ism communications corporation itogon-suyoc … form 17-a 2011.pdf · ism communications...
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SEC Number 808
File Number
________________________________________________
ISM COMMUNICATIONS CORPORATION (formerly, ITOGON-SUYOC MINES, INC.)
________________________________________________ (Company’s Full Name)
The Penthouse, Alphaland Southgate Tower
2258 Chino Roces Avenue corner EDSA, Makati City _________________________________________________
(Company’s Address)
338-5599 ______________________________________
(Telephone Number)
December 31
(Fiscal Year Ending) (month & day)
SEC Form 17-A (Annual Report) ______________________________________
Form Type
______________________________________ Amendment Designation (if applicable)
______________________________________ Period Ended Date
N/A __________________________________________________
(Secondary License Type and File Number)
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SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES 1. For the fiscal year ended December 31, 2011 2. SEC Identification Number 808 3. BIR Tax Identification No. 000-162-935V 4. ISM COMMUNICATIONS CORPORATION (FORMERLY ITOGON-SUYOC MINES, INC.)
Exact name of issuer as specified in its charter
Philippines 5. Province, country or other jurisdiction of incorporation or organization 6. Industry Classification Code: ___________________(SEC Use Only) The Penthouse, Alphaland Southgate Tower, 2258 Chino Roces Avenue corner EDSA, Makati City 7. Address of principal office (632) 338-5599 1231 8. Registrant’s telephone number Zip Code Itogon-Suyoc Mines, Inc., 17th Floor, The Enterprise Center Tower 1, 6766 Ayala Avenue, Makati City 1226 9. Former 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 of each Class Number of shares of common stock outstanding Common 1,916,216,149
11. Are any or all of the securities listed on the Philippine Stock Exchange? Yes 12. Indicate whether the issuer:
a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines during the preceding 12 months (or for such shorter period the registrant was required to file such reports)
Yes b) has been subject to such filing requirements for the past 90 days Yes
11. The aggregate market value of the voting stock held by non-affiliates of the registrant. Shares held by Market value Per Share Non-affiliates as of 31 December 2011 Total Market Value
404,042,992 Php3.34 Php1,349,503,593.28
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Part I – BUSINESS AND GENERAL INFORMATION
Item 1. Business
A. Transformation from a mining company into a telecommunications company
ISM Communications Corporation (“ISMCC”, “ISM”, the “Company” or the “Corporation”) was, originally, a mining company incorporated in March 1925, under the name “Itogon-Suyoc Mines, Inc.”.
During meetings held on June 22 and July 25, 2001, the Board of Directors and stockholders of ISMCC approved a Memorandum of Agreement (“MOA”) between ISMCC and PhilWeb Corporation (“PhilWeb” or “PWC”, formerly “PhilWeb.Com, Inc.”). Under the terms of the MOA, PWC shall manage the transformation of ISMCC from a mining company to a company engaged in information technology, multimedia telecommunications, and other similar industries, including the identification and negotiation with potential investors who will infuse the necessary capital or assets for projects in such industries. In order to implement the MOA, the articles of incorporation of ISM were amended to enable it to undertake its new venture. ISM also divested of all its mining operations, including all its mining-related assets and liabilities. These acts were approved by the stockholders of the Company during a meeting on July 25, 2001. On April 10, 2002, the stockholders of ISM approved a Restructuring Plan, which involved, among others, the following:
a. Change in corporate name from “Itogon-Suyoc Mines, Inc.” to “ISM
Communications Corporation”; and b. Change the primary purpose from a company engaged in the business of
mining to a company engaged in the business of telecommunications, multimedia and information technology.
The Philippine Securities and Exchange Commission (”SEC”) subsequently approved such Restructuring Plan on June 7, 2002. Effective October 1, 2002, the activities of ISM have been entirely focused on building the products and services of its new line of business.
In accordance with the Restructuring Plan, ISM ceased its mining operations and assigned all of its rights over its two mining properties (“Sangilo” and “Suyoc”) located in the Province of Benguet, including all tangible and intangible assets pertaining to the mining operations, to Itogon-Suyoc Resources, Inc. (“ISRI”). As consideration for the aforementioned mining-related assets assigned by ISM, ISRI assumed certain liabilities of ISM.
B. Acquisition of Stakes in Eastern Telecommunications Philippines, Inc. a. ISM-Aerocom Share Swap (17.7% of ETPI)
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On July 11, 2005, ISM entered into a Memorandum of Agreement with Aerocom Investors and Management, Inc. (“Aerocom”) where the latter agreed to transfer and convey to ISM 4,600,557 fully paid common Class “A” shares of Eastern Telecommunications Philippines, Inc. (“ETPI”) in exchange for approximately 6.8 billion newly issued and registered shares of ISM. This was consummated on December 3, 2007 with the listing at Philippine Stock Exchange (“PSE”) of the 6,816,761,093 newly issued shares of ISM in favor of Aerocom. b. Acquisition of AGNP (40% of ETPI)
In September 2005, the stockholders of ISM approved the increase in authorized
capital stock from P300 million to P1.2 billion divided into 120 billion shares at P0.01 par value each, the issuance of about 6.8 billion ISM shares in favor of Aerocom in exchange for approximately 4.6 million Class “A” common shares of ETPI, the issuance of approximately 45.7 billion shares at par value, equivalent to about US$8.2 million to Ashmore Investment Management Ltd. (“Ashmore”), Boerstar Corporation (“Boerstar”) and Araza Resources Corporation (“Araza”) and the acceptance of subscription by way of a rights offering of 30 billion shares at par value (P0.01 per share) in favor of stockholders (but excluding the new investors: Ashmore, Boerstar and Araza).
On November 11, 2005, ISM entered into a Deed of Sale Agreement with Australian Gigahertz Network International Pty Ltd. (“AGNI”), wherein the latter agreed to sell its entire interest in the outstanding capital stock of its wholly owned subsidiary, A. G. N. Philippines, Inc. (“AGNP”), consisting of the entire issued 100,000 common shares of AGNP. In addition, ISM assumed the loan advances of AGNI to AGNP (the “AGNP Loan”). AGNP is a holding company, which owns 10,400,000 Class “B” shares of ETPI, representing 40% of the latter’s total outstanding shares. In consideration of the sale, ISM paid AGNI in 2006 a total amount of US$8,211,679.00 as purchase price apportioned as follows:
US$180,000.00 for all of the outstanding AGNP shares; and
US$8,031,679.00 for the AGNP Loan On December 14, 2006, the SEC approved the increase in ISM’s authorized capital stock from P300 million to P1.2 billion, divided into 120,000,000,000 shares at P0.01 par value per share. Subsequently, the company issued to private investors, Araza, Boerstar, EMDCD Ltd. (“EMDCD”) and Asset Holder PCC No. 2 Ltd re: Ashmore Asian Recovery Fund (“ARF”), the aggregate of 43,127,603,300 shares out of the increased capital. EMDCD and ARF were nominees of Ashmore. The proceeds from the above mentioned subscriptions from private investors were used to acquire 100% ownership in AGNP and the assumption of the AGNP Loan. Also, out of increase in authorized capital, ISM offered 30 billion shares to all its stockholders as of record date of June 8, 2007 (excluding Araza, Boerstar, EMDCD and ARF) at an offer price of P0.01 per share. The rights offering was fully subscribed and raised P300 million. After completing all of regulatory requirements, the rights offer shares were listed with PSE on July 9, 2007.
