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[Note: for the website only. NOT to be included in the printed version of the Prospectus:]
The Prospectus is being displayed in the website to make the Prospectus accessible to more investors. The Philippine Stock Exchange, Inc. (“PSE”) assumes no responsibility for the correctness of any statements made or opinions or reports expressed in the Prospectus. Furthermore, the PSE makes no representation as to the completeness of the Prospectus and disclaims any liability whatsoever for any loss arising from or in reliance in whole or in part on the contents of the Prospectus.
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Initial Public Offering of 36,012,000 primary common shares of Calata Corporation at an Offer Price of PhP7.50 per share to be listed and traded on the Second Board of the Philippine Stock Exchange, Inc.
Issue Manager and Underwriter
Unicapital, Inc.
Selling Agents
The Trading Participants of The Philippine Stock Exchange, Inc.
Financial Advisor
Absolute Traders and Consulting Services, Inc.
This Prospectus is dated May 9, 2012 ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATION CONTAINED HEREIN IS TRUE AND CURRENT.
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CALATA CORPORATION Mc Arthur Hi-way, Banga 1st, Plaridel Bulacan, Philippines (044) 795 0136 http://www.calatacorp.com This Prospectus relates to the offer and sale to the public of 36,012,000 Common Shares with par value of PhP1.00 per share (the “Offer Shares”) of Calata Corporation (the “Company”), a corporation organized under Philippine law, by way of subscription and sale on the Second Board of The Philippine Stock Exchange (“PSE”) at an Offer Price of PhP7.50 per share (the “Offer Price”). The offering will consist of a primary offer (the “Primary Offer”) to be offered from the Company’s authorized but unissued common stock, of 36,012,000 Common Shares at the Offer Price. After the completion of the Offer, the Offer shares will represent ten percent (10%) of the Company’s issued and outstanding capital stock of 360,112,000 common shares. The Offer Shares shall be listed and traded under the stock symbol “CAL.” On December 29, 2011, the Company filed a Registration Statement covering the Offer Shares with the Securities and Exchange Commission (“SEC”), in accordance with the provisions of the Securities Regulation Code. On December 29, 2011, the Company filed its application for the listing and trading of the Offer Shares and the shares of the company that are already issued and outstanding on the PSE. The Offer is conditioned on the listing of the Offer Shares on the PSE. Approval by the PSE will be granted subject to compliance by the Company with the requirements for listing. However, such approval for listing is merely permissive and does not constitute a recommendation or endorsement of the Offer by the PSE. The PSE assumes no responsibility for the correctness of any of the statements made or opinions expressed in this Prospectus. Furthermore, the PSE makes no representation as to the completeness and expressly disclaims any liability whatsoever for any loss arising from or in reliance upon the whole or any part of the contents of this Prospectus. The Company was registered with the SEC on July 23, 1999 under the name Planters Choice Agro Products, Inc. with an authorized capital stock of PhP1,000,000.00 divided into 10,000 common shares with a par value of PhP100.00. On February 22, 2010, the Company obtained approval from the SEC for the change in its corporate name to Calata Corporation. On August 17, 2011, the SEC approved the Company’s application for increase in capital stock from an authorized capital stock of PhP1,000,000.00 divided into 10,000 common shares with a par value of PhP100.00 per share to PhP345,400,000.00 divided into 345,400,000 shares with a par value of PhP1.00 per share. Thereafter, on August 25, 2011, the SEC approved a further increase in the Company’s authorized capital stock to PhP845,400,000.00 divided into 845,400,000 shares with a par value of PhP1.00 per share. Immediately prior to the Offer, the Company has a total of 324,100,000.00 outstanding Common Shares. Immediately after the completion of the Offer, the Company will have a total of 360,112,000 Common Shares issued and outstanding. All of the Common Shares of the Company in issue or to be issued pursuant to the Offer (collectively the “Common Shares”) are unclassified and have, or upon issue will have, identical rights and privileges. The Common Shares may be owned by any person or entity regardless of citizenship or nationality subject to the limits prescribed by the Philippine Constitution and laws on foreign ownership for certain types of domestic companies. See “Plan of Distribution” and “Philippine Foreign Investment, Foreign Ownership” on pages 26 and 197, respectively.
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The Company’s Board of Directors (the “Board”) is authorized to declare cash or stock dividends or a combination thereof. A cash dividend declaration requires the approval of the Board and no shareholder approval is necessary. A stock dividend declaration requires the approval of the Board and shareholders representing at least two-thirds of the Company’s outstanding capital stock. Holders of outstanding shares on a dividend record date for such shares will be entitled to the full dividend declared without regard to any subsequent transfer of shares. The Company has no fixed dividend policy as of the moment but it intends its dividend policy whether in stock or in cash to be strictly subject to statutory limitations. See “Dividend Policy” on page 43. Through the Primary Offer and based on the Offer Price, the Company expects to raise gross proceeds of approximately PhP270,090,000.00. The Offer Price was determined on the basis of a price-to-earnings (P/E) multiple variation approach and through a book-building process. See Determination of the Offer Price on page 28. The net proceeds from the Primary Offer, determined by deducting from the gross proceeds, the total issue management, underwriting and selling fees, listing fees, taxes and other related fees and expenses, will be used by the Company to establish additional distribution outlets nationwide and for general working capital requirements, to finance the growth and expansion plans of its business. Unicapital, Inc., as the Issue Manager and Underwriter, shall receive an estimated fee of 3.0% of the gross proceeds of the Offer, inclusive of amounts to be paid to any other underwriters and selling agents. See “Use of Proceeds” on page 36. Unless otherwise stated, all information contained in this Prospectus has been supplied by the Company. The Company, through its Board, having made all reasonable inquiries, accepts full responsibility for the information contained in this Prospectus and confirms that this Prospectus contains all information with regard to the Company, its business and operations and the Offer Shares, which as of the date of this Prospectus are material in the context of the Offer; that, to the best of its knowledge and belief as of the date hereof, the information contained in this Prospectus are true and correct and are not misleading in any material respect; that the opinions and intentions expressed herein are honestly held; and, that there are no other facts, the omission of which makes this Prospectus, as a whole or in part, misleading in any material respect. The delivery of this Prospectus shall not, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof. Unicapital, Inc. as the Issue Manager and Underwriter, will firmly underwrite the Offer Shares and warrants that it has exercised the level of due diligence required under existing regulations in ascertaining that all material information contained in this Prospectus are true. Except for its failure to exercise the required due diligence, the Issue Manager and the Underwriter assumes no responsibility for any breach of the representations of the Company. See “Plan of Distribution” on page 26. Absolute Traders and Consulting Services, Inc. is the Financial Advisor of the Company for the IPO. Market data and certain industry information used throughout this Prospectus were obtained from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Similarly, internal surveys, industry forecasts and market research, while believed to be reliable, have not been independently verified and neither the Company nor the Issue Manager and Underwriter make any representation as to the accuracy and completeness of such information. In making an investment decision, would-be applicants are advised to carefully consider all the information contained in this Prospectus, including the following key points characterizing potential risks in an investment in the Offer Shares:
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Risks relating to the Company and its business, including:
Dependency on programs developed or supported by the Department of Agriculture of the Philippines;
Risk of being affected by changes in the preferences or purchasing power of consumers;
Risks of the Company not executing its sales strategy efficiently;
Risks of Natural Calamities and Pestilence;
Risk of Outbreak of Animal Diseases;
Exposure to Liquidity Risk;
Credit Risk;
Dependence on the company’s sales team;
Risk of products not meeting customer’s requirements and those that are related to contracts/business arrangements with customers; Risk of Non-exclusivity of distribution agreements/contracts/business arrangements, duration and terms for renewal and those that are related to distribution agreements/contracts/business arrangements with suppliers.
Work Stoppage
Risk of not effectively implementing the business/expansion plan.
Regulatory Risk Risks relating to the Offer Shares, including:
No guarantee of listing on the PSE;
Potential limited liquidity in the market for the Offer Shares and market volatility of the price for the Offer Shares;
Dilution. Risks relating to the Philippines, including
Slowdown in the Philippine economy;
Political or social instability For a more detailed discussion on the risks in investing, see section on “Risk Factors” on page 29 of this Prospectus, which, while not intended to be an exhaustive enumeration of all risks, must be considered in connection with a purchase of the Offer Shares. The readers of this Prospectus are further enjoined to consult their financial advisers, tax consultants, and other professional advisers with respect to the acquisition, holding, or disposal of the Offer Shares described herein. This Prospectus includes forward-looking statements. The Company has based these forward-looking statements largely on its current expectation and projections about future events and financial trends affecting its business and operations. Words including, but not limited to “believe”, “may”, “will”, “estimates”, “continues”, “anticipates”, “intends”, “expects”, and similar words are intended to identify forward-looking statements. In light of the risks and uncertainties associated with forward-looking statements, investors should be aware that the forward-looking events and circumstances in this Prospectus may not occur. The Company’s actual results could differ significantly from those anticipated in the Company’s forward-looking statements. The Offer Shares are offered solely on the basis of the information contained and the representations made in the Prospectus. No dealer, salesman or other person has been authorized by the Company or the Issue Manager and Underwriter to issue any advertisement or to give any information or make any representation in connection with the Offer other than those contained in this Prospectus and, if issued, given or made, such advertisement, information or
representation must not be relied upon as having been authorized by the Company or the lssueManager and Undenrriter.
This Prospectus does not constitute an offer of, or an invitation by or on behalf of, the Companyor the lssue Manager and Undenrvriter to subscribe for or purchase any of the Offer Shares.Neither may this Prospectus be used as an offer to, or solicitation by, anyone in any jurisdiction orin any circumstance in which such offer or solicitation is not authorized or lawful. The distributionof this Prospectus and the Offer in certain jurisdictions may be restricted py law. Persons whocome into possession of this Prospectus are required by the Company and the lssue Managerand underwriter to inform them about, and to observe any such restrictions.
ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATIONCONTAINED HEREIN IS TRUE AND CURRENT.
The Company is organized under the laws of the Republic of the Philippines. lts principal office islocated at Mc Arthur Hi-way, Banga 1st, Plaridel Bulacan, Philippines with teiephone number(044) 795 0136 and (044) 795 1979. Any inquiry regarding this Prospectus should be fonrrrardedto the Company, Unicapital, lnc., and Absolute Traders and Consulting Services, lnc.
CALATA CORPORATION
JOSEPH H. CALATA(Chairman)
By:
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7
TABLE OF CONTENTS
Glossary of Terms 9
Parties to The Offer 12
Executive Summary 13
Summary Financial Information 15
The Offer 19
Terms and Conditions of the Offering 20
Selling Shareholders 25
Plan of Distribution 26
Determination of the Offer Price 28
Risk Factors 29
Use of Proceeds 36
Description of Shares 41
Manual on Corporate Governance 45
List of Stockholders 48
Capitalization 49
Dilution 51
General Corporate Information 53
Common Stockholders 55
Organization 58
Directors and Senior Management 59
Executive Compensation 66
Information with Respect to the Company 69
Business Flow Chart 70
Distribution Products for 2011 72
Business Flow of Operation 79
Business Strategy 89
Competition 94
Industry Overview 99
Plans and Programs 147
Material Contracts 152
Management Discussion and Analysis 158
Properties 182
Legal Proceedings 184
Security Ownership Of Certain Record And Beneficial Shareholders 185
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Interest of Experts and Independent Counsel 187
Regulatory and Environmental Matters 189
Related Party Transactions 192
Philippine Stock Market 195
Philippine Foreign Investment, Foreign Ownership and Exchange Controls 200
Philippine Taxation 202
Responsibility Of Directors And Officers 205
Expenses Other Than Underwriting, Discounts and Commissions 206
Investor Relation Information 207
Financial Statements 208
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GLOSSARY OF TERMS Applicant A person, whether natural or juridical, who seeks to subscribe to
the Offer Shares by submitting an Application under the terms and conditions prescribed in this Prospectus
Application An application to subscribe to Offer Shares pursuant to the Offer Absolute Traders Absolute Traders and Consulting Services, Inc.; also referred to
as the Financial Advisor Banking Day A day (except Saturdays, Sundays and holidays) on which
banks in the Philippines are open for business BPI Bureau of Plant Industry BIR Broiler
Bureau of Internal Revenue Chickens raised specifically for chicken meat production
BSP Bangko Sentral ng Pilipinas, the central bank of the Philippines Common Shares The Company’s shares of common stock, each with a par value
of PhP1.00 Company Calata Corporation Corporation Code Batas Pambansa Blg. 68, otherwise known as “The Corporation
Code of the Philippines” DA Department of Agriculture Dealer
Individual or firm that buys goods from a producer or distributor for wholesale and/or retail reselling.
DENR Department of Environment and Natural Resources Distribution Outlets Distributor
A place of business specifically for distribution and sale of commercial products to dealers, retailers or directly to end consumers. Individual or firm that buys commercial products, warehouses them and resells them to dealers, retailers or directly to end users.
Board of Directors, BOD, Board, Directors
Directors of the Company
Eligible Investors Applicants who are qualified to subscribe to the Offer Shares Firm Order Hogs
Firm orders and commitments to purchase the Offer Shares A domesticated swine weighing 120 pounds (54 kilograms) or more, raised specifically for pork meat production
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IPO Initial Public Offering Issue Manager and Underwriter
Unicapital, Inc.
Listing Date May 23, 2012 Local Small Investor or LSI A share subscriber or purchaser who is willing to subscribe or
purchase a minimum board lot or whose subscription or purchase does not exceed PhP25,000.00
Offer Price PhP7.50 Offer Shares 36,012,000 Primary Common Shares PhP Philippine Pesos, the lawful currency of the Republic of the
Philippines P/E Price-to-Earnings PDTC The Philippine Depository and Trust Corporation, the central
securities depositary of, among others, securities listed and traded on the PSE
Philippine Nationals The term shall mean any of the following: (1) a citizen of the
Philippines or a domestic partnership or association wholly owned by citizens of the Philippines; or (2) a corporation organized under the laws of the Philippines at least 60% of the capital stock outstanding and entitled to vote of which is owned and held by citizens of the Philippines; or (3) a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least 60% of the fund will accrue to the benefit of the Philippine nationals. Where a corporation and its non-Filipino stockholders own stocks in an SEC-registered enterprise, at least 60% of the capital stocks outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least 60% of the members of the Board of Directors of both corporations must be citizens of the Philippines, in order that the corporations shall be considered Philippine nationals.
Prospectus
This Prospectus together with all its annexes, appendices and amendments, if any
PSE The Philippine Stock Exchange, Inc. Qualified Institutional Buyer The term refers to any of the following: mutual funds, pension or
retirement funds, commercial or universal banks, trust companies, investment houses, insurance companies, investment companies, finance companies, venture capital firms, government financial institutions, trust departments of commercial or universal banks, non-bank quasi banking institutions, Trading Participants of the PSE for their dealer accounts, non-stock savings and loan associations, educational assistance funds and other institutions of similar nature determined as such by the SEC
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Receiving Agent and Escrow Agent
BDO Unibank, Inc. – Trust And Investments Group
SCCP
Securities Clearing Corporation of the Philippines
SEC The Philippine Securities and Exchange Commission SRC Republic Act No. 8799, otherwise known as “The Securities
Regulation Code” Stock and Transfer Agent BDO Unibank, Inc. – Trust And Investments Group Trading Day Any day on which trading is allowed in the PSE Trading Participants Member brokers of the PSE Underwriter Unicapital, Inc. Underwriting Agreement The agreement entered into by and between the Company and
the Underwriter, indicating the terms and conditions of the Offer and providing that the Offer shall be fully underwritten by the Underwriter
UI Unicapital, Inc.; also referred to as “Issue Manager” and/or
“Underwriter” USD U.S. Dollars, the lawful currency of the United States of America VAT Value Added Tax
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PARTIES OF THE OFFER The Issuer : CALATA CORPORATION
Mc Arthur Hi-way, Banga 1st, Plaridel
Bulacan, Philippines Issue Manager & Underwriter
: UNICAPITAL, INC. 3/F Majalco Building, Benavidez cor. Trasierra Streets, Legaspi Village 1229 Makati City, Philippines
Financial Advisor : ABSOLUTE TRADERS
AND CONSULTING SERVICES, INC. 1507 Shaw Boulevard Mandaluyong City, Philippines
Selling Agents : TRADING PARTICIPANTS OF THE PHILIPPINE
STOCK EXCHANGE, INC.
Legal Counsel to the Issuer : FABELLA AND FABELLA LAW OFFICE
(FABELLA LAW)
1060-A Clamor Compound, Novaliches Caloocan City, Philippines
Legal Counsel to the Underwriter:
: VILLARAZA CRUZ MARCELO & ANGANGCO (CVC LAW) 11
th Avenue corner 39
th Street,
Bonifacio Global City 1634 Metro Manila, Philippines
Auditors : ALBA ROMEO & CO.
7th Floor Multinational Bancorporation Centre
6805 Ayala Avenue Makati City 1226, Philippines
Stock Transfer, Escrow Agent and Receiving Bank
: BDO UNIBANK, INC. TRUST AND INVESTMENT GROUP BDO Corporate Center 7899 Makati Avenue Makati City, Philippines
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EXECUTIVE SUMMARY The following summary does not purport to be complete and is taken from and qualified in its entirety by the more detailed information including the Company’s financial statements and notes relating thereto as attached in this Prospectus. For discussion of certain matters that should be considered in evaluating any investment in the Offer Shares, see the section entitled “Risk Factors” beginning on page 29 of this Prospectus. OVERVIEW OF THE COMPANY Formerly known as Planters Choice Agro Products, Inc., the Company was incorporated in July 23, 1999. Previous to that, the business was organized as a single proprietorship enterprise called “J. Melvins” which was named after the brothers Joseph H. Calata and Melvin H. Calata. In the Philippines, CALATA CORPORATION is the largest combined distributor of agro-chemicals, feeds, fertilizers, veterinary medicines and other agricultural products coming from manufacturers or “business partners,” such as San Miguel Corporation for B-Meg Feeds and veterinary products, Syngenta, Bayer, Jardine, Dupont, Sinochem, for agro-chemicals, East West Seeds, Monsanto, Planters Products for its agricultural seeds and Swire, Viking for fertilizers. To date, Calata Corporation has a total authorized capital stock of PhP 845,400,000.00 divided into 845,400,000 common shares with PhP 1.00 par value per share. The Company has 7 directors namely; Mr. Joseph H. Calata, Mr. Benison Paul De Torres, Dr. Jaime C. Laya, Mr. Baltazar N. Endriga, Mr. George A. Nava, Amb. Jose A. Zaide and Mr. Harvey S. Keh.As elected during the most recent stockholders’ meeting held on November 25, 2011, Mr. Joseph H. Calata serves as the Chairman, President and Chief Executive Officer of the Company and Mr. Benison Paul De Torres is appointed as the Chief Operating Officer and Chief Financial Officer. The Company is an emerging leader in the Philippine Agricultural Industry. The Company has increased its annual revenues from roughly PhP200 Million in 2003 to more than PhP1.8 Billion in 2010 equivalent to an 800% increase in revenues for the past seven years of operation. THE OFFER The Company, through the Underwriter, is offering up to 36,012,000 primary Common Shares at the Offer Price of PhP7.50 per share. The Offer Shares have a par value of PhP1.00 per share and are being made available for subscription and purchase in the Philippines. The Offer Shares will represent approximately 10% of the Company’s issued and outstanding capital stock of 360,112,000 shares immediately after the completion of the Offer. COMPETITIVE STRENGTHS The Company believes that its strengths lie in the following:
Comprehensive Range of Products
Aggressive Distribution Strategies
Efficient Sales and Logistic System
Attractive growth prospects
Strong market position More information on the Company’s Competitive Strengths may be found in the “INFORMATION WITH RESPECT TO THE COMPANY” on page 85.”
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BUSINESS STRATEGY The Company plans to further strengthen its position and increase its market share in the business. The Company intends to achieve this by pursuing the following strategies:
Increase product awareness
Increase market presence
Improve customer and market knowledge
Expansion of market share
Expansion and diversification to operations related to the existing business RISK OF INVESTING Before making an investment decision, investors should carefully consider the risks associated with an investment in the Company’s Common Shares. These risks include:
Dependency on programs developed or supported by the Department of Agriculture of the Philippines;
Risk of being affected by changes in the preferences or purchasing power of consumers;
Risks of the Company not executing its sales strategy efficiently;
Risks of Natural Calamities and Pestilence;
Risk of Outbreak of Animal Diseases;
Exposure to Liquidity Risk;
Credit Risk;
Dependence on the company’s sales team;
Risk of products not meeting customer’s requirements and those that are related to contracts/business arrangements with customers; Risk of Non-exclusivity of distribution agreements/contracts/business arrangements, duration and terms for renewal and those that are related to distribution agreements/contracts/business arrangements with suppliers.
Work Stoppage
Risk of not effectively implementing the business/expansion plan.
There can be no guarantee that the Offer Shares will be listed on the PSE.
There may be no liquidity in the market for the Offer Shares and the price of the Offer Shares may fall.
A slowdown in the Philippine economy could adversely affect the Company.
Political or social instability could adversely affect the financial results of the Company.
Regulatory Risk. Please refer to the “Risk Factors” on page 29 of this Prospectus for a more detailed discussion. CORPORATE INFORMATION The Company’s principal place of business is at Mc Arthur Hi-way, Banga 1
st, Plaridel Bulacan,
Philippines with telephone number (044) 795 0136. The Company’s website is http://www.calatacorp.com/. The Company can likewise be reached for inquiries on its Investor Relations Program through its telephone number (044) 795 0136) and fax number (044) 7951979.
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SUMMARY FINANCIAL INFORMATION The selected financial information set forth in the following table has been derived from the Company’s audited financial statements for the fiscal years ended 31 December 2011, 2010 and 2009 and should be read in conjunction with the financial statements and notes thereto contained in this Prospectus and the section entitled “Management’s Discussion and Analysis of Financial Condition” on page 154 and other financial information included herein. The Company’s financial statements were prepared by BDO ALBA ROMEO and Co., in accordance with Philippine Financial Reporting Standards. The summary financial information set out below does not purport to project the results of operations or financial condition of the Company for any future period or date. KEY PERFORMANCE INDICATORS The Company’s top five (5) key performance indicators are listed below:
For the year ended
Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008
Audited Audited Audited Audited
Current Ratio
1 1.11 0.91 1.02 1.01
Debt to Equity Ratio2 0.98 271.25 22.93 43.81
Earnings per Share3 0.31 33.84 7.50 4.56
Earnings before Interest and Taxes
4 169,794,248 75,015,214 31,566,350 24,257,924
Return on Equity5 50% 407% 67% 86%
1 Current Assets / Current Liabilities
2 Bank Loans/Stockholders’ Equity
3 Net Income/Outstanding Shares
4 Net Income plus Interest Expenses and Provision for Income Tax
5 Net Income / Average Stockholders’ Equity
These key indicators were chosen to provide Management with a measure of the Company’s financial strength (i.e., Current Ratio, Debt to Equity Ratio, and Earnings before Interest and Taxes) and the Company’s ability to maximize the value of its stockholders’ investment in the Company (i.e., Return on Equity, Earnings per Share). Current ratio shows the liquidity of the Company by measuring how much current assets it has over its current liabilities. The Debt to Equity Ratio indicates how much debt the Company has incurred for each amount of equity in the Company. A higher ratio means that the Company is more aggressive in its use of capital. Earnings per share shows how much the Company is earning for each share that is currently issued and outstanding. Earnings before interest and taxes indicates how much income the Company is generating from its entire operations before interest charges and taxes are deducted. Return on Equity shows how much profits the Company is making for each amount of equity invested in the Company. Likewise, these ratios are used to gauge the performance of the Company in the industry in which in operates.
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BALANCE SHEET
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2011, 2010 and 2009
Notes 2011 2010 2009
ASSETS
Current assets
Cash on hand and in banks 6 P204,788,818 P19,106,061 P20,210,402
Trade and other receivables, net 7 252,529,132 340,864,179 304,031,218
Loans receivables 8 15,000,000 15,000,000
Advances to related parties 20 66,495,612 34,872,831 3,372,096
Inventories 9 179,835,048 224,244,569 269,142,762 Prepayments and other current assets 5,622,210 1,592,204 -
Total current assets 724,270,820 635,679,844 593,384,382
Noncurrent assets
Loans receivables 8 120,000,000 -
Investment properties 10 134,152,963 -
Property and equipment, net 11 72,765,320 25,218,793 1,942,440
Deferred tax assets 22 1,858,969 411,184 285,170
Total noncurrent assets 328,777,252 25,629,977 5,599,706
Total assets P1,053,048,072 P661,309,821 P598,984,088
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 12 P134,698,952 P169,363,509 P236,321,172
Loans payable 13 392,500,000 469,500,000 341,511,459
Advances from related parties 20 52,461,454 -
Dividends payable 15 25,000,000 -
Income tax payable 46,562,355 19,344,822 5,307,284
Total current liabilities 651,222,761 658,208,331 583,139,915
Non-current liability
Pension liability 21 1,820,747 1,370,614 950,566
Total liabilities 653,043,508 659,578,945 584,090,481
Equity
Share capital 14 324,100,000 1,000,000 1,000,000
Retained earnings 75,904,564 730,876 13,893,607
Total equity 400,004,564 1,730,876 14,893,607
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Total liabilities and equity P1,053,048,072 P661,309,821 P598,984,088
INCOME STATEMENT
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
Notes 2011 2010 2009
Sales 16 P2,001,710,303 P1,798,059,555 P1,808,099,952
Cost of sales 17 (1,774,403,120) (1,655,407,570) (1,688,694,868)
Gross profit 227,307,183 142,651,985 119,405,084
Operating expenses 18 (63,300,990) (67,833,353) (88,020,559)
Other operating income 19 1,959,836 - -
Profit from operations 165,966,027 74,818,632 31,384,525
Finance income 6, 8 3,828,221 196,582 181,825
Finance costs 13 (26,934,023) (26,725,754) (20,904,375)
Profit before tax 142,860,225 48,289,460 10,661,975
Provision for income tax 22 (42,686,537) (14,452,191) (3,166,546)
Profit for the year 100,173,688 33,837,269 7,495,429 Other comprehensive income - - -
Total comprehensive income P100,173,688 P33,837,269 P7,495,429
Basic and diluted earnings per share 24 P0.69 P3,383.73 P749.54
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CASH FLOW STATEMENT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
Notes 2011 2010 2009
Cash flows from operating activities Profit before tax P142,860,225 P48,289,460 P10,661,975 Adjustments for: Depreciation 11, 18 5,780,083 5,755,722 132,469 Impairment loss on receivables 7, 18 4,375,816 - - Pension costs 18, 21 450,133 420,048 362,573
Gain on disposal of property and equipment 19 (1,914,123) - -
Finance income 6, 8 (3,828,221) (196,582) (181,825) Finance costs 13 26,934,023 26,725,754 20,904,375
Operating income before working capital changes 174,657,937 80,994,402 31,879,567 Decrease (increase) in: Trade and other receivables 86,814,231 (51,832,961) (23,332,775) Advances to related parties (1,226,567) (78,500,735) (6,414,415) Inventories 44,409,521 44,898,193 (8,048,240) Prepayments and other current assets (6,494,604) (1,592,204) - Increase (decrease) in: Trade and other payables (34,664,557) (66,957,663) 14,602,256 Advances from related parties 52,461,454 - -
Cash provided by (used in) operations 315,957,414 (72,990,968) 8,686,393 Finance income received 6 973,221 196,582 181,825 Income taxes paid (14,452,191) (540,667) (453,348)
Net cash provided by (used in) operating activities 302,478,444 (73,335,053) 8,414,870
Cash flows from investing activities Increase in related party loans receivable 8 (120,000,000) - - Increase in advances to related parties (28,482,091) - - Acquisition of investment properties 10 (134,152,963) - - Acquisition of property and equipment 11 (53,326,610) (29,032,075) (816,542)
Net cash used in investing activities (335,961,664) (29,032,075) (816,542)
Cash flows from financing activities Issuance of additional shares 14 323,100,000 - - Net availments (payments) of short-term loans payable 13 (77,000,000) 127,988,541 17,361,746 Finance cost paid 13 (26,934,023) (26,725,754) (20,904,375)
Net cash provided by (used in) financing activities 219,165,977 101,262,787 (3,542,629)
Net increase (decrease) in cash on hand and in banks 185,682,757 (1,104,341) 4,055,699 Cash on hand and in banks January 1 19,106,061 20,210,402 16,154,703
December 31 P204,788,818 P19,106,061 P20,210,402
Information on significnt non-cash transactions Cash dividend distribution through offsetting 15 P- P47,000,000 P- Gain on disposal of property an equipment 19 (1,914,123) - - Advances to related parties 20 1,914,123 (47,000,000) -
P- P- P-
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THE OFFER The Company, through the Underwriter, is offering up to 36,012,000 primary Common Shares at the Offer Price of PhP7.50 per share. The Offer Shares have a par value of PhP1.00 per share and are being made available for subscription and purchase in the Philippines. The Offer Shares will represent approximately 10% of the Company’s issued and outstanding capital stock of 360,112,000 shares immediately after the completion of the Offer. The Offer will commence at 9:00 a.m. of May 10, 2012 and will end at 12:00 noon of May 16, 2012. The Offer Shares will be listed on the Second Board of the PSE upon submission to the PSE of the SEC Permit to Sell Securities, among other conditions imposed by the PSE for the listing of the Offer Shares. Lock-Up Under the revised listing rules of the PSE applicable to companies applying for listing in the PSE’s Second Board, existing shareholders who own an equivalent of at at least 10% of the issued and outstanding Common Shares of the Company are required not to sell, assign or otherwise dispose of their Common Shares for a minimum of 365 days after the Listing of the Offer Shares. The shares of these existing shareholders shall be locked-up through an escrow arrangement with BDO Unibank, Inc. The following shareholders, each owning at least 10% of the outstanding Common Shares of the Company prior to the Offer, are covered by the 365-day lock-up requirement reckoned from Listing Date:
Prior to the Offer Offered to
be Sold After the Offer
Shareholders No. of Shares % No. of Shares
No. of Shares
%
JOSEPH H. CALATA 217,699,994 67.17 0 217,699,994 60.45
Total 217,699,994 217,699,994
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TERMS AND CONDITIONS OF THE OFFERING Issuer…………………………… Calata Corporation Offer Shares…………………... The Company, through the Underwriter, is offering up to
36,012,000 primary Common Shares from its authorized and unissued Capital Stock with a par value of PhP1.00 per share.
Offer Price……………………... The Offer Shares are being offered at the Offer Price of
PhP7.50 per Offer Share. The Offer Price range was established primarily through the use of market-based valuation methodologies.
Offer Period…………………… The Offer Period shall commence at 9:00 a.m., Manila
time on May 10, 2012 and end at 12:00 noon, Manila time on May 16, 2012. The Company and the Underwriter reserve the right to extend or shorten the Offer Period, subject to the prior approval of the PSE. Applications must be received by the Receiving Agent not later than 11:00 a.m. Manila Time on May 16, 2012. Applications received thereafter or without the required documents will be rejected.
Applications shall be considered irrevocable upon submission to the Underwriter, and shall be subject to the terms and conditions of the Offer as stated in this Prospectus and in the Application. The actual subscription and/or purchase of the Offer Shares shall become effective only upon the actual listing of the Offer Shares on the PSE.
Eligible Investors and Restrictions on Ownership ……………………………..
The Offer Shares may be subscribed or held by any person of legal age or duly organized and existing corporations, partnerships or other corporate entities regardless of nationality. However, the Philippine Constitution and related statutes set forth restrictions on foreign ownership of Philippine companies engaged in certain activities. The Philippine Constitution also limits foreign equity ownership in companies owning land or operating a public utility to 40% of the companies’ capital stock. Thus, any subsequent transfer of Shares must comply with the nationality restrictions. In the event that foreign ownership of the Company’s issued and outstanding capital stock will exceed the permissible level, the Company has the right to reject a transfer request by persons other than Philippine Nationals and has the right not to record such purchases in the books of the Company.
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Minimum Subscription……….. Applications shall be for a minimum of 100 Offer Shares. Applications in excess of this minimum shall be in multiples of One Hundred (100) shares. No subscription or application for multiples of any other number shall be considered.
Procedure for Application……. Application forms to purchase Offer Shares may be obtained from the Underwriter or Selling Agent listed in this Prospectus. All Applications shall be evidenced by the application to purchase form, duly executed in each case by one completed signature card which, for corporate and institutional applicants, should be authenticated by the corporate secretary, and the corresponding payment for the Offer Shares covered by the Application and all other required documents. The duly executed Application and required documents should be submitted during the Offer Period to the same office where it was obtained. If the Applicant is a corporation, partnership or trust account, the Application must be accompanied by the following documents:
A certified true copy of the applicant’s latest articles of incorporation and by-laws and other constitutive documents (each as amended to date) duly certified by its corporate secretary;
A certified true copy of the Applicant’s Philippine SEC certificate of registration duly certified by its corporate secretary; and
A duly notarized corporate secretary’s certificate setting forth the resolution of the applicant’s board of directors or equivalent body authorizing the purchase of the Offer Shares indicated in the Application, identifying the designated signatories authorized for the purpose, including his or her specimen signature, and certifying to the percentage of the applicant’s capital or capital stock held by Philippine citizens and/or corporations, at least 60% of whose issued and outstanding capital is owned by Philippine citizens.
Foreign corporate and institutional applicants who qualify as Eligible Investors, in addition to the documents listed above, are required to submit in quadruplicate, a representation and warranty stating that their purchase of the Offer Shares to which their Application relates will not violate the laws of their jurisdiction of incorporation or organization, and that they are allowed under such laws, to acquire, purchase and hold the Offer Shares.
Payment Terms……………….. The purchase price must be paid in full in Pesos upon the
submission of the duly accomplished and signed
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application form and signature card together with the requisite attachments.
Payment for the Offer Shares shall be made either by: (i) a personal or corporate check/s drawn against an account with a BSP authorized bank at any of its branches located in Metro Manila; or (ii) a manager’s or cashier’s check issued by such authorized bank.
All checks should be made payable to “Calata Corporation IPO.” The check must be dated the same date as the application. The applications and the related payments will be received at any of the offices of the Underwriter, the Selling Agents and the Issuer.
Acceptance/Rejection of Applications…………………….
The actual number of Offer Shares that an Applicant will be allowed to subscribe to in the Offer is subject to the confirmation of the Underwriter. Application shall be subject to the final approval of the Company. The Company reserves the right to accept or reject, in whole or in part, any Application due to any grounds specified in the Underwriting Agreement entered into by the Company and the Underwriter. Applications where checks are dishonored upon first presentation and Applications which do not comply with the terms of the Offer shall be rejected. Moreover, any payment received pursuant to the Application does not mean approval or acceptance by the Company of the Application. An Application, when accepted, shall constitute an agreement between the Applicant and the Company for the Subscription to the Offer Shares at the time, in the manner and subject to terms and conditions set forth in the Application and those described in this Prospectus. Notwithstanding the acceptance of any Application by the Underwriter or its duly authorized representatives, acting for or on behalf of the Company, the actual subscription and purchase by the applicant of the Offer Shares will become effective only upon listing of the Offer Shares on the PSE and upon the obligations of the Underwriter under the Underwriting Agreement becoming unconditional and not being suspended, terminated, cancelled, on or before the Listing Date, in accordance with the provisions of such agreements. If such conditions have not been fulfilled on or before the period provided above, all the application payments will be returned to the applicants without interest and, in the meantime, the said application payments will be held in a separate bank account with the Receiving Agent.
Refunds………………………... In the event that the number of Offer Shares to be
received by an Applicant, as confirmed by the Underwriter, is less than the number covered by its
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Application, or if an Application is rejected by the Company, then the Underwriter shall refund, without interest, within 5 Banking Days from the end of the Offer Period, all, or a portion of the payment corresponding to the number of Offer Shares wholly or partially rejected. All refunds shall be made through the Underwriter or Selling Agent with whom the applicant has filed the Application, at the applicant’s risk.
Registration and Lodgment of Shares with PDTC…………….
All of the issued and outstanding Shares, including treasury shares and the Offer Shares will be issued in scripless form through the electronic book-entry system of BDO Unibank, Inc., Trust and Investment Group as the Stock Transfer Agent and lodged with PDTC as depository agent on listing date through PSE Trading Participants nominated by the Applicants. The Offer Shares are required to be lodged with PDTC. The Applicants must provide the required information in the space provided in the Application to effect the lodgment. The Offer Shares will be lodged with the PDTC prior to the Listing Date. The Applicant may request for the upliftment of their shares and to receive stock certificates evidencing their investment in the Offer Shares through his/her trading participant after the Listing Date. Any expense to be incurred from such issuance of certificates shall be borne by the Applicant.
Registration of Foreign Investments…………………….
The BSP requires that investments in shares of stock funded by inward remittance of foreign currency be registered with the BSP if the foreign exchange needed to service capital repatriation or dividend remittance will be sourced from the banking system. The registration with the BSP of all foreign investments in the Offer Shares will be the responsibility of the foreign investors. See discussion on “Philippine Foreign Investment, Exchange Controls and Foreign Ownership” in the Company’s Prospectus.
Restriction on Issuance and Disposal of Shares……………
Mr. Joseph Calata, who owns 217,699,994 or more than ten percent (10%) of the issued and outstanding Common Shares of the Company after the Offer, is required under the revised listing rules of the PSE applicable to companies applying for listing on the PSE Second Board, not to sell, assign or otherwise dispose of their Common Shares for a minimum period of 365 days after the Listing Date. The PSE will require the Company, as a condition to the listing of the Common Shares, not to issue new shares in its capital or grant any rights to or issue any securities convertible into or exchangeable for, or otherwise carrying rights to acquire or subscribe to, any shares in its capital or enter into any arrangement or agreement whereby new shares or any such securities may be
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issued for a period of 180 days after the Listing Date, except for Stock Dividends and Employee Stock Option Plans.
Listing and Trading…………… The Company’s application for the listing of the Common
Shares was approved by the PSE on April 25, 2012. All of the Common Shares in issue or to be issued including the Offer Shares are expected to be listed on the PSE on May 23, 2012. Trading is expected to commence on the same date.
Expected Timetable………….. The expected timetable of the Offer is tentatively
scheduled as follows: Start of the Offer Period……………….…May 10, 2012 Deadline for Submission of Application for Trading Participants….… May 16, 2012 Deadline for Submission of Application for LSIs..….……………….…..May 16, 2012 Deadline for Submission of Application for the General Public ……………….…… May 16, 2012 End of Offer Period ……………………... May 16, 2012 Date of Lodgment of Shares with PDTC …………………………………….....May 21, 2012 Listing Date and Commencement of Trading on the PSE……………………….… May 23, 2012
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SELLING SHAREHOLDERS Since the Offer is comprised of all primary common shares, therefore there will be no selling shareholders.
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PLAN OF DISTRIBUTION DISTRIBUTION OF THE OFFER The IPO will consist of a total of 36,012,000 Primary Offer Shares. The Company plans to make available up to 7,202,400 Offer Shares or 20% of the Offer Shares, for distribution to the Trading Participants of the PSE. Each. PSE Broker shall initially be allocated up to 54,100 Offer Shares (computed by dividing the Offer Shares allocated to the PSE Brokers between one hundred thirty three [133] PSE Brokers) and subject to reallocation as may be determined by the PSE. Based on the initial allocation for each trading participant of 54,100 Offer Shares, there will be a total of 7,100 residual Offer Shares to be allocated as may be determined by the PSE. Up to 3,601,200 Offer Shares, or 10% of the Offer Shares, shall be made available to Local Small Investors. The term “Local Small Investors” is defined as a share subscriber or purchaser who is willing to subscribe or purchase a minimum board lot or whose subscription or purchase does not exceed PhP25,000.00. Should the total demand for the Offer Shares in the Local Small Investors’ subscription exceed the maximum allocation, the Underwriter shall allocate the Offer Shares by balloting. In the event that the Local Small Investors demand for its 10% allocation, the general public may avail of the remaining Offer Shares. Should the total demand from Local Small Investors be less than the 10% allotted to them, the unsold allocation shall be reallocated back for distribution to the general public. The Offer Shares will be firmly underwritten by the Underwriter, Unicapital, Inc. The Trading Participants shall act as Selling Agents for the Offer, pursuant to the distribution guidelines of the PSE. On or before 11:00 a.m Manila time on May 14, 2012, each Trading Participant shall submit to the PSE its firm orders and commitments to purchase the Offer Shares (the “Firm Order”). The payment for the Firm Orders shall be made on May 16, 2012. Firm Orders from the Trading Participants will be confirmed by the PSE by 9:30 a.m. on May 15, 2012. In no case shall a Trading Participant be awarded more than the Offer Shares indicated in its Firm Order and covered by its payment. Offer Shares not taken up by the Trading Participants and Local Small Investors will be distributed by the Underwriter directly to its clients and the general public. A portion of these may be used for a book-building program. Qualified Institutional Buyers that may be invited to participate in the book-building process shall be limited to the following: mutual funds, pension or retirement funds, commercial or universal banks, trust companies, investment houses, insurance companies, investment companies, finance companies, venture capital firms, government financial institutions, trust departments of commercial or universal banks, non-bank quasi banking institutions, Trading Participants of the PSE for their dealer accounts, non-stock savings and loan associations, educational assistance funds and other institutions of similar nature determined as such by SEC. None of the Offer Shares have been designated to be sold to specified individuals. The Company shall pay a fee to the Issue Manager and the Underwriter upon receipt by the Company of the proceeds of the Offer, pursuant to the Underwriting Agreement executed between the Company, the Issue Manager and the Underwriter. Out of the fee that it will receive from the Company, the Underwriter shall cede to the Selling Agents their corresponding respective selling commissions. The fee to be derived by the Issue Manager and the Underwriter from the Offer is estimated to be PhP8,102,700.00, inclusive of amounts which will be ceded to the Selling Agents in accordance with existing industry practice.
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THE ISSUE MANAGER AND UNDERWRITER Incorporated in the Philippines in 1994, Unicapital, Inc. has an authorized capital of P500,000,000.00, of which P424,713,500.00 worth of shares are issued and outstanding. It obtained its license to operate an investment house in June 29, 1994 and is licensed by the SEC to engage in underwriting or distribution of securities to the public. A certificate of registration on the application for renewal of Unicapital’s license was issued on December 29, 2011 and is valid for three years. Unicapital’s most recent payment for the renewal of its license was on November 24, 2011. Its executives have extensive experience in the capital markets and were involved in a substantial number of major equity and debt issues. Unicapital’s Board of Directors is chaired by Menardo R. Jimenez, Sr. UNDERWRITING COMMITMENT The Offer will be underwritten on a firm commitment basis at the Offer Price. The Underwriter and the Company will enter into, on or before the start of the Offer Period, an Underwriting Agreement wherein the Underwriter will agree to subscribe or procure subscribers for, or to purchase, or procure purchasers for the Offer. The underwriting and selling fees to be paid by the Company in relation to the Offer shall be equivalent to three percent (3%) of the gross proceeds from the Offer. Unicapital does not have any direct or indirect interest in the Company or in any securities thereof (including options, warrants or rights thereto), and other than as Underwriter for the Offer, it does not have any relationship with the Company. Neither does Unicapital have any right to designate or nominate a member to the Board of Directors of the Company. The Underwriter does not have any contract or other arrangement with the Company by which the Underwriter may put back to the Company any unsold securities of the Offer. The Underwriter shall not receive any amount from the proceeds of the IPO aside from the underwriting and selling fees. THE SELLING AGENTS The Trading Participants shall act as Selling Agents for the Offer, pursuant to the distribution guidelines of the PSE. The selling fees for the Selling Agents that is equivalent to one percent one percent (1%) of the gross proceeds from the Offer shall come from the underwriting and selling fees to be paid by the Company in accordance with existing industry practice. THE FINANCIAL ADVISOR Absolute Traders and Consulting Services, Inc. (“Absolute Traders”) acts as the Financial Advisor to the Company, providing financial consulting services. Established in 2007, Absolute Traders is also engaged in business advisory services, research projects, seminars, in-house trainings, conferences, and workshops. Absolute Traders maintains its principal office at 1507 Shaw Boulevard, Mandaluyong City, Philippines with telephone number +632 239-3738.
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DETERMINATION OF THE OFFER PRICE The Offer Price is PHP 7.50 per share, as determined through a book-building process and discussions between the Company and the Underwriter. Prior to the Offer, there has been no public trading market for the Shares. Among the factors considered in determining the Offer Price range were the prevailing market conditions, the Company’s historical performance, the business potential and the ability to generate earnings and cash flow of the Company, and the prevailing market valuation of companies currently listed in the PSE engaged in comparable businesses. The Offer Price may not have any correlation to the actual book value of the Offer Shares. The final Offer Price shall be determined through a book-building approach. The Company’s forward looking statements are based on a number of assumptions about circumstances or events that have not yet occurred, including, but not limited to certain assumptions relating to the Company’s revenue growth, and are subject to significant uncertainties and contingencies, as stated in the section “Risk Factors” on page ‘’29”, that are beyond the Company’s control. Under no circumstances should the use of the forward looking statements as a basis for pricing the Offer Shares be regarded as a representation, warranty, promise or prediction with respect to the accuracy of the underlying assumptions, or that the Company will achieve or is likely to achieve this particular result.
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RISK FACTORS Prospective investors should carefully consider the risks described below, in addition to the other information contained in this Prospectus, including the Company’s financial statements and notes relating thereto included herein, before making any investment decision relating to the Offer Shares. This section does not purport to disclose all the risks and other significant aspects of investing in the Offer Shares. The Company’s past performance is not an indication of its future performance. The occurrence of any of the events discussed below and any additional risks and uncertainties not presently known to the Company or are currently considered immaterial could have a material adverse effect on the Company’s business, result of operations, financial condition and prospects and could cause the market price of the Common Shares to fall significantly and investors may lose all or part of their investment. The risk factors discussed in this section are of equal importance and are only separated into categories for ease of reference. The price of securities can and do fluctuate, and the price of an individual security may experience upward or downward movements, and may even lose all of their value. There is an inherent risk that losses may be incurred rather than profits made as a result of buying and selling securities. There is an extra risk of losses when securities are bought from smaller companies. There may be a significant difference between the buying price and the selling price of these securities. Investors should seek professional advice regarding any aspect of the securities such as the nature of the risks involved in the trading of the securities, especially in the trading of high-risk securities. Each investor should consult his own counsel, accountant and other advisors as to legal, tax, business, financial and related aspects of an investment in the Offer Shares. This risk disclosure does not purport to disclose all of the risks and other significant aspects of investing in these securities. Investors should undertake independent research regarding the Company and study the trading of securities before commencing any trading activity. Investors may request publicly available information on the Offer Shares and the Company from the SEC. RISKS RELATING TO THE COMPANY AND ITS BUSINESS The Company’s business may be affected by any program developed or supported by the Department of Agriculture of the Philippines. The Company’s revenue comes primarily from the sale of agricultural products. Any agricultural program that the Department of Agriculture develops for the farmers of the country may affect the Company’s. In the event that the government is unable to effectively implement its programs, this might result in a slowdown of the Company’s business as farmers might not have the required resources to purchase the Company’s products. There is no guarantee that the Philippine government will not change or prioritize programs for agriculture in the coming years. To mitigate this risk, the Company updates itself regularly with the Department of Agriculture’s policies or programs developed for the agricultural product industry. This allows the Company to react quickly to government programs relating to agricultural products. It also enables the Company to plan ahead to meet the Department of Agriculture’s ongoing or future policies or programs. The Company also conducts its own marketing activities to promote the use or consumption of its product. The Company intends to strengthen its marketing efforts nationwide. The Company’s business and operations may be affected by any changes in the preferences or purchasing power of consumers.
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The Company’s ability to increase or maintain sales is dependent on the public’s continued acceptance of its products. Changes in demographic, social or health proclivity may alter the demand for the Company’s products. Any adverse downturn in the economy of the Philippines may cause consumers to opt for cheaper or more affordable products. Cheaper alternatives are supplied by the government and the private sector, both of which are readily available in the market. To mitigate this risk, the Company, through its comprehensive line of products, provides options and alternatives to its customers, which may attract a loyal following from certain niche markets. Furthermore, the Company participates in the subsidies provided by the national government and passes the savings on to its customers and consumers. The Company may not efficiently execute its strategy to increase sales volume due to the traditional mindset of the Filipino farmer. The Company intends to grow its sales through expansion of related business activities, additional tie-ups, and aggressive marketing strategies. The success of these strategies cannot be guaranteed because farmers in the Philippines are used to traditional methods of agriculture. Thus they may not be susceptible to the innovations the Company’s products may bring. Failure to change the mindset of its target market may hinder the Company’s growth. To mitigate this risk, the Company employs innovative marketing and sales activities in order to encourage the use and loyalty of customers. The Company provides information campaigns in the form of trainings and seminars. In addition, the Company provides initiatives such as promos, sampling, and boothing. To ensure its continuous growth and strength in sales, the Company intends to hire additional manpower for its sales and marketing team. Details on the Company’s marketing, sales, and distribution may be found in the “Information with Respect to the Company” beginning page 69. In terms of exclusivity of supplier contracts and their duration, the Company does not have exclusive distribution agreements with most of its suppliers. The distribution agreements are automatically renewed yearly upon the option of both parties and under terms and conditions agreed upon. Except for its exclusive distribution agreement with San Miguel Foods, Inc. (Feeds), Syngenta Philippines, Inc. (Agro Chemicals) and Monsanto Philippines, Inc. (Seeds),the Company does not have exclusive distribution agreements with the rest of its suppliers of agro chemicals, fertilizers and seeds. This means that other suppliers of the company may, without any legal impediment, enter into distribution agreements with other distributors, hence, decrease in one way or the other, supply of distribution products to the Company and consequently decrease in the sales derived from their products. In general, all supply and distribution agreements are renewed on a yearly basis. Renewal may be express when parties opt to execute a written agreement or implied when parties continue to do business dealings with each other such as taking of orders of supplies. The Company does not usually have duly executed distribution agreements with the rest of its suppliers of agro chemicals, fertilizers and seeds. Furthermore, based on industry practice, actual exclusive distribution agreements are not issued on a yearly basis. In the case of non-exclusive distribution agreements, no formal agreement is executed except for some. Instead, certifications are issued to attest that the Company is a distributor of the pertinent supplier products indicating therein exclusivity or non-exclusivity. However, for other non-exclusive suppliers, certifications are not even given since supply of the products continues for so long as the Company places an order. Nevertheless, to substitute the absence of supply and distribution agreements, the Company strictly enforces proper documentation of transactions with suppliers. The Company religiously
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fills up Purchase Orders which, upon acknowledgment by the supplier, a Sales Invoice is issued. Hence, the Purchase Order and the Sales Invoice signify the contract / agreement between the Company and the supplier. Furthermore, it is worth mentioning that San Miguel Foods, Inc. (SMFI), Syngenta Philippines, Inc. (Syngenta) and Monsanto Philippines, Inc. (Monsanto) are the top suppliers of Calata Corporation in their respective product classifications. For the fiscal year end 31 December 2011, sales from SMFI products (B-Meg Feeds) to different customers accounted for almost 100% of the Company’s Feeds Business and 52% of the Company’s total sales. Sales from Syngenta to different customers accounted for 61% of the Agrochem Business and 13% of the Company’s total sales. Sales from Monsanto to different customers accounted for 47% of the Seeds Business and 1% of the Company’s total sales. In the aggregate, the combined sales of SMFI, Syngenta and Monsanto accounts to 56% of the Company’s total sales. Considering this, the Company strictly complies with its obligation to these suppliers by implementing a strategic marketing strategy and exerting all efforts necessary in meeting targets and delivering mutually agreed upon results from sales to ensure continuity of exclusivity in the distribution of their products. This approach is likewise being implemented for suppliers with whom the Company does not have exclusive distribution agreements with. Compliance with all of the Company’s obligations with suppliers whether grantors of exclusive or non-exclusive distribution agreements shall greatly contribute in ensuring the annual renewal of the agreements with its suppliers. Apart from being a distributor of feeds, agrochemicals, fertilizers and seeds, with the Company venturing into retailing of its distribution products, competition will be expected from existing retailers. However, in order to likewise be competitive, the Company intends to take advantage of the quality of its products, especially those with which it has exclusive distribution agreements as well as its competitive pricing system. The Company likewise plans to provide rebates and incentive schemes for loyal customers of its planned retail stores and establish an effective after sales service system. Regulatory Risk The Company’s business is subject to regulatory approvals, such as the issuance of permits for distribution and importation licenses. The products sold by the Company, such as, veterinary medicines, agrochemicals, fertilizer, pesticide and feeds must be registered with the proper government agency prior to sale or distribution. The cancellation of their registrations will adversely affect the Company’s business. The registration of the products is primarily the responsibility of the suppliers. The Company ensures that it secures all necessary regulatory approvals relating to its operations. Risk of Natural Calamities and Effects of Pestilence The Company’s revenues are highly dependent on the weather conditions in the Philippines. Severe drought or flooding in a certain agricultural region will significantly affect the productivity of the farmer. This will highly affect the demand for fertilizers, pesticides and other agricultural chemicals. Furthermore, the effects of pestilence on agricultural crops can have a significant effect on the demand for the distribution products used in growing them. Crop farmers may be unable to engage in their farming and growing activities since the agricultural land may not be fit for planting. To mitigate this risk related to natural calamities, the Company, in partnership with its key suppliers, would distribute new products manufactured through the use of modern technology to
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withstand if not totally resist the devastating effects forces of nature bring. The Company likewise distributes other agricultural products which are unaffected by natural calamities such as animal feeds for poultry, hogs and ducks. Lastly, to mitigate the effects of pestilence, apart from the distribution of superior quality agricultural products which can help in strengthening the immunity of plants to any damage caused, the Company designates its farm aid technicians to provide an information campaign to educate farmers on how to combat pestilence through proper farming practices as well as the introduction and proper utilization of modern farming technology. Risk of Outbreak of Animal Diseases The Company’s revenues may be affected by the outbreak of swine and poultry diseases because the demand for animal feeds will decrease. To mitigate this risk the Company in partnership with its key suppliers currently deploys farm assistant technicians in the field to prevent and/or treat the disease. In addition, the Company distributes veterinary medicines that help prevent or treat the disease. Exposure to Liquidity Risk This represents the risk or difficulty in raising funds to meet the Company’s commitment associated with financial obligation and daily cash flow requirement. The Company is exposed to the possibility that adverse exchanges in the business environment and/or its operations would result to substantially higher working capital requirements and the subsequent difficulty in financing additional working capital. The Company addresses liquidity concerns primarily through cash flows from operations and short-term borrowings, if necessary. The Company likewise regularly evaluates other financing instruments to broaden the Company’s range of financing sources. Credit Risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. In order to minimize exposure to this risk, the receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to impairment is not significant. The Company deals only with creditworthy counterparty duly approved by the Board of Directors. The Company depends on its competent sales team, the loss of which could adversely affect its business and growth. The Company’s future growth is largely anchored on the continuous expansion of its product distribution. For this, its sales team plays a vital role in the attainment of the Company’s objectives. The Company currently has provided an attractive compensation and incentive scheme to prevent senior members of the sales team from joining competitor firms in the future. The Company’s reputation, business, and financial condition will be affected if the products do not meet customer’s requirements pursuant to the Company’s contracts / business arrangement with customers. The business of the Company is reliant on the quality of the products of its suppliers. Product defects will not only cause product returns but also affect the Company’s reputation as a distributor of quality products.
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Business dealings with customers of the Company are not accompanied by individualized and comprehensive contracts. The Company’s business practice involves issuances of invoices for orders of customers. Initially, it will appear that the absence of such individual contracts may cause problems with the Company as customers’ complaints will have no parameters and hence without limit. However, because of the confidence and commitment of the Company to satisfy customers, it has shown its willingness to address customers’ concerns. Specifically, in order to mitigate this risk, the Company carefully selects business partners who are established institutions in their field both locally and internationally. In addition, the issued invoices set out specific guidelines of reimbursement and/or product replacement whereby the Company fully reimburses the customer by replacing the defective products. Risk of loss due to returns are not borne by the Company as the costs of replacing these products are borne by the Company’s suppliers. Work Stoppage The Company is in the distribution business and the partial or total stoppage of work will significantly affect its operations. Coordination among employees is vital as each personnel in charge of a respective aspect of the distribution business is given the responsibility to ensure that the function required to be performed is in sync with the overall flow of business operations of the Company. Employee morale is likewise a key to having a dynamic and dependable workforce. The Company recognizes the importance of the workforce and ensures that all their entitlements under the law are given. In addition to that, the Company regularly holds team building activities to re-establish harmonious relationship between management and employees. Furthermore, in order not to hamper operations in the event that an employee is unable to report for work, the Company has adequately trained its employees to temporarily replace vacated responsibilities. Risk of not effectively implementing the business/expansion plan The establishment of at least one hundred (100) retail outlets under a created subsidiary is not a simple undertaking. Careful selection of strategic locations and negotiation of lease terms are important consideration, among others. Selection of trust worthy and efficient employees to operate the retail stores is also an important factor. Should the company fail in these aspects, the expansion plan may prove to be futile as the retail outlets would not be profitable. To mitigate this risk, the Company has appointed highly trained and competent personnel within its workforce to spearhead the establishment of the retail outlets. Furthermore, as supplier to the retail outlets, the Company shall provide any necessary assistance to ensure profitability such as but not limited to lower mark ups, assistance in training of outlet personnel and assistance in the marketing of the outlet as well as its products. RISKS RELATING TO THE COMPANY’S COMMON SHARES There can be no guarantee that the Offer Shares will be listed on the PSE. Subscribers of the Offer Shares are required to pay for their purchase upon submission of their Applications during the Offer Period. Although the PSE has approved the Company’s application to list the Offer Shares, because the Listing Date is scheduled after the Offer Period, there can be no guarantee that listing will occur on the anticipated Listing Date or at all. Delays in the admission and the commencement of trading in shares on the PSE have occurred in the past. If the PSE does not admit the Offer Shares onto the PSE, the market for the Offer Shares will be illiquid and shareholders may not be able to trade the Offer Shares. However, they would be able to sell their Shares by negotiated sale. This may materially and adversely affect the value of the Offer Shares.
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There may be no liquidity in the market for the Offer Shares and the price of the Offer Shares may fall. The Shares will be listed on the PSE where trading volumes have historically been significantly smaller than on major securities markets in more developed countries and have also been highly volatile. There can be no assurance that an active market for the Offer Shares will develop following the Offer or, if developed, that such market will be sustained. The Offer Price will be determined after taking into consideration a number of factors including, but not limited to, the Company’s prospects, the market prices for shares of comparable companies and prevailing market conditions. The price at which the Shares will trade on the PSE at any point in time after the Offer may vary significantly from the Offer Price. GENERAL RISKS A slowdown in the Philippine economy could adversely affect the Company. Results of operations of the Company have generally been influenced, and will continue to be influenced by the performance of the Philippine economy. Consequently, the Company’s income and results of operations depend, to a significant extent, on the performance of the Philippine economy. The Philippine economy was adversely affected by the 1997 Asian financial crisis which caused a significant depreciation of the Philippine peso, rise in interest rates and downgrading of the Philippine local currency rating and the ratings outlook for the Philippine banking sector. While the Philippine economy has recovered from this crisis and has registered respectable positive economic growth starting 1999, it continues to be at risk from its significant budget deficit, volatile peso exchange rate and relatively weak banking sector. Any deterioration in economic conditions in the Philippines as a result of these or other risk factors, may materially adversely affect the Company’s financial condition and results of operations. There can also be no assurance that the current or future Governments will adopt economic policies conducive to sustaining economic growth. This risk is beyond the control of the Company. Political or social instability could adversely affect the financial results of the Company. The Philippines has from time to time experienced political, social and military instability and no assurance can be given that the future political environment in the Philippines will be stable. Political instability in the Philippines occurred in the late 1980’s when Presidents Ferdinand Marcos and Corazon Aquino held office. In 2000, former President Joseph Estrada resigned from office after allegations of corruption led to impeachment proceedings, mass public protests and withdrawal of support of the military. In February 2006, President Gloria Arroyo issued Proclamation 1017 which declared a state of national emergency in response to reports of an alleged attempted coup d’etat. The state of national emergency was lifted in March 2006. The country has also been subject to sporadic terrorist attacks in the past several years. The Philippine army has been in conflict with the Abu Sayyaf organization, a group alleged to have ties with the Al-Qaeda terrorist network, and identified as being responsible for kidnapping and terrorist activities. On June 30, 2010, Benigno Aquino III was sworn in as the 15
th and current president of the
Republic of the Philippines. There is no assurance that the policies under the new administration will either improve or worsen the political and economic situation.
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Political instability in the Philippines could negatively affect the general economic conditions and operating environment in the Philippines, which could have a material impact on the Company’s business, financial condition and results of operation. This risk is beyond the control of the Company.
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USE OF PROCEEDS The Company expects to raise gross proceeds from the Primary Offer of approximately PhP270,090,000.00 based on an Offer Price of PhP 7.50 per share and an Offer of 36,012,000 new Common Shares. After deducting the estimated expenses pertaining to the Primary Offer, the estimated net proceeds from the Primary Offer is PhP 242,405,541.52.
COMPUTATION OF NET PROCEEDS
Offer price per share PhP 7.50
Number of Offer Shares 36,012,000
Gross Proceeds 270,090,000
Underwriting and selling fees for the Offer shares 8,102,700
Tax on Initial Public Offering 10,803,600
Documentary Stamp Tax 180,060
Philippine SEC filing and legal research fees
733,991.24
PSE listing and processing fees
Listing fee 2,700,840
Processing fee 56,000
Estimated professional fees 4,000,000 Estimated out-of-pocket and other expenses including printing and engraving costs 1,100,000
Total Expenses 27,677,191.24
Net Proceeds 242,412,808.76
The net proceeds that will be generated from the Offer will be used primarily by the Company to establish retail outlets nationwide and for general working capital requirements.
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The Company will use the net proceeds from the Offer in the following order of priority:
USE OF PROCEEDS PARTICULARS ESTIMATED AMOUNT (IN PHP)
SCHEDULE OF DISBURSEMENT
ESTABLISHMENT OF RETAIL OUTLETS NATIONWIDE Total
Site Development and Building Structure Equipment Cleaning Materials Office Supplies Inventory
24,275,000.00
6,006,875 55,600
357,365
102,200,800.00
132,895,640.00
2012-2013
WORKING CAPITAL
109,517,168.76
2012
TOTAL NET PROCEEDS 242,412,808.76
The Company is embarking on an expansion program to retail agricultural products directly to end-consumers, farmers and other small dealers in the Philippines. Please see discussion on Plan and Programs on page 143 of this Prospectus. The establishment of retail outlets shall be under a wholly-owned subsidiary duly created for the purpose. The estimated cost is estimated at PhP1,328,956.40 per outlet, and will be put up in strategic areas beyond the Company’s existing distribution network. With these retail outlets, the Company will be able to:
Increase business coverage. Retail outlets would enable the Company to conduct business in areas outside its current distribution network.
Establish a more stable customer base. Retail outlets will cater to actual end users compared to current base of resellers who have other sources of supply.
Eliminate the need to engage in “price wars” just to win the sales from dealers.
Increase profit margins as a result of the savings from the resellers’ margin.
Increase significantly cash in-flows to the Company because sales will be Cash on Delivery (COD), as against the resellers that demand credit terms.
Help local farmers through the very low prices that the Company can offer in their stores.
Farmers can get savings from resellers’ margins. Through scale, the Company can negotiate for the lowest prices from suppliers and then pass on the savings to the farmers.
Help local farmers learn the latest technology and techniques in farming through seminars that the Company will offer for free to store customers.
