held

Common

Fidelity Securities, Inc.* 2/F JTKC Centre

2155 Pasong Tamo, Makati City

Filipino

152,412,684²

24.6732%

* Fidelity Securities, Inc. (“Fidelity”) is a registered broker and dealer in securities and holds the shares of the Company in favor of beneficial

owners who hold the shares in their own behalf or on behalf of their respective clients. Includes 587,000, 10,000,000 and 10,000,000 Treasury shares purchased from the stock market under the Buy-back Program that were

approved by the Board on September 21, 2012, September 16, 2011 and August 15, 2008, respectively. 2 Includes 79,381,952 shares in favor of beneficial owner JTKC Equities, Inc. which owns a total of 127,153,247 shares or per cent held of 20.5841% and 5,202,000 shares in favor of beneficial owner Surewell Equities, Inc. which owns a total of 139,450,290 shares or per cent held of 22.5748%.

As required by the Amended Rule on Minimum Public Ownership of The Philippine Stock Exchange, Inc., Article XVIII, Section 3. (e), the level of the Company’s public float is 22.9034% as of December 31, 2012.

74

(2) Security Ownership of Management (Individual Directors and Executive Officers)

Title of Class Name of Beneficial Owner Number of Shares

Nature of Legal & Beneficial Ownership Citizenship

Per cent of Class

Common Bansan C. Choa 855,800 Direct Filipino 0.13854% 40,557,334 Indirect 6.56559% Common Armin V. Demetillo 55,110 Direct Filipino 0.00892% Common Harris Edsel D. Jacildo 17,930 Direct Filipino 0.00290% Common Calixto V. Chikiamco 110 Direct Filipino 0.00002% Common Gilbert C. Gaw 902,764 Direct Filipino 0.14614% 9,755,000 Indirect 1.57918% Common Jose Joel Y. Pusta 110 Direct Filipino 0.00002% Common A. Bayani K. Tan 573,044 Direct Filipino 0.09277% Common Ben C. Tiu 1,199,033 Direct Filipino 0.19410% 15,447,735 Indirect 2.50074% Common Ruben C. Tiu 416,856 Direct Filipino 0.06748% 15,447,735 Indirect 2.50074% Common John Y. Tiu, Jr. 78,419 Direct Filipino 0.01269% 15,447,735 Indirect 2.50074% Common Gregorio T. Yu 110 Direct Filipino 0.00002% Common Bernadette Cindy C. Tiu 154,990 Direct Filipino 0.02509% 466,950 Indirect 0.07559%

The aggregate number of shares owned of record by all Directors and Executive Officers as a group

named herein as of December 31, 2012 is 101,376,765 common shares or approximately 16.41% of the Company’s common shares. This includes the indirect ownership of 97,122,489 shares representing 15.72% of the Company’s common shares.

(3) Voting Trust of 5% or More The Company is not aware of any voting trust agreement executed granting any person the right to

exercise the voting rights of a holder of 5% or more of the securities.

(4) Changes In Control There are no arrangements, existing or otherwise, which may result in a change in control of the

Company.

75

Item 12. Certain Relationships and Related Party Transactions

A related party is a person or entity that is related to the Group that is preparing its financial statements. A

person or a close member of that person’s family is related to Group if that person has control or joint control over the Group, has significant influence over the Group, or is a member of the key management personnel of the Group or of a parent of the Group. An entity is related to the Group if any of the following conditions applies: • The entity and the Group are members of the same group (which means that each parent, subsidiary

and fellow subsidiary is related to the others). • One entity is an associate or joint venture of the other entity (or an associate or joint venture of a

member of a group of which the other entity is a member). • Both entities are joint ventures of the same third party. • One entity is a joint venture of a third entity and the other entity is an associate of the third entity. • The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity

related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.

• The entity is controlled or jointly controlled by a person identified above. • A person identified above has significant influence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members, who may be expected to influence, or be influenced by, that person in their dealings with the Group and include that person’s children and spouse or domestic partner; children of that person’s spouse or domestic partner; and dependents of that person or that person’s spouse or domestic partner. A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Nature of relationship of the Group and its related parties are disclosed below:

Related Parties Nature of Relationship IRemit Singapore Pte Ltd (ISPL) Associate Hwa Kung Hong & Co., Ltd.(HKHCL) Associate Stockholders/ Directors Key Management Personnel

Advances to Related Parties Balance of advances to related parties as shown in the consolidated statement of financial position are summarized per category as follows:

Associates December 31, 2012 December 31, 2011

Amount/ Outstanding Amount/ Outstanding Volume Balances Volume Balances HKHCL Remittance PHP 5,155,165,031 PHP 60,187,956 PHP 5,148,060,359 PHP 29,136,840 Due from 5,223,594 8,192,341 6,382,656 8,715,507 Delivery fees 47,715,373 2,130,587 46,127,251 326,674 ISPL Remittance 7,203,835,917 105,072,529 7,211,603,671 64,141,580 Due from 457,714 10,332,965 996,076 16,034,603 Delivery fees 25,161,186 2,782,994 24,463,777 2,180,325

The following are the nature, terms and conditions of the following accounts:

• Remittance pertains to the principal amount of transaction accepted by a foreign associate office from a

remitter, delivery of which is fulfilled by the Parent Company to intended beneficiary in the Philippines. • Delivery fee is the share in service fee collected by the foreign subsidiary office along with the principal

amount of transaction. Account collected in 1-5 days from date of transaction. • Due from account refers to operating funds and marketing materials advanced to foreign associate

offices. It has a term of settlement within 1-30 days from date of funding. The amounts outstanding are non-interest bearing, unsecured and will be settled in cash. No guarantee was required. No provision made for doubtful accounts as these accounts are all collectible.

76

Affiliates December 31, 2012 December 31, 2011

Amount/ Outstanding Amount/ Outstanding Volume Balances Volume Balances Surewell Equities, Inc. PHP - PHP 254,182 PHP - PHP 270,616

• Surewell Equities, Inc. – This pertains to the cost of rental paid to Surewell Equities Pte. Ltd. (SEPL) for

the sharing of its office in Singapore under a sublease agreement with the Parent Company . SEPL is a foreign subsidiary office of Surewell Equities, Inc., one of the principal stockholders of the Parent Company. No security deposit paid and without provision for escalation. Rent is paid monthly.

The amounts outstanding are non-interest bearing, unsecured and will be settled in cash. No guarantees have been received. No provisions have been made for doubtful debts in respect of the amounts owed by the related parties.

Key Management Personnel December 31, 2012 December 31, 2011

Amount/ Outstanding Amount/ Outstanding Volume Balances Volume Balances Advances PHP 3,779,592 PHP 7,045,214 PHP - PHP -

The following are the nature, terms and conditions:

• Advances – This pertains to receivable from a key management personnel of the Parent Company subject to liquidation within company prescribed period of liquidation.

The amount outstanding is non-interest bearing, unsecured and will be settled in cash. No guaranty required. No provision was made for doubtful account as the account is deemed collectible.

Advances from Related Parties Balance of advances from related parties as shown in the consolidated statement of financial position are

summarized per category as follows: Key Management Personnel December 31, 2012 December 31, 2011

Amount/ Outstanding Amount/ Outstanding Volume Balances Volume Balances Advances PHP 218,417 PHP 218,417 PHP - PHP -


• Advances – This pertains to payable to director of the Parent Company subject to liquidation within

company prescribed period of liquidation. The amount outstanding is non-interest bearing, unsecured and will be settled in cash. No guaranty required.

Lease Contracts The Group leases office spaces from Oakridge Properties. Rent expense amounted to PHP 11.4 million and

PHP 9.2 million in 2012 and 2011, respectively. The Group entered into a sublease agreement with Surewell Equities Pte Ltd., one of the stockholders of the Parent Company. The Group also has deposits amounting to PHP 126.9 million and PHP 193.0 million with Sterling Bank of Asia, Inc. (A Savings Bank) as of December 31, 2012 and 2011, respectively. These deposits earned PHP 0.38 million, PHP 0.42 million, and PHP 1.12 million interest income in 2012, 2011 and 2010, respectively.

Investment in Associate The Group recognized dividend income amounting to PHP 4.9 million and PHP 0.59 million from dividends

declared by ISPL in 2012 and 2010, respectively. The Group has forty nine percent (49%) ownership interest on its associate and a carrying amount of investment amounted to PHP 19.5 million in 2012.

77

Remuneration of Key Management Personnel The remuneration of the directors and other members of key management personnel of the Group are set out

below in aggregate for each of the categories specified in PAS 24, Related Party Disclosures: 2012 2011 2010

Short-term employee benefits PHP 31,659,537 PHP 27,036,984 PHP 21,059,431 Post-employment benefits 1,260,378 1,571,444 549,541 32,919,915 28,608,428 21,608,972

Transaction with Retirement Fund The Group’s retirement benefit fund is maintained with Sterling Bank of Asia, Inc. (A Savings Bank), an

affiliate due to common stockholders, as trustee. The carrying amount and fair value of the fund amounted to PHP 30.3 million as of December 31, 2012. The funds were invested in private equity securities, deposits in banks and government debt securities. In 2012 and 2011, the Group made contributions to the fund amounting to PHP 6.2 million and PHP 6.9 million, respectively. Private equity securities includes PHP 808,100 of the Group’s own equity securities bought back from resigned employees who held such securities, under the special stock purchase program. Such transaction was authorized by the Board of Directors of I-Remit Inc. through its SSS program. The government debt securities consist of peso denominated and USD denominated securities. The Peso-denominated Government Securities of the I-Remit Retirement Fund were purchased from accredited counterparties of SBA-Trust Group. These counterparties are Banks and Investment Houses allowed to trade government securities. Existing Peso GS accounts are all Tax exempt and are currently lodged under the Tax Exempt RoSS Account of SBA-Trust Group with the Bureau of the Treasury (BTr). The USD denominated debt securities are currently lodged with the Philippine Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s accredited counterparties that are allowed to trade government securities.

The law firm of Tan Venturanza Valdez is among the firms engaged by the Company to render legal services. Atty. A. Bayani K. Tan, a Director of the Company, is a managing partner of this firm while Atty. Maria Cecilia V. Soria, the Corporate Secretary, and Atty. Darlene R. Vivas, Assistant Corporate Secretary, are associates. During the year, the Company paid Tan Venturanza Valdez certain legal fees that the Company believes to be reasonable for the services rendered.

78

PART IV. CORPORATE GOVERNANCE

Pursuant to Item V. of SEC Memorandum Circular No. 5, Series of 2013: Annual Corporate Governance Report, dated March 20, 2013, the Corporate Governance section in this Annual Report (SEC Form 17-A) has been deleted.

79

PART V. EXHIBITS AND SCHEDULES The other exhibits, as indicated in the Index to Exhibits, are either not applicable to the Company or require no answer. (a) Exhibit A – Aging of Consolidated Receivables, Unaudited, December 31, 2012 (b) Reports on SEC Form 17-C Reports under SEC Form 17-C (Current Report) that were filed during the last six (6) months covered

by this report and first quarter 2013:

Date Report

July 5, 2012

Purchase of Shares by Principal Shareholders at PHP 2.71 per share from the market: Principal Shareholder Shares

Purchased Total Shares After the Purchase

JTKC Equities, Inc. 10,542,000 127,153,247 Surewell Equities, Inc. 5,202,000 139,450,290 JPSA Global Services Co. 810,000 19,510,000

July 31, 2012 Election of directors in the 2012 Annual Stockholders’ Meeting and the appointment of officers and committee members in the subsequent organizational meeting of the Board of Directors Elected members of the Board of Directors “Please be advised that during the annual stockholders’ meeting of I-Remit, Inc. (the “Corporation”) held today, the following were elected as members of the Board of Directors of the Corporation for the year 2012-2013, to hold office as such until their successors shall have been duly elected and qualified:

Jose Joel Y. Pusta - Independent Director Gregorio T. Yu - Independent Director Calixto V. Chikiamco - Director Bansan C. Choa - Director Armin V. Demetillo - Director Gilbert C. Gaw - Director Harris E. D. Jacildo - Director A. Bayani K. Tan - Director Ben C. Tiu - Director John Y. Tiu, Jr. - Director Ruben C. Tiu - Director

During the same meeting, the shareholders approved the audited financial statements of the

Corporation as of year-end 2011, as well as the re-appointment of SyCip Gorres Velayo & Co. as the Corporation’s external auditor for the year 2012. In the organizational meeting of the Board of Directors held after the shareholders’ meeting, the following persons were elected officers of the Corporation for the year 2012-2013, to serve as such until their successors shall have been duly elected and qualified:

Bansan Choa - Chairman and Chief Executive Officer Harris E. D. Jacildo - President and Chief Operating Officer Maria Cecilia V. Soria - Corporate Secretary Darlene R. Vivas - Assistant Corporate Secretary Bernadette Cindy C. Tiu - First Vice-President and Chief Financial Officer Fitzgerald S. Duba - Compliance Officer

80

Also, during the aforesaid organizational meeting of the Board, the following directors were

elected as members of the various Committees for the year 2012-2013, to serve as such until their successors shall have been duly elected and qualified:

Executive Committee 1. Armin V. Demetillo (Chairman)

2. Bansan C. Choa 3. Gilbert C. Gaw 4. Harris E. D. Jacildo 5. Ben C. Tiu

Audit and Risk Committee 1. Gregorio T. Yu (Chairman)

2. Bansan C. Choa 3. John Y. Tiu, Jr. 4. Harris E. D. Jacildo

Nomination Committee 1. Bansan C. Choa

2. Armin V. Demetillo 3. Gregorio T. Yu

Compensation & Remuneration Committee 1. Bansan C. Choa

2. Armin V. Demetillo 3. Gregorio T. Yu”

September 21, 2012 Board Approval of Buy-back Program of up to 10 million shares September 27, 2012 I-Remit signed MOA with Small World Financial Services Group Ltd October 1, 2012 Addendum to Disclosure dated 27 September 2012 regarding I-Remit having signed a MOA with

Small World Financial Services Group Ltd October 5, 2012 Status of Audit Committee Charter in Compliance with SEC Memorandum Circular No. 4, Series

of 2012 January 28, 2013 I-Remit signed MOA with Megaworld Corporation January 29, 2013 I-Remit signed MOA with Palawan Pawnshop February 21, 2013 I-Remit signed MOA with Century Properties Group, Inc.

Exhibit A

Total Current 2-30 Days 31-60 Days Over 60 DaysAgents 1,067,065,055 1,067,065,055 - - - Couriers 94,426,347 - 94,426,347 - - Related Parties 25,824,702 - - - 25,824,702 Others 5,043,732 - - - 5,043,732

1,192,359,836 1,067,065,055 94,426,347 - 30,868,434

I-REMIT, INC. AND SUBSIDIARIESAging of Consolidated Receivables

UnauditedDecember 31, 2012

SIGNATURES

Pursuant to the requirements of Section 17 of the Code and Section 14 of the Corporation Code, this report is s~nedon behalf of the Issuer by the undersigned, thereunto duly authorized, in~( eti9fn 3By:

~ ANALJ,!:'_M.ANGELESAS7 Preskien: & Controlter

MARIAC~RIACorporate Secretary

SUBSCRIBED AND SWORN to before me thi~/~( ~ ~ (~. :L,affiants exhibiting to me theirCommunity Tax Certificates (CTC) and Competent Evidences ofl en Ity (CEI) as follows:

Name CTC No.; Date and Place of Issue CEIBANSAN C. CHOA 26981086; January 5, 2013; Paranacue City TIN 159-305-537HARRIS E. D. JACILDO 01710103;January8,2013; PasigCity TIN 126-967-441BERNADETTE CINDY C. TIU 01710107;January8,2013;PasiQCity TIN 203-338-548MARIA CECILIA V. SORIA 01368775; January 16, 2013; City of Manila TIN 908-911-456ANALIE M. ANGELES 01707697;Januarv8,2013;PasigCi~ TIN 102-789-384

'. /:. ..,.-_. r-

ANNA FRA CESC C. RESPICIONotary Public fm end in Makati CityAppoi~\ >7 ~·.·i~! - ~., /.: (2") i2-2013)

Comnii"c.:C:J ::;-, -.,~ _ ,,- ':-;iTlCei 31,20132/F J1"C .::)1.'-:', . - . '::;"";;no Roces Street

~"~:::'1_:" .: .y, i i:.i.;') t'\.~31"iiat\!:t-:-' .. ~.~:.~ ~~o':j'Jo. SOSS7

PTR No. 8"ti 17421 O~.03.20131 Pas!9 CityISP No. 913428 ( 12.213.121 Quezon City

Docum~ No.Page No.Book No:"""-.Series of 20~.

'/I~l1tlr www.myiremit.com

STATEMENT OF MANAGEMENT'S RESPONSIBILITYFOR FINANCIAL STATEMENTS

The Management of I-REMIT INC. AND SUBSIDIARIES is responsible for the preparation and fairpresentation of the consolidated financial statements for the years ended December 31, 2012 and2011, including the additional components attached therein, in accordance with the PhilippineFinancial Reporting Standards. This responsibility includes designing and implementing internalcontrols relevant to the preparation and fair presentation of consolidated financial statements thatare free from material misstatement, whether due to fraud or error, selecting and applyingappropriate accounting policies, and making accounting estimates that are reasonable in thecircumstances.

The Board of Directors reviews and approves the consolidated financial statements and submit thesame to the stockholders.

R.S. Bernaldo & Associates and SyCip Gorres Velayo & Co., the independent auditors,appointed by the stockholders for the period December 31, 2012 and 2011, respectively, haveexamined the consolidated financial statements of the Group in accordance with PhilippineStandards on Auditing, and in their reports to the stockholders, have expressed their opinion onthe fairness of presentation upon completion of such examination.

ANSAN C. CHOAan and Chief Executive Officer

TTJ!~""'DY C. TIU

ncial Officer

I-Remit, Inc.26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City 1605 PhilippinesTelephone: (632) 706-9999 and (632) 706-2737Facsimile: (632) 706-2767

;:

MAY 1 5 2013SUBSCRIBED AND SWORN to before me this 2013, affiants

exhibiting to me their Community Tax Certificates (CTC) and Competent Evidences of Identity(CEI) as follows:

Name CTC No., Date and Place of Issue CEIBANSAN C. CHOA 26981086; Januarv 5, 2013; Paranaoue City TIN 159-305-537HARRIS E. D. JACILDO 01710103; January 8, 2013; Pasiq City TIN 126-967-441BERNADETTE CINDY C. TIU 01710107; Januarv8,2013; PasiQCity TIN 203-338-548

Notary Public

Document No.Page No.Book No.Series of 2013.

COVER SHEET

S.E.C. Registration Number

(Company's Full Name)

(Business Address: No. Street CityITown/Province)

Mr. Bansan C. Choa 706-9999Contact Person Company Telephone Number

G1JMonth

GLJDay

lliI£IillFORM TYPE

[illMonth

GLJDay

Fiscal Year Annual Meeting

Secondary License Type, If Applicable

OIIJIIJJDept. Requiring this Doc. Amended Articles Number/Section

18


__ 11_-Total No. of Stockholders Domestic Foreign


File Number LCU

Document I.D. Cashier

STAMPS

Remarks = pis. Use black ink for scanning purposes

R.S. BERNALDO & ASSOCIATES

BOA/PRC No. 0300BSP AccreditedSEC Accreditation No. 0153-FR-1CDA CEA No. 013-AF

A correspondent firm of Panell Kerr Forster International

worldwide

INDEPENDENT AUDITORS' REPORT

The Board of Directors and StockholdersI-REMIT INC. AND SUBSIDIARIES26/F Discovery Centre, 25 ADB AvenueOrtigas Centre, Pasig City

'.' -.,' ~ e

We have audited the accompanying consolid ted financial statements ofI-REMIT INC. AND SUBSIDIARIES, which comprise the consolidated statement of financialposition as of December 31, 2012, and the consolidated statement of comprehensive income,consolidated statement of changes in equity and consolidated statement of cash flows for theyear then ended and a summary of significant accounting policies and other explanatoryinformation.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with Philippine Financial Reporting Standards, and for suchinternal control as Management determines is necessary to enable the preparation ofconsolidated financial statements that are free from material misstatement, whether due tofraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based onour audit. We conducted our audit in accordance with Philippine Standards on Auditing.Those standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the consolidated financial statements arefree from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on theauditors' judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity's preparation and fairpresentation of the consolidated financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimatesmade by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

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

18/F Cityland Condominium 10 Tower 1,6815 Ayala Avenue cor. H.v. Dela Costa St., Makati City, Philippines 1200TEL +63 2 812-1718 to 24 FAX +632 813-6539 E-MAil [email protected] WEBSITE www.rsbernaldo.com

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of I-REMIT INC AND SUBSIDIARIES as of December 31, 2012, and itsfinancial performance and cash flows for the years then ended in accordance with PhilippineFinancial Reporting Standards.

Emphasis of Matter

We draw attention to Note 2.01, which describe the early adoption of amendments to PAS 1which clarifies the requirements for providing comparative information when an entityprovides financial statements beyond the minimum comparative information requirements.As a result of the early adoption, the Group opted not to present related notes to accompanythe opening consolidated statement of financial position. Our opinion is not qualified withregards to this matter.

Without further qualifying our oprruon, we draw attention to Note 35 which states that noappropriation was made for the treasury stocks for the years 2011 and 2010; the goodwill isnot carried at its historical cost and the movement is due to translation adjustment, whichresulted to adjustments in cumulative translation account; and in the 2008 consolidatedfinancial statements, the beginning retained earnings of IRCGmbH, which is 74.90% ownedsubsidiary of the Parent Company in 2008, is taken up as an adjustment to trade receivables.

Other Matter

The consolidated financial statements of the Group as of December 31, 2011, were auditedby another auditor whose report dated March 23, 2012, expressed an unqualified opinion onthose statements.

As part of our audit of the 2012 consolidated financial statements, we also audited theadjustments described in Note 35 that were applied to amend the 2011 consolidated financialstatements. In our opinion, such adjustments are appropriate and have been properly applied.We were not engaged to audit, review, or apply any procedures to the 2011 consolidatedfinancial statements of the Group other than with respect to the adjustments and,accordingly, we do not express an opinion or any other form of assurance on the 2011consolidated financial statements taken as a whole.

R.S. BERNALDO & ASSOCIATESBOA/PRC No. 0300Valid until December 31, 2015SEC Group A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSP Group B AccreditedValid until February 14, 2014CDA CEA No. 013-AFValid until October 25, 2013

Ro!n~oManaging PartnerCPA Certificate No. 25927SEC Group A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSP Group B AccreditedValid until February 14, 2014BIR Accreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No. 109-227-722PTR No. 3676450Issued on January 9, 2013 at Makati City

May 15, 2013

I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF FINANCIAL POSITIONDecember 31, 2012(With Comparative Figures for 2011 and 2010)(In Philippine Peso)

NOTES 2012

ASSETS

Current AssetsCash and cash equivalentsTrade and other receivablesFinancial assets at fair value through profit or lossPrepayments and other current assets

1,062,120,0471.192,359.836

210,180,34723,901,932

891,235,6231,031,284,146

125,226,26428,928,836

883,817,9471,126,047,045

102,905,29436,346,603

78910

2,488.562.162 2,076,674,869 2,149,116,889

Non-current AssetsInvestments in associatesProperty and equipment - netIntangible assets - netRetirement assetDeferred tax assetOther non-current assets

11 19,492,351 23,064,091 20,932,23612 23,495,462 19,207,458 27,013,30813 112.893.853 112,892,135 113,522,93723 2,232,135 368,39430 6,893,941 4,980,348 4,232,92014 31,413,351 38,904,367 42,987,796

196,421.093 199,416,793 208,689,197

2,684,983,255 2,276,091,662 2,357,806,086TOTAL ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current LiabilitiesBeneficiaries and other payablesIncome tax payableLoans payable

519,839,2771,801,235

925,000,000

240.081,1526.563,877

666,000,000

199,496,9156,942,551

877 ,000,000

15

16

1,446,640,512 912,645,029 1,083,439,466

Non-current LiabilitiesDeferred tax liabilitiesRetirement benefit obligation

30 1,217,135 31,969 29,765778,261

1.217,135 31,969 808,026

1,447,857,647 912.676,998 1,084,247,492TOTAL LIABILITIES

S T 0 C K H 0 L D E R S' E QUI T Y

Capital Stock 17

Additional Paid-In Capital 17

Unappropriated Retained Earnings

Appropriated Retained Earnings 17

Cumulative Translation Adjustment 17

Treasury Stock 17

617.725.800

391,232,478

265,296,958

69,209,688

(37,129,628)

(69,209,688)

617,725,800

391,232,478

370,974,049

52,987,208

(16,517,663)

(52,987,208)

562,417,000

429,513,501

301,085,527

40,115,150

(20,602,890)

(40,115,150)

Total Equity Attributable to Equity Holders of the Parent

Non-controlling interest

1,237,125,608 1,363,414,664 1,272,413,138

1,145,456

TOTAL STOCKHOLDERS' EQUITY 1.237.125,608 1,363,414,664 1,273,558,594

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,684,983,255 2,276,091,662 2,357,806,086

(See Notes to Consolidated Financial Statements)

NOTES 2012

REVENUES 18 771,640,852 761,750,514

COST OF SERVICES 19 209,915,076 204,177,261

GROSSPROFIT 561,725,776 588,432,200 557,573,253

NET TRADING GAINS (LOSSES) 9 17,583,669 (3,064,068) 2,475,649

OTHER INCOME 20 15,948,890 43,678,138 27,093,944

595,258,335 629,046,270 587,142,846

OPERATING EXPENSES 21 496,810,798 447,324,486 435,915,471

FINANCECOSTS 16 46,068,423 38,322,540 29,213,843

EQUITY IN NET EARNINGS 11 1,324,830 2,131,855 2,504,455

PROFITBEFORETAX FROM

CONTINUING OPERATION 53,703,944 145,531,099 124,517,987

INCOME TAXES 29 23,177,697 35,897,652 28,298,852

PROFIT(LOSS) FROM:

CONTINUING OPERATION 30,526,247 109,633,447 96,219,135

DISCONTINUED OPERATION 28 26,429,749 (30,304,899)

PROFIT 30,526,247 136,063,196 65,914,236

OTHERCOMPREHENSIVEINCOMETranslation adjustment (20,611,965) 3,983,494 (15,345,110)

TOTAL COMPREHENSIVEINCOME 9,914,282 140,046,690 50,569,126

ATTRIBUTABLE TO:Equity holders of the parent 9,914,282 . 142,154,607 63,488,250Non-controlling interest (2,107,917) (12,919,124)

9,914,282 140,046,690 50,569,126

EARNINGSPERSHARE

Basic Earnings per Share fromContinuing and DiscontinuedOperations 27 0.05 0.23 0.13

Basic Earnings per Share fromContinuing Operations 27 0.05 0.18 0.16


I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF COMPREHENSIVE INfCOMFor the Year Ended December 31, 2012(With Comparative Figures for 2011 and 2010)(In Philippine Peso)

I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the Year Ended December 31, 2012(With Comparative Figures for 2011 and 2010)IIn Philippine Peso)

EquityUnappropriated Appropriated Cumulative Attributable to Non-

Additional Paid- Retained Retained Translation Treasury Equity Holders of controllingNotes Capital Stock in Capital Earnings Earnings Adjustment Stock the Parent Interest Total

Balance at January 1, 2010, as previously stated 17 562,4 i7,000 429,513,501 306,946,085 (20,398,998) (40,115,150) 1,238,362,438 14,064,580 1,252,427,018Correction of prior period errors 17,35 (56,808,252) 40,115,150 13,859,085 (2,834,017) (2,834,017)

Balance at January 1, 2010, as restated 562,417,000 429,513,501 250,137,833 40,115,150 (6,539,913) (40,115,150) 1,235,528,421 14,064,580 1,249,593,001Profit 77,551,227 77,551,227 (11,636,991) 65,914,236Other comprehensive income 17 (14,062,977) (14,062,977) (1,282,133) (15,345,110)Cash dividends 17 (26,603,533) (26,603,533) (26,603,533)

Balance at December 31,2010, as restated 17 562,417,000 429,513,501 301,085,527 40,115,150 (20,602,890) (40,115,150) 1,272,413,138 1,145,456 1,273,558,594Profit 138,069,380 138,069,380 (2,006,184) 136,063,196Other comprehensive income 17 4,085,227 4,085,227 (101,733) 3,983,494Stock dividends 17 55,308,800 (55,308,800)Purchase of non-controlling interest 1 (38,281,023) (38,281,023) 962,461 (37,318,562)Purchase of own stock 17 (12,872,058) (12,872,058) (12,872,058)Appropriation of retained earnings 17,35 (12,872,058) 12,872,058

Balance at December 31, 2011, as restated 17 617,725,800 391,232,478 370,974,049 52,987,208 (16,517,663) (52,987,208) 1,363,414,664 1,363,414,664Profit 30,526,247 30,526,247 30,526,247Other comprehensive income 17 (20,611,965) (20,611,965) (20,611,965)Cash dividends 17 (119,980,858) (119,980,858) (119,980,858)Purchase of own stock 17 (16,222,480) (16,222,480) (16,222,480)Appropriation of retained earnings 17 (16,222,480) 16,222,480

Balance at December 31, 2012 17 617,725,800 391,232,478 265,296,958 69,209,688 (37,129,628) (69,209,688) 1,237,125,608 1,237,125,608


"I ("

j • Ir-',.1 '

I-REMIT INC. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH flOWSFor the Year Ended December 31,2012(With Comparative Figures for 2011 and 2010)(In Philippine Peso)

<' ,

CJ C .: I V L 11Cl-lli'T'SE O. DEL r:OSAR10

NOTES 2012

CASH FLOWS FROM OPERATINGACTIVITIESProfit before tax from continuing operationProfit (Loss) before tax from discontinued operation

53,703,944 145,531,09926,429,749

2010(As restated)

124,517,987(30,304,899)

Profit before taxAdjustments for:Finance costsDepreciationLoss on write-off of assetsPost-employment benefitsUnrealized foreign exchange (gain) loss - netAmortizationLoss (Gain) on sale of property and equipmentEquity in net earnings of associatesFinance incomeUnrealized market valuation (gain) losson financial assets at fair valuethorugh profit or loss (FVPL)

Gain from sale of assets of discontinued operations

16122121,232013121120

928

125,561,124Operating cash flows before changesin working capital

Decrease (Increase) in operating assets:Trade and other receivablesFinancial assets at FVPLPrepayments and other current assetsOther non-current assets

Increase (Decrease) in beneficiaries and other payables

53,703,944

46,068,42311,717,73110,040,8864,294,7043,113,114941,167124,567

(1,324,830)(12,947,419)

(17,583,669)

98,148,618

(164,277,676)(67,370,414)(5,013,982)7,491,016

279,846,425

171,960,848

38,322,54011,261,2952,058,6165,748,578(1,205,505)2,006,374

(3,954)(2,131,855)(13,862,222)

(3,064,068)(65,139,395)

145,951,252

(1,315,200)148,094,9965,024,8243,700,81640,663,944

94,213,088

29,213,84312,544,844

2,376,127(1,769,202)1,525,720

(2,504,455)(12,514,490)

2,475,649

(57,544,136)111,406,287(1,246,688)(3,361,378)(68,971,371 )

Cash generated from operationsContributions to retirement fundIncome taxes paid

23148,823,987(6,158,445)(28,668,766)

342,120,632(6,895,233)(37,021,550)

105,843,838(5,229,490)(55,678,854)

Net cash from operating activities 113,996,776 298,203,849 44,935,494

CASH FLOWS FROM INVESTINGACTIVITIESFinance income receivedDividends received from associateProceeds from disposals of property and equipmentAdditions to softwareAdditions to property and equipmentAcquisition of non-controlling interest in subsidiaries

20111213121

13,036,2914,896,570361,743(945,187)

(16,772,225)

13,749,663

456,143(2,034,070)(7,110,179)(37,318,562)

12,514,490596,3811,610,572(852,274)

(14,039,160)

Net cash from (used in) investing activities (169,991)577,192 (32,257,005)

CASH FLOWS FROM FINANCINGACTIVITIESProceeds from loansPayment for buy-back of sharesFinance cost paidPayment of cash dividendsPayments of loans

1617161716

925,000,000(16,222,480)(46,156,723)(119,980,858)(666,000,000)

666,000,000(12,872,058)(38,402,247)

76,639,939 (262,274,305)

(877,000,000)

877,000,000

(29,396,496)(26,603,533)(930,000,000)

Net cash from (used in) financing activities (109,000,029)

EFFECTSOF FOREIGNEXCHANGERATECHANGESON CASH AND CASH EQUIVALENTS (20,329,483) 3,745,137 (14,761,174)

(78,995,700)NET INCREASE(DECREASE)IN CASHAND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTSAT BEGINNINGOF YEAR

170,884,424 7,417,676

891,235,623 883,817,947 962,813,647

CASH AND CASH EQUIVALENTSAT ENDOF YEAR 883,817,9471,062,120,047 891,235,623


I-REMIT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(With Comparative Figures for 2011 and 2010)

1. CORPORATE INFORMATION

I-Remit Inc. (the “Parent Company”) was incorporated in the Philippines and was

registered with the Securities and Exchange Commission (SEC) on March 5, 2001 and

started commercial operations on November 11, 2001. The principal activities of the

Parent Company and its subsidiaries (collectively referred to as “the Group”), except

Power Star Asia Group Limited (PSAGL), are engaged in the business of fund transfer

and remittance services of any form or kind of currencies or monies, either by

electronic, telegraphic, wire or any other mode of transfer; delivery of such funds or

monies, both in domestic and international market, by providing either courier or freight

forwarding services; and conduct of foreign exchange transactions as may be allowed

by law and other allied activities relative thereto. PSAGL, on the other hand provides

financial advisory and other services.

The Parent Company is 29.18% owned by STAR Equities, Inc., 21.29% owned by

JTKC Equities, Inc. 23.35% owned by Surewell Equities, Inc., 3.27% owned by JPSA

Global Services Co., and the rest by the public. The Parent Company is the ultimate

parent Company of the Group.

The Parent Company, which is domiciled in the Philippines, has its registered office and

principal place of business at the 26/F Discovery Centre, 25 ADB Avenue, Ortigas

Center, Pasig City. The Parent Company’s common shares were listed with the

Philippine Stock Exchange on October 17, 2007.

The Parent Company’s subsidiaries and associates follows:

Subsidiaries

Country of

Incorporation

Functional

Currency

Effective Percentage of

Ownership

2012 2011 2010

International Remittance

(Canada) Ltd. (IRCL) Canada

Canadian

Dollar (CAD)

100% 100% 100%


(LSML) Hong Kong

Hong Kong

Dollar (HKD)

100% 100% 100%


(IGRL)

United

Kingdom

Great Britain

Pound (GBP)

100% 100% 100%

I-Remit Australia Pty Ltd (IAPL) Australia

Australian

Dollar (AUD)

100% 100% 100%


(WEPL) Australia

Australian

Dollar (AUD)

100% 100% 65%

IREMIT Remittance Consulting

GmbH (IRCGmbH) Austria Euro (EUR)

100% 100% 74.9%


(INZL) New Zealand

New Zealand

Dollar (NZD)

100% 100% 100%


(PSAGL) Hong Kong

Hong Kong

Dollar (HKD)

100% 100% 100%

K.K. Iremit Japan (KKIJ) Japan

Japanese

Yen (JPY)

100% 100% -

2

Associates

Country of

Incorporation

Functional

Currency

Effective Percentage of

Ownership

2012 2011 2010

IRemit Singapore Pte. Ltd. (ISPL)

Singapore Singapore

Dollar (SGD)

49% 49% 49%

Hwa Kung Hong & Co., Ltd.

(HKHCL)

Taiwan New Taiwan

Dollar (NTD)

49% 49% 49%

The Parent Company’s ownership to WEPL is consists of direct voting interest of 70%

and indirect voting interest through IAPL of 30%

IRCGmbH is formerly known as IREMIT EUROPE Remittance Consulting AG (IERCAG).

On March 25, 2011, the Parent Company acquired 35% ownership interest in WEPL

from the non-controlling stockholders for a consideration of P12,303,818.

The carrying value of the non-controlling interest at acquisition was P1,090,315.

The difference of P11,213,503 between the consideration paid and the carrying value

of the non-controlling interest was recognized as equity adjustment and deducted from

‘Capital paid-in excess of par value’. The acquisition increased the Parent Company’s

effective ownership in WEPL to 100% from 65%.

On May 5, 2011, the Parent Company acquired the 25.10% ownership interest in

IERCAG from the non-controlling stockholder for a consideration of P25,014,743.

The carrying value of the non-controlling interest at acquisition was P2,052,777

deficit. The difference of P27,067,520 between the consideration paid and the

carrying value of the non-controlling interest was recognized as equity adjustment and

deducted from additional paid-in capital. The acquisition increased the Parent

Company’s ownership interest in IERCAG to 100% from 74.90%.

Consequently, on October 11, 2011, IERCAG changed its legal name to IREMIT

Remittance Consulting GmbH (IRCGmbH) and changed its legal status from a stock

company to a limited liability company. It also amended its Articles of Incorporation to

include management consultancy in its business activities.

On June 10, 2011, the Parent Company incorporated KKIJ in Japan to provide

remittance services. KKIJ has started its commercial operations last May 23, 2012.

2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of

new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in

general includes all applicable PFRS, Philippine Accounting Standards (PAS), and

Interpretations issued by the Philippine Interpretations Committee (PIC), Standing

Interpretations Committee (SIC) and International Financial Reporting Interpretations

Committee (IFRIC) which have been approved by the FRSC and adopted by SEC.

These new and revised PFRS prescribe new accounting recognition, measurement and

disclosure requirements applicable to the Group. When applicable, the adoption of the

new standards was made in accordance with their transitional provisions, otherwise

the adoption is accounted for as change in accounting policy under PAS 8, Accounting

Policies, Changes in Accounting Estimates and Errors.

3

2.01 New and Revised PFRSs with Material Effect on Amounts Reported in the Current

Year (and/or Prior Years)

The following new and revised PFRSs have been applied in the current period and had

materially affected the amounts reported in these financial statements. Details of other

new and revised PFRSs applied in these financial statements that have had no material

effect on the financial statements are set out in section 2.02.

PAS 1, Presentation of Financial Statements – The improvements in this PFRS

clarifies that when an entity changes an accounting policy, or makes a

retrospective restatement or reclassifications it shall present:

a) the opening statement of financial position should be presented as at the

beginning of the required comparative period; and

b) related notes are not required to accompany this opening statement of financial

position.

As a result of early adoption, the Group opted not to present related notes to

accompany the opening consolidated statement of financial position.

2.02 New and Revised PFRSs Applied with No Material Effect on the Financial

Statements

The following new and revised PFRSs have also been adopted in these financial

statements. The application of these new and revised PFRSs has not had any material

impact on the amounts reported for the current and prior years but may affect the

accounting for future transactions or arrangements.

