April 15, 1999
JOINT DAR-LBP MEMORANDUM CIRCULAR NO. 08-99
TO : All Concerned Officials and Personnel of the DAR and LBP
SUBJECT : Guidelines in the Valuation of Rubber Lands Covered by DARAB'S Order to
Recompute
I. PREFATORY STATEMENT
The level of productivity or the average yield of permanent crops, such as rubber, is highly dependent on the age of the tree at the time of valuation. The production cycle of rubber, under normal tapping condition, is as follows: gestation period (Age: 0 to 6 years old); growing yield period (Age: 7 to 16 years old); peak yield period (Age 17 to 21 years old); and declining yield period (Age: 22 to 30 years old).
For rubber claims pending with the DAR Adjudication Board (DARAB) awaiting resolution of various valuation-related issues, there are cases where the plantation remains under the management and operation of the landowner (LO) despite valuation, rejection by LO, and the opening of Savings Deposit Account (SDA) by LBP. Similarly, there are cases where the SDA has been opened and the Certificate of Land Ownership Award (CLOA) has been distributed but the Farmer-Beneficiaries (FBs) have not yet taken over the plantation. Due to the time gap between the original date of Field Investigation (FI) and the date of DARAB's order to recompute (during which period the age and, therefore, the productivity of trees would change), the property should be revalued based on the age and productivity of trees at the time of recomputation. Likewise, the interim income derived by the LO from the plantation (from the opening of SDA up to the date of recomputation) should be considered.
On the other hand, there are also cases where there is a delay between the opening of the SDA and FBs takeover of the plantation by virtue of the issuance/distribution of the CLOA. If the time gap between the original date of FI and the date of FBs takeover covers a significant period that would alter the age and productivity of the trees, the recomputation of the new land value should be based on the age of trees at the time of FBs takeover. The interim income of the LO from the opening of SDA and the FBs takeover should also be considered.
Moreover, because of the growing demand and attractive buying prices for old and even young productive trees, there are cases where the landowner cuts and sells rubber trees while the claim is still at DARAB.
These rubber valuation guidelines are hereby issued to address the foregoing issues.
II. COVERAGE
These guidelines shall govern all lands planted to rubber and whose claims are presently with or to be referred to the DARAB. In all cases, recomputation shall only be effected upon issuance of DARAB Order to Recompute. Specific procedures and schedules are herein prescribed for uniform application in the computation of Land Value (LV).
III. VALUATION PROCEDURES
A. LO Continues to Manage and Operate the Plantation (Despite Valuation, Rejection and Opening of Savings Deposit Account and/or CLOA Distribution) Up to the Time of Revaluation/Recomputation
1. If the time span between the date of original FI and the date of recomputation is more than six months, a new FI shall be conducted in order to update the actual physical condition of the tapping panel and the actual number of standing trees. The following rules shall be applied in determining the age of trees at the time of recomputation:
a. For Young, Non-Tappable Trees
The age of trees shall be measured up to the nearest number of months as of the date of recomputation. Reimbursement of the cumulative development cost shall be up to the date of recomputation.
b. For Productive (Tappable) Trees
The required adjustment in the age of trees, depending on the time gap between the date of the original FI and the date of recomputation, is shown in the following table:
Period from FI Date to Age of Tree
Processing/Recomputation Date to be Adopted
Six Months or Less Use the Age of Trees as of FI Date
More than Six Months Add One (1) Year to the Age of
up to 18 Months Trees as of FI Date
More than 18 Months Add Two (2) Years to the Age of
up to 30 Months Trees as of FI Date
In general, if the time gap between the date of FI and the date of recomputation is six (6) months or less, adopt the age of trees established at the time of FI.
If the time gap between the date of FI and the date of recomputation exceeds 30 months, add one (1) year for every 12 months delay.
2. The Average Gross Production (AGP) to be used in the recomputation of the Capitalized Net Income (CNI) shall be based on the age of trees at the time of recomputation established in Item No. III.A. 1 .b above.
3. Based on the updated age, present condition and actual number of standing trees, recompute the CNI for each age-block using the valuation procedures prescribed in the DAR-LBP Joint Memorandum Circular No. 07, Series of 1999 (hereinafter referred to as JMC No. 07). Likewise, make the necessary adjustments/ recomputations on the Market Value (MV) per Tax Declaration (TD) based on the new productivity classification (with the updated age of the trees, the productivity classification of the land and trees may change) and the present inventory of trees, to arrive at the Recomputed Land Value (RLV).
4. Estimate the Interim Production Income (IPI) derived by the LO from the date of opening of the SDA up to the date of recomputation by using the standard AGP and NIR data provided in Annex B of JMC No. 07 and the following formula:
Interim Production Income (IPI) = AGP per Tree per year x No. of
Trees x SP x NIR
Where: AGP - AGP per tree per year based on the age of tree as of the end of the interim year/period (Annex B of JMC No. 07)
SP - The average of the latest available and applicable selling price of latex/cuplumps during the interim year/period.
