Peace and Equity Foundation -Financial Reports

Peace and Equity Foundation
Financial Statements as of and for the years ended December 31, 2004 and 2003

Contents:
STATEMENTS OF FINANCIAL POSITION
STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS
STATEMENTS OF CASH FLOWS
NOTES OF THE FINANCIAL STATEMENTS:

Note 1 • Note 2 • Note 3 • Note 4 • Note 5 • Note 6 • Note 7 • Note 8 • Note 9 • Note 10 • Note 11 • Note 12 • Note 13 • Note 14

a member of

Report of Independent Auditors

To the Board of Trustees
Peace Equity Access for Community Empowerment
(PEACE) Foundation, Inc.
(A non-stock, non-profit organization)

We have audited the accompanying statements of financial position of Peace Equity Access for Community Empowerment (PEACE) Foundation, Inc. as of December 31, 2004 and 2003, and the related statements of activities and changes in net assets and cash flows for the years then ended. These financial statements are the responsibility of the Foundation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in the Philippines. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Peace Equity Access for Community Empowerment (PEACE) Foundation, Inc. as of December 31, 2004 and 2003, and its activities and changes in net assets and its cash flows for the years then ended in conformity with generally accepted accounting principles in the Philippines.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information shown on Schedule I is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Makati City
March 8, 2005

STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2004 and 2003
(All amounts in Philippine Pesos)

	Notes	2004	2003
A S S E T S
CURRENT ASSETS
Cash and cash equivalents	2, 3, 13	10,029, 943	6,386,834
Receivables	2, 4, 13	116,017,767	98,885,212
Trading investments in trust funds	2, 5, 13	1,653,289,314	1,547,566,336
Prepayments and other current assets		374,262	563,274
Total current assets		1,779,711,286	1,653,401,656
NON-CURRENT ASSETS
Property and equipment	2, 6	18,155,935	16,997,560
Other assets	12	68,860	28,800
Total non-current assets		18,224,795	17,026,360
TOTAL ASSETS		1,797,936,081	1,670,428, 016
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable, accrued expenses and other liabilities	2, 7, 13	43,069, 633	28,000, 045
Grants payable	2, 8	18,132,354	15,564,287
Total current liabilities		61,201, 987	43,564, 332
NET ASSETS
Unrestricted	1	252,075,262	217,204,852
Restricted	1	1,484,658,832	1,409,658,832
Total net assets		1,736,734, 094	1,626,863,684
TOTAL LIABILITIES AND NET ASSETS		1,797,936, 081	1,670,428, 016

STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2004 and 2003
(All amounts in Philippine Pesos)

	Notes	2004			2003
	Notes	Unrestricted	Restricted	Total	2003
REVENUES, GAINS AND OTHER SUPPORTS	2
Donation for endowment fund		-	-	-	1,481,512,11 4
Investment income, net		148,046, 673	-	148,046, 673	14 4,058,296
Unrealized foreign exchange gain, net	13	12,305,364	-	12,305,364	33, 753,872
Unrealized gain in market value of investments under trust accounts, net		35,150,354	-	35,150,354	32,231,978
Others, net		9,082,915	-	9,082,915	4,258,403
Total revenues, gains and other supports		204,585, 306	-	204,585, 306	1,695,814,663
EXPENSES	2
Grants		58,726,965	-	58,726,965	44,858,066
Project expenses	9, 11	23,833,838	-	23,833,838	15,506,900
Provision for losses on advances to project proponents	4	2,518,689	-	2,518,689	2,297,007
Depreciation	6	2,106,638	-	2,106,638	929,703
General and administrative	10, 11	7,528,766	-	7,528,766	5,459,303
Total expenses		94,714,8 96	-	94,714,8 96	69,050,979
CHANGE IN NET ASSETS DURING THE YEAR		109,870, 410	-	109,870, 410	1,626,763,684
NET ASSETS
Beginning of year		100,000	-	100,000	100,000
Transfers:
Change in net assets in 2003		145,251,570	1,481,512,114	1,626,763,684	-
Change in net assets in 2002	1	144,398,482	(144,398,482)	-	-
Change in net assets in 2001	1	18,741,938	(18,741,938)	-	-
Provision for cost of inflation in 2004		(75,000,000)	75,000,000	-	-
Provision for cost of inflation in 2003	1	(41,000,000)	41,000,000	-	-
Provision for cost of inflation in 2001 and 2002	1	(50,287,138)	50,287,138	-	-
End of year		252,075,262	1,484,658,832	1,736,734, 094	1,626,863,684