PFRS 7 (Revised), Financial Instruments: Disclosures – Transfers of Financial

Assets

The amendments to PFRS 7 increase the disclosure requirements for transactions

involving transfers of financial assets. These amendments are intended to provide

greater transparency around risk exposures when a financial asset is transferred but

the transferor retains some level of continuing exposure in the asset.

The amendments also require disclosures where transfers of financial assets are not

evenly distributed throughout the period.

The effective date of the amendment is July 1, 2011, with earlier application

permitted.

PAS 12, Income Taxes – Deferred Tax: Recovery of Underlying Assets

PAS 12 requires an entity to measure the deferred tax relating to an asset

depending on whether the entity expects to recover the carrying amount of the

asset through use or sale. It can be difficult and subjective to assess whether

recovery will be through use or through sale when the asset is measured using the

fair value model in PAS 40, Investment Property. The amendment provides a

practical solution to the problem by introducing a presumption that recovery of the

carrying amount will, normally be through sale.

As a result of the amendments, SIC-21, Income Taxes – Recovery of Revalued

Non-Depreciable Assets would no longer apply to investment properties carried at

fair value. The amendments also incorporate into PAS 12 the remaining guidance

previously contained in SIC-21, which is accordingly withdrawn.

The amendments are effective from January 1, 2012. Earlier application is

permitted.

4

2.03 New and Revised PFRSs in Issue but Not Yet Effective

The Group will adopt the following standards and interpretations enumerated below

when they become effective. Except as otherwise indicated, the Group does not

expect the adoption of these new and amended PFRS to have significant impact on the

financial statements.


Assets




the transferor retains some level of continuing exposure in the asset. The

amendments also require disclosures where transfers of financial assets are not



permitted.

PFRS 9, Financial Instruments: Classification and Measurement

PFRS 9, Financial Instruments, issued in November 2009 and amended in October

2010 introduces new requirements for the classification and measurement of

financial assets and financial liabilities and for derecognition.

PFRS 9 requires all recognised financial assets that are within the scope of

PAS 39, Financial Instruments: Recognition and Measurement, to be subsequently

measured at amortized cost or fair value. Specifically, debt investments that are

held within a business model whose objective is to collect the contractual cash

flows, and that have contractual cash flows that are solely payments of principal

and interest on the principal outstanding are generally measured at amortized cost

at the end of subsequent accounting periods. All other debt investments and

equity investments are measured at their fair values at the end of subsequent

accounting periods.

The most significant effect of PFRS 9 regarding the classification and measurement

of financial liabilities relates to the accounting for changes in fair value of a

financial liability (designated as at fair value through profit or loss) attributable to

changes in the credit risk of that liability. Specifically, under PFRS 9, for financial

liabilities that are designated as at fair value through profit or loss, the amount of

change in the fair value of the financial liability that is attributable to changes in the

credit risk of that liability is recognized in other comprehensive income, unless the

recognition of the effects of changes in the liability's credit risk in other

comprehensive income would create or enlarge an accounting mismatch in profit or

loss. Changes in fair value attributable to a financial liability's credit risk are not

subsequently reclassified to profit or loss. Previously, under PAS 39, the entire

amount of the change in the fair value of the financial liability designated as at fair

value through profit or loss was recognized in profit or loss.

PFRS 9 is effective for annual periods beginning on or after January 1, 2015, with

earlier application permitted.

5

PFRS 10, Consolidated Financial Statements

The Standard establishes the principles for the presentation and preparation of

consolidated financial statements when an entity controls one or more other

entities.

The Standard defines the principle of control and establishes control as the basis

for determining which entities are consolidated in the consolidated financial

statements. This PFRS will supersede PAS 27, Consolidated Financial Statements

and Separate Financial Statements and SIC 12, Consolidation – Special Purpose

Entities.



PFRS 11, Joint Arrangements

The Standard requires a party to a joint arrangement to determine whether the type

of joint arrangement is joint operation or joint venture, by assessing its rights and

obligations arising from the arrangement.

A joint venturer is required to recognise an investment and to account for that

investment using the equity method in accordance with PAS 28, Investments in

Associates and Joint Ventures, unless the entity is exempted from applying the

equity method as specified in the standard. Joint operators are required to

recognise and measure the assets and liabilities (and recognise the related revenues

and expenses) in relation to its interest in the arrangement in accordance with

relevant PFRSs applicable to the particular assets, liabilities, revenues and

expenses.



PFRS 12, Disclosure of Interests in Other Entities

The Standard applies to entities that have an interest in a subsidiary, a joint

arrangement, and an associate or an unconsolidated structured entity. It benefits

the users by identifying the profit or loss and cash flows available to the reporting

entity and determining the value of current or future investment in the reporting

entity.



PFRS 13, Fair Value Measurement

The Standard explains how to measure fair value for financial reporting. It defines

fair value as the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement

date. It emphasizes that fair value is market-based not an entity-specific

measurement; hence an entity’s intention to hold an asset or to settle or otherwise

fulfil a liability is not relevant when measuring fair value. It was developed to

eliminate inconsistencies of fair value measurements dispersed in various existing

PFRSs. It clarifies the definition of fair value, provides a single framework for

measuring fair value and enhances fair value disclosures.

PFRS 13 is effective for annual periods beginning on or after January 1, 2013 with


6

PAS 1, Presentation of Items of Other Comprehensive Income

To improve the presentation of items of Other Comprehensive Income (OCI), the

IASB amended IAS 1 to require entities to group items presented in the OCI on the

basis whether they would be reclassified to (recycled to) profit or loss

subsequently.

The amendments did not address which items should be presented in the OCI and

did not change the option to present OCI items either before or net of tax.

Those amendments are effective for annual periods beginning on or after

July 1, 2012. Earlier application is permitted.

PAS 19 (Amended), Employee Benefits

Significant changes to this standard include removal of corridor approach;

immediate recognition of past service costs; presentation of remeasurements on

defined benefit plans in other comprehensive income; new recognition criteria on

termination benefits; and improved disclosure requirements.

The amended standard comes into effect for accounting periods beginning on or

after January 1, 2013. Earlier application is permitted.

Revised PAS 19, Employee Benefits

The revised PAS 19 ranges from fundamental changes such as removing the

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

clarifications and rewording. The revised standard also requires new disclosures

such as, among others, a sensitivity analysis for each significant actuarial

assumption, information on asset-liability matching strategies, duration of the

defined benefit obligation, and disaggregation of plan assets by nature and risk.

The Group reviewed its existing employee benefits and determined that the

amended standard has significant impact on its accounting for retirement benefits.

The Group obtained the services of an external actuary to compute the impact to

the financial statements upon adoption of the standard. The effects are detailed

below:

As of As of As of

December 31, 2012 December 31, 2011 January 1, 2011

Increase (decrease) in:

Consolidated statement of financial position

Net defined benefit

asset/liability P 17,231 P 1,076,750 P 5,872,169

Deferred tax asset/liability 5,169 323,025 1,761,651

Other comprehensive income (755,457) (3,975,741) -

Retained earnings 777,857 5,375,516 7,633,820

2012 2011

Consolidared statement of comprehensive income

Net benefit cost P (304,062) P (819,678)

Income tax expense 317,856 1,438,626

Profit for the year (13,794) (618,948)

Attributable to the owners of the Parent Company (13,794) (618,948)

Attributable to non-controlling interests - -

7

PAS 27 (Revised), Separate Financial Statements

The amendments to PAS 27 are result of the completion and issuance of a new

standard on consolidation, the PFRS 10, Consolidated Financial Statements.

As a result, PAS 27 will now be titled as Separate Financial Statements containing

requirements relating only to separate financial statements.

The amended standard is applicable to annual periods beginning on or after

January 1, 2013. Earlier application is permitted.

PAS 32 (Amended), Financial instruments: Presentation – Offsetting of Financial

Assets and Liabilities

The amendment provided additional application guidance for offsetting in

accordance with PAS 32. The amendments clarified the meaning of “currently has

a legally enforceable right of set-off” and that some gross settlement systems may

be considered equivalent to net settlement. These amendments are effective for

annual periods beginning on or after January 1, 2014 and should be applied

retrospectively. Earlier application is permitted.

Improvements to PFRS (2011) – Effective for annual periods beginning on or after







b) related notes are not required to Group this opening statement of financial

position.

The objective of financial reporting was also updated to reflect the conceptual

framework.

PAS 16, Property Plant and Equipment – It clarifies that servicing equipment should

be classified as property plant and equipment when it is used during more than one

period and as inventory otherwise.

PAS 32, Financial instruments: Presentation – It clarifies that income tax relating to

distributions to holders of an equity instrument and income tax relating to

transaction costs of an equity transaction should be accounted for in accordance

with PAS 12, Income Taxes.

PAS 34, Interim Financial Reporting – It clarifies that the requirements in PAS 34,

Interim Financial Reporting relating to segment information for total assets for each

reportable segment in order to enhance consistency with the requirements in

PFRS 8, Operating Segments. The amendment clarifies that total assets for a

particular reportable segment need to be disclosed only when the amounts are

regularly provided to the chief operating decision maker and there has been a

material change in the total assets for that segment from the amount disclosed in

the last annual financial statements.

8

3. BASIS FOR THE PREPARATION AND PRESENTATION OF CONSOLIDATED FINANCIAL

STATEMENTS

3.01 Statement of Compliance

The consolidated financial statements have been prepared in conformity with PFRS and

are under the historical cost convention except for certain financial assets carried at

fair value and amortized cost.

3.02 Functional and Presentation Currency

Items included in the consolidated financial statements of the Group are measured

using Philippine Peso (P), the currency of the primary economic environment in which

the Group operates (the “functional currency”).

The Group chose to present its consolidated financial statements using its functional

currency.

3.03 Basis of Consolidation

The consolidated financial statements include the financial statements of the Parent

Company and its subsidiaries.

The consolidated financial statements incorporate the financial statements of the

Parent Company and the entities controlled by the Parent Company (its subsidiaries) up

to December 31 each year. Control is achieved when the Parent Company has the

power to govern the financial and operating policies of an investee entity so as to

obtain benefits from its activities.

Subsidiaries are consolidated from the date when control is transferred to the Parent

Company and ceases to be consolidated from the date when control is transferred out

of the Parent Company.

Subsidiaries are entities controlled by the Group. Control exists when the Group has

the power, directly or indirectly, to govern the financial and operating policies of an

entity so as to obtain benefit from its activities. In assessing control, potential voting

rights that are presently exercisable or convertible are taken into account.

The financial statements of the subsidiaries are included in the consolidated financial

statements from the date when the Group obtains control, and continue to be

consolidated until the date when such control ceases.

On acquisition, the assets and liabilities and the contingent liabilities of a subsidiaries

are measured at their fair values at the date of acquisition. Any excess of the cost of

acquisition over the fair values of the assets acquired is recognized as a goodwill.

Any deficiency of the cost of acquisition below the fair values of the identifiable net

assets acquired (i.e. discount on acquisition) is credited to the profit and loss in the

period of acquisition.

Goodwill is initially measured at cost, being the excess of the aggregate of fair value of

the consideration transferred and the amount recognized for non-controlling interest

over the net identifiable assets acquired and liabilities assumed. If this consideration is

lower than the fair value of the net assets of the subsidiary acquired, the difference is

recognized in profit or loss.

9

After initial recognition, goodwill is measured at cost less any accumulated impairment

losses. For the purpose of impairment testing, goodwill acquired in a business

combination is, from the acquisition date, allocated to each of the Group’s cash-

generating units (CGU) that are expected to benefit from the combination, irrespective

of whether other assets or liabilities of the acquire are assigned to those units.

The consolidated financial statements are prepared using uniform accounting policies

for like transactions and other events in similar circumstances. Inter-Group balances

and transactions, including inter-Group profits and unrealized profits and losses, are

eliminated. When necessary, adjustments are made to the financial statements of the

subsidiary to bring the accounting policies used in line with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated during

consolidation.

Non-controlling interests represent the portion of profit or loss and net assets not held

by the Group and are presented in the consolidated statements of income, consolidated

statements of comprehensive income and within equity in the consolidated statements

of financial position, separately from the Group’s equity attributable to equity holders

of the Parent Company.

Upon the loss of control, the Group derecognizes the assets and liabilities of the

subsidiaries, any non-controlling interests and other components of equity related to

the subsidiaries. Any surplus or deficit arising on the loss of controls is recognized in

profit or loss. If the Group retains any interest in the previous subsidiary, then such

interest is measured at fair value at the date the control is lost. Subsequently, it is

accounted for as entity-accounted investee or as an available-for-sale financial asset

depending on the level of influence retained.

4. SIGNIFICANT ACCOUNTING POLICIES

Principal accounting and financial reporting policies applied by the Group in the

preparation of its consolidated financial statements are enumerated below and are

consistently applied to all the years presented, unless otherwise stated.

4.01 Segment Information

An operating segment is a component of the Group: (a) that engages in business

activities from which it may earn revenues and incur expenses, including revenues and

expenses relating to transactions with other components of the Group; (b) whose

operating results are regularly reviewed by the Group’s chief operating decision maker

to make decisions about resources to be allocated to the segment and assess its

performance; and (c) for which discrete financial information is available.

The Group reports separately, information about an operating segment that meets any

of the following quantitative thresholds: (a) Its reported revenue, including both sales

to external customers and inter-segment sales or transfers, is 10% or more of the

combined revenue, internal and external, of all operating segments, provided that;

(b) The absolute amount of its reported profit or loss is 10% or more of the greater, in

absolute amount, of the combined reported profit of all operating segments that did not

report a loss and the combined reported loss of all operating segments that reported a

loss; and (c) Its assets are 10% or more of the combined assets of all operating

segments.

Operating segments that do not meet any of the quantitative thresholds may be

considered reportable, and separately disclosed, if management believes that

information about the segment would be useful to users of the financial statements.

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For management purposes, the Group is currently organized into three business

segments: Third Party Transactions, Retail Solutions and Special Projects.

These divisions are the basis on which the Group reports its primary segment

information.

4.02 Financial Assets

Financial assets are initially measured at fair value, plus transaction costs, except for

those financial assets classified as at fair value through profit or loss, which are initially

measured at fair value.

Financial assets that are subsequently measured at amortized cost, and where the

purchase or sale are under a contract whose terms require delivery of such within the

timeframe established by the market concerned are initially recognized on the trade

date.

Financial assets are classified into the following specified categories: financial assets

‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-

for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends

on the nature and purpose of the financial assets and is determined at the time of initial

recognition.

The Group’s financial assets include cash and cash equivalents, financial assets at fair

value through profit or loss, trade and other receivables and refundable deposits.

4.02.01 Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a debt

instrument and of allocating finance income over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash receipts including

all fees on points paid or received that form an integral part of the effective interest

rate, transaction costs and other premiums or discounts, through the expected life of

the debt instrument, or, where appropriate, a shorter period to the net carrying amount

on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than

those financial assets carried at fair value through profit or loss.

4.02.02 Amortized Cost

Amortized cost is computed using the effective interest rate method less any

allowance for impairment and principal repayment or reduction. The calculation takes

into account any premium or discount on acquisition and includes transaction costs

and fees that are an integral part of effective interest rate.

4.02.03 Financial Assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for

trading or it is designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on

remeasurement recognized in profit or loss subsequently. The net gain or loss

recognized in profit or loss incorporates any dividend or interest earned on the financial

asset and is included in consolidated statement of comprehensive income. Fair value is

determined in the manner described in Note 31.

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4.02.04 Loans and Receivables

Trade receivables, loans, and other receivables that have fixed or determinable

payments that are not quoted in an active market are classified as ‘loans and

receivables’. Loans and receivables are measured at amortized cost using the effective

interest method, less any impairment. Finance income is recognized by applying the

effective interest rate, except for short-term receivables when the recognition of

interest would be immaterial.

4.02.05 Impairment of Financial Assets

Financial assets, other than financial assets at FVPL, are assessed for indicators of

impairment at the end of each reporting period. Financial assets are impaired where

there is objective evidence that, as a result of one or more events that occurred after

the initial recognition of the financial asset, the estimated future cash flows of the

investment have been affected.

Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or

default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bankruptcy or financial

re-organization.

the lender, for economic or legal reasons relating to the borrower’s financial

difficulty, grants the borrower a concession that the lender would not otherwise

consider

the disappearance of an active market for that financial asset because of financial

difficulties

observable data indicating that there is a measurable decrease in the estimated

future cash flows from a group of financial assets since the initial recognition of

those assets, although the decrease cannot yet be identified with the individual

financial assets in the group, including (i) adverse changes in the payment status of

borrowers in the group (e.g. an increased number of delayed payments or an

increased number of credit card borrowers who have reached their credit limit and

are paying the minimum monthly amount); or (ii) national or local economic

conditions that correlate with defaults on the assets in the group (e.g. an increase

in the unemployment rate in the geographical area of the borrowers, a decrease in

property prices for mortgages in the relevant area, a decrease in oil prices for loan

assets to oil producers, or adverse changes in industry conditions that affect the

borrowers in the group).

Other factors may also be evidence of impairment, including significant changes with

an adverse effect that have taken place in the technological, market, economic or legal

environment in which the issuer operates.

For certain categories of financial asset, such as trade receivables, assets that are

assessed not to be impaired individually are, in addition, assessed for impairment on a

collective basis. Objective evidence of impairment for a portfolio of receivables could

include the Group’s past experience of collecting payments, an increase in the number

of delayed payments in the portfolio past the average credit period of thirty (30) days,

as well as observable changes in national or local economic conditions that correlate

with default on receivables.

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The amount of the impairment is the difference between the asset’s carrying amount

and the present value of estimated future cash flows, discounted at the financial

asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly

for all financial assets with the exception of trade receivables, where the carrying

amount is reduced through the use of an allowance account. When a trade receivable

is considered uncollectible, it is written off against the allowance account. Subsequent

recoveries of amounts previously written off are credited against the allowance

account. Changes in the carrying amount of the allowance account are recognized in

profit or loss.

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

decrease can be related objectively to an event occurring after the impairment was

recognized, the previously recognized impairment loss is reversed through profit or loss

to the extent that the carrying amount of the investment at the date the impairment is

reversed does not exceed what the amortized cost would have been had the

impairment not been recognized.

4.02.06 Derecognition of Financial Assets

The Group derecognizes a financial asset only when the contractual rights to the cash

flows from the asset expire, or when it transfers the financial asset and substantially

all the risks and rewards of ownership of the asset to another entity.

If the Group neither transfers nor retains substantially all the risks and rewards of

ownership and continues to control the transferred asset, the Group recognizes its

retained interest in the asset and an associated liability for amounts it may have to

pay. If the Group retains substantially all the risks and rewards of ownership of a

transferred financial asset, the Group continues to recognize the financial asset and

also recognizes a collateralized borrowing for the proceeds received.

4.03 Investments in Associates

An associate is an entity over which the Group has significant influence and that is

neither a subsidiary nor an interest in a joint venture. Significant influence is the power

to participate in the financial and operating policy decisions of the investee but is not

control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial

statements using the equity method of accounting, except when the investment is

classified as held for sale, in which case it is accounted for in accordance with PFRS 5,

Non-current Assets Held for Sale and Discontinued Operations. Under the equity

method, an investment in an associate is initially recognized in the consolidated

statement of financial position at cost and adjusted thereafter to recognize Group’s

share of the profit or loss and other comprehensive income of the associate. When the

Group’s share of losses of an associate exceeds Group’s interest in that associate

(which includes any long-term interests that, in substance, form part of the Group’s

net investment in the associate), the Group discontinues recognizing its share of

further losses. Additional losses are recognized only to the extent that the Group has

incurred legal or constructive obligations or made payments on behalf of the associate.

13

Any excess of the cost of acquisition over the Group’s share of the net fair value of

the identifiable assets, liabilities and contingent liabilities of the associate recognized at

the date of acquisition is recognized as goodwill. The goodwill is included within the

carrying amount of the investment and is assessed for impairment as part of that

investment. Any excess of the Group’s share of the net fair value of the identifiable

assets, liabilities and contingent liabilities over the cost of acquisition, after

reassessment, is recognized immediately in profit or loss.

The requirements of PAS 39 are applied to determine whether it is necessary to

recognize any impairment loss with respect to the Group’s investment in an associate.

When necessary, the entire carrying amount of the investment (including goodwill) is

tested for impairment in accordance with PAS 36, Impairment of Assets as a single

asset by comparing its recoverable amount (higher of value in use and fair value less

costs to sell) with its carrying amount, Any impairment loss recognized forms part of

the carrying amount of the investment. Any reversal of that impairment loss is

recognized in accordance with PAS 36 to the extent that the recoverable amount of

the investment subsequently increases. An entity loses significant influence over an

investee when it loses the power to participate in the financial and operating policy

decisions of that investee. The loss of significant influence can occur with or without

a change in absolute or relative ownership levels.

4.04 Property and Equipment

Property and equipment are initially measured at cost. The cost of an asset consists of

its purchase price and costs directly attributable to bringing the asset to its working

condition for its intended use. Subsequent to initial recognition, property and

equipment are carried at cost less accumulated depreciation and accumulated

impairment losses.

Subsequent expenditures relating to an item of property and equipment that have

already been recognized are added to the carrying amount of the asset when it is

probable that future economic benefits, in excess of the originally assessed standard of

performance of the existing asset, will flow to the Group. All other subsequent

expenditures are recognized as expenses in the period in which those are incurred.

Depreciation is computed on a straight-line method based on the estimated useful lives

of the assets as follows:

Office and communication equipment 3 years

Transportation and delivery equipment 3 to 5 years

Furniture and fixtures 3 to 5 years

Leasehold improvements are depreciated over the shorter between the improvements’

useful life of five (5) years or the lease term.

An item of property and equipment is derecognized on disposal, or when no future

economic benefits are expected from use or disposal. Gains or losses arising from

derecognition of a property and equipment are measured as the difference between the

net disposal proceeds and the carrying amount of the asset and are recognized in profit

or loss when the asset is derecognized.

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4.05 Intangible Assets

4.05.01 Intangible Assets Acquired Separately

Intangible assets acquired separately are initially carried at cost. Subsequently,

intangible assets with definite useful lives are carried at cost less accumulated

amortization and accumulated impairment losses. Amortization is recognized on a

straight-line basis over their estimated useful lives.

The estimated useful life and amortization method are reviewed at the end of each

annual reporting period, with the effect of any changes in estimate being accounted for

on a prospective basis.

Amortization of software is computed using straight line method based on the

estimated useful lives of three (3) years of the assets.

Goodwill is not amortized but impaired at least on an annual basis.

Intangible assets with indefinite life are not amortized. However, such assets are

reviewed annually to ensure the carrying amount does not exceed the recoverable

amount regardless of whether an indicator of impairment is present. The Group

considers its goodwill as having an indefinite useful life for the reason that it is not

subject to amortization but is reviewed for impairment annually or frequently if events

or changes in circumstances indicate that the carrying value may be impaired.

4.05.02 Derecognition of Intangible Assets

An intangible asset is derecognized on disposal or when no future economic benefits

are expected from use or disposal. Gains or losses arising from derecognition of an

intangible asset are measured as the difference between the net disposal proceeds and

the carrying amount of the asset and are recognized in profit or loss.

4.06 Impairment of Assets

At each reporting date, the Group assesses whether there is any indication that any

assets other than deferred tax assets, assets arising from employee benefits and

financial assets that are within the scope of PAS 39, Financial Instruments:

Recognition and Measurement, may have suffered an impairment loss. If any such

indication exists, the recoverable amount of the asset is estimated in order to

determine the extent of the impairment loss, if any. Where it is not possible to

estimate the recoverable amount of an individual asset, the Group estimates the

recoverable amount of the cash-generating unit to which the asset belongs. When a

reasonable and consistent basis of allocation can be identified, assets are also allocated

to individual cash-generating units, or otherwise they are allocated to the smallest

group of cash-generating units for which a reasonable and consistent allocation basis

can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use.

In assessing value in use, the estimated future cash flows are discounted to their

present value using a pre-tax discount rate that reflects current market assessments of

the time value of money and the risks specific to the asset for which the estimates of

future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less

than its carrying amount, the carrying amount of the asset or cash-generating unit is

reduced to its recoverable amount. An impairment loss is recognized as an expense.

The amount of impairment is applied first to the goodwill attributable to the cash

generating unit then to the identifiable net assets.

15

For assets other than goodwill, when an impairment loss subsequently reverses, the

carrying amount of the asset or cash-generating unit is increased to the revised

estimate of its recoverable amount, but the increased carrying amount does not exceed

the carrying amount that would have been determined had no impairment loss been

recognized for the asset or cash-generating unit in prior years. A reversal of an

impairment loss is recognized as an income.

With respect to goodwill, amounts recognized as impairment shall not be reversed in a

subsequent period

4.07 Borrowing Costs

All other borrowing costs are recognized in profit or loss in the period in which they are

incurred.

4.08 Financial Liabilities and Equity Instruments

4.08.01 Classification as Debt or Equity

Debt and equity instruments are classified as either financial liabilities or as equity in

accordance with the substance of the contractual arrangement.

4.08.02 Financial Liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other

financial liabilities’.

The Group’s financial liabilities consist of trade and other payables (except payable to

government agencies and accrued expenses) and loans payable.

4.08.03 Other Financial Liabilities

Other financial liabilities, including borrowings, are initially measured at fair value

inclusive of directly attributable transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the

effective interest method, with finance cost recognized on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a

financial liability and of allocating finance cost over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash payments through

the expected life of the financial liability, or, where appropriate, a shorter period to the

net carrying amount on initial recognition.

4.08.04 Derecognition of Financial Liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s

obligations are discharged, cancelled or expired. The difference between the carrying

amount of the financial liability derecognized and the consideration paid and payable is

recognized in profit or loss.

4.08.05 Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of

an entity after deducting all of its liabilities. Equity instruments issued by the Group

are recognized at the proceeds received, net of direct issue costs.

16

Ordinary shares are classified as equity. Incremental costs directly attributable to the

issue of new shares or options are shown in equity as a deduction from the proceeds,

net of tax. The cost of acquiring the Group‘s own shares are shown as a deduction

from equity until the shares are cancelled or reissued. When such shares are

subsequently sold or reissued, any consideration received, net of directly attributable

incremental transaction costs and the related income tax effects, is included in equity.

4.09 Offsetting of Financial Instruments

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

consolidated statement of financial position if, and only if, there is a currently

enforceable legal right to offset the recognized amounts and there is an intention to

settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

4.10 Employee Benefits

4.10.01 Short-term Benefits

The Group recognizes a liability net of amounts already paid and an expense for

services rendered by employees during the accounting period. Short-term benefits

given by the Group to its employees include salaries and wages, social security

contributions, short-term compensated absences, incentives and bonuses, and

non-monetary benefits.

4.10.02 Post-employment Benefits

The Group has a funded and non-contributory retirement plan. The cost of providing

benefits is determined using the Projected Unit Credit Method (PUCM) which reflects

services rendered by employees to the date of valuation and incorporates assumptions

concerning employees’ projected salaries. Post-employment expenses include current

service cost plus amortization of past service cost, experience adjustments and

changes in actuarial assumptions over the expected average remaining working lives of

the covered employees. Cumulative actuarial gains and losses in excess of the 10% of

the greater between present value of the defined benefit obligation and fair value of

any plan assets were amortized over the expected average remaining working lifetime

of the employees and recognized as part of retirement expense. Actuarial gains and

losses arising during the year are recognized in profit or loss.

Past service cost is recognized immediately to the extent that the benefits are already

vested, and otherwise is amortized on a straight-line basis over the average period until

the benefits become vested.

Any asset resulting from this calculation is limited to unrecognized actuarial losses and

past service cost, plus the present value of available funds and reductions in future

contributions to the plan.

The funding policy is to contribute an amount based on the actuarial valuation report

which is carried out at regular intervals.

4.11 Provisions and Contingencies

Provisions are recognized when the Company has a present obligation, whether legal or

constructive, as a result of a past event, it is probable that the Company will be

required to settle the obligation, and a reliable estimate can be made of the amount of

the obligation.

17

The amount recognized as a provision is the best estimate of the consideration required

to settle the present obligation at the end of the reporting period, taking into account

the risks and uncertainties surrounding the obligation. Where a provision is measured

using the cash flows estimated to settle the present obligation, its carrying amount is

the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected

to be recovered from a third party, a receivable is recognized as an asset if it is

virtually certain that reimbursement will be received and the amount of the receivable

can be measured reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best

estimate and presented in the Group’s consolidated statement of comprehensive

income.

Contingencies are not recognized in the Group’s consolidated financial statements

unless the possibility of inflow/outflow of resources embodying economic benefits is

probable.

4.12 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will

flow to the Group and the revenue can be measured reliably. Revenue is measured at

the fair value of the consideration received or receivable and represents amounts

receivable for services provided in the normal course of business. Revenue is reduced

for estimated rebates and other similar allowances.

4.12.01 Rendering of Services

Revenue from a contract to provide services is recognized by reference to the stage of

completion of the contract. Revenue from rendering of services is recognized when all

the following conditions are satisfied:

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow

to the Group;

the stage of completion of the transaction can be measured reliably; and

the costs incurred for the transaction and the costs to complete the transaction


Revenue from rendering pertains to delivery fees and other fees.

4.12.02 Finance Income

Finance income is recognized when it is probable that the economic benefits will flow

to the Group and the amount of revenue can be measured reliably. Finance income is

accrued on a time proportion basis, by reference to the principal outstanding and at the

effective interest rate applicable, which is the rate that exactly discounts estimated

future cash receipts through the expected life of the financial asset to that asset’s net

carrying amount on initial recognition.

18

4.13 Expense Recognition

Expense encompasses losses as well as those expenses that arise in the course of the

ordinary activities of the Group.

The Group recognizes expenses in the consolidated statement of comprehensive

income when a decrease in future economic benefits related to a decrease in an asset

or an increase of a liability has arisen that can be measured reliably.

4.14 Leasing

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards of ownership to the lessee. All other leases are

classified as operating leases.

4.14.01 The Group as a Lessee

Operating lease payments are recognized as an expense on a straight-line basis over

the lease term, except where another systematic basis is more representative of the

time pattern in which economic benefits from the leased asset are consumed.

In the event that lease incentives are received to enter into operating leases, such

incentives are recognized as a liability. The aggregate benefit of incentives is

recognized as a reduction of rental expense on a straight-line basis, except where

another systematic basis is more representative of the time pattern in which economic

benefits from the leased asset are consumed.

4.15 Foreign Currency Transactions and Translation

In preparing the consolidated financial statements of the Group, transactions in

currencies other than the Group’s functional currency, i.e. foreign currencies, are

recognized at the rates of exchange prevailing at the dates of the transactions. At the

end of each reporting period, monetary items denominated in foreign currencies are

retranslated at the rates prevailing at that date. Non-monetary items that are measured

in terms of historical cost in a foreign currency are translated using the exchange rates

as at the dates of the initial transactions.

Exchange differences are recognized in profit or loss in the period in which they arise

except for exchange differences arising on non-monetary assets and liabilities where

the gains and losses of such non-monetary items are recognized directly in equity.

Assets and liabilities from foreign operation are translated at exchange rates at the end

of the reporting period. Exchange differences are recognized initially in other

comprehensive income and reclassified from equity to profit or loss on disposal of the

net investment. On the other hand, income and expenses for each statement

presenting profit or loss and other comprehensive income are translated at the average

exchange rate for the period.

4.16 Related Parties and Related Party Transactions

A related party is a person or entity that is related to the Group that is preparing its

financial statements. A person or a close member of that person’s family is related to

Group if that person has control or joint control over the Group, has significant

influence over the Group, or is a member of the key management personnel of the

Group or of a parent of the Group.

19

An entity is related to the Group if any of the following conditions applies:

The entity and the Group are members of the same group (which means that each

parent, subsidiary and fellow subsidiary is related to the others).

One entity is an associate or joint venture of the other entity (or an associate or

joint venture of a member of a group of which the other entity is a member).

Both entities are joint ventures of the same third party.

One entity is a joint venture of a third entity and the other entity is an associate of

the third entity.

The entity is a post-employment benefit plan for the benefit of employees of either

the Group or an entity related to the Group. If the Group is itself such a plan, the

sponsoring employers are also related to the Group.

The entity is controlled or jointly controlled by a person identified above.

A person identified above has significant influence over the entity or is a member of

the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members, who may be

expected to influence, or be influenced by, that person in their dealings with the Group

and include that person’s children and spouse or domestic partner; children of that

person’s spouse or domestic partner; and dependents of that person or that person’s

spouse or domestic partner.

A related party transaction is a transfer of resources, services or obligations between

related parties, regardless of whether a price is charged.

4.17 Taxation

Income tax expense represents the net of the tax currently payable and deferred tax.

4.17.01 Current Tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs

from profit as reported in the consolidated statement of comprehensive income

because of items of income or expense that are taxable or deductible in other years

and items that are never taxable or deductible. The Group’s liability for current tax is

calculated using tax rates that have been enacted or substantively enacted by the end

of the reporting period.

4.17.02 Deferred Tax

Deferred tax is recognized on temporary differences between the carrying amounts of

assets and liabilities in the financial statements and the corresponding tax bases used

in the computation of taxable profit. Deferred tax liabilities are generally recognized for

all taxable temporary differences. Deferred tax assets are generally recognized for all

deductible temporary differences, carry forward of unused tax credits from excess

Minimum Corporate Income Tax (MCIT) over Regular Corporate Income Tax (RCIT) and

unused Net Operating Loss Carryover (NOLCO), to the extent that it is probable that

taxable profits will be available against which those deductible temporary differences

and carry forward of unused MCIT and unused NOLCO can be utilized. Deferred

income tax, however, is not recognized when it arises from the initial recognition of an

asset or liability in a transaction that is not a business combination and, at the time of

the transaction that affects neither the accounting profit nor taxable profit or loss.

20

Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax

assets arising from deductible temporary differences are only recognized to the extent

that it is probable that there will be sufficient taxable profits against which to utilize

the benefits of the temporary differences and they are expected to reverse in the

foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting

period and reduced to the extent that it is no longer probable that sufficient taxable

profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to

apply in the period in which the liability is settled or the asset realized, based on tax

rates and tax laws that have been enacted or substantively enacted by the end of the

reporting period. The measurement of deferred tax liabilities and assets reflects the tax

consequences that would follow from the manner in which the Group expects, at the

end of the reporting period, to recover or settle the carrying amount of its assets and

liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to

set off current tax assets against current tax liabilities and when they relate to income

taxes levied by the same taxation authority and the Group intends to settle its current

tax assets and liabilities on a net basis.

4.17.03 Current and Deferred Tax for the Period

Current and deferred tax are recognized as an expense or income in profit or loss,

except when they relate to items that are recognized outside profit or loss, whether in

other comprehensive income or directly in equity, in which case the tax is also

recognized outside profit or loss.

4.18 Share-based Payments

4.18.01 Equity-settled Share-based Payments

Equity-settled share-based payments to employees and others providing similar services

are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments

is expensed on a straight-line basis over the vesting period, based on the Group’s

estimate of equity instruments that will eventually vest. At the end of each reporting

period, the Group revises its estimate of the number of equity instruments expected to

vest. The impact of the revision of the original estimates, if any, is recognized in profit

or loss such that the cumulative expense reflects the revised estimate, with a

corresponding adjustment to the equity-settled employee benefits reserve.

4.19 Earnings Per Share

The Group computes its basic earnings per share by dividing net income or loss

attributable to ordinary equity holders of the Group by the weighted average number of

ordinary shares outstanding during the period.

21

4.20 Events after the Reporting Period

The Group identifies subsequent events as events that occurred after the reporting

date but before the date when the financial statements were authorized for issue.

Any subsequent events that provide additional information about the Group’s position

at the reporting period, adjusting events, are reflected in the consolidated financial

statements, while subsequent events that do not require adjustments, non-adjusting

events, are disclosed in the notes to consolidated financial statements when material.

4.21 Prior Period Errors

The Group corrects material prior period errors retrospectively in the first set of

consolidated financial statements authorized for issue after their discovery by: (a)

restating the comparative amounts for the prior period presented in which the error

occurred; or (b) if the error occurred before the earliest prior period presented, restating

the opening balances of assets, liabilities and equity for the earliest prior period

presented.

5. CRITICAL JUDGMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are disclosed in Note 4,

Management is required to make judgements, estimates and assumptions about the

carrying amounts of assets and liabilities that are not readily from other sources. The

estimates and associated assumptions are based on historical experience and other

factors that are considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognized in the period in which the estimate is

revised if the revision affects only that period or in the period of the revision and future

periods if the revision affects both current and future periods.

5.01 Critical Judgment in Applying Accounting Policy

5.01.01 Functional Currency

PAS 21 requires management to use its judgment to determine the entity’s functional

currency such that it most faithfully represents the economic effects of the underlying

transactions, events and conditions that are relevant to the entity. In making this

judgment, the Group considers the following:

the currency that mainly influences sales prices for financial instruments and

services (this will often be the currency in which sales prices for its financial

instruments and services are denominated and settled);

the currency in which funds from financing activities are generated; and

the currency in which receipts from operating activities are usually retained.

The Group determined its functional currency to be Philippine Peso, being the currency

that mainly influences the Group revenues and cost and expenses.

22

5.02 Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of

estimation uncertainty at the end of the reporting period that have a significant risk of

causing a material adjustment to the carrying amounts of assets and liabilities within

the next financial year.

5.02.01 Reviewing Residual Values, Useful Lives and Depreciation Method of Property

and Equipment

The residual values, useful lives and depreciation method of the Group’s property and

equipment are reviewed at least annually, and adjusted prospectively if appropriate,

if there is an indication of a significant change in, how an asset is used; significant

unexpected wear and tear; technological advancement; and changes in market prices

since the most recent annual reporting date. The useful lives of the Group’s assets are

estimated based on the period over which the assets are expected to be available for

use. In determining the useful life of an asset, the Group considers the expected

usage, expected physical wear and tear, technical or commercial obsolescence arising

from changes or improvements in production, or from a change in the market demand

for the product or service output and legal or other limits on the use of the Group’s

assets. In addition, the estimation of the useful lives is based on Group’s collective

assessment of industry practice, internal technical evaluation and experience with

similar assets. It is possible, however, that future results of operations could be

materially affected by changes in estimates brought about by changes in factors

mentioned above. The amounts and timing of recorded expenses for any period would

be affected by changes in these factors and circumstances. A reduction in the

estimated useful lives of property and equipment would increase the recognized

operating expenses and decrease non-current assets. The Group uses a depreciation

method that reflects the pattern in which it expects to consume the asset’s future

economic benefits. If there is an indication that there has been a significant change in

the pattern used by which the Group expects to consume an asset’s future economic

benefits, the entity shall review its present depreciation method and, if current

expectations differ, change the depreciation method to reflect the new pattern.