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Provided hereunder is an itemized breakdown of the cost per outlet:
PARTICULARS COST (PhP)
SITE DEVELOPMENT AND BUILDING STRUCTURE
Construction Expense
Paint 5,000.00
Lights 5,000.00
LDR 2,500.00
Electrical 2,000.00
Wallfan 1,250.00
Padlocks 2,000.00
Cabinets 70,000.00
Roll ups 10,000.00
Building Reconstruction
Façade 60,000.00
Signage 50,000.00
Other Repair 10,000.00
Labor Expense
Payroll 20,000.00
Other Expense 5,000.00
242,750.00
EQUIPMENT, CLEANING MATERIALS AND OFFICE SUPPLIES
Equipment
PC-Based USB Biometric Device 5,544.70
Computer Set (CPU, monitor, keyboard, mouse, mouse pad &
AVR)
13,431.08
Epson LX-300 Printer 7,400.18
Globe Tatoo Internet Kit (Prepaid) 995.00
SmartBro Internet Kit (Prepaid) 850.92
Sun Broadband Internet Kit (Prepaid) 746.25
Vault 2,500.00
Web Cam 15,000.00
Push cart 644.44
Scoop 518.08
Weighing Scale - Big 10,500.00
Weighing Scale - Small 1,938.10
Cleaning Materials 556.00
Office Supplies 3,573.65
64,198.40
INVENTORY
Chemicals 702,904.00
Fertilizers 194,850.00
Feeds 67,103.00
Others 57,151.00
1,022,008.00
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PARTICULARS COST (PhP)
TOTAL COST PER OUTLET 1,328,956.40
TOTAL COST OF 100 OUTLETS
Multiplied by 100
132,895,640.00
The Company intends to complete the establishment of its Calata Corporation Retail Stores in 2012. Provided hereunder is a table of the planned nationwide distribution of the outlets:
Regions Provinces No. of Stores
Cordillera Administrative Region Baguio 2
Ilocos Region
Ilocos Norte 5
Ilocos Sur 5
La Union 6
Pangasinan 9
Cagayan Valley
Batanes 3
Cagayan 6
Isabela 6
Nueva Vizcaya 5
Central Luzon
Aurora 5
Bataan 6
Bulacan 8
Nueva Ecija 8
Pampanga 7
Tarlac 7
CALABARZON
Batangas 3
Cavite 2
Laguna 2
Bicol Region Albay 2
Sorsogon 3
Total stores to be established 100
The balance of the proceeds shall be used for working capital requirements for the Company’s day-to-day operations which shall primarily include additional cash requirement for the supply of inventory of its retail outlets and such other incidental expenses related thereto.
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The Company will not use any portion of the proceeds to discharge any debt nor to reimburse any of its officers, directors, employees or shareholders for services rendered, asset previously transferred, or money loaned or advanced. The Company will likewise not use any portion of the proceeds to acquire assets and to finance other businesses. Other than the fees relating to the underwriting and issue management of the Company, the Company will not use the proceeds to pay any financial obligations with the Underwriter and its affiliates. The foregoing discussion represents a best estimate of the use of proceeds of the Offer based on the Company’s current plans and anticipated expenditures. The plans may change based on factors including changing market conditions or new information regarding the cost or feasibility of the plans. The Company’s cost estimates may also change as actual costs may be different from the budgeted costs. For these reasons, the Company may find it necessary or advisable to reallocate the net proceeds with the categories described above, or to alter the plans, including the abandonment of the projects described above and/or pursuit of different projects.
If for any reason the expected gross proceeds are not realized, the Company will use its internally generated funds from operations, existing credit lines, and other potential borrowings to finance the expected uses. The Company is in discussions with various parties regarding the actual locations of the new outlets. Consequently, the proceeds from the Primary Offer that will not be immediately used for the above purposes will be segregated from the other funds of the Company and maintained in separate accounts. In the event of any deviation or adjustment in the planned use of proceeds, the Company shall inform its shareholders, the SEC and the PSE in writing at least 30 days before such deviation or adjustment is implemented. Any material or substantial adjustments to the use of proceeds, as indicated above, should be approved by the Company’s Board of Directors and disclosed to the PSE. In addition, the Company shall submit via the PSE’s Online Disclosure System the following disclosure to ensure transparency in the use of proceeds:
a. Any disbursements made in connection with the planned use of proceeds from the Offer;
b. Quarterly Progress Report on the application of the proceeds from the Offer or on before
the first 15 days of the following quarter;
c. Annual Summary of the application of proceeds on or before January 31 of the year
following the initial public offering;
d. Certification of an external auditor on the accuracy of the information reported by the
Company to the Exchange in the quarterly and annual reports.
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DESCRIPTION OF SHARES Information relating to the Common Shares is set forth below. The description is only a summary and is qualified by reference to Philippine law and the Company’s Articles of Incorporation “Articles”) and By-Laws (“By-Laws”), both as amended, copies of which are available at the SEC. THE COMPANY’S SHARE CAPITAL A Philippine corporation may issue common or preferred shares, or such other classes of shares with such rights, privileges or restrictions as may be provided for in its articles of incorporation and the by-laws. The Company was registered with the SEC on July 23, 1999 under the name Planters Choice Agro Products, Inc. with an authorized capital stock of PhP1,000,000.00 divided into 10,000 common shares with a par value of PhP100.00. In February 22, 2010, the Company obtained approval from the SEC for the change in its corporate name to Calata Corporation. In August 17, 2011, the SEC approved the Company’s application for increase in capital stock from an authorized capital stock of PhP1,000,000.00 divided into 10,000 common shares with a par value of PhP100.00 per share to PhP345,400,000.00 divided into 345,400,000 shares with a par value of PhP1.00 per share. Thereafter, in August 25, 2011, the SEC approved a further increase in the Company’s authorized capital stock to PhP845,400,000.00 divided into 845,400,000 shares with a par value of PhP1.00 per share. Immediately prior to the Offer, the Company has a total of 324,100,000 outstanding common shares. Immediately after the completion of the Offer, the Company will have a total of 360,112,000 Common Shares issued and outstanding. Prior to the Offer, there has been no public trading market for the Company’s Common Shares. Rights Relating to the Common Shares Voting Rights The Company has only one class of shares; all of its shares are Common Shares. Each Common Share is equal in all respects to every other Common Share. All the Common Shares have full voting and dividend rights. The rights of the Company’s shareholders include the right to notice of shareholders’ meetings, the right of inspection of the Company’s corporate books and other shareholders’ rights contained in the Corporation Code of the Philippines. Fundamental Matters Requiring Stockholder Approval The Corporation Code considers certain matters as significant corporate acts that may be implemented only with the approval of shareholders, including those holding shares denominated as non-voting in the articles of incorporation. These acts, which require Board approval and the approval of shareholders representing at least 2/3 of the issued and outstanding capital stock of the Company in a meeting duly called for the purpose (except for the amendment of By-Laws and approval of management contracts in general, which require approval of shareholders representing a majority of the Company’s outstanding capital stock), include:
Amendment of the Articles;
An increase or decrease of capital stock and incurring, creating or increasing bonded indebtedness;
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Delegation to the Board of the power to amend or repeal or to adopt new By-Laws;
Sale, lease, exchange, mortgage, pledge or other disposition of all or a substantial part of the Company’s assets;
Merger or consolidation of the Company with another corporation or corporations;
Investment of corporate funds in any other corporation or for a purpose other than the primary purpose for which the Company was organized;
Dissolving the Company;
Declaration or issuance of stock dividends;
Ratifying a contract between the Company and a Director or officer where the vote of such Director or officer was necessary for approval;
Entering into a management contract where (a) a majority of Directors of the managing corporation constitutes the majority of the board of the managed company or (b) stockholders of both the managing and managed corporations represent the same interest and own or control more than one third of the outstanding capital stock entitled to vote;
Removal of Directors;
Ratification of an act of disloyalty by a Director; and
Ratification of contracts with corporations in which a Director is also a member of the board, where the interest of the Directors is substantial in one corporation and nominal in the other.
Pre-emptive Rights The Corporation Code confers pre-emptive rights in shareholders of a Philippine corporation entitling such shareholders to subscribe to all issues or other dispositions of equity related securities by the corporation in proportion to their respective shareholdings, regardless of whether the equity related securities proposed to be issued or otherwise disposed of are identical to the shares held. A Philippine corporation may provide for the denial of these pre-emptive rights in its article of incorporation. The Company’s Articles of Incorporation currently contains such a denial of pre-emptive rights on all classes of shares issued by the Company and therefore further issues of shares (including treasury shares) can be made without offering such shares on a pre-emptive basis to the existing shareholders. Derivative Suits Philippine law recognizes the right of a shareholder to institute, under certain circumstances, proceedings on behalf of the corporation in a derivative action in circumstances where the corporation itself is unable or unwilling to institute the necessary proceedings to redress wrongs committed against the corporation or to vindicate corporate rights, as for example, where the directors themselves are the malefactors. Appraisal Rights The Corporation Code grants a shareholder a right of appraisal in certain circumstances where he has dissented and voted against a proposed corporate action, including:
An amendment of the articles of incorporation which has the effect of adversely affecting the rights attached to his shares or of authorizing preferences in any respect superior to
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those of outstanding shares of any class or of extending or shortening the term of corporate existence;
The sale, lease, exchange, transfer, mortgage, pledge or other disposal of all or substantially all the assets of the corporation;
The investment of corporate funds in another corporation or business or for any purpose other than the primary purpose for which the corporation was organized; and
A merger or consolidation. In these circumstances, the dissenting shareholder may require the corporation to purchase his shares at a fair value which, in default, is determined by three disinterested persons, one of whom shall be named by the stockholder, one by the corporation, and the third by the two thus chosen. In the event of a dispute, the Philippine SEC will resolve any question relating to a dissenting shareholder’s entitlement to exercise the appraisal rights. The dissenting shareholder will be paid if the corporate action in question is implemented and the corporation has unrestricted retained earnings sufficient to support the purchase of the shares of the dissenting shareholders. Dividends Under Philippine law, a corporation can only declare dividends to the extent that it has unrestricted retained earnings. Unrestricted retained earnings represent the undistributed earnings of the corporation which has not been allocated for any managerial, contractual or legal purposes and which are free for distribution to the shareholders as dividends. A corporation may pay dividends in cash, by the distribution of property, or by the issuance of shares. Board approval suffices for the approval of payment of cash and property dividends. Stock dividends may be paid and distributed only upon the approval of the shareholders at a meeting called for that purpose. The Corporation Code generally requires a corporation with surplus profits in excess of 100% of its paid-in capital to declare and distribute such surplus to its shareholders in the form of dividends. Notwithstanding this general rule, a Philippine corporation may retain all or any portion of such surplus when: (i) justified by definite expansion plans approved by its Board of Directors; (ii) the required consent of any financing institution or creditor for the declaration of dividends pursuant to a loan agreement which prohibits such declaration without said creditor’s consent has not yet been secured; or (iii) it can be clearly shown that such retention is necessary under special circumstances. The Company’s board of directors is authorized to declare cash or stock dividends or a combination thereof. A cash dividend declaration requires the approval of the Board and no shareholder approval is necessary. A stock dividend declaration requires the approval of the Board and shareholders representing at least two-thirds of the Company’s outstanding capital stock. Holders of outstanding shares on a dividend record date for such shares will be entitled to the full dividend declared without regard to any subsequent transfer of shares. Under the Corporation Code, the Company may not make any distribution of dividends other than out of its unrestricted retained earnings. Each holder of a common share is entitled to such dividends as may be declared in accordance with the Company’s dividend policy. Currently, the Company has no specific dividend policy program. However, the Company currently implements a dividend policy mechanism which entitles holders of common shares to receive dividends based on the recommendation of the board of directors. Such recommendation will take into consideration factors such as operating expenses, implementation of business plans, and working capital among other factors.
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The Company intends to declare as a policy that dividends, whether in stock or in cash, shall be strictly subject to statutory limitations. On November 4, 2010, the Company‘s Board of Directors declared a cash dividend amounting to PhP 47,000,000.00. Stockholders on record as of October 31, 2010 were paid their dividend on December 8, 2010. In a meeting held on November 18, 2011, the BOD unanimously approved the declaration of cash dividends in the amount of Twenty Five Million Pesos (P25,000,000) to stockholders of record as of November 8, 2011, subject to the availability of unrestricted retained earnings to cover said dividend declaration. The Company intends to pay said dividends in the first quarter of 2012. Treasury Shares Subject to the authorization of the SEC and the required corporate approvals, the Company may acquire its own Shares, provided that, it has unrestricted retained earnings to pay for the Shares to be acquired or purchased and only for a legitimate corporate purpose. The shares repurchased by the Company shall become treasury shares that may again be disposed of at a reasonable price as may be fixed by the Board of Directors. These Shares neither have voting rights nor dividend rights as long as they remain as treasury shares. Disclosure Requirements / Right of Inspection Philippine stock corporations are required to file a general information sheet which sets forth data on their management and capital structure and copies of their annual financial statements with the SEC. Corporations must also submit their annual financial statements to the BIR. Corporations whose shares are listed on the PSE are also required to file current, quarterly and annual reports with the SEC and the PSE. Shareholders are entitled to require copies of the most recent financial statements of the corporation, which include a balance sheet as of the end of the most recent tax year and a profit and loss statement for that year. Shareholders are also entitled to inspect and examine the books and records that the corporation is required by law to maintain. The Board is required to present to shareholders at every annual meeting a financial report of the operations of the corporation for the preceding year. Change in Control The Company’s Articles and By-laws do not contain any provision that will delay, deter or prevent a change in control of the Company. Other Features and Characteristics of Common Shares The Common Shares are neither convertible nor subject to mandatory redemption. All of the Company’s issued Common Shares are fully paid and non-assessable and free and clear from any and all liens, claims and encumbrances. All documentary stamp tax due on the issuance of all Common Shares has been fully paid.
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MANUAL ON CORPORATE GOVERNANCE The Company has submitted its Manual on Corporate Governance to the SEC in compliance with Revised Code of Corporate Governance SEC Memorandum Circular No. 6 Series of 2009. The Company's policy of corporate governance is based on its Manual. The Manual lays down the principles of good corporate governance in the entire organization. The Manual provides that it is the Board’s responsibility to initiate compliance to the principles of good corporate governance, to foster the long-term success of the Company and to secure its sustained competitiveness in a manner consistent with its fiduciary responsibility, which it shall exercise in the best interest of the Company, its shareholders and other stockholders. Two independent directors to wit, Mr. Harvey Keh and Mr. George Nava, sit on the Board. The Company espouses the definition of independence pursuant to the Securities Regulation Code. The Company considers as an independent director one who, except for his director's fees and shareholdings, is independent of management and free from any business or other relationship which, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in the Company. The Manual embodies the Company’s policies on disclosure and transparency, and mandates the conduct of communication and training programs on corporate governance. The Manual further provides for the rights of all shareholders and the protection of the interests of minority stockholders. Commission of any violation of the Manual is punishable by a penalty ranging from reprimand to dismissal, depending on the frequency of commission as well as the gravity thereof. The Compliance Officer shall be responsible for determining violation/s through notice and hearing and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board. The Board of Directors has constituted certain committees to effectively manage the operations of the Company. The Company’s principal committees of the Board of Directors include the Executive Committee, the Audit Committee, the Compensation Committee and the Nominations Committee. A brief description of the functions and responsibilities of the key committees are set out below: COMMITTEES OF THE BOARD Executive Committee
The Executive Committee is composed of three (3) members of the Board of Directors. Currently, the Executive Committee comprises Joseph H. Calata, Benison Paul B. De Torres and George A. Nava. Joseph H. Calata is the Chairman of the Committee. The Executive Committee may act by majority of all its members, on such specific matters within the competence of, and as may be delegated by the Board of Directors. Audit Committee The Audit Committee provides an oversight of financial management functions, specifically in the areas of managing credit, market, liquidity, operational, legal and other risks and is primarily responsible for monitoring the statutory requirements of the Company. The Audit Committee is responsible for the setting up of an internal audit department and for the appointment of an internal auditor, as well as an independent external auditor. It monitors and evaluates the adequacy and effectiveness of the Company’s internal control systems. It ensures that the Board is taking appropriate corrective action in addressing control and compliance functions with regulatory agencies. It also ensures the Company’s adherence to corporate principles, best practices and compliance with the Manual on Corporate Governance. The Audit Committee
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currently comprises Baltazar Endriga, George A. Nava and Jaime C. Laya. Baltazar Endriga is the Chairman of the Committee. Compensation Committee The Compensation Committee is primarily responsible for establishing a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers who are receiving compensation from the Group. It is responsible for providing an oversight of remuneration of senior management and other key personnel and ensuring that compensation is consistent with the Group’s culture, strategy and control environment. The Compensation and Remuneration Committee currently comprises Joseph H. Calata, Harvey S. Keh and Benison Paul B. De Torres. Joseph H. Calata is the Chairman of the Committee. Nomination Committee The Nomination Committee is primarily responsible for the review and evaluation of the qualifications of all persons nominated to positions requiring appointment by the Board and the assessment of the Board’s effectiveness in directing the process of renewing and replacing Board members. The Nomination Committee currently comprises Joseph H. Calata, George A. Nava and Jose A. Zaide. George A. Nava is the Chairman of the Committee. Stock Transfer Agent BDOBDI UNIBANK, INC. – TRUST AND INVESTMENTS GROUP shall act as the Stock Transfer Agent for the purpose of authenticating and registering transfer of the Offer Shares as set forth in the Stock Transfer Agreement. Other Securities and Options The Company has not issued any other form of securities other than its Common Shares nor has it granted or issued any options to any person.
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RECENT ISSUANCE OF EXEMPT SECURITIES On August 17, 2011, Joseph H. Calata, Daniel C. Go and Garry Lincoln C. Taboso subscribed to 52,100,000, 21,500,000, and 12,500,000 common shares, respectively, at PhP1.00 per share. Joseph H. Calata’s subscription is a private placement transaction from an existing stockholder, hence, an exempt transaction under Section 10.1(e) of the Securities Regulation Code. Daniel C. Go’s and Garry Lincoln C. Taboso’s subscriptions are also private placement transactions under Section 10.1(k) of the Securities Regulation Code. Accordingly, Notices of Exemption dated August 27, 2011 were filed for the 3 subscriptions with the Securities and Exchange Commission on August 31, 2011. On August 25, 2011, Joseph H. Calata, Herbert P. Lipana, Rollie S. Hailili, and Dennis V. Vistan subscribed to 75,000,000, 20,000,000, 14,000,000 and 16,000,000 common shares, respectively, at PhP1.00 per share. Joseph H. Calata’s subscription is a private placement transaction from an existing stockholder, hence, an exempt transaction under Section 10.1(e) of the Securities Regulation Code. Herbert P. Lipana’s, Rollie S. Halili’s, and Dennis V. Vistan’s subscriptions are also private placement transactions under Section 10.1(k) of the Securities Regulation Code. Accordingly, Notices of Exemption dated September 7, 2011 were filed for the 4 subscriptions with the Securities and Exchange Commission on September 9, 2011. On September 9, 2011, Joseph H. Calata, Ritchie Ramille F. Isip, and Zandro L. Zulueta subscribed to 90,000,000, 9,500,000 and 12,500,000 common shares, respectively at PhP1.00 per share. Joseph H. Calata’s subscription is a private placement transaction from an existing stockholder, hence, an exempt transaction under Section 10.1(e) of the Securities Regulation Code. Ritchie Ramille F. Isip’s and Zandro L. Zulueta’s subscriptions are also private placement transactions under Section 10.1(k) of the Securities Regulation Code. Accordingly, Notices of Exempt Transaction dated September 7, 2011 were filed for the 3 subscriptions with the Securities and Exchange Commission on September 9, 2011 containing therein copies of the following documents: SEC Form 10-1, Subscription Agreement, and Audit Verification from an Independent Auditor.
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LIST OF STOCKHOLDERS OF CALATA CORPORATION As of 31 December 2011
NAME
NATIONALITY
SUBSCRIPTION @ par value of P1.00/sh
Resulting Equity
(%)
No. of
Common Shares
Amount
Subscribed
Amount Paid
Joseph H. Calata Filipino 217,699,994 P217,699,994.00 P217,699,994.00 67.17
Melvin H. Calata Filipino 300,000 300,000.00 300,000.00 0.092
Jennibel H. Calata Filipino 50,000 50,000.00 50,000.00 0.015
Carmelita H. Mariano Filipino 30,000 30,000.00 30,000.00 0.009
Cherry Lou M. Dela Cruz Filipino 20,000 20,000.00 20,000.00 0.006
Daniel C. Go Filipino 21,500,000 21,500,000.00 21,500,000.00 6.633
Garry C. Taboso Filipino 12,500,000 12,500,000.00 12,500,000.00 3.856
Herbert P. Lipana Filipino 20,000,000 20,000,000.00 20,000,000.00 6.17
Rollie S. Halili Filipino 14,000,000 14,000,000.00 14,000,000.00 4.319
Dennis V. Vistan Filipino 16,000,000 16,000,000.00 16,000,000.00 4.936
Zandro L. Zulueta Filipino 12,500,000 12,500,000.00 12,500,000.00 3.856
Richie Ramille F. Isip Filipino 9,500,000 9,500,000.000 9,500,000.000 2.931
Jose A. Zaide Filipino 1 1.00 1.00 0.00
George A. Nava Filipino 1 1.00 1.00 0.00
Jaime C. Laya Filipino 1 1.00 1.00 0.00
Baltazar N. Endriga Filipino 1 1.00 1.00 0.00
Harvey S. Keh Filipino 1 1.00 1.00 0.00
Benison Paul B. De Torres Filipino 1 1.00 1.00 0.00
TOTAL 324,100,000 P324,100,000.00 P324,100,000.00 100.00000
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CAPITALIZATION The following table sets forth the balance of long-term debt and shareholders’ equity of the Company as of December 31, 2011. This table should be read in conjunction with the Company’s audited financial statements, including the notes thereto, included elsewhere in this Prospectus. TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY As of Dec. 31, 2011 and as adjusted after giving effect to the Offer, the total liabilities and stockholders’ equity of the Company are as follows:
Amount (in millions) Prior
to the Offer
As adjusted after giving effect to the Offer
Trade and other payables P134.70 P134.70
Short-term loans 392.50 392.50
Advances from related parties Income tax payable
52.46 46.56
52.46 46.56
Dividends payable Pension liability
25.00 1.82
25.00 1.82
Total liabilities 653.04 653.04
Capital stock 324.10 360.10
Additional paid in capital 0.00 234.1
Retained earnings 75.90 75.90
Total stockholders’ equity 400.00 670.10
Total liabilities and stockholders’ equity 1,053.04 1,323.14
SHARE CAPITAL On August 5, 2011, the Company has increased its authorized capital stock from PhP 1,000,000.00 divided into 1,000,000 shares with par value of PhP1.00 per share to PhP345,400,000.00 divided into 345,400,000 shares with par value of PhP1.00. On August 18, 2011, the Company has increased its authorized capital stock from PhP345,400,000.00 divided into 345,400,000 shares with par value of PhP1.00 per share to PhP845,400,000.00 divided into 845,400,000 shares with par value of PhP1.00.
2011 2010
Authorized: 845,400,000 shares at PhP1.00 par value each in 2011 and 10,000 shares at PhP100.00 par value each in 2010
845,400,000 P1,000,000
Issued and outstanding: 324,100,000 shares at PhP1.00 par value each in 2011 and 10,000 shares at PhP100.00 par value each in 2010
P324,100,000 1,000,000
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Subscriptions and full payment of stocks are made during the period on the following dates:
August 17, 2011 P86,100,000 August 25, 2011 125,000,000 September 9, 2011 112,000,000
P323,100,000
The Company currently has a total of 324,100,000 issued and outstanding common shares. After the Offer, the Company will have a total of 360,112,000 issued and outstanding common shares.
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DILUTION The shareholdings of current and new shareholders of the Company immediately before and after the Offer shall be as follows:
Immediately Preceding the
Offer Immediately After the
Offer
Shareholders No. of Shares % No. of Shares %
JOSEPH H. CALATA 217,699,994 67.171 217,699,994 60.453
MELVIN H. CALATA 300,000 0.093 300,000 0.083
JENNIBEL H. CALATA 50,000 0.015 50,000 0.014
CARMELITA H. MARIANO 30,000 0.009 30,000 0.008
CHERRY LOU M. DELA CRUZ 20,000 0.006 20,000 0.006
DANIEL C. GO 21,500,000 6.634 21,500,000 5.970
GARRY LINCOLN C. TABOSO 12,500,000 3.857 12,500,000 3.471
HERBERT P. LIPANA 20,000,000 6.171 20,000,000 5.554
ROLLIE S. HALILI 14,000,000 4.320 14,000,000 3.888
DENNIS V. VISTAN 16,000,000 4.937 16,000,000 4.443
RICHIE RAMILLE F. ISIP 9,500,000 2.931 9,500,000 2.638
ZANDRO L. ZULUETA 12,500,000 3.857 12,500,000 3.471
BENISON PAUL DE TORRES 1 0.000 1 0.000
DR. JAIME C. LAYA 1 0.000 1 0.000
BALTAZAR N. ENDRIGA 1 0.000 1 0.000
GEORGE A. NAVA 1 0.000 1 0.000
AMB. JOSE A. ZAIDE 1 0.000 1 0.000
HARVEY S. KEH 1 0.000 1 0.000
IPO INVESTORS 0 0.000 36,012,000 10.000
Total 324,100,000 100 360,112,000 Note: The dilutive effect of the issuance of the Offer Shares on the abovementioned shareholders prior to the Offer
assumes that the Existing Shareholders will not subscribe to the Offer Shares.
As of December 31, 2011, the Company’s net tangible book value was PhP398,145,595.00 or PhP1.23 per Share. If the net proceeds in the estimated amount of 242,412,808.76 raised from the initial public offering of 36,012,000 shares of stock are received and recorded, it will result in an increase in net tangible book value of PhP0.55 per share to stockholders of the Company before the Offer, and a dilution of PhP5.74 per Share to those that will subscribe to the initial public offering.
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The calculation of the net tangible assets per share before and after the Offer is presented below:
Before the Offer
Net Tangible Book Value As of December 31, 2011 Php 398,145,595
Total No. of Shares Issued and Outstanding 324,100,000
Book Value Per Share Php 1.23
Net Proceeds
Gross Proceeds
At PhP 7.50 per Offer Share 270,090,000.00
Less: Expenses
At PhP 7.50 per Offer Share 27,677,719.24
Net Proceeds
At PhP 7.50 per Offer Share 242,412,808.76
After the Offer
Net Tangible Book Value plus Net Proceeds
At PhP 7.50 per Offer Share Php640,558,403.76
Total No. of Shares Issued and Outstanding 360,112,000.00
Book Value Per Share
At PhP 7.50 per Offer Share Php1.78
The following presents the dilution to the original stockholders as a result of the initial public offering:
Before Offer After Offer
Stockholders Number of Shares % Number of Shares %
Existing shareholders 324,100,000 100.00% 324,100,000 90.00%
Public 0 0.00% 36,012,000 10.00%
Total Issued and Outstanding 324,100,000 100.00%
360,112,000 100.00%
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GENERAL CORPORATE INFORMATION INCORPORATION The Company is duly organized as a corporation under the laws of the Philippines and was registered with the SEC on July 23,1999. ARTICLES OF INCORPORATION AND BY-LAWS The Articles of Incorporation of the Company was approved by the SEC on July 23, 1999. The latest amended Articles was approved by the SEC on February 6, 2012 to include retail trade activities as part of its primary purpose.
The By-Laws of the Company was registered with the SEC on July 23, 1999 and was amended on August 17, 2011 to incorporate the requirements of Section 38 of the Securities Regulation Code on Independent Directors and to prepare the Company for its Initial Public Offering.
PRIMARY PURPOSE Under the Articles, the Company’s primary purpose is tot conduct, engage in and carry on, as principal or otherwise, all lawful business activities involving livestock and agricultural business, corporate or otherwise, such as but not limited to the business of acquiring, raising, breeding, slaughtering, preserving, processing, packing, canning, enveloping, storing, marketing, exporting and commercially distributing livestock such as chicken, fowl, cattle, calves, hogs, goats, sheep, lambs, all kinds of livestock and other animals, as may be permitted by law, for food purposes; the business of cultivating land and other natural resources, planting, growing, producing, buying, preserving, processing, packing, canning, enveloping, storing, marketing, exporting and commercially distributing food and agricultural products including all kinds of goods, commodities, wares and merchandise of every kind and description whether natural or artificial as may be permitted by law; the business of manufacturing, preparing, stocking, packing, buying, selling, importing and exporting, dealing in and delivering all kinds of livestock and agricultural products such as but not limited to poultry, livestock, feeds, feed additives, fertilizers, pesticides, all types of chemicals and substances used for livestock and agriculture, and/or whatsoever materials which may be necessary or incidental to their manufacture or preparation inside or outside the Philippines and all kinds of materials and products and by-products arising out of or used in the breeding and slaughtering of poultry and livestock and all other agricultural activities for food purposes; and to direct, establish, construct, acquire, sell, lease, operate and maintain slaughterhouses, dressing plants, processing plants, refrigeration plants, cold storage, warehouses, sheds, silos, bodegas, storage bins and other buildings, facilities, structures and equipment necessary or expedient for the carrying out of the purposes aforesaid. CAPITAL STRUCTURE The Company has an authorized capital stock of Eight Hundred Forty Five Million Four Hundred Thousand (845,400,000) shares with a par value of One Peso (PhP1.00) per share or a total of Eight Hundred Forty Five Million Four Hundred Thousand Pesos (PhP845,400,000.00). Currently, the Company has Three Hundred Twenty Four Million One Hundred Thousand (324,100,000) shares with a par value of One Peso (PhP1.00) per share or a total of Three Hundred Twenty Four Million One Hundred Thousand Pesos (PhP324,100,000.00). The Company has no treasury shares. CORPORATE TERM The Company is authorized to exist for a term of 50 years from the date of its incorporation. This term may be renewed through an amendment to the Articles approved by the SEC.
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BUSINESS YEAR The business year of the Company begins on the first day of January and ends on the last day of December of each year. APPROVALS The issue and sale of the Common Shares to the public was duly authorized by resolutions of the Board of Directors of the Company passed on November 25, 2011 and approved by the Stockholders owning at least two-thirds of the issued and outstanding capital stock. The Initial Public Offering and initial listing of the Offer Shares of the Company duly authorized by resolutions of the Board of Directors of the Company passed on November 25, 2011 and approved by the Stockholders owning at least two-thirds of the issued and outstanding capital stock. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the Articles and By-laws are available for inspection by the Company’s stockholders at the principal office of the Company, during normal business hours on any day on which such office is open for business. Copies may also be inspected at the office of the SEC.
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COMMON STOCKHOLDERS
Calata Corporation does not have any subsidiaries but has affiliate companies as a result of having common stockholders. Furthermore, Calata Corporation is not a stockholder in any of the following affiliate companies and does not have ownership over any of the following:
Affiliate Name Relationship with Calata Corporation
Place of Registration
Business Operations
Calata Builders Inc Common Stockholders Joseph H. Calata (70%) Melvin H. Calata (10%) Jennibel H. Calata (10%) Cherry Lou M. Dela Cruz (5%) Carmelita H. Mariano (5%) TOTAL 100%
Bulacan Construction of Residential and
Commercial Establishments
Calata Farms Inc Common Stockholders Joseph H. Calata (70%) Melvin H. Calata (10%) Jennibel H. Calata (10%) Cherry Lou M. Dela Cruz (5%) Carmelita H. Mariano (5%) TOTAL 100%
Bulacan Farm projects
Calata Air Inc Common Stockholders Joseph H. Calata (55%) Melvin H. Calata (15%) Jennibel H. Calata (15%) Cherry Lou M. Dela Cruz (5%) Carmelita H. Mariano (10%) TOTAL 100%
Bulacan Aircraft Leasing
Avestha Holding Corp.
(No current subsidiary)
Common Stockholders Joseph H. Calata (0.9%) Melvin H. Calata (0.9%) Jennibel H. Calata (0.9%) Non Calata Stockholders
Eusebio C. Calata (48.6%) Isabel H. Calata (48.6%) TOTAL 100%
Bulacan Holding Company
Agri Phil Corp. Common Stockholders Joseph H. Calata (80%) Melvin H. Calata (5%) Jennibel H. Calata (5%) Cherry Lou M. Dela Cruz (5%) Carmelita H. Mariano (5%) TOTAL 100%
Bulacan Retail Distribution
Seneca Farms Sole Proprietorship Joseph H. Calata
Isabela Broiler Projects
Calata Enterprises Sole Proprietorship Joseph H. Calata
Makati Liason Office
Gastin Corporation Common Stockholders Joseph H. Calata (79.9%) Melvin H. Calata (0.003%) Jennibel H. Calata (0.003%) Carmelita H. Mariano (0.003%) Non Calata Stockholder
Eduardo L. Santos (20%) TOTAL 100%
Bulacan Distribution of Agricultural Products
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ORGANIZATIONAL STRUCTURE OF AFFILIATES
Calata Builders, Inc.
Name Board / Officer Shares %
Joseph H. Calata Chairman and President 17,500 70%
Melvin H. Calata Board Member and Corporate Secretary
2,500 10%
Jennibel H. Calata Board Member 2,500 10%
Carmelita H. Mariano Board Member 1,250 5%
Cherry Lou M. Dela Cruz Board Member 1,250 5%
Benison Paul B. De Torres Treasurer
Calata Farms, Inc.
Name Board / Officer Shares %
Joseph H. Calata Chairman and President 35,000 70%
Melvin H. Calata Board Member and Corporate Secretary
5,000 10%
Jennibel H. Calata Board Member 5,000 10%
Carmelita H. Mariano Board Member 2,500 5%
Cherry Lou M. Dela Cruz Board Member 2,500 5%
Benison Paul B. De Torres Treasurer
Calata Air, Inc.
Name Board / Officer Shares %
Joseph H. Calata Chairman and President 13,750 55%
Melvin H. Calata Board Member and Corporate Secretary
3,750 15%
Jennibel H. Calata Board Member 3,750 15%
Carmelita H. Mariano Board Member 1,250 5%
Cherry Lou M. Dela Cruz Board Member 2,500 10%
Benison Paul B. De Torres Treasurer
Avestha Holding Corporation (No current subsidiary)
Name Board / Officer Shares %
Eusebio H. Calata Board Member 53,500 48.6%
Isabel H. Calata Board Member and Treasurer 53,500 48.6%
Melvin H. Calata Board Member 1,000 0.9%
Joseph H. Calata Chairman and President 1,000 0.9%
Jennibel H. Calata Board Member and Corporate Secretary
1,000 0.9%
Agri Phil Corporation
Name Board / Officer Shares %
Joseph H. Calata Chairman and President 20,000 80%
Melvin H. Calata Board Member and Corporate Secretary
1,250 5%
Jennibel H. Calata Board Member 1,250 5%
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Carmelita H. Mariano Board Member 1,250 5%
Cherry Lou M. Dela Cruz Board Member 1,250 5%
Benison Paul B. De Torres Treasurer
Gastin Corporation
Name Board / Officer Shares %
Joseph H. Calata Chairman and President 249,960 79.9%
Melvin H. Calata Board Member and Corporate Secretary
10 0.003%
Jennibel H. Calata Board Member 10 0.003%
Carmelita H. Mariano Board Member 10 0.003%
Cherry Lou M. Dela Cruz 10 0.003%
Eduardo L. Santos Board Member 62,500 20%
Benison Paul B. De Torres Treasurer
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ORGANIZATION
CORPORATE STRUCTURE
President/CEO Joseph H. Calata
Administrative Supervisors and Special Projects Melvin H. Calata
Jennibel H. Calata
Corporate Secretary
Jose Marie E. Fabella
Chief Financial and Operations Officer
Benison Paul B. De Torres
Accounting Staff
Payroll
Credit and Collection
Human Resource and Administration
Document Controller
General Maintenance
(House Keeping)
Operations
Logistics
Purchasing
Customer Relation
Ware House
Business Development
Sales Manager
Operations Manager
Sales Manager for Chemicals
Office Executive Assistants
Principal Accounting Officer Janet H. Santos
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DIRECTORS AND SENIOR MANAGEMENT The Company’s Board of Directors is responsible for over-all management and direction of the Company. The Board meets to review and monitor the Company’s future plans. The Company has 7 directors. The table below sets forth each member of the Company’s Board elected during the most recent annual stockholder’s meeting held on November 25, 2011 and are to serve until the next annual stockholders’ meeting or until their successors have been duly elected and qualified.
Name Designation
Mr. Joseph H. Calata Chairman, President And Chief Executive Officer
Mr. Benison Paul De Torres Chief Operating Officer, Chief Financial Officer
Dr. Jaime C. Laya Director
Mr. Baltazar N. Endriga Director
Amb. Jose A. Zaide Director
Mr. George A. Nava Independent Director
Mr. Harvey S. Keh Independent Director
Jose Marie E. Fabella Corporate Secretary
JOSEPH HERNANDEZ CALATA, 31. Mr. Calata is the Chairman/President and Chief Executive Officer of Calata Corporation. Mr. Calata has served as Member of the Board of Directors from 1999 up to the present and has been Chairman of the Board from 2009 – present. Mr. Calata shall serve as Chairman and member of the Board of Directors until August 31, 2012 and until his successor is elected and qualified. Mr. Calata is responsible for bringing the Company among the top 1000 Corporations in the Philippines and transforming it into the biggest combined distributor of Agro Chemicals Feeds, Fertilizers and Seeds in the country. A member of the Management Association of the Philippines, Mr. Calata started his professional career as a Trainee Manager of then Planters Choice Agro Products, Inc. Mr. Calata was given the Gintong Kabataan Award ng Bulacan and the Gawad Dangal ng Plaridel Award in 2009. Mr. Calata earned a degree of Bachelor of Science in Commerce, Major in Management of Financial Institutions from the De La Salle University. BENISON PAUL BAUTISTA DE TORRES, CPA, 31. Mr. De Torres has been the Chief Financial Officer of Calata Corporation since 2007. Currently, in addition to said position, Mr. De Torres is the Company’s Chief Operations Officer. Mr. De Torres was elected for the first time to the Board of Directors last November 25, 2011. Mr. De Torres shall serve as member of the Board of Directors until August 31, 2012 and until his successor is elected and qualified. After passing the Certified Public Accountants’ Examination, Mr. De Torres joined the auditing firm of Villaruz, Villaruz and Co. as junior auditor. Thereafter, from 2004 to 2006, Mr. De Torres became an auditor of Sycip, Gorres, Velayo and Co. From 2006-2007, he assumed the position of Financial Services Manager of Prime Outsource Corporation. Mr. De Torres earned his Bachelor of Science in Accountancy at the Philippine School of Business Administration. JOSE MARIE E. FABELLA, 35. Atty. Fabella is the Corporate Secretary of Calata Corporation. He was elected last November 25, 2011 and shall serve as such until August 31, 2012 and until his successor is elected and qualified. He is a partner at Fabella and Fabella Law Office - a firm which specializes in the practice of Corporate and Securities Law and is currently Corporate Secretary and Legal Counsel to various publicly-listed companies. After being admitted to the Philippine Bar in 2005, he immediately engaged in the practice of law by joining several law
60
offices as an associate lawyer. Thereafter, he served as Securities Counsel III at the Securities Registration Division in the Corporation Finance Department of the Philippine Securities and Exchange Commission until January 2010. Apart from conducting lectures to listed companies, Atty. Fabella is an MCLE lecturer on Securities Law and a Masters of Law (Commercial Law) Candidate at the San Beda College Graduate School of Law. BALTAZAR N. ENDRIGA, CPA., 73, Mr. Endriga is a Director of Calata Corporation. He was elected last November 25, 2011 and shall serve as member of the Board of Directors until August 31, 2012 and until his successor is elected and qualified. Currently, Mr. Endriga holds the following positions: Managing Partner, Endriga, Manangu, Aguilar & Associates, Certified Public Accountants; Member – National Executive Council – National Movement for Free Elections (NAMFREL); President, Meridian International College of Business, Arts and Technology; Board Member, Miriam College Foundation; Board Member, Kalayaan College, Private Sector Champion: National Competitiveness Council – for Efficient Public and Private Sector Management; President, Libagon Academy Foundation, Inc., Libagon, Southern Leyte, a Catholic Secondary Level Institution of Learning; Adviser, Board Member, Cultural Center of the Philippines; Board Member, CIBI Foundation, Inc.;Fellow, Institute of Corporate Directors (ICD); Fellow, Institute of Solidarity in Asia; Board Member, Association of Investment Professionals Phils., Inc. Previous Positions Board Member and Treasurer, Management Association of the Philippines (2007-2008); President and Chief Academic Officer, University of the East (Up to June 28,2005); Board Member, UE Board of Trustees (Up to June 28, 2005); Board Member, UE – Foundation for Research & Advanced Studies, Inc. (UE-FRASI) (up to June 28, 2005); President, UE- Center for Review & Special Studies, Inc. (Up to June 28, 2005); Chairman, Cultural Center of the Philippines (July 13, 2001 to July 12, 2003); President, Cultural Center of the Philippines (Sept. 1, 1995 - July 12, 2001); President & CEO, Phil. Central Depository (The service company handling the scripless computer-based trading at the Phil. Stock Exchange) (August 1, 1998 to January 15, 1999); President, Andersen Consulting, Inc. (now Accenture) (February 1, 1993 to August 31, 1995); Partner, Sycip, Gorres, Velayo & Co. (SGV), CPA’s (1974 to January 31, 1992) (SGV & Co. is now a member firm of the Ernst and Young Worldwide.); Started its computer consulting practice in 1974 and developed it into a 150-man strong Group by 1986. Set up the firm’s computer audit capability; In-charge of Information Technology ConsultingDivision, the Advanced Systems Division; In-charge, the Financial Services Ind. Division;In-charge, Information Technology Division; In-charge, Computer Audit Group; In-charge, SGV Computer Center; President, Institute of Advanced Computer Technology (I/ACT) (1993-1995); President, Financial Executives Institute of the Philippines (FINEX) (January – December 1997); Board Member, Institute of Advanced Computer Technology (1978-1992); Member, Advisory Board – Metropolitan Bank & Trust Co.,(April 1998 - April 2004); Consultant to the Board, Manila Doctors’ Hospital (April 1998 to 2002); Board Member, FINEX Research and Development Foundation, Inc. Past Affiliations
Chairman, Quality Assurance Board for the Accounting Profession, Philippine Institute of Certified Public Accountants (PICPA) (2002-2004); Chairman, Federation of Asian Cultural Promotion (February 1998 to January 1999); Chairman, Assn. of Asia Pacific Performing Arts Centre (November 1998 to January 1999); Chairman, Advisory Council, Philippine High School for the Arts (September 1995 to January 1999); Board Member, Film Development Foundation of the Phils. (August 1995 to January 1999); Commissioner, National Commission for Culture and the Arts (September 1995 to January 1999)
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Past Employment Senior Consultant- Touche Ross & Co. (New York) (Now Part of Deloitte, Touche); Management Services Div., Involved in Computerized Information Systems (June 1,1969- December 31, 1970); Supervisor and Associate – L.C. Diaz & Co., CPAs Auditing and Management Consulting (1961- 1966); Faculty Member – U.P. Graduate School of Business Taught Managerial Accounting (1971); Faculty Member- Asian Institute of Management Taught Managerial Information systems (1971); Faculty Member, De La Salle University Graduate School of Business (2000); Bookkeeper and Private tutor (while in college) Educational Background Master of Business Administration, Harvard Business School (1968), (Johnson Foundation Scholar and Peter Deuticke Fellow); Graduate Studies in Economics, Ateneo de Manila Graduate of School of Economics; Bachelor of Business Administration, Magna Cum Laude, major in Accounting, University of the East; Certified Public Accountant, placed sixth in Board Exams; High School Education – Libagon Academy , a Catholic High School, In Libagon, Southern Leyte (1
st to 3
rd Year); UST High School – 4
th Year; Elementary Education – Public School in Libagon,
Southern Leyte Leadership Positions / Membership in Organizations President, Financial Executives Institute of the Philippines (FINEX) (January to Dec. 1997); Chairman, Cultural Committee, Rotary Club-Makati West, 1986; Organized a Natl. Open Competition for the Arts, Apr. 1986; President, MANINDIGAN (1994-1995) (a cause-oriented organization of young business leaders); Market Area Adviser for NAFTA- appointed by DTI for the Philippine Export Development Plan; President, Information Technology Assn. of the Phils. (ITAP) (1993 and 1994); Private Sector Representative to the National Information Technology Council (1994-1995); Chairman, Committee on Environment Bishops-Businessmen’s Conference (BBC)(1992-1995); Head of Mission, Phil. Software Export Mission to the U.S. (Sept. 1987); President, Philippine Computer Society (1985-86, 1986-87); President, Phil. Assn. of Management Accountants (PAMA) (1978); Vice-President, National Assn. Of Accountants-Philippine-International Chapter (1976); Chairman, Committee on Computer Technology, ASEAN Federation of Accountants (1982 to 1989); Annual National Convention Chairman, Philippine Institute of Certified Public Accountants (1972); Chairman, PICPA Committee on Electronic Data processing (1978 -1981); Vice-President, Harvard Business School Association of the Philippines (1972) Recent Professional Training (selected) Philippine Institute of Certified Public Accountants (PICPA); Various seminars and workshops on Philippine Financial Reporting Standards (PFRS), Philippine Standards on Auditing (PSA), BIR Updates, Corporate Governance, Professional Ethics Institute of Corporate Directors (ICD); Various intensive courses on corporate governance Awards Most Outstanding CPA in Professional Development PICPA (1985); Most Outstanding Alumnus in Business Management, UE Alumni Association (1991); Most Outstanding CPA in Public Accounting PICPA (1994); Outstanding Alumnus in Business – 2008, University of Sto. Tomas. HARVEY S. KEH, 30. Mr. Keh is an Independent Director of Calata Corporation. He was elected last November 25, 2011 and shall serve as member of the Board of Directors until August 31, 2012 and until his successor is elected and qualified.
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Mr. Keh graduated from the Ateneo de Manila Quezon City in 2000 with a degree of Bachelor of Science, Major in Psychology and was Secretary-General of the Sanggunian ng mga Mag-aaral (University Student Council/Government). Currently, he holds the following positions: April 2001-Present, Asia Society Philippines, Executive Director; January 2007-Present, Ateneo de Manila University, Director for Youth Leadership and Social Entrepreneurship, School for Governance; January 2007- present, Mc Bride PET Corporation, President and Executive Director; June 2003- Present, Synergia Foundation, Founding Member, Board Member and Treasurer; Past Positions June 2007 to October 2009, Ateneo de Manila University Lecturer, Department of Theology; April 2002- December 2006, Ateneo de Manila University, Founder and Executive Director, Pathways to Higher Education Program Philippines; November 2004- March 2006 Ateneo de Manila, Part-time Faculty, Department of Theology; August 2003-February 2004, January 2005- April 2006, October 2007- February 2010, Radio Veritas, Radio Broadcaster and Commentator; August 2005- December 2006, Peoples Taliba (Newspaper), Columnist; August 2003- February 2004, The Manila Times, Columnist; 2000-2002, Ateneo de Manila Quezon City, Philippines, Project Officer/ Asst. Director of Student Activities; 2000-2003, Ateneo de Manila Quezon City, Philippines, Part-time Faculty, Department of English; 2000, Ateneo de Manila Quezon City, Philippines, Part-time Faculty, Department of Theology Socio- Civic Activities Lead Convenor and Board Member, Philippines 21 Young Leader Program, Asia Society-Philippines, Lead Convenor, Kaya Natin! Movement for Good Governance and Ethical Leadership, Columnist and Contributor, Abante and The Manila Bulletin Fellowships/ Awards Received The Outstanding Young Men of the Philippines (TOYM) 2010, For the Good Governance and Public Education; Fellow, Mirant Center for Bridging Social Divide, Asian Institute of Management (AIM); Fellow, Asia 21 Young Leaders Program, Asia Society (New York); Featured at the Philippines Yearbook 2006, The Fookien Times JOSE ABETO ZAIDE, 68. Ambassador Zaide is a Director of Calata Corporation. He was elected last November 25, 2011 and shall serve as member of the Board of Directors until August 31, 2012 and until his successor is elected and qualified. Ambassador Zaide graduated with the degree of Bachelor of Arts in Economics at the Ateneo de Mania University in 1964. Currently, he writes for the Manila Bulletin under the segment “Below the Line.” Prior to this, his professional experience is as follows: Ambassador to France and permanent Delegate to UNESCO2006- Nov 2008; Ambassador to Portugal and Monaco (non-resident); Chief of Protocol, Department of Foreign Affairs, Manila, 2002-2006; Ambassador to the Federal Republic of Germany 1999-2002; Ambassador to Austria and permanent Representative to the International 1995-1999 Atomic Energy Agency (IAEA), United Nations Industrial Development Organization (UNIDO) and UN Organization in Vienna (UNOV); Ambassador to Slovenia and Croatia (non Resident); Assistant Secretary for European Affairs, DFA Manila1995; Assistant Secretary for Asia Pacific Affairs 1993; Charge d’ Affaires, d.m., Philippine Embassy, Moscow, 1991-1992; Minister, Philippine Embassy, Brussels,1989-1991; First Secretary and Consul General, Philippine Embassy, New Delhi, 1984-1989; Executive Director, Office of European Affairs, DFA Manila,1983-1984; Director for Western European Affairs, Office of European Affairs, DFA Manila, 1983; Second Secretary and Consul, Philippine Embassy, Bonn, 1981-1983; Vice Consul, Philippine Consulate General, Hamburg, 1974-1981; Special Collecting Officer, Foreign Service Staff Employee I, PCG, Hamburg, 1973-1974; Clerk, DFA Manila, 1968-1973.
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Decorations and Other Skills Awardee of German Grand Cross by the President of the Federal Republic of Germany for Distinguished Service; Awardee of Grand Cross of Austria by the Minister of Foreign Affairs for Distinguished Service, including official visit of Philippine President; Isabela la Catolica, conferred in connection with the visit of H.M. the King of Spain and for written editorial enhancing Philippine-Spanish bilateral relations; Knight of Rizal, KOR 1984, Knight Commander of KOR 1999, founded Vienna Chapter 1999, founded Berlin Chapter 2002; Author of “ Bababa ba? Anecdotes of a Foreign Service Officer”; Fluent in English and Filipino, advanced German, basic French and Spanish. JAIME C. LAYA, CPA, Ph.D., 72. Dr. Laya is a Director of Calata Corporation. He was elected last November 25, 2011 and shall serve as member of the Board of Directors until August 31, 2012 and until his successor is elected and qualified. Dr. Laya graduated B.S.B.A (Accounting) Magna Cum Laude at the University of the Philippines in 1957 and placed 8
th in the 1957 CPA Board Exams; M.S. (Industrial Management), Georgia
Institute of Technology, 1961; Ph. D. (Financial Management), Stanford University, 1966. He was likewise awarded the following honors: Doctor of Laws (honoris causa), Philippine Women’s University; Doctor of Humanities (honoris causa), Mindanao State University, 1980; Ten Outstanding Young Men (TOYM) Awardee (Business Education),1967; Outstanding CPA in Government, Philippine Institute of Certified Public Accountants, 1979; Lifetime Achievement Award, Association of Certified Public Accountants in Public Practice, 2007; Distinguished Achievement Award, Philippine Institute of Certified Public Accountants, 2008. Currently, Dr. Laya holds the following positions: Chairman, Philtrust Bank, Dual Tech Foundation, Inc., Don Noberto Ty Foundation, National Commission for Culture and the Arts- National Committee on Monuments Sites; Director, Victorias Miling CompanyInc.(listed company), Philippines AXA Life Insurance Co., Inc., GMA Network, Inc.(listed company), GMA Holdings Inc.(listed company), Ayala Land, Inc.(listed company), Philippine Ratings Services Corporation, Philippines- Mexico Business Council; Trustee, Cultural Center of the Philippines; De La Salle University –Taft, St. Paul University – Quezon City, Metropolitan Museum of Manila, Yuchengco Museum, Manila Polo Club, CIBI Foundation Inc., Heart Foundation of the Philippines, Inc., Fundacion Santiago, American Historical Collection Foundation Inc., Opera Guild of the Philippines; Cofradia de la Immaculada Concepcion, Society for Cultural Enrichment, Inc., and others; He is a Columnist at the Manila Bulletin. Past Positions Minister of Education, Culture and Sports and Chairman, University of the Philippines and other State Universities and Colleges, 1984-86; Minister of the Budget,1975-81; Chairman of Monetary Board and Governor, Central Bank of the Philippines, 1981-84; Chairman, National Commission for Culture and the Arts, as private sector representative in the cultural heritage sector, 1996-2001; Professor of Business Administration and Dean, College of Business Administration, University of the Philippines, 1957-78; Action Officer, Intramuros Administration (old city restoration project), 1979-86; President, Philippine Trust Co., (Philtrust Bank), 1992-98; Founder & Chairman, J.C. Laya & Co. (Later named Laya Mananghaya & Co.,-- now Manabat Sanagustin & Co.,-- Philippine member firm of KPMG International) which grew to become one of the Philippines’ largest auditing consulting firms, 1986-2004; Chairman and President, Association of Certified Public Accountant in Public Practice, 2003, AC PAPP Foundation, Inc, 2004 International Organizations President, Southeast Asian Ministers of Education Council, 1985-86; Chairman, Ad Hoc Working Group on International standards of Accounting and Reporting, United Nations Centre on Transitional Corporations, 1980-83; Chairman/ Member of the Philippine Delegations to the
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International Monetary Fund and International Bank for Reconstruction and Development, Southeast Asian Central Banks Association, United Nations Educational, Cultural and Scientific Organizations (UNESCO) and other Meetings. Memberships Management Association of the Philippines; Financial Executives Institute of the Philippines; Philippine Institute of Certified Public Accountant; Rotary Club of Manila Books Fiscal Management and Finance, Financial Management in the Philippines (1979); Philippine Budget Management (1980); A Money and Banking; A Crisis of Confidence; Gearing for Recovery (1982); A Period of Adjustment (1983); Education A Question of Quality (1985); Moving Forward in Education (1986); Culture: Intramuros of Memory (1983) Written with Esperanza B. Gatbonton; Prusisyon: Philippines Religious Pageantry (1996). Written with Lourdes Tesoro Catañeda; Letras y Figuras: Culture in Business, Business in Culture (2001) A collection of the Author’s papers on culture and the arts. Awarded by Manila Critics’ Circle as best Collection of Essays. 2001; Consuming Passions: Philippine Collectibles (editor, 2003), awarded by the Manila Critics Circle as Best Anthology, 2003; Potluck, Hidalgo Bonding: A family Heritage Cookbook (co-editor, 2006); Sta. Ana Church: A historical Guide 92008); Hidden Treasures, Simple Pleasures (2009). Written with Mariano C. Lao and Eriberto B. Bravo GEORGE A. NAVA, 63. Mr. Nava is an Independent Director of Calata Corporation. He was elected last November 25, 2011 and shall serve as member of the Board of Directors until August 31, 2012 and until his successor is elected and qualified. Mr. Nava graduated in 1971 with a course on Mechanical Engineering at the Mapua Institute of Technology and placed 1
st at the Mechanical Engineering Board Exam. In 1981, Mr. Nava
practiced as a Professional Mechanical Engineer. In 1982, He took MBA units at the Ateneo De Manila for two years. In 1989, He graduated from the Swiss Feed Milling School in Uzwil, Switzerland. Mr. Nava has 25 accumulated years of service with San Miguel Corporation from Project Engineer to Vice-President/General Manager. He also has 41 years of experience as a Mechanical Engineer including 3 years of teaching at the National University. Other positions held are as follows: Vice President, San Miguel Purefoods Company Inc., 2002-2008; Vice President/ Gen Manager, Feeds Business San Miguel Foods Inc., 2002-2004; Concurrent Vice-President/ General Manager, Philippine Nutrition Technology Inc., ( a joint venture of SMPFC and Taiwan Nutrition Technology Inc.) 2002-2005; Vice President and Regional Cluster Director, San Miguel Purefoods Company Inc., 2004-2008; President, Philippine Association of Feed Millers Inc., 2002-2004; Member, Board of Directors, Philippine Nutrition and Technology Inc., 2002-2005; Member, Board of Directors, San Miguel Purefoods Company Inc., Vietnam, 2004-2006. MELVIN H. CALATA, 35. Mr. Calata is currently one of the Administrative Supervisors and Co-chairman of Special Projects for Calata Corporation. He was a member of the Board of Directors from 1999 to November 25, 2011. He was likewise Chairman of the Board of Directors from 2006-2008. He was Corporate Secretary and General Manager of the Company from 2009-November 25, 2011. Mr. Calata is a holder of a Post Graduate Degree of Bachelor of Civil Laws at the Philippine Law School. He earned his undergraduate degree of Bachelor of Science Major in Biology at the De La Salle University. His affiliations are as follows: Senior Warden of the Free and Accepted Masons, Quingua Lodge No. 364, Member of the Bulacan Chamber of Commerce and Industry and Member of the Plarideleno Business Club, Inc. Mr. Calata was awarded as Outstanding Alumni of Centro Escolar University Malolos, Bulacan for Entrepreneurship.
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JENNIBEL H. CALATA, 26. Ms. Calata is currently one of the Administrative Supervisors and Co-chairman of Special Projects for Calata Corporation. She was a member of the Board of Directors from 1999 to November 25, 2011 and was Corporate Secretary of the Company from 2006-2008. Ms. Calata is a holder of a Bachelor’s Degree in Hotel, Restaurant and Institution Management from the De La Salle University St. Benilde.
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EXECUTIVE COMPENSATION Information as to the aggregate compensation during the last 2 fiscal years paid to the Company’s 5 most highly compensated executive officers, and all other officers and directors, as a group, are as follows: Compensation
SUMMARY COMPENSATION TABLE
Annual Compensation (PhP)
2010 2011 2012 Bonus Other
Compensation
5 Most Highly
Compensated
Officers
Joseph H. Calata
Benison Paul B. De Torres
Arnold Pajarillo
Vergel Formaran
Janet H. Santos
Total 3,504,000 4,056,000 4,584,000
0
0
Total Compensation of
Other Unnamed Officers
1,000,000
1,000,000
1,000,000
0
0
TOTAL
4,504,000
5,056,000
5,584,000
0
0
Currently, employees of the Company do not receive supplemental benefits or incentive arrangements. Compensation of Directors Under the By-Laws of the Company, by resolution of the Board, each director, shall receive a reasonable per diem allowance for his attendance at each meeting of the Board. As compensation, the Board shall receive and allocate an amount of not more than 10% of the net income before income tax of the Company during the preceding year. Such compensation shall be determined and apportioned among directors in such manner as the Board may determine, subject to the approval of stockholders representing at least majority of the outstanding capital stock at a regular or special meeting of the stockholders. As of date, the directors have yet to pass a resolution fixing their per diem. There are no other arrangements for compensation either by way of payments for committee participation or special assignments. There are also no outstanding warrants or options held by the Company’s Chief Executive Officer, other officers and/or directors. Family Relationships There are no family relationships either by consanguinity or affinity up to the 4
th civil degree
among the above-identified key officers of the Company. However, Mr. Joseph H. Calata (President and CEO of the Company), Mr. Melvin H. Calata (Administrative Supervisor and Co-
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chairman for Special Projects), and Ms. Jennibel H. Calata (Administrative Supervisor and Co-chairman for Special Projects), are siblings. Involvement in Certain Legal Proceedings The Company is not aware of the occurrence during the past 5 years of any of the following events that are material to an evaluation of the ability or integrity of any director or executive officer:
1. Any bankruptcy petition filed by or against any business of a director, nominee for election as director, or executive officer who was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2. Any director, nominee for election as director, or executive officer being convicted by final judgment in a criminal proceeding, domestic or foreign, or being subject to a pending criminal proceeding, domestic or foreign, excluding traffic violations and other minor offenses;
3. Any director, nominee for election as director, or executive officer being subject to any
order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, commodities or banking activities; and
4. Any director, nominee for election as director, or executive officer being found by a
domestic or foreign court of competent jurisdiction (in a civil action), the Commission or comparable foreign body, or a domestic or foreign exchange or other organized trading market or self - regulatory organization, to have violated a securities or commodities law or regulation, and the judgment has not been reversed, suspended, or vacated.
5. Any director, nominee for election as director, or executive officer being found by a court of competent jurisdiction to have violated the provisions of the National Internal Revenue Code, and the judgment has not been reversed, suspended, or vacated.
EMPLOYEES As of the date of this Prospectus, the Company has one hundred six (106) regular employees broken down as follows: President and CEO (1), Chief Financial Officer and Chief Operations Officer (1), 13 managerial and 91 rank and file employees.Provided hereunder is a breakdown of rank and file employees: Accounting Staff (3), Bulacan Operation (1), Checker (9), Collection Staff (1), Collector (8), Distributor’s Sales Representative/Personnel (16), Driver (19), Distributor’s Sales Personnel – Farm Aide Technician (2), Distributor’s Sales Representative – Farm (1), Executive Assistant – Bulacan (1), Executive Assistant – Makati (1), Farm Aide Technician (6), HR Assistant (1), Internal Audit (1), Inventory Audit (1), Inventory Clerk (1), Key Account Sales Representative (2), Logistics Head (1), Mechanic (1), Mechanic Helper (2), Messenger (2) MIS Officer (1), Office Personnel-Pampanga (2), Office Staff- Makati (1), Office Staff-South NE (1), Sales Coordinator (2), Sales Officer (1), Vet. Med. (1), Warehouse Maintenance (1), Warehouse Staff (1). The planned construction of distribution outlets may require additional hiring to support the same, the number of which cannot be determined until completion of the said activities. Employee Contracts and Termination of Employment and Charge-In-Control Assignments
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All regular employees have duly executed employment contracts which can be terminated due to any of the following reasons: unsatisfactory performance or failure to meet reasonable standards set by the management, failure to comply with terms and conditions of the contract, and for any cause or causes allowed under Philippine laws after complying with the statutory requirements for such termination. Significant Employees Although based on the Organizational Chart, the Company has key officers (President and CEO, CFO and COO and Corprorate Secretary, the Company’s business is not highly dependent on the services of any particular employee. Collective Bargaining Agreements The Company has no collective bargaining agreements with its employees and there are no organized labor organizations in the Company. The Company complies with the minimum compensation and benefits standards pursuant to Philippine law. The Company has not experienced any disruptive labor disputes, strikes or threats of strikes and the Company believes that its relationship with its employees in general is satisfactory. WARRANTS AND OPTIONS There are no outstanding warrants and options held by any of the Company’s directors and executive officers.
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INFORMATION WITH RESPECT TO THE COMPANY HISTORY In 1976, a retail store in Plaridel, Bulacan started selling rice grains through a small retail store called Melvin’s Trading, named after the Calatas’ newborn son. With a capital of only PhP30,000.00, the business was modest with just one helper. Four years after, they changed the store’s name into J-Melvin’s Trading with an addition of another son, Joseph, into the family. With the family growing, it was decided upon to add to the business by means of selling feeds. In 1983, J-Melvin’s Trading was approached and offered to carry agricultural chemicals. The chemicals were initially sold per bottle. As the business grew, J-Melvin’s Trading upgraded and sold the chemicals per box, and not long after, per truckload. Combining good business sense with hard work, quality service, and a mission to give back to the community, the store grew into what later became known as Planters Choice Agro Products Inc., incorporated on July 23, 1999 as an agricultural products distribution company. The Company’s initial authorized capital stock of PhP1,000,000.00 divided into 10,000 common shares with a par value of PhP100.00. On February 22, 2010, the Company obtained approval from the SEC for the change in its corporate name to Calata Corporation. In August 17, 2011, the SEC approved the Company’s application for increase in its authorized capital stock from PhP1,000,000.00 divided into 10,000 common shares with a par value of PhP100.00 per share to PhP345,400,000.00 divided into 345,400,000 shares with a par value of PhP1.00 per share. Thereafter, in August 25, 2011, the SEC approved a further increase in the Company’s authorized capital stock to PhP845,400,000.00 divided into 845,400,000 shares with a par value of PhP1.00 per share. On February 6, 2012, the Company amended its primary purpose as a prelude to its plans to create a subsidiary to handle its retail business. In the Philippines, the Company carries the distinction of being the leading and most complete distributor for all products available in the agricultural industry. It is the country’s largest combined distributor of agro-chemicals, feeds, fertilizers, veterinary medicines and other agricultural products coming from manufacturers or “business partners,” such as San Miguel Corporation for B-Meg Feeds and veterinary products; Syngenta, Bayer, Jardine, Dupont, Sinochem,, for agro-chemicals;; East West Seeds, Monsanto, Planters Products for agricultural seeds; and Swire, Viking for fertilizers. The Company is an emerging leader in the Philippine Agricultural Industry utilizing effective marketing strategies, strong business partnerships, as well as modern technology to accurately monitor sales and client records. The Company has increased its annual revenues from roughly PhP200 Million in 2003 to more than PhP1.8 Billion in 2010 equivalent to an 800% increase in revenues for the past 7 years of operation.
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FEEDS DISTRIBUTION BUSINESS FLOWCHART
B-MEG
FEEDS SMFI, INC.