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 and 2003
(All amounts in Philippine Pesos)

	Notes	2004	2003
CASH FLOWS FROM OPERATING ACTIVITIES
Change in net assets during the year		109,870,410	1,626,763,684
Adjustments for:
Depreciation	6	2,106,638	929,703
Unrealized foreign exchange gain, net	13	(12,305,364)	(33,753,872)
Provision for losses on advances to project proponents	4	2,518,689	2,297,007
Loss on disposal of property and equipment		143,512	-
Amortization of bonds premiums		284,263	855,61 4
Unrealized gain in market value of investment under trust accounts, net		(35,150,354)	(32,231,978)
Investment and interest income		(157,003,693)	(148,308,840)
(Deficiency) excess of net assets before changes in operating assets and liabilities		(89,535,899)	1,416,551,31 8
Increase (decrease) in:
Receivables		(470,147)	(407,296)
Trading investments in trust funds		(58,551,523)	(46,904,446)
Prepayments and other current assets		189,012	(339,584)
Increase in:
Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities		15,069,588	26,699,046
Grants payable		2,568,067	7,655,309
Cash (absorbed by) generated from operations		(130,730,902)	1,403,254,347
Investment and interest income received		163,072,232	147,479,660
Net cash provided by operating activities		32,341,330	1,550,734, 007
CASH FLOWS USED IN INVESTING ACTIVITIES
Proceeds from sale of property and equipment		540,000	-
Acquisitions of property and equipment	6	(3,948,525)	(5,694,997)
Advances made to project proponents		(25,249,636)	(78,090,636)
Increase in other assets		(40,060)	(28,800)
Net cash used in investing activities		(28,698,221)	(83,814,433)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in donation for endowment fund		-	(1,481,512,114)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE YEAR		3,643, 109	(14,592,540)
CASH AND CASH EQUIVALENTS January 1		6,386,834	20,979,374
December 31	3	10,029, 943	6,386,834

NOTES OF THE FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2004 and 2003
(All amounts in Philippine Pesos unless otherwise stated)

Note 1 - General information

Peace Equity Access for Community Empowerment (PEACE) Foundation, Inc. (the “Foundation”) was formed by the Caucus of Development NGO Networks (CODE-NGO) and incorporated on November 27, 2001 for the purpose of providing financial, managerial, technical and policy assistance to non-governmental organizations, people’s organizations, community associations, social entrepreneurs, educational and research institutions, cooperatives and other similar groups or corporations in their effort to reduce or totally eliminate poverty, by increasing the entitlements of the poor in a sustained manner, through the distribution of resources and provision of public goods and by raising the level and quality of social services, thereby empowering them to improve their socio-economic condition and to participate in community and civic affairs. It is governed by a Board of Trustees whose members do not receive any compensation.

On February 14, 2003, CODE-NGO executed a deed of donation in favor of the Foundation, to transfer and convey, an endowment fund in trust of P1.318 billion, the principal amount, plus interest less expenses incurred by the Foundation from October 18, 2001 up to December 31, 2002. The amount advanced from the fund relative to the acquisition of a property (lot with office building currently being used as office site) was also included in the donation granted to the Foundation. The fund represents a portion of the net proceeds earned by CODE-NGO from the sale of Poverty Eradication and Alleviation Certificates (PEACe bonds) in the capital market. As agreed by the Foundation and CODE-NGO, only the earnings of the principal fund shall be utilized for poverty alleviation and development projects, general administrative expenses or acquisition of assets necessary for the furtherance of the Foundation’s objectives.