In both years, Management assessed that there is no significant change from the

previous estimates. The accumulated depreciation of property and equipment

amounted to P82,306,658 and P73,067,842 as of December 31, 2012 and 2011,

respectively, as disclosed in Note 12. The carrying amounts of property and

equipment amounted to P23,495,462 and P19,207,458 as of December 31, 2012 and

2011, respectively, as disclosed in Note 12.

5.02.02 Reviewing Residual Values, Useful Lives and Amortization Method of

Intangible Assets

The residual values, useful lives and amortization method of the Group’s intangible

assets are reviewed at least annually, and adjusted prospectively if appropriate, if there

is an indication of a significant change in, how an asset is used; technological

advancement; and changes in market prices since the most recent annual reporting

date. Amortization begins when the intangible asset is available for use, i.e. when it is

in the location and condition necessary for it to be usable in the manner intended by

management. Amortization ceases when the asset is derecognized. The Group uses a

straight line method of amortization since it cannot determine reliably the pattern in

which it expects to consume the asset’s future economic benefits.

Goodwill is reviewed for impairment annually or more frequently if events or changes in

circumstances indicate that the carrying value may be impaired.

23

Impairment is determined for goodwill by assessing the recoverable amount of the CGU

(or group of CGUs) to which the goodwill relates. Where the recoverable amount of

the CGU (or group of CGUs) is less than the carrying amount of the CGU (or group of

CGUs) to which goodwill has been allocated, an impairment loss is recognized

immediately in the consolidated statement of comprehensive income. Impairment

losses relating to goodwill cannot be reversed for subsequent increases in its

recoverable amount in future periods. The Group performs its annual impairment test

of goodwill at the reporting date.

The recoverable amount of the CGUs have been determined based on value-in-use

calculation using cash flow projections from financial budgets approved by senior

management covering a five-year period. The discount rates applied to cash flow

projections range from 7.19% to 10.81% in 2012, 8.55% to 10.60% in 2011 and

7.31% to 8.83% in 2010, and cash flows beyond the five year-period were

extrapolated using a steady growth rate of 1.00% in 2012, 1.00% in 2011 and

0.13% to 1.43% in 2010.

The calculations of the value-in-use of the CGUs are most sensitive to the following

assumptions:

Growth rate - The forecasted growth rate is based on a very conservative steady

growth rate that does not exceed the long term average rate for the industry.

Pre-tax discount rates - Discount rates reflect management’s estimate of the risks

specific to each CGU. This is the benchmark used by management to assess operating

performance.


previous estimates. The accumulated amortization of software amounted to

P12,728,827 and P11,788,360 as of December 31, 2012 and 2011, respectively, as

disclosed in Note 13. The carrying amounts of software amounted to P1,452,662 and

P1,450,944 as of December 31, 2012 and 2011, respectively, as disclosed in

Note 13.

5.02.03 Asset Impairment

The Group performs an impairment review when certain impairment indicators are

present. Determining the fair value of property and equipment, investment in

associates and intangible assets, which require the determination of future cash flows

expected to be generated from the continued use and ultimate disposition of such

assets, requires the Group to make estimates and assumptions that can materially

affect the consolidated financial statements.

The preparation of the estimated future cash flows involves significant judgment and

estimations. While the Group believes that its assumptions are appropriate and

reasonable, significant changes in the assumptions may materially affect the

assessment of recoverable values and may lead to future additional impairment charges

under PFRS.

Management believes that there is no impairment in the value of its property and

equipment, investments in associates and intangible assets, thus no impairment loss is

recognized in the consolidated financial statements in both years. As of December 31,

2012 and 2011, the aggregate carrying amounts of investments in associates,

property and equipment, and intangible assets amounted to P155,881,666 and

P155,163,684, respectively, as disclosed in Notes 11, 12 and 13.

24

5.02.04 Estimating Allowances for Doubtful Accounts

Allowance for doubtful accounts is maintained at a level considered adequate to

provide for potential uncollectible receivables. The Group estimates the allowance for

doubtful accounts related to its trade receivables based on assessment of specific

accounts where the Group has information that certain customers are unable to meet

their financial obligations. In these cases, judgment used was based on the best

available facts and circumstances including but not limited to, the length of relationship

with the customer and the customer’s current credit status based on third party credit

reports and known market factors. The Group used judgment to record specific

reserves for customers against amounts due to reduce the expected collectible

amounts. These specific reserves are re-evaluated and adjusted as additional

information received impacts the amounts estimated.

The amounts and timing of recorded expenses for any period would differ if different

judgments were made or difference estimate were utilized. An increase in the

allowance for doubtful accounts would increase the recognized operating expenses and

decrease current assets.

As of December 31, 2012 and 2011, Management believes that the recoverability of

receivables is certain; hence, no allowance for doubtful accounts was provided. As of

December 31, 2012 and 2011, the carrying values of trade and other receivables

amounted to P1,192,359,836 and P1,031,284,146, respectively, as disclosed in

Notes 8.

5.02.05 Deferred Tax Assets

The Group reviews the carrying amounts at each reporting period and reduces deferred

tax assets to the extent that it is no longer probable that sufficient taxable profit will

be available to allow all or part of the deferred tax assets to be utilized prior to

expiration.

As of December 31, 2012 and 2011, the Group’s recognized deferred tax assets from

NOLCO, accumulated depreciation, and unused tax credits amounted to P6,893,941

and P4,980,348, respectively, as disclosed in Note 30. Management believes that

future taxable profits will be available to allow all or part of deferred tax assets to be

utilized prior to expiration.


The determination of the retirement obligation and cost and other retirement benefits is

dependent on the selection of certain assumptions used by actuaries in calculating

such amounts. Those assumptions include among others, discount rates, expected

returns on plan assets and rates of compensation increase. In accordance with the

generally accepted accounting principles, actual results that differ from the

assumptions are accumulated and amortized over future periods and therefore,

generally affect the recognized expense and recorded obligation in such future periods.

While the Group believes that the assumptions are reasonable and appropriate,

significant differences in the actual experience or significant changes in the

assumptions may materially affect the pension and other retirement obligations.

Based on the actuarial report as of December 31, 2012 and 2011, the Group has

recognized retirement asset amounting to P2,232,135 and P368,394, respectively, as

disclosed in Note 23. Retirement expense recognized in 2012, 2011 and 2010

amounted to P4,294,704, P5,748,678 and P2,376,127, respectively, as disclosed in

Notes 21 and 23.

25

6. SEGMENT INFORMATION

6.01 Segment Revenue and Results

The following is an analysis of the Group‘s revenue and results from continuing operations by reportable segment (amounts in thousands):

2012

Segment

Revenue

Segment Cost

Segment

Profit

Philippines P 470,199 P 185,136 P 285,063

Asia Pacific 106,346 3,866 102,480

Europe 83,807 10,461 73,346

North America 107,275 10,452 96,823

Adjustment and elimination 4,014 - 4,014

Total P 771,641 P 209,915 P 561,726

2011

Segment

Revenue

Segment Cost

Segment

Profit

Philippines P 490,087 P 175,332 P 314,755

Asia Pacific 131,329 3,440 127,889

Europe 64,288 10,384 53,904

North America 103,124 10,271 92,853

Adjustment and elimination (969) - (969)

Total P 787,859 P 199,427 P 588,432

2010

Segment

Revenue

Segment Cost

Segment

Profit

Philippines P 463,249 P 180,569 P 282,680

Asia Pacific 128,963 2,665 126,298

Europe 60,481 9,411 51,070

North America 109,058 11,532 97,526

Total P 761,751 P 204,177 P 557,574

26

The Segments’ profit and the Group’s profit are reconciled as follow amounts in thousands):

2012 2011 2010

Philippines P 285,063 P 314,755 P 282,680

Asia Pacific 102,480 127,889 126,298

Europe 73,346 53,904 51,070

North America 96,823 92,853 97,526

Adjustments and eliminations 4,014 (969) -

Total for continuing operations 561,726 588,432 557,574

Net trading gains (losses) 17,583 (3,064) 2,476

Other income 15,949 43,678 27,094

Finance costs (46,068) (38,323) (29,214)

Equity in net earnings 1,325 2,132 2,504

Operating expenses (496,811) (447,324) (435,916)

Income tax (23,178) (35,898) (28,299)

Profit P 30,526 P 109,633 P 96,219

Revenue reported above represents revenue generated from external customers. There

were no inter-segment sales in 2012, 2011 and 2010.

The accounting policies of the reportable segments are the same as the Group‘s

accounting policies disclosed in Note 4. Segment profit represents the profit earned by

each segment without allocation of other income, operating expenses, foreign

exchange loss and income tax. This is the measure reported to the chief operating

decision maker for the purpose of resource allocation and assessment of segment

performance.

6.02 Geographical Information

The Group operates in four (4) principal geographical areas. The Group‘s revenue from

continuing operations from external customers and information about its non-current

assets by geographical location are detailed below:

2012

Revenue from

External

Customers

Non-current

Assets

Philippines P 470,199,180 P 331,436,866

Asia Pacific 109,964,208 19,755,933

Europe 84,546,415 8,560,828

North America 107,274,588 8,144,099

Adjustments and eliminations (343,539) (171,476,633)

Total P 771,640,852 P 196,421,093

27

2011

Revenue from

External

Customers

Non-current

Assets

Philippines P 490,087,163 P 330,374,629

Asia Pacific 131,328,620 16,399,386

Europe 64,288,395 8,032,438

North America 103,124,096 6,733,478

Adjustments and eliminations (968,769) (162,123,138)

Total P 787,859,505 P 199,416,793

2010

Revenue from

External

Customers

Non-current

Assets

Philippines P 463,248,573 P 289,498,725

Asia Pacific 128,963,802 12,461,647

Europe 60,480,623 14,412,255

North America 109,057,516 6,384,737

Adjustments and eliminations - (114,068,167)

Total P 761,750,514 P 208,689,197

6.03 Segment Assets and Liabilities

2012 2011 2010

Segment Assets

Philippines P 2,579,264 P 2,161,338 P 2,298,118

Asia Pacific 435,122 356,540 256,831

Europe 89,858 125,544 85,245

North America 97,631 87,150 62,144

Total segment assets 3,201,875 2,730,572 2,702,338

Unallocated (516,892) (454,480) (344,532)

Total assets 2,684,983 2,276,092 2,357,806

Segment Liabilities

Philippines 1,485,601 959,263 1,138,677

Asia Pacific 143,864 82,971 53,107

Europe 101,121 113,573 84,182

North America 63,481 50,795 40,718

Total segment liabilities 1,794,067 1,206,602 1,316,684

Unallocated (346,209) (293,925) (232,437)

Total liabilities P 1,447,858 P 912,677 P 1,084,247

28

For the purpose of monitoring segment performance and allocating resources between

segments:

All assets are allocated to reportable segments other than investment subsidiaries

and inter-segment receivables; and

All liabilities are allocated to reportable segments other than accrued expenses, payable

to government agencies, other payables, retirement benefit obligation, deferred tax

liability and income tax payable.

7. CASH AND CASH EQUIVALENTS

For the purpose of the consolidated statement of cash flows, cash and cash

equivalents include cash on hand, in banks and short-term deposits. Cash equivalents

are short-term, highly liquid investments that are readily convertible to known amounts

of cash with maturities of three months or less from the date of acquisition and that

are subject to an insignificant risk of change in value.

Cash and cash equivalents at the end of the reporting period as shown in the

consolidated statement of cash flows can be reconciled to the related items in the

consolidated statement of financial position as follows:

2012 2011

Cash on hand P 34,689,374 P 47,998,476

Cash in banks 975,550,943 806,000,555

Cash equivalent 51,879,730 37,236,592

P 1,062,120,047 P 891,235,623

Cash in banks earns interest ranging from 0.40% to 2% while cash equivalents earn

interest at rate of 1.75%.

Finance income earned on these accounts amounted to P2,106,151, P3,140,373 and

P3,465,452 in 2012, 2011 and 2010, respectively, as disclosed in Note 20.

8. TRADE AND OTHER RECEIVABLES

The Group’s trade and other receivables consist of:

2012 2011

Agents P 1,067,065,055 P 913,329,835

Couriers 88,815,199 3,523,052

Advances to related parties (Note 26) 25,824,702 25,020,726

Officers and employees 4,754,013 9,514,306

Interest 3,535,978 3,624,850

Non-trade - 72,432,683

Others 2,364,889 3,838,694

P 1,192,359,836 P 1,031,284,146

Receivables from agents pertain to advances made to fund the remittance transactions

to beneficiaries. These are settled within one (1) to five (5) days from transaction

date. No interest was charged on trade receivables.

29

Receivables from couriers pertain to advances made to courier companies to ease up

the door-to-door delivery of the remittances to the beneficiaries. These are settled

within thirty (30) days to sixty (60) days from transaction date.

Advances to related parties include operating funds and marketing materials advanced

to associate offices by the Group. These advances are collected in one month from

date of funding.

Aging of accounts that are past due but not impaired is as follows:

2012 2011

1 – 30 days past due P - P -

31 – 60 days past due - -

Over 60 days past due 12,253,031 8,773,779

P 12,253,031 P 8,773,779

In determining the recoverability of a trade receivable, the Company considers any

change in the credit quality of the trade receivable from the date credit was initially

granted up to the reporting period. The concentration of credit risk is limited due to

the customer base being large and unrelated. Accordingly, the directors believe that

there is no credit provision required.

9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The Group’s financial assets at fair value through profit or loss are as follows:

2012 2011

Debt securities P 189,861,699 P 112,624,807

Equity securities 20,318,648 12,601,457

P 210,180,347 P 125,226,264

Debt securities are bonds issued by various foreign private corporations and foreign

government and are listed overseas. As of December 31, 2012 and 2011, the carrying

amounts includes net unrealized gain and loss of P8,447,554 and P2,100,545,

respectively. Finance income earned in 2012, 2011 and 2010 amounted to

P10,841,268, P10,721,849 and P9,049,038 respectively, as disclosed in Note 20.

Equity securities are common shares of various foreign corporations. As of

December 31, 2012, 2011 and 2010 the carrying amount includes net unrealized

(gain) loss of P2,067,747, (P3,373,744) and nil, respectively.

In 2012 and 2010, the Group has gain from changes in fair value of financial assets at

FVPL amounting to P17,583,669 and P2,475,649, respectively, while in 2011, the

Group has loss from fair value changes of financial assets at FVPL amounting to

P3,064,068, are included in net trading gains in the consolidated statement of

comprehensive income.

The basis of fair values of these debt and equity securities are based on quoted prices

(Level 1) as disclosed in Note 31. There were no transfers between Level 1 and Level

2 fair value measurements.

30

10. PREPAYMENTS AND OTHER CURRENT ASSETS

The details of the Group’s prepayments and other current assets are shown below:

2012 2011

Receivable from Bureau of Internal Revenue (BIR) P 13,160,535 P 13,160,535

Prepaid expenses 5,813,060 9,907,410

Visa cards inventory 2,829,010 3,371,662

Advances to suppliers and contractors 1,830,343 1,087,500

Offices supplies 259,623 190,328

Creditable withholding tax 9,361 2,979

Refundable taxes - 1,208,422

P 23,901,932 P 28,928,836

In 2012 and 2011, receivable from BIR pertains to the excess payments made by the

Group in 2007 for the Initial Public Offering (IPO) percentage tax at P13,160,535. As

of December 31, 2012, the case on the recoverability of tax on IPO is pending

resolution with the Court of Tax Appeals. The Group believes that it will be able to

obtain the refund from the BIR.

Prepaid expenses include payments for interest, rent, association dues and insurance.

Refundable taxes pertain to the advance income taxes paid by LSML at the beginning

of the year based on the tax assessment on the projected income. In 2011, LSML

operations resulted to a loss making the advance tax payments either refundable or

applicable to other tax obligations.

11. INVESTMENTS IN ASSOCIATES

Details of the Group’s associates are as follows:

Name of

Associates Principal Activity

Place of

Incorporation

and Operation

Proportion of

Ownership Interest

2012 2011

ISPL Remittance business Singapore 49% 49%

HKHCL Remittance business Taiwan 49% 49%

The movements in the investment in associates are presented below:

2012 2011

Acquisition cost P 16,173,974 P 16,173,974

Accumulated equity in net income

Balance, January 1 6,890,117 4,758,262

Equity in profit 1,324,830 2,131,855

Dividends declared (4,896,570) -

Balance, December 31 3,318,377 6,890,117

P 19,492,351 P 23,064,091

31

The summarized financial information of the associates is as follows:

2012 2011

ISPL

Total assets 82,988,673 73,253,861

Total liabilities 68,611,378 49,702,899

Net assets 14,377,295 23,550,962

Revenue 1,745,567 55,923,737

Profit P 1,047,199 P 3,127,419

HKHCL

Total assets P 34,857,286 P 26,874,705

Total liabilities 30,312,680 23,905,645

Net assets 4,544,606 2,969,060

Revenue 13,023,598 19,339,949

Profit 1,656,534 1,223,305

32

12. PROPERTY AND EQUIPMENT — net

The carrying amounts of the Group’s property and equipment are as follows:

Office and

communication

equipment

Transportation

and delivery

equipment

Furniture and

fixtures

Leasehold

improvements

Total

January 1, 2011

Cost P 43,553,651 P 7,002,071 P 10,147,352 P 30,636,325 P 91,339,399

Accumulated depreciation (33,075,135) (3,046,690) (6,497,396) (21,706,870) (64,326,091)

Carrying amount 10,478,516 3,955,381 3,649,956 8,929,455 27,013,308

Movements during 2011

Balance, January 1, 2011 10,478,516 3,955,381 3,649,956 8,929,455 27,013,308

Additions 5,425,325 35,315 473,849 1,175,690 7,110,179

Disposal

Cost (2,711,355) - (1,518,214) (1,984,214) (6,213,783)

Accumulated depreciation 738,675 - 776,847 628,335 2,143,857

Exchange adjustments

Cost 194,442 1,073 (23,832) (132,178) 39,505

Accumulated depreciation 131,317 (74) 16,230 228,214 375,687

Depreciation (Note 21) (5,889,913) (1,329,460) (962,326) (3,079,596) (11,261,295)

Balance, December 31, 2011 8,367,007 2,662,235 2,412,510 5,765,706 19,207,458

December 31, 2011

Cost 46,462,063 7,038,459 9,079,155 29,695,623 92,275,300


Carrying Amount P 8,367,007 P 2,662,235 P 2,412,510 P 5,765,706 P 19,207,458

33

Office and

communication

equipment

Transportation

and delivery

equipment

Furniture and

fixtures

Leasehold

improvements

Total


Balance, December 31, 2012 P 8,367,007 P 2,662,235 P 2,412,510 P 5,765,706 P 19,207,458

Additions 8,886,886 2,489,213 1,127,028 4,269,098 16,772,225

Disposal

Cost (1,168,133) (514,960) - - (1,683,093)

Accumulated depreciation 1,018,543 178,240 - - 1,196,783

Reclassification of accounts

Cost 359,082 - (359,082) - -

Accumulated depreciation (275,293) - 275,293 - -

Exchange adjustments

Cost (712,370) (833) (155,388) (693,721) (1,562,312)

Accumulated depreciation 573,121 4,111 153,041 551,859 1,282,132

Depreciation (Note 21) (5,812,338) (1,835,527) (1,361,000) (2,708,866) (11,717,731)

Balance, December 31, 2012 11,236,505 2,982,479 2,092,402 7,184,076 23,495,462

December 31, 2012

Cost 53,827,528 9,011,879 9,691,713 33,271,000 105,802,120


Carrying amount P 11,236,505 P 2,982,479 P 2,092,402 P 7,184,076 P 23,495,462

As of December 31, 2012 and 2011, the cost of fully depreciated property and equipment still in use by the Group amounted to

P65,567,540 and P61,548,191, respectively.

34

In 2012, the Company disposed an equipment with a carrying amount of P486,310 for

a consideration of P361,743 which resulted to loss on disposal of P124,567, while in

2011, the Group disposed an equipment with a carrying amount of P493,669 for a

consideration of P456,143 which resulted to loss on sale of P3,954. Gain on disposal

recognized amounted to P223,214 and included in the consolidated statement of

comprehensive income as part of other income.

The Group’s consolidated depreciation of property and equipment amounted to

P11,717,731, P11,261,295 and P12,544,844 in 2012, 2011 and 2010, respectively,

as disclosed in Note 21.

Depreciation and amortization amounting to P1,760,917 and P795,627 pertains to the

discontinued operations in Italy for the years ended December 31, 2011 and 2010,

respectively, as disclosed in Note 28.

During the year, the Group carried out a review of the recoverable amounts of its

property and equipment. The Group has determined that there is no indication that

impairment has occurred on its property and equipment.

13. INTANGIBLE ASSETS – net

The Group’s intangible assets are as follows:

2012 2011

Goodwill P 111,441,191 P 111,441,191

Software – net 1,452,662 1,450,944

P 112,893,853 P 112,892,135

13.01 Goodwill

The Group’s goodwill relate to the excess of the acquisition cost over the ownership

interest acquired by the Parent Company in IGRL, IAPL, IRCL, LSML and WEPL, as

follows:

13.01.01 IGRL and IAPL

On June 2, 2007, the Parent Company’s BOD approved the acquisition of 100%

ownership interest in both IGRL and IAPL for a consideration of P71,200,000 and

P8,552,000, respectively. IGRL and IAPL are based in United Kingdom and Australia,

respectively. These entities, which are in the remittance business, have the same

operations as the Parent Company. Accordingly, on June 29, 2007, the Parent

Company acquired 100% ownership interest in IGRL and IAPL through the execution of

deeds of assignment by the previous stockholders (who are also the stockholders of

the Parent Company) of both entities. Under the deeds of assignment, the existing

advances by the Parent Company to certain stockholders were applied as payment for

the purchase of IGRL and IAPL.

35

13.01.02 WEPL

On June 2, 2007, the Parent Company’s BOD also approved the acquisition of 20%

ownership interest in WEPL for a consideration of P5,600,000. WEPL was

incorporated and is based in Australia, and has the same operations as the Parent

Company. Accordingly, on June 29, 2007 the Parent Company acquired 20%

ownership interest in WEPL through execution of a deed of assignment by the previous

stockholders (who are also stockholders of the Parent Company) of the entity. Under

the deed of assignment, the existing advances of the Parent Company to certain

stockholders were applied 15% ownership interest in WEPL was acquired by the

Parent Company for a consideration of P3,433,072.

On March 25, 2011, the Parent Company’s BOD approved the acquisition of another

35% ownership interest in WEPL for a consideration of AUD0.27 million

(P12,303,818). As discussed in Note 1, WEPL is effectively 100% owned by the

Parent Company through its direct interest of 70% and indirect interest of 30%

through IAPL.

13.01.03 IRCL

On October 1, 2004, the Parent Company’s BOD approved the acquisition of 65% of

IRCL for a consideration of P10,344,000. IRCL, which was incorporated on

July 16, 2001, is based in Canada, and has the same operations as the Parent

Company. The fair value of the net assets of IRCL at acquisition date is P8,247,612

and the fair value of the 65% ownership interest was P5,360,948. The difference of

P4,983,052 between the consideration paid and the fair value of the interest acquired

in IRCL was recognized as goodwill. On July 26, 2006, the additional 30% ownership

interest from a no-controlling stockholder in IRCL was transferred to the Parent

Company at no additional cost.

On June 2, 2007, the Parent Company’s BOD approved the acquisition of 5%

ownership interest from a non-controlling stockholder for a consideration of

P3,100,000 taking its ownership in IRCL to 100%. Accordingly, on June 29, 2007,

IRCL’s non-controlling stockholder executed a deed of assignment to transfer the

ownership interest to the Parent Company. Under the deed of assignment, the existing

advances from the Parent Company to a certain stockholder were applied as payment

for the purchase of IRCL. The fair value of the net assets of IRCL at acquisition date

was P11,126,780, and the fair value of the additional interest acquired was P556,339.

The difference of P2,543,601 between the consideration paid and the non-controlling

interest acquired in IRCL was recognized as goodwill.

13.01.04 LSML

LSML was incorporated on March 16, 2001, is based in Hong Kong, and has the same

operations as the Parent Company. On June 2, 2007, the Parent Company’s BOD

approved the acquisition of 49% ownership interest in LSML for a consideration of

P24,700,000 thereby taking its ownership in LSML to 100%. Accordingly, on

June 29, 2007, the non-controlling stockholder of LSML (who is also a stockholder of

the Parent Company) executed a deed of assignment to transfer its ownership interest

to the Parent Company. Under the deed of assignment, the existing advances by the

Parent Company to the stockholder were applied as payment for the purchase of

LSML. The fair value of the net assets of LSML at acquisition date was P8,228,257

and the fair value of the additional interest acquired was P4,031,846. The difference

of P20,668,154 between the consideration paid and the non-controlling interest

acquired in LSML was recognized as goodwill.

36

Goodwill acquired through business combinations has been allocated to five (5)

individual CGUs as follows:

2012 2011

IGRL P 69,982,505 P 69,982,505

LSML 20,668,154 20,668,154

IAPL 7,678,564 7,678,564

IRCL 7,526,653 7,526,653

WEPL 5,585,315 5,585,315

P 111,441,191 P 111,441,191

13.02 Software – net

Movements in software are as follows:

2012 2011

Balance, January 1

Cost P 13,239,304 P 12,384,629

Accumulated amortization (11,788,360) (10,302,883)

1,450,944 2,081,746

Movements during the year

Balance, January 1 1,450,944 2,081,746

Additions 945,187 2,034,070

Disposals

Cost - (941,474)

Accumulated amortization - 459,811

Foreign exchange adjustment

Cost (3,002) (237,921)

Accumulated amortization 700 61,086

Amortization (941,167) (2,006,374)

Balance, December 31 P 1,452,662 P 1,450,944

The intangible asset has three (3) years remaining amortization period.

During the year, the Group carried out a review of the recoverable amounts of its

intangible asset. The Group has determined that there is no indication that impairment

has occurred on its intangible assets.

The Group’s consolidated amortization of intangible asset amounted to P941,167,

P2,006,374 in 2012 and 2011, respectively, as disclosed in Note 21.

37

14. OTHER NON-CURRENT ASSETS

Below is the composition of the Group’s other non-current assets.

2012 2011

Refundable deposits (Note 25) P 19,905,025 P 17,291,585

Input VAT 11,464,326 21,242,725

Deferred input VAT - 326,057

Others 44,000 44,000

P 31,413,351 P 38,904,367

The Group has applied for tax credits on Input VAT with the BIR and is waiting for the

issuance of Tax Credit Certificates (TCCs). In 2011, the BIR issued two tax credit

certificates to the Group for its Input VAT filed for years 2005 and 2006 amounting to

P1,710,000 and P3,820,000, respectively. Management of the Company believes

that it will able to collect the rest of the TCCs applicable to its outstanding claims. The

carrying amounts are already net of claims disallowed by the BIR amounting to

P6,790,000, P2,060,000 and nil in 2012, 2011 and 2010, respectively.

Refundable deposits pertain to the security deposits made by the Group in relation to

rental lease agreements for the office spaces in the Philippines, Hong Kong, United

Kingdom, Canada and Italy.

15. BENEFICIARIES AND OTHER PAYABLES

The components of beneficiaries and other payables account are as follows:

2012 2011

Beneficiaries P 443,442,930 P 155,140,304

Agents, couriers and trading clients 41,732,521 65,550,310

Accrued expenses 25,246,630 14,801,171

Payable to government agencies 4,258,753 3,179,656

Payable to suppliers 3,720,856 1,391,836

Advances from related parties (Note 26) 218,417 -

Output VAT - 17,875

Others 1,219,170 - -

P 519,839,277 P 240,081,152

Payables to beneficiaries, agents, couriers and trading clients are noninterest-bearing

and are normally settled within one (1) to thirty (30) days.

Accrued expenses include the Group’s accrual for various operating expenses such as

vacation and sick leave benefits, courier charges, training and development,

professional fees and utilities.

38

16. LOANS PAYABLE

In 2012 and 2011, the Parent Company issued an unsecured, short-term interest-

bearing peso-denominated bank loans with an aggregate amount of P925,000,000 and

P666,000,000, respectively. The loans payable have an interest rate ranges from 5%

and 7.125% per annum and have maturities of less than one (1) year. The related

finance costs from these loans payable amounted to P46,068,423, P38,322,540,

P29,213,843 in 2012, 2011 and 2010, respectively.

The Parent Company has unused credit facilities with various banks amounting to

P1,880,000,000 and P1,480,000,000 as of December 31, 2012 and 2011,

respectively.

Movements of loans payable are as follows:

2012 2011

Balance, January 1 P 666,000,000 P 877,000,000

Additional loans obtain 925,000,000 666,000,000

Payments for short-term loans payable (666,000,000) (877,000,000)


As of the reporting period, the Parent Company is compliant with the terms and

conditions of the loans.

17. ISSUED CAPITAL

17.01 Ordinary Shares

Components of ordinary shares issued and outstanding are as follows:

2012 2011

Ordinary shares P 617,725,800 P 617,725,800

Additional paid-in-capital 391,232,478 391,232,478

P 1,008,958,278 P 1,008,958,278

Shown below are the details on the movements of ordinary shares.

2012 2011

Authorized:

1,000,000,000 shares at P1 par

value per share P 1,000,000,000 P 1,000,000,000

Subscribed, issued, and outstanding:

562,417,000 shares at P1 par value

per share 562,417,000 562,417,000

Stock dividends, 55,308,800 shares

at P1 par value per share 55,308,800 55,308,800

P 617,725,800 P 617,725,800

Ordinary shares carry one vote per share and a right to dividends.

39

On September 13, 2007, the SEC approved the registration of 140,604,000 common

shares with offer price of P4.68 and 454,950,000 outstanding shares with par value

of P1. There are 19, 17 and 13 registered common stockholders as of December 31,

2012, 2011 and 2010. Shares lodged with the Philippine Central Depository (PCD) are

registered under the name of PCD Nominee Corporation and as such are treated as

being held by only one shareholder.

17.01.01 Additional Paid-in Capital

The Group additional paid-in-capital-in excess of par value is composed of excess of

proceeds on issuance of the Group shares amounting to P429,510,000 and excess of

acquisition costs over the carrying value of the non-controlling interests acquired in

2011 amounting to P38,280,000, as disclosed in Note 1.

17.02 Treasury Shares

Details about the Company’s treasury shares are as follows:

2012 2011

Shares Amount Shares Amount

Balance, January 1 14,873,000 P 52,987,208 9,329,000 P 40,115,150

Acquisitions 5,714,000 16,222,480 5,544,000 12,872,058

Balance, December 31 20,587,000 P 69,209,688 14,873,000 P 52,987,208

On August 15, 2008, the Parent Company’s BOD approved the buy-back program to

acquire up to ten million (10,000,000) of its shares, representing approximately 1.87%

of the Parent Company’s total outstanding common shares, from the market. The

Parent Company purchased 9,329,000 shares for P40,110,000 in 2008 under the

buy-back program.

In 2009 and 2008, the Parent Company purchased 130,900 shares for P130,000 and

548,500 shares for P55,000, respectively, under the SSPP. The 808,100 shares

(including 128,700 shares purchased in 2007) purchased under the SSPP, were

subsequently transferred in September 2009 to the retirement fund of the Parent

Company.

On September 16, 2011, the BOD of the Parent Company adopted a resolution

authorizing the buy-back of up to ten million (10,000,000) of its shares from the

market. The Parent Company purchased 4,873,000 shares for P11,350,000 under

this buy-back program. Also on the same year, the Parent Company purchased

671,000 shares for P1,520,000 under the buy- back program approved in August 15,

2008.

On September 21, 2012, the Board of Directors of the Parent Company adopted a

resolution authorizing another buy-back program of up to ten million (10,000,000) of

its shares in the market. The Parent Company purchased the remaining balance of

5,127,000 shares for P14,560,000 from the buy-back program of 2011 and 587,000

shares for P1,670,000 from the latest buy-back program authorized in 2012.

40

17.03 Appropriation of Retained Earnings

The movements in the appropriated retained earnings are as follows:

2012 2011


Additional appropriation 16,222,480 12,872,058


17.04 Cumulative Translation Reserve

Shown below are the movements on the Group’s cumulative translation reserve.

2012 2011


Exchange differences arising on translating the

net assets of foreign operations 20,670,117 (5,961,544)

Gain reclassified to profit or loss on disposal of

foreign operations - 1,934,466

Others (58,152) (58,149)


17.05 Dividends Declared

On March 23, 2009, the BOD of the Parent Company declared cash dividends

amounting to P26,010,000 or P0.0471 per share, payable to shareholders-of-record as

of April 7, 2009. The declaration was subsequently ratified and confirmed by the

Parent Company’ shareholders during their annual meeting held on July 17, 2009.

The payment of dividends was made on May 6, 2009. On March 19, 2010, the BOD

of the Parent Company declared cash dividends amounting to P26,603,533 or

P0.0481 per share, payable to shareholders-of-record as of April 8, 2010.

The declaration was subsequently ratified and confirmed by the Parent Company’

shareholders during their annual meeting held on July 23, 2010. The payment was

made on May 5, 2010.

On June 17, 2011, the BOD of the Parent Company authorized the declaration of stock

dividends equivalent to 10% of outstanding shares of 553,088,000 in favor of its

stockholders-of-record as of August 15, 2011. The declaration was subsequently

ratified and confirmed by the Parent Company’s stockholders during their annual

meeting held on July 29, 2011.

On its regular meeting held in June 22, 2012, the Board of Directors of the Company

approved and authorized the declaration of cash dividends equivalent to P119,980,858

or approximately P0.1993 per share based on the Corporation’s six hundred two

million seventy one thousand eight hundred (P602,071,800) issued and outstanding

common shares as of the end of trading day, payable to all of its stockholders-of-

record as of July 12, 2012. The cash dividends were paid on August 17,2012.

Accumulated net earnings of the subsidiaries amounting to P349.13 million and

P200.65 million as of December 31, 2012 and 2011, respectively, are not available for

dividend declaration. This accumulated equity in net earnings becomes available for

dividend upon receipt of cash dividends from the investees by the Parent Company.

41

18. REVENUES

An analysis of the Group’s revenue for the year from continuing operations is as

follows:

2012 2011 2010

Delivery fees P 554,609,474 P 513,290,111 P 498,740,664

Commission 84,894,485 103,738,196 109,716,962

Realized foreign exchange

gains – net 131,350,949 170,479,667 152,398,738

Other fees 785,944 351,531 894,150

P 771,640,852 P 787,859,505 P 761,750,514

The delivery fees earned of associates amounted to P72,876,559 and P70,591,028 in

2012 and 2011, respectively, as disclosed in Note 26.

19. COST OF SERVICES

An analysis of the Group’s cost of services for the year from continuing operations is

as follows:

2012 2011 2010

Bank charges P 196,747,870 P 184,380,473 P 174,201,772

Delivery charges 13,167,206 15,046,832 29,975,489

P 209,915,076 P 199,427,305 P 204,177,261

20. OTHER INCOME

An analysis of the Group’s other income for the year from continuing operations is as

follows:

2012 2011 2010

Finance income (Notes 7

and 9) P 12,947,419 P 13,862,222 P 12,514,490

GST refund - 21,668,641 -

Rebates - 2,881,469 6,728,713

Unrealized foreign exchange

gain (loss) – net (3,113,114) 1,205,505 1,769,202

Others 6,114,585 4,060,301 6,081,539

P 15,948,890 P 43,678,138 P 27,093,944

Rebates pertain to the refund of bank service charges.

42

21. OPERATING EXPENSES

An analysis of the Group’s operating expenses for the year from continuing operations

is as follows:

2012 2011 2010

Short-term benefits (Note 23) P 253,264,274 P 207,756,488 P 206,149,704

Rental (Note 25) 59,296,196 53,508,878 46,360,479

Marketing (Note 22) 37,914,975 36,339,592 42,590,016

Professional fees 34,413,630 36,222,215 39,709,891

Communication, light and water 28,058,114 23,529,910 22,119,419

Depreciation and amortization (Notes 12

and 13) 12,658,689 11,506,753 13,274,937

Transportation and travel 10,885,556 23,829,160 26,696,985

Photocopying and supplies 10,309,316 14,630,525 11,731,270

Taxes and licenses 10,046,458 9,020,616 7,910,719

Loss on write-off of assets 10,040,886 2,058,616 -

Repairs and maintenance 6,427,108 4,770,543 4,902,356

Business development 5,100,724 2,974,651 2,679,500

Post-employment benefits (Note 23) 4,294,704 5,748,578 2,376,127

Association dues 3,223,761 3,230,078 1,927,949

Entertainment, amusement and

recreation 3,188,030 6,017,276 3,842,472

Insurance 3,054,839 1,974,703 1,835,663

Donations and contributions 2,621,445 - 1,155,280

Penalties and surcharges - 2,992,353 -

Others 2,012,093 1,213,551 652,704

P 496,810,798 P 447,324,486 P 435,915,471

Loss on write-off of asset pertains to disallowed input vat, deposits with Banco Filipino

and expenditures intended for certain investment.

22. MARKETING EXPENSES

The account is composed of the following expenses:

2012 2011 2010

Marketing and promotions P 27,110,504 P 27,746,400 P 34,637,750

Advertising and publicity 10,804,471 9,617,140 8,883,266

P 37,914,975 P 37,363,540 P 43,521,016

Expenses amounting to P1,023,948 and P931,000 pertain to the marketing expenses

of the discontinued operations of Italy for the years ended December 31, 2011 and

2010, respectively.

43

23. EMPLOYEE BENEFITS

Aggregate employee benefits expense comprised:

2012 2011 2010

Short-term benefits P 253,264,274 P 207,756,488 P 206,149,704

Post-employment benefits 4,294,704 5,748,578 2,376,127

P 257,558,978 P 213,505,066 P 208,525,831

23.01 Short-term Employee Benefits

Short-term benefits include salaries and wages, de-minimis fringe benefit, sick and

vacation leave pay, training and development and 13th month pay.

23.02 Post-employment Benefits

The Group accrues benefit pursuant to the provision of the Retirement Pay Law under

non-contributory and of the defined benefit type which provides a retirement benefit

equal to one hundred percent (100%) of Plan Salary for every year of Credited Service.

The most recent actuarial valuations of plan assets and the present value of the

defined benefit obligation were carried out at December 31, 2012 by E.M. Zalamea

Actuarial Services, Inc. The present value of the defined benefit obligation, and the

related current service cost and past service cost, were measured using the Projected

Unit Credit Method.