CALATA
Bulacan Pampanga Pangasinan Nueva Ecija North
Nueva Ecija South
DEALERS
Bulacan Pampanga Pangasinan
Nueva Ecija – North Nueva Ecija - South
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AGRO CHEMICALS, FERTILIZERS, SEEDS DISTRIBUTION FLOWCHART
CHEMICALS SYNGENTA Bayer CB Andrew Asia, Inc. Jardine Distribution, Inc. Leads Agricultural Products Corp Planters Products, Inc Sinochem Crop Protection (Phil), Inc.
FERTILIZERS
Yara International
ASA, et al.
OTHERS
MONSANTO PHILIPPINES, INC.
East West Seeds, et al.
CALATA
CORPORATION
BULACAN
DEALERS
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NON-EXCLUSIVE LIST THE DISTRIBUTION PRODUCTS OF CALATA CORPORATION AS OF 2011
Provided hereunder is an non-exclusive list of distribution products of the Company, some of which have been described using their generic names:
FEEDS A. HOGS
FEED TYPE
DESCRIPTION
BRAND
PIGLET BOOSTER This is a supplement or milk replacer if the milk supply of the sow is inadequate to feed the piglets, given to piglets from 5 to 20 days of age.
B-meg Premium Baby Pig Booster
PRE- STARTER
This feed type is given to pigs from 21 to 50 days of age and weighing about 5 to 12 kilograms.
B-meg Premium Hog Pre-Starter Pellet
B-meg Dynamix Hog Pre-Starter Pellet
STARTER Given to pigs weighing about 12 to 25 kilograms and 51 to 80 days of age
B-meg Premium Hog Starter Pellet
B-meg Dynamix Hog Starter Pellet
B-meg Expert Hog Starter Crumble
B-meg Expert Hog Starter Mash
B-meg Jumbo Hog Starter Mash
GROWER
Next given to pigs when they are about 25 to 60 kilograms and 81 to 120 days of age
B-meg Bonanza Hog Grower Pellet
B-meg Dynamix Hog Grower Pellet1
B-meg Dynamix Hog Grower Pellet3
B-meg Expert Hog Grower Pellet / Mash
B-meg Jumbo Hog Grower Mash
B-meg Premium Hog Grower Pellet
FINISHER
Given when pigs reach 60 to 80 kilograms or about 121 to 145 days of age.
B-meg Bonanza Finisher Pellet
B-meg Expert Finisher Pellet
B-meg Premium Finisher Pellet
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GESTATION/BREEDER
Feed type given to gilt/sow from 1 to 100 days of conception
B-meg Bonanza Hog Gestating Pellet
B-meg Bonanza Hog Breeder Pellet
B-meg Dynamix Hog Gestating Pellet1
B-meg Dynamix Hog Gestating Pellet2
B-meg Expert Brood Sow Pellet1
B-meg Expert Brood Sow Mash
B-meg Jumbo Hog Brood Sow Mash
B-meg Jumbo Hog Gestating Mash
B-meg Premium Hog Gestating Pellet
LACTATION
Given to sow from 101 days of conception to farrowing and from the start of suckling period to weaning
B-meg Expert Brood Sow Pellet2
B-meg Jumbo Hog Lactating Mash
B-meg Premium Hog Lactating Pellet
B. BROILERS
FEED TYPE
DESCRIPTION
BRAND
CHICK BOOSTER 1-10 days old B-Meg BroilerCom Chick Booster
Pureblend Premium Chick Booster Crumble
Pureblend Essential Chick Booster Crumble
B-Meg Integra 1000
STARTER 11-22 days old B-Meg BroilerComStarterCrumble
B-Meg BroilerComStarterMash
Pureblend Premium Broiler Starter Crumble
Pureblend Essential Broiler Starter Crumble
B-Meg Integra 2000
FINISHER 23-30 days old B-Meg BroilerComFinisherCrumble
Pureblend Premium
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Broiler Finisher Crumble/Pellet
Pureblend Essential Broiler Finisher Crumble/Pellet
B-Meg Integra 3000
C. PULLETS AND LAYERS
FEED TYPE
DESCRIPTION
BRAND
STARTER 0-18 weeks old B-meg Chicken Layer Starter Mash
LAYER 19 weeks old B-Meg Chicken Layer Crumble
B-meg Chicken Layer Mash
B-Meg Chicken Layer Pellet
Pureblend Chicken Layer Crumble
Pureblend Chicken Layer Mash
D. FIGHTING COCKS
FEED TYPE
DESCRIPTION
BRAND
CHICK BOOSTER 0-15 days B-Meg Derby Ace Chick Booster Crumble
STARTER 16 days- 3 months B-Meg Derby Ace Junior Starter Crumble
DEVELOPER 3-5 months B-Meg Derby Ace Stag Developer Pellet
CONDITIONER Pre-fight B-Meg Derby Ace Power Conditioner Pellet
BREEDER LAYER Brood Hens B-Meg Derby Ace Breeder Layer Pellet
PRE CONDITIONER Maintenance B-Meg Derby Ace Pre-Con-50kg
E. OTHER FEEDS
Pureblend Premium Duck Layer Pellet
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Pureblend Regular Duck Layer Pellet
Pureblend Quail Layer Mash
B-Meg Pigeon Pellet
AGRO CHEMICALS MOLLUSCICIDES An agent used in controlling golden apple snail, popularly known as “golden kuhol”, which is one of the major pest problems in rice production. Newly transplanted rice seedlings are vulnerable to golden kuhol up to 15 days after transplanting. Product List:
Aquadin Kuhol Kill Primalex Sure
Bayluscide Maso RiceSaver 25SC Surekill
Bayonet Metabait Sakuhol Trap
Doblado Niclomax SnailKill
Exos Niclos Stop
Hit Porsnail SuperKill
HERBICIDES A chemical pesticide designed to control or destroy plants, weeds, or grasses. Herbicides tend to have wide-ranging effects on non-target species (other than those the pesticide is meant to control or kill). Product List:
Advance EC Grassedge Rainbow Tornado Round-up
Agroxone Grastop 70EC RiceBro Triple 2,4-D Amine Sencor
Almix Red Hedonal RiceStar Xtra Vast 2,4-D Ester Sharpshooter
Amine 2, 4-D Klick Rogue EC Axle SL160 Slash
Advice Londax Ronstar Clear Out Stand-Out
Clincher Hedonal Sofit Demolition 16SL Touchdown
Devast Machete EC Sonic Gramoxone Weed Blaster (R)
Direk 800 Nominee Super 2,4D Ester Lebron 160SL Weedban
Ester 24-D Onecide Super Herbicide Massive
Exceed Post Herb 10%SC Tiara SC50 Mower EC
Gallant Pyanchor 5EC TopShot Power
INSECTICIDES A chemical used specifically to kill or control the growth of insects. Farmers spray insecticides like Dichlorovas, Carbofuran, Cypermethrin, Chlorpyrifos and Lambda- Cyhalothrin to insects such as stem borers, sap feeders, defoliators and grain/root feeders. Product List:
Actara Cymbush Mesurol SuperLambda 25 EC
Agri-Mek 1.8EC Cypex liter + Mighty Crop Nurelle Superquick
Alika Dantop Oshin 20SG Tango
Applaud Decis 2.5 Padan Tamaron
Arnis Dichlorvos Panlaban Top Rank 50SP
Ascend Etrofolan Parapest Trebon
Attack Extreme Pegasus Trigard
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Baythroid 050 Fenos Pennant Tsunami
Bida Flash Perfecthion Vapona
Bigathrin Fuerza Prevathon Vasthrin 5EC
Bigboss Furadan ULTRA Pro Axis Vectron 10EW
Blizzard 50SP Hercules Provado Supra Victor 20WP
Boxer Hopcin Rampage Vindex
Boltrin Hytox Rimon Voliam Flexi
Breaker 31.5 EC Ingram 50 SP Selecron Wave 2.5EC
Brodan Karate EC Sevin Wildkid
Bug Buster Lakas 5 EC Siga WokTap
Bulldock Lannate Slam! 2.5EC Xentari
Bushwack Lanus Smash Zorro
Carbomax 3G Larvin Solomon
Cardinal Lebaycid Starkle
Cartap ES Legend Steward
Chess 50- WG Lorsban Sumicidin
Chix Magnum Sumithion
Confidor Malathion Super Cartap
Cruiser 350 FS Marshall 200SC Super Insecticide
Cyclone Matador Super Seven
FUNGICIDES A fungicide is a chemical pesticide compound that kills or inhibits the growth of fungi
1. () In
agriculture, fungicide is used to control fungi that threaten to destroy or compromise crops. Product List:
Aliette Curzate Goldazim Ridomil Gold
Amistar Daconil Ivazeb Score
Antracol WP70 Dithane Kocide Sundazim
Anvil 5 SC Folicur WP25 Manager Venom
Armure Fundazol 50WP. Marthseb 80 WP Vondozeb
Armor Fungitox Micron
Benomyl Fungufree 80WP Previcur N
Benophyl Funguran Revus 250 SC
Benostar 50 WP Gardenil Rovral
FOLIARS AND GROWTH STIMULANTS Products used to create a synergistic effect to dramatically speed up vegetative growth and increase root mass for a healthier plant and root system. Product List:
Agrowell GNSO Hoestick Siam Bloom
Anaa-1000ml Golden Mango Set Humus WSG 56.9 Siam Grower
Algafer - 1000 GreenBee All Purpose Kasunod Foliar Star Foliar Orange
Atonik Stimulant Grobest Maxigrain Star Foliar Yellow
Bayfolan Growmax Pink Mega Booster Steady 10 WP
Berelex - Tablet Growmax Orange Mega F21 Stimulate
1Definition taken from http://www.wisegeek.com/what-are-fungi.htm
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Cal-Guard r Haifa Grow MegaBoom Stoller CaB
Crop Giant Orange Harvest More - 20-20-20 Nevirol Wokozim
Crop Giant Yellow Harvest More 20-5-30 Orgamin Xemas
Cultar Harvest More 30-10-10 Peters - 20-20-20 Yield Master 15-15-30
DeltaSpray 20-20-20 Harvest More 5-5-45 Peters - 9-45-15 Zinc Metalate
Ethrel 24 X 500ml Harvest More 04-00-48 Peters 15-10-30 X-Rice (X-Factor)
FG Power Foliar Harvest More 15-15-30 Peters 30-10-10
Flower Power Harvest Richer Root Feed
Fruit Power Hormex Stand
RODENTICIDES These are chemical substance used to kill rats, mice, and other rodent pests. Product List:
Klerat+Bitrex
Racumin
Ratkill
Zinc Phosphide
TERMITICIDE A chemical substance used as an effective form of termite control for residential, commercial, and industrial use. Product List:
Biflex
Hometrek
Leadrex
Lentrek
Termex
FERTILIZERS
A fertilizer is a substance containing one or more recognized plant nutrients that is used for its plant nutrient content or that is designated for use, or claims to have value, in promoting plant growth. Fertilizers enhance the natural fertility of the soil or replace the chemical elements taken from the soil by previous crops. Recognized plant nutrients include: 1. Primary nutrients
Nitrogen
Phosphorous
Potassium
2. Secondary nutrients
Calcium
Magnesium
Sulfur
3. Micronutrients
Boron Manganese
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Chlorine
Molybdenum
Cobalt
Sodium
Copper
Zinc
Iron
FERTILIZER GRADES
UREA (46-0-0)
Markang Bulaklak 46-0-0
Swire 46-0-0
Universal Harvester 46-0-0
Viking 46-0-0
Sinochem 46-0-0
AMMONIUM SULFATE (21-0-0)
Markang Bulaklak 21-0-0
Sunrise 21-0-0
Swire 21-0-0
Universal Harvester 21-0-0
AMMONIUM PHOSPHATE (16-20-0)
Philphos 16-20-0
Swire 16-20-0
Universal Harvester 16-20-0
POTASH (0-0-60)
Atlas 0-0-60
OTHERS
Atlas 14-14-14 – Zircon
Philphos 14-14-14
Swire 14-14-14 – Zircon
UH 14-14-14 –Zircon
Atlas 17-0-17 50 kgs.
Viking 16-16-16 – Zircon
Bulaklak 25-0-0
SEEDS
Product List:
Bitter Gourd Hot Pepper Pumpkin Sweet Pepper
Cabbage Pechay Ridge Gourd Tomato
Cauliflower Mustaza Patola Watermelon
Radish Onion Bottle Gourd Sweet Corn
Cucumber Papaya Sitao DK818RRC2/YG
Eggplant Carrot Snap Beans DK9132RRC2/YG
Glutinous Corn Okra Cow Pea
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BUSINESS FLOW OF OPERATIONS WITH DEALERS / CUSTOMERS
Customers or buyers of feeds, fertilizers and other products should provide requirements before making transactions and entering into dealership agreements. The Company determines the product-related requirements specified by the customer (whether verbal or written) before acceptance of an order. Customer requirements include the following:
Delivery and post-delivery activities
Not stated by the customer but essential for specified use or known and intended use
Previous customer requirements which pertain to products currently being ordered
Statutory and regulatory requirements related to the product
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Any additional requirements determined by the Company. Prior to committing to the customer, the Company has a process in place for the review of requirements related to the product. The review is conducted before the order is accepted. The process ensures that:
Products requirements are defined.
In case the contract or order requirements differ from those formerly expressed, the sales or the appropriate departments are notified and the differences resolved before the order could be processed.
Records are maintained showing the results of the review and any actions arising therefrom.
Customer requirements are confirmed before acceptance.
In the event that product requirements are changed, the Company promptly communicates changes to its personnel and amends relevant documents.
Customers may transact through cash or credit transactions. Credit terms range from seven (7) days to ninety (90) days depending upon the evaluation and discretion of the Company. Furthermore, it is mandatory for the Company to investigate the credit-worthiness and qualification of the customer through investigation and if satisfactory, the customer shall be allowed to proceed in complying with all necessary requirements. The documents submitted shall be reviewed by the management before sales transactions are made. Customer’s satisfaction shall translate to customer’s payment. To ensure that the Company meets and satisfies the customer's expectations, it highlights effective customer communication as an essential element of customer satisfaction. Appropriate handling of customer communication will help reduce customer dissatisfaction and in many cases turn a dissatisfying scenario into a satisfying experience. The Company conducts post-delivery activities which include any after-sales product service provided as part of the purchase order. The Customer Relations and Sales Departments are responsible for establishing communication methods to ensure inquiries, contracts or order handling, including amendments, and customer feedback, customer complaints are communicated through telephone, email, fax or letter. Customers can also send their inquiries and other concerns through www.calatacorp.com. These are handled expeditiously and professionally. The registration of the products sold by the Company should be the primary responsibility of the manufacturer/supplier. The Company only deals with reputable manufacturers/suppliers. On this basis, the Company assumes that all products it distributes are duly registered. DISTRIBUTION OF SALES AS REPORTED IN THE AUDITED FINANCIAL STATEMENTS
December 31, 2011 December 31, 2010 December 31, 2009
Feeds P1,048,487,027 836,901,746 746,154,296
Fertilizers 487,913,038 179,819,221 251,328,819
Chemicals 442,938,467 228,365,802 153,603,649
Seeds 22,371,771 14,064,618 8,152,028
TOTAL P2,001,710,303 1,259,151,387 1,159,238,792
As reported in the Company’s Audited Financial Statements for the fiscal year ended December 31, 2011, more than half of the Sales of the Company come from its feeds (52%). Sales derived from fertilizers constitute 24% while sales derived from agro chemicals constitute 22%. Finally, sales from seeds form only 1 % of the total sales. CALATA CORPORATION WAREHOUSES
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Calata Corporation’s affiliate company Avestha Holding Corporation (Avestha) owns the Warehouse in Plaridel, Bulacan. The stockholders of Avestha are the following: Eusebio C. Calata (48.6%), Isabel H. Calata (48.6%), Melvin H. Calata (0.9%), Joseph H. Calata (0.9%), Jennibel H. Calata (0.9%). Josefina M. Ongcuangco, businesswoman and owner of JMO Agri Trading Corporation owns N.E. North Warehouse located in San Antonio, San Leonardo, Nueva Ecija. Mr. Amado Santos, a self-employed businessman owns the N.E. North Warehouse located in Sto. Domingo, Nueva Ecija. Atty. Rolando M. Rivera, a retired law practitioner owns the Pangasinan Warehouse located at Carriedo, Tayug, Pangasinan. Mr. Nestor Sotto, a self-employed businessman owns the Pampanga Warehouse located in Lagundi, Mexico, Pampanga. MAJOR SUPPLIERS/BUSINESS PARTNERS OF CALATA CORPORATION FEEDS
SAN MIGUEL FOODS, INC. San Miguel Corporation has always been the vanguard in providing high-quality products and services to Filipinos. And today, the San Miguel seal of excellence will be found on most Filipino tables through its popular and well-loved food and beverage brands.
In 1953, when it first ventured into the feeds manufacturing business, San Miguel went one step further in its drive to feed the nation. Using bacillus megatherium, a growth promotant derived from its beer brewing operations, it began supplying quality animal feeds for poultry and hog raisers nationwide.
Since then, the San Miguel feed manufacturing business has grown by leaps and bounds. In 1955, it registered its flagship brand B-MEG with the Bureau of Animal Industry, giving it the distinction of getting BAI Registration Certificate No 1.
From a one-ton feedmill at the San Miguel Polo Brewery, to the Manila B-MEG Plant in Balintawak, to more than 25 strategically-located feedmills that produce B-MEG products nationwide – raisers are assured of fresh, high quality B-MEG feeds for the growth of their livestock
2.
TERMS OF PAYMENT : 30 days
2 Company description taken from the supplier’s website:www.bmeg.com
WAREHOUSE ADDRESS AREA Maximum Capacity
Warehouse (Bulacan) Cabyawan, Plaridel, Bulacan
5471 sqm 22,000 50kg bags of feeds and fertilizers and 25,000 cartons of agro chemicals and seeds
N.E. South Warehouse San Antonio, San Leonardo, Nueva Ecija
500 sqm. 8,000 50kg bags of feeds
N.E. North Warehouse Sto. Domingo, Nueva Ecija
300 sqm. 3,000 50kg bags of feeds
Pangasinan Warehouse Carriedo, Tayug, Pangasinan
1,300 sqm. 5,000 50kg bags of feeds
Pampanga Warehouse Lagundi, Mexico,Pampanga
406 sqm. 2,500 50kg bags of feeds
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PRODUCT LIST Hog Feeds
B-MEG Premium Hog Feeds
B-MEG Dynamix Hog Feeds
Pureblend Hog Feeds
B-MEG Expert Hog Feeds
Bonanza Hog Pellets
Jumbo Hog Mash
Poultry Feeds
B-MEG Premium Layer
Pureblend Layer
B-MEG Expert Layer
B-MEG Layer (Regular)
B-MEG Premium Broiler
Pureblend Broiler
B-MEG Broiler (Regular)
PBX Broiler
B-MEG Integra
Gamefowl Feeds
B-MEG Derby Ace AGROCHEMICALS
SYNGENTA PHILIPPINES INC.
Syngenta is a leader in agriculture across the globe, bringing retailers and growers improved management solutions. With a workforce of about 300 (Philippines), Syngenta carries the company’s commitment to help growers raise the productivity and quality of their crops. It provides crop protection products for rice, fruits, vegetables, corn, and even ornamentals
3.
OFFICE ADDRESS : 12/F Two World Square 22 Upper McKinley Town Center Fort Bonifacio, 1630 Taguig City TERMS OF PAYMENT : 60 days PRODUCT LIST
Actara
Agri-mek
Alika
Amistar
Apron
Armure
Chess
3 Company description taken from the supplier’s website: www.syngentacropprotection.com
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Cruiser
Cultar
Cymbush
Gramoxone
Karate
Metabait
Pegasus
Revus
Ridomil Gold
Score
Selecron
Sofit
Touchdown
Trigard
Voliam Flexi FERTILIZERS
YARA INTERNATIONAL ASA
Yara International ASA is the world’s leading chemical company that converts energy, natural minerals and nitrogen from the air into essential products for farmers and industrial customers. As the number one global supplier of mineral fertilizers, it helps provide food and biomass which can be used for renewable energy for a growing world population. Yara’s industrial product portfolio includes environmental protection agents that prevent air pollution. Yara’s’ global workforce with more than 7,300 employees represents the great diversity and knowledge that enables it to remain a leading performer in the industry. It is headquartered in Oslo with operations in more than 50 countries and sales to about 150 countries
4.
OFFICE ADDRESS : Unit 1404 Antel 2000, 121 Valero St. Salcedo Village, 1227 Makati City TERMS OF PAYMENT : 30 days PRODUCT LIST
Viking Urea
Viking 16-16-16
Yara Liva Tropicote
Yara Liva Nitrabor
Yara Vita Magtrac
Yara Vita Zintrac
Yara Vita Bortrac
Yara Mila Complex
Yara Mila Hydran
Yara Mila Winner
Yara Vera Amidas
4 Company description taken from the supplier’s website: www.yara.com
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SEEDS
MONSANTO PHILIPPINES, INC.
Monsanto Philippines, Inc. is a wholly owned subsidiary of Monsanto Company, an American company which is the producer of leading seed brands in large-acre crops like corn, cotton, and oilseeds (soybeans and canola), as well as small-acre crops like vegetables. Monsanto Company also produce leading in-the-seed trait technologies for farmers that are aimed at protecting their yield, supporting their on-farm efficiency and reducing their on-farm costs
5.
OFFICE ADDRESS : 7
th Floor, Ayala Life-FGU Center Alabang-Zapote Rd.,
Cor, Acacia Ave. Madrigal Business Park, Alabang, Muntinlupa City
TERMS OF PAYMENT : 90 days PRODUCT LIST CORN SEEDS
DK818RRC2/YG
DK9132RRC2/YG OTHER SUPPLIERS
BAYER CROPSCIENCE, INC.
Bayer CropScience is one of the world’s leading innovative cropscience companies in the area of crop protection, non-agricultural pest control, seeds and plant biotechnology. It develops and markets high performance, trusted and innovative products. Bayer CropScience has about 20,700 employees located in more than 20 countries
6.
OFFICE ADDRESS : 3/F Bayer House, Canlubang Industrial Estate, Canlubang, Calamba, Laguna PLANT ADDRESS : Canlubang Industrial Estate, Canlubang, Calamba, Laguna TERMS OF PAYMENT : 75 days PRODUCT LIST Aliette Antracol Axle Basta Bayfolan Bayluscide Baythroid Bulldock Confidor Decis-R Ethrel Etrofolan Fenos Folicur Gaucho Hedonal
5 Company description taken from the supplier’s website: www.monsanto.com
6 Company description taken from the supplier’s website: www.bayercropscience.com
85
Hercules Hoestick Hopcin Larvin Lebaycid Mesurol Nominee Pennant Provado Supra Racumin Rampage Ricestar Xtra Ronstar Rovral Sencor Sevin Solomon Tiara Vindex Zinc Phosphide
C.B. ANDREW ASIA, INC. C.B. ANDREW ASIA, INC. is a chemical company engaged in the manufacture and sales of various industrial specialty and agricultural chemicals based in Manila, Philippines. The Company markets its products both locally and in the regional markets. Formerly known as Prochem Technology Asia-Pacific, Inc., the company was founded in 1991, initially supplying the local pulp & paper mills but has been exporting to the region since 1996 and to North America since 2001. Through time, the Company has expanded its product scope to include herbicides and related products for agricultural applications
7.
OFFICE ADDRESS : 2
nd Floor NOL Bldg, Commerce Avenue,
Madrigal Business Park, Ayala, Alabang, Muntinlupa City
PLANT ADDRESS : Building Y-2, J.Y. and Sons Compound, Philippine Veterans Center, Western Bicutan, Taguig City TERMS OF PAYMENT : 90 days PRODUCT LIST
Amine 2, 4-D
Clear Out
Guarantee
Stand Out
DU PONT FAR EAST, INC.
Du Pont Far East Inc. - Philippines, is a subsidiary of E.I. DuPont de Nemours & Co., Inc.- U.S.A., DuPont has been delivering the miracle of science in the Philippines since 1973. DuPont in the Philippines repackages crop protection products and produces high-grade hybrid corn seeds. Founded in 1802, the company employs more than 140 employees and operating in more than 70 countries
8.
OFFICE ADDRESS : GT Tower International, Ayala Avenue,
Makati City PLANT ADDRESS : Carmelray, Laguna
7Company description taken from the supplier’s website:http://cbandrew.com/index.php
8 Company description taken from the DuPont Company Profile
86
TERMS OF PAYMENT : 60 days PRODUCT LIST
Curzate M4
Londax 10WP
Almix 20WP
Lannate 40SP
Steward
Prevathon 5SC
Kocide
JARDINE DISTRIBUTION, INC. A member of the Jardine Matheson group and working within the framework of Jardine Engineering Corporation, HK, Jardine Distribution Inc. is a wholesale distributor of agricultural and applied construction chemicals. Originally part of Jardine Davies Inc. group. Jardine Davies acquired its name in 1974, after James Matheson & Co. of Hongkong bought into Theo H. Davies & Co., Ltd of Hawaii. Jardine Davies was one of the first foreign-held Philippine companies to be publicly owned and listed on the Philippine Stock Exchange. The company was formally organized in 2004 incorporating the agricultural and construction chemical divisions of Jardine Davies
9.
OFFICE ADDRESS : 2/F Jardine Building, JM Compound,
Faraday Street corner Osmeña Highway Makati City
TERMS OF PAYMENT : 60 days PRODUCT LIST Agroxone Anvil Applaud Bayonet Chix Clincher Dantop Hometrek Legend Lorsban Nurelle Omex-Bio 20 Omex- Calmax Paclo Padan Porsnail Ricesaver Slash Steady Sumicidin Sumithion Surekill Tornado Vondozeb
LEADS AGRICULTURAL PRODUCTS CORPORATION
Leads Agri is a 100% Filipino-owned corporation that has incessantly competed with global conglomerates. Since its incorporation in February 11, 1997 and its actual start of operation in April 1997 it has emerged as one of the leading agrochemical companies in the country. At present, the entire LEADS family has more than a hundred dynamic and highly motivated employees
10.
9 Company description taken from the supplier’s website: www.jardinedistribution.com
10 Company description taken from the Leads Company Profile
87
OFFICE ADDRESS : Unit 1208 Paragon Plaza, EDSA corner Reliance St., Mandaluyong City, Phils. TERMS OF PAYMENT : 60 days PRODUCT LIST Advice Armor Biflex Blade Bug Buster Cartap Chaku Dichlorvos Domarr Pro Ester 2,4 D Flymax Furadan Ultra Golden Mango Set Leadrex Malathion Manager Marshall Matador Mega Booster Mega F21 Mower Niclos Pyzero Rapture Rimon Starkle Stop Sure Take off Vectron Victor
PLANTERS PRODUCTS, INC.
Planters Products was established in 1963 as a multinational corporation called Esso Standard Fertilizer and Agricultural Chemical Company. In 1970, it was purchased by the country’s largest cooperative of sugar planters, the Sugar Producers Cooperative Marketing Association, and renamed Planters Products. The main business of Planters Products, Inc. is the manufacturing, production, trading and marketing of agro-chemical products. At present, the company has 19 brands of crop protection chemicals consisting of insecticides, herbicides, fungicides, plant nutrition, molluscicides, rodenticides and termiticides
11.
OFFICE ADDRESS : 109 Esteban St. Legaspi Village, Makati City TERMS OF PAYMENT : COD
SINOCHEM CROP PROTECTION (PHIL.) INC. Sinochem is part of the Sinochem International Corporation. It has diverse business interests in logistics, chemicals distribution and trading, integrated rubber business, and agrochemicals. Sinochem International’s solid performance characterized by rapid growth and stability follows that of its parent company, Sinochem Corporation , which has been named to “Fortune Global 500” for more than 20 times, ranking the 168th in 2011
12.
OFFICE ADDRESS : 22F, Tower II, Insular Life Corporate Centre, Insular Life Drive, Filinvest Corporate City, Alabang, 1780 Muntinlupa
11
Company description taken from the Planters Products Company Profile 12
Company description taken from the supplier’s website: www.sinochemphil.com
88
TERMS OF PAYMENT : Machete & New Brands = 60 days Round-up & Power= 90 days PRODUCT LIST Advance Blizzard Direk Machete Power Primalex Rogue Round-up Wave
EAST WEST SEED COMPANY
East West Seed Co. was established in the Philippines in 1982 by Simon Groot, a Dutch agriculturist who saw the need for seeds that were adapted to local conditions in Asia. At the time, the vegetable seed industry in Southeast Asia was little more than a seed trading system. No one was doing vegetable plant breeding, which involves years of trials, selection, crossing and investment. Simon Groot saw the opportunity for locally-developed hybrid seeds, and all the remarkable characteristics they were known for, like higher yields, better disease tolerance, better shelf life and extended growing seasons
13.
OFFICE ADDRESS : Km. 54 Cagayan Valley Road, Barangay Sampaloc, San Rafael, Bulacan TERMS OF PAYMENT : 30 days PRODUCT LIST Bitter Gourd Cabbage Cauliflower Radish Cucumber Eggplant Hot Pepper Pechay Mustaza Onion Papaya Carrot Okra Pumpkin Ridge Gourd Patola Bottle Gourd Sitao Snap Beans Cow Pea Sweet Corn Glutinous Corn Sweet Pepper Tomato Watermelon
13
Company description taken from the supplier’s website: www.eastwestseed.com
89
BUSINESS STRATEGY As part of the Company’s vision to fortify its leadership as the country’s largest combined distributor of agro-chemicals, feeds, fertilizers, veterinary medicines and other agricultural products, the Company intends to effectively carry out the following business strategies: Distribution The Company aims to effectively implement its business strategy with respect to its distribution business with the objective of (1) increasing product awareness, (2) increasing market presence and (3) improving customer and market knowledge. Increase product awareness. The Company conducts promotional activities with the objective of making the customers aware of the Company’s products and its benefits. Specifically, the Company conducts the following:
1. Raffles – Every purchase of the Company’s distribution products at set amounts entitles a customer to a corresponding raffle stub, the winner of which shall be drawn at set dates. Prizes vary but are attractive enough to encourage customers to have a constant recall of the products to purchase in order to participate in the raffle.
2. Brochure Distribution – The Company consistently distributes pamphlets and
brochures as a means to introduce and update its distribution products to the public. Strategic locations are chosen for the distribution such as cockpits, farms and residential areas.
3. Event Sponsorships – The Company provides sponsorships to special events such
as Derby’s, Fiestas and other local celebration. In exchange, the Company is given the full right to advertise its products and create additional awareness to the consuming public.
Increase market presence. The Company intends to increase market penetration by securing placements in dealers that are not yet selling its distribution products. It also aims to further increase the share of its products that are being sold by dealers.
1. Mobile Stores – The Company sends off mobile stores with advertisements on its
distribution products. In the process, it gives samples and giveaways and promotes its dealers within the area covered.
2. Dealer Incentive and Loyalty Reward Programs – In order to encourage dealers to increase the distribution products of the Company in their inventory, the Company gives attractive cash rebates per volume sales met. On the part of consumers, the Company implements a loyalty rewards program which entitles a customer to a certain amount of discount or any other amenity as set by the Company.
Improve customer and market knowledge. The Company intends to teach our customers on the use of the latest products and technology thru farm trials, seminars, etc.
1. Farm Aid Technician and Medical Mission – The Company creates a demand or its
distribution products and improve customer and market knowledge by sending its Farm Aid Technicians and Veterinarians to visit hog growers, farmers and other end users to discuss its distribution products and its benefits. Moreover, the Farm Aid Technicians and Veterinarians establish a relationship with them by taking care of their livestock thru constant check ups and free vaccinations and other medicine.
90
2. Barangay Seminars – The Company also hosts seminars in the locality on how to
improve farmers’ yield with their livestock and other agricultural products and at the same time introduces the Company’s distribution products.
Retailing Expansion of market share. The Company intends to expand its market share in the distribution business by venturing into retailing its distribution products. As soon as the Company secures the necessary approvals from the SEC and PSE in relation to its capital fund raising activity it shall establish a chain of Calata Corporation Retail Stores under a newly created and wholly-owned subsidiary. With this, no form of indebtedness to the Company on the part of the subsidiary will be created as the Company will be the owner of said subsidiary. The Company intends to have up to one hundred percent (100%) ownership. The organizational structure has yet to be finalized although the Company plans to put several members of its management team in the board of directors to ensure that the profitability of the subsidiary will be maximized. All sales derived from the operations of the subsidiary will be reflected in its books as its own revenue. The subsidiary’s revenues may not be directly transferred to the Company. However, as a wholly-owned subsidiary, its financial statements, including the revenue, shall be consolidated with the Company upon submission of the Consolidated Audited Financial Statements. A detailed discussion is provided under the section on Plans and Programs of this Prospectus on page 147. The Company has an existing affiliate Agri Phil Corp. (Agri Phil) which is likewise engaged in retail distribution. However, it is worthy to note that Agri Phil shall not be in competition against the Calata Retail Stores for the following reasons: (1) The Calata Retail Stores shall be strategically located insofar as it will not encroach upon the operations of Agri Phil. Currently, Agri Phil is located in Luzon and has no plans of expanding nationwide since it is intended to be a private and family-owned corporation. On the other hand, Calata Corporation intends to put up its retail stores all over the Philippines in the future. However, subsequent acquisition is a possibility if ever the current stockholders of Agri Phil decide to enter into such negotiations. (2) Agri Phil is considered a customer since it purchases all its distribution products from Calata Corporation. Farms Expansion and diversification to operations related to the existing business. The Farming Operations of the Company will not be funded in whole or in part by the proceeds from the intended Initial Public Offering. Nevertheless, for the purpose of fully describing all the current and future operations of the Company, it is worthy to note that the Company intends to expand operations in other agriculture related industries like livestock farming operations. There are four main farm projects in which the Company is venturing: a) Hog Breeding (piglet production); b) Hog Growing (Hog production); c) Broiler breeding (production of eggs for hatching of chicks) d) Broiler Growing (Broiler production). A detailed discussion is provided under the section on Plans and Programs of this Prospectus on page 147. The Company has an existing affiliate - Calata Farms, which is likewise engaged in farming operations. Calata Farms was intended to be a private and family-owned corporation and was incorporated before the Company’s plans to become a publicly-owned corporation. However, considering that Calata Corporation has decided to venture into the same business, the Company is carefully studying beneficial partnerships such as the consolidation of Calata Farms’ operations with that of the Company’s and other forms of business arrangements subject to the approval of the proposed terms by all parties.
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In summary, the effective implementation of the Company’s business strategies shall enable it to capitalize on its competitive strengths and continue to effectively implement its marketing, sales and distribution techniques as well as increase profitability. COMPETITIVE STRENGTHS Comprehensive Range of Products Calata Corporation is the only company which has a comprehensive range of distribution products such as feeds, agro chemicals, seeds, fertilizers and veterinary medicines. Most competitors are limited only to the business of distribution of either feeds, agrochemicals or fertilizers alone. Aggressive Distribution Strategies
1. The Company strictly implements a full truck load policy. Telemarketers of the Company contact each customer in order to fill up underutilized trucks before deployment from the warehouse. The customers are segregated by area and our people instantly know which customers to contact and what products they are most likely to buy.
2. The Company makes use of its extensive customer database to identify buying patterns and specific needs of each customer. This in turn is used by the Company to proactively book orders from the customers based on their previous buying patterns while communicating new information to customers that will entice them to buy more like new promotional activities for certain products that will most likely result in increased demand.
3. The Company ensures fast processing of orders and quick delivery to customers by implementing a “Next Day Delivery Policy.” The Company has its own fleet of trucks as well as regular suppliers of trucking services to ensure that this policy is met even in peak season.
4. The Company has sales field personnel that are assigned specific areas and physically visit customers to book orders and handle any customer feedback and relay it to the Company for appropriate action.
Established Work Processes
1. Computerized Sales, Logistics and Accounting Systems. The Company has implemented a back office system that allows its key management to (a) track inventory at any time in each warehouse, (b) determine daily sales by product, (c) measure the performance and profitability of the Company.
2. Systematic Customer Credit Approval System. The Company has its own set of documentary requirements and an independent team that conducts its own proper credit investigation for prospective customers. This reduces the incidence of bad debts.
3. Separate Sales and Credit Collection Teams. The Company has its own credit and collection team that is separate from the sales team to ensure that the company’s credit and collection policy is properly followed. This is to minimize collection losses.
In connection to this, the Company has established a Quality Manual enumerating Quality Procedures and Instructions which have been created and currently being implemented to meet the requirements of PNS ISO 9001:2008. The Company’s Quality Manual mirrors the ISO standard and has been customized to its business.
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Furthermore, said Quality Manual covers the Company’s requirements and procedures in the application of a Quality Management System which is intended to comply fully with ISO 9001:2008 as a means of offering the best service and ensure the products to satisfy customer requirements. This Quality Manual represents the scope of Calata Corporation’s Quality Management System, refers to the procedures established, identifies the relationships between the procedures and processes established, and defines the interaction between these processes to improve standards which have been successful in achieving, and in those areas where performance is wanting. Attractive growth prospects The Company is easily able to expand and diversify to other related businesses due to its fully established documented work processes and tested computerized systems. As a result expansion is made with less cost and effort in a shorter span of time. Strong market position The Company has a strong market position due to its long partnership with leading manufacturers such as B-Meg (the country’s number one feeds brand), Syngenta (the world’s number one crop protection company), Monsanto (the world’s number one seed company in the world), and other established multinational product manufacturers such as Bayer, Jardine, Dupont and Sinochem. MARKETING, SALES AND DISTRIBUTION The Company conducts the following Marketing, Sales and Distribution techniques:
1. Company Technicians go to end users for product awareness and demand creation by sharing scientific and economic data regarding animal growth and explaining how the Company’s products can better augment their livelihood and profitability as against other existing products in the market.
2. The Company conducts seminars to: (a) entice non-farmers to enter into the piggery business and; (b) educate farmers in using the latest technologies carried by the Company.
3. Company Technicians approach the end consumers in order to inform them of existing promotions.
4. The Company increases its brand visibility by: (a) posting ads in public utility vehicles and public places, (b) through sponsorships in major local fiestas, (c) improving the store presentation of existing dealers.
5. To increase its customer base, the Company provides free consultation services and free product samples to potential customers.
6. The Company implements dealer incentive programs in order to increase their monthly sales.
7. The Company has various warehouses strategically located in four different provinces to cover the entire distribution area.
8. The company has its own fleet of trucks to cover more than 1,000 dealers and customers. These trucks are serviced by in-house mechanics to ensure an uninterrupted service.
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RESEARCH AND DEVELOPMENT The Company is engaged in the business of distribution of agro-chemicals, feeds, fertilizers, veterinary medicines and other agricultural products. Product research and development is conducted primarily by its key suppliers and business partners.
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COMPETITION In the feeds distribution business, the Company is an exclusive distributor of B-Meg Feeds in the following areas: Nueva Ecija North and South Bulacan
BULACAN # of Dealers
1 Angat 16
2 Balagtas 4
NUEVA ECIJA NE- South NE-North # of Dealers
1 Aliaga 8 8
2 Bongabon 2 2
3 Cabanatuan 14 14
4 Cabiao 5 5
5 Carranglan 5 5
6 Cuyapo 4 4
7 Gabaldon 5 5
8 Gapan 8 8
9 Gen. Tinio 9 9
10 Gen. Natividad 3 3
11 Guimba 9 9
12 Jaen 4 4
13 Laur 3 3
14 Licab 8 8
15 Llanera 3 3
16 Lupao 11 11
17 Muñoz 1 13 14
18 Palayan 2 2
19 Pantabangan 3 3
20 Peñaranda 2 2
21 Quezon 8
22 Rizal 11
23 San antonio 2 2
24 San Isidro 2 2
25 San Jose 3 10 13
26 San Leonardo 1 1
27 Sta. Rosa 6 6
28 Sto. Domingo 13 13
29 Talavera 16 16
30 Zaragosa 2 2
TOTAL 71 125 177
95
3 Bustos 10
4 Bulacan 7
5 Baliuag 36
6 Bocaue 3
7 Calumpit 13
8 Guiguinto 8
9 Hagonoy 10
10 Malolos 10
11 Marilao 4
12 Norzagaray 8
13 Pandi 10
14 Paombong 3
15 Plaridel 19
16 Pulilan 31
17 San Rafael 18
18 Sta. Maria 38
TOTAL 248
East Pangasinan
EAST PANG # of Dealers
1 Asingan 9
2 Alcala 5
3 Balungao 3
4 Bautista 1
5 Bayambang 6
6 Natividan 5
7 Rosales 2
8 San Nicolas 3
9 San Quintin 1
10 Santa Maria 6
11 Santo Tomas 1
12 Tayug 10
13 Umingan 9
14 Villasis 4
TOTAL 65
Pampanga
PAMPANGA # of Dealers
1 Angeles
6
2 Arayat 8
3 Candaba
4 Mabalacat 5
5 Macabebe
96
PAMPANGA # of Dealers
6 Magalang 17
7 Masantol 1
8 Mexico 16
9 Minalin 3
10
San Fernando City 7
11 Santa Ana 3
12 Santo Tomas
TOTAL 66
There are at least twenty seven (27) major feed brands competing with B-Meg in the aforementioned areas, namely: Goldmix, Highgrade, Pigrolac, Phimico, Altlas, Robina, Feed Pro, GMP, CJ, I Feeds, Denka, Premijum Valiant, Sunjin, Hover, Purina, Danway, New Hope, Excel, Ace, Global, Vitarich, Amigo, Mulitive, Viking, Monarch, Master Gain and Legend. Based on survey from gathered field data on the sale of feeds, the Company, through the sale of its B-meg Feeds, leads other brands being sold in its respective areas of operations.
Brand Bulacan Nueva Ecija North
Nueva Ecija South
Pampanga Pangasinan
B-MEG 37% 24%-25% 18%-20% 10%-15% 30%-35%
Pigrolac 17% 24%-25% 18%-20% 10%-15% 30%-35%
Philmico 46%
50%-51%
12% 10%-15% 30%-40% Others (in the
aggregate) 50%-52% 55%-70%
TOTAL 100% 100% 100% 100% 100%
The Company has aggressive distribution strategies that outstands the other distributors. Calata’s computerized system contains an extensive customer database that is used to identify the buying patterns and needs of each of its customers and to guarantee the implementation of “Next Day Delivery Policy” of the Company. The Company is also engaged in distributing other agricultural products which it has no exclusivity arrangements. In ensuring Calata’s visibility in the market, the Company posts ads in public utility vehicles and public places. The Company also sponsors local government festivities such as fiesta events and improvement of its existing dealers’ stores. Considering however that the Company is still in its preliminary process of fortifying its market share in the business of agrochemical, fertilizer and seed distribution as well as defining its specific areas of operation through the planned establishment of its retail stores, identification of actual competitors and data gathering on sales may not yield accurate results as of the time being. CALATA CORPORATION SUPPLIERS WITH EXISTING SUPPLY CONTRACTS
SUPPLY CONTRACTS TERM / LENGTH OF
CONTRACT
FEEDS
San Miguel Foods, Inc. (B-Meg Feeds) Annual Renewal
CHEMICALS Annual Renewal
97
Syngenta
Bayer CropScience
Sinochem Crop Protection (Phil) Inc.
Jardine Distribution, Inc. (Chemical)
Asia Gold Trading
Leads Agricultural Product Corporation
CropChem Corporation(Biostadt Philippines Inc.)
Cropking chemical Inc.
Bongabon Farmers Trading (Sole Proprietor)
Aldiz, Inc.
Planters Products, Incorporated
United Linkage Marketing (Sole Proprietor)
Leads Environmental Health
International Veterinary & Agrochemical Inc.
Vast Agro Solutions, Inc.
JAT Agrifarm Enterprises, Inc.
Integrated Crop Trading Corporation
Pest Master (St. Anne Agro Trading)
C.B. Andrew Asia, Inc. (Pro-Chem Agritech, Inc.)
Samson Agricultural Supply (Sole Proprietor)
Global
Stoller Philippines, Inc
Igpami Mktg., Corp.
Tillermate Enterprises
SRB Commercial (Sole Proprietor)
PHILOR
Marthdave Co., Ltd.
Zagro Corporation
FERTILIZERS
Yara International ASA Annual Renewal
Aurey Wy (Sole Proprietor)
AgroTech Agricultural Products
C & T Poultry and Agricultural Supply (Sole Proprietor)
MVT Fertilizer Traders Company, Inc.
VETERINARIES
San Miguel Foods, Inc. Annual Renewal
Adrem Distribution Specialist, Inc.
JFL Agri-Ventures (Sole Proprietor)
Meditech Veterinaries
SEEDS
Monsanto Philippines, Inc.
East West Seed Company, Inc. Annual Renewal
Jenny Perez (Sole Proprietorship)
98
Jardine Distribution, Inc. (Seeds)
Pioneer Hi Bred Philippines Incorporated
OTHERS
Progressive Poultry Supply Corp
Tambo (Cracked Corn & Corn Grits) Annual Renewal Randy Rosario (Sprayer & Sprayer Parts)(Sole Proprietor)
SUPPLY AND DISTRIBUTION AGREEMENTS In general, all supply and distribution agreements are renewed on a yearly basis. Renewal may be express when parties opt to execute a written agreement or implied when parties continue to do business dealings with each other such as taking of orders of supplies. Except for its exclusive distribution agreement with San Miguel Foods, Inc. (Feeds), Syngenta Philippines, Inc. (Agro Chemicals) and Monsanto Philippines, Inc. (Seeds), the Company does not usually have duly executed distribution agreements with the rest of its suppliers of agro chemicals, fertilizers and seeds. Furthermore, based on industry practice, actual exclusive distribution agreements are not issued on a yearly basis. In the case of non-exclusive distribution agreements no formal agreement is executed except for some. Instead, certifications are issued to attest that the Company is a distributor of the pertinent supplier products indicating therein exclusivity or non-exclusivity. However, for other non-exclusive suppliers, certifications are not even given since supply of the products continues for so long as the Company places an order. Nevertheless, to substitute the absence of supply and distribution agreements, the Company strictly enforces proper documentation of transactions with suppliers. The Company religiously fills up Purchase Orders which upon acknowledgment by the supplier, a Sales Invoice is issued. Hence, the Purchase Order and the Sales Invoice signifies the contract / agreement between the Company and the supplier. DEPENDENCE UPON A SINGLE CUSTOMER The Company is not dependent upon a single or a few customers, the loss of any or more of which would have a material adverse effect on the Company. There is no customer that accounts for five percent (5%) or more or the registrant’s sales. As a distributor for a considerable number of towns in several provinces, the sales of the Company are widely distributed per dealer/customer in its area of operation. At most, it has three top customers as of 2011 year end combining for eleven percent (11%) of the sales of the Company namely: (a) Priscilla T. Rigor four percent (4%), (b) Baliwag Marketing Company, Inc. four percent (4%) and (c) Antonina W. Ting three percent (3%). While it is true that the Company shall be venturing into retail business, the Company takes steps to ensure that existing dealer-customers’ sales would not be affected by carefully locating its retail stores to an area which is beyond the reach of its existing dealer-customers. If despite the fact that the location of the Company’s retail store does not encroach upon the area of its existing dealer-customers, the Company feels that said dealer-customer concerned will, in one way or the other be affected, the Company shall provide said dealer-customer additional incentive schemes, rebates and other forms of assistance to ensure that its profit will not be affected.
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INDUSTRY OVERVIEW I. BRIEF BACKGROUND
a. Philippine Economy At A Glance
Growth in the Philippines has been averaging at about 5 percent over the past 10 years, significantly higher than the rate achieved in the previous two decades. In 2010, the Philippines grew by 7.6 percent, the highest in 30 years. In recent years, the Philippines has restored macroeconomic stability and proved resilient to recent external shocks, such as food and fuel price hikes, the global financial crisis and recession, and the impact of typhoons and El Niño. Rising and counter-cyclical remittances have provided a strong basis for currency stability and a healthy buildup of international reserves. The country currently enjoys a savings rate that exceeds investment. Its human resources are in high demand around the world. Despite these achievements, inclusive growth that benefits the poor has been a continuing challenge for the Philippines. Poverty has remained at about the same level during the last decade, with a little over a quarter of the population below the poverty line. A key challenge has been to deploy these financial and human resources more effectively in the country, especially in rural areas, by improving investment climate and creating job opportunities. The Government has now prioritized an improved business climate, infrastructure development, and public-private partnerships. Investment in human capital and social protection is another critical pillar addressed by the Government to improve the livelihoods of the poor; budget allocations have been increased for health, education, and conditional cash transfer programs. Good governance remains a high priority for the country. The current Administration’s focus on anti-corruption is intended not only to improve the investment climate for domestic and foreign investors, but also to enhance social service delivery and help reduce poverty through more accountable governance. The country has a dynamic civil society and a vibrant media that help articulate the voice of the public for urgent reforms. The work of civil society groups, often highlighted in the media, has contributed to the successful promotion of specific reforms in the fields of procurement, textbook delivery, budget transparency, and community infrastructure, among others. To address these challenges and achieve inclusive growth, the Philippines Development Plan 2011-2016 under the administration of President Benigno S. Aquino III has adopted three broad strategies, namely:
a. Attaining high and sustained economic growth that provides productive employment
opportunities; b. Promoting equal access to development opportunities through: better education,
primary health care and nutrition, and other basic social services; equal access to infrastructure, credit, land, technology, and other productive inputs; and good governance and strong institutions to promote competition; and
c. Establishing effective and responsive social protection to protect and enable those who
do not have the capability to participate in the economic growth process. Underlying these broad strategies is the overarching theme of good governance. Since
President Aquino’s assumption of office in June 2010, he has pursued an agenda of transparency and accountability, civil society participation and anti-corruption. (Reference: http://www.worldbank.org/en/country/philippines/overview)
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b. Profile
The Philippine economy is highly dependent on agriculture. Two thirds of its current population of 75.3 million and three fourths of the poor depend on agriculture for their livelihood. While only a fifth of all the goods and services the country produces and a third of its exports come from the sector, it employs about half of the total workforce. Agriculture and fisheries registered an overall growth rate of 4.01% in 2001, which was mainly contributed by: crops (2.58%), livestock (2.87%), poultry (7.80%), and fisheries (6.05%). Of the crops, the major contributors were rice (4.56%), coconut (1.69%), and banana (2.66%). In terms of area, about a third of the country's 30 million hectares is agricultural. Traditional and current uses of the agricultural land consist of:
Food crops - 52% (coconut, sugar cane, industrial crops, fruits,
vegetables, root crops) Food grains - 31% (rice and other grain crops) Non-food - 17 % (pasture and cut flowers)
Low productivity and low incomes from agriculture and fisheries are consistent with the prevalence of rural poverty. The situation is further aggravated by low farm gate prices of produce and high retail prices of food, which are among the highest in the region.
Location: Southeastern Asia, archipelago between the Philippine Sea and the South China Sea, east of Vietnam
Area: total: 300,000 square kilometers
land: 298,170 square kilometers
water: 1,830 square kilometers
Agricultural land area: 9.560 million hectares (2002 CAF)
arable land: 4.858 million hectares
permanent cropland: 4.193 million hectares
permanent meadows/pastures: 0.129 million hectares
forest land: 0.074 million hectares
other lands: 0.307 million hectares
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About 32% of the country's total land area constitutes the agricultural land. Of this, 51% and 44% were arable and permanent croplands, respectively. (Bureau of Agricultural Statistics, 2010)
Agriculture grew by 4.10% in the first quarter of 2011. Production in the crops subsector was up by 8.19% and the main contributors were palay, corn, sugarcane and banana. There was a slowdown in the livestock subsector while poultry production sustained its upward trend. Fisheries production declined. At current prices, the gross value of agricultural output amounted to PhP347.2 billion or 12.72% more than last year's record.
The crops subsector which contributed 52.99% to total agricultural output, expanded by 8.19%.Production of palay and corn increased by 15.63% and 19.50%, respectively. Sugarcane production grew by 26.73%. Improved production performances were also reported for banana, cassava, cabbage and rubber. The subsector grossed PhP206.1 billion at current prices and recorded a 26.69% increase from the 2010 level.
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Livestock production recorded a 0.59% growth. The subsector accounted for 15.19% of total agricultural production. Hog production inched up by 0.64%. The gross value of livestock production was PhP49.7 billion at current prices. This represented a 3.04% reduction from last year's record.
The poultry subsector posted a 3.92% output increment this quarter. It shared 13.30% in total agricultural production. Chicken production grew by 3.77%. At current prices, the subsector grossed PhP39.0 billion, down by 4.35% from the 2010 level.
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On the average, farm gate prices increased by 8.29% this year. Average price increment was highest in the crops subsector at 17.10%. In the fisheries subsector, average price increase was 1.89%. Prices of livestock products went down by an average of 3.61% and those of poultry products, by 7.96%.
c. Economic Review
GNP (at current prices): PhP 8,810 billion
(at constant prices): PhP 1,655 billion
GDP (at current prices): PhP 7,679 billion
(at constant prices): PhP 1,432 billion
Share of agriculture in GDP 18%
GVA in agriculture and fishery
(at current prices): PhP 1,134 billion
(at constant prices): PhP 258 billion
by sub-sector: Crops: 49%:
palay 17% , corn 7%
coconut 3%, sugarcane 2%
banana 3% , others 17%
Livestock: 11%
Poultry: 10%
Fisheries: 25%
Agricultural activities and services : 5%
II. GENERAL AND AGRICULTURE TRADE SITUATION
a. Gross Domestic Product (GDP)
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Philippine GDP grew 7.3% in 201014
, spurred by consumer demand, a rebound in exports and investments, and election-related spending. The economy weathered the 2008-09 global recessions better than its regional peers due to minimal exposure to troubled international securities, lower dependence on exports, relatively resilient domestic consumption, large remittances from four-to five-million overseas Filipino workers, and a growing business process outsourcing industry. Economic growth in the Philippines averaged 4.5% during the Macapagal-Arroyo administration. Despite this growth, poverty worsened, because of a high population growth rate and inequitable distribution of income. President Aquino’s administration is working to reduce the government deficit from 3.9% of GDP, when it took office, to 2% of GDP by 2013. The government has had little difficulty issuing debt both locally and internationally to finance the deficits. President Aquino's first budget emphasizes education, health, conditional cash transfers for the poor, and other social spending programs, relying on the private sector to finance important infrastructure projects. Weak tax collection, exacerbated by new tax breaks and incentives, has limited the government's ability to address major challenges. The Aquino administration has vowed to focus on improving tax collection efficiency - rather than imposing new taxes - as a part of its good governance platform.
15
(Reference on preceding excerpt: http://www.indexmundi.com/philippines/economy_profile.html -Philippines Economy Profile 2011)
b. Laws and Policies of Government Institutions16
The Department of Agriculture had its beginnings when President Emilio Aguinaldo established the Department of Agriculture and Manufacturing on June 23, 1898. By 1901, under the American colonial government, priority was given to the development of other agricultural products, such as rice and other basic commodities, as well as fishing, forestry, and mining. This new focus necessitated the establishment of the Insular Bureau of Agriculture. This bureau was put under the Department of the Interior through the Philippine Legislature's Act No. 271. The Bureau of Agriculture grew rapidly until it was abolished by the enactment of Act No. 2666, otherwise known as "An Act to Re-organize the Executive Department of the Government of the Philippine Islands," on November 18, 1916, which was implemented on January 1, 1917. This act provided for the establishment of the Department of Agriculture and Natural Resources (DANR), which would take over direct executive control, direction, and supervision of the Bureaus of Agriculture, Forestry, Lands, Science, and Weather, as well as all matters concerning hunting, fisheries, sponges and other sea products, and such others as may be assigned to it by law. By virtue of another Reorganization Act in 1932, the DANR became the Department of Agriculture and Commerce. The Bureau of Commerce, which used to be under the Department of Commerce and Communication, was placed under the reorganized Department. The Bureau of Agriculture was split into the Bureau of Plant Industry and Bureau of Animal Industry. The following year, by virtue of the same Reorganization Act, Secretary Vicente Singson Encarnacion organized the Offices of Accounts and Property and Statistics and Publication, the Fish and Game Administration, established the Divisions of Mineral Resources, Industrial Engineering, and Home Economics, a Fiber Inspection Service, and established a Scientific Library.
14
Data for 2011 is still unavailable. 15
http://www.indexmundi.com/philippines/economy_profile.html -Philippines Economy Profile
2011 16
Department of Agriculture Website: www.da.gov.ph
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Under Secretary Eulogio Rodriguez, the Divisions of Mineral Resources and Industrial Engineering, and the Scientific Library were placed under the Bureau of Science. It was also during Rodriguez's administration that the Division of Mineral Resources was converted into the Bureau of Mines by virtue of Commonwealth Act No. 136. During World War II, President Manuel L. Quezon re-appointed Rafael Alunan, Sr. as Secretary of Agriculture and Commerce up to 1942. The Department of Agriculture and Commerce was reconstituted on July 1, 1945 upon the resumption of the Commonwealth Government. President Sergio Osmeña re-appointed Vicente Singson Encarnacion as Secretary. In 1947, the Department of Agriculture and Commerce was renamed Department of Agriculture and Natural Resources by virtue of a Reorganization Act. The Department of Commerce and Industry was formed as a result of which the Bureau of Commerce, Bureau of Patents and Weather Bureau were spun off from the DANR. The Philippines became a member of the United Nations Food and Agriculture Organization under Secretary Juan G. Rodriguez. It was also during his tenure that the National Rice and Corn Production Program was launched and was coupled with the creation of the Rice and Corn Coordinating Council, which was the forerunner of the National Food and Agriculture Council (NFAC), which is now the National Agricultural and Fishery Council (NAFC). On September 14, 1959, the DANR moved to its permanent building in Diliman, Quezon City from the Agrifina Circle in Manila. With the election of President Ferdinand E. Marcos, Vice-President Fernando Lopez was appointed Secretary of Agriculture and Natural Resources for the second time. It was during his tenure that the Philippines became an exporter of rice in 1968. By virtue of Presidential Decree (P.D.) 461, which was signed into law by President Ferdinand Marcos, the DANR was reorganized in May 1974 into two departments, the Department of Agriculture and the Department of Natural Resources. On June 22, 1978, by virtue of P.D. 1397, all departments were changed to ministries. At the helm of the Ministry of Agriculture was Minister Arturo R. Tanco, Jr., who launched the innovative Masagana 99 rice production program which revolutionized the rice industry and made the Philippines a rice-exporter and self-sufficient in white corn. By virtue of P.D. 461, in June 1978, the MA established 12 regional offices each headed by a Regional Director. On February 28, 1986 as a result of the EDSA People Power Revolution, the ministership was transferred from Minister Salvador Escudero III to Ramon V. Mitra, who was immediately appointed by President Corazon C. Aquino upon her assumption into office. Guided by the principle that agriculture is business, the DA implemented policy and institutional reforms that freed the agriculture markets, enabling farmers to enjoy higher farm gate prices. These reforms included the dismantling of agricultural monopolies and the elimination of agricultural taxes. Reforms in the agricultural credit system, such as the phase-out of the direct lending scheme, were also initiated. The reorganization of the Department of Agriculture was contained in Executive Order (EO) No. 116 and was signed by President Aquino on January 30, 1987. The EO mandated the DA to promote agricultural development by providing the policy framework, public investment, and support services, which are needed for domestic and export-oriented business enterprises. No subsequent issuances and policies were made to have another reorganization of the Department of Agriculture. In 1988, the Livelihood Enhancement for Agricultural Development (LEAD) program was launched to speed up farmers' organizations access to financing, management expertise, and marketing. Agriculture and Fishery Councils (AFCs) were set up at the sectoral, regional,
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provincial and municipal levels to provide inputs on major programs and policy decisions and help plan and monitor DA projects. Senen C. Bacani, appointed in January 1990, implemented the Rice Action Program (RAP) and Corn Production Enhancement Program (CPEP) enabling the Philippines to once again export rice in 1992 and attained self-sufficiency in corn, respectively. In 1992, President Fidel V. Ramos named Roberto S. Sebastian as DA chief who introduced the Key Production Approach (KPA) which became the basis in the formulation of the Medium-Term Agricultural Development Plan (MTADP). In 1996, President Ramos appointed Dr. Salvador H. Escudero III, serving for the second time as DA Secretary. During that time, he launched the Gintong Ani food production and security program. He also organized subsistence farmers into functional groups and cooperatives, aimed at transforming them into viable producers and entrepreneurs. In July 1998, President Joseph Ejercito Estrada designated William D. Dar as Acting DA Secretary who introduced the Estrada administration's 10-point agenda in agriculture and fisheries under the Agrikulturang Makamasa program. In March 1999, President Estrada named former Senate President Edgardo J. Angara as DA Secretary who authored the Agriculture and Fisheries Modernization Act of 1998 or AFMA (Republic Act No. 8435). He put into action the law’s visions of transforming and modernizing the country’s agriculture and fisheries sector. Domingo F. Panganiban continued the implementation of AFMA as the government’s comprehensive framework and platform for rural development when he assumed office in January 2001. A month later, he was replaced by Leonardo Q. Montemayor who implemented the AFMA with special emphasis on its social equity aspect. He launched the Ginintuang Masaganang Ani Countrywide Assistance for Rural Employment and Services (GMA-CARES). Secretary Luis P. Lorenzo Jr., took the helm of the Department in December 2002 and spearheaded the launching of the Roll-On, Roll-Off or RORO transport program. The hybridization programs of the Department were intensified and interventions were focused on the Mindanao regions. Secretary Arthur C. Yap, appointed on August 23, 2004, continued to uphold the vision of a modernized smallholder agriculture and fisheries, a diversified rural economy that is dynamic, technologically advanced and internationally competitive. Under his term, Goal 1 (develop two million hectares of new lands for agribusiness to contribute two million to the 10 million jobs targeted by 2010) and Goal 2 (make food plentiful while keeping the price of "wage goods" at low prices) were unveiled. During Panganiban’s 2nd term as Secretary, a total of 203,000 hectares of idle lands and 313,000 jobs were developed under Goal 1 and ten Huwarang Palengke (outstanding markets) were identified under Goal 2. Food lanes were designated for easier, faster and kotong-free transport of agricultural products.When Secretary Yap took the agri seat on October 23, 2006, he has aggressively and consistently implemented various projects and policies towards the attainment of food security and self-sufficiency. Under FIELDS, the government’s centerpiece program on agriculture, unveiled during the 2008 Food Summit, Yap has set achievement records for the Philippine agri and aqua sectors. Secretary Bernie Fondevilla continued DA’s mandate of providing sufficient food and sustainable livelihood for the Filipino people through modernized technologies and facilities when he took the agri seat on March 2010. On April 6, 2010, Republic Act 10068 or the Organic Agriculture Act was signed into law in the Philippines. Under Section 2 of this law, it is the policy of the State to promote, propagate, develop further and implement the practice of organic agriculture in the Philippines that will cumulatively condition and enrich the fertility of the soil, increase farm productivity, reduce pollution and destruction of the environment, prevent the depletion of natural resources, further protect the health of farmers, consumers and the general public, and save on imported farm inputs. Section 3(b) of RA 10068 defines organic agriculture as including all agricultural systems that promote the ecologically sound, socially acceptable, economically viable and technically feasible production of food and fibers. While it also includes the use of biotechnology and other
107
agricultural practices, it is explicitly stated therein that biotechnology “shall not include genetically modified organisms” On June 30, 2010, President Benigno S. Aquino III appointed two-term congressman of Quezon and civil engineer by profession Proceso J. Alcala as Secretary. One of the principal authors of Republic Act 10068, or the Organic Agriculture Act of 2010, he is keen on increasing rice production and do away with rice imports by 2013 by expanding areas planted to rice to include uplands, marshlands and idle farmlands. He introduced the concept of Agrikulturang Pilipino or Agri-Pinoy as the Department of Agriculture's over-all strategic framework that serves as a guide in the implementation of its various services and programs in 2011-2016 and beyond. Agri-Pinoy optimizes the development of Philippine resources, natural and human, to achieve Philippines goals in agriculture and fisheries, and contribute to national development with its battlecry. "Sa Agri-Pinoy, asensyo'y tuloy-tuloy." (Source: Department of Agriculture Philippines website: http://www.da.gov.ph/newindex2.php?pass=about/history.htm) III. AGRICHEM
The agricultural chemical industries are required to follow the Fertilizer and Pesticides Authority (FPA) Pesticide Regulatory Policies and Implementing Guidelines before their products are allowed to be used by Philippine agriculture. This FPA guideline was patterned from the modified WHO-FAO classification.