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As of December 31, 2006, ISM’s indirect stake (through AGNP) in ETPI amounted to 40% as the acquisition of the additonal 17.7% from Aerocom was, at that time, still envisioned to be consummated sometime in 2007. c. Acquisition of Stake of Smart Communications, Inc. (9.8% of ETPI) An additional 2,548,000 Class “A” shares of ETPI, which is equivalent to 9.8% of the latter’s total outstanding shares, were acquired from Smart Communications, Inc. on October 22, 2007 for P100 million. As of December 31, 2007, ISM has a total ownership in ETPI of 67.5% (based on total outstanding shares). d. Acquisition of Stake of the Republic of the Philippines (through the Privatization Management Office) (10.2% of ETPI) An additional 2,652,000 Class “A” shares of ETPI, which is equivalent to 10.2% of the latter’s total outstanding shares, were acquired from the Republic of the Philippines (through the Privatization Management Office) on March 6, 2008 for P104.1 million. As of December 31, 2008, ISM has a total ownership in ETPI of 77.7% (based on total outstanding shares).
C. Increase in authorized capital to P1.8 billion On November 8, 2007, the board of directors and stockholders approved the increase in ISM’s authorized capital stock from P1.2 Billion divided into 120,000,000,000 shares at a par value of P0.01 per share to P1.8 Billion divided into 180,000,000,000 shares with a par value of P0.01 per share. This was approved by the SEC on August 6, 2008. Out of the increase in authorized capital stock, Ashmore (through its nominees, EMDCD and ARF) subscribed to an aggregate of 16,127,737,226 newly issued shares at a subscription price of P0.0274 per share. PSE approved the listing of the afore-mentioned shares on March 20, 2009.
D. Increase in authorized capital to P2.8 billion On June 23, 2008, the board of directors approved the issuance of new shares by way of rights offering in favor of all stockholders of record as of a record date to be fixed by the President and that the rights offering shall be conducted according to the following terms and conditions:
Each shareholder as of record date shall have the right to subscribe to one (1) ISM common share for every five (5) shares held;
Exercise price shall be Two and Six-Tenths Centavos (P0.026) per share;
The offer period shall be fixed by the Corporation’s President provided that the Offer Period shall commence not later than thirty (30) calendar days from the ‘Record Date’.
The board of directors and stockholders, in special meetings both held on August 4, 2008, approved the following:
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1. The increase in the Company’s authorized capital stock from P1.8 billion
divided into 180,000,000,000 shares at P0.01 par value each share to P2.8 billion divided into 280,000,000,000 shares at P0.01 par value each share
2. To accept subscriptions to the increase in authorized capital stock by way of
rights offering which shall be paid in of one (1) share for every five (5) shares held in favor of all stockholders of record, and that the payment of the subscription price shall be in cash or by conversion of stockholders’ advances to equity.
3. That the board of directors or the president be authorized to determine the
other terms, conditions, and details of the ”Rights Offering”. On December 16, 2008, the board of directors, in view of the current global financial crisis approved the following revisions on the terms and conditions of the “Rights Offering”.
Each stockholder as of record date shall have the right to subscribe to one (1) ISM common share for every 1.92 ISM common shares held as of record date;
The exercise price shall be 1/100 Peso (P0.01) per share subscribed and payable in full, by way of cash or conversion of advances/liabilities to equity;
The “Offer Period” shall be fixed by the Corporation’s President provided that the Offer Period shall commence not later than thirty (30) calendar days from the Record Date;
That the President be authorized to determine the other terms, conditions and details of the “Rights Offering”;
That the board of directors be authorized to have the offer shares be registered under the Securities Regulation Code and be listed with the PSE;
That the President, the Corporate Secretary, or any proper officer of the Corporation be authorized and empowered to sign, execute and deliver such documents and perform such acts as may be necessary to carry into effect the foregoing procedures.
On January 14, 2009, the PSE approved the listing of additional 65,554,832,528 common shares, with a par value of P0.01 per share to cover its 1:1.92 stock rights offering to all eligible stockholders of record as of February 4, 2009, at an offer price of P0.01 per share. The offer period for the rights offering ended last February 16, 2009 with the offering fully subscribed. The increase in capital stock of P655.5 million resulted from ISM’s issuance of 65.5 billion rights offer shares at P0.01 per share.
E. Increase in the par value of the common shares of the Company to Php1.00 per share On September 9, 2010, the SEC approved the Company’s application for the amendment of its Articles of Incorporation to reflect the increase in par value of its common shares from P0.01 per share to P1.00 per share. As a result of the increase in the par value, the following changes in the capital stock of the Company were effected:
Before the increase in After the increase in
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par value par value
Number of authorized shares
280 billion shares 2.8 billion shares
Number of shares issued (inclusive of treasury shares)
182,636,865,800 shares
1,826,268,659 shares
Number of shares subscribed
9,000,068,290 shares 90,000,682 shares
Number of treasury shares
5,115,990 shares 53,192 shares
Number of shares outstanding
191,636,934,090 shares
1,916,216,149 shares
No fractional shares were issued to the stockholders of the Company in the conversion of the number of shares. The Company acquired the resulting fractional shares as additional treasury shares.
F. Sale of 40% interest in ETPI On December 16, 2010, the Executive Committee authorized the Company to sell 100% of its interest in AGNP to Vega Telecom, Inc. (“Vega”), under such terms and conditions which Mr. Eric O. Recto, the President of the Company, may deem to be in the best interest of the Company. AGNP was the corporate vehicle through which the Company held a 40% interest in ETPI. On December 29, 2010, the Company and Vega executed the sale documents for this transaction. Consequently, as of December 30, 2010, the Company’s interest in ETPI was reduced to 37.7%.
G. Acquisition of stake in Acentic GmbH On January 12, 2010, ISM and PhilWeb completed the purchase of a 65% stake in German information technology firm, Acentic GmbH (“Acentic”) for about P1.3 billion. The Company used internally-generated funds to fund its share of the acquisition of this investment. Acentic is the product of the 2003 merger of four interactive TV (“Itv”) companies – Prodac, VMS, Ciscom and Granada Business Technology. Following this, PhilWeb and ISM are set to launch Acentic Asia, a subsidiary of Acentic, which is envisioned to serve as Acentic’s gateway to Asia. The Company is confident that there are strong synergies between PhilWeb and Acentic. Acentic is one of Europe’s leading providers of in-room entertainment. It offers digital and Internet protocol (IP) converged services to hotels, tourism outfits and healthcare facilities. Its digital television services and high-speed Internet access are found in many of the world’s leading hotel rooms including Accor, Dorint, Intercontinental Hotel Group, Hilton, Hyatt, Marriott, Movenpick and Starwood, in more than 30 countries across Europe, the Middle East and Africa. Acentic is the number two operator by room base across Europe, the market leader in Germany and the second largest in the United Kingdom. The UK, which accounted for 67% of Acentic’s EBITDA in 2009, is by far the most profitable market for hotels in Europe due to its greater number of group-based hotels which have a broader supply
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of entertainment systems, allowing for more pull-through revenues and related margins. Acentic has approximately 1,100 hotels and 176,000 hotel rooms under contract across Europe, the Middle East and Africa, which will serve as an instant platform for PhilWeb’s gaming offerings. Acentic also has operating subsidiaries in 8 European markets – UK, Germany, France, Poland, Italy, Spain, Netherlands and Austria, a good take-off for PhilWeb’s growth plans. To date, Europe is still the largest geographical market for the hotel industry with 6.6 million rooms, compared to the America’s 6.5 million rooms and the Asia-Pacific region’s 4.5 million rooms. The European pay-TV industry is a fragmented market with no dominant leader. The Company can look forward to a strong and stable revenue base with Acentic’s long-term contracts with the world’s leading hotel chains. Currently, 38% of the base operating revenue is guaranteed and for the past year, new businesses contracted had a guaranteed average 55% of operating revenue. Majority of contracts are renewed at maturity, highlighting the strength of Acentic’s commercial relationships. In the year ending 2009, Acentic was on tract to post an EBITDA of €10M, from revenues of €46M. Through the years, Acentic has demonstrated technological leadership through its innovative products such as the Acentic Panorama. Over 71% of Acentic’s installed base uses digital systems. The remaining analogue systems will be converted to digital, therefore providing enhanced margins through the superior digital guest offering. This will require significant capital expenditures over the next two years. Acentic’s growth was also made possible by the proven ability of its executives to integrate a number of underperforming businesses, reduce costs while maintaining high levels of customer service, and develop market-leading technologies to support future growth. This partnership will definitely enhance the revenues and growth potentials of both PhilWeb and Acentic, whose combined expertise should lead to more gaming possibilities across Asia and Europe.