The principal assumptions used for the purposes of the actuarial valuations were as

follows:

2012 2011

Discount rate 5.86% 9.69%

Future salary increases 8.00% 8.00%

Expected return on plan assets 7.50% 6.00%

Average remaining working life (in years) 33.10 32.10


follows:

2012 2011 2010

Current service cost P 4,149,490 P 4,618,548 P 2,143,246

Interest cost 1,509,154 2,117,009 1,134,058

Expected return on plan assets (1,493,733) (1,118,673) (738,073)

Changes in effect of asset

ceiling loss 129,793 - -

Actuarial gain (loss) recognized - 131,694 (163,104)

P 4,294,704 P 5,748,578 P 2,376,127

44

The amount included in the consolidated statement of financial position arising from

the entity’s prepaid retirement in respect of its defined benefit plans is as follows:

2012 2011

Present value of defined benefit obligation P 27,959,017 P 22,524,680

Fair value of plan assets 30,303,714 21,816,324

Deficit (Surplus) (2,344,697) 708,356

Unrecognized actuarial gains (losses) (17,231) (1,076,750)

Effect of the asset ceiling 129,793 -

P (2,232,135) P (368,394)

Movements in the present value of the defined benefit obligation in the current period

were as follows:

2012 2011


Current service cost 4,149,490 4,618,548

Interest cost 1,509,154 2,117,009

Actuarial gains (224,307) (6,058,237)


Movements in the fair value of the plan assets in the current period were as follows:

2012 2011


Contributions 6,158,445 6,895,233

Expected return on plan assets 1,493,733 1,118,673

Actuarial gains (losses) 835,212 (1,394,512)


The major categories of plan assets, and the expected rate of return at the end of the

reporting period for each category, are as follows:

2012 2011

Private equity securities P 11,755,471 P 9,245,139

Government debt securities 11,818,150 4,763,467

Deposits in banks 6,402,242 7,613,374

Interest receivable 354,778 215,615

Trust fee payable (26,927) (21,271)


The overall expected rate of return is a weighted average of the expected returns of

the various categories of plan assets held.

The actual return on plan assets amounted to a gain of P2,328,945 and a loss of

P275,839 during 2012 and 2011, respectively.

45


2012 2011 2010 2009 2008

Present value of

defined benefit

obligation P 27,959,017 P 22,524,680 P 21,847,360 P 10,080,516 P 6,574,511

Fair value of plan

assets 30,303,714 21,816,324 15,196,930 12,421,022 3,168,050

Deficit (Surplus) (2,344,697) 708,356 6,650,430 (2,340,506) 3,406,461

Changes in actuarial

assumptions 2,361,420 (498,493) 9,932,542 1,070,082 (3,766,312)

Experience

adjustments on

plan liabilities (2,585,727) (5,559,744) (894,376) (382,676) (206,448)

Experience

adjustments on

plan assets P 835,212 P (1,394,512) P (2,643,029) P 4,452,972 P -

The Group expects to make a contribution of P4,294,704 to its retirement fund in the

next financial year.

The subsidiaries are not required to establish and accrue retirement obligation.

24. SHARE BASED PAYMENTS

On July 20, 2007, the Parent Company’s BOD approved the proposal to set up a SSPP

totaling 15,000,000 shares for the employees of the Parent Company who have been

in the service for at least one (1) calendar year as of June 30, 2007, as well as its

BOD members, resource persons and consultants (collectively referred to as

“the Participants”). A Notice of Exemption under Section 10.2 of the Securities

Regulations Code had been approved by the SEC on September 13, 2007.

Notwithstanding the aforesaid confirmation by the SEC of the exempt status of the

SSPP shares, the SEC nonetheless required the Parent Company to include the SSPP

shares among the shares of the Parent Company which were registered with the SEC

prior to the conduct of its Initial Public Offering in October 2007. The registration of

the Parent Company shares, together with the SSPP shares, was rendered effective on

October 5, 2007.

All 15,000,000 shares were exercised. The shares subject to the SSPP were sold at

par value or P1 per share. Total shares amounting to P11.74 million were paid in full,

while the difference totaling P3.26 million were paid by way of salary loan. Shares

acquired through SSPP are subject to a lock-up period of two years from date of issue,

which ended on September 19, 2009.

The sale is further subject to the condition that should the officer or employee resign

from the Parent Company prior to the expiration of the lock-up period, the shares

purchased by such resigning employee or officer shall be purchased at cost by the

Parent Company as treasury stock. As of December 31, 2009, 24 employees resigned

(9 in 2009, 13 in 2008 and 2 in 2007) and their shares totaling 808,100 (130,900 in

2009, 548,500 in 2008 and 128,700 in 2007) were bought back by the Parent

Company at par value.

As approved by the Parent Company’s BOD, the fair value of the shares issued under

the SSPP was measured at the grant date using the price-earnings multiple model

taking into account the terms and conditions upon which the shares were granted.

The fair value at grant date was P1.33 per share. This transaction also resulted in an

increase in equity by P1.53 million, P2.16 million and P1.00 million in 2009, 2008 and

2007, respectively.

46

On September 19, 2009, which is the end of the lock up period, the 808,100 shares

bought back at cost was transferred to the Parent Company’s retirement fund upon

reimbursement of the P0.81 million paid by the Parent Company for those shares.

The expense arising from the share-based payment plan is recognized over the two-

year lock-up period. The expense recognized under ‘Salaries, wages and employee

benefits’ in the statements of income amounted to P1.53 million in 2009.

25. OPERATING LEASE AGREEMENTS

25.01 The Group as a Lessee

Operating leases relate to leases of space for use of office space with lease terms

between Wynsum Realty and Oakridge Properties. Operating lease payments represent

rentals payable by the Parent Company for office space.

On August 31, 2012, the Parent Company entered into another lease agreement with

Oakridge Properties for the use of office spaces on Units 2704 and 2705 for an initial

term of three (3) years from October 15, 2012 to October 14, 2015 with provision for

10% escalation on the second and third year of the term of contract.

The subsidiaries have their respective operating lease agreements for their office

spaces. The lease contracts are for periods ranging from one (1) to ten (10) years and

may be renewed under the terms and conditions mutually agreed upon by the

subsidiaries and the lessors.

Rent expense of the Group amounted to P59,296,196, P53,508,878, and


P3,914,938 and P4,025,523 of the total rent expense pertains to rent expense of the

discontinued operations of Italy for the years ended December 31, 2011 and 2010,

respectively. The Group’s refundable deposits amounted to P19,905,025 and

P17,291,585 in 2012 and 2011, respectively, as disclosed in Note 14.

At reporting date, the Parent Company had outstanding commitments for future

minimum lease payments under non-cancelable operating leases, which fall due as

follows:

2012 2011

Not later than one year P 48,594,222 P 43,590,836

Later than one year but not later than five

years 75,519,359 53,212,917

Later than five years 2,045,507 -

P 126,159,087 P 96,803,753

47

26. RELATED PARTY TRANSACTIONS

Nature of relationship of the Group and its related parties are disclosed below:

Related Parties Nature of Relationship

IRemit Singapore Pte Ltd (ISPL) Associate

Hwa Kung Hong & Co., Ltd.(HKHCL) Associate

Stockholders/ Directors Key Management Personnel

26.01 Advances to Related Parties

Balance of advances to related parties as shown in the consolidated statement of

financial position are summarized per category as follows:

26.01.01 Associates

December 31, 2012 December 31, 2011

Amount/ Outstanding Amount/ Outstanding

Volume Balances Volume Balances

HKHCL

Remittance P 5,155,165,031 P 60,187,956 P 5,148,060,359 P 29,136,840

Due from 5,223,594 8,192,341 6,382,656 8,715,507

Delivery fees 47,715,373 2,130,587 46,127,251 326,674

ISPL

Remittance 7,203,835,917 105,072,529 7,211,603,671 64,141,580

Due from 457,714 10,332,965 996,076 16,034,603

Delivery fees 25,161,186 2,782,994 24,463,777 2,180,325


• Remittance pertains to the principal amount of transaction accepted by a foreign

associate office from a remitter, delivery of which is fulfilled by the Parent Company

to intended beneficiary in the Philippines.

• Delivery fee is the share in service fee collected by the foreign subsidiary office

along with the principal amount of transaction. Account collected in 1-5 days from

date of transaction.

• Due from account refers to operating funds and marketing materials advanced to

foreign associate offices. It has a term of settlement within 1-30 days from date of

funding.

The amounts outstanding are non-interest bearing, unsecured and will be settled in

cash. No guarantee was required. No provision made for doubtful accounts as these

accounts are all collectible.

48

26.01.02 Affiliates




Surewell Equities, Inc. P - P 254,182 P - P 270,616


• Surewell Equities, Inc. – This pertains to the cost of rental paid to Surewell Equities

Pte. Ltd. (SEPL) for the sharing of its office in Singapore under a sublease agreement

with the Parent Company . SEPL is a foreign subsidiary office of Surewell Equities,

Inc., one of the principal stockholders of the Parent Company. No security deposit

paid and without provision for escalation. Rent is paid monthly.


cash. No guarantees have been received. No provisions have been made for doubtful

debts in respect of the amounts owed by the related parties.

26.01.03 Key Management Personnel




Advances 3,779,592 7,045,214 - -


• Advances – This pertains to receivable from a key management personnel of the

Parent Company subject to liquidation within company prescribed period of

liquidation.

The amount outstanding is non-interest bearing, unsecured and will be settled in cash.

No guaranty required. No provision was made for doubtful account as the account is

deemed collectible.

26.02 Advances from Related Parties

Balance of advances from related parties as shown in the consolidated statement of


26.02.01 Key Management Personnel




Advances 218,417 218,417 - -


• Advances – This pertains to payable to director of the Parent Company subject to

liquidation within company prescribed period of liquidation.


No guaranty required.

49

26.03 Lease Contracts

The Group leases office spaces from Oakridge Properties as disclosed in Note 25. Rent

expense amounted to P11,421,505 and P9,247,615 in 2012 and 2011, respectively.

The Group entered into a sublease agreement with Surewell Equities Pte Ltd., one of

the stockholders of the Parent Company. The Group also has deposits amounting to

P126,865,934 and P193,049,842 with SBA as of December 31, 2012 and 2011,

respectively. These deposits earned P384,536, P425,360, and P1,124,404 interest

income in 2012, 2011 and 2010, respectively.

26.04 Investment in Associate

The Group recognized dividend income amounting to P4,896,570 and P596,381 from

dividends declared by ISPL in 2012 and 2010, respectively. The Group has forty nine

percent (49%) ownership interest on its associate and a carrying amount of investment

amounted to P19,492,351 in 2012.

26.05 Remuneration of Key Management Personnel

The remuneration of the directors and other members of key management personnel of

the Group are set out below in aggregate for each of the categories specified in

PAS 24, Related Party Disclosures:

2012 2011 2010

Short-term employee benefits P 31,659,537 P 27,036,984 P 21,059,431

Post-employment benefits 1,260,378 1,571,444 549,541

P 32,919,915 P 28,608,428 P 21,608,972

26.06 Transaction with Retirement Fund

The Group’s retirement benefit fund is maintained with Sterling Bank of Asia (SBA), an

affiliate due to common stockholders, as trustee. The carrying amount and fair value

of the fund amounted to P30,303,714 as of December 31, 2012.

The funds were invested in private equity securities, deposits in banks and government

debt securities. In 2012 and 2011, the Group made contributions to the fund

amounting to P6,158,445 and P6,895,233, respectively, as disclosed in Note 23.

Private equity securities includes P808,100 of the Group’s own equity securities

bought back from resigned employees who held such securities, under the special

stock purchase program. Such transaction was authorized by the Board of Directors of

I-Remit Inc. through its SSS program as disclosed in Note 24.

The government debt securities consist of peso denominated and USD denominated

securities. The Peso-denominated Government Securities of the I-Remit Retirement

Fund were purchased from accredited counterparties of SBA-Trust Group.

These counterparties are Banks and Investment Houses allowed to trade government

securities. Existing Peso GS accounts are all Tax exempt and are currently lodged

under the Tax Exempt RoSS Account of SBA-Trust Group with the Bureau of the

Treasury (BTr).

The USD denominated debt securities are currently lodged with the Philippine

Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s

accredited counterparties that are allowed to trade government securities

50

27. EARNINGS PER SHARE

The Group’s basic earnings per share is 0.05, 0.23 and 0.11 as of

December 31, 2012, 2011 and 2010, respectively.

The earnings and weighted average number of ordinary shares used in the calculation

of basic earnings per share are as follows:

2012 2011 2010

a. Net income from continuing

operations P 30,526,247 P 109,633,447 P 96,219,135

b. Income/(loss) from

discontinued operations - 26,429,749 (30,304,899)

c. Net income (a+b) 30,526,247 136,063,196 65,914,236

d. Net income attributable to

ordinary equity holders of

the Parent Company for

basic earnings 30,526,247 138,069,380 77,551,227

e. Weighted average number

of shares for basic earnings

per share 600,742,383 607,014,606 608,396,800

f. Basic earnings per share

(c/e) 0.05 0.22 0.11

g. Basic earnings per share

attributable to ordinary

equity holders of the Parent

Company (d/e) 0.05 0.23 0.13

h. Basic earnings per share

from continuing operations

(a/e) 0.05 0.18 0.16

i. Basic earnings (loss) per

share attributable to equity

holders of the Parent

Company from discontinued

operations (b/e) - 0.04 (0.05)

28. DISCONTINUED OPERATIONS

In February 2010, IRCGmbH (formerly IERCAG) started its remittance business in Italy.

On April 28, 2011, IRCGmbH stopped its money remittance operations in Rome and

Milan in Italy in accordance with Article 75 of the Transitional and Final Provisions of

Austrian Payment Services Act, which stipulated that credit institutions that have held

authorizations pursuant to Article 1 paragraph 1 no 23 BWG, as amended by the

Federal Act Federal Law Gazette No. 35/2003, prior to December 25, 2009, have only

until April 30, 2011 to carry out their money remittance operations.

In December 2011, IRCGmbH sold assets relating to its operations in Italy to a third

party. These assets, with an aggregate carrying amount of P7,293,288, were sold for

a consideration of P72,432,683 thereby resulting to a gain on sale of P65,139,395.

51

The results of IRCGmbH’s operation in Italy follow:

2012 2011 2010

Delivery fees P - P 5,289,202 P 7,486,658

Foreign exchange gains – net - 1,006,867 673,204

- 6,296,069 8,159,862

Cost of services - 596,703 3,749,195

Gross income - 5,699,366 4,410,667

Other income – net - 615,909 38,935

Operating expenses - (45,024,921) (34,754,501)

Loss from operations - (38,709,646) (30,304,899)

Gain on sale of assets - 65,139,395 -

Income from discontinued operations P - P 26,429,749 P (30,304,899)

The net cash flows incurred by IRCGmbH in its Italy operations are as follows:

2012 2011

Operating P - P 27,911,882

Financing - (27,911,882)

P - P -

29. INCOME TAXES

29.01 Income Tax Recognized in Profit or Loss

Components of income tax expense are as follows:

2012 2011 2010

Current tax expense P 23,534,368 P 36,053,005 P 28,576,367

Deferred tax benefit (728,427) (745,224) (921,460)

Final tax 371,756 589,871 643,945

P 23,177,697 P 35,897,652 P 28,298,852

The table below shows the income tax rates provided on the assessable profit for the

year of each subsidiary:

2012 2011

PSAGL 16.50% 16.50%

LSML 16.50% 16.50%

IAPL 30.00% 30.00%

WEPL 30.00% 30.00%

INZL 28.00% 28.00%

IGRL 20.00% 21.00%

IRCL 34.20% 34.20%

JPY 30.00% -

52

A numerical reconciliation between tax expense and the product of accounting profit

multiplied by the tax rate in 2012, 2011 and 2010 follows:

2012 2011 2010

Accounting profit P 53,703,944 P 145,531,099 P 124,517,987

Tax expense at 30% 16,111,183 43,659,330 37,355,396

Tax effects of:

Adjustments made due to

consolidation (793,603) 14,028,616 (9,519,133)

Application of tax credit (72,947) - -

Non-taxable income (8,803,902) (10,237,502) (4,386,094)

Non-deductible expenses 2,867,026 2,831,134 1,782,151

Recognition of previously

unrecognized deferred

tax assets (840,927) - -

Non-recognition of deferred

tax assets 21,350,943 (4,566,798) 12,489,198

Difference in statutory rates (6,640,076) (9,817,128) (9,422,666)

P 23,177,697 P 35,897,652 P 28,298,852

30. DEFERRED TAXES

The components of the Group’s deferred tax assets and their respective movements

are as follows:

At January

1, 2011

Charge (credit)

to profit or loss

for the year

At January 1,

2012

Charge (credit)

to profit or loss

for the year

At December 31,

2012

Deferred tax assets

NOLCO P 3,669,877 P 1,310,471 P 4,980,348 P 1,132,385 P 6,112,733

Reversal of temporary

difference - - - 898,714 898,714

Accumulated depreciation 119,288 (119,288) - (117,506) (117,506)

Unused tax credits 443,755 (443,755) - - -

P 4,232,920 P 747,428 P 4,980,348 P 1,913,593 P 6,893,941

Deferred tax liabilities

Unrealized foreign

exchange gain – net P - P - P - P 296,153 P 296,153

Retirement asset - - - 854,517 854,517

Capital allowance 29,765 2,204 31,969 34,496 66,465

P 29,765 P 2,204 P 31,969 P 1,185,166 P 1,217,135

53

31. FAIR VALUE MEASUREMENTS

31.01 Fair Value of Financial Assets and Liabilities

The carrying amounts and estimated fair values of the Group’s financial assets and

financial liabilities as of December 31, 2012 and 2011 are presented below:

2012 2011

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial Assets:

Financial assets at FVPL P 210,180,347 P 210,180,347 P 125,226,264 P 125,226,264

Trade and other receivables 1,192,359,836 1,192,359,836 1,031,284,146 1,031,284,146

Refundable deposits 19,905,025 19,905,025 17,291,585 17,018,242

P 1,422,445,208 P 1,422,445,208 P 1,173,801,995 P 1,173,528,652

Financial Liabilities:

Beneficiaries and other

payables P 515,580,524 P 515,580,524 P 236,883,621 P 236,883,621

Loans payable 925,000,000 925,000,000 666,000,000 666,000,000

P 1,440,580,524 P 1,440,580,524 P 902,883,621 P 902,883,621

Due to short-term nature or demand feature of financial assets at FVPL, trade and

other receivables, refundable deposits, trade and other payables (except payable to

government agencies and accrued expenses) and loans, Management estimates that

their carrying amounts approximate their fair values.

31.02 Fair Value Measurements Recognized in the Consolidated Statement of Financial

Position

The following table provides an analysis of financial instruments that are measured

subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the

degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices (unadjusted)

in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than quoted

prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 fair value measurements are those derived from valuation techniques that

include inputs for the asset or liability that are not based on observable market data

(unobservable inputs).

As of December 31, 2012 and 2011, the financial instruments carried at fair value only

pertains to the Group’s financial assets at FVPL, which consist of investments in debt

and equity securities, as disclosed in Note 9. The fair values of these debt and equity

securities are based on quoted prices (Level 1). There were no transfers between

Level 1 and Level 2 fair value measurements.

54

32. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Group’s Corporate Treasury function provides services to the business, co-

ordinates access to domestic and international financial markets, monitors and

manages the financial risks relating to the operations of the Group through internal risk

reports which analyze exposures by degree and magnitude of risks. These risks

include market risk, including currency risk, fair value interest rate risk and price risk,

credit risk and liquidity risk.

The Group seeks to minimize the effects of these risks by using derivative financial

instruments to hedge risk exposures. The use of financial derivatives is governed by

the Group’s policies approved by the board of directors, which provide written

principles on foreign exchange risk, interest rate risk, credit risk, the use of financial

derivatives and non-derivative financial instruments, and the investment of excess

liquidity. Compliance with policies and exposure limits is reviewed by the internal

auditors on a continuous basis. The Group does not enter into or trade financial

instruments, including derivative financial instruments, for speculative purposes.

The Corporate Treasury function reports quarterly to the Group’s risk management

committee, an independent body that monitors risks and policies implemented to

mitigate risk exposures.

32.01 Market Risk Management

32.01.01 Foreign Currency Risk Management

The Group undertakes transactions denominated in foreign currencies; consequently

exposures to exchange rate fluctuations arise. It is the Company’s policy that all daily

foreign currencies, which arise as a result of its remittance transactions, must be

traded daily with bank partners only at prevailing foreign exchange rates in the market.

The daily closing foreign exchange rates shall be the guiding rate in providing

wholesale rates and retail rates to foreign offices and agents, respectively. The trading

proceeds will be used to pay out bank loans and other obligations of the Company.

The carrying amounts of the Group’s foreign currency denominated monetary assets

and monetary liabilities at the end of the reporting period are as follows:

Assets Liabilities

2012 2011 2012 2011

CAD P 330,890,819 P 204,120,268 P 2,723,607 P 2,231,758

EUR 130,409,602 82,287,633 6,385,997 3,301,794

HKD 57,153,139 71,278,604 931,782 597,641

SGD 110,653,207 69,903,060 - -

AUD 67,415,248 68,926,331 1,622,066 2,024,483

USD 98,929,737 66,185,751 - - -

GBP 146,169,454 68,975,423 6,294,717 1,578,550

IDR 176,200 - - -

JPY 23,340,843 - 2,002,349 -

NTD 62,318,543 29,205,344 - -

NZD 16,355,342 13,381,984 702,604 189,779

QAR 3,100 3,311 - -

P 1,043,815,234 P 674,267,709 P 20,663,122 P 9,924,005

55

The Group is mainly exposed to the Canadian, Euro, Singaporean dollar and United

Kingdom Pound.

The following table details the Group’s sensitivity to a five percent (5)% increase and

decrease in the Philippine Peso against the relevant foreign currencies. The sensitivity

rate of five percent (5)% is used when reporting foreign currency risk internally to key

management personnel and represents management’s assessment of the reasonably

possible change in foreign exchange rates. The sensitivity analysis includes only

outstanding foreign currency denominated monetary items and adjusts their translation

at the period end for a five percent (5)% change in foreign currency rates. The

sensitivity analysis includes external loans as well as loans to foreign operations within

the Group where the denomination of the loan is in a currency other than the currency

of the lender or the borrower. A positive number below indicates an increase in profit

and other equity where the Philippine Peso strengthens five percent (5%) against the

relevant currency. For a five percent (5%) weakening of the Philippine Peso against the

relevant currency, there would be a comparable impact on the profit and other equity,

and the balances below would be negative.

2012 2011

Canadian Dollar P 11,471,339 P 7,057,169

United States Dollar 6,161,714 4,122,296

Euro 5,456,473 3,475,017

Hongkong Dollar 3,351,614 4,213,617

Japan Yen 3,220,833 -

United Kingdom Pound 3,211,795 1,547,563

Australia Dollar 2,450,281 2,491,571

New taiwan Dollar 1,222,776 573,049

Singapore Dollar 464,905 293,695

New Zealand Dollar 53,805 45,347

Indonesia Rupiah 18,354 -

Qatari Riyal 198 211

P 37,084,087 P 23,819,535

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent

foreign exchange risk as the year end exposure does not reflect the exposure during

the year. The Group mitigates its exposure to foreign currency risk by monitoring its

foreign currency cash flows.

32.01.02 Interest Rate Risk Management

The Group’s exposure to interest rate risk arises from its cash deposits in banks which

are subject to variable interest rates.

The interest rate risk arising from deposits with banks is managed by means of

effective investment planning and analysis and maximizing investment opportunities in

various local banks and financial institutions.

Profit for the year ended December 31, 2012 and 2011 would have been unaffected

since the Group has no borrowings at variable rates and interest rate risk exposure for

its cash in bank, which is subject to variable rate, is very immaterial.

The Group’s sensitivity to interest rates has not changed significantly from the prior

year. In Management’s opinion, the sensitivity analysis is unrepresentative of the

inherent interest rate risk as the year-end exposure does not reflect the exposure

during the year.

56

32.01.03 Other Price Risk Management

The Group is exposed to equity price risks arising from equity investments. The

sensitivity analyses below have been determined based on the exposure to equity price

risks at the end of the reporting period.

If equity prices had been five percent (5)% higher/lower:

net profit for the year ended December 31, 2012 would have been unaffected as

the equity investments are classified as financial assets at fair value through profit

or loss and no investments were disposed of or impaired; and

Based on the historical movement of the stock exchange index, management’s

assessment of reasonable possible change was determined to be an increase of

P1,015,932 in the 2012 consolidated statement of comprehensive income.

The Group’s sensitivity to equity prices has not changed significantly from the prior

year.

32.02 Credit Risk Management

Credit risk refers to the risk that counterparty will default on its contractual obligations

resulting in financial loss to the Group. The Group has adopted a policy of only dealing

with creditworthy counterparties and obtaining sufficient collateral, where appropriate,

as a means of mitigating the risk of financial loss from defaults.

The Group only transacts with entities that are rated the equivalent of investment

grade and above. This information is supplied by independent rating agencies where

available and, if not available, the Company uses other publicly available financial

information and its own trading records to rate its major customers. The Company’s

exposure and the credit ratings of its counterparties are continuously monitored and

the aggregate value of transactions concluded is spread amongst approved

counterparties. Credit exposure is controlled by counterparty limits that are reviewed

and approved by the risk management committee annually.

The Company does not have significant credit risk exposure to any single counterparty

or any group of counterparties having similar characteristics. The Company defines

counterparties as having similar characteristics if they are related entities.

The credit risk on liquid funds is limited because counterparties are banks with high

credit ratings.

The carrying amount of financial assets recognized in the financial statements, which is

net of impairment losses, represents the Company’s maximum exposure to credit risk,

without taking into account collateral or other credit enhancements held.

2012 2011

Cash in banks and cash equivalents P 1,027,430,673 P 843,237,147

Trade and other receivables 1,192,359,836 1,031,284,146

Financial assets at fair value through

profit or loss 210,180,347 125,226,264

Refundable deposits 19,905,025 17,291,585

P 2,449,875,881 P 2,017,039,142

The Company does not hold any collateral or other credit enhancements to cover this

credit risk.

57

The table below shows the credit quality by class of financial assets of the Company:

Neither Past Due nor Impaired

High Grade

Medium

Grade

Low

Grade Total

December 31, 2012 - -

Cash in bank and

cash equivalents P 1,027,430,673 P - P - P 1,027,430,673

Trade and other

receivables 1,180,106,805 - - 1,180,106,805

Financial assets at

fair value through

profit or loss 210,180,347 - - 210,180,347

Refundable deposits 19,905,025 - - 19,905,025

P 2,437,622,850 P - P - P 2,437,622,850

December 31, 2011 - -

Cash in bank and

cash equivalents P 843,237,147 P - P - P 843,237,147

Trade and other

receivables 1,022,510,367 - - 1,022,510,367

Financial assets at

fair value through

profit or loss 125,226,264 - - 125,226,264


P 2,008,265,363 P - P - P 2,008,265,363

Maximum exposure for financial instruments recorded at fair value as shown above

represent the risk exposure as of respective balance sheet dates but not the maximum

risk exposure that could arise in the future as a result of changes in value.

The table below shows the maximum credit exposure of the Group per geographical

classification as of December 31, 2012 and 2011:

2012 2011

Asia Pacific P 1,684,327,697 P 1,742,418,296

Middle East 177,709,946 108,885,265

North America 329,052,746 74,982,548

Europe 275,289,164 107,446,135

P 2,466,379,553 P 2,033,732,244

The credit quality of the financial assets was determined as follows:

Loans and receivables

High grade – These are receivables from counterparties with no default in payment.

Medium – These are receivables from counterparties with up to three defaults in

payment.

Low – These are receivables from counterparties with more than three defaults in

payment.

58

32.03 Liquidity Risk Management

Ultimate responsibility for liquidity risk management rests with the board of directors,

which has established an appropriate liquidity risk management framework for the

management of the Group’s short-, medium- and long-term funding and liquidity

management requirements. The Group manages liquidity risk by maintaining adequate

reserves, banking facilities and reserve borrowing facilities, by continuously monitoring

forecast and actual cash flows, and by matching the maturity profiles of financial

assets and liabilities.

The following tables detail the Group’s remaining contractual maturity for its non-

derivative financial liabilities with agreed repayment periods. The tables have been

drawn up based on the undiscounted cash flows of financial liabilities based on the

earliest date on which the Group can be required to pay. The tables include both

interest and principal cash flows. To the extent that interest flows are floating rate,

the undiscounted amount is derived from interest rate curves at the end of the

reporting period. The contractual maturity is based on the earliest date on which the

Group may be required to pay.

Weighted Average

Effective Interest

Rate Within 1 Year

December 31, 2012

Beneficiaries and other payables - P 515,580,524

Loans payable 5% to 7.125% 925,000,000

P 1,440,580,524

December 31, 2011

Beneficiaries and other payables - P 236,883,621

Loans payable 5% to 7% 666,000,000

P 902,883,621

The following table details the Group’s expected maturity for its non-derivative

financial assets. The table has been drawn up based on the undiscounted contractual

maturities of the financial assets including interest that will be earned on those assets.

The inclusion of information on non-derivative financial assets is necessary in order to

understand the Group’s liquidity risk management as the liquidity is managed on a net

asset and liability basis.

Weighted

Average Effective

Interest Rate Within 1 Year

December 31, 2012

Cash and cash equivalents 0.50% to 2% P 1,062,120,047

Trade and other receivables - 1,192,359,836


profit or loss - 210,180,347

P 2,464,660,230

59

Weighted

Average Effective


December 31, 2011

Cash and cash equivalents 0.50% to 2% P 891,235,623

Trade and other receivables - 1,031,284,146


profit or loss - 125,226,264

P 2,047,746,033

The amounts included above for variable interest rate instruments for both non-

derivative financial assets and liabilities is subject to change if changes in variable

interest rates differ to those estimates of interest rates determined at the end of the

reporting period.

The Company’s financing facilities are as follows:

2012 2011

Secured bank loan facilities with various

maturity dates through to 2012 and

which may be extended by mutual

agreement:

amount used P 925,000,000 P 666,000,000

amount unused 1,880,000,000 1,480,000,000

P 2,805,000,000 P 2,146,000,000

32.04 Translation Risk

The Group’s consolidated statement of financial position is exposed to foreign

exchange fluctuations as these affect the translation of subsidiaries’ net assets and

income and expenses denominated in foreign currencies. The following tables set forth

for the year indicated the impact of reasonably possible changes in the rates of other

currencies on equity.

2012

Currency

Change in nominal

foreign currency

exchange rate

Effect on equity

Change in nominal

foreign currency

exchange rate

Effect on

equity

HKD +0.25 15,158,460 +0.09 P 5,099,821

CAD +2.00 1,654,760 +0.50 418,027

EUR +5.04 (911,967) +2.88 (522,027)

NZD +3.24 (1,136,805) -0.03 11,655

AUD +3.86 839,375 +1.26 274,139

GBP +5.60 (120,681) +1.27 (27,318)

JPY +0.08 (4,136,510) +0.04 (1,975,458)

60

2011

Currency

Change in nominal

foreign currency

exchange rate

Effect on equity

Change in nominal

foreign currency

exchange rate

Effect on

equity

HKD +0.11 P 5,233,309 -0.26 P (12,369,640)

CAD +2.81 2,386,352 -1.60 (1,358,777)

EUR +7.36 1,578,924 -0.25 (53,632)

NZD +3.50 (955,612) -2.44 666,198

AUD +2.95 600,471 -2.94 (598,435)

GBP +4.40 (12,964) -1.06 3,123

33. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Group manages its capital to ensure that the Group will be able to continue as

going concerns while maximizing the return to stakeholders through the optimization of

the debt and equity balance. The Group’s overall strategy remains unchanged from

2011 and 2010.

The capital structure of the Group consists of net debt (borrowings as disclosed in

Notes 15, 16, and 30 offset by cash and cash equivalents, as disclosed in Note 7) and

equity of the Group (comprising capital paid-in, retained earnings, cumulative

translation adjustment and treasury stock as disclosed in Notes 17.

Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations

are prohibited from retaining surplus plus profits in excess of 100% of their paid-up

capital stock, except: 1) when justified by definite corporate expansion projects or

programs approved by the board of directors; or 2) when the corporation is prohibited

under any loan agreement with any financial institution or creditor, whether local or

foreign, from declaring dividends without its/his consent, and such consent has not yet

been secured; or 3) when it can be clearly shown that such retention is necessary

under special circumstances obtaining in the corporation, such as when there is a need

for special reserve for probable contingencies. The Company is in compliance with the

above requirements.

The Group’s risk management committee reviews the capital structure of the Group on

an annual basis. As part of this review, the committee considers the cost of capital

and the risks associated with each class of capital. The Company has a target gearing

ratio of 1:1 determined as the proportion of net debt to equity.

The gearing ratio at end of the reporting period was as follows:

2012 2011

Debt P 1,447,857,647 P 912,676,998

Cash and cash equivalents 1,062,120,047 891,235,623

Net Debt 385,737,600 21,441,375

Equity 1,237,125,608 1,363,414,664

Net debt to equity ratio 0.31:1 0.02:1

Debt is defined as long- and short-term borrowings (excluding derivatives and financial

guarantee contracts), as described in Note 4.07, while equity includes all capital and

reserves of the Group that are managed as capital.

61

34. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS

Certain amounts in the comparative financial statements and note disclosures have

been reclassified to conform to the current year’s presentation. The reclassifications

include:

Account Amount

From To 2011 2010

Consolidated Statement of Financial Position

Accounts receivable Trade and other receivables P 916,852,887 P 1,042,606,171

Other receivables Trade and other receivables 114,431,259 83,440,874

Other current assets

Prepayments and other current

assets 28,928,836 36,346,603

Goodwill Intangible assets – net 111,441,191 111,441,191

Software costs Intangible assets – net 1,450,944 2,081,746

Retirement assets Prepaid retirement 368,394 -

Interest-bearing loans Loans payable 666,000,000 877,000,000

Capital paid-in excess of par

value Additional paid-in capital 391,232,478 429,513,501

Consolidated Statement of Comprehensive Income

Interest income Other income 13,862,222 12,514,490

Interest expense Finance cost 38,322,540 29,213,843

Management believes that the above reclassifications resulted to a better presentation

of accounts and did not have any impact on prior year’s profit or loss.

35. CORRECTION OF PRIOR PERIOD ERRORS

In 2012, the Company determined the following:

No appropriation was made for the treasury stocks for the years 2011 and 2010.

The goodwill is not carried at its historical cost and the movement is due to

translation adjustment, which resulted to adjustments in cumulative translation

account.

In the 2008 consolidated financial statements the beginning retained earnings of

IRCGmbH, which is 74.90% owned subsidiary of the Parent Company in 2008, is

taken up as an adjustment to trade receivables.

Thus, the consolidated financial statements as of and for the year ended

December 31, 2012 was restated as follows:

Retained

Earnings as of

January 1,

2010

Cumulative

Translation

Adjustment

Appropriation of retained earnings for the

treasury stocks P (40,115,150) P -

Goodwill adjustment - 13,859,085

Retained earnings take-up (16,693,102) -

Increase (Decrease) (56,808,252) 13,859,085

As previously stated 306,946,085 (20,398,998)

As restated P 250,137,833 P (6,539,913)

62

36. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved and authorized for issuance by the Board of

Directors on May 14, 2013.



A correspondent firm of Pan ell Kerr Forster International

worldwide

INDEPENDENT AUDITORS' REPORT ON THE SUPPLEMENTARY SCHEDULES

The Board of Directors and StockholdersI-REMIT INC. AND SUBSIDIARIES26/F Discovery Centre, 25 ADB AvenueOrtigas Centre, Pasig City

We have issued our report dated May 15, 2013 on the basic consolidated financialstatements of I-REMIT INC. AND SUBSIDIARIES as of and for the period December 31,2012. Our audit was conducted for the purpose of forming an opinion on the basicconsolidated financial statements of I-REMIT INC. AND SUBSIDIARIES taken as a whole.The information in the Schedules I to IV and A to H as of and for the period December 31,2012 which is not a required part of the consolidated financial statements is required to befiled with the Securities and Exchange Commission. Such information is the responsibility ofthe Management of I-REMIT INC. AND SUBSIDIARIES. The information has been subjectedto the auditing procedures applied in our audit of the basic consolidated financial statements.In our opinion, the information is fairly stated in all material respects in relation to the basicconsolidated financial statements taken as a whole.

R.S. BERNALDO & ASSOCIATESBOA/PRC No. 0300Valid until December 31, 2015SEC Group A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSP Group B AccreditedValid until February 14, 2014CDA CEA No. 013-AFValid until October 25, 2013

RO&~DOManaging PartnerCPA Certificate No. 25927SEC Group A AccreditedAccreditation No. 11 92-AValid until March 1, 2015BSP Group B AccreditedValid until February 14, 2014BIR Accreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No.1 09-227-722PTR No. 3676450Issued on January 9, 2013 at Makati City

May 15, 2013

18/F Cityland Condominium 10 Tower 1,6815 Ayala Avenue cor. H.V. Dela Costa St., Makati City, Philippines 1200TEL +63 2 812-1718 to 24 FAX +632 813-6539 E-MAIL [email protected] WEBSITE www.rsbernaldo.com

1

I-REMIT INC. AND SUBSIDIARIES

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTARY SCHEDULES

December 31, 2012

Schedule Content Page No.

Part 1

I Schedule of Retained Earnings Available for Dividend Declaration

(Part 1 4C, Annex 68-C) 2

II Schedule of all effective standards and interpretations under PFRS

(Part 1 4J) 3

III Map showing relationships between and among parent,

subsidiaries, an associate, and joint venture (Part 1 4H) 8

Part 2

A Financial Assets 9

B Amounts Receivable from Directors, Officers, Employees, Related

Parties and Principal Stockholders (Other than Affiliates) 10

C Amounts Receivable from Related Parties which are eliminated

during the consolidation of financial statements 12

D Intangible Assets - Other Assets 14

E Long-Term Debt 15

F Indebtedness to Related Parties (included in the consolidated

statement of financial position) 16

G Guarantees of Securities of Other Issuers 17

H Capital Stock 18

Other Required Information

IV Schedule of Financial Soundness Indicators (Part 1 4D)

2

Schedule I

I-REMIT INC.