NIR - Net Income Rate (Annex B of JMC No. 07)
a. The interim production income shall be computed only if the time gap between the opening of the SDA and the date of recomputation is more than six months.
Example:
Date Age of Tree
Date of Original FI Jan. 31, 1994 20 yrs. old
Date of the Opening of SDA May 22, 1995 21 yrs. old
Date of Recomputation Sept. 1, 1997 23 yrs. old
Time Gap Between the Date Two (2) Years
of Recomputation and the and 3 months
Date of the Opening of the SDA
In this example, we compute IPI using the following valuation input data:
— For IPI21 (May 22, 1995 to May 21, 1996)
AGP21 = AGP at age 21 (See Annex B of JMC No. 07)
SP21 = Average Selling Prices during the period from May 1995 to April 1996
Hence:
IPI21 = AGP21 x SP21 x Total No. of Trees x NIR
— For IPI22 (May 22, 1996 to May 21, 1997)
AGP22 = AGP at age 22 (See Annex B of JMC No. 07)
SP22 = Average Selling Prices during the period from May 1996 to April 1997
Hence:
IPI22 = AGP22 x SP22 x Total No. of Trees x NIR
Total IPI = IPI21 + IPI22
Please note that the interim production income from May 22, 1997 to September 1, 1997 (equivalent to approximately 3 months) is no longer included in the total IPI computation since no adjustment in the age of trees is recognized during the said period in accordance with Item III.A. 1 .b above.
b. An Illustrative Example to show the process of computing interim production income is shown in Annexes 1, 2 and 3.
c. If the landowner (LO) submits his actual income records during the interim production period and said records are verified and validated by LVLCO against industry figures and other records as factual/accurate, the reported income shall be used in computing for the Net Land Value (NLV). NLV shall refer to the difference between RLV and Total IPI. Expressed in equation form:
NLV = RLV - Total IPI
B. The Farmer-Beneficiaries Have Taken Over the Plantation
1. If the time span between the date of original FI and the date of FBs takeover (as certified by the Municipal Agrarian Reform Office) is more than six months, a new ocular inspection shall be conducted in order to update the actual physical condition of the tapping panel, the actual number of standing trees. The following rules shall be applied in determining the age of trees at the time of recomputation:
a. For Young, Non-Tappable Trees
The age of trees shall be measured up to the nearest number of months as of the date of takeover. Reimbursement of the cumulative development cost shall be up to the date of takeover.
b. For Productive (Tappable) Trees
The required adjustment in the age of trees, depending on the time gap between the date of the original FI and the date of FBs takeover, is shown in the following table:
Period from FI Date to Age of Tree
Date of FBs Takeover to be Adopted
Six Months or Less Use the Age of Trees as of FI Date
More than Six Months Add One (1) Year to the Age of
up to 18 Months Trees as of FI Date
More than 18 Months Add Two (2) Years to the Age of
up to 30 Months Trees as of FI Date
In general, if the time gap between the date of FI and the date of FBs takeover is six (6) months or less, adopt the age of trees established at the time of FI.
If the time gap between the date of FI and the date of FBs takeover exceeds 30 months, add one (1) year for every 12 months delay.
2. The Average Gross Production (AGP) to be used in the recomputation of the Capitalized Net Income (CNI) shall be based on the age of trees at the time of takeover established in Item No. III.B.1.b above. DHSCTI
3. Based on the updated age, present condition and actual number of standing trees, recompute the CNI for each age-block using the valuation procedures prescribed in the Joint Memorandum Circular No. 07 Likewise, make the necessary adjustments/recomputations on the Market Value (MV) per Tax Declaration (TD) based on the new productivity classification and the present inventory of trees to arrive at the Recomputed Land Value (RLV).
4. Estimate the Interim Production Income (IPI) derived by the LO from the date of opening of the SDA up to the date of takeover by using the standard AGP and NIR data provided in Annex B of JMC No. 07 and the following formula:
Interim Production Income (IPI) = AGP per Tree per year x No. of
Trees x SP x NIR
Where: AGP - AGP per tree per year based on the age of tree as of the end of the interim year/period (Annex B of JMC No. 07)
SP - The average of the latest available and applicable selling price of latex/cuplumps during the interim year/period.
NIR - Net Income Rate (Annex B of JMC No. 07)
a. The interim production income shall be computed only if the time gap between the opening of the SDA and the date of takeover is more than six months.