H. Acquisition of controlling interest in the Philippine Bank of Communications On June 13, 2011, the Executive Committee authorized the Chairman and/or the President of the Company, in conjunction with other investors (the “ISM Group”), to participate in the auction conducted by Macquarie Capital Advisers (“Macquarie”) for the sale of approximately 97.28% of the outstanding capital of Philippine Bank of Communications (“PBCOM” or the “Bank”) under such terms and conditions that management may deem to be in the best interest of the Corporation. On June 22, 2011, Macquarie informed the ISM Group of the results of the auction where it was selected as PBCOM’s Strategic Third Party Investor (“STPI”). On July 26, 2011, the ISM Group entered into a Memorandum of Agreement with the major shareholders of PBCOM to formalize the acquisition, subject to the appropriate regulatory approvals. The ISM Group agreed to purchase a total of 47,909473 common shares and 120,000,000 preferred shares or a total of 167,909,473 voting shares of the
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Bank (the “Sale Shares”) at a purchase price of Php27.88 per share, regardless of class, or for a total purchase price of Php4,681,316,107.24. This includes the Company’s share of approximately 37.11% of the Bank. Thereafter, the ISM Group filed the necessary applications with the regulatory agencies – the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission and the Philippine Deposit Insurance Commission, for their respective approvals of the acquisition. The ISM Group was able to obtain all the said approvals on December 22, 2011. The sale of the Sale Shares (excluding 814,666 common shares that were not delivered by one of the sellers) was crossed thru the facilities of the Exchange on December 23, 2011. The excluded shares pertained to the Company. Thus, instead of the projected 37.11% ownership in the Bank, the Company only ended with 36.64%.
I. Sale of remaining 37.7% interest in ETPI On June 28, 2011, the Executive Committee authorized the Company to sell its remaining 37.7% controlling stake in ETPI under such terms and conditions no less favorable than the sale of the earlier 40% interest. On October 22, 2011, the Company sold the said stake in ETPI to San Miguel Equity Securities, Inc. With this sale, the Company has fully divested its interest in ETPI. Competitive Business Condition and the Registrant’s Competitive Position in the Industry and Methods of Competition The Company currently has no operations. Sources and Availability of Raw Materials and Names of Principal Supplier ISMCC is a holding company that does not require raw materials in its operations. It is not dependent on any principal supplier.
Dependence on One or a Few Major Customers and Identification of Such ISM, as a holding company, has no sales of its own hence, there are no customers that accounts for 20% or more of its sales. Patents, Trademarks, Licenses, Franchises, Concessions, and Royalty Agreements ISM’s application for registration of its trademarks with the Intellectual Property Office of the Philippines was approved by the said office last April 13, 2009. Pending Applications for Registration of Trademarks The Company has no pending trademark application.
Need for Governmental Approval of Principal Products or Services; Effect of Existing or Probable Governmental Regulations on the Business ISMCC does not need any governmental approval in its products or services. In the event any of its future operations require government approval, ISMCC intends to comply with such requirement.
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Estimate of Amount Spent for Research and Development Activities in the Next Three Years ISMCC does not expect to make any significant investment or expenditure for research and development.
Costs and Effects of Compliance with Environmental Laws ISMCC currently has no operations and thus do not require an environmental compliance certificate from the Department of Environment and Natural Resources. In the event that environmental laws and regulations cover any of its future operations, the Company intends to comply with such requirements. Business Transactions with Related Parties ISMCC has no material business transactions with related parties. Labor ISMCC has no full time employees as of December 31, 2011. There is no union and neither a collective bargaining agreement with its employees. There have been no strikes or threats to strike in the past four years. Supplemental benefits given to qualified employees include stock option plan, among others. Material Events The significant contracts and commitments entered into by the Company are as follows:
a. Memorandum of Agreement between the Company and PWC whereby the Company appointed PWC to manage the transformation of the Company from a mining company to a company engaged in information technology, multi-media, telecommunications, or other similar industries, as well as to identify and negotiate with investors who will infuse the necessary capital or assets for such project.
b. As a member of the ISM Group, the Company, thru the authorized
representative of the ISM Group entered into a Memorandum of Agreement dated July 26, 2011 for the acquisition of the controlling interest in PBCOM. The Company committed to purchase a total of 37.11% of PBCOM. In connection with this acquisition, the Company, together with the other members of the ISM Group, also entered into an Amendment to the 2004 Financial Assistance Agreement with PBCOM and the PDIC wherein it agreed to be bound by the 2004 Financial Assistance Agreement executed by the previous major shareholders of PBCOM for the rehabilitation of the bank.
c. The Company, on October 22, 2011, entered into a deed of sale with San Miguel
Equity Securities, Inc. wherein it sold its remaining 37.77% stake in ETPI in favor of the latter. By virtue of this sale, the Company has completed the divestment of its entire stake in ETPI.
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Item 2. Properties
As of December 31, 2011, the Company reported property and equipment (net of depreciation) of P8.8 million primarily composed of computer equipment, leasehold improvements, transportation equipment, network and data communication equipment, and other fixed assets. No extraordinary purchase or sale of plant and equipment are expected beyond those in the regular course of operations of the Company. All purchases will be financed through internally generated funds and existing capitalization.
Item 3. Legal Proceedings As of December 31, 2011, there are no material lawsuits or claims against ISMCC.
Part II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market Price, Dividends and Related Stockholder Matters
Market Information ISMCC’s shares of common stock are listed in the Philippine Stock Exchange. The following table sets forth the high and low closing sales prices per share of the common shares listed on the PSE during the respective periods indicated according to published financial sources.