The Agrochemical Industry is under strict regulation by the FPA. The extensive regulatory data packages are being submitted to the FPA before any of the pesticide companies can register a product. The FPA licensed pesticide companies are provided with the Material Safety Data Sheet (MSDS), containing data regarding the properties of a particular substance, generated by their respective principals/manufacturers that normally follow the directives/formats of EU and USA. The manufacturers who normally supply products to the local companies develop the MSDSs. For their labels, they are mandated to develop labels that are in accordance to FPA Guidelines. Pesticide Industries have the knowledge and capacity to prepare MSDS and labels as well as to classify chemicals and mixtures following the FPA Guidelines. The hazard classification has been communicated in the context of risk arising from the use of agricultural chemicals. The FPA had facilitated the effective hazard communication by the institutionalization of the Product Stewardship Program. This program requires that for each pesticide product, the registrant is made primarily responsible for the conduct for its product stewardship program. The pesticide stakeholders implement the product stewardship activities such as farmers/dealers training on product safe use. Part of the training includes hazard communication. a. Prices The table below represents the available dealer prices from 2008 to October 2011
17 of the more
commonly used pesticides in the country, classified accordingly as fungicide, insecticide, weedicide, molluscide and rodenticide. The information enumerated is that of the commercially known and available brands of pesticides.
17
Data for November and December 2011 are still unavailable.
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Pesticide: Dealers' Prices by Geolocation, Farm Chemical Form, Farm Chemical, Period and Year
Annual Annual Annual October
2008 2009 2010 2011
PHILIPPINES Liquid Actara (F) .. 1660 450 ..
Agrozeb (F) .. 383 460 ..
Amure; Armure (F) 1960 1333.42 1702.92 2000
Antracol (F) 551.7 493.28 544.6 502
Anvil (F) 640 729.09 765.17 717.5
Applaud (F) 1558.33 1526.26 1558.33 1558.33
Benlate (F) 514.56 465.62 .. ..
Captan;Capton;Capitan (F) 330 460 378.89 ..
Champion (F) 646.25 693.45 760 430
Crown (F) .. .. .. ..
Cupravit (F) .. .. .. ..
Curzate (F) 860.75 .. .. ..
Daconil (F) 699.44 1034.55 911.48 ..
Detonate 40 SP (F) .. .. .. ..
Diafuran (F) .. .. .. ..
Dithane;Dithane M-45 (F) 393.17 402.36 460.75 380
Fungitox (F) 1210 .. 778.33 550
Funguran; Funguran-OH (F) 640.83 704.72 677.95 715
Hinosan (F) 721.82 804.58 862.5 810
Hopkill (F) .. .. .. ..
Kocide; Hocide (F) 692.95 766.46 712.99 670
Kumulus (F) .. 225 .. ..
Manager (F) .. .. .. ..
Mancozeb (F) .. 380 380 350
Maneb (F) 311.6 312 277.5 550
Manzate (F) 511.2 556.53 576.12 440
Manzeb (F) 300 394.55 459.09 450
Melody Duo (F) .. 552 .. ..
Microthiol DF (F) .. .. .. ..
Monet (F) .. .. .. ..
Nordox (F) .. 500 500 ..
Opevicur (F) .. .. .. ..
Padan (F) .. 665 1062.5 ..
Premium (F) .. .. .. ..
Procure (F) .. .. .. ..
Rebin (F) .. .. .. ..
Redeem (F) 335 442.5 419.46 425
Ridomil (F) 546 1150 .. ..
Saprol (F) 384 760 1000 ..
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Savior (F) .. .. .. ..
Score (F) 2484.32 1785.86 1606.66 ..
Selicon (F) .. .. .. ..
Seven Powder (F) 822.5 1172.5 1230 ..
Shotgun (F) .. .. .. ..
Stinger (F) 487.5 484 490.85 457.5
Topsin M (F) .. 1080 .. ..
Tranzeb (F) .. .. 377.5 ..
Vitigran Blue (F) 810 .. 582.5 ..
Vondozeb (F) .. 882.72 356.95 500
Wonder (F) 367.5 415.77 382.76 360
Adder (I) 329.09 316.14 293 300
Admire (I) .. .. .. ..
Agriaden (I) .. .. .. ..
Agrisaver (I) .. .. .. ..
Allitte (I) .. .. .. ..
Arrow (I) 507.81 477.77 436.81 436.5
Ascend (I) 1182.6 1239.82 1329.17 1420
Attack (I) 470.83 428.38 378.1 375
Basudin (I) 515.09 503.18 461.53 ..
Baycarb (I) .. .. .. ..
Bayfolan (I) 344.94 277.93 301.43 ..
Baythroid (I) 1275.2 1295.83 1186.44 1200
Berdugo (I) .. 391.67 411.67 ..
Bida (I) 603.54 651.6 652.22 721
Bloomate (I) .. .. .. ..
Boxer (I) 338.75 320.68 324.38 300
Brodan (I) 445.83 469.17 456.67 450
Bugbuster (I) 443.36 479.13 463.97 380
Bulldock (I) 660.18 665.47 655.35 680
Bullet (I) 429.91 489.53 516.69 518
Bull's Eye (I) 417.5 430.31 389.17 380
Bushwack (I) 371.67 371.67 350.83 350
Capture (I) .. .. .. ..
Cartap (I) 542.08 710 .. ..
Carvil (I) .. .. 350 ..
Check (I) 387.89 390 390 ..
Chess (I) 590 690 445 ..
Chix (I) 581.67 583.33 577.5 580
Chlorpyrifos (I) .. .. 350 ..
Click; klik (I) 502.5 .. .. ..
Combat (I) 442.5 457.67 454.17 480
Confidor SL 100 (I) 7851.67 8380 8380 ..
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Corsair (I) .. .. .. ..
CPM (I) 354.2 326.67 344.57 300
Cyclone (I) 477 455.2 380 ..
Cygrex (I) .. .. .. ..
Cymbush (I) 400.83 354.17 404.17 380
Cypermethrin (I) 317.5 320 332.5 350
Cypex (I) 361.74 343 368.75 390
Decide (I) 395 .. .. ..
Decis 2.5 (I) 1214.8 1108.33 1107.64 1100
Decis R; Decis 100 (I) 545.83 566.67 539.17 600
Diacarb (I) 357.5 450 430 ..
Diamond (I) 1175 .. .. ..
Diazol 40 (I) 630 .. .. ..
Dimotrin (I) .. .. .. ..
Eltra (I) .. .. .. ..
Etropolan (I) .. 580 613.75 ..
Fenom D; Phenom D (I) 669.82 700.74 735.66 650
Flash (I) 452.64 429.17 663.03 320
Furadan (I) 380 305.87 788.83 965
General (I) 937.03 898.08 904.58 965
Goal (I) 2200 .. 2200 2200
Gusathion (I) .. .. .. ..
Hammer (I) 380 .. .. ..
Hercules (I) 725.59 804.47 779.74 750
Hi-per (I) 488.33 462.5 542.5 460
Hoestick (I) 494.24 515.97 498.56 499
Hopcin (I) 535 563.65 560 600
Hostathion (I) 720.49 702.31 704.38 625
Hytox (I) 225 .. 240 ..
Karate (I) 977.5 938.33 909.17 900
King (I) 401.19 437.27 435.76 400
Knock-out (I) 380.83 407.79 412.03 460
Kris (I) 1087.5 1083 1087.92 810
Lakas (I) 322.01 303.75 291.06 ..
Lannate (I) 769.18 682.66 1158.59 630
Larvin (I) 511.43 652.78 1255 ..
Leadmark (I) .. .. 547.5 ..
Lebaycid (I) 914.29 891.43 924.61 790
Lorsban (I) 505 520.83 526.67 600
Magic (I) .. .. .. ..
Magnum (I) 410.83 434.17 380 350
Malathion (I) 345 311.67 305 280
Marshal (I) 800 786.67 775 ..
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Master (I) 1036.88 674.79 .. ..
Matador (I) 1158.64 1324.79 1182.08 1150
Maton (I) 564 .. .. ..
Mepcin (I) 601.82 700.83 704.38 780
Mimic (I) 840 830 830 830
Model (I) 357.5 407.14 391.67 ..
Mustang (I) .. .. .. ..
Nurelle (I) 652.08 701.67 691.67 750
Nuvacron (I) .. .. .. ..
Parapest (I) 366.67 445.83 459.58 480
Pennant (I) 688.58 719.85 724.73 740.14
Plus (I) .. 180 .. ..
Predator (I) .. .. 635 ..
Provado-sudra (I) 1790 1772 1790 ..
Punis-X (I) .. .. .. ..
Rador (I) 670 523.18 460.8 ..
Regent (I) .. .. 570 ..
Ripcord (I) .. 580 598.12 ..
Selecron; Selectron (I) 1139.56 1175.48 1200 1200
Sevin (I) 688.5 804.65 771.19 ..
Sherpa (I) 452.45 414.06 477.21 391.2
Siga (I) 430.86 427.25 406.56 516.25
Smash (I) 523.91 476.25 500.62 400
Sniper (I) 340.24 334.58 357.18 308.33
Solnet (I) .. 350 357.5 ..
Sonic (I) .. .. .. ..
Sumialpha (I) .. .. .. ..
Sumicidin (I) 561.88 548.33 586.57 541.67
Super M (I) 572.92 606.25 600 600
Super Quick (I) .. .. .. ..
Supremo (I) 672.56 520.97 506.08 490
Swat (I) .. 305.83 319.52 ..
Tamaron (I) 1071.67 1161.87 1181.67 1200
Tenant (I) .. 700 .. ..
Terminator (I) 688.57 .. .. ..
Todas (I) .. .. .. ..
Trebon (I) 717.08 718.33 715.83 690
Triplex; Triple 50 EC (I) .. .. .. ..
T.K.O. 50 EC (I) 642.5 403.75 392.5 ..
Vertex (I) 2231.06 .. .. ..
Vexter (I) 492.8 492.6 567 480
Vindex Plus; Vendix (I) 550 609.17 607.5 600
Viper (I) .. 250 .. ..
112
Warrior (I) 454.57 475.04 478.38 450
Winner; Win (I) 430.61 405.14 403.86 560
Wokosim (I) .. 820 816.67 ..
Zinc Metalate (I) 530 305 320 330
Zorgen WP 85 (I) .. .. .. ..
Aquatin; Aquadine (M) .. .. .. ..
Bayluscide (M) 995.83 1032.5 1037.5 1200
Bayonet (M) 207 209 323.33 230
Control (M) .. .. .. ..
Ethrel (M) .. .. .. ..
Flip (M) .. .. .. ..
Hit (M) 895 950 818.07 795
Kuzak (M) 964.32 976.59 987 ..
Maso (M) .. .. .. 950
Metabait (M) .. .. .. 350
Moluxide (M) 930 975 980 ..
Niclus M (M) .. .. .. ..
Parakuhol (M) 1269.38 892.14 900.65 890
Porsnail (M) 853.97 863 837.18 870
Snail Kill (M) .. 240 1140 257.5
Snail Tox (M) .. .. .. ..
Speed (M) 1104.48 958.89 944.42 950
Stop (M) .. .. .. ..
Surekill; Surekel (M) 1715.72 937.71 900.26 2428.57
Swipe (M) 880 .. .. ..
Trap (M) 921.11 .. .. ..
123 Powder (R) .. .. .. ..
1707 (R) .. .. .. ..
Racumin (R) .. 1016 .. ..
Rat Kill (R) .. .. .. ..
Ratoxin (R) .. .. .. ..
Snip (R) .. .. .. ..
Zinc Phosphate (R) .. .. .. ..
Zinc Phosphide (R) .. .. .. ..
2-4-D (W) 303.33 324.17 299.17 350
9121 (W) .. .. .. ..
Ace (W) 498.33 481.11 490.83 ..
Activo (W) 6000 .. .. ..
Advance (W) 547.5 584.17 589.17 600
Advice (W) 499.17 492.81 496.5 ..
Afalon (W) .. .. .. ..
Agrowell (W) .. .. .. ..
Agroxone (W) 301.67 312.5 328.17 300
113
Almix (W) .. .. 410 ..
Atrazine (W) 360 345 .. ..
Basagran (W) 1035 1041.67 .. ..
Basta (W) 1273.12 800 770 790
Bavistin (W) .. .. .. ..
Blade (W) 520 .. .. 320
Blink (W) 742.13 749.17 756.67 756.67
Bolo (W) 505.7 800 450 ..
Burndown (W) .. .. .. ..
Clean Up (W) 398.89 385.68 358 375
Cleanfield (W) 546.82 540 524.44 475
Clear Out (W) 400.35 460.83 423.91 350
Clincher (W) 1245.83 1302.29 1332.58 1300
Compro (W) .. 500 500 ..
Direk (W) 672.92 743.08 755.11 700
Divron (W) 435.45 500 412.5 ..
Drago (W) .. .. 1470 ..
Ester 24 (W) 297.62 322.54 327.21 360
Gramoxone;Gramazone (W) 405.86 428.58 440.21 430
Grassedge (W) 567.14 531.75 540.28 540
Hedonal (W) 355.83 349.17 360.7 400
Herbadox (W) 370 501.7 583.33 550
Herbistar (W) 350 .. 474.29 380
Hero (W) 514.91 529.26 534.03 520
Karet 40 (W) .. .. .. ..
Karmex;Kormex (W) .. .. .. ..
Lambast (W) 529.68 513.58 513.18 505
Lespro (W) 1215.91 1181.25 .. ..
Lomenc (W) .. .. .. ..
Machete;Butachlor (W) 522.5 541.67 540.83 550
Nominee (W) 5374.74 4273.17 2906.75 5800
Onecide (W) 1344.81 1014.2 978.54 965
Paragrass (W) .. .. .. ..
Pillarxone (W) .. .. 430 ..
Pounce (W) .. 430.62 430 480
Power (W) 265 290 289.17 280
Ramoxol (W) .. 2100 .. ..
Rice Guard (W) 720.92 736.93 724.5 ..
Rice Star (W) 1644.39 1965.01 1962.74 2132
Rilof-H (W) 612.76 590.88 612.73 620
Ripit (W) .. .. .. ..
Rogue (W) 486.67 544.58 535 540
114
Ronstar (W) 752.08 729.3 730.42 710
Round-up (W) 553.33 500 465 450
Sharpshooter (W) 401.75 574.11 436.64 380
Slash (W) 397.54 529.07 483.29 528
Solfit; Sofit (W) 735 750 748.33 750
Sonic 600EC (W) 454.35 502.28 480.98 420
Sumithion (W) 744.01 779.17 886.38 892.5
Tornado (W) 495.94 504.55 509.58 500
Toro (W) .. .. .. 440
Twister (W) .. .. .. ..
Weedban (W) 260 392.5 .. ..
Weedkill (W) 352.3 378.12 364.58 403.33
Korthrine (I) .. .. 545 ..
Poker (I) .. .. 550 ..
Protek (I) 374.38 290 413.33 ..
Indosulfan (F) .. .. .. ..
Vitigran Blue (I) .. 1372 .. ..
Goal (W) .. 2200 .. ..
Rice Guard (W) .. 724.5 .. ..
Grass cutter (W) .. 545 540 ..
Redeem (F) .. 420 .. ..
Smash (I) .. 450 .. ..
Applaudl (F) .. 1558.33 .. ..
Thunder (W) .. 425 .. ..
Tornado (W) .. 510 .. ..
Herbistar (W) .. 350 .. ..
Melody Duo (F) .. .. .. ..
123 Powder (M) .. .. .. ..
Actara (M) .. .. .. ..
Perfecthin (I) .. .. 800 ..
U-kew (F) .. .. 350 ..
Arrivo (I) .. .. 585.62 ..
Butakill (W) .. .. 480 ..
Phylate (F) .. .. .. 545
Solid Actara (F) 13465.28 15675 11916.67 14700
Agrozeb (F) 299.84 338.33 343.33 350
Amure; Armure (F) 1435 1359.58 1703.81 ..
Antracol (F) 474.55 462.08 444.17 450
Anvil (F) .. .. .. ..
Applaud (F) 1098.2 1314.85 1302.51 1404
Benlate (F) 3646.25 3149.87 3348.89 2900
Captan;Capton;Capitan (F) 369.55 414.88 419.98 445
Champion (F) 676.67 .. 611.67 740
115
Crown (F) .. .. .. ..
Cupravit (F) .. 410 .. ..
Curzate (F) 761.95 862 696.89 675
Daconil (F) 965.98 952.83 943.9 950
Detonate 40 SP (F) .. .. .. ..
Diafuran (F) .. .. 56.89 ..
Dithane;Dithane M-45 (F) 401.67 464.17 470 450
Fungitox (F) 917.88 893.89 740.62 962.5
Funguran; Funguran-OH (F) 551.67 634.58 607.92 650
Hinosan (F) 676.67 690 640 850
Hopkill (F) .. .. .. ..
Kocide; Hocide (F) 705.83 732.5 720 750
Kumulus (F) 297.61 287.01 255.56 247.5
Manager (F) 240.3 357.14 481.67 475
Mancozeb (F) 346.4 426.81 365.14 350
Maneb (F) 220 240.37 220.62 220
Manzate (F) 388.33 462.5 450.42 450
Manzeb (F) 267.41 343.44 366 350
Melody Duo (F) 724.67 721.78 727.5 ..
Microthiol DF (F) 310 .. 310 310
Monet (F) .. .. .. ..
Nordox (F) .. 600 558.6 657.5
Opevicur (F) .. .. .. ..
Padan (F) 1321.96 1416.74 1679.1 1635.83
Premium (F) .. .. .. ..
Procure (F) 1740 .. .. ..
Rebin (F) 344 .. .. ..
Redeem (F) 453.57 795.38 665 425
Ridomil (F) 1142.92 1157.29 1171.43 1200
Saprol (F) .. 1150 1150 ..
Savior (F) 350 .. .. ..
Score (F) 2560.8 440 1220 1240
Selicon (F) .. .. .. ..
Seven Powder (F) 1266.04 1187.08 1170.91 1160
Shotgun (F) .. 545.12 561 ..
Stinger (F) .. .. .. 460
Topsin M (F) 1139.5 1207.5 991.56 1100
Tranzeb (F) 330.69 359.62 380.79 360
Vitigran Blue (F) 529.35 660 630.13 629
Vondozeb (F) 412.33 498.5 559.03 ..
Wonder (F) 331.48 377.05 435.74 ..
Adder (I) .. .. .. ..
116
Admire (I) .. 1148 1155 ..
Agriaden (I) .. .. .. ..
Agrisaver (I) .. .. .. ..
Allitte (I) .. .. 1900 ..
Arrow (I) .. .. .. ..
Ascend (I) .. .. .. ..
Attack (I) .. .. .. ..
Basudin (I) .. .. .. ..
Baycarb (I) .. .. 1000 ..
Bayfolan (I) .. .. .. ..
Baythroid (I) 1300 .. .. ..
Berdugo (I) 2000 2000 1616.67 ..
Bida (I) .. .. .. ..
Bloomate (I) .. .. .. ..
Boxer (I) .. .. .. ..
Brodan (I) 663.33 .. .. ..
Bugbuster (I) .. .. .. ..
Bulldock (I) .. .. .. ..
Bullet (I) 451.67 445.17 446.25 460
Bull's Eye (I) .. .. .. ..
Bushwack (I) 388.33 .. 446 ..
Capture (I) .. .. .. ..
Cartap (I) 1089.77 993.65 986.67 1150
Carvil (I) 911.67 .. .. ..
Check (I) 4516.67 .. .. ..
Chess (I) 4716.6 4095.89 4554.69 462.5
Chix (I) .. .. .. ..
Chlorpyrifos (I) .. .. .. ..
Click; klik (I) .. .. .. ..
Combat (I) .. .. .. ..
Confidor SL 100 (I) .. .. .. ..
Corsair (I) .. .. .. ..
CPM (I) .. .. .. ..
Cyclone (I) .. .. .. ..
Cygrex (I) .. .. .. ..
Cymbush (I) .. .. 550 ..
Cypermethrin (I) .. .. .. ..
Cypex (I) .. .. .. ..
Decide (I) .. .. .. ..
Decis 2.5 (I) 1246.67 .. .. ..
Decis R; Decis 100 (I) 560 .. .. ..
Diacarb (I) 75 .. .. ..
Diamond (I) 1200 .. .. ..
117
Diazol 40 (I) .. .. .. ..
Dimotrin (I) .. .. .. ..
Eltra (I) .. .. .. ..
Etropolan (I) 560 580.21 590.42 580
Fenom D; Phenom D (I) .. .. .. ..
Flash (I) .. .. .. ..
Furadan (I) 120.07 124.27 239.5 84.96
General (I) .. .. .. ..
Goal (I) .. .. .. ..
Gusathion (I) .. .. .. ..
Hammer (I) .. .. .. ..
Hercules (I) .. .. .. ..
Hi-per (I) .. 2200 2233.33 ..
Hoestick (I) .. .. .. ..
Hopcin (I) .. .. .. ..
Hostathion (I) .. .. .. ..
Hytox (I) .. 492 565 ..
Karate (I) 964.16 .. 930 ..
King (I) .. .. .. ..
Knock-out (I) .. .. .. ..
Kris (I) .. .. .. ..
Lakas (I) .. .. .. ..
Lannate (I) 1362.73 .. 1488.57 1800
Larvin (I) .. .. .. ..
Leadmark (I) .. .. .. ..
Lebaycid (I) .. .. .. ..
Lorsban (I) .. .. .. ..
Magic (I) .. .. .. ..
Magnum (I) 747.5 .. .. ..
Malathion (I) 727 .. .. ..
Marshal (I) .. .. .. ..
Master (I) .. .. .. ..
Matador (I) .. .. .. ..
Maton (I) .. .. .. ..
Mepcin (I) 560 600.83 620.33 660
Mimic (I) .. .. .. ..
Model (I) .. .. .. ..
Mustang (I) .. .. .. ..
Nurelle (I) .. .. .. ..
Nuvacron (I) .. .. .. ..
Parapest (I) .. .. .. ..
Pennant (I) 720 720 700 ..
Plus (I) .. .. .. ..
118
Predator (I) .. .. .. ..
Provado-sudra (I) 480 .. .. ..
Punis-X (I) .. .. .. ..
Rador (I) 490 .. .. ..
Regent (I) .. .. .. ..
Ripcord (I) .. .. .. ..
Selecron; Selectron (I) 1000 .. .. ..
Sevin (I) 1010 883.33 837.5 800
Sherpa (I) .. .. .. ..
Siga (I) .. .. .. ..
Smash (I) .. .. 380 ..
Sniper (I) .. .. .. ..
Solnet (I) .. .. .. ..
Sonic (I) .. .. .. ..
Sumialpha (I) .. .. .. ..
Sumicidin (I) .. .. 535 ..
Super M (I) .. .. .. ..
Super Quick (I) .. .. .. ..
Supremo (I) .. .. .. ..
Swat (I) .. .. .. ..
Tamaron (I) .. .. .. ..
Tenant (I) .. .. .. ..
Terminator (I) .. .. .. ..
Todas (I) .. .. .. ..
Trebon (I) .. .. .. ..
Triplex; Triple 50 EC (I) .. .. .. ..
T.K.O. 50 EC (I) .. .. .. ..
Vertex (I) .. .. .. ..
Vexter (I) .. .. .. ..
Vindex Plus; Vendix (I) .. .. .. ..
Viper (I) .. .. .. ..
Warrior (I) .. .. .. ..
Winner; Win (I) .. .. .. ..
Wokosim (I) .. .. 850 ..
Zinc Metalate (I) .. .. .. ..
Zorgen WP 85 (I) .. .. .. ..
Aquatin; Aquadine (M) 250 .. .. ..
Bayluscide (M) 993.44 1011.04 1053.12 800
Bayonet (M) 229.41 237.92 297.78 230
Control (M) 2393.67 845 2285.71 ..
Ethrel (M) .. .. .. ..
Flip (M) .. .. .. ..
Hit (M) 859.4 1063.1 800 2000
119
Kuzak (M) 1465 990 995 ..
Maso (M) 2356.43 1829.29 1744.42 2571.43
Metabait (M) 300.68 323.5 312.5 300
Moluxide (M) 1881.43 2285.71 700 ..
Niclus M (M) .. 900 .. ..
Parakuhol (M) 1092.59 1153.55 1186.22 900
Porsnail (M) 901.67 942.5 993.75 1000
Snail Kill (M) 266.15 243.62 547.63 260
Snail Tox (M) .. .. .. ..
Speed (M) 1463.11 1057.36 1315.57 ..
Stop (M) 359.17 225 240 ..
Surekill; Surekel (M) 1649.06 1762.13 1205.3 850
Swipe (M) .. 2485.71 .. ..
Trap (M) 1542.62 998.75 917.08 800
123 Powder (R) 442.73 704.44 478.57 480
1707 (R) .. .. .. ..
Racumin (R) 1345.25 1257 1259.5 900
Rat Kill (R) 1568.75 2000 2000 ..
Ratoxin (R) 1800 .. 1200 ..
Snip (R) .. .. .. ..
Zinc Phosphate (R) 1907.14 732 1933.33 2500
Zinc Phosphide (R) 2389.92 1950.7 2125 2000
2-4-D (W) 395.25 489 384.67 ..
9121 (W) .. .. .. ..
Ace (W) .. 400 .. ..
Activo (W) .. .. .. ..
Advance (W) .. 565 .. ..
Advice (W) .. .. .. ..
Afalon (W) .. .. .. ..
Agrowell (W) .. .. .. ..
Agroxone (W) .. .. .. ..
Almix (W) 10685.79 12214.35 11291.67 11333.33
Atrazine (W) 651.86 366.88 500 ..
Basagran (W) .. .. .. ..
Basta (W) .. .. .. ..
Bavistin (W) .. .. .. ..
Blade (W) .. .. .. ..
Blink (W) .. .. .. ..
Bolo (W) .. .. .. ..
Burndown (W) .. .. .. ..
Clean Up (W) .. .. .. ..
Cleanfield (W) .. .. .. ..
Clear Out (W) .. .. .. ..
120
Clincher (W) .. .. .. ..
Compro (W) .. .. .. ..
Direk (W) .. .. .. ..
Divron (W) 450 482.5 .. ..
Drago (W) .. .. .. ..
Ester 24 (W) .. .. .. ..
Gramoxone;Gramazone (W) .. .. .. ..
Grassedge (W) .. .. .. ..
Hedonal (W) .. .. .. ..
Herbadox (W) 1240 .. .. ..
Herbistar (W) .. .. .. ..
Hero (W) .. .. .. ..
Karet 40 (W) .. .. .. ..
Karmex;Kormex (W) .. 677.78 .. ..
Lambast (W) .. .. .. ..
Lespro (W) .. .. .. ..
Lomenc (W) .. .. .. ..
Machete;Butachlor (W) 352.5 492.25 511 ..
Nominee (W) .. 6000 .. ..
Onecide (W) .. .. .. ..
Paragrass (W) .. .. .. ..
Pillarxone (W) .. .. .. ..
Pounce (W) .. .. .. ..
Power (W) 267.5 268 290 ..
Ramoxol (W) .. .. .. ..
Rice Guard (W) .. .. .. ..
Rice Star (W) .. .. .. ..
Rilof-H (W) .. .. .. ..
Ripit (W) .. .. .. ..
Rogue (W) 493.33 513 .. ..
Ronstar (W) .. .. .. ..
Round-up (W) .. .. .. ..
Sharpshooter (W) .. .. .. ..
Slash (W) .. .. 394 ..
Solfit; Sofit (W) .. .. 808.33 ..
Sonic 600EC (W) .. .. .. ..
Sumithion (W) .. .. .. ..
Tornado (W) .. .. .. ..
Toro (W) .. .. .. ..
Twister (W) .. .. .. ..
Weedban (W) .. .. .. ..
Weedkill (W) 344.75 335 325 ..
121
Korthrine (I) .. .. .. ..
Poker (I) .. .. .. ..
Protek (I) .. .. 944 750
Indosulfan (F) .. 278 .. ..
Vitigran Blue (I) .. 572.72 .. ..
Goal (W) .. .. .. ..
Rice Guard (W) .. .. .. ..
Grass cutter (W) .. .. .. ..
Redeem (F) .. 900 .. ..
Smash (I) .. .. .. ..
Applaudl (F) .. 1404 .. ..
Thunder (W) .. .. .. ..
Tornado (W) .. .. .. ..
Herbistar (W) .. .. .. ..
Melody Duo (F) .. 720 .. ..
123 Powder (M) .. 540 .. ..
Actara (M) .. 17800 .. ..
Perfecthin (I) .. .. .. ..
U-kew (F) .. .. .. ..
Arrivo (I) .. .. .. ..
Butakill (W) .. .. .. ..
Phylate (F) .. .. .. ..
.. Data not available
... Data not yet available October 2011 Preliminary F-fungicide I-insecticide M-molluscicide R-rodenticide
W-weedicide
Latest update: 2012-01-13 15:00 Source: Bureau of Agricultural Statistics Copyright: Yes Contact: Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit:liquid in pesos per liter and solid in pesos per kilogram
The next table shows the dealers’ prices of the most commonly used fertilizer grades from 2007 to 2011. There is significant increase in the prices during the last five years.
122
Fertilizers: Dealers' Prices by Geolocation, Fertilizer Grade, Period and Year
December
2007 2008 2009 2010 2011
PHILIPPINES
Ammophos (16-20-0) 837.56 1,624.11 975.70 972.30 1,113.97
Ammosul (21-0-0) 577.34 901.64 521.01 559.98 752.96
Complete (14-14-14) 865.80 1,709.50 1,105.42 1,082.10 1,266.63
Urea (45-0-0) 968.42 1,523.25 956.05 1,014.93 1,339.59
.. Data not available ... Data not yet available November 2011 Preliminary Data based on BAS Weekly Cereals and Fertilizer Price Monitoring (WCFPM) covering 5 dealer-respondents per province Latest update: 2011-12-16 14:00 Source: Bureau of Agricultural Statistics Contact: Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit: pesos per sack of 50 kilograms
The dealers’ prices of pesticides by farm chemical and chemical form are listed in the table below, from 2008 to October 2011, accordingly classified as fungicide, insecticide, molluscide, weedicide and rodenticide.
Pesticide: Dealers' Prices by Region and by Province
Annual Annual Annual October Farm Chemical Form Farm Chemical 2008 2009 2010 2011
Liquid Actara (F) .. 1660 450 ..
Liquid Agrozeb (F) .. 383 460 ..
Liquid Amure; Armure (F) 1960 1333.42 1702.92 2000
Liquid Antracol (F) 551.7 493.28 544.6 502
Liquid Anvil (F) 640 729.09 765.17 717.5
Liquid Applaud (F) 1558.33 1526.26 1558.33 1558.33
Liquid Benlate (F) 514.56 465.62 .. ..
Liquid Captan;Capton;Capitan (F) 330 460 378.89 ..
Liquid Champion (F) 646.25 693.45 760 430
Liquid Crown (F) .. .. .. ..
Liquid Cupravit (F) .. .. .. ..
Liquid Curzate (F) 860.75 .. .. ..
Liquid Daconil (F) 699.44 1034.55 911.48 ..
Liquid Detonate 40 SP (F) .. .. .. ..
Liquid Diafuran (F) .. .. .. ..
Liquid Dithane;Dithane M-45 (F) 393.17 402.36 460.75 380
Liquid Fungitox (F) 1210 .. 778.33 550
Liquid Funguran; Funguran-OH (F) 640.83 704.72 677.95 715
Liquid Hinosan (F) 721.82 804.58 862.5 810
Liquid Hopkill (F) .. .. .. ..
Liquid Kocide; Hocide (F) 692.95 766.46 712.99 670
Liquid Kumulus (F) .. 225 .. ..
Liquid Manager (F) .. .. .. ..
Liquid Mancozeb (F) .. 380 380 350
Liquid Maneb (F) 311.6 312 277.5 550
Liquid Manzate (F) 511.2 556.53 576.12 440
Liquid Manzeb (F) 300 394.55 459.09 450
Liquid Melody Duo (F) .. 552 .. ..
Liquid Microthiol DF (F) .. .. .. ..
123
Liquid Monet (F) .. .. .. ..
Liquid Nordox (F) .. 500 500 ..
Liquid Opevicur (F) .. .. .. ..
Liquid Padan (F) .. 665 1062.5 ..
Liquid Premium (F) .. .. .. ..
Liquid Procure (F) .. .. .. ..
Liquid Rebin (F) .. .. .. ..
Liquid Redeem (F) 335 442.5 419.46 425
Liquid Ridomil (F) 546 1150 .. ..
Liquid Saprol (F) 384 760 1000 ..
Liquid Savior (F) .. .. .. ..
Liquid Score (F) 2484.32 1785.86 1606.66 ..
Liquid Selicon (F) .. .. .. ..
Liquid Seven Powder (F) 822.5 1172.5 1230 ..
Liquid Shotgun (F) .. .. .. ..
Liquid Stinger (F) 487.5 484 490.85 457.5
Liquid Topsin M (F) .. 1080 .. ..
Liquid Tranzeb (F) .. .. 377.5 ..
Liquid Vitigran Blue (F) 810 .. 582.5 ..
Liquid Vondozeb (F) .. 882.72 356.95 500
Liquid Wonder (F) 367.5 415.77 382.76 360
Liquid Adder (I) 329.09 316.14 293 300
Liquid Admire (I) .. .. .. ..
Liquid Agriaden (I) .. .. .. ..
Liquid Agrisaver (I) .. .. .. ..
Liquid Allitte (I) .. .. .. ..
Liquid Arrow (I) 507.81 477.77 436.81 436.5
Liquid Ascend (I) 1182.6 1239.82 1329.17 1420
Liquid Attack (I) 470.83 428.38 378.1 375
Liquid Basudin (I) 515.09 503.18 461.53 ..
Liquid Baycarb (I) .. .. .. ..
Liquid Bayfolan (I) 344.94 277.93 301.43 ..
Liquid Baythroid (I) 1275.2 1295.83 1186.44 1200
Liquid Berdugo (I) .. 391.67 411.67 ..
Liquid Bida (I) 603.54 651.6 652.22 721
Liquid Bloomate (I) .. .. .. ..
Liquid Boxer (I) 338.75 320.68 324.38 300
Liquid Brodan (I) 445.83 469.17 456.67 450
Liquid Bugbuster (I) 443.36 479.13 463.97 380
Liquid Bulldock (I) 660.18 665.47 655.35 680
Liquid Bullet (I) 429.91 489.53 516.69 518
Liquid Bull's Eye (I) 417.5 430.31 389.17 380
Liquid Bushwack (I) 371.67 371.67 350.83 350
Liquid Capture (I) .. .. .. ..
Liquid Cartap (I) 542.08 710 .. ..
Liquid Carvil (I) .. .. 350 ..
Liquid Check (I) 387.89 390 390 ..
Liquid Chess (I) 590 690 445 ..
Liquid Chix (I) 581.67 583.33 577.5 580
Liquid Chlorpyrifos (I) .. .. 350 ..
Liquid Click; klik (I) 502.5 .. .. ..
Liquid Combat (I) 442.5 457.67 454.17 480
Liquid Confidor SL 100 (I) 7851.67 8380 8380 ..
Liquid Corsair (I) .. .. .. ..
Liquid CPM (I) 354.2 326.67 344.57 300
Liquid Cyclone (I) 477 455.2 380 ..
Liquid Cygrex (I) .. .. .. ..
Liquid Cymbush (I) 400.83 354.17 404.17 380
Liquid Cypermethrin (I) 317.5 320 332.5 350
Liquid Cypex (I) 361.74 343 368.75 390
Liquid Decide (I) 395 .. .. ..
Liquid Decis 2.5 (I) 1214.8 1108.33 1107.64 1100
Liquid Decis R; Decis 100 (I) 545.83 566.67 539.17 600
Liquid Diacarb (I) 357.5 450 430 ..
124
Liquid Diamond (I) 1175 .. .. ..
Liquid Diazol 40 (I) 630 .. .. ..
Liquid Dimotrin (I) .. .. .. ..
Liquid Eltra (I) .. .. .. ..
Liquid Etropolan (I) .. 580 613.75 ..
Liquid Fenom D; Phenom D (I) 669.82 700.74 735.66 650
Liquid Flash (I) 452.64 429.17 663.03 320
Liquid Furadan (I) 380 305.87 788.83 965
Liquid General (I) 937.03 898.08 904.58 965
Liquid Goal (I) 2200 .. 2200 2200
Liquid Gusathion (I) .. .. .. ..
Liquid Hammer (I) 380 .. .. ..
Liquid Hercules (I) 725.59 804.47 779.74 750
Liquid Hi-per (I) 488.33 462.5 542.5 460
Liquid Hoestick (I) 494.24 515.97 498.56 499
Liquid Hopcin (I) 535 563.65 560 600
Liquid Hostathion (I) 720.49 702.31 704.38 625
Liquid Hytox (I) 225 .. 240 ..
Liquid Karate (I) 977.5 938.33 909.17 900
Liquid King (I) 401.19 437.27 435.76 400
Liquid Knock-out (I) 380.83 407.79 412.03 460
Liquid Kris (I) 1087.5 1083 1087.92 810
Liquid Lakas (I) 322.01 303.75 291.06 ..
Liquid Lannate (I) 769.18 682.66 1158.59 630
Liquid Larvin (I) 511.43 652.78 1255 ..
Liquid Leadmark (I) .. .. 547.5 ..
Liquid Lebaycid (I) 914.29 891.43 924.61 790
Liquid Lorsban (I) 505 520.83 526.67 600
Liquid Magic (I) .. .. .. ..
Liquid Magnum (I) 410.83 434.17 380 350
Liquid Malathion (I) 345 311.67 305 280
Liquid Marshal (I) 800 786.67 775 ..
Liquid Master (I) 1036.88 674.79 .. ..
Liquid Matador (I) 1158.64 1324.79 1182.08 1150
Liquid Maton (I) 564 .. .. ..
Liquid Mepcin (I) 601.82 700.83 704.38 780
Liquid Mimic (I) 840 830 830 830
Liquid Model (I) 357.5 407.14 391.67 ..
Liquid Mustang (I) .. .. .. ..
Liquid Nurelle (I) 652.08 701.67 691.67 750
Liquid Nuvacron (I) .. .. .. ..
Liquid Parapest (I) 366.67 445.83 459.58 480
Liquid Pennant (I) 688.58 719.85 724.73 740.14
Liquid Plus (I) .. 180 .. ..
Liquid Predator (I) .. .. 635 ..
Liquid Provado-sudra (I) 1790 1772 1790 ..
Liquid Punis-X (I) .. .. .. ..
Liquid Rador (I) 670 523.18 460.8 ..
Liquid Regent (I) .. .. 570 ..
Liquid Ripcord (I) .. 580 598.12 ..
Liquid Selecron; Selectron (I) 1139.56 1175.48 1200 1200
Liquid Sevin (I) 688.5 804.65 771.19 ..
Liquid Sherpa (I) 452.45 414.06 477.21 391.2
Liquid Siga (I) 430.86 427.25 406.56 516.25
Liquid Smash (I) 523.91 476.25 500.62 400
Liquid Sniper (I) 340.24 334.58 357.18 308.33
Liquid Solnet (I) .. 350 357.5 ..
Liquid Sonic (I) .. .. .. ..
Liquid Sumialpha (I) .. .. .. ..
Liquid Sumicidin (I) 561.88 548.33 586.57 541.67
Liquid Super M (I) 572.92 606.25 600 600
Liquid Super Quick (I) .. .. .. ..
Liquid Supremo (I) 672.56 520.97 506.08 490
Liquid Swat (I) .. 305.83 319.52 ..
125
Liquid Tamaron (I) 1071.67 1161.87 1181.67 1200
Liquid Tenant (I) .. 700 .. ..
Liquid Terminator (I) 688.57 .. .. ..
Liquid Todas (I) .. .. .. ..
Liquid Trebon (I) 717.08 718.33 715.83 690
Liquid Triplex; Triple 50 EC (I) .. .. .. ..
Liquid T.K.O. 50 EC (I) 642.5 403.75 392.5 ..
Liquid Vertex (I) 2231.06 .. .. ..
Liquid Vexter (I) 492.8 492.6 567 480
Liquid Vindex Plus; Vendix (I) 550 609.17 607.5 600
Liquid Viper (I) .. 250 .. ..
Liquid Warrior (I) 454.57 475.04 478.38 450
Liquid Winner; Win (I) 430.61 405.14 403.86 560
Liquid Wokosim (I) .. 820 816.67 ..
Liquid Zinc Metalate (I) 530 305 320 330
Liquid Zorgen WP 85 (I) .. .. .. ..
Liquid Aquatin; Aquadine (M) .. .. .. ..
Liquid Bayluscide (M) 995.83 1032.5 1037.5 1200
Liquid Bayonet (M) 207 209 323.33 230
Liquid Control (M) .. .. .. ..
Liquid Ethrel (M) .. .. .. ..
Liquid Flip (M) .. .. .. ..
Liquid Hit (M) 895 950 818.07 795
Liquid Kuzak (M) 964.32 976.59 987 ..
Liquid Maso (M) .. .. .. 950
Liquid Metabait (M) .. .. .. 350
Liquid Moluxide (M) 930 975 980 ..
Liquid Niclus M (M) .. .. .. ..
Liquid Parakuhol (M) 1269.38 892.14 900.65 890
Liquid Porsnail (M) 853.97 863 837.18 870
Liquid Snail Kill (M) .. 240 1140 257.5
Liquid Snail Tox (M) .. .. .. ..
Liquid Speed (M) 1104.48 958.89 944.42 950
Liquid Stop (M) .. .. .. ..
Liquid Surekill; Surekel (M) 1715.72 937.71 900.26 2428.57
Liquid Swipe (M) 880 .. .. ..
Liquid Trap (M) 921.11 .. .. ..
Liquid 123 Powder (R) .. .. .. ..
Liquid 1707 (R) .. .. .. ..
Liquid Racumin (R) .. 1016 .. ..
Liquid Rat Kill (R) .. .. .. ..
Liquid Ratoxin (R) .. .. .. ..
Liquid Snip (R) .. .. .. ..
Liquid Zinc Phosphate (R) .. .. .. ..
Liquid Zinc Phosphide (R) .. .. .. ..
Liquid 2-4-D (W) 303.33 324.17 299.17 350
Liquid 9121 (W) .. .. .. ..
Liquid Ace (W) 498.33 481.11 490.83 ..
Liquid Activo (W) 6000 .. .. ..
Liquid Advance (W) 547.5 584.17 589.17 600
Liquid Advice (W) 499.17 492.81 496.5 ..
Liquid Afalon (W) .. .. .. ..
Liquid Agrowell (W) .. .. .. ..
Liquid Agroxone (W) 301.67 312.5 328.17 300
Liquid Almix (W) .. .. 410 ..
Liquid Atrazine (W) 360 345 .. ..
Liquid Basagran (W) 1035 1041.67 .. ..
Liquid Basta (W) 1273.12 800 770 790
Liquid Bavistin (W) .. .. .. ..
Liquid Blade (W) 520 .. .. 320
Liquid Blink (W) 742.13 749.17 756.67 756.67
Liquid Bolo (W) 505.7 800 450 ..
Liquid Burndown (W) .. .. .. ..
Liquid Clean Up (W) 398.89 385.68 358 375
126
Liquid Cleanfield (W) 546.82 540 524.44 475
Liquid Clear Out (W) 400.35 460.83 423.91 350
Liquid Clincher (W) 1245.83 1302.29 1332.58 1300
Liquid Compro (W) .. 500 500 ..
Liquid Direk (W) 672.92 743.08 755.11 700
Liquid Divron (W) 435.45 500 412.5 ..
Liquid Drago (W) .. .. 1470 ..
Liquid Ester 24 (W) 297.62 322.54 327.21 360
Liquid Gramoxone;Gramazone (W) 405.86 428.58 440.21 430
Liquid Grassedge (W) 567.14 531.75 540.28 540
Liquid Hedonal (W) 355.83 349.17 360.7 400
Liquid Herbadox (W) 370 501.7 583.33 550
Liquid Herbistar (W) 350 .. 474.29 380
Liquid Hero (W) 514.91 529.26 534.03 520
Liquid Karet 40 (W) .. .. .. ..
Liquid Karmex;Kormex (W) .. .. .. ..
Liquid Lambast (W) 529.68 513.58 513.18 505
Liquid Lespro (W) 1215.91 1181.25 .. ..
Liquid Lomenc (W) .. .. .. ..
Liquid Machete;Butachlor (W) 522.5 541.67 540.83 550
Liquid Nominee (W) 5374.74 4273.17 2906.75 5800
Liquid Onecide (W) 1344.81 1014.2 978.54 965
Liquid Paragrass (W) .. .. .. ..
Liquid Pillarxone (W) .. .. 430 ..
Liquid Pounce (W) .. 430.62 430 480
Liquid Power (W) 265 290 289.17 280
Liquid Ramoxol (W) .. 2100 .. ..
Liquid Rice Guard (W) 720.92 736.93 724.5 ..
Liquid Rice Star (W) 1644.39 1965.01 1962.74 2132
Liquid Rilof-H (W) 612.76 590.88 612.73 620
Liquid Ripit (W) .. .. .. ..
Liquid Rogue (W) 486.67 544.58 535 540
Liquid Ronstar (W) 752.08 729.3 730.42 710
Liquid Round-up (W) 553.33 500 465 450
Liquid Sharpshooter (W) 401.75 574.11 436.64 380
Liquid Slash (W) 397.54 529.07 483.29 528
Liquid Solfit; Sofit (W) 735 750 748.33 750
Liquid Sonic 600EC (W) 454.35 502.28 480.98 420
Liquid Sumithion (W) 744.01 779.17 886.38 892.5
Liquid Tornado (W) 495.94 504.55 509.58 500
Liquid Toro (W) .. .. .. 440
Liquid Twister (W) .. .. .. ..
Liquid Weedban (W) 260 392.5 .. ..
Liquid Weedkill (W) 352.3 378.12 364.58 403.33
Liquid Korthrine (I) .. .. 545 ..
Liquid Poker (I) .. .. 550 ..
Liquid Protek (I) 374.38 290 413.33 ..
Liquid Indosulfan (F) .. .. .. ..
Liquid Vitigran Blue (I) .. 1372 .. ..
Liquid Goal (W) .. 2200 .. ..
Liquid Rice Guard (W) .. 724.5 .. ..
Liquid Grass cutter (W) .. 545 540 ..
Liquid Redeem (F) .. 420 .. ..
Liquid Smash (I) .. 450 .. ..
Liquid Applaudl (F) .. 1558.33 .. ..
Liquid Thunder (W) .. 425 .. ..
Liquid Tornado (W) .. 510 .. ..
Liquid Herbistar (W) .. 350 .. ..
Liquid Melody Duo (F) .. .. .. ..
Liquid 123 Powder (M) .. .. .. ..
Liquid Actara (M) .. .. .. ..
Liquid Perfecthin (I) .. .. 800 ..
Liquid U-kew (F) .. .. 350 ..
Liquid Arrivo (I) .. .. 585.62 ..
127
Liquid Butakill (W) .. .. 480 ..
Liquid Phylate (F) .. .. .. 545
Solid Actara (F) 13465.28 15675 11916.67 14700
Solid Agrozeb (F) 299.84 338.33 343.33 350
Solid Amure; Armure (F) 1435 1359.58 1703.81 ..
Solid Antracol (F) 474.55 462.08 444.17 450
Solid Anvil (F) .. .. .. ..
Solid Applaud (F) 1098.2 1314.85 1302.51 1404
Solid Benlate (F) 3646.25 3149.87 3348.89 2900
Solid Captan;Capton;Capitan (F) 369.55 414.88 419.98 445
Solid Champion (F) 676.67 .. 611.67 740
Solid Crown (F) .. .. .. ..
Solid Cupravit (F) .. 410 .. ..
Solid Curzate (F) 761.95 862 696.89 675
Solid Daconil (F) 965.98 952.83 943.9 950
Solid Detonate 40 SP (F) .. .. .. ..
Solid Diafuran (F) .. .. 56.89 ..
Solid Dithane;Dithane M-45 (F) 401.67 464.17 470 450
Solid Fungitox (F) 917.88 893.89 740.62 962.5
Solid Funguran; Funguran-OH (F) 551.67 634.58 607.92 650
Solid Hinosan (F) 676.67 690 640 850
Solid Hopkill (F) .. .. .. ..
Solid Kocide; Hocide (F) 705.83 732.5 720 750
Solid Kumulus (F) 297.61 287.01 255.56 247.5
Solid Manager (F) 240.3 357.14 481.67 475
Solid Mancozeb (F) 346.4 426.81 365.14 350
Solid Maneb (F) 220 240.37 220.62 220
Solid Manzate (F) 388.33 462.5 450.42 450
Solid Manzeb (F) 267.41 343.44 366 350
Solid Melody Duo (F) 724.67 721.78 727.5 ..
Solid Microthiol DF (F) 310 .. 310 310
Solid Monet (F) .. .. .. ..
Solid Nordox (F) .. 600 558.6 657.5
Solid Opevicur (F) .. .. .. ..
Solid Padan (F) 1321.96 1416.74 1679.1 1635.83
Solid Premium (F) .. .. .. ..
Solid Procure (F) 1740 .. .. ..
Solid Rebin (F) 344 .. .. ..
Solid Redeem (F) 453.57 795.38 665 425
Solid Ridomil (F) 1142.92 1157.29 1171.43 1200
Solid Saprol (F) .. 1150 1150 ..
Solid Savior (F) 350 .. .. ..
Solid Score (F) 2560.8 440 1220 1240
Solid Selicon (F) .. .. .. ..
Solid Seven Powder (F) 1266.04 1187.08 1170.91 1160
Solid Shotgun (F) .. 545.12 561 ..
Solid Stinger (F) .. .. .. 460
Solid Topsin M (F) 1139.5 1207.5 991.56 1100
Solid Tranzeb (F) 330.69 359.62 380.79 360
Solid Vitigran Blue (F) 529.35 660 630.13 629
Solid Vondozeb (F) 412.33 498.5 559.03 ..
Solid Wonder (F) 331.48 377.05 435.74 ..
Solid Adder (I) .. .. .. ..
Solid Admire (I) .. 1148 1155 ..
Solid Agriaden (I) .. .. .. ..
Solid Agrisaver (I) .. .. .. ..
Solid Allitte (I) .. .. 1900 ..
Solid Arrow (I) .. .. .. ..
Solid Ascend (I) .. .. .. ..
Solid Attack (I) .. .. .. ..
Solid Basudin (I) .. .. .. ..
Solid Baycarb (I) .. .. 1000 ..
Solid Bayfolan (I) .. .. .. ..
Solid Baythroid (I) 1300 .. .. ..
128
Solid Berdugo (I) 2000 2000 1616.67 ..
Solid Bida (I) .. .. .. ..
Solid Bloomate (I) .. .. .. ..
Solid Boxer (I) .. .. .. ..
Solid Brodan (I) 663.33 .. .. ..
Solid Bugbuster (I) .. .. .. ..
Solid Bulldock (I) .. .. .. ..
Solid Bullet (I) 451.67 445.17 446.25 460
Solid Bull's Eye (I) .. .. .. ..
Solid Bushwack (I) 388.33 .. 446 ..
Solid Capture (I) .. .. .. ..
Solid Cartap (I) 1089.77 993.65 986.67 1150
Solid Carvil (I) 911.67 .. .. ..
Solid Check (I) 4516.67 .. .. ..
Solid Chess (I) 4716.6 4095.89 4554.69 462.5
Solid Chix (I) .. .. .. ..
Solid Chlorpyrifos (I) .. .. .. ..
Solid Click; klik (I) .. .. .. ..
Solid Combat (I) .. .. .. ..
Solid Confidor SL 100 (I) .. .. .. ..
Solid Corsair (I) .. .. .. ..
Solid CPM (I) .. .. .. ..
Solid Cyclone (I) .. .. .. ..
Solid Cygrex (I) .. .. .. ..
Solid Cymbush (I) .. .. 550 ..
Solid Cypermethrin (I) .. .. .. ..
Solid Cypex (I) .. .. .. ..
Solid Decide (I) .. .. .. ..
Solid Decis 2.5 (I) 1246.67 .. .. ..
Solid Decis R; Decis 100 (I) 560 .. .. ..
Solid Diacarb (I) 75 .. .. ..
Solid Diamond (I) 1200 .. .. ..
Solid Diazol 40 (I) .. .. .. ..
Solid Dimotrin (I) .. .. .. ..
Solid Eltra (I) .. .. .. ..
Solid Etropolan (I) 560 580.21 590.42 580
Solid Fenom D; Phenom D (I) .. .. .. ..
Solid Flash (I) .. .. .. ..
Solid Furadan (I) 120.07 124.27 239.5 84.96
Solid General (I) .. .. .. ..
Solid Goal (I) .. .. .. ..
Solid Gusathion (I) .. .. .. ..
Solid Hammer (I) .. .. .. ..
Solid Hercules (I) .. .. .. ..
Solid Hi-per (I) .. 2200 2233.33 ..
Solid Hoestick (I) .. .. .. ..
Solid Hopcin (I) .. .. .. ..
Solid Hostathion (I) .. .. .. ..
Solid Hytox (I) .. 492 565 ..
Solid Karate (I) 964.16 .. 930 ..
Solid King (I) .. .. .. ..
Solid Knock-out (I) .. .. .. ..
Solid Kris (I) .. .. .. ..
Solid Lakas (I) .. .. .. ..
Solid Lannate (I) 1362.73 .. 1488.57 1800
Solid Larvin (I) .. .. .. ..
Solid Leadmark (I) .. .. .. ..
Solid Lebaycid (I) .. .. .. ..
Solid Lorsban (I) .. .. .. ..
Solid Magic (I) .. .. .. ..
Solid Magnum (I) 747.5 .. .. ..
Solid Malathion (I) 727 .. .. ..
Solid Marshal (I) .. .. .. ..
Solid Master (I) .. .. .. ..
129
Solid Matador (I) .. .. .. ..
Solid Maton (I) .. .. .. ..
Solid Mepcin (I) 560 600.83 620.33 660
Solid Mimic (I) .. .. .. ..
Solid Model (I) .. .. .. ..
Solid Mustang (I) .. .. .. ..
Solid Nurelle (I) .. .. .. ..
Solid Nuvacron (I) .. .. .. ..
Solid Parapest (I) .. .. .. ..
Solid Pennant (I) 720 720 700 ..
Solid Plus (I) .. .. .. ..
Solid Predator (I) .. .. .. ..
Solid Provado-sudra (I) 480 .. .. ..
Solid Punis-X (I) .. .. .. ..
Solid Rador (I) 490 .. .. ..
Solid Regent (I) .. .. .. ..
Solid Ripcord (I) .. .. .. ..
Solid Selecron; Selectron (I) 1000 .. .. ..
Solid Sevin (I) 1010 883.33 837.5 800
Solid Sherpa (I) .. .. .. ..
Solid Siga (I) .. .. .. ..
Solid Smash (I) .. .. 380 ..
Solid Sniper (I) .. .. .. ..
Solid Solnet (I) .. .. .. ..
Solid Sonic (I) .. .. .. ..
Solid Sumialpha (I) .. .. .. ..
Solid Sumicidin (I) .. .. 535 ..
Solid Super M (I) .. .. .. ..
Solid Super Quick (I) .. .. .. ..
Solid Supremo (I) .. .. .. ..
Solid Swat (I) .. .. .. ..
Solid Tamaron (I) .. .. .. ..
Solid Tenant (I) .. .. .. ..
Solid Terminator (I) .. .. .. ..
Solid Todas (I) .. .. .. ..
Solid Trebon (I) .. .. .. ..
Solid Triplex; Triple 50 EC (I) .. .. .. ..
Solid T.K.O. 50 EC (I) .. .. .. ..
Solid Vertex (I) .. .. .. ..
Solid Vexter (I) .. .. .. ..
Solid Vindex Plus; Vendix (I) .. .. .. ..
Solid Viper (I) .. .. .. ..
Solid Warrior (I) .. .. .. ..
Solid Winner; Win (I) .. .. .. ..
Solid Wokosim (I) .. .. 850 ..
Solid Zinc Metalate (I) .. .. .. ..
Solid Zorgen WP 85 (I) .. .. .. ..
Solid Aquatin; Aquadine (M) 250 .. .. ..
Solid Bayluscide (M) 993.44 1011.04 1053.12 800
Solid Bayonet (M) 229.41 237.92 297.78 230
Solid Control (M) 2393.67 845 2285.71 ..
Solid Ethrel (M) .. .. .. ..
Solid Flip (M) .. .. .. ..
Solid Hit (M) 859.4 1063.1 800 2000
Solid Kuzak (M) 1465 990 995 ..
Solid Maso (M) 2356.43 1829.29 1744.42 2571.43
Solid Metabait (M) 300.68 323.5 312.5 300
Solid Moluxide (M) 1881.43 2285.71 700 ..
Solid Niclus M (M) .. 900 .. ..
Solid Parakuhol (M) 1092.59 1153.55 1186.22 900
Solid Porsnail (M) 901.67 942.5 993.75 1000
Solid Snail Kill (M) 266.15 243.62 547.63 260
Solid Snail Tox (M) .. .. .. ..
Solid Speed (M) 1463.11 1057.36 1315.57 ..
130
Solid Stop (M) 359.17 225 240 ..
Solid Surekill; Surekel (M) 1649.06 1762.13 1205.3 850
Solid Swipe (M) .. 2485.71 .. ..
Solid Trap (M) 1542.62 998.75 917.08 800
Solid 123 Powder (R) 442.73 704.44 478.57 480
Solid 1707 (R) .. .. .. ..
Solid Racumin (R) 1345.25 1257 1259.5 900
Solid Rat Kill (R) 1568.75 2000 2000 ..
Solid Ratoxin (R) 1800 .. 1200 ..
Solid Snip (R) .. .. .. ..
Solid Zinc Phosphate (R) 1907.14 732 1933.33 2500
Solid Zinc Phosphide (R) 2389.92 1950.7 2125 2000
Solid 2-4-D (W) 395.25 489 384.67 ..
Solid 9121 (W) .. .. .. ..
Solid Ace (W) .. 400 .. ..
Solid Activo (W) .. .. .. ..
Solid Advance (W) .. 565 .. ..
Solid Advice (W) .. .. .. ..
Solid Afalon (W) .. .. .. ..
Solid Agrowell (W) .. .. .. ..
Solid Agroxone (W) .. .. .. ..
Solid Almix (W) 10685.79 12214.35 11291.67 11333.33
Solid Atrazine (W) 651.86 366.88 500 ..
Solid Basagran (W) .. .. .. ..
Solid Basta (W) .. .. .. ..
Solid Bavistin (W) .. .. .. ..
Solid Blade (W) .. .. .. ..
Solid Blink (W) .. .. .. ..
Solid Bolo (W) .. .. .. ..
Solid Burndown (W) .. .. .. ..
Solid Clean Up (W) .. .. .. ..
Solid Cleanfield (W) .. .. .. ..
Solid Clear Out (W) .. .. .. ..
Solid Clincher (W) .. .. .. ..
Solid Compro (W) .. .. .. ..
Solid Direk (W) .. .. .. ..
Solid Divron (W) 450 482.5 .. ..
Solid Drago (W) .. .. .. ..
Solid Ester 24 (W) .. .. .. ..
Solid Gramoxone;Gramazone (W) .. .. .. ..
Solid Grassedge (W) .. .. .. ..
Solid Hedonal (W) .. .. .. ..
Solid Herbadox (W) 1240 .. .. ..
Solid Herbistar (W) .. .. .. ..
Solid Hero (W) .. .. .. ..
Solid Karet 40 (W) .. .. .. ..
Solid Karmex;Kormex (W) .. 677.78 .. ..
Solid Lambast (W) .. .. .. ..
Solid Lespro (W) .. .. .. ..
Solid Lomenc (W) .. .. .. ..
Solid Machete;Butachlor (W) 352.5 492.25 511 ..
Solid Nominee (W) .. 6000 .. ..
Solid Onecide (W) .. .. .. ..
Solid Paragrass (W) .. .. .. ..
Solid Pillarxone (W) .. .. .. ..
Solid Pounce (W) .. .. .. ..
Solid Power (W) 267.5 268 290 ..
Solid Ramoxol (W) .. .. .. ..
Solid Rice Guard (W) .. .. .. ..
Solid Rice Star (W) .. .. .. ..
Solid Rilof-H (W) .. .. .. ..
Solid Ripit (W) .. .. .. ..
Solid Rogue (W) 493.33 513 .. ..
Solid Ronstar (W) .. .. .. ..
131
Solid Round-up (W) .. .. .. ..
Solid Sharpshooter (W) .. .. .. ..
Solid Slash (W) .. .. 394 ..
Solid Solfit; Sofit (W) .. .. 808.33 ..
Solid Sonic 600EC (W) .. .. .. ..
Solid Sumithion (W) .. .. .. ..
Solid Tornado (W) .. .. .. ..
Solid Toro (W) .. .. .. ..
Solid Twister (W) .. .. .. ..
Solid Weedban (W) .. .. .. ..
Solid Weedkill (W) 344.75 335 325 ..
Solid Korthrine (I) .. .. .. ..
Solid Poker (I) .. .. .. ..
Solid Protek (I) .. .. 944 750
Solid Indosulfan (F) .. 278 .. ..
Solid Vitigran Blue (I) .. 572.72 .. ..
Solid Goal (W) .. .. .. ..
Solid Rice Guard (W) .. .. .. ..
Solid Grass cutter (W) .. .. .. ..
Solid Redeem (F) .. 900 .. ..
Solid Smash (I) .. .. .. ..
Solid Applaudl (F) .. 1404 .. ..
Solid Thunder (W) .. .. .. ..
Solid Tornado (W) .. .. .. ..
Solid Herbistar (W) .. .. .. ..
Solid Melody Duo (F) .. 720 .. ..
Solid 123 Powder (M) .. 540 .. ..
Solid Actara (M) .. 17800 .. ..
Solid Perfecthin (I) .. .. .. ..
Solid U-kew (F) .. .. .. ..
Solid Arrivo (I) .. .. .. ..
Solid Butakill (W) .. .. .. ..
Solid Phylate (F) .. .. .. .. .. Data not available ... Data not yet available October 2011 Preliminary F-fungicide I-insecticide M-molluscicide R-rodenticide W-weedicide Latest update: 2012-01-13 15:00 Source:Bureau of Agricultural Statistics Copyright:Yes Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit:liquid in pesos per liter and solid in pesos per kilogram
I. Foreign Trade
Importation of crude fertilizer and agricultural chemicals has been steadily increasing in C.I.F value terms from 2008 to 2010. However, importation of manufactured fertilizer decreased in 2008 to 2009 but increased back in 2010. There is no available data yet for 2011.
C.I.F. is an International Commercial Term (Incoterm) used in maritime transport referring to cost, insurance and freight, wherein the seller agrees to pay for the cost and freight to bring the goods
132
to the point of destination. In addition, the seller must procure and pay for the insurance of the said goods. Agricultural Imports: Quantity and Value by Commodity Group, Year and Quantity/Value
2008 2009 2010
Quantity C.I.F. Value Quantity C.I.F. Value Quantity C.I.F. Value
Crude Fertilizer 182,047,835 27,839,481 528,691,437 43,347,191 345,175,771 53,091,184
FERTILIZER MANUFACTURED
1,350,787,352 625,459,985 1,252,277,455 354,806,903 1,488,112,519 449,923,539
AGRICULTURAL CHEMICALS
270,546,103 284,346,087 293,122,348 285,345,688 221,361,448 302,051,066
TOTAL AGRICULTURAL IMPORTS
. 7,684,736,4
66 .
6,079,795,168
. 7,399,794,7
82
.. Data not available 2010-Preliminary data; All Quantities are in kilograms, except for: LIVE ANIMALS are in heads; ABACA in Bale (125 kilograms); Agricultural Machineries in pieces Latest update:Quantity2011-08-01 09:00 C.I.F. Value2011-08-01 09:00 Source:Bureau of Agricultural Statistics, and source of basic data-National Statistics Office Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Unit:Quantity: in kilograms, no. of heads, bale and pieces C.I.F. Value: in USD
Export of agricultural products from 2008 to 2010 had varying trends. Crude fertilizer export has been steadily decreasing from 2008 to 2010. On the other hand, export of Agricultural chemicals and manufactured fertilizer has been steadily increasing in F.O.B value terms from 2008 to 2010. There is no available data yet for 2011.
F.O.B. value refers to the Incoterm meaning free on board, wherein the seller will the one to load the goods on board the ship nominated by the buyer. The seller likewise must clear the goods for export. The buyer, on the other hand must instruct the seller regarding the details of the vessel and the port where the goods are to be loaded. This does not include air transport.