Example:
Date Age of Tree
Date of Original FI Jan. 31, 1994 20 yrs. old
Date of the Opening of SDA May 22, 1995 21 yrs. old
Date of Recomputation Feb. 22, 1998 23 yrs. old
Time Gap Between the Date Two (2) Years
of Takeover and the Date and 9 months
of the Opening of SDA
In this example, we compute IPI using the following valuation input data:
— For IPI21 (May 22, 1995 to May 21, 1996)
AGP21 = AGP at age 21 (See Annex B of JMC No. 7)
SP21 = Average Selling Prices during the period from May 1995 to April 1996
Hence:
IPI21 = AGP21 x SP21 x Total No. of Trees x NIR
— For IPI22 (May 22, 1996 to May 21, 1997)
AGP22 = AGP at age 22 (See Annex B of JMC No. 07)
SP22 = Average Selling Prices during the period from May 1996 to April 1997
Hence:
IPI22 = AGP22 x SP22 x Total No. of Trees x NIR
— For IPI23 (May 22, 1997 to Feb. 22, 1998)
AGP23 = AGP at age 23 (See Annex B of JMC No. 07)
SP23 = Average Selling Prices during the period from May 1997 to January 1998
Hence.
IPI23 = AGP23 x SP23 x Total No. of Trees x NIR
Total IPI = IPI21 + IPI22 + IPI23
Please note that the interim production income from May 22, 1997 to February 22, 1998 (equivalent to 9 months) is included in the total IPI computation since there is a need to adjust the age of trees by another one year in accordance with Item III.B.1.b above.
b. An Illustrative Example to show the process of computing interim production income is shown in Annexes 1, 2 and 3.
c. If the landowner submits his actual income records during the interim production period and said records are verified and validated by LVLCO against industry figures and other records as factual/accurate, the reported income shall be used in computing for the Net Land Value (NLV). NLV shall refer to the difference between RLV and Total IPI. Expressed in equation form:
NLV = RLV - Total IPI
5. The DAR-Municipal Agrarian Reform Office (DAR-MARO) shall issue a Certification as to the date of the issuance of the Certificate of Land Ownership Award (CLOA) and the actual date of FBs' takeover of the property. The date of FBs' takeover as certified by DAR-MARO shall be the basis of the computation of RLV and Total IPI under Item III. 13.
C. The Landowner Cut and Sold Old and/or Young Productive Trees
In cases where the landowner had cut and sold the old and/or productive trees as of the time of recomputation, the affected portion of the property shall be considered as idle land. The value of the affected area shall be computed in accordance with the formula prescribed under Item II.A.3 of DAR Administrative Order No. 05, Series of 1998, as shown below
LV = MV x 2
On the other hand, if the landowner had cut and sold old/productive trees but the property was found to be fully replanted at the time of recomputation, compute the new land value using the valuation procedures for young, non-tappable trees prescribed in the JMC No. 07.
D. Illustrative Example
Sample computation is shown in Annexes 1, 2 and 3 to illustrate the valuation concepts/principles presented in these Guidelines.
IV. REPEALING CLAUSE AND EFFECTIVITY
All orders, circulars, rules and regulations inconsistent herewith are hereby revoked, amended, or modified as the case may be.
This Joint Memorandum Circular shall take effect ten (10) days after its publication in two national newspapers of general circulation pursuant to Sec. 49 of R.A. 6657.
Metro Manila, April 15, 1999.
(SGD.) HORACIO R. MORALES, JR.
Secretary
Department of Agrarian Reform
(SGD.) FLORIDO P. CASUELA
President and CEO
Land Bank of the Philippines
Published in two (2) National Newspaper
of general circulation:
1. MANILA STANDARD
2. MALAYA
Date of Publication — April 24, 1999
ANNEX "1"
I L L U S T R A T I V E E X AM P L E
Claims Pending at DAR Adjudication Board
GIVEN:
Landowner (LO) — XYZ Rubber Corporation
Location of Property — Naga, Zamboanga del Sur
Location of LO's Offer — November 8, 1993
Date of Field Investigation — January 31, 1994
Date of LO's Rejection/
Opening of Savings Deposit
Account — May 22, 1995
Date of Recomputation — September 01, 1997
Planting Density — 416 trees per hectare
Tapping Practice — Normal Tapping
REQUIRED: a.) Recomputed Land Value (RLV)
b) Interim Production Income (IPI)
c) Net Land Value
COMPUTATION:
The Recomputed Land Value is computed based on the age of the tree as of the date of Recomputation.
CNI Computation — See Annex "2-A"
MVTD Computation — See Annex "2-B"
Salvage Value of Old Rubber Trees — See Annex "2-C"
a.) Recomputed Land Value (RLV) — P68,121,530
b.) Interim Income (IPI)
from Production
(See Annex "3") — P14,220,331
c.) Net Land Value (NLV) = RLV - IPI
= P68,121,530 – P14,220,331
= P53,901,199
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