Price per Share
High Low
2009 First Quarter (ending March 2009) Second Quarter (ending June 2009) Third Quarter (ending September 2009) Fourth Quarter (ending December 2009) 2010 First Quarter (ending March 2010) Second Quarter (ending June 2010) Third Quarter (ending September 2010) Fourth Quarter (ending December 2010) 2011 First Quarter (ending March 2011) Second Quarter (ending June 2011)
0.0289 0.0270 0.0460 0.0775 6.7500 5.7500 4.8000 4.6000 3.08 3.75
0.0160 0.0180 0.0350 0.0600 4.5000 4.7000 3.6000 3.3000 3.04 3.70
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Price per Share
High Low
Third Quarter (ending September 2011) Fourth Quarter (ending December 2011)
3.50 3.38
3.01 3.30
Note: There was an increase in par value from Php0.01 per share to Php1.00 per share in 2010. Dividends ISMCC has not declared any dividends for the last four (4) fiscal years and subsequent quarter. There are no restrictions that limits the ability to pay dividends on common equity or that are likely to do so in the future. Holders There were 4,316 shareholders of record holding the Company’s outstanding capital stock of 1,916,216,149 common shares as of March 31, 2012. Top 20 Stockholders
The top 20 registered stockholders of record as of March 31, 2012 (based on an outstanding capital stock of 1,916,216,149 net of 53,192 shares held in treasury) were:
Name of Shareholder No. of Shares %
1. PCD Nominee Corporation 1,019,799,486 53.22%
2. Asset Holder Pcc No.2 Limited Re Ashmore Asian Recovery Fund 196,618,486 10.26%
3. Emdcd Ltd. 196,618,486 10.26%
4. Boerstar Corporation 105,474,116 5.50%
5. Sagitro, Inc. 100,000,000 5.22%
6. Philweb.Com, Inc. 90,003,539 4.70%
7. Araza Resources Corporation 82,164,016 4.29%
8. Aerocom Investors & Managers, Inc. 68,167,610 3.56%
9. Siis Investment Holdings Limited 22,857,142 1.19%
10. Ehrlich, Craig Edward 21,382,600 1.12%
11. Tan, Luciano H. 997,284 0.05%
12. Ortigas, Ignacio Rafael M. & Xavier Ignacio M. Ortigas 577,606 0.03%
13. Ortigas, Ignacio R. 571,879 0.03%
14. Cham, Allen 537,332 0.03%
15. Sproule, Scott Andrew 500,000 0.03%
16. Montilla, Jose Luis O. 301,000 0.02%
17. Ortigas, Rafael B. 301,000 0.02%
18. Lim, Amparo 221,406 0.01%
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Recent Sales of Unregistered Securities: There has been no sale in the past three years of any unregistered securities of ISMCC or securities that has not been approved exempt from such registration requirements.
Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The current capitalization of the Company, and expected future revenues from its various investment activities are projected to sufficiently meet the Company’s operating cash requirements. The Company intends to utilize internally generated funds to finance the acquisition of computer and other equipment, if any. These acquisitions, and facilities, are not expected to be of material amounts. The Company does not expect to conduct any product research and development in the foreseeable future. No extraordinary purchase or sale of plant and equipment are expected beyond those in the regular course of the Company’s operations. All purchases will be financed through internally-generated funds and existing capitalization. Hiring of employees will be done in the regular course of business, if necessary. There are no known trends, events or uncertainties that are reasonably expected to have a material impact on the Company’s revenues or continuing operations. Performance for the Year Ended December 31, 2011 The Company made investments in the Philippine Bank of Communications (“PBCom”), Alpha Force Security Agency, Inc. (“Alpha Force”) and RRE Ventures Corporation (“RRE”). The Company’s investment in Acentic GmBh (“Acentic”), which was previously classified as “held for sale”, was equitized based on management’s recommendation and as approved by the Executive Committee of the Board of Directors of the Company to hold the investment on a long-term basis. The remaining 37.7% share in ETPI was sold to San Miguel Equity Securities, Inc. in October 2011. Cash and Cash Equivalents The Company reported total cash and cash equivalents of P 629 million. The reported balance is P 810 million lower than that of 2010. The decreased was mainly due to the acquisition of 36.64% equity interest in PBCom.
19. Arthur Winikoff Fao Obmvm 167,300 0.01%
20. Dees Securities Corporation 126,471 0.01%
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Receivables – net Net receivables increased by P 311 million mainly from the sale of the remaining 37.7% stake with ETPI. Investment Held for sale The decrease in investment held for sale of P596 million was caused by the reclassification of investment in Acentic into investment in associate as approved by the Executive Committee of the Board of Directors of the Company. Please see note regarding investment in Acentic below. Property and Equipment – net As of December 31, 2011, property and equipment, net of depreciation, posted at P8.8 million primarily consisting of ISMCC’s computer equipment, Network and Data Equipment, Transportation Equipment and other fixed assets, net of accumulated depreciation and impairment losses. Investment in associates and shares of stock The account at December 31 consists of the following: a) Investment in Acentic On December 22, 2009, the Company entered into an agreement relating to the sale and purchase in January 2010 of certain shares of Acentic GmbH with LBC Capital Sarl (LBC Capital), Host Union and Philweb Corporation. On January 11, 2010, the Company completed the acquisition on 32.5% of Acentic GmbH, a Germany based company engaged in hotels and other multi-dwelling establishment thru Host Union in the amount equivalent to P660 million. The above investment was presented as “Investment held for sale” in the 2010 financial statements following the commitment of the Company’s management on June 16, 2010, to a plan to sell the assets. Efforts to sell the investment have commenced, and a sale was expected by 2011. However, on November 14, 2011, the BOD approved to keep the above investment and withdrew the previous authorization to sell due to economic slowdown in Europe. As a result, the investment ceases to be classified as held for sale and equity method accounting has been applied and the carrying amount of the investment previously classified as held for sale was remeasured using the equity method of accounting. The difference between the remeasured equity amount and the carrying amount of the investment amounted to P64.41 million and is included in profit or loss. The carrying value as at December 31, 2011 amounted to P654 million.
b) Investment in Philippine Bank of Communications (PBCOM) ISMCC acquired 36.64% equity interest in PBCOM in 2011. The transfer of ownership was approved by the Bangko Sentral ng Pilipinas (BSP) on December 23, 2011. The carrying value as at December 31, 2011 amounted to P1.97 billion.
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c) Investment in RRE Ventures Corporation On June 17, 2011, the Company incorporated RRE Ventures Corporation (RRE), a wholly owned subsidiary. RRE’s total authorized capital subscribed and paid minimum capital of P6.25 million. As at December 31, 2011, RRE has no operations. This has not been consolidated in 2011 on the basis of immateriality. d) Investment in Alpha Force Security Agency Earlier in 2011, ISMCC acquired 10% equity interest in Alpha Force Security Agency, Inc. for a total consideration of P1.00 million. Other Non-Current Assets Other non-current asset pertains to escrow fund. An escrow agreement was entered to by ISMCC together with the other buyers of PBCOM on July 21, 2011 with PBCOM as the fund agent. Escrow fund includes excess of the contribution, net of settlement of acquisition cost and related expenses, and interest income earned. The fund was distributed to the investors in January 2012. Accounts Payable and Accrued Expenses The 51% (P128 million) reduction in trade payables and accrued expenses was mainly due to the payment of capital gains tax amounting to P117.5 million arising from sale of AGNP. Stock Options Stock options of P9.9 million represents cost of stock granted to employees. As of 2011 year end, there were no stock options exercised.