SCHEDULE OF RETAINED EARNINGS

AVAILABLE FOR DIVIDEND DECLARATION

DECEMBER 31, 2012

Unappropriated Retained Earnings, Beginning P 153,759,324

Net income based on the face of audited financial statements 30,627,057

Less: Dividend declarations during the year (119,980,858)

Treasury shares (16,222,480)

Unrealized foreign exchange gains – net (987,177)

Add: Realized income categorized as unrealized in previous years 1,205,505

Net loss actual/realized (105,357,953)

Unappropriated Retained Earnings, Ending P 48,401,371

3

Schedule II


SCHEDULE OF EFFECTIVE STANDARDS AND INTERPRETATIONS

DECEMBER 31, 2012

PHILIPPINE FINANCIAL REPORTING STANDARDS

AND INTERPRETATIONS Effective as of December

31, 2012 Adopted

Not

Adopted

Not

Applicable

Framework for the Preparation and Presentation of Financial Statements

Conceptual Framework Phase A: Objectives and

qualitative characteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1

(Revised)

First-time Adoption of Philippine

Financial Reporting Standards

Amendments to PFRS 1 and PAS 27:

Cost of an Investment in a Subsidiary,

Jointly Controlled Entity or Associate

Amendments to PFRS 1: Additional

Exemptions for First-time Adopters

Amendment to PFRS 1: Limited

Exception from Comparative PFRS 7

Disclosures for first-time Adopters

Amendments to PFRS 1: Severe

Hyperinflation and Removal of Fixed

Date for First-time Adopters

Amendments to PFRS 1: Government

Loans

PFRS 2

Share-based Payment

Amendments to PFRS 2: Vesting

Conditions and Cancellations

Amendments to PFRS 2: Group Cash-

Settled Share-based Payment

Transactions

PFRS 3

(Revised) Business Combinations

PFRS 4

Insurance Contracts

Amendments to PAS 39 and PFRS 4:

Financial Guarantee Contracts

PFRS 5 Non-current Asset Held for Sale and

Discontinued Operations

PFRS 6 Exploration for and Evaluation of

Mineral Resources

4

PFRS 7

Financial Instruments: Disclosures

Amendments to PFRS 7: Transition


Reclassification of Financial Assets


Reclassification of Financial Assets -

Effective Date and Transition

Amendments to PFRS 7: Improving

Disclosures about Financial

Instruments

Amendments to PFRS 7: Disclosures -

Transfer of Financial Assets


Offsetting Financial Assets and

Financial Liabilities

Amendments to PFRS 7: Mandatory

Effective Date of PFRS 9 and

Transition Disclosures

PFRS 8 Operating Segments

PFRS 9

Financial Instruments


Effective Date of PFRS 9 and

Transition Disclosures

PFRS 10 Consolidated Financial Statements

PFRS 11 Joint Arrangements

PFRS 12 Disclosure of Interest in Other Entities

PFRS 13 Fair Value Measurements

Philippine Accounting Standards

PAS 1

(Revised)

Presentation of Financial Statements

Amendments to PAS 1: Capital

Disclosures

Amendments to PAS 32 and PAS 1:

Puttable Financial Instruments and

Obligations Arising on Liquidation

Amendments to PAS 1: Presentation of

items Other than Comprehensive

Income

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in

Estimates and Errors

PAS 10 Events After the Balance Sheet Date

PAS 11 Construction Contracts

5

PAS 12

Income Taxes

Amendments to PAS 12 - Deferred Tax:

Recovery of Underlying Assets

PAS 16 Property, Plant and Equipment

PAS 17 Leases

PAS 18 Revenue

PAS 19

Employee Benefits

Amendments to PAS 19: Actuarial

Gains and Losses, Group Plans and

Disclosures

PAS 19

(Amended) Employee Benefits

PAS 20 Accounting for Government Grants and

Disclosure of Government Assistance

PAS 21

The Effect of Changes in Foreign

Exchange Rates

Amendment: Net Investment in a

Foreign Operation

PAS 23

(Revised) Borrowing Cost

PAS 24

(Revised) Related Party Disclosures

PAS 26 Accounting and Reporting by

Retirement Benefit Plans

PAS 27

(Amended) Separate Financial Statements

PAS 28

(Amended)

Investments in Associates and Joint

Ventures

PAS 29 Financial Reporting in Hyperinflationary

Economy

PAS 31 Interests in Joint Ventures

PAS 32

Financial Instruments: Disclosure and

Presentation




Amendments to PAS 32: Classification

of Right Issues

Amendment to PAS 32: Offsetting

Financial Assets and Financial Liabilities

PAS 33 Earning Per Share

PAS 34 Interim Financial Reporting

PAS 36 Impairment of Assets

PAS 37 Provision, Contingent Liabilities and

Contingent Assets

PAS 38 Intangible Assets

6

PAS 39

Financial Instruments: Recognition and

Measurement

Amendments to PAS 39: Transition and

Initial Recognition of Financial Assets

and Financial Liabilities

Amendments to PAS 39: Cash Flow

Hedge Accounting of Forecast

Intragroup Transactions

Amendments to PAS 39: The Fair Value

Option

Amendments to PAS 39:





Amendments to Philippine Interpretation

IFRIC-9 and PAS 39: Embedded

Derivatives

PAS 40 Investment Property

PAS 41 Agriculture

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning,

Restoration and Similar Liabilities

IFRIC 1

Member's Share in Co-operative Entities

and Similar Instruments

IFRIC 4

Determining Whether an Arrangement

Contains a Lease

IFRIC 5

Rights to Interests arising from

Decommissioning, Restoration and

Environmental Rehabilitation Funds

IFRIC 6

Liabilities arising from Participating in a

Specific Market-Waste Electrical and

Electronic Equipment

IFRIC 7

Applying the Restatement Approach

under PAS 29 Financial Reporting in

Hyperinflationary Economies

IFRIC 8 Scope of PFRS 2

IFRIC 9

Reassessment of Embedded Derivatives



Derivatives

IFRIC 10

Interim Financial Reporting and

Impairment

IFRIC 11

PFRS 2- Group and Treasury Share

Transactions

IFRIC 12 Service Concession Arrangements

7

IFRIC 13 Customer Loyalty Programs

IFRIC 14

The Limit on a Defined Benefit Asset,

Minimum Funding Requirements and

their Interaction

Amendments to Philippine

Interpretations IFRIC - 14, Prepayments

of a Minimum Funding Requirement

IFRIC 16

Hedges of a Net Investment in a

Foreign Operation

IFRIC 17

Distribution of Non-Cash Assets to

Owners

IFRIC 18 Transfer of Assets from Customers

IFRIC 19

Extinguishing Financial Liabilities with

Equity Instruments

IFRIC 20

Stripping Costs in the Production Phase

of a Surface Mine

SIC - 7 Introduction of the Euro

SIC - 10

Government Assistance - No Specific

Relation to Operating Activities

SIC - 12

Consolidation - Special Purpose Entities

Amendments to SIC - 12: Scope of SIC

12

SIC - 13

Jointly Controlled Entities - Non-

Monetary Contributions by Venturers

SIC - 15 Operating Leases - Incentives

SIC - 21

Income Taxes - Recovery of Revalued

Non-Depreciable Assets

SIC - 25

Income Taxes - Changes in the Tax

Status of an Entity or its Shareholders

SIC - 27

Evaluating the Substance of

Transactions Involving the Legal Form

of a Lease

SIC - 29

Service Concession Arrangements:

Disclosures

SIC - 31

Revenue - Barter Transaction Involving

Advertising Services

SIC - 32 Intangible Assets - Web Site Costs

8

Schedule III


MAP SHOWING RELATIONSHIPS BETWEEN AND AMONG PARENT,

SUBSIDIARIES, AN ASSOCIATE, AND JOINT VENTURE

STAR Equities Inc.29.1825028 %

JTKC Equities, Inc. 21.2937506%

Surewell Equities, Inc23.3530780%

JPSA Global Services Co.3.2672471%

Public22.9034215%

I-Remit, Inc.

Ownership Structure

International Remittances (Canada) Ltd.100%

Lucky Star Management Limited (Hong Kong)100%

IRemit Global Remittance Limited (UK)100%

Worldwide Exchange Pty Ltd *100%

IREMIT Remittance Consulting GmbH (Austria)100%

*Consisting of 70% direct ownership and 30% indirect ownership through I-Remit Australia Pty Ltd, a wholly-owned subsidiary.** An associate

I-Remit New Zealand Limited100%

IRemit Singapore Pte Ltd **49%

Hwa Kung Hong & Co. Ltd. (Taiwan)**49%

K.K. I-REMIT JAPAN100%

Power Star Asia Group Limited100%

9

I-Remit Inc. and Subsidiaries

Schedule A – Financial Assets

December 31, 2012

Name of issuing entity and

association of each issue

Number of shares or

principal amount of

bonds or notes

Amount shown on

the balance sheet

Income

accrued

Debt securities

Citic Pacific Ltd. $402,000 P=16,649,880 P=1,351,442

Claudius Limited Notes 208,000 9,242,818 702,726

FTP Finance Ltd. 300,650 13,933,355 863,392

Republic of Venezuela 93,500 4,202,494 364,663

Royal Capital BV 301,775 13,404,385 1,078,008

Bank of Ceylon 201,000 8,848,738 367,304

Sistema Intl 300,750 13,243,551 554,754

PT Berau Coal Energy 193,500 7,984,225 196,871

ABN Amro Bank 200,620 8,719,020 159,475

GAZPROM 203,000 8,432,491 105,487

ALFA Bank 201,150 8,711,631 168,546

Columbia Telecom 202,250 8,415,250 119,533

VTB Bank 201,438 8,856,948 122,020

Perusahaan Listrik Negar 203,052 8,466,973 83,570

SBERBANK 200,725 8,333,150 75,582

Eurochem M& C 201,490 8,528,548 22,795

Theta Capital 202,800 8,389,799 24,375

Various Private Corp. 604,490 25,498,443 1,388,215

P=189,861,699 P=7,748,757

Equity securities (shares)

SHS General Motors 5,400 P=6,390,746 P=–

Apple Inc 595 12,998,119 –

Global X Silver (SIL) 1,000 929,783 –

P=20,318,648.00 P=–

10


Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and

Principal Stockholders (Other than Related Parties)

December 31, 2012

Name of Debtor

Balance at

beginning of

period Additions

Amounts

Collected

Amounts

Written-off Current Non- Current

Balance at end of

period

Analiza S. Bismonte P=- P=10,764.69 P=- P=- P=10,764.69 P=- P=10,764.69

Angelina Quito - 8,013.03 8,013.03 - - - -

Annie Angeles 135,702.00 - 135,702.00 - - - -

Anthony Bryan Robles - 8,048.92 8,048.92 - - - -

Bansan Choa 281,891.00 - 17,118.00 - 264,773.00 - 264,773.00

Belinda Herrera - 54,587.64 54,587.64 - - - -

Bernadette Cindy Tiu 7,636,251.87 3,779,591.50 4,425,997.57 - 6,989,845.80 - 6,989,845.80

Carmen Baladad - 160,815.94 160,572.97 - 242.97 - 242.97

Carol Ann Ong - 7,763.47 7,763.47 - - - -

Catherine Chan 13,746.49 436.24 13,746.49 - 436.24 - 436.24

Chris Eusebio - 3,801.06 - - 3,801.06 - 3,801.06

Claire Panes - 67.50 - - 67.50 - 67.50

Clarissa Celestino - 1,928.04 1,729.70 - 198.34 - 198.34

Desiderio Dumalag, Jr. - 28,524.49 - - 28,524.49 - 28,524.49

Dina Simbulan 56,123.61 - - - - 56,123.61 56,123.61

Dolores Joson - 14,072.42 14,071.59 - 0.83 - 0.83

Eleanor Hilario - 12,653.00 - - 12,653.00 - 12,653.00

Elisa Cerdan - 34.53 - - 34.53 - 34.53

Fatima Ramos - 1,928.04 1,729.70 - 198.34 - 198.34

Genevee Llobrera - 12,678.13 12,678.13 - - - -

Gilbert Gaw - 2,580.00 - - 2,580.00 - 2,580.00

Gina Herminigildo - 19,808.80 19,808.80 - - - -

Glenn Igual - 659,816.67 70,716.65 - 589,100.02 - 589,100.02

Harris Jacildo - 1,074,073.96 148,148.16 - 925,925.80 - 925,925.80

Ian Chryzl Gonzales 2,999.40 - - - 2,999.40 - 2,999.40

Irene Hazel Marquez - 27,947.65 27,947.65 - - - -

Jacqueline Songday - 7,763.88 7,763.88 - - - -

Jeddahlyn Gandalera - 8,240.74 7,989.93 - 250.81 - 250.81

Jenifer Lumabi - 126,372.47 126,372.47 - - - -

Jennifer Itable - 5.00 - - 5.00 - 5.00

Jesus Mel Sayo - 100,273.54 26,501.37 - 73,772.17 - 73,772.17

Jhoanna Raoet - 7,763.88 7,763.88 - - - -

Jonathan Bunag 14,143.42 - - - - 14,143.42 14,143.42

11

Jonathan Samaniego - 45,468.47 - - 45,468.47 - 45,468.47

Jose Vernie Vasquez - 14,149.97 14,149.97 - - - -

Joselyn Bagalan 2,576.64 - - - 2,576.64 - 2,576.64

Joycelyn Pangilinan - 7,764.29 7,764.29 - - - -

Juliet Santos - 3.12 - - 3.12 - 3.12

Junell Dasun 16,086.31 - - - - 16,086.31 16,086.31

Justine Castellon 272,309.52 - - - - 272,309.52 272,309.52

Kristal Angeles - 290.62 - - 290.62 - 290.62

Leonida Villegas - 7,763.88 7,763.88 - - - -

Ma Cristina Castellejo 460,328.00 - 99,756.00 - - 360,572.00 360,572.00

Ma. Antonette Wolfe - 12,817.56 12,817.56 - - - -

Ma. Eliza Batang - 9,512.86 9,314.53 - 198.33 - 198.33

Ma. Josefina Sy - 56,424.14 56,424.14 - - - -

Makoto Kinoshita - 4,015,269.00 3,601,224.00 - 414,045.00 - 414,045.00

Maria Ana Telbrico - 7,763.05 7,763.05 - - - -

Maria Angelica Lallana - 66,041.85 65,800.53 - 241.32 - 241.32

Maria Grace Lim - 88.75 - - 88.75 - 88.75

Marie Fe Oporto - 79,867.95 - - 79,867.95 - 79,867.95

Marietta Pavao - 9,253.04 9,253.04 - - - -

Marivic Chaw - 15,093.06 - - 15,093.06 - 15,093.06

Mary Jean Jetomo - 61.45 - - 61.45 - 61.45

May Tsui - 1,022.66 - - 1,022.66 - 1,022.66

Michelle Ramos - 899.27 899.27 - - - -

Milagrosa Sado - 34,605.59 34,605.59 - - - -

Paul Erick Villaluz 1,518.29 - 1,518.29 - - - -

Regina Shimamoto - 657,000.00 21,900.00 - 635,100.00 - 635,100.00

Rocky Flores -

Rodelia Barit - 7,763.88 7,763.88 - - - -

Rogelyn Cimafranca - 8,049.34 8,049.34 - - - -

Romina Dulay - 8,049.75 8,049.75 - - - -

Ronald Guinto - 73,907.61 72,918.41 - 989.20 - 989.20

Ronald Santos 222,362.45 - - - - 222,362.45 222,362.45

Rosita Mendoza - 189,202.50 189,202.50 - - - -

Rosselita Magsalin - 8,847.00 8,847.00 - - - -

Roy Dequina - 187,801.00 - - 187,801.00 - 187,801.00

Ruth Martinez - 6.61 - - 6.61 - 6.61

Severino Lagan - 19,166.66 416.67 - 18,749.99 - 18,749.99

Simeon Sarte - 8,757.21 8,757.21 - - - -

Wilfredo Sinconegue - 14,619.41 14,619.41 - - - -

Winona Fay Gevana - 3,759.00 - - 3,759.00 - 3,759.00

P=9,116,039.00 P=11,811,719.30 P=9,608,134.94 P=- P=10,378,026.05 P=941,597.31 P=11,319,623.36

12


Schedule C - Amounts Receivable from Related Parties which are eliminated

during the consolidation of financial statements

December 31, 2012

Amount/ Outstanding

Balances Volume


Remittance P 906,060,540 P 13,591,056

Due from 2,848,880 9,460,733

Delivery fee 6,406,963 143,428


Remittance 7,172,949,521 193,148,649

Due from 34,369,236 52,541,211

Delivery fee 26,298,780 948,339

Service income 3,646,004 999,952


Remittance 5,654,003,334 33,252,223

Due from 288,604 -

Delivery fee 28,840,903 773,357



Remittance 8,397,932,144 208,951,955

Due from 245,069 -

Delivery fee 55,191,391 1,931,573



Remittance 952,992,756 7,833,438

Due from 126,421 15,812,209

Delivery fee 4,412,176 36,306

Service income 584,255 584,255

13

Amount/ Outstanding

Balances Volume


Remittance 158,815,269 5,813,043

Due from 15,089,831 14,761,355

Delivery fee 1,032,912 43,028

K.K. Iremit Japan

Remittance 165,806,223 20,666,749

Due from 27,505,484 33,117,004

Delivery fee 397,226 41,884


Remittance 3,673,446,537 1,272,493

Due from P 399,907 P 82,349


• Remittance pertains to the principal amount of remittance accepted by a foreign subsidiary office from a remitter, delivery of which is

fulfilled by the Parent Company to intended beneficiary in the Philippines.

• Delivery fee is the share in service fee collected by the foreign subsidiary office along with the principal amount of remittance from a

remitter. Account collected in 1-5 days from date of transaction.

• Due from account refers to operating funds and marketing materials advanced to foreign subsidiary offices. Settled in 1-30 days from

date of funding.

• Service Income refers to service fee collected by the Parent Company from selected foreign subsidiary offices for the administration of

call center agents servicing the requirements of the latter offices.

Transactions with related parties are non-interest bearing, unsecured and will be settled in cash. No guarantees have been received. No

provisions have been made for doubtful debts in respect of the amounts owed by the related parties.

14


Schedule D - Intangible Assets - Other Assets

December 31, 2012

Description1

Beginning

Balance

Additions at

Cost2

Charged to cost

and expenses

Charged to other

accounts

Other changes

additions

(deductions)3 Ending Balance

Goodwill 111,441,190.57 – – – – 111,441,190.57

Software 1,450,944.55 945,187.06 (941,139.52) – (2,330.19) 1,452,661.91

1 The information required shall be grouped into (a) intangibles shown under the caption intangible assets and (b) deferrals shown under the caption Other Assets in the related balance

sheet. Show by major classifications.

2 For each change representing other than an acquisition, clearly state the nature of the change and the other accounts affected. Describe cost of additions representing other than cash

expenditures.

3 If provision for amortization of intangible assets is credited in the books directly to the intangible asset account, the amounts shall be stated with explanations, including the accounts

charged. Clearly state the nature of deductions if these represent anything other than regular amortization.

15


Schedule E - Long-Term Debt

December 31, 2012

Title of issue and

type of

obligation1

Amount

authorized by

indenture

Amount shown under caption

“Current portion of long-term debt’

in related balance sheet2


“Long-Term Debt” in related

balance sheet3

Interest

Rate (%) Maturity Date

None to Report

1 Include in this column each type of obligation authorized.

2 This column is to be totaled to correspond to the related balance sheet caption.

3 Include in this column details as to interest rates, amounts or number of periodic instalments, and maturity dates.

16


Schedule F - Indebtedness to Related Parties

(included in the consolidated financial statement of position)

December 31, 2012

Name of Related Parties1 Balance at beginning of period Balance at end of period2

None to Report

1 The related parties named shall be grouped as in Schedule D. The information called shall be stated for any persons whose investments shown separately in such related schedule.

2 For each affiliate named in the first column, explain in a note hereto the nature and purpose of any material increase during the period that is in excess of 10 percent of the related

balance at either the beginning or end of the period.

17


Schedule G - Guarantees of Securities of Other Issuers

December 31, 2012

Name of issuing entity of

securities guaranteed by

the company for which

this statement is filed

Title of issue of each

class of securities

guaranteed

Total amount of

guaranteed and

outstanding1

Amount owned by

person of which

statement is filed Nature of guarantee2

None to Report

1 Indicate in a note any significant changes since the date of the last balance sheet file. If this schedule is filed in support of consolidated financial statements, there shall be set forth

guarantees by any person included in the consolidation except such guarantees of securities which are included in the consolidated balance sheet. 2 There must be a brief statement of the nature of the guarantee, such as “Guarantee of principal and interest”, “Guarantee of Interest”, or “Guarantee of Dividends”. If the guarantee is

of interest, dividends, or both, state the annual aggregate amount of interest or dividends so guaranteed.

18


Schedule H - Capital Stock

December 31, 2012

Title of Issue1

Number of

shares

authorized

Number of shares

issued and

outstanding as

shown under the

related balance

sheet caption

Number of

shares reserved

for options,

warrants,

conversion and

other rights

Number of

shares held by

related parties2

Directors,

officers and

employees Others3

Common stock - P=1 par value 1,000,000,000 617,725,800 – 460,373,585 357 136,765,215

1 Include in this column each type of issue authorized

2 Related parties referred to include persons for which separate financial statements are filed and those included in the consolidated financial statements, other than the issuer of the

particular security.

3 Indicate in a note any significant changes since the date of the last balance sheet filed.

I-REMIT INC. AND SUBSIDIARIESSCHEDULE IV - FINANCIAL SOUNDNESS INDICATORS

For the Years Ended December 31, 2012 and 2011

2012 2011

A. SHORT-TERM LIQUIDITY RATIO

CURRENT RATIO 1.72 2.28

Current Assets 2,488,562,162 2,076,674,869

Current Liabilities 1,446,640,512 912,645,029

WORKING CAPITAL TO ASSETS 0.39 0.51

(Current Assets - Current Liabilities) 1,041,921,650 1,164,029,840

Total Assets 2,684,983,255 2,276,091,662

B. LONG-TERM SOLVENCY

DEBT TO EQUITY 1.17 0.67

Total Liabilities 1,447,857,647 912,676,998

Shareholders' Equity 1,237,125,608 1,363,414,664

LONG-TERM DEBT TO EQUITY - -

Long-Term Debt - -

Shareholders' Equity - -

FIXED ASSETS TO EQUITY 0.02 0.01

(Fixed Assets - Accumulated Depreciation) 23,495,462 19,207,458


CREDITORS EQUITY TO TOTAL ASSETS 0.54 0.40


Total Assets 2,684,983,255 2,276,091,662

FIXED ASSETS TO LONG-TERM DEBT - -


Long-Term Debt - -

2012 2011

C. RETURN ON INVESTMENTS

RATE OF RETURN ON TOTAL ASSETS 0.01 0.06

Net Income 30,526,247 136,063,196

Average Total Assets 2,480,537,459 2,316,948,874

RATE OF RETURN ON EQUITY 0.02 0.10

Net Income 30,526,247 136,063,196

Average Stockholders' Equity 1,300,270,136 1,318,486,629

2012 2011

D. PROFITABILITY RATIOS

GROSS PROFIT RATIO 0.73 0.75

Gross Income 561,725,776 588,432,200

Revenues 771,640,852 787,859,505

OPERATING INCOME TO REVENUES 0.13 0.23

Income from Operations 99,772,367 183,853,639

Revenues 771,640,852 787,859,505

PRETAX INCOME TO REVENUES 0.07 0.18

Pretax Income 53,703,944 145,531,099

Revenues 771,640,852 787,859,505

NET INCOME TO COMMISSION INCOME 0.04 0.17

Net Income 30,526,247 136,063,196

Revenues 771,640,852 787,859,505

E. INTEREST COVERAGE RATIO

INTEREST COVERAGE RATIO

Eanings Before Interest and Tax 99,772,367 210,283,388

Interest Expense 46,068,423 38,322,540

www.myiremit.com

STATEMENT OF MANAGEMENT'S RESPONSIBILITYFOR FINANCIAL STATEMENTS

The Management of I-REMIT INC. is responsible for the preparation and fair presentation of theseparate financial statements for the years ended December 31, 2012 and 2011, including theadditional components attached therein, in accordance with the Philippine Financial ReportingStandards. This responsibility includes designing and implementing internal controls relevant tothe preparation and fair presentation of separate financial statements that are free from materialmisstatement, whether due to fraud or error, selecting and applying appropriate accountingpolicies, and making accounting estimates that are reasonable in the circumstances.

The Board of Directors reviews and approves the separate financial statements and submit thesame to the stockholders.

R.S. Bernaldo & Associates and SyCip Gorres Velayo & Co., the independent auditors,appointed by the stockholders for the period December 31, 2012 and 2011, respectively, haveexamined the separate financial statements of the Parent Company in accordance with PhilippineStandards on Auditing, and in their reports to the stockholders, have expressed their opinion onthe fairness of presentation upon completion of such examination.

B SANC.CHOAand Chief Executive Officer

I-Remit, Inc.26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City 1605 PhilippinesTelephone: (632) 706-9999 and (632) 706-2737Facsimile: (632) 706-2767

MAY 1 5 2013SUBSCRIBED AND SWORN to before me this 2013, affiants

exhibiting to me their Community Tax Certificates (CTC) and Competent Evidences of Identity(CEI) as follows:

Name CTC No., Date and Place of Issue CEIBANSAN C. CHOA 26981086; January 5, 2013; Parafiaque City TIN 159-305-537HARRIS E. D. JACILDO 01710103; January 8, 2013; Pasig City TIN 126-967-441BERNADETTE CINDY C. TIU 01710107; January 8, 2013; Pasiq City TIN 203-338-548

Notary Public

Document No.Page No.Book No.Series of 2013.

VAN SA C. RAYMUNDONo ry Pllblic for Pasfg City

Commissionuntil 31 December 20142404 Discover; Cent':l, 25ADBAve .. Ortlgas Center, Pasig eit1l

APPT No. 82 (2013·201tf) I Roll No. 50(j80 .PTR No.8429032; 01/07/2013; P<ilsig CityIS? No. 9H115; 1mO{20~2; r;'a!tati Ci'~Y

COVER SHEET

S.E.C. Registration Number

(Company's Full Name)

(Business Address: No. Street CityITown/Province)

Mr. Bansan C. Choa 706-9999Contact Person Company Telephone Number

G1JMonth

GLJDay

lliI£IillFORM TYPE

[illMonth

GLJDay

Fiscal Year Annual Meeting

Secondary License Type, If Applicable

OIIJIIJJDept. Requiring this Doc. Amended Articles Number/Section

18


__ 11_-Total No. of Stockholders Domestic Foreign


File Number LCU

Document I.D. Cashier

STAMPS

Remarks = pis. Use black ink for scanning purposes


aONPRC No. 0300asp AccreditedSECAccreditation No. 0153-FR-1CDA CEA No. 013-AF

A correspondent firm of Pan ell Kerr Forster International

worldwide

INDEPENDENT AUDITORS' REPORT

Report on the Separate Financial Statements

The Board of Directors and StockholdersI-REMIT INC.26/F Discovery Centre, ADB AvenueOrtigas Centre, Pasig City

We have audited the accompanying financial statements of I-REMIT INC., which comprise thestatement of financial position as of December 31, 2012, and the separate statement ofcomprehensive income, separate statement of changes in equity and separate statement ofcash flows for the year ended December 31, 2012 and a summary of significant accountingpolicies and other explanatory information.

Management's Responsibility for the Separate Financial Statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with Philippine Financial Reporting Standards, and for such internalcontrol as Management determines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an oprruon on these financial statements based on our audit.We conducted our audit in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors'judgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity's internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as wellas evaluating the overall presentation of the financial statements.

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

18/F Cityland Condominium 10 Tower 1, 6815 Ayala Avenue cor. H.V. Dela Costa St., Makati City, Philippines 1200TEL +63 2 812-1718 to 24 FAX +632 813-6539 E-MAIL [email protected] WEBSITE www.rsbernaldo.com

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financialposition of I-REMIT INC. as of December 31, 2012, and its financial performance and cashflows for the year then ended December 31, 2012 in accordance with Philippine FinancialReporting Standards.

Emphasis of Matter

We draw attention to Note 2.01, which describe the early adoption of amendments to PAS 1which clarifies the requirements for providing comparative information when an entityprovides financial statements beyond the minimum comparative information requirements.As a result of the early adoption, the Parent Company opted not to present related notes toaccompany the opening separate statement of financial position. Our opinion is not qualifiedwith regards to this matter.

Without further qualifying our opmron. we draw attention to Note 33 which states that noappropriation was made for the treasury stocks for the years 2011 and 2010.

Other Matter

The financial statements of the Company as of December 31, 2011, were audited by anotherauditor whose report dated March 23, 2012, expressed an unqualified opinion on thosestatements.

As part of our audit of the December 31, 2012 separate financial statements, we also auditedthe adjustments described in Note 32 that were applied to amend the December 31, 2011and 2010 financial statements. In our opinion, such adjustments are appropriate and havebeen properly applied. We were not engaged to audit, review, or apply any procedures to theDecember 31, 2011 and 2010 financial statements of the Company other than with respectto the adjustments and, accordingly, we do not express an opinion or any other form ofassurance on the December 31, 2011 and 2010 financial statements taken as a whole.

Report on the Supplementary Information Required Under Revenue Regulations

Our audit was conducted for the purpose of forming an opinion on the basic financialstatement taken as a whole. The supplementary information required under RevenueRegulations 15-2010 and 19-2011 in Notes 35 and 36, respectively, to the financialstatements are presented for purposes of filing with the Bureau of Internal Revenue and arenot a required part of the basic financial statements. Such information is the responsibility ofthe Management of I-REMIT INC. The information has been subjected to the auditingprocedures applied in our audit of the basic financial statements. In our opinion, theinformation is fairly stated in all material respects in relation to the basic financial statementstaken as a whole.

R.S. BERNALDO & ASSOCIATESBOA/PRC No. 0300Valid until December 31,2015SEC Group A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSP Group B AccreditedValid until February 14, 2014CDA CEA No. 013-AFValid until October 25, 2013

RO~~OManaging PartnerCPA Certificate No. 25927SEC Group A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSP Group B AccreditedValid until February 14, 2014BIR Accreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No.1 09-227-722PTR No. 3676450Issued on January 9, 2013 at Makati City

May 15, 2013

I-REMIT INC.SEPARATE STATEMENT OF FINANCIAL POSITIONDecember31, 2012(With Comparative Figures for 2011 and 2010)(In Philippine Pesol

• "j ,l"'~"l1 ~

2~jj ,:'i:3 iJ iu -t.), "

NOTES 2012

ASSETS

Current AssetsCash and cash equivalents 6Trade and other receivables 7Prepayments and other current assets 8

Non-current AssetsInvestments in subsidiaries 9Investments in associates 10Property and equipment - net 11Intangible assets - net 12Retirement asset 24Deferred tax assets 27Other non-current asset 13

TOTAL ASSETS

2010(As restated)

789,926,225 667,523,499 727,665,9191,437,175,689 1,140,046,934 1,257,593,191

19,903,603 23,392,972 23,360,255

2,247,005,517 1,830,963,405 2,008,619,365

285,862,924 279,160,103 228,975,27816,173,974 16,173,974 16,173,9748,901,653 7,094,474 9,493,1151,404,816 1,396,241 1,868,0722,232,135 368,3941,804,760

16,861,366 26,181,442 32,988,285

333,241,628 330,374,628 289,498,724

2,580,247,146 2,161,338,033 2,298,118,089

LIABILITIESAND STOCKHOLDERS'EQUITY

LIABILITIES

Current LiabilitiesBeneficiaries and other payablesIncome tax payableLoans payable

14

15

Non-current LiabilitiesDeferred tax liabilitiesRetirement liability

27

555,881,732 289,663,248 257,058,6531,715,594 3,599,355 3,839,832

925,000,000 666,000,000 877,000,000

1,482.597.326 959,262,603 1,137,898,485

1,150,670778,261

1,150,670 778,261

1,483,747,996 959,262,603 1,138,676,746TOTAL LIABILITIES

STOCKHOLDERS' EQUITY

Capital Stock

Additional Paid-in Capital

Unappropriated Retained Earnings

Appropriated Retained Earnings

17

17

17

617,725,800

429,513,501

49,259,848

69,209,688

617,725,800

429,513,501

154,836,129

52,987,208

562,417,000

429,513,501

167,510,842

40,115,150

Treasury Stock 17

1,165,708,837

(69,209,688)

1,255,062,638

(52,987,208)

1,199,556,493

(40,115,150)

TOTAL STOCKHOLDERS'EQUITY 1,096,499,149 1,202,075,430 1,159,441,343

TOTAL LIABILITIESAND STOCKHOLDERS'EQUITY 2,580,247,145 2,161,338,033 2,298,118,089

(See Notes to Separate Financial Statements)

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I-REMIT INC. IDate i MAY 1 52!' "sns iSEPARATE STATEMENT OF COMPREHENSIVE INCOME l L ,~....", , .-J 1For the Year Ended December 31, 2012 R E c s i V, E:O \(With Comparative Figures for 2011 and 2010) •.fY·~~:fE~q;,nrt ~.,?1.6E::!.J(In Philippine Peso)

NOTES 2012 2011 2010

REVENUE 20 470,199,179 490,087,163 463,248,572

COST OF SERVICES 21 185,136,308 175,332,116 180,568,774

GROSSPROFIT 285,062,871 314,755,047 282,679,798

OTHERINCOME 22 16,804,190 16,373,704 8,104,103

301,867,061 331,128,751 290,783,901

OPERATINGEXPENSES 23 209,625,680 213,536,023 204,594,735

FINANCECOSTS 15 46,068,423 38,322,540 29,213,843

PROFITBEFORETAX 46,172,958 79,270,188 56,975,323

INCOME TAXES 26 15,545,901 23,764,043 16,429,892

PROFIT 30,627,057 55,506,145 40,545,431

EARNINGSPERSHAREBasic Earnings per Share 0.05 0.09 0.07

(See Notes to Separate Financial Statements)

I-REMIT INC.SEPARATE STATEMENT OF CHANGES IN EQUITYFor the Year Ended December 31, 2012(With Comparative Figures for 2011 and 2010)(In Philippine Peso)

Notes Capital stockAdditional Paid-

in Capital

UnappropriatedRetainedEarnings

AppropriatedRetainedEarnings Treasury Stock Total

Balance at January 1, 2010,as previously stated 17 562,417,000 429,513,501 193,684,094 (40,115,150) 1,145,499,445

Correction of prior period error 33 (40,115,150) 40,115,150

Balance at January 1,2010, as restated 562,417,000 429,513,501 153,568,944 40,115.150 (40.115,150) 1,145,499,445Profit 40,545,431 40,545,431Cash dividends 18 (26,603,533) (26,603,533)

Balance at December 31, 2010.as restated 17 562,41 7,000 429,513.501 167,510,842 40.115,150 (40,115,150) 1,159,441,343

Profit 55,506,145 55,506,145Stock dividends 18 55,308,800 (55,308,800)Purchase of own stock 17 (12,872,058) (12,872,058)

Balance at December 31, 2011,as previously stated 17 617,725,800 429,513,501 167,708,187 40,115,150 (52,987,208) 1,202,075,430

Correction of prior period error 33 (12,872,058) 12,872,058

Balance at December 31, 2011.as restated 617.725,800 429,513,501 154,836.129 52,987,208 (52,987,208) 1,202,075,430

Profit 30,627,057 30,627,057Cash dividends 18 (119,980,858) (119,980,858)Purchase of own stock 17 (16,222,480) (16,222,480)Appropriations of retained earnings 17 (16,222,480) 16,222,480

Balance at December 31, 2012 17 617,725,800 429.513.501 49,259,848 69,209,688 (69,209,688) 1,096,499,149(",) V", ~-).• 1 (')

(See Notes to Separate Financial Statements) l.e! _,.-1 ~ .•...•..••~• c"':! "'"F' ~ <'"'"-""•• ">19 (,,, .....•:I~~; , ~,.j Ie••• :

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I-REMIT INC.SEPARATE STATEMENT OF CASH FLOWSFor the Year Ended December 31, 2012(With Comparative Figures for 2011 and 2010)(In Philippine Pesol

NOTES 20122011

(As restated)2010

(As resta ed)

CASH FLOWS FROM OPERATINGACTIVITIESProfit before taxAdjustments for:

Finance costLoss on write-off of assetDepreciationAmortizationRetirement benefit expenseUnrealized foreign exchange gain - netGain on sale of property and equipmentFinance incomeDividend income

1523

11,2312,23

2322

6,2210,22

46,172,958

46,068,42310,040,8865,057,609

936,6134,294,704(987,177)

(1,858,779)(4,896,570)

79,270,188

38,322,5402,058,6164,991,9761,543,0835,748,578(1,205,505)

(3,954)(2,949,353)

56,975,323

29,213,843

6,550,8011,507,9002,376,127(1,769,202)

(3,219,724)(596,381 )

Operating cash flows before changesin working capital

Decrease (Increase) in operating assets:Trade and other receivablesPrepayments and other current assetsOther non-current assets

Increase in beneficiaries and other payables

104,828,667

(302,118,325)3,489,369(720,810)

269,945,476

127,776,169

117,546,258(32,717)

4,748,22732,684,301

91,038,687

35,026,7663,480,468(1,146,492)43,492,092

Cash generated from operationsContribution to retirement fundIncome taxes paid

2475,424,377(6,158,445)

(16,890,790)

282,722,238(6,895,233)

(23,414,649)

171,891,521(5,229,490)

(24,590,301 )

Net cash from operating activities 52,375,142 252,412,356 142,071,730

CASH FLOWS FROM INVESTING ACTIVITIESDividends received 10,22Finance income receivedProceeds from disposal of property and equipment 11Acquisition of non-controlling interest in

subsidiaries 9Additions to intangible assets 12Acquisition of subsidiary. 9Additions to property and equipment 11

4,896,5701,487,023

349,596

(945,188)(6,702,821)(7,214,384)

2,359,4823,964

(37,318,560)(1,071,252)

(12,866,265)(2,593,345)

596,3812,575,7791,610,572

(671,288)

(5,948,825)

Net cash used in investing activities (1,837,381)(8,129,204) (51,485,976)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from loansPayments of loansPayment for cash dividendsPayment for buy-back of sharesFinance cost paid

15151817

925,000,000(666,000,000)(119,980,858)(16,222,480) (12,872,058)(46,156,723) (38,402,247) (29,396,496)

666,000,000 877,000,000(877 ,000,000) (930,000,000)

(26,603,533)

Net cash from (used in) financing activities 76,639,939 (262,274,305) (109,000,029)

EFFECTSOF FOREIGNEXCHANGE RATE

CHANGES ON CASH AND CASH EQUIVALENTS 1,526,209 1,205,505 1,769,202

33,003,522NET INCREASE(DECREASE)IN CASH

CASH AND CASH EQUIVALENTS AT

BEGINNINGOF YEAR

122,4 12,086

667,523,499

(60,142,420)

727,665,919 694,662,397

CASH AND CASH EQUIVALENTS AT END OF YEAR 727,665,919789,935,585 667,523,499

(See Notes to Separate Financial Statementsl

1

I-REMIT INC. NOTES TO SEPARATE FINANCIAL STATEMENTS

December 31, 2012

(With Comparative Figures for 2011 and 2010)

1. CORPORATE INFORMATION

I-Remit Inc. (the “Parent Company”) was incorporated and registered with the

Philippine Securities and Exchange Commission (SEC) on March 5, 2001 and started its

commercial operations on November 11, 2001. The Parent Company is primarily

engaged in the business of fund transfer and remittance services of any form or kind of

currencies or monies, either by electronic, telegraphic, wire or any other mode of

transfer; delivery of such funds or monies, both in the domestic and international

market, by providing either courier or freight forwarding services; and conduct of

foreign exchange transactions as may be allowed by law and other allied activities

relative thereto, respectively.



of P1.00. There are 19, 17 and 13 registered common stockholders as of

December 31, 2012, 2011 and 2010, respectively. Shares lodged with the Philippine

Central Depository are registered under the name of PCD Nominee Corporation and as

such are treated as being held by only one shareholder. The Parent Company’s

common shares were listed with the Philippine Stock Exchange (PSE) on October 17,

2007.