Agricultural Exports: Quantity and Value of by Commodity Group, Year and Quantity/Value
2008 2009 2010
Quantity F.O.B. Value Quantity F.O.B. Value Quantity F.O.B. Value Crude Fertilizer 1,106,380 855,851 938,816 628,876 986,873 506,005 FERTILIZER MANUFACTURED 213,460,147 55,814,663 324,962,378 92,500,649 384,532,119 120,319,927 AGRICULTURAL CHEMICALS 3,626,576 10,525,777 3,452,817 10,595,168 7,013,819 13,821,179 TOTAL AGRICULTURAL EXPORTS . 3,889,303,019 . 3,135,749,268 . 4,101,085,273
.. Data not available 2010-Preliminary data All Quantities are in kilograms except for LIVE ANIMALS are in heads ABACA in Bale (125 kilograms) Agricultural Machineries in pieces Latest update:Quantity: 2011-08-01 09:00 F.O.B. Value: 2011-08-01 09:00 Source:Bureau of Agricultural Statistics, and source of basic data-National Statistics Office Contact:Ermina V. Tepora
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Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Unit:Quantity: kilograms, no. of heads, bale and pieces F.O.B. Value: in USD
SWINE & POULTRY As of October 1, 2011, the country’s swine inventory was 12.1 million heads. This was 3.6% lower than October 1, 2010’s inventory of 12.6 million heads. Stocks in backyard farms (raisers with not more than 20 heads) went down by 6.16% while those in commercial farms increased by 1.86% against 2010 levels. About 66% of the swine population was raised in backyard farms of which there are between 200 and 300 located across the Philippines.
Swine Inventory by Farm Type, Philippines as of Oct 1, 2009 – 2011
2009 2010 2011
Total 13,768,188 12,627,496 12,174,385
Backyard 9,751,055 8,578,793 8,050,490
Commercial 4,017,133 4,048,703 4,123,895 .. Data not available Latest update: 2011-11-30 09:00 Source: Bureau of Agricultural Statistics Contact: Nenita T. Yanson Bureau of Agricultural Statistics 1184 Ben-Lor Bldg., Quezon Avenue, Quezon City Tel: +633321543 Fax: +633321543 Email: [email protected] Unit: heads
The hog industry recorded a 1.11% growth in 2010. Production increased from 1877.34 metric tons in 2010 to 1,898.16 metric tons in 2010. There is no existing data available yet for full year 2011 production.
13.8 12.6 12.2 9.8 8.6 8.1
4.0 4.0 4.1
2009 2010 2011
Total Backyard Commercial
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Volume of Swine Production, Philippines 2009 – 2010
However, based on January to June 2009 to 2011 figures. Hog production has been steadily increasing from 2009 to 2011. Hog Production Semester 1 2009 to 2011
2009 2010 2011
Hog
Semester 1 899.44 914.88 924.40
.. Data not available Latest update:2011-11-30 09:00 Source:Bureau of Agricultural Statistics Contact:Nenita T. Yanson Bureau of Agricultural Statistics 1184 Ben-Lor Bldg., Quezon Avenue Quezon City Tel: +633321543 Fax: +633321543 Email: [email protected]
The country’s total chicken population as of January 1, 2010 was 158.98 million birds, or merely 0.17% higher than last year’s headcount of 158.66 million birds. Broiler inventory dropped by 8.36% in 2010, while layer population posted an increase of 13.72%. Native chicken inventory was higher by 2.05%.
Chicken Inventory by Classification, Philippines as of January 1, 2009 – 2011P
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In 2010, total chicken production grew by 4.02%. The growth in chicken output was attributed to the increase in broiler production which contributed around 69% to the total chicken production. Chicken egg production went up by 5.12%. This increment came from commercial farms which contributed around 84.0% of the total egg output.
Growth Rates in Volume of Production, Philippines 2009 – 2010
Gross value of chicken and chicken egg production in 2010 at current prices grew by 4.39% and 7.16%, respectively. These gains were attributed to the increases in output and farm prices during the year. At constant prices, chicken and chicken egg production contributed around 14.33% to the annual gross output of agriculture in 2010 (PPA January – December 2010). There is no available data yet for full year 2011 production. On the other hand, based on a Jan to Jun 2009 to 2011, comparison, chicken and chicken egg production as been increasing. Chicken and Chicken Eggs Production (Semester 1 2009 to 2011)
2009 2010 2011
Semester 1
Chicken 645.63 660.30 685.36
Chicken Eggs 183.23 193.63 200.37
.. Data not available Latest update: 2011-11-30 09:00 Source:Bureau of Agricultural Statistics Contact:Nenita T. Yanson Bureau of Agricultural Statistics
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1184 Ben-Lor Bldg., Quezon Avenue Quezon City Tel: +633321543 Fax: +633321543 Email: [email protected] Unit:thousand metric tons
I. Domestic Supply and Consumption There is an increasing trend in the production of Hog and Poultry from 2008 to 2011 based on the data gathered from the Bureau of Agricultural Statistics. This is due to the increasing demand of the said commodities Livestock and Poultry: Volume of Production by Animal Type, Period and Year
2008 2009 2010 2011
Hog
Quarter 1 442.70 453.89 455.48 458.39
Quarter 2 434.25 445.55 459.40 466.01
Quarter 3 441.57 447.30 444.90 457.65
Quarter 4 537.22 529.60 538.38 ..
Annual 1,855.73 1,877.34 1,898.16 ..
Chicken
Quarter 1 312.54 326.18 332.09 344.60
Quarter 2 307.37 319.45 328.21 340.77
Quarter 3 310.98 314.72 330.25 347.90
Quarter 4 350.46 340.55 362.58 ..
Annual 1,281.34 1,300.90 1,353.13 ..
.. Data not available Latest update: 2011-11-30 09:00 Source:Bureau of Agricultural Statistics Contact:Nenita T. Yanson Bureau of Agricultural Statistics 1184 Ben-Lor Bldg., Quezon Avenue Quezon City Tel: +633321543 Fax: +633321543 Email: [email protected] Unit:thousand metric tons
II. Demand The table below represents the supply and utilization of pork from 2007 to 2009. There is no data available yet for 2010 and 2011 from the Bureau of Agricultural Statistics.
Livestock: Supply and Utilization Accounts by Commodity, Year and Item
SU Production
SU Imports
SU Gross Supply
UT Exports UT Processing UT Total Carcass Net Food Disposable
UT Carcass Per Capita kg/yr
Pork
2007 1,616,715 52,384 1,669,099 116 19,401 1,335,116 15.07
2008 1,605,807 83,014 1,688,821 0 19,270 1,345,624 14.88
2009 1,628,839 87,284 1,716,123 0 19,546 1,371,046 14.87
SU - Supply UT - Utilization b/ - Less than 1 metric ton Latest update: 2010-09-29 15:00
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Source: Bureau of Agricultural Statistics, and source of basic data: National Statistics Agricultural Accounts and Statistical Indicators Division Ben-lor Bldg., 1184 Quezon Avenue, Quezon City Unit: metric tons
The table below shows the shortage of supply of poultry (dressed chicken) from 2007 to 2010. Importation is needed to augment the discrepancy of supply during those years. There is no data available yet for 2011.
SU Production
SU Imports
SU Gross Supply
UT Exports
UT Total Net Food Disposable
UT Per Capita kg/yr
UT Per Capita gm/day
Dressed Chicken
2007 745,395 38,336 783,731 3,585 780,146 8.81 24.14
2008 812,324 43,758 856,082 3,267 852,815 9.43 25.84
2009 826,294 61,444 887,738 4,548 883,190 9.58 26.25
2010 867,023 98,004 965,027 5,505 959,522 10.21 27.97
SU - Supply UT - Utilization . - Category not applicable .. - Data not available b/ - Less than 1 metric ton Latest update: 2011-08-31 15:00 Source:Bureau of Agricultural Statistics, and source of basic data - National Statistics Office Contact:Ana M. Eusebio Agricultural Accounts and Statistical Indicators Division Bureau of Agricultural Statistics Ben-lor Bldg., 1184 Quezon Avenue, Quezon City Tel +6323723823 Fax +6323723823 Email: [email protected] Unit:metric tons
III. PRICES
On the average, all market levels posted price increases in 2010 compared with the 2009 data. Annual average farm gate price per kilogram of live hogs was up by 6.12 %. Annual average wholesale price per kilogram increased by 3.69 %, while annual average retail price per kilogram of pork in Metro Manila went up by 4.85 %. There is no available data yet for 2011. Annual Average Prices by Market Level, 2009 – 2010
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Farm gate prices of Hogs and Chicken have been steadily increasing from 2007 to 2010. These increments can be attributed to inflation, increasing oil prices, and continuous increase in the cost of raw materials for feeds and feed ingredients, among others. There is no available data yet for 2011. Agricultural Commodities: Farmgate Prices by Commodity and Year
2007 2008 2009 2010
..Hogs Upgraded for Slaughter 71.28 82.14 85.72 90.56
..Chicken Broiler, other breed (backyard) 80.63 79.38 89.69 94.64
..Chicken Broiler, other breed (commercial) 68.67 72.90 78.71 76.04
.. Data not available ... Data not yet available 2010 Final Latest update: 2011-05-12 11:23 Source:Bureau of Agricultural Statistics Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit:pesos per kilogram (or as indicated) * - pesos per piece
Parallel to the increase in farm gate prices is, of course, the increase in the retail prices since the farm gate prices command the retail prices of both swine and poultry in the commercial trade. There is no data available yet for 2011 in the Bureau of Agricultural Statistics.
Agricultural Commodities: Retail Prices by Commodity and Year
2007 2008 2009 2010
..Pork Lean Meat 139.32 156.21 163.54 173.87
..Pork Meat with bones 124.96 141.73 149.31 158.69
..Pork Pata (front) 103.58 117.80 125.32 134.10
..Chicken Fully Dressed (broiler) 112.55 121.64 128.15 129.46
..Chicken Broiler (live) 91.95 100.03 102.96 113.13
.. Data not available ... Data not yet available April and May 2010 - preliminary Latest update:2011-03-08 09:00 Source:Bureau of Agricultural Statistics Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit:pesos per kilogram (or as indicated) *- pesos per piece
III. Foreign Trade
Importation of food and live animals decreased from 2008 to 2009 but increased back in 2010 to C.I.F Value levels higher than 2008. There is no available data yet for 2011.
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Agricultural Imports: Quantity and Value by Commodity Group, Year and Quantity/Value
2008 2009 2010
Quantity C.I.F. Value Quantity C.I.F. Value Quantity C.I.F. Value FOOD AND LIVE ANIMALS 7,867,793,610 5,874,212,801 9,203,153,855 4,783,907,028 8,921,779,045
5,955,596,958
..Live Animals 507,766 13,071,862 831,421 14,824,167 669,713 17,091,532 ..Meat and Meat Preparations 258,163,263 301,685,610 259,900,947 268,389,581 380,772,481 381,711,880 ..Dairy Products and Bird's Eggs 262,373,578 730,626,707 292,680,699 479,763,119 326,562,032 743,876,816
.. Data not available 2010-Preliminary data; All Quantities are in kilograms, except for: LIVE ANIMALS are in heads; ABACA in Bale (125 kilograms); Agricultural Machineries in pieces Latest update:Quantity: 2011-08-01 09:00 C.I.F. Value: 2011-08-01 09:00 Source:Bureau of Agricultural Statistics, and source of basic data-National Statistics Office Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Unit:Quantity: in kilograms, no. of heads, bale and pieces C.I.F. Value: in USD
Live animal exports and Dairy Products and Bird’s eggs exports have decreased in quantity from 2008 to 2009. However, exports of these products increased in 2010. Live animal exports have been increasing consistently from 2008 to 2009. There is no 2011 data available from the Bureau of Agricultural Statistics.
Agricultural Exports: Quantity and Value of by Commodity Group, Year and Quantity/Value
2008 2009 2010
Quantity F.O.B. Value Quantity F.O.B. Value Quantity
F.O.B. Value
FOOD AND LIVE ANIMALS 4216116598 2340670575 3622161061 2062699993 3515967455 2161362343
..Live Animals 1572104 3757532 1032339 2710128 1200734 5015484
..Meat and Meat Preparations 6385482 25166929 8089919 31883786 10341742 39372319 ..Dairy Products and Bird's Eggs 38770773 165748507 27707925 99424147 34743193 142139310
.. Data not available 2010-Preliminary data All Quantities are in kilograms except for LIVE ANIMALS are in heads ABACA in Bale (125 kilograms) Agricultural Machineries in pieces Latest update:Quantity: 2011-08-01 09:00 F.O.B. Value: 2011-08-01 09:00 Source:Bureau of Agricultural Statistics, and source of basic data-National Statistics Office Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Unit:Quantity: kilograms, no. of heads, bale and pieces
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F.O.B. Value: in USD
CORN The January-June 2011 corn production is forecast at 3.30 million metric tons (“MT”). This is 36.8% above the 2010 level of 2.42 million MT. Area harvested may expand by 14.3%, from 967 thousand hectares in 2010 to 1.10 million hectares this year. Yield is, likewise, expected to improve by 19.7%.
Corn Production, Philippines January – June 2011 Forecast and 2009 – 2010 Estimates
IV. Domestic Supply and Consumption There is a gradual increase in corn production from 2007 to 2009, with a significant decrease in 2010. This could be attributed to several disastrous typhoons which hit the country in 2010. There is no 2011 data available yet from the Bureau of Agricultural Statistics. 2011 Figures may come in April 2012 assuming that the latest update for 2010 was April 25, 2011.
Corn: Volume of Production by Cereal Type, Period and Year
Annual
2007 2008 2009 2010
PHILIPPINES
White Corn 2,527,633 2,254,567 2,316,434 2,169,102
Yellow Corn 4,209,307 4,673,658 4,717,599 4,207,693
Corn 6,736,940 6,928,225 7,034,033 6,376,796 2010 data revised as of April 25,2011 Latest update:2011-08-16 09:00 Source:Bureau of Agricultural Statistics Contact:Minda C. Mangabat Bureau of Agricultural Statistics 1184 Ben-Lor Bldg., Quezon Avenue, Quezon City, Philippines Tel.: +6323712067 Fax: +6323712067 Email: [email protected] Unit:metric tons
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V. Demand
The country continues to import corn to prevent the undersupply of the commodity in the event of natural disasters which cause considerable damage to agricultural crops, since corn is one of the basic ingredients for livestock and poultry feeds. As you can see from the UT Exports and SU Imports column, we have been importing every year from 2007 to 2010 but have exported less than 2 thousand metric tons during that same period. There is no data available yet for 2011.
Corn
SU Beginning Stocks
SU Production SU Imports
SU Gross Supply UT Exports UT Seeds
2007 177 6737 152 7066 c/ 53
2008 173 6928 23 7124 2 53
2009 198 7034 303 7535 1 54
2010 254 6377 88 6719 c/ 50
UT Feeds and Waste
UT Processing
UT Ending Stocks
UT Total Net Food Disposable
UT Per Capita kg/yr
UT Per Capita gm/day
4379 899 173 1562 17.63 48.3
4503 924 198 1444 15.96 43.73
4572 938 254 1716 18.61 50.99
4145 851 153 1520 16.17 44.3 SU - Supply UT - Utilization c/ - Less than 1 thousand metric ton Latest update:2011-08-31 15:00 Source:Bureau of Agricultural Statistics, and source of basic data - National Statistics Office Contact:Ana M. Eusebio Agricultural Accounts and Statistical Indicators Division Bureau of Agricultural Statistics Ben-lor Bldg., 1184 Quezon Avenue, Quezon City Tel +6323723823 Fax +6323723823 Email: [email protected] Unit:thousand metric tons
VI. Prices All except Green corn, White experienced increase in prices from 2009 to 2010. Prices were nearly constant for all commodities from 2008 to 2009 except Green Corn Yellow which experienced a significant decrease. There is no data available yet for 2011. Agricultural Commodities: Farmgate Prices by Commodity and Year
2007 2008 2009 2010
..Corngrain [Maize] Yellow, matured 10.09 10.79 10.44 11.26
..Corngrain [Maize] White, matured 9.62 11.58 11.68 11.00
..Green Corn (Maize, green), White 11.07 11.15 10.91 11.63
..Green Corn (Maize, green), Yellow 29.86 33.20 23.46 27.27
.. Data not available ... Data not yet available 2010 Final Latest update:2011-05-12 11:23 Source:Bureau of Agricultural Statistics Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue
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Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit:pesos per kilogram (or as indicated) * - pesos per piece
Wholesale of both white and yellow corn grains and corn grits have surprisingly increased from 2007 to 2009 but decreased in 2010 (except for Corngrain Yellow). There is no data available yet for 2011.
Agricultural Commodities: Wholesale Prices by Commodity and Year
2007 2008 2009 2010
..Corngrain Yellow 11.44 13.14 13.84 14.41
..Corngrain White 11.88 13.71 16.24 15.05
..Corngrits Yellow 16.44 18.65 20.59 20.02
..Corngrits White 17.03 23.10 24.36 21.70
.. Data not available ... Data not yet available 2010 Preliminary Commodity ..Corngrain White includes glutinuous Latest update:2011-03-10 18:00 Source:Bureau of Agricultural Statistics Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit:pesos per kilogram (or as indicated), *- pesos per piece
There was an increase across the board for the retail prices of all commodities below from 2007 to 2009. Retail prices in 2010 retreated from 2009 figures but were still above 2008 retail prices. There is still no data available for 2011. Agricultural Commodities: Retail Prices by Commodity and Year
2007 2008 2009 2010
..Corngrain Yellow 15.79 18.18 19.90 19.26
..Corngrain White 15.31 17.19 21.21 19.55
..Corngrits Yellow 18.81 20.78 23.40 22.79
..Corngrits White 18.83 25.52 27.14 25.06
.. Data not available ... Data not yet available April and May 2010 - preliminary Latest update:2011-03-08 09:00 Source:Bureau of Agricultural Statistics Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Email: [email protected] Unit:pesos per kilogram (or as indicated) *- pesos per piece
VII. Production Data
Corn production had an upward trend from 2007 to 2009, and a very significant decrease in volume in 2010. There is still no data available for full year 2011.
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Corn: Volume of Production Per Year
2007 2008 2009 2010
Corn 6,736,940 6,928,225 7,034,033 6,376,796
2010 data revised as of April 25,2011 Latest update:2011-08-16 09:00 Source:Bureau of Agricultural Statistics Contact:Minda C. Mangabat Bureau of Agricultural Statistics 1184 Ben-Lor Bldg., Quezon Avenue, Quezon City, Philippines Tel.: +6323712067 Fax: +6323712067 Email: [email protected] Unit:metric tons
As for the area harvested per year, there is not much difference from the year 2007 to 2009, with a moderately significant decrease by 2010. There is still no data available for 2011.
Latest update:2011-01-11 09:00 Source:Bureau of Agricultural Statistics Contact:Minda C. Mangabat Bureau of Agricultural Statistics 1184 Ben-Lor Bldg., Quezon Avenue, Quezon City, Philippines Tel.: +6323712067 Fax: +6323712067 Email: [email protected] Unit:Hectares
FEEDS The Philippines currently has about 700 businesses involved in its animal feed industry. The industry is relatively fragmented with 10 of the businesses operating about 60% of the industry's total capacity. Today, there are as many animal feed brands as there are producers. According to the Association of Philippines Feed Millers, industry sales are about USD2.1 billion per annum. Some key points to note about the industry are as follows:
It is composed of commercial millers, which comprise about 37% of businesses, home-mixers (43%) and integrated producers (20%).
74% of the operations are on the main island of Luzon, 14% in Mindanao and 12% in the Visayas.
The commercial millers and integrated producers produce about 56% of the feed that is available in the Philippines. Home-mixers produce the balance of supply.
The largest companies involved in the industry are San Miguel Corporation (25% of production capacity), Cargill Philippines (14%), Swift Foods (13%), General Milling Corporation (12%), Vitarich (11%), Universal Robina, Sun Jin Philippines, Foremost Farms, Tyson Agri-Ventures and Grain Handlers. San Miguel is the Philippines largest corporation and has animal feed operations all over the country.
Corn: Area Harvested by Year
2007 2008 2009 2010
Corn 2,648,317 2,661,021 2,683,890 2,499,040
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The Philippine feed milling industry depends almost entirely on the growth or success of livestock and poultry production. Similarly, the productivity and profitability of livestock and poultry are also dependent on the production efficiency and advanced technology of the feed milling industry, as reflected in its capability to produce high quality feeds at reasonable and stabilized prices.
In order to achieve certain efficiencies and effect some production costs savings, feed millers have bonded into associations. At the forefront of these associations is the Philippine Association of Feedmillers, Inc. (PAFMI).
While the demand for mixed feeds is highly dispersed all over the country, the concentration of firms in Metro Manila resulted in unfavorable effects on marketing and distribution costs, as well as procurement costs of ingredients.
The paramount problems of the feeds industry are its heavy dependence on imports and its chronic shortages of reasonably-priced local feed ingredients. The industry has remained dependent not only on imported inputs but also on imported equipment and machineries.
The country's lingering economic crisis, as manifested in the high inflation rate amidst low income in almost all sectors of the economy, and the consequently depressed markets and declining trend in consumption pattern, have contributed to the decreasing production of livestock and animal feeds.
However, the government has instituted sound policies to assure adequate feed supplies and reliable quality of raw materials and finished feeds at reasonable prices affordable to livestock and poultry raisers. The recent innovations by the government to encourage compliance with existing animal feed laws are the following:
Accreditation of private laboratories to increase chemical analysis capabilities for faster results;
Awards and recognition for consistent compliance with rules and regulations;
Conduct of dialogues, public hearings, congress, workshops to increase level of awareness, improve feedback mechanism and encourage private sector participation in policy formulation;
Linkages with local and international government and non-government organizations for information networking;
Deputation of provincial and regional control officers for animal feed and veterinary drugs and products.
I. Domestic Supply and Consumption The Philippines produces around 6 million tons of agricultural products and related waste products that are used in local animal feed. The Chart below provides an overview of what is used in the Philippines. Animal Feed Ingredients in the Philippines – 6 Million Tons
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II. Demand
Demand for animal feed is currently around 8 million tons per annum. Demand fluctuates with a range of different factors:
Disease outbreaks, which periodically break out in the smallholder area of the pig industry. (Note: According to the Department of Agriculture, the Philippines continues to be H5N1 free so there are no restrictions on its ability to export chicken meat);
The price of key feed ingredients, with the highest price sensitivity occurring for soybean meal (which represents about 50% of manufactured animal feed consumption by weight) and coconut oil; and
Periodic typhoon and major tropical storm damage.
The structure of demand is reported as follows:
Poultry feeds – 55%
Pig feed - 33%; and
Aquaculture and other feeds – 12% III. Foreign Trade Importation for Feeding stuff for animals has steadily decreased in C.I.F. value terms from 2008 to 2010. There is no data available yet for 2011.
Agricultural Imports: Quantity and Value by Commodity Group, Year and Quantity/Value
2008 2009 2010
Quantity C.I.F. Value Quantity C.I.F. Value Quantity C.I.F. Value
..Feeding Stuff for Animals
(excluding Unmilled Cereals)
1,621,136,458 709,609,506 1,916,716,534 670,386,125 1,596,970,194 688,320,348
.. Data not available 2010-Preliminary data; All Quantities are in kilograms, except for: LIVE ANIMALS are in heads; ABACA in Bale (125 kilograms); Agricultural Machineries in pieces Latest update: Quantity 2011-08-01 09:00 C.I.F. Value 2011-08-01 09:00 Source:Bureau of Agricultural Statistics, and source of basic data-National Statistics Office Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Unit:Quantity: in kilograms, no. of heads, bale and pieces C.I.F. Value: in USD
Exportation for Feeding stuff for animals have decreased in F.O.B. value terms from 2008 to 2009 but increased significantly in 2010 and is much higher than 2008 figures.. There is no data available yet for 2011.
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Agricultural Exports: Quantity and Value of by Commodity Group, Year and Quantity/Value
2008 2009 2010
Quantity F.O.B. Value Quantity
F.O.B. Value Quantity
F.O.B. Value
..Feeding Stuff for Animals (excluding Unmilled Cereals) 453,400,327 66,140,026 416,249,282 50,908,421 736,365,431 85,129,457
.. Data not available 2010-Preliminary data All Quantities are in kilograms except for LIVE ANIMALS are in heads ABACA in Bale (125 kilograms) Agricultural Machineries in pieces Latest update:Quantity: 2011-08-01 09:00 F.O.B. Value: 2011-08-01 09:00 Source:Bureau of Agricultural Statistics, and source of basic data-National Statistics Office Contact:Ermina V. Tepora Bureau of Agricultural Statistics 1184 Ben-lor Bldg., Quezon Avenue Quezon City, Philippines Tel: +6323766365 Fax: +6323766365 Unit:Quantity: kilograms, no. of heads, bale and pieces F.O.B. Value: in USD
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PLANS AND PROGRAMS CURRENT OPERATIONS Distribution:
The Company currently distributes the following types of products:
1. Animal feeds - The Company has an exclusive distribution agreement with San Miguel Foods Inc.'s BMEG. The areas covered are the whole of Nueva Ecija, almost all of Bulacan, a third of Pampanga, and a third of Pangasinan. The feeds distribution business accounted for about 52% of the Company's total sales for 2011.
2. Fertilizers - The Company distributes almost all brands of fertilizers in the market. The two top grossing are the Swire and Viking brands. The Company distributes fertlizers in Central Luzon mainly in Bulacan, Pampanga, and Nueva Ecija. The Company closely monitors its fertilizer business because of the relatively volatile prices of fertilizers. The fertilizer distribution business accounted for about 24% of total sales in 2011.
3. Agro-chemicals - The Company distributes almost all brands of agro-chemicals in the market. The biggest contributors to the Company are the products from Syngenta Philippines with whom the Company has an exclusive distributorship agreement similar to that with BMEG. The Syngenta agreement covers the entire Central Luzon composed of the provinces of Bulacan, Pampanga, Tarlac, Nueva Ecija, Zambales, and Bataan. The Company's distribution area of agro-chemicals is the widest among all of the product lines. Sales are mainly centered on Central Luzon but also reaches Isabela, Pangasinan, Baguio and Banaue in Northern Luzon as well as Mindoro, Quezon and Bicol in Southern Luzon. The Agro-chemical distribution business accounted for about 22% of total sales in 2011.
4. Seeds, others - This segment business accounted for about 1% of total sales in 2011. PLANS FOR 2012 TO 2014 Distribution
1. Animal feeds - The Company will prioritize the strengthening of its existing areas of distribution. For areas outside its distribution the Company will focus on the strategy of penetration by establishing a new chain of Calata Corporation Retail Stores.
2. Fertilizers - The Company plans to be aggressive in the fertilizer business. The Company will closely monitor the price movement of fertilizers in the market and if we deem that the conditions are favorable, we will invest heavily in the business.
3. Agro-chemicals - The Company plans to be more aggressive in the agro-chemical industry compared to last year. Last year the El Nino phenomenon affected the sales of the Company in this segment. The Company plans to take advantage of more supplier deals to take advantage of incentives and lower prices.
4. Seeds, others - The Company plans to increase this business thru sales under its Calata Corporation Retail Store Chain.
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Retailing The Company plans to increase revenue and presence by entering into the business of retailing its distribution products thru the establishment of a new chain of Calata Corporation Retail Stores under a newly created and wholly-owned subsidiary as soon as the Company secures the necessary approvals from the SEC and PSE in relation to its capital fund raising activity. The Company shall source its inventory of B-Meg Feeds from existing B-Meg distributors in the locality where its retail stores are established. All other distribution products shall be ordered from the Company’s existing major suppliers as previously described. All retail stores shall be leased premises and negotiations on the terms of the lease as soon as the proceeds from the offering are realized. The Company foresees the following advantages in the putting up of the retail stores:
1. The Company's margins shall increase since the sales are direct to the consumers.
2. The Company shall have a more stable customer base than the distribution business since customers in the distribution are resellers and have an option to buy from other distributors. Whereas, the retail customers are already the end users and once they are satisfied with our service will be a more loyal customer base.
The Company plans to successfully fund at least 100 retail stores in 2012 and further strengthen the operations thru more aggressive and innovative marketing strategies like the improvement of the loyalty rewards program and other incentive schemes. Provided hereunder is an itemized breakdown of the estimated costs per outlet:
PARTICULARS COST (PhP)
SITE DEVELOPMENT AND BUILDING STRUCTURE
Construction Expense Paint 5,000.00 Lights 5,000.00 LDR 2,500.00 Electrical 2,000.00 Wallfan 1,250.00 Padlocks 2,000.00 Cabinets 70,000.00 Roll ups 10,000.00
Building Reconstruction Façade 60,000.00 Signage 50,000.00 Other Repair 10,000.00
Labor Expense Payroll 20,000.00 Other Expense 5,000.00
242,750.00 EQUIPMENT, CLEANING MATERIALS AND OFFICE SUPPLIES
Equipment PC-Based USB Biometric Device 5,544.70 Computer Set (CPU, monitor, keyboard, mouse, mouse pad & AVR)
13,431.08
Epson LX-300 Printer 7,400.18 Globe Tatoo Internet Kit (Prepaid) 995.00 SmartBro Internet Kit (Prepaid) 850.92
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PARTICULARS COST (PhP)
Sun Broadband Internet Kit (Prepaid) 746.25 Vault 2,500.00 Web Cam 15,000.00 Push cart 644.44 Scoop 518.08 Weighing Scale – Big 10,500.00 Weighing Scale – Small 1,938.10 Cleaning Materials 556.00 Office Supplies 3,573.65
64,198.40 INVENTORY
Chemicals 702,904.00 Fertilizers 194,850.00 Feeds 67,103.00 Others 57,151.00
1,022,008.00
TOTAL COST PER OUTLET 1,328,956.40
TOTAL COST OF 100 OUTLETS Multiplied by 100 132,895,640.00
The Company intends to complete the establishment of its Calata Corporation Retail Stores in 2012. The Company shall only start on intensive inventory building and repair of leased sites only when the funds needed are actually received by the Company considering that the establishment of these stores shall come from the proceeds of the initial public offering. Currently, bulk of the work being done is the finalization of the prospective locations as well as the commencement of negotiations for the terms of the lease with the prospective lessors. Provided hereunder is a table of the planned nationwide distribution of the outlets:
Regions Provinces No. of Stores
Cordillera Administrative Region Baguio 2
Ilocos Region
Ilocos Norte
5
Ilocos Sur 5
La Union 6
Pangasinan 9
Cagayan Valley
Batanes 3
Cagayan 6
Isabela 6
Nueva Vizcaya
5
Central Luzon Aurora 5
Bataan 6
150
Bulacan 8
Nueva Ecija
8
Pampanga 7
Tarlac 7
CALABARZON
Batangas 3
Cavite 2
Laguna 2
Bicol Region Albay 2
Sorsogon 3
Total stores to be established
100
Farms: The Farming Operations of the Company will not be funded in whole or in part by the proceeds from the intended Initial Public Offering. Nevertheless, for the purpose of fully describing all the current operations of the Company, it is worthy to note that the Company is currently constructing several large scale farms with an estimated total project cost of P500M. The funding for this undertaking shall be sourced from internally generated funds of the Company and such other bank credit facilities as may be approved. To date, the Company is still in the process of applying for bank credit facilities to augment the funding for this project. The following are the projects under construction:
1. Magnolia Broiler Breeder Farm - Total project cost is P105.46M. The project will produce eggs intended to be chicks to be grown as broilers and then sold by Magnolia to fast foods and supermarkets under the Magnolia brand name. The project will produce a total of 9.36M eggs a year.
2. Monterey Hog Breeder Farm - Total project cost is P110.60M.The project will produce piglets to be grown in hog growing farms. The project will have a total of 1,100 Sows producing the piglets. An estimated 26,460 piglets will be produced per year.
3. Magnolia Broiler Growing Farm - Total project cost is P278M. The project will have a capacity to grow 450,000 broiler heads at 8 growing cycles a year or a total of 3.60M broiler heads per year.
4. Monterey Hog Growing Farm - Total project cost is P53.00M. The project will have the capacity to grow 3,000 hogs at 3 cycles per year or a total of 9,000 hogs per year.
ENVIRONMENTAL COMPLIANCE CERTIFICATES
PROJECT NAME LOCATION STATUS DATE OF ISSUANCE
Monterey Hog Growing Farm
Bgy. Ula, Tugbok District, Davao City
Approved November 8, 2011
Magnolia Broiler
Bgy. Kinawe, Libona, Isabela
Approved December 16, 2011
Bgy. Matina, Tugbok Approved November 8, 2011
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Growing Farm District, Davao
Bgy. Nangka, Libona, Bukidnon
Approved November 28, 2011
Monterey Hog Breeder Farm
Bgy. Naganacan, Sta. Maria, Isabela
Approved October 13, 2011
Magnolia Broiler Breeder Farm
Bgy. Fuyo, Ilagan, Isabela
Approved August 3, 2011
Cost and effects of compliance with environmental laws There is no material cost incurred in securing the Environmental Compliance Certificate (ECC) from the Department of Natural Resources (DENR). Compliance with the requirements of the DENR enables the Company to proceed with its projects subject to certain conditions and restrictions provided in said ECC. DEVELOPMENTAL ACTIVITIES
PROJECT NAME
LOCATION/S TOTAL PRODUCTION
TOTAL PROJECT
COST
STATUS (%)
AMOUNT ALREADY
SPENT
Monterey Hog Breeder
Bgy. Naganacan, Sta. Maria, Isabela
1100 Sows; 26,460 piglets
110,562,338 40% 31,699,500
Monterey Hog Growing
Bgy. Ula, Tugbok District, Davao City
3,000 Hogs 52,710,419 5% 7,818,240
Magnolia Broiler Breeder
Bgy. Fuyo, Ilagan, Isabela 9357660 Eggs; 48000 Breeders
105,482,293 20% 12,167,125
Magnolia Broiler Growing
Bgy. Kinawe, Libona, Bukidnon
150,000 Birds 90,090,609 5% 4,506,100
Bgy. Matina, Tugbok District, Davao
150,000 Birds 96,584,509 5% 11,000,000
Bgy. Nangka, libona, Bukidnon
150,000 Birds 91,681,509
2% 4,097,000
INSURANCE The Company has sufficient insurance coverage that is required by Philippine regulations for real and personal property. Subject to the customary deductibles and exclusions, the Company’s insurance policy include coverage for, among other things, buildings, improvements, machinery and equipment, furniture, fixture, fittings and motor vehicles against damage from fire and natural perils, machinery breakdown, third-party liability to the public and construction works. Currently, the Company has an office and warehouse insurance on the following:
Description Policy # Expiration Date
Insurance Agency
Calata Main Office F-0000006143 11/21/12 The Mercantile Insurance Co., Inc.
Warehouse (Bulacan)
FI-REG-KL-11-0000382-00
06/30/12 PhilCharter Insurance
CHECKS AND BALANCES FOR FLOW OF FUNDS AND RELATED PARTY TRANSACTIONS Controls for Evaluation and Approval of Credit Applications:
The Company has a credit and collection department that is separate and independent from the sales department. The Company instituted this separate department even though the normal practice in its industry is that the sales people are also the ones who collect the receivables.
The independent credit and collection department is tasked with the evaluation of credit applications. The Company has a set of documentary requirements like business registration papers, application forms, proof of identification, bank account details, personal and business references, etc.
After the completion of the documentary requirements as evaluated by the credit and collection department, a credit investigation of the applicant is initiated. The applicant’s bank dealings and records are investigated as authorized by the applicant, the business and personal references are contacted and the feedback recorded. A field credit investigator is also dispatched to do a neighborhood check of the applicant as neighbors are interviewed as to the background and reputation of the applicant. Feedbacks are recorded.
The credit and collection manager summarizes the documentary requirements and feedback reports from references and neighborhood checking. It is then preliminarily evaluated if it will be endorsed for approval by the CFO. If the preliminary evaluation is negative, it is indicated on the report as such.
After the preliminary evaluation by the credit and collection manager, it is then presented to the CFO, if for approval or not. The CFO goes through the documents and the credit investigation reports and decides if the credit application is approved or not.
The CFO also decides based on the report and the customer’s request the amount of credit limit to be given to the customer.
If it is approved, the customer name, address and approved credit limit is entered by the I.T. Dept in the accounting system.
Monitoring of Credit Customers:
The Company divides the customers by area and assigns customers to a specific collection monitoring team. The Company maintains several collection teams with the objective that each team be able to fully monitor each customer. The team is composed of office employees based in the office and field collectors.
The office collection staff monitors the customers’ account thru the Company’s accounting system. All payment details by the customer are given to the staff by the cashier for proper recording in the books.
Every time a customer exceeds his/her approved credit limit. The sales department cannot enter the sales order and cannot prepare an invoice. They prepare a credit extension form and given to the collection office staff. The collection staff checks the customers’ records and endorses it for approval or disapproval to the operations manager or the CFO.
Cash/Check Collection Process:
Each credit collection team sets a regular collection schedule for each customer, taking into account the locations of each customer relative to each other.
The field collector goes to the customer according to the schedule. A receipt with 2 carbon copies is issued to the customer for every payment.
The collector remits the payments along with the copies of the receipts issued to the cashier.
The cashier prepares a collection report for the day indicating receipt numbers and
collector name.
An auditor checks the collection report and verifies it with the carbon copy of the receipt, recounts the cash and check, and checks the booklet of receipts of the collectors to ensure that the carbon copies have no irregularities.
The auditor along with the cashier deposits the collections with the bank.
The collection report prepared by the cashier along with the copies of the receipts is given to the collection staff assigned to each customer for proper posting into each respective customers’ records.
Sound and Independent Internal Audit Control:
In order to strictly monitor the finances of the Company, including the proceeds of the Initial Public Offering (IPO), the Audit Committee which has been duly constituted in accordance with Article 3(K)(i) of the Company’s Manual on Corporate Governance which provides:
“The Audit Committee shall consist of at least three (3) directors, who shall preferably have accounting and finance backgrounds, one of whom shall be an independent director and another with audit experience. The chair of the Audit Committee should be an independent director.”
shall meet on a monthly basis in order to discuss updates on the use of proceeds on said IPO as well as other important audit and finance concerns. Consistent with the functions and objectives of the Audit Committee, an audit manual shall be constituted to serve as the Company’s guide to perform industry best practices to protect not only the interest of its existing stockholders but also that of the investing public.
Immediately upon listing with the Philippine Stock Exchange (PSE), the Company shall establish a policy which has for its objective the imposition of stricter standards in the approval of advances to related parties, such as but not limited to: (a) providing a PHP 50 Million limit on the amount of advance to be granted; (b) charging of interest which is equal to or greater than existing industry practice and such other terms and conditions with the aim of protecting not only the interest of its existing stockholders but also that of the investing public.
As a stronger measure of checks and balances, the Company shall constitute a special internal audit team which shall have the function of verifying and assuring that best internal audit practices are observed. Said team shall report directly to the Audit Committee. The Audit Committee is currently comprised of Baltazar Endriga, George A. Nava, Jaime C. Laya and Benison Paul B. De Torres. George A. Nava is the Chairman of the Committee.
The Company will endeavor to engage competent and qualified professionals as part of its management team at all times.
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MATERIAL CONTRACTS The Company’s principal contracts generally consist of Distributorship Agreements with its top suppliers.Save for the contracts mentioned below, the Company is not a party to any other contract of material importance and outside the usual course of business, and the Directors do not know of any such contract involving the Company. Complementary Feeds Distributorship Agreement with San Miguel Foods, Inc. In a letter dated 01 April 2010 sent by San Miguel Foods, Inc. to the Company with the subject: “Renewal of Distributorship Agreement for 2010”, the Complementary Feeds Distributorship Agreement between San Miguel Foods, Inc. and the Company effective on 01 January 2009 and expiring on 31 December 2009 was extended for 1 year from 01 January 2010 to 31 December 2010, covering hog feeds and poultry feed enumerated in Attachment A of said Letter. Further, the letter dated 01 April 2010 provides that the said Agreement “shall be deemed automatically renewed upon the expiry of its contract term for the like period(s) under the same terms and conditions, except as may be otherwise agreed by the parties in writing, unless the Company (San Miguel Foods, Inc.) notifies the contractor (Calata) in writing of its intent to terminate the Agreement within 60 days prior to the end of the contract term.” Last January 6, 2012, San Miguel Foods, Inc. issued a certification which validated the effectivity of the said agreement. Distributorship Agreement with Sinochem Crop Protection (Phil.) Inc. Sinochem Crop Protection (Phil.) Inc. (“Sinochem”), represented by Mr. Ramil L. Bonifacio, and the Company, represented by Mr. Eusebio Calata, entered into a non-exclusive distributorship agreement dated 01 October 2008 for the distribution of Sinochem’s high quality herbicides by the Company. The Distributorship Agreement is for a term of 15 months beginning on 01 October 2008 and ending on 31 December 2009, renewable automatically for successive terms of 12 months each and subject to early termination by written notice sent by either party to the other not less than 30 days prior to termination date. Last January 5, 2012, Sinochem issued a certification which validated the effectivity of the said agreement. Distributorship Agreement with Monsanto Philippines, Inc. On 15 April 2010, Monsanto Philippines, Inc. (“Monsanto”), represented by Mr. Edgar Juan C. Surtida III, and Calata (then Planters Choice), represented by Mr. Joseph Calata, entered into a non-exclusive distributorship agreement for the purchase and sale of DEKALB Brand Corn Seeds by Planters Choice. The said Distributorship Agreement is for a period of 1 year from 15 April 2010, subject to automatic renewals for periods of 1 year each. The Distributorship Agreement may be terminated at any time, with or without cause, upon delivery of a written notice of termination to the other party. Last January 5, 2012, Monsanto issued a certification which validated the effectivity of the said agreement. Agreement with Syngenta Philippines, Inc. Syngenta Philippines, Inc. (“Syngenta”), represented by Mr. Jose Ramon L. Valmayor, and Calata entered into an Agreement for the sale of Syngenta’s crop protection products (excluding Syngenta’s seed products) in the provinces of Bulacan, Pampanga, Bataan, Aurora and Nueva Ecija. The Agreement is only valid until the end of 2011. However, the Company is in the process of renewing the effectivity of said Agreement.
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Loan Agreement between the Company and Avestha Holdings Corporation Calata, as lender, and Avestha, as borrower, entered into a “Loan Agreement” in 2011 (exact date not indicated). Under the said Agreement, Calata shall lend Avestha PhP120,000,000.00, for a term of 3 years. The principal amount shall be due in 2 years. The interest on the principal balance of the loan, at the rate of 6% per annum,will be payable every end of the month. A grace period on the interest payment for one year was agreed upon by the parties. As collateral of the loan, Avestha shall provide certain real properties valued at a total amount of PhP166,549,000.00. The Loan Agreement further states that Avestha shall not have the right to transfer its rights or obligations under the Agreement without the prior written consent of the Calata. Moreover, the Loan Agreement includes an acceleration clause, which gives Calata the option, upon written notice to Avestha, to make all the obligations of Avestha under the same agreement due and payable, upon occurrence of default. The agreement provides that default occurs when Avestha fails to pay when due any installment or principal or interest, or any fees or charges. Memoranda of Agreement (For Poultry Contract Growing Agreement) San Miguel Foods, Inc., represented by Mr. Dewey Tan, and Calata entered into 3 undated and unnotarized Memoranda of Agreement for the supply and operation of poultry contract growing farms in various locations. Under the Memoranda of Agreement, the parties agree to enter into a growing agreement subject to Calata’s obligation to construct 5 Single Decker Poultry Farms with a total farm capacity of 150,000 birds in each of the following locations with the following completion dates and required start of commercial operations:
Location Completion Date Start of Commercial Operations
Nangka, Libona, Bukidnon August 2012 September 2012
Kinawe, Libona, Bukidnon May 2012 June 2012
Matina Blao, Calinan, Davao July 2012 August 2012
Under each Memorandum of Agreement, any delay in the completion of the farms which would result in delay in the commercial operations thereof will result in a penalty of PhP10,500.00 for every day of delay but not exceeding 5% of the total contract amount equivalent to PhP525,000.00. Under all of the Memoranda of Agreement, the farms shall be for the exclusive use of San Miguel Foods, Inc. Memorandum of Agreement (For Hog Nursery Breeding Agreement) San Miguel Foods, Inc., represented by Dr. Leo A. Obviar and Mr. Dewey T. Tan, and Calata, represented by Mr. Joseph H. Calata, entered into an undated and unnotarized Memorandum of Agreement for the supply and operation of a hog nursery farm. Under this Memorandum of Agreement, the parties agree to enter into a nursery agreement subject to the obligation of Calata to construct a CCS Hog Nursery Farm located at Brgy. Naganacan, Sta. Maria, Isabela, with a total farm capacity of 4,400 heads. The construction of the said farm must be completed on or before June 2012, or such other date as agreed upon in writing by the parties. The farm is supposed to start commercial operations no later than July 2012. Any delay in the completion of the farm which would result in delay in the commercial operations thereof will result in a penalty of PhP369,600.00 for every month of delay but not exceeding PhP739,200.00. The Memorandum of Agreement provides that the farms shall be for the exclusive use of San Miguel Foods, Inc. Memorandum of Agreement (For Hog Contract Breeding Agreement) San Miguel Foods, Inc., represented by Mr. Dewey Tan, and Calata, represented by Mr. Joseph Calata, entered into an undated and unnotarized Memorandum of Agreement for the supply and operation of a hog breeding farm. Under this Memorandum of Agreement, the parties agree to
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enter into a growing agreement subject to Calata’s obligation to construct a CCS Hog Breeding Farm in Brgy. Naganacan, Sta. Maria, Isabela, with a total farm capacity of 1,100 heads. The construction of the said farm must be completed before March 2012, or such other date as agreed upon in writing by the parties. The farm is supposed to start commercial operations no later than January 2012. Any delay in the completion of the farm which would result in delay in the commercial operations thereof will result in a penalty of PhP108,900.00 for every month of delay but not exceeding PhP217,800.00. The Memorandum of Agreement provides that the farms shall be for the exclusive use of San Miguel Foods, Inc. Memorandum of Agreement (For Hog Contract Growing Agreement) San Miguel Foods, Inc., represented by Dr. Leo A. Obviar and Mr. Dewey T. Tan, and Calata Corporation, entered into an undated and unnotarized Memorandum of Agreement for the supply and operation of a hog growing farm. Under this Memorandum of Agreement, the parties agreed to enter into a growing agreement subject to the obligation of Calata to construct a CCS Hog Growing Farm located at Ula, Tugbok, Davao City, with a total farm capacity of 3,780 heads. The construction of the said farm must be completed on or before October 2012, or such other date as agreed upon in writing by the parties. The farm is supposed to start commercial operations no later than November 2012. Any delay in the completion of the farm which would result in delay in the commercial operations thereof will result in a penalty of PhP252,000.00 for every month of delay but not exceeding PhP504,000.00. The Memorandum of Agreement provides that the farms shall be for the exclusive use of San Miguel Foods, Inc. Distributorship Agreement with Gastin Corporation Gastin Corporation is an authorized exclusive distributor of Yara Fertilizers, which includes the whole area of Central Luzon. On 15 August 2011, Calata entered into an Exclusive Distributorship Agreement with Gastin. The Exclusive Distributorship Agreement appoints Calata as the sole and exclusive distributor of Yara Fertilizer in the whole area of Luzon. It obligates Calata to engage in a full-scale information campaign to promote the purchase of Yara Fertilizers to all its clientele retailers and to the public at large. Credit Line Agreement with Metrobank Calata has a PhP70,000,000.00 credit line with Metrobank. Drawings from the said credit line is secured by the following: (1) a real estate mortgage over CCT Nos. 107680 and 107681; (2) continuing surety of the spouses Eusebio and Isabel Calata, Joseph Calata and Melvin Calata; (3) improvements over CCT Nos. 107680 and 107681, subject to fire insurance coverage coursed through PCIC and endorsed in favor of Metrobank; and (4) assignment of Credit Line Insurance of Isabel Calata coursed through Philam Life and endorsed in favor of Metrobank. Facility Agreement with BDO Calata has a facility agreement with BDO which was executed on 22 September 2008. Based on the said agreement, Calata has a credit line of PhP50,000,000.00, a discounting line of PhP100,000,000.00, an inventory financing/ trust receipt line of PhP100,000,000.00 and a bills purchase line of PhP5,000,000.00. Notably, there are certain negative covenants or acts which Calata undertakes not to do unless with the consent of BDO. Some of these negative covenants include the undertaking not to make or permit any material change in the character of its business or capital stock; not permit any material change in ownership or control of its business or its capital stock; under certain conditions not to declare or pay dividends to its stockholders; or make advances to any of its directors or stockholders.
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Moreover, the facility agreement provides for events of default which, among others includes the failure to perform. In case of default, the facility agreement provides that the loan shall be terminated and the loan and all interest accrued and unpaid thereon shall be immediately due and payable. Revolving Promissory Notes Line (“RPNL”) and Domestic Bills Purchase Line (“DBPL”) with BPI Pursuant to the General Loan Agreement Calata has a RPNL with BPI in the amount of PhP80,500,000.00 which expires on 31 August 2012. Various real estates owned by the Isabel and Eusebio Calata, Avestha Holding Corporation and Andres Lipana were used as security and as well as a continuing suretyship executed by Isabel and Eusebio Calata, Joseph Calata, Melvin Calata, Avestha Holding Corporation and Andres Lipana in favor of Calata. Amounts can be drawn via 360-day promissory notes. Calata has an RPNL in the amount of PhP52,000,000.00 which expires on 31 August 2012.Various real estates under the name of Andres Lipana and San Miguel Archangel Land Development Corp. were used as security and as well as a continuing suretyship executed by Isabel and Eusebio Calata, Joseph Calata Melvin Calata, Avestha, Andres Lipana and San Miguel Archangel Land Development Corp. in favor of Calata. Amounts can be drawn via 360-day promissory notes. Calata also has an RPNL in the amount of PhP60,000,000.00 which expires on 31 August 2012. Customer’s post-dated checks and a continuing suretyship executed by Isabel and Eusebio Calata, Joseph Calata and Melvin Calata in favor of Calata served as security. Amounts can be drawn via 90-day promissory notes. Calata has an RPNL in the amount of PhP3,000,000.00 which expires on 31 August 2012. Various lands owned by Isabel and Eusebio Calata were used as security. Amounts can be drawn via 360-day promissory notes. Finally, Calata has a Domestic Bills Purchase Line in the amount of PhP40,000,000.00 which expires on 31 August 2012. A continuing suretyship was executed by the Spouses Calata, Joseph Calata Melvin Calata in favor of Calata as security. The foregoing lines with BPI were issued pursuant to the General Loan Agreement dated 08 December 2005 between BPI and the Spouses Calata for themselves and as representatives of Planter’s Choice Agro Products, Inc. (now Calata Corporation). The said ageement provides for certain acts by Calata which will require prior written consent from BPI such as (1) materially changing the ownership structure and management of the company; (2) merger or consolidation; sale or lease of assets not in the ordinary course of business; and (3) making loans or advances.
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SUPPLY AND DISTRIBUTION AGREEMENTS In general, all supply and distribution agreements are renewed on a yearly basis. Renewal may be express or implied. Except for its exclusive distribution agreement with San Miguel Foods, Inc. (Feeds), Syngenta Philippines, Inc. (Agro Chemicals) and Monsanto Philippines, Inc. (Seeds), the Company does not usually have duly executed distribution agreements with the rest of its suppliers of agro chemicals, fertilizers and seeds. Furthermore, based on industry practice, actual exclusive distribution agreements are not issued on a yearly basis. In the case of non-exclusive distribution agreements no formal agreement is executed except for some. Instead, certifications are issued to attest that the Company is a distributor of the pertinent supplier products indicating therein exclusivity or non-exclusivity. However, for other non-exclusive suppliers, certifications are not even given since supply of the products continues for so long as the Company places an order. Nevertheless, to substitute the absence of supply and distribution agreements, the Company strictly enforces proper documentation of transactions with suppliers. The Company religiously fills up Purchase Orders which upon acknowledgment by the supplier, a Sales Invoice is issued. Hence, the Purchase Order and the Sales Invoice signifies the contract / agreement between the Company and the supplier.
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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
The following management's discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's audited and unaudited financial statements, including the related notes, contained in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company cautions investors that its business and financial performance is subject to substantive risks and uncertainties. The Company's actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set out in "Risk Factors." In evaluating the Company's business, investors should carefully consider all of the information contained in "Risk Factors." Overview The Company has been posting significant increases in its revenues consistent since 2003. The revenues increased from PhP200 Million in 2003 to PhP2.00 Billion in 2011 or an increase of PhP1.80 Billion or 1,000%. The Company is in the agriculture sector which in management’s view is one of the most stable industries and with a lot of opportunities for growth. The Company has been recording significant revenue growths and has not been negatively affected by the economic crisis that hit the global economy hard in 2008. In fact the Company recorded the biggest jump in its revenues in 2008 when the global economic crisis was at its strongest. The Company recorded PhP1.61 Billion in revenues in 2008 against PhP1.08 Billion in 2007 or an increase of PhP530 Million or an increase of 33%. RESULTS OF OPERATIONS Audited results for the fiscal year ended December 31, 2011 compared to Audited results for the fiscal year ended December 31, 2010 The year 2011 saw the highest recorded revenues and net income in the Company’s history. The Revenues amounted to P2.00 Billion in 2011 from P1.80 Billion in 2010 or an increase of P203.65 Million or 11%. The net income amounted to P100.17 Million in 2011 from P33.84 Million in 2010 or an increase of P66.34 Million or 196%. The increase in sales is mainly attributed to increased market penetration primarily through the affiliate “AGRI” retail store chain which allowed to Company to sell in markets not previously accessible. The fertilizer business also had a bigger contribution this year compared to the previous years as the Company saw favorable price movements in fertilizer products. The increase in net income is aside from the increased revenues, mainly due to the increase in the Company’s margins. The Company’s gross profit amounted to P227.31 Million and P142.65 Million in 2011 and 2010 respectively, or an increase of P84.66 Million or 59%. The Company’s operating expenses decreased, for 2011 it amounted to P63.30 Million from P67.33 Million in 2010. The decrease amounted to P4.53 Million or 7%. The decrease is mainly due to the Company’s austerity measures which has resulted in decreasing expenses for the past several years.
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The Company recorded finance income amounting to P3.83 Million in 2011. This is the interest from the loans receivable of the Company. The Company’s finance cost no significant movement. Material Changes to the Company’s Audited Income Statement as of Fiscal Year ended December 31, 2011 compared to the Audited Income Statement as of Fiscal Year ended December 31, 2010 (increase/decrease of 5% or more) Sales amounted to P2.00 Billion in 2011 from P1.80 Billion in 2010 or an increase of P203.65 Million or 11%. The increase is primarily due to increased market penetration mainly due to the affiliate “AGRI” retail store chain which allowed the Company to access markets that were not accessible to it before. Cost of sales increased by P118.96 Million or 7%. It amounted to P1.77 Billion in 2011 and P1.66 Billion in 2010. The increase in this account is due to the increase in sales. Gross Profit increased by P84.66 Million or 59%. It amounted to P227.31 Million in 2011 and P142.65 Million in 2010. The increase is mainly due to the Company’s availment of cash discounts and the best possible volume deals. Operating expenses decreased by P4.53 Million or 7%. It amounted to P63.30 Million from P67.33 Million in 2010. This is due to the Company’s implementation of austerity measures. Finance income increased by P3.83 Million. It amounted to P3.83 Million in 2011. This is the interest from the Company’s loans receivable. Audited results for the fiscal year ended December 31, 2010 compared to Audited results for the fiscal year ended December 31, 2009 The year 2010 was another record breaking year for the Company in terms of net income with PhP33.84 Million recorded in 2010 from PhP7.50 Million in 2009 or an increase of PhP26.34 Million or 350%. The huge jump in net income was achieved through the successful policies implemented by the Company intended to increase its margins. This included price increases, and the availment of the lowest possible costs from suppliers through cash discounts and volume deals. To counteract the expected negative impact these measures will bring, the Company intensified its existing marketing programs putting particular emphasis on those programs targeting end users (pull strategies). The pull strategies were focused on the price increases’ immediate impact on the dealers, whose natural tendency is to resist and possibly adversely affect our sales. The programs’ focus on end users will make the end users buy products from dealers that the dealers should have bought from us. The Sales of the Company was relatively unchanged amounting to PhP1.80 Billion and PhP1.81 Billion in 2010 and 2009 respectively or a decrease of only PhP10 Million or 0.5%. Operating expenses amounted to PhP88.02 Million in 2010 and 2009 respectively, or a decrease amounting to PhP20.19 Million or 23%. The decrease was in line with the Company’s austerity measures implemented in 2010. Finance cost increased with recorded amounts of PhP26.73 Million and PhP20.90 Million in 2010 and 2009 respectively, an increase of PhP5.82 Million or 27.85%. The increase is primarily due to the increased availment of loans to fund early payments to suppliers to take advantage of cash discounts.
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Material Changes to the Company’s Audited Income Statement as of Fiscal Year ended December 31, 2010 compared to the Audited Income Statement as of Fiscal Year ended December 31, 2009 (increase/decrease of 5% or more) The Company’s recorded Gross Profit amounted to PhP142.65 Million and PhP119.41 Million in 2010 and 2009 respectively, or an increase amounting to PhP23.24 Million or 20%. The increase was primarily due to the price increases implemented the Company and the negotiation of the lowest possible costs from suppliers. Operating expenses amounted to PhP88.02 Million in 2010 and 2009 respectively, or a decrease amounting to PhP20.19 Million or 23%. The decrease was in line with the Company’s austerity measures implemented in 2010. Finance cost increased with recorded amounts of PhP26.73 Million and hPP20.90 Million in 2010 and 2009 respectively, an increase of PhP5.82 Million or 27.85%. The increase is primarily due to the increased availment of loans to fund early payments to suppliers to take advantage of cash discounts. Audited results for the fiscal year ended December 31, 2009 compared to Audited results for the fiscal year ended December 31, 2008 The year 2009 saw a big increase of 64% in net income from the previous year. The net income reported amounted to PhP7.50 Million and PhP4.56 Million for 2009 and 2008 respectively. The increase is primarily due to the 12% increase in sales. There was a significant increase in revenues in 2009. The revenues recorded amounted to PhP1.81 Billion and PhP1.61 Billion in 2009 and 2008 respectively, an increase of PhP200 Million or 12%. The increase in sales is primarily due to the new feeds distribution in Nueva Ecija which started in the second half of 2008. Thus, the said Nueva Ecija distribution contributed a full years’ worth of sales for the year 2009, while it was able to contribute only a half year worth of sales for 2008. Operating expenses increased but this is expected because of the new operations in Nueva Ecija. The operating expenses amounted to PhP88.02 Million and PhP74.24 Million in 2009 and 2008 respectively, an increase of PhP13.78 Million or 18%. The increase was mainly because of the above mentioned new feeds distribution in Nueva Ecija which operated for one whole year in 2009 as against only half year in 2008. Material Changes to the Company’s Audited Income Statement as of Fiscal year ended December 31, 2009 compared to Audited Income Statement as of Fiscal year ended December 31, 2008 (increase/decrease of 5% or more) Sales increased with recorded amounts of PhP1.81 Billion and PhP1.61 Billion in 2009 and 2008 respectively or an increase of PhP197.01 Million. The increase in sales was primarily due to the new feeds distribution in Nueva Ecija which started in the second half of 2008. Thus, the said Nueva Ecija distribution contributed a full years’ worth of sales for the year 2009, while it was able to contribute only a half year worth of sales for 2008. Cost of sales amounted to PhP1.69 Billion and PhP1.51 Billion in 2009 and 2008 or an increase of PhP180 Million or 12%. As a percentage of sales, the cost of sales is 93% in 2009 and 94% in 2008. Operating expenses amounted to PhP88.02 Million and PhP74.24 Million in 2009 and 2008 respectively, an increase of PhP13.78 Million or 18%. The operating expenses increased mainly because of the above mentioned new feeds distribution in Nueva Ecija which operated for one whole year in 2009 as against only half year in 2008.
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Finance cost amounted to PhP20.90 Million and PhP17.23 Million in 2009 and 2008 respectively, or an increase of PhP3.67 Million or 21%. The increase in this account is mainly due to the increased working capital requirements of the new feeds distribution business in Nueva Ecija which is partly funded thru the availment of additional loans. FINANCIAL POSITION Audited financial position as of December 31, 2011 compared to December 31, 2010 including discussion on Material Changes to the Company’s Audited Balance Sheet as of Fiscal year ended December 31, 2011 compared to Audited Balance Sheet as of Fiscal year ended December 31, 2010 (increase/decrease of 5% or more) Total assets increased by P391.74 Million or 59%. Recorded amounts were P1.05 Billion and P661.31 Million as of year end 2011 and 2010 respectively. The increase in assets is primarily due to the Company’s income from operations and the infusion of P323.10 Million additional capital by stockholders during the year. The infused capital shall be used for general corporate purposes and expansion of the business such as but not limited to contract growing and breeding of hogs and poultry. These aforementioned projects, however, is not the target for the use of proceeds of the Company’s application for listing and initial public offering of its shares to the public. Total liabilities had no significant movement, it only decreased by P6.54 Million or 1%. There was no significant movement because the reduction in the amounts of trade payables and short term loans were offset by the increase in amounts owed to stockholders and the increased provision for income tax. Cash increased by P185.68 Million or 972%. It amounted to P204.79 Million in 2011 up from P19.11 Million in 2010. This is primarily due to the additional cash invested by the stockholders. Trade receivables decreased by P88.36 Million or 26%. It amounted to P252.53 Million in 2011 down from P340.86 Million in 2010. The decrease is mainly due to the normalization of our terms, the 2010 balance is high because we extended terms to our dealers to encourage them to book their orders. We did this in 2010 because of the effects of the El Nino phenomenon on our sales. In year end 2011, we no longer offered the extended terms. The advances to related parties increased by P31.62 Million or 91%. It amounted to P66.50 Million in 2011 up from P34.87 Million in 2010. This is due to the expansion of operations of affiliates which necessitated the increase in funds needed for investment and operations. Inventories decreased by P44.41 Million or 20%. It amounted to P179.84 Million in 2011 down from P224.44 Million in 2010. This is mainly due to the favorable weather and market conditions for our products in 2011. Our products were fast moving especially in the year-end which is our peak season. This contrasts to the situation in 2010 when the El Nino phenomenon affected the sales of our products which resulted in higher than anticipated levels of inventory in year-end 2010. Loans receivable amounted to P120.00 Million in 2011, there was no amount recorded in 2010. This account represents the amount loaned to Avestha Holding Corporation, which is an affiliate of the Company. The loan is intended as an advance for the planned purchase of the Company of Avestha’s properties. The loan is provided with a market rate of interest set at 6%, so as to compensate the Company for the loan until the purchase of the properties is finalized. Investment properties amounted to P134.15 Million in 2011, there was no amount recorded in 2010. These are the properties purchased by the Company, which are being used as collateral by the Company for loans.
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Property and equipment increased by P47.55 Million or 189%. It amounted to P72.77 Million in 2011 up from P25.22 Million in 2010. The increase represents amounts spent for the Company’s construction of Hog and Broiler farms. Trade payables decreased by P34.66 Million or 20%. It amounted to P134.70 Million in 2011 down from P169.36 Million in 2010. The decrease is mainly due to the fact that the Company takes advantage of cash discounts as much as possible. Loans payable decreased by P77.00 Million or 16%. The decrease is mainly due to the increased cash infusion from stockholders and also from cash internally generated from operations which has allowed the Company to lower its debt levels, while at the same time having enough funds for current operations and also pursue its expansion programs in Hog and Broiler farms. To clarify, the intended target expansion program for part of the additional cash infusion is the Hog and Broiler Farms. On the other hand, the expansion program relating to the establishment of a chain of Calata Retail Stores will be funded by the net proceeds of the Initial Public Offering. Advances from related parties amounted to P52.46 Million in 2011, there was no amount recorded in 2010. This represents the amount loaned from stockholders which is intended to offset the amounts advanced by the Company to its affiliates with the intention that the Company’s funds are intact for its own operations and expansion programs. Dividends payable amounted to P25.00 Million, there was no amount recorded in 2010. This is the accrual of the dividend declared by the Company’s board of directors from the Company’s unrestricted retained earnings. Capital stock increased by P323.10 Million or 32,310%. The increase is due to the additional investment in the Company from the stockholders. As previously explained said capital infusion was useful in decreasing the loans payable by 16% and partially funding the Hog and Broiler Farm construction. Debt to equity decreased from 271.25 in 2010 to 0.98 in 2011 or a decrease of 270.27 or 27,579%. The increase is mainly due to the increase in stockholders’ equity from P1.73 Million in 2010 to P400.00 Million in 2011. The increase in stockholders’ equity came from the additional investment infused by stockholders amounting to P323.10 Million which increased the paid up capital stock to P324.10 Million from only P1.00 Million the year before. The stockholders’ equity also increased due to the increase in retained earnings brought about by the net income earned by the Company during the year which amounted to P100.17 Million after taxes. The increase in retained earnings from the net income was partially offset by the declaration of dividend in 2011 amounting to P2.00 Million. Material Changes to the Company’s Audited Balance Sheet as of Fiscal year ended December 31, 2010 compared to Audited Balance Sheet as of Fiscal year ended December 31, 2009 (increase/decrease of 5% or more) Trade and other receivables increased by 17%. Trade and other receivables amounted to PhP355.86 Million and PhP304.03 Milion as of 2010 and 2009 respectively or an increase of PhP51.83 Million or 17%. Inventories decreased by 17%. Inventory amounted to PhP224.24 Million and PhP269.14 Million as of 2010 and 2009 respectively, or a decrease of PhP44.90 Million or 17%. Property and equipment increased by 1,200%. Property and equipment amounted to PhP25.22 Million and PhP1.94 Million as of 2010 and 2009 respectively or an increase of PhP23.28 Million or 1200%.