Income and Expenses The Company recorded a net income of P513.4 million in 2011. Net Income was substantially contributed by the Company’s gain on sale of remaining share in ETPI and equity in net earnings from PBCom and Acentic. Performance for the Year Ended December 31, 2010 The company reported deconsolidated balance sheet as of December 31, 2010 as a result of sale of AGNP. AGNP owns 40% stake in ETPI. Cash and Cash Equivalents The Company reported total cash and cash equivalents of P 1.438 billion. The reported balance is P 47.5 million higher than that of 2009. The increased was mainly contributed by the proceeds of subscription to 65.5 billion stock rights offerring. Receivables – net Net receivables increased by P 1.3 billion mainly from the sale of the 40% stake with ETPI.
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Investment held for sale The above investment represents 32.5% ownership in Acentic, a Germany based company engaged in hotels and other multi-dwelling establishment thru Hos Union. The investment is presented as as held for sale following the commitment of the Group’s management on June 16, 2010, to plan to sell the assets. Efforts to sell the investment have commenced, and a sale is expected by 2011. However, on November 14, 2011, the BOD approved to keep the above investment and withdrew the previous authorization to sell due to economic slowdown in Europe. Other Current Assets The decrease in other current assets of P96 million was mainly due to deconsolidation of ETPI. Property and Equipment – net As of December 31, 2010, property and equipment, net of depreciation, posted at P12.3 million primarily consisting of ISMCC’s computer equipment, Network and Data Equipment, Transportation Equipment and other fixed assets, net of accumulated depreciation and impairment losses. Property and equipment pertaining to ETPI as of December 31, 2010 were derecognized due to reduction of shareholdings of the Company from 77.7% to 37.7% as a result of sale of AGNP. Investment in Shares of Stock The 1.4 billion amount of investment in shares of stock as of December 31, 2010 represents the remaining value of the 37.7% equity interest of ISMCC in ETPI. Other Non-Current Assets Other non-current assets consists of ISMCC’s Deferred tax assets aggregating to P63 thousand. Goodwill, cash under legal restriction, creditable withholding tax, rental deposits and miscellaneous was derecognized in 2010 as a result of the deconsolidation Accounts Payable and Accrued Expenses The 57% (P324 million) reduction in trade payables and accrued expenses was mainly due to deconsolidation of ETPI. Capital Stock On September 9, 2010, the SEC approved the Company’s application for the amendment of its Articles of Incorporation to reflect the increase in par value of its common shares from P0.01 per share to P1.00 per share. Stock Options
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Stock options of P9.9 million represents cost of stock options granted to employees that have vested. As of 2010 year end, there were no stock options exercised.
Retained Earnings The increase in retained earnings of P259.6 million was mainly brought about by the Company’s share on net income of ETPI and the gain on sale of 100% equity interest in AGNP. The Company’s net income contribution during the year was P259.6 million. Minority Interest No minority interest computed as of December 31, 2010 due to deconsolidation. Income and Expenses The Company recorded a consolidated net income of P282 million in 2010 out of total operating revenues of P1 billion. Net Income was substantially contributed by the Company’s operation, gain on sale of AGNP, interest income and dividend income from foreign associate. The income in 2010 was decreased by P64 million as adjustment to reflect the effect of the equitization of the investment in Acentic as brought by the reclassification of the account. Performance for the Year Ended December 31, 2009 The company reported consolidated financial statements for the year 2009 in view of its 77.7% ownership of ETPI. Cash and Cash Equivalents The Company reported total cash and cash equivalents of P 1.391billion contributed by the Parent Company (P1.174 billion) and ETPI (P217.3 million). The reported balance is P 477.4 million higher than that of 2008 year end which amount was contributed by the proceeds of subscription to 65.5 billion rights offer shares. Receivables – net Net receivables increased by P 49.2 million which largely consists of increase in ETPI’s trade and other receivables net of allowance for impairment loss. Other Current Assets The rise in other current assets of P55.8 million was largely attributed to ETPI’s increased materials and supplies, prepaid expenses and input VAT.
Property and Equipment – net As of December 31, 2009, property and equipment, net of depreciation, was posted at P2.6 billion primarily consisting of ETPI’s land and building, telecommunications and
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power equipment, investment in foreign cable system and other fixed assets, net of accumulated depreciation and impairment losses. Pension Assets This refers to the difference of ETPI’s fair value of retirement plan assets against present value of defined benefit obligation plus unrecognized actuarial loss, the aggregate is P156.5 million. Other Non-Current Assets Other non-current assets consists of ETPI’s goodwill and cost of investments in shares of stock of a Singaporean Company and other non-current assets aggregating to P78.5 million, 20% lower than that of the previous year’s balance.
Accounts Payable and Accrued Expenses The 13% (P82.9 million) reduction in trade payables and accrued expenses was mainly due to payments of capital and operations-related expenditures of the company. Capital Stock The increase in capital stock of P655.5 million resulted from the parent company’s issuance of 65.5 billion rights offered shares at P0.01 per share par value. Stock Options Stock options of P6.7 million represents cost of stock options granted to employees that have vested. As of 2009 yearend, there were no stock options exercised. Retained Earnings
The increase in retained earnings of P116.6 million was mainly brought about by parent holder’s share on the net income of ETPI. Parent company’s net income contribution during the year was P2.4 million. Minority Interest The amount of P 655.1 million represents book value of the minority interest in ETPI as of December 31, 2009.
Income and Expenses The Company recorded a consolidated net income of P149.4 million in 2009 out of total operating revenues of P987.2 million. Net Income was substantially contributed by the Company’s operation, interest income and dividend income from foreign associate.
Item 7. Financial Statements See attached.
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Item 8. Changes in and Disagreements to Accountants on Accounting and Financial Disclosure There were neither changes in nor disagreements with accountants on accounting / financial disclosure.
Part III – CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Registrant
Directors and Executive Officers ISMCC’s Board of Directors is composed of 15 members elected by and from among the Company’s stockholders. The Board is responsible for providing overall management and direction to the Company. The directors and executive officers of the Company and a brief background on each are discussed below.
Age Position/Citizenship/Period Served/Term of
Office Roberto V. Ongpin 75 Chairman of the Board/Director/Filipino/12
yrs./1 yr. Craig E. Ehrlich 56 Vice-Chairman/Director/American/9yrs./1yr. Eric O. Recto 48 President/Director/Filipino/5 yrs./1yr. Mario J. Locsin 60 Executive Vice President/Director/Filipino/2
yrs./1 yr. Gregorio Ma. Araneta III 64 Director/Filipino/7 yrs./1 yr. Walter W. Brown 71 Director/Filipino/2 yrs./1 yr. Pablo L. Lobregat 58 Director/Filipino/2 yrs./1 yr. Alberto M. Montilla 76 Director/Filipino/16 yrs./1yr. Mario A. Oreta 65 Director/Filipino/2 yrs./1 yr. Rafael B. Ortigas 40 Vice President/Director/Filipino/8 yrs./1 yr. Ignacio R. Ortigas 71 Vice President/Director/Filipino/16 yrs./1 yr. Dennis O. Valdes 50 Director/Filipino/3 yrs./1 yr. Roberto V. San Jose 70 Director/Filipino/8 yrs./1 yr. Reynaldo G. David 68 Independent Director/Filipino/1 yr./1 yr. Jose Ernesto C. Villaluna, Jr.
71 Independent Director/Filipino/17 yrs./1 yr.
Rodolfo Ma. A. Ponferrada
35 Corporate Secretary/Filipino/3 yrs./1 yr.
Jovita D.S. Larrazabal 30 Assistant Corporate Secretary/Filipino/1 yr./1 yr. Zaldy M. Prieto 37 Chief Finance Officer/Treasurer/Filipino/3 yrs/1
yr.