Currently, the Foundation reports the income earned and expenses incurred pertaining to the fund under unrestricted activities. Accordingly, the excess of earnings over expenses from 2001 to 2002 were transferred to unrestricted net assets in accordance with the agreement with CODE-NGO. The Foundation also allocates a certain percentage from the earnings of the fund to cover for the cost of inflation.

As a non-stock, non-profit private foundation, organized and operated exclusively for providing financial, managerial, technical assistance to proponents of poverty alleviation and development projects, it is exempt from income tax pursuant to Section 30 of the Tax Reform Act of 1997 (R.A. 8424). However, income derived from its properties, real or personal, or from any of its activities conducted for profit regardless of the disposition made of such income, is subject to tax.

On December 23, 2004, the Bureau of Internal Revenue (BIR) issued to the Foundation a one-year certification of registration in accordance with Revenue Regulations No. 13-98. This certification allows the Foundation certain incentives such as: (a) full or limited deduction by the donors of their donations, grants and contributions pursuant to Section 34(H) of the Tax Code; and (b) exemption from donor’s tax pursuant to Section 101 of the R.A. 8424. The certification issued by the BIR is subject to the representations and commitments set forth in the accreditation issued to the Foundation by the Philippine Council for NGO Certification (PCNC) on October 27, 2004.

The Foundation’s registered office is at No. 69 Esteban Abada Street, Loyola Heights, Quezon City. It has 19 regular employees as of December 31, 2004 (2003 - 18).

Note 2 - Significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements are summarized below:

a) Basis of preparation

The financial statements of the Foundation are prepared in accordance with the generally accepted accounting principles in the Philippines under the historical cost convention.

The preparation of financial statements in accordance with generally accepted accounting principles in the Philippines requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from these estimates.

New accounting standards effective in 2004

The Foundation adopted the following applicable Statements of Financial Accounting Standards/International Accounting Standards (SFAS/IAS) effective January 1, 2004. These new standards have been approved by the Accounting Standards Council (ASC) of the Philippines.

SFAS 12/IAS 12, Income Taxes, which prescribes the accounting treatment of income taxes and requires the recognition of deferred income tax liability for taxable temporary differences and deferred income tax asset for deductible temporary differences if it is probable that a tax benefit will be realized.
SFAS 17/IAS 17, Leases, which prescribes the accounting policies and disclosures to apply to finance and operating leases.

The effect of adopting the above Standards on the financial statements will not be material.

New accounting standards effective in 2005

The ASC approved the issuance of new and revised accounting standards which are based on revised IAS and new International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). These new Standards have been renamed Philippine Accounting Standards (PASs) to correspond to adopted IASs while the Philippine Financial Reporting Standards (PFRSs) correspond to adopted IFRSs. Other SFAS and SFAS/IAS not included will be renamed PASs once the consequential amendments due to improvements project of the IASB/ASC are made. The new Standards are effective for annual periods beginning on or after January 1, 2005.

The Foundation will adopt the following applicable revised and new accounting standards effective January 1, 2005:

Philippine Accounting Standards

PAS 1, Presentation of Financial Statements
PAS 8, Accounting Policies
PAS 16, Property, Plant and Equipment
PAS 17, Leases
PAS 19, Employee Benefits
PAS 36, Impairment of Assets
PAS 39, Financial Instruments: Recognition and Measurement

Except for PFRS 1, the adoption of the revised PAS 1, 8, 16, 17, 19 and 36 will not result in substantial changes to the Foundation’s accounting policies. In summary:

Philippine Financial Reporting Standards

PFRS 1 First-time Adoption of International Financial Reporting Standards

PFRS 1 applies when an entity adopts PFRSs for the first time, by an explicit and unreserved statement of compliance with PFRSs. In general, PFRS 1 requires an entity adopting PFRSs for the first time (a first-time adopter) to comply with each PFRS that has come into effect at the reporting date for its first PFRS financial statements. PFRS 1 requires that a first-time adopter prepare an opening PFRS statements of assets, liabilities and head office account at the date of transition to PFRSs (the beginning of the earliest period for which it presents full comparative information under PFRSs in its first PFRS financial statements). PFRS 1 grants limited exemptions from these requirements in specified areas where the cost of complying with them would be likely to exceed the benefits to users of financial statements. PFRS 1 also prohibits retrospective application of PFRSs in some areas, particularly where retrospective application would require judgments by management about past conditions after the outcome of a particular transaction is already known. Further, PFRS 1 requires disclosures that explain how the transition from previous GAAP to PFRSs affected the entity’s reported financial position, activities and cash flows.

The impact of the adoption of the above accounting Standard could not be reasonably estimated as of December 31, 2004.

b) Cash and cash equivalents

Cash and cash equivalents are carried in the statements of financial position at face value. For purposes of the statements of cash flows, cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less from the date of acquisition.

c) Receivables

Receivables, which include advances to project proponents, are carried at original amount less provision made for impairment of those receivables. A provision for impairment of receivables is established after a study of the estimated collectibility of the receivable balances and evaluation of such factors as aging of the accounts, collection experience of the Foundation in relation to the particular receivable, and identified doubtful accounts. Bad debts are written off in the year they are identified.

d) Trading investments in trust funds

Trading investments in trust funds are carried at fair value plus transaction costs. Fair values are based on current level prices. Gains and losses arising from the changes in the fair value of investments are included in the statements of activities and changes in net assets based on the financial reports of the trustee banks.

e) Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets or lease term as applicable:

Particulars	Number of years
Building	25
Land and building improvements	10
Transportation equipment	5
Communication equipment	3
Office furniture, fixtures and equipment	5

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to activities.

Major additions, replacements and renewals that will increase the flow of future economic benefits in excess of the originally assessed standard of performance of the existing asset are capitalized while ordinary repairs and maintenance are charged to activities as incurred.

f) Impairment of assets

Property and equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount which is higher of an asset’s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

g) Revenue and expense recognition

Investment income, which principally consists of interest income and gain on sale of investments and other income, is recognized when earned.
Grants, project development, monitoring and other expenses are recognized when incurred.
Interest income is recognized on a time proportion basis, net of applicable final withholding tax.

h) Foreign currency translation

i. Functional currency

Items included in the financial statements of the Foundation are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Foundation. The financial statements are presented in Philippine Peso, the functional currency of the Foundation.

ii. Translations and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statements of activities and changes in net assets.

i) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to activities on a straight-line basis over the period of the lease.

j) Retirement benefit costs

Retirement benefit costs are actuarially 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. Past service costs are amortized over 10 years

k) Provisions

Provisions are recognized when the Foundation has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.

l) Comparatives

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current period.

Note 3 - Cash and cash equivalents

Cash and cash equivalents at December 31 consist of:

	2004	2003
Cash on hand and balances with banks	4,367, 843	4,230,498
Short-term placements	5,662,100	2,156,336
	10,029, 943	6,386,834

Short-term placements earn annual interest of 6% (2003 - 5.2%). These deposits have average maturity of 30 days.

Note 4 - Receivables

Receivables at December 31 consist of:

	2004	2003
Advances to project proponents (Schedule I)	P 119,543,717	P 94,294,081
Less allowance for doubtful accounts	5,529,746	3,011,057
	114,013,971	91,283,024
Accrued interest	917,553	6,986,092
Other	1,086,243	616,096
	P 116,017,767	P 98,885,212

The account consists of releases to project proponents subject to repayment for micro-finance, micro-enterprise, agricultural development, housing and proactive projects. These financial advances are charged annual interest of 9% or 12% to cover the administrative costs of servicing the projects. Financial advances extended for micro-enterprise, housing and other projects involving acquisition of assets are secured with real and chattel mortgages and/or joint security.