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Advances to related parties increased by PhP31.50 Million or 934%. Advances to related parties amounted to PhP34.87 Million and PhP3.37 Million as of 2010 and 2009 respectively. Trade and other payables decreased by PhP66.96 Million or 28%. The amounts recorded are PhP169.36 Million and PhP236.32 Million as of 2010 and 2009 respectively. Short-term loans increased by PhP127.99 Million or 37%. The amounts recorded are PhP469.50 Million and PhP341.51 Million as of 2010 and 2009 respectively. Debt to equity ratio increased from 22.93 in 2009 to 271.25 in 2010 or an increase of 1,083%. The increase is mainly due to the decrease in stockholders’ equity from P13.89 Million in 2009 to P0.73 Million in 2010 or a decrease of P13.16 Million or 1,803%. The decrease in stockholders is due to declaration of dividends in 2010 amounting to P47.00 Million. Material Changes to the Company’s Audited Balance Sheet as of Fiscal year ended December 31, 2009 compared to Audited Balance Sheet as of Fiscal year ended December 31, 2008 (increase/decrease of 5% or more) Cash on hand and in banks increased by PhP4.06 Million or 25%. The amounts recorded are PhP20.21 Million and PhP16.15 Million as of 2009 and 2008 respectively. Trade and other receivables increased by PhP23.33 Million or 8%. The amounts recorded are PhP304.03 Million and PhP280.70 Million as of 2009 and 2008 respectively. Inventory increased by PhP8.05 Million or 3%. The amounts recorded are PhP269.14 Million and PhP261.09 Million as of 2009 and 2008 respectively. Property and equipment increased by PhP0.68 Million or 54%. The amounts recorded are PhP1.94 Million and PhP1.26 Million as of 2009 and 2008 respectively. Trade and other payables increased by PhP14.60 Million or 7%. The amounts recorded are PhP236.32 Million and PhP221.72 Million as of 2009 and 2008 respectively. Short-term loans increased by PhP17.36 Million or 5%. The amounts recorded are PhP341.51 Million and PhP324.15 Million as of 2009 and 2008 respectively. Debt to equity decreased from 43.81 in 2008 to 22.93 in 2009 or a decrease of 20.88 or 91%. The decrease is mainly due to the increase in stockholders’ equity in 2009. The increase is from the retained earnings which increased from P6.40 Million in 2008 to P13.89 Million in 2009 or an increase of P7.49 Million or 117%. The increase in retained earnings in 2009 is from the net income from operations amounting to P7.50 Million. Discussion and Representation on both Interim and Year End Audited Financial Statements There are no known trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in increasing or decreasing the Company’s liquidity in any material way. The Company does not anticipate having any cash flow or liquidity problems within the next twelve (12) months. The Company is not in default or breach of any note, loan, lease or other indebtedness or financing arrangement requiring it to make payments. No significant amount of the Company’s trade payables have not been paid within the stated trade terms.
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The Company does not foresee any event that will trigger direct or contingent financial obligation that is material to it, including any default or acceleration of an obligation. There are no material commitments for capital expenditures, events or uncertainties that have had or that are reasonably expected to have a material impact on the continuing operations of the Company. There are no known trends, events or uncertainties that have had or that are reasonably expected to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations. No significant elements of income or loss had arisen from the Company’scontinuing operations. There are no other material changes in the Company’ financial position (5%) or more and condition that will warrant a more detailed discussion. Further, there are no material events and uncertainties known to management that would impact or change reported financial information and condition of the Company. There were no seasonal aspects that had a material effect on the financial condition or results of operations of the Company. LIQUIDITY AND CAPITAL RESOURCES In the years 2008, 2009, 2010 and 2011 the Company’s primary source of liquidity was proceeds from sales and bank financing activities. Net cash from operating and financing activities were sufficient to cover the Company’s working capital and capital expenditure requirements in the years 2008, 2009, 2010 and 2011. The Company has credit lines with several of the top banks of the Philippines which gives it financial flexibility in its operations. The Company’s cash position has been steadily increasing since 2008. From only PhP7.03 Million in December 31, 2008 to PhP204.79 Million in Dec. 31, 2011, an increase of PhP197.76 Million or 2,800%. The increase is primarily due to earnings from the Company’s operations and the additional capital infusion from stockholders in 2011. The net proceeds from the Primary Offer, determined by deducting from the gross proceeds, the total issue management, underwriting and selling fees, listing fees, taxes and other related fees and expenses, will be used to establish Calata Corporation retail outlets nationwide and for general working capital requirements. The following table sets forth information from the Company’s pro forma statements of cash flows for the periods indicated: Cash Flows
Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008
Net cash provided by (used in) operating activities
302,478,444 (73,335,053) 8,414,870 (94,813,174)
Net cash provided by (used in) investing activities
(335,961,664) (29,032,075) (816,542) (524,874)
Net cash provided by (used in) financing activities
219,165,977 101,262,787 (3,542,629) 110,817,251
Beginning Cash 19,106,061 20,210,402 16,154,703 675,500
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Ending Cash 204,788,818 19,106,061 20,210,402 16,154,703
Indebtedness The Company has no long-term loans. All of the Company’s bank financing are short term loans with average terms of 90 to 120 days. The Company’s loan balance as of Dec. 31, 2011 is P392.50 Million.
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To date, the Company has never been in default in making principal and interest payments. KEY PERFORMANCE INDICATORS The Company’ top five (5) key performance indicators are listed below:
For the year ended
Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008
Audited Audited Audited Audited
Current Ratio
1 1.11 0.91 1.02 1.01
Debt to Equity Ratio2 0.98 271.25 22.93 43.81
Earnings per Share3 0.31 33.84 7.50 4.56
Earnings before Interest and Taxes
4 169,794,248 75,015,214 31,566,350 24,257,924
Return on Equity5 50% 407% 67% 86%
1 Current Assets / Current Liabilities
2 Bank Loans/Stockholders’ Equity
3 Net Income/Outstanding Shares
4 Net Income plus Interest Expenses and Provision for Income Tax
5 Net Income / Average Stockholders’ Equity
These key indicators were chosen to provide Management with a measure of the Company’s financial strength (i.e., Current Ratio, Debt to Equity Ratio, and Earnings before Interest and Taxes) and the Company’s ability to maximize the value of its stockholders’ investment in the Company (i.e., Return on Equity, Earnings per Share). Current ratio shows the liquidity of the Company by measuring how much current assets it has over its current liabilities. The Debt to Equity Ratio indicates how much debt the Company has incurred for each amount of equity in the Company. A higher ratio means that the Company is more aggressive in its use of capital. Earnings per share shows how much the Company is earning for each share that is currently issued and outstanding. Earnings before interest and taxes indicates how much income the Company is generating from its entire operations before interest charges and taxes are deducted. Return on Equity shows how much profits the Company is making for each amount of equity invested in the Company. Likewise, these ratios are used to gauge the performance of the Company in the industry in which it operates.
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The above loan balance came from existing and renewed Credit Line Agreements with Metro
Bank, Allied Banking Corporation, Banco De Oro, Bank of the Philippine Islands, Planters Bank, copies of which have already been submitted to the Exchange.
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ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set-out below. These policies have been consistently applied to the period and year presented, unless otherwise stated. Basis of preparation
Basis of measurement
The accompanying financial statements have been prepared under the historical cost convention.
Statement of compliance
The accompanying financial statements have been prepared in accordance with Philippine
Financial Reporting Standards (PFRS) as issued by the Financial Reporting Standards Council
(FRSC), and adopted by SEC. PFRS consists of the following:
a. PFRS - corresponds to International Financial Reporting Standards; b. Philippine Accounting Standards (PAS) - corresponds to International Accounting
Standards; and c. Philippine Interpretations Committee Interpretations (PIC) - correspond to
interpretations of International Financial Reporting Interpretations Committee (IFRIC). Use of judgments and estimates The preparation of financial statements in compliance with adopted PFRS requires the use of certain critical accounting estimates. It also requires Company’s management to exercise judgment in applying the Company's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in Note 3. Functional and presentation currency The accompanying financial statements are prepared in Philippine Peso (PhP), the Company’s functional and presentation currency. All values are rounded to the nearest peso, unless otherwise indicated. Standards, interpretations and amendments to published standards effective beginning January 1, 2011 and onwards New, revised, and amendments to published standards effective in 2011 The Company has adopted the following new, revised and amended standards and interpretations that have been issued and are effective as of January 1, 2011. Except as otherwise indicated, adoption of these new standards and interpretations did not have significant impact on the Company’s financial statements.
PAS 24 Related Party Disclosures (Amendment): The amended standard is effective for annual periods beginning on or after January 1, 2011. It clarified the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government related entities. The Company does not expect any impact on its financial position or performance.
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PIC Interpretations 14 Prepayments of a minimum funding requirement (Amendment): The amendment to IFRIC 14 is effective for annual periods beginning on or after January 1, 2011 with retrospective application. The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset. The amendment is deemed to have no impact on the financial statements of the Company.
PFRS 2 Share-based Payment (Revised): The IASB issued an amendment to IFRS 2 that clarified the scope and the accounting for group cash-settled share-based payment transactions. The Company adopted this amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company.
PFRS 3 Business Combinations (Revised) and PAS 27 Consolidated and Separate Financial Statements (Amended): PFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after becoming effective. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. The Company adopted this revision and amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company.
PAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by PFRS 3 (Revised) and PAS 27 (Amended) affect acquisitions or loss of control of subsidiaries and transactions with non-controlling interests after January 1, 2010. The change in accounting policy was applied prospectively and did not have an impact on the financial position or performance of the Company.
PAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items: The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Company adopted this amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company as the Company has not entered into any such hedges.
PIC Interpretation 17 Distribution of Non-cash Assets to Owners: This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The Company adopted this amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company.
Improvements to PFRS An omnibus of amendments was issued to existing standards, primarily with a view to remove inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies but did not have any impact on the financial position or performance of the Company. Issued in May 2008
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PFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Clarifies that when a subsidiary is classified as held for sale, all its assets and liabilities are classified as held for sale, even when the entity remains a non-controlling interest after the sale transaction. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Company.
Issued in April 2009
PFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Clarifies that the disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in PFRS 5. The disclosure requirements of other PFRS only apply if specifically required for such non-current assets or discontinued operations. The amendment has no impact on the financial position nor financial performance of the Company.
PFRS 8 Operating Segments: Clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Company.
PAS 7 Statement of Cash Flows: States that only expenditure that results in recognizing an asset can be classified as a cash flow from investing activities. This amendment will impact among others, the presentation in the statement of cash flows of the contingent consideration on the business combination completed in 2010 upon cash settlement. The amendment has no impact on the statements of cash flows of the Company.
PAS 36 Impairment of Assets: The amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in PFRS 8 before aggregation for reporting purposes. The amendment has no impact on the financial position nor financial performance of the Company.
Other amendments resulting from Improvements to PFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Company: Issued in April 2009
PFRS 2 Share-based Payment;
PAS 1 Presentation of Financial Statements;
PAS 17 Leases;
PAS 34 Interim Financial Reporting;
PAS 38 Intangible Assets;
PAS 39 Financial Instruments: Recognition and Measurement;
PIC Interpretations 9 Reassessment of Embedded Derivatives; and,
PIC Interpretations 16 Hedge of a Net Investment in a Foreign Operation. Issued in May 2010 An omnibus of amendments was issued to existing PFRS standards. The amendments have not been adopted as they become effective for annual periods on or after either July 1, 2010 or January 1, 2011. The amendments listed below, are considered to have a reasonable possible impact on the Company:
PFRS 3 Business Combinations;
PFRS 7 Financial Instruments: Disclosures;
PAS 1 Presentation of Financial Statements;
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PAS 27 Consolidated and Separate Financial Statements; and,
PIC Interpretation 13 Customer Loyalty Programmes. The Company, however, expects no impact from the adoption of the amendments on its financial position or performance. New standards, interpretations and amendments not yet effective Standards, interpretations and amendments issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. The Company intends to adopt these standards when they become effective.
Issued in October 2011
PFRS 9 Financial Instruments: Classification and Measurement: PFRS 9 as issued reflects the first phase of the work on the replacement of PAS 39 and applies to classification and measurement of financial assets as defined in PAS 39. The standard is effective for annual periods beginning on or after January 1, 2013. In subsequent phases, it will address classification and measurement of financial liabilities, hedge accounting and derecognition. The completion of this project is expected in early 2011. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Company’s financial assets. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.
PFRS 10 Consolidated Financial Statements: This standard was developed to eliminate perceived conflict on concept of consolidation between IAS 27, Consolidated and Separate Financial Statements (amended in 2008) and SIC-12, Consolidation – Special Purpose Entities. IAS 27 (amended in 2008) requires consolidation of entities based on control, whereas SIC-12 mandates consolidation of entities based on risks and rewards. It provides a new definition of control based on three elements: power over the investee, exposure or rights to variable returns from involvement with the investee, ability to use power over the investee to affect the amount of investor’s return.
The new standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
PFRS 11 Joint Arrangements: This standard requires an entity to account joint arrangement based on its rights and obligations arising from the arrangement rather than based on the structure of the arrangement as required by IAS 31, Interests in Joint Ventures. The new standard has removed the option to account jointly-controlled entities using either proportionate consolidation or equity method. The new standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
PFRS 12 Disclosures of interests in Other Entities: This standard prescribes all of the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. The new standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
PFRS 13 Fair Value Measurement: This standard was developed to eliminate inconsistencies of fair value measurements dispersed in various existing IFRSs. It clarifies
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the definition of fair value, provides a single framework for measuring fair value and enhances fair value disclosures. The new standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
PFRS 1 Severe Hyperinflation and Removal of Fixed Date of First-time Adopters: The first amendment replaces references to a fixed date of January 1, 2004 with the date of transition to IFRSs, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs.
The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation.
The amendments are effective July 1, 2011. Earlier application is permitted.
PRFS 2 Group Cash-settled Share based Payment Transactions (Amendment): The amendments respond to request to clarify how an individual subsidiary in a group should account for some share-based payment arrangements in its own financial statements. In these arrangements, the subsidiary receives goods or services from employees or suppliers but its parent or another entity in the group must pay those suppliers. The amendments clarify:
1. The scope of PFRS 2. An entity that receives goods or services in a share-based
payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and regardless of whether the transaction is equity-settled or cash-settled.
2. The interaction of PFRS 2 and other standards. In PFRS 2, a group has the same meaning as in PAS 27, Consolidated and Separate Financial Statements, that is, it includes only a parent and its subsidiaries.
The amendments to PFRS 2 also incorporate guidance previously included in Philippine IFRIC 8, scope of PFRS 2, and Philippine IFRIC 11, PFRS 2-Group and Treasury Share Transactions. As a result, Philippine IFRIC 8 and Philippine IFRIC 11 have been withdrawn.
Entities shall apply the amendments to all share-based payments within the scope of PFRS 2 for annual periods beginning on or after January 1, 2010. Earlier application is permitted.
Amendments to PAS 1 Presentation of Items of Other Comprehensive Income: The presentation of Items of Other Comprehensive Income (Amendments to PAS 1) amended paragraphs 7, 10, 82, 85-87, 90, 91, 94, 100 and 115, added paragraphs IN 17-IN 19, 10A, 81A, 81B, 82A and 139J and deleted paragraphs 12, 81, 83 and 84. Entities shall apply those amendments for annual periods beginning on or after July 1, 2012. Earlier application is permitted.
PAS 12 Deferred Tax: Recovery of Underlying Assets: This standard requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be through sale.
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As a result of the amendments, SIC-21 Income Taxes- Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAs 12 the remaining guidance previously contained in SIC-21, which was accordingly withdrawn. The amendments are effective January 1, 2012. Earlier application is permitted.
PAS 19 Employee Benefits (amended): Significant changes to this standard include: removal of corridor approach in recognizing actual gains and losses, presentation of remeasurements on defined benefit plans in other comprehensive income and improved disclosure requirements. The amended standard is applied retrospectively with limited exceptions. Entities shall apply the amended PAS 19 for annual periods beginning on or after January 1, 2013. Earlier application is permitted.
PAS 27 Separate Financial Statements (amended): This completes the consolidation project. The standard was amended to contain requirements relating only to separate financial statements. The amended standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
PAS 28 Investments in Associates and Joint Ventures (amended): The new standard on joint arrangements is applied to determine the type of joint arrangement in which an entity is involved. With this, IAS 28 was amended to incorporate accounting requirements for joint ventures. Once an entity has determined that it has an interest in a joint venture, it accounts for the investment using the equity method in accordance with IAS 28 (amended in 2011). The amended standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
PFRS Practice Statement on Management Commentary: This Practice Statement is not a PFRS but it provides a broad, non-binding framework for the presentation of management commentary that relates to financial statements that have been prepared in accordance with PFRSs. Entities applying PFRSs are not required to comply with the Practice Statement will not prevent an entity’s financial statements from complying with PFRSs, if they otherwise do so. For listed companies and other issuers of securities to the public that are mandated to provide a management’s discussion and analysis in their annual reports, this Practice Statement may be used as guidance for matters that are provided under SRC Rule 17. The Practice Statement is applicable to management commentary presented prospectively starting on June 29, 2011.
Financial instruments Initial recognition Financial assets and financial liabilities are recognized in the statements of financial position when the Company becomes a party to the contractual provisions of the instrument. In the case of a regular way purchase or sale of financial assets, recognition is done at trade date, which is the date on which the Company commits to purchase or sell the asset.
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Financial instruments are recognized initially at fair value plus transaction costs except for financial instruments measured at fair value through profit or loss (FVPL).
Classification of financial instruments The Company classifies its financial assets as financial assets at FVPL, held-to-maturity (HTM) financial assets, loans and receivables or available for sale (AFS) financial assets. The Company’s financial assets as of September 30, 2011 and December 31, 2010 comprise of loans and receivables. Financial liabilities, on the other hand, are classified as either financial liabilities at FVPL or other financial liabilities. The Company’s financial liabilities as of September 30, 2011 and December 31, 2010 comprise of trade and other payables and short term loans. Management determines the classification of its financial assets and liabilities at initial recognition and, where allowed and appropriate, re-evaluates such designation at every financial reporting date. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented in gross amounts in the statement of financial position. Determination of fair value The fair value of financial instruments traded in active markets is based on their quoted market price or dealer price quotation (bid price for long positions and ask price for short positions). When current bid and asking prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction. If the financial instruments are not listed in an active market, the fair value is determined using appropriate valuation techniques which include recent arm’s length market transactions, net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models, and other relevant valuation models. Derecognition of financial instruments A financial asset or, where applicable, a part of a financial asset or part of a group of similar financial assets is derecognized when: a) the rights to receive cash flows from the asset have expired; b) the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or c) the Company has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired.
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When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of comprehensive income. Financial assets Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate (EIR) method, less provision for impairment. Amortization is determined using the EIR method. Gains and losses are recognized in statement of comprehensive income when the loans and receivables are derecognized or impaired, as well as through amortization process. They are included in the current assets, except for maturities greater than 12 months after the financial position date which are classified as non-current assets. Financial assets at FVPL This category comprises only in-the-money derivatives which are carried in the statement of financial position at fair value with changes in fair value recognized in the statement of comprehensive income in the other operating income line item. AFS investments AFS investments include equity and debt securities. Equity investments classified as AFS are those, which are neither classified as held for trading nor designated at FVPL. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response in the market conditions. After initial measurement, AFS investments are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the statement of income in finance costs and removed from the AFS reserve. The Company evaluated its AFS assets whether the ability and intention to sell them in the near term is still appropriate. When the Company is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Company may elect to reclassify these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly. For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortized cost and the expected cash flows is also amortized over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the statement of income. The Company does not have any asset under this category.
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HTM investments HTM investments are quoted non-derivative financial assets with fixed or determinable payments and fixed maturities for which the Company’s management has the positive intention and ability to hold to maturity. After initial measurement, these investments are measured at amortized cost using the EIR method, less impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. Gains and losses are derecognized or impaired through the amortization process. The Company does not have any assets under this category. Financial liabilities Financial liabilities at FVPL Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVPL. Financial liabilities are classified as held for trading if they are acquired for the purpose for selling the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instrument in hedge relationship as defined by PAS 39. Separate embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in profit or loss. The Company has not designated any financial liabilities upon initial recognition as FVPL. Other financial liabilities Other financial liabilities include the following items:
Bank borrowings and the Company's perpetual preference shares, if any, are initially recognized at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortized cost using the EIR method, which ensures that any interest expense over the period of repayment is at a constant rate on the balance of the liability carried in the statement of financial position. Interest expense in this context includes initial transaction costs and premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Trade payables and other short-term monetary liabilities, which are initially recognized at fair value and subsequently carried at amortized cost using the EIR method.
IFRS 7 fair value measurement hierarchy PFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement (see note 3). The fair value hierarchy has the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
The level in the fair value hierarchy within which the financial asset or financial liability is
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categorized is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the three levels. Impairment of financial assets Assessment of impairment The Company assesses at each financial reporting date whether a financial asset or group of financial assets is impaired. It assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. The determination of impairment losses for financial assets is inherently subjective because it requires material estimates, including the amount and timing of expected recoverable future cash flows. These estimates may change significantly from time to time, depending on available information. Evidence of impairment Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan or advance by the Company on terms that the Company would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the Company, or economic conditions that correlate with defaults in the Company. Impairment on assets carried at amortized cost If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses) discounted at the financial asset’s original EIR (i.e., the EIR computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of loss shall be recognized in “Other income (expenses)” in the statement of comprehensive income. Impairment on assets carried at cost If there is objective evidence of an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or of a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Reversal of impairment loss If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
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recognized in “Other income” in the statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its cost or amortized cost at the reversal date. Inventories
Inventories are stated at the lower of cost or net realizable value (NRV). Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of warehouse merchandise is determined using the first-in, first-out method. NRV is the selling price in the ordinary course of business, less the estimated cost of marketing and distribution. Investment properties Investment properties pertain to land held to earn rental or for capital appreciation, which are both measured at cost, including transaction costs, less accumulated depreciation and accumulated impairment loss. Investment properties are derecognized when they have either been disposed or when the investment properties are permanently withdrawn from use and no future benefit is expected from its disposal. Any gain or loss on the retirement or disposal of investment properties is recognized in its disposal. Any gain or loss on the retirement or disposal of investment properties is recognized in the statement of comprehensive income in the year of retirement or disposal. Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are charged to operations in the year the costs are incurred. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss. Property and equipment
Items of property and equipment are initially recognized at cost, net of accumulated depreciation and impairment losses, if any. It includes the purchase price and directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.
Depreciation is provided on all other items of property and equipment using the straight-line method over their expected useful economic lives, as follows:
Office equipment 5 years Transportation equipment 5 years
The estimated useful lives and depreciation method are reviewed periodically to ensure that the periods and method of depreciation are consistent with the expected pattern of economic benefits from items of property and equipment. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation and any impairment in value are removed from the accounts and any resulting gain or loss is recognized in the statement of comprehensive income.
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Impairment of non-financial assets The carrying amounts of the Company’s non-financial assets such as property and equipment are reviewed at each financial reporting date to determine whether there is any indication of impairment or an impairment loss previously recognized no longer exists or may have decreased. If any such indication exists, the Company makes a formal estimate of the asset’s recoverable amount. The recoverable amount is the higher of an asset or its cash generating unit’s (CGU) fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash flows independent of those from other assets, the recoverable amount is determined for the CGU to which the asset belongs. Whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount and an impairment loss is recognized in the statement of comprehensive income. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized. Reversals of impairment are recognized in the statement of comprehensive income. Equity Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. Revenue Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Pension benefits Pension cost is determined using the projected unit credit method. This method reflects the services rendered by the employees up to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Actuarial valuations are conducted with sufficient regularity, with option to accelerate when significant changes to underlying assumptions occur. Pension expense includes current service cost, interest cost, recognized actuarial gains and losses, the effect of any curtailment or settlements and amortization of transitional liability at the date of adoption of PAS 19. The defined benefit liability / defined benefit asset recognized in the statement of financial position is the present value of the defined benefit obligation at the financial reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated by an actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are
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denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related retirement liabilities. Cumulative unrecognized actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are spread to income over the expected average remaining working lives of employees. Past-service costs are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this instance, the past-service costs are amortized on a straight-line basis over the vesting period. Leases Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the statement of comprehensive income on a straight-line basis over the lease term. The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: a. There is a change in contractual terms, other than a renewal or extension of the
arrangement; or
b. A renewal option is exercised or extension is granted, unless the term of the renewal or extension was initially included in the lease term; or
c. There is a change in the determination of whether fulfilment is dependent on a specified asset; or
d. There is a substantial change to the asset. Where a re-assessment is made, lease accounting shall commence or cease from the date when the change in circumstance gave rise to the re-assessment for scenarios a, c or d above, and the date of renewal or extension for scenario b. Borrowing costs Borrowing costs are recognized as expense in the year in which these costs are incurred. Income taxes Provision for income tax expense represents the sum of the current tax and deferred tax expenses. Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the financial reporting date. Deferred tax
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Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability in the statements of financial position differs from its tax base, except for differences arising on:
the initial recognition of goodwill;
the initial recognition of an asset or liability in a transaction which is not a business combination at the time of the transaction affects neither accounting nor taxable profit; and
investments in subsidiaries and jointly controlled entities where the Company is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable income will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each financial reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and they relate to income taxes levied by the same taxing authority and the Company intends to settle its current tax assets and liabilities on a net basis. Provisions Provisions are recognized when: (a) the Company has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as finance cost. When the Company expects a provision or loss to be reimbursed, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain and its amount is estimable. The expense relating to any provision is presented in the statement of comprehensive income, net of any reimbursement. Related parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. The key management personnel of the Company and post–employment benefit plans for the benefit of the Company’s employees are also considered to be related parties. Events after the reporting date Post year-end events up to the date of the auditors’ report that provide additional information about the Company’s position at financial reporting date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the financial statements when material.
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Earnings per share (EPS) The Company computes its basic earnings per share by dividing profit or loss for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. SIGNIFICANT ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS The preparation of the financial statements in conformity with PFRS requires the Company’s management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements. The estimates and associated assumptions are based on historical experiences and other various factors that are believed to be reasonable under the circumstances including expectations of related future events, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates, assumptions and judgments are reviewed and evaluated on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Determination of functional currency
Based on the economic substance of the underlying circumstances relevant to the Company, the
functional currency is determined to be the Philippine Peso. It is the currency that mainly
influences the Company’s operations.
Classification of financial instruments
The Company classifies a financial instrument, or its component parts, on initial recognition as a
financial asset, a financial liability or an equity instrument in accordance with the substance of the
contractual agreement and the guidelines set by PAS 39 on the definitions of a financial asset, a
financial liability or equity. In addition, the Company also determines and evaluates its intention
and ability to keep the investments until its maturity date.
The substance of a financial instrument, rather than its legal form, and the management’s
intention and ability to hold the financial instrument to maturity generally governs its classification
in the statements of financial position. Determination of fair value of financial instruments The Company carries certain financial assets at fair value, which requires extensive use of accounting estimates and judgment. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Company utilized different valuation methodologies and assumptions.
Impairment of loan and trade and other receivables The Company reviews its loans and receivables at each reporting date to assess whether a provision for impairment should be recognized in its statements of comprehensive income or loans and receivables balance should be written off. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors
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and actual results may differ, resulting in future changes to the allowance. Moreover, management evaluates the presence of objective evidence of impairment which includes observable data that comes to the attention of the Company about loss events such as but not limited to significant financial difficulty of the counterparty, a breach of contract, such as a default or delinquency in interest or principal payments, probability that the borrower will enter bankruptcy or other financial re-organization. Estimation of useful lives of property and equipment The Company reviews annually the estimated useful lives of property and equipment based on the period over which the assets are expected to be available for use. It is possible that future results of operations could be materially affected by changes in these estimates. A reduction in the estimated useful lives of property and equipment would increase recorded depreciation expense and decrease the related asset accounts. Impairment of non-financial assets
The Company assesses at each financial position date whether there is an indication that the carrying amount of all non-financial assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. At the financial position date, the Company assesses whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Estimation of retirement benefits The determination of the obligation and retirement benefits is dependent on management’s assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 20 and include, among others, discount rates per annum and salary increase rates. Actual results that differ from the Company’s assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. While the Company believes that the assumptions are reasonable and appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the retirement obligations. The details of the Company’s pension are provided in Note 20.
Realizability of deferred tax assets
Management reviews the carrying amount of deferred tax assets at each reporting date. The carrying amount of deferred tax assets is reduced to the extent that it is no longer probable that sufficient taxable profit will be available against which the related tax assets can be utilized. Management believes that sufficient taxable profit will be generated to allow all or part of the deferred tax assets to be utilized.
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PROPERTIES REAL PROPERTIES The Company is currently leasing the following real properties as storage warehouses for its distribution products:
Details of the Lease Agreements
Except for the Main Office which is used for administrative purposes, the Lease Agreements
principally provide for the use of the specified premises as storage of the Company’s distribution
products.
Unless, otherwise agreed upon by the parties, all lease agreements are renewed annually upon
the mutual consent of both parties and upon similar terms and conditions except for minimal
increases in the lease payments on leased premises located in N.E. North Warehouse,
Pampanga Warehouse and Pangasinan. The Company is leasing the Main Office, Bulacan
Warehouse and N.E. South Warehouse free of rent. The Main Office and Bulacan Warehouse is
owned by Avestha Holding Corporation, an affiliate, the stockholders of which are also
stockholders in the Company while the N.E. South warehouse is owned by a businesswoman
who has very close ties with the Calata family. Meanwhile, operating leases were entered into by
the Company with the warehouse owners of N.E. North Warehouse, Pampanga Warehouse and
Pangasinan Warehouse whereby the Company is paying an agreed monthly rental for the use of
said warehouses.
The rent expense charged to operations for the years ended December 31, 2011, 2010 and 2009 amounted to P1,206,440, P1,229,050 and P1,152,023, respectively. The Company has likewise acquired real properties, for its hog and broiler growing and breeding projects as follows:
PROJECT NAME LOCATION AREA (sq m)
TCT NO.
Monterey Hog Growing Farm
Bgy. Ula, Tugbok District, Davao City
30,114 TCT No. 146-2011014078
Magnolia Broiler Growing Farm
Bgy. Kinawe, Libona, Bukidnon
18,780 TCT No. 81936
6,281 TCT No. 81789
Bgy. Matina, Tugbok District, Davao
25,000 T-146-2011013915
20,000 T-146-2011013914
5,000 T-146-2011014631
DESCRIPTION ADDRESS AREA
Main Office Banga 1st, Plaridel, Bulacan 924 sqm
Warehouse (Bulacan) Banga 1st, Plaridel, Bulacan 5471 sqm
N.E. South Warehouse San Antonio, San Leonardo, Nueva Ecija
500 sqm.
N.E. North Warehouse Sto. Domingo, Nueva Ecija 300 sqm.
Pangasinan Warehouse Carriedo, Tayug, Pangasinan 1,300 sqm.
Pampanga Warehouse Lagundi, Mexico,Pampanga 406 sqm.
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Bgy. Nangka, Libona, Bukidnon
30,977 T-81699
Monterey Hog Breeder Farm
Bgy. Naganacan, Sta. Maria, Isabela
67,989 TCT No. 382740
Magnolia Broiler Breeder Farm
Bgy. Fuyo, Ilagan, Isabela
28,865 TCT No. 383241
28,345 TCT No. 383243
The Company has no definite plans regarding acquisition of real properties within the next twelve
months. Nevertheless, should it decide to do so, the Company shall comply with the pertinent
disclosure rules as provided by law and as may be warranted under the circumstances. TRANSPORTATION EQUIPMENT As reported in its Audited Financial Statements as of 31 December 2011, the Company owns transportation equipment worth Twenty Three Million Seven Hundred Forty Five Thousand Six Hundred Thirty Pesos (P23,745,630). This is composed of one hundred twelve (112) vehicles. These transportation vehicles are used by the Company for the official use of its farm aid technicians, sales personnel, delivery personnel and other employees for the purpose of carrying out the business of the Company. INTELLECTUAL PROPERTIES Application for Registration of Trade Mark The Company has applied for the registration of the trade mark “Calata Corporation and Logo”. The application has been filed with the Intellectual Property Office (IPO) last March 18, 2011. On November 17, 2011, the Company received a “Notice of Allowance” from the IPO with advise that its publication pursuant to Section 133.2 of RA 8293 has been approved. The description of the mark is as follows: “The mark consists of two wave-like lines of different length. The upper wave-like line is the longest of the two lines and is colored blue, while the lower wave-like line is colored red. Below the said waved-like lines is the word “CALATA”, which are all capitalized. Underneath the aforesaid word is the word “CORPORATION”, which are all capitalized but of smaller font size.” The mark shall extend to the following: chemicals used in agriculture (pesticides, fertilizer), agricultural implements, machineries and equipment, agricultural grains, seeds, foodstuffs for animals and accessories, and for business management. Considering however that the said application is still pending, the Company is in no position to disclose the principal terms and expiration dates of said mark.
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LEGAL PROCEEDINGS As of the date of this Prospectus, to the best of the Company’s knowledge, there is no material pending legal proceedings to which the Company, its directors, shareholders, related parties or any of its affiliates is a party or of which any of their property is subject.
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SECURITY OWNERSHIP OF CERTAIN RECORD AND BENEFICIAL SHAREHOLDERS
Security Ownership of Record and Beneficial Owners: Listed below are the persons known to the Company to be directly or indirectly the record or beneficial owner of more than five percent (5%) of the Company’s voting securities as of December 31, 2011: Title of Class
Name, Address of Record Owner &
Relationship with the Company
Name of Beneficial Owner and Relationship with the Record
Owner
Citizen-ship
No. of Shares
%age
Common Joseph H. Calata Joseph H. Calata Filipino 217,699,994 67.17
Common Daniel C. Go Daniel C. Go Filipino 21,500,000 6.63
Common Herbert P. Lipana Herbert P. Lipana Filipino 20,000,000 6.17
TOTAL 259,199,994 79.97
As of December 31, 2011, the Company’s directors and key officers owned 67.171% of the Company’s issued and outstanding shares of common stock, as follows:
Title of Class
Name, Address of Record Owner and
Relationship with the Company
Name of Beneficial Owner and
Relationship with the
Record Owner
Citizenship No. of Shares
Percentage
Common Joseph H. Calata Banga 1st, Plaridel, Bulacan Chairman / Ceo / President
Joseph H. Calata
Filipino 217,699,994 67.171
Common Benison Paul B. De Torres San Roque, San Rafael, Bulacan Director / Cfo / Treasurer
Joseph H. Calata
Filipino 1 nil
Common Baltazar N. Endriga 12 Edades St. Corinthian Garden Subdivision, Quezon City Director
Joseph H. Calata
Filipino 1 nil
Common Jose A. Zaide 51 Laguna Bay, South Bay Gardens, Paranaque City
Director
Joseph H. Calata
Filipino 1 nil
Common Jaime C. Laya 1000 United Nations Ave., cor. Marcelino St., Ermita, Manila
Joseph H. Calata
Filipino 1 nil
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Director
Common Harvey S. Keh Royal View Mansions Lt. Artiaga Street, San Juan, Metro Manila Independent Director
Joseph H. Calata
Filipino 1 nil
Common George A. Nava Caprina Street, La Residencia De Sta. Rosa, Sta. Rosa City, Laguna Independent Director
Joseph H. Calata
Filipino 1 nil
Common Jose Marie E. Fabella Corporate Secretary
N/A
Filipino N/A N/A
TOTAL 217,700,000 67.171%
Voting Trust Holders of 5% or More
There is no voting trust arrangement executed among the holders of five percent (5%) or more of the issued and outstanding shares of common stock of the Company.
Change in Control For information on Changes in Control, see the section “Description of Shares” on page 32 of this Prospectus.
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INTEREST OF EXPERTS AND INDEPENDENT COUNSEL
The financial statements of the Company were audited by BDO ALBA ROMEO and Co. for the fiscal years ended December 31, 2011, 2010 and 2009. Said external auditor has no shareholdings in the Company, or any right, whether legally enforceable or not, to nominate persons or to subscribe to securities of the Company, in accordance with the professional standards on independence set by the Board of Accountancy and the Professional Regulation Commission. The validity of the Offer Shares and other matters concerning the Offer were passed upon for the Company by De Vera and Associates, independent legal and tax counsel of the Company, The independent legal counsel and tax counsel have no shareholdings or any interest, direct or indirect, in the Company, or any right, whether legally enforceable or not to nominate persons or to subscribe to the securities of the Company in accordance with the standards on independence required in the Code of Professional Responsibility and as prescribed by the Supreme Court of the Philippines. The named external auditors and the independent and legal and tax counsel have not acted and will not as promoter, underwriter, voting trustee, officer or employee of the Company. INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company were audited by BDO ALBA ROMEO and Co. for the fiscal years ended December 31, 2011, 2010 and 2009. Said external auditors have no shareholdings in the Company, or any right, whether legally enforceable or not, to nominate persons or to subscribe to the securities of the Company, in accordance with the professional standard on independence set by the Board of Accountancy and the Professional Regulation Commission. EXTERNAL AUDIT FEES AND SERVICES
The following table sets out the aggregate fees billed for each of the last 3 fiscal years for professional services rendered by the Company’s external auditors:
2011 2010 2009
Audit Fee Php1,800,000.00 Php550,000.00 Php550,000.00
Other Fees 1 270,000.00 82,500.00 82,500.00
TOTAL Php2,070,000.00 Php632,500.00 Php632,500.00
1 Other fees refer to out of pocket expenses such as transportation costs
Apart from the foregoing, no other services were rendered or fees billed by the Company’s auditors as of the fiscal years ended December 31, 2009, 2010 and 2011. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The name of the handling partner for the external audit is:
Partner-in-charge: Michael D. Roxas
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For the fiscal years ended December 31, 2009, the Company’s external auditor was Yanagiya Perez-Raya, CPA. However, considering that the Company shall secure a secondary license for the sale of its securities to the public through the conduct of an Initial Public Offering, pursuant to the requirements of the Securities Regulation Code and its Implementing Rules and Regulations, an External Auditor with Class A accreditation from the Securities and Exchange Commission was required. Thus, the Company engaged the services of BDO Alba Romeo and Associates as its external auditor to conduct the audit for the fiscal years ended December 31, 2011, 2010 and 2009.
The Company has not had any disagreements with its internal auditor and former independent accountant on any matter of accounting principles or practices, financial statement of disclosure or auditing scope or procedure.
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REGULATORY & ENVIRONMENTAL MATTERS
Various government agencies in the Philippines regulate the different aspects of the Company’s business. Business entities engaged in Retail Trade are governed by RA 8762. Section 5 of RA 8762 restricts the Retail Trade business to Filipinos where the paid-up capital of the enterprise is less than the Peso equivalent of US$2,500,000.00. Otherwise, that is, where the paid-up capital of the enterprise is US$2,500,000.00 or more, the enterprise may be wholly owned by foreigners, with the condition however that the investments for establishing a store shall be the Peso equivalent of at least US$830,000.00. Similarly, under Section 5 of PD 194, foreign equity participation shall be allowed in entities engaged in the culture, production, milling, processing, trading excepting retailing, of rice and corn and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof, provided that at least 60% of such foreign equity participation shall be transferred to Filipino citizens over a period to be established by the National Grains Authority. The distribution of veterinary medicines, agrochemicals, fertilizers, pesticides, feeds, and seeds is likewise regulated by different agencies under the Department of Agriculture. With respect to veterinary medicines, the Food and Drug Authority (“FDA”) requires prior authorization for the importation, sale, offering for sale, distribution, or transfer of any health product. Registration of the veterinary medicines with the FDA is also required. Likewise, under Presidential Decree No. 1144, registration with the Fertilizer and Pesticides Authority (“FPA”) is mandatory before pesticides, fertilizers or other agricultural chemicals are, among others, sold or offered for sale. Hence, a handler of fertilizers, pesticides and other agricultural chemicals must also obtain a license from the FPA before it may distribute fertilizers. Moreover, Presidential Decree No. 1144 requires the registration of pesticides, fertilizers or other agricultural chemicals before the same are imported, manufactured, formulated, stored, distributed, sold or offered for sale, transported, delivered for transportation or used. As regards feeds, under Section 4 of the Livestock and Poultry Feeds Act, as amended, any person, partnership, firm, corporation or association desiring to engage in the manufacture, importation, sale or distribution of feeds or feeding stuffs shall first be registered with the Bureau of Animal Industry (“BAI”). The feeds or feeding stuffs in the form of complete mixture, concentrate, supplement, or ingredient must also be registered with BAI prior to manufacture, importation, advertisement, sale or offer for sale or holding in possession for sale. With respect to seeds, a permit must be secured from the Bureau of Plant Industry for the transportation of seeds. The businesses of hog breeding, growing and raising and poultry growing are also regulated by the BAI. Under RA 8485, registration with the BAI is required before any person can establish, maintain and operate a farm for raising livestock and poultry. In case the farm owner will also provide services of transporting the animals for clients, said owner must secure the following from the BAI: 1) Livestock, Poultry and its By-products Handlers License and 2) Livestock Transport Carrier Accreditation. In addition to the foregoing, to prevent the spread of foot and mouth disease with respect to hogs, all livestock shipment must have accompanying Original Copies of the following: Livestock Handler’s License, Veterinary Health Certificate, BAI FMD-free Farm Accreditation Certificate, Authority to Ship, and Shipping Permit.
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As regards poultry growing, farms with 20,000 broilers and 5,000 layers and above, and breeder farms of any volume shall be registered with the BAI. All farms with a minimum stocking density of at least 40,000 broilers or 30,000 layers or 2,000 breeders shall be required to have an attending veterinarian. Further, all inter-provincial shipments of eggs and day-old chicks, pullets and chickens from commercial/backyard poultry farm must be covered by a valid shipping permit issued by the BAI, Office of the Regional Veterinary Quarantine or Office of the Provincial Veterinarian. The farm of origin must first be accredited by the Animal Health Division of BAI/ Office of the Regional Veterinary Quarantine Office/ Office of the Provincial Veterinarian before shipments are allowed. The Consumer Act of the Philippines, the provisions of which are principally enforced by the Department of Trade and Industry, seeks to protect consumers against hazards to health and safety and against deceptive, unfair and unconscionable sales acts and practices; and provide information and education to facilitate sound choice and the proper exercise of rights by the consumer. This law imposes rules to regulate such matters as (i) consumer product and safety; (ii) the production, sale, distribution and advertisement of food, drugs, cosmetics and devices as well as substances hazardous to the consumer’s health and safety; (iii) fair, honest, consumer transactions and consumer protection against deceptive, unfair and unconscionable sales acts or practices; (iv) practices relative to the use of weights and measures; (v) consumer product and service warranties; (vi) compulsory labeling, and fair packaging; (vii) liabilities for defective products and services; (viii) consumer protection against misleading advertisements and fraudulent sales promotion practices; and (ix) consumer credit transactions. Under the SRC, the SEC has jurisdiction and supervision over all corporations, partnerships or associations that are grantees of primary franchises, license to do business or other secondary licenses. As the government agency regulating the Philippine securities market, the SEC issues regulations on the registration and regulation of securities exchanges, the securities market, securities trading, the licensing of securities brokers and dealers and reportorial requirements for publicly listed companies and the proper application of SRC provisions, as well as the Corporation Code, and certain other statutes. GOVERNMENT APPROVALS AND PERMITS The table below lists the Company’s regulatory permits:
GOVERNMENT AGENCY DESCRIPTION EXPIRY DATE
Fertilizer and Pesticide Authority License No. 02-0511-014 to operate as Area Distributor of Agricultural Pesticides
May 16, 2012
Fertilizer and Pesticide Authority License No. 013 to operate as Area Distributor of Fertilizer
May 16, 2012
Bureau of Animal Industry Registration No. D-10-443-Feed Establishment Registration Certificate Registration No. D-11-605- Feed Establishment Registration Certificate Registration No. D-11-
July 26, 2012
December 31, 2011
December 31, 2011
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606- Feed Establishment Registration Certificate
Fertilizer and Pesticide Authority Warehouse of Fertilizer and agricultural pesticides
May 16, 2012
In addition to the above-mentioned permits, the Company has secured all permits material to its operations. These permits include the ECC, Mayor’s Permit, Certificate of Registration with the Bureau of Internal Revenue, Registration with the Social Security System, Philippine Health Insurance Corporation and the Home Mutual Development Fund.
Effect on existing or probable governmental regulations on the business Existing or prospective legislation on government regulation to business enterprises benefit both the business and its customers. Certificates issued by the appropriate government agencies (Bureau of Animal Industry, Fertilizer and Pesticide Authority) signify an imprimatur from government that the business in whose favor the certificates were issued has complied with all necessary requirements to safeguard the buying public without compromising the interest of the business. Likewise, this certification, among others, becomes a source of credibility to customers, hence, can be used as a yardstick for an acceptable prospect for business transactions. While the Company has exclusive distributorship agreement with its major suppliers, it remains confident that in the highly unlikely event that it is unable to retain its exclusive distribution agreements, its proven credibility and success in the distribution business will be able to create for it alternative business opportunities. Environmental permits The Implementing Rules and Regulations for the Philippine Environmental Impact Statement System provides that an Environmental Compliance Clearance (“ECC”) and an Environmental Impact Statement (“EIS”) is required for poultry farms that have a capacity of greater than 100,000 birds. On the other hand, the said Implementing Rules require an ECC and an Initial Environmental Examination (“IEE”) for hog farms that have a capacity of less than 5,000 and greater than 500 heads. Based on the foregoing, Calata’s poultry and hog operations therefore require the submission of an ECC. Calata is required to prepare and submit an EIS as an application for an ECC for its poultry operation and an IEE Report likewise as an application for an ECC for its hog operations.
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RELATED PARTY TRANSACTIONS
Related party transactions are made under the normal course of business. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions and the parties are subject to common control or common significant influence. Such relationships also exist between and/or among entities which are under common control with the reporting enterprise, or between and/or among the reporting enterprises and their key management personnel, directors or its stockholders. Related parties are corporate entities that are owned and controlled by the same owner of the Company, and neither a subsidiary or associate of the Company. The details of the related parties are summarized as follows:
Name of the related party
Relationship Name of Common Stockholders Nature of Operations
Calata Builders, Inc.
Common Stockholders
Joseph H. Calata (70%) Melvin H. Calata (10%) Jennibel H. Calata (10%) Cherry Lou M. Dela Cruz (5%) Carmelita H. Mariano (5%) TOTAL 100%
A corporation established in the Philippines which ventures as a subcontractor and into the realty business.
Calata Farms, Inc.
Common Stockholders
Joseph H. Calata (70%) Melvin H. Calata (10%) Jennibel H. Calata (10%) Cherry Lou M. Dela Cruz (5%) Carmelita H. Mariano (5%) TOTAL 100%
A corporation which offers high efficiency poultry growing using climate-controlled system.
Avestha Holding Corporation
Common Stockholders
Common Stockholders
Joseph H. Calata (0.9%) Melvin H. Calata (0.9%) Jennibel H. Calata (0.9%) Non Calata Stockholders
Eusebio C. Calata (48.6%) Isabel H. Calata (48.6%) TOTAL 100%
A duly organized holding company
Agri Phil Corporation
Common Stockholders
Joseph H. Calata (80%) Melvin H. Calata (5%) Jennibel H. Calata (5%) Cherry Lou M. Dela Cruz (5%) Carmelita H. Mariano (5%) TOTAL 100%
A corporation established to engage in import/export, buying, selling, distributing, marketing at wholesale
Gastin Corporation
Common Stockholders
Joseph H. Calata (79.9%)
Melvin H. Calata (0.003%) Jennibel H. Calata (0.003%) Carmelita H. Mariano (0.003%)
Non Calata Stockholder
Eduardo L. Santos (20%) TOTAL 100%
Distribution of Agricultural Products
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Significant transactions with related parties as of 31 December 2011 are the following: a) Cash advances were made to related parties, excluding stockholders, to support their
operating capital requirements. These loans are repayable once the related parties have sufficient cash flows to support their respective operations. Cash advances from stockholders are used to support the operating capital requirements of the Company. Cash advances to stockholders represent advances made in carrying out the day-to-day opearations of the Company and are subject to liquidation upon utilization. The advances to (from) related parties are non-interest bearing, unsecured and have no fixed repayment terms. As of December 31, 2011 and 2010, the outstanding balances of advances to (from) related parties follow:
2011 2010
Agri Phil Corporation January 1 P- P- Cash advances to 55,455,249 -
December 31 55,455,249 -
Calata Farms January 1 33,173,159 -
Cash advances to (collections from) (33,173,159) 33,173,159
December 31 - 33,173,159
Calata Builders January 1 1,525,347 - Cash advances to 6,200,000 1,525,347
December 31 7,725,347 1,525,347
Stockholders January 1 174,325 3,372,096 Cash advances to 3,306,148 43,802,229
Cash advances from (165,457) - Dividends distribution through offsetting (Note 15)
- (47,000,000)
December 31 3,315,016 174,325
Total advances to related parties P66,495,612 P34,872,831
2011 2010
Stockholders January 1 P- P- Cash advances received 67,869,405 -
Cash advances paid (15,407,951) -
Total advances from related parties P52,461,454 P-
b) An operating lease agreement was executed between the Company and Avestha whereby
the latter granted the former with the rent free use of office premises and various warehouses located in Bulacan.
c) A loan agreement was executed between the Company and Avestha Holdings Corporation whereby the former granted the latter a loan amounting to P120,000,000 for a term of three (3) years subject to interest at the rate of six percent (6%) per annum payable on the balance at the end of every month.
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d) During the year, the Company disposed fully-depreciated property and equipment to a related party that resulted to a gain on disposal amounting to P1,914,123.
e) The short term compensation of key management personnel amounted to P3,822,460,
P2,786,913 and P2,514,680 for the years ended December 31, 2011, 2010 and 2009 respectively. There are no long term compensation of key management personnel for the years ended December 31, 2011, 2010 and 2009, respectively.
f) For the years ended December 31, 2011 and 2010, the Company has not recorded any impairment of receivable relating to the amounts owned by the related parties. The assessment is undertaken through examining the financial position of the related parties and the market in which they operate.
g) In 2010, Calata Farms, Inc. had an advance from Calata Corporation in the amount of
P33,173,159.00 with the intention to use it for its farming operations. However, this plan did not push through as the previous plan to put all new farming operations in Calata was recalled. Instead, the farming operations were done under Calata Corporation. Hence, in 2011, Calata Farms, Inc. did not proceed with its commercial farming operations and opted to fully pay off said advance from Calata Corporation.
h) It was agreed among the family members that Agri Phil willl no longer expand its retail
business once Calata Corporation starts to construct its Calata retail stores.
i) Gastin Corporation is an authorized exclusive distributor of Yara Fertilizers, which includes the whole area of Central Luzon. On 15 August 2011, Calata entered into an Exclusive Distributorship Agreement with Gastin. The Exclusive Distributorship Agreement appoints Calata as the sole and exclusive distributor of Yara Fertilizer in the whole area of Luzon. It obligates Calata to engage in a full-scale information campaign to promote the purchase of Yara Fertilizers to all its clientele retailers and to the public at large. The agreement states that performance quotas, discount rates and the price of the fertilizers shall be discussed and adjusted on a periodical basis as may be evaluated by the parties.
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PHILIPPINE STOCK MARKET The information presented in this section has been extracted from publicly available documents which have not been prepared or independently verified by the Company or the Issue Manager or any of their respective affiliates or advisors in connection with sale of the Offer Shares. BRIEF HISTORY The Philippines initially had two stock exchanges, the Manila Stock Exchange, which was organized in 1927, and the Makati Stock Exchange, which began operations in 1963. Each exchange was self-regulating, governed by its respective Board of Governors elected annually by its members. Several steps initiated by Government and undertaken over the last few years have resulted in the unification of the two bourses into the PSE. The PSE was incorporated in 1992 by officers of both the Makati and the Manila Stock Exchanges. In March 1994, the licenses of the two exchanges were revoked. While the PSE maintains two trading floors, one in Makati City and the other in Pasig City, these floors are linked by an automated trading system which integrates all bids and ask quotations from the bourses. In June 1998, the Philippine SEC granted the PSE a Self-Regulatory Organization (“SRO”) status, allowing it to impose rules as well as implement penalties on erring trading participants and listed companies. On August 8, 2001, PSE completed its demutualization, converting from a non-stock member-governed institution into a stock corporation in compliance with the requirements of the Securities Regulation Code. The PSE has an authorized capital stock of PhP36.8 million, of which PhP15.3 million is subscribed and fully paid-up. Each of the 184 member-brokers was granted 50,000 shares of the new PSE at a par value of PhP1.00 per share. In addition, a trading right evidenced by a "Trading Participant Certificate" was immediately conferred on each member broker allowing the use of the PSE's trading facilities. As a result of the demutualization, the composition of the PSE Board of Governors was changed, requiring the inclusion of seven brokers and eight non-brokers, one of whom is the President. On December 15, 2003, the PSE listed its shares by way of introduction at its own bourse as part of a series of reforms aimed at strengthening the Philippine securities industry. The PSE Management deliberates on all applications for listing and, if the listing application is endorsed by the Management, forwards the application to the PSE board of directors for approval. Classified into financial, industrial, holding firms, property, services, mining and oil sectors, companies are listed either on the Exchange’s First Board, Second Board or the newly created Small and Medium Enterprises Board. Each index represents the numerical average of the prices of component stocks. The PSE has as an index, referred to as the PSEi, which as at the date hereof reflects the price movements of 30 selected stocks listed on the PSE, based on traded prices of stocks from the various sectors. The PSE shifted from full market capitalization to free float market capitalization effective April 3, 2006 simultaneous with the migration to the free float index and the renaming of the PHISIX to PSEi. With the increasing calls for good corporate governance, PSE has adopted an online daily disclosure system to improve the transparency of listed companies and to protect the investing public.
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SELECTED STOCK EXCHANGE DATA The table below sets forth movements in the composite index from 2004 to 2011, and shows the number of listed companies, market capitalization, and value of shares traded for the same period:
Year Composite Index
at Closing Number of
Listed Companies
Aggregate Market Capitalization
(in PhP billions)
Combined Value of Turnover
(in PhP billions)
1995 2,594.20 205 1,545.70 379.00
1996 3,170.60 216 2,121.10 668.90
1997 1,869.20 221 1,261.30 588.00
1998 1,968.80 221 1,373.70 408.70
1999 2,142.90 226 1,938.60 713.90
2000 1,494.50 230 2,577.60 357.60
2001 1,168.10 232 2,142.60 159.50
2002 1,018.40 234 2,083.20 159.70
2003 1,442.40 236 2,973.80 145.40
2004 1,822.80 236 4,766.20 206.60
2005 2,096.00 237 5,948.40 383.50
2006 2,982.50 240 7,172.80 572.60
2007 3,261.60 244 7,978.50 1,338.30
2008 1,872.80 246 4,069.20 763.90
2009 3,052.68 248 6,029.10 994.20
2010 4,201.14 253 8,866.10 1,096.50
2011 4,371.96 253 8,697.00 1,442.60
TRADING The PSE is a double auction market. Buyers and sellers are each represented by stock brokers. To trade, bids or ask prices are posted on the PSE’s electronic trading system. A buy (or sell) order that matches the lowest asked (or highest bid) price is automatically executed. Buy and sell orders received by one broker at the same price are crossed at the PSE at the indicated price. Transactions are generally invoiced through a confirmation slip sent to customers on the trade date (or the following trading date). Payment of purchases of listed securities must be made by the buyer on or before the third trading day (the settlement date) after the trade. For Small-Denominated Treasury Bonds, settlement is on the day the trade was made. Trading on the PSE starts at 9: 00 am,breaks from 12: 00 pm to 1: 30 pm, and ends at 3: 00 pm with a 10-minute extension during which transactions may be conducted, provided that they are executed at the last traded price and are only for the purpose of completing unfinished orders. Trading days are Monday to Friday, except legal and special holidays. Minimum trading lots range from 10 to 5,000,000 shares depending on the price range and nature of the security traded. Odd-sized lots are traded by brokers on a board specifically designed for odd-lot trading.
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To maintain stability in the stock market, daily price swings are monitored and regulated. Under current PSE regulations, when the price of a listed security moves up by 50.0% or down by 50.0% in one day (based on the previous closing price or last posted bid price, whichever is higher), the price of that security is automatically frozen by the PSE, unless there is an official statement from the relevant company or a government agency justifying such price fluctuation, in which case the affected security can still be traded but only at the frozen price. If the issuer fails to submit such explanation, a trading halt is imposed by the PSE on the listed security the following day. Resumption of trading will be allowed only when the disclosure of the issuer is disseminated, subject again to the trading band. SETTLEMENT The Securities Clearing Corporation of the Philippines (SCCP) is a wholly-owned subsidiary of the Philippine Stock Exchange, Inc., and was organized primarily as a clearance and settlement agency for SCCP-eligible trades executed through the facilities of the PSE. It is responsible for (a) synchronizing the settlement of funds and the transfer of securities through Delivery versus Payment (DVP) clearing and settlement of transactions of Clearing Members, who are also Trading Participants of the Exchange; (b) guaranteeing the settlement of trades in the event of a Trading Participant’s default through the implementation of its Fails Management System and administration of the Clearing and Trade Guaranty Fund (CTGF), and; (c) performance of Risk Management and Monitoring to ensure final and irrevocable settlement. SCCP settles PSE trades on a 3-day rolling settlement environment, which means that settlement of trades takes place three (3) days after transaction date (T+3). The deadline for settlement of trades is 12:00 noon of T+3. Securities sold should be in scripless form and lodged under PDTC’s book entry system. Each Trading Participant maintains a Cash Settlement Account with one of the two existing Settlement Banks of SCCP which are Banco De Oro Unibank, Inc. and Rizal Commercial Banking Corporation. Payment for securities bought should be in good, cleared funds and should be final and irrevocable. Settlement is presently on a broker level. SCCP implemented its new clearing and settlement system called Central Clearing and Central Settlement (CCCS) last May 29, 2006. CCCS employs multilateral netting whereby the system automatically offsets “buy” and “sell” transactions on a per issue and a per flag basis to arrive at a net receipt or a net delivery security position for each Clearing Member. All cash debits and credits are also netted into a single net cash position for each Clearing Member. Novation of the original PSE trade contracts occurs, and SCCP stands between the original trading parties and becomes the Central Counterparty to each PSE-Eligible trade cleared through it. SCRIPLESS TRADING In 1995, the Philippine Depository & Trust Corporation (formerly the Philippine Central Depository, Inc.), was organized to establish a central depository in the Philippines and introduce scripless or book-entry trading in the Philippines. On December 16, 1996, the PDTC was granted a provisional license by the Philippine SEC to act as a central securities depository. All listed securities at the PSE have been converted into book-entry settlement in the PDTC. The depository service of the PDTC provides the infrastructure for lodgment (deposit) and upliftment (withdrawal) of securities, pledge of securities, securities lending and borrowing and corporate actions including shareholders’ meetings, dividend declarations and rights offerings. The PDTC also provides depository and settlement services for non-PSE trades of listed equity securities. For transactions on the PSE, the security element of the trade will be settled through the book-entry system, while the cash element will be settled through the current settlement banks, Rizal Commercial Banking Corporation and Banco De Oro Unibank, Inc.
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In order to benefit from the book-entry system, securities must be immobilized into the PDTC system through a process called lodgment. Lodgment is the process by which shareholders transfer legal title (but not beneficial title) over their shares of stock in favor of PCD Nominee Corporation (‘‘PCD Nominee’’), a corporation wholly owned by the PDTC whose sole purpose is to act as nominee and legal title holder of all shares of stock lodged into the PDTC. ‘‘Immobilization’’ is the process by which the warrant or share certificates of lodging holders are canceled by the transfer agent and a new warrant or stock certificate covering all the warrants or shares lodged is issued in the name of PCD Nominee, or any other entity authorized by the SEC, without any jumbo or mother certificate in compliance with the requirements of Section 43 of the Securities Regulation Code (“SRC”). This trust arrangement between the participants and PDTC through PCD Nominee is established by and explained in the PDTC Rules and Operating Procedures approved by the Philippine SEC. No consideration is paid for the transfer of legal title to PCD Nominee. Once lodged, transfers of beneficial title of the securities are accomplished via book-entry settlement. Under the current PDTC system, only participants (e.g. brokers and custodians) will be recognized by the PDTC as the beneficial owners of the lodged equity securities. Thus, each beneficial owner of shares through his participant, will be the beneficial owner to the extent of the number of shares held by such participant in the records of the PCD Nominee. All lodgments, trades and uplifts on these shares will have to be coursed through a participant. Ownership and transfers of beneficial interests in the shares will be reflected, with respect to the participant’s aggregate holdings, in the PDTC system, and with respect to each beneficial owner’s holdings, in the records of the participants. Beneficial owners are thus advised that in order to exercise their rights as beneficial owners of the lodged shares, they must rely on their participant-brokers and/or participant-custodians. Any beneficial owner of shares who wishes to trade his interests in the shares must course the trade through a participant. The participant can execute PSE trades and non-PSE trades of lodged equity securities through the PDTC system. All matched transactions in the PSE trading system will be fed through the Securities Clearing Corporation of the Philippines (SCCP), and into the PDTC system. Once it is determined on the settlement date (trading date plus three trading days) that there are adequate securities in the securities settlement account of the participant-seller and adequate cleared funds in the settlement bank account of the participant-buyer, the PSE trades are automatically settled in the SCCP Central Clearing and Central Settlement System (‘‘CCCS’’), in accordance with the SCCP and PDTC Rules and Operating Procedures. Once settled, the beneficial ownership of the securities is transferred from the participant-seller to the participant-buyer without the physical transfer of stock certificates covering the traded securities. If a stockholder wishes to withdraw his stockholdings from the PDTC System, the PDTC has a procedure of upliftment under which PCD Nominee will transfer back to the stockholder the legal title to the shares lodged by surrendering the PCD Nominee certificate to a transfer agent which then issues a new stock certificate in the name of the shareholder and a report for the balance of the lodged shares. The expenses for upliftment are for the account of the uplifting shareholder. The difference between the depositary and the registry would be on the recording of ownership of the shares in the issuing corporations’ books. In the depository set-up, shares are simply immobilized, wherein customers’ certificates are canceled and a new certificate is issued in the name of PCD Nominee Corp. Transfers among/between broker and/or custodian accounts, as the case may be, will only be made within the book-entry system of PDTC. However, as far as the issuing corporation is concerned, the underlying certificates are in the nominee’s name. In the registry set-up, settlement and recording of ownership of traded securities will already be directly made in the corresponding issuing company’s transfer agents’ books or system. Likewise, recording will already be at the beneficiary level (whether it be a client or a registered custodian holding securities for its clients), thereby removing from the broker its current ‘‘de facto’’ custodianship role.