The number of years indicated after the position and citizenship refers to the period served as a director/officer. Mr. Roberto V. Ongpin was elected Chairman of the Board of the Company in July 2000. He is currently the Chairman of the Board of Philippine Bank of
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Communications, PhilWeb Corporation, Alphaland Corporation, Atok-Big Wedge Co., Inc., The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc. He is a Director of Petron Corporation, San Miguel Corporation and Ginebra San Miguel, Inc. In Hong Kong, he is the Non-Executive Director of Shangri-La Asia and the Deputy Chairman of the South China Morning Post, both listed in the Hong Kong Stock Exchange. He is also the Chairman of Acentic GmbH (Germany) and a Non-Executive Director of Forum Energy PLC (London). Mr. Ongpin joined SGV & Co. in 1964 and was Chairman and Managing Partner of the firm from 1970 to 1979. He served as the Minister of Trade and Industry of the Republic of the Philippines from 1979 to 1986. Mr. Ongpin graduated cum laude in Business Administration from the Ateneo de Manila University, is a Certified Public Accountant, and has an MBA from the Harvard Business School. Mr. Craig E. Ehrlich has been a Director of the Company since July 2003 and was elected as Vice Chairman in May 2006. He has been a Director of PhilWeb Corporation since May 2002. He is the former, long-time chairman of the GSM Association (GSMA), the global trade association representing more than 700 2nd and 3rd generation network operators and over 180 manufacturers and suppliers, serving more than 3.5 billion customers across 218 countries and territories. He is a board member of the International Telecommunications Union (ITU), Hutchison Telecommunication Group, Bharti Airtel (India’s largest company by market capitalization), chairman of Kbro, Taiwan’s largest cable TV company, and founding chairman of Novare Technologies Ltd., a Hong Kong software development company. He was former group managing director of Sunday Communications Limited, a Hong Kong mobile operator. Mr. Ehrlich, a Hong Kong resident since 1987, holds a BA degree from the University of California Los Angeles, a master’s degree from Occidental College, and a postgraduate fellowship with the Coro Foundation. Mr. Eric O. Recto was elected Director and President of the Company in March 2005. He is the Co-Chairman and a Director of Philippine Bank of Communications, the Vice-Chairman and a Director of PhilWeb Corporation, Alphaland Corporation, Atok-Big Wedge Co., Inc., The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc., and the President and a Director of Petron Corporation. He is a Member of the Board of Supervisors of Acentic GmbH as well as a Director of Manila Electric Company and San Miguel Corporation. Before that, he was Undersecretary of the Department of Finance of the Republic of the Philippines in charge of handling both the International Finance Group and the Privatization Office. Before his work with the government, he was CFO of Alaska Milk Corporation and prior to that, Belle Corporation. Mr. Recto has a degree in Industrial Engineering from the University of the Philippines, as well as an MBA from the Johnson School, Cornell University. Mr. Mario J. Locsin was elected Independent Director of the Company in November 2007 and Director and Executive Vice President in October 2008. He is also currently the Vice Chairman and a Director of Philippine Bank of Communications, and the President of Atok-Big Wedge, Co., Inc., Alphaland Heavy Equipment Corporation and Inpilcom, Inc. He is also a Director of PhilWeb Corporation and an Independent Director of Alphaland Corporation, The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc. In the past, he served as the President and COO of Eastern Telecommunications Philippines, Inc., a Director of Belle Corporation, APC Group, Southwest Resources, Philippine Long Distance Telephone Co., and
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PilipinoTelephone Co., as well as a Director, Executive Vice President and COO of Philippine Airlines. Mr. Locsin is also a consultant of Acentic Asia Ltd. He holds a degree in LIA-Honors Math from De La Salle University and a degree of Masters in Business Administration from the University of San Francisco. Mr. Mario A. Oreta was elected a Director of the Company in May 2007. He is currently the President and a Director of Alphaland Corporation, Alphaland Development, Inc., Alphaland Balesin Island Resort Corporation, Alphaland Makati Place, Inc., Alphaland Makati Tower, Inc., The City Club at Alphaland Makati Place, Inc., Alphaland Balesin Island Club, Inc., Alphaland Marina Corporation, Alphaland Marina Club, Inc., Aklan Boracay Properties, Inc., and Alphaland Property Management Corporation, the Vice Chairman and a Director of Alphaland Heavy Equipment Corporation and Alphaland Reclamation Corporation, and Chief Operating Officer of Jet Eagle International Limited, Inc. He is Chairman of Major Holdings, Inc., Major Properties, Inc., and Major Homes, Inc. He is also an Independent Director of PhilWeb Corporation and a Director of Atok-Big Wedge Co., Inc. He is the Founder and Managing Partner of Tanjuatco Oreta and Factoran Law Offices. Mr. Rafael B. Ortigas was elected Vice President and a Director of the Company in April 2002. He is a Director of PhilWeb Corporation, Executive Vice President of Sagitro, Inc. and Itogon-Suyoc Resources, Inc., Vice President of Leafar Commercial Corporation, Chairman, President and Director of Rising Sons of 3K, Inc., Chairman and Director of CK3K, Inc. and GSC-3KCK, Inc., and Director of Vinmer Realty, Inc., Concrete Aggregates Corporation, Director and Treasurer of Creative Trade Center Services, Inc. and Delegate General Partner of Ortigas and Company, Ltd. Mr. Ignacio R. Ortigas has been a Director of the Company since 1993 and was elected Vice President in April 2002. He is President of Sagitro, Inc. and a General Partner of Ortigas & Co., Ltd. Mr. Gregorio Ma. Araneta III was elected a Director of the Company in July 2003. He has been Chairman of Gregorio Araneta Incorporated, Carmel Development Corporation, Gregorio Araneta Management Corporation, and Gamma Holdings Corporation and the Vice Chairman and CEO of Araneta Properties, Inc. since 2003. Mr. Walter W. Brown was elected a Director of the Company in May 2007. He is presently the Chairman of A Brown Company, Inc., Palm Thermal Consolidated Holdings Corporation, International Cleanvironment Systems, Inc., North Kitanglad Agricultural Company, Inc., PhiGold and A Brown Energy & Resources Dev’t. Inc., President of Monte Oro Resources and Energy Inc., the Vice Chairman and a Director of Atok-Big Wedge Co., Inc., and a Director of Forum Energy plc, and PBJ Corporation. He was also the Chairman and Chief Executive Officer of Philex Mining Corporation from January 2004 to December 2009. He received two undergraduate degrees: B.S. Physical Science (1959) and B.S. Geology (1960), both from the University of the Philippines, and post graduate degrees from Stanford University: M.S. Economic Geology (1963), and Ph.D. in Geology, and Major in Geochemistry (1965). He was a candidate in Master of Business Economics (1980) from the University of Asia & the Pacific (formerly Center for Research & Communications). He is currently the Chairman and Director of Family Farm School (PPAI), Chairman and President of StudiumTheologiae Foundation, Vice Chairman of the Board of Trustees of Xavier