Total approvals for advances to project proponents during the year amounted to P118,785,000 (2003 - P88,357,175) of which P60,245,000 (2003 - P34,882,095) are without releases as of December 31, 2004 (See Schedule I).

The Foundation recognized a loss of P2,518,689 (2003 - P2,297,007) for provision for losses on its advances to project proponents during the year ended December 31, 2004. The loss has been charged in the statements of activities and changes in net assets.

Note 5 - Trading investments in trust funds

Trading investments in trust funds at December 31 consist of:

	2004	2003
ING Bank, N.V. (ING)
Republic of the Philippines (ROP) - sovereign bonds	P 368,723,547	P 338,079,592
Unitized investment trust fund (UITF)	196,153,270	-
Stocks listed in stock exchange	136,349,024	100,364,423
Global mutual fund	105,068,328	64,992,392
Corporate loans	95,236,108	51,128,552
Corporate bonds	71,388,792	101,656,836
Quasi - government bonds	42,236,822	273,154,923
Savings deposit account	18,314,974	35,093,555
Commercial papers	8,002,072	-
	1,041,472,937	964,470,273
Deutsche Bank, AG (DB)
Corporate bonds	319,400,831	-
ROP - sovereign bonds	93,169,798	-
Savings deposit account	1,362,898	-
	413,933,527	-
Asia United Bank Corp. (AUB)
Treasury notes	138,110,937	204,908,984
Common trust fund (CTF)	36,306,206	3,652,341
Corporate bonds	23,461,799	17,702,392
Savings deposit account	3,908	10,308
	197,882,850	226,274,025
RCBC Capital Corporation
ROP - sovereign bonds	-	356,822,038
	P 1,653,289,314	P 1,547,566,336

The Foundation pays ING, DB and AUB every quarter one-fourth of the annual service fee rates of 0.25% based on the average market values of funds in trust.

The trading investment in trust fund with RCBC was closed in 2004 and re-invested in DB.

Note 6 - Property and equipment

Property and equipment at December 31 consist of:

	Land (Note 1)	Building (Note 1)	Transportation equipment	Office furniture, fixtures and equipment	Total
Cost
Balance at January 1, 2004	9,158,002	3,994,092	2,228,839	2,679,733	18,060,666
Additions during the year	-	193,625	2,422,624	1,332,276	3,948,525
Disposal	-	-	(874,632)	-	(874,632)
Balance at December 31, 2004	9,158,002	4,187,717	3,776,831	4,012,009	21,134,559
Accumulated depreciation
Balance at January 1, 2004	-	249,562	136,226	677,318	1,063,106
Depreciation during the year	-	414,505	638,720	1,053,413	2,106,638
Disposal	-	-	(191,120)	-	(191,120)
Balance at December 31, 2004	-	664,067	583,826	1,730,731	2,978,624
Net book value at December 31, 2004	9,158,002	3,523,650	3,193,005	2,281,278	18,155,935
Net book value at December 31, 2003	9,158,002	3,744,530	2,092,613	2,002,415	16,997,560

Depreciation expense during the year amounted to P2,106,638 (2003- P929,703) and shown as part of Expenses in the statements of activities and changes in net assets.

Note 7 - Accounts payable, accrued expenses and other liabilities

Accounts payable, accrued expenses and other liabilities at December 31 consist of:

	2004	2003
Trustee fee payable	40,584,745	24,766,906
Accrued expenses	2,248, 659	2,241,381
Accounts payable	236,229	991,758
	43,069, 633	28,000, 045

Trustee fee payable represents service fees of ING, DB and AUB in managing the funds.