The Parent Company is 29.18% owned by STAR Equities, Inc., 21.29% owned by

JTKC Equities, Inc., 23.35% owned by Surewell Equities Inc., 3.27% owned by JPSA

Global Services Co., and the rest by the public.

The Parent Company, which is domiciled in the Philippines, has its registered office and

principal place of business at the 26/F Discovery Centre, 25 ADB Avenue, Ortigas

Center, Pasig City.

2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of

new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in

general includes all applicable PFRS, Philippine Accounting Standards (PAS), and

Interpretations issued by the Philippine Interpretations Committee (PIC), Standing

Interpretations Committee (SIC) and International Financial Reporting Interpretations

Committee (IFRIC) which have been approved by the FRSC and adopted by SEC.

These new and revised PFRS prescribe new accounting recognition, measurement and

disclosure requirements applicable to the Parent Company. When applicable, the

adoption of the new standards was made in accordance with their transitional

provisions, otherwise the adoption is accounted for as change in accounting policy

under PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

2

2.01 New and Revised PFRSs with Material Effect on Amounts Reported in the

Current Year

The following new and revised PFRSs have been applied in the current period and had

materially affected the amounts reported in these financial statements. Details of other

new and revised PFRSs applied in these financial statements that have had no material

effect on the financial statements are set out in section 2.02.






b) related notes are not required to accompany this opening statement of

financial position.

The objective of financial reporting was also updated to reflect the conceptual

framework.

As a result of the early adoption, the Parent Company did not present related notes

to accompanying the opening separate statement of financial position.

2.02 New and Revised PFRSs Applied with No Material Effect on the Financial

Statements

The following new and revised PFRSs have also been adopted in these financial

statements. The application of these new and revised PFRSs has not had any material

impact on the amounts reported for the current and prior years but may affect the

accounting for future transactions or arrangements.


Assets




the transferor retains some level of continuing exposure in the asset.

The amendments also require disclosures where transfers of financial assets are not



permitted.

PAS 12, Income Taxes – Deferred Tax: Recovery of Underlying Assets

PAS 12 requires an entity to measure the deferred tax relating to an asset

depending on whether the entity expects to recover the carrying amount of the

asset through use or sale. It can be difficult and subjective to assess whether

recovery will be through use or through sale when the asset is measured using the

fair value model in PAS 40, Investment Property. The amendment provides a

practical solution to the problem by introducing a presumption that recovery of the

carrying amount will, normally be through sale.

As a result of the amendments, SIC-21, Income Taxes – Recovery of Revalued

Non-Depreciable Assets would no longer apply to investment properties carried at

fair value. The amendments also incorporate into PAS 12 the remaining guidance

previously contained in SIC-21, which is accordingly withdrawn.

3

The amendments are effective from January 1, 2012. Earlier application is

permitted.

2.03 New and Revised PFRSs in Issue but Not Yet Effective

The Parent Company will adopt the following standards and interpretations enumerated

below when they become effective. Except as otherwise indicated, the Parent

Company does not expect the adoption of these new and amended PFRS to have

significant impact on the financial statements.

PFRS 7 (Amended), Financial Instruments: Disclosures – Offsetting Financial Assets


The amendment requires disclosing information that will enable users to evaluate

the effect or potential effect of netting arrangements on an entity’s financial

position. These amendments are effective for annual periods beginning on or after

January 1, 2013 and interim periods within those annual periods. An entity shall

provide the disclosures required by those amendments retrospectively.

PFRS 9, Financial Instruments: Classification and Measurement

PFRS 9, Financial Instruments, issued in November 2009 and amended in

October 2010 introduces new requirements for the classification and measurement

of financial assets and financial liabilities and for derecognition.

PFRS 9 requires all recognised financial assets that are within the scope of PAS 39,

Financial Instruments: Recognition and Measurement, to be subsequently measured

at amortized cost or fair value. Specifically, debt investments that are held within a

business model whose objective is to collect the contractual cash flows, and that

have contractual cash flows that are solely payments of principal and interest on

the principal outstanding are generally measured at amortized cost at the end of

subsequent accounting periods. All other debt investments and equity investments

are measured at their fair values at the end of subsequent accounting periods.

The most significant effect of PFRS 9 regarding the classification and measurement

of financial liabilities relates to the accounting for changes in fair value of a

financial liability (designated as at fair value through profit or loss) attributable to

changes in the credit risk of that liability. Specifically, under PFRS 9, for financial

liabilities that are designated as at fair value through profit or loss, the amount of

change in the fair value of the financial liability that is attributable to changes in the

credit risk of that liability is recognized in other comprehensive income, unless the

recognition of the effects of changes in the liability's credit risk in other

comprehensive income would create or enlarge an accounting mismatch in profit or

loss. Changes in fair value attributable to a financial liability's credit risk are not

subsequently reclassified to profit or loss. Previously, under PAS 39, the entire

amount of the change in the fair value of the financial liability designated as at fair

value through profit or loss was recognized in profit or loss.



PFRS 10, Consolidated Financial Statements

The Standard establishes the principles for the presentation and preparation of

consolidated financial statements when an entity controls one or more other

entities.

4

The Standard defines the principle of control and establishes control as the basis

for determining which entities are consolidated in the consolidated financial

statements. This PFRS will supersede PAS 27, Consolidated Financial Statements

and Separate Financial Statements and SIC 12, Consolidation – Special Purpose

Entities.



PFRS 12, Disclosure of Interests in Other Entities

The Standard applies to entities that have an interest in a subsidiary, a joint

arrangement, and an associate or an unconsolidated structured entity. It benefits

the users by identifying the profit or loss and cash flows available to the reporting

entity and determining the value of current or future investment in the reporting

entity.



PFRS 13, Fair Value Measurement

The Standard explains how to measure fair value for financial reporting. It defines

fair value as the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement

date. It emphasizes that fair value is market-based not an entity-specific

measurement; hence an entity’s intention to hold an asset or to settle or otherwise

fulfil a liability is not relevant when measuring fair value. It was developed to

eliminate inconsistencies of fair value measurements dispersed in various existing

PFRS. It clarifies the definition of fair value, provides a single framework for

measuring fair value and enhances fair value disclosures.



PAS 1, Presentation of Items of Other Comprehensive Income

To improve the presentation of items of Other Comprehensive Income (OCI), the

IASB amended IAS 1 to require entities to group items presented in the OCI on the

basis whether they would be reclassified to (recycled to) profit or loss

subsequently.

The amendments did not address which items should be presented in the OCI and

did not change the option to present OCI items either before or net of tax.

Those amendments are effective for annual periods beginning on or after

July 1, 2012. Earlier application is permitted.

PAS 19 (Amended), Employee Benefits

Significant changes to this standard include removal of corridor approach;

immediate recognition of past service costs; presentation of remeasurements on

defined benefit plans in other comprehensive income; new recognition criteria on

termination benefits; and improved disclosure requirements.

The amended standard comes into effect for accounting periods beginning on or

after January 1, 2013. Earlier application is permitted.

5

Revised PAS 19, Employee Benefits

The revised PAS 19 ranges from fundamental changes such as removing the

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

clarifications and rewording. The revised standard also requires new disclosures

such as, among others, a sensitivity analysis for each significant actuarial

assumption, information on asset-liability matching strategies, duration of the

defined benefit obligation, and disaggregation of plan assets by nature and risk.

The Parent Company reviewed its existing employee benefits and determined that

the amended standard has significant impact on its accounting for retirement

benefits. The Parent Company obtained the services of an external actuary to

compute the impact to the financial statements upon adoption of the standard.

The effects are detailed below:

As of As of As of

December 31, 2012 December 31, 2011 January 1, 2011

Increase (decrease) in:

Separate Statement of

Financial Position

Net defined benefit

asset/liability P 17,231 P 1,076,750 P 5,872,169

Deferred tax asset/liability 5,169 323,025 1,761,651

Other comprehensive income (755,457) (3,975,741) -

Retained earnings 777,857 5,375,516 7,633,820

2012 2011

Separate Statement of Comprehensive Income

Net benefit cost P (304,062) P (819,678)

Income tax expense 317,856 1,438,626

Profit for the year (13,794) (618,948)

Attributable to the owners of the Parent Company (13,794) (618,948)

Attributable to non-controlling interests - -

PAS 27 (Revised), Separate Financial Statements


standard on consolidation, the PFRS 10, Consolidated Financial Statements. As a

result, PAS 27 will now be titled as Separate Financial Statements containing

requirements relating only to separate financial statements.



PAS 28 (Revised), Investment in Associates and Joint Ventures


standard on joint arrangements, the PFRS 11, Joint Arrangements. As a result,

PAS 28 will now be titled as Investment in Associates and Joint Ventures

incorporating requirements for joint ventures.



6

PAS 32 (Amended), Financial instruments: Presentation – Offsetting of Financial

Assets and Liabilities

The amendment provided additional application guidance for offsetting in

accordance with PAS 32. The amendments clarified the meaning of “currently has

a legally enforceable right of set-off” and that some gross settlement systems may

be considered equivalent to net settlement. These amendments are effective for

annual periods beginning on or after January 1, 2014 and should be applied

retrospectively. Earlier application is permitted.

3. BASIS FOR THE PREPARATION AND PRESENTATION OF SEPARATE FINANCIAL

STATEMENTS

3.01 Statement of Compliance

The financial statements have been prepared in conformity with PFRS and are under

the historical cost convention, except for certain financial instruments that are carried

at amortized cost.

3.02 Functional and Presentation Currency

Items included in the separate financial statements of the Parent Company are

measured using Philippine Peso (P), the currency of the primary economic environment

in which the Parent Company operates (the “functional currency”).

The Parent Company chose to present its financial statements using its functional

currency.

3.03 Basis of Preparation

These separate financial statements were based from the Parent Company’s own

transactions, exclusive of transactions of the Parent Company’s subsidiaries, the latter

transactions being used in the preparation of the consolidated financial statements,

which are also available for public use.

4. SIGNIFICANT ACCOUNTING POLICIES

Principal accounting and financial reporting policies applied by the Parent Company in

the preparation of its financial statements are enumerated below and are consistently

applied to all the years presented, unless otherwise stated.

4.01 Financial Assets

Financial assets are initially measured at fair value, plus transaction costs, except for

those financial assets classified as at fair value through profit or loss, which are initially

measured at fair value.

Financial assets that are subsequently measured at amortized cost, and where the

purchase or sale are under a contract whose terms require delivery of such within the

timeframe established by the market concerned are initially recognized on the trade

date.

Financial assets are classified into the following specified categories: financial assets

‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-

for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends

7

on the nature and purpose of the financial assets and is determined at the time of initial

recognition.

The Parent Company’s financial assets include cash and cash equivalents, trade and

other receivables and refundable deposits presented under other noncurrent asset.

4.01.01 Effective Interest Method

The effective interest method is a method of calculating the amortized cost of a debt

instrument and of allocating finance income over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash receipts including

all fees on points paid or received that form an integral part of the effective interest

rate, transaction costs and other premiums or discounts, through the expected life of

the debt instrument, or, where appropriate, a shorter period to the net carrying amount

on initial recognition.

Income is recognized on an effective interest.

4.01.02 Amortized Cost

Amortized cost is computed using the effective interest rate method less any

allowance for impairment and principal repayment or reduction. The calculation takes

into account any premium or discount on acquisition and includes transaction costs

and fees that are an integral part of effective interest rate.

4.01.03 Loans and Receivables

Trade receivables, loans, and other receivables that have fixed or determinable

payments that are not quoted in an active market are classified as ‘loans and

receivables’. Loans and receivables are measured at amortized cost using the effective

interest method, less any impairment. Finance income is recognized by applying the

effective interest rate, except for short-term receivables when the recognition of

interest would be immaterial.

4.01.04 Impairment of Financial Assets

Financial assets are assessed for indicators of impairment at the end of each reporting

period. Financial assets are impaired where there is objective evidence that, as a result

of one or more events that occurred after the initial recognition of the financial asset,

the estimated future cash flows of the investment have been affected.

Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or

default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bankruptcy or financial

re-organization.

the lender, for economic or legal reasons relating to the borrower’s financial

difficulty, grants the borrower a concession that the lender would not otherwise

consider

the disappearance of an active market for that financial asset because of financial

difficulties

observable data indicating that there is a measurable decrease in the estimated

future cash flows from a group of financial assets since the initial recognition of

those assets, although the decrease cannot yet be identified with the individual

financial assets in the group, including (i) adverse changes in the payment status of

8

borrowers in the group (e.g. an increased number of delayed payments or an

increased number of credit card borrowers who have reached their credit limit and

are paying the minimum monthly amount); or (ii) national or local economic

conditions that correlate with defaults on the assets in the group (e.g. an increase

in the unemployment rate in the geographical area of the borrowers, a decrease in

property prices for mortgages in the relevant area, a decrease in oil prices for loan

assets to oil producers, or adverse changes in industry conditions that affect the

borrowers in the group).

Other factors may also be evidence of impairment, including significant changes with

an adverse effect that have taken place in the technological, market, economic or legal

environment in which the issuer operates.

For certain categories of financial asset, such as trade receivables, assets that are

assessed not to be impaired individually are, in addition, assessed for impairment on a

collective basis. Objective evidence of impairment for a portfolio of receivables could

include the Parent Company’s past experience of collecting payments, an increase in

the number of delayed payments in the portfolio past the average credit period of

five (5) days, as well as observable changes in national or local economic conditions

that correlate with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment is the

difference between the asset’s carrying amount and the present value of estimated

future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly

for all financial assets with the exception of trade receivables, where the carrying

amount is reduced through the use of an allowance account. When a trade receivable

is considered uncollectible, it is written off against the allowance account. Subsequent

recoveries of amounts previously written off are credited against the allowance

account. Changes in the carrying amount of the allowance account are recognized in

profit or loss.

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

decrease can be related objectively to an event occurring after the impairment was

recognized, the previously recognized impairment loss is reversed through profit or loss

to the extent that the carrying amount of the investment at the date the impairment is

reversed does not exceed what the amortized cost would have been had the

impairment not been recognized.

4.01.05 Derecognition of Financial Assets

The Parent Company derecognizes a financial asset only when the contractual rights to

the cash flows from the asset expire, or when it transfers the financial asset and

substantially all the risks and rewards of ownership of the asset to another entity.

If the Parent Company neither transfers nor retains substantially all the risks and

rewards of ownership and continues to control the transferred asset, the Parent

Company recognizes its retained interest in the asset and an associated liability for

amounts it may have to pay. If the Parent Company retains substantially all the risks

and rewards of ownership of a transferred financial asset, the Parent Company

continues to recognize the financial asset and also recognizes a collateralized

borrowing for the proceeds received.

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4.02 Investments in Associates

An associate is an entity over which the Parent Company has significant influence and

that is neither a subsidiary nor an interest in a joint venture. Significant influence is the

power to participate in the financial and operating policy decisions of the investee but

is not control or joint control over those policies.

The Parent Company accounts the investment under the cost method. The Parent

Company recognizes as income the dividends received that are distributed from net

accumulated earnings of the investee since the date of acquisition by the investor.

Dividends received that are in excess of the earnings subsequent to the date of

acquisition are not income and therefore considered as return or reduction of

investment.

The requirements of PAS 39 are applied to determine whether it is necessary to

recognize any impairment loss with respect to the Parent Company’s investment in an

associate. When necessary, the entire carrying amount of the investment (including

goodwill) is tested for impairment in accordance with PAS 36, Impairment of Assets as

a single asset by comparing its recoverable amount (higher of value in use and fair

value less costs to sell) with its carrying amount. Any impairment loss recognized

forms part of the carrying amount of the investment. Any reversal of that impairment

loss is recognized in accordance with PAS 36 to the extent that the recoverable

amount of the investment subsequently increases. An entity loses significant influence

over an investee when it loses the power to participate in the financial and operating

policy decisions of that investee. The loss of significant influence can occur with or

without a change in absolute or relative ownership levels.

4.03 Investment in Subsidiaries

A subsidiary is an entity including an unincorporated entity such as a partnership that

is controlled by another entity known as parent. Control is the power to govern the

financial and operating policies of an entity so as to obtain benefits from its activities.

Investments in subsidiaries are accounted under the cost method. Under the cost

method, the Parent Company recognizes as income the dividends received that are

distributed from net accumulated earnings of the investee since the date of acquisition

by the investor. Dividends received that are in excess of the earnings subsequent to

the date of acquisition are not income and therefore considered as return or reduction

of investment.

If the Parent Company loses control of a subsidiary, the Parent Company recognizes

any investment retained in the former subsidiary at its fair value at the date when

control is lost or recognizes any resulting difference as a gain or loss in profit or loss

attributable to the Parent Company. Changes in a parent’s ownership interest in a

subsidiary that do not result in a loss of control are accounted for as equity

transactions.

4.04 Property and Equipment

Property and equipment are initially measured at cost. The cost of an asset consists of

its purchase price and costs directly attributable to bringing the asset to its working

condition for its intended use. Subsequent to initial recognition, property and

equipment are carried at cost less accumulated depreciation and accumulated

impairment losses.

Subsequent expenditures relating to an item of property and equipment that have

already been recognized are added to the carrying amount of the asset when it is

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probable that future economic benefits, in excess of the originally assessed standard of

performance of the existing asset, will flow to the Parent Company. All other

subsequent expenditures are recognized as expenses in the period in which those are

incurred.

Depreciation is computed on a straight-line method based on the estimated useful lives

of the assets as follows:

Office and communication equipment 3 years

Transportation and delivery equipment 3 – 5 years

Furniture and fixtures 3 – 5 years

Leasehold improvements are depreciated over the shorter between the improvements’

useful life of five (5) years or the lease term.

An item of property and equipment is derecognized on disposal, or when no future

economic benefits are expected from use or disposal. Gains or losses arising from

derecognition of a property and equipment are measured as the difference between the

net disposal proceeds and the carrying amount of the asset and are recognized in profit

or loss.

4.05 Intangible Assets

Intangible assets acquired separately are initially carried at cost. Subsequently,

intangible assets with definite useful lives are carried at cost less accumulated

amortization and accumulated impairment losses.

Software costs are amortized on a straight-line basis over its estimated useful life of

three (3) years.

The estimated useful life and amortization method are reviewed at the end of each

annual reporting period, with the effect of any changes in estimate being accounted for

on a prospective basis.

Intangible assets with indefinite life are not amortized. However, such assets are

reviewed annually to ensure the carrying amount does not exceed the recoverable

amount regardless of whether an indicator of impairment is present.

An intangible asset is derecognized on disposal or when no future economic benefits

are expected from use or disposal. Gains or losses arising from derecognition of an

intangible asset are measured as the difference between the net disposal proceeds and

the carrying amount of the asset and are recognized in profit or loss.

4.06 Impairment of Assets

At each reporting date, the Parent Company assesses whether there is any indication

that any assets other than retirement asset and financial assets that are within the

scope of PAS 39, Financial Instruments: Recognition and Measurement, may have

suffered an impairment loss. If any such indication exists, the recoverable amount of

the asset is estimated in order to determine the extent of the impairment loss, if any.

Where it is not possible to estimate the recoverable amount of an individual asset, the

Parent Company estimates the recoverable amount of the cash-generating unit to

which the asset belongs. When a reasonable and consistent basis of allocation can be

identified, assets are also allocated to individual cash-generating units, or otherwise

they are allocated to the smallest group of cash-generating units for which a

reasonable and consistent allocation basis can be identified.

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Recoverable amount is the higher of fair value less costs to sell and value in use.

In assessing value in use, the estimated future cash flows are discounted to their

present value using a pre-tax discount rate that reflects current market assessments of

the time value of money and the risks specific to the asset for which the estimates of

future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less

than its carrying amount, the carrying amount of the asset or cash-generating unit is

reduced to its recoverable amount. An impairment loss is recognized as an expense.

When an impairment loss subsequently reverses, the carrying amount of the asset or

cash-generating unit is increased to the revised estimate of its recoverable amount, but

the increased carrying amount should not exceed the carrying amount that would have

been determined had no impairment loss been recognized for the asset or

cash-generating unit in prior years. A reversal of an impairment loss is recognized as

an income.

4.07 Borrowing Costs

Borrowing costs are recognized in profit or loss in the period in which they are

incurred.

4.08 Financial Liabilities and Equity Instruments

4.08.01 Classification as Debt or Equity

Debt and equity instruments are classified as either financial liabilities or as equity in

accordance with the substance of the contractual arrangements.

4.08.02 Financial Liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other

financial liabilities’.

The Parent Company’s financial liabilities include beneficiaries and other payables

(excluding payable to government agencies and certain accruals) and interest-bearing

loans.

4.08.03 Other Financial Liabilities

Other financial liabilities, including borrowings, are initially measured at fair value

inclusive of directly attributable transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the

effective interest method, with finance cost recognized on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a

financial liability and of allocating finance cost over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash payments through

the expected life of the financial liability, or, where appropriate, a shorter period to the

net carrying amount on initial recognition.

4.08.04 Derecognition of Financial Liabilities

The Parent Company derecognizes financial liabilities when, and only when, the Parent

Company’s obligations are discharged, cancelled or expired. When an existing liability

is replaced by another from the same lender on substantially different terms, or the

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

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

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a new liability. The difference between the carrying amount of the financial liability

derecognized and the consideration paid and payable is recognized in profit or loss.

4.08.05 Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of

an entity after deducting all of its liabilities. Equity instruments issued by the Parent

Company are recognized at the proceeds received, net of direct issue costs.

Ordinary shares are classified as equity. Incremental costs directly attributable to the

issue of new shares or options are shown in equity as a deduction from the proceeds,

net of tax. The cost of acquiring the Parent Company‘s own shares are shown as a

deduction from equity until the shares are cancelled or reissued. When such shares are

subsequently sold or reissued, any consideration received, net of directly attributable

incremental transaction costs and the related income tax effects, is included in equity.

4.09 Offsetting of Financial Instruments

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

statement of financial position if, and only if, there is a currently enforceable legal right

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

to realize the assets and settle the liabilities simultaneously.

4.10 Employee Benefits

4.10.01 Short-term Benefits

The Parent Company recognizes a liability net of amounts already paid and an expense

for services rendered by employees during the accounting period. Short-term benefits

given by the Parent Company to its employees include salaries and wages, social

security contributions, short-term compensated absences, profit sharing and bonuses,

non-monetary benefits.


The Parent Company has a funded, non-contributory retirement plan. The cost of

providing benefits is determined using the Projected Unit Credit Method which reflects

services rendered by employees to the date of valuation and incorporates assumptions

concerning employees’ projected salaries. Post-employment expenses include current

service cost plus amortization of past service cost, experience adjustments and

changes in actuarial assumptions over the expected average remaining working lives of

the covered employees. Cumulative actuarial gains and losses in excess of the ten

percent (10%) of the greater between present value of the defined benefit obligation

and fair value of any plan assets were amortized over the expected average remaining

working lifetime of the employees and recognized as part of retirement expense.

Actuarial gains and losses arising during the year are recognized in profit or loss.

Past service cost is recognized immediately to the extent that the benefits are already

vested, and otherwise is amortized on a straight-line basis over the average period until

the benefits become vested.

Any asset resulting from this calculation is limited to unrecognized actuarial losses and

past service cost, plus the present value of available funds and reductions in future

contributions to the plan.

The funding policy is to contribute an amount based on the actuarial valuation report

which is carried out at regular intervals.

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4.11 Provisions and Contingencies

Provisions are recognized when the Parent Company has a present obligation, whether

legal or constructive, as a result of a past event, it is probable that the Parent

Company will be required to settle the obligation, and a reliable estimate can be made

of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required

to settle the present obligation at the end of the reporting period, taking into account

the risks and uncertainties surrounding the obligation. Where a provision is measured

using the cash flows estimated to settle the present obligation, its carrying amount is

the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected

to be recovered from a third party, a receivable is recognized as an asset if it is

virtually certain that reimbursement will be received and the amount of the receivable


Provisions are reviewed at each reporting date and adjusted to reflect the current best

estimate and presented in the Parent Company’s separate statement of comprehensive

income.

Contingencies are not recognized in the Parent Company’s separate financial

statements unless the possibility of inflow/outflow of resources embodying economic

benefits is probable.

4.12 Share-based Payments

4.12.01 Equity-settled Share-based Payments

Equity-settled share-based payments to employees and others providing similar services

are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments

is expensed on a straight-line basis over the vesting period, based on the Parent

Company’s estimate of equity instruments that will eventually vest. At the end of

each reporting period, the Parent Company revises its estimate of the number of equity

instruments expected to vest. The impact of the revision of the original estimates, if

any, is recognized in profit or loss such that the cumulative expense reflects the

revised estimate, with a corresponding adjustment to the equity-settled employee

benefits reserve.

4.13 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will

flow to the Parent Company and the revenue can be measured reliably. Revenue is

measured at the fair value of the consideration received or receivable and represents

amounts receivable for services provided in the normal course of business. Revenue is

reduced for estimated customer returns, rebates and other similar allowances.

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4.13.01 Rendering of Services

Revenue from a contract to provide services is recognized by reference to the stage of

completion of the contract. Revenue from rendering of services is recognized when all

the following conditions are satisfied:

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow

to the Parent Company;

the stage of completion of the transaction can be measured reliably; and

the costs incurred for the transaction and the costs to complete the transaction can

be measured reliably.

Revenue from rendering of services encompasses delivery fees and other fees.

4.13.02 Dividend and Finance Income

Dividend income from investments is recognized when the shareholder’s right to

receive payment has been established, provided that it is probable that the economic

benefits will flow to the Parent Company and the amount of revenue can be measured

reliably.

Finance income is recognized when it is probable that the economic benefits will flow

to the Parent Company and the amount of revenue can be measured reliably. Finance

income is accrued on a time proportion basis, by reference to the principal outstanding

and at the effective interest rate applicable, which is the rate that exactly discounts

estimated future cash receipts through the expected life of the financial asset to that

asset’s net carrying amount on initial recognition.

4.14 Expense Recognition

Expense encompasses losses as well as those expenses that arise in the course of the

ordinary activities of the entity.

The Parent Company recognizes expenses in the separate statement of comprehensive

income when a decrease in future economic benefits related to a decrease in an asset

or an increase of a liability has arisen that can be measured reliably.

4.15 Leasing

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards of ownership to the lessee. All other leases are

classified as operating leases.

4.15.01 The Parent Company as a Lessee

Operating lease payments are recognized as an expense on a straight-line basis over

the lease term, except where another systematic basis is more representative of the

time pattern in which economic benefits from the leased asset are consumed.

In the event that lease benefits are received to enter into operating leases, such

benefits are recognized as a liability. The aggregate benefits are recognized as a

reduction of rental expense on a straight-line basis, except where another systematic

basis is more representative of the time pattern in which economic benefits from the

leased asset are consumed.

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4.16 Foreign Currency Transactions

In preparing the financial statements of the Parent Company, transactions in currencies

other than the Parent Company’s functional currency, i.e. foreign currencies, are

recognized at the rates of exchange prevailing at the dates of the transactions. At the

end of each reporting period, monetary items denominated in foreign currencies are

retranslated at the rates prevailing at that date. Non-monetary items that are measured

in terms of historical cost in a foreign currency are translated using the exchange rates

as at the dates of the initial transactions.

Exchange differences are recognized in profit or loss in the period in which they arise.

4.17 Related Parties and Related Party Transactions

A related party is a person or entity that is related to the Parent Company that is

preparing its financial statements. A person or a close member of that person’s family

is related to Parent Company if that person has control or joint control over the Parent

Company, has significant influence over the Parent Company, or is a member of the

key management personnel of the Parent Company or of a of the Parent Company.

An entity is related to the Parent Company if any of the following conditions applies:

The entity and the Parent Company are members of the same group (which means

that each parent, subsidiary and fellow subsidiary is related to the others).

One entity is an associate or joint venture of the other entity (or an associate or

joint venture of a member of a group of which the other entity is a member).

Both entities are joint ventures of the same third party.

One entity is a joint venture of a third entity and the other entity is an associate of

the third entity.

The entity is a post-employment benefit plan for the benefit of employees of either

the Parent Company or an entity related to the Parent Company. If the Parent

Company is itself such a plan, the sponsoring employers are also related to the

Parent Company.

The entity is controlled or jointly controlled by a person identified above.

A person identified above has significant influence over the entity or is a member of

the key management personnel of the entity (or of a of the entity).

Close members of the family of a person are those family members, who may be

expected to influence, or be influenced by, that person in their dealings with the Parent

Company and include that person’s children and spouse or domestic partner; children

of that person’s spouse or domestic partner; and dependents of that person or that

person’s spouse or domestic partner.

A related party transaction is a transfer of resources, services or obligations between

related parties, regardless of whether a price is charged.

4.18 Taxation

Income tax expense represents the net of the tax currently payable and deferred tax.

4.18.01 Current Tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs

from profit as reported in the statement of comprehensive income because of items of

income or expense that are taxable or deductible in other years and items that are

never taxable or deductible. The Parent Company’s liability for current tax is

16

calculated using tax rates that have been enacted or substantively enacted by the end

of the reporting period.

4.18.02 Deferred Tax

Deferred tax is recognized on temporary differences between the carrying amounts of

assets and liabilities in the financial statements and the corresponding tax bases used

in the computation of taxable profit. Deferred tax liabilities are generally recognized for

all taxable temporary differences. Deferred tax assets are generally recognized for all

deductible temporary differences, carry forward of unused tax credits from excess

Minimum Corporate Income Tax (MCIT) over Regular Corporate Income Tax (RCIT) and

unused Net Operating Loss Carryover (NOLCO), to the extent that it is probable that

taxable profits will be available against which those deductible temporary differences

and carry forward of unused MCIT and unused NOLCO can be utilized. Deferred

income tax, however, is not recognized when it arises from the initial recognition of an

asset or liability in a transaction that is not a business combination and, at the time of

the transaction that affects neither the accounting profit nor taxable profit or loss.

Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax

assets arising from deductible temporary differences are only recognized to the extent

that it is probable that there will be sufficient taxable profits against which to utilize

the benefits of the temporary differences and they are expected to reverse in the

foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting

period and reduced to the extent that it is no longer probable that sufficient taxable

profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to

apply in the period in which the liability is settled or the asset realized, based on tax

rates and tax laws that have been enacted or substantively enacted by the end of the

reporting period. The measurement of deferred tax liabilities and assets reflects the tax

consequences that would follow from the manner in which the Parent Company

expects, at the end of the reporting period, to recover or settle the carrying amount of

its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to

set off current tax assets against current tax liabilities and when they relate to income

taxes levied by the same taxation authority and the Parent Company intends to settle

its current tax assets and liabilities on a net basis.

4.18.03 Current and Deferred Tax for the Period

Current and deferred tax are recognized as an expense or income in profit or loss,

except when they relate to items that are recognized outside profit or loss, whether in

other comprehensive income or directly in equity, in which case the tax is also

recognized outside profit or loss.

4.19 Earnings Per Share

The Parent Company computes its basic earnings per share by dividing net income or

loss attributable to ordinary equity holders of the Parent Company by the weighted

average number of ordinary shares outstanding during the period.

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4.20 Events after the Reporting Period

The Parent Company identifies subsequent events as events that occurred after the

reporting period but before the date when the financial statements were authorized for

issue. Any subsequent events that provide additional information about the Parent

Company’s position at the reporting period, adjusting events, are reflected in the

financial statements, while subsequent events that do not require adjustments,

non-adjusting events, are disclosed in the notes to financial statements when material.

4.21 Prior Period Errors

The Parent Company corrects material prior period errors retrospectively in the first set

of financial statements authorized for issue after their discovery by: (a) restating the

comparative amounts for the prior period presented in which the error occurred; or (b)

if the error occurred before the earliest prior period presented, restating the opening

balances of assets, liabilities and equity for the earliest prior period presented.

5. CRITICAL JUDGMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Parent Company’s accounting policies, which are disclosed in

Note 4, Management is required to make judgements, estimates and assumptions

about the carrying amounts of assets and liabilities that are not readily from other

sources. The estimates and associated assumptions are based on historical experience

and other factors that are considered to be relevant. Actual results may differ from

these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognized in the period in which the estimate is

revised if the revision affects only that period or in the period of the revision and future

periods if the revision affects both current and future periods.

5.01 Critical Judgment in Applying Accounting Policy

05.01.01 Functional Currency

PAS 21 requires management to use its judgment to determine the entity’s functional

currency such that it most faithfully represents the economic effects of the underlying

transactions, events and conditions that are relevant to the entity. In making this

judgment, the Parent Company considers the following:

the currency that mainly influences sales prices for financial instruments and

services (this will often be the currency in which sales prices for its financial

instruments and services are denominated and settled);

the currency in which funds from financing activities are generated; and

the currency in which receipts from operating activities are usually retained.

The Parent Company determined its functional currency to be Philippine Peso, being

the currency that mainly influences the Parent Company’s revenues and cost and

expenses.

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5.02 Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of

estimation uncertainty at the end of the reporting period that have a significant risk of

causing a material adjustment to the carrying amounts of assets and liabilities within

the next financial year.

5.02.01 Reviewing Residual Values, Useful Lives and Depreciation Method of Property

and Equipment

The residual values, useful lives and depreciation method of the Parent Company’s

property and equipment are reviewed at least annually, and adjusted prospectively if

appropriate, if there is an indication of a significant change in, how an asset is used;

significant unexpected wear and tear; technological advancement; and changes in

market prices since the most recent annual reporting date. The useful lives of the

Parent Company’s assets are estimated based on the period over which the assets are

expected to be available for use. In determining the useful life of an asset, the Parent

Company considers the expected usage, expected physical wear and tear, technical or

commercial obsolescence arising from changes or improvements in production, or from

a change in the market demand for the product or service output and legal or other

limits on the use of the Parent Company’s assets. In addition, the estimation of the

useful lives is based on Parent Company’s collective assessment of industry practice,

internal technical evaluation and experience with similar assets. It is possible,

however, that future results of operations could be materially affected by changes in

estimates brought about by changes in factors mentioned above. The amounts and

timing of recorded expenses for any period would be affected by changes in these

factors and circumstances. A reduction in the estimated useful lives of property and

equipment would increase the recognized operating expenses and decrease non-current

assets. The Parent Company uses a depreciation method that reflects the pattern in

which it expects to consume the asset’s future economic benefits. If there is an

indication that there has been a significant change in the pattern used by which an

Parent Company expects to consume an asset’s future economic benefits, the Parent

Company shall review its present depreciation method and, if current expectations

differ, change the depreciation method to reflect the new pattern.


previous estimates. The carrying values of property and equipment amounted to

P8,901,653 and P7,094,474 as of 2012 and 2011, respectively, as disclosed in

Note 11.

5.02.02 Reviewing Residual Values, Useful Lives and Amortization Method of

Intangible Assets

The residual values, useful lives and amortization method of the Parent Company’s

intangible assets are reviewed at least annually, and adjusted prospectively if

appropriate, if there is an indication of a significant change in, how an asset is used;

technological advancement; and changes in market prices since the most recent annual

reporting date. Amortization begins when the intangible asset is available for use, i.e.

when it is in the location and condition necessary for it to be usable in the manner

intended by management. Amortization ceases when the asset is derecognized.

The Parent Company uses a straight line method of amortization since it cannot

determine reliably the pattern in which it expects to consume the asset’s future

economic benefits.

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Management assessed that there is no significant change from the previous estimates.

Amortization in 2012 and 2011 amounted to P936,613 and P1,543,083, respectively,

as disclosed in Note 12. The carrying amounts of intangible assets as of December

31, 2012 and 2011 amounted to P1,404,816 and P1,396,241 respectively, as

disclosed in Note 12.

5.02.03 Asset Impairment

The Parent Company performs an impairment review when certain impairment

indicators are present. Determining the fair value of property and equipment,

investments in subsidiaries, investment in associates and intangible assets, which

require the determination of future cash flows expected to be generated from the

continued use and ultimate disposition of such assets, requires the Parent Company to

make estimates and assumptions that can materially affect the financial statements.

Future events could cause the Parent Company to conclude that property and

equipment, investments in subsidiaries, investment in associates and intangible assets

are impaired. Any resulting impairment loss could have a material adverse impact on

the financial condition and results of operations.

The preparation of the estimated future cash flows involves significant judgment and

estimations. While the Parent Company believes that its assumptions are appropriate

and reasonable, significant changes in the assumptions may materially affect the

assessment of recoverable values and may lead to future additional impairment charges

under PFRS.

The Parent Company determined that there is no indication that an impairment loss has

occurred on its property and equipment, investments in subsidiaries, investments in

associates and intangible assets, thus, no impairment loss was recognized in both

years. As of December 31, 2012 and 2011, the aggregate carrying amounts of

investments in subsidiaries, investments in associates, property and equipment and

intangible assets amounted to P312,343,367 and P303,824,792, respectively, as

disclosed in Notes 9, 10, 11 and 12.

5.02.04 Estimating Allowances for Doubtful Accounts

The Parent Company estimates the allowance for doubtful accounts related to its

accounts receivables based on assessment of specific accounts where the Parent

Company has information that certain customers are unable to meet their financial

obligations. In these cases, judgment used was based on the best available facts and

circumstances including but not limited to, the length of relationship with the customer

and the customer’s current credit status based on third party credit reports and known

market factors. The Parent Company used judgment to record specific reserves for

customers against amounts due to reduce the expected collectible amounts.

These specific reserves are re-evaluated and adjusted as additional information received

impacts the amounts estimated.

The amounts and timing of recorded expenses for any period would differ if different

judgments were made or different estimates were utilized. An increase in the

allowance for doubtful accounts would increase the recognized operating expenses and

decrease current assets.

As of December 31, 2012 and 2011, Management believes that the recoverability of

receivables is certain; hence, no allowance for doubtful accounts was provided.

As of December 31, 2012 and 2011, the carrying amounts of trade and other

receivables amounted to P1,437,175,689 and P1,140,046,934, respectively, as


20

5.02.05 Deferred Tax Assets

The Parent Company reviews the carrying amounts at each reporting date and reduces

deferred tax assets to the extent that it is no longer probable that sufficient taxable

profit will be available to allow all or part of the deferred tax assets to be utilized prior

to expiration.

In 2012, Management believes that the Parent Company would be able to generate

future taxable profit that would allow all of its deferred tax assets to be fully utilized

prior to expiration. As of December 31, 2012, the carrying amount of deferred tax

assets amounted to P1,804,760, respectively, as disclosed in Note 27. In 2011, the

Parent Company did not recognize deferred tax assets amounting to P2,803,088,

Management believes that it is not probable that future taxable profits will be available

to allow all or part of deferred tax assets to be utilized.