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University, and Member of the Chamber of Mines of the Philippines Inc., and the Geological Society of the Philippines. Mr. Dennis O. Valdes was elected a Director of the Company in May 2007. He is currently the President and a Director of PhilWeb Corporation as well as a Director of Alphaland Corporation and Atok-Big Wedge Co., Inc. His previous work experience includes 10 years with the Inquirer Group of Companies, as a Director of the newspaper, and also expanding their Internet, printing, and ink-making operations. Prior to that, he spent six years with The NutraSweet Company developing its businesses in Asia. He is a Certified Public Accountant, graduated magna cum laude in Business Administration and Accountancy from the University of the Philippines and has an MBA from the Kellogg School of Management, Northwestern University. Mr. Alberto M. Montilla was formerly President and Chairman of the Company from 1995 to 2001. He has been a Director since 1993. Mr. Montilla is currently a Vice President and Secretary of Sagitro, Inc. Mr. Pablo L. Lobregat was elected a Director of the Company in November 2007. He was a Director of Eastern Telecommunications Philippines, Inc. from 2000 to 2008. He is currently the President of Crystal Sugar Co., Inc, Aerocom Investors & Managers, Inc. and Philippine Sugar Research Institute Foundation, Inc. He received a degree in Business Management from Instituto Catolico de Artes Empresariales in Madrid, Spain. Mr. Roberto V. San Jose was elected a Director of the Company in 2011. He was the Corporate Secretary of the Company from February 2002 to May 2011. He is also the corporate secretary of Alsons Consolidated Resources, Inc., Anglo-Philippine Holdings Corporation, Energy Development Corporation, Premiere Entertainment Productions, Inc. and Solid Group, Inc. He is a director and/or officer of various companies which are clients of Castillo Laman Tan Pantaleon and San Jose Law Offices where he is name partner and special counsel. He is a member of the Philippine Bar. Mr. Jose Ernesto C. Villaluna, Jr. was elected as Independent Director of the Company in 1993. He is also a Director of Philex Mining Corporation and Philex Petroleum Corporation, and President of Valle Verde Country Club. Mr. Villaluna was formerly Vice Chairman and President of the Company, President and COO of Philex Mining Corporation, Executive Vice President of Apex Mining and Surigao Consolidated Mining Company, Vice President (Gold Sector) and Director of the Chamber of Mines of the Philippines. Mr. Reynaldo G. David was elected as Independent Director of the Company in May 2011. He is currently a Director of Bank of Commerce and also an Independent Director of Petron Corporation and Atok-Big Wedge Co., Inc. He was formerly the President & CEO of the Development Bank of the Philippines from October 2004 to June 30, 2010. He received his degree in Liberal Arts-Commerce (1963) from the De La Salle University. He also undertook the Advance Management Program (1974) at the University of Hawaii. He has also been a recipient of honorary doctorate degrees from Palawan State University (2005) and West Visayas State University (2009). Mr. David is a certified public accountant.
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Mr. Rodolfo Ma. A. Ponferrada was elected Corporate Secretary of the Company in May 2011 and served as its assistant corporate secretary from May 2007 to May 2011. He is also currently the Corporate Secretary of Alphaland Corporation, Atok-Big Wedge Co., Inc., Philippine Bank of Communications, The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc.; a Senior Vice President in Philweb Corporation; an Assistant Corporate Secretary of Eastern Telecommunications Philippines, Inc.; and a Director (representing the private sector) of the Social Housing Finance Corporation. He is a member of the Philippine Bar and a graduate of the University of the Philippines College of Law. Ms. Jovita D.S. Larrazabal was elected Assistant Corporate Secretary of the Company in May 2011. She also serves as one of the Company's legal counsel. Currently, she is also the Assistant Corporate Secretary of Alphaland Corporation. Prior to joining the group, she was an associate of Sycip Salazar Hernandez & Gatmaitan and Martinez Vergara Gonzalez & Serrano. She is a member of the Philippine Bar. Ms. Larrazabal holds a Juris Doctor degree from the Ateneo De Manila University-College of Law and a Bachelor of Arts degree major in Management Economics from the College of Arts and Sciences of the same university. Mr. Zaldy M. Prieto was elected as Chief Finance Officer and Treasurer of the Company in November 2008. He is also CFO of PhilWeb Corporation. Mr. Prieto is a certified public accountant and certified financial consultant. His previous work experiences include being a senior tax consultant of SGV & Co. in 1998, assistant vice president for finance in Ford Motor Company in 2007 and plant controller and assistant finance director of James Hardie Philippines in 2008. He is a member of the Philippine Institute of Certified Public Accountants and Institute of Financial Consultants. New Nominee for Director VICTOR C. MACALINCAG, Independent Director Mr. Macalincag is an Independent Director of Crown Equities, Inc. and a Director of Semirara Mining Corporation, Republic Glass Holdings Corp., SEM Calcaca Power Power Corporation and Finman Rural Bank. He was the President of Trade & Investment Development Corporation of the Philippines which is presently known as PHILEXIM (formerly PhilGuarantee) from 1991 until his resignation in 2001. He was the Deputy Minister of Finance from 1981 to 1986 and Undersecretary of Finance from 1986 to 1991. He also held the position of National Treasurer from 1981 to 1988. Mr. Macalincag is a Certified Public Accountant. He has a Bachelor of Arts in Business Administration from the University of the East. He also earned a Master of Arts in Economics from the same university. He finished a fellowship program conducted by the Economic Development Institute of the World Bank, Washington D.C. U.S.A. in 1971. Except for Mr. Reynaldo G. David, all the foregoing directors will be nominated for re-election to the Board of Directors at the meeting. No director has resigned or declined to stand for re-election to the Board of Directors since the date of the last annual stockholders’ meeting because of a disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
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As of the date of this Annual Report, the Company has two (2) incumber independent directors, Messrs. Jose Ernesto C. Villaluna, Jr. and Reynaldo G. David.
Except for the foregoing, there are no other significant employees of the Company. Mr. Alberto M. Montilla is the brother-in-law of Atty. Ignacio Ortigas. Mr. Rafael B. Ortigas is a nephew of Messrs. Ortigas and Montilla. Messrs. Eric O. Recto and Dennis O. Valdes are nephews of Mr. Roberto V. Ongpin. Other than the foregoing, none of the directors and officers is related to each other by consanguinity or affinity. None of the directors and officers is involved during the past five years in any bankruptcy proceeding. Neither have they been convicted by final judgment in any criminal proceeding or been subject to any order, judgment or decree of competent jurisdiction, permanently or temporarily enjoining, barring, suspending, or otherwise limiting their involvement in any type of business, securities, commodities or banking activities, nor found in action by any court of administrative bodies to have violated a securities or commodities law.
Item 10. Executive Compensation
For the fiscal years ended 31 December 2009 2010 and 2011, the Company did not pay its directors. For the fiscal year ending 31 December 2012, the Company does not intend to pay its directors. There are no standard arrangements with the company’s directors other than those that have already been disclosed. There are no other arrangements with the company’s directors other than those that have already been disclosed.
Annual Compensation
(a) (b) (c) (d) (e) Name and Principal Position Year Salary Bonus Other Annual Comp.
1. Roberto V. Ongpin21 N/A N/A N/A N/A Chairman
(elected in July 2001) 2. Craig E. Ehrlich1 N/A N/A N/A N/A
Vice Chairman (elected in July 2003) (elected Vice Chairman in May 2006)
3. Eric O. Recto1 N/A N/A N/A N/A
President
1 All the above mentioned executives do not receive salaries from the Company.
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(elected in March 2005) 4. Mario J. Locsin1 N/A N/A N/A N/A
Executive Vice President (elected in October 2008)
5. Zaldy M. Prieto1 N/A N/A N/A N/A CFO & Treasurer (elected in November 2008)
(a) (b) (c) (d) (e) Name and Principal Position Year Salary Bonus Other Annual Comp.