Note 8 - Grants payable

Grants payable represents unreleased and committed grants to project proponents. Total grants approved during the year amounted P64,293,297 (2003 - P57,881,879) of which P19,890,843 (2003 - P4,352,026) are without signed project agreements as of December 31, 2004 (See Schedule I).

Note 9 - Project expenses

Project expenses for the years ended December 31 consist of:

	Note	2004	2003
Project development, monitoring and evaluation	11, 12	11,635,070	11,037,483
Project support		9,508,973	2,587,528
Institutional support		2,689,795	1,881,889
		23,833,838	15,506,900

Note 10 - General and administrative expenses

General and administrative expenses for the years ended December 31 consist of:

	Note	2004	2003
Personnel costs	1, 11	3,612, 816	2,832,898
Supplies and services		2,138, 486	1,274,001
Outside services		1,189,18 4	724,665
Transportation and travel		588,280	627,739
		7,528,766	5,459,303

Note 11 - Retirement benefit costs

The Foundation has a trusteed, non-contributory retirement plan covering all qualified officers and employees administered by Equitable PCIBank MERIT Plan. It is a defined benefit plan which provides a retirement benefit equivalent to 22.5 days pay for every year of credited service in accordance with RA 7641. Under the plan, any employee who has reached the age of fifty (50) and sixty (60) years or more provided that he/she has rendered at least 5 years of credited service is eligible for an early and optional retirement benefit, respectively. An employee retiring at the age of sixty-five (65) years is qualified for compulsory retirement.

An actuarial valuation of the fund was conducted by an independent actuary. The fund of the plan is deposited with a local bank. The funding method used is the Projected Unit Credit Method. Under this method, the current service cost is computed based on the present value of retirement benefits payable in the future in respect of services in the current period while past service cost is the present value of the units of benefits payable in the future in respect of services rendered prior to valuation date.

Based on the latest actuarial valuation dated November 25, 2004, the present value of funded obligations and fair value of plan assets amounted to P426,173 and P552,195, respectively. The principal actuarial assumptions used to determine pension benefits were discount rate of 8%, expected return on plan assets of 8% and future salary increases of 5%.

Pension costs during the year amounted to P310,736 (2003 - P212,996) of which P165,268 (2003 - P139,359) was charged to project development, monitoring and evaluation account, a component of project expenses in the statements of activities and changes in net assets.

Note 12 - Leases

The Foundation has a lease agreement with the Viranclava Corporation covering the office space it occupies in Cebu City for a period of two years commencing on January 1, 2004. The Foundation also leases an office space in Davao City commencing January 10, 2004 from AALA Corporation for a period of one year. The lease agreements required the Foundation to pay rental deposits which are included under Other assets account in the statements of financial position.

Rent expense on the above lease agreements during the year amounted to P267,860 (2003 - P180,000) and is included in project development, monitoring and evaluation account, a component of project expenses in the statements of activities and changes in net assets.

Note 13 - Foreign currency denominated monetary assets and liabilities

The Foundation’s foreign currency denominated monetary assets and liabilities at December 31 follow:

	2004	2003
Assets
Current
Cash and cash equivalents	US$ 1,782	US$ 799
Trading investments in trust funds	17,974,702	16,060,294
Receivables	-	110,938
Liabilities
Accounts payable, accrued expenses and
other liabilities	(362,653)	(295,527)
Net foreign currency assets	US$ 17,613,831	US$ 15,876,504
Peso equivalent	P 991,306,409	P 881,145,972

At December 31, 2004, the exchange rate used is P56.28 per US$1.00
(2003 - P55.50 per US$1.00).

Net foreign exchange gain credited in the statements of activities and changes in net assets in the current year amounted to P12,305,364 (2002 - P33,753,872).

As of March 8, 2005, the exchange rate per US$1 is P54.64.

Note 14 - Approval and authorization for issue of financial statements

The financial statements of the Foundation were approved and authorized for issue by the Foundation’s Finance and Investment Committee on behalf of the Board of Trustees on March 8, 2005.