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AMENDED RULE ON LODGMENT OF SECURITIES On June 24, 2009, the PSE apprised all listed companies and market participants through Memorandum No. 2009-0320 that commencing on July 1, 2009, as a condition for the listing and trading of the securities of an applicant company, the applicant company shall electronically lodge its registered securities with the PDTC or any other entity duly authorized by the SEC, without any jumbo or mother certificate in compliance with the requirements of Section 43 of the Securities Regulation Code. In compliance with the foregoing requirement, actual listing and trading of securities on the scheduled listing date shall take effect only after submission by the applicant company of the documentary requirements stated in the amended rule on Lodgment of Securities of the Exchange. Pursuant to such amendment, the PDTC issued an implementing procedure in support thereof to wit: For new companies to be listed at the PSE as of July 1, 2009, the usual procedure will be observed but the Transfer Agent on the companies shall no longer issue a certificate to PCD Nominee Corp but shall issue a Registry Confirmation Advice, which shall be the basis for the PDTC to credit the holdings of the Depository Participants on listing date. On the other hand, for existing listed companies, the PDTC shall wait for the advice of the Transfer Agents that it is ready to accept surrender of PCNC jumbo certificates and upon such advice the PDTC shall surrender all PCNC jumbo certificates to the Transfer Agents for cancellation. The Transfer Agents shall issue a Registry Confirmation Advice to PCNC evidencing the total number of shares registered in the name of PCNC in the Issuer’s registry as of confirmation date.
199
PHILIPPINE FOREIGN INVESTMENT, FOREIGN OWNERSHIP AND EXCHANGE CONTROLS
REGISTRATION OF FOREIGN INVESTMENTS AND EXCHANGE CONTROLS Under current BSP regulations, a foreign investment in listed Philippine securities (such as the Common Shares) must be registered with the BSP if the foreign exchange needed to service the repatriation of capital and the remittance of dividends, profits and earnings which accrue thereon will be sourced from the banking system. If the foreign exchange required for servicing such capital repatriation or dividends, profits, and earnings remittance will be sourced outside the banking system, registration with the BSP is not required. The application for registration must be filed by a stockbroker/dealer or an underwriter directly with the BSP or with a custodian bank designated by the investor. A custodian bank may be any commercial bank or offshore banking unit in the Philippines appointed by the investor to register the investment, hold shares for the investor, and represent the investor in all necessary actions in connection with his investments in the Philippines. Applications for registration must be accompanied by: (i) a purchase invoice, or subscription agreement and/or proof of listing in the PSE; and (ii) a credit advice or bank certification showing the amount of foreign currency inwardly remitted and converted to Pesos through a commercial bank; and (iii) in certain instances, transfer instructions from the stockholder and/or dealer, as the case may be. Upon submission of the required documents, a Bangko Sentral Registration Document (“BSRD”) will be issued by the BSP or the investor’s custodian bank. Proceeds of divestments, or dividends of registered investments are repatriable or remittable immediately in full through the Philippine commercial banking system, net of applicable tax, without need of BSP approval. Remittance is allowed upon presentation of the BSRD, at the exchange rate applicable on the date of actual remittance. Pending repatriation or reinvestment, divestment proceeds, as well as dividends of registered investments, may be lodged temporarily in interest-bearing deposit accounts. Interest earned thereon, net of taxes, is also remittable in full. Remittance of divestment proceeds of dividends of registered investments may be reinvested in the Philippines if the investments are registered with the BSP or the investor’s custodian bank. The foregoing is subject to the power of the BSP, with the approval of the President of the Philippines, to restrict the availability of foreign exchange during an exchange crisis, when an exchange crisis is imminent or in times of national emergency. The registration with the BSP of all foreign investments in the Offer Shares shall be the responsibility of the foreign investor. RESTRICTION ON FOREIGN OWNERSHIP As previously stated, the net proceeds of the offering shall be used by the Company to establish a chain of retail stores, the operations of which shall be under a created subsidiary. Under the Republic Act 8762
19, companies engaged in retail trade are subject to nationality
restrictions. Unless capitalization and other requirements are complied with an entity engaged in retail trade must be one hundred percent (100%) Filipino-owned. For purposes of determining the nationality of a corporation which in turn is owned in part by another corporation, the grandfather
19
AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS, REPEALING FOR THE PURPOSE REPUBLIC ACT NO.
1180, AS AMENDED, AND FOR OTHER PURPOSES
200
rule shall be used when the economic activity in question is one of those strictly limited by law to Filipino citizens, such as retail trading.
20
As provided in its latest Amended Articles of Incorporation, the Company is further authorized to own land and operate slaughter houses, which may be considered a public utility. Under the Constitution, both these activities are restricted to Filipinos or corporation at least 60% of its capital are owned by Filipinos. Moreover, there is a limitation of forty percent (40%) in foreign equity participation for enterprises engaged in the rice and corn industry. While full foreign ownership is allowed at the outset, the foreign investors shall divest a minimum of sixty percent (60%) of their equity to Filipino citizens within the 30-year period from the start of the enterprise’s operations. The primary purpose of Calata authorizes it to engage in “the business of cultivating, planting, growing, producing, buying, preserving, processing, packing, canning, enveloping, storing, commercially distributing, marketing, exporting, and selling at wholesale or retail food and agricultural products including all kinds of goods, commodities, wares and merchandise of every kind and description whether natural or artificial as may be permitted by law”. Food and agricultural products may include rice, corn and its by-products. Recognizing that capital infusion from foreign investors can likewise account for a substantial contribution to the growth and expansion of the Company, the Company shall take the necessary legal steps in order to accommodate foreign equity within its ownership structure within the limits and conditions allowed by law.
20 SEC-OGC Opinion No. 19-07 dated 28 November 2007.
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PHILIPPINE TAXATION
The following is a general description of certain Philippine tax aspects of the investment in the Company. This discussion is based upon laws, regulations, rulings, income tax conventions (treaties), administrative practices and judicial decisions in effect at the date of this Prospectus. Subsequent legislative, judicial or administrative changes or interpretations may be retroactive and could affect the tax consequences to the prospective investor. The tax treatment of a prospective investor may vary depending on such investor’s particular situation and certain investors may be subject to special rules not discussed below. This summary does not purport to address all tax aspects that may be important to an investor. This general description does not purport to be a comprehensive description of the Philippine tax aspects of the investments in shares and no information is provided regarding the tax aspects of acquiring, owning, holding or disposing the shares under applicable tax laws of other applicable jurisdictions and the specific tax consequence in light of particular situations of acquiring, owning, holding and disposing the shares in such other jurisdictions. EACH PROSPECTIVE HOLDER SHOULD CONSULT WITH HIS OWN TAX ADVISER AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF PURCHASING, OWNING AND DISPOSING OF THE OFFER SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND NATIONAL TAX LAWS. Corporate Income Tax In general, a tax of thirty-five percent (35%) is imposed upon the taxable net income of a domestic corporation from all sources (within and outside the Philippines). However, effective January 1, 2009, the corporate income tax rate was reduced to thirty percent (30%) pursuant to Republic Act 9337. Gross interest income from Philippine currency bank deposits and yield from deposit substitutes, trust fund and similar arrangements as well as royalties from sources within the Philippines are however subject to a final withholding tax of twenty per cent of the gross amount of such income. Tax on Dividends Under current law, cash and property dividends received from a domestic corporation by individual stockholders who are either citizens or residents of the Philippines are subject to tax of ten per cent. Cash and property dividends received by domestic corporations or resident foreign corporations are not subject to tax. Cash and property dividends received from a domestic corporation by a non-resident foreign corporation not engaged in trade or business in the Philippines are generally subject to tax at the rate of thirty-five percent (35%).. However, please note that effective January 1, 2009, the tax rate was reduced to thirty percent (30%) pursuant to Republic Act 9337. Subject to applicable preferential tax rates under treaties in force between the Philippines and the country of domicile of such non-resident foreign corporation, cash and/or property dividends received from a domestic corporation by a non-resident corporation are subject to final withholding tax at the rate of fifteen percent (15%); provided that the country in which the non-resident foreign corporation is domiciled (i) imposes no taxes on foreign–sourced dividends or (ii) allows a credit against the tax due from the non-resident foreign corporation taxes deemed to have been paid in the Philippines equivalent to the difference between the regular income tax on corporations and the fifteen percent (15%) tax on dividends.
202
Documentary Stamp Tax The original issue of shares is subject to documentary stamp tax of Php1.00 for each Php200.00, or a fractional part thereof, of the par value of the shares issued. The transfer of shares is subject to a documentary stamp tax of Php0.75 for each Php200.00, or a fractional part thereof of the par value of the shares transferred. However, the sale, barter or exchange of shares of stock listed and traded through the local stock exchange shall not be subject to documentary stamp tax for a period of five (5) years from the effectivity of Republic Act No. 9243 dated February 17, 2004. Please note that the said exemption expired on March 20, 2009. However, on June 30, 2009, President Gloria Macapal-Arroyo signed Republic Act 9648, which permanently exempts the sale, barter or exchange of shares of stock listed and traded through the local stock exchange from the documentary stamp tax and was made retroactive to March 20, 2009. SALE, EXCHANGE OR DISPOSITION OF SHARES Capital Gains Tax, if sale was made outside the PSE Net capital gains realized by a resident or non-resident other than a dealer in securities during each taxable year from the sale, exchange or disposition of shares of stock outside the facilities of the PSE, unless an applicable treaty exempts such gains from tax or provides for preferential rates, are subject to tax as follows: five percent (5%) on gains not exceeding PhP100,000.00 and ten percent (10%) on gains over PhP100,000.00. An application for tax treaty relief must be filed (and approved) by the Philippine tax authorities in order to obtain an exemption under a tax treaty. A sale or other disposition of shares of stock through the facilities of the PSE by a resident or a non-resident holder, other than a dealer in securities, is subject to a stock transaction tax at the rate of one half percent (0.5%) of the gross selling price or gross value in money of the shares of stock sold or otherwise disposed, unless an applicable treaty exempts such sale from said tax. This tax is required to be collected by and paid to the Philippine Government by the selling stockbroker on behalf of his client. The stock transaction tax is classified as a percentage tax in lieu of a capital gains tax. Under certain tax treaties, the exemptions from capital gains tax discussed herein may not be applicable to the stock transaction tax. Value Added Tax In addition, a VAT of twelve percent (12%) is imposed on the commission earned by the PSE-registered broker, and is generally passed on to the client.
ESTATE AND GIFT TAXES Shares issued by a corporation organized under Philippine laws are deemed to have a Philippine situs, and any transfer thereof by way of donation or succession, even if made by a non-resident decedent or donor outside the Philippines, is subject to Philippine estate and donor’s tax. The transfer of shares of stock upon the death of an individual holder to his heirs by way of succession, whether such holder was a citizen of the Philippines or an alien, regardless of residence, is subject to Philippine taxes at progressive rates ranging from five percent (5%) to twenty percent (20%), if the net estate is over PhP200,000.00. On the other hand, individual and corporate holders, whether or not citizens or residents of the Philippines, who transfer shares of stock by way of gift or donation are liable to pay Philippine donors’ tax on such transfer of shares ranging from two percent (2%) to fifteen percent (15%) of the net gifts during the year exceeding PhP100,000.00. The rate of tax with respect to net gifts made to a stranger (i.e., one who is not a brother, sister, spouse, ancestor, lineal descendant or relative by consanguinity within the fourth degree of relationship) is a flat rate of thirty percent (30%).
203
Estate and donors’ taxes, however, shall not be collected in respect of intangible personal property, such as shares of stock: (a) if the decedent at the time of his death or the donor at the time of the donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or (b) if the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.
TAXATION OUTSIDE THE PHILIPPINES Shares of stock in a domestic corporation are considered under Philippine law as situated in the Philippines and the gain derived from their sale is entirely from Philippine sources; hence, such gain is subject to Philippine income tax and the transfer of such shares by gift (donation) or succession is subject to the donors’ or estate taxes stated above. The tax treatment of a non-resident holder of shares of stock in jurisdictions outside the Philippines may vary depending on the tax laws applicable to such holder by reason of domicile or business activities and such holder’s particular situation. This Prospectus does not discuss the tax considerations on non-resident holders of shares of stock under laws other than those of the Philippines.
204
RESPONSIBILITY OF DIRECTORS AND OFFICERS OF THE COMPANY AND ISSUE MANAGER AND
UNDERWRITER
Unless otherwise stated, all information contained in this Prospectus has been supplied by the Company. The Company, through its Board, having made all reasonable inquiries, accepts full responsibility for the information contained in this Prospectus and confirms that this Prospectus contains all information with regard to the Company, its business and operations and the Offer Shares, which as of the date of this Prospectus are material in the context of the Offer; that, to the best of its knowledge and belief as of the date hereof, the information contained in this Prospectus are true and correct and are not misleading in any material respect; that the opinions and intentions expressed herein are honestly held; and, that there are no other facts, the omission of which makes this Prospectus, as a whole or in part, misleading in any material respect. The delivery of this Prospectus shall not, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof. The Issue Manager and Underwriter, warrants that it has exercised the level of due diligence required under existing regulations in ascertaining that all material information contained in this Prospectus is true. Except for its failure to exercise the required due diligence, the Issue Manager and Underwriter assume no responsibility for any breach of the representation of the Company.
205
EXPENSES OTHER THAN UNDERWRITING, DISCOUNTS AND COMMISSIONS
Tax on Initial Public Offering PhP10,803,600.00
Documentary Stamp Tax 180,060.00
Philippine SEC filing and legal research fees Registration statement filing fee Legal research fee
726,724.00 7,267.24
PSE listing and processing fees Listing fee Processing fee
2,700,840.00 56,000.00
Estimated professional fees 4,000,000.00
Estimated out-of-pocket and other expenses including printing and engraving costs
1,100,000.00
TOTAL PhP19,574,491.24
206
INVESTOR RELATIONS INFORMATION This program was introduced purposely to address and attend to investors’ inquiries about the Company and its future plans for its stockholders.
Atty. Jose Marie E. Fabella, the Company’s Corporate Secretary and Mr. Benison Paul B. De Torres, the Company’s Chief Finance Officer were appointed as Corporate Information Officer (CIO) and Alternate Corporate Information Officer (ACIO), respectively. They share the responsibility of being head of the investors relations unit of the Company. They will oversee the timely and accurate submission of periodic reports and statements required to be filed on a regular basis with the SEC and the PSE as well as current reports on material event that have occurred and are required to be disclosed to the SEC and/or the PSE within a given period from the time of their occurrence. The reports required to be filed with the SEC include, among others, the following:
Annual Report (SEC Form 17-A) – within 105 days after the end of the fiscal year;
Quarterly Report (SEC Form 17-Q) – within 45 days after the end of the first three (3) fiscal quarters of each fiscal year;
Proxy Statement or Information Statement (SEC Form 20-IS) – at least 15 business days prior to the scheduled date of the annual stockholders’ meeting; and
Current Reports (SEC Form 17-C) – within five (5) days after the occurrence of the event required to be reported.
As a general rule, listed companies are required to furnish the PSE copies of all reports submitted to the SEC. The periodic reports required to be filed with the PSE, which are referred to as Structured Continuing Disclosures, include, among others, the following:
Annual Report (SEC Form 17-A) – within 105 days after the end of the fiscal year;
Quarterly Report (SEC Form 17-Q) – within 45 days after the end of the first three (3) fiscal quarters of each fiscal year;
Report on the Top 100 Stockholders – within 15 days after the end of each quarter; and
Board Lot Report – within five (5) trading days after the end of each month.
Listed companies are required to update the investing public with any material fact that occurs which would reasonably be expected to affect investors’ decision in relation to trading of its securities. Such reports, which are referred to as Unstructured Continuing Disclosures, are required to be disclosed to the PSE within 10 minutes from receipt of the information or occurrence of the event.
The Company can be reached for inquiries through its telephone number (044) 795 0136) and fax number (044) 7951979.
207
FINANCIAL STATEMENTS (Attached)
CALATA CORPORATION
(formerly Planters Choice Agro Products, Inc.)
FINANCIAL STATEMENTS DECEMBER 31, 2011 and 2010
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors Calata Corporation (formerly Planters Choice Agro Products, Inc.) McArthur Highway, Banga 1st Plaridel, Bulacan Report on the Financial Statements We have audited the accompanying financial statements of Calata Corporation (formerly Planters Choice Agro Products, Inc.), which comprise the statements of financial position as of December 31, 2011 and 2010, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2011, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Notes 2011 2010
ASSETSCurrent assetsCash on hand and in banks 6 P204,788,818 P19,106,061Trade and other receivables, net 7 252,529,132 340,864,179 Loans receivables 8 15,000,000 15,000,000 Advances to related parties 20 66,495,612 34,872,831 Inventories 9 179,835,048 224,244,569 Prepayments and other current assets 5,622,210 1,592,204
Total current assets 724,270,820 635,679,844
Noncurrent assetsLoans receivables 8 120,000,000 - Investment properties 10 134,152,963 - Property and equipment, net 11 72,765,320 25,218,793 Deferred tax assets 22 1,858,969 411,184
Total noncurrent assets 328,777,252 25,629,977 Total assets P1,053,048,072 P661,309,821
LIABILITIES AND EQUITY
DECEMBER 31, 2011 AND 2010STATEMENTS OF FINANCIAL POSITION
(formerly Planters Choice Agro Products, Inc.)CALATA CORPORATION
LIABILITIES AND EQUITYCurrent liabilitiesTrade and other payables 12 P134,698,952 P169,363,509 Loans payable 13 392,500,000 469,500,000 Advances from related parties 20 52,461,454 - Dividends payable 15 25,000,000 - Income tax payable 46,562,355 19,344,822
Total current liabilities 651,222,761 658,208,331
Non-current liabilityPension liability 21 1,820,747 1,370,614
Total liabilities 653,043,508 659,578,945
EquityShare capital 14 324,100,000 1,000,000 Retained earnings 75,904,564 730,876
Total equity 400,004,564 1,730,876 Total liabilities and equity P1,053,048,072 P661,309,821
(The notes on pages 5 to 45 are an integral part of these financial statements.)
Notes 2011 2010 2009
Sales 16 P2,001,710,303 P1,798,059,555 P1,808,099,952Cost of sales 17 (1,774,403,120) (1,655,407,570) (1,688,694,868) Gross profit 227,307,183 142,651,985 119,405,084 Operating expenses 18 (63,300,990) (67,833,353) (88,020,559) Other operating income 19 1,959,836 - - Profit from operations 165,966,027 74,818,632 31,384,525
Finance income 6, 8 3,828,221 196,582 181,825 Finance costs 13 (26,934,023) (26,725,754) (20,904,375) Profit before tax 142,860,225 48,289,460 10,661,975 Provision for income tax 22 (42,686,537) (14,452,191) (3,166,546) Profit for the year 100,173,688 33,837,269 7,495,429 Other comprehensive income - - -
Total comprehensive income P100,173,688 P33,837,269 P7,495,429
Basic and diluted earnings per share 24 P0.69 P3,383.73 P749.54
(The notes on pages 5 to 45 are an integral part of these financial statements.)
CALATA CORPORATION(formerly Planters Choice Agro Products, Inc.)
STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
Notes Share capital Retained earnings Total
P1,000,000 P6,398,178 P7,398,178Total comprehensive income
for the year - 7,495,429 7,495,429 Balance at December 31, 2009 1,000,000 13,893,607 14,893,607 Total comprehensive income
for the year - 33,837,269 33,837,269Cash dividends declared and paid 15 - (47,000,000) (47,000,000) Balance at December 31, 2010 1,000,000 730,876 1,730,876 Issuance of additional shares 14 323,100,000 - 323,100,000 Total comprehensive income
for the year - 100,173,688 100,173,688 Cash dividends declared 15 - (25,000,000) (25,000,000) Balance at December 31, 2011 P324,100,000 P75,904,564 P400,004,564
Balance at January 1, 2009
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
(The notes on pages 5 to 45 are an integral part of these financial statements.)
CALATA CORPORATION(formerly Planters Choice Agro Products, Inc.)
STATEMENTS OF CHANGES IN EQUITY
Notes 2011 2010 2009
Cash flows from operating activitiesProfit before tax P142,860,225 P48,289,460 P10,661,975 Adjustments for:
Depreciation 11, 18 5,780,083 5,755,722 132,469 Impairment loss on receivables 7, 18 4,375,816 - - Pension costs 18, 21 450,133 420,048 362,573 Gain on disposal of property and equipment 19 (1,914,123) - -
Finance income 6, 8 (3,828,221) (196,582) (181,825) Finance costs 13 26,934,023 26,725,754 20,904,375 Operating income before working capital changes 174,657,937 80,994,402 31,879,567 Decrease (increase) in:
Trade and other receivables 86,814,231 (51,832,961) (23,332,775) Advances to related parties (1,226,567) (78,500,735) (6,414,415) Inventories 44,409,521 44,898,193 (8,048,240) Prepayments and other current assets (6,494,604) (1,592,204) -
Increase (decrease) in:Trade and other payables (34,664,557) (66,957,663) 14,602,256 Advances from related parties 52,461,454 - -
Cash provided by (used in) operations 315,957,414 (72,990,968) 8,686,393 Finance income received 6 973,221 196,582 181,825 Income taxes paid (14,452,191) (540,667) (453,348) Net cash provided by (used in)
operating activities 302,478,444 (73,335,053) 8,414,870
Cash flows from investing activities
CALATA CORPORATION(formerly Planters Choice Agro Products, Inc.)
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
Cash flows from investing activitiesIncrease in related party loans receivable 8 (120,000,000) - - Increase in advances to related parties (28,482,091) - - Acquisition of investment properties 10 (134,152,963) - - Acquisition of property and equipment 11 (53,326,610) (29,032,075) (816,542) Net cash used in investing activities (335,961,664) (29,032,075) (816,542)
Cash flows from financing activitiesIssuance of additional shares 14 323,100,000 - - Net availments (payments) of short-term loans payable 13 (77,000,000) 127,988,541 17,361,746 Finance cost paid 13 (26,934,023) (26,725,754) (20,904,375) Net cash provided by (used in) financing activities 219,165,977 101,262,787 (3,542,629)
Net increase (decrease) in cashon hand and in banks 185,682,757 (1,104,341) 4,055,699
Cash on hand and in banksJanuary 1 19,106,061 20,210,402 16,154,703 December 31 P204,788,818 P19,106,061 P20,210,402
Information on significnt non-cash transactionsCash dividend distribution through offsetting 15 P- P47,000,000 P- Gain on disposal of property an equipment 19 (1,914,123) - - Advances to related parties 20 1,914,123 (47,000,000) -
P- P- P-
(The notes on pages 5 to 45 are an integral part of these financial statements.)
CALATA CORPORATION (formerly Planters Choice Agro Products, Inc.)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011 AND 2010 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2011
NOTE 1 – CORPORATE INFORMATION Calata Corporation (formerly Planters Choice Agro Products, Inc.) (the Company) was organized under the laws of the Republic of the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) per Registration No. A199911666 on July 23, 1999. The primary purpose of the Company is to conduct, engage in and carry on, as principal or otherwise, all lawful business activities involving livestock and agricultural business, corporate or otherwise, such as but not limited to the business of acquiring, raising, breeding, slaughtering, preserving, processing, packing, canning, enveloping, storing, commercially distributing, marketing, exporting, and selling at wholesale or retail livestock such as chicken, fowl, cattle, calves, hogs, goats, sheep, lambs, all kinds of livestock and other animals, as may be permitted by law, for food purposes; the business of cultivating, planting, growing, producing, buying, preserving, processing, packing, canning, enveloping, storing, commercially distributing, marketing, exporting, and selling at wholesale or retail food and agricultural products including all kinds of goods, commodities, wares and merchandise of every kind and descriptions whether natural or artificial as may be permitted by law; the business of manufacturing, preparing stocking, packing, buying, selling, importing and exporting, dealing in and delivering all kinds of livestock and agricultural products such as but not limited to poultry, livestock, marine feeds, feed additives, fertilizers, pesticides, all types of chemicals and substance used for livestock and agriculture, and/or whatsoever materials which may be necessary or incidental to their manufacture or preparation inside or outside the Philippines and all kinds of materials and products and by-products arising out of or used in the breeding and slaughtering of poultry and livestock and all other agricultural activities for food purposes; and to direct, establish, construct, acquire, sell, lease operate and maintain slaughterhouse, dressing plants, processing plant, refrigerating plants, cold storage, warehouses, sheds, silos, bodegas, storage bins, and other buildings, facilities, structures and equipment necessary or expedient for the carrying out of the purposes aforesaid. The Company’s registered address and principal place of business is at McArthur Highway, Banga 1st, Plaridel, Bulacan. On January 5, 2010, the Company’s Board of Directors (BOD) amended its By-laws to change the corporate name from Planters Choice Agro Products, Inc. to Calata Corporation. On February 22, 2010, the SEC issued a Certificate of Amendment approving the said amendment. On August 5, 2011, the Company’s BOD amended its article of incorporation to increase its authorized capital stock from P1,000,000 to P345,400,000 with par value of P100 to P1, respectively (Note 14). On August 17, 2011, the SEC issued a Certificate of Amendment approving the said amendment. On August 18, 2011, the Company’s BOD amended its article of incorporation to increase its authorized capital stock from P345,400,000 to P845,400,000 (Note 14). On August 25, 2011, the SEC issued a Certificate of Amendment approving the said amendmpent. On December 28, 2011, the Company filed with the Securities and Exchange Commission for the registration of Three Hundred Sixty Million One Hundred Twelve Thousand (360,112,000) common shares with a par value of P1 per share, which will be listed in the Philippine Stock Exchange. 1.1 The financial statements of the Company as of December 31, 2011 and 2010 and for each of the three years in the period ended December 31, 2011, 2010 and 2009 were authorized for issue by the BOD on February 7, 2012 and that the President and Chief Executive Officer (CEO) is authorized to approve such financial statements on their behalf.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated. Statement of compliance The financial statements of the Company have been prepared in compliance with Philippine Financial Reporting Standards (PFRS). Basis of measurement and presentation The financial statements have been prepared on a historical cost basis. The financial statements are prepared in Philippine Peso (P), which is the Company’s functional and presentation currency. All values are rounded off to the nearest peso, unless otherwise indicated. Use of judgments and estimates The preparation of financial statements in compliance with PFRS requires the use of certain critical accounting estimates. It also requires the Company’s management to exercise judgment in applying the Company's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effects are disclosed in Note 3. Changes in accounting policies a. New standards, interpretations and amendments effective from January 1, 2011
The accounting policies adopted are consistent with those of the previous financial year except for the following new standards, amendments and interpretations effective for the first time from January 1, 2011 of which none have had a material effect on the financial statements:
• Classification of Rights Issues (Amendment to PAS 32) • Amendment to PFRS 1 First-time Adoption of International Financial Reporting Standards • Amendments to PAS 24 Related Party Disclosures • PIC 19 Extinguishing Financial Liabilities with Equity Instruments • Amendments to PIC 14 Prepayments of a Minimum Funding Requirement
The adoption of the standards or interpretations is described below:
• PAS 32 Financial Instruments: Presentation – Classification of Rights Issues (Amendment): The amendment to PAS 32 is effective for annual periods beginning on or after February 1, 2010 and amended the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency. This amendment will have no impact on the Company after initial application.
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• PFRS 1 Severe Hyperinflation and Removal of Fixed Date of First-time Adopters: The first amendment replaces references to a fixed date of January 1, 2004 with the date of transition to PFRSs, thus eliminating the need for companies adopting PFRSs for the first time to restate derecognition transactions that occurred before the date of transition to PFRSs.
The second amendment provides guidance on how an entity should resume presenting
financial statements in accordance with PFRSs after a period when the entity was unable to comply with PFRSs because its functional currency was subject to severe hyperinflation.
The amendments are effective July 1, 2011. Earlier application is permitted. • PAS 24 Related Party Disclosures (Amendment): The amended standard is effective for
annual periods beginning on or after January 1, 2011. It clarified the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government related entities. Early adoption is permitted for either the partial exemption for government-related entities or for the entire standard. The Company does not expect any impact on its financial position or performance.
• PIC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments: PIC
Interpretation 19 is effective for annual periods beginning on or after July 1, 2010. The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognized immediately in profit or loss. The adoption of this interpretation will have no effect on the financial statements of the Company.
• PIC Interpretation 14 Prepayments of a minimum funding requirement (Amendment):
The amendment to PIC Interpretation 14 is effective for annual periods beginning on or after January 1, 2011 with retrospective application. The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset. The amendment is deemed to have no impact on the financial statements of the Company.
Improvement to PFRS (Issued in May 2010) The FRSC issued improvements to PFRS, an omnibus of amendments to its PFRS. The following amendments have been adopted as they become effective for annual periods on or after either July 1, 2010 or January 1, 2011:
• PFRS 3 Business Combination; • PFRS 7 Financial Instruments: Disclosures; • PAS 1 Presentation of Financial Statements; • PAS 27 Consolidated and Separate Financial Statements; and • PIC Interpretation 13 Customer Loyalty Programmes.
The Company, however, expects no significant impact from the adoption of the amendments on its financial position or performance. b. New standards, interpretations and amendments issued but not yet effective Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective.
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• PFRS 9 Financial Instruments: Classification and Measurement: PFRS 9 as issued reflects the first phase of the FRSC work on the replacement of PAS 39 and applies to classification and measurement of financial assets as defined in PAS 39. The standard is effective for annual periods beginning on or after January 1, 2013. In subsequent phases, the FRSC will address classification and measurement of financial liabilities, hedge accounting and derecognition. The completion of this project is expected in early 2011. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Company’s financial assets. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.
• PFRS 10 Consolidated Financial Statements: This standard was developed to eliminate perceived conflict on concept of consolidation between PAS 27, Consolidated and Separate Financial Statements (amended in 2008) and PIC-12, Consolidation – Special Purpose Entities. PAS 27 (amended in 2008) requires consolidation of entities based on control whereas PIC-12 mandates consolidation of entities based on risks and rewards. It provides a new definition of control based on three elements: power over the investee, exposure or rights to variable returns from involvement with the investee, ability to use power over the investee to affect the amount of investor’s return.
The new standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted. • PFRS 11 Joint Arrangements: This standard requires an entity to account joint
arrangement based on its rights and obligations arising from the arrangement rather than based on the structure of the arrangement as required by PAS 31, Interests in Joint Ventures. The new standard has removed the option to account jointly controlled entities using either proportionate consolidation or equity method.
The new standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted. • PFRS 12 Disclosures of interests in Other Entities: This standard prescribes all of the
disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities.
The new standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted. • PFRS 13 Fair Value Measurement: This standard was developed to eliminate
inconsistencies of fair value measurements dispersed in various existing PFRSs. It clarifies the definition of fair value, provides a single framework for measuring fair value and enhances fair value disclosures.
The new standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
• PAS 27 Separate Financial Statements: This completes the consolidation project. The
standard was amended to contain requirements relating only to separate financial statements.
The amended standard is applicable to annual periods beginning on or after
January 1, 2013. Earlier application is permitted. • PAS 28 Investments in Associates and Joint Ventures: The new standard on joint
arrangements is applied to determine the type of joint arrangement in which an entity is involved. With this, PAS 28 was amended to incorporate accounting requirements for joint ventures. Once an entity has determined that it has an interest in a joint venture, it accounts for the investment using the equity method in accordance with PAS 28 (amended in 2011).
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The amended standard is applicable to annual periods beginning on or after January 1, 2013. Earlier application is permitted.
• PAS 12 Deferred Tax: Recovery of Underlying Assets (Amendment): This standard
requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in PAS 40, Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be through sale.
As a result of the amendments, PIC-21 Income Taxes- Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into PAS 12 the remaining guidance previously contained in PIC-21, which is accordingly withdrawn.
The amendments are effective January 1, 2012. Earlier application is permitted.
• Amendments to PAS 1 Presentation of Items of Other Comprehensive Income
(Amendment): The presentation of Items of Other Comprehensive Income (Amendments to PAS 1) amended paragraphs 7, 10, 82, 85-87, 90, 91, 94, 100 and 115, added paragraphs IN 17-IN 19, 10A, 81A, 81B, 82A and 139J and deleted paragraphs 12, 81, 83 and 84.
Entities shall apply those amendments for annual periods beginning on or after July 1, 2012. Earlier application is permitted.
• PAS 19 Employee Benefits (Amendment): Significant changes to this standard include:
removal of corridor approach in recognizing actual gains and losses, presentation of remeasurements on defined benefit plans in other comprehensive income and improved disclosure requirements.
The amended standard is applied retrospectively with limited exceptions. Entities shall apply the amended PAS 19 for annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
2.2 Financial instruments Initial recognition Financial assets and financial liabilities are recognized in the statements of financial position when the Company becomes a party to the contractual provisions of the instrument. In the case of a regular way purchase or sale of financial assets, recognition is done at trade date, which is the date on which the Company commits to purchase or sell the asset. Financial instruments are recognized initially at fair value plus transaction costs except for financial instruments measured at fair value through profit or loss (FVPL). Classification of financial instruments The Company classifies its financial assets as financial assets at FVPL, held-to-maturity (HTM) financial assets, loans and receivables or available for sale (AFS) financial assets. The Company’s financial assets as of December 31, 2011 and 2010 comprise of loans and receivables, which include cash on hand and in banks, trade and other receivables, loans receivable and advances to related parties. Financial liabilities are classified as financial liabilities at FVPL and other financial liabilities. The Company’s financial liabilities as of December 31, 2011 and 2010 comprise of trade and other payables, short term loans payable advances from related parties and dividends payable. The classification depends on the purpose for which the investments were acquired or whether they are quoted in an active market. Management determines the
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classification of its financial assets and liabilities at initial recognition and, where allowed and appropriate, re-evaluates such designation at every financial reporting date. Classification of financial instruments between debt and equity Financial instruments are classified as liability or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a component that is a financial liability is reported as expense or income. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statement of financial position. Determination of fair value The fair value of financial instruments traded in active markets is based on their quoted market price or dealer price quotation (bid price for long positions and ask price for short positions). When current bid and asking prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction. If the financial instruments are not listed in an active market, the fair value is determined using appropriate valuation techniques which include recent arm’s length market transactions, net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models, and other relevant valuation models. Derecognition of financial instruments A financial asset or, where applicable, a part of a financial asset or part of a group of similar financial assets is derecognized when: a) the rights to receive cash flows from the asset have expired; b) the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or c) the Company has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of comprehensive income.
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Financial assets Financial assets at FVPL
This category comprises only in-the-money derivatives which are carried in the statement of financial position at fair value with changes in fair value recognized in the statement of comprehensive income in the finance income or cost line item. The Company does not have any assets held for trading nor does it voluntarily classify any financial assets as being at FVPL. Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate (EIR) method, less provision for impairment.
Impairment provisions are recognized when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Company will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognized within operating expenses in the statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. The Company's loans and receivables comprise cash on hand and in banks, trade and other receivables, loans receivable and advances to related parties in the statements of financial position. HTM investments HTM investments are quoted non-derivative financial assets with fixed or determinable payments and fixed maturities for which the Company’s management has the positive intention and ability to hold to maturity. After initial measurement, these investments are measured at amortized cost using the EIR method, less impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. Gains and losses are derecognized or impaired, as well as through the amortization process. The Company does not have any assets under this category. AFS investments AFS investments include equity and debt securities. Equity investments classified as AFS are those, which are neither classified as held for trading nor designated at FVPL. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response in the market conditions. After initial measurement, AFS investments are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the statements of comprehensive income in finance costs and removed from the AFS reserve.
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The Company evaluated its AFS assets whether the ability and intention to sell them in the near term is still appropriate. When the Company is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Company may elect to reclassify these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly. For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortized cost and the expected cash flows is also amortized over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the statement of income. The Company does not have any asset under this category. Financial liabilities Financial liabilities at FVPL This category comprises only out-of-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the statement of comprehensive income. The Company does not have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss. Other financial liabilities Other financial liabilities include trade and other payables, advances from related parties and short-term loans, which are initially recognised at fair value and subsequently carried at amortised cost using the EIR method. Fair value measurement hierarchy PFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement (Note 3). The fair value hierarchy has the following levels: a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); b) inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and c) inputs for the asset or liability that are not based on observable market data (unobservable
inputs) (Level 3).
The level in the fair value hierarchy within which the financial asset or financial liability is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the three levels.
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Impairment of financial assets Assessment of impairment The Company assesses at each financial reporting date whether a financial asset or group of financial assets is impaired. It assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. The determination of impairment losses for financial assets is inherently subjective because it requires material estimates, including the amount and timing of expected recoverable future cash flows. These estimates may change significantly from time to time, depending on available information. Evidence of impairment Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan or advance by the Company on terms that the Company would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the Company, or economic conditions that correlate with defaults in the Company. Impairment on assets carried at amortized cost If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses) discounted at the financial asset’s original EIR (i.e. the EIR computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of loss shall be recognized in “Other income (expenses)” in the statement of comprehensive income. Impairment on assets carried at cost If there is objective evidence of an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or of a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Reversal of impairment loss If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in “Other income (expenses)” in the statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its cost or amortized cost at the reversal date.
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2.3 Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realizable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out method. Net realizable value represents the estimated selling price less all estimated costs to be incurred in marketing, selling and distributing the goods. When the net realizable value of the inventories is lower than the cost, the Company provides for an allowance for the decline in the value of the inventory and recognizes the write-down as an expense in the statement of comprehensive income. When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized. 2.4 Prepayments and other current assets Prepayments represent expenses not yet incurred but already paid in cash. Prepayments are initially recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to the statement of comprehensive income as they are consumed in operations or expire with the passage of time. Prepayments are classified in the statements of financial position as current assets when the cost of goods or services related to the prepayment are expected to be incurred within one year or the Company’s normal operating cycle, whichever is longer. Otherwise, prepayments are classified as non-current assets. Other current assets are recognized when the Company expects to receive future economic benefit from it and the amount can be measured reliably. 2.5 Investment properties Investment property, which pertains to land held to earn rentals and/or for capital appreciation, is measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is measured at cost less accumulated impairment loss, if any. Transfers to, or from, investment property shall be made only when there is a change in use. Investment property is derecognized by the Company upon its disposal or the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Any gain or loss on the retirement or disposal of investment properties is recognized in the statement of comprehensive income in the year of retirement or disposal. Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are charged to the statement of comprehensive income in the year the costs are incurred. Gains or losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of comprehensive income. 2.6 Property and equipment Property and equipment are initially measured at cost. At the end of each reporting period, items of property and equipment are measured at cost less any subsequent accumulated depreciation, amortization and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.
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Subsequent expenditures relating to an item of property, plant and equipment that have already been recognized are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Company. All other subsequent expenditures are recognized as expense in the period in which those are incurred. Depreciation is computed on the straight-line method based on the estimated useful lives of the assets as follows:
Office equipment 5 years Transportation equipment 5 years
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognized impairment loss. Cost includes professional fees and for qualifying assets, borrowing costs capitalized in accordance with the Company’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences at the time the assets are ready for their intended use. The estimated useful lives and depreciation method are reviewed periodically to ensure that the periods and method of depreciation are consistent with the expected pattern of economic benefits from items of property and equipment. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation and any impairment in value are removed from the accounts and any resulting gain or loss arising on the disposal or retirement of an asset, determined as the difference between the sales proceeds and the carrying amount of the asset, is recognized in the statement of comprehensive income. 2.7 Impairment of non-financial assets The carrying amounts of the Company’s non-financial assets such as investment properties and property and equipment are reviewed at each financial reporting date to determine whether there is any indication of impairment or an impairment loss previously recognized no longer exists or may have decreased. If any such indication exists, the Company makes a formal estimate of the asset’s recoverable amount. The recoverable amount is the higher of an asset or its cash generating unit’s (CGU) fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash flows independent of those from other assets, the recoverable amount is determined for the CGU to which the asset belongs. Whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount and an impairment loss is recognized in the statement of comprehensive income. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized. Reversals of impairment are recognized in the statement of comprehensive income.
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2.8 Provisions and contingencies Provisions are recognized when: (a) the Company has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as finance cost. When the Company expects a provision or loss to be reimbursed, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain and its amount is estimable. The expense relating to any provision is presented in the statement of comprehensive income, net of any reimbursement. Contingent liabilities are not recognized in the Company’s financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the Company’s financial statements but disclosed in the notes to Company’s financial statements when an inflow of economic benefits is probable. 2.9 Pension benefits Pension cost is determined using the projected unit credit method. This method reflects the services rendered by the employees up to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Actuarial valuations are conducted with sufficient regularity, with option to accelerate when significant changes to underlying assumptions occur. Pension expense includes current service cost, interest cost, recognized actuarial gains and losses, the effect of any curtailment or settlements and amortization of transitional liability at the date of adoption of PAS 19. The defined benefit liability / defined benefit asset recognized in the statements of financial position is the present value of the defined benefit obligation at the financial reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated by an actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related retirement liabilities. Cumulative unrecognized actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are spread to income over the expected average remaining working lives of employees. Past-service costs are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this instance, the past-service costs are amortized on a straight-line basis over the vesting period. 2.10 Equity Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s ordinary shares are classified as equity instruments. Share capital is determined using the nominal value of shares that have been issued.
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2.11 Retained earnings Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income. 2.12 Dividends
Dividends are recognized when they become legally payable. Dividend distribution to equity shareholders is recognized as a liability in the Company’s financial statements in the period in which the dividends are declared and approved by the Company’s board of directors. 2.13 Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business. Revenue from the sales of goods is recognised when the Company has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Company will receive the previously agreed upon payment. These criteria are considered to be met when the goods are delivered to the buyer. Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Interest income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. 2.14 Cost and expense recognition Costs and expenses are recognized in the statement of comprehensive income when decrease in future economic benefit related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably. Costs and expenses are recognized in the statement of comprehensive income: on the basis of a direct association between the costs incurred and the earning of specific items of income; on the basis of systematic and rational allocation procedures when economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined; or immediately when an expenditure produces no future economic benefits or when, and to the extent that, future economic benefits do not qualify, or cease to qualify, for recognition in the statement of financial position as an asset. Costs and expenses in the statement of comprehensive income are presented using the function of expense method. Costs of sales are expenses incurred that are associated with the goods sold and includes purchases of goods and distribution costs. Operating expenses are costs attributable to administrative, marketing and other business activities of the Company. 2.15 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Company does not have any leases under finance lease. Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except when another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
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In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except when another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. 2.16 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. 2.17 Income taxes Income tax expense represents the sum of the current income tax and deferred income tax. Current income tax Current income tax assets and liabilities for the current and the prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using the applicable tax rate for the years presented. Deferred income tax Deferred income tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit and are accounted for using the liability method, except for differences arising on:
• the initial recognition of goodwill; • the initial recognition of an asset or liability in a transaction which is not a business
combination at the time of the transaction affects neither accounting nor taxable profit; and
• investments in subsidiaries and jointly controlled entities where the Company is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Deferred tax liabilities are generally recognized for all taxable temporary differences, while deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities and they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
19
Current and deferred tax are recognized as an expense or income in the statements of comprehensive income, except when they relate to items that are recognized outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax are also recognized outside profit or loss. 2.18 Earnings per share (EPS) The Company computes its basic earnings per share by dividing profit or loss for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. For the purpose of calculating diluted earnings per share, profit or loss for the year attributable to ordinary equity holders and the weighted average number of shares outstanding are adjusted for the effects of all dilutive potential ordinary shares. 2.19 Related parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. The key management personnel of the Company and post–employment benefit plans for the benefit of the Company’s employees are also considered to be related parties. 2.20 Events after the reporting date Post year-end events up to the date of the auditors’ report that provide additional information about the Company’s position at financial reporting date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the financial statements when material. 2.21 Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (CEO) that makes strategic decisions. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, interest income and expenditures and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, and equipment, and intangible assets other than goodwill. NOTE 3 – SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of the financial statements in conformity with PFRS requires the Company’s management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements.
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The estimates and associated assumptions are based on historical experiences and other various factors that are believed to be reasonable under the circumstances including expectations of related future events, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates, assumptions and judgments are reviewed and evaluated on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgments Determination of functional currency Based on the economic substance of the underlying circumstances relevant to the Company, the functional currency is determined to be the Philippine Peso. It is the currency that mainly influences the Company’s operations. Classification of financial instruments The Company classifies a financial instrument, or its component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual agreement and the guidelines set by PAS 39 on the definitions of a financial asset, a financial liability or equity. In addition, the Company also determines and evaluates its intention and ability to keep the investments until its maturity date. The substance of a financial instrument, rather than its legal form, and the management’s intention and ability to hold the financial instrument to maturity generally governs its classification in the statements of financial position. The classification of financial assets and liabilities is presented in Note 4. Determination whether an arrangement contains a lease The determination whether an arrangement contains a lease, is based on its substance. An arrangement is, or contains a lease when the fulfillment of the arrangement depends on a specific asset or assets and the arrangement conveys the right to use the asset. The Company has entered into operating lease arrangement as a lessee. The Company, as a lessee, has determined that the lessor retains substantial risks and rewards of ownership of these properties, which are on operating lease agreements. Leases accounted for as operating leases are disclosed in Note 23. Determination of fair value of financial instruments The Company carries certain financial assets and liabilities at fair value, which requires use of accounting estimates and judgment. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Company utilized different valuation methodologies and assumptions. Any changes in fair value of these financial assets and liabilities would affect profit and loss and equity. The carrying values of financial assets and financial liabilities as of December 31, 2011 and 2010 are disclosed in Note 4.
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Estimates Impairment of loan and trade and other receivables The Company reviews its loans and receivables at each reporting date to assess whether a provision for impairment should be recognized in its statements of comprehensive income or loans and receivables balance should be written off. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Moreover, management evaluates the presence of objective evidence of impairment which includes observable data that comes to the attention of the Company about loss events such as but not limited to significant financial difficulty of the counterparty, a breach of contract, such as a default or delinquency in interest or principal payments, probability that the borrower will enter bankruptcy or other financial re-organization. The carrying value of loans receivable amounted to P135,000,000 and P15,000,000 as of December 31, 2011 and 2010, respectively (Note 8).The carrying value of trade and other receivables amounted to P252,529,132 and P340,864,179 as of December 31, 2011 and 2010, respectively (Note 7). The Company provided for an allowance for impairment on trade receivables amounting to P4,375,816 in 2011. Impairment of inventories At each reporting date, inventories are assessed for impairment by comparing the carrying amount of each item of inventory (or group of similar items) with its selling price less costs to sell. If an item of inventory (or group of similar items) is impaired, its carrying amount is reduced to selling price less costs to sell, and an impairment loss is recognized immediately in profit or loss. Estimation of useful lives of property and equipment The Company reviews annually the estimated useful lives of property and equipment based on the period over which the assets are expected to be available for use. It is possible that future results of operations could be materially affected by changes in these estimates. A reduction in the estimated useful lives of property and equipment would increase recorded depreciation expense and decrease the related asset accounts. The estimated useful lives of property and equipment are discussed in Note 2.6 to the financial statements, which showed no changes in 2011 and 2010. The Company’s property and equipment, net of accumulated depreciation, amounted to P72,765,320 and P25,218,793 as of December 31, 2011 and 2010, respectively (Note 11). Impairment of non-financial assets The Company assesses at each financial position date whether there is an indication that the carrying amount of all non-financial assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. At the financial position date, the Company assesses whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Based on management’s assessment, non-financial assets are fairly stated, thus, no impairment loss needs to be recognized as of December 31, 2011 and 2010 (Notes 10, 11). Realizability of deferred tax assets Management reviews the carrying amount of deferred tax assets at each reporting date. The carrying amount of deferred tax assets is reduced to the extent that it is no longer probable that sufficient taxable profit will be available against which the related tax assets can be utilized.
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Management believes that sufficient taxable profit will be generated to allow all or part of the deferred tax assets to be utilized. The Company’s recognized deferred tax assets amounted to P1,858,969 and P411,184 as of December 31, 2011 and 2010, respectively (Note 22). Estimation of retirement benefits The determination of the obligation and retirement benefits is dependent on management’s assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 20 and include, among others, discount rates per annum and salary increase rates. Actual results that differ from the Company’s assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. While the Company believes that the assumptions are reasonable and appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the retirement obligations. The details of the Company’s pension are provided in Note 21. Pension liability amounted to P1,820,747 and P1,370,614 as of December 31, 2011 and 2010, respectively. Net pension costs presented under operating expenses amounted to P450,133, P420,048 and P362,573 in 2011, 2010 and 2009, respectively (Note 18). NOTE 4 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Company is exposed through its operations to the following financial risks:
• Credit risk • Liquidity risk • Market risk
In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. The following table shows the classification, carrying values and fair values of the Company’s financial assets and financial liabilities as of December 31, 2011 and 2010:
2011 2010 Carrying
Value Fair Value Carrying
Value Fair Value Financial assets: Loans and receivables Cash on hand and in banks (Note 6) P204,788,818 P204,788,818 P19,106,061 P19,106,061
Trade and other receivables (Note 7) 252,529,132 252,529,132 340,864,179 340,864,179 Loans receivable (Note 8) 135,000,000 135,000,000 15,000,000 15,000,000 Advances to related parties (Note 20) 66,495,612 66,495,612 34,872,831 34,872,831
P658,813,562
P658,813,52 P409,843,071 P409,843,071
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2011 2010 Carrying Value Fair Value Carrying Value Fair Value
Financial liabilities: Other financial liabilities Trade and other payables
(Note 12) P134,698,952 P134,698,952 P169,363,509 P169,363,509 Loans payable (Note 13) 392,500,000 392,500,000 469,500,000 469,500,000 Advances from related parties
(Note 20)
52,461,454
52,461,454 - - Dividends payable (Note 15) 25,000,000 25,000,000 - -
P604,660,405 P604,660,405 P638,863,509 P638,863,509 Due to the short-term nature of the transactions, the carrying amounts of cash on hand and in banks, trade and other receivables, short-term loans receivables, advances to (from) related parties, trade and other payables, and short-term loans payable approximates its fair values as of the financial reporting date. The fair value of the long term loans receivable from Avestha Holding Corporation is based on its carrying amount which approximates the discounted value of future cash flows using its interest rate of 6% payable on the balance at the end of every month. The Company’s BOD is mainly responsible for the overall risk management approach and for the approval of risk strategies and principles of the Company. It has also the overall responsibility for the development of risk strategies, principles, frameworks, policies and limits. It establishes a forum of discussion of the Company’s approach to risk issues in order to make relevant decisions. The income, expense, gain and/or losses recognized from financial instruments are as follows: 2011 2010 2009 Impairment loss on trade receivables
(Note 7)
P4,375,816
P-
P- Finance costs (Notes 13) 26,934,023 26,725,754 20,904,375
P31,309,839
P26,725,754
P20,904,375 Finance income (Notes 6, 8) P3,828,221 P196,582 P181,825 The objective of financial risk management is to contain, where appropriate, exposures in the financial risks to limit any negative impact on the Company’s results and financial position. The Company actively measures, monitors and manages its financial risk exposures by various functions pursuant to the segregation of duties principles. The policies for managing specific risks are summarized below: Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to impairment is not significant. The Company deals only with creditworthy counterparty duly approved by the BOD.
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The following table provides information regarding the maximum credit risk exposure of the Company as of December 31, 2011 and 2010: 2011 2010 Cash in banks (Note 6) P204,548,818 P19,031,895 Trade and other receivables (Note 7) 252,529,132 340,864,179 Loans receivables (Note 8) 135,000,000 15,000,000 Advances to related parties (Note 20) 66,495,612 34,872,831
P658,573,562
P409,768,905 The following table provides information regarding the Company’s analysis of the age of financial assets by class as at the reporting date:
Past due but not impaired
Total
Neither past due nor impaired 31-60 days 61-90 days
Over 90 days Impaired December 31, 2011
Loans and receivables
Cash in banks P204,548,818 P204,548,818 P- P- P- P- Trade and other
receivables 252,529,132 224,888,994 12,899,632 3,211,957 15,904,365 (4,375,816) Loans receivable 135,000,000 135,000,000 Advances to related
parties 66,495,612 66,495,613 - - - -
P658,573,562 P630,933,425 P12,899,632 P3,211,957 P15,904,365 (P4,375,816)
Past due but not impaired
December 31, 2010 Total
Neither past due nor impaired 31-60 days 61-90 days Over 90 days Impaired
Loans and receivables
Cash in banks P19,031,895 P19,031,895 P- P- P- P- Trade and other
receivables 340,864,179 328,910,441 7,969,616 2,822,020 1,162,102 -
Loans receivable 15,000,000 15,000,000 - - - - Advances to
related parties 34,872,831 34,872,831 - - - -
P409,768,905 P397,815,167 P7,969,616 P2,822,020 P1,162,102 P-
The credit quality of the Company’s financial assets is considered to be of good quality. Financial assets are expected to be collectible without incurring any credit losses. The Company’s loans receivable from Avestha Holdings Corporation amounting to P120,000,000 is fully secured by the borrower’s real estate properties independently valued by Cuervo Appraisers, Inc. at P166,549,000. Credit quality per class of financial assets The Company’s bases in grading its financial assets are as follows: High grade - These are receivables which have a high probability of collection (the counterparty has the apparent ability to satisfy its obligation and the security on the receivables are readily enforceable). Standard - These are receivables where collections are probable due to the reputation and the financial ability of the counterparty to pay but have been outstanding for a certain period of time.
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Substandard - These are receivables that can be collected provided the Company makes persistent effort to collect them. The table below shows the credit quality by class of financial assets of the Company based on their historical experience with the corresponding parties as of December 31, 2011 and 2010:
December 31, 2011 Neither Past Due nor Impaired
High grade Standard Substandard
Unrated Past due but not impaired Impaired Total grade grade
Loans and receivables Cash in banks P204,548,818 P- P- P- P- P- P204,548,818 Trade and other
receivables
220,513,178
32,015,954
4,375,816
256,904,948 Loans receivable 135,000,000 - - - - - 135,000,000 Advances to related
parties
66,495,613 - - - - -
66,495,613
P626,557,607 P- P- P- P32,015,954 P4,375,816
P662,949,378
December 31, 2010
Neither Past Due nor Impaired
High grade Standard Substandard
Unrated Past due but not impaired Impaired Total grade grade
Loans and receivables Cash in banks P19,031,895 P- P- P- P- P- P19,031,895 Trade and other
receivables
328,910,441
11,953,738 -
340,864,179 Loans receivable 15,000,000 - - - - - 15,000,000 Advances to related
parties
34,872,831 - - - - -
34,872,831
P397,815,167 P- P- P - P11,953,738 P- P409,768,905
The Company has no financial assets that are past due or impaired and whose terms have been renegotiated. Liquidity risk This represents the risk or difficulty in raising funds to meet the Company’s commitment associated with financial obligation and daily cash flow requirement. The Company is exposed to the possibility that adverse exchanges in the business environment and/or its operations would result to substantially higher working capital requirements and the subsequent difficulty in financing additional working capital. The Company addresses liquidity concerns primarily through cash flows from operations and short-term borrowings, if necessary. The Company likewise regularly evaluates other financing instruments to broaden the Company’s range of financing sources. The following table summarizes the maturity profile of the Company’s other financial liabilities as of December 31, 2011 and 2010, respectively based on the contractual undiscounted payments: At December 31, 2011
On demand Within 1 year More than 1 year Total Trade and other payables P42,269,087 P92,429,865 P- P134,698,952 Loans payable 392,500,000 - - 392,500,000 Advances from related parties 52,461,454 - - 52,461,454 Dividends payable 25,000,000 - - 25,000,000
P512,230,541 P92,429,865 P- P604,660,406
At December 31, 2010
On demand Within 1 year More than 1 year Total Trade and other payables P169,363,509 P- P- P169,363,509 Loans payable - 469,500,000 - 469,500,000
P169,363,509 P469,500,000 P- P638,863,509
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Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s bank loans payable. Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans payable with all other variables held constant, the Company’s profit before tax is affected as follows: Increase/decrease Effect on profit interest rate before tax 2011 +1% (P269,340) -1% 269,340 2010 +1% (P267,258) -1% 267,258 2009 +1% (P209,044) -1% 209,044
Capital risk management
The Company manages its capital structure (total equity) and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust or delay the dividend payment to shareholders, and appropriate a percentage of retained earnings towards expansion and capital expenditures. The Company through the Finance function sets operational targets and performance indicators in order to assure that the capital and returns requirements are achieved. Appropriate monitoring and reporting systems accompany these targets and indicators to assess the achievement of Company goals and institute appropriate action. No changes were made in the objectives, policies and processes in 2011 and 2010. The Company has no externally imposed capital requirements. NOTE 5 – SEGMENT REPORTING The CEO is the Company’s chief operating decision-maker. Management has determined the operating segments based on the reports reviewed by the CEO that are used to make strategic decisions. The CEO considers the business from a geographic perspective. Geographically, management considers the performance of the distributorship of agro-products in Bulacan (Main), Nueva Ecija – North, Nueva Ecija – South, Pangasinan and Pampanga. The reportable operating segments derive its revenue primarily from different agro-products such as feeds, seeds, chemicals and fertilizers. All revenue of the reportable segments arises from external customers. The operating segments are organized and managed separately according to the different geographical areas of operations, with each segment representing a strategic business unit that offers the same types of products but serves different locations. These divisions are the basis on which the Company reports its primary segment information. All operating business segments used by the Company meet the definition of a reportable segment under PFRS 8.
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The CEO assesses the performance of the operating segments based on a measure of Earnings Before Interests, Taxes and Depreciation and Amortization (EBITDA). This measurement basis excludes the effects of non-recurring expenditure from the operating segments and common operating expenses. Interest expense is not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Company. Transfer prices between operating segments, if any, are on an arm’s length basis in a manner similar to transactions with third parties. Segment assets and liabilities Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables and inventories. Segment liabilities include all operating liabilities and consist principally of trade and other payables. Segment assets and liabilities do not include deferred income taxes. Segment transactions Segment sales, expenses and performance include sales and purchases with third parties. Intercompany loans between segments, if any, are eliminated during the preparation of the Company’s financial statements.
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The segment information provided to the CEO for the years ended December 31, 2011, 2010 and 2009 is as follows (amounts in thousands):
Bulacan Nueva Ecija - South Nueva Ecija - North 2011 2010 2009 2011 2010 2009 2011 2010 2009
Sales P1,430,025 P1,290,795 P1,298,003 P281,215 P277,887 P279,439 P138,316 P102,641 P103,214
Cost of sales (1,264,958) (1,199,331) (1,223,446) (246,748) (247,102) (252,071) (125,407) (94,972) (96,882)
Other operating income 1,960 (18) - - 6 - - 12 -
Operating expenses (7,171) (23,142) (30,028) (9,848) (5,326) (6,911) (5,787) (6,028) (7,822)
Finance income 3,496 178 164 63 6 6 66 5 5
Finance costs - - - - - - - - -
Provision for income tax (31,002) (4,886) 2,557 (7,404) (7,642) (6,139) (2,156) (498) 445
Profit (loss) for the year 132,350 63,596 47,250 17,277 17,830 14,324 5,032 1,161 (1,039)
Interest - - - - - - - - -
Taxes 31,002 4,886 (2,557) 7,404 7,642 6,139 2,156 498 (445)
Depreciation 5,675 5,564 128 23 45 1 23 45 1
Adjusted EBITDA P169,027 P74,045 P44,821 P24,705 P25,517 P20,463 P7,212 P1,704 P(1,484)
Pampanga Pangasinan Unallocated expense
2011 2010 2009 2011 2010 2009 2011 2010 2009
Sales P48,735 P35,755 P35,955 P103,419 P90,982 P91,490 P- P- P-
Cost of sales (44,124) (34,346) (35,037) (93,166) (79,658) (81,260) - - -
Other operating income - - - - - - - - -
Operating expenses (2,207) (1,945) (2,524) (5,782) (6,575) (8,532) (32,505) (24,818) (32,204)
Finance income 40 - - 164 8 7 - - -
Finance costs - - - - - - (26,934) (26,726) (20,904)
Provision for income tax (733) - 482 (1,390) (1,427) (512) - - -
Profit (loss) for the year 1,710 (536) (1,124) 3,244 3,331 1,194 (59,439) (51,544) (53,109)
Interest - - - - - - 26,934 26,726 20,904
Taxes 733 - (482) 1,390 1,427 512 - - -
Depreciation 15 16 - 44 86 2 - - -
Adjusted EBITDA P2,457 P(520) P(1,605) P4,679 P4,843 P1,708 P(32,505) P(24,818) P(32,204)
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A reconciliation of the total adjusted EBITDA of the reportable segments to the Company’s profit for the year is provided as follows (amounts in thousands):
Total
2011 2010 2009
Sales P2,001,710 P1,798,060 P1,808,100 Cost of sales (1,774,403) (1,655,408) (1,688,695) Other operating income 1,960 - - Operating expenses (63,301) (67,833) (88,021) Finance income 3,828 197 182 Finance costs (26,934) (26,726) (20,904) Provision for income tax (42,687) (14,452) (3,167) Profit (loss) for the year 100,174 33,837 7,495 Common operating expenses (32,505) (24,818) (32,204) Interest 26,934 26,726 20,904 Taxes 42,687 14,452 3,167 Depreciation 5,780 5,756 132
Adjusted EBITDA
P208,080
P105,589
P63,903
The segment assets and liabilities as of the years ended December 31, 2011 and 2010 are as follows (amounts in thousands):
Bulacan Nueva Ecija - South Nueva Ecija - North
2011 2010 2011 2010 2011 2010
Segment assets P567,225 P454,529 P72,267 P114,167 P38,882 P15,508
Segment liabilities P149,861 P158,462 P7,862 P2,973 P14,755 P15,217 Additions to
property and equipment
P53,295
P29,015 P- P- P- P-
Pampanga Pangasinan Unallocated
2011 2010 2011 2010 2011 2010
Segment assets P16,426 P11,430 P20,740 P15,391 P337,508 P50,284
Segment liabilities P6,886 P8,239 P1,897 P3,817 P471,782 P470,871 Additions to
property and equipment
P10
P6
P21
P11 P- P-
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The total reportable segments’ assets are reconciled to the Company’s total assets as follows:
2011 2010
Reportable segments' assets
P715,540,527
P611,025,806 Unallocated: Loans receivable (Note 8) 135,000,000 15,000,000 Advances to related parties (Note 20) 66,495,613 34,872,831 Investment properties (Note 10) 134,152,963 - Deferred tax assets (Note 22) 1,858,969 411,184
Total assets per statement of financial position P1,053,048,072 P661,309,821 The total reportable segments’ liabilities are reconciled to the Company’s total liabilities as follows:
2011 2010 Reportable segments' liabilities
P181,261,307
P188,708,331
Unallocated: Loans payable (Note 13) 392,500,000 469,500,000 Advances from related parties (Note 20) 52,461,454 - Dividends payable (Note 15) 25,000,000 - Pension benefit (Note 21) 1,820,747 1,370,614
P653,043,508 P659,578,945 The amounts provided to the CEO with respect to total assets and total liabilities are measured in a manner consistent with that of the financial statements. The reportable segments’ assets are allocated based on the operations of the segment and the physical location of the assets. The Company’s loans receivable, advances to related parties, investment properties and deferred tax assets are not considered as segment assets. The reportable segments’ are allocated based on the operations of the segment. The Company’s loans payable, advances from related parties and pension liability are not considered as segment liabilities. Unallocated assets and liabilities are managed by the central treasury function. The Company does not have revenues from transactions with a single external customer amounting to ten percent (10%) or more of the Company’s total revenues. NOTE 6 - CASH ON HAND AND IN BANKS The account consists of:
2011 2010 Cash on hand P240,000 P74,166 Cash in banks 204,548,818 19,031,895
P204,788,818 P19,106,061
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Cash in banks earns interest at the respective bank deposit rates. Interest income earned from bank deposits amounted to P973,221, P196,582 and P181,825 for the years ended December 31, 2011, 2010 and 2009, respectively. NOTE 7 – TRADE AND OTHER RECEIVABLES, NET The account consists of:
2011 2010
Trade receivables P247,081,567 P323,632,916 Advances to suppliers 3,656,215 10,898,440 Accrued interest on loans receivable (Note 8) 2,855,000 - Advances to employees 810,066 1,536,937 Other receivables 2,502,100 4,795,886
256,904,948 340,864,179 Allowance for impairment loss (Note 18) (4,375,816) -
P252,529,132 P340,864,179
Trade receivables are from dealers and customers of the Company and are not interest-bearing. Normal credit terms of trade receivables are 30 days and 60 days. During the year, the Company provided an allowance for impairment loss which amounted to P4,375,816 based on specific impairment assessments. NOTE 8 – LOANS RECEIVABLES On September 26, 2011, the Company granted a loan to Avestha Holding Corporation, a related party (Note 20), amounting to P120,000,000 for a term of three (3) years. The principal of the loan will be payable after two (2) years in which an interest at the rate of six percent (6%) will be payable on the balance at the end of every month. The loan is fully secured by the borrower’s various real estate properties independently valued by Cuervo Appraisers, Inc. at P166,549,000. This loans receivable is presented under noncurrent assets in the statements of financial position. On November 4, 2010, the Company granted a loan to Andres Lipana amounting to P15,000,000 for a term of one (1) year, renewable annually upon mutual agreement of both parties. The principal of the loan will be is subject to an interest at the rate of 6 percent (6%) payable at the end of every month. In 2011, the loan is renewed with the same terms and conditions. This loans receivable is presented under current assets in the statements of financial position. Finance income earned on the loans receivable during the year amounted to P2,855,000 (Note 7). NOTE 9 - INVENTORIES The account consists of: 2011 2010
Feeds P123,429,837 P11,232,250 Seeds 16,706,316 44,010,549 Chemicals 33,242,031 154,858,258 Fertilizers 6,456,864 14,143,512
P179,835,048
P224,244,569
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The above inventories are carried at the lower of cost and net realizable value (NRV). The Company has no unusual purchase commitments or inventories pledged as security for liabilities. NOTE 10 – INVESTMENT PROPERTIES During 2011, the Company acquired various lands amounting to P134,152,963. The acquisition value is based on the valuation report dated June 2011 conducted by an independent appraiser. The Company applies the cost model in its investment properties. Management believes that the carrying amounts of the said properties approximate the fair values as of financial reporting date. NOTE 11 – PROPERTY AND EQUIPMENT, NET The details of and movements in this account are as follows: Office Transportation Construction Equipment Equipment In progress Total Cost At January 1, 2010 P591,416 P1,900,000 P- P2,491,416 Additions 1,250,037 27,782,038 - 29,032,075 At December 31, 2010 1,841,453 29,682,038 - 31,523,491 Additions 505,266 2,444,447 50,376,897 53,326,610 Disposals (160,280) (5,037,845) - (5,198,125) At December 31, 2011 2,186,439 27,088,640 50,376,897 79,651,976
Accumulated depreciation At January 1, 2010 276,809 272,167 - 548,976 Depreciation 91,481 5,664,241 - 5,755,722 At December 31, 2010 368,290 5,936,408 - 6,304,698 Depreciation 421,854 5,358,229 - 5,780,083 Disposals (160,280) (5,037,845) - (5,198,125) At December 31, 2011 629,865 6,256,792 - 6,886,657
Net book values December 31, 2011 P1,556,574 P20,831,848 P50,376,897 P72,765,319 December 31, 2010 P1,473,163 P23,745,630 P- P25,218,793
During the year, the Company capitalized expenditures amounting to P50,376,897 related to properties under construction. These expenditures consist of farm equipments, materials, labor and overhead directly related to the construction of the asset. The Company had not capitalized any borrowing costs attributable to the construction of such assets. During the year, the Company disposed fully-depreciated property and equipment to a related party that resulted to a gain on disposal amounting to P1,914,123 (Notes 19 and 20). There are neither restrictions on title on the Company’s property and equipment nor was any of it pledged as security for liability. The Company has no contractual commitment for the acquisition of property and equipment. Depreciation expense amounted to P5,780,083, P5,755,722 and P132,469 in 2011, 2010 and 2009, respectively. Management has reviewed the carrying values of the Company’s property and equipment as of December 31, 2011 and 2010 for impairment. Based on the results of its evaluation, there were no indications that the property and equipment were impaired.