Aggregate Compensation of the CEO & Most Highly-Paid Executive
2007 0 0 0 2008 0 0 0 2009 0 0 0
(a) (b) (c) (d) (e) Name and Principal Position Year Salary Bonus Other Annual Comp.
All Officers and Directors as a Group Unnamed
2007 0 0 0 2008 0 0 0
2009 0 0 0 Employment Contracts and Termination of Employment and Change-in-Control Arrangements
No executive officer has an employment contract with the Company.
There have been no terminations of employment and neither have there been any change-in-control arrangements with the present management.
Item 11. Security Ownership of Certain Record Beneficial Owners and Management
1) Security Ownership of Certain Record and Beneficial Owners
As of December 31, 2011, ISM Communications Corporation knows of no one who beneficially owns more than 5% of its common stock except as set forth in the table below:
Title of Class
Name and Address of Record Owner and
Relationship with the Company
Name of Beneficial Owner and Relationship
with Record Owner
Citizenship Amount and Nature of
Record/Beneficial Ownership
(indicate “r” or “b”)
Percent of Class
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Common PhilWeb Corporation3 20th Floor, Alphaland Southgate Tower, 2258 Chino Roces Avenue corner EDSA, Makati City (Stockholder)
PhilWeb Corporation is a publicly-listed
corporation (See footnote 1)
Filipino 388,453,859 (b) 77,144,542 (r)
20.27%
4.03%
Common Boerstar Corporation4 6766 Ayala Avenue, Legaspi Village, Makati City (Stockholder)
Messrs. Roberto V. Ongpin and Eric O.
Recto (See footnote 2)
Filipino 105,474,116 (r)
5.51%
Common EMDCD Ltd. (EMDCD)5 M&C Corporate Services Ltd., PO Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands (Stockholder)
Ashmore Investment Management Limited
(see footnote 3)
British 196,618,486 (r)
10.26%
Common Asset Holder PCC No. 2 Ltd. Re: Ashmore Asian Recovery Fund (ARF) 6 New Street, Peter Port, Guernsey (Stockholder)
Ashmore Investment Management Limited
(see footnote 4)
British 556,226,748 (r)
29.03%
Security Ownership of Management
As of December 31, 2012, the security ownership of the members of the Board of Directors and that of management are as follows:
Title of Class Name of Director/Officer Citizenship Number of Shares and
Nature of Beneficial Ownership
Percent of Class
Common Roberto V. Ongpin (Chairman of the Board/Director)
Filipino 1,520 (direct) 89,652,999 (indirect)
4.68%
Common Craig E. Ehrlich (Vice Chairman/Director)
American 21,382,600 (direct)
1.12%
Common Eric O. Recto (President/Director)
Filipino 50 (direct) 15,821,117 (indirect)
0.83%
Common Mario J. Locsin (Executive Vice President/Director)
Filipino 100 (direct) 0.00%
Common Rafael B. Ortigas (Vice President/Director)
Filipino 9,508,064 (direct)
0.50%
Common Ignacio R. Ortigas (Vice President/Director)
Filipino 20,565,354 (direct) 14,006,524 (indirect)
1.80%
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Common Alberto M. Montilla (Director)
Filipino 27,974,120 (direct) 5,065,674 (indirect)
1.72%
Common Gregorio Ma. Araneta III (Director)
Filipino 2 (direct) 82,164,016 (indirect)
4.29%
Common Jose Ernesto C. Villaluna, Jr. (Independent Director)
Filipino 7,581,732(direct) 0.40%
Common Reynaldo G. David (Independent Director)
Filipino 1,000(direct) 0.00%
Common Pablo L. Lobregat (Director)
Filipino 50 (direct) 0.00%
Common Walter W. Brown (Director)
Filipino 50 (direct) 0.00%
Common Mario A. Oreta (Director)
Filipino 100 (direct) 0.00.%
Common Dennis O. Valdes (Director)
Filipino 4,200 (direct) 0.00%
Common Roberto V. San Jose (Director)
Filipino 250 (direct) 0.00%
Common Rodolfo Ma. A. Ponferrada (Corporate Secretary)
Filipino 0 (direct) 0.00%
Common Jovita D.S. Larrazabal (Assistant Corporate Secretary)
Filipino 0 (direct) 0.00%
Common Zaldy M. Prieto (Chief Finance Officer/Treasurer)
Filipino 0 (direct ) 0.00%
Aggregate Ownership of Directors and Officers as a Group 293,729,522 15.33%
There are no voting trust agreements or any other similar agreement that may result in a change in control of the Company of which the Company has any knowledge.
Item 12. Certain Relationships and Related Transactions
In the normal course of business, the Group has the following related party
transactions:
a. The Company has an agreement with PhilWeb, a stockholder, where the latter handles the administration function of the Company. Total expenses which include salaries of common personnel, rental, communication and utility charged by PhilWeb amounts to P16.1 million, P13.16 million, P10.82 million in 2011, 2010 and 2009, respectively (see Note 15). b. The Company avails of noninterest-bearing cash advances from PhilWeb to finance working capital requirements. The Company has no key management personnel for the years ended December 31, 2011, 2010 and 2009. All the administrative functions of the Company during the transaction years were being handled by PhilWeb.
Other than the foregoing, there has been no transaction outside of the ordinary course of business during the last two years, nor is any transaction presently proposed, to which the Company was or is to be a party in which any director or executive officer of the Company, or owner of more than 10% of the Company’s voting securities or any member of the immediate family of any of the foregoing persons, had or is to have a direct or indirect material interest. In the ordinary and regular course of business, the
28
Company had or may have had transactions with other companies in which some of the foregoing persons may have an interest. No person, natural or juridical, owns more than 50% of the Company’s voting securities.
Part IV – EXHIBITS AND SCHEDULES
Item 13. Exhibit and Reports on SEC Form 17-C
a. Exhibit
None
b. Reports on SEC Form 17-C
Date of Report
Contents of Report
June 22, 2011
ISM disclosed that the major shareholders of PBCom (acting through Macquarie Capital (Singapore) Pte. Limited) have selected the ISM Group as PBCom's strategic third party investor, subject to regulatory approvals.
July 26, 2011
ISM disclosed the signing of a Memorandum of Agreement (“MOA”) involving the sale (subject to regulatory approvals) of 97.28% of PBCom’s outstanding capital to a group of investors led by the Company. The MOA was signed by the three major shareholders of PBCom, namely: the Chung, Luy and Nubla Groups and the ISM Group. The total consideration was Php4,681,316,107.24. A special meeting of PBCom’s Board of Directors was held to elect the bank’s new officers and directors led by Messrs. Ongpin and Recto.
October 20, 2011
ISM disclosed its entering into a Share Purchase Agreement for the sale of its remaining 37.7% stake in ETPI to San Miguel Equity Securities, Inc. for a total consideration of Php1,507,777,692.00.
December 23, 2011
ISM disclosed that the acquisition by the ISM Group of 47,094,807 common shares and 120,000,000 preferred shares of PBCom at Php27.88 per share was successfully transacted through the facilities of the Exchange. ISM also informed the Exchange that the Securities and Exchange Commission granted the company’s request that the acquisition be exempted from the mandatory tender offer requirements under Section 19 of the Securities Regulation Code.