The determination of the retirement obligation and cost is dependent on the selection

of certain assumptions used by actuaries in calculating such amounts. Those

assumptions include among others, discount rates, expected returns on plan assets and

rates of compensation increase. In accordance with the generally accepted accounting

principles, actual results that differ from the assumptions are accumulated and

amortized over future periods and therefore, generally affect the recognized expense

and recorded obligation in such future periods. While the Parent Company believes

that the assumptions are reasonable and appropriate, significant differences in the

actual experience or significant changes in the assumptions may materially affect the

pension and other retirement obligations.

As of December 31, 2012 and 2011, the Parent Company has recognized retirement

asset amounting to P2,232,135 and P368,394, respectively, as disclosed in Note 24.

Retirement benefit expense recognized amounted to P4,294,704, P5,748,578 and

P2,376,127 in 2012, 2011 and 2010, respectively as disclosed in Note 24.

6. CASH AND CASH EQUIVALENTS

For the purpose of the separate statement of cash flows, cash and cash equivalents

include cash on hand and in banks and cash equivalents. Cash equivalents are short-

term, highly liquid investments that are readily convertible to known amounts of cash

with maturities of three months or less from the date of acquisition and that are

subject to an insignificant risk of change in value.

Cash and cash equivalents at the end of the reporting period as shown in the separate

statement of cash flows can be reconciled to the related items in the separate

statement of financial position as follows:

2012 2011

Cash on hand P 22,455,596 P 24,772,521

Cash in banks 747,470,629 642,750,978

Cash equivalents 20,000,000 -

P 789,926,225 P 667,523,499

Cash in banks earns interest ranging from 0.50% to 2.00% while cash equivalents

earn interest at rate of 1.75%.

21

Finance income earned on these accounts amounted to P1,858,779, P2,949,353 and


7. TRADE AND OTHER RECEIVABLES

The Parent Company trade and other receivables consist of:

2012 2011

Agents P 1,196,101,092 P 993,280,050

Couriers 88,815,199 3,523,052

Advances to related parties (Note 16) 146,490,161 137,260,244

Officers and employees 4,011,145 2,526,259

Others 1,758,092 3,457,329

P 1,437,175,689 P 1,140,046,934

Receivables from agents pertain to advances made to fund the remittance transactions

to beneficiaries. These are settled within one (1) to five (5) days from transaction

date. No interest were charged on trade receivables.

Receivables from couriers pertain to advances made to courier providers to ease up

door-to-door delivery of remittances to beneficiaries. These are settled within one (1)

to (2) weeks from transaction date.

Advances to related parties include operating funds and marketing materials advanced

to foreign subsidiary and associate offices by the Parent Company. These advances

are collected in one month from date of funding.

Aging of accounts that are past due but not impaired is as follows:

2012 2011

1 – 30 days past due P - P -

31 – 60 days past due 6,296,592 -

Over 60 days past due - -

P 6,296,592 P -

In determining the recoverability of a trade receivable, the Parent Company considers

any change in the credit quality of the trade receivable from the date credit was initially

granted up to the reporting period. The concentration of credit risk is limited due to

the customer base being large and unrelated. Accordingly, the directors believe that

there is no credit provision required.

Others include advances to contractors and trading clients for foreign exchange

transactions. These outstanding receivables are due within one (1) year.

22

8. PREPAYMENTS AND OTHER CURRENT ASSETS

The Parent Company’s prepayment’s other current assets consist of:

2012 2011

Receivable from Bureau of Internal Revenue (BIR) P 13,160,534 P 13,160,535

Visa cards inventory 2,829,010 3,371,662

Advances to suppliers and contractors 1,830,343 1,087,500

Prepaid expenses 1,824,093 5,579,968

Office supplies 259,623 190,328

Creditable withholding tax - 2,979

P 19,903,603 P 23,392,972

Receivable from BIR pertains to the excess payments made by the Parent Company in

2007 for the Initial Public Offering (IPO) percentage tax at P13,160,535. As of

December 31, 2012, the case on the recoverability of tax on IPO is pending resolution

with the Court of Tax Appeals. The Parent Company believes that it will be able to

obtain the refund from the BIR.

Prepaid expenses include prepayments for rent, insurance, internet connection and

association dues among others.

9. INVESTMENTS IN SUBSIDIARIES

Details of the Parent Company’s investments in subsidiaries accounted at cost are as

follows:

Name of Subsidiaries Principal Activity

Place of

Incorporation

and Operation

Proportion of

Ownership Interest

2012 2011

IRCGmbH

Remittance and management

consultancy Austria 100% 100%

IGRL Money transfer services

United

Kingdom 100% 100%

LSML

Fund transfer and remittance

services Hong Kong 100% 100%

WEPL


services Australia 100% 100%

IRCL


services Canada 100% 100%

IAPL Money transfer services Australia 100% 100%

PSAGL

Foreign currencies trading

services Hong Kong 100% 100%

KKIJ Money remittance services Japan 100% 100%

INZL Money remittance services New Zealand 100% 100%

23

This account consists of:

2012 2011

IRCGmbH P 103,215,084 P 103,215,083

IGRL 85,355,965 78,653,145

LSML 42,554,665 42,554,665

WEPL 21,336,890 21,336,890

IRCL 13,444,000 13,444,000

IAPL 8,552,000 8,552,000

PSAGL 5,958,800 5,958,800

KKIJ 5,413,120 5,413,120

INZL 32,400 32,400

P 285,862,924 P 279,160,103

Movements of investments in subsidiaries are as follows:

2012 2011


Acquisition of additional shares in subsidiaries 6,702,821 12,866,265


9.01 Additional acquisition of non-controlling interest

9.01.01 IRCGmbH

On May 5, 2011, the Parent Company acquired the remaining 25.10% ownership

interest in IRCGmbH from the non-controlling stockholder for a consideration of

P25,014,743. The acquisition increased the Parent Company’s ownership interest in

IRCGmbH to 100.00% from 74.90%. The receivable from non-controlling shareholder

was applied in full against the total consideration.

Consequently, on October 11, 2011, IERCAG changed its legal name to IREMIT

Remittance Consulting GmbH (IRCGmbH) and changed its legal status from a stock

Parent Company to a limited liability Parent Company. It also amended its Articles of

Incorporation to include management consultancy in its business activities.

9.01.02 WEPL

On March 25 2011, the Parent Company’s BOD approved the acquisition of 35.00%

ownership interest from the non-controlling stockholders of WEPL for a consideration

of AUD274,345 (P12,303,817), consequently making the ownership of the Parent

Company over WEPL at 100.00%. The Parent Company applied its receivables from

the non-controlling shareholders against the acquisition cost.

9.02 Acquisition of subsidiaries

On April 15, 2011, IGRL was authorized by the Financial Services Authority (FSA) of

the United Kingdom as an Authorized Payment Institution under the European Payment

Services Directive, a legislation adopted by the European Union that aims to harmonize

laws across Europe pertaining to the provision of payment services, including money

transfer services. Prior to this grant, the BOD of IGRL approved the increase of IGRL’s

authorized shares to 105,000 with which the Parent Company invested

GBP104,900 or P7,453,145 for the additional capital requirement.

24

On February 10, 2012, the Parent Company increased its capital share for another GBP

100,000 or P6,702,821 as required by FSA.

10. INVESTMENTS IN ASSOCIATES

Details of the Parent Company’s investments in associates are as follows:

Name of

Associates Principal Activity

Place of

Incorporation and

Operation

Proportion of

Ownership Interest

2012 2011

ISPL Remittance business Singapore 49% 49%

HKHCL Remittance business Taiwan 49% 49%

This account consists of:

2012 2011

ISPL P 12,600,000 P 12,600,000

HKHCL 3,573,974 3,573,974

P 16,173,974 P 16,173,974

The Parent Company recognized dividend income amounting to P4,896,570, nil and

P596,381 from dividends declared by ISPL in 2012, 2011 and 2010, respectively, as


25

11. PROPERTY AND EQUIPMENT — net

The carrying amounts of the Parent Company’s property and equipment are as follows:

Office and

communication

equipment

Transportation

and delivery

equipment

Furniture and

fixtures

Leasehold

improvements Total

January 1, 2011

Cost P 25,050,187 P 6,834,602 P 3,779,467 P 11,795,343 P 47,459,599


Carrying amount 3,550,298 3,889,733 795,359 1,257,725 9,493,115


Balance, January 1, 2011 3,550,298 3,889,733 795,359 1,257,725 9,493,115

Additions 2,222,849 35,315 285,181 50,000 2,593,345

Disposal

Cost - - (10) - (10)

Accumulated Depreciation - - - - -

Depreciation (Note 23) (2,483,026) (1,309,027) (414,913) (785,010) (4,991,976)

Balance, December 31, 2011 3,290,121 2,616,021 665,617 522,715 7,094,474

December 31, 2011

Cost 27,273,036 6,869,917 4,064,638 11,845,343 50,052,934


Carrying amount 3,290,121 2,616,021 665,617 522,715 7,094,474


Balance, January 1, 2012 3,290,121 2,616,021 665,617 522,715 7,094,474

Additions 4,864,928 - 13,353 2,336,103 7,214,384

Disposal

Cost (53,200) (514,960) - - (568,160)

Accumulated Depreciation 40,323 178,241 - - 218,564

Depreciation (Note 23) (3,290,998) (1,071,471) (288,233) (406,907) (5,057,609)

Balance, December 31, 2012 4,851,174 1,207,831 390,737 2,451,911 8,901,653

December 31, 2012

Cost 32,084,764 6,354,957 4,077,991 14,181,446 56,699,158


Carrying amount P 4,851,174 P 1,207,831 P 390,737 P 2,451,911 P 8,901,653

As of December 31, 2012 and 2011, the cost of fully depreciated property and

equipment still in use amounted to P28,620,900 and P23,132,698, respectively.

In 2012 and 2011, the Parent Company disposed certain depreciated property and

equipment for total consideration of P349,596 and P3,954, respectively.

Depreciation charged to operating expenses amounted to P5,057,609, P4,991,976

and P6,550,801 in 2012, 2011 and 2010, respectively, as disclosed in Note 23.

During the year, the Parent Company carried out a review of the recoverable amounts

of its property and equipment. The Parent Company has determined that there is no

indication that an impairment has occurred on its property and equipment.

26

12. INTANGIBLE ASSETS – net

The carrying amounts of the Parent Company’s intangible assets follow:

2012 2011

Carrying amount

Cost P 14,113,137 P 13,167,949

Accumulated depreciation (12,708,321) (11,771,708)

1,404,816 1,396,241

Movements during the year

Balance, January 1 1,396,241 1,868,072

Additions 945,188 1,071,252

Amortization (Note 23) (936,613) (1,543,083)


The Parent Company’s intangible assets include software used in the business

activities of the Parent Company.

Amortization charged to operating expenses amounted to P936,613, P1,543,083 and


During the year, the Parent Company carried out a review of the recoverable amounts

of its intangible assets. The Parent Company has determined that there is no

indication that impairment has occurred on its intangible assets.

13. OTHER NON-CURRENT ASSETS

The components of other non-current assets account are as follows:

2012 2011

Input VAT P 11,464,326 P 21,242,725

Refundable deposits (Note 25) 5,353,040 4,568,661

Deferred input VAT - 326,056

Others 44,000 44,000

P 16,861,366 P 26,181,442

The Parent Company has applied for tax credits on Input VAT with the BIR and is

waiting for the issuance of Tax Credit Certificates (TCCs). In 2011, the BIR issued

two tax credit certificates to the Parent Company for its input VAT filed for years 2005

and 2006 amounting to P1,719,885 and P3,815,946, respectively. In 2012, the BIR

issued additional tax credit certificate to the Parent Company for its Input VAT filed in

2008 amounting to P2,968,565. Management of the Parent Company believes that it

will able to collect the rest of the TCCs applicable to its outstanding claims.

The carrying amounts are already net of claims disallowed by the BIR amounting to

P6,677,857, P2,058,616 and nil in 2012, 2011 and 2010, respectively, as disclosed

in Note 23.

27

14. BENEFICIARIES AND OTHER PAYABLES

The components of beneficiaries and other payables account are as follows:

2012 2011

Beneficiaries P 443,309,073 P 155,140,304

Advances from related parties (Note 16) 74,130,345 79,753,117

Agents, couriers and trading clients 23,047,301 44,404,974

Accrued expenses 7,751,470 7,019,510

Payable to suppliers 3,720,856 1,391,836

Payable to government agencies 1,608,544 1,476,777

Others 2,314,143 476,730

P 555,881,732 P 289,663,248

Payables to beneficiaries, agents, couriers and trading clients are noninterest-bearing

and are normally settled within 1 to 30 days.

Accrued expenses include accruals for various operating expenses, courier charges,

training and development, professional fees and utilities.

15. LOANS PAYABLE

In 2012 and 2011, the Parent Company issued an unsecured, short-term interest-

bearing peso-denominated bank loans with an aggregate amount of P925,000,000 and

P666,000,000, respectively. The loans payable have an interest rate ranges from 5%

and 7.125% per annum and have maturities of less than one (1) year. The related

finance cost from these loans payable amounted to P46,068,423, P38,322,540,

P29,213,843 in 2012, 2011 and 2010, respectively.

The Parent Company has unused credit facilities with various banks amounting to

P1,880,000,000 and P1,480,000,000 as of December 31, 2012 and 2011,

respectively.

Movements of loans payable are as follows:

2012 2011


Additional loans obtain 925,000,000 666,000,000

Payments for short-term loans payable (666,000,000) (877,000,000)


As of the reporting period, the Parent Company is compliant with the terms and

conditions of the loans.

28

16. RELATED PARTY TRANSACTIONS

Nature of relationship of the Parent Company and its related parties are disclosed

below:

Related Parties Nature of Relationship

International Remittance (Canada) Ltd. (IRCL) Subsidiary

Lucky Star Management Limited (LSML) Subsidiary

IRemit Global Remittance Limited (IGRL) Subsidiary

I-Remit Australia Pty Ltd (IAPL) Subsidiary

Worldwide Exchange Pty Ltd (WEPL) Subsidiary

IREMIT Remittance Consulting GmbH (IRCGmbH) Subsidiary

I-Remit New Zealand Limited (INZL) Subsidiary

Power Star Asia Group Limited(PSAGL) Subsidiary

K.K. Iremit Japan (KKIJ) Subsidiary

IRemit Singapore Pte Ltd (ISPL) Associate

Hwa Kung Hong & Co., Ltd.(HKHCL) Associate

Sterling Bank of Asia (SBA) Affiliates

Oakridge Properties Affiliates

Surewell Equities Pte. Ltd. Affiliates

Balances and transactions between the Parent Company and its related parties are

disclosed below:

16.01 Advances to related parties

Balance of advances to related parties as shown in the separate statement of financial

position are summarized per category as follows:

16.01.01 Subsidiaries




LSML

Remittance 906,060,540 13,591,056 968,347,557 8,298,821

Due from 2,848,880 9,460,733 6,957,891 6,778,807

Delivery fee 6,406,963 143,428 7,562,975 135,848

IGRL

Remittance 7,172,949,521 193,148,649 5,531,809,775 36,909,320

Due from 34,369,236 52,541,211 23,544,513 19,643,004

Delivery fee 26,298,780 948,339 20,070,096 338,579

Service income 3,646,004 999,952 3,321,792 778,290

WEPL

Remittance 5,654,003,334 33,252,223 4,866,615,954 23,419,787

Due from 288,604 - 916,863 364,387

Delivery fee 28,840,903 773,357 26,358,605 150,004

Service income 1,792,774 369,519 1,464,752 239,788

(Balance forwarded)

29




IRCL

Remittance 8,397,932,144 208,951,955 8,658,896,960 167,796,179

Due from 245,069 - 261,982 33,716

Delivery fee 55,191,391 1,931,573 55,556,118 1,459,060

Service income 1,160,626 236,268 915,676 116,483

INZL

Remittance 952,992,756 7,833,438 768,097,797 10,376,816

Due from 126,421 15,812,209 5,982,986 15,260,990

Delivery fee 4,412,176 36,306 4,032,091 50,530

Service income 584,255 584,255 464,934 464,934

IRCGmbH

Remittance 158,815,269 5,813,043 - -

Due from 15,089,831 14,761,355 - -

Delivery fee 1,032,912 43,028 - -

K.KIJ

Remittance 165,806,223 20,666,749 - -

Due from 27,505,484 33,117,004 5,611,520 5,611,520

Delivery fee 397,226 41,884 - -

IERCAG

Remittance - - 1,534,094,349 -

Due from - - 37,810,554 62,811,308

Delivery fee - - 6,294,573 595,890

IAPL

Remittance 3,673,446,537 1,272,493 4,965,185,873 29,704,309

Due from 399,907 82,349 697,587 373,740

PSAGL

Due from - - 33,166 33,166



subsidiary office from a remitter, delivery of which is fulfilled by the Parent Company


• Delivery fee is the share in service fee collected by the foreign subsidiary office along

with the principal amount of transaction from a remitter. Account collected in 1-5

days from date of transaction.


foreign subsidiary offices. Settled in 1-30 days from date of funding.

• Service Income refers to service fee collected by the Parent Company from selected

foreign subsidiary offices for the administration of call center agents servicing the

requirements of the latter offices.

Transactions with related parties are non-interest bearing, unsecured and will be settled

in cash. No guarantees have been received. No provisions have been made for

doubtful debts in respect of the amounts owed by the related parties.

30

16.01.02 Associates




HKHCL

Remittance 5,155,165,031 60,187,956 5,148,060,359 29,136,840

Due from 5,223,594 8,192,341 6,382,656 8,715,507

Delivery fees 47,715,373 2,130,587 46,127,251 326,674

ISPL

Remittance 7,203,835,917 105,072,529 7,211,603,671 64,141,580

Due from 457,714 10,332,965 996,076 16,034,603

Delivery fees 25,161,186 2,782,994 24,463,777 2,180,325



associate office from a remitter, delivery of which is fulfilled by the Parent Company


• Delivery fee is the share in service fee collected by the foreign subsidiary office along

with the principal amount of transaction. Account collected in 1-5 days from date of

transaction.


foreign associate offices. It has a term of settlement within 1-30 days from date of

funding.


cash. No guarantee was required. No provision made for doubtful accounts as these

accounts are all collectible.

16.02 Other Related Parties

16.02.01 Affiliates



Category Volume Balances

Volume

Balances

Sterling Bank of Asia 384,536 -

425,360

-

Oakridge Properties 11,421,505 - 9,247,615 -

Surewell Equities, Inc. 898,920 - 877,219 -


• Sterling Bank of Asia – This pertains to income earned from depositary accounts in

Peso and USD (FCDU) maintained at Sterling Bank of Asia (SBA), an affiliate of the

Parent Company through common controlling stockholders. Principal stockholders of

SBA are JTKC Equities, Inc. Star Equities, Inc. and Surewell Equities, Inc.

• Oakridge Properties - This pertains to the cost of rental paid to Oakridge Properties,

Inc.(OPI) by the Parent Company for the use of office spaces at Discovery Centre, a

building owned by OPI, an affiliate of the Parent Company. OPI is owned by The

Discovery Leisure Company Inc, (TDLCI), an entity owned by JKTC Equities, Inc, and

JKTC Realty Corporation. Lease contract with Oakridge includes security deposit of

31

two months and one month advance rental. Rent is paid monthly with provision for

yearly escalation.

• Surewell Equities, Inc. – This pertains to the cost of rental paid to Surewell Equities

Pte. Ltd. (SEPL) for the sharing of its office in Singapore under a sublease agreement

with the Parent Company . SEPL is a foreign subsidiary office of Surewell Equities,

Inc., one of the principal stockholders of the Parent Company. No security deposit

paid and without provision for escalation. Rent is paid monthly.


cash. No guarantees have been received. No provisions have been made for doubtful

debts in respect of the amounts owed by the related parties.

16.02.02 Key Management



Volume Balances

Volume

Balances

Key Management

Advances 500,000 689,385

600,000

929,385


• Advances – This pertains to a key management personnel subject to liquidation

within company prescribed period of liquidation.


No guaranty required. No provision was made for doubtful account as the account is

deemed collectible.

16.03 Advances from Related Parties

Balance of advances from related parties as shown in the separate statement of




Category Volume Balances

Volume

Balances

Subsidiary

PSAGL 53,926,985 65,440,113 77,952,025 75,534,429


Accounts payable to PSAGL represents charges on various treasury assistance and

advisory services rendered by PSAGL to the Parent Company.

The amounts outstanding are unsecured, non-interest bearing and will be settled in

cash. No guarantees have been given or received. No provisions have been made for

doubtful debts in respect of the amounts owed to a related party.

32

16.04 Lease Contracts

The Parent Company leases office spaces from Oakridge Properties as disclosed in

Note 25. Rent expense amounted to P11,421,505 and P9,247,615 in 2012 and

2011, respectively.

The Parent Company entered into a sublease agreement with Surewell Equities Pte

Ltd., one of the stockholders of the Parent Company. The Parent Company also has

deposits amounting to P126,865,934 and P193,049,842 with SBA as of December

31, 2012 and 2011, respectively. These deposits earned P384,536, P425,360, and

P1,124,404 interest income in 2012, 2011 and 2010, respectively.

16.05 Investment in Associate

The Parent Company recognized dividend income amounting to P4,896,570 and

P596,381 from dividends declared by ISPL in 2012 and 2010, respectively. The

Parent Company has forty nine percent (49%) ownership interest on its associate and

a carrying amount of investment amounted to P19,492,351 in 2012.

16.06 Remuneration of Key Management Personnel

The remuneration of the directors and other members of key management personnel of

the Parent Company is set out below in aggregate for each of the categories specified

in PAS 24, Related Party Disclosures:

2012 2011 2010

Short-term benefits P 22,368,436 P 21,310,932 P 19,605,330

Post-employment benefits 1,260,378 1,571,444 549,541

P 23,628,814 P 22,882,376 P 20,154,871

16.07 Transaction with Retirement Fund

The Parent Company’s retirement benefit fund is maintained with Sterling Bank of Asia

(SBA), an affiliate due to common stockholders, as trustee. The carrying amount and

fair value of the fund amounted to P30,303,714 as of December 31, 2012 as


The funds were invested in private equity securities, deposits in banks and government

debt securities. In 2012 and 2011, the Parent Company made contributions to the

fund amounting to P6,158,445 and P6,895,233, respectively, as disclosed in Note 24.

Private equity securities includes P808,100 of the Parent Company’s own equity

securities bought back from resigned employees who held such securities, under the

special stock purchase program. Such transaction was authorized by the BOD of

I-Remit Inc. through its SSS program as disclosed in Note 19.

The government debt securities consist of peso denominated and USD denominated

securities. The Peso-denominated Government Securities of the I-Remit Retirement

Fund were purchased from accredited counterparties of SBA-Trust Group.

These counterparties are Banks and Investment Houses allowed to trade government

securities. Existing Peso GS accounts are all Tax exempt and are currently lodged

under the Tax Exempt RoSS Account of SBA-Trust Group with the Bureau of the

Treasury (BTr).

33

The USD denominated debt securities are currently lodged with the Philippine

Depository Trust Corporation (PDTC). These were also purchased from SBA-Trust’s

accredited counterparties that are allowed to trade government securities

17. ISSUED CAPITAL

The issued capital of the Parent Company is as follows:

2012 2011

Ordinary shares P 617,725,800 P 617,725,800

Additional paid-in capital 429,513,501 429,513,501

P 1,047,239,301 P 1,047,239,301

17.01 Ordinary Shares

The ordinary shares of the Parent Company are described as follows:

2012 2011

Authorized:

1,000,000,000 shares at P1 par value

per share P 1,000,000,000 P 1,000,000,000

Subscribed and issued:

562,417,000 shares at P1 par value per

share P 562,417,000 P 562,417,000

Stock dividends, 55,308,800 shares at P1

par value per share 55,308,800 55,308,800

Total subscribed, issued P 617,725,800 P 617,725,800

Ordinary shares carry one vote per share and a right to dividend.



of P1. There are 19, 17 and 13 registered common stockholders as of December 31,

2012, 2011 and 2010. Shares lodged with the Philippine Central Depository are

registered under the name of PCD Nominee Corporation and as such are treated as

being held by only one shareholder.

17.01.01 Additional Paid In Capital

The Parent Company’s additional paid-in-capital-in excess of par value is composed of

excess of proceeds on issuance of the Parent Company’s shares amounting to

P429,510,000 and excess of acquisition costs over the carrying value of the

non-controlling interests acquired in 2011 amounting to P38,280,000, as disclosed in

Note 1.

34

17.02 Treasury Shares

Details about the Parent Company’s treasury shares are as follows:

2012 2011

Shares Amount Shares Amount

Balance, January 1 14,873,000 P 52,987,208 9,329,000 P 40,115,150

Acquisitions 5,714,000 16,222,480 5,544,000 12,872,058

Balance, December 31 20,587,000 P 69,209,688 14,873,000 P 52,987,208

On August 15, 2008, the Parent Company’s BOD approved the buy-back program to

acquire up to ten million (10,000,000) of its shares, representing approximately 1.87%

of the Parent Company’s total outstanding common shares, from the market. The

Parent Company purchased 9,329,000 shares for P40,110,000 in 2008 under the

buy-back program.

In 2009 and 2008, the Parent Company purchased 130,900 shares for P130,000 and

548,500 shares for P55,000, respectively, under the SSPP. The 808,100 shares

(including 128,700 shares purchased in 2007) purchased under the SSPP, were

subsequently transferred in September 2009 to the retirement fund of the Parent

Company.


resolution authorizing the buy-back of up to ten million (10,000,000) of its shares in

the market. The Parent Company purchased 4,873,000 shares (P11,350,000) under

the buy-back program. Also on the same year, the Parent Company purchased

671,000 shares (P1,520,000) under the buy-back program approved in

August 15, 2008.


resolution authorizing another buy-back program of up to ten million (10,000,000) of

its shares in the market. The Parent Company purchased the remaining balance of

5,127,000 shares (P14,560,000) from the buy-back program of 2011 and 587,000

shares (P1,670,000) from the latest buy-back program authorized in 2012.

17.03 Appropriation of Retained Earnings

As of December 31, 2012 and 2011, appropriated retained earnings pertaining to

treasury shares amounted to P69,209,688 and P52,987,208, respectively. This is in

accordance with the legal requirement of Section 41 of the Corporation Code which

requires an entity to have sufficient retained earnings to support for the treasury

shares.

18. DIVIDENDS DECLARED




Parent Company’ shareholders during their annual meeting held on July 17, 2009.

The payment of dividends was made on May 6, 2009.

35




Parent Company’ shareholders during their annual meeting held on July 23, 2010. The

payment was made on May 5, 2010.

On June 17, 2011, the Board of Directors of the Parent Company authorized the

declaration of stock dividends equivalent to 10% of outstanding shares of

553,088,000 in favor of its stockholders-of-record as of August 15, 2011.

The declaration was subsequently ratified and confirmed by the Parent Company’s

stockholders during their annual meeting held on July 29, 2011.

On its regular meeting held in June 22, 2012, the Board of Directors of the Parent

Company approved and authorized the declaration of cash dividends equivalent to

P119,980,858 or approximately P0.1993 per share based on the Corporation’s

Six Hundred Two Million Seventy One Thousand Eight Hundred Pesos (P602,071,800)

issued and outstanding common shares as of the end of trading day, payable to all of

its stockholders-of-record as of July 12, 2012.

19. SHARE-BASED PAYMENTS

On July 20, 2007, the Parent Company’s BOD approved the proposal to set up an

Special Stock Purchase Program (SSPP) totaling 15,000,000 shares for the employees

of the Parent Company who have been in the service for at least one (1) calendar year

as of June 30, 2007, as well as its BOD members, resource persons and consultants

(collectively referred to as “the Participants”). A Notice of Exemption under

Section 10.2 of the Securities Regulations Code had been approved by the SEC on

September 13, 2007. Notwithstanding the aforesaid confirmation by the SEC of the

exempt status of the SSPP shares, the SEC nonetheless required the Parent Company

to include the SSPP shares among the shares of the Parent Company which were

registered with the SEC prior to the conduct of its Initial Public Offering in October

2007. The registration of the Parent Company shares, together with the SSPP shares,

was rendered effective on October 5, 2007.

All 15,000,000 shares were exercised. The shares subject to the SSPP were sold at

par value or P1.00 per share. Total shares amounting to P11.74 million were paid in

full, while the difference totaling P3.26 million were paid by way of salary loan.

Shares acquired through SSPP are subject to a lock-up period of 2 years from date of

issue, which ended on September 19, 2009.

The sale is further subject to the condition that should the officer or employee resign

from the Parent Company prior to the expiration of the lock-up period, the shares

purchased by such resigning employee or officer shall be purchased at cost by the

Parent Company as Treasury stock. As of December 31, 2009, 24 employees

resigned (9 in 2009, 13 in 2008 and 2 in 2007) and their shares totaling 808,100

(130,900 in 2009, 548,500 in 2008 and 128,700 in 2007) were bought back by the

Parent Company.

As approved by the Parent Company’s BOD, the fair value of the shares issued under

the SSPP was measured at the grant date using the price-earnings multiple model

taking into account the terms and conditions upon which the shares were granted.

The fair value at grant date was P1.33 per share. This transaction also resulted in an

increase in equity by P1.53 million, P2.16 million and P1.00 million recognized as

‘Share-based payment’ under equity in 2009, 2008 and 2007, respectively.

36

On September 19, 2009, which is the end of the lock up period, the 808,100 shares

bought back at cost was transferred to the Parent Company’s retirement fund upon

reimbursement of the P808,100 paid by the Parent Company for those shares.

The expense arising from the share-based payment plan is recognized over the two-

year lock-up period. The expense recognized under ‘Salaries, wages and employee

benefits’ in the Parent Company separate statement of comprehensive income

amounted to P1.53 million in 2009.

20. REVENUE

The Parent Company’s revenue from operations amounted to P470,199,179,

P490,087,163 and P463,248,572 in 2012, 2011 and 2010, respectively.

The Parent Company’s primary operation is to engaged in fund transfer and remittance.

21. COST OF SERVICES

The following are the components of the Parent Company’s cost of services:

2012 2011 2010

Bank charges P 171,969,103 P 160,285,284 P 147,447,466

Delivery charges 13,167,205 15,046,832 33,121,308

P 185,136,308 P 175,332,116 P 180,568,774

22. OTHER INCOME

Components of other income are as follows:

2012 2011 2010

Service fees P 7,848,011 P 6,316,114 P -

Dividends (Note 10) 4,896,570 - 596,381

Finance income (Note 6) 1,858,779 2,949,353 3,219,724

Foreign exchange gain –

net 987,177 2,722,754 116,205

Rebates - 2,881,469 687,509

Reversal of foreign

income tax - -

2,406,695

Others 1,213,653 1,504,014 1,077,589

P 16,804,190 P 16,373,704 P 8,104,103

Service fees pertain to revenue earned from services rendered by the call center agents

employed by the Parent Company to service the phone in transactions of its foreign

subsidiary offices in Canada, New Zealand, Australia and UK. Also included on this

classification is the service fee collected from the Social Security System (SSS) for

remittance accepted and transacted by the Parent Company on its behalf amounting to

P499,973.

Foreign exchange gain – net represents currency exchange income (net of losses)

arising from revaluation of foreign currency denominated assets and liabilities.

Rebates pertain to the refund of bank service charges.

37

23. OPERATING EXPENSES

During 2012, 2011 and 2010, operating expenses are as follows:

2012 2011 2010

Salaries, wages and

employee benefits

(Note 24) P 87,034,589 P 83,310,975 P 83,926,886

Marketing 26,422,467 28,248,090 32,398,920

Communication, light and

water 17,544,663 13,782,359 10,971,965

Rental (Note 25) 14,464,084 14,230,999 11,744,048

Professional fees 10,893,897 8,488,153 9,566,460

Loss on write-off of asset 10,040,886 2,058,616 -

Taxes and licenses 6,994,878 6,726,300 6,085,301

Transportation and travel 6,569,769 21,159,472 21,814,488

Business development 5,100,724 2,974,650 2,679,500

Depreciation (Note 11) 5,057,609 4,991,976 6,550,801

Supplies 4,576,498 8,941,140 5,848,125

Post-employment benefits

(Note 24) 4,294,704 5,748,578 2,376,127

Association dues 3,223,761 3,230,078 1,927,949

Donations and contributions 2,621,445 - 1,155,280

Entertainment, amusement

and recreation 1,728,062 4,459,545

2,843,451

Amortization (Note 12) 936,613 1,543,083 1,507,900

Repairs and maintenance 799,106 691,037 799,563

Insurance 506,867 814,865 613,229

Miscellaneous 815,058 2,136,107 1,784,742

P 209,625,680 P 213,536,023 P 204,594,735

Loss on write-off of asset pertains to disallowed input vat, deposits with Banco Filipino

and expenditures intended for certain investment.

24. EMPLOYEE BENEFITS

Aggregate employee benefits expense comprised:

2012 2011

Short-term benefits P 87,034,589 P 83,310,975

Post-employment benefits 4,294,704 5,748,578

P 91,329,293 P 89,059,553

24.01 Short-term Employee Benefits

Short-term benefits include salaries and wages, de-minimis fringe benefit, sick and

vacation leave pay, training and development and 13th month pay.

38

24.02 Post-employment Benefits

The Parent Company accrues benefit pursuant to the provision of the Retirement Pay

Law under non-contributory and of the defined benefit type which provides a

retirement benefit equal to one hundred percent (100%) of Plan Salary for every year

of Credited Service.

The most recent actuarial valuations of Plan assets and the present value of the

defined benefit obligation were carried out at December 31, 2012 by E.M. Zalamea.

The present value of the defined benefit obligation, and the related current service cost

and past service cost, were measured using the Projected Unit Credit Method.

The principal assumptions used for the purposes of the actuarial valuations were as

follows:

2012 2011

Discount rate 5.86% 9.69%

Future salary expenses 8.00% 8.00%

Expected return on plan assets 7.50% 6.00%

Average remaining working life (in years) 33.10 32.10


follows:

2012 2011

Current service cost P 4,149,490 P 4,618,548

Interest on obligation 1,509,154 2,117,009

Expected return on plan assets (1,493,733) (1,118,673)

Actuarial loss recognized - 131,694

Change in the effect of the asset ceiling – loss 129,793 -

P 4,294,704 P 5,748,578

The amount included in the separate statement of financial position arising from the

Parent Company’s obligation in respect of its defined benefit plans is as follows:

2012 2011

Present value of defined benefit obligation P 27,959,017 P 22,524,680

Fair value of plan assets 30,303,714 21,816,324

Deficit (surplus) (2,344,697) 708,356

Unrecognized actuarial losses (17,231) (1,076,750)

Effect of the asset ceiling 129,793 -

Retirement Asset P (2,232,135) P (368,394)

39

Movements in the present value of the defined benefit obligation in the current period

were as follows:

2012 2011


Current service cost 4,149,490 4,618,548

Interest cost 1,509,154 2,117,009

Actuarial gain (224,307) (6,058,237)


Movements in the fair value of the plan assets in the current period were as follows:

2012 2011


Contributions 6,158,445 6,895,233

Actual return on plan assets 1,493,733 1,118,673

Actuarial gain (loss) 835,212 (1,394,512)


The major categories of plan assets, and the expected rate of return at the end of the

reporting period for each category, are as follows:

2012 2011

Government debt securities P 11,818,150 P 4,763,467

Private equity securities 11,755,471 9,245,139

Deposits in banks 6,402,242 7,613,374

Interest receivable 354,778 215,615

Trust fee payable (26,927) (21,271)


The overall expected rate of return is a weighted average of the expected returns of

the various categories of plan assets held.

The actual return on plan assets amounted to a gain of P2,328,945 and loss of

P275,839 in 2012 and 2011, respectively.

40


2012 2011 2010 2009 2008

Present value of

defined benefit

obligation P 27,959,017 P 22,524,680 P 21,847,360 P 10,080,516 P 6,574,511

Fair value of plan

assets 30,303,714 21,816,324 15,196,930 12,421,022 3,168,050

Deficit (Surplus) (2,344,697) 708,356 6,650,430 (2,340,506) 3,406,461

Changes in actuarial

assumptions 2,361,420 (498,493) 9,932,542 1,070,082 (3,766,312)

Experience

adjustments on

plan liabilities (2,585,727) (5,559,744) (894,376) (382,676) (206,448)

Experience

adjustments on

plan assets P 835,212 P (1,394,512) P (2,643,029) P 4,452,972 P -

The Parent Company expects to make a contribution of P4,294,704 to its retirement

fund in the next financial year.

25. OPERATING LEASE AGREEMENTS

25.01 The Parent Company as a Lessee

Operating leases relate to leases of space for use of office space with lease terms

between Wynsum Realty and Oakridge Properties. Operating lease payments represent

rentals payable by the Parent Company for office space.

On August 31, 2012, the Parent Company entered into another lease agreement with

Oakridge Properties for the use of office spaces on Units 2704 and 2705 for an initial

term of three (3) years from October 15, 2012 to October 14, 2015 with provision for

10% escalation on the second and third year of the term of contract.

The rent expense of the Parent Company amounted to P14,464,084, P14,230,999

and P11,744,048 as of 2012, 2011 and 2010, respectively, as disclosed in Note 23.

As of 2012 and 2011, the Parent Company has a refundable deposits amounting to

P5,353,040 and P4,568,661, respectively, as disclosed in Note 13.

At each reporting date, the Parent Company had outstanding commitments for future

minimum lease payments under non-cancelable operating leases, which fall due as

follows:

2012 2011

Not later than one year P 11,464,590 P 10,458,903

Later than one year but not later than five years 7,998,175 7,101,949

P 19,462,765 P 17,560,852

41

26. INCOME TAXES

26.01 Income Tax Recognized in Profit or Loss

Components of income tax expense are as follows:

2012 2011 2010

Current tax expense P 15,828,235 P 23,174,172 P 15,785,947

Deferred tax expense (benefit) (654,090) - -

Final tax 371,756 589,871 643,945

P 15,545,901 P 23,764,043 P 16,429,892

A numerical reconciliation between tax expense and the product of accounting profit

multiplied by the tax rate in 2012, 2011 and 2010 follows:

2012 2011 2010

Accounting profit P 46,172,958 P 79,270,188 P 56,975,323

Tax expense at 30% 13,851,888 23,781,056 17,092,597

Tax effects of:

Non-deductible finance cost 184,019 291,986 318,753

Non-deductible VAT Input 2,003,357 - -

Non-deductible expenses 533,442 - -

Non-recognition of DTA - (14,064) (659,486)

Recognition of previous

unrecognized DTA (840,927) - -

Others (185,878) (294,935) (321,972)

P 15,545,901 P 23,764,043 P 16,429,892

27. DEFERRED TAXES

27.01 Deferred Tax Assets

The components of the Parent Company’s deferred tax assets and their respective

movements are as follows:

Accrued

courier

charges

Accrued

Interest

Accrued –

others

Total

Balance, January 1, 2012 P - P - P - P -

Recognized in profit or loss 433,360 571,862 799,538 1,804,760

Balance, December 31,

2012 P 433,360 P 571,862 P 799,538 P 1,804,760

42

In 2011 and 2010, the Parent Company did not recognized deferred tax assets on the

following temporary differences:

2011 2010

Accrued interest P 1,994,506 P 2,074,213

Accrued courier charges - 393,793

Others 808,582 381,961


27.02 Deferred Tax Liabilities

Retirement Asset

Unrealized

foreign

exchange gain

Total

Balance, January 1, 2012 P - P - P -

Recognized in profit or loss 854,517 296,153 1,150,670

Balance, December 31, 2012 P 854,517 P 296,153 P 1,150,670

28. EARNINGS PER SHARE

The Parent Company’s basic earnings per share is 0.05, 0.09 and 0.07 as of

December 31, 2012, 2011 and 2010, respectively.