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NOTE 12 – TRADE AND OTHER PAYABLES The account consists of: 2011 2010
Trade payables P124,120,187 P158,452,509 Others 10,578,765 10,911,000
P134,698,952
P169,363,509 Trade payables are from suppliers of agro-products and are non-interest-bearing. Normal credit terms are 30 to 60 days. Other payables mainly consist of the one percent (1%) tax withheld by the Company on its collections from customers. NOTE 13 – LOANS PAYABLE The loans payable as of December 31, 2011 and 2010 consist of secured short-term peso denominated loans obtained from local banks with interest rate of 6.25% to 7.75% in 2011, 2010 and 2009. The terms of the loans are six months or less and are subject for renewal. 2011 2010 Loans payable, January 1 P469,500,000 P341,511,459 Availments during the period - 127,988,541 Payments during the period (77,000,000) -
Loans payable, December 31
P392,500,000
P469,500,000 Interest expense arising from these loans amounted to P26,934,023, P26,725,754 and P20,904,375 in December 31, 2011, 2010 and 2009, respectively. During the year, the Company paid a portion of its loans payable amounting to P77,000,000. NOTE 14 - SHARE CAPITAL The account consists of: 2011 2010
Authorized:
845,400,000 shares at P1 par value each in 2011, and 10,000 shares at P100 par value each in 2010
P845,400,000 P1,000,000 Issued and outstanding at January 1:
10,000 shares at P100 par value each
P1,000,000 P1,000,000 Issued during the year:
323,100,000 shares at P1 par value each
323,100,000 - Issued and outstanding at December 31:
324,100,000 shares at P1 par value each in 2011, and 10,000 shares at P100 par value each in 2010
P324,100,000 P1,000,000
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On August 5, 2011, the Company has increased its authorized capital stock from one million pesos (P1,000,000) divided into ten thousand (10,000) shares with par value of one hundred peso (P100) per share, to three hundred forty five million, four hundred thousand pesos (P345,400,000) divided into three hundred forty five million, four hundred thousand (345,400,000) shares with par value of one peso (P1). On August 18, 2011, the Company has increased its authorized capital stock from three hundred forty five million, four hundred thousand pesos (P345,400,000) divided into three hundred forty five million, four hundred thousand (345,400,000) shares with par value of one peso (P1) per share, to eight hundred forty five million, four hundred thousand pesos (P845,400,000) divided into eight hundred forty five million, four hundred thousand (845,400,000) shares with par value of one peso (P1) per share. Subscriptions and full payment of stocks during the period were made on the following dates:
August 15, 2011 P86,100,000 August 23, 2011 125,000,000 September 9, 2011 112,000,000 P323,100,000
The Company has 18 and 5 shareholders as of December 31, 2011 and 2010, respectively. NOTE 15 – DIVIDENDS On a meeting held on November 18, 2011, the BOD unanimously approved the declaration of cash dividends in the amount of Twenty Five Million Pesos (P25,000,000) to stockholders of record as of November 8, 2011, subject to the condition on the availability of unrestricted retained earnings to cover said dividend declaration. On a special meeting held on November 4, 2010, the Company’s BOD approved the declaration of cash dividends amounting to P47,000,000 which were paid on December 8, 2010 through offsetting of its advances to its stockholders (Note 20). The dividend per share is P47. NOTE 16 – SALES The account consists of: 2011 2010 2009 Feeds P1,048,487,027 P1,173,496,156 P1,133,097,265 Fertilizers 487,913,038 322,165,228 253,330,018 Chemicals 442,938,467 279,658,329 408,483,802 Seeds 22,371,771 20,887,632 12,474,919 Others - 1,852,210 713,948 P2,001,710,303 P1,798,059,555 P1,808,099,952
The Company has an existing Complementary Feeds Distributorship Agreement (the Agreement) with San Miguel Foods, Inc. (SMFI) wherein the parties agreed that the Company will exclusively distribute B-MEG Feeds. The Agreement is valid for one year and shall be automatically renewed upon expiry with the same terms and conditions except as may be agreed by the parties in writing, unless SMFI notifies the Company in writing of its intent to terminate the Agreement within 60 days prior to the end of the term. The Company has other distributorship agreements but on a non-exclusive basis. The agreements are valid for one year and shall be automatically renewed for another year, subject to the right of either party to terminate.
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The Company’s revenue may be affected by any program developed or supported by the Department of Agriculture of the Philippines. The Company’s revenue comes primarily from the sale of agricultural products. Any agricultural program that the Department of Agriculture develops for the farmers of the country may affect the Company’s revenue. In the event that the government is unable to effectively implement its programs, this might result in a slowdown of the Company’s business as farmers might not have the required resources to purchase the Company’s products. There is no guarantee that the Philippine government will not change or prioritize programs for agriculture in the coming years. To mitigate this risk, the Company updates itself regularly with the Department of Agriculture’s policies or programs developed for the agricultural product industry. This allows the Company to react quickly to government programs relating to agricultural products. It also enables the Company to plan ahead to meet the Department of Agriculture’s ongoing or future policies or programs. The Company also conducts its own marketing activities to promote the use or consumption of its product. The Company intends to strengthen its marketing efforts nationwide. Risk of natural calamities The Company’s revenues are highly dependent on the weather conditions in the Philippines. Severe drought or flooding in a certain agricultural region will significantly affect the productivity of the farmers. This will highly affect the demand for fertilizers, pesticides and other agricultural chemicals. To mitigate this risk, the Company in partnership with its key suppliers would distribute new products manufactured through the use of modern technology to withstand if not totally resist the devastating effects brought by forces of nature. In addition, the Company distributes other agricultural products which are unaffected by natural calamities such as animal feeds for poultry, hogs and ducks. Risk of outbreak of animal diseases The Company’s revenues may be affected by the outbreak of swine and poultry diseases because the demand for animal feeds decreases in case an outbreak happens. To mitigate this risk the Company, in partnership with its key suppliers, currently deploys farm assistant technicians in the field to prevent and/or treat swine and poultry diseases. In addition, the Company also distributes veterinary medicines that help prevent or treat the said diseases. NOTE 17 – COST OF SALES The account consists of: 2011 2010 2009
Inventories, beginning P224,244,569 P269,142,762 P261,094,522 Net purchases 1,729,993,599 1,610,509,377 1,696,743,108 Cost of goods available for sale 1,954,238,168 1,879,652,139 1,957,837,630 Inventories, ending (Note 9) 179,835,048 224,244,569 269,142,762
P1,774,403,120 P1,655,407,570 P1,688,694,868
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NOTE 18 – OPERATING EXPENSES The account consists of:
2011 2010 2009
Salaries, wages and benefits P21,849,469 P18,979,147 P21,287,693 Transportation and travel 5,965,984 1,090,790 4,069,329 Depreciation (Note 11) 5,780,083 5,755,722 132,469 Professional fees 5,714,995 3,110,195 4,279,243 Impairment loss on receivables (Note 7) 4,375,816 - - Commissions 3,314,986 8,954,618 10,816,448 Marketing 2,529,790 16,710,277 29,851,722 Repairs and maintenance 2,256,539 1,477,672 2,253,189 Representation and entertainment 1,525,269 762,139 4,753,277 Taxes and licenses 1,435,725 1,613,009 370,067 Communication 1,263,707 925,261 1,520,108 Rental (Note 23) 1,206,440 1,229,050 1,152,023 Office supplies 1,126,750 135,768 378,651 Insurance 1,111,726 921,844 1,184,003 Utilities 915,220 831,596 1,949,681 Pension costs (Note 21) 450,133 420,048 362,573
Others 2,478,358 4,916,217 3,660,083
P63,300,990 P67,833,353 P88,020,559 NOTE 19 – OTHER OPERATING INCOME The account consists of:
2011 2010 2009 Gain on disposal of property and equipment P1,914,123 P- P- Others 45,713 - -
P1,959,836 P- P-
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NOTE 20 – RELATED PARTY TRANSACTIONS Related party relationships exist when one party has the ability to control, directly or indirectly through one or more intermediaries, the other party or exercise significant influence over the other party in making financial and operating decisions. Such relationships also exist between and/or among entities which are under common control with the reporting enterprise, or between and/or among the reporting enterprises and their key management personnel, directors or its stockholders. The details of the Company’s related parties are summarized as follows:
Name of the related party Relationship Nature of Operations Calata Builders Common
Stockholders A corporation established in the
Philippines which ventures as a subcontractor and into the realty business
Calata Farms Common Owner
A sole proprietorship owned by which offers high efficiency poultry growing using climate-controlled system
Avestha Holdings Corporation Common Owner
A corporation established to engage in holding of shares of stock of different corporations
Agri Phil Corporation Common Stockholders
A corporation established to engage in import/export, buying, selling, distributing, marketing at wholesale and retail all kinds of goods of every kind and description such as but not limited to agricultural products
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Significant transactions with related parties are as follows: a) Cash advances were made to related parties, excluding stockholders, to support their
operating capital requirements. These loans are repayable once the related parties have sufficient cash flows to support their respective operations. Cash advances from stockholders are used to support the operating capital requirements of the Company. Cash advances to stockholders represent advances made in carrying out the day-to-day opearations of the Company and are subject to liquidation upon utilization. The advances to (from) related parties are non-interest bearing, unsecured and have no fixed repayment terms. As of December 31, 2011 and 2010, the outstanding balances of advances to (from) related parties follow:
2011 2010 Agri Phil Corporation January 1 P- P- Cash advances to 55,455,249 - December 31 55,455,249 -
Calata Farms January 1 33,173,159 - Cash advances to (collections from) (33,173,159) 33,173,159 December 31 - 33,173,159 Calata Builders January 1 1,525,347 - Cash advances to 6,200,000 1,525,347 December 31 7,725,347 1,525,347 Stockholders January 1 174,325 3,372,096 Cash advances to 3,306,148 43,802,229 Cash advances from (165,457) - Dividends distribution through offsetting (Note 15) - (47,000,000) December 31 3,315,016 174,325 Total advances to related parties P66,495,613 P34,872,831
2011 2010 Stockholders January 1 P- P- Cash advances received 67,869,405 - Cash advances paid (15,407,951) - Total advances from related parties P52,461,454 P-
b) An operating lease agreement was executed between the Company and the stockholders
whereby the latter granted the former with the rent free use of office premises and various warehouses located in Bulacan.
c) A loan agreement was executed between the Company and Avestha Holdings Corporation whereby the former granted the latter a loan amounting to P120,000,000 for a term of three (3) years subject to interest at the rate of six percent (6%) payable on the balance at the end of every month (Note 8).
d) During the year, the Company disposed fully-depreciated property and equipment to a related party that resulted to a gain on disposal amounting to P1,914,123 (Notes 11 and 19).
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e) The short term compensation of key management personnel amounted to P3,822,460, P2,786,913 and P2,514,680 for the years ended December 31, 2011, 2010 and 2009 respectively. There are no long term compensation of key management personnel for the years ended December 31, 2011, 2010 and 2009, respectively.
f) For the years ended December 31, 2011 and 2010, the Company has not recorded any impairment of receivable relating to the amounts owned by the related parties. The assessment is undertaken through examining the financial position of the related parties and the market in which they operate.
NOTE 21 - PENSION COSTS The Company maintains an unfunded, non-contributory defined benefit retirement plan covering all qualified employees. Normal retirement benefits are equal to the employee’s retirement pay as defined in Republic Act No. 7641 multiplied by his years of service. Normal retirement date is the attainment of age 60 and completion of at least five years of service. The following tables summarize the components of net pension cost recognized in the statements of comprehensive income and the amounts recognized in the statements of financial position:
Net pension costs presented under operating expense are as follows: 2011 2010 2009 Current service cost P347,571 P347,571 P324,167 Interest cost 102,562 74,831 44,012 Net actuarial gain recognized in the year - (2,354) (5,606)
P450,133 P420,048 P362,573
Components of net pension liability and the amounts recognized in the statement of financial position are as follows: 2011 2010 2009 Present value of defined benefit obligation
P2,008,832 P1,558,699
P806,364
Unrecognized actuarial gain (188,085) (188,085) 144,202 P1,820,747 P1,370,614 P950,566
Present value of defined benefit obligation is as follows: 2011 2010 2009 Balance at January 1 P1,558,699 P806,364 P386,752 Interest cost 102,562 74,831 44,012 Current service cost 347,571 347,571 324,167 Actuarial loss - 329,933 51,433 Balance at December 31 P2,008,832 P1,558,699 P806,364
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Movements in unrealized actuarial gains are as follows: 2011 2010 2009 Balance at January 1 (P188,085) P144,202 P201,241 Actuarial loss on obligations - (329,933) (51,433) Actuarial gains recognized - (2,354) (5,606) Balance at December 31 (P188,085) (P188,085) P144,202 The principal assumptions used in determining pension liability of the Company are shown below: 2011 2010 2009 Discount rates 6.58% 7.93% 9.37% Future salary increase rates 5.00% 5.00% 5.00% NOTE 22 – INCOME TAXES a. The components of the Company’s provision for income tax are as follows:
2011 2010 2009 Current P44,134,322 P14,578,205 P3,275,318 Deferred (1,447,785) (126,014) (108,772) P42,686,537 P14,452,191 P3,166,546 b. The components of the Company’s deferred tax assets are as follows:
Balance at
January 1, 2010
Charged to operations during the
period
Balance at
December 31, 2010
Charged to operations during the
period
Balance at December 31, 2011
Allowance for
impairment losses on trade receivables
P-
P-
P-
P1,312,745
P1,312,745 Pension liability 285,170 126,014 411,184 135,040 546,224
P285,170 P126,014 P411,184 P1,447,785 P1,858,969
The Company reviews deferred tax assets at each financial reporting date and recognizes these to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized. Deferred tax assets were recognized as of December 31, 2011 as management believes that the carryforward benefit would be realized in its future operations.
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c. The reconciliation of the provision for income tax computed at the statutory income tax rate to provision for income tax shown in the statements of comprehensive income are as follows:
2011 2010 2009
Income tax computed at 30% P42,858,067 P14,486,838 P3,198,593 Add (deduct) income tax effects
resulting from: Non-deductible expenses 120,436 150,342 131,273 Income subjected to final tax (291,966) (58,975) (54,548) Change in recognized DTA - (126,014) (108,772)
P42,686,537 P14,452,191 P3,166,546 NOTE 23 – LEASE AGREEMENTS The Company has entered into various lease agreements with different companies for the lease of warehouses located in Nueva Ecija, Pampanga and Pangasinan, all of which fall under the category of operating leases. The lease agreements are renewable every year where terms and conditions are subject to the agreement of both parties. The rent expense charged to operations for the years ended December 31, 2011, 2010 and 2009 amounted to P1,206,440, P1,229,050 and P1,152,023, respectively (Note 18). Future minimum annual rentals are as follows:
Period 2011 2010 Not later than one year P1,206,440 P1,206,440
NOTE 24 – EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. The financial information pertinent to the derivation of the basic earnings per share for the years ended December 31, 2011, 2010 and 2009, are as follows: 2011 2010 2009 Profit for the year attributable to
ordinary equity holders of the Company
P100,173,688 P33,837,269 P7,495,429 Weighted average number of shares
outstanding 145,300,000 10,000 10,000
P0.69 P3,383.73 P749.54 There are no dilutive potential ordinary shares for the years ended December 31, 2011, 2010 and 2009. Therefore, the Company’s basic and diluted earnings per share for the years ended December 31, 2011, 2010 and 2009 are equal.
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The reconciliation of the average number of shares outstanding as of December 31, 2011 is as follows:
Date Number of
shares issued Number of shares
outstanding
Weighted average number
of shares January 1, 2011 1,000,000 1,000,000 1,000,000 August 15, 2011 86,100,000 87,100,000 54,437,500 August 23, 2011 125,000,000 212,100,000 8,837,500
September 9, 2011 112,000,000 324,100,000 81,025,000
324,100,000 145,300,000 NOTE 25 – RECLASSIFICATIONS Certain account reclassifications were made to conform with 2011 financial statements presentations. The effects of the reclassifications relative to 2010 financial statements are summarized below:
Account Before
reclassification Reclassification After
reclassification
Advances to related parties - current P- P34,872,831 P34,872,831
Advances to related parties - noncurrent P34,872,831 (P34,872,831) P-
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NOTE 26 – INFORMATION REQUIRED BY BUREAU OF INTERNAL REVENUE (BIR)
A. REVENUE REGULATION (RR) 15-2010
On November 25, 2010, the BIR issued Revenue Regulations RR No. 15-2010 which prescribes additional procedural and/or documentary requirements in connection with the preparation and submission of financial statements accompanying the tax returns. Under the said RR, companies are required to disclose, in addition to the disclosures mandated under PFRS and such other standards and/or conventions that may heretofore be adopted, in the Notes to the Financial Statements, information on taxes, duties and license fees paid or accrued during the taxable year. Following is the required information under RR No. 15-2010 for the year ended December 31, 2011:
2011 Output Value Added Tax (VAT) P53,152,616 Vatable sales 442,938,467 Exempt sales 1,558,771,836 Input VAT At January 1 P5,279,022 Current year’s domestic purchases 49,741,837 Claims for tax credit/refund and other adjustments (53,152,616) At December 31 P1,868,243
Documentary stamp tax Loan instruments P309,248
Withholding taxes Tax on compensation and benefits P- Creditable withholding taxes 2,688 Final withholding taxes on dividends paid - P2,688 All other taxes Other taxes paid during the year recognized under “Taxes and licenses” account in profit or loss Permits P944,691 Others 181,786 P1,126,477
As of December 31, 2011, the Company has no pending tax court cases nor has received tax assessment notices from the BIR.
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B. REVENUE REGULATION (RR) 19-2011 Revenue Regulations 19-2011 was issued to prescribe the new BIR Forms that will be used for Income Tax filing covering and starting with Calendar Year 2011, and to modify Revenue Memorandum Circular No. 57-2011. Pursuant to Section 244 in relation to Sections 6(H), 51(A)(1), and 51(A)(2) of the National Internal Revenue Code of 1997 (Tax Code), as amended, these Regulations are prescribed to revise BIR Form No. 1700, 1701 and 1702 to reflect the changes in information requested from said BIR Form and to enable the said form to be read by an Optical Character Reader. Under Guidelines and Instructions of BIR Form No. 1702, page 4, the following schedules are prescribed under existing revenue issuances which must form part of the Notes to the Audited Financial Statements: a. Sales
2011 Feeds P1,048,487,027 Fertilizers 487,913,038 Chemicals 442,938,467 Seeds 22,371,772 P2,001,710,303
b. Cost of sales
2011
Inventories, beginning P224,244,569 Net purchases 1,729,993,599 Cost of goods available for sale 1,954,238,168 Inventories, ending 179,835,048 P1,774,403,120
c. Non-operating and taxable other income
2011
Gain on disposal of property and equipment P1,914,123 Others 45,713
P1,959,836
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d. Itemized Deductions (if taxpayer did not avail of OSD)
2011
Interest expense P26,532,569 Salaries, wages and benefits 21,849,469 Transportation and travel 5,965,984 Depreciation 5,780,083 Professional fees 5,714,995 Commissions 3,314,986 Marketing 2,529,790 Repairs and maintenance 2,256,539 Representation and entertainment 1,525,269 Taxes and licenses 1,435,725 Communication 1,263,707 Rental 1,206,440 Office supplies 1,126,750 Insurance 1,111,726 Utilities 915,220 Others 2,478,358
P85,007,610 e. Taxes and Licenses Permits P944,691 Documentary stamp tax 309,248 Others 181,786 P1,435,725
Note 2010 2009 2008
ASSETSCurrent assetsCash on hand and in banks 5 P19,106,061 P20,210,402 P16,154,703Trade and other receivables 6 355,864,179 304,031,218 280,698,443 Inventories 7 224,244,569 269,142,762 261,094,522 Prepayments and other current assets 1,592,204 - -
Total current assets 600,807,013 593,384,382 557,947,668
Non-current assetsProperty and equipment, net 8 25,218,793 1,942,440 1,258,367 Advances to related parties 20 34,872,831 3,372,096 - Deferred tax asset 17 411,184 285,170 176,398
Total non-current assets 60,502,808 5,599,706 1,434,765
Total assets P661,309,821 P598,984,088 P559,382,433
LIABILITIES AND EQUITYCurrent liabilitiesTrade and other payables 9 P169,363,509 P236,321,172 P221,718,916 Short-term loans 10 469,500,000 341,511,459 324,149,713 Income tax payable 19,344,822 5,307,284 2,485,314 Advances from related parties 20 - - 3,042,319
Total current liabilities 658,208,331 583,139,915 551,396,262
Non-current liabilityPension liability 16 1,370,614 950,566 587,993
Total liabilities 659,578,945 584,090,481 551,984,255
EquityShare capital 11 1,000,000 1,000,000 1,000,000 Retained earnings 730,876 13,893,607 6,398,178
Total equity 1,730,876 14,893,607 7,398,178
Total liabilities and equity P661,309,821 P598,984,088 P559,382,433
DECEMBER 31, 2010, 2009 AND 2008STATEMENTS OF FINANCIAL POSITION
(formerly Planters Choice Agro Products, Inc.)CALATA CORPORATION
(The notes on pages 5 to 27 are an integral part of these financial statements)
Note 2010 2009 2008
Sales 13 P1,798,059,555 P1,808,099,952 P1,611,090,694Cost of sales 14 (1,655,407,570) (1,688,694,868) (1,512,751,355) Gross profit 142,651,985 119,405,084 98,339,339 Operating expenses 15 (67,833,353) (88,020,559) (74,242,962) Profit from operations 74,818,632 31,384,525 24,096,377
Finance income 5 196,582 181,825 161,547 Finance cost 10 (26,725,754) (20,904,375) (17,232,462) Profit before tax 48,289,460 10,661,975 7,025,462 Provision for income tax 17 (14,452,191) (3,166,546) (2,461,454) Profit for the year 33,837,269 7,495,429 4,564,008 Other comprehensive income - - -
Total comprehensive income P33,837,269 P7,495,429 P4,564,008
Earnings per share 3,383.73 749.54 456.40
(The notes on pages 5 to 27 are an integral part of these financial statements)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
CALATA CORPORATION(formerly Planters Choice Agro Products, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
Note Share capital Retained earnings Total
1,000,000 1,834,170 2,834,170 Total comprehensive income
for the year - 4,564,008 4,564,008
Balance at December 31, 2008 1,000,000 6,398,178 7,398,178Total comprehensive income
for the year - 7,495,429 7,495,429
Balance at December 31, 2009 1,000,000 13,893,607 14,893,607 Total comprehensive income
for the year - 33,837,269 33,837,269 Dividends declared and paid 12 - (47,000,000) (47,000,000)
Balance at December 31, 2010 P1,000,000 P730,876 P1,730,876
Balance at December 31, 2007
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(The notes on pages 5 to 27 are an integral part of these financial statements)
CALATA CORPORATION(formerly Planters Choice Agro Products, Inc.)
STATEMENTS OF CHANGES IN EQUITY
Notes 2010 2009 2008
Cash flows from operating activitiesProfit before tax P48,289,460 P10,661,975 P7,025,462 Adjustments for:
Depreciation 8, 14 5,755,722 132,469 122,107 Pension costs 6 420,048 362,573 152,170 Finance income 5 (196,582) (181,825) (161,547) Finance cost 10 26,725,754 20,904,375 17,232,462
Operating income before working capital changes 80,994,402 31,879,567 24,370,654 Decrease (increase) in:Trade and other receivables (51,832,961) (23,332,775) (71,557,793) Advances to related parties 12 (78,500,735) (3,372,096) - Inventories 44,898,193 (8,048,240) (5,071,899) Prepayments and other current assets (1,592,204) - - Increase (decrease) in:Trade and other payables (66,957,663) 14,602,256 (21,497,820) Advances from related parties - (3,042,319) (20,957,681) Cash provided by (used in) operations (72,990,968) 8,686,393 (94,714,539) Finance income received 196,582 181,825 161,547 Income taxes paid (540,667) (453,348) (260,182) Net cash provided by (used in)
operating activities (73,335,053) 8,414,870 (94,813,174)
Cash flows from investing activityAdditions to property and equipment 8 (29,032,075) (816,542) (524,874)
Cash flows from financing activitiesProceeds from short-term loans 127,988,541 17,361,746 128,049,713 Finance cost paid (26,725,754) (20,904,375) (17,232,462) Net cash provided by (used in)
financing activities 101,262,787 (3,542,629) 110,817,251
Net increase (decrease) in cashon hand and in banks (1,104,341) 4,055,699 15,479,203
Cash on hand and in banksJanuary 1 20,210,402 16,154,703 675,500 December 31 P19,106,061 P20,210,402 P16,154,703
(The notes on pages 5 to 27 are an integral part of these financial statements)
CALATA CORPORATION(formerly Planters Choice Agro Products, Inc.)
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
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CALATA CORPORATION (formerly Planters Choice Agro Products, Inc.)
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 and 2008
NOTE 1 – CORPORATE INFORMATION Calata Corporation (the Company), formerly Planters Choice Agro Products, Inc., was organized under the laws of the Republic of the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) per Registration No. A199911666 on July 23, 1999. The primary purpose of the Company is to engage in the trading of Agro products on a wholesale or retail basis. The Company’s registered address and principal place of business is at McArthur Highway, Banga 1st, Plaridel, Bulacan. On January 5, 2010, the Company’s Board of Directors (BOD) amended its By-laws to change the corporate name from Planters Choice Agro Products, Inc. to Calata Corporation. On February 22, 2010, the SEC issued a Certificate of Amendment approving the said amendment. The financial statements of the Company as of December 31, 2010, 2009 and 2008 were authorized for issue by the BOD on March 2, 2011. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set-out below. These policies have been consistently applied to both years presented, unless otherwise stated. 2.1 Basis of preparation Basis of measurement The accompanying financial statements have been prepared under the historical cost convention. Statement of compliance The accompanying financial statements have been prepared in accordance with Philippine Financial Reporting Standards (PFRS) as issued by the Financial Reporting Standards Council (FRSC), and adopted by SEC. PFRS consists of the following:
a. PFRS - corresponds to International Financial Reporting Standards; b. Philippine Accounting Standards (PAS) - corresponds to International Accounting
Standards; and c. Philippine Interpretations Committee Interpretations (PIC) - correspond to
interpretations of International Financial Reporting Interpretations Committee (IFRIC). Use of judgments and estimates The preparation of financial statements in compliance with adopted PFRS requires the use of certain critical accounting estimates. It also requires Company’s management to exercise judgment in applying the Company's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in Note 3.
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Functional and presentation currency The accompanying financial statements are prepared in Philippine Peso (P), the Company’s functional and presentation currency. All values are rounded to the nearest peso, unless otherwise indicated. Standards, interpretations and amendments to published standards effective beginning January 1, 2010 and onwards New, revised, and amendments to published standards effective in 2010 The Company has adopted the following new, revised and amended standards and interpretations that have been issued and are effective as of January 1, 2010. Except as otherwise indicated, adoption of these new standards and interpretations did not have significant impact on the Company’s financial statements. • PFRS 2 Share-based Payment (Revised): The IASB issued an amendment to IFRS 2 that clarified
the scope and the accounting for group cash-settled share-based payment transactions. The Company adopted this amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company.
• PFRS 3 Business Combinations (Revised) and PAS 27 Consolidated and Separate Financial
Statements (Amended): PFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after becoming effective. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. The Company adopted this revision and amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company.
• PAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without
loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by PFRS 3 (Revised) and PAS 27 (Amended) affect acquisitions or loss of control of subsidiaries and transactions with non-controlling interests after January 1, 2010. The change in accounting policy was applied prospectively and did not have an impact on the financial position or performance of the Company.
• PAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items: The
amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Company adopted this amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company as the Company has not entered into any such hedges.
• PIC Interpretation 17 Distribution of Non-cash Assets to Owners: This interpretation provides
guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The Company adopted this amendment as of January 1, 2010 and did not have an impact on the financial position or performance of the Company.
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Improvements to PFRS An omnibus of amendments was issued to existing standards, primarily with a view to remove inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies but did not have any impact on the financial position or performance of the Company. Issued in May 2008 • PFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that when a
subsidiary is classified as held for sale, all its assets and liabilities are classified as held for sale, even when the entity remains a non-controlling interest after the sale transaction. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Company.
Issued in April 2009 • PFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the
disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in PFRS 5. The disclosure requirements of other PFRS only apply if specifically required for such non-current assets or discontinued operations. The amendment has no impact on the financial position nor financial performance of the Company.
• PFRS 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. The amendment is applied prospectively and has no impact on the financial position nor financial performance of the Company.
• PAS 7 Statement of Cash Flows: States that only expenditure that results in recognizing an asset can be classified as a cash flow from investing activities. This amendment will impact among others, the presentation in the statement of cash flows of the contingent consideration on the business combination completed in 2010 upon cash settlement. The amendment has no impact on the statements of cash flows of the Company.
• PAS 36 Impairment of Assets: The amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in PFRS 8 before aggregation for reporting purposes. The amendment has no impact on the financial position nor financial performance of the Company.
Other amendments resulting from Improvements to PFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Company: Issued in April 2009 • PFRS 2 Share-based Payment; • PAS 1 Presentation of Financial Statements; • PAS 17 Leases; • PAS 34 Interim Financial Reporting; • PAS 38 Intangible Assets; • PAS 39 Financial Instruments: Recognition and Measurement; • PIC Interpretations 9 Reassessment of Embedded Derivatives; and, • PIC Interpretations 16 Hedge of a Net Investment in a Foreign Operation.
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New standards, interpretations and amendments not yet effective Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. The Company intends to adopt these standards when they become effective.
• PAS 24 Related Party Disclosures (Amendment): The amended standard is effective for
annual periods beginning on or after January 1, 2011. It clarified the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government related entities. The Company does not expect any impact on its financial position or performance.
• PAS 32 Financial Instruments: Presentation – Classification of Rights Issues (Amendment): The amendment to PAS 32 is effective for annual periods beginning on or after 1 February 2010 and amended the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency. This amendment will have no impact on the Company after initial application.
• PFRS 9 Financial Instruments: Classification and Measurement: PFRS 9 as issued reflects the
first phase of the work on the replacement of PAS 39 and applies to classification and measurement of financial assets as defined in PAS 39. The standard is effective for annual periods beginning on or after January 1, 2013. In subsequent phases, it will address classification and measurement of financial liabilities, hedge accounting and derecognition. The completion of this project is expected in early 2011. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Company’s financial assets. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.
• PIC Interpretations 14 Prepayments of a minimum funding requirement (Amendment): The
amendment to IFRIC 14 is effective for annual periods beginning on or after January 1, 2011 with retrospective application. The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset. The amendment is deemed to have no impact on the financial statements of the Company.
• PIC Interpretations 19 Extinguishing Financial Liabilities with Equity Instruments: Philippine
Interpretations Committee Interpretations 19 is effective for annual periods beginning on or after July 1, 2010. The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognized immediately in profit or loss. The adoption of this interpretation will have no effect on the financial statements of the Company.
Improvement to PFRS (Issued in May 2010) An omnibus of amendments was issued to existing PFRS standards. The amendments have not been adopted as they become effective for annual periods on or after either July 1, 2010 or January 1, 2011. The amendments listed below, are considered to have a reasonable possible impact on the Group: • PFRS 3 Business Combinations; • PFRS 7 Financial Instruments: Disclosures; • PAS 1 Presentation of Financial Statements; • PAS 27 Consolidated and Separate Financial Statements; and, • PIC Interpretation 13 Customer Loyalty Programmes.
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The Company, however, expects no impact from the adoption of the amendments on its financial position or performance. 2.2 Financial instruments Initial recognition Financial assets and financial liabilities are recognized in the statements of financial position when the Company becomes a party to the contractual provisions of the instrument. In the case of a regular way purchase or sale of financial assets, recognition is done at trade date, which is the date on which the Company commits to purchase or sell the asset. Financial instruments are recognized initially at fair value plus transaction costs except for financial instruments measured at fair value through profit or loss (FVPL).
Classification of financial instruments The Company classifies its financial assets as financial assets at FVPL, held-to-maturity (HTM) financial assets, loans and receivables or available for sale (AFS) financial assets. The Company’s financial assets as of December 31, 2010, 2009 and 2008 comprise of loans and receivables. Financial liabilities, on the other hand, are classified as either financial liabilities at FVPL or other financial liabilities. The Company’s financial liabilities as of December 31, 2010, 2009 and 2008 comprise of accounts payable, short term loan, long term loan and other current liabilities. Management determines the classification of its financial assets and liabilities at initial recognition and, where allowed and appropriate, re-evaluates such designation at every financial reporting date. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statements of financial position. Determination of fair value The fair value of financial instruments traded in active markets is based on their quoted market price or dealer price quotation (bid price for long positions and ask price for short positions). When current bid and asking prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction. If the financial instruments are not listed in an active market, the fair value is determined using appropriate valuation techniques which include recent arm’s length market transactions, net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models, and other relevant valuation models. Derecognition of financial instruments A financial asset or, where applicable, a part of a financial asset or part of a group of similar financial assets is derecognized when: a) the rights to receive cash flows from the asset have expired; b) the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or c) the Company has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
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When the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statements of comprehensive income. Financial assets Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate (EIR) method, less provision for impairment. Amortization is determined using the EIR method. Gains and losses are recognized in statements of comprehensive income when the loans and receivables are derecognized or impaired, as well as through amortization process. They are included in the current assets, except for maturities greater than 12 months after the financial position date which are classified as non-current assets. Cash includes cash on hand and in banks. The Company’s cash on in banks, trade and other receivables, and advances to related parties are included under this category (see Notes 5, 6 and 20). Financial liabilities Other financial liabilities Other financial liabilities include the following items: • Bank borrowings and the Company's perpetual preference shares are initially recognized at
fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortized cost using the EIR method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statements of financial position. Interest expense in this context includes initial transaction costs and premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
• Trade payables and other short-term monetary liabilities, which are initially recognized at
fair value and subsequently carried at amortized cost using the EIR method. The Company’s trade and other payables, short-term loans and advances from related parties are included under this category (see Notes 9, 10 and 20). IFRS 7 fair value measurement hierarchy PFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement (see note 3). The fair value hierarchy has the following levels:
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(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
The level in the fair value hierarchy within which the financial asset or financial liability is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the three levels. Impairment of financial assets Assessment of impairment The Company assesses at each financial reporting date whether a financial asset or group of financial assets is impaired. It assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. The determination of impairment losses for financial assets is inherently subjective because it requires material estimates, including the amount and timing of expected recoverable future cash flows. These estimates may change significantly from time to time, depending on available information. Evidence of impairment Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan or advance by the Company on terms that the Company would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the Company, or economic conditions that correlate with defaults in the Company. Impairment on assets carried at amortized cost If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses) discounted at the financial asset’s original EIR (i.e.,the EIR computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of loss shall be recognized in “Other income (expenses)” in the statements of comprehensive income. Impairment on assets carried at cost If there is objective evidence of an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or of a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.
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Reversal of impairment loss If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in “Other income” in the statements of comprehensive income, to the extent that the carrying value of the asset does not exceed its cost or amortized cost at the reversal date. 2.3 Inventories
Inventories are stated at the lower of cost or net realizable value (NRV). Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of warehouse merchandise is determined using the first-in, first-out method. NRV is the selling price in the ordinary course of business, less the estimated cost of marketing and distribution. 2.4 Property and equipment
Items of property and equipment are initially recognized at cost, net of accumulated depreciation and impairment losses, if any. It includes the purchase price and directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statements of comprehensive income during the financial period in which they are incurred.
Depreciation is provided on all other items of property and equipment using the straight-line method over their expected useful economic lives, as follows:
Office equipment 5 years Transportation equipment 5 years
The estimated useful lives and depreciation method are reviewed periodically to ensure that the periods and method of depreciation are consistent with the expected pattern of economic benefits from items of property and equipment. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation and any impairment in value are removed from the accounts and any resulting gain or loss is recognized in the statements of comprehensive income. 2.5 Impairment of non-financial assets The carrying amounts of the Company’s non-financial assets such as property and equipment are reviewed at each financial reporting date to determine whether there is any indication of impairment or an impairment loss previously recognized no longer exists or may have decreased. If any such indication exists, the Company makes a formal estimate of the asset’s recoverable amount. The recoverable amount is the higher of an asset or its cash generating unit’s (CGU) fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash flows independent of those from other assets, the recoverable amount is determined for the CGU to which the asset belongs.
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Whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount and an impairment loss is recognized in the statements of comprehensive income. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized. Reversals of impairment are recognized in the statements of comprehensive income. 2.6 Share capital Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares are classified as equity instruments (see Note 11). 2.7 Revenue Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue from sales is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. 2.8 Pension benefits Pension cost is determined using the projected unit credit method. This method reflects the services rendered by the employees up to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Actuarial valuations are conducted with sufficient regularity, with option to accelerate when significant changes to underlying assumptions occur. Pension expense includes current service cost, interest cost, recognized actuarial gains and losses, the effect of any curtailment or settlements and amortization of transitional liability at the date of adoption of PAS 19. The defined benefit liability / defined benefit asset recognized in the statements of financial position is the present value of the defined benefit obligation at the financial reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated by an actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related retirement liabilities. Cumulative unrecognized actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are spread to income over the expected average remaining working lives of employees. Past-service costs are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this instance, the past-service costs are amortized on a straight-line basis over the vesting period. 2.9 Leases Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the statements of comprehensive income on a straight-line basis over the lease term. The determination of whether an arrangement is, or contains a lease is based on the substance of the
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arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: a. There is a change in contractual terms, other than a renewal or extension of the
arrangement; or
b. A renewal option is exercised or extension is granted, unless the term of the renewal or extension was initially included in the lease term; or
c. There is a change in the determination of whether fulfillment is dependent on a specified asset; or
d. There is a substantial change to the asset. Where a re-assessment is made, lease accounting shall commence or cease from the date when the change in circumstance gave rise to the re-assessment for scenarios a, c or d above, and the date of renewal or extension for scenario b. 2.10 Borrowing costs Borrowing costs are recognized as expense in the year in which these costs are incurred. 2.11 Income taxes Provision for income tax expense represents the sum of the current tax and deferred tax expenses. Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the financial reporting date. Deferred tax Deferred tax assets (DTA) and liabilities are recognized where the carrying amount of an asset or liability in the statements of financial position differs from its tax base, except for differences arising on: • the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination at the time of the transaction affects neither accounting nor taxable profit; and
• investments in subsidiaries and jointly controlled entities where the Company is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable income will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each financial reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and they relate to income taxes levied by the
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same taxing authority and the Company intends to settle its current tax assets and liabilities on a net basis. Provisions Provisions are recognized when: (a) the Company has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as finance cost. When the Group expects a provision or loss to be reimbursed, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain and its amount is estimable. The expense relating to any provision is presented in the statements of comprehensive income, net of any reimbursement. 2.12 Related parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. The key management personnel of the Company and post–employment benefit plans for the benefit of the Company’s employees are also considered to be related parties. 2.12 Events after the reporting date Post year-end events up to the date of the auditors’ report that provide additional information about the Company’s position at financial reporting date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the financial statements when material. 2.13 Earnings per share (EPS) The Company computes its basic earnings per share by dividing Profit or loss for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. NOTE 3 – SIGNIFICANT ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS The preparation of the financial statements in conformity with PFRS requires the Company’s management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements. The estimates and associated assumptions are based on historical experiences and other various factors that are believed to be reasonable under the circumstances including expectations of related future events, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates, assumptions and judgments are reviewed and evaluated on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
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Determination of functional currency Based on the economic substance of the underlying circumstances relevant to the Company, the functional currency is determined to be the Philippine Peso. It is the currency that mainly influences the Company’s operations. Classification of financial instruments The Company classifies a financial instrument, or its component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual agreement and the guidelines set by PAS 39 on the definitions of a financial asset, a financial liability or equity. In addition, the Company also determines and evaluates its intention and ability to keep the investments until its maturity date. The substance of a financial instrument, rather than its legal form, and the management’s intention and ability to hold the financial instrument to maturity generally governs its classification in the statements of financial position. The classification of the Company’s financial instruments is set-out in Note 4 of the financial statements. Determination of fair value of financial instruments The Company carries certain financial assets at fair value, which requires extensive use of accounting estimates and judgment. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Company utilized different valuation methodologies and assumptions. The fair values of the Company’s financial instruments are set out in Note 4 of the financial statements Impairment of loans and receivables The Company reviews its loans and receivables at each reporting date to assess whether a provision for impairment should be recognized in its statements of comprehensive income or loans and receivables balance should be written off. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Moreover, management evaluates the presence of objective evidence of impairment which includes observable data that comes to the attention of the Company about loss events such as but not limited to significant financial difficulty of the counterparty, a breach of contract, such as a default or delinquency in interest or principal payments, probability that the borrower will enter bankruptcy or other financial re-organization. The carrying value of loans and receivables amounted to P374,896,074, P324,293,716 and P296,793,146 as of December 31, 2010, 2009 and 2008, respectively (see Note 4). The Company has not provided any allowance for impairment on loans and receivables as management believes that all loans and receivables are collectible. Estimation of useful lives of property and equipment The Company reviews annually the estimated useful lives of property and equipment based on the period over which the assets are expected to be available for use. It is possible that future results of operations could be materially affected by changes in these estimates. A reduction in the estimated useful lives of property and equipment would increase recorded depreciation expense and decrease the related asset accounts.
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The Company’s property and equipment, net of accumulated depreciation, amounted to P25,218,793, P1,942,440 and P P1,258,367 as of December 31, 2010, 2009 and 2008, respectively (see Note 8). Impairment of non-financial assets The Company assesses at each financial position date whether there is an indication that the carrying amount of all non-financial assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. At the financial position date, the Company assesses whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Estimation of retirement benefits The determination of the obligation and retirement benefits is dependent on management’s assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 15 and include, among others, discount rates per annum and salary increase rates. Actual results that differ from the Company’s assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. While the Company believes that the assumptions are reasonable and appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the retirement obligations. The details of the Company’s pension are provided in Note 16. Realizability of deferred tax assets Management reviews the carrying amount of deferred tax assets at each reporting date. The carrying amount of deferred tax assets is reduced to the extent that it is no longer probable that sufficient taxable profit will be available against which the related tax assets can be utilized. Management believes that sufficient taxable profit will be generated to allow all or part of the deferred tax assets to be utilized. The Company’s recognized deferred tax assets amounted to P411,184, P285,170 and P176,398 as of December 31, 2010, 2009 and 2008, respectively (see Note 17). NOTE 4 – FINANCIAL INSTRUMENTS Fair values of financial instruments The following table shows the carrying values and fair values of the Company’s financial assets and financial liabilities as of December 31:
2010 2009 2008 Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value
Financial assets: Loans and receivables Cash in banks P19,031,895 P19,031,895 P20,150,402 P20,150,402 P16,094,703 P16,094,703 Trade and other receivables 355,864,179 355,864,179 304,031,218 304,031,218 280,698,443 280,698,443 Advances to related parties 34,872,831 34,872,831 3,372,096 3,372,096 - -
P409,843,071 P409,843,071 P327,553,716 P327,553,716 P296,793,146 P296,793,146
2010 2009 2008 Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value
Financial liabilities: Other financial liabilities
Trade and other payables P169,363,509 P169,363,509 P236,321,172 P236,321,172 P221,718,916 P221,718,916 Short-term loans 469,500,000 469,500,000 341,511,459 341,511,459 324,149,713 324,149,713 Advances from related parties - - - - 3,042,319 3,042,319
P639,457,231 P639,457,231 P577,832,631 P577,832,631 P548,910,948 P548,910,948
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Current financial assets and financial liabilities Due to the short-term nature of the transactions, the carrying amount of cash on hand and in banks, trade and other receivables, advances to (from) related parties, trade and other payables, short-term loans and advances from related parties approximates the fair value as of financial position date. NOTE 5 - CASH ON HAND AND IN BANKS
2010 2009 2008 Cash on hand P74,166 P60,000 P60,000 Cash in banks 19,031,895 20,150,402 16,094,703 P19,106,061 P20,210,402 P16,154,703 Cash in banks earns interest at the respective bank deposit rates. Interest income earned from short term placements amounted to P196,582, P181,825 and 161,547, for the years ended December 31, 2010, 2009 and 2008, respectively. NOTE 6 – TRADE AND OTHER RECEIVABLES
2010 2009 2008 Trade receivables P348,771,379 P304,031,218 P60,000 Other receivables 7,092,800 - - P355,864,179 P304,031,218 P16,154,703 Trade receivables are from dealers and customers of the Company and are not interest-bearing. Normal credit terms of trade receivables are 30 days and 60 days. Other receivables pertain to advances to employees and cash advances to suppliers. No allowance for impairment has been provided as management believes that the trade receivables are fully collectible. NOTE 7 - INVENTORIES 2010 2009 2008
Chemicals P154,858,258 P197,315,389 P208,203,382 Seeds 44,010,549 8,846,225 3,964,052 Feeds 11,232,250 30,396,456 23,892,477 Fertilizers 14,143,512 32,584,692 25,034,611 P224,244,569 P269,142,762 P261,094,522
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NOTE 8 – PROPERTY AND EQUIPMENT, NET Office Transportation Equipment Equipment Total Cost
At January 1, 2008 P400,000 P750,000 P1,150,000 Additions 24,874 500,000 524,874 At December 31, 2008 424,874 1,250,000 1,674,874 Additions 166,542 650,000 816,542 At December 31, 2009 591,416 1,900,000 2,491,416 Additions 1,250,037 27,782,038 29,032,075 At December 31, 2010 P1,841,453 P29,682,038 P31,523,491
Accumulated depreciation
At January 1, 2008 P124,400 P170,000 P294,400 Depreciation 72,107 50,000 122,107 At December 31, 2008 196,507 220,000 416,507 Depreciation 80,302 52,167 132,469 At December 31, 2009 276,809 272,167 548,976 Depreciation 91,481 5,664,241 5,755,722 At December 31, 2010 P368,290 P5,936,408 P6,304,698
Net book value December 31, 2010 P1,473,163 P23,745,630 P25,218,793
December 31, 2009 P314,607 P1,627,833 P1,942,440
December 31, 2008 P228,367 P1,030,000 P1,258,367 NOTE 9 – TRADE AND OTHER PAYABLES 2010 2009 2008
Trade payables P158,452,509 P234,674,105 P219,227,571 Others 10,911,000 1,647,067 2,491,345 P166,093,722 P236,321,172 P261,094,522
Trade payables are from suppliers of agro-products and are not interest-bearing. Normal credit terms are 30 days and 60 days. NOTE 10 – SHORT-TERM LOANS Short-term bank loans as of December 31, 2010, 2009 and 2008 consisted of secured short-term peso denominated loans obtained from local banks with interest rate of 6.25% to 7.75% in 2010, 7.00% to 8.75% in 2009 and 7.50% to 9.00% in 2008. The terms of the loans is six months or less and are subject to renewal. Interest expense arising from these loans amounted to P26,725,754, P20,904,375 and P17,232,462 in 2010, 2009 and 2008, respectively. Interest payable as of December 31, 2010, 2009 and 2008 amounted to Nil, P552,634 and P573,750, respectively. Various properties owned by the stockholders were used as collateral for these types of loans.
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NOTE 11 - SHARE CAPITAL 2010 2009 2008
Authorized:
10,000 shares at P100 par value each
P1,000,000 P1,000,000
P1,000,000 Issued and outstanding:
10,000 shares at P100 par value each
1,000,000 P1,000,000
P1,000,000 NOTE 12 – DIVIDENDS On a special meeting held on November 4, 2010, the Company’s BOD approved the declaration of cash dividend amounting to P47,000,000 which was paid on December 8, 2010 through offsetting of its advances to its stockholders. NOTE 13 – SALES 2010 2009 2008 Feeds P1,173,496,156 P1,133,097,265 865,557,663 Fertilizers 322,165,228 253,330,018 309,186,084 Chemicals 279,658,329 P408,483,802 P413,093,963 Seeds 20,887,632 12,474,919 22,860,095 Others 1,852,210 713,948 392,889 P1,798,059,555 P1,808,099,952 P1,611,090,694
The Company has an existing Complementary Feeds Distributorship Agreement (the Agreement) with San Miguel Foods, Inc. (SMFI) wherein the parties agreed that the Company will exclusively distribute B-MEG Feeds. The Agreement is valid for one year and shall be automatically renewed upon expiry with the same terms and conditions except as may be agreed by the parties in writing, unless SMFI notifies the Company in writing of its intent to terminate the Agreement within 60 days prior to the end of the term. The Company has other distributorship agreements but on a non-exclusive basis. The agreements are valid for one year and shall be automatically renewed for another year, subject to the right of either party to terminate. NOTE 14 – COST OF SALES 2010 2009 2008
Inventories, beginning P269,142,762 P261,094,522 P256,022,573 Net purchases 1,610,509,377 1,696,743,108 1,517,823,304 Cost of goods available for sale 1,879,652,139 1,957,837,630 1,773,845,877 Inventories, ending 224,244,569 269,142,762 261,094,522
P1,655,407,570 P1,688,694,868 P1,512,751,355
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NOTE 15 – OPERATING EXPENSES
2010 2009 2008
Salaries, wages and benefits P18,979,147 P21,287,693 18,227,316 Marketing 16,710,277 29,851,722 24,312,189 Commissions 8,954,618 10,816,448 10,199,502 Depreciation (Note 8) 5,755,722 132,469 122,107 Professional fees 3,110,195 4,279,243 2,400,658 Taxes and licenses 1,613,009 370,067 315,711 Repairs and maintenance 1,477,672 2,253,189 2,560,391 Rental (Note 19) 1,229,050 1,152,023 1,008,580 Transportation and travel 1,090,790 4,069,329 3,730,283 Communication 925,261 1,520,108 1,686,543 Insurance 921,844 1,184,003 1,066,387 Utilities 831,596 1,949,681 1,690,342 Representation and entertainment 762,139 4,753,277 3,861,255 Pension costs (Note 16) 420,048 362,573 152,170 Office supplies 135,768 378,651 415,205
Others 4,916,217 3,660,083 2,494,323
P67,833,353 P88,020,559 P74,242,962 NOTE 16 - PENSION COSTS The Company maintains an unfunded, non-contributory defined benefit retirement plan covering all qualified employees. Normal retirement benefits are equal to the employee’s retirement pay as defined in Republic Act No. 7641 multiplied by his years of service. Normal retirement date is the attainment of age 60 and completion of at least five years of service. The following tables summarize the components of net pension cost recognized in the statements of comprehensive income and the amounts recognized in the statements of financial position:
Net pension costs (under operating expenses): 2010 2009 2008 Current service cost P347,571 P324,167 P117,298 Interest cost 74,831 44,012 34,872 Net actuarial gain recognized in the year (2,354) (5,606) -
P420,048 P362,573 P152,170
Components of net pension liability:
2010 2009 2008 Defined benefit obligation P1,558,699 P806,364 P386,752 Unrecognized actuarial losses (gains) (188,085) 144,202 201,241
P1,370,614 P950,566 P587,993
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Present value of defined benefit obligation: 2010 2009 2008 Balance at January 1 P806,364 P386,752 P417,631 Interest cost 74,831 44,012 34,872 Current service cost 347,571 324,167 117,298 Actuarial loss 329,933 51,433 (183,049) Balance at December 31 P1,558,699 P806,364 P386,752 Movements in unrealized actuarial gains: 2010 2009 2008 Balance at January 1 P144,202 P201,241 P 18,192 Actuarial loss on obligations (329,933) (51,433) 183,049 Actuarial gains recognized (2,354) 5,606 Balance at December 31 (P188,085) P155,414 P201,241 The principal assumptions used in determining pension liability of the Company are shown below: 2010 2009 2008 Discount rates 7.93% 9.37% 11.38% Future salary increase rates 5.00% 5.00% 5.00% NOTE 17 – INCOME TAXES a. The components of the Company’s provision for income tax are as follows:
2010 2009 2008 Current P14,578,205 P3,275,318 P2,485,314 Deferred (126,014) (108,772) (23,860) P14,452,191 P3,166,546 P2,461,454 b. The components of the Company’s DTA are as follows:
2010 2009 2008
Pension liability P411,184 P285,170 P176,398 c. The reconciliation of the provision for income tax computed at the statutory income tax rate
to provision for income tax shown in the statements of comprehensive income are as follows:
2010 2009 2008 Income tax computed at normal rate P14,486,838 P3,198,593 P2,458,912 Add (deduct) income
tax resulting from: Non-deductible expenses 150,342 131,273 82,944 Income subjected to final tax (58,975) (54,548) (48,464)Change in recognized DTA (126,014) (108,772) (23,860) Effect of change in statutory rate - - (8,078)
P14,452,191 P3,166,546 P2,461,454
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NOTE 18 – INFORMATION REQUIRED BY BUREAU OF INTERNAL REVENUE’S (BIR) REVENUE REGULATION (RR) 15-2010
On November 25, 2010, the BIR issued Revenue Regulations RR No. 15-2010 which prescribes additional procedural and/or documentary requirements in connection with the preparation and submission of financial statements accompanying the tax returns. Under the said RR, companies are required to disclose, in addition to the disclosures mandated under PFRS and such other standards and/or conventions that may heretofore be adopted, in the Notes to the Financial Statements, information on taxes, duties and license fees paid or accrued during the taxable year. Following is the required information under RR No. 15-2010 for the year ended December 31, 2010:
2010 Output Value Added Tax (VAT) P33,558,999 Vatable sales 279,658,329 Exempt sales 1,499,602,226 Input VAT At January 1 P7,514,051 Current year’s domestic purchases 29,835,491 Claims for tax credit/refund and other adjustments 33,558,999 At December 31 P3,790,543
Documentary stamp tax Loan instruments P1,291,291
Withholding taxes Tax on compensation and benefits P638,041 Creditable withholding taxes 14,297,190 Final withholding taxes on dividends paid 4,700,000 P19,635,231 All other taxes Other taxes paid during the year recognized under “Taxes and licenses” account in profit or loss Permits P338,437 Others 1,052,123 P1,390,560
As of December 31, 2010, the Company has no pending tax court cases nor has received tax assessment notices from the BIR.
NOTE 19 – LEASE AGREEMENTS The Company has entered into various lease agreements with different companies for the lease of warehouses located in Nueva Ecija, Pampanga and Pangasinan, all of which fall under the category of operating leases. The lease agreements are renewable every year where terms and conditions are subject to the agreement of both parties. The rent expense charged to operations for the years ended December 31, 2010, 2009 and 2008 amounted to P1,229,050, P1,152,023 and P1,008,580, respectively (see Note 15).
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NOTE 20 – RELATED PARTY TRANSACTIONS Related party relationships exist when one party has the ability to control, directly or indirectly through one or more intermediaries, the other party or exercise significant influence over the other party in making financial and operating decisions. Such relationships also exist between and/or among entities which are under common control with the reporting enterprise, or between and/or among the reporting enterprises and their key management personnel, directors or its stockholders. The details of the related parties are summarized as follows:
Name of the related party Relationship Nature of Operations Calata Builders Common
Stockholders A company established in the
Philippines which ventures as a subcontractor and into the realty business.
Calata Farms Common Owner
A sole proprietorship which offers high efficiency poultry growing using climate-controlled system.
Significant transactions with related parties are the following: a) Cash advances were made to related parties to support their operating capital requirements.
These loans are repayable once the related parties have sufficient cash flows to support their respective operations. As of December 31, 2010, 2009, and 2008, the outstanding balances of advances to (from) related parties follow:
2010 2009 2008 Calata Farms January 1 P- P- P- Cash advances during the year 33,173,159 - - December 31 33,173,159 - - Calata Builders January 1 - - - Cash advances during the year 1,525,347 - - December 31 1,525,347 - - Stockholders January 1 P3,372,096 (P3,042,319) (24,000,000) Cash advances during the year 43,802,229 6,414,415 - Collection (payment) - - 20,957,681 Dividends distributed (47,000,000) - - December 31 P174,325 P3,372,096 (P3,042,319) Total advances to (from) related parties
P34,872,831
P3,372,096
(P3,042,319)
b) Operating lease agreement between the Company and the stockholders whereby the latter
granted the former with the rent free use of office premises and various warehouses located in Bulacan.
c) Key management personnel compensation amounted to P2,786,913, P2,514,680 and
P3,014,513 for the years ended December 31, 2010, 2009 and 2008, respectively.
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NOTE 21 – FINANCIAL RISK MANAGEMENT The Company’s BOD is mainly responsible for the overall risk management approach and for the approval of risk strategies and principles of the Company. It has also the overall responsibility for the development of risk strategies, principles, frameworks, policies and limits. It establishes a forum of discussion of the Company’s approach to risk issues in order to make relevant decisions. Financial risk management objectives and policies The Company is exposed to variety of financial risks (credit risk, liquidity risk, and interest rate risk), which result from both its operating and investing activities. These financial risks are covered mainly in its policies and guidelines. The objective of financial risk management is to contain, where appropriate, exposures in these financial risks to limit any negative impact on the Company’s results and financial position. The Company actively measures, monitors and manages its financial risk exposures by various functions pursuant to the segregation of duties principles. The policies for managing specific risks are summarized below: Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to impairment is not significant. The Company deals only with creditworthy counterparty duly approved by the BOD. The following table provides information regarding the maximum credit risk exposure of the Company as of December 31: 2010 2009 2008 Cash in banks P19,031,895 P20,150,402 P16,154,703 Trade and other receivables 355,864,179 304,031,218 280,698,443 Advances to related parties 34,872,831 3,372,096 - P409,768,905 P307,403,314 P296,853,146
The following table provides information regarding the credit risk exposure of the Company by classifying assets according to the Company’s credit ratings of debtors: Past due but not impaired
2010 Total
Neither past due nor impaired 31-60 days 61-90days Over 90 days Impaired
Cash in banks P19,031,895 P19,031,895 P- P- P- P- Trade and other
receivables 355,864,179 343,910,441 7,969,616 2,822,020 1,162,102 - Advances to related
parties 34,872,831 34,872,831 - - - -
P409,768,905 P397,815,167 P7,969,616 P2,822,020 P1,162,102 P-
Neither past
due nor impaired
Past due but not impaired 2009 Total 31-60 days 61-90days Over 90 days Impaired
Cash in banks P20,210,402 P20,210,402 P- P- P- P-
Trade receivables 304,031,218 304,031,218 5,512,739 2,659,954 958,784 - Advances to related
parties 3,372,096 3,372,096 - - - -
P327,613,716 P327,613,716 P5,512,739 P2,659,954 P958,784 P-
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Neither past
due nor impaired
Past due but not impaired 2008 Total 31-60 days 61-90days Over 120 days Impaired
Cash in banks P16,154,703 P16,154,703 P- P- P- P-
Trade receivables 280,698,443 272,233,975 6,118,791 1,528,302 817,375 -
P296,853,136 P16,154,703 P6,118,791 P1,528,302 P817,375 P-
The credit quality of the Company’s financial assets is considered to be good quality and expected to be collectible without incurring any credit losses. Liquidity risk This represents the risk or difficulty in raising funds to meet the Company’s commitment associated with financial obligation and daily cash flow requirement. The Company is exposed to the possibility that adverse exchanges in the business environment and/or its operations would result to substantially higher working capital requirements and the subsequent difficulty in financing additional working capital. The Company addresses liquidity concerns primarily through cash flows from operations and short-term borrowings, if necessary. The Company likewise regularly evaluates other financing instruments to broaden the Company’s range of financing sources. The following table summarizes the maturity profile of the Company’s financial liabilities as of December 31, 2010, 2009 and 2008, respectively based on the contractual undiscounted payments: At December 31, 2010
On Demand Within 1 Year More than 1 Year Total Trade and other payables P169,363,509 - P- P169,363,509 Short-term loans - 469,500,000 - 469,500,000
P169,363,509 P469,500,000 P- P638,863,509
At December 31, 2009
On Demand Within 1 Year More than 1 Year Total Trade and other payables P236,321,172 P- P- P236,321,172 Short-term loans - 341,511,459 - 341,511,459
P236,321,172 P341,511,459 P- P577,832,631
At December 31, 2008
On Demand Within 1 Year More than 1 Year Total Trade and other payables P221,718,916 P221,718,916 P- P221,718,916 Short-term loans - 324,149,713 - 324,149,713
P221,718,916 P545,868,629 P- P545,868,629
Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as the Company’s interest rate on bank loans is fixed. Capital risk management
The Company manages its capital structure (total equity) and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust or delay the dividend payment to shareholders, and appropriate a percentage of retained earnings towards expansion and capital expenditures. The Company through the Finance function sets operational targets and performance indicators in order to assure that the capital and returns requirements are achieved. Appropriate monitoring and reporting systems accompany these targets and indicators to assess the achievement of Company goals and institute appropriate action.
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No changes were made in the objectives, policies and processes in 2010, 2009 and 2008. NOTE 22 – EARNINGS PER SHARE The retained earnings have been restated to reflect the effect of the adoption of PAS 19, Employee benefits. The impact of the adoption follows: 2010 2009 2008 Profit for the year attributable to ordinary equity holders of the Company
P33,837,269 P7,495,429 P4,564,008
Weighted average number of shares outstanding
10,000 10,000 10,000
3,383.73 749.54 456.40