The earnings and weighted average number of ordinary shares used in the calculation

of basic earnings per share are as follows:

2012 2011 2010

Earnings used in the calculation

of total basic earnings per

share P 30,627,057 P 55,506,145 P 40,545,431

Weighted average number of

ordinary shares for the

purposes of basic

earnings per share 600,742,383 607,014,606 608,396,800

The Parent Company did not have any potential dilutive instruments as of

December 31, 2012, 2011 and 2010.

43

29. FAIR VALUE MEASUREMENTS

29.01 Fair Value of Financial Assets and Liabilities

The carrying amounts and estimated fair values of the Parent Company’s financial

assets and financial liabilities as of December 31, 2012 and 2011 are presented below:

2012 2011

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial Assets:

Trade and other

receivables P 1,437,175,689 P 1,437,175,689 P 1,140,046,934 P 1,140,046,934

Refundable deposits 5,353,040 5,353,040 4,568,661 4,568,661

P 1,442,528,729 P 1,442,528,729 P 1,144,615,595 P 1,144,615,595

Financial Liabilities:


payables P 547,602,343 P 547,602,343 P 281,166,961 P 281,166,961

Loans payable 925,000,000 925,000,000 666,000,000 666,000,000

P 1,472,602,343 P 1,472,602,343 P 947,166,961 P 947,166,961

Due to short-term nature or demand feature of trade and other receivables, refundable

deposits, beneficiaries and other payables (except payable to government agencies and

accrued expenses) and loans payable, Management estimates that their carrying

amounts approximate their fair values.

30. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Parent Company’s Corporate Treasury function provides services to the business,

co-ordinates access to domestic and international financial markets, monitors and

manages the financial risks relating to the operations of the Parent Company through

internal risk reports which analyze exposures by degree and magnitude of risks. These

risks include market risk, including currency risk and fair value interest rate risk, credit

risk and liquidity risk.

The Parent Company seeks to minimize the effects of these risks through appropriate

and dedicated investment planning aimed to reduce risk exposure. These parameters

include monitoring cash flows and investigation of counterparty’s credit quality.

Compliance with policies and exposure limits is reviewed by the Treasury on a

continuous basis.

The Treasury reports quarterly and monitors risks and policies implemented to mitigate

risk exposures.

44

30.01 Market Risk Management

30.01.01 Foreign Currency Risk Management

The Parent Company undertakes transactions denominated in foreign currencies;

consequently exposures to exchange rate fluctuations arise. It is the Parent

Company’s policy that all daily foreign currencies, which arise as a result of its

remittance transactions, must be traded daily with bank partners only at prevailing

foreign exchange rates in the market. The daily closing foreign exchange rates shall be

the guiding rate in providing wholesale rates and retail rates to foreign offices and

agents, respectively. The trading proceeds will be used to pay out bank loans and

other obligations of the Parent Company.

The carrying amounts of the Parent Company’s foreign currency denominated

monetary assets at the end of the reporting period are as follows:

2012

FCDU PESO

Cash Receivable Total

CAD 2,192,803 5,070,966 7,263,769 229,638,797

EUR 285,567 1,908,884 2,194,451 119,250,810

SGD 166,911 3,127,603 3,294,514 110,653,207

USD 1,531,460 878,521 2,409,981 98,929,737

GBP 14,862 1,447,131 1,461,993 96,629,841

AUD 658,878 836,352 1,495,230 63,582,679

NTD - 44,131,195 44,131,195 62,318,543

JPY 400,031 43,489,087 43,889,118 20,899,120

NZD 271,178 234,624 505,802 16,965,597

HKD 251 2,593,639 2,593,890 13,735,815

IDR 42,923,183 - 42,923,183 176,200

QAR 275 - 275 3,100

48,445,399 103,718,002 152,163,401 832,783,446

2011

FCDU PESO

Cash Receivable Total

CAD - 3,899,810 3,899,810 166,949,916

EUR 600,992 702,086 1,303,078 73,922,243

SGD 440,811 1,628,629 2,069,440 69,903,060

USD 1,263,619 246,093 1,509,712 66,185,751

AUD 45,588 1,215,971 1,261,559 55,804,483

GBP 14,873 796,606 811,479 54,974,473

NTD - 20,248,641 20,248,641 29,205,344

NZD 4,809 309,338 314,147 10,589,449

HKD 23,219 1,496,086 1,519,305 8,565,572

JPY - - - -

IDR - - - -

QAR 275 - 275 3,311

2,394,186 30,543,260 32,937,446 536,103,602

The Parent Company is mainly exposed to the changes in CAD and US Dollar.

45

The following table details the Parent Company’s sensitivity to a 5% increase and

decrease in the Philippine Peso against the relevant foreign currencies. The sensitivity

rate of 5% is used when reporting foreign currency risk internally to key management

personnel and represents management’s assessment of the reasonably possible change

in foreign exchange rates. The sensitivity analysis includes only outstanding foreign

currency denominated monetary items and adjusts their translation at the period end

for a 5% change in foreign currency rates. A positive number below indicates an

increase in profit and other equity where the Philippine Peso strengthens 5% against

the relevant currency.

2012 2011

CAD P 12,415,357 P -

EUR 6,447,262 -

SGD 5,982,435 -

USD 5,348,609 -

GBP 5,224,265 -

AUD 3,437,580 -

NTD 3,369,235 -

JPY 1,129,905 -

NZD 917,240 -

HKD 742,623 -

IDR 9,526 -

QAR 168 -

P 45,024,205 P -

The Parent Company's sensitivity to foreign currency has increased during the current

year mainly due to increase in foreign currency denominated assets.

In Management’s opinion, the sensitivity analysis is unrepresentative of the inherent

foreign exchange risk as the year end exposure does not reflect the exposure during

the year. The Parent Company’s sensitivity analysis increases to 5% from 0%, as

compared to prior year. The Parent Company mitigates its exposure to foreign currency

risk by monitoring its US Dollar cash flows.

30.01.02 Interest Rate Risk Management

The Parent Company’s exposure to interest rate risk arises from its cash deposits in

banks which are subject to variable interest rates.

The interest rate risk arising from deposits with banks is managed by means of

effective investment planning and analysis and maximizing investment opportunities in

various local banks and financial institutions.

Profit for the year ended December 31, 2012 and 2011 would have been unaffected

since the Parent Company has no borrowings at variable rates and interest rate risk

exposure for its cash in bank, which is subject to variable rate, is very immaterial.

The Parent Company’s sensitivity to interest rates has not changed significantly from

the prior year. In Management’s opinion, the sensitivity analysis is unrepresentative of

the inherent interest rate risk as the year-end exposure does not reflect the exposure

during the year.

46

30.02 Credit Risk Management

Credit risk refers to the risk that counterparty will default on its contractual obligations

resulting in financial loss to the Parent Company. The Parent Company has adopted a

policy of only dealing with creditworthy counterparties and obtaining sufficient

collateral, where appropriate, as a means of mitigating the risk of financial loss from

defaults. The Parent Company only transacts with entities that are rated the

equivalent of investment grade and above. This information is supplied by independent

rating agencies where available and, if not available, the Parent Company uses other

publicly available financial information and its own trading records to rate its major

customers. The Parent Company’s exposure and the credit ratings of its counterparties

are continuously monitored and the aggregate value of transactions concluded is

spread amongst approved counterparties. Credit exposure is controlled by counterparty

limits that are reviewed and approved by the risk management committee annually.

Trade receivables consist of a large number of customers, spread across diverse

industries and geographical areas. Ongoing credit evaluation is performed on the

financial condition of accounts receivable and, where appropriate, credit guarantee

insurance cover is purchased.

The credit risk on liquid funds is limited because the counterparties are banks with high

credit-ratings.

The carrying amount of financial assets recognized in the financial statements, which is

net of impairment losses, represents the Parent Company’s maximum exposure to

credit risk, without taking into account collateral or other credit enhancements held.

2012 2011

Cash in banks and cash equivalents P 767,470,629 P 642,750,978

Trade and other receivables 1,437,175,689 1,140,046,934

Refundable deposit 5,353,040 4,568,661

P 2,209,999,358 P 1,787,366,573

The Parent Company does not hold any collateral or other credit enhancements to

cover this credit risk.

The table below shows the credit quality by class of financial assets of the Parent

Company:

2012


High Grade

Medium

Grade

Low

Grade Total

Cash in banks and

cash equivalents P 767,470,629 P - P - P 767,470,629

Trade and other

receivables 1,437,175,689 - - 1,437,175,689

Refundable deposit 5,353,040 - - 5,353,040

P 2,209,999,358 P - P - P 2,209,999,358

47

2011


High Grade

Medium

Grade

Low

Grade Total

Cash in banks and cash

equivalents P 642,750,978 P - P - P 642,750,978

Trade and other

receivables 1,140,046,934 - - 1,140,046,934


P 1,787,366,573 P - P - P 1,787,366,573

The credit quality of the financial assets was determined as follows:

Loans and receivables

High grade – These are receivables from counterparties with no default in payment.

Medium – These are receivables from counterparties with up to three defaults in

payment.

Low – These are receivables from counterparties with more than three defaults in

payment.

30.03 Liquidity Risk Management

Ultimate responsibility for liquidity risk management rests with the board of directors,

which has established an appropriate liquidity risk management framework for the

management of the Parent Company’s short, medium and long-term funding and

liquidity management requirements. The Parent Company manages liquidity risk by

maintaining adequate reserves, banking facilities and reserve borrowing facilities, by

continuously monitoring forecast and actual cash flows, and by matching the maturity

profiles of financial assets and liabilities.

48

The following tables detail the Parent Company’s remaining contractual maturity for its

non-derivative financial liabilities with agreed repayment periods. The tables have been

drawn up based on the undiscounted cash flows of financial liabilities based on the

earliest date on which the Parent Company can be required to pay. The tables include

both interest and principal cash flows. The contractual maturity is based on the

earliest date on which the Parent Company may be required to pay.

Weighted

Average

Effective

Interest

Rate Within 1 year

1 – 5

years Total

December 31, 2012


payables

P 547,602,343 P - P 547,602,343

Loans payable 5- 7.125% 925,000,000 - 925,000,000

P 1,472,602,343 P - P 1,472,602,343

December 31, 2011


payables

P 281,166,961 P - P 281,166,961

Loans payable 5- 7.125% 666,000,000 - 666,000,000

P 947,166,961 P - P 947,166,961

The following table details the Parent Company’s expected maturity for its non-

derivative financial assets. The table has been drawn up based on the undiscounted

contractual maturities of the financial assets including interest that will be earned on

those assets. The inclusion of information on non-derivative financial assets is

necessary in order to understand the Parent Company’s liquidity risk management as

the liquidity is managed on a net asset and liability basis.

Weighted

Average

Effective


1 – 5

Years Total

December 31, 2012

Cash and cash equivalents

Floating

interest rates P 789,926,225 P - P 789,926,225

Trade and other receivables - 1,437,175,689 - 1,437,175,689

Refundable deposit 5,353,040 - 5,353,040

- P 2,232,454,954 P - P 2,232,454,954

December 31, 2011

Cash and cash equivalents

Floating

interest rates P 667,523,499 P - P 667,523,499

Trade and other receivables - 1,140,046,934 - 1,140,046,934

Refundable deposit 4,568,661 4,568,661

- P 1,812,139,094 P - P 1,812,139,094

The amounts included above for variable interest rate instruments for both

non-derivative financial asset is subject to change if changes in variable interest rates

differ to those estimates of interest rates determined at the end of the reporting period.

49

The Parent Company’s financing facilities are as follows:

2012 2011

Secured bank loan facilities with various

maturity dates through to 2012 and

which may be extended by mutual

agreement:

amount used P 925,000,000 P 666,000,000

amount unused 1,880,000,000 1,480,000,000

P 2,805,000,000 P 2,146,000,000

31. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Parent Company manages its capital to ensure that the Parent Company will be

able to continue as going concerns while maximizing the return to stakeholders through

the optimization of the debt and equity balance. The Parent Company’s overall

strategy remains unchanged from 2011 and 2010.

The capital structure of the Parent Company consists of net debt offset by cash and

bank balances and equity of the Parent Company.

Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations

are prohibited from retaining surplus plus profits in excess of 100% of their paid-up

capital stock, except: 1) when justified by definite corporate expansion projects or

programs approved by the board of directors; or 2) when the corporation is prohibited

under any loan agreement with any financial institution or creditor, whether local or

foreign, from declaring dividends without its/his consent, and such consent has not yet

been secured; or 3) when it can be clearly shown that such retention is necessary

under special circumstances obtaining in the corporation, such as when there is a need

for special reserve for probable contingencies. The Parent Company is in compliance

with the above requirements.

The BOD has overall responsibility for monitoring capital in proportion to risk. Profiles

for capital ratios are set in the light of changes in the Parent Company’s external

environment and the risks underlying the Parent Company’s business, operation and

industry. The Parent Company has a target gearing ratio of 1:1 determined as the

proportion of net debt to equity.

The gearing ratio at the end of each reporting period was as follows:

2012 2011

Debt P 1,483,757,357 P 959,262,603

Cash 789,926,225 667,523,499

Net Debt 693,831,132 291,739,104

Equity 1,095,742,712 1,202,075,430

Net debt to equity ratio 0.63:1 0.24:1

Debt is defined as long and short-term borrowings, as described in Notes 14 and 15,

while equity includes all capital and retained earnings of the Parent Company that are

managed as capital.

50

32. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS

Certain amounts in the comparative financial statements and note disclosures have

been reclassified to conform to the current year’s presentation. The reclassifications

include:

Account Amount

From To 2011 2010

Separate Statement of Financial Position

Investments in

subsidiaries and

associates

Investments in

subsidiaries P 279,160,103 P 228,975,278

Investments in

subsidiaries and

associates

Investments in

associates

16,173,974

16,173,974

Retained earnings

Appropriations of

retained earnings

52,987,208

40,115,150

Separate Statement of Comprehensive

Income

Interest income Other income P 2,949,353 P -

Interest income Other income - 3,219,724

Interest expense Finance cost 38,322,540 29,213,843

Management believes that the above reclassifications resulted to a better presentation

of accounts and did not have any impact on prior year’s profit or loss.

33. CORRECTION OF PRIOR PERIOD ERROR

In 2012, the Parent Company determined that no appropriation was made for the buy-

back of shares in 2011 and 2010 amounting to P52,987,208 and P40,115,150,

despite of the legal requirement of the Corporation Code to have sufficient retained

earnings to cover-up the cost of the re-acquired shares. Thus, the Management

appropriated retained earnings with respect to its period specific effects. Management

believes that such restatement is appropriate and resulted to a better presentation of

accounts.

34. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved and authorized for issue by the Board of

Directors on May 14, 2013.

51

35. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO. 15–2010

The Bureau of Internal Revenue (BIR) has released a new revenue regulation dated

November 25, 2010 amending Revenue Regulations No. 21-2002 setting forth

additional disclosures on Notes to Financial Statements. Below are the disclosures

required by the said Regulation:

35.01 Taxes, Duties and Licenses Paid or Accrued

The details of the Parent Company’s taxes, duties and licenses fees paid or accrued in

2012 are as follows:

35.01.01 Output VAT

The Parent Company is a VAT-registered Parent Company with VAT output declaration

of P77,871 for the year based on the amount reflected in the revenue.

Zero-rated sales of goods and services consist of export sales and those rendered to

persons or entities whose exemptions are provided under special laws or international

agreements to which the Philippines is a signatory.

The Parent Company, being engaged in the business of fund transfer and remittance

services of any form or kind of currencies or monies, is registered as a zero-rated VAT

taxpayer under Section 108 (B)(2) of NIRC. Revenue from rendering of services such

as delivery fees, realized foreign exchange gains and other fees are zero-rated.

35.01.02 Input VAT

An analysis of the Parent Company’s input VAT claimed during the year is as follows:

Balance, January 1 P 21,242,725

Current year’s domestic purchases/payments for:

Capital goods subject to amortization 4,082

Capital goods not subject to amortization 3,413

Services lodged under other accounts 333,405

Total available input tax 21,583,625

Claims for tax credit/refund and other adjustments (10,119,299)

Balance, December 31 P 11,464,326

35.01.03 Other Taxes and Licenses

An analysis on the Parent Company’s other taxes and licenses and permit fees paid or

accrued during the year is as follows:

Documentary stamp taxes P 4,048,788

Licenses and permits 2,500,199

Others 445,911

P 6,994,898

Documentary stamp taxes are paid for application for loans and other transactions.

52

35.01.04 Withholding Taxes

An analysis on the Parent Company’s withholding taxes paid or accrued during the

year is as follows:

Withholding tax on compensation and benefits P 10,038,970

Expanded withholding taxes 7,622,786

P 17,661,756

Expanded withholding tax pertains to rentals, professional fees and contractors.

36. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO. 19–2011

Pursuant to Section 244 in relation to Section 6(H) of the National Internal Revenue

Code of 1997 (Tax Code), as amended, these Regulations are prescribed to revise BIR

Form 1702 setting forth the following schedules. Below are the disclosures required

by the said Regulation:

36.01 Revenues

The Parent Company’s revenue for the taxable year 2012, which pertains to rendering

of services, amounted to P470,199,179.

36.02 Cost of Services

The following is an analysis of the Parent Company’s cost of services for the taxable

year:

Bank charges P 171,969,103

Delivery charges 12,409,356

P 184,378,459

36.03 Non-Operating and Taxable Other Income

The Parent Company’s non-operating and taxable other income for the taxable year

2012 amounted to P15,777,134.

53

36.04 Itemized Deductions

The following is an analysis of the Parent Company‘s itemized deductions for the

taxable year:

Salaries, wages and employee benefits P 87,034,589

Finance cost 46,156,723

Marketing 26,833,138

Communication, light and water 17,138,220

Rental 14,464,084

Professional fees 10,500,714

Taxes and licenses 6,994,878

Fringe benefits 6,915,323

Transportation and travel 6,569,769

Depreciation and amortization 5,994,222

Supplies 4,576,498

Association dues 3,223,761

Entertainment, amusement and recreation 1,728,062

Repairs and maintenance 799,106

Insurance 506,865

Other expenses 9,401,117

P 248,837,069



A correspondent firm of Pane II Kerr Forster International

worldwide

SUPPLEMENTAl- INDEPENDENT AUDITORS' REPORT

The Board of Directors and StockholdersI-REMIT INC.26/F Discovery Centre, ADB AvenueOrtigas Centre, Pasig City

We have examined the financial statements of I-REMIT INC. for the year endedDecember 31, 2012 on which we have rendered the attached report dated May 15, 2013.

In compliance with Revenue Regulation V-20, we are stating that no partner of our Firm isrelated by consanguinity or affinity to the president, manager or principal stockholders of theCompany.

R.S. BERNALDO & ASSOCIATESBOA/PRC No. 0300Valid until December 31, 2015SEC Group A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSP Group B AccreditedValid until February 14, 2014CDA CEA No. 013-AFValid ntil Qctober 25, 2013

~RO ~RIO S. BERNALDOManaging PartnerCPA Certificate No. 25927SEC Group A AccreditedAccreditation No. 1192-AValid until March 1, 2015BSP Group B AccreditedValid until February 14, 2014BIR Accreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No.1 09-227-722PTR No. 3676450Issued on January 9, 2013 at Makati City

May15,2013

18/F Cityland Condominium 10 Tower 1, 6815 Ayala Avenue cor. H.V. Dela Costa St., Makati City, Philippines 1200TEL +63 2 812-1718 to 24 FAX +632 813-6539 E-MAIL [email protected] WEBSITE www.rsbernaldo.com


aONPRC No. 0300asp AccreditedSEC Accreditation No. 0153-FR-1CDA CEA No. 013-AF

A correspondent firm of Panell Kerr Forster International

worldwide

INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY SCHEDULES

The Board of Directors and StockholdersI-REMIT INC.26/F Discovery Centre, 25 ADB AvenueOrtigas Centre, Pasig CityS

We have issued our report dated May 15, 2013 on the basic separate financial statements ofI-REMIT INC. as of and for the year ended December 31, 2012. Our audit was conducted forthe purpose of forming an opinion on the basic separate financial statements of I-REMIT INC.taken as a whole. The information in Index to the Separate Financial Statements andSupplementary Schedules as of and for the year ended December 31, 2012 which is not arequired part of the basic separate financial statements is required to be filed with theSecurities and Exchange Commission. Such information has been subjected to the auditingprocedures applied in pl:lr .audit of the basic separate financial statements and, in our opinion,is fairly stated in all material respects in relation to the basic separate financial statementstaken as a whole.

R.S. BERNALDO & ASSOCIATESBOA/PRC No. 0300Valid until December 31, 2015SEC Group A AccreditedAccreditation No. 0153-FR-1Valid until September 13, 2014BSP Group B AccreditedValid until February 14, 2014CDA CEA No. 013-AFValid ntil October 25, 2013

~~RIO S. BERNALDO

Managing PartnerCPA Certificate No. 25927SEe Group A AccreditedAccreditation No. 11 92-AValid until March 1, 2015BSP Group B AccreditedValid until February 14, 2014BIR Accreditation No. 08-002793-1-2012Valid from October 23, 2012 until October 22, 2015Tax Identification No.1 09-227-722PTR No. 3676450Issued on January 9, 2013 at Makati City

May 15, 2013

18/F Cityland Condominium 10 Tower 1,6815 Ayala Avenue cor. HV. Dela Costa St., Makati City, Philippines 1200TEL +63 2 812-1718 to 24 FAX +632 813-6539 E-MAIL [email protected] WEBSITE www.rsbernaldo.com

1

I-REMIT INC.

INDEX TO THE SEPARATE FINANCIAL STATEMENTS

AND SUPPLEMENTARY SCHEDULES

December 31, 2012

Schedule Content Page No.

Part 1

I Schedule of Retained Earnings Available for Dividend

Declaration

(Part 1 4C, Annex 68-C)

2

II Schedule of all effective standards and interpretations under

PFRS

(Part 1 4J)

3

III Map showing relationships between and among parent,

subsidiaries, an associate, and joint venture (Part 1 4H) 8

Part 2

A Financial Assets 9

B Amounts Receivable from Directors, Officers, Employees,

Related Parties and Principal Stockholders (Other than Affiliates)

10

C Intangible Assets - Other Assets 12

D Long-Term Debt 13

E Indebtedness to Related Parties (included in the consolidated

statement of position)

14

F Guarantees of Securities of Other Issuers 15

G Capital Stock 16

Other Required Information

IV Schedule of Financial Soundness Indicators (Part 1 4D)

2

Schedule I

I-REMIT INC.

SCHEDULE OF RETAINED EARNINGS

AVAILABLE FOR DIVIDEND DECLARATION

DECEMBER 31, 2012

Unappropriated Retained Earnings, Beginning P 153,759,324

Net income based on the face of audited financial statements 30,627,057

Less: Dividend declarations during the year (119,980,858)

Treasury shares (16,222,480)

Unrealized foreign exchange gains - net (987,177)

Add: Realized income categorized as unrealized in previous years 1,205,505

Net loss actual/realized (105,357,953)

Unappropriated Retained Earnings, Ending P 48,401,371

3

Schedule II

I-REMIT INC.

SCHEDULE OF EFFECTIVE STANDARDS AND INTERPRETATIONS

DECEMBER 31, 2012

PHILIPPINE FINANCIAL REPORTING STANDARDS

AND INTERPRETATIONS Effective as of December 31,

2012 Adopted

Not

Adopted

Not

Applicable

Framework for the Preparation and Presentation of

Financial Statements

Conceptual Framework Phase A: Objectives and

qualitative characteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1

(Revised)

First-time Adoption of Philippine

Financial Reporting Standards Amendments to PFRS 1 and PAS 27:

Cost of an Investment in a Subsidiary,

Jointly Controlled Entity or Associate Amendments to PFRS 1: Additional

Excemptions for First-time Adopters

Amendment to PFRS 1: Limited

Exception from Comparative PFRS 7

Disclosures for first-time Adopters Amendments to PFRS 1: Severe

Hyperinflation and Removal of Fixed

Date for First-time Adopters Amendments to PFRS 1: Government

Loans

PFRS 2

Share-based Payment

Amendments to PFRS 2: Vesting

Conditions and Cancellations

Amendments to PFRS 2: Group Cash-

Settled Share-based Payment

Transactions

PFRS 3

(Revised) Business Combinations

PFRS 4

Insurance Contracts Amendments to PAS 39 and PFRS 4:

Financial Guarantee Contracts

PFRS 5 Non-current Asset Held for Sale and

Discontinued Operations

4

PFRS 6 Exploration for and Evaluation of Mineral

Resources

PFRS 7

Financial Instruments: Disclosures

Amendments to PFRS 7: Transition






Amendments to PFRS 7: Improving

Disclosures about Financial Instruments


Transfer of Financial Assets


Offsetting Financial Assets and Financial

Liabilities


Effective Date of PFRS 9 and Transition

Disclosures

PFRS 8 Operating Segments

PFRS 9

Financial Instruments


Effective Date of PFRS 9 and Transition

Disclosures

PFRS 10 Consolidated Financial Statements

PFRS 11 Joint Arrangements

PFRS 12 Disclosure of Interest in Other Entities

PFRS 13 Fair Value Measurements

Philippine Accounting Standards

PAS 1

(Revised)

Presentation of Financial Statements

Amendments to PAS 1: Capital

Disclosures




Amendments to PAS 1: Presentation of

items Other than Comprehensive Income

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in

Estimates and Errors

PAS 10 Events After the Balance Sheet Date

PAS 11 Construction Contracts

5

PAS 12

Income Taxes

Amendments to PAS 12 - Deferred Tax:

Recovery of Underlying Assets

PAS 16 Property, Plant and Equipment

PAS 17 Leases

PAS 18 Revenue

PAS 19

Employee Benefits

Amendments to PAS 19: Actuarial Gains

and Losses, Group Plans and Disclosures

PAS 19

(Amended) Employee Benefits

PAS 20 Accounting for Government Grants and

Disclosure of Government Assisstance

PAS 21

The Effect of Changes in Foreign

Exchange Rates

Amendment: Net Investment in a

Foreign Operation

PAS 23

(Revised) Borrowing Cost

PAS 24

(Revised) Related Party Disclosures

PAS 26 Accounting and Reporting by Retirement

Benefit Plans

PAS 27

(Amended) Separate Financial Statements

PAS 28

(Amended) Investments in Associates and Joint

Ventures

PAS 29 Financial Reporting in Hyperinflationary

Economy

PAS 31 Interests in Joint Ventures

PAS 32

Financial Instruments: Disclosure and

Presentation



Obligations Arising on Liquidation Amendments to PAS 32: Classification

of Right Issues

Amendment to PAS 32: Offsetting

Financial Assets and Financial Liabilities

PAS 33 Earning Per Share

PAS 34 interim Financial Reporting

PAS 36 Impairment of Assets

PAS 37 Provision, Contingent Liabilities and

Contingent Assets

PAS 38 Intangible Assets

6

PAS 39

Financial Instruments: Recognition and

Measurement

Amendments to PAS 39: Transition and

Initial Recognition of Financial Assets


Amendments to PAS 39: Cash Flow

Hedge Accounting of Forecast

Intragroup Transactions Amendments to PAS 39: The Fair Value

Option

Amendments to PAS 39: Reclassification

of Financial Assets


Reclassification of Financia Assets -




Derivatives

PAS 40 Investment Property

PAS 41 Agriculture

Philippine Interpretations

IFRIC 1

Changes in Existing Decommissioning,

Restoration and Similar Liabilities

IFRIC 1

Member's Share in Co-operative Entities

and Similar Instruments

IFRIC 4

Determining Whethter an Arrangement

Contains a Lease

IFRIC 5

Rights to Interests arising from

Decommissioning, Restoration and

Environmental Rehabilitation Funds

IFRIC 6

Liabilities arising from Participating in a

Specific Market-Waste Electrical and

Electronic Equipment

IFRIC 7

Applying the Restatement Approach

under PAS 29 Financial Reporting in

Hyperinflationary Economies IFRIC 8 Scope of PFRS 2

IFRIC 9

Reassessment of Embedded Derivatives Amendments to Philippine Interpretation


Derivatives

IFRIC 10

Interim Financial Reporting and

Impairment

IFRIC 11

PFRS 2- Group and Treasury Share

Transactions

IFRIC 12 Service Concession Arrangements

7

IFRIC 13 Customer Loyalty Programs

IFRIC 14

The Limit on a Defined Benefit Asset,

Minimum Funding Requirements and

their Interaction Amendments to Philippine

Interpretations IFRIC - 14, Prepayments

of a Minimum Funding Requirement

IFRIC 16

Hedges of a Net Investment in a Foreign

Operation

IFRIC 17

Distribution of Non-Cash Assets to

Owners

IFRIC 18 Transfer of Assets from Customers

IFRIC 19

Extinguishing Financial Liabilities with

Equity Instruments

IFRIC 20

Stripping Costs in the Production Phase

of a Surface Mine

SIC - 7 Introduction of the Euro

SIC - 10

Government Assisstance - No Specific

Relation to Operating Activities

SIC - 12

Consolidation - Special Purpose Entities Amendments to SIC - 12: Scope of SIC

12

SIC - 13

Jointly Controlled Entities - Non-

Monetary Contributions by Venturers

SIC - 15 Operating Leases - Incentives

SIC - 21

Income Taxes - Recovery of Revalued

Non-Depreciable Assets

SIC - 25

Income Taxes - Changes in the Tax

Status of an Entity or its Shareholders

SIC - 27

Evaluating the Substance of

Transactions Involving the Legal Form of

a Lease

SIC - 29

Service Concession Arrangements:

Disclosures

SIC - 31

Revenue - Barter Transaction Involving

Advertising Services

SIC - 32 Intangible Assets - Web Site Costs

8

Schedule III

I-REMIT INC.

MAP SHOWING RELATIONSHIPS BETWEEN AND AMONG PARENT,

SUBSIDIARIES, AN ASSOCIATE, AND JOINT VENTURE

STAR Equities Inc.29.1825028 %

JTKC Equities, Inc. 21.2937506%

Surewell Equities, Inc23.3530780%

JPSA Global Services Co.3.2672471%

Public22.9034215%

I-Remit, Inc.

Ownership Structure

International Remittances (Canada) Ltd.100%

Lucky Star Management Limited (Hong Kong)100%

IRemit Global Remittance Limited (UK)100%

Worldwide Exchange Pty Ltd *100%

IREMIT Remittance Consulting GmbH (Austria)100%

*Consisting of 70% direct ownership and 30% indirect ownership through I-Remit Australia Pty Ltd, a wholly-owned subsidiary.** An associate

I-Remit New Zealand Limited100%

IRemit Singapore Pte Ltd **49%

Hwa Kung Hong & Co. Ltd. (Taiwan)**49%

K.K. I-REMIT JAPAN100%

Power Star Asia Group Limited100%

9

I-Remit Inc.

Schedule A – Financial Assets

December 31, 2012

Name of issuing entity and

association of each issue

Number of shares or

principal amount of bonds

or notes

Amount shown on the

balance sheet

Income accrued

None to Report

10

I-Remit Inc.

Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and

Principal Stockholders (Other than Related Parties)

December 31, 2012

Name of Debtor

Balance at

beginning of

period

Additions

Amounts

Collected

Amounts

Written-off

Current

Non- Current

Balance at end

of period

Analiza S. Bismonte P - P 10,764.69 P - P - P 10,764.69 P - P 10,764.69

Annie Angeles 135,702.00 - 135,702.00 - - - -

Bernadette Cindy Tiu 929,384.80 500,000.00 740,000.00 - 689,384.80 - 689,384.80

Catherine Chan 13,746.49 436.24 13,746.49 - 436.24 - 436.24

Chris Eusebio - 3,801.06 - - 3,801.06 - 3,801.06

Claire Panes - 67.50 - - 67.50 - 67.50

Clarissa Celestino - 1,928.04 1,729.70 - 198.34 - 198.34

Desiderio Dumalag, Jr. - 28,524.49 - - 28,524.49 - 28,524.49

Dina Simbulan 56,123.61 - - - - 56,123.61 56,123.61

Elisa Cerdan - 34.53 - - 34.53 - 34.53

Fatima Ramos - 1,928.04 1,729.70 - 198.34 - 198.34

Gilbert Gaw - 2,580.00 - - 2,580.00 - 2,580.00

Glenn Igual - 659,816.67 70,716.65 - 589,100.02 - 589,100.02

Harris Jacildo - 1,074,073.96 148,148.16 - 925,925.80 - 925,925.80

Ian Chryzl Gonzales 2,999.40 - - - 2,999.40 - 2,999.40

Jennifer Itable - 5.00 - - 5.00 - 5.00

Jesus Mel Sayo - 100,273.54 26,501.37 - 73,772.17 - 73,772.17

Jonathan Bunag 14,143.42 - - - - 14,143.42 14,143.42

Joselyn Bagalan 2,576.64 - - - 2,576.64 - 2,576.64

Juliet Santos - 3.12 - - 3.12 - 3.12

Junell Dasun 16,086.31 - - - - 16,086.31 16,086.31

Justine Castellon 272,309.52 - - - - 272,309.52 272,309.52

Kristal Angeles - 290.62 - - 290.62 - 290.62

Ma Cristina Castellejo 460,328.00 - 99,756.00 - - 360,572.00 360,572.00

Ma. Eliza Batang - 9,512.86 9,314.53 - 198.33 - 198.33

Maria Grace Lim - 88.75 - - 88.75 - 88.75

11

Marie Fe Oporto - 3,480.44 - - 3,480.44 - 3,480.44

Marivic Chaw - 15,093.06 - - 15,093.06 - 15,093.06

Mary Jean Jetomo - 61.45 - - 61.45 - 61.45

Paul Erick Villaluz 1,518.29 - 1,518.29 - - - -

Regina Shimamoto - 657,000.00 21,900.00 - 635,100.00 - 635,100.00

Rocky Flores - - - - - - -

Ronald Santos 222,362.45 - - - - 222,362.45 222,362.45

Severino Lagan - 19,166.66 416.67 - 18,749.99 - 18,749.99

TOTAL P 2,127,280.93 P 3,189,204.26 P 1,304,964.20 P - P 3,069,923.68 P 941,597.31 P 4,011,520.99

12


Schedule C - Intangible Assets - Other Assets

December 31, 2012

Description Beginning

Balance

Additions at

Cost

Charged to cost

and expenses

Charged to other

accounts

Other changes

additions

(deductions)

Ending Balance

Software 1,396,241.38 945,187.06 (936,612.53) – – 1,404,815.91

13


Schedule D - Long-Term Debt

December 31, 2012

Title of issue and

type of obligation

Amount

authorized by

indenture


“Current portion of long-term debt’ in

related balance sheet


“Long-Term Debt” in related

balance sheet

Interest

Rate

%

Maturity

Date

None to Report

14


Schedule E - Indebtedness to Related Parties

(Included in the consolidated financial statement of position)

December 31, 2012

Name of Related Parties Balance at beginning of period Balance at end of period

None to Report

15


Schedule F - Guarantees of Securities of Other Issuers

December 31, 2012

Name of issuing entity of

securities guaranteed by

the company for which

this statement is filed

Title of issue of each

class of securities

guaranteed

Total amount of

guaranteed and

outstanding

Amount owned by person

of which statement is

filed

Nature of guarantee

None to Report

16


Schedule G - Capital Stock

December 31, 2012

Title of Issue

Number of

shares

authorized

Number of

shares issued

and

outstanding as

shown under

the related

balance sheet

caption

Number of

shares reserved

for options,

warrants,

conversion and

other rights

Number of

shares held by

related parties

Directors,

officers and

employees

Others

Common stock - P=1 par

value

1,000,000,000 617,725,800 – 460,373,585 207 136,765,215

I-REMIT INC. AND SUBSIDIARIESSCHEDULE IV - FINANCIAL SOUNDNESS INDICATORS

For the Years Ended December 31, 2012 and 2011

2012 2011

A. SHORT-TERM LIQUIDITY RATIO

CURRENT RATIO 1.52 1.91

Current Assets 2,247,014,878 1,830,963,405

Current Liabilities 1,482,606,687 959,262,603

WORKING CAPITAL TO ASSETS 0.30 0.40

(Current Assets - Current Liabilities) 764,408,191 871,700,802

Total Assets 2,580,256,506 2,161,338,033

B. LONG-TERM SOLVENCY

DEBT TO EQUITY 1.35 0.80



LONG-TERM DEBT TO EQUITY - -

Long-Term Debt - -


FIXED ASSETS TO EQUITY 0.01 0.01



CREDITORS EQUITY TO TOTAL ASSETS 0.58 0.44


Total Assets 2,580,256,506 2,161,338,033

FIXED ASSETS TO LONG-TERM DEBT


Long-Term Debt - -

11

2012 2011

C. RETURN ON INVESTMENTS

RATE OF RETURN ON TOTAL ASSETS 0.01 0.02

Net Income 30,627,057 55,506,145

Average Total Assets 2,370,797,270 2,229,728,061

RATE OF RETURN ON EQUITY 0.01 0.05

Net Income 30,627,057 55,506,145

Average Stockholders' Equity 2,370,797,269 1,180,758,387

12

2012 2011

D. PROFITABILITY RATIOS

GROSS PROFIT RATIO 0.61 0.64

Gross Income 285,062,871 314,755,047

Revenues 470,199,179 490,087,163

OPERATING INCOME TO REVENUES 0.20 0.24

Income from Operations 92,241,381 117,592,728

Revenues 470,199,179 490,087,163

PRETAX INCOME TO REVENUES 0.10 0.16

Pretax Income 46,172,958 79,270,188

Revenues 470,199,179 490,087,163

NET INCOME TO COMMISSION INCOME 0.07 0.11

Net Income 30,627,057 55,506,145

Revenues 470,199,179 490,087,163

E. INTEREST COVERAGE RATIO

INTEREST COVERAGE RATIO 2 3

Eanings Before Interest and Tax 92,241,381 117,592,728

Interest Expense 46,068,423 38,322,540

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